Some observers believe that the federal government favors government contractors over the public interest far too often. A recent action seems to give some credence to that belief. The government has increased the amount it reimburses contractors for executive pay, which comes at a convenient time since the media doesn’t always follow government happenings in depth during the holiday season. This increase also came while lawmakers were looking to raise the amount federal workers pay toward their pensions. The difference in how the two groups are dealt with has drawn fire from the head of a federal employees union. J. David Cox, Sr., who is the National President of American Federation of Government Employees, made it clear that he will “not stand by idly while contractors get rich at middle-class federal employees’ expense.”
The White House Office of Management and Budget (OMB), has raised the cap the government pays to reimburse federal contractors for the salaries of top executives. According to an action made public in a Dec. 4 memo, the government will reimburse up to $952,308 per contract toward top-level salaries. The previous amount was $763,029. The change went into effect on Jan. 1. While Christmas has come early for federal contractors, government employees found their stockings “full of coal.” With funds being hard to come by for the operations of the federal government, I have to wonder how the increases for government contractors can be justified.
Cox is justifiably upset over this state of affairs. The reimbursement is the maximum amount the government pays toward executive salaries, but it’s not a salary limit. Individual companies can pay the executives whatever they want, but must cover the extra amount from their own budget. Currently, salaries are reimbursed based on an industry average that’s set annually by the OMB. According to the Government Accountability Office (GAO), the cap has increased 63 percent since 1998, outpacing the growth of inflation and the rate of federal salaries. The White House has proposed setting the limit at $400,000 – the same amount the president earns – a move that could save $180 million a year.
The House of Representatives has rejected efforts to change the formula used to determine the reimbursement and Senate motions have been stymied. The reimbursement change comes after three straight years of employee pay freezes and a week of lost wages due to this summer’s sequestration furloughs. It also comes as the Senate-House Budget Committee is considering a legislation that would require federal workers to pay more toward their retirement. They say this is an effort to blunt the impact of sequestration on national defense. Mr. Cox made this point, which puts things in context:
Putting things in the proper perspective, while government contractors are being favored, some in Congress are advocating an array of substantial compensation cuts for modestly paid VA nurses and Border Patrol agents. It appears that wealthy contractors are getting a fat pay raise, and that cause is coming from U.S. taxpayers. This is the height of irresponsible governing and leadership to allow this ridiculous increase in taxpayer-funded compensation for contractor executives.
The union would like to see the reimbursement cap for government contractors lowered to $230,700, the current salary earned by Vice President Biden. That seems reasonable. According to a GAO report, a change of that sort could save as much as $440 million per year. I wonder how far – considering the vast political power of corporations that do business with the federal government – that proposal will get. What do you think?
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