This is the story of how Republicans, in a budget-cutting frenzy, have come uncomfortably close to cutting future retirement benefits for 334,000 military careerists.
It begins with the Republican landslide victory last November, attributed in part to their pledge to balance the federal budget by 2002. In January, new majorities assumed control of Congress, and the budget committees, chaired by Senator Pete Domenici (R-NM) and Representative John Kasich (R-OH), began work on separate plans to end deficit spending.
Cutting more than $1 trillion is not easy, so budget committee staffs relied heavily on a book published annually by the Congressional Budget Office (CBO) called Reducing the Deficit: Spending and Revenue Cutting Options. Inside are scores of suggestions, at least a few to anger every American, from indexing cigarettes and alcohol to removing milk price supports for dairy farmers.
Bean counters grabbed at the ideas as if they were gold. Some hit at military people. For example, Representative Kasich liked a proposal to cut annual cost-of-living adjustments (COLAs) to military and federal civilian retirees. The Senate committee also fed on the 435-page book, but Senator Domenici rejected any suggestion to cut COLAs.
For months, each committee worked on its own budget blueprint, called a concurrent budget resolution, to set ceilings for broad budget categories such as defense. While specific program cuts remain the responsibility of authorizing committees, the committee guidelines do describe assumptions made to reach the top line figures.
On 9 May, both committees unveiled their budget bills, and to the surprise of many, Representative Kasich had dropped his assumption of deep COLA cuts. Senator Domenici’s blueprint not only spared military retirees more COLA cuts but also set aside $1.8 billion to restore 24 months of lost inflation protection through 1998. Service associations were ecstatic.
But buried in the Senate resolution—and not appearing in any documents released by the committee—was an idea a single staffer pulled from page 296 of the CBO book, something the staffer described as a minor change. Called “High-1,” it would save $649 million over seven years by lowering the retired pay of persons who joined service before 8 September 1980 but have not retired by 1 October 1995.
Under current law, service members receive retired based on a percentage of a final basic pay. The Senate plan would replace that formula with one based on average basic pay during the final year of service. This would dampen the impact on annuities of pay raises and longevity increases earned within 12 months of retirement. The size of the loss would vary by rank, years served, and timing of retirement.
To understand the impact, assume a Navy senior chief or Marine first sergeant reached 26 years of service on 1 January 1995 and retired that same day. Under current law, his annuities would have been boosted by the 1 January military pay raise and by a large longevity raise for completing 26 years. Monthly retired pay would have been $1,914. If the same E-8, retiring on the same day, fell under High-1, 12-month averaging would mute the impact of the annual raise and 26-year “fogey.” Retired pay would be $1,753, down $161 a month, or 8.4%.
This is a worst-case scenario. The effect on someone who retired last December, for example, and received no longevity raise over the last 12 months would be only 0.2%. CBO estimates an average lifetime drop in retired pay of roughly 3%.
While a Senate staffer confirmed High-1 was in the budget bill, the services could not find it. Neither could the Senate Armed Services Committee. It is not even clear if Senator Domenici knew about it in his own bill. In late June, a House- Senate conference committee met to iron out differences in the resolutions, House staffers said they were delighted to learn of High-1, having been forced to abandon their own plan to trim military retirement. House conferees readily agreed to the change. Pentagon officials still did not know a significant change to military retirement was in the budget guidelines.
The first public action on High-1 came 1 August when the House National Security Committee agreed to reconcile the defense authorization bill to the budget bill. Without a hearing, with virtually no debate over the impact on readiness, 30 Republicans and 1 Democrat voted to shave retirement benefits for 22% of the current force. Representative Douglas “Pete” Peterson (D-FL), a retired Air Force pilot who spent six and a half years in a North Vietnamese prison, called High-1 the “Vietnam Veterans’ Retirement Reduction Act, because that is whom we’re hitting.” The committee action, he said, “is unconscionable.”
The Joint Chiefs of Staff two days later warned in a letter to committee chairmen that High-1 will stall the drawdown; force a new wave of involuntary retirements; and possibly raise, rather than lower, defense costs. More serious still, they said, will be the impact on morale. “To change the rules at this stage ... is blatantly unfair and unwarranted,” the Joint Chiefs said.
The Senate Armed Service Committee had until 22 September to accept High-1 or find another way to save $647 million.
The committee staffer who first took a fancy to High-1 no doubt has moved on to other matters. These are, after all, busy times for bean counters.