For good reason. I live in Ottawa and interact with a good many government workers that aren't shy about how little work they do. I'm not convinced increasing comp is going to somehow motivate these folks into greater productivity.
But if you refuse to have competitive wages, no competent software engineer will want to work in government. Then you get some contractor job from a consulting company and good luck with that: many are happy to send a handful of junior developrts to fill their multi million contracts, with their seniors hopping in just enough time to justify the billing.
Increased comp isn't to motivate current people. It is so you aren't only hiring people at the level of skill and motivation as the current people.