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MOAA names 5 threats to pay and benefits

Jan. 23, 2013 - 08:30AM   |   Last Updated: Jan. 23, 2013 - 08:30AM  |  
(Army Times Publishing Co.)
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As the fiscal noose tightens around the Pentagon, a major military association is concerned that myths and misconceptions about personnel-related costs will lead to unnecessary and morale-sapping cuts in benefits and programs.

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As the fiscal noose tightens around the Pentagon, a major military association is concerned that myths and misconceptions about personnel-related costs will lead to unnecessary and morale-sapping cuts in benefits and programs.

The Alexandria, Va.-based Military Officers Association of America, with more than 380,000 members from all branches of the armed forces, says a growing mountain of studies — many from within the Pentagon — singles out pay, benefits, health care and other personnel programs as responsible for squeezing other programs out of the budget.

Top defense officials have repeatedly portrayed health care costs as "eating us alive" and "out of control," while several think tanks have used similar language to argue that the way to free up more money for developing and buying weapons is to cut personnel benefits.

Allegations that personnel and health costs are consuming a disproportional share of the defense budget "simply aren't true," said retired Air Force Col. Steve Strobridge, government relations director for MOAA and a former Air Force chief of compensation.

"It's absurd to try to blame the Pentagon's budget problems" on service members, retirees and their families, he said. "Many of these proposals to whack pay, retirement and health care would dramatically undermine retention and readiness while ignoring the Pentagon's real problems, which stem from war costs, inefficiency, ineffective management and broken accounting systems."

The myths, according to MOAA:

1. Personnel costs are to blame for DoD's budget problems.

Defense officials seeking money for weapons programs point out that the cost of pay and benefits has increased almost 90 percent since 2001, three times faster than inflation. Analysts have warned if that growth continues, the entire defense budget would be consumed by personnel costs by 2039.

Pentagon comptroller Bob Hale has made exactly this point. "We will fully support the all-volunteer force," he said at a 2012 budget briefing, but "we felt we had to make some changes here in order to avoid overly large cuts in force structure and modernization."

Strobridge said the increase does not account for the fact that military personnel and health costs have stayed about one-third of the defense budget for 30 years while the defense budget, as a share of the overall federal budget, has been declining.

MOAA notes having personnel costs make up one-third of the budget is not out of line with other big organizations. United Parcel Service, for example, spends about 61 percent of its budget on personnel. Federal Express spends about 43 percent, and Southwest Airlines spends about 31 percent.

Picking 2001 as the starting date to measure personnel costs also is misleading, according to MOAA, because that's when Congress created the Tricare for Life health benefit for Medicare-eligible retirees, and when Congress and the Pentagon were increasing military pay in several one-time adjustments in special pays not likely to be repeated.

2. Capping pay won't hurt.

The Defense Department is talking about capping military raises for three years, starting Jan. 1, 2015, based on a belief that military salaries are too high compared with wages of comparably educated and experienced civilians.

Under the proposal, the 2015 raise would be 0.5 percent rather than following the formula in law under which raises match the average annual increase in private-sector pay. The 2016 raise would be 1 percent, and the 2017 raise would be 1.5 percent. The pay caps would end in 2018.

Just talk of smaller pay raises has a negative effect, Strobridge said. "It does not help morale to have military leaders sending a message you are not worth what they are paying you."

MOAA sees this as a move timed by the Pentagon to begin as the last combat troops have returned home from Afghanistan and personnel levels will begin to fall. This avoids the political fallout of capping raises while troops are still in combat and eases concerns about smaller raises harming recruiting and retention.

Hale has defended capping raises, saying the smaller increases are aimed "to get some control over personnel costs while also giving our members and their families time to plan." Smaller raises, he said, will save $16.5 billion over five years.

Pay studies "can't just look at the amount of pay," Strobridge said. "Compensation isn't a simple dollar figure." Pay might increase 10 percent, but if "you have to work 50 percent harder, that's not a pay raise," he said.

3. Retired pay is overly generous.

Military retired pay after 20 years of service is not as generous as it sounds, said Strobridge. "If it was so generous, why do only 20 percent of people who enter the military stay in long enough to receive it?" he said.

"Retired pay does not include housing and subsistence allowances, it does not include bonuses and special pays, and it doesn't include the tax advantages of tax-free allowances that the Defense Department likes to point [to] when trying to make military pay sound so great," he said. "It is not 50 percent of your total pay. It is 50 percent of your highest three years of basic pay, which is far different."

For example, an E-7 with 20 years of service assigned to Fort Hood, Texas, receives more than $71,000 in pay and allowances plus any special or incentive pays if he has dependents. However, retired pay for this soldier starts at about $24,000 a year. Still, the lifetime value of this benefit is $1.4 million because retired pay begins immediately, and payments are inflation-adjusted.

4. Retired pay is unfair to noncareer members.

One justification for reforming retired pay is to find a cost-neutral way to pay for new, modest pension benefits for those who serve only a few years.

Advocates, like the Defense Business Board, say this is fairer to the force, especially to enlisted members who are less likely than officers to stay in the military for 20 years.

"What is fair about punishing people who serve and sacrifice longest in order to fund new payments for people who choose to leave?" said Strobridge, who believes plans that provide retirement benefits for those with as few as five years of service would encourage people to get out.

Strobridge favors providing early retirement and other incentives during a drawdown so that career-minded service members whose careers are cut short receive something for the time they've put in.

5. Tricare beneficiaries should pay more for health care.

In the push to raise out-of-pocket fees for Tricare health and pharmacy co-pays, defense officials have said the military's rising medical budget is choking off money from other programs.

MOAA believes that problem is overstated. Strobridge points to the Defense Department's request to shift $708 million from its 2012 health care budget to pay for other programs, which he said is hardly a sign that health care spending is out of control.

That money was available to be spent on nonhealth programs because costs ended up much lower than expected. Pentagon officials had predicted an almost 13 percent increase in health costs for active-duty members and an 8.5 percent increase for retirees and family members.

But during the first six months of fiscal 2012, costs rose a modest 0.6 percent for active-duty members and dropped 2.7 percent for other beneficiaries.

Health care costs are rising, Strobridge acknowledged, both in the military and private sector.

But before raising out-of-pocket costs for patients, he said, the military should look at being more efficient with what it has, including making greater use of military hospitals and clinics that are operating under capacity and are 25 percent less expensive to DoD than when beneficiaries use private-sector doctors.

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