An additional $17.5 billion could be saved over a decade by capping military basic pay, the report says.
CBO’s cost-savings is based on shaving off half a percentage point from across-the-board raises that most federal employees receive as calculated by the employment cost index (ECI), prepared by the Bureau of Labor Statistics.
Under the Federal Employees Pay Comparability Act of 1990 (FEBCA), most feds receive an annual adjustment to their pay each January based on the ECI. The President can limit the size of the increase in a national emergency or when “serious economic conditions call for such action,” according to the report. Also Congress can authorize an adjustment that differs from one called for by the President, the report adds.
The CBO did not calculate a decrease for 2012 because the President, in his budget, had requested freezing pay for all civilian federal employees.
In the military, over the past decade, lawmakers have passed across-the-board raises that exceeded ECI by 0.5 percent for servicemembers. Savings could come by capping raises at 0.5 percent below ECI, specifically from 2012 to 2015, according to the report.
The rationale for decreasing feds’ raises is to demonstrate that “federal workers have not been shielded from the impacts of the economic downturn, which has results in large numbers of workers in the private sector either losing their job or having their wages remain flat or decline,” the CBO states.
The potential downside of the reductions would be in recruitment and retention, particularly in areas that require more education and higher skills, the report states.
In the military, the CBO proposes adding $920 million in reenlistment bonuses to counter the effect of a pay cap on retention. Therefore, between 2012 and 2015, servicemembers would be eligible to receive an overall pay that would be higher than if pay had kept pace with the ECI.
“Although the lower pay could adversely affect recruiting and retention levels in future years, based on the success of DoD’s personnel management over the past several years – and the decline in the number of personnel deployed in Iraq and Afghanistan – CBO anticipates that DoD would be able to attain the desired levels in 2016 and beyond without continuing to pay the additional bonuses,” the report states.