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The original documents are located in Box 50, folder "1975/08/07 - Federal Pay Raise
Meeting" of the James M. Cannon Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 50 of the James M. Cannon Files at the Gerald R. Ford Presidential Library
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
STATEMENTS
WASHINGTON, D.C. 20503
August 6, 1975
MEETING ON FEDERAL PAY RAISE
August 7, 1975
4:00 p.m.
The Oval Office
(30 minutes)
FROM: JAMES T. LYNN
Chein
I. PURPOSE
To discuss federal pay adjustment options.
II. BACKGROUND PARTICIPANTS AND PRESS PLAN
A. Background: Under the Federal Pay comparability
Act of 1970, you have broad discretion in sub-
mitting to Congress an alternative plan to the
regular October 1 comparability increase because
of "national emergency or economic conditions
affecting the general welfare."
B. Participants: Donald H. Rumsfeld, John O. Marsh,
James M. Cannon, James T. Lynn, Paul H. O'Neill,
Robert E. Hampton.
C. Press Plan: No Press.
III. AGENDA
A. Discussion of Available Options
An options paper is attached.
EXECUTIVE OFFICE OF THE PRESIDENT
EXECUTIVE CELLING
OFFICE OF MANAGEMENT AND BUDGET
STATES
WASHINGTON, D.C. 20503
MEMORANDUM FOR THE PRESIDENT
FROM:
JAMES T. LYNN
Ohine
SUBJECT:
Federal Pay Raise
I. Background
Under the Federal Pay Comparability Act of 1970, Civil
Service Commission Chairman Hampton and I, as your
designated pay agent, are sending you a report advis-
ing that an 8.66% salary increase is appropriate to
bring Federal pay rates to comparability with private
enterprise. Your Advisory Committee on Federal Pay
is also submitting its independent views. It supports
the agent's recommendation this year.
The Act authorizes the President to propose an alter-
native plan if appropriate because of "national
emergency or economic conditions" and transmit the
plan to Congress before September 1. Either House may
disapprove the plan, in which case the comparability
recommendation takes effect October 1 for Federal
white-collar workers, and members of the uniformed
services. (See Tab A for listing of previous recom-
mendations and Congressional action).
As a result of recent enactment of the comparability
pay increase for officials covered by executive,
legislative, and judicial schedules, Presidential
and Congressional action will result in pay increases
for Members of Congress, judges and departments and
agency heads as well.
II. Options
A. Implement an 8.66% pay increase.
PRO - This amount is the minimum necessary to main-
tain comparability for Federal employees
with their private enterprise counterparts
in accordance with the standards provided by
current law. While high, it merely reflects
the inflation that has occurred in the past
year.
2
- Current Federal pay rates were based on the
survey of private enterprise rates in effect
during the period of wage controls which
terminated in March 1974. A limitation on
the October adjustment, which would control
rates until October 1976, would extend
controls on Federal salaries 2½ years beyond
the end of controls for industry.
- About 1.2 million other Federal employees
covered by the Postal Service and the Federal
wage-board pay systems are receiving increases
averaging over 9%. Federal annuitants and
social security recipients are receiving full
cost of living adjustments despite attempts
to limit increases to 5%.
- Full comparability increases have been imple-
mented since 1970 despite repeated attempts
to hold the line on Federal pay by delaying the
effective dates. Inaction on the 5% pay cap
legislation suggests there is Congressional
support for the full comparability increase on
October 1 again this year.
- Implementation of the full comparability increase
would greatly enhance the Federal labor relations
program. For the first time this year, employee
organizations feel they have had the meaningful
role they believe Congress intended in the
Federal pay setting process. The submission
of an alternative plan would exacerbate the
feeling that white-collar and military employees
are being unfairly treated under existing laws.
- Establishment of the Rockefeller pay panel
reflects the need to look at the comparability
standard again. Support for the panel's
findings from Congress, employees and Federal
unions would be enhanced by continued
Presidential support of current pay procedures.
CON - The arguments against the comparability increase,
which are more fully developed as arguments for
Option B, can be summarized as follows:
- Costs for an 8.66% increase would be $1.6B more
than the 5% on which the FY 1976 budget allowance
was based.
- The increase could be a source of inflationary
pressure into the future.
3
- Implementation would be inconsistent with public
statements and veto actions on Federal spending.
B. Propose an alternative plan reducing the increase
to 5%.
PRO - Recent Congressional debate on the increase in
executive, legislative, and judicial salaries
and press coverage on the October pay increase
anticipate a 5% proposal. With the Congressional
increase tied to the October 1 adjustment--so
that there is now a "conflict of interest"
situation -- Members may find it difficult to
oppose the more modest increase.
- A 5% pay increase is consistent with your
January 13 statement to
"
insist on a 5%
limit on any Federal pay increase in 1975
"
and with the 5% pay cap legislation subse-
quently transmitted.
- An 8.66% adjustment would increase the deficit,
which already exceeded the $60B level in August,
by $1.6B. The FY 1976 budget allowance was
based on 5%.
- The limitation is consistent with economic goals
and with the general policy of holding down
increases in Federal spending in fiscal year
1976.
- A sizeable pay increase for the largest and
most visible block of Federal employees--about
1.3 million civilian and 2.1 million military--
following the even more liberal increases
recently negotiated by the Postal Service
might weaken the ability of private employers
to hold the line in pay negotiations. It could
be a source of inflationary pressure well into
the future.
CON - The arguments against this option, which are
more fully developed as pros for Option A, are
summarized as follows:
- A limitation on pay increases for only one
segment of the country's workforce is inequitable.
- Months of negotiations with the Federal Employees
Pay Council will look like a charade and could
intensify their efforts to gain bargaining
rights.
4
C. Combine a program of employment reductions with a
proposed alternative plan reducing the increase
to some percentage between 5% and 8.66%.
PRO - The additional costs of a percentage increase
higher than 5% would be offset by the savings
in an employment reduction.
- A somewhat larger increase for Federal
employees might demonstrate greater concern
for equity to Federal employees and gain,
therefore, additional support in Congress
for an alternative plan.
- A 6% to 6.5% limitation would still demonstrate
the Government's leadership in reducing infla-
tionary pressure.
CON - A compromise approach does not have the clear-
cut advantages of the other options, but carries
some of the disadvantages of both.
- The cushion needed to stay within 1976 employ-
ment targets which have been set is gone. Under
an employment reduction program, not only would
all requests for increases be disallowed, but
personnel ceilings would have to be further
reduced. While personnel ceilings do constrain
growth of employment, they tend to create in-
efficiencies in the management of organizations
which has led GAO and others to vigorously
criticize the ceiling program.
- There is no specific justification for a 6 or
6.5% increase. It appears to be an arbitrary
number.
Note:
Although an announcement of employment cuts could be
made simultaneously with the alternative plan proposal,
this is not desirable unless it could be determined
within the next three weeks from what base and in which
agencies the cuts would be made. A general announcement
of employment reductions has little credibility without
such specificity. Therefore, the announcement should
be made after the pay procedures have been completed.
5
Recommendation: That you authorize informal discussions
with key members of the Congressional leadership, aimed
at reaching agreement on an increase between the extremes
of full comparability, 8.66% and 5%.
Attachments
Tab A - Chronology of Pay Adjustments
Tab B - Report of Federal Advisory Committee
on Federal Pay
TAB A
Chronology of Pay Adjustments
and Use of Alternative Plans
Under the Federal Pay Comparability Act
Fiscal year 1971
- Pay Comparability Act called for adjustment in January 1971
- adjustment made at scheduled time
Fiscal year 1972
- Pay Comparability Act called for adjustment in January 1972
- President submitted alternative plan to delay until July 1972,
and Congress did not disapprove
- Congress then passed Economic Stabilization Act Amendments,
reinstating January 1972 adjustment date
- adjustment made at originally scheduled January 1972 date
Fiscal year 1973
- Pay Comparability Act called for adjustment in October 1972
- President delayed until January 1973 (without using alternative
plan procedure)
- Court ordered retroactive change
- adjustment retroactively changed to originally scheduled
October 1972 date
Fiscal year 1974
- Pay Comparability Act called for adjustment in October 1973
- President submitted alternative plan proposing delay until
December 1973
- Senate disapproved alternative plan
- adjustment made at originally scheduled October 1973 date
Fiscal year 1975
- Pay Comparability Act called for adjustment in October 1974
- President submitted alternative plan proposing delay until
January 1975
- Senate disapproved alternative plan
- adjustment made at originally scheduled October 1974 date
ADVISORY COMMITTEE ON FEDERAL PAY
1016 16th Street, N. W.
Washington, D.C. 20036
August 4, 1975
The President
The White House
Washington, D.C. 20500
Dear Mr. President:
The Advisory Committee on Federal Pay has the honor of submitting
to you its fourth annual report. The report incorporates our
findings and recommendations with respect to the Fiscal 1976 pay
adjustment for 1.4 million Federal civilian employees.
The Committee hopes that our recommendations will prove useful
to you in arriving at your final decision.
Respectfully submitted,
Fredench R
Frederick R. Livingston
Member
Robert B. 111c Kerse
Robert B. McKersie
Member
Terome m Rosow
Jerome M. Rosow
Chairman
REPORT ON THE FISCAL 1976 PAY INCREASE UNDER
THE FEDERAL STATUTORY PAY SYSTEMS
Annual Report of the
Advisory Committee on Federal Pay
August 4, 1975
CONTENTS
Page
I. Introduction
1
II. This Year's Increase and the Payline
1
III. Relations Between the President's Agent and the
Employee Representatives
2
IV. The Future of Labor Relations
3
V. Time Lag
3
VI. Compression and Executive Pay
4
VII. Recommendations
5
Appendix A: Organizations Discussing the President's
Agent's Report with the Advisory Committee on
Federal Pay
6
I. INTRODUCTION
Recommendations of the Advisory Committee on Federal Pay regarding the
Fiscal 1976 salary adjustment for approximately 1.4 million government
employees covered by the Federal Pay Comparability Act of 1970 are
contained in this, the fourth annual report of the Committee. More
than 2 million members of the Armed Services and (for the first time
this year, as a result of legislation just enacted) Federal executives,
judges, and members of Congress receive the same percentage increase in
pay as the General Schedule, Veterans' Administration, and Foreign
Service employees covered by the comparability legislation.
II. THIS YEAR'S INCREASE AND THE PAYLINE
The Advisory Committee endorses the uniform increase of 8.66 percent
in General Schedule pay scales, agreed to by the President's Agent and
the Federal Employees Pay Council, to go into effect the first pay
period in October 1975. This endorsement stems from the Committee's
belief that, in the absence of overwhelming reasons, it should not
recommend reversal or modification of an agreement.
The principles of comparability with private industry pay and mainte-
nance of pay differences in conformity with work differences are
theoretically served best by the line of best fit proposed by the
staff of the President's Agent. This line would provide for salary
increases ranging from 5.1 percent in Grade 1 to 9.9 percent in the
theoretical Grade 18 rate. The highest increase that would actually
be put into effect would be 9.5 percent (in the Lower steps of
Grade 15).
The Committee was not persuaded by the arguments of the Pay Council
that the data support a uniform revcentage increase or larger increases
at the lower grades. Inteed the professional organizations made a
compelling argument for 2. non-uniform system of increased. As noted
above, our endorsement of the
spon the fact that the principal porties agreed on this approven. The
Committee decision was also influenced by its belief that failure to
follow the line of best fit this year would not set resealent. The
Committee sincerely hopes that revised techniques (changes in the type
:: payline, in curve-fitting techniques, und In well Information) will
be agreed to before next year's ray decision must be made, so that the
line of best fit resulting from these new approached onn be Wed.
The maximum actual dollar loss caused by the choice of a uniform
percentage increase is 275 at Step 1, of Grade 15.
,,
gain
to
any employee resulting from the uniform line is $39 a year for Step 10
&
FORD
of Grade 1.
GERALD
LIBRARY
- 2 -
Plans of the parties to begin serious discussions of payline issues in
the fall and thus to separate discussion of technical issues from the
decision as to the current pay change are to be commended. As we
pointed out last year, "A major reason for the acrimonious discussions
between the Pay Agent and the Pay Council is the effort to reach deci-
sions with respect to the amount of each annual pay increase simul-
taneously with decisions about technical issues of comparability.
...
Decisions on technical issues should not be reached under the gun
of an annual pay deadline. Efforts to do so make the parties suspicious
that decisions are not made on professional grounds but are intended to
influence the size of the annual adjustment." We urge the Pay Council
and the Pay Agent to set and observe a deadline for resolving these
issues well in advance of next year's pay discussions.
Now that the 3-year transition to the dual payline has been completed,
we would hope that the issue would be considered as settled. The
Committee stated in last year's report, "We continue to believe that
the dual payline is preferable to the previous pay-fixing practice
since it compares actual Federal pay to actual private pay. We are
convinced that the new payline method is stable and not subject to
manipulation." Experience this year has reinforced our belief in the
validity of the dual payline approach.
III. RELATIONS BETWEEN THE PRESIDENT'S AGENT
AND THE EMPLOYEE REPRESENTATIVES
We are pleased to note that relations between the President's Agent and
the Federal Employees Pay Council have apparently improved during the
past year. At the time of last year's report this Committee was deeply
concerned at the continued deterioration of the relationship. Special
credit should go to the President's Agent for initiating steps to
improve this relationship.
This year has also seen an improvement in communications between the
Pay Agent and representatives of employee organizations that are not
members of the Federal Employees Pay Council. The Pay Agent held
two meetings with these groups and has pledged to increase discussions
with them during the coming year.
While recognizing that the Pay Comparability Act does not give these
organizations the same role in the pay-setting process as members of
the Pay Council, the Committee believes that the substantial difference
in views between these organizations and members of the Pay Council
warrants them greater opportunity for terminal consultation.
The pay comparability legislation requires the President's Ament to
"give thorough consideration to the views and recommendations of
employee organizations not represented on the Federal Daployees Pay
Council.'
FORD is LIBRARY
- 3 -
IV. THE FUTURE OF LABOR RELATIONS
Aside from the areas of conflict on technical issues, the most signifi-
cant aspect affecting the relationship between the Agent and the
Federal employee organizations stems from the fact that each year since
the enactment of the comparability statute the President has not followed
the normal procedures envisioned by that statute. Either he has
attempted to delay the Federal pay increase on the grounds of his economic
stabilization authority or has proposed an alternative plan. As a result,
each comparability adjustment has gone into effect only because these
departures from normal procedure have been set aside by Congress or the
courts.
In last year's report the Advisory Committee stated that, "The
efforts to invoke an alternative plan attempted to enlarge executive power
under the /comparability/ statute, which states that an alternative plan
can be invoked only 'because of national emergency or economic conditions
affecting the general welfare
While the Advisory Committee is
aware of the economic considerations, the statute calls for Federal
employee pay to be comparable with similar occupations in the private
sector. It is imperative that an alternative plan be invoked only under
extraordinary circumstances as an exception rather than the rule." Con-
stant resort to emergency procedures makes the whole process envisioned
by the statute meaningless and the BLS survey of private industry pay a
futile exercise.
The unions expressed real concern lest the President propose an alterna-
tive plan this year which would either reduce the amount or delay the
effective date of the Federal pay increase. Discussions of the Advisory
Committee with Federal employee representatives took place the very day
the 1975 Postal pay settlement was announced. Union leaders were very
upset by the further widening of the gap between Postal and Federal
white-collar pay that this settlement presaged. Since the time when
Postal employees achieved collective bargaining rights, increases have
been 25 percent greater than those provided by the comparability legis-
lation. Failure to implement the 8.66 percent adjustment will widen
this gap, which has already seriously undermined the confidence of
Federal unions in the present system.
Labor relations is a very fragile entity. In the judgment of this
Committee, if an alternative plan is again proposed it is inevitable
that more pressure will build up to scrap the present statute. The
Federal unions will petition Congress to substitute some form of col-
lective bargaining more akin to that prevailing in the private sector.
This pressure will mount and eventually become irresistible.
V. TIME LAG
Plans to discuss ways to reduce the time between the BLS survey of pay
in private industry and the effective date of the Federal ray increase
indicate that the present 6-month lag between the survey and the
LIBRATY GERALD FORD
- 4 -
Federal increase can be reduced. This is a promising development,
since the delay is a serious compromise with comparability. The BLS,
the Pay Agent, and the Pay Council are to be complimented on speeding
up their roles in this year's pay-setting process to permit the Advisory
Committee to submit its report to the President at an earlier date than
in previous years.
VI. COMPRESSION AND EXECUTIVE PAY
The problem of compression of the General Schedule pay structure result-
ing from failure to give Federal executives, judges, and legislators any
salary increase since 1969 has become progressively more serious since
the Advisory Committee commented on it in its first report in 1972.
That report was prepared before the problem of inflation of wages and
living costs became acute. In the period during which the executive pay
ceiling has remained static, the Consumer Price Index has risen almost
50 percent and pay scales of the General Schedule rank-and-file super-
vised by these executives have advanced steadily.
The entire principle of maintaining pay distinctions in keeping with
work and performance distinctions, required by the Pay Comparability
Act of 1970, has been seriously compromised by the ceiling. It is
becoming inaccurate to describe Federal pay as part of a dynamic system.
Congressional action on July 30, 1975 to amend the Executive Pay Act
has created a link to the Comparability Pay Act. This takes one criti-
cal step to break the freeze which has had such adverse effects by
compressing the pay structure of the General Schedule. Unfortunately,
it is only a partial measure, since compression will still remain after
the October pay increase of 8.66 percent. The new statutory salary
ceiling will be $39,100. Therefore, all salaries specified in the new
General Schedule as needed to provide comparability with 1975 private
enterprise pay in excess of $39,100 remain as theoretical "asterisk"
rates; they cannot be paid because they exceed the ceiling. Five levels
of responsibility will continue to be compensated at one fixed rate.
In other words, the serious lag created over the past 6 years in pay
scales of the highest grades of the General Schedule will not be
corrected.
General Schedule pay increases put into effect from late 1969
to the present have totaled 37 percent. If the increase that went into
effect in July 1769 as the final stage c: a catch-up with the private
sector is included, pay increases for the General Schedule rank-and-
file have totaled over 50 percent between early 1969 and 1975.
FORD & GERALD LIBRARY
- 5 -
VII. RECOMMENDATIONS
We recommend:
1. An across-the-board 8.66 percent increase in Federal pay
scales to go into effect the first pay period in October.
2. The President's Agent and the Federal Employees Pay
Council establish and observe a deadline for agreement on
technical improvements in the payline well in advance of
decisions with respect to next year's pay increase.
3. The President's Agent involve employee organizations that
are not members of the Federal Employees Pay Council in
the pay-setting process sooner and to a greater degree
than during the past year.
4. Efforts now under way to reduce the time lag between the
survey of pay in private industry and the effective date
of the Federal pay increase be completed and implemented
as soon as possible.
The Committee is available to meet with you at your convenience to
discuss these recommendations.
Respectfully submitted,
Lumgstin
Frederick R. Livingston
Member
Robert-B. Mr Kinsie
Robert B. McKersie
Member
Free 11 Rosaw
Jerome M. Rosow
Chairman
FORD & DERALD LIBRARY
- 6 -
APPENDIX A
Organizations Discussing the President's Agent's Report
With the Advisory Committee on Federal Pay
President's Pay Agent
Office of Management and Budget
Civil Service Commission
Edward F. Preston
Raymond Jacobson
Leonard Peeler
Arch Ramsey
Richard Hall
James Woodruff
Frederick Hohlweg
William Kennard
Federal Employees Pay Council
Richard Galleher, Chairman,
Dr. Nathan Wolkomir, President,
AFL-CIO
NFFE (also attending,
James M. Peirce)
Clyde M. Webber, President, AFGE
(also attending, Stephen Koczak,
Jerry Klepner, NTEU
George R. Boss)
Other Employee Organizations
Air Traffic Control Association,
The Federal Professional Asso-
Inc.,* Gabriel A. Hartl,
ciation, Maurice Ronayne,
Executive Director
President (also attending,
Dr. Edwin Becker, Dr. Ewan
Association of Civilian Techni-
Clague, Lionel Murphy)
cians, Vincent Paterno,
President
National Association of Federal
Veterinarians,*
Association of Senior Engineers
Dr. Clarence H. Pals,
Of the Naval Ship Systems
Executive Vice President
Command,* John Buck
National Association of Govern-
Association of Government
ment Employees, Gary Altman,
Accountants, Chris Peratino,
Director of Research
President (also attending,
Nathan Cutler, Donald
Scantlebury, John Lordan)
*Affilisted with the National Federation of Professional
organizations.
LISEASE GERALD R. FORD
- 7 -
APPENDIX A - Continued
Other Employee Organizations - Continued
National Association of Govern-
Organization of Professional
ment Engineers, * Dean Fravel
Employees of the U.S.
Department of Agriculture, *
National Federation of Profes-
Richard G. Ford, President,
sional Organizations,
George E. Bradley, Executive
James D. Hill, Executive
Director
Director
*Affiliated with the National Federation of Professional
Organizations.