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The Office of Personnel Management raised cost-of-living allowance rates for federal employees in Puerto Rico and Hawaii County on Thursday, but the Bush administration, Democratic lawmakers and federal employee groups are pushing proposals to switch from a COLA system to locality pay for employees in far-flung locations.

"It has become increasingly clear that the nonforeign COLA is dated and in need of reform," said National Treasury Employees Union President Colleen Kelley. "Such an initiative must be done in a way that is fair to employees and does not make sudden, unplanned changes in their pay and compensation."

OPM sets COLAs by conducting cost-of-living surveys to determine the difference in costs between Washington, D.C., and Alaska, the Pacific region and the Caribbean. Each region is surveyed once every three years. Almost 50,000 employees in those areas receive COLAs ranging from 13 percent to 25 percent. OPM raised Puerto Rico's to 13 percent and Hawaii County's to 18 percent.

Proponents of a shift to locality pay cite a number of reasons. COLA payments do not count toward federal retirement benefits. They also do not count as part of basic pay eligible for Thrift Savings Plan matching funds, but COLAs also are not taxed as part of employees' income.

Michael Fitzgerald, president of the Federal Managers Association Chapter 187 in Hawaii, said COLAs were less competitive than locality payments in West Coast cities such as San Francisco and Los Angeles.

"It is easy to see why employees would be looking to complete their final three years [of federal employment] in these cities," he told lawmakers at a Senate Homeland Security and Governmental Affairs Federal Workforce Subcommittee field hearing on Thursday in Honolulu. "Specific data to document this migration is hard to come by, but the stories are endless. In my office alone, a husband and wife have separated for their careers...They plan to retire in the islands, but must endure a long-distance relationship in order to properly plan for their retirement."

At the president's direction, OPM in May 2007 proposed legislation to phase in locality pay and phase out COLA payments during a seven-year period. This May, Sen. Daniel Akaka, D-Hawaii, introduced a competing bill that would shift federal employees from COLAs to locality payments by 2012. The legislation is co-sponsored by Sen. Daniel Inouye, D-Hawaii, and Alaska Republicans Lisa Murkowski and Ted Stevens.

The time frame for the adjustment is not the only difference between the two bills. The OPM legislation would decrease COLAs by 85 cents per dollar of locality pay to compensate for the increased taxes employees would pay on locality payments. Unlike COLAs, locality payments are taxable income. The Federal Managers Association said at the Thursday hearing that the COLA reduction should be no more than 75 percent. Akaka's legislation sets a 65 percent reduction.

The Senate bill would allow federal employees to opt out of transitioning to locality pay. But they would not be allowed to opt back in.

Both NTEU and the Federal Managers Association said switching to locality pay would be critical for recruiting a new generation of federal employees to locations covered by the nonforeign COLA.

"Cutting the pay of federal workers simply because of where they live is unfair," Kelley said.

COMMENTS

• I just can't figure out how getting rid of the 25% COLA and implementing the "RUS" locality pay will help you in the long run. Are those who work in Hawaii wanting this conversion planning to live here or are they just here for a few years and transitioning pack to conus, and are just worried about getting a higer pay check upon arrival. Those who live in Hawaii will eventually lose in the long run, unless the GS/NSPS starting pay is raised to offset the loss of 11.2% of COLA compared to the 13.8% locality for "RUS". Wow, lose approx. 5,000.00 now to gain an approx. an extra $2,400.00 in retirement that is taxed by both the Fed. Gov and State? It will only make sense if the locality is equal to what San Fransico is receiving....approx. 32.5% or something close to it effect when the change takes place and not 3 years down the line. People living in Hawaii, Alaska, Puerto Rico and the other outlaying areas are being treated unfairly again, being paid less, as if they're second class citizens, compared to the CONUS personnel. How easy it's to say pack up and move for a better pay. That's the easy response. T Shibata Posted October 3, 2008 4:33 PM
• Skeeter, your “caring” argument only validates your contempt for us AND yourself IF you are one of us; which I figure is highly unlikely. It is mere opinion since without our efforts, no administration, Red OR Blue, could accomplish its goals. Whether you like or admit it, our existence enables the governmental functions at a cheaper price/cost than contractors (also known as your "feather merchants") due to institutional and extended knowledge base. As for value, our efforts in this complex filled-to-the-bursting society are like the ubiquitous air; you would normally not notice them unless we aren’t there, another sign of a job well done, or you have a problem you need help with. As for the Ketter Killer’s assertion, the principle of variable pay components is valid for both the military and the government employee; non-basic pay components can and are regularly adjusted for local variables such as equivalent pay scales, cost of living, etc, thus saving the government tens of millions in your taxes. The military also have an additional benefit that these costs are not taxable, which few begrudge them. If you wish to continue the charade that you actually belong in these discussions and know what you speak of; you might consider modifying your arguments to include something more than “I don’t like you guys!”, “You cost too much!”, and “You don’t earn your keep!” At least address the issues instead of jearing like a school boy. Tip off Posted June 3, 2008 3:30 PM
• Hey Dan K. you are about to find out in Nov. what the American people think of the Republicans and their way of doing business. Ask yourself this.....are you better off now than 7 yrs ago when Bush "took" office ? There is your answer and that is what the majority of Americans feel right now. Come Nov. the(dis)service of the Republicans will no longer be needed. Retired Air Traffic Controller Posted June 3, 2008 11:52 AM