Chambers Consider Reversing Defense Pension Cuts
Both Congress and the Pentagon oppose a cut to military pensions contained in last year’s bipartisan budget deal, but the rush to legislative action underscores a potentially big problem for the military: There is deep reluctance on Capitol Hill to make cost-saving changes to the military’s increasingly expensive benefits and compensation system.
Efforts to reverse the politically unpopular cut played out in both chambers this week, with House leaders briefly considering attaching it to the debt limit increase and then passing it separately Tuesday by a vote of 326-90, and the Senate debating a stand-alone measure (S 1963) offered by Arkansas Democrat Mark Pryor.
The legislative dilemma is not over what to do about the cut, but rather how to reverse it, with a flurry of bills from both parties offering various ways to offset the estimated $6 billion in cost savings generated from reducing by 1 percent the annual cost-of-living adjustment in pensions for working-age military retirees. Other proposals, including Pryor’s, simply seek to scrap the cut altogether.
When the COLA cut was first included in the fiscal 2014 budget resolution (PL 113-67), it seemed like the savings equivalent of low-hanging fruit, since it would merely slow the rate of growth and only affect working-age retirees, many of whom are in the civilian workforce. But the backlash on the Hill — and from the Pentagon — was swift and strong.
During a Jan. 28 Senate Armed Services Committee hearing, defense officials said they were not consulted during negotiations on the budget deal and want current service members and retirees exempt from any changes to the pension system. Vice Chairman of the Joint Chiefs of Staff James A. Winnefeld Jr. told the panel that the provision, which would not go into effect until December 2015, created “considerable and understandable anxiety” among military retirees and those planning for retirement.
Even so, there is broad consensus in the Pentagon that the department’s rising personnel costs threaten investments in other areas, from the routine costs of operating and maintaining the military to its plans for expensive and ambitious new weapons systems. Department officials have tried for years to make modest changes to military benefits, but every proposal has been met with stiff resistance on Capitol Hill and among a small army of influential veterans service organizations.
Personnel and related costs such as health care and retirement compensation now consume roughly half of the Defense Department’s budget. A July 2012 report from the Center for Strategic and Budgetary Assessments found that, if left unchecked, personnel costs will consume the entire defense budget by 2039, assuming the Pentagon’s annual budget rises only with inflation.
“We’re pricing ourselves out of the ability to fight,” said Todd Harrison, who authored the CSBA report.
Arnold Punaro, a retired two-star Marine Corps major general and former top congressional national security aide, suggested that people both on and off Capitol Hill need to be reminded that the Defense Department’s primary goal is war fighting.
“It’s not a benefits outfit,” Punaro said.
House Armed Services ranking member Adam Smith, D-Wash., one of a handful of lawmakers opposed to repealing the pension cut, has said he is concerned the military’s readiness will take a hit as the Defense Department continues to grapple with lower-than-anticipated annual budgets.
“It’s frustrating that we are still not accepting the reality of where we’re at,” Smith said at a breakfast with reporters last week. “Everyone is still at the mindset we were at three years ago, in terms of projections of what DOD is going to spend. And that’s gone.”
If nothing else, the congressional reaction to the pension cut provides a primer for the Pentagon on how not to propose changes to the military’s pay and compensation system. Indeed, the provision has already been revised to exempt disabled veterans and survivors from the cut, which reduced the anticipated $6 billion in savings over the next decade by only about 10 percent.
“The whole COLA issue just goes to show this is not something that Congress should tackle on a piecemeal basis, making little changes here and there independently,” Harrison said. “Also, if they’re going to make changes, it needs to grandfather in past and current service members or otherwise it’s not going to survive.”
It seems counterintuitive that a more sweeping package of changes to the military’s pay system could get buy-in from lawmakers who have fought smaller and more incremental changes. But Harrison believes that a comprehensive proposal backed by hard data could pass congressional muster.
The Pentagon could, for instance, make cuts to benefits that service members do not value highly, while protecting basic pay and other benefits that play directly into their decisions to join — and ultimately remain in — the military, Harrison suggested. The department could then invest a portion of the cost savings in top-priority benefits, essentially enhancing the compensation system for many service members while also reducing its price tag.
Those are the types of issues that a congressionally mandated commission on military pay and benefits is tasked with reviewing. Congress recently extended the commission’s work by nine months, to February 2015, effectively pushing off any effect of its recommendations until at least the fiscal 2016 budget cycle.
Senior congressional aides said the commission got off to a late start, and some commission members grew concerned late last year because information the group needed was slow in coming from the Pentagon. But former Pentagon Comptroller Dov Zakheim, who sits on the panel, said the response from the Defense Department has improved.
“I’m not too worried, quite frankly,” Zakheim said. “I think we’re going to be fine.”
The expectations are high, with defense observers hoping that the panel can provide a blueprint to address the problem that could ultimately be sold to reluctant lawmakers.
“If the commission will do its job, then I think we may have a good starting point for real substantive and lasting reform,” Harrison said.
Frank Oliveri contributed to this report.