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Bill Would Reduce 2014 Troop Pay Raise to 1%

A proposed deal on a defense bill in Congress would decrease troops' pay raise in 2014 to 1 percent from 1.7 percent this year.

The figure is in line with what the Obama administration requested and the Democratic-led Senate Armed Services Committee approved earlier this year. While the Republican-led House of Representatives previously passed a 1.8 percent military pay raise for next year, some of its leaders have since agreed to limit the increase as part of a legislative compromise.

"It appears that the 1 percent pay raise is what's been locked in," Michael Hayden, director of government relations at the Military Officers Association of America, an Alexandria, Va.-based nonprofit representing some 380,000 current and former officers, said in an interview with Military.com. "We've been pushing real hard for 1.8 percent, but our expectation is we may have lost that battle."

The change means the average enlisted member will receive a monthly pay increase of $26 instead of $47, according to Pentagon budget documents. The House is expected to vote this week on the compensation levels as part of the 2014 National Defense Authorization Act, which sets policy goals and spending targets for the fiscal year that began Oct. 1.

The leaders of the armed services panels -- Sen. Carl Levin, D-Mich., and Rep. Howard "Buck" McKeon, R-Calif. -- on Monday announced a last-minute compromise on the defense bill and, in a departure from the norm, urged their colleagues to pass the legislation without amendments to meet certain year-end deadlines. The House is scheduled to adjourn Friday for holiday recess.

If the measure passes the House, it will go to the Senate for a vote next week. If that chamber approves it and President Barack Obama signs it, the pay raise would become law and take effect Dec. 31.

The lower raise for military personnel was "a tough decision" for Pentagon leaders, but it allowed them to not have to thin the ranks "by thousands of additional troops on top of the drawdown already planned," according to budget documents.

The bill doesn't specify a pay raise of 1 percent, though it gives President Barack Obama the authority to set it at that level, which he has already vowed to do.

The legislation supports existing law, which stipulates a 1.8 percent military pay raise to keep pace with civilian wages, but -- more importantly -- gives the president flexibility to make exceptions by executive order, according to a press release from McKeon's committee.

"President Obama has notified Congress that he intends to use his authority to set the 2014 military pay increase at 1 percent," the release states. "The NDAA neither affirms [nor] rejects the President's decision."

While the bill would effectively set pay raises at 1 percent, it would also reject proposed fee increases for the Tricare health care system and renew combat pay and other benefits.

Even so, if Congress doesn't pass the bill soon, important forms of military compensation would freeze after Dec. 31, including hazard pay and re-enlistment bonuses, according to Sen. James Inhofe, R-Okla., the senior Republican on the Senate panel.

Separately, congressional negotiators on Tuesday announced a budget deal that would undo some of the automatic federal spending cuts known as sequestration. The agreement, known as the Bipartisan Budget Act, would give the Defense Department more than $30 billion in additional funding in 2014 and 2015.

However, the pact would be paid for in part by reducing pension contributions to working-age military retirees. Military retirees between the ages of 40 and 62 would receive an annual cost-of-living increase that's 1 percent less than inflation. The reduction would be introduced over three years and take full effect in 2016.

Hayden said MOAA has vowed to fight the provision and already started a letter-writing campaign to lawmakers.

"This was a backroom deal that was made by a committee that doesn't have jurisdiction over armed services," he said. "It not only caught us by surprise, I think it caught members of Congress by surprise, especially members of the armed services committees."

The pension change could decrease retirement benefits by nearly 20 percent in some years for military retirees, Hayden said. For example, an E-7 who retires at age 40 would receive about $35,500 by age 62, down from about $44,000; while an O-5 who retires at age 42 would get about $63,900 by age 62, down from about $77,600, he said.

Overall, however, military retirees would see a roughly 10 percent decrease in retirement pay by age 61 -- and the cumulative effect of the cost-of-living adjustment would decline over time, according to Kevin Brancato, a defense analyst at Bloomberg Government in Washington, D.C.

"You're talking about a small decrease in the total package for a retiree's lifetime," he said in a telephone interview. "It's between four and five percent."

The House is similarly expected to vote on the budget bill before adjourning Friday, and could vote as early as Thursday.

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