A proposal newly introduced in Congress (HR-6398) by several Democrats—and backed by federal employee organizations—for an average 5.1 percent raise for 2023 marks the beginning of the long annual process of determining the following year’s raise.
Introduction of such bills—essentially putting a stake in the ground ahead of the White House’s raise recommendation—has become an annual practice of its own, with the number typically somewhat above the figure indicated by federal pay law. That would be the case again with the new proposal, which the sponsors would split as 4.1 percent across-the-board and 1 percentage point divided as locality pay.
Under federal pay law, the Employment Cost Index measure of growth in wages—not living costs—for the 12 months through each September is supposed to be used in setting the across the board portion in the White House’s subsequent budget proposal for the next fiscal year. A half percentage point is to be shaved off the indicated amount and locality pay is supposed to be paid in addition, varying by locality. The unreduced figure for the measuring period toward January 2023 was 4.6 percent.
That formula has not been followed in practice, though, due to the potential cost of the indicated locality raises and disagreements over the calculations underlying those figures. In some years the ECI number has played little to no role in a determination of a raise while in others the full or reduced ECI number alone has become the total raise, with locality pay sometimes carved out of it.
For 2022, the comparable figure was 2.7 percent, which is the amount that President Biden recommended and ultimately was paid by default when Congress effectively accepted that figure by remaining silent on the issue last year. Amounts varied somewhat by locality.
That number was well below the 2022 increase for retirees, which was 5.9 percent for those retired under the CSRS program and 4.9 percent for those retired under the FERS program who are eligible for COLAs (generally meaning not until after reaching age 62). The two are set in separate ways, though, with the retiree COLA paid automatically based on an inflation index.