Banking & Financial Institutions

Budget ax may fall on fed pensions

Greg Nash

Federal workers look like they could be the big losers if House and Senate budget conferees reach a deal.

Rep. Paul Ryan (R-Wis.) and Sen. Patty Murray (D-Wash.) are working behind closed doors to reach a deal that would replace some of the automatic spending cuts known as the sequester with other reductions.

{mosads}They are believed to be looking at hiking federal worker employee retirement contributions, which would effectively lower federal pay. The savings would be used to prevent sequester cuts to the Pentagon and non-defense discretionary spending.

Unions representing workers are worried about the cuts already on the table.

“This is a crunch time and crisis time for federal employees,” said J. David Cox. the president of the AFL-CIO’s American Federation of Government Employees, on Monday. “We are prepared to stand up against anyone who is prepared to come back to the same well again.”

The fact that Senate Democrats and House Republicans are leading the conference could put federal workers at a disadvantage.

Their strongest political power base is House Democrats, who are close to the unions that represent federal workers. That means their key protectors include House Minority Whip Steny Hoyer (D-Md.) and House Budget Committee ranking member Rep. Chris Van Hollen (D-Md.), who is a budget conferee.

Yet Van Hollen could find himself on the outside looking in if Murray and Ryan — representing Senate Democrats and House Republicans — make a deal.

Van Hollen said Monday that he finds any deal focusing on federal workers unfair. 

“This is no time to ask them to shoulder even more of the burden, especially when House Republicans refuse to close a single corporate tax loophole as part of that effort,” said Van Hollen, who added that Murray is keeping him in the loop on the talks. 

Sources say Ryan and Murray are focused on “low-hanging fruit” from previous talks.

Both President Obama and Ryan included cuts to federal worker benefits in their budgets, making it an area where there is some agreement between the two parties.

Ryan and Murray are avoiding big-ticket items like raising tax rates or cutting Medicare and Medicaid benefits, areas where there is little agreement between Republicans and Democrats. 

While Obama and Ryan have both targeted federal employees with their budgets, their numbers are different.

Obama’s 2014 budget called for increasing current federal worker retirement contributions by 1.2 percent, which would save $20 billion over 10 years. 

Ryan proposed increasing contributions by 5.5 percent, saving $132 billion over 10 years.

Cox said that he personally made it clear to Obama that it is unacceptable to require federal workers to contribute more to their retirements.

“We are drawing a line in the sand,” Cox said. 

A letter issued Thursday by 40 House Democrats highlighted the worries of members representing federal workers.

The letter to budget conferees, which was led by Rep. Stephen Lynch (D-Mass.) and Rep. Elijah Cummings (D-Md.), noted that workers have been operating under a three-year pay freeze.

The letter also noted that federal workers have already seen their pay cut through furloughs this year, and that new federal hires starting last January had to pay 2.3 percent more for retirement benefits. 

That cut to benefits came as part of a 2012 deal that extended a payroll tax holiday for all workers temporarily. Unions point out that as part of other fiscal talks, Republicans have succeeded in keeping a pay freeze for federal workers in place for three years. 

“Federal workers are a perennial punching bag,” deficit hawk Bob Bixby of The Concord Coalition said on Monday. Bixby is advocating a grand bargain that tackles bigger items, including Medicare. 

National Treasury Employees Union President Colleen Kelley said any cuts to retirement benefits would be unacceptable.

“If this were to occur, it would come atop all that federal employees have endured over the past three years and would amount to a serious pay cut and yet another assault on these dedicated public servants,” she said Monday. “Reaching into the pockets of your employees over and over to fund shortfalls is a sure path to recruitment and retention problems.”

Budget conferees, to be sure, are focused on other areas as well to try to find savings that could be used to offset the sequester cuts.

There is talk of claiming savings from cuts to the troubled Postal Service.

Fredric Rolando, president of the National Association of Letter Carriers, said Monday that postal reform must be out of any Ryan-Murray deal that cuts services or benefits. 

“The Postal Service has not received a dime from taxpayers since 1982 and does not contribute to the federal deficit. Mandating damaging service cuts at the Postal Service has no place in the budget deal,” Rolando said. 

Other low-hanging fruit has included increasing aviation fees, tapping wireless spectrum sales and finding savings from a deal on a new farm bill.

Federal workers could actually be double losers from a small deal.

Their retirement contributions could be targeted to turn off part of the sequester, leaving most of the automatic spending cuts in place.

That would risk further furloughs and possible layoffs.

Tags budget conference Chris Van Hollen Chris Van Hollen Patty Murray Patty Murray Paul Ryan Paul Ryan

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