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Budget deal offers sequester relief, funding stability

Dec. 15, 2013 - 06:00AM   |  
By SEAN REILLY   |   Comments
A proposed budget agreement would relieve some of the sequester pressure on DoD and make funds available for critical maintenance needs.
A proposed budget agreement would relieve some of the sequester pressure on DoD and make funds available for critical maintenance needs. (U.S. Navy)

Congress is expected to give final approval this week to a two-year budget framework that would require new federal employees to pay more for their pensions but avert the threat of a partial government shutdown next month and give agencies some relief from a fresh round of sequester-related budget cuts.

The bill passed the House overwhelmingly late last week; the Senate is set to take it up this week before adjourning for the year.

For workers hired after Dec. 31, the deal would set their contributions into the Federal Employees Retirement System at 4.4 percent of salary, well above the 0.8 percent rate that most federal employees pay. Workers already on the payroll would not be affected.

“We think it’s only right and fair that [federal employees] pay something more toward their pensions, just like the hard-working taxpayer that pays for those pensions in the first place,” the committee’s chairman, Rep. Paul Ryan, R-Wis., said at a news conference at the Capitol.

The measure also would:

■ Partially repeal sequester-related budget cuts for 2014 and 2015, a step that should ease, if not eliminate, the threat of furloughs and layoffs for federal employees.

■ Offer a “self plus one” health insurance option under the Federal Employees Health Benefits Program, along with the standard family plan.

■ Slash the cap on reimbursable executive compensation for contractors to $487,000 — barely half of the $952,000 threshold that the White House budget office announced earlier this month for fiscal 2012.

The deal represents a partial victory for federal employee unions and lawmakers who strongly opposed hiking pension contributions for current employees. House Democrats in Virginia, Maryland and other areas with heavy concentrations of federal employees mostly voted for it last week. While the bill continues a Republican trend of using the federal workforce “as an ATM in the name of deficit reduction,” it is a step toward “more meaningful, lasting improvements,” Rep. Jim Moran, D-Va., said in a statement.

By providing longer-term budget certainty, the deal would allow agency managers to plan for spending reductions in other areas besides personnel, said Henry Romero, a one-time OPM executive now at Federal Management Partners, a consulting firm.

The clearest beneficiary would be the Defense Department. For 2014, the agreement would set a government-wide discretionary spending cap of $1.012 trillion, up $45 billion from the existing maximum. Of that increase, approximately half would go to DoD — enough to prevent a $20 billion cut that is otherwise set to begin next month, said Steve Ellis, vice president at Taxpayers for Common Sense, a watchdog group.

The exact 2014 levels for DoD and other agencies, however, will be fixed by the House and Senate appropriations committees, which must act within the next month to replace a continuing resolution that expires Jan. 15.

For the FBI, which has warned of agent furloughs if the full 2014 sequester cuts go through, it’s too early to tell what the deal’s impact will be, spokeswoman Allison Mahan said in an email.

The agreement marks the second time in two years that lawmakers have turned to new federal hires to shoulder the brunt of benefit cuts. Last year, Congress and the White House agreed to boost the FERS contribution rate from the traditional 0.8 percent of salary to 3.1 percent for federal workers who came on board starting this year. If approved, the new agreement will add a third 4.4 percent contribution tier for workers with less than five years federal service hired in 2014 and thereafter.

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