Will the shutdown showdown have any impact on next year’s pay raise? Also, OPM recent announcement about locality adjustments.
For a while there, next year’s annual pay raise for federal employees appeared pretty set at 5.2% - that was the figure published in the White House’s proposed budget. Despite a push for an 8.7% salary increase in the House, neither chamber of Congress mentioned a federal raise in budget discussions over the summer. When President Biden announced his alternate pay plan at the end August, the 5.2% average raise was practically official. All that is needed at this point is an executive order solidifying the percentage and that is still expected to happen at some point in December.
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However, since a budget for Fiscal Year 2024 was not finalized, almost threatening a government shutdown, there could still be some action from Congress before the next November 17th deadline. And then, if there isn’t a continuing resolution or budgetary bill passed in time, feds could still be furloughed before the end of the year. Adding more uncertainty to the equation is the fact that there is no Speaker of the House at the moment. Without a speaker, Congress is unable to bring any legislation to the floor for a vote. It is unclear if even a stop-gap measure could be pushed through until that vacancy is filled.
So, should there be a shutdown, and federal employees have to be furloughed for any period of time, would this trigger Congress to include a raise other than 5.2% when a Fiscal Year 2024 budget finally passes? Or would the White House feel inclined to approve a raise closer to the 8.7% that was proposed in the FAIR act?
Lessons from 2019
After the longest government stoppage happened in December 2018, there was a 1.9% federal raise that was retroactively implemented when the government finally reopened in February 2019. If a shutdown did occur this year and bled into 2024, it is feasible that such a retroactive raise could reoccur. During the last shutdown, for those who retired amidst the furloughs, it is unclear if the raise had any impact on their retirement calculation. For those planning to retire soon, if they’re waiting a little longer so the presumed 5.2% raise would slightly boost their high-3 salary number, a shutdown could interfere with such plans. On a similar note, it might be a good idea to submit that retirement application while the government is fully operational even though OPM retirement services stays open during shutdowns. (If you’re close to retirement and need help, schedule an appointment with one our fed-focused advisors!)
Locality Changes
Also related to the 2024 annual pay raise, OPM recently announced it is adding Clallam and Jefferson counties to the Seattle/Tacoma locality although it is uncertain if the change would be implemented before December, when the GS pay tables are typically released for the upcoming year. Last October, the Federal Salary Council similarly added the localities of Fresno, CA, Rochester, NY, and Spokane, WA. These geographic areas are believed to see a locality pay boost by January.
The 5.2% raise is an average that factors in locality as the “across-the-board” raise for 2024 is expected to be 4.7%. 1.5 million federal employees currently receive locality pay, which was enacted in 1990 to fill pay gaps between private and public sectors. At first, the pay gaps were not to exceed 5% but to attain that goal nowadays would cost the government roughly $22 billion. And despite the fact that pay gaps vary greatly for different occupations, especially AI and cybersecurity jobs, there is a single locality rate for each area regardless of the type of job.
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Until Next Time,
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**Written by Benjamin Derge, Financial Planner, ChFEBC℠ The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.
