March 28, 2014

 

The FY2015 defense budget will officially be released on March 4, but MOAA has learned it will contain a number of proposals to cut pay and benefits, and dramatically lower end strength. The budget is expected to include proposals to:

• Consolidate TRICARE options for retirees and active duty family members, increase deductibles and co-pays, and establish new enrollment fees
• Cap currently serving pay increases below private sector wage growth for the second consecutive year
• Reduce commissary savings for uniformed service families
• Increase servicemembers’ out-of-pocket housing costs

Health care: A new health care threat emerges from soon-to-be released budget proposal.

Once again the administration will propose TRICARE copay and deductible increases, as well as establishing enrollment fees.

But for the first time the budget will attempt to consolidate TRICARE programs for retirees under 65 and active duty family members. We believe they intend to eliminate TRICARE Prime, the managed care option, leaving only a fee for service option (similar to existing TRICARE Standard and Extra) for retirees and families. We’ll have more detail next week after the proposal is officially released.

Pay: For the second consecutive year the administration seeks a pay cap at 1 percent. This is 0.8 percent below private sector wage growth.

Past experience shows once Congress begins to cap pay below private sector pay growth, it continued until retention and readiness are undermined.

The troops’ last three raises averaged less than 1.4 percent. The FY 2014 pay raise was the smallest in 50 years.

Congress worked over the past decade to fix a 13.5 percent pay gap with the civilian sector, but this proposal would extent a worrying trend in depressed pay increases.

Housing: Basic Allowance for Housing (BAH) currently covers the average rent and utility costs for servicemembers and their families. The budget would trim the benefit back by shifting 5 percent of the costs onto servicemembers.

Commissaries: The proposal cuts the commissary subsidy from 30 percent to 10 percent in the continental U.S.; overseas and remote commissaries will not be affected.

On average, a family of four would lose nearly $3,000 worth of commissary savings annually under this proposal.

When the two years of pay caps (FY14 and FY15) are combined with a 5 percent out-of-pocket housing cut proposal, and the commissary subsidy cuts, an Army Sergeant (E-5) with 10 years’ service and a family of four will see an annual loss of over $4,300. An Army Captain (O-3) would lose over $5,000 annually when fully implemented.

End strength: The services have already accelerated a drawdown of 124,000 active and reserve component servicemembers by two years. The budget is expected to call for an additional 78,000-plus in cuts to end strength.

To achieve this new goal in an accelerated timeline, the services will be forced to use involuntary tools such as reductions in force (RIF) boards, selected early retirement boards, and reenlistment limitations.

MOAA’s position: The Pentagon insists the proposed cuts are necessary to trim spending on pay and benefits. DoD argues personnel costs have “risen 40 percent more than growth in the private sector” since 2001.

But this fails to acknowledge that much of increased personnel spending since 2001 was requested by the service chiefs to restore compensation that had been slashed throughout the 1990s and resulted in severe retention problems.

More importantly, the recent changes to pay and benefits have already started to bend the curve of personnel costs downward. Personnel growth has slowed to a two percent annual growth rate since 2010.

MOAA understands the difficult predicament the Pentagon now faces and we agree that ending the harmful effects of sequestration must accomplished.

But the “quadruple whammy” of capping pay, increasing out-of-pocket housing expenses, slashing commissary benefits, and cutting health care benefits would be four giant steps towards repeating the unwise measures which led to retention and readiness problems in the past.

MOAA will have a full analysis of the FY 2015 budget submission in next week’s legislative update. We will also be hosting a Facebook Town Hall event on March 6 to answer your questions on the budget.