Bidding opens on 2008 pay raise at 3 percent

If recent history is a guide, federal employees are on track to receive a 3 percent pay raise in 2008, based on figures released Tuesday by the Labor Department.

For the past several years, federal employees have received a raise equal to that granted to their military counterparts. A 2004 law mandates that military salaries be bumped up annually to a rate equal to the change in the Labor Department's Employment Cost Index for the private sector's wages from September to the previous September.

That same law, the fiscal 2004 National Defense Authorization Act, previously tacked on an additional 0.5 percent to the change in the cost index to determine the overall military raise. But the law calls for raises from 2007 onward to be equal to the ECI, without the extra bump. Congress can always vote not to follow the formula in the law, but traditionally the change in the ECI has proved to be a good indication of the actual raise granted.

From September 2005 to September 2006, the change in the index was 3 percent, a figure that President Bush is likely to use as a guide when he releases his 2008 budget proposal in February.

Lawmakers voted in the fiscal 2007 Defense Department authorization and appropriations bills to give a 2.2 percent raise to the military, which was equivalent to the change in the ECI from September 2004 to September 2005. A higher figure of 2.7 percent had been batted around in initial discussions about the 2007 military raise.

The civilian pay raise for next year is still up in the air. Congress will decide in a lame-duck session after next week's elections whether to give 2.2 percent or 2.7 percent to nonmilitary federal workers in 2007.

For the first time, President Bush recommended an equal pay raise, 2.2 percent, for both groups in his 2007 budget proposal. The lower military proposal put federal employee unions and advocacy groups in the unusual position of lobbying for a higher military raise, so that the civilian raise would rise to it.

National Treasury Employees Union President Colleen Kelley said she will push for a 3.5 percent raise for both groups in 2008. Kelley said the extra raise is necessary to close the gap between private and public sector salaries.

"We will always start the conversation pointing to the gap," Kelley said. "But at a minimum [3.5 percent is] what we would be pushing for."

Although the ECI has become the de facto civilian pay raise formula, another law on the books is supposed to calculate civilian pay. In 1990, Congress passed the Federal Employees Pay Comparability Act, which established a pay raise formula to close the gap between the government and the private sector.

The complex formula designated in the act would have granted civilian employees an average pay raise much higher than the raises they have received since its passage.

But FEPCA has not been enacted as intended. Instead, each year the president uses a loophole that allows him to override the formula and propose a much lower pay raise. Congress then typically pushes for pay parity between the civilian and military workforce.

A chunk of the 3 percent pay hike employees would receive in 2008 if the change in the ECI is used -- 1 percent or 0.5 percent if it follows typical patterns -- would be allocated for locality pay, which differs according to geographic location. To further complicate the pay formula, the Defense and Homeland Security departments may have sophisticated pay-for-performance and market-based pay mechanisms in place by 2008 that would override the 3 percent figure.