Update – June 3, 2014: Congress has made some changes to the original 2015 budget proposal, which included some austere cuts, including the possibility of eliminating Commissaries located on Stateside bases. The 1% raise for base pay looks like it will remain in effect.
The Department of Defense recently released a proposed military budget for 2015 (DoD). The results are along the lines of what we have come to expect lately: there will be budget cuts in order to reign in the DoD and federal budget. In the proposal, the strength of force will be reduced, weapon systems will be cut, and military pay raises will be capped at 1%, as they were in 2014. There is also an expected reduction of 5% for Basic Allowance for Housing. Other proposed cuts include consolidating health care plans and reducing commissary subsidies. Keep in mind everything that follows is still a proposal until signed into law.
Proposed Pay Raise – Just 1% for the Next 3 Years
The proposed 1% pay raise looks like it will be standard for the next few years, as the proposed 2015 military budget intends to extend a 1% pay raise for each of the next three years. The military would need to receive a 1.8% raise to match public sector wage growth over the last year. Military pay has always been, and will likely always be, a contentious issue. Military members received larger than normal pay raises through the first decade of the 2000’s. The goal was to bring military pay closer to civilian pay. Now, the government wants to slow down the rate of the pay raises. While a 1% pay raise isn’t much, it is better than no raise, which is what federal employees received for three years, from 2011 – 2013 (source). Hopefully the era of small pay raises will be short lived.
Expect to Pay More Out of Pocket for Your Housing
The 5% decrease in BAH is a bit of a misnomer as it isn’t a direct cut, and it won’t happen overnight. However, the proposed cuts are real, and are expected to take place over the next few years. The goal is to shift 5% of housing expenses to service members over the course of the next several years. Part of this will be accomplished by slowing down the cost of living increases. So it’s likely that BAH wouldn’t be decreased as much as it wouldn’t be increased to keep up with inflation. BAH Rates are protected through a Rate-Protection plan, which freezes BAH rates for military members who already live in a location. When the government reduces BAH rates, they are locked in for members who currently live in the area. BAH is only changed for new members who move to the area. So it is likely people wouldn’t see an actual decrease in their BAH until they PCS to another location.
The proposal also changes how BAH benefits are calculated. The current method includes the cost of renter’s insurance in the calculation. The new method will remove renter’s insurance from the calculations.
Proposed Commissary Cuts, But No Commissary Closures
As noted in the update at the top of the page, closing the Commissary closings appear to be shelved for the time being. However, there are expected to be some cuts to Commissary funding that may impact the Commissaries at some level. The important thing to understand is the goal is no longer to close Commissaries outright. It is important to know what was on the chopping block in the event this line item is brought back in future budget talks. The following paragraph discusses the previously discussed cuts.
Commissary cuts have been discussed at many levels, including the possible closure of US Commissaries. The 2015 budget proposal includes a $1 billion reduction in commissary subsidies over the next 3 years. To put this in perspective, that will leave the Commissary with less than 1/3 of their current budget of $1.4 billion. The Commissary offers shoppers savings of close to 30% on their purchases (By law Commissaries are required to sell items at cost, plus a 5% surcharge). Several proposals have been made to reduce the proposed subsidies and increase the Commissary surcharge in order to reduce the amount of subsidies required to keep the Commissaries open. This would shift some of the cost to shoppers, but would result in keeping the Commissary doors open.
Expect to Pay More for Prescription Drugs
This spring, TRICARE initiated a pilot program requiring TRICARE for Life beneficiaries to use the mail order system for maintenance medication used to treat chronic illnesses such as high blood pressure, high cholesterol, diabetes, and similar chronic conditions. One version of the new budget would require all retirees and their dependents to use the mail order system for these types of medications, regardless of their age. Beneficiaries could still use the base pharmacy for their medication needs. There are also discussions to hike prescription medication prices.
The Military Advantage blog has a good rundown on the possible price hikes.
Reduction in Force & Weapon Systems
The Army is considering reducing their strength of force by roughly 13% – from close to 520,000 today, to around 440,000 to 450,000 Soldiers. Sequestration could further reduce that number to 420,000. To put this in perspective, this would be the smallest the Army has been since before World War II. Defense Secretary Chuck Hagel cites budget constraints and changing warfare strategies as the reasons for cutting such as large number of troops. The cuts, if approved, wouldn’t happen overnight. They would be phased in through 2019, and would take into account retirements, normal separations, and other factors.
The DoD is also considering retiring the A-10 and U-2 aircraft, citing changes in how air wars are fought. The missions these aircraft support can also be handled by other aircraft, at least to a satisfactory degree. The Navy could also see to half their current cruiser fleet retired. The Marines could see a Reduction in Force.
Budget Cuts Are the New Reality
The cuts we are seeing today are reminiscent of the Reduction in Force that occurred at the end of the Cold War in the late 1980s and 1990s (though the Cold War cuts were much larger). But that doesn’t make things easier for those who are experiencing cuts today. The fact of the matter is the military is adjusting to the current environment. Cuts are part of today’s military environment, and will continue to be an issue in the foreseeable future.