Federal White-Collar Pay: FY2005 Salary Adjustments

Publication Date: February 2005

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Government

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Abstract:

Federal white-collar employees are to receive an annual pay adjustment and a locality-based comparability payment, effective in January of each year, under Section 529 of P.L. 101-509, the Federal Employees Pay Comparability Act (FEPCA) of 1990. The law has never been implemented as originally enacted; annual and locality payments have been reduced. In January 2005, they received a 2.5% annual pay adjustment and a 1.0% locality-based comparability payment under Executive Order 13368, issued by President George W. Bush on December 30, 2004. Although the federal pay adjustments are sometimes referred to as cost-of-living adjustments, neither the annual adjustment nor the locality payment is based on measures of the cost of living.

The annual pay adjustment is based on the Employment Cost Index (ECI), which measures change in private-sector wages and salaries. The index showed that the annual across-the-board increase would be 2.5% in January 2005. The size of the locality payment is determined by the President, and is based on a comparison of non-federal and General Schedule (GS) salaries in 32 pay areas nationwide. By law, the disparity between non-federal and federal salaries was to be gradually reduced to 5% over the years 1994 through 2002; FEPCA requires that amounts payable may not be less than the full amount necessary to reduce the pay disparity to 5% in January 2005. The Federal Salary Council and the Pay Agent recommended that, to carry out FEPCA, the 2005 locality payments range from 18.14% in the "Rest of the United States" (RUS) pay area to 47.96% in the San Jose-San Francisco pay area. The payment recommended for the Washington, DC, pay area was 29.66%. Because the new locality rate replaces the existing locality rate, the change in locality rates is derived by comparing 2004 locality payments with those recommended for 2005. This comparison results in recommended net increases for 2005, if the ECI and locality-based comparability payments were granted as required by law, of 9.19% in the RUS pay area to 22.10% in the San Jose-San Francisco pay area, and 15.94% in the Washington, DC, pay area. The nationwide average net pay increase, if the ECI and locality-based comparability payments were granted as required by law, would have been 13.06% in 2005. President Bush's FY2005 budget proposed a 1.5% federal civilian pay adjustment. He proposed a 3.5% pay adjustment for the uniformed military, and a number of Members of Congress advocated the same pay adjustment for federal civilians. The Departments of Transportation and Treasury and Independent Agencies appropriations bill, 2005 -- H.R. 5025, as passed by the House of Representatives, and S. 2806, as reported in the Senate -- provides a 3.5% pay adjustment for federal civilian employees, including those in the Departments of Defense and Homeland Security. This appropriations bill was incorporated as Division H of the Consolidated Appropriations Act for FY2005 (H.R. 4818) which was signed by the President on December 8, 2004, and became P.L. 108-447.

The President's budget for FY2006 proposes pay adjustments of 2.3% for federal civilian employees and 3.1% for the uniformed military. The same pay adjustment for both civilians and the military is advocated by several Members of Congress.