Congress last week defied President Barack Obama's call to forego locality pay increases in 2010.

All federal employees under the General Schedule will receive a 1.5 percent raise in January, plus a small locality raise that will average 0.5 percent.

The Office of Personnel Management has not yet calculated what each locality's raise will be, but San Francisco, Washington, New York, Boston and Hartford, Conn., continue to have the greatest gap between federal and private-sector salaries and will likely get the largest locality raises.

Obama first proposed a 2 percent pay raise — the smallest in at least 16 years — in February, saying it would be inappropriate to award bigger raises during a recession. On Nov. 30, he reiterated his call, adding that there should be no locality pay component to that.

Congress chose to set aside 0.5 percent, or a quarter of the funds budgeted for the 2010 pay raise, for locality raises.

The military will receive a 3.4 percent increase in 2010, breaking with the longstanding tradition of pay parity between service members and federal employees. Next year will be only the fifth year in three decades — along with 1984, 1994, 1995 and 2002 — when federal pay raises were lower than military raises. OPM Director John Berry in September said the administration expects to return to pay parity in 2011.

House Majority Leader Steny Hoyer, D-Md., also promised to push for pay parity next year.

"While I believe that this year's adjustment is reasonable in light of an economic downturn where millions of Americans have lost their jobs, I am disappointed that parity was not achieved," Hoyer said. "Like their military counterparts, civilian federal employees have made significant contributions to help our country respond to the challenges we face both domestically and abroad, and I believe their pay adjustments ought to reflect that."

National Treasury Employees Union President Colleen Kelley told reporters Dec. 9 she was happy to see a locality pay increase restored to the raise.

She noted it would have been the first time since locality pay was created in 1994 that the government did not distribute some portion of the pay raise based on locality.

The House passed the $446.8 billion omnibus spending bill containing the pay raise Dec. 10. At press time on Dec. 11, the Senate had not yet voted on the bill, but it was expected to approve it over the weekend.

More employees to get locality raises

For the first time next month, federal employees in Hawaii, Alaska and U.S. territories such as Puerto Rico will receive at least some locality payment, thanks to the Defense Authorization Act signed in October. Those employees will receive one-third of the "rest of U.S." locality pay raise in January and a reduced non-foreign cost-of-living allowance. In 2011, those employees will receive two-thirds of the locality pay raise, and in 2012 they will get the entire locality pay raise.

Cost-of-living allowances do not count toward employees' salaries when retirement is calculated, but locality pay does.

"This is something the 49th and 50th states have been looking forward to for many years now," said Gloria Uyehara, executive director for the Honolulu Federal Executive Board.

Uyehara said locality pay will help Hawaii agencies hold on to employees nearing retirement and conduct succession planning. Employees' pensions are calculated based on the average of their highest-three annual salaries, and she said many employees leave Hawaii for jobs with locality pay so they can get higher pensions.

"In the last three to five years [of their career], we see seasoned workers leave," Uyehara said. "In Hawaii, we have a very difficult time recruiting and retaining workers [because of a lack of locality pay]. This will help us better manage our bench."