GovernmentExecutive.com

The Office of Personnel Management late last week announced that federal executives will be eligible to receive a maximum cost-of-living increase of 1.9 percent in 2006.

This means that Senior Executive Service members in agencies with OPM pay-for-performance certification can make up to $165,200 a year. The 2005 cap was $162,100.

Employees in agencies without certification will have an earning potential of $152,000, up from $149,200.

The 1.9 percent increase is similar to a cost-of-living increase, but is not officially designated as such. It does not amount to an automatic across-the-board raise for the SES because agencies decide on their own how, or if, to distribute it.

Employees must meet performance expectations to receive the adjustment. The SES started its move to a pay-for-performance system in 2004. Agencies are required to obtain OPM certification before implementing the new system, which qualifies their top-performing SES employees for higher salaries.

The possible 1.9 percent raise is separate from performance-based raises that move executives ahead in their payband.

The SES cost-of-living increase is smaller than the anticipated 2006 General Schedule raise of 3.1 percent. President Bush still needs to issue an executive order implementing that pay hike, which Congress approved in November and the president signed into law Dec. 1.

Carol Bonosaro, president of the Senior Executives Association, which advocates for career federal executives, said disparity between the two systems is becoming a problem.

"The concern is that, given the fact that the General Schedule increase inevitably is greater than the Executive Schedule increase and the fact that any raise related to inflation is really totally discretionary with agencies [for the SES], there is a growing concern about the reluctance of the GS-15's to enter the SES," Bonosaro said. "They feel as though they lose ground."

The 1.9 percent increase is not decided by the same political process as the GS pay hike. Instead, it is calculated from a formula linked to the annual Employment Cost Index computed by the Labor Department.

Congress does have the ability to deny that increase, however. The last time it froze the SES pay cap was in 1999. It also froze executive pay in 1994, 1995, 1996 and 1997.

Bonosaro said some agencies last year chose to base the amount of this increase on performance, so that an "outstanding" would receive 1.9 percent, "exceeds fully successful" would receive 1.5 percent and "fully successful" would receive 1 percent.