Radical Deficit-Cutting Options on Table

Published Oct 24, 2011. By Sean Reilly.

Among the hundreds of deficit-cutting recommendations that poured into the 12-member supercommittee this month, one urged that new and current federal employees with less than five years of service get no defined-benefit pension.

It also calls for cutting the pensions of Federal Employees Retirement System (FERS) employees with more than five years of service.

Another recommendation called for extending the current two-year pay freeze to five years. Another called for the permanent end to within-grade step increases. And another called for ending the practice of allowing feds to factor unused sick leave into their pension calculation.

Recommendations by both Republican and Democratic lawmakers took aim at federal pay, benefits and other expenses.

"Federal employees, including members of Congress and our staffs, must sacrifice as part of an urgent need to curtail the cost of the federal government and reduce the national debt," Sens. Joe Lieberman, I-Conn., and Susan Collins, R-Maine, wrote in a joint letter to the supercommittee. The senators, who lead the Senate Homeland Security and Governmental Affairs Committee, urged that the two-year pay freeze be extended by one additional year.

The freeze now covers 2011 and 2012; adding another year would save $32 billion over a decade, the senators said.

Alongside other proposals, Lieberman and Collins also recommended phasing in a 1.2 percent increase over three years in the amount that FERS participants contribute to their pension plans, as well as for legislative and judicial branch staff. That change would eventually bring their total contribution to 2 percent of salary.

Lieberman and Collins said the government should also stop allowing FERS participants to count unused sick leave toward their retirements and move to a "high-five" system under which federal pensions are based on an average of employees' five highest-earning years, instead the current system based on the highest three.

Rep. Darrell Issa, R-Calif., who chairs the House Oversight and Government Reform Committee, lobbed more radical suggestions at the supercommittee, including the one to end the FERS pension program for employees with less than five years of service and cutting pensions for those with longer service to reflect only the service they have served until now.

He also proposes extending the pay freeze to five years; slashing the federal workforce by 10 percent; ending step increases; and dramatically increasing employee pension contributions — from 0.8 percent to 7 percent for FERS employees and from 7 percent to 10 percent for Civil Service Retirement System (CSRS) employees.

In all, those steps would yield 10-year savings of at least $375 billion, Issa told the supercommittee in a letter.

In a letter to the supercommittee, a group of 20 organizations representing various segments of the federal workforce termed Issa's plan as so draconian "that it would completely destroy the civil service as we know it."

The group, called the Federal-Postal Coalition, urged the supercommittee in a letter to reject proposals that "would further harm the livelihoods of federal employees." Like their private-sector counterparts, federal workers are confronting hardships because of unemployed spouses and rising health care costs, the coalition said. Lieberman and Collins are also asking more from federal employees than from contractors, the group added.

Regardless of whether the bipartisan supercommittee succeeds in creating a long-term deficit reduction package, experts say feds should not expect the pressure on their pay and benefits to let up.

"It's easier to beat up on government employees than fundamentally restructure Medicare," said Steve Bell, a former top Senate Budget Committee staffer now at the Bipartisan Policy Center, a think tank.

Federal compensation is "going to remain a pretty attractive target," said Diane Lim Rogers, chief economist for the Concord Coalition, a bipartisan group dedicated to fiscal responsibility.

Under debt ceiling legislation signed in August, the 12-member, House-Senate supercommittee has until Nov. 23 to present a plan for carving as much as $1.5 trillion from expected federal deficits over the next decade. The panel, which has shown little progress toward that goal, has been deluged with suggestions, including scores of ideas from other congressional panels.

As long as the economy continues to limp along, however, federal workers shouldn't count on any across-the-board raises, said Steve Ellis, vice president of Taxpayers for Common Sense, a watchdog group that tracks federal spending.

"It would be hard for Congress to turn around and do that," Ellis said.

Democratic lawmakers on the oversight committee stood up against the proposed cuts to federal pay and benefits. Cuts, such as those proposed by Issa, would hurt recruitment, retention and agency performance. Instead, they proposed capping all taxpayer-reimbursed contractor compensation at about $200,000, far less than the existing system allows.

But the bipartisan scrutiny of the federal compensation system represents a rare point of consensus in congressional recommendations to the supercommittee.

"We're a much smaller constituency than other programs that are on the table," said Dan Adcock, legislative director of the National Active and Retired Federal Employees Association, which plans a national "call-in day" Nov. 2 to have its 300,000 members contact lawmakers and urge them not to single out federal employees and retirees.

Adcock also saw broader anti-government sentiments at work, fueled in part by conservative think tank studies claiming that federal employees are generally better paid than their counterparts in the private sector.

"Federal workers, even though they didn't cause the fiscal situation that we're in, have become the whipping boy," he said.

Members of Congress offered a grab bag of other ideas that could affect federal agencies and their workforces. Many fell along partisan lines.

Other GOP ideas included defunding the Justice Department's Office of Legal Policy, canceling extension of Washington-area locality pay to overseas Foreign Service officers; and conducting the 2020 Census primarily online.

Besides slashing contractor reimbursements, Democrats suggested making federal buildings more energy-efficient; streamlining Federal Employees Health Benefits Program prescription drug contracting by having the Office of Personnel Management contract directly with pharmacy benefit managers; and requiring chief information officers to review information technology investments that deviate 20 percent or more from their baseline costs.

One other recommendation with bipartisan backing is a Senate Budget Committee proposal to move the government to biennial budgeting.