- The Washington Times - Monday, June 13, 2005

More than half of the federal work force will be under a very different civil service system by 2009.

The departments of Defense and Homeland Security — two of the biggest federal operations — hope to have some people getting raises based on performance, not on longevity, by January 2007.

If that happens, then this January’s pay raise, which will range between 2.3 percent and 3.1 percent, will be the last across-the-board increase that most feds will get. Money that would have been used to give them automatic 3 percent time-in-grade raises will be put into a special merit pay pool. Raises will be based on the performance ratings that workers get from supervisors.

Until now, most members of the public and federal officials have assumed that opposition to pay-for-performance comes from powerful federal unions such as the American Federation of Government Employees and the National Treasury Employees Union, or from timid bureaucrats afraid of change.

But it appears that some of the top bosses, the captains of agencies who will be running the new merit-pay systems, are doing some sweating of their own. They are members of the elite Senior Executive Service (SES).

The Senior Executives Association (SEA), which represents most of the top career employees, says there are a ton of problems with the SES pay-for-performance plan. For one thing, SEA says, many executives don’t understand it. Other executives — like rank-and-file workers — are concerned with pay banding, in which several grades or levels are bundled together.

Federal agencies are revamping their executive salary structure. Those with certified plans can pay up to $162,100, and those without certification from the Office of Personnel Management still can pay up to $149,200.

Many rank-and-file feds fear that leaving a system in which raises are based on job ratings will lead to a return to the spoils system, under which raises were given to bosses’ pet employees, buddies, romantic interests or political cronies. That is something the executives fear as well.

Most interesting to the troops is that the generals also are worried about quotas.

The SEA says it has seen “some evidence of an inclination … to try to meet a perceived bias toward some sort of normal distributions and to avoid very many high ratings,” which would result in larger raises.

In other words, in an operation where 90 percent of the executives are rated as “excellent,” even if they are, some would have to get smaller raises because it would look bad if that many people get the equivalent of an “A.”

R Fund

OK, so your house in McLean, Potomac or Glover Park has doubled in value in the past few years. That’s great.

But until it’s sold, you haven’t made anything that you can transfer from paper to the bank account.

Commercial real estate also is booming in the Washington area and other places, so this is the time to invest in real estate, right? The correct answer is twofold:

Either yes, or no. Check this space for the correct answer. In the year 2010.

Even Federal Reserve Chairman Alan Greenspan talks about “bubbles” when he mentions real estate as an investment. But many federal/postal/military investors would love to park some of their tax-deferred planning-for-retirement money into real estate investment trusts, or REITs.

Rep. Thomas M. Davis III, Virginia Republican, has proposed allowing a real estate investment option, the R Fund, into the federal Thrift Savings Plan. It would join three stock-market indexed funds (the C, S and I funds), as well as the bond-indexed F Fund and the Treasury securities G Fund.

Critics warn that the R Fund would be too narrow an investment option for a retirement-building fund. Next, they say, would come demands for a gold fund, or a fund based on high-tech stocks.

Opposition notwithstanding, there is a better than even chance that Congress will approve an R Fund option for feds.

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

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