OPM pushes to extend locality pay to Alaska, Hawaii

Cost-of-living allowances for federal employees in Hawaii, Alaska and the U.S. territories could be replaced with locality payments under a new Bush administration proposal sent to lawmakers Wednesday.

The legislative proposal seeks to correct potential disparities between locality-based comparability payments allowed under a 1990 law and nonforeign area COLAs authorized under general civil service law.

By law, locality pay is available only to employees in the 48 contiguous states and the District of Columbia, while the COLA program covers white-collar civilian federal employees in most other nonforeign areas, such as Alaska, Hawaii, Guam, the Northern Mariana Islands, Puerto Rico and the U.S. Virgin Islands.

COLAs are a major component of total pay for federal employees outside the contiguous states. Such payments are not subject to federal income tax, but also are not creditable for retirement. Locality pay, on the other hand, is counted as basic pay for computing retirement benefits.

In a letter accompanying the proposal, Office of Personnel Management Director Linda Springer said there is a perception that total pay and retirement benefits for employees in nonforeign areas have "eroded gradually" in comparison with those for employees in the contiguous states.

"These perceived disparities between the pay and retirement benefits of those two groups of employees generate actual and potential staffing problems for federal agencies in nonforeign areas, especially in retaining employees near retirement," Springer wrote.

Under the proposal, COLAs would gradually be replaced with locality pay over a seven-year period beginning in 2008.

Springer noted that during the last 20 years, the COLA program has been "fraught with litigation," costing the government hundreds of millions of dollars in settlement payments and attorney fees.

Under one settlement, OPM agreed to implement a new methodology for setting COLAs, including a three-year survey cycle beginning in 2002. The results of that survey confirmed that COLA rates under the current calculations would decrease for many areas, likely causing additional litigation. That, and a potential constitutional challenge to the lack of locality pay in nonforeign areas, opens the possibility of future liabilities, Springer said.

Springer said implementing the proposal would produce modest savings in mandatory expenditures of about $1 million the first year. But the net cost increase over the first five years would be about $2 million, with a total cost of $109 million over the next 10 years.

"We believe this extension of locality pay to the nonforeign areas will appropriately apply effective and contemporary compensation practices to more federal employees and eliminate the inefficiencies and conflicts inherent in the outmoded approach taken by the COLA program," Springer wrote.

Sen. Daniel Akaka, D-Hawaii, said Wednesday that he plans to carefully review the proposal while also seeking input from affected employees.

"Together we can work to ensure that these federal workers are not disadvantaged when it comes to their compensation or retirement," Akaka said.

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
Close [ x ] More from GovExec

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Sponsored by Brocade

    Best of 2016 Federal Forum eBook

    Earlier this summer, Federal and tech industry leaders convened to talk security, machine learning, network modernization, DevOps, and much more at the 2016 Federal Forum. This eBook includes a useful summary highlighting the best content shared at the 2016 Federal Forum to help agencies modernize their network infrastructure.

  • Sponsored by CDW-G

    GBC Flash Poll Series: Merger & Acquisitions

    Download this GBC Flash Poll to learn more about federal perspectives on the impact of industry consolidation.

  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

  • Sponsored by Aquilent

    A DevOps Roadmap for the Federal Government

    This GBC Report discusses how DevOps is steadily gaining traction among some of government's leading IT developers and agencies.

  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.

  • Sponsored by CDW-G

    Joint Enterprise Licensing Agreements

    Read this eBook to learn how defense agencies can achieve savings and efficiencies with an Enterprise Software Agreement.

  • Sponsored by Cloudera

    Government Forum Content Library

    Get all the essential resources needed for effective technology strategies in the federal landscape.


When you download a report, your information may be shared with the underwriters of that document.