Unfounded Fears

It might not be realistic; it could be general shakiness brought on by the sour economy. But some federal employees and retirees are worried that their pay and benefits -- long one of the draws to federal service -- are at risk as the government seeks to balance competing spending priorities.

The reaction was mixed last week when the government announced the highest cost-of-living increase since 1982 for Civil Service Retirement System annuitants. Margaret Baptiste, president of the National Active and Retired Federal Employees Association, told Government Executive she was concerned that short-term relief for COLA-eligible retirees would come with a hefty price tag down the road. She was worried, she said, that the 5.8 percent boost for CSRS employees and the 4.8 percent increase for Federal Employees Retirement System participants would invite scrutiny of federal employee compensation and sharp cutbacks on future COLAS.

It wouldn't be the first time federal employee pay has been laid down as a bargaining chip in a larger crisis. During the 1995 government shut-down, then-Speaker of the House Newt Gingrich proposed requiring furloughed federal employees to come back to work without pay. This plan, not surprisingly, spurred a major union backlash.

But there's no reason to suspect that federal employee pay and retirement benefits are going to land on the chopping block immediately in a new administration, even given the bad economic situation. While GOP presidential nominee John McCain has proposed an overall discretionary spending freeze for federal programs, he hasn't mentioned federal employees' pay specifically. Neither has Democratic rival Barack Obama, who has said he will consider program spending on a case-by-case basis, cutting initiatives that are inefficient or don't work.

Other fears may be even more unfounded. At Monday's Federal Retirement Thrift Investment Board Meeting, Thrift Savings Plan Executive Director Greg Long said participants in the 401(k)-style program were asking whether the federal government would raid the government securities (G) fund -- the TSP's most stable offering and a haven for many feds in the current financial storm -- to pay for the financial system bailout. They also expressed concerns, Long said, that if the government reached its debt ceiling -- a self-imposed limit on spending set by Congress and approved by the president -- it would not be able to issue securities to the G Fund, and the investments federal employees made in that fund would not be guaranteed.

Both concerns have been anticipated by legislation, said Long and Tom Trabucco, TSP's director of external affairs. TSP assets are legally required to be held in trust for the plan's investors.

"We had a law enacted to make sure people know the government was going to back these that says when [G Fund] securities cannot be issued, they will be immediately issued following Congress raising the debt ceiling," Trabucco said. "There is zero effect on participants."

So the market might trash your TSP funds, but the government won't. And if, as some observers have suggested, the current crop of crises throws a spotlight on the importance of agencies, raising federal employee pay to make it competitive with private sector compensation could actually become a priority.

There's no doubt that change is coming to the federal government, and it's coming rapidly. It's just too soon to tell how, or if, it will affect employee pay and benefits.