Pay Raise for Troops Still Up in the Air

Lawmakers have a lot of work to do when they return to Washington Nov. 12 after the mid-term elections, including deciding how big of a pay raise to give military service members next year.

The House and Senate versions of the fiscal 2015 Defense authorization bill differ on the amount of the pay increase: the House-passed legislation tacitly supports a 1.8 percent across-the-board boost for members of the military, while the Senate bill includes a 1 percent raise – the same amount that President Obama has recommended.

The Senate Armed Services Committee approved its Defense authorization bill in May, and it was placed on the Senate calendar in early June. It’s unclear at this point whether there will be a full debate of the bill, or if the leadership will decide to fast-track a vote. Congress also needs to vote on omnibus appropriations legislation or another continuing resolution before the current one expires on Dec. 11. 

The 1.8 percent pay bump for troops is in line with the automatic fiscal 2015 cost-of-living adjustment scheduled for the military; there is not an explicit provision regarding a pay raise in the House legislation, but by staying silent, lawmakers are supporting the amount that would automatically take place under the law.

If the Senate ultimately passes a bill with the 1 percent raise, the two chambers will have to hammer out their differences in conference committee. Military service members received a 1 percent pay boost in 2014.

The formula for determining service members’ annual pay increase is based on the Bureau of Labor Statistics’ Employment Cost Index and the growth in private-sector wages. But under the law (Title 37, Chapter 19, Section 1009) the president has the authority to set an alternate pay raise for military personnel, citing a national emergency or fiscal concerns, if Congress doesn’t pass legislation adjusting the amount or canceling it. The 1990 Federal Employees Pay Comparability Act allows the president through executive order to set a pay raise for federal civilian employees under the same circumstances.

Federal civilian employees are on track to receive a 1 percent raise in 2015. That’s the amount Obama has recommended, and Congress is not likely to alter that at this point.

The nonpartisan Congressional Budget Office last week estimated that a 1.8 percent pay raise for uniformed personal in 2015 would cost $1.3 billion next year.

The Senate Defense authorization bill, like the House-passed version, also calls for a pay freeze for general and flag officers in fiscal 2015, as recommended by the Obama administration. CBO estimated that a 1 percent pay raise for most troops combined with the pay freeze for some officers in the Senate bill would save $588 million in 2015 and $3.9 billion between 2015 and 2019. 

The Senate panel approved other personnel-related White House recommendations, including a provision that results in a smaller increase for troops’ basic housing allowance and higher pharmacy co-pays from 2015 through 2024 for non-active duty TRICARE beneficiaries. The panel, led by outgoing Chairman Carl Levin, D-Mich., however, rejected more aggressive White House recommendations related to TRICARE, such as creating enrollment fees for TRICARE-for-Life beneficiaries. Like their House colleagues, senators on the Armed Services Committee also rejected the administration’s recommendations to cut funding of military commissaries, the heavily-subsidized stores on base where service members and their families buy food and other goods.

Another important provision in the Senate Defense authorization bill would grandfather those who first join the military before Jan. 1, 2016, from the reduced cost-of-living adjustments that apply to military retired pay. The current law grandfathers in those who joined the military before Jan. 1, 2014. Congress in February repealed a provision in the 2013 Bipartisan Budget Act that cut the pensions of working-age military retirees until they reach the age of 62. The reduced cost-of-living adjustment however, still applies to those who first join the military after Jan. 1, 2014.

The Senate panel in a summary of the legislation made a point of saying that the provisions related to slowing the growth of personnel costs – including the 1 percent pay raise, housing allowance and higher pharmacy co-pays – were “undesirable but necessary to produce a defense budget that provides sufficient funding to address readiness and modernization deficits, authorizes a sufficiently-sized and trained force to meet national defense objectives, and adheres to congressionally-mandated budget levels.”

The bill also urged the Military Compensation and Retirement Modernization Commission to conduct a survey of active-duty and retired service members about pay and benefits, and includes a provision requiring the Defense secretary to review the effectiveness of the 40-year pay table. 

Overall, the House fiscal 2015 Defense bill would authorize $521.3 billion in spending for national defense in fiscal 2015, and an additional $79.4 billion for overseas contingency operations. The Senate version would authorize $514 billion in spending for national defense, and an additional $59 billion for overseas contingency operations.