Pentagon Defends Pay and Benefit Cuts to Congress

The military's top leaders tried to sell Congress Tuesday morning on the pay and benefits changes they proposed in the 2015 defense budget that would reduce pay raises to 1 percent, raise health care fees, and shrink housing allowances by an average of 5 percent.

Chairman of the Joint Chiefs of Staff Gen. Martin Dempsey testified alongside every service chief before the Senate Armed Services Committee saying the Pentagon had no choice but to reduce compensation packages in order to offset budget cuts and salvaging readiness rates and modernization programs.

"In our deliberations, we collectively assessed how a wide range of compensation proposals would affect our troops at every rank, and over the course of their service. We concluded that we can no longer put off rebalancing our military compensation," Dempsey said in his written testimony.

The pay and benefit changes would save the military $31 billion, Dempsey told Congress. If the proposal is rejected, the U.S. military will have to cut an additional $2.1 billion out of the 2015 budget, he said.

Senators on the committee challenged the generals and admirals assumptions over savings and asked the Pentagon brass why Congress should make these changes now versus waiting for the results of the Military Compensation and Retirement Modernization Commission due next year.

Dempsey and Vice Chairman of the Joint Chiefs of Staff Adm. James A. Winnefeld said waiting even one year would cause the military to miss out on $10 billion worth of savings over the next five years. If the changes are made in the 2015 defense budget, the military would see savings of $12 billion by 2020, Dempsey said in his written testimony.

"We have enough information to request these nominal pay and compensation changes now," Dempsey said.

On the opposite side of Capitol Hill, the House Armed Services Committee has already taken steps to reject the proposals to reduce the pay and benefit packages for service members. The committee eliminated the proposals from the budget that the U.S. House of Representatives will vote on.

The Senate Armed Services Committee will similarly mark up the Pentagon's defense budget later this month. The tone of the questions from the Senators Tuesday indicated that the Pentagon's proposal will also likely be rejected until the results of the commission are issued.

"We're having a commission that's supposed to report back to the Congress here I think next year and I'd like to hear from the committee before we make any real substantial changes," Sen. Lindsey Graham, R-S.C., told the military's leaders.

The Pentagon has said for years that personnel costs are growing too fast and taking up too large a percentage of the military's overall budget. This is why compensation rates must be slowed down, Dempsey and the other leaders said.

Military personnel costs are budgeted at $177 billion in fiscal 2015, or more than a third of the department's non-war budget of $496 billion. Including civilian personnel, the percentage rises to almost half of the spending plan.

Winnefeld said the cuts proposed to pay and benefits would only amount to a small percentage of the budget reductions the Pentagon is making compared to other portions of the military.

"These changes would only account for about 10 percent of our planned cuts within an area that accounts for about one third of our budget. The other 90 percent of our cuts are going to come out of the other two-thirds of our budget that buys things," Winnefeld said.

The vice chairman of the Joint Chiefs of Staff also said the Pentagon's pay and benefits proposals have been mischaracterized in the media.

"Some say we are cutting pay. That's not true as Chairman Dempsey said. We quickly eliminated any proposal such as reducing the overseas COLA that would do that," Winnefeld said.

However, the Pentagon is proposing a 1 percent pay raise, which is 0.8 percent lower than the employment cost index and less than what service members have received in years past. It's also below the inflation rate meaning the value of a service member's pay check would go down next year when compared to 2014 if the Pentagon's proposal is passed.

Winnefeld didn't explain how this could not be perceived as a cut. Instead, he highlighted how Defense Department civilians had not received a pay raise for three years until 2014.

The vice chairman also said the Pentagon is fulfilling its promises in providing health care benefits to troops.  The Defense Department plans to "modernize" the Tricare health care system by "consolidating plans and adjusting deductibles and co-pays in ways that encourage member to use our most affordable means of care," including military treatment facilities, preferred providers and generic prescription medications, Defense Secretary Chuck Hagel said when the proposal was unveiled in February.

Many veteran service organizations have lobbied against these changes to Tricare along with the compensation reductions. Winnefeld tried to respond to those concerns.

"Others say that we are trying to renege on promised health care benefits," Winnefeld told Congress. "Again, not true. We are actually trying to simplify a bewildering system while incentivizing our people to help us contain costs. We will continue to provide the same quality health care to our troops and retirees and it will continue to be free for those on active duty."

The Pentagon also addressed the proposal to reduce the subsidy provided to the organization that runs base commissaries from $1.4 billion to $400 million by 2017. Winnefeld rejected the notion that the Defense Commissary Agency (DeCa) would have to close commissary stores in the U.S. because of those cuts as many experts have said would be necessary.

"Some are suggesting that we want to close state side commissaries," Winnefeld said. "We have never considered that in any meeting that I've ever attended. In fact we think our commissaries are an important part of the benefits we offer our families. But we want those stores have to have to work as hard as our unsubsidized exchanges in providing a good deal for our people. We think DeCa can find at least the first year's savings through efficiencies, not price increases."

The service chiefs offered their support for the pay and benefits changes to Congress. Chief of Naval Operation Adm. Jonathan Greenert said he traveled to locations across the Navy to hold town hall meetings to get feedback from sailors on the proposals.

He said sailors do not want to lose cash from their pockets, but understood the balance of personnel costs with readiness and modernization costs in light of the sequestration cuts.

A survey conducted by Military.com found that 90 percent of active duty service members rejected the proposed changes issued by the Pentagon on pay and benefits. More than 95 percent said previous testimony offered by Pentagon officials saying troops supported the proposals was, in fact, false.

The Association of the U.S. Navy also conducted a poll to weigh service members' reaction to the pay and benefits proposals. Retired Vice Adm. John Totushek, the association's president, who also testified before the Senate panel Tuesday, said their survey found the same results as Military.com.

"We did a recent study basically asking people to tell us what they thought about the impending changes and 90 percent of them didn't like what was being proposed," Totushek said. "What the chiefs are hearing might not be what's really going on."

-- Michael Hoffman can be reached at mike.hoffman@monster.com