Military Times

Pentagon signals an end to cuts for military pay and benefits

Military troops and their families can breathe a sigh of relief.

Mostly absent from the Pentagon's new budget request released Tuesday were the aggressive cuts to military pay and benefits and across-the-board force reductions that were central to the Defense Department's cost-cutting efforts in recent years.

The budget for fiscal 2017 may signal an end to the five-year push from the military's leadership to scale back rank-and-file personnel costs amid fears that spending on troops would ultimately squeeze the military's ability to pay for training, new weapons and high-tech research.

"For the most part, I think this conversation is over," said Mackenzie Eaglen, a military personnel expert with the American Enterprise Institute in Washington.

The shift is fueled by several factors. During the past several years, Congress has approved some key cost-cutting initiatives, so the expense of today's troops is leveling off. And the force is smaller, therefore cheaper.

More broadly, Congress has eased pressure from the spending caps known as sequestration that took effect in 2013. And the rise of the Islamic State group — and with it the prospect of continued combat deployments — has made Washington less eager to cut the military in general and its war fighters in particular. Lastly, a strengthening economy has top Pentagon officials more concerned about recruiting and retention.

For military service members, it's not all good news. The pay raise penciled in for next year is pretty small — 1.6 percent — a half percentage point below the 2.1 percent that would technically keep up with the growth of private-sector wages. And there are some revived proposals to wring some savings from the military health care system with more pharmacy co-payments.

Yet the 1.6 percent raise, relative to the standard measurement for the annual uptick in civilian pay, is the best of the past four years. And among those health care reforms, the Pentagon this year omitted several proposals from past years that targeted military families directly, specifically some increased fees on families that sought health care outside military clinics or at emergency rooms.

"Many of these proposals have gone as far as they are going to go," said Katherine Blakeley, a military budget expert with the Center for Strategic and Budgetary Assessments.

"People are not going to be as vigorous in advancing personnel reforms as they've been in previous years, partly because it's an election year and partly because a lot of these things have been tackled in some way already," she said.

Blakeley also noted the Pentagon's recent decision to open all combat jobs to women. "That will be a big change for people to digest," she said, and may drain some of Washington's will for new compensation reforms.

The fading pressure on military compensation also reflects shifting politics in Washington. Rank-and-file pay and benefits were put under a microscope after the 2011 Budget Control Act imposed 10-year defense spending caps, and that intensified with the sequestration of Defense Department accounts in 2013.

Yet since 2013, Congress has voted three times to give the Pentagon some relief from the budget caps. Cumulatively, that's translated to an additional $97 billion for the Defense Department beyond the spending caps' original projections.

"The DoD has a pretty good track record of getting relief form the budget caps," said Todd Harrison, a defense budget expert with the Center for Strategic and International Studies.

"They are starting to feel a bit more confident that they will get that kind of relief in the future," Harrison said.

Inside the defense budget, personnel costs have leveled off. The total request for fiscal 2017 for "Military Personnel" is about $139 billion, similar to the nominal amount requested in 2011 and substantially less when adjusting for inflation.

That's partly because the active-duty force is smaller. The budget for next year plans for 1.28 million troops, about 10 percent fewer than the force's recent peak of 1.42 million in 2010, Defense Department data shows.

And per-troop costs — once the focus of concern among the top brass — has been essentially flat since 2012 when adjusted for inflation, Harrison said.

Those per-person personnel costs rose dramatically in the years following 2001 as frequent combat deployments inspired Congress to layer new benefits and generous pay raises on the force.

But that growth was halted in part by four consecutive years — 2014 through 2017 — of military pay raises that fell below private-sector wage growth. The rise in military health care costs also slowed in part due to adjustments in Tricare enrollment fees. And Congress in recent years approved reductions to the Basic Allowance for Housing, cutting the tax-free benefit from 100 percent of estimated housing costs to 95 percent and forcing individuals to make up the difference with out-of-pocket cash.

Nevertheless, per-troop costs remain high by historic standards. The new military retirement system approved last year will not be a big money saver because, for the first time, it extends new retirement benefits to the vast majority of troops who separate before reaching 20 years of service.

Although Congress has signaled an interest in tackling military health care reform, many experts are skeptical and believe that will be politically impossible, in part because it's an election year and also because the motivation to make controversial changes to military health care benefits will be harder now that it's no longer implicitly linked to a generous new retirement benefit.

"By dis-aggregating retirement reform from military health care reform, Congress took away the carrot and left only the stick. It's all pain from here and no gain, and I think that was incredibly foolish for them," Eaglen said.

An unwritten consensus has emerged in Washington that prefers to have a smaller force rather than additional reductions to individual pay and benefits.

"I believe it's been an overt choice. I do believe the political leadership in DoD and on the Hill have made this choice and are happy with it," Eaglen said.

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