The annual federal pay raise, unlike the cost of living increase the usually goes into effect each January for federal retirees, is a complex process with an unpredictable outcome.
The reason is because the federal pay raise is determined by the political process in Congress after a recommendation from the President.
This year, President Obama recommended a 2% average annual pay raise for federal employees in 2010. (See President Asks Federal Employees to Sacrifice in 2010: Proposes 2% Pay Raise)
Then, last month, it appeared that federal civilian employees might get a much higher raise. The 2010 authorization bill for the Department of Defense contained the authorization for a 3.4 percent pay raise for military personnel next year. Federal employee advocates jumped on that and asked for "pay parity" meaning that federal civilians would also get an average pay raise of 3.4% in 2010. (See Pay Parity and Your 2010 Pay Raise)
That, obviously, was not the final word.
The House Appropriations Committee approved a 2 percent raise for workers as part of its financial services spending bill this week. The pay raise was not a specific item approved by this committee; it just adopted the President’s recommendation of a 2% average raise.
Now, Assistant Senate Majority Leader Richard Durbin, (D-IL) announced legislation that would give federal civilian employees a 2.9% cost of living raise.
So, will the final figure be 2%, 2.9% or 3.4%?
Anyone who says he knows the definitive answer to that question is probably making a guess.
The federal deficit figure is now moving into public consciousness and that could impact the final negotiations and put pressure on Congress to approve a lower figure. But, at the same time, the argument in favor of pay parity with the military has been successful in recent years and may again prevail for the 2010 pay raise.
Regardless of which figure is approved by Congress and signed by the President, keep in mind that the 2%, 2.9% or 3.4% is an average figure. Some federal employees will get a higher raise because of their locality pay area while others will get less.
COLA Update for Federal Retirees
As of this writing, it appears that federal retirees will not get a cost of living increase for 2010. The final figure will not be available until this Fall. But, as of today, there is a -3.1 figure for inflation. This does not mean your pension payment will decrease. It does mean your payment is unlikely to go up unless there is a spike in the inflation rate in the next several months.