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Office of the Press Secretary

For Immediate Release August 31, 1994


August 31, 1994

Dear Mr. Speaker: (Dear Mr. President:)

Action on the FY 1995 Treasury, Postal Service, and General Government Appropriations Bill, will not be completed before the August 31st deadline for an alternative pay plan. Therefore, as a protective measure, in order to ensure that a substantially larger pay increase does not go into effect automatically by operation of law, it is necessary for me to transmit an alternative pay plan.

Under section 5303(a) of title 5, United States Code, the rates of basic pay of the statutory pay systems would be increased by 2.6 percent effective in January 1995.

Section 5303(b) of title 5, however, provides me the authority to implement an alternative pay adjustment plan if I consider the pay adjustment that would otherwise be required by law to be inappropriate because of "national emergency or serious economic conditions affecting the general welfare." As you know, alternative pay plan authority has been used many times over the past 15 years. "Serious economic conditions" are defined in the statute to include consideration of economic measures such as the Index of Leading Economic Indicators, the Gross National Product, the unemployment rate, the budget deficit, the Consumer Price Index, the Producer Price Index, the Employment Cost Index, and the Implicit Price Deflator for Personal Consumption Expenditures.

The budget discipline put in place by my Administration has contributed to sustained economic growth and low inflation. To continue this budget discipline and its favorable impact on economic conditions I have determined that an alternative pay adjustment is appropriate for the 1995 pay raise under section 5303.

The 1995 budget I submitted to the Congress proposed a modest pay increase of 1.6 percent for Federal employees. I believed that this was an appropriate increase in view of the other disciplines we have worked with the Congress to put in place that have reduced the Federal budget deficit and improved our Nation's economy. Further, we are currently making substantial reductions in Federal employment pursuant to the Federal Workforce Restructuring Act enacted by the Congress this year. To achieve these reductions, many agencies are offering Federal employees early retirement and incentives of up to $25,000 to leave Federal service. These considerations, as well, lead me to conclude that the substantially larger pay increase that would otherwise automatically go into effect is not appropriate at this time.

The House version of the 1995 Treasury, Postal Service, and General Government Appropriations Bill includes a provision offered by Representative Steny Hoyer that provides a section 5303 pay raise of 2.0 percent and a limited section 5304 locality pay raise. The Senate version of the bill has no pay raise provision. The Administration has informed the conference committee that it would not object to the pay raise in the House version of the bill if military personnel receive a pay raise higher than the 1.6 percent proposed in the 1995 budget. It appears likely that the 1995 Defense Authorization Bill will provide military members a 2.6 percent raise.

Consistent with the provisions of the House-passed Treasury, Postal Service, and General Government Appropriations Bill, the pay raise will be made in accordance with the following plan:

       In accordance with section 5303(b) of title 5, 
       United States Code, the pay rates for each statutory 
       pay system shall be increased by 2.0 percent, 
       effective on the first day of the first applicable 
       pay period beginning on or after January 1, 1995.

The statute also provides me alternative plan authority for locality-based comparability payments, or locality pay, under section 5304 of title 5. The deadline for transmitting this alternative plan to Congress is November 30. In the absence of legislation, it would be my intent to provide Federal civilians with locality pay raises that equal 0.6 percent of civilian payroll.

In my opinion, this alternative pay plan for a 2 percent pay increase under section 5303 will not materially affect the Government's ability to recruit or retain well-qualified employees. Federal hiring rates and attrition rates are very low. In addition, most employees will receive other pay increases, such as locality pay and within-grade increases. Thus, we have every reason to believe that these pay increases, coupled with appropriate use of pay flexibilities such as recruitment bonuses and retention allowances, will allow the Federal Government to continue to be competitive in attracting and retaining quality employees.



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