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    "ocrText": "The original documents are located in Box 6, folder \"Peterson Commission Report on\nExecutive Salaries, December 2, 1976\" of the White House Special Files Unit Files at the\nGerald R. Ford Presidential Library.\nCopyright Notice\nThe copyright law of the United States (Title 17, United States Code) governs the making of\nphotocopies or other reproductions of copyrighted material. Gerald Ford donated to the United\nStates of America his copyrights in all of his unpublished writings in National Archives collections.\nWorks prepared by U.S. Government employees as part of their official duties are in the public\ndomain. The copyrights to materials written by other individuals or organizations are presumed to\nremain with them. If you think any of the information displayed in the PDF is subject to a valid\ncopyright claim, please contact the Gerald R. Ford Presidential Library.\nDigitized from Box 6 of the White House Special Files Unit Files at the Gerald R. Ford Presidential Library\nCommission on\nExecutive, Legislative\nand Judicial Salaries\n1750 K Street, N.W.\nWashington, D.C. 20006\nDecember 2, 1976\nThe Honorable Gerald R. Ford\nPresident\nThe White House\nWashington, D. C. 20500\nDear Mr. President:\nIt is my privilege to present to you the attached report of the\nCommission on Executive, Legislative and Judicial Salaries.\nAll recommendations in this report have the unanimous support of\nthe distinguished Americans who constitute the Commission. This\nunanimity reflects the urgency of the Commission's concern with\na genuine crisis of public confidence in the quality and integrity of\nour Government.\nWe fear that the twin trends of ebbing public trust and the increasing\ndifficulty of attracting and retaining high quality people may soon be\nirreversible -- unless the kind of actions suggested in this report are\nundertaken as soon and as vigorously as possible.\nWe further believe that the American public will understand that a\nsmall investment now in terms of increased salaries and a large in-\nvestment now of conviction, time and effort in reform in the form\nof a new Code of Public Conduct -- will pay large public dividends in\nthe building of a competent, full time and trusted government.\nRespectfully submitted\nPear\nPeter G. Peterson\nChairman, Commission on\nExecutive, Legislative and Judicial\nmr. President on Behalf formy Salaries fellow-commissiones.\nwe Thank you for this opportunity to contribute.\nTHE PRESIDENT HAS SEEN a name\nThe Report\nof the\nCommission on Executive, Legislative\nand Judicial Salaries\nDecember 1976\nSUMMARY\nIntroduction\nNames of Commission members and members\nof the Task Force on Public Conduct.\nHow We Did Our Work\nThe concept of \"total compensation,\"\nincluding benefits (pensions, insurance,\netc.) and \"psychic income\" in the form\nof prestige and the sense of doing an\nimportant job for the country. A list\nof studies undertaken.\nThe Problem\nImages and Reality - The executives in\nthis survey have had only one nominal 5%\nincrease in nearly eight years. The\nresult - in the top grades - has been\ndifficulty in recruiting good people,\nhigh early retirement, and bad morale\ncaused in part by \"compression\" at the\nhigh levels of civil service, where\n20,000 people in four grades all receive\nthe same \"frozen\" salary. Why does\nCongress deny these raises? Because it\nknows the mood of Americans, who have\nfar less confidence in public officials\nthan before. Breaches of trust - even\nby relatively few - have reduced the\nwillingness to increase compensation.\nOnly a commitment to serious reform will\nconvince Americans that trust and\nconfidence can be restored, and that\nincreases in salary are justified.\nRecommendations -- Part I:\nA Code of Public Conduct\nProposed general principals of a Code to\ncover all public officials at Level V\nand above - executive, legislative, and\njudicial. Public disclosure of finan-\ncial affairs. Rigorous restrictions on\noutside earned income. Strict conflict\nof interest provisions on investments.\nAppropriate and accountable expense al-\nlowances. Clear restrictions on post-\nservice employment. Equal applicability\nacross the three branches. Vigorous and\nconsistent auditing. A proposed com-\nmitment to prompt action by all three\nbranches after careful consultation and\nprecise drafting.\nRecommendations - Part II:\nCompensation\nO Principles of Compensation\nThe inappropriateness of \"comparability\"\nat these high executive levels. The\nneed for executive salaries as low as\npossible yet sufficient to attract and\nretain high-quality people. Salaries\nshould contemplate full-time work, and\nobviate the need for outside earned\nincome (legal fees, honoraria, etc.)\nThe need not to exclude people of high\nability who depend entirely upon current\nincome to support themselves and their\nfamilies. The basis for granting less\nof an increase in the top levels, and\nmore at the lower levels, where\nnonmonetary satisfications are less. A\nnational pay standard, and one tied to\nthe job, rather than artificially pre-\ndetermined fixed relationships.\n2\nO Background Studies on Compensation\nand the Proposed Scales\nSelected material from the Weber/-\nYankelovich studies. Why executives\nenter government? Why they leave? How\nmuch of a consideration at either point\nis salary? Some sacrifice is customary.\nRelative salary advantages and sacri-\nfices on entry into different branches.\nRealization of substantial increases on\nleaving government service. The dif-\nferent problem of the judiciary, a life-\ntime commitment to a substantially\nlowered standard of living. Pension\ncosts as a \"comparability\" factor;\npostponement of executive contributions\nto the system as a way to improve cash\nflow during short-term government\nservice. A proposal for relocation\ncosts. A proposal to ease the \"two-\nresidence\" requirement for Members of\nCongress and the problems caused by it.\nAnnual automatic cost of living adjust-\nments unwise.\no Salary Recommendations\nThe case for greater increases in ju-\ndicial pay. Outside earning capacity\nabandoned for lifetime service.\nThroughout the three branches substan-\ntially greater rates of increase at the\nlower levels than at the higher levels.\nSmallest increase recommended for Cabi-\nnet officers. Large increases for as-\nsistant secretaries and the lower\nlevels, where the problems are great and\nnon-monetary income lower. The rela-\ntionship among the salary levels of the\nVice President, the Speaker, and the\nChief Justice maintained through equal\nincreases for each. Congress raised\nslightly less than average but still a\nsubstantial amount - remembering our\nproposal to eliminate most outside\nearned income, and recognizing the\nstrong desire of Congress to be\nconservative on the matters of members'\npay. \"Compression\" greatly reduced to a\nsatisfactory level.\n3\nRecommendations - Part III:\nQuadrennial Commission\nA concept for a permanent guadrennial\n:\ncommission, with a four-year term and a\nfull agenda. Organization and responsi-\nbilities of the proposed commission.\nProposed studies of the varying pension\nsystems within the government, particu-\nlarly variations in benefit levels, cost\nassumptions, (static projections seri-\nously underestimate funding needs),\nearly retirement program, and funding\nand budgeting generally. Do the people\nunderstand the funding shortfalls? Life\ninsurance benefits should be studied as\nwell. Some coverage seems inadequate,\nsome inconsistent. The problem of\nproper job classification; some serious\nanomalies.\nSubmittal to the President\nUnanimous agreement on recommendations.\nNo dissenting positions.\n11\nINTRODUCTION\nUnder existing statute, a Commission on Executive, Legislative, and\nJudicial Salaries is formed every four years to make recommendations to\nthe President on the appropriate level of compensation for the Vice\nPresident and for positions in the Executive Branch from Cabinet officers\nthrough Level V, for the Members of Congress, and for Supreme Court\nJustices and other members of the Federal judiciary (the complete statute\nis presented in an Appendix).\nThe nine Commissioners are appointed by representatives of each of the\nthree branches of the Federal Government. Three, including the\nchairman, are appointed by the President, and two each by the Chief\nJustice, the Speaker of the House of Representatives, and the President\nof the Senate.\nThe Commission makes its recommendations to the President and he\nsubmits his recommendations as part of his next Budget message.\nThe recommendations from the President go into effect within 30 days,\nunless they are disapproved or modified by either the House or the\nSenate.\nMembers of the 1976 Commission are:\nAppointed by the President:\nLane Kirkland\nSecretary-Treasurer\nAFL-CIO\nNorma Pace\nSenior Vice President and Economist\nAmerican Paper Institute\nPeter G. Peterson - Chairman of the Commission\nChairman of the Board\nLehman Brothers Incorporated\nFormer Secretary of Commerce\nAppointed by the President of the Senate:\nJoseph F. Meglen\nLawyer\nPartner: Meglen & Bradley\nBernard G. Segal\nLawyer\nChairman, Schnader, Harrison, Segal & Lewis\nPast President, American Bar Association\nAppointed by the Speaker of the House of Representatives:\nEdward H. Foley\nLawyer\nFormer Undersecretary of the Treasury\nSherman Hazeltine\nChairman of the Board\nFirst National Bank of Arizona\nAppointed by the Chief Justice of the United States:\nCharles T. Duncan\nDean\nHoward Law School\nChesterfield Smith\nLakeland, Florida\nLawyer\nPartner: Holland & Knight\nPast President, American Bar Association\nExecutive Director:\nWesley R. Liebtag\nDirector, Personnel Programs\nInternational Business Machines Corporation\nIn the belief that public confidence is directly related to a set of\nperceptions of the conduct of public officials, we asked a special task\nforce of distinguished Americans to propose a set of standards for public\nofficials in the difficult area of conflict of interest, outside income and\npost-service employment. We are most grateful for their efforts, and we\nbelieve the proposed Code of Public Conduct to be a significant element in\nour proposals. The members of the task force are listed on the following\npage.\n2\nMembers of the Task Force on Public Conduct\nMortimer M. Caplin, Chairman of the Task Force\nPartner: Caplin & Drysdale\nFormer Commissioner of Internal Revenue Service\nTom Bradley\nMayor, Los Angeles, California\nTom C. Clark\nAssociate Justice, U.S. Supreme Court, Retired\nC. Douglas Dillon\nFormer Secretary of the Treasury\nRay Garrett, Jr.\nPartner: Gardner, Carton, & Douglas\nFormer Chairman, Securities and Exchange\nCommission\nMartha W. Griffiths\nPartner: Griffiths & Griffiths\nFormer Member, U.S. House of Representatives\nLeon Jaworski\nPartner: Fulbright & Jaworski\nFormer Director, Office of Watergate Special\nProsecution Force\nWilliam McChesney Martin, Jr.\nFormer Chairman of the Federal Reserve Board\nGeorge Romney\nChairman, National Center for Voluntary Action\nFormer Industrialist, Secretary of Housing and\nUrban Development\nWilliam D. Ruckelshaus\nSenior Vice President, Weyerhauser Company\nFormer Deputy Attorney General\nGeorge P. Shultz\nPresident, Bechtel Corporation\nFormer Secretary of the Treasury\nStuart Symington\nUnited States Senator\n3\nCyrus R. Vance\nPartner: Simpson, Thacher & Bartlett\nFormer Deputy Secretary of Defense\nW. Willard Wirtz\nPartner: Wirtz & Gentry\nFormer Secretary of Labor\n4\nHOW WE DID OUR WORK\nIl might be useful, at the outset, to explain how the Commission went\nabout its duties. The staff was composed principally of personnel\nexecutives from private industry, and personnel and manpower experts\nfrom academia.\nWhile government specialists made sqme important contributions, there was\na general feeling that the work of this task force should be directed by\nand presented to the Commission by representatives of the private sector,\nas well as by our able Executive Director, on the theory that the\nobjectivity and thus the credibility of the studies would be enhanced if\nthe government members were not, in effect, sitting in judgment on their\nown compensation problems. Accordingly, leading personnel executives\nwith backgrounds in major private concerns such as IBM, Eastman Kodak,\nRCA, Hay Associates, and Pfizer were brought in to take a major role in\nthe various research projects.\nWe turned to Dr. Arnold Weber, Provost, Carnegie-Mellon University, for\nsome original research on why people came, didn't come, stayed, and left\ngovernment service and what the role of compensation was.\nAl the threshold of its deliberations, the Commission determined to study\nthe problem in terms of \"total compensation\", rather than merely limiting\nils inquiry and its recommendations to questions of salary alone. Man\ndoes not live, the Scriptures tell us, by bread alone (whether the ancient\nor modern meaning of the word), and there are many elements of\nremuneration which go to make up a salary, a wage, compensation. Such\nobvious benefits and perquisites as pensions, insurance, vacations,\nseverance pay, profit sharing, and the like have all become familiar parts\nof the wage \"package\". To those available to the senior government\nexecutive, judge, or legislator must be added the \"psychic\" income of a\nfulfilled sense of patriotism, the knowledge that one is doing (and\nperhaps doing well) an important job for one's country as well as, to be\nsure, the sense of importance which attaches to many of these positions at\nor near the lop. There is also the strong possibility of career\nenhancement after government service is over. On the negative side\nthere is income and career advancement foregone in the private sector,\nthe difficulties of transferring family life to a new, expensive, and\nprobably unknown site, and - again in the case of the Judicial and\nExecutive Branches - the above average possibility of a substantial drop\nin annual income.\nConsistent with this desire to examine total compensation, the following\nare examples of studies which were conducted:\n11\nSalary and Economic Indicators and Trends\n-\nFederal government salaries - all levels\n-\nState government salaries - selected jobs\n-\nPrivate sector salaries - blue collar, clerical,\nprofessional, and executive\n-\nSalary spreads between organization levels\n-\nGeographic salary rate differentials\n-\nCost of living\nFringe Benefits in Government and Private Sector\n-\nPension - size, costs, funding\n-\n!\nMedical and health plans\n-\nLife insurance plans\n-\nPerquisites\n-\nMoving allowances and housing reimbursements\nOther\n-\nConflict of interest\n-\nDisclosure\n-\nPost-government service employment\n-\nAuditing procedures\n-\nTenure\n-\nRetirement\n-\nRecruiting\n-\nAttitudes of top government officals towards pay\nand other factors that may influence decisions to\njoin, remain in, or leave government service\nFinally, the Commission wished to assure the fullest possible exposure of\nthe data to public review and also wished to assure its own exposure to\ncomment from the many interested parties.\nAll studies were presented in public hearings.\nOver 100 organizations and individuals were invited to testify and 24\nappeared.\nWritten comments were received from over 100 sources.\n:\n2\nOver 520 individuals from all three branches - incumbents, departees, as\nwell as those who decided not to come to government, were interviewed by\nthe Yankelovich, Skelly and White firm in the study for Dr. Arnold\nWeber.\nIn addition, a number of key government officials were asked to provide\ntheir views on specific issues - in particular, those officials in present\nand previous administrations who had the recruiting responsibility.\nThe Commission also examined, to its great profit, the report prepared in\n1975 under the direction of Vice President Nelson Rockefeller, the report\non the Federal pay system, which report contributed strongly to the\nCommission's decision to consider \"total compensation\" in the course of its\ndeliberations instead of merely looking at salary levels. Vice President\nRockefeller also contributed a substantial and thoughtful statement for the\nconsideration of the Commission.\nIn carrying out the work outlined in this report, the Commission was well\naware that its legal responsibility is primarily recommending rates of pay\nto the President, but we were also aware that we met in time of crisis,\nthat the rate of good people leaving the government in the upper grades\nhad become a flood, that partly because of the crisis of confidence in the\nnation no significant pay raises at all - whatever the recommendations of\nQuadrennial Commissions - would have been granted for eight years, and\nwe quickly saw that a recommendation for substantial salary increases,\nunaccompanied by any reference either to the other elements of income or\nthe crisis of confidence, would meet the same fate as did the\nrecommendations in 1974. We did not believe we had been convened to\nperform an idle act. Mr. President, in the spirit of that belief, and\nmindful of our legal and moral obligations, the Commission respectfully\npresents this report.\n3\nTHE PROBLEM - IMAGES AND REALITY\nOn September 22, 1976, Congress acted to deny a small upward salary\nadjustment to the top employees of all three branches of the Federal\nGovernment, an adjustment which reflected a percentage increase based\nupon a comparability study with the General Schedule and which would\nhave occurred automatically had Congress not voted affirmatively to deny\nit.\nThe action was hardly justified by the facts. Since 1969, Federal judges,\nall members of the House and Senate and top officials of the Executive\nBranch had received only one increase in salary - and that had been 5%.\nThis \"freeze\" had occurred during a period of sometimes double-digit\ninflation and regular pay increases for workers in all other parts of\nsociety, including government at all levels - state, local and the Federal\nCivil Service General Schedule.\nDuring the time in question - 1969 to 1976 - in which the officials whose\npay is the subject of this report received a total 5% increase, average\nhourly private non-farm earnings increased by 70.1%. The Consumer\nPrice Index for urban wage earners and clerical employees went up nearly\nas rapidly, by 60.5%.\nGeneral Schedule Federal Civil Service pay increased on the average\nduring that period by 65.7%, and in the so-called \"super grades\" GS 16 -\n18, by 48.9%.\nThe 1976 survey of executive pay ($30,000 to $65,000) in 318 private\ncompanies showed a salary increase during those seven years of 52.5% in\nall companies and of 58.6% in companies where no bonuses were paid.\nIn fifteen major state governments, in the years from 1969 to 1975, the\nGovernors' pay was increased by 37.7% and that of the top five\nadministrative officials by 41.5%. In general, all the indicators - including\nthose cited above - demonstrated an approximate 55% increase in\ncomparable salary rates since 1969 which, allowing for the 5% increase in\n1975, would have required a 50% increase in Executive Level salaries by\n1976, just in order to provide comparable treatment. The charts on the\nfollowing pages dramatically illustrate the disparity in treatment at the\ntime the Congress chose to deny a modest 5% increase to the judiciary and\nExecutive Levels and, to be sure, to its own members.\nThe problem which Congress addressed - or, more properly, failed to\naddress - ran deeper than merely a substantial lag in salary increments\nover a nearly eight year period. Since, by statute, the employees of the\nCivil Service General Schedule cannot be paid more than the salary of the\nlowest level of executives - Level V - these employees at the GS-18 level\nand below were \"frozen\" at existing pay levels soon after the 1969\nadjustment. As increases have been granted in the General Schedule over\nthe years - more or less comparable to those granted elsewhere in and out\nof government - this \"compression\" has added more and more upper level\nOVERVIEW: CHANGES IN EXECUTIVE LEVEL\nSCHEDULE VS. SIGNIFICANT PAY INCREASE INDICATORS\n70\nHRLY. EARNINGS\nAVG. G.S.\n60\nC.P.I., INDUST. ToT. COMP.\nINDUST. SALARIES\nPATC (GS11-15)\n50\nAVG. SUPERGRADE\nTOP 5 STATE OFFICIALS*\n40\n% INCREASE\nGOVERNORS*\n*15 LARGE STATES\n30\n20\n10\nI\nEXECUTIVE LEVELS\n0\n1969\n70\n71\n72\n73\n74\n75\n76\nYEAR\nSUMMARY OF INDICATORS 1969-1976\nAVG.\nHAY ASSOC.\nHRLY.\nCONS.\nAVG.\nINCR\nEARN\nPRICE\nINCR.\nSUPER\nPATC\nALL\nNON-BONUS\nINDEX\nINDEX\nG.S.\nGRADES\nSURVEY\nCO'S\nCO'S\n70\n60\n% INCREASE\n50\n0\nCONCLUSION:\nIndicators suggest an approximate 55% increase in\nsalary rates since 1969.\ncivil servants to the \"frozen pay\" category. This has now reached down\nlo the middle steps of GS-15, with the result that more than 20,000 men\nand women in grades 15 to 18 as well as comparable grades in the foreign\nservice and other government salary groups have for years faced, and\nface now, the prospect of no pay increase when they are promoted. They\nhave, in the words of the song, \"gone about as far as they can go\". This\nmeans that in most government agencies executives at four and sometimes\nlive levels of management are paid at the same \"frozen\" salary rate.\nThus, in one study, over 40% declined a government job offer which\ninvolved an increase in responsibility but could not involve an increase in\npay.\nThis situation led, for example, to a circumstance where a NASA official\ntold us that 47 people who work for him make as much or more than he\ndoes.\nThis also has a noticeable effect on retirement rates. The retirement law\nprovides for semi-annual increases in annuities commensurate with\nincreases in the cost of living, and only this year has an added 1%\n\"kicker\" been eliminated. Since the cost-of-living upward adjustment had\ngone only to retirees, and not to those who remained on the job at a\n\"frozen\" salary, the latter group forfeited the annuity raises awarded\nduring the period of the seven years. This was more than an incentive to\nearly relirement; some thought it was a virtual command to retire when\nfirst eligible.\nAnd so it proved to be. Only 19.9% of all eligible employees retired\nduring the year beginning November 1973 but 29.9% of \"frozen rate\"\nexecutives did so in the same period. (Members of Congress who chose to\nretire are not included). For the following year, the general rate\nremained relatively constant at 19.5%, but early retirement by executives\nwhose salaries were \"frozen\" jumped to 46.6%.\nAccording lo the Chairman of the Civil Service Commission:\nGenerally, the objective evidence of problems seems greatest among\ncertain highly paid professions, where there is easy movement\nbetween the Government and the private sector:\n-\nMany agencies, and particularly the regulatory\nagencies, report tremendous difficulty in retaining attorneys,\nsince the skills they have acquired in regulatory work enable\nthem to make much more in private practice. For example, at\nICC the General Counsel and the Deputy General Counsel both\nresigned this year. In a single agency, the National Labor\nRelations Board, fifteen administrative law judges left last\nyear.\nThe Social Security Administration was unable to fill its Chief\nActuary position for over a year, during which time more than\n30 candidates refused the job because of the pay.\n2\nKey scientists and researchers have been retiring and\nresigning at an unprecedented rate. From 1969 to 1976, the Air\nForce lost 46 percent of its top scientists. Forty candidates\nrefused the post of director of a major new Defense Department\nresearch program, with the majority saying they would have to\ntake a pay cut to accept.\n-\nIn the last three years, four of the eleven Institute\nDirectorships at NIH have become vacant and remained vacant\nnearly a year, with 85 out of 87 outside candidates refusing the\njobs because of pay. EPA finds that the senior physicians it\nneeds to conduct its clinical research programs are earning up\nto $80,000 in private practice or medical schools.\nWhile the evidence of the impact of the executive pay situation may\nbe most' dramatic among the professionals, the problem certainly\nexists among all types of managerial jobs:\n-\nThe Social Security Administration lost nine of its nineteen\nsupergrades to retirement at one time last year.\n-\nThe average retirement age among Air Force supergrades has\ndropped from 62.5 in 1969 to 56.5 in 1975.\n-\nMore than half of the Civil Service Commission's supergrades\nhave retired in the last three years.\nAnother aspect of the executive pay problem that is proving very\ndifficult for agencies to deal with is the refusal of employees to\naccept geographical reassignments (particularly to Washington, D.C.\nor New York City) or promotions to more difficult jobs because no\npay raise would be involved:\n-\nFive of the Defense Contract Audit Agency's six GS-16 Regional\nManagers declined to be considered for promotion to the GS-17\npost of Deputy Director.\n-\nSeveral GS-15 meteorologists refused to be considered for the\nGS-16 post of New York Regional Director of the National\nWeather Service.\n-\nFifteen managers at GS-15 and higher in the Veterans\nAdministration have refused reassignments in the last year.\n-\nMany IRS executives have refused to be considered for\npromotions; IRS has had 51 payless promotions in the last two\nyears.\nThe same stories are told in the Judicial Branch. Deputy Attorney\nGeneral Harold Tyler, whose job includes a major responsibility in\nconnection with the selection and nomination of candidates for the Federal\nbench, gave it as his \"firm opinion in the last 19 months there has been\nstrong circumstancial evidence, if not direct evidence, that current pay\n3\nscales in vogue for the last several years are discouraging qualified men\nand women, particularly in the age group from 40 to 55 years, from\nconsidering taking a judicial appointment.\"\nWhy then, in the fact of this available evidence, did Congress choose to\ndeny, yet again, a relatively small increase in salary to executive and\njudicial officials, including Members of Congress?\nThe people's representatives who voted this way surely were not obtuse;\nthey knew the alarming facts. They had no desire to deny themselves,\njudges and executives a pay raise out'of some real or imagined grievance.\nOn the contrary, they knew the scope of the problem and the need for a\nsolution - in the form of a substantial increase. But they also knew,\nbetter than anyone else in government, the mood of America, and they\nknew that the consequences in November for any Congressman who voted\nhimself a pay raise in September - however justified - would be paid at\nthe ballot box.\nCongressmen and Senators are unique in many ways, but in none more so\nthan that they are virtually the only employed Americans who have the\npower to set their own salaries.\nThey do not covet that power; they would gladly assign it to someone\nelse, almost any else. But it is a constitutional burden they must bear,\nand in 1976 that meant bearing, as well, an even heavier burden. The\nAmerican people had lost confidence in Government - despite a vastly\nimproved climate of trust in the Presidency itself - noticeable since the\nend of the \"national nightmare\" in August, 1974. They did not trust\ntheir leaders. They did not believe them to be people of honor, integrity\nand probity. And they believed these defects to be most clear when the\nsubject was money.\nThe great social historian of our country, Alexis de Tocqueville, noted as\nearly as the first half of the last century an abiding difference between\nour democracy and the aristocracy of other lands, including France, his\nown. A democracy, he noted, pays its secondary officials well but is\n\"parsimonious only towards its principal agents\". The scale of\nremuneration, observed de Tocqueville, is determined by a comparison\nwith the people's wants. Americans lived, he found, in great comfort and\nsought to have their servants share in that comfort. But lacking any\n\"distinct idea\" of the needs of a high official, and envious when they did\nhave such a distinct idea, they made salaries \"diminish as the power of\nthe recipients increases\".\nDe Tocqueville was speaking only relatively, he deemed it proof of this\ntheory that the Secretary of State earned only three times the salary of\nthe \"Chief Clerk\" at the Treasury and the President only four times the\nsalary of the Secretary of State. We have become even more egalitarian\nsince. What would de Tocqueville have made of the phenomenon known as\n\"compression\", by result of which the top several grades of \"clerk\" all\nearn the same amount so that the Chief Clerk makes no more than, let us\nsay, many of his own assistants, and theirs as well? How would he have\naccounted for a system of executive pay in which cabinet heads -\n4\nSecretary of State and the others - earn not 300% of the salary of the\nChief Clerk, but only 150% of it? And in which 100 United States Senators\nand 435 Representatives earn only 12% more than some 20,000 \"clerks\"?\n11 is more than a healthy egalitarianism which has brought us to this\npass. Our people are younger (63% of our Congressmen are 38 years old\nor under and in January more than half will have only four years of\nseniorily or less), better educated, and to be sure, more informed.\nAlthough great differences in income and what the academics like to call\nsocio-economic status still exist, we have nonetheless progressed in the\n150 years since \"Democracy in America\" first appeared - even closer to\nthat egalitarian ideal foreseen by de Tocqueville. So that healthy\nscepticism toward authority, expressed in an anti-aristocratic denial of\nhuge salaries to those who govern us, is as strong, if not stronger, as\never.\nBut in the past decade, other and less healthy forces have been at work\nwhich have greatly aggravated the unease about public officials and the\nreluctance to reward them with adequate compensation. This sentiment -\nwhether called \"anti-Washington feeling\" by political observers (and\nsuccessful politicians) or \"alienation\" by public opinion analysts and social\ncommentators - has been easy to detect and, for the people's\nrepresentatives, easy to act upon.\nFor more than a decade, the number of Americans who agree with the\nstatement, \"people in government don't care about people like me\" has\nsteadily risen. The percentage of Americans with a reasonable degree of\ntrust and confidence in their public officials - not that they be right,\nonly that they tell the truth - has declined precipitously.\n-\nDr. Gallup tells us that the general level of trust in government\nhas fallen from 76% in 1964 to 33% in this year.\n-\nA survey by Yankelovich, Skelly & White this year yielded the\nalarming statistics that 61% of the people believe \"there is\nsomething morally wrong with the country.\"\n-\nThe same survey showed that 83% of the respondents say that\nthey do not trust those in positions of leadership as much as\nthey used to.\nI\nSurveys in the mid 60's showed that 1/3 of all Americans felt\nisolated and distant from the political process. By the mid\n70's, a 2/3 majority reported an attitude of \"what I feel doesn't\nreally count.\"\n-\nAn assessment of spending priorities among Americans (\"spend\nmore,\" \"spend less\"), of a dozen categories compiled earlier\nthis year, revealed that the only category faring less well than\ngovernment salaries was foreign aid, both as to the large\nnumber saying \"spend less\" and the small number saying\n\"spend more.\" Even \"welfare,\" not traditionally an area in\nwhich many Americans want increased spending, fared better in\nthe survey than government salaries.\n5\nThese serious developments - this steady slide of public confidence in\ngovernment - did not just happen. This was. no ordinary historic or\ncyclical pattern. On the contrary, it came as the inevitable result of a\nseries. of government crises - scandals, in the common usage of de\nTocqueville's time: - which successively shook American's faith in the\nprobily of public officials.\nBy, the mid-nineteen seventies, 70% of all Americans say they get most of\ntheir news from TV and: 50% identify television as the source of all their\nnews. Over the past decade here: are some of the messages which have\nflickered into our Ilving rooms.\nThe Viet Nam War, in which we came to doubt the truth of what\nwe were told about our allies and about the war itself - from\nsuccessive administrations of both parties.\no\nWalergate and all that was subsumed under that heading. A\nPresident who resigned in the face of impeachment charges, and\nseveral of his aides convicted of an obstruction of justice\ninvolving the payment of large sums of \"hush money\".\no\nUnreported campaign contributions paid illegally by American\ncorporations.\no\nCampaign money, some of it paid illegally and all of it secretly\nfrom special interest groups such as the milk producers.\nO\nA Vice President resigned after a plea of nolo contendere\nfollowing charges that he had. taken bribes in the very\nexecutive office of government.\nA powerful committee chairman of the House resigned after\ncharges that public funds had been used. to. pay an employee\nwhose \"work\" consisted only sexual favors for the boss.\na\nCorruption of foreign leaders by some of the same corporations,\nresulting in the public disgrace of the leaders of some of our\nallies and the indictment and trial of others.\na\nAllegations of the improper use of union pension funds,\nincluding links to organized crime, in a union whose ex-\npresident had been pardomed, some felt for political reasons.\nOJ\nCurrent reports of payment by foreign citizens to Congressmen\nand other public figures. perhaps more than 100 in all.\nAfter all of this, to which must be added revelations of illegal and\nperhaps criminal activity by the very agencies charged with keeping the\npeace al home and abroad, is it any wonder that public confidence in\ngovernment has never been lower? Is there any wonder that public\nofficials have come under the same general civic indictment, that they are\nbelieved (however wrongly as to the great majority) to be taking\nadvanlage of high salary and retirement scales, that expense accounts\n6\nand reimbursable payments, staff and travel allowances, outside income\n(in some cases in excess of salary) and honoraria from trade associations\nand trade unions or \"legal fees\" from corporations - all are believed to be\nways in which the top officials take financial advantage of their positions\nin ways the ordinary citizen cannot. Is it a surprise that the major\nexplicit and implicit public issue in the elections of 1976 - local, state and\nnational - was the relation between the citizen and the government - in\nwhich the government and its conspicious representatives suffered by\ncomparison?\nThis Commission, Mr. President, could have interpreted its mandate\nnarrowly, looked at the impressive data which was developed and which\nmake it clear that the failure to accord substantial increases in salary to\nthe top levels of all three branches of government has led to a crisis - a\ncrisis whose impact on the public is substantial. We could have concluded\nthat without that substantial increase the problems would only worsen -\n\"compression\" will, in a few years \"freeze\" all employees of GS 15 and\nbegin to creep lower; early retirement will increase as will the number of\nvacancies in key jobs because of the unwillingness of competent people to\nfill them. We could have noted all that, proposed new pay schedules\nrecommended herein, and counted our task as finished.\nBut our task would not have been finished, because we firmly believe that\nwithout serious attention to the nature of the larger crisis we have\ndescribed - the crisis of confidence and of trust - our labors would have\nbeen useless. The members of both houses of Congress are close to the\npeople and they can gauge the extent of this greater crisis better than\nothers. They would have anticipated the response of the American people\nconfronted with a substantial salary increase and too few checks on what\nthey perceive to be continuing breaches of public trust. The result\nwould be the same as it has been for the past eight years.\nWe have therefore assumed as part of our task the proposal of a new Code\nof Public Conduct - reforms applicable to all three branches of\ngovernment, which we believe must be the indispensible prelude to a\npopular acceptance of a general increase in executive, legislative and\njudicial salaries.\nWe have proceeded on a basis, from the beginning of our deliberations, of\n\"total compensation\", and we believe these proposed reforms to be the\nway to pursue that end. Americans are not blind to the problems\ndiscussed here, nor do they wish to punish all bureaucrats, legislators,\nand judges for the sins of the few. But they do believe that a public\noffice is indeed a public trust. They will pay a fair day's wage for a full\nday's work but they want to know that the salary they pay is the salary\nthe public servant receives. They will pay enough to avoid the necessity\nof hidden \"moonlighting\", but they want to know and be able to verify -\nthat there is none of this \"moonlighting\" going on anyway. They want\nopen, fair and responsive government from fair and honorable people who\nwork full time for what they receive - and they will pay adequate salaries\nil they believe that what they pay for is what they get.\n7\nWhat is the alternative? It is a nice question, but which we do not have\nmuch time lo answer: whether and for how long a free society can endure\nif the majority of its members believe that many high officials are serving\na private interest and not the public?\nDo we continue, then, down this path of increasing public cynicism? Do\nwe lose more and more of our best officials who want to stay in public\nservice - whether elected or appointed - but who nevertheless resign\nunder the spur of higher and higher living expenses, particularly the\neducation of their children? Do we force fine men and women into early\nretirement, not only because they can no longer ask their families to make\nthe financial sacrifice, but as well because they choose no longer to abide\nthe increasing public abuse which accompanies the government post? It is\none thing to stay in the kitchen and take the heat that comes with the\npolitical territory; it is quite another to bear the suspicion and doubt\nproperly earned by others.\nWe have not only reviewed the statistics of the past, impressive as they\nare. We have talked privately with some of our most senior and respected\ncareer officials, who speak sadly of the likelihood that they will have to\nleave government service. This is true not only of those high in the\nbureaucracy; we speak here of some highly respected elected officials as\nwell.\nIf we continue down the path of the past eight years, in which the politics\nof survival have required no pay raises at all, we must accept the\nimplications of a government of only the rich, or only the young and\nuntried or, more likely, a government of those who are willing to\ncompromise themselves with political money. The costs of such a\ngovernment reach beyond the costs of a salary increase; they are\nincalculable, and to a free people unacceptable.\nBut this cynicism, this lack of confidence, is not our natural state, as the\ndata shows. We are an optimistic people and we have always believed that\ntimes will be better - and so they have always turned out to be. We can\nachieve a rebirth of that confidence that has always sustained us, but to\ndo so we must begin the slow process of restoring trust in our public\ninstitutions and the people who guide them.\nWe believe a commitment to the principles of reform which follow could be\nthe first step in this process.\n8\nRECOMMENDATIONS - PART I:\nA CODE OF PUBLIC CONDUCT\nMr. President, we believe il an exercise in political futility (a judgement\nCongress has confirmed more than once) to propose any significant\nincrease in executive, legislative, and judicial salaries unless you are\nsalisfied that the leaders of the other branches of government will join\nyou in a commitment to major reform. (Speaking for ourselves, we would\nnot have proposed significant salary increases except in the context of\nsuch reform). Such a reform must be sufficiently tangible to persuade a\nsubstantial majority of Americans that the Post-Watergate era has truly\nbegun. Such a majority is by no means persuaded now.\nWe believe that this program - this Code of Public Conduct -should\nencompass the following general principles, to be applied by developing\nregulations to govern the activities of all members of the judiciary, the\nCongress, and officials of the Executive Branch above a certain level.\nWhile we understand that we cannot completely eliminate conflicts of\ninterest simply by devising rules, we believe major improvements and\nclarifications are possible and necessary.\nWe recognize that the Administration is presently in a period described as\ntransition and that any legislation which might be formulated as a result\nof this report would have to be enacted during the term of office of your\nsuccessor. Therefore, we would certainly support such continuing\nconsultation with the President-elect as you deemed appropriate.\nPUBLIC DISCLOSURE\nAll such individuals should be required to make disclosure of their\nfinancial affairs by periodically filing with an appropriate authority, as\nsuggesled below, financial statements showing all income, by source and\namount, reimbursements for travel and other expenses, gifts, debts, and\npersonal holdings. Such information shall be made public unless the\nappropriate authority specifically permits the confidentiality of certain\ninformation, for example, in order to avoid impairing the privacy of\nothers, or in certain special situations, the privacy of the individual. In\nany case, however, the information should be available in an official\nproceeding whether legislative, judicial, or administrative.\nDiscussion - Currently, disclosure requirements in the Executive and\nLegislalive Branches are incomplete, inconsistent, inconstant, and in\ngeneral inadequate. For example, in one of the houses of Congress, the\nsource of honoraria (for speaking engagements) above $300 is publicly\navailable, but not the amount. It is no great service to discover that one\nor another pressure or interest group has been regularly paying a\nmember without being able to find out how much. Indeed, the whole\nquestion of honoraria needs to be examined. It is conceivable that in\nsome cases, the person has not been engaged for the occasion merely\nbecause of substantive or oratorical skills or his added prestige to an\notherwise ordinary meeting: sometimes the member's legislative standing\nhas weighed in the equation.\nhere will be cases where close questions will arise between the demands\nof individual privacy and the public's need to know. It is certainly not\nour objective lo make the disclosure rules so onerous an invasion of\nprivacy that we discourage first-rate people from entering public service.\nIt is for these reasons that we believe that an appropriate authority\nshould review these disclosures and make these sensitive judgements. If,\nin an extreme case, the appropriate authority wishes to make information\npublic in a confirmation hearing that the individuals believe is an\nunnecessary invasion of privacy, then the prospective appointee should\nbe given the opportunity of withdrawing his or her name from\nconsideration.\nAs to \"other\" income for services rendered, in the House of\nRepresentalives the source but not the amounts over $5,000 of income\nfrom a \"single source\" are reported. But not, alas, publicly - this\ninformation, inadequate as it is, is sealed and available only for an\n\"Official Investigation\". In the Senate, income other than from honoraria\nand contributions, is filed under seal but not reported to the public.\nThus, the public is denied the relevant information on \"other\" income\nearned, which might reveal a real or apparent conflict between the private\ninterest of the employee and his official government duties. (If, as\nJustice Brandeis said, \"sunlight is the best disinfectant\", then the\naverage citizen remains in the dark as to this private compensation\nbeyond a public salary).\nRIGOROUS RESTRICTIONS ON OUTSIDE EARNED INCOME\nThe government should provide fair and reasonable compensation to its\npublic servants sufficient to permit them to meet all normal personal and\nfamily obligations without the need for outside income. All executives,\njudges, Senators, and Representatives may then be reasonably expected\nto devole their full time and energies to their public employment, and the\nearning of outside income should be restricted. Under these\ncircumstances, they should be prohibited from receiving honoraria, legal\nfees, gifts, or the proceeds of testimonial dinners, etc. for personal use,\nand any other compensation for services rendered which might have, or\nappear to have an influence on the conduct of the public's business.\nAl the same time, we want to fix the salary levels so that high executive\nposts are not reserved solely for wealthy individuals with sufficient\nsavings, estales, or investments - i.e., unearned outside income - to\nwhom these regulations are unimportant.\nWe are not unmindful, Mr. President, that we have raised here the whole\nquestion of \"money in politics\", most of the ramifications of which, such\nas the influence of personal wealth and campaign contributions on\nelections, are outside the scope of this report. But clearly, a new public\nimage of government must include further reforms in this area as well.\nDiscussion - Many public officials have told members of the Commission\nthat they are uneasy about some of the outside income they accept, and\nonly do so because of the pressure of rapidly rising costs and static\nsalaries. Thus, we believe most public officials and private citizens would\n2\nwelcome a salary level which would permit the minimization (for example,\nperhaps nominal amounts to be earned from academic lectures or writing,\nprovided such activities did not impinge upon the work of the\ngovernment) or elimination of outside earned income entirely.\nSTRICT CONFLICT OF INTEREST PROVISIONS UPON INVESTMENT\nTight but sensible provisions should be developed in order to eliminate -\nor at the very least minimize - those conflicts that necessarily arise when\nthe economic investment interest of the individual falls within the scope of\nhis public responsibility. The involvement of government in our economic\naffairs has become such that as a people we have probably lost the\ncapacity to eliminate entirely all conflicts of interest, particularly those\nwhich are minimal, occasional, and transitory. In some cases - indeed, in\nmost cases - public disclosure may be adequate protection. In others,\nwhere there is a direct conflict (as in certain executive departments,\nlegislative committees, or certain cases before a court), it would be\ndesirable to review the potential conflict with an appropriate and perhaps\nnew authority. A specific procedure could then be recommended to fit the\nparticular case - whether it might be divestiture, a blind trust (which\nmight be devised so as to be deaf as well) or, in some cases, abstention\nfrom the particular decision - so as to minimize a real or apparent\nconflict.\nAPPROPRIATE AND ACCOUNTABLE EXPENSE ALLOWANCES\nThere is a need for much more consistency in the availability of legitimate\nexpense allowances in all three branches of government, including\ndomeslic and - when appropriate - foreign travel, entertainment granted\nand received, and gifts. Equally as important, there is a need to\nreassure the public that, once these allowances have been granted the\nexpenditures reported are indeed made for the permitted and specified\npurposes, and not as a mask for substitute income.\nDiscussion - The Commission notes wide differences among the various\nbranches and, for that matter, various positions within the branches, as\nto the scope and nature of expense allowances. (The Speaker's expense\nallowance is $10,000. The Chief Justice's is $5,000. Yet it is reported\nthat the Chief Justice is also often expected to represent the judiciary in\noutside contacts with both domestic and foreign groups. We would simply\nargue that the system of government allowances should have coherence).\nA permissible expense in one place is not permitted elsewhere. A ceiling\nimposed in one branch may be exceeded in another and, as recent\nrevelations have made clear, the auditing of expense accounts has been,\nfrom time to time and from place to place, loose enough to permit (or\nperhaps to encourage) the flow of expense funds as a substitute for\ndenied salary increases, or at levels higher than the public would support\nwere they made public. Various GAO studies have been regularly critical\nof the opportunities presented for abuse in this area. Most of the\ncriticism is directed at loose definitions and lax administration of\nexpenses, so-called \"administrative funds,\" and travel and gift allowance\nregulations. In this connection, we commend the efforts in Congress\nsuch as those of the Obey Commission in the House of Representatives to\n3\nrescind the authority of the Committee on Administration to expand,\nchange the character, or create new categories of allowances without a\nvole of the members of the full House, as well as efforts to consolidate\naccounts, abolish extra postal allowances, eliminate so-called \"cash outs,\"\nand to require documented vouchers. It is a useful first step.\nPOST-SERVICE EMPLOYMENT\nRestrictions should be imposed - throughout the government - so as to\ninsure that top executives, judges, or legislators do not compromise\neither their objectivity or that total devotion to the job to which the\npublic is entilled, by any arrangements they may make while in public\nemployment with respect to subsequent employment or other relationships.\nDifferent departments or branches have different rules which limit post-\nservice employment. More consistent and explicit rules are needed. In\nthis way, all government employees and even more important the public\ncould and would know the limits of permissible conduct. The present\nambiguilies permit alleged \"revolving door\" arrangements through which\ncompany executives, government regulators, and contract negotiators\npass freely, changing hats or uniforms as they go, doing damage to\npublic respect for government.\nEQUAL APPLICABILITY ACROSS THE THREE BRANCHES OF\nGOVERNMENT\nWe recognize there are Constitutional and operational issues as between\nthe various branches of government. However, if we assume that our\nsenior officials are to be paid enough to meet all normal personal and\nfamily obligations without the need for outside income, then these\nregulations should be broadly applicable across all three branches of\ngovernment. Differences in form and function among agencies,\ndepartments and positions, elected or appointed, have in the past dictated\ndifferences in treatment in this area, but surely the over-riding interest\nof the government and the people in open and respected administration of\nthe people's business should generally prevail over differences that may\nexist.\nVIGOROUS AND CONSISTENT AUDITING\nAn appropriate body or bodies should be established - or if an existing\none is to be so charged, it should be strengthened - to insure that these\nrequirements are fully enforced and that all information disclosed under\nthis Code of Public Conduct is regularly and adequately audited and\npublicly reported.\nDiscussion The acceptable standards in the conduct of the public's\nbusiness should be even higher than those of the marketplace. Yet\ntoday, most would agree that the auditing procedures of our larger public\ncorporations - which standards are themselves coming under increasing\nquestion - meet a higher standard than those imposed in many areas of\nthe government.\n4\nONE APPROACH TO A CREDIBLE, TANGIBLE COMMITMENT TO IMPLEMENT\nTHIS CODE OF PUBLIC CONDUCT\nIn order to translate the principles of reform - which really constitute the\nessential preconditions for acceptance of upward salary movement by\nCongress and the public - we suggest a Presidential meeting with the\nChief Justice and the leadership of the Senate and the House. Such a\nmeeting would be counted historic if its result were a joint commitment to\naction on a Code of Public Conduct. (We know you will, of course, at all\ntimes want to be especially sensitive to the Constitutional perogatives of\nthe other branches with regard to the qualifications of their members).\nSuch a commitment could consist of three major actions:\n1.\nA Commitment to the Principles of the Code\nThis is a largely symbolic act, and would require no more than\nagreement to proceed, but we live in large part by symbols,\nand the crisis in confidence and trust in many ways reflects\nthat fact. A formal signing of a declaration to proceed, and a\ncommitment to the principles of the Code set forth above, would\nbe persuasive to the public that action had begun.\n2.\nA Commitment to Prompt Action\nWe do not underestimate the complexity of the problem, nor the\nneed lo proceed with great care and caution in devising specific\nregulations and new mechanisms, but neither do we\nunderestimate the public impatience with unnecessary delay.\nWe believe it would be reasonable for you, Mr. President, to\ncall for the Code's being in place and functioning throughout\nthe three branches within nine months.\n3.\nA Commitment to a New Mechanism to Meet the Schedule\nWe believe there is merit in the idea of creating an\nintergovernmental commission, composed of equal representation\nof private citizens appointed by each branch, to develop after\nthe most careful consultation with the branches involved a\nspecific Code of Public Conduct and set up mechanisms to\noversee and administer the Code. The chairman should be\nnamed by the President after consultation with the Chief Justice\nand the leadership of each house. The staff of the Commission\nshould come primarily from the private sector; professional\nguidance might appropriately be sought from such groups as\nbar associations or organizations of auditors. Such\noriganizations could provide short-term experienced talent for\nthis purpose.\nLegislation authorizing such a commission should properly be submitted at\nthe same time as the Budget message which reflects the salary increases\nproposed - should you choose to accept them. The Commission would be\nauthorized to examine in confidence whatever information would be\n5\nrelevant with respect, for example, to expense allowances, auditing\nprocedures, outside income, investments, and conflict-of-interest\nreporting.\nThe commission would be under mandate to submit regulations, or\nlegislative proposals where required, within 180 days, which would set\nforth precise rules to put the principles of the Code into effect,\nmechanisms to resolve conflict-of-interest questions, procedures to audit\nthe results of these programs, methods to guarantee the availability of\npublic scrutiny and to assure that all public officials would read,\nunderstand, and accept the new Code of Public Conduct before embarking\non their duties.\n6\nRECOMMENDATIONS: PART II\nCOMPENSATION\nPRINCIPLES OF COMPENSATION\nSome of the principles which guided our deliberations are set forth here.\nI.\nDirect pay comparisons with the private sector - the so-called\nprinciple of \"comparability\" - are inappropriate for almost all\nthe positions covered by this report. Positions in the Civil\nService General Schedule, and even for many of the GS 16 to\nGS 18 super grades, the principle is usually applicable and\nuseful in helping set scales for pay and other elements of\ncompensation.\nBut at the Executive Levels, and in the judiciary and the\nCongress, comparability is of little value. With what job in the\nprivate sector, for example, does one \"compare\" the top\npositions at the Department of Defense? Or a Judge of the\nCourt of Appeals?\nAnd, for that matter, what if \"comparable\" jobs could be found?\nIf some top positions at HEW, for example, had a rough\ncomparability, let us say, to the presidency of a large\ninsurance company, or the chief of the U.S. Information\nAgency to the chairman of a large radio and television network,\nwhat then? Would the Congress wish to pay, and would the\npeople support, a comparable salary? Do we want Cabinet\nofficers to be earning three times as much as the President's\n$200,000? To ask the question is to answer it.\nThe taxpayer's interest is in the opposite direction, toward\nsalaries as low as possible, but yet adequate to attract and\nhold - for a reasonable period of time - the best qualified\nexecutives, legislators and judges for these positions.\n2. On the assumption that the important posts to be filled on the\nExecutive Level are full time jobs, pay levels should be set so\nthat there would be no need for office holders to rely on those\nforms of outside income (honoraria, legal fees, etc.) which not\nonly distract the officials but also corrode public trust. A\nproper compensation system must make it possible for people of\noutstanding ability to devote all of their time to the job.\n3. Top grade salaries should be adequate to attract and motivate\npeople of outstanding ability but whose standard of living\ndepends upon current income, rather than savings,\ninvestments, or other unearned income. Americans do not want\nsomeone seeking high government posts because of the good\nsalary, nor do they want able people to turn down the job\nbecause the salary is too low. A top official's position in the\nFederal Government ought not to involve so substantial a drop\nin living standards - at least with respect to certain\nfundamentals such as the education of one's children - as to\ndiscourage people from taking jobs in the first place.\nNevertheless, much of the data developed during our deliber-\nations tells us that most executives and judges are prepared to\naccept some diminution in income to come into the government.\n4. Setting pay scales within the five Executive Levels involves a\ncurious phenomenon: the difference in pay should be less as\none moves up the scale, but at present the spread is greater.\nIn the General Schedule there seems to be justification for\ngreater comparative rewards at the top of the ladder, but in\nthe Executive Levels the reverse seems to us to be true. In\nterms of total compensation, a Cabinet Secretary receives much\nmore of the non-monetary income - the emotional, psychic\nreturn - than an Assistant Secretary. The same is also\nprobably true of the chairman of a regulatory commission\nagainst a member of the same commission.\n2\nThis principle - the need for greater increases at the lower and\nsecondary levels - is reinforced when one considers the Weber-\nYankelovich data. There, it appears that officials do not\nconsider salary as a major factor when they enter government\nservice, but that it plays a major role in their ultimate decision\nto leave. It is precisely at these entry levels for government\nexecutives and judges that we must look most closely. The\nsalaries should be high enough - and that means today that the\nincrease should be large enough - not only to attract them but\nto retain these people for a reasonable time once they ve made\nthe change. The evidence suggests that a Presidential\nappointee sees the new job as a temporary one of from two to\neight years (the latter figure is a maximum, the average is\ncloser to the former). Whether or not as a conscious part of\nthe motivation at the time of entry or not - a chief motivating\nfactor seems to be the opportunity for the new challenge of\npublic service - there will almost certainly be better prospects\nat the time of reentry into the private sector.\nThus the common problem during government service, at least\ninsofar as the salary is concerned, is to avoid a further\nsubstantial erosion of the ability to maintain an already reduced\nbut acceptable living standard assumed from entry. Thus, for\nthe unaffluent, the problem is almost entirely one of cash flow\nwithout regard to building up an estate or to replenish savings\nor investments or enhancing life style. (As we point out later,\nthose in Executive Levels are not likely to be concerned in any\nway with their government pension rates or accumulated leave.\nGiven these facts, it seems clearly wrong to compel these\nexecutives to immediately reduce their cash flow by\ncontributing to a pension fund from which they will almost\ncertainly draw no benefit.)\n3\nFurthermore, since we have set entry salaries at which we\nbelieve to be the lowest dollar levels consistent with the\ngovernment's objectives, it is important that some mechanism\n(such as the permanent quadrennial commission discussed later)\nbe developed to assure that the salary - the cash flow - does\nnot substantially deteriorate as against the cost of living. The\nexperience of the past eight years has demonstrated - with its\nextraordinarily high exit rates - that while psychic income and\nthe desire for public service can compensate for an initial drop\nin income, it is not enough to sustain a continued erosion.\nEven a highly motivated government executive, Member of\nCongress or a Fèderal judge, cannot warm his hands\nindefinitely before a picture of a fire.\n5. The scale for government officials at these levels should be set\nnationally rather than, for example, after a determination of\nvarying geographic rates of salary and cost of living. While\nthere appeared superficially to be some economies available\nthrough such a geographic approach, as well as the possibility\nof some recruiting advantages, a further consideration of the\ncomplexities of the problem, as well as of the other issues which\nwould then be raised and considered with respect to all other\ncomponents of compensation, led inescapably to the conclusion\nthat the disadvantages of \"regionalization\" far outweighed the\nslight gain.\n6. The principle of fixed or automatic \"linkage\" - a recent\nhistorical development - seems inappropriate as a continuing\nway to fix salaries at these levels. Indeed, as the\naccompanying chart shows, the most commonly referred to\nlinkage only began in 1969 (linkage between Congress, Level II\n(undersecretaries), and the Judges of the Court of Appeals.)\nThere is also the \"linkage\" between Cabinet positions and\nAssociate Justices in the Supreme Court.\n4\nAs the chart on the following page indicates, there is no\nhistoric linkage among these positions, and we cannot find a\npersuasive rationale for its rigid application. The basis since\n1969 has apparently been largely political, based on the\nassumption that the Circuit Judges and the Level II executives\nmight serve as a \"lifeline\" to the Members of Congress,\nunderstandably unwilling to raise their own pay unilaterally.\nBut as the public mood has intensified, the lifeline has\ndisappeared, and it is Congress which has served as an anchor\nover the past eight years, dragging down the \"links\" and\npreventing any increase, anywhere.\nThere are, in fact, sound reasons for unlinking Congress,\nLevel II (or any other level), and any of the Federal judges.\nNol only are these, of course, entirely different jobs with\nentirely different responsibilities, but the career anticipation\npatterns vary sharply. The Weber-Yankelovich data tells us\nthat in almost every case, a Cabinet officer and a Circuit Judge\nwill take a reduction in salary when entering government\nservice; the difference is that the executive official will resume\na high level of earnings (perhaps even higher than if the choice\nhad not been made to interrupt a private career in the first\nplace) upon leaving the government. The judge, on the other\nhand, has not made a decision to enter government for only a\nfew years, and therefore, to accept a slightly lower salary for\nthat period of service; but has on the contrary elected a per-\nmanent change, not only in earnings but in life style as well.\nIf, as is customary, the judge is selected from those successful\nat the bar, the certain assumption is that the trade-off for the\njudicial life, with the non-monetary satisfactions it affords, is a\nheavy reduction in dollar earnings - for all of the remaining\nproductive years. That factor alone suggests unlinking the\ntwo.\n5\nSELECTED LINKAGES AND RELATIONSHIPS AMONG\nEXECUTIVE, LEGISLATIVE, AND JUDICIAL BRANCHES\n(1975 - 1874)\nMEMBERS\nEXECUTIVE LEVEL II\nYEAR OF\nOF\nCIRCUIT\n(DEPUTY SECRETARY\nEXECUTIVE LEVEL I\nADJUSTMENT\nCONGRESS\nJUDGES\nET AL)\n(CABINET HEAD)\n1975\n44,600\n44,600\n44,600\n63,000\n1969\n42,500\n42,500\n42,500\n60,000\n1965\n30,000\n---\n---\n1964\n---\n33,000\n30,000\n35,000\n1956\n---\n---\n22,500 AND 22,000\n25,000\n1955\n22,500\n25,500\n---\n---\n1949\n---\n---\n---\n22,500\n1947\n12,500\n---\n---\n---\n1946\n---\n17,500\n---\n---\n1945-1932\nUP & DOWN\n---\n---\nUP & DOWN\n1926\n---\n12,500\n---\n---\n1925\n10,000\n---\n---\n15,000\n1919\n---\n8,500\n---\n1907\n7,500\n---\n---\n12,000\n1903\n---\n7,000\n---\n---\n1891\n---\n6,000\n---\n---\n1874\n5,000\n---\n---\n8,000\n5A\nAs for the Members of Congress, neither of the foregoing\nassumptions prevail. Histocially, most members, after all, have\nleft not because the pay is too low or the job ultimately\nunsatisfying, but because they were defeated for election or for\npoor health, and these are risks that go with the territory.\n(More recently, however, there has been increasing evidence\nthat pay has become a factor.) The psychic income is vastly\ndifferent - indeed, of a different kind - than it is in the\nExecutive Branch or in the judiciary, and the risks and\nburdens include not only the loss of a job but of undeserved\npublic obloquy. And the decisions required, of course, do not\naffect just one government department or policy, nor even one\ngroup of litigants or others similary situated, but the greater\nissues that affect all of our people. There is simply no\njustification for the continued automatic linkage of salary among\nthese groups. Each should stand on its own, and with proper\npublic understanding, the political consequences can be\nminimized.\n6\nBACKGROUND STUDIES ON COMPENSATION\nThe realization came early to the members of the Commission that we had\nembarked not upon a clearly-defined, objective study of the relative pay\nscales for different branches of the government, but instead upon a path\nstrewn with politics, precedents (constitutional and otherwise) and\nprejudice.\nWe also concluded at an early stage in our deliberations that we possessed\nno special expertise in the politics of Federal pay. Even if we did, there\nare others with the power we lack to do something about their views, and\nwe are only an advisory group. We therefore decided that our advice\nwould be more credible and therefore more helpful if we fought off the\ntemplation to compete with the political experts. For example, we have\nregistered our opinion - backed, we believe, by logic - that \"linkage\"\nwhich has existed since 1969, tying the salaries of Members of Congress\nto those of Level II executives and to those of Appellate Judges, should\nbe eliminated. Whether or not this is, nevertheless, a \"political\"\nnecessity, we shall leave to others to decide.\nAl the outsel, we decided to commission some original factual research on\nquestions which seemed to be thus far unanswered. We wanted to know\nthe evaluation in the private executive marketplace of the worth of\nvarious branches and levels of government - questions to be asked of\npresent and former executives as to their opinions both before and after\ngovernment service. How important, for example, is the actual dollar\ncompensation - or how important should it be - at the various levels and\nbranches, given the great differences in tenure, future career paths, and\nthe so-called \"psychic income\" of the different posts.\nWe authorized such a study to be done, under the direction of Dr. Arnold\nWeber, Provost of Carnegie-Mellon University. Dr. Weber has a rich\nbackground in labor economics and prior government service as Assistant\nSecretary of Labor, Associate Director of OMB and as the first director of\nthe Cost of Living Council.\nWe believe that this work yields important insights as well as a good deal\nof factual basis for our recommendations. We present here some excerpts\nfrom Dr. Weber's findings so as to make clear some of the bases and\nassumptions which undergird our pay recommendations. Considering a\nnumber of factors - such as desire for public service and long term\ncareer development - Dr. Weber concluded,\nCompensation was a significant factor in each of the key decisions;\nto enter, depart, and remain in high level government positions.\nWhen approached with an offer of a Federal position, the individual\ndecision to accept or reject is influenced by the \"adjusted\" salary (in\nconstant 1967 dollars) of the job presently held and the job offered.\nThe higher the salary in the prospect's current job, the more likely\nthat he or she will refuse the Federal executive position offered. On\nthe other hand, the higher the salary related to the job offered, the\nmore likely that the potential appointee will accept. Similarly, the\ngreater a Federal executive's salary before acceptance, the more\nlikely that his tenure in government will be shortened, although his\nlength of service may be influenced by any salary increases while in\ngovernment.\nWe shall amplify some of his conclusions with some actual tabulations of\nanswers lo particular questions. Some of these percentage tabulations are\nraw unrefined data. But if the reader is careful, we believe there will be\nfound here facts and explanations which will make our conclusions clear\nand easier to understand.\nWhat did the 528 questioned incumbents and departees from senior\npositions in the three branches tell us about the role of compensation in\naccepting or rejecting offers to come into government? We need not rely\nonly on their verbal opinions, we should first look at what happened in\nfact to their salaries when they came to work for the government.\nIn fact, the Weber survey indicated that upon joining government, the\naverage respondent accepted a decrease in salary of $8,100 or 21.1% of his\nsalary immediately prior to joining the government.\n2\nTheir responses to a number of questions support the contention that\nindividuals accept Federal employment with the understanding that salary\nlevels will be below those they could receive from employment in positions\nof comparable reponsibility outside government.\nIn response lo the question, \"Tell us in your own words, why you\ndecided to accept Federal employment?\", the most frequent responses\nwere:\nThe opportunity for public service - 17% of respondents.\n0\nTo accept a new challenge - 12% of respondents.\no\nLess than 1% of the respondents mentioned an increase in salary\nas a reason for accepting the position.\nIn response to the specific question, \"What was the role of compensation\nin your decision to accept Federal employment?\", 86% of the respondents\nindicated compensation had either a negative or no influence on their\ndecision.\nO\nNegative influence - 28% of respondents.\nNo influence - 58% of respondents.\nPositive influence - 14% of respondents. (Note: super grades\nhave been eliminated).\nRespondents were asked to rate the importance of each of a number of\npossible motivations which might have influenced their decision to accept\nFederal employment.\nRespondents Indicating\nEither \"Very Important\"\nMolivations\nor \"Somewhat Important\"\nPublic Service\n95%\nChallenging Interesting\nWork\n95%\nRecognition\n68%\nOpportunity to do\nSomething Different\n68%\nLong Term Career\nDevelopment\n60%\nCompensation\n43%\n3\nCompensation was by a considerable margin the least frequently reported\nfactor to be of any significance in influencing the decision to accept\nFederal employment.\nDr. Weber has tried to put this congeries of non-salary factors into\ncontext in the following way:\nWithin this complex of factors, compensation is likely to exert a\nsignificant influence. This does not mean that compensation is\ndominant or operates to the exclusion of other factors. It is\nreasonable to assume, however, that compensation will strongly con-\ndition decisions concerning Federal employment. Although the jobs\ninvolved are usually prestigious and public service may be its own\nreward, the individuals involved nonetheless have economic needs\nand alternatives which will limit the extent of their 'sacrifices'.\nThe acceptees eloquently stated their desire for public service. But\nthe translation of this desire into a positive decision was also\nconsistent with economic circumstances which permitted such\nsubjective goals to be realized.\nAlthough the 'call' to public service may excite noble motives, this\nstudy indicates that these motives were most likely to be translated\ninto positive decisions when the anticipated or actual costs were not\nonerous and did not worsen over time.\nWe would expect and are reassured that people, in Dr. Weber's phrase,\nexpress \"noble motives\" in explaining the decision to go into government\nservice. We find these data consistent with this motivation, particularly\nwhen we remember this study does show that on the average, these\nofficials took a substantial cut when they came to government.\nOn the question of the role of compensation in departures from\ngovernment service, we believe this study has some important things to\nsay. Unfortunately, our sample of departing Federal judges is smaller\nthan we would like to see. But even on this subject, there are some facts\nworth keeping in mind on the growing importance of compensation (or\nrather the lack of increased compensation in a highly inflationary period)\nin accelerating departures from something even as prestigious and\nsalisfying as the Federal bench. To quote from the Weber study, \"during\nthe last four years (since January 1972), total resignations averaged 3.25\nper year; however, during the prior 31-year period they averaged just\nunder one per year.\"\n4\nThe raw dala supply some interesting conclusions, not only on the\nimportance of compensation in departures but how this factor varies by\nbranch of government. Here is Dr. Weber's summary statement:\nThe decision to depart Federal service was associated with a process\nof economic erosion. Thus, the higher the proportion that an\nindividual's salary was of his or her total income, the more likely\nthat the individual had left government service. There is some\nevidence that the compensation factor was especially important in the\ndecision to depart of those in Executive Levels IV and V.\nRegardless of an individual's experience in government, the decision\nlo depart is influenced by personal and economic elements. In this\nrespect, the analysis indicates that where salary constitutes a\npreponderant component of his total income, then he is more likely to\nbe a departee - other factors equal - than if he gains a substantial\nproportion of his income from other sources. In this manner, the\nvariable \"percentage of total income from salary\" is positively related\nto departure. For the sample of incumbents and departees used in\nthis analysis, more than 75% of total annual income was derived from\nsalary on average. As this proportion approached 100%, it more\nlikely indicated a departee.\nThe loss of income means that an individual will have to reduce his\nstandard of living, his rate of savings, or dip into other resources.\nThe greater proportion that his Federal salary is of his total income\nfrom all sources, the more likely that the individual will have to\ndeplete his savings or capital or suffer a deterioration in his\nstandard of living.\nThe verbal responses to the survey illustrate this process of\ndepletion. One departed executive noted that, \"I spent my savings\nlo keep the family going. It would take twice as much money in\nsalary to (remain in government) comfortably.\" Another official\nasserled, \"I would like to earn more money to make up for 3-1/3 lean\nyears. I need to rebuild savings.\"\n5\nDr. Weber continues:\nThe economics of the accept/reject decision also were related to the\nprospect of supporting a son or daughter's college education. If the\npotential appointee anticipated the enrollment of a child in college\nwithin the next five years, this projection exerted a negative\ninfluence on the decision to accept. Of those who rejected offers,\n67% anticipated a child in college in the next five years. The figure\nfor those who accepted was 36%.\nLikewise, in the decision to depart government:\nThe influence of college expenses was highlighted by several\ndepartees. One explained his leaving by stating, \"I needed more\nincome, especially for college costs. II Another pointed out,\n\"Suddenly, I became aware of college money requirements. I needed\nmore money, I can't see the government ever paying enough.\"\nReferring now back to the raw data, we think they add to our\nunderstanding of the role of compensation in departures - particularly in\nexplaining the substantial differences among branches and levels -\nanother piece of evidence in the argument against \"linkage\".\nQuestion: \"On balance, to what extent was your annual income a factor\nin the decision to leave the Federal Government?\"\nResponses:\nExecutive\nJudicial\nLegislative\n\"To a large extent\"\n32%\n73%\n9%\n\"To some extent\"\n43\n18\n17\n\"To no extent\"\n25\n9\n74\nQuestion: \"In your own words, what would you say are the reasons you\nleft your Federal employment?\"\nResponses: First Mentioned Executive Judicial Legislative\nInadequate compensation\nor had a better offer\n38%\n73%\n8%\nNever intended to stay\n14\n--\n--\nHad Enough\n13\n9\n13\nPoor Health\n5\n5\n28\nLost Election\n--\n--\n30\n6\nof particular interest to the Commission was the considerable disparity in\nthe change in adjusted salary that respondents in each of the branches\nhad reported on entering government service. These amounts are\npresented in the table below:\nAll Respondents Who Had\nJoined Government Service\nExecutive\nI - V\nJudicial Legislative\nAverage Adjusted* Salary\n$39,800\n$44,500\n$28,300\nhold just prior to Government\nemployment\nAverage Adjusled* Salary at\n30,800\n30,000\n29,000\nEntry to Government\nAverage Change\n-9,000 -14,500\n+700\nin salary at entrance\nAverage Change as a Percent\n-23%\n-33%\n+2%\nof Original Salary\n*All dollars presented in the Weber survey are deflated to 1967\nrales. For example, the cost of living - as measured by the\nConsumer Price Index, determined by the Bureau of Labor\nStatistics - rose 33% from 1967 to 1973. To calculate \"adjusted\"\nsalaries earned in 1973, the salary would be multiplied by a deflation\nfactor of 0.75 (100% divided by 133%). Thus, if in 1973, an\nindividual earning $50,000 in the private sector accepted a\ngovernment position at $38,000, the \"adjusted\" salaries would be\ncalculated as follows:\nMultiplied\nAdjusted\n1973\nBy Deflation\n1967\nDollars\nFactor\nDollars\nPrior Salary\n$50,000\n.075\n$37,500\nEntry Salary\n$38,000\n.075\n$28,500\n7\nThis data suggests that there is sizeable personal economic sacrifice made\nby individuals joining two of the three branchs of government. The\nsurvey further indicates that the magnitude of the economic sacrifice has\nincreased in real terms over the past several years due to the effect\ninflation has had in reducing the purchasing power of fixed salaries.\nAnother measure of the relative financial burden or the \"opportunity cost\"\nof not working outside the government is indicated by the salaries which\nindividuals received immediately upon departure. The table below sets\nforth a comparision by branch of the average annual salary that respon-\ndents who departed government employment received just prior and\nimmediately following the transition:\nAVERAGE ADJUSTED SALARIES OF DEPARTEES\nLAST SALARY\nPRIOR TO\nFIRST JOB\nDEPARTURE FROM\nAFTER\nPERCENT\nGOVERNMENT\nGOVERNMENT\nCHANGE\nExecutive I-V\n$26,200\n$48,900\n87%\nJudicial\n$24,700\n$45,500\n84%\nLegislative\n$30,800\n$41,400\n34%\nThese data tend to support the conclusion that the relative financial\nburden falls most heavily on the members of the Judicial and Executive\nBranches while the opportunity cost of serving in the Legislature appears\nto be significantly less.\n8\nA summary comparison of the percentage changes in adjusted salary\nexperienced by respondents in each of the three branches at the time of\nentry and deparlure is sel forth below.\nPERCENT CHANGES IN ADJUSTED INCOME\nPERCENT OF GAIN\nPERCENT CHANGE\nIN ADJUSTED\nIN ADJUSTED\nSALARY AT\nSALARY AT ENTRY*\nDEPARTURE*\nExecutive Level I-V\n-23%\n+87%\nJudicial\n-33%\n+84%\nLegislative\n+ 2%\n+34%\nFor incumbents and departees (all acceptees) (salary just\nbefore government compared to first government salary).\nFor departees only - last government salary compared to\nfirst salary after government.\nSelling aside the political and psychological aspects, whose consequences\nwe have said we are pleased to delegate to others, we believe all these\ndata have a good deal to say about the notion of fixed linkages among the\nbranches. Dr Weber shares our view:\nThe automatic linkage of salary increases for federal executives,\nmembers of the judiciary, and legislators should be closely reviewed.\nThe analysis indicates that the three categories are distinguishable\nin lerms of career and earnings patterns. Effective compensation\npolicies should take account of these differences. For example, the\nsample data reveal that, on average, Federal executives and judges\nincur a significant reduction in income when they assume positions\nwith government, but that legislators experience a slight increase.\nUniform treatment of the three categories may accommodate the needs\nof attraction and retention for one group, but not the other two.\nBefore moving lo the actual question of salary increases, we believe,\nMr. President, there are a few specific matters which must be raised.\n9\nPENSION COSTS\nThis is an enormously important subject and a troubling one to this\nCommission. We are troubled by the enormous unfunded costs and what\nwe believe is not adequate understanding of this melancholy fact by too\nmany legislative and executive officials and most certainly by the public.\nWe are troubled that true future pension costs are not built into our\nbudget calculations and projections. We are troubled that the outside\nstudies of these pensions are not adequate. These are some of the\nreasons we assign pensions a very high priority on the agenda of an\nexpanded quadrennial commission.\nWe must lake cognizance as well of the substantial differences among the\nBranches in pension benefits and employee contributions.\nThis is particularly true for the Federal judiciary. Judges get 100% of\nfinal pay but make no contribution. Were it not for this difference, we\nwould have been inclined to propose larger salary increases for the\njudiciary - because theirs is a long-term career position, not an\ninterlude; and the evidence is overwhelming that Federal judges can earn\nmore in the private sector, and the evidence, as well as the public,\ngenerally is substantially more supportive of higher salaries for the\njudiciary. The Commission notes that although Federal judges receive full\npay throughout retirement, the great majority nevertheless continue to\nperform judicial duties during that time.\nThere is also some specific short-term salary relevance to a pension\nrecommendation we make in the next section: namely, that members of\nExecutive Levels I-V, given the temporary nature of their service, be\npermitted to defer contributions to the pension plan until the fifth\nanniversary following appointment. This is a recommendation that costs\nthe taxpayer nothing; indeed it saves the taxpayer money in that it would\nbe a form of salary relief.\nWe asked Dr. Weber if and how this recommendation would square with his\nstudies and the comment in his report speaks for itself.\nSome salary relief can be provided by raising the effective adjusted\nsalary of Federal employment by permitting incumbents the option of\nchoosing to substitute cash for fringe benefits. This may help the\n\"cash flow\" problem associated with extended tenure in Federal\nemployment and lessen the depletion of resources associated with\nlong periods of government service.\n10\nThere are also two areas of expenses not now adequately provided for\nwhich we believe operate as a deterrent to attracting top quality people\nwho do not have independent means to government service. These are (I)\nrelocation costs, and (2) two-residence requirements for Members of\nCongress.\nRELOCATION COSTS\nProblem\nNewly appointed members of the Executive Branch and newly elected\nCongressmen are required to pay their own relocation costs. The\nCommission believes that this burden is unfair and may inhibit the\ngovernment's ability to recruit those with a limited net worth.\nEmployees in the private sector are normally eligible for relocation\nassistance. The same is true only of \"critical skill\" government\nemployees. General government employees receive no relocation\nassistance. The chart below illustrates this disparity.\nNEW HIRE MOVING AND LIVING REIMBURSEMENT\nPRACTICES IN THE PRIVATE SECTOR AND GOVERNMENT\nPRIVATE\nPRACTICE\nSECTOR*\nFEDERAL GOVERNMENT\nGeneral\nCritical Skills\nEmployees\nEmployees\nHousehunting Trip(s)\n77 %\nNo\nNo\nShipment of Household\n100 %\nNo\nYes\nTravel Expense to\n99 %\nNo\nYes\nNew Location\nTemporary Living\n90 ₒ %\nNo\nYes\nat New Location\nSurvey of 320 companies.\nCritical Skills,\" i.e., manpower shortages in\nspecialized fields designated by the U.S. Civil\nService Commission.\nConsistent with the Commission's view that government salaries for top\nofficials should be lower than those in private industry but also consistent\nwith its view that government employment must be made attractive to\nthose without significant resources, these allowances are needed and we\nbelieve can be easliy justified to the public.\n11\nRecommendation\nEach newly elected Member of Congress and each newly appointed\nexecutive should be reimbursed toward relocation costs providing that his\nor her present residence is outside of the Washington, D.C. metropolitan\narea or the city to which the official is assigned. The allowances should\nbe as follows:\nTransportation and temporary storage of household goods with\na maximum weight of 11,000 pounds.\n-\nSubsistence and travel to the location of the new post for the\nappointee and eligible family members and dependents as\ndefined in the Federal Transportation Regulations.\nSubsistence while occupying temporary quarters awaiting\npermanent housing.\nTWO RESIDENCE REQUIREMENTS FOR MEMBERS OF CONGRESS\nProblem\nPublic law requires that each member of the Senate and House of\nRepresentatives maintain a \"residence\" in his District. Beyond this,\nmany legislators have told us their constituents much prefer that they be\ntaxpaying property owners so they can better understand local tax\nburdens. Their duties require their presence in Washington with the\nresulting need for two residences. While we know that some Congressmen\nmaintain only a mailing address in their home District, it is nonetheless\ntrue that these requirements impose general burdens that are unique to\nCongressmen, particularly those with limited outside means. The burden\nhas been increased in recent years by the virtually continuous time\nCongress has remained in session.\nIt is estimated that approximately 80% of the members bring their families\nto Washington. Most of the remaining 20% live in single-room/efficiency\ntype accommodations.\nThe Commission believes that these circumstances not only impose an\nunfair financial burden on the members but also work to the detriment of\nthe interests of their constituents. The emotional pressures created by\neither the financial drain or the separation from family or the less\nfrequent exposure to their constituents are surely counterproductive.\n12\nRecommendation\nEach Member of Congress should be eligible to receive up to $5,000\npayable annually as an allowance toward the extra costs imposed as a\nresult of the requirements that a residence be maintained in both\nWashington and the home District, provided that such payments shall be\nsupported by evidence of the actual maintenance of two residences.\nAlternatively, the concept of the current tax deduction for traveling\nexpenses could be expanded to include the expense of two residences,\nprovided the expenses are actually incurred. On this basis, the present\ntax deduction of $3,000 should be increased to $8000. The $3,000 amount\nwas set in 1952 and has become inadequate.\n(It is the Commission's understanding that the Bureau of Labor Statistics\nhas undertaken a study that will identify housing costs at salary rates\nconsistent with Congressional earnings.) We are confident from our\nexperience with rental properties that reasonable accommodations could\ncost at least $5,000 annually.\nCOST OF LIVING - WHY ISN'T $44,000 A YEAR PLENTY?\nIt is not only Members of Congress - although they feel it most keenly -\nwho are aware of the substantial feeling throughout the country that\nthere is something wrong with people who cannot live adequately, indeed\ngraciously, on $44,000 per year. Members of this Commission, some of\nwhom either live or have lived in places like Billings, Montana or\nKearney, Nebraska or Prescott, Arizona hear this persistent question\noften.\nThe argument must be met, and while the answers may not arouse much\nsympathy or even understanding, fairness requires that certain obvious\nideas be set forth clearly.\n1. The quality of person we all seek to attract to Washington - in\nany branch - will almost certainly have achieved or expect to\nachieve a higher degree of success than the average person in\nhis or her field, and will have established an equivalently\nhigher standard of living. No member of the Commission\nquarrels with the principle that some financial sacrifices are\nappropriately required from the government executive, but the\nhuman condition being what is is, we appreciate that the\nfinancial disadvantage an executive, legislator or judge is\nwilling to assume will be at best a relative thing.\n13\nThus, unless we are ready to say that we want our top officials\nlo earn no more than the average salary of all Americans, we\nmust set higher levels - and the only question is how high must\nwe go to obtain and keep them? Put another way, what is the\nleast we can pay to achieve this purpose? We must point out\nthat assuming a Federal budget of more than $400 billion, the\nimpact of the total salaries we are proposing (including the\nmajor portion of the effect on the unfreezing of salary rates\nwarranted to those in GS 16 through 18 several years ago, but\nnever paid) comes to about $130 million, or three one-\nhundredths of one percent (.03%). If the result is even a\nslight margin of improvement in the quality and retention of\nable officials, the return to the nation should far exceed that\ncost.\n2.\nWe believe that no fair assessment of Federal compensation can\nbe undertaken without some understanding of the relationship\nof the cost of living in Washington, D.C. to other cities in the\nnation. A survey of comparative costs comparing Chicago,\nOmaha, Des Moines, and Atlanta, while the data are far from\ncomplete, suggests a higher cost in Washington of some 20-30%.\n(This does not of course include the cost of private higher\neducation - or secondary education either.)\nIn this same connection, the following figures in the area of\nhousing are instructive. These are average prices of the\nhouses sold by a national real estate firm in various cities\nacross the country.\nRANKED BY AVERAGE HOME PURCHASE PRICE\n(FIRST NINE MONTHS - 1976)\nAVERAGE HOME\nAREA\nPURCHASE PRICE\nINDEX\nWashington, D.C.\n$68,400\n(1.00)\nSan Francisco\n59,600\n(0.87)\nChicago\n57,600\n(0.84)\nAtlanta\n55,700\n(0.81)\nMinneapolis\n55,400\n(0.81)\nLincoln\n54,900\n(0.80)\nOmaha\n44,800\n(0.65)\nDes Moines\n34,100\n(0.50)\n14\nNOTE: It is clear that even this limited sample suggests that\nthose moving to Washington experience significantly higher\nhousing costs. The difference may be even greater than that\nshown since those who come for a limited stay may be expected\nto be forced to make rapid decisions - given the time pressures\nof the new assignments.\nBut beyond this static picture at a given moment, we have the even more\ndifficult problem of what to do about future levels of inflation.\nANNUAL COST OF LIVING ADJUSTMENTS\nThe Commission has been offered probably nearly every point of view\navailable with regard to how to handle periodic cost of living adjustments.\nWe are impressed with the argument that the current crises in which we\nfind ourselves has come about largely because of the absence of such\nadjustments.\nWe are also mindful of the potential negative impact on incumbents,\npotential government officials, and those \"frozen\" at the top of the\nGeneral Schedule if the prognosis for future adjustments is as dim as the\nrecord of the past eight years.\nThus, we have no problem accepting Dr. Weber's conclusion, at least as a\nrational objective, \"systematic, periodic adjustments in the salary levels\nof Federal executives (and judges) probably will have a positive influence\non the decision to accept and remain in Federal service.\"\nOur difficulty, of course, is with the means, but not the end, by which\nsuch adjustments could be made. Among the public's frustrations we\nknow of, none that ranks higher than inflation. And we know of no\nproblem which the public is more likely to blame on government spending\nand therefore the Congress and Executive Branch. The idea that\nCongress would be willing to support the notion that the rest of the\ncountry suffers the ravages of inflation, but that its members have a kind\nof inflation insurance, protected from the very disease that it is believed\nlo have created is not one whose time has come.\n15\nIt is virtually inconceivable to us that Congress would not insist on\nexplicit voting on this issue whenever the question of the cost of living\nadjustment would arise. Quite apart from the self-serving aspects (or\nperhaps we should say self-destructive aspects) of this kind of automatic\ncost of living adjustment, it would be perceived as a bad example to the\nresl of the country, particularly when we remember that the Council on\nWage and Price Stability reports that only about 10% of all workers are\ncovered by such clauses in a contract, and, in any event, these\nescalation clauses over the period 1968 to 1974 provided only about half of\nthe rise in the cost of living during the period.\nOne could imagine a scheme whereby such a cost of living adjustment\napplied to the branch of government that might be said to have had the\nleast impact in causing inflation, the judiciary. Again, given our system\nof equal but separate branches, and the example it would set at very high\nlevels of government to the public at large, we think this would also be\ninappropriate.\nThus, we conclude that the most practical approach to cost of living\nadjustments would be a permanent commission making recommendations as\nappropriate to the President, but at the very least, of course, once every\nfour years.\nSALARY RECOMMENDATIONS\nIf our logic has been valid and our factual base sound, our\nrecommendations should not require major exposition. (Our\nrecommendations for specific salary adjustments are set forth in tables at\nthe end of this section.)\nThus, we will only in a summary way review the high points and let the\nnumbers speak for themselves.\n1. As a group, we have recommended the highest level of\nincreases for the judiciary. We shall not over-elaborate the\nreasons: the judges have made, or at least want to make, a long\nterm career decision, there is no opportunity to \"recoup\" later\non and this group foregoes more outside earning opportunity\nthan any other in Federal service. The strains of the past\nseven years are beginning to show, not only in the upper ranks\nof the Federal judiciary but even more in the Federal\nBankruptcy Courts where 18 resignations in the past two years\nappear to be related to money problems. Finally, all of our\nstudies and other research tell us the American public is most\nsupportive of the highest possible quality in the judiciary, and\nis quite prepared, we believe, to pay for it.\n16\n2. Throughout the three branches, we have proposed substantially\nhigher rates of increase at the lower levels than at the higher\nlevels. First, it is at these levels that the most serious problem\nbecomes the maintenance of a minimum acceptable standard,\ntaking into account that the employee will accept a reduction\nfrom his previous income but not one that seems unreasonable,\nconsidering the likelihood that the salary will not be increased\nsignificantly during the term of employment and that increases\nwhich might otherwise be expected \"on the outside\" must be\nforegone. Equity and the needs of the government require that\nthese lower-level executives get the larger increases. Beyond\nthis, the psychic rewards at the higher (i.e., Cabinet) levels\nare of such a magnitude that we cannot persuade ourselves that\nequivalent increases are necessary to attract and retain persons\nof the highest quality.\nThe American people, under the best of circumstances, will\nhave trouble assimilating this large overall increase at one time.\nThe educational task will be easier if it can be understood that\nthe most senior officials of all three branches were willing to\nsacrifice in relation to their equally hard working but less\nhonored colleagues. With the thought that it might cushion the\nshock, we explored the option of phasing these recommenda-\ntions in over a period of years. We have rejected this course\non two grounds: one of equity (this increase has already been\npostponed too long), and one of pragmatism (some have\nexpressed fears that attempts would be made in future years to\nrescind the subsequent phases), perhaps under the threat of\npopular retaliation at a time of increased \"anti-government\"\nfeeling. The case for these increases can be made, clearly and\nconvincingly, but it need and should only be made once.\n17\n3.\nOne cannot fail to notice that we recommend that the Cabinet\nlevel posts receive a smaller increase than any others. In some\nways, this reflects years of what one might consider relative\nover-compensation in relation to Levels II-V in the Executive\nBranch. The current differential between Executive Levels I\nand Il cannot be justified on any ground we have heard. The\nCabinet Secretary takes the job for what he knows is a limited\nperiod. The psychic rewards are high. The later alternatives\nin the private sector are nearly always enlarged and enhanced,\nand indeed are probably better than they would otherwise have\nbeen. Finally, we have little doubt that at $67,500 a President\nwould be able to attract and retain very high quality\ncandidates. While this breaks the \"linkage\" with Supreme\nCourt Justices, we have spelled out why we believe the job and\ncareer circumstances are fundamentally different.\n4.\nAs to the relationship among the salary levels of the Vice\nPresident, the Speaker, and the Chief Justice, the increases we\npropose maintain the relationship whereby all are paid at the\nsame salary level. We saw nothing to be gained by changing\nthese historical relationships and took note of the differences in\nthe living and expense allowances in the case of the Vice\nPresident.\n5.\nWith respect to Congress, the increase in salary allowance is\nslightly less than average but still a substantial 28.9%. We\noffer these thoughts - first of all, we should remember that we\nare proposing that the Congress eliminate most outside earned\nincome, honoraria, and legal fees that many now earn. Thus,\neven assuming, Mr. President, you accept our recommendation\nto provide a housing allowance, the actual increase is less than\nfor other groups. We have had extensive consultations with\nCongressional leaders on this matter and they have widely\nindicated to us a strong desire to be conservative on matters of\nmembers' pay. Given the statutory requirement that the\nComptroller General be at so-called Level II ($60,000), any\nanomaly created by the fact that this employee of the Congress\nis making more than its members should take into account the\nrecommended Congressional housing allowance.\n18\n6.\nIt should be noted that our Level V recommendation of $49,000\nstill will result in some compression (through much reduced - to\n2, 485 employees from the current number of 20,365 - and all\nconfined to GS 18 and the upper steps of GS 17).\nOur reasoning is as follows: we are not at all offended by some\ncost discipline and pressure of Level V rates on the super\ngrades. It is here that the cost exposures are greatest (over\n70% of the total cost of our proposed increases). It is also here\nthat the Commission has the least faith in the system's ability to\nmeasure need and worth. Too many experts have also\ncautioned us to be sure that these comparability studies give\nfull weight to the costs of generous fringe benefits, such as the\nearly retirement feature of the pension plan. This question\nabout the super grades is a worthy one for the quadrennial\ncommission whose creation we are recommending.\nIn the meantime, our interviews with those at high levels of the\nbureaucracy suggest that neither this income nor the slight\ncompression remaining will present a serious problem.\nThe tables on the following pages, Mr. President, represent the results of\nour deliberations on salary recommendations.\nTable 1 - Illustrates the salary relationships we recommend among the\ndifferent levels in each of the branches.\nTable 2 - Sels forth our specific recommendations for salary adjustment\nfor each position.\nTable 3 - Presents estimates of the cost of implementing these salary\nrecommendations - including the cost of both the specific salary increases\nand also the related effect of raising the ceiling on the \"compressed\"\nsalaries in the General Schedule and the associated groups of Federal\nemployees.\nTable 4 - Provides a comparison of the population of Federal employees\npresently affected by compression with the reduced population which\nwould still be compressed at the recommended levels.\n19\nTABLE 1\nCOMMISSION ON EXECUTIVE, LEGISLATIVE AND JUDICIAL SALARIES\nRECOMMENDED PAY RELATIONSHIPS OF TOP FEDERAL OFFICIALS 1\n(Selected Positions - See Table 1 for all Positions)\nEXECUTIVE\nLEGISLATIVE\nJUDICIAL\nSALARY\n($000)\n80\nVice President-$80,000\nSpeaker of the House - $80,000\nChief Justice - $80,000\n[3.2%]\n78\nAssociate Justice-$77,500\n76\n74\n[18.5%]²\n72\n[23.1%]\n[19.2%]\n70\n68\nLevel I - - $67,500\n66\nPres. Pro-Tem, Maj & Min\nCircuit Judge - $65,000\nLeaders - $65,000\n64\n[12.5%]\n[4.8%]\n62\n[8.3%]\nDistrict Judge - $62,000\n60\nLevel II - - $60,000\nComptroller General - $60,000\n[4.3%]\n[8.8%]\n58\n[5.3%]\nCongress - $57,500\n[0.9%]\nLevel III - $57,000\nAsst. Compt. Genl. - $57,000\nDirector, Admin, Ofc of\n56\nCourts - $57,000\n[7.5%]\n[7.5%]\n[7.5%]\n54\nLevel IV - $53,000\nLibrarian - $53,000\nBankruptcy Judge - $53,000\n52\n[8.2%]\n[8.2%]\n50\nLevel V - - $49,000\nDeputy Librarian - $49,000\n48\n46\nFOOTNOTES:\n1\nRecommended salaries and inter-level pay differentials.\n2\nPercentages in brackets are the inter-level pay differentials.\nTABLE 2\nCOMMISSION ON EXECUTIVE, LEGISLATIVE AND JUDICIAL SALARIES\nRECOMMENDED SALARY LEVELS\nPRESENT\nRECOMMENDED\nPERCENT INCREASE\nVice President\n$65,600\n$80,000\n22.0%\nChief Justice\n65,600\n80,000\n22.0%\nSpeaker of the House\n65,600\n80,000\n22.0%\n75\nAssociate Justice\n63,000\n77,500\n23.0%\nExecutive Level I\n63,000\n67,500\n7.1%\nPresident Pro-Tem, Majority and Minority Leaders\n52,000\n65,000\n25.0%\nJudges - Circuit Courts of Appeals\n44,600\n65,000\n45.7%\nJudges - Court of Claims\n44,600\n65,000\n45.7%\nJudges - Court of Military Appeals\n44,600\n65,000\n45.7%\nJudges - Court of Customs and Patent Appeals\n44,600\n65,000\n45.7%\nJudges - U.S. District Courts\n42,000\n62,000\n47.6%\nJudges - Customs Court\n42,000\n62,000\n47,6%\nJudges - Tax Court\n42,000\n62,000\n47,6%\nExecutive Level II\n44,600\n60,000\n34.5%\nComptroller General\n44,600\n60,000\n34.5%\nSenatore, Representatives, Resident Commissioner of Puerto Rico\n44,600\n57,500\n26,9%\nExecutive Level III\n42,000\n57,000\n35.7%\nAssistant Comptroller General\n42,000\n57,000\n35,7%\nDirector - Administrative Office - U.S. Courts\n42,000\n57,000\n35.7%\nExecutive Level IV\n39,900\n53,000\n32.8%\nGeneral Counsel - GAO\n39,900\n53,000\n32,8%\nLibrarian of Congress\n39,900\n53,000\n32.8%\nPublic Printer\n39,900\n53,000\n32.8%\nArchitect of the Capitol\n39,900\n53,000\n32.8%\nCommissioners - Court of Claims\n37,800\n53,000\n40.2%\nDeputy Director - Administrative Office - U.S. Courts\n37,800\n53,000\n40.2%\nBankruptcy Judges (full time)\n37,800\n53,000\n40,2%\nExecutive Level V\n37,800\n49,000\n29.6%\nDeputy Librarian of Congress\n37,800\n49,000\n29.6%\nDeputy Public Printer\n37,800\n49,000\n29.6%\nAssistant Architect of the Capitol\n37,800\n49,000\n29.6%\nBankruptcy Judges (part time)\n18,900\n26,500\n40.2%\nBoard of Governors, U.S. Postal Service\n10,000\n10,000\n0%\nTABLE 3\nCOMMISSION ON EXECUTIVE, LEGISLATIVE AND JUDICIAL SALARIES\nESTIMATED COST OF SALARY RECOMMENDATIONS\nI. OFFICIALS WHOSE SALARIES ARE DETERMINED PURSUANT TO THE COMMISSION'S RECOMMENDATIONS\nCURRENT\nCOST OF\nNEW\nEMPLOYEE\nSALARY\nSALARY\nSALARY\nPERCENT\nGROUP\nPOPULATION\nCOSTS\nINCREASES\nCOSTS\nINCREASE\nEXECUTIVE\n865\n$ 34,663,300\n$ 10,977,200\n$ 45,640,500\n31.7%\nLEGISLATIVE\n550\n24,538,900\n7,099,600\n31,638,500\n28.9%\nJUDICIAL\n1,081\n43,841,900\n19,472,100\n63,314,000\n44.4%\nTOTAL\n2,496\n$103,044,100\n$ 37,548,900\n$140,593,000\n36.4%\nII. FEDERAL EMPLOYEES -- WITH SALARIES LIMITED BY EXECUTIVE LEVEL V --\nCURRENT\nCOST OF\nNEW\nEMPLOYEE\nSALARY\nSALARY\nSALARY\nPERCENT\nGROUP\nPOPULATION\nCOSTS\nINCREASES\nCOSTS\nINCREASE\nGENERAL\nSCHEDULE &\n20,365\n$806,479,000²\n$ 80,942,222³\n$887,421,222\n10.0%\nEQUIVALENTS\nNOTE:\n1 2,485 employees in this group will still be affected by salary\ncompression, up to a maximum of approximately $5,400. See\nTable 4 for further detail.\n2 Rounded data.\n3\nThe annual cost of additional Federal pension liabilities will be\napproximately $11,032,000.\nThe tables below present a comparison of the population of\nFederal employees affected by salary compression (I) at the\npresent salary levels (Level V at $39,600) and (II) at the\nrecommended salary levels (Level V at $49,000).\nTABLE 4\nCOMMISSION ON EXECUTIVE, LEGISLATIVE AND JUDICIAL SALARIES\nFEDERAL EMPLOYEE POPULATION AFFECTED\nBY COMPRESSION\nI. At Current Level -- Executive Level V and at $39,600 --\nGS GRADE\nGENERAL\nFOREIGN\nVETERANS\nMILI-\nPL 313\nGENERAL\nALL\nOR EQUIV\nSCHEDULE\nSERVICE\nADMIN.\nTARY\nTYPES\nGRADES\nOTHERS\nTOTAL\n15\n8,537\n1\n2,783\n124\n0\n350\n398\n12,193\n16\n3,309\n881\n22\n31\n881\n398\n154\n5,676\n17\n990\n0\n26\n0\n264\n158\n46\n1,484\n18\n348\n455\n6\n5\n93\n89\n16\n1,012\nTOTAL\n13,184\n1,337\n2,837\n160\n1,238\n995\n614\n20,365\nIII. At Recommended Level -- Executive Level V at $49,000 --\nGS GRADE\nGENERAL\nFOREIGN\nVETERANS\nMILI-\nPL 313\nGENERAL\nALL\nOR EQUIV\nSCHEDULE\nSERVICE\nADMIN.\nTARY\nTYPES\nGRADES\nOTHERS\nTOTAL\n15\n0\n0\n0\n0\n0\n0\n0\n0\n16\n202\n0\n10\n31\n54\n31\n9\n337\n/\n17\n752\n0\n26\n0\n201\n122\n35\n1,136\n18\n348\n455\n6\n5\n93\n89\n16\n1,012\nTOTAL\n1,302\n455\n42\n36\n348\n242\n60\n2;485\nRECOMMENDATIONS - PART III\nA New Concept of a Quadrennial Commission -\nA Four Year Term and A Full Agenda: Recommendations in\nOther Areas - Pensions - Life Insurance - Job Classifications\nThis Commission - particularly during the short term of its existence - is\nalmost overwhelmed by the number of compensation issues which are not\nreceiving objective or coherent review. This is hardly surprising, since\nwe are dealing with the world's most complex manpower structure.\nThe threshold question - one which concerns the Members of Congress\nnot quadrennially, but bi-annually - is this, and it is asked insistently,\none imagines, wherever Americans gather to discuss public matters: \"Who\nelse do you know - or what other group is there - whose members vote\ntheir own salary?\" The question, of course, has larger implications than\nthose relating lo congressional pay and benefits. It could be as easily\nphrased: \"Is il appropriate to rely on government personnel to review\ntheir own compensation structures?\" We think the answer is properly in\nthe negative.\nThus, we believe the concept of a permanent quadrennial commission, of\nprivate citizens, has a much broader applicability than the present\nsyslem, which calls only for review once every four years of only one\nrelatively narrow portion of the compensation package - salaries.\nIn addition, the Commission believes that a predominantly private sector\nstaff could add substantially to both the objectivity and therefore the\ncredibility of the periodic analysis of the total, \"whole\" Federal\ncompensation process.\nThere is a variety of issues which a permanent commission could seek to\nresolve. There is, for example, a lack of coherence in the compensation\nprogram across the spectrum of all three branches - a lack of coherence\nwhich would be unacceptable within any moderately well-run private\nbusiness enterprise. Later in this section of the report, we will attempt\nto illuminate and amplify some of the specific problem areas which could\nwith great profit lo the nation form part of the agenda of a four year\ncommission.\nRECOMMENDATION\nA new quadrennial commission should be appointed to a four-year term.\nIl should be supported by an Office of Personnel Management. The\nsupport office should have the following characteristics:\nI. Mission\nTo advise the quadrennial commission on defined personnel\nmatters relating to the executive, legislative, and judicial\nstructure, and on the relationship to General Schedule grades\n16, 17, and 18.\n11. Organization\nA. Report to the chairman of the commission.\nB. Draw executive director from the private sector (four year\nterm).\nC. Have limited permanent government staff.\nD. Have advisory committee composed of private sector\ncompensation and evaluation executives (two year term).\nE. Have advisory group composed of representatives of the\nChief Justice, the Executive, and Legislative Branches\nand the Civil Service Commission.\n111. Responsibilities\nA. Provide staff support to the commission.\nB. Advise the commission on an annual basis on the\ndesirability of applying the annual comparability (cost of\nliving) increase to the various levels and/or groups within\nits area of responsibility.\nC. Submit an annual report of the \"State of the System\" to\nthe commission.\nD. Conduct appropriate salary surveys (to be done by\nindustry advisory committee).\n2\nE. Establish and maintain a data base for tracking\ncompensation information in all sectors of the economy.\nF. Within one year from date of appointment, recommend a\npay system which provides some recognition for\nindividual performance. (The Commission was distressed\nto see how automatic the promotion and pay increase\nsystems were - which is to say how often they seem to be\nbased on seniority rather than performance. For example,\nwhen we tried to find out whether we were losing a higher\nproportion of the outstanding people, we found there was\nno way to identify who the outstanding people were.)\nG. Monitor and recommend approval of the relevant job\nclassifications in the Executive Levels and consult with the\nCivil Service Commission on the classifications and\norganization patterns in grades 16, 17, and 18.\nH. Within one year from date of appointment, make\nrecommendations on an improved classification system. In\nmaking this study, the Commission recommends the Office\nof Personnel Management give serious consideration to the\nso-called \"broad band\" approach previously examined by\nthe Civil Service Commission. Under this concept, grades\n16, 17, and 18 are merged into one group. The average\nper capita salary for an agency would be budgeted at a\nspecified level, and then within certain limits, individual\nsalaries could be set at the discretion of the agency head.\n3\nIMMEDIATE TASKS FOR A NEW PERMANENT COMMISSION\n1.\nPENSION BENEFITS (see Appendix for Commission studies)\nThere are now 5I separate employees' retirement systems in the\nFederal Government. Benefits vary (e.g., for 35 years of service at\nage 65, 64% of final salary for Executive Branch employees, to 77% of\nfinal pay for Members of Congress, to 100% of final salary after ten\nyears of service at age 70 for the Federal judiciary). Employee\ncontributions vary (e.g., from 8% of gross salary in Congress to 7%\nin the Executive Branch to no contribution at all in the judiciary,\nexcept for 4.5% to an annuity system for survivor benefits).\nLegislative committee jurisdiction varies. And because these pension\nprograms - all within the Federal Government employee system - are\noperated independently rather than on an integrated basis,\nindividuals are able to draw pensions from one plan (or more) while\ndrawing a full salary from another source within the same\ngovernment. This \"double-dipping\", as it is called by critics of the\nsystem, is a fruitful source of discontent for those citizens who\nobserve from outside the government - but not outside the tax\npaying public.\nUnder all these circumstances, we should not be surprised at the\nlack of coherence - or even the lack of a rationale. But there are\nfar larger issues at stake here than mere symmetry. There is the\ncrucial question of costs, for example. Who, when it comes to\nfunding, is watching the store?\nOn the funding issue, the Commission asked a panel of private sector\nexperts to work with the Civil Service Commission to determine the\ndegree of funding which would be required to fund Federal pension\nobligations at the same rate as leading American companies fund their\nsystems.\n4\nWhile it is true that different experts may make different\nassumptions about future funding arrangements, we were stuck by\nthe narrow range of estimates within which our private sector expert\nanalysis fell. For example: current funding as a percentage of\npayroll should be between 33% and 40% (two to three times the rate in\nprivate industry); that present unfunded Federal pension liabilities\ntotal approximately $107 billion and that the generous 20-year early\nretirement program has led to the anomalous combination of high\ncosts and high exit rates.\nWe have, in the course of our work on this issue, asked a few key\nmembers of both Houses if they were aware of these huge future\npension costs, and the surprised responses have left us far from\nreassured. It is safe to assume that if this knowledge is not\nwidespread in Congress, neither is the country aware of the size of\nthese future obligations. The New York City analogy should not\nescape us.\nWe should ask as well whether the pension costs are fully considered\nwhen \"comparability\" is regularly assessed. From what the\nCommission has been able to determine in the short time available, it\nseems unlikely.\nAll this suggests that high on the agenda of the new full-time\nquadrennial commission should be a full review of all Federal pension\nprograms, and whether the idea of such a permanent commission is\nadopted or not, the President should now ask for a review of several\ncritical pension issues:\nA. Variation in benefit levels and employee contributions - in all\nthree branches and within the branches.\nB. Cost assumptions - The current method of assuming stable cost\nprojections in a time of steadily rising prices seriously under-\nestimates, in our view, the future costs.\nC. The early retirement program - its benefit levels, its cost and\nits overall effect.\nD. How these pension costs should be reflected in both budgeting\nand funding procedures and how t' ey should be communicated\nto the Legislative Branch - and, to be sure, to the people.\n5\nContribution to Pension Costs of Executive Levels I-V\nWe feel we know enough already, however, to make one\nrecommendation for modifying pension funding for those at Executive\nLevels, which would have an immediate favorable impact on \"whole\ncompensation\" levels at no cost to the public. The Weber-\nYankelovich study makes it clear that many people in these posts\ncomplain of a cash flow deficit while in government service, and a\npostponement of entry into the system would relieve some of this\npressure and would, in any event, be only fair.\nCurrent administrative provisions require that Executive Branch\nofficials immediately, upon appointment, begin making a contribution\nof 7% of their salaries, after tax, to a pension fund. Judges do not\nmake contributions at all, and Members of Congress may, with\ncertain limitations, delay making payments until they wish to enter\nthe plan, at which time they may make a lump sum payment,\nincluding interest. This provision for Congress, which the\nCommission believes to be wise, recognizes the inherent unfairness\nin requiring those whose tenure in government is likely to be brief\nto make immediate contributions, with the consequent negative effect\non the individual's cash flow.\nStudy shows that the current average tenure for Members of\nCongress is approximately ten years. Tenure for those in the\nExecutive Branch is less than three years. It appears obvious that\nthe deferral option should be made available to the Executive\nBranch.\nRecommendation\nEach such executive should be permitted to defer contributions to\nthe pension fund until the fifth anniversary date following the initial\nappointment. The contribution should include appropriate interest\npayments.\nA note of caution is required. \"Late funding\" must be limited to\ncertain Executive Level positions which have historically involved\ndemonstrably brief tenure. If it is extended to all employees, it will\nfurther damage the already weak pension plan funding base.\n6\n2.\nLIFE INSURANCE BENEFITS\nSome Illustrative Problems:\n-\nThe current level of life insurance provided to government\nemployees by industry standards is inadequate. Most major\ncompanies provide two to three times earnings as insurance,\noften at no cost to the employee, versus about one time\ncoverage in the government. Not only do government\nemployees contribute to the insurance, but the cost per\nthousand is extremely high.\n-\nThe failure to require employees who retire early to continue to\ncontribute to the cost of full insurance coverage until at least\nage 65 imposes an unfair cost burden on active individuals.\n-\nCongress typically votes to give the surviving spouse of a\nCongressman an additional year's pay. This is not the case\nwith members of other branches. The judiciary continues to\nfeel that its joint survivor benefits are not adequate in spite\nof the recent legislation on this matter.\nAs in other aspects of the Federal compensation program, the\ncoherence of the insurance program throughout the Federal system\nwould benefit from a system-wide review by the staff of the\npermanent quadrennial commission.\nThe Commission believes that even its cursory examination supports\nthe following recommendations:\nA. Increase normal coverage from one to two times earnings.\nB. Establish a maximum insurance level.\nC. Continue premium payments by all participants until age 65 or\nuntil the coverage drops to the post-retirement level.\n7\n3.\nCLASSIFICATION OF POSITIONS IN EXECUTIVE LEVELS\nVirtually every government executive to whom the Commission spoke,\nincluding those in all three branches of government, expressed the\nview that the present process of assigning jobs to levels is\ninadequate. The reasons offered for this inadequacy were as\nfollows:\nA.\nThe lack of a strong central control. This lack affects not only\nnew jobs, but makes it almost impossible to re-evaluate\npreviously established jobs where the work's content has\neroded.\nB. Job classifications have been created without adequate\noverview. It appears clear that some of the newer and more\nvisible agencies and organizations, such as HEW and EPA, have\nreceived more favorable treatment than some of the more mature\nagencies, such as Defense.\nBased on the testimony which the Commission received, it carried out\ntwo studies. By necessity, these studies were not comprehensive.\nOne focused on Levels 1, II, III, and IV. The other dealt with\npositions in Level V and General Schedule grades 16-18. Both were\nconducted by private sector specialists. A summary appears below:\nTotal Judged\nNumber of\nTo Be\nJobs\nNumber\nNumber\nImproperly\nLevel\nExamined\nToo Low\nToo High\nClassified\nII\n7\n2\n4\n6\nIII\n3\n-\n3\n3\nIV\n6\n-\n4\n4\nV\n13\n-\n2\n2\nGS-18\n15\n1\n7\n8\nGS-17\n7\n1\n1\n2\nGS-16\n11\n-\n2\n3\nTotal\n62\n4\n23\n27\nWhen we remember that there are 5,144 jobs and we have sampled\nonly 62 of these, it should not be concluded from the data shown\nabove that the Commission believes that they are representative of\nall of the jobs. Neither should it be concluded that the Commission\nsupports all of the individual task force recommendations on\nclassifications. Rather, one should conclude that brief examinations\nof a small number of selected jobs were sufficient to verify the\nexistence of a problem of significant magnitude. The problem should\nbe addressed promptly if we are to avoid further deterioration of the\nclassifications with the resultant unnecessary increase in cost.\n8\nThe Problem of Proper Job Classification - Some Illustrations of Anomalies\nThe Commission's conclusion is that a significant number of Federal\nGovernment jobs, both in the super grades and Executive Levels, are\nevaluated erroneously.\nBut this is too serious and sophisticated a matter to be evaluated by the\ncurrent Quadrennial Commission, preoccupied as it has been by coming to\ngrips with the urgent realities of the salary situation in only a few weeks'\nperiod. What follows, then, is designed to illustrate the problem, not a\nproposal to resolve it.\nPerhaps the example of the Chairman of the Federal Reserve Board will\nserve to punctuate the anomalous nature of the classification problems.\nBy any standard, the Chairman of the Federal Reserve Board has\nresponsibilities that one could argue are roughly equivalent to the\nSecretary of the Treasury. His position has many aspects of a career\njob - given the fourteen year tenure. Thus, it does not offer the\nprospect of a short government career. The internal relationships within\nthe \"government\" banking institutions are more than anomalous. They\nare incomprehensible. The President of the New York Federal Reserve\nBank is paid $97,500 versus the $44,600 Level II salary of the Chairman of\nthe Federal Reserve Board.\nAn equally irrational classification result is the enormously important job\nof Director of the Office of Management and Budget, who constantly\nnegotiates with Cabinet members on critical budget matters on behalf of\nthe President, yet is still classified as Level 11; i.e., at the level of an\nUndersecretary.\nIt can thus be seen that a permanent quadrennial commission would have a\nfull plate from which to dine. Pensions, insurance, cost of living,\nreclassification of job levels - all are illustrative of ongoing problems\nwhich directly affect salary levels, form a serious portion of \"whole\ncompensation\" and cannot be ignored for four years only to be swept\nunder the rug once again as a commission such as ours seeks to do its job\nin the allotted time. The expenditure of a few hundred thousand dollars\nis a low price to pay to bring order and coherence to a civilian pay system\nwhich costs the tax payers some $45 billion per year, and which could\nafter a few years return substantial money savings as well.\n9\nMr. President,\nWe are pleased to report that we are in unanimous agreement on our\nrecommendations, and that there are no dissents on the content of the report.\nRespectfully submitted on behalf of the Commission,\nPeter 4 Person\nPeter G. Peterson\nChairman,\nCommission on Executive, Legislative\nand Judicial Salaries\nCommissioners:\nCharles T. Duncan\nEdward H. Foley\nSherman Hazeltine\nLane Kirkland\nJoseph F. Meglen\nNorma Pace\nBernard G. Segal\nChesterfield Smith\nAPPENDIX A\nORGANIC STATUTE\nFOR THE COMMISSION ON EXECUTIVE, LEGISLATIVE,\nAND JUDICIAL SALARIES\nSection 225 of Public Law 90-206 (81 Stat. 613, 642), as\namended by section 6(a) of Public Law 91-375 (84 Stat. 719, 775),\nand section 206(a) of Public Law 94-82 (89 Stat. 419, 423) (2 U.S.C. 351-361)\nSec. 225. (a) ESTABLISHMENT OF COMMISSION. There is hereby established\na commission to be known as the Commission on Executive, Legislative,\nand Judicial Salaries (hereinafter referred to as the \"Commission\").\n(b) MEMBERSHIP --\n(1) The Commission shall be composed of nine members who shall be\nappointed from private life, as follows:\n(A) three appointed by the President of the United States, one\nof whom shall be designated as Chairman by the President;\n(B) two appointed by the President of the Senate;\n(C) two appointed by the Speaker of the House of Representatives;\nand\n(D) two appointed by the Chief Justice of the United States.\n(2) The terms of office of persons first appointed as members of the\nCommission shall be for the period of the 1969 fiscal year of the Federal\nGovernment, except that, if any appointment to membership on the Commission\nis made after the beginning and before the close of such fiscal year,\nthe term of office based on such appointment shall be for the remainder\nof such fiscal year.\n(3) After the close of the 1969 fiscal year of the Federal Government,\npersons shall be appointed as members of the Commission with respect to\nevery fourth fiscal year following the 1969 fiscal year. The terms of\noffice of persons so appointed shall be for the period of the fiscal\nyear with respect to which the appointment is made, except that, if any\nappointment is made after the beginning and before the close of any such\nfiscal year, the term of office based on such appointment shall be for\nthe remainder of such fiscal year.\n(4) A vacancy in the membership of the Commission shall be filled in\nthe manner in which the original appointment was made.\n(5) Each member of the Commission shall be paid at the rate of $100\nfor each day such member is engaged upon the work of the Commission and\nshall be allowed travel expenses, including a per diem allowance, in\naccordance with section 5703(b) of title 5, United States Code, when\nengaged in the performance of services for the Commission.\n(c) PERSONNEL OF COMMISSION --\n(1) Without regard to the provisions of title 5, United States Code,\ngoverning appointments in the competitive service, and the provisions of\nchapter 51 and subchapter III of chapter 53 of such title, relating to\nclassification and General Schedule pay rates, and on a temporary basis\nfor periods covering all or part of any fiscal year referred to in\nsubsection (b) (2) and (3) of this section--\n(A) the Commission is authorized to appoint an Executive\nDirector and fix his basic pay at the rate provided for level V\nof the Executive Schedule by section 5316 of title 5, United\nStates Code; and\n(B) with the approval of the Commission, the Executive Director\nis authorized to appoint and fix the basic pay (at respective\nrates not in excess of the maximum rate of the General Schedule\nin section 5332 of title 5, United States Code) of such additional\npersonnel as may be necessary to carry out the function of the\nCommission.\n(2) Upon the request of the Commission, the head of any department, agency,\nor establishment of any branch of the Federal Government is authorized\nto detail, on a reimbursable basis, for periods covering all or part of\nany fiscal year referred to in subsection (b) (2) and (3) of this section\nany of the personnel of such department, agency, or establishment to\nassist the Commission in carrying out its function.\n(d) USE OF UNITED STATES MAILS BY COMMISSION--The Commission may use the\nUnited States mails in the same manner and upon the same conditions as\nother departments and agencies of the United States.\n(e) ADMINISTRATIVE SUPPORT SERVICES-The Administrator of General Services\nshall provide administrative support services for the Commission on a\nreimbursable basis.\n(f) FUNCTION--The Commission shall conduct, in each of the respective\nfiscal years referred to in subsection (b) (2) and (3) of this section,\na review of the rates of pay of--\n(A) the Vice President of the United States, Senators, Members of\nthe House of Representatives, the Resident Commissioner from\nPuerto Rico, the Speaker of the House of Representatives, the\nthe President pro tempore of the Senate, and the majority and minority\nleaders of the Senate and the House of Representatives;\n(B) offices and positions in the legislative branch referred to\nin subsections (a), (b), (c), and (d) of section 203 of the Federal\nLegislative Salary Act of 1964 (78 Stat. 415; Public Law 88-426);\n(c) justices, judges, and other personnel in the judicial branch\nreferred to in sections 402(d) and 403 of the Federal Judicial\nSalary Act of 1964 (78 Stat. 434; Public Law 88-426); and\n(D) the Governors of the Board of Governors of the United States\nPostal Service appointed under section 202 of Title 39.\nSuch review by the Commission shall be made for the purpose of determining\nand providing--\n(i) the appropriate pay levels and relationships between and among\nthe respective offices and positions covered by such review, and\n(ii) the appropriate pay relationships between such offices and\npositions and the offices and positions subject to the provisions\nof chapter 51 and subchapter III of chapter 53 of title 5, United\nStated Code, relating to classification and General Schedule pay\nrates.\n(g) REPORT BY THE COMMISSION TO THE PRESIDENT--The Commission shall\nsubmit to the President a report of the results of each review conducted\nby the Commission of the offices and positions within the purview of\nsubparagraphs (A), (B), (C), and (D) of subsection (f) of this section,\ntogether with its recommendations. Each such report shall be submitted\non such date as the President may designate but not later than January 1\nnext following the close of the fiscal year in which the review is con-\nducted by the Commission.\n(h) RECOMMENDATIONS OF THE PRESIDENT WITH RESPECT TO PAY-The President\nshall include, in the budget next transmitted by him to the Congress after\nthe date of the submission of the report and recommendations of the\nCommission under subsection (g) of this section, his recommendations with\nrespect to the exact rates of pay which he deems advisable, for those\noffices and positions within the purview of subparagraphs (A), (B), (C),\nand (D) of subsection (f) of this section. As used in this subsection,\nthe term \"budget\" means the budget referred to in section 201 of the\nBudget and Accounting Act, 1921, as amended (31 U.S.C. 11).\n(1) EFFECTIVE DATE OF RECOMMENDATIONS OF THE PRESIDENT--\n(1) Except as provided in paragraph (2) of this subsection, all or\npart (as the case may be) of the recommendations of the President trans-\nmitted to the Congress in the budget under subsection (h) of this section\nshall become effective at the beginning of the first pay period which\nbegins after the thirtieth day following the transmittal of such recom-\nmendations in the budget; but only to the extent that, between the date\nof transmittal of such recommendations in the budget and the beginning\nof such first pay period--\n(A) there has not been enacted into law a statute which establishes\nrates of pay other than those proposed by all or part of such\nrecommendations,\n(B) neither House of the Congress has enacted legislation which\nspecifically disapproves all or part of such recommendations, or,\n(C) both.\n(2) Any part of the recommendations of the President may, in accordance\nwith express provisions of such recommendations, be made operative on\na date later than the date on which such recommendation otherwise are\nto take effect.\n(j) EFFECT OF RECOMMENDATIONS OF THE PRESIDENT ON EXISTING LAW. AND PRIOR\nPRESIDENTIAL RECOMMENDATIONS--The recommendations of the President trans-\nmitted to the Congress immediately following a review conducted by the\nCommission in one of the fiscal years referred to in subsection (b) (2)\nand (3) of this section shall be held and considered to modify, supersede,\nor render inapplicable, as the case may be, to the extent inconsistent\ntherewith--\n(A) all provisions of law enacted prior to the effective date or\ndates of all or part (as the case may be) of such recommendations\n(other than any provision of law enacted in the period specified in\nparagraph (1) of subsection (i) of this section with respect to\nsuch recommendations), and\n(B) any prior recommendations of the President which take effect\nunder this section.\n(k) PUBLICATION OF RECOMMENDATIONS OF THE PRESIDENT--The recommendations\nof the President which take effect shall be printed in the Statutes at\nLarge in the same volume as public laws and shall be printed in the Federal\nRegister and included in the Code of Federal Regulations."
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