Senate Majority Leader Harry Reid speaks at a press conference in Washington, D.C., on Wednesday. The nearly $1 trillion in spending cuts Congress approved last week does not include increases to federal employees' retirement contributions, lower pensions or lower cost-of-living adjustments, but that relief is likely to be fleeting. (Chris Maddaloni / Army Times)
Federal employees who feared that a debt-ceiling deal would mean steep cuts to their pay and benefits have been given a reprieve.
But that relief is likely to be fleeting — those feared cuts could come in a few short months.
The nearly $1 trillion in spending cuts Congress approved last week does not include increases to federal employees' retirement contributions, lower pensions or lower cost-of-living adjustments for federal retirees, all of which were being considered by the White House and House Republicans. But experts said they believe the second round of deficit reduction — which will cover entitlements and additional revenues — will contain many provisions affecting federal employees.
A bipartisan, bicameral "super committee" of 12 senior lawmakers must find as much as $1.5 trillion in additional savings by Nov. 23.
"We're happy there are no cuts to federal pay and pensions, but moving forward, we're still facing a slippery slope," said Matt Biggs, spokesman for the International Federation of Professional and Technical Engineers (IFPTE). "We still remain very leery on what [the super committee] will do."
And although the initial $1 trillion in across-the-board cuts does not specifically target federal employees, they are still likely to cause headaches as they become reality over the next decade.
Dan Adcock, legislative director for the National Active and Retired Federal Employees Association, said those cuts are likely to translate into staffing cuts, hiring freezes, and canceled programs.
For feds nearing retirement, there is one possible silver lining in this: These cuts could mean more buyout and early-retirement offers at some agencies, he said.
"It ratchets down even further on the resources available to federal agencies," Adcock said. "It's going to be a real challenge to federal managers to continue to do more with less. Hopefully, agencies will do everything short of [laying off] federal workers, whether through a freeze or downsizing through attrition."
American Federation of Government Employees President John Gage said the cuts could cost tens of thousands of federal jobs as agencies struggle to contain spending. This will further harm the already-ailing economy, Gage said.
Likely near-terms cuts
Training and travel — traditionally the first areas cut when money gets tight — are almost certain to be slashed, Adcock said.
Adcock worries that the steady drumbeat of bad news for federal employees and criticism may be demoralizing, and could increase attrition. He adds that older feds who fear getting stuck with a reduced pension may speed up their retirement plans.
But although several lawmakers are considering trimming federal pension costs by transitioning from a high-3 system to the high-5 system — in which annuities are based on the average of an employees' five highest annual salaries, instead of the current three — the change isn't here yet.
"It would be a mistake for them to leave based on a proposal," Adcock said. "If it's concrete, that's another thing. But we just don't know how all that's going to play."
The $1 trillion in discretionary cuts won't be imposed all at once but parceled out over the next 10 years. Adcock said lawmakers could possibly extend the current pay-scale freeze beyond 2012 to help reach those cuts, though he said that would be a bad idea.
"Anything's possible," Adcock said. "One would hope that they don't go to pay specifically. And to do it in a hurry could be harmful to the federal workforce. But sometimes these decisions are made on the fly, without a thoughtful process."
Federal unions and other employee organizations are already turning a wary eye to the super committee, which could revive the pay and benefits cuts that were stripped from the debt ceiling deal.
How pension cuts were spared
Before talks broke down July 22 between President Obama and House Speaker John Boehner, R-Ohio, they were reportedly close to a deal that would have increased the amount federal employees contribute to their pensions every pay period, which would have felt like a pay cut. Obama and Boehner were also zeroing in on a high-5 pension plan, and using a so-called chained Consumer Price Index to calculate COLAs for federal and military pensions and Social Security that would have lowered annual adjustments by about one-quarter of a percentage point.
Under the scuttled deal, new federal employees would probably have contributed vastly more to their Federal Employees Retirement System (FERS) pensions — up from the current 0.8 percent to about 6 percent. Current FERS and Civil Service Retirement System employees would also have increased but to a much less degree. Their rates would have been increased by about 0.5 percent each year for three years, after the federal pay freeze ends.
AFGE spokesman Tim Kauffman said Republicans' insistence that the deal not include additional revenues may have spared federal employees from increases to their pension contributions.
"That was supposed to be scored as a revenue enhancer, if you're raising the pension formula," Kauffman said. "But all revenues were off the table, including tax increases."
Biggs said Senate Majority Leader Harry Reid, D-Nev., deserves the lion's share of credit for getting federal employee pay and benefits removed from the final agreement. The proposal he unveiled July 25 did not touch pay and benefits, and provided the framework for the final deal.
"The one that really delivered was Reid," Biggs said.
Reps. Steny Hoyer, D-Md., and Chris Van Hollen, D-Md., also pushed to avoid pay and benefit cuts for federal employees.
"These men and women have clearly sacrificed to help put the nation on sounder fiscal footing," Hoyer said Aug. 1. "It is essential that they not be singled out to make additional sacrifices that, on top of the two-year pay freeze, would impose greater financial challenges on them."
All eyes on the super committee
National Treasury Employees Union President Colleen Kelley said her union will watch that committee closely to ensure they don't change federal employees' retirement or other benefits. Kelley said federal employees did not cause the current economic crisis and said it can't be fixed by targeting their pay and benefits.
Many Republican lawmakers disagree, and say federal employees' compensation is too generous and should be scaled back.
Adcock fears that with tax increases and Medicare and Medicaid being such hot political topics, the super committee will see federal employee pay and benefits as an easier target for cuts. He said NARFE plans to use its grass-roots "Protect America's Heartbeat" campaign to lobby the super committee and ensure feds don't bear a disproportionate share of the budget-balancing burden.
"We're going to focus on those 12 members, and educate them on the contributions federal workers make to the daily lives of all Americans," Adcock said. "Feds and retirees tend to be the low-hanging fruit in budget battles. Feds are willing to do their part [to reduce the debt], but if they're the only one standing, that's not equitable."
If the super committee cannot reach an agreement on $1.5 trillion in deficit reduction, or if Congress does not approve their plan, $1.2 trillion in automatic spending cuts would be triggered. But federal and military retirement benefits are specifically excluded from those automatic cuts.