A cost-of-living increase is included in the President's budget proposal released early each calendar year. It is part of the spending forecast and appropriations request for the ensuing fiscal year, a starting point for legislative discussion. However, the actual percentage increase is set through a separate bill debated by Congress and usually signed into law the following fall.
Legislators are not bound by any specific annual Consumer Price Index formula, but historically have chosen to mirror the percentage given to Social Security recipients. The Social Security increase, in turn, is based on a Bureau of Labor Statistics calculation of the rise in the consumer price index for urban wage earners and clerical workers (CPI-W).
Cost of living adjustments become effective December 1 each year and are reflected in the payment received by veterans on or about the first day of the new year. Whenever a payment falls on a holiday or weekend, as is the case with the January 1 payment each year, that month’s payment is issued the last prior business day.
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