Two percent pay raise included in 2004 budget proposal

As expected, the Bush administration Monday proposed a 2 percent across-the-board pay raise for federal employees in 2004.

Military employees will get an average 4.1 percent pay raise next year, under the Bush fiscal 2004 budget proposal, continuing the administration's trend of offering a larger pay raise to military personnel than to civil service employees. The 2 percent across-the-board pay raise spurns the 2.7 percent base pay raise set by the formula used to determine annual civil service pay raises. Before the pay raise measure was announced, several lawmakers moved to introduce legislation calling for military-civilian pay parity.

According to the administration, the current civil service system makes it difficult to attract and retain a more highly skilled workforce, and unfairly benefits mediocre employees because "pay and performance are generally unrelated."

"Exceptional employees find themselves locked in 'time-in-grade' pay prisons, as requirements dictate that performers stay at least one year at, say, a GS-12 level before moving, and then only as high as a GS-13," the administration said in the budget document. "Even worse, pay over the course of a federal career is heavily determined by the level at which a civil servant begins working."

The administration's budget proposal also calls for the creation of a $500 million fund, administered by the Office of Personnel Management, that agencies can draw from to raise the annual salaries of exceptional employees.

The proposed $500 million Human Capital Performance Fund would level the playing field and allow agencies to give performance-based raises in 2004. The raises would be permanent salary increases that also increase employees' pensions and their agencies' Thrift Savings Plan contributions. The measure would require legislative approval. Agencies would be required to submit plans to OPM that include details about how the money would be used to improve agency results, as well as reward high performers.

"Rewarding top employees and those with unusually important skills is preferable to the traditional method of evenly spreading raises across the federal workforce regardless of performance or contribution," administration officials said in the budget document.

Last year the Bush administration proposed a 2.6 percent pay raise for federal workers in fiscal 2003. Several lawmakers opposed that figure and eventually the House and a Senate panel approved a 4.1 percent pay raise, but Congress adjourned without passing the measure. In November, the administration announced it would give federal employees a 3.1 percent increase with no additional pay for workers based on labor costs in the areas where they work. House Minority Whip Steny Hoyer, D-Md., and several other lawmakers vowed to get a retroactive raise of 4.1 percent included in the fiscal 2003 omnibus appropriations bill still being ironed out in Congress.

Hoyer and National Treasury Employees Union President Colleen Kelley both expressed disappointment with the administration over the pay raise proposal, insisting that it would undercut morale.

The budget proposal also includes a plan to raise the salary cap of Senior Executive Service members and eliminate the six-step salary ladder system. Under federal law, salaries for the SES are capped at the third-highest pay level on the Executive Schedule, the five-level schedule on which salaries are set for members of Congress and executive branch political appointees. The Bush administration would raise the cap to the second-highest level of the schedule, which is $154,700 this year.