The 2020 federal deficit will likely top $3.8 trillion and, by 2022, will be approximately 106% of the Gross Domestic Product (GDP). We didn’t expect to be here. The pandemic and quarantine really socked it to our economy and there are direct connections between those debts and how flexible government agencies are likely to be in resolving fines and penalties.
As a general matter, agencies feel starved for resources in even the best of times. There is always more work to do than the resources allow for and I haven’t seen an agency which didn’t have a number of projects waiting in the wings for better budget days. However, when budgets get tight, agencies turn their attention to eking more value out of core income producing operations. Given how tight budgets will be for all levels of government, I’m expecting to see heavier fines and penalties.
Fines and penalties tend to be flexible and agencies can often mitigate effects for seemingly worthy subjects. For example, Immigration and Customs Enforcement (ICE) has reduced financial consequences of employing unauthorized workers in exchange for enrolling in E-Verify and the ICE Mutual Agreement between Government and Employers (IMAGE) program. Since the agency’s goal is to foster a culture of compliance, more inspections and investigations, with lower penalties for non-compliance, and agreements which bind employers to long-term compliance, is good policy.
However, budget woes push agencies the opposite direction. It is a sort of organizational defense posture which seeks to hold onto the people and institutions they have in order to wait out the tough times. This also makes management sense and, as a federal government manager for many years, I am comfortable opining that it is the kind of thinking that inserts itself into even seemingly minor and disconnected negotiations. Agency components look around at others and seek to reapportion resources in their favor and components with the ability to generate agency revenue have greater influence in those decisions.
Fines and penalties are revenue generators for government agencies, from local code enforcement to the U.S. Department of Justice and everywhere in-between. For agencies struggling to fund core business, expanding revenue-generating components is good management since money taken in through enforcement can be filtered to other components. For regulators and enforcement, generating revenue protects resources and, for all of those reasons, I expect agencies to be considerably less flexible in how they settle fines and penalties.
For the citizenry, this heightens the importance of self-auditing. It is rare that we know as much as we think we do about the rules which impact our lives. Often, that matters little since we count on reasonableness from regulators and enforcement. Think, for example, about speeding: Many do it and most expect to be given some latitude for less than egregious conduct. Yet, I think it is generally understood that some jurisdictions use speeding tickets as revenue generators and that, in those circumstances, we are more likely to take the full brunt of the law. So it is with regulations at all levels of government and that should makes us more careful when agencies face tight budgets.
Now is a good time to take another look at our operations, updating policies and procedures as we identify potential liabilities. Just as we review insurance and purchase contracts regularly to make sure the agreements are oriented to business needs, we should be periodically looking at the policies and procedures which affect how we recruit, hire, employ, and terminate employees to keep them aligned to company goals. Small investments now can prevent costly mitigation later.
Green and Spiegel is here to help. We have the knowledge and experience to discretely identify liabilities in employing foreign nationals and restructure operations in ways that meet business goals. Our compliance and enforcement practice is perfectly suited to help companies assess compliance and adapt existing operations to the changing regulatory environment.
We’re open during the quarantine and here to help. Folks are invited to contact us on the web or you can call me directly at 484-645-4194. I’m also available via email at [email protected].
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