President Trump’s Elimination of the Federal COLA Is Likely Illegal

by Sam Wice — Tuesday, Sept. 4, 2018@Wice_sam

President Trump recently wrote a letter to Congress explaining why he will eliminate the scheduled cost-of-living adjustments (COLA) for federal employees. President Trump argued that “[w]e must maintain efforts to put our Nation on a fiscally sustainable course, and Federal agency budgets cannot sustain such increases.” However, President Trump’s decision to eliminate the COLA is likely illegal. For the purposes of this article, I will not delve into whether federal employees are over or under paid, but this study from the Congressional Budget Office (CBO) provides an excellent summary of the issue.

To ensure “any existing pay disparities between Federal and non-Federal employees should be completely eliminated” the Pay Comparability System in Title 5 of the U.S. Code sets the annual COLA increase for federal employees. Specifically, it sets the national COLA to .5% less than the Employment Cost Index (ECI), which is a measure of the change in the employer costs of labor, independent of the influence of employment shifts among occupations and industry categories. To determine locality pay increases based on local changes in the cost of living, the Federal Salary Council makes recommendations in an annual report.

However, the president has the limited authority to adjust these statutory COLAs “[i]f, because of national emergency or serious economic conditions affecting the general welfare, the [p]resident should consider the level of comparability payments which would otherwise be payable . . . in any year to be inappropriate.” I see the plain meaning of this language as imposing three requirements for the president to reduce or eliminate the COLA: (1) there is a national emergency or serious economic conditions affecting the general welfare; (2) the president considers the payments to be inappropriate; and (3) the president considers the payments as inappropriate because of the national emergency or serious economic conditions affecting the general welfare. President Trump has not satisfied the first and third requirements.

First, he has not demonstrated that there is either a national emergency or serious economic conditions affecting the general welfare. The only allusion in his letter to either a national emergency or serious economic conditions affecting the general welfare are references to the current fiscal position and costs of the COLA. President Trump never explicitly finds that there is a national emergency or serious economic conditions affecting the general welfare exists.

His allusion to the current fiscal situation is not enough to infer serious economic conditions affecting the general welfare. Under the Pay Comparability System, “[i]n evaluating an economic condition affecting the general welfare . . . the President shall consider pertinent economic measures including, but not limited to, the Indexes of Leading Economic Indicators, the Gross National Product, the unemployment rate, the budget deficit, the Consumer Price Index, the Producer Price Index, the Employment Cost Index, and the Implicit Price Deflator for Personal Consumption Expenditures.” President Trump does not explicitly evaluate any of the required economic measures. The only potential reference to one of the economic measures is when President Trump alludes to the budget deficit by describing a fiscally sustainable course and federal agency budgets. However, he does not explain why this alone rises to the level of a serious economic condition affecting the general welfare. Additionally, President Trump only alludes to one of the pertinent measures even though the law requires the president to consider multiple measures. Thus, President Trump did not establish a prima facie basis for eliminating the COLA.

Furthermore, there is no objective basis to find that there is a national emergency or serious economic conditions affecting the general welfare. Specifically, there is no basis for finding that there is a national emergency. President Obama officially ended the War in Iraq in 2011 and the United States is not officially engaged in another armed conflict. Likewise, in fiscal year 2018 there has been no major natural disaster. I will note that President Trump has continued a declaration that a national emergency exists because of the September 11, 2001 terrorist attacks and the continued risk of terrorist attacks. However, I imagine a court would closely examine whether the president can still claim emergency powers from the attack. Additionally, there is no causal relationship between the national emergency and federal pay.

Similarly, there is no basis for finding serious economic conditions affecting the general welfare. The unemployment rate has not been this low since 2000, more Americans are employed than ever before, and real gross domestic product grew by 4.2% in the most recent quarter. Unsurprisingly, President Trump agrees that the economy is doing well. One day after President Trump issued the letter eliminating the COLA, he stated that the United States has a “booming economy. . . and unemployment filings have dropped to the lowest level . . . in over half a century.” His statements are in direct opposition to a finding that the United States has a national emergency or serious economic conditions affecting the general welfare.

Finally, even if the findings regarding the current fiscal condition are taken to mean that there is a finding of a national emergency or serious economic conditions affecting the general welfare, President Trump has taken actions that demonstrate that he does not consider the current fiscal condition to be why he wants to eliminate the COLA. During this fiscal year, President Trump has increased the deficit through tax cuts and increased appropriations spending. Based on these policy decisions, CBO estimated that he increased the federal deficit in 2018 by $242 billion and by $2.7 trillion over a ten-year period. Similarly, one day after President Trump issued the letter eliminating the COLA, he issued an executive order to examine providing greater tax benefits to retirement accounts (i.e., decreasing revenue and increasing the deficit). These actions show that President Trump is not concerned about the fiscal course. Further, increasing the deficit by more than $242 billion over the last year and planning to further increase the deficit shows that President Trump does not view an increase in the deficit as unsustainable for the budget.

The Pay Comparability System only gives the president the power to reduce or eliminate a COLA under limited circumstances. President Trump cannot legally use his view that federal employees are overpaid as a reason for eliminating the COLA.

Cite As: Author Name, Title, 36 Yale J. on Reg.: Notice & Comment (date), URL.

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About Sam Wice

Sam Wice is a former analyst at the Congressional Budget Office and a former Council Member of the American Bar Association’s Section of Administrative Law and Regulatory Practice. He can be reached at sam.wice[at]outlook.com.

5 thoughts on “President Trump’s Elimination of the Federal COLA Is Likely Illegal

  1. Taylor Crabtree

    What are the prospects for success of an action challenging this determination? Has there been any case law on the level of deference the President is afforded in making this (or analogous) determinations?

    Reply
    1. Sam Wice Post author

      Findings under the Pay Comparability System have never been challenged in court. Trump v. Hawaii is likely the most applicable case on the level of deference, which I take to be a Chevron level of deference–although the deference level is not directly stated. I encourage anyone who is more of an expert on deference to comment.

      However, as President Trump does not make the prima facie findings required by the Pay Comparability System, there is nothing with which to defer and I think a challenge would likely succeed.

      I should note, Congress is currently debating whether to set the level of federal employees’ COLA in an annual appropriations bill. Any appropriations laws would supersede the Pay Comparability System and preempt any potential challenge.

      Reply
  2. Eric Hirschhorn

    Mr. Wice’s premise is that even if the President reissues his letter with all the findings required by the statute, the courts will examine whether the facts support such findings. I think there’s a reasonable chance that–as evidenced by the Supreme Court’s recent immigration decision–the courts will not look behind presidential findings of national emergencies and the like. (For what it’s worth, I think federal employees are underpaid.)

    Reply
    1. Sam Wice Post author

      On the re-issuance point, President Trump cannot fully reissue the letter. He can only reissue the letter to modify the locality-pay COLA. The Pay Comparability System requires the president to issue a letter modifying the nation-wide COLA by September 1, which has passed. 5 U.S.C. § 5303(b)(1)(A). However, the letter to modify the locality-pay COLA only needs to be issued one month before the COLA would otherwise go into effect (i.e., December 1). 5 U.S.C. § 5304a(a)(1).

      I agree that if President Trump conducted a similar analysis and findings as the travel ban, the Supreme Court would likely defer to the findings. Here, I think the Supreme Court would likely find that President Trump has not approached the required analysis to get the same level of deference. In addition to not making the required prima facie findings, there are two key differences with the travel ban. First, the Supreme Court in Trump v. Hawaii commented on how extensive the 12-page findings were and that the executive order included analysis from several agencies. Here, President Trump has one sentence of findings without any analysis from agencies. Second, although arguably President Trump publicly provided a different reasoning for the travel ban than his findings, he did not directly contradict the findings as he did in this instance.

      Reply
  3. Ed Oliver

    Obama did it for 3 years and I didn’t see all the complaining about it being illegal.
    I guess it’s only illegal with it’s not a liberal doing it.

    Reply

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