Although we believe that authority for managing the operations of the agency should be vested in a single administrator, a board could be established to advise the administrator on the many economic and social policy issues affecting the financial solvency of the Social Security programs. This would also give the Administration and Congress an opportunity to receive bipartisan views on such issues and help insulate the programs from major shifts in policy direction. The major goals of S. 216 could be achieved by adopting this organizational structure while still providing for a strong single administrator. RESPONSIBILITIES OF KEY OFFICIALS SHOULD BE CLARIFIED If the Congress decides to implement a board, the provisions of S. 216 that delineate the responsibilities of the board, and the executive director should be clarified to clearly establish accountability for directing SSA's operations. Title I of the bill prescribes that the board govern, by regulation, programs under titles II and XVI of the Social Security Act and establish and oversee efficient and effective operations in SSA. Title I also prescribes that the executive director will be SSA's chief operating officer, responsible for administering the programs. The legislation should clarify that the Executive Director should be responsible for directing the operations of the agency. In addition, the bill appears to provide authority for the board to establish SSA's organizational structure, an authority that might better be given to the executive director, who will have to direct operations using that structure. Also, the bill gives the board authority for developing long-range plans for the agency. However, we believe the executive director should do the agency's operational planning. OTHER CONCERNS We oppose the provisions requiring the Comptroller General to carry out the inherently contradictory functions of both consulting in the implementation of demonstration projects and reporting on their effectiveness. Although evaluating the effectiveness of executive agency programs is a primary function of GAO, helping to implement those programs would appear to undermine our ability to independently evaluate them. Section 101 establishing the beneficiary ombudsman does not state to whom this official reports. The role of the ombudsman in representing beneficiaries could be rendered ineffective unless this person reports at a high level within the organization, such as to the board or to a single administrator. We have some concerns about section 103 of S. 216 relating to personnel, procurement, and budgetary matters and these are discussed in appendix II. PERSONAL EARNINGS AND BENEFIT STATEMENT As we stated in our testimony before this subcommittee on July 14, 1988, we believe there is merit in providing covered workers with better information about their Social Security earnings and benefits, as would be required by S. 1079. However, before legislatively mandating a personal earnings and benefits statement, we believe the subcommittee should consider the feasibility and costs for doing so. As you know, SSA began providing such information in August 1988 to those who request it through a "Personal Earnings and Benefit Statement" (PEBS). These statements provide workers with a summary of earnings from 1937 through 1950; an annual breakout of earnings from 1951 to the present with the FICA tax paid each year; benefit estimates for retirement before age 65, at full retirement age, and at age 70; estimates for survivors and disability benefits; and insured status information for each type of benefit. Currently, SSA is conducting a pilot test to determine whether it is feasible and useful periodically to send similar statements to all covered workers. This test will also determine the costs and resource impacts, as well as operational problems, associated with sending unsolicited PEBS. SSA plans to complete this effort by mid1990, at which time it will be able to present to the Congress and the administration alternatives and costs for routinely providing earnings and benefit statements to all covered workers. PEBS serves several purposes. First, it provides people with the opportunity to verify the accuracy of their earnings records and, if necessary, to resolve discrepancies. The failure to post or to accurately record earnings information could affect both workers' eligibility for, and the amount of, Social Security benefits. As we stated before this subcommittee last year, SSA recorded $58.5 billion less in workers earnings than the Internal Revenue Service recorded for the period 1978-1984. We estimated that 9.7 million individuals would have uncredited earnings and that beneficiaries lost, on average, nearly $17 a month. SSA is currently working to resolve these discrepancies. Since the inception of PEBS, SSA responded to nearly 4.6 million requests for earnings statements from covered workers. In turn, through April 1989, these statements generated about 54,000 cases in which earning discrepancies were found by the requestors. SSA estimates that 3 percent of all requested earnings statements will result in follow-up work to clear up discrepancies. In the longrun, PEBS may be SSA's most effective tool for assuring the accuracy of workers' earnings records. PEBS also facilitates planning for economic security during retirement, enables workers and their families to make more informed retirement decisions. According to a study done for the American Association of Retired Persons (AARP), 7 out of 10 non-retired Americans believe such planning is important. Obviously, Social Security is a critical element in retirement planning. Early information on prospective benefits payable under Social Security would enable covered workers to plan for supplemental sources of income to complement what they will receive under Social Security. Finally, PEBS could help educate the public about Social Security and build public confidence. Some of the current public dissatisfaction with Social Security is due to a lack of information on the various benefits. Better information and understanding of all the benefits provided by Social Security should result in improved public confidence. In this regard, the Home Testing Institute conducted studies for SSA in December 1987 and November 1988 on people's "confidence in" and "knowledge of" Social Security. Results showed a measurable increase in both categories between 1987 and 1988. SSA attributes this increase, in part, to PEBS, which was launched in August 1988. As we stated previously before this Subcommittee, any legislation that would require SSA to send all workers a statement of earnings and benefit estimates should be drafted with an understanding of the administrative actions that would be required and the cost and resource impacts. Our work at SSA has shown that if legislation is enacted without considering these factors, SSA will have to resort to error prone, inefficient, and labor intensive manual processes. In reference to S. 1079, SSA indicates they will not be able to automate adequately some provisions by their effective dates and some of the mandated requirements cannot be implemented without large increases in work years. Consequently, before legislatively mandating a personal earnings and benefit statement, we believe the subcommittee should consider the results of SSA's ongoing research on alternatives for providing such information. Finally, Section 1(c) authorizes the disclosure of address information by IRS to SSA. However, this may not go far enough in requiring IRS to provide SSA current address information from its various taxpayer files. IRS considers this information tax data and has often been reluctant to disclose this information for other than tax purposes. Mr. Chairman, that concludes my testimony. We would be happy to answer any questions and work with the subcommittee in revising the bills to reflect our con cerns. Enclosure. APPENDIX I.-SUMMARY OF MAJOR STUDIES ON BOARD FORMS OF LEADERSHIP A number of studies done over the last 50 years have been critical of the board form of organization, primarily for regulatory commissions. The studies reiterated the weaknesses of collegial regulatory bodies and recommended actions to correct the identified problems and vest responsibility for management in a single administrator. 1937-BROWNLOW COMMITTEE REPORT In 1937, the Committee on Administrative Management (the Brownlow Committee) published its report which stressed the lack of coordination among independent regulatory commissions and between the independent agencies and other government branches. The report highlighted the need for reorganization to improve coordination. The proposed solution was to abolish the independent regulatory commissions and integrate them into the executive branch where the commissions would become agencies within the executive departments. Once relocated, the commission functions would be divided between an administrative section directed by a single administrator and a judicial section that would remain independent in the making of regulatory decisions. The main thrust of the Brownlow Committee Report was that policy and administration could be coordinated in the several regulatory fields only if the_agencies were responsible to a Cabinet head and ultimately to the President. The Executive Reorganization bill of 1938, which contained many of the recommendations of the Brownlow Committee, was defeated in the Congress, partly out of concern that it would give too much power to the President. 1949-HOOVER COMMISSION REPORT Unlike the Brownlow Committee, the first Hoover Commission concluded that the regulatory commissions had a rightful place in the political system, but to expectations. The Commission's recommendations found that they had generally failed to perform tended to be concerned with the organizational status and administrative structure of commissions. The Commission's report argued that the regulatory commissions would be more effective and efficient if the administrative responsibilities were vested in the commission chairperson. Echoing the Brownlow Committee, the Hoover Commission also noted the lack of coordination between the commissions and the agencies in the executive branch with similar regulatory responsibilities. To overcome this problem, it recommended that the position of administrative management director in the Bureau of the Budget (now OMB) be established to "suggest ways and means to improve and thereby reduce the cost of disposing of business before administrative agencies." 1960-REDFORD REPORT AND LANDIS REPORT In 1960, two reports were published addressing in a more limited way the special problems related to operations and coordination posed by independent regulatory commissions. These reports suggested coordinating mechanisms to ensure a greater degree of accountability to the executive branch. The first of these, the Redford Report, prepared for the President's Advisory Committee on Government Organization, suggested statutory changes to allow policy direction from the President. The second report, the Landis Report, proposed that the administrative powers of the commission chairperson be enhanced and that staff positions be made more attractive by delegating authority. The report further suggested that the formulation of regulatory policy come under presidential guidance to ensure uniformity. Such guidance would be provided by naming special White House assistants to oversee and coordinate regulatory policy. 1971-ASH COUNCIL REPORT The 1971 report of the President's Advisory Council on Executive Organization (the Ash Council) found the board form of organization for the regulatory commissions to be essentially ineffective and unable to respond well and in a timely fashion to economic, technological and social changes, and public needs. These weaknesses were attributed by the Council primarily to independence from presidential authority, collegial administration, and the judicial cast of agency activities. The Council's report recommended a major restructuring of the independent regulatory commission system "to assure coordination of regulatory matters with national policy goals, to improve the management efficiency of regulatory functions, to improve accountability to the Congress and the Executive Branch, and to increase the probability of superior leadership for regulatory activities." This was to be accomplished by eliminating, in most cases, the plural-member commissions and replacing them with organizations headed by single administrators responsible to the President. The Ash Council Report was the subject of extensive discussion for several years after its release. Although the report has had its supporters, most commentators have been unconvinced, believing that the Council failed to make a logical case because it lacked factual or analytical evidence for most of its conclusions. The changes and reforms directly attributable to the Ash Council were negligible. 1972-REPORT BY THE COMMISSION ON RAILROAD RETIREMENT In 1972, The Commission on Railroad Retirement concluded that the Railroad Retirement Board should no longer operate as a separate independent agency and that it should be headed by a single administrator rather than a board. In arriving at their conclusion on independence, the Commission stated that independent agencies lack the strength of a presidentially-appointed cabinet officer which prevents them from achieving maximum administrative effectiveness and that an independent agency serving a single clientele has a more difficult task in representing the best interests of the general public. The Commission's report was critical of the beard form of organization and stated that an agency which has responsibilities of an administrative nature should preferably be headed by a single administrator. The Commission observed that boards suffer real handicaps in the achievement of effective administrative or managerial leadership. In developing its conclusion, the Commission reiterated the findings of the 1971 report by the President's Advisory Council on Executive Organization which extolled the merit of vesting responsibilities in a single administrator as opposed to a board. 1984-REPORT BY THE NATIONAL ACADEMY OF PUBLIC ADMINISTRATION The National Academy of Public Administration (NAPA) concluded that single administrators are far more effective and accountable than boards. Their report stated that even if a beard's role is carefully defined and its membership carefully selected, it is almost impossible to keep such a board from interjecting itself into the management of the organization. In discussing the disadvantages of boards, the NAPA report stated 66 the likelihood is that they would end up confusing and debilitating the authority of the agency head, creating conflict for the staff, and becoming another layer of management which adds little and detracts much. Furthermore, the composition of such beards becomes an issue in itself, and all too often breeds preoccupation with diversionary issues of balance, representativeness, or political fairness, rather than the ability of such beards to contribute to the success of the program.' APPENDIX II.-GAO'S SPECIFIC CONCERNS ABOUT SECTION 103 PERSONNEL; The central management agencies of the executive branch have an appropriate role in broad policy development and oversight of agency operations, but these roles should be carried out as unobtrusively as possible. Thus, we support removal of detailed controls, which is the intent of this legislation, but not if achieved in a way that erodes the ability of the central management agencies to apply policy and regulations consistently throughout the Federal government. CONTRACT AUTHORITY FOR COMPUTER PURCHASES AND FACILITIES CONSTRUCTION We support the provision that allows contract authority for computer purchases and facilities construction to (1) cover the total cost of such acquisitions and (2) be available until expended. But this authority should be provided only after SSA's currently inadequate financial controls have been substantially strengthened. While such funding may increase the likelihood that projects will be completed without interruptions once they have been approved, there is no assurance that the government will get what it pays for without reliable financial information and reporting on costs and performance. COMPREHENSIVE WORKFORCE PLAN We agree with the requirement that SSA requests for staffing and personnel be based upon a comprehensive workforce plan. Our ongoing work shows that SSA needs to improve its work measurement system for it to be a reliable basis for work force planning, but we believe SSA can make these improvements. DEMONSTRATION PROJECT FOR PERSONNEL We have concerns regarding the requirements for proposed demonstration projects relating to personnel matters. We believe the proposals are overly broad, with no limits on the number of employees participating in or the time period for the projects. The time frame for evaluating the results and reporting appears to be too short to permit any valid conclusions. Finally, we note that the Office of Personnel Management (OPM) already has authority in chapter 47 of title 5, U.S.C., to permit similar demonstration projects. PAY FOR KEY TECHNICAL AND PROFESSIONAL STAFF We believe that raising the current level of pay for SSA's key technical and professional staff, as the bill would allow, should go a long way towards attracting and retaining quality people. However, we are concerned that the legislation appears to grant the board authority to appoint staff totally at its own discretion, without spe cific regulations or criteria to protect the interests of the government. While there may be a legitimate need for SSA to have an increased number of senior executive service and executive-level positions, SSA should be required to justify the extent of such an increase in accordance with OPM regulations. We also believe that the amount of salary that can be paid to hire high-quality managers and technical staff under the bill is too low. As we have stated on many occasions in the past, executive pay levels should be raised. It is difficult to attract highly skilled technical managers from the private sector, where pay scales are much higher. SSA officials have told us repeatedly that they have had difficulties attracting high-quality executives because of inadequate pay levels. OMB'S INVOLVEMENT IN APPORTIONMENT PROCESS We also have concerns over the provision in the bill that would restrict OMB's involvement in the apportionment process. We do not favor constraining OMB's authority under the Antideficiency Act. But recognizing the concern over how OMB might use the process, the provision in the bill could be revised to require OMB to report to the Congress any restriction of or deduction from SSA's apportionment with an explanation of why OMB took that action. PREPARED STATEMENT OF GENE LEHRMANN The American Association of Retired Persons (AARP) appreciates this opportunity to testify on improving confidence in Social Security by establishing an independent agency to administer the program and by providing personal benefit statements to workers. These are important matters and we commend Senator Moynihan for his dedicated leadership in both areas. I. INDEPENDENT AGENCY AARP supports S. 216, introduced by Senator Moynihan, which would create an independent agency to administer the Social Security and Supplemental Security Income (SSI) programs. Adoption of S. 216 would improve public confidence by ensuring that these programs are administered in a stable and professional manner. The Social Security Administration (SSA) one of the largest and most widely known Federal agencies, directly serves the needs of over 38 million beneficiaries and indirectly touches the lives of almost all Americans. It issues new and replacement Social Security cards, maintains the wage records of 133 million workers, and processes millions of claims and information requests annually. SSA's workload will continue to increase as the population ages and the workforce continues to grow. In order to accommodate this growing workload and improve the quality of service to beneficiaries, SSA must function in a stable environment that is conducive to longrange planning. Also, it should be run by competent, professional management and adequately staffed by knowledgeable people in order to serve the public effectively. A. History When Social Security was enacted in 1935, an independent Social Security Board was established to administer the programs in the Social Security Act. It operated as a free-standing agency with jurisdiction over both social insurance and meanstested programs. In 1939 this board was placed under the then newly-organized Federal Security Agency. In 1946 the board was abolished and replaced by a single administrator. When the Department of Health, Education and Welfare replaced the Federal Security agency in 1953, the Social Security Administration was grouped together with an array of welfare, rehabilitation, drug, education and health services programs in the new department. In 1977 the Medicare and Medicaid programs were removed from SSA's jurisdiction. Today the Social Security Administration is the largest federal agency without independent status. (Only the Veterans' Administration was bigger, and it recently was elevated to cabinet status.) B. THE NEED FOR STABLE AND INDEPENDENT LEADERSHIP The need for strong, stable, and independent leadership at SSA is one of the most powerful arguments for creating an independent agency. Throughout most of its history it was hailed as a hallmark Federal agency providing quality service to the public in a cost effective way. However, since the late 1970's SSA has endured successive and rapid turnover in its top leadership. Between 1978 and 1983, there were three Commissioners of Social |