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Hello everyone, Ian Smith here with
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fedsmith.com here to talk to you about
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the 2026 federal pay raise. Is it too
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early to talk about next year's pay
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raise? I don't think so. Apparently not
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because we're talking about it. The
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topic's out there. It's floating around
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and hard to believe, but we're already
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halfway through the year. We're into
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June now. Year will be over before we
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know it. And honestly, this topic comes
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up even before now. but it has been
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picking up some steam here lately. So, I
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thought I'd talk to you about what next
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year's pay raise is looking like for
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federal employees and also to talk to
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you about pay parody and how that ties
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into the 2026 raise and why you're
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likely to hear the pay parody argument
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this year. So, here we go. As of right
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now, the White House put forth its
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budget back in May for 2026. It's it's a
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budget blueprint and that typically will
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kick off part of the the pay raise
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discussion process in the spring when
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the budget request comes out. And this
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year's budget request is silent on a pay
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raise for federal employees in 2026.
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Most people are assuming that what that
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means is that the president is not
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proposing a pay raise for federal
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employees next year. However, he has he
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the president and the white house in the
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budget blueprint have put forth a raise
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for members of the military of
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3.8%. So that's where the pay parody
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argument comes in. What is pay
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parity? This is the notion of paying
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federal employees equal with members of
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the military in any given year. And the
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reason it's likely to come up this year
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is because of this obvious discrepancy
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between the raises that have been put
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forth, assuming they come to fruition.
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The White House appears to be proposing
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no pay raise for federal employees next
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year, and it has proposed a 3.8% raise
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for members of the
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military. Some are going to argue this
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isn't fair. Federal employees are
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getting shafted, and so they need to be
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equal to keep it fair. And so it could
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be an effective argument in a year like
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this when there's such a glaring
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discrepancy between the two figures. The
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groups that you're most likely to hear
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this argument come from are federal
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employee unions since they represent the
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interests of federal employees as well
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as lawmakers. And if you do hear it from
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any members of Congress, it's likely to
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be ones who represent the DC
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metropolitan area because a lot of
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federal employees live in that area.
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they are those lawmakers constituents
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and so they're going to want to curry
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favor with the voters in that area. As
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you can probably imagine, this is
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something that would be even more likely
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to come up in an election year.
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Obviously, it's not an election year,
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but given that this is all part of a
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political process that is based on
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politics, you could see why it might be
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that way. As an example, last year there
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was a group of lawmakers who sent a
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letter to President Biden in December
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and uh they were pushing him to more
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than double the 2% raise in 2025. He had
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proposed for federal employees to make
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it equal with the 4.5% raise that was
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being given to members of the
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military. Ultimately didn't work out
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that way. As you know, federal employees
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got a overall average 2% raise this
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year. Is pay par an effective argument?
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The best way to address that question is
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to look at historical pay raise figures.
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I have analyzed data going back to 2003
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comparing pay raise figures with members
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of the military to federal employees.
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And in that time period, there were 10
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years when federal employees had smaller
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raises than members of the military.
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There were no years when federal
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employees had higher pay raises, but
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there were 13 years when the pay raises
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were
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equal. So at least on that basis, it has
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mixed results. But yeah, it may it may
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not be a bad argument because again, the
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majority of those years the figures were
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equal. I've written an accompanying
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article that goes with this video that's
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got that table in it. I'm not going to
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put it up on the screen here. It's too
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much data. it would get cluttered in the
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video, I think, but I will include a
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link to that article in the description.
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So, if you'd like to take a a more
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in-depth look at that, please check it
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out. Now, to tie all this together,
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you've got to look at how the pay raise
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process works, how it unfolds every
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year. Like I said, it's mid midway
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through the year. We're in June now when
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I'm recording this. We're already
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talking about next year's pay raise. The
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topic honestly though comes up earlier
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as I said sometimes as early as January
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or
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February. For instance, there's a bill
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that was proposed earlier this earlier
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this year by Congressman Jerry Connelly
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and Senator Brian Shadz from Hawaii and
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they put forth a 4.3% raise for federal
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employees. This is a tradition that the
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two have. Every year going back, I've
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forgotten how many years they've been
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doing it now. I think it's nine or 10
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years at least, they introduced this
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bill very early in the year to
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um propose a a higher raise for federal
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employees for the coming year than what
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they're likely to otherwise get.
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However, this bill has never become law
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in all the years it's been introduced.
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And I'll go ahead and make a prediction
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now. It's not going to happen this year
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either. Just looking at the historical
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track record on it. As you probably
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know, Congressman Connelly passed away
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recently. I don't know what that will
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hold for the future of this bill. If
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somebody steps in in his place and it
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starts being introduced uh next year
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about the same time or perhaps Senator
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Shatz will introduce it on his own. I
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don't know. That will be interesting to
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see what happens with that next year in
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terms of how it fits into the federal
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pay raise process. The pay raise is
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determined each year by a political
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process. It's not based on an automatic
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formula. So, it can vary from year to
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year, and it does vary from year to year
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based on the political climate. It's not
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to be confused with a COLA. Sometimes
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I'll hear people refer to the annual pay
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raise for federal employees as a cola.
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It's not. It's different. COLA stands
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for cost of living adjustment. That only
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applies to federal retirees to their
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annuity payments. that is based on an
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automatic formula and it's computed
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automatically every year based on the
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cost of living the
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CPI. But at any rate, that's a side
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note. The way the the pay raise process
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unfolds each year is the White House
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will usually propose a raise early in
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the year via the budget blueprint.
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Congress can get involved. They can set
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a raise that overrides what the
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president is suggesting by passing
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legislation. That sometimes happens, but
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it's not the norm. Usually, whatever the
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president proposes is what ultimately
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comes to
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pass. And then the president in August
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will issue what's called the alternative
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pay plan letter. And that's when the
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proposal for a raise is formalized a bit
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more. but it doesn't become final until
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December. Um the president will issue an
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executive order formalizing the raise at
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that point and that directs the office
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of personnel management to go ahead and
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process the raise and issue the the pay
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tables for the coming year showing what
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the raise is and how it impacts annual
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salaries. That's a basic overview of the
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annual pay raise process, the current
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status on the 2026 pay raise, and also
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pay parody and how it ties in to the
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situation this year. Like I said, given
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the situation, I think you're likely to
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hear this argument come up and that's
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why and that's what pay parody is and
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how it applies here. I hope you found
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this video helpful. Be sure to subscribe
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to the channel for more updates on this
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and other topics. When this process
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unfolds throughout the year and more
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information becomes available, we'll be
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posting more videos as well as articles
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on the fedsmith.com website. So, please
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be sure to check them out. Have a good
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day.
