Proposed Budget Cuts Benefits, End Strength, Ships

Defense Secretary Chuck Hagel outlined a Pentagon budget plan Monday that would cut the growth of pay and retirement benefits for service members and veterans while shrinking the Army to pre-World War II levels.

"There are difficult decisions ahead, that is a reality we're living with," Hagel said in unveiling a $496 billion 2015 Defense Department budget plan that included long-term proposals sure to draw fire from Congress and veterans groups.

"As we end our combat mission in Afghanistan, this will be the first budget to fully reflect the transition DoD is making after 13 years of war -- the longest conflict in our nation's history," Hagel said.

The defense budget will be formally submitted, along with President Obama's overall proposal for federal spending, on March 4.

Acting Deputy Defense Secretary Christine Fox and budget defense specialists have scheduled a series of follow up budget briefings this week to focus on the details that will have to pass muster with lawmakers who have shown little appetite for taking on pay and benefits issues in an election year.

Under Hagel's proposals, the Air Force' A-10 Thunderbolt attack plane would be retired along with the U-2 spy plane fleet after Air Force leaders have been saying the service can no longer afford to fly aircraft that serve niche missions.

Army Gen. Martin Dempsey, chairman of the Joint Chiefs of Staff, said he agreed with the proposals to "shed systems we no longer need and simply can't afford," such as the A-10 attack aircraft and and the U-2.

The Army would have to cancel designs for a new Combat Ground Vehicle and the Marine Corps would lose the proposed new Amphibious Combat Vehicle.

The Navy would keep 11 carriers for at least another year, but reduce the projected size of the Littoral Combat Ship fleet from 52 to 32. The Navy would also be tasked with improving the survivability of the LCS in combat, one of the main arguments of LCS critics.

"We need to closely examine whether the LCS has the protection and firepower to survive against a more advanced military adversary and emerging new technologies, especially in the Asia Pacific," Hagel said.

Half of the Navy's cruiser fleet -- or 11 ships -- will be placed in reduced operating status while they are modernized, and eventually returned to service with greater capability and a longer lifespan, Hagel said.

Possibly the most controversial proposal offered by Hagel was the plan to draw down the Army past an end strength of 490,000. Unless sequestration cuts are lifted, the Army may have to shrink down to 420,000 soldiers.

"Since we are no longer sizing the force for prolonged stability operations, an Army of this size is larger than required to meet the demands of our defense strategy," Hagel said.

"We have decided to further reduce active-duty Army end-strength to a range of 440,000 to 450,000," Hagel said. If Congress continues with budget reductions under the sequester process, "the active-duty Army would have to draw down to an end strength of 420,000 soldiers," Hagel said.

"We're all willing to take a risk, but none of us wants to take a gamble," Dempsey said at the Pentagon briefing with Hagel. As for the possibility that Army strength could go down to 420,000, Dempsey said "I'm telling you, 420 is too low."

The Marine Corps was scheduled to reduce the number of troops to 182,000 but would have to go down to about 175,000 if sequester continues, Hagel said.

In a relative surprise, the defense secretary proposed avoiding the Congressional sequester cuts entirely over the next several years to boost defense spending by $115 billion.

In addition, Hagel said that President Obama's proposed budget would include a $26 billion increase for defense in fiscal year 2015 to make up for shortfalls. The $26 billiion appeared to be highly problematic, as it would have to be paid for by tax reforms that Congress has been reluctant to consider.

On base commissaries, a senior military official speaking on background said there were no immediate plans to shut commissaries down, but the budget will but cut from $1.4 billion to $400 million over the next three years as Military.com first reported last month.

The result would be that base commissaries overseas would remain, while most stateside commissaries would close -- except possibly for those in remote areas where major supermarkets are unavailable off base, the senior official said.

On base housing, Hagel said the budget was designed to "slow the growth of tax-free housing allowances -- which currently cover 100 percent of housing expenses -- until they cover an average of 95 percent of housing expenses with a 5 percent out-of-pocket contribution."

Hagel acknowledged that he was likely to get the most pushback on his proposals for reforms on pay, benefits and Tricare.

"We will simplify and modernize our Tricare health insurance program by consolidating plans and adjusting deductibles and co-pays in ways that encourage members to use the most affordable means of care -- such as military treatment facilities, preferred providers, and generic prescriptions," Hagel said.

"We will ask retirees and some active-duty family members to pay a little more in their deductibles and co-pays, but their benefits will remain affordable and generous," Hagel said.

There were no immediate plans to revisit the proposal to cut cost-of-living adjustments for military retirees -- a proposal that has already been rejected by Congress, Hagel said.

On pay, "we chose to slow the growth of military compensation costs in ways that will preserve the quality of the all-volunteer force, but also free up critical funds needed for sustaining training, readiness, and modernization," Hagel said.

Hagel said that personnel costs make up about half of the defense budget, and those levels of spending cannot be maintained.

"For Fiscal Year 2015 we will recommend a one percent raise in basic pay for military personnel -- with the exception of general and flag officers, whose pay will be frozen for one year," Hagel said.

The budget proposal also included plans for major changes in the size and structure of the Army National Guard, which now numbers about 355,000, and the 205,000 soldiers in the Army Reserves.

"By 2017, under our recommendations, there would be 335,000 soldiers in the Army National Guard force structure and 195,000 in the Reserves," Hagel said. "If sequestration returns in 2016, the Army National Guard would continue drawing down further, to 315,000. Army Reserves would draw down to 185,000," Hagel said.

The budget called for a swap of helicopters between the active-duty Army and the Army Guard.

"We've recommended Army Guard Apache attack helicopters be transferred to active-duty units," Hagel said. "The Active Army will transfer Blackhawk helicopters to the National Guard, where they will bolster the Guard's needed capabilities in areas like disaster relief and emergency response."

- Richard Sisk can be reached at richard.sisk@monster.com.