[Federal Register Volume 73, Number 237 (Tuesday, December 9, 2008)]
[Proposed Rules]
[Pages 74858-74860]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-28832]



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Part III





Office of Personnel Management





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5 CFR Part 591



Nonforeign Area Cost-of-Living Allowances; 2008 Interim Adjustments; 
2007 Nonforeign Area Cost-of-Living Allowance Survey Report: Pacific 
and Washington, DC Areas; Proposed Rule and Notice

  Federal Register / Vol. 73 , No. 237 / Tuesday, December 9, 2008 / 
Proposed Rules  

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OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 591

RIN 3206-AL72


Nonforeign Area Cost-of-Living Allowances; 2008 Interim 
Adjustments

AGENCY: U.S. Office of Personnel Management.

ACTION: Proposed rule.

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SUMMARY: The U.S. Office of Personnel Management (OPM) is proposing to 
change the cost-of-living allowance (COLA) rates received by certain 
white-collar Federal and U.S. Postal Service employees in the Pacific 
and Alaska COLA areas. The proposed rate changes are the result of 
interim adjustments OPM calculated based on relative Consumer Price 
Index differences. The proposed regulations would reduce the COLA rates 
for the Pacific allowance areas and Anchorage, Fairbanks, and Juneau, 
Alaska, by 1 percentage point.

DATES: We will consider comments received on or before February 9, 
2009.

ADDRESSES: Send or deliver comments to Charles D. Grimes III, Deputy 
Associate Director for Performance and Pay Systems, Strategic Human 
Resources Policy Division, U.S. 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 Commonwealth of the Northern Mariana 
Islands (CNMI), Puerto Rico, and the U.S. Virgin Islands. Executive 
Order 10000, as amended, delegates to the U.S. 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. We set the COLA rate for each 
area based on the results of these surveys.
    As required by section 591.223 of title 5, Code of Federal 
Regulations, we conduct cost-of-living surveys in the Caribbean, 
Alaska, and Pacific COLA areas on a 3-year rotating basis, and in the 
Washington, DC, area on an annual basis. For areas not surveyed during 
a particular year, we adjust COLA rates by 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.) We adopted these 
regulations pursuant to the stipulation for settlement in Caraballo et 
al. v. United States, No. 1997-0027 (D.V.I.), August 17, 2000. 
Caraballo was a class-action lawsuit that resulted in many changes in 
the COLA methodology and regulations.

2007 Pacific Survey Results

    We conducted living-cost surveys in the Hawaii COLA areas 
(Honolulu, Hawaii County, Maui, and Kauai), Guam, and the Washington, 
DC, area in the spring of 2007. We publish the results of these surveys 
in the 2007 Nonforeign Area Cost-of-Living Allowance Survey Report: 
Pacific and Washington, DC, Areas, which accompanies this proposed rule 
in this separate part.
    As described in the 2007 survey report, we compared the results of 
the COLA area surveys with the results of the DC area survey to compute 
a living-cost index for each of the Pacific COLA areas. Table 1 shows 
the final 2007 Pacific survey living-cost indexes. These indexes are 
superseded by the 2008 interim CPI adjustment indexes as discussed in 
the section that follows.

                  Table 1--2007 Pacific Survey Indexes
------------------------------------------------------------------------
                       Allowance area                           Index
------------------------------------------------------------------------
Honolulu County, HI........................................       121.37
Hawaii County, HI..........................................       111.71
Kauai County, HI...........................................       118.14
Maui County, HI............................................       123.62
Guam/CNMI..................................................       119.98
------------------------------------------------------------------------

2008 Interim Adjustments

    We computed 2008 interim adjustments for the Alaska and Pacific 
COLA areas based on the relative change in the CPIs for these areas 
compared with the Washington, DC, area. As required by 5 CFR 591.225, 
we used the CPI, All Urban Consumers (CPI-U), published by the Bureau 
of Labor Statistics (BLS) for Anchorage, Honolulu, and the Washington-
Baltimore area for the comparisons. We did not compute interim 
adjustments for Puerto Rico and the U.S. Virgin Islands because we 
conducted surveys in these areas in 2008.

Alaska Interim Adjustments

    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 2 shows this process.

 Table 2--Anchorage and Washington-Baltimore CPI-U Changes 2006 to 2008
------------------------------------------------------------------------
                        Survey area                             CPI-U
------------------------------------------------------------------------
Anchorage 2006 CPI-U First Half...........................    176.7
Anchorage 2008 CPI-U First Half...........................    187.659
Anchorage change..........................................      6.202%
DC-Baltimore 2006 CPI-U first half........................    127.7
DC-Baltimore 2008 CPI-U first half........................    138.49
DC-Baltimore change.......................................      8.4495%
------------------------------------------------------------------------

    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 3 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 6.202 
percent (i.e., multiplied by 1.06202), the change in the Anchorage CPI-
U, and reduced it by 8.4495 percent (i.e., divided by 1.084495), the 
change in the Washington-Baltimore CPI-U, to give a new price index of 
107.62. We then added the 9-point adjustment factor to the new price 
index, which yields a 2008 Fairbanks interim adjustment COLA rate of 
116.62.

[[Page 74859]]



                             Table 3--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
2008 CPI Adjusted Price Indexes.............................       100.68       107.62       108.78       121.25
2008 COLA Indexes with Adj. Factors.........................       107.68       116.62       117.78       130.25
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Pacific Interim Adjustments

    The process we used to compute the interim adjustments for the 
Pacific areas (i.e., Honolulu, Hawaii County, Kauai, Maui, and Guam/
CNMI) is identical to the one for the Alaska areas except we used the 
BLS CPI-U for Honolulu, as specified in Sec.  591.225. Table 4 shows 
the relative change in the Honolulu CPI-U compared with the Washington-
Baltimore CPI-U.

  Table 4--Honolulu and Washington-Baltimore CPI-U Changes 2007 to 2008
------------------------------------------------------------------------
                        Survey area                             CPI-U
------------------------------------------------------------------------
Honolulu 2007 CPI-U First Half.............................       216.62
Honolulu 2008 CPI-U First Half.............................      227.334
Honolulu change............................................       4.946%
DC-Baltimore 2006 CPI-U first half.........................        132.0
DC-Baltimore 2008 CPI-U first half.........................       138.49
DC-Baltimore change........................................      4.9167%
------------------------------------------------------------------------

    We multiplied the price indexes from the five 2007 Pacific 
surveys--Honolulu, Hawaii County, Kauai, Maui, and Guam--by the change 
in the Honolulu CPI-U and divided that by the change in the Washington-
Baltimore CPI-U. We used the Pacific area price indexes from the 2007 
Pacific survey report, which accompanies this proposed rule. Table 5 
shows the indexes, the interim adjustment process, and the final 
results.

                            Table 5--Pacific COLA Area CPI-U Price Index Adjustments
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                                                   Honolulu    Hawaii Co.     Kauai         Maui         Guam
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2007 COLA Survey Indexes.......................       121.17       111.72       118.15       123.63       119.97
Adjustment Factors.............................            5            7            7            7            9
2007 COLA Survey Price Indexes.................       116.17       104.72       111.15       116.63       110.97
2008 CPI Adjusted Price Indexes................       116.40       104.74       111.17       116.65       111.01
2008 COLA Indexes with Adj. Factors............       121.40       111.74       118.17       123.65       120.01
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COLA Rate Reductions

    As a result of the interim adjustments, we are proposing to reduce 
the COLA rates for Anchorage, Fairbanks, Juneau, and the Pacific 
allowance areas because we have determined costs in these areas have 
decreased in relation to the DC area. Section 5941 of title 5, U.S. 
Code, requires that the nonforeign area cost-of-living allowance be 
based on living costs in an area that are substantially higher than 
living costs in the DC area.
    On January 3, 2008, at 73 FR 772, we published a proposed rule to 
reduce the COLA rates in Anchorage, Fairbanks, and Juneau from 24 
percent to 23 percent based on the results of the 2006 COLA surveys in 
Alaska. On August 25, 2008, at 73 FR 50174, we published a second 
proposed rule that would further reduce the COLA rates in Anchorage, 
Fairbanks, and Juneau from 23 percent to 22 percent based on the 
results of the 2007 interim CPI adjustments.
    The 1-percent decrease proposed in this rule would further reduce 
the rates in these areas to 21 percent. However, 5 CFR 591.228(c) 
limits COLA rate reductions to 1 percentage point in a 12-month period. 
Therefore, we would not implement COLA rate reductions in the Alaska 
areas under this proposed rule until at least 12 months after the 
effective date of the 2007 interim adjustment reductions. For example, 
if the proposed reductions based on the 2006 survey results become 
effective in mid-December of this year, we would not implement the 
proposed 2007 interim adjustment reductions before mid-December of 
2009, and would not implement the reductions proposed under this rule 
before mid-December of 2010. Under this timeframe, the 2009 Alaska 
survey indexes may supersede the 2008 CPI adjustment indexes.
    The rate reductions proposed for the Pacific areas are not affected 
by the 12-month delay on reductions under 5 CFR 591.228(c). Therefore, 
we plan to implement the Pacific and Alaska reductions in separate 
actions.

Executive Order 12866, Regulatory Review

    This rule has been reviewed by the Office of Management and Budget 
in accordance with Executive Order 12866.

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.

Office of Personnel Management.
Michael W. Hager,
Acting Director.

    Accordingly, OPM proposes to amend subpart B of 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 5 CFR part 591 continues 
to read as follows:

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

    2. Revise appendix A of subpart B to read as follows:

Appendix A to Subpart B of Part 591--Places and Rates at Which 
Allowances Are Paid

    This appendix lists the places approved for a cost-of-living 
allowance and shows the authorized allowance rate for each area. The 
allowance rate shown is paid as a percentage

[[Page 74860]]

of an employee's rate of basic pay. The rates are subject to change 
based on the results of future surveys.

------------------------------------------------------------------------
                                                              Allowance
                    Geographic coverage                          rate
                                                              (percent)
------------------------------------------------------------------------
State of Alaska:
    City of Anchorage and 80-kilometer (50-mile) radius by            21
     road..................................................
    City of Fairbanks and 80-kilometer (50-mile) radius by            21
     road..................................................
    City of Juneau and 80-kilometer (50-mile) radius by               21
     road..................................................
    Rest of the State......................................           25
State of Hawaii:
    City and County of Honolulu............................           24
    Hawaii County, Hawaii..................................           17
    County of Kauai........................................           24
    County of Maui and County of Kalawao...................           24
Territory of Guam and Commonwealth of the Northern Mariana            24
 Islands...................................................
Commonwealth of Puerto Rico................................           14
U.S. Virgin Islands........................................           25
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 [FR Doc. E8-28832 Filed 12-8-08; 8:45 am]
BILLING CODE 6325-39-P