Discretionary Spending

Multiple Budget Functions

Reduce the Annual Across-the-Board Adjustment for Federal Civilian Employees’ Pay

CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.

Billions of Dollars 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2023–
Change in Discretionary Spending  
  Budget authority 0 -1.1 -2.6 -4.2 -6.0 -7.8 -9.8 -11.8 -14.0 -16.2 -13.9 -73.5
  Outlays 0 -1.1 -2.5 -4.1 -5.9 -7.7 -9.7 -11.7 -13.9 -16.1 -13.6 -72.7
Change in Mandatory Outlays 0 0.2 0.5 0.9 1.3 1.7 2.1 2.5 3.0 3.5 2.9 15.7

This option would take effect in January 2024.

About 20 percent of the discretionary savings displayed are reductions in intragovernmental payments. Such transactions would transfer resources from one category of the budget to another: Reducing future increases in federal pay would lower agencies' contributions for federal employees' retirement, Social Security, and Medicare, but those smaller payments would reduce federal receipts by an equal amount and thus would offset part of the savings. The increase in mandatory outlays shown above represents the reduction in those offsetting receipts.

Under the Federal Employees Pay Comparability Act of 1990 (FEPCA), most federal civilian employees receive a pay adjustment each January. The adjustment is equal to the annual growth in the employment cost index (ECI) for wages and salaries of workers in private industry minus 0.5 percentage points. In recent years, however, policymakers have often lowered the adjustment.

This option would reduce the pay adjustment specified in FEPCA by an additional 0.5 percentage points. As a result, from 2024 to 2032, the adjustment would equal the growth rate in the ECI minus 1 percentage point. If the growth rate for the ECI was less than 1 percent, which has not occurred since the enactment of FEPCA, then no across-the-board adjustment would be granted for that year.