April 25, 1979
Page 8639
Mr. STEVENS. Now, the distinguished Senator from Maine has agreed to provide me his views of the effect that the Budget Committee's recommendations have upon the authorizing committees and upon the law.
What assumptions does this resolution make with regard to cost-of-living increases for Federal civilian and military retirement benefits?
Mr. MUSKIE. The Budget Committee assumed that cost-of-living increases for Federal civilian and military retirees would be changed from a semi-annual basis to an annual basis, beginning in July 1980. The savings assumed from this change, which would require a change in existing law, were as follows:
For the income security function 600, $0.1 billion in fiscal year 1980, $0.5 billion in fiscal year 1981, and $0.6 billion in fiscal year 1982, for cumulative savings over the next 5 years of $2.5 billion;
For the defense function 050, $0.1 billion in fiscal year 1980, $0.2 billion in fiscal year 1981, and $0.2 billion in fiscal year 1982, for cumulative savings over the next 5 years of $0.7 billion; and
For the budget as a whole, $0.2 billion in fiscal year 1980, $0.7 billion in fiscal year 1981, and $0.8 billion in fiscal year1982, for a cumulative savings over the next 5 years of $3.2 billion.
Mr. STEVENS. To what extent would these assumptions be binding on the authorizing committees with jurisdiction over these programs?
Mr. MUSKIE. As you know, the Budget Committee does not make detailed policy choices. Our job is to set spending targets for each of the major functions and missions of the budget. In order to do so in a responsible way, the committee has always discussed major policy options when establishing the targets for each function and mission, and these choices are described generally in our report. We would be shirking our duty if we simply set spending targets for each function and mission without discussing the policy implications of our decisions. It is well understood, however, that our detailed policy assumptions are not binding on the Congress. The requirements of the Budget Act will be met if the costs of the policy decisions made by the appropriations and authorizing committees and the Congress as a whole do not exceed the targets established in the budget resolution.
One further point should be clarified. While it is true that the budget resolution before you is expressed in functional terms, these functional targets are not the only yardsticks by which compliance with the budget resolution is measured. The Budget Act requires that the budget resolution totals be allocated to the appropriations and authorizing committees according to the budgetary decisions included in each concurrent budget resolution. Each committee is required to file a "crosswalk" report which describes how that committee plans to spend the money allocated to it.
Mr. STEVENS. If the changes in law contemplated by this budget resolution are not adopted, would equivalent savings have to be achieved elsewhere?
Mr. MUSKIE. Yes, if the budget targets of this budget resolution are to be met, the Congress would have to achieve comparable savings elsewhere. This means that if the Governmental Affairs Committee does not act as this budget assumes it will, comparable savings would have to be achieved through other action by that committee, or other committees' program funds would be penalized to the extent these savings are not achieved.
Mr. STEVENS. I thank the Senator from Maine for so graciously answering my questions. I now yield again to the Senator from Arkansas.
Mr. PRYOR. I thank the Senator.
Do the budget resolution and report reaffirm the sole responsibility of authorizing committees to decide what programs should be changed and to set priorities within their authorizing jurisdiction?
Mr. MUSKIE. As I have often said before, the Budget Committee is not a line item committee.
The assumptions which we use in reaching our targets are not binding on the authorizing committees. But again let me emphasize that if the authorizing committees do not act to achieve the savings assumed by the Budget Committee, other comparable savings would have to be achieved by that committee or other committees, or the budget adopted by the Congress would be breached.
Mr. PRYOR. I thank the Senator.
I yield back to the distinguished Senator from Alaska.
Mr. STEVENS. Mr. President, under the circumstances, I will not offer my amendment.
Mr. BELLMON. Mr. President, I have found the comments made by my colleagues during this colloquy informative, but also somewhat troubling.
The Budget Committee assumed some modest savings in Federal military and civilian retirement programs.
As my colleagues have already pointed out, the Budget Committee simply assumed — as did the House Budget Committee — that there would be an orderly transition from the present twice-a- year cost-of-living adjustments to once-a-year adjustments.
Social security, veterans pensions, veterans compensation, and the supplemental security income program all adjust benefits once a year.
I do not see why Federal retirees should be favored more than the recipients of these other programs in making cost-of-living adjustments.
The argument that we should not rush into this — but rather should wait for various studies to be finished — leaves me with the feeling that there is a bit of a. stall going on.
There have been plenty of studies of the Federal retirement systems.
I have here one inch-thick one issued in December 1978 by the General Accounting Office. It is entitled "Need for Overall Policy and Coordinated Managementof Federal Retirement Systems."
It deals with the fragmented situations that we now have in Federal retirement and with issues such as unfunded liability of Federal Retirement Systems.
Let me read a quote from page viii of this report:
In 1976, three major retirement systems — uniformed services, civil service, and Foreign service — reported unfunded liabilities in excess of $273 billion, an increase of 75 percent since 1970.
Conservatively, these liabilities are expected to increase to $349 billion by the end of fiscal year 1986.
And there is another new report, this one by the Congressional Budget Office — also issued in December 1978 — on "Options for Federal Civil Service Retirement: On Analysis of Costs and Benefit Provisions."
This report discusses options for saving money in Federal civilian retirement.
It examines particularly some of the features of the Federal retirement system which are more generous than practices followed in non-Federal employment — including the twice-a-year cost-of-living adjustments.
The CBO report concludes that the Federal Government is currently spending 15.6 percent of salary and wage costs on retirement benefits — and that this would be cut to 9.4 percent — or by over one-third, if a retirement plan similar to the typical private sector plan were in use.
In short, Mr. President, there are many opportunities for savings in the Federal retirement systems we now have.
If the authorizing committees do not like the specific change the Budget Committee assumed, there are plenty of other possibilities they can consider to save the modest amounts of money the Budget Committee assumed.
I hope the colloquy here today — and the attention the Budget Committees in both Houses are giving to this important question — will help generate some action on the many issues in need of attention.
Mr. CHILES. Mr. President, I would like to clarify the situation regarding cost-of-living adjustments for civilian and military Federal retirees. I would like to point out for the record that this issue cannot be considered in isolation without recalling the circumstances which brought it into being.
The semi-annual cost-of-living adjustment was created by my modification of Senator HOLLINGS’ amendment to eliminate the "1 percent kicker" back in 1976. When we looked at the cost-of-living issue then, it became clear that the extra 1 percent over the actual change in prices was too big a benefit in times of rapid inflation. But we also became aware that it was put in to compensate for the long lead time under the old system, where no cost-of-living increase occurred until the Consumer Price Index went up 3 percent, then stayed there for 3 months. The extra 1 percent was put in to make up for the fact that in the 1960's, when inflation was low, it took as much as 25 months to get any adjustment. When inflation went from 3 to 5 to 10 percent, the extra 1 percent added on top of each increase became too much of a bonus. But when we replaced it, we decided to put some regularity into the system. Since increases had been occurring every 8 or 9 months, we chose semi-annual as most appropriate. This was not without precedent. since the food stamp reform bill had also provided a semi-annual adjustment.
The total picture, then, was a true reform. We examined the goal which Congress had intended to achieve, and found a less costly way to achieve it. While we made major savings — about a billion dollars a year — from taking out the 1-percent kicker, we paid a small price to offset delays and put the system on a regular basis. The total savings assumed by the Budget Committee for elimination of the semi-annual adjustment was $100 million in outlays out of a total defense function of $124 billion, that is, eight-tenths of 1 percent, and $100 million in an income security budget of $184 billion, or one-half of 1 percent. My first question, Mr. President, is just how much savings did the Budget Committee assume from eliminating the semi-annual adjustment?
Mr. MUSKIE. Should be $100 million in function 050 — defense — and $300 million in function 600 — income security — outlays only.
Mr. CHILES. What we are talking about then, Mr. President, is saving $100 million of outlays out of a total defense function of $124 billion — that is, eight-tenths of 1 percent — and $100 million in an income security budget of $184 billion.
If the committees and Congress can find other ways to make that small amount of savings within those large functional totals, then we will still be within the budget resolution. We discussed this issue of different assumptions about how to achieve the totals when we marked up the budget resolution in committee, and I think it is important to set it straight out here for the record.
Mr. President, as I made clear in the beginning of my remarks, I believe the semi-annual cost-of-living adjustment for Federal retirees was a reasonable compromise, which was made within the context of a major budgetary savings. To take back that compromise now would bea breach of faith with the retirees. I do not think it is going to happen, and I for one will oppose any legislative attempts to repeal the existing law. There are lots of other ways we can find to make those small amounts of savings in those large functions. That is why I have not offered an amendment to add money to the resolution. But I am glad we had this opportunity to set the record straight.