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Many servicemembers are not well informed about their hodgepodge of pays, allowances, benefits and tax breaks and therefore don’t recognize and appreciate the real worth of their compensation packages.

The observation is made in a Government Accountability Office report, released late last month, that questions the “reasonableness, appropriateness, affordability and sustainability” of the military compensation system.

The GAO report adds timbre to a rising chorus of warnings, mostly from defense think tanks and senior defense officials, that military personnel costs are soaring and that too much of that money goes into deferred compensation, such as retirement and lifetime health care, which are seen as relatively inefficient ways to attract recruits or even to retain careerists. The study is timely for defense officials who last spring created a Defense Advisory Committee on Military Compensation to study private-sectorlike changes to military pay and benefits. A draft report is due next month.

In February, the Center for Strategic and Budget Assessments in Washington published a report detailing the sharp rise in military compensation since 1999 and warning of an affordability crisis. In a book, and later in a New York Times commentary, economist Cindy Williams of MIT’s Security Studies Program argued that much of the recent spike in military compensation helps retirees and survivors but does little to attract recruits or sustain the current force.

The GAO report says annual government spending on military pay, allowances and benefits jumped 29 percent, or by $35 billion, from 2000 to 2004. The government, it adds, spent an average of $112,000 last year on compensation for active-duty members. That average is across the force, officers and enlisted, and includes the cost of benefits to members from other departments, such as Veterans Affairs, Labor and Education.

Because military compensation costs are paid by four departments, Congress and DOD officials lack “transparency” to manage them effectively. They are missing a cost trend that, in time, will squeeze budgets for other defense priorities, GAO suggests.

Basic pay and allowances alone are “competitive” with private-sector wages, exceeding salaries or wages of 70 percent of Americans of similar age and education, GAO says. “While some specific skill groups could likely make considerably more in civilian jobs, such perceptions of noncompetitive compensation seem to be inaccurate in broad terms,” the report says.

Meanwhile, military benefits remain “much greater” than those of civilian peers, it adds.

Despite the competitiveness of military compensation, GAO confirmed through focus groups with active-duty servicemembers what Defense Department surveys also show — that many are both dissatisfied and misinformed about their compensation.

“We heard frequent complaints from senior enlisted servicemembers and officers that benefits were eroding,” GAO says. That perception “is in direct contrast to the reality that costs to compensate servicemembers have risen dramatically in recent years and benefits are projected to rise even more dramatically.”

It recommends that Defense officials launch a comprehensive communication and education plan.

For at least the last six years, military pay raises have exceeded wage growth in the private sector. Housing allowances not only have kept pace with rental costs but have closed a 15 percent gap. Enlistment and re-enlistment bonuses and special pays have climbed, particularly for ground forces, since the U.S. invasion and occupation of Afghanistan and Iraq.

Congress in 1999 repealed a less valuable retirement plan that would have hit members who entered service in 1986 or later. It opened the federal Thrift Savings Plan to military savers. In 2002, Congress approved a significant expansion in health benefits for older retirees and families. Last year, lawmakers boosted the value of the Survivor Benefit Plan by phasing out a reduction in benefits that occurs at age 62. Congress also ended for seriously disabled retirees the ban on “concurrent receipt” of military retirement and VA disability compensation.

Despite the gains, the report chides DOD for failing to educate members effectively about their compensation.

It also blames a “piecemeal” approach to pays and benefits since the end of World War II. GAO recalls that it warned in a report almost 30 years ago that the mix of pays and allowances already was too complex. Since then it’s gotten more confusing. Congress and the department have added benefits “with little consideration of … whether costs are affordable and sustainable over the long term, or their effectiveness and return in terms of recruiting or retention,” says GAO.

Only 49 percent of military compensation is paid as cash. The 51 percent of “non-cash and deferred benefits” reflects a commitment to members and families but it is undervalued by servicemembers, GAO says. It cites a study by economists John T. Warner and Saul Pleeter that found that half of all officers and 90 percent of enlisted members equate the value of $1 payable in 20 years with four cents in their pocket today.

To comment, write Military Update, P.O. Box 231111, Centreville, VA 20120-1111, e-mail milupdate@aol.com or visit militaryupdate.com.


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