“I am obviously not of Peace Corps fiber,” Lawrence (Hanks) says at one point. “It’s not that I can’t help these people, it’s just that I don’t want to.”
Employees that are by law unable to get a raise might decide to leave the government, or worse, they might stay as disengaged, disgruntled employees. But there are ways to make them less frustrated by a salary cap.
Congratulations! Sounds like you have engaged employees who care about your agency’s mission, though disagree that all decisions from above serve that mission. Here's advice to get their cooperation.
Some officials might make you part of “innovation theater,” encouraging employees to go through the motions of an innovation process, without letting them produce any substantive change. But you can still learn from it ...