With Congress’ approval and the president’s signature on March 26 in place, a “continuing resolution” should keep funds flowing to federal government agencies through September. The action averts a government shutdown, which would have meant temporary closure of many federal offices, a disruption in public services and many federal workers going without pay.

News of the bill brought some relief to many federal employees and active duty service members, yet it’s only one hurdle cleared in a series of budget-related issues that threaten their paychecks.

“Avoiding a disruption in government services is good news for the country in general, as Congress can continue to work through the budgetary concerns on the table,” said Dan Brouillette, senior vice president of government and industry relations at USAA. “However, budget cuts already in effect may lead to lost wages for hundreds of thousands of workers.”

On March 1, 2013, $85 billion in automatic federal budget cuts (known as sequestration) took effect, requiring sharp cuts to defense spending this year. As a result, the Defense Department has announced plans to furlough many of its civilian employees, likely by converting them to four-day work weeks. This could amount to a 20% pay cut for many defense civilians.

Active-duty military members will not be furloughed, though Defense officials have noted that their work could be indirectly affected by the reduced staffing of civilian support positions.

More Trouble Ahead?

Yet another issue looming in Washington is the debate over whether to raise the federal debt ceiling. The debt ceiling is the total amount of money the federal government is authorized to borrow, a cap on borrowing that was already exceeded at the end of last year. The deadline for Congress to decide is May 19, but Treasury Department officials have said they can postpone the actual deadline until mid-summer.

Preparing for Furloughs … or Worse

While the full impact of the government’s budget problems has yet to be realized, it’s never too early to make contingency plans.

“Federal employees who might be affected by the budget issues should start thinking about how they will preserve their financial well-being if bad news comes,” says Scott Halliwell, a CERTIFIED FINANCIAL PLANNER™ practitioner at USAA. “For those who have already received a furlough notice, it’s time to get serious — not just planning, but acting now to slash expenses and stay out of debt.”

This content is provided courtesy of USAA.

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