In a letter to the Speaker of the House and the President of the Senate, President Bush has sent an alternative plan for across-the-board and locality pay increases for civilian Federal employees in January 2004.
The President said that the country could not afford the raises that General Schedule (GS) employees would get if he did not invoke his authority to invoke an alternative plan for pay raises.
Under the existing system, employees covered by the locality play system would have received a raise of up to 15.1 percent.
President Bush stated that if the higher raise were given to employees, it would be necessary to cut back on employment, reduce the fight against terrorism, or force deep cuts in discretionary federal spending. As a result of these alternatives, the President states “…I have determined that a total pay increase of 2 percent would be appropriate for GS and certain other employees in January 2004.”
In addition, the President cited the $500 million dollars from the Human Capital Performance Fund. Money from this fund will be used to pay extra money to high performing Federal employees in agencies with “rigorous and disciplined” performance management systems” if the $500 million fund is passed by Congress. (For more on the pay for performance issue, see the link on the left hand side of this page.)
The law also requires an assessment by the President as to the impact of this decision on the ability to recruit and retain a well-qualified workforce. His letter notes that the quit rate for GS employees 1.7 percent–below the average rate of most private companies.
Furthermore, any pay raise above the 2 percent would be unfunded. This underfunding would require agencies to absorb the additional cost and freeze hiring in order to pay the higher rates.
The proposal from the President will not be a surprise to many Federal employees. Similar steps have been taken by presidents in recent years. A Fedsmith.com poll taken recently showed that most employees expected a pay raise in the range of 4%. It is likely that the ultimate raise will be in the 3% range by the time the measure is approved in Congress.