Agencies with similar duties should merge into a few big departments as part of a large-scale "reconstruction" of the federal government that should begin with a pay raise for federal judges and other high officials, a panel of experts recommended yesterday.

The National Commission on the Public Service, led by former Federal Reserve chairman Paul A. Volcker, concluded that sprawling bureaucracy, rigid personnel systems and increasingly inadequate pay at the top over the past 50 years had undercut prospects for an efficient, effective government that attracts and retains talented employees.

The 13-member panel of former public officials, coordinated by the Brookings Institution, spent 11 months examining ways to "restore and renew" government service and developing its 48-page report released yesterday, "Urgent Business For America: Revitalizing The Federal Government For The 21st Century." The commission is a private group and its recommendations are not binding on Congress or the president.

"This is not a subject ordinarily associated with making the blood run hot," said Volcker, who led a similar commission more than a decade ago, "but this is an important subject that needs attention."

Mark Everson, deputy director for management at the Office of Management and Budget, called the report "an important contribution, and we're going to study it with great interest."

In contrast, the American Federation of Government Employees, a public employee union, called the study "an embarrassment," objecting to recommendations that would overhaul civil service protections and concentrate more power over pay and hiring in senior managers.

"[O]ne wonders whether they are at all aware of the depth and breadth of corruption which led to the passage of the Pendleton Act that established the civil service," said Bobby L. Harnage Sr., president of the AFGE.

The nonpartisan commission believes a growing thicket of sometimes overlapping missions and programs across agencies has made management more difficult, expanded the influence of special interests, sparked turf battles and stymied policy. The panelists noted that seven different agencies run 40 different job-training programs; that nine agencies operate 27 teenage pregnancy programs; and that eight agencies operate 50 different programs to help the homeless.

Panelists recommend broad changes, including consolidating agencies, shrinking the number of political appointees, curtailing financial disclosure requirements and overhauling personnel management and pay systems.

Among the first steps should be "an immediate and significant" increase in pay for federal district judges, the report says. With a salary of $150,000 a year, federal judges enjoy lifetime appointments and receive annual compensation equivalent to more than 31/2 times the 2000 U.S. median household income of $41,994.

But federal judges have less purchasing power than they did 30 years ago because their raises have not kept pace with inflation, the report says. What's more, their pay is far less than what they could earn in private law firms and lags behind the average annual salary for top law school deans ($301,639) and law professors ($209,571). As a result, some of the country's best lawyers have elected to stay in the private sector, a trend that could diminish the quality of federal judges over the long term, the report says.

"They don't have to get paid exorbitant salaries, but $150,000 is a little low," Volcker said.

The commission made a similar case for increasing the pay of high-level administration officials, who are paid at least $154,700 a year, and lawmakers, who receive $154,700 annually. The panelists said their recommendations were "philosophically in tune" with the creation of the Department of Homeland Security, which will merge 22 agencies and 170,000 employees and give managers more freedom to hire, fire and promote workers. The department's creation also shows that the political climate is ripe for reform, they said, conceding, however, that it would still be a difficult task that could take 10 years or longer.

"We shouldn't underestimate how hard it will be to get this done even though we are in a better time to get this done than we ever have been," said Constance Horner, a panelist who headed the Office of Personnel Management in the Reagan administration.

Colleen Kelley, president of the National Treasury Employees Union, which represents 150,000 workers in 28 agencies, said the panel's proposal was built around an untested model.

"It's kind of a pie-in-the-sky proposal," Kelley said. "I think an awful lot of oversight and watching of the Department of Homeland Security needs to be done before any decisions could be made to create other mega-agencies. ... Just because it's been formed, deciding that everything should be reorganized like that is a mistake. It's premature."

Other panelists include: former senator Bill Bradley (D-N.J.); former comptroller general Charles Bowsher; former defense secretary Frank C. Carlucci; former White House chief of staff Kenneth M. Duberstein; Franklin D. Raines, former Office of Management and Budget director; Richard Ravitch, former chairman of the New York Metropolitan Transportation Authority; former treasury secretary Robert E. Rubin; former health and human services secretary Donna E. Shalala; and former House member Vin Weber (R-Minn.). The panel had two ex-officio members, Strobe Talbott, president of the Brookings Institution and former deputy secretary of state; and Bruce Laingen, executive director of the first National Commission on the Public Service and a former member of the Foreign Service.

Paul Volcker, left, chairman of the National Commission on the Public Service, talks to reporters about the panel's call for fundamental changes in the structure and personnel policies of federal agencies.