Effect of Personnel Reform on the Federal Aviation Administration's Budget

Under personnel reform legislation enacted in 1995, the Administrator of the Federal Aviation Administration (FAA) implemented a new personnel management system. The system is exempt from most governmentwide personnel laws, but is subject to change only if the Administrator consults and negotiates those changes with the exclusive bargaining representatives of FAA's employees. When FAA and labor cannot reach an agreement regarding changes in the personnel management system, the legislation requires that the Federal Mediation and Conciliation Service be used to reach an agreement, and if that step is unsuccessful, FAA's proposed changes become effective 60 days after FAA transmits its proposed changes, along with labor's objections and its reasons for the objections, to Congress. FAA's first labor negotiation following the reform legislation was with the National Air Traffic Controllers Association (NATCA), which represents, among others, FAA's 15,000 Air Traffic Controllers, Traffic Management Coordinators, and Traffic Management Specialists. Congress' letter asked us to review FAA's human capital system. Congress also raised several questions, including (1) How personnel reforms have affected FAA's budget and how compensation for FAA's unionized workforce compares with other government employees? and (2) What has FAA done to ensure that the federal budget and appropriations processes are used to guide labor compensation negotiations?

The requirement to negotiate pay with unions representing FAA's employees initially affected FAA's budget because FAA had to use funds that were originally intended for other purposes to cover negotiated pay increases. When FAA negotiated the agreement with NATCA in 1998, the agency did not determine the future cost of the agreement prior to signing. Controllers received significant pay increases in the early years of the agreement. Therefore, to cover the increases in pay under existing appropriations, FAA used funds that were originally intended for other purposes. For example, in fiscal year 1999, FAA used $93 million of its operations appropriation that was originally planned for activities such as hiring, equipment maintenance, and training. Cumulatively, from 1998 through 2006, the agreement resulted in air traffic controllers' pay scales increasing between 49 and 81 percent, depending on the complexity of the air traffic control facility where a controller worked. During this timeframe, the pay scale for federal employees under the general schedule increased by 26 percent. From 1998 through 2006, total expenditures for controller personnel compensation and benefits (PC&B) increased by a greater percentage than total PC&B for other FAA employees. However, during this timeframe, FAA's operations appropriation increased by a greater percentage than total PC&B expenditures. FAA noted that the number of permanent staff funded by operations declined by 7,300, or almost 16 percent, during this time period. To ensure that the federal budget and appropriations processes are used to guide future labor agreements, FAA implemented a requirement in 2003 that all proposed labor agreements be priced out and coordinated with its finance staff. Specifically, every proposed labor agreement must be accompanied by a budget analysis that estimates cost impacts and assesses affordability relative to anticipated funding levels. FAA's intent is to ensure that labor agreements are affordable before reaching agreements. However, FAA noted that pricing out and coordinating labor proposals with the finance staff does not, in itself, limit the cost of a new contract. Overall, FAA followed the new requirement in completing nine agreements and in negotiations for another nine pending agreements. FAA also followed the requirement in negotiations with NATCA during 2005 and 2006 that did not produce an agreement. Because FAA and NATCA did not reach an agreement on pay, FAA followed the steps outlined in the reform legislation, resulting in FAA's proposal being implemented in June 2006-- 60 days after it was sent to Congress with NATCA's objections to the proposed agreement. Due to higher growth in controller pay bands compared to the general schedule, the new contract implemented controller pay bands that were between 25 and 34 percent lower than those in effect under the prior agreement. Incumbent controllers retained their previous pay levels. Controllers whose pay exceeded the maximum levels of the new bands were eligible for performance pay in the form of bonuses, but not in the form of permanent pay increases. In 2007 and 2008, the new controller pay bands increased by the same percentage as the general schedule.