Troops will see a 1 percent pay raise, slowed growth in their housing allowance and a $3 increase in most prescription co-pays as part of a military budget deal expected to be finalized this week.
The measure includes authorization for $521 billion in base military spending and nearly $64 billion more in overseas contingency funds, including about $5 billion for the current fight in Iraq and Syria. House and Senate lawmakers are expected to fast track the legislation in an effort to finalize the measure within the next two weeks.
The deal marks another triumph for House and Senate negotiators, who have shepherded some version of the annual defense authorization bill through Congress for more than 50 consecutive years.
But the details are likely to irritate outside advocates who pushed against any pay and benefits cuts, arguing that the defense budget should not be balanced on troops' wallets.
All of the pay and benefits trims were backed by the Pentagon and White House in an effort to slow the growth of personnel costs. The housing cuts and pharmacy co-pays were the final sticking points for lawmakers, with a compromise reached after nearly a month of behind-the-scenes fights.
The lower pay raise will be the most obvious hit for troops, who would be in line for a 1.8 percent raise based on anticipated private-sector wage growth.
For an E-3 with three years of service, the lower raise is a loss of about $195 a year. For an E-7 with 10 years, it comes out to $356. For an O-5 with 12 years of service, it's $667 in annual salary.
Pentagon planners noted that move alone will save them about $3.8 billion over the next five years. Opponents argued that it creates a new wage gap between troops and their civilian counterparts, giving them less disposable income.
In addition, lawmakers approved trimming back the housing allowances paid to troops who live off base. The Pentagon initially sought to reduce the tax-free housing benefit by 5 percent by reducing the 100 percent of troops' estimated housing costs that are covered now down to an average of 95 percent — in effect making troops pay 5 percent of their housing with out-of-pocket cash.
The new deal allowing only a 1 percent reduction for one year pushes off future decisions for now.
The result will be housing allowance rates next year that cover 99 percent of estimated housing costs, with troops themselves covering the 1 percent shortfall out of pocket. Service members are unlikely to see an outright reduction in their housing allowance unless they change duty stations, but rates for troops moving into new areas will be set slightly lower when compared to the projected housing costs.
The pharmacy co-pay increases also reflect just a one-year advance on defense leaders' multiyear plan for more significant co-pay hikes. Under the deal, all prescriptions except mail-order generic drugs would see a $3 increase starting in January.
White House officials had also asked for a cut in commissary funding and a massive restructuring of the Tricare system in an effort to free up even more money for training and modernization accounts.
But House and Senate officials said they opposed making any longer-term decisions on pay and benefits until after the Military Retirement and Compensation Modernization Commission offers its comprehensive review in February.
"It's important that lawmakers get to see that report," a senior Senate staffer said. "But the military is also desperate for budget relief now. So we had to include some things for next year."
The authorization bill deal also includes language prohibiting the Defense Department from retiring the A-10, rejecting arguments by budget officials that the aging aircraft was too costly to maintain.
The compromise does include trims in flight hours and maintenance for the aircraft next year, but only after a readiness study is completed.
Likewise, lawmakers will block Army plans to retire any Army National Guard Apache helicopters next year, instead offering some budget relief to keep them operational.
Negotiators inserted authorizations for President Obama's plan to arm and equip Syrian rebels in the fight against Islamic State militants, but rejected new language favored by the White House which would move toward closing operations at the Guantanamo Bay detention facility.
And the compromise bill includes a host of new protections for military sexual assault victims, but no plans for divorcing those cases entirely from the military justice system as some advocates have wanted.
The House is expected to vote on the measure this week, without any floor amendments. At least 60 senators will have to agree to bring the measure to the floor without any amendments to get passage in that chamber, but negotiators are optimistic that will happen sometime next week.
Obama has voiced opposition to lawmakers reversing many of the proposed cost-cutting moves but is expected to sign the compromise deal into law if it passes Congress.