Obama announces two-year federal pay freeze

This story has been updated from the original version.

Federal employees will not receive any pay increases for two years, Obama administration officials announced on Monday.

President Obama's proposed pay freeze for 2011 and 2012 will apply to all civilian workers, including Defense Department employees, but not to military personnel. Workers who are promoted to a higher General Schedule grade still will be eligible for pay raises, officials said.

According to the White House, the freeze will save $28 billion during the next five years. The measure is a continuation of the administration's Accountable Government Initiative, designed to cut cost and save taxpayer dollars.

"I did not reach this decision easily," Obama said in a White House address. "This is not just a line item on a ledger; these are people's lives."

He noted several groups of federal employees, including doctors and nurses at the Veterans Affairs Department, National Park Service employees, and Social Security Administration workers, perform critical functions. But he said sacrifice is required to balance the federal budget and to get the economy moving again. "That sacrifice must be shared by the employees of the federal government," Obama said.

"I'm asking civil servants to do what they've always done: Play their part," the president added.

The president had proposed a 1.4 percent pay hike for civilian and military employees in his fiscal 2011 budget. The Senate Appropriations Committee in July approved legislation that met Obama's request for the civilian raise, but House appropriators have been silent on the issue.

On the military side, Senate Appropriations in September approved legislation granting a 1.4 percent pay raise for service members, matching the figure included in the Senate Armed Services Committee's Defense authorization bill. The House Appropriations Committee has not released the figure to be included in its Defense legislation, but the House in late May passed its Defense authorization bill with a 1.9 percent pay raise for service members. (An authorization bill represents what Congress intends to spend, but appropriators actually allocate the funds.) Obama has said he opposes the higher proposed increase.

The administration has not ruled out other changes, such as workforce reductions, Office of Management and Budget Deputy Director for Management Jeffrey Zients told reporters before Obama's announcement.

"We're in the midst of the 2012 budgeting process," Zients said. "Really agencies are going to need to do more with less. No specific decisions have been made as far as size of federal workforce -- we will roll that out as part of the budget."

Zients noted Monday's announcement comes just before the president's Nov. 30 deadline to set locality pay.

"This pay freeze is not a reflection on [federal workers'] fine work," wrote OMB Director Jack Lew in a blog post. "It is a reflection of the fiscal reality that we face: just as families and businesses across the nation have tightened their belts, so must the federal government."

Lawmakers and union leaders reacted strongly to the proposed freeze.

"At a time when our nation's seniors have been denied a cost-of-living-increase and private sector hiring is stagnant, it is both necessary and quite frankly, long overdue to institute a pay freeze for the federal workforce," said Rep. Darrell Issa, R-Calif. Issa is likely to take over the House Oversight and Government Reform Committee responsible for federal workforce issues. In addition to freezing pay, Republican lawmakers have outlined a number of proposals that would affect the federal workforce.

Democrats and unions were more critical.

"While I appreciate that the president reduced the length of his proposed pay freeze from three to two years, it would have produced significantly more savings had that sacrifice been shared between federal civilian and military personnel -- with a strong exception for the members of our military and civilian employees risking their lives on our behalf in Afghanistan, Iraq and anywhere else they are serving in harm's way," said House Majority Leader Rep. Steny Hoyer, D-Md., adding the proposal also will hinder governmentwide pay parity.

The National Treasury Employees Union "is mindful of our nation's economic circumstances, but we are very disappointed with the White House's position and intend to explore all of our options, including working with Congress to overturn it," said Colleen Kelley, NTEU's president. "The modest 1.4 percent raise under consideration for 2011 is reflective of the average increase in wages in the private sector."

Patricia Niehaus, national president of the Federal Managers Association, said the decision feels like a punishment for federal employees and called on the administration to reconsider whether a pay freeze is the appropriate action.

"Not only does this recommendation disregard future economic conditions that warrant examination of annual federal pay adjustments, but it also serves as a major deterrent to potential hires with critical expertise," Niehaus said. "Federal agencies will be unable to attract the best and brightest to civil service if the government institutes a blanket freeze on federal pay."