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TESTIMONY OF MAY 23, 1996 I am pleased to be here this morning to
describe the Administration's progress toward achieving
the 272,900 FTE employment reduction required by the Federal Work
Force Reduction Act (the
"Act") by the end of Fiscal Year 1999. I will also discuss our plans
for using voluntary separation
incentives, or buyouts, to help those agencies that must downsize in
order to meet severe resource
limitations or program terminations. The authorities provided to the Department
of Defense and separately to the non-Defense
agencies in the Act have been successfully used to jump-start
employment reductions -- with
Executive Branch non-postal employment levels now below two million,
and still falling. By the
end of Fiscal Year 1995, we reported a total reduction of 185,000 FTEs
from the 1993 base used
in the Act. The President's budget shows that we expect to achieve a
reduction of 214,400 FTEs
by the end of this fiscal year. I might add that projections from
agency reports to date indicate a
greater reduction. The OPM "head count" numbers this year show a
decline of approximately
230,000 to 240,000. While it is true that about two-thirds of the
overall FTE reduction as of the
end of Fiscal Year 1995 was from DOD components, significant
reductions occurred on the non-
DOD side as well. Agriculture is down about 11,000; HHS down nearly
7,000; HUD down more
than 1,000; Interior by more than 6,000; Labor by 1,200; State by 1,
800; Transportation by
6,000; VA down 5,700. These numbers are comparisons of actual FTE
levels in FY 1993 with
FY 1995 actuals. I am attaching a chart to my testimony that shows
each of the agencies FTE
employment data since 1993. OPM data show that gains were also made
toward reducing overhead positions, as
recommended in the National Performance Review. Of the nearly 32,700
buyout takers On the basis of our experience, therefore,
it is clear that the 272,900 personnel reductions
called for in the Federal Workforce Restructuring Act will be met,
probably ahead of the schedule
required by the Act. Beyond the streamlining plans agencies have been
implementing, budgetary
resources are not expected to be available to the agencies to meet the
salary and other costs for a
workforce that is any larger than that provided under the Act. With
both the House and Senate
budget resolutions calling for discretionary spending more than $40
billion below the President's
plan by 2000, the gap is wide and, whatever the final budget outcome,
more personnel cuts will be
required. How we plan for and make those cuts will test our
commitment as a responsible
employer. Based on average Government-wide salary and benefits costs,
agencies are faced with
reducing employment levels by approximately 20,000 for every one
billion-dollar cut in
discretionary spending for salaries and benefits. Faced with the certainty that employment
levels must continue to decrease, a top priority for
agency managers is managing this downsizing as efficiently as
possible. One possibility suggested
has been simply to freeze hiring. An agency hiring freeze will
capture whatever normal turnover
occurs, but that may be from positions critical to the agency's
mission requirements. Also,
substantial turnover occurs in lower graded, nontechnical jobs, making
reengineering only by
attrition an impractical approach. Another alternative is to use reductions in
force. Most people agree that reductions in force
are the least desirable method for downsizing since they are expensive
and disrupt the workforce
and productivity. This past Sunday's article in the Washington Post
Magazine illustrates the
dislocations resulting from RIFs. To avoid -- or at least minimize --
RIFs, planning for
downsizing should first include all available alternatives to
involuntary separation. By targeting incentives for voluntary
separation, as can be done with the buyout program,
agencies have a greater ability to manage their attrition. Not all
non-defense agencies will need
buyout authority in the next few years. However, it is impossible to
predict now which agencies
will be confronted with budgetary cuts, sometimes unexpected, that
will require further FTE
reductions over a very short time period. Our proposal, the "Federal Employment
Reduction Assistance Act of 1996", therefore
provides that agencies would have buyout authority for a four year
period. This will allow
agencies to use this authority whenever necessary. However, we also
provide that only
downsizing agencies would be authorized to offer buyouts. We also
provide that agency plans for
using buyouts as part of their downsizing efforts are to be reviewed
and approved by OMB before
buyouts can be offered. And, to discourage employees from turning
down a buyout now in the
expectation that another buyout bill will inevitably come along, we
not only establish a four-year
buyout period, but also provide that the buyout payment declines over
the four-year period by
$5,000 each year, going from $25,000 in Fiscal Year 1997 to $10,000 in
the year 2000. In addition, our proposed legislation
recognizes that involuntary separations outside of the
Defense Department may be required as we work to balance the budget.
If that occurs,
employees in the non-Defense agencies would be able to volunteer for
RIFs in lieu of colleagues
about to be separated. Also, for those who are involuntarily
separated, the agency would be
authorized to pay the employer's share of the premium for health
benefits coverage for up to 18
months after separation to cushion the impact of job loss and
transition to new employment.
DOD agencies already have these authorities. We believe that these
provisions are necessary in
non-Defense agencies as well. While other buyout and "soft landing" bills
have been introduced, we believe that the
Administration's proposal is the best response to our present
situation. Our legislation makes all
costs of the separation incentive explicit, rather than hidden in
other programs, such as the
retirement program. The Federal Workforce Restructuring Act offset
the CBO-determined pay-
as-you-go costs by an assessment on all agencies of $80 every year for
four years for each of their
employees. Our legislation provides that the offset, now estimated by
CBO to be 15% of the
salaries of employees who receive buyouts, will be made only by the
agencies using buyouts. The Administration does not support as a
general matter "soft landing" proposals that would
increase the Government's long term costs, such as those that would
change the retirement
program's 2% reduction for early retirement. We also are concerned
about proposals that
produce apparent savings in the short term while they actually
increase long term costs, such as
those that would index deferred annuities to future wage increases.
Mr. Chairman, I know that you have been
concerned about several aspects of the
administration of the buyout program under the Federal Workplace
Restructuring Act of 1994,
for example, the findings of the Department of Transportation's
Inspector General regarding
employees at the Federal Aviation Administration taking buyouts and
then returning to work as
contractors. The fact that the IG identified the problem, took firm
and timely action, and the
situation received wide media coverage is a positive indication of
effective oversight. As
Chairman of the President's Committee on Integrity and Efficiency and
the Executive Committee
on Integrity and Efficiency, the organizations of Inspectors General
from throughout
Government, I have discussed this matter with agency IGs. At our
meetings earlier this month, I
raised the question of the possible need for a cross agency review of
the use of buyouts. None of
the IGs present had received indications of problems in the operation
of the buyout programs in
their agencies. While I understand that GAO has identified other
situations, in the Department of
Defense and NASA, where some buyout takers took employment with a
contractor, I have not, as
yet, received any additional information from GAO on those
situations. However, I understand
that GAO found that use of buyouts allowed agencies to downsize
without disproportionately
affecting women and minorities and that most managers found the
buyouts a useful tool in their
downsizing efforts. You also asked specifically about OMB's
approval of the Departments of Energy and
Transportation deferred buyout program, recently highlighted by the
media. We did this after
review of the opinion of Energy's General Counsel. In the special
circumstances applicable to
these departments and few others, we agreed with their analysis. For
an agency to reoffer unused
deferred buyouts, there must have been an agency head determination,
prior to March 31, 1995,
that employees in targeted positions being offered buyouts at that
time had to be retained, to the
extent possible, in order to ensure the performance of the agency's
mission. If that were the case,
and not all buyouts were used, the agency may reoffer any of the
unused deferred buyouts already
allocated by OMB to the employees in the same targeted positions.
Separation must occur by not
later than March 31, 1997. In closing Mr. Chairman, let me say that I
appreciate your interest and concern in ensuring that
the government manages its continuing downsizing in an effective and
economical manner. The
President's Management Council, which I chair, is composed of the
Chief Operating Officers of
the agencies. They have focused for the past two years on the need
for humane downsizing. As
part of their consideration of these issues, they strongly support the
renewed used of buyout
authority by those agencies continuing to reduce in size. This concludes my statement. I will be pleased to answer any questions that you may have.
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