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Washington, D.C.-National Treasury Employees Union (NTEU) National President Colleen M. Kelley today criticized factual errors in the recently released Heritage Foundation report "Taking Charge of Federal Personnel."

In a letter to the report's primary author, George Nesterczuk, Kelley said, "There are some areas of the report with which we are in agreement, some where we strongly disagree and some that are just so factually incorrect that I felt is was important to provide you with accurate information, so that you could make the appropriate corrections."

Kelley identified factual errors in the report, including: an incorrect claim that the Supreme Court ruled on Executive Order 12871 (which created partnerships in the federal sector); an incorrect claim that the Federal Employees Retirement System (FERS) is "running up a debt;" and, an incorrect claim that Federal Employees Health Benefit (FEHB) Program costs are being driven up by mental health parity and "mandated coverage."

Kelley pointed out that the Supreme Court has never ruled on Executive Order 12871. In addition, she said, NTEU never filed any action against then-Secretary Robert Rubin for not complying with the Executive Order, as claimed in the report.

Kelley said the FERS system is fully funded by agency and employee contributions, and is not running up debt "that must be redeemed by future generations of taxpayers," as alleged in the report.

As regards the FEHB program, Kelley said that increased premium costs have little if anything to do with mandated coverage. She said that everyone acknowledges the fact that the biggest factor in recent premium increases is the "staggering increase" in prescription drug costs, which has been estimated to account for roughly 40 percent of premium increases. Kelley pointed out that an initiative to test reducing the cost of prescription drugs by allowing one small FEHB carrier to purchase drugs at discounted prices as the veterans' health system does was "torpedoed when all of the major drug suppliers refused to sell drugs to the plan."

Kelley did say in her letter that she agreed with the recommendation that the federal government move closer to a market model for federal pay. "In the private sector," wrote Kelley, "collective bargaining is used to set wages and benefits. That is how the market works. We would support using the private sector collective bargaining model to change the way federal pay is set."

The union leader said she agreed with the report's statement that "input from employees and even unions is helpful," and to the report's observation that with regard to political appointees versus career employees, "the best qualified are already in career positions." Kelley said NTEU agrees with that view and "urges the new Administration to take advantage of the expertise and experience of the career civil service."

Kelley took exception to the report's recommendation that appointment decisions be "based on loyalty first and expertise second, and that the whole governmental apparatus must be managed from this perspective." Kelley wrote, "I strongly disagree that loyalty, while an important factor for any job, should outweigh expertise when it comes to carrying out the government's business."

As for the report's criticism of former President Clinton for frittering away critical months by "focusing on ethnic and gender diversity in his appointments," Kelley wrote, "While I agree with the sentiment that political appointments should be made quickly, I strongly disagree with the view that striving for diversity in appointments is a waste of time." Saying her view seems to be shared by President Bush, she said, "While I don't agree with all of his Cabinet choices, he has clearly demonstrated that he values diversity."

"In broader terms," Kelley wrote, "I disagree with your view that runs through your report that federal employees are underperforming and overpaid and have benefits that are too generous. I am hopeful that the George W. Bush Administration also disagrees with that view."

January 26, 2001

Mr. George Nesterczuk

Domestic Policy Studies Department

The Heritage Foundation

214 Massachusetts Ave., N.E.

Washington, D.C. 20002-4999

Dear Mr. Nesterczuk:

I read with interest your recent Backgrounder report for the Heritage Foundation entitled, "Taking Charge of Federal Personnel." There are some areas of the report with which we are in agreement, some where we strongly disagree and some that are just so factually incorrect that I felt it was important to provide you with accurate information, so that you could make the appropriate corrections.

Inaccuracies:

On page 29 of your report you state: "The entire 'partnership' issue threatened to get totally out of control when the National Treasury Employees' Union (NTEU) sued then-Secretary of the Treasury Robert Rubin for not complying with the provisions in Executive Order 12871 that call for negotiations over management rights. The case was resolved by the Supreme Court's finding that the executive order could not override the Secretary's discretionary authority not to bargain over issues reserved in statute as management rights."

First, NTEU never filed any action--lawsuit, unfair labor practice or any other action against Secretary Rubin for not complying with Executive Order 12871.

Second, no issue involving Executive Order 12871 has ever gone before the U.S. Supreme Court. NTEU has never asked the Supreme Court to review any action involving Executive Order 12871 and to my knowledge no other entity has ever made such a request to the Supreme Court.

Third, no judicial body, including the Federal Labor Relations Authority, the Federal Services Impasses Panel or any state or federal Court has ever found as you assert, "that the executive order could not override the Secretary's discretionary authority not to bargain over issues reserved in statute as management rights." Such a holding would vitiate entirely the effectiveness of Executive Orders, would run contrary to our Constitutional structure wherein all executive authority rests ultimately with the President as Chief Executive and was never even asserted in any forum I am aware of.

The only issue that was ever reviewed was whether a court could enforce the order. The D.C. Circuit held on this issue that the responsibility rested exclusively with the President, who could take whatever action he deemed appropriate if his designees did not follow his orders.

On page 21 of your report you state: "The Federal Employees Retirement System, though more portable in its Social Security and 401(k) portion than its predecessor, is still running up debt that must be redeemed by future generations of taxpayers." That is not true. The FERS system is fully funded by agency and employee contributions.

On page 25 of your report you indicate that mandated coverage in the Federal Employees Health Benefits Program "can easily drive up premium costs. . . Mental health parity stands out as one such Clinton legacy. Already, after years of small and relatively reasonable premium growth, FEHBP premiums are beginning to escalate. Since 1997, they have gone up from 8 percent to 12 percent every year, for a net increase of nearly 50 percent in just four years."

While FEHPB premium costs have gone up over the past four years it has little if anything to do with mandated coverage. Mental health partity, in particular, did not even go into effect until January 1, 2001 and its cost impact is expected to be minimal according to OPM. As with the rest of health care, the biggest factor in recent premium increases is the staggering increase in prescription drug costs. It is estimated that roughly 40% of recent FEHBP premium increases are the direct result of prescription drug costs.

FEHBP premiums could be reduced and both federal enrollees and the taxpayer could save money if the FEHBP were allowed to buy drugs at the same discounted prices as the veterans' health system. As you know, efforts by the Clinton Administration to grant the request of one small FEHBP carrier to buy drugs off that schedule as a pilot program was torpedoed when all of the major drug suppliers refused to sell drugs to the plan.

Agreements:

On page 24 of your report you assert: "The obvious solution is to move closer to a market model for federal pay." In the private sector, collective bargaining is used to set wages and benefits. That is how the market works. We would support using the private sector collective bargaining model to change the way federal pay is set.

On page 24 of your report you also state that, "input from employees and even unions is helpful. . ." (emphasis added). We agree with that statement and so do many agency heads. IRS Commissioner Rossotti has stated numerous times that the massive reorganization now taking place at the IRS could not have been accomplished without the efforts of NTEU and its members. While your report tries to portray partnership efforts as giving policy decision making authority to unions that is not the case. Partnership has merely provided unions and the frontline employees they represent the opportunity to have pre-decisional input with management, not to actually make decisions. It seems we are in agreement in supporting such input.

On page 11 of your report with regard to political appointees versus career employees you state that, "the best qualified are already in the career positions. . . " NTEU agrees with that view and urges the new Administration to take advantage of the expertise and experience of the career civil service.

Disagreements:

The quote above, regarding career positions, was taken from the following longer statement on pages 10 and 11 of your report:

. . . the Office of Presidential Personnel (OPP) must make appointment decisions based on loyalty first and expertise second, and that the whole governmental apparatus must be managed from this perspective. Picking appointees who are 'best for the job' merely in terms of expert qualifications can be disastrous for an Administration genuinely committed to change, because the best qualified are already in the career positions and part of the status quo . . .

I strongly disagree that loyalty, while an important factor in any job, should outweigh expertise when it comes to carrying out the government's business.

On page 15 of your report you state: "President Clinton frittered away critical months by focusing on ethnic and gender diversity in his appointments . . . " While I agree with the sentiment that political appointments should be made quickly, I strongly disagree with the view that striving for diversity in appointments is a waste of time. I believe that it is critically important for any President to seek to bring diverse backgrounds, as well as racial, gender and ethnic diversity to his or her politically appointed team. My view seems to be shared by President George W. Bush. While I don't agree with all of his Cabinet choices, he has clearly demonstrated that he values diversity.

In broader terms, I disagree with your view that runs through your report that federal employees are underperforming and overpaid and have benefits that are too generous. I am hopeful that the George W. Bush Administration also disagrees with that view.

Sincerely,

Colleen M. Kelley

National President