Federal pay freeze still on table in payroll tax cut talks?

Monday - 12/19/2011, 11:35am EST

By Jolie Lee
@jleewfed
Federal News Radio

Federal employees were safe from another year of a pay freeze and changes to their annuity formula in the two-month payroll tax cut bill passed by the Senate this weekend. But now House Republican leaders are shunning the bipartisan bill, wanting to write their own version.

Without congressional action, the payroll tax would rise 2 percentage points on Jan. 1.

The House scheduled a vote late Monday. It's unclear whether or not a House version of the bill would include any changes to federal pay and benefits.

Last week, the House passed a payroll tax cut extension that extended the federal pay freeze for one more year and changed the federal annuity from a high-three to a high-five formula. The House bill also increased federal employees' pension contributions by 0.5 percent annually, until it reaches 2.3 percent in 2015. The Senate rejected the bill.

The bill passed this weekend by the Senate extends the tax cut for two months by increasing fees charged by Fannie Mae, Freddie Mac and the Federal Housing Administration by one-tenth of 1 percentage point.

But House Speaker Rep. John Boehner (R-Ohio) said on Sunday's Meet the Press that two months is "just kicking the can down the road." Boehner did not specify the changes he would like in the bill, but touted "reasonable reductions in spending."

The Senate bill also includes a provision dear to Republicans that would force President Obama to approve a proposed Canada-to-Texas oil pipeline within 60 days unless he declares the project would damage the national interest.

The President had previously said he would make no decision on the Keystone XL pipeline until 2013, allowing him to wait until after next November's elections to choose between two Democratic constituencies: unions favoring the project's thousands of jobs and environmentalists opposed to its potential pollution and massive energy use. Obama initially threatened to kill the payroll tax bill if it included the pipeline language but eventually retreated.

One potential hindrance to quick approval of a new payroll tax bill is the Senate's adjournment. It would take approval from all 100 senators to let the Senate hold any votes before the chamber's late January return.

The Associated Press contributed to this story.

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