Pay Raise Issue Heating Up

OMB has sent a letter to Congress urging a 1.5% raise for federal employees rather than 3.5% proposed by Congress.

Is the past a prologue to the future?

All of us tend to think that what happened in the recent past will be repeated in the future. Think, for example, of the pay raise for federal white collar employees. In recent years, the president (both Democrat and Republican) have proposed a lower pay raise than that which has been finally adopted by Congress. Most of us assume that will happen again this year.

Up until now, the scenario has been very familiar. The President proposed a 1.5% increase for federal civilian employees and 3.5% for military personnel. Congress has passed a resolution supporting the concept of pay parity for military and civilians which would mean that both groups would get 3.5%. But, in the meantime, there has been an election, federal spending has continued to increase, and federal employees have been placed front and center as partisan participants in the campaign as federal unions issued a continuing series of attacks against George Bush and in favor of John Kerry.

So, while the playbook has been similar this year, the underlying facts are different. Before it’s over, federal employees may end up getting the 3.5% raise.

But, even if that eventually happens, the pay raise is not going through the same smooth sailing this time around.

The Director of the Office of Management and Budget sent a letter on November 17th to Ted Stevens, Chairman of the Senate Appropriations Committee, regarding the federal pay raise.

We don’t know what impact this letter will have. But, in past years, the administration has been low-key in opposing the higher pay raise for federal employees. That is obviously not the case this time around. And, with the administration actively opposing the pay raise, the possibility of the raise getting through Congress is diminished.

The administration is trying to reduce federal spending. Often what happens is that agencies have to absorb the cost of the pay raise and cut back on services in order to pay the raise. A good example is our National Park System which is under stress in some areas because of lack of maintenance. A higher federal pay raise will add an additional $2.2 billion in spending.

The OMB Director also expressed concern that it will be necessary to fire some federal employees because of budget constraints if the pay raise is passed.

So here is an interesting conundrum: Do you prefer to see a higher pay raise or put your job of those of your fellow employees at risk? That, in effect, is the threat underlying the latest volley in the pay raise dispute.

And, says the OMB Director, the higher pay raise is not necessary anyway. The 1.5% exceeds inflation and, while there are problems in recruiting new employees in some areas, that is not a government-wide problem. Presumably, the additional personnel flexibilities being passed by Congress that apply to some areas in which recruiting is difficult, will address this problem for those agencies without increasing spending throughout government.

Here is what the letter said insofar as the pay raise is concerned:

The Administration urges the Congress to adopt the President’s civilian pay proposal and strongly opposes any provision that would provide for a government-wide civilian pay raise that exceeds the 2.5 percent pay raise set to go into effect in January 2005. The 3.5 percent increase provided in the FY 2005 Transportation, Treasury and Independent Agencies Appropriations bills exceeds the President’s request by $2.2 billion, and provides a percentage increase that exceeds inflation, the statutory base pay increase, and the average increase in private sector pay as measured by the Employment Cost Index. Any recruitment or retention problems facing the Government are limited to a few areas and occupations and do not warrant such an arbitrary across-the-board increase. An increase to 3.5 % across-the-board would be very difficult for agencies to absorb, particularly when combined with any other across-the-board reductions used to meet overall spending targets, and will likely require reductions-in-force or shifts of resources away from critical programmatic priorities.

About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources. Follow Ralph on Twitter: @RalphSmith47