California feds seek pay policy change

The Federal Executive Boards of Los Angeles and San Francisco have joined forces to issue a report that calls for replacing the locality pay system with a structure under which employees in high-cost areas would receive nontaxable housing allowances. A group of representatives brought the shiny, bound report, titled Imperfect Storm, to Washington this week to try to gather support.

The Office of Personnel Management, which sets pay policy for federal agencies, and the Federal Salary Council, a group of nine presidentially appointed labor leaders and salary experts who make recommendations on locality pay, did not collaborate on the report.

A spokesman for OPM said the agency had not even "had a chance to review the report and therefore we just cannot comment at this time." Asked whether OPM was consulted in the creation of the report, he said the agency would not comment.

California's high housing costs are the motivation behind the effort, which proposes housing allowances based on the military's model and determined by geographical location. The group also calls for signing and retention bonuses and a lift of the federal pay cap.

"Most federal organizations in California's very high-cost areas…are having great difficulty in recruiting and retaining qualified, capable employees," the report stated. "We simply cannot find and keep enough good people. The foundation is crumbling."

Imperfect Storm argues that the cost-of-labor formula used to derive locality pay should be replaced by a cost-of-living system. California's high immigrant population, it said, skews federal cost-of-labor data unfairly low.

The report stated that a more accurate housing allowance indicator would reduce overpayment to employees in other parts of the country and curb costs. For example, it notes that GS-9, Step 3 employees in San Francisco spend 83 percent of their income on mortgages while their counterparts in Houston pay 17 percent.

Cost-of-labor indicators are meant to allow agencies to compete against local and state governments or the private sector in hiring but do not guarantee federal employees a certain standard of living.

This is not the first attempt by a California Federal Executive Board to raise local pay.

In October, the LA board presented the Federal Salary Council with a different proposal: split the locality into two separate areas -- LA-coastal and LA-inland. The inland area's labor market, the board said, unfairly skewed the rest of the city's labor statistics. That proposal was put on hold to be considered for 2007.

Federal executive boards were established by President Kennedy in 1961 to better coordinate federal agencies outside Washington.