A 25 percent cost-of-living adjustment received by federal white-collar workers in Hawai'i could be in jeopardy under a proposal in President Bush's 2008 fiscal year budget.

The Bush administration wants to do away with the pay allowance and replace it with so-called locality pay, which, in most cases, isn't as high as the cost-of-living adjustment in Honolulu.

Bush's plan calls for existing workers to get locality pay with any shortfall between that and COLA being made up through other payments. New federal workers would just receive the locality pay adjustment.

Hawai'i Sen. Daniel Akaka is asking for more information on Bush's plan, which was disclosed in two sentences in the massive budget document released Monday.

Some people may benefit under the plan, while others could be hurt, Akaka press secretary Jesse Broder Van Dyke said. People would have higher retirement benefits with locality pay.

BEGAN IN 1948

Hawai'i's federal white-collar workers, along with those in Alaska, Guam and other U.S. territories, have received the cost-of-living adjustments since 1948, helping ensure they receive pay that's comparable to counterparts on the Mainland.

But since the late 1990s there's been a debate about switching to locality pay because of the higher retirement benefits. The extra money provided by COLA isn't counted in income calculations used in determining pensions.

In 1994 the federal government implemented the locality pay system to help narrow the gap between federal and private-sector salaries, and surveys each year determine the adjustment.

Locality pay adjustments range from 12.6 percent to 30.3 percent this year depending on the area, with the majority of the U.S. receiving less than a 20 percent allowance, a check of the Office of Personnel Management's Web site shows.

It's not been determined how much of a locality adjustment would be available for Honolulu. COLA adjustments in Honolulu and on Maui and Kaua'i are 25 percent; the rate is 17 percent in Hilo, Hawai'i.

Chances are the locality adjustment won't be as great as the Honolulu COLA when comparing local pay against federal base pay rates, said Al Miller, a Hilo-based manager for the Federal Aviation Administration and president of the Big Island COLA Defense Committee, a group that wants to protect the cost-of-living program.

"There's a lot of mixed emotions about converting from COLA to locality pay," he said.

"Some people want to hang on to COLA, some want to get locality pay because it counts toward retirement. COLA is not taxed by the federal government, but locality pay is."

Miller said he couldn't comment specifically on Bush's plans until he learns more. But he said one big potential problem is what to do about Postal Service workers who receive COLA now. On the Mainland, Postal Service workers don't get locality pay adjustments.

Akaka has noted the concerns and is seeking more details on the plan.

"I have asked the Office of Personnel Management, which administers the Non-Foreign COLA allowance, to provide me with a full briefing on the president's proposal," Akaka said in a news release. "My goal is to ensure that federal workers in Hawai'i and the other noncontiguous regions are not disadvantaged when it comes to their retirement."

CHANGES EXPECTED

Nancy Keychak, Office of Personnel Management associate director for policy, said the proposal is still being drafted and that changes can be expected as it gets reviewed by the administration and Congress.

"We know what we would like, but there will be a big opportunity for other people to be heard on this before anything is final," she said.

She said the administration wants to simplify pay systems for federal workers and make the retirement system more equitable.

"Our intent is not to harm anybody," Keychak said.

Reach Greg Wiles at gwiles@honoluluadvertiser.com.