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Justification: Capitol Hill Police Reimbursement

SUMMARY

The Metropolitan Police Department of the District of Columbia assigns a special detail of officers to provide security on Capitol Hill. The District presently receives a reimbursement for the services provided by the police detail. However, the present reimbursement formula does not compensate the District for the full cost of the detail. An increase in the reimbursement rate is being proposed to offset the actual cost of retirement benefits being earned by the Capitol Hill detail.

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Detailing officers of the Metropolitan Police Department to the Capitol is authorized in Title 9, Section 126 (a) of the D. C. Code. Reimbursement for the cost of these officers, in turn, is authorized in annual appropriation acts for the legislative branch. The Home Rule Act (P.L. 93-198) empowers the Mayor to enter into agreements to provide services to the Federal Governmen provided that "such services are furnished at rates or charges based on the actual cost of furnishing such services" (emphasis added) (Section 731 (a)).

The formula for determining the amount of the reimbursement was established in 1964. The 1964 formula provides a retirement contribution equal to 29.1% of salary costs for officers detailed to the Capitol. This fraction was based on payments to retired officers in that year as a percentage of the total police payroll at that time. The District believes that this reimbursement rate is no longer sufficient to cover rising pension costs.

DETERMINING PENSION COSTS

To the maximum extent possible, the cost of pension expenses for the Capitol detail should be determined on the basis of generally accepted accounting principles. The Accounting Principles Board of the American Institute of Certified Public Accountants has taken the position that pension costs should be reported on an accrual basis to recognize the cost of retirement benefits as they are bein earned by current employees rather than when they are being paid out to retired employees (Opinion #8, "Accounting for the Cost of Pension Plans"). Underlying this accrual concept is the need to account for three separate cost components in determining current pension expenses: (1) benefits being earned annually base on an actuarial calculation termed "normal cost," (2) a payment to amortize previously unfunded prior service costs over a reasonable period, and (3) interest charges on all unfunded liabilities. The first element, normal cost, when compar with annual payroll costs, shows the value of retirement benefits being earned annually by current employees relative to their salaries. The latter two cost categories shows the current cost impact of failing to fully compensate retiremer benefits earned in. prior years.

In June of this year, the public accounting firm of Arthur Andersen and Company issued a report to the Senate Committee on the District of Columbia whic raised a number of issues concerning the City's retirement cost accounting.

1/ Report on the Accounting and Financial Management Practices of the District of Columbia Government. Volume IX - Retirement Systems, June, 1976.

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The report recommended that the District follow conventional pension accounting methods in reporting retirement costs and include such expenses in annual financial statements. The District has accepted this recommendation and plans to begin disclosing these expenses in the FY 1976 financial report, a practice which will be continued in subsequent years. In keeping with this recommendation, the Congress should be assessed the full cost of retirement benefits for the Capitol detail, including normal cost as well as amortization and interest charges for the unfunded liability attributed to prior Capitol Hill service.

The current "normal cost" of the police pension plan is 68.4% of payroll levels for uniformed police officers. The overall normal cost percentage was calculated by the actuarial office of the U.S. Treasury Department (see attached letter). Since employees currently contribute 7% of their salary for retirement purposes, the employer's share of normal cost is 61.4%.

The amount of unfunded prior service liability for the Capitol Hill detail has not yet been determined because of insufficient actuarial information on the amount of service provided by the Capitol detail over the years. This issue will be addressed as part of an actuarial study to be conducted by the U.S. Treasury Department next year. In the interim, however, it is reasonable to begin reimbursing the District for at least the annual normal retirement costs of the detail.

RECOMMENDED FY 1978 REIMBURSEMENT

Salary costs for the Metropolitan Police officers detailed to Capitol Hill are estimated at $1,048.3 thousand in fiscal 1978. Under current reimbursement provisions, the District would receive a total reimbursement of $1,362.8 thousand in FY 1978, of which approximately $305.1 thousand is for retirement costs attributed to the detail. Under the proposed reimbursement formula, retirement costs for the detail amount to 61.4% of payroll or $643.7 thousand which represents an increase of $338.6 thousand above the retirement reimbursement under the current formula. This increase brings the total reimbursement for the detail to the recommended level of $1,701.4 thousand in fiscal 1978.

GOVERNMENT OF THE DISTRICT OF COLUMBIA OFFICE OF BUDGET AND MANAGEMENT SYSTEMS October 1976

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In response to your request our actuarial office has calculated a new entrant normal cost for the D. C. Police Retirement System of 68.379 percent, which includes the 7 percent employee contribution and is thus equivalent to a net new entrant normal cost of 61.379 percent. This figure is by definition the level percentage of salary which must be contributed annually over the entire working lifetime of a typical employee in order to pay for his benefits. If the full normal cost contributions are not made in any year, an unfunded liability is created which must eventually be financed if the benefits promised by the system are to be realized.

At the present time this office does not have the data which it would need in order to estimate the liabilities which have accrued to the Police Retirement System because of past service on Capitol Hill. We will work with the District of Columbia in developing this information should there be a need to do so.

Our normal cost calculations assume an interest rate of 7 percent and annual salary and annuity increases of 5 percent. They are based or the probability and force distributions developed for the 1971 valuation of the system.

Please let me know if we can be of further assistance.

Sincerely yours,

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Francis X. Cavanaugh
Director

Office of Government Financing

Mr. Comer S. Coppie, Director

Office of Budget & Management Systems
Room 423

District Building

14th & E Streets, N. W.

Washington, D. C. 20004

Question. In previous testimony before the Subcommittee on February 19, 1976 (Legislative Branch Appropriations Hearings for 1977, Page 595), and on other occasions, you stated that this surcharge was determined by agreeement to be 30 percent, or less than half the amount that is now being requested. I can find nothing in the official record of legislative appropriations to justify this doubling of the surcharge. What justification is the basis for this increase from 30 percent to 61.4 percent just overnight?

Response. I believe this was moved forward in the subcommittee on District of Columbia Appropriations. The justification would be based on the actual cost of retirement benefits as revealed by the study conducted by the U.S. Treasury Department.

Question. What percentage of the surcharge is to repay the cost of police training alone?

Response. It is now my understanding that the 61.4 percent surcharge is totally based on retirement costs and that we are not being charged for training costs, health and life insurance and other administrative costs.

Question. Since the Metropolitan Police Detail is comprised of almost all the same personnel year after year, why is the surcharge not discounted after the first year of their service with the U.S. Capitol Police, by the appropriate percentage to repay the cost of training, recruitment, and other one-time overhead costs, so that Congress is not paying for the same overhead costs over and over again?

Response. According to available information we are not now repaying costs for training, recruitment or other one-time overhead costs.

Question. You stated that the Metropolitan Police who retire or leave the Detail to the Capitol Police force are not being replaced, so that the Detail will be terminated as soon as possible. My review of the Detail rosters which you provided for the record in past years shows that 19 Metropolitan Police who were on your roster for 1975 (Legislative Branch Appropriations Hearings for 1976, Pages 798799) have since left the Detail (See attached list). Of the 19 who left, three were officers, two were sergeants, two were detective II's, one was a lieutenant, seven were detective/sergeants, 2 were captains, and two were deputy chiefs. According to rosters since 1975, seven Metropolitan Police have been added to the Detail (see attached list), replacing two of the three officers, both sergeants, both detective II's, and the lieutentant. Why were these people added, if the goal is to give Capitol Police deserved promotions and to phase out the Metropolitan Police Detail so that the Capitol Police will become an independent professional force?

Response. When I testified before the Legislative Branch Appropriations in 1975 I did not indicate at that time an intention to immediately reduce the number of Metropolitan Police detailed to the Capitol. On page 805 of the Legislative Branch Appropriations Hearings for 1976 I stated "We have authorization for a total of 50 from the Metropolitan Police Department here and while I think perhaps as the Capitol Police force needs slacken, that this detail could be reduced somewhat." At the direction of the respective Sergeants at Arms, with the concurrence of the Capitol Police Board, seven Metropolitan Police personnel were detailed in 1975; five in March of 1975 and two in November of 1975. No Metropolitan Police personnel have been detailed to Capitol Hill since 1975.

Question. Please provide a list to update the roster of the Metropolitan Police Detail on page 59 of last year's hearings, for this official hearing record.

Response.

METROPOLITAN POLICE DETAILED TO CAPITOL POLICE FORCE

Awkward, George C.

Beamon, Edward

Bell, Lester R.

Burge, Joseph F.
Chazen, Sidney
Clark, William P.
Cottrill, Glenn E.
Cousins, Leonard B.
Cranford, Charles E.
Dusseau, Edgar J.
Evans, William R.
Fratantuono, Gerald
Gooden, Jerome V.
Halcisak, William T.

Hartford, Milton H.
Heller, Lewis L.
Keys, Charles D.
Malone, Timothy H.
Marafino, Daniel B.

Orfield, Gary L.
Peletski, Carl T.

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Powell, Jack L.

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Question. You stated that the Metropolitan Police Detail is needed to provide leadership and law enforcement expertise for The Capitol Police. Yet substantial funds have been appropriated to provide the Capitol Police with training at the Federal Law Enforcement Training School at Glynco, Georgia, which you have described in past years as "the West Point of police schools." They also receive training at the U.S. Capitol Police Training School, and some have gone to the FBI National Academy. Please provide a table showing the amount of funds appropriated for training at these facilities, and any other training for each year since fiscal year 1969. Also please tell us for the record how many current Capitol Police officers have received training at each facility, and what training each new Capitol Policeman receives. How long does it take, in your estimation, for the Capitol Police department to establish necessary leadership from within?

Response. The time required to establish leadership from within is a very difficult question to answer. Certainly there are already persons on the Capitol Police force who are trained and qualified to be leaders. However, one of the most important factors necessary for expertise in the investigative field is in depth experience. It is therefore more effective if at least some of those individuals assigned to supervise the detectives have experience in addition to training.

[The information regarding training follows:]

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