Federal workers would be held to a 5 percent pay raise and civilian and military retirees would face cuts in future cost-of-living annuities under budget proposals that were detailed yesterday by the Reagan administration.
For the first time, government employes would be asked to pay a portion of the cost of their Medicare insurance coverage similar to the Social Security hospital insurance tax now paid by other workers.
The proposals, coming at a time when the government's 1.1 million-plus civilian work force is reeling from other program and staffing shake-ups, also call for additional non-defense personnel reductions.
Since the Defense Department is exempted from having to reduce the number of its employes, President Reagan's announced intention of cutting the federal work force by 75,000 through 1984 and by another 75,000 by 1987 is aimed solely at government workers in non-military positions. Administration officials said yesterday that a good deal of the personnel cutbacks could probably be accomplished through attrition rather than reductions in force (RIFs), but it left those decisions up to the "management discretion" of individual agencies.
Analyses provided by the Office of Management and Budget said the work force reductions alone would save the government about $2.1 billion when they become fully effective in fiscal 1985.
OMB spokesmen said yesterday that the president's proposals involving federal workers were intended to hold down government costs by cutting the size of the work force and ensuring improved management of benefits for those who remain.
Unions representing federal workers were quick to criticize much of the president's proposals dealing with government employes, who were already unhappy with the 4.8 percent pay raise they received last fall. A year earlier, their pay had gone up 9 percent.
"Being one of the fortunate who need not rely on government programs, the President is out of touch or just unconcerned with the hardships his indiscriminate budget cutting creates," Vincent L. Connery, president of the National Treasury Employees Union, said in a statement.
Connery said the latest proposals by the administration would drastically cut the federal work force and further reduce pay and retirement benefits for already beleaguered government employes.
Among the major proposed budget items affecting federal workers:
Pay: A 5 percent pay raise, due in October, that employe representatives said would be disappointing to federal workers fighting to maintain salary comparability with the private sector. President Reagan does not make the final decision on what pay increase to propose until late this summer, and OMB officials said he is free to propose a figure higher or lower than that amount.
Retirees: A change in future cost-of-living adjustments for retired civilian and military government employes, 100,000 of whom live in the Washington area.
The adjustments would be limited to either the actual rise in the cost of living or the percentage pay increase that active federal workers get, whichever is less. The union spokesman asserted yesterday that, under present economic conditions, the pay raise given federal workers would surely be less and retirees thus would be "cheated" out of adequate cost-of-living adjustments.
Retirees now receive inflation-adjustment raises based on the annual rise in living costs. Under the new proposal, retirees whose annuity in any given year is 120 percent or more of the annuity of current retirees of the same grade/step and length of service would not receive cost-of-living increases. If the annuity is more than 100 percent but less than 120 percent, the adjustment would be 75 percent of the cost-of-living increase.
Medicare: Currently, more than half of retired federal workers over age 65 qualify for hospital insurance coverage even though they did not pay the hospital insurance tax. Under the budget proposal, Medicare would continue to be the primary payer after 65 but federal workers would begin paying the tax, normally 1.3 percent of their salary up to $32,400. This change would improve the solvency of the hospital insurance trust fund and provide more equitable treatment for federal workers, according to OMB.
Federal Employee Injury Compensation: Not a new proposal from the Reagan administration, this provision would alter the compensation rate for paying disability benefits and institute new safeguards against abuse in applying for such benefits.
The administration wants to pay workers compensation according to a formula based on 80 percent of take-home pay rather than a flat percentage that is now paid out. In addition, the 45-day continuation of pay during the processing of claims would be eliminated and the waiting period before compensation is paid would be extended from three to seven days. Long-term disabled employes would be transferred to civil service retirement rolls at the age of 65.
OMB said the changes were designed to return disabled workers to their jobs as soon as possible and perhaps cut down the number of claims, which have grown from 18,000 in 1970 to more than 30,000 in 1980. But union representatives said the proposals amounted to a net reduction in disabled workers' pay and threatened their ability to receive money to live on while they are disabled and their claim is being processed.
OMB spokesmen said yesterday that the retirement proposals would hold down future cost-of-living adjustments until the annuities paid to those who retired some time ago begin to match the annuities paid to new retirees, which have tended to be much lower. The present system, officials said, encourages federal employes to retire earlier, increasing the drain on the federal retirement system.
Noting the RIFs and temporary employe furloughs now being planned by many agencies, Edward Preston, OMB's assistant director for federal personnel policy, said the Reagan administration had never pretended that attempts to reduce the size of government would be "painless." Still, he said, the layoffs have not approached the high numbers initially forecast by critics of the administration's programs.