In June 2023, FedSmith published this article on locality pay regarding a proposed rule published in the Federal Register by the Office of Personnel Management (OPM). The article noted that the proposal would add about 32,900 more federal employees to the locality pay system. OPM has not issued the final rule. The final rule will likely be published in time to be applied to the 2024 locality pay system.
On October 10, 2023, OPM released the Annual Report of the President’s Pay Agent for Locality Pay in 2024.
$22 Billion to Reduce GS Pay Disparities
One item that will attract the attention of many readers is this statement in the Pay Agent’s report:
Regarding budgetary concerns, this report includes an estimated cost of $22 billion for reducing GS pay disparities as originally intended by the statute. That cost would have a substantial impact on agency budgets. However, it is also 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 every year since that first year.
The new report has approved a recommendation of the Federal Salary Council to add the Washington State Counties of Clallam and Jefferson to the Seattle-Tacoma, WA, locality pay area. These counties were not included in the earlier proposed rule issued by OPM. This means that these counties will not be included in the 2024 locality pay areas, because the rulemaking process must be completed before adding these new counties will be implemented.
Proposed Changes to the General Schedule Pay System
It is common knowledge that the federal pay system has been breaking down for some time. Some agencies now have a unique pay system similar to the GS system but pay higher wages than other agencies. Also, more federal employees are routinely added to the locality pay system.
This means the actual salaries for federal employees vary considerably by geographic area. Also, the system now allows placing federal employees into existing pay areas despite being far from the “home base” for a locality pay area.
And, as noted in the quote above from the President’s Pay Agent, “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….”
The result is considerable confusion and general dissatisfaction with the federal government’s existing pay system(s). How to change the system is racked with disagreement. The Pay Agent has weighed in with this observation regarding the pay system:
…[We] believe there is a need to consider major legislative reforms of the GS pay system, which continues to establish a single percentage locality rate in each locality pay area without regard to the differing labor markets and average salary levels for major occupational groups. The current pay comparison methodology used in the locality pay program ignores the fact that non-Federal pay in a local labor market varies substantially between different occupational groups. As currently applied, locality payments in a local labor market may leave some mission-critical occupations significantly underpaid while overpaying others.
The Federal Salary Council routinely announces the federal employee pay disparity with the private sector is about 24%.
On the other hand, as the Salary Council does not include federal employee benefits in its calculations, others contend the federal sector is overpaying. Here is one contrary observation: “[T]he federal government competes with other government and private-sector employers to attract people with the necessary skills the agencies need. As a result, federal workers enjoy 30% to 40% higher total compensation (in wages and benefits) than their private sector counterparts.”
Reaching agreement among disparate views will be difficult. As a result, the existing system continues to remain in place.
New Pay Areas Likely to be Added for 2024
There are four new locality pay areas that OPM has proposed (and accepted by the Pay Agent). These four locality pay areas will likely be finalized in time for the 2024 locality pay tables.
- Fresno-Madera-Hanford, California Fresno County, CA; Kings County, CA; Madera County, CA; Mariposa County, CA; and Tulare County, CA;
- Reno-Fernley, Nevada to include Churchill County, NV; Lyon County, NV; Storey County, NV; and Washoe County, NV;
- Rochester-Batavia-Seneca Falls, New York, to include Genesee County, NY; Livingston County, NY; Monroe County, NY; Ontario County, NY; Orleans County, NY; Seneca County, NY; Wayne County, NY; and Yates County, NY.
- Spokane-Spokane Valley-Coeur d’Alene, Washington-Idaho to include Benewah County, ID; Kootenai County, ID; Shoshone County, ID; Ferry County, WA; Lincoln County, WA; Pend Oreille County, WA; Spokane County, WA; Stevens County, WA.
In addition to these new locality pay areas, there are many other areas to be added to existing pay areas. These areas are at the end of this article, published in June 2023.
The actual salary figures for each locality pay area are usually published in December shortly before the new rates go into effect. We anticipate this same timetable will apply to the 2024 locality pay rates as has been done previously.