REVISED ANNUAL PAY ADJUSTMENT PROCESS.

SEC. 602. REVISED ANNUAL PAY ADJUSTMENT PROCESS.(a) Requirement for Annual Adjustment.—Subsection (a) of section 1009 of title 37, United States Code, is amended to read as follows:“(a) Requirement for Annual Adjustment.—Effective on January 1 of each year, the rates of basic pay for members of the uniformed services under section 203(a) of this title shall be increased under this section.”.(b) Effectiveness of Adjustment.—Subsection (b) of such section is amended by striking “shall—” and all that follows and inserting “shall have the force and effect of law.”.(c) Percentage of Adjustment; Alternative Pay Adjustment Authority.—Such section is further amended—(1) by striking subsections (c), (d), (e), and (g);(2) by redesignating subsection (f) as subsection (d); (3) by inserting after subsection (b) the following new subsection (c):“(c) Equal Percentage Increase for All Members.—(1) An adjustment made under this section in a year shall provide all eligible members with an increase in the monthly basic pay that is the percentage (rounded to the nearest one-tenth of one percent) by which the ECI for the base quarter of the year before the preceding year exceeds the ECI for the base quarter of the second year before the preceding calendar year (if at all).“(2) Notwithstanding paragraph (1), but subject to subsection (d), the percentage of the adjustment taking effect under this section during each of fiscal years 2004, 2005, and 2006, shall be one-half of one percentage point higher than the percentage that would otherwise be applicable under such paragraph.“(3) In this subsection:117 STAT. 1499“(A) The term ‘ECI’ means the Employment Cost Index (wages and salaries, private industry workers) published quarterly by the Bureau of Labor Statistics.“(B) The term ‘base quarter’ for any year is the three-month period ending on September 30 of such year.”; and(4) by adding at the end the following new subsection:“(e) Presidential Determination of Need for Alternative Pay Adjustment.—(1) If, because of national emergency or serious economic conditions affecting the general welfare, the President considers the pay adjustment which would otherwise be required by this section in any year to be inappropriate, the President shall prepare and transmit to Congress before September 1 of the preceding year a plan for such alternative pay adjustments as the President considers appropriate, together with the reasons therefor.“(2) In evaluating an economic condition affecting the general welfare under this subsection, the President shall consider pertinent economic measures including the Indexes of Leading Economic Indicators, the Gross Domestic 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.“(3) The President shall include in the plan submitted to Congress under paragraph (1) an assessment of the impact that the alternative pay adjustments proposed in the plan would have on the Government’s ability to recruit and retain well-qualified persons for the uniformed services.”.