Deficit Commission Recommends Freezing Federal Salaries, Changing Retirement Calculations

By on November 10, 2010 in Current Events with 7 Comments

What does the future hold for you in your federal career and in your retirement?

Don’t answer too quickly. You may be in for a surprise.

Deciding how to cut federal spending is going to result in some unhappy people. One person’s “pork barrel project” is another person’s “essential spending to create new jobs.”

The initial draft report for President Barack Obama’s bipartisan deficit commission has been released by the co-chairmen and contains recommendations that, if enacted, would directly impact the federal workforce. Federal employee salaries and benefits have been growing during a recession and there has been an avalanche of articles, and an occasional defense of salaries by federal employees unions and OPM after the OPM director initially cited the need for a more credible analysis of the federal salary structure.

The growth of federal salaries in a period of high unemployment and several reports comparing the average federal salary to a lower private sector wage structure make federal employee pay and benefits an obvious target for reducing spending—and the deficit commission is aiming at the federal workforce in its draft report..

Keep in mind that this is a draft report. There is no indication it will be adopted anytime soon or ever adopted as currently written. Any final decision will be made after a debate in Congress and that is not likely to happen right away.

The timing for releasing the draft report is not accidental. The new proposals were released as the Treasury Department reported that the federal government began the new fiscal year with a deficit in October that is the third highest October shortfall on record. Last month’s federal deficit set the stage for what is expected to be a third consecutive year of $1 trillion-plus deficits which highlights the necessity for cutting spending in ways that will make some segments of our society unhappy. 

Here are several examples of potential savings that may impact the federal workforce in varying degrees:

  • Freeze federal salaries, bonuses, and other compensation at non-Defense agencies for three years ($15.1 billion in savings)
  • Freeze federal salaries, bonuses, and other compensation at the Department of Defense for three years ($5.3 billion in savings)
  • Cut the federal workforce by 10% (2-for-3 replacement rate) ($13.2 billion in savings) 
  • Use highest 5 years to calculate civil service pensions
  • Ask federal workers to contribute 1⁄2 the cost (not 1/14th) of their retirement annuity contribution (See page 38 of the attached report)
  • Reform COLA payments for civilian & military early retirees to adopt a “more accurate measure of savings” to achieve savings
  • Switch to a more accurate measure of inflation (chained CPI) for calculating COLAs
  • Raise the regular Social Security retirement age to 68 in about 2050 and to 69 in 2075

You can download the entire draft report to see the full package of proposed changes to the federal budget structure.

© 2016 Ralph R. Smith. All rights reserved. This article may not be reproduced without express written consent from Ralph R. Smith.

About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources.

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  1. Quien_99 says:

    I think it is amazing how Congress is willing to reduce our incomes and cut federal jobs, but retain the salaries of the rich and put the so called ability to increase jobs in the private sector. It is because of the failures in the private sector that has cause a lot of the problems we have now, so why should we trust that they will create these jobs or that they even care as long as they keep their money in their pockets.

  2. JeanPublic says:

    If the government truly wants to reduce the deficit, nickel and diming the federal workforce is not effective. These numbers look impressive as savings because to hear we are saving 13 billion here and 15 billion there are high dollar figures to common people. However, if the government and this so called commission really wants to save the nation and reduce the financial mess the US finds itself sinking into, END THE WAR. BRING OUR TROOPS HOME. INVEST IN OUR NATION AND NOT IRAQ. ELIMINATE THE HUGE GOVERNMENT CONTRACTORS IN IRAQ MAKING $200,000 a yeat tax free doing work that would warrant a $50,000 or less salary in the US. This foolishness of stressing the workforce and comparing apples to watermelons by saying the salaries are higher for federal workers duing the recession; when in fact, the public workforce had lagged behind the private sector for years. The average federal worker falls within the 5-11 grade level and not the 14-EIS officer pay of $120,000 – 200,000 salary. The information being released to the public is simply a scare tactic and a way to divide and conquer. As a previous writer stated, the CSR employees is shrinking due to retirement so how is this group still being used as a benchmark. The US has so many social entitlement programs that can save billions of dollars. Look at Medicare, Food stamps, section 8 and other such programs. Yes, we must and should care for the less fortunate. However, these programs are designed to cripple and keep the users of these systems dependent on the systems. They are not encouraged nor are they trained to get off and support the economic system that took care of them when they were in need. The bottom line is, like all of us, if the money is drying up and expenses are getting out of control, put an end to the largest expenses that are drying up our finances. BRING OUR TROOPS HOME. SAVE OUR ECONOMY. PROTECT OUR BORDERS AND GET THE POLITICIANS THAT ARE SELLING AND BARTERING OUR COUNTRY, OUT OF OFFICE AND DO IT NOW.

    • Retired Fed says:

      No kidding!!  Iraq is sitting on all of that oil.  Let THEM pay the bill.  However, I would an exception about your comments on social entitlement programs for the elderly.  Most cannot get the jobs they once had to maintain a decent standard of living, if they can get jobs at all.

  3. Oso says:

    End the war. Save trillions in equipment, personnel, VA and contractor costs.

  4. Margaret Hagan says:

    Where to begin? First I find it cowardly that our legislators chose the federal workforce, particularly CSR employees. This group has been shrinking yearly due to attrition and it appears that is why they are now the target. They are the minority so lets target the smallest fraction, they won’t have much of a voice to complain… cowardly is that. I began my career 33 years ago with one set of rules in place (retirement calculations) and upheld my end of the bargain with a career I am proud of only to be told now that the rules will be changed in the middle of the game or more aptly just before the end of the game and not in my favor! This is unacceptable and the type of action that forces exceptional government employees to have the wind knocked out of their sails and become, what a large number of the public believes most government workers are, (lazy do nothings). The government (management) takes exceptional workers and and creates the do nothings. I have seen it first hand numerous times over my career. They slowly takes away an exceptional employee’s ambition, creativity and demands employees to adhere to the status quo “do nothing”. This is demanded by management because they are so concerned about their next promotion and that it may be impacted or missed because an employee somehow does their job which would bring light unto the supervisor. If that light is anyway perceived as “your employee made an error or shook the boat by their action” the supervisor sees his chances for climbing the ladder dissappear. This is even more prevalent when a supervisor has been promoted and is unfamiliar with the area they are running. They do not trust employees that have been performing the jobs, or may have lost competition for the job with the newly promoted supervisor. Thus, we have the creation of the “government worker”. These are the employees who simply show up to work, doing nothing and maintaining the status quo, while receiving their pay checks. Once this pattern of maintaining the status quo is repeated day in a day out..voila, a true government employee is born!! This is why the moral is so low in most agencies today. When you knock the wind out of peoples sails this is the result! Employees are stiffled by management, who are concerned about their own chances for promotion. My suggestion, if such changes are being initiated, let it be for future employees who will have the oppurtunity to chose to play under those rules or not. Another thought, why do I not hear any mention of reforming Congress’s pensions? It is nice to work for one term or multiple yet end up with a full life time pension, health benefits, etc. Minimal time in yet full pensions!! Tell me that isn’t some nice gig.

    • Cindy Rosen says:

      I totally understand and agree with Margaret’s comments. I have been one of those employees who has gone the extra mile and I have been told to “stay within my lane'” which really bothers me.  I am NOT the typcal govenment employee and furthermore don’t want to be. I have A LOT more to give of myself but can’t, and find it this new situation very frustrating!