This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations Federal Register

75451

Vol. 69, No. 242

Friday, December 17, 2004

OFFICE OF PERSONNEL 

MANAGEMENT 

5 CFR Part 531 

RIN 3206–AJ45 

General Schedule Locality Pay Areas

AGENCY: Office of Personnel 

Management.

ACTION: Final rule.

SUMMARY: The Office of Personnel 

Management is issuing final regulations 

on behalf of the President’s Pay Agent 

to link the definitions of General 

Schedule locality pay area boundaries to 

the geographic scope of the new 

metropolitan statistical area definitions 

established by the Office of Management 

and Budget. This regulation also 

establishes new criteria for evaluating 

areas adjacent to locality pay areas for 

inclusion in the pay area. The 

regulations retain all of the existing 

locality pay areas, which are expanded 

to include a number of additional 

locations.

DATES: Effective date: December 17, 

2004.

FOR FURTHER INFORMATION CONTACT:

Allan Hearne, (202) 606–2838; FAX: 

(202) 606–4264; e-mail: payperformance-policy@opm.gov.

SUPPLEMENTARY INFORMATION: Section 

5304 of title 5, United States Code, 

authorizes locality pay for General 

Schedule (GS) employees with duty 

stations in the contiguous United States 

and the District of Columbia. By law, 

locality pay is set by comparing GS pay 

rates with non-Federal pay rates for the 

same levels of work in each locality pay 

area. Non-Federal pay levels are 

estimated by means of salary surveys 

conducted by the Bureau of Labor 

Statistics (BLS). Currently, there are 32 

locality pay areas: 31 separate 

metropolitan locality pay areas and a 

Rest of U.S. (RUS) locality pay area that 

consists of all locations in the 

contiguous United States that are not 

part of one of the 31 separate 

metropolitan locality pay areas. 

Section 5304(f) of title 5, United 

States Code, authorizes the President’s 

Pay Agent (the Secretary of Labor, the 

Director of the Office of Management 

and Budget (OMB), and the Director of 

the Office of Personnel Management 

(OPM)) to determine locality pay areas. 

The boundaries of locality pay areas 

must be based on appropriate factors, 

which may include local labor market 

patterns, commuting patterns, and the 

practices of other employers. The Pay 

Agent must give thorough consideration 

to the views and recommendations of 

the Federal Salary Council, a body 

composed of experts in the fields of 

labor relations and pay policy and 

representatives of Federal employee 

organizations. The President appoints 

the members of the Federal Salary 

Council, which submits annual 

recommendations to the President’s Pay 

Agent about the locality pay program. 

On October 28, 2003, the Council 

recommended that the Pay Agent adopt 

new metropolitan statistical areas 

established by OMB as the basis for 

defining locality pay areas and new 

criteria for evaluating adjacent areas for 

inclusion in the locality pay area. The 

planned changes in locality pay area 

boundaries based on the Council’s 

recommendations were published in the 

Federal Register on September 22, 2004, 

and the Pay Agent reviewed comments 

received through November 8, 2004, the 

end of the comment period. 

Based on the Council’s 

recommendations, the Pay Agent is 

issuing final regulations that use 

county-based Metropolitan Statistical 

Area (MSA) and Combined Statistical 

Area (CSA) definitions established by 

OMB as the basis for defining GS 

locality pay areas. MSA and CSA 

definitions can be found at http://

www.whitehouse.gov/omb/bulletins/

fy04/b04–03.html.

The Council also recommended and 

the Pay Agent is adopting new criteria 

for evaluating adjacent areas for 

inclusion in a locality pay area. The 

criteria are: 

1. For adjacent MSAs and CSAs: To 

be included in an adjacent locality pay 

area, an adjacent MSA or CSA currently 

in the RUS locality pay area must have 

at least 1,500 GS employees and an 

employment interchange measure of at 

least 7.5 percent. 

2. For adjacent counties that are not 

part of a multi-county MSA or CSA: To 

be included in an adjacent locality pay 

area, an adjacent county that is 

currently in the RUS locality pay area 

must have at least 400 GS employees 

and an employment interchange 

measure of at least 7.5 percent. 

3. For Federal facilities that cross 

locality pay area boundaries: To be 

included in an adjacent locality pay 

area, that portion of a Federal facility 

outside of a higher-paying locality pay 

area must have at least 750 GS 

employees, the duty stations of the 

majority of those employees must be 

within 10 miles of the separate locality 

pay area, and a significant number of 

those employees must commute to work 

from the higher-paying locality pay area. 

The Council also recommended and 

the Pay Agent is adopting the rule that 

any county (or partial county in the case 

of portions of York County, ME) 

currently included in a metropolitan 

locality pay area will be retained in the 

locality pay area if the county or partial 

county has an employment interchange 

measure of 15 percent or more with the 

area covered by the new MSA or CSA 

definition. ‘‘Employment interchange 

measure’’ is defined by OMB as ‘‘the 

sum of the percentage of employed 

residents of the smaller entity who work 

in the larger entity and the percentage 

of the employment in the smaller entity 

that is accounted for by workers who 

reside in the larger entity.’’

Noting the disparity between Federal 

and non-Federal pay levels in the 

Kansas City, St. Louis, and Orlando 

locality pay areas as compared to the 

disparity in the RUS locality pay area, 

the Council recommended that the Pay 

Agent discontinue these three locality 

pay areas. The Pay Agent tentatively 

agreed to this change in its 2003 report 

to the President. Upon further review, 

however, the Pay Agent determined that 

it would be advisable to continue to 

monitor the disparity between Federal 

and non-Federal pay levels in the 

Kansas City, St. Louis, and Orlando 

areas before determining whether those 

areas should be discontinued. The Pay 

Agent asked the Federal Salary Council 

to review this matter. In its 

recommendation letter of October 21, 

2004, the Council concluded that these 

three areas should be discontinued in 

75452 Federal Register / Vol. 69, No. 242 / Friday, December 17, 2004 / Rules and Regulations 

2006. OPM currently intends to publish 

a proposed rule on behalf of the Pay 

Agent next year to implement this 

recommendation of the Federal Salary 

Council. 

Impact and Implementation 

Overall, the changes in locality pay 

area boundaries move about 17,000 GS 

employees to metropolitan locality pay 

areas from the RUS locality pay area and 

retain about 16,000 GS employees in 

metropolitan locality pay areas that 

would have been excluded if only the 

new MSA definitions were used. 

Comments on the Proposed Rule 

OPM received 113 comments on the 

proposed regulations, including 

comments from Members of Congress 

from Massachusetts and Virginia and 

comments from three Federal agencies. 

The commenters generally supported 

the planned changes in locality pay 

areas. 

Many of the commenters cited high 

living costs as the justification for 

higher locality pay. However, living 

costs are not directly considered in 

setting locality pay or defining locality 

pay areas. Locality pay is set by 

comparing General Schedule and nonFederal pay for the same levels of work 

to allow the Government to recruit and 

retain an adequate workforce. Locality 

pay is not designed to equalize living 

standards for GS employees across the 

country. Since living costs are just one 

of many factors that affect the supply of 

and demand for labor, they are not 

considered separately. 

Some commenters suggested that 

other locations also should be added to 

a higher paying locality pay area. These 

locations include Beale Air Force Base 

in Yuba County, CA; Berks County, PA; 

Clinton County, OH; Cumberland 

County, ME; El Paso County, CO; 

Jefferson County, WA; Lancaster, PA; 

Mendocino County, CA; and Portland, 

ME. We have not adopted these 

suggestions because these locations do 

not meet the criteria established for 

being added to an adjacent locality pay 

area and because BLS is unable to 

conduct full-scale salary surveys in any 

of these locations. 

The Pay Agent notes that employees 

in Mendocino County, CA, used census 

data to measure Federal employment. 

The Federal Salary Council’s criterion 

for inclusion in a locality pay area is 

based on the number of GS employees 

in an area. Census data include other 

Federal employees, such as uniformed 

military, blue-collar employees, and 

U.S. Postal Service employees. 

One commenter suggested that GS 

employment should not be used as a 

criterion for evaluating areas or that 

provisions should be allowed for 

exceptions if a strong rationale exists. 

The Pay Agent agrees with the Federal 

Salary Council that the number of GS 

employees in the area under 

consideration is an important factor in 

assessing areas and defers to the 

Council’s judgment on the matter. The 

Pay Agent also concludes that 

exceptions to established rules should 

be avoided. 

Several commenters suggested that 

the boundaries of GS locality pay areas 

should coincide with the boundaries of 

certain Federal Wage System (FWS) 

local wage areas. There are 32 GS 

locality pay areas and more than 130 

FWS areas. Salary surveys for the GS 

program are conducted by the Bureau of 

Labor Statistics, are expensive to 

conduct, and therefore cover fewer 

areas. Those for the FWS program are 

conducted by the Department of 

Defense, cover jobs that are more readily 

matched to non-Federal jobs, and 

include more areas. The Pay Agent 

concludes that there is no basis for 

requiring that the boundaries of the GS 

locality pay areas coincide with the 

boundaries of the FWS local wage areas. 

One commenter expressed concern 

that delays in the Pay Agent’s plans to 

merge the Kansas City, St. Louis, and 

Orlando locality pay areas with the Rest 

of U.S. locality pay area might delay 

plans to expand the existing small-scale 

salary survey of Austin, TX. The 1-year 

delay in discontinuing these three 

locality pay areas has not affected BLS’

plans to expand its salary surveys. 

One Federal agency sub-element 

commented that it is not experiencing 

recruitment and retention problems in 

Huntsville and that the Huntsville area 

should not be expanded. The same 

agency wished to retain the St. Louis 

locality pay area and expand the 

Chicago and Indianapolis areas in order 

to assist its recruitment efforts. While 

recruitment and retention issues are 

certainly important to the Government 

as an employer, they are not the basis 

for establishing or defining locality pay 

areas. The Pay Agent concludes that one 

agency sub-element’s experience in a 

few areas should not affect the general 

methodology used to define the locality 

pay areas for all Federal agencies.

One agency commented that 

expanding locality pay area boundaries 

could result in changes in special rates 

entitlements. OPM will address that 

issue in guidance we plan to issue later 

this year regarding the January 2005 pay 

adjustment. 

At its public meeting on September 

27, 2004, and in its written 

recommendations of October 21, 2004, 

the Federal Salary Council noted that 

the York-Hanover-Gettysburg, PA CSA 

now meets the MSA/CSA criteria to be 

included in the Washington-Baltimore 

locality pay area. The Council 

recommended that the Pay Agent add 

the York area to the WashingtonBaltimore locality pay area as part of 

this regulatory review. We also received 

written comments, including comments 

from the Department of Defense (the 

largest Federal agency in the area), 

supporting this recommendation. The 

final rule incorporates the YorkHanover-Gettysburg, PA CSA into the 

Washington-Baltimore locality pay area. 

Waiver of Delay in Effective Date 

In order to give practical effect to 

these regulations at the earliest possible 

moment, I find that good cause exists for 

making this rule effective immediately 

upon publication in the Federal 

Register. The delay in effective date is 

waived so that affected agencies and 

employees may benefit from the new 

locality pay area definitions on the 

effective date of the January 2005 GS 

pay adjustment. 

E.O. 12866, Regulatory Review 

The Office of Management and Budget 

has reviewed this rule in accordance 

with E.O. 12866. 

Regulatory Flexibility Act 

I certify that these regulations will not 

have a significant economic impact on 

a substantial number of small entities 

because they will apply only to Federal 

agencies and employees.

List of Subjects in 5 CFR Part 531 

Government employees, Law 

enforcement officers, Wages.

Office of Personnel Management. 

Kay Coles James, 

Director.

■ Accordingly, OPM is amending 5 CFR 

part 531 as follows:

PART 531—PAY UNDER THE 

GENERAL SCHEDULE

■ 1. The authority citation for part 531 

continues to read as follows:

Authority: 5 U.S.C. 5115, 5307, and 5338; 

sec. 4 of Pub. L. 103–89, 107 Stat. 981; and 

E.O. 12748, 56 FR 4521, 3 CFR, 1991 Comp., 

p. 316; Subpart B also issued under 5 U.S.C. 

5303(g), 5333, 5334(a), and 7701(b)(2); 

Subpart C also issued under 5 U.S.C. 5304, 

5305, and 5553; sections 302 and 404 of 

Federal Employees Pay Comparability Act of 

1990 (FEPCA), Pub. L. 101–509, 104 Stat. 

1462 and 1466; and section 3(7) of Pub. L. 

102–378, 106 Stat. 1356; Subpart D also 

issued under 5 U.S.C. 5335(g) and 7701(b)(2); 

Subpart E also issued under 5 U.S.C. 5336; 

Federal Register / Vol. 69, No. 242 / Friday, December 17, 2004 / Rules and Regulations 75453

Subpart F also issued under 5 U.S.C. 5304, 

5305(g)(1), and 5553; and E.O. 12883, 58 FR 

63281, 3 CFR, 1993 Comp., p. 682 and E.O. 

1306, 63 FR 68151, 3 CFR, 1998 Comp., p. 

224; Subpart G also issued under 5 U.S.C. 

5304, 5305, and 5553; section 302 of the 

FEPCA, Pub. L. 101–509, 104 Stat. 1462; and 

E.O. 12786, 56 FR 67453, 3 CFR, 1991 Comp., 

p. 376.

Subpart F—Locality-Based 

Comparability Payments

■ 2. In § 531.602, the definition of CMSA

is removed, a definition of CSA is added 

in alphabetical order, and the definition 

of MSA is revised to read as follows:

§ 531.602 Definitions.

* * * * *

CSA means the geographic scope of a 

Combined Statistical Area, as defined by 

the Office of Management and Budget 

(OMB) in OMB Bulletin No. 04–03, plus 

any areas subsequently added to the 

CSA by OMB.

* * * * *

MSA means the geographic scope of a 

Metropolitan Statistical Area, as defined 

by the Office of Management and 

Budget (OMB) in OMB Bulletin No. 04–

03, plus any areas subsequently added 

to the MSA by OMB.

* * * * *

■ 3. In § 531.603, paragraph (b) is revised 

to read as follows:

§ 531.603 Locality pay areas.

* * * * *

(b) The following are locality pay 

areas for purposes of this subpart: 

(1) Atlanta-Sandy Springs-Gainesville, 

GA–AL—consisting of the AtlantaSandy Springs-Gainesville, GA–AL 

CSA; 

(2) Boston-Worcester-Manchester, 

MA–NH–ME–RI—consisting of the 

Boston-Worcester-Manchester, MA–NH 

CSA, plus the Providence-New BedfordFall River, RI–MA MSA, Barnstable 

County, MA, and Berwick, Eliot, Kittery, 

South Berwick, and York towns in York 

County, ME; 

(3) Chicago-Naperville-Michigan City, 

IL–IN–WI—consisting of the ChicagoNaperville-Michigan City, IL–IN–WI 

CSA; 

(4) Cincinnati-MiddletownWilmington, OH–KY–IN—consisting of 

the Cincinnati-Middletown-Wilmington, 

OH–KY–IN CSA; 

(5) Cleveland-Akron-Elyria, OH—

consisting of the Cleveland-AkronElyria, OH CSA; 

(6) Columbus-Marion-Chillicothe, 

OH—consisting of the ColumbusMarion-Chillicothe, OH CSA; 

(7) Dallas-Fort Worth, TX—consisting 

of the Dallas-Fort Worth, TX CSA; 

(8) Dayton-Springfield-Greenville, 

OH—consisting of the DaytonSpringfield-Greenville, OH CSA; 

(9) Denver-Aurora-Boulder, CO—

consisting of the Denver-AuroraBoulder, CO CSA, plus the Ft. CollinsLoveland, CO MSA and Weld County, 

CO; 

(10) Detroit-Warren-Flint, MI—

consisting of the Detroit-Warren-Flint, 

MI CSA, plus Lenawee County, MI; 

(11) Hartford-West HartfordWillimantic, CT–MA—consisting of the 

Hartford-West Hartford-Willimantic, CT 

CSA, plus the Springfield, MA MSA and 

New London County, CT; 

(12) Houston-Baytown-Huntsville, 

TX—consisting of the HoustonBaytown-Huntsville, TX CSA; 

(13) Huntsville-Decatur, AL—

consisting of the Huntsville-Decatur, AL 

CSA; 

(14) Indianapolis-AndersonColumbus, IN—consisting of the 

Indianapolis-Anderson-Columbus, IN 

CSA, plus Grant County, IN;

(15) Kansas City-Overland ParkKansas City, MO–KS—consisting of the 

Kansas City-Overland Park-Kansas City, 

MO–KS CSA; 

(16) Los Angeles-Long BeachRiverside, CA—consisting of the Los 

Angeles-Long Beach-Riverside, CA CSA, 

plus the Santa Barbara-Santa MariaGoleta, CA MSA and all of Edwards Air 

Force Base, CA; 

(17) Miami-Fort Lauderdale-Miami 

Beach, FL—consisting of the Miami-Fort 

Lauderdale-Miami Beach, FL MSA, plus 

Monroe County, FL; 

(18) Milwaukee-Racine-Waukesha, 

WI—consisting of the MilwaukeeRacine-Waukesha, WI CSA; 

(19) Minneapolis-St. Paul-St. Cloud, 

MN–WI—consisting of the MinneapolisSt. Paul-St. Cloud, MN–WI CSA; 

(20) New York-Newark-Bridgeport, 

NY–NJ–CT–PA—consisting of the New 

York-Newark-Bridgeport, NY–NJ–CT–

PA CSA, plus Monroe County, PA, and 

Warren County, NJ; 

(21) Orlando-The Villages, FL—

consisting of the Orlando-The Villages, 

FL CSA; 

(22) Philadelphia-Camden-Vineland, 

PA–NJ–DE–MD—consisting of the 

Philadelphia-Camden-Vineland, PA–

NJ–DE–MD CSA, plus Kent County, DE, 

Atlantic County, NJ, and Cape May 

County, NJ; 

(23) Pittsburgh-New Castle, PA—

consisting of the Pittsburgh-New Castle, 

PA CSA; 

(24) Portland-Vancouver-Beaverton, 

OR–WA—consisting of the PortlandVancouver-Beaverton, OR–WA MSA, 

plus Marion County, OR, and Polk 

County, OR; 

(25) Richmond, VA—consisting of the 

Richmond, VA MSA; 

(26) Sacramento—Arden-Arcade—

Truckee, CA–NV—consisting of the 

Sacramento—Arden-Arcade—Truckee, 

CA–NV CSA, plus Carson City, NV; 

(27) St. Louis-St. Charles-Farmington, 

MO–IL—consisting of the St. Louis-St. 

Charles-Farmington, MO–IL CSA; 

(28) San Diego-Carlsbad-San Marcos, 

CA—consisting of the San DiegoCarlsbad-San Marcos, CA MSA; 

(29) San Jose-San Francisco-Oakland, 

CA—consisting of the San Jose-San 

Francisco-Oakland, CA CSA, plus the 

Salinas, CA MSA and San Joaquin 

County, CA; 

(30) Seattle-Tacoma-Olympia, WA—

consisting of the Seattle-TacomaOlympia, WA CSA; 

(31) Washington-Baltimore-Northern 

Virginia, DC–MD–PA–VA–WV—

consisting of the Washington-BaltimoreNorthern Virginia, DC–MD–VA–WV 

CSA, plus the Hagerstown-Martinsburg, 

MD–WV MSA, the York-HanoverGettysburg, PA CSA, Culpeper County, 

VA, and King George County, VA; and 

(32) Rest of U.S.—consisting of those 

portions of the continental United States 

not located within another locality pay 

area.

■ 4. In § 531.606, paragraph (g) is revised 

to read as follows:

§ 531.606 Administration of locality rates 

of pay.

* * * * *

(g) In the event of a change in the 

geographic coverage of a locality pay 

area as a result of the addition by OMB 

of a new area(s) to the definition of an 

MSA or CSA or as the result of any 

change made by the President’s Pay 

Agent in the definition of a locality pay 

area, the effective date of any change in 

an employee’s entitlement to a locality 

rate of pay under this subpart is the first 

day of the first pay period beginning on 

or after January 1 of the next calendar 

year. Any area removed by OMB from 

coverage within an MSA or CSA that 

serves as the basis for defining a locality 

pay area must be reviewed by the 

Federal Salary Council and the 

President’s Pay Agent before a decision 

is made regarding the locality pay status 

of that area.

* * * * *

[FR Doc. 04–27660 Filed 12–16–04; 8:45 am] 

BILLING CODE 6325–39–P