No New Locality Pay Areas in 2020

A new President’s Pay Agent report does not add locality pay areas in 2020 and finds the Salary Council’s method of comparing pay with private sector “lacks credibility”.

What is the President’s Pay Agent?

The President’s Pay Agent (not to be confused with the Federal Salary Council) has issued its annual report on locality pay for 2020. And, no, the 2020 locality pay rates have not been issued. They will come out shortly after the Executive Order on the 2020 pay raise is issued by President Trump.

For those readers who do not spend a lot of time on this issue throughout the year (certainly the vast majority of readers), the President’s Pay Agent consists of the Secretary of Labor and the Directors of the Office of Management and Budget and the Office of Personnel Management.

The Pay Agent considers the recommendations of the Federal Salary Council, defines locality pay areas, and submits an annual report to the President on the locality pay program. The report compares rates of pay under the General Schedule to non-Federal pay, identifies areas in which a pay disparity exists and specifies the size of the disparity and makes recommendations for locality rates, and includes the views of the Federal Salary Council.

The Federal Salary Council is a different organization and it submits annual recommendations on the locality pay program to the President’s Pay Agent.

No New Locality Pay Areas for 2020

Federal employees in Des Moines, Iowa and Imperial County, California may be disappointed by the report.

In 2018, the Federal Salary Council added Des Moines, Iowa to the list of areas qualifying for an addition to the list of locality pay areas. The Salary Council has also recommended Imperial County, CA as an addition to the Los Angeles, CA locality pay area.

Employees in these areas may be pleased to know that the President’s Pay Agent has approved making these changes for Des Moines and Imperial County. But, as has happened with other areas in the past, the changes will not be effective in January 2020.

The Pay Agent wrote in the report, “We tentatively agree that, after appropriate rulemaking, a separate locality pay area should be established for Des Moines, IA.” In addition, “We agree to the designation of Imperial County, CA, as an area of application to the Los Angeles locality pay area following appropriate rulemaking procedures.”

This is the same approach that has been taken in recent years. For example, Burlington, Vermont and Virginia Beach, Virginia were recommended by the Salary Council as new locality pay areas in 2016. In 2017, the Pay Agent accepted the recommendation to add these areas “after appropriate rulemaking procedures”, and they were added to the list of locality pay in 2018.

In effect, this means that the Office of Personnel Management will publish a proposed change to locality pay areas, receive comments and then issue a final rule. These actions do not occur quickly but will probably take place in 2020.

Differences Within Salary Council

There is a difference of opinion with the Salary Council on recommendations for changes in the federal pay system.

Within the Salary Council, there are three seats for experts in labor relations and pay policy and six seats for unions representing a number of General Schedule employees. The differences of opinion are often between the union members and the experts on the Council.

In its latest report, the Pay Agent noted:

We also agree with the Council, as reflected in its approach this year, that it is not necessary for all of the Council members to agree with each other when debating and providing sound advice to an Administration.

As might be expected, the Pay Agent looked at the different recommendations and selected its preferred recommendation on pay. In this case, the Pay Agent wrote:

We greatly appreciate the recommendation from the Chairman and the other two expert members of the Council that, when the Federal government administers pay and benefits systems for its dedicated employees, total rewards rather than just base pay should be considered.

Salary Council Salary Methodology “Lacks Credibility”

The Pay Agent made a direct observation regarding the Salary Council’s findings with regard to a disparity in federal and private sector pay.

The Salary Council routinely reports a disparity between federal employee pay and private pay at 30% or higher. The Pay Agent says that the methodology used by the Salary Council “lacks credibility” because it does not take employee benefits into account.

According to the latest Pay Agent report:

[The] CBO (Congressional Budget Office) identified a 17 percent average compensation premium for Federal workers – with Federal employees receiving on average 47 percent higher benefits and 3 percent higher wages than counterparts in the private sector. While we recognize that the methodologies used by CBO and the Federal Salary Council differ, and that the current locality pay methodology allows the Pay Agent to make distinctions in GS pay levels on a singular geographic basis for each locality pay area, we find that the overall scale of the pay disparities presented to us each year using the current locality pay methodology lacks credibility. The existing GS classification and pay system rewards longevity over performance and fails to appropriately compensate employees based on mission needs and labor market dynamics.

This is not the first time the Pay Agent has criticized the Salary Council methodology and conclusions on the pay disparity between federal and private sector employees. Reiterating the same negative comment about the Salary Council’s conclusions does provide the Pay Agent with a rationale for not agreeing with the recommendations of the Council.

Conclusions of Disparity in Federal and Private Pay

The Pay Agent also responded to the findings of the Salary Council that a number of areas have a pay disparity of more than 50%.

For example, Austin, TX was found to have a disparity of 50%, Boston, MA a disparity of 72%; Los Angeles and New York a disparity of about 80% and about 87% for the Washington, DC area.

The average locality comparability rate in 2020 would be 52.54% under the methodology used for this report. In other words, to close the disparity in federal and private sector pay, the average locality pay would be more than 52% according to the Salary Council.

For comparison, the average rate authorized in 2018 was 22.33%. This Salary Council methodology and report, therefore, “lacks credibility” according to the Pay Agent.

The Pay Agent made this observation in its report regarding the failure to implement the system that would dramatically raise federal salaries to eliminate any pay disparity:

It is important to emphasize that the underlying methodology for locality pay of relying on one singular locality rate covering a locality pay area has lacked credibility since the beginning of locality pay in 1994 to such a degree that the statutory formula for closing pay gaps has been overridden either by Congress or by successive Presidents each and every year since that first year.

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