Gas Guzzlers Beware

Gas prices are skyrocketing. What about mileage reimbursement for those driving their cars on government business?

Numerous federal employees drive their own cars while working for Uncle Sam. Most of those readers who are in this situation get reimbursed at the rate approved by the General Services Administration which is currently 40.5 cents per mile.

This mileage rate was last set by GSA on February 4, 2005 so the rate isn’t that old—it has just been surpassed by the economics of the gas and oil industry. But, if you are in a position of driving your car for business (or for pleasure, for that matter) you have undoubtedly noticed that the price of gas has been rising dramatically.

According to the Department of Energy, the price of gas is now 74.4 cents more per gallon that it was one year ago. That is an increase of about 39%.

Moreover, the Energy Department figures do not yet include the increases that are now appearing as a result of Hurricane Katrina and its impact on the drilling rigs in the Gulf of Mexico. The hurricane damage may add as much as 30 cents more to a gallon of gas which is predicted to be over $3.00 per gallon in some markets in the very near future (or already there in some).

The mileage reimbursement that became effective in February 2005 was approximately 8% over the amount paid for mileage reimbursement in 2003. Gas prices are now up about 39% in the past year–again, not counting the imminent impact of the hurricane on gas and oil operations in the Gulf of Mexico. In effect, if you are driving for Uncle Sam on business, you are spending more of your own money when you drive your own car for business purposes because the mileage reimbursement you are receiving doesn’t reflect the current price of gasoline.

Many readers do not drive their cars for government business purposes but they do drive to work most days. So when you use your own car for commuting, you also feel the impact of the rise of gasoline prices. That won’t have much impact if you are riding the subway to work in cities like Washington, DC or New York but those who must drive their cars every day will certainly feel the difference.

An average driver is going to use about 1000 gallons of gas per year to the rise in the cost of gas will cost most of us about $720 more per year. Federal employees are better off because, according to OPM, the average salary for full time federal employees is $60,517—well above the average for most Americans–so the overall increase is a much smaller percentage of the annual budget for the average federal employee. The result doesn’t change that many readers will be spending more of their after tax money on gas.

Several readers have written in and asked what impact the rapid increase in the cost of gasoline will have on the federal pay raise this year. For retirees, there will be an impact as the rising cost of energy will certainly have an inflationary impact. Retirees will therefore see a larger increase in their annuity payments next year because of an increase in the cost of living and are likely to actually get a larger increase than many active federal employees.

But most federal employees do not get a cost of living increase–they get a raise. (For more on these issues see “COLA’s, Pay Raises and the Federal Community,” and “OPM Recommends COLA Increases for Some Federal Employees.”)

No one can be certain how our political process will pay out. The most likely increase will be 3.1% for the average general schedule employee but no decision has been made and there is plenty of uncertainty as a result of civil service reform, natural disasters and the war in Iraq.

One certainty: Those traveling on business for Uncle Sam and using their own cars, and those commuting to work in a private vehicle every day are spending more of their own money on gas.

Our advice: Make the maximum payment you can to your TSP account every pay period, join a car pool, and be thankful you are not sitting in the Superdome in New Orleans. And, if you can fly to your destination while on government business, you may save money rather than driving your own car.

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