SEQUESTRATION FACT SHEET #1

SEQUESTRATION FACT SHEET #1

By Jeff Bratko, Steward AFGE Local 704

You’ve probably heard the word “sequestration” used by the news media during the last few months.  Some people refer to it as being part of the “fiscal cliff” that may occur in January 2013.  There is a lot we do not know about how sequestration will be implemented.  Unfortunately, management is handling sequestration the way it handled the furlough threat a couple of years ago. It does not appear that specific plans for dealing with the sequestration are being shared with employees.  That means that you are on your own in terms of planning for the sequestration.  Waiting to make plans for the sequestration until management provides us with some facts may be a costly mistake.  However, in order to make plans you need some basic facts and that is what this fact sheet provides.

What is sequestration?

Sequestration is a process through which automatic, across-the-board spending cuts are made in most discretionary spending by Federal Agencies.  It is part of the Budget Control Act of 2011 (BCA) which became effective on August 2, 2011.  The BCA includes a number of provisions that will impact you in 2013 and beyond.

At this point, sequestration is scheduled to be in place on January 2, 2013.

How will sequestration affect me?

Of course, that’s the question everyone wants answered.  Each agency affected by sequestration is going to experience a budget cut estimated to be between 8 and 10% of each agency’s 2013 budget.  However, because that cut is spread over only 9 months, the impact will be more like a cut of 11 to 13% during the period from January 2 until the end of September.  Sequestration does not cut your hourly rate of pay.  However, some sources report that Agencies may have to furlough staff for 4 to 5 weeks during that time period.

Can you afford to lose 5 weeks of pay between January and October next year?

Keep in mind that sequestration impacts not just pay but the budget for the work you do including the budget for travel, training, and supplies.  Sequestration also impacts decisions about whether vacancies will be filled and the budget for awards.

So if I save the equivalent of 5 weeks of pay before the sequestration then I will be safe, right?

Not necessarily. The BCA contains other provisions that will impact your net pay in 2013 and beyond. For those employees who pay into social security, the temporary payroll tax cut is set to expire in 2013.  Regular tax rates are also scheduled in increase.  A number of tax breaks are also going to be reduced.  The net impact of those changes will vary from individual to individual but the net effect is that take home pay will be reduced for many employees.

I heard Congress is going to pass a continuing resolution in September that will keep our current budget in place until next March.  Won’t that solve this problem?

If and when Congress passes a continuing resolution that resolution will have no impact on the sequestration and tax increases set to begin in January 2013.  A continuing resolution will not amend the cuts and tax increases required by the BCA.

Won’t Congress step in and fix this mess after the November elections?

Some news reports have suggested that, to avoid the fiscal cliff, Congress will take action to alter the BCA sometime before the end of December.  However, that is pure speculation and there has been little talk of eliminating all the budget cuts that will be imposed on Agencies like EPA. There is no guarantee that Congress and the White House will come up with a solution that keeps your net pay from being reduced in 2013.

This is supposed to be a fact sheet but a lot of it consists of just speculation.  Why should I get all worked up about something that might never take place?

We are only able to present you with limited information because the Union does not control the sequestration process or what Congress and the White House will do before January 2, 2013. However, because the Agency, Congress and the White House have provided Federal employees with no guidance or information about how to plan their personal budgets for 2013, we felt we had to at least make you aware of the uncertainty to allow you a chance to make informed choices about your spending plans now.

Keep in mind that many employees have to make spending decisions and commitments for next year well in advance of January 2, 2013 and making such decisions and commitments will be a challenge given the uncertainty of the sequestration and tax increases that will occur if nothing changes.

Author: Michael J. Mikulka

President, AFGE Local 704, representing over 900 bargaining unit employees working at the U.S. EPA Region 5 Offices in Chicago, Grosse Ile, MI and Westlake, OH.

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