April 26, 1978
Page 11545
Mr. BELLMON. Mr. President, will the Senator yield about 2 minutes for a comment?
Mr. President, I would also like to join in commending Senator NELSON for raising this issue, and for the bill he is proposing that new Federal employees are to be covered by social security instead of by the separate civil service retirement system.
He and others have proposed that Federal employees be integrated into the social security system on a gradual basis, and I believe this is an idea we ought to consider carefully, and it is one that I personally find attractive.
It could make a major difference in the whole picture on the actuarial soundness of the civil service system as well as the social security system. Long-range funding issues ought to be resolved as part of the decision on whether to integrate the two systems.
The military retirement system is funded now on an annual appropriation basis, with no trust fund to cover future liabilities. This could prove to be an even bigger problem than funding the civil service retirement system. The Budget Committee considered leaving room in the fiscal year 1979 budget for initiating a military retirement trust fund. We decided the issue needed further study, and we hope the Senator from Wisconsin will consider that it will.
Putting additional money into the Federal civil service trust fund would seem to me to be premature. The system did have a balance at the end of 1977 of about $49 billion, so it would seem that we do not have an immediate urgency.
I would recommend that Congress make a comprehensive review of the entire system of Federal retirement, military retirement, and of the social security system and try to see what the interactions are.
So, Mr. President, I want to simply commend Senator NELSON for raising this issue and to pledge my personal cooperation to him in working out a solution to the whole troublesome retirement and disability picture that faces the country.
Mr. MUSKIE. Mr. President, I have nothing substantive to add to what our two colleagues, Senator CHILES and Senator BELLMON, have said. I join in complimenting Senator NELSON for raising this issue after having carefully probed and developed the facts which he has presented, not only to us here today but earlier.
I assure him of the Budget Committee's concern and of our interest in pursuing the matter and developing a resolution of it. Senator CHILES, of course, in the Appropriations Committee, has authorizing committee responsibility for it, and we will work with him, since he is a member of—
Mr. CHILES. I think the Government Affairs Committee would have the authorizing responsibility.
Mr. MUSKIE. You have the appropriations responsibility, that is right. I think in working together, we can produce some sound policy decisions.
Mr. President, I share the Senator's concern that the budget does not now include the full "current costs" of retirement benefits that are expected to be paid to Federal employees after they retire.
The problem here — and it is one that has been recognized for several years — is that the contributions toward employee retirement that are required by law to be made by the employee and by the employing agency are determined on a so-called "static" accrual basis that does not take account of future changes in wages and prices. This is a critical point, because these changes cause increases in employee retirement benefits — wage changes do so because the retiring employee's benefits are based on Federal pay rates in effect at the time of retirement, and price increases do so because retirement benefits are indexed by law to rise with increases in the Consumer Price Index (CPI).
As wage and price increases occur under the existing system of funding, additional appropriations are made to compensate employee retirement and disability funds for the '"unfunded liabilities" thus created, that is, the increased benefit payments that cannot be covered by agency and employee contributions.
One aspect of this problem that is of particular concern to the congressional budget process is its effect on functional allocations within the budget. Since the personnel benefit costs now reflected in the various functional categories do not include adequate agency contributions toward retirement, the current system understates the true costs of conducting the programs in these functions.
The concern about civilian employee retirement costs is particularly timely this year since the administration has proposed a substantial change in the funding of the military retirement system. The proposed change would require the Department of Defense to make contributions toward retirement and disability benefits on behalf of its current military employees, at levels determined on a "dynamic accrual" basis that reflects a more realistic treatment of inflation, interest rates, and pay raises than does the "static" basis now used for civilian employee retirement. This proposed change is intended to make defense totals more accurately reflect the true current costs of conducting the Nation's defense program.
The budget resolution now before the Senate does not reflect this proposed change in the method of funding military retirement benefits. The Budget Committee omitted this change without prejudice, deeming it premature to include the change before the authorizing committee had had the opportunity to consider the proposal and report appropriate legislation.. Similar considerations apply to this proposed amendment to the budget resolution.
In short there are a number of questions concerning this issue that need to be carefully considered before specific funding decisions are made.
There are legal questions as to what changes, if any, to authorizing legislation are required. There are technical questions as to how an "adequate" level of contributions should be calculated. And there are important equity questions, for example what portion of retirement contributions should be borne by the Government? Whether changes should be made for civilian employees without a simultaneous change in the military retirement system? It is unlikely that these questions could be answered in time to have any impact on the budget for fiscal year 1979.
Beyond these considerations, there is the point that the proposed amendment would not get to the heart of the problem, which is that the current system of funding does not require that Federal agencies make adequate contributions toward retirement benefits that will have to be paid in future years to employees who are conducting this year's programs.This problem requires that the committees with authorizing jurisdiction over employee retirement and disability consider alternatives and report legislation that will place the funding of benefits on an actuarially sound basis, so that future budgets will reflect the true current costs of Federal programs.
Mr. President, I congratulate the Senator for the concerns he has raised here. This is a real issue, and one that deserves our consideration. But, we cannot act in haste, through this budget resolution, to effect the changes the Senator is advocating. We must study the issue carefully before we act.
In view of these considerations, but repeating that I share the concern that is the basis for the amendment. I suggest the Senator may wish to consider withholding his amendment at this time.
Mr. NELSON. Mr. President, as I said at the beginning, I intend to withdraw the amendment.
However, before doing so, I have just another brief comment.
I was well aware that it would be difficult to adopt a particular figure for the additional liability incurred in fiscal year1979 which is not accounted for in this budget resolution. In fact the Budget Committee has not had the opportunity to run the figures of the General Accounting Office through its own computer. What I did was to ask the General Accounting Office for figures, and they made their own assumptions, which I must say are very conservative assumptions. My impression is that the $6 billion figure is a very conservative figure. The figure would likely be a few hundred million dollars more if GAO had used slightly more liberal assumptions than they used to calculate the $6.1 billion figure. So I recognize the problem of the Budget Committee not having an opportunity to go through it with their own computer system.
Of course, with the military retirement system, there are no contributions involved. The employees of the military do not contribute nor do the various branches of the military contribute. We just, somehow or other, pay the costs of military retirement benefits. There is a very serious, growing unfunded liability resulting from military retirement benefits. I realize that this is something that needs to be addressed in the future.
I recognize the problem that the Budget Committee faces. I only wish to make a record on this, so that people will begin to understand that in fact there is a very serious problem here. And I would hope, though it may not be possible this year, that the bills I have introduced would be acted upon this year.
I recognize, also, that once we cover Federal employees under social security, we also have to develop additional options, as are provided in private employment, for another pension plan which would be adequately funded, or for an IRA plan or something else. However, in order to stop the growth of the existing civil service retirement system, I would hope very soon we could pass measures providing for the coverage of new employees under social security and the financing of civil service retirement benefits or a dynamic basis with contributions shared equally by employees and the employer.
Mr. President, I withdraw my amendment No. 1801, and I thank the chairman of the Budget Committee and the Senator from Florida.
The PRESIDING OFFICER (Mr. HART). The amendment is withdrawn.