Budget official describes Pentagon's cost-saving measures

27 Feb 2014 | Amaani Lyle

The Pentagon's chief financial officer assured a conference audience of the Defense Department's commitment to the forces.

Feb. 26, 2014, despite plans to modestly slow growth in military pay and benefits.

"We are committed to full support of the all-volunteer force, and we will ensure we do this in a way that slows growth and nobody's pay is cut," Defense Department Comptroller Robert F. Hale said in remarks at the Defense Programs Conference at the Newseum here.

Growth in military pay and benefits has exceeded that of the private sector by about 40 percent since 2001, Hale noted. As the Defense Department moves off the wartime footing for the first time since then, he added, officials must look to reduce personnel costs and streamline modernization plans to find efficiencies.

"That will allow us to move to a smaller Army, [from] 440,000 to 450,000 active forces over the next two years, and if Congress takes us down to sequestration level, that would go down to 420,000," he said. Similarly, he added, Marine Corps numbers will drop from 182,000 to 175,000.

The Defense Department's fiscal year 2015 budget request includes a 1 percent military basic pay raise for most service members and a pay freeze for general and flag officers. Additionally, the growth of basic allowance for housing will slow over five years, ultimately resulting in service members paying about 5 percent of their housing expenses out-of-pocket.

Hale also described what he acknowledged is a "contentious" decision to cut DOD's current provision of about $1.4 billion in direct subsidies to commissaries to $400 million. "We are not directing any commissaries to close," he said, [but] some may if they cannot survive in this environment." Under the proposal, subsidies would continue for overseas commissaries and those in remote locations where discount grocery shopping is unavailable. Military exchanges operate without such subsidies.

In health care, Hale said, DOD officials are seeking to simplify, modernize and consolidate TRICARE programs for retirees under age 65.

"[This] will save us several hundred million dollars in administrative costs," Hale said. "We will modestly increase co-pays and deductibles ... in a way that tries to guide our retirees and active duty family members to the most affordable types of care in the military treatment facilities, which are often seriously underutilized."

Although the overall pace of modernization will have to slow, Hale said, some programs, such as cybersecurity and special operations, will see growth.

Because DOD is shrinking in size and finding efficiencies, the operations and maintenance budget, which is closely tied to readiness, will grow faster than the rate of inflation, Hale said, allowing a gradual recovery in the readiness of the forces after last year's sequestration spending cuts forced curtailment of many readiness activities.

"We face unprecedented budgetary turmoil," Hale acknowledged. "There are modest signs of stability, but we will face leaner budgets."

Headquarters Marine Corps