Budget office says military-civilian pay gap dwindling

Compensation packages for active-duty enlisted personnel grew by 21 percent from 2000 to 2006, helping to eliminate the pay and benefits gap between military and civilian jobs, the Congressional Budget Office concluded in a report released Friday.

The report, requested by the Senate Budget Committee, comes amid a continuing congressional effort to reward heavily deployed troops and create incentives to stay in uniform by enhancing basic pay, food and housing allowances, tax advantages and re-enlistment bonuses. Indeed, both the House and Senate versions of the fiscal 2008 defense authorization bill include a 3.5 percent pay raise for military personnel -- a half a percent higher than requested by the Pentagon.

The White House, which opposed the larger pay raise, has estimated it will cost $265 million in fiscal 2008 and $7.3 billion between fiscal 2008 and fiscal 2013. Meanwhile, lawmakers have thwarted the Bush administration's efforts to increase TRICARE health coverage co-pays and other fees for many military retirees -- a move the Pentagon has said would save $20 billion over the next six years and help rein in rising healthcare costs.

Military basic pay still slightly lags behind civilian salaries. But when food and housing allowances are factored in, the pay gap between military and civilian jobs "appears to have been eliminated," Matthew Goldberg, the assistant director of the Office of Management and Budget's national security division, told reporters Friday.

The CBO report acknowledged difficulty comparing civilian pay to total military compensation packages, which also includes other non-cash benefits such as subsidized child care and health care. "Policymakers, individual service members and taxpayers may find it difficult to assess the adequacy of military pay because that compensation includes many components spread among different agencies and appropriations," the report said.

CBO suggested that lawmakers, OMB or the Defense Department could take various steps to make it easier to compare military and civilian compensation, including consolidating personnel costs into a single appropriation.

Alternatively, Congress could simply combine the three largest components of cash compensation funded out of the services' personnel appropriations -- basic pay, housing and food allowances. Doing so, CBO concluded, would yield little cost savings, but would allow for "more-accurate benchmarking" because lawmakers could evaluate all three pots of money together.

In addition, the report explored substituting cash for non-cash benefits -- such as offering a "cafeteria plan" of healthcare benefits for family members of service personnel and consolidating commissaries and post exchanges to offer tax-free grocery allowances of roughly $500 a year. Doing so, CBO estimated, would save about $700 million annually.

The Defense Department also could shut down its domestic schools and instead offer families $8,600 tuition allowances per student -- a move that could save $80 million a year. Supporters of the effort to move to a more cash-based benefits system believe that it would give recruits a better idea of their total compensation, according to the report.

But critics say non-cash benefits, like health care and subsidized child care, help offset the challenges of military life and ultimately promote military readiness by improving the quality of life, even in isolated areas where troops are deployed.