FY2016 budget deficit increases to $587 billion

Friday, October 21st, 2016


The Treasury Department and the Office of Management and Budget (OMB) announced that the final FY2016 federal budget deficit was $587 billion, up $148 billion from FY2015 ($439 billion).  The administration had estimated in the annual Mid-Session Review in July that the FY2016 deficit would be $616 billion.

This is the first increase in the deficit in five years.

The increase in the deficit came as higher government expenditures (+$166 billion) more than offset a small increase in revenues (+$18 billion).  The administration does point out that part of the increase in outlays was due to the timing of benefit payments.  Because October 1 fell on a weekend, benefit payments were made in September.

Data on government expenditures and receipts and the deficit are reported in the Monthly Statement of Receipts and Outlays of the United States Government (MTS) prepared by the Treasury Department.

When measured as a percent of Gross Domestic Product (GDP), the FY2016 deficit increased to 3.2 percent (from 2,5 percent in FY2015), about the average for the past 40 years.  During the period FY2009 to FY2012 the deficit’s share of GDP averaged about 8.5 percent.

The modest revenue growth (+$18 billion) in 2016 was led by a 4.7 percent increase in social insurance and retirement receipts (+$49.8 billion).  Miscellaneous receipts increased by 5.8 percent (+$8.4 billion), estate and gift taxes rose by 11 percent increase (+$2.1 billion), and individual income tax receipts increased by a very small 0.3 percent (+$5.3 billion).  However, these increases were partially offset by an almost 13 percent decline in corporate income tax receipts (-$44.2 billion), a 3.3 percent decrease in excise taxes (-$3.2 billion), and a 0.6 percent drop in customs duties (-$0.2 billion).

Spending on health programs and Medicare increased by $77.5 billion in FY2016 (+7.5 percent). Social Security outlays rose $28.3 billion (+3.2 percent), and spending for veterans benefits and services rose by $14,8 billion (9.3 percent). Outlays for net interest payments increased by $17.4 billion (+7.8 percent).  Spending on national defense increased by only $3.9 billion in FY2016 (0.7 percent). 

Looking ahead, OMB projected in its Mid-Session Review that the FY2017 deficit would be $441 billion.  However, both OMB and the Congressional Budget Office expect deficits to rise again by 2020.

Federal civilian retirees to get 0.3 percent COLA in 2017

Wednesday, October 19th, 2016


Federal civilian retirees are set to receive a 0.3 percent cost-of-living adjustment (COLA) in 2017.  Retirees covered under the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS) will see the increase reflected in their January 2017 payment.

This small increase results from continuing low inflation throughout the year, primarily due to the decline in gasoline prices.  The annual retiree COLA is calculated as the change in the average Consumer Price Index for Wage Earners and Clerical Workers (CPI-W)—published by the Bureau of Labor Statistics (BLS)—from the third quarter of the previous year to the third quarter of the current year.

This is the same calculation for the Social Security COLA.  Social Security recipients will also receive a 0.3 COLA in 2017.

Federal retirees received no COLA in 2016.  The COLA was 1.7 percent in 2015. 1.5 percent in 2014, 1,7 percent in 2013 and 3.6 percent in 2012. No adjustment was paid to retirees in 201 and 2010.

In late August President Obama notified Congress that federal civilian employees should receive a 1.6 percent pay raise in 2017. The 1.6 percent pay raise is a combination of a 1.0 percent across-the-board raise announced in the letter and an increase in locality pay the president said he will announce by November 30, 2016.  If Congress takes no action on the pay raise when it completes the FY2017 appropriations bills, the president can issue an executive order implementing the raise.

DoD changes probationary period for new civilian hires

Wednesday, October 5th, 2016


Beginning in November, the probationary period for new civilian hires will be two years instead of one year, the Department of Defense announced this week.

In a memorandum to DoD human resources directors, Acting Assistant Secretary for Civilian Personnel Policy Julie Blanks said the change would affect personnel appointed to permanent positions in competitive service and SES appointments from November 26, 2015 forward.  The change was required in Sec. 1105 of the FY2016 National Defense Authorization Act.

The policy change is necessary, DoD said, because one year may not be enough time to judge the performance of new employees, in the “increasingly complex nature” of DoD’s work.  “The longer probationary period offers employees a greater opportunity to showcase their talents and for supervisor’s to properly asses their capabilities,” a DoD spokesperson said.

The new policy does not apply to personnel appointed prior to November 26, 2105 and those appointed in excepted service, a DOD spokesperson said.

The policy memorandum notes that DoD and the military services do have the discretion to extend a probationary period beyond two years.  The policy for this discretionary extension is being prepared.

The two-year probationary period policy does not change the one-year probationary period for supervisors, DoD said.  New employees appointed to a supervisory period will serve the one-year probationary period and the one-year supervisory probationary period concurrently. 

A person transferring from another agency to DoD who has completed a probationary period in competitive service (and has full appeal rights under the Merit Systems Protection Board) does not have to serve another probationary period, DoD said.  However, a person who transfers from another government agency and receives a career SES appointment in DoD after November 26, 2015 will serve a two-year probationary period.

A person who transfers from another agency into DoD who has not completed a probationary period could be required to complete a new probationary period, with possible credit for receive credit for prior probationary service.

Federal employee health insurance premiums set to increase 4.4 percent in 2017

Friday, September 30th, 2016


Health Insurance premiums for employees covered under the Federal Employees Health Benefits (FEHB) Program will increase an overall average of 4.4 percent in 2016, the Office of Personnel Management (OPM) announced this week.

The increase is lower than the 6.4 percent increase registered in 2016, but higher than the increases in 2015 (3.2 percent), 2014 (3.7 percent) and 2013 (3.4 percent).

The FEHB program covers about 85 percent of all federal employees and 90 percent of federal retirees. According to OPM, FEHB is the largest employer-sponsored health benefits program in the United States.  The federal government pays an average of 70 percent of total premium cost.  Premiums for specific health plans and dental and vision plans are shown on the OPM website.

OPM announced that “all plans will offer clinically appropriate and medically necessary treatment for children diagnosed with Autism Spectrum Disorder in 2017.”

The Open Season for health, dental and vision, and tax-deferred Flexible Spending Accounts (federal employees only) will start on November 14, 2016 and end on December 12, 2016.  Open season allows federal employees and retirees to make changes to their plans and eligible employees to enroll in the plan of their choice.

Congress passes FY2017 CR to avert government shutdown

Thursday, September 29th, 2016


Yesterday, Congress approved a Continuing Resolution (CR) that will keep the government running until December 9, 2016.  The House passed the CR (H.R. 5325) by a bipartisan vote of 342-85 as 170 Republicans and 172 Democrats voted for passage.  Earlier in the day, the Senate passed the CR 72-26. The president is expected to sign the bill before the fiscal year begins on Saturday.

Final negotiations on the CR were stalled because Senate Democrats would not let the bill proceed without funding for the water contamination crisis in Flint, Michigan.  They argued that just as the proposed CR includes assistance for flood damage in Louisiana and other states, the bill should also include assistance for Flint.

With the Senate deadlock continuing, and the possibility of a government shutdown rising as the Friday midnight deadline approached, House Democrat and Republican leaders agreed to a deal that would provide assistance to Flint.  House Speaker Paul Ryan (R-WI) and Minority Leader Nancy Pelosi (D-CA) agreed to include funding for Flint assistance in the Water Resources Development Act.  Flint assistance is already in the Senate version of the water resources bill.  Senate leaders accepted the deal and the Senate and House passed the CR.

Commenting on the bill, House Appropriations Committee Chair Rep. Hal Rogers (R-KY) said “a continuing resolution is a last resort. But, it is what we must do to fulfill our congressional responsibility to keep the lights on in our government.”  Senate Appropriations Committee chair Sen. Thad Cochran (R-MS) called the CR “a short-term fix that will allow the Senate and the House to complete work on the FY2017 appropriations bills later this year.”

The CR is included in the FY2017 Military Construction/Veterans Affairs appropriations bill, which funds DoD military construction and Veterans Affairs appropriations for the full year.

The CR essentially allows agencies to fund FY2017 programs at the FY2016 level ($1.067 trillion for the total government and $74.1 billion for Overseas Contingency Operations (OCO)) until December 9.  During the CR period, no new starts are permitted nor are programs allowed to increase production rates above the FY2016 rate

The bill also includes $1.1 billion in emergency funding for preventing the spread of the Zika virus, funding to address the opioid crisis, and $500 million in rebuilding and recovery grants to families and communities affected by recent flooding.

Congress will be in recess until after the November elections, returning for a “lame duck” session beginning on November 14.  They will work to pass 11 individual FY2017 appropriations bills, a series of “mini-buses that include some individual appropriations, or more likely an omnibus appropriations bill containing the 11 remaining appropriations bills.

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