From the FEDweek Weekly Issue: Wednesday, August 19, 2015


 Many Could Get Larger Boost in Pay

The similar orders of the last two years specified that the increase was to be paid across the board, with no breakout for a locality component. However, it's generally expected that some or maybe even all of the increase for 2016 would be designated as locality pay in order to start the planned 13 new GS localities (Albany, Albuquerque, Austin, Charlotte, Colorado Springs, Davenport, Harrisburg, Kansas City, Laredo, Las Vegas, Palm Bay, St. Louis and Tucson). Rules to create those new localities have not yet been finalized, but the draft plan projected that 102,000 employees working in those areas would be affected, under the proposed boundaries. Employees in those areas currently are being paid at the lowest of the locality rates, the catchall "rest of the U.S." rate; by being in a specific locality their pay would get an additional boost. Exactly how much wouldn't be determined until new pay comparison figures are announced, which typically happens in October--precise rates aren't set until a year-end executive order. In addition, under the proposed rules, 21 of the existing 31 metro localities would be expanded, by bringing in certain outlying areas. That change would be based on new commuting data used as the basis for extending localities beyond standard statistical metropolitan measures and would result in still larger pay raises for employees working in those added areas, as well. The proposal did not specify how many employees would benefit from that, although an earlier estimate by an advisory body put the number above 20,000 However, the proposed rules added that "the addition of new areas results in a smaller amount to allocate for locality pay increases in existing areas"--in other words, the extra boost for some would come at the cost of smaller raises in existing localities that would have been paid otherwise. How much smaller also is to be determined. 

Locality Pay Does Make a Difference
The locality pay system never has functioned the way it was designed in the early 1990s, when the current federal pay law was enacted. That law called for annual across the board raises about equal to the employment cost index indicator of private sector wage growth plus locality pay sufficient to virtually close the indicated pay gap with the private sector over a 10-year period. The former element has been more or less followed, but administrations of both parties have refused to even propose raises large enough to close the pay gaps, with the result being that the gap overall is about the same now as it was then. Instead, raises have been negotiated annually between the White House and Congress, with most of the amount typically paid across the board and the dollar value of the remainder divvied out on a locality basis. However, even that has made a difference. A GS job in the San Francisco locality, the highest-paid, pays about 20 percent above the rate of a job with the same grade and step in the RUS locality. Also, locality pay counts toward high-3 salary on which federal annuities are based, meaning that it produces a difference in retirement benefits for employees with careers that are otherwise the same in terms of years of service and job level. It also counts for purposes such as FEGLI life insurance maximums, certain types of differential and incentive pay, and in lump-sum payments for unused annual leave on separation from service.

 Pay Order Is Likely for 2016

With no federal employee raise amount for 2016 having been set by legislation yet, President Obama can use authority under federal pay law to set a raise that would be paid by default in January should no number, including zero, be enacted into law by the end of the calendar year. Such an order--which most likely would repeat his earlier proposal for 1.3 percent--must be issued by the end of August. Some years such orders have been issued and in others they haven't, largely depending on how the budget is progressing. This year has been shaping up as a replay the last two years, when the White House's early-year budget proposal had recommended a 1 percent raise for the following January, and appropriations bills moving through Congress afterward were silent on the issue. Neither the House nor the Senate version of the key bill, the financial services-general government appropriations bill, contains a raise figure but both essentially assume one will be paid, stating that political appointees would not get whatever raise is paid. Those bills also would continue the practice of capping a wage grade raise at a location at the increase going to GS employees there; wage grade employees are under a separate locality pay system but in practice their raises have been capped in that way for many years.