President Biden has issued the alternative pay plan letter which brings the 2023 federal pay raise one step closer to reality. This is a required step in the procedure for the pay raise for federal employees in any given year unless there is an intent to implement the Federal Employee Pay Comparability Act of 1990 (FEPCA). That has never happened since the bill was passed.
This year’s alternative pay plan letter states:
Title 5, United States Code, authorizes me to implement alternative plans for pay adjustments for civilian Federal employees covered by the General Schedule and certain other pay systems if, because of “national emergency or serious economic conditions affecting the general welfare,” I view the increases that would otherwise take effect as inappropriate.
Congress could also pass legislation to determine the amount of the pay raise. As that has not been done earlier this year, and there were several opportunities where Congress could have done so in legislation that was under consideration, that is unlikely to happen for the 2023 pay raise.
Biden Proposes 4.1% 2023 Federal Pay Raise With 0.5% for Locality Pay
As expected, the annual pay plan letter proposes the same pay raise for federal employees next year that was initially put forth in the White House’s 2023 budget proposal.
The federal pay raise for 2023 will be an across-the-board base pay increase of 4.1% and locality pay increases to average 0.5%. This will result in an overall average increase of 4.6% for civilian Federal employees, consistent with the assumption in the president’s 2023 budget proposal.
In effect, this means that federal employees in some areas will get a larger raise than others. Locality pay areas such as the Washington, DC metropolitan area and San Francisco pay areas get a larger pay raise because of the locality pay rate applied to their area.
In 2022, federal employees in the Seattle-Tacoma, Washington areas come out ahead of all the others with a raise of 3.21%. With a pay raise of 2.42%, the “Rest of the U.S.” was at the bottom of the list in 2022.
Biggest Federal Pay Raise in 20 Years
No doubt, many federal employees will see headlines touting the 2023 pay raise as the largest pay raise in 20 years. That is the case. During the Bush administration, federal employees received an identical pay raise percentage of 4.6% back in 2002. On the other hand, and better news for those federal employees in 2002, the rate of inflation was 1.6%. (See Federal Employee Pay Raises and Inflation)
Prior to that, the largest pay raise was 4.8% during the Carter administration. Inflation in 1981 was 10.3%. The 2023 raise under President Biden is almost comparable to the pay raise under President Carter when there was also a rate of high inflation. As in 1981, while the pay raise provided a bigger paycheck, the actual purchasing power of every dollar was lower because of rising inflation.
What Is an Alternative Pay Plan?
About 40 years ago, Congress passed the Federal Employees Pay Comparability Act (FEPCA). This law intended to change the way pay is set each year for the General Schedule and to maintain pay comparability by locality. It also called for establishing several special pay plans.
In short, FEPCA created a two-part annual pay adjustment for General Schedule federal employees. Each year, there is to be an across-the-board pay adjustment and a locality pay adjustment that varies by various locality pay areas.
The annual pay adjustment was to be an automatic adjustment based on a formula. Time has rendered this automatic adjustment irrelevant. No president has followed this formula since the law was enacted. As the formula would result in a large pay raise for the federal workforce again this year, that will not happen.
Instead, FEPCA gives the president this alternative.
If, because of national emergency or serious economic conditions affecting the general welfare, the President should consider the pay adjustment which would otherwise be required…to be inappropriate, the President shall—
Public Law 101-509
“(A) prepare and transmit to Congress before September 1 of the preceding calendar year a plan for such alternative pay adjustments as he considers appropriate, together with the reasons therefor; and
“(B) adjust the rates of pay of each statutory pay system, in accordance with such plan, effective on the same day as the increase under subsection (a) would otherwise take effect.
In some years, the president will issue an alternative pay plan that only includes an across-the-board pay raise. In other years, the alternative plan includes a separate percentage for locality pay. Each locality pay area learns of the specific plan for that pay area when the Office of Personnel Management (OPM) posts the information.
Letter to the Speaker of the House of Representatives and the President of the Senate on the Alternative Plan for Pay Adjustments for Civilian Federal Employees
August 31, 2022
Dear Madam Speaker: (Dear Madam President:)
I am transmitting an alternative plan for pay adjustments for civilian Federal employees covered by the General Schedule and certain other pay systems in January 2023.
Title 5, United States Code, authorizes me to implement alternative plans for pay adjustments for civilian Federal employees covered by the General Schedule and certain other pay systems if, because of “national emergency or serious economic conditions affecting the general welfare,” I view the increases that would otherwise take effect as inappropriate.
Accordingly, I have determined that it is appropriate to exercise my authority to set alternative pay adjustments for 2023 pursuant to 5 U.S.C. 5303(b) and 5 U.S.C. 5304a.
Specifically, I have determined that for 2023, the across-the-board base pay increase will be 4.1 percent and locality pay increases will average 0.5 percent, resulting in an overall average increase of 4.6 percent for civilian Federal employees, consistent with the assumption in my 2023 Budget.
Federal agencies have witnessed growing recruitment and retention challenges with Federal positions experiencing eroded compensation. Multiple years of lower pay raises for Federal civilian employees than called for under regular law have resulted in a substantial pay gap for Federal employees compared to the private sector. The American people rely on Federal agencies being managed and staffed by skilled, talented, and engaged employees, including those possessing critical skills sets, which requires keeping Federal pay competitive. This alternative pay plan decision will allow the Federal Government to better compete in the labor market to attract and retain a well‑qualified Federal workforce.
The adjustment described above shall take effect on the first day of the first applicable pay period beginning on or after January 1, 2023.
Sincerely,
JOSEPH R. BIDEN JR.
