Key members of Congress and staff worked last night to wrap up a fiscal 2005 spending package for federal agencies, and Capitol Hill aides predicted that the legislation would include a provision providing a 3.5 percent pay raise for federal employees.

Despite losing every pay raise vote this year, the Bush administration tried yesterday to hang tough on the proposed raise. The White House budget office released a five-page letter to House and Senate appropriators on the spending package and repeated its opposition to the proposed raise in the letter's fourth paragraph.

The proposed 3.5 percent raise exceeds President Bush's request by $2.2 billion "and provides a percentage increase that exceeds inflation, the statutory base pay increase and the average increase in private sector pay," wrote Joshua B. Bolten, director of the Office of Management and Budget.

The proposed raise "would be very difficult for agencies to absorb," Bolton said, noting that most agencies will probably face an across-the-board cut designed to meet an overall budget cap. The combination, he warned, "will likely require reductions-in-force or shifts of resources away from critical programmatic priorities."

Congressional aides acknowledged that some cash-strapped agencies may have to rethink some spending priorities next year but were skeptical that funding shortfalls would lead to layoffs.

Bush began the year proposing a 1.5 percent pay raise for the civil service and a 3.5 percent raise for the military. Congress approved the military raise and decided to continue a "pay parity" policy for the civil service.

Although some House Republicans objected to a parity increase, a bipartisan majority signaled in a floor vote that it backed the policy, in part because the raise goes to FBI and CIA agents, to scientists and researchers and to others involved in homeland security.

Bolton's letter did not place a veto threat against the pay raise.

But he warned that proposals to curb the administration's competitive sourcing program would draw a veto recommendation if left in the bill. A Republican aide said yesterday that House-Senate negotiators had not decided what to do about the contracting provisions, but suggested they would probably be dropped if no compromise can be struck with the White House. The provisions would limit funding for job competitions to determine if "commercial activities" performed by federal employees should be turned over to the private sector.

John Gage, president of the American Federation of Government Employees, faulted the Bush administration for "standing against the longstanding and bipartisan tradition of fairness in wages" and for protesting competitive sourcing restrictions that it had previously accepted on Defense Department bills.

If Congress failed to act on the pay raise before Nov. 30, the salary formulas in a 1990 pay law would provide federal employees with a 2.5 percent across-the-board raise next year. Bolton's letter acknowledged that would be the case, but was silent on a second component of federal pay, a geographic adjustment tied to local labor markets.

Retirements

Michael B. Frosch, a lawyer with the Internal Revenue Service, will retire Jan. 3 after more than 35 years of federal service, including eight years in the Office of Chief Counsel for the Bureau of Engraving and Printing and 27 years in the Office of Chief Counsel for the IRS.

Rex A. Wisdom, an information technology specialist at the Air Force Pentagon Communications Agency, retired Nov. 13 after 20 years with the Defense Department.

Talk Shows

George Gould, director of legislative and political affairs for the National Association of Letter Carriers, will be the guest on "FEDtalk" at 11 a.m. today on federalnewsradio.com.

Prudence Bushnell, dean of the leadership and management school at the Foreign Service Institute, will be the guest on "The Business of Government Hour" at 9 a.m. tomorrow on WJFK radio (106.7 FM).

"Being Thankful for Having a Job" will be the topic for discussion on the Imagene B. Stewart call-in program at 8 a.m. Sunday on WOL radio (1450 AM).

E-mail: barrs@washpost.com