Under the 1990 Federal Employees Pay Comparability Act (FEPCA), the base federal pay increase for 2005 is calculated by subtracting 0.5 percent from the change in the Employment Cost Index from September 2002 to September 2003. That change was 3 percent. That means the base pay increase for 2005 would be 2.5 percent under the formula.
The 2005 pay raise information was included in the annual report released last week by the President's Pay Agent, a group made up of Office of Personnel Management Director Kay Coles James, Labor Secretary Elaine Chao and Office of Management and Budget Director Josh Bolten.
In addition to the base across-the-board increases, federal employees who live in 31 metropolitan areas around the country would also receive additional locality pay increases based on the cost of labor in each city.
The president and Congress, however, can -- and usually do -- reject the FEPCA formula and set raises at a different level than those prescribed in the law. For example, under the formula, federal employees would be due a 2.7 percent base pay raise in January 2004. However, in his fiscal 2004 budget issued in February, President Bush called for a 2 percent total average raise, divided between a 1.5 percent across-the-board increase and 0.5 percent in locality pay raises. The smaller increase was paired with a proposal to create a $500 million Human Capital Performance Fund, from which managers could withdraw money to raise the salaries of their best performers. The fund was created, but Congress only allotted $2.5 million for the fund.
Members of Congress pushed for a larger raise and included language granting civil service employees and blue collar workers a 4.1 percent average pay raise in the $820 billion fiscal 2004 omnibus spending bill passed by the House on Dec. 8. However, the Senate has delayed voting on the bill until late January and federal employees will only see a 2 percent increase until the bill receives approval from the Senate and is signed into law by the president.
Military raises are calculated by adding 0.5 percent to the ECI, so service members can expect a 3.5 percent raise in 2005 based on their pay formula.