Budget Proposal Slows Cost Growth, Pentagon Leaders Say

Budget Proposal Slows Cost Growth, Pentagon Leaders Say

By Lisa Daniel
American Forces Press Service

WASHINGTON, March 28, 2012 - The Defense Department's proposed budget would slow the growth in pay and benefits without negatively affecting today's service members, senior defense leaders told senators here today.

"Our budget is a balanced, interconnected whole, and I would suggest you view it as such," Robert F. Hale, the Pentagon's chief financial officer and comptroller, told the Senate Armed Services Committee's personnel subcommittee.

Hale was joined at the hearing by Jo Ann Rooney, acting undersecretary of defense for personnel and readiness; Dr. Jonathan Woodson, assistant secretary of defense for health affairs; and David L. McGinnis, acting assistant secretary of defense for reserve affairs.

The department's fiscal 2013 budget request includes $168 billion, or 32 percent of a $525.4 billion base budget, for personnel and readiness. The base budget is 2.5 percent less than the current year and reflects part of $487 billion the department must cut over five years as part of the Budget Control Act. The department faces at least $500 billion more in cuts if Congress does not act against a "sequestration" trigger that will go into effect in January unless Congress agrees on another way to save that amount.

The Pentagon leaders told the senators that plans call for a 5.5 percent end-strength reduction -- about 100,000 service members -- over five years. Changes to the TRICARE health plan would raise fees for military retirees based on their income, and higher pharmacy co-pays would encourage the plan's mail-order option for their prescriptions.

The budget request cuts $259 billion from previously planned personnel and readiness funds over five years, Hale said, mostly from more disciplined spending, including cutting contractors and cutting end strength. It increases investments in cyber and special operations, while reducing costs from weapons systems, he said, and "fully supports the all-volunteer force."

The cuts to end strength will save $9 billion next year and $53 billion over five years, Hale said.

The cuts were disproportionately on the investment side, the comptroller told the panel.

"In the end, we decided to address pay and benefits to avoid what we viewed as overly large cuts in force structure and investments," he said.

The cost of pay and benefits has risen more than 87 percent since 2001, 30 percent more than inflation, Hale said. Still, he added, the budget proposal does not break faith with the all-volunteer force, which he said must be adequately compensated for the unique challenges of military life.

Rather, he said the budget would have incremental cuts to civilian pay, leveling off to a freeze in fiscal 2016 and 2017, and increases TRICARE fees to retirees and beneficiaries who fill prescriptions at pharmacy storefronts.

The proposals "have the full support of our military leaders, all the members of the Joint Chiefs and the senior enlisted advisors," Hale said.

The proposed cost savings are equal to the cost of about 60,000 troops, he added.

"What keeps the CFO up at night," he said, "is if you don't approve this plan, we will need bigger cuts to end strength and pay and benefits."

Rooney said the plan reflects the department's goals of moving toward preventive health care, better internal efficiencies, provider payment reform and more cost-sharing among beneficiaries.

The plan protects the overall well-being of the total force, including access to mental health services, educating military children, maintaining morale, welfare and recreation programs, and commissary benefits, she said.

Service members have demonstrated their versatility, adaptability and commitment, Rooney said, with prolonged, repeated deployments. At the same time, she said, the performance of military medicine continues to set new standards, but the current cost growth is unsustainable.

"Throughout this budget process, I believe we have developed the right balance ... to shape the force we need," she said.

Woodson said the military health system "has performed with great skill, and undeniable courage" in combat, while simultaneously responding to humanitarian crises around the world – a trait he called "unique among all military or nonmilitary organizations on this globe."

Woodson said he is committed to maintaining that standard, and that the military must compete against the civilian medical field for top talent in health professionals.

The department must reduce health care costs to maintain quality, Woodson said. In 1996, military retired beneficiaries were responsible for 27 percent of all health care costs, compared to 10 percent today, he said. If the DOD plan is approved, they will pay about 14 percent in 2017, he said.

McGinnis spoke of the budget plan's impact on the National Guard and reserve forces, noting that more than 150,000 are currently mobilized. He listed training, equipment, readiness and retention as Guard and reserves budget priorities.

The budget also would protect important Guard and reserve programs such as the State Partnership Program, which pairs 63 Guard units with foreign military units, and the Heroes to Hire employment assistance program.

About 25 percent of former junior enlisted service members who are Iraq or Afghanistan combat veterans are unemployed, McGinnis said.