Benefits Cuts Resurface in 2020 Budget Proposal

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By on March 11, 2019 in Pay & Benefits with 0 Comments

Close up of a person's hand holding a kitchen knife cutting a $100 dollar bill into pieces on a wooden surface depicting pay cuts, budget cuts

The president’s fiscal year 2020 budget proposal was released today after a delay caused by the recent government shutdown (it was originally slated for release in February).

Update: Details on the benefits cuts outlined below are now available. See Details Revealed on Proposed Benefits Cuts

Reorganizing OPM

A key component of the budget is reiterating the administration’s proposal for a major reorganization for the Office of Personnel Management. The proposal reads:

The last broad Federal civil service reform occurred over 40 years ago when the Civil Service Reform Act of 1978 established OPM. The current structure of OPM and the Federal employment system are archaic and do not reflect important realities of today’s workforce. For example, the Government Accountability Office has had Federal human capital on its high-risk list since 2001, and the Congress has acted to exempt an increasing portion of the civilian workforce from the purview of these structures. These realities have reduced OPM’s ability to manage the Federal workforce effectively and to address core strategic and policy concerns.

The Budget reflects the end-state organizational structure and resources necessary to build and sustain the Federal workforce of tomorrow. This full reorganization of OPM includes:

  • Transferring elements of workforce policy and strategy functions to the Executive Office of the President.
  • Transferring the conduct of background investigations functions to the Department of Defense.
  • Transferring all remaining functions to the General Services Administration (GSA), including oversight and transactional functions from OPM’s Human Resources Solutions (HRS), Retirement Services, Healthcare & Insurance, Office of Inspector General, and Merit System Accountability and Compliance organizations. (emphasis added)

This is not a new idea and was originally proposed by the Trump administration in 2018.

Proposed Benefits Cuts

Note the statement about transferring functions to the General Services Administration. This is key because of another set of line items I found buried in the budget proposal.

Although I found no direct statements or discussion of cuts to federal employees’ pay or benefits, I did find this list of items in the accounting tables towards the end of the budget document, all of which were listed under the section for budget items related to GSA:

  • Increase employee contributions to 50 percent of cost, phased in at one percent per year
  • Implement defined contribution system for term employees
  • Eliminate Federal Employees Retirement System COLA, reduce Civil Service Retirement System COLA by 0.5 percent
  • Eliminate the Special Retirement Supplement
  • Change retirement calculation from high–three years to high–five years
  • Reduce the G Fund interest rate
  • Federal Employees Health Benefits (FEHB) Program:
    • Modify the government contribution to FEHB premiums
    • Provide tax preemption for Federal Employees Dental/Vision Program

A few takeaways about these:

First, as I said, I found no direct discussion of these items anywhere else in the document, so the only information I have is what is listed here. However, with the exception of the second bullet about a defined contribution system for term employees, these clearly are all cuts because the cost projections from the table all show spending reductions over the next decade with each line item.

Second, we’ve heard many of these proposals before (like in last year’s budget proposal), so it stands to reason that the proposals are still the same. Some are self-explanatory; eliminating the COLA under FERS, for example, is pretty obvious as to what would happen there. For a detailed discussion of some of these proposed budget cuts, see last year’s article on the 2019 budget proposal.

Third, these are presumably the functions that are currently under OPM that would get moved to GSA because they were listed under GSA in the accounting table. A footnote next to them implied this as well.

Don’t Start Worrying Just Yet

As I mentioned, many of these proposals have been floated before, but to actually become reality takes much more than getting mentioned in a budget proposal.

These annual budget proposals, regardless of which administration is in office, are just that – proposals. There are many other interested parties who get to have their say in the process long before any of these proposals turn into reality.

An article in USA Today about today’s budget release put it this way:

The budget the president sends to Congress is just a starting point, a way for the administration to spell out its spending priorities for the coming year. Lawmakers have their own ideas about how federal dollars should be spent, and since they seldom line up closely with the president’s vision, Congress usually shelves the president’s budget proposal and writes its own.

The process becomes even more complicated when an opposing party is in charge, as it is this year. Democrats led by Speaker Nancy Pelosi control the House for the first time in eight years, while Republicans still hold the Senate and the White House.

The president’s budget is usually DOA the moment it reaches Congress. Given the power split, that will be especially true this year.

In short, USA Today wrote, “In Washington-speak, it will be dead on arrival.”

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About the Author

Ian Smith is one of the co-founders of FedSmith.com. He enjoys writing about current topics that affect the federal workforce.

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