There’s Plenty of Fat in Federal Pensions

The Gramm-Rudman deficit reduction legislation has a lot of federal retirees stirred up. They fear that they may lose their cost-of-living adjustments (COLAs), not only for this year, but for the five years that the legislation is to be in effect--and perhaps longer.

On the other hand, many federal retirees believe that civil and military pensions, if not reduced, will eventually bankrupt the country. I am one of them.

My federal pensions began in 1973 with a civil service/congressional pension of $360 per week. Today, thanks to additional military and Social Security benefits--plus cost-of living adjustments on all three-- my federal pension totals $1,377 per week. The civil service portion of these pension increases were given to me regardless of my needs or whether or not I was working, or how many federal pensions I was already drawing.

My pension totals are higher than most, but they illustrate the lax manner with which federal pensions are dished out. Charles Morris, a retired Treasury Department employee who referred to himself as “one of the small fry” during the 1983 hearings on the Social Security amendments, told Congress: “Something must be very, very wrong” with a system that pays $342,000 in federal pensions to an employee who paid in only $6,600.

We 2.8 million federal pensioners receive more than $37 billion in civil and military benefits, as compared to the $34 billion received by the 7.9 million private sector pensioners. (Those amounts do not include Social Security benefits.) From 1970 to 1982 the cost of civil service and military pensions increased at an annual rate of about 17% compared to a consumer price index increase of 7.9%.

More than $400 billion could be saved by granting the cost-of-living adjustment only on the first $10,000 of federal retirees’ total federal pension income--an amount equivalent to the maximum Social Security benefit.

However, the apologists for the federal retirees have argued successfully against any modifications. These lobbyists are responsible for the rejection of pension reforms and proposed COLA cuts by the Post Office and Civil Service committees in both the House and Senate.

But now that Gramm-Rudman has been approved, the climate for change is much improved. The new emphasis on waste cutting will require the budgeteers to seriously examine the long-term costs of federal pensions.

COLAs account for only 40% of the long-term federal pension cost. The other 60%, more than $1 trillion, is due to early retirement--about 40% of civilian employees retire before 55; generous benefits--the basic pension benefit formula provides 80% of pay to those who spend their careers in civil service; frequent “disability” retirements--more than twice as many civil servants retire on disability as private-sector employees do; and double-dipping--all military retirees, and 75% of civil service retirees, will qualify for Social Security when they really “retire.”

Since 1975 these generous civil service retirement provisions have cost taxpayers $100 billion more than a good private sector plan would have cost. We could avoid wasting another $300 billion by 1995 if the civil service retirement system were made comparable to private sector plans.

Right now we have an opportunity to do just that. Under the terms of the Social Security Act of 1983, Congress must design a pension plan for the 300,000 civil servants hired since Jan. 1, 1984. The new system is scheduled for congressional action by the end of April. The public has a window of opportunity to evaluate the costs of both the present plan and the congressional proposals.

In previous showdowns, the federal employee and retiree organizations have almost always carried the day. Thus Congress has been unable to redesign the civil service retirement system into an affordable pension program. Both the current House and Senate proposals for the new system are twice as generous and twice as costly as good private sector plans.

Cuts mandated by Gramm-Rudman will force Congress to make hard budget decisions. Federal employee and retiree lobbyists and political action groups must not be allowed to continue to force Congress to sustain excessively generous federal pensions at the expense of programs truly in the national interest.

The leading spokesman for preserving lavish federal pensions, L.J. Andolsek, president of the National Assn. of Retired Federal Employees, calls Gramm-Rudman “the death of fairness in Washington.” He predicts: “This action will haunt the major players in this sordid drama all the way to the polls in November.”

Those of us concerned about the extreme generosity of the civil service retirement system think that under Gramm-Rudman we have an opportunity to revive “fairness,” not bury it. Until now, the loudest voice has been that of Andolsek & Co. How about letting Congress hear from John Q. Public?