Budget Winners and Losers

By Stephen Barr
Tuesday, February 6, 2007

The budget that President Bush sent to the Congress yesterday contains nuggets of good news for federal employees: Their numbers would grow, as would their salaries.

But those retiring after relatively short careers would lose part of the standard health insurance subsidy. And many employees not involved in national and homeland security would see their programs operate with flat or reduced funding in fiscal 2008.

According to the president's plan, executive branch employment, excluding the Postal Service, would increase to more than 1.87 million civil service workers, up by 2.8 percent compared with fiscal 2004. The budget numbers show that the government would add 40,000 full-time employees to the 2006 tally of 1,832,800.

Much of the hiring would be in response to added duties for homeland security and fighting terrorism, the budget said. The Department of Homeland Security, for example, would receive funding to hire an additional 3,000 Border Patrol agents.

The budget also would add staff at the U.S. Patent and Trademark Office, the Food and Drug Administration, the Federal Aviation Administration, the Energy Department's National Nuclear Security Administration and in federal prisons. The Census Bureau would also grow by opening regional offices in preparation for the 2010 census.

But some agencies would lose employees. The biggest loser would be the Agriculture Department, which would decline by about 5,000 workers in 2008, compared with 2006.

Civil service and military personnel would receive a pay raise of 3 percent in 2008, according to the budget. The proposed raise, announced Friday by the Office of Management and Budget, will be reviewed by Congress.

The National Treasury Employees Union objected to the budget's proposal to allow the president to allocate some of the pay raise to address recruitment and retention challenges in government. Colleen M. Kelley, the union president, said the raise should be at least 3.5 percent, given that the 2007 raise was the lowest in 20 years.

Bush's budget also included a discussion of military compensation that said "military members are compensated well above comparably aged and educated civilians" in the private sector. That argument rested largely on the higher deferred payments for health-care and retirement benefits for military personnel. Overall, the budget said, current and future pay and benefits average more than $100,000 per service member.

The budget would make changes to the Federal Employees Health Benefits Program. The biggest policy change would reduce the subsidy that the government provides for retiree health-care costs.

Currently, federal employees who retire with five years of continuous service receive the same subsidy as they did when they were working. Under the formula, the government pays about 70 percent of the health insurance premium.

The budget proposal would require employees to have 10 years of government service for the government to pick up 70 percent of the premium. The government would pay only half of the subsidy, or 35 percent, on behalf of those with only five years of service and would phase in higher contributions for those with more than five but less than 10 years of service.

Each year, the government has about 550 employees who retire with more than five but less than 10 years of service, the Office of Personnel Management said. They make up a small part of the annual retirement exodus that ranges from 60,000 to 70,000.

Linda M. Springer, director of the OPM, said the budget proposal sought to "create greater equity" between those who served a full career in government and those who joined relatively late in their careers, perhaps motivated by the opportunity to claim relatively generous health benefits in retirement. "We don't want people just coming opportunistically to join us," she said.

But Judy Park, legislative director for the National Active and Retired Federal Employees Association, suggested that the proposal could hamper the government's ability to hire mid-career professionals at a time when federal agencies will be coping with substantial numbers of baby boom retirements. "If the government is trying to be more competitive in getting middle-management people to fill those positions, then is this not tearing down their competitive edge?" she asked.

The changes to the health benefits program also affect the Patent and Trademark Office, requiring the agency to set aside money to cover retiree health-care liabilities. OPM officials said the patent office operates through fees and should take over its retiree obligations, much as the U.S. Postal Service has for its retirees.

The administration also seeks to allow the largest carrier for the Federal Employee Health Benefit Program, Blue Cross and Blue Shield, to offer a third health insurance option, probably a high-deductible plan featuring a health savings account. Currently, Blue Cross is limited to two options.

Stephen Barr's e-mail address isbarrs@washpost.com. Diary associate Eric Yoder contributed to this column.

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