Deficit Reduction Plan Slams Fire Fighters

November 15, 2010 – A high-level bipartisan commission is working on a plan to reduce the federal budget deficit that includes several proposals harmful to the nation’s professional fire fighters and emergency medical personnel.

The commission’s co-chairs, former Republican Senator Alan Simpson and former Clinton White House Chief of Staff Erskine Bowles, have proposed a far-reaching plan that slashes federal spending and restructures the tax code. But many of the commission’s proposals will undermine important benefits that IAFF leaders have fought hard to create.

Of particular concern is the commission’s recommendation that all newly hired state and local government employees begin paying into Social Security in the year 2020. While the proposal appears to grandfather in current employees who are not paying into Social Security, it fails to consider the impact that bringing new hires into Social Security will have on retirement systems that don’t currently include Social Security.

If state and local governments are required to pay 6.2 percent of the salary of new hires into Social Security, these agencies will be unable to afford to continue making the required contributions into existing pension systems. This will jeopardize the stability of pension funds for those currently on the job, and even for current retirees.

At a time when many governments are under pressure to convert their retirement system from a defined benefit plan to a defined contribution plan, the requirement to begin paying into Social Security for new hires could prompt them to abolish their defined benefit pension systems altogether.

“Mandatory Social Security coverage could be a fatal blow to our efforts to preserve the retirement systems we have created for our members,” says IAFF General President Harold Schaitberger. “The commission’s recommendations are short-sighted and undermine the retirement security of our nation’s first responders.”

Several other recommendations contained in the proposal are also troubling. The idea of taxing employer-provided health care and employer pension contributions are among the many changes to the tax code included in the Simpson-Bowles proposal. Last year, the IAFF led a nationwide campaign to defeat a proposal to tax workers on the value of employer-provided health care benefits during debate over health care reform. Eventually a compromise version was adopted that imposed a tax on insurance companies that sell expensive plans, but retained the tax exclusion for workers who receive such benefits.
That idea has now been resurrected as a way to reduce the deficit rather than as a way to reform health care. “The package may be different, but it’s still the same bad idea,” says Schaitberger. “The IAFF will once again lead the charge against this harmful proposal.”

Federal fire fighters are especially hard hit by the deficit reduction proposal. The plan calls for freezing the pay of federal workers for three years, reduces their pension benefits, and increases employee contributions to both retirement and health care.

Fire fighters employed by state and local governments could also lose important benefits if the recommendations are adopted. Most notably, the proposed elimination of various tax exclusions would likely do away with the Healthcare Enhancement for Local Public Safety (HELPS) program that enables many retired fire fighters purchase health care.

Municipal fire fighters would also be harmed by plans to slash federal spending on programs that benefit the fire service, and abolish the federal tax deduction for state and local taxes. Eliminating this tax exclusion will put additional pressure on municipalities that are struggling with their own budget deficits.

Officially known as the National Commission on Fiscal Responsibility and Reform, the 16-member commission was created by President Obama in February and includes members appointed by Obama and Republican and Democratic congressional leaders. The group was charged with trying to craft a bipartisan deficit reduction plan that could win congressional approval.

Under the rules established for the commission, a proposal must win the votes of 14 of the 18 members for it to be considered an official recommendation of the commission. While the plan put forward by the co-chairs is unlikely to garner that level of support, many of the recommendations contained in the Simpson-Bowles plan are sure to be debated in the 112th Congress that convenes in January.