[Federal Register: November 9, 2001 (Volume 66, Number 218)]
[Rules and Regulations]
[Page 56737-56740]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09no01-17]
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Part II
Office of Personnel Management
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5 CFR Part 591
Cost-of-Living Allowances (Nonforeign Areas): Allowance Rate
Adjustments; Methodology Changes; Commissary/Exchange Rates; Survey
Frequency; Gradual Reductions; Final Rule, Proposed Rule, and Interim
Rule
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OFFICE OF PERSONNEL MANAGEMENT
5 CFR Part 591
RIN 3206-AJ26 and 3206-AJ15
Cost-of-Living Allowances (Nonforeign Areas); Allowance Rate
Adjustments
AGENCY: Office of Personnel Management.
ACTION: Final rule.
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SUMMARY: The Office of Personnel Management (OPM) is adopting as final
two interim regulations regarding nonforeign area cost-of-living
allowances (COLAs). OPM is also addressing comments received in
response to the publication of the 1998 COLA survey report. The two
interim rules implemented increases in the COLA rates paid to certain
Federal employees in several of the COLA areas. One interim regulation
increased COLA rates paid in Hawaii, Guam and the Commonwealth of the
Northern Mariana Islands (CNMI), Puerto Rico, and the U.S. Virgin
Islands. These increases were the result of a settlement of litigation
regarding nonforeign area COLAs. The second interim regulation
increased the local retail COLA rate paid to certain Federal employees
in Guam/CNMI. This increase was the result of cost-of-living surveys
OPM conducted in the COLA areas in 1998.
DATES: Effective December 10, 2001.
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 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. The Office of Personnel
Management (OPM) conducts living-cost surveys in each allowance area to
determine whether, and to what degree, 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. The current COLA rates were
set pursuant to the settlement of Caraballo, et al. v. United States,
No. 1997-0027 (D.V.I), August 17, 2000, and became effective in October
2000.
Interim Increases
On October 3, 2000, OPM published an interim rule in the Federal
Register (65 FR 58901) to increase the COLA rates paid to certain
Federal employees in Hawaii, Guam/CNMI, Puerto Rico, and the U.S.
Virgin Islands. These rates became effective on the first day of the
first pay period beginning on or after October 1, 2000, and are still
in effect. The table below shows the increased allowance rates and the
places where they apply.
------------------------------------------------------------------------
COLA rate
Allowance area (percent)
------------------------------------------------------------------------
Hawaii County.............................................. 16.50
Kauai County............................................... 23.25
Maui County................................................ 23.75
Puerto Rico................................................ 11.50
U.S. Virgin Islands........................................ 22.50
------------------------------------------------------------------------
The interim rule also increased the commissary/exchange COLA rate
for Guam/CNMI. However, OPM is eliminating the commissary/exchange
category in a separate document published in this issue of the Federal
Register. With this change, employees with commissary and exchange
purchasing privileges will begin receiving the same COLA rate as other
employees in Guam/CNMI.
OPM made these changes pursuant to section 9 and Exhibit C of the
stipulation for settlement of Caraballo et al. v. United States, Civil
No. 1997/27 (D.V.I.). The court approved the settlement on August 17,
2000. The settlement prescribed the new COLA rates and required that
they be made effective on the first day of the first applicable pay
period beginning on or after October 1, 2000. We issued the interim
rule with a 30-day comment period, and we received one comment. This
comment was from a Federal employee union that endorsed the interim
rule.
Guam/CNMI Rate Increase
On July 17, 2000, OPM published an interim regulation for comment
in the Federal Register (65 FR 44100) to implement a rate increase for
the Guam/CNMI COLA area. This increase was the result of cost-of-living
surveys OPM conducted in the nonforeign allowance areas in 1998. The
interim regulation increased the local retail COLA rate for Guam/CNMI
from 22.5 percent to 25 percent. We received no comments on this
change, and we are adopting it as final.
Comments on the 1998 Survey Report
OPM also published for comment on July 17, 2000 (65 FR 44103), the
complete ``Report on 1998 Surveys Used to Determine Cost-of-Living
Allowances in Nonforeign Areas,'' which described the survey process
and how OPM derived the new Guam/CNMI rate. We received one written and
two verbal responses to our request for comments. One respondent
commented on a number of issues as they relate to Anchorage, Alaska.
The other respondents commented on the Guam commissary/exchange COLA
rate. We discuss these comments below.
Earthquake insurance. One commenter believes OPM should survey the
cost of earthquake insurance. The commenter stated that even though we
were unable to assign a cost to earthquake insurance and that some
employees do not buy it, these circumstances should have no bearing on
including such insurance as a necessary cost of living in Anchorage.
While our survey notice mentioned some complexities related to
determining flood insurance requirements, we did not note these
complexities with regard to earthquake insurance. We wrote in the
survey notice commentary, however, that less than 10 percent of the
population in each allowance area purchases earthquake insurance. We
believe this number was insufficient to warrant surveying earthquake
insurance, as it did not represent a cost for a large number of Federal
employees in the allowance areas.
In future surveys, OPM will use a new methodology we are adopting
as a result of the Caraballo settlement. Caraballo was a class-action
lawsuit in which the plaintiffs contested the methodology OPM used to
determine COLA rates. The class included all Federal employees who
received a COLA from October 1, 1990, through September 30, 2000. Under
the new methodology, OPM will use rents and/or a rental equivalence
approach to determine shelter costs. The rental equivalence approach
compares the rental values of homes. Home insurance is implicit in
these values. Therefore, OPM will no longer directly survey any type of
homeowner insurance. We will continue to survey renter's insurance,
which typically covers loss due to earthquakes.
Medical services. The commenter also believes OPM's survey
methodology underestimates the cost and restricted availability of
medical services in
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Anchorage. In particular, the commenter noted that there are no health
maintenance organizations (HMOs) among the Federal providers in
Anchorage and that other plans cost more. OPM's averaging of premium
costs (see section 6.3.1 of the report) took into consideration the
absence of lower-cost HMOs in Anchorage and other areas. The average in
Anchorage was higher because it did not include lower-cost HMOs. The
average in the Washington, DC, area was lower because it included HMOs
and other lower-cost plans. We derived area indexes by comparing the
allowance area against the Washington, DC, area; therefore, the index
for Anchorage reflects the higher premium costs in that area.
The Caraballo settlement provides for special adjustment points to
cover factors such as local differences in quantity or quality of goods
and services. In future surveys, OPM will add these adjustment points
to the COLA index in consideration of factors such as higher out-of-
pocket costs associated with obtaining health services.
The commenter also noted that dental care is more expensive in
Anchorage. We surveyed costs associated with common dental care
services and included these costs in our area comparisons.
Utility costs. The commenter remarked that utility costs are high
in Anchorage and that trash removal and recycling are not covered by
taxes. We surveyed utility costs (see section 4.2.4.1 of the report)
and included these costs in our price comparisons. We did not survey
trash removal or recycling, as we have found that the extent to which
consumers pay these fees in lieu of higher taxes or utility fees
differs significantly by area.
Vehicle operation costs. The commenter believes Anchorage has a
high accident rate and that automobile glass loss is common. We
surveyed the cost of automobile insurance in the allowance areas (see
section 5.2.9 of the report). If accident rates are higher in Alaska
than in the Washington, DC, area, and this is reflected in the relative
insurance rates, OPM captured this in the living-cost index. Also, the
insurance we priced included comprehensive coverage that covers
windshield and other automobile glass loss or damage. In the Alaska
areas, we also added the cost of the deductible to the annual private
transportation costs on the assumption that windshields are replaced
frequently.
The commenter also noted that studded tires are a necessity in
Anchorage and that most car owners have engine block heaters. We
surveyed the prices of studded snow tires in Alaska (see section 5.2.5
of the report) and included the cost of engine block heaters in our
survey of new vehicle prices in Alaska (see section 5.2.1 of the
report). The commenter also believes that a 98-percent fuel performance
factor is not sufficient for estimating auto fuel consumption in
Anchorage's cold climate. We applied a 98-percent factor in Anchorage
only for the effect of gradient on gas mileage (see section 5.2.3.3 of
the report). As table 5-1 of the report shows, the total fuel-
performance adjustment for Anchorage was 83 percent.
The commenter also believes the resale value of a vehicle in
Anchorage is lower than the Kelly Blue Book value. Research conducted
for OPM in the past did not indicate that used cars in Anchorage were
worth more or less than used cars in the Washington, DC, area. (See
section 5.2.7 of the report.) However, the report shows higher
depreciation rates in most allowance areas because new car prices were
usually higher in the COLA areas than in the Washington, DC, area.
Consumer goods. The commenter noted that many consumer goods must
be shipped to Anchorage at high cost or are unavailable in Anchorage.
In regard to shipping, we surveyed catalog prices for a number of items
and included any additional costs of shipping and excise taxes in the
price where applicable. The extent to which fewer goods or services
leads to higher costs was reflected in the item prices we collected.
Pursuant to the Caraballo settlement, OPM will add in future surveys an
adjustment factor to the price index in consideration of living-costs
associated with the unavailability of goods and services in an
allowance area.
The commenter noted high prices for parkas, boots, and a dry suit
needed for river recreation. In Alaska and the DC area, we surveyed the
price of a man's parka, a woman's coat, and men's and women's boots for
our price comparisons. We did not survey dry suits because we believe
they are less commonly purchased, particularly in the DC area.
Communication costs. The commenter noted that long distance
telephone rates were much higher in Anchorage. We surveyed long
distance charges in the allowance areas. (See section 4.2.4.1 of the
report.) The commenter also asked whether the survey looked at costs
associated with changing email addresses. We did not survey this cost
because we believe it is not practical to cover these kinds of less
common expenses.
Guam commissary/exchange rate. We received two verbal comments on
the Guam commissary/exchange COLA rate. The commenters believe that
since OPM was increasing the local retail rate by 2.5 percentage
points, OPM also should increase the commissary/exchange rate by 2.5
percentage points. OPM did not increase the commissary/exchange COLA
rate because the results of the 1998 survey indicated that no increase
was warranted. However, as noted above, OPM subsequently increased the
Guam commissary/exchange COLA rate pursuant to the Caraballo
settlement.
Corrections to the 1998 Survey Report
We discovered two errors in the 1998 survey report, which we
discuss below. These errors did not affect the COLA rate for any
allowance area.
In section 6 of the report, we erroneously republished Table 6-2
from the 1997 survey report. The correct Table 6-2 follows. We used the
correct values in deriving the index, except that we erroneously
assigned the St. Croix value in the first column to St. Thomas.
Correcting this error resulted in a change in the final index (Appendix
22) for the Virgin Islands from 116.30 to 116.33.
Table 6-2.--Summary of Private Education Use Factors and Indexes
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Employees w/children Price
in private schools Use Price index w/
Location ------------------------ factor index use
Local area DC area factor
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Anchorage........................................... 10.34 13.23 0.7816 45.23 35.35
Fairbanks........................................... 8.56 13.23 0.6470 31.54 20.41
Juneau.............................................. 12.43 13.23 0.9395 41.70 39.18
Nome................................................ 8.08 13.23 0.6107 28.55 17.44
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Honolulu............................................ 26.86 13.23 2.0302 87.25 177.14
Hilo*............................................... 18.94 13.23 1.4316 121.25 173.58
Kona*............................................... 18.94 13.23 1.4316 94.45 135.21
Kauai............................................... 22.46 13.23 1.6977 77.92 132.28
Maui................................................ 20.39 13.23 1.5412 47.62 73.39
Guam................................................ 42.26 13.23 3.1943 75.80 242.12
Puerto Rico......................................... 54.33 13.23 4.1066 51.46 211.32
St. Croix........................................... 57.27 13.23 4.3288 56.78 245.79
St. Thomas.......................................... 51.90 13.23 3.9229 63.30 248.32
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* Use data available only for Hawaii County.
In appendix 14, we erroneously listed ``0'' as the value for
Chevrolet Blazer tires in Honolulu. The correct value is 129. This
correction changed the final index for Honolulu in Appendix 22 from
124.51 to 124.61.
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.
Executive Order 12866, Regulatory Review
This rule has been reviewed by the Office of Management and Budget
in accordance with Executive Order 12866.
List of Subjects in 5 CFR Part 591
Government employees, Travel and transportation expenses, Wages.
Office of Personnel Management.
Kay Coles James,
Director.
PART 591--ALLOWANCES AND DIFFERENTIALS
Accordingly, under the authority of 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), OPM is adopting the interim rules for 5 CFR part 591 published on
July 17, 2000, at 65 FR 44100, and on October 3, 2000, at 65 FR 58901,
as final without change.
[FR Doc. 01-28056 Filed 11-8-01; 8:45 am]
BILLING CODE 6325-39-P