Home Legislative Action Congressional Testimony NTEU Views on the FY 2003 Budget for the Treasury Department And General Government Operations

NTEU Views on the FY 2003 Budget for the Treasury Department And General Government Operations

4/05/2002

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

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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 l50,000 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 play such a vital role in maintaining and strengthening our democracy.

The past seven months have been a very trying time for the American public. First came the tragic events of September 11th, then the anthrax outbreak in October and November, the frequent security threats on our ports and borders, the ongoing recession, and most recently the corporate accounting scandals. Never before has it been so clear how vulnerable our nation is to such a wide variety of attacks. And never before has the need to invest in a highly trained, highly skilled, dedicated federal workforce to respond to and prevent these attacks been so clear. If any American didn’t appreciate the national value of our federal employees before the tragic events of September 11th, then they sure recognize their work now. Our nation depends on these patriots who work for the federal government.

Every federal employee at the Department of Treasury plays a critical role in our nation’s war on terrorism and homeland security. Inspecting cargo at our ports and borders to prevent the entry into our country of illegal drugs and dangerous biological and chemical weapons; collecting taxes and tariffs to ensure our military and homeland law enforcement agencies have the tools they need to keep us safe; ensuring the integrity of our government’s revenue payment and collection systems; working with local law enforcement agencies to protect the public from dangerous explosives and illegal trafficking of alcohol and firearms; printing and distributing Social Security checks that are so important to the homeland stability of so many of our families: the list goes on and on. While these jobs may be different, what is consistent is that it is federal employees who are on the job for America making countless contributions to our nation’s stability, security, and prosperity.

That is why it is incumbent upon Congress and the Administration to ensure that the dedicated employees who perform these vital functions for America day in and day out – during times of war and times of peace – have the tools and resources they need to do their jobs. And it is incumbent upon Congress and President Bush to provide these employees with the pay, benefits, and job protections that are, at a bare minimum, on par with those in the private sector. Below I have highlighted some of the critical areas of the Administration’s fiscal year 2003 budget request for the Department of Treasury and other agencies under this subcommittee’s jurisdiction. I would welcome the opportunity to provide additional views at a later date.

I.

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 the Administration’s budget will only make the human capital crisis worse. NTEU believes that, at a minimum, federal employees should get a 4.1% pay increase, identical to the amount the Administration proposed for the military. The Administration’s budget recommends a 2.6% pay increase for civilian employees. However, both the House and Senate FY 03 Budget Resolutions call for pay parity between civilians and military personnel, and we hope the final appropriations bill fully funds at least a 4.1% 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 FY 03 budget request fails to provide additional funding to help 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 on average 13% this year, 10.5% last year, and another 9.3% the year before that. Over the last five years, premiums for the most popular plan in the FEHBP, Blue Cross Standard Option family coverage, increased 60%. During this same period, federal salaries rose an average of 13%. NTEU urges this Subcommittee to help reduce the health care costs paid by federal employees.

II.

Contracting Out

NTEU remains strongly opposed to the Administration’s “competitive sourcing” initiative which sets arbitrary quotas for agencies to open up thousands of federal employee jobs to the private sector.

The Office of Management and Budget has directed every department and agency to open up to the private sector in fiscal year 2002 the work of five percent of the federal jobs on their FAIR Act inventories and an additional ten percent in FY 2003. The Administration will be directing agencies and departments to ultimately open up to the private sector fifty percent – more than 425,000 – of these federal jobs considered commercial in nature.

The arbitrary privatization quotas will significantly disrupt operations at agencies like the IRS, which is in the middle of a sweeping reorganization plan, and agencies on the front lines of our homeland defense, such as the Customs Service, where personnel are working under heightened Level 1 border security as a result of the tragedy of September 11th. Unfortunately, the one-size-fits-all quotas give no consideration whatsoever to unique circumstances of different agencies. This directive is already having a negative impact on the morale of the federal workforce, and we believe the directive will lead to more waste, more broken promises, and more cost overruns in government contracting.

NTEU urges this subcommittee to reject the use of these arbitrary quotas so that agencies can focus on achieving their missions in the most reliable, cost effective, and efficient manner.

III.

Budget Gimmicks

While the Administration has requested a budget increase for the Department of Treasury over last year’s funding level, much of that increase is attributed to a budget gimmick suggested by the Administration, that would, for the first time, require agencies to pre-fund future retiree health and retirement costs from current appropriations. Fortunately, both the House and Senate Budget Committees rejected the Administration’s proposal. The House declined to include this proposal in its FY 03 Budget Resolution unless, and until, the appropriate authorizing committee makes this change in law. And the Senate Budget Resolution contains no change at all. Congress should not be misled about the impact these new creative accounting procedures being used by the Office of Management and Budget will have on operations at the Department of Treasury and other agencies. In the long-term, agency budgets will shrink to accommodate the costs of the retiree and health care programs.

IV.

Internal Revenue Service

There are nearly twenty thousand fewer employees at the IRS than there were just ten years ago. But as the size of the IRS workforce has decreased, the workload has grown and become more complex. For example, in1988, 140 million tax returns were filed; in 2002 the IRS expects to receive 231 million returns. In 1999, taxpayers contacted the IRS for assistance approximately 117 million times, up from 105 million contacts in 1996.

And in 2001, IRS employees responded to new challenges, first expeditiously issuing millions of tax rebate checks and answering record numbers of phone calls related to the rebate. Then after the tragic events of September 11th, employees worked to provide administrative relief to the victims and their families, and worked to foster taxpayer giving to charitable organizations.

Yet, even as the number of total tax returns filed each year continues to increase and the tax code continues to undergo sweeping changes from Congress, the American taxpayers are receiving better service from the IRS. Unfortunately, it is no coincidence that examination coverage of tax returns has declined during this period of staffing cuts and increased workloads. Unless the downward trend in staffing levels is turned around, the IRS will not be able to increase tax compliance and enforcement activity, while continuing to deliver better services to the taxpayers.

Unfortunately, the Administration’s budget for FY 2003 does not provide the IRS with the resources necessary for the Service to continue to perform current operations, while simultaneously meeting its modernization goals. Because the IRS continues to redirect employees from tax compliance functions to help with customer service, including answering taxpayers’ questions, and providing walk-in assistance to taxpayers, the Administration’s budget comes up far short.

While the Administration’s $10.4 billion request for IRS operations may appear to be slightly higher than last year’s funding level, the funding is essentially flat in “real” dollar terms because of the retiree accrual budget gimmick. Furthermore, the budget ignores the need to hire enough additional employees to stop the decline in audits and enforcement activities. And the budget fails to provide enough funds for additional equipment and better training for the employees.

Improving customer service, enhancing tax return processing, and increasing tax compliance can only happen if the Administration and Congress support increased funding for staffing, more advanced technology and equipment, and better training. Employees at the IRS have responded to the mandates from Congress 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.

While meaningful funding for the IRS is important to operations, NTEU also believes that in order to maximize efficiencies at the IRS, Congress must act to modify Section 1203 of the IRS Restructuring and Reform Act. As mentioned earlier, audit rates are down. One reason is the lack of staff; another is an issue that 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. Commonly known as the “Ten Deadly Sins,” Section 1203 outlines ten infractions for which IRS employees must be fired. One of those infractions is the untimely filing of federal income taxes even when a refund is due.

The Administration’s FY 03 budget endorses a package of proposals that includes changing the mandatory termination provisions to allow the IRS Commissioner to provide appropriate punishment for offenses, “up to and including termination.” In its budget request, the Administration noted that an IRS employee who fails to file a refund return is subject to termination even though any other taxpayer who files a refund return late is not subject to any penalty.

The Ways and Means Committee recently voted to include modifications of Section 1203 in H.R. 3991, the “Taxpayer Protection and IRS Accountability Act of 2002.” The President, the Secretary of the Treasury, the IRS Commissioner, the IRS Oversight Board and NTEU all agree that this package of changes would make Section 1203 fairer. Violations of any of the ten offenses should be taken seriously, but mandatory termination in every instance should not be the only disciplinary action available. No other federal or congressional employee is subject to similar mandatory termination and fairness demands that IRS employees not be subject to this uniquely harsh standard.

NTEU asks for this subcommittee’s support for the changes to the section 1203 mandatory termination provisions of the IRS Reform and Restructuring Act being proposed by the Administration, so that tax fairness applies to all Americans, even those who work at the IRS.

V.

U.S. Customs Service

The President’s FY2003 budget requests a funding level of $3.18 billion and 19,628 FTEs for the United States Customs Service. This request represents a token increase from last year’s appropriations. NTEU feels that this budget is simply inadequate to meet the needs of Customs personnel, especially in light of the incidents surrounding September 11th. Customs inspectors, CEO’s and import specialists make up our nation’s first line of defense in the wars on terrorism and drugs.

In 2001, Customs Service employees seized over 1.7 million pounds of cocaine, heroin, marijuana and other illegal narcotics – including over 9.5 million tablets of Ecstasy, triple the amount seized in 1999. Customs also processed over 497 million travelers last year, including 1 million cars and trucks and over $1.3 trillion worth of trade. These numbers continue to grow annually. Over the last decade trade has increased by 137%. In addition, Customs personnel are responsible for ensuring compliance with hundreds of import laws and regulations, as well as stemming the flow of illegal contraband such as child pornography, illegal arms, weapons of mass destruction and laundered money.

It has become very clear that funding must be substantially increased in order to allow Customs to meet the challenges of the future, especially as Customs continues to have significantly higher workloads and increased threats along America’s borders. Customs’ recent internal review of staffing, known as the Resource Allocation Model or R.A.M., shows that Customs needed over 14,776 new hires just to fulfill its basic mission and that was before September 11. As a result of the tragedy of September 11th, all Customs personnel continue to work under heightened Level 1 border security. Level 1 is the highest level of border security possible.

Yet, despite the increased threats of terrorism, the dramatic increases in trade resulting from NAFTA, and new drug smuggling challenges, the Customs Service has confronted its rapidly increasing workload and homeland security mission 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 legitimate trade) to successfully conduct their missions.

The recent deployment of over 700 National Guard troops to our borders clearly shows the need for more Customs personnel. Currently, the National Guard troops are unarmed, which not only puts the Customs inspectors’ lives in danger but that of the National Guard as well. In fact, a number of drug seizure cases have had to be dismissed because of the improper discovery and handling of illegal drugs by National Guard troops. These troops need to be removed from the borders and quickly replaced with highly trained Customs personnel.

Last year, Congress acknowledged the shortage of staffing and resources by appropriating $245 million for staffing and technology needs for both the Northern and Southwest Borders in the FY2002 emergency supplemental appropriations. We urge this Congress to again increase the funds available for additional inspectors and equipment in areas around the country that are experiencing the severe shortages. NTEU would also ask the committee to work to provide funding for the Customs Service in the FY2003 emergency supplemental appropriation, despite the Administration’s request, which called for no appropriations for the U.S. Customs Service.

The U.S. Customs Service continues to be the Nation’s premier border agency. Not only do the employees of the U.S. Customs Service interdict drugs but they also ensure that all goods entering and exiting the United States do so in compliance with over 400 U.S. laws and regulations at 301 points of entry across the country. Customs also has a mission as a revenue collection agency. Customs collects an estimated $25 billion in revenue on over 25 million entry summaries involving over $1.3 trillion in international trade every year. However, Customs’ ability to facilitate the movement of legitimate trade is also being weakened due to inadequate resources.

In addition to appropriations, Customs also receives funds from the COBRA account. This user fee account funds all inspectors and canine enforcement officers’ overtime pay as well as approximately 1100 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 could be expected in 2002. Customs anticipates collecting approximately $300 million in COBRA fees during FY2002, well below the $350 million they project in COBRA obligations during FY2002.

To help remedy this problem, the President’s FY2003 budget proposes to temporarily increase two COBRA fees to raise an additional $250 million for personnel overtime and resource needs. The first involves the international air passenger fee, which would be raised from $5.00 to $11.00. The second fee increase involves the cruise vessel passenger fee, which would be raised from $1.75 to $2.00.

Unfortunately, Congress has been extremely reluctant to raise these fees in the past, so it is unlikely that this additional money will ever materialize. The Appropriations Committee must make sure that this $250 million is appropriated so that the Customs Service can continue its critically important work.

The COBRA fund will expire on September 30, 2003, unless it is reauthorized by Congress before then. However, the President’s FY2003 budget does not call for the reauthorization of COBRA. COBRA must be reauthorized or Congress must appropriate additional funds to make up for the loss of the user fees.

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 $300 million towards its modernization effort to install the new ACE (Automated Commercial Environment). Fortunately, President Bush’s Fiscal 2003 budget would provide an additional $312 million this year. 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 critically important staffing needs.

One of the most discussed ideas being debated on the topic of enhancing border and port security, is the idea of border agency consolidation. The most talked about border agency consolidation proposal would combine the Customs Service, INS and the Border Patrol into one agency under the jurisdiction of the Department of Justice. I find this proposal to be extremely troubling.

One of the keys to operating any government agency is sound organization. It can ensure that problems reach their proper level of decision quickly and efficiently. More importantly, good organization helps assure accountability. Unfortunately, a border agency consolidation plan that would put the Customs Service under the jurisdiction of the Department of Justice would not improve, but exacerbate current border problems. The Justice Department has consistently shown that is has a poor record of accountability and lacks a sound organizational structure with regard to the two border security agencies currently under its jurisdiction: the INS and the Border Patrol.

Most recently, the INS notified flight schools of the approval of student visas for two of the September 11 hijackers six months after the terrorist attacks. The INS also mistakenly allowed four suspected Pakistani terrorists into the country without proper documentation and they cannot now be found.

Consolidating these three organizations would cause logistical and institutional chaos. It would also take attention away from critical homeland security priorities. Yes, all three of these organizations deal with front line border and port security, but in very different capacities. Each of these agency’s missions is unique and should remain in their current structure. Ignoring each agency’s fields of expertise will lead to losing that expertise.

For example, Customs is charged with preventing contraband from entering the U.S. as well as preventing terrorists from using commercial or private transportation venues of international trade for smuggling explosives or weapons of mass destruction into or out of the United States. Customs personnel use advanced manifest information on goods to improve targeting systems to detect questionable shipments as well as deploying state of the art inspection technology at land borders, airports and seaports. Customs personnel also use advanced computer systems to compare international passenger information against law enforcement databases on a passenger-by-passenger basis to detect possible terrorists or criminals.

Whereas, the Border Patrol’s primary mission is the detection and prevention of illegal entry into the United States between ports of entry, the INS is tasked with the deterrance of unlawful entry of persons into the United States as well as facilitating lawful entry of persons entering the United States at ports of entry.

The Customs Service is also responsible for collecting over $25 billion in trade revenue each year. The structure of the Department of Justice has nothing to do with revenue collection or trade facilitation, two main missions of the U.S. Customs Service. Adding revenue collection and trade facilitation responsibilities to the Department of Justice’s mission would create a logistical mess and make it more difficult for U.S. companies that import and export goods.

The American public expects its borders to be properly defended. The government must show the public that it is serious about protecting the borders by fully funding the agencies tasked with defending the borders and laws of the United States. No organizational structure change will be successful, no matter how good it may look on paper, if the government does not provide proper funding for its border security agencies.

Quite simply, adequate resources have not been provided in the President’s FY2003 budget for Customs Inspectors, Canine Enforcement Officers and Import Specialists to adequately do their jobs. This subcommittee acted in the last session of Congress to increase funding so that Customs could meet its responsibilities. We sincerely appreciate your efforts and we would ask you to again increase funding levels for Customs in the FY2002 supplemental and the FY 2003 Treasury-Postal appropriations bill.

VI.

Law Enforcement Status

Another issue that I would like to address is law enforcement status for Customs Inspectors, Canine Enforcement Officers, and IRS Revenue Officers. The U.S. Customs Service Inspectors and Canine Enforcement Officers continue to be the nation’s first line of defense against terrorism and the smuggling of illegal drugs and contraband at our borders and ports. Customs Service Inspectors have the authority to apprehend and detain those engaged in terrorism, drug smuggling and violations of other civil and criminal laws. For example, it was Customs Inspectors who stopped a terrorist attack planned for New Years Day 2000 by identifying and capturing a terrorist with bomb making material as he tried to enter the country at Port Angeles, Washington.

Canine Enforcement Officers and Inspectors carry weapons, and three times a year they must qualify and maintain proficiency on a firearm range. Yet, they do not have law enforcement officer status. They are being denied the benefits given to their colleagues who they have been working beside to keep our country safe. Customs employees face real dangers on a daily basis, granting them law enforcement officer status would be an appropriate and long overdue step in recognizing the tremendous contribution Customs personnel make to protecting our borders from terrorism and drugs.

IRS Revenue Officers are the most threatened and physically assaulted group of federal employees. They show up at the doors of those who do not pay their taxes not knowing what to expect. It is a dangerous and extremely stressful job.

There are currently bills before Congress, HR 1841 and S 1935, that would grant law enforcement status to appropriate Customs personnel and IRS Revenue Officers. NTEU asks all members of the committee to cosponsor these very important pieces of legislation.

VII.

Other Critical Agency Funding Priorities

In addition to the work of the IRS and Customs Service, the Treasury Department performs many more critical functions that also need to be adequately funded. For example, while NTEU appreciates last year’s support from Congress for funding new hires at ATF, NTEU would urge Congress to continue to bolster the ATF workforce so that the bureau is better positioned to prevent even more violent crimes, 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 the Administration has proposed so that they can continue to operate the federal government’s payment, collection, and 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, another key agency under this subcommittee’s jurisdiction is the Federal Election Commission (FEC). In light of the changes in our campaign finance laws resulting from the recent enactment of Campaign Finance Reform legislation, it is critical that Congress provide the FEC with substantially more funding and staffing than was provided in previous years. The FEC workforce had already seen a significant workload increase over the past few years as the amount of money being spent on elections by candidates and campaign committees increased dramatically. Now with the complex changes contained in the new campaign finance law, the need for increased resources at the FEC is that much more important.

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 federal 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 protect and 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 are doing.

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