Blue Ribbon Panel Begins Contentious Debate on Military Compensation

A bipartisan group of former lawmakers and retired officers will spend the next six to nine months delving into one of the most divisive issues in Washington today: Reforming military compensation for an era of shrinking budgets.

The Military Compensation and Retirement Modernization Commission recently opened for business in Arlington, Va. The National Defense Authorization Act for Fiscal Year 2013 established the nine-member panel. Congress typically sets up independent commissions to tackle politically tough issues like base closures. Military compensation is just as contentious, often described as the third rail of the Pentagon’s budget.

The group will review every military compensation and retirement program and make recommendations  — on whether these programs should be kept as is or changed — to the president and Congress by Spring 2014. In a Sept. 26 statement, the commission announced its goals are to “ensure the long-term health of the all-volunteer force, a high quality of life for the members of the armed forces and their families, and make sure that the compensation and retirement programs are financially sustainable.”

How to strike the right balance among these goals could be difficult as military spending begins a projected decade-long downturn and the cost of active-duty and retiree compensation continues to rise at above-inflation rates, experts said.

The commission will begin conducting hearings as early as October, said spokesman James Graybeal. “We plan to talk to veterans, families and also advocacy groups on all sides of the issue,” he said.

The panel also will examine the work done by think tanks on this issue. Defense budget analyst Todd Harrison, of the Center for Strategic and Budgetary Assessments, led a 2012 study that concluded that the all-volunteer force, in its current form, is financially unsustainable.

Over the past decade, the cost per person in the active duty force increased by 46 percent, Harrison said. “If personnel costs continue growing at that rate and the overall defense budget remains flat with inflation, military personnel costs will consume the entire defense budget by 2039.”

Harrison suggested that compensation programs are outdated and should be better tailored to members’ preferences. Service members of all ranks, for instance, place a high value on basic pay, especially those at the lower end of the pay scale, but service members at all stages of their career do not always value free TRICARE for Life health insurance, the CSBA study concluded.

Retirement benefits also should be restructured, Harrison said. “More than 80 percent of service members in each age group would be willing to have the retirement eligibility age raised to 50 in exchange for a 1 percent increase in basic pay,” he added. “Keeping faith with the troops should not preclude changes to the compensation system.” The study, said Harrison, “demonstrates that the Defense Department can improve the value of its compensation system by making changes the troops prefer while also reducing costs.”

On the other side of the debate are groups that oppose changes to retiree benefits such as the Military Officers Association of America. “MOAA intends to use its influence and that of its 380,000-plus members to fight” proposals to curtail benefits, the association said in a statement. MOAA opposes the suggested pay cap for currently serving members of the uniformed services of 1 percent and the Pentagon’s plan to shift $25 billion in costs to military beneficiaries by raising annual TRICARE fees by $1,000 or more for retired families.

“Military pay along with strong health care and retirement benefits are the foundational elements necessary to not just recruit, but also sustain an all-volunteer force,” said MOAA President and CEO Norb Ryan Jr. “The last time the government cut back on military pay and benefits, the results were disastrous by the late ‘90s,” he said. “It simply didn’t work then and it’s taken the past 12 years to rebuild what was lost.”

The Military Compensation and Retirement Modernization Commission is chaired by Alphonso Maldon Jr, a longtime financial industry executive and former assistant secretary of defense for force management policy. Other members include former Congressmen Steve Buyer and Chris Carney; retired Army Gen. Peter W. Chiarelli; retired Navy Adm. Edmund Giambastiani Jr.; Mike Higgins, a retired Air Force officer and former professional staff member of the House Armed Services Committee; former Sens. Bob Kerrey and Larry Pressler; and Dov Zakheim, former undersecretary of defense, comptroller.

Topics: Defense Department, DOD Budget, DOD Policy, Government Policy