Government affairs

Today, the White House released its $4.7 trillion budget proposal (compared to its $4.4 trillion proposal last year) for the upcoming 2020 fiscal year (FY). The new proposal, viewable here, was released one month later than is customary, because of the government shutdown. More detail is expected later this month. Nonetheless, it provides a framework of the priorities of the executive branch.

Release of the administration’s budget proposal kicks off the months-long appropriations process. The budget serves as an indication of the president’s budget priorities.  

The budget proposal would increase defense spending from $716 billion to $750 billion for FY2020 while cutting non-defense spending from $597 billion to $543 billion, and it seeks to slash $845 billion from Medicare and $1.5 trillion from Medicaid over 10 years. In addition, the proposal would raise the federal budget deficit to $1.1 trillion in FY2020 and FY2021 (from an estimated $897 billion in FY2019), even after proposing to eliminate a dozen important federal agencies and programs, including the Economic Development Administration, the Community Development Block Grant program, National Heritage Areas, the Advanced Research Projects Agency-Energy, and the Advanced Technology Vehicle Manufacturing Loan Program. It also proposes making permanent the tax cuts for individuals implemented during the last Congress and seeks $8.6 billion to fund new border walls.

Major provisions affecting NALC members in the Trump administration budget for FY 2020 are outlined below.

Postal Service

• “Reform the Postal Service.” This item appears to refer to postal reform efforts from last Congress. This should be confirmed when more details of the budget are released in the next few weeks. The budget cites $4.1 billion in postal-related cuts for FY2020, and up to $98.2 billion in postal-related cuts over a 10-year period. The White House’s FY2019 budget request called for $44.49 billion in vaguely defined cuts and revenue changes over a decade, with proposed reductions in the frequency of delivery and the scaling back of door delivery.
  
  
• Instituting General Services Administration (GSA) proposals. This reference appears to refer to the proposal by the Trump administration’s Office of Management and Budget (OMB) last summer, which called for reforming and restructuring the federal government, including privatizing the Postal Service. The budget cites a $1.6 billion increase in postal-related costs for FY2020, and a $21.2 billion increase in postal-related costs over a 10-year period.

Federal Employees Retirement & Health Benefits

• Increase FERS contributions. For active federal and postal employees covered by the Federal Employees Retirement System (FERS), the budget calls for gradually equalizing employee and agency payroll contributions for pension benefits. This would raise the pension contributions of letter carriers by 1 percent of pay per year for up to six years, resulting in a take-home pay cut of up to $3,700 annually after six years for active letter carriers. The exact impact would depend on when FERS employees were hired.
  
  
• High-5 average. The proposal calls for reducing Civil Service Retirement System (CSRS) and FERS pension benefits for new retirees by basing annuities on workers’ highest average yearly salary over five years (high-5) instead of over the highest three years (high-3).
  
  
• Eliminate annuity supplement. It also would eliminate the annuity supplement that covers the gap for employees who retire under FERS before they qualify for Social Security benefits at age 62.
  
  
• Slash COLAs. For all retirees, the administration’s budget calls for eliminating or reducing cost-of-living adjustments (COLAs). For current and future annuitants under FERS (which covers any employee hired after 1984), the budget would eliminate basic annuity COLAs entirely. For those under CSRS, COLAs would be reduced by 0.5 percent each year. These changes would devastate the finances of retirees who rely on annual COLAs to keep up with the cost of living.
  
  
• Reduce the TSP’s G Fund interest rate. This proposal includes a change to the government bond fund ("G" fund), the largest and most popular investment vehicle available in the Thrift Savings Plan. Millions of active and retired G Fund investors would receive a reduced rate of return. The new rate would be tied to the interest rate on 90-day Treasury bills instead of an average of medium- and long-term Treasury bond rates. This would reduce the rate from 2.33 percent (in the 12 months ending in January) to 1.55 percent -- which translates into a $1.4 billion annual loss for TSP participants. The cost of this proposal to participants would rise dramatically if longer-term interest rates continue to rise.

• Higher premiums for workers. For both active and retired federal employees, the budget proposes modifying the federal government’s contribution to the Federal Employees Health Benefits Program (FEHBP) so that federal employees pay more into the program. Although details for how the new calculations are not specified, previous proposals called on federal employees to pay an additional seven percent, cutting significantly into their monthly take-home pay. A seven-percentage point cost shift (similar to what was proposed last year) for a $20,000-per-year family health plan would raise retiree contributions by about $1,400 annually. FEHBP contribution levels for active letter carriers are set by the terms of the collective-bargaining agreement with USPS. While the proposed budget wouldn’t immediately affect these contribution percentages for active letter carriers, it likely would have an effect on future negotiations on this issue.

Department of Labor

• Budget cut. Much like the White House’s FY2019 proposal, the Department of Labor would see a $1.2 billion, or 10 percent, budget cut under the administration’s proposal through the elimination of programs it deems “duplicative, unnecessary, unproven, or ineffective.”
  
  
• Training cuts. The budget once again slashes for training workers who lose their jobs as a result of lay-offs or natural disasters. Other job training funds for Native Americans and seasonal migrant workers are now completely defunded.
  
  
• Union monitoring. Also as in FY2019, one of the few increases in the DOL budget would go to the office that monitors union activities. It states that: “The Budget would…support more audits and investigations to uncover flawed officer elections, fraud, and embezzlement.”

“Thankfully for federal employees and the American people, this budget is dead on arrival in the House of Representatives,” Rep. Gerald E. Connolly (D-VA), said. “Instead of recycling these tired and radical attacks on federal workers, the president should move expeditiously to implement the 1.9 percent pay increase Congress sent to his desk almost a month ago.”

While White House budget proposals typically are ‘non-starters’ on Capitol Hill, lawmakers do discuss, reference and debate these proposals as various House, Senate and caucus proposals are being formulated. 

This makes it important for letter carriers to urge their representatives in Washington to reject attacks on the federal workforce as well as on the Postal Service and its networks.

NALC will continue to update letter carriers as additional budget details are released and as the House and Senate begin their budget considerations.