Federal Diary: ‘Modest’ raise in Obama’s proposed budget doesn’t satisfy workforce

Joe Davidson
Columnist February 13, 2012

President Obama won’t please many folks with the federal employee provisions in the fiscal year 2013 budget plan he released Monday.

The president wants to end the two-year freeze on basic pay rates and give workers a small, 0.5 percent bump next year. But employee contributions for retirement benefits would rise 0.4 percent in each of the next three years.

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

To federal workers, this is giving with one hand while taking away with the other.

“The end result of these proposals is essentially another year of the federal pay freeze,” the Federal Managers Association said in a release.

John Gage, national president of the American Federation of Government Employees, was vehement: “This attack on federal retirements is a sop to the right wing. The GOP has insisted on huge federal retirement cuts ... and this only serves to fan the flames.”

Yet alternatives offered by Republicans would hit federal employees even harder. Twice in two months, the House has approved legislation extending the pay freeze for another year. The current freeze already amounts to a $60 billion employee sacrifice over 10 years. And six Republican senators are pushing legislation that would extend the freeze for an additional 18 months, through June 2014. But that could translate to 24 months, because federal raises are granted in January.

Earlier this month, Rep. Dennis A. Ross (R-Fla.), chairman of the House federal workforce subcommittee, called the proposed pay hike “fiscally irresponsible,” and said “an across the board pay increase for federal workers is unwarranted.”

Ross and other Republicans repeatedly cite a January Congressional Budget Office report that stated: “Overall, the federal government paid 2 percent more in total wages than it would have if average wages had been comparable with those in the private sector.”

Two percent isn’t much. Given the pay freeze, there might not be a wage gap at all in favor of federal workers.

“Because this is an analysis of 2005-2010 data, (the CBO report) does not reflect the decline in relative federal wages during the pay freeze the past two years, or the very modest pay proposal for 2013 which is well below the average private sector pay increase,” said Moira Mack, an Office of Management and Budget spokeswoman, after the CBO report was released.

A chart deep in the president’s thick budget plan shows federal pay increases dropping sharply in comparison with private workforce raises. The budget document says the administration decided on a “modest” raise, because “continuation of a pay freeze was unsustainable.”

By the way, Republicans ignore a Federal Salary Council report that says federal employees are underpaid by an average of 26 percent.

The CBO also found that in total compensation, including benefits, federal employees have a 16 percent advantage over private sector workers. CBO added, however, that “estimates of the costs of benefits are much more uncertain than its estimates of wages.” In any case, the report did not take into account the additional 1.2 percent of salary, over three years, the administration wants employees to contribute toward retirement benefits. That is expected to cost workers $27 billion over a decade.

Republicans are pushing plans to increase the employee contribution toward retirement by 1.5 percent of salary over three years, also starting next year.

After the budget release, Ross said Obama’s plan for increasing retirement contributions “is a good start, but nowhere near where most agree it needs to be.” In this case “most” must mean Republicans, because Democrats and federal employees certainly don’t agree.

Obama’s plan would end a Federal Employees Retirement System benefit for most newly hired employees who retire before age 62. That payment, worth about $8,000 annually on average according to a congressional estimate, replicates the portion of the Social Security benefit earned during federal employment. It is paid until those retirees are eligible to begin drawing Social Security benefits.

The change would apply only to those hired after enactment of the budget and would exempt occupations subject to mandatory retirement before age 62, such as law enforcement. The administration’s proposal, first made last fall, differs from a House Republican plan that would eliminate the benefit for most retiring after this year.

The budget also repeats a proposal the administration first made in 2010 that would allow federal employees to phase into retirement by working part time while receiving both their full salary and their full annuities. Under current law, retirees who return to government work generally have their pay reduced by the amount of their pensions, although there are limited exceptions.

Under the proposal, these retirees typically would work half-time and spend a fifth of their time mentoring younger employees. When they ended the phased retirement period, they would receive a supplement to their annuity that would be prorated according to their hours of work.

Staff writer Eric Yoder contributed to this column.

Previous columns by Joe Davidson are available at wapo.st/JoeDavidson . Follow the Federal Diary on Twitter: @JoeDavidsonWP.

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