Order Code RL34380
The Executive Schedule IV Pay Cap on General
Schedule Compensation
February 15, 2008
Curtis W. Copeland
Specialist in American National Government
Government and Finance Division

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The Executive Schedule IV Pay Cap on General
Schedule Compensation
Summary
Annual pay adjustments for about 1.3 million employees under the General
Schedule (GS) and certain other systems are governed by Section 529 of P.L. 101-
509, the Federal Employees Pay Comparability Act of 1990 (FEPCA), which
generally requires that covered employees receive an annual basic pay adjustment and
a locality-based comparability payment. For the GS pay adjustment that took effect
in January 2008, the size of the total pay increase (i.e., the annual adjustment plus
locality pay) varied across the 32 pay areas, but averaged 3.5% nationwide.
In recent years, though, an increasing number of GS employees have not
received all of the base and locality pay increases that were designated for their pay
areas. By law (5 U.S.C. §5304(g)(1)), base GS pay and locality pay combined cannot
exceed Level IV of the Executive Schedule (EX-IV) — which, for 2008, is set at
$149,000. Therefore, GS employees whose total pay was already equivalent to EX-IV
could only receive the same amount of pay increase that was provided to employees
in the Executive Schedule (which, for 2008, was 2.5%). Any employees whose pay
was below EX-IV but, after the increase, would have been above Level IV, could
only receive a portion of the total increase scheduled for other employees in their pay
area.
For the GS pay adjustment that took effect in January 2008, more than 7,100
GS-15 and equivalent employees in 12 pay areas did not receive all of the pay
increase designated for their pay areas — an increase of more than 6,000 “capped”
employees from the year before, primarily because the EX-IV cap affected employees
in the Washington, DC, pay area for the first time. Some GS-15 employees have
been affected by the cap since 2002, and employees in five additional pay areas are
likely to be affected in 2009. By 2012, GS-14 employees may also begin to be
affected. As a result of the EX-IV cap, the affected employees’ salaries are
substantially lower than they would have been had the cap not been in effect, and any
pensions that they are due to receive in the future will also be lower.
This report provides information on the effect of the EX-IV pay cap on pay for
GS employees; and discusses the potential implications of the pay cap on salaries,
pensions, and the ability of agencies to recruit and retain staff. The report also
provides some background information on the GS and Executive Schedule pay
systems and the annual pay adjustment processes in those systems.
This report will be updated if policy developments occur or if additional factual
information becomes available on the number of employees affected.

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Contents
General Schedule Pay Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Executive Schedule Pay Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
GS-15 Pay Compression Caused by EX-IV Linkage . . . . . . . . . . . . . . . . . . . 6
Concluding Observations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Appendix. Major Federal White-Collar Pay Schedules . . . . . . . . . . . . . . . . . . . 16
List of Figures
Figure 1. An Increasing Aggregate Number of Pay Areas and
GS-15 Steps Have Been Affected by the EX-IV Pay Cap . . . . . . . . . . . . . . . 8
Figure 2. GS-14, Step 10 Employees in San Francisco
May Have Their Pay Capped by 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
List of Tables
Table 1. Annual and Locality Pay Adjustments Under FEPCA, 1991 to 2008 . . 4
Table 2. The Aggregate Number of Pay Areas and GS-15 Pay Steps
Affected by the EX-IV Pay Cap Has Grown . . . . . . . . . . . . . . . . . . . . . . . . . 7
Table 3. More than 7,100 GS-15/Equivalent Employees Have Been
Affected by the EX-IV Pay Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Table 4. GS-15, Step 10 Pay Rates May Be Capped in Five Additional
Pay Areas by 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Table 5. Effect of the EX-IV Pay Cap on GS-15, Step 10, Salaries in
San Francisco, 2002 Through 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

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The Executive Schedule IV Pay Cap on
General Schedule Compensation
On January 4, 2008, President George W. Bush signed an executive order
implementing the 2008 pay adjustments for most federal employees.1 As a result,
employees within the General Schedule (GS) and related pay systems (covering more
than 1.3 million of the nearly 1.9 million employees in the executive branch as of
September 2007)2 received an average 3.5% pay increase — a 2.5% across-the-board
increase to their base pay under 5 U.S.C. §5303, and an average 1% locality pay
increase under 5 U.S.C. §5304. The size of the locality portion of the pay increase
varied by pay area, based on differences in the size of the federal-nonfederal pay
differential in those areas.3 As a result, the total pay increase provided to GS
employees (i.e., the across-the-board increase plus locality pay) was often either
somewhat more than, or somewhat less than, the 3.5% national average. For
example, GS employees in Indianapolis, IN, received a 2.96% total pay increase in
January 2008, whereas GS employees in San Francisco, CA, received an increase of
4.23%, and employees in Washington, DC, received a 4.49% increase.
However, in recent years, an increasing number of GS employees have not
received all of the base and locality pay increases that were designated for their pay
areas. By law (5 U.S.C. §5304(g)(1)), base GS pay and locality pay combined cannot
exceed Level IV of the Executive Schedule (EX-IV) — which, for 2008, is set at
$149,000.4 Therefore, employees whose total pay was already equivalent to EX-IV
could only receive the same amount of increase that was provided to employees in
the Executive Schedule (which, for 2008, was 2.5%). Any employee whose pay was
below EX-IV but, after the increase, would have been above Level IV, could only
receive a portion of the total increase. For the adjustment that took effect on January
6, 2008, more than 7,100 GS and GS-equivalent employees in 12 pay areas did not
receive all of the pay increase for their pay areas. Some GS employees have been
affected by the cap since 2002. As a result, these “capped” employees’ salaries are
substantially lower than they would have been had the pay caps not been in effect,
1 The President, “Executive Order 13454 — Adjustments of Certain Rates of Pay,” 73
Federal Register 1481, Jan. 8, 2008. For more on this adjustment, see CRS Report
RL33732, Federal White-Collar Pay: FY2008 Salary Adjustments, by Barbara L. Schwemle.
2 The figures used in this report for the number of federal employees in the executive branch
do not include employees of the U.S. Postal Service, military employees of the Department
of Defense, or employees of the intelligence agencies.
3 See [https://www.opm.gov/oca/08tables/locdef.asp] for a list and definitions of the 32 pay
areas.
4 Also by statute (5 U.S.C. §5303), base GS pay (i.e., without the locality differential)
cannot exceed Level V of the Executive Schedule (for 2008, $139,600).

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CRS-2
and any pensions that they are due to receive in the future will also be lower (because
federal pensions are based, in part, on the average of the highest three consecutive
years of base pay).5
This report provides information on the effect of the EX-IV pay cap on pay for
GS employees and discusses the potential implications of the pay cap on the ability
of agencies to recruit and retain staff. First, the report describes the GS and
Executive Schedule pay systems and the annual pay adjustment process.
General Schedule Pay Adjustments
Created by the Classification Act of 1949, the GS pay system is divided into 15
grades of difficulty and responsibility of work, with 10 steps within each grade that
employees progress across through longevity and at least an acceptable level of
performance. The duties and responsibilities of GS-15 employees are described in
5 U.S.C. 5104 as follows:
Grade GS-15 includes those classes of positions the duties of which are - (A) to
perform, under general administrative direction, with very wide latitude for the
exercise of independent judgment, work of outstanding difficulty and
responsibility along special technical, supervisory, or administrative lines which
has demonstrated leadership and exceptional attainments; (B) to serve as head
of a major organization within a bureau involving work of comparable level; (C)
to plan and direct or to plan and execute specialized programs of marked
difficulty, responsibility, and national significance, along professional, scientific,
technical, administrative, fiscal, or other lines, requiring extended training and
experience which has demonstrated leadership and unusual attainments in
professional, scientific, or technical research, practice, or administration, or in
administrative, fiscal, or other specialized activities; or (D) to perform consulting
or other professional, scientific, technical, administrative, fiscal, or other
specialized work of equal importance, difficulty, and responsibility, and
requiring comparable qualifications.
Annual pay adjustments for employees under the GS and certain other systems
are governed by Section 529 of P.L. 101-509, the Federal Employees Pay
Comparability Act of 1990 (FEPCA), which generally requires that covered
employees receive an annual basic pay adjustment and a locality-based comparability
payment. The same amount of basic pay adjustment is provided to nearly all covered
employees and is based on the Bureau of Labor Statistics (BLS) Employment Cost
Index (ECI), which measures changes in private sector wages and salaries. Federal
pay rates are generally required to be increased by an amount that is 0.5% less than
the percentage change in the ECI from one year to the next, but the law stipulates a
15-month lag at the time of each adjustment. For example, the pay increase for
January 2008 was based on the percentage change in the ECI from the quarter ending
on September 30, 2005, to the quarter ending on September 30, 2006. The ECI
change for this period was 3.0%, so the formula required that the basic pay
adjustment (i.e., without the locality differential) for January 2008 would be 2.5%.
5 For more information, see CRS Report 98-810, Federal Employees’ Retirement System:
Benefits and Financing, by Patrick Purcell.

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CRS-3
However, FEPCA also authorizes the President to issue an alternative pay plan (by
September 1 of the year prior to the scheduled effective date) in the event of a
national emergency or serious economic conditions affecting the general welfare.
The locality portion of the annual adjustment for GS and other employees is
based on a comparison of federal pay rates for particular positions to non-federal
rates of pay (as measured by BLS surveys) within designated local pay areas. In
2008, there are 32 such local pay areas (including one called “Rest of the United
States”). Those pay areas (and how they are referred to later in this report) are:
! Atlanta-Sandy Springs-Gainesville, GA-AL (hereinafter, “Atlanta”)
! Boston-Worcester-Manchester, MA-NH-RI-ME (“Boston”)
! Buffalo-Niagara-Cattaraugus, NY (“Buffalo”)
! Chicago-Naperville-Michigan City, IL-IN-WI (“Chicago”)
! Cincinnati-Middletown-Wilmington, OH-KY-IN (“Cincinnati”)
! Cleveland-Akron-Elyria, OH (“Cleveland”)
! Columbus-Marion-Chillicothe, OH (“Columbus”)
! Dallas-Fort Worth, TX (“Dallas-Fort Worth”)
! Dayton-Springfield-Greenville, OH (“Dayton”)
! Denver-Aurora-Boulder, CO (“Denver”)
! Detroit-Warren-Flint, MI (“Detroit”)
! Hartford-West Hartford-Willimantic, CT-MA (“Hartford”)
! Houston-Baytown-Huntsville, TX (“Houston”)
! Huntsville-Decatur, AL (“Huntsville”)
! Indianapolis-Anderson-Columbus, IN (“Indianapolis”)
! Los Angeles-Long Beach-Riverside, CA (“Los Angeles”)
! Miami-Fort Lauderdale-Pompano Beach, FL (“Miami”)
! Milwaukee-Racine-Waukesha, WI (“Milwaukee”)
! Minneapolis-St. Paul-St. Cloud, MN-WI (“Minneapolis”)
! New York-Newark-Bridgeport, NY-NJ-CT-PA (“New York”)
! Philadelphia-Camden-Vineland, PA-NJ-DE-MD (“Philadelphia”)
! Phoenix-Mesa-Scottsdale, AZ (“Phoenix”)
! Pittsburgh-New Castle, PA (“Pittsburgh”)
! Portland-Vancouver-Beaverton, OR-WA (“Portland”)
! Raleigh-Durham-Cary, NC (“Raleigh”)
! Richmond, VA (“Richmond”)
! Sacramento-Arden-Arcade-Yuba City, CA-NV (“Sacramento”)
! San Diego-Carlsbad-San Marcos, CA (“San Diego”)
! San Jose-San Francisco-Oakland, CA (“San Francisco”)
! Seattle-Tacoma-Olympia, WA (“Seattle”)
! Washington-Baltimore-Northern Virginia, DC-MD-VA-WV-PA
(“Washington DC”)
! Rest of the United States
FEPCA provides that payments are to be made within each locality in which federal
pay rates lag behind non-federal rates by more than 5%. However, as was the case
for the basic adjustment, FEPCA also permits the President to establish an alternative
level of locality-based comparability payments because of a national emergency or
serious economic conditions affecting the general welfare. To do so, the President
must transmit a report to Congress at least one month before the comparability

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CRS-4
payments would be payable that describes the alternative level of payments and why
the alternative level is necessary.
This complicated formula for calculating basic and locality payments
notwithstanding, FEPCA has never been implemented without presidential or
congressional intervention. No annual basic pay adjustment was made in 1994, and
the adjustment was reduced in 1995, 1996, and 1998. Reduced amounts of locality
payments were provided in 1995 through 2008. Table 1 below shows the annual and
locality pay adjustments made under FEPCA for the years 1991 through 2008.
Table 1. Annual and Locality Pay Adjustments
Under FEPCA, 1991 to 2008
Locality
Net Increase,
ECI-Based
Locality
Payments
Annual and
Annual
Annual
Payments
Required
Locality Pay
Year
Adjustment
Adjustment
Authorized
by FEPCA
(National
Required by
Authorized
(National
(National
Average,
FEPCA
Average)
Average)
Weighted)
1991
—
4.1%
—
—
4.1%
1992
4.2%
4.2%
—
—
4.2%
1993
3.7%
3.7%
—
—
3.7%
1994
2.2%
0
3.95%
3.95%
3.95%
1995
2.6%
2.0%
6.44%
5.05%
3.08%
1996
2.4%
2.0%
8.58%
5.56%
2.49%
1997
2.3%
2.3%
11.29%
6.37%
3.09%
1998
2.8%
2.3%
14.30%
6.93%
2.84%
1999
3.1%
3.1%
16.95%
7.50%
3.65%
2000
3.8%
3.8%
20.62%
8.62%
4.89%
2001
2.7%
2.7%
23.12%
9.77%
3.76%
2002
3.6%
3.6%
25.92%
10.95%
4.72%
2003
3.1%
3.1%
27.59%
12.12%
4.21%
2004
2.7%
2.7%
25.71%
13.81%
4.24%
2005
2.5%
2.5%
25.51%
15.01%
3.54%
2006
2.1%
2.1%
25.85%
16.22%
3.19%
2007
1.7%
1.7%
24.15%
16.80%
2.24%
2008
2.5%
2.5%
31.02%
17.50%
3.50%
Sources: For the ECI-required annual adjustment, see U.S. Department of Labor, Bureau of Labor Statistics,
Employment Cost Index, Sept. of each year. For the locality payments required by FEPCA, see Report on
Locality-Based Comparability Payments for the General Schedule, Annual Report of the President’s Pay Agent,
Dec. of each year. For the annual and locality pay adjustments authorized, see E.O. 12736, Dec. 12, 1990; E.O.
12786, Dec. 26, 1991; E.O. 12826, Dec. 30, 1992; presidential memorandum of Dec. 1, 1993; E.O. 12944, Dec.
28, 1994; E.O. 12984, Dec. 28, 1995; E.O. 13033, Dec. 27, 1996; E.O. 13071, Dec. 29, 1997; E.O. 13106, Dec.
7, 1998; E.O. 13144, Dec. 21, 1999; E.O. 13182, Dec. 23, 2000; E.O. 13249, Dec. 28, 2001; E.O.s 13282, Dec.
31, 2002, and 13291, Mar. 21, 2003; E.O.s 13322, Dec. 30, 2003, and 13332, Mar. 3, 2004; E.O. 13368, Dec.
30, 2004; E.O. 13393, Dec. 22, 2005; E.O. 13420, Dec. 21, 2006; and E.O. 13454, Jan. 4, 2008.

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CRS-5
The process by which GS pay rates are compared to pay rates outside the federal
government within local pay areas was determined by Congress and is administered
by the Office of Personnel Management (OPM) using data collected by BLS. That
process has been examined by top compensation experts in academia and elsewhere
and found to be valid and reliable.6 Such reviews have found consistently that
federal pay lags behind the private sector by as much as 50% in some localities.
Nevertheless, concerns by Congress and the current and previous Presidents about
the validity of the pay comparison process and the budgetary implications of
implementing the results of that process have led to the establishment of alternative
pay plans in virtually each year since FEPCA was enacted.
Because of differences in locality payments provided, the salaries associated
with each GS grade and step vary by locality. For example, in 2008, GS salaries in
Indianapolis, IN, range from a low of $19,349 to a high of $140,764; in San
Francisco, CA, GS salaries range from a low of $22,591 to a high of $149,000.
Executive Schedule Pay Adjustments

The Executive Schedule (EX), established by Section 303 of P.L. 88-426 in
August 1964, consists of five pay levels. Generally, Level I of EX (EX-I) includes
Cabinet secretaries and other Cabinet-level officials; Level II includes deputy
secretaries of departments, secretaries of military departments, and heads of major
agencies; Level III includes under secretaries of departments and heads of middle-
level agencies; Level IV includes assistant secretaries and general counsels of
departments, heads of smaller agencies, and members of certain boards and
commissions; and Level V includes administrators, commissioners, directors, and
members of boards, commissions, or units of agencies. EX-I through EX-V positions
are specified in statute at 5 U.S.C. §§5312-5316. According to OPM’s “FedScope”
database, as of September 2007, the Executive Schedule covered 468 employees in
the highest levels of federal agencies.7 Of these, 275 were in cabinet departments,
including 36 in the Department of Defense, 32 in the Department of State, and 24 in
the Department of Energy. The largest number of EX employees were at EX-IV
(275), followed by EX-III (98), EX-II (37), and EX-I and EX-V (18 each).
Individuals in EX positions, as well as leaders and Members of Congress, the
Vice President, and federal justices and judges, receive an annual pay adjustment
under the Ethics Reform Act of 1989, P.L. 101-194 (103 Stat. 1716, at 1769, 5
U.S.C. §5318 note). The pay adjustment is based on the percentage change in the
wages and salaries for the private industry workers element of the ECI, minus 0.5%
6 For example, Charles H. Fay, Chair of the Human Resource Management Department at
Rutgers University School of Management and Labor Relations said that “BLS uses
impeccable methodology in gathering reliable and valid data to price the GS, and applies
sophisticated statistical methods to evaluate survey data and apply it to the GS for the
Federal Salary Council.” Testimony of Charles H. Fay before the House Subcommittee on
the Federal Workforce, Postal Service, and the District of Columbia; and the Senate
Subcommittee on the Oversight of Government Management, the Federal Workforce, and
the District of Columbia, May 22, 2007, p. 13.
7 The FedScope database may be accessed at [http://www.fedscope.opm.gov].

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CRS-6
(December indicator), and is rounded to the nearest multiple of $100. In January
2008, individuals paid on the EX schedule received a 2.5% salary increase, resulting
in the following rates of pay:
! EX-I — $191,300
! EX-II — $172,200
! EX-III — $158,500
! EX-IV — $149,000
! EX-V — $139,600
Studies have shown that employees in the EX pay system have been losing
buying power in recent decades. For example, in June 2006, using the Gross
Domestic Product (GDP) price deflator, the Government Accountability Office
(GAO) reported that EX-I positions were paid 27% less in constant dollars than they
were in 1970.8 EX-II through EX-V positions had also experienced losses in
inflation-adjusted dollars from 1970 to 2006, although not as much (between 7% and
11%). When using the Consumer Price Index (CPI) to adjust for inflation, GAO
found that the buying power losses during this period were even greater, ranging
from 25% to 41% for EX-I through EX-V.
GS-15 Pay Compression Caused by EX-IV Linkage
GS employees at grade 15, step 10, in the San Francisco pay area were the first
to encounter the EX-IV pay cap as part of the 2003 pay adjustment. Since then, as
Table 2 and Figure 1 below indicate, GS-15 employees in more and more pay areas,
and at lower and lower step levels within the grade, have been affected by the EX-IV
pay cap. By 2008, GS-15 employees in 12 pay areas at an aggregate total of 20 steps
were affected.
8 U.S. Government Accountability Office, Human Capital: Trends in Executive and Judicial
Pay, GAO-06-708 (June 2006).

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CRS-7
Table 2. The Aggregate Number of Pay Areas and GS-15 Pay
Steps Affected by the EX-IV Pay Cap Has Grown
Aggregate
Aggregate
Number of
Number of
Affected Pay Areas and Steps
Year
EX-IV Cap
Pay Areas
Pay Steps
(with new areas and steps in bold)
Affected
Affected
2003
$134,000
1
1
San Francisco (10)
2004
$136,900
2
3
Houston (10)
San Francisco (9 and 10)
2005
$140,300
4
6
Houston (9 and 10)
Los Angeles (10)
New York (10)
San Francisco (9 and 10)
2006
$143,000
7
10
Chicago (10)
Detroit (10)
Hartford (10)
Houston (9 and 10)
Los Angeles (10)
New York (10)
San Francisco (8, 9, and 10)
2007
$145,400
9
15
Boston (10)
Chicago (10)
Detroit (10)
Hartford (10)
Houston (9 and 10)
Los Angeles (9 and 10)
New York (9 and 10)
San Diego (10)
San Francisco (7, 8, 9, and 10)
2008
$149,000
12
20
Boston (10)
Chicago (10)
Denver (10)
Detroit (10)
Hartford (9 and 10)
Houston (8, 9, and 10)
Los Angeles (9 and 10)
New York (9 and 10)
Sacramento (10)
San Diego (10)
San Francisco (7, 8, 9, and 10)
Washington DC (10)
Source: CRS, based on information from OPM.

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CRS-8
Figure 1. An Increasing Aggregate Number of Pay Areas and GS-15
Steps Have Been Affected by the EX-IV Pay Cap
25
ed
20
ffect
A
s
p
te 15
/S
reas
10
ay A
f P
o
er
5
b
m
u
N
0
2003
2004
2005
2006
2007
2008
Pay Areas
Steps

Source: CRS, based on information from OPM.
According to data provided by OPM (Table 3 below), after the January 2008
pay increase, more than 7,100 GS-15 employees had their pay capped at the EX-IV
rate — up from 824 who were capped before the increase. The jump in the number
of capped employees is largely attributable to the addition of the Washington, DC,
pay area to the list of areas affected by the EX-IV cap.

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CRS-9
Table 3. More than 7,100 GS-15/Equivalent Employees Have
Been Affected by the EX-IV Pay Cap
Number of GS-15 Steps
Number of Employees
Pay Area
Affected
Affected
Boston
1( Step 10)
86
Chicago
1 (Step 10)
82
Denver
1 (Step 10)
93
Detroit
1 (Step 10)
5
Hartford
2 ( Steps 9 and 10)
9
Houston
3 (Steps 8, 9, and 10)
235
Los Angeles
2 (Steps 9 and 10)
58
New York
2 (Steps 9 and 10)
164
Sacramento
1 (Step 10)
11
San Diego
1 (Step 10)
35
San Francisco
4 (Steps 7, 8, 9, and 10)
248
Washington, DC
1 (Step 10)
6,080
Total Across All Pay
20 steps
7,106
Areas
Source: CRS, based on information from OPM.
If the EX-IV pay cap remains in place, more and more locality pay areas, and
steps within those pay areas, will likely be affected by the cap in the future. As
Table 4 below shows, based on the average rates of increase in the EX-IV cap and
GS pay rates in the various pay areas since 2002, GS-15, step 10, employees in five
additional pay areas (Philadelphia, Seattle, Minneapolis, Miami, and Dallas-Fort
Worth) are likely to have their salaries capped at the EX-IV rate in 2009. By that
point (assuming the total number of pay areas stays the same), employees at GS-15,
step 10, (and, in several areas, below step 10) in more than half of the 32 pay areas
would receive the same salary — effectively eliminating the locality-based pay
diversification that was contemplated by FEPCA. The trend data indicate that GS-15,
step 10, employees in several other pay areas (e.g., Cincinnati, Atlanta, and
Cleveland) are likely to be capped by 2010 or 2011.

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CRS-10
Table 4. GS-15, Step 10 Pay Rates May Be Capped in Five
Additional Pay Areas by 2009
EX-IV
GS-15, Step 10 Pay in
Year
Cap
Philadelphia
Seattle
Minneapolis
Miami
Dallas
2008
$149,000
$148,986
$148,502
$148,105
$147,707
$147,249
2009
$152,400
$154,379;
$153,878;
$153,455;
$152,760;
$152,565;
but capped at
but capped at
but capped at
but capped at
but capped at
$152,400
$152,400
$152,400
$152,400
$152,400
2010
$155,900
$159,968;
$159,448;
$158,984;
$157,984;
$158,072;
but capped at
but capped at
but capped at
but capped at
but capped at
$155,900
$155,900
$155,900
$155,900
$155,900
2011
$159,500
$165,759;
$165,220;
$164,734;
$163,387;
$163,779;
but capped at
but capped at
but capped at
but capped at
but capped at
$159,500
$159,500
$159,500
$159,500
$159,500
Source: CRS.
Note: Estimates for the EX-IV caps and the GS-15, step 10, rates in the five pay areas for 2009
through 2011 are based on the average rates of increases in the cap and in those pay areas from 2002
through 2008.
Also, because the EX-IV pay cap has affected GS-15 employees at lower and
lower steps over time, eventually, the cap is likely to affect employees at the GS-14
pay grade. As Figure 2 below indicates, based on the average rates of increase in the
EX-IV cap and GS pay rates in San Francisco since 2002, GS-14, step 10, employees
are expected to be affected by the EX-IV pay cap in the year 2012.

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CRS-11
Figure 2. GS-14, Step 10 Employees in San Francisco May Have Their
Pay Capped by 2012
$166,900
170,000
$159,500
160,000
150,000
$130,000
$159,207
140,000
130,000
120,000
)
110,000
($
ry
100,000
$108,642
la
a
90,000
80,000
l S
a
70,000
nnu
60,000
A
50,000
40,000
30,000
20,000
10,000
0
2002 2003 2004 2005 2006 2007 2008 *2009 *2010 *2011 *2012 *2013
EX-IV
GS-14/10 in San Francisco
Source: CRS
Note: Projections for the EX-IV caps and the GS-15, step 10, rates for 2009 through 2013
(marked with asterisks) are based on the average rates of increases in the cap and pay rates in
the San Francisco pay area from 2002 through 2008.
Concluding Observations
Because of the interaction between (1) the current EX-IV statutory limitation on
GS base pay and locality pay, and (2) the current salaries of some 275 EX-IV
employees, more than 7,100 GS employees in 12 pay areas are not receiving pay
increases that they would otherwise be due. Also, the number of pay areas and GS
employees affected by the EX-IV pay cap are expected to grow in the next few years.
Based on recent trends, by 2009, GS-15 employees in more than half of the 32 federal
pay areas may be affected. For these “capped” employees, the notion of locality-
based differentials will have been diminished, as all of them will be making the same
salary regardless of location. Also, because their salary increases are tied to the lower
rates of increase in the Executive Schedule, these GS-15 employees will be losing
buying power at the same rate as their Executive Schedule counterparts. By 2012,
employees in the San Francisco pay area at the GS-14 level may have their pay
capped. Should that occur, some GS-14 employees, seeing that their pay cannot
increase if they are promoted to GS-15, may be unwilling to take on the sometimes
significantly greater responsibilities associated with the higher grade.

---

CRS-12
Also, some GS-15 employees, seeing that their “high-three” salaries (used to
calculate retirement annuities) cannot increase at the same pace as lower-graded
employees in the same pay area, may be more likely to retire as soon as they reach
retirement eligibility — possibly exacerbating the “retirement tsunami” or “brain
drain” that has been viewed as a concern for the federal workforce.9 For example,
as Table 5 below shows, because of the EX-IV pay cap, GS-15, step 10, employees
in San Francisco have forgone a cumulative total of nearly $49,000 in salary since
2002. If one of those GS-15, step 10, employees is under the Civil Service
Retirement System (CSRS) and retires at the end of 2008, the employee’s high-three
average salary would be $12,565 less than it would have been without the cap. As
a consequence, the employee’s annual pension (assuming exactly 30 years of service)
would be $7,068 less than it would have been without the cap. Over a 20-year period
of retirement (not counting annual increases in pensions), the employee could be
expected to forgo an additional $141,360 in retirement income because of the EX-IV
pay cap during their last years of service.10
9 See, for example, testimony of Linda Springer, Director, U.S. Office of Personnel
Management, in U.S. Congress, House Committee on Oversight and Government Reform,
Subcommittee on the Federal Workforce, Postal Service, and the District of Columbia,
“Federal Benefits: Are We Meeting Expectations?” hearings, 110th Cong., 1st sess., Aug. 2,
2007; and Jenny Mandel, “Retirement-eligible acquisition workers to triple in 10 years,”
Government Executive, Aug. 9, 2006, available at [http://www.govexec.com/dailyfed/0806/
080906m1.htm].
10 The employee’s high-three average salary with the cap would be $145,800 ($143,000 plus
$145,400, plus $149,000 divided by three); the employee’s high-three average salary
without the cap would be $158,365 ($153,080 plus $157,673, plus $164,342 divided by
three). Under CSRS, the annual pension for a 30-year employee is 56.25% of the
employee’s high-three average salary. Therefore, the pension for the employee with the cap
would be $82,012; the pension for the employee without the cap would be $89,080 —
$7,068 more, or $141,360 more over a 20-year period of retirement (not counting any
inflation-protection increases in pensions during this period).

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CRS-13
Table 5. Effect of the EX-IV Pay Cap on GS-15, Step 10, Salaries
in San Francisco, 2002 Through 2008
Salary
Salary
Salary with
Forgone
Salary
without the
Year
the EX-IV
because of the
Increase
EX-IV Pay
Pay Cap
EX-IV Pay
Cap
Cap
2002
5.42%
$127,798
$127,798
$0
2003
4.87%
$134,000
$134,022
$22
2004
5.35%
$136,900
$141,192
$4,292
2005
4.30%
$140,300
$147,263
$6,963
2006
3.95%
$143,000
$153,080
$10,080
2007
3.00%
$145,400
$157,673
$12,273
2008
4.23%
$149,000
$164,342
$15,342
Total
——-
——-
——-
$48,972
Source: CRS analysis based on OPM data.
The link between EX-IV pay and the top of the GS pay system is only one of
several statutorily based interrelationships within and between federal pay schedules.
The Appendix of this report provides a chart showing the salary and total
compensation limitations between different schedules. For example, as discussed at
length in another CRS report, the salaries of Members of Congress and officials paid
at EX-II generally have been in parity since the Executive Schedule was established
in 1964.11 In agencies where the Senior Executive Service (SES) appraisal systems
have not been certified by OPM, SES base pay cannot exceed EX-III; but where the
SES appraisal systems have been certified, base pay may be up to EX-II. Base pay
plus locality pay for Senior Level (SL) and Scientific or Professional (ST) employees
cannot exceed EX-III — one level higher than the cap for GS employees.12 Total
compensation (i.e., base salaries plus locality pay plus bonuses) for GS employees
cannot exceed EX-I — the same cap that applies to SES, SL, and ST employees in
agencies without certified appraisal systems. However, in agencies where OPM has
certified the appraisal system, total compensation for SES, SL, and ST employees can
be as high as the Vice President’s salary ($221,100). Also, under the Ethics Reform
Act of 1989, the pay adjustment for the Executive Schedule can be no larger than the
GS base pay adjustment, regardless of the amount specified by the relevant ECI data
(the December ECI minus 0.5%).
11 CRS Report RS20388, Salary Linkage: Members of Congress and Certain Federal
Executive and Judicial Officials, by Barbara Schwemle. Members of Congress, District
Court judges, and other members of the legislative and executive branches were paid the
same as EX-II until 2007, when Congress acted to deny itself a pay increase (P.L. 110-5,
Feb. 15, 2007). Therefore, in 2007 and 2008, the salaries for Members of Congress and
District Court judges have been somewhat less than EX-II.
12 See 5 U.S.C §5304(g)(2).

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CRS-14
Because of this interlocking series of pay and compensation linkages, raising the
pay cap on GS pay rates (e.g., from EX-IV to EX-III) to relieve the pay compression
that has occurred at the GS-15 level in recent years could create other problems. For
example, raising the GS total pay cap (i.e., base pay plus locality pay) from EX-IV
to EX-III would allow GS employees to earn up to $158,500 in 2008 — the same cap
that applies to SL and ST employees, and to SES employees in agencies without
certified appraisal systems. As a result, GS employees could earn as much or more
than their supervisors. This type of “pay compression” or “pay inversion” is
reportedly already occurring in some areas, with SES employees earning less than the
employees they supervise.13 On the other hand, SES, SL, and ST employees in
agencies with certified appraisal systems can also already earn salaries and bonuses
that exceed the salaries of their agency heads (since presidentially appointed agency
heads cannot receive locality pay or bonuses).14
The Ethics Reform Act of 1989 includes two provisions under which pay rates
for Members of Congress, the Vice President, federal officials paid under the EX,
and certain federal justices and judges can be set. The first of these provisions
provides for a quadrennial review of the salaries of federal officials by a Citizens’
Commission on Public Service and Compensation.15 The commission is to make
recommendations to the President. The law requires the commission and the
President to submit recommendations to Congress providing that the salaries of the
! Speaker of the House of Representatives, the Vice President of the
United States, and the Chief Justice of the United States shall be
equal;
! Majority and Minority Leaders of the House of Representatives and
the Senate, the President pro tempore of the Senate, and Level I of
the Executive Schedule (e.g., Cabinet secretaries) shall be equal; and
! Senators, Members of the House of Representatives, the Resident
Commissioner of Puerto Rico, Delegates to the House, judges of the
U.S. District Courts, judges of the United States Court of
International Trade, and Level II of the Executive Schedule (deputy
13 See, for example, statement for the record of Carol A. Bonosaro, President of the Senior
Executive Association, in U.S. Congress, House Committee on Oversight and Government
Reform, Subcommittee on the Federal Workforce, Postal Service, and the District of
Columbia, Federal Pay, hearings, 110th Cong., 1st sess., July 31, 2007. Ms. Bonosaro said
that GS employees working for one Senior Executive in a high cost-of-living area were
“receiving salaries $20,000 more than he is, and they are also eligible for compensatory time
for travel or work after duty hours or on weekends.”
14 As noted earlier in this report, SES, SL, and ST employees in agencies with certified
performance appraisal systems can earn total compensation up to the salary of the Vice
President ($221,100 in 2008); Cabinet secretaries heading major executive departments and
agencies are paid at EX-I ($191,300 in 2008).
15 Ethics Reform Act of 1989, P.L. 101-194, §701(a), Nov. 30, 1989; 103 Stat. 1716, at
1763; 2 U.S.C. §351.

---

CRS-15
secretaries of Cabinet departments, secretaries of military
departments, and heads of major agencies) shall be equal.16
The commission, however, has never been activated. The commission was initially
funded in the 1993 Treasury, Postal Service, and General Government
Appropriations Act, but that appropriation was rescinded in the 1994 act.17
Congress has not systematically examined the EX pay system since the passage
of the Ethics Reform Act of 1989, and some have called for Congress to do so now
to avert even more pay compression problems in the future.18
16 Ibid., §701(I); 103 Stat. 1716, at 1766; 2 U.S.C. §362.
17 Treasury, Postal Service, and General Government Appropriations Act, 1993, P.L. 102-
393, Oct. 6, 1992; 106 Stat. 1729, at 1743; and Treasury, Postal Service, and General
Government Appropriations Act, 1994, P.L. 103-123, Oct. 28, 1993; 107 Stat. 1226, at 1239.
The appropriation of $250,000 was to remain available until Sept. 30, 1994.
18 U.S. House, Committee on Government Reform, Subcommittee on the Federal Workforce
and Agency Organization, Executive and Judicial Compensation in the Federal Government
(Quadrennial Commission), hearing, Sept. 20, 2006. Transcript available from the
committee.

---

CRS-16
Appendix. Major Federal White-Collar Pay
Schedules
Total
Number of
Base Pay
Locality
Salary
Compensation
Pay Schedule
Employees
Adjustment
Pay
Limitations
Limitations
(Sept. 2007)
Mechanism
Available
(Jan. 2008)
(Jan. 2008)
Executive
468
Employment
No
EX-I: $191,300
Presidentially
Schedule (EX)
Cost Index
EX-II: $172,200
appointed and
(ECI, Dec. data)
EX-III:
Senate confirmed
minus 0.5%, but
$158,500
EX members are
cannot be (1)
EX-IV:
not eligible for
more than the
$149,000
awards and
GS pay
EX-V:
bonuses.
increase, (2)
$139,600
greater than 5%,
or (3) less than
zero.
Senior Level
994
ECI (Sept. data)
Yes. The
Base pay ranges
Total
(SL) and
minus 0.5%.
Pay Agent
from 120% of
compensation in
Scientific or
Annual
may extend
the minimum
agencies with
Professional
adjustment may
locality pay
base pay for
certified
(ST)
be provided at
to SL and
GS-15
performance
the discretion of
ST, and has
($114,468) to
appraisal systems
agency heads.
done so
EX-IV
may be up to the
each year
($149,000) (5
Vice President’s
since 1994.
U.S.C. §5376).
salary ($221,100)
——————-
(5 U.S.C.
Base pay and
§5307(d)).
locality pay
———————
combined
—-
cannot exceed
In agencies
EX-III
without certified
($158,500)
appraisal
(5 U.S.C.
systems, total
§5304(g)(2))
compensation
——————-
may be up to
Locality pay -
EX-I ($191,300)
Wash. DC pay
(5 U.S.C.
area: $138,380
§5307(a)(1)).
to $158,500

---

CRS-17
Total
Number of
Base Pay
Locality
Salary
Compensation
Pay Schedule
Employees
Adjustment
Pay
Limitations
Limitations
(Sept. 2007)
Mechanism
Available
(Jan. 2008)
(Jan. 2008)
Senior
7,231
Automatic pay
No
Base pay:
Total
Executive
(6,553
increases no
$114,468-
compensation in
Service (SES)
Career)
longer occur; an
$158,500 or
agencies with
agency may
$172,200
certified
increase a
——————
performance
senior
— -
appraisal systems
executive’s pay,
Base pay in
may be up to the
as long as his or
agencies whose
Vice President’s
her performance
performance
salary ($221,100)
or contributions
appraisal
(5 U.S.C.
warrant an
systems have
§5307(d)).
increase, in
been certified
———————
order to
by OPM may be
— —
maintain the
up to EX-II
In agencies
individual’s
($172,200).
without certified
relative position
——————
appraisal
within the SES
——
systems, total
pay rate range.
In agencies
compensation
(5 CFR
whose appraisal
may be up to
534.404(b)(3))
systems have
EX-I ($191,300)
not been
(5 U.S.C.
certified, base
§5307(a)(1)).
pay may be up
to EX-III
($158,500).

---

CRS-18
Total
Number of
Base Pay
Locality
Salary
Compensation
Pay Schedule
Employees
Adjustment
Pay
Limitations
Limitations
(Sept. 2007)
Mechanism
Available
(Jan. 2008)
(Jan. 2008)
General
1,257,821
ECI — Sept.
Yes
Base pay cannot
Total
Schedule (GS)
(GS and
data minus
exceed EX-V
compensation
identical)
0.5%
($139,600)
(salary plus
(5 U.S.C.
bonuses) cannot
1,313,919
§5303(f)).
exceed EX-I
(GS and
——————
($191,300)
related)
— -
(5 U.S.C.
Base pay and
§5307(a)(1)).
locality pay
combined
cannot exceed
EX-IV
($149,000)
(5 U.S.C.
§5304(g)(1))
——————
——
Base Pay:
GS-1, step 1
($17,046) to
GS-15, step 10
($124,010)
——————
——
Locality Pay -
Wash. DC pay
area: GS-1,
step 1 ($20,607)
to GS-15, step
10 ($149,000)
Sources: Data on the number of employees in each pay system are from OPM’s FedScope database,
accessible at [http://www.fedscope.opm.gov/employment.asp].

---