The pay raise vs. the COLA gap is real!!!

People who confuse January federal pay raises with January cost of living adjustments may have their eyes opened next year. As in pried open with a crow bar!

How come?

President Barack Obama has proposed a 1.3 percent pay raise for active-duty civil servants. A group of House and Senate Democrats is pushing a long-shot 3.8 percent raise for white-collar government employees. Odds are feds will see the 1.3 percent hike, the largest in 5 years, in their early 2016 paychecks.

For retirees, January is another thing.

Raises for retirees are based on any rise in living costs from the third quarter of the current year over the third quarter of the previous year. Most times, the Consumer Price Index-W goes up, triggering an automatic COLA. In January of this year, the feds, military and Social Security retirees got a 1.7 percent inflation catchup. But what if there is no inflation?

Last Monday, this column reported (accurately) that based on the most recent CPI-W data (January 2015), feds were looking at a zero COLA next year. The final figure will be based on the CPI level for the third quarter of this year. That was fairly grim news for many retirees. But it actually gets worse.

A reader, David Curran, pointed out that retirees currently are in a statistical hole, because of deflation. We ran it past David Snell at the National Active and Retired Federal Employees. He too said it is even worse than it appeared in the column:

“Mr. Curran is correct. I only gave the monthly difference. The new CPI-W figure for January 2015 was 228.294, which is 2.54 percent lower than the average CIP-W for the third quarter of 2014, which was 234.242 (1982- 84+100). The 2014 third quarter average will be the reference figure for determining the 2016 COLA.” If any!!

Bottom line is retirees won’t know whether they get a 2016 COLA until the third quarter (July, August, September) CPI data is published. That will be sometime in early October.

The only good news — so far — for retirees is that the COLA escalator only goes in one direction. That is up! If living costs drop, as they have, COLAs are not reduced accordingly. That is unless some pesky member of Congress reads this and decides what goes up must sometimes go down.

NEARLY USELESS FACTOID:

By Michael O’Connell

Richard Thomas, a fish and wildlife technician for the New York State Department of Environmental Conservation, took a crack in 1988 at calculating an answer to the saying: How much wood would a woodchuck chuck if a woodchuck could chuck wood? If “chucking” were the equivalent of “tossing or discarding” dirt as the woodchuck digs a 35-foot burrow and the average square foot of soil weighs 20 pounds, then a woodchuck could chuck 700 pounds in a day, according to Thomas.

Source: Associated Press

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