COLA Calculation

Every year we are sent COLA figures from the Annual Conference and Social Security makes an annual COLA calculation for the coming year's checks. Where do they come from?

Annual Conference COLA figure

Our conference treasurer, Diane Knudsen, distributes a COLA figure in advance of charge conference season. She uses the increases from end of June of the previous year to end of June of the currrent year. (This is explained in her 2008 Treasurer's Notes.) She distributes a figure for the SF Bay Area and another for the West Urban index. Okay, so where does our conference treasurer gets those figures? That's explained below.

COLA Calculation From CPI Data

The figures everyone uses for COLA are from the US Bureau of Labor Statistics databases, specifically the "Consumer Price Index" (CPI). The CPI is available in various subdivisions such as urban consumers, urban wage earners and clerical workers, west urban consumers, various metropolitan areas, etc. It takes the Bureau of Labor Statistics about a couple of months to compile all of the statistics for a given month. For example, in the first week of December we have results up to the end of October. The particular COLA figure you get depends, then on when you retrieve your data and for which group of consumers you use.

Our Annual Conference uses the "West Urban" index, that averages over all of the urban consumers in the western U.S., and the "San Francisco-Oakland-SanJose, CA" index, that averages over all of the urban consumers in the SF Bay area, for June previous year to June this year. The Social Security Administration uses "Urban Wage Earners and Clerical Workers", that averages all of those types of workers in the entire U.S., from the third quarter average previous year to average third quarter this year. The Social Security COLA for 2009 payments is 5.8%. See the SSA's Latest Cost-of-Living Adjustment page for how they do it.

Let's go through an example for the Annual Conference COLA figure that is appropriate for the Bakersfield area, the "West Urban" COLA.

  1. Go to the "Most Requested Statistics" Consumer Price Index page for all urban consumers (select the link to bring it up in another window).
  2. Select the "West Region All Items" checkbox at the bottom and click the "Retrieve Data" button.
  3. The page that comes up has a table of data back to the past 10 years by default. Find the June 2007 value (= 212.680) and the June 2008 value (= 223.040).
  4. Subtract the June 2007 value from the June 2008 value to find the annual change (= 223.040 - 212.680 = 10.36).
  5. Divide the result (10.36) by the June 2007 value and then multiply by 100 to find the percent change from the previous year (= 10.36/212.680 x 100 = 0.04871168 x 100 = 4.87%)
  6. Round to the nearest tenth (=4.9%).

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Wesley United Methodist Church -- Bakersfield, CA