Agencies turn to buyouts in tough budget environment

By Kellie Lunney

August 16, 2011

Check out our Buyout Watch to see if your agency is on the list.

Federal agencies increasingly are turning to buyouts and early retirement incentives as a way to save money and avoid potential layoffs or furloughs in the face of steep budget cuts in fiscal 2012.

Since May, at least 15 agencies have offered buyouts and early outs to employees, sought authority from the Office of Personnel Management to do so, or are considering requesting authority to offer early departure incentives, according to Government Executive reports. The trend potentially affects tens of thousands of employees across government.

The uptick in buyout offers is not unprecedented, however, government observers noted. The last time the government relied heavily on buyouts and early outs as a tool to reshape the federal workforce was during the 1990s as part of the Clinton administration's reinventing government initiative.

"That was the last time we've had buyouts to the extent I think we're going to see now," said John Palguta, vice president for policy at the nonprofit Partnership for Public Service. "For most agencies, we're not seeing huge numbers, relatively speaking, but clearly going into the next fiscal year that could change."

A spokeswoman said OPM does not collect or analyze data on federal buyouts.

The difference between now and then, Palguta said, is that agencies' use of the incentive in the 1990s was not budget-driven, but part of an overall initiative that aimed to make government more efficient and streamlined. Agencies unsurprisingly are anticipating a rough fiscal 2012, and are planning accordingly, he said. Typically, agencies seek buyout and early out authority early in the fiscal year to save as much money as possible.

"It's a tool. There's a cost associated with it," Palguta said. "You want to use that tool efficiently to target the folks you can most easily do without."

The steady stream of agencies seeking authority for voluntary separations also indicates a desire to avoid worse scenarios -- layoffs or furloughs.

"Voluntary separations are better than involuntary separations. Duh," said Saul Schniderman, president of the Library of Congress Professional Guild, American Federation of State, County and Municipal Employees Local 2910.

"Buyouts are better than [reductions in force] and furloughs, and I think they are better for the agency also," said Schniderman, whose guild represents 1,500 Library of Congress employees. The Library of Congress just reached an agreement with three unions including AFSCME 2910 to offer buyouts and early outs that could affect 350 employees this fall.

Nevertheless, Schniderman said, it's still a sad day for the Library of Congress. "We are diminishing the efficiency of the nation's oldest cultural institution, but better this way than another way."

Agencies can combine the cash incentive buyouts -- which offer employees up to $25,000 -- with early-out options, which afford eligible employees over 50 with 20 years of service or any age with 25 years of service an early retirement with a reduced pension. It's a more attractive option for agencies looking to downsize or reshape their workforce.

It's unclear, however, whether the majority of employees eligible will take the buyouts, given the state of the economy, Palguta said. "Employees who are worried about their financial futures -- it won't be enough to persuade them to jump ship in this economy."

A 2006 report from the Government Accountability Office found that agencies were making greater use of buyouts. The Defense Department has had its own buyout authority since 1993. During the 1990s, lawmakers granted special authority to most civilian agencies to offer buyouts on a few occasions, but it wasn't until 2002 that Congress gave the executive branch authority to offer buyouts to non-Defense agencies.

By Kellie Lunney

August 16, 2011