[Federal Register Volume 69, Number 242 (Friday, December 17, 2004)]
[Rules and Regulations]
[Pages 75451-75453]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-27660]



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  Federal Register / Vol. 69, No. 242 / Friday, December 17, 2004 / 
Rules and Regulations  

[[Page 75451]]



OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 531

RIN 3206-AJ45


General Schedule Locality Pay Areas

AGENCY: Office of Personnel Management.

ACTION: Final rule.

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

SUMMARY: The Office of Personnel Management is issuing final 
regulations on behalf of the President's Pay Agent to link the 
definitions of General Schedule locality pay area boundaries to the 
geographic scope of the new metropolitan statistical area definitions 
established by the Office of Management and Budget. This regulation 
also establishes new criteria for evaluating areas adjacent to locality 
pay areas for inclusion in the pay area. The regulations retain all of 
the existing locality pay areas, which are expanded to include a number 
of additional locations.

DATES: Effective date: December 17, 2004.

FOR FURTHER INFORMATION CONTACT: Allan Hearne, (202) 606-2838; FAX: 
(202) 606-4264; e-mail: [email protected].

SUPPLEMENTARY INFORMATION: Section 5304 of title 5, United States Code, 
authorizes locality pay for General Schedule (GS) employees with duty 
stations in the contiguous United States and the District of Columbia. 
By law, locality pay is set by comparing GS pay rates with non-Federal 
pay rates for the same levels of work in each locality pay area. Non-
Federal pay levels are estimated by means of salary surveys conducted 
by the Bureau of Labor Statistics (BLS). Currently, there are 32 
locality pay areas: 31 separate metropolitan locality pay areas and a 
Rest of U.S. (RUS) locality pay area that consists of all locations in 
the contiguous United States that are not part of one of the 31 
separate metropolitan locality pay areas.
    Section 5304(f) of title 5, United States Code, authorizes the 
President's Pay Agent (the Secretary of Labor, the Director of the 
Office of Management and Budget (OMB), and the Director of the Office 
of Personnel Management (OPM)) to determine locality pay areas. The 
boundaries of locality pay areas must be based on appropriate factors, 
which may include local labor market patterns, commuting patterns, and 
the practices of other employers. The Pay Agent must give thorough 
consideration to the views and recommendations of the Federal Salary 
Council, a body composed of experts in the fields of labor relations 
and pay policy and representatives of Federal employee organizations. 
The President appoints the members of the Federal Salary Council, which 
submits annual recommendations to the President's Pay Agent about the 
locality pay program.
    On October 28, 2003, the Council recommended that the Pay Agent 
adopt new metropolitan statistical areas established by OMB as the 
basis for defining locality pay areas and new criteria for evaluating 
adjacent areas for inclusion in the locality pay area. The planned 
changes in locality pay area boundaries based on the Council's 
recommendations were published in the Federal Register on September 22, 
2004, and the Pay Agent reviewed comments received through November 8, 
2004, the end of the comment period.
    Based on the Council's recommendations, the Pay Agent is issuing 
final regulations that use county-based Metropolitan Statistical Area 
(MSA) and Combined Statistical Area (CSA) definitions established by 
OMB as the basis for defining GS locality pay areas. MSA and CSA 
definitions can be found at http://www.whitehouse.gov/omb/bulletins/fy04/b04-03.html.
    The Council also recommended and the Pay Agent is adopting new 
criteria for evaluating adjacent areas for inclusion in a locality pay 
area. The criteria are:
    1. For adjacent MSAs and CSAs: To be included in an adjacent 
locality pay area, an adjacent MSA or CSA currently in the RUS locality 
pay area must have at least 1,500 GS employees and an employment 
interchange measure of at least 7.5 percent.
    2. For adjacent counties that are not part of a multi-county MSA or 
CSA: To be included in an adjacent locality pay area, an adjacent 
county that is currently in the RUS locality pay area must have at 
least 400 GS employees and an employment interchange measure of at 
least 7.5 percent.
    3. For Federal facilities that cross locality pay area boundaries: 
To be included in an adjacent locality pay area, that portion of a 
Federal facility outside of a higher-paying locality pay area must have 
at least 750 GS employees, the duty stations of the majority of those 
employees must be within 10 miles of the separate locality pay area, 
and a significant number of those employees must commute to work from 
the higher-paying locality pay area.
    The Council also recommended and the Pay Agent is adopting the rule 
that any county (or partial county in the case of portions of York 
County, ME) currently included in a metropolitan locality pay area will 
be retained in the locality pay area if the county or partial county 
has an employment interchange measure of 15 percent or more with the 
area covered by the new MSA or CSA definition. ``Employment interchange 
measure'' is defined by OMB as ``the sum of the percentage of employed 
residents of the smaller entity who work in the larger entity and the 
percentage of the employment in the smaller entity that is accounted 
for by workers who reside in the larger entity.''
    Noting the disparity between Federal and non-Federal pay levels in 
the Kansas City, St. Louis, and Orlando locality pay areas as compared 
to the disparity in the RUS locality pay area, the Council recommended 
that the Pay Agent discontinue these three locality pay areas. The Pay 
Agent tentatively agreed to this change in its 2003 report to the 
President. Upon further review, however, the Pay Agent determined that 
it would be advisable to continue to monitor the disparity between 
Federal and non-Federal pay levels in the Kansas City, St. Louis, and 
Orlando areas before determining whether those areas should be 
discontinued. The Pay Agent asked the Federal Salary Council to review 
this matter. In its recommendation letter of October 21, 2004, the 
Council concluded that these three areas should be discontinued in

[[Page 75452]]

2006. OPM currently intends to publish a proposed rule on behalf of the 
Pay Agent next year to implement this recommendation of the Federal 
Salary Council.

Impact and Implementation

    Overall, the changes in locality pay area boundaries move about 
17,000 GS employees to metropolitan locality pay areas from the RUS 
locality pay area and retain about 16,000 GS employees in metropolitan 
locality pay areas that would have been excluded if only the new MSA 
definitions were used.

Comments on the Proposed Rule

    OPM received 113 comments on the proposed regulations, including 
comments from Members of Congress from Massachusetts and Virginia and 
comments from three Federal agencies. The commenters generally 
supported the planned changes in locality pay areas.
    Many of the commenters cited high living costs as the justification 
for higher locality pay. However, living costs are not directly 
considered in setting locality pay or defining locality pay areas. 
Locality pay is set by comparing General Schedule and non-Federal pay 
for the same levels of work to allow the Government to recruit and 
retain an adequate workforce. Locality pay is not designed to equalize 
living standards for GS employees across the country. Since living 
costs are just one of many factors that affect the supply of and demand 
for labor, they are not considered separately.
    Some commenters suggested that other locations also should be added 
to a higher paying locality pay area. These locations include Beale Air 
Force Base in Yuba County, CA; Berks County, PA; Clinton County, OH; 
Cumberland County, ME; El Paso County, CO; Jefferson County, WA; 
Lancaster, PA; Mendocino County, CA; and Portland, ME. We have not 
adopted these suggestions because these locations do not meet the 
criteria established for being added to an adjacent locality pay area 
and because BLS is unable to conduct full-scale salary surveys in any 
of these locations.
    The Pay Agent notes that employees in Mendocino County, CA, used 
census data to measure Federal employment. The Federal Salary Council's 
criterion for inclusion in a locality pay area is based on the number 
of GS employees in an area. Census data include other Federal 
employees, such as uniformed military, blue-collar employees, and U.S. 
Postal Service employees.
    One commenter suggested that GS employment should not be used as a 
criterion for evaluating areas or that provisions should be allowed for 
exceptions if a strong rationale exists. The Pay Agent agrees with the 
Federal Salary Council that the number of GS employees in the area 
under consideration is an important factor in assessing areas and 
defers to the Council's judgment on the matter. The Pay Agent also 
concludes that exceptions to established rules should be avoided.
    Several commenters suggested that the boundaries of GS locality pay 
areas should coincide with the boundaries of certain Federal Wage 
System (FWS) local wage areas. There are 32 GS locality pay areas and 
more than 130 FWS areas. Salary surveys for the GS program are 
conducted by the Bureau of Labor Statistics, are expensive to conduct, 
and therefore cover fewer areas. Those for the FWS program are 
conducted by the Department of Defense, cover jobs that are more 
readily matched to non-Federal jobs, and include more areas. The Pay 
Agent concludes that there is no basis for requiring that the 
boundaries of the GS locality pay areas coincide with the boundaries of 
the FWS local wage areas.
    One commenter expressed concern that delays in the Pay Agent's 
plans to merge the Kansas City, St. Louis, and Orlando locality pay 
areas with the Rest of U.S. locality pay area might delay plans to 
expand the existing small-scale salary survey of Austin, TX. The 1-year 
delay in discontinuing these three locality pay areas has not affected 
BLS' plans to expand its salary surveys.
    One Federal agency sub-element commented that it is not 
experiencing recruitment and retention problems in Huntsville and that 
the Huntsville area should not be expanded. The same agency wished to 
retain the St. Louis locality pay area and expand the Chicago and 
Indianapolis areas in order to assist its recruitment efforts. While 
recruitment and retention issues are certainly important to the 
Government as an employer, they are not the basis for establishing or 
defining locality pay areas. The Pay Agent concludes that one agency 
sub-element's experience in a few areas should not affect the general 
methodology used to define the locality pay areas for all Federal 
agencies.
    One agency commented that expanding locality pay area boundaries 
could result in changes in special rates entitlements. OPM will address 
that issue in guidance we plan to issue later this year regarding the 
January 2005 pay adjustment.
    At its public meeting on September 27, 2004, and in its written 
recommendations of October 21, 2004, the Federal Salary Council noted 
that the York-Hanover-Gettysburg, PA CSA now meets the MSA/CSA criteria 
to be included in the Washington-Baltimore locality pay area. The 
Council recommended that the Pay Agent add the York area to the 
Washington-Baltimore locality pay area as part of this regulatory 
review. We also received written comments, including comments from the 
Department of Defense (the largest Federal agency in the area), 
supporting this recommendation. The final rule incorporates the York-
Hanover-Gettysburg, PA CSA into the Washington-Baltimore locality pay 
area.

Waiver of Delay in Effective Date

    In order to give practical effect to these regulations at the 
earliest possible moment, I find that good cause exists for making this 
rule effective immediately upon publication in the Federal Register. 
The delay in effective date is waived so that affected agencies and 
employees may benefit from the new locality pay area definitions on the 
effective date of the January 2005 GS pay adjustment.

E.O. 12866, Regulatory Review

    The Office of Management and Budget has reviewed this rule in 
accordance with E.O. 12866.

Regulatory Flexibility Act

    I certify that these regulations will not have a significant 
economic impact on a substantial number of small entities because they 
will apply only to Federal agencies and employees.

List of Subjects in 5 CFR Part 531

    Government employees, Law enforcement officers, Wages.

Office of Personnel Management.
Kay Coles James,
Director.


0
Accordingly, OPM is amending 5 CFR part 531 as follows:

PART 531--PAY UNDER THE GENERAL SCHEDULE

0
1. The authority citation for part 531 continues to read as follows:

    Authority: 5 U.S.C. 5115, 5307, and 5338; sec. 4 of Pub. L. 103-
89, 107 Stat. 981; and E.O. 12748, 56 FR 4521, 3 CFR, 1991 Comp., p. 
316; Subpart B also issued under 5 U.S.C. 5303(g), 5333, 5334(a), 
and 7701(b)(2); Subpart C also issued under 5 U.S.C. 5304, 5305, and 
5553; sections 302 and 404 of Federal Employees Pay Comparability 
Act of 1990 (FEPCA), Pub. L. 101-509, 104 Stat. 1462 and 1466; and 
section 3(7) of Pub. L. 102-378, 106 Stat. 1356; Subpart D also 
issued under 5 U.S.C. 5335(g) and 7701(b)(2); Subpart E also issued 
under 5 U.S.C. 5336;

[[Page 75453]]

Subpart F also issued under 5 U.S.C. 5304, 5305(g)(1), and 5553; and 
E.O. 12883, 58 FR 63281, 3 CFR, 1993 Comp., p. 682 and E.O. 1306, 63 
FR 68151, 3 CFR, 1998 Comp., p. 224; Subpart G also issued under 5 
U.S.C. 5304, 5305, and 5553; section 302 of the FEPCA, Pub. L. 101-
509, 104 Stat. 1462; and E.O. 12786, 56 FR 67453, 3 CFR, 1991 Comp., 
p. 376.

Subpart F--Locality-Based Comparability Payments

0
2. In Sec.  531.602, the definition of CMSA is removed, a definition of 
CSA is added in alphabetical order, and the definition of MSA is 
revised to read as follows:


Sec.  531.602  Definitions.

* * * * *
    CSA means the geographic scope of a Combined Statistical Area, as 
defined by the Office of Management and Budget (OMB) in OMB Bulletin 
No. 04-03, plus any areas subsequently added to the CSA by OMB.
* * * * *
    MSA means the geographic scope of a Metropolitan Statistical Area, 
as defined by the Office of Management and Budget (OMB) in OMB Bulletin 
No. 04-03, plus any areas subsequently added to the MSA by OMB.
* * * * *

0
3. In Sec.  531.603, paragraph (b) is revised to read as follows:


Sec.  531.603  Locality pay areas.

* * * * *
    (b) The following are locality pay areas for purposes of this 
subpart:
    (1) Atlanta-Sandy Springs-Gainesville, GA-AL--consisting of the 
Atlanta-Sandy Springs-Gainesville, GA-AL CSA;
    (2) Boston-Worcester-Manchester, MA-NH-ME-RI--consisting of the 
Boston-Worcester-Manchester, MA-NH CSA, plus the Providence-New 
Bedford-Fall River, RI-MA MSA, Barnstable County, MA, and Berwick, 
Eliot, Kittery, South Berwick, and York towns in York County, ME;
    (3) Chicago-Naperville-Michigan City, IL-IN-WI--consisting of the 
Chicago-Naperville-Michigan City, IL-IN-WI CSA;
    (4) Cincinnati-Middletown-Wilmington, OH-KY-IN--consisting of the 
Cincinnati-Middletown-Wilmington, OH-KY-IN CSA;
    (5) Cleveland-Akron-Elyria, OH--consisting of the Cleveland-Akron-
Elyria, OH CSA;
    (6) Columbus-Marion-Chillicothe, OH--consisting of the Columbus-
Marion-Chillicothe, OH CSA;
    (7) Dallas-Fort Worth, TX--consisting of the Dallas-Fort Worth, TX 
CSA;
    (8) Dayton-Springfield-Greenville, OH--consisting of the Dayton-
Springfield-Greenville, OH CSA;
    (9) Denver-Aurora-Boulder, CO--consisting of the Denver-Aurora-
Boulder, CO CSA, plus the Ft. Collins-Loveland, CO MSA and Weld County, 
CO;
    (10) Detroit-Warren-Flint, MI--consisting of the Detroit-Warren-
Flint, MI CSA, plus Lenawee County, MI;
    (11) Hartford-West Hartford-Willimantic, CT-MA--consisting of the 
Hartford-West Hartford-Willimantic, CT CSA, plus the Springfield, MA 
MSA and New London County, CT;
    (12) Houston-Baytown-Huntsville, TX--consisting of the Houston-
Baytown-Huntsville, TX CSA;
    (13) Huntsville-Decatur, AL--consisting of the Huntsville-Decatur, 
AL CSA;
    (14) Indianapolis-Anderson-Columbus, IN--consisting of the 
Indianapolis-Anderson-Columbus, IN CSA, plus Grant County, IN;
    (15) Kansas City-Overland Park-Kansas City, MO-KS--consisting of 
the Kansas City-Overland Park-Kansas City, MO-KS CSA;
    (16) Los Angeles-Long Beach-Riverside, CA--consisting of the Los 
Angeles-Long Beach-Riverside, CA CSA, plus the Santa Barbara-Santa 
Maria-Goleta, CA MSA and all of Edwards Air Force Base, CA;
    (17) Miami-Fort Lauderdale-Miami Beach, FL--consisting of the 
Miami-Fort Lauderdale-Miami Beach, FL MSA, plus Monroe County, FL;
    (18) Milwaukee-Racine-Waukesha, WI--consisting of the Milwaukee-
Racine-Waukesha, WI CSA;
    (19) Minneapolis-St. Paul-St. Cloud, MN-WI--consisting of the 
Minneapolis-St. Paul-St. Cloud, MN-WI CSA;
    (20) New York-Newark-Bridgeport, NY-NJ-CT-PA--consisting of the New 
York-Newark-Bridgeport, NY-NJ-CT-PA CSA, plus Monroe County, PA, and 
Warren County, NJ;
    (21) Orlando-The Villages, FL--consisting of the Orlando-The 
Villages, FL CSA;
    (22) Philadelphia-Camden-Vineland, PA-NJ-DE-MD--consisting of the 
Philadelphia-Camden-Vineland, PA-NJ-DE-MD CSA, plus Kent County, DE, 
Atlantic County, NJ, and Cape May County, NJ;
    (23) Pittsburgh-New Castle, PA--consisting of the Pittsburgh-New 
Castle, PA CSA;
    (24) Portland-Vancouver-Beaverton, OR-WA--consisting of the 
Portland-Vancouver-Beaverton, OR-WA MSA, plus Marion County, OR, and 
Polk County, OR;
    (25) Richmond, VA--consisting of the Richmond, VA MSA;
    (26) Sacramento--Arden-Arcade--Truckee, CA-NV--consisting of the 
Sacramento--Arden-Arcade--Truckee, CA-NV CSA, plus Carson City, NV;
    (27) St. Louis-St. Charles-Farmington, MO-IL--consisting of the St. 
Louis-St. Charles-Farmington, MO-IL CSA;
    (28) San Diego-Carlsbad-San Marcos, CA--consisting of the San 
Diego-Carlsbad-San Marcos, CA MSA;
    (29) San Jose-San Francisco-Oakland, CA--consisting of the San 
Jose-San Francisco-Oakland, CA CSA, plus the Salinas, CA MSA and San 
Joaquin County, CA;
    (30) Seattle-Tacoma-Olympia, WA--consisting of the Seattle-Tacoma-
Olympia, WA CSA;
    (31) Washington-Baltimore-Northern Virginia, DC-MD-PA-VA-WV--
consisting of the Washington-Baltimore-Northern Virginia, DC-MD-VA-WV 
CSA, plus the Hagerstown-Martinsburg, MD-WV MSA, the York-Hanover-
Gettysburg, PA CSA, Culpeper County, VA, and King George County, VA; 
and
    (32) Rest of U.S.--consisting of those portions of the continental 
United States not located within another locality pay area.

0
4. In Sec.  531.606, paragraph (g) is revised to read as follows:


Sec.  531.606  Administration of locality rates of pay.

* * * * *
    (g) In the event of a change in the geographic coverage of a 
locality pay area as a result of the addition by OMB of a new area(s) 
to the definition of an MSA or CSA or as the result of any change made 
by the President's Pay Agent in the definition of a locality pay area, 
the effective date of any change in an employee's entitlement to a 
locality rate of pay under this subpart is the first day of the first 
pay period beginning on or after January 1 of the next calendar year. 
Any area removed by OMB from coverage within an MSA or CSA that serves 
as the basis for defining a locality pay area must be reviewed by the 
Federal Salary Council and the President's Pay Agent before a decision 
is made regarding the locality pay status of that area.
* * * * *

[FR Doc. 04-27660 Filed 12-16-04; 8:45 am]
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