[Federal Register Volume 59, Number 206 (Wednesday, October 26, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-26556]


  Federal Register / Vol. 59, No. 206 / Wednesday, October 26, 1994 /
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[[Page Unknown]]

[Federal Register: October 26, 1994]


                                                   VOL. 59, NO. 206

                                        Wednesday, October 26, 1994

OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 591

RIN 3206-AF88

 

Cost-of-Living Allowances (Nonforeign Areas)

AGENCY: Office of Personnel Management.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Office of Personnel Management (OPM) is issuing final 
regulations to increase certain cost-of-living allowance (COLA) rates 
paid to General Schedule, U.S. Postal Service, and certain other 
Federal employees in Kauai County, Hawaii; Guam and the Commonwealth of 
the Northern Mariana Islands; and the U.S. Virgin Islands. The final 
regulations also consolidate the two nonforeign COLA areas in the U.S. 
Virgin Islands into a single allowance area, delete obsolete 
Commissary/Exchange COLA categories in four areas, clarify definitions 
shown in one of the appendices, and remove from regulations three 
locations listed as places where nonforeign post differentials are 
paid. These three locations are no longer territories or possessions of 
the United States and, therefore, are not covered by the nonforeign 
area post differential program.

DATES: Effective Date: These regulations are effective October 26, 
1994. Applicability Date: These regulations are applicable on the 1st 
day of the 1st pay period beginning on or after October 26, 1994.

FOR FURTHER INFORMATION CONTACT: Allan G. Hearne, Methodology 
Development Branch, Office of Compensation Policy, Personnel Systems 
and Oversight Group, Office of Personnel Management, Room 6H31, 1900 E 
Street NW., Washington, DC 20415, (202) 606-2838.

SUPPLEMENTARY INFORMATION: Under section 5941 of title 5, United States 
Code, certain Federal employees in nonforeign areas outside the 48 
contiguous States are eligible for cost-of-living allowances when local 
living costs are substantially higher than those in the Washington, DC, 
area. Nonforeign area COLA's are currently paid in Alaska, Hawaii, 
Puerto Rico, the U.S. Virgin Islands, Guam, and the Commonwealth of the 
Northern Mariana Islands.
    OPM contracted with Runzheimer International to conduct living-cost 
surveys during the summer of 1993 in Hawaii, Guam, Puerto Rico, and the 
U.S. Virgin Islands. At that time, Runzheimer also surveyed the 
Washington, DC, area, which is the base or reference area for living-
cost comparisons.
    According to these surveys, the COLA rates should be increased in 
three areas and reduced in three other areas. However, a provision in 
the Treasury, Postal Service, and General Government Appropriations 
Act, 1992 (Public Law 102-141 as amended), bars OPM from reducing any 
COLA rate through December 31, 1996. Therefore, only the COLA rate 
increases are being implemented.
    The increases in COLA rates are summarized in the following table: 

                          COLA Rate Increases                           
------------------------------------------------------------------------
                                                  Old rate(s)   New rate
            Allowance area/category                (percent)   (percent)
------------------------------------------------------------------------
County of Kauai, Hawaii All Employees...........         17.5      20.0 
Territory of Guam and Commonwealth of the                               
 Northern Mariana Islands Commissary/Exchange...         17.5      20.0 
U.S. Virgin Islands All Employees...............  \1\12.5/17.           
                                                            5     17.5  
------------------------------------------------------------------------
\1\Old rates for St. Croix and St. Thomas/St. John, respectively.       

    In computing the new COLA rate, OPM made two changes relative to 
the indices published with the proposed rule. The changes were made to 
correct an error in one survey and to incorporate a methodological 
change recommended by one of the commenters on the proposed rule. 
Neither of these changes affected the COLA rates proposed in the 
Federal Register on May 26, 1994 (at 59 FR 27314).
    The error OPM corrected was the failure to price a homeowner 
insurance policy in Maui, Hawaii, that included coverage of damage 
caused by high winds. Correcting this raised the Maui index slightly.
    The methodological change made by OPM was to use the Goods and 
Services Component index as the cash contributions item index in the 
Miscellaneous Component. The effect of this change was a slight 
increase in the living-cost indices in all areas except Puerto Rico. 
The chart below compares the indices shown in the notice that 
accompanied the proposed rule and those used in this final rule. As 
noted above, none of these convert to a different COLA rate under the 
procedures prescribed in 5 CFR 591.206(b). 

                 Previous and Final Living-Cost Indices                 
------------------------------------------------------------------------
                                                      Previous    Final 
              Allowance area/category                  index      index 
------------------------------------------------------------------------
City and County of Honolulu, Hawaii:                                    
  All Employees.....................................    122.90    123.32
Hawaii County, Hawaii:                                                  
  All Employees.....................................    109.63    109.82
Kauai County, Hawaii:                                                   
  All Employees.....................................    119.27    119.69
Maui and Kalawao Counties, Hawaii:                                      
  All Employees.....................................    119.32    120.29
Territory of Guam and Commonwealth of the Northern                      
 Mariana Islands:                                                       
  Local Retail                                          122.25    122.67
  Commissary/Exchange...............................    120.81    121.14
Puerto Rico:                                                            
  All Employees.....................................    103.00    102.96
U.S. Virgin Islands:                                                    
  All Employees.....................................    117.81   118.01 
------------------------------------------------------------------------

    In this final rule, OPM is also consolidating the two allowance 
areas in the U.S. Virgin Islands into a single allowance area. The two 
allowance areas were (1) the island of St. Croix and (2) the islands of 
St. Thomas and St. John. The new allowance area is titled ``The U.S. 
Virgin Islands.'' In future surveys, OPM will continue to survey living 
costs on both St. Croix and St. Thomas, but the data will be 
consolidated to represent the Virgin Islands as a whole.
    OPM is eliminating Commissary/Exchange COLA rates in Anchorage, 
Alaska; Fairbanks, Alaska; Honolulu, Hawaii; and Puerto Rico. OPM is 
not eliminating the Commissary/Exchange COLA rate in the Guam/
Commonwealth of the Northern Mariana Islands (CNMI) allowance area.
    According to the Department of Defense, Defense Commissary Agency 
(DeCA), Federal civilian employees in the Anchorage, Fairbanks, 
Honolulu, and Puerto Rico allowance areas do not have access to 
commissaries by virtue of their Federal civilian employment. 
Commissary/Exchange COLA rates are payable only to Federal white-collar 
employees who, by virtue of their Federal civilian employment, have 
unlimited access to commissaries and exchanges in the allowance areas. 
Since Federal civilian employees in these four areas do not have access 
to commissaries, the Commissary/Exchange COLA rates are not payable in 
these areas. Accordingly, OPM is eliminating the Commissary/Exchange 
COLA rates in these areas.
    In Guam/CNMI, on the other hand, DeCA says some Federal civilian 
employees have access to commissaries by virtue of their Federal 
civilian employment. OPM believes these employees also have access to 
exchange facilities. Therefore, OPM is not eliminating the Commissary/
Exchange COLA rate in Guam/CNMI.
    The elimination of the Commissary/Exchange rates in the four areas 
should have no effect on the COLA paid to any employee. Federal white-
collar employees in these areas should be receiving the higher Local 
Retail COLA rate. Similarly, although OPM does not control access to 
commissaries and exchanges, OPM believes its action should not affect 
the commissary or exchange privileges that employees might otherwise 
enjoy. Therefore, if an employee in one of the four areas finds that 
his or her COLA rate or access to commissaries or exchanges is 
adversely affected by the elimination of the Commissary/Exchange COLA 
rate, the employee should contact his or her agency immediately, and 
the agency should bring the issue to OPM's attention as quickly as 
possible.
    Consistent with the terminology used in other areas where only one 
COLA rate is payable, OPM is retitling the ``Local Retail'' COLA rate 
as the ``All Employees'' COLA rate in the four areas affected. The 
retitling will not affect the COLA rates.
    OPM is also clarifying the definitions used in appendix A to 
subpart B of title 5, Code of Federal Regulations, because the previous 
definitions were subject to misinterpretation. The new definitions 
address this problem. The changes do not affect COLA rates or 
eligibility.
    Lastly, OPM is also removing from the regulations three locations 
listed as places where nonforeign post differentials are paid. The 
three locations are the Canton, Enderbury, and Christmas Islands. These 
islands are no longer territories or possessions of the United States 
and, therefore, are not covered by the nonforeign area post 
differential program.

Summary and Analysis of Comments

    OPM received 127 comments on the proposed regulations and notice it 
published in the Federal Register on May 26, 1994. Nearly all of these 
were from employees on St. Croix who endorsed the consolidation of the 
Virgin Islands allowance areas.
    OPM received one comment opposing the consolidation. The commenter 
believed the economies of St. Thomas and St. Croix were significantly 
different and that living costs are higher on St. Thomas than on St. 
Croix. The commenter also suggested that OPM survey St. Thomas twice a 
year, once in the ``tourist season'' and once in the ``off-season'' and 
average the results.
    Although there may be differences between St. Thomas and St. Croix, 
OPM believes consolidation will improve the survey and the 
administration of the program. Living costs vary among and within many 
COLA areas, including the Virgin Islands. The issue is whether it is 
practical to differentiate among the living costs of certain places. 
Generally, the smaller the area surveyed, the more difficult it is to 
measure relative differences in living costs. By consolidating areas 
where appropriate, OPM can improve the surveys and reduce unwarranted 
fluctuations in COLA's that otherwise might occur. This is the purpose 
of the consolidation of the Virgin Islands allowance areas. OPM does 
not believe semi-annual surveys of St. Thomas are necessary. OPM plans, 
however, to review survey timing in all allowance areas.
    One commenter requested that St. Croix employees receive their 
increase retroactively to the date of the increase in the St. Thomas 
COLA rate. OPM finds no basis for a retroactive adjustment. The 
previous St. Croix living-cost surveys were conducted according to 
regulation and provided adequate measures of local living costs. 
Therefore, the St. Croix COLA rates set pursuant to previous surveys 
are appropriate.
    Two commenters suggested that OPM review community selection in the 
City and County of Honolulu, Hawaii, allowance area. The commenters 
believed some of the communities surveyed were not typical of places 
where Federal employees live. OPM is reviewing community selections in 
all of the COLA survey areas in light of the results of the Federal 
Employee Housing and Living Patterns Survey. OPM revised community 
selections in several areas prior to the summer 1994 surveys. One of 
these allowance areas was the City and County of Honolulu.
    One commenter believed OPM had not complied with provisions of the 
Treasury, Postal Service, and General Government Appropriations Act, 
1992 (Pub. L. 102-141, as amended by Pub. L. 103-329), as these 
provisions apply to the COLA program. The law requires OPM to study 
living-cost issues and submit to Congress a report on possible changes 
in the COLA methodology. The report is due March 1, 1996. The commenter 
thought the law directed OPM to make changes in the COLA model before 
the report due date.
    As we stated in our response to comments received on an earlier 
proposed rule (at 59 FR 13844), OPM carefully reviewed Pub. L. 102-141 
and the related Senate Appropriations Committee report. OPM determined 
that the law has two requirements: (1) COLA rates may not be reduced 
through December 31, 1995, and (2) OPM must submit a report to Congress 
on possible changes in the COLA methodology. The law does not direct 
OPM to implement methodological changes at this time.
    The Senate Committee, however, asked OPM to research specific 
methodological issues. OPM is doing this and plans to include the 
results of its research in its report to Congress. Although the law 
does not require OPM to implement changes, OPM will continue to make 
improvements in the COLA program, as appropriate. We are implementing 
some of these changes with this final rule.
    The commenter said OPM regulations should describe the COLA model 
and survey in greater detail. OPM believes the COLA regulations are 
adequately detailed and that subjecting the survey process to a set of 
overly detailed and inflexible rules would impair, rather than improve, 
the COLA program. The flexibility results in a more accurate COLA model 
because improvements can be made from one year to the next. Such 
changes are made public because, before COLA rates are adjusted, OPM 
publishes in the Federal Register a detailed report on the survey 
methodology and results. Employees have the opportunity to comment on 
any changes, and OPM takes these comments into careful consideration.
    The commenter believed OPM violated the Administrative Procedure 
Act (APA) by publishing details after the survey. He said OPM could not 
``go back and replicate the data if it is subsequently determined that 
the changes were 'inappropriate.''' The APA does not require OPM to 
make a change for each comment received. Instead, the APA requires OPM 
to inform the public of certain proposals and actions, allow the public 
to comment on these, and take these comments into consideration. This 
we do.
    As evidenced in this final rule, OPM implements recommended changes 
as appropriate. With this rule, OPM is correcting an error made in the 
calculation of the Maui index, implementing a new methodology for 
calculating the Miscellaneous Component index, and eliminating 
Commissary/Exchange COLA rates in areas where they are no longer 
payable. OPM also adopted, based in part on comments it received, 
community changes for the summer 1994 COLA surveys. Therefore, OPM is 
in compliance with both the letter and spirit of the APA.
    The commenter said there was no basis in law for the pledge of 
confidentiality that is provided on the Background Survey information 
collection materials, which was part of Appendix 5 of the report. The 
Freedom of Information Act (FOIA), as codified at 5 U.S.C. 552, allows 
the Government to withhold information from public release if the 
information contains trade secrets or commercial or financial 
information that is privileged or confidential. Generally, the 
information collected in Background Surveys is privileged commercial 
information. Background Surveys are used to identify items that will be 
priced and outlets at which the prices will be collected. To identify 
commonly purchased items and popular outlets, information on such 
things as sales volume and market penetration are collected. This 
information is protected from disclosure under FOIA.
    The commenter believed the COLA model was unnecessarily complex and 
suggested that it be simplified to use only one income level. The 
commenter said this would reduce survey costs and the number of 
subjective assumptions required. As we noted in our response to similar 
comments received on an earlier proposed rule (at 59 FR 13845), OPM's 
regulations require the measurement of living costs at multiple income 
levels. This approach recognizes that relative living costs may vary by 
income level and that the distribution of employees by income level may 
vary among areas. The multiple income approach, therefore, yields a 
more accurate measure of overall living-cost differences than a single 
income approach. Nevertheless, to the extent that multiple income 
levels require additional subjective assumptions, we agree that the 
overall integrity of the model might not be impaired by using a single 
income level. OPM is examining this issue and plans to address it in 
its report to Congress.
    The commenter also objected to Runzheimer's recommendation that OPM 
include income taxes in the COLA model. He believed this would unduly 
complicate the model. As stated in previous Federal Register notices, 
OPM is studying issues relating to Federal, State, and local income 
taxes and plans to include the results of this study in its report to 
Congress.
    The commenter wanted the COLA model to take into account the 
``objectively determinable'' costs of remoteness, isolation, and 
special needs. He cited increased home maintenance, out-of-area college 
and university costs, and medical expenses as examples of these extra 
costs. In comments on previous Federal Register notices, many employees 
identified special ``needs'' they believed were unique to their area. 
OPM has and is continuing to research many of these issues, including 
home maintenance, college and university costs, and medical expenses. 
We plan to include the results of this research in our report to 
Congress. At present, however, OPM believes the COLA model reasonably 
and adequately measures cost differences for the vast majority of 
expenses that Federal employees typically incur.
    Noting the difficulty of comparing colleges and universities of 
equal quality, the commenter further proposed that OPM measure the cost 
of higher education solely in the DC area. He said allowance area costs 
could be computed by adding to the DC costs the extra expense of out-
of-state tuition, room and board, and round-trip air travel between the 
allowance areas and Washington, DC. Although this approach would 
address the problem of comparing the cost of an education of like 
quality, we believe measuring costs in this manner would vastly 
overstate the costs incurred by most Federal employees in the allowance 
areas. Measuring costs in this manner could also significantly 
understate the average cost of college and university education 
incurred by Federal employees in the DC area.
    The commenter said items needed only in allowance areas should be 
priced in the allowance area, but not in DC. OPM is researching the 
issue of special needs. While there may be consumer requirements unique 
to living in the allowance areas, there also are consumer requirements 
unique to living in the Washington, DC, area. For the summer surveys, 
the model does not address these issues because they are highly 
subjective, difficult to measure, and vary widely among areas. Instead, 
the model compares the cost of an item in an allowance area with the 
cost for the same item in the DC area. OPM believes this is consistent 
with the settlement of Hector Arana, et al. v. United States, in which 
the plaintiffs asked OPM to adopt a methodology that compared specified 
brands, models, and sizes whenever possible.
    We note, however, that the Senate Appropriations Committee asked 
OPM to research the issue of items required in the allowance area but 
not in the Washington, DC, area and include this research in its report 
to Congress. This OPM is doing.
    The commenter recommended that OPM add 5 percentage points to all 
COLA rates to take into account costs that exist but are not 
objectively determinable. OPM believes intangible factors, such as 
difficult living conditions, should not be part of the COLA program. 
There are other programs, such as the post differential program, that 
compensate Federal employees in such circumstances. OPM believes COLA 
should compensate employees for measurable differences in living costs.
    Even if we agreed conceptually with such changes, significant 
changes in the law, Executive Order, and regulations would be required 
to allow the adjustment of COLA for these intangible factors. The 
Senate Appropriations Committee specifically asked OPM to study factors 
relating to remoteness and isolation and to report to Congress on 
legislative recommendations on how to calculate COLA's. Therefore, 
final resolution of these issues must await OPM's report to Congress 
and subsequent congressional action.
    The commenter believed employees in the allowance areas saved at a 
higher rate to afford the down payment for a house or a car or to pay 
for college/university education. He said OPM should take this into 
consideration and adjust savings and investments by the overall index 
for the area. The COLA model uses the same approach to savings and 
investments as the Bureau of Labor Statistics uses in the Consumer 
Expenditure Survey (CES). That approach accounts for savings and 
investments made for the purpose of future purchases in the category or 
component associated with the item to be purchased. For example, 
savings made for the down payment or purchase of an automobile are 
accounted for in the private transportation category. Therefore, if 
automobiles cost more in an allowance area and the purchaser must save 
more to afford the car, the COLA model already takes this additional 
savings requirement into account. No additional adjustments are 
required.
    On the other hand, the savings and investment category in the 
Miscellaneous Component covers long-term savings and investments, such 
as those made for retirement purposes. The category also includes life 
insurance. For Federal employees, the cost of life insurance and 
required contributions to a Federal retirement system do not vary by 
geographic area. Any additional insurance or contributions to the 
retirement systems are a matter of personal preference. Therefore, it 
is appropriate to hold the index constant for these items.
    The commenter objected to trimming high and low values in the 
housing component and use of trend analyses. The commenter believed 
housing market price anomalies should be tolerated or that only 
``obvious errors or anomalies'' should be eliminated. The purpose of 
trimming and trend analyses is to stabilize the housing price data from 
one year to the next. As OPM stated in its response to comments 
received on an earlier proposed rule (at 59 FR 13846), trimming is 
essentially a nonparametric technique similar to using the median 
rather than the average. OPM and Runzheimer considered using the median 
but rejected it because the limited number of observations obtained in 
some smaller allowance areas could cause the median to be erratic from 
one year to the next. Trimming provides stability; and because equal 
numbers of high and low values are trimmed, no bias is introduced. 
Eliminating ``obvious anomalies'' would be a more subjective process 
with a potential for bias.
    The commenter thought the age of the home should be included in 
home sales analyses. He recommended comparing prices of homes of a 
similar age, size, and room count. Numerous factors influence home sale 
prices, but data on many of these factors are not readily available. 
Runzheimer uses home size and room count as the major criteria in 
housing comparisons because data on these factors are usually available 
in all areas and because these factors typically have a significant 
influence on home prices. Age is not used because data on it frequently 
are not available and because OPM's initial research indicates that its 
use may be problematic. Moreover, as noted in the report, the number of 
home sales observations is limited in many areas. Stratifying these 
small quantities into age groups for purposes of comparison would 
complicate the model--something the commenter wished to avoid. It would 
also probably introduce unwarranted fluctuations in the housing index 
from one year to the next--something OPM wants to avoid.
    The commenter said the survey failed to take into consideration the 
use of solar water heaters in Hawaii and Guam. The commenter believed 
the model did not account for the capital cost of such heaters or the 
possible reduction in overall utility consumption.
    As OPM stated in its response to comments received on an earlier 
proposed rule (at 59 FR 13847), significant home features and 
improvements generally are reflected in the selling price of the home. 
Therefore, living-cost surveys reflect the cost of solar water heaters 
to the extent that such items influence home market values and are 
commonly found in homes in any area, including Hawaii and Guam. If 
solar water heaters are so common that their use generally reduces the 
consumption of utilities, the survey results will reflect lower utility 
costs. This is as it should be. The COLA model compares overall living 
costs in the allowance area with overall living costs in the DC area. 
If housing is more expensive and utility costs are lower because solar 
heaters are common, the final comparison of overall housing costs will 
be equitable. No special consideration of capital improvement costs or 
reduced utility consumption is appropriate.
    The commenter said employees in the allowance areas face extreme 
weather disturbances, particularly typhoons or hurricanes. He believed 
these weather disturbances and other climatic conditions result in 
higher costs, particularly home insurance and maintenance costs.
    The cost of homeowner's insurance is part of the COLA model. The 
policies priced include coverage of damage caused by high winds (e.g., 
hurricane winds). As shown in Appendix 7 of the report, these policies 
are relatively expensive in areas where severe weather is a problem. 
Other costs, such as the cost of repairing storm damage, are more 
difficult to address in the surveys. Although it may be possible to 
price the cost of repairing or replacing an item such as a window or a 
roof, it is difficult to know how often this must be done in each 
allowance area compared with the Washington, DC, area. The same is true 
with other types of maintenance, such as painting. It is difficult to 
know what tasks, if any, must be performed more often in the allowance 
areas than in the Washington, DC, area. OPM is researching these issues 
and plans to discuss them in its report to Congress.
    The commenter objected to the selection of Los Angeles as the 
common destination point for comparing airfares. He said the Los 
Angeles routes were highly competitive and resulted in lower fares 
compared with other destinations. The commenter suggested pricing 
round-trip tickets from each area to Kansas City. As stated in the 
report, Los Angeles was selected because it is a common point within 
the continental United States that is roughly equidistant from each of 
the allowance areas and the Washington, DC, area. The route may be 
highly competitive, but that does not invalidate cost comparisons. OPM 
is measuring the relative cost of air travel. If competition reduces 
fares, the reductions will be reflected in the Washington, DC, to Los 
Angeles fares as well as in the allowance area to Los Angeles fares. 
Therefore, OPM believes the comparisons are appropriate.
    The commenter also felt that the COLA model did not measure true 
air transportation costs. He said inter-island travel and travel to the 
contiguous 48 States required more frequent use of air transportation. 
The COLA model does not account for regional differences in the 
frequency of transportation. It assumes the typical Federal employee 
uses air travel occasionally but mainly travels by private automobile, 
putting 15,000 miles per year on a car. The model may underestimate the 
cost of air travel for some allowance area residents, but it probably 
overestimates private transportation costs for others because it is 
unlikely that most island residents would put 15,000 miles per year on 
their cars. Needless to say, OPM would prefer to employ better usage 
estimates for both private and air transportation. To this end, OPM is 
researching transportation issues and plans to include the results of 
this research in its report to Congress.
    The commenter believed the medical expense portion of the 
Miscellaneous Component failed to reflect the higher out-of-pocket 
expenses that some Federal employees in the allowance areas incur. The 
commenter cited as examples the higher price of medical service, the 
absence of Health Maintenance Organizations (HMO's), and the need to 
travel outside the area to obtain some medical services. The COLA model 
takes into consideration relative differences in medical costs. For 
example, the report indicated that medical costs in Honolulu are 
roughly 10 percent above those in the Washington, DC, area. OPM notes 
that HMO's are very popular in Hawaii and Puerto Rico and that all of 
the allowance areas have medical facilities that provide commonly 
required medical services. Nevertheless, OPM is researching issues 
relating to medical expenses. The results of that research will be 
incorporated in our report to Congress.
    The commenter criticized the methodology used for catalog pricing. 
He assumed DC employees do not purchase by catalog but that allowance 
areas employees do because certain items were not locally available. 
Consequently, he recommended comparing allowance area catalog prices 
with over-the-counter prices in the Washington, DC, area.
    As stated in the report, catalogs are a popular form of retailing 
in both the allowance areas and in the Washington, DC, area. The COLA 
model includes catalog sales to reflect this common type of shopping 
and to allow the comparison of the prices of certain items for which 
the same brands, models, and sizes are difficult to find in the 
allowance areas and in the Washington, DC, area. OPM does not agree 
with the commenter's assumption that people only purchase from catalogs 
when the item is not available locally. People make catalog purchases 
for a variety of reasons, including price, convenience, and 
availability. Numerous catalog merchandisers compete in the allowance 
areas and in the Washington, DC, area. It would be inappropriate, 
therefore, to compare allowance area catalog prices with over-the-
counter prices in the DC area. In the employee survey, OPM asked 
employees about their purchasing patterns, including whether they 
typically purchase various types of items by catalog. OPM plans to 
include the results of this survey in its report to Congress.
    The commenter criticized OPM for using old consumer expenditure 
information to weight commissary and exchange prices. OPM acknowledges 
it is using older information. As evidenced in this final rule, 
however, OPM has been researching commissary and exchange usage to 
discern which Federal employees have such access and in which areas. 
OPM plans to continue and expand this research, as appropriate.
    The commenter assumed that employees who are paid the commissary 
and exchange COLA rate would have commissary and exchange access if 
stationed in the Washington, DC, area. He recommended, therefore, 
comparing commissary and exchange prices in the allowance areas with 
commissary and exchange prices in the DC area.
    Executive Order 10000 requires OPM to ``* * *make appropriate 
deductions when * * * commissary or other purchasing privileges are 
furnished as a result of Federal civilian employment at a cost 
substantially lower than the prevailing costs in the allowance area 
concerned.'' Commissary and exchange prices in Guam are significantly 
lower than prevailing prices. Therefore, a reduction in the COLA rate 
is warranted. The methodology used to calculate the Commissary and 
Exchange COLA rate involves the comparison of a weighted average of 
local retail prices and commissary and exchange prices in the allowance 
area with local retail prices only in the Washington, DC, area. This 
methodology was reviewed and upheld by the court in Joseph E. Curlott, 
Jr., et al. v. Robert E. Hampton, et al. and Charles R. Kester, et al. 
v. Alan K. Campbell.

Regulatory Flexibility Act

    I certify that this regulation will not have a significant economic 
impact on a substantial number of small entities because the regulation 
will affect only Federal agencies and employees.

List of Subjects in 5 CFR Part 591

    Government employees, Travel and transportation expenses, Wages.

U.S. Office of Personnel Management.
James B. King,
Director.

    Accordingly, OPM is amending 5 CFR part 591 as follows:

PART 591--ALLOWANCES AND DIFFERENTIALS

Subpart B--Cost-of-Living Allowance and Post Differential--
Nonforeign Areas

    1. The authority citation for subpart B of part 591 continues to 
read as follows:

    Authority: 5 U.S.C. 5941; E.O. 10000, 3 CFR, 1943-1948 Comp., p. 
792; E.O. 12510, 3 CFR, 1985 Comp., p. 338.

    2. In Sec. 591.204, paragraph (b)(4) is revised to read as follows:


Sec. 591.204  Establishment of allowance areas.

* * * * *
    (b)* * *
    (4) The U.S. Virgin Islands.
* * * * *
    3. In Sec. 591.208, paragraph (b) is revised to read as follows:


Sec. 591.208 Post differential.

* * * * *
    (b) The places at which differentials are paid are--
    (1) American Samoa (including the island of Tutuila, the Manua 
Islands, and all other islands of the Samoa group east of longitude 171 
degrees west of Greenwich, together with Swains Island);
    (2) Guam;
    (3) The Commonwealth of the Northern Mariana Islands;
    (4) Johnston Island and Sand Island; and
    (5) Midway Islands and Wake Island.
* * * * *
    4. Appendix A of subpart B is revised to read as follows:

Appendix A of Subpart B--Places and Rates At Which Allowances Shall Be 
Paid

    This appendix lists the places where a cost-of-living allowance has 
been approved and shows the allowance rate to be paid to employees 
along with any special eligibility requirements for the allowance 
payment. The allowance percentage rate shown is paid as a percentage of 
an employee's rate of basic pay.

------------------------------------------------------------------------
                                                              Authorized
                                                               allowance
           Geographic coverage/allowance category                rate   
                                                               (percent)
------------------------------------------------------------------------
                       State of Alaska                                  
                                                                        
City of Anchorage and 80-kilometer (50-mile) radius by road:            
  All Employees.............................................       25.0 
City of Fairbanks and 80-kilometer (50-mile) radius by road:            
  All Employees.............................................       25.0 
City of Juneau and 80-kilometer (50-mile) radius by road:               
  All Employees.............................................       25.0 
Rest of the State:                                                      
  All Employees.............................................       25.0 
                                                                        
                       State of Hawaii                                  
                                                                        
City and County of Honolulu:                                            
  All Employees.............................................       22.5 
County of Hawaii:                                                       
  All Employees.............................................       15.0 
County of Kauai:                                                        
  All Employees.............................................       20.0 
County of Maui and County of Kalawao:                                   
  All Employees.............................................       22.5 
                                                                        
 Territory of Guam and Commonwealth of the Northern Mariana             
                           Islands                                      
                                                                        
Local Retail................................................       22.5 
Commissary/Exchange.........................................       20.0 
                                                                        
                 Commonwealth of Puerto Rico                            
                                                                        
All Employees...............................................       10.0 
                                                                        
                     U.S. Virgin Islands                                
                                                                        
All Employees...............................................       17.5 
------------------------------------------------------------------------

Definitions of Allowance Categories

    The following are definitions of the allowance categories used in 
the tables in this appendix.
    All Employees: This category covers all Federal employees eligible 
for an allowance under 5 U.S.C. 5941.

    Local Retail: This category covers all Federal employees 
eligible for an allowance who do not have unlimited access to 
commissary and exchange facilities by virtue of their Federal 
civilian employment.
    Commissary/Exchange: This category covers all Federal employees 
eligible for an allowance who have unlimited access to commissary 
and exchange facilities by virtue of their Federal civilian 
employment.

    Note: Eligibility for access to military commissary and exchange 
facilities is determined by the appropriate military department. If 
an employee is furnished these privileges for reasons associated 
with his or her Federal civilian employment, he or she will receive 
an identification card that authorizes access to such facilities. 
Possession of such an identification card is sufficient evidence 
that the employee uses the facilities.

    5. Appendix B of subpart B is revised to read as follows:

Appendix B of Subpart B--Places and Rates At Which Differentials Shall 
Be Paid

    This appendix lists the places where a post differential has been 
approved and shows the differential rate to be paid to eligible 
employees. The differential percentage rate shown is paid as a 
percentage of an employee's rate of basic pay.

------------------------------------------------------------------------
                                                             Percentage 
                    Geographic coverage                     differential
                                                                rate    
------------------------------------------------------------------------
American Samoa (including the island of Tutuila, the Manua              
 Islands, and all other islands of the Samoa group east of              
 longitude 171 deg. west of Greenwich, together with                    
 Swains Island)...........................................        25.0  
Johnston Island and Sand Island...........................        25.0  
Midway Islands............................................        25.0  
Territory of Guam and Commonwealth of the Northern Mariana              
 Islands..................................................        20.0  
Wake Island...............................................        25.0  
------------------------------------------------------------------------

[FR Doc. 94-26556 Filed 10-25-94; 8:45 am]
BILLING CODE 6325-01-P