Federal workforce would share deficit-reduction pain in various ways

By Joe Davidson
Washington Post Staff Writer
Wednesday, December 1, 2010; 10:40 PM

The federal workforce would take a hit, along with many other parts of government, under a plan released Wednesday by a presidential commission that's trying to get the nation's finances in order.

Nothing would be spared: pay, staff size, health insurance benefits, even retiree programs.

Well, almost nothing. Contractors, who can be considered part of the federal workforce broadly defined, are untouched in the report. That's a major change from the panel's draft document.

Otherwise, workforce proposals in "The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform" closely track key points of the draft released last month by the co-chairmen, Alan K. Simpson, former Republican senator from Wyoming, and Erskine Bowles, a Clinton administration White House chief of staff.

"Al and I are not going to wimp out," Bowles told a commission meeting. "It's go big or go home."

Many federal employees probably wish the panel had gone home. Even if the report is not adopted by the full commission, the recommendations are just the latest indication of the significantly more constrained atmosphere surrounding the federal workplace. That includes the two-year federal pay freeze President Obama proposed this week.

A vote on the commission's report, originally scheduled for Wednesday, was moved to Friday.

Like the November document, the report released Wednesday would impose a three-year freeze on federal workers, including Defense Department civilians, and cut the federal workforce through attrition by 10 percent or about 200,000 positions.

First the report's soft soap: "Out of duty and patriotism, hardworking federal employees provide a great service to this country."

Then reality: "But in a time of budget shortfalls, all levels of government must trim back."

Estimated savings: $20.4 billion in 2015.

Average pay for federal workers is about $74,000 a year, the Office of Personnel Management says. Average total compensation is about $95,400, of which benefits account for about 29 percent.

Presumably, no current employees would lose their jobs under the plan to shrink the workforce. In fact hiring would continue, though at a reduced rate. "As part of the transition to a smaller, more efficient workforce, this would mean hiring only two new workers for every three who leave service," according to the report. "This proposal will save $13.2 billion in 2015."

No mention was made of the impact fewer workers would have on customer service. Colleen M. Kelley, president of the National Treasury Employees Union, said it "would have a devastating impact on the ability of the federal workforce to provide the services Americans need and expect."

The earlier draft said 250,000 non-defense contractors should be cut and suggested slicing Pentagon contractors by more than half. It's not clear why, but this time, they emerged without a scratch.

Workers would probably pay more health insurance under a voucher system proposed by the commission. The projected savings is $18 billion through 2020. Federal Employees Health Benefits Program would provide a subsidy whose growth would be limited to the amount of the increase in the gross domestic product plus 1 percent. Based on recent annualized GDP growth, for example, the subsidy would increase no more than 3.5 percent. But the average health premium increase for federal workers next year is 7.2 percent.

"For federal retirees, this subsidy could be used to pay a portion of the Medicare premium," the report said.

The commission warned, however, that "a voucher or subsidy system holds significant promise of controlling costs, but also carries serious potential risks."

One risk, more like a sure thing, said Jacqueline Simon, public policy director of the American Federation of Government Employees, is that vouchers "would drastically accelerate" the trend toward having workers pay more for health insurance.

Workers could pay more as a result of the commission's call for creation of another panel, a "federal workforce entitlement task force to re-evaluate civil service and military health and retirement programs and recommend savings of $70 billion over ten years."

Possible changes the task force might consider include basing federal retirement payments on the five highest years of employee earnings, instead of the three highest. Deferring cost-of-living adjustments and raising employee contributions to retirement plans also should be considered, the report says.

Retirees would end up "paying more for smaller benefits," said Daniel Adcock, legislative director of the National Active and Retired Federal Employees Association.

That's the idea.

"Military and civilian pensions are both out of line with pension benefits available to the average worker in the private sector, and in some cases, out of line with each other across different categories of federal employment," the report says.

The financially ailing U.S. Postal Service would have greater ability to manage what now seems a bleak future. Billions in the hole, the Postal Service, which does not rely on tax dollars, wants authority to eliminate one delivery day, but Congress has no appetite for that. For the commission, it's just one more piece of bad-tasting but necessary medicine:

"To put the Postal Service on a path toward long-term solvency, the Commission recommends reversing restrictions that prevent the Postal Service from taking steps to survive - such as shifting to five-day delivery and gradually closing down post offices no longer able to sustain a positive cash-flow."

Staff writer Eric Yoder contributed to this column.

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