Document Name: Chapter 1 -- Cutting Red Tape Part I
Date: 09/07/94
Owner: National Performance Review
Title:Chapter 1 -- Cutting Red Tape Part I

Author: Vice President Albert Gore's National Performance Review

Date:7 September 1993 10:00:00 EST

Content-Type: text/ascii charset=US ASCII

Content-Length: 106599

Chapter 1

Cutting Red Tape


About 10 years ago, two foresters returned from a hard day in the

field to make plans for the coming week. Searching for a detail

of agency policy, they found themselves overwhelmed by

voluminous editions of policy manuals, reports, and binders

filled with thousands of directives. One forester recalled the

very first Forest Service manual- -small enough to fit into

every ranger's shirt pocket, yet containing everything foresters

needed to know to do their jobs.

"Why is it that when we have a problem," the other forester

asked, "the solution is always to add something--a report, a

system, a policy--but never take something away?"

The first replied: "What if . . . we could just start over?" 1


The federal government does at least one thing well: It

generates red tape. But not one inch of that red tape appears by

accident. In fact, the government creates it all with the best of

intentions. It is time now to put aside our reverence for those

good intentions and examine what they have created--a system that

makes it hard for our civil servants to do what we pay them for,

and frustrates taxpayers who rightfully expect their money's


Because we don't want politicians' families, friends, and

supporters placed in "no-show" jobs, we have more than 100,000

pages of personnel rules and regulations defining in exquisite

detail how to hire, promote, or fire federal employees.2 Because

we don't want employees or private companies profiteering from

federal contracts, we create procurement processes that require

endless signatures and long months to buy almost anything.

Because we don't want agencies using tax dollars for any

unapproved purpose, we dictate precisely how much they can spend

on everything from staff to telephones to travel.

And because we don't want state and local governments using

federal funds for purposes that Congress did not intend, we write

regulations telling them exactly how to run most programs that

receive federal funds. We call for their partnership in dealing

with our country's most urgent domestic problems, yet we do not

treat them as equal partners.

Consider some examples from the daily lives of federal

workers, people for whom red tape means being unable to do their

jobs as well as they can--or as well as we deserve. The district

managers of Oregon's million-acre Ochoco National Forest have 53

separate budgets--one for fence maintenance, one for fence

construction, one for brush burning- -divided into 557 management

codes and 1,769 accounting lines. To transfer money between

accounts, they need approval from headquarters. They estimate the

task of tracking spending in each account consumes at least 30

days of their time every year, days they could spend doing their

real jobs.3 It also sends a message: You are not trusted with

even the simplest responsibilities.

Or consider the federal employees who repair cars and trucks

at naval bases. Each time they need a spare part, they order it

through a central purchasing office--a procedure that can keep

vehicles in the shop for a month. This keeps one-tenth of the

fleet out of commission, so the Navy buys 10 percent more

vehicles than it needs.4 Or how about the new Energy Department

petroleum engineer who requested a specific kind of calculator to

do her job? Three months later, she received an adding machine.

Six months after that, the procurement office got her a

calculator--a tiny, hand-held model that could not perform the

complex calculations her work required. Disgusted, she bought her


Federal managers read the same books and attend the same

conferences as private sector managers. They know what good

management looks like. They just can't put it into

practice--because they face constraints few managers in the

private sector could imagine.

Hamstrung by rules and regulations, federal managers simply

do not have the power to shape their organizations enjoyed by

private sector managers. Their job is to make sure that every

dollar is spent in the budget category and the year for which it

was appropriated, that every promotion is consistent with central

guidelines, and that every piece of equipment is bought through

competitive bidding. In an age of personal computers, they are

asked to write with quill pens.


Never tell people how to do things. Tell them what you want to

achieve, and they will surprise you with their ingenuity.

General George S. Patton



This thicket of rules and regulations has layer upon layer

of additional oversight. Each new procedure necessitates

someone's approval. The result is fewer people doing real work,

more people getting in their way. As management sage Peter

Drucker once said, "So much of what we call management consists

of making it difficult for people to work."6

As Robert Tobias, president of the National Treasury

Employees Union, told participants at the Philadelphia Summit on

Reinventing Government, "The regulations and statutes that bind

federal employees from exercising discretion available in the

private sector all come about as a response to the humiliations,

mistakes, embarrassments of the past." Even though, as Tobias

noted, "those problems are 15, 20, 30 years old," and "the

regulations and the statutes don't change." The need to enforce

the regulations and statutes, in turn, creates needless layers of


The layers begin with "staff" agencies, such as the General

Services Administration (GSA) and the Office of Personnel

Management (OPM). These staff agencies were designed originally

to provide specialized support for "line" agencies, such as the

Interior and Commerce departments, that do government's real

work. But as rules and regulations began to proliferate, support

turned into control. The Office of Management and Budget (OMB)

which serves the President in the budget process, runs more than

50 compliance, clearance, and review processes. Some of this

review is necessary to ensure budget control and consistency of

agency actions--with each other and with the President's

program--but much of it is overkill.

Line agencies then wrap themselves in even more red tape by

creating their own budget offices, personnel offices, and

procurement offices. Largely in response to appropriations

committees, budget offices divide congressional budgets into

increasingly tiny line items. A few years ago, for example, base

managers in one branch of the military had 26 line items for

housing repairs alone.7 Personnel offices tell managers when they

can and cannot promote, reward, or move employees. And

procurement offices force managers to buy through a central

monopoly, precluding agencies from getting what they need, when

they need it.

What the staff agencies don't control, Congress does.

Congressional appropriations often come with hundreds of strings

attached. The Interior Department found that language in its 1992

House, Senate, and conference committee reports included some

2,150 directives, earmarks, instructions, and prohibitions.8 As

the federal budget tightens, lawmakers request increasingly

specific report language to protect activities in their

districts. Indeed, 1993 was a record year for such requests. In

one appropriations bill alone, senators required the U.S. Customs

Service to add new employees to its Honolulu office, prohibited

closing any small or rural post office or U.S. Forest Service

offices; and forbade the U.S. Mint and the Bureau of Engraving

and Printing from even studying the idea of contracting out guard


Even worse, Congress often gives a single agency multiple

missions, some of which are contradictory. The Agency for

International Development has more than 40 different objectives,

disposing of American farm surpluses, building democratic

institutions, and even strengthening the American land grant

college system.9 No wonder it has trouble accomplishing its real

mission--promoting international development.

In Washington, we must work together to untangle the knots

of red tape that prevent government from serving the American

people well. We must give cabinet secretaries, program directors

and line managers much greater authority to pursue their real


As Theodore Roosevelt said: "The best executive is the one

who has the sense to pick good men to do what he wants done, and

self-restraint enough to keep from meddling with them while they

do it."

Our path is clear: We must shift from systems that hold

people accountable for process to systems that hold them

accountable for results. We discuss accountability for results in

chapter 3. In this chapter, we focus on six steps necessary to

strip away the red tape that so engulfs our federal employees and

frustrates the American people.

First, we will streamline the budget process, to remove the

manifold restrictions that consume managers' time and literally

force them to waste money.

Second, we will decentralize personnel policy, to give

managers the tools they need to manage effectively--the authority

to hire, promote, reward, and fire.

Third, we will streamline procurement, to reduce the

enormous waste built into the process we use to buy $200 billion

a year in goods and services.

Fourth, we will reorient the inspectors general, to shift

their focus from punishing those who violate rules and

regulations to helping agencies learn to perform better.

Fifth, we will eliminate thousands of other regulations that

hamstring federal employees, to cut the final Lilliputian ropes

on the federal giant.

Finally, we will deregulate state and local governments, to

empower them to spend more time meeting customer

needs--particularly with their 600 federal grant programs--and

less time jumping through bureaucratic hoops.

As we pare down the systems of over-control and

micromanagement in government, we must also pare down the

structures that go with them: the oversized headquarters,

multiple layers of supervisors and auditors, and offices

specializing in the arcane rules of budgeting, personnel,

procurement, and finance. We cannot entirely do without

headquarters, supervisors, auditors, or specialists, but these

structures have grown twice as large as they should be.

Counting all personnel, budget, procurement, accounting,

auditing, and headquarters staff, plus supervisory personnel in

field offices, there are roughly 700,000 federal employees whose

job it is to manage, control, check up on or audit others.10 This

is one third of all federal civilian employees.

Not counting the suffocating impact these management control

structures have on line managers and workers, they consume $35

billion a year in salary and benefits alone.11 If Congress enacts

the management reforms outlined in this report, we will

dramatically cut the cost of these structures. We will reinvest

some of the savings in the new management tools we need,

including performance measurement, quality management, and

training. Overall, these reforms will result in the net

elimination of approximately 252,000 positions. (This will

include the 100,000 position reduction the President has already

set in motion.)

A reduction of 252,000 positions will reduce the civilian,

non-postal work force by almost 12 percent--bringing it below two

million for the first time since the 1966.12

This reduction, targeted at the structures of control and

micromanagement, is designed to improve working conditions for

the average federal employee. We cannot empower employees to give

us their best work unless we eliminate much of the red tape that

now prevents it. We will do everything in the government's power

to ease the transition for workers, whether they choose to stay

with government, retire, or move to the private sector.

Our commitment is this: If an employee whose job is

eliminated cannot retire through our early retirement program,

and does not elect to take a cash incentive to leave government

service, we will help that employee find another job offer,

either with government or in the private sector.

Normal attrition will contribute to the reduction. In

addition, we will introduce legislation to permit all agencies to

offer cash payments to those who leave federal service

voluntarily, whether by retirement or resignation. The Department

of Defense (DOD) and intelligence community already have this

"buy-out" authority; we will ask Congress to extend it to all

agencies. We will also give agencies broad authority to offer

early retirement and to expand their retraining, out-placement

efforts, and other tools as necessary to accomplish the 12%

reduction. Agencies will be able to use these tools as long as

they meet their cost reduction targets.

These options will give federal managers the same tools

commonly used to downsize private businesses. Even with these

investments, the downsizing we propose will save the taxpayer

billions over the next 5 years.

None of this will be easy. Downsizing never is. But the

result will not only be a smaller workforce, it will also be a

more empowered, more inspired, and more productive workforce.

As one federal employee told Vice President Gore at one of

his many town meetings, "If you always do what you've always

done, you'll always get what you always got." We can no longer

afford to get what we've always got.

Step 1: Streamlining The Budget Process

Most people can't get excited about the federal budget

process, with its green-eyeshade analysts, complicated

procedures, byzantine language, and reams of minutiae. Beyond

such elements, however, lies a basic, unalterable reality. For

organizations of all kinds, nothing is more important than the

process of resource allocation: what goal is sought, how much

money they have, what strings are attached to it, and what

hurdles are placedble reality. For organizations of all kinds,

nothing is more important than the process of resource

allocation: what goal is sought, how much money they have, what

strings are attached to it, and what hurdles are placed before

managers who must spend it.

In government, budgeting is never easy. After all, the

budget is the most political of documents. If, as the political

scientist Harold D. Lasswell once said, politics is "who gets

what, when, how," the budget answers that question.13 By crafting

a budget, public officials decide who pays what taxes and who

receives what benefits. The public's largesse to children, the

elderly, the poor, the middle class, and others is shaped by the

budgets that support cities, states, and the federal government.

But if budgeting is inherently messy, such messiness is

costly. Optimally, the budget would be more than the product of

struggles among competing interests. It also would reflect the

thoughtful planning of our public leaders. No one can improve

quality and cut costs without planning to do so.

Unfortunately, the most deliberate planning is often

subordinated to politics, and is perhaps the last thing we do in

constructing a budget. Consider our process. Early in the year,

each agency estimates what it will need to run its programs in

the fiscal year that begins almost 2 years later. This is like

asking someone to figure out not only what they will be doing,

but how much it will cost 3 years later--since that's when the

money will be spent. Bureau and program managers typically

examine the previous year's activity data and project the figures

3 years out, with no word from top political leaders on their

priorities, or even on the total amount that they want to spend.

In other words, planning budgets is like playing "pin the tail on

the donkey." Blindfolded managers are asked to hit an unknown


OMB, acting for the President, then crafts a proposed budget

through back-and forth negotiations with departments and

agencies, still a year before the fiscal year it will govern.

Decisions are struck on dollars--dollars that, to agencies, mean

people, equipment, and everything else they need for their jobs.

OMB's examiners may question agency staff as they develop options

papers, OMB's director considers the options during his

Director's Review meetings, OMB "passes back" recommended funding

levels for the agencies, and final figures are worked out during

a final appeals process.

Early the next year, the President presents a budget

proposal to Congress for the fiscal year beginning the following

October 1. Lawmakers, the media, and interest groups pore over

the document, searching for winners and losers, new spending

proposals, and changes in tax laws. In the ensuing months,

Congress puts its own stamp on the plan. Although House and

Senate budget committees, guide Congress' action, every committee

plays a role.

Authorizing committees debate the merits of existing

programs and the President's proposals for changes within their

subject areas. While they decide which programs should continue

and recommend funding levels, separate appropriations committees

draft the 13 annual spending bills that actually comprise the


Congressional debates over a budget resolution,

authorization bills, and appropriations drag on, often into the

fall. Frequently the President and Congress don't finish by

October 1, so Congress passes one or more "continuing

resolutions" to keep the money flowing, often at the previous

year's level. Until the end, agency officials troop back and

forth to OMB and to the Hill to make their case. States and

localities, organizations and advocates seek time to argue their

cause. Budget staffs work non-stop, preparing estimates and

projections on how this or that change will affect revenues or

spending. All this work is focused on making a budget--not

planning or delivering programs.

Ironies riddle the process.

-- Uncertainty reigns: Although they begin calculating their

budget 2 years ahead, agency officials do not always know by

October 1 how much they will have to spend and frequently don't

even receive their money until well into the fiscal year.

-- OMB is especially prone to question unspent funds--and

reduce the ensuing year's budget by that amount. Agency officials

inflate their estimates, driving budget numbers higher and

higher. One bureau budget director claims that many regularly ask

for 90 percent more than they eventually receive.

-- Despite months of debate, Congress compresses its actual

decision-making on the budget into such a short time frame that

many of the public's highest priorities--what to do about drug

addiction, for example, or how to prepare workers for jobs in the

21st century--are discussed only briefly, if at all.

-- The process is devoid of the most useful information. We

do not know what last year's money, or that of the year before,

actually accomplished. Agency officials devise their funding

requests based on what they got before, not whether it produced



There are two ways to reduce expenditures. There is the

intelligent way...going through each department and questioning

each program. Then there is the stupid way: announcing how much

you will cut and getting each department to cut that amount. I

favor the stupid way.

Michel Belanger Chairman, Quebec National Bank May 7, 1992


In sum, the budget process is characterized by fictional

requests and promises, an obsession with inputs rather than

outcomes, and a shortage of debate about critical national needs.

We must start to plan strategically--linking our spending with

priorities and performance. First, we must create a rational

budgeting system.

Action: The President should begin the budget process with an

executive budget resolution, setting broad policy priorities and

allocating funds by function for each agency.14

Federal managers should focus primarily on the content of

the budget, not on the process. A new executive budget resolution

will help them do that. The President should issue a directive in

early 1994 to mandate the use of such a resolution in developing

his fiscal year 1996 budget. It will turn the executive budget

process upside down.

To develop the resolution, officials from the White House

policy councils will meet with OMB and agency officials. In those

sessions, the administration's policy leadership will make

decisions on overall spending and revenue levels, deficit

reduction targets, and funding allocations for major inter-agency

policy initiatives. The product of these meetings--a resolution

completed by August--will provide agencies with funding ceilings

and allocations for major policy missions. Then, bureaus will

generate their own budget estimates, now knowing their agency's

priorities and fiscal limits.

Our own Environmental Protection Agency (EPA) tried a

similar approach in the 1970s as part of a zero-based budgeting

trial run. Although zero-based budgeting fell short, participants

said, two important advantages emerged: a new responsiveness to

internal customer needs and a commitment to final decisions. When

participants voted to cut research and development funds because

they felt researchers ignored program needs, researchers began

asking programs managers what kind of research would support

their efforts. EPA also found that, after its leaders had

agonized over funding, they remained committed to common


Critics may view the executive budget resolution process as

a top-down tool that will stifle creative, bottom-up suggestions

for funding options. We think otherwise. The resolution will

render top officials responsible for budget totals and policy

decisions, but will encourage lower-level ingenuity to devise

funding options within those guidelines. By adopting this plan,

we will help discourage non-productive micro-management by senior

department and agency officials.

Action: Institute biennial budgets and appropriations.15

We should not have to enact a budget every year. Twenty

states adopt budgets for 2 years. (They retain the power to make

small adjustments in off years if revenues or expenditures

deviate widely from forecasts). As a result, their governors and

legislatures have much more time to evaluate programs and develop

longer-term plans.

Annual budgets consume an enormous amount of management

time--time not spent serving customers. With biennial budgets,

rather than losing months to a frantic "last-year's

budget-plus-X-percent" exercise, we might spend more time

examining which programs actually work.

The idea of biennial budgeting has been around for some

time. Congressman Leon Panetta, now OMB director, introduced the

first biennial budgeting bill in 1977, and dozens have been

offered since. Although none have passed, the government has some

experience with budget plans that cover 2 years or more. In 1987,

the President and Congress drafted a budget plan for fiscal years

1988 and 1989 that set spending levels for major categories,

enabling Congress to enact all 13 appropriations bills on time

for the first time since 1977.

In addition, Congress directed the Defense Department to

submit a biennial budget for fiscal 1988 and 1989 to give

Congress more time for broad policy oversight. At the time,

Congress asserted that a biennial budget would "substantially

improve DOD management and congressional oversight," and that a

two-year DOD budget was an important step toward across-the-board

biennial budgeting. Administrations have continued to submit

biennial budgets for DOD.

The 1990 Budget Enforcement Act and the 1993 Omnibus Budget

Reconciliation Act set 5-year spending limits for discretionary

spending and pay-as-you-go requirements for mandatory programs.

With these multi-year caps in place, neither the President nor

Congress has to decide the total level of discretionary spending

each year. These caps provide even more reason for biennial

budgets and appropriations. In Congress, 7 out of 10 members

favor a biennial process with a 2-year budget resolution and

multi-year authorizations. The time is ripe.

We recommend that Congress establish biennial budget

resolutions and appropriations and multi-year authorizations. The

first biennium should begin October 1, 1996, to cover fiscal

years 1997 and 1998. After that, bienniums would begin October 1

of each even-numbered year. Such timing would allow President

Clinton to develop the first comprehensive biennial federal

budget, built on the new executive budget resolution. In off

years, the President would submit only amendments for exceptional

areas of concern, emergencies, or other unforeseen circumstances.

Biennial budgeting will not make our budget decisions

easier, for they are shaped by competing interests and

priorities. But it will eliminate an enormous amount of busy work

that keeps us from evaluating programs and meeting customer


Action: OMB, departments, and agencies will minimize budget

restrictions such as apportionments and allotments.16

Congress typically divides its appropriations into more than

1,000 accounts. Committee reports specify thousands of other

restrictions on using money. OMB apportions each account by

quarter or year, and sometimes divides it into sub-accounts by

line-item or object class--all to control over-spending.

Departmental budget offices further divide the money into


Thus, many managers find their money fenced into hundreds of

separate accounts. In some agencies, they can move funds among

accounts. In others, Congress or the agency limits the transfer

of funds, trapping the money. When that happens, managers must

spend money where they have it, not where they need it. On one

military base, for example, managers had no line item to purchase

snowplow equipment, but they did have a maintenance account. When

the snowplow broke down they leased one, using the maintenance

account. Unfortunately, the 1-year lease cost $100,000--the same

as the full purchase price.

Such stories are a dime a dozen within the federal

bureaucracy. (They may be the only government cost that is coming

down.) Good managers struggle to make things work, but, trapped

by absurd constraints, they are driven to waste billions of

dollars every year.

Stories about the legendary end-of-the-year spending rush

also abound. Managers who don't exhaust each line item at year's

end usually are told to return the excess. Typically, they get

less the next time around. The result: the well-known spending

frenzy. The National Performance Review received more examples of

this source of waste--in letters, in calls, and at town

meetings--than any other.

Most managers know how to save 5 or 10 percent of what they

spend. But knowing they will get less money next year, they have

little reason to save. Instead, smart managers spend every penny

of every line item. Edwin G. Fleming, chief of the Resources

Management Division of the Internal Revenue Service's Cleveland

District, put it well in a letter to the Treasury Department's

Reinvention Team:

Every manager has saved money, only to have his allocation

reduced in the subsequent year. This usually happens only

once, then the manager becomes a spender rather than a

planner. Managing becomes watching after little pots of

money that can't be put where it makes business sense

because of reprogramming restrictions. So managers, who are

monitors of these little pots of money, are rewarded for the

ability to maneuver, however limitedly, through the baroque

and bizarre world of federal finance and procurement.

Solutions to these problems exist. They have been tested in

local governments, in state governments, even in the federal

government. Essentially, they involve budget systems with fewer

line items, more authority for managers to move money among line

items, and freedom for agencies to keep some or all of what they

save--thus minimizing the incentive for year-end spending sprees.

Typically, federal organizations experimenting with such

budgets have found that they can achieve better productivity,

sometimes with less money.

During an experiment at Oregon's Ochoco National Forest in

the 1980s, when dozens of accounts were reduced to six,

productivity jumped 25 percent the first year and 35 percent more

the second. A 1991 Forest Service study indicated that the

experiment had succeeded in bringing gains in efficiency,

productivity, and morale, but had failed to provide the Forest

Service region with a mechanism for complying with congressional

intent. After 3 years of negotiations, Washington and Region 6,

where the Ochoco Forest is located, couldn't agree. The region

wanted to retain the initial emphasis on performance goals and

targets so forest managers could shift money from one account to

another if they met performance goals and targets. Washington

argued that Congress would not regard such targets as a serious

measure of congressional intent. The experiment ended in March


When the Defense Department allowed several military bases

to experiment with what was called the Unified Budget Test, base

commanders estimated that they could accomplish their missions

with up to 10 percent less money. If this experience could be

applied to the entire government, it could mean huge savings.

Beginning with their fiscal year 1995 submissions to OMB,

departments and agencies will begin consolidating accounts to

minimize restrictions and manage more effectively. They will

radically cut the number of allotments used to subdivide

accounts. In addition, they will consider using the Defense

Department's Unified Budget plan, which permits shifts in funds

between allotments and cost categories to help accomplish


OMB will simplify the apportionment process, which

hamstrings agencies by dividing their funding into amounts that

are available, bit by bit, according to specified time periods,

activities, or projects. Agencies often don't get their funding

on time and, after they do, must fill out reams of paperwork to

show that they adhered to apportionment guidelines. OMB will also

expedite the "reprogramming" process, by which agencies can move

funds within congressionally appropriated accounts. Currently,

OMB and congressional subcommittees approve all such

reprogrammings. OMB should automatically approve reprogramming

unless it objects within a set period, such as five days.

While understandable in some cases, such earmarks hamper

agencies that seek to manage programs efficiently. Agencies

should work with appropriations subcommittees on this problem.

Action: OMB and agencies will stop using full-time equivalent

ceilings, managing and budgeting instead with ceilings on

operating costs to control spending.18

In another effort to control spending, both the executive

and legislative branches often limit the number of each agency's

employees by using full-time equivalent (FTE) limits. When

agencies prepare their budget estimates, they must state how many

FTEs they need in addition to how many dollars. Then, each

department or agency divides that number into a ceiling for each

bureau, division, branch, or other unit. Congress occasionally

complicates the situation by legislating FTE floors.

Federal managers often cite FTE controls as the single most

oppressive restriction on their ability to manage. Under the

existing system, FTE controls are the only way to make good on

the President's commitment to reduce the federal bureaucracy by

100,000 positions through attrition. But as we redesign the

government for greater accountability, we need to use budgets,

rather than FTE controls, to drive our downsizing. FTE ceilings

are usually imposed independently of--and often conflict

with--budget allocations. They are frequently arbitrary, rarely

account for changing circumstances, and are normally imposed as

across-the-board percentage cuts in FTEs for all of an agency's

units- -regardless of changing circumstances. Organizations that

face new regulations or a greater workload don't get new FTE

ceilings. Consequently, they must contract out work that could be

done better and cheaper in-house. One manager at Vice President

Gore's meeting with foreign affairs community employees at the

State Department in May 1993 offered an example: his FTE limit

had forced him to contract out for a junior programmer for the

Foreign Service Institute. As it turned out, the programmer's

hourly rate equaled the Institute Director's, so the move cost

money instead of saving it.

The President should direct OMB and agency heads to stop

setting FTE ceilings in fiscal year 1995.

For this transition, the agencies' accounting systems will

have to separate true operating costs from program and other

costs. Some agencies already have such systems in place; others

must develop financial management systems to allow them to

calculate these costs. We address this issue in a separate

recommendation in chapter 3.

This recommendation fully supports the President's

commitment to maintain a reduced federal workforce. Instead of

controlling the size of the federal workforce by employment

ceilings--which cause inefficiencies and distortions in managers'

personnel and resource allocation decisions--this new system will

control the federal workforce by dollars available in operating


Action: Minimize congressional restrictions such as line items,

earmarks, and eliminate FTE floors.19

Congress should also minimize the restrictions and earmarks

that it imposes on agencies. With virtually all federal spending

under scrutiny for future cuts, Congress is increasingly applying

earmarks to ensure that funding flows to favored programs and

hometown projects.

Imagine the surprise of Interior Secretary Bruce Babbitt,

who a few months after taking office discovered that he was under

orders from Congress to maintain 23 positions in the

Wilkes-Barre, Pennsylvania, field office of his department's

anthracite reclamation program. Or that his department was

required to spend $100,000 to train beagles in Hawaii to sniff

out brown tree snakes. Edward Derwinski, former secretary of

Veteran Affairs, was once summoned before the Texas congressional

delegation to explain his plan to eliminate 38 jobs in that


Action: Allow agencies to roll over 50 percent of what they do

not spend on internal operations during a fiscal year.21

As part of its 13 fiscal year 1995 appropriations bills,

Congress should permanently allow agencies to roll over 50

percent of unobligated year-end balances in all appropriations

for operations. It should allow agencies to use up to 2 percent

of rolled-over funds to finance bonuses for employees involved.

This approach, which the Defense Department and Forest Service

have used successfully, would reward employees for finding more

productive ways to work. Moreover, it would create incentives to

save the taxpayers' money.

Shared savings incentives work. In 1989, the General

Accounting Office (GAO) discovered that the Veterans

Administration had not recovered $223 million in health payments

from third parties, such as insurers. Congress then changed the

rules, allowing the VA to hire more staff to keep up with the

paperwork and also to keep a portion of recovered third-party

payments for administrative costs. VA recoveries soared from $24

million to $530 million.22

If incentives to save are to be real, Congress and OMB will

have to refrain from automatically cutting agencies' budgets by

the amount they have saved when they next budget is prepared.

Policy decisions to cut spending are one thing; automatic cuts to

take back savings are quite another. They simply confirm

managers' fears that they will be penalized for saving money.

Agencies' chief financial officers should intervene in the budget

process to ensure that this does not happen.

Step 2: Decentralizing Personnel Policy

Our federal personnel system has been evolving for more than

100 years--ever since the 1881 assassination of President James

A. Garfield by a disappointed job seeker. And during that time,

according to a 1988 Office of Personnel Management publication:

...anecdotal mistakes prompted additional rules. When the

rules led to new inequities, even more rules were added.

Over time...a maze of regulations and requirements was

created, hamstringing managers...often impeding federal

managers and employees from achieving their missions and

from giving the public a high quality of service.

Year after year, layer after layer, the rules have piled up.

The U.S. Merit Systems Protection Board reports there are now 850

pages of federal personnel law--augmented by 1,300 pages of OPM

regulations on how to implement those laws and another 10,000

pages of guidelines from the Federal Personnel Manual.



Our federal personnel system ought to place a value on

experience. That's not always the case. Consider the story of

Rosalie Tapia. Ten years ago, fresh from high school, she joined

the Army and was assigned to Germany as a clerk. She served out

her enlistment with an excellent record, landed a job in Germany

as a civilian secretary for the Army, and worked her way up to

assistant to the division chief. When the Cold War ended, Tapia

wanted to return to the U.S. and transfer to a government job

here. Unfortunately, one of the dictates contained in the

government's 10,000 pages of personnel rules says that an

employee hired as a civil servant overseas is not considered a

government employee once on home soil. Any smart employer would

prefer to hire an experienced worker with an excellent service

record over an unknown. But our government's policy doesn't make

it easy. Ironically, Tapia landed a job with a government

contractor, making more money-- and probably costing taxpayers

more-- than a job in the bureaucracy would have paid.


On one topic alone--how to complete a standard form for a

notice of a personnel action- -the Federal Personnel Manual

contains 900 pages of instructions. The full stack of personnel

laws, regulations, directives, case law and departmental guidance

that the Agriculture Department uses weighs 1,088 pounds.

Thousands of pages of personnel rules prompt thousands of

pages of personnel forms. In 1991, for example, the Navy's Human

Resources Office processed enough forms to create a "monument"

3,100 feet tall--six times the height of the Washington monument.

Costs to the taxpayer for this personnel quagmire are enormous.

In total, 54,000 personnel work in federal personnel positions.23

We spend billions of dollars for these staff to classify each

employee within a highly complex system of some 459 job series,

15 grades and 10 steps within each grade.

Does this elaborate system work? No.

After surveying managers, supervisors and personnel officers

in a number of federal agencies, the U.S. Merit Systems

Protection Board recently concluded that federal personnel rules

are too complex, too prescriptive, and often counterproductive.

Talk to a federal manager for 10 minutes: You likely will

hear at least one personnel horror story. The system is so

complex and rule-bound that most managers cannot even advise an

applicant how to get a federal job. "Even when the public sector

finds outstanding candidates," In 1989, Paul Volcker's National

Commission on the Public Service explained, "the complexity of

the hiring process often drives all but the most dedicated away."

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