Pay and Benefits Watch: Something old, new, borrowed, and blue

If President Clinton's fiscal 2001 budget proposal were a wedding, it would have the blessings of tradition. When it comes to federal pay and benefits, the budget has something old, something new, something borrowed and something blue.

Several of the President's proposals are old-that is, they were introduced in past years but never enacted. For example, the budget reintroduces a plan to renew governmentwide buyout authority. The administration proposed the buyout idea last year as well, but Congress opted instead to give a select few agencies individual buyout authority (See Millionaires and Buyouts, Dec. 2, 1999).

Another old proposal is offering long-term care insurance to federal employees at group discounts. The administration floated that idea last year, too, but disagreements with some members of Congress over the proper role for the Office of Personnel Management in the program kept the proposal from going anywhere.

The administration also recycled a proposal to require Federal Employee Health Benefits Program carriers to cover mental health and substance abuse care.

New in the budget this year is a proposal to make health insurance premiums part of employees' pre-tax income. That means employees wouldn't have to pay taxes on the part of their income that goes toward health insurance. The administration is also proposing to give OPM more control over health premiums. The details of that proposal have not yet been released.

Several 2001 budget proposals were borrowed from members of Congress. A proposal to permit newly hired federal employees to participate immediately in the Thrift Savings Plan, instead of waiting a year, is an idea that Rep. Connie Morella, R-Md., has championed for several years. Morella's bill to implement the change, H.R. 208, passed the House last year and is awaiting Senate approval. Her bill would also allow employees to roll over funds from previous employers' 401(k) programs into the Thrift Savings Plan, an idea President Clinton endorsed in his budget.

From Rep. Steny Hoyer, D-Md., the President borrowed a proposal to repeal a temporary increase in federal employees' retirement contributions. The proposal would roll back a provision included in the 1997 Balanced Budget Act that called for a gradual increase in payroll deductions for retirement, from 7 percent of pay for Civil Service Retirement System enrollees in 1998 to 7.5 percent in 2002. Over the same period, deductions for enrollees in the Federal Employees Retirement System are supposed to increase from 0.8 percent to 1.3 percent.

Under the Balanced Budget Act, the deductions would return to their 1998 levels in 2003. Clinton's 2001 budget proposal recommends returning the deductions to their 1998 levels two years early.

The potential price tag for all of the pay and benefits proposals may leave federal employees feeling blue again, however. The retirement contribution rollback would cost an estimated $1.2 billion from 2001 to 2003, and the budget's proposed 3.7 percent pay raise would cost $3.1 billion in 2001. The administration has not yet provided cost figures for its other ideas.

Garry Ewing, staff director at the House Government Reform Subcommittee on the Civil Service, said OPM officials will be meeting with his staff soon to discuss the budget proposals. He said the cost of the pay and benefits package is a concern.

"That's certainly a question we'll be asking," Ewing said.

Ewing also pointed out that the Congressional Budget Office has yet to assess the costs of Clinton's budget proposals. CBO's estimates will affect Congress' willingness to support plans to boost federal pay and benefits.