Budget Agreement Passed in House and Senate

Cost of living allowances for retirees to be reduced

By CAPT Marshall Hanson, USN (Ret.)

The Senate passed the Bipartisan Budget Control Act on Wednesday, Dec. 18. The bill will be rolling back $31 billion in cuts the Department of Defense faced under sequestration over the last two years. It easily passed in the Senate, 64 to 36.

Hastily passed by the House on Friday, Dec. 13, by a vote of 332-94, the contents of the bill were not thoroughly reviewed for impact. The six days between House and Senate brought details to light as the House bill was reviewed.

Controversy arose when it was learned that “working age” retirees would have the cost of living allowance (COLA) reduced by one percent from when they retired until age 62. A number of Senators tried to delay passage of the bill passage, or amend it to provide an offset for the $6 billion that budget leadership planned to gain from reducing military retiree COLA’s. Ten percent of that $6 billion would be a reduction in COLA from Chapter 61 retirees, who were medically retired.

Retirees who were drilling Reservists would only be affected for one year if they retire at 60-years-old. As written, the COLA reduction only lasts until they reached 62-years-old, with a recalculation occurring so that a retiree who is 62-years-old would have a constructed pay level that equates to what they would have received without the cut. A Reservist would only receive a reduced COLA at 61-years-old. Reserve Force veterans who earned earlier retirement serving in Iraq and Afghanistan would risk a COLA reduction during those earlier years.

Examples of this haste, included in the House press statement, are about the COLA reduction itself. The statement included an explanation saying that the first COLA cut would be one quarter of a percent.  Some who have read the bill indicate it will be a full percent. In addition the House statement said that disabled military would not be included in any COLA reduction. VA disabilities are not affected, but ROA learned that military veterans who were medically retired are indeed included, as was confirmed by both the Pentagon and the Congressional Budget Office.

The Federal Times reports that “Pentagon leaders support the plan, as do defense industry executives.”  As passed, DoD would receive $22.5 billion in readiness funds for Fiscal Year (FY) 2014 and another $9 billion in FY 2015. While this does not totally offset sequestration and reduce some of the financial pressure. ROA hopes that this additional funding will put a pause on suggest cuts to the Reserve Forces.

While DoD leadership avoided comment on the controversy, several flag and general officer retirees to weighed in. General Jim Jones, USMC, Gen. Chuck Wald, USAF, MGen. Arnold Punaro, USMCR and Admiral Greg Johnson, from the Bipartisan Policy Center, publically supported the Bipartisan Budget Act, with a statement that said “Such a change is much needed - but it's only a first step. Additional reforms to compensation to ensure benefits are both fair and sustainable will be essential to slow the rise of personnel costs and to ensure the military is able to make the necessary investments to maintain sufficient capability to fight and win wars."

Senators Roger Wicker, R-Miss., Kelly Ayotte, R- N.H, and Lindsay Graham, R-S.C., disagreed with the cuts and held a press conference on the day of the bill’s passage, hoping to slow the process down. Senator Jeff Sessions, R-Ala., went to the Senate floor hoping to change to bill by amendment, but was procedurally stopped. The Senators have pledged to eliminate the COLA cut. Sen. Ayotte has already introduced legislation to provide an offset.

Part of the motivation behind the agreement was to avoid a government shutdown on Jan. 15.  Passage of the bill will permit Hill staff to work over the Christmas recess to develop an actual budget that can be passed when the Congress returns in January. The Bipartisan Budget Control Act was more a handshake agreeing to a financial architecture, rather than budget specifics. ROA didn’t support delaying the legislation.

No cuts will occur before January of 2015. This provides at least nine months of legislative session in which to correct the problem.

While he voted for the budgetary bill, Armed Services Committee Chairman Sen. Carl Levin, D-Mich. did so reluctantly. ROA received a phone call from his staff indicating that Sen. Levin and Ranking Member James Inhofe were caught by surprise by the provision to reduce the COLA and were displeased that they were not included in the process. It was pointed out that another group being possibly impacted by the reduction is the recipients of the Survivor Benefit Plan.  

In their conversation with ROA, the SASC staff has promised that there is bi-partisan support to fix this within the SASC which was left out of the process. They expect to fix this provision during the next year, and are looking at offsets that will cover the $6 billion that were budgeted from the COLA reduction. 

After the vote, many Senators who voted in favor of the agreement were making public statements that they didn’t support the cut to military COLA. It should also be noted that while Federal employees face a similar COLA reduction, it is for only new federal employees and not retroactive to current employees.

The budget act’s co-author, Sen. Patty Murray, D-Wash., is now calling the COLA cut “a technical error,” and supports a correction.