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Rejecting a plan by his Office of Management and Budget to cap the 2004 military pay raise at 2 percent, President Bush will propose a “targeted” increase that would boost pay an average of 4.1 percent, according to administration sources.

That would make the raise almost a full percentage point higher than the anticipated wage growth in the private sector.

If approved by Congress, next January’s military raise will be capped at 2 percent only for new recruits. For all other servicemembers, the pay increase will range from 3.2 percent to more than 6 percent.

Bush’s plan is to be delivered to Congress in early February as part of his 2004 budget proposal. The largest raises would be aimed at enlisted grades E-5 through E-9.

Most officers would receive 3.7 percent, which would still be a half percentage point higher than private sector wage growth as measured by the government’s Employment Cost Index.

Administration sources said Bush made the pay raise decision personally, resolving a disagreement between OMB Director Mitchell Daniels, whose proposal was reported in Stars and Stripes in late December, and senior defense officials. The outcome was even better for servicemembers than expected.

Defense officials had hoped to be allowed to follow current law and have an overall raise of 3.7 percent in 2004. Bush agreed to that, plus another 0.4 percent, to address more quickly a perceived pay gap between career enlisted and civilian peers.

Bush’s decision eases concerns at the Pentagon of a raise cap plan being unveiled by this administration as forces build in the Persian Gulf for possible war with Iraq.

OMB had told defense officials in early December to expect to cap military raises next year at 2 percent, almost cutting in half a 3.7 percent planned increase as called for under a 1999 law to close an undefined military pay gap. Military pay adjustments through 2006 are to be set a half percentage point above the annual rise in private-sector wages.

Daniels not only wanted a pay raise cap next year but proposed disconnecting future military raises from private sector wage growth and tying them instead to the annual inflation rate. OMB predicted the switch would save billions of dollars over the next decade.

But the logic and timing, as tens of thousands of additional servicemembers deploy, stunned defense leaders who turned to Bush for relief. He rejected the OMB proposal, sources said, more than a week before visiting soldiers at Fort Hood, Texas, on Jan. 3.

Though Bush didn’t announce his 2004 raise decision to soldiers there, he did say that he understood the “sacrifices of military families” and noted that the 2003 defense bill he signed in early December supports “the largest increase in defense spending in a generation.”

He added, to cheers, “I wanted to make sure that our soldiers had the best possible pay.”

Targeting raises

If Congress agrees with Bush’s pay raise plan for next January, it would be the fourth consecutive “targeted” raise, including a special raise in July 2001, aimed at least in part at making mid- and senior-grade enlisted pay more competitive. The increase overall in ’04 would be 4.1 percent but actual raises would vary by pay grade and, to some extent, within grade based on time in service.

New recruits (E-1s) would see the smallest increase, 2 percent. Other junior enlisted would get 3.2 percent, enough to stay even with private sector wage growth. Pay grades E-5 through E-9 would see the biggest increases, some as high as 6.25 percent. All officers except the most junior would get 3.7 percent, matching the ECI-plus-a-half-percent formula. Officers in the rank of O-1 would get a 3.2 percent increase.

Charles S. Abell, principal deputy undersecretary for personnel and readiness, acknowledged at a Pentagon news conference Dec. 23 differences within the administration over ’04 pay raise. Defense officials, he said, continued to support military raises set a half percentage point above changes in the ECI, with special targeting to benefit career enlisted members.

Abell also hinted that a compromise was in the works, saying pay for “our most junior enlisted and our most junior officers is significantly better than pay of [civilian] counterparts, based on age and experience and education levels on the outside.”

He based his comments, it was later learned, on findings of a Pentagon study group, the 9th Quadrennial Review of Military Compensation. In a report released last March, the QRMC said junior enlisted compensation “compares favorably with their civilian counterparts.”

The report recommends extra pay increases for midgrade and senior enlisted to recognize gains in their education levels over the past decade. The QRMC recommended only a “modest pay adjustment” for junior enlisted.

Some administration officials expect Congress to change the Bush military pay proposal slightly, if only to ensure that junior enlisted grades receive the full 3.7 percent increase supported by law.

One source said Daniels lost this round but that OMB will continue to press for linking future military raises to changes in the Consumer Price Index, which measures inflation, versus ECI, which tracks wage growth. The switch would save billions of defense dollars over the next decade. OMB is expected to raise it again, presumably when the storm of war is not so near.

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