Report: Slash federal benefits, reap government savings

The government could save billions of dollars by slashing federal health and retirement benefits, according to a new report from the Congressional Budget Office. The report, "Budget Options," is the Congressional Budget Office's annual snapshot of the budget choices facing federal lawmakers. The document surveys current budgetary needs and provides an objective look at more than 200 specific ways to cut federal spending and increase revenues. As in previous years, federal workers would be affected by dozens of the proposed cuts, ranging from the elimination of parking subsidies to the closure of military depots. Eight options described in the report would reduce federal health or retirement benefits. Together, the cuts would save Uncle Sam more than $80 billion over 10 years. Nearly half of these projected savings would come from converting the Federal Employees Health Benefits Program to a voucher-based plan. A perennial fixture of the "Budget Options" report, this proposal would shift far more health care costs to federal workers than alternate benefits program reforms being considered by the Bush administration. Under the voucher plan, the government would pay the first $2,400 of benefit program premiums, rather than 72 percent of premiums as currently mandated by law. The payment level would increase at the rate of inflation, which is expected to grow at half the rate of premiums. By 2006, federal workers would pay more than 40 percent of their premiums under this plan. Other benefit reductions analyzed in the report include limiting or deferring cost-of-living increases for retirees; changing the formula for determining federal pensions from an average of the employee's three highest-earning years to the employee's four highest-earning years; reducing the government's matching contributions for the Thrift Savings Plan; and basing retirees' health benefits on their length of service in the government. Each of these proposals has appeared in previous editions of the report. The report notes these measures amount to a "revocation of earned retirement benefits" to federal workers and could impede the government's ability to attract and retain skilled workers. "The main argument against cutting any retirement benefit is that such an action hurts both retirees and the government's ability to recruit a quality workforce," the report said. Other cost-savings proposals covered in the report include:
  • Close military depots: An additional round of base closures targeted specifically at maintenance depots could save $1.7 billion over 10 years, the report estimates. The Bush administration stated that further rounds of base closures "will be necessary" in its budget blueprint.
  • Eliminate the free or low-cost transfer of federal property: The General Services Administration could save $500 million over 10 years by selling surplus federal buildings at market value, instead of giving excess buildings to state and local governments for free or at little cost.
  • Cut the number of political appointees: Capping the number of political appointees at 2,200 would save more than $700 million in salaries over the next 10 years, according to the report. But political appointees help the President maintain control over the federal bureaucracy, the report noted.
  • End free parking subsidies: Forcing federal employees to pay commercial parking rates could earn the government $1.3 billion over 10 years. But the measure would reduce employees' total compensation and federal workers in the Washington area would foot the bill for about 75 percent of the charge.
  • Repeal the Service Contract Act: The 1965 Service Contract Act indexes the pay of contract workers in a certain area to that of non-contractor employees doing similar work. Repealing this law could save at least $9.8 billion over 10 years, but would reduce the compensation of contractor employees and potentially undermine collective bargaining agreements.
  • Allow agencies to bargain for electricity: The government could save $517 million over 10 years if agencies were allowed to buy power on a competitive basis, the report says. Currently, the government buys about half of its power through the Department of Defense. Several bills in the 106th Congress would have allowed all customers to purchase power in a competitive market.
In one of its new recommendations, the report called on agencies to provide clear linkages between agency activities and desired outcomes in the performance plans required under the 1993 Government Performance and Results Act. For example, the report takes issue with the performance measures used to evaluate a Transportation Department program that uses information technology to combat traffic congestion. Transportation included data on how this program relates to similar state and local efforts, instead of documenting whether the program has actually reduced traffic. "Information on results is difficult to use in weighing budgetary options without some indication of how the agency's efforts contributed to those outcomes," the report concluded.
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