Sequestration Can’t Touch Certain Pay and Benefits

An optimist’s look at what is protected from those dreaded governmentwide spending cuts.

Way back in August 2011, a Maryland senator explained to a roomful of his constituents the benefits of an obscure budget procedure known as sequestration.

Democrat Ben Cardin held a town hall meeting with Census Bureau employees last summer in Suitland, Md., fielding questions from nervous feds on the issues du jour and how they would affect pay and benefits. The topics ranged from the debt ceiling; the then-looming government shutdown; the civilian pay freeze; proposals to increase feds’ pension contributions; and the deficit reduction options under consideration by the congressional super committee, now better known as the failure that could trigger sequestration.

During the town hall, Cardin pointed out that while the super committee could basically do whatever it wanted to in the name of deficit reduction, options were a lot more limited under sequestration as far as changes to federal pay, benefits and other programs exempt from the automatic, across-the-board governmentwide spending cuts. Cardin was one of the first lawmakers to rightly point out that, while sequestration is far from ideal for about 1,000 different reasons, at least there are some protections in place under the law for feds.

So, with a glass-half-full spirit, let’s recap. In the category of federal pay and benefits, which major programs are protected from spending cuts under sequestration?

  • Pay, sort of: This is a little tricky to wrap your mind around. Federal pay under a statutory pay system -- the General Schedule, for example -- is subject to spending cuts as are other administrative expenses within budgets. But the rates of pay for individual civilian and military employees cannot be reduced under sequestration. In other words, if an agency has to find more savings within its administrative accounts, which include employees’ salaries, then it can resort to furloughs or layoffs. A furloughed employee isn’t paid and isn’t guaranteed back pay. But the agency can’t indiscriminately slash an employee’s rate of pay to save money. So if you aren’t furloughed, your pay is protected, but if you are furloughed, all bets are off. Layoffs are more expensive for agencies, so the odds are furloughs will be much more popular than reductions-in-force in the event of sequestration. And don’t forget, a furlough of more than 30 calendar days, or of more than 22 discontinuous work days, is considered an RIF, according to the Office of Personnel Management.
  • Veterans’ benefits: Vets’ disability, health care, education and counseling benefits are protected. The Obama administration also has exempted the entire Veterans Affairs Department from sequestration.
  • Federal employees’ retirement benefits: The government’s payments to the Civil Service Retirement and Disability Fund are shielded.
  • Health care benefits of federal employees and retirees are exempt as well.
  • Military personnel: Under the law governing sequestration, the president can exempt military personnel accounts or reduce them by a lower percentage. President Obama this past summer told Congress that he would exempt military personnel accounts from sequestration. That means service members’ jobs, pay, allowances and retirement benefits are protected from sequestration if the cuts take effect Jan. 2, 2013. But TRICARE, the military’s health care program, is not immune to spending reductions. TRICARE, which is part of the Defense Health Program, falls under the Defense Department’s operations and maintenance kitty, which is subject to sequestration.

Note: This is not an exhaustive list, but rather the highlights. Read this Congressional Research Service report for a more in-depth look at federal programs exempt from sequestration.

And, ICYMI: Check out our poll on sequestration preparations across government.

Oh, sequestration. You’ve emerged from the backwater of a little-known 1985 law named after a trio of former lawmakers (Gramm, Rudman and Hollings) to take center stage in 2012 and possibly wreak havoc in 2013. We’ll be watching.