Federal pay freeze explained

Wednesday - 12/22/2010, 5:10pm EST

Jackie Simon, Public Policy Director, American Federation of Government Employees

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With the signing into law of the continuing resolution through March 4, the White House accomplished its goal of freezing federal employee pay for two years, through Dec. 31, 2012. (Scroll down for the full text in the CR.)

But even with the proposal becoming law, there still are a lot of unknowns that the law doesn't answer. The Office of Personnel Management is expected to issue guidance in the coming weeks to help explain how agencies should implement the freeze.

The law, however, does provide some insight into what Congress' intentions are.

Federal News Radio's Jason Miller asked Jackie Simon, the public policy director for the American Federation of Government Employees, to shed some light on what the provisions in the law mean to federal employees, and try to answer some of the most pressing questions.

WFED: The continuing resolution passed and was signed into law Tuesday. It includes a pay freeze for federal employees for two years. Talk about AFGE's reaction to the freeze.

JS: My reaction is that it was entirely gratuitous by President Obama and Congress. It will have no impact on the deficit if reducing the deficit were an important economic priority right now. In fact, the people at the Center on Economy Policy Research have done some calculations using OMB's own macroeconomic model and they think it will cost the economy about 18,000 jobs because of fewer dollars circulating in the economy in the form of out of federal pay checks. It's a really bad policy and it will certainly impoverish federal employees and their families.

WFED: Section b (1) that talks about "no statutory pay adjustment would otherwise take effect during the period beginning on January 1, 2011, and ending on December 31, 2012, shall be made." When they say statutory pay adjustment, can you define what that means?

JS: Generally speaking that means pay systems that are described in the law, and when I say described in the law not only their structure is described in the law but also the mechanism for adjusting the rates for people who are paid under that systems. That includes the General Schedule, sometimes called the white collar federal pay system, it includes the blue collar pay system, Federal Wage System and it includes the pay system for the Senior Executive Service.

WFED: There are some questions about what else could be included, such as the Federal Aviation Administration or other collective bargaining agreements. The language in the CR doesn't clarify some of those other questions?

JS: That's right. Any collectively bargained pay system or collectively bargained pay adjustment are outside the statutory framework and I don't see that addressed in the CR. I have a hard time believing that the government will be able to get away with unilaterally abrogating those contracts. For federal employees who are lucky enough to have collective bargaining rights over pay and pay rates, I think that their promised pay increases have been protected.

WFED: Another big question we get is the step increases and other performance bonuses for senior managers, there is nothing in this bill that says step increases would not be allowed. Do you read this as step increases would be allowed because they don't mention it?

JS: Yes, I believe step increases will be allowed to continue. Obviously agencies will have their funding severely restricted and all the anti-federal employee rhetoric to the contrary that says step increases are automatic; They are not automatic; they are performance based. And in some cases even though it's not acknowledged, they occur only when there's sufficient budget authority to pay it. I think people's eligibility for step increases, certainly quality step increases, solely based on performance will be negatively affected by this freeze because it's not just a pay freeze in the CR, it's also other budget restrictions that will constrain what agencies can do for their workforces.

(Editor's Note: The Office of Management and Budget confirms that feds will still be eligible for within-grade step increases.)

WFED: A lot of people forget that when Congress does approve a pay raise, it's not extra money they are approving. It has to come out of existing salaries and expenses or existing funding. That's a big issue people don't understand that the savings OMB says they will achieve, $5 billion over two years, is really cost avoidance than actual savings. Do you look at it the same way?

JS: For many years now, agencies have been required to absorb the cost of any kind of pay adjustments. But this year it's even more restrictive in terms of how much money agencies will have to spend on various categories of spending. It's clear that there is no intention to freeze step increases and eliminate all eligibility for bonuses, agencies will have less money, generally, to compensate their workforce. Meanwhile, of course, they will have plenty of money to do anything they want for their contractors.