Pay and Benefits Watch: Raising the executive pay roof

A general rule of pay rates is that a subordinate should not make more money than the boss. The federal government tends to follow that rule, and has cascading caps in place to prevent employees from pocketing more pay than their superiors.

Last year as part of the fiscal 2000 Treasury-General Government appropriations bill, Congress approved an increase in the President's salary from $200,000 to $400,000. The raise will take effect when the next President assumes office.

The pending presidential increase will leave a lot more wiggle room, given the general rule above, to raise the pay of all the President's men and women. With the presidential increase, the sound economy and a budget surplus, the Senior Executives Association senses an opportunity to increase the cap on pay for members of the Senior Executive Service.

SESers are paid on a six-tiered basic salary scale, plus locality pay. Meanwhile, members of Congress, Cabinet officials and other political appointees are paid on a five-tiered scale called the Executive Schedule.

By law, the base salaries of SESers cannot exceed Level IV of the Executive Schedule, which this year is $122,400. SESers' base salary plus locality pay cannot exceed Level III, which this year is $130,200.

During the 1990s, the SES pay scale became compressed, because the President gave SESers raises but Congress blocked politically unpopular raises in the Executive Schedule (which includes congressional pay). By this year, the pay rates for the top three tiers of the SES basic pay scale have reached $122,400. With locality pay, the top three tiers of SESers around the country are all being paid the same rate. In San Francisco, Los Angeles, Houston and New York, the top four tiers of SESers are all paid the same rate.

The Senior Executives Association's plan to alleviate the compression is to increase the basic pay cap from Level IV to Level II, which this year is $141,300. Rep. Tom Davis, R-Va., has introduced a bill (H.R. 3147) that would do just that. The bill has five co-sponsors. But according to the association's general counsel, G. Jerry Shaw, the Clinton administration has been cool to the idea, because it could leave some career SESers making more money than their political appointee bosses.

Shaw said administration officials were willing to consider an increase in the cap on basic pay from Level IV to Level III and a bump in the cap on basic plus locality pay from Level III to Level III plus locality pay.

Retirees and Health

Federal retirees hope a friendly member of Congress will introduce legislation currently being drafted by the National Association for Retired Federal Employees to allow retirees to make their health insurance premiums part of their pre-tax income. The Clinton administration is extending that benefit to federal employees this year. Making premiums part of pre-tax income increases employees' take-home pay and helps offset the rising costs of health insurance, the administration says.

The administration can give the benefit to current employees without a change in legislation because Section 125 of the tax code allows employers to do so. But extending the benefit to retirees would require a change in tax law. No retirees, in the public or private sectors, can currently claim health insurance premiums as pre-tax income.

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