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Federal Eye
Posted at 06:00 AM ET, 07/17/2012

For federal employees, budget options range from bad to worse

For federal employees, the political debate over whether to prevent or to allow automatic cuts that are scheduled for many government programs starting in January may boil down to a pick-your-poison choice.

Eye Opener

The House plans to vote this week on a bill to require the Obama administration to detail the potential impact of the cuts, called sequestration. That could chop more than $100 billion off federal spending in 2013 — about 10 percent of defense spending and about 8 percent of domestic discretionary spending — if Washington doesn’t enact spending cuts, revenue increases or a combination of both to prevent it. The Senate recently ordered a similar report in an amendment to a farm bill.

While the prospect of the cuts has been hanging over Washington since the debt ceiling deal of last summer — and especially since the later failure of the congressional “supercommittee” — concern about the potential impact has been rising lately. The House Armed Services Committee, which already has warned of the potential impact on national security, plans to hold a hearing Wednesday on the possible impact on the defense industry.

So far there has been no detailed look into the potential effect on federal employees and retirees. However, a recent Congressional Research Service report noted that under a series of prior laws, some federal spending has been named as exempt from automatic cuts. This includes federal pay rates and retirement benefits, along with items such as interest payments on the national debt, Social Security and veterans benefits, and military pay rates, CRS said.

CRS added, however, that it “cannot say with certainty how these provisions may be interpreted and applied in a future sequestration, including the sequestration scheduled to occur in January 2013, or how potential ambiguities in language may be resolved.”

It also noted that expenses to administer federal programs are subject to sequestration, even if spending through the program itself is protected. That could translate into pressure to cut federal employment, since salaries are paid from those accounts. Expenses such as employee training and incentive programs commonly are paid from the same accounts and also could be cut.

Meanwhile, several plans to avoid sequestration would hit federal employees in other ways. House Budget Committee Republicans are citing as an alternative a bill the House passed in May. That bill would require all federal employees to pay an additional 5 percent of salary toward their retirement annuities, beginning with a 1.5 percent increase in 2013. It also would end, for most of those hired into federal jobs starting next year with less than five years of prior service, a supplement paid to many employees who retire before age 62.

Earlier, the House passed a budget outline that called for continuing the freeze on federal salary rates for three more years through 2015, cutting federal employment by 10 percent through a modified hiring freeze, and requiring higher retirement contributions.

Neither of those measures has advanced in the Senate.

However, earlier this year a group of six GOP senators proposed a plan designed to avoid sequestration through steps including extending the pay freeze through 2014 and cutting federal employment by 5 percent through a modified hiring freeze. That plan, too, has not advanced.

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By  |  06:00 AM ET, 07/17/2012

 
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