NTEU Views on the FY 2002 Budget for the Treasury Department and General Government Operations

5/01/2001

House Appropriations Committee Subcommittee on Treasury, Postal Service and General Government

Chairman Istook, Ranking Member Hoyer and other distinguished Members of this subcommittee, my name is Colleen Kelley and I am the National President of the National Treasury Employees Union. As you know, NTEU represents more than l55,000 federal employees across the federal government, including most of the employees who work at the Department of Treasury. I want to thank you for giving me the opportunity to present testimony on behalf of these dedicated men and women who keep our democratic government running.

I would like to highlight some of NTEU's priorities and concerns contained in President Bush's Fiscal Year 2002 budget request for the Department of Treasury and other agencies under this Subcommittee’s jurisdiction. Too many times, our nation takes for granted the work performed by the men and women at the U.S. Treasury Department. It is these dedicated individuals who work to ensure that the taxes and tariffs due to the Treasury are paid; they are the ones standing on the front lines of our borders and ports in keeping illegal drugs out of our country; they ensure the integrity of our government’s revenue payment and collection systems; they work with local law enforcement agencies to protect the public from dangerous explosives and illegal trafficking of alcohol and firearms; they print and distribute Social Security checks that are so important to so many of our families. Every day, the men and women who work for the federal government make countless contributions to our nation’s stability, security, and prosperity.

That is why it is incumbent upon Congress and President Bush to ensure that these dedicated employees have the tools and resources they need to do their jobs. And it is incumbent upon Congress and President Bush to provide these employees – who selflessly provide for our nation day in and day out – with the pay and benefits that are, at a bare minimum, on par with those in the private sector. Below I have highlighted NTEU’s views on some of the most important issues facing the Treasury Agencies’ workforce. I would welcome the opportunity to provide additional views at a later date.

Internal Revenue Service

Total staffing levels at the IRS decreased by 18,000 between 1992 and last year and the number of revenue agents declined by more than twenty percent between 1995 and 2000. Notwithstanding these staffing decreases, during the past decade, Congress made hundreds of changes to the tax code (801 changes in the Taxpayer Relief Act of 1997 alone), our nation experienced unprecedented economic growth, which led to the filing of more complex tax returns, and the total number of tax returns processed by the IRS increased by nearly 10%. Simultaneously, IRS toll free phone services and web-based services for taxpayers were expanded and improved, taxpayers can visit IRS officials at more convenient locations during longer hours of operation, and taxpayers have more options for filing their returns. IRS employees have successfully done more with less over the last decade.

Unfortunately, NTEU does not believe that President Bush’s budget for FY 2002 provides the IRS with the resources necessary for the Service to continue to perform current operations, while simultaneously meeting its modernization goals. The budget does not adequately take into account tax compliance staffing shortfalls due to the shifting of many IRS examination staff, revenue agents, compliance officers, auditors and others to help improve customer service, answer taxpayers’ questions, and provide walk-in assistance to taxpayers. And the Bush budget does not recognize the requirements necessary to bring IRS information technology systems into the 21st century. In fact, the newly created independent IRS Oversight Board pointed out that the budget fails to provide funding for an additional 1,300 employees needed to stop the decline in staffing levels which has led to a drop in audits and enforcement activities. And the Oversight Board, in its report on President Bush’s 2002 budget for the IRS, points out that the budget fails to provide funding for new laptop and desktop computers to accommodate new computer programs, even though the IRS has spent millions of dollars developing new software.

President Bush’s budget proposal for the IRS indicates that this Administration is not willing to make the long-term commitment necessary to modernize the IRS, and is not willing to provide the Service with even a reasonable fraction of what is required to carry out its mission.

The Bush Administration and Congress need to do more than merely fund band-aid repairs to address immediate needs at the IRS. The IRS needs adequate funding for day-to-day operations and maintenance, but it also needs a commitment from President Bush and Congress to invest in long-term improvements that will modernize tax compliance and customer service to meet the demands of the American taxpayers. Improving customer service, enhancing tax return processing, and increasing tax compliance can only happen if President Bush and Congress support increased funding for staffing, more advanced technology and equipment, training and innovation. Employees at the IRS have responded to the mandates from Congress contained in the IRS Restructuring and Reform Act and are making tremendous progress. However, the current IRS workforce can only do so much with its limited resources. Further progress in making the IRS more efficient and more effective will only be achieved if President Bush and Congress provide more funding.

The IRS needs to maintain current staffing levels, be able to hire new staff and retain them for longer than one year, and completely modernize outdated IRS technology and equipment. Without a long-term commitment to provide adequate funding, the IRS will be forced to shuffle resources from one account to another, with the end result being an IRS less responsive to the needs of the American taxpayers.

For example, the President’s budget does include funding for the IRS Staffing Tax Administration for Balance and Equity (STABLE) initiative. The STABLE initiative was first proposed by the previous Administration and funded in the current year’s budget. If fully implemented, the original initiative would enable the IRS to hire nearly 4,000 new employees to help increase compliance and improve customer service.

Unfortunately, the amount of funding in President Bush’s budget would only allow the IRS to “complete” the hiring of roughly two-thirds of the required 4,000 new employees. Because the Bush budget fails to provide funding to account for inflation and routine pay increases for the IRS to maintain its current workforce, the IRS will be forced to cut back on its plans to hire additional employees. This is simple math: if we want to maintain the current levels of staffing and hire additional employees, the IRS needs enough money to pay those currently working at the IRS and the IRS needs enough money to recruit additional qualified individuals. Both cannot be funded under the proposed budget.

The President’s budget will provide $400 million in investments to modernize IRS's outdated computer systems. This is less than half of the Oversight Board’s recommendation of $1 billion for systems modernization. NTEU supports the Board’s recommended funding allocation so that IRS employees will have the systems infrastructure they need to more efficiently process, store, analyze, and manage taxpayer records, and so that taxpayers can be assured that their taxpayer information is secure and kept confidential.

While NTEU supports an increased budget for more advanced information technology systems and better equipment, we do not believe that these improvements have to come at the expense of reduced funding for staffing.

As you know, audit rates are down. One reason is the lack of staff; another is an issue which has had a chilling effect on employees, and I believe has contributed to the declining rates of audits and tax compliance. IRS employees continue to work in fear of section 1203 of the IRS Restructuring and Reform Act, which sets out ten infractions, known as the “Ten Deadly Sins,” for which IRS employees face mandatory dismissal. One of those infractions is the untimely filing of federal income taxes.

IRS employees violating the IRS Rules of Conduct have always been subjected to discipline, including dismissal, and rightly so. However, RRA’s requirement for mandatory dismissal of employees who violate these infractions, is unduly harsh, especially in light of the fact that many IRS employees are being terminated for filing returns late, even when they have refunds due. Section 1203 is having a negative effect on collections and morale at the IRS, and must be repealed or modified.

U.S. Customs Service

The President’s FY2002 budget requests a funding level of $1.96 billion for salaries and expenses and 17,849 FTEs for the United States Customs Service. This represents an additional $97 million and 370 additional FTEs from last year’s appropriations. NTEU feels that this budget is woefully inadequate to meet the needs of this country’s oldest law enforcement agency.

The workload of the Customs Service employees has dramatically increased every year including more commercial entries that must be processed, more trucks that must be cleared and more passengers that must be inspected at the 301 ports of entry. There has been a relatively small increase in personnel worldwide, despite the dramatic increases in trade resulting from NAFTA, the increased threat of drug smuggling and the opening of new ports and land border crossings each year. In 2000, Customs Service employees seized over 1.5 million pounds of cocaine, heroin, marijuana and other illegal narcotics -- as well as over 9 million tablets of Ecstasy, triple the amount seized in 1999. Customs also processed nearly 500 million travelers last year , including 140 million cars and trucks and over $1 trillion worth of trade. This number continues to grow annually, and statistics show that over the last decade trade has increased by 135%.

In addition, Customs employees have become responsible for preventing international money-laundering and arms smuggling. Yet, the Customs Service has confronted its rapidly increasing workload with relatively static staffing levels and resources. In the last ten years, there have not been adequate increases in staffing levels for inspectional personnel and import specialists – the employees who process the legitimate trade and thwart illegal imports.

It’s very clear that funding must be increased to allow Customs to meet the challenges of the future. In recent years Customs has seen a decrease in the level of funding, relative to other Federal law enforcement agencies, even while having significantly higher workloads and threats along America’s borders. Customs’ recent internal review of staffing, known as the Resource Allocation Model or R.A.M., shows that Customs needs over 14,776 new hires just to fulfill its basic mission for the future. Congress must lead by example in showing the men and women of the Customs Service they respect and support the difficult and dangerous work these officers do 365 days a year by providing increased funding for the Customs Service.

NTEU recommends deploying the new hires to our nation’s ports of entry along the busy Southwest land border where wait times hinder trade facilitation and drug smuggling is at its peak, and in the busy area ports on the Northern Border where ports are unmanned, while the trafficking of “B.C. Bud” marijuana and the threat of international terrorism has changed the landscape. In addition to the busy land borders, NTEU recommends focusing attention on the bustling seaports and airports across the country. The understaffed and overworked inspectors at the U.S. seaports and airports currently contend with corruption, theft and safety issues that are a direct result of the lack of staffing. As one Southwest Border Senator aptly phrased it: “ U.S. seaports and airports are under siege by smugglers, drug traffickers and other criminals, yet law enforcement agencies that regulate them are understaffed and outgunned.”

Last year, Congress acknowledged the shortage of staffing and resources by appropriating $13.7 million for staffing and other resources for the Southwest Border. We hope that this Congress will again increase the funds available for additional inspectors and equipment in all areas around the country that are experiencing the most severe shortages.

Another issue, which is of extreme importance to the front line employees of the U.S. Customs Service, is the COBRA account. This user fee account funds all inspectors and canine enforcement officers’ overtime pay as well as approximately 1400 Customs positions across the country. This account is funded with user fees collected from Air/Sea Passengers except from the Caribbean and Mexico, Commercial Vehicles, Commercial Vessels/Barges and Rail Cars.

The history of collections and obligations for COBRA over the last 5 years shows a significant drawing down of reserve money available in the COBRA fund for overtime and additional positions, to the point where a significant ($40 to $60 million) shortfall is expected in 2001. Customs anticipates collecting $300 million in COBRA fees during FY2001, well below the $350 million they project in COBRA obligations during FY2001.

Based on the projected shortfall in the COBRA funding account, Customs has cut back on overtime and held off filling hundreds of new positions, thereby decreasing services to all taxpayers and exacerbating the long delays at many border crossings. It is imperative that the COBRA fund be reauthorized. It is currently set to expire in September 2003. Along with the reauthorization of COBRA there must be significant increases in appropriated funds to enable Customs to properly staff all ports of entry across the United States, and to ensure that shortfalls in the COBRA account prevent undue reliance on the unpredictable COBRA account.

It has become increasingly more difficult to recruit the best and the brightest into the ranks of Customs Service employees including inspectional personnel and import specialists. Import specialists have yet to be recognized for their increased responsibility for determining the classification, appraisal value and admissibility of products coming into the United States. In response to the recent explosive growth in trade, and the enactment of the Customs Modernization Act in 1994, the responsibilities and necessary technical abilities of Customs’ import specialists have increased tremendously, yet their salary structure and position description have not reflected the GS-12 graded workload they must perform regularly. Customs conducted a pilot audit of import specialists’ work that showed the higher graded work that they perform, yet Customs has not provided the resources to effect these upgrades. NTEU will continue to pressure legislators and the agency to comply with the classification standards and provide GS-12 journeyman levels for the Customs Service’s import specialists.

The Customs Service employees assigned to the Customhouse at the Los Angeles Seaport (Terminal Island, CA) have endured years of environmentally unsafe working conditions, including exposure to particulate matter from the nearby petroleum coke facility, asbestos, noxious fumes and other air pollutants. The current health and safety conditions are absolutely intolerable, and I urge the appropriators to ensure that the General Services Administration (GSA) permanently moves these employees as quickly and efficiently as possible. NTEU will continue to work with Customs and Members of Congress on a permanent solution, but immediate interim steps are also needed. The Customs Service should be provided the resources to move the remaining 150 employees to temporary work sites pending the final permanent move.

NTEU believes that it is also important for Congress to focus its attention on the failing computer system currently operated by the Customs Service -- the Automated Commercial System (ACS). Last Year Customs received $130 million towards its modernization effort but President Bush’s Fiscal 2002 budget keeps funding at the same level. At this current funding pace it will take 14 years to install the new ACE (Automated Commercial Environment). The current ACS is a 17 year old, outdated system that is subject to brown outs and freezes that wreak havoc on trade facilitation and employees' ability to do their jobs. Although a system upgrade is necessary for Customs to meet its modernization efforts, NTEU would oppose funding a new system by shifting funds away from the front line employees who currently facilitate the volumes of trade growth and enforce our laws at the borders.

Quite simply, the resources have not been provided in the President’s FY2002 for Customs Inspectors, Canine Enforcement Officers and Import Specialists to adequately do their jobs. These are dedicated, professional individuals and I urge Congress to appropriate more funding to increase staffing levels for Customs and to provide them with the resources they need to do their jobs.

Other Critical Agency Funding Priorities

In addition to the work at the IRS and Customs Service, the Treasury Department performs many more critical functions that also need to be adequately funded. For example, NTEU is hopeful that Congress will provide funding for BATF’s request for 340 new hires. This will enable the bureau to better prevent violent crimes and protect the public, while continuing to collect billions of dollars from license fees and tariffs. The Financial Management Service and the Bureau of Public Debt need at least what President Bush has proposed so that our government can continue to operate the federal government’s payment, collection, accounting services, and when necessary, borrow money and account for the resulting debt. And with modern technology in the hands of sophisticated criminals, the Bureau of Engraving and Printing faces great challenges in designing and printing counterfeit-proof currency, stamps, and other government-issued financial documents. Like the budget recommendations for all Treasury bureaus, the President’s budget request for BEP should be viewed as a floor not a ceiling.

Finally, with the increase in money being spent on elections by candidates and campaign committees, and complex problems with our entire election process, it is critical that the Federal Election Commission sees a significant increase in funding over previous years’ budgets. FEC employees cannot possibly keep up with its increasing workload and ensure the integrity of our democratic voting system with the limited resources they have been given over the years.

Federal Employee Pay and Benefits

The human capital crisis facing the federal government is an issue that Congress can help solve. It is no secret that the federal civil service system needs fundamental changes to address retention and recruitment problems. The primary obstacle to retaining highly qualified individuals working for the government today and recruiting the federal workforce of tomorrow is inadequate pay and benefits. There was once a time when it was the steady pay and good health care and retirement benefits offered by the federal government that encouraged young individuals to dedicate their careers to working for the government. However, with the widening of the pay gap between the public and private sectors, and the skyrocketing costs of health care premiums paid by federal employees, more and more individuals who would like to work for the government instead are opting for careers in the private sector where the pay and health care coverage are now much better.

Unfortunately, the proposals in President Bush’s budget will only make the human capital crisis worse. NTEU believes that, at a minimum, federal employees should get a 4.6% pay raise, identical to the amount President Bush proposed for the military. President Bush’s budget recommends a 3.6% pay increase for civilian employees. However, both the House and Senate-approved budget resolutions call for pay parity between civilians and military personnel, and we hope the final appropriations bill fully funds at least a 4.6% pay raise for all federal employees. No single issue is more important to federal employees than bringing the pay of federal employees more in line with individuals working in the private sector.

NTEU also was very disappointed that the Bush budget fails to provide additional funding to assist federal employees afford the skyrocketing costs of health care coverage. In recent years, the rising costs of the Federal Employees Health Benefits Program (FEHBP) have put health care coverage out of reach for many lower paid federal employees and retirees. Premiums for federal employees went up 10.5% this year, 9.3% last year, and another 9.5% the year before that. Additionally, the Bush budget would drop the requirement that federal health plans must pay for contraceptive health coverage if they pay for other prescription drugs, which will lead to further health care cost increases for many federal employees. NTEU urges this Subcommittee to help reduce the health care costs paid by federal employees.

NTEU was very pleased that last year this Subcommittee extended the child care subsidy program for lower graded employees for another year. However, not all agencies are taking full advantage of this program due to a shortage of money and uncertainty regarding the program's future. This was confirmed recently by a report done by the Office of Personnel Management. The OPM report also found that employees expressed concern about the possible need to change child care arrangements in order to qualify for the subsidies without being assured that the program would be permanent. With additional funding and a longer-term commitment from Congress and President Bush, more agencies will be able to operate and expand this cost-effective and family-friendly program.

The President and Congress cannot expect the federal government to deliver the services and perform the necessary tasks the American taxpayers expect if adequate funding is not provided to retain the current workforce, recruit additional employees, and give these employees the equipment and training they need to improve the efficiency of their work. Day in and day out, federal employees are working to improve the quality of life for all Americans. If we want our nation to have confidence in the federal government, then we need to make sure the employees receive adequate pay and recognition for their work, and that they have the tools they need to have confidence in the work they’re doing.

Thank you for this opportunity to provide you with NTEU’s views on the important issues under this subcommittee’s jurisdiction.