Federal Pay: FY2003 Salary Adjustments (CRS Report for Congress)
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| Release Date |
March 25, 2003 |
| Report Number |
RL31291 |
| Report Type |
Report |
| Authors |
Barbara L. Schwemle, Government and Finance Division |
| Source Agency |
Congressional Research Service |
Summary:
Federal white-collar employees are to receive an annual pay adjustment and a locality-based
comparability payment, effective in January of each year, under Section 529 of P.L. 101-509 , the
Federal Employees Pay Comparability Act (FEPCA) of 1990. In January 2003, they received a 3.1%
annual pay adjustment under Executive Order 13282 issued by President Bush on December 31,
2002 and a locality-based comparability payment, averaging about 1.0% of the General Schedule
payroll, under Executive Order 13291 issued by the President on March 21, 2003. The locality pay
adjustment is retroactive to January 2003. (The December 31, 2002 executive order had frozen the
locality-based comparability payments at the levels authorized for January 2002.) The cost of the
combined pay adjustments is about $3.8 billion dollars. Although the federal pay adjustments are
sometimes referred to as cost-of-living adjustments, neither the annual adjustment nor the locality
payment is based on measures of the cost of living.
The annual pay adjustment is based on the Employment Cost Index (ECI), which measures
change in private-sector wages and salaries. The index showed that the annual across-the-board
increase would be 3.1% in January 2003. The size of the locality payment is determined by the
President, and is based on a comparison of non-federal and General Schedule (GS) salaries in 32 pay
areas nationwide. By law, the disparity between non-federal and federal salaries was to be gradually
reduced to 5% over the years 1994 through 2002; FEPCA requires that amounts payable may not be
less than the full amount necessary to reduce the pay disparity to 5% in January 2003. The Federal
Salary Council and the Pay Agent recommend that the 2003 locality payments range from 22.41%
in the "Rest of the United States" (RUS) pay area to 46.79% in the San Francisco pay area. The
payment recommended for the Washington, DC, pay area was 28.93%. Because the new locality
rate replaces the existing locality rate, the change in locality rates is derived by comparing 2002
locality payments with those recommended for 2003. This comparison resulted in recommended
increases in locality rates from 2002 to 2003 ranging from 16.17% in the RUS pay area to 27.13%
in the San Francisco pay area, with a rise of 19.24% in the Washington, DC, pay area. The
nationwide average net pay increase, if the ECI and locality-based comparability payments were
granted as stipulated in FEPCA, would have been 18.56%. President George Bush's FY2003 budget
proposed a 2.6% federal civilian pay adjustment.
FEPCA has never been implemented as originally enacted. Since 1995, locality payments have
been much lower than FEPCA requires.
