Federal employees appear on track for a 3.5 percent pay raise next year.

Last week, a Senate Appropriations subcommittee approved the raise as part of a $90.6 billion spending bill for the Transportation and Treasury departments and several small agencies. The pay raise was approved by the House Appropriations Committee in July.

The decision by the Senate subcommittee should make it relatively easy for the House and Senate to include the raise in legislation that can be sent to the president. But House and Senate aides expect that it might be weeks before Congress wraps up spending bills for fiscal 2005, raising the prospect that House-Senate agreement on the pay raise might not be reached until after Election Day.

President Bush proposed a 1.5 percent pay raise for the civil service and a 3.5 percent raise for the military in his fiscal 2005 budget. But several members of the Washington area delegation organized support for a "pay parity" approach to provide the government's civilian employees with a raise equal to that of the military.

Rep. Steny H. Hoyer (D-Md.), who often plays a key role in the annual pay-setting process, has repeatedly noted that Congress has provided equal pay adjustments to civil service and military employees in 17 of the past 20 years.

During this year's debate, Hoyer and other Washington area lawmakers stressed that civil service employees have taken on expanded responsibilities for homeland security and the war against terrorism.

In theory, federal employee raises should be set according to a 1990 law. But the law has been mostly ignored by the Clinton and Bush administrations because of questions about the methodology for setting raises and because of its cost.

Under the law, government raises are supposed to be linked to the Employment Cost Index, a Labor Department survey of wage changes in the private sector. When the law is followed, civil service employees receive annual raises that are a half-percentage-point less than the average private-sector increase. Employees also receive a "locality pay" adjustment reflecting labor market conditions in 32 designated areas, mostly big cities.

Numerous federal employees say "COLA" when talking about their annual raise. But that term more accurately reflects the inflation adjustment provided federal retirees each year.

The cost-of-living adjustment for federal retirees is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers.

The index, which was created in 1919, sets the COLAs for federal retirees, military retirees and recipients of Social Security and veterans' benefits.

The federal retirement COLAs are based on the percentage difference between the third-quarter average of two consecutive years. Officials said the government will announce the 2005 COLA for federal retirees in mid-October.

Based on Labor Department data collected through July, federal retirees are on course for a 2.6 percent increase next year in their retirement checks. But the size of the COLA might change, depending on inflation trends in August and September.

New FEHBP Rates Coming

The Office of Personnel Management plans to announce new health insurance premium rates today, giving federal employees and retirees a sense of how much their health care will cost in 2005.

The House civil service subcommittee also will explore how the Federal Employees Health Benefits Program can improve its service and serve as a model for the nation.

Rep. Tim Murphy (R-Pa.), the subcommittee's acting chairman, will hold a hearing today in Pittsburgh.

Retirements

Jim Stueve, deputy public affairs officer at Walter Reed Army Medical Center, retired Sept. 3 after 34 years of federal service. Prior assignments include the Office of Economic Opportunity/Community Services Administration, Army Military District of Washington, Army National Guard Bureau and secretary of the Army's public affairs staff.

William Reckert, a medical records transcriber in the federal torts branch of the Justice Department, retired March 31 after 53 years of federal service.

Robert C. Stokes Jr., taxpayer education and communication territory manager at the Internal Revenue Service, retired July 1 after 35 years of federal service.

E-mail: barrs@washpost.com