Federal agencies tighten belts with buyouts, early retirements

Joe Davidson
Columnist January 11, 2012

While Republican presidential hopefuls are talking about pink slips and the joys of firing people, many agencies in the Obama administration are quietly paying employees to leave their jobs.

Buyouts and early retirement programs are the scalpel Uncle Sam uses before he has to turn to the hatchet of layoffs.

Joe Davidson writes the Federal Diary, a column about the federal workplace that celebrated its 80th birthday in November 2012. View Archive

“I don’t think it is any secret that going forward the federal government will be on a strict diet and will require some belt tightening,” said John Berry, director of the Office of Personnel Management.

Federal-employee belts are the ones likely to get a lot of that tightening because the salary lines of agency budgets consume a lot of money.

OPM uses two tools to help agencies reduce their staffing levels without resorting to pink slips and firings. One is the Voluntary Separation Incentive Payments (VSIP) program, which is government-speak for buyouts. Employees can get up to $25,000 to quit. The other is the Voluntary Early Retirement Authority (VERA), which allows workers to get annuities years earlier than usual.

These programs give agency officials “the flexibility to respond to the budget situation,” Berry said, allowing them to create a “glide path” to workforce reduction rather than the crash that layoffs would be.

But if the two V’s don’t get the job done, he added, “agencies do have the tool box, which we all know goes in the direction of reduction in force” or RIFs, which means pink slips.

“Our hope is through creative use of VERA and VSIP authority and workforce strategic planning that agencies will be able to respond to the . . . ’12 and 2013 budget years without having to move into more drastic approaches like reductions in force,” he said, adding: “There may be cases where people, they’ve done all they can do with VERA and VSIP and will have to look at other options.”

OPM has a strike team to provide quick responses to agency requests for buyouts and early retirements. “We’ve approved quite a few of them, and we’ve managed a pretty good turnaround time on almost all of those,” he said. “We know, done well, this is the best way to respond to this and allow you to design your workforce to address your budget.”

Despite the increased budget pressures, he doesn’t expect the number of buyout and early retirement requests from agencies to be dramatically higher this year than last.

“It’s not a cliff,” he said.

Jack Lew, the Office of Management and Budget director, whom President Obama has named to be his chief of staff, understands how important career employees are and knows “that jarring impacts can really upset the system,” Berry added. “He recognizes we’ve got to have a tighter, leaner government, but we can do that responsibly without creating chaos.”

In fiscal 2010, OPM gave 14 departments permission to offer buyouts: Agriculture, Commerce, Defense, Energy, Education, Health and Human Services, Homeland Security, Housing and Urban Development, Interior, Justice, Labor, Treasury, Transportation and Veterans Affairs.

The same agencies were allowed to offer early retirement, except for Defense and Health and Human Services.

The next year, a dozen departments, including several of the same ones, got the okay for buyouts from OPM: Agriculture, Commerce, Defense, Energy, Education, Health and Human Services, Housing and Urban Development, Interior, Justice, Labor, Treasury and Veterans Affairs.

For fiscal 2011, all of those departments, except the Pentagon, were granted early retirement authority, and Homeland Security was added to that list.

OPM does not have the number of employees who potentially could get a buyout or an early retirement offer from their agencies.

Despite the early outs, the overall number of federal workers may not decline, at least not by much.

The White House budget plan for this fiscal year projected an increase in federal employment to 2,116,000, from an estimated 2,101,000 in fiscal 2011, not including the Postal Service. But those projections were made before the budget battles between Democrats and Republicans and the threat of automatic spending cuts to reduce the deficit.

“That being the case, I think the 2012 estimate is probably a bit high,” said John Palguta, a senior vice president of the Partnership for Public Service, a think tank that focuses on federal workplace issues. (The Partnership has a content sharing relationship with The Washington Post.) “My prediction is that the size of the federal workforce . . . at the end of FY 2011 will be the high water mark. I think we’ll see a small dip in FY 2012 and a bigger dip in FY 2013.”

Closing note: According to White House data, the number of federal employees in 2011 was less than in 1985, under former president Ronald Reagan, whom Republicans consider to be the godfather of small government, despite a national population that is about 30 percent larger now.

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