What factors (CPI, budget, negotiations) could change the proposed 2026 federal pay raise?
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Executive summary
The most immediate factors that could change the proposed 2026 federal pay raise are the President’s alternative pay plan (a 1% across‑the‑board increase with a freeze on locality pay), Congress’s power to override or pass different legislation (including proposals like the FAIR Act), and the statutory wage‑setting formulas and data inputs that drive locality and comparability calculations such as the Employment Cost Index and BLS surveys (which, if allowed to operate, would have produced much larger adjustments) [1] [2] [3] [4].
1. The President’s alternative pay plan: the baseline that started this fight
The White House transmitted an alternative pay plan that proposes a 1% base increase for most General Schedule employees while freezing locality pay at 2025 levels, and it directs OPM to provide up to a 3.8% increase for certain law‑enforcement categories [1] [5]. That letter effectively sets the administration’s expectation for January 2026 pay tables and is the reference point from which Congress, unions and agencies will push back or negotiate [5].
2. Congress can change it — legislative override and budget process matter
Congress has the authority to alter or override the President’s plan through the appropriations process or standalone legislation; multiple outlets note Congress could pass alternative measures to increase or restore locality adjustments [4] [2]. Political dynamics matter: Democratic proposals such as the FAIR Act sought a substantially higher average raise (4.3%) to counter a freeze, showing how partisanship and chamber control could produce different outcomes [2].
3. Locality pay and statistical inputs are a wild card
Locality pay is calculated from Bureau of Labor Statistics data — notably the Annual National Compensation Survey — and is the most complicated and variable piece of the puzzle; letting statutory comparability formulas and updated BLS/Economic indices run their course would produce much larger locality adjustments than the White House proposal anticipates [4]. Analysts estimate that if the statutory formula and locality updates were allowed, locality increases would average roughly 18.88% and the base across‑the‑board raise could be around 3.3% — figures the administration cited as fiscally unsustainable when justifying its freeze [3] [6].
4. The Employment Cost Index and Federal Salary Council inputs drive the statutory formula
Under FEPCA and related guidance, the Employment Cost Index and comparability studies inform what the “statutory” raise would be; the Federal Salary Council and OPM produce recommendations that feed into that process. Some documents and council analysis projected a higher base raise (around 3.3%) before the administration’s alternative plan [6]. Whether these technical inputs are used or sidelined is a policy decision that can materially change final pay rates [6] [4].
5. Unions, retention/health‑benefit pressures and political leverage
Unions and federal employee groups are mobilizing against freezes and higher health‑insurance premiums — for example, union warnings about a 12.3% average rise in FEHBP premiums creates additional political pressure to seek higher pay increases to offset net compensation losses [7]. That pressure can influence lawmakers weighing the political costs of supporting a freeze versus authorizing larger raises [7] [2].
6. Timing: executive orders, OPM tables and Congressional deadlines
Practically, the President customarily issues an executive order by late December to formalize pay decisions and OPM releases final pay tables in December/January; until then, Congress can act during budget negotiations and appropriations to change the outcome [8] [5] [2]. The window for legislative change narrows as the calendar advances toward the end‑of‑year deadlines for pay table publication [8] [5].
7. What’s settled and what reporting doesn’t cover
Available sources consistently report the administration’s 1% alternative plan, the proposed 3.8% for some law enforcement, the existence of Congressional counterproposals (including the FAIR Act), and the technical inputs that would produce larger locality adjustments [1] [5] [2] [3] [4]. Sources do not mention the final list of law‑enforcement categories that will receive the 3.8% increase — OPM consultation was ordered but eligibility categories had not been published in these reports [5].
Bottom line: three levers that will determine the final raise
The final 2026 federal pay outcome depends on whether the administration’s alternative pay plan is adopted unchanged, whether Congress uses its budgetary power to override or pass a higher raise (and which proposals it endorses), and whether statutory comparability processes and locality recalculations based on BLS/ECI data are allowed to take effect — each of these steps is documented in reporting and would materially change pay tables if applied [1] [4] [3] [2].