8/26/08: The SEC has announced a 1.5% merit pay salary increase for FY 2009, effective this pay period. This amount roughly represents the equivalent of a “one-step” merit pay increase for everyone at the agency. NTEU continues to maintain that 1.5% represents a woefully inadequate pay raise for SEC employees, who have been asked by agency management to produce more and more while the SEC continues to reduce their pay raises under the merit pay program. The agency has now chosen to slash its merit pay budget for three consecutive years. Indeed, the paltry 1.5% raise represents the lowest merit pay budget yet – even less than the previously inadequate budgets in 2006 and 2007. NTEU will continue to vigorously pursue a larger merit pay budget from Congress, as well as for retroactive application of that raise when the FY 2009 SEC budget is finally appropriated.

It is important to note that the funding for the 1.5% merit pay salary increase was included in the administration’s FY 2009 budget request for the SEC. It is thus not entirely surprising that the SEC believes that it is reasonable to limit its current funding to this amount, in the absence of the final appropriation, for the time being. However, what is surprising is that the SEC has not acknowledged that the overall SEC budget will likely be considerably higher than what the administration has requested, as a result of NTEU's efforts.

Indeed, as the SEC knows, NTEU has been successfully pressing the case in Congress for an increase over the 1.5% requested by the agency. As a direct result of the Union’s efforts, the House Appropriations Committee has already voted to provide $15 million in additional SEC funding for the coming fiscal year, with language providing that “at least half” of this amount is to be used to increase the merit pay budget at the SEC. Furthermore, the Senate Appropriations Committee has also voted to provide $25 million in additional SEC funding for FY 2009. When Congress ultimately does take up the SEC’s budget, it is likely that the final conference version will be somewhere in between these two recommendations – both of which would provide sufficient funds for a larger merit pay increase.

Because it appears likely that NTEU’s legislative work will result in a final budget that will exceed the administration’s request, NTEU has urged the SEC to provide an assurance to its employees that it will provide an additional, retroactive merit pay raise for FY 2009 if the budget contains the additional funds for merit pay. Unfortunately, however, the SEC has refused to provide any assurance that it will make any such additional merit pay raise, even if NTEU succeeds in its efforts to obtain additional funds for that purpose. This is reflected in the SEC’s notice, which is notably silent on the issue of what the agency will do if NTEU’s legislative work continues to bear fruit.

Obviously, NTEU has recognized that such a commitment by the SEC would be moot if Congress explicitly stated a different intent for the use of an additional appropriation of funds. Given that caveat, however, the SEC’s refusal to provide any assurance with respect to this issue is tantamount to saying that the agency is leaving open the possibility that it might use an additional appropriation obtained by NTEU for other SEC “needs,” and not for increasing the FY 2009 merit pay raise. If the SEC actually has such additional “needs” (e.g., additional hiring or a technology purchase), NTEU believes that the agency should bring those issues to the attention of Congress during the budget process and request additional funds to deal with them directly. It is imprudent and unfair for the SEC to leave open the option of using additional funds appropriated by Congress at the Union’s urging for any purpose other than increasing merit pay.

It is also worthy of note that the SEC, in its merit pay notice, points to the proposed 3.9% federal pay raise that all federal employees expect to receive in January, as if to suggest that it somehow makes the agency’s 1.5% merit pay increase more acceptable. Ironically, because Congress has yet to pass a FY 2009 budget, this 3.9% raise, like the SEC’s merit pay budget, also has yet to be enacted. Furthermore, it is only because of NTEU’s work on Capitol Hill on your behalf that this raise is currently expected to be a full 1% higher than the 2.9% raise originally proposed by the administration earlier this year. More importantly, however, the amount of the January federal pay raise is an entirely separate issue from the adequacy of the budget for the SEC’s merit pay system. The federal pay raise is intended, under the 1990 Federal Employees Pay Comparability Act, to help close the gap between federal and private sector pay. The expectation of an adequate federal pay raise in January as a result of NTEU’s hard work should in no way be perceived as somehow relieving the SEC of its obligation to adequately fund its own merit pay system.

Perhaps the most unfortunate aspect of the SEC’s current posture on merit pay is that it will reinforce the perception in the minds of many SEC employees that the agency lacks a sufficient commitment to adequately compensate them for their exemplary service to our nation. This is particularly the case in light of the fact that the SEC has now consciously chosen to slash its merit pay budget for three years in a row, even while there is a growing understanding that our work regulating the U.S. securities markets is more important than ever.

Be assured that, whatever positions the SEC takes on merit pay as the budget process continues to unfold for FY 2009, NTEU will continue to work for your best interests. The Union will continue to press the case for an increased merit pay budget in Congress. We will continue to urge the SEC to do the right thing by providing an additional, retroactive merit pay raise to its employees when the 2009 budget is appropriated. And we will continue to keep you informed about the process.

As always, thank you to all of the Union members at the SEC, without whom NTEU’s continuing efforts on behalf of SEC employees on these compensation issues would not exist.