Pay, benefits and workforce reductions in the president’s 2018 budget proposal

President Donald Trump wants to give civilian federal employees a 1.9 percent pay raise in 2018, according to his full budget proposal, which the White House released Tuesday.

Members of the military would receive a 2.1 percent raise next year.

But some federal employee groups and lawmakers say the pay raise does little to undo the damage the president’s cuts to federal retirement benefits would have on current employees and retirees.

These pay numbers were expected, though, and a 1.9 percent raise for civilian workers is in line with the annual pay adjustment formula set under Title 5 of the U.S. Code for most federal employees under the General Schedule. The president can choose to differ from this formula, and Congress can ultimately propose and pass any alternative numbers in its budget.

Some federal employee organizations, such as the Federal Manager’s Association, welcomed the president’s proposal of a 1.9 percent pay raise but said it “paled in comparison” to “damaging” cuts to retirement benefits.

Retirement

The president’s budget contains several major changes to the federal retirement system, which some financial experts say would significantly impact current federal employees and retirees, as well as future workers.

The budget proposes four changes:

  • An increase in employee contributions by 1 percent each year for the next six years,
  • An elimination of the cost-of-living adjustment (COLA) for current and future Federal Employee Retirement System (FERS) participants and cutting the COLA by 0.5 percent for Civil Service Retirement System (CSRS) participants of what the typical formula currently allows,
  • basing future retirement benefits on the average of an employee’s highest five years of salary. Currently, retirement benefits are based on an employee’s length of service, salary and highest three-year average salary, and,
  • Eliminate supplemental payments to employees who retire before age 62.

“We thought they were commonsense reforms to try and bring the federal government benefit programs closer to the private sector,” Office of Management and Budget Director Mick Mulvaney said during a May 23 press briefing. “I’m a federal worker. I have a pension and a 401(K). Raise your hand if you have a pension and a 401(K). We’re simply trying to get some commonsense back into that program. We don’t think that’s an unreasonable thing to do; it’s the right thing to do on behalf of the taxpayers.”

The administration sees these changes as a way to realize new cost savings — more than $4.1 billion in 2018 and anywhere between $100 billion-$200 billion over the next 10 years — and bring the generous federal retirement package in line with the private sector.

“Viewed in the context of the broader labor environment, the administration believes the implementation and phasing in of these changes will not impact the federal government’s recruiting and retention efforts,” the budget said.

Federal employee unions and organization’s bashed the president’s proposed retirement changes.

Worried about the Trump administration's proposed cuts to federal retirement? Find out what these 100 members of Congress have to say about it.

“[It] represents a significant setback and ‘slap in the face’ to federal managers and all federal employees,” FMA National President Renee Johnson said in a statement. “It is duplicitous to claim a campaign promise to not touch retirements, then tout cuts to feds’ retirement as one of the top four ways to save money in this request.”

The American Federation of Government Employees (AFGE) similarly slammed the cuts, in addition to the workforce reductions outlined in the president’s budget.

“This budget rips away any sense of financial security that federal workers currently have and shows how little regard this administration has for the everyday Americans who keep our government running,” AFGE National President J. David Cox said.

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National Treasury Employee Union President Tony Reardon said he wasn’t surprised to see cuts to retirement in the president’s budget. But he said these proposals are particularly “misguided” because they disrupt the “pact” federal employees made with Congress and the public when they entered federal service.

“If these attacks on retirement were to become law, Congress would be yanking out the rug [from] underneath these employees,” Reardon said during a May 23 press conference. “It’s going to put federal employees who are impacted by them in a position of having a very difficult retirement.”

Some members of Congress voiced their own concerns with the president’s proposals.

Rep. Gerry Connolly (D-Va.), who introduced legislation in January proposing a 3.2 percent pay raise for federal workers in 2018, described the cuts as “another attack on federal employees and retirees.”

“Cuts of this magnitude will make it impossible to recruit and retain the qualified workforce we need to meet our nation’s challenges,” he said in a statement.

Rep. Rob Wittman (R-Va.) said he was disappointed to see proposals that put federal employees as a “pay-for” in the president’s budget.

“We continue to ask our federal civilian workforce to do more with less and that is the wrong approach,” he said in a statement. “As Congress works on our budget going forward, I hope we reconsider this targeting of federal employees as an offset to deficit reductions and instead consider other reduction efforts that focus on addressing the true drivers of debt.”

Workforce reductions and government reorganization

As the president’s “skinny budget proposal” suggested in March, some agencies will see spending and personnel increases, while others will see reductions.

The president’s budget proposes about 1,000 fewer full-time-equivalents (FTEs) in total among the 24 Chief Financial Officers (CFO) Act agencies. Exact personnel cuts are difficult to determine, however, because the 2018 budget assumes FTE and funding levels from the 2017 continuing resolution. At the time OMB prepared the 2018 budget, Congress had yet to pass full appropriations bills for 2017 and the FTE totals in the president’s full budget proposal may change.

Seven agencies, such as the departments of Defense, Veterans Affairs and Homeland Security, will see a total increase of 23,000 FTEs. But the budget also proposes decreases of 24,000 full-time employees across 17 agencies. The Environmental Protection Agency, for example, would lose about 3,800 full-time employees, or 24 percent of its workforce, under the President’s budget proposal.

2018 Proposed Cabinet Agency Full Time Equivalents (FTEs) in Thousands
2016  2017 (est.) 2018  +/- FTE +/- Percent
Agriculture 86.8 88.4 83.8 ⇓4.6 ⇓5.2%
Commerce 40.3 43.6 42.6 ⇓1.0 ⇓2.2%
DoD/Military Programs 725.3 730.6 740.1 ⇑9.4 ⇑1.3%
Education 4.1 4.2 4.0 ⇓0.2 ⇓3.8%
Energy 14.9 15.5 15.2 ⇓0.2 ⇓1.4%
HHS 72.6 74.6 75.1 ⇑0.5 ⇑0.7%
Homeland Security 183.5 181.3 189.3 ⇑8.0 ⇑4.4%
HUD 8.0 7.9 7.7 ⇓0.2 ⇓2.7%
Interior 64.2 64.0 60.0 ⇓4.1 ⇓6.3%
Justice 114.9 118.6 116.2 ⇓2.4 ⇓2.1%
Labor 16.5 16.3 15.9 ⇓0.4 ⇓2.3%
State 32.1 33.8 32.4 ⇓1.4 ⇓4.0%
Transportation 54.3 55.4 55.3 ⇓0.2 ⇓0.3%
Treasury 93.4 93.1 87.3 ⇓5.9 ⇓6.3%
Veterans Affairs 345.1 356.4 364.1 ⇑7.8 ⇑2.2%

Click here to view the full list of agency-by-agency FTE changes

In addition, the budget points to savings of $57.3 billion in discretionary funding in 2018, including $26.7 billion toward program elimination and $30.6 billion in other reductions. It eliminates more than 60 federal programs over time.

The budget reiterated the Trump administration’s desire to eliminate or reform ineffective programs, and OMB directed agencies to identify workforce reductions over a four-year period between fiscal 2018 and 2022 as part of their efforts to reorganize and restructure.

“Some agencies may find the greatest efficiencies come from insourcing or reducing management layers while others will want to review programs, shared service and outsourcing options or restructuring,” the budget said. “This may mean reorganizing, consolidating and eliminating programs, functions and organizations where necessary.”

The administration dedicated an entire chapter of the budget to “building and using evidence to improve government effectiveness.” Specifically, it calls on agencies to develop a “learning agenda,” which would help agencies identify questions about their programs and find the answers to them.

These agendas would create an environment that promotes evidence-based decision-making, the budget documents said.

The administration also wants to “dispel the myth” that it’s too difficult to hold federal employees accountable.

“The administration is examining administratively burdensome agency activities and processes, including barriers to efficient human capital management that exist in policy, legislation and regulation,” budget documents said. “There is a commitment to advocating for policies to help agencies manage their workforce in a more agile manner, reducing barriers employees face in their jobs and providing flexibilities for agency leadership and management that will allow managers to adopt practices that are common in high-performing organizations.”