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Extended pay freeze, layoffs likely

Nov. 28, 2011 - 08:48AM   |  
By STEPHEN LOSEY   |   Comments
Rep. Steny Hoyer, D-Md., is one of several leaders who say the sequestration cuts could prompt Congress to extend the current two-year pay-scale freeze by at least one more year.
Rep. Steny Hoyer, D-Md., is one of several leaders who say the sequestration cuts could prompt Congress to extend the current two-year pay-scale freeze by at least one more year. (Gannett Government Media Corp)

The supercommittee's failure to strike a deficit deal and triggering of $1.2 trillion in sequestration cuts could prompt the most drastic government realignment since the Clinton administration.

The sequestration cuts technically begin in January 2013, but experts say agencies will probably start laying the groundwork this fiscal year to prepare for those budget reductions. That's likely to mean 2012 will see a hiring freeze, buyouts and early outs, and maybe even layoffs through reductions-in-force to start bringing payroll costs down.

Agencies could be forced to cut tens of thousands of vital jobs, such as Border Patrol, FBI and other law enforcement agents, Transportation Security Administration screeners and air traffic controllers.

It won't stop there. Hundreds of thousands more employees are likely to be furloughed at agencies such as the Defense and Justice departments and the Federal Aviation Administration some for more than a month.

And some experts including House Minority Whip Steny Hoyer of Maryland think the sequestration cuts could prompt Congress to extend the current two-year pay-scale freeze by at least one more year.

"I think everything's a possibility," said Julie Tagen, legislative director for the National Active and Retired Federal Employees Association. "All of the options are bad for the workforce."

Some federal employees may feel they dodged a bullet when the supercommittee collapsed, since some lawmakers were pushing the panel to cut federal benefits as part of a deficit reduction package. But that relief will likely be fleeting. John Palguta, vice president for policy at the Partnership for Public Service, expects that as Congress scrambles to cut the budget next year, lawmakers will once again consider benefit cuts such as increasing the amount feds contribute to their pensions, basing pensions on the average of their five highest annual salaries instead of their three highest salaries, or basing pension cost-of-living adjustments on a lower inflation rate.

"When you get into a situation like this, you put everything on the table," Palguta said. "It will be a time of increased anxiety for federal employees. We'll see all these things discussed, and at least the possibility that some will be enacted."

‘No easy off ramps'

None of these options is inevitable, of course. Congress could still strike a broad deficit reduction deal to avoid the sweeping across-the-board sequestration cuts. Or Congress could exempt the Defense Department from its half of the sequestration cuts, or even undo the cuts entirely.

But none of these alternatives is likely to happen. The gulf between parties particularly on taxes for the wealthy is growing wider and wider, making it extremely unlikely Democrats and Republicans will be able to find common ground to reduce the deficit next year. And President Obama last week threatened to veto any attempt to undo the sequestration cuts or exempt Defense.

"There will be no easy off ramps on this one," Obama said.

Agencies are in the midst of preparing their fiscal 2013 budget requests, but the Office of Management and Budget has not yet provided them guidance on how to prepare for sequestration.

"There is more than a year for Congress to do its job, which we expect to include balanced deficit reduction at least equal to what the supercommittee was charged to accomplish," OMB spokeswoman Meg Reilly said in an email. "Congress can still act to avoid the sequester, and we expect them to live up to their responsibility and do so."

In a Sept. 12 report, the Congressional Budget Office predicted that under the sequestration process outlined in the Budget Control Act, defense spending would be cut nearly $55 billion each year, or about 10 percent, beginning in 2013, saving $492 billion by 2021. Spending at non-Defense agencies would be cut anywhere from $39 billion, or 7.8 percent, to $33 billion each year, saving $322 billion by 2021. Another $170 billion would be cut from Medicare and other programs over the next decade, and reducing debt service costs would save $169 billion more.

Paul Posner, a former Government Accountability Office official who now teaches at George Mason University, thinks some changes will be made to the cuts. In the 1980s, when lawmakers also used the threat of across-the-board cuts to attack budget deficits, he said, such reductions were never allowed to take full effect, but they helped prod lawmakers to take a less-drastic approach.

Hoyer called the supercommittee's failure to reach a deal "unconscionable." Sequestering $1.2 trillion in across-the-board budget cuts "is not rational," he said, since it doesn't differentiate between high-priority and low-priority programs. But undoing the automatic trigger and reneging on the fallback cuts agreed to earlier this year as some Republicans have proposed would be even worse, he said.

"Doing nothing is not an option either," Hoyer said. "Cutting the $1.2 trillion is absolutely essential. We need to make a decision on taxes, and entitlements and other spending as well. It's not going to go away."

Agencies must prepare

Hoyer said federal managers should start preparing for the sequestration cuts right away.

"Obviously they need to be thinking about, ‘If sequestration occurs, what impact does that have on me?'" Hoyer said. The preparations should not only be "for their own management, but also to inform Congress and the American people that if they do this, this is what happens. If it means children are not going to be fed, kids not be educated, firefighters not on the job, you need to know, this is the consequence of our decision."

Hoyer said transportation projects in his state will likely be hit by sequestration cuts, as would Defense facilities such as the Naval Air Station Patuxent River.

Defense Secretary Leon Panetta on Nov. 14 told lawmakers that sequestration would mean vast layoffs and furloughs of Defense civilian employees, such as contracting and payroll personnel. Republicans on the House Armed Services Committee expect at least 200,000 Defense civilians more than a quarter of the total workforce would have to be furloughed, some for more than a month.

And Democrats on the House Appropriations Committee estimate that tens of thousands of non-Defense civilians will lose their jobs because of sequestration. That will mean longer lines for airport screening, fewer food inspections, fewer law enforcement personnel investigating cases, and fewer Border Patrol agents, Rep. Norm Dicks of Washington, the committee's ranking Democrat, said in an Oct. 13 letter to the supercommittee.

The Administrative Office of the U.S. Courts said it provided Dicks' staff with the staffing reduction figures cited in his letter. The courts expect to have to cut 36 percent of their workforce, or 7,800 court staffers, and another 453 court security officers.

Justice said that cutting 7.8 percent from its budget would leave it with $2.1 billion less than it had in fiscal 2011. But increased rent bills, contributions to health care and retirement, and other unavoidable cost increases would bring Justice's cuts up to $2.9 billion more than a 10 percent cut from fiscal 2011 levels.

Should these cuts materialize, as expected, Justice would first continue its hiring freeze and leave 4,000 already-vacant positions unfilled to try to plug that 10 percent funding gap. But that would not be enough Justice said it probably would have to cut about 16,000 positions in fiscal 2013. That's almost 14 percent of its current 117,000-person workforce.

The remaining Justice employees would have to be furloughed about 25 days or in the case of Bureau of Prisons employees, up to 30 days. Cutting almost 2,200 prison guards would result in 5.6 inmates for every remaining guard, up from 4.9 today. Justice said this would likely mean more inmate violence and put guards at greater risk.

Justice said it would also run out of funding to detain suspects awaiting trial or sentencing two months before the end of fiscal 2013. And Justice said investigations and prosecutions into terrorism, drug dealing, gangs, gun-running and violent crime would be severely hindered. That would mean fewer criminal fines and forfeited assets going to the government, which means less revenue, Justice said. And with fewer attorneys on staff, Justice said it could be forced to settle some lawsuits earlier, on less-favorable terms.

"Sequestration in 2013 could have significant, devastating consequences to the Department of Justice's ability to carry out its core mission," Justice spokeswoman Adora Andy said in an email.

At the Energy Department, a workforce review board is looking at how programs and employment might be affected, said Michael Kane, the department's chief human capital officer.

Spokesmen for several other agencies, including OMB, declined to discuss the consequences of sequestration or did not respond.

Henry Romero, a former executive at the Office of Personnel Management, and Palguta said it's unlikely the staffing cuts will even come close to the 350,000 positions cut during President Clinton's government downsizing. But if sequestration does happen, the government is certain to see the steepest cuts since the 1990s.

Agencies will likely try to achieve the necessary cuts through attrition, early outs and buyouts, Palguta and Romero said, and try to avoid highly disruptive RIFs. But they fear some agencies will have no choice but to resort to RIFs to achieve those steep cuts.

"There may be no other solution," Romero said. "When things get really tough, [agencies] have no choice but to stop doing certain things. And there are probably people in those jobs doing that function. So if people don't take a buyout or leave through normal attrition, they'll have no choice but to do a RIF."

sreilly@federaltimes.com?subject=Reader Question">Sean Reilly contributed to this report.

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