- The Washington Times - Monday, December 20, 2004

If President Bush attempts to impose a federal pay freeze — as some budget-watchers predict — it could backfire and wind up costing the taxpayers more money in the not-so-long run.

First, it’s doubtful that Congress would go along with a federal pay freeze. President Clinton tried it once. That year, government workers wound up with pay raises ranging from 3 percent to nearly 6 percent.

Second, the effort to freeze federal pay would be a yearlong battle. The issue probably wouldn’t be settled until the last appropriations bill was passed. During that time, agencies that wanted to keep good workers — or just be nice — could give them raises via promotions.

In the end, the White House probably would lose the pay fight — as it has every year since 1993 — and be faced with a hostile work force.

Although most federal workers outside the U.S. Postal Service don’t belong to unions, their heavy concentration in many states, from Maryland and Virginia to New York, Illinois, California and Alaska, gives them lots of political clout. Friends of feds include Sen. Ted Stevens, Alaska Republican and chairman of the Appropriations Committee; Sen. John W. Warner, Virginia Republican, who heads the Armed Services Committee; and Rep. Thomas M. Davis III, Virginia Republican and chairman of the House Government Reform Committee. Rep. Steny H. Hoyer of Maryland — who has made a career outfoxing presidents on the pay issue — would rally Democrats, as would Sen. Joe Lieberman of Connecticut.

So although there may be a serious attempt to freeze federal pay, the track record is that it’s an idea not ready for political prime time.

Pay raise

New city-by-city federal pay scales for 2005, reflecting the average 3.5 percent pay raise coming in January, won’t be published until officials know how much of the upcoming raise will be allocated to locality pay. If the president follows past practice, he will designate 1 percent of the 3.5 percent raise for locality increases. That would result in a slightly higher raise in many cities, including Washington and Baltimore.

Investing

Here’s another good reason to take part in the federal Thrift Savings Plan. The federal TSP’s administrative fees are about 50 percent less than those charged to civilians in similar mutual fund accounts. That means more money is invested, providing a greater opportunity for positive returns.

In fact, the federal TSP — with its super-safe Treasury securities fund — is so good that one government worker last year transferred $1 million from his previous employer’s 401(k) plan into the TSP. That’s an act of faith.

By the way, the open season for joining the TSP or for increasing tax-deferred deductions by $1,000 or more next year ends Dec. 31.

Windfall/offset

Congress failed to act on proposals to modify or eliminate the so-called “windfall” formula that can trim the monthly Social Security benefit of civil service retirees (and many schoolteachers) by as much as $300 per month. It also didn’t vote on a plan to eliminate the “offset” formula that can totally wipe out the Social Security spousal or survivor benefit anticipated by retired feds.

But a record number of House and Senate members this year did promise to support elimination of the formulas that can eat into, or eat up, the Social Security benefits of thousands of retired feds — if they ever come up for a vote. Opponents of the formulas already have started rounding up support for next year.

Mike Causey, senior editor at FederalNewsRadio.com, can be reached at 202/895-5132 or mcausey@federalnewsradio.com.

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