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FEDERAL PAY POLICIES AND ADMINISTRATION

HEARING

BEFORE THE

SUBCOMMITTEE ON FEDERAL WORKFORCE,

POSTAL SERVICE, AND THE DISTRICT

OF COLUMBIA

OF THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

JULY 31, 2007

Serial No. 110–151

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

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

http://www.house.gov/reform

(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

HENRY A. WAXMAN, California, Chairman

TOM LANTOS, California

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

BRIAN HIGGINS, New York

JOHN A. YARMUTH, Kentucky

BRUCE L. BRALEY, Iowa

ELEANOR HOLMES NORTON, District of

Columbia

BETTY MCCOLLUM, Minnesota

JIM COOPER, Tennessee

CHRIS VAN HOLLEN, Maryland

PAUL W. HODES, New Hampshire

CHRISTOPHER S. MURPHY, Connecticut

JOHN P. SARBANES, Maryland

PETER WELCH, Vermont

TOM DAVIS, Virginia

DAN BURTON, Indiana

CHRISTOPHER SHAYS, Connecticut

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

MARK E. SOUDER, Indiana

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

JOHN J. DUNCAN, JR., Tennessee

MICHAEL R. TURNER, Ohio

DARRELL E. ISSA, California

KENNY MARCHANT, Texas

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

VIRGINIA FOXX, North Carolina

BRIAN P. BILBRAY, California

BILL SALI, Idaho

JIM JORDAN, Ohio

PHIL SCHILIRO, Chief of Staff

PHIL BARNETT, Staff Director

EARLEY GREEN, Chief Clerk

DAVID MARIN, Minority Staff Director

SUBCOMMITTEE ON FEDERAL WORKFORCE, POSTAL SERVICE, AND THE DISTRICT OF

COLUMBIA

DANNY K. DAVIS, Illinois

ELEANOR HOLMES NORTON, District of

Columbia

JOHN P. SARBANES, Maryland

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio, Chairman

WM. LACY CLAY, Missouri

STEPHEN F. LYNCH, Massachusetts

KENNY MARCHANT, Texas

JOHN M. MCHUGH, NEW YORK

JOHN L. MICA, Florida

DARRELL E. ISSA, California

JIM JORDAN, Ohio

TANIA SHAND, Staff Director

(III)

C O N T E N T S

Page

Hearing held on July 31, 2007 ............................................................................... 1

Statement of:

Faleomavaega, Hon. Eni F.H., a Delegate in Congress from American

Samoa; and Hon. Patrick J. Kennedy, a Representative in Congress

from the State of Rhode Island .................................................................... 42

Faleomavaega, Hon. Eni F.H. .................................................................. 42

Kennedy, Hon. Patrick J. .......................................................................... 43

Kelley, Colleen, National president, National Treasury Employee Union;

J. David Cox, National secretary-treasurer, American Federation of

Government Employees; and Curtis Copeland, Congressional Research

Service ............................................................................................................ 62

Copeland, Curtis ........................................................................................ 95

Cox, J. David ............................................................................................. 76

Kelley, Colleen ........................................................................................... 62

Springer, Linda, Director, Office of Personnel Management, accompanied

by Nancy Kichak, Assistant Director, Strategic Human Resource Policy,

Office of Personnel Management ................................................................. 49

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

Copeland, Curtis, Congressional Research Service, prepared statement

of ..................................................................................................................... 97

Cox, J. David, National secretary-treasurer, American Federation of Government Employees; and Curtis Copeland, Congressional Research

Service, prepared statement of .................................................................... 78

Davis, Hon. Danny K., a Representative in Congress from the State

of Illinois:

Prepared statement of ............................................................................... 3

Various prepared statements ................................................................... 6

Kelley, Colleen, National president, National Treasury Employee Union,

prepared statement of ................................................................................... 65

Kennedy, Hon. Patrick J., a Representative in Congress from the State

of Rhode Island, prepared statement of ...................................................... 45

Springer, Linda, Director, Office of Personnel Management, prepared

statement of ................................................................................................... 51

(1)

FEDERAL PAY POLICIES AND

ADMINISTRATION

TUESDAY, JULY 31, 2007

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON FEDERAL WORKFORCE, POSTAL

SERVICE, AND THE DISTRICT OF COLUMBIA, COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, Washington, DC.

The subcommittee met, pursuant to notice, at 3:30 p.m. in room

2154, Rayburn House Office Building, Hon. Danny K. Davis (chairman of the subcommittee) presiding.

Present: Representatives Davis of Illinois, Sarbanes, Lynch, and

Marchant.

Staff present: Tania Shand, staff director; Caleb Gilchrist, professional staff member; Lori Hayman, counsel; Cecelia Morton, clerk;

Ashley Buxton, intern; and Alex Cooper, minority professional staff

member.

Mr. DAVIS OF ILLINOIS. I call the subcommittee to order and

thank all of you who have been inconvenienced.

Given the fact that this is the last week before our proposed

summer recess, lots of things are going on, and schedules are being

changed, and there is a strong effort to get as many things done

before the end of Friday as we possibly can. As a matter of fact,

we passed so many bills yesterday until I couldn’t keep count of

them, so nobody can suggest that this Congress is not working. As

a matter of fact, it is working, and working well.

Welcome Ranking Member Marchant, members of the subcommittee, hearing witnesses, and all of those in attendance. Welcome to the Subcommittee on Federal Workforce, Postal Service,

and the District of Columbia hearing on Federal Pay Policies and

Administration.

Hearing no objection, the Chair, ranking member, and subcommittee members will each have 5 minutes to make opening

statements, and all Members will have 3 days to submit statements for the record.

I know that my ranking member is on the way and will be here,

so I will just go ahead, and if he comes and wishes to have an

opening statement we will make arrangements for that to happen.

Welcome Ranking Member Marchant, members of the subcommittee, hearing witnesses, and all of those in attendance. More

than 100 Federal agencies employ about 2.7 million civilian workers, approximately 2 percent of the total U.S. work force, in jobs

representing more than 800 occupations. In March 2007 the Congressional Budget Office issued a report entitled Characteristics

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and Pay of Federal Civilian Employees. The report examined a subset of the civilian work force, approximately 1.4 million salaried

workers, not including the employees of the Postal Service, who fill

full-time, permanent positions in the executive branch.

The report states that, while there is a common view that the

Federal Government is a monolithic employer with a standard pay

schedule and hiring rules, Federal agencies, through current laws,

executive orders, and regulations, have been granted considerable

latitude in hiring and setting pay. This hearing is being held to examine the Federal Government’s wide range of pay and administration policies.

Federal agencies compete with one another for talent. From 2001

to 2005, more than 50,000 employees transferred from one agency

to another. While these employees saw their basic pay rise about

$1,800, there is some concern that, as the Federal Government’s

pay system becomes more fragmented, it will make it more difficult

for employees to transfer from one agency to another.

Furthermore, this subcommittee has much to learn about how

pay is established in the Federal Government and what roles the

Bureau of Labor Statistics, the Federal Salary Council, and the

Federal Prevailing Rate Advisory Committee play in setting pay.

We need to know more about agencies’ experience with pay for performance systems and market-based compensation studies. These

issues are critical as the Federal Government seeks to recruit and

retain a quality work force.

This hearing is the first step in examining Federal pay issues.

Future hearings will take a more focused look at pay compression,

pay for performance systems, and market-based compensation

studies. Today’s witnesses will help set the foundation for those

hearings.

[The prepared statement of Hon. Danny K. Davis follows:]

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Mr. DAVIS OF ILLINOIS. I would like to ask unanimous consent

that the statements of Representative Barney Frank, who could not

be here today due to a full committee markup he had to chair; Representative Luis Fortun ̃ o; the Senior Executive Association; and the

Forum of U.S. Administrative Law Judges be submitted for the

record. Hearing no objection, that will be the order.

[The prepared statements of Hon. Barney Frank, Hon. Luis G.

Fortun ̃ o, the Senior Executive Association, and the Forum of U.S.

Administrative Law Judges follow:]

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Mr. DAVIS OF ILLINOIS. We are, indeed, fortunate that we have

some distinguished witnesses here. Before I swear them in, I will

just indicate who they are. Even though they have been sworn as

Members of Congress, let me just indicate that our first panel is

the Honorable Eni Faleomavaega, the Congressional Delegate representing American Samoa. Delegate Faleomavaega served as a

staff counsel for the House Committee on Interior and Insular Affairs from 1975 to 1981, and as Deputy Attorney General for the

Territory of American Samoa from 1981 to 1984. Mr. Faleomavaega

was elected to the House of Representatives January 3, 1989.

The Honorable Patrick Kennedy is serving his seventh term in

Congress as the Representative from the 1st District of Rhode Island. Representative Kennedy was appointed to the House Appropriations Committee in December 1998, but requested a leave of

absence in order to fulfill a 2-year term as chairman of the Democratic Congressional Campaign Committee. Representative Kennedy now sits on the House Appropriations and Natural Resources

Committee.

Gentlemen, we thank you so very much for your presence. We

will begin with Delegate Faleomavaega. You may proceed.

STATEMENTS OF HON. ENI F.H. FALEOMAVAEGA, A DELEGATE

IN CONGRESS FROM AMERICAN SAMOA; AND HON. PATRICK

J. KENNEDY, A REPRESENTATIVE IN CONGRESS FROM THE

STATE OF RHODE ISLAND

STATEMENT OF HON. ENI F.H. FALEOMAVAEGA

Mr. FALEOMAVAEGA. Thank you, Mr. Chairman, for giving me

this opportunity to testify before you on an ongoing issue regarding

COLA practices that discriminate against Federal employees in my

District.

I am deeply concerned that Federal employees in my District do

not receive the non-foreign-area cost of living allowance that the

Office of Personnel Management provides in other non-foreign

areas in which Federal employees are eligible to receive additional

compensation.

As you know, Mr. Chairman, OPM is authorized to designate

places in non-foreign areas eligible to receive additional compensation by virtue of costs of living that are substantially higher than

in the Washington, DC, area. Federal statute provides authorization for COLA, and Executive Order 10,000 establishes two separate programs providing compensation in non-foreign areas, including COLA, based on higher costs and post-deferential pay as an incentive to work in non-foreign areas with extraordinarily different

difficult living conditions.

Regulations governing administration of the COLA program are

found in Title 5 of CFR Part 591.

Mr. Chairman, to determine eligibility for COLA and the rate of

COLA payment, OPM conducts price surveys for comparison with

prices in the base area of Washington, DC. Using these survey results, OPM has determined that Federal employees in all non-foreign areas except my District are eligible to receive COLA.

In response to a recent inquiry from my office seeking data to determine why Federal employees in my District do not receive

43

COLA, OPM staff explained that OPM has never conducted a survey in American Samoa. Since American Samoa clearly falls within

OPM’s definition of non-foreign area, it seems highly unreasonable

that OPM asserts that the cost of living in my District is not high

enough to justify payment of COLA. How in the world can you do

this when no survey was ever done by OPM in my District? To me,

that is ridiculous.

Although I have discussed these concerns with OPM officials, I

have yet to receive an explanation that justifies withholding nonforeign COLA from American Samoa’s Federal work force. Overall,

my discussions with OPM have not proven fruitful. At this point

I am looking to explore other options that could lead to a more fair

and equitable treatment of the Federal employees in my District.

Given that American Samoa faces the same issues driving higher

prices for goods, services, and travel that face all other insular

areas in similar situations, it seems highly discriminatory that

OPM chooses not to survey my District or provide COLA to Federal

employees in my District.

The bottom line, Mr. Chairman, is that I just don’t understand

why OPM treats my little District in such a cavalier fashion, in my

humble opinion. I don’t even have COLA. My understanding is that

now there is a new proposal coming out from the administration

about having locality pay as another option that is possible for Federal employees to participate in.

I did introduce legislation to provide that COLA should be given

to my Federal employees that work in American Samoa.

I sincerely hope, Mr. Chairman, that we will pursue this issue,

and whatever proposed legislation that the administration has to

offer and what we could do simply to correct this inequity that has

existed for too long.

With that, Mr. Chairman, I will be happy to receive any questions. Thank you.

Mr. DAVIS OF ILLINOIS. Thank you very much. We appreciate

your testimony.

We will move to Mr. Kennedy.

STATEMENT OF HON. PATRICK J. KENNEDY

Mr. KENNEDY. Thank you, Mr. Chairman.

I appreciate the opportunity today to have a chance to testify on

behalf of the critical issue of pay equity for our workers in the New

England area. In particular, I also want to commend my colleague,

Congressman Barney Frank, who has been a leader on this issue

but who has been unable to join us due to other committee action

in the Financial Services Committee, which he is at currently.

As Federal officials, both Congressman Frank and I are very familiar with the economy and job opportunities and the commuting

patterns in our area. In fact, I have to drive through Congressman

Frank’s District to get back to home every evening from parts of

my District, so we absolutely are in the same area, and so we share

the same market in terms of our workers, and we also share the

same economy as Boston in terms of the cost of living.

There is a very real case for treating our workers in the Massachusetts/Rhode Island area the same as the Boston area for the

Federal wage area. In fact, it is already the case where white collar

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Federal workers are at present treated as if they are working in

the Boston areas for purposes of pay parity. The irony is that blue

collar workers in the Federal civilian system are not paid according

to the same pay parity system for cost of living.

That logic just doesn’t wash, Mr. Chairman. I don’t care how the

Office of Personnel Management justifies it. If they have already

determined that it is good enough for the white collar employees

to be treated on pay parity for purposes of the market-based compensation and so forth to be paid the same because of the cost of

living and the like, why are they not treating those at the lowest

ends of the pay scale, the blue collar workers, the same? They are

living in the same marketplace. In fact, the case should be made

that they deserve to be compensated even more so on the same parity level as the Boston pay scale, which is higher, because, frankly,

they are the ones who are on the lowest end of the scale and they

have the toughest time making ends meet.

Frankly, we have a tough time filling these civilian slots, and

this is, I think, a matter of great importance to us as people who

are concerned about the strength of our civilian work force and the

continuity of that work force and the longevity. I believe it is something that needs to be rectified, and that is the reason why I am

here today to testify on behalf of these workers and say that it is

just not justified that wage rates in Boston could be up to 33 percent higher than the ones in Rhode Island, and yet these workers

in Rhode Island are essentially looking for homes and are paying

for cost of living rates that are roughly the same as those that are

working in and around Boston. It is just unjustified, and we need

to get this remedied.

We have report language in the House Appropriations Committee

to address this through the financial services and general Government appropriations bill, but the real solution lies with the Office

of Personnel Management, and the decision to make this correction

is now in their hands. This discrimination for blue collar workers

needs to end, and it has been going on too long. I hope that we are

finally making progress to have hourly workers who labor just as

hard for less pay have their work redeemed and treated the same

as those who are white collar workers whose work is acknowledged

to be worthy of being paid on the same scale as their counterparts

in the Boston area.

With that, I conclude my testimony and submit my fuller statement for the record. Thank you, Mr. Chairman.

[The prepared statement of Hon. Patrick J. Kennedy follows:]

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Mr. DAVIS OF ILLINOIS. Thank you, gentlemen, very much. I will

begin with some questions.

I must confess that I find both sets of testimony to be quite intriguing, and it causes me some thoughts that I had not really

spent a great deal of time pursuing.

Mr. Faleomavaega, how many Federal employees work in American Samoa, and how does this number compare with the number

of Federal employees in the Commonwealth of the Northern Mariana Islands?

Mr. FALEOMAVAEGA. I don’t know if there is a threshold that

OPM determines to say, well, because of a certain number therefore we will look after you and check what the situation is. I don’t

want to mislead you, Mr. Chairman. I want to give you a more specific number. Also, when you say Federal employees, I have about

600 of my men and women who just came back from Iraq. I consider them as Federal employees and when they came to Hawaii

they don’t get a post differential and soldiers from Hawaii get that

increase in their wages. A lot of these measurements that are

taken are from some regulatory portions of the OPM regulations

that say the cost of living or the standard of living may be the

basis.

I don’t want to render a guess here, Mr. Chairman, as to the

exact number, but I will get that number and may it be made part

of the record.

Mr. DAVIS OF ILLINOIS. All right.

Let me ask you how much does a gallon of milk, for example,

cost?

Mr. FALEOMAVAEGA. Mr. Chairman, we don’t drink that much

milk. [Laughter.]

Maybe a loaf of bread might be better. It is very similar to the

cost of bread in the State of Hawaii.

One of the things that I am always confronted with is that our

friends at the OPM say the cost of living in your District is small.

Well, how can they ever make such generalizations and statements

when there has never been a survey done by OPM of the cost of

living in my District? It just doesn’t make sense.

Now, what they have done is they have taken the cost of living

study out of the Territory of Guam and just simply tacked on the

Northern Marianas as part of it, and yet they never conducted a

survey for the Northern Marianas also. I find it highly questionable

in terms of what procedures they follow. They treat two insular

areas in one way and then treat my little insular area in a different way. I think that is unfair.

Mr. DAVIS OF ILLINOIS. Let’s just say if I was to go to dinner at

a moderate-priced food establishment and have myself a couple of

those exotic drinks that probably exist. When I finished, what

would my check likely be?

Mr. FALEOMAVAEGA. Mr. Chairman, I think maybe if I can respond to your question this way, all the insular areas have to import everything, from fuel to milk, if you will, the gas. So if I would

just simply respond, it is similar to the State of Hawaii. They have

to import practically everything. The State of Hawaii is one of the

highest cost of living States, comparable or perhaps even higher

than the Washington, DC, area.

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Now compare that, the State of Hawaii, where we have to import

just like Hawaii our goods. The gas now is $3-something a gallon.

So I don’t find it any different from any of the States, probably

even higher than some of the States, simply because we have to

import practically everything that we have. We don’t have oil. We

have a lot of fish, we have a lot of sharks, but we don’t have oil.

Mr. DAVIS OF ILLINOIS. You don’t eat the sharks, do you?

Mr. FALEOMAVAEGA. Yes, we do. Shark is delicious. In fact, shark

fin is the highest-cost soup in Asia. It is about $100 for a little bowl

of shark fin soup. By the way, we don’t like killing sharks indiscriminately like that, cutting only the fins and then get rid of the

carcass. We do have a Federal law that puts restrictions on that.

But shark meat is good if you know how to prepare it.

Mr. DAVIS OF ILLINOIS. Well, thank you very much.

Let me ask you, Mr. Kennedy, do you know why the Federal Prevailing Rate Advisory Committee has not made a determination to

calculate the pay of southeastern Massachusetts and Rhode Island

with the prevailing rate?

Mr. KENNEDY. Well, I understand that there is a new director

coming on, in fact, tomorrow. There has been a delay here and I

think it is unfortunate that the delay has taken place, because we

are talking about people’s livelihoods, and as we spoke about today

in the floor and yesterday with the Lenny Ledbetter case, time

equals money. When you are delaying justice in terms of people’s

pay equity, every time that check is less than that is another unjust check and it is another sign of discrimination. So we need to

get this rectified as soon as possible, and I hope that administratively with the new regional director coming onboard that will be

expedited with their new leadership as soon as possible.

I might add that this means that within the blue collar wage

scale the gap will be within the Boston market. It doesn’t mean it

is going to be within the same higher pay scale as the white collar;

we are just asking for it to be on the same scale for that type of

work that is now currently being performed.

Mr. DAVIS OF ILLINOIS. What is there that is unique about this

area that may have caused this disparity to exist?

Mr. KENNEDY. I think probably the demand, perhaps. They could

make the claim that there is a greater demand for the white collar

workers, so they made the exception for the pay for white collar

workers to accede into the Boston area pay scale as an incentive

for them to bring in those white collar workers into a very needed

area, which is the Navy Undersea Warfare Center’s very important

work in Rhode Island, for example. That could be the one explanation, and they could say, well, we needed to do that for the purposes of attracting people to these positions, whereas the need for

us to attract people for the positions of these other civilian jobs is

not of that critical a nature, and so we don’t need to put them in

the same category.

But the problem with that is you have already defied your own

rule in terms of fairness. If you have given a break to one class of

workers that you are paying one set of wages to in the same building, and yet the workers that are working hourly wages in that

same work force that are working alongside those same workers

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are now not treated equitably for purposes of that regional pay

scale.

Mr. DAVIS OF ILLINOIS. Thank you, gentlemen, very much.

Let me ask Mr. Sarbanes if he has any questions.

Mr. SARBANES. Mr. Chairman, I don’t really have any questions.

I appreciate your holding the hearing. I do want to say that I have

benefited, as you have, from getting a deeper understanding on

these two issues which go to questions of within the pay structure

whether there is the kind of parity and fairness there needs to be.

I am interested in that, and equally interested in the question of

how the overall pay structure for Federal employees compares to

the work force at large, so I look forward to hearing the rest of the

testimony.

Thank you.

Mr. DAVIS OF ILLINOIS. Thank you very much.

Mr. KENNEDY. Mr. Chairman, if I could just finally say, I mean,

it would be one thing if I was here just saying that I would like

to see my workers paid the same as the ones up in Boston, and I

could make a strong case because the cost of living, we are all geographically so close, so the cost of everything doesn’t vary greatly

because it is the proximity of everything. The region is a high-cost

region as it is. But really a salient point is the fact that there is

already a double standard where they are already paying those

same workers in my area that are white collar the prevailing, higher Boston wage rate, but they are not doing so for the hourly wage

workers. That is what I think is the nub of the issue here.

Thank you.

Mr. DAVIS OF ILLINOIS. Thank you gentlemen very much.

Mr. FALEOMAVAEGA. Mr. Chairman, I was humoring my good

friend from OPM here earlier before the hearing started, but, on

a more serious strain, I sincerely hope that OPM will be more

forthcoming and try to resolve this little problem that we have out

there in the middle of the Pacific.

I don’t think it is a complicated issue, but it just seems that

when I request information or trying to find out how to go about

doing things, they don’t seem to care. That disturbs me.

So with that humor, Mr. Chairman, I want to thank you for allowing me to come.

Mr. DAVIS OF ILLINOIS. I thank the gentlemen very much. There

may be some written questions that we may submit for you and

ask you that you answer them.

With that, I would ask Ms. Springer to step forward. We are always pleased to have join us for these hearings and discussions.

The Honorable Linda Springer, who is the eighth Director of the

U.S. Office of Personnel Management. She was unanimously confirmed by the U.S. Senate in June 2005, and as the OPM Director

Ms. Springer is responsible for the Federal Government’s human

resources planning, benefits program, services, and policies for the

1.8 million employee civilian work force worldwide.

Thank you so much, Ms. Springer. If you would, stand and raise

your right hand. It is the custom of this subcommittee to swear in

our witnesses.

[Witness sworn.]

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Mr. DAVIS OF ILLINOIS. The record will show that the witness answered in the affirmative.

Thank you so much. It is good to see you.

Ms. SPRINGER. Thank you, Mr. Chairman. It is good to see you,

as well.

Mr. DAVIS OF ILLINOIS. And you may proceed.

STATEMENT OF LINDA SPRINGER, DIRECTOR, OFFICE OF PERSONNEL MANAGEMENT, ACCOMPANIED BY NANCY KICHAK,

ASSISTANT DIRECTOR, STRATEGIC HUMAN RESOURCE POLICY, OFFICE OF PERSONNEL MANAGEMENT

Ms. SPRINGER. Mr. Sarbanes, also thank you for your interest

and for the opportunity to appear before you today to discuss the

Federal Government’s pay administration policies.

OPM does have responsibility for setting pay rates for the general schedule, which covers about 1.3 million employees. We also

manage the Federal wage system, which covers about 200,000 employees, and the certification process for the Senior Executive Service performance-based pay system, which covers about 7,000 employees.

In addition, OPM administers special pay rates; regulates recruitment, retention, and relocation incentives; conducts and evaluates demonstration projects in alternative personnel systems. Our

specific responsibilities in administering these systems and incentives is presented in my written statement. I would like to use the

balance, though, of my opening statement time to discuss performance-based alternative pay systems and various legislative proposals that we have.

Alternative pay systems fall into three major categories: demonstration projects, independent systems, and Government-wide executive pay. These systems are characterized by such features as

performance-based pay and broad pay bands.

OPM can establish and evaluate personnel motion projects to test

changes in Government-wide human resources management systems. In excess of 50,000 employees are covered by alternate pay

system demonstration projects. The Navy’s China Lake demonstration project established in 1980 was the first of these and was

made permanent in 1994. Since 1980, OPM has approved 17 additional demonstration projects. Four were completed, three were

made permanent by separate legislation based on successful evaluation results, and the balance are currently active.

The second group of alternative pay systems are agency specific.

These were established under independent authority granted by

Congress. In several of these cases, agencies successfully argued

that their recruiting and retention efforts would have been seriously impeded by continued coverage under the general schedule’s

outmoded system. Over 30,000 employees are covered by independent systems in place in such agencies as the FDIC, the IRS, FAA,

Office of the Comptroller of the Currency, and others. This figure

does not include employees covered by the newer NSPS and Homeland Security Department systems.

The third category, Government-wide executive pay, applies to

the Senior Executive Service and the Senior Foreign Service, covering about 8,000 employees. These alternative pay systems have exVerDate 11-MAY-2000 11:36 May 15, 2009 Jkt 000000 PO 00000 Frm 00053 Fmt 6633 Sfmt 6633 U:\DOCS\48812.TXT KATIE PsN: KATIE
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isted for as long as 25 years, and today cover over 90,000 Federal

employees.

OPM has studied the experience under these systems and issued

a comprehensive report in October 2005 at the request of Senators

Collins and Voinovich, with our evaluation. The entire report is

available at the OPM Web site, OPM.GOV, but I would highlight

that in all these systems we have observed that performance, not

time, drives pay; success depends on effective implementation; and

employees have come to support those alternative pay systems.

As a result of these efforts, we have learned what works and

what does not work when it comes to implementing successful performance-based pay systems. Challenges must be addressed, but

done right. I emphasize that—done correctly. Better performers get

higher pay. Agencies can better compete for and retain top talent.

And the associated accountability structures support agency missions.

Mr. Chairman, I also want to bring to this committee’s attention

three legislative proposals related to pay. First is the Senior Professional Performance Act of 2007. This would increase the maximum

rate of basic pay for certain senior level and senior technical positions to executive level three from the current limit of executive

level four. It is similar to the SES system, and that proposal further provides that, in the case of an agency that has a certified performance application system, the maximum rate of basic pay for

those positions could be as high as executive II, so very similar to

the SES.

Our second proposal would provide that certification of an agency’s Senior Executive Service performance application system

would be in effect for a 24-month period, beginning on the date of

certification, with the opportunity to extend it for 6 months. This

remedies an unintended disadvantage in agencies where the system is certified near the end of a calendar year, so it is kind of a

technical fix.

Mr. Chairman, we are pleased that both of these proposals were

recently approved by the Senate Committee on Homeland Security

and Governmental Affairs, and we are hopeful that both the Senate

and House will be able to adopt them before the current session of

Congress.

There is a third legislative initiative that I would like to comment briefly on, and that is that we have proposed legislation that

would extend locality pay to non-foreign areas outside the contiguous 48 States. Currently, employees in some of these areas receive

COLA adjustments, but, as we heard earlier, there are some exceptions. What this would do is to extend locality pay to all these

areas, including American Samoa, so that would resolve the question that was raised earlier about them not having parity with

other areas.

What we would do would be to phase that in over a 7-year period

to mitigate any transition effects, but that would be the way we

would propose addressing that problem.

This concludes my opening statement, Mr. Chairman, and I

would be happy to answer any questions you or any other Members

would have.

[The prepared statement of Ms. Springer follows:]

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Mr. DAVIS OF ILLINOIS. Thank you very much for your testimony.

Let me just ask, now that we have been joined by our ranking

member, if he had any comments prior to the questioning.

Mr. MARCHANT. No, Mr. Chairman, I don’t. I apologize. I had

votes in another committee. Thank you.

Mr. DAVIS OF ILLINOIS. Thank you very much, Mr. Marchant.

Let me just ask Director Springer, in testimony that he submitted for the record, Representative Barney Frank notes that OPM

took over a year to appoint a Chair to the Federal Prevailing Rate

Advisory Council. Could you share with us why that may have

taken such a long time?

Ms. SPRINGER. I can, Mr. Chairman. That position was previously paid as if it were a full-time commitment, a very significant

salary. In fact, what I learned when I got to OPM was that the

Chair position required no more than half of someone’s time, and

so I re-set the conditions there to be that we would hire someone

and only pay them commensurate with the amount of time they

would spend.

Now, the other condition on that position is that the incumbent

cannot accept any other position, so you have a situation where

someone is not able to get compensation from another position but

can only, because this is a half-time position, receive half of a full

salary. That is very difficult to find candidates that can work under

those circumstances, so we started from the very beginning. When

the previous Chair left we tried to find someone. We have someone

who is very qualified. He has just recently retired from Federal

service in many capacities, Peace Corps among them, and others,

but who was looking for exactly that type of situation. But it is not

easy to find when you have the constraint of not being able to supplement that position with another one. That is the reason why it

took so long. I’m being very candid with you. It is not for lack of

effort. But we do have a good candidate now. His first day is tomorrow.

Mr. DAVIS OF ILLINOIS. I guess it is not a problem now because

you have found the ideal candidate. Do you think it might make

any sense to change some part of it? I mean, can the person do

what they need to do just on a part-time or half-time basis?

Ms. SPRINGER. I interviewed the previous Chair about that, because it wasn’t a decision to make lightly, obviously. I wanted to

make sure it wasn’t a temporary change in workload or something

like that, and they said no, consistently that 50 percent was the

maximum. In some cases over the course of a year it was less than

that.

They set their own agenda, and I don’t set it for them. So it just

depended on the agenda, but at most it was 50 percent. I didn’t feel

it was a good use of taxpayers’ dollars to be paying a large annual

salary to someone who only worked at most 50 percent of the time.

Mr. DAVIS OF ILLINOIS. Let me ask, do you think it is maybe

something that we would want to take a look at?

Ms. SPRINGER. I am certainly happy to do that, but at this point

the good news is that we do have a very qualified candidate who

is very happy with those conditions.

Mr. DAVIS OF ILLINOIS. Could you explain to us how locality pay

is calculated?

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Ms. SPRINGER. I am going to probably ask for a little help from

my associate director here on that, but clearly at this point there

are different areas which, for the general schedule locality pay,

that we look at, and look at the relative relationship to the District

of Columbia as sort of a baseline, and then set the locality adjustment relative to that for, I believe, a comparable work force.

This is our associate director, Nancy Kichak.

There are 32 areas. We deal with Bureau of Labor Statistics data

and we compare Federal pay to Federal pay. I don’t know if there

is anything else you would like for her to add to that might be

helpful. She is the expert.

Mr. DAVIS OF ILLINOIS. You mentioned the District of Columbia.

Is that sort of a starting place in any kind of way?

Ms. KICHAK. That is one area. District of Columbia is the locality

base. Then we look at the rates in those areas.

Ms. SPRINGER. Right. We look at the rates in 32 areas, but the

D.C. area is the base area.

Mr. DAVIS OF ILLINOIS. So if the cost of living is as high or higher

than what it is in the District of Columbia, then that area would,

in all likelihood, qualify for a pay differential?

Ms. SPRINGER. I believe that is correct, yes. It is wages, though.

It is not cost of living; it is the actual wages that we are looking

at.

Mr. DAVIS OF ILLINOIS. All right.

Well, let me go to Mr. Sarbanes and see if he has some questions.

Mr. SARBANES. Thank you, Mr. Chairman.

I was just curious. I am learning. I am in a heavy learning mode

here, and I appreciate the hearing for that purpose, alone.

I was curious about the demonstration projects which you referred to, of which there have been a number, I guess, since 1980.

Seventeen of them are mentioned in your testimony having been

approved. I am just interested in how you determine. I guess my

first question would be: what drives the kind of demonstration

project that sort of bubbles up as something that ought to be done?

What are the different factors that drive that? I imagine there

would be concerns about competing for work force, about looming

retirements and how to deal with them. I imagine it would also include responding to complaints or critique that get generated internally or externally. So my first question is: what are the factors

that drive the impetus for these demonstration projects? And then

the second is: what criteria do you use in approving them, deciding

which ones should go forward?

Ms. SPRINGER. That is a good question, because we have had requests just recently—and I would say recently within the past year

or so—for additional demonstration authority. There is a very long

process, by the way. It is not as simple as an agency coming to

OPM and saying, We don’t feel we are competitive enough so we

want to have authority to have an alternate pay system, and OPM

just blesses it and they go on their way. There is a Federal Register notice process. There is a whole set of requirements that an

agency is required to do, as well as giving public notice of how that

system will work.

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We have learned over the years what constitutes a sound alternative pay system, and we look for those things. Among them are

good performance management structures and accountability structures, ways that feedback is given to employees, ways that the different pay bands are set up, manager requirements, training requirements. Have the managers been trained in how to function in

this environment in a fair way for employees?

It is not something that happens lightly or quickly. There are

limitations by Congress on the number of demonstration projects

you can have, and I think that limitation is 10 at any given time,

and the maximum number of people that could be in a demonstration project I believe is capped at 5,000, if I am not mistaken. And

so Congress has given limited authority to agencies to step out in

that area.

The reasons why they do it are ones that you mentioned. It often

deals with competitiveness, it deals sometimes with the mission of

an agency that is considered to be very important in the sense that

they can’t take the time it takes to go out and hire on a protracted

basis. They want to be a very attractive employer in the talent

market. And they want to retain those people, and they feel that

to get the very best and the very brightest they need to have a

more contemporary pay structure.

Mr. SARBANES. Thank you. I don’t have any other questions.

Mr. DAVIS OF ILLINOIS. Thank you very much, Mr. Sarbanes.

Mr. Marchant.

Mr. MARCHANT. Ms. Springer, of the legislative proposals that

OPM has submitted to Congress this year, which ones do you think

are absolutely critical to be enacted?

Ms. SPRINGER. With respect to pay? These particular three? Well,

I think they all are, actually, but of those three I think that the

two of the three, the SES, the senior technical and the senior level

employees, those executives, letting them have the opportunity to

go to higher levels is important.

We need those people. We have a great dependency on them,

their leadership, their experience, especially with the retirement

wave. I have said this so many times, people think it is the only

thing I focus on, but we have to keep them. We have it for senior

executives who are managers. We need it for these senior leaders

who are the professional, technical leaders, as well. I would say

that is very important.

A close second would be moving from COLA to locality. If we

don’t do that, then we are going to have to come back on a caseby-case basis and try and deal with this COLA issue that was commented on earlier. But I would rather do it across the board.

That would be sort of my one and two.

Mr. MARCHANT. What sort of improvements in programs regarding Federal pay would you like to see implemented during the remainder of your term?

Ms. SPRINGER. I wish I had more time, to be honest with you,

because I believe today that we have a patchwork system of pay

in the Federal Government. We have systems that I have listed in

my written statement. There are other systems that are smaller

and less, maybe, widely known, but it creates internal inequities.

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If I had all the time in the world, what I would do is step back

and come up with a whole new system. But what I hope that we

can do in this time is to just continue to raise awareness, pass

these proposals, and raise awareness of the need for contemporary

pay systems. We need to be competitive in the market for talent

that everybody else is going after, and this is, in some cases, a competitive disadvantage in certain areas. Not all areas.

People often say, Well, how do you think we compare to the private sector? It really depends on the occupation, the geographic

area, tenure, all those things.

I can find people who, in my own experience, are paid higher

than what I know to be the case in the private sector, and others

that are lower. But the fact of the matter is that we have an antiquated system that does not reflect performance. It pays for people

to show up at work. I hope we will continue to get educated about

that.

Mr. MARCHANT. Did you use any business models, large corporate business models? If you did, did you find any large corporation in America that operates under this kind of a system?

Ms. SPRINGER. I can’t say that I have conducted or OPM has conducted an exhaustive study, but we certainly don’t find it to be

prevalent. I mean, I am not going to say there aren’t some. I am

sure there are some in certain areas. But in the companies that we

have looked at, not exhaustively, but the ones that we have and

that we are competing with for talent, we find that there is a performance element to pay, many times, to a much greater extent

than what we have. All we are talking about is the increase in pay

being a function to some degree of how well you did your job, not

that your whole pay is at risk or half your pay is at risk the way

it is found in the private sector.

Mr. MARCHANT. Thank you very much. Thank you for your visit

to my office.

Ms. SPRINGER. Thank you.

Mr. MARCHANT. I appreciate it.

Mr. DAVIS OF ILLINOIS. Thank you very much.

Mr. Lynch.

Mr. LYNCH. Thank you, Mr. Chairman.

Ms. Springer, I appreciate your coming before the committee and

trying to help us with our work. I am a little bit flabbergasted

about the delay on the chairman’s position at the Federal Prevailing Rate Advisory Committee. I understand that it was vacant for

almost 2 years. What I thought I heard you say was you had

changed the position to a part-time position and also added a requirement that person do nothing else but that job.

Ms. SPRINGER. If I may?

Mr. LYNCH. Yes. Go ahead. I hope I am wrong. I hope that is not

what I heard.

Ms. SPRINGER. The latter requirement that you said was not one

that I set; that is a pre-existing requirement, that the individual

in that position not hold another position. That is not my requirement. That had been there. That was in place.

Mr. LYNCH. OK. Not hold another position?

Ms. SPRINGER. Right.

Mr. LYNCH. OK.

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Ms. SPRINGER. As far as the part-time, yes, what I did was to say

that we will pay for the amount of essentially the time commitment

of the individual, which was 50 percent or less. We are not going

to pay someone—you can pick a figure. Let’s say it is $140,000 for

doing a half year’s work. I don’t think that would be what the taxpayers would expect us to do.

Mr. LYNCH. No, but I wouldn’t expect there to be a job open for

almost 2 years while we are waiting to fill it. That would give you

a little indication about the desirability of that job.

Let me just say something else. There are five other members on

this committee. What the heck were they doing while they had no

chairman? I don’t expect that there was very high productivity in

the other five people.

Ms. SPRINGER. Well, if I may again——

Mr. LYNCH. Well, let me just tell you——

Ms. SPRINGER. We don’t set the agenda for that.

Mr. LYNCH. Go ahead.

Ms. SPRINGER. They don’t come under my control. They don’t set

the agenda. OPM does not set the agenda. They could meet whenever they wanted to, but I thought——

Mr. LYNCH. Without a chairman?

Ms. SPRINGER. I believe they can, but without having the chairman I think they were not able to——

Mr. LYNCH. I think they would be rudderless without a chairman. That is why you have a chairman.

Ms. SPRINGER. That is very possible.

Mr. LYNCH. OK. You know, this reminds me of a story one of my

local mayors used to tell me. When we asked them how many people worked at City Hall, he said, about half of them. You know,

this is the height of bureaucracy that this position remained open,

vacant, because we or you, more specifically, made a part-time job

out of this that we cant fill for 2 years.

Ms. SPRINGER. It was about a year and a half, by the way.

Mr. LYNCH. A year and a half.

Ms. SPRINGER. Yes. I am not saying that is good.

Mr. LYNCH. That is much too long, though. That is much too

long. That is low. We got zero productivity out of that position for

a year and a half, and now we think we have the perfect candidate.

Ms. SPRINGER. Yes.

Mr. LYNCH. After a year and a half. Any company in America

that worked like that would go right out of business. You have to

realize that. You see, that is not success. You think you saved

something, but you left the job empty for a year and a half. We

have to do better than that. That is unacceptable. OK? This is an

important position. We should have figured out. There are 55,000

Federal employees. We should have been able to figure out some

way to give that person something else to do. Give them a broom,

give them a mop, give them something, but they should have been

able to fill a full-time position and pay them a decent salary. It is

not successful to leave the job open for a year and a half trying to

find somebody willing to take the job, unless you want to leave the

job open purposefully.

Ms. SPRINGER. Which is not the case.

Mr. LYNCH. Well, I hope it is not. It sure looks that way to me.

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I yield back, Mr. Chairman.

Mr. DAVIS OF ILLINOIS. Thank you very much, Mr. Lynch.

Let me just ask Ms. Springer, could you define pay compression

for us?

Ms. SPRINGER. There are various places where pay compression

manifests itself. I will give you one that is very noticeable. When

the Senior Executive Service, which is tied to the Executive level

salary levels, when those salary levels only increase, when they increase at a lower percentage rate than the rate the general schedule levels increase, then you have a problem where the level 15 in

the general schedule, for example, starts to butt up against the

lowest or the first level of senior executive pay.

What happens is that you have people in that general schedule

level 15 who don’t find it particularly attractive to move to the Senior Executive Service level.

Another one is where you have people who start to max out within the senior executive level so that you are unable to give them

the type of performance-based pay increase that they have earned.

Those are two examples right there.

Mr. DAVIS OF ILLINOIS. There seems to be a great deal of discussion and conversation continuing about the effectiveness of pay for

performance.

Ms. SPRINGER. Yes.

Mr. DAVIS OF ILLINOIS. Could you tell us your department’s

views on that? How do you think it is going?

Ms. SPRINGER. Yes, Mr. Chairman. We think that the place to

look for where the ultimate success story would be or where to

learn is from looking at these projects and systems covering 90,000

employees that have been in effect for a number of years, to look

at their experience. That is why we did the study in late 2005.

Systems like this need to be around long enough to deal with the

cultural issues, the training issues, the migration from an old system to a new system. It takes time. So to look at some of the more

recent examples, the newer systems, and to pass judgment is really

premature, so our agency—and I believe I can speak for the agency

in this, because we published a report—would say that these systems over time are successful and meet their objectives. They have

to be done properly, and there are instances where people rushed,

went out too quickly, didn’t do all their training or their homework.

But done properly, as has been the case predominantly in this

90,000 employee group, we find, by and large, that they are successful.

Mr. DAVIS OF ILLINOIS. You did mention some concern about our

pay system being somewhat patchy or a patchwork and in need of

review, and certainly some further scrutiny. I guess I kind of took

your thoughts on that to be similar to Representative Lynch’s conversation with his mayor in terms of half the people down at City

Hall working, and some of the individuals who show up for work

but we don’t have a good way of determining what they have done

or how much they are doing or how they should be compensated.

Other than pay-for-performance, are there other thoughts and

ideas that the department has as to what we look at as we go

through some review?

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Ms. SPRINGER. One of the things that they need to look at before

they get to any type of a pay for performance type structure is to

have the underpinning of a good performance management system.

I don’t care what type of pay structure you go to or compensation

structure, you have to make sure the agencies’ managers are

trained in how to set goals with employees and that employees

have their say in that, and that there are good performance management practices through the cycle, the performance year; that

there are accountabilities; that things are measurable. All those

things are rudimentary before you even move to a new pay system.

That has been a focus of OPM in working with the agencies, even

when they don’t have an authority to move to a performance-based

pay structure.

Some of the other things, though—and I will give you an example, Congressman—you can have two people, a senior executive

who is in a performance-based pay system, and a GS–13 or –14,

both working on the same project. They meet success. They achieve

it beyond expectations. The senior executive will have that be a factor in getting an above-average adjustment to their pay. The general service person doesn’t get that opportunity. They get the same

as the person who didn’t reach for that higher level of performance.

I don’t think that is fair for the rank and file employees to not

have the same up-side opportunity that the person in the Senior

Executive has. The boss has the up-side opportunity, the rank and

file person doesn’t because they are stuck on this old one-size-fitsall system.

So I am not saying that there aren’t many ways to do this, and

we can look at it, but I think that to stay where we are in a 1950’s

vintage system that pays everybody the same, regardless, is just

unfair.

People will say, well, you can give them a performance award or

a special act award. A dollar of a special act award is not as valuable as a dollar of a salary increase. It is not there the next year

in your starting opening salary. It doesn’t count toward your pension. There are a lot of reasons why that special act or performance

award does not have the same value proposition for an employee

who has worked just as hard as the boss has, who has the up-side

potential.

Mr. DAVIS OF ILLINOIS. Any my last question is: you did mention

that over time pay for performance could prove itself, or you can

make some determination. Do you have any notion of how much

time a system would need to be in place before you could make a

real determination about its effectiveness?

Ms. SPRINGER. I would like to get back to you on that, check our

report, and look at those particular cases to see how long, but it

is not 1 year. It is a few years, I think, before you really start to

see that it takes hold.

Mr. DAVIS OF ILLINOIS. Thank you very much.

Either one of you gentlemen have any further questions?

[No response.]

Mr. DAVIS OF ILLINOIS. Thank you very much. We appreciate

your being here and appreciate your testimony.

Ms. SPRINGER. Thank you, Mr. Chairman.

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Mr. DAVIS OF ILLINOIS. And we will go to our next panel. While

they are coming, I will introduce them.

Our third panel is Ms. Colleen Kelley. She is the president of the

National Treasury Employee Union, the Nation’s largest independent Federal sector union, representing employees in 31 different

Government agencies. As the union’s top elected official, she leads

NTEU’s efforts to achieve the dignity and respect Federal employees deserve. Ms. Kelley represents the NTEU before Federal agencies, in the media, and testifies before Congress on issues of importance to the NTEU members and Federal employees. Welcome.

Mr. J. David Cox is the National secretary-treasurer of the

American Federation of Government Employees, the Nation’s largest union representing Federal and District of Columbia government employees. He was elected during the union’s 37th convention

in August 2006. Welcome, Mr. Cox.

And Mr. Curtis Copeland is currently a Specialist in American

Government at the Congressional Research Service [CRS], within

the U.S. Library of Congress in Washington, DC. His specific area

of research expertise is Federal rulemaking and regulatory policy.

If you all would stand and raise your right hand to be sworn in.

[Witnesses sworn.]

Mr. DAVIS OF ILLINOIS. The record will show that each of the witnesses answered in the affirmative.

We thank you all again for coming, for being with us. Ms. Kelley,

we will begin with you.

STATEMENTS OF COLLEEN KELLEY, NATIONAL PRESIDENT,

NATIONAL TREASURY EMPLOYEE UNION; J. DAVID COX, NATIONAL SECRETARY-TREASURER, AMERICAN FEDERATION

OF GOVERNMENT EMPLOYEES; AND CURTIS COPELAND,

CONGRESSIONAL RESEARCH SERVICE

STATEMENT OF COLLEEN KELLEY

Ms. KELLEY. Thank you very much, Chairman Davis, Ranking

Member Marchant, Mr. Lynch. I appreciate the opportunity to be

here today to talk about this important matter.

First, much has been made about a recent study by the Partnership for Public Service suggesting that the general schedule system

of pay should be immediately dismantled. Despite the press attention, I believe it is important to point out that the study surveyed

55 human capital officers, mostly political appointees, with five

questions. A minority of them recommended immediately scrapping

the GS system, which covers 1.3 million Federal employees. No

hard data was unearthed to support the recommendations that the

GS pay system needs replaced by what they call a market- and performance-sensitive pay system.

In fact, the GS is market based. It has the goal of achieving comparability with the private sector through the 32 different locality

pay areas that were talked about, and employees received pay

raises based on merit, which in my mind is synonymous with performance. It is a structured system, and yet managers currently

have trouble implementing it. It does not make sense to me that

a more subjective system will solve anything.

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In fact, the alternative pay experiments being promoted to replace the GS system have been dismal failures. For example, the

IRS pay banding compensation system for managers is clearly not

working, and I would recommend that this subcommittee take a

close look at that.

Just this month on July 3, 2007, the Treasury Inspector General

for Tax Administration released a report that he titled, ‘‘The Internal Revenue Pay for Performance System May Not Support Initiatives to Recruit, Retain, and Motivate Future Leaders.’’ Most

alarming was the finding that the IRS, according to TIGTA, has,

‘‘Risked its ability to provide quality service to taxpayers, because

the system hindered the agency’s ability to recruit and keep skilled

leaders.’’

NTEU strongly believes that in the absence of a statutorily defined pay system like the GS system that pay should be the subject

of collective bargaining, as it is in the private sector. At the FDIC,

NTEU bargains today for pay on behalf of its employees, and there

are still problems at the FDIC. The FDIC divorced its pay system

from its performance management system and it established a separate set of what they call corporate contribution factors to determine employee annual pay increases. With the heavy reliance on

these vague and subjective corporate contribution factors, employees do not clearly understand what they must do to be evaluated

at the highest level, and the forced ranking system prevents them

from ever knowing how this might translate into a pay increase,

so the pay system does little to actually motivate performance.

In TSA, due to the lack of collective bargaining rights, serious

problems abound at that agency with the transportation security

officers’ new PASS system. Allegations of favoritism and cronyism

surround the system, and no meaningful employee appeals process

exists.

At the Department of Homeland Security, while the pay for performance system has not yet been implemented, we are very concerned that it will push employees who are already demoralized out

of the agency, when the importance of keeping experienced, skilled

employees is greater than ever.

The proposed system is not set by statute, nor is it subject to collective bargaining. It will have employees competing against each

other and discourage teamwork. It is subjective and enormously

complex.

Before Congress considers any further limitations of the GS system, it should require OPM to promote existing flexibilities and authorities that could help agencies recruit and maintain talented

Federal employees. These range from cash awards to individuals

and groups to quality step increases, retention allowances, student

loan repayments, foreign language awards, travel incentives, referral bonuses, and many others.

Federal employees deserve what every other employee deserves:

a system that offers fair compensation for a fair day of quality

work.

When the administration proposed its fiscal year 2008 budget

with a 3 percent pay raise, I spoke out in opposition and called for

a minimum 3.5 increase. That level continues the tradition of providing Federal employees and military personnel a pay increase

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based on the employment cost index plus one-half of a percent. It

also begins to close the 13 percent pay gap between civil servants

and the private sector. If we are serious about addressing the

needs of the Federal work force, fair and adequate pay is the first

place to start.

Fortunately, Congress is moving legislation with this pay level

and NTEU will not rest until both military and civilian employees

receive their fair raise.

In conclusion, there is no hard evidence that the current pay system for Federal employees needs to be changed. The current experiments with alternative pay systems are failing, and the Government should use the flexibilities it currently has before moving

to new pay system experiments.

I thank you again for the opportunity to testify today and will

be happy to answer any questions you have.

[The prepared statement of Ms. Kelley follows:]

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Mr. DAVIS OF ILLINOIS. Thank you very much.

Mr. Cox.

STATEMENT OF J. DAVID COX

Mr. COX. Thank you, Mr. Chairman, for the opportunity to testify

today on an important issue such as Federal pay. As has been the

case for so many issues, the Bush administration has been relentless in its efforts to politicize Federal pay. The methods used have

been numerous and sometimes clandestine, but unfortunately very

effective.

First and foremost has been the campaign to replace a system

based on objective market data with one based on subjectivity and

discretion.

Second has been a campaign to suggest that the data produced

by the Department of Labor and calculated according to sound statistical procedures by professionals at OPM are fatally flawed and

should be replaced by back-of-the-envelope calculations, so-called

market research, and private data on an agency-by-agency, supervisor-by-supervisor base.

Next come the contrary claims that the Government must contract out because it cannot match the high salaries demanded by

cutting-edge professionals versus the Government overpays its lazy

bureaucrats and needs a new personnel system with the flexibility

to deny raises to those judged over market by their bosses. We

have seen bonus programs at the DOD that have substantially

given more to political appointees than career employees, and pay

for performance schemes that want to judge Federal employees on

how effective they carry out the President’s management agenda.

The list is long and threatens to grow longer.

When the administration hasn’t been busy trying to privatize our

jobs, it has been focused on taking away our rights and protections

as Federal employees. There is a reason Federal employees have

had job protections that are different from the private sector. The

merit system principles ensure that Federal agencies and programs

are administered by a work force that is hired and paid solely on

the basis of objective, apolitical criteria.

Pay for performance is a grave threat to this merit system, and

the political independence of the Federal work force, since it is a

political initiative that can be sold using slogans and assurances

that are difficult to review. After all, how can one oppose the concept of rewarding excellence or giving workers financial incentive

to become more efficient and productive. When said in this context,

pay for performance sounds as though it will both pay for itself and

improve the output and morale of the work force. Who could oppose

it? But what is really at work with pay for performance is the ability of a Federal manager to discriminate among employees for any

reason and call it performance.

Pay is such a crucial aspect of employee that the authority to

manipulate it by setting a worker’s base pay and deciding whether

and by how much to adjust that pay each year gives the political

appointees that control agencies enormous power.

Under the general schedule, Federal jobs are classified according

to duties. Salaries are assigned to jobs on the basis of market data.

Employees are able to progress through a career ladder if they

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meet objective performance criteria. And Congress each year decides salary adjustments on the basis of national and local labor

market data collected by the Bureau of Labor Statistics. No political interference whatsoever.

Pay for performance schemes also undermine congressional authority. Law makers may vote to fund annual payroll adjustments

to express their support for Federal work force and the programs

they administer and the services they provide, but giving political

appointees the discretion to manipulate the distribution of those

payroll dollars means a simple vote to adjust Federal pay will not

produce the intended result.

However much power Congress means to accede to the executive

branch, this administration always takes the ball and runs with it.

With pay for performance, that means the merit system protections

get the shaft.

It is in this context that I hope you consider the recently published Partnership for Public Service Survey of Human Capital Officers’ Opinions on the GS System. All of these individuals are political appointees by the President charged with carrying out his

agenda. We know how this administration feels about folks who

think for themselves; as such, it is no more surprising to learn that

they all think the general schedule must go and then to learn that

the Bush administration appointees all think the war in Iraq is

going great. It doesn’t deserve any more comment than that, Mr.

Chairman.

Federal pay should not be a contentious issue. It should be a

matter of market data. It should be subject to public scrutiny,

should be adequate to allow the Government to recruit and retain

high-quality work force dedicated to public service, and should

allow its employees to at least take the Federal employee health insurance, participate in the thrift savings plan, and, most of all,

have a decent quality of life, raise their children, and pursue the

American dream.

Mr. Chairman, this concludes my statement. I will take any

questions.

[The prepared statement of Mr. Cox follows:]

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Mr. DAVIS OF ILLINOIS. Thank you very much, Mr. Cox.

Mr. Copeland.

STATEMENT OF CURTIS COPELAND

Mr. COPELAND. Thank you, Mr. Chairman, Mr. Marchant. Thank

you for inviting me to testify at today’s hearing on Federal pay.

Although there are dozens of different Federal pay systems currently in use, I will focus on three issues related to the major Federal white collar pay systems, the first of which is the annual general schedule pay adjustment process.

Although this is commonly referred to as a cost of living adjustment [COLA], the actual adjustment is driven by measures of the

cost of labor outside the Federal Government. The adjustment process was established by the Federal Employees Pay Comparability

Act of 1990 [FEPCA], which actually requires two kinds of adjustments, one which is the same for all covered employees, and the

other which varies depending on non-Federal pay rates in 32 areas

of the country.

The locality pay portion of the adjustment was intended to eventually bring Federal salaries to within 5 percent of non-Federal pay

in those areas; however, Federal pay adjustments have almost

never been implemented through this FEPCA process, with either

the President or Congress intervening to determine the size of the

overall increase.

Another major Federal pay issue is the increasing degree of pay

compression occurring within and between the different white collar pay schedules. For example, the difference in pay between Cabinet Secretaries and the top of the Senior Executive Service is now

only about one-third of what it was in 1991. Senior-level employees

can currently earn more than the heads of small agencies that are

statutorily paid at executive levels four and five.

Members of the Senior Executive Service who work in agencies

with performance appraisal systems that have been certified by

OPM can receive pay and bonuses that equal the salary of the Vice

President, more than Cabinet Secretaries who are not eligible for

bonuses.

Pay compression is also starting to affect regular GS employees.

For example, because GS pay cannot exceed executive level schedule four, certain GS employees in nine locality pay areas are currently unable to receive full locality pay adjustments. Without

changes in executive schedule pay caps or linkages, these pay compression problems will only become more severe over time.

There have also been a number of proposals to reform the Federal pay system, as has been mentioned today, such as making employee pay more a function of organizational performance or employee performance, which has been referred to as performancebased pay. Some agencies have already begun implementing these

reforms, as has been mentioned, and studies of the implementation

of the performance-based pay systems in the Federal Government

have been done by GAO, MSPB, and a number of other organizations. They have all generally reached the same conclusion: agencies must have valid, reliable, accepted performance appraisal systems in place before linking pay to performance.

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Legislation has been introduced in this Congress that could make

Federal pay systems somewhat more performance based. For example, S. 1045 introduced by Senator Voinovich would require employees to have a performance rating of at least fully successful to

receive annual pay adjustments, locality pay, or other types of increases.

Market base pay is another type of pay reform that has been garnering attention, as has been mentioned. Although the market has

always been a factor in the implementation of FEPCA and in setting special pay rates, GAO, as you know, recently used market

pay data to conclude that some of its employees were already overpaid and therefore should not receive an annual pay adjustment.

However, at a hearing in this subcommittee in May an expert in

market-based pay criticized how this market study was conducted

and how GAO used the results.

This experience suggests that great care must be taken in determining what constitutes the relevant market and the relationship

of individual Federal occupations to that market.

OPM has submitted draft legislation on yet another pay reform,

as the Director mentioned, converting white collar Federal employees in what are known as non-foreign areas like Alaska, Hawaii,

Guam, Puerto Rico, and the Virgin Islands, into the locality pay

system. Since 1948, these employees have received tax-free supplements of up to 25 percent of base pay in order to improve recruitment and retention, but those supplements have not counted toward their pay when calculating retirement.

Switching from these cost-of-living-based supplements to cost-oflabor-based compensation, which do count as base pay—these locality payments—represents a major change in compensation philosophy. OPM has estimated that doing so will cost more than $100

million over the next 10 years.

Mr. Chairman, this concludes my prepared statement. I would be

happy to answer any questions.

[The prepared statement of Mr. Copeland follows:]

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Mr. DAVIS OF ILLINOIS. Well, thank you all so very much.

Those buzzers have been votes that we actually have, but they

are procedural votes. One is a quorum call. The other one is a motion to adjourn. I don’t think we are going to be doing that, so I

am just going to skip the vote and continue.

Let me thank you for your testimony. Ms. Kelley and Mr. Cox,

if both of you would respond to this question: how would you evaluate the implementation of pay for performance and the marketbased compensation studies that we have gotten up to this point?

In an overall sense, in your analysis, how is pay for performance

working?

Ms. KELLEY. In NTEU’s experience, the agencies that have

moved in this direction have failed miserably and have caused a lot

of problems among the employees. It has caused morale to decrease

even lower than it had been otherwise. There is no credibility with

employees that there is any interest on the part of the agencies in

putting a system in place that would meet the employees’ criteria.

And for employees, it is very simple. They are looking for a system that is fair, that is credible, and that is transparent. They

want to know that at the beginning of the year if they are told that

they do A, B, and C, that they will have excelled, and that the recognition and reward at the end of that time will be X, they expect

that the X will be there. That is not the case.

Many of the demonstration projects and alternative systems that

OPM reports on failed to tell you is that many of those projects

were given additional funding in order to be able to pay the top

performers, and not to have to decrease or flat-line the pay of other

employees who were doing not only the job that was expected of

them but excelling at their job also.

You know, I must say I was very surprised and disappointed to

hear Director Springer say two things. No. 1, she said that employees today under the current system are paid to show up. I think

that is an insult to the Federal employees who work hard every

day. They not only meet the expectations laid out for them, but

they work hard to excel. They shouldn’t have to guess what it is

they have to do to excel. That would be very clear and specific and

transparent, and they should be able to reach those goals if they

so choose.

The other example she gave, though, that was very surprising to

me was about the SESer and the grade 14 working on a project together, and that there is a way to reward the SESer but not the

grade 14. Well, NTEU does not represent SESers, but everyone

that I have ever talked to does not applaud the system that is in

place for them, their pay banding system. In fact, what they do is

trash it. They have done their own study and analysis, and all of

the results show that they are not satisfied with that system that

seems to be held out as a model by OPM.

The grade 14, the example that they cannot be compensated

other than with the lump sum cash is absolutely false. This is one

of the sore points with NTEU and with Federal employees there

are so many flexibilities that agencies have the authority to use

today that they do not use. OPM should be leading the way, not

only encouraging but providing them with the support, assistance

as to how to do this.

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One of the ways to reward that grade 14 is with a high-quality

increase or a step increase. That does go into their base pay. They

carry it forward. It is part of their retirement contributions. It is

not a one-time cash payment.

So, you know, that is just one example of misinformation that is

out there that the SES system is so good and should be used for

all Federal employees. SESers will not tell you that.

Mr. COX. Mr. Chairman, in DOD obviously at this point none of

our bargaining unit has been put under pay for performance. There

has been the demonstration project, and, again, as Ms. Kelley said,

additional money was given in those projects, so therefore employees got a little more money and seemed to like it. Then, as the

money dried up, it did not happen and the employees felt discriminated against.

I am a registered nurse. I worked for the VA Medical Center in

Salisbury for 23 years as a registered nurse. Registered nurses in

the VA are under that type of performance pay and the promotion

process. I saw in my 23 years registered nurses that did all the criteria, worked very hard, achieved the goals that were established

by regulations for them to be paid and to be promoted, a pay for

performance system. It would go to the Professional Standards

Board, they would vote the person met the criteria, but the medical

center director would stamp it disapproved. I don’t want to do this,

I don’t have the money.

That goes all the way back to the process, too, as Director

Springer talked about bonuses and performance awards. Throughout the Federal Government I hear frequently about SESers and

the higher grade employees and performance awards and things of

that nature, but a lot of our members are housekeeping aids. They

are those wage-grade employees that Mr. Lynch was speaking of

earlier that are not getting recognized in any way whatsoever.

They don’t get performance awards, even with an outstanding performance, because, again, some manager says, I don’t want to

spend the money that way, I would prefer to spend it this way.

So pay for performance doesn’t work. It has not worked well in

these demonstration projects. I have personally experienced it in

my Federal career that it is not the way to go. There has to be a

system, and I believe that is why Congress established the merit

system in the beginning, so that the work force would not be

hooked to the political system.

Mr. DAVIS OF ILLINOIS. Thank you both very much.

Mr. Lynch.

Mr. LYNCH. Thank you, Mr. Chairman.

You know, at the outset I just want to say thank you, Mr. Chairman, for holding this hearing. I was an iron worker for 20 years,

and I firmly believe that the American workers don’t have a better

friend in the Congress than you, Mr. Chairman. I appreciate all the

work you do.

Mr. Chairman, following the implementation of the civilian personnel system reform—they call it reform; changes are more likely—at the Department of Homeland Security in 2002 and the Department of Defense in 2003, the current administration has continually sought to erode the rights and protections afforded to our

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tably, in July 2005 the White House circulated draft legislation to

abolish the longstanding general schedule pay system across the

Federal Government by 2010, in favor of a variety of untested and

extremely subjective pay for performance compensation schemes.

While the proposal was never enacted, recent agency personnel

reforms have evidenced the administration’s continued willingness

to experiment with alternative compensation systems, and specifically pay for performance, all at the expense of the Nation’s nearly

two million Federal civilian employees, their pay, and their future

retirement security.

As a former union president, I can tell you that pay for performance implementation is simply not in the best interest of the employee morale. It is not what its title implies. It destroys workplace

unity and productivity. And with employee pay becoming highly dependent on subjective assessments and evaluations, it often results

in vastly different salaries for employees with identical job duties

and seniority.

As a Member of Congress and the Oversight Committee, in particular, I can tell you that the implementation of such a highly subjective pay system across our Federal agencies defies common

sense.

Remember, this committee not very long ago, a few weeks ago,

amidst reports that officials from the White House’s Office of Political Affairs were conducting political briefings on Federal agency

property—these are the same people that are going to review the

employee performance. Specifically, earlier this year our committee,

as well as the Office of Special Counsel, determined that they had

meetings on how to help Republican candidates win future elections, and it was conducted on General Services Administration

property in the presence of the GSA Administrator Lurita Doan

and over 30 other GSA political appointees. These would be the

people who would be making judgments on the performance of

these employees.

During a subsequent hearing in June of this year we examined

allegations that Ms. Doan sought retaliation against GSA officials

that were cooperating with the Special Counsel and investigators.

According to an interview transcript released by the Special Counsel’s office, the head of GSA, Ms. Doan, asserted that, ‘‘Until extensive rehabilitation of their performance occurs, they will not be getting promoted and will not be getting bonuses or special awards or

anything of that nature.’’ This is retaliation against employees, and

the Government. The Bush administration is trying to put this system in over our Government employees, Defense Department and

other employees.

In addition to the GSA investigator, our committee is continuing

to investigate reports that at least 20 other political briefings were

given to officials of at least 15 other Federal agencies. The implications are clear: either you play ball with this administration or you

don’t get the raises, you don’t get your bonuses.

This is going back to the early 1920’s and the patronage and corruption that was attached to these jobs before we had reform. That

is a step we should not be taking.

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Mr. Chairman, for these reasons I am very concerned about this

administration’s inclination toward abandoning the current Federal

pay system in favor of a pay-for-patronage compensation structure.

Again, I thank you for holding this hearing.

I just want to say that I remember the first changes that were

put in on our Defense Department employees and Homeland Security employees. What happened is they were stripped of their rights

to bargain collectively. Their rights were taken away, and the reason that was given by the Republican administration for stripping

them of their rights was that they could not be trusted. They could

not be trusted. The national security would suffer if the Defense

Department and Homeland Security, the very employees who are

on the front lines, they could not be trusted with negotiating over

the terms and conditions of their own employment. That is a slap

in the face. That is a giant step backward. That will cause goodquality employees to walk away from Government service.

I think that is something that we should reject. If there are going

to be standards for giving people raises, they should be objective

so that anyone looking at the performance of that employee will

know whether they deserve a raise or they don’t deserve a raise.

That should not be allowed to be a decision within the mind of

someone who is holding Republican party meetings in Government

offices on Government time at Government expense.

Mr. Chairman, I just think we should reject this proposal and I

yield back the balance of my time.

Mr. DAVIS OF ILLINOIS. Well thank you very much, Mr. Lynch.

I would have been pleased to have been a member of your union.

Mr. LYNCH. I am sorry, Mr. Chairman?

Mr. DAVIS OF ILLINOIS. I said I would have been pleased to have

been a member of your union.

Mr. LYNCH. Thank you.

Mr. COX. I would have, too, Mr. Chairman.

Mr. DAVIS OF ILLINOIS. Let me ask you, Mr. Copeland, could you

share what the thinking may have been around the idea that executive schedule positions are not eligible for locality pay?

Mr. COPELAND. Sure. Essentially, the decision was made that

these executive schedule positions really should be paid on a national basis rather than a local basis, but it is interesting when you

look at where these people are. 402 of the 475 people in the executive schedule are in Washington, DC. In fact, 470 of the 475 are

in Washington, Virginia, or Maryland. So it is basically a pay system for people that are in this area.

Mr. DAVIS OF ILLINOIS. Yes. I guess one could kind of understand, because there aren’t many people who are going to be in

other locations.

Mr. COPELAND. Right.

Mr. DAVIS OF ILLINOIS. Because this is kind of where the action

is. Well, let me ask you, this talk about pay compression and its

impact, does it limit unrealistically the ability of certain categories

of individuals to continue to progress relative to compensation for

their work and experiences?

Mr. COPELAND. I believe it does. One of the best examples of that

would be to compare people in different pay systems. For example,

in 1964, when the executive schedule was set up, the executive

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schedule five, which is the lowest level of the executive schedule,

were paid 6.1 percent more than the top end of the GS system, so

there was a gap between the executive schedule and the regular

GS.

Right now executive schedule five is paid 13.5 percent less than

the top of the general schedule. Even looking within the general

schedule, you have nine locality pay areas where people cannot get

locality pay increases, basically that they are due, because they are

bumping up against the cap, which is executive schedule four for

the GS–15 step 10’s. And in San Francisco it has even been down

to step seven.

Mr. DAVIS OF ILLINOIS. Are the administrative law judges sort of

caught in a bind in a sense in terms of comparability? How do they

rank or rate with other individuals who hold the title of law judge

and their compensation?

Mr. COPELAND. It is hard to compare regular judicial salaries to

administrative law judge salaries because they are really apples

and oranges, but administrative law judges are among the most

compressed of all the pay schedules. One of the statements that

was submitted for the record today documents that much better

than I can, but I could just note that administrative law judges are

paid basically at the same level. If you look in the Federal Employees Almanac, for example, there is a listing for the top, I think,

three or four levels of administrative law judges. They are all paid

exactly the same, so there is no advantage to moving above a certain level. The same thing that used to occur in the Senior Executive Service where, once you got to a certain pay level, there was

no advantage to going up to higher levels.

Mr. DAVIS OF ILLINOIS. Ms. Kelley, let me just revisit if I could

a moment. You did not express a great deal of confidence in the

current implementation of the pay for performance. Do you think

it can be made to work? If so, what would need to change about

it? Or does it just need to be junked and say it is not going to

work?

Ms. KELLEY. Well, I have not seen anything yet that I can say

I am convinced would work, but I would also not say that the current system is perfect. We have said this to the administration and

we have said it to Homeland Security when we were going through

the meet and confer process in Homeland Security. We said to

them, look, identify the valid problems you have with the GS system and we will sit and work with you to change those. But they

have to be valid problems, not just change for the sake of change.

What we really have heard throughout any conversation we have

ever had is this focus of just wanting to dismantle the entire system. They really don’t want to fix it or have an up-front conversation about what needs to be fixed.

They say, for example, that they cannot compensate the highest

performers. Well, I want the highest performers compensated, too,

so we would welcome the opportunity to be in that conversation.

But the answer is not scrap the current system and then ask us

to take on faith some unknown system.

So I have not seen anything that I am convinced will work, but

I want a system that allows employees to be compensated a fair

wage at market rates compared to the private sector, and that is

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not happening today. So, I am interested in being in that conversation.

Mr. DAVIS OF ILLINOIS. Well, Mr. Cox, we all continue to suggest

that we want Federal employment to be comparable with private

sector in terms of the ability to recruit to get some of the best and

the brightest and to make sure that the Federal work force is as

productive and as effective as any work force that we would find

any place. Do you think we can accomplish that under the pay for

performance system?

Mr. COX. The pay for performance system will not accomplish

that for you. Pay for performance in reality is about lowering pay

and controlling pay, sir. It is about being able to give money to who

you want, how you want, when you want. We all understand those

type systems.

The GS system may have its flaws, but at this point it is the best

system that we have and we need to work to improve that again,

not just throw it out, scrap it up, tear it down, and start from

scratch again. The system does work. It recognizes employees.

There are many things in the system, again, that is not used by

the managers and the agencies to give within-grade increases and

to recognize employees because it comes back to how the agencies

want to spend their money instead of recognizing employees.

Mr. DAVIS OF ILLINOIS. Well, thank you all so much. I always

thought that politics was giving money to who you wanted to when

you wanted to where you wanted to. Sounds like you are defining

a system that is fraught with some political implications. But it

has certainly been a pleasure to have you all come and testify. We

appreciate your patience and we apologize for any inconvenience

that we may have caused with changing our schedules.

Thank you all so much.

This hearing is adjourned.

[Whereupon, at 5:08 p.m., the subcommittee was adjourned.]

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