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Washington, D.C.—The federal government is already paying nearly $700,000 in salary reimbursements to certain employees of federal contractors and may soon have to boost that amount if sensible contractor caps are not put in place by Congress, the leader of the nation’s largest independent union of federal employees told a House subcommittee today.

“NTEU strongly believes that at a time when our economy is struggling, millions of Americans are unemployed, and our national debt and deficit continue to grow, taxpayers should not fund government reimbursements for private contractor salaries that are more than three times higher than the pay earned by Cabinet secretaries,” said President Colleen M. Kelley of the National Treasury Employees Union (NTEU).

The NTEU leader made that assertion in testimony submitted to the House Appropriations Subcommittee on Financial Services and General Government, which is conducting a hearing on the proposed fiscal 2013 budget for the Office of Management and Budget (OMB). This agency oversees the federal contracting process.

President Kelley is a leader in efforts to rein in government contracting and return contracted work in-house, where it can be performed by trained, accountable federal workers.

She noted for the subcommittee that under current federal rules, government contractors can charge taxpayers almost $700,000 for the salaries of their top five employees, based on an executive compensation benchmark last amended in 1998.

Contractors generally enjoy wide latitude on the amounts they can choose to pay their employees within the context of a government contract; as a result, it is not uncommon for employees apart from those at the top level to be paid in excess of the benchmark amount.

Kelley noted that OMB has said unless Congress acts to limit executive compensation, “it will be forced to raise the compensation level to nearly $750,000 in the near future,” in line with the congressional mandate to maintain parity with the private sector.

Recent studies, she added, have shown that lowering the cap to $200,000 for all contractor employees would save $50 billion over 10 years.

The NTEU leader welcomed recent congressional attention to this issue, noting that H.R. 2980, introduced by Rep. Paul Tonko (D-N.Y.), and which NTEU favors, would lower the cap on salary reimbursements to $200,000. Pending Senate legislation, S. 2198, introduced by Sen. Barbara Boxer (D-Calif.) and Sen. Charles Grassley (R-Iowa), also would drop the cap, lowering it to $400,000.

One positive step already has occurred, Kelley said, with congressional approval of the National Defense Authorization Act of 2011, which extended the current salary reimbursement cap to all defense contractor employees, not just the top five. “While the cap was not lowered, and would only apply to defense contractors,” she said, “NTEU believes this is a positive first step in reforming contractor pay.”

President Kelley pointed out that while an administration effort led by OMB has reduced the amount of federal contracting, it still is quite significant, with the size of the contractor workforce currently estimated to be some five times greater than the federal civil service.

“With agencies so reliant on federal contractors,” she said, “the in-house capacity of agencies to perform many critical functions has been eroded, jeopardizing their ability to accomplish their missions. It also has resulted in the outsourcing to contractors of functions that are inherently governmental or closely associated to inherently governmental functions.”

On that subject, she asked the subcommittee to include legislative language in a fiscal 2013 appropriations measure that would prohibit funding for the Internal Revenue Service (IRS) to use private tax collectors.

The IRS had such a program in place for two years, but it proved to be a financial bust, and an aggressive campaign by NTEU led the agency to discontinue it. Nonetheless, the IRS retains the statutory right to reinstate its use of private companies for tax collection if it chooses; the funding prohibition has appeared in omnibus appropriations measures in fiscal years 2009 and 2010.

“Nothing is as inherently governmental as the collection of taxes, and all steps must be taken to assure that IRS never again undertakes efforts to privatize tax collection,” Kelley told the subcommittee.

As the nation’s largest independent union of federal workers, NTEU represents 150,000 employees in 31 agencies and departments.