Federal pay debate heads back to Capitol Hill this week

When the Congressional Budget Office updated its comparison study of federal pay and benefits last month, House Oversight and Government Reform Committee Chairman Jason Chaffetz (R-Utah) said the results would fuel the committee’s work to modernize the civil service.

That work is beginning Thursday morning, as the committee considers recommendations from the Government Accountability Office, American Enterprise Institute and Heritage Foundation on ways to “improve and modernize” the current federal compensation system. CBO will also testify.

The hearing will refuel a familiar debate: whether CBO’s latest findings reemphasize past arguments that federal employees are over-compensated and should pave the way for changes to the civil service system — or whether the comparison study reinforces government’s struggles to recruit and retain top talent in mission critical areas.

Four witnesses will discuss the 17 percent compensation disparity between federal employees and their counterparts in the private sector, according to CBO.

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In total, federal employees with a high school diploma or less earn on average 53 percent more than their counterparts in the private sector, while federal workers with a bachelor’s degrees received 21 percent more in compensation.

In contrast, total compensation costs for employees with a professional degree or doctorate were 18 percent lower than workers in the private sector, CBO said.

Government Operations Subcommittee Chairman Mark Meadows (R-N.C.) will chair the hearing while full committee Chairman Chaffetz recovers from foot surgery in Utah.

The current federal compensation system is too expensive and doesn’t incentivize top performers to stay in their positions, Meadows will say. He’ll advocate for a federal pay and benefits that supports a more transient, younger federal workforce, which may not stay in government for as many years as their older colleagues.

“We need a fiscally sustainable pay and benefits system that allows the federal government to reward performance and compensate based on the importance of the position, not simply on tenure,” according to Meadows’ opening statement.

According to their written testimonies, witnesses from the Heritage Foundation and American Enterprise Institute (AEI) will argue that Congress take the CBO study seriously and should consider compensation reforms.

“The CBO’s report should settle the public debate on whether the federal government pays
well,” Andrew Biggs, resident scholar for AEI, said in his written testimony. “It does, and in most cases better than the private sector. The next debate is over how to make federal compensation work better, in the sense of attracting and retaining the employees the federal government needs without paying above-market salaries and benefits.”

Biggs has long studied pay and compensation comparability between the public and private sectors, first at the Heritage Foundation and now for AEI.

The Heritage Foundation will suggest that compensation gaps between federal and private sectors workers may be higher than what CBO suggested, because the study doesn’t include other benefits that some federal employees receive, such as student loan repayment or forgiveness programs and childcare, transportation and retiree health benefits.

The American Federation of Government Employees (AFGE), which has been a vocal opponent of the CBO comparison study and prefers the Bureau of Labor Statistics and Office of Personnel Management’s calculation of federal pay gaps between the private sector, will also testify at the hearing.

According to the BLS/OPM calculation, federal employees earn 34.07 percent less than their counterparts in the private sector.

The National Active and Retired Federal Employees Association is urging the committee to take a “measured approach” as it evaluates federal compensation.

“This hearing is about more than pay,” NARFE National President Richard Thissen wrote in a statement to the committee. “It is about how we value public service, and whether we, as a nation, will support federal compensation strategies that ensure American citizens are served by a competent and well-qualified federal workforce.

Though pay and compensation does play a large role, agencies have other tools to recruit and retain a high-performing federal workforce, the Government Accountability Office will suggest. An argument over pay doesn’t paint the full picture of the challenges government faces in filling mission critical skills gaps.

“While the federal compensation system may need to be re-examined, it will also be important for agencies to make better use of the management tools already available to them,” GAO Strategic Issues Director Robert Goldenkoff said in his written testimony. “Indeed, more effective use of hiring flexibilities, adopting leading human capital management practices and strengthening the capacity of agencies’ human resource offices could significantly improve executive branch personnel management, and thus help agencies to better carry out their missions in an era of highly constrained resources.”

Government spent about $215 billion to compensate about 2.2 million federal civilian employees in fiscal 2016, according to CBO. Those employees made up 1.5 percent of the U.S. workforce and are spread among more than 100 agencies and represent more than 650 occupations.

The Senate Budget Committee also examined CBO’s federal pay comparison study and offered the findings as a potential avenue where the government could begin to find cost savings in a May 17 hearing entitled “Ways to Run the Government for Less.”

CBO found the federal defined benefit retirement system is the biggest difference between the two sectors and their compensation packages. Though new federal employees now contribute more toward their pensions than their predecessors, defined benefit plans have become less common in the private sector.

“As we run out of money in the federal government, our pensions, our employees’ pensions, the [executive] branch’s pensions, your pensions aren’t really guaranteed, so we need to be taking a look at the entire pension system for the federal government,” Senate Budget Committee Chairman Mike Enzi (R-Wyo.) said. “I guess that would include the military as well.”

Moving the federal workforce to a defined contribution plan would close the gap between the public and private sectors, though the government wouldn’t see the savings immediately, said Keith Hall, CBO director.

Yet the Senate committee’s ranking member, Bernie Sanders (I-Vt.), said government shouldn’t offer similar pay and retirement options as the private sector.

“We have millions of workers flipping hamburgers; we have millions of workers all over this country earning eight or nine bucks an hour, and you … can’t survive on eight or nine bucks an hour,” he said. “So the federal government, for a number of reasons, says that we’re going to hire lower-income workers. … We’re going to try to pay them a little bit more, so maybe they can pay rent and take care of their food. I don’t think this is all that shocking. The answer is not to lower, in my mind, wages for federal workers.”