President Bush changes locality pay formula

President Bush decided on Thursday to use a new formula to determine locality pay for federal employees in 2007, giving a greater portion to employees in cities such as New York and San Francisco.

The new formula takes into consideration the increasing pay gaps between the private and public sectors in some cities, such as New York, compared to others. But switching formulas means that many cities and the "Rest of U.S." category will get a slightly smaller locality boost.

The final locality number will depend on whether lawmakers allocate a 2.7 percent or a 2.2 percent total pay increase for civilians next year. Congress may not make its decision until well into 2007, forcing retroactive pay raises for federal employees.

The president's decision Thursday assumed a 2.2 percent raise.

Lawmakers approved a 2.7 percent raise in draft legislation for civilians, but passed a 2.2 percent raise for the military. Historically, lawmakers have brought the civilian raise in line with the military's and it is unlikely, especially during a time of war, that lawmakers would grant civilians more than soldiers.

Assuming the total pay raise is 2.2 percent, and the portion devoted to locality raises is 0.5 percent, employees in the New York region would get a 3.03 percent total pay raise under the new formula. New Yorkers would have received a 2.63 percent raise under the old formula. San Francisco area employees would be in line for a 3 percent raise, rather than 2.71 percent. Washington workers would receive a 2.64 percent raise, as opposed to 2.4 percent.

The "Rest of U.S." area is slated to get a 1.81 percent raise under the new formula, which is smaller than the 2.03 percent it would have received.

In October, the Federal Salary Council, an independent body of salary experts, employee representatives and federal officials that usually makes recommendations on the allocation of locality pay, chose to leave it up to the president.

Once Congress votes on the final pay raise amount, Bush will still have to sign an executive order with the 2007 pay raise.