The Republican-led House passed a Fiscal Year 2016 budget plan Wednesday that counts federal employees and their benefits among its many targets.
Passed on a party-line vote of 228-199, the House budget plan aims to balance the budget within 10 years by making cuts to Medicaid, food stamps, welfare and funding for non-Defense agencies. The proposal also repeals the Affordable Care Act.
The 265-page House Budget Committee report that accompanies the bill offers suggestions for specific cuts, although it will be up to the committees with jurisdiction over the issues to take them or leave them.
One suggestion targets the Thrift Saving Plan’s G Fund.
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“Securities within the G Fund are not subject to risk of default. Payment of principal and interest is guaranteed by the U.S. government. Yet the interest rate paid is equivalent to a long-term bond. As a result, those who participate in the G Fund are rewarded with a long-term rate on what is essentially a short-term security,” the report said.
The report suggests, in essence, basing the G Fund’s interest rate on a three- month average rather than the current four-year average. It estimates the change would save up to $32 billion over 10 years.
The report also calls for a reform of the federal retirement system to increase the share federal employees pay into their retirement benefits.
“This policy has the effect of reducing the personnel costs for the employing agency,” the report said. “The budget assumes savings from a reduction in agency appropriations associated with the reduction in payments that agencies make into the Civil Service Retirement and Disability Fund for Federal employee retirement.”
Currently, anyone hired before 2013 contributes 0.8 percent to the Federal Employees Retirement System. Federal employees hired in 2013 contribute 3.1 percent to their defined benefit pension. Employees hired in 2014 are required to contribute 4.4 percent. Under the the House budget, all federal employees would pay 6.6 percent.
The plan would also curtail the growth of health benefits for federal retirees, as well as members of Congress and their staffs.
“Currently, Federal contributions to the Federal Employees Health Benefits Program grow by the average weighted rate of change in these programs,” the report said. “This budget supports restricting the growth in these plans to inflation for retirees. This proposal assumes direct spending savings of $21.7 billion for adopting a policy like this. The budget also proposes basing Federal employee retirees’ health benefits on length of service. This option would reduce premium subsidies for retirees who had relatively short Federal careers and result in $1.2 billion in savings.”
Postal employees can also expect to see changes in how much they pay into their health and life insurance premiums. The proposal gives the Postal Service some flexibility in how it responds to market changes, opening the door for reform at USPS.
Finding savings by reducing the federal workforce
The budget also estimates a savings of $59 billion over 10 years by reducing the size of the civilian workforce.
“The budget includes discretionary savings by assuming a 10-percent reduction in certain agencies of the Federal civilian workforce through attrition, whereby the administration would be permitted to hire one employee for every three who leave government service,” the report said. “National-security positions would be subject to exemption.”
Cutting spending at non-Defense agencies
Despite two years of sharp budget cuts, the Internal Revenue Service remains ripe for reform, according to the report.
“The Internal Revenue Code now contains approximately four million words, and each year taxpayers and businesses spend more than 6 billion hours complying with filing requirements,” the report said. “The ongoing investigation related to the IRS targeting American citizens demonstrates that the massive budget has not resulted in the IRS serving taxpayers better; rather, it has created a bloated bureaucracy with space for inefficiency and abuse.”
The IRS wouldn’t need to have nearly 90,000 employees and a budget of $11 million if the tax code were simpler and easier to administer, the report said.
“Simplifying the tax code may reduce accidental errors in tax filing and improve voluntarily compliance,” the report said. “A simplified tax code would have the dual benefits of reducing both the time taxpayers devote to complying with an overly complex code and the taxpayer dollars needed to administer and enforce it.”
For non-Defense agencies as a whole, the House plan would trim $759 billion below sequestration caps by 2025. The Senate plan would make similar but less severe cuts of $236 billion to non-Defense agencies’ operating budgets.
House goes easier on Defense
Both the House and Senate plans maintain the $612 billion in spending for the Department of Defense that President Barack Obama proposed in his budget plan earlier this year.
Before passing the final version of its budget, the House approved an amendment by House Budget Chairman Tom Price (R-Ga.) to increase by $2 billion the budget authority for the Overseas Contingency Operations/Global War on Terrorism function for FY 2016. That figure is now at $96 billion.
While the House budget report acknowledged the ongoing efforts by President Obama and the Pentagon to reduce the military’s force strength, it said cuts in the uniformed services should be reflected in the contractor and civilian communities as well.
“Any reductions in military end strength should be accompanied by reductions in the civilian and contractor workforce, which has ballooned in recent years and is now approximately the same size as the active-duty military, a ratio that is out of balance,” the report said. “Reductions by the Secretary of Defense should focus on performance while retaining vital functions that directly support the uniformed force.”
The Senate is expected to vote on its own budget plan later today or early tomorrow.