[House Report 108-586]
[From the U.S. Government Publishing Office]



108th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     108-586

======================================================================



 
                   PAY COMPRESSION RELIEF ACT OF 2004

                                _______
                                

  July 7, 2004.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Mr. Tom Davis of Virginia, from the Committee on Government Reform, 
                        submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                        [To accompany H.R. 3737]

      [Including cost estimate of the Congressional Budgt Office]

    The Committee on Government Reform, to whom was referred 
the bill (H.R. 3737) to increase the minimum and maximum rates 
of basic pay payable to administrative law judges, and for 
other purposes, having considered the same, report favorably 
thereon with amendments and recommend that the bill as amended 
do pass.

                                CONTENTS

                                                                   Page
Committee Statement and Views....................................     3
Section-by-Section Analysis......................................     5
Explanation of Amendments........................................     8
Committee Consideration..........................................     8
Rollcall Votes...................................................     8
Application of Law to the Legislative Branch.....................     8
Statement of Oversight Findings and Recommendations of the 
  Committee......................................................     9
Statement of General Performance Goals and Objectives............     9
Constitutional Authority Statement...............................     9
Federal Advisory Committee Act...................................     9
Unfunded Mandate Statement.......................................     9
Committee Estimate...............................................     9
Budget Authority and Congressional Budget Office Cost Estimate...    10
Changes in Existing Law Made by the Bill as Reported.............    10
Additional Views.................................................    14

    The amendments are as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; REFERENCES.

    (a) Short Title.--This Act may be cited as the ``Pay Compression 
Relief Act of 2004''.
    (b) References.--Except as otherwise expressly provided, whenever 
in this Act an amendment is expressed in terms of an amendment to a 
section or other provision, the reference shall be considered to be 
made to a section or other provision of title 5, United States Code.

SEC. 2. AMENDMENTS RELATING TO BASIC PAY.

    (a) Administrative Law Judges.--Section 5372(b)(1)(C) is amended by 
striking ``may not exceed the rate for level IV'' and inserting ``may 
not exceed the rate for level III''.
    (b) Contract Appeals Board Members.--Section 5372a is amended--
          (1) By striking subsection (b) and inserting the following:
    ``(b)(1) Rates of basic pay under this section--
          ``(A) shall consist of--
                  ``(i) the rate for the chairman of an appeals board;
                  ``(ii) the rate for the vice chairman of an appeals 
                board; and
                  ``(iii) the rate for all other contract appeals board 
                members;
          ``(B) shall be initially adjusted by the Office of Personnel 
        Management and thereafter adjusted under paragraph (2); and
          ``(C) shall not be greater than the rate of basic pay for 
        level III of the Executive Schedule nor less than 94 percent of 
        the rate of basic pay for level IV of the Executive Schedule.
    ``(2) Subject to paragraph (1)(C), effective at the beginning of 
the first applicable pay period commencing on or after the first day of 
the month in which an adjustment takes effect under section 5303 in the 
rates of basic pay under the General Schedule, each rate of basic pay 
for contract appeals board members shall be adjusted by an amount 
determined by the President to be appropriate.''; and
          (2) by adding after subsection (c) the following:
    ``(d) The Office of Personnel Management shall prescribe 
regulations necessary to administer this section.''.
    (c) Certain Senior-Level Positions.--Section 5376(b)(1)(B) is 
amended by striking ``level IV'' and inserting ``level III''.

SEC. 3. AMENDMENTS RELATING TO LOCALITY-BASED COMPARABILITY PAYMENTS.

    (a) Modified Maximums.--Paragraph (2) of section 5304(g), as 
amended by section 1125(a)(1)(A) of the National Defense Authorization 
Act for Fiscal Year 2004 (Public Law 108-136; 117 Stat. 1638), is 
amended to read as follows:
    ``(2) The applicable maximum under this subsection shall be--
          ``(A) level II of the Executive Schedule for positions under 
        subparagraphs (A)-(D) of subsection (h)(1); and
          ``(B) level III of the Executive Schedule for any positions 
        under subsection (h)(1)(E) which the President may 
        determine.''.
    (b) Administrative Appeals Judges.--Section 5304(h)(1), as amended 
by section 1125(a)(1)(B) of the National Defense Authorization Act for 
Fiscal Year 2004 (Public Law 108-136; 117 Stat. 1638), is amended--
          (1) in subparagraph (C), by striking ``and'' at the end;
          (2) by redesignating subparagraph (D) as subparagraph (E); 
        and
          (3) by inserting after subparagraph (C) the following:
          ``(D) a position to which section 5372b applies (relating to 
        administrative appeals judges); and''.

SEC. 4. TECHNICAL AND CONFORMING AMENDMENTS.

    Section 5304(h)(2)(B), as amended by section 1125(a)(1)(C) of the 
National Defense Authorization Act for Fiscal Year 2004 (Public Law 
108-136; 117 Stat. 1638), is amended--
          (1) in clause (i)--
                  (A) by striking ``(A) through (C)'' and inserting 
                ``(A) through (D)''; and
                  (B) by striking ``(vii)'' and inserting ``(vi)''; and
          (2) in clause (ii), by striking ``(1)(D)'' and inserting 
        ``(1)(E)''.

SEC. 5. APPLICABILITY.

    (a) In General.--The amendments made by this Act shall--
          (1) for purposes of computing any rate of compensation for 
        service performed in any pay period beginning before the date 
        specified under subsection (b), be treated as if they had never 
        been enacted; and
          (2) for purposes of computing any rate of compensation for 
        service performed in any pay period beginning on or after the 
        date specified under subsection (b), take effect as if included 
        in the enactment of the National Defense Authorization Act for 
        Fiscal Year 2004 (Public Law 108-136; 117 Stat. 1392).
    (b) Date Specified.--The date specified under this subsection shall 
be the earlier of--
          (1) the first day of the first pay period beginning at least 
        90 days after the date of the enactment of this Act; or
          (2) such other date (not earlier than the date of the 
        enactment of this Act) as the Office of Personnel Management 
        may determine.

SEC. 6. REPORTING REQUIREMENT.

    (a) In General.--Not later than 6 months after the date of the 
enactment of this Act, the Office of Personnel Management shall submit 
to the Committee on Government Reform of the House of Representatives 
and the Committee on Governmental Affairs of the Senate a written 
report containing the following:
          (1) A list of all Executive Schedule positions, and the rate 
        of basic pay in effect for and the total number of individuals 
        occupying each such position.
          (2) A comparison of the rates of basic pay for administrative 
        law judges, administrative appeals judges, and contract appeals 
        board members (before and after taking comparability pay into 
        account) with--
                  (A) the rates of basic pay for Executive Schedule 
                positions; and
                  (B) the rates of basic pay for United States 
                magistrate judges, United States bankruptcy judges, 
                judges of a United States district court, and judges of 
                a United States court of appeals, respectively.
          (3) A determination of whether rates of basic pay for 
        administrative law judges, administrative appeals judges, and 
        contract appeals board members are incongruous with the rates 
        of basic pay for the positions referred to in paragraphs (2)(A) 
        and (2)(B), respectively.
          (4) A recommendation on the extent to which the rates of 
        basic pay for Executive Schedule positions should be adjusted 
        (if at all), based on any determination under paragraph (3).
          (5) Any other information or recommendation which the Office 
        of Personnel Management considers pertinent to the issue of 
        appropriate rates of basic pay for Executive Schedule 
        positions.
    (b) Data and Methodology.--The report of the Office of Personnel 
Management under this section shall include a statement identifying the 
data and methodology used in preparing such report.
    (c) Definitions.--For purposes of this section--
          (1) the term ``Executive Schedule positions'' means positions 
        under the Executive Schedule under subchapter II of chapter 53 
        of title 5, United States Code, and all other positions in the 
        executive branch the annual rates of basic pay for which are 
        individually fixed, or expressly authorized to be fixed, by 
        statute, at the rate provided for a level of the Executive 
        Schedule or at a rate determined by reference to a level of the 
        Executive Schedule, but does not include administrative law 
        judges, contract appeals board members, or administrative 
        appeals judges;
          (2) the terms ``administrative law judge'', ``contract 
        appeals board member'', and ``administrative appeals judge'' 
        have the meanings given them by sections 5372, 5372a, and 5372b 
        of title 5, United States Code, respectively; and
          (3) the term ``comparability pay'' means comparability pay 
        under section 5304 of title 5, United States Code, or similar 
        provision of law.

    Amend the title so as to read:

    A bill to adjust the rates of pay payable to administrative law 
judges, and for other purposes.

                      Committee Statement and Views


                           PURPOSE AND SUMMARY

    H.R. 3737, the Pay Compression Relief Act of 2004, is 
intended to raise the current cap on pay that results in pay 
compression of pay rates of higher level administrative law 
judges, members of contract appeals boards, and certain senior 
level employees outside the Senior Executive Service. The rates 
of basic pay for these employees would be set administratively, 
subject to a new, higher limit set in law, together with a new 
higher cap on locality pay. This allows the Executive branch to 
establish salaries that reflect differences in position 
responsibility.

                  BACKGROUND AND NEED FOR LEGISLATION

    The Committee is concerned by the problem of pay 
compression among administrative law judges (ALJs) and certain 
other categories of employees outside the Senior Executive 
Service (SES). Pay compression causes employees at lower levels 
of responsibility to be paid at the same rate of pay as higher-
responsibility employees. Until enactment of the National 
Defense Authorization Act for Fiscal Year 2004, the employees 
covered by H.R. 3737 were subject to the same pay cap as 
members of the SES. Due to the recognized problem of pay 
compression in the SES, section 1125 of the Act amended title 5 
of the United States Code to relieve pay compression in the SES 
by lifting the cap on pay from executive level III (currently 
$145,600) to executive level II ($158,100) for high-performing 
executives in agencies with qualifying performance appraisal 
systems. The Act also authorizes employing agencies to set 
individual SES pay at any rate within a range of $104,927 (120% 
of grade 15 of the General Schedule) to a maximum of EL-III or, 
for agencies with certified performance appraisal systems, EL-
II.
    The approximately 1,300 ALJs in nearly 30 Federal agencies 
across the government are responsible for hearing disputes over 
agency decisions. Most of them work at the Social Security 
Administration, where they make judgments on benefits appeals. 
ALJs in other agencies adjudicate cases involving a range of 
significant and diverse regulatory matters that may affect 
millions of people and involve billions of dollars. Due to the 
need for independent decision-making by ALJs, their pay is not 
subject to performance appraisal ratings.
    The current EL-III cap on combined basic and locality pay 
of ALJs has resulted in a serious pay compression problem:
     Both levels of supervisory ALJs in all 32 
localities receive the same pay.
     ALJs at the highest non-supervisory level (AL-3F) 
in 11 localities--including Boston, Chicago, Los Angeles, New 
York and San Francisco--receive the same pay as supervisors.
     In two localities (San Francisco and Houston), 
ALJs at the next level down (AL-3E) also receive the same pay 
as supervisors.
     In another seven localities, the AL-3F rate is 
within about $1000 per year of the supervisory rate.
    The magnitude of this problem threatens the ability to hire 
and retain an appropriate number of well-qualified ALJs. This 
legislation addresses ALJ pay compression by authorizing OPM to 
adjust upward the maximum rates of basic pay for ALJs (up to a 
cap of EL-III), while continuing their eligibility for locality 
pay increases subject to a new cap of (EL-II).
    In the case of members of boards of contract appeals, when 
basic pay is increased by locality pay, the Chairman and Vice 
Chairman in every locality are capped at EL-III ($145,600). In 
18 of the 32 locality pay areas, the other members of these 
boards also receive the capped rate, so that the majority of 
these employees all receive the same pay despite differing 
levels of responsibility. The amendment would allow OPM to 
alleviate this severe pay compression, increasing the combined 
basic plus locality pay cap to EL-II.
    Senior level (SL) and scientific and professional (ST) 
positions are also capped under current law at EL-IV for basic 
pay and EL-III for combined basic and locality pay. By law, 
their basic pay is set by their employing agency head, subject 
to OPM regulations. The amendment would raise the locality pay 
cap to EL-II, but does not otherwise change the ability of 
agency heads to determine the appropriate pay rate in each 
case.
    The Subcommittee expects OPM to take action to alleviate 
pay compression for ALJs and members of boards of contract 
appeals as soon as possible following enactment of this 
legislation and to encourage agency heads to make appropriate 
use of their new flexibility in setting salaries of SL/ST 
employees.

                          LEGISLATIVE HISTORY

    On January 28, 2004, Subcommittee Chairwoman Jo Ann Davis 
introduced H.R. 3737. That same day, the bill was referred to 
the Government Reform Committee, which referred the bill to the 
Subcommittee on Civil Service and Agency Organization on 
January 30. On February 10, a Subcommittee hearing was held, 
titled ``Esprit de Corps: Recruiting and Retaining America's 
Best for the Federal Civil Service.'' The witnesses included 
Ronald Sanders, Associate Director of the Office of Personnel 
Management, and the Honorable Kevin Dugan, representing the 
Association of Administrative Law Judges. At a March 17, 2004, 
business meeting, the Subcommittee marked up H.R. 3737. 
Chairwoman Jo Ann Davis offered an amendment in the nature of a 
substitute and Ranking Minority Member Danny Davis offered an 
amendment to the substitute. Mr. Davis's amendment was approved 
by voice vote and the substitute, as amended, was then approved 
by voice vote, and the amended bill was reported out of the 
Subcommittee. On April 1, 2004, the Government Reform Committee 
approved the bill as reported out of the Subcommittee and 
ordered the bill favorably reported to the House of 
Representatives.

                      Section-by-Section Analysis


Section 1. Short title; references

    The short title of H.R. 3737, as amended, is the Pay 
Compression Relief Act of 2004.
    Provisions of the bill that amend a section of law or other 
provision are references to sections or provisions of title 5, 
United States Code, unless otherwise specified.

Section 2. Amendments relating to basic pay

    Administrative law judges, contract appeals board members, 
and certain senior level positions. Subsections (a)-(c) would 
increase the upper limit on basic pay for administrative law 
judges (ALJs), board of contract appeals (BCA) members, and 
certain senior level (SL) and scientific and professional (ST) 
positions by amending sections 5372, 5372a, and 5376 of title 
5. The new upper limit would rise by $8,700 per year from 
executive level IV ($136,900) to executive level III 
($145,600). The lower limit on basic pay for these employees 
would remain unchanged at 65% of EL-IV for ALJs, 94% of EL-IV 
for BCA members, and 120% of the minimum rate of grade 15 of 
the General Schedule ($104,927) for SL/ST positions. The new 
basic pay ranges are summarized below:

----------------------------------------------------------------------------------------------------------------
                       Minimum basic pay            Current maximum basic pay      Maximum basic pay under H.R.
               ------------------------------------------------------------------         3737 as amended
                                                                                 -------------------------------

----------------------------------------------------------------------------------------------------------------
ALJ             65% of EL-IV......     $88,985   EL-IV.............    $136,900   EL-III...........    $145,600
CAB             94% of EL-IV......     128,686   EL-IV.............     136,900   EL-III...........     145,600
SL/ST           120% of GS-15/1...     104,927   EL-IV.............     136,900   EL-III...........     145,600
----------------------------------------------------------------------------------------------------------------

    Under subsection (a), the actual rates of basic pay for 
ALJs will continue, as under current law, to be set within the 
statutory limits in accordance with OPM regulations and the 
President will determine the amount of General Schedule 
increases that will be applied to ALJs' basic pay. Under the 
current basic pay schedule the actual minimum rate of basic pay 
for ALJs is $91,200 (about 66.6% of EL-IV) and the actual 
maximum rate is $136,900. Within this range, there are three 
levels: AL-1 is for Chief ALJs in larger offices, AL-2 is for 
Deputy Chief ALJs and Chief ALJs in smaller offices, and AL-3 
is for non-supervisory ALJs. AL-1 and AL-2 each have a single 
rate of basic pay, currently set at 100% and 97.4% of EL-IV, 
respectively. By law, AL-3 is divided into six rates of basic 
pay, and employees can move from one rate to the next after 
periods of service set out in statute at 5 U.S.C. 5372. An ALJ 
who enters his position at AL-3A will progress to AL-3B after 
52 weeks, AL-3C after another 52 weeks, and AL-3D after another 
52 weeks, AL-3E after another 104 weeks and finally to AL-3F 
after another 104 weeks. The current rates of basic pay are as 
follows:

AL-3A.........................................................   $91,200
AL-3B.........................................................    98,100
AL-3C.........................................................   105,200
AL-3D.........................................................   112,200
AL-3E.........................................................   119,200
AL-3F.........................................................   126,100
AL-2..........................................................   133,300
AL-1..........................................................   136,900

    Subsection (b) addresses the basic pay of members of boards 
of contract appeals. Section 5372a of title 5 currently sets 
the rates of basic pay as follows:

------------------------------------------------------------------------

------------------------------------------------------------------------
Chairman............................  EL-IV ($136,900).
Vice chairman.......................  97% of EL-IV ($132,793).
Other members.......................  94% of EL-IV ($128,686).
------------------------------------------------------------------------

    The amendment would establish a new range of basic pay for 
these employees: the minimum basic pay would remain at the 
current 94% of EL-IV and the maximum would increase to EL-III 
($145,600). The subsection requires OPM to initially adjust the 
pay of current members of these boards and the President would 
then determine the amount of each General Schedule increase by 
which each rate of basic pay for these employees will be 
adjusted on an annual basis.
    Subsection (c) addresses the pay of certain senior level 
(SL) and scientific and professional (ST) employees, whose pay 
is set under section 5376 of title 5. These are positions above 
GS-15 but outside the Senior Executive Service. The head of 
each employing agency sets the basic pay of these positions, 
subject to OPM regulations, within a range of not less than 
120% of grade 15, step 1, of the General Schedule and not more 
than EL-IV. The employing agency also determines the amount of 
basic pay adjustments for these positions when General Schedule 
basic pay rates are adjusted. Subsection (c) would raise the 
current cap on basic pay in these positions to EL-III, but does 
not change the lower end of the range under current law (120% 
of grade 15, step 1).

Section 3. Amendments relating to locality-based comparability payments

    Subsection (a) raises the cap on combined basic pay and 
locality pay under section 5304 of title 5 from EL-III 
(currently $145,600) to EL-II ($158,100) for administrative law 
judges, members of boards of contract appeals, and certain 
senior level (SL) andscientific and professional (ST) employees 
whose basic pay is set under section 5376 of title 5. Raising this cap 
to EL-II will allow relief from the severe pay compression now 
affecting employees who are not now receiving the full locality pay 
amount due to the EL-III cap.
    Subsection (b) ensures that administrative appeals judges 
(AAJs) will continue to be eligible for locality pay under 
section 5304 of title 5. AAJs' basic pay is set under section 
5372b of title 5, and is subject to a statutory minimum of 65% 
of EL-IV (same as the lower limit on ALJ basic pay) and a 
statutory maximum equal to the rate of basic pay for the AL-3F 
level, the highest rate in the ALJ pay schedule below the 
Deputy Chief ALJ level. Within these limits, the basic pay of 
AAJs (employees whose primary duties involve reviewing ALJ 
decisions and who are not classified above GS-15) is set by the 
employing agency head, subject to OPM regulations.
    Subsection (b) does not change the statutory relationship 
of AAJ pay to ALJ pay. However, a technical change is included 
to ensure that AAJs continue to be eligible for locality pay. 
Current section 5304(h)(1)(D), the provision allowing AAJs to 
receive locality pay, restricts locality pay eligibility to 
employees whose basic pay is no higher than EL-IV. Under the 
authority to set ALJ pay in section 2 of the bill, the basic 
pay rate for AL-3F may exceed EL-IV. Because AAJs' basic pay 
may exceed EL-IV under the new authority, subsection (b) amends 
section 5304(h)(1) to specify that AAJs will be eligible for 
locality pay.

Section 4. Technical and conforming amendments

    Section 1125(a)(1)(C) of the National Defense Authorization 
Act for Fiscal Year 2004 (Public Law 108-136; 117 Stat. 1638) 
created a reference in section 5304(h)(2)(B) of title 5 to a 
non-existent clause (vii) of section 5304(h)(1). That reference 
is being changed to clause (vi). The correction of the other 
error in the Act (a reference in section 5304(g)(2)(A) to 
``subparagraphs (A)-(D)'' that should have been a reference to 
``subparagraphs (A)-(C)'') is obviated by the addition of a 
subparagraph (D) to section 5304(h)(1), the subparagraph that 
ensures that AAJs will continue to be eligible for locality pay 
upon implementation of the bill (see section 3). The other 
conforming amendment in this section is the re-designation of 
current subparagraph (D) of section 5304(h)(1) as subparagraph 
(E), which is necessary due to insertion of the new 
subparagraph (D) in paragraph (h)(1).

Section 5. Applicability

    For the purpose of computing increases in pay as authorized 
by H.R. 3737, the effective date is the first day of the first 
pay period beginning at least 90 days after enactment, or 
another date established by OPM, whichever is earlier. Pay 
increases authorized by the bill will be computed as if 
included in the National Defense Authorization Act for Fiscal 
Year 2004, enacted November 24, 2003, but no increase will 
apply to service performed before the date established under 
this section.

Section 6. Reporting requirement

    H.R. 3737 would require the Office of Personnel Management 
to submit to the House Government Reform Committee and the 
Senate Governmental Affairs Committees a report containing:
           A list of all Executive Schedule positions 
        and the rate of basic pay for each one, with the total 
        number of incumbents in each such position;
           A comparison of the pay rates for ALJs, 
        AAJs, and BCA members with the pay rates (before and 
        after taking locality pay into account) for Executive 
        Schedule positions and U.S. magistrate judges, 
        bankruptcy judges, and district and appeals court 
        judges;
           A determination of whether ALJ, AAJ, and CAB 
        member rates of pay are incongruous with rates for 
        Executive Schedule positions and those of the above-
        mentioned judges;
           A recommendation on adjusting pay under the 
        Executive Schedule; and
           Any other information or recommendation OPM 
        considers pertinent to this matter.
    OPM is required to include a statement identifying the data 
and methodology used in preparing the report, which is due to 
the Committees no later than 6 months after enactment of H.R. 
3737.

                       Explanation of Amendments

    The provisions of the substitute are explained in this 
report.

                        Committee Consideration

    On April 1, 2004, the Committee met in open session and 
ordered reported favorably the bill, H.R. 3737, as amended, by 
voice vote, a quorum being present.

                             Rollcall Votes

    No rollcall votes were held.

              Application of Law to the Legislative Branch

    Section 102(b)(3) of Public Law 104-1 requires a 
description of the application of this bill to the legislative 
branch where the bill relates to the terms and conditions of 
employment or access to public services and accommodations. 
This bill would raise the current cap on pay that results in 
pay compression of pay rates of higher leveladministrative law 
judges, members of contract appeals boards, and certain senior level 
employees outside the Senior Executive Service.
    Legislative branch employees that are subject to the 
General and Executive Pay Schedules may be eligible for the 
benefits provided by this legislation.

  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
(2)(b)(1) of rule X of the Rules of the House of 
Representatives, the Committee's oversight findings and 
recommendations are reflected in the descriptive portions of 
this report.

         Statement of General Performance Goals and Objectives

    In accordance with clause 3(c)(4) of rule XIII of the Rules 
of the House of Representatives, the Committee's performance 
goals and objectives are reflected in the descriptive portions 
of this report.

                   Constitutional Authority Statement

    Under clause 3(d)(1) of rule XIII of the Rules of the House 
of Representatives, the Committee must include a statement 
citing the specific powers granted to Congress to enact the law 
proposed by H.R. 3737. Article I, Section 8, Clause 18, the 
Necessary and Proper Clause, of the Constitution of the United 
States grants the Congress the power to enact this law.

                     Federal Advisory Committee Act

    The Committee finds that the legislation does not establish 
or authorize the establishment of an advisory committee within 
the definition of 5 U.S.C. App., Section 5(b).

                       Unfunded Mandate Statement

    Section 423 of the Congressional Budget and Impoundment 
Control Act (as amended by Section 101(a)(2) of the Unfunded 
Mandate Reform Act, P.L. 104-4) requires a statement whether 
the provisions of the report include unfunded mandates. In 
compliance with this requirement the Committee has received a 
letter from the Congressional Budget Office included herein.

                           Committee Estimate

    Clause 3(d)(2) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison by the 
Committee of the costs that would be incurred in carrying out 
H.R. 3737. However, clause 3(d)(3)(B) of that rule provides 
that this requirement does not apply when the Committee has 
included in its report a timely submitted cost estimate of the 
bill prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act.

     Budget Authority and Congressional Budget Office Cost Estimate

    With respect to the requirements of clause 3(c)(2) of rule 
XIII of the Rules of the House of Representatives and section 
308(a) of the Congressional Budget Act of 1974 and with respect 
to requirements of clause (3)(c)(3) of rule XIII of the Rules 
of the House of Representatives and section 402 of the 
Congressional Budget Act of 1974, the Committee has received 
the following cost estimate for H.R. 3737 from the Director of 
Congressional Budget Office:

H.R. 3737--Pay Compression Relief Act of 2004

    H.R. 3737 would raise the caps on combined basic and 
locality pay from Executive Schedule Level III (currently 
$145,600) to Executive Schedule Level II (currently $158,100) 
for administrative law judges, contract appeals board members, 
and senior level and scientific and professional employees. It 
also would direct the Office of Personnel Management to conduct 
a study comparing rates of pay for those employees with pay for 
other high-level federal employees.
    Based on information from the Office of Personnel 
Management, CBO estimates that the cost of raising the caps for 
the affected employees would be about $1 million in fiscal year 
2005. Over the 2005-2009 period, implementing the legislation 
would cost about $6 million, subject to the availability of 
appropriated funds. H.R. 3737 would not affect direct spending 
or revenues.
    The cost of this legislation arises because the salaries of 
roughly 430 of these employees are already at the caps 
currently specified by statute. Raising the caps will allow 
those employees to get higher annual across-the-board pay 
raises and locality-based comparability adjustments. CBO 
assumes that each January--under both current law and under the 
proposed legislation--base pay will increase by its projection 
of the employment cost index minus one-half percent, the 
average locality adjustment will raise base pay by an 
additional one-half percent, and Executive level salaries (and 
thus the caps) will rise by the full amount proscribed in the 
Ethics Reform Act, which governs pay raises for Members of 
Congress and Executive level employees. (Alternatively, if the 
adjustment of caps under current law were only one-half of the 
amount specified by the Ethics Reform Act to account for the 
fact that the Congress votes to block those raises in some 
years, pay compression under current law would worsen. In that 
case, the cost of the legislation relative to current law would 
be $16 million over the five-year period.)
    H.R. 3737 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would impose no costs on state, local, or tribal governments.
    The CBO staff contact for this estimate is Ellen Hays. This 
estimate was approved by Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

CHAPTER 53 OF TITLE 5 UNITED STATES CODE

           *       *       *       *       *       *       *



CHAPTER 53--PAY RATES AND SYSTEMS

           *       *       *       *       *       *       *



SUBCHAPTER I--PAY COMPARABILITY SYSTEM

           *       *       *       *       *       *       *



5304. Locality-based comparability payments

    (a) Pay disparities shall be identified and reduced as 
follows:
          (1) * * *

           *       *       *       *       *       *       *

    (g)(1) * * *
    [(2) The applicable maximum under this subsection shall be 
level III of the Executive Schedule for
          [(A) positions under subparagraphs (A)-(D) of 
        subsection (h)(1); and
          [(B) any positions under subsection (h)(1)(D) which 
        the President may determine.]
    (2) The applicable maximum under this subsection shall be--
          (A) level II of the Executive Schedule for positions 
        under subparagraphs (A)-(D) of subsection (h)(1); and
          (B) level III of the Executive Schedule for any 
        positions under subsection (h)(1)(E) which the 
        President may determine.
    (h)(1) For the purpose of this subsection, the term 
``position'' means--
          (A) * * *

           *       *       *       *       *       *       *

          (C) a position to which section 5372a applies 
        (relating to contract appeals board members); [and]
          (D) a position to which section 5372b applies 
        (relating to administrative appeals judges); and
          [(D)] (E) a position within an Executive agency not 
        covered under the General Schedule or any of the 
        preceding subparagraphs, the rate of basic pay for 
        which is (or, but for this section, would be) no more 
        than the rate payable for level IV of the Executive 
        Schedule;
but does not include--
          (i) * * *

           *       *       *       *       *       *       *

    (2)(A) * * *
    (B) A request by an agency head or exercise of authority by 
the President under subparagraph (A) shall cover--
          (i) with respect to the positions under subparagraphs 
        [(A) through (C)] (A) through (D) of paragraph (1), all 
        positions described in the subparagraph or 
        subparagraphs involved (excluding any under clause (i), 
        (ii), (iii), (iv), (v), or [(vii)] (vi) of such 
        paragraph); and
          (ii) with respect to the positions under paragraph 
        [(1)(D)] (1)(E), such positions as may be considered 
        appropriate (excluding any under clause (i), (ii), 
        (iii), (iv), (v), or (vi) of paragraph (1)).

           *       *       *       *       *       *       *


SUBCHAPTER VII--MISCELLANEOUS PROVISIONS

           *       *       *       *       *       *       *



Sec. 5372. Administrative law judges

    (a) * * *
    (b)(1)(A) * * *

           *       *       *       *       *       *       *

    (C) The rate of basic pay for AL-3, rate A, may not be less 
than 65 percent of the rate of basic pay for level IV of the 
Executive Schedule, and the rate of basic pay for AL-1 [may not 
exceed the rate for level IV] may not exceed the rate for level 
III of the Executive Schedule.

           *       *       *       *       *       *       *


Sec. 5372a. Contract appeals board members

    (a) * * *
    [(b) Rates of basic pay for contract appeals board members 
shall be as follows:
          [(1) Chairman of an appeals board--the rate of basic 
        pay payable for level IV of the Executive Schedule.
          [(2) Vice chairman of an appeals board--97 percent of 
        the rate under paragraph (1).
          [(3) Other members of an appeals board--94 percent of 
        the rate under paragraph (1).]
    (b)(1) Rates of basic pay under this section--
          (A) shall consist of--
                  (i) the rate for the chairman of an appeals 
                board;
                  (ii) the rate for the vice chairman of an 
                appeals board; and
                  (iii) the rate for all other contract appeals 
                board members;
          (B) shall be initially adjusted by the Office of 
        Personnel Management and thereafter adjusted under 
        paragraph (2); and
          (C) shall not be greater than the rate of basic pay 
        for level III of the Executive Schedule nor less than 
        94 percent of the rate of basic pay for level IV of the 
        Executive Schedule.
    (2) Subject to paragraph (1)(C), effective at the beginning 
of the first applicable pay period commencing on or after the 
first date of the month in which no adjustment takes effect 
under section 5303 in the rates of basic pay under the General 
Schedule, each rate of basic payment for contract appeals board 
members shall be adjusted by an amount determined by the 
President to be appropriate.

           *       *       *       *       *       *       *

    (d) The Office of Personnel Management shall prescribe 
regulations necessary to administer this section.

           *       *       *       *       *       *       *


Sec. 5376. Pay for certain senior-level positions

    (a) * * *
    (b)(1) Subject to such regulations as the Office of 
Personnel Management prescribes, the head of the agency 
concerned shall fix the rate of basic pay for any position 
within such agency to which this section applies. A rate fixed 
under this section shall be--
          (A) * * *
          (B) not greater than the rate of basic pay payable 
        for [level IV] level III of the Executive Schedule.

           *       *       *       *       *       *       *


                            ADDITIONAL VIEWS

    We support H.R. 3737 to raise the pay caps for 
administrative law judges (ALJs), administrative appeals 
judges, and other senior positions in the government.
    These pay increases are necessary to recruit and retain 
highly qualified individuals. The positions covered by this 
bill are ones of significant responsibility and merit 
competitive salaries. For instance, the 1,300 ALJs in the 
federal government adjudicate cases involving complex 
regulatory matters that affect large numbers of people or 
involve millions--and sometimes billions--of dollars.
    Although we support this legislation, we are concerned 
about the pay disparities created by both this bill and 
legislation enacted last year to raise salaries for other 
federal employees. After enactment of this bill, a large number 
of federal employees would be paid at Executive Schedule Level 
II, which is currently $158,100. This is the same amount earned 
by deputy secretaries of cabinet departments, agency 
administrators, and federal district judges. In fact, under 
this bill, ALJs would earn more than federal bankruptcy judges 
and magistrates.
    We believe it is important to maintain some pay 
differential between the deputy secretary of a department and 
the employees who work in the department. It is also important 
to maintain some pay differential between federal district 
judges and ALJs.
    To address this problem, Representative Danny Davis offered 
an amendment at the Subcommittee markup to require the Office 
of Personnel Management (OPM) to study federal salaries and 
determine whether further salary adjustments need to be made. 
This amendment is codified in Section 6 of the bill. It is our 
hope that Congress will carefully consider the findings of the 
OPM study and address any pay disparities.
                                   Henry A. Waxman.
                                   Danny K. Davis.

                                  
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