Bush's Merit Pay Plan Is Stalled in Congress

It looks as though the White House has failed to get the job done this year in promoting its proposed Human Capital Performance Fund.

The fund, announced early this year as part of President Bush's 2004 budget plan, was supposed to provide $500 million that agencies could tap to award higher raises to their best workers. Officials explained that the fund would help fix a "broken" compensation system in which most federal pay raises are determined by longevity rather than performance.

"The federal pay system has been in a time warp for over 50 years," Mark W. Everson, then the deputy director for management at the Office of Management and Budget, said in January. "The president is committed to fixing it."

Kay Coles James, director of the Office of Personnel Management, which would administer the fund, said in July that across-the-board pay raises for federal workers are a relic of the past.

"The Human Capital Performance Fund is a 21st century approach that tells employees, 'Performance matters,' " James said. Congress wasn't persuaded.

The Senate recently failed to pony up money for the fund in the Transportation and Treasury appropriations bill, the traditional vehicle for federal pay measures. The House approved $2.5 million -- but only if separate legislation passes authorizing the fund. (A provision creating the fund is in the House version of the defense authorization bill, and administration officials are hopeful the Senate will go along.)

An OMB official, who spoke on condition of anonymity, said: "We're disappointed. It's effectively zeroing out the fund and rejecting the idea of pay for performance. But we're going to continue to work with the Congress. . . .

We've got to get away from across-the-board pay increases for nothing."

Critics, including lawmakers from both parties, said Bush's fund was unlikely to provide federal workers much of an incentive for good performance. Even if fully funded, it would represent only 0.5 percent of the overall civilian payroll of about $100 billion.

They also questioned whether a centrally managed fund was the right approach, rather than placing the authority with individual agencies. And they noted that the General Accounting Office has found that few agencies have systems in place to adequately measure employee performance, raising the risk that the higher raises would be based mainly on favoritism.

The Senate Appropriations Committee report said the panel "agrees with the concept but denies the creation of the Human Capital Performance Fund. The committee believes that an initiative of this type should be budgeted and administered within each individual agency."

There were other problems, too.

At the same time he pitched the performance fund, Bush proposed to increase base pay by 4.1 percent for the military but only 2 percent for civilian workers. That prompted some lawmakers and federal employee union leaders to complain that the president had created the performance fund merely by scaling back the base raise, a move they say would demoralize employees.

"It's a sham," Rep. Steny H. Hoyer (D-Md.) said of the proposed fund in January.

John Gage, president of the American Federation of Government Employees, said Friday that the union viewed the proposed fund "as a slush fund for Bush's political appointees and their friends. We never believed it would trickle down to front-line rank-and-file federal employees."

Still, White House plans for pay-for-performance are far from dead. The administration has strongly suggested that it will install such a system at the Department of Homeland Security when it finalizes new personnel rules for the agency early next year.