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Most military service members in Hawaii are facing a possible pay cut of around 4.6% amid persistent high inflation as the Department of Defense contemplates amending its cost of living allowance for armed forces personnel outside the contiguous United States.
The result could mean a roughly 50% cut in COLA in Hawaii.
A spokesperson for the agency at the Pentagon, Maj. Charlie Dietz, on Tuesday said that final decisions have not been made to implement any change to COLA for members serving in Hawaii or any overseas location at this time. Dietz would not comment on changes under consideration.
During a March 15 congressional hearing, Undersecretary of Defense for Personnel and Readiness Gilbert Cisneros Jr. said a bigger spike in costs for goods and services on the mainland has triggered an effort to reset COLA rates elsewhere so that wages for personnel serving in Hawaii and overseas can buy about as much as service members stationed on the continent.
It’s an effort to even out pay,” he said of the differential. “It’s not just Hawaii, but it’s all over. Germany, Japan — all these areas are facing the same cut,” Cisneros said in response to a question from U.S. Sen. Mazie Hirono (D, Hawaii) during a hearing of the Senate Armed Services Committee’s personnel subcommittee.
Hirono sought justification for a roughly 50% COLA cut after service members in Hawaii contacted her office with concerns over such a reduction. Cisneros said he would send the committee more information explaining the justification for such a reduction in more detail, though Hirono told him she believes a 50% cut is unwarranted given the cost of living in Hawaii.
“Today, the cost of a gallon of gas in Hawaii is $4.85, more than $1 above the national average of $3.46,” she said. “A gallon of milk in Hawaii is about $7.25 compared to the national average of $4.41. The cost of housing in Hawaii is higher than any other state — I could go on. … As we continue to combat inflation, the thought of slashing the cost of living allowance for service members in Hawaii is absurd.”
COLA is a nontaxable supplemental pay allowance designed to offset variations in prices for goods and services excluding housing. It is paid to more than 230,000 service members worldwide. Hawaii has about 40,500 active-duty personnel, according to state data.
Hawaii’s COLA rate, according to the U.S. Office of Personnel Management, boosts pay by 9.28% in all counties except for Hawaii County, where the boost is 3.5%.
A 50% cut would amount to a 1.75% pay cut in Hawaii County and 4.6% on Oahu, Maui and Kauai.
In dollars, cuts would vary depending on military pay grade, years of service and number of dependents.
Military publication Stars and Stripes reported that the contemplated cut on Oahu would amount to $312 a month for an E-6 level service member with 10 years of service and three dependents, while someone at the O-4 level and equal in other factors would lose $408 per month.
Local economist Paul Brewbaker said a COLA decrease is easy to rationally view as an indignity, especially because the price of goods and services statewide is still rising much faster than historical average levels.
However, he said the federal government’s justification for a cut appears to be supported given how COLA is calculated.
Two surveys are used to calculate the allowance for equalizing purchasing power around the world. One is done every three years and asks service members where they shop, including commissaries and the internet. The other survey is annual and assesses prices for nearly 120 goods and services, excluding housing, found at retail outlets identified in the other survey.
Brewbaker said non- housing cost differentials between Hawaii and the mainland have been narrowing in recent decades because of changes that include the opening of big-box stores in Hawaii and the expansion of e-commerce.
“E-commerce pre-COVID was already crushing the price differential on many commodities,” he said.
Another factor Brewbaker noted is inflation, which for Hawaii has generally been a little lower than the national average for over a decade and in the current spike that began in 2021.
In the most recent inflation report for Honolulu in February, prices were up 5.2% over the prior 12 months compared with 6.4% nationally.
“Honolulu isn’t that much more expensive than any of the major California metro areas,” Brewbaker said.
A shrinking COLA for Hawaii, in fact, has been a trend for more than a decade.
In 2009, COLA for most counties in the state was 25%. The figure has decreased every year or nearly every year since then, falling to 16% by 2011 then to 11% in 2017, followed by slight annual decreases after that.
It remains to be seen if the Defense Department moves ahead and implements its planned COLA cut for Hawaii and other places. In the past, some COLA reduction announcements have been rescinded after drawing public criticism.
On Sept. 15, Marine Corps Forces Pacific announced in a Facebook post that a Hawaii COLA reduction was slated to take effect in increments starting in November. The warning, issued in part to help service members prepare themselves financially, prompted an outpouring of negative comments.
In one comment, Timothy Canup advised others to avoid assignments in Hawaii because of rising prices for things such chicken, which now costs the same as ribeye steak, and an 11.36-pound, half-spiral glazed ham that was $36.69 at the commissary.
“This would cost about $50 out in town at Safeway,” Canup wrote. “For freaking ham!!!”
A day later, the command said the decrease would not be implemented and that the two surveys used to adjust COLA would be redone.
“If the results indicate a change is warranted, it will be implemented prospectively,” the command said on its website Sept. 16. “However, no changes are being implemented at this time.”
More recently, Navy administrators for defense operations on Guam said in a February Facebook post that a 66% COLA decrease for Guam was scheduled to take effect March 16.
Joint Region Marianas commander Rear Adm. Benjamin Nicholson said in a Facebook video that unplanned decreases in pay are never easy, and that “these decisions were not made here in Guam.”
Nicholson said he was working with U.S. Indo- Pacific Command to appeal the reduction for Guam. According to Defense Department spokesperson Dietz, no change or final decision for any increases has been made.
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