In short, the Board would be totally free to make its own choices with respect to personnel without any regard for the existing provisions of the civil service system. This prompts us to ask how are the merit principles upon which the civil service system is based to be assured under the provisions of S. 216? What rights and protections would the employees of the new independent agency have?

In light of this serious deficiency, AFGE recommends that language be added to the bill to insure that exclusive representatives are involved in the design and implementation of any demonstration projects. This could be accomplished by amending Section 103.

Current SSA employees are endowed with the benefits of the labor-management rights provisions of Chapter 71 of Title 5. In exercising those rights, many have chosen exclusive representatives. In such cases, both SSA and the employees have benefited from their negotiated agreements. The language of S. 216, particularly that contained in Section 105, seems to permit the new agency to modify or even terminate such agreements. There is no reason why employees should suffer the loss of the benefits and protections under those agreements. There is no reason why the exclusive representatives of the current SSA employees should not continue to represent those employees who are transferred to the new independent agency.

To the extent that the current SSA employees will be employees of the new independent agency and performing the same functions, AFGE believes that it is in the interest of the public, the agency, the employees, and their exclusive representatives to (1) retain existing bargaining units, (2) continue recognition of exclusive representatives, and (3) continue in full force and effect all collective bargaining agreements as well as mandate the continuation of any negotiations which are currently being undertaken between SSA and exclusive representatives. This can be accomplished by implementing the following three changes:

(1) Amend Section 102 to provide that however the Board chooses to establish organizational units, where there is a community of interest which existed prior to the establishment of the new independent agency which was. the basis for the determination of an appropriate unit for representation, that community of interest shall be the basis for the continuation of such unit.

(2) Amend paragraph 105 to provide that current exclusive representatives shall continue to represent the employees who are transferred to the new Agency. In other words, make clear that the status quo shall remain with respect to representational rights under Chapter 71 of Title 5.

(3) Amend paragraph 105 to provide that all collective bargaining agreements in effect shall remain in effect and be binding upon the Administration and that where negotiations are currently underway, they shall continue between exclusive representatives and the new Agency.

Again, we wish to express our appreciation to the Committee for moving forward so quickly in this 101st Congress to establish SSA as an independent agency, and to provide for annual earnings and benefit statements. It is our desire to have SSA established as an independent agency and we believe that this can be accomplished in a manner which also provides clear employee protections. Thus, we look forward to working with the Committee to develop the provisions necessary to adequately address the concerns we raised above, thereby protecting the employees of SSA and working toward assuring the integrity of the existing merit principles upon which the civil service system is founded.

Thank you for the opportunity to appear here today and to present the views of AFGE on S. 216 and S. 212. I would be happy to respond to any questions the Committee might have.

PREPARED STATEMENT OF LOUIS W. SULLIVAN

Mr. Chairman and Members of the Subcommittee:

I am pleased to have the opportunity to discuss S. 216, which would make the Social Security Administration (SSA) an independent agency in the executive branch. All of us can agree that the goal of SSA should be to provide high-quality service to the American public. The question before you today is whether making SSA an independent agency would be the most efficient and effective means of attaining this goal. The answer to that question is clearly “no.”

To provide the most effective and efficient public service, it is critical that SSA keep its energies clearly focused, be well managed and motivated and meet the needs of its employees. This has been and can continue to be done within the Department of Health and Human Services (HHS). Independent agency status would

not make the task any easier and, indeed, is squarely against recognized concepts of good management.

Further, separating SSA from HHS would undercut the President's role as manager of the executive branch, would weaken important links with other HHS agencies, and would eliminate many administrative economies inherent in a large Government department. Consequently, the Administration strongly opposes making SSA an independent agency.

In the remainder of my statement, I would like to discuss the impetus behind the independent agency movement over the years and the consequences of making SSA independent.

BACKGROUND OF INDEPENDENT AGENCY CONCEPT

The Social Security program was administered in its first years as an independent agency, but by 1939, before actual payment of monthly benefits began, it became an integral part of the Federal Security Agency (FSA), the forerunner of today's Department of Health and Human Services. The FSA was established to group agencies with related missions under common leadership in-order to coordinate policymaking, management, and operations.

It was recognized that it was impractical to expect the President to manage directly all the major programs and agencies of the Federal Government without having them grouped under Cabinet officers.

Proposals to reestablish SSA as an independent agency arose in the 1970's as a result of a concern on the part of some that Social Security policy decisions were being dictated by partisan political and short-term budgetary considerations and that SSA faced serious systems and organizational problems.

Social Security amendments enacted in 1983 established a Joint Study Panel of three experts to recommend how an independent SSA could be implemented. As you know, the panel did not address the pros and cons of an independent Social Security agency. Rather, as required by its statutory mandate, the panel dealt extensively with the various administrative and organizational issues that would arise if SSA were established as an independent agency and specifically cautioned that the panel's recommendations regarding how an independent agency might be structured should not be interpreted as an endorsement of the concept.

Since the panel issued its report, bills to make SSA independent have been considered in each recent Congress-although none has been enacted. I suggest as a reason the fact that there is no evidence indicating that making SSA independent would improve its capacity to do its job more effectively.

INTENT OF INDEPENDENT AGENCY ADVOCATES

The history of the independent agency movement indicates that its sponsors have wanted to accomplish two things—(1) insulate the Social Security program from possible political or budgetary pressure, and (2) improve the quality of service the Agency provides. In reality, the Social Security program has become so large-21 percent of Federal expenditures in fiscal year 1989-and so visible-39 million people receive benefits and 130 million pay Social Security taxes-that it is not possible or desirable to restrict debate about changes in the program.

Moreover, I believe that there is broad bipartisan agreement that changes in Social Security should be evaluated on their merits and not be advanced for budgetary or partisan political purposes. The bipartisan support that produced the historic 1983 Social Security amendments is a model for how Social Security issues should and will be handled in the future. I believe this bipartisan model should be used to address all important policy questions-for example, how Social Security programs are reflected in the budget, how the Social Security trust funds are counted for Gramm-Rudman-Hollings deficit reduction target purposes, and how trust fund balances are invested. Making SSA an independent agency would have no effect on how these issues are raised and handled in the political arena.

From a public service perspective, SSA's performance overall in getting its work done is significantly better today than it was a few years ago. With the help of systems modernization and streamlined processes and procedures, SSA generally has eliminated its work backlogs and now provides quicker, more accurate service to beneficiaries. The improvements SSA has made in the quality of service it provides and the efficiency the Agency has achieved rebut arguments that independent agency status is essential for administrative or operational reasons.

DISADVANTAGES OF MAKING SSA INDEPENDENT

On the contrary, there are clear disadvantages to establishing SSA as an independent agency.

First, I would note that S. 216 purports to establish SSA as an "independent agency" with limited executive branch accountability. In this respect the bill is a direct affront to the role of the President as Chief Executive and undermines his ability to develop coherent economic and social policies for the Nation.

Independent agency status would have costs to SSA and the public. Establishing SSA as an independent agency would weaken important links between the Agency and the President and between SSA and parallel agencies within HHS. These links are valuable to SSA and to the public it serves.

As a Cabinet member, the Secretary of HHS reports directly to the President, who is, in turn, directly accountable to the electorate. The President and the Secretary of HHS are thus in an excellent position to provide policy leadership on Social Security issues. Moreover, the independent agency proposals under consideration would weaken SSA's ties with executive branch support agencies under the President's leadership. Those agencies have the expertise and resources to help SSA with its space and procurement needs, in the case of the General Services Administration, and personnel needs, in the case of the Office of Personnel Management.

SSA also benefits from its close ties to other agencies under the HHS umbrella. As you know, many agencies in HHS are concerned with issues closely related to those dealt with by SSA. To name a few, the Administration on Aging funds social services for the elderly, the National Institute on Aging is concerned with health programs for the aged, and the Health Care Financing Administration's Medicare and Medicaid programs are vital in providing health care to older citizens and persons with disabilities.

SSA is particularly close to the Health Care Financing Administration (HCFA), since OASDI and Medicare share many eligibility and coverage provisions and their recordkeeping processes are highly integrated. Likewise, SSI and the Medicaid program share certain eligibility requirements and procedures. Service to beneficiaries under all of these programs could suffer if an organizational change made it more difficult for SSA and HCFA to coordinate both policy and operations.

Local Social Security offices also serve as a "one stop shop" for the elderly. Typically, beneficiaries of Social Security benefits receive information regarding the Medicare program through their local Social Security office. Local offices also perform outreach, providing local community groups with opportunities to learn about Social Security and Medicare programs.

Moreover, as the catastrophic health insurance program is implemented, these links between Social Security programs and Medicare will become more important. The Department's Catastrophic Coordinating Committee is currently involved in planning the implementation of this new program. The Social Security Administration and the Health Care Financing Administration are represented on this committee, allowing for important cross-agency coordination and communication.

The vital link forged between SSA and other HHS agencies will become more critical in the future. As the aging of the baby-boom generation occurs, more policy and service coordination between the agencies will be necessary, and there will be a growing need to coordinate the cash payments provided through the OASDI and SSI programs with the health and social services provided through all parts of HHS.

The programs administered by SSA also impact our youngest citizens. At the end of fiscal year 1988, children accounted for 9.2 percent of all disability insurance beneficiaries. Similarly, by the end of fiscal year 1988, 4.8 percent of all retirement and survivors insurance benefits were paid to children. Benefit payments to those children totaled approximately $11 billion in FY 1988.

Due to either disability or the death of a parent, Social Security's child beneficiaries are among those who are particularly reliant upon the services and programs available through the HHS network. Both the Head Start program and the Administration on Developmental Disabilities may provide targeted assistance to disabled children. Children of deceased workers might also receive cash assistance through the Aid to Families with Dependent Children (AFDC) program. The Supplemental Security Income program (SSI) also provides assistance to children. Approximately 290,000 blind and disabled children were receiving SSI payments at the end of 1987. Entitlement to OASDI and SSI child's benefits also allows our youngest citizens to access the Medicare and Medicaid programs.

SSA also serves as a primary gateway to information concerning other programs. SSA is an especially key contact point for younger beneficiaries who may not be receiving the wide range of information about benefits the aged receive from private

organizations. Any breakdown in SSA's gateway function to other HHS programs would prove detrimental to both older and younger beneficiaries.

In addition to the administrative disruption, another practical consideration is that removal of SSA from HHS would eliminate many of the administrative economies inherent in a large Government department, requiring expenditure of trust fund monies for the establishment of duplicative and expensive payroll, personnel, and other support structures now operating efficiently in HHS.

DISADVANTAGES OF A PLURAL EXECUTIVE

The fact that independent status would in no way help SSA do a better job and would create serious new problems for the Agency are sufficient reasons to oppose S. 216. However, the bill is fatally flawed in creating a bipartisan, three-person executive to head SSA. In 1984, the Congressional Research Service (CRS) prepared an extensive report to the Congressional Study Panel on making SSA independent. Based on considerable research, the report stated that ". . . the concept of the plural executive to administer executive agencies has never enjoyed wide support." The report notes that George Washington observed early in our Nation's history that ". whatever, and whenever one person is found adequate to the discharge of a duty by close application thereto it is worse executed by two people, and scarcely done at all if three or more are employed therein."

The history of the three-person Social Security Board in the 1930's is a case in point. A detailed account of the Board's experience reviewed in the CRS report conIcluded that "By the end of March 1937, only one major administrative conclusion appeared clearly warranted: namely, that the Board structure was inadequate for operating the Social Security program."

A bipartisan board to head SSA is a prescription for indecision and inaction just when the Agency is making strong forward strides in the service it provides the American people. Independent agency status would cause serious problems for SSA; a plural executive would almost certainly prove as ineffective as the initial Social Security Board. The 1984 Congressional study Panel addressed this issue and recommended that SSA, if made independent, continue to be headed by a single Administrator.

The General Accounting Office has also testified repeatedly that it believes the more effective form of leadership for an independent SSA to be a strong single Administrator at the head of the Agency, assisted by an advisory board on policy matters that would have no role in SSA operations.

In addition, S. 216 provides for an SSA Executive Director, appointed by and primarily responsible to the 3-member board. In contrast to current law, administration of the Social Security program would be carried out by an individual selected without either the advise and consent of the Senate or nominated by the President. The nation's largest domestic program would be run by an individual neither accountable to any elected official or the American people.

A Social Security Administration governed by a 3-member board also raises questions regarding the constitutionality of the legislation. In particular, the Administration is concerned by Section 101(b)(i) of the bill which states that the President would be able to remove members of the Board only for "neglect of duty or malfeasance in office."

An attempt to limit executive branch oversight of SSA's statutory duties and responsibilities, by restricting the President's removal authority, raises serious separation of powers concerns. Restrictions on the President's removal power over such Officers impede the exercise of the President's constitutional obligation to "take Care the Laws be faithfully executed." (U.S. Constitution, Article I, Section 3.)

The bill also directs the Board to report on certain matters to both the President and Congress and to report with respect to other matters exclusively to the Congress. These concurrent reporting requirements also raise serious practical and constitutional concerns.

ADMINISTRATION POSITION ON INDEPENDENT AGENCY LEGISLATION

For the reasons I have discussed, the Administration strongly opposes legislation to make SSA an independent agency. We do not believe that taking SSA out of the Department of Health and Human Services would help SSA accomplish its mission, and such a change could seriously hinder close coordination in the delivery of related Federal programs to the public.

PERSONAL EARNINGS AND BENEFIT ESTIMATE STATEMENTS

Mr. Chairman, you have also requested that I comment on S. 212, which would require that SSA implement in three phases a program to mail personal earnings and benefit statements to all workers. As you know, Commissioner Dorcas Hardy announced in August 1988 an SSA initiative to provide personalized earnings and benefit estimate statements to all workers upon request. Thus far, over 10 million workers have asked for the form to request an earnings statement and over 5 million workers have returned the completed request.

This new statement serves three vital purposes:

First, it lets people examine and, if necessary, correct their earnings records promptly. The new statement contains a year-by-year display of a worker's earnings from 1951 through the most recent year. This detailed information allows a worker to make sure that his earnings record is correct, so that his future benefits will be based on all his covered earnings.

• Second, it provides workers with comprehensive benefit estimates, putting a dollar and cents value on the full package of protection that Social Security offers. Third, the statement helps people do their own financial planning. They learn what to expect from Social Security and are in a better position to plan supplemental sources of retirement income.

The form contains disability and survivors benefit estimates; retirement benefit estimated for reduced benefits, benefits at normal retirement age, and benefits at age 70; and the number of credits the worker needs to be insured for all types of benefits.

There are two basic reasons why earnings statements are currently available only upon request, rather than to everyone, as S. 212 would require. First, SSA's systems of records have current addresses for beneficiaries, but not for people still working. This is a concern not only because some workers might not get their statements, but also because mail delivered to the wrong address increases the potential for confidential personal information to get into the wrong hands. Second, there is concern that benefit-estimates based on automated projections of future earnings might be much less reliable, particularly for workers many years away from retirement age, than benefit estimates based on the workers' own projections of future earnings. In addition there is concern that workers who do not request benefit estimates may not use the information sent to them to check their earnings or learn about Social Security. The Department may then be in a position of expending resources that might be used more effectively in other public information efforts. Allowing workers who request benefit estimates to provide their own estimates of earnings and the address to which the statement should be mailed avoids both problems.

Mr. Chairman, we are continuing to explore alternatives for issuing SSA-initiated statements. The objective is a process that will give the public the information it wants and can most readily use, will distribute the statements in a manner that safeguards confidentiality and yet is as cost-effective as possible, and will keep SSA workloads manageable. To achieve this, we believe strongly that we must test the various options fully before settling on a final design.

Because no statement content or distribution methodology is clearly without problems, SSA plans to conduct several tests beginning with the first one this July to focus on those issues. We are concerned about confidentiality even during the test modes, so one version will use blank forms rather than personal information to test the reliability of the addresses. Other tests will involve distribution of statements through several large employers with whom we will negotiate special arrangements for safeguarding the information released to the individual SSN holders. We will be happy to provide information regarding the results of the tests as they are conducted. We believe, however, that it would be inadvisable to enact legislation requiring statements to be sent to all workers before we assess the impact of our current efforts and ways are found to secure good addresses, to ensure the privacy of the information, and to estimate earnings in future years.

CONCLUSION

In conclusion, I would reiterate that the Bush Administration, like prior Administrations of both Parties, strongly opposes separating the Social Security Administration from the Department of Health and Human Services and making it an independent agency.

In regard to benefit statements, we are assessing our current approach of providing combined earnings and benefit estimate statements to those who request it, and we are testing alternative approaches designed to provide wider dissemination of the information. We want to ensure that resources directed toward providing this