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Federal pay freeze plan wouldn't stop raises

Dec. 6, 2010 - 08:28AM   |  
By STEPHEN LOSEY   |   Comments

President Obama spoke of the need for sacrifice last week when he announced a two-year pay freeze for federal employees.

But feds won't be too terribly deprived in 2011 and 2012. Despite the freeze, some 1.1 million employees will receive more than $2.5 billion in raises during that period.

Congress is expected to approve Obama's proposal, which cancels only cost-of-living adjustments for two years. Regularly scheduled step increases for the 1.4 million General Schedule employees who make up two-thirds of the civilian work force will continue. The size of those increases ranges from 2.6 percent to 3.3 percent and by law kick in every one, two or three years, depending on an employee's time in grade.

John Gage, national president of the American Federation of Government Employees, called Obama's plan "wrongheaded" and driven by politics. But he said the news that step increases will not be affected takes some of the sting out of the decision.

"They're doing this as a symbol, but it's the wrong type of symbol to take it out on working people making basic wages," Gage said.

But Rep. Jason Chaffetz, R-Utah, called the retention of step increases a hole in Obama's plan. He also said the administration should freeze hiring and reduce the federal payroll from $447 billion to $400 billion.

"Somehow, someway I think this country can survive on just a $400 billion payroll," Chaffetz said. He is the ranking Republican on the House Oversight and Government Reform subcommittee on the federal work force, and could become chairman when Republicans take control of the House next year.

In addition to General Schedule employees receiving step increases, some of the government's roughly 187,000 wage-grade employees also will receive step increases.

And many employees will receive promotions, which also come with salary increases, Jeffrey Zients, the Office of Management and Budget's deputy director for management, said last week.

Many senior employees won't get raises, but will receive bonuses for good performance, although OMB and the Office of Personnel Management are telling agencies to cap bonuses at 2010 levels. OPM said it does not yet have information on fiscal 2010 bonuses, but the Asbury Park Press of New Jersey reported in June that the government paid $408 million in bonuses to 359,400 people, an average $1,135 each, in fiscal 2009.

The White House specifically exempted military service members from the freeze. And OMB said Obama's freeze will not apply to legislative branch employees.

Spokesman Mark Saunders said the U.S. Postal Service froze senior management's pay on Nov. 15.

"At this point, we have done everything under our control to limit salary increases, and the rest will be addressed through collective bargaining," Saunders said.

The Administrative Office of the U.S. Courts said judicial branch employees don't get cost-of-living adjustments unless GS employees do, so the freeze will cover them. But more than 25,000 judicial employees will receive step increases.

Federal Times calculated the $2.5 billion cost of step increases using OPM data on the number of employees at each GS grade level and step, and the within-grade increases those employees will receive over the next two years by advancing to the next step.

$2B in savings in 2011

Obama's two-year freeze proposal is less than the three-year freeze the co-chairmen of a White House-appointed deficit reduction commission are pushing for and the White House was considering as recently as Thanksgiving week.

The White House expects the two-year freeze will save $2 billion in fiscal 2011, $28 billion over the next five years, and more than $60 billion over the next 10 years.

Congress will have to approve the pay freeze by the end of December, or a 0.9 percent increase will automatically go into effect.

Obama's proposal was swiftly denounced by federal unions and employee groups, who cited data from the Bureau of Labor Statistics that suggest private-sector salaries grew last year faster than federal wages.

"This proposal to freeze federal pay is a superficial, panicked reaction to the deficit commission report," Gage said. "This is no time for scapegoating."

The Federal Managers Association said that since civil servants are facing an average 7 percent increase in health care premiums next year, the freeze will amount to a reduction in take-home pay.

"While the president claims his proposal is not intended to punish or disrespect federal employees, a two-year pay freeze certainly feels like punishment," FMA said in a statement. "We at FMA understand the demands placed on our economy and the current state of our fiscal crisis. Taking steps to reverse our government's spending, however, should not be unduly borne by our nation's civil servants."

House Republican Whip Eric Cantor, from Virginia, applauded Obama's proposal.

"Many federal employees do important work, but this is exactly the kind of savings measure we have to make in order to begin to restore some fiscal sanity in America," Cantor said.

Reaction to the announcement by federal employees was mixed. Some who wrote to Federal Times said it is unfair to cancel their salary adjustments while the government is spending money on wars and bailouts. Others said they don't mind giving up their raises to help balance the books.

Max Stier, president of the Partnership for Public Service, said he doesn't expect a pay freeze to cause retention problems. He doesn't think retirements will spike, even though employees nearing retirement will see their salaries, a factor in their annuity calculations, stagnate for a few years, he said. He also said he expects few employees will look for work elsewhere.

"We are not likely to see a mass exodus from government, or a dramatic difference in its ability to recruit and retain employees," Stier said. "A lot of that is due to the fact that most feds are in their jobs because they care about making a difference. Money does matter to them, but it's not their dominant motivation."

But Stier said an across-the-board freeze is a bad idea. He said the government needs to overhaul how it classifies and pays its employees so it can steer more money to critical employees in high demand such as doctors and engineers and not give all employees massive raises.

"For certain occupations and certain levels of responsibility, there's already been a substantial gap between what they can earn in the government vs. the private sector," Stier said. "This makes that discrepancy worse."

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