    [Public Papers of the Presidents of the United States: George W. Bush (2003, Book II)]
    [August 27, 2003]
    [Pages 1070-1071]
    [From the U.S. Government Publishing Office www.gpo.gov]

    [[Page 1070]]

    Letter to Congressional Leaders Transmitting an Alternative Plan for Pay
    Increases for Civilian Federal Employees
    August 27, 2003

    Dear Mr. Speaker:  (Dear Mr. President:)
        I am transmitting an alternative plan for across-the-board and
    locality pay increases payable to civilian Federal employees covered by
    the General Schedule (GS) and certain other pay systems in January 2004.
        Under title 5, United States Code, civilian Federal employees
    covered by the GS and certain other pay systems would receive a two-part
    pay increase in January 2004: (1) a 2.7 percent across-the-board
    increase in scheduled rates of basic pay derived from Employment Cost
    Index data on changes in the wages and salaries of private industry
    workers, and (2) a locality pay increase based on Bureau of Labor
    Statistics' salary surveys of non-Federal employers in each locality pay
    area, which would cost about 10 percent of payroll for the calendar
    year. Including increases for blue-collar and other workers, the total
    Federal employee pay increase would cost about 13 percent of payroll in
    calendar year 2004. For Federal employees covered by the locality pay
    system, the overall average pay increase would be about 15.1 percent.
        For each part of the two-part pay increase, title 5, United States
    Code, authorizes me to implement an alternative pay plan if I view the
    adjustment that would otherwise take effect as inappropriate due to
    ``national emergency or serious economic conditions affecting the
    general welfare.'' For the reasons described below, I have determined
    that it would be appropriate to exercise my statutory alternative plan
    authority to limit the January 2004 GS pay increases.
        A national emergency has existed since September 11, 2001, that now
    includes Operation Enduring Freedom in Afghanistan and Operation Iraqi
    Freedom. Full statutory civilian pay increases costing 13 percent of
    payroll in 2004 would interfere with our Nation's ability to pursue the
    war on terrorism. Such increases would cost about $13 billion in fiscal
    year 2004 alone--$11 billion more than the 2 percent overall Federal
    civilian pay increase I proposed in my 2004 Budget--and would build in
    later years.
        Such cost increases would threaten our efforts against terrorism or
    force deep cuts in discretionary spending or Federal employment to stay
    within budget. Neither outcome is acceptable. Therefore, I have
    determined that a total pay increase of 2 percent would be appropriate
    for GS and certain other employees in January 2004.
        A 2 percent pay increase should be complemented by $500 million
    dollars from the Human Capital Performance Fund, which I proposed in my
    FY 2004 Budget and which is now contained in H.R. 1588, the National
    Defense Authorization Act for Fiscal Year 2004. Favorable congressional
    action to establish full funding for this initiative would be a key step
    towards rewarding the highest performing and most valuable employees in
    agencies with rigorous and disciplined performance management systems.
    Providing higher pay for employees whose exceptional performance is
    critical to the achievement of the agency mission is preferable to
    spreading limited dollars across-the-board to all employees regardless
    of their individual performance or contribution.
        I will allocate 1.5 percent of the 2 percent total increase to an
    across-the-board increase under section 5303 of title 5, United States
    Code, and use the remaining 0.5 percent of payroll to continue the
    implementation of the locality pay program under section 5304. Our
    national situation precludes granting larger pay increases to GS
    employees at this time.
        Accordingly, I have determined that--

    [[Page 1071]]

        (1) Under the authority of section 5303(b) of title 5, United States
    Code, the pay rates for each statutory pay system will be increased by
    1.5 percent, effective on the first day of the first applicable pay
    period beginning on or after January 1, 2004; and
        (2) Under the authority of section 5304a of title 5, United States
    Code, locality-based comparability payments in the percentages set forth
    in the attached table will go into effect in January 2004.
        Finally, the law requires that I include in this report an
    assessment of the impact of my decision on the Government's ability to
    recruit and retain well-qualified employees. I do not believe this
    decision will materially affect our ability to continue to attract and
    retain a quality Federal workforce. To the contrary, since any pay raise
    above the 2 percent I have proposed would likely be unfunded, agencies
    would have to absorb the additional cost and could have to freeze hiring
    in order to pay the higher rates. Moreover, GS quit rates are at an all-
    time low of 1.7 percent per year, well below the overall average quit
    rate in private enterprise. Should the need arise, the Government has
    many compensation tools, such as recruitment bonuses, retention
    allowances, and special salary rates, to maintain the high-quality
    workforce that serves our Nation so very well.
             Sincerely,

                                                              George W. Bush

    Note: Identical letters were sent to J. Dennis Hastert, Speaker of the
    House of Representatives, and Richard B. Cheney, President of the
    Senate.