Workforce for the 21st Century: Analyzing the President’s Management Agenda

5/16/2018

House Committee on Oversight and Government Reform

Chairman Gowdy, Ranking Member Cummings and members of the Committee, thank you for allowing NTEU to share its thoughts on the President’s Management Agenda (PMA). As National President of NTEU, I represent federal employees across 32 agencies and I appreciate the opportunity to discuss this important issue.

In March, the Administration released the PMA, which was previewed in the President’s Fiscal Year (FY) 2019 Budget Request and lays out specific steps the Administration plans to take, a timeline for doing so, and the official or agency responsible. While the PMA’s stated goal is to effectively and efficiently achieve agency missions and improve service to America through enhanced alignment and strategic management of the federal workforce, the proposals to accomplish this goal are, in reality, an all-out assault on the pay, benefits, and rights of federal workers.

PAY AND PERFORMANCE MANAGEMENT

The Administration claims that the federal personnel system is broken and proposes to align total compensation with competitive labor market practice. Their first step is to implement a pay freeze for all federal workers in 2019, and to slow the frequency of within grade step increases. Next, the Administration proposes a $1 billion interagency workforce fund, $700 million for the Department of Defense and $300 million for the remainder of the federal workforce, to provide targeted pay incentives to reward and retain high performers and those with the most essential skills. This would be the first step in the Administration’s stated goal to reform the pay system and move to a more performance-based pay system.

Unfortunately, the Administration is relying on flawed outside studies that fail to compare the complexity of federal jobs with the private sector, such as the federal government’s own study from the Bureau of Labor Statistics (BLS) which uses data from the National Compensation Survey (NCS) to estimate how salaries vary by level of work from the occupational average, as well as data from the Occupational Employment Statistics (OES) to estimate average salaries by occupation in each locality pay area. This study compares actual job duties, not just job titles, which is important given the incredibly complex work federal employees are required to do. BLS then provides that information to the President’s Pay Agent, who lists pay gaps in certain locality areas as well as a national average gap. Over the years, the Pay Agent has consistently reported gaps showing lower pay for federal employees, with the average pay disparity as of March 2017 at 31.86 percent. Instead, this Administration is relying on studies that only look at a comparison of education levels to determine that most federal workers are overpaid. As the BLS surveys and Pay Agent Reports show, this is inaccurate and by relying instead on these outside studies, the Administration is moving to reduce the pay and benefits provided to federal workers and will make the federal government less competitive with the private sector.

Meanwhile, the Administration will be denying federal workers who are performing their work on behalf of the American people a pay increase that is based on successful performance of their job duties, and by implementing a pay freeze will ensure that the federal government falls further behind the private sector. It is important to recognize that federal workers have already contributed over $200 billion to deficit reduction through a three-year pay freeze, five years of below-market pay increases (that were below what the current pay laws call for), unpaid furlough days, and increases (take-home pay reductions) to retirement benefits.

Furthermore, by solely targeting employees with the “most essential skills” for pay increases, NTEU fears that the federal government will focus on high demand skill sets—such as cybersecurity and technology jobs, but ignore critical jobs needed to make agencies work— such as budget analysts, human resources professionals, lawyers, law enforcement, and administrative staff, to name a few—risking an increase in the number of career federal employees who leave the government and take their institutional knowledge with them. A pay system that limits compensation to randomly-selected occupations will prohibit agencies from executing a wholeof-government approach to operations, will threaten agency performance, and will risk disparate treatment of its workforce.

BENEFITS

Retirement For the second year in a row, the President is calling for a cut in federal employee retirement benefits by: (1) significantly increasing Federal Employee Retirement System (FERS) employee contributions by about 1 percentage point each year until they equal the agency contribution rate, translating to a take-home pay cut of approximately 6 and a half percent for most employees, (2) basing future Civil Service Retirement System (CSRS) and FERS benefits on the average of the high five years of salary instead of the current high three, (3) eliminating the FERS supplement which approximates the value of Social Security benefits for those who retire before age 62, (4) eliminating the annual cost of living adjustments (COLA) for the pensions of current and future FERS retirees, and (5) significantly reducing the COLA for the pensions of current CSRS retirees, and future CSRS retirees, by about 0.5 percent annually. In addition, this year the President added an additional change to his overall retirement proposal-- reducing the G Fund interest rate under the Thrift Savings Plan (TSP), thereby lowering and essentially negating the value of this TSP option, and leaving near-retirement employees with no safe-harbor options.

The Administration claims that such changes are needed to compete with the private sector and provide portability as today’s workers switch jobs more often than those in the past. However, when looking at data from the most recent Office of Personnel Management’s (OPM) Federal Employee Benefits Survey, the availability of a retirement annuity has the largest selfreported impact on recruitment and retention. The highest scores were seen when participants were asked to rate the extent to which the availability of a retirement annuity through FERS or CSRS had influenced their decision to take a job with the Federal Government. The same was true when asked about the extent to which the benefit influences their decision to remain in a Federal job. As such, it is unclear how cutting federal retirement benefits will help the federal government compete with the private sector in recruiting and retaining talented employees. Further, the FERS system, was purposely designed to bring so-called full portability to the federal employee retirement system by providing federal workers with Social Security benefits, and a defined contribution pension (TSP), easing the ability for individuals to transfer back-andforth between federal agencies and the private-sector.

To be clear, the overall goal of these changes is to make federal workers pay more for their retirement benefits while getting less, further contributing to the retirement insecurity of the nation. Studies show that 62% of working households age 55-64 have retirement savings less than one times their annual income, which is far below what they will need in retirement. And federal jobs are middle class jobs. It is important to not overlook that the average FERS monthly annuity is $1,100. These middle-class workers can ill afford a six to seven percent pay cut or a retirement benefit that fails to keep up with inflation, and ultimately these changes will require them to work longer at agencies into their senior years.

Health Care

In another effort to save money under the guise of improving the government’s ability to recruit and retain skilled workers, the Administration is seeking to change the Federal Employees Health Benefits Program (FEHBP) by significantly modifying the government contribution rate by tying it to each health plan’s individual performance rating. For many FEHBP enrollees, this will mean that the government’s overall contribution rate will be lower than it is now, requiring enrollees to pay significantly higher premiums. If an individual chooses a health plan that is determined to be lower-performing by the Program Plan Performance Assessment overseen by OPM (19 selected metrics), they would be forced to pay significantly more out-of-pocket, with the government reducing its contribution by seven to ten percent.

The FEHBP is the federal government’s employer sponsored healthcare program administered by OPM that covers close to 9 million federal employees, retirees, and their families. Enrollees can choose among many different types of plans, including HMOs, fee for service plans, and high deductible catastrophic plans. Under current law, enrollees pay on average 30% of the total premium cost, which is higher than the average 18% that private sector workers pay for their premiums for individual plans. The most recent OPM data from the Federal Employee Benefits Survey cites high levels of satisfaction with FEHBP, and directly demonstrates the important recruitment and retention role played by FEHBP—with 90% of respondents saying that the availability of FEHBP was extremely important/important, and over 71% responding that FEHBP was a key reason for taking a federal job, and more than 80% of respondents citing the health care program as a chief reason in staying with the government.

If the Administration really desires to be more competitive for skilled workers, NTEU suggests they lower the amount federal workers pay for their health insurance while still providing employees high quality care and meaningful choices to meet their individual healthcare needs. If the Administration’s plan is approved, federal workers will be forced to move to cheaper plans that provide less coverage and fail to meet the health care needs of their families or drop coverage all together. This is especially true as health care premiums under the FEHBP have increased by 6-7 percent per year for the past three years, with increasing numbers of employees and retirees struggling to afford FEHBP premiums. The federal government should aim to be a model employer rather than risk the health and financial security of its employees.

Leave and Workplace Flexibilities

The President also claims that federal employee sick and annual leave benefits are disproportionate to the private sector, and proposes converting the 10 paid federal holidays along with the earned sick and annual leave days to a general ‘paid time off’ model that would combine all leave into one paid time off category and reduce total leave days. The proposal also includes adding a short-term disability insurance policy to protect employees who experience a serious medical situation, which would require an employee contribution.

A robust paid leave program helps to attract top talent. For organizations that are in an arms race for talent, generous work-life balance benefits such as paid leave helps set an organization apart from others. Furthermore, not all employers can pay workers at the top of the pay scale. This is especially true for federal agencies, which offer lower salaries than private industry. For some workers, the right combination of pay and paid time-off can make a lowerpaying job more attractive than a slightly better-paying job elsewhere. Paid leave programs also impact employee engagement because the benefit helps employees feel they’re being supported by the employer. That engagement is expressed through hard work, which improves productivity. Further, many questions remain about how such a leave proposal would work for those covered by the Fair Labor Standards Act (FLSA) and alongside Family and Medical Leave Act (FMLA) benefits which typically work in tandem with sick leave.

Moreover, providing paid leave reduces employee turnover, a major cost to organizations. The cost to replace a worker in a midrange salary, for instance, is about 20 percent of their pay, according to a study from Center for American Progress. To propose such a change at the same time that federal agencies are curtailing telework makes no sense. OPM’s own 2017 Federal Work Life Survey shows employee satisfaction with work schedule flexibilities is 80%, the highest out of all work-life programs assessed, which leads to improved morale (83%), increased performance (76%), intent to stay (76%), improved stress management (74%) and improved health (67%). Cutting back on these critical benefits, especially as private sector employers are providing more flexibilities, including parental leave, will only make the federal government’s recruitment and retention efforts more difficult. Rather than reducing leave benefits, Congress needs to act on Representative Maloney’s (D-NY) bill, H.R. 1022, and Senator Schatz’s (D-HI) legislation to provide paid parental leave benefits to federal workers.

Workers’ Compensation

Recycling proposals from prior administrations, the President is looking to reduce federal employee workers’ compensation benefits by providing a single injury rate of compensation limited to approximately 66% of the injured worker’s pay, eliminating family benefits, removing injured workers from the program at retirement age, and establishing a waiting period before beneficiaries could begin to collect needed benefits.

For decades the federal workers’ compensation program has been considered the benchmark for such programs across the country, providing a generous lifeline for civil servants who can no longer perform their duties because of on-the-job injuries. Cutting benefits for federal workers disabled on the job, is simply a budget-trimming move that could leave many injured civil servants and their families without enough to live on. Many federal positions, such as law enforcement and inspectors, are inherently high-risk occupations, and individuals willing to serve in these jobs rely on the availability of workers’ compensation. Such cuts remove the FECA supplement for dependents, which is especially significant for low-wage workers, and would essentially provide no relief to families, who will be driven into poverty by the reduction. Cutting benefits at retirement age is especially troubling. Like most states, the federal government currently provides permanent benefits for permanent injuries. This is necessary because employees who cannot work because of injuries do not experience normal wage growth, do not earn Social Security credit, cannot contribute to the Thrift Savings Plan, and may have little ability to save. Moreover, the employees in the Civil Service Retirement System this applies to are not even eligible for Social Security. The core premise around workers compensation is that you should be no better off and no worse off after the injury, but this proposal will make many people far worse off, particularly on the lower end of the wage scale.

Public Service Loan Forgiveness Program

The Administration has also proposed to eliminate the Public Service Loan Forgiveness program, a federal program that forgives federal student loans for borrowers who are employed full-time (more than 30 hours per week) in an eligible federal, state or local public service job or 501(c)(3) non-profit job who make 120 eligible on-time payments over ten years. Instead, the Administration proposes the creation of a single Income-Driven Repayment (IDR) plan, which according to the budget would “simplify” repayments.

The Public Service Loan Forgiveness program incentivizes people to work in the public sector where salaries are lower and the demand is greater. If people don’t have a reason to take a lower-paying job, some experts worry that the gap between the rural and urban communities and other low-income areas will continue to increase. In addition, the federal government will lose its ability to attract lawyers and scientists who may want to join the civil service but can’t afford to because of student debt. Nearly 750,000 borrowers have completed an employee certification form for the program, which has aided many individuals in recent years to be able to afford higher-education while choosing a career with a federal agency, which increasingly requires higher-level skills and education for available positions.

EMPLOYEE RIGHTS AND PROTECTIONS

Labor Relations One of the main goals of the PMA is to “rebalance” labor-management relations. According to the President’s FY19 Budget Request, “Current employer-employee relations activities consume considerable management time and taxpayer resources, and may negatively impact efficiency, effectiveness, costs of operations, and employee accountability, and performance.” Therefore, agency managers are encouraged to restore management prerogatives that have been ceded to federal labor unions.

Federal law clearly states that the right of employees to organize, bargain collectively, and participate through labor organizations in decisions which affect them safeguards the public interest and contributes to the effective conduct of public business. Front-line employees, who often are the workers who interact most directly with the public and who carry out the specific elements of an agency’s mission, and their union representatives have ideas and information that are essential to improving the delivery of quality government services to the public. Further, through the collective bargaining process and the use of pre-decisional involvement (PDI), employees, through their labor representatives, can have meaningful input resulting in better quality decision-making, more support for decisions, timelier implementation, and better results for the American people. According to OPM’s 2014 Labor-Management Relations in the Executive Branch report, there are numerous instances where PDI has been successful and increased agency productivity as well as significantly increased employee satisfaction and morale. Congress should advance Representative Cummings’ (D-MD) bill, H.R. 4878, and Senator Schatz’s companion legislation to re-establish the Federal Labor Management Council, and to promote collaboration and partnership with labor organizations at the agency-level.

Due Process Rights

According to the President’s FY19 Budget Request and the PMA, the use of private sector “norms” would be useful in addressing the “onerous” requirements to successfully remove an employee for misconduct or poor performance, given that only one in 200 employees is fired, and when they are, they have a variety of avenues to appeal and challenge actions. The Administration also notes that federal managers are reluctant to expend the energy necessary to go through the process of dismissing the worst performers and conduct violators. At the same time more than 99 percent of employees are rated as fully successful or higher in their evaluations.

What the Administration fails to realize is that if more than 99 percent of federal workers are listed as fully successful or higher in their evaluations, it means that the vast majority of federal workers are doing their jobs. If the numbers were significantly lower, the federal government would be completely unable to meet its missions. Forcing a distribution of ratings fails to recognize individual improvements and can demoralize employees on a high performing team. Moreover, if managers are unwilling to appropriately evaluate and rate an employee or to take action to remove workers then the answer lies in more training for federal managers and supervisors, not eliminating due process or independent third-party review from entities with expertise in dealing with discriminatory, retaliatory, and biased employer activity. NTEU has long supported manager and supervisor training, including legislation that has been considered by this Committee. Undermining the ability for career, non-partisan civil servants to appeal adverse employment actions turns federal workers into political employees who are hired and fired based on personal loyalty oaths, not their ability to do a job and makes them unwilling and unable to come forward to disclose government waste, fraud, and abuse. A merit-based civil service that works for the people, and not expressly for one individual, is a cornerstone of our republic, and eliminating the ability of employees to challenge a removal, would threaten our government, and the public’s confidence that employees’ service is performed in the interest of our nation, and not for personal gain or interests.

Conclusion

Although the PMA’s goal is to improve service delivery to the American people through strategic federal workforce management, the Administration’s specific proposals to cut federal employee rights, pay, and benefits will only serve to dismantle the federal non-partisan civil service and make it nearly impossible for the federal government to recruit and retain a skilled workforce. With agencies not able to compete with the private-sector on pay and salaries, retirement, health care, and leave are its chief recruitment and retention tools, and actively engaging in a race to the bottom in these areas will do great damage to the quality and skill of the federal workforce. I urge members of this Committee to reject these proposals and instead find ways to increase the federal government’s ability to be an employer of choice. To undo the damage of no and small pay raises in recent years, Congress should act on legislation to provide a pay raise in 2019, amidst a vibrant economy, low unemployment, and private-sector companies providing healthy pay raises and bonuses to their workforces. NTEU is proud to support Representative Connolly’s (D-VA) bill, H.R. 757, and Senator Schatz’s (D-HI) legislation that would provide a three percent pay raise to federal employees. Furthermore, federal agencies need to invest in their employees by providing adequate training, and to work with their frontline employees, and their representatives, in a constructive manner, to improve agency operations and workplace conditions.

Thank you again for the opportunity to share my views with you today. I am happy to answer any questions.