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Backgrounder #1034 on Federal Budget

May 16, 1995

Slashing Congressional Spending, Part I:  Congressional Pay,Pensions, Perks, and Staff

By

INTRODUCTION

Excessive pay, perks, and expenses focused citizen anger on Congress and helped trigger the 1994 electoral revolution. The new Republican majorities in the House and Senate moved quickly to cut staff and expenses and eliminate many of Congress's exemptions from the law. Further steps are necessary, however, to reduce perks, reform pensions, and further trim staff. Congressional committees currently are considering some of these reforms, while others will likely be debated in the course of the appropriations process. But several problems remain.

Automatic pay raises are scheduled each year with no vote required, further boosting lawmakers' salaries, which already exceed $11,000 a month;

Congressional pensions far exceed most private-sector plans, and benefits exceed those of most other federal employees;

Taxpayer-funded mailings, travel, and other perks are abused to promote incumbents' reelection bids; and

Congress remains the most heavily staffed legislature in the world.

These perks continue to insulate Congress from American citizens, frustrate political fairness, and promote legislative careerism and bureaucracy. Reforms in these areas will mean a more efficient, representative, and politically competitive Congress.

PAY. Congress should repeal its automatic pay raise so that Members will have to bear political responsibility for raising their own pay. Given the recent adoption of the 27th Amendment -- which attempts to prevent lawmakers from raising their own pay without taking responsibility for it at the polls -- the time for ending automatic pay hikes has come. Because that amendment was drafted long before cost of living adjustments were conceived, the constitutionality of current automatic adjustments is debatable, but the amendment's intent is clear and gives Congress an additional reason to end the practice. Congress also should enforce existing federal laws that dock lawmakers' pay for unexcused absences.

PENSIONS. Congress should reform its pension system, which encourages careerism and is twice as generous as any private-sector plan. The current system of escalating benefits creates open-ended liabilities for taxpayers and should be changed to one funded largely or exclusively by the contributions of Members themselves, similar to private-sector 401(k) retirement accounts. New rules should apply to all Members elected or reelected in 1996 or later, forcing Members either to leave office at the end of the 104th Congress under the old pension system or to continue into the 105th Congress under new rules.

PERKS. Official franking (postage), travel, and media resources contribute significantly to historically high incumbent reelection rates. Congress should trim perks with an eye to eliminating unjustifiable campaign-related spending, especially the frank. At a minimum, the House should double the franking cuts recently authorized by its Oversight Committee. Congress's ultimate goal should be to eliminate the mass mailings its Members send out -- mailings which accomplish little besides serving as taxpayer-funded quasi- campaign aids -- either by cutting the funds available for franking or by regulating mass mailings out of existence. Subsidies for publications and services like calendars and recording studios that lack any legislative function should be ended, and such other perks as frequent flier miles accrued through official travel and free medical care from military hospitals should be disallowed.

STAFF. Congress's huge staff is expensive and opens the door to bigger and more intrusive government. The role played by aides in congressional elections should be curtailed or eliminated entirely. A cut in personal staffs, so far untouched by the new Republican Congress, would force lawmakers to make more decisions directly instead of leaving them to subordinates.

The new Congress has made an impressive start on franking and committee staff cuts. However, to complete the reform effort, Members must deal with their automatic pay raises, fat pensions, taxpayer- funded perks, and retinues of personal staff. Until they do, the overgrown Congress will remain less efficient, effective, and thrifty and more insulated from the real world than it ought to be.

A FAST START FOR REFORMS

Congressional reform was a major focus of the Contract with America, and the new Congress deserves praise for aggressively beginning to reform itself in a few short weeks. Rules changes and staff cuts were among the first- day items in the Contract, which also included term limits, line-item veto power for the President, and a balanced budget amendment. Such changes will affect congressional powers and operations dramatically.

On the very first day the House was in session, it voted to shrink committee staff by one-third and abolish three committees and twenty- five subcommittees, in keeping with the promises of the Contract. Given that House committee staff had grown to roughly 1,200 percent of its size at the end of World War II, such a cut was long overdue. These reforms did more than eliminate some committee redundancy; they saved money. The Oversight Committee was able to cut committee funding by 30 percent because of staff cuts, saving taxpayers $67 million yearly. Similar cuts -- a 15 percent cut in committee funding and a 12.5 percent cut in funds for leadership offices -- have been made in the Senate.

In January, Congress passed and the President signed legislation applying to Congress eleven federal laws, such as the Occupational Safety and Health Act, the Americans with Disabilities Act, and the Civil Rights Act, from which it had been exempt. for the first time in history, aggrieved staffers can take their cases to federal court, argue them before a jury, and have access to appeals. The rapid passage of the Congressional Accountability Act with strong bipartisan support is a credit to Speaker of the House Newt Gingrich, Senate Majority Leader Bob Dole, and other congressional leaders.

In March, the House Oversight Committee approved a one-third cut in members' franking allowances from their 1994 authorizations. This would save over $20 million in postage-related spending yearly, bringing down the average yearly spending ceiling per congressional office from $163,000 to $108,000. This is a healthy step on the road to elimination of franking abuses.

In April, the House passed legislation that would bring generous congressional pensions more in line with those of other federal employees. The legislation would reduce the benefits accrual rate to equal those of other federal employees; increase the contributions lawmakers and other federal employees make to their own retirement, bringing the share of benefits paid for by employees from 28 percent to 34 percent; and bring pension calculation practices into parity with the private sector by calculating retirement ann cities on the basis of the highest five, not three, years of salaried employment. These reforms are long overdue, given that the federal employee pension system now has a shortfall of over half a trillion dollars, which must be paid for out of general revenues.

In short, the actions Congress already has taken demonstrate a serious commitment to internal reform and bode well for the difficult tasks that lie ahead. The most pressing areas for further reform are congressional pay, pensions, perks, and staff.

CONGRESSIONAL PAY

Federal lawmakers' salaries have been a source of controversy since the early nineteenth century. When Congress passed its first pay raise in 1816, furious voters replaced nearly two-thirds of the House of Representatives -- a turnover rate unsurpassed until the controversies over slavery that led eventually to the War Between the States. The next Congress responded by repealing the pay raise. Perennial controversies over lawmakers' pay have led Congress to experiment with establishing independent panels to set pay scales, providing tax deductions for lawmakers' Washington living expenses, and attaching congressional pay raises to bills adjusting all federal workers' salaries.

Currently, the taxpayer pays each Member of Congress $133,600 yearly. The "ethics reform" passed by Congress in 1989 provided for annual cost of living adjustments (COLAs) derived from the Bureau of Labor Statistics' index of wages and salaries in private industry so that lawmakers would never have to vote on politically explosive pay raises. Representative John Boehner (R-OH), now Chairman of the House Republican Conference, brought suit against the automatic COLA in 1992 on the grounds that it violates the 27th Amendment's stricture against implementing legislative pay raises without an intervening election. The lawsuit failed at both the federal district and federal appellate levels, however, thus making the amendment's intent -- that a Congress should not be allowed to change its own salary without an intervening election -- a dead letter. Neither Boehner nor the other 20 Members who had standing in the case chose to appeal the appellate decision to the Supreme Court.

Although the congressional COLAs are intended to be automatic, it is possible for determined Members to block their implementation. Last year, for instance, the House voted to amend the Treasury/Postal Service appropriations bill to delete the pay raise scheduled for January 1995. When Representative Jim Ross Lightfoot (R-IA) realized that the conference committee for the appropriation intended to delete the House provision blocking the pay hike, he threatened to call for a House vote to instruct the conference committee to eliminate the pay raise. Although Lightfoot's motion would not have been binding on the conferees, the threat of having to defy what almost certainly would have been a lopsided negative vote was enough to make the committee retreat on its pay raise efforts. Similar efforts blocked a COLA scheduled for 1994.

Ultimately, however, such actions block COLAs for only one year, leaving automatic pay raises to reappear every year. The long- term solution is to rewrite the law to eliminate automatic pay raises, especially since the political pressures that blocked new COLAs for the past two years show every sign of continuing. Since most workers do not receive an automatic pay hike every year, it is difficult to see why Congress should, especially when Members do not even have to vote on it. The Constitution puts Congress in charge of setting its own pay; Members should accept that responsibility.

Representatives Michael Bilirakis (R-FL), Howard Coble (R- NC), Marge Roukema (R-NJ), and Gerald Solomon (R-NY) independently have introduced legislation that would eliminate the automatic congressional COLA currently in effect. Representative Andy Jacobs's (D-IN) H.R. 834 would cut congressional pay to its 1989, pre-"ethics reform" level of $89,500 yearly.

The federal law that requires Members to forgo their salary if they fail to show up for work should be enforced. This has become a problem particularly among lawmakers who run for other offices or lose their primary bids for reelection. For instance, in the 103rd Congress, Representative Craig Washington (D-TX), who was beaten in his reelection primary, subsequently failed to show up for work for two months; Representative Jim Slattery (D-KS) was absent for 40 days while campaigning unsuccessfully for governor; and Representative Fred Grandy (R-IA) was absent for more than a month during his failed gubernatorial campaign. Over $47,000 of taxpayer money was paid to these three no- show Congressmen for the days they missed. Since federal law permits paid absences for lawmakers only in the case of personal or family illness, these Representatives essentially are profiting from Congress's failure to enforce its own laws -- a problem that is compounded when unexcused absences occur just before primary elections, since voters have relatively little opportunity to take absences into account. The National Taxpayers Union has filed a complaint with the House Ethics Committee, but ethics complaints should not be required to make Congress follow the rules it has set for itself.

Paying lawmakers' salaries when they do not show up for work not only wastes money, but also subsidizes their campaigns for election to other offices or reelection to those they already hold. Former congressional candidate Michael Maibach has experienced how campaign laws make it more difficult for private-sector employees to be elected to Congress: "[Out of 15 candidates for one congressional seat, I was] the only one on a private payroll. The other 14 included three sitting county supervisors and one state legislator. While the law required that I not campaign on [my employer's] time, those already in office had no such constraint. Taxpayers, in effect, paid them to campaign for their next office!... Lawmakers who make it illegal to campaign on 'company time' make it legal for themselves to campaign on 'government time.'" Maibach concludes that the current system locks out most candidates who are not self-employed, independently wealthy, or already holding public office.

In addition to the tremendous disadvantages private-sector candidates already face, the Federal Election Commission has proposed greater regulation of the personal use of campaign funds, which would eliminate candidates' ability to pay themselves a salary during campaigns. Payment of salaries from campaign funds is often the only way many challengers can approach parity with incumbents, each of whom is paid a full salary even while campaigning. Ironically, when former Maryland Senate candidate Alan Keyes paid himself a salary from campaign funds, he was buffeted by accusations of unethical conduct, despite the fact that his purpose was merely to put himself on the same level as the incumbent he faced -- who retained a full-time salary while campaigning, paid for by taxpayers.

The most sweeping solution to the problem of a Congress too highly paid and too insulated from the experiences of the rest of the country is presidential aspirant Lamar Alexander's proposal to "cut their pay and send them home." Alexander advocates a 50 percent salary cut coupled with legislative sessions of no more than six months per year. This would permit lawmakers to retain an authentic connection to the districts they represent by living and working there, rather than acquiring a Washington mindset that often is antithetical to the desires of their constituents.

CONGRESSIONAL PENSIONS

Congress's pension system is roughly twice as generous as those of most Fortune 500 corporations. Not only do these generous pensions burden the taxpayers, but they also promote political careerism by providing incentives for lawmakers to extend their tenure. Over 250 Members of the 103rd Congress will become "pension millionaires," receiving pension income after their retirement in excess of $1 million. For instance, former Speaker of the House Tom Foley is eligible for nearly $124,000 per year in addition to the pay he will receive from his job at a lobbying/law firm. The former Speaker could take in over $3 million in pension checks over the course of his expected lifetime. COLAs are applied to congressional pensions as well as congressional salaries. Only one in ten private-sector pensions is adjusted for inflation, and many of those compensate for only a third of the inflation rate.

Although some Members of Congress have defended their pension system as being the same as that of other federal workers, legislators' pensions actually are far more generous. Congressional pension formulas have the same high "accrual rate" -- one of the formula's three variables -- as those of policemen and firefighters. Since the pension formulas of few other occupations are so high, and since the work of a Congressman rarely contains dangers on a par with entering burning buildings or subduing felons, it is difficult to justify the extra- high accrual rates. Inflated pension formulas compound the problem of legislators' ignorance of and inexperience with the economic challenges of those they ostensibly represent.

With the public becoming noticeably more exercised about congressional pensions, several lawmakers have produced pension reform proposals. Representative Howard Coble's (R-NC) H.R. 165 is the most radical; it removes legislators from the federal employee retirement system, thus eliminating pension benefits from congressional service. Another Coble bill, H.R. 126, would eliminate the COLA from congressional pensions. Senator John McCain's (R-AZ) S. 48 would subject legislators' retirement annuities to the standard current earnings test, which would make congressional pension recipients vulnerable to the same rate of taxation that Social Security recipients face. Senator Spencer Abraham's (R-MI) S. 355 would mandate disclosure of pension contributions, expected returns, and any other information needed to calculate the total costs to taxpayers of congressional pensions. Senator Richard Bryan (D-NV) has offered S. 288, which lowers congressional pension accrual rates to the same level as federal pensions and caps retired lawmakers' payments at the level of their final high salary; in the House, Representatives Glen Browder (D-AL) and Bob Goodlatte (R-VA) have introduced similar measures, H.R. 907 and H.R. 575, respectively. As noted above, pension reforms recently approved by the House include adjustments to accrual rates. Senator Bryan has promised to seek a vote on his measure shortly.

Representative Dan Miller's (R-FL) proposal, H.R. 804, is the most comprehensive: Miller's plan would eliminate the current congressional pension system for Members who begin their service in the 105th Congress or later and replace it with a 401(k)-style tax- exempt savings plan. This would mirror the move from "defined benefit" plans to "defined contribution" plans currently taking place in the private sector by letting legislators decide how much they wish to contribute to their own retirement and freeing taxpayers from unfunded pension liabilities. Contributions of up to 5 percent of salary would be matched for up to twelve years of service, after which, although the limit for a Member's own contributions would be raised to 10 percent, taxpayers no longer would match these retirement savings. Capping the donation limit at twelve years would remove any pension-related financial incentive for serving in Congress longer than that period of time. Legislators also would retain Social Security benefits. Members with service prior to the 105th Congress would be allowed to continue contributing to their pensions until they were vested, in order to fulfill the expectations upon which they relied when making previous contributions, but no more contributions after the twelve- year limit would be accepted.

Miller's plan moves in the right direction, but it could be improved. The ultimate goal of pension reform should be to remove all lawmakers from defined benefit plans. This would reduce the incentives to stay in office and would be a first step toward easing the unfunded liability of the Civil Service Retirement System (currently estimated at over $500 billion). The best solution is to require all Members to enter defined contribution plans as a condition of further congressional service. Since it is arguably unfair to take away benefits without notice from lawmakers who have planned for them in the past, lawmakers ought to be given a choice: either retire at the end of the 104th Congress with their current pension intact or (assuming they win reelection) enter the 105th Congress with a defined contribution plan that does not impose additional liabilities on the taxpayer.

A similar proposal was applied in the 102nd Congress, when Members were given notice that they would forfeit the privilege of taking their campaign funds for personal use upon retirement, as they traditionally had been able to do, if they remained into the 103rd Congress. Although some defenders of the current pension system may argue that lawmakers who assumed it would continue have made their financial plans on that basis, election to Congress is a limited-term contract of employment that inevitably expires. Since lawmakers are not entitled to assume they will win their next campaign for reelection, they certainly cannot assume continuous preservation and expansion of pension benefits premised upon reelection.

Finally, Congress should adopt a similar solution for all federal employees, since switching congressional pensions to a defined contribution system leaves the problem of other federal pensions -- and their unfunded liabilities -- unsolved. The legislation the House passed in April, which equalizes accrual rates and contribution levels among Members, congressional staff, and other federal workers, is a step toward this goal. However, it only postpones rather than eliminates the liability crisis which ultimately will be borne by taxpayers.

CONGRESSIONAL PERKS

The keystone of congressional perks is the frank -- mail from congressional offices paid for by taxpayers, not lawmakers. Use of the frank permits every incumbent to send out hundreds of thousands of dollars worth of self-publicizing mail and stoke the fires of reelection. Although House measures to cut staff, committees, and subcommittees have received more attention, franking cuts arguably are even more important. Earlier this month, the House Oversight Committee authorized a one-third cut from the 1994 funding level for franked mail, bringing down the average spending ceiling per member for franked mail from $326,000 to $216,000 per two- year term. (Even this reduced ceiling exceeds the amount -- roughly $206,000 -- the average major-party challenger spent on his entire 1994 campaign.) A series of reforms in Senate franking over the past several years have come close to eliminating taxpayer-funded mass mailings in that body.

Although the franking privilege dates back to the First Continental Congress of 1775, most of the abuses it has fostered have a considerably more modern pedigree. Many derive from "postal patron" mailings, delivered to each stop on a postal route and therefore not required to carry a specific name or address. Before the early 1960s, postal patron mail almost always was restricted to rural or private carrier routes. (For two brief periods, first in the mid-1930s and later in the mid-1950s, city routes could receive postal patron mailings.) Since that time, expanded use of postal patron mail and advances in technology -- primarily computers that sort and target demographic groups and printers that produce personalized letters -- have combined to grant incumbents impressive taxpayer-funded direct- mail capabilities.

Before 1973, the only standards that regulated franking were those formulated by the courts and postal authorities, whose reluctance to irritate Congress led to lax enforcement and general confusion about the frank's proper use. This climate led to several questionable uses of the frank in the 1972 elections. Representative Fletcher Thompson (R-GA), for example, sent franked mail to voters across his state in the course of an unsuccessful Senate campaign. The cost of the mailing -- over $200,000 -- became a factor in Thompson's eventual loss to Sam Nunn. With twelve cases of alleged abuse in the courts, lawmakers moved in 1973 to create new franking guidelines. New regulations defined frankable material, restricted mass mailings, and created a House Commission on Congressional Mailing Standards to resolve franking disputes and rule on individual cases. Similar duties were assigned to the Senate Select Committee on Standards and Conduct (later renamed the Select Ethics Committee).

Although the regulations issued by the Commission on Mailing Standards have eliminated the frank's most crassly reelection- oriented uses (for instance, Members are blocked from sending mass mailings statewide or 60 days before they appear on the ballot, must disclose the amount they spend on franking, and no longer may send letters of congratulation for birthdays or anniversaries), they betray an awareness that mass mailings are used all too frequently to bolster the name identification and image of their senders. For instance, the "guidelines" (which do not carry the full force and effect of regulations) that the Commission issued limiting all mailings to two pictures of the sending Congressman per page and eight mentions of his or her name (not including use of the name in the frank proper, the masthead, the return address, a photo caption, a reprint from the Congressional Record, or a signature) not only illustrates the self- promotional potential of the frank for incumbents, but also raises disturbing questions about the extent of such use before any reforms were issued.

Although the word frank is derived from the Latin for free (francus), franked mail is decidedly not free. As computer and printer technology improved in the 1970s and 1980s, making it easier to send targeted direct mail and produce impressive postal patron mailings, the use of the frank exploded. Between 1972 and 1988, yearly franking costs increased, after adjusting for inflation, by 86 percent. During the 1980s, Congress spent from a low of $43 million per year to a high of $113 million per year on taxpayer-funded postage. House franking has risen in every election year by an average of 64 percent from the previous year since 1980. In 1993, for example, House franking costs totaled $24.6 million, which grew to $42.3 million in 1994 -- a 72 percent increase. Franking trends show a decided drop beginning in the early 1990s. Although causation is difficult to prove, the 1990 rules requiring individual office disclosure of franking amounts (and the attendant embarrassment that comes from a great deal of franking) probably had something to do with the drop. Franking costs, however, remain well above their pre-mass mailing level.

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