Cuts to military pay and benefits can’t wait, Pentagon tells Congress

Pentagon leaders say the reductions to military personnel spending they are proposing as part of the fiscal 2015 budget weren’t easy decisions, but Congress needs to OK them this year, or the overall military budget picture will become far gloomier over the next five years.

The Defense Department is taking heat from military associations and Capitol Hill not just for proposing trims to compensation, but also for the timing of the proposals. They come one year before the congressionally-chartered Military Compensation and Retirement Modernization Commission is scheduled to issue a full package of recommendations to reform the entire structure of military pay and benefits, including salaries, pensions, health care and other perks.

But in budget hearings on Capitol Hill Tuesday and Wednesday, Pentagon officials insisted they’ve done enough analysis on their own to move forward with a package of changes that they said must be made immediately, including lower military pay raises, smaller housing allowances, an end to commissary subsidies and new out-of- pocket health care costs for military family members and retirees.

“If we wait until we have the commission results, then we’re going to have to take all of this money out of readiness and modernization,” said outgoing Defense undersecretary Robert Hale, DoD’s comptroller and chief financial officer. “We think that will damage national security, and that’s why we’re doing this. We’d rather wait; we’d rather not do this at all. But the budget caps are in effect and we don’t see them changing.”

Reductions are ‘modest’

The Pentagon’s budget does not propose any changes to the current retirement system. DoD says it wants to wait for the commission’s recommendations on that politically-volatile topic.

Defense officials defended their current personnel proposals this week as being “modest.” The proposals would lower military pay raises to 1 percent per year instead of keeping pace with private-market wage inflation. Housing allowances would be changed to cover only 95 percent of the estimated cost of service members’ rent, and the department would no longer pay the costs of renters insurance.

Also, commissary shoppers would get about a 10 percent discount from private market prices for groceries, compared to the average 30 percent they enjoy now. And the TRICARE health insurance system would introduce new fees and co-pays to try to push beneficiaries to use lower-cost military treatment facilities and pharmacies.

If Congress enacts those and other personnel changes into law, DoD estimates it would save about $2 billion in 2015.

Sen. Lindsey Graham (R-S.C.) is one of the few lawmakers who routinely and publicly agrees with the Pentagon’s assessment that the military personnel budget is in need of serious structural reform. But even he was unwilling to embrace the department’s proposals Wednesday.

“Could we find $2 billion [in the federal budget] this year that would avoid us having to make structural decisions about commissaries, about TRICARE and other things about compensation? I’ll probably support these things in the end, I’d just like the commission to do it,” he said. “It’s not that I don’t trust the department’s work product, but we’ve got ourselves in a bind here. You’ve got a commission studying the same subject matter. You’ve got an administration that’s got to come up with money within the budget caps. If we could find a $2 billion safety valve, I think we could allow the commission to do its work. If you’re going to ask people to give up some of their housing allowances, I’d just like to make it a more thoughtful process and be able to go to these folks and say, ‘We’ve had the best minds in the country looking at this.’ I just think it be easier for us to sell.”

No easy choices

DoD says it’s not just a $2 billion problem. The Pentagon estimates the changes it wants to begin making next year would carry compounding savings that would accrue to the tune of $31 billion over the next five years.

And Hale said even delaying the changes by a year or two would throw DoD’s already-tenuous budget plans way out of balance.

“If you delay all of these, the whole budget slips,” Hale said. “You would have to wait probably two years before you could act on the commission’s recommendations, so it’s probably another $15 billion or so in that period. I don’t have the exact number, but what you’re doing is forcing further cuts in numbers of personnel or modernization in the out years.”

Sen. Kirsten Gillibrand (D-N.Y.), the chairwoman of the Armed Services Subcommittee on Personnel, said she acknowledges none of DoD’s budget choices are easy ones at the moment. But she said the combined effects of all of the department’s proposed changes would be unnecessarily harsh to service members, especially those who are at lower ranks, and consequently are lower-paid.

“We offer a set of benefits and pay to incentivize our forces to take on these very tough jobs and make the sacrifices of having to relocate your family every two or three years, and your spouse may not be able to work because of that relocation,” she said. “So we really are changing the deal. My concern is if we have this commission and they are going to do a more balanced approach, it seems to be a missed opportunity to not wait to see what they can come up with. This was not an easy process for the Pentagon, but these are real cuts. If you’re a family that’s making $20,000 or $30,000 a year, that 30 percent in grocery savings really matters.”

Defense officials say they were only able to win the military’s Joint Chiefs’ support for the personnel spending cutbacks by pledging that any savings would be applied directly to the military services’ accounts for readiness and modernization, both of which have already taken significant hits and would suffer further if sequestration kicks in again in 2016.

Hale said those are precisely the funding priorities that would most suffer if Congress decides to prohibit any cuts to the services’ personnel accounts.

“The chiefs set meeting after meeting debating these very points,” he said. “But if you choose to go back on these proposals, you’re going to have to take it out of somewhere. I don’t think you’ll want to take it out of modernization, because we could have the same debate about whether we’re buying enough aircraft and ships. I hope you don’t want to take it out of readiness. But those are the choices you’ve got.”

The Pentagon also believes that a majority of its own service members might be less protective of their pay and benefits than members of Congress are. Based on surveys, the department thinks troops are more concerned about the ongoing cutbacks to their training, equipment and other budget-related limitations on their ability to do their day-to-day jobs than they are about their own compensation around the margins.

“Our members join our service to learn and exercise their skills,” said Jessica Wright, the acting undersecretary of defense for personnel and readiness.”We believe that readiness and training are clearly the ultimate care we can give our service members. If we cannot afford to train, exercise and operate — if the quality of their service is diminished — we will lose precisely those service members we want to retain.”


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