Saving Money Through Decentralization

Currently, there are 320,000 federal employees in the Washington, D.C., metropolitan area. The average federal worker makes $123,049 in salary and benefits. As such, my calculator tells me that–if DC-based employees were making the average–we’re spending  about $39 billion dollars annually on government salaries in the Washington area.

Twenty years ago, there was a very good reason to have government departments centrally located: It just made communication that much easier–and cheaper. You could probably justify having these employees in one place by the savings in long distance phone calls alone. Today, however, we have the Internet. Video calls through Skype are free as long as you have an internet connection. Most cell phone plans have unlimited long distance. Email and instant messaging are essentially instantaneous. People working on the same project no longer need to be in the same room, building, state, or even country to work together effectively.

So what happens if we were to move a government agency from DC to somewhere else? For selfish reasons, let’s take the Department of Energy Headquarters and move it from Washington to Oak Ridge, Tennessee. The Department of Energy has 19,000 employees. I couldn’t find a number for how many of these employees are in Washington, but since 15% of all federal employees are in Washington, I’ll use that number, giving me 2,850 employees. Now, if I plug the $123,049 figure into a cost-of-living calculator, I can see that one of these employees could have the same standard of living in Oak Ridge with a salary and benefits cost of $79,964. Multiplying that savings out, I get a savings of over $122 million dollars per year. Please note that this is only the savings in salary and benefits. It does not include facilities expenses or the cost of civilian contractors, and I’d bet some serious money that we’d help the environment a bit because people in Oak Ridge have shorter commutes than people in the DC area.

There are many places that have a similar cost-of-living to Oak Ridge. If we were able to, over time, so as to not completely destroy the Washington economy, move half of the employees currently located in Washington to less costly places, the salary and benefits savings would be nearly $7 billion dollars annually. Once you include other expenses, it would not surprise me in the least if the annual savings ended up being double that. Now, $15 billion is only a little over one percent of the current annual budget deficit, but every little bit helps, right?

I have another little twist to add: What if we open up these relocation plans to a competitive bidding process? Let communities around the country compete to have these departments move to their back yards, in a manner similar to when a company like Volkswagen was deciding where to build a U.S. factory. To get these high-paying stable jobs, cities would likely jump through some pretty big hoops, offering things like infrastructure and construction credits. The cost of moving the facilities might be negligible, depending on the level of competition.

Finally, there may be one additional “stealth” savings. If it is more difficult for federal employees to meet legislators face-to-face, it might be more difficult for them to argue to preserve some costly programs. If Members of Congress have fewer government employees and contractors as neighbors in DC, making decisions that impact their jobs will be less personal and, hopefully, more pragmatic. It may be a case that the Internet limits this impact, because long-distance communication is incredibly convenient, but I think it would be interesting to see.


I had a good time talking with Andraé McGary on Live and Local this afternoon, and I hope that some of you had the opportunity to listen to what I had to say. If you would like to contact me directly, please don’t hesitate to send me an email, or, if you prefer, you can call me on my cell at 423-933-4855. If I don’t answer, please leave a voice mail and I will return your call as soon as possible.

Thanks for reading.


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