The inability of Congress and the White House to reach a budget agreement means that all bets are off as to the timing and amount of next year's raise for federal workers and retirees, and the status of the lump-sum pension option.
Earlier this year it appeared that workers would get a January raise of 3.5 percent to 4.1 percent; that retirees could count on an inflation adjustment of about 5 percent, and that about-to-retire workers would be able take a lump-sum pension payment in two installments.
The items at stake in the unresolved budget negotiations:
Furloughs: The Office of Management and Budget has told agencies to prepare for furloughs that could begin in October if no budget agreement is reached and mandatory cuts required by the Gramm- Rudman-Hollings Act go into effect. Officials hope for an agreement early next month that would eliminate the need for furloughs. That happened in 1982 when 40,000 federal workers were furloughed briefly when Congress and the White House couldn't agree on spending targets.
1990 Pay Raise: The budget flap will determine the size and timing of the next raise. White-collar nonmilitary workers are due an increase in January. The White House originally proposed a 3.5 percent adjustment. The House approved a 4.1 percent raise. The Senate budget doesn't address the pay issue. Economizers may seek to scale down the raise -- to about 3.5 percent -- and to delay it until mid-1991 or until Oct. 1, the start of the 1992 fiscal year.
COLAs: Retired federal and military personnel are due a cost of living adjustment (COLA) of about 5 percent in January. But economizers may seek to delay the raise or give retirees a smaller increase.
Lump-Sum Payments: Federal retirees may now elect to take a reduced annuity and get a lump-sum pension payment that is equal to about 7 percent of their lifetime salary. They get 50 percent of the lump-sum payment shortly after retiring, and the remainder one year from the date of retirement. That 50-50 split is due to end Sept. 30. Afterward, unless Congress extends the program or changes it, retirees would get a single lump-sum payment. The administration wants the lump-sum option ended. Congress isn't likely to allow it to revert to a single 100 percent payment because of the added cost to the government.
Insiders say budget negotiators could extend the 50-50 lump-sum payment, spread the payments over three years, or eliminate the lump-sum benefit entirely for maximum savings to the government. Unfortunately, Congress may not decide the lump-sum issue until late next month or early October.
Workers who want to be sure they retire in time to get the 50-50 lump-sum payment should be prepared to have their retirement effective no later than Aug. 31 if they are under the Federal Employees Retirement System, or no later than Sept. 3 if they are under the old Civil Service Retirement System.
Check this space tomorrow for a complete update on the lump-sum payment situation.