Less spendable income means drop in COLA
October 10, 2007
Military members will see a decrease in their cost-of-living allowance for this fiscal year because of new federal statistics on spending habits.
Data recently released by the U.S. Department of Labor’s Bureau of Statistics show that Americans are spending more money on housing and utilities, meaning they have less spendable income, according to Steve Bridges, director of finance operations with the Army’s 266th Finance Command in Germany.
As a result of this drop in spendable income, troops living overseas will see a slight decrease in their COLA.
“They’re talking a dollar a day for most people,” Bridges said. “It’s a minor impact.”
“If you have more spendable income, you need more COLA to make your purchasing power comparable to what it would be if you lived in [the States],” Bridges wrote in an e-mail to Stars and Stripes. “Less spendable income equates to less purchasing power so there would be a reduced need for COLA to maintain the new level of purchasing power.”
Spendable income is basically regular military compensation minus housing, taxes, savings, life insurance, gifts and cash contributions, he said. The spendable income used to calculate COLA is based on averages. Spendable income tables are computed for different family sizes and income levels based on Labor Department statistics on how people typically spend their income.
The spendable income tables that necessitated this month’s COLA dip — which Bridges said has nothing to do with the exchange rate of the dollar against foreign currencies — will be in effect for the whole fiscal year, which began Oct. 1.
To put it all in perspective, an E-6 based at Ramstein Air Base, Germany, with three dependents received a daily COLA of about $25 a day for the last two weeks of September. For the first two weeks of October, that same E-6 will receive about $23.60 a day, which amounts to a loss of about $40 a month.
An O-2 with three dependents at Ramstein will see a drop from about $28.70 a day to $26.90 a day, roughly a loss of $54 a month.
“The sole purpose of COLA is to maintain a standard of living (stateside versus overseas) even though that standard of living might be at a lower level,” Bridges wrote in his e-mail. “Any concern about a lower standard of living for servicemembers must be addressed by Congress through increased salaries so that all servicemembers benefit.”
For more information on the COLA program, visit the Per Diem, Travel and Transportation Allowance Committee Web site at: http://perdiem.hqda.pentagon.mil/perdiem/.