The President's Pay Agent

Locality Pay Areas

Under 5 U.S.C. 5304(e)(2)(A), the Federal Salary Council made a recommendation to the Pay Agent on the composition of locality pay areas for 2006. This recommendation was transmitted to the Pay Agent in a memorandum dated October 21, 2004. (See Appendix I.)

Pay Disparities Below the RUS Pay Disparity

Last year, the Council concluded that the Kansas City, Orlando, and St. Louis locality pay areas should be merged with the RUS locality pay area and the survey resources used elsewhere. The Pay Agent tentatively agreed to that recommendation, but subsequently decided to ask the Council to review the matter again this year. The Council has again recommended that we drop Kansas City, Orlando, and St. Louis as separate locality pay areas because the weighted average of the OCSP and NCS pay disparities for each of those locations continues to be below that for the RUS locality pay area. We regretfully conclude that these three areas should be dropped, since the disparities have been close to or below that for the RUS locality pay area under both surveys for each of the last 3 years, as shown below:

Table 3.

Locations with Pay Gaps below that for the Rest of U.S. Locality Pay Area

The Council also recommended that BLS reallocate survey resources from these metropolitan areas to increase the sample size in several other metropolitan areas currently surveyed by BLS as part of the RUS locality pay area. The Council selected RUS metropolitan areas to be surveyed in rank order by GS employment, provided the area has at least 2,500 GS employees, at least 375,000 nonfarm workers, and non-Federal pay levels 5 percent or more higher than the RUS area based on the BLS model described in Appendix II. (The last criterion automatically excludes any area in RUS that is not currently surveyed by BLS.) The Pay Agent approved that recommendation of the Federal Salary Council and BLS has discontinued salary surveys in Kansas City, Orlando, and St. Louis for locality pay purposes as of 2005. BLS plans to begin redesigning its existing surveys in the following areas: the Phoenix-Mesa-Scottsdale, AZ Metropolitan Statistical Area (MSA), the Memphis, TN-MS-AR MSA, the Austin-Round Rock, TX MSA, the Louisville-Elizabethtown-Scottsburg, KY-IN Combined Statistical Area (CSA), the Buffalo-Niagara-Cattaraugus, NY CSA, and the Raleigh-Durham-Cary, NC CSA.

The Council also reviewed pay gaps for Austin, Buffalo, Louisville, Memphis, Phoenix, and Raleigh this year. These data are from small-scale surveys BLS conducts as part of its data collection for the RUS locality pay area. While we asked BLS to expand the sample in these areas, they have not yet been able to do so. Because these are small-scale RUS surveys, the sample size is generally smaller than would be the case if BLS had redesigned the surveys to the scope of a locality pay survey. Pay Agent staff asked BLS to include these areas in a separate model with the existing locality pay areas and produce model-filled data files for review.

The pay gaps for these areas using the small-scale NCS surveys with model fills for missing jobs (there are no OCSP surveys for these areas) are shown in the table below.

Table 4.

Pay Gaps in Six New Areas

The Council concluded that we should make Buffalo, Phoenix, and Raleigh locality pay areas in 2006 based on the above results. The Council believes Memphis should not become a locality pay area in 2006 because the survey results are too close to the pay gap for RUS. Since Austin and Louisville pay gaps are below RUS, the Council recommended that those areas not become locality pay areas at this time. We agree with the Council's recommendation and plan to add Buffalo, Phoenix, and Raleigh as separate locality pay areas in 2006. We ask BLS to continue its plans to ensure an appropriate sample size for its salary surveys in all six areas so that the Council and the Pay Agent can review data from appropriate surveys in the future. We also note that BLS canceled its existing survey of Raleigh as part of its budget reduction in 2004, and that we will have to use the same data on Raleigh, appropriately updated, next year. BLS should endeavor to reinstate the Raleigh survey as soon as possible.

Please note that the RUS data used in this report include data from the six areas identified above, as specified by the Pay Agent in our 2003 Report. These surveys are included in the RUS data because BLS and OPM did not know beforehand which, if any, to exclude, and because data from these areas represent other areas in BLS' RUS sampling scheme. We have adjusted the RUS pay gap in a cost neutral fashion to net out the recommended Buffalo, Phoenix, and Raleigh locality pay areas, as shown in Table 5 below.

Table 5.
Adjusting the RUS Pay Gap to Remove Separate Areas

The RUS data BLS provided this year already included Kansas City, Orlando, and St. Louis, so there is no need to combine the pay gap data for these locations with RUS data.

Defining Locality Pay Areas

OPM published a proposed rule in the Federal Register on September 22, 2004, on behalf of the Pay Agent to implement changes in locality pay area boundaries recommended by the Federal Salary Council in 2003 (69 FR 56721). One of the Council's recommendations was that Metropolitan Statistical Areas and Combined Statistical Areas adjacent to locality pay areas should be included in the pay area if the MSA or CSA has 1,500 or more GS employees and an employment interchange measure of 7.5 percent or more. Since the Council's review in 2003, GS employment in the York-Hanover-Gettysburg, PA CSA, which is adjacent to the Washington-Baltimore locality pay area, has increased above the 1,500 GS employee threshold recommended by the Council. The York area already passed the Council's recommended 7.5 percent commuting criterion with an employment interchange measure of 10.73 percent.

While the York area was not included in the Council's 2003 recommendation for locality pay areas in 2005 and was not specifically identified in the proposed rule published in the Federal Register, the Council believes we should add the York CSA to the Washington-Baltimore locality pay area in January 2005. We plan to follow the Council's recommendation, and OPM will respond to this comment when it publishes a final rule on the 2005 locality pay areas.

The Council has also recommended and we have agreed that Buffalo, Phoenix, and Raleigh should become new locality pay areas in January 2006. OPM will evaluate areas adjacent to these areas and include a report on its findings in the Federal Register notice that contains a proposed rule to establish these new locality pay areas.

Locality Pay Areas for 2006

1. Atlanta-Sandy Springs-Gainesville, GA-AL Combined Statistical Area;
2. Boston-Worcester-Manchester, MA-NH Combined Statistical Area, plus the Providence-New Bedford-Fall River, RI-MA Metropolitan Statistical Area, Barnstable County, MA, and Berwick, Eliot, Kittery, South Berwick, and York towns in York County, ME;
3. Buffalo-Niagara-Cattaraugus, NY Combined Statistical Area;
4. Chicago-Naperville-Michigan City, IL-IN-WI Combined Statistical Area;
5. Cincinnati-Middletown-Wilmington, OH-KY-IN Combined Statistical Area;
6. Cleveland-Akron-Elyria, OH Combined Statistical Area;
7. Columbus-Marion-Chillicothe, OH Combined Statistical Area;
8. Dallas-Fort Worth, TX Combined Statistical Area;
9. Dayton-Springfield-Greenville, OH Combined Statistical Area;
10. Denver-Aurora-Boulder, CO Combined Statistical Area, plus the Ft. Collins-Loveland, CO Metropolitan Statistical Area and Weld County, CO;
11. Detroit-Warren-Flint, MI Combined Statistical Area, plus Lenawee County, MI;
12. Hartford-West Hartford-Willimantic, CT Combined Statistical Area, plus the Springfield, MA Metropolitan Statistical Area and New London County, CT;
13. Houston-Baytown-Huntsville, TX Combined Statistical Area;
14. Huntsville-Decatur, AL Combined Statistical Area;
15. Indianapolis-Anderson-Columbus, IN Combined Statistical Area, plus Grant County, IN;
16. Los Angeles-Long Beach-Riverside, CA Combined Statistical Area, plus the Santa Barbara-Santa Maria-Goleta, CA Metropolitan Statistical Area and all of Edwards Air Force Base, CA;
17. Miami-Fort Lauderdale-Miami Beach, FL Metropolitan Statistical Area, plus Monroe County, FL;
18. Milwaukee-Racine-Waukesha, WI Combined Statistical Area;
19. Minneapolis-St. Paul-St. Cloud, MN-WI Combined Statistical Area;
20. New York-Newark-Bridgeport, NY-NJ-CT-PA Combined Statistical Area, plus Monroe County, PA, and Warren County, NJ;
21. Phoenix-Mesa-Scottsdale, AZ Metropolitan Statistical Area;
22. Philadelphia-Camden-Vineland, PA-NJ-DE-MD Combined Statistical Area, plus Kent County, DE, Atlantic County, NJ, and Cape May County, NJ;
23. Pittsburgh-New Castle, PA Combined Statistical Area;
24. Portland-Vancouver-Beaverton, OR-WA Metropolitan Statistical Area, plus Marion County, OR, and Polk County, OR;
25. Raleigh-Durham-Cary, NC Combined Statistical Area;
26. Richmond, VA Metropolitan Statistical Area;
27. Sacramento--Arden-Arcade--Truckee, CA-NV Combined Statistical Area, plus Carson City, NV;
28. San Diego-Carlsbad-San Marcos, CA Metropolitan Statistical Area;
29. San Jose-San Francisco-Oakland, CA Combined Statistical Area, plus the Salinas, CA Metropolitan Statistical Area and San Joaquin County, CA;
30. Seattle-Tacoma-Olympia, WA Combined Statistical Area;
31. Washington-Baltimore-Northern Virginia, DC-MD-VA-WV Combined Statistical Area, plus the Hagerstown-Martinsburg, MD-WV Metropolitan Statistical Area, the York-Hanover-Gettysburg, PA Combined Statistical Area, Culpeper County, VA, and King George County, VA; and
32. Rest of U.S.-consisting of those portions of the continental United States not located within another locality pay area.

Component counties of MSAs and CSAs are identified in lists 2 through 4 of OMB Bulletin 04-03, which is available on the Internet at http://www.whitehouse.gov/omb/bulletins/fy04/b04-03.html.