10 questions and answers on budgetary threats to federal employees

January 23, 2013
Capitol Fall

In football, a “triple threat” refers to a player skilled at running, passing and kicking. Federal employees are facing a triple threat of their own: from the government hitting its debt ceiling, from pending “sequestration” automatic cuts in budgets, and from a potential lapse in agency spending authority. The three relate in some ways but are separate in others.

Following are 10 questions and answers on those issues:

Q. What’s at stake for federal employees if the debt limit is exceeded?

A. The government actually has hit the ceiling already. The Treasury Department, however, has been using various financial maneuvers to free up operating money, which it projects can prevent a default for only several more weeks.

The main impact on employees so far has come from one of those maneuvers: The Treasury has stopped issuing the bonds that make up the government securities fund, or G Fund, in their 401(k)-style Thrift Savings Plan. That has been done many times in the past, without financial harm to investors. Both the TSP and the Treasury Department have said that once again, accounts continue to be credited with interest and that investors’ ability to borrow or withdraw money is not affected.

Still, some participants object to the use of their TSP accounts for debt ceiling relief, since those accounts are personal investments and not a government-run trust fund like the civil service retirement fund.

Q. What’s the impact of the new House bill on the debt ceiling?

A. Essentially, it would buy time for Washington to deal with the same fiscal issues that have raised the threat of shutdowns and sequestration, but without the threat of a default until at least May 18. It would not provide relief from those threats in the meantime.

The measure would add teeth, however, to an existing requirement that each chamber of Congress pass a budget outline by April 15. If either the House or Senate missed that deadline, the salaries of its members would be held in escrow until such a measure is passed. That outline, called a budget resolution, is not signed into law, but it does set standards for later spending bills.

Due to internal procedures, having a budget resolution in place could make it easier for Congress, especially the Senate, to enact deficit reduction. Many such bills that have moved in the House but died in the Senate in recent years have targeted federal pay raises, benefits and employment levels.

Q. If the government defaults, will federal employees be paid? Will they be furloughed?

A. This is largely unexplored territory, but the Congressional Research Service said in a Jan. 4 report that if the debt limit is reached and the Treasury exhausts its stopgap tools, “an agency may continue to obligate funds.” The government would continue to receive revenue from taxes and other sources and could continue to pay its bills — at least some of them, or at least partially.

“Employees would not be sent home, and checks would continue to be issued. If the Treasury was low on cash, however, there could be delays in honoring checks and disruptions in the normal flow of government services,” it said.

“In contrast to this, if Congress and the President do not enact interim or full year appropriations for an agency, the agency does not have budget authority available for obligation. If this occurs, the agency must shut down non-excepted activities, with immediate effects on government services,” it added.

As it happens, employees currently are facing that prospect, too.

Q. What is behind the threat of a government shutdown?

A. The government is operating under a “continuing resolution,” enacted just before this fiscal year started last Oct. 1, that lasts through March 27. That measure generally continued federal spending at prior levels. Such temporary measures are common, although they generally don’t last nearly as long as six months.

Congress and the White House must agree to some sort of other funding measure, or agencies for the most part will not have authority to continue spending beyond that date. That would cause a partial government shutdown.

The word “partial” is important, because in similar situations, agencies have required employees whose duties are considered “emergency” in nature to continue working.

Q. Who would stay on the job and who would be furloughed?

A. That would be up to individual agencies. Contingency plans made in 2011, the last time a partial shutdown was threatened due to a logjam over spending authority, may need to be changed.

At the time, officials said that all but about 800,000 of the 2.1 million federal employees were in positions whose duties would exempt them from being furloughed (employees of self-funding operations such as the U.S. Postal Service wouldn’t be affected).

Q. Would employees be paid later?

A. During the 2011 threat, officials said that employees who continued to work would be paid once the impasse ended but no decision was made regarding those who would have been sent home; that would be up to Congress and the White House.

Employees who were kept on the job during past partial shutdowns have been paid later, as were employees kept home on unpaid furloughs, according to the most recent CRS on the topic, issued in September 2011. However, it said, there are no guarantees that employees who do not work will be paid.

“This may be the case, because if furloughed employees are prohibited from coming to work during a shutdown, the government arguably would not be incurring a legal obligation to pay them,” CRS said. “Several considerations, including personnel costs, productivity and retention, might be weighed when assessing the issue of retroactive pay for furloughed staff.”

Q. Doesn’t sequestration also raise the threat of furloughs?

A. It does, but in a different way. While a shutdown furlough would send many employees off the job immediately and continuously until the budget impasse is solved, furloughs triggered by sequestration most likely wouldn’t begin right away and would be spread out over the rest of the year.

Automatic cuts in many programs of about 8-10 percent are now set to begin in early March unless they are delayed again or prevented. The Office of Management and Budget has said that agencies “will likely need to furlough hundreds of thousands of employees and reduce essential services such as food inspections, air travel safety, prison security, border patrols and other mission-critical activities.” The Pentagon has issued a similar warning.

In both cases, federal unions criticized the policies as directing cuts too heavily toward federal employees and not enough toward government contractors.

Some agencies have taken actions. The military services have imposed hiring freezes, with exceptions for crucial positions, on their civilian employment. They also are cutting back on expenses such as travel and training, laying off temporary employees and preparing for furloughs.

The Navy, for example, has said it would furlough employees one day a week starting April 16. The Air Force said that it will put out guidance on furloughs if it comes to that, while the Army said furloughs could happen, although they should be a “last resort.”

Other agencies could issue similar guidance soon.

Buyout and early retirement offers also could be in the mix; there’s been no word – yet – of layoffs of permanent employees.

Q. What happens to the benefits of employees put on furlough?

A. There are some differences between a “shutdown furlough” related to a lapse in agency spending authority and an “administrative furlough” caused by of a shortage of funds, as would happen in a sequester. In both cases, employees told to stop working cannot substitute paid leave for that time in order to keep their income steady, while benefits such as health and life insurance continue, with certain special rules potentially applying.

Policies for each situation are set by the Office of Personnel Management.

Q. Can salaries of federal employees be reduced in a sequester?

A. Again, there is little precedent, but according to a CRS report issued Jan. 11, a sequester order may not “reduce or have the effect of reducing the rate of pay an employee is entitled” to. In other words, pay rates would stay the same.

However, an unpaid furlough amounts to a pay cut — or extra, unpaid time off, depending on how one looks at it.

Q. What does all this mean for the prospect of a pay raise this year?

A. The continuing resolution specified that salary rates not increase through its duration. Last month, President Obama issued an order providing for a 0.5 percent general increase once that measure expires. He had stated that intent as far back as last summer.

That raise will take effect unless a law is enacted in the meantime to either continue the salary rate freeze or to set a different figure. The House initially planned to vote this week on a bill to continue the freeze for the entire calendar year, but postponed that vote when it called up its bill on the debt ceiling.

The natural vehicle for addressing the issue would be whatever measure gets enacted to replace the continuing resolution. Passage of the House’s freeze extension bill would amount to that chamber stating its position in advance of negotiations with the Senate and the White House.

Even though salary rates haven’t increased since January 2010, many employees have continued to receive raises for promotion, for performance, or by successfully completing waiting periods for advancement up the steps of a pay ladder, for occupations that use that type of pay system. That includes the General Schedule, the largest pay system, covering most white-collar employees.

The “fiscal cliff” law enacted at the start of this month prevented members of Congress from receiving a raise in 2013. They have received no raise in four straight years, five of the last seven and 10 of the last 20.

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