Discussions on the federal workforce since the late 1990s have focused on the management ofhuman capital. The term "human capital" refers to "a concept that views employees as assets in thesame sense as financial capital ... [and] presupposes that an investment in human potential will yieldsignificant returns for the organization." (1) Humancapital also "describe[s] what an organizationgains from the loyalty, creativity, effort, accomplishments, and productivity of its employees." (2) Theeconomist Lester C. Thurow defined human capital as: an individual's productive skills, talents, and knowledge. It is measured in terms of the value (price multiplied by quantity) of goods and servicesproduced. Since consumption is the ultimate goal of our economic system, the value of a man'scapital is the same as the value of the consumption goods and services which he directly or indirectlyproduces. When the value of goods and services rises, the value of human capital rises. When thevalue of goods and services falls, the value of human capital falls. (3) To the General Accounting Office (GAO), human capital is "an organization's people," "its most critical asset in managing for results," and "assets to be valued." (4) In January 2001, GAO addedstrategic human capital management to its list of high-risk areas in the federal government. According to GAO, human capital challenges met the three criteria for high risk: they "are evidentat multiple agencies"; they "affect a significant portion of the government's total budget or otherresources"; and they "should be monitored and addressed through individual agency actions as wellas through OMB [Office of Management and Budget] and OPM [Office of Personnel Management]initiatives, legislative action, and/or congressional oversight." GAO found that federal workforcereductions were conducted without sufficient planning for their effects on agency performance. Agencies also reduced investments in performance rewards, enabling technologies, and training andprofessional development programs. GAO also determined that many agencies anticipate rapidturnover of top leadership and managers. About 45% of the career Senior Executive Service willbecome eligible to retire by FY2005 and are expected to retire. (5) In a January 2003 update of the high risk designation, GAO acknowledged the administration's placement of strategic management of human capital at the top of the President's managementagenda and the authority for a new personnel system and additional governmentwide personnelflexibilities enacted in P.L. 107-296 , the Homeland Security Act of 2002. "Nevertheless, despitebuilding momentum for comprehensive and systematic reforms," according to GAO, "[t]he basicproblem, which continues today, has been the long-standing lack of a consistent strategic approachto marshaling, managing, and maintaining the human capital needed to maximize governmentperformance and assure its accountability.... [T]he problem is a set of policies that are viewed bymany as outdated, overregulated, and not strategic." (6) As the 106th Congress was drawing to a close, the then-chairman of the Senate Committee on Governmental Affairs, Senator Fred Thompson, and the then-chairman of the Senate Subcommitteeon Oversight of Government Management, Restructuring, and the District of Columbia, SenatorGeorge Voinovich, published committee and subcommittee reports that included recommendationsto address challenges in managing the federal government and its human capital, given the possibilitythat a significant number of federal employees would be eligible to retire by 2004. (7) The Administration of President George W. Bush submitted a legislative proposal entitled The Managerial Flexibility Act of 2001 to Congress on October 15, 2001. OMB described the proposalas "a key component of the Bush Administration's 'Freedom to Manage' initiative ... to eliminatelegal barriers to effective management." (8) Theproposal included provisions on personnelmanagement flexibilities, including voluntary separation incentive payments, voluntary earlyretirement, recruitment and retention bonuses and relocation allowances, academic degrees, theSenior Executive Service, personnel management demonstration projects, and direct hire. Provisions similar to those in the President's proposal were part of legislation to change various policies related to managing the federal workforce that were considered in the Senate and the Houseof Representatives in the 107th Congress. Senator Voinovich introduced S. 1603 , theFederal Human Capital Act of 2001, on October 31, 2001, and S. 1639 , the FederalEmployee Management Reform Act of 2001, on November 6, 2001. Senator Thompson introduced S. 1612 , the Managerial Flexibility Act of 2001, on November 1, 2001. (9) The bills werereferred to the Senate Committee on Governmental Affairs. The committee's Subcommittee onInternational Security, Proliferation, and Federal Services conducted two days of hearings on thelegislation on March 18 and 19, 2002, taking testimony from the Office of Personnel Management,the General Accounting Office, employee organizations, and several scholars who have studiedfederal workforce issues. (10) RepresentativeConstance Morella introduced H.R. 4580 ,the Good People, Good Government Act, on April 24, 2002, and it was referred to the HouseCommittee on Government Reform. Senator Daniel Akaka, chairman of the subcommittee, said that the hearings "continue[d] the dialogue on what needs to be done to make government service more attractive to young people andto inspire and compensate those who have chosen government as their job choice." He stated that"[t]here must be a commitment from the highest levels of government and a willingness to allocatethe resources necessary to achieve a strong and vibrant workforce." (11) During his testimony beforethe subcommittee on March 19, 2002, Paul C. Light of the Brookings Institution noted that "[p]astefforts to restore the luster of federal service have been hampered by a lack of interest in incrementalaction." He commented that the pending legislation "would clearly increase government's ability tocompete for talent" and should be "viewed as first, not final, steps in what will ultimately amountto an historic restructuring of the federal government's human capital system." (12) Following the Senate committee hearings, Senator Voinovich, joined by Senators Fred Thompson and Thad Cochran, revised some of the provisions in S. 1603 and S. 1639 , as introduced, and merged them into one bill, S. 2651 , the FederalWorkforce Improvement Act of 2002, introduced on June 20, 2002. Several of the S. 2651 provisions, including those on agency Chief Human Capital Officers, alternative ranking andselection procedures, voluntary separation incentive payments, the repeal of recertificationrequirements for the Senior Executive Service, academic degree training, and modifications to theNational Security Education Program, were enacted in P.L. 107-296 , The Homeland Security Actof 2002, signed by President George Bush on November 25, 2002, and are applicablegovernment-wide. (13) The Office of PersonnelManagement (OPM) is currently crafting a new humanresources management system for the department. No further action was taken on any of the other107th Congress bills. In the 108th Congress, S. 129 , the Federal Workforce Flexibility Act of 2003, passed the Senate with an amendment by unanimous consent on April 8, 2004. Senator Voinovichintroduced S. 129 on January 9, 2003, and the bill was referred to the Senate Committeeon Governmental Affairs. On October 22, 2003, the committee ordered the bill to be reported withan amendment in the nature of a substitute, after agreeing by voice vote to an amendment offeredby Senator Akaka making political appointees ineligible for the enhanced recruitment, relocation,and retention bonuses and adding reporting requirements on the bonuses. S. 129 wasreported on January 27, 2004. (14) The committeesubstitute, as amended, was agreed to by the Senateby unanimous consent on April 8, 2004. In the House of Representatives, the Subcommittee on CivilService and Agency Organization of the House Committee on Government Reform marked up S.129 on May 18, 2004. Before forwarding the legislation to the full committee, thesubcommittee agreed by voice vote to an amendment in the nature of a substitute offered byRepresentative Jo Ann Davis and en bloc amendments offered by Representative Danny Davis. Theen bloc amendments related to making political appointees ineligible for the enhanced recruitment,relocation, and retention bonuses and adding reporting requirements on the bonuses. On June 24,2004, the House committee ordered the bill to be reported to the House of Representatives by voicevote, after agreeing, by voice vote, to an amendment in the nature of a substitute offered byRepresentative Jo Ann Davis. Another bill related to management of the federal workforce was introduced in the House of Representatives on April 3, 2003. Representative Jo Ann Davis introduced H.R. 1601 ,the Federal Workforce Flexibility Act of 2003, and it was referred to the House Committee onGovernment Reform. As introduced, S. 129 and H.R. 1601 were identicalexcept for one provision relating to personnel demonstration projects. (15) Both bills include a numberof the provisions that were in S. 2651 (107th Congress). S. 129 , as passed by the Senate and as ordered to be reported to the House, would amend current law provisions on critical pay, civil service retirement system computation forpart-time service, agency training, and annual leave. The bill also would amend current lawprovisions on recruitment and relocation bonuses and retention allowances (which would be renamedbonuses). As ordered to be reported to the House, S. 129 would amend the current 5U.S.C. ï¿½ï¿½5753 and 5754 language on such bonuses and allowances. As passed by the Senate, itwould add new sections 5754a and 5754b on recruitment, relocation, and retention bonuses to Title5 United States Code . Therefore, if S. 129 as passed by the Senate were enacted, agencieswould be able to use the current law provisions on recruitment and relocation bonuses and retentionallowances at 5 U.S.C. ï¿½ï¿½5753 and 5754 and the enhanced authority for recruitment, relocation, andretention bonuses proposed at 5 U.S.C. ï¿½ï¿½5754a and 5754b. (16) S. 129 , as ordered to be reported to the House, would amend current law provisions on pay administration. These amendments were included in S. 129 as introduced, but theywere dropped during Senate committee markup and are not included in the Senate-passed versionof the bill. Provisions that would amend current law on retirement service credit for cadet ormidshipman service and compensatory time off for travel were added to S. 129 duringSenate committee markup and are included in the legislation as passed by the Senate and as orderedto be reported to the House. Added during Senate Committee markup as well were provisions onSenior Executive Service authority for the White House Office of Administration that are in theSenate-passed bill, but are not in the legislation as ordered to be reported to the House (theprovisions were removed from the House version of the bill during the full House committeemarkup). Other provisions that would have amended current law provisions relating to contributionsto the Thrift Savings Plan, annuity commencement dates, and retirement for air traffic controllerswere included in S. 129, as forwarded by the House Civil Service and AgencyOrganization Subcommittee to the House Government Reform Committee, but were removed duringthe full committee markup. The Congressional Budget Office (CBO) estimates that if S. 129 were enacted, direct spending would increase by $4 million in 2004, $71 million over the 2004-2008 period, and$233 million over the 2004-2013 period. Revenues would increase by less than $500,000 annuallystarting in 2005, according to CBO. For various administrative requirements, assuming that thenecessary appropriations are provided, CBO estimates that the cost of implementing the legislationwould be $351 million over the 2004-2008 period and $756 million over the 2004-2013 period. (17) On April 8, 2003, the Subcommittee on Oversight of Government Management, the Federal Workforce, and the District of Columbia of the Senate Committee on Governmental Affairs, and theSubcommittee on Civil Service and Agency Organization of the House Committee on GovernmentReform, conducted a joint hearing on the federal government's human capital challenge. (18) TheMembers took testimony on S. 129 and H.R. 1601 and suggestions foradditional legislation. (Comments related to the former are included under the relevant provisionsof the bills.) With regard to the latter, a professor of public management at Harvard University,Steven Kelman, suggested that three additional provisions be included in the pending legislation:establishment of a version of the Presidential Management Intern program for mid-careerprofessionals to increase their options for entry into government service, an amendment to 5 U.S.C.ï¿½201 to add that a candidate's "accomplishments" be considered with his or her "knowledge, skills,and abilities" as a basis for hiring and promotion decisions, and extension of the Outstanding Scholarhiring authority from the current GS-7 level to the GS-9 level to make graduates of master's degreeprograms eligible. (19) A February 11, 2004, hearing conducted by the House Subcommittee on Civil Service and Agency Organization included a discussion of H.R. 1601 . (20) Subcommittee ChairwomanJoAnn Davis stated that H.R. 1601, along with other initiatives, seeks "to address the veryreal pay, benefit and personnel issues that keep potential employees from joining the civil serviceand sometimes drive our best employees and managers away." (21) In his statement, RepresentativeDanny Davis cautioned that "[g]ranting federal agencies flexibilities that do not addresswell-documented problems or are not clear solutions to these problems is a disservice to federalemployees and the taxpayers." (22) Carl DeMaio,President of The Performance Institute, a privatethink tank, recommended that the personnel flexibilities be accompanied by a plan to coordinate allhuman capital activities. (23) The National Presidentof the American Federation of GovernmentEmployees (AFGE), John Gage, testified that his union strongly prefers S. 129 becauseit does not include the demonstration project authorities included in H.R. 1601. He alsorecommended that the exercise of any of the enhanced flexibilities be predicated on the fullimplementation of the pay comparability provisions of the Federal Employees Pay ComparabilityAct. (24) The National Commission on the Public Service, in its report to Congress issued on January 7, 2003, characterized the personnel provisions enacted in P.L. 107-296 , the Homeland Security Actof 2002, as "promising approaches to personnel reform." Among its proposals, the commissionrecommended that operating agencies develop more flexible personnel management systems to meettheir special needs and that Congress and OPM continue efforts to simplify and accelerate therecruitment of federal employees. (25) This report discusses each of the provisions in S. 129 , as passed by the Senate and as ordered to be reported to the House. Comments from the 107th Congress Senate subcommitteehearings, the 107th Congress section analyses that accompanied S. 2651 and S. 1612 , and the 108th Congress joint Senate and House subcommittee hearing and theHouse subcommittee hearing are included under the discussions of relevant provisions of the bills. For a comparison of each of the provisions in S. 129 with current law, see CRS Report RL31516 , Federal Workforce Flexibilities: A Side-by-Side Comparison of S. 129 (108thCongress) with Current Law . [author name scrubbed], Specialist in Social Legislation, Domestic Social Policy Division, Congressional Research Service (CRS), prepared the text on provisions relating to retirement. L.Elaine Halchin, Analyst in American National Government, Government and Finance Division,CRS, prepared the text on provisions relating to Senior Executive Service Authority for the WhiteHouse Office of Administration. Barbara Schwemle, Analyst in American National Government,Government and Finance Division, CRS, prepared all other text. Enhanced authority for federal agencies to pay recruitment and relocation bonuses and retentionallowances (sometimes referred to as "the three Rs") is among the changes proposed in Title I of S. 129 , as passed by the Senate and as ordered to be reported to the House. Firstenacted as part of the Federal Employees Pay Comparability Act of 1990 ( P.L. 101-509 ), bonusesand allowances of up to 25% of basic pay were viewed as an additional cash incentive to help makeagencies more successful in the competitive job market. A 1999 OPM evaluation of the use of thethree Rs found that limited funding and limited recruitment because of downsizing contributed torestricted agency use. Several of the proposed changes (allowing flexibility in the methods ofpayment and raising the maximum amounts) were suggested by agencies responding to OPM'sstudy. (26) Section 101(a) of S. 129 , as ordered to be reported to the House, would amend various provisions of current law at 5 U.S.C. ï¿½5753 on recruitment and relocation bonuses. S. 129 , as introduced, would have done the same at Section 201(a). During Senatecommittee markup, S. 129 was amended at Section 101(a) to add a new section 5754a onrecruitment and relocation bonuses to Title 5 United States Code , and these provisions are in the billas passed by the Senate. Therefore, if the Senate-passed S. 129 were enacted, agencieswould be able to use the current law provisions on recruitment and relocation bonuses at 5 U.S.C.ï¿½5753 and the enhanced authority for recruitment and relocation bonuses proposed at 5 U.S.C.ï¿½5754a. Reason for Paying Bonuses. Current law authorizes the payment of recruitment and relocation bonuses if OPM determines that the agencywould be likely, in the absence of bonuses, to encounter difficulty in filling certain positions. S. 129 would continue this provision (5 U.S.C. ï¿½5754a(b)(1) and 5 U.S.C. ï¿½5753(b)(1)). Eligible Employees. Currently, recruitment bonuses may be paid to employees who are newly appointed under the General Schedule (GS). Relocation bonuses may be paid to employees under the GS or any other pay authority in theexecutive, legislative, and judicial branches who must relocate to accept GS positions. S. 129 would provide that the bonuses would be paid only to employees covered by theGS pay system (except as discussed below, under "extending coverage to other employees") whoare newly appointed (recruitment); or who are current federal employees who move to new positionsin the same geographic areas, under circumstances OPM would describe in regulations; or are currentfederal employees who must relocate to accept positions in different geographic areas (relocation)(5 U.S.C. ï¿½5754a(b)(2) and 5 U.S.C. ï¿½5753(a)(1)(A) and (b)(2)). Service Agreement. Current law requires an employee who receives a recruitment or relocation bonus to enter into an agreement with the agencyto complete a period of employment. The required period of service is determined by OPMregulations. Repayment of a bonus on a pro rata basis is required if an employee voluntary fails tocomplete the service period or is separated for cause on charges of misconduct or delinquency beforecompleting the service period. S. 129 would amend current law to provide that anemployee would be required to enter into a written service agreement to complete a period ofemployment with the agency, not to exceed four years. OPM regulations could prescribe a minimumservice period. The service agreement would include the length of the required service period; theamount of the bonus; the method of payment; and other terms and conditions under which the bonuswould be payable, including the conditions under which the agreement could be terminated beforethe service period had been completed, and the effect of the termination. The agreement would beeffective upon employment with the agency or movement to a new position or geographic area, asapplicable. A service agreement for a recruitment bonus could be effective at a later date undercircumstances that OPM would describe in regulations, such as an initial period of formal basictraining (5 U.S.C. ï¿½5754a(c) and 5 U.S.C. ï¿½5753(c)). Limitations on, Payment, and Nature of Bonus. Current law limits the bonus to 25% of the annual basic pay rate and provides for lump sumpayment. Basic pay does not include locality pay. The bonus is not part of basic pay and can be paidbefore a newly hired employee enters on duty. S. 129 (subsection 5 U.S.C. ï¿½5754a(d))and reordered subsections of 5 U.S.C. ï¿½5753) would amend current law to provide that a bonus couldnot exceed 25% of the employee's annual basic pay rate at the beginning of the service period,multiplied by the number of years (or fractions thereof) in the service period, not to exceed fouryears. A bonus could be paid as an initial lump sum, in installments, as a final lump sum uponcompletion of the full service period, or in a combination of these forms. S. 129 doesnot include the current law provision excluding locality pay from basic pay; this would mean thatthe bonus could be calculated on the basis of the basic General Schedule rate, with locality payincluded. The current law provisions stating that a bonus is not part of basic pay and that a bonuscan be paid before a newly hired employee enters on duty are included, but "eligible individual"would be substituted for "newly hired" employee. Waiver of the Limitation. S. 129 would add new text to provide that OPM regulations could authorize an agency head to waive the25% limitation based on a critical agency need. Under a waiver, the amount of the bonus could beup to 50% of the employee's annual basic pay rate at the beginning of the service period, multipliedby the number of years (or fractions thereof) in the service period, not to exceed 100% of theemployee's annual basic pay rate at the beginning of the service period (5 U.S.C. ï¿½5754a(e) and 5U.S.C. ï¿½5753(e)). Plans for Paying Bonuses. S. 129 would add a new subsection to provide that OPM regulations would require that agencies establishplans for paying recruitment and relocation bonuses before paying such bonuses (5 U.S.C. ï¿½5754a(f)and 5 U.S.C. ï¿½5753(f)). Regulations. Current law authorizes OPM to prescribe regulations. S. 129 would amend current law by requiring that OPM wouldprescribe regulations to administer the section, including regulations on repayment of a recruitmentor relocation bonus in appropriate circumstances when the service period had not been completed(5 U.S.C. ï¿½5754a(g) and 5 U.S.C. ï¿½5753(g)). Extending Coverage to Other Employees. Current law authorizes the President to apply the section to employees otherwise not covered. S. 129 would amend current law by providing that OPM could extend coverage tocategories of employees who otherwise would not be covered at the request of the head of anexecutive agency (5 U.S.C. ï¿½5754a(h)(1) and 5 U.S.C. ï¿½5753(a)(1)(B)). Political Appointees Not Eligible for Bonuses. A bonus could not be paid to an individual who is appointed to, or who holds a position to whichhe or she was appointed by the President, by and with the advice and consent of the Senate; anoncareer appointee position in the Senior Executive Service (SES); or a position that has beenexcepted from the competitive service by reason of its confidential, policy-making, orpolicy-advocating character (5 U.S.C. ï¿½5754a(h)(2) and 5 U.S.C. ï¿½5753(a)(2)). According to staffof the Senate Committee on Governmental Affairs, the current authority at 5 U.S.C. ï¿½5753 allowspolitical appointees to be eligible for recruitment and relocation bonuses. This provision wouldexclude political appointees from being eligible for the enhanced recruitment and relocation bonusesauthorized in S. 129 . Reporting Requirement. OPM would submit to the Senate Committee on Governmental Affairs and the House Committee on Government Reforman annual report on bonuses paid. The House version would provide that the annual report wouldbe submitted for each of the first five years that the bonuses were paid. Under the Senate version,each report would include the use by each agency of recruitment and relocation bonuses, including,with respect to each agency and each type of bonus, the number and amount of bonuses by grade,including the General Schedule, SES, and Executive Schedule positions. Under the House version,each report would include a description of how the authority to pay recruitment and relocationbonuses was used by the respective agencies, including, with respect to each such agency and eachtype of bonus, the number and dollar amount of bonuses paid to individuals holding positions withineach pay grade, pay level, or other pay classification; and if applicable, to individuals who movedbetween positions that were in different agencies but the same geographic area (including the namesof the agencies involved). The report also would include a determination of the extent to which suchbonuses furthered the purposes of the statute authorizing them (5 U.S.C. ï¿½5754a(i) and Section101(c)(1)). Applying the Statute. The Senate version would provide that an individual could not be paid a recruitment or relocation bonus under the proposedSection 5754a and a recruitment or relocation bonus under 5 U.S.C. ï¿½5753 (5 U.S.C. ï¿½5754a(j)). Definitions. Under current law, the terms "agency" and "employee" are defined. "Agency" means an executive agency, the Library ofCongress, the Botanic Garden, the Government Printing Office, the Office of the Architect of theCapitol, and the government of the District of Columbia (5 U.S.C. ï¿½5102(a)(1)). (27) S. 129 does not include a definition of "agency." Currently, "employee" means an individual employed in or under an agency (5 U.S.C. ï¿½5102(a)(2)). S. 129 (5 U.S.C. ï¿½5754a(a) and 5 U.S.C. ï¿½5753(a)(3)) would amendcurrent law by providing that "employee" would mean (except as otherwise provided by 5 U.S.C.ï¿½2105 or when specifically modified): an officer and an individual who is (1) appointed in the civil service by the President; Member(s) of Congress, or the Congress, a member of a uniformedservice, an individual who is an employee under 5 U.S.C. ï¿½2105, the head of a governmentcontrolled corporation, or an adjutant general; (2) engaged in the performance of a federal functionunder authority of law or an executive act; and (3) subject to the supervision of an individual namedunder (1) above while engaged in the performance of the duties of his or her position. Certainindividuals employed at the United States Naval Academy also are covered by the term (5 U.S.C.ï¿½2105). Section 101(a) of S. 129 , as ordered to be reported to the House, also would amend various sections of current law (5 U.S.C. ï¿½5754) on retention allowances. S. 129 , asintroduced, would have done the same at Section 201(a). During Senate committee markup, S.129 was amended at Section 101(a) to add a new section 5754b on retention bonuses toTitle 5 United States Code , and these provisions are in the bill as passed by the Senate. Therefore,if S. 129 as passed by the Senate were enacted, agencies would be able to use the currentlaw provisions on retention allowances at 5 U.S.C. ï¿½5754 and the enhanced authority for retentionbonuses proposed at 5 U.S.C. ï¿½5754b. S. 129 would amend current law by renaming theallowances as bonuses. Reason for Paying Bonuses. Current law authorizes allowances for employees whose unusually high or unique qualifications or the agency'sspecial need for their services makes it essential to retain them. Additionally, the agency mustdetermine that the employee would be likely to leave in the absence of an allowance. S. 129 would add, as another reason for paying the bonuses, an agency determination that, in theabsence of a bonus, an employee would likely leave federal service or take a different federalposition under conditions which OPM would describe in regulations (5 U.S.C. ï¿½5754b(b) and 5U.S.C. ï¿½5754(b)). Eligible Employees. Current law (5 U.S.C. ï¿½5754(a)) authorizes allowances for General Schedule (GS) employees. S. 129 wouldprovide that the bonuses would be paid only to employees covered by the GS pay system (except asdiscussed under "extending coverage to other employees" below) (5 U.S.C. ï¿½5754b(d) and 5 U.S.C.ï¿½5754(a)(1)(A)). The bills would add new text (5 U.S.C. ï¿½5754b(c) and 5 U.S.C. ï¿½5754(c)) toprovide that OPM could authorize an agency head to pay retention bonuses to a group of employeesin one or more categories of positions in one or more geographic areas, subject to 5 U.S.C.ï¿½5754b(b)(1) and 5 U.S.C. ï¿½5754(b)(1), and regulations, if there were a high risk that a significantportion of employees in the group would be likely to leave in the absence of bonuses. Service Agreement. Currently, a service agreement is not required for payment of a retention allowance. S. 129 would providethat the employee would have to enter into a written service agreement to complete a period ofemployment with the agency. The service agreement would include the length of the requiredservice period; the amount of the bonus; the method of payment; and other terms and conditionsunder which the bonus would be payable, including the conditions under which the agreement couldbe terminated before completion of the service period and the effect of the termination. A writtenservice agreement would not be required if the retention bonus were paid in biweekly installmentswith the payment set at the full bonus percentage rate established for the employee with no portionof the bonus deferred. In this case, if the agency decided to terminate the payments, the agencywould inform the employee in writing of that decision. Except as OPM would provide inregulations, the employee would continue to be paid the bonus through the end of the pay period inwhich the notice would be provided. A bonus could not be based on any period of service which wasthe basis for a recruitment or relocation bonus (5 U.S.C. ï¿½5754b(e) and 5 U.S.C. ï¿½5754(d)). Limitations on Payment and Nature of Bonus. Current law limits the allowance to 25% of the annual basic pay rate (excluding locality pay) and provides for payment at the same time and in the same manner as basic pay. The allowance is notpart of basic pay. Any action to reduce or eliminate the allowance is not appealable. S. 129 would amend current law by providing that a retention bonus would be stated as a percentageof the employee's basic pay for the service period associated with the bonus, and could not exceed25% of the employee's basic pay if paid to the employee individually or 10% of the employee's basicpay if paid to the employee as part of a group. A bonus could be paid in installments aftercompletion of specified periods of service or in a single lump sum at the end of the full period ofservice required by the agreement. An installment payment could not exceed the product derivedby multiplying the amount of basic pay earned in the installment period by a percentage not toexceed the bonus percentage rate established for the employee. If the installment paymentpercentage were less than the bonus percentage rate, the accrued but unpaid portion of the bonuswould be payable as part of the final installment payment after completion of the full service periodunder the terms of the service agreement (5 U.S.C. ï¿½5754b(f) and 5 U.S.C. ï¿½5754(e)). As in current law, a retention bonus would not be part of an employee's basic pay. The current 5 U.S.C. ï¿½5754(b)(2) provision stating that reduction or elimination of the allowance is notappealable would be deleted. Waiver of the Limitation. S. 129 would provide that OPM, upon request of an agency head, could waive the 25% or 10% limitationsand permit the agency head to pay bonuses of up to 50% of basic pay based on a critical agency need(5 U.S.C. ï¿½5754b(g) and 5 U.S.C. ï¿½5754(f)). Plans for Paying Bonuses. The bill provides that OPM regulations would require that agencies establish a plan for paying retention bonuses beforepaying such bonuses (5 U.S.C. ï¿½5754b(h) and 5 U.S.C. ï¿½5754(g)). Regulations. Current law authorizes OPM to prescribe regulations. S. 129 and H.R. 1601 would continue the policy (5U.S.C. ï¿½5754b(i) and 5 U.S.C. ï¿½5754(h)). Extending Coverage to Other Employees. Current law authorizes the President to apply the section to employees otherwise not covered. S. 129 would amend current law by providing that OPM could extend coverage tocategories of employees who otherwise would not be covered at the request of the head of anexecutive agency (5 U.S.C. ï¿½5754b(j)(1) and 5 U.S.C. ï¿½5754(a)(1)(B)). Political Appointees Not Eligible for Bonuses. A bonus could not be paid to an individual appointed by the President, by and with the advice andconsent of the Senate; a noncareer appointee position in the Senior Executive Service (SES); or aposition which has been excepted from the competitive service by reason of its confidential,policy-making, or policy-advocating character (5 U.S.C. ï¿½5754b(j)(2) and 5 U.S.C. ï¿½5754(a)(2)). According to staff of the Senate Committee on Governmental Affairs, the current authority at 5U.S.C. ï¿½5754 allows political appointees to be eligible for retention allowances. This provisionwould exclude political appointees from being eligible for the enhanced retention bonuses authorizedin S. 129 . Reporting Requirement. OPM would submit to the Senate Committee on Governmental Affairs and the House Committee on Government Reforman annual report on bonuses paid. Under the House version, the annual report would be submittedfor each of the first five years that bonuses were paid. Under the Senate version, each report wouldinclude each agency's use of recruitment and relocation bonuses, including, with respect to eachagency and each type of bonus, the number and amount of bonuses by grade, including GeneralSchedule, SES, and Executive Schedule positions. Under the House version, each report wouldinclude a description of how the authority to pay retention bonuses was used by the respectiveagencies, including, with respect to each such agency, the number and dollar amount of bonuses paidto individuals holding positions within each pay grade, pay level, or other pay classification; and ifapplicable, how the authority was used to prevent individuals from moving between positions thatwere in different agencies but the same geographic area (including the names of the agenciesinvolved). The report also would include a determination of the extent to which such bonusesfurthered the purposes of the statute authorizing them (5 U.S.C. ï¿½5754b(k) and Section 101(c)). The House version at Section 101(a)(3) also includes a provision which would provide that it is the sense of Congress that the OPM Director would, each time a bonus was paid to recruit orrelocate a federal employee from one government agency to another within the same geographic areaor to retain a federal employee who might otherwise leave one government agency for another withinthe same geographic area, be notified of that payment within 60 days after the date on which thebonus was paid. The OPM Director would monitor the payment of such bonuses to ensure that theywere an effective use of the federal government's funds and had not adversely affected the abilityof those government agencies that lost employees to other government agencies (in suchcircumstances) to carry out their missions. Applying the Statute. The Senate version would provide that an individual could not be paid a retention bonus under the proposed Section 5754b anda retention allowance under 5 U.S.C. ï¿½5754 (5 U.S.C. ï¿½5754b(l)). Definitions. Under current law, the terms "agency" and "employee" are defined. "Agency" means an executive agency, the Library ofCongress, the Botanic Garden, the Government Printing Office, the Office of the Architect of theCapitol, and the government of the District of Columbia (5 U.S.C. ï¿½5102(a)(1)). (28) S. 129 does not include a definition of "agency." Currently, "employee" means an individual employed in or under an agency (5 U.S.C. ï¿½5102(a)(2)). S. 129 (5 U.S.C. ï¿½5754b(a) and 5 U.S.C. ï¿½5754(a)(3)) would amendcurrent law by providing that "employee" would mean (except as otherwise provided by 5 U.S.C.ï¿½2105 or when specifically modified): an officer and an individual who is (1) appointed in the civil service by the President; Member(s) of Congress, or the Congress, a member of a uniformedservice, an individual who is an employee under 5 U.S.C. ï¿½2105, the head of a governmentcontrolled corporation, or an adjutant general; (2) engaged in the performance of a federal functionunder authority of law or an executive act; and (3) subject to the supervision of an individual namedunder (1) above while engaged in the performance of the duties of his or her position. Certainindividuals employed at the United States Naval Academy also are covered by the term (5 U.S.C.ï¿½2105). Section 101(b) of S. 129 , as passed by the Senate, and Section 101(d)(1) of S. 129, as ordered to be reported to the House, would provide that the provisions of thesection would become effective on the first day of the first applicable pay period beginning on orafter 180 days after the act's enactment. The House version of the bill also would provide that arecruitment or relocation bonus service agreement that was authorized under 5 U.S.C. ï¿½5753 beforethe act's effective date would continue, until its expiration, to be subject to 5 U.S.C. ï¿½5753 as ineffect on the day before the act's effective date (Section 101(d)(2). Payment of a retention allowancethat was authorized under 5 U.S.C. ï¿½5754 before the act's effective date would continue, subject to5 U.S.C. ï¿½5754 as in effect on the day before the act's effective date, until the retention allowancewas reauthorized or terminated (but no longer than one year after the act's effective date) (Section101(d)(3)). (29) The proposed amendments would give agencies more flexibility in implementing recruitment, relocation, and retention bonuses. For instance, the reasons for using the bonuses would beexpanded; the methods for making the payments would be several (lump sum at the beginning or endof the service period or in installments); and the size of the bonuses could be increased by usingwaiver authority. The section analysis which accompanied S. 2651 (107th Congress)stated that the changes would enable agencies to use the bonuses "in more strategic ways thatenhance their desired effect" and "help federal agencies be more competitive in recruiting andretaining" the workforces they require. (30) By including a more specific service requirement for receipt of recruitment and relocation bonuses and by adding such a service requirement for receipt of retention bonuses, agencies wouldmore directly tie an employee's service to the bonus payments. The amendments do not addressagency funding of the bonuses, as Colleen M. Kelley of the National Treasury Employees Union(NTEU) commented during her testimony before the Senate subcommittee hearing. "As thisCommittee knows, federal agencies have a wealth of flexibilities available to them," she said, but: Unfortunately, in December of 1999, [OPM] reported that overall, only 0.14% of all Executive Branch employees received recruitment, retention orrelocation incentives in Fiscal Year 1998. Recruitment bonuses were given 0.3% of the time. Relocation bonuses were given to 1.0% of employees and 0.09% of employees received retentionallowances. Less than 1/4 of 1% of the federal workforce received any form of recruitment, retentionor relocation incentive in Fiscal Year 1998. When agencies were asked why they did not use theincentives available to them, more often than not, they cited budgetary constraints. Agencies simplyare not being given the resources necessary to fund the very programs and incentives that mightactually help put them on the road to solving their human capital crises .... Expanding the availabilityof these incentives makes little sense if agencies are not provided with the resources to accomplishthe goal. And with agencies slated to receive a 1% reduction in their discretionary spending accountsfor 2003, it is difficult to see how increasing and expanding recruitment and retention allowanceswill in any way translate into more of these flexibilities actually being offered to either prospectiveor current federal employees. (31) Ms. Kelley, in testifying before the April 8, 2003 joint subcommittee hearing, emphasized the critical importance of the committee ensuring "that appropriate funding will be forthcoming beforegiving false hope to agencies that additional bonus options are available to them." (32) She reiteratedthis view at the House subcommittee hearing. (33) Expressing his views before the Senate subcommittee on March 18, 2002, Bobby L. Harnage, Sr., national president of the American Federation of Government Employees (AFGE), reiteratedthose of Ms. Kelley and commented: "Implicitly, the assumption appears to be that bonus paymentsto select individuals would be paid from existing salary accounts. That is, agencies would only beable to use the broadened authority in the draft proposal to provide bonuses if they paid for themthrough the elimination of jobs or the denial of other salary adjustments for those not selected fora bonus." He stated the opinion that limiting the bonuses to General Schedule employees ignores the"equally acute" human capital crisis affecting blue collar workers under the Federal Wage System. Finally, Mr. Harnage observed that "Bonuses of any size are not a replacement for competitivesalaries and benefits." (34) Mr. Harnage expressedsimilar viewpoints at the April 8, 2003 jointsubcommittee hearing and questioned the lack of "a separate, supplemental funding mechanism foreither the payment of bonuses, or the expansion of critical pay authority" in S. 129 and H.R. 1601 . (35) The Federal Managers Association (FMA) representative, John Priolo, recommended a separate line item in the budget for recruitment at the March 18, 2002 Senate subcommittee hearing. (36) MaxStier, representing the Partnership for Public Service at the April 8, 2003 joint subcommittee hearing,urged Congress to commit the resources necessary to meet the challenges of managing the federalworkforce and to "[f]ollow the lead of private sector companies who have increasingly come torealize that success in workforce management feeds success in every other area of organizationalactivity." (37) At the same hearing, ComptrollerGeneral David Walker recommended that "Congressshould consider capping the number or percentage of employees in an agency who would be eligiblefor" recruitment bonuses and retention allowances. (38) Carl DeMaio of The Performance Institute testified before the House subcommittee hearing that, "[a]t the very least, in exchange for bonuses, a system for measuring individual performanceshould be integrated into the provisions for granting those bonuses, thereby requiring results-basedgoals and milestones." He also recommended that a written service agreement be required forbonuses paid in biweekly installments. (39) At thesame hearing, John Gage of AFGE stated that theproposed legislation does not provide funding for the bonuses and questioned whether such bonuseswould improve recruitment and retention. According to him, "Bonus payments do not count as basicpay for purposes of retirement or other salary adjustments" and "[t]hey are a poor substitute for ...competitive salaries and regular salary increases." (40) Mr. Gage also expressed views similar to thosestated by Colleen Kelley of NTEU at the Senate subcommittee hearing discussed above. In histestimony before the House subcommittee, Ronald Sanders, Associate Director for Strategic HumanResources Policy at OPM, stated that, "[e]xcept for its extension of [recruitment and retention]authorities to political appointees, [OPM] would prefer [ H.R. 1601 ], which simplyreplaces existing flexibilities with the new ones, without adding any new reporting requirements." (41) Section 301(b) of S. 129 , as ordered to be reported to the House, would repeal the current law provision at 5 U.S.C. ï¿½5305 note that authorizes relocation payments for LEOs. S. 129 , as introduced, included the same provision at Section 201(b), but it was droppedduring markup by the Senate Committee on Governmental Affairs and is not included in theSenate-passed bill. Currently, an LEO whose basic pay rate is less than $60,000 may receive arelocation payment of up to $15,000. For other federal employees, the amount of a recruitment orrelocation bonus cannot exceed 25% of the annual basic pay rate of the position to which theemployee is being appointed or relocated. The analysis which accompanied the introduction of S. 1612 (107th Congress) stated that repeal "would simplify administration of the bonus authority and make treatment of allemployees more consistent and equitable." LEOs "could still be paid a bonus of $15,000 ... byextending the service period to cover more than one year." (42) Section 102 of S. 129 , as passed by the Senate and as ordered to be reported to the House, would amend the critical pay provisions of 5 U.S.C. ï¿½5377. Under current law, (43) the Officeof Management and Budget (OMB), in consultation with OPM, may, upon the request of an agencyhead, grant authority to fix the rate of basic pay for one or more critical positions in such agency atnot less than the rate that would otherwise be payable for the position, but not greater than the ratepayable for Level I of the Executive Schedule ($175,700, as of January 2004), except upon thePresident's written approval. Each of these positions must require an extremely high level ofexpertise in a scientific, technical, professional, or administrative field and be critical to an agency'ssuccessful accomplishment of an important mission. The authority may be granted or exercised onlyto the extent necessary to recruit or retain an exceptionally well qualified individual for the position. S. 129 would amend current law to provide that this authority could be granted by OPMin consultation with OMB. Current law specifies that the authority for critical pay terminates whenever OMB determines that one or more of the requirements for critical pay are no longer met. S. 129 wouldamend this provision to authorize OPM to make the determination. Under current law, OMB may authorize the exercise of this authority for up to 800 positions government-wide at any time. Of this number, no more than 30 of the positions at any time couldbe positions whose pay rate would otherwise be determined according to the Executive Schedule(EX). (Positions on the EX schedule include cabinet secretaries, deputy secretaries, administrators,board chairmen, assistant secretaries, and under secretaries.) S. 129 would amend thisprovision to provide that OPM would authorize the exercise of this authority and be held to the samelimitations on the number of positions. The roles of OMB and OPM would be exchanged in other policy areas. For example, OPM would consult with OMB before prescribing regulations or making any decision to grant or terminateany authority for critical pay. OPM would be required to report to the House Committee onGovernment Reform and the Senate Committee on Governmental Affairs annually and in writingon the operation of the pay authority for critical positions. Annual reports to Congress on use of the authority are required under current law. S. 129 does not include this provision. Discussion of the Provisions. S. 129 would shift oversight and reporting authority for critical pay positions from OMB to OPM. Thesection analysis that accompanied S. 2651 (107th Congress) stated that the provision'sobjective "is to encourage [the] increased application of this underutilized authority as a means ofattracting talented individuals to critical positions in the federal government for short periods oftime." (44) OPM staff do not anticipate a need fora significant increase in staff resources were theagency to assume responsibility for administering the critical pay provisions. (45) The critical pay provisions in current law were enacted to recognize the disparity between government and private sector salary structures, particularly at the senior level, and to streamline theprocess for appointing individuals to designated critical positions. This authority does not addresspay and salary issues of members of the Executive Schedule, Senior Executive Service, andsenior-level positions. Colleen M. Kelley of NTEU stated at the Senate subcommittee hearing thatshe does not "think it is possible to solve the human capital crisis without addressing" federal pay. (46) Expressing similar viewpoints at the April 8, 2003, joint subcommittee hearing, Ms. Kelley statedthat "[p]roperly compensating the federal workforce would make further critical pay authorityunnecessary." (47) Carl DeMaio of The PerformanceInstitute recommended pay based on the market"that focuses more on non-profit pay comparisons rather than private-sector ones" at the Housesubcommittee hearing. (48) During the same hearing,John Gage of AFGE expressed concern that theproposed legislation does not provide funding for the expansion of critical pay authority and testifiedin support of adequate and competitive salaries for all employees rather than "for a lucky few." (49) During the period 1991 through 2000, OMB received 55 requests for critical pay, and 37 of these were approved. Twenty-nine authorizations were later cancelled because the positionsremained vacant for an extended period of time. (50) As of December 2003, OPM's Central PersonnelData File showed that five employees were being paid under the critical pay authority at 5 U.S.C.ï¿½5377. Among the positions approved for critical pay are these: the Director of the NationalInstitutes of Health; the Director of the Richland, WA, Operations Office of the Department ofEnergy, Office of Environmental Management; the Distinguished Chief Scientist for InformationTechnology at the Ames Research Center, National Aeronautics and Space Administration; theCommissioner for Education Research, the Commissioner for Education Evaluation and RegionalAssistance, and the Commissioner for Education Statistics at the Department of Education; theCommissioner of the Food and Drug Administration; and the Executive Director and ManagingDirectors of the National Transportation Safety Board. (51) Neither the section analysis thataccompanied S. 2651 (107th Congress) nor the Senate subcommittee hearing testimonyprovided information on how widely the authority might be used or for which types of positions. If enacted, Section 105(1) of S. 129 , as passed by the Senate, would amend 3 U.S.C. ï¿½107(b) to give the President authority to employ senior executives in the White HouseOffice of Administration, and would require that any permanent Senior Executive Service (SES)positions established be career reserved positions. The provision was added to S. 129 during markup by the Senate Committee on Governmental Affairs at the request of OPM. The SESincludes two types of appointees, career and noncareer. Only career appointees may fill careerreserved positions. Employment of individuals as senior executives would be carried out in accordance with 5 U.S.C. ï¿½3132 and related provisions. Other provisions in Title 5 applicable to the SES includeChapter 31, Subchapter II (authority for employment); Chapter 33, Subchapter VIII (appointment,reassignment, transfer, and development in the SES); Chapter 35, Subchapter V (removal,reinstatment, and guaranteed placement in the SES); Chapter 43, Subchapter II (performanceappraisal in the SES); Chapter 45, Subchapter I (awards for superior accomplishments); Chapter 53,Subchapter VIII (pay for the SES); and Chapter 75 (adverse actions). For the Office ofAdministration to hire individuals as senior executives, OPM would have to allocate SES positionsto the White House Office of Administration. (52) The hiring process for career appointees, which isa merit-based selection process, involves a recruitment program and requires candidates todemonstrate they have the requisite executive qualifications. (53) Current law at 3 U.S.C. ï¿½114 establishes a limitation on basic pay for an employee of the Vice President appointed under 3 U.S.C. ï¿½106, the White House Office, the Executive Residence at theWhite House, the Domestic Policy Staff, or the Office of Administration. That limitation is set ata rate no less than 120% of GS-15, step 1 ($104,927, as of January 2004), and not greater than levelIV of the Executive Schedule ($136,900, as of January 2004). Section 105(2) of S. 129 , as passed by the Senate, would amend current law to provide that the limitation on basic pay would be GS-15, step 10 ($113,674, as of January 2004) andthat the limitation would not apply to senior executives. These provisions are not included in S. 129 , as ordered to be reported to the House. Several provisions related to agency training are included in Title II of S. 129 , aspassed by the Senate and as ordered to be reported to the House. Training is a discretionary accountin agency budgets and is usually one of the first items reduced when funding is needed to pay forfixed or mandatory expenditures such as pay and benefit increases or other programs. A May 2000Senate hearing on training in the federal government found that "most agencies spread their trainingdollars throughout their budget" in an effort "to make it difficult for OMB or the appropriationssubcommittees to identify training money and reprogram it." The hearing also found that "[s]everalof the agencies are unable to provide information on their training budgets from previous yearsbecause their record-keeping is poor or nonexistent." (54) The changes proposed in S. 129 are designed to help agencies better plan their training activities. Section 201(a) of S. 129 , as passed by the Senate and as ordered to be reported to the House, would amend current law at 5 U.S.C. ï¿½4103 by adding language on agency trainingplans. (55) Currently, agency heads are required toestablish, operate, maintain and evaluate a plan, orplans, for training employees to assist in achieving the agency's mission and performance goals byimproving employee and organizational performance. S. 129 would require agency headsto evaluate each training program or plan with respect to accomplishing specific performance plansand strategic goals in performing the agency mission and to modify such program or plan toaccomplish those plans and goals. The House version of the provision specifies that the evaluationwould be on a regular basis. Discussion of the Provision. This requirement would tie training activities to the accomplishment of agency missions. Proponents believe it willhelp to ensure that the federal government's training monies are used to optimal advantage.According to Comptroller General David Walker, Agreeing on expected results and associated performance measures at the outset for training and development efforts can also help ensure thatcredible evaluation results will be available to provide feedback on performance. A systematicevaluation of training and development efforts can help show how such efforts contribute toindividual and organizational performance and suggest opportunities for furtherimprovement. (56) Section 201(b) of S. 129 , as passed by the Senate and as ordered to be reported to the House, would add new provisions to Chapter 41 of Title 5 relating to agency training. (57) (TheSenate version would add two new sections and the House version would add one new section.)There are no similar provisions in current law. Under the Senate-passed version of S. 129,each agency would be required to appoint or designate a training officer who would be responsiblefor developing, coordinating, and administering training for the agency. Both the Senate and Houseversions of the legislation would provide that, in consultation with OPM, each agency head wouldestablish a comprehensive management succession program to train employees to develop agencymanagers, and a program to train managers on actions, options, and strategies a manager could usein relating to employees with unacceptable performances, mentoring employees and improvingperformance and productivity, and (in the House version only) conducting employee performanceappraisals. Discussion of the Provisions. Establishing the position of training officer is intended to help ensure efficient and effective use of agency trainingmonies. According to the section analysis that accompanied S. 2651 (107th Congress),the training officer "could be the same person" as the Chief Human Capital Officer. (58) More than adecade ago, Congress required OPM to report annually on training expenditures in the executivebranch, but this requirement was dropped as downsizing at OPM resulted in a reallocation of staffand resources. Congress has not received this information since the mid 1980s. NTEU's ColleenM. Kelley stated during the Senate subcommittee hearing, "While the legislation draws long overdueattention to the need to properly train employees, again, it does nothing to address the resourceproblems that have prevented agencies from adequately training their employees in the past." (59) Atthe House subcommittee hearing, she advocated for Congress to ensure that training is funded. (60) John Priolo, representing the Federal Managers Association, recommended to the Senatesubcommittee that "a separate line item on training [be included] in agency budgets to allowCongress to better identify the allocation of training funds each year." (61) The managerial training program requirement would respond to agency comments, most recently presented at a Senate Committee on Governmental Affairs, Subcommittee on Oversight ofGovernment Management, Restructuring, and the District of Columbia hearing in May 2000, that"their employee training budgets were inadequate and that they could use additional trainingfunds." (62) Ronald Sanders of OPM testified beforethe House subcommittee that appointment oftraining officers in federal agencies is unnecessary as training and development are among theprincipal responsibilities of the agency Chief Human Capital Officers. (63) Accrual of Leave for Newly Hired Federal Employees with Qualified Experience. Under current law at 5 U.S.C. ï¿½6303, employees with lessthan three years of federal service accrue annual leave at four hours per biweekly pay period. Six andeight hours of annual leave are accrued every two weeks by employees with three but less than 15years of service and with 15 or more years of service, respectively. Individuals newly hired in thefederal government begin at the four-hour rate. Section 202(a) of S. 129 , as passed by the Senate and as ordered to be reported to the House, would amend 5 U.S.C. ï¿½6303 by adding new text that would allow an agency head tocount prior service, not with the federal government, for purposes of annual leave accrual. TheSenate version of the provision would authorize an agency head to deem "a period of qualifiednon-federal career experience" as "a period of service performed as an employee" for the purposeof annual leave accrual. (64) Credit would beallowed for service that was performed in a position withduties directly related to the duties of the position that the individual holds in the agency and thatmeets other such conditions as OPM regulations would prescribe. The authority would becomeeffective 120 days after the act's enactment and would apply only to an individual hired on or afterthe effective date. Under the House version of the provision, OPM would prescribe regulations governing the granting of credit for annual leave accrual of a newly hired employee not later than 180 days afterenactment of the amendment. Credit would be granted for the employee's prior service, nototherwise creditable for such purposes, if the service were performed in a position the duties ofwhich directly related to the position the employee had been appointed to and met such otherrequirements as OPM might prescribe. Further, the agency head would have to decide thatapplication of the provision was necessary to achieve an important agency mission or performancegoal. The service would be creditable as of the effective date of the employee's appointment andwould continue to be so creditable unless the employee failed to complete a full year of continuousservice with the agency. An employee who held a position in the Civil Service within 90 days beforethe appointment's effective date would not be eligible to have his or her nongovernmental servicecredited for the purposes of annual leave accrual. The proposed change would allow newly hired employees to accrue more than four hours of annual leave immediately upon beginning their employment with the federal government. Forexample, an individual hired by the federal government who has 12 years of "qualified non-federalservice," as determined by the agency head, might be credited with 12 years of federal service andthus earn six hours of annual leave per pay period. Increasing the number of hours of leave newlyhired employees may accrue is viewed by some as an effective recruiting tool, particularly formid-level employees. In her testimony before the House subcommittee hearing, Colleen M. Kelleyof NTEU stated that, "if annual leave limits are in fact a barrier to hiring, the entire leave systemshould be reviewed." (65) Annual Leave Enhancements for Senior Level Employees. Currently, a federal employee must have at least 15 years of serviceto accrue eight hours of annual leave per biweekly pay period. In amending 5 U.S.C. ï¿½6303, Section202(b)of S. 129 , as passed by the Senate and as ordered to be reported to the House,would allow certain categories of senior level employees to accrue a full day of annual leave for eachpay period regardless of how many years of service they have. (66) Employees in positions classifiedabove GS-15 or in scientific or professional positions established under 5 U.S.C. ï¿½3104, membersof the Senior Executive Service, and employees in an equivalent category for which the minimumrate of basic pay is greater than the rate for GS-15, step 10 (the House version states this asemployees in an equivalent category as determined by OPM), would be eligible to accrue eight hoursof annual leave every two weeks. This provision would take effect 120 days after the act'senactment date, and would require OPM to prescribe implementing regulations not later than 120days after the act's enactment. Under the House version, the amendments would not apply to anemployee appointed to a position before the effective date of the regulations implementing theprovision. Targeting senior level employees for this benefit is viewed by some as an effective tool for recruitment and retention. To the extent that most senior executives continue to be drawn fromgovernment ranks, and that these individuals may have already reached, or are about to reach, 15years of service by the time they enter the ranks of the SES, this provision's effect might be limited. To the extent that it attracts more outside managers to the federal ranks, it might have a positiveeffect on recruitment. Under current law at 5 U.S.C. ï¿½5542(b)(2), the time that an employee spends in a travel status away from his or her official duty station is not considered to be hours of employment unless specificrequirements are met. The requirements are that (1) the time spent is within the days and hours ofthe employee's regularly scheduled administrative workweek, including regularly scheduledovertime hours; or (2) the travel involves the performance of work while traveling, is incident totravel that involves the performance of work while traveling, is carried out under arduous conditions,or results from an event that could not be scheduled or controlled administratively (including travelto an event and return from an event to the official-duty station). Section 203 of S. 129 , as passed by the Senate and as ordered to be reported to the House, would amend current law by adding a new Section 5550b to Chapter 55, Subchapter V ofTitle 5 United States Code . The section would provide that, notwithstanding current law, anemployee could be granted compensatory time off from his or her scheduled tour of duty for timespent in officially authorized travel status, away from his or her official duty station, that is nototherwise compensable. An employee who has any hours treated as hours of work or employmentfor purposes of compensatory time would not be entitled to payment for any such hours that areunused as compensatory time. OPM would prescribe regulations to implement the provision notlater than 30 days after enactment of the section. If the provision were enacted, federal employees who traveled outside of the normal business hours to meetings, training, and other official activities would no longer need to use their ownpersonal time for such travel. This provision was added to S. 129 during markup bythe Senate Committee on Governmental Affairs at the request of Senator Akaka. During the Housesubcommittee hearing, Colleen M. Kelley of NTEU expressed strong support for compensatory timeoff for travel as an effective recruitment and retention tool. (67) At the same hearing, Ronald Sandersof OPM stated that the personnel agency does not support the provision, because "there is nocompelling business case"; the benefit is "not typically found in the private sector"; and "such abenefit has a significant cost ... in terms of lost productivity." (68) Civil Service Retirement System Computation for Part-Time Service. Employees covered by the Civil Service Retirement System (CSRS) whowork part-time can experience disproportionately large cuts in their retirement annuities as the resultof a regulation adopted by OPM in response to the Comprehensive Omnibus Budget ReconciliationAct of 1986 ( P.L. 99-272 ). Current law (5 U.S.C. ï¿½8339(p)) requires retirement annuities for afederal worker whose career includes part-time employment to be based on the rate of pay that wouldbe paid for full-time service, with the employee's service time prorated for the actual number ofhours worked. In its regulation, however, OPM adopted an interpretation of this statute that alsoapplies a lower rate of pay than would be applied if part-time employees had worked full-time fortheir entire careers. Some Members of Congress who sponsored the relevant sections of P.L. 99-272 have stated that the OPM regulation unfairly penalizes part-time work by making larger reductionsin these workers' retirement annuities than were intended by Congress. (70) Section 103 of S. 129 , as passed by the Senate, and Section 211 of S. 129, as ordered to be reported to the House, would amend current law to clarify that CSRSretirement annuities based in whole or in part on part-time service should be prorated for the periodof service that was performed on a part-time basis. (71) Retirement Service Credit for Cadet or Midshipman Service. Under current law at 5 U.S.C. ï¿½8331(13) and 5 U.S.C. ï¿½8401(31), afederal employee who served in the armed forces can count his or her military service toward acivilian retirement annuity, provided that the employee makes a deposit to the Civil ServiceRetirement and Disability Fund equal to the amount that would have been withheld from his or hermilitary pay (plus applicable interest) if military service had been covered under the civilianretirement system. Section 104 of S. 129 , as passed by the Senate, and Section 212 of S. 129, as ordered to be reported to the House, would amend current law to include serviceas a cadet at the U.S. Military Academy, the U.S. Air Force Academy, or the U.S. Coast GuardAcademy, or as a midshipman at the U.S. Naval Academy in the definition of "military service" thatcan be creditable under the Civil Service Retirement System or the Federal Employees' RetirementSystem. The provision was added to S. 129 during markup by the Senate Committee on Governmental Affairs at the request of OPM. Section 301 of S. 129 , as ordered to be reported to the House, would amend various sections of Chapter 53 of Title 5 on administering special pay rates. S. 129 , asintroduced, included the same provisions at Section 204, but they were dropped during markup bythe Senate Committee on Governmental Affairs and are not included in the Senate-passed bill. Theprovisions would become effective on the first day of the first applicable pay period beginning onor after the 180th day after the act's enactment. Conversion rules would apply as follows. Subjectto any regulations OPM could prescribe, an employee under the General Schedule, a prevailing rateschedule, or a special occupational pay system who, on the day before the effective date of Section301 was receiving a retained rate under 5 U.S.C. ï¿½5363, or was receiving under similar authority arate of basic pay greater than the maximum rate of basic pay payable for the grade of the employee'sposition, would have that rate converted as of the effective date of Section 301, and the employeewould be considered to be receiving a retained rate under 5 U.S.C. ï¿½5363 (as amended by Section301). The newly applicable retained rate would equal the formerly applicable retained rate asadjusted to include any applicable locality-based comparability payment. Discussion of the Provisions. The section analysis which accompanied S. 2651 (107th Congress) explained that "The changeswould correct a variety of pay administration anomalies associated with special rates and payretention that resulted from the introduction of locality pay under the GS [General Schedule] paysystem," and that "No current employee would lose pay because of these changes." Further, thesection analysis stated that "The proposed changes would go a long way toward reinvigorating thespecial rates program as a useful recruitment and retention tool and would thereby help to relievepressure for authority to set pay outside the GS system." (72) Identical proposed changes also wereincluded as Section 124(a) and (c) of S. 1612 (107th Congress). Under current law at 5 U.S.C. ï¿½5304(g)(2)(A), Executive Schedule level III ($145,600, as of January 2004) is the maximum total pay allowable for senior-level, Senior Executive Service (SES),Federal Bureau of Investigation and Drug Enforcement Administration SES, and administrative lawjudge (ALJ) positions. Section 302 of S. 129 , as ordered to be reported to the House,would amend current law to exclude ALJ positions from coverage under the provision. Congressional interest in legislative reforms to improve the management of the federalgovernment's workforce continues in the 108th Congress. The National Commission on the PublicService, in its report to Congress submitted on January 7, 2003, recommended the development ofmore flexible personnel management systems by operating agencies and continued efforts to simplifyand accelerate federal recruitment processes. The Department of Homeland Security and theDepartment of Defense, respectively, are currently working with the Office of PersonnelManagement to craft new human resources management systems for their employees, and personnelmanagement flexibilities likely will be a focus of the discussions surrounding these efforts, as wellas of congressional oversight of the new systems. A representative of the Federal ManagersAssociation, Karen Heiser, testifying before the April 8, 2003, joint subcommittee hearing said thatthose in government service must continually ask such questions as "Do employees receive thetraining they need? Are they receiving the proper incentives to do a good job? In short, is thegovernment investing in its people?" in contemplating "a world-class and resilient Civil Service." (73)

Summary: As in the previous Congress, management of the federal workforce continues to be an issue ofinterest to the Senate and the House of Representatives in the 108th Congress. S. 129 ,the Federal Workforce Flexibility Act of 2003, passed the Senate with an amendment by unanimousconsent on April 8, 2004. In the House, the Subcommittee on Civil Service and AgencyOrganization forwarded S. 129 to the House Committee on Government Reform on May18, 2004, after amending it by voice vote. On June 24, 2004, the House committee ordered the billto be reported to the House of Representatives, after amending it, by voice vote. The bill wasintroduced by Senator George Voinovich on January 9, 2003. A similar bill, H.R. 1601 ,the Federal Workforce Flexibility Act of 2003, was introduced in the House by Representative JoAnn Davis on April 3, 2003. S. 129 , as passed by the Senate and as ordered to be reported to the House, would amend current law provisions on critical pay, civil service retirement system computation forpart-time service, agency training, and annual leave. The bill also would amend current lawprovisions on recruitment and relocation bonuses and retention allowances (which would be renamedbonuses). As ordered to be reported to the House, S. 129 would amend the current 5U.S.C. ï¿½ï¿½5753 and 5754 language on such bonuses and allowances. As passed by the Senate, itwould add new sections 5754a and 5754b on recruitment, relocation, and retention bonuses to Title5 United States Code . Therefore, if S. 129 as passed by the Senate were enacted, agencieswould be able to use the current law provisions on recruitment and relocation bonuses and retentionallowances at 5 U.S.C. ï¿½ï¿½5753 and 5754 and the enhanced authority for recruitment, relocation, andretention bonuses proposed at 5 U.S.C. ï¿½ï¿½5754a and 5754b. S. 129 , as ordered to be reported to the House, would amend current law provisions on pay administration. These amendments were included in S. 129 as introduced, butthey were dropped during Senate committee markup and are not included in the Senate-passedversion of the bill. Provisions that would amend current law on retirement service credit for cadetor midshipman service and compensatory time off for travel were added to S. 129 duringSenate committee markup and are included in the legislation as passed by the Senate and as orderedto be reported to the House. Added during Senate Committee markup as well were provisions onSenior Executive Service authority for the White House Office of Administration that are in theSenate-passed bill, but are not in the legislation as ordered to be reported to the House. Otherprovisions that would have amended current law provisions relating to contributions to the ThriftSavings Plan, annuity commencement dates, and retirement for air traffic controllers were includedin S. 129 as forwarded by the House Civil Service and Agency Organization Subcommitteeto the House Government Reform Committee, but were removed during the full committee markup. This report, which will be updated as needed, discusses each of the provisions in S. 129 , as passed by the Senate and as ordered to be reported to the House.