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44–956 PDF 2008

EXECUTIVE AND JUDICIAL COMPENSATION IN THE

FEDERAL GOVERNMENT (QUADRENNIAL COMMISSION)

HEARING

BEFORE THE

SUBCOMMITTEE ON THE FEDERAL WORKFORCE

AND AGENCY ORGANIZATION

OF THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

SEPTEMBER 20, 2006

Serial No. 109–260

Printed for the use of the Committee on Government Reform

(

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

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

TOM DAVIS, Virginia, Chairman

CHRISTOPHER SHAYS, Connecticut

DAN BURTON, Indiana

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

GIL GUTKNECHT, Minnesota

MARK E. SOUDER, Indiana

STEVEN C. LATOURETTE, Ohio

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

JOHN J. DUNCAN, JR., Tennessee

CANDICE S. MILLER, Michigan

MICHAEL R. TURNER, Ohio

DARRELL E. ISSA, California

JON C. PORTER, Nevada

KENNY MARCHANT, Texas

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

CHARLES W. DENT, Pennsylvania

VIRGINIA FOXX, North Carolina

JEAN SCHMIDT, Ohio

BRIAN P. BILBRAY, California

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

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

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

CHRIS VAN HOLLEN, Maryland

LINDA T. SANCHEZ, California

C.A. DUTCH RUPPERSBERGER, Maryland

BRIAN HIGGINS, New York

ELEANOR HOLMES NORTON, District of

Columbia

———

BERNARD SANDERS, Vermont

(Independent)

DAVID MARIN, Staff Director

LAWRENCE HALLORAN, Deputy Staff Director

BENJAMIN CHANCE, Chief Clerk

PHIL BARNETT, Minority Chief of Staff/Chief Counsel

SUBCOMMITTEE ON THE FEDERAL WORKFORCE AND AGENCY ORGANIZATION

JON C. PORTER, Nevada, Chairman

JOHN L. MICA, Florida

TOM DAVIS, Virginia

DARRELL E. ISSA, California

KENNY MARCHANT, Texas

PATRICK T. MCHENRY, North Carolina

JEAN SCHMIDT, Ohio

DANNY K. DAVIS, Illinois

MAJOR R. OWENS, New York

ELEANOR HOLMES NORTON, District of

Columbia

ELIJAH E. CUMMINGS, Maryland

CHRIS VAN HOLLEN, Maryland

EX OFFICIO

HENRY A. WAXMAN, CALIFORNIA

RON MARTINSON, Staff Director

ALEX COOPER, Clerk

TANIA SHAND, Minority Professional Staff Member

(III)

C O N T E N T S

Page

Hearing held on September 20, 2006 ..................................................................... 1

Statement of:

Hornby, D. Brock, judge, U.S. District Court for the District of Maine,

chairman, judicial branch, Committee of the Judicial Conference of

the United States; Philip M. Pro, chief judge, U.S. District Court for

the District of Nevada; Sean O’Keefe, chancellor, Louisiana State University, former Administrator, National Aeronautics and Space Administration; and Gary Burtless, John C. and Nancy D. Whitehead Chair

in Economic Studies, the Brookings Institution ......................................... 43

Burtless, Gary ............................................................................................ 63

Hornby, D. Brock ....................................................................................... 43

O’Keefe, Sean ............................................................................................. 61

Pro, Philip M. ............................................................................................. 45

Walker, David M., Comptroller General of the United States ..................... 18

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

Burtless, Gary, John C. and Nancy D. Whitehead Chair in Economic

Studies, the Brookings Institution, prepared statement of ....................... 66

Cummings, Hon. Elijah E., a Representative in Congress from the State

of Maryland, prepared statement of ............................................................ 16

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

of Illinois, prepared statement of ................................................................ 12

Hornby, D. Brock, judge, U.S. District Court for the District of Maine,

chairman, judicial branch, Committee of the Judicial Conference of

the United States and Philip M. Pro, chief judge, U.S. District Court

for the District of Nevada, prepared statement of ..................................... 48

Porter, Hon. Jon C., a Representative in Congress from the State of

Nevada:

Prepared statement of ............................................................................... 8

Prepared statement of Mr. Cook .............................................................. 5

Walker, David M., Comptroller General of the United States, prepared

statement of ................................................................................................... 21

(1)

EXECUTIVE AND JUDICIAL COMPENSATION

IN THE FEDERAL GOVERNMENT (QUADRENNIAL COMMISSION)

WEDNESDAY, SEPTEMBER 20, 2006

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON FEDERAL WORKFORCE AND AGENCY

ORGANIZATION,

COMMITTEE ON GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 2 p.m. in room

2203, Rayburn House Office Building, the Honorable Jon C. Porter

(chairman of the subcommittee) presiding.

Present: Representatives Porter, Davis of Illinois, Norton,

Cummings.

Staff present: Ronald Martinson, staff director; Chad Bungard,

deputy staff director/chief counsel; Jessica Johnson, OPM detailee/

counsel; Paul Sherry, DOE detailee/senior counsel; Alex Cooper,

legislative assistant; Tania Shand, minority professional staff member; and Teresa Coufal, minority assistant clerk.

Mr. PORTER. I would like to call this hearing to order. I would

like to certainly welcome you all here today. We appreciate your

being with us, and we will appreciate testimony from some of our

experts and a few judges that are with us today. We appreciate

your expertise.

And in keeping with recent tradition, prior to moving into the

business of the hearing this afternoon, I want to take a few moments to recognize an individual. As the chairman of the Subcommittee on the Federal Workforce, I try very hard to recognize

some of the superstars that have been either retired from the Federal work force or are currently part of the Federal work force.

Today I would like to recognize an individual that is in the State

of Nevada. Of course, there are literally millions of dedicated individuals that work for the Federal Government in and around the

world. We’ve recognized folks in Afghanistan and Iraq.

But in Nevada today, I have a gentleman that actually goes by

the name of Nevada’s Knight in Shining Armor. Can you hear us

OK, Reggie?

Mr. KNIGHT [via teleprompter]. Yes, I can hear you, Congressman Porter.

Mr. PORTER. We appreciate your being with us, and I will be formally giving you the certificate of congressional recognition in Nevada in a few weeks. But I want to say thank you and if I can embarrass you for a moment, I’m going to read from the NARF magaVerDate 11-MAY-2000 11:02 Nov 12, 2008 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 C:\DOCS\44956.TXT KATIE PsN: KATIE
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zine. ‘‘Reginald B. Knight, Reggie to his many friends, of the NARF

chapter 2276 in Pahrump, Nevada, there are very few if any of the

offices in the local chapter or in the Nevada NARF Federation that

Reggie has not held.’’ For that reason, he is the subject of this

month’s Faces of NARF feature. I think it is a centerfold, but that

is OK. [Laughter.]

Your story begins in Detroit, graduated in 1954, joined the U.S.

Marine Corps, rose through the ranks, retiring in 1974 as a sergeant major. You saw combat in Vietnam as a recon platoon sergeant and was senior enlisted staff assistant to commanding officer

of the fighter attack squadron of the Marines. Following his retirement from the Marines, Reggie went to work for the VA, serving

as a representative of the Saddleback College of Mission Viejo,

California, and took classes and received his associate degree. Has

been involved in the southern Nevada community I believe since

1994, is that right, Reggie?

Mr. KNIGHT. That’s correct.

Mr. PORTER. We appreciate all that you have done. I am not

going to embarrass you with all the other nice things they have

said about you here. But again, you truly are a knight in shining

armor. Thank you for all that you do for the retired Federal employees, but more importantly, for all those folks in Nevada, and

all you have done for the Pahrump community.

So today, I know that you are 2,500 miles away, but on behalf

of the committee, we are recognizing you with congressional recognition. What we have done is entered your history in the Congressional Record, it will be part of literally the history of our country and thank you so much for everything that you have done.

So since I can’t give it to you in person today, if you can see

it——

Mr. KNIGHT. I can see it. Thank you very much. I appreciate

that.

Mr. PORTER. We will bring it back with us, and thank you very

much for everything you have done and for being with us today.

Mr. KNIGHT. Thank you, sir.

[Applause.]

Mr. PORTER. Also, you will receive a copy of the congressional

recognition. There is a Congressional Record that will be a part,

again, of the Library of Congress. You will receive a book and additional information from the U.S. Congress. So again, thank you for

being with us. Take care.

Mr. KNIGHT. Thank you very much, Congressman Porter.

Mr. PORTER. And you’re welcome to sit through the meeting, if

you would like.

Mr. KNIGHT. I appreciate that. With the issues that you’re dealing with, I want to sit through it. [Laughter.]

Mr. PORTER. Very good. Thank you again very much.

Now, having a quorum present, we will formally begin the meeting. I appreciate the Members being here today.

It is really an unfortunate reality that there has been and always

will be a substantial difference in pay between top level Federal

Government executives and executive branches in the private sector. Perhaps Babe Ruth summed it up best when asked by a reporter during the Great Depression of the 1930’s why his salary as

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a baseball player was more than that of the President of the

United States, Herbert Hoover. The Babe’s response was, ‘‘I had a

better year.’’

Well, many years have passed since Babe Ruth’s humorous, yet

telling, remark. And needless to say, the Babe did not call the shot

on the problem of pay erosion and pay compression for certain top

executives on the Federal level. Inequities in pay for certain top

level executives of the Federal Government have existed for some

time and have not gone away.

In fact, for many, as we will hear today from some of our distinguished witnesses, it is getting worse, and it has caused the Federal Government to lose some of its best and brightest leaders. It

is getting worse, and we need to change that. Until this problem

is properly addressed, the American people will continue to pay a

high price for the low salaries that are being paid to certain top

level Federal officials.

In June 2006, the GAO completed a study undertaken at my request entitled Human Capital: Trends in Executive and Judicial

Pay. The GAO report calls attention to the fact that the basic pay

rates of certain top level executives and members of the judiciary,

particularly those under executive schedule and judicial pay plans,

when adjusted for inflation to 2006 dollars, have suffered dramatic

declines since 1970.

For example, when adjusted for inflation using the consumer

price index, well recognized as an official Government index and

often utilized by Congress, for example, used for Social Security

and civil service adjustments, pay for Cabinet Secretaries declined

in value by 41 percent and the pay of the Chief Justice by 34 percent since 1970. In terms of actual dollars, applying the CPI, this

means that in 1970 Cabinet Secretaries were paid the equivalent

of $309,000 in 2006 dollars.

But today, because of pay erosion, Cabinet Secretaries are being paid $183,500, or 41 percent less because of inflation, or what otherwise might be called pay deflation. And again applying the CPI,

it means that in 1970 the Chief Justice was being paid the equivalent of $321,000 in 2006 dollars, but today is receiving $212,000,

or 31 percent less because of inflation or pay deflation.

Along with the GAO report, past studies have confirmed that certain executives and judicial pay rates are inadequate when measured against inflation and changing economic conditions. For example, in 2003, the National Commission on Public Service, chaired

by the distinguished Paul Volcker, found that there was a failure

of Federal compensation policies at top levels within all three

branches of comparison to the private sector.

Of particulate note, the 2003 National Commission found the

state of judicial pay to be so egregious that the Commission noted

that the first priority of the Congress should be ‘‘an immediate and

substantial increase in judicial salaries.’’ Unfortunately, the 2006

GAO report confirms that the problem continues.

It is now time to find a solution that will be successful. GAO has

noted in this report has noted that certain principles should be considered to attract and retain the quality of executive and judicial

leadership necessary to address the 21st century challenges. In

particular, GAO has stated that top level pay plans should be senVerDate 11-MAY-2000 11:02 Nov 12, 2008 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 C:\DOCS\44956.TXT KATIE PsN: KATIE
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sitive to hiring and retention trends, reflective of the responsibilities, knowledge and skills, of contributions, transparent, market

sensitive, flexible to economic change, sustainable and competitive.

In its report, GAO has observed that the reestablishment of a salary commission may be an option to consider in maintaining reasonable salary relationships across executive and judicial positions,

something I think that makes a whole lot of sense.

GAO noted that both in 1967 and 1989 Congress authorized the

establishment of a commission to study and make recommendations with respect to the salary of top level Federal employees, including positions with the executive schedule, as well as the judiciary. The first of these commissions was abolished and the second

commission was never appointed. What we must do now is devise

some system to assure adequate compensation for top Federal executives and judges that will have the confidence of the public and

the members of the legislative, executive and judicial branches of

the Federal Government. At this point, however, we are just sharing preliminary thoughts on the matter.

The purpose of the hearing is to first examine the results of the

study conducted by GAO and to hear about and discuss inequities

in the existing system. However, we have asked our witnesses and

would be most grateful if they would share their views with the

subcommittee on whether a salary commission or some other option

could best assure that top level members of the executive branch

and judges are fairly compensated.

In addition to our distinguished group of witnesses today, testimony has been provided by Fred W. Cook, founding director of the

Frederic W. Cook and Co., independent consulting firm specializing

in executive compensation issues. Mr. Cook could not be with us

today as a witness. He is a well recognized expert on compensation

issues and is currently vice chairman of the Defense Department

Business Board, a Federal advisory committee that provides DOD

senior management advice on the best practices from the private

sector.

I ask unanimous consent that Mr. Cook’s testimony may be included in this hearing.

[The prepared statement of Mr. Cook follows:]

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Mr. PORTER. Critical to the success of the Federal Government

in the 21st century is the need to properly address a wide variety

of human capital issues involving the Federal work force. As this

subcommittee knows first-hand, as we have just witnessed, recognizing Mr. Reggie B. Knight, of my home State of Nevada, for his

outstanding contributions as a member of the work force, Federal

employees not only do an outstanding job, they often go above and

beyond the call of duty. In doing so, they should and will be recognized. They are truly one of the Nation’s greatest resources.

One of the most critical human capital issues facing the Federal

Government today concerns the need to make certain that employees in the Federal work force are properly compensated for the responsibilities they undertake in serving the public. In the face of

national emergencies, work force shortages and the looming retirement tsunami, and the loss of well-qualified Federal employees to

the private sector, it is essential that on the Federal level we explore all options to ensure that compensation for job performance

is commensurate with the responsibilities undertaken. Our Federal

employees deserve no less.

And this should especially be the case for those in the position

of high responsibility in the work force, namely those in the top

level executive judicial positions in our Government.

Now, having read the formal statement, let me tell you what I

really think. We have a real challenge before us, and we appreciate

Mr. Walker being here today to talk about that. But we have to

make sure we encourage the best and the brightest to become a

part of our work force. We want to make sure that those that are

with us are compensated properly and those that enter retirement

are compensated properly.

I have always felt, especially from the judiciary side, that although it is very important that we have a legislative branch and

executive branch, but knowing at the end of the day that our court

system is the best in the world, and we can always, as residents

of this great country count upon the courts. We may not always

agree with certain levels of the court, but available to us are different steps and at the end of the day, the Supreme Court.

So we have to make sure that we keep the best and brightest,

we encourage the best and the brightest. And make sure that those

that are in these top level positions remain with us, because I certainly understand why a judge may leave and go back in private

practice. It is very difficult to compete with the private practice

with the salaries the way they are.

So in very plain language, this is an area I think that is a real

challenge for our country. I am pleased that the committee is looking at this. I would now like to recognize our ranking member, Mr.

Danny Davis, for his opening statement.

[The prepared statement of Hon. Jon C. Porter follows:]

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

Before I give my opening statement, I too would just like to congratulate Mr. Knight on his recognition. I was just thinking, if the

Babe was around today and was asked the same question, he

would probably give the same answer. [Laughter.]

But thank you very much, Mr. Chairman.

Reform of the general schedule and implementation of pay for

performance plans for rank and file Federal employees has been

the subject of many of our subcommittee hearings. This is the first

hearing during which we will focus our attention specifically on executive and judicial pay. I am indeed pleased that we are doing so.

I believe that each Federal employee, regardless of position,

should be paid a living wage and a wage that is commensurate

with skills, experience and knowledge. Based on the report that the

GAO issued in June on executive and judicial pay, it is clear that

the pay of our most senior officials and judges has declined in

value. The GAO report recommends that when restructuring the

pay plans for the executive and judicial positions, the plans should

be sensitive to hiring and retention trends, reflective of responsibilities and skills, transparent, market sensitive, flexible to economic

change, sustainable and competitive. And I reemphasize, competitive.

It would be helpful if the witnesses addressed questions related

to the hiring and retention trends among executive and judicial

employees. Are we having trouble filling these positions? Are we

losing current employees to the private sector? Also, how do we

hold the individuals at the highest levels of Government accountable for their actions while ensuring fairness and preventing

abuse?

I have always been somewhat amazed, even before running for

and being elected to public office, why the perception of the public

seems to be that public employees, for some reason, shape, form or

purpose, are not as valuable as those in the private sector. That

is a question I have never been able to fully understand. I hope

that we can shed some light on that philosophical thinking of people in our country, as well as the practical application of different

kinds of thinking to the compensation that we provide for these

men and women on whom, I think, rest a tremendous value relative to the stability of our Government, the stability of our Nation

and the continuous progress of us as a people. So I look forward

to the testimony of today’s witnesses and thank you very much,

Mr. Chairman, for holding this hearing.

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

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Mr. PORTER. Thank you, Mr. Davis.

Congresswoman Holmes Norton.

Ms. NORTON. Thank you, Mr. Chairman. And I thank the GAO

for its report.

I agree with the ranking member, we have been concerned with

the rank and file salaries, particularly as health care has gone up.

As we speak, we have done very little to make sure that the best

and the brightest continue to choose Government. I suppose that

is where my focus is and where I think it has to be.

But I do not want to be understood as believing that the problem

that the GAO report addresses is not a serious problem and that

it shouldn’t be considered. I think it certainly must be considered.

I simply offer the context in which I think all thought of pay raises

in a period like this must be viewed.

These very high level leaders are indeed at the height of their

career. We are talking, let’s understand who we are talking about.

We are talking about political appointees. We are talking about

judges and justices. We are talking about people who, at the moment they decide to come into an administration already know

that, for example, the students that I continue still to teach, whenever I go back to teach at Georgetown, instantly make more than

a Federal judge and instantly—I am talking about the top firms

and the first year out of law school. They make more the first year

out than their law professors. They make more than Members of

Congress. And they make more than Federal judges.

Any Federal judge, there is no, the plethora of them is the only

thing we have to worry about, the plethora of lawyers who want

to be Federal judges or Cabinet Secretaries boggles the mind. Bear

in mind also that our country has been over-lawyered since Thomas Jefferson. There are so many of them that I literally, when I

first began to teach, and even before I got tenure, I told my law

students, look, sorry, I told students who came to be me because

they knew I was a law professor, look, if you have a good, analytical mind, I don’t want to train you away from what you are considering. But you really ought to consider that the one profession that

is full of folks is us. And you ought to consider across the board.

That is just how seriously I feel about the glut of lawyers seeking

positions at the highest level with the Government.

Again, I don’t want to be understood as being against adjusting

the wages of people who have seen no adjustment in real terms in

30 years. I do believe it is only fair to note that first of all, Cabinet

Secretaries have to be separated from judges. You want to be a

Cabinet Secretary because you want to get out here as quick as you

can to use the fact that you have been a Cabinet Secretary in order

to go and really cash in. And that is whether you are in Democratic

or Republican administrations. I don’t know why they would be

lumped together except of course, their salaries have not gone up.

The whole notion of trying to ‘‘attract’’ them to political appointments that there are maybe 1,000 people for every single one of

them who are overqualified is not what I think we should be about

to keep them is a political matter and not a salary matter. And we

have seen that they do stay, in this administration, for example,

a fairly long period of time. And I have not noticed, even in the last

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administration, that there was a lot of turnover. Yes, some turn

over, but not any more than one might expect.

Now, to go to judges, a lawyer has to really make a focused decision if he takes a position for life. I disagree with the Chief Justice

of the United States who said recently in testimony that the failure

to raise judicial pay was a direct threat to judicial independence.

Hogwash. This has nothing to do with judicial independence. When

it says that a judge is appointed for life, it doesn’t mean that if he

leaves before his life ends the public loses. For life to him, particularly at a period when people often change what they want to do

or get financial pressure they may not have had before means he

goes. But he doesn’t go because of anything internal to judicial administration or justice.

So the fact that there is some turnover, the ranking member is

right, we have to understand what kind of turnover we mean. Because I suggest to you that the figures do not show that there is

huge turnover in the Federal judiciary. And particularly since lawyers work off of the premise ‘‘know or should have known,’’ and the

notion that your salary hasn’t been raised in 30 years when you

took an appointment last year from the President or from the prior

President, don’t think they don’t know that.

So as much as I think adjustments are due, these are the very

people, these are the last people, people who are the most replaceable in our country, a bunch of lawyers. Too much of our talent is

out there. That’s why all of them want to come in and get some

distinguishing feature, like having been a judge. And we have not

seen that they hop in and be a judge and then go out. But I can

tell you this: that even a judge who is a district judge or court of

appeals judge, and he goes someplace, he is going to land big time

in a law firm making a lot of money. And yet they are not rapidly

leaving.

Democratic Members said this year that they did not think the

Members of Congress should take a pay raise until the minimum

wage was raised. Now, Members of Congress are not hugely overpaid. But it did seem to me that was the kind of thing to do to set

an example for the rest of the country. The lowest trick that I have

ever seen was paid by the majority, because what they did was to

attach our salary as well as the minimum wage to the estate tax,

hoping that there would be enough greedy Members of Congress so

that whole package would pass, and it failed, at least in the Senate.

I would be for some adjustment for these highly paid people

whose career will land them even better things if they decide to

leave when in context we deal with first those who have no place

to land but further at the bottom without an increase in minimum

wage. Then with the rank and file employee of the Federal Government, especially those who are now have seen no increase in the

amount we will pay, percentage we will pay of their health care insurance ever. Same percentage here. And when that balance is

brought to bear, and that is the only context in which I think we

should consider adjustments. We should look across the board. We

will see that the highest ranking people are further behind. To him

who is given most, he should be willing to give back most.

15

When that is done and we are just recognizing that these people

have made a very conscious decision to give up salary in order to

have these very distinguished positions, and then recognize that we

are uncompetitive in seeking employees, for example, who can go

to one of the dot come capitals right out here in Northern Virginia,

when we see all of that in context, then yes, the Justice of the Supreme Court and his eight colleagues, and yes, the judges of the

district courts and the courts of appeals shall and should be adjusted. And they should be adjusted in the context of adjustments

that are due millions of others.

Thank you, Mr. Chairman.

Mr. PORTER. Thank you. Mr. Cummings.

Mr. CUMMINGS. Thank you for holding this important hearing

today, Mr. Chairman, to examine the pay rates for Federal executive and judicial positions. I was troubled to learn from the Government Accountability Office report that you requested that is entitled Human Capital: Trends in Executive and Judicial Pay that we

are not offering competitive salaries to our Government’s top officials.

As you know, the report finds that the salaries for the Federal

Government’s senior leaders, including political appointees and

Federal judges and justices, have not been keeping pace with inflation on the growth of wages over the past 30 years. To the contrary, adjusted for inflation, they have actually gone down over

time.

Adjusted based on GDP, the salaries for Cabinet Secretaries have

gone down 27 percent since 1970. Supreme Court justices have

seen a 19 percent cut. Just think of what that means, adjusted for

GDP, Chief Justice Warren Burger made more than Chief Justice

John Roberts makes. And Secretary of State Henry Kissinger made

more than Secretary of State Condoleezza Rice.

I think we can all agree this reality is unreasonable. We send a

poor message to our Nation’s most important leaders by giving

them a pay cut. And the cuts have not only been felt in high profile

positions. A January 2003 report of the National Commission on

Public Service found that in 2003, about 70 percent of the Senior

Executive Service received level pay due to pay compression.

We have an obligation to the American taxpayer to keep overhead costs in all levels of Government low. But there comes a point

where we will no longer be able to attract our Nation’s best and

brightest because we are unwilling to pay them. We must compete

on a level playing field with the other industries that are pulling

talented individuals in these fields. We can only do so by offering

appropriate salaries. That is why I appreciate your dedication to

this issue, Mr. Chairman, and I look forward to learning more

about how we can implement the recommendations that the GAO

has made with regard to addressing this problem.

I look forward to the testimony of our witnesses today and I yield

back.

[The prepared statement of Hon. Elijah E. Cummings follows:]

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Mr. PORTER. Thank you, Mr. Cummings. I ask at this point for

unanimous consent that all Members have 5 legislative days to

submit written statements and questions for the hearing record,

and that any answers to written questions provided by the witnesses also be included in the record. Without objection, so ordered.

I ask unanimous consent that all exhibits, documents and other

materials referred to by Members and the witnesses may be included in the hearing record, that all Members be permitted to revise and extend their remarks. Without objection, so ordered.

It is also the practice of this committee to administer the oath

to all witnesses. I have always wanted to have the oath done by

a judge, so this is a real pleasure for me today. [Laughter.]

So if you would all stand, please. Please raise your right hands.

[Witnesses sworn.]

Mr. PORTER. Let the record reflect that all witnesses have answered in the affirmative. Please be seated.

Our first panel, I would like to invite a witness to the table who

has spent a little time with us in this subcommittee, and we appreciate your being here, Mr. Walker. Mr. Walker is the Comptroller

General of the Government Accountability Office. Again, I think

that your office is a part of this establishment, for years, and we

appreciate what you have done. Welcome, and we will appreciate

your testimony.

STATEMENT OF DAVID M. WALKER, COMPTROLLER GENERAL

OF THE UNITED STATES

Mr. WALKER. Thank you, Mr. Chairman, Ranking Member Davis,

other members of the subcommittee. I appreciate the opportunity

to be here today to report on our latest report dealing with trends

in executive judicial pay. This is a copy of the report, which it is

my understanding all of you have had an opportunity to receive

and review.

I assume that my entire statement will be entered into the

record, and therefore, if it will be, I will just summarize. Is that

all right, Mr. Chairman?

Mr. PORTER. Please.

Mr. WALKER. Thank you.

In our report on executive and judicial pay, we found that generally, the salaries for the Federal Government’s senior leaders, including political appointees and Federal justices and justices, have

not kept pace with inflation or the growth in wages over the last

30 years. Our work is consistent with the National Commission on

Public Service’s findings that salaries for top Government officials

have not kept pace with inflation or maintained a reasonable relationship to the market.

And I have two exhibits up here that are in my testimony, the

far one on the left is Appendix No. 1, which is part of my testimony, which talks about the differences in pay based upon adjusting for CPI as well as the GDP deflator. And the one on the right

talks about what has happened over time looking at a variety of

indices, whether it is wages, prices or other types, as well as very

specific positions, to try to help bring this home.

I would respectfully suggest that while executive and judicial pay

overall has declined in value when adjusted for inflation and as

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compared to other indices, that any restructuring of executive and

judicial pay should consider basic pay received as only one part of

a total compensation package. We need to be looking at total compensation, not just cash compensation. Total compensation includes

such elements as cash, basic pay, locality pay, cash awards and bonuses, noncash benefits, such as annual and sick leave, health insurance and deferred benefits, such as pension and retiree health

and other benefits such as life insurance.

For example, at present, selected executive level positions or executive schedule positions, administrative law judges, inspectors

general and Federal justices and judges, do not receive cash awards

and bonuses due to the nature of their positions, while career senior executives may receive them. All of the executive level positions

may receive noncash benefits, such as health and life insurance

and retirement. However, there are significant differences in retirement benefits, such as larger retirement benefits for Federal justices and judges, compared to many executive level positions.

Organizations in the Federal Government may need to be flexible

in order to look at not only how much they are paying but in what

form they are paying it, whether it should be in cash, current and/

or deferred benefits. Thus, the Federal Government may need from

time to time to shift the balance in total compensation between pay

and benefits in order to do what Ms. Holmes Norton and several

of you said, and that is, in order to be able to attract and retain

top talent.

I would, however, respectfully suggest that not all executive level

positions are equal, and that we need to do a much more thorough

analysis of the difference between these types of positions. For example, while there is no question that the Federal Government

wants to be in a position to attract and retain not just enough people but top quality people for these critical positions, we need to

keep in mind that there are several criteria that executive and judicial pay plans should meet in our opinion.

First, they need to be sensitive to hiring and retention trends. Do

we have a problem or not? Are we having difficulty in attracting

and retaining an adequate number of people with the right type of

quality? It is not just number, it is also quality. And you don’t necessarily want to wait until you have a huge problem before you

solve the problem. But we need to be aware of that. Look at supply

and demand, look at whether or not we are having a problem.

Second, we need to pay more attention, I believe, to something

that Ms. Holmes Norton touched on, and that is, we need to look

at the responsibilities, the skills and knowledge, the tenure and the

contributions of these positions. For example, I would respectfully

suggest that a political appointee who is in a policy position who

by definition is only going to be in that policy position for 2 to 4

years, in most circumstances, is fundamentally different than a

person who is in a professional position that requires a degree of

independence that is going to be in a position for a number of

years, and therefore is making much more of a sacrifice as compared to the opportunity cost of what they could get in the private

sector versus the public sector.

I think we also need to make sure that they are transparent,

that they are marked as sensitive, flexible to economic change, that

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they are affordable and sustainable and that they are competitive.

With that, Mr. Chairman and members of the subcommittee, I

think I would reinforce that yes, there is an issue here. There is

a very real issue here. But any restructuring of executive and judicial pay should not treat all positions of the same level necessarily

the same, that we need to do a more substantive analysis than

that, that we need to consider total compensation, not just base pay

and cash compensation.

And that moving forward, there may be a need for a commission

to look at various options for how best to handle this and to try

to de-politicize the issue, including whether and to what extent certain positions ought to be coupled with congressional pay. Right

now, as you know, there are a number of positions that are directly

coupled with congressional pay. I think that has to be looked at.

As you know, the National Commission recommended a decoupling

in that regard.

And last, but certainly not least, to reemphasize, if we look in

substance at what type of skills and knowledge is necessary, how

long a person is likely to be in that job, whether or not that job

requires a degree of independence, such as inspectors general and

judges, I think those are factors that we need to be considering to

a much greater extent than we have in the past. I have been a

Presidential appointee of President Ronald Reagan, President

George Herbert Walker Bush and President Bill Clinton. The fact

is that the first two appointments, I knew by definition I was going

to be in for a short period of time. In my current position, I made

a 15 year commitment.

Those are fundamentally different things. And I think that we

need to understand that and recognize that to a greater extent

than we have in the past. Thank you, Mr. Chairman.

[The prepared statement of Mr. Walker follows:]

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Mr. PORTER. Thank you, Mr. Walker. I think maybe you need

combat pay. I see that your arm is in a sling. We are glad you are

OK.

Mr. WALKER. You should see the other guy. [Laughter.]

Mr. PORTER. We are glad you are OK. Thank you for your testimony, and to your staff. I know they put a lot of time into putting

this report together. So we appreciate it.

I would like to elaborate a little bit on the reestablishment of the

salary type commission. What do you see are some of the critical

factors that should be discussed, who should be on the committee,

and your different ideas?

Mr. WALKER. Well, as you know, there have been committees in

the past, some of which were staffed, some of which exist in law

but have never been staffed. I think we have to recognize the reality that this is an important, complex, controversial issue that

also has potential political implications. And given that fact, I

think we have to professionalize the process.

I think serious consideration needs to be given to having a credible and capable commission, comprised of both professionals and

other noted individuals with credibility on both sides of the aisle,

who would end up doing the type of analyses that I talked about,

a more thorough analysis than has been done in the past, and

could make recommendations that would require, for example, a response by the President, would require congressional hearings,

mandatory, and possibly require congressional action within a certain period of time, possibly with amendments or limited amendments.

We need to figure out how we can professionalize the process,

make it more routine and yet recognize the reality that there are

problems with the American people. The American people don’t

necessarily understand or appreciate some of the issues that we are

talking about here to the extent that they could and should.

Mr. PORTER. Thank you.

Mr. Davis.

Mr. DAVIS OF ILLINOIS. Mr. Walker, I was trying to think, do you

think it would have any real bearing if we were to ask the American public in a way what they thought about the issue? And I

don’t know if we would necessarily make use of a poll, or find some

way to glean as much thinking from the public as we could glean,

relative to their thoughts on the issue?

Mr. WALKER. Mr. Davis, I would respectfully suggest that there

are a number of issues, and this may well be one of them, that

there needs to be more public education, more outreach, and more

citizen engagement than there has been in the past. Frankly, most

members of the public aren’t experts in competitive compensation

practices. They are not experts in the nature of compensation in

the Federal Government, much less the nature of compensation in

the private sector. They don’t know how many of these executive

level positions are political appointee positions versus career. They

don’t know, for example, how many of these positions are people

that come in for 2 years, end up going out and making a lot more

money in the private sector, which, as I say, that should be treated

fundamentally differently than people who are making a longer

term commitment.

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So I think education and citizen engagement is an important

part to addressing this issue, as well as other issues.

Mr. DAVIS OF ILLINOIS. I was trying to think of, how did we get

to where we are in terms of how did we actually begin to determine

value? It seems to me that compensation has a great deal to do

with one’s interpretation or acknowledgement of value in terms of

saying, this is worth so and so, this is worth so and so. It seems

to me that whatever the public is willing to buy, that is what they

are sold. I think of athletes who earn $40 million to play baseball,

or $100 million to play football. The public says, we are willing to

buy this, because we are prepared to buy the tickets for the games

to generate the revenue that it takes to be able to pay these individuals.

Would it be rational to try and look at what takes place in the

public sector versus what takes place in the private sector? Delegate Norton talked about what beginning attorneys might expect to

earn in certain kinds of practices, and in some ways, this will supersede what a senior judge might earn in the public environment.

Maybe back into compensation by looking at the private sector, and

then trying to attach public value as a possible way of arriving at

a decision.

Mr. WALKER. Several thoughts about that. No. 1, I do think it

is relevant to consider private sector compensation practices as an

input mechanism to try to help inform the public and to try to help

inform any decisionmaking that is made here. However, I would

also respectfully suggest that there are fundamental differences between the public sector and the private sector. All of us in this

room recognize that those that go into the public sector are doing

it to maximize their self-worth, not their net worth, and to make

a difference for the country and their fellow man, not to be able to

maximize their bank account.

So we just need to understand that. So I don’t think that we

have to, nor should we expect to pay the same amount of compensation for the same level of responsibility in the public level as

the private sector, because people are looking for, they have different motivations and certain kinds of people are going to work in

the public sector versus the private sector.

At the same point in time, we need to pay enough to be able to

attract and retain top quality people, to be able to compete for the

best and brightest. And in that circumstance, I think we have to

do a little bit more through analysis than we have done in the past.

If you look at our compensation practices, they are very hierarchial

based. They are kind of like the 1950’s, here is the hierarchy,

where are you in the hierarchy.

One of the things I would respectfully suggest we need to do is

we need to do something that several of you talked about. We need

to do a more thorough analysis. What are the skills and knowledge

and education that is required for this? Is this a position that we

are asking for a long term commitment for? Is this something that

we need a degree of independence for? Or is it something that

somebody is coming in at a high level position to serve their country for 2 years and then they are going to be going back out to the

private sector and they will probably, frankly, make money, more

money because they did that?

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I think we need to have a more professional and thorough analysis than has been done in the past, rather than a mere hierarchical

approach.

Mr. DAVIS OF ILLINOIS. Thank you very much.

Thank you, Mr. Chairman.

Mr. PORTER. Congresswoman Norton.

Ms. NORTON. Thank you very much, Mr. Chairman.

Could I begin, Mr. Walker, by just noting that Federal employees, of course, I believe you would agree, work within a market system. Federal Government has tried, not always successfully, to

take that into account. Would you agree that there are many Federal employees who, if they chose to leave today, could earn more

in the private sector?

Mr. WALKER. No question. I think that is something we have to

consider when constructing Federal compensation practices.

Ms. NORTON. Indeed, what we are finding, of course, is that early

retirements, it is really heartbreaking to see it, early retirements

and even before retirement, people go out and work for a contractor, because they can instantly make more money. So I think I

want to just establish for the record that Federal employees on

whom we depend for homeland security, for vital occupations, work

non-competitively with the private sector. That said, let me move

on.

Considering that we are speaking in the context of supply and

demand, I have to chuckle, because women are always told, that

well, you earn less because after all, there are too many of you applying for the same job, the same kinds of jobs. The Federal Government has made adjustments for a few rarified occupations that

are indispensable. For example, scientific occupations or other

highly skilled occupations.

Is it your view that we have not been able, excuse me, that is

not my question, I just want to note that for the record.

Would you agree that being a lawyer in a market system based

on supply and demand is not a skill that is scarce in this society?

One of the things I teach in my seminars is that if this generation

of lawyers does not learn how to cut through all the harm lawyers

have done the whole economy will suffer tremendously.

So I am trying to get to why we would want to rush in, even

though I want to stipulate again for the record, I don’t think anybody should be 30 years without having at least some more adjustment in real terms than these very senior people have. But I assume that in making this case, GAO has looked at whether or not

there has in fact been turnover of the kind we would want to discourage. What has the turnover been for Cabinet Secretaries? What

has the turnover been for district court judges? What has the turnover been for justices of the Supreme Court? What has the turnover been for judges of the courts of appeals of the United States?

Mr. WALKER. I believe that it is essential that more analysis

needs to be done on that. That is one of the reasons why I think

considering some type of a commission approach is appropriate,

and for that commission to be informed, not just by this type of information, but also the type of information you are talking about.

I think one of the things we have to keep in mind is that while

this is factually accurate, it also starts with 1970 and by starting

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with 1970, it assumes that everything was properly aligned in

1970. We haven’t done the baseline analysis that I recommended.

We have never done the baseline analysis that I have recommended, which needs to be done. So this starts with that assumption, which may or may not be a valid assumption.

Ms. NORTON. Did the GAO consider, and I appreciate very much

tat you have separated out the kinds of employees, high level employees we are dealing with, and we are not lumping people who

go out and make a mint with people who have appointments for

longer periods of time, including life. Did you consider the value of

having served for the person who has not gotten the increase you

would like to see him have? Have you considered the value of having served for the Cabinet Secretary?

For that matter, did you consider the value of having served for

a lawyer who has wanted to be a judge all his life, even though he

may consider now he has children in college and has to get out, the

great honor that many believe they have when they become a district court judge? The value of that, or is the value of having served

as Cabinet Secretary a part of this analysis that says they are underpaid?

Mr. WALKER. It is not part of this analysis. But as I tried to

touch on, I do think it is relevant to distinguish between what is

the nature of the position, are we having a problem, how long is

that person likely to stay there, and to what extent it is a true economic sacrifice versus not. Now, one would expect that most Federal judges, subject to doing an initial analysis, would intend to

stay for the long term. So if they are making a long-term commitment, then they are going to be more affected by not keeping up

over time due to power of compounding than somebody who you

pointed out who comes in to be a Cabinet Secretary, comes in to

be a deputy Secretary for 2 years and then goes back out to the

private sector. Because by definition, their job is temporary.

Ms. NORTON. Mr. Walker, I appreciate something you said in

your testimony about looking at non-economic compensation. And

just let me suggest for people who have finally become a judge of

the Supreme Court, that is only nine people. Sometimes I think

that being a Justice on the Supreme Court is a guarantee of longevity. Because if you want to find a group of people who never

leave, you just look at how long Justices serve. The only question

I think Congress may 1 day feel, because the Justices and judges

themselves have, we have been investigating a judge up here, because judges haven’t looked closely enough at themselves. Somebody gets senile and nobody does anything about it, because they

are there so long.

But consider, Mr. Walker, that a Justice who works very, very

hard, they must be very robust, because they work into old age and

do a lot of work. But they are off all summer. If they get sick, they

can be gone for as long as they see fit. If you are a senior judge,

sitting on as few cases or as many as you would like, that means

you are retired. You still get your full compensation.

I am trying to find ways in which particularly judges, and to separate them out, I should feel sorry for at a time when we can’t get

any increase in the minimum wage and the rank and file Federal

employees are fleeing the Federal Government as if it is a training

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ground, take what we have invested in them and go invest it in the

private sector.

So I am trying to find a way to find somebody to feel sorry for

in here. And I am not having a lot of luck.

Mr. WALKER. You are making a case for one of the points that

I made. And that is, you can’t just look at base compensation. You

have to also look at other elements of compensation, including pensions and including other provisions that go with the job. You just

can’t look at base pay. You have to look at all those issues, too.

Ms. NORTON. Well, I just want to submit for the record, Mr.

Chairman, I think the Congress has done a good job at doing that.

Because of the salaries, because of senior judges, because of Justices, there may be something we need to look for. Again, every

time I find somebody to feel sorry for, a district judge who may

work really hard because trials are hard, I keep thinking of the

reams of lawyers who want to be district court judges. And I can’t

reconcile that with supply and demand that is always thrown in

our face and somehow being afraid about the quality.

Therefore I really have to ask you this question. Do you believe

that the quality of the judiciary has been in any way affected by

the salaries that you have described?

Mr. WALKER. I cannot say that has been the case. But I think

the potential exists for it to be the case if something is not done

eventually.

Ms. NORTON. Again, I want to stipulate again that I think something should be done. But I am asking these questions in order to

stress my point about context. And I am not sure there is a Member of this Congress, frankly, in this context, who would go now,

and the chairman is certainly not suggesting that, to the highest

level people in the Government.

One final question, Mr. Chairman. This is a thoughtful report.

You look for ways that might in fact accomplish what you want to

accomplish. And you look for options. There is one part of your report that I have to take issue with. But maybe I don’t, maybe you

can explain it to me. And that is the notion of performance based

bonuses. Apparently, for political appointees who are subject to

Senate appointment, for the life of me, I know everybody is into we

have to give those who work hardest special compensation. But for

the life of me, for people who, as you say, never intend to work for

terribly long, are rewarded handsomely, simply by having held the

position, even if they did a putrid job in the position.

The notion of putting us to work trying to find whoever would

do it, and there you come to a real problem, but trying to find the

difference between the Secretary at HHS and the Secretary of

Labor, seems to me to be a useless exercise. These people are supposed to work their little behinds off for the time they are here. I

have ever reason to believe they do. They are very high pressure

jobs. And it is, it seems to me, a stretch to take the performance

based notion and try to apply it to political appointees who should

need, and I stress this, should need no incentive given all they

have to gain. No incentive to do the best job they can.

If the point of the performance based is to say, we want you to

work harder, if you get this, you will work harder, we want to distinguish you, we want to distinguish you between those who don’t

42

work hard and those who do, then it seems to me that it is out of

place to say to somebody that high in the Government, we are

going to distinguish between those of you who work hard and those

of you who work a little harder.

Mr. WALKER. I do not think it is an across the board issue. Let

me give you an example where there is a problem right now, and

which could become more acute. As you know, senior executive

service members that are career officials who are part of a performance based, who have an adequate performance oriented appraisal

system, can be approved by OPM for that agency to have base pay

up to level 2, which is what I make.

In addition to that, they can receive bonuses that will allow them

to make up to the amount that the Vice President of the United

States makes. That is a fact. And there are people that are in that

situation.

You have certain positions, for example, let’s take the inspector

general position. There are Presidential-appointee inspector generals who are supposed to be professional, who are supposed to be

independent, who by statute are level 4 positions. So by definition,

they are making significantly less——

Ms. NORTON. Let me ask you then, the reason I asked this question is, you give us examples on page 10 of your testimony, and you

do give some that one might understand, because they are more

like SESers. Selected executive schedule positions that are appointed by the President, subject to Senate appointment, including

selected IGs, ALJs and Federal justices and judges do not, do not,

that is, referring back to receive bonuses. Now, would you amend

that? How are you going to give a bonus to a Federal judge, sir?

Mr. WALKER. And I think there are certain positions where you

don’t want to. All the more reason why you have to look at what

is an appropriate level of base compensation.

Ms. NORTON. So you are not arguing that judges——

Mr. WALKER. I am not necessarily arguing that you do it across

the board. There may be circumstances. But if you don’t give a

bonus, then you need to think about what does that mean from the

standpoint of base compensation.

Ms. NORTON. Thank you, Mr. Chairman.

Mr. PORTER. Thank you.

Mr. Walker, thank you for being here today. We appreciate your

testimony, and get well soon.

Mr. WALKER. Thank you.

Mr. PORTER. What I would like to do is combine panel two and

three. We will be voting here shortly, so I will apologize in advance,

I am not sure how many votes we are going to have, but I will let

you know when that comes through.

Gentlemen, we appreciate your being here. We have with us D.

Brock Hornby, judge, U.S. District Court for the District of Maine,

chairman of the Judicial Branch, Committee of the Judicial Conference of the United States; Judge Philip M. Pro, chief judge and

a good friend of mine, U.S. District Court for the district of Nevada.

And Judge Pro, my partner, Mr. Davis, was just in Las Vegas. And

he has speeding tickets he would like your help with. [Laughter.]

Not really, just kidding.

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Also the Honorable Sean O’Keefe, chancellor of Louisiana State

University, former Administrator, National Aeronautics and Space

Administration. And our third panel is Dr. Gary Burtless, John C.

and Nancy D. Whitehead Chair in Economic Studies, the Brookings

Institution.

I would like to begin with Judge Hornby. Welcome. We appreciate your being here today.

STATEMENTS OF D. BROCK HORNBY, JUDGE, U.S. DISTRICT

COURT FOR THE DISTRICT OF MAINE, CHAIRMAN, JUDICIAL

BRANCH, COMMITTEE OF THE JUDICIAL CONFERENCE OF

THE UNITED STATES; PHILIP M. PRO, CHIEF JUDGE, U.S. DISTRICT COURT FOR THE DISTRICT OF NEVADA; SEAN

O’KEEFE, CHANCELLOR, LOUISIANA STATE UNIVERSITY,

FORMER ADMINISTRATOR, NATIONAL AERONAUTICS AND

SPACE ADMINISTRATION; AND GARY BURTLESS, JOHN C.

AND NANCY D. WHITEHEAD CHAIR IN ECONOMIC STUDIES,

THE BROOKINGS INSTITUTION

STATEMENT OF D. BROCK HORNBY

Judge HORNBY. Thank you, Mr. Chairman. Thank you for holding this important hearing, and thank you for inviting members of

the judiciary to attend and participate. As I told you in the hall,

the only other time I have testified in Congress, I was with Judge

Pro. So I am pleased to be here again testifying with him.

Mr. PORTER. Well, Judge, any good stories on the judge, I would

like to have them. You can give them to me later. [Laughter.]

Judge HORNBY. And can I assume that our written remarks are

incorporated into the record?

Mr. PORTER. Yes, they will be. Thank you.

Judge HORNBY. We believe that the Federal judiciary is at a

crossroads. If the current situation is not checked, we believe that

pay compression is going to threaten our ability to recruit and retain experienced, professional judiciary employees as well as talented judges. We have 5 years of missed COLAs for the Federal judiciary, and for Congress, I point out. And they have had a substantial impact, there is a chart up here to my left, that shows the

salary that you would be paid and we would be paid if the COLAs

had gone into effect as intended by Congress when the system was

set up versus what it actually is. Those are simply in real dollars

and reflect the decision of Congress to forego COLAs five times.

Second, the COLA that Federal judges and members receive is

automatically lower than what the general schedule employees receive. And since 1993, the result of that has been that the compensation of Federal judges and members has increased by 23.7

percent, whereas the compensation of general schedule employees

has increased by 57.5 percent. The reason for that is the locality

pay adjustment. Because when the ECI, the COLA percentage is

fixed, then there is a subtraction of the average locality pay. And

members and judges do not get the locality pay portion.

The result of that for the judiciary has been severe pay compression and indeed, inversion. If you look at the second chart, you will

see that there was a reasonable hierarchy in 1994 from the judges

on down through the circuit executives, the bankruptcy and magVerDate 11-MAY-2000 11:02 Nov 12, 2008 Jkt 000000 PO 00000 Frm 00047 Fmt 6633 Sfmt 6633 C:\DOCS\44956.TXT KATIE PsN: KATIE
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istrate judges, down to senior judiciary employees. And if you look

at 2006, you will see now, it is flat, and indeed that senior judiciary

employees and circuit executives now exceed substantially what

magistrate judges and bankruptcy judges can be paid, which are

capped by statute.

So we have not simply severe compression, we have actual inversion in what has taken place. And because salaries have not kept

pace with inflation, as you heard the Comptroller General say, the

purchasing power of Federal judges and judiciary staff has declined

since 1993, senior judiciary staff, whereas compensation in the notfor-profit area and the private sector has been spiraling upwards.

I am sure you have read the stories that we all read about what

1st-year associates now make at major law firms. Not only does it

well exceed what bankruptcy judges and magistrate judges are

earning, it is exceeding what district judge and circuit judges are

earning, once you add in the bonuses that they are paid. The compensation for judiciary executives is lower than that of the executive branch executives. Legislation enacted in 2003 raised pay caps

for career senior executives to as high as $212,000. Similar to what

you folks have done for your employees, we have capped compensation of non-judge employees at $165,200, the pay of a Federal district judge. So it is no longer competitive in that respect with the

executive branch. All these disparities have left the judiciary at a

serious disadvantage in competing for talent against all other sectors, private, not-for-profit, even other government entities.

We think there are three things that need to be done to correct

the situation. First of all, COLAs for the judiciary and for Congress

should equal COLAs for the general schedule employees, so that

those adjustments better reflect annual inflation and help the compression problem. Second, we think that the missed COLAs for

both the judiciary and Congress should be restored, alleviating in

part the substantial losses that have taken place in real dollars

over the past years as reflected on those graphs. And third, we believe that top level salaries have to be raised to alleviate pay compression and inversion in the judiciary.

And I wanted to make a couple of comments about the amount

of judges’ pay. We are concerned about what is going to happen in

the future to judges. Yes, judges do not expect and should not expect to be paid what partners make in major law firms. No one

makes that argument. They expect to take a financial cut because

there are wonderful rewards to the job in terms of the public service we can perform in terms of what the job holds.

But more and more judges now are coming out of the public service ranks. They are coming from the ranks of bankruptcy judges,

magistrate judges, U.S. attorneys, people who made the decision

long ago to spend their career in public service. Do we want a judiciary where we cannot find people from the patent bar to go on the

Federal bench, cannot find people who are skilled and experienced

in corporate law in dealing with some of these very difficult questions that Federal judges have to deal with? Do we want only people who are committed to public service on the one hand and only

people who are independently wealthy on the other? Or do we want

to maintain our tradition of having a diverse judiciary of people

from across the board?

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There was reference to Babe Ruth. And I am from New England,

and so I know more than most of you do that the Red Sox lost Babe

Ruth to the Yankees. [Laughter.]

And people in Maine understand that baseball players get paid

a lot of money, even though they can’t. People understand how the

market works. They understand that Jay Leno gets paid more.

They understand that their doctors get paid more. They understand even that their lawyers get paid more.

So even though judges should not be paid at the same level as

their private sector equivalents, there needs to be a recognition

that it is important to the well-being of this country that we have

good judges on the bench. And yes, when judges take the job, they

know there is going to be the sacrifice. But they expect to be kept

equal. They don’t expect that they are going to fall behind as life

moves on and as their kids go to college.

I see my time is up. And I will summarize simply by saying, we

are the third branch of the American Government. I believe that

all Americans want strong, talented people running their court system. And I am fearful that the current structure is going to have

a negative impact on judiciary employees and on Federal judges as

well.

Thank you, Mr. Chairman.

Mr. PORTER. Thank you, Judge. We appreciate it very much.

Next is my friend, Judge Pro, Chief Judge of the U.S. District

Court for the District of Nevada.

STATEMENT OF PHILIP M. PRO

Judge PRO. Thank you very much, Mr. Chairman and Mr. Davis.

Thank you so much for allowing me to participate today. I am delighted to do this, and want to thank you, Mr. Chairman, for convening this hearing and for calling for the study that has been conducted.

I was going to begin by talking from the perspective of a Federal

judge, but something Mr. Davis said provoked in my mind I think

a broader and a very important question. If I could pick up on that,

the value of our employees in government service and public service. You both have touched upon the importance of this.

As one who has worked in government in one capacity or another

and as a judge for 26 years, I can tell you that the folks in public

service, at least that I work with in the courts, and I know this to

be true of others, are valuable people. They perform wonderful

service for this Government. And it is important to the citizens of

this country, I think, that people who seek jobs in public service

continue to find some incentive to do so, not disincentives, not

carry a burden beyond that which we might expect them to bear.

People are drawn to public service for a wide variety of reasons.

But I think that all of us, for example, who become judges cherish

the fact that we are honored to hold an office such as that of Federal judge. I know that Members of Congress surely feel the same

way. But so do our probation officers, so do our pre-trial services

officers, so do our clerks of court and deputy clerks of court who

feel that they are making a very important contribution to the operation of our Government, because they are making an important

contribution in so many different ways.

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Our system depends, our democracy depends upon an informed

public, certainly, exercising its franchise, but it depends as well

upon citizens willing to undertake the many responsibilities of public service. And it is easy to talk about the folks that we characterize as in leadership positions, whether they are Members of Congress or judges or senior Government officials, and keep the focus

on them. But the value runs through the entire system, in all of

the individuals who commit to public service deserve to be compensated fairly.

An independent judiciary is essential to the rule of law. It is essential to the democracy that we live in. And I fear that as we

progress, there has been study after study after study which has

demonstrated the inequity in the compensation that is available

currently to Federal judges. As my colleague Judge Hornby said, no

judge expects to be compensated at the same level as a partner in

a law firm, anything of that type. We have made a choice. And it

is a choice, as Congresswoman Norton said, with our eyes open.

And there are other lawyers that would love to be Federal

judges, I don’t doubt that. But if we are to continue to attract and

retain the best and the brightest available lawyers to become Federal judges, if we are to attract and retain the best and the brightest people to other sectors of Government, we have to compensate

them fairly and at least competitively with the private sector, so

that they are not forced to take vows, what a colleague of mine

calls vows of dignified poverty.

A judge who accepts a lifetime appointment does so with his or

her eyes open, there is no question about it. It is a lifetime commitment to public service. And we should not, I suggest, after years

in office, be forced to consider whether we continue to do something

that we love doing, that we think is important, and choose between

that and educating members of our family or supporting our family.

I can speak anecdotally just from the District of Nevada, Mr.

Chairman, with which you are very familiar. In the past 18

months, one of my colleagues left the Federal bench to enter the

private sector, alternative dispute resolution. He did not want to

leave, it is Judge David Hagen. He did not want to leave the bench

at all. He had three children in college, he simply could not afford

to remain as a U.S. district judge.

We recently selected a new bankruptcy judge, which took office

last month, in our court, Judge Nakagawa, Mike Nakagawa. When

the net was cast for applicants, I talked to a great many lawyers,

members of the bankruptcy bar, excellent lawyers, who told me

that they would not seek the position, even though they would love

to do it, because they couldn’t afford that economic downturn that

they would face.

We have had difficulty in some cases filling positions, finding the

best people, thankfully we found some good ones, in our technology

departments, IT departments. That is always a difficult for us. And

Mr. Davis, I think that poll that you talked about would be an interesting poll. But I think if the question were posed with where

you began, what members of the public do you think, not so much

as what is the dollar figure that these people in various positions

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should be paid, but what is their value, I think you would perhaps

get a different response, I hope you would.

And I hope that the American public recognizes, and I know it

is a difficult matter for the Members of Congress to address and

to face the scrutiny that you do face and the responses that you

face when you talk about subjects like pay. It is a delicate, delicate

subject. It is a difficult subject. Your responsibilities are heavy in

making those kinds of decisions, just as those of a judge are sometimes heavy in making the decisions we have to make. And I respect that.

But we have judges who are leaving the bench. There are, it is

my understanding in response to one of the questions posed earlier,

since 1990 there have been 100 article 3 judges who have left the

bench. I don’t have that number in front of me, I don’t have the

numbers, but I believe we can provide that for you, it is approximately that number, some eight or nine this year alone.

I don’t want to belabor my testimony on this part, other than one

baseball metaphor that you all mentioned about Babe Ruth. I went

on the internet last night and I saw that umpires are paid between

$87,000 and $357,000 a year, depending upon their experience, for

calling balls and strikes. Well, we spend a lot of time calling balls

and strikes in a form, too, in our courts every day. And I don’t

know of any judges that are paid close to what a baseball umpire

is. More power to them, I am sure they have a difficult job. But

so those who sit as Members of Congress, so do those who sit on

the Federal bench, so do those that work within Government in

senior capacities and otherwise.

So I would urge your committee and Congress to move forward

with relief in this area. Thank you very much.

[The prepared statement of Judge Hornby and Judge Pro follows:]

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Mr. PORTER. Thank you very much.

There are those that would suggest that we cap attorneys’ fees.

That would equalize this problem. [Laughter.]

But that is not why we are here today. We have the Honorable

Sean O’Keefe, Chancellor of Louisiana State University, former Administrator, National Aeronautics and Space Administration. Welcome.

STATEMENT OF SEAN O’KEEFE

Mr. O’KEEFE. Thank you, Mr. Chairman and Congressman

Davis. I appreciate the opportunity to spend time with you. Of the

better than 150-odd hearings I have had the opportunity and privilege to testify at, this is the first one I have appeared at voluntarily. All others were—[laughter.]

Mr. PORTER. We can arrange for you to come back, if you would

like. [Laughter.]

Mr. O’KEEFE. This is more fun than I can stand, Mr. Chairman.

I appreciate this. Precedents are to be set just once, that is for

sure.

But I appreciate the opportunity. This is an important question,

and it is one that again I think the fact that you are delving into

this issue is a sensitive matter, one that certainly is not the most

publicly popular one to do, but I commend you for taking on the

question.

I will say up front that I am not here at all to advocate for a

specific compensation rate for executive pay. That is not a matter

I think that will have any bearing, particularly given the important

analysis you have received from the Comptroller General, who can

provide far more insightful and helpful ways of looking and determining what competitiveness means, and comparability. So as a

consequence, I will not offer a view one way or the other in terms

of what rates are more or less competitive or comparable. Again,

I think the members of the judiciary here are far more qualified

in that regard, too.

I would offer, though, just a couple of points. The first is that we

adhere as a general principle to a very Jeffersonian model of how

we promote public service opportunities. There are varying ways to

describe that, but I think the preference that I would adhere to is

that model, for whatever set of circumstances in combination really

promotes and motivates a fair amount of mobility and it motivates

and encourages a level of public service across the public spectrum,

which is a desirable aspect.

That said, we ought to have eyes wide open in terms of what the

consequences of that would call for. I think there are three very important factors that bear on the executive leadership that we are

bringing in that have bearing on what I would call a subjective

competitiveness for compensation rates.

The first one is that it all depends on where you are in your station in life and age and professional experience in terms of the willingness and ability to be able to follow through. I think the very

eloquent statement that Justice Pro offered as to what motivates

all of us in public service, or who have been engaged in it, to involve ourselves in this. If you can afford it, you will stay is the botVerDate 11-MAY-2000 11:02 Nov 12, 2008 Jkt 000000 PO 00000 Frm 00065 Fmt 6633 Sfmt 6633 C:\DOCS\44956.TXT KATIE PsN: KATIE
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tom line, I think is what I heard very eloquently said. And I think

fried to its lowest denominator, that is it.

Earlier in a career or later in a career, it becomes a much more

conducive and easier opportunity, particularly if it tracks as closely

as possible from a longevity standpoint, with the age of each kid

that you may have. That has an important bearing, or did in my

circumstances. I have been appointed to Presidential appointments,

confirmed by the Senate on four separate occasions. On the first

two occasions, first as the Controller and CFO at the Defense Department, second as the Secretary of the Navy, I was at an earlier

stage in my career in which the kids were an awful lot younger.

As a consequence, they didn’t have a habit of eating quite as much.

As I came back to public service in the latter two capacities, as

the Deputy Director at OMB and later as the NASA Administrator,

they had unfortunately become teenagers and were also aspiring to

colleges. The combination of all that made it extremely difficult,

when you compound it with mobility and the Jeffersonian model of

leaving town, coming back, finding an opportunity to live in this

town, which is the least affordable place probably to look to for

housing opportunities. That compounds to make this a very shortterm kind of opportunity. Notwithstanding other interpretations,

that was the one that certainly influenced mine.

I would also add to that, though, the second matter, which makes

it equally difficult in dealing with the matter of what is a base

level of compensation, which is the compounding effect of the ethics

rules. They are there for good and present reason. They are there

to avoid conflict of interest. They are there to avoid circumstances

in which folks would seek to display the kind of professional behavior that I think the Congresswoman’s comments earlier were right

on point, of the kind of efforts we seek to avoid in public servants,

of coming through the revolving door and seeking to establish some

kind of opportunity that then can be translated to some more remunerative case. That is what we seek to discourage by our approach. And that is commendable. In my view, I think it works.

But it works to a detriment in some circumstances, because as

you enter public service as a Presidential appointee or as an executive level appointee after having done something else, what it usually requires is liquidity of just about everything you own. I found

upon my return to public service as Deputy Director at OMB, the

Office of Government Ethics had perfected the conflict of interest

rules, and determined that if you have no interests, you will have

no conflicts. And they set about the business of assuring that I had

no interests, and they were all liquidated, every one of which were

required to be absolved, any investment in anything had to be liquidated. And at the time I entered, it was a market condition that

was less than desirable for that action.

So it made it virtually impossible for that liquidity to make of

any value to fall back on to the extent that it was a combination

of tuition demands as well as mortgage demands of moving back

to a high-priced town that made it a finite period of time which I

could serve. That is what determined ultimately the reason I had

to leave. It finally got down to the stage that several colleagues

who were in similar station, we all compared our Visa bills and determined exactly how much longer we could stand to pay the interVerDate 11-MAY-2000 11:02 Nov 12, 2008 Jkt 000000 PO 00000 Frm 00066 Fmt 6633 Sfmt 6633 C:\DOCS\44956.TXT KATIE PsN: KATIE
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est on it and then decided to withdraw. So it became a very difficult set of circumstances in that case.

The third factor I would say, very quickly, is the confirmation

process itself. This is one that requires an extended period of time

for consideration and I offer this not as someone who is complaining about it. In all four of the capacities in which I was confirmed,

not one took longer than 6 weeks. Matter of fact, the shortest took

three. I probably am one of the few people who will sit here talking

about this circumstance that is probably a world record, to have

had four appointments, all of which took that short a span of time.

I unfortunately am the anomaly in that case. Most of them take

6 to 8 months. As a consequence, most folks who are considering

executive positions and looking at the requirements to liquidate, to

do all the things necessary in order to meet the requirements

there, and then oh, by the way, come to a position which is not

competitive by any means from the executive compensation standpoint, ultimately make the decision to withdraw. The volume of

that I think is much larger than the number who are actually confirmed, just by virtue of the consequences that apply in these cases.

So in sum, I would say that those three factors, what is not a

competitive rate, but nonetheless a living rate, and I think in this

regard the Congresswoman’s points are just right on. But when you

compound that with a set of standards that are there for good and

present reason, they are there in order to assure ethical behavior.

It has the effect of limiting the amount of time that you can spend.

And the third one is, some folks make the decision to avoid it entirely because of the onerous process of even getting there in the

first place for what in the end will be a sacrifice that requires this.

The Comptroller General’s, I think a very important recommendation on a commission would be very, very well pursued, with all

three of these factors weighing in. Because any one of them individually will force a motivation of the original intentions, by any

one of those three.

And all three have very valid reasons. We seek to avoid profiting

or coming to public service in order to benefit by the remuneration.

We certainly seek to avoid folks coming as a matter of ethics to

public service for the purpose of a revolving door. And we seek to

go through the confirmation process in order to assure those who

come have a true objective for public service.

But the combination of all three has the effect, I think, of the

consequences we see and unfortunately, decisions that must be

made, certainly in my own case, of withdrawing from that service

regardless of my personal commitment, objective and intention

thereof.

I thank you, Mr. Chairman.

Mr. PORTER. Thank you very much.

I believe we are being called to vote. So we have about 15 minutes. I just wanted you to know that the bells indicate we are voting in about 15 minutes. What we would like to do is ask Mr.

Burtless if you would give your testimony, please.

STATEMENT OF GARY BURTLESS

Mr. BURTLESS. I am a labor economist, and so I look at these salaries differently from someone who actually has gone through the

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ordeals that people who have been asked to perhaps make big sacrifices to serve in public service have. The basic conclusion of

GAO’s report is that inflation adjusted salaries have not risen, in

fact have shrunk since 1970. It is very hard to argue with this conclusion.

Figure 1 in my testimony, which uses a somewhat different

deflator, shows exactly the same trend. We can also consider other

benchmarks, and as a labor economist, I think looking at other

benchmarks is also interesting. One benchmark is, what is the median income received by four-person families in the United States.

In Figure 2 in my testimony, I show what has happened between

1960 and the present. Between 1960 and 1969, the pay of executive

schedule 1 job was 4.2 times that of a median income four-person

family in the United States. But between 2000 and 2004, it had

slipped to just 2.6 times that ratio.

For office holders in executive 2 schedule, the same ratio fell

from 3.4 to 2.3. So it is not only the case that inflation adjusted

salaries at the top end of the Government pay scale have declined,

they have also fallen in relationship to middle class incomes in the

United States.

Another benchmark you might think of is the wage that is

earned by an average worker. Well, we can go back to 1909, the

Bureau of Labor Statistics has measured what an average manufacturing worker receives in the United States. And in chart 3 in

my testimony, I track the pay ratio of Cabinet officers and Members of Congress, because they represent ceilings on wages received

by many other people in the executive branch and in the judicial

branch.

You can see the top officer holders’ pay in the 1960’s was not an

aberration. In fact, it was lower in relationship to workers’ pay in

the 1960’s than top executive sector salaries were earlier on in the

20th century. So relative to the earnings of manufacturing workers,

both Cabinet and congressional pay was considerably higher before

1969.

But it is not very likely that the Government is going to be recruiting new executives, scientists, lawyers, technicians and so

forth from the ranks of production workers and manufacturing.

What we need to do is recruit job candidates from the same pool

of candidates which supplies executives, scientists, lawyers in the

private sector and in academia. Chart 4 in my written testimony

shows how Federal executive schedule pay stacks up against the

average pay of American workers with post-college degrees. As you

can see, top Federal salaries have slipped in comparison to this

benchmark since the 1970’s and also since the early 1990’s.

The reason for this is quite straightforward. Private sector salary

disparities have increased in the years after 1970. Workers with

the widest management responsibility, the highest technical qualifications, have enjoyed much faster pay gains than average production workers. But top Federal salaries have not kept up. They have

declined in inflation adjusted dollars.

When we examine the salaries paid to top Federal executives and

compare them with the compensation earned by people in the private sector who serve in equally demanding or frequently much

less demanding jobs, the gap in salaries is huge. I am not really

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worried that the Government is going to be unable to attract talented candidates for the very top jobs in Government. We can always find very good candidates who are wiling to serve as Secretary of Defense, as Governor of the Federal Reserve or as Assistant Secretary of the Treasury, for reasons that David Walker mentioned.

What the Government might not be able to do is to find strong,

ambitious candidates to serve lengthy spells in Government service

to attain GS–14, GS–15 and SES positions that have demanding

managerial, technical, scientific or legal responsibilities. For better

or worse, the executive branch requires the experience and talents

of very good people, as does the judiciary. And those talents largely

determine the Government’s success in carrying out policy and administering justice.

When an able 25 or 30 year old is thinking about the risks and

rewards of different kinds of careers, how many will be attracted

by a career where the top salary is not far above the starting salary in a law firm, where the top salary is below the average professor’s income in top ranked universities, where the top salary is far

below the typical partner’s income in an accounting firm? I am not

talking about law firms, I am talking about accounting firms. No

rational observer would claim that the best public servants are motivated solely by monetary rewards.

But no sensible person should think that the decision to serve in

a demanding position is totally divorced from financial considerations. Top executives, top doctors, top lawyers, top scientists in

business and academia have seen their compensation climb much

faster than that of ordinary workers over the last 25 years. But the

people who hold top Federal jobs in the judiciary and the executive

branch and the Congress have seen their pay shrink in purchasing

power and in relation to the pay of people who do similar and frequently much less demanding jobs.

I think pay levels affect candidates’ decisions to begin or to continue a career in Federal service. The long-term decline in top Federal pay has reduced the attractiveness of Government employment

and it has deprived the senior Federal service of many able candidates.

Thank you.

[The prepared statement of Mr. Burtless follows:]

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Mr. PORTER. Thank you, Doctor.

I want you to know you are all very lucky today, because we

have to be in the Capitol in about 6 minutes to vote and there is

a series of three votes, which could take 30 to 40 minutes. So instead of us asking you questions at this point, we will be submitting questions for the record. We appreciate very much that you

are here today.

Mr. DAVIS OF ILLINOIS. Mr. Chairman, could I just have a last

word. We talked about the umpires and referees and baseball players. I was just reminded of three guys getting ready for the World

Series. [Remarks being made off mic.] One said, let me take all the

close balls and strikes. The second guy said, well, give me all the

close ones and strikes. The third umpire said, well, now, as far as

I’m concerned, ain’t none of them nothing until I call them. [Laughter.]

Mr. PORTER. That sounds like some judges that I know. Again,

thank you all very much for being here. To Mr. Walker, thank you

for your time.

And one last point. I would like to recognize Tania, who is the

staff director of the minority side. She was engaged over the weekend, so congratulations.

[Applause.]

Mr. PORTER. The meeting is adjourned. Thank you all for being

here.

[Whereupon, at 3:35 p.m., the subcommittee was adjourned.]

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