The bill passed by Congress reopening the federal government after a two-week shutdown grants retroactive pay for furloughed federal workers and clears the way for all federal employees to receive a 1 percent pay raise in January.

The continuing resolution, which funds government operations through Jan. 15, also grants agencies some spending flexibilities to avoid sequestration-related furloughs over the next few months.

Feds could see pay raise

According to the bill, furloughed employees “shall be compensated at their regular standard rate of compensation for the period of such lapse in appropriations, as soon as practicable.”

“Excepted” employees who worked during the shutdown are also guaranteed pay.

The bill also allows for a modest pay increase for federal employees in January, according to several Democratic senators.

In August, Barack Obama, using his authority under the Federal Employese Pay Comparability Act, ordered a 1 percent raise to go into effect at the beginning of 2014. That will hold as long as Congress doesn’t pass legislation prohibiting an increase.

The CR is silent on the issue of federal pay, which would allow Obama’s plan to be implemented, according to Sen. Barbara Mikulski (D-Md.), chairwoman of the Appropriations Committee.

“The promise of a modest pay raise and back pay for furloughed government employees are good first steps in recognizing the value of federal workers,”Mikulski said in a statement. “They have been the targets of unending attacks. They’ve been furloughed, laid off and locked out through no fault of their own. I believe federal employees should never be scapegoats in fights over deficit reduction.”

Federal employees haven’t seen a pay increase since January 2010. Obama initially called for a two-year freeze on federal pay in early 2011 as part of his administration’s deficit-reduction efforts. Congress later extended the freeze through the end of this year.

“I’m proud we were able to fulfill our promise to make [federal employees] whole again with back pay and finally break through the pay freeze with a modest adjustment for next year,” Sen. Ben Cardin (D-Md.) said in a statement. “As they return to doing their work on behalf of the American people, I will continue to fight to keep federal workers from being pawns in every budget battle that lies ahead.”

Budget battle over sequestration looms

One of the budget battles closest on the horizon will center on setting long-term funding for agencies. The bill passed by Congress Wednesday ending the shutdown only extends funding through Jan. 15.

The legislation calls for the creation of a bipartisan House-Senate budget conference committee to hammer out a deal on fiscal 2014 funding.

The main sticking point is likely to be what to do about the automatic spending constraints, known as sequestration.

The House and Senate have remained at odds this year over how to account for sequestration in their 2014 spending plans. The House has settled on a plan that encompasses the total amount of the sequester cuts but spares the Defense Department from deeper reductions. The Senate, on the other hand, has argued for a higher top-line number, which assumes that sequestration will be replaced with alternative deficit savings.

The CR passed by Congress Wednesday extends funding at an annual rate of about $986 billion — which is closer to the House’s top-line figure. Democrats argue, however, that the lower funding level would require agencies to make drastic cuts if it were enacted over the course of the year.

In the meantime, the CR grants agencies some flexibility to stave off sequestration-related furloughs — at least for the next few months.

As many as 100,000 federal employees at more than a dozen agencies were furloughed over the summer because of sequestration.

The bill allows agencies to allocate funding for employee pay and benefits up to the rate necessary to avoid furloughs, provided the agency only does so as a last resort and takes other actions to reduce administrative expenses first.

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