The package also contains a special "targeted" raise for 1 July 2000, which would range from 0.1% to 5.5% depending upon rank and time in service. The extra dollars are intended to reshape the military pay table to better award performance-driven promotions.
The final piece of the package is a White House commitment to support annual military and federal civilian pay raises that keep pace with private sector wage growth. That would include a 4.4% increase for all servicemen and women in January 2000, and yearly raises after that of 3.9% through 2005.
On paper, the total cost of the package would be $30 billion over the six-- year defense plan (2000-2005), including roughly $9 billion the administration didn't plan to spend on personnel until the Joint Chiefs said last September that readiness and morale were beginning to fray.
The three-part package, said Chairman of the Joint Chiefs of Staff General Henry Shelton, "will send a strong signal to our troops. It will tell them we have heard their concerns about retirement, about pay, about the pace of operations and we are taking decisive action . . . because they deserve no less."
Defense Secretary William Cohen declined to discuss how the initiatives would be funded until the budget officially is unveiled in late January. Other sources did provide details, however, and they show the extent to which military leaders wrestled with accountants to deliver a viable pay package and still stay below White House budget ceilings.
Improving Redux so that a 20-year retiree gets 50%—rather than 40%—of average basic pay over the member's highest three earning years would restore half of the benefit value lost when Congress moved to Redux for new entrants on I August 1986. The Redux generation, when retired, still would see their annual cost-of-living adjustments capped 1% below inflation while older retirees continue to receive full cost-of-living adjustments. But the inflation-minus-one cap would be eased slightly under the administration's proposal to lessen the impact of the cap during years when inflation is low.
The cost of the Redux changes over six years would be $4.4 billion. But the administration plans to defer the budgetary impact until I October 2005, the effective date of change, and years after Clinton has left office. This would create a new unfunded liability for the Treasury Department of $7.5 billion, by one estimate. But the Treasury Department, not the Defense Department, would pick up most of the tab.
Some officials argue this plan violates a 1984 law that directs the Defense Department to set aside in each budget year enough money to pay future benefits earned that year by the current force. Defense Department lawyers, however, have found a way to "finesse" the law, one source said, and key members of Congress were said to be ready to agree to that.
Defense officials also struggled with the cost of providing both an across-- the-board 4.4% raise in January 2000, as promised by Clinton, and a targeted raise to reshape the pay table. In the end, they elected to delay the targeted raise six months, to July 2000, in order to save $400 million.
The special raise still will cost an extra $4.5 billion over the six-year budget plan and almost a million members would benefit immediately from the mid-year hike. Mid-grade officers, O-4s and O-5s with roughly 6 to 14 of years service, would see the bigger raises of 3.5% to 5.5%. The smallest mid-year raise—0.1 %—would go to 30,000 E-5s with 14 years of service, reflecting their slow pace of advancement. A quarter of the force would get no mid-year raise.
Facing lingering questions about a 13.5% pay gap, Pentagon leaders tried to spin gold from the string of annual pay raises now penciled into future defense budgets. Cohen called the 4.4% raise in 2000 and the subsequent 3.9% yearly raises though 2005 the largest increase in basic pay "in nearly a generation."
In fact, those 3.9% figures merely project what's needed to match private sector wage growth in a booming economy. If private wage growth dips, Cohen conceded, so will those pay raises.
The Joint Chiefs won concessions on Redux but lost their fight inside the administration for a large catch-up raise. So the package going to Congress appears a little light. Key questions now are whether Congress will approve it and whether it is enough to sustain a quality force.