Slowing increases in housing and food allowances for the military by changing a crucial benchmark could save the Pentagon billions, the Congressional Budget Office reported Thursday.
The idea proposed in the report is to tie these allowances to the same benchmark used for base salary increases for military personnel.
The Department of Defense is required to use the Bureau of Labor Statistics’ Cost of Employment Index, or ECI, to adjust the base salary, which accounts for 70% of the military’s regular expenses. The only exception is when Congress approves a larger pay rise.
But housing allowance rates are set annually by the Secretary of Defense, using data on vacant rental housing in each location. Food allowances are set annually on the basis of the food price index of the Ministry of Agriculture.
These combined methods resulted in an increase in troop compensation beyond what the DoD envisioned, according to CBO report published Thursday.
The goal of the Pentagon was for troops to be paid at the 70th percentile of earnings for comparable civilians, meaning that 30% of civilians in similar jobs would earn more than troops.
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But military compensation now far exceeds that. The CBO said the cash salary – base salary plus food and lodging allowances – for enlisted personnel was around the 90th percentile of civilians with similar levels of experience and university education in 2018. The The army has, on the whole, been successful in bringing in quality new recruits in recent years.
The military spent about $ 160 billion on cash compensation and benefits for service members in 2020, which is about a quarter of its base budget of $ 630 billion.
The Bureau of Labor Statistics calculates the CIS using its National Employer Compensation Survey, measuring the amount of compensation that has changed in the United States in certain jobs.
“These data raise questions as to whether the DoD pays more for its staff than necessary to achieve its objectives,” the report said. “The DoD may be able to pay less while meeting its personnel goals, while potentially meeting other goals, such as purchasing weapons.”
The Center for Strategic and International Studies also raised concerns about compensation costs for military personnel in its own report published Thursday. The active-duty military peaked after WWII in fiscal year 1952, CSIS said, then fell 64% to its lowest level in fiscal 2016. But during the same period, total personnel costs increased by 110%. driven in part by an increase in the ratio of officers to enlisted personnel, increases in military pay relative to the amount of the cost of employment index and significant increases in housing allowances.
The CBO suggested adjusting the cash payment increases for all service members using the ECI benchmark. If this method were adopted in the coming years, he said, the military could save about $ 3 billion a year, or 1.7% of its annual cash spend and spending, by the time. 2030.
The CBO study found that housing allowances increased faster than the cost of employment index between 2000 and 2020. If the CIS had been used instead, housing allowances for enlisted troops at pay level E-4 would have been 9% lower in 2020 than they were actually liquidated. being.
If all elements of regular cash compensation had started adjusting in 2004, the CBO said, the military would have spent about $ 4 billion less in 2020 alone.
The CBO also designed and envisioned a new base salary adjustment system called the Alternative Salary Index, which it said would be tailored to the age and educational level of military personnel. The CIS does not take into account this type of demographic information.
But when the CBO used this method to recalculate the increases from 2004 to 2020, it found that it would not differ much over time from the salary increases set using the ECI. The new index would also vary more from year to year, leading to larger fluctuations in salary increases.
The CBO did not take into account special pay and incentives, which vary by job and location, and tax benefits for troops because food and housing allowances are untaxed.
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