Fed Pencils In a $162M Budget, Including 4.5% More for Salaries

WASHINGTON - The Federal Reserve Board on Monday tentatively approved a $162 million budget for 1996, including 4.5% more for salaries.

The total is up 5.5%. The increase for salaries, mirroring a similar boost planned for the 12 reserve banks, would go into a merit pool from which supervisors could award top employees with larger raises.

Fed officials repeatedly stressed that the 4.5% could be adjusted up or down on the basis of an annual survey the Fed conducts of government and industry wages. That survey will be forwarded to the board this fall, before the Fed considers its final budget.

The Fed's 4.5% increase would outstrip the industry's average salary increase of 3%. But Edmund J. Seifried, a wage arbitrator and economics professor at Lafayette College in Easton, Pa., said a 4.5% increase is not unusual for a highly skilled, highly qualified work force.

"It doesn't surprise me at all, considering the fact that they hire the best people," Mr. Seifried said.

The Fed said higher health insurance costs, the wage hike, and the cost of leasing a new office in Washington account for most of the increases in 1996's spending blueprint.

The projected budget includes $2.8 million to fund various Fed initiatives, including office automation and implementation of the revised Community Reinvestment Act rules.

The Fed also approved $7.4 million in projected capital outlays, down substantially from the $12.1 million budgeted for this year.

Fed Chairman Alan Greenspan cautioned the board to keep tight reins on spending as it reviews each department's budget. Bureaucracies often allow costs to rise without reviewing whether every program is needed, he said.

"Unless we keep focusing on it, I will bet it slips out from under us," Mr. Greenspan said of the Fed's focus on cost control.

Allowing spending to rise uncontrollably could lead the board to impose across-the-board cuts, a move he said would be a "mistake."

The spending plan now returns to the individual Fed departments, which will prepare formal budgets incorporating the projected increases. The board will debate those individual requests, and approve a final 1996 budget, in October.

The Fed last week tentatively approved a 5.8% increased in projected spending for the individual reserve banks. Much of that projected increase would pay for enforcement of the new CRA rules, including the planned hiring of 65 new examiners.

The reserve banks' budget projection includes funds for two special projects: the Fed's centralized computer system and an automated currency authentication system.

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