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March 10, 2005
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Terry Boyd & Scott Schonauer
Stars and Stripes, European
Soldiers, sailors, Marines and airmen are asking how cost-of-living adjustments can go down with the dollar near historic lows.
On March 1, U.S. Army Europe issued a news release stating that the COLA would decrease about 16 percent for servicemembers in Europe due to “a gradual improvement in the U.S. dollar-to-euro exchange rate that began in January 2005.”
But USAREUR officials could not explain the reason for the COLA dropping 16 percent. The command does not set COLA rates, only relays news about cost-of-living adjustment changes, said Elke Herberger, USAREUR public affairs specialist. Herberger directed further questions to the per diem committee in Washington, D.C.
Since the beginning of the year, the dollar climbed from $1.35 for 1 euro on Jan. 4 to $1.32 on Feb. 23, or a 2.2 percent increase.
There were COLA increases on Nov. 1 and Dec. 16, 2004, so the dollar's short-lived upward spike in February and the related decrease in COLA, caught many Europe-based Americans by surprise.
A 16 percent COLA decrease on the family's last paycheck was “unexpected,” said Stephanie Jones, whose husband is an officer with the 2nd Battalion, 6th Infantry Regiment, 1st Armored Division in Baumholder, Germany.
Jones said she doesn't see a rise in the dollar's value “to justify” the COLA cut, Jones added.
In many cases, the recent drop in COLA took more than $100 from troops' pockets. Late last year, a typical E-7 was earning about $800 in COLA. Now, he gets about $680.
“I can only speak for myself, but my COLA has dropped $191.28 in a one-month period from 1 Feb 05 to 1 Mar 05,” Petty Officer 1st Class G. Dean Mahaffey from Naples, Italy, wrote in an e-mail to Stars and Stripes.
“That is approximately a 15 percent drop in one month, and I have not seen any change that would (explain) why this has occurred,” he wrote.
Why the COLA cut came all at once instead of incrementally is not clear. To be sure, there are many other factors in calculating COLA, including prices at stateside bases.
The per diem committee, which sets Department of Defense allowances, generally adjusts COLA rates when there is at least a 5 percent cumulative upward or downward movement in dollar value against foreign currencies, according to an e-mail from Roy Sammarco, chief of the Per Diem, Travel and Transportation Allowance Committee.
The committee's currency software accumulates weekly differences until there's a 5 percent change, Sammarco wrote. But the dollar rate never hit that magical 5 percent mark, Sammarco stated.
“You are correct in that the accommodation rate has not hit .7775,” he wrote in response to an earlier Stars and Stripes query.
Repeated attempts to reach Sammarco for clarification were unsuccessful.
The accommodation rate is the rate at which U.S. military-affiliated banks can sell euros. The closest that rate came was .7635 on Feb. 9, according to the Heidelberg-based 266th Finance Command's Web site.
Sammarco was traveling, according to a spokesman at his office, and only per diem committee members can address COLA issues, said Paul Boyce, a spokesman for Army personnel issues.
The decrease in COLA may be short-lived, USAREUR stated in its release.
Over the 15 days that should have determined the COLA for soldiers' final February pay, the dollar's value rose — using the 266th Finance Command's figures — from $1.32 to $1.28 per euro, or an increase in value of 3 percent. And in the eight-day lag period, the actual exchange rate has once again headed down, a trend acknowledged in the USAREUR release.
“The dollar to euro exchange rate has recently declined from mid-February 2005 levels,” the release stated. “If this trend continues, servicemembers can expect an increase in their COLA when the downward movement in the exchange rate reaches the 5 percent threshold.”
Whatever the reason for the COLA cut, servicemembers say they're still using a dollar that is worth only about 75 euro cents.
That has a big impact when paying phone and the cable television bills in euros, Jones said.
“I'll think twice about going shopping on the economy,” she said.
Most of all, people are left wondering what happened.
“Prices,” said Master Sgt. Robert Boufford, assigned to the 723rd Air Mobility Squadron at Ramstein Air Base, “have gone up, not down.”
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