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For Federal Workers, a Fiscal Cliff Deal Carries Dangers

Brendan Smlalowski/Bloomberg News
Over the past couple of years, as Washington has lurched from fiscal crisis to fiscal crisis, federal employees have seen their salaries and benefits targeted for budget savings.

Federal workers know the drill when it comes to big budget questions. With Congress grappling with another fiscal crisis, federal employee unions are bracing for more efforts to wring savings from government salaries and benefits.

Several lawmakers in recent weeks have started floating the idea of extending the 2-year-old federal pay freeze that is due to expire at the end of this month and trimming spending on pensions and benefits to help bring the budget under control. Although those ideas have not gathered much traction so far, leaders of unions representing government workers are worried their members will be an easy target for new cutbacks and already are lobbying lawmakers.

“We are certainly taking it as a serious threat and trying to talk to people about it,” said Maureen Gilman, legislative and political director for the National Treasury Employees Union.

Over the past couple of years, as Washington has lurched from fiscal crisis to fiscal crisis, federal employees have seen their salaries and benefits targeted for budget savings. Already, employees have worked under a pay freeze in place since 2010. In February, lawmakers agreed to higher pension contributions from new federal employees to raise $15 billion to offset the cost of extending the payroll tax cut and expanded unemployment insurance.

“That’s where they turn repeatedly when they need money,” said J. David Cox, president of the American Federation of Government Employees. “We’ve given $103 billion. That equates to $50,000 for every federal employee. That’s a chunk of change.”

Most recently, a proposal from Speaker John A. Boehner, R-Ohio, to avert the fiscal cliff included $300 billion in discretionary spending cuts that he said came from a deficit reduction plan put forward in 2010 by a presidential commission on deficit reduction. That proposal called for a federal pay freeze and a workforce reduction through attrition. Although Boehner’s plan was hazy on the details, House Republicans could offer up similar cuts now.

Separately, Sen. Bob Corker, R-Tenn., has offered his own deficit reduction proposal that includes cuts to the federal workforce. His plan would extend the pay freeze through 2015, reduce federal hiring, move new employees off the existing defined benefit pension plan and convert the federal health plan to a voucher system.

Corker’s proposal would get $397 billion from cuts to federal workforce spending.

“It’s one of those measures that people on both sides of the aisle have looked at, including Bowles-Simpson,” he said. “There’s a lot of bipartisan support for them.”

The ideas certainly have the support of budget hawks.

“There’s no doubt that there’s going to be people looking for ways to do efficiencies, whether it’s in extending the pay freeze or other means,” said Steve Ellis, vice president of Taxpayers for Common Sense. “We think there’s a lot of room for efficiencies there.”

Wary on Sequester

Union leaders say they will lobby aggressively to kill any proposal that requires more concessions from employees, but that strategy could backfire. Absent any congressional action, a series of automatic, across-the-board spending cuts would kick in next year that would slash roughly $600 billion, or 8.2 percent, of nondefense discretionary spending over 10 years. Although it remains unclear how those cuts would affect the workforce if the cuts under sequester start taking hold in January, the effect over time could be devastating.

By contrast, any deal that Congress comes up with, even if it hits the federal workforce, would likely be less harmful to government employees.

“Whatever deal gets done is likely to be far better than sequestration,” said Patrick Lester, fiscal policy director at OMB Watch, an independent public policy research group. “Even though I don’t think the federal employees are necessarily big players in this budget discussion, I don’t think they’ll be affected that badly in this final outcome.”

According to the Congressional Research Service, salaries for federal government employees had been growing at about the rate of inflation for the 10 years before President Barack Obama signed the pay freeze at the end of 2010, cutting off a 1.4 percent scheduled increase. But the federal workforce count also has crept upward since hitting a 20-year low point in 2001.

The federal workforce is estimated at 1.35 million civilian workers and 757,000 Defense Department workers in the 2013 fiscal year, according to the Office of Management and Budget, a total that is 21.5 percent more than the head count in 2001.

Even if the sequester hits in January, there are ways the Obama administration can minimize the damage in the short term. The latest continuing resolution (H J Res 117) allows the OMB to front-load spending to prevent furloughs. That means the administration could choose to protect government employees if it becomes necessary to extend negotiations until early next year, Lester said.

Federal employees say they’ve been asked to bear the brunt of budget cuts for too long, and it’s time to spread the pain.

“We would like to see some more people share in the burden of this,” Gilman said. “It seems extremely unfair to our members who are middle-class employees.”

But outside observers say any long-term deficit deal that comes out of the current negotiations almost certainly will trim the size of the federal government. That means employee groups are going to have to accept some concessions. The question for worker representatives is whether they will be able to limit the damage for their members.

“Everything I’m seeing at this particular point in time suggests that the federal personnel will get off relatively easily” in the current fiscal cliff debate, said Lester. “But in the long run there’s probably going to be very significant caps on spending, and those caps will eventually bite and they probably will play out in terms of early buyouts and all those things that agencies usually do.”

AFGE’s Cox, however, is undaunted.

“We certainly will be working very hard against that,” he said. “We don’t need a race to the bottom in this country.”

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