Survivors' benefits cut due a new look Panetta testifies at hearing


WASHINGTON -- The Clinton administration will reconsider a controversial plan to reduce the benefits of federal retirees' widows and widowers, Leon Panetta said yesterday.

"I think if there's one area that we need to look at again, I think it's that area," the budget director told a Senate appropriations subcommittee hearing.

Reducing survivors' benefits may be the most unpopular of Mr. Clinton's budget proposals affecting federal workers. The proposals include the planned one-year wage freeze and delayed locality pay increases.

Many federal survivors are elderly women who have little or no other income, said Maryland Democratic Sen. Barbara A. Mikulski, a member of the subcommittee.

Survivors' benefits are deducted from the monthly pension checks of federal retirees. Under the administration plan, checks would be reduced by the regular amount -- 8.5 percent for those in the Civil Service Retirement System and 10 percent for Federal Employees Retirement System members -- but payments to survivors would be reduced by 10 percent.

The new plan would apply to the widows and widowers of all retirees who die after Sept. 30 of this year, and is calculated to save $473 million over five years.

Yesterday's hearing was called to discuss the operating and personnel costs of the Office of Management and Budget, which Mr. Panetta directs. But Ms. Mikulski -- a friend of Mr. Panetta's since the 1970s, when they were both freshmen in the House -- used the opportunity to push for another look at the survivors' benefits proposal.

Before the hearing began, Mr. Panetta and Ms. Mikulski exchanged a big bear hug. "How are you doing?" he asked.

"I'm doing fine," the senator replied. "I was doing great until you took away survivors' benefits."

Ms. Mikulski then pulled him away for a private, whispered conversation.

Sen. Dennis Deconcini, D-Ariz., the subcommittee chairman, was the first to question Mr. Panetta, and they discussed OMB's operating expenses. But when Ms. Mikulski's turn came, she addressed topics affecting federal workers.

She criticized the administration's across-the-board wage freeze, which would apply whether a worker earned $100,000 or $13,000.

Mr. Panetta said he is "working on a formula" to make the freeze less regressive. "I think we have to be a little fairer in the way we apply this," he said.

He also said OMB is looking at ways to encourage retirement, which is key to the administration's planned reduction of 100,000 federal positions.

Ms. Mikulski pointed out that the wage freeze actually will reduce the incentive to retire because pensions are calculated using employees' three highest annual earnings, and workers eligible for retirement may wait around until their pay goes up again.

After the hearing, Ms. Mikulski said, "I think Mr. Panetta was very clear that the [administration's] earlier recommendations would be a disservice to federal employees and could work against" Mr. Clinton's goal of improving the operations of the federal government.

PUBLIC SERVICE WEEK -- Federal employees get their week in the sun May 3-9, which Congress has deemed Public Service Recognition Week.

The eighth annual observance will be celebrated with four days of activities on the National Mall in Washington tomorrow through Sunday and in some 1,000 communities around the country, according to the Public Employees' Roundtable, a co-sponsor.

More than 60 federal agencies and branches of the armed services will offer information and demonstrations about their work at booths on the Mall. There will be hourly entertainment.

Most exhibits will be open from 10 a.m. until 5 p.m. today through Saturday.

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