Budget May Roil Benefits for Elderly

Despite widespread assurances that Social Security would be exempt from the automatic government budget cuts threatened for Oct. 1, those cuts would delay the processing of benefit claims and cause a “drastic falloff of service” to the nation’s 40 million Social Security beneficiaries, a confidential agency memorandum says.

The Social Security Administration would be forced to furlough its employees for as much as 85 days during the year to achieve the savings of $1.3 billion required under the Gramm-Rudman budget law, the memorandum says.

Social Security beneficiaries “will not understand how a drastic falloff of service is possible with the trust funds at a level of nearly $215 billion and growing,” Social Security Commissioner Gwendolyn S. King wrote in a memorandum to Bush Administration budget officials. “They will be convinced that the government is stealing their money.” A copy of the memorandum, issued on Tuesday, was obtained by The Times.

The common understanding that Social Security would be spared the Gramm-Rudman ax applies only to the size of the monthly checks mailed to millions of households. The amount of the benefit check remains unchanged. Instead, the budget-cutting burden would fall on the payroll, office expenses and administrative operations of the Social Security program.

“People will notice it when it’s more difficult for their phone calls to go through,” King said Thursday in response to questions about the memorandum. Social Security has eliminated local phone numbers in favor of a nationwide 800 line to handle calls for information and to schedule appointments. Callers will face “more and more busy signals,” King said.

“When they call for an appointment, it will take longer and longer to fit them in,” she said. Inside the Social Security offices, “the lines will be longer and longer,” she said, and some offices may be shut if the budget cutbacks last a full year.

“It’s going to be so upsetting to a work force now working with stability and a sense of direction and satisfaction,” King said, referring to the 63,000 employees of her agency. “We have given confidence back to the general public, but I despair when I think of the turmoil we will put people through” if the full budget cuts take place.

“Things will be harder for anyone who has a need to communicate with Social Security,” she said. Handling of claims could take as much as 30% longer. It now takes about three weeks to issue a Social Security card, 20 days to handle a new claim for retirement benefits and 60 days to process a new claim for disability benefits.

The Bush Administration has announced that mandatory budget cuts will be imposed Oct. 1 unless the President and Congress agree on a new package of spending reductions and revenue increases. Non-defense spending programs, including the Social Security Administration, would have to cut outlays by 32% to achieve the savings of $101.2 billion needed to meet the Gramm-Rudman deficit target.

The Middle East crisis, with a sharp increase in spending to transport and maintain troops in Saudi Arabia, may force Congress to alter or abandon the budget targets and avert the automatic spending cuts. Meanwhile, however, the Office of Management and Budget is asking all agencies for detailed plans on the “sequester,” or automatic budget reduction.

The response from Social Security provides one view of an agency under fiscal siege. The required cutbacks of $1 billion “would be devastating to employees and would severely disrupt public confidence in the Social Security system,” King wrote.

With workers on extensive furloughs, the Social Security Administration would fall far behind in the complex task of making millions of changes in records and benefit amounts. Benefit checks are changed when a disabled person goes back to work, when a person receiving retirement benefits earns more than $9,360 a year from working, when a spouse dies and in many other circumstances.

The “inability to keep pace with the routine changes to the benefit rolls could result in incorrect payments to beneficiaries in the range of $10 billion to $15 billion over the course of the year,” the memorandum said.

King has proposed an alternative plan to avoid the furloughs and the accompanying decline in service. She wants to freeze all hiring, promotions, travel and new contracts until Jan. 1. This would save $400 million and provide additional time for Congress and the President to agree on a budget compromise.

No employee furloughs without pay would take place until after Jan. 1 under King’s plan.

All Social Security spending--the benefit checks and the salaries of the employees who run the system--is financed by the trust fund, which collects payroll taxes from 110 million workers and their employers. The trust fund has a surplus and helps reduce the overall deficit of the federal government.

However, because Social Security is included in the general federal budget, the cutbacks required under Gramm-Rudman also fall on the operations of the Social Security system.