CBO
TESTIMONY
Statement of
James L. Blum
Deputy Director
Congressional Budget Office
on
Financing Retirement for
Federal Civilian Employees
before the
Subcommittee on Civil Service
Committee on Government
Reform and Oversight
U.S. House of Representatives
June 28, 1995
NOTICE
This statement is not available for public release
until it is delivered at 9:15 a.m. (EDT) on Wednesday, June 28, 1995.
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Mr. Chairman and Members of the Subcommittee, I appreciate the opportunity
to discuss the financing of the Civil Service Retirement and Disability
Fund (CSRDF). In my statement today, I will make five points:
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The CSRDF is a set of accounts, common in the federal budget, for recognizing
the cost of deferred compensation as it is earned and the liabilities that
have accumulated for future payments. That accounting may give the illusion
that the government is setting aside funds to pay future benefits. Unlike
private pension funds, however, the trust fund has no independent capacity
to make future payments.
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Financing for civil service retirement benefits is on a pay-as-you-go basis.
Benefits paid each year are financed by federal revenues received that
year, including payroll tax contributions paid by federal employees.
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The retirement fund does not face a financial crisis. Over time, the ratio
of beneficiaries to the revenue base does not surge. In fact, the demand
on the general fund declines in constant dollar terms after 2015.
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The Administration's proposal to increase agency contributions for Civil
Service Retirement System (CSRS) employees could make agencies more aware
of the cost of doing business but is not intended to cause additional changes
in the budget.
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Turning the CSRDF into a pension fund comparable to those sponsored by
state and local governments or private firms would entail a fundamental
policy change. Financial resources would have to be accumulated outside
of government as retirement benefits were earned. A substantial increase
in federal debt held by the public would be required in the near term to
finance the new pension fund.
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