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2015 budget released: How the cuts affect pay, BAH, per diem and Tricare

Mar. 4, 2014 - 06:00AM   |  
US-POLITICS-BUDGET
Copies of the fiscal year 2015 budget are seen at the Senate Budget Committee hearing room March 4. (Brendan Smialowski/AFP via Getty Images)
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The Pentagon’s new budget released Tuesday says military personnel spending should fall to its lowest point since 2008 as cuts to compensation take effect and the force continues to shrink from its wartime peak.

The budget documents for 2015 offer new details on Defense Secretary Chuck Hagel’s proposals last week to reduce spending on pay and benefits. Those included controversial calls for Congress to limit troops’ pay raises, slash housing allowances by about 6 percent, eliminate commissary subsidies in many locations and boost Tricare fees for families of active-duty troops and working-age retirees.

Overall the department is asking Congress for about $135.2 billion for military personnel, the lowest request since 2008 when adjusted for constant 2014 dollars, according to newly released budget documents and data provided by Visual DoD, a private-sector information technology firm that tracks Pentagon spending.

That includes plans to shed about 36,700 troops from across the force, bringing the total size of the active-duty component down to about 1.31 million. The Army will absorb the brunt of those cuts as it drops about 20,000 soldiers in 2015.

The Pentagon is also mounting a new attempt to cut travel costs. Specifically, that effort will reduce per diem rates for troops on extended travel. It will also eliminate reimbursements for laundry services, bottled water and other “incidental” expenses. Officials could not immediately provide details of the new per diem rates.

Family support programs are facing some reductions, reflecting in part a slowdown in renovating Defense Department-run schools. Child care and youth programs may also see reductions, according to the budget documents.

While overall spending on military personnel is shrinking, the rest of the defense budget is shrinking more rapidly as spending falls in other areas such as operational training, new weapons purchases and research.

The Defense Department’s total base budget request for 2015 is about $496 billion, down from $553 billion three years ago before the latest round of budget cuts took effect. Personnel spending, as a percentage of the base budget, has grown slightly during the past three years, from 34.6 percent in 2012 to 35.6 percent in 2015, reflecting in part the continued growth in per-troop costs.

Capping troops pay raises

For the next several years, troops are likely to get pay raises that fall below the uptick in civilian wages, according to the budget documents. The Pentagon’s proposed raise for next year is 1 percent, well below the 1.8 percent increase in the employment-cost index, to which military pay is traditionally pegged.

Five-year plans suggest troops will continue to get 1 percent pay increases in 2016 and 2017, followed by a 1.5 percent increase in 2018 and a 1.8 percent raise in 2019. Officials say that will curb long-term growth in personnel costs.

Details on BAH

For the BAH reductions, the budget reveals plans to spread the 6 percent reduction evenly across the force. The goal is to prevent troops in high cost-of-living areas from having to pay a larger portion of their base pay for housing compared to those living in low cost-of living areas.

As the Defense Department scales back today’s 100 percent housing allowance to cover only 95 percent of housing costs, the new BAH payments will be adjusted so that service members in the same paygrade but living in different areas should see the same dollar out-of-pocket costs.

The result will be that troops in pricey areas, San Diego, for example, will not have to pay any more for housing than troops in areas that cost far less, such as Killeen, Texas. That will eliminate any incentive for troops to seek assignments in low-cost areas to avoid higher housing expenses.

Those BAH changes are likely to require approval from Congress. And even if they are approved — which is unclear — no troops would see an immediate drop in BAH payments. Rate protection will keep rates steady for individuals. Reductions will take effect over several years as annual increases are slowed and the real-world housing costs rise above today’s rates.

Tricare fee increases

The cost of health care for active-duty military families will rise if Congress approves the Pentagon’s plan for ratcheting up co-pays for family members. The budget documents suggest that for a service member who heads a family of four, meaning he or she has three dependents, the annual out-of-pocket health care costs will rise from $158 a year to $364 a year.

Commissary cuts

The Pentagon wants to eliminate commissary subsidies at most domestic bases, which will likely result in shoppers seeing prices rise by about 20 percent. Exemptions will be granted for overseas commissaries and also for 25 commissaries in remote and isolated areas in the United States.

War funding continues

The spending on war funding, known as overseas contingency operations, is not likely to drop much despite plans to withdraw most U.S. troops from Afghanistan and reduce troop levels in the U.S. Central Command region to their lowest point in more than a decade.

The new budget documents did not offer a detailed proposal for the so-called OCO budget next year, but included an estimate of $79.8 billion as a “placeholder” estimate. That’s down only a fraction from the $85.2 billion approved for OCO funding this year.

Experts say services have been using OCO funding to help fill gaps imposed by across-the-board budget cuts.

All four services are facing force reductions.

The Army will see about 20,000 troops cut next year as the total force falls from about 510,400 funded for this year to about 490,000 for next year. At the same time, the active-duty Army will be eliminating six of today’s 38 brigade combat teams and two of today’s 13 combat aviation brigades.

The Air Force will also see significant reductions, down about 11,000 billets from this year’s target level of 322,200 airmen to next year’s level of about 310,900. At the same time, the active-component Air Force budget eliminates 10 percent of today’s 40 combat coded squadrons and will reduce this year’s aircraft inventory of 3,746 planes by about 5 percent.

The Marine Corps will see funding eliminated for about 5,000 Marines from this year’s force of 188,800, as the target level for 2015 drops to 184,100 Marines. The Marines budget also calls for dropping the total number of infantry battalions from 25 to 23.

The Navy will see only modest manpower reductions as the force drops a few hundred sailors from this year’s total of 323,900 sailors down to 323,600 in 2015. Next year’s budget suggests the Navy will reduce the size of its total surface fleet from 288 ships this year to 283 in 2015.

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