What will happen to feds in 2011?

Wednesday - 1/12/2011, 11:48am EST

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By Jolie Lee
Federal News Radio

In 2010, federal employees' pay and benefits came under attack by lawmakers faced with a gaping deficit. What changes are ahead for feds in 2011?

Federal News Radio's Mike Causey discussed the top issues government workers will face this year with a panel from the Federal Times: Steve Watkins, editor; Steve Losey, reporter who covers personnel matters; and Andrew Tilghman, Pentagon reporter.

Pay freeze
The passage of a two-year pay freeze for federal employees was perhaps the biggest news of last year and, to many, a "shock," Watkins said.

The freeze stemmed from recommendations made by the deficit reduction commission, which proposed a three-year pay freeze.

A bill proposed by Rep. Kevin Brady (R-Texas) includes the deficit reduction proposals and would extend the pay freeze into a third year. The bill also includes a measure to reduce the federal workforce by 10 percent.

"One likely prospect could be the proposals in the deficit commission report could actually come to life as a deal to extend the debt ceiling," Losey said.

Government shutdown
The "specter" of a government shutdown will reappear as early as March when lawmakers will debate whether or not to extend the debt ceiling, Watkins said.

The last shutdown in 1995 derived from debate over appropriations bill that affected discretionary spending, but now in 2011, "there's big concerns about deficits," he said.

"It may be out of that debate we actually see some increased odds of a possible shutdown," Watkins said.

If there is a shutdown, it's unclear if federal employees will be paid for the time, Losey said. Lawmakers may simply view that time as a furlough, he said.

"There's not a whole lot of appetite to specifically give feds a furlough, but if it does happen as a side effect because of these budget battles, feds won't find a whole lot of sympathy," Losey said.

Possible changes to health and retirement
The deficit reduction commission recommendations included changes to both health and retirement benefits for federal employees.

One proposal was to change the retirement formula from the high-three to the high-five, where benefits would be calculated based on the average of the last five years worked instead of the last three years worked.

"High-five is a dirty word around Washington," Causey said.

The high-five formula probably will not affect employees "near top grade levels" due to caps, Watkins said.

Others, however, will have to "sit down and start crunching numbers," Losey said.

The deficit reduction commission also proposed turning the federal health plan into a "bit of an experiment where they would make it a premium-supported plan," Watkins said. The government would give participants a fixed subsidy to apply to any plan.

"I think that obviously scares an awfully lot of people," Watkins said. "I can expect a huge cry of opposition, certainly from the unions and groups like AARP. Perhaps that would be a big political battle."

The era of austerity has created an environment where nothing is safe from cuts.

"There's a recognition from both sides that sacred cows from both sides are going to have to get gored," Losey said. "We can't do this without cutting defense spending. We can't do this without taking a scalpel or hatchet...to things like retirement benefits."

Defense budget
Defense Secretary Robert Gates outlined a "long list of budget cuts" last week aimed to cut $78 billion in the defense budget over the next five years, Tilghman said.

The word "cuts" is somewhat misleading because in fact the Pentagon budget will actually grow -- just not as much as in previous years, Tilghman said. Gates plans to flatten the DoD budget in 2015, he added.

Gates has proposed increasing premiums to the military's health care program, TRICARE, costing $50 billion a year.

"Leaving aside the sacred obligation we have to America's wounded warriors, health care costs are eating the Defense Department alive," Gates said in a Jan. 6 news conference.

Gates' proposal would raise fees only on military retirees under the age of 65, who presumably have access to health care in their civilian jobs in addition to their military pensions and haven't seen a rate increase in more than 15 years. Health care for active-duty troops would remain free and rates charged to older retirees would remain untouched.

However, Tilghman pointed out that about half of those covered in TRICARE are not current service members. There also career military employees planning to retire who "have to readjust financial planning if there's significant cost increases."

Federal security
Lawmakers are revisiting the amount of resources devoted to protecting government workers in the wake of the weekend shooting in Tucson that killed six, including a federal judge, and injured 13, including Rep. Gabrielle Giffords (D-Ariz.).

The Federal Protective Service, charged with protecting federal buildings, has been a "basket case," Watkins said. The Department of Homeland Security is reviewing whether or not FPS should be reliant on contractors, he said. Currently, about 15,000 FPS employees are contracted, while only 1,200 are federal employees.

Watkins said he expects to see "a lot more collaboration" with local police for protection in Congressional districts.