How the New Budget Cuts Would Impact You

You've seen the headlines and all you want to know is this: "what do the upcoming pay and benefit cuts mean for my family?"

UPDATE 3/5/14: The Defense Department has released all the details of the proposed cuts.

Go here for the most up to date information on how the proposed cuts would impact you.

The Defense Department Feb. 24 laid out a pretty bleak forecast when it comes to the future of pay, benefits and employment for current service members and retirees. Troop reductions. Lower BAH. Higher Tricare fees. Huge commissary cut. More personnel cuts. Smaller pay raise each year.

First, remember that none of this is law just yet. All of it is still just a proposal.

But still, that's some pretty scary stuff. We've known for awhile that life as we know it in the military is coming to end. Programs are downsizing or shutting. Rumors are flying about what is going away and when.

But what does it all mean?

What the Defense Department released this week was just a taste of their full proposal that will come out March 4 -- and then make it past Congress. Until then all we have in the way of details is what they presented Feb. 24 and speculation. All of the exact "but HOW?" stuff is still to come.

Here is what we know now about how it will impact you:

You Might Get Kicked Out of the Military

What we do know: Services, especially the Army and the Marine Corps, are already drawing down. For example, the Army already is working on reducing its current size of 520,000 soldiers to 490,000. However, under the new budget they are looking to shrink it even further to 440,000 active duty soldiers. The Marine Corps will be drop from 190,000 to 182,000 (and more if sequestration comes back). That means being given a pink slip when you thought you were making the military a life long business.

What we don't know: Exactly how the force reduction will work. For the current troop reduction it means separation boards for officers and denied reenlistments for soldiers and Marines, especially in "over strength" specialties. We could guess that similar paths will be taken in the future, but no details were given. We also don't know exactly how downsizing will impact the Navy or Air Force.

Does this make you as nervous as it makes me? Take our poll.

BAH Would Go Down

First, let's briefly review how BAH is calculated. The DoD each year looks at each area with assumptions about the kind of housing each pay grade qualifies for (example: an O-3 with dependents receives the rate for a three bedroom townhouse), the cost of utilities and the cost of renter's insurance. The result of that survey is what you receive for housing each month. (If you really want all the nitty gritty on this, go here).

What we do know: None of the BAH reductions are going to hit your paycheck in one lump immediately, or even if and when the 2015 budget passes later this year. You will see some reductions, though. The Pentagon's 2015 proposal will drop rates about 5 percent over time. They will stop including the cost of rental insurance in their calculation and they will start only covering 95 percent of your housing costs. That means if your pay grade is receiving $1,300 for housing in your area right now, in theory that number could go down to $1,235.

What we don't know: Exactly how this will roll-out over time. Officials said they are going to "slow the growth" of BAH. That makes it sound like we might over the next few years simply see smaller or no BAH rate growth in areas where it has consistently been going up. We also don't know how this will impact people who already live in an area. Right now if the BAH rate goes down where you are living, you continue to receive the older, higher rate. The new, lower rate only impacts people new to the area. Will that continue? The information released March 4 will hopefully tell us.

Commissary Funding Would Be Slashed

Like we've been reporting for months, the commissary system is going to see huge cuts over the next three years. While DoD officials claim they have no plans to close the commissary system, plenty of industry insiders wonder if that won't be the final result anyway.

What we do know: The commissary currently receives $1.4 billion to pay employees (many of whom are military family members), keep lights on and ship food. The new budget will reduce the commissary's tax payer funding to a measly $400 million by 2017. To stay open the commissary system is going to have to come up with that $1 billion themselves. Insiders have suggested that they are planning to do so by asking Congress to let them raise prices, raise the surcharge and nix subsidies for shipping food to OCONUS commissaries. (You can read more about this specific issue here).

What we don't know: The DoD's exact plan for how the commissary system is going to come up with that $1 billion extra by 2017 without closing stores won't be revealed until later. And we don't know exactly how much is going to be cut from their budget for 2015, either -- just that it will be slashed a total of $1 billion by 2017.

Poll: If commissary prices went up, would you continue to shop?

Tricare Fees Would Go Up

What we do know: Health care is the single most expensive part of military personnel costs and so the DoD is very interested in reigning it in. In the new budget deductibles and co-pays for retirees and some active duty users are going to go up and Tricare is going to be dramatically reshaped. According to a DoD official at a background briefing  that are going to "transform the health care system into a single plan."

Medically retired servicemembers, their families and surviving families of those who died on active duty will be sheltered from some of the cost increases. "We will simplify and modernize our Tricare health insurance program by consolidating plans and adjusting deductibles and co-pays in ways that encourage members to use the most affordable means of care," according to Defense Secretary Chuck Hagel.

What we dont know: Anything else. Those frustratingly few details leave us asking "wait, what?" with no answers, at least for now. That announcement sure makes it sound like it's going to cost more for users to go outside a local treatment facility for care or to pick-up prescriptions at civilian pharmacies. But how much more is yet to be seen. And what's this about a "single plan?" What does that mean? We'll have to wait to find out.

Pay Raises Would Be Slowed

What we do know: In recent years we have received a 1.8 percent pay increase each year. In 2015 the DoD is only asking for most troops to receive 1 percent. General officers and flag officers are going to see a pay freeze. And past 2015 pay raises will be "restrained."

What we don't know: What does "restrained" mean? We can count on 1 percent for 2015, but "restrained" in the future is, well, ambiguous.


Finally, Something to Remember

All of this is a proposal. To become law it has to first get past Congress and then be signed into law by the President. There is plenty of speculation out there that some of these proposals won't get past lawmakers as is. We could still see drastic changes to this stuff before it hits our backyards.

And you can make a difference. We saw it with the recent repeal of the retiree cost of living adjustment (COLA) reduction. People spoke up in LOUD opposition, and lawmakers took action to make the change. If you don't like something you see here, contact your Congressman and let him or her know.

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