Cost-of-Living Allowances (Nonforeign Areas); Methodology Changes

AGENCY:

Office of Personnel Management.

ACTION:

Final rule.

SUMMARY:

The Office of Personnel Management (OPM) is making technical changes in the methodology used to determine nonforeign area cost-of-living allowances (COLAs). The changes correct minor drafting errors; provide consistent treatment of sale prices; allow the use of non-housing price data collected on St. John, U.S. Virgin Islands; correct and clarify the definition of survey areas; and allow a one-time prospective index adjustment for the Caribbean and Alaska areas concurrent with the effective date of any COLA rate changes resulting from the 2004 Pacific COLA surveys. OPM is making these changes in large part as the result of experience gained in recent COLA surveys and upon the recommendation of several groups established to assist us in administering the COLA program.

DATES:

Effective November 5, 2004.

FOR FURTHER INFORMATION CONTACT:

Donald L. Paquin, (202) 606-2838; fax: (202) 606-4264; or e-mail: COLA@opm.gov.

SUPPLEMENTARY INFORMATION:

Section 5941 of title 5, United States Code, authorizes the payment of cost-of-living allowances (COLAs) to employees of the Federal Government stationed in certain nonforeign areas outside the contiguous 48 States whose rates of basic pay are fixed by statute. 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.

The Government pays nonforeign area COLAs to General Schedule, U.S. Postal Service, and certain other Federal employees in Alaska, Hawaii, Guam and the Commonwealth of the Northern Mariana Islands (CNMI), Puerto Rico, and the U.S. Virgin Islands. OPM conducts COLA surveys in each allowance area to determine whether, and to what extent, local living costs are higher than those in the Washington, DC, area. OPM sets the COLA rate for each area based on the results of these surveys.

On February 9, 2004, OPM published proposed regulatory changes in the Federal Register (69 FR 6020) which would (1) correct minor drafting errors; (2) provide consistent treatment of sale prices; (3) allow the use of non-housing price data collected on St. John, U.S. Virgin Islands; (4) correct and clarify the definition of the survey areas; and (5) allow a one-time prospective index adjustment for the Caribbean and Alaska areas concurrent with the effective date of any COLA rate changes resulting from the 2004 Pacific COLA surveys. We received six comments on these proposed changes.

One comment was from members of the Hilo COLA Advisory Committee (CAC). Prior to each survey, OPM establishes CACs in each survey area to advise OPM on the COLA surveys and other issues relating to the administration of the COLA program. The Hilo CAC noted that the definition of the Hilo, Hawaii, survey area (which was stated as the “City of Hilo”) was incorrect because Hilo is not a municipality. Therefore, OPM is changing the survey area name to the “Hilo area.”

Another comment was from members of the Kailua Kona CAC who recommend that the Kailua Kona survey area be expanded to include Waimea and Waikoloa areas. OPM agreed to survey these areas on a test basis in the 2004 survey to determine the feasibility of expanding the survey area. OPM found that it was feasible to do so and agrees with the recommendation to expand the survey area. To reflect this change, OPM is changing the name of the survey area to the “Kailua Kona/Waimea area,” which includes Waikoloa.

A third comment was from a member of the Survey Implementation Committee, established pursuant to the settlement in Caraballo, et al. v. United States, No. 1997-0027 (D.V.I.), August 17, 2000. The commenter recommended that OPM no longer collect housing data in eastern Puerto Rico because of the closing of Roosevelt Roads Naval Station. The commenter suggested that OPM consider surveying other areas in Puerto Rico. We agree that OPM may need to revise the areas in which it collects housing data in Puerto Rico. Therefore, we have removed the reference to eastern Puerto Rico from the Survey Area table in 5 CFR 591.215, removed a similar reference from § 591.219(b), and allowed for the collection of housing data in other areas in Puerto Rico with significant Federal employment.

Another member of the Survey Implementation Committee recommended that we clarify the exception in § 591.219(b), which concerns the use of housing data collected in eastern Puerto Rico and in St. John. The commenter recommended that the exception state that OPM combines housing data collected for St. John with the data collected for St. Thomas to produce indexes for the St. Thomas/St. John survey area. We agree that the exception in § 591.219(b) may have been confusing and have concluded that it is no longer needed. OPM analyzes the data it collects in St. Thomas/St. John in the same manner as the data it collects in Fairbanks/North Pole, Kailua Kona/Waimea, and other survey areas with multiple locations. Therefore, there is no exception applicable to St. John.

A fifth commenter requested that OPM revise the proposed change in the definition of “Washington, DC, area or DC area” in § 591.201 to state exactly the situations the change will affect or cite the parts or subparts to which the revised definition applies. OPM proposed changing the definition of several survey areas to address the need to survey certain items on an exception basis in locations beyond the local jurisdiction. With one exception, the proposed definitional changes were limited to § 591.215(a), which lists the survey areas. The exception is the Washington, DC, area, which is defined in § 591.201 and listed again with the other survey areas in § 591.215(a).

Because the purpose of § 591.201 is to define terms that OPM uses throughout subpart B, we believe it would be impractical to cite within the definition of the “Washington, DC, area or DC area” each section where the term is used. OPM also believes it would be impractical to state exactly which situations (i.e., items and locations) the expanded definition addresses. Survey items change from one survey to the next, in large part based on CAC recommendations. From experience OPM has learned that it sometimes must survey items, such as golf, snow skiing, and air travel, in areas beyond the local jurisdictions listed in the table in § 591.215(a). Therefore, OPM proposed expanding several of those areas on an exception basis. The proposed change lists golf, snow skiing, and air travel as examples because setting in regulation exactly which items OPM can survey outside a jurisdiction would be overly restrictive and would weaken OPM's ability to accommodate CAC suggestions. Therefore, we are not adopting the commenter's suggestion, but we are making additional changes in the title and column headings in the table in § 591.215(a) to further clarify survey area definitions.

Before each survey, OPM consults with the local CACs concerning item selection, including any items we might survey outside local jurisdictions. We also include a list of the items surveyed in the survey reports we publish for comment in the Federal Register. The item descriptions identify which items OPM surveyed beyond local jurisdictions.

The sixth commenter stated that Federal employees should not receive COLA increases. The commenter noted the high cost of living in the Washington, DC, area and stated that she did not believe Federal employees in other areas needed to receive more than employees in the DC area. OPM notes that section 5941 of title 5, United States Code, and Executive Order 10000 require the Federal Government to pay COLAs to Federal employees in areas outside the contiguous 48 States where living costs are substantially higher than in Washington, DC. Under this authority, OPM sets COLA rates after surveying and comparing living costs in the COLA areas and the DC area.

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 these regulations will not have a significant economic impact on a substantial number of small entities because they will affect only Federal agencies and employees.

List of Subjects in 5 CFR Part 591

• Government employees
• Travel and transportation expenses
• Wages

Accordingly, the Office of Personnel Management amends 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. In § 591.201, revise the definition of “Washington, DC, area or DC area” to read as follows:

3. In § 591.213, revise paragraph (b)(1) to read as follows:

4. In § 591.215, revise paragraph (a) to read as follows:

5. In § 591.216, revise paragraph (b) to read as follows:

6. In § 591.219, revise paragraph (b) to read as follows:

7. In § 591.222, revise paragraph (c) to read as follows:

8. In § 591.224, revise paragraph (b) and add paragraph (c) to read as follows: