Projecting Your 2009 Federal Pay Increase
By Ralph Smith
Wednesday, May 21, 2008
Federal employees know that the process of determining the next year's pay raise is a year-long process. Some readers send in comments complaining that their "COLA" does not keep up with the cost of living while contending that the next year's raise should exceed the cost of living increase.
The reality is that federal employees get a raise; federal retirees get a cost of living adjustment (COLA). The issue comes up each year and here is a brief explanation.
As often happens, several events may occur that will impact the 2009 federal pay raise.
First, the current projected COLA (so far anyway) for next year is 3.5%. That will change before it becomes final. In all likelihood, the final figure will be higher than 3.5%. Benefits awarded under the Federal Employees Compensation Act (FECA) to individuals who left the workforce due to work-related injuries or illnesses are adjusted according to each calendar year's percentage change in an inflation index. April's index is 2.4 percent higher than the December 2007 base. The COLA calculation varies between retirement systems and here is a brief explanation of the differences.
Second, President Bush has proposed an average 2009 federal pay raise of 2.9%. That figure could--and probably will--be changed by Congress before all is said and done. He proposed to raise military pay figures by an average of 3.4%. The 2009 Defense authorization bill recently passed by the House Armed Services Committee would require military pay raises from 2010 to 2013 to be a half-percentage point higher than the employment cost index (ECI) — the annual increase in wages and salaries for workers in the private sector. It already looks like Congress may give military personnel a higher pay raise for next year, probably about 3.9%, as the bill that has been passed by this committee would provide a 2009 pay increase in this amount.
Third, the reality is that the concept of "pay parity" has been successful. When troops are being killed in a combat zone, the military pay tends to go up and federal civilian employees have been successful for a number of years in riding the coattails of the military and getting the same level of pay increase as the military in most years. (See "Patriotism, Pay and Parity")
Fourth, it is also possible that, because of how the pay system is structured, federal retirees could get a larger increase in 2009 than active federal employees will receive. With the potential COLA for retirees standing at 3.5% as of April, and with another five months to go before the final figure is computed, the increase for federal retirees could be 4% or higher. There is no requirement that active federal employees get the same or higher increase than retirees. For example, in 2006, retirees generally received a 4.1% increase while active federal employees generally got less than 4%. (See 4.1%! Fed Retirees Can Look Forward to Bigger Than Expected Increase)
A lot will happen between now and your pay increase next year. And, with an election coming in November, there may be even more surprises than usual. But, going out on a limb, here is my prediction for 2009: An average federal pay increase of 3.9% for current federal employees. That would mean that federal employees in some areas would get quite a bit more than that and some would get much less. (See "Understanding the 2008 Federal Pay Raise (Maybe)
For those willing to go out on a limb, take our instant poll on the right hand side of this page and see how your answer compares to other readers.
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