Federal pay freeze likely under new Congress

President Obama's 2.1 percent pay hike may be the last feds see for awhile from Congress, says Jeff Neal, former DHS chief human capital officer.

This column was originally published on Jeff Neal’s blog, ChiefHRO.com, and was republished here with permission from the author.

The 115th Congress began its work on Jan. 3. While control of the House and Senate did not change, the 115th is going to be sending legislation to a President who is more likely to sign it. That means civil service legislation that had little chance of surviving a presidential veto will be received by a (most likely) much more receptive President Donald Trump. So, what kind of legislation should we expect to see in the two-year term of the 115th? Which bills are Democrats likely to go to general quarters to try to stop? And what is likely to make its way to the President’s desk and be signed? Following are six changes I believe we may see from this Congress.

  1. Pay freeze. Conservative think tanks such as the Heritage Foundation and the Cato Institute have argued for many years that federal workers are overpaid. A pay freeze is a quick way to begin to address what they believe is a problem. The 2.1 percent pay increase President Barack Obama approved may be the last general increase the federal workforce will see for the next couple of years. A pay freeze would most likely be passed under budget reconciliation procedures that would prohibit a filibuster in the Senate.
  2. Revision of what constitutes “due process.” There is a lot of support among federal employees, the public and politicians for making it easier to fire federal employees who are poor performers or who engage in misconduct. The VA Accountability First and Appeals Modernization Act of 2016, which passed the House last year, could serve as the template for a governmentwide change to due process. It would reduce notice for proposed adverse actions from 30 days to 10, reduce the time to file an Merit System Protection Board appeal from 30 days to seven, and require MSPB to issue decisions on appeals within 60 days. If MSPB failed to act in 60 days, the adverse action would become final. The bill also adds more deference to agency decisions. Given the views of some members of Congress that federal employees should be “at-will” and the proposal in the “Promote Accountability and Government Efficiency Act” introduced by Rep. Todd Rokita (R-Ind), in the last Congress, the processes the VA bill outlined might be a best-case scenario. Rokita’s bill says, “Notwithstanding any other provision of law, any employee in the civil service (as that term is defined in section 2101 of title 5, United States Code) hired on or after the date that is 1 year after the date of enactment of this Act shall be hired on an at-will basis. Such an employee may be removed or suspended, without notice or right to appeal, from service by the head of the agency at which such employee is employed for good cause, bad cause, or no cause at all.” The ability to fire a federal employee for “bad cause” or “no cause at all” would, in effect, make all federal employees political appointees. Whether eventually having 2 million political appointees is a good idea is something I will leave up to readers. I would expect to see a coalition of both Republicans and Democrats engaging on this issue, with a bipartisan solution likely to occur.
  3. The “Holman Rule.” This rule, recently adopted by the House majority, allows any member of the House to submit amendments to appropriations bills to retrench expenditures by (1) reducing amounts of money in the bill, (2) reducing the salaries of federal employees, or (3) reducing the compensation of any person paid by the Treasury. The effect is that an amendment could cut the pay of an individual employee to $1, reduce the budget of a program, office or agency, or cut federal pay in general. The Holman Rule predates the Pendleton Act that created the career civil service. It has not been used for decades. The rule allows for amendments, but they still must pass. I think it is likely we will see the rule applied on high profile targets, such as employees or agencies that get caught up in scandals. It is also likely that widespread use of the rule would cause the appropriations process (which is barely working already) to grind to a halt.
  4. Collective Bargaining. There are multiple approaches to curtailing collective bargaining that we may see. Following are a few possibilities. I anticipate Democrats in both the House and Senate would fight changes in collective bargaining.
    • Reduction of elimination of “official time.” Official time is time on the clock for representational duties. It is there mainly because unions are required to represent every employee, even those who do not pay dues.
    • Changes to representational elections. The biggest change to election procedures would be to require a majority of employees in the bargaining unit, rather than a majority of those voting, to vote in favor before a union could be recognized. Because many employees never bother to vote in such elections, the result would be far fewer bargaining units being recognized.
    • Elimination of collective bargaining for Transportation Security Officers at TSA. TSA officers are in a bargaining unit that is outside the normal union processes other agencies follow. TSA employment practices are governed by the Aviation and Transportation Security Act, which allows the TSA Administrator broad discretion to set conditions of employment for screeners. Eliminating collective bargaining would require nothing more than a signature from the new TSA Administrator, once s/he is confirmed.
    • Other changes to the Labor Relations Statute (5 USC Chapter 71). There are many other changes that could take place, including restricting issues subject to bargaining, eliminating impact and implementation bargaining with respect to exercise of management rights, and reducing the number of employees eligible to be in a bargaining unit (for example, not allowing cleared employees to be represented by a union).
  5. Pay for Performance. The last two major attempts at civil service pay reform were the National Security Personnel System (NSPS) at Defense and MAXHR at Homeland Security. Both included pay for performance processes that eliminated step increases, moved employees into broad pay bands and made most pay raises contingent on performance. MAXHR never got off the ground, but NSPS was rolled out to 200K+ employees. There were some good aspects of NSPS, including much better performance communication between managers and employees, but it also had issues. The biggest were the tendency to concentrate the pay raises in the highest paid workers, and the fact that white employees got slightly larger pay raises than non-white employees. Both of those problems are fixable. Because pay for performance in place in numerous agencies already, and it has been passed before, I think this one is highly likely and it will get votes on both sides of the aisle.
  6. Benefits. Federal employees covered by the Civil Service Retirement System (CSRS) or the Federal Employees Retirement System (FERS) have something that few private sector employees have today — a “defined benefit” pension plan. Such plans were the norm in the U.S. for many years, but have been mostly replaced with “defined contribution” plans such as a 401(k). There have been multiple proposals in recent years to eliminate the defined benefit portion of FERS and move new hires (not existing employees) to a plan based entirely on Social Security and the Thrift Savings Plan. Many Democrats and some Republicans may object, but the average federal salary is $81,000, while the U.S. average is less than $50,000, and most of their constituents do not have defined benefit pensions. Even though there are some good reasons why the average federal worker makes more money, and one can argue that the government should try to set an example as an employer, it is likely this one would pass.

The first year of a party change in Washington puts a lot of issues on the table and it is unlikely everything would happen at once. A comprehensive civil service reform bill would take time and energy that the Congress may not want to devote to federal workforce issues. That means the most likely outcome is piecemeal legislation stretched out over both years of the 115th Congress.

Jeff Neal is a senior vice president for ICF International and founder of the blog, ChiefHRO.com. Before coming to ICF, Neal was the chief human capital officer at the Department of Homeland Security and the chief human resources officer at the Defense Logistics Agency.

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