Prediction: 2014 COLA Will Be Between 1.3 and 1.7 Percent

Posted by Jason Van Steenwyk

militaryauthority.com cost of living adjustmentThe annual Cost of Living Adjustment (COLA) used to calculate military base pay raises will fall between 1.3 and 1.7 percent this year. That’s a projection made by the Military Officers Association of America, which keeps a close eye on issues relating to pay and benefits in the military.

Congress normally bases the annual COLA adjustment on the change in the Consumer Price Index between June and September. The August CPI has been published already, and reflects an inflation rate of 1.5 percent, according to MOAA. There is one month remaining in the calculation period. MOAA makes their prediction based on the normal variance in the September number. If inflation is modest or negative in September, the COLA adjustment is likely to be towards the bottom of the 1.3 to 1.7 percent range. If inflation is higher than 1.5 percent annualized, then the COLA is likely to be towards the top of the range.

However, the Cost of Living adjustment will likely do little more than to bring servicemembers’ base pay even with what their take home pay was two years ago. This is because with the Social Security payroll tax holiday ending at the beginning of 2013, the base pay of the vast majority of American workers, including military, fell by two percentage points. The COLA increase for the year did not cover the shortfall. So unless the servicemember got promoted or got a time in service increase in pay, they experienced a net reduction in take home base pay.

As of this writing, the budget negotiations for FY 2014 are still in flux. There may be adjustments to other allowances as well, including housing allowances and even TRICARE premiums. We will continue to report on these issues as they come up.

Of most immediate import is a scheduled DoD budget reduction of some $52 billion, which will occur effective FY 2014 unless Congress intervenes with another budget or appropriations bill.

What could that mean for military families?

  • A sharp pullback in PCS moves.
  • Those leaving the military may have to fund their own moves back to their homes of record.
  • A rollback in bonuses
  • Cuts in personnel. Increased involuntary separations.
  • U.S. commissaries could be closed – forcing military families to pay more out of pocket for food.

 

A reduction of this magnitude will also affect budgets for exercises, training, spare parts, maintenance, and nearly every other aspect of the DoD budget.      

One plan proposed by the Stimson Center, for example, looks to slash military spending on benefits beginning in 2015, chiefly from cutting health care for retirees still of working age, reducing retired pay by $2 billion, and cutting off funding for commissaries.

 

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