Human Capital: Trends in Executive and Judicial Pay (22-JUN-06,
GAO-06-708).
Critical to the success of the federal government's
transformation are its people--human capital. Yet, the government
has not transformed, in many cases, how it classifies,
compensates, develops, and motivates its employees to achieve
maximum results within available resources and existing
authorities. GAO has reported that the federal government as a
whole may face challenges in offering competitive compensation to
its senior leaders who have reached a statutory pay cap. As
requested, GAO (1) provided trend data for basic pay rates of
selected federal executive and judicial pay plans from 1970 to
2006, (2) identified elements of total compensation for the
selected pay plans in 2006, and (3) identified principles for any
possible restructuring of these pay plans. We selected 1970 as a
baseline because salary increases went into effect in 1969 for
executive-level positions as recommended by the Commission on
Executive, Legislative, and Judicial Salaries. The pay plans
cover the following--career Senior Executive Service (SES),
administrative law judges (ALJ), senior-level (SL), Executive
Schedule (EX), scientific or professional (ST), and members of
Boards of Contract Appeals (BCA), as well as federal justices and
judges--the Chief Justice, associate justices, circuit judges,
district judges, and judges of the U.S. Court of International
Trade.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-06-708
ACCNO: A55849
TITLE: Human Capital: Trends in Executive and Judicial Pay
DATE: 06/22/2006
SUBJECT: Comparative analysis
Executive compensation
Judicial compensation
Pay rates
Human capital
******************************************************************
** This file contains an ASCII representation of the text of a **
** GAO Product. **
** **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced. Tables are included, but **
** may not resemble those in the printed version. **
** **
** Please see the PDF (Portable Document Format) file, when **
** available, for a complete electronic file of the printed **
** document's contents. **
** **
******************************************************************
GAO-06-708
* Results in Brief
* Observations
* GAO Contact
* Acknowledgments
* GAO's Mission
* Obtaining Copies of GAO Reports and Testimony
* Order by Mail or Phone
* To Report Fraud, Waste, and Abuse in Federal Programs
* Congressional Relations
* Public Affairs
United States Government Accountability Office
Report to the Chairman, Subcommittee on the Federal Workforce and Agency
Organization, Committee on Government Reform, House of Representatives
GAO
June 2006
HUMAN CAPITAL
Trends in Executive and Judicial Pay
GAO-06-708
Contents
Letter 1
Results in Brief 3
Observations 6
Appendix I Objectives, Scope, and Methodology 9
Appendix II Briefing Slides 12
Appendix III GAO Contact and Staff Acknowledgments 43
Figure
Figure 1: Percentage Differences in Nominal and Inflation-Adjusted Basic
Pay Rates for the Selected Pay Plans from 1970 to 2006 4
Abbreviations
ALJ administrative law judge BCA Board of Contract Appeals BEA Bureau of
Economic Analysis BLS Bureau of Labor Statistics CPDF Central Personnel
Data File CPI Consumer Price Index EX Executive Schedule GDP Gross
Domestic Product GS General Schedule IG inspector general OPM Office of
Personnel Management PA Presidential appointment PAS Presidential
appointment subject to Senate confirmation SES Senior Executive Service SL
senior-level ST scientific or professional
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.
United States Government Accountability Office
Washington, DC 20548
June 21, 2006
The Honorable Jon C. Porter Chairman Subcommittee on the Federal Workforce
and Agency Organization Committee on Government Reform House of
Representatives
Dear Mr. Chairman:
In order to respond to an array of governance and fiscal challenges in the
21st century, the federal government must have the institutional capacity
to plan more strategically, react more expeditiously, and focus on
achieving results. Critical to the success of this transformation are the
federal government's people-its human capital. We have commended the
progress that has been made in addressing human capital challenges in the
last few years. Still, significant opportunities exist to improve
strategic human capital management to respond to current and emerging 21st
century challenges. For example, the government has not transformed, in
many cases, how it classifies, compensates, develops, and motivates its
employees to achieve maximum results within available resources and
existing authorities.1
Further, leading organizations understand that they need senior leaders
who are drivers of continuous improvement and stimulate and support
efforts to facilitate change and achieve related transformation efforts.
We have reported that the federal government as a whole may face
challenges in offering competitive compensation to its senior leaders.2 In
2003, about 70 percent of Senior Executive Service (SES) members received
the same basic pay due to compression-when their pay reached a statutory
cap. The SES performance-based pay system, implemented in 2004, provided
an interim solution to this issue of pay compression creating a single,
open-range pay band and allowing agencies to increase the basic pay cap
for their senior executives upon certification of their performance
management systems by the Office of Personnel Management (OPM) with
concurrence from the Office of Management and Budget.
1GAO, 21st Century Challenges: Reexamining the Base of the Federal
Government, GAO-05-325SP (Washington, D.C.: February 2005).
2GAO, Human Capital: Symposium on Designing and Managing Market-Based and
More Performance-Oriented Pay Systems, GAO-05-832SP (Washington, D.C.:
July 27, 2005).
The second National Commission on the Public Service has reported that the
salaries for top-level government officials-such as political appointees,
SES members, and federal justices and judges-have not been keeping pace
with inflation or maintaining reasonable relationships to the market. In
2003, the Commission recommended that top-level officials in the
executive, legislative, and judicial branches receive significant
increases in their salaries to ensure a reasonable relationship to
relevant professional positions, such as leaders in not-for-profit and
educational organizations or state and local governments.3
At your request, our objectives were to (1) provide trend data for basic
pay rates of selected federal executive and judicial pay plans from 1970
to 2006, (2) identify elements of total compensation for the selected pay
plans in 2006, and (3) identify principles for any possible restructuring
of these pay plans. These pay plans cover the following: career SES,
administrative law judges (ALJ), senior-level (SL), Executive Schedule
(EX) levels I to V, scientific or professional (ST), and members of Boards
of Contract Appeals (BCA), as well as the federal justices and judges from
courts under Article III of the Constitution of the United States-the
Chief Justice, associate justices, circuit judges, district judges, and
judges of the United States Court of International Trade. For the first
objective, as a point of comparison, we also included the basic pay rates
for the General Schedule (GS) grade 15, step 10, position. We provided the
basic pay rates for every 10 years starting with 1970. We selected 1970 as
a baseline because salary increases went into effect in 1969 for EX
positions, federal justices and judges, and other top-level government
officials as recommended by the Commission on Executive, Legislative, and
Judicial Salaries. For additional information on our objectives, scope,
and methodology, see appendix I. On March 8, 2006, we briefed your staff
on our review. The purpose of this report is to transmit the briefing
slides (see app. II) and the additional analyses that you requested at
that time as a result of the briefing. We performed our work from February
through May 2006 in accordance with generally accepted government auditing
standards.
3The National Commission on the Public Service, Urgent Business for
America: Revitalizing the Federal Government for the 21st Century
(Washington, D.C.: January 2003).
Results in Brief
The basic pay rates for all of the selected federal pay plans increased in
nominal dollars from 1970 to 2006. However, when adjusted for inflation to
2006 dollars using the Gross Domestic Product (GDP) price deflator, the
pay rates for those under the EX pay plan and the federal justices and
judges decreased and the pay rates for the SES, SL/ST, and ALJ positions
increased, as shown in figure 1.4 For example, in 1970, EX-level I
positions (e.g., cabinet secretaries) were paid $250,204 (in 2006 dollars)
compared to $183,500 in 2006-a decrease of about 27 percent. In other
words, the pay for EX-level I positions actually declined in value by
about 27 percent from 1970 to 2006, despite an increase in nominal dollars
of about 206 percent. On the other hand, the inflation-adjusted pay rates
for SES, ALJs, SL/ST, and BCA positions increased from 1970 to 2006. In
1970, ALJs were paid $148,058 (in 2006 dollars) compared to $152,000 in
2006-an increase of about 3 percent during this time period. In addition,
the inflation-adjusted pay rates for the district and circuit judges and
judges of the U.S. Court of International Trade stayed about the
same-decreasing by about 1 percent during this time period. In comparison,
when adjusted for inflation to 2006 dollars using the CPI, the pay rates
for all of the selected pay plans decreased. For example, pay actually
declined in value for cabinet secretaries and ALJs by 41 percent and 17
percent, respectively.
4We adjusted the basic pay rates from the selected pay plans to calendar
year 2006 dollars using the Bureau of Economic Analysis's GDP price
deflator and the Bureau of Labor Statistics's Consumer Price Index (CPI).
From 1970 to 2006, the CPI has increased at an average annual rate of 4.7
percent, whereas the GDP price deflator has increased at an annual average
rate of 4.0 percent. See appendix I for more information on these indexes.
Figure 1: Percentage Differences in Nominal and Inflation-Adjusted Basic
Pay Rates for the Selected Pay Plans from 1970 to 2006
Notes: We provided the maximum basic pay rates for SES, SL/ST, ALJ, and
BCA positions and included locality pay for the Washington, D.C./Baltimore
area in the basic pay rates for the SL/ST, ALJ, BCA, and GS-15, step 10,
positions in 2006. While we only included basic pay rates, SES, SL/ST, and
GS-15, step 10, positions are eligible for cash awards/bonuses.
Total compensation includes elements such as cash (e.g., locality pay,
cash awards/bonuses), noncash benefits (e.g., annual and sick leave,
health insurance), and deferred benefits (e.g., retirement, life
insurance). Importantly, our analysis of the elements of total
compensation centered on those elements that are authorized by statute for
each pay plan. The specific application of each element will differ based
on an individual's choice (e.g., to use child care facilities or purchase
life insurance), each agency's program decision (e.g., to participate in
the student loan repayment program), and differences across pay plans. For
the executive-level positions, the elements of total compensation vary
within and across the selected pay plans in 2006. For example, SES and
SL/ST positions may receive cash awards/bonuses, while selected EX
positions that are appointed by the President subject to Senate
confirmation, ALJs, BCA positions, and federal justices and judges, at
present, do not receive cash awards/bonuses due to the nature of the
positions. Also, EX positions that are appointed by the President (with or
without Senate confirmation) may not receive any outside earned income
from teaching, writing, speaking, or other activities, while other EX
positions may receive outside earned income, subject to certain
limitations. Federal justices and judges may receive income from teaching
subject to certain limitations.
All of the positions within the selected pay plans may receive noncash or
deferred benefits, such as health and life insurance, retirement, and
access to child care facilities. However, there are differences in
retirement, such as larger benefits, for federal justices and judges
compared to other executive-level positions. While we did not determine
the balance of total compensation between pay and benefits within and
across the executive-level pay plans, federal civilian employees received,
in broad terms, most of their compensation-about 67 percent-in salary and
wages and about 33 percent in the form of benefits or deferred
compensation.5 For workers in private industries, we recently reported
that their wages made up 71 percent of total compensation, while benefits
accounted for 29 percent.6
Regarding any possible restructuring of executive-level pay plans, certain
principles should be considered to attract and retain the quality and
quantity of executive leadership necessary to address 21st century
challenges. Executive-level pay plans should be
5GAO, Military Personnel: DOD Needs to Improve the Transparency and
Reassess the Reasonableness, Appropriateness, Affordability, and
Sustainability of Its Military Compensation System, GAO-05-798
(Washington, D.C.: July 19, 2005).
6GAO, Employee Compensation: Employer Spending on Benefits Has Grown
Faster Than Wages, Due Largely to Rising Costs for Health Insurance and
Retirement Benefits, GAO-06-285 (Washington, D.C.: Feb. 24, 2006).
o sensitive to hiring and retention trends-actual trends, such as
demographic, workforce, and economic trends and their effects on
the federal government's ability to hire and retain high-quality
persons for these positions are considered;
o reflective of responsibilities, knowledge and skills, and
contributions-the positions vary both within and across
executive-level pay plans;
o transparent-Congress, leadership, and the public can easily
understand the value of the compensation and contributions;
o market-sensitive-the compensation of the relevant markets
(e.g., private or nonprofit sectors) is appropriately considered;
o flexible to economic change-changes in the nation's economy,
such as extraordinary economic circumstances or severe budgetary
constraints, can be accommodated;
o sustainable-over the longer term, given known cost trends and
risks and future fiscal imbalances, executive-level pay plans are
financially sustainable; and
o competitive-reasonable total compensation and other elements
necessary to attract and retain leadership can help ensure the
optimum use of taxpayers' dollars and make the most efficient
allocation between cash and noncash benefits.
While the types of experiences, responsibilities, and required
knowledge and skills vary both within and across the
executive-level positions, as well as the type of appointment and
length of service, there are several illustrative issues that
deserve further reconsideration.
o Maintaining a reasonable relationship across executive-level
positions. As discussed earlier, we and others have reported on
challenges in offering competitive compensation to executive and
judicial positions. A commission may be an option for exploring
ways to maintain a reasonable relationship across these positions
and to the relevant markets, such as nonprofit and educational
organizations or state and local governments. For example, in 1967
and 1989, Congress established the authority to appoint
commissions to provide salary recommendations to the President
every 4 years for top-level executive, judicial, and legislative
officials. The commission established in 1989 has never been
appointed.
o Recognizing equity issues. There are differences in the basic
pay rates for inspectors general (IG) based on the level of
appointment even though the powers and duties extended to IGs in
either appointment are essentially the same. Most IGs for cabinet
departments and major agencies are appointed by the President
subject to Senate confirmation (paid at EX-level IV). However, IGs
for some agencies, such as the National Science Foundation and the
Securities and Exchange Commission, are appointed by the agency
head and paid at varying amounts including GS-15 or SES pay rates.
o Considering performance-based bonuses. There are positions
across the executive-level pay plans that are not eligible to
receive bonuses (or awards) due to the nature of the positions.
For example, SES and SL/ST positions may receive bonuses, while
selected EX positions that are appointed by the President subject
to Senate confirmation (including selected IGs), ALJs, BCA
positions, and federal justices and judges do not. Bonuses awarded
within a system that incorporates appropriate safeguards may be an
option for rewarding individuals in these positions for their
contributions. Appropriate safeguards, including reasonable
transparency and appropriate accountability mechanisms can help
ensure fairness and prevent politicization and abuse. Bonuses must
be performance-based with a mechanism for assessing individuals'
performance based on multiple sources of input and checks and
balances to help ensure that the positions' independence is not
compromised.
o Recognizing anomalies between comparable pay plans. There are
anomalies between comparable pay plans, such as the SES and SL/ST
pay plans. For example, as of January 2004, the aggregate pay cap
(basic pay plus awards/bonuses) for SES and SL/ST positions is
higher for individuals whose agencies have certified performance
management systems. However, the higher basic pay cap only applies
to SES members under certified performance management systems, not
SL/ST positions.
We provided drafts of this report to the Director of the Office of
Personnel Management and the Director of the Administrative Office
of the United States Courts for their information. As we agreed
with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30
days after its date. At that time, we will provide copies of this
report to other interested congressional parties, the Director of
the Office of Personnel Management, and the Director of the
Administrative Office of the United States Courts. We will make
copies of this report available to others on request. The report
is also available at no charge on GAO's Web site at
http://www.gao.gov .
If you or your staff have any questions concerning this report,
please contact me on (202) 512-5500 or Lisa Shames, Acting
Director, at (202) 512-6806 or [email protected]. Contact points for
our Offices of Congressional Relations and Public Affairs may be
found on the last page of this report. Other GAO staff who made
major contributions to this report are acknowledged in appendix
III.
David M. Walker Comptroller Geneof the United States
Our objectives were to (1) provide trend data for basic pay rates
of selected federal executive and judicial pay plans from 1970 to
2006, (2) identify elements of total compensation for the selected
pay plans in 2006, and (3) identify principles for any possible
restructuring of these pay plans. We selected governmentwide
executive-level pay plans from the executive and judicial branches
for our review. For the executive branch, we included the
executive-level pay plans with the largest number of individuals
according to the Office of Personnel Management's (OPM) Central
Personnel Data File (CPDF). These pay plans cover the following:
career Senior Executive Service (SES), administrative law judges,
senior-level, Executive Schedule (EX), scientific or professional,
and members of Boards of Contract Appeals. For the EX pay plan, we
also included legislative positions-the Comptroller General, the
Librarian of Congress, the Public Printer of the United States
from the U.S. Government Printing Office, Senators, and Members of
the House of Representatives-whose pay rates are tied to the EX
pay plan. For the judicial branch, we included the federal
justices and judges from courts under Article III of the
Constitution of the United States-the Chief Justice, associate
justices, circuit judges, district judges, and judges of the
United States Court of International Trade. For the first
objective, as a point of comparison, we also included the basic
pay rates for the General Schedule (GS) grade 15, step 10,
employees. Employees in this position receive an annual general
pay increase that is based on the Employment Cost Index and
delivered automatically and uniformly to all employees.
To meet our objectives, we collected and analyzed pay rates for
the selected pay plans beginning in 1970 and then every 10 years
including the current pay rates for 2006. We selected 1970 as a
baseline because salary increases went into effect in 1969 for EX
positions, federal justices and judges, and other top-level
government officials as recommended by the Commission on
Executive, Legislative, and Judicial Salaries. We gathered the
basic pay rates and other related data, such as average pay and
aggregate pay caps, and the elements of total compensation, from a
variety of sources including legal references and documents-United
States Code, Code of Federal Regulations, and Executive Orders, as
well as OPM data and information from the CPDF, annual pay tables,
and other policy documents. Importantly, our analysis of the
elements of total compensation centered on those elements that are
authorized by statute for each pay plan. The specific application
of each element will differ based on an individual's choice (e.g.,
to use child care facilities or purchase life insurance), each
agency's program decision (e.g., to participate in the student
loan repayment program), and differences across pay plans.
In addition, we reviewed our prior work as well as that of other
public sector organizations, such as the Congressional Research
Service and National Commission on the Public Service.
We used the CPDF data from September 2005 to identify the number
of individuals in the selected pay plans in the executive branch.
We also used the CPDF data to identify the average rate of pay and
the distribution of individuals by pay level within selected pay
plans from September of 1990, 2000, and 2005. Data on the federal
justices and judges are not maintained in the CPDF. Based on
previous GAO work, we found the CPDF data were sufficiently
reliable for the purposes of this report.1
To account for inflation, we adjusted the basic pay rates from the
selected pay plans to calendar year 2006 dollars using the Bureau
of Economic Analysis's (BEA) Gross Domestic Product (GDP) price
deflator and the Bureau of Labor Statistics's (BLS) Consumer Price
Index (CPI). Each index has its strengths and weaknesses in
measuring inflation. The CPI measures the average change over time
in the prices paid by consumers for a fixed market basket of
consumer goods and services. BLS weights each item in the CPI to
specify the importance of the expenditure item relative to the
market basket of goods and services and to provide appropriate
emphasis to the price changes associated with those items. These
expenditure weights remain fixed until the next major revision of
the CPI's market basket of goods and services and they serve as a
benchmark from which price comparisons are calculated.2 However,
since the expenditure weights are fixed, the CPI does not reflect
the extent to which purchasers' spending patterns change in
response to relative price changes and, as such, it tends to
overstate the effect of price changes on purchasing power.
By contrast, the GDP price deflator measures changes over time in
the prices of broader expenditure categories than the CPI
including personal consumption expenditures, gross private
domestic investment, net exports of goods and services, and
government consumption expenditures and gross investment. In
addition, unlike the CPI, BEA annually changes the weights applied
to the GDP price deflator's expenditure categories over time,
which helps reflect how relative price changes affect purchasers'
spending patterns.
Historically, inflation as measured by the CPI has tended to
outpace inflation as measured by the GDP price deflator. Over the
period of time covered by this report (1970 to 2006), the CPI has
increased at an average annual rate of 4.7 percent, whereas the
GDP price deflator has increased at an average annual rate of 4.0
percent.
In addition, to account for economywide trends in wage and salary
growth, we adjusted the basic pay rates from the selected pay
plans to calendar year 2006 dollars using BEA's National Income
and Product Accounts wage index for private industries. We used
this wage index because it provided a continuous series of wage
data for the entire time period covered by our analysis. Wage and
salary data pertaining to a more narrowly defined sector of the
nonfederal workforce (e.g., white-collar workers) was not
available for the entire time period. We performed our work from
February through May 2006 in accordance with generally accepted
government auditing standards.
Lisa Shames, (202) 512-6806 or [email protected]
In addition to the individual named above, Janice Latimer, Timothy
Carr, Rick Krashevski, Maria-Alaina Rambus, Michael Volpe, and
Gregory Wilmoth were key contributors to this report.
The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in
meeting its constitutional responsibilities and to help improve
the performance and accountability of the federal government for
the American people. GAO examines the use of public funds;
evaluates federal programs and policies; and provides analyses,
recommendations, and other assistance to help Congress make
informed oversight, policy, and funding decisions. GAO's
commitment to good government is reflected in its core values of
accountability, integrity, and reliability.
The fastest and easiest way to obtain copies of GAO documents at
no cost is through GAO's Web site ( www.gao.gov ). Each weekday,
GAO posts newly released reports, testimony, and correspondence on
its Web site. To have GAO e-mail you a list of newly posted
products every afternoon, go to www.gao.gov and select "Subscribe
to Updates."
The first copy of each printed report is free. Additional copies
are $2 each. A check or money order should be made out to the
Superintendent of Documents. GAO also accepts VISA and Mastercard.
Orders for 100 or more copies mailed to a single address are
discounted 25 percent. Orders should be sent to:
U.S. Government Accountability Office 441 G Street NW, Room LM
Washington, D.C. 20548
To order by Phone: Voice: (202) 512-6000 TDD: (202) 512-2537 Fax:
(202) 512-6061
Contact:
Web site: www.gao.gov/fraudnet/fraudnet.htm E-mail:
[email protected] Automated answering system: (800) 424-5454 or
(202) 512-7470
Gloria Jarmon, Managing Director, [email protected] (202) 512-4400
U.S. Government Accountability Office, 441 G Street NW, Room 7125
Washington, D.C. 20548
Paul Anderson, Managing Director, [email protected] (202)
512-4800 U.S. Government Accountability Office, 441 G Street NW,
Room 7149 Washington, D.C. 20548
Observations
Appendix I: Objectives, Scope, and Methodology
1GAO, OPM's Central Personnel Data File: Data Appear Sufficiently Reliable
to Meet Most Customer Needs, GAO/GGD-98-199 (Washington, D.C.: Sept. 30,
1998).
2BLS has made major revisions to the market basket about once a decade
between 1940 and 1997. Since 1998, BLS has updated the expenditure weights
for the market basket every 2 years.
Appendix II: Briefing Slides
Appendix III: GAO Contact and Staff Acknowledgments
GAO Contact
Acknowledgments
(450488)
GAO's Mission
Obtaining Copies of GAO Reports and Testimony
Order by Mail or Phone
To Report Fraud, Waste, and Abuse in Federal Programs
Congressional Relations
Public Affairs
www.gao.gov/cgi-bin/getrpt?GAO-06-708.
To view the full product, including the scope
and methodology, click on the link above.
For more information, contact Lisa Shames at (202) 512-6806 or
[email protected].
Highlights of GAO-06-708, a report to the Chairman, Subcommittee on the
Federal Workforce and Agency Organization, Committee on Government Reform,
House of Representatives
June 2006
HUMAN CAPITAL
Trends in Executive and Judicial Pay
Critical to the success of the federal government's transformation are its
people-human capital. Yet, the government has not transformed, in many
cases, how it classifies, compensates, develops, and motivates its
employees to achieve maximum results within available resources and
existing authorities. GAO has reported that the federal government as a
whole may face challenges in offering competitive compensation to its
senior leaders who have reached a statutory pay cap.
As requested, GAO (1) provided trend data for basic pay rates of selected
federal executive and judicial pay plans from 1970 to 2006, (2) identified
elements of total compensation for the selected pay plans in 2006, and (3)
identified principles for any possible restructuring of these pay plans.
We selected 1970 as a baseline because salary increases went into effect
in 1969 for executive-level positions as recommended by the Commission on
Executive, Legislative, and Judicial Salaries. The pay plans cover the
following-career Senior Executive Service (SES), administrative law judges
(ALJ), senior-level (SL), Executive Schedule (EX), scientific or
professional (ST), and members of Boards of Contract Appeals (BCA), as
well as federal justices and judges-the Chief Justice, associate justices,
circuit judges, district judges, and judges of the U.S. Court of
International Trade.
The basic pay rates for all of the selected federal pay plans increased in
nominal dollars from 1970 to 2006. However, when adjusted for inflation to
2006 dollars using the Gross Domestic Product price deflator, the pay
rates for those under the EX pay plan and the federal justices and judges
decreased and the pay rates for the SES, SL/ST, and ALJ positions
increased. For example, in 1970, cabinet secretaries were paid $250,204
(in 2006 dollars) compared to $183,500 in 2006. Their pay actually
declined in value by about 27 percent during this period. In 1970, ALJs
were paid $148,058 (in 2006 dollars) compared to $152,000 in 2006. Their
pay increased in value by 3 percent during this period. In comparison,
when adjusted for inflation to 2006 dollars using the Consumer Price
Index, the pay rates for all of the selected pay plans decreased. For
example, pay actually declined in value forcabinet secretaries and ALJs by
41 percent and 17 percent, respectively.
The elements of total compensation vary among the selected pay plans. For
example, SES and SL/ST positions may receive cash awards/bonuses, while,
at present, selected EX positions, ALJs, BCA positions, and federal
justices and judges do not due to the nature of the positions. All of the
positions within the selected pay plans may receive noncash or deferred
benefits, such as health and life insurance, retirement, and access to
child care facilities. However, there are differences in retirement, such
as larger benefits, for federal justices and judges compared to other
executive-level positions.
Regarding any possible restructuring of these pay plans, certain
principles should be considered to attract and retain the executive
leadership necessary to address 21st century challenges. The pay plans
should be
o sensitive to hiring and retention trends;
o reflective of responsibilities, knowledge and skills, and
contributions;
o transparent;
o market-sensitive;
o flexible to economic change;
o sustainable; and
o competitive.
Going forward, there are several illustrative issues that deserve further
reconsideration-maintaining a reasonable relationship in total
compensation across executive-level positions; recognizing equity issues
in the basic pay rates within the same position, such as inspectors
general; considering performance-based bonuses with appropriate safeguards
for positions that do not receive them including selected EX positions,
ALJs, BCA positions, and federal justices and judges; and recognizing
anomalies between comparable pay plans, such as SES and SL/ST, in terms of
basic pay caps, as well as aggregate pay (basic pay plus cash
awards/bonuses).
*** End of document. ***