Military spending on pay, benefits spiraling upward, GAO chief says

Military re-enlistment bonuses that can reach as high as $90,000, as well as overall compensation packages worth an average of more than $100,000 annually for active duty personnel, are contributing to out-of-control military spending, the head of the Government Accountability Office said Wednesday.

Health care costs are "escalating so rapidly, it's impacting on other crucial considerations" such as the size and shape of the force and the equipment and weapons systems available to military personnel, said David Walker, the comptroller general, at a breakfast event hosted by Government Executive.

In discussing the total value of military compensation packages, including include pay, health care, bonuses and retirement benefits, Walker cited a recent GAO report that pegged the average for active duty enlisted personnel and officer compensation at $112,000 a year. More than half, or 51 percent, of this compensation takes the form of health care and other benefits.

This amounts to about double the average for civilian pay, Walker said.

The federal government's total cost of active duty compensation increased by 29 percent from 2000 to 2004, from $123 billion to $158 billion, according to the report. Health care costs were a major driver of this change, increasing 69 percent over the period, the report said.

Adding fuel to the fire, the 2006 National Defense Authorization Act authorized a doubling of Army enlistment bonuses to $40,000 for active duty personnel and $20,000 for reserves, and a boost in the maximum reenlistment benefit offered to personnel in hard-to-fill positions from $60,000 to $90,000. The Army currently offers a top re-enlistment bonus of $40,000, according to an Army spokesperson.

Walker emphasized the need for recognition in the budgeting process of the full financial impact of funding decisions. "Part of the problem is that when Congress considers legislation, and the administration proposes it, they only consider a one-year, five-year, or maybe 10-year time horizon," Walker said.

A health care benefit extension enacted in 2000 that applies to older uniformed service retirees was estimated to cost $40.4 billion over its first 10 years, but carries a financial statement liability of $293 billion, according to materials Walker presented.

Walker also said problems in federal fiscal reporting present a major challenge to informed decision-making, noting that the Treasury Department was unable to reach conclusions on the validity of accounting at a number of agencies, including the Defense Department, in its annual financial report on the federal government.

It's important that agencies be able to close out the year's books within the 45-day window allowed by the audit process, because that short time period represents a window for which systems should be able to provide "timely and accurate information" for use in management decision-making, Walker said.

The comptroller general has long pushed for federal spending reform, pointing to the growing share of the budget projected to be spent on entitlement programs and interest on the national debt. Defense and national security budgets represent a significant portion of discretionary spending that could be affected by these trends.