Don\'t Go Overboard on Federal Pay

**Vote NO Today on H Res. 581**

 

Dear Colleague:

 

**WE HAVE ALREADY BEEN GENEROUS!**

  

[Time]{.underline}\'s May 26, 2003 cover story, \"Where Did My Raise
Go?\" found that pay raises were lean for most private sector workers. 
Yet during the same time we\'ve been quite generous to federal civil
service workers, who also enjoy better job security and benefits than
the private sector.  **Over the last 7 years, federal workers\' got base
pay raises of \$1.66 for every \$1.00 increase in the cost-of-living. 
Over the last 4 years, their raises have been [double]{.underline} the
actual cost-of-living increases. **

** **

**\"SUPER-SIZED\" RAISES ARE NOT NEEDED!**  

** **

Some claim a 32% pay disparity between federal workers and their private
sector counterparts.  That number paints an inaccurate picture.  It
covers [base pay only]{.underline}, and does not include *total
compensation* such as locality pay and benefits (health care,
retirement, etc.).  The supposed gap falls to 17% when locality pay is
included, and then evaporates when benefits are included. 

 

**House Resolution 581** supports giving federal workers an extra
**\$2.2 billion** [on top of]{.underline} a 1.5% (the actual
cost-of-living increase).  But because the President\'s budget proposes
3.5% for the military, sponsors insist that everyone else must get the
larger raise, too.  Rather than targeting those who put their lives at
risk, H Res. 581 gives office workers the same bonus. 

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But are super-sized raises needed to recruit and retain federal
workers?  **No.**  There is no flight to the private sector:  The
federal attrition rate is 1.7% \-- far below that for private sector
employees.  OMB Director Josh Bolton testified before Congress last week
that there is [no]{.underline} government-wide recruiting and retention
problem.  The handful of potential shortages in isolated skills or
localities is managed through targeted incentives outside of the annual
pay raise.  (OMB\'s letter opposing H Res. 581 is excerpted on the
back.)

 

**WE CANNOT AFFORD TO SPEND THIS ADDITIONAL \$2.2-BILLION!**

 

If we grant these too-large raises, they will cost \$2.2-billion this
year, and another \$2.2-billion next year, and every year that follows. 
It is false to claim that agencies somehow \"absorb\" the expense.  As
it has in past years, larger raises means agencies won\'t have the money
to do their normal work, so they\'ll make temporary adjustments and
increase their supplemental and future requests.  (Besides, when
agencies are able to trim expenses, we should use that to reduce overall
spending, and make progress on our huge deficit!) 

 

Vote **NO** on H Res. 581.  To help, or for further information, contact
Kurt Conrad of my staff at 225-2132.

 

                                                                       
Very Truly Yours,

 

                                                                       
S/

 

                                                                       
Ernest J. Istook, Jr.

                                                                       
Member of Congress

**Text Version of OMB Director Bolton\'s letter to Speaker Hastert**

 

 

                                 March 30, 2004

 

 

The Honorable Dennis Hastert

Speaker

U.S. House of Representatives

Washington, D.C.  20515

 

Dear Mr. Speaker:

 

     As the House of Representatives begins consideration of a
resolution on Federal pay policy, I strongly urge the House to support
the Federal employee pay policy reflected in the President\'s FY 2005
Budget.  The Administration believes this approach, rather than the one
reflected in the proposed resolution, is the most effective way to
achieve the desired result:  to recruit, retain, and reward quality
employees.

 

     The President\'s Budget proposes to increase compensation for
civilian employees by 2 percent, or by over \$2 billion, targeted to
address specific needs and opportunities.  The proposal includes:  a 1.5
percent across-the-board pay increase to maintain civilian employee
buying power; \$200 million spread across agency budgets for use in
addressing specific recruitment and retention needs; and, \$300 million
for the Human Capital Performance Fund, which agencies can use to reward
their highest performing employees.  The resolution under consideration
would instead support the same across-the-board increases for civilian
workers that the President has proposed for military personnel.

 

     The Administration strongly supports the proposed resolution\'s
goal of providing sufficient compensation for civilian and military
employees to support our critical efforts to recruit, retain, and reward
quality employees effectively and responsibly.  The Administration,
however, does not believe that providing the same across-the-board
increases for civilian workers that the President proposes for military
personnel will help us achieve this goal.

 

     If added to the President\'s proposal for \$2 billion in pay
increases for civilian employees, the additional cost of providing every
civilian employee with the identical across-the-board raise proposed for
the military would be about \$2.2 billion.  Because Congress cannot
provide this funding without exceeding budget limits or shifting money
away from higher priorities, this increase essentially acts as an
\"unfunded mandate\" that agencies must cover within existing funds.

 

     Federal civilian employees have enjoyed cumulative annual pay
increases of 45.1 percent since 1993.  For the last five years, Federal
employees have received raises that exceed overall private sector wage
growth.  State governments, by contrast, have provided smaller increases
for their employees when faced with similar resource constraints. In the
past four years, many States have frozen pay completely at various
points in time, and we are not aware of any State that in 2004 gave its
workers as large an across-the-board raise as is being proposed for
Federal workers this year.

 

 

     In addition, Federal employees receive other types of pay
increases.  In 2005, we estimate the value of within grade and quality
step increases as 1.3 percent, the value of promotions as 1.2 percent,
and the value of cash awards as 1.3 percent of civilian payroll.  While
not everyone will receive these increases, with the 3.5 percent
across-the-board pay increase that the proposed resolution supports,
overall Federal employee compensation in 2005 would increase by about
\$5 billion.

 

     Federal employee benefits are also increasingly more attractive
relative to those available in the private sector.  These include a
defined benefit annuity and lifetime health benefits for as little as
five years of service, as well as transit subsidies, long-term care
insurance, preferential tax treatment of health insurance premiums, and
flexible spending accounts for dependent and healthcare expenses.  The
Federal civilian benefits package increasingly stands out as one of the
most comprehensive available anywhere.

 

     Both civilian and military employees perform crucial functions on
behalf of the American public.  The Administration believes, however,
that giving every civilian employee the identical raise proposed for the
military does not support the goal of providing compensation to
effectively and responsibly recruit, retain, and reward quality
employees.  Advocates for providing identical pay raises to civilian and
military employees cite recruitment and retention problems, but we have
no evidence that the Federal Government has widespread recruitment and
retention problems.  With respect to retention, the voluntary attrition
rate is at a near historic low of 1.6 percent.  Only in relatively few
occupations are recruitment and retention problems an issue, and the
President\'s pay policy gives agencies the tools and resources to
address these concerns.

 

     The President\'s pay proposal provides sufficient pay not only to
recruit and retain needed workers, but also to reward the government\'s
highest performing employees.  The Administration is implementing better
agency performance appraisal systems that will be able to distinguish
superior performance.  Such systems will enable agencies to reward
employees with funds from the Human Capital Performance Fund.  These
incentives will produce improved performance and results for the
American people.

 

     Our civilian and military employees are vital to the success of the
Federal government in meeting its commitments to the American people. 
Federal workers should be rewarded with a pay policy that most
effectively recruits, retains, and rewards quality employees.  The
Administration believes the pay policy included in the FY 2005 Budget
supports those goals.  While we recognize that the proposed Sense of the
House resolution has no binding effect on either the budget or
appropriations processes, we urge Members to oppose the resolution.

 

                                   Sincerely,

 

                                   /signed/

 

 

                                   Joshua B. Bolten

                                   Director