Just slightly more than a month after Congress voted by an overwhelming margin to cut back military retiree pensions as part of the Ryan-Murray budget agreement, members of the Senate Armed Services Committee were unanimous Tuesday in pressing to repeal the provision as soon as possible.
The Defense Department agreed wholeheartedly, despite its desire to slow its spending in the broader category of military compensation.
As one of its deficit reduction measures, the two-year budget accord aimed to save $6 billion over the next 10 years by reducing military retirees’ annual cost of living adjustments to one percentage point below inflation from working age until they reach age 62. Because of a legislative oversight, the cutbacks also applied to retirees who can’t work — those who retired because of a disability.
While Congress ironed out that glitch when it passed an omnibus appropriations bill earlier this month, Sen. Carl Levin (D-Mich.) and his colleagues on the Armed Services Committee say the COLA cuts to the rest of the retiree population are unfair.
“I believe it’s wrong because it targets a single group — military retirees — to help address the budget problems of the federal government as a whole,” said Levin, the committee chairman. “While reforms have been made to the federal civilian pension system over the past several years, those changes applied prospectively to new employees. By contrast, this change to military pensions will apply upon implementation to current retirees, their families and survivors.”
Wait and see urged
The absence of grandfathering in the pension scaleback is one issue that outraged advocacy groups for military personnel; another is that it sidestepped the ongoing work of a special commission Congress appointed just a year ago to take a holistic look at the military compensation system and put it on a more sustainable fiscal footing.
The law that created that panel specifically told members not to recommend any changes to the benefits enjoyed by current military members and retirees, so the COLA change came as a bit of a surprise to the Pentagon.
“To my knowledge, no DoD officials were consulted on the details of the Bipartisan Budget Act, including the consumer price index-minus-1 provision,” said Christine Fox, the acting deputy secretary of Defense. “If the Congress decides to retain the CPI-minus-1 approach, we strongly recommend it be modified to include grandfathering. But because of the complex nature of military retirement benefits, I would urge that the Congress not make any changes in this area until the Military Compensation and Retirement Modernization Commission presents its final report in February 2015. There are many ways we might change military retirements, including far more fundamental reforms. Because this provision does not go into effect until December 2015, there is ample time for such a careful review, including waiting for the commission to provide its input.”
Given that breathing room over the next two years, Defense officials made clear that they are not planning to propose any changes to military retirement in the annual budget submission the Obama administration expects to deliver in early March. They’re wary of lawmakers doing any more tinkering before the commission reports back to Congress early next year. For example, if the commission decided it was appropriate to make some kind of changes to retiree COLAs, DoD worries the panel might be denied that opportunity if lawmakers act now to overcorrect what they now perceive as a mistake.
“We believe changes to our retirement plan, if appropriate, should only be made after the commission takes a holistic look at the many variables involved in such a plan,” said Adm. James Winnefeld, the vice chairman of the Joint Chiefs of Staff. “Accounting for changes in the cost of living is only one of those variables, and it’s far too soon to reach a conclusion on whether it should be part of a grandfathered plan. I’d also say that however and whenever the specific provision is addressed should not permanently remove cost of living adjustments as a potential variable in a future grandfathered plan. In other words, we don’t have to rush in to this. We just need to make sure we get it right.”
Bills to change on the table
But at least among members of the Senate Armed Services Committee, lawmakers have no interest in waiting.
After the avalanche of angry emails and phone calls they received from military members and retirees over the last month, they’re eager to disavow at least the pension portion of the vote and put the issue behind them as quickly as possible.
“The passing of the first budget out of a divided Congress in 28 years was somewhat miraculous,” said Sen. Angus King (I-Maine). “This provision confirms that, because we can’t find parenthood. It was an immaculate conception — or maybe an immaculate misconception. I don’t think we should wait for the commission. I think we should fix this. It’s not a huge item. It should be fixed. And I think our veterans and people that are receiving pensions, for some odd reason, may not fully trust us to resolve this in 2015. So I think we should take care of it as soon as we can.”
Several senators already have introduced bills to effectuate the repeal, some of which attempt to find offsetting savings elsewhere in the federal budget and some of which do not.
Winnefeld said it’s important to remember, however, that the COLA change’s savings tally is not just $6 billion. That’s the amount the reduced payments to current retirees would save the U.S. Treasury’s mandatory accounts over the next decade, but since DoD also has to make about $500 million in payments each year from its discretionary budget to pre-fund payments to future retirees, it’ll have to make up that sum out of current operating dollars.
“That’s going to involve readiness, capability, capacity choices that we will not be able to make because of that,” Winnefeld said. “But we’re prepared to deal with that. We understand it’s a factor among all the many other factors that we have to deal with when crafting a budget.”
A more sustainable trajectory needed
Even if DoD doesn’t like the COLA change Congress made last month, the department still thinks Congress must reduce the upward pressure on personnel spending in the Pentagon.
While lawmakers have permitted a few changes to past practice over the last couple years, like limiting pay increases to 1 percent this year and allowing minor hikes in retiree health care fees, Winnefeld says Congress needs to resist the urge to award military pay raises that go behind the administration’s budget request and hold back on expanding other benefits.
“Our nation has provided substantial increases over the last decade in compensation that have more than closed previously existing gaps with the rest of our nation’s workforce,” Winnefeld said. “We in uniform are very grateful for all of this. It means a lot. However, demanding at this point that our compensation not only remain at its currently high relative level but that it continue to rise faster than that for the average American is simply not sustainable at a time when our entire budget is under great pressure. We substantially increased the compensation growth trajectory in the late ’90s, and in the post-9/11 period. These increases worked.”
The Defense Department’s Quadrennial Military Compensation Commission’s regular comparisons of military benefits found in 2002 that a mid-grade enlisted military member was paid at about the 50th percentile when matched up against civilian workers with similar education and work skills. By 2009, after years of pay raises at all ranks, those same service members were paid at between the 85th and 90th percentile of a cohort of similarly-skilled U.S. Workers.
“That’s understandable after a decade of war,” Winnefeld said. “But those numbers are an indicator that we can, and should place compensation on a more sustainable trajectory.”