Decoding COLA: 'It's pretty complex'
October 5, 2003
Under the intricate cost-of-living allowance system, a servicemember at Atsugi Naval Air Facility near Tokyo receives hundreds of dollars more than one of the same rank a few miles away at Camp Zama.
Some military officials want to know why.
An E-5 with three dependents at Atsugi receives $1,075.01 a month. At Camp Zama, the allowance would be $817.00.
At Atsugi, an O-4 with three dependents receives $1,741.67. At Camp Zama, $1,323.67.
The amounts are calculated using a COLA index for each base: The index for Atsugi is 150; it’s 138 for Camp Zama.
“My concern is the great difference between the two,” said Army Maj. Keith Muschalek, country allowance coordinator for Japan with U.S. Forces Japan.
Unlike Okinawa — where COLA for all servicemembers is based on one index — the COLA indexes for bases on the Kanto Plain vary dramatically.
Most indexes in South Korea are fairly even.
The index reflects how much more expensive living in an area is than the U.S. national average. The index, along with a servicemember’s disposable income, rank, time in service and number of dependents decides the actual dollar amount.
Each year, the Defense Department gives $1 billion in COLA to 320,000 servicemembers at 600 overseas locations. The average supplement is $300, according to the Per Diem committee.
One explanation for the disparity between Atsugi and Zama comes from a transportation study conducted eight years ago. The study indicated people at Atsugi drive to work more than those at Zama, which ratchets up living costs. Many Atsugi residents are assigned to Yokosuka’s USS Kitty Hawk and are believed to make the trip there for work. That could account for the difference.
“I’m not sure I buy the validity of that,” Muschalek said. “I know in proximity the prices can’t vary that much. I’ve requested a new [transportation] study because of this.”
The study may not be the sole reason for the disparity, but officials are not entirely sure what is.
“It’s pretty complex,” said Susan Brumbaugh, chief of the COLA Section for the Per Diem, Travel and Transportation Allowance Committee in Washington.
Many factors shape a base’s index. It’s calculated using a survey of spending habits, the cost of goods and exchange rates.
The cost of goods might not vary, and the exchange rates are the same across the nation. So the difference can come from the way people shop.
“There can be more purchases on the local economy,” Brumbaugh said.
Off-base purchases are more expensive and raise living costs, particularly in the Tokyo area.
“It’s based on where you live and your needs,” agreed Petty Officer 1st Class Gus Espree, a personnelman with the Atsugi customer service desk that administers the COLA surveys. “It’s based on the resources available on base. If you have limited resources on base, you go out in town.”
The farther from a base a family lives, the more likely they are to shop off base. And an absence of movies and services on a base means hitting the local economy for those, as well.
Every two years, or when warranted, shopping behaviors are measured through a lengthy and detailed survey called the Living Pattern Survey.
Servicemembers indicate the first and second most common places they shop for a variety of items, from fresh milk to toilet paper to DVDs.
The Per Diem committee then goes to those places and prices 120 items. And that sets the COLA index.
“We go out to all the stores identified in the Living Pattern Survey and pick up a piece of pork and price it,” Muschalek said. “It’s hands-on pricing.”
If more people at a base indicate they shop off base, the COLA there will be higher. But officials say people can’t easily fake their surveys for more money.
At Atsugi, Espree’s office will go to the stores where people say they shop during the survey period to monitor U.S. shoppers. They interview clerks and owners to verify the results.
“You can’t legislate morality or honesty,” Brumbaugh said. “But we are pretty adept at spotting inaccuracies.”
So the question remains: Why the differences in the Kanto Plain COLA indexes, where local costs are fairly consistent? Brumbaugh said geography doesn’t necessarily mean indexes should be the same.
“There’s nothing there geographically [that affects the index], and it might change with the next reporting cycle,” Brumbaugh said.
That could come sooner with the new transportation study requested by Muschalek. It’s scheduled for some time next year and could help explain why bases differ in the region.