STATEMENT OF
THOMAS L. GARTHWAITE, M.D.
DEPUTY UNDER SECRETARY FOR HEALTH
DEPARTMENT OF VETERANS AFFAIRS
AT THE ON-THE-RECORD BREIFING ADDRESSING
DEPARTMENT OF VETERANS AFFAIRS BUYOUT AUTHORITY
BEFORE
THE
COMMITTEE ON VETERANS' AFFAIRS
UNITED STATES SENATE

May 6, 1999

I am pleased to appear before the Committee today to discuss the Department of Veterans Affairs’ (VA) proposed legislation to provide temporary authority for the use of voluntary separation incentives to reduce employment levels and to restructure staff. On April 13, 1999, VA transmitted its proposed legislation to the Congress, and on

May 3, 1999, Chairman Specter introduced the bill as S. 940.

In the next several years, VA will continue to undergo significant changes primarily due to changes in delivery of care and benefits and technology enhancement. VA believes that offering separation incentives, or buyouts, can be an appropriate tool, along with the current Early Retirement Authority and Reduction-in-Force authority, for those VA components that are redesigning their employment mix. The Veterans Health Administration (VHA) and the Veterans Benefits Administration (VBA) are engaged in significant reengineering and restructuring and would benefit greatly from this authority.

Voluntary separation incentives were offered in VA as a result of the Federal Workforce Restructuring Act of 1994, and the Treasury, Postal Service, and General Government Appropriations Act of 1997. We believe that VA used these previous authorities conservatively, responsibly, and effectively. VA did not use this authority as a "golden handshake," or to reward employees who were going to retire in any case. Rather, VA allocated buyouts to eliminate positions it no longer needed. It has been an effective tool, significantly assisting VA in restructuring its workforce, while minimizing adverse actions such as involuntary separations, also known as "RIFS."

VA’s proposed legislation would provide authority VA-wide to offer separation incentives. Further details of how each of VA’s Administrations would use this authority are detailed in this statement.

Veterans Health Administration (VHA)

On April 13, 1999, Dr. Kenneth Kizer, Under Secretary for Health, testified on the transformation that health care in this country is experiencing due to changes in technology, financing mechanisms, delivery systems including managed care, patient expectations, and other factors. VHA has risen to the challenges this environment of change has presented over the past five years, and has made dramatic improvements in quality, patient satisfaction, efficiency and accountability. We are committed to making further improvements in each of these domains in the future.

VHA has reduced its number of employees from over 200,000 full-time employees (FTE) to a projected level of 176,000 FTE during this period. VHA has been able to reshape its work force while minimizing adverse impact on employees by reengineering work processes, and using previous buyout authority and other human resource management tools in a strategic manner.

VHA first used buyout authority in FY 94. At that time, Dr. Kizer was just outlining the future direction in the Vision for Change, and focused buyout strategy on achieving the streamlining goal set forth by what was then the National Performance Review (NPR) and is now the National Partnership for Reinventing Government. VHA targeted the buyouts on reducing or eliminating administrative and managerial positions, supervisory positions, assistant chief or deputy positions, and positions in Human Resource Management, Fiscal, and Purchasing and Contracting.

VHA was authorized to use up to 1,662 buyouts in FY 94. However, only 1,054 requests met the conditions imposed by VHA management and were actually granted. Of these, 999 were on the Medical Care Appropriation, 32 were in Headquarters, and 23 were on the Research Appropriation.

In FY 95, OMB authorized VHA to offer 620 buyouts. VHA’s strategy targeted positions which had become redundant at twenty (20) facilities which had been integrated into nine (9) organizations. The buyouts helped to dramatically reduce duplication of effort, enabling management to realize the economies of the integrations. VHA also targeted buyouts to assist in Service Consolidations. For example, many facilities combined Engineering Service and Environmental Service into a Facilities Management Service, and Fiscal and Acquisition and Materiel Management Services into a Business Office. Buyouts were offered to managers and supervisors whose positions were redundant.

VHA actually used only 528 of the 620 buyout slots it had been authorized. Fifteen (15) Senior Executives accepted buyouts, together with 281 employees at the 9 facility integration sites, and 227 employees in service level consolidations.

In FY 97, VHA was authorized to offer 4,442 buyouts. To ensure that all proposed buyout offers were based on a strategic plan, each facility was required to identify the number that would be offered to employees whose positions would be abolished for the following reasons:

• Facility was being integrated with another facility.
• Service was being consolidated with another service (e.g., consolidating a Fiscal Service with an Acquisition and Materiel Management Service into a single Business Office).
• Service was being consolidated with that of another facility (e.g., setting up one Human Resource Office to serve all four facilities in Chicago, IL, instead of having four separate Human Resource Offices).
• Function is being contracted-out or performed on a fee-basis.
• Supervisory position is being eliminated to broaden span of control.
• In-patient services are being discontinued.
• Title 38 position becomes unnecessary because of changes in case-mix.

In each case, VHA managers were required to eliminate the specific position encumbered by the employee who received the buyout. This ensured that offers were made only when the position was no longer necessary. VHA used 3,500 of the 4,442 slots it had been authorized, again reflecting its conservative, responsible use of the buyout tool.

Subsequently, VHA was authorized to extend its buyout window until

December 30, 1997. By surveying the field facilities again, and using the same criteria, VHA identified another 2,860 slots. VHA used 2,013 slots, again, eliminating the specific position encumbered by the employee who accepted the buyout.

Since FY 94, VHA has been able to avoid salary costs of over $290 million through the use of buyouts. These funds have been used to mitigate the impact of reduced budgetary levels, to restructure the organization of its health care delivery system, and to change the skills mix of its employee population.

In the Fall of 1998 in preparation for developing a new request for buyout authority, VHA managers were required to identify the types of positions that could be eliminated through a voluntary separation incentive, using the categories outlined above (e.g., facility integration, service consolidation, or change in patient mix). Again, managers were advised that they will be required to eliminate the specific position encumbered by the employee who received the buyout, to ensure the focus was on eliminating unnecessary positions, and not on providing employees with separation windfalls. Based on this survey, VA identified the need to offer buyouts to approximately 7,000 employees over a five-year period ending in September 2004.

Veterans Benefits Administration (VBA)

The Veterans Benefits Administration (VBA) would like to offer approximately 1,300 buyouts over the next five fiscal years to support its plans and initiatives for high quality and expeditious service for veterans. Over this period, VBA will continue major streamlining activities affecting both field offices and Central Office operations. These include continuing consolidation of its field management, information technology and insurance functions, and reengineering its business processes and skill mix to restructure its organization, improve service delivery, streamline operations and reduce costs.

Under previous buyout authority, authorization to receive a separation incentive was based on a careful analysis of VBA's restructuring and operational needs. VBA considered the buyout program preferable for this purpose to a mandatory reduction in force (RIF). Some categories of employees were excluded from the program because of VBA’s critical needs at the time. The following categories of employees were targeted for the buyout incentive program:

• Members of the Senior Executive Service:There is a requirement to continuously monitor the need for SES positions. Consequently, VBA offered the buyout to SES employees and approved the separation where there was no longer a need for the position at the SES level, where remote management by another SES employee was feasible, or where the reassignment of an employee in a targeted, excess SES position was possible.

• GS-14 and GS-15 Positions Nationwide: To achieve NPR recommendations to reduce management and supervisory positions (1-to-15 supervisor to employee ratio), reduce the number of "assistant" positions, and the other high level staff support positions, VBA offered buyout authority to employees at the GS-14 and GS-15 grade levels. This gave VBA an opportunity to accomplish combining divisions at each regional office, reducing the size of headquarters, and reducing positions in administrative occupations at these grade levels.

• Information Resource Management Activities: A reduction in information technology positions was deemed critical to the success of VBA’s strategy. Technological advancements reduced the need for these positions. Employees in the computer specialist, program analyst, management analyst, and administrative/clerical support positions were offered buyouts in an effort to avoid RIFs. Buyouts were also offered to employees at Washington, DC and Austin, Texas, excluding staff involved with the Year 2000 compliance efforts.

• Supervisory Positions at the GS-13 Grade Level and Below: To achieve further reductions in the number of supervisors, VBA offered the buyout to employees occupying certain "assistant" positions at the GS-13 grade level and below, e.g., Supervisory Contact Representative, Supervisory Personnel Management Specialist, and Vocational Rehabilitation and Counseling Officer.

• VBA Central Office: To achieve a reduction in headquarters staff, VBA offered the buyout to positions targeted for abolishment where the work performed could be easily absorbed in other positions that were duplicative in nature. Examples of these occupations are Systems Analyst, Program Analyst, Management Analyst, Counseling Psychologist, and administrative and clerical positions.

• Administrative and Support Employees Nationwide: Automation enhancements and changes in mainstream occupations required that VBA reduce or eliminate certain administrative and support (clerical) occupations. VBA offered the buyout to administrative and clerical employees in those occupations where work was dwindling or was duplicative in nature.

The following categories of employees were excluded from the buyout incentive

program because they were considered vital to current organizational needs:

• Information Resources Management staff assigned to the year 2000 project in Central Office, Hines, IL, Philadelphia, PA, and Austin TX.
• Employees assigned to VETSNET (computer modernization effort).
• Rating Specialists and other personnel actively involved in adjudicating claims.
• Staff assigned to the Insurance Center at Philadelphia, PA.

National Cemetery Administration (NCA)

The National Cemetery Administration (NCA) would like to offer a total of 50 buyouts over the next five fiscal years. In accordance with the goals of NPR, NCA has continued to identify functions subject to restructuring of the workforce and its skill mix, consolidating of functions and using information technology to replace manually intensive tasks. The buyout authority will enable NCA to accomplish its goal of realigning functions while minimizing an adverse impact on employees, through such actions as involuntary separations.

In 1994, NCA initiated streamlining efforts to reduce Headquarters functions. Seven buyouts were approved and each FTE was transferred to cemetery field operations. NCA’s efforts under NPR continued in 1995, as four buyouts were approved for specific targeted positions. Both of these efforts permitted NCA to better utilize our cemetery personnel as some facilities closed, others expanded or consolidated, and new cemeteries were being built.

NCA used buyout authority in FY 97 to support the realignment of VA’s

headstone and marker program. The restructuring included using 14 of its authorized

30 buyouts as Memorial Programs Service established three satellite processing

centers within underutilized buildings at existing national cemeteries. Services to

veterans and their families improved as the skill mix of an empowered and motivated

workforce helped NCA adapt successfully to continue to produce the more than 300,000

monuments processed annually.

Other Organizations in VA

The current proposed legislation provides for VA-wide authority to conduct voluntary incentive separations. Other VA organizations and offices, located primarily in Headquarters, though much smaller in terms of numbers of employees would also be able to use, subject to the same strict criteria, buyouts as a tool for accomplishing strategic restructuring and realignment.

Proposed legislation

VA is proposing multiple-year buyout authority (through September 30, 2004) that would enable management to use buyouts as a planning tool. The proposed legislation is based in large measure on the Federal Workforce Restructuring Act of 1994, and the Treasury, Postal Service and General Government Appropriation Act of 1997. As noted above, VA believes it has used these prior authorities conservatively, responsibly, and effectively, awarding fewer buyouts in each case than it was authorized to do.

As with these earlier buyout authorities, our proposed legislation limits the amount of the buyout payment to a maximum of $25,000; requires VA to make a contribution equal to 15 percent of the final basic pay of each employee covered by the Civil Service Retirement and Disability Fund to that fund; requires that an employee who receives monies from a buyout repay those monies in their entirety if, except under extremely limited circumstances, they accept another government job within 5 years of receipt; and reduces the Department’s full-time equivalent employment (FTEE) by one FTEE for each employee who separates after receiving a buyout.

VA’s proposal also requires that the Secretary submit a strategic plan to the Director of the Office of Management and Budget outlining the use of these "buyout" slots. The plan must identify the positions and functions to be reduced or eliminated by organization unit, geographic location, occupational category and grade level. The plan would also specify the manner in which the employment reductions would improve efficiency or meet budget or staffing levels. The Director, Office of Management and Budget, would have the authority to approve or disapprove each plan submitted, or could modify the timeframes during which buyouts were available, the amounts involved, or the occupations covered. This external review will provide further assurance that the buyouts are correctly targeted to achieve the specific cuts which are needed.

Conclusion

In summary, over the next five years VA must continue to re-engineer, restructure, and reallocate its processes, staff, and resources to provide the Nation’s veterans with the highest possible quality in delivery of benefits, medical care and other services. The Nation’s veterans have earned and deserve the best from VA and its employees. To provide them our best we must maximize our organizational efficiency. This will require us to eliminate unnecessary positions in specific facilities. In the absence of buyout authority, we are forced to rely on attrition, early retirement, and career-transition services, or less desirably, reductions-in-force and staffing adjustments.

We would prefer to accomplish staffing reductions using voluntary methods including buyouts. Reductions-in-force and staffing adjustments are less effective and less efficient tools that are destructive of employee morale. They carry indirect costs related to grade and pay retention, severance pay, lump sum payments, unemployment compensation, and appeals litigation among others which buyouts do not. Voluntary buyouts are a far superior, and more humane, tool with which to restructure and reduce our workforce. We believe new buyout authority will significantly reduce the need for using less desirable, involuntary methods to restructure and reduce our workforce.

My colleagues and I will be pleased to answer your questions.