Groups urge Obama not to target federal pay and benefits

Richard A. Bloom/National Journal
President Obama is set to unveil his deficit reduction plan Monday, and federal employee groups are urging him not to target government workers' pay and benefits in his proposal.

The Federal-Postal Coalition, made up of several federal employee unions and groups, sent letters to Obama and Office of Management and Budget Director Jack Lew outlining certain proposals the organization believes will have an adverse effect on the federal workforce, particularly those related to employees' retirement plans. Most employees currently contribute 0.8 percent of their salaries to their pensions, but at least one proposal reportedly under consideration during debt ceiling negotiations called for raising that to 1.2 percent for current employees and 4 percent for future hires. Agencies contribute 11.7 percent to employees' pensions, with that level set to increase to 11.9 percent in October.

While it remains unclear whether Obama will include recommendations that will modify federal pay and/or benefits, employee groups are concerned about the possibility, particularly since they view the two-year federal pay freeze as sufficient sacrifice. "While we were deeply unhappy about the freeze itself, our greater objection was to the timing," the Sept. 15 letter stated. "Because it was issued unilaterally in late 2010, well before a larger budget deal, federal employees are now vulnerable to another attack on compensation during super committee negotiations. Far too many policymakers have already forgotten this sacrifice by the nation's civil servants, but when reminded of it, are surprised to learn of the $60 billion price tag." The White House claims the pay freeze will save an estimated $2 billion by the end of fiscal 2011 and more than $60 billion during the next decade.

Other proposals floating around that the president could incorporate in his plan include raising federal employees' health insurance premium contributions, reducing the salary used to calculate annuities from an average of the highest three years of federal service to the highest five years, and lowering the multiplier used to calculate annuities from 1.7 percent to 0.7 percent.

Most observers agree that government employees will have to sacrifice beyond the current two-year pay freeze, either in the form of increased pension contributions, an extended pay freeze, a hiring freeze, or some other cut to salaries and benefits.

Obama said during a Sept. 8 speech announcing his $447 billion plan to create more jobs that he would submit recommendations to the joint congressional super committee for further deficit reduction. The group is responsible for recommending between $1.2 trillion and $1.5 trillion in savings over the next decade by Thanksgiving, but Obama has called on them to exceed that figure.

On Thursday, The Wall Street Journal reported that Obama's proposal will not recommend any major changes to Social Security or Medicare. It's not clear what that portends for federal pay and benefits. "I hope that that's an indication that they will stay away from further cuts to employee compensation," said Beth Moten, legislative director for the American Federation of Government Employees, the largest federal employee union. "If they are going to protect Social Security, Medicare and Medicaid, then they should protect federal employees as well," she added.

During a Sept. 6 congressional hearing, Office of Personnel Management Director John Berry said Obama would release a strategy for addressing the U.S. Postal Service's fiscal crisis in conjunction with the deficit reduction package. Postal officials in August announced they would seek flexibility to allow the agency to create its own health and retiree benefits programs.

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