The good news-bad news scenario for federal workers began to solidify yesterday as Congress moved toward final action on deficit reduction and tax reform. The bad news for federal retirees appeared to be that:
*The 3.1 percent cost-of-living raise programmed to show up in the January checks of government retirees, including 100,000 in this area, will probably disappear in February as the result of of Senate-House action under way on the budget deficit reduction plan.
The so-called Gramm- Rudman-Hollings amendment to the balanced-budget bill that was being debated yesterday would put a hold on the COLA due government retirees. They would still get the raise, amounting to about $28 for the typical retiree, next month. But the increase would be rescinded thereafter as part of an effort to trim $1.6 billion from federal outlays during the fiscal year.
Congress is to decide in March what kind of COLA, if any, should be allowed for retirees in 1986. Under the complex procedure being established, retirees could get some raise or nothing at all.
Moves on the Hill to trim COLAs have infuriated the National Association of Retired Federal Employees, which has one of the 10 largest political action committee funds in the nation. Association officials say officials of the fund, which collected $700,000 in contributions in the last three months, will take no further requests for financial help from members of Congress pending a review of votes on the issue.
The good news for federal workers:
*The House rejected the Democratic version of the tax reform bill, primarily because of a pension tax change that would have affected 19 million federal, state and local government workers, teachers and others who contribute toward their retirement plans.
The new tax rules would have required persons retiring after July 1 to start paying taxes on a portion of their pensions, even though their contributions were taxed initially. Under current law, the retirees' pensions are tax free until they recover all the money they put into the system.
Some members of Congress warned that the pension tax change could stampede up to 200,000 of the government's best and most senior employes into early retirement.
The House sent the tax reform bill back to the Rules Committee with the understanding that it either strike the pension tax proposal or allow an amendment that would do the same thing when the reform bill comes before the House.
Public employe leaders were elated yesterday by the 223-to-202 House vote sending the tax reform bill back to the Rules Committee. It had seemed assured of passage.
But the rejection enraged leaders of the House Ways and Means Committee. They had put in the pension tax plan to help raise revenues -- but had included an exemption for members of Congress and political appointees.