President Obama has proposed a two year pay freeze for the federal workforce. That proposal surprised many and may have even surprised the federal employee unions that represent federal employees. While it may disappoint those of us in the federal community, it is likely that the effort to cut back on federal pay and benefits is a long way from ending.
Losing out on a pay increase of 1.4% or so for the federal workforce may be disappointing but may be good politics for the president in the midst of a recession. With unemployment at 9.8% and, what some refer to as the “real” unemployment rate at about 18% when counting people who are no longer looking for work or who are underemployed, the President’s action is obviously much more favorably received outside areas with a large federal workforce.
In any event, the President’s proposal to freeze federal pay did not go far enough for some.
Congressman Jason Chaffetz is one of these folks. Congressman Chaffetz (R-UT) says Congress should pass a bill temporarily canceling General Schedule employees’ step increases.
Congressman Chaffetz makes the point in an interview with the Federal Times that handing out billions of dollars in step increases while touting a pay freeze shows the White House’s plan is disingenuous and “full of holes.” In other words, the federal pay freeze is good political theater but isn’t a serious effort to cut back on federal spending.
So, how would a serious effort to cut back federal spending work if one is considering cutting the payroll for federal employees? Chaffetz says Congress should set budgetary limitations for agencies, and allow each agency to spend its money within those limits instead of Congress mandating changes to staffing or pay levels. In other words, if an agency wanted to spend more of its budget for higher salaries for federal employees it could do so by cutting back on its spending in other areas whether those areas were program cuts, cutting back on maintenance or finding other ways to save money.
While it irritates many readers to state the obvious with regard to within-grade increases, these step raises are largely automatic, based on longevity in a particular grade. Outstanding performance can allow a step pay raise. Not every worker gets a step raise every year, but the raises average about 2% per year for workers as a group. Very few supervisors go to the trouble to deny an employee a within-grade increase although it does happen in some cases each year.
It isn’t just Congressman Chaffetz that has in mind freezing annual step increases. The federal debt commission says that freezing within-grade increases as well as the annual pay freeze would save more than twice the amount that President Obama is now seeking with his proposed pay freeze.
Another target in the federal benefits area could be the amount of annual leave that is given to federal workers. The big advantage for federal workers over private-sector workers comes in time off, pensions and lesser-known benefits. After three years, federal workers get 20 days of vacation, 10 paid holidays and 13 sick days, according to the Heritage organization. “A private worker would be lucky to get that after 20,” James Sherk, a labor analyst at the conservative Heritage Foundation. He also argues, as does Congressman Chaffetz, that pay freezes are needed but the better long-term solution is basing the federal pay system on merit and not how long a person has been working for the government or in a particular pay grade.
We cannot predict what will happen in Congress to current or future pay and benefits. But, as those who work for the government area aware, we are visible in the media and subject to the political winds of change. At the moment, the wind is blowing in a direction many would not have predicted just a short time ago. As proposals emerge, we will strive to inform our readers of these changes so that you will be informed about possible impact on your financial future so that it may help in making career or financial decisions about your future.