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42–953 CC 1997

THE IMPACT OF THE PRESIDENT’S FISCAL YEAR

1998 BUDGET ON FEDERAL EMPLOYEES

HEARING

BEFORE THE

SUBCOMMITTEE ON THE CIVIL SERVICE

OF THE

COMMITTEE ON 

GOVERNMENT REFORM 

AND OVERSIGHT 

HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTH CONGRESS

FIRST SESSION

FEBRUARY 13, 1997

Serial No. 105–33

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

(

(II)

COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT 

DAN BURTON, Indiana, Chairman 

BENJAMIN A. GILMAN, New York 

J. DENNIS HASTERT, Illinois 

CONSTANCE A. MORELLA, Maryland 

CHRISTOPHER SHAYS, Connecticut 

STEVEN SCHIFF, New Mexico 

CHRISTOPHER COX, California 

ILEANA ROS-LEHTINEN, Florida 

JOHN M. MCHUGH, New York 

STEPHEN HORN, California 

JOHN L. MICA, Florida 

THOMAS M. DAVIS, Virginia 

DAVID M. MCINTOSH, Indiana 

MARK E. SOUDER, Indiana 

JOE SCARBOROUGH, Florida 

JOHN B. SHADEGG, Arizona 

STEVEN C. LATOURETTE, Ohio 

MARSHALL ‘‘MARK’’ SANFORD, South 

Carolina 

JOHN E. SUNUNU, New Hampshire 

PETE SESSIONS, Texas 

MICHAEL PAPPAS, New Jersey 

VINCE SNOWBARGER, Kansas 

BOB BARR, Georgia 

——— ———

HENRY A. WAXMAN, California 

TOM LANTOS, California 

ROBERT E. WISE, JR., West Virginia 

MAJOR R. OWENS, New York 

EDOLPHUS TOWNS, New York 

PAUL E. KANJORSKI, Pennsylvania 

GARY A. CONDIT, California 

CAROLYN B. MALONEY, New York 

THOMAS M. BARRETT, Wisconsin 

ELEANOR HOLMES NORTON, Washington, 

DC 

CHAKA FATTAH, Pennsylvania 

TIM HOLDEN, Pennsylvania 

ELIJAH E. CUMMINGS, Maryland 

DENNIS J. KUCINICH, Ohio 

ROD R. BLAGOJEVICH, Illinois 

DANNY K. DAVIS, Illinois 

JOHN F. TIERNEY, Massachusetts 

JIM TURNER, Texas 

THOMAS H. ALLEN, Maine 

———

BERNARD SANDERS, Vermont 

(Independent) 

KEVIN BINGER, Staff Director 

DANIEL R. MOLL, Deputy Staff Director 

JUDITH MCCOY, Chief Clerk 

PHIL SCHILIRO, Minority Staff Director 

SUBCOMMITTEE ON CIVIL SERVICE

JOHN L. MICA, Florida, Chairman 

MICHAEL PAPPAS, New Jersey 

CONSTANCE A. MORELLA, Maryland 

CHRISTOPHER COX, California 

PETE SESSIONS, Texas 

TIM HOLDEN, Pennsylvania 

ELIJAH E. CUMMINGS, Maryland 

ELEANOR HOLMES NORTON, Washington, 

DC 

EX OFFICIO

DAN BURTON, Indiana HENRY A. WAXMAN, California 

GEORGE NESTERCZUK, Staff Director 

GARRY EWING, Counsel 

NED LYNCH, Senior Policy Director 

SUSAN MOSYCHUK, Professional Staff Member 

CAROLINE FIEL, Clerk 

CEDRIC HENDRICKS, Minority Professional Staff Member 

(III)

C O N T E N T S 

Page 

Hearing held on February 13, 1997 ....................................................................... 1

Statement of: 

Bates, Hugh, president, National Association of Postmasters; and William 

Brennan, president, National League of Postmasters ............................... 82

Tobias, Robert E., national president, National Treasury Employees 

Union; Michael Styles, president, Federal Managers Association; 

Charles E. Jackson, president, National Association of Retired Federal 

Employees; and James D. Cunningham, president, National Federation 

of Federal Employees .................................................................................... 14

Letters, statements, etc., submitted for the record by: 

Bates, Hugh, president, National Association of Postmasters, prepared 

statement of ................................................................................................... 85

Biller, Moe, American Postal Workers Union, prepared statement of ......... 101

Brennan, William, president, National League of Postmasters, prepared 

statement of ................................................................................................... 92

Cunningham, James D., president, National Federation of Federal Employees: 

New York Times article ............................................................................ 73

Prepared statement of ............................................................................... 55

Davis, Hon. Thomas M., a Representative in Congress from the State 

of Virginia, prepared statement of .............................................................. 65

Jackson, Charles E., president, National Association of Retired Federal 

Employees, prepared statement of .............................................................. 40

Mica, Hon. John L., a Representative in Congress from the State of 

Florida: 

Charts reflecting cash flows and contributions ....................................... 98

Prepared statement of ............................................................................... 5

Pappas, Hon. Michael, a Representative in Congress from the State of 

New Jersey, prepared statement of ............................................................. 13

Sessions, Hon. Pete, a Representative in Congress from the State of 

Texas, prepared statement of ....................................................................... 12

Styles, Michael, president, Federal Managers Association, prepared statement of ........................................................................................................... 32

Tobias, Robert E., national president, National Treasury Employees 

Union: 

Letter sent to Chairman Kasich .............................................................. 69

Prepared statement of ............................................................................... 16

(1)

THE IMPACT OF THE PRESIDENT’S FISCAL 

YEAR 1998 BUDGET ON FEDERAL EMPLOYEES 

THURSDAY, FEBRUARY 13, 1997 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON THE CIVIL SERVICE, 

COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 9:30 a.m., in room 

2247, Rayburn House Office Building, Hon. John L. Mica (chairman of the subcommittee) presiding. 

Present: Representatives Mica, Pappas, Morella, Sessions, 

Holden, Norton, and Cummings. 

Also present: Representatives Davis of Virginia and Waxman. 

Staff present: George Nesterczuk, staff director; Garry Ewing, 

counsel; Susan Mosychuk and Ned Lynch, professional staff members; Caroline Fiel, clerk; and Cedric Hendricks, minority professional staff member. 

Mr. MICA. Good morning. I would like to call this meeting of the 

House Government Reform and Oversight Committee, Subcommittee on the Civil Service, to order. 

I welcome you to our first hearing of the new Congress, the 

105th Congress. And also, I am extremely delighted today to announce the Civil Service Subcommittee appointments. 

I had the honor of taking the Chair for a second term. And serving as vice chairman of our subcommittee will be Mike Pappas 

from New Jersey, a new Member. 

Of course, one of the most experienced, knowledgeable, and capable individuals on our panel is rejoining us, Connie Morella, from 

Maryland. Welcome back. 

We are also pleased to have Chris Cox join us as part of the leadership on our side of the aisle. He is returning to the Government 

Reform and Oversight Committee, but will be new to our subcommittee. 

And another new Member, Pete Sessions, from Texas, will be 

joining us. 

On the other side of the aisle, I am delighted that the minority 

has chosen for the ranking member someone who served very capably on our panel before and will be a great ranking member. I 

think that we are going to have a tremendous working relationship 

together. I am pleased to welcome as our ranking member, Tim 

Holden. Tim, welcome. 

We also have Elijah Cummings on the minority side joining us. 

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tee. Also Eleanor Norton, who is a delegate from DC. So they will 

be joining Tim on the minority side. 

I would like to welcome everyone, and again invite your participation in our subcommittee process. We are pleased to have many 

familiar faces back, some on our panel today, and others in the audience. 

As is customary, I will begin today’s hearing with a brief opening 

statement, and then yield to our ranking member and those Members who have opening statements. 

So we begin today’s hearing; again, welcome. This morning’s first 

hearing of the 105th Congress of our Civil Service Subcommittee 

has an important topic. And I have called this hearing to provide 

all of us with an opportunity to discuss several issues raised in the 

President’s fiscal year 1998 budget that may affect every Federal 

employee and every Federal retiree. It is an important subject. 

That subject is part of balancing our Federal budget, and balancing our Federal budget is one of Congress’ most important responsibilities. 

Today, we face a direct national debt of more than $5.6 trillion. 

We also face the responsibility of meeting more than $18 trillion 

in unfunded liabilities from retirement accounts and from other national indebtedness. 

Under the terms of the President’s proposal, Federal employees 

and retirees would assume responsibility for $6.252 billion of cuts 

that he has identified to reach a balanced budget by the year 2002. 

The most significant change in this section of the budget would 

require agencies to increase their payments to the Civil Service Retirement and Disability Fund by 1.5 percent beginning on October 

1, 1997. 

This increase in the agency’s payments would produce $621 million the first year, and yield nearly $3 billion over 5 years. Unchecked, this proposal could strain agency coffers and require reductions in force, unscheduled reductions in force. 

The President’s budget also calls for Federal employees to pay a 

greater proportion of their pension costs. This change is delayed, 

unfortunately, and fails to fend off or provide retirement options. 

For employees enrolled in the Civil Service Retirement System or 

the Federal Employees Retirement System, the payroll deduction 

for retirement benefits will be raised by one-half of 1 percent, 

phased in over 3 years. Beginning in January 1999, the payroll deduction will increase 0.25 percent, an additional 0.15 percent the 

following year, and the final one-tenth of 1 percent will be imposed 

in January 2001. Last year, the general Treasury doled out $19 billion to pay current retirement benefits and $24 billion in interest 

on funds borrowed from the Civil Service Retirement and Disability 

Trust Fund. Our Civil Service Retirement System now sports an 

unfunded liability which exceeds $540 billion. While I have long favored some increases in employee contributions, which has not 

been changed since 1969, I feel that some of the proposals brought 

forth by the administration are particularly unfair as it relates to 

postal employees, who are also asked to contribute more. Right 

now, the postal retirement fund is one of the secure funds that we 

have in the Federal Government. 

3

The remainder of the budget reductions that the President has 

proposed to cut from Federal retirement programs are achieved by 

targeting retired civilian Federal employees. And they have imposed on them a 3-month delay in the annual cost-of-living adjustments in their pension for the next 5 years. Retired Federal employees are often the least likely to be able to survive any kind of 

a cut. And they are singled out, I believe, in this budget proposal 

in an unfair manner. This slice out of the benefits of Federal retirees will result in a $278 million cut during fiscal year 1998, and 

nearly $1.5 billion in reduction of benefits over the next 5 years of 

this budget. 

This part of the President’s budget is identical in most respects 

to a plan that was proposed in the Senate, and promoted by a coalition of Federal employee unions and organizations in 1995. 

The President included a similar plan in last year’s budget proposal. I proposed an alternative plan. None of the previous versions 

of this plan have been enacted, and we stand today facing continuing budget deficits, growing unfunded liabilities, and unfortunately we still have raided trust funds, all a concern to me. 

The administration has decided that balancing the budget re- quires Federal employees and annuitants to forego $3.3 billion in 

benefits over the next 5 years. Their agencies will have to reduce 

spending by nearly $3 billion to free up their increased share of the 

retirement cost. Regrettably, the administration has declined to 

send a representative today to respond or to provide additional insight in supporting arguments or documentation for advancing this 

proposal. 

I presume that the administration has some compelling arguments to justify these proposed changes in funding Federal retirement programs. And we intend to continue to seek some of those 

answers that we will not get here today. 

There are several other related issues raised in the President’s 

budget that warrant further scrutiny. Although several witnesses 

today will offer comments relating to the Federal Employees 

Health Benefits Program, we will need to defer this discussion to 

a future date, when the administration will be available to testify. 

There has been some discussion of a prospective change in the 

calculation of the Government share of the Federal Employees 

Health Benefit Program premium. In fiscal year 1999, the current 

Phantom Big 6 formula expires, and is to be replaced by the Big 

5 formula. This change could have a serious impact on employees’

health insurance premiums. By its silence, the budget silence, on 

this particular subject, I must conclude that the administration is 

content with Federal employees picking up a greater share of their 

health care premiums, and has, in fact, included it as a budget savings beyond 1999. 

Another major budget issue that we must address is this administration’s proposal to take over a portion of the District of Columbia’s retirement liabilities. From the budget documents, it would 

appear that the administration is proposing to raid the current assets in some of the DC pension accounts to pay for short-term annuity obligations. 

As a matter of principle, I strongly object to raiding another pension fund. It is even illegal in the private sector. And I would like 

4

to see it illegal in the Federal sector. But that appears to be the 

proposal. While the Federal Government right now is getting away 

with the raid of some of these funds, it does not make it right. 

At a time when we need to be looking for ways to infuse real 

cash in our pension system, Social Security as well as Civil Service, 

the DC proposal appears headed in the wrong direction. We will 

come back to that issue. We are not going to discuss it at length 

today. In fact, Ms. Norton is not here, but I would like to consult 

with her and other members of the panel about a hearing on that 

subject, which I think is more than warranted. 

I called this hearing today to review these various proposals of 

the administration, and to solicit the views of organizations and 

groups representing our Federal employees and retirees. 

The Budget Committee has assigned the Committee on Government Reform and Oversight some of the responsibilities for achieving spending reductions and savings, at least comparable to the 

$6.252 billion proposed by the administration. 

We cannot shirk that responsibility, and I ask the assistance of 

the Federal employees and retirees and their organizations to help 

us in identifying the most reasonable options for sharing that burden. 

If you recall the last time we went through this exercise, those 

who were on the panel, we could not reach a determination in our 

subcommittee or a solution. It was punted to the Budget Committee, and we got something that I do not think any of us really 

liked as far as a proposal from that group. 

So we do have an important responsibility to help guide this 

process and these proposals. And I do sincerely welcome and solicit 

your views. 

We have a genuine obligation to live within the resources that 

the American taxpayers provide to meet the expenses of Government. And I look forward to your assistance and help, so we can 

achieve this goal of a balanced budget by 2002 with your help. 

In just a moment, I will introduce our panel of witnesses. But I 

did want to conclude my opening remarks by welcoming our new 

Members who have joined us. I see Pete Sessions from Texas, and 

Elijah Cummings from Maryland. Welcome. We welcomed you before you got here, and we welcome you again. 

And now I will yield for an opening statement to our ranking 

member. 

[The prepared statement of Hon. John L. Mica follows:]

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Mr. HOLDEN. Thank you, Mr. Chairman. And thank you for that 

warm welcome. It is my great pleasure to serve on the subcommittee as the ranking Democratic member, and I am pleased 

to be joined by two fine colleagues on the Democratic side, Elijah 

Cummings and Eleanor Holmes Norton. 

As we begin the 105th Congress, we will face many important 

issues that are within the jurisdiction of this subcommittee. I look 

forward to working with you in a spirit of bipartisanship. And I am 

confident that working together, that we will be successful in making improvements that will make the Government run better and 

more efficiently. 

Today, we will have the opportunity to hear a variety of views 

regarding the President’s fiscal year 1998 budget proposal. It is 

very important for us to carefully examine how these proposed 

changes will affect current Federal employees and retirees. 

As we all know, there will be many difficult decisions in the days 

ahead, as we work to balance the Federal budget. And let there be 

no mistake, we must balance the Federal budget. Our Nation’s fiscal stability depends on it. 

With that said, we turn to the most important question of how 

we balance the budget fairly, and with the least adverse impact on 

all of those affected. 

I have always believed that you cannot single out any one group 

to balance the budget, and that we will only be successful if everybody joins in to do their part. Shared sacrifice must truly be 

shared. 

Federal employees and retirees have been asked a number of 

times to do their part for a deficit reduction. The Federal Government Service Caucus has estimated that Federal employees have 

lost $40 billion through delays or elimination of COLAs, and another $104 billion in reductions in scheduled pay increases. 

I am very concerned that these proposals will have a negative 

impact on the Government’s ongoing efforts to recruit and maintain 

a highly skilled and productive workforce. 

Over the last several years, Federal employees’ morale has been 

repeatedly besieged by Government shut-downs, proposals to reduce their benefits, and failure to fully implement the Federal Employee Pay Comparability Act. 

I think that those of us on this subcommittee can work together 

to improve the Federal workforce. I look forward to hearing this 

testimony, and hope that we can all work together to devise a 

budget, which will be fair to all interests, and while also balancing 

the budget in a timely manner. 

Thank you, Mr. Chairman. 

Mr. MICA. Thank you. 

And I would like to yield now for an opening statement to Mrs. 

Morella. 

Mrs. MORELLA. Thank you. I want to thank you, Mr. Chairman, 

for holding this morning’s hearing. As you mentioned, this is the 

first hearing of the 105th Congress. And it is appropriate that we 

begin by looking out for Federal employees and retirees in the 

President’s budget. I look forward to hearing from my friends on 

the two panels that we have assembled before us. 

9

I want to also congratulate the newest members of this subcommittee. We do operate in a fine bipartisan fashion, and I look 

forward to continuing to do that. 

Speaking of the President’s budget, I am alarmed in the President’s budget by some elements that I think would adversely impact Federal employees and retirees. And as you know, many are 

my constituents. 

Over the past several years, Federal retirees and employees have 

been asked to bear a disproportionate share of deficit reduction. 

And in addition, the reduction of the Federal workforce by 272,900 

FTEs has caused anxiety, as we know full well, among Federal employees. And it meant that fewer employees must do more work. 

Federal employees have performed admirably, and it is not fair to 

punish them in this budget. 

Despite protests from Members of Congress on both sides of the 

aisle, President Clinton’s budget contains a 3-month delay in Federal civilian retiree and Foreign Service retiree cost-of-living adjustments through 2002. 

It is one thing to share the sacrifices of deficit reduction. The 

President’s budget, however, subjects neither Social Security beneficiaries nor military retirees to this delay. 

Over the last several years, Federal retirees and employees have 

been forced to bear a disproportionate share of deficit reduction. 

And for the first time in 4 years, Federal employees received their 

COLA in January, just like Social Security recipients and military 

retirees. From 1994 to 1996, Federal retirees did not receive their 

COLAs until April. 

On February 4th of this year, I introduced H. Con. Res. 13. It 

states, ‘‘The sense of Congress is that cost-of-living adjustments for 

Federal retirees should be paid beginning in January of each year, 

as current law prescribes, and should not be delayed, whether it is 

part of budget agreement or otherwise.’’ Already, there are like 46 Members who have co-sponsored this 

resolution. I hope that all Members here today will sign on. Mr. 

Cummings is a co-sponsor, and Ms. Norton is a co-sponsor. And I 

invite other members of the subcommittee to do so. 

I strongly oppose the President’s proposed increase in Federal 

agency and employee contributions to Federal employee retirement. 

These are not painless spending cuts. The President’s budget increases agency contributions to the Civil Service Retirement and 

Disability Fund by 1.51 percent for all CSRS employees. 

And as you know, Federal retirement contributions are paid out 

of agency salaries and expenses accounts, accounts that are already 

constricted from past budget reductions. We know the ramifications 

that are possible. 

So increasing agency contributions at this time, particularly outside the context of a balanced budget proposal, will further tighten 

agency accounts, and could lead to further reductions in force or 

furloughs. This increase amounts to an across-the-board spending 

cut that will affect every agency and program in the Federal Government. These proposals would unduly burden a small segment of 

society. 

The President’s budget would also require Federal employees to 

pay additional portions of their salaries to their own retirement, 

10

beginning in January 1999. An increase of 0.25 percent in 1999, 

0.15 percent increase in 2000, and a 0.10 percent increase in 2001 

would provide for an additional $1.829 billion in savings, savings 

coming from the pockets of Federal employees. 

And I am also concerned about the future of the FEHB program. 

Beginning in 1999, the Government contribution will no longer be 

60 percent of the Big 6. It will be 60 percent of the remaining Big 

5. This will lead to higher cost for employees. And I intend to offer 

a legislative remedy to prevent this from occurring. I look forward 

to hearing from you about what you think should be the remedy. 

I think that you all know that I strongly support a balanced 

budget, and members of this subcommittee do also. But balancing 

the budget is about making choices. And it is unconscionable to single out Federal employees and retirees to contribute more than others. For lower wages than their counterparts in the private sector, 

Federal employees have worked and continue to work to make our 

Nation strong. 

I strongly hope that we will repay loyalty with loyalty, and not 

unduly burden Federal employees and retirees by reducing their 

salaries, and hamstringing their employing agencies, or delaying 

their COLAs. 

Thank you very much, Mr. Chairman. 

Mr. MICA. Thank you. 

The new members will soon learn that Federal employees and retirees have——

Mrs. MORELLA. A special place in my heart. 

Mr. MICA [continuing]. An incredible advocate in the person of 

the lady from Maryland. 

I am pleased to recognize now for an opening statement, and also 

welcome Mr. Cummings, from Maryland. Thank you. 

Mr. CUMMINGS. Thank you, Mr. Chairman. 

It certainly is a pleasure to have been appointed to this committee. 

Mr. Chairman, I was very pleased yesterday when you approached me and extended a hand of bipartisanship. That meant 

a lot to me. I think that when we are about the business, as we 

must be, of uplifting the lives of the people in this country and our 

Federal employees, I think that it must take a bipartisan effort. 

And I certainly am looking forward to working with you. 

I also look forward to working with our ranking member, and all 

of the members of this subcommittee. In my district in Baltimore, 

we have thousands upon thousands of Federal employees and retirees. The Social Security Administration’s headquarters is located in 

my district. And so I have a tremendous interest here. 

And so I am looking forward to hearing from our witnesses this 

morning. I will also take a moment to pay some special recognition 

to my good friend, Connie Morella. We served in the Maryland 

House of Delegates together. And Connie has always been about 

the business of bipartisanship, and I really appreciate that. 

And so we move forward uplifting the lives of Federal employees. 

So often what I think happens is that Federal employees get a bad 

rap. Federal employees and retirees often bear the brunt for all the 

faults of the Federal Government. 

11

But I am just here to say that being from a district where I have 

so many retirees and Federal employees, I am very, very sensitive 

to those issues. And for those reasons, I am just glad to be a part 

of this. And I look forward to a bipartisan effort. 

Mr. MICA. Thank you, Mr. Cummings, and again, welcome. 

Mr. Sessions has left an opening statement with Mrs. Morella. 

And by unanimous consent, it will be made part of the record. 

[The prepared statements of Hon. Pete Sessions and Hon. Michael Pappas follow:]

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Mr. MICA. We would like to go ahead and get under way with 

our two panels today, and I would like to introduce our first panel 

of witnesses. Let the record show that this list has been compiled 

today in reverse alphabetical order, thus enabling witnesses who 

have often appeared at the end of our panels to lead off our discussions, and I notice at least that Mr. Tobias is still awake. 

I am pleased to welcome to the 105th Congress again Mr. Robert 

Tobias, no stranger to our panel, no wilting violet, to this panel. 

He always have valuable testimony and very opinionated. He is national president of the National Treasury Employees Union and 

does a great job as their spokesperson and advocate. 

We will also hear from Mr. Michael B. Styles, the president of 

the Federal Managers Association. We have heard from Federal 

managers on many occasions in the past, and we welcome you 

back. 

Another individual who is no stranger to this subcommittee is 

Charles E. Jackson, the president of the National Association of 

Retired Federal Employees, and a tireless advocate for Federal retirees. 

And Mr. James D. Cunningham, who is now the president of the 

National Federation of Federal Employees. And we welcome all of 

our panelists this morning. 

As is customary for our witnesses, and this is an investigations 

and oversight committee and subcommittee, we do swear in our 

witnesses. So if you would stand and raise your right hand. 

[Witnesses sworn.] 

Mr. MICA. And I guess in compliance with this new House Rule 

XI and House Rule XII, the panelists have disclosed any receipt of 

Federal largesse. And I thank you for complying. 

So with those comments, we will start the testimony. And as 

usual, and I read your statement late last night, Mr. Tobias; we 

ask that if you can summarize, hopefully within 5 minutes. We do 

not ring the bells or bring the shepherd’s hook out. But that is the 

custom of our panel to summarize, if you can. And then we will 

have an opportunity to discuss the issues with the members of the 

panel. 

So welcome, and you are recognized, Mr. Tobias. 

STATEMENTS OF ROBERT E. TOBIAS, NATIONAL PRESIDENT, 

NATIONAL TREASURY EMPLOYEES UNION; MICHAEL 

STYLES, PRESIDENT, FEDERAL MANAGERS ASSOCIATION; 

CHARLES E. JACKSON, PRESIDENT, NATIONAL ASSOCIATION 

OF RETIRED FEDERAL EMPLOYEES; AND JAMES D. 

CUNNINGHAM, PRESIDENT, NATIONAL FEDERATION OF 

FEDERAL EMPLOYEES 

Mr. TOBIAS. Thank you very much, Mr. Chairman. I appreciate 

that kind introduction. I start today from the wilting violet school 

by asking you and all of the other members of your committee to 

request Chairman Kasich not to assign any reconciliation savings 

to the Government Reform Committee this year. 

I wrote to Chairman Kasich and urged that the fiscal year 1998 

budget resolution assign zero savings to you and this committee, 

and I ask you to do the same. 

15

Mr. Chairman, Federal employee and retiree pay, benefits and retirement annuities have been cut by $222 billion since 1976. We 

have given our fair share. 

Mr. Chairman, in your role as a member of the board of directors 

of the executive branch of our Government, you have asked Federal 

workers to do more, and you have asked for more accomplishment, 

and Federal employees have responded. We ask you, Mr. Chairman, to do the same. 

Mr. Chairman, we ask that you recognize that a 2.8 percent pay 

increase is not adequate. It is not consistent with the law you 

passed in 1990, and it is not consistent with the need to attract the 

best workers needed to accomplish more. And it is not consistent 

with the fact that the Federal workforce is the same size it was in 

1963, yet the population we serve has increased dramatically. 

Mr. Chairman, we ask that the increased retirement contributions requested by the President from both agencies and employees 

be denied. The retirement plan created in 1986 is patterned after 

the private sector as the 1996 GAO report requested by you concluded. 

And the GAO report further underscores the point that most private employers do not require employees to contribute anything to 

their defined benefit plans. We have a private sector plan, and we 

already contribute enough. 

And those who are already retired deserve some stability. Singling out the Federal retiree for a COLA delay is unjust. The average Federal pension is $18,816 a year. These people are not rich. 

Most do not receive Social Security benefits. And unlike Social Security benefits, Federal retirement is taxed fully. 

These proposals, however, pale in comparison to the 1996 budget 

reconciliation instructions, where this committee recommended 

changing the retirement annuity calculation from the high 3 to the 

high 5-year average, limiting the Government’s contribution to the 

health benefit program to the rate of inflation, thereby driving even 

more Federal employees off the health insurance roles, increasing 

the Federal employee contribution to the retirement system by 2.5 

percent, and the agency contribution by 11 percent. 

Mr. Chairman, I say enough, no more. Please recognize what we 

have done. Please recognize what we are doing. And please join 

with us in asking Chairman Kasich to spare Federal employees in 

the 1998 budget. Thank you. 

[The prepared statement of Mr. Tobias follows:]

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Mr. MICA. Thank you, Mr. Tobias. 

And I will recognize Mr. Michael Styles now. 

Mr. STYLES. Thank you, Mr. Chairman. 

I would like in public to thank you for attending our mid-year 

conference on one of those overnight flights. I appreciate that. I am 

sitting here in about the same state you were. I would also like to 

thank Congresswoman Morella for her outstanding leadership in 

seeking to ensure that promises made to Federal workers and retirees are promises kept. 

FMA appreciates and applauds your sense of Congress resolution 

in support of maintaining January cost of living adjustments for 

Federal retirees. Thank you very much. 

Since our comments are made for the record, the other night 

when I came home from work—I work out in California, and am 

still a full-time Federal employee—I happened to take a look at the 

Federal Times and saw Retirement Under Fire. And you would 

think that after all of this time that that would not bother me, but 

in fact it incensed me. 

And I thought that my comments today to you should be a little 

bit more from the heart and provide you with some insight from 

my perspective. I thought that it was important for me to provide 

you with some personal insight into the effect that a continued 

bombardment of the Federal workforce is having. 

I personally have 38 years of Federal service, and I am currently 

55 years of age. I am getting ready to walk over here to my NFFE 

buddies. I can retire tomorrow, but I always had the dream of finishing 49 years of service to my country. 

I can still remember taking my oath to my country as a young 

man proudly becoming a U.S. Marine. I can also quite vividly remember taking an oath to my country when I became a civil service employee at the Long Beach Naval Shipyard. 

I also remember the pledge that was made to me when I became 

a part of this extremely dedicated strike-free workforce. That 

pledge was to assure that paying benefits to the Federal workforce 

would be comparable to the private sector. 

As my career unfolded, it became obvious that Federal pay and 

benefits were lagging behind those of the large private sector corporations with equivalent positions. But service to country in itself 

was a compelling factor in remaining a Federal employee. 

During the 1980’s, the Federal workforce came under tremendous pressure as private sector corporations lost their competitive 

edge worldwide, and sought out more and more Government contracts to offset their losses in the private sector marketplace. 

The premise, of course, was that the private sector was more cost 

effective than the public sector, a theory that more and more often 

became if as true competition became realistic. 

You may recall that the 1980’s became known as the decade of 

greed, because so many became rich while the Government went 

head over heels into debt. 

In 1988, I was selected by the Department of the Navy to participate in the experience with industry program. I went to work at 

a large defense contractor. Having read the same newspapers that 

you do, I knew that the private sector was much more adept at 

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running a business operation. I had much to learn, and had an extensive dream sheet, if you will. 

What I learned, however, was that while they had a tremendously talented workforce, they had problems as well. While I was 

with this corporation, they were getting involved in total quality 

management. They were using, I would like you to understand, the 

public sector, North Island Naval Rework Facility, their plan for 

total quality management. The reverse was true. 

Also, while I was there, I found a pay schedule or I was given 

a pay schedule that was approximately 1 year old. I can tell you 

quite frankly that I was depressed for more than 2 weeks, because 

I had figured by that time that I had thrown away much of my life. 

Because the private sector most certainly was paid a substantial 

amount more than we are. 

And I would look at the 29 percent that we talk to here as being 

a rather good example of the disparity between the wage systems. 

I returned from that experience with tremendous pride in the 

Federal workforce and our capabilities. Since 1990, when I became 

the president of the Federal Managers Association, I have had the 

opportunity to see the entirety of America’s workforce at work, 

doing the things that they do for America on a daily basis. 

The FAA, Social Security, Veterans Affairs, IRS, Army, Navy, Air 

Force, Marine Corps, Border Patrol, Agriculture, GSA, Labor, and 

so on. I can tell you without doubt that ours is truly the most talented and dedicated workforce assembled in the history of the 

world. The sad part is that the American people do not know that. 

The Berlin wall did not crumble because of Gorbachev. It crumbled because of the will of the American people and the dedication 

of our Nation’s Federal workforce, both military and civilian. 

Desert Storm was a success because of that same unbounded determination. 

Faced with BRAC, privatization, A–76, and unrelenting downsizing, this workforce has continued to produce at even higher levels. 

The Long Beach Naval Shipyard, which recently closed, did so $6 

million in the black, while many private yards have gone bankrupt. 

When the private sector contractors came to Kelly and McClellan 

Air Force Materiel Commands to start to bid on their work loads, 

their first impressions and comments pertained to the incredibly 

competent workforce. They stated that they would only take on 

those work loads, if they could hire the people currently doing the 

work. 

Agency heads and senior executives who come from the private 

sector are always surprised at the Federal employees’ competence, 

dedication, and loyalty, and are quick to state that fact. It is easy 

to see why people have a misperception about the capability and 

determination of the Federal employee. 

Throughout every political debate, the Federal employee becomes 

the whipping boy. My greatest fear is that the ‘‘Pygmalion effect’’

or the self-fulfilling prophecy will become the reality of tomorrow. 

We are creating a workforce, and we are telling everyone we 

have. At a recent meeting with mid-level and senior Navy Department managers, I asked him how many of them would tell their 

children to go to work for the Federal Government. There were 30 

31

people in the room, and not one raised their hand. All had over 20 

years of service. That is a telling message. 

In providing testimony before this committee several years ago, 

we talked about cost savings. And we talked about total quality initiatives. And as I sit at this panel with two of my co-members of 

the Partnership Council, I would ask that you the panel and we the 

Federal employees become partners in telling America what we are 

really about, in providing the cost savings that we really can provide given the opportunity and the empowerment by the Congress 

and the agencies. 

Mr. Chairman, I have always looked at this committee as the 

Federal workers’ voice to the House and to ultimately the American 

people. The message that I would like to be brought forward is that 

ours are not nonessential employees, but quite the contrary. They 

are in fact the very essence of our Nation, the fiber that our beautiful flag is woven from. They touch and are part of everything that 

is good about America. 

Now is not the time to further alienate and penalize Federal employees. Now is the time for America to stand behind the pledge 

that it made to its workforce when they took the same oath that 

I so proudly did. 

I want to thank you once again for inviting FMA to present our 

views to the subcommittee, and I look forward to the partnership 

that I hope that we have created. Thank you. 

[The prepared statement of Mr. Styles follows:]

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Mr. MICA. Thank you. 

Mr. Jackson. 

Mr. JACKSON. Thank you, Mr. Chairman. 

As president of the National Association of Retired Federal Employees, I appreciate the opportunity to appear before you today. 

NARFE is very disappointed in the President’s decision to single 

out civil service retirees and survivors for a COLA delay in his latest budget. We can only view this proposal as a public dismissal 

of the value of Government service. 

NARFE is also displeased with the repeated call for increased 

employee contribution to the Civil Service Retirement and Disability Fund. Additionally, we believe that if agency contributions 

are to be used, that the corresponding increase in the discretionary 

spending caps are necessary to ensure that agencies can absorb 

this new cost without being forced to lay off more workers. 

In reviewing this package of Federal retirement recommendations, we believe that two questions should be asked. First, is there 

a legitimate public policy reason for a Federal annuitant COLA 

delay, and for increased retirement fund contribution? 

This is a relevant question, since the President’s own director of 

the National Economic Council recently claimed that changes in 

COLAs or in the Consumer Price Index ought to be based on the 

facts rather than on political whim. 

The answer depends on the financial well-being of the fund. If 

the fund were in trouble, lawmakers would have to consider increasing income, cutting benefits, or both. The President proposes 

that benefits be cut by delaying COLAs. And this budget is calling 

for increased income to the fund. 

The enigma here is that there is no indication that the fund is 

in dire fiscal straits. The fund is on sound financial footing. During 

the last Congress, the GAO testified that there is an adequate balance in the fund to disburse annuities to Federal retirees and survivors on an ongoing basis. 

Some say that Government contributions are not real money, but 

this is just plain wrong. The contributions are real income, since 

the funds are appropriated by Congress, and since there is an annual limit on the amount of funds that the Congress may appropriate. 

It has been said that Government securities issued to the fund 

are not real assets, because they are non-marketable. Not true. The 

only difference between marketable and non-marketable securities 

is that the latter cannot be traded in the financial market. 

U.S. savings bonds and Government securities held in the Social 

Security trust fund are also non-marketable. Few holders of U.S. 

savings bonds or other Government securities would like to hear 

that these investments are not real assets. 

NARFE recognizes that Federal employees pay 25 percent of 

their retirement cost. This is far greater than the majority of employers in the private sector require. It is 97 percent of medium 

and large employers who pay for retirement without employee contributions. 

Taxpayers as employers pay 75 percent of retirement costs for 

Federal employees, while most other employers pay 100 percent. 

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thing that employers must do. Since our fund is in good shape, we 

believe that a reduction in the benefit of retirees and an increase 

in employee contributions are unnecessary. 

Federal retirees understand that the enormous Federal debt that 

accrued during the 1980’s stunt what our economy could be. As 

older Americans, we want to leave a sound economy for our grandchildren. For that reason, we believe that the goal to reduce this 

burden is not only commendable but essential. 

But as attempts are made to balance the budget, we must ask 

if everyone is making a shared sacrifice toward this goal. The answer is a resounding no. Year after year, the White House and 

Capitol Hill have reduced our earned inflation protection while Social Security has been paid on time and in full. And we know that 

delays in Social Security and military retiree COLAs were never 

considered as options in this budget. 

It is ironic that during the recent balanced budget debate, that 

some have said that protecting Social Security is essential, since no 

private sector employer would reduce employee pensions to pay off 

debt. But these same individuals say nothing about protecting the 

retirement benefits of the Government’s own employees. 

Federal retirees and survivors are understandably outraged by a 

proposal that takes away their full and timely inflation protection 

in 1998 after the Capitol Hill and White House allowed it to be restored in 1997. 

In addition to policy considerations and equity issues, members 

of this subcommittee must understand what this COLA delay proposal means to your constituents who are Federal civilian annuitants. It means that the average Federal retiree will lose $726 

over the next 5 years. But just as detrimental is the message it 

sends that civil service retirees and their survivors are less worthy 

than other retirees. 

Unlike Social Security benefits, Federal civilian annuities are 

100 percent taxable from the first dollar of payment. Although we 

have looked, we can find nothing in the budget which proposes a 

3-month extension on the tax filing deadline for Federal retirees. 

In fact, none of the bills that Federal annuitants must pay will 

be delayed, just because their COLA is. Inflation will not be abated 

while Federal retirees wait for their inflation protection to be paid. 

This is a discriminatory COLA delay, because no other group of 

older Americans are being asked to share this burden. 

As this committee develops its views and estimates for submission to the Budget Committee, NARFE urges you to reject the administration’s COLA delay and contributions proposal. 

We also ask you to support full and timely payment of our 

COLAs by cosponsoring H. Con. Res. 13 introduced by Representative Morella. 

Mr. Chairman, you also asked NARFE to comment on the expiration of the FEHBP’s Aetna proxy premium 2 years from now. According to OPM actuaries, the premium formula changes already 

required for 1997 and 1998 contract years will have an insignificant effect. 

However, OPM says that if Congress fails to reauthorize the 

Aetna proxy premium, costs for enrollees could increase by $164 for 

self-only policies, and $326 for family plans in 1999. 

39

Such a substantial increase in premiums would be difficult for 

many Federal retirees and survivors to absorb, and might force 

many enrollees out of a fee for service option. Reserving fee for 

service plans is particularly important to us, since older Americans 

require more continuity of care, as their need for medical attention 

increases. The importance that we place in the doctor-patient relationship of our choosing cannot be overstated. 

Mr. Chairman, NARFE wants to work with you and your subcommittee this year to explore ways and means of ensuring that 

FEHBP enrollee costs do not skyrocket as a result of changes in 

the premium calculation formula. 

We make ourselves available to help develop legislation that will 

not impose new financial burdens on enrollees or the Government. 

We also urge that there be no hasty or radical changes made until 

everyone can examine the costs and effects of alternatives. 

Thank you again, Mr. Chairman, for the opportunity to present 

NARFE’s views. I would be happy to answer questions that you or 

other members of the subcommittee may have. 

[The prepared statement of Mr. Jackson follows:]

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Mr. MICA. Thank you, Mr. Jackson. And we will defer questions. 

We will hear now from James Cunningham. 

Mr. CUNNINGHAM. Good morning, Mr. Chairman, and members 

of the subcommittee. My name is Jim Cunningham. And speaking 

for the members of the National Federation of Federal Employees, 

I would like to thank you for the opportunity to appear before you 

this morning. 

Before I begin, I must say that I look forward to working closely 

with you, Chairman Mica, and the members of this subcommittee 

over the next 2 years, as you address issues of importance to the 

Federal Government and its workers. 

At the outset, I must say that this budget is a severe disappointment to NFFE. I fear that this budget reflects that the administration, while publicly committed to working with employees, does not 

feel the need to adequately compensate the employees they profess 

to value so highly. 

Each day Federal employees across this Nation serve proudly 

their country and their fellow citizens. These employees do not 

work for the Federal Government because they seek to enrich 

themselves, but they work for the Government because they believe 

that serving the public is a patriotic and noble duty. 

These employees are dedicated and committed to the ideal that 

the Government exists to serve its citizens. Federal employees 

strive each day to ensure that the American public receive the 

services that they need and expect. 

However, because Federal employees do not work for the Government because they expect high pay, they do have financial obligations that must be met. Like workers in the private sector, Federal 

employees must purchase goods and services, and just like private 

sector employees, the purchasing power of Federal employees is 

eroding by inflation each year. 

However, Federal employees watch the value of their paychecks 

erode at a considerably faster pace than their private sector counterparts. For example, based on a comparison of the consumer price 

index and the employment cost index for 1980 through 1995, the 

value of private sector salaries was reduced by 5.2 percent. During 

that same period of time, the value of Federal employees’ salary 

was reduced by 24.3 percent. 

Obviously, this situation is intolerable. And Federal employees 

need and deserve pay adjustments that will not only protect the 

value of their salaries from further erosion by inflation, but will 

also correct the inequity of the past 15 years. 

Unfortunately, President Clinton’s fiscal year 1998 budget contains only a 2.8 percent pay adjustment for Federal employees. 

This is unacceptable to the members of NFFE. This small adjustment is far short of the 6.6 percent pay adjustment that employees 

should be receiving under the provisions of the 1990 Federal Employees Pay Comparability Act. 

Not only has the failure of the administration and Congress to 

provide the full adjustments called for by FEPCA inflicted severe 

financial hardship on Federal employees, but by consistently 

under-funding the raises mandated by FEPCA, the administration 

and Congress are endangering the future ability of the Federal 

53

Government to provide citizens with the high quality service and 

assistance that they have come to expect. 

When it was enacted in 1990, FEPCA represented a fair bipartisan solution to eliminating the gap between public and private 

sector jobs. Support for FEPCA was centered on the realization 

that pay comparability with the private sector was necessary, if the 

Government wished to recruit and retain the best and the brightest 

employees. 

As the Government continues to downsize, the duties of each employee increase both in number and in complexity. If the Federal 

Government hopes to maintain a civilian workforce that is capable 

of meeting the demands being placed on them, then Government 

must compensate its employees in an adequate and equitable fashion. 

NFFE opposes the administration proposal to increase by 0.5 

percent the amount that employees pay into the Civil Service Retirement and Disability Funds. NFFE asserts that increasing the 

amount that employees contribute to their retirement fund is yet 

one more example of the discriminatory fashion in the way that 

Federal employees and retirements are routinely treated by Congress and the executive branch. 

This increase in retirement contributions is nothing more than a 

payroll tax that is being levied against only Federal employees. I 

would hope that this Congress with its commitment to reducing the 

tax burden of all Americans will not choose to inflict a new tax on 

Federal employees. 

NFFE is also very concerned that the proposal to increase agency 

payments into the Civil Service Retirement Trust Fund will increase downsizing pressure at all Federal agencies. By increasing 

the agency payment to the trust fund without providing additional 

funding for this purpose, this proposal would force agencies to 

make the payment from their salaries and expense account. 

Reducing the available pool of money for salaries will in turn 

place greater pressure on already tight operating accounts. It is 

highly probable that this pressure will force the agencies to cut positions. By forcing agencies to eliminate jobs without the benefit of 

a comprehensive strategic plan, this silent RIF will have a dramatic and destruction effect on the capability and effectiveness of 

the Federal agencies. This situation should be avoided at all costs. 

NFFE also feels that to delay cost-of-living adjustments to Federal retirees is both unfair and unjust. This proposal unfairly singles out one group of retirees and punishes them for choosing to 

serve their fellow citizens. It is outrageous that Federal retirees are 

forced to suffer the erosion of their hard earned retirement benefits 

while the COLAs of military retirees and Social Security recipients 

remain untouched. 

Before I conclude, I would like to address one final issue. NFFE 

is proud to be a member of the National Partnership Council, and 

has strongly supported the goals and mission of the National Performance Review. NFFE believes and is committed to the proposition that by working together in partnership that management 

and employees can redesign their work place in models of efficiency 

and quality. 

54

However, NFFE has grown increasingly concerned over the administration’s constant focus on the number of jobs that it has 

eliminated. For example, during the President’s press conference 

releasing the budget, I watched with dismay as Vice President 

Gore trumpeted the fact that the administration was 2 years ahead 

of schedule in reaching its massive job elimination targets. 

Little thought appears to be given to the pain that these cuts 

have inflicted on the targeted employees, and no mention at all is 

given to the ever increasing number of contractors who are being 

called in to do the work of separated Federal employees. 

Little over 31⁄2 years ago, Federal employees welcomed a portion 

of the NPR report, in which Vice President Gore declared that Federal employees are good people trapped in a bad system. For once, 

it was the system that was being blamed and not Federal employees. 

On this basis, NFFE embraced many portions of the NPR. And 

we look forward to the systemic reforms that would allow them to 

truly create a Government that all Americans could be proud of. 

But if employees who have supported the NPR see that they and 

their coworkers are losing their jobs and being replaced by contractors, then the NPR’s declaration of fixing the system and not blaming its people will be meaningless, and the NPR will be meaningless, and the NPR will be remembered as just another attempt to 

portray Federal employees as the problem. 

It is important to remember that Federal employees support 

much of the NPR because they are interested in making their agencies work better. However, they do not want to see their work 

transferred to contractors and have their job reinvented out of existence. Federal employees are proud to work for America. We 

strive each day to deliver to the public the high-quality goods and 

services they deserve and expect. In return, we ask only that our 

leaders in the executive and legislative branches of Government respect the work we do and treat us with the respect we deserve. 

Thank you very much. 

[The prepared statement of Mr. Cunningham follows:]

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Mr. MICA. Thank you, Mr. Cunningham. We have also been 

joined by another member of the full panel and Chair of the DC 

Subcommittee, Mr. Davis, from Virginia. Did you have an opening 

statement or comment? 

Mr. DAVIS. Mr. Chairman, first of all, thank you very much for 

allowing me to be here and for allowing this panel to come forward 

and, I think, express what are my concerns about some of the 

changes that have been suggested in compensation this year. And 

I would ask unanimous consent that my full statement be included 

in the record. 

Mr. MICA. Without objection, so ordered. 

Mr. DAVIS. Let me just make a couple of comments, if I can. I 

have just come out from speaking to a business group in northern 

Virginia, and every one of them will tell you that their major asset 

today is no longer their computers and machinery or equipment or 

buildings; it is their people. And they invest in their people, they 

keep them happy, and then they do not have to go out and rehire 

and retrain constantly. 

In every business organization the world seems to understand 

that except for the Federal Government, where constantly when 

you look for cuts, the first place we look is at our people. And I 

think you all have expressed that very eloquently today. We need 

to get smart about that if we want to have a Government and to 

recruit and train the best and the brightest of people who are willing to give their lives to making Government a better place. 

But I think the most invidious form of discrimination I can see 

is in this COLA inequity. It is talked about in this year’s budget, 

where if you work for somebody else, you are on Social Security or 

you are a active military, you get your COLA on time; only if you 

work for the Federal Government are we going to delay you. What 

an awful message that sends. 

No business organization would do that. Nobody who understands how you handle people and what makes an organization run 

would do that, and they are just not getting it, and I think all of 

you have put forward today very eloquently the concerns in our 

business organizations and among employees just asking to be 

treated fairly. That is all we want to do. 

If we do that, there may have to be cuts here and there or something, but to just be treated fairly along the way, it is in the taxpayers’ interest, and it is in this Government’s interest to make 

that work, and I appreciate all of you being here today and sharing 

your statements. Thank you, Mr. Chairman. 

[The prepared statement of Hon. Thomas M. Davis follows:]

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Mr. MICA. Thank you, Mr. Davis. We will now start the round 

of questioning here, and I will open with a couple of comments and 

questions. We have sort of a variety of recommendations here. Mr. 

Tobias, well, I think they are pretty unanimous in their conclusion. 

It is sort of no, no, no, and no, all three as far as additional contributions or cuts, but we really have to face, I guess, some of the 

political reality of this. When the President recommends $61⁄2 billion being taken out of 

these accounts, how can we do something to assist in his effort and 

our effort, too, in balancing the budget? Now, I have proposed in 

the past a number of ways we could take some pressure off and 

some expenses off. 

We had proposed a Medical Savings Account. We asked you all 

to look at that as one option, and the experience we had in the 

hearings that we conducted showed that both the employee and the 

employer, in many instances public entities, paid lower premiums 

on both parts. It is true that they had not been tried on as wide 

a number of folks that we deal with, but I propose that as one idea. 

Retirement options that we need to be looking at, giving some opportunity for some other avenues to take some pressure off of the 

current system. I also advocated if we increased employee contribution, that we fence off the funds. I do not think the Federal employees mind contributing more; the problem is they continue to get 

less, and they have had all of the assets taken out of a trust fund. 

We are now paying—it was $24 billion out of the budget a year or 

so ago, and I think that is escalating and gets up to an incredible 

amount if we keep letting that fund mushroom, the deficit. 

And other options. We looked at the ‘‘high three’’ versus the ‘‘high five.’’ Actually, most of the proposals that came out did not 

do much to deal with the unfunded liability except for the ‘‘high 

three’’ versus the ‘‘high five.’’ Now, you know the way this place operates, and Mr. Tobias, you 

have said, ‘‘just say no,’’ but we are going to have to come back with some proposal. The President has said $6.5 billion. Do you 

have any suggestions where we can save some funds? Are you willing to look at any of these? Do you have any other alternatives for 

helping us reduce this cost without hurting the benefits, without 

hurting the pay? Can you offer that to the subcommittee? And I 

will ask all of you, starting with Mr. Tobias. 

Mr. TOBIAS. Well, Mr. Mica, I guess I start by asking you to, indeed, consider the political context and the history of this subcommittee. Recommending zero cuts would not be new to this committee. There have been times in the past when this committee has 

recommended zero savings, and I would ask that this committee 

serve as an educational force as opposed to reacting to what others 

might say. 

I would hope that this committee would take its responsibility as 

the board of directors of the congressional branch and educate 

Members as to what impact their decisions have on the Federal 

workforce. Now, you said, Mr. Chairman, that Federal employees 

do not mind if they contribute more. I really disagree with that. 

They do mind if they contribute more to their retirement. 

Mr. MICA. I think, Mr. Tobias, I said if their funds were fenced 

off. 

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Mr. TOBIAS. Well, I understand that. They do mind if they contribute more because it constitutes money out of their pocket, and 

I do not believe that there is anyone who would say, ‘‘I would like 

to contribute more.’’ And when we look at what Federal employees 

are doing, what they are asked to do, and the comparison of their 

benefits with the private sector, we are behind. 

So I would hope that you would, indeed, share my views, and I 

will be happy to give you this letter that I sent to Chairman Kasich. 

Mr. MICA. Thank you, and without objection, we will make this 

a part of the record. 

[The information referred to follows:]

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Mr. MICA. Well, I thank you for this, but, again, I am looking for 

some positive areas where we can work together to bring down 

costs, and I am not talking just about costs to the Federal Government; I am talking about health care costs to Federal employees, 

other opportunities for Federal employees for retirement, for increasing their potential savings and their return when they retire. 

So if you do have any suggestions, I welcome them. If you do not 

have any today and your statement is ‘‘just say no,’’ I appreciate 

it. Mr. Styles, any ideas? 

Mr. STYLES. Well, yes, sir. I have to echo my colleagues’ remarks 

about the impact that these continued assaults on the Federal employees’ benefits and retirement packages have, and that is why I 

brought out my comments here today in a more emotional, insightful way, because even after 38 years of Federal service, to see that 

headline really had a tremendous impact upon me. 

And in going around the country and seeing people who, without 

doubts, have been working for 19 to 35 percent less than comparable wages in the private sector, I think that that impact that 

we have is creating what I mentioned is the ‘‘Pygmalion effect.’’ We 

are creating the workforce we are telling the American public we 

have. It does not exist just yet, but it is moving in that direction, 

and I think what we have to do if we are talking about cost savings 

is, once again, go to the point of empowering the employees of the 

Federal Government. 

It is amazing how resourceful our employees are, and in every 

challenge that has been put forward to them, they have responded 

and provided you more and more with less. I also believe, and I 

mentioned that in my comment, I look to you as partnership. I look 

to you as the voice to the Congress and the American people to represent us in the true vision of what we perform in every day work. 

I would say to you that we are saving money. I would say that 

the partnership effort that we have brought forward at the national 

level is moving closer and closer down to the agency levels, and it 

is a remarkable thing to go around the country and hear reports 

that are made to us about the tremendous savings that are being 

brought forward. I think that is the type of collective effort we have 

to bring to the table, if you will, to bring about the savings that 

Mr. Kasich is looking for. And I think we can do that, and we have 

proven ourselves over time. 

Mr. MICA. Well, again, gentlemen, I am looking for some solid 

proposals that may not be $6.5 billion that the President has recommended. But he has already set the bar and we have got to 

come back and respond in some fashion that is fair to Federal employees. And I know you are saying ‘‘no,’’ but I am looking for positive steps that we can take. 

There are some things, I think, that have been proposed that are 

grossly unfair. The picking out solely of Federal retirees. Everyone 

looks for fairness. If it had been proposed for everyone, maybe that 

is another question, but here they have singled these folks out, 

postals, who actually have an imbalanced retirement fund. 

So we have got to find some areas that we can go back to Mr. 

Kasich and deal with the administration and say that we are meeting some of these net reductions in spending or cost. Mr. Styles. 

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Mr. STYLES. I have another comment, sir. We, as Federal employees, have been listening to the debate about how big the tax cut 

should be for the American people and what sector it should hit. 

I think too often we, as Federal employees, feel that we are not a 

part of that conversation. In fact, we are the answer to some of the 

solutions to provide those tax cuts for other Americans, and I think 

that we feel unjustly put upon because of that. 

Mr. MICA. Thank you. Mr. Jackson. 

Mr. JACKSON. This is one of my points. When you talk about 

seeking the avenues for recommending to the budget, one of the 

things that I think that this committee also needs to take a look 

at is if the taxes are not cut, then the need to reduce the Federal 

retirement benefits decreases. 

So, when you are talking about some of the ways of what you do, 

and although I have been in Washington only 3 years as the president of NARFE, I do know that for the past 10 years, when 

NARFE has appeared before this committee or the committee dealing with civil service and we have testified contrary to what the 

recommendations were, we still ended up with $50 million in cuts, 

delays in COLAs. 

Mr. Styles recommended or talked about his years with the Federal Government. I have been retired for over 25 years, and I was 

forced into a reduction in force as a part of the Federal Government, and I can tell you that when you are forced into a reduction 

in force at the age of 50, it is not a pleasant experience for anyone. 

And many of the people today that are faced with this, of having 

to go out and find other jobs because they have been reduced, I 

think that sometimes we lose sight of the pain that is being inflicted on some of those people also. But they were a part of the 

Federal Government, and they thought they spent 25 or 30 years 

in the position that they thought that they were doing something 

and that they were contributing to the country, and now suddenly 

they find that they are no longer a part of that. 

When you were talking about, and I know, having talked with 

you previously, I know how you feel about the Medical Savings Account. And we have also talked, and you know that I am not totally 

opposed to this, but I want to remind you that under the KennedyKassebaum bill there is a pilot under that and also that the Congressional Budget Office, in their report last year, in their report 

they said that the MSAs cost money, not save it. 

So if you are planning on the MSAs for the Federal community, 

particularly for retirees, I would ask that we be very careful on 

that, because there is no history at this particular time on retirees 

going into such a plan, and I would hope that this would be seriously considered, that you think that there is a lot of savings, that 

we be very careful that perhaps there is not. 

Mr. MICA. Thank you, Mr. Jackson. Mr. Cunningham. 

Mr. CUNNINGHAM. Oh, I have been champing at the bit over 

here. I will tell you what. I have not been to town long. I was elected at the last convention, and I took office November 1st, and the 

reason I ran was because I am a Federal employee, proud of it. I 

will have my 25th year coming up in June, and I am the son of 

a retired Federal employee, and I am very proud of that. 

72

And I was sitting home, and I am seeing all these cuts that are 

coming by, and not only as a Federal employee, but as a citizen of 

this great country, I know what we do for America every single 

day, and I am thinking, wait a minute. If we get rid of the best 

workers we have, we are going to be in really bad shape as a country. 

So I say, well, what can we do? Let me look at this problem. I 

am a very simple man from east Texas. Let me start off there. So 

I look at things very simply. Now, if you want to know what it 

costs to employ Federal employees, that information is handy. It is 

very available. 

Now, when I came to town here, I asked my staff to find out 

what we pay for contractors, what does it cost us. Now, I have got 

some really bright people, let me tell you, but we had a real hard 

time getting that information, but we did get a New York Times 

article that I wanted to share with you today. 

And in this article, and it is March 18, 1996, Monday late edition, and in here they have a John Koskinen quote, and he says 

that the Government spent $103 billion in salary for Federal employees in 1995. And then over here he made a quote. It says: 

‘‘Overall, Mr. Koskinen acknowledged the government does not 

know how many private workers it is paying for. ‘You can use any 

number you want,’ ’’ he said, ‘‘but whatever it is, it is a lot of people.’’

Now, I just want to know what we are paying these folks. And 

do they take an oath? No, sir, they do not. They come and they go 

and there has been plenty of evidence provided to this Congress or 

to past Congresses that says that Government employees are a bargain at any price. So if you want to save money, $6.6 billion, that is a drop in the 

bucket. We can find that for you, sir. I can assure you, give us an 

opportunity, and there is one thing that my colleague said over 

here. With these partnerships that we have set up now, some of 

them are working very well. 

There are other cost savings. So if we are talking about $6.6 billion, that is a piece of cake. We can show you how to find that 

money. 

[The information referred to follows:]

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Mr. MICA. Thank you, Mr. Cunningham, and I appreciate your 

suggestion. That is a new suggestion. I know we have talked about 

contract employees before, but we would welcome—if you could find $6.6 billion, we will not only welcome it; we will hold a dinner in 

your honor here. 

Mr. TOBIAS. Mr. Chairman. 

Mr. MICA. I am not joking, but I sincerely welcome any suggestions and concrete proposals that you have. Yes, very briefly, Mr. 

Tobias. I want to give everybody a chance. 

Mr. TOBIAS. Mr. Chairman, the President is proposing $899 mil- lion savings in the first year, $6.2 billion over 5 years. The people 

I represent in the Internal Revenue Service in 1995 increased the 

amount of revenue that they collected by $833 million. Now, Congress then decided in 1996 to eliminate all of those folks who had 

made that increased contribution. 

I believe that we have to look at Federal employee pay and contributions in that context, and if this committee wants to just look 

at its $6.2 billion and whacking at Federal employees, that is one 

thing, but a solution to this problem would be to tell the people 

that I represent that we want $833 million more, and I can tell 

you, we can get that and a heck of a lot more and solve this problem and allow Federal employees to be paid what they ought to be 

paid. 

Mr. MICA. Well, again, I thank you. What I would like to do is 

give Mr. Holden an opportunity to question, and maybe you can 

relay some of your additional comments, but still I am very sincere 

about hearing your recommendations. Mr. Holden, you are recognized. 

Mr. HOLDEN. Thank you, Mr. Chairman. I want to thank the 

panel for their testimony today. 

A couple of you have testified that the Federal employees and re- tirees have contributed more than $220 billion over the last 20 

years toward deficit reduction through cuts in their pay and benefits. I believe, Mr. Tobias, you gave a few examples. I am just wondering if you could give me a detailed explanation of the actions 

taken by the Congress or past or present administrations to 

produce that result. 

Mr. TOBIAS. The $220 billion is based on a GAO report updated 

by the Federal Employee Task Force. It is a very, very detailed 

amount, and I will be happy to submit it to you and submit it for 

the record. 

Mr. HOLDEN. I would appreciate that. What evidence is there 

that the lack of pay comparability has hampered our efforts to recruit and maintain a competent workforce? 

Mr. TOBIAS. The evidence is quite ample. I think that Mr. Styles 

mentioned the fact that do you recommend Federal employment to 

your children, and the answer is, no, you do not. And when you ask 

people, when you look at the people who go to colleges and you ask 

college students, ‘‘Are you going to apply to the Federal Government for a job?’’ the answer is no. When you look at the age of the 

workforce, you see it aging every year. New people are not attracted to the Federal workforce. 

So I think that all the objective evidence shows that the Federal 

Government is not competitive. 

77

Mr. HOLDEN. Anyone else? 

Mr. STYLES. Yes, sir. In fact, he gave me another thought as I 

was coming across this one here. One is the hollow workforce that 

we are creating, quite frankly. You are losing people at the top. 

You are down sizing in such a dramatic fashion that you are forcing people out at the bottom. So the average age of the Federal 

workforce is rising over time. And not to belabor that, but what 

this does to our workforce is as that again workforce leaves, you 

have nobody with the experience and knowledge to take their place. 

OK? You have not had that ability to train people over time to take 

the higher positions. 

A second part that you talked about, you mentioned schools. One 

of the things that we have done in our organization is we have 

tried to get out and get involved in the communities so that we can 

show the communities, especially the colleges, that we are a viable 

workforce and we are a career to be chosen by students in colleges. 

The Federal Managers Association itself has given to scholarship 

programs. We have been part of the building of universities themselves and give plaques, even a plaque to say ‘‘The Federal Managers Association’’ to represent all of us in the Federal Government. That is how bad things are. People do not look to the Federal 

Government as an employer; only as a last resort of employment. 

Mr. HOLDEN. Mr. Cunningham, anything to add? 

Mr. CUNNINGHAM. Well, the only thing that comes to my mind, 

Congressman, is I was president of a St. Louis local, and we experienced a BRAC action there, and as president, the local news media 

there in St. Louis came to the house, and they were interviewing 

my family and I and trying to get, you know, our reaction to the 

bad news, and they started with me, you know, and we would go 

through all this. 

And they get to my 22-year-old son, and they say, well, your dad 

says he loves his job, although he is going through all these problems, and his father, or your grandfather, is a retired Federal employee. Do you plan on following in his footsteps? And he said, not 

unless my dad can clean it up. 

And that is basically the way he and his sister, my daughter, 

feel. There is an honorable thing about coming in and serving your 

country as a civilian, but the way that we treat our own workers 

today, it makes people take a second look at it, absolutely. 

Mr. HOLDEN. Mr. Cunningham, you made a reference to ‘‘silent 

RIFs’’ that would likely result from increasing agency retirement 

contributions. RIFs are already occurring at agencies as a consequence of planned down sizing. What, if any, special problems 

would be caused by these silent RIFs? 

Mr. STYLES. I can jump at that, if you would like. 

Mr. CUNNINGHAM. Please do. 

Mr. STYLES. OK. Silent RIF. I have to say this. I am very proud 

of the term because I think I invented it. I was sitting on the base 

one day with my colonel, and the colonel was starting to look at 

his FTEs and the dollars and all this kind of stuff, and how am 

I going to pay these people. They have given me the slots, but they 

have not given me the money to pay the people. 

Now, if the agency is not funded fully for the mission requirements, there is no way they can pay their people, so when you talk 

78

about an additional funding from the agencies, if it is not allocated 

to them in the first place, they have to look elsewhere for the savings; and what they do is force people out, not with a stated RIF, 

but if you want to call it ‘‘management to payroll,’’ we can call it 

that, if you will. 

But that is what the silent RIF is about, not being funded at the 

level your mission requires you being funded. 

Mr. CUNNINGHAM. Now, one of the biggest outgrowths you are 

going to get from this is whenever they go in, they cross-level an 

agency, you leave a lot of holes in your department-wide, from department to department. It leaves an agency handicapped in that 

sense for your skills mix. 

Mr. HOLDEN. Mr. Jackson, you made reference to how much 

money the color of the label costs the average retiree. Did you say 

$700—what did you say, sir, $700—— Mr. JACKSON. Over a 5-year period. 

Mr. HOLDEN. $700-and-some over a 5-year period. How much 

money will the increased employee contribution take out of the 

pocket of the average Federal employee? 

Mr. TOBIAS. Well, the average Federal employee is about $42,000, so 1.5 percent times that times five. I am not quick 

enough to answer your question. 

Mr. STYLES. I would believe, though, that we could find out that 

information for you and provide it to you, sir. 

Mr. HOLDEN. OK. Thank you, Mr. Chairman. 

Mr. STYLES. If I might, I wanted to answer one of the questions 

earlier, and it was, how are we going to find some savings? And 

the $108 billion in contracting out came up—Mr. Cunningham 

brought it up—and it is also in my testimony that I proposed, not 

what I gave from the floor here. But H.R. 1409, which was introduced by Delegate Eleanor Holmes-Norton in the 104th Congress, 

was to reduce the $108 billion the Federal Government spends annually on contracting out for services in order to fully fund civil 

service pay adjustments. 

Now, I would point to this $108 billion in the way that Mr. 

Cunningham did. We do not know how much money we spend on 

contracting out. We do not know how many people work for the 

Federal Government. And I say this to you, it might sound strange 

to say. We could say that there are 2 million people working for 

the Federal Government, but, in fact, everyone who is a contractor 

works for the Federal Government, and they are paid by the Federal Government and out of the taxpayer’s pocket. 

There are anywhere from 8 million on up Federal employees, if 

you will. The people that work for Hughes Aircraft, General Dynamics, all of these corporations that work for the Federal Government through contracts are paid by the American people; and every 

time we talk about moving things from the public sector to the private sector, we give the impression to the American people that we 

are shrinking the size of Government when, in fact, we are moving 

it across to the other sector being paid out of the same pot. 

The Federal Government has not shrunk. We may have lost more 

Federal employees on the one side, but we have gained them on the 

private sector side. And one of the things that really bothers us, 

the folks sitting at this table, is the fact that invariably we have 

79

seen people underbid to get our jobs and then escalate the costs, 

and there is nobody tracking those costs. And we have come many 

times before Congress and asked to put some mechanism in place 

to track the costs of contracting out and to see where escalation is. 

There is a good place to save some money, I do believe. 

Mr. MICA. Well, thank you, Mr. Holden. All right. Gentlemen of 

the panel and the organizations you represent and others that are 

out there, I am still going to challenge you and ask you to come 

forward with some ways in which we can provide better benefits 

to our Federal employees, health care benefits, retirement benefits, 

and to come up with some other ideas of savings. Now, Mr. 

Cunningham has recommended one in looking at contracts, but I 

think we have got to look at some of these fundamental problems. 

Two years ago, I proposed an alternative relating to capping the 

amount of Federal payment at the 1995 level adjusted for inflation 

in FEHBP. And I asked Jim King, the director, to calculate what 

that would have done, my original proposal. And I will give each 

of you a letter that I received January 10, 1997 that said, we would 

have saved $820 million in health-premium benefits during the 

past 2 years, and this would have put $200 back into the pockets 

of FEHBP enrollees. So this is the kind of suggestion that I am 

looking for that result in some benefit to our employees and some 

benefit to the employer, which is the Federal Government. 

The second area that we are facing a crisis in, and I keep bringing this up before us, and this is not just a hearing on this issue, 

but it is one we have to face. And I will provide each of you with 

this cash-flow of CSRDF, which was presented to me, this latest 

cash-flow. And it shows, in 1977—and I should correct my opening 

statement. The $24 billion net outlay from the Treasury was in 

1992. In 1997, that grossed $37 billion. That is net outlay. The 

total outlay is $41 billion in 1997, and the amount of employee contribution is $4.8 billion. The agency contribution is $11 billion. 

Now, to tell you how bad this problem gets and that we need to 

be anticipating it, this year it is only $30 billion anticipated in net 

outlays. And I know we can look at CSRS, they can come back and 

tell me that there is no problem with funding as long as the Federal Government continues pouring money out of the general treasury into it. In 20 years, this amount grows to the net outlay of 

$107 billion. That is equal to the entire deficit that we ran up last 

year. 

And the figures get even worse beyond that. We have Federal retirees living longer. We have fewer contributing. You testified we 

have a smaller force, so this is going to create a problem. There are 

no funds in the trust fund that can be invested in what I consider 

alternative methods, which would provide, or could provide, a better retirement benefit. We do not have enough options, in my opinion, at this point for our Federal retirees. 

So we have a couple of areas we could look at. I solicit, within 

the next few weeks, your hard, concrete proposals. I cannot go to 

Mr. Kasich and just say no. We have done that. We tried that before, and we have punted from the subcommittee, and the results 

were not what I like. So, I am asking you all to work with us and 

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provements that we can make. And I know they are there, and I 

know you know some of them. Mr. Tobias. 

Mr. TOBIAS. I was just going to say, Mr. Chairman, I am very 

concerned about this idea of saving $800 million over the last 2 

years because over the last 9 years, if we had the proposal which 

would limit increases to inflation, it would have cost 37 percent, or 

$80 a month, over the last 9 years. I think that we may have had 

over the last 2 years significant savings, but people who come to 

the Federal Government as a career are not looking at 2 years; 

they are looking at a life time, and so over the last 9 years it would 

have been significantly more costly to have that kind of a system. 

And, second, I would say that when we calculate the numbers 

that you cite, $30 billion and $107 billion, and so forth, I think it 

somewhat masks the fact that we have two systems in the Federal 

Government: the CSRS system, where the workforce is aging and 

the system is going out of business; and the FERS system, which 

is a private-sector plan which is virtually self-funding. 

So the idea that the ever-increasing numbers of FERS participants would be required through increased contributions to be 

funding the CSRS system I think is contrary to what Congress 

promised in 1986 and contrary to what makes good sense for the 

FERS employees. So I am certainly sympathetic to what you say 

about trying to find savings, but I would hope that the statements 

about bipartisanship would, in fact, yield a bipartisan just say no, 

because last year there was not any agreement on the committee, 

and the full Budget Committee acted. 

If there could be agreement on this committee, I think that it 

would be seen in a quite different light than what occurred last 

year. 

Mr. MICA. Thank you. Mr. Styles, did you want to comment? 

Mr. STYLES. The comment I would like, perhaps if we are getting 

ready to close, is this. I thank you for your challenge, and I thank 

you and the committee for your real dedication to solving this problem. I do believe that we have problems that exist, and we are not 

going to get around it. We have to work together to solve them, and 

our association, and I am sure the folks at this table, will work in 

partnership with you to do exactly that. Thank you. 

Mr. MICA. Mr. Jackson. 

Mr. JACKSON. Mr. Chairman, we want to work with you in the 

committee, but I can tell you that it is very, very difficult to make 

a recommendation to a committee when we, in effect, are the only 

single group, that we are being asked to contribute $1.5 billion to 

this, and we are the only group of senior citizens that are singled 

out. And yet this committee, or you, would suggest that we come 

forward in helping you in solving this problem. 

If we are going to contribute $1.5 billion, I think we have helped 

solve the problem. I do not agree with the problem, and I certainly 

take exception to it, and I can tell you that probably in the 3 years 

that I have been sitting at my desk, I have received, since this proposal was submitted by the President, more vicious language crossing my desk over this proposal than anything that has happened 

in my administration. 

81

The members, the people that devoted their lives to the Federal 

Government, they not only dislike it, that it is discrimination, but 

they are angry, and I mean they are really angry. 

So we certainly will help you in any way that we can, but I think 

that every time, as I said before, every time in the past 10 years 

that we have come before the committee and made recommendations or attempted to work, we still ended up with the cuts, and 

that is hard to take. If you make a recommendation in sincerity, 

then somewhere along the line we have to be considered also. 

Mr. MICA. Thank you, Mr. Jackson. As I said in my opening 

statement, I think two of these proposals are blatantly unfair. One 

is singling out Federal retirees. The other that I cannot find a justification for is imposing this additional contribution on postal 

folks; and we are going to hear from them in a few minutes here. 

But, again, our charge is to look at what the President and this administration has proposed today, and then if we can work with the 

Budget Committee and try to achieve something that protects our 

Federal employees. And if there is not a justification for them to 

contribute additionally to retirement, or that cannot be fenced off, 

as I have advocated, then we will just say no. 

But if I can come forward with any positive suggestions that you 

have it will help us with both the Budget Committee and the administration. 

Finally, Mr. Cunningham. 

Mr. CUNNINGHAM. Also, NFFE looks forward to offering some 

proposals for you to consider. We will get to work on that just as 

soon as we leave here. 

Mr. MICA. Well, I was going to dismiss you all. I understand Mr. 

Waxman wanted to ask a question, and he is on his way over here, 

so I want to extend that courtesy to him. In the meantime, I do 

want to thank you again. 

The way we ran the subcommittee the past 2 years is to try to 

seek input from all organizations and individuals. Today, I will also 

leave the record open for at least 2 weeks, so that if you have additional comments, suggestions, recommendations, whether you are 

on the panel or outside the panel, we will welcome them and make 

them a part of the record. I want to now give an opportunity to the 

ranking member of the full committee to offer some questions. We 

have Mr. Tobias, Mr. Styles, Mr. Jackson, Mr. Cunningham representing these organizations. Mr. Waxman, you are recognized, 

sir. 

Mr. WAXMAN. Thank you very much, Mr. Chairman. I want to 

commend you for holding this hearing. It is important that we look 

at the various budget alternatives. We are all trying to figure out 

how to balance the budget, but it is my belief that Federal employees have done enough in terms of balancing this budget. 

I think we ought to look at eliminating a lot of the corporate welfare that still exists, we should eliminate waste, fraud, and abuse 

where they may exist, and take on some of the bigger issues where 

our budget is out of control. I do not think it is fair to go to the 

public employees, who have already sacrificed, and ask them to 

sacrifice more. I certainly do not think it is fair to ask them to be 

treated differently in terms of their COLA increases than those 

who are on Social Security or those who are on any other program. 

82

I am sorry that I was not here for the testimony that you have 

given orally and will not be able to stay here, but I have had a 

chance to review it. I think the testimony you have given us in this 

hearing is a point of view that I strongly want to identify myself 

with. 

Thank you very much, Mr. Chairman. 

Mr. MICA. Thank you. Thank you for joining us, Mr. Waxman. 

I look forward to working with you in a bipartisan fashion. Some 

of the individuals on the panel have expressed similar comments 

today, and they have all indicated a willingness to work together 

in the months ahead, particularly as we tackle some of these tough 

budget questions. Do you have something else? 

Mr. WAXMAN. I did want to add the fact that our committee has 

a number of subcommittees meeting at the very same time. I am 

right now participating in a hearing on the Superfund issue, so I 

am going to have to excuse myself. I did want to come in here and 

make this comment. And to you, Mr. Chairman, I want to pledge 

to work with you in a bipartisan way, so that we can deal with the 

matters before us. 

Mr. MICA. Thank you, and I look forward to joining you on the 

Superfund panel shortly. 

Well, I do want to thank you for participating. This is an open 

panel, and if you have got positive suggestions, we will work with 

you in the best interests of our Federal employees and our Federal 

retirees. Thank you, and you are excused. 

I would like to call our next panel. We have two witnesses, Hugh 

Bates, who is president of the National Association of Postmasters 

of the United States; and Mr. William Brennan, president of the 

National League of Postmasters. We have asked them to join us 

today and talk about the impact of the President’s budget on their 

employees. And, gentlemen, as you know, this is an investigation. 

It is an oversight subcommittee. It is our custom to swear in our 

witnesses, so if you would stand and raise your right hand. 

[Witnesses sworn.] 

Mr. MICA. And I think the witnesses have also complied with the 

House Rule XI and Committee Rule 12, and I would like to welcome you today. Also, I think you heard the instructions that we 

will submit lengthy testimony for the record and hope that you can 

summarize your comments so we will have an opportunity for questions. We have had people coming and going, as you have heard 

today. There are some simultaneously conducted hearings this 

morning. 

Welcome, Mr. Bates. You are recognized. 

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

Mr. BATES. Thank you, Mr. Chairman. My name is Hugh Bates. 

I am permanently assigned as Postmaster at Clanton, AL. That is 

a community of about 8,000 people in central Alabama. 

At the present time, I am on leave of absence from the Postal 

Service, serving here in the Washington, DC, area as national 

president of the National Association of Postmasters. I represent 

83

approximately 24,000 active Postmasters and 20,000 retired Postmasters, which makes up our Association. 

Before I entered into the Postal Service some 32 years ago, I also 

gave 4 years of my life that I was proud to do with the United 

States Marines and fought with those in Korea, so I have quite a 

long record in Government service, and I am proud of every day of 

it. I thought I could get by without my glasses. I am not going to 

make it. 

Mr. MICA. Go right ahead. 

Mr. BATES. Mr. Chairman, the National Association of Postmasters, first of all, we want to commend President Clinton for 

submitting to Congress the 1998 budget that boldly and responsibly addresses the needs of the American people while projecting 

a balanced Federal budget over the next 5 years. 

Let me assure you, the 44,000 people that I represent, we commend it, we commend this Congress, and we hope that you are able 

to balance the budget because we believe in it. We do not think 

that our children and our grandchildren should be burdened with 

debts that we incur and the interest that we have to pay, that they 

should have to pay those. So we hope that you are able and hope 

that we can help you some way to do it. 

We think in the Postal Service we have done our part. In 1995, 

we operated very efficiently and came out with a project of $1.8 billion-plus in the black. Last year, in 1996, we operated and come 

out in the black with $1.5 billion. I do not know of any other Federal agency that can say that. Maybe there is, but I have not heard 

of it. But I think we are on the right track to doing what we need 

to be doing. Not that I agree with everything that we do. However, 

we are on the right track. 

However, our organization, NAPUS, which is an acronym for the 

National Association of Postmasters, we cannot support a plan that 

will delay until April 1 of each year, from 1988 through 2002, the 

COLA payments to Federal and postal retirees and no delayed payment to individuals who receive Social Security with their military 

retirement benefits. 

NAPUS also believes it is wrong for the Federal Government to 

single out one group of Americans to contribute more in budget 

savings than others. 

The argument advanced by some that Federal and postal retirees 

can more easily afford the COLA delay than workers on Social Security is unfounded. While it is true that earned annuities of retired Federal and postal employees are generally larger than Social 

Security or military retirement benefits, it must be remembered 

that Federal employees currently pay 7 percent of every dollar they 

earn toward their Civil Service Retirement or their FERS retirement, while Social Security recipients pay for the calendar year, according to my estimation, on their first $65,400. 

The Fund for Assuring an Independent Retirement, with the acronym of ‘‘FAIR,’’ an organization of which NAPUS is a member, 

sent a letter to President Clinton on January 15, 1997, urging 

President Clinton not to include any further reductions in the 

earned compensation of our civil servants, our postal workers, and 

retirees in his 1988 budget recommendations. According to FAIR, 

84

during the previous 20 years, employee and retirement compensation had been reduced by $200 billion for deficit reduction. 

The proposed delay in COLA payments would cost Federal and postal retirees an estimated $14.2 billion over 5 years. If Congress 

accepts the report of a special commission that the Consumer Price 

Index overstates inflation by as much as 1.1 percent, Federal and 

postal retirees would have their COLA further reduced. How long 

can we expect the Federal Government to be balanced on the back 

of its dedicated and loyal workforce? 

Mr. Chairman, NAPUS respectfully urges the Congress to support the sense-of-Congress resolution sponsored by Representative 

Connie Morella of Maryland that says the effective date for retiree 

COLAs should remain January 1 of each year. 

In addition, Mr. Chairman, NAPUS has received no Federal 

grants, and no contracts have been awarded to this organization in 

the past 2 years. I would also like to say that the Federal Government or the Postal Service receives no contributions from Congress 

other than that for blind people, schools, and libraries, revenue 

foregone. Other than that, we receive no contribution from Congress, and we are paying our own way at the present time. 

Thank you for inviting NAPUS to share its views on how the 

President’s fiscal-year budget would impact Federal and postal employees and retirees. We urge you to remember our concern that 

the administration’s budget plan moves through Congress. 

This concludes my remarks, but I will be glad to answer any 

questions that I might. Thank you. 

[The prepared statement of Mr. Bates follows:]

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Mr. MICA. Thank you, Mr. Bates. I would like to welcome William Brennan. Mr. Brennan, you are recognized. 

Mr. BRENNAN. Thank you, Mr. Chairman. I am Bill Brennan, 

president of the National League of Postmasters. On behalf of 

America’s active and retired Postmasters and other postal managers and Federal employees whose interests are represented by 

the National League of Postmasters, I thank you for inviting me 

here to comment on that portion of the President’s budget proposal 

which includes the Civil Service Retirement benefits. 

I believe these proposals are fairly identical to those proposed 

last year by the Senate and the administration. Our Postmasters 

serve in every corner of this country on every day of the week. 

While their jobs can be very demanding, they are proud of the work 

they do and of their important role in providing public service. I 

believe that it is time for elected officials on both ends of Pennsylvania Avenue to acknowledge the contribution of these civil servants and to stop using them as a possible source of funds for every 

new budget-balancing effort. 

While most of the compensation package for Postmasters is determined through consultation with the Postal Service rather than 

being set by Congress, as is the case for most other agencies, our 

retirement and health benefits remain part of the same program 

serving all Federal civil servants. 

It has become an annual exercise here in Washington to suggest 

using Federal retirement programs as a way to help balance the 

budget. Postal employees and other civil servants may tire of this 

exercise, by they have come to expect it. 

So as we begin another budget-making session, I want to be very 

clear that the League continues to oppose the singling out of civil 

servants to carry the load. We continue to oppose attempts to modify the Civil Service Retirement System and FERS, which would result in reduced benefits. We believe that the current Federal retirement plans are as much a part of the employee’s compensation 

package as the agreed-upon wages, and we concur that the Supreme Court decision that defined Federal retirement as a form of 

deferred compensation for service was, in fact, appropriate. 

We go on record opposing the various proposals to reduce the retirement benefit in the name of deficit reductions or for other reasons. Those proposals that would mean going from the ‘‘high three’’

to the ‘‘high five,’’ raising the retirement age, increasing the employee contribution, and, of course, reducing or delaying retirees’

COLA. 

It is my understanding, and it has been said here many times 

this morning, that there are no similar proposals to delay COLAs 

for Social Security recipients or military retirees. Delayed COLAs 

are proposed for Federal postal civilian retirees only, and I ask 

why. 

In the past, various OBRAs required COLA delays in the name 

of reducing the deficit, and yet, after all of this sacrifice on the part 

of these people, the deficit still remains, and our elected officials 

want to again return to this group of retirees for more sacrifices. 

I would urge every member of the Government Reform and Oversight Committee to co-sponsor House Concurrent Resolution 13 

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that Congresswoman Morella has introduced. I think this is very 

appropriate, and I do commend her for introducing this. 

Now, asking for an increased contribution is much the same as 

creating a special tax on civil servants, but to seek an increased 

contribution from postal employees would be an even greater tax 

because it would place an extra burden on employees of an agency 

which has already made a contribution per person that is larger 

than any other Government agency. 

It is hard to use the usual excuse of the unfunded liability when 

asking for more money from the Postal Service. Asking more from 

us is selective taxation, and I guess in this case we would prefer 

not to be among the selected. 

Postal retirements do not contribute to the national debt. The 

Postal Service is required by law to make additional contributions 

which are not required of other agencies. Since 1974, the Postal 

Service has been required to pay over a 30-year period amounts to 

amortize any increase in the deferred liability resulting from an increase in pay on which retirement benefits and contributions are 

based. 

Also, the OBRA of 1990 requires Postal Service funding of the 

cost-of-living adjustment paid to all former employees of the Postal 

Service who retired since July 1, 1971, and their survivors. Because 

of these contributions, there are no unfunded liabilities for retirees 

of the Postal Service, and, therefore, no reason for the Postal Service employees to be included in this proposal. 

The League was disappointed to learn the executive branch had 

chosen to include proposals to delay COLAs and increase employee 

contributions in its recently released budget. We had requested 

that that section affecting Federal benefits be removed. Unfortunately, we were not heard. However, the League is willing to continue working with the administration to correct this inequity. 

Now, we are appealing to both political parties, to both Houses 

in the legislative branch to resist the temptation to place a special 

tax on Federal civil servants for the purpose of balancing the Federal budget. If sacrifices are required, all Americans should be 

asked to give in an equitable manner. 

You also requested a comment about the change in the health 

premiums, effective fiscal year 1999. I have asked our administrator of the health plan which we oversee, the Postmasters Benefit 

Plan, to give me some data on what he saw the impact to be. Mr. 

Chairman, he said that had that been in effect in 1996, he would 

expect that there would have been a 10 percent increase in the employees’ contribution toward their health insurance. Now, if that 

number remains consistent, we would anticipate that that also 

would be the status we would find when we reach 1999. 

We view this as improper and unfair and would ask that some 

action be taken to negate the impact of that change that is coming 

up. 

Mr. Chairman, I thank you for this opportunity to present our 

position on the important issues. As always, I look forward to 

working with you and your staff, and your committee, to find solutions to these problems. With that, I would entertain any questions 

that you may have. 

[The prepared statement of Mr. Brennan follows:]

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Mr. MICA. Thank you, Mr. Brennan and Mr. Bates. I just told the 

staff we have had all male witnesses today. We ought to be able 

to find some female witnesses from these organizations, so I am 

going to make a specific request in the future, there has got to be 

some equity in this. But, Mr. Brennan and Mr. Bates, I agree with 

you that there is no real reason to require a postal community to 

contribute more to the retirement fund. 

I have held up here for the former panel this chart that shows 

the cash-flow into the retirement fund, and it, in fact, shows that 

these OPM figures show that in fiscal year 1997 the postal community will contribute 54 percent of that cash-flow. By 2015, that will 

increase to 81 percent. More importantly, these contributions equal 

the full normal cost of retirement as computed by OPM actuaries. 

Together, the postal workers and the Postal Service are already 

paying, in my opinion, and according to these tables, their fair 

share. 

[The information referred to follows:]

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Mr. MICA. This is why, in the last Congress, as you will recall, 

I steadfastly opposed increasing the contributions from postal 

workers, and I am pleased to see that Moe Biller, the head of the 

American Postal Workers Union, recognized it in his statement for 

the record, and let me quote him: ‘‘In fact, in the tax-cut bill of the 

104th Congress, postal workers were specifically excluded from the 

proposal to increase contributions to the retirement system.’’ [The prepared statement of Mr. Biller follows:]

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Mr. MICA. Mr. Brennan and Mr. Bates, perhaps one of you can 

answer a question that has puzzled me for some time. Why did the 

postal unions and employee groups agree to have their members 

saddled with the unnecessary hikes that were proposed as part of 

the Stevens plan, if you will recall, in negotiations with the Senate? 

Mr. Bates. 

Mr. BATES. My understanding was that at that time there was 

a proposal to increase our retirement years from the ‘‘high five’’ to 

the ‘‘high three’’ and to budget out or to balance out or whatever 

you want to call it that it was agreed by many that if we would 

take a one-half-percent raise, then it would stay at the ‘‘high three’’

rather than the ‘‘high five,’’ and it was felt like that while we were 

working, if we had a choice between the two, that we could afford 

to pay the one-half of 1 percent while we were working so that it 

would not affect our retirement and make it much less when we 

did retire. That is about the only reason I can give on it. 

Mr. MICA. Mr. Brennan. 

Mr. BRENNAN. I would concur with that, that similar to what you 

said to the earlier panel today, that you are looking for $6.5 billion, 

and it has to come from somebody, so it came down to a point last 

year, what is the least offensive option? If something has to happen, what is the least offensive? Given our druthers, no, of course 

not, they would not want to be involved. But it is like saying, 

which of your children do you—if you have to get rid of one, which 

one do you get rid of? Tough choices, hopefully choices no one will 

ever have to make. 

Mr. MICA. Well, I am hoping that we do not have to get rid of 

any of our children this time around. 

I offer to you the same suggestions and opportunity that I offered 

the previous panel, if you have any recommendations for savings. 

I think, Mr. Bates, in your testimony, you pointed out how the 

Postal Service is running surpluses and in a positive vein. 

Unfortunately, in the President’s proposal, you get hit twice unfairly, once in the increased employee contributions, for which 

there is no basis because your plan is funded, and we do have some 

tangible assets there. You are not part of the problem, and you 

should not be asked to pay for the problem. 

The second great disparity is that with Federal retirees, and you 

are also lumped into that with all other Federal retirees for a 

delay, which I view as totally unfair in singling out Federal employees, whether they be postal or other Federal employees. But, 

again, I will ask you, do you have any other recommendations that 

could come from within our jurisdiction? 

Now, you know, we can talk about corporate welfare and we can 

talk about the tax cuts and we can talk about all those other 

things, but is there anything you can recommend to the committee—and it does not have to be now; you can submit it later to 

us—that we can present to Mr. Kasich and the Budget Committee 

or the administration to counter their proposals? Recomendations 

that say, these are some things that we can do to increase benefits, 

to bring down costs for our employees, and costs for the government. Do you have any suggestions today, Mr. Bates or Mr. Brennan? Mr. Bates. 

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Mr. BATES. Today, I do not; and I think I could have in the next 

2 weeks because I have 900 Postmasters coming into Washington 

starting Saturday. They will be here for a week, what we call our 

Annual Leadership Conference. It is our leaders from across all 50 

States. I am sure that some of those people are going to be able 

to give me something that I can bring back to you; but, today, no, 

I do not have any. 

Mr. MICA. OK. Mr. Brennan. 

Mr. BRENNAN. The followup that has been suggested earlier, and 

it is one of the things on my proposed list, is the contracting-out 

costs. They are running wild every place, including in the Postal 

Service. It is a way to transfer a cost from an employee cost over 

to another line. Yet, the total cost is there. 

Other things perhaps might be to combine some of the jurisdictions for Federal retirement, military retirement, and Social Security instead of treating each one totally separate, each committee 

or subcommittee addressing each of these things totally independent, try to make some commonality in how you approach 

things such as deferred-COLA increase, whatever it happens to be. 

It is tough to provide better benefits and still come up with a 

savings. It is tough to even maintain benefits and come up with a 

savings. And given the fact that particularly in the Civil Service 

Retirement System, as that base of people paying in dries up and 

in less than 50 percent of the Federal employees now, the income 

to that program is going to continue to drop. And, yes, for some out 

years the expenses of that will continue up. But at some point in 

time, then it will cycle back down as people have left that system 

permanently. 

But we will also look at things. We have people coming in for our 

legislative conference the week after Mr. Bates’ group, and some of 

them will be calling on you and your members, as I believe you will 

all be back in session; and, hopefully, we will have some thoughts 

for you. 

Mr. MICA. Thank you. Just for the record, and I think you alluded to it in your testimony, our calculations indicate, in fact, that 

the additional contribution imposed on postal employees would result in an overfunding of that account or that those funds would 

be used to offset some of the costs for other Federal employees. Is 

that your basic take on this, Mr. Brennan? 

Mr. BRENNAN. Yes. I think that every imaginable way of determining that the Postal Service has had a shortfall in funding retirements has been computed and assessed and paid. Now, unless 

there is something else out there that is going to come down the 

pike in the next year or so, I would think that we have our bill 

paid in full and perhaps even an advance payment. 

Mr. MICA. Mr. Bates. 

Mr. BATES. No, sir, I do not have anything else. 

Mr. MICA. The other area that is of interest to me is bringing 

down the cost of health care, both for postal workers and all Federal employees. The cost to the Federal Government or the Postal 

Service and the cost of the premium payer. I would welcome any 

suggestions or recommendations you have. I have thrown out several suggestions. One, I felt, at least for the 2 years since I have 

been here, is reduce some of the payments and premiums for our 

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Federal employees. Another is looking at some options, MSAs and 

other avenues. 

So if you have any recommendations in that regard or any other 

alternatives to encourage individual retirement savings and opportunities, I would like to hear from you on that. Do you have any 

comment, Mr. Brennan? 

Mr. BRENNAN. Your position on the Medical Savings Accounts is 

well known to me, at least, and I am not sure that I totally agree 

with it. I think that the real answer is to control the costs that the 

providers of our medical benefits charge each and every one of us. 

In doing so, you would tend to drive down the rates. 

In trying to reduce the Government cost, if that is the proper 

term to use, in terms of payments to the employees for their medical insurance, the thing that we fear is that the young, healthy 

employee will use that like a savings account or a bank account, 

and he or she will not bother to provide themselves with the real 

medical insurance that they might need. You know, when you are 

young, you are invincible and nothing is ever going to happen to 

you, and as you get older, you find all these things start to happen 

to you. 

So we find that perhaps those people will not take a very healthy 

level of insurance and that the plans out there will be unduly burdened with a disproportionate number of folks who have higher 

medical needs, which in turn will drive their premium up. How you 

get around that, I do not know. 

Mr. MICA. The hearing that we held and the testimony that we 

took in indicated just the opposite: that, in fact, young people—who 

are healthier and have less disposable income—tend to ignore covering themselves with insurance because the premiums are high; 

and if they had options where there was a lower premium and 

some catastrophic coverage, they, in fact, are more likely to pick up 

both. That comes from the private sector and public sector experience that we looked at. 

But high premiums are forcing young people out of the market 

and hurting folks, and there is no indication that there is a cherrypicking that we can see from the experience. Of course, we will see 

from some of these demonstration projects how that works on a 

broader scale, but I am open to other suggestions and other retirement options or opportunities for our folks and welcome them. 

Mr. Bates, did you have anything? 

Mr. BATES. No, sir. 

Mr. MICA. Well, I want to thank both of you gentlemen for testifying today. I am hoping that the postal community, and you represent some folks who are Federal postal employees, does not cave 

to some of the President’s proposals at this juncture. I think that 

there is some inequity proposed. We are all trying to get to the 

same point, a balanced budget, but I think that we need to look for 

the most effective way we can do it without hurting our employees 

and, particularly, the retirees who this will probably impact the 

most. 

But I appreciate your testimony, and I look forward to any other 

comments and suggestions that you have in the coming weeks. 

And, as I said, the record will remain open. 

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If there is no further business to come before the subcommittee 

this morning, I will adjourn this meeting. Thank you. 

[Whereupon, at 11:25 a.m., the subcommittee was adjourned.] 

[Additional information submitted for the hearing record follows:]

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