By the close of the 109 th Congress, the Administration, the American Foreign Service Association (AFSA), which is the recognized bargaining agent for the members of the Foreign Service, and the leadership of House Committee on International Relations (HIRC) and the Senate Committee on Foreign Relations (SFRC) agreed on provisions establishing a new Foreign Service compensation system. 6060 passed the House of Representatives without the new Foreign Service performance-based compensation provisions. Introduction

The 110 th Congress may choose to decide if and how to address an issue that both the Department of State and the American Foreign Service Association (AFSA) consider to be a high priority personnel issue for the Foreign Service—the elimination of a 18.59 % pay disparity between service in the continental United States and service abroad. The Administration, in its February 2007 Budget Request to the Congress for FY 2008, urged the enactment of legislation creating a new compensation system for the Foreign Service, and the appropriation of $34.5 million needed to implement the first phase of the new compensation system. However, reportedly due to cost concerns among the House Republican leadership, this proposal was not included in the final version of H.R. 109-472 . The current Foreign Service system was created under the authorities provided by the Foreign Service Act of 1980 ( P.L. The remaining third is generally posted in Washington, DC. The Bush Administration, however, opposes any changes in the Foreign Service compensation system unless it is linked to performance, and part of an overall review of Foreign Service personnel modernization. The Administration states its belief that the current civil service system is ineffective and needs to be tied to a market-sensitive, performance-based system. These provisions, which were designated as the Foreign Service Compensation Reform proposal, were supported by the Administration and AFSA. That support, however, was not unanimous. There were others who question the Administration's intent, considering the difficulty between labor and the Administration at the Departments of Defense and of Homeland Security as the Administration attempts to institute a new performance-based personnel structure at these two departments. Some of Members and congressional staff who are concerned about the proposed performance-based system state that congressional dynamics have changed with the 2006 election. Why Change the Compensation System? The new system would be a pay-for-performance system." Area of Continuing Concern Regarding the Legislative Proposal

			Impact of the Loss of Automatic Pay Adjustments

Some members of the Foreign Service expressed concern that due to the lack of automatic increases in the new system because of the elimination of both the step adjustments and the ties to the ECI and Locality Pay increases, the Foreign Service compensation system could fall behind the Civil Service. The estimate total, at that time, was $554 million over five years.
At a time when increasing numbers of Foreign Service personnel are going to posts of greater hardship and danger, an 18.5% pay differential that currently exists between service in Washington, DC, and service abroad is impacting morale and assignment considerations. Provisions implementing a new compensation system to address this issue were developed and supported by the George W. Bush administration, the American Foreign Service Association (AFSA), and the bipartisan leadership of both the House Committee on International Relations (HIRC) and the Senate Committee on Foreign Relations (SFRC). These provisions, which were to be part of the Department of State Authorities Act of 2006 (P.L. 109-472; H.R. 6060), were dropped from the final version of the bill because of House Republican Leadership concerns over the five-year cost of implementing the new compensation system.
The Bush administration, AFSA, and the leadership of both HIRC and the SFRC were in discussion and negotiations for more than a year before developing the consensus compensation provisions. These provisions, the Foreign Service Compensation Reform proposal, would institute a new worldwide, performance-based system for the Foreign Service that would be tied to Washington, DC, salary rates. The compromise language addressed two outstanding issues—the morale-impacting pay disparity, and the institution of a performance-based pay system that the Administration believed would improve the Service. The Administration, once again, requested enactment of a new worldwide, performance-based, compensation system in its fiscal year 2008 budget request.
The concepts behind the agreed upon Foreign Service compensation system have wide support. However, support is not unanimous. Some members of the Foreign Service are concerned about the elimination of automatic pay increases that are inherent to the proposed performance-based system. Others question the Administration's intent with regard to the rights of labor. Further, House Republican Leadership expressed concerns regarding the reaction of some of the more fiscally conservatives Members to the more than $500 million five-year cost that is associated with the full implementation of this new compensation system.
This report discusses (1) the background leading to a proposal to change the compensation system from both an Administration and Foreign Service perspective, (2) the current Foreign Service (FS) System as established in the Foreign Service Act of 1980 and why the Foreign Service views its personnel system as already a performance-based system, (3) the 109th Congress agreements on this legislation, (4) major issues that remained to be resolved in arriving at the agreement, (5) continuing concerns, and (6) cost estimates.