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Federal Employees May See Reduction In Cost Of Living Allowance In 2006


February 3, 2005
Copyright © 2005 CARIBBEAN BUSINESS. All Rights Reserved.

Federal government employees working in Puerto Rico can expect their cost-of-living allowances (COLAs) to be reduced from 11.5% to 10.5% beginning in January 2006. The U.S. government pays COLAs to white-collar civilian federal employees in Puerto Rico, Alaska, Hawaii, Guam, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands. Approximately 44,000 employees, including U.S. Postal Service employees, receive these COLAs.

During a meeting with the directors of 80 federal agencies and offices in Puerto Rico, Jerome D. Mikowiez, director of Salary & Wage Systems Group from the Office of Personnel Managemefnt in Washington, D.C., said a new survey of Puerto Rico will be conducted this year to determine new COLA rates for the island’s federal employees. The meeting was sponsored by the Federal Executives Association of Puerto Rico and the Caribe Federal Credit Union.

To set the COLA rates the Office of Personnel Management (OPM) surveys the prices of over 200 items including goods and services, housing, transportation, and miscellaneous expenses. OPM conducts these surveys in each of the allowance areas and in the Washington, D.C., area.

On Aug. 17, 2000, the U.S. District Court of the Virgin Islands approved the settlement of Caraballo et al. vs. U.S., a class-action lawsuit in which the plaintiffs contested the methodology the OPM used to determine COLA rates. This class-action settlement involves all people who received a cost-of-living allowance while working in a nonforeign area as a civilian employee of the U.S. or a federal entity between Oct. 1, 1990 and Sept. 30, 2000. Under the settlement, the federal government made significant changes in the way the COLA is calculated, including adoption of a "nonprice" adjustment factor. There are also important procedural changes in the administration of the program, including substantial ongoing employee involvement.

Federal executives in Puerto Rico stated during the meeting with the director of Salary & Wage Systems Group that when conducting the survey, OPM should consider the island’s high cost of utilities; the crime problem that leads to higher insurance rates; education problems requiring parents to pay for private schools; and the threat of hurricanes. "You can’t compare with cities on the mainland [U.S.] because it costs more to live in Puerto Rico," stated one federal executive.

OPM executives will return to Puerto Rico in March to conduct a survey and compare it to the one carried out three years ago. Based on this survey, Mikowiez projects the COLA in Puerto Rico may be reduced to 10.5%.

Mikowiez added that the only way to change the manner in which the COLA is calculated for Puerto Rico is to change the law, and without voting representation in Congress, there is no way for that to happen.

This Caribbean Business article appears courtesy of Casiano Communications.
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