KAISERSLAUTERN, Germany — Military personnel stationed in Ansbach could see their cost-of-living allowances reduced to zero over the coming weeks as adjustments to the pay supplement, which offsets the cost of living in high-priced overseas locales, take effect across Germany.
Personnel stationed in Wiesbaden and Garmisch will also see significant reductions in their cost-of-living allowances, known as COLA, while those in Grafenwöhr, Vilseck and the Kaiserslautern military community will experience modest cuts.
The adjustments are the result of an annual survey of overseas goods and services, which found prices in some German locales have fallen relative to prices stateside, according to U.S. Army Europe's human resources division, which coordinated the assessment.
Because the allowance is designed to keep overseas purchasing power on par with the U.S., a drop in prices overseas — or a rise in stateside prices without a corresponding uptick in the cost of overseas goods and services — can lead to a reduction of the pay supplement.
In Ansbach's case, both falling local prices and rising costs in the U.S. contributed to a 10-pont reduction in COLA, which will be phased in over a month beginning March 16, said William A. Gordon, chief of military pay policy in USAREUR's human resources division.
"Europe as a whole is in a deflationary period," Gordon said. "The costs of goods and services in Europe are going down. And the costs of those same services in [the continental United States] are going up. So that's the problem that we're running into."
Prices on over half of the roughly 120 goods and services surveyed in the Ansbach area in November were found to have declined over the previous year, Gordon said. Hardest hit were prices for phone service, furniture, household goods and transportation.
Meanwhile, the U.S. consumer price index for urban consumers — a measure of the cost of goods and services across the country — recorded an overall 1.6 percent increase in the cost of goods and services in the States over a similar period, according to the U.S. Bureau of Labor Statistics.
"All of that combined together led to the 10-point decrease in the Ansbach area," Gordon said.
Personnel in Garmisch and Wiesbaden will see 6-point reductions, while Kaiserslautern, Vilseck and Grafenwöhr get 2-point cuts. COLA in Hohenfels, meanwhile, will jump 2 points based on new price data.
COLA payments supplement troops' spendable income, which is the portion of income left after paying for housing expenses, taxes, savings, life insurance, gifts and contributions. If the cost of a market basket of goods and services in an overseas location is 30 percent higher than the U.S. average, the COLA index for that location would be 30 points — enough to restore purchasing power to U.S. levels.
A 10-point reduction, as is coming to Ansbach, translates to a $10 decrease in COLA for every $100 of spendable income.
A single private living in the barracks in Ansbach can expect about $165 a month less per month as a result of the adjustment. Personnel who earn more — and therefore receive higher COLA payments — will see their COLA fall by larger sums.
An Ansbach-based Army staff sergeant with six years of service, two dependents and living off base, for example, will see a drop of about $282 per month.
COLA rates in Germany are already at or near their lowest levels in years as a result of the euro's recent nosedive against the dollar. The allowance is adjusted twice a month based on the exchange rate, and has fallen roughly 50 percent across Germany over the last year as the euro tanked.
Ansbach's rate is currently set at 14 and has been as low as 12 earlier this year — before the euro hit an 11-year low against the greenback. The 10-point reduction, were it to kick in today, would slash the rate to 4. If the euro remains weak, the rate could fall to zero.
In announcements to the force about the impending COLA cuts, Army officials have noted that the reductions aren't as much a pay cut as an adjustment that is necessary to bring purchasing power back in line with stateside locations.
"If individuals are using COLA for the right reasons, the dollar is stronger, so their buying power is greater when the dollar is stronger than the euro," Gordon said. "So the only people that really hurt are the people that are using COLA for something other than what it was set up to be."