Fiscal prudence requires ORNL to prepare for smaller budgets, director says

Many budget questions remain unresolved heading into the fiscal year that starts Oct. 1 and there could be another $100 million drop in funding, so Oak Ridge National Laboratory is implementing plans to further reduce overhead spending and opening a voluntary separation program that could reduce the workforce by up to 475 jobs, Director Thom Mason said Thursday.

Employees can apply for the Voluntary Separation Program, or VSP, from Oct. 1 to Nov. 14. Those employees who are accepted will leave the payroll by Dec. 31.

Lab officials emphasized that they hope the number of staff cuts is smaller than 475. ORNL has about 4,400 to 4,500 employees.

“We’re not targeting a specific number of reductions,” Mason said in a Thursday morning message to employees. “To maximize flexibility, the plan we submitted to DOE (the U.S. Department of Energy) requested permission to reduce the workforce by up to 475 jobs. We certainly hope far fewer staff are affected, but we simply don’t have a clear enough picture of the budget yet, and may not get one until early next year.”

Mason said lab officials will be able to judge whether the VSP has reduced payroll costs enough once more reliable projections are in place. If more cuts are needed, ORNL will implement an Involuntary Separation Plan, or ISP, beginning Feb. 1, 2014. It would run through the end of Fiscal Year 2014, which is Sept. 30, 2014.

In his message to employees, Mason said the lab has “carefully and deliberately” prepared for changes in federal budget priorities and reductions in funding during the past two years. The changes have included workforce restructurings, the initiation of employee contributions to the pension plan, and a shift toward more consumer-driven health care. The changes have kept ORNL on sound financial footing despite the federal sequestration (automatic spending cuts that started earlier this year), an economic downturn, and the rising costs of doing business, Mason said.

But he said the federal budget outlook does not promise to improve. The lab’s budget had remained steady at about $1.6 billion from 2010 to 2012, but ORNL anticipates closing the books on Fiscal Year 2013, which ends Sept. 30, with business volume closer to $1.5 billion. And he said some models project a decrease in business volume to as low as $1.4 billion in 2014.

“We hope the decision-makers who provide our funding view a strong national laboratory system as essential to U.S. competitiveness, with a return on investment far higher than the short-term cost,” Mason said. “The truth, however, is that we don’t know exactly what the budget picture will look like, how much we will receive, or exactly which programs will expand or contract. All we know for certain is that after a period of growth that has resulted in the transformation of ORNL, fiscal prudence requires us to prepare for smaller budgets in years to come.”

Here is the full text of Mason’s message:

Thank you for your continued dedication to breakthrough science, engineering, and innovation this past fiscal year. You have allowed Oak Ridge National Laboratory (ORNL) to maintain its recognized leadership across Department of Energy (DOE) mission areas despite significant funding challenges.

Many budget questions remain unresolved, and I want to give you an update on plans for positioning ORNL as we begin fiscal 2014.

In the past two years, we’ve carefully and deliberately prepared for changes in federal budget priorities and reductions in funding. Work force restructurings, the initiation of employee contributions to the pension plan, and a shift toward more consumer-driven health care have kept us on sound financial footing despite sequestration, an economic downturn, and the rising costs of doing business.

These changes, while difficult, have allowed us to improve our competitive position by lowering charge-out rates and continuing progress toward a direct-to-indirect staffing ratio of 60:40. They’ve also allowed us to restore some benefits, such as matches to our 401(k) plan this year and a reduction in health-care premiums beginning next year.

Unfortunately, the federal budget outlook does not promise to improve. After remaining steady at approximately $1.6 billion from 2010 to 2012, we anticipate closing the books on fiscal 2013 with business volume closer to $1.5 billion. In 2014, some models project a decrease in business volume to as low as $1.4 billion.

We hope the decision-makers who provide our funding view a strong national laboratory system as essential to U.S. competitiveness, with a return on investment far higher than the short-term cost. The truth, however, is that we don’t know exactly what the budget picture will look like, how much we will receive, or exactly which programs will expand or contract. All we know for certain is that after a period of growth that has resulted in the transformation of ORNL, fiscal prudence requires us to prepare for smaller budgets in years to come.

As a result, we are implementing plans to further reduce overhead spending in anticipation of reductions in programmatic funding.

Initially, a Self-Select Voluntary Separation Program (VSP) will open on October 1. Employees can apply for the VSP from Oct. 1 through Nov. 14. Management reserves the right to deny any application, and employees will be notified in early December whether their application has been accepted. Accepted employees will leave the payroll by Dec. 31.

Meetings to explain details and eligibility for the VSP will be held beginning Oct. 1 around ORNL. Dates, times and locations are available at https://portal09.ornl.gov/sites/hrd/vsp/default.aspx, along with answers to likely questions and more information about the VSP process.

We’re not targeting a specific number of reductions. To maximize flexibility, the plan we submitted to DOE requested permission to reduce the work force by up to 475 jobs. We certainly hope far fewer staff are affected, but we simply don’t have a clear enough picture of the budget yet, and may not get one until early next year. When more reliable projections are in place, we can gauge whether the VSP has reduced our payroll costs far enough. If more cuts are needed, we will implement an Involuntary Separation Plan (ISP) beginning Feb. 1, 2014. It would run through the end of fiscal 2014 (Sept. 30, 2014).

As I mentioned at the Extended Leadership Team meeting this week (only half in jest), I’d encourage you to ignore media reports about budget machinations for the next three months. The twists and turns in Washington will cause much debate and concern, but when the smoke clears, we will have some sort of budget, and we will have done our best to ensure that we’re using our funding well.

We aim to implement these changes with minimal disruption to your professional and personal lives, and we will keep you informed as we work through the process. The painful adjustments of recent years have allowed us to continue our essential national missions through tough times. Your support is essential for our future success, and I welcome your feedback and questions. Connect with me through my blog or submit questions to [email protected].

Finally, many are wondering about the effect a government shutdown would have on ORNL if Congress cannot agree on a budget by month’s end. As in years past, ORNL has enough funding to continue operations even if federal employees have to stop work on Oct. 1, and all UT-Battelle staff should report to work as usual.

Thom