[Weekly Compilation of Presidential Documents Volume 39, Number 35 (Monday, September 1, 2003)]
[Pages 1121-1122]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
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

[[Page 1122]]

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--
    (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.