Increasing the buyout maximum to $40,000 government-wide would increase the share of employees who accept such offers, CBO has said in what likely amounts to a post-mortem on that effort for this year.
CBO’s analysis of a Senate bill (S-1888) also could provide support for a renewed effort, if not this year then next, however, since buyouts are a main way—commonly coupled with early retirement offers—for agencies to reorganize or downsize while avoiding the RIF process. The bill, already passed a Senate committee, would increase the maximum to $40,000 government-wide—currently DoD can pay that much but other agencies are limited to $25,000—while indexing the amount to inflation in following years.
The Trump administration, like the Obama administration before it, argues that the $25,000 amount—unchanged since buyout authority began in the early 1990s—is not a strong enough lure to retire or otherwise separate. Many employees who are offered the incentives turn them down, although no data are kept on percentages.
The Senate had included the proposed boost in the annual DoD authorization bill but that provision was dropped in a conference with the House and that bill since has been signed into law. Another attempt could be made in another bill but the DoD measure was considered the most likely host for such a change.
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CBO projected that the inflation increases would bring the payment up to $45,000 by 2023, and said it “expects that a number of people would be induced to separate by the higher payments. Using information from DoD and OPM, CBO estimates that about 1,000 additional people would separate from the federal workforce through 2021. In 2022, that number would jump to 2,500 additional people each year.”
“Those additional separations would probably lead to some employees retiring sooner than they would have under current law,” it added, which would result in some savings to the government from lower retirement costs. However, it said that those savings would not offset the additional spending on buyouts, which it projected at $365 million over five years.
“Increased buyouts could have other effects on personnel costs. For example, if an agency hired lower paid employees to replace those who separated, it might save on personnel costs, even after considering the costs of hiring and training those new employees. However, those potential savings could be offset by other personnel decisions, such as promoting current employees into vacated, higher-paying positions; hiring additional people to fill agency needs in other areas; or rewarding high-performing employees with bonuses,” it said.