U.S. GOVERNMENT PRINTING OFFICE

65–172 cc WASHINGTON : 2000

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

(II)

COMMITTEE ON GOVERNMENTAL AFFAIRS

FRED THOMPSON, Tennessee, Chairman

WILLIAM V. ROTH, Jr., Delaware

TED STEVENS, Alaska

SUSAN M. COLLINS, Maine

GEORGE V. VOINOVICH, Ohio

PETE V. DOMENICI, New Mexico

THAD COCHRAN, Mississippi

ARLEN SPECTER, Pennsylvania

JUDD GREGG, New Hampshire

JOSEPH I. LIEBERMAN, Connecticut

CARL LEVIN, Michigan

DANIEL K. AKAKA, Hawaii

RICHARD J. DURBIN, Illinois

ROBERT G. TORRICELLI, New Jersey

MAX CLELAND, Georgia

JOHN EDWARDS, North Carolina

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

JUDD GREGG, New Hampshire

RICHARD J. DURBIN, Illinois

ROBERT G. TORRICELLI, New Jersey

Kristine I. Simmons, Staff Director

Marianne Clifford Upton, Minority Staff Director and Chief Counsel

Julie L. Vincent, Chief Clerk

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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

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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.

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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 ‘‘goodbye.’’ 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.

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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

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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

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1The prepared statement of Ms. Gross appears in the Appendix on page 31.

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.

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.

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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.

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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

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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.

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1The prepared statement of Mr. Romero appears in the Appendix on page 43.

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.

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.

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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.

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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.

12

1The prepared statement of Ms. Kelley appears in the Appendix on page 69.

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.

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

13

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, childcare 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 childcare 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

14

1The prepared statement of Mr. Brostek appears in the Appendix on page 80.

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.

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

15

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

16

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 everyVerDate 11-MAY-2000 14:40 Aug 08, 2000 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 65172.TXT SAFFAIRS PsN: SAFFAIRS
17

body 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, timeconsuming 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

18

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 onetime 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?

19

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 payfor-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

20

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

21

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

22

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

23

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

24

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

25

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.

26

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

27

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.

28

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?

29

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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