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Madam Chair, Mr. Chair, and Members of the Subcommittees, I appreciate this opportunity to discuss voluntary separation incentives and the restructuring of the federal work force. Last week, the Congressional Budget Office (CBO) released a study, Reducing the Size of the Federal Civilian Work Force, that examines three standard approaches to reducing employment--hiring freezes, layoffs, and early retirements. My testimony today will review the highlights of this study. Our major findings were:

• Permanent cuts in staff will always save money by reducing the continuing costs of government. The relative cost advantages of different approaches to cutting staff, however, depend on the period of time considered. Also, arbitrary or across-the-board cuts may cause backlogs and delays in providing needed services and could leave the government with little in the way of savings.
  
  
• The costs of various approaches to cutting staff may not be a paramount concern. In addition to costs, agencies engaged in cutting employment must be concerned with ensuring fairness to employees, preserving needed skills, and preventing increases in average salary.
  
  
• With careful management, agencies can accommodate personnel reductions of several percent a year by relying on a partial hiring freeze with only a modest level of layoffs. If reductions are large or highly concentrated in time or by occupation or region--as could be the case under current budgetary constraints and the reductions proposed by the National Performance Review (NPR)--agencies would probably find it harder to reduce employment without laying off more workers. In these cases, separation incentives could help to avoid layoffs.

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