Cost-of-living adjustment to remain same for Alaska, Hawaii, territories

Federal employees living in Alaska, Hawaii and U.S. overseas territories will not get an extra cost-of-living adjustment, or a pay decrease, because of new research on housing expenses, the Office of Personnel Management announced Monday.

In a Federal Register notice, OPM said the results of a new housing survey in Alaska, Hawaii, Guam, the Northern Mariana Islands, Puerto Rico and the U.S. Virgin Islands show no need for an adjustment to cost-of-living calculations based on housing costs.

Workers in those areas do not receive the locality raises that government employees in the contiguous states do. Instead, they get a cost-of-living increase based on surveys comparing local expenses such as housing, utilities, food and transportation, with those in the Washington, D.C., area.

This latest study was a special research project taken on by OPM to determine if the housing survey was accurate. OPM uses market rental data for homes to determine the cost of shelter in each area, but two advisory committees that advise the OPM effort were concerned that methodology was inaccurate.

OPM hired statistical research firm Westat Inc. to make more than 150,000 phone calls in an effort to determine if market rents were different than homeowners' own estimates of their rental values. Reasons for a difference could include homeowners' pride of ownership or lack of information about rental markets, causing them to inaccurately estimate their homes' rental value.

But OPM's results showed there was not a high enough difference between rental estimates and market rates to justify extra cost-of-living adjustments for federal employees outside the 48 contiguous states. The agency, which guides pay policy governmentwide, said it does not plan any further studies on the issue.

All of these surveys attempt to fix a problem brought up in an August 2000 class-action lawsuit from federal employees in noncontiguous states who thought they were being underpaid. OPM settled the lawsuit and began new cost-of-living studies in those areas.