Obama to propose 0.5 percent increase in federal worker's pay

President Obama is on track to propose a modest increase in federal civilian workers pay as part of his 2013 budget due in early February, an administration official confirmed Friday.

The 0.5 percent pay increase comes after two years during which civilian pay was frozen to save billions. The 2013 pay increase is far less than the current rate of inflation, which stood at 3.4 percent in November compared to a year earlier.

Republicans have proposed keeping the civilian pay freeze in place for at least one more year.

By keeping the increase modest, the White House expects to free up $2 billion for other uses in 2013, and $28 billion over 10 years compared to the budget baseline.

By comparison, a full-year payroll-tax break of 2 percentage points costs $112 billion, according to the White House. It remains to be seen how Obamas proposal will affect payroll-tax-cut negotiations that must conclude by the end of February

The Office of Management and Budget has not yet set a date for the release of the budget, but it traditionally comes out the first Monday in February.

Congress would have to approve the pay hike. Republicans, who control the House, have urged an extension of the pay freeze for at least another year to help pay for continuing payroll-tax relief — an idea sharply criticized by the National Treasury Employees Union (NTEU) and other federal employee unions.

“Federal employees are working with severely limited resources,” NTEU President Colleen Kelley wrote in a letter to the 20 lawmakers on the conference committee earlier this week. “They have faced government shutdowns four times this year, yet they have worked diligently to deliver services to the public. To ask them to bear such a disproportionate additional burden is unfair and unacceptable.”

Kelley reacted to the news of the proposed pay increase.

“The good news is that the pay freeze is ending, but I am disappointed at the size of the proposed 2013 increase,” she said.

The White House and congressional Democrats have pushed for a second year of the payroll-tax holiday as the economy slowly recovers from a deep recession.

Lawmakers enacted a two-month extension of the cut, along with a Medicare “doc fix” and an extension of federal unemployment benefits, as a temporary resolution of a holiday standoff with House Republicans who had insisted on a final deal before years end.

A conference committee is expected to begin meetings later this month to discuss a way forward, with the big question being how to pay for the measure.

But, “a permanent pay freeze is not an acceptable policy,” one of the senior administration officials said Friday, according to a Washington Post report.

“While modest, a 0.5 percent increase reflects the belt-tightening we must do in these difficult times,” the official said.

— Updated at 12:09 p.m.