MADAM CHAIR AND MEMBERS OF THE SUBCOMMITEE:

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP89-00066R000900080019-8
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 33
• Document Creation Date: December 22, 2016
• Document Release Date: January 14, 2011
• Sequence Number: 19
• Publication Date: February 26, 1985
• Content Type: MISC

Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
STATEMENT OF
HONORABLE DONALD J. DEVINE
DIRECTOR OFFICE OF PERSONNEL MANAGEMENT
before the
SUBCOMMITTEE ON COMPENSATION
AND EMPLOYEE BENEFITS
COMMITTEE ON POST OFFICE AND CIVIL SERVICE
U.S. HOUSE OF REPRESENTATIVES
FISCAL YEAR 1986 BUDGET PROPOSALS
CONCERNING CIVIL SERVICE RETIREMENT,
FEDERAL EMPLOYEES HEALTH BENEFITS,
AND FEDERAL PAY
FEBRUARY 26, 1985
MADAM CHAIR AND MEMBERS OF THE SUBCOMMITTEE:
THANK YOU FOR INVITING ME TO APPEAR THIS AFTERNOON TO DISCUSS THE ADMINIS-
TRATION'S FISCAL YEAR 1986 BUDGET PROPOSALS ON CIVIL SERVICE RETIREMENT,
FEDERAL EMPLOYEES HEALTH BENEFITS, AND FEDERAL PAY.
CIVIL -SERVICE RETIREMENT
A RECENT INDEPENDENT STUDY BY THE CONSULTING FIRM OF TOWERS, PERRIN, FORSTER,
AND CROSBY FOUND THAT THE AVERAGE EMPLOYER COSTS OF PENSIONS IN THE PRIVATE
SECTOR--FOR THE HALF OF THE POPULATION WHICH HAS PENSIONS--WAS 18 PERCENT
OF PAYROLL, COMPARED TO THE GOVERNMENT'S 28 PERCENT OF PAYROLL. EVEN MORE
IMPORTANT, THE STUDY FOUND THAT THE PROVISION OF BENEFITS WAS VERY UNEVEN
BETWEEN DIFFERENT SEGMENTS OF THE WORKFORCE. DATA SHOW THAT 45 PERCENT OF
A COHORT OF NEW EMPLOYEES WILL ACTUALLY SUBSIDIZE THE RETIREMENT SYSTEM, AND
ANOTHER 15 PERCENT WILL RECEIVE NO REAL BENEFITS. ALMOST 60 PERCENT WILL DO
1
VERY POORLY, WHILE A RELATIVELY SMALL GROUP DOES EXTREMELY WELL. THE CIVIL
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
-2-
SERVICE RETIREMENT SYSTEM IS THE GOVERNMENT'S THIRD LARGEST ENTITLEMENT
PROGRAM WITH AN OUTLAY OF APPROXIMATELY $23 BILLION IN 1985. IT HAS A
DYNAMIC UNFUNDED LIABILITY OF OVER A HALF A TRILLION DOLLARS. IT IS A
SYSTEM BADLY IN NEED OF REFORM.
THIS ADMINISTRATION IS COMMITTED TO MAKING THAT REFORM FOR THE SAKE OF
BOTH GOOD PERSONNEL MANAGEMENT AND SOUND FINANCIAL ADMINISTRATION. IN
1986, OUR PROPOSED RETIREMENT REFORMS WOULD REDUCE OUTLAYS BY $731 MILLION
AND INCREASE RECEIPTS BY $269 MILLION. I WOULD LIKE TO DISCUSS EACH OF
THESE REFORMS IN TURN.
FIRST, WE PROPOSE TO REVISE THE WAY CIVIL SERVICE ANNUITIES ARE ADJUSTED
TO REFtECF CHANGES IN THE COST OF LIVING. CURRENT LAW ENSURES THAT FEDERAL
ANNUITANTS, UNLIKE MOST OTHER RETIREES OUTSIDE GOVERNMENT OR EVEN ACTIVE
FEDERAL. WORKERS, WILL BE COMPLETELY ISOLATED FROM ANY EFFECTS OF INFLATION,
SINCE THEIR ANNUITIES ARE REQUIRED TO BE ADJUSTED EACH YEAR TO REFLECT FULL
INCREASES IN THE COST OF LIVING AS MEASURED BY THE CONSUMER PRICK INDEX
(CPI). CONSEQUENTLY, AS FEDERAL RETIREMENT BENEFITS HAVE RISEN AT A FASTER
RATE THAN PAY, MANY RETIREMENT-ELIGIBLE INDIVIDUALS HAVE FOUND IT FINANCIALLY
ADVANTAGEOUS TO LEAVE FEDERAL SERVICE. THIS DISINCENTIVE TO WORK HAS TAKEN
A PARTICULAR TOLL ON EXPERIENCED AND VALUABLE SENIOR PERSONNEL. REMOVING
THIS DISINCENTIVE CONTINUES TO BE A PARAMOUNT PERSONNEL MANAGEMENT CONCERN.
OUR APPROACH TO THE PROBLEM INVOLVES SEVERAL STEPS, STARTING WITH THE
ELIMINATION OF THE COST-OF-LIVING ADJUSTMENT (COLA) NOW SCHEDULED FOR
PHIS DECEMBER. THIS COLA FREEZE WOULD BE CONSISTENT WITH COLA FREEZES
BEING PkOPOSED FOR A NUMBER OF OTHER INDEXED PROGRAMS, INCLUDING MILI-
'iARY RETIRED PAY. THEN, BEGINNING WITH THE DECEMBER 1986 COLA, OUR
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
-3-
COLA AMOUNT WOULD BE THE LESSER OF THE INCREASE IN GENERAL SCHEDULE PAY
OR THE CPI CHANGE TO GIVE RETIREES AND EMPLOYEES EQUAL TREATMENT. THAT
COLA WOULD BE PAYABLE ON THE FIRST $10,000 OF ANNUITY. PENSIONS OVER
$10,000 WOULD BE INCREASED BY 55 PERCENT OF THE COLA. IN SUBSEQUENT
YEARS, THE $10,000 BASE AMOUNT TO WHICH THE FULL INCREASE APPLIES WOULD
BE ADJUSTED BY THE PERCENTAGE OF THE PREVIOUS YEAR'S COLA. THIS CHANGE
WOULD BRING FEDERAL RETIREES INTO CLOSER ALIGNMENT WITH OTHER RETIRED
PEOPLE, WHO TYPICALLY RECEIVE FULL COLA'S ONLY ON THEIR SOCIAL SECURITY
BENEFITS, AND ONLY ABOUT ONE-THIRD OF THE COLA ON ANY PRIVATE PENSION
PAYMENTS THEY RECEIVE.
SECOND, THE BUDGET PROPOSES TO ELIMINATE A PRACTICE UNDER OUR RETIREMENT
SYSTEM VIRTUALLY UNKNOWN IN THE PRIVATE SECTOR--UNREDUCED RETIREMENT
BENEFITS AS EARLY AS AT AGE 55. WE PROPOSE THAT.CURRENT FEDERAL EMPLOY-
EES WITH SUFFICIENT SERVICE CONTINUE TO BE ABLE TO RETIRE AS EARLY AS AGE
55, BUT BENEFITS WOULD BE REDUCED TO REFLECT THE'COST TO THE RETIREMENT
SYSTEM OF THIS EARLY RETIREMENT. FOR EACH YEAR THE EMPLOYEE IS UNDER ACE
65 AT THE TIME OF RETIREMENT, THE ANNUITY WOULD BE REDUCED BY 5 PERCENT.
THIS REDUCTION WOULD NOT APPLY TO ANYONE WHO IS ALREADY 55, AND IN ORDER
TO EASE ITS IMPACT ON THOSE NEAR RETIREMENT, THE REDUCTION WOULD BE PHASED
IN OVER If) YEARS. FOR INSTANCE, AN EMPLOYEE WHO IS NOW 54 COULD RETIRE AT
55 WITH AN ANNUITY REDUCTION OF ONLY 5 PERCENT. ONLY THOSE NOW 45 AND
UNDER WOULD BE SUBJECT TO THE FULL REDUCTION. LIKE THE COLA CHANGE, THIS
PROPOSAL WOULD BRING FEDERAL RETIREES INTO CLOSER ALIGNMENT WITH RETIREES
IN OTHER, SECTORS OF THE ECONOMY, WHERE RETIREMENT AT AGE 55 WITH UNREDUCED
BENEFITS I:: RARELY PERMITTED.
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
-4-
THIRD, AGAIN FOLLOWING THE NORMAL PATTERN FOLLOWED IN THE PRIVATE SECTOR, WE
PROPOSE TO BASE ANNUITY COMPUTATIONS ON THE RETIREE'S HIGHEST FIVE YEARS OF
EARNINGS, RATHER THAN THE HIGHEST THREE. PRIOR TO 1969, A PERIOD OF LOW
INFLATION, THE HIGH-FIVE YEARS' SALARY WAS USED. SINCE THEN, COMPUTATIONS
HAVE BEEN BASED ON THE HIGH-THREE. EMPLOYEES WHO ARE WITHIN THREE YEARS OF
ELIGIBILITY FOR RETIREMENT WOULD NOT BE AFFECTED.
FOURTH, WE WOULD PHASE OUT OVER A FOUR-YEAR PERIOD THE RETIREMENT CREDIT
CURRENTLY GIVEN FOR UNUSED SICK LEAVE. THIS TYPE OF BENEFIT IS NOT ONLY
VERY EXPENSIVE BUT ALSO IS NOT TYPICALLY AVAILABLE TO NON-FEDERAL WORKERS.
FIFTH, WE PROPOSE CHANGES THAT ARE CONSISTENT WITH ENACTED REFORMS AND
OTHER EXISTING PROVISIONS IN SOCIAL SECURITY. THESE INCLUDE DELETING
THE GUARANTEED MINIMUM BENEFIT FOR FUTURE ANNUITANTS, PHASING OUT SPECIAL
BENEFITS FOR ADULT STUDENTS, AND CHANGING ELIGIBILITY RULES FOR SURVIVING
SPOUSES, FORMER SPOUSES, AND INSURABLE INTEREST BENEFICIARIES TO PARALLEL
MORE CLOSELY THE TREATMENT OF SIMILARLY SITUATED INDIVIDUALS COVERED BY
SOCIAL SECURITY.
SIXTH, WE WOULD REQUIRE THE POSTAL SERVICE AND THE D.C. GOVERNMENT TO CON-
TR[B['TE TO THE RETIREMENT FUND AN ADDITIONAL 2 PERCENT OF BASIC PAY EACH
YEAR UNTIL THEIR PAYMENTS, PLUS EMPLOYEE DEDUCTIONS, ARE SUFFICIENT TO
COVER THE DYNAMIC NORMAL COST OF THE RETIREMENT SYSTEM. THE D.C. GOVERN-
MENT AND THE POSTAL SERVICE ARE SUPPOSEDLY NOW SELF-SUPPORTING, WITH ANY
FEDERAL SUBSIDIES CLEARLY IDENTIFIED AS SUCH. YET THESE TWO ENTITIES ARE
CONTINUING TO RECEIVE MASSIVE HIDDEN SUBSIDIES THROUGH THEIR PARTICIPATION
IN THE CIVIL SERVICE RETIREMENT SYSTEM.
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
--5-
FINALLY, AS A PART OY THE ONGOING EFFORT TO DISENTANGLE FEDERAL AND DIS-_.
CRicr OF COLUMBIA AFFAIRS, WE PROPOSE TO EXCLUDE EMPLOYEES HIRED BY THE
GOVERNMENT OF THE DISTRICT OF COLUMBIA AFTER SEPTEMBER 30, 1985, FROM
THE FEDERAL RETIREMENT, LIFE INSURANCE, AND HEALTH BENEFITS PROGRAMS.
FEDERAL EMPLOYEES HEALTH BENEFITS
NOW I WOULD LIKE TO TURN TO THE FEDERAL EMPLOYEES HEALTH BENEFITS (FEHB)
PROGRAM, WHERE WE ARE AGAIN PROPOSING A MAJOR LEGISLATIVE REFORM. THE
PRESENT FEHB PROGRAM HAS MANY VERY GOOD FEATURES, ESPECIALLY ITS WfDE
CHOICF OF PLANS AVAILABLE. TO ENHANCE THIS MOST ATTRACTIVE FEATURE, WE
HAVE PROPOSED A SYSTEM THAT IS POPULARLY KNOWN AS A "VOUCHER" SYSTEM.
WE BELIEVE THIS APPROACH CAN MAKE A VALUABLE CONTRIBUTION TO THE FEHB
PROGRAM.
UNDER THIS SYSTEM, OPM WOULD NO LONGER NEGOTIATE DETAILED CONTRACTS WITH
CARRIERS. INSTEAD, ANY CARRIER THAT IS PREPARED TO MEET CERTAIN MINIMAL
REQUIREMENTS WOULD BE ADMITTED TO THE PROGRAM, AND WOULD BE FREE TO OFFER
ANY NUMBER OF PLANS IT WISHED. ALL PLANS WOULD BE REQUIRED TO INCLUDE
CATASTROPHIC COVERAGE, BUT CARRIERS WOULD OTHERWISE BE FREE TO DESIGN
THEIR BENEFIT PACKAGES IN WHATEVER WAY THEY THINK WOULD ATTRACT THE MOST
ENROLLEES. ENROLLEES WOULD RECEIVE INFORMATION TO HELP THEM IN SELECTING
TUE PLAN BEST SUITED TO THEIR NEEDS. PARTICIPATION BY A WIDER RANGE OF
PLANS WOULD INCREASE THE NUMBER OF CHOICES AVAILABLE TO ENROLLEES, FURTHER
SHARPENING THE COMPETITIVE FORCES THAT HAVE MADE THE CURRENT PROGRAM
SUCCESSFUL..
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
-6-
THE GOVERNMENT CONTRIBUTION WOULD NO LONGER BE CAPPED AT THE CURRENT 75
PERCENT OF A PLAN'S PREMIUMS SO ENROLLEES WOULD NO LONGER BE PENALIZED
FOR ENROLLING IN A LOW-COST PLAN. ENROLLEES WOULD EVEN BE ABLE TO RE-
CEIVE A REBATE IF THE PREMIUM FOR THE PLAN THEY CHOOSE IS LESS THAN THE
GOVERNMENT CONTRIBUTION. THE GOVERNMENT CONTRIBUTION WOULD NO LONGER BE
DETERMINED BY THE PREMIUM COSTS OF PARTICULAR PLANS, BUT WOULD INSTEAD BE
BASED ON THE DOLLAR AMOUNTS OF THE AVERAGE GOVERNMENT CONTRIBUTIONS FOR
SELF-ONLY AND SELF-AND-FAMILY COVERAGES IN THE YEAR PRIOR TO INAUGURATION
OF THE VOUCHER, ADJUSTED IN FUTURE YEARS BY PERCENTAGE CHANGES IN A GENERAL
PRICE INDEX.
FEDERAL PAY
THE BUDGET PROPOSES A ONE-TIME REDUCTION IN PAY OF 5 PERCENT, EFFECTIVE IN
JANUARY OF 1986, FOR FEDERAL CIVILIAN EMPLOYEES. AS YOU RECALL, DURING THE
RECESSION, LABOR UNIONS IN THE PRIVATE SECTOR RENEGOTIATED THEIR CONTACTS AND
TOOK CUES TO HELP THEIR INDUSTRIES GET BACK ON THEIR FEET AGAIN. IT SEEMS
ONLY APPROPRIATE THAT GOVERNMENT EMPLOYEES, TOO, SHOULD CONTRIBUTE IN A
SIMILAR WAY TO HELP THEIR EMPLOYER AND TO SHARE IN CUTTING THE COST OF
GOVERNMENT. A CORPORATION WITH A $200 BILLION RED INK BALANCE AND A $500
BILLION UNFUNDED PENSION LIABILITY SURELY IS A BUSINESS IN TROUBLE. WE
MUST ALL SHARE IN PUTTING OUR HOUSE BACK IN ORDER.
THANK YOU. I WOULD BE HAPPY TO ANSWER ANY QUESTIONS THE SUBCOMMITTEE
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
TESTIMONY BY REP. MICHAEL D. BARNES
BEFORE THE HOUSE SUBCOMMITTEE ON COMPENSTION AND EMPLOYEE BENEFITS
ON THE EFFECTS OF THE ADMINISTRATION'S FY 86 BUDGET PROPOSALS
ON FEDERAL EMPLOYEES AND RETIREES.
February 26, 1984
It is always a privilege to appear before this Subcommitee and
its distinguished Chair. Tcday it's also a heavy responsibility. The
decisions that this Subconmittee will make in the next week may well
be pivotal to the future of Federal service in light of what the
Administration has proposed in its budget.
At the outset, let me join with the Chair and with my
co-Chairman of our Federal Government Service Task Force, Vic Fazio,
in rejecting the proposal to cut Federal pay by 5 percent. In my
,.*ew, this pay cut could be the fatal blow that crushes the spirit of
puulic service in our country. The reasons are many.
On a number of ocassions, I have spoken about the impact of
previous cuts proposed by the Administration and adopted by Congress
on the morale of the Federal worker. I,have been genuinely alarmed by
the degree to which career public servants have become discouraged.
Ike've already lost too many of our very-finest Federal employees.
What happens .. Youth no longer want 12 serve?
But I am also distressed by the reaction I've found among young
people from our Natic -'s?finest universities, colleges, and graduate
~chools. Most of them reject the premise that it's still possible to
build a fruitful career in public service. Young people no longer
regard Federal service as an exciting, honorable vocation.
In short, if we do not support a strong Federal service, we
simply devalue it. John Kennedy's call for a Federal service that is
a "lively career", his challenge to young Americans to serve, to build
a secure American future, now seems the faintest echo in the public's
mir:d.
When X,g d-evalue pav we devalue Federal service.
We have devalued Federal pay for eight straight years. Federal
j-;y laws require government to pay Federal workers amounts comparable
to those received by their private sector counterparts. We seem to
forget that when we cut pay we trade a measure of quality for that
reduction. Since 1978, inflation-fed deficits obliged government to
invent every conceivable excuse for holding pay below the level of
comparability. Year after year, pay cuts--and these were pay cuts
oecause the value of Federal pay did not come close to keeping pace
with inflation--dragged Federal pay so far behind comparable private
pay that the entire pay-setting process became an embarassment.
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 . Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8 Page 2
We are embarassed, not because the Bureau of Labor Statistic:,
survey is wrong, but because deficits make us helpless to put the
natter right, to obey the law, and to tradeoff pay with minimal damage
to the quality of service. We risk makinE career paths in Federal
service a walk into no man's land.
There is 1o iustificatjon for . U yav cut.
The-pay cut's advocates believe that the reduction can be
justified for four reasons: a) deficits create a national emergency
that justifies such drastic measures, b) workers in the private sector,
have had to endure similar cuts in pay in the last year, c) Federal
quit rates are several times less than those in the the private
sector, d) surveys that show Federal workers are paid less than
p,?ivate workers are wrong because Federal pay should be compared to
the average pay of all workers--not just workers in enterprises
similar to the Federal government.
Vic Fazio wants to speak to the point about private wage
N:.vebacks--and also has comments on the ludicrous quit rate analysis
p;?epared by the Office of Personnel Management. My testimony focuses
or: pay-cut proponents' other two arguments.
Recent work done by our Federal Government Service Task Force
provides evidence that a 5% pay cut for Federal workers could
precipitate a national emergency in its own right. I don't think the
best, way to fight one National emergency'is to create another one.
!.e Task Force analysis compares average private Day to Federal pay.
I do not doubt the accuracy of existing-comparability surveys.
Nevertheless, we decided to examine what would have happened in the
last ten years to Federal pay and benefits had--as pay-cut proponents
suggest--he Federal government paid its workers the same raise
received by the average private sector worker. Please note we're not
talking about the average raise for white collar employees or for
en;ployee: in larger firms. We're just talking about the average
worker.
The results of this analysis yield some important insights about
Federal pay practices. Using an average private pay raise as a
baseline, we found that the Federal government had already saved $12.3
i.i.Lion from 1977 through 1985--an average of $1.35 billion per year
,)y limiting pay increases to well under average annual increases in
~LY:e private sector. (See chart no. 1, appendix).
For the average Federal worker these savings translated into an
out of pocket loss of $22,330 for the period. That's quite a premium
'o pay for the privil^ge of working in the public service. For many,
i'. probably meant that that they could not afford to send a child
,;.'~rough college or put aside something extra for retirement. (See
cL.arts no.s 2,3 and 4).
If we cut Federal pay by 5% in FY 86, the gap would rocket up to
ii..t under $30,000--a loss of $7500 in one year alone. That's $7500
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 ? Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
1-ss than Federal workers vould have received had they gotte,
raises equal to those paid to average private sector worker..
chart nc. 3). In 1986, therefore, the gap between Federal and private
I-;.y will be 11.9%--a 5% cut and a 6.9% advance for the average private
Lactor employee.
L..i cuts, 111e deficits.. snowball
We Lave begun to realize--having learned the hard way--that
unchecked deficits tend to snowball. Before it's too late, we ought
to realize that the same lesson applies to paycuts. We make these
cuts in one year, and the reduced salary base keeps on rippling
throughout an employee's career and on into retirement. By reducing
pay below private sector levels for eight consecutive years, we have
amplified this initial ripple into a wave that is dramatically
reducing lifetime and retirement earnings.
These are not speculative or imaginary earnings, but very real
'lcllars that Federal employees would have earned had they received the
same raise as the average private sector employee for the last ten
years. (See chart no. 4).
jh& snowball keeps right oj, rolling through Jg, retirement years.
Pay cuts directly affect Federal annuities, particularly for
employees at the end of their careers. Pay cuts even more heavily
Damage Federal employees who defer their'retirement to remain in
Federal service. Our analysis shows that each year that a retirement
eligible employee experiences an additional pay cuc cumulatively adds
to the amount of pay and retirement benefits he or she loses. This
fact is not unknown to senior employees now leaving government. (See
harts no. 5 & 6).
An average Federal employee who retired from Federal service in
i977, lost 3% of his or her annuity because pay was held below the
average private sector increase. (See profile of losses for 1977
retiree, chart no. 8). The average 1978 retiree lost 5.8% of the
arnuity. (chart no. 9). The average 1979 retiree: 3.4%. The average
1r,)A0 retiree: 4%. Note that during these years, Federal pay stayed
within shouting distance of average private pay. (Charts no.s 10 &
11).
Then, beginning in 1981, the percentage of annuities lost began
to climb dramatically as pay began to really lag behind. In 1981: the
percentage of annuity lost moved into double digits to 10.8% ; then to
10.9% in 1982, up to 11.6% in 1983, and 11.7% in 1984. This year the
gap, even without a pay cut, will explode to 15.8%. And, jJ x& U
FFlua ith a # r,av c rather than ,fig private sector increase -VLe
will ,fig short-changing our average 1986 retiree tj 21.7%. (See chart
no. 5). These percentages apply to the amount of annuity lost from
the date of retirement to the present, not simply to the impact of pay
withheld on the retiree's annuity at the time of retirement.
But the effects on initial annuities are equally serious. The
1977 retiree lost $303.00 of his or her annuity. By 1981, the averagr
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8 Page 4
Initial loss was over $1,000 more ($1347.00). Last year, pay cuts
cost the 1985 retiree $2298.37. It's small wonder that the average
19$3 retiree who had carefully planned for retirement over the past
;.en years left government disappointed, if not embittered. The 1986
retiree can look forward to an initial annuity of $3012 less than he
or she would have received through average private sector pay raises.
In other words, the loss to the initial pension has doubled since
',;81. (See Chart no.s 6 & 7).
Recent retirees have been I-t& hardest b1 l.
Three-quarters of a million (non-postal) employees retired
between 1977 and 1985. This group took the brunt of the Federal pay
:uts. The later an employee retired during this period the harder he
or she was hit. (See chart 13). A 1978 retiree lost a combination of
$8,161 to pay cuts during the last ten years. In 1981 this combined
total loss had grown to $15,654 for an employee retiring that year.
But hang on to your hats, because next year, if we cut pay by 5%, the
1986 retiree will have lost a combined total of $32,749. (See Chart
14).
Conclusion.
No one suggests that Federal employees should not share the
Lurderis of deficit reduction, but the clear and convincing evidence,
Madam Chair is that they have done more than their lair share and will
L.ontinue to do so even when Wg reject this irresponsible proposal IQ
QI Federal pj What I have tried to do this afternoon is
demonstrate that the idea of cutting pay was not discovered yesterday.
We have cut pay. We have burdened Federal employees over the last ten
years as no other group of workers in our society. We haven't always
i?cced responsibly in cutting pay in the past, but neither have we
Iziced the destruction of what can continue to be the world's finest
civil service.
I thank my colleague for his patience in letting me go through
this analysis. I know that he has several critically important
comments to add about the Administration's proposals on Federal
retirement. Let me emphasize that the annuity losses I discussed were
the indirect consequences of withdrawing wage increases. As heavy as
those losses were, we have to recognize that Congress made direct cuts
to Federal retirement of over 10% since 1977. In this context, I think
it's clear that Congress must continue to reject efforts to reduce the
Federal retirement system. In my view, the Administration's proposals
-c cut retirement is not only a breach of faith with Federal employees
and retirees, but a direct attack on a system of public service that
serves this country well.
Once again, thank you for the opportunity to share these views
with the Subcommittee. After my colleague makes his presentation, I'm.
sure we will be happy to try to answer any questions that you may
have.
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
FAY + RETIREMENT SAVINGS
78 ?9 88 81 82 83
YEAR
BUDGET SAVINGS
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
84
85
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
76
615
79
609
60
1024
81
1912
Be
1421
83
1748
84
1893
85
2353
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
PRIVATE U. FEDERAL PAY
...... @sees go *a fee.* as 0.0 oost so* goof go* go** 666611.0 .0.0 8090 so a**.0 0.0 ow so 0.00909 SIPS&* so *Deep%
76 77 78 79 80 81 82 83 84 85
YEAR
ACTUAL GS RAISE ? COMPARABILITY
.AV PR I U. SECTOR
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
PAY EARNED W. PP I U. I NCR,
(THOUSANDS)
era
W
Cry
O
30
a.
20
W
(I
ce
10
W
0
76 77 78 79 00 81 82 03 84 85 86
YEAR
1 GS RV. SALARY 0 W.RU.PRIU.INCR.
F-I
PAY LOST
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
OS AV. SALARY
W. AV. PRIV. INCR.
PAY LOST
76
16352
16891
539
77
17170
181,75
1005
78
17995
19629
1634
79
18984
21121
2137
80
20313
22346
2033
81
22162
24558
2396
Be
23225
25781
253E
83
24154
26946
2792
84
25000
28132
3132
85
25875
29961
4086
86
24581
32028
7447
_."- Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
PAY EARNED W. PP I U. I NCR,
40 (THOUSANDS)
U)
0
-J
30
20
78 79 80 81 82 83 84 85 86
YEAR
GS flV. SALARY E2 W. R11. PRIU. INCR.
PRY LOST M CUM. PAY LOST
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
OS AV. SALARY
N. AV. PR I V. I NCR.
PAY LOST
CUM. PAY LOS I
78
17995
19629
1634
1634
79
18984
21121
2137
2137
Be
20313
22346
2033
2033
81
22162
24558
2396
2396
82
23225
25781
2536
2536
83
24154
26946
2792
2792
84
25000
28132
3132
3132
85
25875
29961
4086
4086
86
24581
32028
7447
7447
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 U)
a
PAY LOSS REDUCES ANNUITY
I?
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
40
~~?......t?.N.NH.N?.....Ssu.~~ m.S.IS.S ~..N.NuNN?u HsN...NHH.NHN..Ns.......H..Y_.? _w.~.
wu
A
r r Rts ry 80 81 82 83 84 85 86
r % ANNUITY LOST
YEAR
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
77
3.80
78
5.80
79
3.40
80 '
4
81
10.80
Be
10.90
83
11.60
84
11.70
85
15.80
86
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
LOST $ AT RETIREMENT
5000
4000
co
Ifflo
3000
J
J
2000
1000
A
............................................................................................................ .
? .. -.??~S.~^ ..~..
rose* o * so ooooo,e *so a* so see so@ ..................
r ( ( 8U 81 82 83 84 85 86
INITIAL LOSS
YEAR
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
77
303.18
78
565.31
79
362.81
80
454.50
81
1347.75
82
1426.50
83
1572.18
84
1586.25
85
2298.37
86
---- ----- Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
TOTAL RET. $ LOST(PAY)
5000
I-
u~
4000
3000
2000
J
1000
H
A
f f fti f Ub 61 b4 b-S b4 85 86
^ PAY RESTRAINED
YEAR
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
496.31
776.58
470.22
541.74
1477.57
1460.66
1399.70
1586.25
8296.37
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
LOSS PROFILE 1977 RETIREE
600
500
100
0
........................................................................UMEMMMEM. ..=
77 78 79 80 81 82 83 84
YEAR
$ LOST/YEAR
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
77
303
78
325
79
360
Be
409
81
463
82
503
83
523
84
541
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
PROFILE OF 1978 RETIREE
2000
1000
0
...............................................................................................................
70 79 80 81 82 83 84
YEAR
RET. $ LOST
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
1980 RETIREE
1979 RETIREE
1978 RETIREE
1977 RETIREE
77
303
78
565
325
79
362
626
360
80
454
412
712
409
81
514
466
805
463
Be
558
507
875
503
83
580
526
909
523
84
600
545
941
541
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
PROFILE OF 1979 RETIREE
600
500
79 80
81 82
YEAR
83
100
0
RET. S LOST
.4
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
1981 RETIREE 1982 RETIREE 1983 RETIREE 1984 RETIREE
81
1347
8E*
1465
1426
83
1522
1482
1572
84
1575
1534
1627
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
PROFILE OF 1980 RETIREE
700
600
500
400
300
200
100
0
80 81
PET.: LOST
82
YEAR
83
84
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
Be
454
81
514
8c
558
83
580
84
600
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
RETIREE COHORTS $ LOSSES
6000
5000
4000
3000
cI
2000
m
1000
0
[n j H 0 m 11.11 N t.-I P m [.I- t
77 78 79 80 81 8.*21
YEAR
8% 84
1980 RETIREE ED 1979 RETIREE
1978 RETIREE ? 1877 RETIREE
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
 Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8
PAY LOST
ANNUITY LOST
TOTAL LOST
78
3178
5436
8614
79
5315
1821
8136
80
7348
2708
10056
81
9744
5910
15654
12280
4442
16722
83
15072
3199
18721
84
18204
1586
19790
85
22920
2298
24588
86
29737
4188
33925
Approved For Release 2011/01/14: CIA-RDP89-00066R000900080019-8