‘Antiquated Assumptions’ About Federal Pay and Benefits

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By on February 12, 2017 in Pay & Benefits with 0 Comments

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What are the prospects for a federal employee pay raise in 2018? What changes will occur in the federal employee benefits package in the coming year?

It is too early to be certain, but there are some indications about where changes are likely to happen. Here is a summary.

2018 Pay Raise

There is a belief by many in Congress and the administration that federal benefits are too high and out of step with the private sector. We are being optimistic and assuming there will be a pay raise of some kind in January 2018.

Here is an example. According to White House Press Secretary Sean Spicer:

 “The Federal workforce has expanded significantly during the last two Administrations, from approximately 1.8 million Federal civilian employees during the Clinton Administration to approximately 2.1 million as of 2016 (an approximately 17 percent increase).

Federal employee health and retirement benefits continue to be based on antiquated assumptions and require a level of generosity long since abandoned by most of the private sector. Those costs are unsustainable for the Federal government, just as they are proving to be unsustainable for state and local governments with similar health and retirement packages.”

The statement was made in a communications briefing announcing a temporary hiring freeze for much of the federal government.

There has also been a bill introduced by Virginia Congressman Gerry Connolly (D-VA)—who has many federal employees in his district—to provide a pay raise of 3.2% in 2018. The proposed raise would give federal employees a 2% increase in their base pay and a 1.2% average increase in locality pay. (See Legislation Introduced to Give Federal Employees a 3.2% Pay Raise in 2018)

The same Congressman introduced legislation for a 5.3% raise for federal employees in 2017. It had 32 co-sponsors.

The legislation arrives at the 3.2% figure by taking the difference between last year’s 5.3% request and what federal workers ultimately got in 2017 (2.1%).

Of course, the final pay raise for 2017 was 2.1%. Perhaps Congressman Connolly is just trying to be more realistic this time around as the 2016 legislative proposal never gained traction in Congress.

If there is a pay raise in 2018, it will likely be relatively small. The amount of the raise may also be tied to performance ratings in some way.

Major Goal of the 115th Congress

Jason Chaffetz (R-UT) is the Chairman of the House Oversight and Government Reform Committee.

Chaffetz says that a major goal in the 115th Congress is reforming the management of federal employees. There is also a goal of moving federal agencies out of the Washington, DC metropolitan area.

And, something that should attract attention of current federal employees: there is also a goal of changing the federal retirement system.

Congressional Action vs. Executive Orders

In a recent hearing, Senator James Lankford (R-OK) remarked that Congress can work on a bipartisan basis to reform federal workforce rules or that change will happen through executive action.

With a sharply divided Congress, it is not clear a bi-partisan consensus on management issues will emerge. The bills that have been introduced generally have co-sponsors from one political party only.

A resolution has been proposed in the Senate supporting federal employees, and the proposal pledges “to oppose efforts to reduce Federal workforce pay and benefits, eliminate civil service employment protections, undermine collective bargaining, and increase the use of non-Federal contractors for inherently governmental activities.” The proposal has 14 Democrats co-sponsoring the legislative proposal.

A simple resolution such as this is used when a proposal just affects one chamber of Congress. It must be agreed to in the chamber in which it was introduced. It is not voted on in the other chamber and does not have the force of law.

There is not a strong likelihood of this proposal passing. It would undercut many legislative proposals that, as noted above, reflect the majority’s goals for the current Congress. The position of the resolution is that the existing system of federal workforce management is satisfactory and the sponsors will oppose change.

No Evidence of Bipartisanship

At the moment, there is no evidence of a bipartisan consensus emerging in Congress on changes impacting the federal workforce. Bills that are passed are likely to be voted along straight party lines. That is not a good approach for retaining the current system as compromise legislation would normally accommodate some changes preferred by both parties.

With Republicans controlling both chambers in Congress and the White House, bipartisan efforts would appear to benefit federal employees. But, so far at least, the Democrats are gathering publicity by trying to derail changes in Congress without any real success.

Issues to Watch

There is not likely to be a large pay increase in 2018. For the past several years, and after several years of a pay freeze, pay raises have been determined by the president. Congress did not exercise its authority to take action.

If the efforts to make changes to the federal management system start to become a real possibility, Congress will probably legislate any pay raise for next year. It would likely be part of other legislative changes such as a pay for performance system— a perennially popular topic and one often mentioned in possible changes.

Proposals to change the general schedule pay structure will be much tougher to implement. No obvious proposals have been forthcoming as to how a new pay system would be structured. That could happen; it is more like a pay for performance system will be layered over the existing general schedule pay system.

Legislation Making it Easier to Fire a Fed

It is not just federal pay and the benefits package that is attracting attention in Congress.

A bill in the House of Representatives now has 12 co-sponsors. It is called the Merit Act of 2017. The purpose of the bill is to make it easier to fire federal employees for misconduct or performance.  It is “an alternative removal for performance or misconduct for Federal employees.”

The bill has been referred to the House Committee for Oversight and Government Reform. (See Removal of Federal Employees for Misconduct or Performance)

Retirement System Changes

It is likely that changes will be made to the FERS retirement system.

Many in Congress believe that the federal retirement system is too generous. As noted in a recent report (on page 101 for those with a strong interest), the federal government contributes about 18% to the federal employee’s retirement, including thrift savings plan contributions.

The report contends that large private sector companies contribute between 3 and 5 percent instead of 18% to pension programs. One proposal it to cut the federal government’s contribution to 8% instead of 18%.

Part of this proposal would phase out the current FERS system. The system would not change for most current federal employees. The significant changes would have the greatest impact on new employees or employees with five years of service or less. (See Proposed Changes to Federal HR: From Worst Case to Possible)

Health Benefits Program Changes

A proposal to eliminate the federal subsidy for retiree health benefits for new hires is also a possible change.

The federal government continues to offer the FEHB plan to federal retirees. One way to cut down on government expenses is to eliminate FEHB subsidized health insurance coverage after retirement.

One proposal being floated is to eliminate the federal subsidy for retiree health benefits for new federal employees. Under this proposal, the government would continue to provide access to FEHB benefits in retirement. Employees would pay the full cost of those premiums.

As the federal government subsidizes a large percentage of the cost of FEHB health insurance, the result would probably be to shift many new retirees into Medicare.

Labor Relations Changes

It is likely there will be changes in the federal labor relations program. The most likely changes will be to place restrictions on official time usage.

A recent GAO report concluded there was not accurate recording and reporting of official time in the Department of Veterans Affairs.

It is unlikely the VA us unique. Congress may pass restrictions on having any federal employees working full time for a union while collecting a federal paycheck and full benefits. (See Paid Time for Union Activity and Government Efficiency)

Restrictions on use of government facilities for union activities are also a possibility.

There is likely to be consideration for restricting the appeal options currently available to federal employees. Federal employee unions would continue to play a major role in representing bargaining unit employees in appeals, including a negotiated grievance procedure.

Enjoy the Ride

Changes always occur with new administrations. When working for the federal government when administrations changed from President Carter to President Reagan, there were many employees fearing possible changes. Changes did occur. Probably the biggest change was substituting the FERS system for the CSRS system.

When President Carter took office, there was fear of changes he would introduce.

The Civil Service Reform Act was implemented. Despite much hand wringing about making unions stronger and a pay for performance system that would harm many federal employees, the system survived and many employees thrived.

Examples of change with each new administration bring out expressions of fear and anxiety. In 2017, there is much publicity about federal employees engaging in a resistance movement. For the vast majority of federal employees, the changes will not cause them to leave government unless they are planning on retiring anyway. Many of the changes will not impact current employees.

The federal government will still be a good place to work. Some employees will move to new agencies or a new locale. The fear of change is usually worse than the reality.

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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