[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]



 
   THE IMPACT OF THE PRESIDENT'S FISCAL YEAR 1998 BUDGET ON FEDERAL 
                               EMPLOYEES
=======================================================================

                                HEARING

                               before the

                   SUBCOMMITTEE ON THE CIVIL SERVICE

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM
                             AND OVERSIGHT
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED FIFTH CONGRESS

                             FIRST SESSION
                               __________

                           FEBRUARY 13, 1997
                               __________

                           Serial No. 105-33
                               __________

Printed for the use of the Committee on Government Reform and Oversight




                     U.S. GOVERNMENT PRINTING OFFICE
42-953                       WASHINGTON : 1997
________________________________________________________________________
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              COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT

                     DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
J. DENNIS HASTERT, Illinois          TOM LANTOS, California
CONSTANCE A. MORELLA, Maryland       ROBERT E. WISE, Jr., West Virginia
CHRISTOPHER SHAYS, Connecticut       MAJOR R. OWENS, New York
STEVEN SCHIFF, New Mexico            EDOLPHUS TOWNS, New York
CHRISTOPHER COX, California          PAUL E. KANJORSKI, Pennsylvania
ILEANA ROS-LEHTINEN, Florida         GARY A. CONDIT, California
JOHN M. McHUGH, New York             CAROLYN B. MALONEY, New York
STEPHEN HORN, California             THOMAS M. BARRETT, Wisconsin
JOHN L. MICA, Florida                ELEANOR HOLMES NORTON, Washington, 
THOMAS M. DAVIS, Virginia                DC
DAVID M. McINTOSH, Indiana           CHAKA FATTAH, Pennsylvania
MARK E. SOUDER, Indiana              TIM HOLDEN, Pennsylvania
JOE SCARBOROUGH, Florida             ELIJAH E. CUMMINGS, Maryland
JOHN B. SHADEGG, Arizona             DENNIS J. KUCINICH, Ohio
STEVEN C. LaTOURETTE, Ohio           ROD R. BLAGOJEVICH, Illinois
MARSHALL ``MARK'' SANFORD, South     DANNY K. DAVIS, Illinois
    Carolina                         JOHN F. TIERNEY, Massachusetts
JOHN E. SUNUNU, New Hampshire        JIM TURNER, Texas
PETE SESSIONS, Texas                 THOMAS H. ALLEN, Maine
MICHAEL PAPPAS, New Jersey                       ------
VINCE SNOWBARGER, Kansas             BERNARD SANDERS, Vermont 
BOB BARR, Georgia                        (Independent)
------ ------
                      Kevin Binger, Staff Director
                 Daniel R. Moll, Deputy Staff Director
                       Judith McCoy, Chief Clerk
                 Phil Schiliro, Minority Staff Director
                                 ------                                

                     Subcommittee on Civil Service

                    JOHN L. MICA, Florida, Chairman
MICHAEL PAPPAS, New Jersey           TIM HOLDEN, Pennsylvania
CONSTANCE A. MORELLA, Maryland       ELIJAH E. CUMMINGS, Maryland
CHRISTOPHER COX, California          ELEANOR HOLMES NORTON, Washington, 
PETE SESSIONS, Texas                     DC

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
                   George Nesterczuk, Staff Director
                          Garry Ewing, Counsel
                   Ned Lynch, Senior Policy Director
               Susan Mosychuk, Professional Staff Member
                          Caroline Fiel, Clerk
          Cedric Hendricks, Minority Professional Staff Member








                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on February 13, 1997................................     1
Statement of:
    Bates, Hugh, president, National Association of Postmasters; 
      and William Brennan, president, National League of 
      Postmasters................................................    82
    Tobias, Robert E., national president, National Treasury 
      Employees Union; Michael Styles, president, Federal 
      Managers Association; Charles E. Jackson, president, 
      National Association of Retired Federal Employees; and 
      James D. Cunningham, president, National Federation of 
      Federal Employees..........................................    14
Letters, statements, etc., submitted for the record by:
    Bates, Hugh, president, National Association of Postmasters, 
      prepared statement of......................................    85
    Biller, Moe, American Postal Workers Union, prepared 
      statement of...............................................   101
    Brennan, William, president, National League of Postmasters, 
      prepared statement of......................................    92
    Cunningham, James D., president, National Federation of 
      Federal Employees:
        New York Times article...................................    73
        Prepared statement of....................................    55
    Davis, Hon. Thomas M., a Representative in Congress from the 
      State of Virginia, prepared statement of...................    65
    Jackson, Charles E., president, National Association of 
      Retired Federal Employees, prepared statement of...........    40
    Mica, Hon. John L., a Representative in Congress from the 
      State of Florida:
        Charts reflecting cash flows and contributions...........    98
        Prepared statement of....................................     5
    Pappas, Hon. Michael, a Representative in Congress from the 
      State of New Jersey, prepared statement of.................    13
    Sessions, Hon. Pete, a Representative in Congress from the 
      State of Texas, prepared statement of......................    12
    Styles, Michael, president, Federal Managers Association, 
      prepared statement of......................................    32
    Tobias, Robert E., national president, National Treasury 
      Employees Union:
        Letter sent to Chairman Kasich...........................    69
        Prepared statement of....................................    16









   THE IMPACT OF THE PRESIDENT'S FISCAL YEAR 1998 BUDGET ON FEDERAL 
                               EMPLOYEES

                              ----------                              


                      THURSDAY, FEBRUARY 13, 1997

                  House of Representatives,
                 Subcommittee on the Civil Service,
              Committee on Government Reform and Oversight,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 9:30 a.m., in 
room 2247, Rayburn House Office Building, Hon. John L. Mica 
(chairman of the subcommittee) presiding.
    Present: Representatives Mica, Pappas, Morella, Sessions, 
Holden, Norton, and Cummings.
    Also present: Representatives Davis of Virginia and Waxman.
    Staff present: George Nesterczuk, staff director; Garry 
Ewing, counsel; Susan Mosychuk and Ned Lynch, professional 
staff members; Caroline Fiel, clerk; and Cedric Hendricks, 
minority professional staff member.
    Mr. Mica. Good morning. I would like to call this meeting 
of the House Government Reform and Oversight Committee, 
Subcommittee on the Civil Service, to order.
    I welcome you to our first hearing of the new Congress, the 
105th Congress. And also, I am extremely delighted today to 
announce the Civil Service Subcommittee appointments.
    I had the honor of taking the Chair for a second term. And 
serving as vice chairman of our subcommittee will be Mike 
Pappas from New Jersey, a new Member.
    Of course, one of the most experienced, knowledgeable, and 
capable individuals on our panel is rejoining us, Connie 
Morella, from Maryland. Welcome back.
    We are also pleased to have Chris Cox join us as part of 
the leadership on our side of the aisle. He is returning to the 
Government Reform and Oversight Committee, but will be new to 
our subcommittee.
    And another new Member, Pete Sessions, from Texas, will be 
joining us.
    On the other side of the aisle, I am delighted that the 
minority has chosen for the ranking member someone who served 
very capably on our panel before and will be a great ranking 
member. I think that we are going to have a tremendous working 
relationship together. I am pleased to welcome as our ranking 
member, Tim Holden. Tim, welcome.
    We also have Elijah Cummings on the minority side joining 
us. Representative Cummings, from Maryland was on the full 
committee. Also Eleanor Norton, who is a delegate from DC. So 
they will be joining Tim on the minority side.
    I would like to welcome everyone, and again invite your 
participation in our subcommittee process. We are pleased to 
have many familiar faces back, some on our panel today, and 
others in the audience.
    As is customary, I will begin today's hearing with a brief 
opening statement, and then yield to our ranking member and 
those Members who have opening statements.
    So we begin today's hearing; again, welcome. This morning's 
first hearing of the 105th Congress of our Civil Service 
Subcommittee has an important topic. And I have called this 
hearing to provide all of us with an opportunity to discuss 
several issues raised in the President's fiscal year 1998 
budget that may affect every Federal employee and every Federal 
retiree. It is an important subject.
    That subject is part of balancing our Federal budget, and 
balancing our Federal budget is one of Congress' most important 
responsibilities.
    Today, we face a direct national debt of more than $5.6 
trillion. We also face the responsibility of meeting more than 
$18 trillion in unfunded liabilities from retirement accounts 
and from other national indebtedness.
    Under the terms of the President's proposal, Federal 
employees and retirees would assume responsibility for $6.252 
billion of cuts that he has identified to reach a balanced 
budget by the year 2002.
    The most significant change in this section of the budget 
would require agencies to increase their payments to the Civil 
Service Retirement and Disability Fund by 1.5 percent beginning 
on October 1, 1997.
    This increase in the agency's payments would produce $621 
million the first year, and yield nearly $3 billion over 5 
years. Unchecked, this proposal could strain agency coffers and 
require reductions in force, unscheduled reductions in force.
    The President's budget also calls for Federal employees to 
pay a greater proportion of their pension costs. This change is 
delayed, unfortunately, and fails to fend off or provide 
retirement options. For employees enrolled in the Civil Service 
Retirement System or the Federal Employees Retirement System, 
the payroll deduction for retirement benefits will be raised by 
one-half of 1 percent, phased in over 3 years. Beginning in 
January 1999, the payroll deduction will increase 0.25 percent, 
an additional 0.15 percent the following year, and the final 
one-tenth of 1 percent will be imposed in January 2001. Last 
year, the general Treasury doled out $19 billion to pay current 
retirement benefits and $24 billion in interest on funds 
borrowed from the Civil Service Retirement and Disability Trust 
Fund. Our Civil Service Retirement System now sports an 
unfunded liability which exceeds $540 billion. While I have 
long favored some increases in employee contributions, which 
has not been changed since 1969, I feel that some of the 
proposals brought forth by the administration are particularly 
unfair as it relates to postal employees, who are also asked to 
contribute more. Right now, the postal retirement fund is one 
of the secure funds that we have in the Federal Government.
    The remainder of the budget reductions that the President 
has proposed to cut from Federal retirement programs are 
achieved by targeting retired civilian Federal employees. And 
they have imposed on them a 3-month delay in the annual cost-
of-living adjustments in their pension for the next 5 years. 
Retired Federal employees are often the least likely to be able 
to survive any kind of a cut. And they are singled out, I 
believe, in this budget proposal in an unfair manner. This 
slice out of the benefits of Federal retirees will result in a 
$278 million cut during fiscal year 1998, and nearly $1.5 
billion in reduction of benefits over the next 5 years of this 
budget.
    This part of the President's budget is identical in most 
respects to a plan that was proposed in the Senate, and 
promoted by a coalition of Federal employee unions and 
organizations in 1995.
    The President included a similar plan in last year's budget 
proposal. I proposed an alternative plan. None of the previous 
versions of this plan have been enacted, and we stand today 
facing continuing budget deficits, growing unfunded 
liabilities, and unfortunately we still have raided trust 
funds, all a concern to me.
    The administration has decided that balancing the budget 
requires Federal employees and annuitants to forego $3.3 
billion in benefits over the next 5 years. Their agencies will 
have to reduce spending by nearly $3 billion to free up their 
increased share of the retirement cost. Regrettably, the 
administration has declined to send a representative today to 
respond or to provide additional insight in supporting 
arguments or documentation for advancing this proposal.
    I presume that the administration has some compelling 
arguments to justify these proposed changes in funding Federal 
retirement programs. And we intend to continue to seek some of 
those answers that we will not get here today.
    There are several other related issues raised in the 
President's budget that warrant further scrutiny. Although 
several witnesses today will offer comments relating to the 
Federal Employees Health Benefits Program, we will need to 
defer this discussion to a future date, when the administration 
will be available to testify.
    There has been some discussion of a prospective change in 
the calculation of the Government share of the Federal 
Employees Health Benefit Program premium. In fiscal year 1999, 
the current Phantom Big 6 formula expires, and is to be 
replaced by the Big 5 formula. This change could have a serious 
impact on employees' health insurance premiums. By its silence, 
the budget silence, on this particular subject, I must conclude 
that the administration is content with Federal employees 
picking up a greater share of their health care premiums, and 
has, in fact, included it as a budget savings beyond 1999.
    Another major budget issue that we must address is this 
administration's proposal to take over a portion of the 
District of Columbia's retirement liabilities. From the budget 
documents, it would appear that the administration is proposing 
to raid the current assets in some of the DC pension accounts 
to pay for short-term annuity obligations.
    As a matter of principle, I strongly object to raiding 
another pension fund. It is even illegal in the private sector. 
And I would like to see it illegal in the Federal sector. But 
that appears to be the proposal. While the Federal Government 
right now is getting away with the raid of some of these funds, 
it does not make it right.
    At a time when we need to be looking for ways to infuse 
real cash in our pension system, Social Security as well as 
Civil Service, the DC proposal appears headed in the wrong 
direction. We will come back to that issue. We are not going to 
discuss it at length today. In fact, Ms. Norton is not here, 
but I would like to consult with her and other members of the 
panel about a hearing on that subject, which I think is more 
than warranted.
    I called this hearing today to review these various 
proposals of the administration, and to solicit the views of 
organizations and groups representing our Federal employees and 
retirees.
    The Budget Committee has assigned the Committee on 
Government Reform and Oversight some of the responsibilities 
for achieving spending reductions and savings, at least 
comparable to the $6.252 billion proposed by the 
administration.
    We cannot shirk that responsibility, and I ask the 
assistance of the Federal employees and retirees and their 
organizations to help us in identifying the most reasonable 
options for sharing that burden.
    If you recall the last time we went through this exercise, 
those who were on the panel, we could not reach a determination 
in our subcommittee or a solution. It was punted to the Budget 
Committee, and we got something that I do not think any of us 
really liked as far as a proposal from that group.
    So we do have an important responsibility to help guide 
this process and these proposals. And I do sincerely welcome 
and solicit your views.
    We have a genuine obligation to live within the resources 
that the American taxpayers provide to meet the expenses of 
Government. And I look forward to your assistance and help, so 
we can achieve this goal of a balanced budget by 2002 with your 
help.
    In just a moment, I will introduce our panel of witnesses. 
But I did want to conclude my opening remarks by welcoming our 
new Members who have joined us. I see Pete Sessions from Texas, 
and Elijah Cummings from Maryland. Welcome. We welcomed you 
before you got here, and we welcome you again.
    And now I will yield for an opening statement to our 
ranking member.
    [The prepared statement of Hon. John L. Mica follows:]
    [GRAPHIC] [TIFF OMITTED] T2953.001
    
    [GRAPHIC] [TIFF OMITTED] T2953.002
    
    [GRAPHIC] [TIFF OMITTED] T2953.003
    
    Mr. Holden. Thank you, Mr. Chairman. And thank you for that 
warm welcome. It is my great pleasure to serve on the 
subcommittee as the ranking Democratic member, and I am pleased 
to be joined by two fine colleagues on the Democratic side, 
Elijah Cummings and Eleanor Holmes Norton.
    As we begin the 105th Congress, we will face many important 
issues that are within the jurisdiction of this subcommittee. I 
look forward to working with you in a spirit of bipartisanship. 
And I am confident that working together, that we will be 
successful in making improvements that will make the Government 
run better and more efficiently.
    Today, we will have the opportunity to hear a variety of 
views regarding the President's fiscal year 1998 budget 
proposal. It is very important for us to carefully examine how 
these proposed changes will affect current Federal employees 
and retirees.
    As we all know, there will be many difficult decisions in 
the days ahead, as we work to balance the Federal budget. And 
let there be no mistake, we must balance the Federal budget. 
Our Nation's fiscal stability depends on it.
    With that said, we turn to the most important question of 
how we balance the budget fairly, and with the least adverse 
impact on all of those affected.
    I have always believed that you cannot single out any one 
group to balance the budget, and that we will only be 
successful if everybody joins in to do their part. Shared 
sacrifice must truly be shared.
    Federal employees and retirees have been asked a number of 
times to do their part for a deficit reduction. The Federal 
Government Service Caucus has estimated that Federal employees 
have lost $40 billion through delays or elimination of COLAs, 
and another $104 billion in reductions in scheduled pay 
increases.
    I am very concerned that these proposals will have a 
negative impact on the Government's ongoing efforts to recruit 
and maintain a highly skilled and productive workforce.
    Over the last several years, Federal employees' morale has 
been repeatedly besieged by Government shut-downs, proposals to 
reduce their benefits, and failure to fully implement the 
Federal Employee Pay Comparability Act.
    I think that those of us on this subcommittee can work 
together to improve the Federal workforce. I look forward to 
hearing this testimony, and hope that we can all work together 
to devise a budget, which will be fair to all interests, and 
while also balancing the budget in a timely manner.
    Thank you, Mr. Chairman.
    Mr. Mica. Thank you.
    And I would like to yield now for an opening statement to 
Mrs. Morella.
    Mrs. Morella. Thank you. I want to thank you, Mr. Chairman, 
for holding this morning's hearing. As you mentioned, this is 
the first hearing of the 105th Congress. And it is appropriate 
that we begin by looking out for Federal employees and retirees 
in the President's budget. I look forward to hearing from my 
friends on the two panels that we have assembled before us.
    I want to also congratulate the newest members of this 
subcommittee. We do operate in a fine bipartisan fashion, and I 
look forward to continuing to do that.
    Speaking of the President's budget, I am alarmed in the 
President's budget by some elements that I think would 
adversely impact Federal employees and retirees. And as you 
know, many are my constituents.
    Over the past several years, Federal retirees and employees 
have been asked to bear a disproportionate share of deficit 
reduction. And in addition, the reduction of the Federal 
workforce by 272,900 FTEs has caused anxiety, as we know full 
well, among Federal employees. And it meant that fewer 
employees must do more work. Federal employees have performed 
admirably, and it is not fair to punish them in this budget.
    Despite protests from Members of Congress on both sides of 
the aisle, President Clinton's budget contains a 3-month delay 
in Federal civilian retiree and Foreign Service retiree cost-
of-living adjustments through 2002.
    It is one thing to share the sacrifices of deficit 
reduction. The President's budget, however, subjects neither 
Social Security beneficiaries nor military retirees to this 
delay.
    Over the last several years, Federal retirees and employees 
have been forced to bear a disproportionate share of deficit 
reduction. And for the first time in 4 years, Federal employees 
received their COLA in January, just like Social Security 
recipients and military retirees. From 1994 to 1996, Federal 
retirees did not receive their COLAs until April.
    On February 4th of this year, I introduced H. Con. Res. 13. 
It states, ``The sense of Congress is that cost-of-living 
adjustments for Federal retirees should be paid beginning in 
January of each year, as current law prescribes, and should not 
be delayed, whether it is part of budget agreement or 
otherwise.''
    Already, there are like 46 Members who have co-sponsored 
this resolution. I hope that all Members here today will sign 
on. Mr. Cummings is a co-sponsor, and Ms. Norton is a co-
sponsor. And I invite other members of the subcommittee to do 
so.
    I strongly oppose the President's proposed increase in 
Federal agency and employee contributions to Federal employee 
retirement. These are not painless spending cuts. The 
President's budget increases agency contributions to the Civil 
Service Retirement and Disability Fund by 1.51 percent for all 
CSRS employees.
    And as you know, Federal retirement contributions are paid 
out of agency salaries and expenses accounts, accounts that are 
already constricted from past budget reductions. We know the 
ramifications that are possible.
    So increasing agency contributions at this time, 
particularly outside the context of a balanced budget proposal, 
will further tighten agency accounts, and could lead to further 
reductions in force or furloughs. This increase amounts to an 
across-the-board spending cut that will affect every agency and 
program in the Federal Government. These proposals would unduly 
burden a small segment of society.
    The President's budget would also require Federal employees 
to pay additional portions of their salaries to their own 
retirement, beginning in January 1999. An increase of 0.25 
percent in 1999, 0.15 percent increase in 2000, and a 0.10 
percent increase in 2001 would provide for an additional $1.829 
billion in savings, savings coming from the pockets of Federal 
employees.
    And I am also concerned about the future of the FEHB 
program. Beginning in 1999, the Government contribution will no 
longer be 60 percent of the Big 6. It will be 60 percent of the 
remaining Big 5. This will lead to higher cost for employees. 
And I intend to offer a legislative remedy to prevent this from 
occurring. I look forward to hearing from you about what you 
think should be the remedy.
    I think that you all know that I strongly support a 
balanced budget, and members of this subcommittee do also. But 
balancing the budget is about making choices. And it is 
unconscionable to single out Federal employees and retirees to 
contribute more than others. For lower wages than their 
counterparts in the private sector, Federal employees have 
worked and continue to work to make our Nation strong.
    I strongly hope that we will repay loyalty with loyalty, 
and not unduly burden Federal employees and retirees by 
reducing their salaries, and hamstringing their employing 
agencies, or delaying their COLAs.
    Thank you very much, Mr. Chairman.
    Mr. Mica. Thank you.
    The new members will soon learn that Federal employees and 
retirees have----
    Mrs. Morella. A special place in my heart.
    Mr. Mica [continuing]. An incredible advocate in the person 
of the lady from Maryland.
    I am pleased to recognize now for an opening statement, and 
also welcome Mr. Cummings, from Maryland. Thank you.
    Mr. Cummings. Thank you, Mr. Chairman.
    It certainly is a pleasure to have been appointed to this 
committee.
    Mr. Chairman, I was very pleased yesterday when you 
approached me and extended a hand of bipartisanship. That meant 
a lot to me. I think that when we are about the business, as we 
must be, of uplifting the lives of the people in this country 
and our Federal employees, I think that it must take a 
bipartisan effort. And I certainly am looking forward to 
working with you.
    I also look forward to working with our ranking member, and 
all of the members of this subcommittee. In my district in 
Baltimore, we have thousands upon thousands of Federal 
employees and retirees. The Social Security Administration's 
headquarters is located in my district. And so I have a 
tremendous interest here.
    And so I am looking forward to hearing from our witnesses 
this morning. I will also take a moment to pay some special 
recognition to my good friend, Connie Morella. We served in the 
Maryland House of Delegates together. And Connie has always 
been about the business of bipartisanship, and I really 
appreciate that.
    And so we move forward uplifting the lives of Federal 
employees. So often what I think happens is that Federal 
employees get a bad rap. Federal employees and retirees often 
bear the brunt for all the faults of the Federal Government.
    But I am just here to say that being from a district where 
I have so many retirees and Federal employees, I am very, very 
sensitive to those issues. And for those reasons, I am just 
glad to be a part of this. And I look forward to a bipartisan 
effort.
    Mr. Mica. Thank you, Mr. Cummings, and again, welcome.
    Mr. Sessions has left an opening statement with Mrs. 
Morella. And by unanimous consent, it will be made part of the 
record.
    [The prepared statements of Hon. Pete Sessions and Hon. 
Michael Pappas follow:]
[GRAPHIC] [TIFF OMITTED] T2953.004

[GRAPHIC] [TIFF OMITTED] T2953.005

    Mr. Mica. We would like to go ahead and get under way with 
our two panels today, and I would like to introduce our first 
panel of witnesses. Let the record show that this list has been 
compiled today in reverse alphabetical order, thus enabling 
witnesses who have often appeared at the end of our panels to 
lead off our discussions, and I notice at least that Mr. Tobias 
is still awake.
    I am pleased to welcome to the 105th Congress again Mr. 
Robert Tobias, no stranger to our panel, no wilting violet, to 
this panel. He always have valuable testimony and very 
opinionated. He is national president of the National Treasury 
Employees Union and does a great job as their spokesperson and 
advocate.
    We will also hear from Mr. Michael B. Styles, the president 
of the Federal Managers Association. We have heard from Federal 
managers on many occasions in the past, and we welcome you 
back.
    Another individual who is no stranger to this subcommittee 
is Charles E. Jackson, the president of the National 
Association of Retired Federal Employees, and a tireless 
advocate for Federal retirees.
    And Mr. James D. Cunningham, who is now the president of 
the National Federation of Federal Employees. And we welcome 
all of our panelists this morning.
    As is customary for our witnesses, and this is an 
investigations and oversight committee and subcommittee, we do 
swear in our witnesses. So if you would stand and raise your 
right hand.
    [Witnesses sworn.]
    Mr. Mica. And I guess in compliance with this new House 
Rule XI and House Rule XII, the panelists have disclosed any 
receipt of Federal largesse. And I thank you for complying.
    So with those comments, we will start the testimony. And as 
usual, and I read your statement late last night, Mr. Tobias; 
we ask that if you can summarize, hopefully within 5 minutes. 
We do not ring the bells or bring the shepherd's hook out. But 
that is the custom of our panel to summarize, if you can. And 
then we will have an opportunity to discuss the issues with the 
members of the panel.
    So welcome, and you are recognized, Mr. Tobias.

 STATEMENTS OF ROBERT E. TOBIAS, NATIONAL PRESIDENT, NATIONAL 
 TREASURY EMPLOYEES UNION; MICHAEL STYLES, PRESIDENT, FEDERAL 
 MANAGERS ASSOCIATION; CHARLES E. JACKSON, PRESIDENT, NATIONAL 
    ASSOCIATION OF RETIRED FEDERAL EMPLOYEES; AND JAMES D. 
CUNNINGHAM, PRESIDENT, NATIONAL FEDERATION OF FEDERAL EMPLOYEES

    Mr. Tobias. Thank you very much, Mr. Chairman. I appreciate 
that kind introduction. I start today from the wilting violet 
school by asking you and all of the other members of your 
committee to request Chairman Kasich not to assign any 
reconciliation savings to the Government Reform Committee this 
year.
    I wrote to Chairman Kasich and urged that the fiscal year 
1998 budget resolution assign zero savings to you and this 
committee, and I ask you to do the same.
    Mr. Chairman, Federal employee and retiree pay, benefits 
and retirement annuities have been cut by $222 billion since 
1976. We have given our fair share.
    Mr. Chairman, in your role as a member of the board of 
directors of the executive branch of our Government, you have 
asked Federal workers to do more, and you have asked for more 
accomplishment, and Federal employees have responded. We ask 
you, Mr. Chairman, to do the same.
    Mr. Chairman, we ask that you recognize that a 2.8 percent 
pay increase is not adequate. It is not consistent with the law 
you passed in 1990, and it is not consistent with the need to 
attract the best workers needed to accomplish more. And it is 
not consistent with the fact that the Federal workforce is the 
same size it was in 1963, yet the population we serve has 
increased dramatically.
    Mr. Chairman, we ask that the increased retirement 
contributions requested by the President from both agencies and 
employees be denied. The retirement plan created in 1986 is 
patterned after the private sector as the 1996 GAO report 
requested by you concluded.
    And the GAO report further underscores the point that most 
private employers do not require employees to contribute 
anything to their defined benefit plans. We have a private 
sector plan, and we already contribute enough.
    And those who are already retired deserve some stability. 
Singling out the Federal retiree for a COLA delay is unjust. 
The average Federal pension is $18,816 a year. These people are 
not rich. Most do not receive Social Security benefits. And 
unlike Social Security benefits, Federal retirement is taxed 
fully.
    These proposals, however, pale in comparison to the 1996 
budget reconciliation instructions, where this committee 
recommended changing the retirement annuity calculation from 
the high 3 to the high 5-year average, limiting the 
Government's contribution to the health benefit program to the 
rate of inflation, thereby driving even more Federal employees 
off the health insurance roles, increasing the Federal employee 
contribution to the retirement system by 2.5 percent, and the 
agency contribution by 11 percent.
    Mr. Chairman, I say enough, no more. Please recognize what 
we have done. Please recognize what we are doing. And please 
join with us in asking Chairman Kasich to spare Federal 
employees in the 1998 budget. Thank you.
    [The prepared statement of Mr. Tobias follows:]
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    Mr. Mica. Thank you, Mr. Tobias.
    And I will recognize Mr. Michael Styles now.
    Mr. Styles. Thank you, Mr. Chairman.
    I would like in public to thank you for attending our mid-
year conference on one of those overnight flights. I appreciate 
that. I am sitting here in about the same state you were. I 
would also like to thank Congresswoman Morella for her 
outstanding leadership in seeking to ensure that promises made 
to Federal workers and retirees are promises kept.
    FMA appreciates and applauds your sense of Congress 
resolution in support of maintaining January cost of living 
adjustments for Federal retirees. Thank you very much.
    Since our comments are made for the record, the other night 
when I came home from work--I work out in California, and am 
still a full-time Federal employee--I happened to take a look 
at the Federal Times and saw Retirement Under Fire. And you 
would think that after all of this time that that would not 
bother me, but in fact it incensed me.
    And I thought that my comments today to you should be a 
little bit more from the heart and provide you with some 
insight from my perspective. I thought that it was important 
for me to provide you with some personal insight into the 
effect that a continued bombardment of the Federal workforce is 
having.
    I personally have 38 years of Federal service, and I am 
currently 55 years of age. I am getting ready to walk over here 
to my NFFE buddies. I can retire tomorrow, but I always had the 
dream of finishing 49 years of service to my country.
    I can still remember taking my oath to my country as a 
young man proudly becoming a U.S. Marine. I can also quite 
vividly remember taking an oath to my country when I became a 
civil service employee at the Long Beach Naval Shipyard.
    I also remember the pledge that was made to me when I 
became a part of this extremely dedicated strike-free 
workforce. That pledge was to assure that paying benefits to 
the Federal workforce would be comparable to the private 
sector.
    As my career unfolded, it became obvious that Federal pay 
and benefits were lagging behind those of the large private 
sector corporations with equivalent positions. But service to 
country in itself was a compelling factor in remaining a 
Federal employee.
    During the 1980's, the Federal workforce came under 
tremendous pressure as private sector corporations lost their 
competitive edge worldwide, and sought out more and more 
Government contracts to offset their losses in the private 
sector marketplace.
    The premise, of course, was that the private sector was 
more cost effective than the public sector, a theory that more 
and more often became if as true competition became realistic.
    You may recall that the 1980's became known as the decade 
of greed, because so many became rich while the Government went 
head over heels into debt.
    In 1988, I was selected by the Department of the Navy to 
participate in the experience with industry program. I went to 
work at a large defense contractor. Having read the same 
newspapers that you do, I knew that the private sector was much 
more adept at running a business operation. I had much to 
learn, and had an extensive dream sheet, if you will.
    What I learned, however, was that while they had a 
tremendously talented workforce, they had problems as well. 
While I was with this corporation, they were getting involved 
in total quality management. They were using, I would like you 
to understand, the public sector, North Island Naval Rework 
Facility, their plan for total quality management. The reverse 
was true.
    Also, while I was there, I found a pay schedule or I was 
given a pay schedule that was approximately 1 year old. I can 
tell you quite frankly that I was depressed for more than 2 
weeks, because I had figured by that time that I had thrown 
away much of my life. Because the private sector most certainly 
was paid a substantial amount more than we are.
    And I would look at the 29 percent that we talk to here as 
being a rather good example of the disparity between the wage 
systems.
    I returned from that experience with tremendous pride in 
the Federal workforce and our capabilities. Since 1990, when I 
became the president of the Federal Managers Association, I 
have had the opportunity to see the entirety of America's 
workforce at work, doing the things that they do for America on 
a daily basis.
    The FAA, Social Security, Veterans Affairs, IRS, Army, 
Navy, Air Force, Marine Corps, Border Patrol, Agriculture, GSA, 
Labor, and so on. I can tell you without doubt that ours is 
truly the most talented and dedicated workforce assembled in 
the history of the world. The sad part is that the American 
people do not know that.
    The Berlin wall did not crumble because of Gorbachev. It 
crumbled because of the will of the American people and the 
dedication of our Nation's Federal workforce, both military and 
civilian. Desert Storm was a success because of that same 
unbounded determination.
    Faced with BRAC, privatization, A-76, and unrelenting down-
sizing, this workforce has continued to produce at even higher 
levels.
    The Long Beach Naval Shipyard, which recently closed, did 
so $6 million in the black, while many private yards have gone 
bankrupt.
    When the private sector contractors came to Kelly and 
McClellan Air Force Materiel Commands to start to bid on their 
work loads, their first impressions and comments pertained to 
the incredibly competent workforce. They stated that they would 
only take on those work loads, if they could hire the people 
currently doing the work.
    Agency heads and senior executives who come from the 
private sector are always surprised at the Federal employees' 
competence, dedication, and loyalty, and are quick to state 
that fact. It is easy to see why people have a misperception 
about the capability and determination of the Federal employee.
    Throughout every political debate, the Federal employee 
becomes the whipping boy. My greatest fear is that the 
``Pygmalion effect'' or the self-fulfilling prophecy will 
become the reality of tomorrow.
    We are creating a workforce, and we are telling everyone we 
have. At a recent meeting with mid-level and senior Navy 
Department managers, I asked him how many of them would tell 
their children to go to work for the Federal Government. There 
were 30 people in the room, and not one raised their hand. All 
had over 20 years of service. That is a telling message.
    In providing testimony before this committee several years 
ago, we talked about cost savings. And we talked about total 
quality initiatives. And as I sit at this panel with two of my 
co-members of the Partnership Council, I would ask that you the 
panel and we the Federal employees become partners in telling 
America what we are really about, in providing the cost savings 
that we really can provide given the opportunity and the 
empowerment by the Congress and the agencies.
    Mr. Chairman, I have always looked at this committee as the 
Federal workers' voice to the House and to ultimately the 
American people. The message that I would like to be brought 
forward is that ours are not nonessential employees, but quite 
the contrary. They are in fact the very essence of our Nation, 
the fiber that our beautiful flag is woven from. They touch and 
are part of everything that is good about America.
    Now is not the time to further alienate and penalize 
Federal employees. Now is the time for America to stand behind 
the pledge that it made to its workforce when they took the 
same oath that I so proudly did.
    I want to thank you once again for inviting FMA to present 
our views to the subcommittee, and I look forward to the 
partnership that I hope that we have created. Thank you.
    [The prepared statement of Mr. Styles follows:]
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    Mr. Mica. Thank you.
    Mr. Jackson.
    Mr. Jackson. Thank you, Mr. Chairman.
    As president of the National Association of Retired Federal 
Employees, I appreciate the opportunity to appear before you 
today.
    NARFE is very disappointed in the President's decision to 
single out civil service retirees and survivors for a COLA 
delay in his latest budget. We can only view this proposal as a 
public dismissal of the value of Government service.
    NARFE is also displeased with the repeated call for 
increased employee contribution to the Civil Service Retirement 
and Disability Fund. Additionally, we believe that if agency 
contributions are to be used, that the corresponding increase 
in the discretionary spending caps are necessary to ensure that 
agencies can absorb this new cost without being forced to lay 
off more workers.
    In reviewing this package of Federal retirement 
recommendations, we believe that two questions should be asked. 
First, is there a legitimate public policy reason for a Federal 
annuitant COLA delay, and for increased retirement fund 
contribution?
    This is a relevant question, since the President's own 
director of the National Economic Council recently claimed that 
changes in COLAs or in the Consumer Price Index ought to be 
based on the facts rather than on political whim.
    The answer depends on the financial well-being of the fund. 
If the fund were in trouble, lawmakers would have to consider 
increasing income, cutting benefits, or both. The President 
proposes that benefits be cut by delaying COLAs. And this 
budget is calling for increased income to the fund.
    The enigma here is that there is no indication that the 
fund is in dire fiscal straits. The fund is on sound financial 
footing. During the last Congress, the GAO testified that there 
is an adequate balance in the fund to disburse annuities to 
Federal retirees and survivors on an ongoing basis.
    Some say that Government contributions are not real money, 
but this is just plain wrong. The contributions are real 
income, since the funds are appropriated by Congress, and since 
there is an annual limit on the amount of funds that the 
Congress may appropriate.
    It has been said that Government securities issued to the 
fund are not real assets, because they are non-marketable. Not 
true. The only difference between marketable and non-marketable 
securities is that the latter cannot be traded in the financial 
market.
    U.S. savings bonds and Government securities held in the 
Social Security trust fund are also non-marketable. Few holders 
of U.S. savings bonds or other Government securities would like 
to hear that these investments are not real assets.
    NARFE recognizes that Federal employees pay 25 percent of 
their retirement cost. This is far greater than the majority of 
employers in the private sector require. It is 97 percent of 
medium and large employers who pay for retirement without 
employee contributions.
    Taxpayers as employers pay 75 percent of retirement costs 
for Federal employees, while most other employers pay 100 
percent. This retirement obligation is not at all unreasonable. 
It is something that employers must do. Since our fund is in 
good shape, we believe that a reduction in the benefit of 
retirees and an increase in employee contributions are 
unnecessary.
    Federal retirees understand that the enormous Federal debt 
that accrued during the 1980's stunt what our economy could be. 
As older Americans, we want to leave a sound economy for our 
grandchildren. For that reason, we believe that the goal to 
reduce this burden is not only commendable but essential.
    But as attempts are made to balance the budget, we must ask 
if everyone is making a shared sacrifice toward this goal. The 
answer is a resounding no. Year after year, the White House and 
Capitol Hill have reduced our earned inflation protection while 
Social Security has been paid on time and in full. And we know 
that delays in Social Security and military retiree COLAs were 
never considered as options in this budget.
    It is ironic that during the recent balanced budget debate, 
that some have said that protecting Social Security is 
essential, since no private sector employer would reduce 
employee pensions to pay off debt. But these same individuals 
say nothing about protecting the retirement benefits of the 
Government's own employees.
    Federal retirees and survivors are understandably outraged 
by a proposal that takes away their full and timely inflation 
protection in 1998 after the Capitol Hill and White House 
allowed it to be restored in 1997.
    In addition to policy considerations and equity issues, 
members of this subcommittee must understand what this COLA 
delay proposal means to your constituents who are Federal 
civilian annuitants. It means that the average Federal retiree 
will lose $726 over the next 5 years. But just as detrimental 
is the message it sends that civil service retirees and their 
survivors are less worthy than other retirees.
    Unlike Social Security benefits, Federal civilian annuities 
are 100 percent taxable from the first dollar of payment. 
Although we have looked, we can find nothing in the budget 
which proposes a 3-month extension on the tax filing deadline 
for Federal retirees.
    In fact, none of the bills that Federal annuitants must pay 
will be delayed, just because their COLA is. Inflation will not 
be abated while Federal retirees wait for their inflation 
protection to be paid.
    This is a discriminatory COLA delay, because no other group 
of older Americans are being asked to share this burden.
    As this committee develops its views and estimates for 
submission to the Budget Committee, NARFE urges you to reject 
the administration's COLA delay and contributions proposal.
    We also ask you to support full and timely payment of our 
COLAs by cosponsoring H. Con. Res. 13 introduced by 
Representative Morella.
    Mr. Chairman, you also asked NARFE to comment on the 
expiration of the FEHBP's Aetna proxy premium 2 years from now. 
According to OPM actuaries, the premium formula changes already 
required for 1997 and 1998 contract years will have an 
insignificant effect.
    However, OPM says that if Congress fails to reauthorize the 
Aetna proxy premium, costs for enrollees could increase by $164 
for self-only policies, and $326 for family plans in 1999.
    Such a substantial increase in premiums would be difficult 
for many Federal retirees and survivors to absorb, and might 
force many enrollees out of a fee for service option. Reserving 
fee for service plans is particularly important to us, since 
older Americans require more continuity of care, as their need 
for medical attention increases. The importance that we place 
in the doctor-patient relationship of our choosing cannot be 
overstated.
    Mr. Chairman, NARFE wants to work with you and your 
subcommittee this year to explore ways and means of ensuring 
that FEHBP enrollee costs do not skyrocket as a result of 
changes in the premium calculation formula.
    We make ourselves available to help develop legislation 
that will not impose new financial burdens on enrollees or the 
Government. We also urge that there be no hasty or radical 
changes made until everyone can examine the costs and effects 
of alternatives.
    Thank you again, Mr. Chairman, for the opportunity to 
present NARFE's views. I would be happy to answer questions 
that you or other members of the subcommittee may have.
    [The prepared statement of Mr. Jackson follows:]
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    Mr. Mica. Thank you, Mr. Jackson. And we will defer 
questions.
    We will hear now from James Cunningham.
    Mr. Cunningham. Good morning, Mr. Chairman, and members of 
the subcommittee. My name is Jim Cunningham. And speaking for 
the members of the National Federation of Federal Employees, I 
would like to thank you for the opportunity to appear before 
you this morning.
    Before I begin, I must say that I look forward to working 
closely with you, Chairman Mica, and the members of this 
subcommittee over the next 2 years, as you address issues of 
importance to the Federal Government and its workers.
    At the outset, I must say that this budget is a severe 
disappointment to NFFE. I fear that this budget reflects that 
the administration, while publicly committed to working with 
employees, does not feel the need to adequately compensate the 
employees they profess to value so highly.
    Each day Federal employees across this Nation serve proudly 
their country and their fellow citizens. These employees do not 
work for the Federal Government because they seek to enrich 
themselves, but they work for the Government because they 
believe that serving the public is a patriotic and noble duty.
    These employees are dedicated and committed to the ideal 
that the Government exists to serve its citizens. Federal 
employees strive each day to ensure that the American public 
receive the services that they need and expect.
    However, because Federal employees do not work for the 
Government because they expect high pay, they do have financial 
obligations that must be met. Like workers in the private 
sector, Federal employees must purchase goods and services, and 
just like private sector employees, the purchasing power of 
Federal employees is eroding by inflation each year.
    However, Federal employees watch the value of their 
paychecks erode at a considerably faster pace than their 
private sector counterparts. For example, based on a comparison 
of the consumer price index and the employment cost index for 
1980 through 1995, the value of private sector salaries was 
reduced by 5.2 percent. During that same period of time, the 
value of Federal employees' salary was reduced by 24.3 percent.
    Obviously, this situation is intolerable. And Federal 
employees need and deserve pay adjustments that will not only 
protect the value of their salaries from further erosion by 
inflation, but will also correct the inequity of the past 15 
years.
    Unfortunately, President Clinton's fiscal year 1998 budget 
contains only a 2.8 percent pay adjustment for Federal 
employees. This is unacceptable to the members of NFFE. This 
small adjustment is far short of the 6.6 percent pay adjustment 
that employees should be receiving under the provisions of the 
1990 Federal Employees Pay Comparability Act.
    Not only has the failure of the administration and Congress 
to provide the full adjustments called for by FEPCA inflicted 
severe financial hardship on Federal employees, but by 
consistently under-funding the raises mandated by FEPCA, the 
administration and Congress are endangering the future ability 
of the Federal Government to provide citizens with the high 
quality service and assistance that they have come to expect.
    When it was enacted in 1990, FEPCA represented a fair 
bipartisan solution to eliminating the gap between public and 
private sector jobs. Support for FEPCA was centered on the 
realization that pay comparability with the private sector was 
necessary, if the Government wished to recruit and retain the 
best and the brightest employees.
    As the Government continues to downsize, the duties of each 
employee increase both in number and in complexity. If the 
Federal Government hopes to maintain a civilian workforce that 
is capable of meeting the demands being placed on them, then 
Government must compensate its employees in an adequate and 
equitable fashion.
    NFFE opposes the administration proposal to increase by 0.5 
percent the amount that employees pay into the Civil Service 
Retirement and Disability Funds. NFFE asserts that increasing 
the amount that employees contribute to their retirement fund 
is yet one more example of the discriminatory fashion in the 
way that Federal employees and retirements are routinely 
treated by Congress and the executive branch.
    This increase in retirement contributions is nothing more 
than a payroll tax that is being levied against only Federal 
employees. I would hope that this Congress with its commitment 
to reducing the tax burden of all Americans will not choose to 
inflict a new tax on Federal employees.
    NFFE is also very concerned that the proposal to increase 
agency payments into the Civil Service Retirement Trust Fund 
will increase downsizing pressure at all Federal agencies. By 
increasing the agency payment to the trust fund without 
providing additional funding for this purpose, this proposal 
would force agencies to make the payment from their salaries 
and expense account.
    Reducing the available pool of money for salaries will in 
turn place greater pressure on already tight operating 
accounts. It is highly probable that this pressure will force 
the agencies to cut positions. By forcing agencies to eliminate 
jobs without the benefit of a comprehensive strategic plan, 
this silent RIF will have a dramatic and destruction effect on 
the capability and effectiveness of the Federal agencies. This 
situation should be avoided at all costs.
    NFFE also feels that to delay cost-of-living adjustments to 
Federal retirees is both unfair and unjust. This proposal 
unfairly singles out one group of retirees and punishes them 
for choosing to serve their fellow citizens. It is outrageous 
that Federal retirees are forced to suffer the erosion of their 
hard earned retirement benefits while the COLAs of military 
retirees and Social Security recipients remain untouched.
    Before I conclude, I would like to address one final issue. 
NFFE is proud to be a member of the National Partnership 
Council, and has strongly supported the goals and mission of 
the National Performance Review. NFFE believes and is committed 
to the proposition that by working together in partnership that 
management and employees can redesign their work place in 
models of efficiency and quality.
    However, NFFE has grown increasingly concerned over the 
administration's constant focus on the number of jobs that it 
has eliminated. For example, during the President's press 
conference releasing the budget, I watched with dismay as Vice 
President Gore trumpeted the fact that the administration was 2 
years ahead of schedule in reaching its massive job elimination 
targets.
    Little thought appears to be given to the pain that these 
cuts have inflicted on the targeted employees, and no mention 
at all is given to the ever increasing number of contractors 
who are being called in to do the work of separated Federal 
employees.
    Little over 3\1/2\ years ago, Federal employees welcomed a 
portion of the NPR report, in which Vice President Gore 
declared that Federal employees are good people trapped in a 
bad system. For once, it was the system that was being blamed 
and not Federal employees.
    On this basis, NFFE embraced many portions of the NPR. And 
we look forward to the systemic reforms that would allow them 
to truly create a Government that all Americans could be proud 
of. But if employees who have supported the NPR see that they 
and their coworkers are losing their jobs and being replaced by 
contractors, then the NPR's declaration of fixing the system 
and not blaming its people will be meaningless, and the NPR 
will be meaningless, and the NPR will be remembered as just 
another attempt to portray Federal employees as the problem.
    It is important to remember that Federal employees support 
much of the NPR because they are interested in making their 
agencies work better. However, they do not want to see their 
work transferred to contractors and have their job reinvented 
out of existence. Federal employees are proud to work for 
America. We strive each day to deliver to the public the high-
quality goods and services they deserve and expect. In return, 
we ask only that our leaders in the executive and legislative 
branches of Government respect the work we do and treat us with 
the respect we deserve. Thank you very much.
    [The prepared statement of Mr. Cunningham follows:]
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    Mr. Mica. Thank you, Mr. Cunningham. We have also been 
joined by another member of the full panel and Chair of the DC 
Subcommittee, Mr. Davis, from Virginia. Did you have an opening 
statement or comment?
    Mr. Davis. Mr. Chairman, first of all, thank you very much 
for allowing me to be here and for allowing this panel to come 
forward and, I think, express what are my concerns about some 
of the changes that have been suggested in compensation this 
year. And I would ask unanimous consent that my full statement 
be included in the record.
    Mr. Mica. Without objection, so ordered.
    Mr. Davis. Let me just make a couple of comments, if I can. 
I have just come out from speaking to a business group in 
northern Virginia, and every one of them will tell you that 
their major asset today is no longer their computers and 
machinery or equipment or buildings; it is their people. And 
they invest in their people, they keep them happy, and then 
they do not have to go out and rehire and retrain constantly.
    In every business organization the world seems to 
understand that except for the Federal Government, where 
constantly when you look for cuts, the first place we look is 
at our people. And I think you all have expressed that very 
eloquently today. We need to get smart about that if we want to 
have a Government and to recruit and train the best and the 
brightest of people who are willing to give their lives to 
making Government a better place.
    But I think the most invidious form of discrimination I can 
see is in this COLA inequity. It is talked about in this year's 
budget, where if you work for somebody else, you are on Social 
Security or you are a active military, you get your COLA on 
time; only if you work for the Federal Government are we going 
to delay you. What an awful message that sends.
    No business organization would do that. Nobody who 
understands how you handle people and what makes an 
organization run would do that, and they are just not getting 
it, and I think all of you have put forward today very 
eloquently the concerns in our business organizations and among 
employees just asking to be treated fairly. That is all we want 
to do.
    If we do that, there may have to be cuts here and there or 
something, but to just be treated fairly along the way, it is 
in the taxpayers' interest, and it is in this Government's 
interest to make that work, and I appreciate all of you being 
here today and sharing your statements. Thank you, Mr. 
Chairman.
    [The prepared statement of Hon. Thomas M. Davis follows:]
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    Mr. Mica. Thank you, Mr. Davis. We will now start the round 
of questioning here, and I will open with a couple of comments 
and questions. We have sort of a variety of recommendations 
here. Mr. Tobias, well, I think they are pretty unanimous in 
their conclusion. It is sort of no, no, no, and no, all three 
as far as additional contributions or cuts, but we really have 
to face, I guess, some of the political reality of this.
    When the President recommends $6\1/2\ billion being taken 
out of these accounts, how can we do something to assist in his 
effort and our effort, too, in balancing the budget? Now, I 
have proposed in the past a number of ways we could take some 
pressure off and some expenses off.
    We had proposed a Medical Savings Account. We asked you all 
to look at that as one option, and the experience we had in the 
hearings that we conducted showed that both the employee and 
the employer, in many instances public entities, paid lower 
premiums on both parts. It is true that they had not been tried 
on as wide a number of folks that we deal with, but I propose 
that as one idea.
    Retirement options that we need to be looking at, giving 
some opportunity for some other avenues to take some pressure 
off of the current system. I also advocated if we increased 
employee contribution, that we fence off the funds. I do not 
think the Federal employees mind contributing more; the problem 
is they continue to get less, and they have had all of the 
assets taken out of a trust fund. We are now paying--it was $24 
billion out of the budget a year or so ago, and I think that is 
escalating and gets up to an incredible amount if we keep 
letting that fund mushroom, the deficit.
    And other options. We looked at the ``high three'' versus 
the ``high five.'' Actually, most of the proposals that came 
out did not do much to deal with the unfunded liability except 
for the ``high three'' versus the ``high five.''
    Now, you know the way this place operates, and Mr. Tobias, 
you have said, ``just say no,'' but we are going to have to 
come back with some proposal. The President has said $6.5 
billion. Do you have any suggestions where we can save some 
funds? Are you willing to look at any of these? Do you have any 
other alternatives for helping us reduce this cost without 
hurting the benefits, without hurting the pay? Can you offer 
that to the subcommittee? And I will ask all of you, starting 
with Mr. Tobias.
    Mr. Tobias. Well, Mr. Mica, I guess I start by asking you 
to, indeed, consider the political context and the history of 
this subcommittee. Recommending zero cuts would not be new to 
this committee. There have been times in the past when this 
committee has recommended zero savings, and I would ask that 
this committee serve as an educational force as opposed to 
reacting to what others might say.
    I would hope that this committee would take its 
responsibility as the board of directors of the congressional 
branch and educate Members as to what impact their decisions 
have on the Federal workforce. Now, you said, Mr. Chairman, 
that Federal employees do not mind if they contribute more. I 
really disagree with that. They do mind if they contribute more 
to their retirement.
    Mr. Mica. I think, Mr. Tobias, I said if their funds were 
fenced off.
    Mr. Tobias. Well, I understand that. They do mind if they 
contribute more because it constitutes money out of their 
pocket, and I do not believe that there is anyone who would 
say, ``I would like to contribute more.'' And when we look at 
what Federal employees are doing, what they are asked to do, 
and the comparison of their benefits with the private sector, 
we are behind.
    So I would hope that you would, indeed, share my views, and 
I will be happy to give you this letter that I sent to Chairman 
Kasich.
    Mr. Mica. Thank you, and without objection, we will make 
this a part of the record.
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    Mr. Mica. Well, I thank you for this, but, again, I am 
looking for some positive areas where we can work together to 
bring down costs, and I am not talking just about costs to the 
Federal Government; I am talking about health care costs to 
Federal employees, other opportunities for Federal employees 
for retirement, for increasing their potential savings and 
their return when they retire. So if you do have any 
suggestions, I welcome them. If you do not have any today and 
your statement is ``just say no,'' I appreciate it. Mr. Styles, 
any ideas?
    Mr. Styles. Well, yes, sir. I have to echo my colleagues' 
remarks about the impact that these continued assaults on the 
Federal employees' benefits and retirement packages have, and 
that is why I brought out my comments here today in a more 
emotional, insightful way, because even after 38 years of 
Federal service, to see that headline really had a tremendous 
impact upon me.
    And in going around the country and seeing people who, 
without doubts, have been working for 19 to 35 percent less 
than comparable wages in the private sector, I think that that 
impact that we have is creating what I mentioned is the 
``Pygmalion effect.'' We are creating the workforce we are 
telling the American public we have. It does not exist just 
yet, but it is moving in that direction, and I think what we 
have to do if we are talking about cost savings is, once again, 
go to the point of empowering the employees of the Federal 
Government.
    It is amazing how resourceful our employees are, and in 
every challenge that has been put forward to them, they have 
responded and provided you more and more with less. I also 
believe, and I mentioned that in my comment, I look to you as 
partnership. I look to you as the voice to the Congress and the 
American people to represent us in the true vision of what we 
perform in every day work.
    I would say to you that we are saving money. I would say 
that the partnership effort that we have brought forward at the 
national level is moving closer and closer down to the agency 
levels, and it is a remarkable thing to go around the country 
and hear reports that are made to us about the tremendous 
savings that are being brought forward. I think that is the 
type of collective effort we have to bring to the table, if you 
will, to bring about the savings that Mr. Kasich is looking 
for. And I think we can do that, and we have proven ourselves 
over time.
    Mr. Mica. Well, again, gentlemen, I am looking for some 
solid proposals that may not be $6.5 billion that the President 
has recommended. But he has already set the bar and we have got 
to come back and respond in some fashion that is fair to 
Federal employees. And I know you are saying ``no,'' but I am 
looking for positive steps that we can take.
    There are some things, I think, that have been proposed 
that are grossly unfair. The picking out solely of Federal 
retirees. Everyone looks for fairness. If it had been proposed 
for everyone, maybe that is another question, but here they 
have singled these folks out, postals, who actually have an 
imbalanced retirement fund.
    So we have got to find some areas that we can go back to 
Mr. Kasich and deal with the administration and say that we are 
meeting some of these net reductions in spending or cost. Mr. 
Styles.
    Mr. Styles. I have another comment, sir. We, as Federal 
employees, have been listening to the debate about how big the 
tax cut should be for the American people and what sector it 
should hit. I think too often we, as Federal employees, feel 
that we are not a part of that conversation. In fact, we are 
the answer to some of the solutions to provide those tax cuts 
for other Americans, and I think that we feel unjustly put upon 
because of that.
    Mr. Mica. Thank you. Mr. Jackson.
    Mr. Jackson. This is one of my points. When you talk about 
seeking the avenues for recommending to the budget, one of the 
things that I think that this committee also needs to take a 
look at is if the taxes are not cut, then the need to reduce 
the Federal retirement benefits decreases.
    So, when you are talking about some of the ways of what you 
do, and although I have been in Washington only 3 years as the 
president of NARFE, I do know that for the past 10 years, when 
NARFE has appeared before this committee or the committee 
dealing with civil service and we have testified contrary to 
what the recommendations were, we still ended up with $50 
million in cuts, delays in COLAs.
    Mr. Styles recommended or talked about his years with the 
Federal Government. I have been retired for over 25 years, and 
I was forced into a reduction in force as a part of the Federal 
Government, and I can tell you that when you are forced into a 
reduction in force at the age of 50, it is not a pleasant 
experience for anyone.
    And many of the people today that are faced with this, of 
having to go out and find other jobs because they have been 
reduced, I think that sometimes we lose sight of the pain that 
is being inflicted on some of those people also. But they were 
a part of the Federal Government, and they thought they spent 
25 or 30 years in the position that they thought that they were 
doing something and that they were contributing to the country, 
and now suddenly they find that they are no longer a part of 
that.
    When you were talking about, and I know, having talked with 
you previously, I know how you feel about the Medical Savings 
Account. And we have also talked, and you know that I am not 
totally opposed to this, but I want to remind you that under 
the Kennedy-Kassebaum bill there is a pilot under that and also 
that the Congressional Budget Office, in their report last 
year, in their report they said that the MSAs cost money, not 
save it.
    So if you are planning on the MSAs for the Federal 
community, particularly for retirees, I would ask that we be 
very careful on that, because there is no history at this 
particular time on retirees going into such a plan, and I would 
hope that this would be seriously considered, that you think 
that there is a lot of savings, that we be very careful that 
perhaps there is not.
    Mr. Mica. Thank you, Mr. Jackson. Mr. Cunningham.
    Mr. Cunningham. Oh, I have been champing at the bit over 
here. I will tell you what. I have not been to town long. I was 
elected at the last convention, and I took office November 1st, 
and the reason I ran was because I am a Federal employee, proud 
of it. I will have my 25th year coming up in June, and I am the 
son of a retired Federal employee, and I am very proud of that.
    And I was sitting home, and I am seeing all these cuts that 
are coming by, and not only as a Federal employee, but as a 
citizen of this great country, I know what we do for America 
every single day, and I am thinking, wait a minute. If we get 
rid of the best workers we have, we are going to be in really 
bad shape as a country.
    So I say, well, what can we do? Let me look at this 
problem. I am a very simple man from east Texas. Let me start 
off there. So I look at things very simply. Now, if you want to 
know what it costs to employ Federal employees, that 
information is handy. It is very available.
    Now, when I came to town here, I asked my staff to find out 
what we pay for contractors, what does it cost us. Now, I have 
got some really bright people, let me tell you, but we had a 
real hard time getting that information, but we did get a New 
York Times article that I wanted to share with you today.
    And in this article, and it is March 18, 1996, Monday late 
edition, and in here they have a John Koskinen quote, and he 
says that the Government spent $103 billion in salary for 
Federal employees in 1995. And then over here he made a quote. 
It says: ``Overall, Mr. Koskinen acknowledged the government 
does not know how many private workers it is paying for. `You 
can use any number you want,' '' he said, ``but whatever it is, 
it is a lot of people.''
    Now, I just want to know what we are paying these folks. 
And do they take an oath? No, sir, they do not. They come and 
they go and there has been plenty of evidence provided to this 
Congress or to past Congresses that says that Government 
employees are a bargain at any price.
    So if you want to save money, $6.6 billion, that is a drop 
in the bucket. We can find that for you, sir. I can assure you, 
give us an opportunity, and there is one thing that my 
colleague said over here. With these partnerships that we have 
set up now, some of them are working very well.
    There are other cost savings. So if we are talking about 
$6.6 billion, that is a piece of cake. We can show you how to 
find that money.
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    Mr. Mica. Thank you, Mr. Cunningham, and I appreciate your 
suggestion. That is a new suggestion. I know we have talked 
about contract employees before, but we would welcome--if you 
could find $6.6 billion, we will not only welcome it; we will 
hold a dinner in your honor here.
    Mr. Tobias. Mr. Chairman.
    Mr. Mica. I am not joking, but I sincerely welcome any 
suggestions and concrete proposals that you have. Yes, very 
briefly, Mr. Tobias. I want to give everybody a chance.
    Mr. Tobias. Mr. Chairman, the President is proposing $899 
million savings in the first year, $6.2 billion over 5 years. 
The people I represent in the Internal Revenue Service in 1995 
increased the amount of revenue that they collected by $833 
million. Now, Congress then decided in 1996 to eliminate all of 
those folks who had made that increased contribution.
    I believe that we have to look at Federal employee pay and 
contributions in that context, and if this committee wants to 
just look at its $6.2 billion and whacking at Federal 
employees, that is one thing, but a solution to this problem 
would be to tell the people that I represent that we want $833 
million more, and I can tell you, we can get that and a heck of 
a lot more and solve this problem and allow Federal employees 
to be paid what they ought to be paid.
    Mr. Mica. Well, again, I thank you. What I would like to do 
is give Mr. Holden an opportunity to question, and maybe you 
can relay some of your additional comments, but still I am very 
sincere about hearing your recommendations. Mr. Holden, you are 
recognized.
    Mr. Holden. Thank you, Mr. Chairman. I want to thank the 
panel for their testimony today.
    A couple of you have testified that the Federal employees 
and retirees have contributed more than $220 billion over the 
last 20 years toward deficit reduction through cuts in their 
pay and benefits. I believe, Mr. Tobias, you gave a few 
examples. I am just wondering if you could give me a detailed 
explanation of the actions taken by the Congress or past or 
present administrations to produce that result.
    Mr. Tobias. The $220 billion is based on a GAO report 
updated by the Federal Employee Task Force. It is a very, very 
detailed amount, and I will be happy to submit it to you and 
submit it for the record.
    Mr. Holden. I would appreciate that. What evidence is there 
that the lack of pay comparability has hampered our efforts to 
recruit and maintain a competent workforce?
    Mr. Tobias. The evidence is quite ample. I think that Mr. 
Styles mentioned the fact that do you recommend Federal 
employment to your children, and the answer is, no, you do not. 
And when you ask people, when you look at the people who go to 
colleges and you ask college students, ``Are you going to apply 
to the Federal Government for a job?'' the answer is no. When 
you look at the age of the workforce, you see it aging every 
year. New people are not attracted to the Federal workforce.
    So I think that all the objective evidence shows that the 
Federal Government is not competitive.
    Mr. Holden. Anyone else?
    Mr. Styles. Yes, sir. In fact, he gave me another thought 
as I was coming across this one here. One is the hollow 
workforce that we are creating, quite frankly. You are losing 
people at the top. You are down sizing in such a dramatic 
fashion that you are forcing people out at the bottom. So the 
average age of the Federal workforce is rising over time. And 
not to belabor that, but what this does to our workforce is as 
that again workforce leaves, you have nobody with the 
experience and knowledge to take their place. OK? You have not 
had that ability to train people over time to take the higher 
positions.
    A second part that you talked about, you mentioned schools. 
One of the things that we have done in our organization is we 
have tried to get out and get involved in the communities so 
that we can show the communities, especially the colleges, that 
we are a viable workforce and we are a career to be chosen by 
students in colleges.
    The Federal Managers Association itself has given to 
scholarship programs. We have been part of the building of 
universities themselves and give plaques, even a plaque to say 
``The Federal Managers Association'' to represent all of us in 
the Federal Government. That is how bad things are. People do 
not look to the Federal Government as an employer; only as a 
last resort of employment.
    Mr. Holden. Mr. Cunningham, anything to add?
    Mr. Cunningham. Well, the only thing that comes to my mind, 
Congressman, is I was president of a St. Louis local, and we 
experienced a BRAC action there, and as president, the local 
news media there in St. Louis came to the house, and they were 
interviewing my family and I and trying to get, you know, our 
reaction to the bad news, and they started with me, you know, 
and we would go through all this.
    And they get to my 22-year-old son, and they say, well, 
your dad says he loves his job, although he is going through 
all these problems, and his father, or your grandfather, is a 
retired Federal employee. Do you plan on following in his 
footsteps? And he said, not unless my dad can clean it up.
    And that is basically the way he and his sister, my 
daughter, feel. There is an honorable thing about coming in and 
serving your country as a civilian, but the way that we treat 
our own workers today, it makes people take a second look at 
it, absolutely.
    Mr. Holden. Mr. Cunningham, you made a reference to 
``silent RIFs'' that would likely result from increasing agency 
retirement contributions. RIFs are already occurring at 
agencies as a consequence of planned down sizing. What, if any, 
special problems would be caused by these silent RIFs?
    Mr. Styles. I can jump at that, if you would like.
    Mr. Cunningham. Please do.
    Mr. Styles. OK. Silent RIF. I have to say this. I am very 
proud of the term because I think I invented it. I was sitting 
on the base one day with my colonel, and the colonel was 
starting to look at his FTEs and the dollars and all this kind 
of stuff, and how am I going to pay these people. They have 
given me the slots, but they have not given me the money to pay 
the people.
    Now, if the agency is not funded fully for the mission 
requirements, there is no way they can pay their people, so 
when you talk about an additional funding from the agencies, if 
it is not allocated to them in the first place, they have to 
look elsewhere for the savings; and what they do is force 
people out, not with a stated RIF, but if you want to call it 
``management to payroll,'' we can call it that, if you will.
    But that is what the silent RIF is about, not being funded 
at the level your mission requires you being funded.
    Mr. Cunningham. Now, one of the biggest outgrowths you are 
going to get from this is whenever they go in, they cross-level 
an agency, you leave a lot of holes in your department-wide, 
from department to department. It leaves an agency handicapped 
in that sense for your skills mix.
    Mr. Holden. Mr. Jackson, you made reference to how much 
money the color of the label costs the average retiree. Did you 
say $700--what did you say, sir, $700----
    Mr. Jackson. Over a 5-year period.
    Mr. Holden. $700-and-some over a 5-year period. How much 
money will the increased employee contribution take out of the 
pocket of the average Federal employee?
    Mr. Tobias. Well, the average Federal employee is about 
$42,000, so 1.5 percent times that times five. I am not quick 
enough to answer your question.
    Mr. Styles. I would believe, though, that we could find out 
that information for you and provide it to you, sir.
    Mr. Holden. OK. Thank you, Mr. Chairman.
    Mr. Styles. If I might, I wanted to answer one of the 
questions earlier, and it was, how are we going to find some 
savings? And the $108 billion in contracting out came up--Mr. 
Cunningham brought it up--and it is also in my testimony that I 
proposed, not what I gave from the floor here. But H.R. 1409, 
which was introduced by Delegate Eleanor Holmes-Norton in the 
104th Congress, was to reduce the $108 billion the Federal 
Government spends annually on contracting out for services in 
order to fully fund civil service pay adjustments.
    Now, I would point to this $108 billion in the way that Mr. 
Cunningham did. We do not know how much money we spend on 
contracting out. We do not know how many people work for the 
Federal Government. And I say this to you, it might sound 
strange to say. We could say that there are 2 million people 
working for the Federal Government, but, in fact, everyone who 
is a contractor works for the Federal Government, and they are 
paid by the Federal Government and out of the taxpayer's 
pocket.
    There are anywhere from 8 million on up Federal employees, 
if you will. The people that work for Hughes Aircraft, General 
Dynamics, all of these corporations that work for the Federal 
Government through contracts are paid by the American people; 
and every time we talk about moving things from the public 
sector to the private sector, we give the impression to the 
American people that we are shrinking the size of Government 
when, in fact, we are moving it across to the other sector 
being paid out of the same pot.
    The Federal Government has not shrunk. We may have lost 
more Federal employees on the one side, but we have gained them 
on the private sector side. And one of the things that really 
bothers us, the folks sitting at this table, is the fact that 
invariably we have seen people underbid to get our jobs and 
then escalate the costs, and there is nobody tracking those 
costs. And we have come many times before Congress and asked to 
put some mechanism in place to track the costs of contracting 
out and to see where escalation is.
    There is a good place to save some money, I do believe.
    Mr. Mica. Well, thank you, Mr. Holden. All right. Gentlemen 
of the panel and the organizations you represent and others 
that are out there, I am still going to challenge you and ask 
you to come forward with some ways in which we can provide 
better benefits to our Federal employees, health care benefits, 
retirement benefits, and to come up with some other ideas of 
savings. Now, Mr. Cunningham has recommended one in looking at 
contracts, but I think we have got to look at some of these 
fundamental problems.
    Two years ago, I proposed an alternative relating to 
capping the amount of Federal payment at the 1995 level 
adjusted for inflation in FEHBP. And I asked Jim King, the 
director, to calculate what that would have done, my original 
proposal. And I will give each of you a letter that I received 
January 10, 1997 that said, we would have saved $820 million in 
health-premium benefits during the past 2 years, and this would 
have put $200 back into the pockets of FEHBP enrollees. So this 
is the kind of suggestion that I am looking for that result in 
some benefit to our employees and some benefit to the employer, 
which is the Federal Government.
    The second area that we are facing a crisis in, and I keep 
bringing this up before us, and this is not just a hearing on 
this issue, but it is one we have to face. And I will provide 
each of you with this cash-flow of CSRDF, which was presented 
to me, this latest cash-flow. And it shows, in 1977--and I 
should correct my opening statement. The $24 billion net outlay 
from the Treasury was in 1992. In 1997, that grossed $37 
billion. That is net outlay. The total outlay is $41 billion in 
1997, and the amount of employee contribution is $4.8 billion. 
The agency contribution is $11 billion.
    Now, to tell you how bad this problem gets and that we need 
to be anticipating it, this year it is only $30 billion 
anticipated in net outlays. And I know we can look at CSRS, 
they can come back and tell me that there is no problem with 
funding as long as the Federal Government continues pouring 
money out of the general treasury into it. In 20 years, this 
amount grows to the net outlay of $107 billion. That is equal 
to the entire deficit that we ran up last year.
    And the figures get even worse beyond that. We have Federal 
retirees living longer. We have fewer contributing. You 
testified we have a smaller force, so this is going to create a 
problem. There are no funds in the trust fund that can be 
invested in what I consider alternative methods, which would 
provide, or could provide, a better retirement benefit. We do 
not have enough options, in my opinion, at this point for our 
Federal retirees.
    So we have a couple of areas we could look at. I solicit, 
within the next few weeks, your hard, concrete proposals. I 
cannot go to Mr. Kasich and just say no. We have done that. We 
tried that before, and we have punted from the subcommittee, 
and the results were not what I like. So, I am asking you all 
to work with us and the members of the subcommittee to come up 
with any positive improvements that we can make. And I know 
they are there, and I know you know some of them. Mr. Tobias.
    Mr. Tobias. I was just going to say, Mr. Chairman, I am 
very concerned about this idea of saving $800 million over the 
last 2 years because over the last 9 years, if we had the 
proposal which would limit increases to inflation, it would 
have cost 37 percent, or $80 a month, over the last 9 years. I 
think that we may have had over the last 2 years significant 
savings, but people who come to the Federal Government as a 
career are not looking at 2 years; they are looking at a life 
time, and so over the last 9 years it would have been 
significantly more costly to have that kind of a system.
    And, second, I would say that when we calculate the numbers 
that you cite, $30 billion and $107 billion, and so forth, I 
think it somewhat masks the fact that we have two systems in 
the Federal Government: the CSRS system, where the workforce is 
aging and the system is going out of business; and the FERS 
system, which is a private-sector plan which is virtually self-
funding.
    So the idea that the ever-increasing numbers of FERS 
participants would be required through increased contributions 
to be funding the CSRS system I think is contrary to what 
Congress promised in 1986 and contrary to what makes good sense 
for the FERS employees. So I am certainly sympathetic to what 
you say about trying to find savings, but I would hope that the 
statements about bipartisanship would, in fact, yield a 
bipartisan just say no, because last year there was not any 
agreement on the committee, and the full Budget Committee 
acted.
    If there could be agreement on this committee, I think that 
it would be seen in a quite different light than what occurred 
last year.
    Mr. Mica. Thank you. Mr. Styles, did you want to comment?
    Mr. Styles. The comment I would like, perhaps if we are 
getting ready to close, is this. I thank you for your 
challenge, and I thank you and the committee for your real 
dedication to solving this problem. I do believe that we have 
problems that exist, and we are not going to get around it. We 
have to work together to solve them, and our association, and I 
am sure the folks at this table, will work in partnership with 
you to do exactly that. Thank you.
    Mr. Mica. Mr. Jackson.
    Mr. Jackson. Mr. Chairman, we want to work with you in the 
committee, but I can tell you that it is very, very difficult 
to make a recommendation to a committee when we, in effect, are 
the only single group, that we are being asked to contribute 
$1.5 billion to this, and we are the only group of senior 
citizens that are singled out. And yet this committee, or you, 
would suggest that we come forward in helping you in solving 
this problem.
    If we are going to contribute $1.5 billion, I think we have 
helped solve the problem. I do not agree with the problem, and 
I certainly take exception to it, and I can tell you that 
probably in the 3 years that I have been sitting at my desk, I 
have received, since this proposal was submitted by the 
President, more vicious language crossing my desk over this 
proposal than anything that has happened in my administration.
    The members, the people that devoted their lives to the 
Federal Government, they not only dislike it, that it is 
discrimination, but they are angry, and I mean they are really 
angry.
    So we certainly will help you in any way that we can, but I 
think that every time, as I said before, every time in the past 
10 years that we have come before the committee and made 
recommendations or attempted to work, we still ended up with 
the cuts, and that is hard to take. If you make a 
recommendation in sincerity, then somewhere along the line we 
have to be considered also.
    Mr. Mica. Thank you, Mr. Jackson. As I said in my opening 
statement, I think two of these proposals are blatantly unfair. 
One is singling out Federal retirees. The other that I cannot 
find a justification for is imposing this additional 
contribution on postal folks; and we are going to hear from 
them in a few minutes here. But, again, our charge is to look 
at what the President and this administration has proposed 
today, and then if we can work with the Budget Committee and 
try to achieve something that protects our Federal employees. 
And if there is not a justification for them to contribute 
additionally to retirement, or that cannot be fenced off, as I 
have advocated, then we will just say no.
    But if I can come forward with any positive suggestions 
that you have it will help us with both the Budget Committee 
and the administration.
    Finally, Mr. Cunningham.
    Mr. Cunningham. Also, NFFE looks forward to offering some 
proposals for you to consider. We will get to work on that just 
as soon as we leave here.
    Mr. Mica. Well, I was going to dismiss you all. I 
understand Mr. Waxman wanted to ask a question, and he is on 
his way over here, so I want to extend that courtesy to him. In 
the meantime, I do want to thank you again.
    The way we ran the subcommittee the past 2 years is to try 
to seek input from all organizations and individuals. Today, I 
will also leave the record open for at least 2 weeks, so that 
if you have additional comments, suggestions, recommendations, 
whether you are on the panel or outside the panel, we will 
welcome them and make them a part of the record. I want to now 
give an opportunity to the ranking member of the full committee 
to offer some questions. We have Mr. Tobias, Mr. Styles, Mr. 
Jackson, Mr. Cunningham representing these organizations. Mr. 
Waxman, you are recognized, sir.
    Mr. Waxman. Thank you very much, Mr. Chairman. I want to 
commend you for holding this hearing. It is important that we 
look at the various budget alternatives. We are all trying to 
figure out how to balance the budget, but it is my belief that 
Federal employees have done enough in terms of balancing this 
budget.
    I think we ought to look at eliminating a lot of the 
corporate welfare that still exists, we should eliminate waste, 
fraud, and abuse where they may exist, and take on some of the 
bigger issues where our budget is out of control. I do not 
think it is fair to go to the public employees, who have 
already sacrificed, and ask them to sacrifice more. I certainly 
do not think it is fair to ask them to be treated differently 
in terms of their COLA increases than those who are on Social 
Security or those who are on any other program.
    I am sorry that I was not here for the testimony that you 
have given orally and will not be able to stay here, but I have 
had a chance to review it. I think the testimony you have given 
us in this hearing is a point of view that I strongly want to 
identify myself with.
    Thank you very much, Mr. Chairman.
    Mr. Mica. Thank you. Thank you for joining us, Mr. Waxman. 
I look forward to working with you in a bipartisan fashion. 
Some of the individuals on the panel have expressed similar 
comments today, and they have all indicated a willingness to 
work together in the months ahead, particularly as we tackle 
some of these tough budget questions. Do you have something 
else?
    Mr. Waxman. I did want to add the fact that our committee 
has a number of subcommittees meeting at the very same time. I 
am right now participating in a hearing on the Superfund issue, 
so I am going to have to excuse myself. I did want to come in 
here and make this comment. And to you, Mr. Chairman, I want to 
pledge to work with you in a bipartisan way, so that we can 
deal with the matters before us.
    Mr. Mica. Thank you, and I look forward to joining you on 
the Superfund panel shortly.
    Well, I do want to thank you for participating. This is an 
open panel, and if you have got positive suggestions, we will 
work with you in the best interests of our Federal employees 
and our Federal retirees. Thank you, and you are excused.
    I would like to call our next panel. We have two witnesses, 
Hugh Bates, who is president of the National Association of 
Postmasters of the United States; and Mr. William Brennan, 
president of the National League of Postmasters. We have asked 
them to join us today and talk about the impact of the 
President's budget on their employees. And, gentlemen, as you 
know, this is an investigation. It is an oversight 
subcommittee. It is our custom to swear in our witnesses, so if 
you would stand and raise your right hand.
    [Witnesses sworn.]
    Mr. Mica. And I think the witnesses have also complied with 
the House Rule XI and Committee Rule 12, and I would like to 
welcome you today. Also, I think you heard the instructions 
that we will submit lengthy testimony for the record and hope 
that you can summarize your comments so we will have an 
opportunity for questions. We have had people coming and going, 
as you have heard today. There are some simultaneously 
conducted hearings this morning.
    Welcome, Mr. Bates. You are recognized.

 STATEMENTS OF HUGH BATES, PRESIDENT, NATIONAL ASSOCIATION OF 
POSTMASTERS; AND WILLIAM BRENNAN, PRESIDENT, NATIONAL LEAGUE OF 
                          POSTMASTERS

    Mr. Bates. Thank you, Mr. Chairman. My name is Hugh Bates. 
I am permanently assigned as Postmaster at Clanton, AL. That is 
a community of about 8,000 people in central Alabama.
    At the present time, I am on leave of absence from the 
Postal Service, serving here in the Washington, DC, area as 
national president of the National Association of Postmasters. 
I represent approximately 24,000 active Postmasters and 20,000 
retired Postmasters, which makes up our Association.
    Before I entered into the Postal Service some 32 years ago, 
I also gave 4 years of my life that I was proud to do with the 
United States Marines and fought with those in Korea, so I have 
quite a long record in Government service, and I am proud of 
every day of it. I thought I could get by without my glasses. I 
am not going to make it.
    Mr. Mica. Go right ahead.
    Mr. Bates. Mr. Chairman, the National Association of 
Postmasters, first of all, we want to commend President Clinton 
for submitting to Congress the 1998 budget that boldly and 
responsibly addresses the needs of the American people while 
projecting a balanced Federal budget over the next 5 years.
    Let me assure you, the 44,000 people that I represent, we 
commend it, we commend this Congress, and we hope that you are 
able to balance the budget because we believe in it. We do not 
think that our children and our grandchildren should be 
burdened with debts that we incur and the interest that we have 
to pay, that they should have to pay those. So we hope that you 
are able and hope that we can help you some way to do it.
    We think in the Postal Service we have done our part. In 
1995, we operated very efficiently and came out with a project 
of $1.8 billion-plus in the black. Last year, in 1996, we 
operated and come out in the black with $1.5 billion. I do not 
know of any other Federal agency that can say that. Maybe there 
is, but I have not heard of it. But I think we are on the right 
track to doing what we need to be doing. Not that I agree with 
everything that we do. However, we are on the right track.
    However, our organization, NAPUS, which is an acronym for 
the National Association of Postmasters, we cannot support a 
plan that will delay until April 1 of each year, from 1988 
through 2002, the COLA payments to Federal and postal retirees 
and no delayed payment to individuals who receive Social 
Security with their military retirement benefits.
    NAPUS also believes it is wrong for the Federal Government 
to single out one group of Americans to contribute more in 
budget savings than others.
    The argument advanced by some that Federal and postal 
retirees can more easily afford the COLA delay than workers on 
Social Security is unfounded. While it is true that earned 
annuities of retired Federal and postal employees are generally 
larger than Social Security or military retirement benefits, it 
must be remembered that Federal employees currently pay 7 
percent of every dollar they earn toward their Civil Service 
Retirement or their FERS retirement, while Social Security 
recipients pay for the calendar year, according to my 
estimation, on their first $65,400.
    The Fund for Assuring an Independent Retirement, with the 
acronym of ``FAIR,'' an organization of which NAPUS is a 
member, sent a letter to President Clinton on January 15, 1997, 
urging President Clinton not to include any further reductions 
in the earned compensation of our civil servants, our postal 
workers, and retirees in his 1988 budget recommendations. 
According to FAIR, during the previous 20 years, employee and 
retirement compensation had been reduced by $200 billion for 
deficit reduction.
    The proposed delay in COLA payments would cost Federal and 
postal retirees an estimated $14.2 billion over 5 years. If 
Congress accepts the report of a special commission that the 
Consumer Price Index overstates inflation by as much as 1.1 
percent, Federal and postal retirees would have their COLA 
further reduced. How long can we expect the Federal Government 
to be balanced on the back of its dedicated and loyal 
workforce?
    Mr. Chairman, NAPUS respectfully urges the Congress to 
support the sense-of-Congress resolution sponsored by 
Representative Connie Morella of Maryland that says the 
effective date for retiree COLAs should remain January 1 of 
each year.
    In addition, Mr. Chairman, NAPUS has received no Federal 
grants, and no contracts have been awarded to this organization 
in the past 2 years. I would also like to say that the Federal 
Government or the Postal Service receives no contributions from 
Congress other than that for blind people, schools, and 
libraries, revenue foregone. Other than that, we receive no 
contribution from Congress, and we are paying our own way at 
the present time.
    Thank you for inviting NAPUS to share its views on how the 
President's fiscal-year budget would impact Federal and postal 
employees and retirees. We urge you to remember our concern 
that the administration's budget plan moves through Congress.
    This concludes my remarks, but I will be glad to answer any 
questions that I might. Thank you.
    [The prepared statement of Mr. Bates follows:]
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    Mr. Mica. Thank you, Mr. Bates. I would like to welcome 
William Brennan. Mr. Brennan, you are recognized.
    Mr. Brennan. Thank you, Mr. Chairman. I am Bill Brennan, 
president of the National League of Postmasters. On behalf of 
America's active and retired Postmasters and other postal 
managers and Federal employees whose interests are represented 
by the National League of Postmasters, I thank you for inviting 
me here to comment on that portion of the President's budget 
proposal which includes the Civil Service Retirement benefits.
    I believe these proposals are fairly identical to those 
proposed last year by the Senate and the administration. Our 
Postmasters serve in every corner of this country on every day 
of the week. While their jobs can be very demanding, they are 
proud of the work they do and of their important role in 
providing public service. I believe that it is time for elected 
officials on both ends of Pennsylvania Avenue to acknowledge 
the contribution of these civil servants and to stop using them 
as a possible source of funds for every new budget-balancing 
effort.
    While most of the compensation package for Postmasters is 
determined through consultation with the Postal Service rather 
than being set by Congress, as is the case for most other 
agencies, our retirement and health benefits remain part of the 
same program serving all Federal civil servants.
    It has become an annual exercise here in Washington to 
suggest using Federal retirement programs as a way to help 
balance the budget. Postal employees and other civil servants 
may tire of this exercise, by they have come to expect it.
    So as we begin another budget-making session, I want to be 
very clear that the League continues to oppose the singling out 
of civil servants to carry the load. We continue to oppose 
attempts to modify the Civil Service Retirement System and 
FERS, which would result in reduced benefits. We believe that 
the current Federal retirement plans are as much a part of the 
employee's compensation package as the agreed-upon wages, and 
we concur that the Supreme Court decision that defined Federal 
retirement as a form of deferred compensation for service was, 
in fact, appropriate.
    We go on record opposing the various proposals to reduce 
the retirement benefit in the name of deficit reductions or for 
other reasons. Those proposals that would mean going from the 
``high three'' to the ``high five,'' raising the retirement 
age, increasing the employee contribution, and, of course, 
reducing or delaying retirees' COLA.
    It is my understanding, and it has been said here many 
times this morning, that there are no similar proposals to 
delay COLAs for Social Security recipients or military 
retirees. Delayed COLAs are proposed for Federal postal 
civilian retirees only, and I ask why.
    In the past, various OBRAs required COLA delays in the name 
of reducing the deficit, and yet, after all of this sacrifice 
on the part of these people, the deficit still remains, and our 
elected officials want to again return to this group of 
retirees for more sacrifices.
    I would urge every member of the Government Reform and 
Oversight Committee to co-sponsor House Concurrent Resolution 
13 that Congresswoman Morella has introduced. I think this is 
very appropriate, and I do commend her for introducing this.
    Now, asking for an increased contribution is much the same 
as creating a special tax on civil servants, but to seek an 
increased contribution from postal employees would be an even 
greater tax because it would place an extra burden on employees 
of an agency which has already made a contribution per person 
that is larger than any other Government agency.
    It is hard to use the usual excuse of the unfunded 
liability when asking for more money from the Postal Service. 
Asking more from us is selective taxation, and I guess in this 
case we would prefer not to be among the selected.
    Postal retirements do not contribute to the national debt. 
The Postal Service is required by law to make additional 
contributions which are not required of other agencies. Since 
1974, the Postal Service has been required to pay over a 30-
year period amounts to amortize any increase in the deferred 
liability resulting from an increase in pay on which retirement 
benefits and contributions are based.
    Also, the OBRA of 1990 requires Postal Service funding of 
the cost-of-living adjustment paid to all former employees of 
the Postal Service who retired since July 1, 1971, and their 
survivors. Because of these contributions, there are no 
unfunded liabilities for retirees of the Postal Service, and, 
therefore, no reason for the Postal Service employees to be 
included in this proposal.
    The League was disappointed to learn the executive branch 
had chosen to include proposals to delay COLAs and increase 
employee contributions in its recently released budget. We had 
requested that that section affecting Federal benefits be 
removed. Unfortunately, we were not heard. However, the League 
is willing to continue working with the administration to 
correct this inequity.
    Now, we are appealing to both political parties, to both 
Houses in the legislative branch to resist the temptation to 
place a special tax on Federal civil servants for the purpose 
of balancing the Federal budget. If sacrifices are required, 
all Americans should be asked to give in an equitable manner.
    You also requested a comment about the change in the health 
premiums, effective fiscal year 1999. I have asked our 
administrator of the health plan which we oversee, the 
Postmasters Benefit Plan, to give me some data on what he saw 
the impact to be. Mr. Chairman, he said that had that been in 
effect in 1996, he would expect that there would have been a 10 
percent increase in the employees' contribution toward their 
health insurance. Now, if that number remains consistent, we 
would anticipate that that also would be the status we would 
find when we reach 1999.
    We view this as improper and unfair and would ask that some 
action be taken to negate the impact of that change that is 
coming up.
    Mr. Chairman, I thank you for this opportunity to present 
our position on the important issues. As always, I look forward 
to working with you and your staff, and your committee, to find 
solutions to these problems. With that, I would entertain any 
questions that you may have.
    [The prepared statement of Mr. Brennan follows:]
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    Mr. Mica. Thank you, Mr. Brennan and Mr. Bates. I just told 
the staff we have had all male witnesses today. We ought to be 
able to find some female witnesses from these organizations, so 
I am going to make a specific request in the future, there has 
got to be some equity in this. But, Mr. Brennan and Mr. Bates, 
I agree with you that there is no real reason to require a 
postal community to contribute more to the retirement fund.
    I have held up here for the former panel this chart that 
shows the cash-flow into the retirement fund, and it, in fact, 
shows that these OPM figures show that in fiscal year 1997 the 
postal community will contribute 54 percent of that cash-flow. 
By 2015, that will increase to 81 percent. More importantly, 
these contributions equal the full normal cost of retirement as 
computed by OPM actuaries. Together, the postal workers and the 
Postal Service are already paying, in my opinion, and according 
to these tables, their fair share.
    [The information referred to follows:]
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    Mr. Mica. This is why, in the last Congress, as you will 
recall, I steadfastly opposed increasing the contributions from 
postal workers, and I am pleased to see that Moe Biller, the 
head of the American Postal Workers Union, recognized it in his 
statement for the record, and let me quote him: ``In fact, in 
the tax-cut bill of the 104th Congress, postal workers were 
specifically excluded from the proposal to increase 
contributions to the retirement system.''
    [The prepared statement of Mr. Biller follows:]
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    Mr. Mica. Mr. Brennan and Mr. Bates, perhaps one of you can 
answer a question that has puzzled me for some time. Why did 
the postal unions and employee groups agree to have their 
members saddled with the unnecessary hikes that were proposed 
as part of the Stevens plan, if you will recall, in 
negotiations with the Senate? Mr. Bates.
    Mr. Bates. My understanding was that at that time there was 
a proposal to increase our retirement years from the ``high 
five'' to the ``high three'' and to budget out or to balance 
out or whatever you want to call it that it was agreed by many 
that if we would take a one-half-percent raise, then it would 
stay at the ``high three'' rather than the ``high five,'' and 
it was felt like that while we were working, if we had a choice 
between the two, that we could afford to pay the one-half of 1 
percent while we were working so that it would not affect our 
retirement and make it much less when we did retire. That is 
about the only reason I can give on it.
    Mr. Mica. Mr. Brennan.
    Mr. Brennan. I would concur with that, that similar to what 
you said to the earlier panel today, that you are looking for 
$6.5 billion, and it has to come from somebody, so it came down 
to a point last year, what is the least offensive option? If 
something has to happen, what is the least offensive? Given our 
druthers, no, of course not, they would not want to be 
involved. But it is like saying, which of your children do 
you--if you have to get rid of one, which one do you get rid 
of? Tough choices, hopefully choices no one will ever have to 
make.
    Mr. Mica. Well, I am hoping that we do not have to get rid 
of any of our children this time around.
    I offer to you the same suggestions and opportunity that I 
offered the previous panel, if you have any recommendations for 
savings. I think, Mr. Bates, in your testimony, you pointed out 
how the Postal Service is running surpluses and in a positive 
vein.
    Unfortunately, in the President's proposal, you get hit 
twice unfairly, once in the increased employee contributions, 
for which there is no basis because your plan is funded, and we 
do have some tangible assets there. You are not part of the 
problem, and you should not be asked to pay for the problem.
    The second great disparity is that with Federal retirees, 
and you are also lumped into that with all other Federal 
retirees for a delay, which I view as totally unfair in 
singling out Federal employees, whether they be postal or other 
Federal employees. But, again, I will ask you, do you have any 
other recommendations that could come from within our 
jurisdiction?
    Now, you know, we can talk about corporate welfare and we 
can talk about the tax cuts and we can talk about all those 
other things, but is there anything you can recommend to the 
committee--and it does not have to be now; you can submit it 
later to us--that we can present to Mr. Kasich and the Budget 
Committee or the administration to counter their proposals? 
Recomendations that say, these are some things that we can do 
to increase benefits, to bring down costs for our employees, 
and costs for the government. Do you have any suggestions 
today, Mr. Bates or Mr. Brennan? Mr. Bates.
    Mr. Bates. Today, I do not; and I think I could have in the 
next 2 weeks because I have 900 Postmasters coming into 
Washington starting Saturday. They will be here for a week, 
what we call our Annual Leadership Conference. It is our 
leaders from across all 50 States. I am sure that some of those 
people are going to be able to give me something that I can 
bring back to you; but, today, no, I do not have any.
    Mr. Mica. OK. Mr. Brennan.
    Mr. Brennan. The followup that has been suggested earlier, 
and it is one of the things on my proposed list, is the 
contracting-out costs. They are running wild every place, 
including in the Postal Service. It is a way to transfer a cost 
from an employee cost over to another line. Yet, the total cost 
is there.
    Other things perhaps might be to combine some of the 
jurisdictions for Federal retirement, military retirement, and 
Social Security instead of treating each one totally separate, 
each committee or subcommittee addressing each of these things 
totally independent, try to make some commonality in how you 
approach things such as deferred-COLA increase, whatever it 
happens to be.
    It is tough to provide better benefits and still come up 
with a savings. It is tough to even maintain benefits and come 
up with a savings. And given the fact that particularly in the 
Civil Service Retirement System, as that base of people paying 
in dries up and in less than 50 percent of the Federal 
employees now, the income to that program is going to continue 
to drop. And, yes, for some out years the expenses of that will 
continue up. But at some point in time, then it will cycle back 
down as people have left that system permanently.
    But we will also look at things. We have people coming in 
for our legislative conference the week after Mr. Bates' group, 
and some of them will be calling on you and your members, as I 
believe you will all be back in session; and, hopefully, we 
will have some thoughts for you.
    Mr. Mica. Thank you. Just for the record, and I think you 
alluded to it in your testimony, our calculations indicate, in 
fact, that the additional contribution imposed on postal 
employees would result in an overfunding of that account or 
that those funds would be used to offset some of the costs for 
other Federal employees. Is that your basic take on this, Mr. 
Brennan?
    Mr. Brennan. Yes. I think that every imaginable way of 
determining that the Postal Service has had a shortfall in 
funding retirements has been computed and assessed and paid. 
Now, unless there is something else out there that is going to 
come down the pike in the next year or so, I would think that 
we have our bill paid in full and perhaps even an advance 
payment.
    Mr. Mica. Mr. Bates.
    Mr. Bates. No, sir, I do not have anything else.
    Mr. Mica. The other area that is of interest to me is 
bringing down the cost of health care, both for postal workers 
and all Federal employees. The cost to the Federal Government 
or the Postal Service and the cost of the premium payer. I 
would welcome any suggestions or recommendations you have. I 
have thrown out several suggestions. One, I felt, at least for 
the 2 years since I have been here, is reduce some of the 
payments and premiums for our Federal employees. Another is 
looking at some options, MSAs and other avenues.
    So if you have any recommendations in that regard or any 
other alternatives to encourage individual retirement savings 
and opportunities, I would like to hear from you on that. Do 
you have any comment, Mr. Brennan?
    Mr. Brennan. Your position on the Medical Savings Accounts 
is well known to me, at least, and I am not sure that I totally 
agree with it. I think that the real answer is to control the 
costs that the providers of our medical benefits charge each 
and every one of us. In doing so, you would tend to drive down 
the rates.
    In trying to reduce the Government cost, if that is the 
proper term to use, in terms of payments to the employees for 
their medical insurance, the thing that we fear is that the 
young, healthy employee will use that like a savings account or 
a bank account, and he or she will not bother to provide 
themselves with the real medical insurance that they might 
need. You know, when you are young, you are invincible and 
nothing is ever going to happen to you, and as you get older, 
you find all these things start to happen to you.
    So we find that perhaps those people will not take a very 
healthy level of insurance and that the plans out there will be 
unduly burdened with a disproportionate number of folks who 
have higher medical needs, which in turn will drive their 
premium up. How you get around that, I do not know.
    Mr. Mica. The hearing that we held and the testimony that 
we took in indicated just the opposite: that, in fact, young 
people--who are healthier and have less disposable income--tend 
to ignore covering themselves with insurance because the 
premiums are high; and if they had options where there was a 
lower premium and some catastrophic coverage, they, in fact, 
are more likely to pick up both. That comes from the private 
sector and public sector experience that we looked at.
    But high premiums are forcing young people out of the 
market and hurting folks, and there is no indication that there 
is a cherry-picking that we can see from the experience. Of 
course, we will see from some of these demonstration projects 
how that works on a broader scale, but I am open to other 
suggestions and other retirement options or opportunities for 
our folks and welcome them.
    Mr. Bates, did you have anything?
    Mr. Bates. No, sir.
    Mr. Mica. Well, I want to thank both of you gentlemen for 
testifying today. I am hoping that the postal community, and 
you represent some folks who are Federal postal employees, does 
not cave to some of the President's proposals at this juncture. 
I think that there is some inequity proposed. We are all trying 
to get to the same point, a balanced budget, but I think that 
we need to look for the most effective way we can do it without 
hurting our employees and, particularly, the retirees who this 
will probably impact the most.
    But I appreciate your testimony, and I look forward to any 
other comments and suggestions that you have in the coming 
weeks. And, as I said, the record will remain open.
    If there is no further business to come before the 
subcommittee this morning, I will adjourn this meeting. Thank 
you.
    [Whereupon, at 11:25 a.m., the subcommittee was adjourned.]
    [Additional information submitted for the hearing record 
follows:]
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