Senate housing allowance reform would end windfalls of rent sharing
May 26, 2016
The Senate Armed Services Committee, as part of a more aggressive campaign to hold down military compensation costs, is calling for “substantial reform” of the $21 billion Basic Allowance for Housing (BAH) program.
One of its proposals would end what the committee perceives as windfall BAH payments made to servicemembers who opt to reside together, thus lowering their actual costs of off-base housing while assigned stateside.
A second BAH “reform” would cap individual monthly payments to the lesser of two amounts: either what individuals actually pay to rent housing or to a local BAH maximum based on their rank and dependency status.
The reforms are described in the committee’s 678-page report [No. 114-255] released this week to explain hundreds of provisions in its fiscal 2017 defense authorization bill (S. 2943) and the reasoning behind many.
The Senate bill also proposes a fourth consecutive military pay raise cap next January, sweeping changes to Tricare, as detailed here last week, and a two-year test to privatize up to five commissaries, in addition to adopting variable pricing and other modern tools to operate the base grocery stores.
More than 30 senators already are backing an amendment from Sens. Jim Inhofe, R-Okla., and Barbara Mikulski, D-Md., to block a privatization test until a study ordered in last year’s defense authorization bill, on the costs and benefits of privatization, is completed.
On all of these issues, the House-passed defense bill doesn’t go as far the Senate bill would to slow compensation growth. But the Senate bill also fully funds overseas contingency operations for next year, which the House does not, triggering a veto threat from President Barack Obama.
Last year the Senate committee, chaired then, as now, by Sen. John McCain, R-Ariz., with close friend Sen. Lindsey Graham, R-S.C., serving as its personnel subcommittee chairman, proposed two other controversial changes to BAH. Neither survived final negotiations with the House.
One would have eliminated BAH for more than 40,000 servicemembers married to other members, arguing that BAH is designed so one “with dependents” payment should cover a couple’s average rental costs. But Defense Department officials countered that BAH is integral to the total compensation package. Ending it would inflict a “significant marriage penalty” on those who happened to be wed to other servicemembers. The committee also proposed lowering BAH to 75 percent of a full monthly rate for members who reside with other members, a change House conferees also rejected.
The Senate committee under McCain still aims to end BAH windfalls with new rules it hopes the House will accept. DOD support again isn’t likely. Indeed, the committee report criticizes DOD for failing to prepare, as Congress requested, a report on how best to modify BAH rates to cover actual housing costs. In the report it gave Congress in March, the committee said, DOD “expressed its opposition to limiting BAH to actual housing costs.”
The committee said the perception of housing allowances has become distorted over time. The original intent “was to provide a housing benefit for servicemembers in recognition of the transient nature of military service, and in further recognition of the reality that civilian spouses are often unemployed and sacrifice careers of their own.”
The tax-free nature of the housing allowance, the fact that rates differ based on dependency status and that BAH isn’t paid when a member lives in government housing serve to validate the original purpose, it said.
Yet DOD officials have made BAH integral to its calculation of Regular Military Compensation, which is used to compare compensation to civilian salaries and track the adequacy of military pay. The disconnect of housing allowance from its real purpose grew wider still since 1999 as BAH rates rose steadily to fully cover average rental costs by 2006.
The result is that BAH “now far exceeds the actual cost of housing borne by some servicemembers,” said the committee. It cited a U.S. Army Audit Agency audit that BAH paid just to co-located married servicemembers exceeded their actual housing costs by more than $200 million in 2014.
The committee said its new reform proposals — to provide only partial BAH tied to shared rent and to limit BAH overall based on the smaller amount between actual rent and the local BAH maximum — would not affect members until their first permanent change-of-station move after Jan. 1, 2018.
It also directs that DOD give Congress a new report by next March on how the new BAH calculations should be implemented, and to include an estimate of the impact on force retention and overall compensation, particularly for members who now choose to reside with other members.
The new BAH proposals are expected to draw the same sharp criticism from dual-service couples heard last year. One major military association already has labeled this a fresh attack on an essential element of compensation earned separately by members not assigned to base housing.
Some committee critics say McCain, who entered the U.S. Naval Academy a decade before the all-volunteer force began, is trying to revert to the “paternalism” of a bygone era when the military touted “taking care of its own” and worried less about keeping military compensation competitive.
Another highlight of the Senate bill, which will be voted on sometime after the Memorial Day recess, would permanently authorize a $310 a month Special Survivor Indemnity Allowance (SSIA) to 62,000 surviving spouses. These survivors, all of whom either had spouses die while on active duty or die in retirement from service-connected conditions, are unlikely to be satisfied with SSIA becoming permanent. It equals only about one-fourth what most of them lose in Survivor Benefit Plan (SBP) payments because they also qualify for Dependency and Indemnity Compensation (DIC) from the Department of Veterans Affairs, and, by law, taxable SBP must be offset by non-taxed DIC.
Congress created SSIA almost a decade ago to give these survivors temporary relief from the offset. Ending it entirely was seen as unaffordable. With SSIA due to expire next year, the House voted to extend it for a year. The Senate committee wants SSIA made permanent at $310 a month, signaling that more relief than that will remain unaffordable.