Defense Budget Issues: Effect of Civilian Hiring Freeze on Fiscal Year 1991 Budget

Published by the Government Accountability Office on 1990-06-29.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

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                                                                           DEFENSE BUDGET
                                                                           Effect of Civilian
                                                                           Hiring Freeze on Fiscal
                                                                           Year 1991 Budget

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              United States
GAO           General Accounting Office
              Washington, D.C. 20648

              National Security and
              International Affairs Division


              June 29,lQQO

              The Honorable John Murtha
              Chairman, Subcommittee on Defense
              Committee on Appropriations
              House of Representatives

              Dear Mr. Chairman:

              This briefing report is in response to your February 22, 1990, request
              that we analyze the effect of the Department of Defense’s (DOD) civilian
              hiring freeze on its fiscal year 1991 budget.

              On May 16, 1990, we provided your staff an oral briefing on our prelimi-
              nary findings, A separate report is being prepared on the matters
              related to the issue of whether the budget for the Office of the Secretary
              of Defense properly reflects the funds applied to management support
              agencies and activities.

              The DOD announced a civilian personnel hiring freeze on January 11,
              1990. As of June 14, 1990, DOD estimates a potential savings of about
              $780 million in fiscal year 1991, as a result of this freeze. However, DOD
              officials cautioned that this $780 million savings may include about
              $300 million from Defense Management Review initiatives that have
              already been incorporated in the total fiscal year 1991 budget, but not
              yet allocated to specific accounts.

              The original announcement listed 14 categories of exemptions from the
              civilian personnel hiring freeze and provided other individual vacancy
              exemptions. On April 12, 1990, two more categories of exemptions were
              added. The exemptions are set forth in the appendix. A DOD official esti-
              mated that the two additional exemptions would decrease the estimate
              of fiscal year 1991 budget savings by about 25 percent (or $195 million),
              resulting in an estimated net 1991 savings figure of about $585 million.
              This demonstrates that the amount of savings are very sensitive to any
              changes in the basic assumptions used by DOD to calculate those savings.

              To determine the effect of the DOD civilian personnel hiring freeze on the
Scopeand      fiscal year 1991 budget, we interviewed DOD officials and reviewed their
Methodology   savings calculations at the Offices of the Comptroller and the Assistant
              Secretary of Defense (Force, Management and Personnel). We also ana-
              lyzed the reasonableness of DOD'S methodology used to calculate savings.

              Page 1                                   GAO/NSIAD-W232BR   DOD Budget Issues

In general, we believe DOD'S methodology for calculating savings is rea-
sonable and its savings calculations are accurate.

We met with cognizant DOD officials to discuss the report contents and
their comments have been incorporated where appropriate. These offi-
cials concurred with the facts presented in this report. Our review was
performed between February and June 1990 in accordance with gener-
ally accepted government auditing standards.

We are sending copies of this report to the Chairmen, House and Senate
Armed Services Committees, House and Senate Committees on Appro-
priations, Senate Committee on Governmental Affairs, and House Com-
mittee on Government Operations and the Secretary of Defense. Copies
will be made available to others upon request.

Please contact me at (202) 276-4687 if you or your staff have any ques-
tions concerning this briefing report. Major contributors to this briefing
report are John A. Rinko, Assistant Director; Shirley E. Hendley,
Evaluator-in-Charge; and Ronald J. Bonfilo, Evaluator.

Sincerely yours,

Paul F. Math
Director, Research, Development,
  Acquisition, and Procurement Issues

Page 2                                    GAO/NSIAD4%292BR   DOD Budget Issues
Page 3   GAO/NSIAD-90-232BR   DOD Budget Iseuea
Appendix I

Original izndSubsequentExemptionsto the
Civilian PersonnelHiring F’reeze

                        After DoD announced its civilian,personnel hiring freeze in January
                        1990, it set forth 14 categories of exemptions and provided other indi-
                        vidual vacancy exemptions. In April 1990, two other categories of
                        exemptions were added. This appendix sets forth the original and subse-
                        quent categories of exemptions.

                        Each of the service secretaries and the directors of the Defense agencies
Original Exemptions     may approve filling positions on a case-by-case basis, if, after personally
                        reviewing the justifications, they determine that such positions must be
                        filled in order to maintain a national defense capability. In addition to
                        individual vacancy exemptions, certain categories of exemptions were
                        established. According to information provided by DOD, these include:

                      . Commitments made to employees or applicants before January 11,1990,
                        will be honored. This covers employees who had been selected for pro-
                        motion, reassignment, or a permanent change-of-station, but the action
                        had not yet been completed. It also covers applicants who had been
                        selected, but had not yet entered on duty.
                      . Hiring to prevent employment from falling below a statutorily imposed
                        level. Some examples are child care, reserve and National Guard techni-
                        cians, and Defense Contract Audit Agency employees.
                      . College and university graduates for entry level positions, and the
                        various programs for summer and school year employment. This pre-
                        vents the loss of the 1990 group that will be graduating from colleges
                        and universities and sustains efforts to provide youth with summer
                        employment opportunities.
                      . Teachers for the DOD dependent schools were exempted to assure that
                        the DOD overseas and section VI schools are adequately staffed for the
                         1990 school year.
                      . Hiring individuals for non-appropriated fund positions in morale, wel-
                        fare, and recreation activities, Because non-appropriated fund salaries
                        are not included in Defense appropriations, and are paid from revenue
                        generated by the non-appropriated fund activities, loss of staff would
                        have a direct impact on ability to generate revenue. This will cause an
                        increased demand on the need for appropriated funds to maintain non-
                        self-supporting morale, welfare, and recreation operations.
                      . Employees who are registered in the Priority Placement Program as a
                        result of force reductions or installation closures. This exemption pro-
                        vides employment opportunities to employees identified for separation
                        from federal service through force reductions or installation closures.
                        This exemption affirms earlier Secretary of Defense assurances that
                        individuals affected by base closures will be protected.

                        Page 4                                    GAO/NSIAD-99-222BR   DOD Budget Issues
                 Appendix 1
                 Original and Subeequent Exemptioxw   to the
                 Civilian Personnel Hiring Freeze

               Employment positions in Berlin, which are Deutsche mark funded and
               paid for by the West German government.
               Employment positions in foreign military sales are exempt because the
               salaries are reimbursed to the United States by the purchasing coun-
               tries. Furthermore, a hiring freeze in this category could prevent DOD
               from fulfilling the terms of some foreign military sales agreements.
             . Individual positions directed by adjudicated settlements such as arbitra-
               tion, Federal Labor Relations Authority, or Merit System Protection
               Board decisions are exempt to comply with court and administrative
             . Medical positions (up to 1,000 for each service), are exempt to comply
               with the Congress’ request that each service accelerate civilian health
               care staff recruiting. Failure to hire staff could lead to serious cost
               increases in the Civilian Health and Medical Program of the Uniformed
             I The 1986 Military Family Act requires that for every two vacancies
               occurring overseas, one vacancy may be filled by employing a military
               spouse. Spouses ordinarily transfer with military personnel. The hiring
               freeze would prohibit their employment and would adversely affect
               troop morale and readiness.
               Vacancies may be filled in commissary stores to prevent degradation of
               service. High personnel turnover can quickly affect such functions as
               check-out counters, meat cutting, and shelf stocking.
               Overseas vacant positions, which directly support child and day care
               centers, are exempt because very high turnover rates have adversely
               affected the ability of some child care centers to remain open.
               To meet emergencies, the Military Sealift Command may fill up to 36
               positions without prior clearance.

             . Internal transfers, reassignments, or promotions are exempted to help
Subsequent     implement Defense Management Review decisions and to reduce the
Exemptions     work load associated with case-by-case exemptions.
             . Temporary employees are exempt if they have no break in service. The
               civilian employment freeze did not permit the retention of temporary
               employees beyond the date set at the time of their initial appointment. A
               large number of appointments, made before the hiring freeze, had
               expired and had generated a large number of case-by-case exemptions.

(896B27)         Page 5                                        GAO/NsIAD-204422BB   DOD Budget IsSUeS

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