Board Sets Cost-of-Living Adjustment (COLA) at 0% for 2010
For the first time since PSRS/PEERS began granting cost-of-living (COLA) increases in 1977 (PSRS) and in 1982 (PEERS), the cost-of-living has actually decreased from one year to the next, resulting in no COLA for PSRS/PEERS benefit recipients.
PSRS COLAs are based on increases in the cost of living shown by the Consumer Price Index for Urban Consumers (CPI) for the preceding fiscal year (July 1 – June 30). The CPI for the period July 1, 2008 to June 30, 2009 was -1.4%. Although the law does not require the Board to reduce member benefits when the CPI is negative, it does state that when the cost of living decreases, no COLA will be given. Therefore, the Board, at its August 31 meeting, set the January 2010 COLA for PSRS and PEERS retirees at 0%.
The decrease in the cost of living during fiscal year 2009 was primarily caused by a precipitous decline in energy and oil prices from mid-2008 through the early part of 2009. The average price of gasoline during this time period went from over $4 per gallon in June 2008, dropping to around $2.50 per gallon in June 2009. This decline was significant enough to overwhelm the slight increases seen in prices of other categories used in the calculation of the CPI, such as food, housing and medical care, and resulted in a negative overall index for the period.
The Social Security Administration also announced in October that for the first time in 35 years, Social Security recipients will receive no cost-of-living increases in their Social Security checks in 2010, for similar reasons.