The Budget "Shell Game" and Your Federal Employee Benefits

By on February 15, 2011 in Current Events, Human Resources with 23 Comments

Readers who have been federal employees for a number of years have probably become inured to to the games or strategies employed by professional politicians to achieve their goals–or, as is often done, a strategy to confuse and mislead their constituents as to what they are really doing.

And, since money and budgets are a major source of contention among competing interest groups, nowhere are the games and strategies more apparent than politicians explaining their position or votes on how to spend money in the federal budget.

We are in the midst of budget proposals. Since a budget was never passed for the current fiscal year which actually started on October 1, 2010, we are already one-third into the current fiscal year and the government is still running on a continuing resolution. That is likely to continue for the next few weeks and, perhaps, for the rest of the fiscal year.

Complicating this is the new 2012 budget proposal issued by the White House this week. That budget proposal is not to be confused with the on-going debate about how to spend the government’s money for the remainder of the 2011 fiscal year.

For obvious reasons, many readers are undoubtedly wondering what may happen to their pay and benefits under the various proposals. Understanding and following the various proposals is roughly akin to watching a carnival barker rapidly moving a pea underneath three different shells, sometime known as a “shell game.” A shell game is: “a confidence trick used to perpetrate fraud. In confidence trick slang, this famous swindle is referred to as a short-con because it is quick and easy to pull off.” That often is an accurate description of the antics used by our elected officials who often like to dip, slide and evade when explaining how they want to spend or cut the federal budget. 

Creating Fear and Uncertainty In the Federal Workforce

With that background, what will the 2012 budget change, if anything, with federal employee pay and benefits in the midst of compiling the largest federal government deficits in history?

President Obama appointed a deficit commission as one solution to the budget deficit crisis. According to the Commission’s website, their charter is that the “Commission shall propose recommendations that meaningfully improve the long-run fiscal outlook, including changes to address the growth of entitlement spending and the gap between the projected revenues and expenditures of the Federal Government.” The results of this effort were issued late in 2010. (See Deficit Commission Recommends Freezing Federal Salaries, Changing Retirement Calculations)

From reading the report of President Obama’s own appointed commission, you may have been expecting a proposal in the 2012 budget request to freeze federal employee salaries for three years, change the retirement calculation for federal annuities from high three to high five, raise the Social Security retirement age, change the COLA calculation for federal employee retirement annuities, or cut the federal workforce by 10%.

That didn’t happen.

Good News for Federal Employee Pay and Benefits (Or, Alternatively, It Could Have Been Much Worse)

Everything is relative when it comes to discussing the federal budget. So, in anticipation of the negative comments from readers bemoaning the current two year federal pay freeze that is now in effect (and, as many retirees know, we are in the second year of no COLA increase for federal employee retirees or Social Security recipients) perhaps a description of the the 2012 budget proposal that will be more satisfying for some readers is: “It could have been much worse.”

The proposed budget does retain the two year federal employee pay freeze in place but does not propose extending the freeze for an additional year. As noted in the budget proposal: “In late 2010, the President proposed and Congress enacted a two-year freeze in the pay of civilian Federal employees as one of the steps needed to put the Nation on a sustainable fiscal path. This will save $2 billion for the remainder of 2011, $28 billion over the next five years, and more than $60 billion over the next 10 years.”

There is no reference to a three year pay freeze for federal employees in the portion of the budget discussing the federal civilian workforce other than the inference that a longer freeze is not mentioned so, apparently, a longer pay freeze is not contemplated by the administration.

But, with the shell game analogy in mind, note that since the budget does not mention any federal pay proposal for later than 2012, the administration could ask for a raise or a prolonged pay freeze for 2013 and beyond and not violate its stated intent in this proposal. Moreover, the budget proposal is just a proposal; the final figure will be a compromise between Congress and the administration and many in Congress were just elected on a platform of cutting the federal budget and the federal deficit.

And what about cutting the federal workforce by 10% or so as recommended by the deficit commission?

Here is what is stated in the proposal: “The 2012 Budget estimates a 2012 workforce of 2.1 million, roughly the same level as proposed last year and a modest increase over 2010 actual levels.”

Again, no reference to the budget deficit commission proposal but, by inference, the commission’s recommendations were ignored here as well.

The proposal does reference federal retirement, but not in the way that may have been intended or anticipated by the deficit commission. The proposal notes: “Between 2005 and 2008, annual separations (retirements and other departures) from the Federal workforce ranged between 244,000 and 252,000. Separations fell to 212,000 in 2009. If the reduced retirement pattern continues, 230,000 separations are likely in 2011. If separation rates return to their 2007 levels instead, more than 300,000 separations could occur in 2011.”

In effect, in the nine pages of the budget proposal that specifically addresses the federal workforce, there is no reference to changing in any way how federal annuity benefits are calculated. 

So, did the budget proposal completely ignore the recommendations of the President’s deficit commission?

When the commission’s recommendations were issued, the President stated: “The commission’s majority report includes a number of specific proposals that I — along with my economic team — will study closely in the coming weeks as we develop our budget and our priorities for the coming year.”  

According to White House Budget Director Jack Lew, “this budget is a down payment.” That statement, apparently, is meant to convey the impression that the recommendations were not completely ignored by the administration in making its 2012 budget recommendations.

Perhaps more objective, a columnist for the Washington Post wrote: “It’s like the Fiscal Commission never happened.”

Or, in other words, the President’s economic team may have considered the proposals but ignored them when making the final recommendations.

That is probably good news for the the federal workforce.

But don’t get carried away with a celebration. No one knows what the final result will be for the 2012 budget. The election results from last November are still on everyone’s mind as politicians prepare for the elections again next year.

Politicians will be vociferously spinning their respective positions to convince as much of the electorate as possible that they are in complete agreement with the voters–regardless of what the voter many hold as a political position.

Now, the intensity of the “shell game” will start in earnest.

 

© 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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