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2011 Pay Raise Poker Chip

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Fed-watchers will be checking President Obama’s budget or State of the Union address for clues of a possible link between the size of the next pay raise and soon-to-be-proposed major overhaul of the federal civil service system.

Well-plugged in folks, like Politicio, are reporting that after a year of massive spending (to both save the economy and pump a little pork in key places) the administration will focus on holding down federal spending.

Pay raises for millions of federal civilian and military personnel are a big ticket item each year. And in an election year giving feds raises (even small ones) don’t win friends and influence people in most parts of the country.

The administration wants to revamp and streamline the way civil servants are hired, paid and promoted. Some of the changes will be relatively easy fixes. But many, if not most, of the proposed changes, still a work in progress, could be a very hard sell to federal workers and especially to unions representing rank and file employees and professional organizations representing managers and top career executives.

The political irony is that if the Bush administration proposed the same things most would be dead on arrival at Capitol Hill. But because the Obama administration is fed-friendly, union opposition (even if intense) is likely to be quieter, at least on the surface.

So what’s the link between civil service reform and the 2011 pay raise? Maybe a lot, maybe nothing. But look at what did and didn’t happen last year.

Federal workers won the biggest package of benefit changes and improvements, ever, from Congress and the White House. By the same token the 2010 raise proposed by the President, and upheld by Congress, was the smallest in years. Was there a link?

Some insiders believe the unions (reluctantly) accepted the 2 percent federal pay raise (while the military got 3.9 percent) in return for passage of legislation that grants FERS employees retirement credit for unused sick leave, and other improvements.

The administration said last August it was opposed to the sick-leave-credit bill. But lobbyists on both sides of the issues said that the amount of the 2010 pay raise was the 2,000 pound elephant in the negotiating room.

Most federal and postal unions tangled early and often with the Bush administration on everything from pay to policy. Unions were especially outraged by the imposition of the National Security Personnel System, which is now in the process of being dismantled, at the Defense Department.

Federal unions were and are elated to have a Democratic White House, and Congress. It paid off last year with the vast array of perks that became law. It also paid off with major changes to federal sick leave/retirement rules, and improvements in the Thrift Savings Plan.

But times could be leaner this year. If the administration puts the emphasis on frugality in government, the next federal pay raise will definitely be on the table as a bargaining chip.

Congress and the White House could offer federal unions a juicy bone. Maybe like a proposal to let feds and postal workers to roll unused annual or sick leave into their 401(k) plan.