Last week, Treasury Secretary Mnuchin sent a letter to the Speaker, alerting him that since the statutory debt limit had been suspended only until December 8 as part of the last Continuing Resolution (CR), on December 9 the Treasury Department was once again making use of “extraordinary measures” to prevent the United States from defaulting on its obligations. The Treasury Department began by suspending auctions of certain state and municipality securities, and has now moved to suspend investments in the Thrift Savings Plan’s ‘G’ Fund’ and for the Civil Service Retirement and Disability Fund (CSRDF). It is important to note that current law requires that the G Fund and the CSRDF be made whole once the debt limit is increased, and there is no impact on federal employees or retirees. In his letter, the Treasury Secretary encouraged Congress to raise the debt limit at its first opportunity. It is unknown at this time whether or not Congress and the President will address the debt ceiling in the next legislative measure that follows the CR that expires on Friday, December 22.
Speaker Paul Ryan (R-WI) formed a working group to study the debt ceiling issue, which expanded its focus to curb federal spending and to “fix” the congressional budget and appropriations process. The working group has now reported that all federal spending, including mandatory spending, should be subject to the annual budget and appropriations process. Further, they want to institute various legislative procedures that would make it extremely difficult for Congress to override spending caps and to change the debt limit, which would require massive cuts to many federal programs. Overall, the group believes the primary way to manage the debt limit is to address the root cause of spending, which is to cut mandatory programs. A category of mandatory spending programs are federal employee retirement and health care benefit programs, as well as Social Security, Medicare, military retirement, and certain veterans’ benefits to name a few.
Further adding to the interest on the part of some in Congress to discuss cuts to mandatory spending, or so-called entitlement reform, is that, if the current tax reform legislation under consideration is enacted, the deficit is projected to increase by over a trillion dollars, which will trigger a need to cut various federal programs almost immediately. Alarmed by such a potential increase in the deficit, a group of House Republicans, led by Speaker Ryan, have announced they will seek to reduce mandatory spending in 2018.
Both of these forces—attempts to tackle the debt ceiling and calls for overall ‘entitlement reform’ (mandatory spending encompasses so-called entitlements) increase the likelihood that federal employee compensation will again be targeted in the new year. In recent years, we have seen congressional budgets, many crafted by then-Representative Ryan, containing cuts to federal employee compensation and benefits—ranging from seeking to extend the federal employee pay freeze for many more years, to reducing the workforce by 10% over a period of three years through attrition, and to significantly increasing the amount of money contributed by federal employees to the federal retirement systems, while simultaneously decreasing the amount of the annuity, and to significantly reducing the amount of the employer contribution to federal employee health care benefits. This year, the administration proposed detrimental cuts to federal retirement, and the House-passed budget resolution—which was ultimately not adopted—would have required significant, yet undetermined, cuts to federal employee retirement programs.
While reductions in federal employee compensation have not been mentioned specifically yet in any of the announcements concerning plans to target federal spending in 2018, NTEU will be closely monitoring these issues and will remain vigilant in the months ahead.
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