Oct. 30, 2007
VA COLA 2007 UPDATE 03: Military retired pay and veterans' disability compensation will increase by 3.3% on 1 DEC, marking an annual cost-of-living adjustment that is both less than expected and smaller than last year's 4.1% increase. The 3.3% increase will first appear in January checks. For the second straight year, it is larger than ` JAN increase in military basic pay, which will be just 2.2%. The main reason the retirement COLA is below 4% is that energy prices and transportation costs have dropped in the last three months, according to statistics provided by the U.S. Labor's Department's Bureau of Labor Statistics, which compiles consumer prices. In the past year, some consumer costs have risen by more than 4%. Health care costs increased an average of 4.2% and housing costs jumped by 4.1%, according to the BLS. Food price, on the other hand, rose by just 2.5%. At the same time, transportation costs have dropped by 3.2% from a year ago and overall energy costs have declined by 4.3%.
Annual increases in military and federal civilian retired pay and military survivor benefits are automatic, linked by law to the increase in Social Security benefits. All the benefits are tied to a comparison of consumer prices from the last three months of each fiscal year, which ends on 30 SEP, to the same period of the previous fiscal year. Veterans' disability benefits, veterans' dependency and indemnity compensation for survivors and veterans' pensions do not automatically increase. But Congress passed and President Bush signed a bill guaranteeing they would get the same 1 DEC increase. Military pay raises also are approved only by an act of Congress, but that is not the reason why the 1 JAN basic pay increase will be less than the retirement adjustment. Military and federal civilian pay raises are computed by law to keep pace with private-sector wage growth, not with inflation. Often, such as in 2002 through 2005, this results in military raises that are larger than retirement increases. But the 1 JAN 06 military raise and now the coming 1 JAN 07 military increase will be lower because private-sector wage growth has been lower than inflation. [Source: NavyTimes Rick Maze article 18 Oct 06]
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