Obama’s Budget Targets COLAs, Federal Retirement Benefits

Susan Walsh/AP

President Obama’s 2014 budget proposal will include a less generous formula for calculating federal retirees’ cost of living adjustments, and ask federal employees to make higher contributions to their retirement pensions, a senior Obama administration official has informed members of Congress.

The official said Obama would agree to a chained Consumer Price Index -- which changes the inflation formula to account for modifications in purchasing habits as prices change -- only if congressional Republicans are “willing to do more on revenues.”  The chained CPI is viewed as a more accurate measure of how people substitute one item for another in the face of a price increase, but the result would be lower COLAs over time for federal retirees and Social Security beneficiaries.

“This isn’t about political horsetrading,” the official said. “It’s about reducing the deficit in a balanced way that economists say is best for the economy and job creation.”

Advocates for federal retirees warned against accepting arguments in favor of the chained CPI.

“Don’t be fooled by economists and politicians who claim that switching to the chained CPI formula for Social Security benefits, retirement annuities and disability insurance is ‘painless,’ ” National Active and Retired Federal Employees Association President Joseph A. Beaudoin said in a statement. “While the short-term reduction in benefits may be modest, the long-term reduction will be substantial.”

Obama proposed instituting the chained CPI during fiscal cliff negotiations last year.

White House officials told members of the media the president’s budget will also target $35 billion in savings by increasing the amount federal employees must pay toward their retirement benefits, The Washington Post reported. The savings were also previously included in negotiations with House Republicans.

New federal employees already are seeing a hike in their pension contributions: In 2012 lawmakers raised the contribution rate from 0.8 percent to 3.1 percent for new hires.

The American Federation of Government Employees urged lawmakers to oppose the 2014 budget provisions, saying Obama has been acting more and more like an enemy.

“The administration signed the Budget Control Act that brought us the sequester,” AFGE President J. David Cox said in a statement. “It pushes a cruel cut to Social Security, veterans, and federal employee retirement benefits through the chained CPI. And now, a final act of betrayal. The White House proposes a fiscal 2014 budget with $35 billion MORE in retirement system cuts, accelerating the race to the bottom for federal workers and their families.”

House Speaker John Boehner, R-Ohio, voiced complaints with Obama’s overall budget proposal.

“If the president believes these modest entitlement savings are needed to help shore up these programs, there's no reason they should be held hostage for more tax hikes,” Boehner said in a statement. “That’s no way to lead and move the country forward."

Kellie Lunney contributed to this report.

CLARIFICATION: This story has been updated to clarify a quote from AFGE. 

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
Close [ x ] More from GovExec

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Sponsored by Brocade

    Best of 2016 Federal Forum eBook

    Earlier this summer, Federal and tech industry leaders convened to talk security, machine learning, network modernization, DevOps, and much more at the 2016 Federal Forum. This eBook includes a useful summary highlighting the best content shared at the 2016 Federal Forum to help agencies modernize their network infrastructure.

  • Sponsored by CDW-G

    GBC Flash Poll Series: Merger & Acquisitions

    Download this GBC Flash Poll to learn more about federal perspectives on the impact of industry consolidation.

  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

  • Sponsored by Aquilent

    A DevOps Roadmap for the Federal Government

    This GBC Report discusses how DevOps is steadily gaining traction among some of government's leading IT developers and agencies.

  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.

  • Sponsored by CDW-G

    Joint Enterprise Licensing Agreements

    Read this eBook to learn how defense agencies can achieve savings and efficiencies with an Enterprise Software Agreement.

  • Sponsored by Cloudera

    Government Forum Content Library

    Get all the essential resources needed for effective technology strategies in the federal landscape.


When you download a report, your information may be shared with the underwriters of that document.