[Federal Register Volume 73, Number 165 (Monday, August 25, 2008)]
[Notices]
[Pages 50176-50177]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-19593]



  Federal Register / Vol. 73, No. 165 / Monday, August 25, 2008 / 
Notices  

[[Page 50176]]


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OFFICE OF PERSONNEL MANAGEMENT


Nonforeign Area Cost-of-Living Allowances; 2007 Interim 
Adjustments

AGENCY: Office of Personnel Management.

ACTION: Notice.

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SUMMARY: This notice publishes the 2007 interim adjustments for the 
Alaska and Caribbean Nonforeign Cost-of-Living Allowance (COLA) areas. 
The Federal Government conducts COLA surveys in Alaska, Hawaii, Guam, 
Puerto Rico, and the U.S. Virgin Islands to set COLA rates. These 
surveys are conducted once every 3 years on a rotating basis. In 
between COLA surveys, the Government adjusts COLA rates for the areas 
not surveyed using the relative change in the Consumer Price Index 
(CPI) for the COLA areas compared with the Washington-Baltimore CPI. 
The Alaska and Caribbean COLA areas were not surveyed in 2007; 
therefore, OPM is calculating and publishing interim adjustments for 
these COLA areas.

DATES: We will consider comments received on or before October 24, 
2008.

ADDRESSES: Send or deliver comments to Charles D. Grimes III, Deputy 
Associate Director for Performance and Pay Systems, Strategic Human 
Resources Policy Division, Office of Personnel Management, Room 7300B, 
1900 E Street, NW., Washington, DC 20415-8200; fax: (202) 606-4264; or 
e-mail: [email protected].

FOR FURTHER INFORMATION CONTACT: J. Stanley Austin, (202) 606-2838; 
fax: (202) 606-4264; or e-mail: [email protected].

SUPPLEMENTARY INFORMATION: Section 5941 of title 5, United States Code, 
authorizes Federal agencies to pay cost-of-living allowances (COLAs) to 
white-collar Federal and U.S. Postal Service employees stationed in 
Alaska, Hawaii, Guam and the Northern Mariana Islands, Puerto Rico, and 
the U.S. Virgin Islands (USVI). Executive Order 10000, as amended, 
delegates to the Office of Personnel Management (OPM) the authority to 
administer nonforeign area COLAs and prescribes certain operational 
features of the program. OPM conducts living-cost surveys in each 
allowance area and in the Washington, DC, area to determine whether, 
and to what degree, COLA area living costs are higher than those in the 
DC area.
    As required by section 591.223 of title 5, Code of Federal 
Regulations, OPM conducts COLA surveys in the Alaska, Pacific, and 
Caribbean areas on a 3-year rotating basis, and in the Washington, DC, 
area on an annual basis. OPM sets the COLA rate for each area based on 
the results of these surveys. For areas not surveyed during a 
particular year, OPM computes interim adjustments to COLA rates based 
on the relative change in the Consumer Price Index (CPI) for the COLA 
area compared with the Washington, DC, area. (See 5 CFR 591.224-226.)
    In 2007, we surveyed the Pacific COLA areas of Honolulu County, 
Hawaii County, Maui County, and Kauai County, Hawaii, and Guam. We did 
not survey the Alaska or Caribbean COLA areas. Therefore, we are 
adjusting the previous Alaska and Caribbean survey price indexes using 
the relative change in CPIs. As required by 5 CFR 591.225, we used the 
CPI, All Urban Consumers (CPI-U), as published by the Bureau of Labor 
Statistics (BLS) for Alaska and the Washington-Baltimore area and the 
Puerto Rico CPI as produced by the Puerto Rico Department of Work and 
Human Resources.

2006 Alaska Survey Results and Interim Adjustments

    First, we computed the change in prices for the Anchorage area 
compared with the change in prices for the Washington-Baltimore area 
using the CPI-Us for each area. Table 1 shows this process.

 Table 1--Anchorage and Washington-Baltimore CPI-U Changes 2004 to 2006
------------------------------------------------------------------------
                        Survey area                             CPI-U
------------------------------------------------------------------------
Anchorage 2006 CPI-U First Half............................   176.7
Anchorage 2007 CPI-U First Half............................   179.394
Anchorage change...........................................     1.5246%
DC-Baltimore 2006 CPI-U first half.........................   127.7
DC-Baltimore 2007 CPI-U first half.........................   132.0
DC-Baltimore change........................................     3.3673%
------------------------------------------------------------------------

    Next, we multiplied the price indexes from the four 2006 Alaska 
surveys--Anchorage, Fairbanks, Juneau, and Rest of the State of Alaska 
(represented by Kodiak)--by the change in the Anchorage CPI-U and 
divided that by the change in the Washington-Baltimore CPI-U. We used 
the Alaska area price indexes from the 2006 Alaska survey report, 
published on January 3, 2008, at 73 FR 774. The price index is the COLA 
survey index before the addition of the adjustment factor specified in 
5 CFR 591.227. The adjustment factor reflects differences in need, 
access to and availability of goods and services, and quality of life 
in the COLA area relative to the DC area and is a fixed amount. 
Therefore, it is not adjusted by the change in the CPI.
    Table 2 shows the interim adjustment process. For example, the 2006 
Fairbanks COLA survey adjusted index, as published in the Federal 
Register, is 118.90. The Fairbanks adjustment factor is 9 points. 
Therefore, subtracting the adjustment factor shows 109.90 as the price 
index from the 2006 survey. We increased this price index by 1.5246 
percent (i.e., multiplied by 1.015246), the change in the Anchorage 
CPI-U, and reduced it by 3.3673 percent (i.e., divided by 1.033673), 
the change in the Washington-Baltimore CPI-U, to give a new price index 
of 107.94. We then added the 9 point adjustment factor to the new price 
index, which yields a 2007 Fairbanks Interim Adjustment COLA rate of 
116.94.

                             Table 2--Alaska COLA Area CPI-U Price Index Adjustments
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                                                            Anchorage     Fairbanks      Juneau        Kodiak
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2006 COLA Survey Indexes................................        109.81        118.90        120.08        132.82
Adjustment Factors......................................          7             9             9             9
2006 COLA Survey Price Indexes..........................        102.81        109.90        111.08        123.82
2007 CPI Adjusted Price Indexes.........................        100.98        107.94        109.10        121.61
2007 COLA Indexes with Adj. Factors.....................        107.98        116.94        118.10        130.61
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[[Page 50177]]

2005 Caribbean Survey Results and Interim Adjustments

    The process we used to compute the interim adjustments for the 
Caribbean areas (i.e., Puerto Rico and USVI) is identical to the one 
for the Alaska areas except that we used the Puerto Rico CPI as 
produced by the Puerto Rico Department of Work and Human Resources, as 
specified in 5 CFR 591.225. The Puerto Rico Department of Labor and 
Human Resources implemented a revised methodology for producing its CPI 
calculations effective December 2006. As shown in table 3, the changed 
methodology had a substantial effect on the measured inflation rate, 
demonstrating a significant overstatement of the inflation rate under 
the old methodology.

           Table 3--Puerto Rico CPI Measurements 2006 to 2007
------------------------------------------------------------------------
                                                    Old          New
                    Period                      methodology  methodology
------------------------------------------------------------------------
December 2006 CPI.............................   334.8        100.00
June 2007 CPI.................................   373.5        103.06
Percent increase from January 2006 to June        11.5591%      3.0600%
 2007.........................................
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    The Puerto Rican Department of Labor and Human Resources estimated 
the inflation rate for the year beginning June 2006 and ending June 
2007 to be in the range of 5 to 6 percent under the new methodology. To 
provide more precision, we applied the 3.06 percent inflation rate for 
the last 6 months of the year to the first half of the year. This 
resulted in an annual inflation rate of 6.2136 percent (1.0306 x 
1.0306), exceeding the estimate by the Puerto Rico Department of Labor 
and Human Resources. Using this value for the annual inflation rate, we 
multiplied 106.2136 by 312.2 (the June 2006 CPI) to arrive at a CPI of 
331.60 for June 2007. Table 4 shows the relative change in the Puerto 
Rico CPI from June 2005 to June 2007 compared with the Washington-
Baltimore CPI-U.

Table 4--Puerto Rico and Washington-Baltimore CPI-U Changes 2005 to 2006
------------------------------------------------------------------------
                        Survey area                             CPI-U
------------------------------------------------------------------------
Puerto Rico 2005 CPI first half............................   277.2
Puerto Rico 2007 CPI first half............................   331.6
Puerto Rico change.........................................    19.625%
DC-Baltimore 2005 CPI-U first half.........................   122.8
DC-Baltimore 2007 CPI-U first half.........................   132.0
DC-Baltimore change........................................     7.4919%
------------------------------------------------------------------------

    We multiplied the Puerto Rico and USVI price indexes by the change 
in the Puerto Rico CPI and divided that by the change in the 
Washington-Baltimore CPI-U. We used price indexes for Puerto Rico and 
USVI from the 2005 Caribbean survey report published at 71 FR 63179. As 
noted in section 4.2.3 of the report, we calculated the Puerto Rico 
survey index (103.32) after we re-priced water utilities based on a 
post-survey increase in water utility rates. The CPI for Puerto Rico 
already reflects this increase; therefore, we reverted to the pre-
increase index level (103.06) to avoid duplication in the interim 
adjustment calculation. Table 5 shows the 2005 indexes, the interim 
adjustment process, and the final results.

       Table 5--Caribbean COLA Area CPI-U Price Index Adjustments
------------------------------------------------------------------------
                                                       Puerto
                                                        Rico      USVI
------------------------------------------------------------------------
2005 COLA Survey Indexes............................    103.06    128.21
Adjustment Factors..................................      7         9
2005 COLA Survey Price Indexes......................     96.06    119.21
2007 CPI Adjusted Price Indexes.....................    106.90    132.67
2007 COLA Indexes with Adj. Factors.................    113.90    141.67
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Interim Adjustments Summarized

    In a proposed rule published with this notice, we propose to adjust 
COLA rates based on the interim CPI adjustments. In Alaska, the results 
indicate that COLA rates in Anchorage, Fairbanks, and Juneau should 
continue to be reduced by an additional 1 percentage point in each 
area. (COLA rates may be reduced by no more than 1 percentage point in 
a 12-month period as provided under 5 CFR 591.228(c).) In the 
Caribbean, the results indicate that the COLA rate for the U.S. Virgin 
Islands is currently set at the appropriate level and the rate for 
Puerto Rico should be increased to 14 percent.

Office of Personnel Management.
Michael W. Hager,
Acting Director.
[FR Doc. E8-19593 Filed 8-22-08; 8:45 am]
BILLING CODE 6325-39-P