Budget deal would avert threat of January shutdown

The threat of a Jan. 15 government shutdown receded as the leaders of the Budget committees in the House and Senate agreed on a two-year deal that deflects some of the cuts imposed by sequestration in the near term while extending the sequester regime by two years, through 2023.

Rep. Paul Ryan (R-Wis.) and Sen. Patty Murray (D-Wash.) essentially agreed to split the difference between their two budgets on discretionary spending. The final deal calls for $1.012 trillion in spending for fiscal 2014, with $520.5 going to defense and $491.8 billion to non-defense agencies. It taps the brakes on sequestration cuts, with a reduction of about $45 billion in fiscal 2014 and $18 billion in fiscal 2015.

"In divided government, you don't always get what you want," Ryan said in a Capitol Hill press conference on Dec. 10.

Opposition from House Republicans appears to be the biggest political hurdle to the agreement. Ryan urged House Republicans to vote for the plan because the deal contains no tax increases, extends the regime of automatic budget cuts, takes aim at improper payments and moves toward reining in federal pension costs.

Murray said at the joint press conference that she made the deal in consultation with Senate leaders, and the White House issued a statement saying President Barack Obama would sign the bill.

If the deal is passed, appropriators would be able to write spending bills for the remainder of fiscal 2014 and full appropriations for fiscal 2015 based on the measure's caps.

"This deal allows congressional committees to proceed under regular order, and gives government agencies and the companies that do business with them the certainty they need to hire workers and make investments," Murray said.

Changes to retirement benefits

Changes to military and civilian federal employee pensions figure into the $63 billion in sequester relief and $23 billion in deficit reduction promised under the deal. Federal employees hired in 2014 and beyond will contribute 4.4 percent of their salaries toward retirement, an increase of 1.3 percentage points from the current rate of 3.1 percent. Feds returning to the government with more than five years of service will be exempt from the increase.

"Nothing in this agreement affects current federal employees," said Rep. James Clyburn (D-S.C.), a member of the conference committee that negotiated the deal. "All of this has to do with federal employees who will be going to work for the government after Jan. 1, 2014."

The largest federal employees union opposes the deal because of the increase in contributions to defined benefit pensions for newly hired employees.

"The result will be a serious shortfall in their retirement income security and a substantial lowering of their standard of living," said J. David Cox Sr., national president of the American Federation of Government Employees, in a statement.

On the military side, the deal reduces the cost-of-living adjustment for working-age military retirees. A 0.25 percent decrease will hit in December 2014, followed by a 0.50 percent reduction in December 2015. The deal does not reduce retirement benefits from one year to the next, nor does it affect injured or disabled veterans.

A new cap on contractor compensation

The deal also reduces the cap on contractor executive compensation on federal contracts to $487,000. The Obama administration recently announced an increase to the cap from $763,029 to $952,308. The Ryan-Murray deal allows for "narrowly targeted exceptions for scientists, engineers or other specialists," but such exceptions will be limited, and Congress will have to be kept in the loop through an annual report on contractor compensation from the Office of Management and Budget. Additionally, the deal repeals OMB's authority to set annual increases.

The contractor compensation measure is competing against a similar provision in the defense authorization bill agreed to by the House and Senate Armed Services committees earlier this week. That bill proposes a $625,000 cap on contractor compensation and includes exceptions for certain high-tech categories, including cybersecurity.

Stan Soloway, president of the Professional Services Council, said the rate in the defense bill represents a reasonable compromise that the Ryan-Murray measure threatens to upset.

"This is not about egregious salaries," he told FCW. "It's about enabling industries to compete for the right kind of talent to support the government."

It's unclear how the two measures will be resolved if both pass.

Still, Soloway said he is pleased to see the prospect of a January shutdown dimmed. "Getting the budget deal done is critical for federal agencies to plan and execute programs," he said. "The uncertainty and chaos that has buffeted agencies flows down to external partners, including industry."