U.S. Office of Personnel Management - Ensuring the Federal Government has an effective civilian workforce

Mr. Chairman and Members of the Subcommittee:

I appreciate the opportunity to appear before you today to discuss the Office of Personnel Management (OPM) appropriations request for Fiscal Year 2009.

As you know, OPM provides a variety of products and services to the nearly 1.8 million employees in the Federal Government. Some of our products and services include managing health insurance for approximately 8 million current and former Federal employees and their families, administering retirement services for over 2 million retirees from all branches of Government, completing 90 percent of background investigations for industry and Federal agencies, and administering career development programs. As the OPM Director, I am committed to successfully delivering on our responsibilities on a timely basis. In short, I believe the American citizens and the Federal civilian workforce expect us to get things done, and our FY 2009 budget request will allow us to do just that.

We are requesting $20.0 billion to carry out our mission in FY 2009. Of this total, $19.8 billion is requested for mandatory programs and $228.9 million for discretionary activities. The discretionary request reflects $211 million for Salaries and Expenses - including transfers from the Trust Fund Accounts of $118.1 million - and $18 million for the Office of the Inspector General. The total discretionary request reflects a net decrease of $15.4 million compared to the FY 2008 enacted level. I also want to note that OPM operates a revolving fund for the administration and operations of a number of programs including our Federal investigative services and Government-wide training efforts.

Retirement Claims Processing and Benefits Programs

OPM's request includes funding to improve the services it delivers to Federal employees, annuitants, and their families through the retirement and insurance programs.

On February 25, 2008, OPM began the rollout of the first ever Federal electronic retirement system. The budget requests an additional $15.2 million in No-Year Trust funds for continuation of this project. These funds will allow OPM to continue the conversion of millions of paper retirement records to electronic data and contract for the information technology needed for the system so that retirees can receive full payments once they separate from service eliminating interim payments at reduced amounts. At full rollout, employees will be able to model their retirement and initiate the process.

Federal Employees Health Benefits Program (FEHB)

As the administrator of the FEHBP, OPM will continue to negotiate and contract with private insurance companies that offer a broad range of health insurance benefits, including high-deductible health plans with Health Savings Accounts and consumer-driven health plan options. As such, OPM will spend $26 million in FY 2009 to ensure the viability of the Program's 283 health care plans covering over 8 million people. As usual, OPM will continue to carry out tough negotiations with health carriers to contain premium hikes. Over the years these negotiations have resulted in employee premiums that are substantially lower than those of the private sector while maintaining benefit levels, and continuing to provide, improve, and expand tools so customers can make informed health insurance decisions. In fact, the FEHBP increase for 2008 was 2.1 percent, compared to an average 8.7 percent increase for the private sector and a 6.3 percent increase for the California Public Employees' Retirement System during that same year.

Human Resources Management

In FY 2009, OPM will pursue policy initiatives that continue to reform human resources management in Federal agencies. We will work with the Department of Defense to ensure the reforms underway link pay to performance in a fair and consistent manner. At the same time, OPM will work with other agencies engaged in implementing Alternative Personnel Systems to assess the lessons learned from various modernization efforts. Mr. Chairman, in the last half-century, the Federal workforce has changed significantly, and the old personnel system has not kept pace.

The FY 2009 budget will allow OPM to maintain the competitiveness of Federal employee compensation and benefits by exploring ways to refine market adjustments to Federal pay, and providing Federal employees with opportunities, benefits, and service delivery that compare favorably with other employers. For instance, OPM will continue to develop new workforce recruitment strategies and tools, and further improve the hiring process by developing a life-cycle reform model for agencies to adopt to streamline the current recruitment process. And last but not least, OPM will spend $200,000 to continue to support the Nation's returning Veterans by providing assistance in finding job opportunities with the Federal Government.

Implementing Human Capital Standards for Success

OPM will use requested funds to engage Federal agencies in implementing the Human Capital Assessment and Accountability Framework, and other best practices in human capital management, in keeping with the Merit System Principles, veterans' preference, and other standards. At the beginning of FY 2008, 17 of the 26 agencies reporting under the President's Management Agenda Scorecard have met these standards, up from 11 in 2006, eight in 2005, and zero in 2003. As a result, more than 99 percent of the Federal civilian workforce is employed by agencies that have made significant progress toward meeting these standards.

Through its Compliance Program, OPM will continue to evaluate, review, and ensure agencies comply with Merit System Principles and veterans' preference, and to ensure whistleblower protection and other rights and privileges are honored and protected. OPM will strengthen this program through a human capital accountability system that holds agencies accountable for adhering to these principles, laws, and rules, as well as the human capital best practices referenced above.

Human Resources Line of Business

In 2009, OPM will continue to be a leader in the President's Management Initiative for Expanded Electronic Government and has included $7,202,000 in its request for this purpose. The requested resources will support the Human Resources Line of Business (HR LOB) and Enterprise Human Resources Integration (EHRI). HR LOB will continue to identify and document common functional, technical, and data requirements consistent with Federal human resources policies and will work toward the establishment of Federal and private sector Shared Service Centers to meet these requirements. During 2009, the EHRI project will continue to modernize how the Federal Government maintains, stores, protects, and transmits information on human resources transactions.

Security-Related Activities

The FY 2009 request includes funding for a number of important security-related activities. OPM will implement Homeland Security Presidential Directive 12 (HSPD-12), Policy for a Common Identification Standard for Federal Employees and Contractors, which was signed by the President on August 27, 2004. This mandates the circulation of a Federal standard for a secure and reliable form of identification for Federal employees and contractors. HSPD-12 requirements will enhance OPM's strategic goal of improving security and emergency planning actions throughout the agency.

Revolving Fund

OPM also provides a variety of ongoing services that are financed by other agencies through our revolving fund. These services include providing one-stop access to high-quality e-Training products and services; offering professional development and continuous learning for Federal managers and executives; providing employment information and assessment services; automating other agencies' staffing systems; providing examining services when requested by an agency; providing technical assistance and consulting services on all facets of Human Resources management; testing potential military personnel for the Department of Defense where it is cost-effective for OPM to do so; managing the selection, coordination, and development of Presidential Management Fellows; and conducting investigations for all employees to determine whether they are suitable for employment, as well as more in-depth investigations for employees whose positions require security clearances. For those ongoing revolving fund responsibilities, the FY 2009 budget includes an estimated $1 billion in obligations and 3,131 FTE to be financed through payments for OPM's services by other agencies.

Mandatory Payment Accounts

The OPM budget request also includes mandatory appropriations to fund the Government contributions to the health benefits and life insurance programs for Federal annuitants.

For the approximately 1.9 million annuitants participating in the Federal Employees Health Benefits Program, we estimate that about $9.6 billion will be needed to pay the Government's share of the cost of coverage. That represents an increase of $769 million over FY 2008. We estimate that, for the 500,000 annuitants under age 65 who elect post-employment life insurance coverage, an appropriation of $46 million will be required.

Also, as mandated by the financing system established in 1969 by Public Law 91-93, liabilities resulting from changes (principally pay raises) since that year that affect retirement benefits must be amortized over a 30-year period. For that purpose, we are requesting a "such sums as may be necessary" payment to the Civil Service Retirement and Disability Fund in the amount of $10.2 billion dollars. This represents an increase of $100 million to cover the service cost of the Civil Service Retirement System, which is not funded by and for active employees.

Thank you again for the opportunity to appear before you today to discuss OPM's budget request. I would be pleased to answer any questions you may have.