Pay Agent Approves New Locality Pay Area, Calls for Legislative Changes to All Federal Pay

The Trump administration last month authorized two additions to the list of locality pay areas, likely beginning in 2021, but called on Congress to make federal compensation more “market-based” across the board.

In a report dated Dec. 19 and released on the Office of Personnel Management’s website last week, the President’s Pay Agent, which is a board comprised of Labor Secretary Eugene Scalia, Office of Management and Budget Acting Director Russell Vought and OPM Director Dale Cabaniss, greenlit a series of recommendations from the advisory Federal Salary Council. Chief among them were the creation of a new Des Moines, Iowa, locality pay area, and the addition of Imperial County, Calif., to the Los Angeles locality pay area.

The inclusion of these new regions is “subject to rulemaking,” meaning OPM must act over the course of the next year to finalize the additions. The pay agent also approved the salary council’s recommendation that officials should consider human capital indicators when weighing regions’ requests to be granted a locality pay area despite not meeting the established criteria for inclusion.

“We agree that requests to establish new locality pay areas or areas of application for locations not meeting the locality pay program’s current criteria should be supported by human capital data collected and compiled in a consistent manner,” the pay agent wrote. “Such data should cover all federal agencies in the location of concern and having positions receiving [General Schedule] locality pay. These data should be compiled by and coordinated among those agencies, using a process similar to that used for title 5 GS special rate requests.”

But the fact that regions are coming to the salary council every year to be included in locality pay areas despite not meeting the criteria is a sign that Congress must reform the locality pay program and federal employee compensation more broadly, the pay agent wrote. 

“We also note that the underlying methodology for locality pay, which relies on a singular locality rate to cover a locality pay area, has lacked credibility since the beginning of locality pay in 1994—to such a degree that the statutory formula for closing pay gaps has been overridden either by Congress or by successive presidents each and every year since that first year,” the report states. “[Ultimately], we believe there is need for fundamental legislative reforms of the federal compensation system. We believe it is imperative to develop performance-sensitive compensation systems that make the government more citizen-centered, results-oriented, and market-based.”