Alternatives to sequester could hit federal employees in other ways

March 1, 2013

While sequestration carries the threat of widespread furloughs of many federal employees, enactment of an alternative could amount to a case of pick your poison.

Capitol Fall

Political leaders met Friday but failed, at least for now, to find a path away from budget cuts that threaten more than 1 million employees with up to 22 unpaid days off, for most starting as early as April.

That failure shifts the focus to the next budget deadline of March 27, when temporary funding for the government runs out. A new measure could, in theory at least, provide partial or full relief from the sequestration. However, many of the options in circulation would hit federal employees in other ways.

The White House recently cited a proposal from late 2012 when sequestration was threatened — before being delayed until today — as still on the table. That proposal, for example, lists $35 billion in savings from “reform federal retirement programs.”

That proposal does not give specifics, but the administration several times has proposed raising the required employee contribution to retirement by 1.2 percentage points, phased in over three years. The administration also has proposed ending a retirement supplement paid to some employees who retire before age 62, although effective only with those hired after a future date.

House Republican leaders, meanwhile, have pointed to several deficit reduction bills passed by that chamber last year. Those bills included increasing retirement contributions by 5 percentage points over five years, reducing the federal workforce by 10 percent through attrition, and continuing the freeze on federal salary rates through 2015.

House Majority Leader Eric Cantor (R-Va.) has cited the idea of increasing contributions toward retirement as a common ground. The House recently voted to deny the 0.5 percent federal raise scheduled to take effect in April.

The Senate has not taken up any of those bills. But Sen. Kelly Ayotte (R-N.H.) has proposed to extend the freeze on federal employee salary rates through 2014 and require all employees to pay an additional 2.3 percentage points toward their retirement benefits. In addition, her plan, which the Senate set aside Thursday as it took up — and defeated — competing proposals by each party, would end the retirement supplement for those hired after this year.

Also, the bipartisan Simpson-Bowles Commission recently resurfaced and advocated “modernizing civilian and military health and retirement programs” as part of a large package of spending and tax changes.

While it too did not give details, the commission’s original proposal called for increasing employee contributions toward retirement, making annuity benefits less generous in several ways, and changing the cost-sharing formula for health insurance in a way that over time could shift more of the costs onto enrollees.

Several alternatives proposed by Democrats in the House and Senate, meanwhile, would replace sequestration with revenue increases and spending cuts not affecting federal workers.

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Eric Yoder | March 1, 2013