Before leaving the Pentagon in January 2001, Defense Secretary William Cohen made good on his promise to launch a major reform of basic allowances for housing (BAH) for 748,000 service members living off base in the United States.
But it will be up to the new defense chief, Donald H. Rumsfeld, to resource Cohen's long-range BAH plan sufficiently so that out-of-pocket costs for the typical stateside military renter are eliminated, on schedule, by 2005.
Service members living off base saw monthly BAH rise on 1 January by an impressive average of 14.5%, the result of improved housing cost surveys for calculating BAH and a $700 million increase in allowance dollars for fiscal year 2001. By contrast, rental costs nationwide rose only 3.5% last year.
It was the largest housing allowance increase in many years, officials said, and fulfilled Cohen's promise made this time last year to set BAH rates for 2001 so that the typical military renter pays no more than 15% of housing costs out of pocket. At the same time, Cohen set a goal for the Defense Department to raise BAH an extra 3% a year above annual inflation for rents nationwide, so that overall out-of-pocket costs for stateside military renters disappear by 2005.
Bernard Rostker, Cohen's Under Secretary of Defense for Personnel and Readiness, said the average BAH increase ranged, by pay grade, from 12% to 17%. But 11% of BAH recipientsroughly 83,000-did not see an allowance increase, either because local rental costs stagnated or fell in the past year, or because local BAH already was high enough that out-of-pocket costs stayed below the new 15% threshold.
The goal to eliminate all out-of-pocket rental costs by 2005 is not set in law, but defense dollars are earmarked for it, said Navy Vice Admiral Pat Tracey, Deputy Assistant Secretary of Defense for Military Personnel Policy. "It would actually have to be a fairly deliberate decision not to do that," she said.
"I would just hope," added Rostker at a press conference to unveil the new BAH rates, "that the new administration would not break faith with our service members, and keep it, maybe even improve the commitment of resources necessary, to provide a justly compensated military.... If we want the kind of military we have said that we want, we can't do it on the cheap."
The new BAH rates not only kept pace with the rise in rental costs nationwide but also sliced average out-of-pocket expenses for military renters to 15%, down from 19% last year. Also, in response to complaints last year that in some areas newly adjusted BAH rates failed to reflect local housing costs realities, defense officials reviewed rate-setting procedures and made significant reforms for 2001.
For example, Tracey said she and other defense officials traveled to areas such as Tacoma, Washington, and saw for themselves that rundown housing in bad neighborhoods indeed had been included in last year's survey, and this had the effect of dampening local BAH rates.
"We found we were not happy with the housing we had been pricing.... They were not the quality we would expect our people to obtain," Tracey said. Other sources of pricing bias also were uncovered and eliminated. "We made some substantial improvements to the way we [do] surveys," she said.
BAH rate calculations for 2001 rely more heavily on prices of housing being recommended by base housing offices, and less on rental prices found in the classified ads of local newspapers. Officials also for the first time used U.S. Census data to locate and avoid including rental prices of neighborhoods with high crime rates and troubled public schools.
Also, Tracey added, the Department of Defense changed its method of estimating utility costs, another factor in setting BAH. All local utility cost data had been collected in late spring. As a result, previous BAH rates failed to reflect "big incremental changes" in energy costs that occur later in the year. For 2001 rates, utility costs were collected last October and, in some high-cost areas such as Seattle, as late as December, Tracey said.
"I am still concerned about places where the [energy costs] are accelerating," said Tracey, "because we can only change the rates each year."
Through 2005, BAH rates are projected to rise overall by 7% a year, said Saul Peeter, an assistant director of military compensation for the Office of the Secretary of Defense. That assumes annual inflation on rents nationwide of 3%, he said, plus execution of Cohen's plan to "buy down" the current 15% absorption rate to zero for military renters with an extra BAH raise of 3.8% a year.
The typical E-6, said another defense official, "would be taking home $175 more a month. That's real money."
Now, all the Bush administration needs to do, according to the departing Clinton team, is make sure the extra money earmarked for higher housing allowances-an average of $1 billion more per year-is not shifted to some more pressing defense priority.