Military Financial Advice - Army Times

Small COLA hike a surprise to veterans

A 2.8 percent cost-of-living adjustment in veterans’ disability and survivor pay approved by the Senate just before the summer congressional recess is drawing complaints and head-scratching from veterans because the amount is far short of the annual inflation rate this year, running at 6.2 percent through July.

The proposed 2.8 percent hike “is a joke,” said Dan Cedusky, an Army veteran and veterans’ advocate from Champaign, Ill.

With the cost of everything going up, including state and local taxes, a 2.8 percent increase would leave people further behind, said Cedusky, known in veterans’ circles as Colonel Dan.

But the 2.8 percent hike was included in S 2617 by the Senate Veterans’ Affairs Committee merely as a placeholder, with lawmakers expecting to alter the amount before final passage of the bill so that the annual increase in veterans’ disability compensation, dependency and indemnity compensation for survivors, and pensions for low-income vets matches the cost-of-living adjustment for Social Security and military retired pay.

Social Security, military and federal civilian retirement, and some other federal entitlement programs, automatically increase each Dec. 1 to keep pace with the cost of goods and services; veterans benefits don’t.

Congress must pass and the president must sign legislation granting an increase. Lawmakers try to ensure the change is made at the same time, and in the same amount, as the other federal programs.

While the amount of the Social Security increase won’t be known until late October, it is expected to be well above 2.8 percent. The Consumer Price Index, a measurement of the cost of goods and services calculated monthly by the Bureau of Labor Statistics, is up 6.2 percent with two months to go in the fiscal year.

Steve Strobridge of the Military Officers Association of America said that even amid some signs that inflation is moderating as the cost of crude oil drops, the increase this year will be a lot closer to 6.2 percent than to the 2.8 percent in the veterans’ COLA bill.

The 2.8 percent increase was included in the bill based on a July 17 recommendation from the Congressional Budget Office, a nonpartisan arm of Congress, which Strobridge said clearly is an “old projection.”

It’s not an uncommon practice, he said, but it sticks out this year because the difference between the early inflation estimate and the subsequent increase in consumer prices is large.

In its recommendation to the budget committee, the CBO acknowledged that the 2.8 percent COLA likely would be too small and said it would revise its economic projection later this year.