May 16, 2006 | WebMemo on Federal Budget
Under the FAA's final offer, total controller compensation would rise to $187,000 over five years, in contrast to the more than $200,000 that the controllers have been demanding since last September. As a result of this and other differences in the offers, taxpayers will save $600 million if Congress allows the FAA's contract to take effect.
Despite generous salaries and early retirement benefits, the controllers want more and have proposed a new five-year contract that includes an 18 percent pay increase, which would increase cash earnings from $128,000 to $151,000 and total compensation to over $200,000 by the last year in the contract. The federal government's counteroffer would allow cash pay to rise from an average of $128,000 in 2005 to $140,000 over the five-year contract, and total compensation would rise from $166,000 to $187,000.The government also proposes to create a new pay tier for new hires to repair the financial damage done by the 1998 contract.
In response to the proposed new pay tier, the controllers argue that expected controller retirements in the near term (10 percent over the next year and 75 percent over the next decade) will save $543 million over the next five years as the more highly paid senior controllers retire and are replaced by lower-paid new entrants under the existing scale.The FAA counters that the old contract, compared with the new pay tier, would provide new entrants with substantial pay increases during their early years that would offset any initial savings.
Since the existing contract expired in September 2005 and efforts to negotiate a new one have reached an impasse, the FAA invited the Federal Mediation and Conciliation Service (FMCS) to join the discussions to help reach a deal. Even with the FMCS, the impasse persisted, and negotiations broke down in early April 2006. The delay in reaching a new agreement is caused in part by the flaws and peculiar provisions in the 1998 agreement that work both for and against the controllers union, depending upon the rate of progress in the negotiations. To the controllers' considerable benefit, they continue to receive pay increases after expiration of the existing contract in September 2005. Under terms of that contract, between the contract's expiration and an agreement on a new one, controllers still receive annual pay increases "at a rate that is the greater of the government-wide increase plus 0.8 percent or the agency-wide increase." In other words, despite the absence of a new contract, controllers will continue to receive larger pay increases than their counterparts elsewhere in the civil service receive. As a consequence, the union's incentive to negotiate a compromise agreement with the government is greatly diminished.
However, the 1998 contract was not totally one-sided. It provided the government with some remedies in the event that the union became intransigent and abused its privileges as granted under the contract. Specifically, the 1998 contract included a safety valve that allows the FAA to impose a contract on the controllers, subject to congressional action, if good-faith negotiations came to a complete impasse.
That impasse arrived on April 5, 2006. As a result, the FAA's final offer will become the effective labor contract unless Congress intervenes in the union's favor. Yet with Congress under growing pressure to control spending better and hold the line on taxes, Members may not be inclined to aid a privileged class of government workers whose base salaries are already more than four times the average annual salary of their constituents employed in the private sector.
To thwart this outcome, several Members of Congress have introduced legislation to overturn the congressional role provided by the federal laws governing FAA-controller contract negotiations. Senator Barack Obama (D-IL) introduced S. 2201 in the Senate, and Representative Sue Kelly (R-NY) has introduced its companion bill (H. R. 4755) in the House of Representatives to limit the government's ability to curb the excessive growth in controller wages. If enacted, their proposal would eliminate the FAA's option of imposing a contract on the controllers when negotiations reach an impasse (a right that the federal government effectively has over the millions of other well-paid civil servants); terminate congressional responsibility over that portion of the FAA budgetary process; and transfer the final decision on the contract (and the federal budget) to an independent arbitrator.
Regardless of the legislative outcome, the Department of Transportation (DOT) and FAA leadership should be commended for holding the line against the union's excessive demands and attempts by the controllers' congressional supporters to undermine efforts to restrain spending. The government's success to date has also come at the expense of the union's highly paid lobbyists, members of a thriving industry in Washington, D.C., that is increasingly driving the federal budget process.Notably, the union's professional lobbyists have failed to garner many congressional cosponsors for the Obama-Kelly legislation beyond the predictable big spenders and union supporters.
Notwithstanding the intense resistance from the union and its congressional supporters, the FAA's proposal is comparatively timid considering the many financial and operational problems facing this government monopoly, which is struggling to operate in a fast changing world. While other nations have improved their aviation services and reduced air traffic control operating costs through the privatization and/or commercialization of all or some of their national aviation systems, America's aviation control system continues to operate in the warm and generous embrace of a government monopoly.
Recent FAA Privatization Successes
A DOT Inspector General review found that contracting out 187 Level 1 towers to private controller services saved taxpayers $250,000 per tower per year prior to the 1998 wage contract. Given the subsequent escalation in controller salaries, the Inspector General estimates that a contracting program applied to the remaining 71 FAA-managed Level 1 towers would save $881,000 per tower per year. Congress should encourage the FAA to pursue this opportunity to save an estimated $63 million per year in taxpayer money.
Despite bipartisan pro-union resistance in the House and Senate, the FAA successfully contracted out the 2,500 employee positions in flight service centers to a private company for a savings of $2.2 billion over the next 10 years. It achieves these savings by implementing new technologies and restructuring operations. These new technologies will allow the number of flight service centers to shrink from 58 to 20 and the number of government workers to fall from 2,500 to 1,500 while providing the same or better services.
What the Administration and Congress Should Do
Instead of pretending that such a monopolistic structure possesses any value in the modern world, the Administration and Congress should build on the FAA's successful resistance to the union's excessive wage demands, as well as on related privatization successes, by pursuing a comprehensive restructuring strategy that will move the FAA into the 21st century. To achieve this end, Congress should:
Federal Aviation Reauthorization Act of 1996, Public Law 104-264.
FAA data are from Marion C. Blakely, FAA Administrator, letter to Senator Barack Obama (D-IL), January 13, 2006.
All salary data are from Blakely letter to Senator Barack Obama.
National Air Traffic Controllers Association, "The Numbers Don't Lie."
See Ronald D. Utt, Ph.D., "A Primer on Lobbyists, Earmarks, and Congressional Reform," Heritage Foundation Backgrounder No. 1924, forthcoming.
Ronald D. Utt, Ph.D., "Will Congress Protect the Unionized Government Monopoly at the FAA?" Heritage Foundation Executive Memorandum No. 887, June 19, 2003, at www.heritage.org/Research/GovernmentReform/EM887.cfm.
See U.S. Department of Transportation, "Air Traffic Control: Analysis of Illustrative Corporate Financial Scenarios," May 3, 1994.