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[Unofficial Transcript]
[Mr. Ross] Good afternoon and welcome to the Subcommittee on Federal Workforce, U.S. Postal
Service, and Labor Policy.
Today, we have two panels that will be testifying before us. I do want to note, though, that
we probably will have to take a break in between 2:00 and 3:00 for two votes. So we'll have
to take a temporary recess for about 30 minutes at that time and then reconvene for the specific
purpose of continuing our testimony. Hopefully, we will be able to get through the first panel
before we have to go do our votes.
With that, I will call the committee to order; and, as is custom with the full committee
and the subcommittees, I will read the mission statement of the Oversight Committee.
We exist to secure two fundamental principles: First, Americans have a right to know that
the money Washington takes from them is well spent; and, second, Americans deserve an efficient,
effective government that works for them.
Our duty on the Oversight and Government Reform Committee is to protect those rights. Our
solemn responsibility is to hold the government accountable to taxpayers, because taxpayers
have a right to know what they get from their government. We will work tirelessly in partnership
with citizen watchdogs to deliver the facts to the American people and bring genuine reform
to the Federal bureaucracy. This the mission of the Oversight and Government Reform Committee.
Today, we are here to discuss whether Federal employees are adequately compensated. I'll
begin with my opening statement and then defer to the Ranking Member Lynch for his.
According to the Office of Personnel Management, the average salary for Federal employees was
$74,311 in 2010. The average private sector worker earned $50,462, according to an August 10,
2010, analysis conducted by the Cato Institute. The Federal Government also pays an average
of 36 percent of employees' base health insurance and pension benefits, in addition to generous
paid leave. Taken together, Federal employees, on average, earned $101,628 in total compensation
in 2010, nearly four times more than the average private sector worker.
The members of this subcommittee recognize that our talented workforce performs critically
essential functions and missions throughout the government on behalf of our Nation. We
appreciate their service. Federal employees should be compensated fairly. Yet current
Federal salaries and benefits are not in line with the marketplace when compared to the
private workforce compensation. In a time when our economy is in a recession, the contrast
between the government and private sector pay is troubling. The Federal Government has
no incentive or obligation to reduce salaries in order to be competitive to stay in business.
It can simply borrow more money or raise taxes.
With Federal spending and unemployment at or near record highs, this hearing presents
an opportunity for lawmakers of this committee to hear important testimony from our distinguished
panelists on how best to address the growing pay disparity between the Federal civilian
workforce and the private sector workforce.
Over the past decade, compensation of private sector employees has not kept pace with that
of Federal employees. Moreover, Federal workers receive generous benefits, vacation, health
insurance, pension plans, retirement savings, and disability pay. These benefits greatly
exceed those that are normally provided to the private sector workforce.
Last November, President Obama announced a 2year pay freeze for Federal employees. Unfortunately,
the pay freeze did not impact salary increases driven primarily by the passage of time or
bonuses, meaning President Obama's pay freeze wasn't really a freeze.
Additionally, according to the Bureau of Labor Statistics, the Federal Government grew by
157,000 people from December 2008 to 2010, while private sector lost 8.8 million jobs.
The unemployment rate hovers around 9 percent. The President's budget requests an additional
15,000 new Federal workers for the fiscal year 2012. Our taxpayers can no longer be
asked to foot the bill for these Federal employees, while watching their own salaries remain flat
and their benefits erode. Congress has an obligation to consider all policy reforms
that overhaul Federal compensation, reduce costs, and better align with the private sector.
I thank the witnesses all for appearing today, and I look forward to your testimony.
I now recognize the distinguished ranking member from Massachusetts, Mr. Lynch, for
his opening statement.
[Mr. Lynch] Thank you, Mr. Chairman. I thank the witnesses for their attendance here. Good
afternoon, members of the committee.
The topic of today's hearing regarding Federal employees compensation requires us, I think,
periodically to review the way we are paying our Federal employees, reviewing the pay levels
and benefits that they receive. But, recently, this topic has generated much debate.
As stewards of the people, we should conduct robust oversight into the Office of Personnel
Management's paysetting practices, and we owe the U.S. taxpayer full transparency in
this area, as well as assurance that the salaries and benefits provided to our Federal workers
are reasonable and appropriate.
I note that the debate over Federal employee benefits predated the 1883 enactment of the
Pendleton Act overhauling the patronage system, and I'm quite confident this debate will outlive
the service of our committee.
Like all Americans, Federal employees are not immune from our Nation's economic and
fiscal challenges; and they understand the sacrifices called for in the 2year pay freeze
enacted this past December by Congress and the President.
However, we need to be careful not to get caught up in the oversimplistic data comparisons
between private sector and Federal jobs. A recent New York Times article pointed out
that when comparing private and public sector occupations the clearest pattern to emerge
is an education divide. The most reliable factor in predicting compensation levels is
actually the level of education; and when comparing private and public sector occupations,
the clearest pattern to emerge is an education divide, a divide that has grown more pronounced
in recent decades.
Today's Federal civilian workforce is highly educated, with over half of all Federal employees
working in the nine highestpaying professional occupations in the country. It is also a workforce
marked by a declining number of blue collar workers, dropping from over 30 percent to
just under 9 percent of the workforce in the last 40 years. So the Federal employees
are a more professional level of employee. We have contracted out most of the blue collar
jobs, the lowerpaying jobs, which is why you get a discrepancy when comparing Federal employees
to the general public.
In light of the 2year pay freeze which is squeezing the pockets of Federal workers who
are also facing everescalating health care costs today, I'm reintroducing my bill to
inject cost transparency into the Federal Employees Health Benefit Program contracts
between health plans and pharmacy benefit managers. This bill will lower Federal employees'
outofpocket spending and the program's operational costs, resulting in a winwin for both Federal
employees and taxpayers.
I look forward to hearing from the distinguished witnesses assembled here today as your expertise
and guidance on compensation issues enables us to better forge a highperforming civil
service that is prepared to meet the challenges of the 21st century. Thank you.
[Mr. Ross] Thank you, Mr. Lynch.
Members may have 7 days to submit opening statements and extraneous materials for the
record.
We'll now welcome our first panel, the Honorable John Berry, who is the Director of the U.S.
Office of Personnel Management.
Mr. Berry, pursuant to committee rules, all witnesses must be sworn in before their testimony,
before they testify. Please rise and raise your right hand.
Do you solemnly swear or affirm that the testimony you are about to give this committee will
be the truth, the whole truth, and nothing but the truth?
[Mr. Berry] I do.
[Mr. Ross] Let the record reflect the witness answered in the affirmative.
Mr. Berry, please limit your opening statement to 5 minutes. We do have your testimony,
and we're grateful for that, and we're very grateful for you to be here. You may begin.
[Mr. Berry] Thank you Chairman Ross, Ranking Member Lynch, and members of the subcommittee.
It's an honor to be with you here today, and I appreciate the opportunity.
I believe that the members of this subcommittee and I, and all Federal employees, share the
goal of making government more efficient while improving services; and I look forward to
working together with you to accomplish that.
President Obama said it best last week when he said, "I don't think it does any good when
public employees are denigrated or vilified or their rights are infringed upon. We need
to attract the best and the brightest to public service. Our times demand it."
Our need for great workers could not be more clear. Federal employees hold lives in their
hands and oversee large sums of taxpayer dollars. We need talented and innovative people at
the Department of Defense supporting our warfighters. We need great doctors and nurses at our veterans
hospital doing lifesaving work. And we need tough men and women at the Departments of
Justice and Homeland Security to protect us from another terrorist attack.
And it is just a fact, Mr. Chairman, in order to get these workers we must provide pay and
benefits on par with other large companies for whom we compete with talent. We cannot
and should not be the employer of last resort.
Despite the complex challenges we face, the Federal civilian workforce is virtually as
small today as it has been throughout the modern era. In 1953, there was one Federal
worker for every 78 residents. Today, 2009, it was one for every 147.
President Obama has frozen annual pay adjustments for 2 years. The raw comparisons of average
pay between Federal and private sector employees often can ignore important differences between
skill levels, complexity of work, scope of responsibility, size of organization, location,
experience level, as well as exposure to personal danger. Even comparisons that purport to compare
employees in the same occupations can sometimes be misleading.
For example, some claim that Federal attorneys make more than private sector attorneys. In
fact, while more than half of our general attorneys in the Federal Government earn less
than $90,000 in their first year of service, the median firstyear salary for comparable
attorneys in the private sector is $145,000.
As another example, Federal cooks may seem overpaid until you consider that many of them
work in our prison system where they supervise inmates in a very dangerous environment.
The Federal Government, like most large employers, also provides an array of benefits. While
we need to do this to be competitive, note that these benefits are not free to our employees.
Employees share in the cost of those benefits and, in many cases, pay 100 percent of the
cost. For health benefits, enrollees share 30 percent of the premium costs. For dental
and vision, they pay 100 percent of the cost. For life insurance, they pay 66 percent for
the basic premium but 100 percent for any coverage beyond that. For longterm care, they
pay 100 percent.
I'd also like to note that Congress and President Reagan reformed our benefits, our retirement
benefits, 25 years ago, and this has avoided the struggles that State and local governments
are now going through. Those reforms guarantee that our FERS retirement system is financially
sound and fully funded at 100 percent.
Bottom line, this administration is committed to providing the superior service the American
people expect and deserve. Managers and employees who aren't doing that should be held accountable
and ultimately fired if they don't improve. There should be no place in the Federal Government
for nonperformers to hide.
Our pay system is not perfect. I have said before, it is six decades old and could use
a reexamination. We are required by law to reduce all of the comparisons to one average
number. This is imperfect and does not reflect the complexity of the workforce.
But, even so, we must reject misleading uses of data that perpetuate the myth that Federal
employees are, as a whole, overcompensated. They are not. Our wages and our benefits are
fair, and they are competitive. Any reforms we undertake must meet the following principles
that our existing GS system does well: transparency, equal pay for equal work, no political influence,
and the ability to recruit and retain the workforce we need. This is how it must be
if we are to recruit and retain the best workers and carry out our critical lifesaving and
lifeenhancing missions. Falling behind is unacceptable.
Thank you, Mr. Chairman. I'm happy to answer any questions.
[Mr. Ross] Thank you, Mr. Berry. I will yield myself 5 minutes for questions.
Mr. Berry, I note that in the President's January, 2011,
Pay Agent report it showed
a 22 percent difference between Federal employee pay and private sector pay, and I was wondering,
did that include benefits, that assessment, that report?
[Mr. Berry] No, that is focused specifically just on the pay.
[Mr. Ross] And, subsequent to you testifying, we'll have another panel. Mr. Biggs will testify
that a Federal pay premium of 14 percent, and when combined with benefits premium of
33 percent, total Federal salary and benefits are nearly 25 percent above those of similar
private sector employees; and Mr. Sherk will testify that Federal employees earn a total
compensation of 30 to 40 percent greater comparable than private sector workers. Do
you agree with their findings?
[Mr. Berry] Absolutely not.
[Mr. Ross] And why not? Because, in one sense, we're talking about strictly compensation.
In the other, we're talking about compensation and benefits.
[Mr. Berry] If we just if we'll stay for compensation for a second, Mr. Chairman
and I agree, I'm happy to look at them together. But for the purposes of this discussion, it's
easier if we can keep them separate for a moment.
Their comparisons are based on gross averages. As Congressman Lynch mentioned, the Federal
workforce is now a very skilled, white collar, high sophisticated workforce. It used to be
40 years ago over a third of our workforce was blue collar. Less than 10 percent is
today. And so we need to compare the Federal Government with like to like.
What the Bureau of Labor Statistics does and the Department of Commerce is they go into
literally every locality, every one of your States in the country, and they will compare
entrylevel, midlevel, and seniorlevel career for each position.
So they'll look at an engineer, for example. They will find a job in the private sector
that is almost duplicative. And the private sector doesn't use the GS system, so you could
imagine this is very exhaustive. It's expensive. It takes a lot of work.
The work that you're going to hear from in the next panel, they don't have the resources
to do that. The Bureau of Labor Statistics does that on an annual basis for us, and that's
the data we're comparing. So we're getting real comparison of like jobs to like jobs.
The averages you're going to hear about from that panel are looking at the total labor
force of the civilian market. The primary jobs in the private sector are retail clerks
and service workers, waiters and waitresses. We don't have those in the Federal Government
and those that we do are generally provided on a contract basis with the private sector.
So that average, you can see, pulls down the private sector number. But when you compare
engineer to engineer, lawyer to lawyer, doctor to doctor, nurse to nurse, what it shows consistently
for 20 years is that Federal employees lag the private sector.
[Mr. Ross] But wouldn't you also agree, because I don't believe OPM considers the job security
as a criteria when determining the value of a job. Is that correct?
[Mr. Berry] No, sir. Obviously, working in the Federal Government, our mission is long
term in nature.
[Mr. Ross] And it should be for any employment. I mean, people go into employment for careers
and not to change jobs through a revolving door. And I guess my question is, is that
when you look at fiscal year 2010, the quit rate for GS employees was 1.5 percent and
the layoff rate was .37 percent. And do you have any opinion as to how that would compare
to the private sector?
[Mr. Berry] Our attrition rates pretty much track the private sector. You know, I have
heard some misinformation from some folks talking about that the Federal Government
doesn't have a retention problem. Let me just give you doctors and nurses. In '05, we hired
5,300 of them. As of today, we have lost 2,300, for a quit rate of over 43 percent. I have
a retention problem. And that is primarily based when we are talking to employees as
they leave, one of the biggest and leading concerns is the fact that they're underpaid.
[Mr. Ross] But, again, speaking as a whole Federal workforce, we're only looking at a
1.5 percent quit rate. I mean, so I wouldn't consider that to be so much of a problem.
If it was 40 percent as a total of the entire workforce, then I would consider it a problem.
But let me ask you, you talked about highly skilled occupations, engineers and lawyers,
being paid below the market. Are there any circumstances or instances where Federal employees
are paid above the market?
[Mr. Berry] Absolutely. Yes, sir. The average when I say I do not mean to represent when
I say the 22 percent pay gap that the Department of Labor references doesn't apply to each
and every job reaching every employee. That is a gross average, which means some employees
are paid more, some are paid less, some are paid the same. Clearly, to get that number
of the gap, the clear majority are paid less. There are some that are paid more.
[Mr. Ross] Real quickly. I've just got a couple of seconds. How many days of paid leave are
Federal employees entitled to? Do you know?
[Mr. Berry] We can give you it varies based on years of service, Mr. Chairman, so if I
could I'll just provide that to you for the record.
[Mr. Ross] Okay. Thank you.
[Mr. Berry] So you'll have it exactly.
[Mr. Ross] I see my time's up.
I'll now recognize the distinguished gentleman and ranking member from Massachusetts, Mr.
Lynch, for 5 minutes.
[Mr. Lynch] Thank you, Mr. Chairman.
Welcome, Director Berry. I want to thank you for the good work you're doing over there.
One of the things I just want to start out by pointing out is I notice behind me there's
a chart here, employment changes, that the Federal Government added 157,000 jobs. I just
want to now, this is 2008 through 2010. Now, you would think that that meant that employment
at the Federal in the Federal sector actually went up. During I went back, and I got the
numbers because I was surprised by that number, and I went back and actually calculated the
number of separations, the number of people who left the Federal Government. We had almost
207,000 leave in 2010, 90,000 in 2009 just over 90,000 and 219,000 in 2008, for a total
separation of 616,359 employees. So while they're saying there's 157,000 new firsttime
employees, there's also been a reduction of 616,000 employees who left. And I think that
also speaks to the argument of job security. If 616,000 employees and these were deaths,
firings, these were quits, these were retirements, all combined. So it does, I think, provide
a little wider picture.
Director Berry, much is said of the general schedule's lack of performance management,
mainly its inability to appropriately reward individual performance. I think it was because
of some of those concerns back in 2009 we experimented with an alternate pay system
at the Department of Defense called the National Security Personnel System. We spent hundreds
of millions of dollars implementing the new system and, oddly enough, we had .8 percent
of people who usually are rejected for step increases under the old system, and under
this new system, this payforperformance system, .2 .2 percent were rejected for the step
increases. So with the new system, on pay for performance that's been suggested as being
an alternative here, we had less people get disciplined or rejected for their step increases.
So I'm just curious. It seems like the managers were doing the same thing under the new system
as they did under the old system, and I'm just curious if that's a if you think that's
a viable alternative here.
[Mr. Berry] Well, Mr. Lynch, I think you hit on two points that I think it's important
for the committee to keep in its sights, if you will, as you move forward on this path.
First is, you know, the Congress repealed NSPS, and so the Defense Department has been
moving employees back into the GS system. If you think that their payforperformance
system, NSPS, is going to save the taxpayer dollars, what we found is that 20 percent
of the workforce, in moving back, is on retained pay, meaning that they are making more than
they would have made had they been in the GS schedule. And so, therefore, they're going
to stay frozen until the GS schedule catches up with them. Now, that's a big number.
The second point is it goes to something I've learned in the 2 years on the job here
in working on this, and I've spent a lot of time looking at pay, performance, and the
combination thereof and learning from the NSPS story. And I have concluded that it is
more important to focus on the performance side of the equation first and get that right.
Good performance is based on three key things that we do to a certain extent in the Federal
Government, but I would not sit here and tell you we do well. We need to do it a lot better.
And that is, align organizational mission and goals right down through the SES down
to the individual employee's performance and then have managers, employees regularly having
conversations, just like they do in the private sector. Are we on track or off track? And
if we're off track, laying out the plan to be back on, and if they are not back on, they're
gotten rid of.
That's a good performance system. We can do that.
And so what I'm going to do, and what we just did yesterday through the Chief Human Capital
Officers Council, is we've created a working group made up and shared by two career senior
executives so it won't have political interference or bias and they will report in on what can
we do as the Federal government to tighten and strengthen our performance system. I think
if we get that right then we can have the discussion about pay, and we can avoid repeating
the same mistakes that were made under NSPS.
[Mr. Lynch] That's great. Thank you, Mr. Director.
Thank you, Mr. Chairman. I yield back.
[Mr. Ross] Thank you, Mr. Lynch.
I recognize the distinguished gentleman from Utah for 5 minutes, and then we'll probably
recess to go vote.
[Mr. Chaffetz] Thank you for being here.
I want to make sure we get the numbers. My understanding is since the time Barack Obama
took office until now there is a net increase of Federal employees, which excludes the uniform
military, census and postal, the net increase is 157,000 additional Federal workers, yes?
[Mr. Berry] There is an increase, Mr. Chaffetz; and about 75 percent of those would be comprised
in VA hospitals, Homeland Security, Justice Department.
[Mr. Chaffetz] But the net increase, the net increase of Federal employees is roughly 157,000
additional Federal workers.
[Mr. Berry] Yes, sir.
[Mr. Chaffetz] And you did announce in October that you plan to hire an additional 125,000.
Not all 125,000 would be a net increase, but roughly 40 to 50,000 would be a net increase
in current employment levels in the Federal Government.
[Mr. Berry] I think that number, Mr. Chaffetz, has been overtaken by the President's budget
that was submitted which shows that number staying flat for 3 years.
[Mr. Chaffetz] My understanding of the President's budget is that he's actually increased the
compensation level in his budget by 2.5 percent, or roughly $6 billion, this year over last
year.
[Mr. Berry] Well
[Mr. Chaffetz] Why the increase? Why the additional $6 billion? If there's a pay freeze and you're
not going to need very many new employees, why a $6 billion increase in that line item?
[Mr. Berry] I would need to understand better exactly what line you're referencing in the
budget.
[Mr. Chaffetz] It went from $236,175,000 to $242 million I'm sorry billion dollars
between 2011 and 2012 based on the executive branch, excluding the United States Postal
Service.
[Mr. Berry] There is a natural growth, sir, of promotions, for example. The President's
pay freeze does not prevent people from being promoted based on performance.
[Mr. Chaffetz] So the reality on a pay freeze is the net did not save the American taxpayers
money. In fact, it doesn't keep them equal. In fact, that number is actually growing,
is it not, because of bonuses and step increases and other things?
[Mr. Berry] No, the pay freeze, sir, is a costofliving adjustment that is a definite
savings. It saves over $28 billion in 5 years and $60 billion in 10 years.
[Mr. Chaffetz] The reality is it will cost the taxpayers more. Taxpayers will pay more
for Federal employees, as a whole, this year as opposed to the year before.
[Mr. Berry] Had the President not frozen pay that same number would be $28 billion higher.
[Mr. Chaffetz] What I'm saying is accurate, right?
I guess what is concerning to many of us is, when the President and you, in your very first
line say, quote, President Obama has frozen annual pay adjustments for 2 years, it gives
the impression that we're not going to spend more money on personnel. But the reality is
we're going to spend billions and billions more because of bonuses and step increases
and other things. At the same time, you're hiring additional people. So for the Federal
workforce that is working hard, they're somewhat offended because their pay is frozen. Meanwhile,
you're out hiring additional people.
[Mr. Berry] Mr. Chaffetz, in the President's pay freeze he also directed OPM and the Office
of Management and Budget to report back to him on a program that will address and deal
with bonuses and reward and incentive program for Federal employees. The Office of Management
and Budget and I will be doing that in short order, and we will look forward to discussing
that with you more. But I think you will see that those numbers will change.
[Mr. Chaffetz] My understanding is, in 2009, based on a letter that you gave to this committee
on February 16, it said that 779,000 people in the Federal Government actually got awards,
which is a combination of bonuses and other things. In fact, over 63 percent of the Federal
workers actually got, quote, unquote, awards. Why so many people are getting so many awards
at a time when people are losing their jobs?
[Mr. Berry] You have to understand with a 2.1 million size workforce the average number
in that GS of those awards is below a thousand dollars.
[Mr. Chaffetz] But 63 percent of them.
[Mr. Berry] These are not the Wall Street bonuses that people are used to when they
think of a bonus. These are recognizing outstanding performance.
[Mr. Chaffetz] That's offensive to a lot of people. Sixtythree percent of Federal workers
got a bonus, got an award, and there are lot of people out there losing their job. They
have their own businesses. They don't understand when the President stands up and says, oh,
we're going to have a pay freeze; and then you're handing out bonuses to get around it.
It doesn't make sense.
How much money are you going to give away in bonuses this next year?
[Mr. Berry] It works out to be between 1 and 2 percent of payroll, sir, that is used in
bonuses for the GS schedule.
[Mr. Chaffetz] What is the dollar amount of that?
[Mr. Berry] I'll have to get you the exact number for the record, sir.
[Mr. Chaffetz] My understanding, according to Federaltimes.com, which put out a report
on December 6 of 2010, it said that more than threequarters of the 1.4 million General
Schedule employees will get at least one pay raise between 2011 and 2012.
[Mr. Berry] One of the things that I you know, and I will take it's a legitimate concern
to be addressed. And one of the things we can take back to this working group that we've
established, the CHCO council, is that a fair number?
[Mr. Chaffetz] Do you dispute that number?
[Mr. Berry] I trust you, Mr. Chaffetz. I would presume that you're reading from a legitimate
[Mr. Chaffetz] Well, thank you. The answer is yes.
[Mr. Ross] Thank you. The gentleman's time has expired.
What we'll do is we'll take a recess to continue our votes, and we'll reconvene 5 minutes
after our last vote. It should be within about a half hour. Thank you.
[Recess.] �