The fiscal year 2024 budget from the Republican Study Committee (RSC) would make drastic reductions to the pay and benefits of federal employees.
Among the proposed changes to federal employees’ pay and benefits are:
- Reforming paid leave policies to match the value of private sector benefits
- Ending automatic pay raises for federal employees
- Restrictions on bonuses paid to federal employees
- Elimination of pensions for newly hired federal employees
- Changing from a high-three to a high-five pension calculation for current federal employees
- Moving to a voucher system for FEHB premiums
Reforms to Federal Employee Pay
The 2024 RSC budget notes that the compensation system currently used for federal employees “largely ignores the more efficient compensation approach used in the private sector.”
Furthermore, it points to a 2017 report from the Congressional Budget Office which found that federal employees earn, on average, 17% more than their private sector counterparts.
Consequently, the 2024 RSC budget proposes the following reforms to federal employee pay:
- Reform federal worker paid leave policies to match the value of benefits paid by the private sector. This reform alone would save taxpayers more than $75 billion over 10 years.
- Automatic raises for federal employees should be eliminated. Pay increases for federal employees should be merit-based. This would save taxpayers $57 billion over 10 years.
- Congress should require that agencies only award bonuses when employees meet the standard for “exceeds fully successful.” Exceeds Fully Successful, according to the OPM guidance is “reserved for the individuals who are delivering measurable outcomes for the American public in a way that is measurably beyond the standard set for fully successful.”
- Congress should impose reasonable limits on the size of bonuses that can be awarded and the number of senior employees who can receive an award. More than $1 billion in bonuses for federal employees were paid by the taxpayers in 2016. This included $1.7 million in bonuses to IRS employees who were sanctioned by the agency for misconduct. The RSC Budget would require disclosure of all bonuses for federal employees and require reports to Congress on all large cash bonuses.
- Congress should repeal current law restrictions that prohibit basing bonus decisions on the relative performance of an employee compared to their peers.
- Congress should reform the federal pay scale to attract and reward high skilled, highly productive federal workers, and stop overpaying less qualified employees.
Reforming the G Fund Interest Rate
The RSC budget states that it would reform “the interest rate provided by the G Fund in the Thrift Savings Plan (TSP) to more accurately reflect the yield on a short-term T-bill rate.” While it doesn’t elaborate, this reform is likely based on past similar proposals that would effectively reduce the interest rate of the G Fund.
The G Fund is a specialized fund only available through the Thrift Savings Plan (TSP). Consequently, it is not available to investors in the private sector.
G Fund investors currently benefit from medium-term bond interest rates on investments that are a short-term security. In other words, G Fund investors receive a higher interest rate than is normally available as there is less risk in short-term bonds.
Basing the yield on a short-term Treasury bill rate instead of the current rate (an average of medium and long-term Treasury bond rates) would reduce both the projected rate of return to investors and cost the government less money.
Reforms to Federal Retirement Benefits
The budget also contains a number of cost-cutting measures for federal employees’ retirement benefits.
New federal employees would be required to be enrolled in the Thrift Savings Plan only rather than the defined benefit pension system under the Federal Employees Retirement System (FERS). The RSC budget notes that this “would give workers needed control over their retirement savings, ensure solvency for federal pensions and save taxpayers more than $235 billion over 10 years…”
The following retirement reforms are proposed for current federal employees:
- Switching to a high-five calculation instead of a high-three for computing retirement annuity payments
- Increasing the share of employee contributions to FERS over time
- Reducing or eliminating the cost of living adjustment (COLA) for FERS and the Civil Service Retirement System (CSRS)
- Eliminating the Special Retirement Supplement (SRS)
The budget proposes some reforms to the Federal Employees Health Benefits (FEHB) program.
Newly hired federal employees would not be allowed to carry FEHB benefits into retirement as current federal employees are allowed to do. The budget states, “As noted by the Heritage Foundation, federal employees are able to participate in the FEHB plan even after retirement while having large parts of the cost subsidized by taxpayers. This is a benefit unavailable to virtually all private sector workers.”
It also would establish a voucher system for FEHB premiums. The RSC budget says, “The government would offer a standard federal contribution towards the purchase of health insurance and employees would be responsible for paying the rest. This option would encourage employees to purchase plans with the appropriate amount of coverage that fits their needs. The government should also reduce its contributions to federal workers’ premiums to align with the private sector more closely.”
Making It Easier to Fire Federal Employees
Lastly, the RSC budget proposes reforms to the removal process for non-performing federal employees by passing into law several bills that have been proposed by Republican lawmakers.
The RSC budget says that it is currently “virtually impossible to remove most federal employees.” It notes, “A review by the GAO found that the dismissal process is estimated to take 170 to 370 days. According to the Heritage Foundation, of 2.1 million federal employees, only 11,046 (0.5 percent) were fired in 2017. This system is so absurd that the courts have actually ruled that federal employees have a property right to continued employment.”
The MERIT Act is one of these bills the RSC budget says needs to be passed into law. Introduced by Congressman Barry Loudermilk (R-GA), some of the reforms it would make include shortening the timeframe to remove a poorly performing federal employee to 30 days, limiting the retirement compensation awarded to a federal employee removed for committing a felony, and authorizing agencies to recoup bonuses paid to employees when performance or conduct issues are discovered.
Another is the Anti-Deficiency Reform and Enforcement Act which was sponsored by former Congressman Paul Mitchell (R-MI). This bill would expand grounds for removing employees under the Anti-Deficiency Act to include misusing an official vehicle or aircraft for personal travel.
Two bills introduced by former Congressman Jody Hice (R-GA) would serve to limit federal employees from using paid time off for exercising union duties and end the practice of the federal government serving as the dues collector for the unions. The Official Time Reform Act would ban federal employees from lobbying while on official time. The Official Time Reporting Act would require the Office of Personnel Management to report to Congress on all agency personnel conducting union duties at work.
The Help End Redundant Claims Unnecessarily Leaving Employers Suffering Act (HERCULES Act) (H.R. 8855) was introduced by Congressman Kevin Hern (R-OK). It would limit outside appeals to formal disciplinary actions, such as removal or demotion, and not compensation decisions as well as limit the venue for outside appeals to one office in response to disciplinary action.
Hern also introduced the Union Accountability Act which would rescind the executive order issued by President Biden that expanded federal employee union powers and made it harder to fire workers for misconduct.
Clearly, the proposals in the budget would not pass in the current Congress and under the Biden administration. The 2024 RSC budget cuts federal spending by $16.3 trillion over 10 years according to the Committee press release. In contrast, the White House 2024 budget proposal has a price tag of $6.9 trillion.
Despite the widely contrasting ideologies reflected in the RSC budget and the Biden administration, the ideas the House Republicans are proposing could gain more traction under a different Congress and presidential administration. If the 2024 election were to lead to Republicans controlling the White House and Congress, these proposals would suddenly not seem so far-fetched.