To get from Paul Beckman's place in the civil service system to Jim Owens', you have to travel half of the country, which isn't so rough, and scale seven rungs of the bureaucracy, which is.
Beckman is Dallas branch manager of the Internal Revenue Service's Examination Division. It's a pretty big job: he supervises a staff of 100 auditors and computer specialists who pore over tax returns of Dallas area corporations. At 47, Beckman is two years younger than Owens, and both have been with the IRS since 1957.
But Owens has moved up much further. In 1980, he was named southwest regional commissioner for the IRS, putting him four tiers above Beckman on an organization chart. Then in 1981, Owens was FEDERAL WORKERS UNLOVED AND UNDER SIEGE brought here to take over the whole shebang as deputy commissioner. That's the top career job at IRS, giving Owens direct responsibility for 88,000 employes and a $2.5 billion budget.
And now the rub: until last month, Beckman's salary was $57,500, while Owens' was $58,500.
The denizens of the six bureaucratic layers in between also were all jammed into the same salary closet.
This phenomenon has been around long enough to have a name--"executive pay compression"--and is by no means limited to the IRS.
At various times over the last decade, as many as 45,000 of the nation's top civil servants in every part of the federal government have had their pay bunched like this, their incentives to climb the topmost rungs of the career ladder restrained by the stark fact that, as Beckman notes, "after a certain point, there's no more money in it."
In a nation where 12 million people can't find a job, much less a $57,500 salary, this tale of pay compression in bureaucracy's stratosphere is not going to put lumps in a lot of throats.
But as a parable for the way the federal government goes about the business of compensating its employes, it could not be more apt.
The system is out of whack. Of its many problems, three stand out:
After years of tinkering, Congress and the president still haven't developed a credible mechanism for balancing political and budgetary pressures to hold down government salaries against the management imperatives to attract a competent work force. The most widely accepted wage mechanism in the private sector, collective bargaining, is not permitted in the federal government, except for the quasi-independent Postal Service.
The last major pass at the problem came in 1970, when Congress enacted a pay comparability law designed to keep civil service salaries on a par with equivalent jobs in the private sector. But presidents have routinely ignored the law and, as budgetary pressures grew, have declared annual "emergencies" that have allowed government pay to lag a record 13.9 percent behind that of the private sector.
Political leaders have created salary distortions within the bureaucracy that weigh most heavily on those most important to its effective functioning--managers who have made it to the top, and professionals such as accountants, engineers, scientists and lawyers with skills marketable in the private sector. In a nutshell, federal pay is good at the lower levels, but becomes steadily worse on the way up.
Most ominous of all, the government has not struck a happy balance between its pay and its pensions. Pay lags behind private sector comparability, pensions exceed it. Moreover, within the pension system, the vast bulk of benefits go to the 25 percent of the work force that stays in the system long enough to retire, while the short-service worker pays proportionately far more into the system than he or she takes out.
None of these distortions is new, but racehorse inflation in the last decade has made all three much worse. It has dramatically enhanced benefits to federal retirees, whose pensions are fully indexed, while eroding purchasing power of federal workers, whose salaries are not.
That, in turn, has put all of the wrong incentives in all of the wrong places. It makes unassailable bottom-line sense these days, and has for quite a while, that seasoned bureaucrats at the height of their productive years should retire from government jobs while they are in their mid-50s--old enough to qualify for full retirement benefits but young enough to seek work on the outside.
The brief second careers launched or resumed by these early retirees are, in turn, tailor-made to provide a windfall from a redistributive Social Security system that delivers its greatest proportional benefits to those who participate in the system for the shortest time.
Thus, the shrewd bureaucrat winds up in his golden years with two bites at the federal apple--Social Security and a civil service pension, both fully indexed against inflation.
According to the Social Security Administration, 73 percent of all federal civil service annuitants age 62 and over are receiving Social Security benefits and their federal pension.
More on Social Security in a moment. First, some figures that show what's been happening to federal employe pay and pension over the last 13 years:
In 1969, the average monthly annuity for retired civil servants was $260. By 1982, thanks mainly to a succession of lavish cost-of-living indexing provisions, it had risen to $1,047 per month, a fourfold increase. Some of the provisions, such as twice-a-year COLA adjustments and an inflation-plus-1-percent kicker, have been repealed.
Meanwhile, in the same period, the consumer price index rose by 162 percent while the salary of all government employes at the GS15 level--the top of the middle-range managers--and below increased by just 118 percent. Thus, purchasing power of the entire general schedule system, as a system, has actually been eroding over the last 13 years. This is not necessarily the case for individual employes, who have also had salary adjustments for longevity and/or promotions.
For the top-level careerists, the salary situation is even more stark. Since 1969, their pay has increased just 75 percent. The earning power of top executives who reached the system-wide pay cap, a level pegged slightly below that of congressional salaries, a decade ago has since eroded by about one-third.
"When you see that in 1972 at the pay cap you're making $36,000 a year, and in today's economy with those equivalent dollars, you're making $23,000, it becomes difficult after a while to explain to your friends why you are such a failure," James Colvard, a physicist who supervises 200,000 civilians as deputy chief of Navy materiel, told Congress nearly two years ago.
Since then, Congress lifted the pay cap once in late 1981 and again last month, but even with those increases, top bureaucrats still have seen their purchasing power decrease by one-third over a 13-year span.
How did this fix come about? Raising government pay is always a briar patch for politicians, and over the years, the predictable response has been to hold back salary increases and make up the difference with hidden and/or delayed forms of compensation, for instance, pension benefits.
Eventually, though, the piper must be paid. In the military pay system, where tendencies to delay compensation have been even more exaggerated, the annual budget of the pay-as-you-go pension system exceeds the annual budget of the Army.
Now the demands of the Civil Service Retirement System (CSRS) are reaching those same budget-gobbling dimensions. In fiscal 1981, government workers paid $3.8 billion into their pension system, but the government had to add another $18.4 billion from its operating budget--a thirteenfold increase over the 1968 budget outlay of $1.4 billion. A part of this increase is to make up for earlier underfunding of the system.
By 1986, budget outlays to fund the CSRS are expected to balloon to more than $30 billion. They are growing at six times the rate of growth of employe contributions.
Budgetary pressure to break this cycle is enormous. The administration's new budget is expected to propose heavy cuts in retirement benefits: shifting from 55 to 65 the minimum age at which federal employes can retire without penalty, raising the employe contribution from 7 to 9 percent of salary next year and as high as 11 percent by 1985, and basing future annuities on a high-five-year salary average rather than a high-three.
Such proposals will meet stiff resistance in Congress where federal workers get a friendlier ear than in the White House, but they are not the only forces threatening the retirement system.
Other, external pressures are coming from big brother--Social Security, which is having a notorious bout with short-term insolvency and is on the prowl for quick fixes.
Among the quickest and likeliest fixes is forcing all new federal employes to join the Social Security System. This proposal, which already has the approval of the bipartisan Social Security Task Force, would bring a much-needed short-term infusion of money into the system by adding a new group of taxpayers to the rolls without immediately adding beneficiaries.
Over the long haul, of course, universal coverage would not be a moneymaker for Social Security, but it would bring some savings to government by, among other things, eliminating the double-dipping windfalls.
Federal employe and retiree groups will fight strongly against such universal coverage. Why should it matter to current employes what retirement arrangements are made for future employes? They fear that the creation of a dual work force, one with a more generous retirement system than the other, will mean that benefits of the better-off group will always be politically vulnerable. They're probably correct.
When Social Security was enacted in 1935, federal workers were exempted because it was thought unnecessary and redundant; they already had a mandatory contribution pension plan. In fact, they've had it for 62 years now, and they like it just fine.
The two systems have grown on somewhat parallel tracks over the years but do not share the same basic premise. One is a deferred compensation system designed to provide career employes with a livable wage in retirement; the other is a social insurance program designed to provide a floor of benefits to the elderly. If federal workers went on Social Security, their retirement system would be turned into a supplemental one, with greatly reduced benefits.
Comparing federal workers' current annuity benefits with what the typical private sector employe receives from Social Security and pensions is difficult, because private plans vary so widely. But it's fair to say that the CSRS is generous by any standards. Even though government workers must pay 7 percent of their wages (more than most private sector pension plans) into the system, their benefits more than make up for the contribution.
The typical federal employe replaces a higher percentage of his salary in retirement than the average private sector worker does from Social Security and a pension. The government annuitant is fully indexed to inflation, while only 3 percent of private-sector pension plans are. And, because of liberal early-out features, nearly half of all government workers retire by age 60, compared to 7 percent in the private sector.
Government workers do not want to give this up. They are especially bitter at the prospect of being asked to rescue Social Security from problems they had no hand in creating. L.J. (Lud) Andolsek, president of the National Association of Retired Federal Employees, has called those who would tamper with the civil service retirement system "jackals of the forest."
Somewhat more soberly, James Lantonio, assistant IRS commissioner for human resources, says: "We view our retirement as a reward for putting up with low pay."
From the other side, John W. Macy Jr., a former chairman of the U.S. Civil Service Commission, believes federal employes would be better off without such good benefits. He says they create resentments among the general public that make it harder for government workers to lobby for better pay.
Actually, though, there doesn't seem to be much resentment about federal employe pensions, according to a Washington Post poll taken earlier this month. Asked what they thought of federal employe retirement benefits, 33 percent of those polled said they were too high, 31 percent the right amount, 9 percent too low and the rest had no opinion.
On a pay question, 56 percent said they believed federal workers were paid more than those in equivalent private-sector jobs, while 10 percent said they were paid less. So some misconceptions abound.
Macy's perspective on the pay-and-pension dilemma is intriguing. In 1962, he was among proponents of the "reform" that for the first time indexed federal pension benefits. But instead of indexing them to salary increases, which good-government advocates of the time said would make them too vulnerable to political vagaries, he advocated indexing them to inflation--at the time, 2 percent.
"I've had a guilty conscience ever since," Macy said. "I just wasn't bright enough to foresee double-digit inflation." As penance, Macy heads a private citizens lobby, the National Committee on Public Employee Pension System, that has been calling for a major scaling back of benefits.
His co-chairman is former representative Hastings Keith of Massachusetts, a triple-dipper at the federal pension trough. Twenty years service in the military, Congress and the executive branch, and a long career in the private sector bring Keith combined annual payments from the government of more than $65,000.
He has been trying to give the government back some of his checks, but the government wants no part of it. So he goes around the country shocking people at how liberal the benefits can be.
This irks the public employe lobby. "Keith represents absolutely no one except a handful of people who contrive to manipulate the system," said Stephen Skardon, legislative director of NARFE.
Actually, there are other isolated cases of retirees trying to return portions of their pensions, contending not that they've manipulated anything but that their COLA overcompensates them for inflation's effect on the elderly.
While pensions will clearly dominate federal employe compensation issues in coming months, other, structural matters cry out for attention.
The comparability law, enacted in 1970 to establish a mechanism for equal pay for equal work, has been ignored by presidents in eight of the years since. Employe confidence in the system's equity is at a low. The employes believe, correctly, that in budget crunches, comparability is first to go.
But administration officials say the comparability mechanism has flaws that make it worth ignoring. The Carter and Reagan administrations have called for a total compensation comparability system in which benefits and salaries are calculated into the formula. The current system calculates only salaries.
Donald J. Devine, director of the Office of Personnel Management, says the comparability formulas are technically imperfect, doing a poor job of measuring government and private-sector pay.
Devine has another complaint about the current system: "grade creep." OPM studies show that about 13 percent of federal civilian jobs, including about 30 percent in this area, are overgraded. Their job description and corresponding salary rates are inflated above their real value. Devine is developing a program to attack this, although it will run into obvious resistance from employe groups.
Another structural problem is the linkage of congressional salaries to the pay for top-level career jobs. Informally observed for decades, that linkage was written into law in 1978 and has created the caps that put Owens and Beckman so uncomfortably close on the salary schedule.
The Senior Executives Association, which represents about 6,700 top career executives, thinks its people would be better off without such linkage. Nothing could be worse, the association believes, than to be tied to the contortions of Congress each time it goes through the political agony of raising its own salary.
Others, such as former OPM director Alan K. Campbell, believe senior executives are better off linked. Erratic as the current system may be, he argues, at least it puts top careerists' salary levels in the hands of a legislative body with a self-interest in raising them.
This argument goes back and forth and maybe always will. Fixing the pay of those who work for the sovereign has never been a job the nation has handled with particular grace. A century and a half ago, Alexis de Tocqueville may have rendered the last word on the matter:
"A Democratic state is most parsimonious toward its principal agents. In America, the secondary officers are much better paid, and the dignitaries of the administration much worse, than they are elsewhere."
In other words, 'twas ever thus.