Annual cost of living adjustments for the nearly 3 million federal retirees have been shrinking over the past decade partly because of a lower inflation rate and White House and congressional fine-tuning of the nation's biggest company retirement program.
According to General Accounting Office estimates, legislative changes since 1977 that have frozen, delayed or reduced COLAs to U.S. retirees have saved the government -- and cost retirees -- an estimated $17 billion.
There are an estimated 100,000 government civilian retirees in the Washington area ranging from ex-government officials and members of Congress who draw handsome annuities to low-level retirees whose incomes are barely above the poverty line.
During the 1970s, federal retirees routinely got raises ranging from 7 percent to 10 percent a year. In many instances, the increases actually exceeded the annual rate of inflation.
But because of changes in the COLA system, and the growing emphasis on budget-cutting, retiree raises have shrunk in recent years. The 4.2 percent raise that retirees are due in January could be delayed or eliminated by budget-cutters who are looking for ways to trim the deficit in the wake of the stock market crash. Congressional and White House sources have said that all programs -- except politically untouchable Social Security benefits that go to one in every seven Americans -- are candidates for economizing.
Today the average federal retiree gets an annuity of $13,742, which is less than half the salary of the average active duty civil servant. Civil service pensions are higher in the Washington area because this is home to many who retired at relatively high grades. Because Washington is the headquarters for most agencies, the average white-collar civil service salary here is more than $32,000, compared with an average of about $27,000 outside the Washington area.
During the 1970s, Congress replaced a system that gave retirees raises that were 1 percent above the actual cost of living with a system that gave them twice-yearly (March and September) COLAs.
In 1977, for example, retirees got a 4.8 percent raise in March and a 4.3 percent adjustment in September. In 1978, they got raises of 2.4 percent and 4.9 percent; in 1979, the two raises were 3.9 percent and 6.9 percent, and in 1980, when inflation peaked, the two raises were 6 percent and 7.7 percent.
The next year, 1981, Congress and the White House shifted to a once-a-year COLA that gave retirees a 4.4 percent raise in March. In 1982, the raise was 8.7 percent. In 1983, in an attempt to cut pension costs, Congress shifted to a system that gave younger retirees a 3.3 percent raise while those 62 and over got a 3.9 percent raise. In 1984, Congress dropped that so-called diet COLA system, and all retirees got the same 3.5 percent raise, which was 2.6 percent less than the actual rise in living costs.
The next year, 1985, retirees were supposed to get a 3.1 percent COLA that would have been effective in January 1986. But that raise was canceled by the newly enacted Gramm- Rudman-Hollings deficit reduction act. In January of this year, retirees got a 1.3 percent raise.