They may comprise the greatest fighting force in the history of armed services, but today's U.S. military find themselves to be no different than their fellow Americans when it comes to Congress and the laws governing the federal budget.
Today, concern in Washington has never been greater for cutting waste and reducing spending; however, trying to find a way to carry it out in a way that’s acceptable to Democrats and Republicans alike has proven to be quite a futile venture. As a result, sequestration is now part of everyone’s daily experience.
Since Congress couldn’t agree on a budget to reduce the deficit by March 1st of this year, automatic, across-the-board spending cuts were enacted under the Budget Control Act of 2011. The series of cuts commonly referred to as the sequestration, call for some $85 billion in reductions during the current federal fiscal year while also targeting similar reductions for fiscal years 2014 through 2021, producing a grand total of $1 trillion in savings.
To date, air traffic controllers and meat inspectors seemed to have won a reprieve from the budgetary furlough knife, however for many others the impact is making its presence known. Federal courts are reducing staff and their hours of operation. Head Start programs are taking similar measures. Patients are being turned away by doctors because of Medicare cutbacks, and within the Department of Defense, furlough notices are becoming all too commonplace.
“During the first week of June, employees subject to furlough began receiving their official warning order’ notifying them of the Department’s potential to furlough,” noted Arty Arteaga, President/CEO of the Defense Credit Union Council—DCUC—the niche trade association representing the interests of credit unions operating on military installations worldwide. “From the time of receipt, recipients have seven calendar days to appeal.”
According to Arteaga, appeals are made back to the branch of service issuing the notice. After doing so, recipients then wait for a decision letter. Once issued, the letter makes the furlough official.
Twenty Percent Paycuts
For those impacted, the furloughs will amount to a 20% cut in pay over a period of 11 weeks. While the Pentagon estimates that the furloughs will generate a savings of $1.8 billion, many others are more inclined to ask at what cost. Overall, their impression is that if left unchecked, the sequestration will result in defense downsizing, leading to a reduction in retirement and education benefits, an increase in healthcare costs and the likelihood of early separation, a reduction in promotions, and forced relocations due to base closures and realignment.
At Scott Air Force Base in southern Illinois, Frank Padak, President/CEO of the $920-million Scott Credit Union, expressed his hope that the government can find some more funds or adjust the rules to shorten the furlough timeframe.
“I don’t know too many families that can afford a 20% cut in pay for 11 weeks without some repercussions,” he said. “It may very well be the difference between determining what bills to pay or foregoing vacation or future purchases. Fortunately they’ve had some time to think about it.”
Padak confirmed that Scott Credit Union has been receiving a number of inquiries on loans to help out members and just like all of his DCUC-member colleagues, his credit union is taking a number of steps to ensure that the members know they won’t be facing this challenge alone.
“If you already have a loan with us, we’ll do a payment extension so we can move out that payment 30 or 60 days, allowing you to essentially skip a payment,” he explained. He went on to say that the credit union is also ready to loan at 0% interest, up to 100% of the previous month’s pay. “So even though they might miss 20% of their salary, we’re willing to loan up to 100% at no interest for 60 days.”
Softening The Impact
Such measures designed to soften the impact of the furloughs on the military and their families can also be found at Service Credit Union in Portsmouth, N.H. Gordon Simmons, President/CEO of the $2.3-billion financial cooperative, counted a wide range of services now available for his members, from a 0% Sequestration Loan to penalty-free early withdrawals on certificates of deposit and a 90-day loan payment deferral. In addition to these and other measures, Service Credit Union is also offering free financial education assistance to further help members find peace of mind.
Although the credit union plans to do everything possible to help its members survive the furloughs, Simmons is still concerned that many will not be able to meet their ongoing financial commitments.
“Some will face the decision of meeting the daily needs of their families or paying their debts, leading to possible auto repossessions, unpaid bills in general and perhaps even home foreclosures,” he said. “Should sequestration remain in place for a prolonged period of time, irreparable damage will occur to some individuals’ credit ratings and their quality of life. We can help our members avoid these consequences, but only for a short run and that’s exactly how long we’re hoping the sequestration will last.”
Denise Floyd, President/CEO at Fort Sill Federal Credit Union in Oklahoma, shares a similar perspective as her colleague in New England. “Right now I don’t know what to expect. I do know that if they put more money into the defense budget come October 1, things around here will improve. But if the sequestration continues and the powers at be do not decide how to handle it, I think it will begin to negatively affect our economy even more. Right now, I think everyone is just wishing for October first.”
New Budget Oct. 1
October 1 marks the start not only of a new federal fiscal calendar, but a new federal budget as well. Although many are hoping that the 2014 budget will lessen the impact of furloughs and cuts, many officials at the Department of Defense are not as equally optimistic.
According to an article appearing on April 10th in the American Forces Press Service, Defense Department budget request documents show that the $526.6-billion defense base budget request included in President Obama’s fiscal year 2014 budget proposal reflects “great uncertainty,” but maintains national defense strategy and a continued commitment by Pentagon leaders’ to the careful use of taxpayer dollars. The article states that the 2014 budget request is largely consistent with that of 2013.
The budget calls for a round of base realignment and closures, savings in managing military medical treatment facilities, cuts in low-priority and poorly performing weapons programs, and slowed growth in military pay and benefits. The Pentagon statement accompanying the request notes, “The fiscal 2013 sequester cuts will mean training cutbacks, civilian furloughs, maintenance delays, and deployment curtailments that will inevitably have rippling effects into [fiscal] 2014.’ The statement notes the president’s budget request includes balanced deficit reduction proposals that allow Congress to replace and repeal the sequester-related reductions’ required by the 2011 Budget Control Act.”
At Fort Sill, Floyd says the military and their families are holding onto hope that the furloughs are not a forever deal and Congress will repeal the sequester-related reductions. Although she has not yet seen a lot of refinancing, the credit union has had phone calls from members who are inquiring what kinds of help they can count on in the event they cannot make their payments. For now, however, the majority are pulling the reigns in a little, just trying to get through the furloughs.
A Little Concerned’
“I still think they’re a little concerned about what’s going to happen to them at the end of the fiscal year. They don’t want to go in debt anymore because they don’t know what’s at the end of the tunnel. So they’re trying to be hopeful that it’s going to be okay, but they’re still concerned that it might not be.”
Floyd is insistent that no matter what comes at the end of the tunnel, Fort Sill Federal Credit Union will be there for its members. “We will do whatever we can to help them at this point. This is nothing of their doing. They’ve done the right things. So we’re going to help them.”
And, like her counterparts on other bases, Floyd is offering an array of services specially designed to counter the impact of sequestration, such as overdraft forgiveness, skip-a-payment, loan modifications, nullifying late fees, and relief loans up to $3,000 at 3% interest for one year with the first payment delayed for 60 days.
Patricia Kimmel, President/CEO at Belvoir Federal Credit Union just outside the city limits of Washington, D.C., lists a skip-a-pay program for her members as well, although no one affected by sequestration has yet to apply for it. “There’s nothing that we’re not open to discussing if someone is impacted,” she said.
Kimmel noted that some government agencies are doing the furloughs in short periods of time, others are managing it over several days in a row, and still others are not doing it at all because they found money to offset such drastic measures. In the case of Fort Belvoir, Kimmel reports that the credit union has not seen anyone who has gone through the furlough as of yet.
“What we are seeing is some people are a little more wary to take out more debt and we’re seeing people inquire more about refinancing existing debt in order to lower their payments.” She also highlighted some unique demographics of her membership. “We have a lot of families where both spouses work in a government job, so we’re not just talking about one income that’s going to be impacted. We’re talking about a double whammy.”
Monitoring The Pulse’
For Kimmel and her credit union team, a double impact on a family’s salary could be disastrous. “If it does happen,” she says, “I think we’re going to see difficulty in making a monthly payment or two and not more than that. At least, that’s our hope.”
And just like her colleagues at other DCUC-member credit unions, Kimmel pledges an unwavering commitment to do whatever it takes to support her members. “We’re constantly monitoring the pulse of what’s happening to our workforce and listening to the members who might call or come in to inquire so we can be ready to be a good resource for them.”
For now, she says, “The only thing we can do as a financial institution that serves the military and DOD is to stand ready and be flexible. That really is our only course of action.”
Having a flexibility to respond innovatively to a member’s needs and standing ready to meet those needs no matter what the challenge might be—can be viewed as the rallying cry across the board at all credit unions committed to serving the military, the Department of Defense and their families, and such a commitment should come at no surprise according to Arteaga.
“I’ve not seen others take the preparatory measures to support the Department’s civilian workforce that our on-base member credit unions have,” he pointed out.
Arteaga believes such a commitment is fueled by the trust members place in their credit union and because of that trust, they know that if something like the sequestration is going to happen, they can rely on their on-base credit union to actually assist, whether they’re civilians or military personnel.
According to Arteaga, they can always rely on the credit union to be there to lend that helping hand because it’s all part of the fabric that makes a credit union what it is.
“For more than 80 years credit unions have been operating on military bases and supporting the DOD establishment. We have history and with that history of outstanding and reliable support comes trust; a trust that has developed over the years because of our integrity, our loyalty, and our commitment to serve.”
He continued by emphasizing, “Our member credit unions are always front and center when it comes to helping people; not because they have to, but because they want to. It’s in their DNA. It’s what they do best! They hold themselves to a higher standard and frankly, are proud to do so! No one needs to do that for them!”
Walter Laskos is a freelance writer. For info: waltlaskos@gmail.com.
