Curbing the Surge in Year-End Federal Government Spending: Reforming “Use it or Lose It” Rules—2016 Update

Abstract

The “use it or lose it” phenomenon refers to the propensity of US government agencies to spend unused financial resources toward the end of the fiscal year out of fear that leftover resources will be returned to the Department of the Treasury and will prompt future congressional budget cuts for the agency. While anecdotes and media stories of year-end spending surges are widespread, empirical support for such surges or the motivation behind them is significantly less available. The budget and spending literature has examined the efficacy of policy solutions designed to curb year-end spending surges, but these studies have often been done without empirical evidence. In this update of the 2014 version of this paper, we examine existing literature on the prevalence, consequences, wastefulness, and causes of year-end spending surges. We then update the expenditure patterns we identified for executive departments’ year-end obligated federal contracts using data obtained from USASpending.gov. We review literature on purported solutions to curb year-end spending surges and recommend a pilot program to give limited budget rollover authority to select agencies.