Are Federal Pay and Benefits Too Generous?

The federal government is too generous with the pay and benefits it provides to its workforce, according to a conservative Washington think tank.

Congress should revamp the General Schedule pay scale so it is more in line with private-sector pay and “emphasize performance-based increases over automatic increases,” reduce the amount of paid leave that federal employees accrue, and require most employees to contribute more to their retirement benefits, the Heritage Foundation proposed in a new policy paper released Thursday.

The “Blueprint for Reform: A Comprehensive Policy Agenda for a New Administration in 2017” outlined proposed changes to 23 federal agencies, including the Office of Personnel Management, which is responsible for overseeing the pay and benefits of the government workforce. The policy recommendations, the second part of Heritage’s three-part Mandate for Leadership Series, argue for a smaller federal government with fewer regulations, a bigger military, reforms to the tax and entitlement systems and reduced federal spending. The think tank typically publishes such proposals for managing the executive branch and developing policy during presidential election years.

“The federal government should have the tools to compete with private-sector employers to recruit and retain valuable employees, but it must also minimize taxpayer costs by not providing excess pay and compensation to federal employees,” the blueprint argued. “In addition, these proposals would provide portability and autonomy for federal employees by not discouraging them from moving into and out of federal employment and by providing them greater ownership and control of their retirement benefits.”

Heritage estimated that the personnel reforms “would reduce accrued federal employee compensation costs by an estimated 10 percent over the 2017-2026 period.”

A GS pay scale that reduces within-grade step increases and takes away their “automatic” nature would give federal managers more flexibility to reward top performers and withhold pay increases from poor performers, Heritage argued. A 2010 report from the think tank concluded that federal employees on average receive 22 percent higher wages than their private-sector counterparts – a claim that the Federal Salary Council disputes. That group, made up of federal employee union representatives and pay experts, most recently said that feds’ pay lags 35 percent behind non-federal workers performing similar jobs.

Jessica Klement, legislative director of the National Active and Retired Federal Employees Association, said the assumption that federal pay and benefits are overly generous and out-of-whack with the private sector is “wholly inaccurate.” She said that pay in many federal jobs, particularly for doctors, lawyers and senior executives, lags behind industry compensation. “Additionally, large private sector companies with which the federal government competes for talent tend to offer benefits that the federal government does not, such as paid parental leave,” Klement said by email. “If anything, the federal government should start to emulate those practices, not move further away from attracting top talent to serve our nation.”

Heritage also proposed bringing feds’ paid leave – annual and sick leave – more in line with the private sector, either by combining the two separate banks into a paid time off plan similar to many companies, or simply reducing the number of leave days that federal workers can accrue based on the employee’s years of service. “A federal employee with five years of service receives up to 33 days of paid leave, including 20 vacation days and 13 sick days, and 10 paid holidays,” the document said. “The typical private-sector employer provides between 19 and 23 days of paid leave and fewer paid holidays for employees with that length of service.”

Other proposed personnel reforms Heritage floated included:

• Requiring new federal hires and employees with between five and 25 years of service to pay more for their retirement benefits by decreasing the government contribution. (Congress in 2012 and in 2013 enacted legislation that required certain feds to pay more toward their pensions.)
• Giving federal managers bigger bonus budgets to reward and retain top performers.
• Requiring federal workers to shoulder more of their health care costs under the Federal Employees Health Benefits Program.
• Extending the probationary period for most new government hires from one year to three years. (It is easier to fire government workers during their probationary periods before they become permanent employees.)
• Curtailing the appeals process for employees who are fired.
• Eliminating the FEHBP government contribution for retiree health benefits for new hires. “The government could continue to provide access to FEHBP benefits in retirement but require employees to pay the full cost of those premiums,” the document said.

Federal employee unions took issue with the proposals.

“Clearly, the Heritage Foundation’s goal is to try to limit the effectiveness of government in any way possible in order to maximize its billionaire backers’ business profits,” National Treasury Employees Union National President Tony Reardon said in a statement. “Cutting federal employee compensation by 10 percent, cutting vacation and sick leave, phasing out a defined benefit pension and ending health coverage for retirees would make it virtually impossible to get the kind of talented employees needed to accomplish the critical missions of our federal government.”

American Federation of Government Employees National President J. David Cox Sr. also expressed strong opposition. “This report is a tedious restatement of Heritage’s vicious old attacks on federal employees and the hardworking Americans they serve,” he said in a statement. “It is disgusting to advocate for cutting the pay for the people who care for our veterans, patrol our borders, and inspect our food, while showering the wealthy with billions in tax cuts. Why should federal workers’ wages be slashed, pensions eliminated, or their health insurance destroyed? Why combine destroying the lives of middle class workers with huge tax cuts for the wealthy and corporations? Heritage needs to do some serious soul searching.”