When Defense Secretary Leon Panetta publicly outlined the 2013 defense budget proposal on Jan. 26, 2012, he revealed a topline Pentagon request – a $525 base budget – lower than last year’s request of $531 billion, but higher than the $518 billion appropriated by Congress for FY 2012. The 2013 request for overseas contingency operations, mostly in Afghanistan, is $88.4 billion, significantly lower than the FY 2012 appropriation of $115 billion; this is mostly due to the Iraq drawdown.

Panetta made it clear that the hit taken by the Pentagon’s topline was focused on shoring up the federal government’s bottom line, with a long-term aim at deficit reduction.

While many of the proposed cuts take the form of force reduction, especially in the end strengths of the Army (80,000 fewer soldiers, from 570,000 to 490,00 by 2017) and the Marine Corps (20,000 fewer Marines, from 202,000 to 182,000), other changes have been proposed for military pay and retiree benefits.

Though the details of the proposed cuts will not be apparent until the entire federal budget proposal is released on Feb. 13, Panetta did outline several changes unlikely to be welcomed by active-duty and Reserve personnel nor military retirees:

• Slower growth in military pay. For 2013 and 2014, the Pentagon will continue to rely on the indexing formula that keeps military pay raises on pace with private sector pay growth, but beginning in 2015, military pay raises will be limited, in an unspecified way.
• TRICARE Prime enrollment fee hikes for “working age” military retirees under the age of 65. The first-ever fee increases for working age retirees enrolled in TRICARE Prime – a hike of $30 a year annually for individuals and $60 for families – were enacted in the 2012 budget; future increases will be tied to growth in the cost-of-living adjustment (COLA) applied to military retirement pay – a “tiered” approach based on a person’s rank at retirement. The Military Officers Association of America, one of the nation’s most influential advocates for retired and active-duty service members, has found fault with this tiered approach, claiming that it “would make military retirees the only group of government retirees subject to healthcare means-testing. This is a concept we’ve fought ardently because it flies in the face of logic for a military service incentive – basically, the longer and more successfully you serve, the less benefit you earn.”
• TRICARE for Life fee hikes for military retirees over the age of 65. Though the amount was not specified by Panetta, the deficit reduction proposal submitted by the Obama administration to the Joint Select Committee on Deficit Reduction, or “Super Committee,” this past fall included a $200 annual fee for 2014. TRICARE for Life is the supplemental, Medigap-style health plan for military retirees.
• Increased TRICARE copayments and deductibles for non-elderly, non-disabled military retirees.
• The formation of a federal commission to study reforming the military retirement system. Also mentioned in the administration’s deficit reduction proposal, the creation of the commission is not tied to any budgeting changes in pensions or other retirement benefits. In other words, the Pentagon does not plan to save any money through whatever recommendations such a commission might submit – probably because the recommendation would likely include modifications to the military’s “cliff vesting” system, whereby retirees who have served 20 years receive a full pension, and those who serve anything less receive no pension at all.

The proposed commission would be modeled after the authorities of the Base Realignment and Closure (BRAC) Commission: Congress could give its recommendations an up or down vote, but would not be able to modify them.

Panetta pledged that none of the changes proposed by the commission will affect those currently serving, who will be grandfathered in to their existing benefits packages – but ultimately, this decision will be up to Congress.

Like all budget proposals, Panetta’s presentation is the beginning, rather than the culmination, of a protracted debate among the White House, the legislature, and the American public – especially those representing the nation’s armed forces personnel. To help inform this debate, Todd Harrison, senior fellow for Defense Budget Studies at the non-partisan Center for Strategic and Budgetary Assessments (CSBA), has initiated an online survey that will allow current service members to weigh in with their preference for how the Pentagon might handle pay and benefits in future budgets.

“A lot is still to be determined,” said Harrison. “We’re trying to put real data into the debate, based on what people in the military think.”

Service members can take the online survey at www.CSBAmilsurvey.org.