March 7, 2014

 

The administration unveiled its FY 2015 defense budget request on March 4. The proposal calls for a $495.6 billion budget, a top line that is virtually unchanged from the past two years.   

Faced with a somewhat fixed topline and the full impact of sequestration still looming for 2016, the Pentagon’s budget is looking at all accounts, and includes shifting personnel costs onto the backs of servicemembers to free up funding for other programs.    

The budget includes cuts to military compensation and healthcare benefits, a 20 percent cut in headquarters operating budgets, a Base Realignment and Closure (BRAC) round in FY 2017, and $159.3 billion in modernization and recapitalization of equipment and facilities.

Specific cuts include:

 

Military pay cap: the proposal caps the 2015 military pay raise at 1 percent – 0.8 percent below private sector wage growth. This follows an identical pay cap in 2014. The Pentagon plan extends the 1 percent pay cap through 2017, rising to 1.5 percent in 2018, and 1.8 percent in 2019.    

If enacted these caps would create a significant pay gap between the military and the private sector. A 13.5 percent military pay gap in the late 1990s led to major retention problems.  

TRICARE: the proposal calls for sweeping changes for TRICARE beneficiaries of all ages. The proposal would:

 

• Eliminate the existing TRICARE Prime, Standard, and Extra options for retirees under age 65 and military families. These options would be replaced by a single consolidated health care plan most similar to the existing TRICARE Standard/Extra. The fee-for-service plan would require all beneficiaries to pay copays and a deductible, and retirees would be required to pay an annual participation fee. Access would not be guaranteed under this proposal.
• Establish an annual TRICARE For Life (TFL) enrollment fee. The fee would be a percentage of retired pay, rising to 2 percent of pay per year in 2018. Current TFL beneficiaries would be exempt from the fee.
• Dramatically increase pharmacy copays, and require all beneficiaries to obtain their maintenance medication refills through either an MTF or the mail-order pharmacy.  

We’ve created a table to provide a deeper analysis of the proposed health care cuts.  

Housing: For the first time in over a decade the Pentagon proposed increases in housing cost-shares for military families. The proposal slowly increases Basic Allowance for Housing (BAH) out-of-pocket costs until servicemember pays 5 percent of the cost. If enacted, the BAH cuts would become effective upon a servicemembers next PCS move.  

Commissary: The proposal cuts the commissary subsidy by $1 billion over the next three years. Domestic commissaries will see a 66 percent reduction in savings. Overseas commissaries would not be affected, and no commissaries would close due to the cuts.

In total, the annual loss of purchasing power for active duty personnel would be severe.   

 

The FY 2015 budget proposal regurgitates many of the cuts proposed by DoD in the past, but new cuts to housing and the commissary add to the threat. MOAA is gearing up to fight off these short sighted, budget-driven proposals and to ensure the nation does not repeat the errors that were made in the past.