	Introduction

In January 2004, federal white-collar employees received a 1.5% annual pay adjustment anda 0.5% locality-based comparability payment under Executive Order 13322, issued by PresidentGeorge Bush on December 30, 2003. (2) H.R. 2989 , the Departments ofTransportation and Treasury and IndependentAgencies Appropriations Bill, 2004, as passed by the House of Representatives and the Senate in thefirst session of the 108th Congress, provided a 4.1% pay adjustment to federal civilian employees. 2989 was incorporated in H.R.2673. President Bush signed H.R. The President issued Executive Order 13332 on March 3, 2004, to provide theadditional pay adjustment, which was allocated as an average 1.2% annual and 0.9% locality. Federal white-collar employees are to receive an annual pay adjustment and a locality-based comparability payment, effective in January of each year, under Section 529 of P.L. 101-509 , theFederal Employees Pay Comparability Act (FEPCA) of 1990. (4) Although the federal pay adjustmentsare sometimes referred to as cost-of-living adjustments, neither the annual adjustment nor the localitypayment is based on measures of the cost of living. FEPCA has never been implemented asoriginally enacted. The nationwideaverage net pay increase in January 2004, if the ECI and locality-based comparability payments hadbeen granted as specified by FEPCA, would have been 15.15%. The annual pay adjustment is based on the Employment Cost Index (ECI), which measures change in private sector wages and salaries. For the January 2004 localitypayments, a phase-in of NCS survey data was approved. By law, the disparitybetween non-federal and federal salaries is to be reduced to 5%. In order to meet the target for closing the pay gap, the council recommended locality pay raises ranging from 19.45% in the "Rest of the United States" (RUS) pay area to 47.64% in the SanFrancisco pay area. The payment recommended for the Washington, DC, pay area was 28.78%. (25) Because the new locality rate replaces the existing locality rate, the change in locality rates is derivedby comparing 2003 locality payments with those recommended for 2004. This comparison resultedin recommended increases in locality rates from 2003 to 2004 of 11.90% in the RUS pay area to25.23% in the San Francisco pay area, and 17.31% in the Washington, DC, pay area. The cost of the January 2004 locality-based comparability payments would be $8.830 billion if the full amount necessary to reduce the pay disparity of the target gap to 5% were provided inJanuary 2004 as required by FEPCA, according to the Pay Agent. The President issued an alternative plan to change the amount of the annual adjustment and locality-based comparability payments on August 27, 2003. 108-199 on January 23,2004. 108-199 . (77)
The Consolidated Appropriations Act provides an additional 2.1% pay adjustment to federal civilian employees. OPM issuedrevised salary tables for 2004 on its website the next day; these are available on the Internet at http://www.opm.gov . Themethodology has remained a concern because the Bureau of Labor Statistics surveys documentingnon-federal rates of pay were not approved for use in determining the 2000, 2001, 2002, and 2003locality payments. In P.L.
Federal white-collar employees are to receive an annual pay adjustment and a locality-based comparability payment, effective in January of each year, under Section 529 of P.L. 101-509 , theFederal Employees Pay Comparability Act (FEPCA) of 1990. In January 2004, they received a 1.5%annual pay adjustment and a 0.5% locality-based comparability payment under Executive Order13322, issued by President George W. Bush on December 30, 2003. P.L. 108-199 , enacted onJanuary 23, 2004, provides a 4.1% pay adjustment for 2004. Under the law, an additional 2.1% payadjustment, allocated as an average 1.2% annual and 0.9% locality, was provided to federal civilianemployees under Executive Order 13332, issued by the President on March 3, 2004. OPM publishedrevised salary tables for 2004 on its website the next day. Although the federal pay adjustments aresometimes referred to as cost-of-living adjustments, neither the annual adjustment nor the localitypayment is based on measures of the cost of living.
The annual pay adjustment is based on the Employment Cost Index (ECI), which measures change in private-sector wages and salaries. The index showed that the annual across-the-boardincrease would be 2.7% in January 2004. The size of the locality payment is determined by thePresident, and is based on a comparison of non-federal and General Schedule (GS) salaries in 32 payareas nationwide. By law, the disparity between non-federal and federal salaries was to be graduallyreduced to 5% over the years 1994 through 2002; FEPCA requires that amounts payable may not beless than the full amount necessary to reduce the pay disparity to 5% in January 2004. The FederalSalary Council and the Pay Agent recommended that the 2004 locality payments range from 19.45%in the "Rest of the United States" (RUS) pay area to 47.64% in the San Francisco pay area. Thepayment recommended for the Washington, DC, pay area was 28.78%. Because the new localityrate replaces the existing locality rate, the change in locality rates is derived by comparing 2003locality payments with those recommended for 2004. This comparison resulted in recommendedincreases in locality rates from 2003 to 2004 of 11.90% in the RUS pay area to 25.23% in the SanFrancisco pay area, and 17.31% in the Washington, DC, pay area. The nationwide average net payincrease, if the ECI and locality-based comparability payments were granted as stipulated in FEPCA,would have been 15.15%. President Bush proposed a 2.0% federal civilian pay adjustment in hisFY2004 budget. On August 27, 2003, he issued an alternative plan to provide the 2.0% adjustmentin January 2004. H.R. 2989 , the Departments of Transportation and Treasury andIndependent Agencies Appropriations Bill, 2004, as passed by the House of Representatives and theSenate, and as incorporated in H.R. 2673 , the Consolidated Appropriations Act forFY2004, provides a 4.1% pay adjustment for federal civilian employees. H.R. 2673 wasenacted as P.L. 108-199 .
FEPCA has never been implemented as originally enacted. Since 1995, locality payments have been much lower than FEPCA requires. Additionally, the Bureau of Labor Statistics surveysdocumenting non-federal rates of pay were not approved for use in determining the 2000, 2001,2002, and 2003 locality payments. A phase-in of BLS survey data was approved for 2004.