Almost 33,000 federal civilian employees are a step closer to a bigger pay raise in 2024, after the Office of Personnel Management published a proposal to establish four new locality pay areas for the General Schedule.
OPM’s proposed rule, added to the Federal Register Wednesday, comes after the President’s Pay Agent in December approved recommendations from the Federal Salary Council to establish the four new locality pay areas.
The announcement from OPM is one of the later steps in the process for making changes to locality pay for federal civilian employees. Typically, the President’s Pay Agent, a panel comprising the OPM director, the Labor Department secretary and the Office of Management and Budget director, issues annual reports to decide on pay recommendations from the Federal Salary Council, a larger body composed of labor relations and pay policy experts. Any recommendations that the pay agent approves then go to OPM. The agency writes up the proposal and timeline for implementing the changes.
Beyond approving the four new locality pay areas, the pay agent’s recommendations in its 2022 report included expansions of already-existing locality pay areas, as well as an update to the way locality pay is mapped out. OPM outlined plans to start basing locality pay maps on OMB’s recently updated geographic definitions of metropolitan statistical areas and combined statistical areas — a change that would adjust or add scores of counties to existing locality pay areas. Notably, though, OPM said no locations would be moved to a lower-paying locality pay area as part of this change.
The proposed rule, once finalized, would also add the following regions to existing locality pay areas:
Dukes and Nantucket counties in Massachusetts to the Boston locality
Huron County, Michigan, to the Detroit locality
Pacific and San Juan counties in Washington to the Seattle locality
Between the new and expanded locality pay areas, OPM said it expects the rule would impact roughly 32,900 federal employees who work in those areas. OPM plans to adopt all of the approved recommendations in time for feds to see the changes reflected in their 2024 pay.
But what federal employees will actually see on their paychecks next year remains undetermined. The fiscal 2024 budget request asked Congress for a 5.2% average federal pay raise. Some lawmakers, mostly Democrats in support of the FAIR Act, are pushing for an even bigger pay raise of 8.7% in 2024. But several House Republicans have recently pushed in the opposite direction, calling for cuts to feds’ pay and benefits.
Locality pay, first established in 1990, is part of the system that determines pay for the nearly 2 million federal employees on the General Schedule (GS). In most years, the government breaks down the annual federal pay raise between a base pay raise and a locality pay raise. The federal government currently defines 54 different locality pay areas, each with its own independently calculated percentage-based pay raise for civilian federal employees. Once finalized, the new locality pay areas would bring that number up to 58.
Locality pay was initially designed to counter the growing wage gap between the federal and non-federal job sectors. According to the Federal Salary Council, the overall average wage gap in 2022 between federal and non-federal occupations was 24.09%.
And larger problems still loom in the federal employees’ pay system as a whole. For years, the President’s Pay Agent has called for “major legislative reforms,” saying the current structure for determining pay for the 1.5 million federal employees on the General Schedule is “inherently flawed.”
The Biden administration’s fiscal 2024 budget request included proposals to fix pay compression and reform federal pay, but so far, there has not been legislation introduced in support of these goals from the White House.
There may also be indirect impacts of the new proposed rule as well, potentially impacting locality pay for federal employees on a larger scale, beyond the roughly 33,000 directly impacted.
“Should this proposal be implemented, the larger annual increases locations might receive as a result of being redesignated to a higher-paying locality pay area would be offset by the annual increases elsewhere being smaller than they would absent such redesignation,” OPM said. “These changes would result in geographic differences in federal salaries better reflecting the overall geographic differences in salary in line with statutory goals. In turn, this could affect federal recruitment and retention across the U.S.”
OPM is requesting comments on the proposed rule about those larger impacts. The proposal will remain open to public comment until July 28.