Year-End Federal Spending and Government Waste: Reforming 'Use It or Lose It' Rules

Abstract

At the end of every fiscal year, US government agencies spend large sums of their budgets in a potentially wasteful manner. These year-end spending surges are described by the “use it or lose it” phenomenon, which is driven by a fear that leftover resources will prompt future budget cuts. Every year the media documents examples of wasteful year-end spending, but there has been little empirical research on the phenomenon. This paper examines existing literature on the prevalence, consequences, wastefulness, and causes of year-end spending surges. It reviews previous efforts to examine year-end spending and, using publicly available data, analyzes whether the quality of year-end spending is lower than spending at other points during the year. The paper does not find obvious indicators that year-end spending quality is worse than other spending. Future studies may be able to find more definitive evidence, given further data availability or different methodologies.