House Spending Bill Includes a Federal Employee Pay Freeze

Late summer signifies the start of budget discussions for the 2019 fiscal year. Along with discussing hot-button issues like education spending and the investment in border security, elected officials are trying to determine if federal employees should receive a raise this year or if they should instate a federal employee pay freeze.

There’s good news related to the issues, and there’s bad news.

Let’s look at where each area of the government stands in regard to employee pay raises (including the call for a federal employee pay freeze) and what you can expect from your paycheck next year.

The House Supports the President’s Federal Employee Pay Freeze

Discussion about the 2019 budget began in February 2018 when President Trump proposed a pay freeze for federal workers. His plan also includes cuts to federal retirement benefits that could affect future employees — some of which may even impact existing workers.

“Across the board pay increases have long-term fixed costs, yet fail to address existing pay disparities, or target mission critical recruitment and retention goals,” President Trump writes in his 2019 budget proposal (shared by Federal News Radio). “The administration, therefore, proposes a pay freeze for federal civilian employees for 2019.”

In the following months after this proposal, Congress worked to develop their own proposals for the 2019 budget. In late July, the House passed their appropriations bill that followed the President’s request and denied federal employees a pay raise.

The Senate Supports a 1.9% Raise

If the Senate were to agree with the President and the House, then most federal workers likely won’t receive a pay increase next year. Fortunately, this was not the case.

There are plenty of issues that the Senate does not agree on, but the future of federal employees is not one of them. On August 1st of this year, Senators approved a 1.9% pay increase for federal employees 92-6 in a bipartisan win rarely seen by the acting elected officials.

“This pay raise is important to keep federal pay from falling even farther behind that of the private sector,” the National Active and Retired Federal Employees Association said in a statement to the Washington Post. “Now more than ever, competitive federal salaries are sorely needed to confront hiring needs as 40% of the current workforce is eligible to retire in the next three years.”

This measure means both legislative arms (the House and Senate) will need to work together with the President to form a budget for 2019. The federal employee pay freeze is still on the table, but the vast majority of Senators disagree with it.

On August 1st, Senators approved a 1.9% pay increase for federal employees 92-6 in a bipartisan win rarely seen by the acting elected officials.Click To Tweet

The Case for Employee Pay Increases

The President makes a reasonable statement in his budget proposal when he advocates in favor of a federal employee pay freeze. Essentially, pay increases over the course of the decade will increase our costs, not decrease them. This money has to come from somewhere, and citizens may need to pay higher taxes or watch other programs get cut to recoup the costs.

However, there are multiple reasons to support increases in federal employee pay. These reasons touch on hiring practices, the economy as a whole, and the individual lives of people who work for the federal government.

Federal Pay Needs to Stay Competitive With the Private Sector

Employees used to start working at a company and stay there until they retire. Today, most workers stay at a job for a few years and then grow their career at a different organization. If federal employers can’t offer salaries that are competitive with what their employees can get working for a private company, then more people are going to leave.

Plus, it’s going to be harder for employers to hire replacements, as the best employees won’t want to accept a pay cut to work for the government.

Pay Freezes Reduce the Spending Power of Employees

Over the past ten years, the inflation rate in the US has hovered between 2-3%. A pay increase is typically part of the Cost of Living Adjustment (COLA) that most employees receive. In 2019, the estimated inflation rate is 2.44%.

If the pay of federal employees doesn’t at least match inflation, then most workers will be able to buy less with what they make. This hurts people on an individual level, and it also hurts the economy as people pull back from what they can afford.  

Prepare for Any Changes In Your Pay

Regardless of what Congress and the President agree to this year, you can prepare to keep saving whether or not you receive a pay raise. MyFEDBenefits helps federal workers get the most out of your benefits and helps you save for retirement. Whether you are going through a difficult financial patch now or are worried about the future, we are here to help.

Start by completing one of our Free Benefits Workbooks to better understand your financial needs. Then one of our benefits specialists will contact you to help you find the solutions you need to prepare for whatever comes ahead.