Military and Federal Workers Are Living the Good Life While the Ones Who Pay Their Salaries Struggle

Between 2001 and 2009, per capita spending on three major components (basic pay and allowances for housing and subsistence) of cash compensation for active military personnel rose by 37 percent in inflation-adjusted dollars.

Government Would Save Billions by Capping Pay, CBO Says

March 15, 2011

GovExec.com - Reducing annual pay increases for federal civilian workers and military personnel would save the government billions of dollars during the next decade, according to the latest figures from the Congressional Budget Office in a report on trimming the burgeoning deficit.

CBO estimates the deficit will rise to $7 trillion during the next 10 years if mandatory and discretionary spending is not reined in across government. Capping military pay increases and reducing the annual across-the-board adjustment for civilian raises are two available areas, among several others, for cuts, the March 2011 report said.

The nonpartisan CBO said if the government capped the basic pay increase for service members from 2012 to 2015 and set raises at a rate 0.5 percentage points below the increase in the employment cost index,

it would save about $6 billion between 2012 and 2016, and $17 billion between 2012 and 2021. Since 2001, lawmakers have approved military pay raises for the average service member that exceeded the ECI by 0.5 percentage point.

President Obama's fiscal 2012 budget request proposes a 1.6 percent pay raise for military personnel and allocates an overall $8.3 billion for education, housing and other quality of life programs for service members.

"Between 2001 and 2009, per capita spending on three major components of cash compensation for active military personnel rose by 37 percent in inflation-adjusted dollars," the report said, citing basic pay, and allowances for housing and subsistence, as the primary compensation categories.

Overall, the Defense Department accounts for more than half of all annual discretionary funding, and any significant deficit reduction needs to take into account Defense appropriations, CBO said.

Nearly 40 percent of all spending is discretionary, totaling more than $1.3 trillion in 2010.
As for civilian compensation, CBO says the government could save about $10 billion during five years and $50 billion during 10 years by reducing by 0.5 percent the annual across-the-board pay raise expected under the 1990 Federal Employees Pay Comparability Act from 2013 to 2021. Obama has called for a federal civilian pay freeze in 2011 and 2012. Compensation costs for civilian personnel make up about 15 percent of federal discretionary spending, according to CBO.

But the report said the bigger savings would come from capping military pay.

According to CBO's analysis, "median cash compensation for military personnel -- including the tax-free cash allowances for food and housing -- exceeds the salaries of most civilians who have comparable education and work experience."

CBO acknowledged that reducing pay for service members and civilians could hinder recruitment and retention.

"That effect might be more pronounced for federal agencies that require workers with advanced degrees and professional skills."

To offset some of the pain associated with lowered base pay for service members in particular, CBO suggested expanding reenlistment bonuses. 

The report highlighted other areas for spending savings that would affect the health care benefits of Defense personnel, among them:

• An increase in cost-sharing in TRICARE for military retirees who are not yet eligible for Medicare;


• A limit on the TRICARE benefit for military retirees and their dependents (many enrollees who already have employer-sponsored insurance through a civilian job opt for enrollment in TRICARE Prime, which has the lowest out-of-pocket costs within the TRICARE system);


• An increase in cost-sharing for prescription drugs under TRICARE.

NSPS Employees Can Expect 2.26 Percent Pay Boost

January 11, 2011

GovExec.com - Defense Department employees still under the National Security Personnel System will see a pay boost this month, according to Pentagon leadership.

A Dec. 27, 2010, memo from Undersecretary of Defense for Personnel and Readiness Clifford Stanley clarifies the funding available for performance-based pay increases for more than 54,000 workers and creates a salary "control point," designed to match pay limits with those that will apply when employees transition out of NSPS.

According to a Defense spokeswoman, 2.26 percent of salaries within a given pay pool are available for performance-based pay increases. Employees will be eligible for performance-based bonuses that individual agencies will determine, but those awards are neither automatic nor guaranteed. According to the spokeswoman, agencies are still compiling the pay pool data for the 2010 payout, but employees must have received a rating of "3" or higher to be eligible for a performance award.

The 2.26 percent is used for calculating and budgeting the available funds for NSPS annual performance awards. Performance-based increases and raises under Accelerated Compensation for Developmental Positions, which recognizes improvement of employees in training programs and other developmental capacities, might be included in pay raise calculations, according to the memo.

A mandatory control point, however, prevents employees from receiving a performance-based raise if the increase will push their salary above Level IV of the Executive Schedule, or $155,500.

The control point does not apply to physicians or dentists, who will be eligible for higher salaries matching those paid by the Veterans Affairs Department and the private sector, Stanley wrote.

Defense transferred nearly 172,000 employees, or 76 percent, back to the General Schedule in fiscal 2010, in keeping with department estimates. The remaining NSPS workers will move into alternative pay systems this spring, and all employees must transition by the end of 2011.

Congress repealed NSPS in the fiscal 2010 Defense authorization law, giving the department until Jan. 1, 2012, to roll back the controversial pay-for-performance system completely.

CLARIFICATION: This story was updated to reflect that some, but not all, NSPS employees could receive performance-based pay increases.

Concerns Over Pay Loom as Pentagon Returns to General Schedule

May 17, 2010

GovExec.com - The Federal Managers Association is asking lawmakers to ensure Pentagon employees do not lose salary as a result of the transition from the department's defunct pay-for-performance system.

"While the [2010] law explicitly states no employee shall lose or see a decrease in pay as they transition, I am concerned that this language will allow DoD officials to freeze future pay of top performers due to current [General Schedule] rules on pay retention," FMA National President Patricia Niehaus said in a May 14 letter to the leadership of the House and Senate Armed Services Committees.

According to Nieuhaus, since the average pay raise under the National Security Personnel System exceeded raises under the General Schedule, many NSPS employees are now, in terms of salary, a GS level above where they were when they entered NSPS. When these employees return to the GS grade they occupied prior to their conversion into NSPS, it is likely their salary will exceed the GS Step 10 level, Niehaus said. Under pay retention rules, these employees would receive only half the annual pay raise until the GS system catches up with them.

"We are increasingly concerned with the rush of DoD officials to transition employees out of NSPS without taking a close look at the number of employees likely to be subject to pay retention rules," Niehaus said.

An FMA survey of its members showed an average of 20 percent to 25 percent of employees are subject to pay retention rules. If FMA's members are representative of NSPS employees as a whole, then about 40,000 employees could face a decrease in pay.

"Many of these dedicated employees have crunched the numbers and determined that the General Schedule will not catch up with them by the time they retire over the next decade," Niehaus wrote. "This is unacceptable."

FMA is most concerned that pay retention would have the greatest effect on employees who were top performers under NSPS, which Niehaus said would send the message that above-average performance is not rewarded in the federal workplace.

"As members of the Federal Managers Association prepare to transition out of NSPS, I respectfully request that you take action to ensure high-performing DoD civil servants receive the compensation they have rightfully earned before they are forced to endure the effects of this unjust policy," the letter said.

The House Armed Services Committee will mark up the 2011 Defense authorization bill on Wednesday. Spokespeople from both the majority and the minority sides said they were unable to discuss the legislation heading into the markup. But it's likely the bill will address the NSPS transition, given the requirement that all Defense employees leave the system by Jan. 1, 2012.

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