The President’s proposed budget to Congress for Fiscal Year (FY) 2019 has been officially released. As a reminder, an administration’s budget request serves as a spending blueprint and guide to Congress, and additional legislation is then needed to enact the majority of its specific recommendations and proposals.

The federal workforce is under attack from all sides in the President’s budget request—including in the areas of pay, performance management, retirement, health insurance, workers’ compensation, leave, labor-management relations and due process rights.   

Pay and Performance Management

The first major item, as expected given various news reports and internal leaks, is a call for a pay freeze for calendar year 2019. While Congress could still act to provide a pay raise, pay adjustments have been provided in recent years via the President’s administrative authority. Based on the formula under current pay laws (the Federal Employee Pay Comparability Act), federal employees should receive a 2.1% across-the-board pay raise in January 2019, prior to any amount being provided for locality pay rates. At the same time, the President’s budget calls for a 2.6% pay raise for the military for 2019. 

Relying on flawed studies that fail to compare the complexity of federal jobs with the private sector, the President’s budget request proposes the pay freeze for federal workers and calls for the establishment of a “pay for performance system.” According to the budget, more than 99 percent of employees are rated as fully successful or higher in their evaluations, supposedly demonstrating the failure of federal performance management systems to adequately differentiate the performance of individuals. Urging the implementation of private sector norms, the budget request announces that the President plans to seek the authority to slow the frequency of step-increases (also called within-grades), as they are granted on a “fixed, periodic schedule without regard to whether [employees] are performing at an exceptional level or merely passable.” However, the budget also states that agencies will be increasing performance-based pay for workers in certain mission-critical areas (undefined) through the establishment of a centrally-managed fund that will be used to provide incentives (undefined). 

Further, the budget request calls for major changes to civil service laws, which would require action by Congress, including eliminating the General Schedule system, arguing that the federal government’s personnel system must be modernized for the current employment era which requires more ‘term’ hires over permanent employees and less generous pension and health care benefits in order to mirror private-sector compensation practices. The budget also announces that the Administration plans to release the full details of its ‘Management Agenda in March, which will have as its goal bringing the federal government in line with the private sector. 

Retirement

The President’s budget calls for devastating cuts of approximately $68 billion over ten years for federal employee retirement and health programs. For federal retirement, many of the retirement cuts from last year’s budget are again proposed to Congress, with the addition of a proposal impacting the Thrift Savings Plan (TSP). Specifically, the President calls for:

• Significantly increasing Federal Employee Retirement System (FERS) employee contributions by about 1 percentage point each year until they equal the agency contribution rate. It would take approximately six years to fully reach the new employee contribution rate of about 7 percent, translating into a massive pay cut (most FERS employees currently contribute 0.8% of salary towards their future FERS pension, with the agency contributing 13.7%). Employee contributions by federal law enforcement officers, including Customs and Border Protection Officers, would increase by this same amount, but would not equal their greater agency contribution rates.
• Basing future CSRS and FERS retirement benefits on the average of the high five years of salary instead of the current high three.
• Eliminating the FERS supplement which approximates the value of Social Security benefits for those who retire before age 62. This proposal would apply to all future retirees, including those individuals subject to mandatory retirement.  
• Eliminating the annual cost of living adjustments (COLA) for the pensions of current FERS retirees and future FERS retirees.
• Reducing the COLA for the pensions of current Civil Service Retirement System (CSRS) retirees, and future CSRS retirees, by about 0.5 percent annually from what the current formula would provide.
• Reducing the G Fund interest rate under the TSP, thereby lowering the value of this TSP option.

These proposals all would require congressional action.

Health Care  

The President seeks to change the Federal Employees Health Benefits Program (FEHBP) by significantly modifying the government contribution rate by tying it to each plan’s performance rating. For many FEHBP enrollees, this will mean that the government’s overall contribution rate will be lower than it is now, requiring enrollees to pay significantly higher premiums.If an individual chooses a health plan that is not high-performing according to the Program Plan Performance Assessment overseen by the Office of Personnel Management (19 metrics), they would be forced to pay more, with the government reducing its contribution by seven to ten percent. This proposal would also require congressional action.

Workers Compensation

The budget request recycles prior proposals that would reduce federal employee workers’ compensation benefits.These proposals, which would also require congressional action, would provide a single injury rate of compensation limited to approximately 66% of the injured worker’s pay, would eliminate family benefits, would seek to remove injured workers from the program at retirement age, and would establish a waiting period before beneficiaries could begin to collect needed benefits.    

Leave

The budget states that federal employee sick and annual leave benefits are disproportionate to the private sector, and proposes converting the 10 paid federal holidays along with the earned sick and annual leave days to a general ‘paid time off’ model that would combine all leave into one paid time off category and reduce total leave days per year.The proposal also includes adding a short-term disability insurance policy to protect employees who experience a serious medical situation, which would require an employee contribution. These changes would require congressional action.  

Labor Relations and DUE PROCESS RIGHTS

The budget states that “agency managers will be encouraged to restore management prerogatives that have been ceded to federal labor unions” and that “current employer-employee relations activities consume considerable management time and taxpayer resources, and may negatively impact efficiency, effectiveness, costs of operations, and employee accountability, and performance. 60% of federal employee belong to a union.” It highlights the recent Administration’s actions to rescind labor-management forums, and pledges to prioritize workforce policies that “address poor performers and conduct violators.” It also states that the “requirements to successfully remove an employee for misconduct or poor performance are onerous” and that “employees have a variety of avenues to appeal and challenge actions.” The forthcoming Management Agenda is expected to include both administrative and legislative proposals regarding due process and performance.       

Public Service Loan Forgiveness Program

The budget proposes to eliminate the Public Service Loan Forgiveness program. Federal employees, among other public-sector employees, have benefitted from this program, which has aided many federal employees in recent years to be able to afford higher-education while choosing a career with a federal agency. Instead, the Department of Education would design a single Income-Driven Repayment (IDR) plan, which according to the budget would “simplify” repayments.

It is anticipated that Congress will not ultimately enact many of the proposed agency spending cuts contained in the President’s budget request, and will instead begin to move their own proposals over the next few months. However, some of the anti-federal employee initiatives, in terms of compensation and due process rights, may develop into formal legislative proposals.