SPECIAL EDITION: FDA, Lay-offs, and User Fees Explained
Information for Reporters[1]
Note: Since the original column was published, I have become aware that lay-offs should not be referred to as a reduction-in-force (RIF) because that term triggers certain procedures and protections that employees might not have in the case of lay-offs. This column has been updated to reflect that distinction.
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Last Saturday’s (February 15) lay-offs at FDA included some FDA employees whose salaries are “fully paid by user fees.” This surprised many and set off a lot of speculation as to how that saved the government money and whether it meant that FDA was unilaterally changing the terms of the user fee agreements.
The short answers:
yes, FDA employees can be laid off, regardless of funding source;
yes, the FDA lay-offs save the government money[2]; and
no, the lay-offs do not affect the user fee agreements, although it is unknown whether deadlines within the agreements might be affected.
As you review the explanation (below), keep in mind that user fees were always meant to supplement, not supplant, activities paid for by Budget Authority (BA) appropriations[3]. Necessarily, that means that many FDA activities can be funded by either source.
Note: FDA’s accounting for activities, employee time, FTE’s, funding source, and payroll is complex. The three bullets above are correct, while the Q&A below is my best explanation of why they are correct.
Q: If an FDA employee’s salary is paid from user fee funds, why would they be laid off during a lay-off that is intended to save the government money? What happens to the money?
A: Despite common usage that suggests otherwise: even if an employee’s entire salary is paid from user fees, it does not make them “a user fee employee” distinct from other employees. Also, there is no distinct “user fee workforce” made up of specific individuals[4].
Rather, user fees support full-time-equivalent slots (FTE’s), not individuals. For accounting purposes, an employee may be paid—in whole or part—by user fees or BA (appropriated) monies, depending on the activities they are engaged in and the availability of user fee and appropriated (BA) support. Often, it is not even specific to the individual because a lot of the work done with BA funds is for activities that are creditable for purposes of the user fee agreements (i.e., eligible for payment by user fees).
The availability of user fees is tied to defined activities and not individuals or some minimum level of FTE’s. Thus, the departure of any given individual does not change the user fee agreement or the responsibilities of FDA and industry.
Q: How does this save the government money?
A: The user fee monies allocated to pay for the activities of a laid-off employee can be re-allocated to pay for the activities of another employee who is: 1/ currently being paid (in whole or part) with BA (appropriated) monies, and 2/ performing tasks and services that are otherwise payable with user fee funds. After the re-allocation[5], the net result is a decrease in BA supported work and no change in user fee supported work.
This column is on the record provided that attribution is given to the source (FDA Matters: The Grossman FDA Report) and author (Steven Grossman). Note that I am no longer the Executive Director of the Alliance for a Stronger FDA. All opinions are my own.
The Administration has asserted—and the media has accepted—that lay-offs (at any agency, not just at FDA) save money. I have had no reason to research this question, but my prior understanding (which may be incorrect) is that lay-offs do not save money until the appropriation is lowered or the President proposes, and the Congress adopts rescissions of funds. At best, this is a technical point and a government-wide issue not specific to FDA.
To assure that user fees did not supplant BA (appropriated) funding, the user fee laws contain “maintenance of effort” provisions for how much BA money must be appropriated before user fees can be collected. The triggers vary for each program. These “maintenance of effort” provisions are not likely to be triggered by lay-offs, but may become an issue later if Congress tries to shrink the FDA’s BA budget beyond a certain point. We will address this in a future column if it becomes relevant.
A possible exception is the Center for Tobacco Products, which is 100% user fee funded. It could be said that CTP has a “user fee workforce” made up of specific individuals.
The re-allocation process may be more complex than what I have described, but the net results are the same.