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Proposed Rule

Nonforeign Area Cost-of-Living Allowance Rates; Puerto Rico and Hawaii County, HI

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Office of Personnel Management.


Proposed rule.


The Office of Personnel Management (OPM) is proposing to change the cost-of-living allowance (COLA) rates received by certain white-collar Federal and U.S. Postal Service employees in Puerto Rico and Hawaii County, HI. The proposed rate changes are the result of interim adjustments OPM calculated based on relative Consumer Price Index differences between the cost-of-living allowance areas and the Washington, DC, area. OPM is also proposing an additional one-time adjustment to the Puerto Rico COLA rate based on the impact of the new sales tax in Puerto Rico.


We will consider comments received on or before November 5, 2007.


Send or deliver comments to Charles D. Grimes III, Deputy Associate Director for Performance Management and Pay Systems, Strategic Human Resources Policy Division, Office of Personnel Management, Room 7300B, 1900 E Street, NW., Washington, DC 20415-8200; fax: (202) 606-4264; or e-mail:

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J. Stanley Austin, (202) 606-2838; fax: (202) 606-4264; or e-mail:

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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 (OPM) 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. OPM sets the COLA rate for each area based on the results of these surveys.

As required by section 591.223 of title 5, Code of Federal Regulations, OPM conducts COLA surveys once every 3 years on a rotating basis. For areas not surveyed during a particular year, OPM adjusts COLA rates by the relative change in the Consumer Price Index (CPI) for the COLA area compared with the Washington, DC, area. (See 5 CFR 591.224-591.226.) OPM adopted these regulations 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 which resulted in many changes in the COLA methodology and regulations.

OPM computed interim adjustments based on the relative change in the CPI for the Pacific and Caribbean COLA areas. A separate notice on the calculation of these interim adjustments accompanies this proposed rule. The interim adjustments indicate that, except for Hawaii County and Puerto Rico, the COLA rates for the Pacific and Caribbean COLA areas are currently set at the appropriate levels. For Hawaii County, the adjustments indicate that the COLA rate should be increased from 17 percent to 18 percent. For Puerto Rico, the adjustments indicate the COLA rate should be increased from 10.5 percent to 11 percent. This increase in Puerto Rico supersedes the 1-percent reduction proposed by OPM on October 27, 2006, at 71 FR 63176, based on the 2005 survey results.

Puerto Rico Sales Tax Adjustment

On July 4, 2006, the Puerto Rico government enacted the Tax Justice Act of 2006 (Act No. 117, HB 2193), which established a new Commonwealth sales and use tax of 5.5 percent and authorized an additional municipal sales and use tax of up to 1.5 percent. To measure the impact of the new sales tax on living costs in Puerto Rico, we applied the sales tax to covered items priced in OPM's 2005 Puerto Rico COLA survey. (The law exempted many items from coverage; e.g., most grocery items, cars, rent, prescription drugs, many professional services, health insurance, and school tuition.) We then recalculated the Puerto Rico price index incorporating the sales tax. The index increased by 1.9 points to 112.94, which translates to a COLA rate of 13 percent. Therefore, to account for this additional cost to Federal employees in Puerto Rico, we are proposing to increase the Puerto Rico COLA rate to 13 percent.

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.

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List of Subjects in 5 CFR Part 591

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Office Of Personnel Management.

Linda M. Springer,


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Accordingly, OPM proposes to amend subpart B of 5 CFR part 591 as follows:

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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:

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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.

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2. 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. Start Printed Page 51201

Geographic coverageAllowance rate (percent)
State of Alaska:
City of Anchorage and 80-kilometer (50-mile) radius by road24
City of Fairbanks and 80-kilometer (50-mile) radius by road24
City of Juneau and 80-kilometer (50-mile) radius by road24
Rest of the State25
State of Hawaii:
City and County of Honolulu25
Hawaii County, Hawaii18
County of Kauai25
County of Maui and County of Kalawao25
Territory of Guam and Commonwealth of the Northern Mariana Islands25
Commonwealth of Puerto Rico13
U.S. Virgin Islands25
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[FR Doc. E7-17638 Filed 9-5-07; 8:45 am]