Bill Calls for Higher Contributions for Federal Employees, an End to 'Hypocrisy'

The House Oversight and Government Reform Committee is considering a bill that would push Federal employees, including members of Congress, to contribute 1.5% more toward their pensions.

(February 7, 2012) — The US government could be on the hook for higher contributions to its pension scheme under proposed legislation, with the House Oversight and Government Reform Committee weighing the possibility of a contribution hike for federal employees.

Under the bill being considered, introduced by Rep. Dennis Ross (R-Fla.), Federal employees would be required to contribute 1.5% more toward their pensions. The House Oversight and Government Reform Committee is scheduled to consider the legislation today.

Congressman Ross said in a statement: “Since I was elected in 2010, whenever asked by constituents what the greatest challenge facing this Congress is, I always answer ‘credibility.’ The American people rightfully demand in their elected Representatives a willingness to live under the laws they pass. They are tired of the perks and hypocrisy they witness in their Congress. As representatives of the people we serve, Congress should live under the same rules as everyone else.”

The legislation, which would apply to workers hired after this year and who do not have at least five years of previous federal service, would have federal retirement calculated on an employee’s highest five earning years as opposed to the highest three, as is currently done.

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The hype for greater contributions for Federal employees comes after Congressman Tim Griffin (R-Ark.) introduced legislation calling for the end of pension funds for members of Congress.

While a majority of the private-sector workforce has seen their pensions slowly disappear, members of Congress receive both a pension and a quality employer-match plan.

“The rest of the country has been focused on state and local government pensions. So how has Washington been able to get away with pensions while the rest of the country loses theirs? Members of Congress pay far less into their pensions than other government workers while taxpayers kick in more,” Griffin told aiCIO in a telephone interview.

According to Griffin, the demise of congressional pensions would give federal lawmakers more credibility in addressing related financial issues.

“Ultimately, this is about the next step. When you talk about congressional pensions, you’re talking about millions of dollars. This bill only deals with members of Congress — the gateway with which we have to travel to get credibility and political momentum to deal with the broader issue of federal pensions,” Griffin said, adding that his legislation is not a question of morality, but a question of affordability.

(February 7, 2012) — The West African Nation of Gabon has become the latest on the continent to launch a sovereign wealth fund to capitalise on oil sales income, following similar moves by nearby Ghana and Nigeria.

Gabon, which won independence from France in 1960, announced through its Council of Ministers this weekend that it intended to pool money earned from its oil production to fund domestic infrastructure projects.

The move was reported in the French press yesterday.

Gabon’s fund will be called the Fonds Souverain de la Republique and is targeted to raise €760 million. Once 25% of this target is reached, investment returns and surplus oil revenues will be used to hit the target.

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The country’s GDP hit $14 billion in 2010, according to the government’s website, with a heavy slant on oil extraction. Oil is the country’s greatest export and a 10% levy on all revenue will be collected and pooled in the fund.

Oil revenues comprise roughly 46% of the government’s budget, 43% of GDP, and 81% of exports, according to the government. However, oil production has been declining rapidly from its high point of 370,000 barrels per day in 1997. Some estimates suggest that Gabonese oil will be expended by 2025, hence the creation of the fund to tap income while it is still available.

In a paper for the Center for Global Development last year, Adam Dixon and Ashby Monk said: “In the right circumstances….a SWF can be a useful addition to a country’s toolkit for combating the resource curse. But to increase the likelihood of success, these funds have to be designed with intent to deliver on promised results. In our experience, this requires good governance principles and practices. As such, the real challenge for resource-rich African countries is designing, governing, and managing a SWF that can realistically achieve the objectives set out for it by the government.”

Last year, Ghana announced it would create a fund to pool income from its oil revenue, following moves by Nigeria earlier in the decade. Previously the country had a small fund, according to the SWF Institute, but this announcement is the first serious approach at a well-managed investment vehicle.

Income from oil and other fossil fuels has been the foundation for many SWFs around the world. Most funds in the Middle East were created with excess revenues from natural resources and the largest European fund, Norway’s Government Pension Fund – Global was formed with income from the nation’s oil revenue.