February 12, 2016
On Feb. 9, the administration unveiled its proposed FY17 budget. The request is strikingly similar to the administration's budget proposal last year and once again calls for a military pay raise cap, commissary funding cuts, and higher TRICARE fees.
Military Pay and Retirement
Under the Pentagon budget proposal, servicemembers would receive a capped pay raise for the fourth year in a row. The proposed 1.6 percent pay raise is another .5 percent below the average American's 2.1 percent raise, as measured by the Employment Cost Index (ECI). The proposed cap further expands the pay gap between the military and the private sector to 3.1 percent. The budget touts this as “the largest raise in four years;” but each of the last seven military raises have been lower than any raise during the previous 48 years.
The budget proposal also proposes adjustments to the new, blended retirement system that will take effect for new service entrants in 2018. The new system will cut military retired pay for this group by 20 percent, in order to provide up to a five percent government match to federal Thrift Savings Plan (TSP) accounts held by military members.
Under current law, government matching begins when a servicemember reaches three years of service. DoD proposes delaying government matching until the fifth year of service. The budget also proposes extending the government match - which stops at 26 years - until retirement, and increasing the government matching potential to 6 percent. The Pentagon is also pushing for greater flexibility on the continuation pay portion of the new system that comes at the 12 year mark.
MOAA supports improving the match and extending it for the full career, as other 401(k)-like programs do. But we're not in favor of delaying the match until the fifth year of service for junior troops.
One surprising proposal was a $221 million cut to commissary funding.
“That's perplexing,” said MOAA President Lt. Gen. Dana Atkins, USAF (Ret). “Last year, the administration proposed cutting $300 million as the first step toward privatizing commissaries. After Congress restored the funding, administration officials agreed the benefit needs to be preserved, and they'd accept whatever level of savings might be realized by business efficiencies without reducing the benefit. To us, that's inconsistent with proposing a $221 million cut. Without context, that seems considerably more than any efficiencies could be expected to generate in one year.”
MOAA will push to restore commissary funding to a level consistent with reasonable expectations of system efficiency improvements that won't affect the value of the benefit.
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