By Stephen Barr
Tuesday, November 27, 2007

Next year's federal pay raise is something of a muddle.

Spending bills in Congress would give federal employees a 3.5 percent pay raise in 2008, slightly more than the 3 percent recommended by President Bush. But the appropriations bills have not gotten to a vote, largely because Congress and the White House are locked in a dispute over spending priorities for most federal agencies.

Because Congress has not acted on the raise, Bush faces a deadline Friday, set by a 1990 federal pay law, to decide whether to issue a pay plan for federal employees.

The 1990 law envisions bringing white-collar federal pay more in line with the private sector by supplementing the annual, across-the-board raise with a geographic-based adjustment, known as locality pay. But the locality adjustments have never been fully implemented because of concerns about their cost and how to measure the "pay gap" between the federal and private sectors.

If Bush fails to send Congress an alternative plan, the law would require a substantial pay raise -- a base pay increase of 2.5 percent and locality pay increases that would average 12.5 percent. A raise of that size seems out of the question, given the administration's efforts to hold down non-defense spending next year and the likely public outcry over government employees receiving such a huge raise.

The president is able to sidestep the law's requirements by making an emergency declaration and setting out an alternative plan. In some previous years, Bush and former president Bill Clinton have used this discretion to provide raises lower than those stipulated by the law.

Administration officials said yesterday that they expect Bush to issue an alternative plan by Friday. Because Bush let an August deadline on base pay pass without action, federal employees are assured a 2.5 percent base pay raise, as provided by the 1990 law, the officials said.

That means Bush is left with a decision on locality pay. Assuming he sticks with his original budget proposal for an average 3 percent raise, federal employees would get a 0.5 percent increase in locality pay next year.

The administration is on record in opposition to a 3.5 percent civil-service raise, telling Congress in June that such a raise would be higher than the average increase in private-sector pay, as measured by the Labor Department's employment cost index. The congressional approach also would not address any recruitment or retention problems facing the government, the White House contended.

Still, Bush has signed a defense appropriations bill that provides a 3.5 percent pay raise for the military, and Congress has authorized that raise in pending legislation. The president had originally recommended a 3 percent raise for the armed forces.

His decision to accept the higher military raise seems to signal that he would not oppose an equal raise for the civil service if Congress passed such legislation.

In most previous years, Congress and the White House have backed equal raises to the military and the civil service on the grounds that civilians in the FBI, Department of Homeland Security and other agencies are as essential as the military in protecting the nation.

But several spending bills are trapped in the Senate, waiting for a consensus to emerge on fiscal 2008 priorities. Until a deal is reached, the government will operate under interim funding measures, known as continuing resolutions. The current stopgap measure expires Dec. 14.

It's possible the budget impasse will spill over into next year, as has happened in some years. In that case, Congress may not act on the federal pay raise until February or March and would have to stipulate whether the raise was retroactive to the first federal payday in January.

Officials said yesterday that it is difficult to predict when all parts of the pay puzzle will fall into place. "There are many unknown pieces right now," Nancy H. Kichak, an associate director at the Office of Personnel Management, said.

Stephen Barr's e-mail address isbarrs@washpost.com.