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 2005. This recommendation was transmitted to the Pay Agent in a memorandum dated October 28, 2003. (See Appendix I.)

Pay Disparities Below the RUS Pay Disparity

The Council 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 is below that for the RUS locality pay area and the disparity has been close to or below that for the RUS locality pay area under either survey for the last 2 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 metropolitan areas currently surveyed by BLS as part of the RUS locality pay area. The Council selected metropolitan areas to be surveyed in rank order by GS employment, provided the metropolitan 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 approves this recommendation of the Federal Salary Council and asks BLS to discontinue salary surveys in Kansas City, Orlando, and St. Louis for locality pay purposes as soon as feasible and begin augmenting existing surveys in as many of the following areas as possible:

Table 4.

Locations Currently in RUS to be Surveyed if Resources Become Available

The Pay Agent also asks that BLS formulate a survey plan and report to the Pay Agent in August 2004 on how many of the new areas could be surveyed for locality pay purposes and under what timeline. BLS should submit data to the Pay Agent that includes any locations shown in the above table which BLS plans to survey separately for locality pay purposes under its survey plan as a prospective separate locality pay area. The data submitted in 2004 for areas shown above and included in the survey plan should be reported in a separate computer data file with model fills and GS employment weighting, and each affected area should be included in the 2004 BLS pay model as a separate locality pay area. (BLS may continue to use the data from any or all of these areas in its RUS estimates, if needed, until such time as the geographic scope of the RUS surveys is revised.)

For the purpose of calculating pay disparities for this report, we have combined the pay disparities for Kansas City, Orlando, and St. Louis with that for the RUS locality pay area as shown below:

Combining Areas with Pay Gaps Below RUS

Defining Locality Pay Areas

In 1993, the Council recommended and the Pay Agent approved using Metropolitan Statistical Areas (MSAs) defined by the Office of Management and Budget (OMB) as the basis for defining locality pay areas. MSAs in the 1990s were based on population size and density and commuting patterns. The Council also recommended and the Pay Agent approved criteria for evaluating adjacent areas for inclusion in MSA-based locality pay areas.

In June 2003, OMB redefined MSAs using new criteria and 2000 census data. The redesigned MSAs also include changes in nomenclature. For example, OMB discontinued Consolidated Metropolitan Statistical Areas (CMSAs) and added Combined Statistical Areas (CSAs) and Micropolitan Statistical Areas. CSAs are similar in concept to CMSAs, as they are formed by combining adjacent MSAs with a high level of commuting. Micropolitan Statistical Areas are a new classification consisting of locations with smaller population cores.

The Council, after considerable review, recommended that the Pay Agent adopt the new MSAs and CSAs as the basis for defining locality pay areas in 2005. The Council reached this conclusion because counties are added to MSAs based on the level of commuting between the county and the core of the MSA. In the Council's view, Federal agencies in any county where 25 percent or more of the resident workers commute to the MSA or 25 percent or more of the workers employed in the county commute from the MSA would experience serious recruitment or retention problems if the county were excluded from the locality pay area. While CSAs are established using somewhat different criteria and commuting rates than used for adding outlying counties to MSAs, commuting rates are still the primary factor in establishing CSAs, and the Council recommended that CSA definitions be used whenever possible. The Council also recommended that we use county-based MSAs in New England in lieu of town-based MSAs. Finally, the Council recommended new criteria for evaluating areas adjacent to an MSA-based locality pay area.

Under the Council's recommendations, 76 counties (or partial counties in New England) with about 5,300 GS employees would be added to existing locality pay areas as a result of changes in MSA definitions. (This total excludes 12 counties that would be added to the Kansas City, Orlando, and St. Louis areas if those areas were to remain as separate locality pay areas. There are 34,000 GS employees currently in these three locality pay areas.) The counties that would be added to MSA-based locality pay areas are show in Attachment 2 of Appendix I.

The Council also recommended the following new criteria for evaluating areas adjacent to MSA-based locality pay areas:

1. For adjacent MSAs and CSAs: To be included in an adjacent locality pay area, an adjacent MSA or CSA currently in the RUS locality pay area must have at least 1,500 GS employees and an employment interchange measure of at least 7.5 percent.

2. For adjacent counties that are not part of a multi-county MSA or CSA: To be included in an adjacent locality pay area, an adjacent county that is currently in the RUS locality pay area must have at least 400 GS employees and an employment interchange measure of at least 7.5 percent.
3. For Federal facilities that cross locality pay area boundaries: To be included in an adjacent locality pay area, that portion of a Federal facility outside of a higher-paying locality pay area must have at least 750 GS employees, the duty stations of the majority of those employees must be within 10 miles of the separate locality pay area, and a significant number of those employees must commute to work from the higher-paying locality pay area.
4. For counties currently included in an MSA-based locality pay area that would be excluded under the new MSA and CSA definitions: To continue to be included in the locality pay area, any county (or portion of a county in the case of York County, ME, where the full county was never in the adjacent locality pay area), must have an employment interchange rate of at least 15 percent.

The Council recommended that the Employment Interchange Measure be used as the basis for calculating commuting rates. The Employment Interchange Measure is used by the Office of Management and Budget in combining adjacent MSAs and is defined as--

A measure of the ties between two adjacent entities. The employment interchange measure is the sum of the percentage of employed residents of the smaller entity who work in the larger entity and the percentage of the employment in the smalle entity that is accounted for by workers who reside in the larger entity.

Implementation of these criteria would result in the following areas being added to or retained in existing MSA-based locality pay areas:

1)      Adjacent MSAs and CSAs:

Table 5.

MSA-Based Areas of Application

2)      Adjacent counties that are not part of a multi-county MSA or CSA:

Table 6.

County-Based Areas of Application

3)      Federal facilities that cross locality pay area boundaries:

That portion of Edwards Air Force Base in Kern County, CA.

4)      Counties currently included in an MSA-based locality pay area which would be excluded under the new MSA and CSA definitions:

Table 7.

Areas Retained in MSA-Based Locality Pay Areas

The Pay Agent tentatively agrees with the Council's analysis and recommendations on defining locality pay areas and asks that OPM publish a proposed rule in the Federal Register on its behalf. After the Pay Agent has considered public comments on this proposal, OPM will publish a final rule in time for implementation in January 2005.

The Council also recommended that locations added to locality pay areas need not be reevaluated each year for continued inclusion in the locality pay area. The Pay Agent approves this recommendation of the Council.

In its recommendations this year, the Council expressed its intent to adopt specific criteria for groups seeking to have their area added to an existing locality pay area. The Pay Agent endorses the Council's plan and will consider adopting a similar approach by regulation.

Locality Pay Areas for 2005

The Pay Agent will continue the following 29 locality pay areas in 2005 but with modified boundaries, as discussed above:

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)      Chicago-Naperville-Michigan City, IL-IN-WI Combined Statistical Area;

4)      Cincinnati-Middletown-Wilmington, OH-KY-IN Combined Statistical Area;

5)      Cleveland-Akron-Elyria, OH Combined Statistical Area;

6)      Columbus-Marion-Chillicothe, OH Combined Statistical Area;

7)      Dallas-Fort Worth, TX Combined Statistical Area;

8)      Dayton-Springfield-Greenville, OH Combined Statistical Area;

9)      Denver-Aurora-Boulder, CO Combined Statistical Area, plus the Ft. Collins Loveland, CO Metropolitan Statistical Area and Weld County, CO;

10)  Detroit-Warren-Flint, MI Combined Statistical Area, plus Lenawee County, MI;

11)  Hartford-West Hartford-Willimantic, CT Combined Statistical Area, plus the Springfield, MA Metropolitan Statistical Area and New London County, CT;

12)  Houston-Baytown-Huntsville, TX Combined Statistical Area;

13)  Huntsville-Decatur, AL Combined Statistical Area;

14)  Indianapolis-Anderson-Columbus, IN Combined Statistical Area, plus Grant County, IN;

15)  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;

16)  Miami-Fort Lauderdale-Miami Beach, FL Metropolitan Statistical Area, plus Monroe County, FL;

17)  Milwaukee-Racine-Waukesha, WI Combined Statistical Area;

18)  Minneapolis-St. Paul-St. Cloud, MN-WI Combined Statistical Area;

19)  New York-Newark-Bridgeport, NY-NJ-CT-PA Combined Statistical Area, plus Monroe County, PA, and Warren County, NJ;

20)  Philadelphia-Camden-Vineland, PA-NJ-DE-MD Combined Statistical Area, plus Kent County, DE, Atlantic County, NJ, and Cape May County, NJ;

21)  Pittsburgh-New Castle, PA Combined Statistical Area;

22)  Portland-Vancouver-Beaverton, OR-WA Metropolitan Statistical Area, plus Marion County, OR, and Polk County, OR;

23)  Richmond, VA Metropolitan Statistical Area;

24)  Sacramento--Arden-Arcade--Truckee, CA-NV Combined Statistical Area, plus Carson City, NV;

25)  San Diego-Carlsbad-San Marcos, CA Metropolitan Statistical Area;

26)  San Jose-San Francisco-Oakland, CA Combined Statistical Area, plus the Salinas, CA Metropolitan Statistical Area and San Joaquin County, CA;

27)  Seattle-Tacoma-Olympia, WA Combined Statistical Area;

28)  Washington-Baltimore-Northern Virginia Combined Statistical Area, plus the Hagerstown-Martinsburg, MD-WV Metropolitan Statistical Area, Culpeper County, VA, and King George County, VA; and

29)  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

03-04 available on the Internet at: http://www.whitehouse.gov/omb/bulletins/b03-04.html.