Committee Addresses Crisis in Federal Pay

Judge David R. Hansen (8^th Cir.) was appointed to the District Court for the Northern District of Iowa in 1986 and elevated to the Eighth Circuit in 1991. He became chair of the Judicial Conference Committee on the Judicial Branch in 1998.

Q:Judges have received only a single cost-of-living adjustment since 1993, the one in January 1998. What has this meant in terms of the erosion in take-home dollars for a judge's salary? A:Since January 1993, the value of a judge's salary has declined over 16 percent when measured against the Consumer Price Index. What that means is that each judge's annual salary is worth about $22,000 less today than it was in 1992. In the aggregate, since 1993, each judge has lost over $77,000 in purchasing power. On the other side of the coin, the caseloads of district judges have increased by more than 15 percent. This situation of having more work to do for less real pay is disheartening, discouraging, and de-moralizing to judges. But, we are not alone in feeling the real pain of con-stant salary erosion. The compensation of each member of Congress and high-level executive branch official has slipped in the very same way.

Judge David Hansen

Q:The assumption had been that the annual Employment Cost Index adjustment mechanism built into the 1989 Ethics Reform Act would eliminate this kind of problem. What went wrong?

A:After 1989, annual cost-of-living salary adjustments were something that judges and other top government officials were not supposed to worry about. The Ethics Reform Act provided for indexed cost-of-living salary adjustments in each year that the pay of the rank and file federal employees was adjusted. The Act worked well for the first two or three years, and the Congress, the Judiciary, and the senior Executive Branch officials received the salary adjustments contemplated when the Act was passed—adjustments that were statutorily designed to maintain what had been determined by the Congress in 1989 to be fair and adequate salaries. In 1993 all of government joined in a belt-tightening effort because of the size of the projected budget deficit and the perceived state of the economy, and no government employee received a COLA. Every year thereafter, with the exception of 1997 when Congress authorized a 2.3 percent cost-of-living adjustment payable in 1998, the Congress has seen fit to deny itself the annual cost-of-living adjustment already authorized by the 1989 Act, and in so doing, it has also denied the Act's benefits to the Judiciary and the senior officials of the executive branch.

The problem is that only Congress can fix the pay of its members, judges, and other top government officials, or create a mechanism for doing so. Members of Congress recognize the delicate nature of this conflict, and they are often reluctant to allow themselves to receive even modest cost-of-living salary adjustments because they fear an adverse public reaction. I wish the media would help explain their financial needs, including the need of many of them to maintain two

Q:The Ethics Reform Act also created a Citizens Commission on Public Service and Compensation. What was its original purpose? And what happened to the Commission?

A:In 1989, Congress adopted a new approach to the problem of setting the salaries of top government officials by establishing a Citizens' Commission on Public Service and Compensation to replace what was informally known as the Quadrennial Salary Commission. The Citizens' Commission is substantially different from the Quadrennial Salary Commission, and Congress adopted the new system because members believed that the public was unhappy with certain features of the former process. In particular, many members believed that the public was irate because the Quadrennial Commission's recommendations could take effect in an automatic fashion without a recorded vote.

The Citizens' Commission, like the Quadrennial Salary Commission, was to be appointed every four years with the mission of recommending salary levels for top government officials. The first commission was to be convened in 1993; however, Congress rescinded its funding, and only four of 11 members were named. The Chief Justice named two appointees, and I understand that the President pro tempore of the Senate made appointments as well.

Prior to 1967, which is the year the Quadrennial Salary Commission system was established, there was no established mechanism for adjusting the pay of judges and other top government officials. As a result, top government employees went years without salary adjustments. The Quadrennial Salary Commission was intended to bring a degree of fairness and regularity to the politically charged issue of federal compensation. This system, while not perfect, did lead to some periodic upward adjustments in pay.

Q: Where has the Judicial Conference stood on the issue of salary adjustments for judges?

A:The Judicial Conference strongly believes that Congress and the President should let the Ethics Reform Act's Employment Cost Index mechanism work. The crisis in federal pay in the 1980's came about largely because of the absence of such annual and automatic cost-of-living salary adjustments. When the Ethics Reform Act was enacted, it was understood that the Employment Cost Index mechanism would provide top government officials with regular cost-of-living salary adjustments which would alleviate the future need for major "catch-up" adjustments of the type enacted in 1989.

The Conference also supports a pay adjustment for judges to recoup lost annual cost-of-living salary adjustments. Such an adjustment would not raise in absolute terms the salaries of judges and other top government officials, it would simply restore their lost purchasing power.

The Conference also wants to address the problem of salary compression. Within the Judiciary, the salaries of court unit executives are bumping up against (and, in some instances, surpassing) the salaries of bankruptcy judges and magistrate judges. Similar compression is affecting the pay of executive branch officials, as well. In San Francisco, officials in the top four levels of the Senior Executive Ser-vice (SES) are bumping up against the salary cap of $125,900. In most other localities, officials in the top three levels of the SES have hit this cap.

Q:Your Committee on the Judicial Branch has made recommendations in the past on judicial salaries. What is the Committee's agenda for the 106^th Congress?

A:The Committee is deeply concerned about the pattern of pay slippage that has emerged due to the denial of annual cost-of-living salary adjustments. In 1989, judges, in return for the assurance of annual and automatic cost-of-living salary adjustments, accepted severe limits on income earned from outside sources and honoraria. If Congress and the President do not reverse this pattern of salary neglect, it will threaten judicial independence, as well as the ability of the Judiciary to attract and retain talented, public-spirited people who could and do earn much more money elsewhere. It has not escaped our notice that pursuant to legislation passed last year, the IRS is now authorized to pay its most senior managers salaries equal to that paid to the Chief Justice.

Q:What is the public perception of COLA-type pay adjustments for elected officials and federal judges?

A:I believe that a majority of the public supports compensating its government's top officials fairly, and that includes some method of protecting the pay of those officials from the effects of inflation. Good modern government demands the sharpest minds and the sharpest talents to solve the problems of an ever increasingly complex society, and government must be at least reasonably competitive with the salaries and benefits offered in the private sector.

Judges, like any other employees, do not expect to receive real salary increases annually; however, judges also do not accept judicial appointments anticipating that their purchasing power will shrink annually. I sometimes wonder how quickly those judges appointed in 1993 would have accepted their commissions if they had been told then that their real pay would be worth $22,000 less per year by 1999. We live in a society where cost-of-living salary adjustments to maintain purchasing power—whether such adjustments are made pursuant to a collective bargaining agreement or a statute (as in the case of Social Security)—are a fact of economic life. The danger in denying top government officials annual cost-of-living salary adjustments to protect them against salary erosion is that the best and the brightest will refuse to enter government service because it will entail too great a financial sacrifice. Able lawyers are more than willing to make some sacrifices for the prestige and sense of public service that the Judiciary offers, but psychic income does not protect you from increases in the cost of living, nor does it buy a house and pay a mortgage, or send children to college

Q:In your opinion, what is the single greatest impediment to a cost-of-living increase for judges?

A:The reluctance of the Congress to let the 1989 Act work as it was intended to grant its members a cost-of-living adjustment.

Q:Legislation on judicial benefits surfaced briefly in the 105^th Congress. What happened to the bill, and what do you expect, legislatively, in the coming session?

A:Last summer, the Judiciary sought legislation authorizing it to establish a flexible benefits plan, including a cafeteria plan, for a period of five years for federal judicial officers and employees.

Flexible benefits plans and cafeteria plans are almost universal in the large employee private sector and are also very common within state governments. In fact, the Judiciary's proposed plan is very similar to one proposed for House members and employees by the House Oversight Committee in 1996.

Essentially, a flexible benefits plan allows an employee to divert salary to an employee's benefits on a pre-tax basis, thus transforming the benefits into non-taxable fringe benefits. An employee would save money by not paying taxes on the portion of the employee's salary that pays insurance premiums. In this way, employees may have easier access to such essential benefits as health care and dependent care While the Judiciary would continue to offer judges and employees the current federal benefits package, this statutory change would authorize the Director of the Administrative Office to make new supplemental benefits available, including dental benefits, short- and long-term disability benefits, long-term care insurance, and vision care. Last year our proposed legislation was included in an omnibus civil service bill containing over 40 provisions, some provisions of which were strongly opposed by federal employee unions, as well as by some key members of the House Civil Service Subcommittee. In the face of strong opposition to many of the draft bill's provisions, then House Civil Service Subcommittee Chairman John Mica (RFL) agreed to pursue only several provisions that had the unanimous support of subcommittee members. As a result, the Judiciary's flexible benefits legislation did not make it out of subcommittee.

I believe that the Judiciary will seek to have similar legislation introduced this year.