In this season of protracted, polarized budget debates, where divisions over national spending and taxing priorities were laid bare time and again, a tiny political miracle was born in an unlikely place.

The federal bureaucracy, continually threatened with furloughs and layoffs over the last month, emerged from the budget mayhem with the civil service's biggest prize in 20 years: a new pay system.

The Federal Employees Comparability Act was the product of an initial consensus among the White House, the Office of Personnel Management and civil service advocates in Congress that the federal government had lost its ability to hire and retain intelligent, hard-working, white-collar employees because government salaries were no longer competitive with the private sector.

But to get a deal, to come up with additional money during a budget crunch and to get the president to relinquish some of his authority to set the annual pay raise, it took negotiators who acted with respect toward their adversaries, who were willing to compromise and who were convinced that the public's critical views of government in recent days do not taint the system's career bureaucrats.

"Everybody believed that" public outrage over the conduct of elected officials "did not extend to the government worker," said a key House aide in the negotiations. "Government-bashing aims at the government institutions at the top."

The federal pay legislation begins the process of overhauling the uniformity in the current General Schedule -- where everyone of the same rank receives the same salary and the same annual raise -- and replaces it with a system in which a portion of a worker's annual raise is linked to local labor markets.

In 1992 and 1993, before the locality-based schedules begin, employees are guaranteed up to a 5 percent annual raise based on the Employment Cost Index, which measures the changes in private local labor market salaries and wages. If the ECI exceeds 5 percent, the president has the choice whether to grant workers more.

In 1994, when the locality adjustments begin, the act guarantees an annual raise equal to the ECI of up to 5 percent, minus 0.5 percent. In addition, workers in high-cost cities will receive a locality-based adjustment. The adjustment would be 20 percent of the total federal-private pay gap and will not be applied to areas where the gap is less than 5 percent.

For example, if the gap between federal wages and non-federal wages (including state and local government wages) in the Washington area is 25 percent in 1994, employees here would receive an ECI-based raise, plus 20 percent of the 25 percent, which is another 5 percent increase.

Beginning in 1995, and in every year for the next nine years, the remaining gap would be closed by 10 percent. But starting in 1995 the president also regains his broad discretion to set raises and could refuse to agree to enough money to pay for narrowing the gap.

The president also has full discretion to set the pay raise in any year if there is a war or if there is negative GNP growth for two consecutive quarters.

While all parties agreed on the basic concept -- that the uniform federal structure had become inequitable -- the administration and the Democratic-controlled congressional committees were far apart on how to achieve a change.

First, John Berry, an aide to Rep. Steny H. Hoyer (D-Md.), worked out the details with administration, congressional and federal employee union representatives. "He was not very judgmental and he handled the situation really well," said the OPM negotiator. "He was very effective."

Once Berry whittled down the issues to money and discretion, the three key players, OMB Associate Director Frank Hodsoll, Hoyer and OPM Director Constance B. Newman, had a final meeting.

Congressional aides said it was Newman's diplomatic negotiating style -- with Congress and the administration -- that encouraged adversaries to bridge their differences.

"When there were sticking points, she provided the oil at the right times to get the machine from seizing up," said one House aide. "In my 5 1/2 years here, she has been the smoothest administrator I've dealt with. She kept her word throughout the whole process."

Newman is vacationing in Europe and did not return a telephone call to where she is staying.

On the money issues, Hoyer wanted $3.4 billion to address the average 28 percent private-public gap he contended exists around the country. Hodsoll was willing to commit $960 million to deal with the 14 percent gap the administration figured existed.

Hodsoll also wanted full discretion for the president and Hoyer wanted the president to give it up for four years.

At the 2 1/2-hour meeting that broke the impasse, Newman, who had maintained a united front with OMB, at one point turned to Hodsoll and subtly suggested the administration would have to come up with more money if it wished to accomplish the bill's goals, Hoyer recalled.

"Because she is such a warm and gracious person, that's how it came across," said Hoyer.

In the end, the compromise was a middle-ground figure of $1.8 billion for locality-based raises in 1994.

The system's biggest challenge will be to divide the United States into work regions and then to determine in which regions salaries fall behind those in the private sector by more than 5 percent.

To accomplish this, a new Federal Salary Council and the president's pay advisers will set geographical boundaries and the Bureau of Labor Statistics will conduct surveys of non-federal employers. (The council, to be appointed by the president, will be made up of three labor relations experts and six representatives of employee organizations.)

The president, following the law's guidelines, will set the annual pay raise based on the ECI formula. Congress, however, could boost pay, subject to a veto.

The administration and Congress have committed $3.5 billion over the three years beginning in 1992 for the ECI-based raises plus the $1.8 billion for the locality-based raises in 1994.

Departments and agencies will have to use their annual budgets to pay for many of the discretionary parts of the act, which include:

Immediate locality adjustments of up to 8 percent in cities with the greatest public-private disparities, which in the past have included Los Angeles, New York and San Francisco.

Immediate salary increases of 5 percent at the entry level (GS-5 and GS-7).

New authority for agency managers to give recruitment, relocation and retention bonuses and to hire new civil servants above the minimum rate.

Higher rates to attract employees to about 800 "critical positions."

Allowing certain retirees to reenter the work force on a temporary basis without giving up their retirement compensation.

Advance pay to new hires, travel expenses for prospective employees and time off as an incentive to certain employees.