ࡱ> DFC%` 'bjbj 78̟̟:V3BBB L P|||8$4 N%h"888888$$$$$$$$&h)$88$88%"88$$_  8 `$|.w $%0N% ,).0) &) 8H 8888$$^"888N%4 4 4 4 4 4 D ,LXD,  STATEMENT FOR THE RECORD OF AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES, AFL-CIO BEFORE THE SUBCOMMITTEE ON OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL WORKFORCE, AND THE DISTRICT OF COLUMBIA SENATE COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS ON S. 3013, NON-FOREIGN AREA RETIREMENT EQUITY ASSURANCE ACT OF 2008 JUNE 12, 2008 The American Federation of Government Employees, AFL-CIO (AFGE) is pleased to submit this testimony on behalf of the more than 600,000 federal employees our union represents, including thousands who live and work in numerous federal agencies and programs located in the non-foreign COLA areas. AFGE strongly supports S. 3013, the Non-Foreign Area Retirement Equity Assurance Act of 2008, introduced by Senator Akaka (D-Hawaii), Senator Stevens (R-Alaska), Senator Inouye (D-Hawaii), and Senator Murkowski (R-Alaska). In all respects, it is superior to the legislation proposed by the Bush Administration in the Presidents FY 2008 Budget which also sought to shift federal employees in non-foreign COLA areas to locality pay. S.3013 phases in locality pay over a relatively brief three-year period. This schedule for replacing COLAs with locality pay allows employees to obtain the benefits of locality pay rapidly, and pay back the federal retirement system in an affordable way. The Administrations proposal, in contrast, draws out the phase in period over seven long years. The stated reason for this lengthy phase in is the fear that a faster transition would exacerbate federal agencies retention problems by encouraging a rush to retirement. Delaying the implementation of locality pay in order to hold federal employees hostage to OPMs preferred schedule of retirement for those eligible to retirement is neither fair nor respectful of federal employees. Although other localities that have been found to have pay gaps in excess of the five percent threshold have received the entire locality pay immediately upon the establishment of a new locality, we believe the transition from COLA to locality justifies a short phase in period. As such, we support the three year schedule provided in S.3013. The legislations formula for the gradual replacement of COLAs with locality pay is also far superior to that found in the Presidents proposal. The Administration would have offset each dollar of locality with a reduction of $.85 from COLA; S.3013 has a formula that is designed to ensure that employees take home pay is not adversely affected during the transition. The $.65 offset per dollar of locality is strongly preferable, and AFGE endorses this approach. In addition to speeding the transition to locality pay, this formula also ensures that no employees paycheck will actually decline during the transition, an important standard that AFGE members both need and appreciate, especially in light of the recent upsurge in gasoline prices and general inflation. S.3013 also has the important virtue of making the transition to locality pay voluntary for current employees. Under the legislation, employees who choose to forego locality pay will be permitted to lock in the 2008 COLA rate. We strongly support making the transition to locality pay voluntary. However, there are already-approved increases in COLA rates awaiting the lengthy rulemaking process in the Office of Management and Budget (OMB) and the Office of Personnel Management (OPM) that might not be finalized in time to meet the deadline described in the legislation. We request that language be added to allow a lock in to include amounts provided in pending increases in non-foreign COLAs. In that way, federal employees in Puerto Rico, who are scheduled to receive an increase in their COLAs from 13 percent to 14 percent by next year at the latest, will be able to obtain the higher amount if they choose to remain in the COLA system. Finally, S.3013 provides an opportunity for both regular employees, and employees subject to mandatory retirement ages who become eligible for retirement during the transition period to pay into the Civil Service Retirement and Disability Retirement Fund amounts, plus interest, that they would have paid if they had been covered by locality pay, so that their annuities will not be adversely affected. We strongly support this provision, which is absent from the Administrations proposal. Federal employees consider many factors when deciding the date on which to retire. In fact, the majority who already receive locality pay do not retire on the day they reach eligibility. There is no reason to deprive federal employees in non-foreign areas, who have long sought locality pay, the ability to neutralize the financial impact on their annuities of their long wait. They deserve the ability to pay into the retirement system to make themselves whole, and AFGE strongly supports the provisions of S.3013 that allow them to do so. There are two protections missing from S.3013 that AFGE strongly urges the Committee to add to the bill. The first is a guarantee that no federal employee in any non-foreign area who chooses to participate will ever receive locality pay that is less than the amount provided to the Rest of US or RUS. Second, we ask that explicit language be added that two new localities be added to the current 32 Federal Employees Pay Comparability Act (FEPCA) localities that cover the entire states of Hawaii and Alaska. The legislation is vague regarding these new localities, saying only that in the second and third years that employees would receive applicable comparability payments approved by the President. Since the dawn of the locality pay program in 1992, funding at the Department of Labor has been cited by the Presidents Pay Agent as an excuse for severely limiting the number of pay localities. In 2006, the cities of Orlando, Kansas City, and St. Louis all had to be dropped in order to make room for cities with larger pay gaps relative to RUS due mainly to the budget rule that only 32 cities would be surveyed, no more. It would be wrong to rob Peter to pay Paul and eliminate two existing localities to facilitate the addition of Hawaii and Alaska. Likewise, it would be wrong to force federal employees in Hawaii and Alaska to remain part of RUS when preliminary data show that their pay gaps are far in excess of those in RUS. Thus, it is necessary to be explicit in requiring the addition of these two, new localities to the current roster. The reports of the Federal Salary Councils Workgroup meetings, as well as the official reports of the Federal Salary Council since 2003 make reference to decisions to drop some localities and add others. ( HYPERLINK "http://www.opm.gov/oca/fsc/index.asp" \o "blocked::http://www.opm.gov/oca/fsc/index.asp" http://www.opm.gov/oca/fsc/index.asp) In these reports, the budget constraints that have been discussed explicitly are implicitly referred to in statements that urge the Bureau of Labor Statistics (BLS) to utilize resources that had been devoted to one set of localities to a new set. The fact that the total number of localities has not been increased since 1998 is also evidence of the fact that BLS budget constraints have limited the number of cities and regions that could become separate localities. AFGE strongly urges the addition of explicit language in the legislation that would direct the BLS to conduct surveys of Hawaii and Alaska for purposes of establishing both states as new localities under FEPCA that would not displace any existing locality. This concludes AFGEs statement. We would be happy to answer any questions members of the Committee may have on this matter. When locality pay began, there were 28 localities. In 1995, four cities were added and five were dropped to bring the total down to 27. In 1997, three were added; in 1998 an additional two cities were added to bring the total up the current number of 32. In 2006, three cities were dropped and three were added. The total remains 32.     PAGE  PAGE 4 {00249833.DOC}   N O e w x y 2 ; M  O P Q R  ! ; P '(3󵨛zmcmmzhQtOJQJ^Jh Uh9OJQJ^Jh UOJQJ^Jh Uh+OJQJ^JhOJQJ^Jh Uh6K8OJQJ^Jh UhQtOJQJ^Jh!5OJQJ^Jh2i5OJQJ\^Jhn5OJQJ\^JhM\c5OJQJ\^JhNL5OJQJ\^Jh!55OJQJ\^J!   '()*_`abmnop   $`a$gd!5:&''    ! 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