Federal White-Collar Pay: FY2006 and FY2007 Salary Adjustments

Publication Date: November 2005

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Labor

Type:

Abstract:

Federal white-collar employees are intended by law 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 The law has never been implemented as originally enacted; annual and locality payments pursuant to the statute have been reduced each year. Although the annual adjustment and the locality payment are sometimes referred to as cost-of-living adjustments, neither is based on changes in 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 size of the locality payment is determined by the President and is based on a comparison of nonfederal and General Schedule salaries in 32 pay areas nationwide. By law, the disparity between nonfederal and federal salaries was to be gradually reduced to 5% during the years 1994 to 2002. Continuing in each year thereafter, FEPCA requires that amounts payable may not be less than the full amount necessary to reduce the pay disparity to 5%. An average 3.1% pay adjustment in January 2006 is included in the conference report accompanying the Transportation, Treasury, Housing and Urban Development, the Judiciary, the District of Columbia, and Independent Agencies Appropriations Act for FY2006 (H.R. 3058) as agreed to by the House of Representatives and the Senate. On October 21, 2005, as part of its memorandum to the Pay Agent on the January 2007 locality payments, the Federal Salary Council recommended that the 3.1% pay adjustment be allocated as 2.1% annual and 1.0% locality pay. Once the President signs H.R. 3058, he must issue an Executive Order allocating the increase between annual and locality pay. Legislation (S. 1928) currently pending in the 109th Congress would deny a pay adjustment to federal civilian employees, but not to federal law enforcement officers, in January 2006. No action has occurred on this bill.

As for the January 2007 pay adjustment, the ECI shows that the annual acrossthe-board increase would be 1.7%. The Federal Salary Council recommends that to carry out FEPCA, the 2007 locality payments range from 14.10% in the "Rest of the United States" (RUS) pay area to 49.65% in the San Jose-San Francisco pay area and be 31.36% in the Washington, DC, pay area. Because the new locality rate replaces the existing locality rate, the rate change is derived by comparing 2006 locality payments with those recommended for 2007. This comparison, which will enable the net (annual and locality) pay adjustment for January 2007 to be calculated, can be made once the pay adjustment for January 2006 is finalized.

The Department of Homeland Security (DHS) and the Department of Defense (DOD) have issued final regulations to implement their new personnel systems, which include changes to the process for adjusting federal pay. In July 2005, the Administration released a draft proposal that would extend changes similar to those at DHS and DOD government-wide, but legislation has not been introduced. This report will be updated.