Lawmakers vowing to reverse cuts to military pensions face a dilemma

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House and Senate leaders face a dilemma, when they return in January amid a bipartisan backlash over cuts to military pensions.

Lawmakers from both parties are demanding the quick repeal of military retirement cuts included in last month’s two-year budget deal.

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A flurry of bills have been introduced in both chambers to remove the $6 billion cut to the cost-of-living adjustment (COLA) for working-age military retirees, and service member and veterans organizations plan a major lobbying push when Congress returns.

But the military pension cut was one of many intertwined elements of the budget agreement struck between Rep. Paul Ryan (R-Wis.) and Sen. Patty Murray (D-Wash.), who chair their chamber's Budget panels.

Reducing military pensions was a core part of the deal that also reduces pensions for civilian federal workers. The agreement, which was quickly passed in both the House and Senate in December, replaced $63 billion in automatic spending cuts known as the sequester in 2014 and 2015 while reducing long-term deficits by a total of $85 billion.

So far, House and Senate leaders have not indicated they will bring up any of the bills that would fix the military pension cuts. Leadership offices did not respond to requests for comment on taking up military benefits legislation in 2014.

Ryan and Murray have agreed to make one change to the law: reversing pension cuts for former service members retired for medical reasons. They say medically retired veterans were included in the agreement due to a technical error.

But in a sign that House leadership might resist legislation to remove the military retirement cuts from the deal, Ryan wrote an op-ed before Christmas defending the overall pension cuts.

“For me, there's simply no choice between responsible reforms of military compensation and making what our military leadership has called ‘disproportionate cuts to military readiness and modernization,’ Ryan said.

Whether any military pension bills get votes on the floor, the retirement benefits fight is poised to be one of the fiercest battles in Congress in the first months of 2014, with vocal lawmakers from both parties flanked by veterans groups and demanding action.

The issue could be politically volatile in 2014 as well, particularly for lawmakers who oppose the COLA cut but still voted for the budget deal.

Sen. Jeanne Shaheen (D-N.H.), who is up for reelection this year, was criticized over the retirement benefits by the New Hampshire Republican Party, after she voted for the budget agreement, even though she also introduced legislation that would repeal the cuts.

The pension cuts battle is one part of a brewing war over military compensation costs, as the Pentagon grapples with budget pressures under sequestration.

Both sides see the fight over the military retirement benefits as a test case to gauge how politically difficult it would be to make future changes to pensions and other benefits, like military healthcare.

That has sparked a full-court press from service member and veterans organizations to reverse the military retirement reductions.

“There’s no doubt that this is a little bit of a weather vane, a litmus test as to what the veterans and military communities’ tolerance is going to be for this, and what types of cuts we’re going to be willing to tolerate and what types of cuts we're going to fight on,” said Alex Nicholson, legislative director for the Iraq and Afghanistan Veterans of America (IAVA).

Budget hawks say military pay and benefits threaten to overrun the defense budget and eat up a bigger piece of the mandatory spending pie, as costs have skyrocketed over the past decade.

Defense Secretary Chuck Hagel has endorsed compensation reform, and Pentagon leaders backed the budget deal despite the reduction in benefits for military retirees.

Supporters of compensation reform argue that the budget agreement makes a small adjustment to military pensions, reducing the COLA by 1 percent below inflation until retirees reach age 62.

Ryan, for instance, cites statistics that show a sergeant first class who retires at 38 would still receive $1.7 million in pension benefits over a lifetime with the cuts, rather than $1.8 million.

Opponents paint a different picture. They say the same Sergeant First Class who retires at 42 loses $72,000 in retirement pay because of the cuts, the equivalent of three years worth of benefits.

Service member and veterans groups say the decision to target retirees and current service members, rather than changing benefits only for new enlistees, is breaking a promise made to those who serve.

Sen. Lindsey Graham (R-S.C.), who voted against the budget deal over the retirement cuts, says he is open to considering compensation reform, but he argued the quickly passed budget agreement was the wrong approach to changing benefits.

“Reform will come one day, but it sure as hell won’t come this way,” Graham said last month.

The military pension cuts do not take full effect until 2016, leaving plenty of time for changes to be made to the law. Supporters and opponents of compensation reform are eying a congressionally mandated panel that is studying all aspects of military compensation, and is due to report its findings in May.

Senate Armed Services Committee Chairman Carl Levin (D-Mich.), a crucial Senate voice on military issues, has also said his committee will review the COLA changes in the budget deal early next year.

— Pete Kasperowicz contributed.