Unity One Credit Union

Credit union informs: what is the sequester?

Mon, Mar 04, 2013 @ 11:27 AM / by Erayne Hill posted in credit union, furlough, sequester

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Unity One Credit Union likes to keep its member informed. Please read the following article regarding the sequester taken from the Texas Credit Union League's LoneStar Leaguer.Breaking down the sequester

The sequester are arbitrary, across-the-board spending cuts lawmakers approved but swore would never happen.  Will you notice an immediate effect? Not likely, according to Rick Grady, Texas Credit Union League’s (TCUL) vice president of research.  Grady points out that the $85 billion the federal government is not spending represents a 2.2 percent budget cut and will leave the deficit spending level at $817.9 billion. Excess spending will still be 28 percent more than revenue.

The impact on credit unions: Grady says it depends on their membership base and select employee groups.

“If they are community-based the impact may be minimal,” Grady notes.  “If they are military aligned, then only the civilian employees will be impacted. Service personnel are exempt from pay cuts. Benefits for both may be reduced. If they are aligned with a military contractor or agency receiving federal funds, then some members of those private corporations may be laid off.”

For the most part, the ramifications would kick in over months, not several days or weeks, so any “pain” will have a slow and gradual effect.

The exact timeline of how the so-called sequester will unfold is still unclear. And lawmakers may eventually agree to replace the cuts. But here's what we know now [according to Money Magazine with some comments from Grady]:

Friday, March 1 - Sequester went into effect: The White House budget office issued an official sequestration order that cancels $85 billion in spending authority for the seven months remaining in the fiscal year. It will also submit a report to Congress detailing the level of cuts each agency must make to its programs, projects and activities.

March 1 and beyond - Federal workers put on notice; grants and contracts curtailed: So far at least one federal agency -- the National Labor Relations Board -- has already issued a formal 30-day furlough notice to employees. The Department of Justice says it plans to do so by Friday.

And the bulk of federal agencies planning furloughs will follow suit sometime thereafter. The FAA, for instance, will formally give notice today that it plans to close 168 contractor-staffed air traffic control towers on April 1, and another 21 towers by Sept. 30, industry officials told CNN. The towers affected would be at small- and medium-sized airports that handle 5.8 percent of all commercial airline traffic.

Agencies will also cut back on issuing new contracts and reduce federal grants to everything from schools to airports to states.

March 26 and on - Furloughs take effect: Federal workers subject to furloughs will start working fewer days. That may be when the public first notices delays in federal services -- from making decisions about disability benefits to processing visas to providing airport security -- as well cutbacks in the hours of national parks. [Note: notice they are working fewer days as opposed to fully unemployed.]

When furloughed, employees are prohibited from working for a set number of days for which they will not be paid. The furloughs will vary from agency to agency.

The Pentagon, for instance, has said workers would be furloughed for one day a week up to 22 weeks starting in April. But the Department of Housing and Urban Development is planning on furloughs of just seven days: May 10, May 24, June 14, July 5, July 22, Aug. 16 and Aug. 30, according to a document obtained by CNN Money. HUD offices nationwide would be closed on those seven days. And the IRS won't start furloughs until summer.

March 27 - Funding for the government expires: Congress must pass a new bill setting funding levels for the rest of fiscal year 2013, which ends Sept. 30. If they don't, the government would shut down all but essential services. This is one legislative vehicle that could contain a sequester fix. [Likelihood of this happening, near zero, other than a day or two. The impact on the economy would be too great to bear.]

April and May - Budget negotiations: If lawmakers haven't agreed to a sequester fix by this point, they may try to do so during their annual budget negotiations for the next fiscal year.

Mid-May to August - Debt ceiling negotiations: Congress will need to raise the country's debt limit. This could provide another legislative vehicle for a sequester fix, if one hasn't been put in place already. [The current debt ceiling is $16.4 trillion.]

August and September - Back to school, but not for some: Teachers and school staff affected by education-related cuts may be laid off for the 2013-14 school year. [Note: Texas schools receiving funding from local property taxes (45 percent of their funding), state funds (43 percent of their budget), and federal funds (12 percent of their funds). The 12 percent of the funds are susceptible to a 2 percent budget cut.]

Still unknown - Smaller unemployment checks: Everyone collecting federal extended unemployment benefits will see their checks cut by 9.4% retroactive to March 1. Just when they would start seeing smaller checks depends on how quickly their state unemployment office makes the change, which will vary from state to state. But chances are good many collecting benefits would see smaller checks sometime in March.

By Dec. 31 - Fewer jobs created: The Congressional Budget Office has estimated that the economy would produce 750,000 fewer full-time jobs as a result of the forced spending cuts if they remain in effect for the whole calendar year. [This might cause the unemployment rate in the U.S. to rise by one-half to one percent from its current 7.9 percent unemployment.]

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