Service members overseas will see fewer changes in their cost-of-living allowance due to a little-known provision signed into law in December. The change is expected to produce more stability in their personal finances,

The fiscal 2023 National Defense Authorization Act limits how often the overseas COLA can be decreased to no more than once every six months, unless the reductions come about as part of a permanent change-of-station move. There is no limit on how often the overseas COLA can be increased.

The overseas COLA can go up or down based on two factors: differences between the cost of living for troops overseas and those stateside, and currency fluctuations. The defense bill “enacted restrictions limiting the Department to instituting OCOLA decreases … no more than once every six months,” said Navy Cmdr. Nicole Schwegman, a DoD spokeswoman.

Service members living in Hawaii and Guam have heard from local commanders that their COLA is about to be decreased, based on those annual calculations. But the issue is still being discussed at the Pentagon.

”No final decisions have been made to implement any change to COLA for members serving in Hawaii, Guam or any other overseas locations at this time,” Schwegman said.

Currently, the overseas COLA is adjusted once a year by region based on comparisons between prices in the region and prices in the continental U.S. But it can also be adjusted as often as every pay period for currency fluctuations, determined by the appreciation or depreciation of the foreign currency. The difference can amount to hundreds of dollars a month, depending on a service member’s rank and number of family members.

Defense officials have been working to implement the new law, and it’s not clear yet whether this will affect possible reductions in overseas COLA for the last pay period in April. But if it doesn’t happen then, it may not happen until much later this year, according to a source familiar with the deliberations. The law also requires DoD officials to notify Congress six months before changes are made in the COLA tables, and it’s not yet clear whether this has happened.

Jenna Lang, the wife of a Navy captain stationed at Yokosuka, Japan, said the stability provision “is really fantastic.”

The frequent changes in the allowance because of currency fluctuations, often paycheck to paycheck, has been a major problem, she said.

“The hardest part for families is the budgeting piece,” she said.

While her family can deal with wild downward swings in COLA, Lang said she is concerned about other families. Such swings in the allowance are particularly hard on more junior enlisted and officers, who may be on tighter budgets.

The overseas COLA is meant to offset higher prices of non-housing goods and services overseas, essentially equalizing purchasing power at businesses outside the gate with that of service members in the continental U.S. As one example, she cited of the effects of COLA decreases in young families eligible for the Women, Infants and Children Overseas Program. The commissary is often out of milk, she said. Young families can go out in town and buy milk, but those who are eligible for the Overseas WIC program can’t use the vouchers for milk and other nutritional items in stores outside the gate.

While milk and other items may be cheaper out in town, she says, the families using Overseas WIC are still having to pay for them. There’s also the issue of whether the family is comfortable going into a civilian store where the language and labeling are different. Some may not have access to a car, and it’s also more difficult with young children in tow.

Worries in Hawaii, Guam

During a March 15 Senate Armed Services personnel subcommittee hearing, Sen. Mazie Hirono, D-Hawaii, told defense officials that service members there have contacted her office because they have been hearing about an imminent decrease of about 50% to their OCOLA.

“That’s a big potential cut,” Hirono said. “Certainly, I share their concerns. Hawaii has the most expensive cost of living of any state in the country today.

She cited the cost of a gallon of gas at $4.85, more than $1 above the national average, and a gallon of milk at about $7.25, nearly $3 above the national average.

“As we continue to combat inflation, the thought of slashing the cost-of-living allowance for service members in Hawaii is absurd,” she said, and asked for the justification for such a large reduction.

Gilbert Cisneros Jr., undersecretary of defense for personnel and readiness, told subcommittee members that it’s not just Hawaii facing issues with OCOLA, but other areas such as Germany and Japan.

“As people are struggling here in the continental United States, it’s kind of evened the playing field out,” he said. “All these areas are facing the same cut because, again, the COLA is meant to bring the pay scale or pay in alignment with what it would be here, to make sure that the dollar — if they were here in the states —that the dollar would stretch just as far as they are overseas.”

Cisneros committed to providing more information about the cuts.

Tracy Cullinan, a Navy commander’s wife living in Hawaii, said a COLA decrease would be a detriment to her family’s finances, but because they are a dual income family, they will adapt.

“For other families, meeting basic needs is going to be a struggle,” she said. “I’ve seen many military families already struggling with putting food on the table, paying for rising utility costs and putting gas in their vehicles. Many military families here already utilize food pantries, free and reduced lunch, WIC and other social programs.

“I worry for those who are already stretching their budget as it is,” she said. “I’ve run into families who have absolutely no room for extras and any sort of emergency would be catastrophic.”

Military families are advised to use the commissary and on-base gas stations, housing and daycare to get the most competitive pricing, she said, “but the demand is greater than the supply, forcing us to find those things out on the economy.”

Inflation continues to be a problem in Hawaii, she said, citing the skyrocketing prices of fresh fruit and vegetables as one example.

Senior military leaders have been doing the best they can to communicate to families with the information they have, and they’ve also been working to appeal the expected reduction in COLA, she said.

More transparency

The law also requires the Defense Department to provide more information about the methodology it uses to determine the cost-of-living allowance payments.

According to DoD, overseas COLA is adjusted once a year, using a formula that compares the prices of goods and services overseas with average prices for equivalent goods and services in the continental U.S. Service members only receive a COLA if costs are higher at their overseas location than average CONUS costs.

If prices in the continental U.S. rise more quickly than the prices overseas, the Overseas COLA will decrease.

Two surveys are used for the annual COLA adjustments to determine the relative cost of living in the continental U.S. compared with the overseas cost. A Living Pattern Survey of service members, conducted every three years, asks where service members shop and what percentage of goods they buy locally, at commissaries and exchanges, and through online retailers.

Then each year, the Retail Price Schedule, a market basket survey, captures prices for about 120 goods and services based on the shopping outlets identified by the most recent Living Pattern Survey.

The annual adjustment is separate from the adjustments based on fluctuations in the foreign currency.

Karen has covered military families, quality of life and consumer issues for Military Times for more than 30 years, and is co-author of a chapter on media coverage of military families in the book "A Battle Plan for Supporting Military Families." She previously worked for newspapers in Guam, Norfolk, Jacksonville, Fla., and Athens, Ga.

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