The Senate on Tuesday afternoon rejected language to extend the federal pay freeze another year, through 2013. Here are some questions and answers about the potential effect on prospects for a federal pay raise.
Does the Senate vote mean that federal employees will receive a raise in 2013?
Not necessarily, but it is a step in that direction. Under current law, the earliest federal pay rates could be raised is January 2013. Last month the House approved a one-year extension of the freeze as part of a separate bill. The Senate hasn’t taken up that bill, nor any of the several similar bills pending before it.
What happened Tuesday is that the Senate rejected an amendment to a transportation bill that would have used savings from extending the pay freeze by a year to offset the cost of certain energy policies and tax breaks.
The policy questions of extending the pay freeze aside, some members of Congress have started objecting to the practice of using savings from changes in federal employment policies to fund unrelated spending. Federal employee organizations raise the same concerns.
Last month, part of the cost of extending unemployment benefits was funded by requiring most employees newly hired after this year to pay more into the federal retirement fund. Last week the Senate approved a different amendment to the transportation bill to use savings from a retirement change to fund spending for rural roads and schools. That language would allow employees to draw a partial annuity and continuing to work part-time while drawing a proportionate salary, with savings coming from paying only part-time salaries in those positions.
Won’t the House just add a pay freeze extension to its version of the bill?
Possibly, but a transportation bill is not a typical place to address federal pay. Generally, raises for the following January are determined annually during the congressional budget process, with a decision often not finalized until late in the year. This year’s budget cycle has barely gotten started.
The House last month started work on its own version of the transportation bill but got bogged down before recessing for this week. It was considering several other federal employment-related provisions as spending offsets in its bill, including raising retirement contributions by current employees, ending a retirement supplement for many federal employees who retire before age 62 effective with those retiring starting next year, and making the annuity benefits for those hired after this year less generous.
Those provisions may be set aside, at least temporarily, if the House decides to use the Senate version as its new starting point. Leaders may decide against trying to add a pay freeze continuation to the bill in light of the Senate vote.
What’s the administration’s position on federal pay for 2013?
The White House has recommended a 0.5 percent increase for next January. That was part of a budget plan offered in February in which the administration called a continued freeze “unsustainable.”
However, the administration did agree in late 2010 to impose the two-year freeze for 2011 and 2012.
The federal pay law formula indicates a 1.7 percent raise for January 2013, which is the amount the White House has recommended for military personnel. But the White House’s recommendation for 0.5 percent could effectively set a cap for that increase, if any raise is paid.
The last general raise, of 2 percent, was paid in January 2010. If an extension of the freeze is passed, the next raise would be January 2014 at the earliest.
Do all federal employees get the same increase when a general raise is paid?
Typically, the raise is broken into two components: part is paid as an across the board increase, and the money available for the rest is divided up as locality pay. Under locality pay, increases vary somewhat according labor market conditions in various metropolitan and other areas. With a raise as small as 0.5 percent, though, the entire amount might be paid across the board.
How much are federal employees losing due to the existing freeze?
That depends on what you assume they would have been paid otherwise. Before the two-year freeze was enacted, political leaders mainly were considering a 1.4 percent increase for January 2011 (1.9 percent also was on the table); military personnel ended up receiving 1.4 percent. For 2012, the indicated federal raise number was 1.6 percent; military personnel received that amount in January.
If federal raises had been paid in 2011 and 2012, they might have matched the amounts that actually were paid to the military. They also might have been lower. It’s almost certain that the federal raises would not have been higher than the military raises; that hasn’t happened in decades.
Pay freezes also have a delayed financial impact on employees, since when they retire their annuities are based on their years of service and highest three consecutive years of salaries. In many cases, a freeze will mean using a lower salary figure. The dollar amount of that difference would vary from person to person.
How are some federal employees continuing to get raises despite the freeze?
The largest federal salary system is the General Schedule, which covers most white-collar workers below the most senior levels. That system consists of 15 grades, each of which has 10 steps. Generally, employees advance to the next higher step every one, two or three years, varying by the step they are on.
These “within-grade raises” or “step increases” have remained allowed despite the freeze. So have raises on promotion. In that sense, the freeze is more accurately a pay rate freeze or a salary schedule freeze, rather than a pay freeze.
Pay for some federal employees, including senior executives, is set within broad pay bands. Within-grade raises aren’t paid in those salary systems. However, those employee can get raises based on promotions or performance.
Why don’t members of Congress share the pain of pay freezes?
They do. Raises for Congress are supposed to be automatic, set by a separate formula, but the law caps any annual raise for legislators at the base pay raise for General Schedule federal workers. So, when federal workers get no raise, Congress gets no raise.
In addition, Congress in some years rejects a raise for itself even though an increase is paid to federal workers. Since 1994, Congress has gone without a raise nine times, including four of the last six years.