Defense budget plan cracks down on pay hikes

This story has been updated.

Military personnel could begin seeing more limited pay raises beginning in 2015 as part of the Defense Department’s efforts to trim $487 billion from its budget over the next decade.

In a release of the highlights of the Pentagon’s fiscal 2013 budget proposal, Defense Secretary Leon Panetta outlined plans to rein in growth of military compensation and benefits spending as part of the administration’s deficit reduction efforts. The department will seek savings through limiting pay raises, switching to a “tiered” approach to the TRICARE health insurance program and upping enrollment fees.

The department’s plan would allow full pay raises in 2013 and 2014 to keep pace with increases in private sector pay. Beginning caps on pay hikes in 2015 will “give troops and their families fair notice and lead time before these proposed changes take effect,” Panetta said.

The current proposal makes no specific recommendations to target military retirement benefits as a source of savings, but calls on lawmakers to establish a commission to “conduct a comprehensive review of military retirement in the context of total military compensation,” according to the budget document released Thursday.

The department’s $525 billion fiscal 2013 budget request is $7 billion below the fiscal 2012 base budget and $45 billion below last year’s projected budget request for fiscal 2013.

The Pentagon hopes to achieve $260 billion of the necessary savings by fiscal 2017. According to the budget document released Thursday, $60 billion of those savings will come from “excess overhead, operations expenses and personnel costs,” including “reductions in planned civilian pay raises.” The budget document does not detail those reductions.

The administration plans to unveil its full budget request Feb. 13. The department could also face additional cuts if lawmakers allow sequestration to move forward in 2013.

Military compensation and benefits currently account for about one-third of the defense budget; the changes proposed to compensation and benefits as part of the fiscal 2013 request Thursday account for roughly one-ninth of the budget reductions sought by the department, Panetta noted. “As the strain of deployments on a force that has served and sacrificed for over a decade of war are reduced -- and the demands on recruitment and retention ease -- we have an opportunity to address personnel costs in a way that is fair, transparent and consistent with DoD’s primary responsibility to protect the nation,” Panetta said. “These proposals are fully supported by the U.S. military’s uniformed leadership.”

The department pledges that military personnel will see their pay check increase every year despite the change in 2015. In addition, all changes to TRICARE and retirement benefits will be “grandfathered” – meaning any changes would only affect future members of the armed forces.

The proposal’s recommended health care benefit changes include: a tiered approach for TRICARE, which would require senior-grade retirees to pay more and junior-grade retirees pay less; an enrollment fee for TRICARE-for-Life for retirees 65 and older; and additional increases in pharmacy co-pays in a way that would increase incentives for use of generics and mail order.

Perhaps the biggest personnel-related effort to curb spending unveiled Thursday was anticipated troop-reduction: Panetta recommended lowering the Army’s ranks from 570,000 -- its highest ever, post-Sept. 11, 2011 level -- to 490,000, and decreasing and Marine Corps troops from 202,000 to 182,000 within the next five years. The Army also plans to eliminate eight brigade combat teams to achieve the reduction.

“Even with these reductions, the Army and Marine Corps will be larger than they were in 2001,” Panetta said.

“I’m confident that 490,000 [Army soldiers] is the right number for 2017,” Chairman of the Joint Chiefs of Staff Gen. Martin Dempsey told reporters in remarks after Panetta Thursday. “It may not be the right number for 2020. We got the Army to confront a particular kind of conflict. Those demands are going down. I think it’s perfectly reasonable that the force structure of the active Army go down, too.”