[Weekly Compilation of Presidential Documents Volume 30, Number 35 (Monday, September 5, 1994)]
[Pages 1729-1730]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
Letter to Congressional Leaders on the Revised Pay Schedule for Federal 
Employees

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

[[Page 1730]]

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.
    Sincerely,
                                            William J. Clinton

Note: Identical letters were sent to Thomas S. Foley, Speaker of the 
House of Representatives, and Albert Gore, Jr., President of the Senate.