Bush backs 2 percent raise; seeks performance pay fund

The Bush administration plans to give federal employees a 2 percent across-the-board pay raise in 2004, and create a new $500 million fund agencies can use to raise the salaries of high performers, Office of Personnel Management officials announced.

The president's 2004 budget proposal, scheduled for release Feb. 3, includes a proposal for a 2 percent across-the-board civil service pay raise next year, less than the 2.7 percent across-the-board raise set under the formula that is supposed to be used to determine annual civilian pay increases.

The president also will propose a change in law to create a $500 million Human Capital Performance Fund, to be used by agencies for performance-based raises in 2004. These would be permanent salary increases that also increase employees' pensions and their agencies' Thrift Savings Plan contributions.

"We have an old, outdated, antiquated system that gives everybody the same amount of money every year," OPM Director Kay Coles James said Friday. "Instead of rewarding longevity, the government needs to reward performance. When we have federal employees talking about my pay increase rather than the pay increase, then I think we will have succeeded."

OPM would administer the performance fund and agencies would be required to submit plans to OPM detailing how they planned to use money from the fund to reward excellent performance and improve agency results. According to the Office of Management and Budget, agencies could use fund money to reward employees for performing extra duties, suggesting ideas that save the agency money or taking on managerial responsibilities.

The money could also be used for recruiting and retaining employees with specialized skills. Such employees would include engineers, nurses and pharmacists, OMB said.

The Bush administration has shown a penchant for performance-based pay measures, modeling its 2002 Freedom to Manage initiative around flexible pay systems and linking employee compensation more closely to job performance. Pay-for-performance measures have picked up momentum in the past few weeks. Newly appointed House Government Reform Committee Chairman Tom Davis, R-Va., has said performance pay is one of his top priorities. Critics of performance-based pay structures say the federal appraisal system used with them is flawed, and fear managers will be too subjective in the evaluation process.

OPM's James and Mark Everson, deputy director for management at OMB, said the performance fund would require a cultural shift at agencies that are unaccustomed to tying pay to performance. While agencies will be required to submit a plan to OPM on how they will award performance-based raises, James said agencies would be given a lot of leeway in how they do it.

"We think this is going to foster a lot of creativity," James said.

National Treasury Employees Union President Colleen Kelley said performance-based pay should not come at the expense of raises for all federal employees.

"Where is this $500 million coming from?" Kelley asked. "Would the pay raise have been 2.5 percent or 3 percent if they didn't create this fund? I asked this question and was told no, but I don't know how they ever will be able to show me that, and if this is coming at the expense of the General Schedule pay raise for 2004, I think that would be inappropriate."

Kelley said NTEU has proposed funds similar to the Human Capital Performance Fund in the past that focused on recruiting and retention.

"We've talked about the need to provide a fund like this and give money to the agencies for programs that are well-established, like student loan repayment programs and child care subsidies, none of which appear to be covered by this fund," Kelley said. "This reminded me that we're still waiting for the report on how much money was paid to political appointees for bonuses."

Officials at the American Federation of Government Employees, the largest federal employee union, said they would fight the proposed changes and any move by the administration to overhaul the civil service system.

"This will be a big slush fund for political appointees and managers who work for them, to reward one another. We don't think rank-and-file employees will see a dime of this money," said Jacqueline Simon, public policy director for AFGE. "It's just a continuation of what we've experienced as a war on federal employees, trying to privatize our jobs, trying to destroy the civil service system, trying to destroy the merit system that the civil service is based on, all with this sort of nice sounding rhetoric-pay-for-performance."

Rep. Steny Hoyer, D-Md., a long-time champion of federal employees, said the performance pay fund is fine if it's implemented in an environment where the salaries of federal employees are in line with those of private-sector workers.

"The proposal is made in lieu of doing what is fair to federal employees and what the law requires," Hoyer said. "It shortchanges all federal employees, and frankly it shortchanges those who are performing outstandingly by giving them an adjustment, but not giving them an adjustment on a salary that is comparable to those of their private sector counterparts," he added. "I don't mind the $500 million being added on to pay Michael Jordan-type federal employees to recognize their outstanding federal performance, but you need to pay the rest of the performers who are making your team work a fair wage."

The government already has a system for raising top performers' base pay. Managers can grant their employees quality step increases, which are bumps up the steps of the General Schedule ahead of the normal tenure-based step increases. Federal managers often complain that requirements to justify quality step increases makes them hard to give out. In 2000, managers awarded 61,551 quality step increases, with an average value of $811. The total cost of quality step increases that year was $49.9 million.

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
Close [ x ] More from GovExec

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Sponsored by Brocade

    Best of 2016 Federal Forum eBook

    Earlier this summer, Federal and tech industry leaders convened to talk security, machine learning, network modernization, DevOps, and much more at the 2016 Federal Forum. This eBook includes a useful summary highlighting the best content shared at the 2016 Federal Forum to help agencies modernize their network infrastructure.

  • Sponsored by CDW-G

    GBC Flash Poll Series: Merger & Acquisitions

    Download this GBC Flash Poll to learn more about federal perspectives on the impact of industry consolidation.

  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

  • Sponsored by Aquilent

    A DevOps Roadmap for the Federal Government

    This GBC Report discusses how DevOps is steadily gaining traction among some of government's leading IT developers and agencies.

  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.

  • Sponsored by CDW-G

    Joint Enterprise Licensing Agreements

    Read this eBook to learn how defense agencies can achieve savings and efficiencies with an Enterprise Software Agreement.

  • Sponsored by Cloudera

    Government Forum Content Library

    Get all the essential resources needed for effective technology strategies in the federal landscape.


When you download a report, your information may be shared with the underwriters of that document.