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

for the

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

on

Fiscal Year 2006 Performance Budget for the Office of Personnel Management

Mr. Chairman and Members of the Subcommittee:

I appreciate the opportunity to submit for the record a statement addressing both the appropriations request for the Office of Personnel Management (OPM) for fiscal year (FY) 2006 and the significant Administration initiatives we intend to pursue in furtherance of the President's management agenda.

To provide some context for the President's request for appropriations for OPM, I would like to review briefly the progress we have made during the last year, particularly in developing new human resources management systems for the Departments of Homeland Security (DHS) and Defense (DOD), and to outline the plans we have to extend that progress throughout the civil service.

First, our joint development, with DHS, of the new human resources management (HRM) system for that department was unprecedented from the standpoint of the joint regulatory process through which the system was established. In addition, the collaborative process through which those regulations were developed included employees and managers and the largest labor organizations representing the department's employees, as well as numerous federal and private experts and stakeholders. The final regulations were published on February 1, 2005.

Simultaneously, we have been engaged with DOD in the development of their National Security Personnel System (NSPS), building on the experience we had gained through the DHS process. The proposed regulations for NSPS were published on February 14, 2005, and the comment period ended on March 16, 2005. The many comments received are currently being analyzed and will be considered in the development of the final regulations that will establish the new system.

Having learned from those experiences, we are now uniquely positioned to apply those lessons in a thoughtful and creative fashion throughout the civil service. Consistent with Administration policy, we will be developing legislative proposals to modernize the systems and authorities available to the remaining Federal agencies. In a more specialized arena, we will be working to identify whether additional separate legislative proposals are needed for law enforcement officers (LEO's).

As with the new systems in DHS and DOD, implementation activities are a crucial part of OPM's role with regard to other recently-passed legislation. The Federal Workforce Flexibility Act made significant changes that will require complex adjustments in pay and leave administration practices. In addition, the new pay-for-performance system for the senior executive service (SES) requires certification of agency performance appraisal systems, as well as extensive guidance on issues relating to SES performance management and administration.

In addition, the intelligence reform legislation enacted last year authorized the director of the Federal Bureau of Investigation (FBI) to establish career positions for intelligence analysts within the FBI, to establish an FBI reserve service for the temporary reemployment of former FBI employees during periods of emergency, and to extend, for a limited period, the mandatory retirement age for FBI employees to 65. We will be working with the FBI to facilitate the implementation of those intelligence reforms.

The introduction of new dental and vision benefits for Federal employees and annuitants will require additional efforts this year.

Also, the acceptance of the transfer of personnel security investigations functions from the Defense Security Service constitutes an immensely important responsibility, creating in one place a single unit to conduct the vast majority of background investigations for the entire Federal Government. As a result, to carry out personnel investigations, an additional 1,686 employees were added to OPM's rolls to date as a result of the transfer of function, and the workload has drastically increased, as well.

We will also continue to engage agencies in implementing the human capital standards for success as they transform their human capital management practices, consistent with the merit system principles, veterans' preference, and other critical standards. The standards for success were developed jointly with the Office of Management and Budget and the Government Accountability Office. Through the compliance program, OPM will ensure that merit system principles are preserved and honored.

In addition, we will be working closely with agencies to strengthen their human capital accountability systems. As additional human resources flexibilities are being made available to agencies, there is a greater responsibility for accountability at the level within each agency where authorities are delegated and decisions are made. Strengthening accountability Government-wide helps ensure adherence to merit system principles and results in efficient, effective, and responsible administration of Government services.

Again in 2006, OPM will assess the effectiveness of its strategic human resources policy activities by administering the Federal human capital survey, and by continuing to track and report the extent to which agencies are using flexibilities such as direct hiring authority, teleworking, and student loan repayments.

Among our most extensive and forward-looking responsibilities is the implementation of a Human Resources Line-of-Business (HR-LOB) common solution. Transition of our current OPM-managed e-Government projects into a single framework will leverage economies of scale, while reducing costs and increasing the quality and consistency of service provided.

In FY 2006, the request for resources for e-Government initiatives funded from salaries and expenses, including Enterprise Human Resources Integration (EHRI), and e-Payroll, is more than $4 million below the amount provided in FY 2005, including no-year and 3-year funding.

For basic operating expenses, OPM's general fund request totals about $124.5 million, to support 998 full-time equivalent (FTE) employees. These overall resources will enable OPM to continue to support the transformation of agencies in more effectively managing human capital while increasing their accountability; to modernize HRM systems to streamline hiring, and link pay more closely to agency missions; and to improve both employee security and emergency response coordination. Included are nearly $114.2 million in annual funds and slightly more than $10.3 million in no-year funding for the e-Government initiatives described earlier, including EHRI, e-Payroll, e-Training, and HR-LOB.

In transfers from the benefits trust funds, OPM is requesting $100.0 million in annual funds to support 1,151 FTE engaged in the administration of the employee retirement and insurance programs.

Additionally, we will continue working to establish contracts to implement the major activities of the retirement systems modernization project. That strategic initiative will replace OPM's legacy systems with modern technology, moving from paper to electronic recordkeeping and reengineering business processes.

It should be noted, too, that the funding for the Office of the Inspector General (IG) is derived, in significant part, from transfers from trust funds. While the request for that office will be discussed in more detail in a separate statement, it bears mentioning that their overall request totals more than $17.9 million and 140 FTE. The bulk of that funding, $16.3 million, would represent transfers from trust funds, with $1.6 million coming from general funds.

Notwithstanding our independent relationship with the IG and his fine staff, we continue to work cooperatively on issues of mutual interest, including maintaining the integrity of our benefits trust funds and monitoring the Combined Federal Campaign. We strongly support and greatly appreciate the work of his office on such important matters.

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. For those ongoing revolving fund responsibilities, the FY 2006 budget includes an estimated $1.1 billion in obligations and 2,734 FTE to be financed through payments for OPM's services by other agencies.

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 1.9 million annuitants participating in the Federal Employees Health Benefits Program, we estimate that about $8.4 billion will be needed to pay the Government's share of the cost of coverage. That represents an increase of $570 million over FY 2005. We estimate that, for the 500,000 annuitants under age 65 who elect post-employment life insurance coverage, an appropriation of $36 million will be required.

It is also worth noting that the President's budget proposes to use pension savings provided to the Postal Service by the Postal Civil Service Retirement System Funding Reform Act of 2003, Public Law 108-18, savings that would otherwise be held in escrow in 2006 and beyond, to begin funding the substantial Postal Service liabilities for its annuitants.

Under this plan, the Postal Service would make payments for its accruing actuarial costs of post-retirement health benefits coverage for its current employees, and amortization payments needed to liquidate its liability for the post-retirement health benefits coverage of its current retirees.

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 $26.6 billion dollars. This represents an increase of $400 million to cover the service cost of the Civil Service Retirement System which is not funded by and for active employees.

Finally, the President's FY 2006 budget proposes a pay increase for white-collar Federal employees of 2.3 percent, to be distributed between an across-the-board raise and locality pay, as determined by the President later in the year. Once again, the Government-wide general provisions in the budget include the appropriate legislative language to ensure that, if warranted by local private sector market rates, blue-collar Federal employees receive pay adjustments up to the amount received by their white-collar colleagues.

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.