Clinton budget to include 3.7 percent pay raise

President Clinton's 2001 budget will recommend a 3.7 percent federal pay raise in 2001, the Office of Personnel Management said Thursday.

An OPM official said the budget will also recommend scaling back retirement deductions from federal employees' pay checks and making employees' health insurance premium payments tax-free.

The 3.7 percent average pay raise recommended for next year follows on a 3.8 percent across-the-board increase and an average 1 percent locality pay raise for federal employees this year. Later this year, the administration will decide how to divide the 3.7 percent increase between an across the board increase and locality pay rates.

The reduced retirement deductions would roll back a provision included in the 1997 Balanced Budget Act that called for a gradual increase in employees' retirement deductions, from 7 percent of pay for Civil Service Retirement System enrollees in 1998 to 7.5 percent in 2002. Over the same period, deductions for enrollees in the Federal Employees Retirement System are supposed to increase from 0.8 percent to 1.3 percent. Under the Balanced Budget Act, the deductions would return to their 1998 levels in 2003. Clinton's 2001 budget proposal will recommend returning the deductions to their 1998 levels two years early.

By making health insurance premiums part of pre-tax income, the government would help offset large increases in employees' health coverage costs over the past few years. This year, rates under the Federal Employees Health Benefits Program went up an average of 9.3 percent, following a 10.2 percent increase in 1999 and an 8.5 percent increase in 1998.

The Clinton administration also wants to reverse a delay in pay for many military personnel and some civilian employees. Under the fiscal 2000 budget approved by Congress last fall, pay checks for affected personnel that were originally schedule to be sent out the last week in September were delayed until the first week in October. The move shifted about $4.3 billion in costs into 2001 as a tactic to meet 2000 budget limits. The administration is proposing to move the pay checks back into September.