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[Senate Hearing 106-586]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 106-586

        THE EFFECTIVENESS OF FEDERAL EMPLOYEE INCENTIVE PROGRAMS

=======================================================================

                                HEARING

                               before the

                  OVERSIGHT OF GOVERNMENT MANAGEMENT,
        RESTRUCTURING AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE

                                 of the

                              COMMITTEE ON
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                              May 2, 2000

                               __________

      Printed for the use of the Committee on Governmental Affairs

_______________________________________________________________________
For sale by the Superintendent of Documents, Congressional Sales Office
         U.S. Government Printing Office, Washington, DC 20402

                     U.S. GOVERNMENT PRINTING OFFICE
65-172 cc                    WASHINGTON : 2000

                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                   FRED THOMPSON, Tennessee, Chairman
WILLIAM V. ROTH, Jr., Delaware       JOSEPH I. LIEBERMAN, Connecticut
TED STEVENS, Alaska                  CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine              DANIEL K. AKAKA, Hawaii
GEORGE V. VOINOVICH, Ohio            RICHARD J. DURBIN, Illinois
PETE V. DOMENICI, New Mexico         ROBERT G. TORRICELLI, New Jersey
THAD COCHRAN, Mississippi            MAX CLELAND, Georgia
ARLEN SPECTER, Pennsylvania          JOHN EDWARDS, North Carolina
JUDD GREGG, New Hampshire
             Hannah S. Sistare, Staff Director and Counsel
      Joyce A. Rechtschaffen, Minority Staff Director and Counsel
                  Darla D. Cassell, Administrive Clerk

                                 ------                                

SUBCOMMITTEE ON OVERSIGHT OF GOVERNMENT MANAGEMENT, RESTRUCTURING, AND 
                        THE DISTRICT OF COLUMBIA

                  GEORGE V. VOINOVICH, Ohio, Chairman
WILLIAM V. ROTH, Jr., Delaware       RICHARD J. DURBIN, Illinois
JUDD GREGG, New Hampshire            ROBERT G. TORRICELLI, New Jersey
                  Kristine I. Simmons, Staff Director
   Marianne Clifford Upton, Minority Staff Director and Chief Counsel
                     Julie L. Vincent, Chief Clerk
                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Voinovich............................................     1
    Senator Durbin...............................................     3
    Senator Akaka................................................     4

                               WITNESSES
                          Tuesday, May 2, 2000

Roberta L. Gross, Inspector General, National Aeronautics and 
  Space Administration...........................................     5
Henry Romero, Associate Director, Workforce Compensation and 
  Performance, Office of Personnel Management....................     9
Colleen M. Kelley, National President, National Treasury 
  Employees Union................................................    12
Michael Brostek, Associate Director, Federal Management and 
  Workforce Issues, General Government Division, U.S. General 
  Accounting Office..............................................    14

                     Alphabetical List of Witnesses

Brostek, Michael:
    Testimony....................................................    14
    Prepared statement...........................................    80
Gross, Roberta L.:
    Testimony....................................................     5
    Prepared statement...........................................    31
Kelley, Colleen M.:
    Testimony....................................................    12
    Prepared statement...........................................    69
Romero, Henry:
    Testimony....................................................     9
    Prepared statement...........................................    43

                                Appendix

Letter from Ms. Gross to Senator Voinovich dated May 16, 2000....    93
Letter from Mr. Friedman to Senator Voinovich dated May 19, 2000.    98

 
        THE EFFECTIVENESS OF FEDERAL EMPLOYEE INCENTIVE PROGRAMS

                              ----------                              

                          TUESDAY, MAY 2, 2000

                                   U.S. Senate,    
       Oversight of Government Management, Restructuring,  
                 and the District of Columbia Subcommittee,
                          of the Committee on Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:14 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. George V. 
Voinovich, Chairman of the Subcommittee, presiding.
    Present: Senators Voinovich, Akaka, and Durbin.

             OPENING STATEMENT OF SENATOR VOINOVICH

    Senator Voinovich. The Subcommittee will come to order.
    I first want to apologize for being late, I was presiding 
this morning.
    This morning's hearing of the Subcommittee on Oversight of 
Government Management is on the effectiveness of Federal 
employee incentive programs. This is the fourth hearing that we 
have held in our effort to empower Federal employees, change 
the culture of the Federal workforce, and address the human 
capital crisis that is confronting our Federal Government.
    Last July, we examined the experiences of State Government. 
In October, we learned how some Federal agencies are 
significantly changing and modernizing their operations, and in 
March, we examined whether the government is positioning itself 
to address the human capital challenges of the future. Today's 
hearing will explore whether the Federal Government has the 
right programs in place to attract, retain, and motivate a 
world-class workforce.
    I am reminded of a story that Senator Durbin told at our 
last hearing. He mentioned how law firms are increasing the 
salaries of their lawyers by $50,000 to $75,000 a year to 
compete with rapidly growing high-tech companies which can 
offer sky-high salaries and generous stock options to 
individuals.
    When I think about that story, I question whether current 
Federal incentives, including recruitment bonuses, flexible 
office hours, telecommuting, on-site daycare, vacation time, 
and performance pay are adequate to bring the best and 
brightest people into government service.
    The Subcommittee will ask whether existing employee 
incentive programs are effective in encouraging innovation and 
creating an atmosphere in which employees feel there are 
substantial rewards for excellence and productivity.
    I am especially interested in learning whether agencies 
have adequate budgets to offer whatever customized incentives 
they may have developed in order to meet their particular human 
capital needs. You have to have the money to offer them. In 
short, are the current incentives enough to persuade people to 
come to work for the Federal Government and, once working for 
the Federal Government, remain with the Federal Government?
    The government faces many challenges in this area. We 
understand that most people who seek employment in the Federal 
Government are motivated by the desire to serve their country, 
and thank God there are still many people like that in our 
Nation today. However, we cannot take that spirit for granted 
when the employment opportunities in the private sector are 
more attractive than ever before because of this country's 
thriving economy. The pull for people to stay in the private 
sector is greater than ever before.
    According to the Office of Personnel Management, by 2004, 
32 percent of Federal employees will be eligible for regular 
retirement and 21 percent will be eligible for early 
retirement. So the prospect is that by 2004 over half the 
Federal workforce could say ``good-bye.'' As the baby boomers 
leave government service en masse, the government will be hard 
pressed to hire new workers with the right skills, which will 
increasingly mean high technology skills. How do we get those 
skills? This will require a much greater investment in pay and 
benefits than Federal employees currently receive if the 
government hopes to compete with that private sector.
    Furthermore, surveys of Federal employees conducted by OPM 
and others during the last few years indicate a majority of 
Federal employees do not believe that creativity and innovation 
are rewarded. Regardless of whether that understanding is true 
or a misperception, if people believe that is the way it is, 
then we need to respond to it.
    Coupled with the example I mentioned earlier about the 
enormous salaries being offered to young professionals, it 
becomes clear that something has to be done. For one, we should 
look at the private sector where many companies are finding new 
and innovative ways to attract and retain people. I am sure 
that many of you have heard that several large companies have 
begun to offer all employees home computers. They are not doing 
this as a give-away; rather, they have determined that 
universal computer literacy of their workforce is going to be 
essential to their company's future success. It sends a strong 
signal of what they value and that they are willing to invest 
in their employees.
    I think it is a very interesting idea, and it underscores 
an important point, and that is, the Federal Government needs 
to undertake a substantive review of how it motivates and 
retains its workforce in the information age. It is an 
important element to building the kind of quality government 
that our Nation should have. It is interesting that as the 
private sector moves along, they are going to expect their 
Federal Government to move along. And if they are going 85 
miles an hour with technology and innovation and we are at 25 
miles an hour, in effect we end up being an impediment to the 
growing economy and our Nation.
    It is really important that we start thinking about that. 
We are very, very important to the future of this country's 
economy, and more and more government is being involved, and 
when it is involved, it should be involved in such a way with 
the technology and people that are necessary in order to grease 
the skids and at least not get in the way of progress in our 
country.
    Today, the testimony we will hear will tell us about 
incentives that are currently available, and hopefully our 
witnesses will share their suggestions on how to improve the 
current situation. That is what I am more interested in than 
anything else.
    I now yield to Senator Durbin, our Ranking Minority Member, 
for his comments.

              OPENING STATEMENT OF SENATOR DURBIN

    Senator Durbin. Thank you, Mr. Chairman, and I thank the 
panel for joining us this morning.
    Virtually every successful business that you have a chance 
to analyze or get to meet the leaders of will tell you that the 
reason for their success is the people that work there. They 
can have the best technology in the world, but if they don't 
have a creative, hard-working, inspired workforce, they are not 
going anywhere. I think that is the story of human experience, 
that we are as good as our Senate staff people who represent us 
and come in contact with our voters and constituents much more 
than we do on a personal basis. And the agencies of government 
that we rely on to do the most important work also are as good 
as the people that work there.
    This is, I guess, an appropriate time for this hearing 
because I understand that it is Public Service Recognition 
Week. And although we haven't heard a lot of trumpets blaring 
and people announcing this on the morning talk shows, the fact 
is that public service for many of us who have dedicated our 
lives to it means a lot. And for those who are here today 
representing so many agencies, I thank you for your personal 
contribution to public service and your continued devotion to 
it.
    It is interesting, Mr. Chairman, that we just went through 
a hearing in the Armed Services Appropriations Committee about 
the question of recruitment and retention of men and women in 
our military. And it appears that our friends at the Marine 
Corps are doing very well. They have a certain image which 
attracts good men and women, and they continue to meet their 
requirements in terms of recruitment.
    But the other branches are having a tougher time. The Navy 
is having a tough time, the Air Force as well, and the Army, 
one of the worst.
    The thing that has kept them going and has managed to 
maintain their work in place is retention. They have convinced 
a lot of men and women who are eligible to quit or retire to 
stick around, stay a little while longer. And I am wondering, 
as we look at this Federal workforce and the challenge that we 
face here and talk about recruiting new Federal employees, 
whether we ought to devote a few moments as well to talking 
about what it will take to keep some of the veteran career 
employees on the job a little while longer. It can make a 
significant difference in terms of maintaining the key services 
that we count on from the Federal Government.
    I said to the Chairman at a previous hearing that before he 
was elected to the Senate, we went through a very sad and 
tragic period of time during the government shutdown, and there 
were talk-show hosts who were blaring at full volume that no 
one would ever notice if the Federal Government shut down, that 
these were all faceless, bureaucratic paper shufflers who, 
frankly, really didn't do anything important to the lives of 
Americans across our Nation.
    Those commentators were wrong, and as a result of that 
shutdown, I think a lot of people on Capitol Hill and maybe 
even some of the radio commentators learned a lesson. The 
agencies of Federal Government do important work, and I can 
list here 50 different examples my staff put together, from 
getting out Social Security checks to making sure our planes 
land safely at the airports, and everything in between. And we 
know that we need the very best people to make that happen.
    Thank you for having this hearing, and thanks to this panel 
for joining us.
    Senator Voinovich. Thank you.
    Senator Akaka, welcome. Would you like to make a statement 
this morning.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Thank you very much, Mr. Chairman.
    As the Ranking Minority Member of the Senate's 
International Security, Proliferation, and Federal Services 
Subcommittee, I commend you on your unwavering interest, Mr. 
Chairman, in empowering the Federal workforce. I know that our 
Subcommittee jurisdictions overlap, and I just want you to know 
that I appreciate sitting with your Subcommittee this morning.
    I look forward to hearing from the witnesses today who 
support my belief that our Federal civil servants are the 
government's most valuable asset. How we recruit, train, and 
retain these fine men and women is a critical dialogue that 
deserves our full attention.
    Having sat on civil service panels for most of my 
congressional career, I know how important salary, benefits, 
and other compensation incentives are to attracting and 
retaining qualified employees. Federal agencies, if given 
adequate funding, would be better positioned to utilize 
incentive programs that are already available. Flattened 
budgets and the pressure to reallocate limited resources do not 
benefit Federal employees or the ultimate end users, and that 
is the American taxpayers.
    Our Nation's civil servants have given much to their 
country, especially when Congress was balancing the budget 
during times of crunching deficits. Now that the country is 
enjoying record-breaking surpluses, I believe Federal employees 
should be rewarded for their contributions, and I will continue 
to push for realistic budgets and salaries for Federal agencies 
and their employees.
    Again, Mr. Chairman, I thank you for holding this hearing 
today and for this opportunity to say a few words. Thank you.
    Senator Voinovich. Thank you, Senator Akaka.
    I would now like to introduce today's witnesses. The Hon. 
Roberta Gross is the Inspector General of the National 
Aeronautics and Space Administration. She will discuss how NASA 
motivates its workforce and the policy her office follows to do 
the same.
    Henry Romeo is the Associate Director of Workforce 
Compensation and Performance at the Office of Personnel 
Management. He will discuss various incentives that are 
currently available to Federal agencies through OPM.
    Colleen M. Kelley is the National President of the National 
Treasury Employees Union. Ms. Kelley will offer the union's 
perspective on how to best attract, retain, and motivate 
Federal employees.
    And last, but not least, Michael Brostek is an Associate 
Director of the Federal Management and Workforce Issues at the 
General Accounting Office, and he will discuss GAO's work in 
this area. And I have also asked Mr. Brostek to comment on how 
GAO motivates its own employees. We are interested in that, Mr. 
Brostek.
    We thank you for coming, and we look forward to hearing 
from you. And as is the custom of this Subcommittee, please 
stand and I will administer an oath. Do you swear that the 
testimony you are about to give before this Subcommittee is the 
truth, the whole truth, and nothing but the truth, so help you, 
God?
    Ms. Gross. I do.
    Mr. Romero. I do.
    Ms. Kelley. I do.
    Mr. Brostek. I do.
    Senator Voinovich. Let the record show that all four 
witnesses answered in the affirmative.
    I would now like to hear first from Ms. Gross, and I think 
the witnesses understand that we would like you to limit your 
testimony, to the best of your ability, to 5 minutes. Your 
written testimony will be made part of our record. We will 
start then with Ms. Gross.

 TESTIMONY OF ROBERTA L. GROSS,\1\ INSPECTOR GENERAL, NATIONAL 
              AERONAUTICS AND SPACE ADMINISTRATION

    Ms. Gross. Thank you. Mr. Chairman and Members of the 
Subcommittee, I thank you for the opportunity to be here today 
to talk about retention and recruitment of NASA and NASA OIG 
employees.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Gross appears in the Appendix on 
page 31.
---------------------------------------------------------------------------
    NASA has a cutting-edge mission, and that requires a 
creative and an informed workplace. The failure to recruit, to 
train, and retain skilled workers has, in fact, caused some 
problems for NASA: Very recent shuttle flights had some 
anomalies. This problem caused, in part, the mission 
vulnerabilities of the costly Mars Climate Orbiter failure.
    Because of past flattened and reduced budgets, only 
recently has NASA begun hiring again. This hiring authority 
will allow the agency really to right-size, that is, it can 
replace staff with essential skills that have been lost through 
attrition and buyouts, and it will ensure new personnel so that 
we can have future leaders. There are statistics that show the 
aging force compared to the new recruits. At NASA, there have 
been no recruits, almost, because of the downsizing.
    A significant aspect of NASA's new staffing plans, however, 
will be the use of temporary and term appointments, and in my 
mind, it is a real question whether this strategy will attract 
hard-to-reach skilled workers, and we will be following that 
through some of our inspections and audits.
    But let me turn to the NASA Inspector General experience, 
and let me particularly focus on our efforts to increase and 
manage the information technology environment at NASA Office of 
Inspector General (OIG).
    We needed to recruit professionals who could effectively 
audit, inspect, and investigate information technology 
security, which is obviously critical to an agency such as 
NASA. We have a Computer Crimes Division which is small, but it 
is smart and efficient. (I will take the time to say and 
recognize my workers.) And, in part, we have been able to 
successfully recruit some skilled staff for the CCD because I 
made a policy we are going to offer them higher grades and 
higher salaries, and, generally, compared to the workforce, my 
other workforce, they are at higher levels.
    We have also created a workplace known for its leadership 
in the computer crimes field. It is the place to be. We sort of 
look at ourselves as the Chicago Bulls. If you want to combat 
computer crime, come to the NASA Inspector General's Office.
    Senator Durbin. I appreciate that analogy. [Laughter.]
    Ms. Gross. It is also a challenging agency environment. 
After all, IT security at NASA impacts astronaut security, 
satellite mission success, and protection of cutting-edge 
technology from inadvertent loss or malicious attacks.
    However, recruitment in this occupational field is 
increasingly difficult because of the lure of the private 
sector: Higher salaries, more lucrative benefits, profit 
sharing, stock options, and greater flexibility to balance work 
and private life. And it has been much more difficult because 
of this lure.
    We have had similar difficulties, and in some ways even 
more difficulties, in recruiting for our IT audit staff. Over 
the last few years, we have tried to use bonuses to recruit 
experienced IT auditors and evaluators, but that is not good 
enough. The private sector--your Big Ten firms that are going 
to be using this kind of workforce for consultants . . . are 
snapping up IT auditors with large salaries in the six figures, 
promises of advancement, and education benefits. It has just 
been very, very difficult.
    There is also just a ``where the government does it to 
itself'' problem. The occupational series for auditors requires 
24 academic credit hours of accounting to qualify as an 
auditor. If I need an information technology auditor, 
information technology security auditor, I really don't need 
those 24 hours of financial accounting. That is for the 
financial audits. Everybody doesn't have to know how to do 
financial audits. But if they are going to be called auditors, 
they have to qualify in this series. And so I have had very 
qualified people from the outside sector who want to retain 
their title of auditor. They are qualified, they have passed 
all sorts of tests, but they don't come because we have the 
requirement of 24 hours of accounting. That is where we do it 
to ourselves. And before the hearing, I did speak to Mr. Romero 
on that.
    Moreover, it is my experience that it just takes too long 
to hire staff. We have lost leading candidates in both audit 
and computer crimes arena to the private sector competitors 
because companies can hire top-performing candidates faster 
than we can. I would say a fast recruit--bringing somebody on 
board--is 3 months. That is ridiculous. This is a fast-moving 
market. People do not have to wait around for the Federal 
Government. They want to know where they are going to work, and 
they are always unsure about budgeting. Is the Federal budget 
going to be there? The process is just too long.
    We believe a key to one possibility for the recruitment 
issue is to forge some partnerships with schools and 
departments that emphasize criminal justice, computer science, 
and other related academic disciplines. And here is where we do 
hope for support from the administration, which does have 
proposals in this arena, and Congress, because it is a real 
budgeting issue to subsidize loan forgiveness programs for 
graduates with IT specialties.
    Let me turn to the issue of high-cost labor markets. This 
is a huge problem. NASA and other Federal organizations face a 
very real problem with the high cost of living in those areas 
like Northern and Southern California. During the last 4 years, 
we have continuously, but unsuccessfully, recruited for an 
information technology criminal investigator and analyst in the 
San Francisco Bay area. We have had two people that accepted, 
and we told them make sure they looked at the housing market. 
And after they did that, they turned down the offer.
    The high cost of housing is just too high. We could always 
force people to relocate, but then those valuable employees 
would then take a different job rather than move.
    The ability to subsidize or otherwise provide housing may 
be one way to attract capable IT employees to such high-cost-
of-living areas, and maybe some of those base-closing areas or 
other Federal facilities may be one way of looking at it. But 
certainly something has to be done.
    This Committee is rightfully emphasizing human resources 
management. The private sector human resource community has 
been aggressively recruiting in the current boom economy. They 
have been focusing how to get the best and the brightest. But 
look at what has been happening for the Federal human resource 
community in the last couple of years. What are they focused on 
because of the budget? It is not because they are bad people or 
they are unenthusiastic about their job. They have had to focus 
on running reductions in force, early-out retirements, and 
buyout plans. Many of them have maybe lost the skills as well 
as the network for recruitments. They just haven't had to learn 
what to do to compete in this kind of market.
    So this Committee's attention on human resource management 
is very, very key if you think of what those human resource 
people have been doing in the past several years and what they 
have to do in the current employment situation.
    I am going to suggest a few ideas that this Committee can 
be considering, that OPM needs to consider, and that the 
private sector does use. We have got to be able to have those 
flexibilities. Aggressive pay banding so that people don't have 
to incrementally go up year by year for their step increases. 
We should have that kind of flexibility where staff have a 
range of salaries so we, as managers, can advance employees on.
    I also think that we need limited, noncompetitive hiring 
authority for highly specialized, hard-to-fill positions, such 
as IT auditors. If it takes me 3 months at best to get somebody 
in and I am able to locate people through some affirmative 
recruitments, I should be able to have limited, noncompetitive 
hiring. And let OPM or let GAO audit me to make sure that I am 
not just doing an old-boy system or an old-girl system and not 
getting the best and the brightest.
    We should be expanding recruitment and retention bonuses 
greater than the 25 percent of annual salary because we know it 
doesn't work in all locations.
    The other one, flexibility in annual leave entitlement for 
experienced non-Federal recruits. If I have somebody from the 
private sector who has spent 10 years in the private sector and 
wants to work for NASA and wants to work in my Computer Crimes 
Division--remember, it is a great place to work--that person 
may have 4 weeks vacation in their current job. As a new 
Federal employee, they get to start off with 4 hours per pay 
period for the first 3 years. In other words, they get 2 weeks 
vacation. That is a huge sacrifice. For all of us, time is 
money. Time is very important. How are you going to be family-
friendly with that kind of inflexibility?
    I have other ideas, but I see my time is coming to an end. 
What I would say is that I was very glad to hear both Senators 
using their offices as a bully pulpit in recognizing civil 
servants. It is very important that in evaluating the work of 
Federal employees--and, of course, that is one thing that we do 
at the Inspector General's Office for fraud, waste, abuse, and 
mismanagement. But we all have to make sure that it is well 
balanced because government service is important, and that is 
really something that we need to say is one of the chits of why 
people come to serve. They come to serve because you can make a 
difference, and like I said, I was very happy to see you using 
your offices as a bully pulpit.
    In conclusion, we know that budget constraints limit use of 
incentives. However, the government cannot afford not to 
attract and retain the best of Federal Government employees. I 
would like to personally thank this Committee for emphasizing 
this whole need to get the best and brightest for public 
service.
    Thank you.
    Senator Voinovich. Thank you.
    Ms. Gross. Senator, before you go on to the next witness, 
my parents are here, and they have an Ohio connection. So I 
couldn't help but introduce them to you. My mother was born in 
Ohio. My father met my mother at Wright-Patterson where they 
were working. My brother and I were both born in Dayton. So I 
am sure they wanted to say hello.
    Senator Voinovich. Well, thank you for being here, and I 
say hello to you. One of the wonderful things that we have in 
Ohio is Wright-Patterson Air Force Base, which I think is the 
finest facility in the world. It is nice to know that it has 
brought some wonderful people to Ohio, and I am sure you are 
very proud that your daughter is working for NASA. Thanks for 
letting me know that.
    Mr. Romero.

  TESTIMONY OF HENRY ROMERO,\1\ ASSOCIATE DIRECTOR, WORKFORCE 
  COMPENSATION AND PERFORMANCE, OFFICE OF PERSONNEL MANAGEMENT

    Mr. Romero. Mr. Chairman, Senator Durbin, I appreciate this 
opportunity to appear before you to discuss the numerous 
Federal employee incentives and their effectiveness. As OPM's 
Director Janice Lachance stated before this Subcommittee in 
early March, the Federal Government is engaged in the war for 
talent. Winning this war requires not only aggressively 
competing for highly skilled new employees, but also retaining 
and developing our current workforce. We intend to meet these 
challenges by ensuring agencies effectively existing incentives 
and flexibility tools, as well as developing additional 
flexibilities.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Romero appears in the Appendix on 
page 43.
---------------------------------------------------------------------------
    Traditionally, the most important incentive to attract new 
Federal employees or to motivate current employees has been 
pay. It is important that the basic salary we pay our employees 
be competitive with other employers for similar kinds and 
levels of work. This is a goal that has historically been 
difficult to achieve. Also, there has been considerable 
controversy over the years on how to compare the salaries of 
Federal and non-Federal employees in a meaningful way.
    During the last 2 years, the President and Congress have 
agreed to increase Federal employee pay by more than 8 percent. 
The President's budget for fiscal year 2001 continues that 
trend by proposing an overall pay increase of 3.7 percent. If 
enacted, this 2-year increase would be the largest 2-year jump 
since the 1981-82 period.
    A competitive salary is just one part of any employer's 
strategy for attracting and retaining the workforce it needs. 
Over the years, OPM and Congress have provided several 
flexibilities for agencies. For example, current law authorizes 
OPM to establish higher basic salaries, which we call ``special 
salary rates,'' for specific occupations or geographic 
locations when Federal agencies are experiencing significant 
recruitment or retention problems. In addition, Congress has 
also authorized recruitment bonuses and retention allowances. 
The recruitment bonus authority gives Federal agencies a tool 
to attract a specific candidate with special skills when the 
position involved would be difficult to fill.
    Similarly, the retention allowance authority helps Federal 
agencies retain employees with special skills when they 
otherwise would likely leave. These payments can be up to 25 
percent of basic pay.
    Since 1991, when these tools were created, Federal agencies 
have taken a cautious approach toward their use. During fiscal 
year 1998, however, we witnessed significant growth. In that 
year, 1,089 recruitment bonuses were given. Retention 
allowances were given to 2,300 employees in fiscal year 1998, 
and we expect that when we get data from fiscal year 1999 the 
numbers will be higher as a lot of agencies used these 
retention bonuses to deal with the Y2K problem.
    We are looking at legislative and administrative options to 
enhance these authorities and make them more flexible. We are 
exploring increasing the size of recruitment and retention 
incentives and allowing a variety of payment methods.
    But compensation is not the only component of a successful 
strategy. That is why we have adopted a perspective we call the 
strategic rewards approach. This acknowledges that an 
organization's reward system involves all aspects of a work 
situation.
    Employers must recognize that many workers face the need to 
balance work and family responsibilities on a daily basis. On 
this score, the Federal Government, as an employer, clearly has 
been a leader for more than 2 decades. Flexible work schedules 
were first introduced in the Federal Government in the late 
1970's. We are proud that about half of all Federal employees 
take advantage of this program, which has become a model for 
non-Federal employers as well.
    We have also been a leader in introducing family-friendly 
leave programs. The annual vacation leave and sick leave system 
has been supplemented in recent years by a number of new 
programs, including leave sharing, unpaid family and medical 
leave, paid sick leave for family care and adoption purposes, 
and additional paid leave for organ donation purposes.
    In response to a Presidential directive last year, we will 
implement a major enhancement to our sick leave program. Very 
soon Federal employees will be able to use a total of up to 12 
weeks of accrued paid sick leave each year to care for a family 
member with a serious health condition.
    The government's awards statute provides a broad framework 
for recognizing superior performance and significant 
accomplishments. OPM regulations and policies continue this 
decentralized approach that allows agencies to design programs 
that will work for them. OPM provides extensive guidance about 
ways to use the incentives.
    Over the years, the Federal Government has included many 
more lower-level employees in such awards programs than the 
private sector. Awards programs also give agencies a means of 
providing additional compensation to reward short-term 
accomplishments as well as designing long-term incentive 
programs that focus employee energy on attaining specific 
agency outcomes and goals.
    During the 1980's and early 1990's, agencies primarily gave 
cash awards to employees using bonuses tied to the employee's 
annual performance ratings. Agencies are now moving toward 
making greater use of awards based on specific accomplishments. 
This reinforces the line of sight and recognition value of the 
award by specifying what accomplishment is being rewarded.
    Generally agency spending on awards has remained fairly 
constant at about 1 percent of total salaries over the last 10 
years. For fiscal year 1998, agencies gave out 589,000 rating-
based performance awards; about 33 in every 100 employees 
received one. Agencies also granted over 650,000 other awards 
based on specific employee contributions, a rate of 36 awards 
per 100 employees.
    Awards programs must be flexible to permit local 
organizations to tailor their programs and to allow for 
appropriate recognition of different forms and degrees of 
accomplishment.
    Further, to be successful, awards programs must be credible 
to employees and their representatives. Agencies must develop 
more transparent and credible criteria and increase employee 
involvement in the development of their programs. Awards 
programs have provided an arena where agency labor-management 
partnerships produce positive results for the entire 
organization.
    In addition, design flexibility is important for keeping 
programs fresh and appealing to employees and managers alike. 
Adapting and refining awards programs and criteria are a 
natural part of an organization's ongoing use of rewards and 
recognition.
    However, there is growing evidence about other factors that 
really make a difference in retaining scarce talent to meet 
future goals. Reward system designers have identified two. The 
first typically is called ``learning and development,'' and the 
second is often referred to as ``workplace environment.'' In 
other words, the rewards that really matter to people and make 
a difference in their decision to stay relate to how well the 
organization supports their skills building and the kind of 
work setting the organization provides.
    With regard to the first item, for many years agencies have 
had the authority to establish tuition assistance and 
reimbursement programs. These programs pay some or all of the 
cost of college courses and provide Federal employees with 
opportunities to round out their academic backgrounds or 
professional knowledge.
    A more recent innovation is the individual learning account 
which is now being piloted by 13 Federal agencies. These 
accounts allow agencies to set aside specific dollar amounts 
and/or official time for Federal employees to use for their 
learning and development.
    Federal employees have access to more than 250 federally 
sponsored or assisted child-care sites around the country. We 
are very pleased that recent legislation permits agencies to 
use appropriated funds to make child care more affordable for 
their lower-income employees. We also need to focus on the 
leadership of the agencies to ensure that they are motivating 
their employees.
    In summary, we have special challenges and opportunities in 
the Federal Government to keep employees engaged and working 
toward shared goals. The fact is that many, if not most, people 
do not enter public service for the money. They want a chance 
to contribute and make their country a better place to live and 
raise a family. Often the obstacles they face are enormous, and 
the results of the policies and programs they developed to 
conquer disease or clean up the environment may not be apparent 
for years. In such situations, it is incumbent upon us to 
recognize our employees' contributions.
    It does not take piles of money or stock options to let 
public employees know that they are valued and make a 
difference. We do not have the money or stock options to give, 
in any event, but we do have a powerful reward in the 
recognition we can confer.
    When we do these things, I am confident we can implement 
strategies that will foster commitment and promote excellence.
    Thank you for the opportunity, Mr. Chairman. I would be 
pleased to answer any questions you may have.
    Senator Voinovich. Thank you, Mr. Romero.
    Ms. Kelley, we are anxious to hear your perspective on how 
good our incentives are and perhaps some other ideas that we 
ought to undertake.

TESTIMONY OF COLLEEN M. KELLEY,\1\ NATIONAL PRESIDENT, NATIONAL 
                    TREASURY EMPLOYEES UNION

    Ms. Kelley. Thank you, Chairman Voinovich, and Ranking 
Minority Member Durbin.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Kelley appears in the Appendix on 
page 69.
---------------------------------------------------------------------------
    NTEU represents more than 155,000 Federal employees across 
the country, and I want to thank you for holding this hearing 
today to examine the Federal Government's incentive programs 
and their effectiveness. I share your belief that Federal 
employees, just like their private sector counterparts, must 
believe that substantial rewards and incentives exist for 
excellence and for productivity. Without appropriate 
compensation and incentives, the Federal Government will find 
it increasingly difficult to recruit and retain quality 
employees in the future.
    The most critical compensation elements of Federal 
employment--pay, retirement, and health benefits--have each 
faced setbacks in recent years that have limited their 
competitiveness within the private sector. As you know, the 
Federal Employees Pay Comparability Act, or FEPCA, has not been 
followed, leaving pay lagging far behind private sector wages 
for similar work. Moreover, Federal employees have been forced 
to pay more toward their retirement with no corresponding 
increases in retirement benefits, and premiums for the Federal 
Employees Health Benefits Program have increased almost 30 
percent over the past 3 years.
    According to many analysts, for most prospective employees 
the most critical element in deciding whether or not to accept 
a job offer is salary. Under the 1990 FEPCA law, Federal 
employees were to receive an annual pay adjustment designed to 
begin to close the gap between Federal and private sector 
salaries, measured at that time at approximately 30 percent. 
The law has never been implemented as intended, and a 
substantial pay gap remains today. Fully implementing FEPCA 
would do more to address recruitment and retention in the 
Federal Government than all of the remaining incentive programs 
in place today combined.
    The same law that created this new Federal pay authority 
also authorized a number of other programs geared toward 
helping agencies to recruit and to retain employees. One 
provision permits Federal agencies to offer retention 
allowances of up to 25 percent. Another gave agencies the 
authority to offer one-time bonuses of up to 25 percent of 
basic pay to recruit employees and/or to relocate employees to 
less desirable locations.
    However, only 0.14 percent, less than one-quarter of 1 
percent, of all Executive Branch employees have received 
recruitment, retention, or relocation incentives that are known 
as the three R's in fiscal year 1998. Furthermore, when these 
incentives were awarded, they were most often paid at a rate of 
only 10 percent of basic pay or less, versus the 25 percent 
that is allowable. When asked what the most common impediments 
were to greater use of the three R's, agencies cited budgetary 
constraints and prolonged hiring freezes.
    The same is true of performance awards, incentive awards, 
and even bilingual awards. Agencies simply do not have the 
resources to adequately fund these important incentives.
    Until Congress provides adequate discretionary funding to 
Federal agencies, these problems will remain. The fact is the 
Federal Government faces stiff hiring competition. While the 
Federal Government struggles under artificial budget 
constraints to adequately fund its basic pay and benefits 
package, private industry has recognized the impact our full 
employment economy has had on attracting the best employees. 
They have forged ahead with meaningful incentives, most of 
which are not available in the Federal Government. They include 
stock options, investments in employee education, top-notch 
training programs, fitness centers, and a laundry list of other 
benefits.
    In the past few years, family-friendly programs such as 
alternative work schedules, telecommuting options, leave banks, 
child-care facilities, and opportunities to use personal sick 
leave to care for ill family members have all provided 
incentives to employees to join or to remain in the Federal 
workforce. These family-friendly incentives have proven 
effective in both the public and the private sectors, but here, 
again, in the Federal Government funding remains an issue.
    One of the benefits made available to private sector 
employees is on-site subsidized child-care facilities. For 
working families with children between the ages of three and 
five, child care is their second or third largest household 
expense. Private industry has found that making affordable 
child care available to its employees helps make the inevitable 
choice between family and work a little less stressful.
    NTEU encouraged and Congress passed language in the fiscal 
year 2000 Treasury appropriations bill giving all Federal 
agencies the discretion to use their appropriated funds to 
subsidize child-care expenses for their lower-paid employees. 
Unfortunately, this language will expire on September 30, 
providing little time to determine whether this provision is 
helping to make safe, quality child care available while 
positively impacting morale and worker productivity. And here 
again, however, due to budgetary constraints, agencies have not 
been provided with any new funding for this important purpose. 
NTEU is seeking an extension of language permitting these 
subsidies and would certainly appreciate assistance in this 
effort.
    I also want to bring to your attention what NTEU believes 
has become a major disincentive for employees who we represent 
at the Internal Revenue Service. As part of the IRS 
Restructuring and Reform Act, known as RRA, of 1998, Congress 
enacted Section 1203, which lists ten infractions for which IRS 
employees face mandatory dismissal. IRS employees work in fear 
of what have come to be known as the ``10 Deadly Sins.''
    The broad scope and the vague nature of the 10 Deadly Sins 
have created anxiety and confusion in the workplace. These 
infractions, which range from IRS employees not paying their 
taxes on time or improperly placing a lien on a delinquent 
taxpayer, have always subjected employees to discipline, up to 
and including dismissal, and rightly so. However, the RRA's 
requirement for mandatory dismissal of employees is having a 
chilling effect on the collection efforts and morale at the 
IRS. No other government employee in the Executive, Judicial, 
or Legislative Branch, and, in fact, no other American 
taxpayer, must be fired solely on the basis of paying their 
taxes 1 day late.
    NTEU vigorously opposed Section 1203 and continues to 
believe that this section of the act should be repealed or 
changed. We would be grateful for any assistance with this 
matter.
    In conclusion, I believe we are in agreement that the most 
valuable resource the Federal Government has is its employees 
and that there is a direct link between employee job 
satisfaction and whether or not the Federal Government's 
customers are satisfied. NTEU hopes to work with you toward 
solutions on these important issues.
    Thank you very much, and I would welcome the opportunity to 
answer any questions you might have.
    Senator Voinovich. Thank you very much.
    Mr. Brostek.

 TESTIMONY OF MICHAEL BROSTEK,\1\ ASSOCIATE DIRECTOR, FEDERAL 
 MANAGEMENT AND WORKFORCE ISSUES, GENERAL GOVERNMENT DIVISION, 
                 U.S. GENERAL ACCOUNTING OFFICE

    Mr. Brostek. Mr. Chairman and Members of the Subcommittee, 
thank you for inviting us to discuss the role of incentive 
programs in motivating and rewarding employees to achieve high 
performance that supports agency missions and goals. Incentive 
programs can be an important part of performance management 
systems because they serve to align employee expectations with 
agency missions and goals.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Brostek appears in the Appendix 
on page 80.
---------------------------------------------------------------------------
    In my testimony today, I concentrate on awards given to 
employees for their performance on the job, although I would be 
happy to participate in a discussion about other awards.
    I will summarize my three main points.
    First, Federal agencies have broad authority to design and 
implement a variety of incentive programs, and this is very 
useful because no one incentive program is optimal in all 
circumstances.
    Second, over the last 5 years, agencies have used this 
flexibility to decrease their emphasis on awards that are tied 
directly to employees' performance appraisals and to increase 
their emphasis on alternative forms of monetary compensation or 
awards such as special act or service awards or gainsharing 
awards.
    And, finally, while agencies have been making use of the 
range of incentives available to them and have been altering 
the types of awards they make, many agencies do not assess 
whether their award programs are actually effective in 
motivating employees.
    Under their broad authority, agencies can and do offer 
employees a mix of awards that include monetary and nonmonetary 
recognition. Monetary awards include, as I mentioned, 
performance awards that are based on the employee's rating of 
record, and there are at least four other types of monetary 
awards. Those include special act or service awards, quality 
step increases, time-off awards, and gainsharing awards. 
Nonmonetary incentives include such things as medals, 
certificates, and other honorary recognition.
    The broad flexibility available to agencies is key because 
it enables agencies to devise incentive programs that their 
employees are most likely to find to be motivating. Incentive 
programs require careful construction because some employees 
may respond well to monetary awards, other employees may 
respond better to simple public recognition of their 
performance, and those preferences can change over time.
    Over the past 5 years, agencies have generally moved to 
provide fewer employees performance awards, but to give those 
who do receive those awards larger dollar amounts. In addition, 
over that same period agencies have increased the use of other 
monetary awards and increased the dollar amounts that are given 
for those awards.
    We do not know precisely why these trends are developing. 
However, based on some work that we have done in the past, the 
decrease in the use of performance awards, those tied to 
performance appraisals, may be partly attributable to the 
common perception that employees' performance appraisals may 
not accurately reflect differences in employees' real 
performance.
    Because the motivating power of incentive programs is 
difficult to predict and can change over time, it is essential 
that agencies assess whether their incentive programs are, in 
fact, effectively motivating employees to improve their 
performance and to align that performance with the goals and 
strategies of the agency. Unfortunately, many agencies do not 
do so.
    In assessing whether their incentive programs are 
effective, agencies may benefit from considering key elements 
that high-performing public and private sector organizations 
have used in their incentive programs. These elements include 
top management support, clearly defined and transparent 
criteria for the awards, use of multiple awards for both 
individuals and teams, targeting the awards only to high 
performers, publicizing those awards, and regularly monitoring 
and updating the program.
    Mr. Chairman, you also asked me to comment a little bit 
about the awards that GAO uses, and the incentive program that 
GAO uses. We include, as do Federal agencies, a broad array of 
awards and honorary recognition for our employees. Those range 
from annual awards that the Comptroller General gives to a 
small set of employees, distinguished service awards, and 
meritorious service awards. We have various group awards that 
relate to things like EEO and the functioning of teams. We also 
provide throughout the year spot awards to employees as quickly 
as possible after an act that is noteworthy. It is very clear 
in the literature that the motivating power of an award is 
often best if it is given as contemporaneously as possible with 
the act that you really appreciate. So we have a spot award 
program through which we do that kind of thing.
    The last thing I would like to mention is that under our 
pay system, we are a banded agency as opposed to having a GS 
system. The pay that one gets within a band, and the pay 
increases that one gets over time, are tied to performance. We 
have an annual process in which we assess the performance of 
each employee, and we consider the contributions they have made 
to achieving the mission of the agency and decide upon salary 
increases for employees based on that assessment.
    In conclusion, the Federal Government's employees--as we 
all agree, its greatest asset--define an agency's character and 
its capacity for performance. Incentive programs can be a 
critical element in aligning individual and team performance 
expectations with the goals and objectives of the agency. But 
incentive award programs are challenging to design and 
maintain. Poorly designed programs can actually de-motivate 
employees. Therefore, agencies should periodically assess their 
incentive programs to ensure that programs do, in fact, 
motivate their employees.
    That concludes my remarks. I would be happy to answer 
questions.
    Senator Voinovich. Thank you very much.
    I think that the first question I would like to ask is, in 
a nutshell: In your opinion, are the incentives that we have, 
adequate? And, second, if you had your way, what additional 
incentives would be added? Maybe we ought to start with the 
latter question. What new ideas do you have for incentives for 
our folks in the Federal workforce? Let's start with that.
    Ms. Gross. I would say that the greatest boon to being able 
to manage a workforce that works at a creative agency like NASA 
would be greater flexibility. And every kind of specific reform 
that I would put would have flexibility at its root. I think we 
are in a very inflexible personnel system, from the speed at 
which it takes to bring people on to being able to package 
incentives to recruit them, package incentives to retain them. 
And I just don't need those kind of flexibilities but also the 
budget. If you gave me all those flexibilities that I will now 
start listing, it doesn't matter, if I don't have an 
appropriate budget.
    The NASA's Inspector General's Office is something like 93 
percent personnel. What we do is audit, inspect, ane evaluate. 
And so we have a very small percentage of our budget that is 
remaining for discretionary spending. Discretionary means 
travel, like go to where you have to go for the investigation. 
That is not exactly discretionary.
    This year, because of the circumscribed budget, I have 
allocated $75,000 for my awards pool. It was larger last year, 
smaller now because of a decrease from the President's 
recommended budget. GAO asked whether or not you would know 
whether there is a difference if your awards pool is larger and 
smaller. I can tell you, my staff is very demoralized about a 
smaller awards pool. I have 200 people, and we are spreading 
out $75,000. So I am not flexible at all.
    But when good times come, what I would like to be able to 
have is the ability to have pay banding. Pay banding--GAO has 
said they now have it. Right now you have employees that are 
GS-11's or GS-12's or GS-13's. And to get them promoted, many 
of them, you have to--even though you know who is eligible to 
be promoted, you have decided who is going to be promoted, you 
have to announce and have the eligibles apply for a promotion. 
And everybody that is eligible for that level of promotion 
applies for it. And then you go through a process.
    If you had pay banding, you would have people that are GS-
11's, or whatever, and there is a range of salaries, a large 
range of salaries, maybe $20,000 or something like that, and 
you can decide who among those GS-11's is eligible to receive 
more money because of their work. And you don't have to go 
through this laborious, time-consuming process of announcing a 
promotion. You are rewarding people on the basis of 
performance. So that is a huge flexibility that I don't have.
    I am recruiting people for information technology security, 
criminal investigators and auditors. They are a rare commodity. 
But because NASA is a nice place to work--NASA is a great place 
to work--I have to say that as a NASA employee--and I think 
that we (OIG) are on the cutting edge for this IT arena. But I 
can't noncompetitively find people who are the best and 
brightest who would like to come to NASA and say I could bring 
you on in 2 or 3 weeks. I have lost prospective employees 
because it took so long to get through the process. And by the 
time we went and announced the position (like I said, a fast 
recruitment would be 3 months--they can range anywhere between 
4 and 6 months between the time that you announce it and bring 
people on.) That is terrible----
    Senator Voinovich. Ms. Gross, may I ask you something?
    Ms. Gross. Yes.
    Senator Voinovich. Why does it take so long? Don't you have 
the authority within your agency to go out and hire, or do you 
have to go through the Office of Personnel Management and fill 
out paperwork and they are the ones that do the hiring?
    Ms. Gross. The Inspector General's Office has more 
flexibility than most of the agency enterprises. I am able to 
write the personnel descriptions, and that takes a long time 
because what you are having to do is write it very carefully so 
that you select out all those people that you don't want 
applying who look and say, hey, it would be nice to work for 
NASA, but they don't really have the qualifications. And you 
have to be very careful of your wording so that you are really 
getting only those you want to apply.
    Then what happens is you have to put the announcement out 
for a period of time, 2 weeks to 30 days. Then you wait until--
because of the postmark, so you wait another 10 days because 
mail can still come in. And then what happens is your 
personnelist looks at it, and I have delegated authority from 
OPM, so they look at it to weed out the unqualified people, 
which you always want to do. If I have more than five 
applicants, I have to have a panel of three people sit all day, 
and I have to get panels of people who are qualified, either my 
own staff who have to stop working or I get some people from 
the agency if they have the expertise, and they sit and do a 
paper screening to rank the highly qualified. Then the 
resulting list is then referred to the selecting official who 
does interviewing. Then we notify the people, and then they 
have to work with their personnel offices and give notice to 
their current employer.
    So if we were able to circumvent this process, the 
candidates could be giving notice a long time before current 
practices. This current process just takes a long time. It is a 
long process. It is not all with the Federal Government. It has 
always been every job I have had. It takes a long time. But 
with the Federal Government, it is particularly a long time.
    And I am flexible. The Inspector General's Office has its 
own personnel authority. It really is a nightmare. I would 
request flexibilities to be able to just have some limited 
noncompetitive hiring authority, where you have highly 
difficult to recruit personnel--I am not asking that for most 
of my staff. You know, half my staff are auditors. Except for 
the IT auditors, I don't mind living with the normal slow 
process. I could live with it. But where I am looking for 
people who have skills that are highly competitive and they are 
wanted by the private sector, I want to move like the private 
sector.
    You know, I can't offer them the same kind of pay. I can't 
offer them stock benefits. But there are people that really 
want to work for NASA, and they really want to work for the 
Inspector General's Computer Crimes Unit. I can't get those 
people because they have got families and they have got to have 
certainty in life. So it is a huge flexibility to hire 
noncompetitively and provide pay bands.
    I think also even though Mr. Romero was talking about a 
number of bonuses, we are not able to necessarily package all 
these bonuses. Sometimes personnel are allowed just a one-time 
bonus. Also they don't impact on the base of an employee. If 
you had some flexibility of saying it is going to be 25 percent 
but for you it is going to be a base--it is not that you are 
just a GS-11. This 25 percent will be on your base pay, and it 
will always be with you so the next year you actually have 25 
percent higher than other GS-11's, it is not just a one-time 
only, then that is an incentive.
    If you go to the private sector, they do have incentives 
that they give people, like recruitment bonuses, but they have 
high bases. For select employees, if I had the budget, I would 
like to be able to do a salary base change, and that would give 
me the flexibility.
    Remember I said my key theme is flexibility. It is fine to 
have all of these different if personnel tools I could package 
them in my way. I would be willing to give the paper trail and 
let somebody audit me on that--even the inspector general could 
be audited, right?--so that I would justify that really what I 
am not doing is abusing the system but really hiring for merit.
    Senator Voinovich. So what you are saying is that the 
incentives that you have right now, if you had the flexibility 
and the budget, they would be adequate? You wouldn't be asking 
for housing allowances or something of that sort?
    Ms. Gross. Yes.
    Senator Voinovich. Which are not included in a package to 
date.
    Ms. Gross. No, I don't think they are adequate. I think 
what you don't have is the ability to bundle these up. A lot of 
these are one-time bonuses. And so that is not flexible. I 
might want for a certain employee to offer 25 percent every 
year for the next 5 years, because for me this employee would 
be worth it. I don't have these housing allocations. I don't 
have a banding so that I could promote people.
    Let me give you another example. We have had people who 
have graduated----
    Senator Voinovich. So you don't have pay banding now?
    Ms. Gross. No.
    Senator Voinovich. OK. So that would help.
    Ms. Gross. It would help a lot. Another thing, again, the 
inflexibility of the Federal Government system, students that 
graduate with a master's in computer science, a number of them 
have written to us and would like to get hired for my Computer 
Crimes Unit or even for my IT audit group.
    Personnel with an advanced degree in computer science come 
in without any work experience, they have to be hired at a GS-
9. Well, excuse me, but people with a master's in computer 
science is going to go to Microsoft or they are going to go to 
KPMG. They can't afford to come to me even though I might be 
their first choice. Talk about inflexibility.
    And you are not--it is just a system that does not give----
    Senator Voinovich. Let me ask you this: Is it regulated--
because I am new here--by law that you can't have bands, or is 
it done by----
    Ms. Gross. Right now that is by law.
    Senator Voinovich. It is by law.
    Mr. Romero. Senator, there is no statutory authority to 
have agencies have broad banding systems other than in 
demonstration projects, and we have several that are in effect 
right now throughout the Federal Government, and most 
demonstration projects, when agencies have undertaken them, 
have really focused on pay-for-performance systems, and they 
have been very positive in their results.
    I think that we have found that when you have pay for 
performance, which is the net result of having a demonstration 
project that has a broad banding system, you do wind up with a 
situation where the employees that are better performers wind 
up getting rewarded at a higher rate or getting rewarded more 
than marginal performers. And that is both good for them and 
also a strong message to the ones that might be marginal 
performers.
    So there is a strong notion that pay-for-performance 
systems such as you would have with broad banding systems are 
effective in terms of rewarding and recognizing your good 
performers.
    Senator Voinovich. But the thing is, from what I heard, the 
pay for performance is not being used as often----
    Mr. Romero. It is not available to all Federal agencies.
    Senator Voinovich [continuing]. Because, from what I have 
read from testimony of others, many employees are not confident 
of the performance evaluations that are being done. Therefore, 
because there is an issue of whether or not they are adequate 
or not, then you shy away from that and you go to some other 
ways of rewarding employees.
    Ms. Kelley. Right now, unless you have the authority, as 
Mr. Romero said, under a demonstration project, the agencies 
can't even do that.
    Ms. Gross. Right.
    Ms. Kelley. But when they do--and from NTEU's perspective, 
moving away from the grade and step system might be a good 
thing to do, if the employees believe that the performance 
appraisal system is a fair and a credible one. And so where 
NTEU is on this is that the employer representative must be 
involved in the design of a system that would be seen as 
credible to employees. But it all does come back to the issue 
of budget because, in a pay-banding system, if one employee is 
going to move up the ladder faster someone else must lose out. 
There is only so much money in the agency's budget. That money 
has to come from somewhere.
    So the involvement of the employer representative in the 
design process is something that we have supported and have 
worked in the past with OPM on and with agencies where we have 
had that opportunity.
    Senator Voinovich. Well, I would welcome some 
recommendations on how the system could be improved. Mr. 
Romero, you should gather together folks that really have the 
knowledge to make recommendations and understand that there is 
a variety of needs that are out there. New programs should be 
fairly flexible. And once you have done that, you estimate the 
amount of money that is needed. I mean, $75,000?
    Ms. Gross. Is a joke.
    Senator Voinovich. You have got to be kidding me.
    Ms. Gross. I am not. I wish I was.
    Senator Voinovich. These unmet needs that are very 
important to retaining and attracting people are getting the 
back of the hand, and we are going off on a lot of what I 
sometimes refer to as boutique programs, which have high 
visibility and popularity, and we neglect basic necessities. It 
is like the shoemaker whose kids are going around with holes in 
their shoes.
    Mr. Romero. I agree, Senator, and that is why we are 
working right now with the various stakeholders in designing 
legislative proposals that would give agencies authority to 
begin the design of broad banding systems. And we recognize 
that the key would be to have the authority out there so that 
agencies can determine for themselves what will be a valid 
performance management system that will have credibility and 
that will be accepted by the employees as being fair and 
equitable. So we are looking at that in terms of giving broad 
banding authority to all Federal agencies.
    Also, Ms. Gross mentioned the flexibility in the existing 
three R's, and as I indicated in my written statement, there 
was a cautious approach when the statute was first enacted, and 
we have taken steps to provide more flexibility and more 
information about those authorities, because in a recent study, 
it was determined that even the current authorities, which may 
or may not be flexible enough for all agencies, there was not 
as extensive use made of them as there could be. And a lot of 
the reasons were that, for one thing, there wasn't information 
about them outside of the headquarters organization. There may 
not have been even the knowledge at the operating level that a 
manager or supervisor could exercise that kind of authority and 
have that flexibility.
    Also, in many cases, agencies kept the authority level at a 
very high level, so it became an administrative burden to even 
request authority to give a recruitment or retention bonus, and 
that is something that we are trying to get the agency to push 
down to operating levels.
    Finally, there is also the problem that it is always a 
budget problem where both Senator Durbin and Senator Akaka 
talked about the budget crunch in the 1980's, and it is no 
surprise that awards and recognition programs were the ones 
that were sacrificed first whenever there is a budget crunch. 
And even now with the case of retention and recruitment 
allowances, there is not a sufficient amount of money budgeted 
to provide them even where you have a situation where it is 
most appropriate. Where you have that highly skilled candidate 
that is the perfect situation that these allowances and bonuses 
are designed for, there may not be enough money to pay that 
bonus, whether it is 10 or 25 percent, because of the budget 
situation in many agencies.
    But we are working on a proposal to provide even more 
flexibility to be able to give larger amounts, provide more 
variety of the situations in which these allowances might be 
payable, and to provide more payment options so that there 
could be biweekly or lump-sum or scattered payments. All of 
these will be features of what we are looking at in terms of 
more flexibility in these allowances and bonus programs.
    Senator Voinovich. Thank you. I would just make one more 
comment, and, Senator Durbin, I am sure you have some questions 
that you would like to ask.
    The question is: How do you get people's attention to this 
crisis that we have? You mentioned, Ms. Gross, that you are 
having some real problems where your personnel issues were 
impacting on your agency's mission.
    Ms. Gross. Yes.
    Senator Voinovich. I met recently with some folks from the 
Air Force, and their lack of people in the area of maintenance 
and maintaining military aircraft.
    Ms. Gross. Scary.
    Senator Voinovich. I met a pilot who is leaving the Air 
Force who said, ``I am leaving because I don't have confidence 
anymore.'' This is starting to impact our national security and 
our government. We ought to try to make the public and Members 
of Congress more aware of the importance of this issue.
    Sometimes people say, well, you are losing half your 
employees. That is good because you have too many people 
working for the Federal Government anyhow.
    Ms. Gross. Right.
    Senator Voinovich. Too many of them don't understand how 
important what you do is to our country and to their future, 
quality of life and well-being.
    Senator Durbin.
    Senator Durbin. Mr. Chairman, as I listened to this panel 
suggest that Congress has been remiss meeting its 
responsibility in appropriating appropriate funds for 
incentives and daycare centers and some of the things that we 
did as the Taxpayer's Bill of Rights when it came to the 
changes at the IRS, I am reminded of the Walt Kelly ``Pogo'' 
cartoon where he announced, ``We have met the enemy and they 
are us.'' When we called in these agencies to find out what 
they were doing wrong, they told us that we are doing it wrong 
here on Capitol Hill. And I think there is a lot of truth to 
that.
    I have listened carefully to what they have said. It 
appears that in most instances there are many incentives that 
could be funded and used to attract and retain Federal 
employees. But it depends on Congress doing its part. We have 
to appropriate the money. And if we don't put the money in 
place, all the authority in the world isn't very valuable, and 
also be a little sensitive, as Ms. Kelley says, to the climate 
that you create in a punitive environment.
    I note, incidentally, that recently OPM had a survey of 
some 32,000 Federal employees, and 40 percent of them responded 
out of 48 agencies. Sixty percent of the Federal employees in 
the survey indicated they were satisfied with their jobs. That 
is slightly below a comparable private sector rate of 62 
percent. That is pretty encouraging, really, when you consider 
it, all things considered.
    When you took the highest levels of job satisfaction, two 
of the agencies that have a high level are represented here 
today: NASA and OPM. When it came to low job satisfaction among 
Federal agencies, it was interesting that INS and Customs 
Service came out, and I wouldn't be surprised if the IRS wasn't 
too far away in terms of the job satisfaction of the employees. 
It may reflect to some extent contact with the public. If you 
have to work with the public every day under a stressful 
situation, it takes it out of you after a while. We find that 
in our business because we are constantly in touch with our 
constituents, and you have to be ready for your game every day 
or it shows.
    But I guess the point that I am driving at is I want to get 
down to some specifics here of some areas that have been 
discussed, and I want to ask for some response. We had a 
previous hearing, and at the previous hearing, there was talk 
about one incentive that is available, and that is the 
forgiveness of college loans, educational debts. And I thought 
to myself that is a pretty good one, because so many young 
people come out of college burdened with heavy debt, and if you 
could offer an incentive to them to reduce their college 
indebtedness if they come work for the Federal Government, that 
is as good as a pay raise. In fact, it may be, as soon as you 
get out of college, a great incentive to consider public 
service.
    And so I wrote to the Director of OPM, Ms. Lachance, and 
asked her to give us some background on these programs. And, 
again, it comes down to appropriations. If we don't appropriate 
enough money for you to offer this incentive, it is on the 
books but it doesn't mean anything. It is an incentive that 
might work, but won't unless you can pay for it.
    But a couple things came through that were interesting, Mr. 
Chairman. The student loan repayments basically say up to 
$6,000 a year, not to exceed $40,000 per employee. They apply 
to 22 job classifications containing almost 300 job series. I 
am not sure exactly what that means, but it appears it is 
fairly limited in terms of those who could quality for it.
    In order to qualify for it, you agree to work for the 
Federal Government for at least 3 years, absent some 
extraordinary circumstances. And if you continue beyond 3 
years, you can obviously make beyond the first 3 years' 
reimbursement.
    Here is the part that I found interesting, though. We 
passed this law in 1990. The OPM is still working on the rules. 
It is 10 years later. And they haven't put the rules in place 
to implement the legislation that we passed 10 years ago.
    That is not encouraging. We have a responsibility to 
appropriate the money, but, Mr. Romero, could you comment on 
the fact that it would take so long to develop the rules for 
this incentive, which I think could be very appealing on 
college campuses.
    Mr. Romero. We agree, Senator, that in this climate it is 
the most appropriate incentive, and that is why we are 
proposing regulations to implement the provisions of 5 U.S. 
Code 5379.
    During the 1990's, as you talked about the budget crunch, 
there really wasn't any call on the part of the agencies for 
this kind of added authority, primarily because they wouldn't 
have had the money to pay--first of all, there wasn't any 
recruiting being done. In fact, as several of the other 
witnesses have indicated, most people were involved in 
downsizing and being concerned about maintaining current 
staffing levels. So there was not a climate, there was not a 
mentality of we need all these tools to recruit new people, new 
college hires. Some agencies have not done college hiring in 4 
or 5 years. So there was not a demand, even though the law was 
on the books.
    It is a different situation right now, and now it is why 
have we waited so long. But we are proposing regulations to 
make this available to all agencies, the authority to repay 
student loans. All the Perkins, Stafford, and PLUS loans that 
most college students take out would be covered.
    You mentioned the coverage. We are talking about 22 
occupational categories, 300 job series. That is a lot of jobs. 
A single series might have as many as 10,000, 20,000 Federal 
employees in that series. The statute was clear that it was 
supposed to be for those kind of occupations that college 
graduates usually pursue in terms of Federal employment, and 
that is why it wouldn't be applied to just some of the 
occupations that we didn't think that you would need to give 
this kind of benefit to.
    So there is in the statute some coverage limitations, but 
it still covers an awful lot of Federal employees. Primarily 
all the technical, scientific, and more professional kind of 
jobs that we have in the Federal Government would be ones that 
would be able to apply the student loan repayment benefit.
    Senator Durbin. Your explanation makes sense, but at this 
moment in time, can you give me an idea when the rules and 
regulations might be coming out of OPM on this law?
    Mr. Romero. Today I don't know where they are right now in 
the clearance process, but I can get that information to the 
Committee by the end of the day or tomorrow.
    Senator Durbin. If you would, please.
    Let me go to Ms. Kelley, because I think you raised a point 
regarding my daughter and son-in-law--my daughter works for the 
Department of Agriculture. When our new grandson came along, 
they were very excited at the possibility of getting our 
grandson into the U.S. Department of Agriculture daycare. It 
takes a year or two in advance for you to apply--I don't know 
how that works--but in order to be admitted, and for some 
reason it didn't work out. But it was disappointing to my 
daughter because the thought of having her new son close by so 
she could visit on break or at lunchtime meant a lot to her.
    So when you mentioned daycare, it really struck me. That is 
something as a grandfather that I thought about, that I like a 
lot. And it appears from what you say we just haven't done 
enough in that. We haven't really made that a priority. And 
after college loans, if you are talking about new parents, I 
can't think of another thing that you could offer to an 
employee at that stage in their life that might be more 
appealing: Affordable, quality daycare, accessible to your 
place of work.
    I am going to focus on that a little more now. You have 
really piqued my interest in it. And I also think you have done 
a good job in your testimony talking about the Taxpayer's Bill 
of Rights.
    Ms. Kelley. Thank you.
    Senator Durbin. And maybe we ought to revisit it. I know it 
was extremely popular. I voted for it. I think everybody in 
sight voted for it. Go after that mean old IRS and protect the 
taxpayers.
    I am going to take a look and see how we are doing on 
enforcement actions now that we have created this different 
environment, and take a look as well as to whether or not we 
are creating an onerous and really unjustifiable burden when it 
comes to the employees who have this special responsibility. 
But thank you for your testimony on that.
    Ms. Kelley. Thank you, Senator. I appreciate that and will 
look forward to your help.
    Senator Durbin. We will.
    Ms. Gross, one of the things that you brought up that I 
thought was interesting is, if you want to hire an experienced 
employee and bring him on the job, many times you don't have 
the flexibility to say, incidentally, we will match the leave 
time you have already accumulated in the private sector.
    Ms. Gross. Right.
    Senator Durbin. You don't have to go up the ladder to the 
point where 10 years from now you will have the same number of 
vacation days you already have at your private firm.
    Now, is that statutory? Is that regulatory? What would it 
take to give you the authority to make that decision? That 
doesn't seem like it has a direct budget impact, direct 
appropriations impact.
    Ms. Gross. It is statutory.
    Senator Durbin. Statutory. Here we are again.
    Ms. Gross. It is such an amazing inflexibility. I have 
hired, for example, an investigator who had worked at Amtrak, 
which is a Federal corporation. It is a mixed-government 
Federal corporation. And he had something like 5 weeks' 
vacation, but he is a new Federal employee because the Federal 
corporation, you are not a Federal employee. He didn't qualify 
for that. And so now at this stage of his life, he is starting 
back with 2 weeks.
    It is the same kind of issue that really is a door closer 
for some people in the private sector that are interested in 
working in the criminal investigative----
    Senator Durbin. It is very understandable. And, Mr. 
Chairman, I can't speak for you, but I would like to take a 
look at that, and maybe we can work on this together.
    Ms. Gross. Thank you.
    Mr. Romero. Senator, we are working, we are already working 
with many of our stakeholders on a proposal that would give new 
Federal employees--and we started talking first about senior 
executives, but the discussion has centered around any Federal 
employee that is in a hard-to-fill occupation. We ought to be 
able to have the flexibility to give them the accrual rate 
benefit of someone who has been around 15 years that from the 
start you actually can be accruing at a high--or get credit for 
some of what you might have earned had you been working for the 
government for a while. So that is something--the idea of 
providing people a greater annual leave benefit is something we 
are looking at.
    Senator Durbin. The last thing I would like to ask you--and 
any one of you can comment on it--is on this retention 
question. When you have reached a person who has the time in 
and they are eligible for retirement, do you find that there 
are one or two things that they are particularly sensitive to? 
If you went to them and said we can change things a little bit 
in terms of your workload or in terms of time off, would you 
stick around for another year? We are going to need you in this 
job while we transition into a new project or bring someone 
else on board.
    Is there anything that stands out on this retention 
question that seems particularly appealing to career employees?
    Mr. Romero. We have always surveyed employees as they 
leave, exit interviews of a lot of employees, especially those 
that may be leaving because it appears that they are unhappy. 
But it is very constant through the years that people want to 
stay and will stay around if they value their work, if they 
enjoy what they are doing, and if they feel they are valued. 
And this is why this hearing is so appropriate in terms of how 
do you recognize and reward people so that they feel like they 
are doing something meaningful and want to stick around.
    Something very interesting that has been emerging in a lot 
of recent surveys is that they also--something that is very 
critical is who they work for. And a lot of people leave not 
because of the money or the leave accrual rate. They just don't 
like the person they are working for. They don't feel that that 
is a nurturing environment, and so I think we need to do a lot 
of work in terms of our supervisory and management development 
and training. People leave because they just don't like their 
bosses.
    Mr. Brostek. Mr. Durbin, we did some work on this very 
issue: How could you get employees who are nearing retirement 
age to stay on longer? It has been a while since we did that. 
It was in the early 1990's, and I don't remember all the 
specific reasons why employees said they might stay, and what 
kind of things would induce them to stay. We will be sure you 
get a copy of that report.
    One of the things that they did mention was compensation 
and whether they might get an increase in their retirement 
benefit for staying longer with the government. I think some of 
the reasons that were mentioned here today are probably 
appropriate as well.
    I would like to go back, if I could for a moment, though, 
to your point about, once again, it is Congress' responsibility 
here or fault, if we were giving fault. I would give you a 
small out on that, if I could, Senator. We continually bring to 
the table the message that what agencies need to do in this 
whole area of their greatest asset, their human capital, is do 
some self-assessment on how well their current systems are 
working and bring to the table some fact-based analysis about 
where there are impediments to improving their performance.
    And what I would ask you, Senator, is how often you have 
seen that kind of fact-based analysis, how often you have seen 
in the budget submission from an agency a case that they needed 
greater money to offer retention allowances or bonuses or to 
pay their employees differently. I think that it would be 
useful to take a look at that, because our impression based on 
the plans that are required under the Results Act, the 
Government Performance and Results Act, is that agencies 
frequently have not included any kind of analysis about what 
they really need in order to use their people more effectively.
    Senator Durbin. Good point. Thank you.
    Thanks, Mr. Chairman.
    Senator Voinovich. I have always said to my directors, if 
you can't measure it, don't do it. And so if you don't measure 
how this is working out, then it is very difficult to pinpoint 
what works and what doesn't work.
    You have X number of dollars in a budget, so, first, we 
need to determine what percentage of a budget is adequate to do 
some of these things that the Federal Government allows you to 
do. And second, is something that we ought to look at in terms 
of appropriations: When a budget is submitted by a department, 
do you specifically earmark X percent that would be used for 
taking advantage of these incentives? Do agencies get a salary 
or personnel level?
    Mr. Romero. Usually just a salary--an expenses line item. 
It is an additional earmark for----
    Senator Voinovich. So that is what you get. You get a 
personnel line item, and then you are supposed to deal with all 
the things related to personnel through that. That might be 
something, Mr. Romero, that the administration at this stage of 
the game might look at. We have these incentives, and maybe 
there should be a specific budget allocation for them.
    Mr. Romero. I know that in the past, though, where there 
has been on the part of Congress in a statute a sort of 
mandatory minimum or maximum, there have been problems where 
people see that as a dictate that they have to meet certain 
goals, or whenever there is a budget crunch, there is a 
statutory requirement that X amount go to awards, and in order 
to meet that requirement, they sacrifice other things. So there 
is always a caution in terms of having any minimum or maximum 
that are generally applicable to the whole workforce.
    Senator Voinovich. Well, let me just say this to you. I 
don't know the answer to that. That is your baby. But you ought 
to look at what other governments do, maybe in other States, or 
what the private sector does and how they work that into their 
budget so that they have the flexibility to get the job done. 
Obviously, there isn't enough money now to do it. I request 
that you look into this and take it to the Office of Management 
and Budget and talk about that issue.
    I am not kidding you. We are talking about creating new 
programs this year, and we are not taking care of the things 
that need to be taken care of. The house is not in very good 
shape right now, and we want to go out and build new houses 
when the one that we have is in bad shape. So I think that we 
ought to do first things first.
    The other thing is, which of these incentives would really 
make a difference in terms of retention? We want to attract, 
but how do we retain people? If you look at the numbers and 
know 31 percent are going to retire, and you have another 21 or 
22 percent that could retire early, what can we do now to make 
sure that that 21 percent doesn't retire early? What is it that 
will create the kind of environment that convinces them to 
stick around? Is it the training budget? We have a survey out 
right now asking questions like what percentage of the agency 
budget is being used to upgrade the skills of individuals and 
what kind of opportunities do you afford them? What would cause 
employees to say, I want to stick around here?
    Ms. Kelley and I have talked about quality and empowerment 
of employees and getting them involved in the operation of 
their departments. What influence does that have on somebody 
wanting to stay in an agency?
    A friend of mine had a son that worked at one of our 
Federal agencies at Los Alamos. He is a Ph.D. and the rest of 
it. He left this Federal agency because he said it was 
Dullsville. It lacked excitement, and he decided not to stay.
    So I think that even though, Mr. Romero, this is the end of 
an administration, I think it is incumbent on the current 
administration to make some serious recommendations on how to 
respond to this human capital crisis that we have. I would like 
to work out a timetable with you and see if we can't gather the 
people together that are necessary so you can come back with 
some recommendations in the next maybe 6 to 8 weeks regarding 
what we can do in the short term and then look at some of the 
long-term solutions that we need to incorporate that will be 
looked at by the new administration when they come in.
    The new administration needs to know that they have a real 
problem here and they had better get on this one and give it a 
high priority, because if they don't, they are in deep trouble. 
So I would like to figure out something that we can do to 
address this immediately.
    Mr. Romero. We will be glad to work with you on that.
    Senator Voinovich. And then look at the long term and get 
the folks that are necessary to deal with this in a very 
constructive way.
    Mr. Romero. Yes, sir.
    Senator Voinovich. Would any of you like to add anything to 
your testimony here today?
    Ms. Gross. I would just like to add that one of the issues 
is if you have stable funding and you know what your funding is 
going to be as agencies and they know that they are not going 
to be in a downsizing environment, then you can have these 
reforms, both the current ones as well as future ones that are 
needed. I think it is very difficult, and I think as Mr. Romero 
said, OPM just stopped looking at what to do to implement the 
law on----
    Mr. Romero. Loan repayment, student loans.
    Ms. Gross [continuing]. The student loans, because 
everybody was in a spiraling downsizing mode.
    Now, that doesn't mean they shouldn't have still been 
proposing the regulations, but, nevertheless, I know it is true 
about NASA. NASA offers many opportunities to its employees for 
training, for going to school, but what happens is, we have to 
get the work done. We have a space station that NASA has to 
finish. In my case, we have computer crimes and hackers are 
there all the time. I mean, they are not just waiting for us to 
go to school.
    And because of that, you don't have the staffing levels 
that you may need, so it really makes it difficult to take 
advantage of some of the training. But my staff tells me that 
is something they absolutely do want. Technology changes so 
fast. They feel that also they want to have those credentials 
for when they have to testify in court that they have a 
master's in some of these programs, they want to be 
credentialed. And so we are balancing that need. I think a 
stability in terms of funding and workforce will go a long ways 
so that, in fact, you can do these other things that are 
absolutely crucial so that you can have the Federal Government 
that the public deserves.
    Senator Voinovich. When I first became Governor of Ohio we 
had very little in the area of training, but when we finished, 
we were able to offer each employee of the State Government up 
to $2,500 a year for upgrading their skills or pursuing higher 
education. And it was a combination of the State and the unions 
working together. In fact, the unions gave up some of their pay 
increases and said, look, we will give this up, if we put a 
nickel in, you put a dime in, so that we could build this fund, 
because they understood how important it was for their workers 
to be upgrading their skills.
    Ms. Kelley, you were talking about the child-care issue. 
Refresh my memory. We need to get that reauthorized so it 
doesn't sunset.
    Ms. Kelley. Yes, the current legislation expires on 
September 30, and we need to have that language extended into 
the 2001 budget so we can really get this thing going.
    Senator Voinovich. And repeat it again.
    Ms. Kelley. The ability to use appropriated funds by the 
agencies to subsidize child care, and this is the first time 
that has ever been authorized. Now, no additional funds were 
allotted to the agencies to do it, but the fact is they now 
have the authority to use appropriated funds, and we are 
working with many of them to try to put pilot programs in 
place. But it is due to expire September 30.
    Senator Voinovich. OK. This would be----
    Mr. Romero. The legislation has a 1-year limit.
    Senator Voinovich. Is it subsidizing the cost of child 
care, or is it money out of your budget for building child 
care?
    Mr. Romero. No.
    Senator Voinovich. It is just strictly----
    Ms. Kelley. The cost of child care. It is a reimbursement.
    Senator Voinovich. It is additional money that you would 
provide someone as part of their compensation for child care?
    Ms. Kelley. Yes.
    Senator Voinovich. Was it experimental?
    Ms. Kelley. Well, it was just set up with a 1-year life on 
it in this appropriations bill, and that is why it will expire 
September 30.
    Mr. Romero. The President has included in his budget 
request, Senator, that the law be extended for another year.
    Senator Voinovich. Well, it probably ought to be extended 
for 5 years. In Ohio, we offered businesses up to a $100,000 
tax credit to create a facility either on their premises or 
work in conjunction with other businesses in their area to 
create the physical facility. We gave them a tax break and said 
if you paid up to X dollars in subsidizing child care for your 
employees, this would be a direct credit against your State 
tax.
    This would seem to be a major incentive that would attract 
new people, but I don't know what impact it would have on 
retaining folks that have been around for 20 years. All these 
things have to be put on the table and looked at, the costs 
involved in implementing them measured, and then figure out 
which ones within a limited budget you would offer to make a 
difference.
    One last comment. This Thursday we are going to have a 
hearing on the National Partnership for Reinventing Government. 
We have had significant downsizing of the Federal Government 
but the administration did not consider the effects that 
downsizing would have on the delivery of government services. 
When we consider downsizing an agency or creating new 
incentives, we need to keep the mission of the agency in mind 
and ensure that we do not adversely affect the ability of the 
agency to carry out its mission. So I am interested in the 
testimony that we are going to hear on Thursday.
    But I want to emphasize again that we need to evaluate this 
human capital crisis, do something short term, and then look at 
the long-term picture. And we need, Mr. Romero, some 
recommendations back from the administration. I will certainly 
do what I can to let the appropriators know that this is 
something that they ought to be paying some attention to.
    I know we are going to see an increase in the defense 
budget this year. One of my concerns there is that it is all 
going to be spent on hardware when we have a human capital 
crisis in our military.
    Thank you very much for your testimony today.
    Ms. Gross. Thank you.
    Mr. Romero. Thank you.
    Ms. Kelley. Thank you.
    Mr. Brostek. Thank you.
    [Whereupon, at 11:48 a.m., the Subcommittee was adjourned.]
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