Defense Budget Would Cut Troop Pay and Benefits

The U.S. Defense Department is proposing limiting troop pay raises, reducing housing allowances and cutting funding for commissary stores because of automatic budget cuts, officials said.

Defense Secretary Chuck Hagel and Chairman of the Joint Chiefs of Staff Army Gen. Martin Dempsey outlined the recommendations as part of a preview of the Pentagon's $496 billion base budget request for fiscal 2015, which begins Oct. 1. The federal government's spending plan is scheduled to be released on March 4.

The proposals to curb personnel costs, which the officials said consume a rising share of defense spending, include limiting troop pay raises to 1 percent, reducing housing allowances by an average of 5 percent, cutting some $1 billion in commissary subsidies -- which will likely mean higher prices for troops and retirees -- and higher health care fees for some retirees.

"The savings will enable us to sustain a well-trained, ready, agile, motivated and technologically superior force," Hagel said during a briefing Monday afternoon at the Pentagon. "Although these recommendations do not cut anyone's pay, I realize they will be controversial."

The proposals drew swift criticism from veterans' service organizations and many lawmakers who have voted down similar efforts in the past.

"The all volunteer force is a finely tuned instrument," Rep. Howard "Buck" McKeon, R-Calif., chairman of the House Armed Services Committee, said in a statement. "These moves are the consequence of trying to resolve our fiscal problems on the backs of our troops."

Norb Ryan, president of the Military Officers Association of America, an Alexandria, Va.-based advocacy group, also released a statement, saying capping military raises below private-sector pay growth will "undermine retention and readiness."

With two years' worth of pay caps and the 5 percent housing-cut proposal, an E-5 Army sergeant with 10 years of service and a family of four would lose $1,400 a year, while an O-3 Army captain would lose $2,100 by the end of fiscal 2015, according to the association.

Hagel said personnel reductions are needed in order to preserve funding in other areas of the budget, including weapons modernization and readiness. The request would downsize the military, especially the Army, whose active-duty force would shrink to between 440,000 and 450,000 soldiers -- and even further to 420,000 soldiers if automatic cuts known as sequestration remain in effect.

"Reducing the Army to its smallest size since World War II is the worst possible approach to maintain our national security," Caroline Delleney, a spokeswoman for Rep. Joe Wilson, R-S.C., chairman of the House Armed Services Military Personnel Subcommittee, said in a statement.

During the past decade of war in Iraq and Afghanistan, where U.S. combat operations will end this year, military compensation has surged by 40 percent more than private-sector pay, thanks in part to generous pay raises from Congress, Hagel said. A former senator from Nebraska, the secretary said he supported the raises, which were higher than the Pentagon requested.

"It was the right thing to do at the time, given the burdens being placed on our service members, the military's recruiting and retention challenges, and the fact that we had few constraints in defense spending," he said. "But today, DoD faces vastly different fiscal challenges."

While troops would receive a 1 percent increase in basic pay next year -- down from 1.8 percent in recent years -- general officers and flag officers would see their pay frozen at current levels, Hagel said. Basic pay would continue to rise after 2015, though the increases would be "restrained," he said.

Service members would also have to pay out of pocket for some of their housing expenses. The department would cover an average of 95 percent of such costs under basic allowance for housing (BAH), with troops picking up the difference, Hagel said. The idea isn't new. In the 1990s, troops on average paid 18 percent of their housing costs, he said.

Retirees and some family members of active-duty troops would also have to pay more for health care. The 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, 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, as they should be," he said. Medically retired service members and survivors wouldn't pay annual participation fees and would pay a smaller share of health care costs overall, he said.

What's more, the request would reduce the Defense Commissary Agency's annual budget from $1.4 billion today to $400 million by 2017 as first reported by Military.com. Some sources have predicted that such a decrease in funding will force the agency to make major changes, from raising prices to shuttering stores.

"We are not shutting down commissaries," Hagel said. "All commissaries will still get free rent and pay no taxes. They will be able to continue to provide a very good deal to service members and retirees -- much like our post exchanges, which do not receive direct subsidies."

Overseas stores and those in remote locations will continue to receive subsidies, he said.

Think tanks such as the Center for Strategic and Budgetary Analysis say the Pentagon needs to review such in-kind benefits. A survey done by the center found that most troops don't necessarily value certain benefits -- like the commissary -- as much as the military pays for them.

Lawmakers from both political parties will likely push back against the Pentagon's personnel proposals.

Sen. Kirsten Gillibrand, D-N.Y., chairman of the Senate Armed Services Personnel Subcommittee, "has concerns" about the reported cuts to military health care and housing, according to her spokesman, James Rahm.

"She will be looking at these proposals closely and will be focused on ensuring that Congress honors the commitments we have already made to our service members, veterans, retirees and their families," he said in a statement.

- Brendan McGarry can be reached at brendan.mcgarry@monster.com.