Comments from many FedSmith.com readers express frustration with their pay. That is certainly understandable. Federal employees last received an overall pay increase in 2010. Add to that the fact that furloughs have impacted pay of some federal employees and there are a lot of people working for Uncle Sam who are not happy with their pay situation.
The House has just approved a 1.8 percent pay raise for military personnel in the fiscal 2014 Defense spending bill. This action will give federal civilians some optimism as the concept of “pay parity” with the military has often come up and has frequently been successful in past years. As we have noted in earlier articles on this website, the House Department of Defense spending bill also includes language halting civilian furloughs in the next fiscal year if sequestration continues.
Despite the freeze on the annual pay, federal employees are still eligible to receive within-grade increases or promotions and, in fact, there has been an increase in the annual federal employee salary despite the pay freeze. (See Average Federal Salary Goes Up Despite Pay Freeze)
So, will there be an overall pay increase for the federal government’s civilian workers in 2014?
There are many financial and political hurdles that have to be overcome between the Obama Administration and the House of Representatives. The administration wants to increase spending, not cut it. The House wants to cut spending—not increase it. Add to this the political debate over the debt ceiling that is rapidly approaching and throw into the mix the concern shared by all elected officials about the outcome of the 2014 national elections and there are plenty of opportunities for both parties to advance their agendas. The federal pay raise is little more than a pawn in this political game but the decisions that occur in the political process will impact your personal financial prospects for 2014.
But, while anything can happen, the odds do not favor of a significant pay increase or any increase at all.
The spending bills that have been passed by the House so far are silent on the issue of a pay raise in 2014. The Senate panel also did not address a federal pay raise in its fiscal 2014 Financial Services and General Government spending bill that was recently approved. There is little enthusiasm for a pay increase within Congress for the federal workforce. Note this language in a recent committee report: “Should the president provide a civilian pay raise for fiscal year 2014, it is assumed that the cost of such a pay raise will be absorbed within existing appropriations for fiscal year 2014.”
In his 2014 budget proposal, President Obama proposed a 1% pay raise for 2014. In the absence of action by Congress, the president has authority to raise federal employee pay based on the Employment Cost Index and he may have that option this year. But the sense of Congress appears to be that if the president wants a raise for the federal workforce, the cost of that raise will have to come from overall 2014 appropriations for agencies.
If Congress does not act and if the president does decide to implement a 1% pay raise, there will not be many expressions of joy among the workforce. Here’s why.
In addition to the continuing pay freeze, changes to the amount paid by new federal employees toward retirement, and furloughs for some federal employees, additional furloughs are also possible in the next fiscal year if Congress keeps sequestration in place. (See, for example, Two Significant Changes to FERS) Note also that the president’s budget proposal recommended increasing retirement contributions of federal workers hired prior to 2013 by 1.2% over three years starting in 2014. The budget proposal also proposes eliminating the FERS Annuity Supplement for new employees. (See President’s Budget Proposes Increased Retirement Contributions for Federal Workers)
And, while a number of federal employees have had a pay raise because of having received a promotion or a within grade increase (WIG), most have not. Those that have not received any increase are undoubtedly feeling financial pressure as inflation is increasing the cost of many basic expenses that everyone has to pay.
The federal pay structure is largely determined by politics. There are attempts to make the process look and feel like a scientific system is in place. In reality, it is not scientific. Federal government spending has skyrocketed in the past few years and the federal debt is at historic levels. The political atmosphere in Washington, DC is rancorous—probably worse than it has been in modern times. There are two strongly held ideologies that are competing for dominance in the political arena and they are on display in the press on a regular basis.
It is unlikely there will be a political resolution that is remotely satisfying to these two points of view on the role of government. Allegations about actions by the Internal Revenue Service in the last election, the publicity about lavish spending on conferences and travel in federal agencies, and a general public sentiment that has little or no confidence in government doing a good job (See articles such as Trust in Government and 62% Think Government Should Cut Spending to Help Economy), all contribute to a lack of faith and trust in government. There is not a significant public demand to raise federal employee salaries.
My guess is that the number of retirements from federal service will continue to increase despite the staid economic growth because, as the baby boomers survey the current environment, many will decide they will be better off with taking their retirement annuity and hoping for a raise when the next cost of living increases are distributed. For those who are not eligible to retire, or who cannot take the probable cut in pay they will receive after retirement, they will content themselves with having a secure job and decent benefits at a time when unemployment is still high and we are setting records for the number of people leaving the workforce and entering federal welfare or payment programs.
We will keep readers informed of any changes on the pay raise issue. Our advice: Hope for the best and plan your budget as if there will not be any raise in 2014. For those so inclined, and especially those who live in an area with a large federal workforce, contact your Congressional representatives to express your views and your concerns.