It Could Get Worse

By Kellie Lunney

December 1, 2011

The failure of the so-called congressional super committee to reach a deficit reduction deal by its Nov. 23 deadline temporarily spared federal employees from further pay and benefits pain. Any agreement likely would have included an increase in the amount individual feds contribute to their pensions -- a proposal with bipartisan support. But the failure of that panel to achieve consensus on spending cuts sets up a potentially worse scenario for federal workers who are worried about their salaries, retirement benefits and health care.

Because of the super committee's disintegration, federal employees should heed two words: Simpson-Bowles. That's the name of another fiscal commission that has received a lot of attention in the past year and that originated many of the deficit reduction proposals.

In 2010, the bipartisan fiscal commission, created by President Obama and led by former Republican Sen. Alan Simpson from Wyoming and former White House Chief of Staff Erskine Bowles, released their deficit reduction recommendations, a few of which would affect the pay and benefits of federal workers. Arguably some of those proposals would have a greater impact on federal pay and benefits than an increase in individual pension contributions rates. Among the Simpson-Bowles recommendations:

Extended pay freeze: The panel recommended a three-year civilian pay freeze across government. The commission estimated it would save $20.4 billion in 2015. The plan also freezes lawmakers' pay. Congress has opted to freeze its own pay for the last few years anyway. In fact, news reports Wednesday said Senate Republicans were considering continuing the two-year federal civilian pay raise to pay for an extension of the payroll tax cut and cited Simpson-Bowles as a proponent of the idea.

Reducing the size of the federal workforce through attrition: The Simpson-Bowles report recommends shrinking the government rolls by 10 percent, by hiring two new workers for every three employees who leave service. The commission claims such a reduction would save $13.2 billion in 2015. This proposal has some momentum behind it. In November, the House Oversight and Government Reform Committee approved a bill that calls for hiring one federal employee to replace every three workers who retire or leave their job, shrinking the workforce across-the-board by 10 percent by 2015. The Hill newspaper reported Wednesday that Republicans support such a reduction to help pay for an extension of the payroll tax holiday.

Increased health care contributions: The panel suggested an increase in the amount of money federal employees pay in premiums under the Federal Employee Health Benefits Program.

The Simpson-Bowles commission also proposed reducing federal travel and vehicle budgets, which the Obama administration already has begun to target. The panel supported greater use of telecommuting, which could be a boon for many feds who would like that benefit but don't currently have the option to work off-site.

It's unclear whether Congress or the administration will accept any or all of these proposals. Since the super committee's flame-out, there has been talk of Congress voting on the recommendations of the Simpson-Bowles commission; indeed, many of the ideas reportedly discussed by members of the joint panel on deficit reduction originated with Simpson-Bowles.

The likelihood of an up-and-down vote on the entire report though is not high, since there are recommendations that are unpalatable to both parties. But several suggestions, including those affecting federal pay and benefits, could be fleshed out in stand-alone legislation or bundled into a larger legislative package. And this could all happen well before -- and separate from -- the across-the-board automatic spending cuts that go into effect in 2013 as a result of the super committee failure and could result in layoffs and furloughs at government agencies.

If any of these scenarios play out, federal employees will find themselves missing the super committee.

By Kellie Lunney

December 1, 2011