Deficit-reduction plans could impact federal workers, military and veterans

Federal workers, military personnel and veterans could take a hit under more than a dozen deficit-reduction options the nonpartisan Congressional Budget Office detailed in a new report Wednesday.

The potential impacts range from reduced pensions and cost-of-living raises for federal employees to capped pay increases for military personnel and stricter eligibility requirements for veterans’ disability.

The agency released its report shortly after a congressional conference committee held its second meeting to discuss budget matters and ways of avoiding another government shutdown like the one that occurred in October. The talks have yielded few signs of progress so far.

The nation’s current fiscal policy will increase the deficit in coming years and ultimately prove unsustainable, according to the CBO. The agency projected in September that federal debt would match the entire U.S. economic output within 25 years without a change.

Wednesday’s report listed scores of options for reducing the deficit through spending cuts and increased revenues, with many of them directly impacting federal employees, military personnel and veterans. Below are five noteworthy examples:

Reduce federal-employee pensions

Savings: $5.5 billion over 10 years

Currently, the government calculates annuities based on average pay during an employees highest three consecutive years of earnings, or the highest 36 months in the case of military personnel.

The government could instead use a formula based on the highest five consecutive years of average pay for employees and the highest 60-month average for service members.

The federal government last year paid $75 billion in pension benefits to federal employees and their survivors, in addition to roughly $50 billion to military retirees and their survivors.

Lower cost-of-living raises for feds

Savings: $53 billion over 10 years

Since 1990, federal law has required the federal government to give its employees a raise every January to keep up with the cost of living. The president and Congress can alter the adjustment rate or put the raises on hold altogether, as lawmakers have done for the past three years.

The pay bumps are currently calculated using an index for the annual rate of increase in wages and salaries, minus 0.5 percent.  The CBO analyzed an alternative that would reduce the increases by 0.5 percentage points each year through 2023.

The CBO noted that any significant reductions in discretionary spending will be difficult without cuts in federal-worker compensation, which comprises about 15 percent of costs in that budget category. However, the agency also said that lowering the cost-of-living raises could impact the government’s ability to attract and retain the best talent.

Reduce the federal workforce through attrition

Savings: $43 billion over 10 years

The federal government last year employed about 2.2 million workers, excluding the U.S. Postal Service. The CBO estimated that the number could drop by 70,000 with a plan that would limit agencies to one new hire for every three employees who leave.

Under that option, the president could exempt an agency from the requirement because of national-security concerns or in the event of an extraordinary emergency. Additionally, agencies would not be allowed to hire contractors to offset reductions in the federal workforce.

This plan will surely run into opposition from federal agencies and labor groups, which have already argued that the workforce is stretched thin.

Higher fees for military-retiree health-care benefits

Savings: $20 billion over 10 years

The federal government spent about $50 billion on military health care in 2012, according to the CBO report. The cost has more than doubled since 2001, and it will rise another 25 percent by 2023, the agency said.

One proposal would raise the enrollment fees to for working-age military retirees — those who are not old enough to qualify for Medicare yet — and their families. Co-payments would also increase.

Stricter eligibility requirements for veterans’ disability pay

Savings: $20 billion over 10 years

The Department of Veterans Affairs made nearly $3 billion in disability payments last year for seven medical conditions that the Government Accountability Office determined not to be caused or aggravated by military service, according to the CBO.

The government could save billions by no longer providing disability benefits for veterans who suffer from those ailments, which include hemorrhoids, osteoarthritis, certain heart problems and Crohn’s disease, which affects the bowels.

Disabilities considered to be connected to military service include loss of limbs, migraines and treatable hypertension.