Federal workers would receive a 2 percent pay increase under terms of the deficit-reduction compromise reached yesterday between Congress and the White House, but would be denied the seniority increases nearly half had counted on this year.
The freezing of the so-called within-grade salary increases due 40 percent of the work force would "save" about $450 million over what the government would ordinarily spend on personnel costs, according to the compromise. In-grade raises increase workers' salaries by 3 percent.
At the same time, retirees who have been allowed to remove their contributions to the retirement plan as a lump sum on leaving the government will be able to take out only half as much, according to the terms.
Altogether, the compromise requires that $850 million in deficit reduction come from federal workers. The annual federal civilian payroll is $74 billion.
The Congress, however, is not bound to extract the savings in precisely the way specified in the framework agreed to yesterday, according to congressional aides. The civil service cuts are identified only as "personnel reforms."
Budget director James C. Miller III, speaking at a news conference, said, "One thing we're going to do is slow down the grade creep in civilian agencies."
Grade creep occurs when workers are classified in the general schedule at a higher level than the duties of their job would call for. The administration crusaded against this several years ago, launching what was called the "bulge project" to combat the growth in the number of positions that were classified as GS-11 to GS-15, primarily management jobs.
Administration officials said yesterday that grade creep in civilian agencies has been modest, with the sharp increases occurring at the Defense Department.
Miller explained later that he meant that the compromise would slow down increases within a given grade. Workers usually receive the longevity increases if their performance is considered to be fully successful, which almost every worker's is.
Workers get in-grade increases every year for the first three years, every second year for the next six years, and every third year thereafter until they reach the top of the scale.
Such a freeze raises equity questions because 40 percent of the workers would be penalized, while the 60 percent who were not due seniority increases this year would not be touched. Also, workers whose government anniversaries have already occurred this year might escape, leaving three-quarters whose anniversary dates occur later to absorb the cuts.
Miller, at his news conference, said he expected federal retiree lump-sum payments to be "circumscribed dramatically."
In the long run, the government saves money by allowing retirees to remove their contributions to the retirement system because it reduces their long-term benefits. But in the short run, which is the way the government budgets, it increases the deficit by showing up as a loss in the year the retirement occurs.
Should Congress be unable to pass the deficit-cut compromise, which is unpopular in many quarters, the full effects of the Gramm-Rudman-Hollings budget law's automatic cuts would be felt.
Gramm-Rudman-Hollings gives the Pentagon the right to protect certain programs from automatic cuts if Congress is notified within five days of the signing of the automatic cutback order.