Prospects Unclear for Trump’s $1 Billion Performance Fund

The omission of one White House management proposal from the $1.3 trillion omnibus spending bill for fiscal 2018, approved by Congress and signed by President Trump last week, could serve as a bellwether for the administration’s plans to transform the federal workforce.

The spending package includes a number of provisions that specifically prohibit agency leaders from enacting plans to downsize or reshape their organizations without consulting Congress. And totally absent from the more-than 2,000-page document was the White House’s proposed $1 billion inter-agency performance fund, which the White House wanted to enact this fiscal year. That fund would be used by agencies for designing programs like performance-based pay and to pay bonuses for individual high performers across government.

Although in budget documents Office of Management and Budget officials suggested the fund could act in conjunction with a proposed 2019 pay freeze for all civilian federal employees to replace across-the-board raises, officials later suggested the fund would be used to implement agency-specific initiatives to improve performance.

“There are a number of innovations being proposed across a variety of different agencies,” said Sara Ratcliff, executive director of the Chief Human Capital Officers Council, earlier this month.

When the fund was first proposed last month, federal employee groups lambasted the idea, and officials expressed skepticism that it could be implemented absent legislation on civil service reform.

The pay freeze and the performance fund "are on very, very different legislative paths,” said Jessica Klement, staff vice president for advocacy at the National Active and Retired Federal Employees Association. “They can tie them into one, but while the pay freeze happening seems all but certain, the chances of this fund are highly unlikely. This would be performance management, and you need legislation to do performance management.”

It remains to be seen whether White House officials will revive the performance fund proposal as they negotiate with lawmakers over fiscal 2019 appropriations bills, as they did with a variety of plans to cut federal employee retirement programs that went unimplemented in fiscal 2018. The fund’s absence from the omnibus also raises the question of whether Congress will be willing to advance proposals that require action on Capitol Hill in Trump’s management agenda, which also include measures to make it easier for agencies to reward high performers, and punish or fire poor employees.

Donald Kettl, a professor at the University of Maryland School of Public Policy, said it is unlikely anything advances legislatively in the realm of management or pay and benefits. The most likely result, he said, is a pay freeze without any meaningful efforts to introduce performance-based pay.

"Congress is likely to be skittish about coupling a performance fund with a pay increase," Kettl said. "It's attractive for the administration, but each part of the issue—performance pay and a pay increase—is tough for Congress these days." The two elements might prove to be "a toxic brew if mixed together."

He added that some sort of partial-year pay increase could be in the offing, but that any discussions on that front likely would not begin until at least October.

The Office of Management and Budget said last week that it would advocate for legislation to update the federal civil service system.

“The administration intends to partner with Congress on overhauling the statutory and regulatory rules that have, over time, created an incomprehensible and unmanageable civil service system,” OMB said.

In another development, the House last week voted to extend the controversial Holman Rule through fiscal 2018, which makes it easier for lawmakers to eliminate federal jobs and reduce the salaries of federal employees. Although some House Republicans tried in vain to use the Holman Rule to slash one-third of the employees at the Congressional Budget Office, it has not been successfully invoked since its revival last year.

Rep. Gerry Connolly, D-Va., was not available for comment Tuesday, but last week he accused Republicans of extending the rule “without any public debate.”

Kettl said that the extension of the Holman Rule but unwillingness to actually use it could stem from fears over being held responsible for controversial staffing decisions.

"It's a tempting tool for conservatives, but they've been reluctant so far to do more than wave it in the air," he said. "It would be a very big step in the separation-of-powers battles. And it would risk invoking the 'you break it, you bought it' rule: Congress would own the details of administrative action to a far greater degree, and that carries grave risks."