Nonforeign Area Cost-of-Living Allowance Rates; Alaska, 65241-65246 [E8-26141]
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65241
Rules and Regulations
Federal Register
Vol. 73, No. 213
Monday, November 3, 2008
This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents. Prices of
new books are listed in the first FEDERAL
REGISTER issue of each week.
OFFICE OF PERSONNEL
MANAGEMENT
5 CFR Part 591
RIN 3206–AL37
Nonforeign Area Cost-of-Living
Allowance Rates; Alaska
U.S. Office of Personnel
Management.
ACTION: Final rule.
AGENCY:
SUMMARY: The U.S. Office of Personnel
Management (OPM) is reducing the
cost-of-living allowance (COLA) rates
received by certain white-collar Federal
and U.S. Postal Service employees in
Anchorage, Fairbanks, and Juneau,
Alaska. The rate reductions are the
result of living-cost surveys conducted
by OPM in Alaska and the Washington,
DC area in 2006. Based on the survey
results, OPM is reducing the COLA rates
for Anchorage, Fairbanks, and Juneau
from 24 percent to 23 percent. OPM is
also issuing a minor clarification
regarding the Alaska COLA area
boundaries to make clear the 50-mile
area radius is by the shortest route using
paved roads.
DATES: Effective date: December 3, 2008.
Implementation date: First day of the
first pay period beginning on or after
December 3, 2008.
FOR FURTHER INFORMATION CONTACT: J.
Stanley Austin, (202) 606–2838; fax:
(202) 606–4264; or e-mail:
COLA@opm.gov.
Section
5941 of title 5, United States Code,
authorizes Federal agencies to pay costof-living allowances (COLAs) to whitecollar Federal and U.S. Postal Service
employees stationed in Alaska, Hawaii,
Guam and the Northern Mariana
Islands, Puerto Rico, and the U.S. Virgin
Islands (USVI). Executive Order 10000,
as amended, delegates to the Office of
Personnel Management the authority to
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SUPPLEMENTARY INFORMATION:
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administer nonforeign area COLAs and
prescribes certain operational features of
the program. OPM conducts living-cost
surveys in each allowance area and in
the Washington, DC area to determine
whether, and to what degree, COLA-area
living costs are higher than those in the
DC area.
As required by § 591.223 of title 5,
Code of Federal Regulations, OPM
conducts COLA surveys in the Alaska,
Pacific, and Caribbean areas on a 3-year
rotating basis, and in the Washington,
DC area on an annual basis. OPM sets
the COLA rate for each area based on
the results of these surveys. For areas
not surveyed during a particular year,
OPM computes interim adjustments to
COLA rates based on the relative change
in the Consumer Price Index (CPI) for
the COLA area compared with the
Washington, DC area. (See 5 CFR
591.224–226.)
OPM adopted the COLA survey
methodology pursuant to the stipulation
for settlement in Caraballo et al. v.
United States, No. 1997–0027 (D.V.I.),
August 17, 2000. Caraballo was a classaction lawsuit in which the plaintiffs
contested the prior methodology OPM
used to determine COLA rates. In the
Caraballo settlement, the parties agreed
that if the Government adopted and
maintained certain changes in the COLA
program, the plaintiffs would be barred
from bringing suit over these issues. The
stipulation for settlement is available on
OPM’s Web site at https://www.opm.gov/
oca/cola/settlement.asp.
Before the settlement, the parties
entered into a memorandum of
understanding under which they
engaged in a cooperative process to
study living-cost and compensation
issues. The research was exhaustive and
covered essentially all aspects of the
COLA program. A summary of that
research is available on OPM’s Web site
at https://www.opm.gov/oca/cola/
research.asp.
Exhibit A of the Caraballo settlement
agreement lists 26 ‘‘Safe Harbor
Principles’’ that outline the changes to
which the parties agreed. These
principles formed the basis for a new
COLA methodology, which OPM
incorporated into its regulations. In
developing these regulations, OPM
consulted with the Survey
Implementation Committee, which was
established under the Caraballo
settlement and is composed of
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representatives of the parties in
Caraballo. The Survey Implementation
Committee in turn consulted with the
Technical Advisory Committee, which
was also established under the
Caraballo settlement and comprises
three economists with expertise in
living-cost comparisons. OPM
published proposed regulations
detailing the new methodology for
notice and comment in the Federal
Register on November 9, 2001, at 66 FR
56741, and final regulations on May 3,
2002, at 67 FR 22339, to implement the
new methodology. The Survey
Implementation Committee and the
Technical Advisory Committee worked
closely with OPM in preparing for and
implementing the first series of postsettlement COLA surveys.
2006 Alaska Survey
OPM conducted living-cost surveys in
Anchorage, Fairbanks, Juneau, and the
Washington, DC, area in the spring of
2006. On January 3, 2008, at 73 FR 774,
we published the results of these
surveys in the 2006 Nonforeign Area
Cost-of-Living Allowance Survey Report:
Alaska and Washington, DC, Areas.
As described in the 2006 survey
report, we compared the results of the
COLA area surveys with the results of
the DC area survey to compute a livingcost index for each of the Alaska COLA
areas. Table 1 shows the final 2006
Alaska survey living-cost indexes. These
indexes indicate reductions in the
COLA rates for Anchorage, Fairbanks,
and Juneau. OPM’s regulations at 5 CFR
591.228(c) limit COLA rate reductions
to 1 percentage point in a 12-month
period; therefore, we are reducing the
rates in Anchorage, Fairbanks, and
Juneau from 24 percent to 23 percent.
TABLE 1—2006 ALASKA SURVEY
INDEXES
Allowance area
Anchorage ................................
Fairbanks ..................................
Juneau ......................................
Rest of the State of Alaska ......
Index
109.81
118.90
120.08
132.82
Area Boundary Clarification
We are also issuing a clarification to
5 CFR 591.207 regarding the Alaska
COLA-area boundaries to make clear the
80-kilometer (50-mile) area radius is by
the shortest route using paved roads
when available, as measured from the
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Federal courthouse to the official duty
station. We believe the prior regulations
should not have been interpreted
differently, but issue this clarification to
assist agencies when alternate
interpretations are presented.
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Discussion of Comments
We published a notice of proposed
rulemaking regarding the planned
reduction in the COLA rates for
Anchorage, Fairbanks, and Juneau and
the area-boundary clarification in the
Federal Register on January 3, 2008, at
73 FR 772. We address the comments
we received in response to the proposed
rule in the discussion that follows.
Locality Pay
A number of commenters wrote in
support of replacing the nonforeign-area
COLA with locality pay. Three
commenters believed OPM should not
reduce Alaska COLA rates, while
backing a legislative initiative to
implement locality pay in the COLA
areas. One commenter asked why a
transition to locality pay has not already
begun. Another commenter said OPM
should consider the locality pay
received by Federal employees in the
Washington, DC, area in determining
COLA rates for the nonforeign areas.
Several commenters noted that, unlike
the nonforeign-area COLA, locality pay
is included in computations for
retirement and the Thrift Savings Plan.
The Federal Employees Pay
Comparability Act of 1990 (FEPCA)
authorizes locality pay only for Federal
employees in the contiguous 48 States
and Washington, DC. We cannot
consider DC-area locality pay in
determining rates outside the 48 States
because doing so would be equivalent to
extending locality pay in these areas
without authority. Additionally, we
cannot credit COLAs in the retirement
calculation because 5 U.S.C. 8331(3)
and 8401(4) exclude allowances from
base pay for Federal retirement
purposes. Changes in law would be
required to extend locality pay to
Federal employees in the COLA areas or
to include COLAs in base pay for
Federal retirement purposes.
Congress is considering legislation
that would replace the nonforeign-area
COLA with locality pay. Because we are
not able to forecast whether legislation
on this issue will pass or how long the
legislative process will take, we must
proceed with COLA rate changes in
accordance with section 5941 of title 5,
U.S. Code, and the Caraballo settlement.
Living Costs
Most of the commenters believed the
surveys did not fully consider the
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expenses incurred in the allowance
areas. Many noted expenses in the
Alaska COLA areas that they felt were
either not accounted for in the surveys
or that affected the accuracy of the
results of the surveys. These expenses
included—
—Goods and services typically found in
the Washington, DC, area that are not
available in the allowance areas, the
cost to obtain these goods and
services in the allowance areas (e.g.,
shipping fees), and the quality of the
goods and services that are available;
—Goods and services typically
purchased in the allowance areas that
are not typically purchased in the
Washington, DC, area;
—Variations in spending patterns
between the Washington, DC, area
and the allowance areas;
—Hardships encountered under adverse
climate conditions;
—Climate influences on purchase of
clothing, automobiles, automobile
maintenance, insurance, and other
goods and services;
—Housing and utility prices as affected
by climate and availability;
—The frequency and cost of air travel in
the allowance areas;
—The additional need for travel,
lodging, and out-of-pocket expenses
for quality medical care in the
allowance areas; and
—Travel and other costs to send
children to private schools.
As required by section 5941 of title 5,
U.S. Code, we compare living costs in
the COLA areas with living costs in the
Washington, DC area to determine
COLA rates. We measure costs using the
methodology stipulated in the Caraballo
settlement. We conduct on-site surveys
in each survey area and collect more
than 4,000 prices on over 300 items
representing typical consumer
purchases. We collect prices at over 900
outlets, including grocery, hardware,
electronics, and department stores, as
well as automobile dealers, doctors,
dentists, insurance companies, and
many other providers of goods and
services. We collect these prices in both
the COLA and DC areas to use in the
price comparisons that determine each
area’s COLA rate.
The comparisons result in indexes
that reflect how COLA area prices
measure against DC area prices over a
given period of time. These indexes do
not necessarily correspond to rising (or
falling) prices in the COLA areas. For
instance, if living costs in a COLA area
rise, but living costs in the DC area rise
more sharply, the COLA rate for the area
would decrease. Conversely, if COLA
area living costs decrease, but DC area
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living costs decrease more sharply, the
COLA rate for the area would increase.
In consultation with representatives
of Alaska-area employee organizations
and agencies on the Anchorage,
Fairbanks, and Juneau COLA Advisory
Committees, we select representational
items to be surveyed under nine
categories of expenses: Food, Shelter
and Utilities, Household Furnishings
and Supplies, Apparel, Transportation,
Medical, Recreation, Education and
Communication, and Miscellaneous. We
divide these categories into
subcategories and select a sufficient
number of items to represent each
subcategory in the living-cost surveys.
Recognizing the difficulty in
surveying all employee costs in the
allowance areas, the Caraballo
settlement prescribed adjustment factors
to be added to the price indexes for each
COLA area. These factors reflect
differences in need, availability of and
access to goods and services, and
quality of life in each of the COLA areas.
The settlement set the adjustment factor
for Anchorage at 7.0, for Fairbanks at
9.0, for Juneau at 9.0, and for the Rest
of Alaska at 9.0.
We believe the COLA methodology
and surveys comply fully with the
Caraballo settlement, include ample
representational items, and provide
sufficient adjustment factors to account
for cost differences due to climate,
remoteness, and geographical and
cultural diversity. We worked closely
with the Survey Implementation
Committee, the Technical Advisory
Committee, and the survey-area COLA
Advisory Committees to develop the
survey procedures, items and outlets to
be surveyed, and analytic techniques for
the price comparisons.
Rising Prices
A number of commenters noted that
certain costs have increased since we
conducted the 2006 Alaska survey. They
cited the cost of gasoline, housing,
utilities, shipping, airline tickets,
grocery items, medical needs,
automobile expenses, recreational costs,
various fees and taxes, and other items.
Several commenters believed we should
survey more frequently. We recognize
that prices for various items will
increase in the COLA areas and/or the
DC area between surveys. We collect
prices in each survey area every 3 years
on a rotating basis according to a
schedule agreed upon by the parties in
the Caraballo settlement. As noted
previously, we adjust area price indexes
in non-survey years based on the
relative change in the CPI for the COLA
area compared with the CPI for the
Washington, DC area. These
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adjustments are designed to account for
price fluctuations between surveys.
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Energy Costs
Many commenters felt we should
increase Alaska COLA rates to account
for rising electric and heating oil costs.
While DC area energy costs have also
increased as a result of escalating fuel
prices, we examined the effect recent
Alaska energy rates would have on the
area indexes. The results indicated
slightly higher indexes in Alaska, but
would not raise the indexes sufficiently
to overcome the COLA rate reductions.
The 2008 interim CPI adjustment
indexes will reflect any increases in
energy costs in Alaska compared to the
DC area.
Several commenters noted that
heating costs are higher in Alaska than
the DC area because the Alaska climate
is colder for longer periods of time. We
discuss the energy utility model used to
determine the price of utilities in
section 4.2.4 of the Alaska survey report
published at 73 FR 774. The utility
model reflects the higher home energy
costs in Alaska. As shown in Appendix
5 of the report, we determine energy
utility indexes for the COLA areas based
on energy usage over a 12-month period.
Geographic Coverage
One commenter said the cost of living
in Girdwood, AK, which is 40 miles
outside of Anchorage, is significantly
higher than in Anchorage. The
commenter felt the Girdwood cost of
living is not adequately reflected in the
Anchorage survey and that we should
conduct a separate survey in Girdwood.
We review outlets for surveying item
prices in the Anchorage COLA area with
the Anchorage COLA Advisory
Committee prior to our surveys. We are
open to recommendations from the
Committee for surveying a selection of
items in Girdwood. We cannot conduct
a separate survey in Girdwood. Under 5
CFR 591.206(b), the head of a
department or agency must submit a
request to OPM to initiate any
reconsideration of the definition of a
COLA area. One of the criteria for
defining a COLA area is the
concentration of Federal employees in
the area. OPM’s Central Personnel Data
File shows the Federal population in
Girdwood to be small.
One commenter said the Juneau cost
of living is higher than Anchorage and
Fairbanks because of the lack of road
access. Another commenter said
Fairbanks cannot be compared to
Juneau, Anchorage, or the DC area
because of its colder winters. We
conduct separate surveys in each
allowance area and collect local prices
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reflecting actual costs to consumers in
each area. We compare each COLA
area’s living costs to living costs in the
DC area, as required by law. Based on
this comparison, we produce a distinct
index for each COLA area. The 2006
Alaska surveys indicated an index of
109.81 for Anchorage, 118.90 for
Fairbanks, and 120.08 for Juneau.
One commenter noted it was more
expensive to live in Anchorage than Los
Angeles, San Francisco, or New York,
where the locality pay rates exceed the
Anchorage COLA rate. The law that
authorizes the payment of COLAs in
Alaska and the other nonforeign areas
requires that we compare living costs in
the nonforeign areas with living costs in
the DC area. The Federal Employees Pay
Comparability Act of 1990 does not
authorize locality pay for areas outside
the contiguous States and Washington,
DC. Locality pay is not a cost-of-living
allowance, but is based on a comparison
of Federal salaries with non-Federal
salaries on a locality basis.
The same commenter said we should
raise the COLA rate for the Rest of the
State of Alaska allowance area and
return Anchorage to its former 25
percent rate based on the high cost of
living in each area. Another commenter
questioned why we were reducing the
Juneau COLA rate when Ketchikan,
which the commenter said had less
expensive housing and was closer to
Seattle along shipping lines, was not
being reduced. The current COLA rate
for the Rest of the State of Alaska, which
includes Ketchikan, is 25 percent. We
cannot raise this rate because 5 U.S.C.
5941 limits COLAs to no more than 25
percent of basic pay. As permitted
under the Caraballo settlement, we do
not generally survey the Rest of the
State of Alaska COLA area, but
determine its COLA rate using
alternative indicators (e.g., cost
information published by the University
of Alaska). In the 2006 Alaska survey,
we determined the COLA index for the
Rest of the State of Alaska area to be
132.82 (converting to an uncapped
COLA rate of 33 percent). In the 2003
Alaska survey, we had determined the
index to be 134.80 (or 35 percent).
While the index has decreased since
2003, it remains above 1.25 (25 percent)
and therefore continues to support the
maximum 25 percent COLA rate.
The index for Anchorage declined
from 112.63 in 2003 to 109.81 in 2006.
The index for Juneau increased from
118.34 in 2003 to 120.08 in 2006. The
index for Fairbanks increased from
115.26 in 2003 to 118.90 in 2006. Actual
COLA rates are currently higher in
Alaska because the Caraballo settlement
established rates based on historical
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levels in the areas. The COLA rates in
Alaska remain higher than indicated by
OPM’s surveys because we reduce rates
by no more than 1 percent in a 12month period.
Military Raises
Four commenters questioned why we
were reducing civilian COLAs in Alaska
when military co-workers were
receiving raises. The civilian and
military COLAs are governed under
separate laws and are computed under
different methodologies. Two major
differences are that the military COLA
does not use the DC area as a base for
comparison and does not include
housing expenses. The methodology for
the civilian nonforeign area COLA
derives from 5 U.S.C. 5941, Executive
Order 10000, and the Caraballo
settlement.
Impact of Reductions
The same four commenters expressed
concern about the impact the COLA
reductions in Anchorage, Juneau, and
Fairbanks would have on employees,
their families, and the Alaska economy.
A number of commenters expressed
similar concerns regarding recruitment
and retention of employees in the
Alaska COLA areas. We set COLA rates
in accordance with 5 U.S.C. 5941,
which authorizes COLAs based on
living costs in the nonforeign areas that
are substantially higher than living costs
in the DC area. We cannot adjust COLA
rates for other reasons, such as for
recruitment and/or retention purposes.
However, we attempt to minimize the
impact on employees and on the local
economy by reducing COLA rates by no
more than 1 percentage point in a 12month period. To address recruitment
and retention problems, agencies may
offer recruitment, retention, and
relocation incentives and/or special
salary rates. OPM’s Web site at https://
www.opm.gov/oca/pay/index.asp
provides information on various pay
authorities to assist with agency
recruitment and retention efforts.
Price Substitutes
One commenter disagreed with the
use of prices from Anchorage or
Fairbanks for Juneau. As provided by
the Caraballo settlement (under Safe
Harbor Principle 11), we use prices from
adjacent areas in limited circumstances
when local prices for individual items
are unavailable. We minimize the
necessity for doing this by substituting
items in the local area survey and
adding the substituted items to the DC
survey. However, we are not always able
to locate the substituted items in the DC
area. We tested the effect on the Juneau
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COLA index of dropping the prices we
used from Anchorage and Fairbanks and
found it slightly lowered the index.
Private Education
The same commenter noted that there
were no private K–12 schools in Juneau
and suggested we include the cost to
send a child to a residential private
school outside Juneau in the private
education price. We surveyed K–12
private education in the Alaska COLA
areas and the DC area and computed an
average tuition price that reflected all
grade levels. Because a large majority of
children in the Alaska survey areas
attend public schools, we apply ‘‘use
factors’’ to reflect the relative extent to
which Federal employees make use of
private education in the COLA and DC
areas. We described the process used for
K–12 private education in the Alaska
areas in the Alaska survey report at 73
FR 777. The adjustment factor for an
area covers any additional costs
involved with sending children to
private schools.
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Catalog Pricing
The commenter also suggested we
survey more items by catalog and
include shipping fees. The commenter
also believed we should include
shipping for items that have to be
returned. The commenter believed these
costs to be measurable and did not feel
they should be included in the
adjustment factor for the area. We
currently survey a select number of
items in each area by catalog and
include shipping in the total price of the
items. We review outlets for surveying
item prices with the local area COLA
Advisory Committees prior to data
collection. We are open to surveying
more items by catalog at the
recommendation of the COLA Advisory
Committees. Regarding the inclusion of
shipping costs for returned items, we do
not believe the frequency of returns can
be measured accurately, either in the
allowance areas or the DC area. The
Caraballo settlement specifically
provided for the adjustment factor,
which reflects ‘‘differences in need,
availability of and access to goods and
services, and quality of life,’’ to cover
costs such as these.
Insurance
The same commenter asked if
mudslide and avalanche coverage is
included under the catastrophic
coverage we specify for renter
insurance. We use a rental equivalence
approach to determine shelter costs. The
rental equivalence approach compares
the rental values of homes. Home
insurance is a cost to the owner and
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therefore is implicit in these values.
However, we do survey renter insurance
and include the price of any special
riders necessary to cover earthquake and
hurricane damage. We do not specify
mudslide or avalanche coverage as we
have had no indications that this
coverage is commonly purchased, even
in Juneau. We would be open to
including this coverage based on
reliable data showing residents in a
particular COLA area often purchase
renters insurance with mudslide and/or
avalanche riders.
Medical Services
A number of commenters noted that
doctor, dental, and vision care are more
expensive in the COLA areas. Several
commenters said it was necessary to
travel outside the area to obtain some
medical services. These commenters felt
the survey should include travel costs in
these circumstances. We survey the
prices of several medical services
(including dental services) and items in
each COLA area and in the DC area. The
medical services index reflects any
higher prices in the Alaska COLA areas.
We do not attempt to price or quantify
the availability of medical services. We
consider this to be part of the
adjustment factor we add to the price
index to reflect differences in need,
access to, and availability of goods and
services, and quality of life in the COLA
areas relative to the Washington, DC,
area.
One commenter noted that there were
no Health Maintenance Organizations
(HMOs) in Anchorage. As described at
73 FR 778, OPM compared average
health insurance premium costs in the
COLA area with average health
insurance premium costs in the DC area.
Therefore, the health insurance
premium index reflects higher local
costs to the extent that an area has only
higher cost plans available (i.e., to the
extent HMOs are not available).
Automobile Costs
Several commenters said we should
survey two sets of automobile tires in
Alaska because snow tires are necessary
during winter months. We survey both
studded snow tires and all-season radial
tires in Alaska to compute an average
price for tires. As described at 73 FR
778, we compare this price with the
average price for all-season radial tires
in the DC area. We average tire prices
in Alaska because each set of tires is not
in use year round. We include
mounting, balancing, new stems, stud
fee (in Alaska), tire disposal fee, and
taxes in the price for each set of tires.
We consider other possible tire-related
costs, such as wear and rotation
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frequency, to be covered by the
adjustment factor for the area.
One commenter felt we should
account for the need for head bolt
heaters in Fairbanks. We included the
cold-weather package in the price for
the Chevrolet Silverado we surveyed.
We include engine block heaters and
other cold weather equipment or
accessories to the extent they are
standard additions at COLA area
dealerships.
Housing Costs
Two commenters said housing prices
are higher in Alaska than in the lower
48 States. Two other commenters said
increased military deployments and
pipeline and other non-Federal
activities were reducing the available
housing in Fairbanks and Anchorage
and raising housing costs. As noted
previously, the Caraballo settlement
prescribed the methodology we use to
conduct COLA surveys and set COLA
rates. The settlement stipulates that we
use a rental equivalence approach to
estimate shelter costs and a hedonic
regression approach to compare housing
of similar quality. We worked closely
with the Technical Advisory Committee
economists and the Survey
Implementation Committee to develop
methodologies for the rental
equivalence and hedonic regression
processes.
We contracted for the services of a
company with experience in rental data
collection to survey rental properties in
the Alaska and DC areas in 2006. We
employed hedonic regression analysis to
the rental data to compare rents in
Anchorage, Fairbanks, and Juneau with
rents in the Washington, DC, area.
Section 5941 of title 5, U.S. Code,
requires that we use the DC area as the
basis for comparison; therefore, we
cannot consider costs in other areas of
the country.
As with other expenses, we recognize
that shelter costs may increase in the
COLA areas and/or the DC area between
surveys. We conduct rental surveys with
our price surveys in each COLA area
every 3 years on a rotating basis
according to the schedule agreed upon
in the Caraballo settlement. As noted
previously, we adjust area price indexes
in non-survey years based on the
relative change in the CPI for the COLA
area compared with the CPI for the
Washington, DC area. To the extent
housing prices change as a result of
reduced availability or for other reasons,
these adjustments will account for any
such price fluctuations between
surveys.
One commenter asked how we
applied the data element ‘‘exceptional
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view’’ in the survey of rental units in
Alaska, where good views are typical.
Appendix 4 of the Alaska Survey Report
describes the ‘‘exceptional view’’ data
element as a ‘‘view of a park, ocean,
mountain, valley, golf course, etc., that
is unusually beautiful for the area and
may increase the rental value of the
property.’’ The description notes that
properties with direct access to these
features are not surveyed. In the 2006
survey comparisons, we used six rental
properties in Alaska that were
considered to have an ‘‘exceptional
view’’ relative to the area.
comparison purposes. Employees in all
areas have varying tax obligations
depending on income, dependents,
deductions, and other factors. In the DC
area, employees pay a State income tax
(Virginia and Maryland), city income
tax (DC), local income tax (Maryland
counties), personal property tax
(Virginia counties), sales tax, and meals
(restaurant) tax, among others. The
extent to which the total tax burden may
be higher in a COLA area than in the DC
area is covered by the adjustment factor
we add to the price index for each
COLA area pursuant to the Caraballo
settlement agreement.
Air Travel
Several commenters noted the high
cost of air travel from the Alaska COLA
areas to areas in the continental United
States. The commenters requested that
we consider excessive travel expenses
arising from the lack of airline
competition, increasing airfare rates,
and area remoteness. The COLA
methodology takes travel expenses into
account in two ways. First, we compare
the cost of air travel from the various
COLA areas to common destinations in
the contiguous States with the cost of air
travel from the DC area to those same
destinations. Second, as noted
previously, we add to the overall price
index for the COLA area an adjustment
factor that reflects differences in need,
access to and availability of goods and
services, and quality of life in the COLA
area relative to the DC area. This
adjustment factor is designed to address
considerations such as air travel that
arise as a result of limited access and
limited availability in the COLA areas.
Rate Preservation
Two commenters believed it to be a
breach of contract for the COLA rate to
be reduced from the 25 percent rate in
effect when they accepted positions in
Alaska. As noted previously, 5 U.S.C.
5941 requires that nonforeign area
COLAs be based on differences in living
costs between the allowance areas and
the DC area. These differences vary over
time, and we must adjust rates
accordingly. We have not represented
the COLAs as being non-changing,
although litigation and legislation have
barred reductions in the past. With the
settlement of the Caraballo litigation,
there is no longer a bar on reducing
COLA rates. Because our surveys
indicate that living costs in the Alaska
survey areas no longer support a COLA
rate of 25 percent, we must reduce the
COLAs for Anchorage, Fairbanks, and
Juneau in accordance with law.
Taxes
Two commenters expressed concern
over high property-tax rates. Another
commenter said we were reducing
COLA rates at the time when taxes are
increasing in Anchorage. Property taxes
are an expense owners consider in
setting rent; therefore, the rental
equivalence methodology captures
differences in property tax rates.
Because of the complexity involved, we
do not attempt to determine the
aggregate tax liability for employees in
the COLA areas and the DC area for
Regulatory Flexibility Act
I certify that this regulation will not
have a significant economic impact on
a substantial number of small entities
because the regulation 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.
Michael W. Hager,
Acting Director.
Accordingly, OPM 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 § 591.207, revise paragraphs (a),
(b), and (c) to read as follows:
■
§ 591.207
Which areas are COLA areas?
*
*
*
*
*
(a) City of Anchorage, AK, and 80kilometer (50-mile) radius by shortest
route using paved roads when available,
as measured from the Federal
courthouse to the official duty station;
(b) City of Fairbanks, AK, and 80kilometer (50-mile) radius by shortest
route using paved roads when available,
as measured from the Federal
courthouse to the official duty station;
(c) City of Juneau, AK, and 80kilometer (50-mile) radius by shortest
route using paved roads when available,
as measured from the Federal
courthouse to the official duty station;
*
*
*
*
*
■ 3. Revise appendix A of subpart B to
read as follows:
Appendix A to Subpart B of Part 591—
Places and Rates at Which Allowances
Are Paid
This appendix lists the places approved for
a cost-of-living allowance and shows the
authorized allowance rate for each area. The
allowance rate shown is paid as a percentage
of an employee’s rate of basic pay. The rates
are subject to change based on the results of
future surveys.
Allowance
rate
(percent)
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Geographic coverage
State of Alaska:
City of Anchorage and 80-kilometer (50-mile) radius by road .........................................................................................................
City of Fairbanks and 80-kilometer (50-mile) radius by road ..........................................................................................................
City of Juneau and 80-kilometer (50-mile) radius by road ..............................................................................................................
Rest of the State ..............................................................................................................................................................................
State of Hawaii:
City and County of Honolulu ............................................................................................................................................................
Hawaii County, Hawaii .....................................................................................................................................................................
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Federal Register / Vol. 73, No. 213 / Monday, November 3, 2008 / Rules and Regulations
Allowance
rate
(percent)
Geographic coverage
County of Kauai ................................................................................................................................................................................
County of Maui and County of Kalawao ..........................................................................................................................................
Territory of Guam and Commonwealth of the Northern Mariana Islands ...............................................................................................
Commonwealth of Puerto Rico ................................................................................................................................................................
U.S. Virgin Islands ...................................................................................................................................................................................
[FR Doc. E8–26141 Filed 10–31–08; 8:45 am]
BILLING CODE 6325–39–P
DEPARTMENT OF AGRICULTURE
Food and Nutrition Service
7 CFR Part 248
[FDMS 2007–0008]
RIN 0584–AD74
WIC Farmers’ Market Nutrition
Program (FMNP): Nondiscretionary
Provisions of Public Law 108–265, the
Child Nutrition and WIC
Reauthorization Act of 2004
Food and Nutrition Service,
USDA.
ACTION: Interim final rule.
erowe on PROD1PC64 with RULES
AGENCY:
SUMMARY: This interim final rule
amends the WIC Farmers’ Market
Nutrition Program (FMNP) regulations
to codify three FMNP nondiscretionary
provisions mandated in the Child
Nutrition and WIC Reauthorization Act
of 2004. The three nondiscretionary
provisions include the option to
authorize roadside stands, a reduction
in the required amount of State
matching funds, and an increase in the
maximum Federal benefit level. These
changes are intended to increase State
agency flexibility in managing the
Program. The first two provisions
became effective on October 1, 2004,
while the increased maximum Federal
FMNP benefit level was effective as of
June 30, 2004.
The provisions set forth in this
rulemaking are nondiscretionary, i.e.,
the Department has not exercised any
authority to interpret the statutory
provisions beyond the language that is
specifically provided in the legislation.
However, the Department believes that
at least one of the provisions in this
rulemaking may generate additional
questions or comments concerning its
implementation. Therefore, the rule is
being issued as an interim final rule, to
afford the public the opportunity to
comment on the possible implications
of the provisions contained herein.
DATES: This rule will become effective
on December 3, 2008.
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Comment Date: To be considered,
comments on this interim rule must be
postmarked on or before January 2,
2009.
ADDRESSES: The Food and Nutrition
Service (FNS) invites interested persons
to submit comments on this interim
final rule. Comments may be submitted
by any of the following methods:
• Federal eRulemaking Portal: Go to
https://www.regulations.gov. Information
on using Regulations.gov, including
instructions for accessing documents,
submitting comments, and viewing the
docket after the close of the comment
period, is available through the site’s
‘‘User Tips’’ link under ‘‘How to Use
This Site’’. Go to ‘‘More Search
Options’’ for alternative search methods,
including searching by agency, viewing
documents with an open comment
period, or searching by document type.
To make comments on this interim final
rule, enter ‘‘WIC Farmers’ Market
Nutrition Program (FMNP):
Nondiscretionary Provisions of Public
Law 108–265, the Child Nutrition and
WIC Reauthorization Act of 2004’’ or
‘‘FDMS 2007–0008’’ under ‘‘Search
documents’’; click ‘‘go’’ and then use
the features available on the left side of
the results page to narrow your results.
Under the document listing, click on
‘‘Send a comment or submission.’’
• Mail: Send comments to Patricia N.
Daniels, Director, Supplemental Food
Programs Division, Food and Nutrition
Service, USDA, 3101 Park Center Drive,
Room 528, Alexandria, Virginia 22302,
(703) 305–2746.
Comments submitted in response to
this interim rule will be included in the
record and will be made available to the
public. Please be advised that the
substance of the comments and the
identities of the individuals or entities
submitting the comments will be subject
to public disclosure. FNS will make the
comments publicly available on the
Internet via https://www.regulations.gov.
Information regarding the interim rule
will be available on the FNS Web site
at https://www.fns.usda.gov/wic.
FOR FURTHER INFORMATION CONTACT:
Debra R. Whitford, Chief, Policy and
Program Development Branch,
Supplemental Food Programs Division,
USDA/FNS 3101 Park Center Drive,
PO 00000
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Room 529, Alexandria, VA 22302 or at
(703) 305–2746 during regular business
hours (8:30 a.m. to 5 p.m.) Monday
through Friday.
SUPPLEMENTARY INFORMATION:
I. Procedural Matters
A. Executive Order 12866
This interim final rule has been
determined to be significant and was
reviewed by the Office of Management
and Budget in conformance with
Executive Order 12866.
B. Regulatory Impact Analysis
A Regulatory Impact Analysis (RIA)
was developed for this interim final
rule. It follows this regulation as an
Appendix. The conclusions of this
analysis are summarized below.
Need for Action. The interim final
rule amends the FMNP regulations to
implement three nondiscretionary
provisions mandated in Public Law
108–265, the Child Nutrition and WIC
Reauthorization Act of 2004. The three
provisions, which give State agencies
the option to authorize roadside stands,
reduce the required amount of State
matching funds, and increase the
maximum Federal benefit level. These
provisions became effective in fiscal
year 2005.
Benefits. The benefit of this interim
final rule is to provide State agencies
with added flexibility in operating the
FMNP.
Costs. The provisions in this interim
final rule are not expected to increase
significantly the administrative burden
to the Department or to State agencies,
nor will they affect overall program
costs since the FMNP is funded by an
annual appropriation.
C. Regulatory Flexibility Act
This interim final rule has been
reviewed with regard to the
requirements of the Regulatory
Flexibility Act of 1980 (5 U.S.C. 601–
612). Nancy Montanez Johner, Under
Secretary, Food, Nutrition, and
Consumer Services, has certified that
this rule will not have a significant
impact on a substantial number of small
entities. In addition, this interim final
rule provides State and local agencies
with greater flexibility in operating the
E:\FR\FM\03NOR1.SGM
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]]>Agencies
[Federal Register Volume 73, Number 213 (Monday, November 3, 2008)]
[Rules and Regulations]
[Pages 65241-65246]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-26141]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
week.
========================================================================
Federal Register / Vol. 73, No. 213 / Monday, November 3, 2008 /
Rules and Regulations
[[Page 65241]]
OFFICE OF PERSONNEL MANAGEMENT
5 CFR Part 591
RIN 3206-AL37
Nonforeign Area Cost-of-Living Allowance Rates; Alaska
AGENCY: U.S. Office of Personnel Management.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The U.S. Office of Personnel Management (OPM) is reducing the
cost-of-living allowance (COLA) rates received by certain white-collar
Federal and U.S. Postal Service employees in Anchorage, Fairbanks, and
Juneau, Alaska. The rate reductions are the result of living-cost
surveys conducted by OPM in Alaska and the Washington, DC area in 2006.
Based on the survey results, OPM is reducing the COLA rates for
Anchorage, Fairbanks, and Juneau from 24 percent to 23 percent. OPM is
also issuing a minor clarification regarding the Alaska COLA area
boundaries to make clear the 50-mile area radius is by the shortest
route using paved roads.
DATES: Effective date: December 3, 2008. Implementation date: First day
of the first pay period beginning on or after December 3, 2008.
FOR FURTHER INFORMATION CONTACT: J. Stanley Austin, (202) 606-2838;
fax: (202) 606-4264; or e-mail: COLA@opm.gov.
SUPPLEMENTARY INFORMATION: Section 5941 of title 5, United States Code,
authorizes Federal agencies to pay cost-of-living allowances (COLAs) to
white-collar Federal and U.S. Postal Service employees stationed in
Alaska, Hawaii, Guam and the Northern Mariana Islands, Puerto Rico, and
the U.S. Virgin Islands (USVI). Executive Order 10000, as amended,
delegates to the Office of Personnel Management the authority to
administer nonforeign area COLAs and prescribes certain operational
features of the program. OPM conducts living-cost surveys in each
allowance area and in the Washington, DC area to determine whether, and
to what degree, COLA-area living costs are higher than those in the DC
area.
As required by Sec. 591.223 of title 5, Code of Federal
Regulations, OPM conducts COLA surveys in the Alaska, Pacific, and
Caribbean areas on a 3-year rotating basis, and in the Washington, DC
area on an annual basis. OPM sets the COLA rate for each area based on
the results of these surveys. For areas not surveyed during a
particular year, OPM computes interim adjustments to COLA rates based
on the relative change in the Consumer Price Index (CPI) for the COLA
area compared with the Washington, DC area. (See 5 CFR 591.224-226.)
OPM adopted the COLA survey methodology pursuant to the stipulation
for settlement in Caraballo et al. v. United States, No. 1997-0027
(D.V.I.), August 17, 2000. Caraballo was a class-action lawsuit in
which the plaintiffs contested the prior methodology OPM used to
determine COLA rates. In the Caraballo settlement, the parties agreed
that if the Government adopted and maintained certain changes in the
COLA program, the plaintiffs would be barred from bringing suit over
these issues. The stipulation for settlement is available on OPM's Web
site at https://www.opm.gov/oca/cola/settlement.asp.
Before the settlement, the parties entered into a memorandum of
understanding under which they engaged in a cooperative process to
study living-cost and compensation issues. The research was exhaustive
and covered essentially all aspects of the COLA program. A summary of
that research is available on OPM's Web site at https://www.opm.gov/oca/
cola/research.asp.
Exhibit A of the Caraballo settlement agreement lists 26 ``Safe
Harbor Principles'' that outline the changes to which the parties
agreed. These principles formed the basis for a new COLA methodology,
which OPM incorporated into its regulations. In developing these
regulations, OPM consulted with the Survey Implementation Committee,
which was established under the Caraballo settlement and is composed of
representatives of the parties in Caraballo. The Survey Implementation
Committee in turn consulted with the Technical Advisory Committee,
which was also established under the Caraballo settlement and comprises
three economists with expertise in living-cost comparisons. OPM
published proposed regulations detailing the new methodology for notice
and comment in the Federal Register on November 9, 2001, at 66 FR
56741, and final regulations on May 3, 2002, at 67 FR 22339, to
implement the new methodology. The Survey Implementation Committee and
the Technical Advisory Committee worked closely with OPM in preparing
for and implementing the first series of post-settlement COLA surveys.
2006 Alaska Survey
OPM conducted living-cost surveys in Anchorage, Fairbanks, Juneau,
and the Washington, DC, area in the spring of 2006. On January 3, 2008,
at 73 FR 774, we published the results of these surveys in the 2006
Nonforeign Area Cost-of-Living Allowance Survey Report: Alaska and
Washington, DC, Areas.
As described in the 2006 survey report, we compared the results of
the COLA area surveys with the results of the DC area survey to compute
a living-cost index for each of the Alaska COLA areas. Table 1 shows
the final 2006 Alaska survey living-cost indexes. These indexes
indicate reductions in the COLA rates for Anchorage, Fairbanks, and
Juneau. OPM's regulations at 5 CFR 591.228(c) limit COLA rate
reductions to 1 percentage point in a 12-month period; therefore, we
are reducing the rates in Anchorage, Fairbanks, and Juneau from 24
percent to 23 percent.
Table 1--2006 Alaska Survey Indexes
------------------------------------------------------------------------
Allowance area Index
------------------------------------------------------------------------
Anchorage.................................................. 109.81
Fairbanks.................................................. 118.90
Juneau..................................................... 120.08
Rest of the State of Alaska................................ 132.82
------------------------------------------------------------------------
Area Boundary Clarification
We are also issuing a clarification to 5 CFR 591.207 regarding the
Alaska COLA-area boundaries to make clear the 80-kilometer (50-mile)
area radius is by the shortest route using paved roads when available,
as measured from the
[[Page 65242]]
Federal courthouse to the official duty station. We believe the prior
regulations should not have been interpreted differently, but issue
this clarification to assist agencies when alternate interpretations
are presented.
Discussion of Comments
We published a notice of proposed rulemaking regarding the planned
reduction in the COLA rates for Anchorage, Fairbanks, and Juneau and
the area-boundary clarification in the Federal Register on January 3,
2008, at 73 FR 772. We address the comments we received in response to
the proposed rule in the discussion that follows.
Locality Pay
A number of commenters wrote in support of replacing the
nonforeign-area COLA with locality pay. Three commenters believed OPM
should not reduce Alaska COLA rates, while backing a legislative
initiative to implement locality pay in the COLA areas. One commenter
asked why a transition to locality pay has not already begun. Another
commenter said OPM should consider the locality pay received by Federal
employees in the Washington, DC, area in determining COLA rates for the
nonforeign areas. Several commenters noted that, unlike the nonforeign-
area COLA, locality pay is included in computations for retirement and
the Thrift Savings Plan.
The Federal Employees Pay Comparability Act of 1990 (FEPCA)
authorizes locality pay only for Federal employees in the contiguous 48
States and Washington, DC. We cannot consider DC-area locality pay in
determining rates outside the 48 States because doing so would be
equivalent to extending locality pay in these areas without authority.
Additionally, we cannot credit COLAs in the retirement calculation
because 5 U.S.C. 8331(3) and 8401(4) exclude allowances from base pay
for Federal retirement purposes. Changes in law would be required to
extend locality pay to Federal employees in the COLA areas or to
include COLAs in base pay for Federal retirement purposes.
Congress is considering legislation that would replace the
nonforeign-area COLA with locality pay. Because we are not able to
forecast whether legislation on this issue will pass or how long the
legislative process will take, we must proceed with COLA rate changes
in accordance with section 5941 of title 5, U.S. Code, and the
Caraballo settlement.
Living Costs
Most of the commenters believed the surveys did not fully consider
the expenses incurred in the allowance areas. Many noted expenses in
the Alaska COLA areas that they felt were either not accounted for in
the surveys or that affected the accuracy of the results of the
surveys. These expenses included--
--Goods and services typically found in the Washington, DC, area that
are not available in the allowance areas, the cost to obtain these
goods and services in the allowance areas (e.g., shipping fees), and
the quality of the goods and services that are available;
--Goods and services typically purchased in the allowance areas that
are not typically purchased in the Washington, DC, area;
--Variations in spending patterns between the Washington, DC, area and
the allowance areas;
--Hardships encountered under adverse climate conditions;
--Climate influences on purchase of clothing, automobiles, automobile
maintenance, insurance, and other goods and services;
--Housing and utility prices as affected by climate and availability;
--The frequency and cost of air travel in the allowance areas;
--The additional need for travel, lodging, and out-of-pocket expenses
for quality medical care in the allowance areas; and
--Travel and other costs to send children to private schools.
As required by section 5941 of title 5, U.S. Code, we compare
living costs in the COLA areas with living costs in the Washington, DC
area to determine COLA rates. We measure costs using the methodology
stipulated in the Caraballo settlement. We conduct on-site surveys in
each survey area and collect more than 4,000 prices on over 300 items
representing typical consumer purchases. We collect prices at over 900
outlets, including grocery, hardware, electronics, and department
stores, as well as automobile dealers, doctors, dentists, insurance
companies, and many other providers of goods and services. We collect
these prices in both the COLA and DC areas to use in the price
comparisons that determine each area's COLA rate.
The comparisons result in indexes that reflect how COLA area prices
measure against DC area prices over a given period of time. These
indexes do not necessarily correspond to rising (or falling) prices in
the COLA areas. For instance, if living costs in a COLA area rise, but
living costs in the DC area rise more sharply, the COLA rate for the
area would decrease. Conversely, if COLA area living costs decrease,
but DC area living costs decrease more sharply, the COLA rate for the
area would increase.
In consultation with representatives of Alaska-area employee
organizations and agencies on the Anchorage, Fairbanks, and Juneau COLA
Advisory Committees, we select representational items to be surveyed
under nine categories of expenses: Food, Shelter and Utilities,
Household Furnishings and Supplies, Apparel, Transportation, Medical,
Recreation, Education and Communication, and Miscellaneous. We divide
these categories into subcategories and select a sufficient number of
items to represent each subcategory in the living-cost surveys.
Recognizing the difficulty in surveying all employee costs in the
allowance areas, the Caraballo settlement prescribed adjustment factors
to be added to the price indexes for each COLA area. These factors
reflect differences in need, availability of and access to goods and
services, and quality of life in each of the COLA areas. The settlement
set the adjustment factor for Anchorage at 7.0, for Fairbanks at 9.0,
for Juneau at 9.0, and for the Rest of Alaska at 9.0.
We believe the COLA methodology and surveys comply fully with the
Caraballo settlement, include ample representational items, and provide
sufficient adjustment factors to account for cost differences due to
climate, remoteness, and geographical and cultural diversity. We worked
closely with the Survey Implementation Committee, the Technical
Advisory Committee, and the survey-area COLA Advisory Committees to
develop the survey procedures, items and outlets to be surveyed, and
analytic techniques for the price comparisons.
Rising Prices
A number of commenters noted that certain costs have increased
since we conducted the 2006 Alaska survey. They cited the cost of
gasoline, housing, utilities, shipping, airline tickets, grocery items,
medical needs, automobile expenses, recreational costs, various fees
and taxes, and other items. Several commenters believed we should
survey more frequently. We recognize that prices for various items will
increase in the COLA areas and/or the DC area between surveys. We
collect prices in each survey area every 3 years on a rotating basis
according to a schedule agreed upon by the parties in the Caraballo
settlement. As noted previously, we adjust area price indexes in non-
survey years based on the relative change in the CPI for the COLA area
compared with the CPI for the Washington, DC area. These
[[Page 65243]]
adjustments are designed to account for price fluctuations between
surveys.
Energy Costs
Many commenters felt we should increase Alaska COLA rates to
account for rising electric and heating oil costs. While DC area energy
costs have also increased as a result of escalating fuel prices, we
examined the effect recent Alaska energy rates would have on the area
indexes. The results indicated slightly higher indexes in Alaska, but
would not raise the indexes sufficiently to overcome the COLA rate
reductions. The 2008 interim CPI adjustment indexes will reflect any
increases in energy costs in Alaska compared to the DC area.
Several commenters noted that heating costs are higher in Alaska
than the DC area because the Alaska climate is colder for longer
periods of time. We discuss the energy utility model used to determine
the price of utilities in section 4.2.4 of the Alaska survey report
published at 73 FR 774. The utility model reflects the higher home
energy costs in Alaska. As shown in Appendix 5 of the report, we
determine energy utility indexes for the COLA areas based on energy
usage over a 12-month period.
Geographic Coverage
One commenter said the cost of living in Girdwood, AK, which is 40
miles outside of Anchorage, is significantly higher than in Anchorage.
The commenter felt the Girdwood cost of living is not adequately
reflected in the Anchorage survey and that we should conduct a separate
survey in Girdwood. We review outlets for surveying item prices in the
Anchorage COLA area with the Anchorage COLA Advisory Committee prior to
our surveys. We are open to recommendations from the Committee for
surveying a selection of items in Girdwood. We cannot conduct a
separate survey in Girdwood. Under 5 CFR 591.206(b), the head of a
department or agency must submit a request to OPM to initiate any
reconsideration of the definition of a COLA area. One of the criteria
for defining a COLA area is the concentration of Federal employees in
the area. OPM's Central Personnel Data File shows the Federal
population in Girdwood to be small.
One commenter said the Juneau cost of living is higher than
Anchorage and Fairbanks because of the lack of road access. Another
commenter said Fairbanks cannot be compared to Juneau, Anchorage, or
the DC area because of its colder winters. We conduct separate surveys
in each allowance area and collect local prices reflecting actual costs
to consumers in each area. We compare each COLA area's living costs to
living costs in the DC area, as required by law. Based on this
comparison, we produce a distinct index for each COLA area. The 2006
Alaska surveys indicated an index of 109.81 for Anchorage, 118.90 for
Fairbanks, and 120.08 for Juneau.
One commenter noted it was more expensive to live in Anchorage than
Los Angeles, San Francisco, or New York, where the locality pay rates
exceed the Anchorage COLA rate. The law that authorizes the payment of
COLAs in Alaska and the other nonforeign areas requires that we compare
living costs in the nonforeign areas with living costs in the DC area.
The Federal Employees Pay Comparability Act of 1990 does not authorize
locality pay for areas outside the contiguous States and Washington,
DC. Locality pay is not a cost-of-living allowance, but is based on a
comparison of Federal salaries with non-Federal salaries on a locality
basis.
The same commenter said we should raise the COLA rate for the Rest
of the State of Alaska allowance area and return Anchorage to its
former 25 percent rate based on the high cost of living in each area.
Another commenter questioned why we were reducing the Juneau COLA rate
when Ketchikan, which the commenter said had less expensive housing and
was closer to Seattle along shipping lines, was not being reduced. The
current COLA rate for the Rest of the State of Alaska, which includes
Ketchikan, is 25 percent. We cannot raise this rate because 5 U.S.C.
5941 limits COLAs to no more than 25 percent of basic pay. As permitted
under the Caraballo settlement, we do not generally survey the Rest of
the State of Alaska COLA area, but determine its COLA rate using
alternative indicators (e.g., cost information published by the
University of Alaska). In the 2006 Alaska survey, we determined the
COLA index for the Rest of the State of Alaska area to be 132.82
(converting to an uncapped COLA rate of 33 percent). In the 2003 Alaska
survey, we had determined the index to be 134.80 (or 35 percent). While
the index has decreased since 2003, it remains above 1.25 (25 percent)
and therefore continues to support the maximum 25 percent COLA rate.
The index for Anchorage declined from 112.63 in 2003 to 109.81 in
2006. The index for Juneau increased from 118.34 in 2003 to 120.08 in
2006. The index for Fairbanks increased from 115.26 in 2003 to 118.90
in 2006. Actual COLA rates are currently higher in Alaska because the
Caraballo settlement established rates based on historical levels in
the areas. The COLA rates in Alaska remain higher than indicated by
OPM's surveys because we reduce rates by no more than 1 percent in a
12-month period.
Military Raises
Four commenters questioned why we were reducing civilian COLAs in
Alaska when military co-workers were receiving raises. The civilian and
military COLAs are governed under separate laws and are computed under
different methodologies. Two major differences are that the military
COLA does not use the DC area as a base for comparison and does not
include housing expenses. The methodology for the civilian nonforeign
area COLA derives from 5 U.S.C. 5941, Executive Order 10000, and the
Caraballo settlement.
Impact of Reductions
The same four commenters expressed concern about the impact the
COLA reductions in Anchorage, Juneau, and Fairbanks would have on
employees, their families, and the Alaska economy. A number of
commenters expressed similar concerns regarding recruitment and
retention of employees in the Alaska COLA areas. We set COLA rates in
accordance with 5 U.S.C. 5941, which authorizes COLAs based on living
costs in the nonforeign areas that are substantially higher than living
costs in the DC area. We cannot adjust COLA rates for other reasons,
such as for recruitment and/or retention purposes. However, we attempt
to minimize the impact on employees and on the local economy by
reducing COLA rates by no more than 1 percentage point in a 12-month
period. To address recruitment and retention problems, agencies may
offer recruitment, retention, and relocation incentives and/or special
salary rates. OPM's Web site at https://www.opm.gov/oca/pay/index.asp
provides information on various pay authorities to assist with agency
recruitment and retention efforts.
Price Substitutes
One commenter disagreed with the use of prices from Anchorage or
Fairbanks for Juneau. As provided by the Caraballo settlement (under
Safe Harbor Principle 11), we use prices from adjacent areas in limited
circumstances when local prices for individual items are unavailable.
We minimize the necessity for doing this by substituting items in the
local area survey and adding the substituted items to the DC survey.
However, we are not always able to locate the substituted items in the
DC area. We tested the effect on the Juneau
[[Page 65244]]
COLA index of dropping the prices we used from Anchorage and Fairbanks
and found it slightly lowered the index.
Private Education
The same commenter noted that there were no private K-12 schools in
Juneau and suggested we include the cost to send a child to a
residential private school outside Juneau in the private education
price. We surveyed K-12 private education in the Alaska COLA areas and
the DC area and computed an average tuition price that reflected all
grade levels. Because a large majority of children in the Alaska survey
areas attend public schools, we apply ``use factors'' to reflect the
relative extent to which Federal employees make use of private
education in the COLA and DC areas. We described the process used for
K-12 private education in the Alaska areas in the Alaska survey report
at 73 FR 777. The adjustment factor for an area covers any additional
costs involved with sending children to private schools.
Catalog Pricing
The commenter also suggested we survey more items by catalog and
include shipping fees. The commenter also believed we should include
shipping for items that have to be returned. The commenter believed
these costs to be measurable and did not feel they should be included
in the adjustment factor for the area. We currently survey a select
number of items in each area by catalog and include shipping in the
total price of the items. We review outlets for surveying item prices
with the local area COLA Advisory Committees prior to data collection.
We are open to surveying more items by catalog at the recommendation of
the COLA Advisory Committees. Regarding the inclusion of shipping costs
for returned items, we do not believe the frequency of returns can be
measured accurately, either in the allowance areas or the DC area. The
Caraballo settlement specifically provided for the adjustment factor,
which reflects ``differences in need, availability of and access to
goods and services, and quality of life,'' to cover costs such as
these.
Insurance
The same commenter asked if mudslide and avalanche coverage is
included under the catastrophic coverage we specify for renter
insurance. We use a rental equivalence approach to determine shelter
costs. The rental equivalence approach compares the rental values of
homes. Home insurance is a cost to the owner and therefore is implicit
in these values. However, we do survey renter insurance and include the
price of any special riders necessary to cover earthquake and hurricane
damage. We do not specify mudslide or avalanche coverage as we have had
no indications that this coverage is commonly purchased, even in
Juneau. We would be open to including this coverage based on reliable
data showing residents in a particular COLA area often purchase renters
insurance with mudslide and/or avalanche riders.
Medical Services
A number of commenters noted that doctor, dental, and vision care
are more expensive in the COLA areas. Several commenters said it was
necessary to travel outside the area to obtain some medical services.
These commenters felt the survey should include travel costs in these
circumstances. We survey the prices of several medical services
(including dental services) and items in each COLA area and in the DC
area. The medical services index reflects any higher prices in the
Alaska COLA areas. We do not attempt to price or quantify the
availability of medical services. We consider this to be part of the
adjustment factor we add to the price index to reflect differences in
need, access to, and availability of goods and services, and quality of
life in the COLA areas relative to the Washington, DC, area.
One commenter noted that there were no Health Maintenance
Organizations (HMOs) in Anchorage. As described at 73 FR 778, OPM
compared average health insurance premium costs in the COLA area with
average health insurance premium costs in the DC area. Therefore, the
health insurance premium index reflects higher local costs to the
extent that an area has only higher cost plans available (i.e., to the
extent HMOs are not available).
Automobile Costs
Several commenters said we should survey two sets of automobile
tires in Alaska because snow tires are necessary during winter months.
We survey both studded snow tires and all-season radial tires in Alaska
to compute an average price for tires. As described at 73 FR 778, we
compare this price with the average price for all-season radial tires
in the DC area. We average tire prices in Alaska because each set of
tires is not in use year round. We include mounting, balancing, new
stems, stud fee (in Alaska), tire disposal fee, and taxes in the price
for each set of tires. We consider other possible tire-related costs,
such as wear and rotation frequency, to be covered by the adjustment
factor for the area.
One commenter felt we should account for the need for head bolt
heaters in Fairbanks. We included the cold-weather package in the price
for the Chevrolet Silverado we surveyed. We include engine block
heaters and other cold weather equipment or accessories to the extent
they are standard additions at COLA area dealerships.
Housing Costs
Two commenters said housing prices are higher in Alaska than in the
lower 48 States. Two other commenters said increased military
deployments and pipeline and other non-Federal activities were reducing
the available housing in Fairbanks and Anchorage and raising housing
costs. As noted previously, the Caraballo settlement prescribed the
methodology we use to conduct COLA surveys and set COLA rates. The
settlement stipulates that we use a rental equivalence approach to
estimate shelter costs and a hedonic regression approach to compare
housing of similar quality. We worked closely with the Technical
Advisory Committee economists and the Survey Implementation Committee
to develop methodologies for the rental equivalence and hedonic
regression processes.
We contracted for the services of a company with experience in
rental data collection to survey rental properties in the Alaska and DC
areas in 2006. We employed hedonic regression analysis to the rental
data to compare rents in Anchorage, Fairbanks, and Juneau with rents in
the Washington, DC, area. Section 5941 of title 5, U.S. Code, requires
that we use the DC area as the basis for comparison; therefore, we
cannot consider costs in other areas of the country.
As with other expenses, we recognize that shelter costs may
increase in the COLA areas and/or the DC area between surveys. We
conduct rental surveys with our price surveys in each COLA area every 3
years on a rotating basis according to the schedule agreed upon in the
Caraballo settlement. As noted previously, we adjust area price indexes
in non-survey years based on the relative change in the CPI for the
COLA area compared with the CPI for the Washington, DC area. To the
extent housing prices change as a result of reduced availability or for
other reasons, these adjustments will account for any such price
fluctuations between surveys.
One commenter asked how we applied the data element ``exceptional
[[Page 65245]]
view'' in the survey of rental units in Alaska, where good views are
typical. Appendix 4 of the Alaska Survey Report describes the
``exceptional view'' data element as a ``view of a park, ocean,
mountain, valley, golf course, etc., that is unusually beautiful for
the area and may increase the rental value of the property.'' The
description notes that properties with direct access to these features
are not surveyed. In the 2006 survey comparisons, we used six rental
properties in Alaska that were considered to have an ``exceptional
view'' relative to the area.
Air Travel
Several commenters noted the high cost of air travel from the
Alaska COLA areas to areas in the continental United States. The
commenters requested that we consider excessive travel expenses arising
from the lack of airline competition, increasing airfare rates, and
area remoteness. The COLA methodology takes travel expenses into
account in two ways. First, we compare the cost of air travel from the
various COLA areas to common destinations in the contiguous States with
the cost of air travel from the DC area to those same destinations.
Second, as noted previously, we add to the overall price index for the
COLA area an adjustment factor that reflects differences in need,
access to and availability of goods and services, and quality of life
in the COLA area relative to the DC area. This adjustment factor is
designed to address considerations such as air travel that arise as a
result of limited access and limited availability in the COLA areas.
Taxes
Two commenters expressed concern over high property-tax rates.
Another commenter said we were reducing COLA rates at the time when
taxes are increasing in Anchorage. Property taxes are an expense owners
consider in setting rent; therefore, the rental equivalence methodology
captures differences in property tax rates. Because of the complexity
involved, we do not attempt to determine the aggregate tax liability
for employees in the COLA areas and the DC area for comparison
purposes. Employees in all areas have varying tax obligations depending
on income, dependents, deductions, and other factors. In the DC area,
employees pay a State income tax (Virginia and Maryland), city income
tax (DC), local income tax (Maryland counties), personal property tax
(Virginia counties), sales tax, and meals (restaurant) tax, among
others. The extent to which the total tax burden may be higher in a
COLA area than in the DC area is covered by the adjustment factor we
add to the price index for each COLA area pursuant to the Caraballo
settlement agreement.
Rate Preservation
Two commenters believed it to be a breach of contract for the COLA
rate to be reduced from the 25 percent rate in effect when they
accepted positions in Alaska. As noted previously, 5 U.S.C. 5941
requires that nonforeign area COLAs be based on differences in living
costs between the allowance areas and the DC area. These differences
vary over time, and we must adjust rates accordingly. We have not
represented the COLAs as being non-changing, although litigation and
legislation have barred reductions in the past. With the settlement of
the Caraballo litigation, there is no longer a bar on reducing COLA
rates. Because our surveys indicate that living costs in the Alaska
survey areas no longer support a COLA rate of 25 percent, we must
reduce the COLAs for Anchorage, Fairbanks, and Juneau in accordance
with law.
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 this regulation will not have a significant economic
impact on a substantial number of small entities because the regulation
will affect only Federal agencies and employees.
List of Subjects in 5 CFR Part 591
Government employees, Travel and transportation expenses, Wages.
Office of Personnel Management.
Michael W. Hager,
Acting Director.
0
Accordingly, OPM 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
0
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.
0
2. In Sec. 591.207, revise paragraphs (a), (b), and (c) to read as
follows:
Sec. 591.207 Which areas are COLA areas?
* * * * *
(a) City of Anchorage, AK, and 80-kilometer (50-mile) radius by
shortest route using paved roads when available, as measured from the
Federal courthouse to the official duty station;
(b) City of Fairbanks, AK, and 80-kilometer (50-mile) radius by
shortest route using paved roads when available, as measured from the
Federal courthouse to the official duty station;
(c) City of Juneau, AK, and 80-kilometer (50-mile) radius by
shortest route using paved roads when available, as measured from the
Federal courthouse to the official duty station;
* * * * *
0
3. Revise appendix A of subpart B to read as follows:
Appendix A to Subpart B of Part 591--Places and Rates at Which
Allowances Are Paid
This appendix lists the places approved for a cost-of-living
allowance and shows the authorized allowance rate for each area. The
allowance rate shown is paid as a percentage of an employee's rate
of basic pay. The rates are subject to change based on the results
of future surveys.
------------------------------------------------------------------------
Allowance
Geographic coverage rate
(percent)
------------------------------------------------------------------------
State of Alaska:
City of Anchorage and 80-kilometer (50-mile) radius by 23
road..................................................
City of Fairbanks and 80-kilometer (50-mile) radius by 23
road..................................................
City of Juneau and 80-kilometer (50-mile) radius by 23
road..................................................
Rest of the State...................................... 25
State of Hawaii:
City and County of Honolulu............................ 25
Hawaii County, Hawaii.................................. 18
[[Page 65246]]
County of Kauai........................................ 25
County of Maui and County of Kalawao................... 25
Territory of Guam and Commonwealth of the Northern Mariana 25
Islands...................................................
Commonwealth of Puerto Rico................................ 13
U.S. Virgin Islands........................................ 25
------------------------------------------------------------------------
[FR Doc. E8-26141 Filed 10-31-08; 8:45 am]
BILLING CODE 6325-39-P
