With a winter storm approaching Washington D.C., legislators quickly crafted and rushed through legislation grandfathering currently serving members and working-age retirees from the Bipartisan Budget Act’s cost of living adjustment (COLA) penalty. The Senate was considering a bill that would have provided full repeal, but as the weather reports worsened, the Senate quickly turned to a different bill (S. 25) on Wednesday which passed the House on Tuesday.  Although it’s not full repeal, the legislation is a big step in the right direction.  The COLA cut will still affect new entrants who joined the military after Jan. 1, 2014 and the partial repeal is paid for by extending the sequestration of mandatory programs (mostly Medicare) for one year to 2024. 

MOAA prefers full repeal, and believes any compensation changes should be proposed by the Congressionally-mandated Military Compensation and Retirement Modernization Commission (MCRMC). The MCRMC should make recommendations that take into consideration all aspects of recruiting, retention and readiness – not piecemeal changes.  These recommendations should then be fully vetted by the Armed Services Committees in the traditional legislative process. We’re pleased that Congress did listen and reacted to more than 295,000 messages sent by MOAA members over the past two months.   “This was a tremendous effort from the very beginning – from getting the word out on the financial impacts, to storming the Hill with our Military Coalition and American Legion colleagues, to energizing  our membership and supporters with huge grassroots efforts, and to our Chairman, General John Tilelli, USA (Ret.) testifying before the Senate Armed Services Committee. We are grateful for the outpouring of support from so many congressional leaders,” MOAA President Vice Adm. Norb Ryan, USN (Ret) said. This represents a significant victory, but more challenges are just ahead as the administration prepares to roll out its annual budget which will likely contain more military compensation and benefit cuts.

During a Senate Armed Services Committee hearing on the COLA cuts for working-age military retirees established in the Bipartisan Budget Act of 2013 (BBA), Pentagon witnesses repeatedly talked about curbing military personnel costs. It became crystal clear the Pentagon does not intend to wait until the Military Compensation and Retirement Modernization Commission’s (MCRMC) completes its review in February 2015 to start adjusting currently serving compensation and benefit programs.  Although the hearing focused on the COLA-cutting provision, committee members also discussed the rate of personnel cost growth, which Pentagon witnesses characterize as unsustainable. 

Regarding the FY 2015 budget submission, acting Deputy Secretary of Defense Christine Fox said, “We are seriously considering proposing additional changes to compensation, not retirement … but modest proposals on other parts of compensation.”  Fox outlined in her statement that “Secretary [Chuck] Hagel, the Joint Chiefs, and the service secretaries agree that we cannot afford to sustain the rate of growth in military compensation that we’ve experienced over the last decade.” The witnesses further outlined that much of the rate of growth since the early 2000s “reflects the convergence of multiple motivations, all of them well-intentioned,” such as eliminating the pay gap and zeroing out out-of-pocket housing expenses. 

Vice Chairman of the Joint Chiefs Adm. James Winnefeld Jr., USN, warned, “Demanding at this point that our compensation not only remain at its currently high relative level but that it continue to rise faster than that of the average American is simply not sustainable.”   Fox went on to say, "The one-third of the defense budget consumed by military compensation cannot be exempt as an area of defense savings. We must find ways to slow the rate of growth." Instead of acknowledging that in the late 1990s retention and recruiting were on the ropes and subsequent plus-ups in personnel costs were needed corrections to keep the previous years of cutbacks from breaking the career force, it appears the Pentagon now uses the steep growth rate over the past decade to forecast the future personnel cost growth glide path — a glide path that’s much more horizontal since 2010. 

Military members will not see pay increases that exceed private-sector pay by 11.5 percent over the next two decades, and they won’t have their out-of-pocket housing expenses zeroed out — again.  But the writing on the wall is clear. The gains over the past 13 years are now targets for cuts.  So what’s on the chopping block? We don’t have a crystal ball, but the following forms of pay and benefits have emerged as leading candidates:

• Capping pay raises or even freezing pay;
• Making additional end-strength cuts;
• Changing basic allowance for housing to make servicemembers assume more of the costs;
• Reducing the commissary benefit savings;
• and Means-testing TRICARE fees and establishing TRICARE For Life/TRICARE Standard enrollment fees.