The Inaugural Address and Its Impact on Federal Employees

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By on January 23, 2017 in Pay & Benefits, Retirement with 0 Comments

Image of Donald Trump speaking on Inauguration Day

The inaugural address is the first indication about how President Trump will govern. What can federal employees gather from this first speech by the new president?

There are several common themes throughout the new president’s first speech that provide more insight into his philosophy. From this philosophy, and promises and statements made during the campaign, we have an early look into how the federal government may be changing.

Transferring Power from Government Back to the People

President Trump intends to follow through on what he repeated during the campaign. His statement near the beginning of the Inaugural speech was, “We are transferring power from Washington, D.C. and giving it back to you, the American People.”

This philosophy will likely prove to be meaningful to the federal workforce.

While federal employees may not think of themselves as the “political elite,” they are a major portion of the federal establishment. Cutting back on the role of government will impact federal employees and agencies.

A case in point: One of the first two executive orders issued by the new president on his first day in office was restricting and cutting back on federal regulations. (See White House Orders Federal Agencies to Halt Regulations) He has also promised to eliminate two regulations for every new one issued. And today, President Trump issued an executive order to impose a freeze on federal hiring.

The regulatory changes are likely to be widespread throughout the federal government. Some agencies and organizations (for example, the Border Patrol) will likely benefit with an infusion of new employees. Others are likely to see employees being transferred to new jobs or jobs being eliminated.

This is where the Holman Rule could come into play. This newly revived legislative rule will make it easier to alter agency priorities and personnel. Those who wonder if their jobs will be at risk will want to pay attention to what is happening in Congress during the budget process. (See How To Quickly Reduce Federal Employee Salaries and Agency Programs)

Protecting the Establishment but Not American Citizens

Here is a quote from President Trump’s Inaugural address:

Washington flourished — but the people did not share in its wealth. Politicians prospered — but the jobs left, and the factories closed.

The establishment protected itself, but not the citizens of our country. Their victories have not been your victories; their triumphs have not been your triumphs; and while they celebrated in our nation’s capital, there was little to celebrate for struggling families all across our land.

The Heritage Foundation played a significant role in the transition. Their recommendations will likely play a significant role in changes impacting federal employees pay and benefits.

Philosophical Change and the Impact on Federal Pay

Here is a quote from a recent Heritage Foundation report regarding federal pay:

A Heritage Foundation study estimated that federal employee compensation is 30 percent to 40 percent higher than private-sector compensation; a Congressional Budget Office (CBO) study estimated that the advantage is 16 percent; and an American Enterprise Institute study estimated that the gap is 61 percent.

The Federal Salary Council routinely concludes that federal employees are underpaid by about 34%. There are no references in the Heritage report about the Federal Salary Council’s report or its relative value.

Consider President Trump’s statement about those in Washington flourishing while American citizens are struggling to the Heritage report about the much higher salaries provided to federal employees.

While this comparison does not necessarily lead to a conclusion that federal pay is too high for civil service employees, it certainly leads to a conclusion that large pay raises for most federal workers are unlikely—whether these federal employees are working in Washington or far outside of the beltway.

If Congress goes along with this philosophy, routine within-grade increases are likely to be reduced. On the other hand, federal employees who receive very high performance ratings may come out ahead of their colleagues when pay raises are awarded.

The Heritage report suggests a larger bonus pool becoming available to managers to reward the highest performance employees.

Also in the Heritage Report:

Congress should take away the automatic nature of WIGIs (within-grade increases) by making it easier for federal managers not to give all employees WIGIs.

Impact on Federal Benefits

Here is a statement about the federal government’s leave program from Heritage:

Combine federal vacation and sick leave into a (paid time off) plan similar to that offered by large, private sector employees. This would amount to 16 days for workers with fewer than three years of service and up to 27 days for the longest- serving workers.

If adopted, this proposal would amount to about one week less of paid time off from work for many federal employees.

Federal Retirement System

Changes are likely to at least be proposed to the federal retirement system. Here is a summation of one view on the federal retirement program:

[P]rivate-sector employers who offer retirement plans typically contribute a maximum of between 3 percent and 5 percent of employees’ salaries to their retirement plan. The federal government, on the other hand, contributes up to 18 percent of employees’ pay….

While this recommendation would not impact federal employees with more than 25 years of federal service, it may change the retirement plan for less senior employees.

Federal employees with five or more years of service but fewer than 25 years could select one of these options under the Heritage proposal:

  • Remain in the FERS system and continue to receive both FERS and TSP benefits but pay a higher share of FERS costs.
  • Maintain a frozen FERS benefit with no further FERS contributions but receive an additional 3 percentage points of matching TSP contributions, for a total government-provided contribution of up to 8 percent (4 percent automatic plus up to 4 percent matching), compared to the current 5 percent max.
  • Receive a lump-sum benefit payment equal to 75 percent of the present value of accrued FERS benefits, no future FERS benefit, and higher TSP contributions (an additional 3 percent matching, up to 8 percent total).

Impact on Federal Retirements

The number of federal employees applying for retirement always jumps in January. In January 2016, there was a 73% jump in these applications. (See OPM’s Retirement Claims Backlog Jumps 73% in January)

The federal workforce is older than many private companies. A large number of federal employees are now eligible to retire. It is likely that the backlog in applications being processed by OPM will jump to more than 20,000 in January 2017.

Living in Interesting Times

A change in administrations always leads to changes in the federal workforce. The change from the Obama administration to the Trump administration is more significant than more recent administration changes.

President Trump is not a traditional conservative president. He is being described as a populist. As one commentator described his Inaugural speech: “This was not a conservative speech. There was not even a nod to the notion of shrinking the size of government, not even a Clintonian ‘the era of big government is over.’ That is not Trump’s passion.”

President Trump avoids being obtuse. He does not shrink from confrontation. He means what he says. His passion is to change the political establishment in ways that he feels will help most Americans.

How that will play out for the federal workforce remains to be seen. It will be an interesting time, and perhaps challenging, for many or most federal employees.

Older employees are sometimes resistant to change. Watch what happens to the retirement backlog figures when the information is released in early February.

FedSmith looks forward to keeping our readers up to date on proposed changes that impact the federal workforce.

Follow Ralph on Twitter: @RalphSmith47

© 2017 Ralph R. Smith. All rights reserved. This article may not be reproduced without express written consent from Ralph R. Smith.

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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. Follow Ralph on Twitter: @RalphSmith47

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