A few days ago, FedSmith posted an article entitled Will New Federal Locality Pay Areas be Added for 2018? Four new areas have been recommended for inclusion in the locality pay system by the Federal Salary Council.
In its report on 2017 locality pay, the Salary Council recommended that Burlington, Vermont and Virginia Beach, Virginia be established as new locality pay areas. These areas would be in addition to the 13 new locality pay areas established as new locality pay areas in January 2016.
In addition, the Salary Council has recommended that Birmingham, Alabama and San Antonio, Texas be added as new locality pay areas. The President’s Pay Agent, which makes the final decision on this topic, has not aproved adding Birmingham and San Antonio. It is possible they could still be added in 2018. And, as with the Burlington, Vermont area and the Virginia Beach, Virginia area, they may end up getting pushed back one more year or not added at all. (See Adding Birmingham and San Antonio to Locality Pay Areas)
OPM Comment on Adding New Locality Pay Areas
After the latest article on federal locality pay was published, FedSmith received the following comment from an Office of Personnel Management (OPM) spokesman on the current status of adding Burlington, VT and Virginia Beach, VA as these cities were tentatively approved by the President’s Pay Agent.
In its December 2016 report on locality pay for 2017, the President’s Pay Agent tentatively approved, after appropriate rulemaking, the Council’s recommendation to establish a Burlington, VT, locality pay area and a Virginia Beach, VA, locality pay area. The Pay Agent did not specify a timeline for initiating the rulemaking process that would be required to make the change—i.e., (1) publication of a proposed rule in the Federal Register, (2) a period for public comment, and (3) publication of a final rule in the Federal Register—and the Pay Agent has not yet initiated such a rulemaking process.
Prognosis
What are the chances of adding new locality pay areas in January 2018? Probably not very good.
The Federal Salary Council consists primarily of union representatives. As might be expected, the Council routinely comes up with recommendations to add more federal employees into the locality pay system. No doubt, as employee representatives, they have found a way to raise federal employee salaries without going through Congress or having the political process directly intervene with raising federal salaries.
Federal Salary Council Conclusions
One problem is that the Salary Council routinely finds that federal employee salaries are significantly less than private sector salaries. Their conclusions differ markedly from other reports on federal salary levels, including the recommendations of the Congressional Budget Office.
One reason is the Salary Council does not focus on federal employee benefits. Despite this exclusion, the primary difference between federal and private sector pay and benefits is the more expensive benefits package provided by the federal government. On average, federal benefits are 52 percent higher for federal employees than private sector employees according to the CBO.
In its latest report, the Salary Council concluded: “Taking into account existing locality pay rates averaging 20.16 percent, the overall remaining pay disparity is 34.07 percent.”
Congressional Budget Office Conclusions
The Congressional Budget Office (CBO) concluded, as cited by the House Committee on Oversight and Government Reform:
- In April (2017), CBO released a report that found federal employees earn 17 percent more than comparable private sector employees in total compensation, with wide variances depending on education.
- The retirement benefits available to most federal employees are an important factor contributing to the compensation differences.
- Entities such as the Heritage Foundation and the Government Accountability Office have offered reform proposals to make federal compensation more performance-oriented, affordable and sustainable.
The House Committee on Oversight and Government Reform cited the CBO conclusions and has not paid attention to the Federal Salary Council’s conclusions. It is reasonable to conclude that the Salary Council’s conclusions are not generally given high regard in the current Congress or the administration. The Council’s observations and conclusions are important as they their recommendations often result in raising federal employee salaries because the locality pay system operates outside the public eye and within the federal bureaucracy. Their recommendations are less likely to be influential in the near future.
There is obviously no hurry in the current political climate for raising federal employee salaries under the locality pay system. When the Pay Agent issues its next report, which may be in December, we will have more insight into the philosophy of the Pay Agent. It is likely that the Pay Agent will delay implementing recommendations or not approving Salary Council recommendations in the near future. The last report of the Pay Agent was issued on December 5, 2016.
