October 7, 2003

Salary council calls for 1.4 percent locality pay raise in 2004

By Tanya N. Ballard

Federal employees would receive a 2.7 percent across-the-board salary increase and a 1.4 percent locality pay increase in 2004 under a recommendation approved Tuesday by the Federal Salary Council.

In August, President Bush announced he would hold the white-collar pay raise to 2 percent in 2004 because of budget constraints and national security needs. The administration initially proposed the 2 percent raise in the fiscal 2004 budget it presented to Congress earlier this year. However, a month later the House passed an appropriations bill that included a 4.1 percent pay raise in 2004 for civilian and wage grade federal employees. The Senate Appropriations Subcommittee on Transportation, Treasury and General Government approved similar legislation in September.

Though the amount of the 2004 pay raise is still up in the air, the council, a group led by the Office of Personnel Management that includes federal officials and federal union representatives, decided Tuesday that the pay raise should be divvied up in a way that takes into account the size of the pay gap in each locality. For the past four years

locality pay has been, on average, 1 percent.

The council also elected to use new metropolitan statistical areas (MSAs) adopted by the Office of Management and Budget in June as the basis for locality pay areas in 2005. None of the current locality pay areas would lose its locality pay area designation under the recommendation, though some of them might expand to include new communities.

The government established the locality pay system under the 1990 Federal Employees Pay Comparability Act. Federal workers in 31 metropolitan areas, ranging from Atlanta and Washington to Huntsville, Ala., receive special locality pay based on the cost of labor in each city. Outside the 31 areas, federal workers in the 48 contiguous states are covered by the "Rest of the U.S." locality pay category. Locality pay areas are usually based on MSAs and consolidated metropolitan statistical areas that OMB defines by population, population density and commuting information.

Each year, federal officials from across the country petition the Federal Salary Council for higher salaries in their areas. A council working group considers the petitions, then recommends whether to approve or deny higher locality pay rates for the jurisdictions that apply. The full council approves them and makes a recommendation to the President's Pay Agent, a group that includes OPM Director Kay Coles James, OMB Director Joshua Bolten and Labor Secretary Elaine Chao. The pay agent then recommends a course of action to the president. This year OMB revised its MSAs based on new information from the 2000 census and the council delayed making changes to locality pay areas until it could review the new areas.