After weeks of wrangling, name-calling, and self-serving press conferences, Congress passed a bill that ended a 16-day government shutdown on October 16th. President Obama signed the bill shortly after midnight. Federal employees are, for the most part, returning to work today.
Those federal employees returning to work will get paid for the time they were not at work during the shutdown. When they will get paid is not clear. “Essential” federal employees who were working during the shutdown were already guaranteed to be paid although probably not on the usual pay date for at least some of those who were told to remain on the job. The largest payroll provider for federal employees is the Defense Finance and Accounting Service (DFAS). This agency will make its next distribution on October 25th. Employees in a number of other agencies with different payroll service providers may not get paid until October 29th.
Several readers have also inquired about the impact of the shutdown on their retirement. Presumably, some of these folks will plan on retiring in the near future from the nature and sometimes frantic tone of their questions. Your federal retirement benefits are based on the number of years you have worked for the government and your consecutive “high three” salary years. These factors are not impacted by the shutdown unless you were in a non-pay status for more than six months during a calendar year.
However, for some readers, your leave accrual may be impacted because of the shutdown. According to the Office of Personnel Management (OPM), “if an employee is furloughed (i.e., placed in nonpay status) for part of a biweekly pay period, the employee’s leave accrual will generally not be affected for that pay period.” That sounds good but there is a catch which OPM describes as follows:
[W]hen a full-time employee with an 80-hour biweekly tour of duty accumulates a total of 80 hours of nonpay status from the beginning of the leave year (either in one pay period, or over the course of several pay periods), the employee will not earn annual and sick leave in the pay period in which that 80-hour accumulation is reached. If the employee again accumulates 80 hours of nonpay status, he or she will again not earn leave in the pay period in which that new 80-hour total is reached. At the end of the leave year, any accumulation of nonpay status hours of less than 80 hours is zeroed out so that the accumulation of nonpay status hours for the next leave year starts at zero.
In effect, some readers will lose out on leave they would have accumulated had they been at work during the shutdown.
So, what is gained in the new legislation? In effect, the agreement buys more time for a political resolution to the underlying cause of the disagreements because the underlying economic and political disagreements are still unresolved.
Enforcement of the debt limit has been suspended until February 7, 2014. If you are a pessimist (or, perhaps, just a realistic observer of the political process), it is easy to foresee there could be another political confrontation over the national debt in February and March.
Federal agencies are funded through January 15. And, if there is no agreement on a budget by that time, there could be another government shutdown.
The impetus for reaching an agreement, despite the intense philosophical differences, is that automatic spending cuts referred to as the sequester will go into effect. The next round of sequestration would cut government spending by an additional $19 billion on January 15th in addition to the cuts made this year. $19 billion is a large amount of money but certainly dwarfed by the current national debt which is about to hit $17 trillion. While the general predictions of dire consequences from the first sequester did not materialize, the threat of some additional cuts may be sufficient to spur compromise from both political parties to reach a longer term agreement.
The legislation ending the shutdown also required a round of budget negotiations. The deal doesn’t require anything from the budget negotiators other than to finish the discussions by December 13th and avoid using the negotiations as a way for additional debt ceiling increases. This effort will be led by Senate Budget Chairman Patty Murray and House Budget Chairman Paul Ryan. For those who think we have seen a similar scenario previously, we have seen such a scenario with a “super-committee” appointed to resolve the differences. The effort was not successful. But, with the memory of the recent shutdown and rancorous debate over the debt ceiling still fresh in everyones’ mind, perhaps this effort will be more successful.
Murray and Ryan may just be playing their political roles but at least they are trying to express some optimism in a joint statement in which they said: “We recognize … the challenges we face in reaching an agreement. But we want to find common ground and work toward a bipartisan deal. We intend to focus on what we can achieve.”
So, will taxes increase for many Americans in the near future? Will government be subject to at least minimal spending reductions and will our national debt start to decrease if modifications are made to the massive entitlement programs that threaten to overwhelm the government with expenses that will continue to go up as the aging baby boomer population ages?
The current agreement that reopens the government doesn’t offer any insight. It is just a temporary resolution and further delaying any resolution.
Of course, underlying the negotiations will be political calculations involving the national elections in 2014. What public positions will likely increase the political power of one party over the other? What actions could lead to a change in the majority party in the Senate or the House? Chances are, these calculations will be foremost in the minds of those voting on the next legislation to be put forward in Congress. It also means a significant resolution may not come about until voters make their decision in November 2014.
Our advice to federal employees: Try to save your money in case of another shutdown. It may not happen and may be unlikely to happen but it is a possibility. If you are in a financial position to save some for future expenses if you have to do without a paycheck for a few days or a few weeks, you will be in better shape by having an emergency fund at your disposal.