Agency spending will be constrained for the next decade due to partisan stalemates in Congress and long-term budgetary issues, a trade association for federal contractors predicts.
The Professional Services Council’s Vision Federal Market Forecast — an annual initiative under its foundation through which more than 400 industry volunteers interviewed federal employees representing about 30 agencies as well as think tank experts and congressional staffers to anticipate federal budget priorities and challenges — expects that the government in the near term will experience a “legislative logjam.”
Under this scenario, the baseline for non-defense spending is at fiscal 2025 levels while defense appropriations would experience 2% annual growth. It also predicts continued use of impoundments and recissions, two administrative tools that the Trump administration has relied on as part of its goal to cut government spending.
Mike Reilly, a Vision volunteer, said during a Nov. 24 press call previewing the industry forecast that a “legislative logjam” is “sort of what we’re experiencing now.”
The agreement to end the 43-day shutdown included full-year appropriations bills that cover the Agriculture and Veterans Affairs departments as well as the legislative branch. (The rest of the government is operating under a continuing resolution that will maintain current funding levels through Jan. 30.) In line with such a scenario, the three enacted spending measures, while mostly rejecting Trump’s proposed cuts, largely didn’t increase funding for government programs or only did so modestly.
Even after the end of Trump’s second term, however, forecast predicts that agency budget increases will continue to be limited due to rising national debt and projections that Medicare and Social Security trust funds will run out of money by the early 2030s. Specifically, PSC expects that a deal involving budget caps and automatic spending cuts will be necessary to stabilize the entitlement programs.
“What this means in practical terms is that the fiscal environment for the next decade will be tight, competitive, highly dependent on supplemental funding, reconciliation and prone to crisis-driven appropriations,” Reilly said. “Base budgets alone will struggle to drive new initiatives, especially on the non-defense side.”
Despite this, speakers on the press call said that Trump’s agency workforce reductions and reorganizations may increase the government’s reliance on contractors if critical work stops being performed.
“I do think there’s a sense — and I’ve heard this from multiple people, both in government and in industry — that something has to happen before people will say, ‘Oh gosh, we got rid of this or that, and then look what happened as a result,’” said Vision volunteer Andrea McCarthy. “So I think it’s going to take time to unfold. I don’t think without something dramatic happening, that anything’s going to change. But I think, too, as we get closer to the midterms, if there’s services that aren’t being delivered to civilians that used to get them, that’s going to be a forcing function.”
Even so, the Trump administration has targeted government contracts as part of its cost-cutting effort.
