U.S. Office of Personnel Management www.opm.gov - Recruiting, Retaining and Honoring a World-Class Workforce to Serve the American People

Statement for the Record of
The Honorable Linda M. Springer
Director
Office of Personnel Management

Before the

Subcommittee on Transportation, Treasury, the Judiciary,
Housing and Urban Development, and Related Agencies
Committee on Appropriations
United States Senate

On

Fiscal Year 2007 Performance Budget
for the Office of Personnel Management

May 31, 2006

Mr. Chairman and Members of the Subcommittee:

I appreciate the opportunity to submit for the record a statement addressing the appropriations request for the Office of Personnel Management (OPM) for fiscal year (FY) 2007.

As you know, OPM provides a variety of products and services to the nearly 1.8 million employees in the Federal Government. Some of our products and services include managing health insurance for approximately 8 million current and former Federal employees and their families, administering retirement services for over 2 million retirees from all branches of Government, completing 90 percent of background investigations, and administering career development programs. As the OPM Director, I am committed to successfully delivering on our responsibilities on a timely basis. In short, I believe the American citizens and the Federal civilian workforce expect us to get things done, and our FY 2007 budget request will allow us to do just that.

OPM’s New Strategic and Operational Plan

Mr. Chairman, operational planning and budgeting go hand in hand, and the OPM process is no exception. For an organization to fulfill its mission, it is first necessary to have a clear understanding of that mission, with supporting strategic objectives and operational goals. These goals must be accompanied by strong oversight and accountability in order to reach optimal performance.

With these principles in mind, we recently reassessed the agency’s goals and priorities, with an eye toward creating a more transparent and accountable OPM. This planning process was guided by an advisory group consisting of executives and senior General Schedule employees with OPM knowledge and expertise. During these meetings, the advisory group reviewed draft strategic objectives and goals, identified important program needs and milestones, and played a critical role in the development of the resultant plan.

During the planning process, I also reached out to other resources for input, including Members of Congress, the Chief Human Capital Officers Council Executive Committee, union leadership, and the Office of Management and Budget.

The result is OPM’s new Strategic and Operational Plan, which begins with a concise mission statement - to ensure the Federal Government has an effective civilian workforce. While this plan complies with the Government Performance and Results Act of 1993, it differs markedly from previous OPM plans and other Federal agency plans as well. This is intentional. Its goals are straightforward and readily identifiable, with each being action-oriented and beginning with a verb. Each goal also has a date by which it will be accomplished. The plan’s 170 goals are included in the OPM Senior Executives’ performance agreements. This means that, under the new SES performance-based pay system, executive compensation is directly linked to successful execution of the plan’s goals. The bottom line is this - program performance will remain subject to high level management attention to ensure achievement.

The new plan was developed concurrently with our 2007 budget request. The budget priorities you have seen in the Congressional Budget Justification can be traced back to program priorities in our new plan. This means that accomplishing the goals of the plan is realistic as long as the funding request is sustained.

We are requesting $36.6 billion to carry out our mission in FY 2007. Of this total, $36.4 billion is requested for mandatory programs and $255.7 million for discretionary activities. The discretionary request reflects $238 million for Salaries and Expenses - including transfers from the Trust Fund Accounts of $126.9 million - and $17.7 million for the Office of the Inspector General. The total discretionary request reflects a net increase of $17.2 million compared to the FY 2006 enacted level.

Highlights of the request are discussed below.

Retirement Claims Processing and Benefits Programs

OPM’s request includes funding to improve the services it delivers to Federal employees, annuitants, and their families through the retirement and insurance programs. Most notably, we will reduce the time needed to process claims for benefits submitted by retiring Federal employees to an average of 30 days. This represents a significant improvement over the timeliness reported for FY 2005 - 80 days for employees retiring under the Civil Service Retirement System (CSRS), and 93 days for those under the Federal Employees’ Retirement System (FERS).

The budget requests an additional $26.7 million in No-Year Trust funds for the Retirement Systems Modernization (RSM) Project. These funds will allow OPM to continue the conversion of millions of paper retirement records to electronic data and contract for the information technology needed for the system. RSM is the core strategy to meet OPM’s long-term customer service, business, and financial management goals for the retirement program. As RSM is implemented, OPM will authorize new retirement benefits within five or fewer days (for 17 percent of all claims in FY 2008 and 49 percent in FY 2009). RSM will also improve the accuracy of retirement claims from 90 percent (CSRS) and 93 percent (FERS) to between 95 percent and 97 percent, respectively.

RSM implementation is scheduled for 18 to 36 months from contract award. During this period, OPM will need experienced Legal Administrative Specialists (claims processors) to provide subject matter expertise and advice as the effort progresses. The FY 2007 budget provides the flexibility to support RSM implementation while maintaining timeliness and accuracy in processing retirement claims.

For the Federal Employees Health Benefits Program (FEHBP), OPM will continue to negotiate and contract with private insurance companies that offer a broad range of health insurance benefits, including high-deductible health plans with Health Savings Accounts and consumer-driven health plan options. Customers can make informed health insurance decisions by several means: OPM-sponsored health plan brochures and Web site postings, health plan customer satisfaction survey results, Web-based comparison/decision tools, and the Health Plan Employer and Data Information Set. OPM will continue to carry out tough negotiations with health carriers to contain premium hikes and maintain benefit levels, and continue to provide, improve, and expand tools so customers can make informed health insurance decisions. In addition, OPM will continue to maintain the competitiveness of the insurance programs by implementing the new dental/vision benefits required by Public Law 108-496.

Human Resources Management (HRM) Reform

In FY 2007, OPM will pursue policy initiatives that continue to reform human resources management in Federal agencies. We will work with the Departments of Homeland Security (DHS) and Defense (DOD) to ensure the reforms underway link pay to performance. At the same time, OPM will work with other agencies engaged in Alternative Personnel Systems to assess the lessons learned from various modernization efforts. OPM is uniquely positioned to apply lessons learned from modernization efforts undertaken at DHS and DOD to the rest of the Federal workforce.

Mr. Chairman, in the last half-century, the Federal workforce has changed significantly, and the old personnel system has not kept pace. According to the 2004 Federal Human Capital Survey (FHCS), for example, only 27 percent of Federal employees believe steps are being taken to deal with poor performers, and only 29 percent believe differences in performance are recognized in a meaningful way. Little of an employee’s current compensation is based on performance or mission accomplishment. The FY 2007 request will allow OPM to deliver this needed human resources modernization.

The FY 2007 budget will also allow OPM to maintain the competitiveness of Federal employee benefits by promoting affordable options within the Federal Employees Health Benefits Program, such as health savings plans, explore ways to refine market adjustments to Federal pay, and provide Federal employees with opportunities, benefits, and service delivery that compare favorably with other employers. For instance, OPM will continue to develop new workforce recruitment strategies and tools, and further improve the hiring process.

OPM will assess the results of its strategic human resources policy activities by analyzing data collected from the FHCS and Federal Benefits Survey to be issued in 2006 and by continuing to track and report the extent to which agencies use innovations such as hiring flexibilities, teleworking, and student loan repayments. The results of these surveys will provide broad Governmentwide indicators on the status of Federal human capital, which will benefit lawmakers, managers, and employees—and enable OPM to assess its performance in terms of delivering new human resources policies and issuing ongoing policy guidance as needed.

Implementing Human Capital Standards for Success

OPM will use requested funds to engage Federal agencies in implementing Human Capital Standards for Success, and other best practices in human capital management, in keeping with the Merit System Principles, veterans’ preference, and other standards. OPM’s success will be measured by the number of agencies that meet the Human Capital Standards for Success. At the beginning of FY 2006, 11 of the 26 agencies reporting under the President’s Management Agenda Scorecard met these standards, up from eight in 2005, and zero in 2003. An additional 14 agencies have made significant progress toward achieving these standards. As a result, more than 99 percent of the Federal civilian workforce is employed by agencies that have made significant progress toward meeting these standards.

OPM expects continued improvement in 2006 and 2007 as it strengthens these standards and engages more agencies to fully adopt them. Also, OPM expects Federal agencies to make hiring decisions more quickly and implement improved and documented succession plans. In addition, OPM anticipates Federal employees to be better trained for their jobs and to be held accountable for their performance as agencies implement improved performance management systems.

Through the Compliance Program, OPM will continue audit, review, and oversight activities to ensure agencies comply with Merit System Principles and veterans’ preference, and to ensure whistleblower protection and other rights and privileges are honored and protected. OPM will strengthen this program by implementing a human capital accountability system that holds agencies accountable for adhering to these principles, laws, and rules, as well as the human capital best practices referenced above.

Human Resources Line of Business

In 2007, OPM will continue to be a leader in the President’s Management Initiative for Expanding Electronic Government and has included $8,349,000 in its request for this purpose. The requested resources will support the Human Resources Line of Business (HR LOB) and Enterprise Human Resources Integration (EHRI). HR LOB will continue to identify and document common functional, technical, and data requirements consistent with Federal human resources policies. It will work toward the establishment of Federal and private sector Shared Service Centers to meet these requirements. During 2007, the EHRI project will continue to modernize how the Federal Government maintains, stores, protects, and transmits human resources transactions and resulting information.

Security-Related Activities

The FY 2007 request includes funding for a number of important security-related activities. OPM will implement Homeland Security Presidential Directive 12 (HSPD-12), Policy for a Common Identification Standard for Federal Employees and Contractors, which was signed by the President on August 27, 2004. This mandates the circulation of a Federal standard for a secure and reliable form of identification for Federal employees and contractors. HSPD-12 requirements will enhance OPM’s strategic goal of improving security and emergency actions throughout the agency. Our request also contains funds for security upgrades at OPM field offices across the country. These funds will be used to address critical vulnerabilities and correct the most serious problems identified during field evaluations. Failure to correct these deficiencies compromises the security of our employees.

Office of the Inspector General

OPM’s discretionary request includes a total of $17.8 million for the Office of the Inspector General (OIG) to carry out its audit, investigative, and oversight responsibilities. This amount reflects a net decrease of $452,000 (2.2 percent) in general funds from the 2006 appropriated resources. The trust funds annual level is unchanged from 2006 and will enable the OIG to continue its investigative oversight of the Federal Employees Health Benefits Program and the Civil Service Retirement System/Federal Employees’ Retirement System programs, to audit FEHBP plans and carrier information systems, and to continue its prescription drug audit plan, established in 2005.

Revolving Fund

OPM also provides a variety of ongoing services that are financed by other agencies through our revolving fund. These services include providing one-stop access to high-quality e-Training products and services; offering professional development and continuous learning for Federal managers and executives; providing employment information and assessment services; automating other agencies’ staffing systems; providing examining services when requested by an agency; providing technical assistance and consulting services on all facets of HRM; testing potential military personnel for the Department of Defense where it is cost-effective for OPM to do so; managing the selection, coordination, and development of Presidential Management Fellows; and conducting investigations for all employees to determine whether they are suitable for employment, as well as more in-depth investigations for employees whose positions require a security clearances. For those ongoing revolving fund responsibilities, the FY 2007 budget includes an estimated $1 billion in obligations and 2,786 FTE to be financed through payments for OPM’s services by other agencies.

Mandatory Payment Accounts

Since OPM serves as the "employing agency" for Federal annuitants, the OPM budget request also includes, as always, mandatory appropriations to fund the Government contributions to the health benefits and life insurance programs for those individuals.

A "such sums as may be necessary" appropriation is requested for each of these accounts because of the mandatory nature of those payments. For the approximately 1.9 million annuitants participating in the Federal Employees Health Benefits Program, we estimate that about $8.8 billion will be needed to pay the Government’s share of the cost of coverage. That represents an increase of $560 million over FY 2006. We estimate that, for the 500,000 annuitants under age 65 who elect post-employment life insurance coverage, an appropriation of $39 million will be required.

Also, as mandated by the financing system established in 1969 by Public Law 91-93, liabilities resulting from changes (principally pay raises) since that year that affect retirement benefits must be amortized over a 30-year period. For that purpose, we are requesting a "such sums as may be necessary" payment to the Civil Service Retirement and Disability Fund in the amount of $27.5 billion dollars. This represents an increase of $350 million to cover the service cost of the Civil Service Retirement System, which is not funded by and for active employees.

Pay Raise

Finally, the President’s Budget proposes an overall average civilian Federal pay increase of 2.2 percent - the same overall average increase as proposed for the military. This amount is equal to the full increase in the Employment Cost Index for the 12-month period ending in September 2005. It is designed to preserve the relative position of the Federal Government in the overall labor market.

The Budget includes a legislative proposal that would provide the President with the flexibility to allocate a portion of the 2.2 percent pay increase to special rate increases for specific groups of employees (by occupation, location, or grade level) for which recruitment or retention efforts are or may become significantly handicapped.

This proposal is designed to send a signal that the Federal pay adjustment process should be "smarter" - i.e., more strategic and market-sensitive. This new flexibility cannot be exercised without congressional approval of the proposed legislation. It would be used only if the Government has sufficient data to support the need for such pay increases in response to demonstrated recruitment/retention problems and OPM determines it’s readiness to implement.

Thank you again for the opportunity to provide for the record a discussion of OPM’s budget request. I would be pleased to provide any additional information the subcommittee may need.