Policy & Strategy

Pentagon officials want a change to $6B pension cut

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Pentagon officials on Tuesday for the first time called for the $6 billion cut to military pensions to be changed so current service members and veterans are not affected.

Senators from both parties went further than that, arguing for a full repeal of the cut included in last month’s budget deal — approved overwhelmingly in bipartisan House and Senate votes.

{mosads}Acting Deputy Defense Secretary Christine Fox said at a Senate hearing the Pentagon would “strongly recommend” grandfathering the cuts included in last month’s two-year budget deal.

This would ensure that current retirees, and people now in the military who will retire and see their pensions reduced, would not be affected by the cuts. Only future members of the military would see their pensions reduced. 

The Pentagon’s arguments are likely to spur momentum to change the controversial provision. More than a third of lawmakers have endorsed repealing the $6 billion cut altogether, and veterans groups have lobbied fiercely to reverse it.

The biggest hurdle to reversing the cut remains finding a way to offset its cost that is acceptable to both parties.

The cut was included along with a separate reduction to the pensions of civilian workers, affecting only civilian workers hired after Jan. 1, 2014.

The budget deal reduces the annual cost-of-living adjustment (COLA) for working-age military retirees under the age of 62 by 1 percentage point below inflation. Retirees have to have served 20 years in the military to be eligible for the pension.

Fox and Adm. James Winnefeld, vice chairman of the Joint Chiefs, appeared to seek a middle ground at Tuesday’s Senate Armed Services Committee hearing, recommending grandfathering current service members but waiting for a commission on personnel costs to report its findings before making any lasting changes to the system. The panel’s report is due February 2015.

“We cannot afford to sustain the rate of growth in military compensation we’ve experienced over the last decade,” Fox said Tuesday. “The one-third of the defense budget consumed by military compensation cannot be exempt as an area of defense savings. We must find ways to slow the rate of growth.”

For lawmakers, however, waiting until next year to fix the $6 billion COLA cut is unacceptable, even though the changes do not take effect until December 2015.

“I believe we will have the ability to act promptly on a bill, and I hope that we will — and not wait for the commission — because there is a clear consensus we should clear the air on this issue,” Senate Armed Services Committee Chairman Carl Levin (D-Mich.) said at the hearing.

Budget hawks, including budget deal co-author Rep. Paul Ryan (R-Wis.), have defended the reductions to military retirement benefits as a modest change that is needed to start curbing military personnel costs.

But on Tuesday, none of the senators on the Armed Services panel defended the cuts, and several complained that committee members were not consulted before the cuts were included in the budget deal.

In her testimony, Fox also said that “no DOD officials were consulted on the details” of the budget deal.

Sen. Kelly Ayotte (R-N.H.) on Tuesday said she was tweaking her proposal to repeal the COLA reductions to try to convince Democrats to back her measure.

Ayotte said her new amendment addresses Democrats’ chief concern with her initial bill, which prevents illegal immigrants from claiming the additional child tax credit. The new measure, she said, allows taxpayers to use a child’s valid Social Security number to claim the credit, even if the parents are illegal immigrants.

“They said their big beef last time was what about the children who are American children, and you’re hurting them, and I said, ‘OK, I’ll listen to you,’ and I’ve revamped my proposal,” Ayotte said. Her measure would save $20 billion over 10 years.

But Democrats said they preferred to find a different offset.

“I think there are better pay-fors than that,” said Sen. Tim Kaine (D-Va.), a member of the Senate Armed Services Committee. “I don’t think you need to pay for this fix by harming programs that affect children.”

Levin told The Hill he still needed to see the details of Ayotte’s bill, but that he didn’t expect Democrats to support a measure that would “hit kids to pay for this.”

The Armed Services chairman said he wanted to bring a repeal bill to the Senate floor without an offset, and then let senators propose various amendments that would pay for the retirement benefits.

“It’s going to be a lot harder to get a bill to the floor which has broad, bipartisan coalition if you try to identify the pay-for in advance,” Levin said.

Kristina Wong contributed.

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