If you’ve been a federal employee for a while, you likely consider a regular cost-of-living raise as a given. You might expect something similar to the 5.2% increase you received beginning in January 2024 (or, at the very least, the 4.3% salary bump from the previous year). If you’re really optimistic, you might be hoping for a potential 7.4% increase in January 2025, which is what federal unions and some Democrats have been pushing since last spring.
So, will you get a raise in 2025? If so, will it be a nice jump? The answers are: Yes, probably, but it’ll probably be a smaller increase.
The Current Situation
The White House Perspective
In May 2024, the White House proposed a 2% salary bump for federal employees in 2025. In the era of ongoing inflation (not to mention the increases over the past two years), a 2% increase might seem puny. But here is the rationale:
- The increase is in line with what government employees received before the pandemic
- Inflation should drop below 2% in 2025
Annual inflation (as measured by the Consumer Price Index or CPI) has stubbornly remained above 3% for several months. Yet in July 2024, the annualized CPI increased by 2.9%, the lowest yearly growth since March 2021. As such, the decline might seem to align with the Biden Administration’s justification for a 2% federal employee salary increase.
Appropriations Committee Actions
Raising federal employees’ salaries depends on more than suggestions from presidential administrations. Salary increases are just one of the multiple issues involved with the federal budget. And once that federal budget is suggested, it’s up to the Senate Appropriations Committee to give it legs.
On Aug. 1, the Senate Appropriations Committee approved four 2025 spending bills, including a 27-0 approval of the Financial Services and General Government Appropriations bill. If the legislation is enacted, it would direct about $27.9 billion to covered agencies in 2025, including enough for pay raises.
But don’t start counting on that pay raise just yet. As mentioned above, Congress needs to pass funding legislation. The issue here is that GOP members are eying spending cuts on all appropriations, while Democrats are opposing those cuts. Additionally, Congress is in recess until September 9.
The typical path for a federal spending bill is that Congress passes it, and the President signs an executive order in mid-to-late December to finalize it. That is, if the government is still running.
The four spending bills (and others) that passed the Senate Appropriations Committee have not been debated by Congress — and likely won’t be for a while. As noted, Congress is currently in recess.
After that, it has until Sept. 30 to propose a budget for presidential approval. If there is not much progress once Congress returns, a short-term funding bill or a continuing resolution (CR) would need to be enacted to prevent a shutdown.
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The Likelihood of a Shutdown
While most members of Congress are reluctant to see a shutdown so close to a major election, the Freedom Caucus has no such unwillingness. This caucus has stated that they won’t support government funding without the passage of a “voter integrity” bill, the Safeguard American Voter Eligibility (SAVE) Act. This legislation aims to prevent non-citizens from voting in U.S. elections, even though doing so is already illegal.
The SAVE Act passed the Republican-controlled House but was stymied in the Democratic-majority Senate. If the Freedom Caucus — or anyone else — insists on attaching the voter legislation to government funding, it could spark a government shutdown.
If a CR passes (which is what the Freedom Caucus calls for), it would punt the appropriations discussion to January 2025. However, if a shutdown occurs, a raise is the least of your worries. Whether your job is furloughed during a shutdown, you don’t get paid until a budget is negotiated and approved, or a CR or short-term funding bill is passed. That raise won’t go into effect either, at least until everyone agrees.
On the positive side, you will get paid after the shutdown ends — eventually. And once the appropriations spending is approved, you will likely get that raise, too. Salaries and approved raises are paid retroactively. How much that final raise will be is dependent on Congressional action.
Riding it Out
While government work can be secure and stable, salary increases (and sometimes even getting paid) are subject to partisanship and other factors. To protect yourself during a shutdown or a smaller-than-anticipated raise, consider the following:
- Set up and contribute to an emergency fund
- Plan and maintain a realistic budget
- Reach out to a fed-focused Certified Financial Planner™ for tax-advantaged strategies and investments
If you need assistance with investment management or fed-focused financial planning, contact the seasoned experts at Serving Those Who Serve. For more information or to set up a no-obligation meeting, visit the website or email [email protected].
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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 Serving Those Who Serve writers and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy suggested. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment or financial decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. **
