HOUSE "HEARING" ON ADMINISTRATION'S PROPOSED FY 86 BUDGET CUTS TO FEDERAL EMPLOYEE BENEFITS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP89-00066R000700110024-0
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 85
• Document Creation Date: December 27, 2016
• Document Release Date: March 5, 2013
• Sequence Number: 24
• Publication Date: February 27, 1985
• Content Type: MEMO

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T-1 I
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OLL 85-0666
27 February 1985
STAT
MEMORANDUM FOR: See Distribution
. /I P &A9-"
I
Acting Chief, Liaison Division, OLL
Liaison Division, OLL
SUBJECT: House "Hearing" on Administration's Proposed
FY 86 Budget Cuts to Federal Employee
Benefits
1. On 26 February 1985, Congresswoman Mary Rose Oakar
(D., OH), chaired a "hearing" on the Administration's
proposed FY 1986 Budget cuts to Federal employee benefits.
Oakar is Chairwoman of the Subcommittee on Compensation and
Employee Benefits of the House Post Office and Civil Service
Committee. The other Committee Members who attended are
Mervyn M. Dymally (D., CA), John T. Myers (R., IN), Dan
Young (R., AL), and William D. Ford (D., MI), Committee
Chairman. (This "hearing"was referred to as a briefing for
Members because the Committee has not yet met to ratify its
rules and subcommittee assignments).
. 2. The purpose for this "hearing" was to collect
information that will support the Committee's
recommendations to the Budget Committee.=vis-a-vis the
Administration's proposals. The Committee will most likely
reject all of the proposals, much to the approval of the
standing-room only crowd of Federal union groups.
3. Attached hereto is the list of witnesses and the
formal comments of several who testified. Copies of the
full proceedings will be distributed when available. There
were no surprises during the hearing. The Administration's
position, defended by Dr. Donald J. Devine, Director, Office
of Personnel Management, remains firm on all cuts proposed
and there are now no signs of compromise.
4. In her opening comments (attached hereto), Oakar
cited-drug enforcement agents, foreign service officers,
letter carriers, meat & poultry inspectors, NIH employees,
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STAT
STAT
social security administrators, and Federal retirees as
loyal and hard workers who were being abused by the
Administration.
5. John Myers, speaking for the minority, stated that
he shared the concern of the majority, was interested in
cooperation, and cited "quick fixes" and the unweildy budget
process as the causes behind the roller coaster treatment of
Federal benefits. Traditionally, this Committee has
maintained a bi-partisan pro-Federal employee orientation
and this statement signals that this will continue during
the 99th Congress. In fact, the majority staff expressed
surprise that the Republicans on the Committee havve been so
vocal in their opposition to the Administration's proposals.
6. In response to questions about retirement, Dr.
Devine alluded to a supplement plan that OPM is drafting.
He did not give any details, but suggested that the plan
would involve portable benefits, such as Social Security
plus some form of employee savings; it would not include the
employer-provided pension.
Attachment:
as stated
Distribution:
1 - D/OP w/att
1 - DD/EB&S/OP w/att
1 - DD/PA&E/OP w/att
1 - D/OF w/att
1 - DDA w/att
1 - D/OLL w/att
1 - DD/OLL w/att
1 - C/LEG w/att.
1 - AC/LD w/att
1 - C/HL/LD w/att
1 - OLL Chrono w/o att
1 - OLL Record w/att
1 - ubject w/att
1 - rono w/o at,t
OLL:LD :aw (27 February 1985)
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TELEPHONE [phone]
BRIEFING OF THE
COMMITTEE ON POST OFFICE AND CIVIL SERVICE
ON THE FISCAL YEAR 1986 BUDGET PROPOSALS
TUESDAY, FEBRUARY 26, 1985
LIST OF WITNESSES
1. The Honorable Michael D. Barnes
Member of Congress
(D-MD)
2. The Honorable Vic Fazio (D-CA)
Member of Congress
3. The Honorable Stan Parris (R-VA)
Member of Congress
I. Dr. Donald J. Devine, Director
Office of Personnel Management
5. Mr. Martin L. Duggan, Chair
Advisory Committee on Federal Pay
accompanied by
Ms. Lucretia Tanner, Executive Director
Advisory Committee on Federal Pay
5. Mr. George Stelluto, Associate Commissioner
Office of Wages & Industrial Relations
Bureau of Labor Statistics
Department of Labor
accompanied by
Mr. Charles O' Connor,.'Division Chief
Division of Occupational Pay and Employee Benefit
Levels
Bureau of'Labor Statistics
Department of .Labor
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7.
9.
Mr. Kenneth Blaylock, President
American Federation of Government Employees, AFL-CIO
Mr. L.J. Andolsek, President
National Association of Retired Federal Employees
accompanied by
Ms. Judy Park, Legislative Director
National Association of Retired Federal Employees and
Mr. Tom Trabucco, Associate Legislative Director
National Association of Retired. Federal Employees
Panel:_ Mr. Moe Biller, President
American Postal Workers Union, AFL-CIO
accompanied by
Mr. Patrick J. Nilan, Legislative Director
American Postal Workers Union, AFL-CIO and
Mr. Roy Braunstein, Legislative Aide
American Postal Workers Union, AFL-CIO
Mr. Vincent Sombrotto, President
National Association of Letter Carriers, AFL-CIO
accompanied by
Mr. George Gould, Legislative Director
National Association of Letter Carriers,
AFL-CIO
10. Panel: Mr. Thomas P. Costin, President
National Association of Postmasters
of the United States
Mr. R. Fain Hambright, President
National League of Postmasters
accompanied by
Mr. Ed Bowley, Legislative Consultant
National League of Postmasters
Mr. Reuben Handelman, Executive Vice
President
National' Association of Postal Supervisors
accompanied by
Mr. AndreW Ruddick
(Retired:) Consultant
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Mr. Robert L. White, President
National Alliance of Postal and Federal
Employees
11. Panel: Mr. Bun B. Bray, Executive Director
Federal Managers Association
accompanied by
Mr. Red Evans, Assistant Executive Director
Federal Managers Association
Mr. David Gusky, Legislative Director
National Federation of Federal Employees
Mr. Ed Murphy, Legislative Counsel
National Association of Government Employees
AFL-CIO
Mr. Lary D. Silver, President
National Association of Agricultural Stabilization
and Conservation Service, United States
Department of Agriculture, County Office
Employees
12. Panel: The Honorable John N. Erlenborn (R-IL)
Former Member of.Congresq
Mr. Robert Mueller
National Taxpayers Union
Mr. G. Jerry Shaw, President
Senior Executives Association
Mr. Paul Newton, Legislative Director
National Treasury Employees Union
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TNIRTY.FIOf Dim= WAsNINatoN, D.C. 2051!
CAU0o11NIA [phone]
Congregg; of the initeb fitateig
Jouot of Repreantatibes;
Wia%bington, 3?.C. 20515
HEARING ON THE ADMINISTRATION'S BUDGET PROPOSALS
SUBCOMMITTEE ON COMPENSATION AND EMPLOYEE BENEFITS
FEBRUARY 26, 1985, 1:00 P.M.
STATEMENT OF THE HONORABLE MERVYN M. DYMALLY
FOREIGN AFFAIRS
SCIENCE AND TECHNOLOGY
DISTRICT OF COLUMBIA
CNAMM". IU$COMMITTU
ON JUDICIMIY AND EWNCATIOU
Let me start, Chairwoman Oakar, by commending you for moving so
quickly to hold hearings on these issues of vital concern to
Postal and Federal employees. Your leadership in this area is
much appreciated by your Committee colleagues. and the people-
whose interests we represent.
As Chairman of the Subcommittee on Postal Personnel and
Modernization, I am deeply concerned about the Administration's
latest proposals for cutting Civil Service Retirement benefits.
Once again, Postal and. Federal employees are being threatened
with losing the retirement benefits they have worked. for and
deserve, under the guise of reducing the Federal budget deficit.
Federal employees also are being asked to accept a''five percent
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reduction in pay, when an independent study commissioned by this
committee shows that Federal employee pay already lags behind the
private sector by an average of ten percent. Health benefits are
threatened, as well. While it is certainly necessary to reduce
the huge deficit that has loomed up in the past four years under
the current Administration, this task cannot be accomplished on
the backs of the Federal workforce.
For too long, the Administration has projected an image of its
own workforce which suggests to the American people that Postal
and Federal employees receive too many benefits and are
unproductive -- in effect, little more than a drain on the
Federal budget. As you well know, Madam Chair, these workers
perform many services vital to the well-being of large segments
of,our society. The Administration attempts to lay the blame for
deficit problems on Federal and Postal employees because it is
expedient to do so, 'conveniently ignoring the vast majority of
productive, dedicated workers who have made a career of public
service.
I join you and my other colleagues here today to emphasize my
continuing support of Postal and Federal employees in their fight
to retain hard-won and well-deserved benefits. I am also
strongly. behind their efforts to counter. the false image created
by,their own employer, and to regain a sense of self esteem for
their work in the Federal government. Public employees must no
f! L
longer shoulder undue financial, and psychological burdens to
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compensate for the current Administration's deficit woes.
Once again, I commend you, Madam Chair, for taking the initiative
on this issue, and for sending the Administration a clear. signal
of Congressional intent on this matter.
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Statement by
George L. Stelluto, Associate Commissioner
Wages and Industrial Relations
Bureau of Labor Statistics
before the
Compensation and Employee Benefits Subcommittee'
Post Office and Civil Service Committee
UNITED STATES HOUSE OF REPRESENTATIVES
February 26, 1985
Madam Chairperson and Members of the Subcommittee:
I welcome the opportunity to appear before this Subcommittee
to explain the role of the Bureau of Labor Statistics (BLS)
in the pay comparability process for Federal white-collar employees.
I will focus first on the BLS role under existing legislation,
then briefly describe the scope of the Bureau's 1985 national
survey of Professional,-Administrative, Technical, and Clerical
Pay--the PATC survey. I will conclude with a few comments on
possible future expansions to the PATC survey, as proposed
by the President's Agent for pay comparability.
THE BLS ROLE
BLS has served as statistical agent in the Federal white-
collar pay comparability process since its inception in 1962.
This role, which.requires the development each year of data
on white-collar salaries in private industry for use by the
Federal Government to set pay for its employees, was restated
in the'Federal Pay Comparability Act of 1970. The 1970 Act
has been the legislative foundation for the Federal pay comparability
process over the past 15 years.
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While the 1970 Act calls for "appropriate annual surveys
conducted by the Bureau of Labor Statistics," it places the respon-
siblity for survey coverage with the President's Pay Agent (cur-
rently the Secretary of Labor, the Director of the Office of
Personnel Management, and the Director of the office of management
and Budget). The Agent sets up comparability procedures, specifies
coverage of the PATC survey, and makes recommendations to the
President on annual pay adjustments for Federal white-collar
employees. In other words, it is the Agent--not BLS--that speci-
fies which private industries, size of firms, and occupations
the PATC survey will cover.
The BLS role in the pay comparability process is to conduct
the survey and ensure that it is objective, reliable, and statisti-
cally sound and, at the same time, meets;.the Pay Agent's specifi-
cations. BLS is responsible for: (1) Developing lists of firms
within the prescribed PATC survey coverage, (2) selecting a proba-
bility based sample of these firms, (3) collecting, primarily
by personal visit, pay data for specific white-collar occupations
in the sample firms, (4) reviewing and validating the survey
results; and (5) delivering survey tabulations to the President's
Agent. BLS also provides technical advice to the Agent on matters
affecting the survey, such as on the manner in which the occupa-
tional work levels should be defined so they are readily understood
in the private industry setting.
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.The relationship between BLS and the President's Pay Agent
has existed for over two decades. Our respective roles are
.firmly established. The President's Pay Agent provides policy
direction for the Federal pay comparability process; the BLS,
on the other hand, is responsible for statistical matters related
to the survey.
THE PATC SURVEY
Although new and revised occupational definitions have
become regular occurrences in the PATC survey, the sizes and
types of private industry firms have not changed since 1979.
This same coverage defines the 1985 survey, which is now underway.
A nationwide sample (excluding Alaska and Hawaii) of 3,500 establish-
ments was drawn for the following industry and employment size
groups for 1985:
Establishment
Industry minimum employment sizes
Mining ------------------------------- 250 workers
Construction ------------------------- 250 workers
Manufacturing ------------------------ 100-250 workers
Transportation and
public utilities ------------------- 100-250 workers
Wholesale trade ----- -- 100 workers
Retail trade ------------------------- 250 worker
Finance, insurance,
and real estate -------------------- 100 workers
Selected services -------------------- 50-100 workers
The PATC survey produces estimates of average salaries for
about 100 work levels within 25 white-collar occupations in private
industry. Work levels are described. in terms of pay-determining
duties and responsibilities based on descriptions that the Pay
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Agent can relate to Grades 1 through 15 in the Federal government's
General Schedule. Overall the survey covers jobs ranging from
routine file clerks and messengers to high level engineers, attor-
neys, and accountants.
BLS uses a uniform set of job descriptions, developed jointly
with the Office of Personnel Mangement, to classify employees
in sample establishments according to their actual duties and
responsibilities. This job-matching process involves personal
visits to sample establishments, dialogue with establishment
officials, extensive use of company position descriptions, organi-
zational charts, and personnel and payroll records. Salaries
collected for the survey occupations are those paid to full-time
employees for standard work schedules.
Results of the 1985 PATC survey will be delivered to the
President's Pay Agent this coming July. BLS will also issue
a news release on the survey in July and publish a comprehensive
bulletin in October.
THE FUTURE
The Federal pay comparability process is large, complex,
and has major impact on the Federal budget. Because of this,
the process has been evaluated and reviewed by a number of groups
including the General Accounting Office, the Rockefeller Panel,
and the Grace Commission. These groups have consistently claimed
two short-comings in the comparability process:
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The limited scope of the PATC survey because it excludes
small establishments, major private industries (particularly
such services as hospitals), and State and local govern-
'ments.
The inadequate representation of the occupations surveyed.
The latest proposals under consideration to change the PATC
survey are described in the 1984 Pay Agent's Report. The proposals
include expanding the PATC survey to smaller establishments,
to additional private industries, and-to State and local govern-
ments. (Including State and local governments in the comparability
process would require, of course, a change in the 1970 Act.)
Finally, BLS has reduced its regular PATC job maintenance
activities and is working with the Office of Personnel Management
staff in: Analyzing occupations in current and expansion indus-
tries, developing and testing job descriptions for new industries
to be surveyed; and exploring methods for selecting PATC occupa-
tions to address criticisms of the lack of representativeness
in current PATC jobs.
I have described briefly the BLS role in the pay comparability
process. BLS has a service oriented.role limited to providing
data required for decision making. Many factors must, of course,
be considered by the President-, his advisors, and the Congress
in final decisions made. The Bureau of Labor Statistics stands
ready to provide as much help as possible.in developing data
require3 to carry out Federal pay policy.
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Madam Chairperson, that concludes my remarks. I would be
pleased to answer any questions you or the members of the subcom-
mittee may have.
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REPRESENTATIVE STAN PARRIS
before the
POST OFFICE AND CIVIL SERVICE SUBCOMMITTEE ON COMPENSATION AND EMPLOYEE BENEFITS
Hearing on
FISCAL YEAR 1986 BUDGET PROPOSALS
February 23, 1985
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MADAME CHAIR, I APPRECIATE THIS OPPORTUNITY TO TESTIFY BEFORE
THE HOUSE POST OFFICE CIVIL SERVICE SUBCOMMITTEE ON COMPENSATION
AND EMPLOYEE BENEFITS REGARDING THE ADMINISTRATION'S PROPOSED
FY 86 BUDGET CHANGES FOR FEDERAL WORKERS AND RETIREES. DURING THE
i
PAST FEW YEARS, THE CIVIL SERVICE HAS BEEN FACED WITH A LARGE
NUMBER OF NEW PROPOSALS. HOWEVER, THIS YEAR'S BUDGET
RECOMMENDATIONS FOR THE FISCAL YEAR BEGINNING THIS OCTOBER ARE
PARTICULARLY DRACONIAN.
I RECOGNIZE THE NEED FOR BUDGET RESTRAINT AND I STRONGLY
SUPPORT DEFICIT-REDUCTION MEASURES, BUT AS I HAVE SAID ON A NUMBER
OF OCCASIONS BEFORE THIS SUBCOMMITTEE, ACTIVE AND RETIRED
GOVERNMENT WORKERS HAVE ALREADY MADE THEIR FAIR SHARE OF
SACRIFICES. THIS YEAR'S PROPOSED BUDGET FURTHER PUNISHES AN
ALREADY EMBATTLED FEDERAL WORKFORCE - NOT TO MENTION THAT MOST OF
THE PROPOSALS WOULD HAVE LITTLE OR NO IMPACT ON. REDUCING THE
FISCAL 1986 BUDGET DEFICIT. IT WOULD TAKE A NUMBER OF YEARS
BEFORE THE IMPACT OF SUCH CHANGES WOULD MAKE THEMSELVES FELT.
MORE IMPORTANTLY, THE CUMULATIVE EFFECT OF THESE PROPOSALS
WOULD BE DEVASTATING TO AN EMPLOYEE, SAY IN MY DISTRICT, WHO HAS A
FAMILY TO FEED AND CHILDREN TO SEND TO COLLEGE IN AN AREA WITH ONE
OF THE HIGHEST STANDARDS OF LIVING IN THE COUNTRY. FOR SEVERAL
YEARS NOW, GOVERNMENT WORKERS HAVE RECEIVED LIMITED AND DELAYED
PAY INCREASES, HAVE HAD SUBSTANTIAL REDUCTIONS IN HEALTH BENEFITS
WHILE THEIR PREMIUMS HAVE INCREASED, AND HAVE HAD TO PAY A
MEDICARE TAX, JUST TO MENTION A FEW EXAMPLES. NOW THE
ADMINISTRATION EXPECTS EMPLOYEES TO WORK AN EXTRA TEN YEARS,
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ACCEPT A PENSION COMPUTATION CHANGE, THROW AWAY ACCUMULATED SICK
LEAVE AT RETIREMENT, AND TAKE A FIVE PERCENT PAY CUT - A PROPOSAL
LAST TRIED"DURING THE 1930s IN THE MIDST OF THE GREAT DEPRESSION.
MOREOVER, THE OFFICE OF MANAGEMENT AND BUDGET HAS PROPOSED THE
i
ELIMINATION OF 25,000 JOBS IN FEDERAL REGIONAL AND FIELD OFFICES
IN TEN DIFFERENT AGENCIES, THE BULK COMING FROM THE SOCIAL
THIS IS A SIMPLE MATTER OF EQUITY. HOW MUCH LONGER CAN WE
MAKE THESE DEMANDS ON FEDERAL WORKERS AND EXPECT THEM TO STAY IN
THEIR JOBS OR PERFORM PRODUCTIVELY? SINCE I RETURNED TO THE
CONGRESS FOUR YEARS AGO, I HAVE BEEN PREDICTING THAT THESE TYPES
OF PROPOSALS WILL RESULT IN A FEDERAL GOVERNMENT COMPRISED OF
PEOPLE WHO CAN'T GET JOBS IN THE PRIVATE SECTOR.
MADAME CHAIR, I REGRET THIS IS NO LONGER A MATTER OF
PREDICTING THE FUTURE. CIVIL SERVANTS ARE LEAVING THE GOVERNMENT
IN UNPRECEDENTED NUMBERS, TOP COLLEGE GRADUATES ARE BEING
DISCOURAGED FROM MAKING CIVIL SERVICE A CAREER, AND LIFE-TIME
FEDERAL EMPLOYEES ARE TAKING EARLY RETIREMENT. EFFORTS TO ATTRACT
AND RETAIN SKILLED, CAPABLE PEOPLE IN FEDERAL SERVICE HAVE BEEN
SEVERELY REDUCED. AS A RESULT, THE FEDERAL GOVERNMENT IS BECOMING
LESS RESPONSIVE AND RESPONSIBLE TO THE NEEDS OF EVERYONE.
I COMMEND THE SUBCOMMITTEE FOR ITS EFFORTS AND URGE IMMEDIATE
ACTION TO HAVE THESE PROPOSALS WITHDRAWN FROM FY 86 BUDGET
CONSIDERATIONS.
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~gF1ise of 3!eprsenfatiw5
Committee on 13ost Wire
unh QIi i1 p,5E1S1ire
f csllinBtan, 314t. 20515
OPENING STATEMENT OF CONGRESSWOMAN MARY ROSE OAKAR
CHAIR-DESIGNEE OF THE SUBCOMMITTEE ON COMPENSATION
AND EMPLOYEE BENEFITS OF THE HOUSE POST OFFICE
AND CIVIL SERVICE COMMITTEE
OVERSIGHT BRIEFING ON FY 1986 BUDGET PROPOSALS
TUESDAY, FEBRUARY 26, 1985
WASHINGTON, D.C.
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r
THE COMMITTEE WILL COME TO ORDER.
SINCE THE COMMITTEE ON POST OFFICE AND CIVIL SERVICE HAS NOT
HELD ITS ORGANIZATIONAL MEETING AND HAS NOT ADOPTED ITS RULES FOR
THE 99TH CONGRESS, THE PROCEEDINGS TODAY WILL BE CONDUCTED IN THE
FORM OF A BRIEFING FOR ALL MEMBERS OF THE COMMITTEE, RATHER THAN
AS A SUBCOMMITTEE HEARING. FOLLOWING TODAY'S BRIEFING, I WILL
REQUEST THE FULL COMMITTEE TO AUTHORIZE PRINTING OF THESE
PROCEEDINGS.
I HAVE SCHEDULED THIS BRIEFING TODAY IN ORDER FOR THE
SUBCOMMITTEE ON COMPENSATION AND EMPLOYEE BENEFITS TO
EXPEDITIOUSLY FULFILL ITS OBLIGATIONS UNDER THE BUDGET ACT
CONCERNING THE PROPOSALS CONTAINED IN THE PRESIDENT'S BUDGET FOR
FISCAL YEAR 1986 AFFECTING FEDERAL PAY, THE CIVIL SERVICE
RETIREMENT SYSTEM, AND THE FEDERAL EMPLOYEES HEALTH BENEFITS
.PROGRAM.
TO BRIEFLY SUMMARIZE THE PRESIDENT'S BUDGET PROPOSALS, HE IS
SEEKING TO:
(1) CUT FEDERAL PAY BY FIVE PERCENT;
(2) RAISE THE MINIMUM RETIREMENT AGE FOR FULL BENEFITS UNDER THE
CIVIL SERVICE RETIREMENT SYSTEM FROM 55 TO 65;
(3) DECREASE ANNUITIES FOR FEDERAL WORKERS UNDER 65 BY FIVE
PERCENT A YEAR. UPON FULL IMPLEMENTATION, THIS WOULD,CUT
ANNUITIES IN HALF FOR THOSE WHO RETIRE AT AGE 55;
(u) ELIMINATE THE 1986 COLA;
(5) CALCULATE FUTURE COLAS BEGINNING IAN 1987, BY LIMITING'THEM
TO THE LOWER OF THE INCREASE IN GENERAL SCHEDULE PAY OR THE
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CONSUMER PRICE INDEX AND LIMIT COLAS TO 55 PERCENT FOR
ANNUITIES THAT EXCEED $10,000, ADJUSTED BY THE CPI;
(6) CHANGE THE CIVIL SERVICE RETIREMENT FORMULA SO THAT
ANNUITIES WOULD BE-CALCULATED ON THE HIGHEST FIVE YEARS OF
EARNINGS, RATHER THAN THE PRESENT THREE YEARS;
(7) PHASE-OUT'~REET~I ~ reAQCREDIT FOR UNUSED. SICK LEAVE;
(8) CONFORM CIVIL SERVICE SURVIVOR, ADULT STUDENT AND MINIMUM
BENEFITS TO THOSE PROVIDED BY SOCIAL SECURITY;
(9) REQUIRE THE POSTAL SERVICE AND THE DISTRICT OF COLUMBIA TO
PHASE-IN THE PAYMENT OF THE FULL COST OF PENSIONS, LESS THE
EMPLOYEES' CONTRIBUTIONS;
(10) DISCONTINUE RETIREMENT LIFE AND HEALTH INSURANCE COVERAGE
FOR EMPLOYEES FIRST HIRED BY THE DISTRICT OF COLUMBIA AFTER
SEPTEMBER 30, 1985; AND
(11) IMPLEMENT A HEALTH BENEFITS VOUCHER PLAN.
I AM DEEPLY CONCERNED WITH THE IMPACT OF THESE PROPOSALS ON
THE MORALE AND PRODUCTIVITY OF FEDERAL EMPLOYEES AND THE VITAL
SERVICES THAT THEY PERFORM FOR THE CITIZENS OF OUR COUNTRY.
LET'S CONSIDER FOR A MOMENT THAT,. WHEN WE SAY "FEDERAL
EMPLOYEE," WE ARE TALKING ABOUT PEOPLE LIKE OUR ASTRONAUT, SALLY
RIDE, AND DRUG ENFORCEMENT AGENTS WHO RISK THEIR LIVES TO STEM
THE FLOW OF ILLEGAL SUBSTANCES THAT ARE FLOODING OUR NATION. WE
ARE TALKING ABOUT OUR DEPENDABLE LETTER CARRIERS; THE PEOPLE WHO
INSPECT MEAT AND POULTRY TO PROTECT OUR CITIZENS FROM DISEASE;
THE MEN AND WOMEN AT THE NATIONAL. INSTITUTE OF HEALTH WHO ARE
PERFORMING INVALUABLE CANCER RESEARCH; AND THE DEDICATED
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EMPLOYEES WHO ARE RESPONSIBLE FOR ADMINISTERING PROGRAMS
ASSISTING THE FARMERS OF OUR GREAT NATION.
WHEN WE SAY, '!FEDERAL EMPLOYEE," WE ARE NOT SIMPLY REFERRING
TO A FACELESS BUREAUCRACY. WE ARE DESCRIBING MANY OF OUR SONS
AND DAUGHTERS, OUR NEIGHBORS, AND OUR FRIENDS. WE ARE REFERRING
TO PEOPLE WHO MAKE CERTAIN THAT SOCIAL SECURITY CHECKS ARE
DELIVERED ON TIME TO OUR SENIOR CITIZENS AND TO THOSE WHO
ADMINISTER VITAL MEDICARE BENEFITS. WE ARE TALKING ABOUT THE
"RETIREES" WHO, WHEN WORKING FOR THE FEDERAL GOVERNMENT, PLACED
AMERICAN ASTRONAUTS ON THE MOON, DEVELOPED PROGRAMS TO PROTECT
OUR CHILDREN FROM UNSAFE TOYS, AND PRESERVED OUR COUNTRY'S
HERITAGE THROUGH THE ESTABLISHMENT AND ADMINISTRATION OF SUCH
FINE INSTITUTIONS AND MUSEUMS AS THE SMITHSONIAN.
WE ARE DESCRIBING PEOPLE WHO ARE WORKING HARD, RAISING
FAMILIES, AND TRYING TO MAKE ENDS MEET. WE ARE REFERRING TO
GRANDPARENTS AND OTHER SENIORS WHO DEDICATED THEIR LIVES TO
PUBLIC SERVICE. THESE ARE THE MEN AND WOMEN WHO HAVE BEEN MUCH
MALIGNED AND ABUSED BY THIS ADMINISTRATION -- WHO ARE NOW FACING
EXTRAORDINARY REDUCTIONS IN THEIR PAY, RETIREMENT BENEFITS, AND
HEALTH INSURANCE. THESE ARE AMONG THE VICTIMS OF THE FISCAL YEAR
1986 BUDGET WHO ARE BEING SINGLED-OUT FOR EXTRAORDINARY
SACRIFICES. I CANNOT AGREE THAT THESE MEASURES ARE NECESSARY,
FAIR, OR EVEN IN THE PUBLIC INTEREST.
I-AM PARTICULARLY DISTURBED BY THE PROPOSAL TO REDUCE
FEDERAL PAY FOR MANY REASONS. FIRST OF ALL, IT IS GROSSLY,UNFAIR
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TO SINGLE OUT FEDERAL WORKERS FOR A SUBSTANTIAL PAY REDUCTION,
WHILE MILITARY PERSONNEL WOULD RECEIVE A THREE PERCENT PAY RAISE
IN JULYi
FURTHERMORE, IN REVIEWING THE HISTORY OF WAGE INCREASES IN
THE FEDERAL GOVERNMENT FOR THE PAST 15 YEARS, I AM STRUCK BY THE
FACT THAT WAGES FOR WHITE COLLAR WORKERS HAVE RISEN BY 221
PERCENT, WHILE MILITARY PAY HAS GROWN BY 306 PERCENT, AND WAGES
IN THE PRIVATE SECTOR HAVE INCREASED BY 290 PERCENT. IN
COMPARISON TO THE MILITARY AND THE PRIVATE SECTOR, FEDERAL WHITE
COLLAR WAGES HAVE FALLEN SUBSTANTIALLY BEHIND, DESPITE THE CLEAR
INTENTION OF THE FEDERAL WAGE COMPARABILITY ACT OF 1970 THAT
GENERAL SCHEDULE PAY REMAIN COMPARABLE TO WAGES IN THE PRIVATE
SECTOR.
IT IS ALSO IMPORTANT TO NOTE THAT, DURING THIS SAME PERIOD,
THE CONSUMER PRICE INDEX HAS INCREASED BY 306 PERCENT. SINCE
1970, FEDERAL WHITE COLLAR WORKERS.HAVE SEEN THEIR STANDARD OF
LIVING STEADILY DECLINE, DESPITE THE REDUCTION IN THE RATE OF
INFLATION FOR THE PAST FEW YEARS.
IN CONSIDERING THE PAY CUT PROPOSAL, WE MUST ALSO KEEP IN
MIND THE RECENT REPORT OF HAY ASSOCIATES ON TOTAL COMPENSATION IN
THE FEDERAL, STATE, AND PRIVATE SECTORS PREPARED FOR THE
COMMITTEE ON POST OFFICE AND CIVIL SERVICE. IN THIS REPORT, HAY
ASSOCIATES CONCLUDED THAT.FEDERAL PAY LAGS BEHIND THE PRIVATE
SECTOR BY 10.3 PERCENT, INCREASING TO 58.4 PERCENT FOR SENIOR
EXECUTIVE SALARIES. ON A;TOTAL COMPENSATION BASIS, FEDERAL PAY
AND FRINGE BENEFITS TRAIL THE PRIVATE SECTOR BY 7.2 PERCENT AND,
W EN COMBINED WITH STATE EMPLOYMENT DATA, 6.2 PERCENT. AND, THE
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MOST RECENT REPORT OF THE PAY AGENT FOUND THAT, UNDER CURRENT
PROCEDURES, FEDERAL PAY IS 18.3 PERCENT BEHIND THE PRIVATE
SECTOR.<
GIVEN THIS DATA, I AM BAFFLED BY THE CONCLUSIONS REACHED BY
THE OFFICE OF PERSONNEL MANAGEMENT IN ITS REPORT ENTITLED
"REFORMING FEDERAL PAY: AN EXAMINATION OF MORE REALISTIC PAY
ALTERNATIVES." THIS REPORT APPARENTLY IS THE,ONLY DOCUMENT
JUSTIFYING THE ADMINISTRATION'S PROPOSAL TO REDUCE FEDERAL PAY BY
FIVE PERCENT. I AM LOOKING FORWARD TO QUESTIONING THE DIRECTOR
OF THE OFFICE OF PERSONNEL MANAGEMENT CLOSELY ON THE QUALITY OF
THE REPORT, THE RELIABILITY OF THE DATA, AND THE VALIDITY OF THE
CONCLUSIONS. CERTAINLY, BASED ON MY UNDERSTANDING OF THE REPORT,
IT APPEARS TO BE A HASTILY PREPARED DOCUMENT, SORELY LACKING BOTH
IN CREDIBILITY AND ANALYSIS.
WITH REGARD TO THE REMAINDER OF THE ADMINISTRATION'S
PROPOSALS, WE HAVE SEEN MOST OF THEM IN PRIOR BUDGET SUBMISSIONS
OF THE PRESIDENT. CERTAINLY, THE PROPOSAL TO CREATE A VOUCHER
PLAN AS A SUBSTITUTE FOR THE CURRENT FEDERAL EMPLOYEES HEALTH
BENEFITS PROGRAM IS NOT NEW TO THIS COMMITTEE. I, FOR ONE, HAVE
CONSISTENTLY OPPOSED A VOUCHER PLAN AS'NO MORE THAN A MEANS OF
DRASTICALLY REDUCING HEALTH INSURANCE COVERAGE FOR FEDERAL
WORKERS AND RETIREES.
IF THERE WAS EVER ANY, QUESTION ABOUT THE ADMINISTRATION'S
INTENTLON.IN SEEKING A VOUCHER PLAN, WE NEED ONLY LOOK AT THE
BUDGET DOCUMENTS THEMSELVES. THE ADMINISTRATION PROJECTS A
REDUCTION IN BUDGET AUTHORITY FOR THE FEHBP FOR FISCAL YEARR1:1987,
WHEN THE VOUCHER PLAN WOULD FIRST BECOME EFFECTIVE, OF $56
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MILLION AND, IN 1988, OF $171 MILLION, COUPLED WITH A $53 MILLION
REDUCTION IN OUTLAYS. IN EFFECT, ONE YEAR AFTER ITS
IMPLEMENTATION, THE VOUCHER PLAN WOULD SLASH $53 MILLION IN
HEALTH INSURANCE BENEFITS FOR FEDERAL WORKERS AND ANNUITANTS.
I AM EQUALLY DISTRESSED BY THE UNRELENTING ATTEMPT OF THE
ADMINISTRATION TO REDUCE BENEFITS UNDER THE CIVIL SERVICE
RETIREMENT SYSTEM. IT IS A TRAVESTY THAT THIS ADMINISTRATION
CONTINUES TO TAKE AIM AT SENIOR CITIZENS, SOME OF THE POOREST
PEOPLE IN THIS COUNTRY, WHILE THROWING AWAY MONEY ON OVER-PRICED
AND USELESS EQUIPMENT AT THE DEPARTMENT OF DEFENSE. OVER THE
PAST THREE YEARS, FROM FEBRUARY 1981 TO MAY 1984, A RETIREE WHOSE
TOTAL ANNUITY FOR THIS PERIOD SHOULD HAVE BEEN $63,506 HAS SEEN
HER BENEFITS REDUCED TO $57,581 -- A CUT OF MORE THAN TEN PERCENT
-- BECAUSE OF REDUCTIONS IN THE RETIREMENT PROGRAM UNDER THE
REAGAN ADMINISTRATION.
I, FOR ONE, AM DEEPLY OFFENDED BY THE MISINFORMATION AND
MISREPRESENTATION OF'THE CIVIL SERVICE RETIREMENT PROGRAM BY THE
GRACE COMMISSION AND THE ADMINISTRATION. SIMPLY PUT, IN MY
OPINION, THERE IS NO JUSTIFICATION FOR ANY FURTHER ATTEMPT TO
REDUCE BENEFITS UNDER THE CIVIL SERVICE RETIREMENT PROGRAM.
I AM LOOKING FORWARD TO THE TESTIMONY OF THE WITNESSES AT
THE BRIEFING TODAY. BECAUSE OF THE TIME CONSTRAINTS FOR THIS
BRIEFING, I WOULD ASK THE WITNESSES TO SUMMARIZE THEIR TESTIMONY
IN JUST-A FEW MINUTES. I AM HOPEFUL THAT THIS BRIEFING WILL
PROVIDE THE MEMBERS OF THIS COMMITTEE WITH THE INFORMATION THAT
WE NEED TO ASSESS?THE WISDOM AND IMPACT OF THE PRESIDENT'S BUDGET
PROPOSALS.,
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NEWS
FROM
NARFE
February 26, 1985,
NATIONAL ASSOCIATION OF
RETIRED FEDERAL EMPLOYEES
1533 New Hampshire Ave., N.W. Washington, D.C. 20036
[phone]
FOR IMMEDIATE RELEASE Judy Park-[phone]
IF IT'S WRONG FOR A DIME
IT'S WRONG FOR A DOLLAR
Washington, D. C. -- With these words, "Lud" Andolsek, President of the half-
million member National Association of Retired Federal Employees, called on
Congress to again reject the Reagan Administration's budget proposals on Civil
Service retirement and health benefits. Most of the Administration's.proposals
have been considered and repudiated in the past by Congress. While recognizing
that the stakes are higher this year because of irresponsible fiscal policies
and their resultant deficits, Andolsek stood firm stating "If it's wrong for a
dime, it's wrong for a dollar".
He likened the proposed structural changes to the retirement system to "pulling
up stakes on the near end of a transitional bridge before the far side is
secured," referring to Congress' yet to be finished work on fashioning a
supplemental retirement program for employees hired after 1983. "Let's not
break with the past until we have a foot firmly planted in the future."
Attacking the plan to freeze, then cut only Civil Service Retirement-COLAS as
"duplicitous", Andolsek noted that_retiree's.deserve inflation protection no
matter for whom they worked.'. On the proposal to manipulate the size of future
COLAS, he recalled his days as Commissioner of Civil Service when adjustments
were viewed as "election protection for politicians rather than inflation
protection for the elderly." He also observed that means-tests might be
appropriate for welfare, but they have no place in a staff retirement program.
Concerning the proposed voucher system of health insurance, the Association
President stated, "Rebates may be appropriate gimmicks on the car lots of
America, but they do not belong on the minds of American citizens making crucial
health care decisions."
Expressing the retiree association's concern over the deficit problem, Andolsek
expressed a .willingness to discuss reasonable approaches to restricting the costs
of COLAS But the requirements for such approaches were made clear -- "They
must be consistent across the. board, and they must not run contrary to the
goals of the retirement programs'they affect."
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VINCENT R. SOMBROTTO
PRESIDENT
100 INDIANA AVENUE, N.W.
WASHINGTON, D.C. 20001
202/393-4695
TESTIMONY OF
NATIONAL ASSOCIATION OF LETTER CARRIERS, AFL-CIO
BEFORE THE
SUBCOMMITTEE ON COMPENSATION AND EMPLOYEE BENEFITS
COMMITTEE ON POST OFFICE AND CIVIL SERVICE
U. S. HOUSE OF REPRESENTATIVES
WASHINGTON, D.C.
FEBRUARY 26, 1985
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Madam Chair, my name is George Gould, Legislative and
Political Assistant to President Vincent Sombrotto of the
National Association of Letter Carriers, a labor
organization of over 261,000 members who are either
presently employed as city delivery carriers by the U. S.
Postal Service or who are retired from such employment.
President Sombrotto could not appear today due to.a long
term commitment to attend the NALC Council of Presidents'
annual meeting.
I do not need to detail to you today the fact that
postal/federal employee and retiree benefits have been
singled out consistently during periods of budget crisis and
cutbacks in spending. Although we are not the cause. of the
budget deficit that exists today, letter carriers have
helped to reduce that deficit, while those causing the
deficit are unwilling to make a serious effort. The issue
is fairness.
As you look at the laundry list of ;proposed cuts in benefits
and programs affecting postal/federal employees, it's _e.sy
to: recite the money savings to the budget each of these cuts
represents.
But the,real issue in the '86 budget proposal is people--
individual letter carriers' and family members directly.
affected by each. of these proposed cuts. she impact. is rmost.
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dramatic when one looks at the out-of-pocket dollar loss or
lifetir..e annuity loss to a government employee. When you
look at individuals, the rhetoric of the Grace Commission
and those constantly attacking our benefits as "excessive
and overgenerous" disappears.
Consider for example the cuts targeted at those already
retired. A letter carrier with 30 years of service retiring
in tarch, 19-95, will receive an annual annuity of $12,647.
If the retiree provides a survivor annuity, the basic
annuity is reduced by $994.70; the retiree's share of the
health benefit premium reduces that basic annuity by another
$863.88. This brings the retiree's annuity to $899.04 per.
month or $10,788.48 per year. As you are aware, a federal
employee's annuity is subject to income taxes, thus reducing
the amount further.
The current budget proposal would deny this retiree a
cost-of-living adjustment in 1986; the retiree would lose
approximately $520 in in-Eflation adjustment. Then in 1927,
the loss would be further compounded by paying the COLA on
the lower of CPI or federal wage increase -an additional
loss'of approximately $165, and capping the COLA on
annuities, over $10,000 at 55% of the revised COLA, thus
,causing an additional loss of c200 in inflation adjustmen
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Without a change in the current law, by January, 1987, this
retiree would receive $ 1,084 in COLAs based on the
Administration's inflation projections; if enacted into law
this year these budget proposals would reduce that COLA
amount by ee 740. This retiree's modest annuity will be
further eroded because full inflation protection has been
eliminated.
If that isn't enough, the Administration's proposal to
change the health benefit formula would further reduce the
monthly annuity by increasing the retiree-paid portion of
the health premium. Additionally, the Administration's
voucher plan would force retirees as well as active
employees to look for a low cost, low option health plan,
bear the additional costs out of pocket, or worse yet forego
necessary medical treatment. These proposals changing the
federal employee health benefit plan system directly
threaten the health of our 10 million federal workers and
retirees and their family members covered by the plans.
While the orevious proposals affect employees already,
retired .there are numerous recommendations that would
directly impact those currently working. For the active
letter .carrier, the 'Administration (management) proposals-to
chance the retirement plan under Which this employee was
hired should be illegal. In fact, in the private sector,
this is a violgtion ;of the law. As President Reagan
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recently said, the government made a contract with the
people who serve in our armed forces and the government
cannot break that contract. Our people have that same
contract. Increasing the retirement age to 65 means a
letter carrier would have to work 10 years longer, perhaps
as long as 46 years--the maximum retirement benefit of 80
percent is reached at 41 years and 11 months--and contribute
well over $15,000 more into the retirement fund while
receiving reduced benefits.
Of course, a letter carrier could retire at age 55 with 30
years service, but the basic annuity would be reduced by 5%
for each year of early retirement. Therefore, for the
letter carrier retiring in.i?arch,.l9t'5 that I cited earlier
in the testimony, the basic annuity would be reduced. from
$12,647 per year to $5,323.50, less. survivor annuity and
health premium, bringing the annual annuity down to
$5,097.27 per year, with the poverty level for an elderly
family of two being $5,023.. Further, remember this is a
letter carrier's retirement income, not a supplement to
other retirement incomes!
Other proposed changes would further reduce this basic
annuity; for example, calculating the annuity on high75
instead of high-3 and eliminating retirement credit for
unused sick leave. On the -latter',, let' me say this Was a
sound management decision to encourage er;;nloYees to work and.
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not feel they have to use their unused sick leave before
retirement. The proposal is still sound.
The Administration's budget could also affect postal rates,
by eliminating the revenue foregone appropriation for
reduced mail rates for non-profit mailers such as churches,
schools, charities and veterans' groups. If this
appropriation is eliminated, the result would double
non-profit pail rates, with devastating effects.
Madam Chair, one additional proposal contained in the
President's FY'35 budget directly affects the Postal
Service. That proposal would require the Postal Service to
dramatically increase its contribution to the Civil Service
Retirement fund. If enacted, the cost in 1586 alone :,ou1d
be between $218 and $300 million, increasing at a greater
rate for the later years.
Currently, the USPS transmits to OPt the 14 percent,
employer/employee contribution as well as an annual unfunded
liability nay:nent. In 1984, these amounts were:
$1,825,284,000 for the 14% employer/employee contribution;
dnd $917,204,000 for the annual unfunded liability payment.
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r?q other federal agency makes a direct contribution to the
unfunded liability!
Madam Chair, as'I stated earlier, these budget proposals
affect real people. It is a retired letter carrier with 34
years of service like Joe Eucciero of St. Petersburg,
Florida, whose COLA would be cut. It is the future of
active letter carrier Chris Slocum., a mother of three small
children, of Yakima, c;ashington, that is endangered if the
retirement contract is broken. And it is the health care
benefits of active letter carrier and father of five, Dan
Rupp of Cleveland, Ohic, whose benefits would be drastically
reduced.
Madam chair, the examples go on. But the point is the same-.
The budget cuts proposed in the FY'86 federal budget are
cuts against real people who serve and have served as
dedicated employees of their government.
I hope this Congress will not allow unconscionable proposals
to be enacted this year or any year.
Madam Chair, I will, be more than happy to answer any
questions you or the other Members of the Subcommittee r icht
wish to ask.
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STATEMENT OF
',HONORABLE DONALD J. DEVINE
DIRECTOR: OFFICE OF PERSONNEL MANAGEMENT
before the
SUBCOMMITTEE ON COMPENSATION
AND EMPLOYEE BENEFITS
COMMITTEE ON POST OFFICE AND CIVIL SERVICE
U.S. HOUSE OF REPRESENTATIVES
FISCAL YEAR 1986 BUDGET PROPOSALS
CONCERNING CIVIL SERVICE RETIREMENT,
FEDERAL EMPLOYEES HEALTH BENEFITS,
AND FEDERAL PAY
FEBRUARY 26, 1985
MADAM CHAIR AND MEMBERS OF"THE SUBCOMMITTEE:
THANK YOU FOR INVITING ME TO APPEAR THIS AFTERNOON TO DISCUSS THE ADMINIS-
TRATION'S FISCAL YEAR 1986 BUDGET PROPOSALS ON CIVIL SERVICE RETIREMENT,
FEDERAL EMPLOYEES HEALTH BENEFITS,-AND FEDERAL PAY.
CIVIL SERVICE RETIREMENT
A RECENT- INDEPENDENT STUDY BY THE CONSULTING FIRM OF TOWERS, PERRIN, FORSTER,
AND CROSBY FOUND THAT THE AVERAGE EMPLOYER COSTS OF PENSIONS IN THE PRIVATE
SECTOR----FOR THE HALF OF THE POPULATION WHICH HAS PENSIONS--WAS 18 PERCENT
OF PAYROLL, COMPARED TO THE GOVERNMENT'S 28 PERCENT OF PAYROLL. EVEN MORE
IMPORTANT, THE STUDY FOUND THAT THE PROVISION OF BENEFITS WAS VERY UNEVEN
BETWEEN DIFFERENT SEGMENTS OF THE WORKFORCE. DATA SHOW THAT 45 PERCENT OF
A COHORT OF NEW EMPLOYEES WILL ACTUALLY SUBSIDIZE THE RETIREMENT SYSTEM, AND
ANOTHER 15 PERCENT WILL RECEIVE NO REAL BENEFITS. ALMOST 60 PERCENT WILL DO
VERY POORLY, WHILE A RELATIVELY SMALL GROUP DOES EXTREMELY WELL. THE CIVIL
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SERVICE RETIREMENT SYSTEM IS THE GOVERNMENT'S THIRD LARGEST ENTITLEMENT
PROGRAM WITH AN OUTLAY OF APPROXIMATELY $23 BILLION IN,1985. IT-HAS A
DYNAMIC UNFUNDED LIABILITY OF OVER A HALF A TRILLION DOLLARS. IT IS A
SYSTEM BADLY IN NEED OF REFORM.
THIS ADMINISTRATION IS COMMITTED TO MAKING THAT REFORM FOR THE SAKE OF
BOTH GOOD PERSONNEL MANAGEMENT AND SOUND FINANCIAL ADMINISTRATION. IN
1986, OUR PROPOSED RETIREMENT REFORMS WOULD REDUCE OUTLAYS BY $731 MILLION
AND INCREASE RECEIPTS BY $269 MILLION. I WOULD LIKE TO DISCUSS EACH OF
THESE REFORMS IN TURN.
FIRST, WE PROPOSE TO REVISE THE WAY CIVIL SERVICE ANNUITIES ARE ADJUSTED
TO REFLECT CHANGES IN THE COST OF LIVING. CURRENT LAW ENSURES THAT FEDERAL
AFINUI7'ANTS, UNLIKE MOST OTHER RETIREES OUTSIDE GOVERNMENT OR,EVEN ACTIVE
FEDERAL WORKERS, WILL BE COMPLETELY ISOLATED FROM ANY EFFECTS OF INFLATION,
SINCE THEIR ANNUITIES ARE REQUIRED TO BE ADJUSTED EACH YEAR TO REFLECT FULL
INCREASES IN THE COST OF LIVING AS MEASURED BY THE CONSUMER PRICE INDEX
(CPI). CONSEQUENTLY, AS FEDERAL RETIREMENT BENEFITS HAVE RISEN AT A FASTER
RATE THAN PAY, MANY RETIREMENT-ELIGIBLE INDIVIDUALS HAVE FOUND IT FINANCIALLY
ADVANTAGEOUS TO LEAVE FEDERAL SERVICE. THIS DISINCENTIVE TO WORK HAS TAKEN
A PARTICULAR TOLL ON EXPERIENCED AND VALUABLE SENIOR PERSONNEL. REMOVING
THIS DISINCENTIVE CONTINUES TO BE A. PARAMOUNT PERSONNEL MANAGENE14T CONCERN.
OUR APPROACH TO THE PROBLEM INVOLVES SEVERAL STEPS, STARTING WITH THE
ELIMINATION OF THE COST-OF-LIVING ADJUSTMENT (COLA) NOW SCHEDULED FOR
PHIS DECEMBER. THIS COLA FREEZE WOULD BE CONSISTENT WITH COLA FREEZES
BEING PROPOSED FOR A NUMBER OF OTHER INDEXED PROGRAMS, INCLUDING MILI-
'ZARY RETIRED PAY. THEN, BEGINNING WITH THE DECEMBER 1986 COLA, OUR
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COLA AMOUNT WOULD BE THE` LESSER OF THE INCREASE IN GENERAL SCHEDULE PAY
OR 'THE CPI CHANGE TO GIVE RETIREES AND EMPLOYEES EQUAL- TREATMENT. THAT
COLA. WOULD BE PAYABLE ON THE FIRST $P0,000 OF ANNUITY. PENSIONS OVER
$1.0,000 WOULD BE INCREASED BY 55 PERCENT OF THE COLA. IN SUBSEQUENT
YEARS, THE $10,000 BASE AMOUNT TO WHICH THE FULL INCREASE APPLIES WOULD
BE ADJUSTED BY THE PERCENTAGE OF THE PREVIOUS YEAR'S COLA. THIS CHANGE
WOULD BRING FEDERAL RETIREES INTO CLOSER. ALIGNMENT WITH OTHER RETIRED
PEOPLE, WHO TYPICALLY RECEIVE FULL COLA'S ONLY ON THEIR SOCIAL SECURITY
BENEFITS, AND ONLY ABOUT ONE-THIRD OF THE COLA ON ANY PRIVATE PENSION
PAYMENTS THEY RECEIVE.
SECOND, THE BUDGET PROPOSES TO ELIMINATE A PRACTICE UNDER OUR RETIREMENT
SYSTEM VIRTUALLY UNKNOWN IN THE PRIVATE SECTOR--UNREDUCED RETIREMENT
BENEFITS AS EARLY AS AT AGE 55. WE PROPOSE `'HAT.CURRENT FEDERAL. EMPLOY-
EES WITH SUFFICIENT SERVICE CONTINUE TO BE ABLE TO RETIRE AS EARLY AS AGE
55, BUT BENEFITS WOULD BE REDUCED TO REFLECT THE'COST TO THE RETIREMENT
SYSTEM OF THIS EARLY RETIREMENT. FOR EACH YEAR THE EMPLOYEE IS UNDER AGE
65 AT THE TIME OF RETIREMENT, THE ANNUITY WOULD BE REDUCED BY 5 PERCENT.
THIS REDUCTION WOULD NOT APPLY TO ANYONE WHO IS ALREADY 55, AND IN ORDER
TO EASE ITS IMPACT ON THOSE NEAR RETIREMENT, THE REDUCTION WOULD BE PHASED
IN OVER 10 YEARS. FOR INSTANCE, AN EMPLOYEE WHO IS NOW 54 COULD RETIRE AT
55 WITH AN ANNUITY REDUCTION OF ONLY 5 PERCENT. ONLY THOSE NOW 45 AND
UNDER WOULD BE SUBJECT TO THE FULL REDUCTION. LIKE THE COLA CHANGE, THIS
PROPOSAL WOULD BRING FEDERAL RETIREES INTO CLOSER ALIGNMENT WITH RETIREES
IN OTHER SECTORS OF THE ECONOMY, WHERE RETIREMENT AT AGE 55 WITH UNREDUCED
BENEFITS I:: RARELY PERMITTED.
x:;'. ,..w,.~a~' C'`I F'tb_k . _..'~+E:?~!zj;, ~ .:::`~' .x ..,:,.:,.,,: ,,.. a`~...? .t?.~ ~Y;.,I R.1:."'f'q ~W.'?}RS"~,i?`, 1k~ .~i ~h6 .. .a. ,_,,.:]u ~"i,~v,.!?%.re.'"v.._"1;~"^,dT..tM1^.'.'""...?^,-~ .,-',-:e.+itd-wt.--.-?-_c______. _._._
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THIRD, AGAIN FOLLOWING THE NORMAL PATTERN FOLLOWED IN THE PRIVATE SECTOR, WL
PROPOSE TO BASE ANNUITY COMPUTATIONS ON THE RETIREE'S HIGHEST FIVE YEARS Of
EARNINGS, RATHER THAN THE HIGHEST THREE. PRIOR TO 1969, A PERIOD OF LOW
INFLATION, THE HIGH-FIVE YEARS' SALARY WAS USED. SINCE THEN., COMPUTATIONS
HAVE BEEN BASED ON THE HIGH-THREE. EMPLOYEES WHO ARE WITHIN THREE YEARS OF
ELIGIBILITY FOR RETIREMENT WOULD NOT BE AFFECTED.
FOURTH, WE WOULD PHASE OUT OVER A FOUR-YEAR PERIOD THE RETIREMENT CREDIT
CURRENTLY GIVEN FOR UNUSED SICK LEAVE. THIS TYPE OF BENEFIT IS NOT ONLY
VERY EXPENSIVE BUT ALSO IS NOT TYPICALLY AVAILABLE TO NON-FEDERAL WORKERS.
FIFTH, WE PROPOSE CHANGES THAT ARE CONSISTENT WITH ENACTED REFORMS AND
OTHER EXISTING PROVISIONS IN SOCIAL SECURITY. THESE INCLUDE DELETING
THE GUARANTEED MINIMUM BENEFIT FOR FUTURE ANNUITANTS, PHASING OUT SPECIAL
BENEFITS FOR ADULT STUDENTS, AND CHANGING-ELIGIBILITY RULES FOR SURVIVING
SPOUSES, FORMER SPOUSES, AND INSURABLE INTEREST BENEFICIARIES TO PARALLEL
MORE CLOSELY THE TREATMENT OF SIMILARLY SITUATED INDIVIDUALS COVERED BY
SOCIAL SECURITY.
SIXTH, WE WOULD REQUIRE THE POSTAL SERVICE AND THE D.C. GOVERNMENT TO CON-
TRIBUTE TO THE RETIREMENT FUND AN ADDITIONAL 2 PERCENT OF BASIC PAY EACH
YEAR UNTIL THEIR PAYMENTS, PLUS EMPLOYEE DEDUCTIONS, ARE SUFFICIENT TO
COVER THE DYNAMIC NORMAL COST OF THE RETIREMENT SYSTEM. THE D.C. GOVERN-
MENT AND THE POSTAL SERVICE ARE SUPPOSEDLY NOW SELF-SUPPORTING, WITH ANY
FEDERAL SUBSIDIES CLEARLY IDENTIFIED AS SUCH. YET THESE TWO ENTITIES ARE
CONTINU;NC TO RECEIVE MASSIVE HIDDEN SUBSIDIES THROUGH THEIR PARTICIPATION
IN THE CIVIL SERVICE RETIREMENT SYSTEM.
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FTNA`I,LY, AS A PART Or THE ONGOING EFFORT TO !DISENTANGLE 'FEDERAL AND DIS-
1RLcr OF` COLUMBIA AFFAIRS, WE PROPOSE TO EXCLUDE EMPLOYEES HIRED BY THE
GOVERNMER'1' 01' THE DISTRICT OF COLUMBIA APrER SEPTEMBER 30, ]985, FROM
THE FEDERAL RETIREMENT, LIFE INSURANCE, AND HEALTH BENEFITS PROGRAMS.
FEDERAL EMPLOYEES HEALTH BENEFITS
NOW I WOULD LIKE TO TURN TO THE FEDERAL EMPLOYEES HEALTH BENEFITS (FEHB)
PROGRAM, WHERE WE ARE AGAIN PROPOSING A MAJOR LEGISLATIVE REFORM. THE
PRESENT FEHB PROGRAM HAS MANY VERY GOOD FEATURES, ESPECIALLY ITS WIDE
CHOICE OF PLANS AVAILABLE. TO ENHANCE THIS MOST ATTRACTIVE FEATURE, WE
HAVE PROPOSED A SYSTEM THAT IS POPULARLY KNOWN AS A "VOUCHER" SYSTEM.
WE BELIEVE THIS APPROACH CAN MAKE A VALUABLE CONTRIBUTION TO THE FEHB
PROGRAM.
UNDER THIS SYSTEM, OPT! WOULD NO LONGER NEGOTIATE DETAILED CONTRACTS WITH
CARRIERS. INSTEAD, ANY CARRIER THAT IS PREPARED TO MEET CERTAIN MINIMAL
REQUIREMENTS WOULD BE ADMITTED TO THE PROGRAM, AND WOULD BE FREE TO OFFER
.ANY NUMBER OF PLANS IT WISHED. ALL PLANS WOULD BE REQUIRED TO INCLUDE
CATASTROPHIC COVERAGE, BUT CARRIERS WOULD OTHERWISE BE FREE TO DESIGN
THEIR BENEFIT PACKAGES IN WHATEVER WAY THEY THINK WOULD ATTRACT THE MOST
ENROLLEES. ENROLLEES WOULD RECEIVE INFORMATION TO HELP THEM IN SELECTING
THE PLAN BEST SUITED TO THEIR NEEDS. PARTICIPATION BY A WIDER RANGE OF
PLANS WOULD INCREASE THE NUMBER OF CHOICES AVAILABLE TO ENROLLEES, FURTHER
SHARPENING THE COMPETITIVE FORCES THAT. HAVE MADE THE CURRENT PROGRAM
SUCCESSFUL.
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THE.GOVERNMENT CONTRIBUTION WOULD NO'LONGER'BE CAPPED AT THE CURRENT 75
PERCENT OF A PLAN'S PREMIUMS SO ENROLLEES WOULD NO LONGER BE PENALIZED
FOR ENROLLING IN A LOW-COST PLAN. ENROLLEES WOULD EVEN BE ABLE TO RE-
CEIVE A REBATE IF THE PREMIUM FOR THE PLAN THEY CHOOSE IS LESS THAN THE
GOVERNMENT CONTRIBUTION. THE GOVERNMENT CONTRIBUTION WOULD NO LONGER BE
DETERMINED BY THE PREMIUM COSTS OF PARTICULAR PLANS, BUT WOULD INSTEAD BE
BASED ON THE DOLLAR AMOUNTS OF THE AVERAGE GOVERNMENT CONTRIBUTIONS FOR
SELF-ONLY AND SELF-AND-FAMILY COVERAGES IN THE YEAR PRIOR TO INAUGURATION
.OF THE VOUCHER, ADJUSTED IN FUTURE YEARS BY PERCENTAGE CHANGES IN A GENERAL
PRICE INDEX.
FEDERAL PAY
THE BUDGET PROPOSES A ONE-TIME REDUCTION IN PAY OF 5 PERCENT, EFFECTIVE IN
JANUARY OF 1986, FOR FEDERAL CIVILIAN EMPLOYEES. AS YOU RECALL, DURING THE
RECESSION, LABOR UNIONS IN THE PRIVATE SECTOR RENEGOTIATED THEIR CONTACTS AND
TOOK CUTS TO HELP THEIR INDUSTRIES GET BACK ON THEIR FEET AGAIN. IT SEEMS
ONLY APPROPRIATE THAT GOVERNMENT EMPLOYEES, TOO, SHOULD CONTRIBUTE IN A
SIMILAR WAY TO HELP THEIR EMPLOYER AND TO SHARE IN CUTTING THE COST OF
GOVERNMENT. A CORPORATION WITH A $200 BILLION RED INK BALANCE AND A $500
BILLION UNFUNDED PENSION LIABILITY SURELY IS A BUSINESS IN TROUBLE. WE
MUST ALL SHARE IN PUTTING OUR HOUSE BACK IN ORDER.
THANK YOU. I WOULD BE HAPPY TO ANSWER ANY QUESTIONS THE SUBCOMMITTEE
MAY HAVE.
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TESTIMONY BY REP. MICHAEL D. BARNES
BEFORE THE HOUSE SUBCOMMITTEE ON COMPEN:STION AND EMPLOYEE BENEFITS
ON THE EFFECTS OF THE ADMINISTRATIONS FY?86 BUDGET PROPOSALS
ON FEDERAL EMPLOYEES AND RETIREES.
February 26, 1984
It is always a privilege to appear before this Subcommitee and
its distinguished Chair. Today it's also a heavy responsibility. The
decisions that this Subcommittee will make in the next week may well
be pivotal to the future of Federal service in light of what the
Administration has proposed in its budget.
At the outset, let me join with the Chair and with my
co-Chairman of our Federal Government Service Task Force, Vic Fazio,
in rejecting the proposal to cut Federal pay by 5 percent. In my
1.-.ew,.this pay cut could be the fatal blow that crushes the spirit of
public service in our country. The reasons are many.
On a number of ocassions, I have spoken about the impact of
Fievious cuts proposed by the Administration and adopted by Congress
on the morale of the Federal worker. I ,have been genuinely alarmed by
the degree to which career public servants have become discouraged.
We've already lost too many of our very, -f.inest Federal employees.
What hupe: if Youth n-o longer want e v
But I am also distressed by the reaction I've found among young
people from our Natio"-'s?finest universities, colleges, and graduate
~chools. Most of them reject the premise that it's still possible to
build a fruitful career in public service. Young people no longer
regard Federal service as an exciting, honorable vocation.
In short, if we do not support a strong Federal service, we
simply devalue it. John Kennedy's call for a Federal service that is
a "lively career", his challenge to young Americans to serve, to build
a secure American future, now seems the faintest echo in the public's
,Hind.
When X? S&_value puy we devalue Federal L&rv1g_e,
We have devalued Federal pay for eight straight years. Federal
j>,:v laws require government to pay Federal workers amounts comparable
to those received by their private sector counterparts. We seem to
forget that when we cut pay we trade a measure of quality for that
reduction. Since 1978,. inflation-fed deficits obliged government to
invent every conceivable excuse for holding pay below the level of
comparability. Year after year, pay cuts--and these were pay cuts
because the value of Federal pay did not come close to keeping pace
with inflation--dragged Federal pay so far behind comparable private
pay that the entire pay-setting process became an embarassment.
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We are embarassed, not because the Bureau of Labor Statistic;
survey is wrong, but because deficits make us helpless to put the
n:Rtter right, to obey the law, and 'co tradeoff pay with minimal damage
to the quality of service. We risk makinE career paths in Federal
service a walk into'no man's land.
he e is no justification or o y~y cut.
The-pay cut's advocates believe that the reduction can be
justified for four reasons: a) deficits create a national emergency
that justifies such drastic measures, b) workers in the private sector
have had to endure similar cuts in pay in the last year, c) Federal
quit rates are several times less than those in the the private
sector, d) surveys that show Federal workers are paid less than
p