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4 Budget Takeaways for Feds

As Congress hurries to pass its spending blueprints by Friday, many members of the federal workforce find themselves in the crosshairs of potential budgetary cuts for fiscal year 2016. Proposed spending cuts aimed at altering federal retirement plans, benefits, and salaries will be under consideration. The following is a summary of the top four budget takeaways for federal employees.

Pay, Health Care and Attrition
The $3.8 trillion House GOP budget, released last Tuesday, seeks to balance the federal government's books by cutting $5.5 trillion in spending over the next decade. Such cuts include changes to the federal employee retirement and health care systems, as well as the size of the workforce. This blueprint proposes cuts to both the federal workforce by 10 percent through attrition, and by limiting the employer contribution to the Federal Employees Health Benefit plan (FEHB), which, according to Senate Budget Committee aides, would result in $170 billion in savings over 10 years. Furthermore, while Obama’s budget proposed a 1.3 percent pay raise for federal employees, this budget offers no such promise.

In contrast, House Democrats released their FY 2016 budget plan yesterday, which leaves the door open for a federal pay raise, and would put measures in place to thwart future efforts to reduce the size of the federal workforce.

TSP G Fund
The budget also looks to the Thrift Savings Plan’s G fund in order to implement deeper spending cuts. In addition to their budget proposal, House Republicans released a 265-page Budget Committee report which suggested basing the G Fund's interest rate on a three-month average, instead of the current four-year average. This change, they estimated, would save up to $32 billion over 10 years.

Kim Weaver, the Federal Retirement Thrift Investment Board’s director of external affairs, which operates the TSP, said this change “would drop the interest to virtually zero, which would make the G Fund worthless to our participants. It wouldn't even begin to keep pace with inflation.”

Federal Pension
Senate Republicans, led by budget committee Chairman Mike Enzi, R-Wyo., called for a hike in employee pension contributions by proposing a 50-50 split in federal employee and agency contributions to defined benefits packages. This new system would require feds to contribute 6.35 percent of their paychecks toward their pensions, up from the current contribution rate of 0.8 percent to 4.4 percent.

"In keeping with a recommendation from the National Commission on Fiscal Responsibility and Reform, this budget calls for Federal employees — including Members of Congress and congressional staff — to make greater contributions toward their own retirement," the legislation text said.

The House Budget Committee report fleshed out another money-saving option that would base retirement health benefits on the amount of years an employee has worked for the government. Reducing premium subsidies for those with shorter federal careers would save $1.2 billion over ten years, according to the report.

Sequestration
With sequestration set to fully resume this October, President Obama made it very clear he will not sign a budget bill that fails to cancel sequestration budget cuts.

The House Republicans’ proposal would keep base spending at the sequestration limit of $523 billion, but would inflate the Overseas Contingency Operations (OCO) budget to $94 billion, in an effort to offset the consequences of sequestration for the Department of Defense. In response to this proposal, Obama said “I will not,” sign such legislation allowing for sequestration to go back into effect.

According to the White House Office of Management and Budget, discretionary spending overall would be reduced more than $90.4 billion if sequestration went back into effect. Defense spending would level off at $521 billion, and $492 billion for non-defense spending.

Congressional Republicans are intent on protecting the Defense Department from sequestration, but a surge in defense spending would “significantly cut domestic spending through measures such as ending Obamacare and slashing welfare programs,” according to The Huffington Post.

The discretionary budget authority for national defense (DoD, and other defense-related spending) would increase by $387 billion from FY2017 to FY2025, while cutting non-defense budgets by $759 billion over the same period.

 

By Brionne Griffin | FEDmanager

Posted in General News

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