Washington Post, March 13, 2003,Pg. B2

Federal Diary

Budget Cutters Target Programs For Federal Workers And Retirees

By Stephen Barr

The chairman of the House Budget Committee yesterday signaled that federal employees and retirees probably would have to bear some of the pain that will come with holding down the federal deficit.

Just how the government's employees and retirees would be asked to shoulder that burden was not clear yesterday. The proposal made by Rep. Jim Nussle (R-Iowa), the Budget Committee chairman, directed the House Government Reform Committee, which oversees federal employee and retiree programs, to produce budget savings by eliminating billions of dollars "of waste, fraud and abuse in mandatory programs."

Nussle ordered savings of $1.1 billion in fiscal 2004, about $11 billion over five years and almost $40 billion over 10 years, according to a chart released by the Budget Committee.

In past years, the Budget Committee has provided specific instructions on what programs and entitlements to cut when drafting the House budget resolution. But a committee spokesman said yesterday that Nussle "believes it makes much more sense to let the committees of jurisdiction decide how to root this out. Our job is to lay the framework and let each committee handle its issues."

Nussle's plan is the first step in a drawn-out process for drafting a budget for the fiscal year. His ambitious effort would balance the budget in seven years, partly by asking 14 House committees to scour their federal programs and come up with savings of $470 billion over 10 years.

The Budget Committee spokesman said cracking down on waste, fraud and abuse should produce the savings, since Nussle's plan would cut "less than a penny on the dollar" in programs overseen by the 14 House committees.

A spokesman for the Government Reform Committee declined to comment on Nussle's plan. The committee is seeking more information from the budget panel, the spokesman said.

Social Security, unemployment benefits, the military and homeland security are off-limits for budget cuts, the Budget Committee spokesman said.

That would put a squeeze on many non-defense programs, including those under the jurisdiction of the Government Reform Committee. Any suggestions to cancel or delay cost-of-living adjustments for retirees or to ask employees to pay more toward their retirement will draw fierce opposition from federal unions and the National Association of Retired Federal Employees.

Nussle's plan could prove especially vexing for Rep. Thomas M. Davis III (R-Va.), chairman of the Government Reform Committee. He represents about 54,000 federal employees who could be affected by benefit cutbacks. He also is trying to build consensus for dramatic changes in the way the government hires, fires and pays its employees.

The Budget Committee's plan follows the release of a Congressional Budget Office report outlining numerous program cuts for consideration, including potential reductions in the federal retirement and health insurance programs. Many of the ideas have been raised -- and rejected -- many times before, but could take on new life this year.

The largest potential saving -- $700 million in one year and $12.5 billion over five years -- would come from switching to a voucher system in the Federal Employees Health Benefits Program. In such an arrangement, the practice of linking the government's contribution toward premiums to the annual premium increases would end. Instead, the government contribution would be set at a fixed dollar maximum and increased by the rate of general inflation, which in recent years has been well below the rate of FEHBP premium increases.

That design could have the effect of shifting an average of $1,300 more in annual costs to the enrollee by 2008, CBO said.

The second-largest potential saving -- $200 million in one year and $4 billion over five years -- mentioned by CBO would come from limiting retiree cost-of-living adjustments.

The report also raised several other possible changes, including: basing government contributions toward health benefits on length of service for future retirees; basing retirement benefits for future retirees on the highest four years of salary rather than the current highest three years; limiting agency contributions toward Thrift Savings Plan accounts for employees under the Federal Employees Retirement System; and charging employees commercial rates for parking at government buildings.