Yokota COLA Decrease for 2018
YOKOTA AIR BASE, Japan --
• Cost of Living Allowance rates at Yokota Air Base will decrease significantly in 2018.
• Decreases in the average costs of recreation, furniture, household products, tobacco and alcohol account for this year’s COLA decrease.
• COLA is determined by where members shop, how much those goods and services cost and the exchange rate.
• Paychecks are always changing since COLA rates fluctuate regularly. Base your expenses off of base pay rather than your current paycheck.
Starting the first pay period in January, military members on Yokota Air Base will see a significant decrease in their Cost of Living Allowance. The decrease is the result of a host of factors, to include Retail Price Schedule data, exchange rate fluctuations and the prices of goods and services in CONUS compared to the prices of similar goods and services in Japan.
For more detailed COLA information please continue reading:
The overseas Cost of Living Allowance (COLA) is a non-taxable supplemental pay allowance, designed to equalize purchasing power so members can purchase the same level of goods and services overseas as they could if they were stationed in the states. It is calculated by comparing prices overseas with average prices of equivalent goods and services in CONUS. Previously the Yokota COLA index was 126 (sometimes represented as 0.26), meaning on average it costs 26% more to purchase goods and services here than in the states. For 2018, the COLA index is decreasing 8 points to 118. At Yokota Air Base, decreases in the average costs of recreation, furniture, household products, tobacco and alcohol account for the COLA decrease.
The amount of COLA that a military member at Yokota receives is affected by 2 main factors: (1) spendable income and (2) the COLA index. Spendable income depends on ranks, years of service, number of dependents and whether or not the member lives in the dorms. Basically, higher salaries require higher COLA payments in order to bring the spendable income in balance with CONUS levels. You can see these inputs as you use the online COLA calculator at http://www.defensetravel.dod.mil/site/colaCalc.cfm
The COLA index is determined by the Defense Travel Management Office (DTMO) using 3 primary inputs:
• Retail Pricing Schedule (RPS) – an annual survey that reports the prices of an approximately 120 item “market basket” of goods and services including groceries, clothing, personal care, household furnishings/appliances, medicine, recreation, public transportation, vehicle expenses, childcare, and even alcohol and tobacco. On and off base prices are reported in this survey.
• Living Pattern Survey (LPS) – This survey is usually completed every 3 years and asks members where they shop for various goods and services. In answering the where we shop question, DTMO is able to understand where to account for the increased cost of living. The on/off base ratio, as determined by this survey, breaks COLA into 2 pieces; a portion representing the increased cost of purchases on base and a portion representing the increased cost of purchases off base.
• Currency Exchange Rate – DTMO collects exchange rates and makes changes to the COLA index as much as every pay period as the buying power of the US Dollar versus the Japanese Yen fluctuates. Exchange rates do not affect your entire COLA payment. It only affects the portion of spendable income spent off base, as reported by the LPS above.
So if the Cola Index is decreasing 6.5%, why is my COLA payment dropping by nearly 30%? It is hard to understand the affect exchange rates have on COLA payments by only looking at these 2 numbers. You must look back to the purpose of COLA to grasp the big picture. The purpose of COLA is equalize purchasing power so members can purchase the same level of goods and services overseas as they could if they were stationed in the states. Purchasing power is driven by spendable income. Spendable income is the amount of money, based on the Department of Labor statistics, that a typical military member overseas will spend on a regular basis and can be calculated using the instructions in the Joint Travel Regulation (JTR), Appendix J. As mentioned before, if the COLA index is 126 then the COLA payment will be 26% of the spendable income. Adding this COLA payment to the previous spendable income yields a new spendable income that allows for members overseas to purchase the same level of goods and services as in the states.
Now to the calculations… For example, an E-6 with 12 years of service and 3 dependents has an approximate spendable income of $3,200 per month. If the COLA index is 126, as was the case for Yokota members at the end of 2017, the COLA payment will be $832 (3200 x 0.26). When the COLA index decreases to 118 the new COLA payment is $576 (3200 x .18). That’s a 6.5% change in the COLA index and a 30% decrease in COLA payments! The reason the COLA payments change so drastically is because the purpose of COLA is to adjust the overall spendable income to the appropriate level. This E-6’s spendable income, after receiving their COLA payment, changed from $4,032 (3200 + 832) to $3,776 (3200 + 576); a 6.5% change. So, although their COLA payment changed a lot, their overall spendable income changed by the exact amount reflected by the COLA index.
Service members will be able to directly influence 2019 COLA rates by participating in the Living Pattern Survey this summer. The web-based Living Pattern Survey asks service members which local stores they shop in and what percentage of their shopping they do at the commissary and exchange versus off-base. The data is then combined with demographic factors such as rank, time in service, number of dependents, and housing status to calculate COLA rates.
For those service members concerned about the financial impacts of the 2018 COLA decrease, there are resources available to help. The Yokota Airman and Family Readiness Center offers financial planning and counseling services and can assist military families with creating a budget that reflects the reduction in take-home pay. To contact the Yokota A&FRC please call 225-8725.
For more information on COLA including Frequently Asked Questions (FAQ) and the COLA calculator, please visit the DTMO website at https://www.defensetravel.dod.mil/site/cola.cfm.