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Editor's Note: Ned on Feds will appear each Monday on GovExec.com, beginning today. Ned Lynch brings to the column decades of experience in seven federal agencies and on Capitol Hill, most recently as a senior staffer on the House Government Reform Subcommittee on Civil Service. We don't expect that our readers will always agree with Ned's opinions, but we hope he'll encourage a broad debate on key issues of interest to federal employees, managers and executives.

President Clinton's fiscal 2001 budget renewed a request for expanded authority to offer buyouts to federal employees to facilitate restructuring of the federal workforce. The Clinton administration claims these payments - usually close to $25,000 for senior federal employees who are already eligible for annuities - would help "protect agencies' diversity gains" while enabling it to reshape the federal workforce without resorting to reductions in force.

One of the main arguments in favor of buyouts is that they provide a way of breaking the logjam of "old guys" who purportedly block the upward mobility of bright young employees by continuing public service rather than coasting into early retirement. The Treasury paid such separation incentives to more than 130,000 federal employees between 1993 and 1997 - 92 percent of them eligible for some form of annuity, plus taxpayer subsidized health insurance for the rest of their lives. However, the federal workforce continues to age. The average age of federal employees has increased from approximately 43 in 1993 to a bit over 46 today.

So who are these "old guys" who would be ushered into an earlier retirement than they had planned? For the most part, the targeted employees are white men aged 46 to 60, many of them facing college tuitions, aging parents, or thinking they need to work and save before sailing into the sunset. They might leave federal employment, but many cannot afford simply to go fishing. They will work for someone, and a buyout might only be the start of the federal subsidy to their future income.

If buyouts were restricted solely to the best senior federal employees, they could be rationalized as well-deserved rewards for excellence. But what employer in his right mind would pay $25,000 to encourage outstanding 50 year-old employees to work for someone else? Because they are knowledgeable about key federal activities, their expertise would be especially valuable to consulting firms, where they will continue to serve the public. Thus, the $25,000 golden handshake would combine with their annuities as a long-term subsidy for their private employers, who plan on employees working up to a normal retirement age. Does the administration really want buyouts as disguised subsidies to contractors supporting federal programs?

Alternatively, agencies might make a concerted effort to retain their talented executives and direct buyouts to less stellar performers, or as some describe it, buy the deadwood out the door. Leave aside, for the moment, the question of the message that an agency sends to the employees who get these offers. (Read: "Your skills are no longer useful to us. We want younger people in your place. Good luck finding a private employer.") What message does it send to the 35 to 45 year old colleagues who watch these offers?

Imagine hearing this around the water cooler: "Oh, Tom Smith worked hard, showed real ingenuity and dedication, and was rewarded by being too valuable to get a buyout. Charlie Chumpchange, on the other hand, waited them out, building coffee cup towers in his corner office until they bought him off to the golf course." Admonitions to treat "human capital" as an asset, deserving of "investment," ring hollow next to the damaging message about the federal market value of these experienced employees that is implicit in such buyout offers. $25,000 a pop turns out to be a very expensive first installment on the full price of failed performance management.

Buyouts are a substantial expenditure because of the long-term commitment to the retired employee. The Office of Personnel Management conceded to the Congressional Budget Office that the incremental cost of the additional retirement benefit amounts to 26 percent of an employee's final salary, assuming the agency eliminates the position. Where employees are replaced - as intended in "restructuring" - the cost of buyouts escalates to three to four times this level. It is easy to see why anyone would want to collect an additional $25,000 - even if it is taxed. I have yet to get a satisfactory answer to the question, "What is the public interest in paying it?"