House panel rejects benefits cuts in 2015 defense budget

In the first official congressional action on the Pentagon’s proposed 2015 budget, House lawmakers have rejected proposed cuts in housing allowances and commissary funding, as well as an overhaul of the Tricare system that would increase out-of-pocket costs for some beneficiaries.

But members of the House Armed Services Committee’s personnel panel remained noticeably silent on the Defense Department’s proposed 1 percent basic pay raise for troops next year, opening the door for another smaller-than-expected pay boost in January.

And the lawmakers also signaled that they want service members to play a role in deciding what pay and benefits cuts they’ll see in the future, proposing a study that would ask troops to rank their benefits in value and importance undefined for example, whether they value health care and bigger paychecks over retirement pay and housing allowances.

Top Pentagon officials had spent the last two months arguing that the pay and benefits changes are necessary to help contain growing personnel costs, which threaten to overwhelm funding for readiness and modernization as long as the mandatory, automatic budget cuts known as sequestration remain in effect.

The personnel subcommittee’s draft of the 2015 defense authorization bill shows lawmakers remain unconvinced by that argument. In a statement, the subcommittee said the draft bill “rejects proposals that would have increased out-of-pocket costs for military families.”

Instead, the plan punts long-term compensation reform to next year, after the congressionally mandated Military Compensation and Retirement Modernization Commission is scheduled to release its final report on ways to revamp the way pay and benefits are handled.

The subcommittee action is just the first step in a long process, and defense officials still have months of lobbying opportunity ahead before a final defense authorization bill is approved by Congress. But Senate leaders have expressed similar reluctance to cut troops’ compensation before the commission has a chance to weigh in.

Outside advocacy groups also have argued that no compensation changes should be considered until the commission finishes its work.

Service officials say delaying all the changes could cost DoD tens of billions in compounding personnel spending in years to come.

Benefits saved

The Pentagon’s fiscal 2015 budget proposal had included plans to gradually reduce housing allowance rates to cover only 95 percent of average off-base rental costs, down from 100 percent. The House subcommittee would sideline that plan for now.

Defense leaders had also pushed to eliminate commissary subsidies at most domestic bases, effectively reducing annual funding for the system by two-thirds, which would have led to price increases of about 20 percent for patrons. Instead, the House plan asks for a study “to identify efficiencies that could lead to cost savings without reducing military family benefits.”

The subcommittee also rejects a DoD proposal to combine the three major existing Tricare plans undefined Prime, Standard and Extra undefined into a single system with a fee structure based on where beneficiaries get their medical care.

Instead, lawmakers asked for an anonymous survey of service members to determine “the value that members of the Armed Forces place on ... forms of compensation relative to one another.” That would include basic pay, bonuses, health care benefits and retirement pay.

Lower pay

The authorization bill draft does not weigh in on a pay raise for 2015. Under current law, basic pay raises that take effect each Jan. 1 are pegged to the increase in private-sector wage growth in the most recent full fiscal year. Under that formula, the pay raise for 2015 would be at least 1.8 percent.

But Pentagon officials have pushed for a 1 percent capped pay raise instead, to cut costs. And without specific congressional language mandating a higher raise, the president can intervene and set a lower pay raise.

If the 1 percent proposal is adopted by the Senate later this year, it would mark the second consecutive year troops would see a pay raise lower than expected private-sector wage growth.

For an E-3 with three years of service, the difference in the two pay plans will cost about $195 a year. For an E-7 with 10 years, it comes out to $356. For an O-5 with 12 years of service, the lower pay plan would erase about $667 of annual salary.

Military advocates have argued that the smaller annual pay is only part of the problem. After years of lobbying to close the so-called “pay gap” between private-sector wages and military paychecks undefined which by common measure peaked at more than 13 percent in the late 1990s undefined they worry the recent trend will leave service members with less purchasing power and more debt.

Ultimately, advocates say, capped pay raises would lead to the same recruiting and retention problems that plagued the military in the 1990s, when the pay gap was peaking.

Pentagon budget officials are proposing similar capped pay raises through at least 2018, which would continue to widen the gap. But they argue the trims, while difficult, will not devastate military families, and will help protect readiness and modernization efforts.

The 1 percent pay raise troops received this year was the lowest in the history of the all-volunteer military, dating back to 1973. In congressional testimony, service leaders have repeatedly pointed out that troops are still in line to see a pay increase at a time when some private-sector firms are withholding raises.

The full House is expected to vote on a final draft of the full defense authorization bill later this month. The Senate is scheduled to offer its initial drafts of the legislation in coming weeks, with a full chamber vote possible in early summer.