In deficit talks, fed groups fear alternatives could cut benefits

Wednesday - 12/12/2012, 8:24pm EST

Many in government are worried about the threat of sequestration, the across-the-board budget cuts set to take effect in January unless Congress and the White come up with an alternative deficit-cutting plan.

But federal employee groups and sympathetic lawmakers are also concerned about such alternatives — if they contain changes to federal employee pay or compensation.

"In debates on the floor of the House, you often hear our Republican colleagues disparage federal employees," said Rep. Chris Van Hollen (D-Md.), in a conference call hosted by the Federal-Postal Coalition. "You often hear federal employees being scapegoated."

Few specifics on proposals

While they cited few specific proposals — the main players in the ongoing deficit talks have mostly kept quiet — Van Hollen and the federal-employee groups pointed to few measures that they contend would be harmful to the federal workforce.

Last week, House Speaker John Boehner sent a letter to President Barack Obama detailing broad outlines of a budget deal, which specifically cites savings from non-health care related mandatory spending, including federal compensation.

Van Hollen said he hasn't seen anything more specific than that, but "if you look at the size of the numbers they're talking about and you look at their past proposals, I think it's fair to assume they're calling for significant cuts."

The congressman said he's most concerned about increases to federal employees' pension contributions without a commensurate increase in benefits. "Republican proposals I've seen would amount to an effective 4, 5 or 6 percent pay cut for federal employees," Van Hollen said.

Increases to feds' pension contributions may be among the most likely to be enacted. Lawmakers voted to approve pension-contribution increases for new federal employees last year. And the White House has also proposed increasing pension contributions.

Groups also concerned about CPI changes

Federal-employee groups are also concerned about proposed changes to the formula the Labor Department used to calculate inflation.

Jessica Klement, the legislative representative for the National Active and Retired Federal Employees (NARFE) Association, said a moved to a so-called "chained CPI" would result in lower annual cost-of-living adjustments for federal retirees.

However, like the current COLA formula, the new system would not take into account the rising costs of health care.

The idea, which was endorsed by the Simpson-Bowles deficit-reduction panel, "is getting a lot of traction," in the current negotiations, Klement said, in part because of the projected savings — $300 billion to $400 billion.

Klement said employee groups are not opposed to reevaluating the COLA formula on its face.

"But to do so only in the name of deficit reduction because you need to pass year-end legislation is very flawed policy," she said.

Fair share

Van Hollen and the unions contend that federal employees have already paid more than their fair share toward reducing the deficit.

The unions say the two-year pay freeze (extended into at least April 2013) has already netted the government $88 billion in savings. And feds chipped in another $15 billion in savings when Congress approved a provision requiring newly hired federal employees to contribute more toward their pensions as part of a broad deal last February to extend the payroll tax holiday for all American workers.

Bruce Moyer, chair of the Federal-Postal Coalition said the pension-contribution increase was a "classic example of going to the federal workforce as Treasury's ATM."

The payroll tax cut is again set to expire at the end of the year — part of the package of expiring tax breaks and budget cuts known as the "fiscal cliff."

But Moyer said Congress should look elsewhere for savings. "Enough is enough ... There are other sectors of the economy, other able Americans that should be called upon now to bear the burden of deficit reduction."

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