Budget Proposal and 2027 Federal Pay Raise
Federal employees may be heading into 2027 with a familiar reality of being left behind for a raise in the coming year. President Trump has released the 2027 budget proposal. There is no mention of a raise for federal civilian employees next year.
The budget does contain this paragraph regarding a pay raise for military personnel:
Pay Raise for the Troops. The Administration recognizes the importance of America’s warfghters and their families, so the Budget funds a military pay raise of seven percent for all DOW military personnel ranked E-5 and below, six percent for E-6 to O-3, and fve percent for O-4 and above. This enduring investment, far above the standard annual military pay raise, builds on the President’s recruiting and retention success, by doubling down on the Administration’s goal to restore America’s fighting force.
It is a long way until December, and a lot could happen to the 2027 pay raise between now and then. A final decision on a pay raise for next year will be made in a few months. But, if that position holds, civilian employees could face a pay freeze or a low pay raise in 2027.
The average federal employee salary is now $113,201, according to data from the Office of Personnel Management (OPM). For 2026, the average federal employee pay raise was 1% across the board for the General Schedule (GS) and most statutory pay systems, with no additional increase to locality‑pay percentages. A small pay raise for two consecutive years (or a very low one) will not be popular with the workforce, despite the high average salaries.
What the Budget Proposal Really Means
A presidential budget is just the opening move. Under the federal pay-setting process, the president can propose a raise—or none at all—under the authority of the Federal Employees Pay Comparability Act.
When a budget proposes no civilian pay raise, it signals three things:
- The administration is prioritizing fiscal restraint or shifting resources elsewhere
- Civilian pay is not a near-term policy priority
- The default outcome could be 0%, unless Congress intervenes
There is precedent for this approach. In past cycles, administrations have proposed pay freezes or minimal increases for civilians while supporting larger military raises. Congress has sometimes accepted those decisions by default.
The Military vs. Civilian Pay Gap Is Widening
If the current framework holds—a 7% military raise versus 0% for civilians—it would represent a stark divergence. In the last several years, there has been a move for higher military pay raises than for civilian employees.
The recent trend is actually getting worse:
| Year | Military Raise | Federal Employee Raise |
|---|---|---|
| 2024 | 5.2% | 5.2% |
| 2025 | 4.5% | 2% |
| 2026 | 3.8% | 1% |
| 2027 | 7%? | 0%? |
The 2027 proposal is potentially the largest gap yet (7% vs 0%). That gap matters for several reasons:
1. Recruitment and Retention Pressure
Federal agencies are already competing with the private sector, where pay may be higher and significantly higher in some cases. Estimates show federal salaries lag private-sector equivalents by roughly 25%, although the federal government offers benefits that offset some of this difference.
2. Workforce Morale
Pay disparities between military and civilian personnel—especially within the same agencies such as the Department of War—undermine morale and cohesion.
3. Increased Attrition Risk
Higher-skilled employees (IT, cybersecurity, acquisition) are the most mobile—and the most likely to leave if pay stagnates.
4. Long-Term Pay Compression
Without regular increases, lower- and mid-grade employees feel the squeeze first, especially in high-cost areas where locality pay already lags.
What Congress Is Proposing Instead
Congressional Democrats have already introduced the Federal Adjustment of Income Rates (FAIR) Act, proposing an average 4.1% pay raise for civilian employees in 2027.
That proposal breaks down as follows:
- 3.1% across-the-board increase
- ~1% average locality pay adjustment
The reality is that the FAIR Act is more of a negotiating position than a likely outcome.
Historically, these proposals usually become law at levels lower than stated. There will likely be changes in the coming months between Congressional budget negotiators and the administration.
What Is the Most Likely 2027 Pay Raise?
Strip away the politics, and the likely range becomes clearer.
Recent pattern: proposals higher, final raises lower.
Most likely scenarios for 2027:
| Scenario | Probability | Explanation |
| 0% raise | Moderate | Happens if Congress defers to the president’s plan |
| 1%–2% raise | Most likely | Typical compromise outcome in tight budgets |
| 3%–4% raise | Possible but less likely | Would require strong congressional push |
A raise in the 1%–2% range is the most realistic expectation, unless political pressure shifts significantly.
The Bigger Issue: Structural Pay Policy
The deeper problem is not just one year’s raise—it’s the system itself.
Under current law, federal pay should track private-sector wage growth. In practice, that formula is routinely ignored because of cost concerns.
The result:
- Pay raises become political decisions, not economic ones
- Civilian employees absorb the gap over time
- Catch-up raises never fully materialize
What Federal Employees Should Watch
Three developments will determine the final outcome:
- White House alternative pay plan (late 2026)
- Congressional appropriations process
- Economic conditions (inflation, deficits, labor market pressure)
If Congress stays passive, expect a minimal raise—or none. If lawmakers push back, a modest increase becomes more likely.
Bottom Line
Right now, civilian federal employees are facing the real possibility of no pay raise in 2027, while military personnel could receive a substantial increase.
That imbalance highlights a broader trend: civilian pay is increasingly treated as discretionary, while military pay remains a priority.
Unless Congress steps in aggressively, federal employees should plan for another below-inflation pay adjustment—if they receive one at all.
