On Monday, February 12, the Administration released details to their FY2019 Budget Proposal, titled “Efficient, Effective, Accountable: An America Budget”. The proposed budget is a $4.4 trillion budget that sets forth the Administration’s priorities as Congress begins to prepare spending legislation for the next fiscal year. This is the first time, however, that the Administration acknowledge’ s their FY2019 Budget Proposal will not eliminate the federal budget deficit after 10 years, in large part due to the spending increases and the recently passed tax cuts.
In an attempt to find budget savings, numerous recommendations have been made that directly impact federal and postal employees. To start, the FY2019 Budget Proposal recommends basing the G Fund yield on a short-term T-Bill rate; essentially making the G fund worthless. The budget proposal also targets federal and postal employee benefits, trying to align federal and postal employee benefits more with the private sector. The recommendations include increasing FERS contribution rates by one percent each year, eliminating the Cost of Living Adjustment (COLA) for FERS retirees and reducing the COLA for CSRS retirees by 0.5%, utilizing a high-5 average salary instead of high-3 in the computation of FERS annuities, and eliminating the special annuity supplement.
The FY2019 proposal also recommends giving the USPS the authority to reduce mail delivery from 6 to 5 days where there is a business case for doing so, allowing the USPS to begin shifting to centralized and curbside delivery where appropriate, authorizing the USPS to raise needed revenue with a one-time rate increase, and requiring the rate setting system to provide flexibility to ensure the stability of postal operations and the ability of the USPS to meet their statutory obligations for retiree health and pension costs.
The FY2019 budget estimates these operational reforms will improve the USPS’ financial position by $45 billion over 10 years. In addition, the proposed retirement and benefit changes listed above are estimated to reduce Postal Service costs by $35 billion over 10 years. In total, the proposed budget estimates the recommended changes will reduce the unified budget deficit by $44 billion over 10 years and result in an on-budget savings of $40 billion as the Postal Service resumes statutory payments to on-budget OPM accounts.
While most Administration’s Budget Proposal are consider “dead on arrival” and usually dismissed by Congress, who typically pass their own budget, the individual proposals could pop up at any time in the future as Congress looks to find “pay-fors” and budget savings.