- The Washington Times - Monday, October 20, 2003

As federal agencies move toward pay-for-performance systems — where across-the-board raises cease to be automatic — locality pay, raises given to federal employees living in 32 metropolitan areas to ensure pay parity with their private-sector counterparts, will become a paycheck protector.

The Department of Defense wants to abandon the traditional regular federal pay raises and automatic “time-served” within-grade increases (worth 3 percent) that now go to nearly half the work force each year. Parts of Defense (labs and acquisition activities with 120,000 civilians) are or will be going to pay for performance.

The Internal Revenue Service, the Federal Aviation Administration and other agencies are doing their own versions of systems in which supervisors determine the lion’s share of all raises.

Under the Defense plan — now tied up in Congress — civilian raises would be based on a 100-point rating system. Workers would be guaranteed only the amount of the annual locality raise (typically 1 percent of the total raise). To get more they would have to score between 51 and 100. Bottom line is some — perhaps many — might get only the annual locality raise.

Given the choice, feds in the 32 major government job centers nationwide would rather have a large locality-pay adjustment than a comparable across-the-board pay raise.

Why? The answer is: Money, in hand and for life.

Example: A federal worker retiring from a high-grade job in San Francisco or New York will have a much larger lifetime annuity than his twin — in the same grade with the same amount of service time — who spent his or career working on the East Coast, in the Washington or Baltimore area.

The difference in pay — thanks to locality pay — is an $8,000 per year pay advantage for the San Francisco-based fed and a considerably larger lifetime annuity that is indexed to inflation. Feds in Los Angeles, Houston, Chicago and other cities earn more than D.C.-based civil servants.

Once retired, the federal workers all get the same cost-of-living adjustments wherever they live. But retirees from a higher locality-pay system will start off with an annuity (which could range from 55 percent to 80 percent of final salary) that will keep him or her ahead for life.

Many private firms base pensions on the employee’s highest salary. Since most pension plans are funded solely by the company, benefits are less than in government where employees contribute to their retirement fund. Most private firms do not give regular (if any) inflation adjustment to retirees. Government retirees get a cost-of-living adjustment each year. This coming January it will be worth 2.1 percent.

The locality-pay system and differentials is the only portion of the 1990 federal pay law that has survived efforts of the Clinton, and now Bush, administrations to make it more “realistic.” Both think the pay “gap” between the federal government and the private sector — the reason the 1990 law was enacted — is a myth.

Both administrations said the pay comparisons conducted by the Labor Department should take into account the value of fringes like retirement, extra holidays, vacation time and regular longevity within-grade (WIGs) raises — in addition to regular annual pay raises.

Defense hopes to lead the way into the brave new pay world by setting up a system that eliminates the annual across-the-board federal pay raise and WIGs. If Congress OKs the system, then Defense civilians would get raises each year that would reflect their performance as measured by supervisors.

Under the plan, officials say, some workers could get only the locality raise while others could get up to 10 percent. The money would come from regular pay-raise funds plus money for bonuses.

Backers say the Defense plan reflects the real world and would encourage poor performers to shape up or ship out. Opponents say the changeover would institutionalize the buddy system.

Whatever Congress does about the Defense Department’s proposed “transformation” plan, the locality-pay raises will apparently continue and be an even more important factor for the average fed.

Mike Causey, senior editor at FederalNewsRadio.com, can be reached at 202/895-5132 or [email protected]federalnewsradio.com.

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