Fox Says DOD Must Slow Growth of Military Compensation

By Jim Garamone

American Forces Press Service

WASHINGTON, Jan. 28, 2014 – The Defense Department must slow the rate of growth in military pay and compensation or the organization will not be able to fight and win the nation’s wars, Acting Deputy Defense Secretary Christine H. Fox said here today.

Fox, testifying before the Senate Armed Services Committee, said DOD must get a handle on pay and benefits or risk sending service members into harm’s way unprepared.

The deputy thanked the senators for supporting the Bipartisan Budget Act, which she said mitigates the worst of the problems DOD faces under the Budget Control Act of 2011. Still, she added, it only goes through the next two years, and this is a long-term problem.

“Beyond those two years, the BCA remains the law of the land,” she said. “If sequestration is allowed to persist, our analysis shows that it will lead to a force that is too small, inadequately equipped and insufficiently trained to fully defend the nation’s interests.”

Given this budgetary background, DOD civilian and military leaders have said time and again that the one-third of the defense budget consumed by military compensation cannot be exempt as an area of defense savings. “We must find ways to slow the rate of growth,” Fox told the committee.

Inflation-adjusted pay and benefit costs are 40 percent higher than in 2001, even though the active force today is just slightly larger. Defense health care costs alone have grown from less than $20 billion in 2001 to nearly $50 billion in 2013. Payments for housing costs also have increased faster than inflation.

“If this department is going to maintain a future force that is properly sized, modern and ready, we clearly cannot maintain the last decade’s rate of military compensation growth,” Fox said.

Military service is about more than just a paycheck. The jobs and service military personnel perform are as important. If the department doesn’t have money to maintain equipment, or supply the latest technology, or get service members the latest and best training “then they are being done a disservice,” the deputy said.

“When they’re sent into harm’s way, this disservice can quickly transition into a breach of trust,” Fox said. “Here I am referring to our collective, sacred obligation to provide our troops with the finest training and equipment possible, so that they can deploy to combat able to accomplish their mission and return to their families.”

The department does have recommendations for slowing the growth of compensation fairly and effectively, Fox said. “Most notably, just this year, Congress accepted a 1 percent basic pay raise, even though the employment cost index called for an increase of 1.8 percent. We are currently reviewing all military pays and benefits, and may offer further proposals.”

Fox spoke directly to the “COLA-minus-one” or “CPI-minus-one” provision included as part of the Bipartisan Budget Act. The provision required capping cost-of-living raises in retirement pay for working-age military retirees at 1 percent below inflation, as measured by the Consumer Price Index.

“To my knowledge, no DOD officials were consulted on the details of the BBA, including the CPI-minus-one provision,” she said. “The department fully supported the changes made to the provision to exempt military disability retirement and survivors.”

The department does support a comprehensive review of this provision, the acting deputy defense secretary said, including its effect on retirees not currently exempted. “If the Congress decides to retain the CPI-minus-one approach, we strongly recommend it be modified to include ‘grandfathering,’” she said.

Fox called on Congress to refrain from changing military retirement until the Military Compensation and Retirement Modernization Commission presents its final report in February 2015.

“There are many ways we might change military retirement, including more fundamental reforms,” she said. “Because the CPI-minus-one 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.”