Federal Workers in the Crosshairs as Fiscal Commission Issues Highly Anticipated Deficit Report


Tuesday, the President’s National Commission on Fiscal Responsibility and Reform, an advisory group of 18 current and former members of Congress tasked with identifying policies to reduce the federal budget deficit, issued its highly anticipated report prescribing solutions to America’s budget problems. Unfortunately for federal employees, the report recommends more problems than solutions.

Calling for steep cuts in the number, pay, health and retirement benefits of civil servants, the Commission is looking to make the federal workforce an example of government restraint. “Washington needs to learn to do more with less, using fewer resources to accomplish existing goals without risking a decline in essential government services,” the report says. Though greater efficiencies in the operation of the federal government are indeed necessary, devastating the federal workforce in the name of greater efficiency is not the best way to meet that end.

First, the report recommends a three-year, across the board federal pay freeze impacting all civilian federal employees. This report comes just two days after the White House announced its intention to freeze federal pay for the next two years. As NFFE reported recently, the proposed freeze on federal pay would have a number of serious detrimental impacts on federal workers’ bottom lines. Were the Commission’s three-year freeze to be implemented, damage to federal workers’ long term financial and retirement security would be greatly increased, substantially reducing your pay and shrinking your future retirement annuities.

The Commission also recommends reducing the size of the federal workforce through attrition. The proposal call for a 2-for-3 hiring plan, hiring on 2 workers for every three who retire in an effort to reduce the number of federal workers by 10 percent. Were this proposal to be implemented, over 200,000 federal jobs would be eliminated with little respect for the scope and complexity of agencies’ missions.

“Reducing the federal workforce through an arbitrary 2-for-3 replacement policy will reduce the quality and quantity of government services and result in a logistical nightmare for federal agencies,” said NFFE National President William R. Dougan. “Not only will it shortchange the American people on the vital services they receive from experienced federal workers every day, it may shift that work to contractors who have proven to be more expensive and operate with less transparency. In a nutshell, this proposal would diminish services, raise costs, and force the American taxpayer to foot the bill.”

Another area the Commission targets in its report are the federal health care and retirement benefits. The report calls for major reforms to the Federal Employee Health Benefits Plan (FEHBP), which would transform the system into “a defined contribution premium support plan that offers federal employees a fixed subsidy that grows by no more than GDP plus 1 percent each year.” What this recommendation really means, is that you will now receive less and less assistance each year for your health care expenses, regardless of how fast premiums increase. With FEHBP premium increases averaging 8.8% in 2010, and 7.2% for 2011, it is apparent that a “GDP plus 1” system will quickly balloon your health care bills.

In terms of retirement benefits, the report recommends moving from a “high 3” annuity calculation to a “high 5” system, in addition to increasing employees’ share of pension contributions. This “high 5” figure refers to the average pay earned over the 5 most highly paid years of government service. The net impact of this change would be a lower average salary figure when computing the value of your annuity. Here’s how: In most cases, when the government calculates your annuity, it takes your “high 3” average salary figure, multiplies it by your years of service, then multiplies it by either 0.1 (FERS employees) or 0.2 (CSRS employees). The resulting figure represents your annual retirement annuity. By changing the average salary figure from “high 3” to “high 5,” this amount is lowered, resulting in a smaller annuity payment for life.

Taken together, all the cuts put forward by the Fiscal Commission total in the billions of dollars. However, the proposals, in addition to hurting current and former federal workers, would diminish the government’s ability to recruit and retain top talent at the federal agencies that protect our forests, care for our veterans, support our armed forces abroad, and provide other essential services to the American people.

“What these proposals give federal workers is lower pay and benefits today, and a leaner retirement tomorrow,” said Dougan. “Federal employees are already substantially underpaid compared to their counterparts doing the same jobs in the private sector. If we want to recruit and retain the next generation of doctors, intelligence analysts, chemical engineers, and biologists, the government needs to do right by its employees.”