[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
EXECUTIVE AND JUDICIAL COMPENSATION IN THE FEDERAL GOVERNMENT
(QUADRENNIAL COMMISSION)
=======================================================================
HEARING
before the
SUBCOMMITTEE ON THE FEDERAL WORKFORCE
AND AGENCY ORGANIZATION
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 20, 2006
__________
Serial No. 109-260
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
index.html
http://www.house.gov/reform
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COMMITTEE ON GOVERNMENT REFORM
TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut HENRY A. WAXMAN, California
DAN BURTON, Indiana TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida PAUL E. KANJORSKI, Pennsylvania
GIL GUTKNECHT, Minnesota CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio DENNIS J. KUCINICH, Ohio
TODD RUSSELL PLATTS, Pennsylvania DANNY K. DAVIS, Illinois
CHRIS CANNON, Utah WM. LACY CLAY, Missouri
JOHN J. DUNCAN, Jr., Tennessee DIANE E. WATSON, California
CANDICE S. MILLER, Michigan STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio CHRIS VAN HOLLEN, Maryland
DARRELL E. ISSA, California LINDA T. SANCHEZ, California
JON C. PORTER, Nevada C.A. DUTCH RUPPERSBERGER, Maryland
KENNY MARCHANT, Texas BRIAN HIGGINS, New York
LYNN A. WESTMORELAND, Georgia ELEANOR HOLMES NORTON, District of
PATRICK T. McHENRY, North Carolina Columbia
CHARLES W. DENT, Pennsylvania ------
VIRGINIA FOXX, North Carolina BERNARD SANDERS, Vermont
JEAN SCHMIDT, Ohio (Independent)
BRIAN P. BILBRAY, California
David Marin, Staff Director
Lawrence Halloran, Deputy Staff Director
Benjamin Chance, Chief Clerk
Phil Barnett, Minority Chief of Staff/Chief Counsel
Subcommittee on the Federal Workforce and Agency Organization
JON C. PORTER, Nevada, Chairman
JOHN L. MICA, Florida DANNY K. DAVIS, Illinois
TOM DAVIS, Virginia MAJOR R. OWENS, New York
DARRELL E. ISSA, California ELEANOR HOLMES NORTON, District of
KENNY MARCHANT, Texas Columbia
PATRICK T. McHENRY, North Carolina ELIJAH E. CUMMINGS, Maryland
JEAN SCHMIDT, Ohio CHRIS VAN HOLLEN, Maryland
Ex Officio
HENRY A. WAXMAN, California
Ron Martinson, Staff Director
Alex Cooper, Clerk
Tania Shand, Minority Professional Staff Member
C O N T E N T S
----------
Page
Hearing held on September 20, 2006............................... 1
Statement of:
Hornby, D. Brock, judge, U.S. District Court for the District
of Maine, chairman, judicial branch, Committee of the
Judicial Conference of the United States; Philip M. Pro,
chief judge, U.S. District Court for the District of
Nevada; Sean O'Keefe, chancellor, Louisiana State
University, former Administrator, National Aeronautics and
Space Administration; and Gary Burtless, John C. and Nancy
D. Whitehead Chair in Economic Studies, the Brookings
Institution................................................ 43
Burtless, Gary........................................... 63
Hornby, D. Brock......................................... 43
O'Keefe, Sean............................................ 61
Pro, Philip M............................................ 45
Walker, David M., Comptroller General of the United States... 18
Letters, statements, etc., submitted for the record by:
Burtless, Gary, John C. and Nancy D. Whitehead Chair in
Economic Studies, the Brookings Institution, prepared
statement of............................................... 66
Cummings, Hon. Elijah E., a Representative in Congress from
the State of Maryland, prepared statement of............... 16
Davis, Hon. Danny K., a Representative in Congress from the
State of Illinois, prepared statement of................... 12
Hornby, D. Brock, judge, U.S. District Court for the District
of Maine, chairman, judicial branch, Committee of the
Judicial Conference of the United States and Philip M. Pro,
chief judge, U.S. District Court for the District of
Nevada, prepared statement of.............................. 48
Porter, Hon. Jon C., a Representative in Congress from the
State of Nevada:
Prepared statement of.................................... 8
Prepared statement of Mr. Cook........................... 5
Walker, David M., Comptroller General of the United States,
prepared statement of...................................... 21
EXECUTIVE AND JUDICIAL COMPENSATION IN THE FEDERAL GOVERNMENT
(QUADRENNIAL COMMISSION)
----------
WEDNESDAY, SEPTEMBER 20, 2006
House of Representatives,
Subcommittee on Federal Workforce and Agency
Organization,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 2 p.m. in room
2203, Rayburn House Office Building, the Honorable Jon C.
Porter (chairman of the subcommittee) presiding.
Present: Representatives Porter, Davis of Illinois, Norton,
Cummings.
Staff present: Ronald Martinson, staff director; Chad
Bungard, deputy staff director/chief counsel; Jessica Johnson,
OPM detailee/counsel; Paul Sherry, DOE detailee/senior counsel;
Alex Cooper, legislative assistant; Tania Shand, minority
professional staff member; and Teresa Coufal, minority
assistant clerk.
Mr. Porter. I would like to call this hearing to order. I
would like to certainly welcome you all here today. We
appreciate your being with us, and we will appreciate testimony
from some of our experts and a few judges that are with us
today. We appreciate your expertise.
And in keeping with recent tradition, prior to moving into
the business of the hearing this afternoon, I want to take a
few moments to recognize an individual. As the chairman of the
Subcommittee on the Federal Workforce, I try very hard to
recognize some of the superstars that have been either retired
from the Federal work force or are currently part of the
Federal work force. Today I would like to recognize an
individual that is in the State of Nevada. Of course, there are
literally millions of dedicated individuals that work for the
Federal Government in and around the world. We've recognized
folks in Afghanistan and Iraq.
But in Nevada today, I have a gentleman that actually goes
by the name of Nevada's Knight in Shining Armor. Can you hear
us OK, Reggie?
Mr. Knight [via teleprompter]. Yes, I can hear you,
Congressman Porter.
Mr. Porter. We appreciate your being with us, and I will be
formally giving you the certificate of congressional
recognition in Nevada in a few weeks. But I want to say thank
you and if I can embarrass you for a moment, I'm going to read
from the NARF magazine. ``Reginald B. Knight, Reggie to his
many friends, of the NARF chapter 2276 in Pahrump, Nevada,
there are very few if any of the offices in the local chapter
or in the Nevada NARF Federation that Reggie has not held.''
For that reason, he is the subject of this month's Faces of
NARF feature. I think it is a centerfold, but that is OK.
[Laughter.]
Your story begins in Detroit, graduated in 1954, joined the
U.S. Marine Corps, rose through the ranks, retiring in 1974 as
a sergeant major. You saw combat in Vietnam as a recon platoon
sergeant and was senior enlisted staff assistant to commanding
officer of the fighter attack squadron of the Marines.
Following his retirement from the Marines, Reggie went to work
for the VA, serving as a representative of the Saddleback
College of Mission Viejo, California, and took classes and
received his associate degree. Has been involved in the
southern Nevada community I believe since 1994, is that right,
Reggie?
Mr. Knight. That's correct.
Mr. Porter. We appreciate all that you have done. I am not
going to embarrass you with all the other nice things they have
said about you here. But again, you truly are a knight in
shining armor. Thank you for all that you do for the retired
Federal employees, but more importantly, for all those folks in
Nevada, and all you have done for the Pahrump community.
So today, I know that you are 2,500 miles away, but on
behalf of the committee, we are recognizing you with
congressional recognition. What we have done is entered your
history in the Congressional Record, it will be part of
literally the history of our country and thank you so much for
everything that you have done.
So since I can't give it to you in person today, if you can
see it----
Mr. Knight. I can see it. Thank you very much. I appreciate
that.
Mr. Porter. We will bring it back with us, and thank you
very much for everything you have done and for being with us
today.
Mr. Knight. Thank you, sir.
[Applause.]
Mr. Porter. Also, you will receive a copy of the
congressional recognition. There is a Congressional Record that
will be a part, again, of the Library of Congress. You will
receive a book and additional information from the U.S.
Congress. So again, thank you for being with us. Take care.
Mr. Knight. Thank you very much, Congressman Porter.
Mr. Porter. And you're welcome to sit through the meeting,
if you would like.
Mr. Knight. I appreciate that. With the issues that you're
dealing with, I want to sit through it. [Laughter.]
Mr. Porter. Very good. Thank you again very much.
Now, having a quorum present, we will formally begin the
meeting. I appreciate the Members being here today.
It is really an unfortunate reality that there has been and
always will be a substantial difference in pay between top
level Federal Government executives and executive branches in
the private sector. Perhaps Babe Ruth summed it up best when
asked by a reporter during the Great Depression of the 1930's
why his salary as a baseball player was more than that of the
President of the United States, Herbert Hoover. The Babe's
response was, ``I had a better year.''
Well, many years have passed since Babe Ruth's humorous,
yet telling, remark. And needless to say, the Babe did not call
the shot on the problem of pay erosion and pay compression for
certain top executives on the Federal level. Inequities in pay
for certain top level executives of the Federal Government have
existed for some time and have not gone away.
In fact, for many, as we will hear today from some of our
distinguished witnesses, it is getting worse, and it has caused
the Federal Government to lose some of its best and brightest
leaders. It is getting worse, and we need to change that. Until
this problem is properly addressed, the American people will
continue to pay a high price for the low salaries that are
being paid to certain top level Federal officials.
In June 2006, the GAO completed a study undertaken at my
request entitled Human Capital: Trends in Executive and
Judicial Pay. The GAO report calls attention to the fact that
the basic pay rates of certain top level executives and members
of the judiciary, particularly those under executive schedule
and judicial pay plans, when adjusted for inflation to 2006
dollars, have suffered dramatic declines since 1970.
For example, when adjusted for inflation using the consumer
price index, well recognized as an official Government index
and often utilized by Congress, for example, used for Social
Security and civil service adjustments, pay for Cabinet
Secretaries declined in value by 41 percent and the pay of the
Chief Justice by 34 percent since 1970. In terms of actual
dollars, applying the CPI, this means that in 1970 Cabinet
Secretaries were paid the equivalent of $309,000 in 2006
dollars.
But today, because of pay erosion, Cabinet Secretaries are
being paid $183,500, or 41 percent less because of inflation,
or what otherwise might be called pay deflation. And again
applying the CPI, it means that in 1970 the Chief Justice was
being paid the equivalent of $321,000 in 2006 dollars, but
today is receiving $212,000, or 31 percent less because of
inflation or pay deflation.
Along with the GAO report, past studies have confirmed that
certain executives and judicial pay rates are inadequate when
measured against inflation and changing economic conditions.
For example, in 2003, the National Commission on Public
Service, chaired by the distinguished Paul Volcker, found that
there was a failure of Federal compensation policies at top
levels within all three branches of comparison to the private
sector.
Of particulate note, the 2003 National Commission found the
state of judicial pay to be so egregious that the Commission
noted that the first priority of the Congress should be ``an
immediate and substantial increase in judicial salaries.''
Unfortunately, the 2006 GAO report confirms that the problem
continues.
It is now time to find a solution that will be successful.
GAO has noted in this report has noted that certain principles
should be considered to attract and retain the quality of
executive and judicial leadership necessary to address the 21st
century challenges. In particular, GAO has stated that top
level pay plans should be sensitive to hiring and retention
trends, reflective of the responsibilities, knowledge and
skills, of contributions, transparent, market sensitive,
flexible to economic change, sustainable and competitive. In
its report, GAO has observed that the reestablishment of a
salary commission may be an option to consider in maintaining
reasonable salary relationships across executive and judicial
positions, something I think that makes a whole lot of sense.
GAO noted that both in 1967 and 1989 Congress authorized
the establishment of a commission to study and make
recommendations with respect to the salary of top level Federal
employees, including positions with the executive schedule, as
well as the judiciary. The first of these commissions was
abolished and the second commission was never appointed. What
we must do now is devise some system to assure adequate
compensation for top Federal executives and judges that will
have the confidence of the public and the members of the
legislative, executive and judicial branches of the Federal
Government. At this point, however, we are just sharing
preliminary thoughts on the matter.
The purpose of the hearing is to first examine the results
of the study conducted by GAO and to hear about and discuss
inequities in the existing system. However, we have asked our
witnesses and would be most grateful if they would share their
views with the subcommittee on whether a salary commission or
some other option could best assure that top level members of
the executive branch and judges are fairly compensated.
In addition to our distinguished group of witnesses today,
testimony has been provided by Fred W. Cook, founding director
of the Frederic W. Cook and Co., independent consulting firm
specializing in executive compensation issues. Mr. Cook could
not be with us today as a witness. He is a well recognized
expert on compensation issues and is currently vice chairman of
the Defense Department Business Board, a Federal advisory
committee that provides DOD senior management advice on the
best practices from the private sector.
I ask unanimous consent that Mr. Cook's testimony may be
included in this hearing.
[The prepared statement of Mr. Cook follows:]
[GRAPHIC] [TIFF OMITTED] T4956.001
[GRAPHIC] [TIFF OMITTED] T4956.002
Mr. Porter. Critical to the success of the Federal
Government in the 21st century is the need to properly address
a wide variety of human capital issues involving the Federal
work force. As this subcommittee knows first-hand, as we have
just witnessed, recognizing Mr. Reggie B. Knight, of my home
State of Nevada, for his outstanding contributions as a member
of the work force, Federal employees not only do an outstanding
job, they often go above and beyond the call of duty. In doing
so, they should and will be recognized. They are truly one of
the Nation's greatest resources.
One of the most critical human capital issues facing the
Federal Government today concerns the need to make certain that
employees in the Federal work force are properly compensated
for the responsibilities they undertake in serving the public.
In the face of national emergencies, work force shortages and
the looming retirement tsunami, and the loss of well-qualified
Federal employees to the private sector, it is essential that
on the Federal level we explore all options to ensure that
compensation for job performance is commensurate with the
responsibilities undertaken. Our Federal employees deserve no
less.
And this should especially be the case for those in the
position of high responsibility in the work force, namely those
in the top level executive judicial positions in our
Government.
Now, having read the formal statement, let me tell you what
I really think. We have a real challenge before us, and we
appreciate Mr. Walker being here today to talk about that. But
we have to make sure we encourage the best and the brightest to
become a part of our work force. We want to make sure that
those that are with us are compensated properly and those that
enter retirement are compensated properly.
I have always felt, especially from the judiciary side,
that although it is very important that we have a legislative
branch and executive branch, but knowing at the end of the day
that our court system is the best in the world, and we can
always, as residents of this great country count upon the
courts. We may not always agree with certain levels of the
court, but available to us are different steps and at the end
of the day, the Supreme Court.
So we have to make sure that we keep the best and
brightest, we encourage the best and the brightest. And make
sure that those that are in these top level positions remain
with us, because I certainly understand why a judge may leave
and go back in private practice. It is very difficult to
compete with the private practice with the salaries the way
they are.
So in very plain language, this is an area I think that is
a real challenge for our country. I am pleased that the
committee is looking at this. I would now like to recognize our
ranking member, Mr. Danny Davis, for his opening statement.
[The prepared statement of Hon. Jon C. Porter follows:]
[GRAPHIC] [TIFF OMITTED] T4956.003
[GRAPHIC] [TIFF OMITTED] T4956.004
[GRAPHIC] [TIFF OMITTED] T4956.005
Mr. Davis of Illinois. Thank you very much, Mr. Chairman.
Before I give my opening statement, I too would just like to
congratulate Mr. Knight on his recognition. I was just
thinking, if the Babe was around today and was asked the same
question, he would probably give the same answer. [Laughter.]
But thank you very much, Mr. Chairman.
Reform of the general schedule and implementation of pay
for performance plans for rank and file Federal employees has
been the subject of many of our subcommittee hearings. This is
the first hearing during which we will focus our attention
specifically on executive and judicial pay. I am indeed pleased
that we are doing so.
I believe that each Federal employee, regardless of
position, should be paid a living wage and a wage that is
commensurate with skills, experience and knowledge. Based on
the report that the GAO issued in June on executive and
judicial pay, it is clear that the pay of our most senior
officials and judges has declined in value. The GAO report
recommends that when restructuring the pay plans for the
executive and judicial positions, the plans should be sensitive
to hiring and retention trends, reflective of responsibilities
and skills, transparent, market sensitive, flexible to economic
change, sustainable and competitive. And I reemphasize,
competitive.
It would be helpful if the witnesses addressed questions
related to the hiring and retention trends among executive and
judicial employees. Are we having trouble filling these
positions? Are we losing current employees to the private
sector? Also, how do we hold the individuals at the highest
levels of Government accountable for their actions while
ensuring fairness and preventing abuse?
I have always been somewhat amazed, even before running for
and being elected to public office, why the perception of the
public seems to be that public employees, for some reason,
shape, form or purpose, are not as valuable as those in the
private sector. That is a question I have never been able to
fully understand. I hope that we can shed some light on that
philosophical thinking of people in our country, as well as the
practical application of different kinds of thinking to the
compensation that we provide for these men and women on whom, I
think, rest a tremendous value relative to the stability of our
Government, the stability of our Nation and the continuous
progress of us as a people. So I look forward to the testimony
of today's witnesses and thank you very much, Mr. Chairman, for
holding this hearing.
[The prepared statement of Hon. Danny K. Davis follows:]
[GRAPHIC] [TIFF OMITTED] T4956.006
Mr. Porter. Thank you, Mr. Davis.
Congresswoman Holmes Norton.
Ms. Norton. Thank you, Mr. Chairman. And I thank the GAO
for its report.
I agree with the ranking member, we have been concerned
with the rank and file salaries, particularly as health care
has gone up. As we speak, we have done very little to make sure
that the best and the brightest continue to choose Government.
I suppose that is where my focus is and where I think it has to
be.
But I do not want to be understood as believing that the
problem that the GAO report addresses is not a serious problem
and that it shouldn't be considered. I think it certainly must
be considered. I simply offer the context in which I think all
thought of pay raises in a period like this must be viewed.
These very high level leaders are indeed at the height of
their career. We are talking, let's understand who we are
talking about. We are talking about political appointees. We
are talking about judges and justices. We are talking about
people who, at the moment they decide to come into an
administration already know that, for example, the students
that I continue still to teach, whenever I go back to teach at
Georgetown, instantly make more than a Federal judge and
instantly--I am talking about the top firms and the first year
out of law school. They make more the first year out than their
law professors. They make more than Members of Congress. And
they make more than Federal judges.
Any Federal judge, there is no, the plethora of them is the
only thing we have to worry about, the plethora of lawyers who
want to be Federal judges or Cabinet Secretaries boggles the
mind. Bear in mind also that our country has been over-lawyered
since Thomas Jefferson. There are so many of them that I
literally, when I first began to teach, and even before I got
tenure, I told my law students, look, sorry, I told students
who came to be me because they knew I was a law professor,
look, if you have a good, analytical mind, I don't want to
train you away from what you are considering. But you really
ought to consider that the one profession that is full of folks
is us. And you ought to consider across the board. That is just
how seriously I feel about the glut of lawyers seeking
positions at the highest level with the Government.
Again, I don't want to be understood as being against
adjusting the wages of people who have seen no adjustment in
real terms in 30 years. I do believe it is only fair to note
that first of all, Cabinet Secretaries have to be separated
from judges. You want to be a Cabinet Secretary because you
want to get out here as quick as you can to use the fact that
you have been a Cabinet Secretary in order to go and really
cash in. And that is whether you are in Democratic or
Republican administrations. I don't know why they would be
lumped together except of course, their salaries have not gone
up.
The whole notion of trying to ``attract'' them to political
appointments that there are maybe 1,000 people for every single
one of them who are overqualified is not what I think we should
be about to keep them is a political matter and not a salary
matter. And we have seen that they do stay, in this
administration, for example, a fairly long period of time. And
I have not noticed, even in the last administration, that there
was a lot of turnover. Yes, some turn over, but not any more
than one might expect.
Now, to go to judges, a lawyer has to really make a focused
decision if he takes a position for life. I disagree with the
Chief Justice of the United States who said recently in
testimony that the failure to raise judicial pay was a direct
threat to judicial independence. Hogwash. This has nothing to
do with judicial independence. When it says that a judge is
appointed for life, it doesn't mean that if he leaves before
his life ends the public loses. For life to him, particularly
at a period when people often change what they want to do or
get financial pressure they may not have had before means he
goes. But he doesn't go because of anything internal to
judicial administration or justice.
So the fact that there is some turnover, the ranking member
is right, we have to understand what kind of turnover we mean.
Because I suggest to you that the figures do not show that
there is huge turnover in the Federal judiciary. And
particularly since lawyers work off of the premise ``know or
should have known,'' and the notion that your salary hasn't
been raised in 30 years when you took an appointment last year
from the President or from the prior President, don't think
they don't know that.
So as much as I think adjustments are due, these are the
very people, these are the last people, people who are the most
replaceable in our country, a bunch of lawyers. Too much of our
talent is out there. That's why all of them want to come in and
get some distinguishing feature, like having been a judge. And
we have not seen that they hop in and be a judge and then go
out. But I can tell you this: that even a judge who is a
district judge or court of appeals judge, and he goes
someplace, he is going to land big time in a law firm making a
lot of money. And yet they are not rapidly leaving.
Democratic Members said this year that they did not think
the Members of Congress should take a pay raise until the
minimum wage was raised. Now, Members of Congress are not
hugely overpaid. But it did seem to me that was the kind of
thing to do to set an example for the rest of the country. The
lowest trick that I have ever seen was paid by the majority,
because what they did was to attach our salary as well as the
minimum wage to the estate tax, hoping that there would be
enough greedy Members of Congress so that whole package would
pass, and it failed, at least in the Senate.
I would be for some adjustment for these highly paid people
whose career will land them even better things if they decide
to leave when in context we deal with first those who have no
place to land but further at the bottom without an increase in
minimum wage. Then with the rank and file employee of the
Federal Government, especially those who are now have seen no
increase in the amount we will pay, percentage we will pay of
their health care insurance ever. Same percentage here. And
when that balance is brought to bear, and that is the only
context in which I think we should consider adjustments. We
should look across the board. We will see that the highest
ranking people are further behind. To him who is given most, he
should be willing to give back most.
When that is done and we are just recognizing that these
people have made a very conscious decision to give up salary in
order to have these very distinguished positions, and then
recognize that we are uncompetitive in seeking employees, for
example, who can go to one of the dot come capitals right out
here in Northern Virginia, when we see all of that in context,
then yes, the Justice of the Supreme Court and his eight
colleagues, and yes, the judges of the district courts and the
courts of appeals shall and should be adjusted. And they should
be adjusted in the context of adjustments that are due millions
of others.
Thank you, Mr. Chairman.
Mr. Porter. Thank you. Mr. Cummings.
Mr. Cummings. Thank you for holding this important hearing
today, Mr. Chairman, to examine the pay rates for Federal
executive and judicial positions. I was troubled to learn from
the Government Accountability Office report that you requested
that is entitled Human Capital: Trends in Executive and
Judicial Pay that we are not offering competitive salaries to
our Government's top officials.
As you know, the report finds that the salaries for the
Federal Government's senior leaders, including political
appointees and Federal judges and justices, have not been
keeping pace with inflation on the growth of wages over the
past 30 years. To the contrary, adjusted for inflation, they
have actually gone down over time.
Adjusted based on GDP, the salaries for Cabinet Secretaries
have gone down 27 percent since 1970. Supreme Court justices
have seen a 19 percent cut. Just think of what that means,
adjusted for GDP, Chief Justice Warren Burger made more than
Chief Justice John Roberts makes. And Secretary of State Henry
Kissinger made more than Secretary of State Condoleezza Rice.
I think we can all agree this reality is unreasonable. We
send a poor message to our Nation's most important leaders by
giving them a pay cut. And the cuts have not only been felt in
high profile positions. A January 2003 report of the National
Commission on Public Service found that in 2003, about 70
percent of the Senior Executive Service received level pay due
to pay compression.
We have an obligation to the American taxpayer to keep
overhead costs in all levels of Government low. But there comes
a point where we will no longer be able to attract our Nation's
best and brightest because we are unwilling to pay them. We
must compete on a level playing field with the other industries
that are pulling talented individuals in these fields. We can
only do so by offering appropriate salaries. That is why I
appreciate your dedication to this issue, Mr. Chairman, and I
look forward to learning more about how we can implement the
recommendations that the GAO has made with regard to addressing
this problem.
I look forward to the testimony of our witnesses today and
I yield back.
[The prepared statement of Hon. Elijah E. Cummings
follows:]
[GRAPHIC] [TIFF OMITTED] T4956.007
[GRAPHIC] [TIFF OMITTED] T4956.008
Mr. Porter. Thank you, Mr. Cummings. I ask at this point
for unanimous consent that all Members have 5 legislative days
to submit written statements and questions for the hearing
record, and that any answers to written questions provided by
the witnesses also be included in the record. Without
objection, so ordered.
I ask unanimous consent that all exhibits, documents and
other materials referred to by Members and the witnesses may be
included in the hearing record, that all Members be permitted
to revise and extend their remarks. Without objection, so
ordered.
It is also the practice of this committee to administer the
oath to all witnesses. I have always wanted to have the oath
done by a judge, so this is a real pleasure for me today.
[Laughter.]
So if you would all stand, please. Please raise your right
hands.
[Witnesses sworn.]
Mr. Porter. Let the record reflect that all witnesses have
answered in the affirmative. Please be seated.
Our first panel, I would like to invite a witness to the
table who has spent a little time with us in this subcommittee,
and we appreciate your being here, Mr. Walker. Mr. Walker is
the Comptroller General of the Government Accountability
Office. Again, I think that your office is a part of this
establishment, for years, and we appreciate what you have done.
Welcome, and we will appreciate your testimony.
STATEMENT OF DAVID M. WALKER, COMPTROLLER GENERAL OF THE UNITED
STATES
Mr. Walker. Thank you, Mr. Chairman, Ranking Member Davis,
other members of the subcommittee. I appreciate the opportunity
to be here today to report on our latest report dealing with
trends in executive judicial pay. This is a copy of the report,
which it is my understanding all of you have had an opportunity
to receive and review.
I assume that my entire statement will be entered into the
record, and therefore, if it will be, I will just summarize. Is
that all right, Mr. Chairman?
Mr. Porter. Please.
Mr. Walker. Thank you.
In our report on executive and judicial pay, we found that
generally, the salaries for the Federal Government's senior
leaders, including political appointees and Federal justices
and justices, have not kept pace with inflation or the growth
in wages over the last 30 years. Our work is consistent with
the National Commission on Public Service's findings that
salaries for top Government officials have not kept pace with
inflation or maintained a reasonable relationship to the
market.
And I have two exhibits up here that are in my testimony,
the far one on the left is Appendix No. 1, which is part of my
testimony, which talks about the differences in pay based upon
adjusting for CPI as well as the GDP deflator. And the one on
the right talks about what has happened over time looking at a
variety of indices, whether it is wages, prices or other types,
as well as very specific positions, to try to help bring this
home.
I would respectfully suggest that while executive and
judicial pay overall has declined in value when adjusted for
inflation and as compared to other indices, that any
restructuring of executive and judicial pay should consider
basic pay received as only one part of a total compensation
package. We need to be looking at total compensation, not just
cash compensation. Total compensation includes such elements as
cash, basic pay, locality pay, cash awards and bonuses, noncash
benefits, such as annual and sick leave, health insurance and
deferred benefits, such as pension and retiree health and other
benefits such as life insurance.
For example, at present, selected executive level positions
or executive schedule positions, administrative law judges,
inspectors general and Federal justices and judges, do not
receive cash awards and bonuses due to the nature of their
positions, while career senior executives may receive them. All
of the executive level positions may receive noncash benefits,
such as health and life insurance and retirement. However,
there are significant differences in retirement benefits, such
as larger retirement benefits for Federal justices and judges,
compared to many executive level positions.
Organizations in the Federal Government may need to be
flexible in order to look at not only how much they are paying
but in what form they are paying it, whether it should be in
cash, current and/or deferred benefits. Thus, the Federal
Government may need from time to time to shift the balance in
total compensation between pay and benefits in order to do what
Ms. Holmes Norton and several of you said, and that is, in
order to be able to attract and retain top talent.
I would, however, respectfully suggest that not all
executive level positions are equal, and that we need to do a
much more thorough analysis of the difference between these
types of positions. For example, while there is no question
that the Federal Government wants to be in a position to
attract and retain not just enough people but top quality
people for these critical positions, we need to keep in mind
that there are several criteria that executive and judicial pay
plans should meet in our opinion.
First, they need to be sensitive to hiring and retention
trends. Do we have a problem or not? Are we having difficulty
in attracting and retaining an adequate number of people with
the right type of quality? It is not just number, it is also
quality. And you don't necessarily want to wait until you have
a huge problem before you solve the problem. But we need to be
aware of that. Look at supply and demand, look at whether or
not we are having a problem.
Second, we need to pay more attention, I believe, to
something that Ms. Holmes Norton touched on, and that is, we
need to look at the responsibilities, the skills and knowledge,
the tenure and the contributions of these positions. For
example, I would respectfully suggest that a political
appointee who is in a policy position who by definition is only
going to be in that policy position for 2 to 4 years, in most
circumstances, is fundamentally different than a person who is
in a professional position that requires a degree of
independence that is going to be in a position for a number of
years, and therefore is making much more of a sacrifice as
compared to the opportunity cost of what they could get in the
private sector versus the public sector.
I think we also need to make sure that they are
transparent, that they are marked as sensitive, flexible to
economic change, that they are affordable and sustainable and
that they are competitive. With that, Mr. Chairman and members
of the subcommittee, I think I would reinforce that yes, there
is an issue here. There is a very real issue here. But any
restructuring of executive and judicial pay should not treat
all positions of the same level necessarily the same, that we
need to do a more substantive analysis than that, that we need
to consider total compensation, not just base pay and cash
compensation.
And that moving forward, there may be a need for a
commission to look at various options for how best to handle
this and to try to de-politicize the issue, including whether
and to what extent certain positions ought to be coupled with
congressional pay. Right now, as you know, there are a number
of positions that are directly coupled with congressional pay.
I think that has to be looked at. As you know, the National
Commission recommended a decoupling in that regard.
And last, but certainly not least, to reemphasize, if we
look in substance at what type of skills and knowledge is
necessary, how long a person is likely to be in that job,
whether or not that job requires a degree of independence, such
as inspectors general and judges, I think those are factors
that we need to be considering to a much greater extent than we
have in the past. I have been a Presidential appointee of
President Ronald Reagan, President George Herbert Walker Bush
and President Bill Clinton. The fact is that the first two
appointments, I knew by definition I was going to be in for a
short period of time. In my current position, I made a 15 year
commitment.
Those are fundamentally different things. And I think that
we need to understand that and recognize that to a greater
extent than we have in the past. Thank you, Mr. Chairman.
[The prepared statement of Mr. Walker follows:]
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Mr. Porter. Thank you, Mr. Walker. I think maybe you need
combat pay. I see that your arm is in a sling. We are glad you
are OK.
Mr. Walker. You should see the other guy. [Laughter.]
Mr. Porter. We are glad you are OK. Thank you for your
testimony, and to your staff. I know they put a lot of time
into putting this report together. So we appreciate it.
I would like to elaborate a little bit on the
reestablishment of the salary type commission. What do you see
are some of the critical factors that should be discussed, who
should be on the committee, and your different ideas?
Mr. Walker. Well, as you know, there have been committees
in the past, some of which were staffed, some of which exist in
law but have never been staffed. I think we have to recognize
the reality that this is an important, complex, controversial
issue that also has potential political implications. And given
that fact, I think we have to professionalize the process.
I think serious consideration needs to be given to having a
credible and capable commission, comprised of both
professionals and other noted individuals with credibility on
both sides of the aisle, who would end up doing the type of
analyses that I talked about, a more thorough analysis than has
been done in the past, and could make recommendations that
would require, for example, a response by the President, would
require congressional hearings, mandatory, and possibly require
congressional action within a certain period of time, possibly
with amendments or limited amendments.
We need to figure out how we can professionalize the
process, make it more routine and yet recognize the reality
that there are problems with the American people. The American
people don't necessarily understand or appreciate some of the
issues that we are talking about here to the extent that they
could and should.
Mr. Porter. Thank you.
Mr. Davis.
Mr. Davis of Illinois. Mr. Walker, I was trying to think,
do you think it would have any real bearing if we were to ask
the American public in a way what they thought about the issue?
And I don't know if we would necessarily make use of a poll, or
find some way to glean as much thinking from the public as we
could glean, relative to their thoughts on the issue?
Mr. Walker. Mr. Davis, I would respectfully suggest that
there are a number of issues, and this may well be one of them,
that there needs to be more public education, more outreach,
and more citizen engagement than there has been in the past.
Frankly, most members of the public aren't experts in
competitive compensation practices. They are not experts in the
nature of compensation in the Federal Government, much less the
nature of compensation in the private sector. They don't know
how many of these executive level positions are political
appointee positions versus career. They don't know, for
example, how many of these positions are people that come in
for 2 years, end up going out and making a lot more money in
the private sector, which, as I say, that should be treated
fundamentally differently than people who are making a longer
term commitment.
So I think education and citizen engagement is an important
part to addressing this issue, as well as other issues.
Mr. Davis of Illinois. I was trying to think of, how did we
get to where we are in terms of how did we actually begin to
determine value? It seems to me that compensation has a great
deal to do with one's interpretation or acknowledgement of
value in terms of saying, this is worth so and so, this is
worth so and so. It seems to me that whatever the public is
willing to buy, that is what they are sold. I think of athletes
who earn $40 million to play baseball, or $100 million to play
football. The public says, we are willing to buy this, because
we are prepared to buy the tickets for the games to generate
the revenue that it takes to be able to pay these individuals.
Would it be rational to try and look at what takes place in
the public sector versus what takes place in the private
sector? Delegate Norton talked about what beginning attorneys
might expect to earn in certain kinds of practices, and in some
ways, this will supersede what a senior judge might earn in the
public environment. Maybe back into compensation by looking at
the private sector, and then trying to attach public value as a
possible way of arriving at a decision.
Mr. Walker. Several thoughts about that. No. 1, I do think
it is relevant to consider private sector compensation
practices as an input mechanism to try to help inform the
public and to try to help inform any decisionmaking that is
made here. However, I would also respectfully suggest that
there are fundamental differences between the public sector and
the private sector. All of us in this room recognize that those
that go into the public sector are doing it to maximize their
self-worth, not their net worth, and to make a difference for
the country and their fellow man, not to be able to maximize
their bank account.
So we just need to understand that. So I don't think that
we have to, nor should we expect to pay the same amount of
compensation for the same level of responsibility in the public
level as the private sector, because people are looking for,
they have different motivations and certain kinds of people are
going to work in the public sector versus the private sector.
At the same point in time, we need to pay enough to be able
to attract and retain top quality people, to be able to compete
for the best and brightest. And in that circumstance, I think
we have to do a little bit more through analysis than we have
done in the past. If you look at our compensation practices,
they are very hierarchial based. They are kind of like the
1950's, here is the hierarchy, where are you in the hierarchy.
One of the things I would respectfully suggest we need to
do is we need to do something that several of you talked about.
We need to do a more thorough analysis. What are the skills and
knowledge and education that is required for this? Is this a
position that we are asking for a long term commitment for? Is
this something that we need a degree of independence for? Or is
it something that somebody is coming in at a high level
position to serve their country for 2 years and then they are
going to be going back out to the private sector and they will
probably, frankly, make money, more money because they did
that?
I think we need to have a more professional and thorough
analysis than has been done in the past, rather than a mere
hierarchical approach.
Mr. Davis of Illinois. Thank you very much.
Thank you, Mr. Chairman.
Mr. Porter. Congresswoman Norton.
Ms. Norton. Thank you very much, Mr. Chairman.
Could I begin, Mr. Walker, by just noting that Federal
employees, of course, I believe you would agree, work within a
market system. Federal Government has tried, not always
successfully, to take that into account. Would you agree that
there are many Federal employees who, if they chose to leave
today, could earn more in the private sector?
Mr. Walker. No question. I think that is something we have
to consider when constructing Federal compensation practices.
Ms. Norton. Indeed, what we are finding, of course, is that
early retirements, it is really heartbreaking to see it, early
retirements and even before retirement, people go out and work
for a contractor, because they can instantly make more money.
So I think I want to just establish for the record that Federal
employees on whom we depend for homeland security, for vital
occupations, work non-competitively with the private sector.
That said, let me move on.
Considering that we are speaking in the context of supply
and demand, I have to chuckle, because women are always told,
that well, you earn less because after all, there are too many
of you applying for the same job, the same kinds of jobs. The
Federal Government has made adjustments for a few rarified
occupations that are indispensable. For example, scientific
occupations or other highly skilled occupations.
Is it your view that we have not been able, excuse me, that
is not my question, I just want to note that for the record.
Would you agree that being a lawyer in a market system
based on supply and demand is not a skill that is scarce in
this society? One of the things I teach in my seminars is that
if this generation of lawyers does not learn how to cut through
all the harm lawyers have done the whole economy will suffer
tremendously.
So I am trying to get to why we would want to rush in, even
though I want to stipulate again for the record, I don't think
anybody should be 30 years without having at least some more
adjustment in real terms than these very senior people have.
But I assume that in making this case, GAO has looked at
whether or not there has in fact been turnover of the kind we
would want to discourage. What has the turnover been for
Cabinet Secretaries? What has the turnover been for district
court judges? What has the turnover been for justices of the
Supreme Court? What has the turnover been for judges of the
courts of appeals of the United States?
Mr. Walker. I believe that it is essential that more
analysis needs to be done on that. That is one of the reasons
why I think considering some type of a commission approach is
appropriate, and for that commission to be informed, not just
by this type of information, but also the type of information
you are talking about.
I think one of the things we have to keep in mind is that
while this is factually accurate, it also starts with 1970 and
by starting with 1970, it assumes that everything was properly
aligned in 1970. We haven't done the baseline analysis that I
recommended. We have never done the baseline analysis that I
have recommended, which needs to be done. So this starts with
that assumption, which may or may not be a valid assumption.
Ms. Norton. Did the GAO consider, and I appreciate very
much tat you have separated out the kinds of employees, high
level employees we are dealing with, and we are not lumping
people who go out and make a mint with people who have
appointments for longer periods of time, including life. Did
you consider the value of having served for the person who has
not gotten the increase you would like to see him have? Have
you considered the value of having served for the Cabinet
Secretary?
For that matter, did you consider the value of having
served for a lawyer who has wanted to be a judge all his life,
even though he may consider now he has children in college and
has to get out, the great honor that many believe they have
when they become a district court judge? The value of that, or
is the value of having served as Cabinet Secretary a part of
this analysis that says they are underpaid?
Mr. Walker. It is not part of this analysis. But as I tried
to touch on, I do think it is relevant to distinguish between
what is the nature of the position, are we having a problem,
how long is that person likely to stay there, and to what
extent it is a true economic sacrifice versus not. Now, one
would expect that most Federal judges, subject to doing an
initial analysis, would intend to stay for the long term. So if
they are making a long-term commitment, then they are going to
be more affected by not keeping up over time due to power of
compounding than somebody who you pointed out who comes in to
be a Cabinet Secretary, comes in to be a deputy Secretary for 2
years and then goes back out to the private sector. Because by
definition, their job is temporary.
Ms. Norton. Mr. Walker, I appreciate something you said in
your testimony about looking at non-economic compensation. And
just let me suggest for people who have finally become a judge
of the Supreme Court, that is only nine people. Sometimes I
think that being a Justice on the Supreme Court is a guarantee
of longevity. Because if you want to find a group of people who
never leave, you just look at how long Justices serve. The only
question I think Congress may 1 day feel, because the Justices
and judges themselves have, we have been investigating a judge
up here, because judges haven't looked closely enough at
themselves. Somebody gets senile and nobody does anything about
it, because they are there so long.
But consider, Mr. Walker, that a Justice who works very,
very hard, they must be very robust, because they work into old
age and do a lot of work. But they are off all summer. If they
get sick, they can be gone for as long as they see fit. If you
are a senior judge, sitting on as few cases or as many as you
would like, that means you are retired. You still get your full
compensation.
I am trying to find ways in which particularly judges, and
to separate them out, I should feel sorry for at a time when we
can't get any increase in the minimum wage and the rank and
file Federal employees are fleeing the Federal Government as if
it is a training ground, take what we have invested in them and
go invest it in the private sector.
So I am trying to find a way to find somebody to feel sorry
for in here. And I am not having a lot of luck.
Mr. Walker. You are making a case for one of the points
that I made. And that is, you can't just look at base
compensation. You have to also look at other elements of
compensation, including pensions and including other provisions
that go with the job. You just can't look at base pay. You have
to look at all those issues, too.
Ms. Norton. Well, I just want to submit for the record, Mr.
Chairman, I think the Congress has done a good job at doing
that. Because of the salaries, because of senior judges,
because of Justices, there may be something we need to look
for. Again, every time I find somebody to feel sorry for, a
district judge who may work really hard because trials are
hard, I keep thinking of the reams of lawyers who want to be
district court judges. And I can't reconcile that with supply
and demand that is always thrown in our face and somehow being
afraid about the quality.
Therefore I really have to ask you this question. Do you
believe that the quality of the judiciary has been in any way
affected by the salaries that you have described?
Mr. Walker. I cannot say that has been the case. But I
think the potential exists for it to be the case if something
is not done eventually.
Ms. Norton. Again, I want to stipulate again that I think
something should be done. But I am asking these questions in
order to stress my point about context. And I am not sure there
is a Member of this Congress, frankly, in this context, who
would go now, and the chairman is certainly not suggesting
that, to the highest level people in the Government.
One final question, Mr. Chairman. This is a thoughtful
report. You look for ways that might in fact accomplish what
you want to accomplish. And you look for options. There is one
part of your report that I have to take issue with. But maybe I
don't, maybe you can explain it to me. And that is the notion
of performance based bonuses. Apparently, for political
appointees who are subject to Senate appointment, for the life
of me, I know everybody is into we have to give those who work
hardest special compensation. But for the life of me, for
people who, as you say, never intend to work for terribly long,
are rewarded handsomely, simply by having held the position,
even if they did a putrid job in the position.
The notion of putting us to work trying to find whoever
would do it, and there you come to a real problem, but trying
to find the difference between the Secretary at HHS and the
Secretary of Labor, seems to me to be a useless exercise. These
people are supposed to work their little behinds off for the
time they are here. I have ever reason to believe they do. They
are very high pressure jobs. And it is, it seems to me, a
stretch to take the performance based notion and try to apply
it to political appointees who should need, and I stress this,
should need no incentive given all they have to gain. No
incentive to do the best job they can.
If the point of the performance based is to say, we want
you to work harder, if you get this, you will work harder, we
want to distinguish you, we want to distinguish you between
those who don't work hard and those who do, then it seems to me
that it is out of place to say to somebody that high in the
Government, we are going to distinguish between those of you
who work hard and those of you who work a little harder.
Mr. Walker. I do not think it is an across the board issue.
Let me give you an example where there is a problem right now,
and which could become more acute. As you know, senior
executive service members that are career officials who are
part of a performance based, who have an adequate performance
oriented appraisal system, can be approved by OPM for that
agency to have base pay up to level 2, which is what I make.
In addition to that, they can receive bonuses that will
allow them to make up to the amount that the Vice President of
the United States makes. That is a fact. And there are people
that are in that situation.
You have certain positions, for example, let's take the
inspector general position. There are Presidential-appointee
inspector generals who are supposed to be professional, who are
supposed to be independent, who by statute are level 4
positions. So by definition, they are making significantly
less----
Ms. Norton. Let me ask you then, the reason I asked this
question is, you give us examples on page 10 of your testimony,
and you do give some that one might understand, because they
are more like SESers. Selected executive schedule positions
that are appointed by the President, subject to Senate
appointment, including selected IGs, ALJs and Federal justices
and judges do not, do not, that is, referring back to receive
bonuses. Now, would you amend that? How are you going to give a
bonus to a Federal judge, sir?
Mr. Walker. And I think there are certain positions where
you don't want to. All the more reason why you have to look at
what is an appropriate level of base compensation.
Ms. Norton. So you are not arguing that judges----
Mr. Walker. I am not necessarily arguing that you do it
across the board. There may be circumstances. But if you don't
give a bonus, then you need to think about what does that mean
from the standpoint of base compensation.
Ms. Norton. Thank you, Mr. Chairman.
Mr. Porter. Thank you.
Mr. Walker, thank you for being here today. We appreciate
your testimony, and get well soon.
Mr. Walker. Thank you.
Mr. Porter. What I would like to do is combine panel two
and three. We will be voting here shortly, so I will apologize
in advance, I am not sure how many votes we are going to have,
but I will let you know when that comes through.
Gentlemen, we appreciate your being here. We have with us
D. Brock Hornby, judge, U.S. District Court for the District of
Maine, chairman of the Judicial Branch, Committee of the
Judicial Conference of the United States; Judge Philip M. Pro,
chief judge and a good friend of mine, U.S. District Court for
the district of Nevada. And Judge Pro, my partner, Mr. Davis,
was just in Las Vegas. And he has speeding tickets he would
like your help with. [Laughter.]
Not really, just kidding.
Also the Honorable Sean O'Keefe, chancellor of Louisiana
State University, former Administrator, National Aeronautics
and Space Administration. And our third panel is Dr. Gary
Burtless, John C. and Nancy D. Whitehead Chair in Economic
Studies, the Brookings Institution.
I would like to begin with Judge Hornby. Welcome. We
appreciate your being here today.
STATEMENTS OF D. BROCK HORNBY, JUDGE, U.S. DISTRICT COURT FOR
THE DISTRICT OF MAINE, CHAIRMAN, JUDICIAL BRANCH, COMMITTEE OF
THE JUDICIAL CONFERENCE OF THE UNITED STATES; PHILIP M. PRO,
CHIEF JUDGE, U.S. DISTRICT COURT FOR THE DISTRICT OF NEVADA;
SEAN O'KEEFE, CHANCELLOR, LOUISIANA STATE UNIVERSITY, FORMER
ADMINISTRATOR, NATIONAL AERONAUTICS AND SPACE ADMINISTRATION;
AND GARY BURTLESS, JOHN C. AND NANCY D. WHITEHEAD CHAIR IN
ECONOMIC STUDIES, THE BROOKINGS INSTITUTION
STATEMENT OF D. BROCK HORNBY
Judge Hornby. Thank you, Mr. Chairman. Thank you for
holding this important hearing, and thank you for inviting
members of the judiciary to attend and participate. As I told
you in the hall, the only other time I have testified in
Congress, I was with Judge Pro. So I am pleased to be here
again testifying with him.
Mr. Porter. Well, Judge, any good stories on the judge, I
would like to have them. You can give them to me later.
[Laughter.]
Judge Hornby. And can I assume that our written remarks are
incorporated into the record?
Mr. Porter. Yes, they will be. Thank you.
Judge Hornby. We believe that the Federal judiciary is at a
crossroads. If the current situation is not checked, we believe
that pay compression is going to threaten our ability to
recruit and retain experienced, professional judiciary
employees as well as talented judges. We have 5 years of missed
COLAs for the Federal judiciary, and for Congress, I point out.
And they have had a substantial impact, there is a chart up
here to my left, that shows the salary that you would be paid
and we would be paid if the COLAs had gone into effect as
intended by Congress when the system was set up versus what it
actually is. Those are simply in real dollars and reflect the
decision of Congress to forego COLAs five times.
Second, the COLA that Federal judges and members receive is
automatically lower than what the general schedule employees
receive. And since 1993, the result of that has been that the
compensation of Federal judges and members has increased by
23.7 percent, whereas the compensation of general schedule
employees has increased by 57.5 percent. The reason for that is
the locality pay adjustment. Because when the ECI, the COLA
percentage is fixed, then there is a subtraction of the average
locality pay. And members and judges do not get the locality
pay portion.
The result of that for the judiciary has been severe pay
compression and indeed, inversion. If you look at the second
chart, you will see that there was a reasonable hierarchy in
1994 from the judges on down through the circuit executives,
the bankruptcy and magistrate judges, down to senior judiciary
employees. And if you look at 2006, you will see now, it is
flat, and indeed that senior judiciary employees and circuit
executives now exceed substantially what magistrate judges and
bankruptcy judges can be paid, which are capped by statute.
So we have not simply severe compression, we have actual
inversion in what has taken place. And because salaries have
not kept pace with inflation, as you heard the Comptroller
General say, the purchasing power of Federal judges and
judiciary staff has declined since 1993, senior judiciary
staff, whereas compensation in the not-for-profit area and the
private sector has been spiraling upwards.
I am sure you have read the stories that we all read about
what 1st-year associates now make at major law firms. Not only
does it well exceed what bankruptcy judges and magistrate
judges are earning, it is exceeding what district judge and
circuit judges are earning, once you add in the bonuses that
they are paid. The compensation for judiciary executives is
lower than that of the executive branch executives. Legislation
enacted in 2003 raised pay caps for career senior executives to
as high as $212,000. Similar to what you folks have done for
your employees, we have capped compensation of non-judge
employees at $165,200, the pay of a Federal district judge. So
it is no longer competitive in that respect with the executive
branch. All these disparities have left the judiciary at a
serious disadvantage in competing for talent against all other
sectors, private, not-for-profit, even other government
entities.
We think there are three things that need to be done to
correct the situation. First of all, COLAs for the judiciary
and for Congress should equal COLAs for the general schedule
employees, so that those adjustments better reflect annual
inflation and help the compression problem. Second, we think
that the missed COLAs for both the judiciary and Congress
should be restored, alleviating in part the substantial losses
that have taken place in real dollars over the past years as
reflected on those graphs. And third, we believe that top level
salaries have to be raised to alleviate pay compression and
inversion in the judiciary.
And I wanted to make a couple of comments about the amount
of judges' pay. We are concerned about what is going to happen
in the future to judges. Yes, judges do not expect and should
not expect to be paid what partners make in major law firms. No
one makes that argument. They expect to take a financial cut
because there are wonderful rewards to the job in terms of the
public service we can perform in terms of what the job holds.
But more and more judges now are coming out of the public
service ranks. They are coming from the ranks of bankruptcy
judges, magistrate judges, U.S. attorneys, people who made the
decision long ago to spend their career in public service. Do
we want a judiciary where we cannot find people from the patent
bar to go on the Federal bench, cannot find people who are
skilled and experienced in corporate law in dealing with some
of these very difficult questions that Federal judges have to
deal with? Do we want only people who are committed to public
service on the one hand and only people who are independently
wealthy on the other? Or do we want to maintain our tradition
of having a diverse judiciary of people from across the board?
There was reference to Babe Ruth. And I am from New
England, and so I know more than most of you do that the Red
Sox lost Babe Ruth to the Yankees. [Laughter.]
And people in Maine understand that baseball players get
paid a lot of money, even though they can't. People understand
how the market works. They understand that Jay Leno gets paid
more. They understand that their doctors get paid more. They
understand even that their lawyers get paid more.
So even though judges should not be paid at the same level
as their private sector equivalents, there needs to be a
recognition that it is important to the well-being of this
country that we have good judges on the bench. And yes, when
judges take the job, they know there is going to be the
sacrifice. But they expect to be kept equal. They don't expect
that they are going to fall behind as life moves on and as
their kids go to college.
I see my time is up. And I will summarize simply by saying,
we are the third branch of the American Government. I believe
that all Americans want strong, talented people running their
court system. And I am fearful that the current structure is
going to have a negative impact on judiciary employees and on
Federal judges as well.
Thank you, Mr. Chairman.
Mr. Porter. Thank you, Judge. We appreciate it very much.
Next is my friend, Judge Pro, Chief Judge of the U.S.
District Court for the District of Nevada.
STATEMENT OF PHILIP M. PRO
Judge Pro. Thank you very much, Mr. Chairman and Mr. Davis.
Thank you so much for allowing me to participate today. I am
delighted to do this, and want to thank you, Mr. Chairman, for
convening this hearing and for calling for the study that has
been conducted.
I was going to begin by talking from the perspective of a
Federal judge, but something Mr. Davis said provoked in my mind
I think a broader and a very important question. If I could
pick up on that, the value of our employees in government
service and public service. You both have touched upon the
importance of this.
As one who has worked in government in one capacity or
another and as a judge for 26 years, I can tell you that the
folks in public service, at least that I work with in the
courts, and I know this to be true of others, are valuable
people. They perform wonderful service for this Government. And
it is important to the citizens of this country, I think, that
people who seek jobs in public service continue to find some
incentive to do so, not disincentives, not carry a burden
beyond that which we might expect them to bear.
People are drawn to public service for a wide variety of
reasons. But I think that all of us, for example, who become
judges cherish the fact that we are honored to hold an office
such as that of Federal judge. I know that Members of Congress
surely feel the same way. But so do our probation officers, so
do our pre-trial services officers, so do our clerks of court
and deputy clerks of court who feel that they are making a very
important contribution to the operation of our Government,
because they are making an important contribution in so many
different ways.
Our system depends, our democracy depends upon an informed
public, certainly, exercising its franchise, but it depends as
well upon citizens willing to undertake the many
responsibilities of public service. And it is easy to talk
about the folks that we characterize as in leadership
positions, whether they are Members of Congress or judges or
senior Government officials, and keep the focus on them. But
the value runs through the entire system, in all of the
individuals who commit to public service deserve to be
compensated fairly.
An independent judiciary is essential to the rule of law.
It is essential to the democracy that we live in. And I fear
that as we progress, there has been study after study after
study which has demonstrated the inequity in the compensation
that is available currently to Federal judges. As my colleague
Judge Hornby said, no judge expects to be compensated at the
same level as a partner in a law firm, anything of that type.
We have made a choice. And it is a choice, as Congresswoman
Norton said, with our eyes open.
And there are other lawyers that would love to be Federal
judges, I don't doubt that. But if we are to continue to
attract and retain the best and the brightest available lawyers
to become Federal judges, if we are to attract and retain the
best and the brightest people to other sectors of Government,
we have to compensate them fairly and at least competitively
with the private sector, so that they are not forced to take
vows, what a colleague of mine calls vows of dignified poverty.
A judge who accepts a lifetime appointment does so with his
or her eyes open, there is no question about it. It is a
lifetime commitment to public service. And we should not, I
suggest, after years in office, be forced to consider whether
we continue to do something that we love doing, that we think
is important, and choose between that and educating members of
our family or supporting our family.
I can speak anecdotally just from the District of Nevada,
Mr. Chairman, with which you are very familiar. In the past 18
months, one of my colleagues left the Federal bench to enter
the private sector, alternative dispute resolution. He did not
want to leave, it is Judge David Hagen. He did not want to
leave the bench at all. He had three children in college, he
simply could not afford to remain as a U.S. district judge.
We recently selected a new bankruptcy judge, which took
office last month, in our court, Judge Nakagawa, Mike Nakagawa.
When the net was cast for applicants, I talked to a great many
lawyers, members of the bankruptcy bar, excellent lawyers, who
told me that they would not seek the position, even though they
would love to do it, because they couldn't afford that economic
downturn that they would face.
We have had difficulty in some cases filling positions,
finding the best people, thankfully we found some good ones, in
our technology departments, IT departments. That is always a
difficult for us. And Mr. Davis, I think that poll that you
talked about would be an interesting poll. But I think if the
question were posed with where you began, what members of the
public do you think, not so much as what is the dollar figure
that these people in various positions should be paid, but what
is their value, I think you would perhaps get a different
response, I hope you would.
And I hope that the American public recognizes, and I know
it is a difficult matter for the Members of Congress to address
and to face the scrutiny that you do face and the responses
that you face when you talk about subjects like pay. It is a
delicate, delicate subject. It is a difficult subject. Your
responsibilities are heavy in making those kinds of decisions,
just as those of a judge are sometimes heavy in making the
decisions we have to make. And I respect that.
But we have judges who are leaving the bench. There are, it
is my understanding in response to one of the questions posed
earlier, since 1990 there have been 100 article 3 judges who
have left the bench. I don't have that number in front of me, I
don't have the numbers, but I believe we can provide that for
you, it is approximately that number, some eight or nine this
year alone.
I don't want to belabor my testimony on this part, other
than one baseball metaphor that you all mentioned about Babe
Ruth. I went on the internet last night and I saw that umpires
are paid between $87,000 and $357,000 a year, depending upon
their experience, for calling balls and strikes. Well, we spend
a lot of time calling balls and strikes in a form, too, in our
courts every day. And I don't know of any judges that are paid
close to what a baseball umpire is. More power to them, I am
sure they have a difficult job. But so those who sit as Members
of Congress, so do those who sit on the Federal bench, so do
those that work within Government in senior capacities and
otherwise.
So I would urge your committee and Congress to move forward
with relief in this area. Thank you very much.
[The prepared statement of Judge Hornby and Judge Pro
follows:]
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Mr. Porter. Thank you very much.
There are those that would suggest that we cap attorneys'
fees. That would equalize this problem. [Laughter.]
But that is not why we are here today. We have the
Honorable Sean O'Keefe, Chancellor of Louisiana State
University, former Administrator, National Aeronautics and
Space Administration. Welcome.
STATEMENT OF SEAN O'KEEFE
Mr. O'Keefe. Thank you, Mr. Chairman and Congressman Davis.
I appreciate the opportunity to spend time with you. Of the
better than 150-odd hearings I have had the opportunity and
privilege to testify at, this is the first one I have appeared
at voluntarily. All others were--[laughter.]
Mr. Porter. We can arrange for you to come back, if you
would like. [Laughter.]
Mr. O'Keefe. This is more fun than I can stand, Mr.
Chairman. I appreciate this. Precedents are to be set just
once, that is for sure.
But I appreciate the opportunity. This is an important
question, and it is one that again I think the fact that you
are delving into this issue is a sensitive matter, one that
certainly is not the most publicly popular one to do, but I
commend you for taking on the question.
I will say up front that I am not here at all to advocate
for a specific compensation rate for executive pay. That is not
a matter I think that will have any bearing, particularly given
the important analysis you have received from the Comptroller
General, who can provide far more insightful and helpful ways
of looking and determining what competitiveness means, and
comparability. So as a consequence, I will not offer a view one
way or the other in terms of what rates are more or less
competitive or comparable. Again, I think the members of the
judiciary here are far more qualified in that regard, too.
I would offer, though, just a couple of points. The first
is that we adhere as a general principle to a very Jeffersonian
model of how we promote public service opportunities. There are
varying ways to describe that, but I think the preference that
I would adhere to is that model, for whatever set of
circumstances in combination really promotes and motivates a
fair amount of mobility and it motivates and encourages a level
of public service across the public spectrum, which is a
desirable aspect.
That said, we ought to have eyes wide open in terms of what
the consequences of that would call for. I think there are
three very important factors that bear on the executive
leadership that we are bringing in that have bearing on what I
would call a subjective competitiveness for compensation rates.
The first one is that it all depends on where you are in
your station in life and age and professional experience in
terms of the willingness and ability to be able to follow
through. I think the very eloquent statement that Justice Pro
offered as to what motivates all of us in public service, or
who have been engaged in it, to involve ourselves in this. If
you can afford it, you will stay is the bottom line, I think is
what I heard very eloquently said. And I think fried to its
lowest denominator, that is it.
Earlier in a career or later in a career, it becomes a much
more conducive and easier opportunity, particularly if it
tracks as closely as possible from a longevity standpoint, with
the age of each kid that you may have. That has an important
bearing, or did in my circumstances. I have been appointed to
Presidential appointments, confirmed by the Senate on four
separate occasions. On the first two occasions, first as the
Controller and CFO at the Defense Department, second as the
Secretary of the Navy, I was at an earlier stage in my career
in which the kids were an awful lot younger. As a consequence,
they didn't have a habit of eating quite as much.
As I came back to public service in the latter two
capacities, as the Deputy Director at OMB and later as the NASA
Administrator, they had unfortunately become teenagers and were
also aspiring to colleges. The combination of all that made it
extremely difficult, when you compound it with mobility and the
Jeffersonian model of leaving town, coming back, finding an
opportunity to live in this town, which is the least affordable
place probably to look to for housing opportunities. That
compounds to make this a very short-term kind of opportunity.
Notwithstanding other interpretations, that was the one that
certainly influenced mine.
I would also add to that, though, the second matter, which
makes it equally difficult in dealing with the matter of what
is a base level of compensation, which is the compounding
effect of the ethics rules. They are there for good and present
reason. They are there to avoid conflict of interest. They are
there to avoid circumstances in which folks would seek to
display the kind of professional behavior that I think the
Congresswoman's comments earlier were right on point, of the
kind of efforts we seek to avoid in public servants, of coming
through the revolving door and seeking to establish some kind
of opportunity that then can be translated to some more
remunerative case. That is what we seek to discourage by our
approach. And that is commendable. In my view, I think it
works.
But it works to a detriment in some circumstances, because
as you enter public service as a Presidential appointee or as
an executive level appointee after having done something else,
what it usually requires is liquidity of just about everything
you own. I found upon my return to public service as Deputy
Director at OMB, the Office of Government Ethics had perfected
the conflict of interest rules, and determined that if you have
no interests, you will have no conflicts. And they set about
the business of assuring that I had no interests, and they were
all liquidated, every one of which were required to be
absolved, any investment in anything had to be liquidated. And
at the time I entered, it was a market condition that was less
than desirable for that action.
So it made it virtually impossible for that liquidity to
make of any value to fall back on to the extent that it was a
combination of tuition demands as well as mortgage demands of
moving back to a high-priced town that made it a finite period
of time which I could serve. That is what determined ultimately
the reason I had to leave. It finally got down to the stage
that several colleagues who were in similar station, we all
compared our Visa bills and determined exactly how much longer
we could stand to pay the interest on it and then decided to
withdraw. So it became a very difficult set of circumstances in
that case.
The third factor I would say, very quickly, is the
confirmation process itself. This is one that requires an
extended period of time for consideration and I offer this not
as someone who is complaining about it. In all four of the
capacities in which I was confirmed, not one took longer than 6
weeks. Matter of fact, the shortest took three. I probably am
one of the few people who will sit here talking about this
circumstance that is probably a world record, to have had four
appointments, all of which took that short a span of time.
I unfortunately am the anomaly in that case. Most of them
take 6 to 8 months. As a consequence, most folks who are
considering executive positions and looking at the requirements
to liquidate, to do all the things necessary in order to meet
the requirements there, and then oh, by the way, come to a
position which is not competitive by any means from the
executive compensation standpoint, ultimately make the decision
to withdraw. The volume of that I think is much larger than the
number who are actually confirmed, just by virtue of the
consequences that apply in these cases.
So in sum, I would say that those three factors, what is
not a competitive rate, but nonetheless a living rate, and I
think in this regard the Congresswoman's points are just right
on. But when you compound that with a set of standards that are
there for good and present reason, they are there in order to
assure ethical behavior. It has the effect of limiting the
amount of time that you can spend.
And the third one is, some folks make the decision to avoid
it entirely because of the onerous process of even getting
there in the first place for what in the end will be a
sacrifice that requires this. The Comptroller General's, I
think a very important recommendation on a commission would be
very, very well pursued, with all three of these factors
weighing in. Because any one of them individually will force a
motivation of the original intentions, by any one of those
three.
And all three have very valid reasons. We seek to avoid
profiting or coming to public service in order to benefit by
the remuneration. We certainly seek to avoid folks coming as a
matter of ethics to public service for the purpose of a
revolving door. And we seek to go through the confirmation
process in order to assure those who come have a true objective
for public service.
But the combination of all three has the effect, I think,
of the consequences we see and unfortunately, decisions that
must be made, certainly in my own case, of withdrawing from
that service regardless of my personal commitment, objective
and intention thereof.
I thank you, Mr. Chairman.
Mr. Porter. Thank you very much.
I believe we are being called to vote. So we have about 15
minutes. I just wanted you to know that the bells indicate we
are voting in about 15 minutes. What we would like to do is ask
Mr. Burtless if you would give your testimony, please.
STATEMENT OF GARY BURTLESS
Mr. Burtless. I am a labor economist, and so I look at
these salaries differently from someone who actually has gone
through the ordeals that people who have been asked to perhaps
make big sacrifices to serve in public service have. The basic
conclusion of GAO's report is that inflation adjusted salaries
have not risen, in fact have shrunk since 1970. It is very hard
to argue with this conclusion.
Figure 1 in my testimony, which uses a somewhat different
deflator, shows exactly the same trend. We can also consider
other benchmarks, and as a labor economist, I think looking at
other benchmarks is also interesting. One benchmark is, what is
the median income received by four-person families in the
United States. In Figure 2 in my testimony, I show what has
happened between 1960 and the present. Between 1960 and 1969,
the pay of executive schedule 1 job was 4.2 times that of a
median income four-person family in the United States. But
between 2000 and 2004, it had slipped to just 2.6 times that
ratio.
For office holders in executive 2 schedule, the same ratio
fell from 3.4 to 2.3. So it is not only the case that inflation
adjusted salaries at the top end of the Government pay scale
have declined, they have also fallen in relationship to middle
class incomes in the United States.
Another benchmark you might think of is the wage that is
earned by an average worker. Well, we can go back to 1909, the
Bureau of Labor Statistics has measured what an average
manufacturing worker receives in the United States. And in
chart 3 in my testimony, I track the pay ratio of Cabinet
officers and Members of Congress, because they represent
ceilings on wages received by many other people in the
executive branch and in the judicial branch.
You can see the top officer holders' pay in the 1960's was
not an aberration. In fact, it was lower in relationship to
workers' pay in the 1960's than top executive sector salaries
were earlier on in the 20th century. So relative to the
earnings of manufacturing workers, both Cabinet and
congressional pay was considerably higher before 1969.
But it is not very likely that the Government is going to
be recruiting new executives, scientists, lawyers, technicians
and so forth from the ranks of production workers and
manufacturing. What we need to do is recruit job candidates
from the same pool of candidates which supplies executives,
scientists, lawyers in the private sector and in academia.
Chart 4 in my written testimony shows how Federal executive
schedule pay stacks up against the average pay of American
workers with post-college degrees. As you can see, top Federal
salaries have slipped in comparison to this benchmark since the
1970's and also since the early 1990's.
The reason for this is quite straightforward. Private
sector salary disparities have increased in the years after
1970. Workers with the widest management responsibility, the
highest technical qualifications, have enjoyed much faster pay
gains than average production workers. But top Federal salaries
have not kept up. They have declined in inflation adjusted
dollars.
When we examine the salaries paid to top Federal executives
and compare them with the compensation earned by people in the
private sector who serve in equally demanding or frequently
much less demanding jobs, the gap in salaries is huge. I am not
really worried that the Government is going to be unable to
attract talented candidates for the very top jobs in
Government. We can always find very good candidates who are
wiling to serve as Secretary of Defense, as Governor of the
Federal Reserve or as Assistant Secretary of the Treasury, for
reasons that David Walker mentioned.
What the Government might not be able to do is to find
strong, ambitious candidates to serve lengthy spells in
Government service to attain GS-14, GS-15 and SES positions
that have demanding managerial, technical, scientific or legal
responsibilities. For better or worse, the executive branch
requires the experience and talents of very good people, as
does the judiciary. And those talents largely determine the
Government's success in carrying out policy and administering
justice.
When an able 25 or 30 year old is thinking about the risks
and rewards of different kinds of careers, how many will be
attracted by a career where the top salary is not far above the
starting salary in a law firm, where the top salary is below
the average professor's income in top ranked universities,
where the top salary is far below the typical partner's income
in an accounting firm? I am not talking about law firms, I am
talking about accounting firms. No rational observer would
claim that the best public servants are motivated solely by
monetary rewards.
But no sensible person should think that the decision to
serve in a demanding position is totally divorced from
financial considerations. Top executives, top doctors, top
lawyers, top scientists in business and academia have seen
their compensation climb much faster than that of ordinary
workers over the last 25 years. But the people who hold top
Federal jobs in the judiciary and the executive branch and the
Congress have seen their pay shrink in purchasing power and in
relation to the pay of people who do similar and frequently
much less demanding jobs.
I think pay levels affect candidates' decisions to begin or
to continue a career in Federal service. The long-term decline
in top Federal pay has reduced the attractiveness of Government
employment and it has deprived the senior Federal service of
many able candidates.
Thank you.
[The prepared statement of Mr. Burtless follows:]
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Mr. Porter. Thank you, Doctor.
I want you to know you are all very lucky today, because we
have to be in the Capitol in about 6 minutes to vote and there
is a series of three votes, which could take 30 to 40 minutes.
So instead of us asking you questions at this point, we will be
submitting questions for the record. We appreciate very much
that you are here today.
Mr. Davis of Illinois. Mr. Chairman, could I just have a
last word. We talked about the umpires and referees and
baseball players. I was just reminded of three guys getting
ready for the World Series. [Remarks being made off mic.] One
said, let me take all the close balls and strikes. The second
guy said, well, give me all the close ones and strikes. The
third umpire said, well, now, as far as I'm concerned, ain't
none of them nothing until I call them. [Laughter.]
Mr. Porter. That sounds like some judges that I know.
Again, thank you all very much for being here. To Mr. Walker,
thank you for your time.
And one last point. I would like to recognize Tania, who is
the staff director of the minority side. She was engaged over
the weekend, so congratulations.
[Applause.]
Mr. Porter. The meeting is adjourned. Thank you all for
being here.
[Whereupon, at 3:35 p.m., the subcommittee was adjourned.]
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