U.S. Military to Unveil Plan to Cut Personnel Costs | Wall Street Journal

Defense Secretary Chuck Hagel to Propose Limits on Pay Raises, Housing Allowances; Congress Unlikely to Back Changes in Election Year, Experts Say


WASHINGTON—Defense Secretary Chuck Hagel is set Monday to recommend a limit on military pay raises, higher fees for health-care benefits and less generous housing allowances to prune billions of dollars in benefits from the defense budget, setting up an election-year confrontation with veterans groups and lawmakers.

Faced with steadily increasing military personnel costs that threaten to overwhelm an ever-tighter budget, Mr. Hagel is also expected to include a one-year freeze on raises for top military brass—a gesture meant to show that the best-compensated leaders also will make sacrifices.

Pentagon officials describe the package of cuts, which will be part of the military’s coming budget, as a modest and realistic attempt to save billions of dollars needed to protect other critical portions of U.S. defense spending.

But the approach—which would also place limits on things like support for grocery stores offering discounts to military families—is certain to face fierce resistance from veterans groups that recently defeated a far more modest congressional effort to curb military pay.

“This is a real uphill battle with Congress,” said Mieke Eoyang, a former Democratic congressional aide and director of the National Security Program at Third Way, a centrist think tank in Washington.
“God bless [Mr. Hagel] for trying to get a handle on these costs,” she said. “But in this political environment, in an election year, it’s going to be hard for members of Congress to accept anything that’s viewed as taking benefits away from troops.”

Pentagon officials say that they recognize the political realities, but emphasize that declining military spending makes trimming costs even more important this year.

“Personnel costs reflect some 50% of the Pentagon budget and cannot be exempted in the context of the significant cuts the department is facing,” said Adm. John Kirby, the Defense Department’s top spokesman. “Secretary Hagel has been clear that, while we do not want to, we ultimately must slow the growth of military pay and compensation.”

Senior officials say they have White House backing to make a serious push for the changes this year.

“The past several years of proposals, and the intransigence that they have been met with on the Hill [in Congress] only further demonstrates the urgency that we need to make progress on this now,” said one senior defense official.

Veterans organizations are expected to oppose many of the proposals.
Joe Davis, a spokesman for the Veterans of Foreign Wars, said veterans groups understand there is a “finite amount of money,” but would like to see the Pentagon focus more on other cost cuts it is seeking, such as closing unnecessary bases and scaling back weapons programs, rather than targeting personnel costs.

“We are here to make sure America honors its commitment to its military members, veterans and their families,” he said.
Mr. Hagel is expected to steer clear of changes to military retirement benefits and wait until a special commission presents proposals next year, defense officials said.

His plan, officials said, will call for holding down pay raises for troops and a one-year pay freeze for the Defense Department’s senior military leaders.

His proposal will include cutting subsidies for commissaries that provide discounted goods for military families, a move expected to reduce the annual support from about $1.4 billion to $500 million. None of them will be asked to close. He also will call for raising health-care fees spent on some nonurgent care and placing new limits on increases to troops’ housing allowances.

The push to overhaul military pay and benefits has intensified as the Defense Department seeks ways to restructure its operations amid tightening budgets and the end of costly wars in Afghanistan and Iraq.

In the wake of the Sept. 11, 2001, attacks, Washington injected billions more into the military budget. Average pay and benefits for U.S. active-duty and reserve personnel rose to $81,600 in 2013 from $44,200 in 2001, a rise of 85%, according to the Pentagon.

In effort to slow the increase, Mr. Hagel will seek to prevail where his predecessors have failed. Robert Gates, who served as defense secretary under Presidents George W. Bushand Barack Obama, in his recent memoir described his inability to enact any benefits changes as one of his “biggest failures” in the job.

Veterans groups demonstrated their clout this month by persuading lawmakers to repeal modest trims to military pensions that had been part of a broader congressional compromise package on the budget.
Pentagon officials characterized that effort as an attempt at piecemeal change, while coming trims will be “balanced, pragmatic, measured approaches.”

Some experts note that Congress could be more receptive to curbing military-personnel costs after November’s elections.

“The political reality is that this is DOA for now, but it’s not DOA forever,” said Todd Harrison, a defense expert at the Center for Strategic and Budgetary Assessments, a Washington think tank with close ties to the Pentagon. “You’ve got to be honest: Congress is not going to do this months before an election.”

The Military Officers Association of America, which led the recent charge to roll back the cost-of-living cut, is taking a wait-and-see approach on future proposals.

But retired Vice Adm. Norbert Ryan, its president, praised Mr. Hagel for meeting with his group three times as part of his outreach to veterans associations, more often than other recent secretaries, and said he is willing to listen to the proposals.

“We will be open to looking at these proposals but we are really worried about the piecemeal approach,” he said. “You are going to take purchasing power out of military members’ and their family’s pocketbooks.”

A senior defense official predicted the cut to the commissary subsidies would likely be the most difficult political push on Capitol Hill.

Commissaries offer at-cost groceries to current and former members of the military. While big-box stories willing to take a loss on items like eggs and milk can undercut some prices, commissaries in general offer a discount on overall grocery bills.

Next to retirement benefits, commissary access is the second most important benefit to many veteran service organizations, particularly those representing older retired veterans.

“These are near and dear to the retired population’s heart,” the official said. “The commissaries will be a battle.”

The Department of Defense spends $1.4 billion a year on subsidies to commissaries, funding that defense officials note would pay for roughly 15,000 soldiers.

Under the plan, commissaries overseas and some in rural areas of the U.S. would still get a subsidy. But over time, others would be forced to operate like base exchanges, which sell other consumer products but don’t receive a taxpayer subsidy.

Defense officials have higher hopes that other proposals, like slowing the growth of housing subsidies and pay raises, will gain more traction on Capitol Hill.

Officials note that they are not trying to cut service members’ pay.
“It is about slowing the growth of pay and benefits,” said a senior military official. “It is about ensuring fair compensation.”

via U.S. Military to Unveil Plan to Cut Personnel Costs | Wall Street Journal.