Shrinkage Rap

Two years into their reinventing-government effort, Clinton Administration officials couldn't be more upbeat about meeting one of their central objectives: trimming the federal bureaucracy.

In fiscal 1994, the executive branch's civilian workforce shrunk by about 102,000 full-time equivalent positions, dropping to a level of about 2.05 million. "Nothing has helped our credibility more on [reinventing government] than the fact that government is 102,000 people smaller," says Elaine Kamarck, who heads Vice President Gore's National Performance Review.

The downward trend is expected to continue this fiscal year. The Administration estimates the federal workforce will shed another 34,900 positions, bringing the size of the civilian workforce down to 2.02 million. The two-year reduction should total about 137,000 by the end of fiscal 1995 -- a 6 percent decline from fiscal 1993.

The cuts allowed the Clinton Administration to keep the head count in the executive branch below the ceilings mandated by the 1994 Federal Workforce Restructuring Act; 2.08 million in 1994 and 2.04 million in 1995. In subsequent years, the ceilings drop by 2 percent annually, until by fiscal 1999 the size of the civilian federal workforce will be capped at 1.88 million. By then, the workforce will have been reduced by 272,900 workers -- about a 13 percent cut from a base of 2.16 million in fiscal 1993.

Congress' goal in passing the act was to prune a bureaucracy that has become a symbol of government bloat and wastefulness. The bureaucracy has attained such ignominy even though it hasn't grown during the past 30 years hovering around 2.9 million, if postal workers and temporary and part-time employees are included. The mandatory 13 percent cut in non-postal civilian employment will bring the federal workforce down to the size it was in the early 1960s, before Congress passed the massive health and welfare programs of the Great Society.

The Clinton Administration is halfway to that goal, an accomplishment that is in no small part due to the law itself. Besides setting the ceilings, the law gave non-Defense executive-branch agencies authority to offer employees up to $ 25,000 each -- depending on salary and length of service -- if they retired early or resigned. (The Defense Department has been offering buyouts since fiscal 1993 and will continue its program through fiscal 1999.) Administration officials last year fought hard to get the buyout authority, which they viewed as one of the most effective tools for meeting the NPR's goals of reducing the number of government supervisors, managers and what it called "overhead" workers -- employees in personnel, budgeting, accounting, auditing, procurement and headquarters functions.

While the Administration may tout its success in reducing the overall number of federal workers, analysts following the Administration's progress in meeting the NPR's goals say too few of those leaving are supervisors, and congressional Republicans argue that the cuts were too concentrated in the Defense Department Also, agencies worry that they were forced to cut workers before they determined how to restructure their organizations to meet the NPR's goal of "creating a government that works better and costs less." Says Nancy Kingsbury, who follows federal employee management issues for the General Accounting Office: "I can almost guarantee you that five years from now we'll be issuing reports that find problems we can trace to a lack of supervision and workers in key areas."

Buyouts' Popularity

The Clinton Administration owes much of its success in reducing the executive branch civilian workforce to the buyout program.

As Government Executive went to press, the Office of Personnel Management was estimating that about 90,000 federal workers would accept buyouts by March 31 -- the deadline for doing so at non-DoD agencies -- some 55,000 of them from DoD. Another 10,000 DoD civilian employees are expected to accept buyouts by the end of fiscal 1995. Outside the Defense Department, buyouts were most popular at departments and agencies that have been targets for restructuring and downsizing, such as Agriculture, Education, Interior, Transportation, the General Services Administration and NASA. (See table, page 26.) Thus the buyout programs will have enticed about 100,000 federal employees to leave by the end of this fiscal year. Another 37,000 employees are expected to have departed by Sept. 30, including people who leave through normal attrition, early retirees ineligible for buyouts and victims of reductions in force. DoD accounted for two-thirds of the 8,600 RIFs government-wide in fiscal 1994; non-Defense agencies such as OPM and GSA accounted for the remainder.

Buyouts were central to the Administration's goal of reducing the federal bureaucracy for two reasons. First, they offered a way to avoid painful and costly RIFs. In mid-March, when OPM knew more than 80,000 buyouts had been approved, Leonard Klein, head of OPM's staffing group, said "the buyouts saved us from issuing more than 80,000 RIFs."

Although the cost of the buyout program will exceed $ 2 billion, RIFs would have cost more, OPM says, because the government would have had to provide laid-off employees with severance pay, unemployment benefits and outplacement services. OPM estimates that the average buyout immediately saves $ 6,200 over what the average layoff costs.

A 1993 Congressional Budget Office report disagreed, saying buyouts are more costly in the short run because not every buyout avoids a layoff, as OPM assumed. In the long run, however, CBO says buyouts do save money, GAO has not been able to quantify savings. Second, by targeting buyout offers, the Administration met the NPR goals of reducing numbers of supervisors, managers and overhead employees.

For example, the Federal Aviation Administration blocked front-line, lower-grade employees such as air-traffic controllers, maintenance workers and aviation safety inspectors from applying for buyouts. As a result, about 40 percent of FAA's 2,900 buyouts went to supervisors. The Treasury Department limited buyouts to the GS-14, -15 and Senior Executive Service ranks. And Agriculture's Forest Service, which accounted for about half the department's 5,300 buyouts, restricted them to employees at GS-14 and above at units where jobs will be abolished and to GS-13 and above at its regional offices and research stations. All of the agency's administrative employees, regardless of grade level, were eligible for buyouts.

Such restrictions did indeed skew the buyouts to the upper grade levels. Employees in grades GS-11 through GS-15, SES members and blue-collar supervisors took more than 56 percent of the non-Defense buyouts -- a greater proportion than those positions represented in the total workforce before the buyouts started last year, according to OPM. About 38 percent of the buyouts went to individuals in overhead positions, which matched their share of the total workforce. (Included in overhead positions were some supervisors.)

Span Of Control

Still, buyouts did not make significant strides toward meeting the NPR goal of increasing the so-called "span of control" -- halving the supervisor-employee ratio from a government-wide average of 1:7 to 1:15 by the end of fiscal 1999.

In written testimony given to the House Civil Service Subcommittee in March, GAO reported that the ratio at Agriculture, which was 1:8 in fiscal 1993, will only reach 1:10 by fiscal 1996. And the average Commerce Department supervisor will oversee 8.4 employees in fiscal 1996 -- not a big improvement from the 6.6 employees under each supervisor in fiscal 1993. GAO's Kingsbury says it is unlikely the government-wide supervisor-employee ratio will reach the 1:15 goal by fiscal 1999.

The reason for the slow progress may be found in agencies like NASA.

The space agency hadn't planned to offer more than the 1,177 buyouts it approved in 1994, but it was forced to offer 2,000 more to help meet President Clinton's planned $ 5 billion NASA budget cut over five years. The buyouts were driven more by budget numbers than an interest in reducing supervisors, says Spence Armstrong, NASA's associate administrator for human resources and education; NASA thus made buyouts available to all employees. The agency estimates its supervisor-employee ratio will decrease from 1:5.4 in 1993 to 1:8 in 1996.

DoD isn't targeting supervisors, either. Government's largest department typically has used buyouts not to reduce the number of managers, but to soften the blow of base closures by offering them to managers and front-line employees alike. As a result, the average grade of those accepting a buyout at DoD is GS-9, which is also the average grade held by civilian employees government-wide.

With no immediate plans for more buyouts, the Administration can only depend on early retirement and attrition to increase the supervisor-employee ratio. But those reductions occur proportionately through all grade levels, so they don't help increase the span of control. Still, departments like Interior hope to halve their ratios to help meet the government-wide ratio goal of 1:15. The department's ratio, 1:6 in 1993, will bottom out at 1:12 in 1999, says Theresa Trujeque, Interior's deputy assistant secretary for human resources.

Nevertheless, the lack of significant progress in improving the ratios through buyouts had John Koskinen, deputy director for management at the Office of Management and Budget, backing away from the 1:15 goal. "We may not reach 1:15," he told Government Executive in March, "but what's important is that people are moving in the right direction."

Conversely, buyouts have provided a good start in cutting overhead positions, which the NPR has targeted for a 50 percent reduction by fiscal 1999. In its March testimony, GAO reported that by fiscal 1996, Agriculture and Commerce will have reduced the number of employees in personnel, budgeting, accounting, auditing, procurement and headquarters functions by 10 percent and 12 percent, respectively. NASA will have cut out 13 percent of its overhead positions.

Finding the additional cuts shouldn't be too difficult, Kingsbury says. Besides attrition, elimination of overhead positions will occur when agencies begin the second phase of reinventing government. REGO II, as it is known, calls for agencies to identify programs that can be discontinued, privatized or transferred to state and local governments.

DoD's Burden

The overall decrease in federal employment may be impressive, but some say DoD has unfairly shouldered most of the decline.

"The restructuring exercise thus far looks more like a Department of Defense workforce restructuring that a government-wide streamlining," complained House Civil Service Sub-committee chairman John Mica, R-Fla., during a hearing on downsizing in March. About three of every four positions eliminated in fiscal 1994 and 1995 came from DoD, GAO testified. (See graph.) And in fiscal 1996, the Administration estimates DoD will account for 94 percent of the 35,900 positions slated to be cut.

Mica pointed out that most of the cuts in non-Defense agencies were concentrated in a handful of agencies, and he urged OMB to begin to make more cuts "across the full scope of the executive branch and not just the Defense Department."

Koskinen defends the Administration's record so far, explaining that non-Defense cuts look smaller than they truly are because some agencies had to hire additional workers to carry out programs Congress expanded. In fiscal 1995 and 1996, for instance, Treasury plans to add 4,900 employees, most of whom will oversee the taxpayer compliance program in the Internal Revenue Service. In the same period, the Justice Department plans to have a net increase of nearly 13,900 workers, many of whom will implement provisions in the 1994 crime bill.

"You can't run more prisons without more people," Koskinen says. He also notes that DoD's share of cuts will drop to a little more than half of the total between 1997 and 1999.

Even with DoD accounting for about 75 percent of the total workforce reduction over the last two years, DoD executives aren't rankled. "I'm not sure anyone at DoD is complaining that we're shouldering more of a burden than other departments," says Ronald Sanders, former head of DoD's civilian personnel policy and now director of the recently established Center for Public Management at the Maxwell School of Citizenship and Public Affairs at Syracuse University.

Sanders says civilian Defense managers understand that DoD's downsizing is part of a continuing evolution in its mission following the end of the Cold War, which is a separate issue from NPR streamlining goals.

Matching cuts to changing missions is exactly what non-Defense agencies should be doing -- but aren't, says experts on government management.

The National Academy of Public Administration (NAPA) warns that decisions about what functions an agency should conduct should precede any cuts, the exact opposite of what's happening now. Meeting arbitrary employment ceilings "does not give . . . managers the flexibility they need to decide how best to structure their organizations around the functions which have been authorized by Congress and the Administration," testified NAPA fellow James Colvard, who once held high positions in NASA and the Navy, at a January hearing of the House Appropriations Sub-committee on Treasury, Postal Service and General Government.

Colvard's warning appears to be ringing true at some agencies. One of the executives who managed FAA's buyouts says overhead functions have been reduced so much that "we're feeling the impact. We're a little thin now." At the Social Security Administration, 1,200 supervisors, managers and overhead employees took buyouts, and executives still haven't developed a long-term plan to manage the crushing workload the agency expects as more Americans retire. "We've done what my mother always warned me not to do: We've put the cart before the horse," says an SSA official. And at NASA, "No one has the answers for how we'll do things in a different way," says Armstrong. "We're still working on it. I can only hope we haven't done anything dumb."

Smaller is Better

Nevertheless, the American public and Congress ultimately will judge the success of reinventing government less by how much better government works than by how much smaller it is. "Everybody understands head counts," Colvard said at the hearing.

On that score, the Clinton Administration has made points, as it is squarely on track to meet the goal of cutting the required 272,900 jobs by the end of fiscal 1999. The Administration needs to cut less than 100,000 jobs in 1997-99 to meet the goal.

GAO's Kingsbury says the Administration should have no problem making the cuts, even if it just relies on normal attrition. The annual attrition rate required to carve out the required 100,000 jobs is just 1.75 percent. Historically, attrition in government has been much higher -- about 5 percent, on average -- although it is now somewhat lower.

In addition, early retirement, or early outs, will be available until Sept. 30. OPM officials are meeting with agencies to determine whether early-out options should be extended into fiscal 1996. GAO does expect that some agencies will have to institute RIFs in order to comply with NPR goals, but a minimum are expected.

But before the White House reaches the vaunted 272,900 cuts, Congress may up the ante. As early as next month, Sen. William Roth, R-Del., chairman of the Governmental Affairs Committee, could unveil a plan that would require the executive branch to cut up to 860,000 civilian jobs -- more than three times the current target. To get there, up to half of all agencies and departments would be eliminated. Cutting the federal bureaucracy may be popular, but it remains to be seen if Americans are ready to slash government that much.

THINNING MANAGEMENT RANKS

The federal buyout program for domestic agencies was aimed in part at cutting the ranks of supervisors and managers. Progress was made, as indicated by data showing a concentration of buyouts going to employees in higher pay grades.

Among white-collar workers, 64 percent of the buyouts went to employees at GS-11 and above, though only 43 percent of the workforce was in those grades at the time the buyouts were authorized in March 1994. Still, the Administration appears unlikely to reach its goal of cutting the number of managers in half by 1999.


         Number of   Share of  Number of Share of

         Employees  Workforce  Buyouts * Buyouts



GS 1-10     482,250       57%      8,151     36%

GS-11       120,951        14      3,558      16

GS-12       126,304        15      4,539      20

GS-13        73,068         9      3,062      13

GS-14        28,838         3      2,051       9

GS-15         6,816         1      1,209       5                            SES           6,509         1        151       1

Total       844,736       100     22,721     100

* Another 4,700 buyouts went to wage-grade workers, nearly all of them in non-supervisory positions. Buyout figures are as of March 7, 1995.

Source: Office of Personnel Management

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