Federal and military retirees -- 100,000 of them here -- have a big stake in the budget President Reagan will send to Congress Wednesday. Key political and career brass involved in writing the pension portion of that budget are divided into two camps: The chop-chop group and the promise-is-a-promise faction.
The chop-chop folks want to change the system that gives retirees inflation adjustments each March and September. They favor a proposal in President Carter's final budget. It would limit U.S. retirees to one cost-of-living raise each year. Their argument is that it is only fair, since most people whose pay or benefits are tied to the Consumer Price Index (including everybody under Social Security) get only one raise a year, if that, and hardly anyone gets a full inflation catch-up.
The second faction points out that the changeover would save the government very little, and most importantly from a political standpoint, would force President Reagan to go back on a campaign pledge he made to government retirees last year.
In an Oct. 3 letter to the National Association of Retired Federal Employees, Reagan siad, "I do not favor abandoning the present semiannual indexing" system for government retirees. The letter was drafted by Max Hugel, then of the Reagan press office and signed by the candidate.
Unlike active duty federal workers, retirees are not covered by the Hatch "no politics" Act.
NARFE, the biggest of all federal-postal groups, used the Reagan letter in chapter meetings from Florida to California. Many retirees worked to get out the Reagan vote. The association took a poll after the election. About 80 percent of those responding said they voted for Reagan. Most citied his pledge to keep the twice-yearly COL cycle as a big reason for the Reagan vote.
Attempts to get a sneak preview of the Reagan plan for retirees resulted in mixed signals:
Some top federal officials say they have been tipped, or deduced from questions asked them abou the COL process, that the budget will propose a single-raise system.
Others say Reagan will finesse it -- that is, protect his promise -- by ignoring the COL question. That would still leave Congress free to take action against the twice-yearly COLs without making Reagan the bad guy. It could be attached to a bill that Reagan would "have" to sign. Like a tax cut bill.
Reagan could make less drastic changes by advocating a revised Consumer Price Index. It would exclude the costs of new home purchases from the monthly inflation measurement and substitute rental costs. The theory there is that few retirees are buying new houses. Such a revised CPI system would have "reduced" the 1980 inflation rate by two percent.
Budget-cutters also are discussing retaining the twice-yearly COL raise system for retirees below a certain income level, and putting those retirees who get higher annuities under a single annual COL system.
Reagan's budget will be out this week. Even if he decides to keep the twice-yearly COL system -- as he promised -- Congress still could take action on its own. Both the Senate and House last year tentatively approved a one-shot COL system, but backed off after heavy lobbying from retirees, their organizations and federal and postal unions.