Federal Pay: FY 1999 Salary Adjustments

Publication Date: July 1998

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Government

Type:

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). Although federal pay adjustments are sometimes referred to as cost-of-living adjustments, neither the annual adjustment nor the locality payment has anything to do with living costs. The annual adjustment is based on the Employment Cost Index (ECI), which measures the change in private sector wages and salaries. The ECI requires a 3.1% increase in January 1999. The size of the locality payment is determined by the President and is based on a comparison of non-federal and General Schedule salaries in 32 pay areas nationwide. The Federal Salary Council and the Pay Agent have issued their recommendations on the 1999 locality payments. If 70% of the target pay gap between these salaries is made up in 1999, as required by FEPCA, the increase in locality payments would range from 7.95% in the “Rest of the United States” pay area to 17.70% in the San Francisco pay area, and would be 10.46% 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 be 12.75%.

The Council’s memorandum to the Pay Agent states that the credibility of the locality pay program is suffering because the small amount of money allocated for locality pay combined with changing the pay gaps each year leads to results that are hard for many to understand and accept. Among its recommendations are that the Pay Agent recommend and the President adopt the FEPCA requirement for eliminating 70% of the target pay gaps in setting January 1999 locality rates. Another recommendation is that, if an alternative plan is issued, instead of applying a uniform phase-in factor across-the-board to all localities, the increases would be based on the size of the pay gap in each locality. Areas with gaps larger than the average target gap would get bigger increases whether the gap had increased or decreased since the previous report.

President Clinton proposed a 3.1% pay adjustment for federal employees in his FY1999 budget. This amount is the overall average increase, including locality pay adjustments. Section 644(d) of H.R. 4104, Treasury, Postal Service, and General Government Appropriations Bill, 1999, as reported to the House, would provide an annual pay adjustment of "3.1 percent, unless otherwise provided for" under 5 U.S.C. 5303. Incorporated at section 644(a)-(c) is the text of legislation, H.R. 3251 and S. 1679, introduced by Representative Steny Hoyer and Senator Paul Sarbanes, respectively, which would modify the conditions that must be met before the President could issue alternative plans for the annual and locality-based comparability pay adjustments. The standard for issuing an alternative plan would be “a declared state of war or severe economic conditions.” The latter would be considered to exist if, during the 12-month period ending two calendar quarters before the date as of which the adjustment is scheduled to take effect, there occur two consecutive quarters of negative growth in the real Gross Domestic Product.