A National Park Service employee posts a sign on a barricade Oct. 1 to close access to the Lincoln Memorial in Washington. (Carolyn Kaster / AP)
For federal employees, the newly approved budget deal assures them their first across-the-board pay raise in four years, eases the threat of job cuts and furloughs, and offers hope for a respite from a string of budget crises that have wreaked havoc with agency planning.
But it also means that new federal hires will pay dramatically more for their pensions. And although the deal rolls back some of the sequester-driven spending cuts set to take effect next month, it locks in tight budgets for the next two years.
After winning final congressional approval Wednesday, the legislation now goes to President Obama for his signature. For fiscal 2014 and 2015, it would keep federal discretionary spending virtually frozen at just over $1 trillion, according to an analysis by the Bipartisan Policy Center, a private think tank.
Even with the partial sequester relief, agencies “will still be pretty squeezed,” said Shai Akabas, the center’s associate director for economic policy.
Although Congress still has to approve a full-year spending bill to replace the continuing resolution that expires Jan. 15, the new framework “gives some predictability and stability to the appropriations process,” said Dan Blair, president of the National Academy of Public Administration and a former interim head of the Office of Personnel Management.
Federal managers are ‘giddy” at the prospect of being able to plan a year or two ahead, said Debra Roth, an attorney specializing in federal personnel law who writes a column for Federal Times. “This is how government should work.’
Roth also predicts the agreement will reduce the likelihood of large-scale furloughs and reductions-in-force. Although the Defense Department may proceed with some limited RIFs, for example, “I think there is no longer going to be a dramatic across-the-board event,” she said.
The bill allows Obama to go ahead next month with a 1 percent pay raise for most federal workers, The increase, the first of its kind since 2010, does not apply to some 200,000 blue-collar employees paid under the Wage Grade schedule; the American Federation of Government Employees is urging passage of a separate measure sponsored by Rep. Matt Cartwright, D-Pa., that would give those workers the same 1 percent increase. Despite bipartisan support, Cartwright’s bill has no chance of passage before next month because House members have already adjourned for the year.
Also starting next month, however, new federal employees will pay more than five times as much for their pensions as the bulk of the current workforce.
For most participants in the Federal Employees Retirement System, the contribution rate is 0.8 percent of salary; for workers hired after this month, their share will be 4.4 percent. For someone with an annual salary of $50,000, that means paying $2,200 per year under the new rate, versus $400 under the one in effect before this year.
The measure will save the U.S. Treasury an estimated $6 billion over the next 10 years, according to the Congressional Budget Office. As a growing share of the workforce is covered by the higher rate, the savings will amount to almost $20 billion in the second decade, Rep. Darrell Issa, R-Calif., said in a news release hailing the change.
But Blair questioned whether the boost will ultimately hurt agency recruitment. “It’s an employer’s market when it comes to jobs right now,” he said, “but with the economy picking up, that can switch very quickly.”
Finally, the bill will add a “self-plus-one” option to the Federal Employees Health Benefits Program. The administration proposed the change in its fiscal 2014 draft budget. Up to now, FEHBP enrollees have had the choice between self-only and family health plans. For participants who are married without dependent children or are single parents of just one child, the change is intended to lower premium costs.