NALC: White House releases FY 2021 budget proposal

The Trump Administration released its $4.8 trillion Fiscal Year 2021 budget proposal on Feb. 10. With regards to the U.S. Postal Service, as in previous budget requests the White House proposal includes:

“…changes to how rates are set for products that are deemed outside the universal service obligation; changes to delivery processing, mode, and frequency; increased use of private sector partners; more closely aligning Postal Service employee wages with those of other Federal employees; licensing access to the mailbox; and providing additional Government services at retail locations. In addition to Government-wide changes to health and pension programs that will reduce Agency operating costs, the Budget also proposes to re-amortize the payments to the Retiree Health Benefits Fund, including those payments missed in previous years, based on the Postal employee population at or near the retirement age.”

Major provisions affecting NALC members in the White House budget request are similar to past years. They are outlined below.

Postal Service

  • “Reform the Postal Service” The budget asks for more than $90 billion in cuts to USPS operations and workforce compensation over 10 years. Changes are based on the recommendations of the White House Postal Task Force, which include: cuts to postal employee pay; eliminating the USPS mailbox monopoly; opening the private sector up to mail sorting; and implementing a new rate-setting system, which would allow for increased rates on packages and services deemed “non-essential.”
  • USPS Privatization not included. In his FY20 request, the president included a proposal by the Office of Management and Budget (OMB) that called for reforming and restructuring the federal government, including privatizing the Postal Service. Privatization of the Postal Service has not been included in this year’s request.

Federal Employees Retirement & Health Benefits

  • Pay increase lags behind inflation. While the administration’s prior two budgets called for a federal workforce pay freeze, this budget proposes a 1 percent across-the-board pay increase for federal employees, while recommending a 3 percent increase for military personnel. Inflation rates in the United States have risen from 2.1 percent in the president’s first year in office to 2.3 percent for 2019. Legislation introduced in the 116th Congress by House and Senate Democrats called for a FY21 pay raise of 3.5 percent.
  • 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 a 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 proposal would take $10.5 billion in retirement investments from federal employees, retirees, active military personnel and veterans over the next 10 years.
  • 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 7 percent, cutting significantly into their monthly take-home pay. A 7-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 proposals for FY20 and FY19, the Department of Labor would see a $1.3 billion, or 11 percent, budget cut in 2021, through the elimination of programs deemed “duplicative, unnecessary, unproven, or ineffective.”
  • Training cuts. The budget once again slashes funding 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 would be completely defunded.
  • Union monitoring. One of the few increases in the DOL budget would go to the office that monitors union activities. The DOL’s Office of Labor-Management Standards would get a 16 percent boost, to $50 million next year. The budget states that it would “support more audits and investigations to uncover flawed officer elections, fraud, and embezzlement.”

It is 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 on the process, as additional budget details are released and as the House and Senate begin their budget considerations.

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