The Crisis In Public Service

7/17/2002

National Commission on the Public Service

My name is Colleen Kelley and I am the National President of the National Treasury Employees Union (NTEU). On behalf of the more than l50,000 federal employees represented by NTEU, I want to thank you very much for inviting me here today to testify before the National Commission on the Public Service.

I believe we all share the same goal - to make the federal government an employer of choice. We must take the appropriate steps to retain our current employees, and the knowledge and skills they bring to the federal government, while at the same time enticing a new crop of bright and talented young people into public service. The need to hire, and maintain, a highly trained and skilled federal workforce has never been more clear. For too long a period of time, the federal government has failed to invest in its most important resource - its employees. What we are seeing today is the effect of that failure.

In fact, twelve years after the first Volcker Commission issued its groundbreaking report on the need to rebuild the public service, we find ourselves seeking solutions to the same problems we failed to address at that time. What the first National Commission on the Public Service described as a quiet crisis, has escalated to a fever pitch.

I think there is very little question as to why this is the case. The Administration's proposal to create a new Department of Homeland Security is an excellent case in point. The Administration's proposal seeks to consolidate l70,000 federal employees from approximately two dozen different agencies into the new Department without providing any new resources for this effort.

To add insult to injury, the Administration's original bill sought to provide the head of the new agency with the authority to set - and change -federal employee rights and benefits whenever he or she saw fit. Stripping such a large group of federal employees of their current statutory rights, including whistleblower protection, access to federal retirement and health insurance and even the right to form unions and collectively bargain sent shock waves through the federal workforce. Contrary to reassuring the Nation's federal workforce, these proposals have helped to exacerbate the crisis the federal government faces in attracting and retaining employees.

I am pleased to say that during House Government Reform Committee consideration of the Homeland Security proposal last week, the committee affirmatively voted to retain these critical rights and benefits for the federal employees who will be transferred to the new agency. As NTEU has pointed out to the Administration and to Congress, federal employees have been fighting the war against terrorism before, during and since September ll. They have been fighting to protect all of our rights and freedoms - they should not have their own rights and freedoms taken away as a result.

As the Members of this body know, much of the work of the federal government and its employees has not been appropriately valued or rewarded in recent years. The first Volcker Commission studied the soundness of the current compensation system (The Federal Pay Comparability Act of l970), questioning whether it enabled the federal government to recruit and retain the workforce it would require for the future. One of the original Volcker Commission's conclusions was that "the gap between what government and the private sector pays has grown far beyond the point where government can hope to recruit and retain qualified staff." The Commission's report went on to highlight the fact that "if it (the federal government) is to remain a credible career choice, government simply cannot permit the purchasing power of federal pay to decline year after year and the gap between public and private pay for comparable jobs to widen." As we all know, the purchasing power of federal salaries has continued to erode and the gap has continued to grow.

In large measure, enactment of the Federal Employees Pay Comparability Act (FEPCA) in l990 sprung from the Volcker Commission recommendations. FEPCA, which resulted from bipartisan negotiations between a Republican Administration and Democratic Congress with input from stakeholders such as NTEU, represented a fundamental change in how federal pay would be set. At the time, it was praised for introducing a market-based, geographically sensitive method for setting federal pay.

Unfortunately, FEPCA has failed, and along with it, our hope that federal pay would finally be calculated without regard to partisan politics. FEPCA's methodology has been criticized, yet no proposal to alter that methodology has been made by either the current or past Administration. I think we all agree that FEPCA has not failed because of faulty methodology.

FEPCA has failed because the resources necessary to fund the pay increases it called for were never forthcoming. In reality, the Act required more funding than either the Office of Management and Budget or the White House - under President Clinton and now under President Bush - were willing to support. We don't just have a human capital crisis, we are faced with a political capital crisis as well. It is NTEU's opinion that there is little point in trying to negotiate a new federal pay system unless and until the policymakers are willing to spend the political capital to commit the resources necessary to make a new system work.

For too long, too little attention and too few resources have been spent on the federal government and its employees. Federal agencies are in a contest with state and local governments and private sector employers for the best employees, a battle we continue to lose. In spite of this, the President's budget for Fiscal Year 2003 proposed a 4.l% pay raise for the active duty military while suggesting that the Nation's civilian employees deserve no more than a 2.6% raise next year. This is not a proposal the Administration would make if it were serious about addressing the human capital crisis.

NTEU is gratified that the full House Appropriations Committee as well as the Senate Treasury Appropriations Subcommittee have endorsed a 4.l% pay raise for the Nation's civilian federal workforce next year. A 4.l% federal employee pay raise is the minimum that should even be considered given the Bureau of Labor Statistics (BLS) estimation of the current gap between private and public sector pay. According to BLS, in some parts of the country, the gap is as much as 32%. The Congressional Research Service recently reported that, in order to comply with the FEPCA law, federal employees would have to receive average raises of more than l8% in 2003.

Despite these facts and the influence we all know salary has on a prospective employee's decision whether or not to accept a job, legislation pending on Capitol Hill today to address the human capital crisis is silent on the issue of pay. NTEU does not believe it is possible to solve the human capital crisis without addressing this critical issue.

Another key component of the federal compensation package in need of review is the federal health benefits program. Once a crown jewel in the federal benefits package, premiums for coverage under the Federal Employees Health Benefits Program (FEHBP) have put it out of reach for many employees. The program has rapidly become not only prohibitively expensive for current employees, but unattractive to prospective employees as well. It, too, limits the federal government's ability to be competitive with the private sector.

In 2002, FEHBP premiums soared l3%. This rise followed increases of l0.5% in 200l and 9.3% in 2000. Over the last five years, premiums for the most popular FEHBP plan, Blue Cross Standard Option Family Coverage, have increased by 60%. During this same period, federal salaries increased an average of l3%.

As health insurance premiums consume ever greater portions of employee take home pay, it is critical that the FEHBP, too, receive careful scrutiny in the context of recruiting and retaining the best and the brightest. Legislation is pending before both the House and the Senate (H.R.l307, S.l982) to increase the employer share of FEHBP premiums from the current average of 72% to the most common industry standard, 80%. These bills represent modest steps toward addressing the human capital crisis, yet despite the importance of affordable health insurance coverage to prospective employees, the human capital proposals pending before Congress also fail to address this issue.

While pay and benefits are by no means the only factors prospective employees consider when comparing job opportunities, they are often the most important. When considering employment with the federal government, prospective employees are also usually eager to learn about training and career advancement opportunities. They want an opportunity to make a difference and to perform important and challenging work. Study after study has shown this to be true, yet, the federal government continues to fail miserably at these challenges.

Although the original Volcker Commission noted that government "must invest more" in its development programs and ensure that the proper training is available to permit employees to perform effectively, thirteen years later, these challenges still wait to be addressed. Every year, agencies are hamstrung by restrictive funding levels and are forced to shuffle resources between competing priorities and from one account to another. When agencies face budget shortfalls, one of the first things they cut is their training program.

Employee training, just like so many other elements central to solving the human capital crisis, tends to be driven by available resources. Agencies, which have been held to unrealistic funding levels for so long, have increasingly found that they do have the resources to provide training. The end result - employees do not receive the proper training to perform their missions and, increasingly, they are unable to enhance their abilities to prepare for advancement within their agencies. Without proper training, everyone loses - customers do not receive the best service and employees do not find their work rewarding or challenging.

Another issue that continues to erode the morale of the federal workforce, and can't possibly encourage prospective employees, is the Administration's blind targets for contracting out federal jobs. OMB has imposed arbitrary quotas on every federal agency, including agencies proposed for the new Department of Homeland Security, to open up 15% of the federal jobs listed on their FAIR Act inventories by the end of FY 2003, and OMB has established a final quota for every agency to open up to private contractors 50% of these federal employee jobs. We cannot begin to discuss methods to retain and recruit a high performing federal workforce until the Administration puts the brakes on their quota-driven outsourcing initiative. The Administration’s position on outsourcing is very clear: it does not matter whether agencies use a flawed outsourcing process or one that works, as long as agencies open up 425, 000 federal employee jobs to the private sector. What is that saying to the federal workforce?

The move to contract out more and more federal employee jobs comes despite the fact that agencies still are unable to determine whether contracting out is saving the taxpayers money or improving the delivery of government services. Agencies simply do not have the staffing or systems in place to track the work of contractors.

As a result, it seems that once a contractor gets a contract, that work is out the door and rarely - if ever - scrutinized again. For example, last summer, we learned that Mellon Bank, a contractor hired by the Internal Revenue Service, lost, shredded, and removed 70,000 taxpayer checks worth $1.2 billion in revenues for the U.S. Treasury. Why did it take so long for the government to detect a problem with this contractor’s failure to deliver the promised services? If agencies had better tracking systems and more contract oversight staff, the fraud – and the losses to the taxpayers – resulting from the Mellon contracting fiasco could have been halted much sooner.

NTEU is very troubled that despite the lack of oversight of contractors, OMB continues to force agencies to comply with their arbitrary outsourcing quotas, which will open up 425, 000 federal government jobs to private sector contractors. This is an insult to federal employees. I was a member of the Commercial Activities Panel. And even though the Panel was split on most of the recommendations in the final report released on April 30, the one area where there was unanimous agreement was on the ten principles that should guide sourcing policy. One of the principles was that federal sourcing policies and practices should “avoid arbitrary full time equivalent (FTE) or other arbitrary numerical goals.” The supporting commentary stated that there is “an overall concern about arbitrary numbers driving sourcing policy or specific sourcing decisions…. Any FTE or other numerical goals should be based on considered research and analysis. The use of arbitrary percentage or numerical targets can be counterproductive.” OMB surprisingly supported this principle.

Unfortunately, the OMB outsourcing quotas do not allow for any flexibility for the unique circumstances of an agency. And to date, the Administration still has not articulated its justification for how they came up with the specific quotas of 5%, 15%, and 50% they have imposed on agencies. Where is the data that shows that a 5% quota, a 15% quota, or a 50% quota for contracting out federal employee jobs with or without competition are the right numbers and will lead to savings and improved agency performance? Where is the data that shows that these randomly chosen numbers for outsourcing will improve operations at homeland security agencies? Nowhere has OMB ever given a good justification on why 15% and 50% are the right size quotas for agencies like the IRS, which is in the middle of a sweeping reorganization aimed at better serving the American taxpayers, or an agency like the Customs Service, which has been working under heightened Level 1 border security as a result of the tragedy of September 11, or the Department of Health and Human Services which has also played a critical role in responding to threats to our homeland security.

The quotas are driving many civilian agencies to simply convert the work to private sector performance without first conducting public-private competitions, because agencies have been so overwhelmed with other management initiatives and meeting their mission requirements. Due to a lack of experience in administering fair public-private competitions, other agencies have opted to hire outside contractors to administer the A-76 public-private competitions. And, there are still many agencies trying to meet OMB’s quotas that just cannot seem to get their act together. The only thing OMB has made clear to agencies about Competitive Sourcing is that they have to get to 15 percent by the end of FY 03, and ultimately get to 50 percent. How to get there has been a wide-open and constantly changing message from OMB.

And now that OMB is moving ahead unilaterally to rewrite A-76, agencies are even more confused on how to meet the outsourcing quotas. On one hand, the Administration has told agencies to meet the quotas to open up 425,000 federal employee jobs to the private sector either through privatization without competition or through A-76 competitions. On the other hand, OMB is saying publicly that A-76 does not work, put it through a shredder, and draft a new policy for an untested process. You talk about a human capital crisis: who would want to be a government procurement official in this environment?

Whether one supports contracting out or one supports having federal employees perform the government’s work, I think we can all agree that agencies should have the discretion to determine how best to balance their workloads with their budgets. This Commission needs to call on OMB to issue a directive abolishing their outsourcing quotas immediately.

Instead of rushing to contract out more government work, Congress and the Administration should make the necessary investments today in increased agency staffing, resources, and better training, so that the taxpayers can get government services delivered by federal employees at even lower costs and increased efficiency tomorrow. After spending a year on the Commercial Activities Panel listening to the concerns about contracting out from people who deal with this day in and day out, and seeing the negative impact the Administration’s outsourcing initiative is having on agencies, I am more convinced than ever that when supported with the tools and resources they need to do their jobs, there is no one who is more reliable and who can do the work of the federal government better than federal employees.

In conclusion, inadequate pay and benefits, blind contracting out targets, artificially restricted agency funding levels and the failure of agencies to address infrastructure issues such as training, remain the primary obstacles to retaining the highly qualified employees we have today and recruiting the federal workforce we will need tomorrow. NTEU looks forward to working with the Volcker Commission to put the federal government on the path to resolving these critical matters.