Federal worker Q&A guide to the fiscal cliff: Ten answers on jobs, cuts and more

Posted by Eric Yoder on December 12, 2012 at 6:00 am

Federal employees have a major stake in the debate over whether, and how, the government should back away from the “fiscal cliff” and potential for automatic “sequestration” cuts to programs starting in January.

Agencies have begun making plans for a sequester that could include steps such as hiring freezes, unpaid furloughs and even layoffs. However, the exact impact remains unknown.

Meanwhile various proposals to avoid the sequester are circulating, including some that would protect federal employees and others that would affect federal jobs, pay and benefits.

Following are 10 key questions employees are asking, and the answers as best as they can be determined at this point.

Q. If sequestration hits, will all federal programs be affected equally?

A. No. The Office of Management and Budget has said (pdf) that programs such as Social Security and veterans benefits would be fully protected, while others, such as Medicare, would be partially exempt. The cuts in unprotected programs would vary according to how they are classified within the federal budget, but in many cases would be in the range of 10 percent.

However, even where a program itself is fully or partially exempt, the “salaries and expenses” account that pays employees who run it is subject to sequestration, the report said.

Q. What is the potential impact on federal jobs?

A. Salaries and expenses accounts also pay for costs such as travel and training. Agencies probably would look to those areas for reductions and they could take further steps such as leaving vacancies unfilled. But depending on the savings needed, they also might have to cut jobs.

One academic study (pdf), done for a defense industry association, projected the loss of some 48,000 civilian employee jobs at the Defense Department and more than 229,000 more  from non-defense agencies. That’s out of a total federal workforce of about 2.1 million.

OMB’s report projected no specific numbers but said that the numbers of FBI and border patrol agents and prison correctional officers would be “slashed,” and programs ranging from food safety inspections to clean water and air protections would be “degraded.”

The ranking Democrat on the House Appropriations Committee, Rep. Norman D. Dicks (Wash.), has projected similar impacts as well as cuts in some health-care services for military personnel, among other programs.

Sequestration would come on top of spending caps already required by the 2011 budget deal that created the present situation. Defense Department officials recently warned of civilian personnel cuts even if the government does not go over the fiscal cliff.

Q. Can sequestration cut federal pay rates?

A. The OMB report did not address that issue directly, but a Congressional Research Service analysis concluded (pdf) that a sequester order may not “reduce or have the effect of reducing the rate of pay an employee is entitled to.”

However, if employees are furloughed they will lose income.

Q. How would a furlough work?

A. Furloughs are forced unpaid time off. If an agency decides to furlough employees for a certain number of work days to meet its budget, it could order a continuous furlough, or it could spread out the days over the remainder of the fiscal year through Sept. 30.

The latter approach would have the advantage of keeping the agency’s work flowing more smoothly; also, if a continuous furlough were to exceed 22 work days, additional employee protections such as longer notice periods would apply.

Q. Government shutdowns have been threatened many times because of budget deadlocks. Isn’t this the same thing?

A.  Those standoffs involved disputes over policy and spending that held up enactment of regular appropriations; employees whose work is not deemed “emergency” in nature would be furloughed until a deal is reached, while emergency employees would have to continue working unpaid. That has been threatened several times in recent years although it hasn’t happened since the mid-1990s. In the past, employees have been reimbursed for the salary they missed while on furlough, even those who did not work.

If employees are furloughed due to a sequester, they would likely not be repaid later.

Q. Would employees be laid off?

A. They might, but “reductions in force” are even more complex and disruptive than furloughs. Deciding which employees would be affected is a time-consuming process taking into account veterans status, length of service, performance and type of appointment. There are required notice periods and appeal rights, and some affected employees could knock lower-ranked workers out of their jobs.

RIFs also can be expensive, at least up front, because laid-off employees gain the right to benefits including severance pay, cash payments for unused vacation time and job placement assistance. A RIF also may leave the agency with a poor mix of the employee skills needed to get its work done.

But RIFs are used from time to time in downsizings, although usually on a fairly small scale. An RIF is the government’s method of getting employees off the payroll involuntarily and permanently, if it comes to that.

Q. Would agencies offer voluntary buyout and early retirement separation incentives?

A. It is common for agencies to offer one or both when forced to downsize, with one motivation being to avoid RIFs or at least lessen the need for them.

Buyouts are payments to encourage employees to retire or quit; the typical pre-tax amount is $25,000 but in some cases it has been less.

Early retirement offers allow employees to retire at any age with 25 years of service, or with at least 20 years of service at age 50 or above. That’s earlier than under standard federal retirement eligibility combinations. In some circumstances, retirement benefits are reduced, which discourages employees from taking such offers.

Whether such incentives would produce enough vacancies to avoid furloughs or RIFs is an open question.

Q. What alternatives to sequestration are being considered that would affect federal workers?

A. Several include proposals to cut the workforce; thus, jobs could be on the line either way political leaders decide to go.

The House has twice passed plans calling for a 10 percent cut in the workforce, while the Senate defense budget seeks a 5 percent civilian employment cut. The Senate recently rejected a bid to knock out that provision. Sponsors have said those cuts could be achieved over several years by attrition, with hiring restrictions.

The House-passed plans also would extend the salary rate freeze to a total of five years, while ordering that current employees also increase their contributions toward retirement on the order of 5 percent of salary, phased in over five years.

House Republican leaders recently cited those ideas in a fiscal cliff offer letter to the White House.

The Simpson-Bowles Commission, which some see as a model for a deal, raised similar ideas. Another ideas under discussion involve a less-generous formula for future cost of living adjustments in retirement programs.

Q. What are federal employee organizations doing about this?

A. Federal unions don’t have the authority to bargain over pay, benefits or the size of the workforce. But they can lobby political leaders and try to sway public opinion, and they have been active in those areas.

Both individually and collectively, unions and other employee organizations argue that federal workers have already contributed enough toward deficit reduction. They point out that:

• Basic salary rates have been frozen since the last general increase was paid in      January 2010 (although many individuals are eligible for raises for  various reasons).
• Those first hired in 2013 and later (as well as to those returning to federal employment with less than five years of previous service) will have to pay more toward their retirement benefits.
• There will be no general 2013 raise at least until April, and there is no guarantee of a raise even then. If a raise is paid, it almost certainly would be 0.5 percent, below the 1.7 percent that military personnel will receive in January; the two raises were linked for many years in the name of “pay parity.”

They also oppose cutting the workforce, and have gained unusual allies in the contractor community, whose numbers also stand to be cut under the Senate plan.

Q. If the cuts kick in, will employees be affected right away?

A. Not necessarily. Actions such as furloughs might be weeks if not months down the road. Time would be needed to finalize plans, and the required savings would not have to be spread equally over the remaining nine months of the fiscal year, only achieved in total by Sept. 30.

An analysis (pdf) by the private group OMB Watch noted that agencies have some control over the rate of spending within a fiscal year. They might be able to continue spending on salaries at prior levels, at least for a while, pending the finalization of a deal to call off the sequestration. Of course, if no such law were enacted, the pain later in the budget year would be even greater.