Out of Control Policy Blog

$1 Billion in Savings?

HR 2548 was dropped last Thursday. Last year, a similar bill, the "Federal Asset Management Improvement Act of 2001," was dropped, however, it didn't go too far despite GSA's positive response -- GSA is expected to continue its support this year as well. The bill will allow GSA and other agencies to utilize real property management techniques used by the private sector, including outright asset divestiture and public-private partnerships. This is an important tool to assist GSA and other federal agencies get rid of assets they don't use and need, while focusing their resources on achieving mission and goals.

This comes just days after GAO issued a report, and the House Government Reform Committee held a hearing on the status of federal property. The report, "Federal Real Property: Executive and Legislative Actions Needed to Address Long-Standing and Complex Problems," noted that the federal government is spending hundreds of millions of dollars maintaining and repairing unused and unneeded facilities and property. For example, the State Department faces $736 million in repairs for its buildings, including more than half of its posts overseas. The Pentagon reports that it is spending between $3 billion and $4 billion per year maintaining facilities that are no longer needed. Furthermore, the Department of Education is spending an estimated $70 million annually maintaining excess facilities. While the Veterans Affairs Department estimates that it is spending close to $360 million -- or nearly $1 million per day -- on underused or vacant facilities. Yet, these agencies don't have the flexibility and ability to divest unused or unwanted properties -- the Sessions bill, however, will change this.

It will have the most impact on GSA, which manages 8,000 buildings, more than half of which are older than 50 years, but like the other agencies, does not have authority to enter into partnerships or dispose of facilities as it sees fit. According to the GAO, repairs on GSA's buildings would cost an estimated $5.7 billion.

After going thru four rounds of base closures, the Defense Department has reduced its real property holdings by 21 percent since the Cold War. Yet Defense still estimates it is spending $3 billion to $4 billion each year maintaining facilities that are not needed.

Former OMB Director Mitch Daniels has said that the federal government “is sitting on an incredible array of unutilized and underutilized assets.” According to its own financial statements, the government has $307 billion in property, plant and equipment; $209 billion in loans receivable; and $184 billion in inventories and related property. Hearing this, Jonathan Breul wrote, "The time and resources invested in servicing and managing those loans receivable could be put to better use if some of the loans were sold or if management of the remainder were outsourced."

Given the tough fiscal climate this is an important tool our policy makers need to have in their arsenal to help balance budgets and bring more efficiency to government. Several states, including California, have introduced similar legislation or are considering divesting assets.

Earlier this year, Reason Foundation released a study answering many of the questions that would be raised about asset divestiture and enhanced-use leasing arrangements.


« Public Greed | Main | Federal privatization suffering death of… »




Out of Control Policy Archives