Members are entitled to CONUS COLA if they are stationed in an eligible location.
Data from several sources is used to determine which locations are eligible for COLA: (1) local market price data from a private contractor; (2) information pertaining to the availability of commissaries and exchanges is provided by their parent organizations; (3) average savings generated by commissaries and exchanges is also provided by the parent organizations; and (4) CONUS-wide surveys, roughly every three years, determine the utilization rate of commissaries and exchanges.
The Department employs a contractor who provides cost-of-living differentials for non-housing expenditures for a given family size and level of income. The contractor develops a Standard City that represents the average expenditures for a particular market bask of goods and services for a typical civilian household. The contractor also collects costs for the same market basket in at least 300 locations nationwide where Service members are stationed to calculate the COLA indexes. An index is developed representing the percentage of income needed to purchase the same items in each location relative to the cost for the Standard City.
The availability of military commissaries and/or exchanges in proximity to a Uniformed Service member's place of duty implies that expenditures for the member will be lower than for a comparable civilian. The presence or absence of facilities has a major impact on the calculation of the CONUS COLA index. Even without these facilities, the vast majority of locations do not qualify for CONUS COLA. This is because the average expenses do not meet the established threshold of 108% above the national average cost of living. That is, non-housing costs in most locations are not greater than 8% above the Standard City for the standard market basket of goods and services. For example, an area with a COLA index of 115 would be eligible for a COLA payment of 7%. An area with a COLA index of 107.9 would not receive CONUS COLA. For more information, see Data Collection & Calculation of Local Costs.
The threshold essentially defines what is considered a high-cost area. Congress mandated that the CONUS COLA threshold be no lower than 108%. With a threshold of 108, members must absorb up to 8 percent of the average expenses above the national average for non-housing costs. Members assigned to locations where the local non-housing costs are greater than 8 percent above the national average receive CONUS COLA to offset additional expenses.
The initial step in calculating a CONUS COLA index for each area is to combine the expenditures for individual items into major commodity groups.
Individual locality expenditures for the other non-housing categories: transportation, food at home, food away from home, tobacco, alcohol, furnishings and household operations, clothing, domestic service, medical care, personal care, and recreation are compared to those of the Standard City, resulting in a relative percentage. Deductions are made for commissaries and exchanges, if available. An additional adjustment is made for the Basic Allowance for Subsistence (BAS), since the BAS is an allowance for food for the military member.
The total expenditures less deductions for the area are divided by the adjusted total expenditures for Standard City, which is also adjusted for deductions. The results are the CONUS COLA index for that location.
Income taxes (federal and state), FICA and miscellaneous expenditures are the categories for which the value remains constant, regardless of location.
CONUS COLA is reviewed each year. A location’s COLA index may decrease because prices increased at a lesser rate in that location than in the Standard City, one or more U.S. Government facilities may have become available since the review, or market basket prices may decrease from one year to the next.