Budget Director James C. Miller III last night seriously wounded and may have killed a proposal to implement the deficit-reduction agreement with the help of an increase in the cost of postage stamps.
Desperate for "personnel reforms" to produce $1.7 billion in savings specified by the administration and congressional negotiators last month, Congress had turned to the Postal Service.
Congressional committees considered asking the Postal Service to pick up the tab for cost-of-living raises for its retirees, Postal Service budget officer Stephen P. Dargusch testified before the Postal Rate Commission Tuesday. The cost, $1.9 billion over two years, has been subsidized by the taxpayers, although the post office is now a semiprivate corporation.
The Postal Service has had a 16 percent rate increase pending since last May that would raise the cost of a first-class stamp to 25 cents. Requiring the post office to pay the full cost of its retirement system in advance would make a rate increase virtually inevitable. Some congressional aides say that the move might push the cost of a stamp to 26 cents.
"We won't score it," Miller said last night, referring to the budget term for counting deficit savings. "I said during deficit negotiations that I wouldn't score it, and it resurfaced and I said again I wouldn't score it.
"It presupposes that the Postal Service will pay for it by lowering costs or raising rates sufficient to recover the difference," he said. The Office of Management and Budget is smarting from having approved an earlier capital improvement plan for the Postal Service that just "increased the deficit," he said, because the service neither lowered costs nor raised revenues enough to pay for it.
Miller said, however, that he had "agreed to go back and look at the postal area" for savings that would meet the terms of the deficit-reduction agreement.
Postal Service spokesman Frank S. Johnson Jr. said the Postal Service "was not at all sure" the retirement funding proposal was "a good move. It would add a large amount to our cost base and we have no indication the rate commission would allow us to make it up."
About $1.7 billion in cuts over two years from federal personnel accounts were called for in the deficit-reduction agreement announced Nov. 20.
Congressional aides said at the time that the negotiators had decided to freeze seniority pay increases for federal workers and limit retirement fund withdrawals. But neither cut was written in stone.
It soon became clear, according to administration and congressional officials, that the seniority pay freeze wouldn't save half the $450 million that bargainers initially claimed it would.
This was because the average federal worker doesn't get the so-called "in-grade" step increase for the full year, but only on the anniversary of his or her government service. Federal workers periodically get "in-grade" increases as they move up in seniority on the civil service scale. On average, federal workers get their seniority increases for only half the year they are awarded.
A second proposal to limit retirement fund withdrawals to half the money contributed to the system by the retiree may also produce less revenue than expected. This is because government personnel officials say many retirees would simply move up their retirement dates to take advantage of the more generous provisions.
One Senate staff member said last night that Miller's statement made changes in civil service retirement fund withdrawal regulations a more likely target than previously, despite its uncertain yield in deficit reduction.