09/09/2026
September 2026
As September begins, Congress is transitioning from its August recess into a shortened election-year legislative schedule. The House returned briefly at the beginning of the month, while the Senate remains in a state work period until September 14, when both chambers are expected to resume legislative business. Before leaving Washington, lawmakers completed action on a bipartisan continuing resolution, signed into law September 2, that keeps federal agencies funded through December 11. The measure provides near-term operating stability but postpones decisions on full-year FY2027 appropriations, including final IRS funding and staffing levels. Against this backdrop, federal managers are also preparing for a 2027 civilian pay freeze and significant changes to governmentwide performance-management requirements—developments that will directly affect recruitment, retention, workforce planning and day-to-day leadership across the IRS.
Funding stability, manager compensation and performance-management implementation
1. Temporary Funding Provides Stability - but Not Certainty
Congress has moved to prevent an October shutdown, but full-year IRS funding remains unresolved.
Congress has approved a continuing resolution that would maintain federal funding through December 11, 2026. The House passed the Senate amended measure on September 1 by a bipartisan vote of 370-48. At the time of this draft, the measure was awaiting the President's signature.
For IRS managers, the immediate benefit is continuity. A continuing resolution reduces the threat of an October 1 funding lapse and gives agencies greater confidence that employees can remain in the job and essential operations can continue. It does not, however, resolve the larger questions surrounding the IRS's fiscal year 2027 resources.
The Administration requested $9.8 billion in discretionary funding for the IRS for FY2027, $1.4 billion - or 12.2 percent - below the FY2026 enacted level of $11.2 billion. The request emphasizes data-driven enforcement, digital taxpayer services, privacy and technology modernization. Congress has not completed the full-year Financial Services and General Government appropriations process, leaving final IRS funding and staffing levels subject to later negotiations.
Update: On Wednesday, September 2, 2026, the President signed into law:
H.R. 6500, the “Continuing Appropriations and Extensions Act, 2027,” which includes a short-term continuing resolution that provides fiscal year 2027 appropriations to Federal agencies through December 11, 2026, for continuing projects and activities of the Federal Government, and extends authorities for a broad range of programs including surface transportation and veteran programs.
What this means for IRS managers:
Temporary funding can preserve operations without providing the planning certainty that managers need. Under continuing resolution, decisions involving hiring, contracts, training, travel, technology investments and workload support may remain constrained or subject to revision. Managers may be expected to maintain service levels while preparing for several possible funding outcomes.
Workforce capacity is part of that calculation. The IRS has already experienced significant staffing losses, and watchdog findings show that the agency reassigned nearly 1,200 employees to Taxpayer Services to address critical shortages and potential filing-season backlogs. The FY2027 budget anticipates further workforce changes, although no new IRS-wide Reduction in Force has been publicly confirmed.
The PMA perspective:
PMA supports stable, predictable funding that allows the IRS to plan responsibly, maintain taxpayer service and equip managers to lead effectively. If additional restructuring or staffing reductions are considered, managers should receive timely information, meaningful consultation and practical implementation support. Temporary funding may avert an immediate crisis, but it should not substitute for the long-term resource decisions necessary to sustain sound tax administration.
Watch next:
House-Senate negotiations over full-year IRS funding; and any IRS guidance affecting staffing, hiring, training or operating plans.
2. A 2027 Pay Freeze Raises Questions About the Future of Federal Management. For PMA, the central issue is whether manager compensation supports the recruitment and retention of capable leaders.
The President has transmitted an alternative pay plan that would keep base and locality pay unchanged in 2027 for most civilian federal employees. The plan sets the across-the-board and locality adjustments at zero. In a separate action, the Office of Personnel Management was directed to provide a 3.8 percent compensation increase for qualifying federal law-enforcement personnel.
The decision comes as IRS managers continue to lead through restructuring, staffing losses, new tax-law implementation, technology changes and heightened performance expectations. Those responsibilities make the compensation question particularly important for the agency's leadership pipeline.
Why pay compression matters
Pay compression occurs when the difference between a manager's compensation and the compensation of employees supervised becomes too small - or when employees can earn more because of overtime, premium pay or other compensation. The issue is not whether employees deserve appropriate pay. The concern is whether the compensation structure recognizes the additional accountability, availability and complexity associated with management service.
PMA member feedback has already identified compensation disparities as a concern. A pay freeze could reinforce the perception that assuming a management position means accepting substantially greater responsibility without a meaningful financial distinction. Over time, that can reduce interest in management, encourage experienced leaders to leave and weaken succession planning.
The management-capacity question:
The IRS cannot meet its mission through staffing numbers alone. It needs experienced managers who can translate policy into operations, balance workloads, develop employees, address performance and conduct issues, and maintain service during organizational change. Compensation policies should help the government attract and retain those leaders.
PMA will use its September Manager Pulse to gather current information about pay compression, manager retention and employees' willingness to pursue management careers. The survey will be brief and confidential, and results will be reported only in aggregate. The findings can help PMA develop evidence-based recommendations for IRS and Treasury leadership, OPM, Congress and the Government Managers Coalition.
The PMA perspective:
PMA recognizes the fiscal considerations involved in governmentwide pay decisions. At the same time, sustained pay compression presents an operational risk. Federal compensation policy should recognize the distinct responsibilities carried by managers and should support a strong, capable leadership pipeline. PMA will continue advocating for compensation approaches that improve recruitment, retention, recognition and pay progression for federal managers.
Member action:
Watch for the September PMA Manager Pulse and share your experience. Strong participation will help PMA distinguish individual concerns from broader management trends.
3. New Performance Rules Put Implementation in Managers' Hands
The policy has changed. The next test is whether managers receive the clarity, training and support needed to apply it fairly.
New governmentwide performance-appraisal regulations took effect August 6, 2026, for covered non-Senior Executive Service employees. Several rating-system requirements must be implemented beginning January 1, 2027. OPM has also issued a Performance Management Officer Manual and supporting materials to help agencies revise their appraisal systems and obtain OPM approval.
The final rule changes more than the structure of performance ratings. It removes rating patterns that include a Level 2, permits OPM to establish standardized distributions for some or all rating levels, eliminates mandatory higher-level review of Level 1 ratings, restricts challenges to ratings of record through negotiated grievance procedures, requires a supervisory critical element for covered supervisors, and establishes biennial OPM certification of agency appraisal systems.
What managers should expect:
For managers, successful implementation will depend on much more than revised forms or automated systems. Performance plans will need clear distinctions among rating levels and meaningful alignment with organizational results. Managers will need to communicate expectations early, document performance consistently, provide timely feedback and explain how individual results connect to the work of the organization.
Calibration and rating consistency will also require careful attention. Any process intended to improve differentiation must preserve an evidence-based evaluation of each employee's actual performance. Managers should understand who has authority to review or adjust proposed ratings, what documentation is expected and how disagreements will be resolved.
Questions PMA believes IRS should address:
What changes will apply to the IRS performance system for FY2027, and when will managers receive final guidance?
What training, examples and documentation standards will be provided before managers establish or apply revised expectations?
How will rating calibration operate, and how will the integrity of a manager's evidence-based assessment be protected?
How will the required supervisory critical element be incorporated into manager performance plans?
What HR and employee-relations support will be available when managers address performance problems or rating disputes?
The PMA perspective:
PMA supports meaningful accountability and performance systems that distinguish results fairly. Those goals depend on clear standards, adequate training, consistent application and sustained leadership engagement. Managers should not be expected to implement major changes through fragmented instructions or after-the-fact corrections.
PMA will seek timely IRS information about the FY2027 transition and will continue emphasizing the practical needs of supervisors responsible for implementing the new requirements. Consultation with managers during system design can help identify operational problems before they affect employees, ratings or mission results.
Watch next:
IRS implementation guidance, training schedules, changes to ITM or related systems, rating-calibration procedures, and the transition of affected employees to USA Performance.
Primary sources
Internal Revenue Service, FY 2027 Congressional Budget Justification and Annual Performance Report and Plan, Publication 4450 (Rev. 4-2026).
U.S. Government Publishing Office, House Document 119-189, Alternative Plan for Pay Adjustments, transmitted August 26, 2026.
Office of Personnel Management, Performance Appraisal for General Schedule, Prevailing Rate, and Certain Other Employees, 91 Fed. Reg. 41521 (July 7, 2026).
Office of Personnel Management, Additional Guidance for Agency Implementation of Regulations on Performance Appraisal, July 30, 2026.
Treasury Inspector General for Tax Administration, Status of the IRS's Workforce as of January 2026, Report No. 2026-IE-R009.
White House Signing Announcement for HR 6500
