May 16, 2014
Senate Armed Services Committee Chairman Levin asked MOAA to address a number of discrepancies between testimony provided by MOAA and the Joint Chiefs of Staff at a May 6 hearing. This week MOAA responded to the committee and addressed three key areas.
Personnel Cost Share of the Services Budget
When asked during the May 6 hearing, the Service Chiefs indicated that personnel costs consume anywhere from 63 (Marine Corps) to 33 (Navy) percent of their service budgets.
MOAA maintains that military personnel costs across all services have hovered near 33 percent for the past three decades.
After review, it became clear that the services were not using uniform standards to measure personnel costs. Some of the services use different factors when calculating personnel costs. The services added budget lines such as child care and youth programs, warfighter and family programs, Morale, Welfare and Recreation, tuition assistance, other voluntary education programs, the commissary subsidy, family housing, unemployment compensation, and military construction.
MOAA believes procurement and construction as well as family readiness programs should not be included in the equation. But if they are, the services should compare this share of the budget over the past 30 years to identify any growth.
Future Forecast
DoD and service leaders repeatedly state that personnel costs are unsustainable based on the current rate of growth.
But DoD and other analysts use the growth rate of the past decade to forecast the growth rate for the next two or three decades which is very misleading.
MOAA suggested the committee ask DoD exactly how it projects future growth. If they are using the last decade’s cost growth as the inflation factor for future growth, MOAA believes that is an invalid approach.
Beginning in 2000, Congress worked for ten straight years to restore military pay comparability, repeal retirement cuts, zero-out housing costs for currently serving and their families, and restore promised healthcare coverage for older retirees. These fixes cost money, but they were needed to fix retention and readiness problems. Personnel and health care costs experienced an average rate of growth of approximately 7.8% annually from 2000-2010.
From 2011 to 2014, cost growth has slowed and actually declined at an average rate of 1.5% per year.
With no need for further restoration of compensation, MOAA explained that personnel costs will continue to consume the same share of the budget, and may drop further based on planned end strength reductions.
Lost Purchasing Power
MOAA analysis shows a sergeant (E-5) with a family of four would lose an average of $5,000 in purchasing power if the FY 2015 budget proposal is fully enacted.
During the hearing the Chief of Naval Operations (CNO), Admiral Jonathan Greenert (USN), asserted that analysis of “literal pay” reflects a 4 percent loss of purchasing power, or $2,500.
But follow up analysis shows the CNO included only pay caps and changes to the housing allowance. But the comparison ignores the impact of cuts to the commissary subsidy and new out-of-pocket health care costs for active duty military families.
MOAA remains concerned that the Pentagon is repeating some of the very same mistakes that led to significant recruiting and retention problems in the late 90s and would negate the needed compensation improvements Congress implemented since 2000 to match the extraordinary demands and sacrifices of military service and a military career.
What’s needed is to sustain pay and benefits for the men and women in uniform and their families as well as those that have faithfully served two decades or more.