Legislative News Update 10 May 2010 



Legislative News is AUSA Government Affairs Directorate's 
weekly electronic newsletter, and is published 
every Monday when Congress is in session. 


In this issue:

  • Defense Secretary to Take Hard Look at Pentagon Bureaucracy
  • DFAS to Resume VSI/SSB Recoupment



In remarks delivered over the weekend, Defense Secretary Robert Gates said that he is ordering a top-to-bottom review of the military bureaucracy in search of at least $10 billion in annual savings. He told the audience at the 65th anniversary of Victory in Europe at the Eisenhower Memorial Library in Abilene, Kan., that “Given America’s difficult economic circumstances and parlous fiscal condition, military spending on things large and small can and should expect closer, harsher scrutiny.  The gusher has been turned off, and will stay off for a good period of time.”

Gates continued, “The fact that we are a nation at war and facing an uncertain world, I believe, calls for sustaining the current military force structure – Army brigades, Marine regiments, Air Force wings, Navy ships.  This typically requires regular real growth in the defense budget ranging from two and three percent above inflation.  In this year’s budget request, the Defense Department asked for, and I hope will receive, just under two percent – roughly that level of growth.  But, realistically, it is highly unlikely that we will achieve the real growth rates necessary to sustain the current force structure.”

Gates said that he will personally oversee the effort to reshape the Pentagon and that he won’t be denied.  “We’re not going to roll over to preserve programs that we think we don’t need – regardless of where the pressure is coming from.”

As expected, one of the targets mentioned for savings is military health care.  Gates said, “Health care costs are eating the Defense Department alive, rising from $19 billion a decade ago to $50 billion – roughly the entire foreign affairs and assistance budget of the State Department.  The premiums for TRICARE, the military health insurance program, have not risen since the program was founded more than a decade ago.”

Adding, “Many working age military retirees – who are earning full-time salaries on top of their full military pensions – are opting for TRICARE even though they could get health coverage through their employer, with the taxpayer picking up most of the tab as the result.  In recent years the department has attempted modest increases in premiums and co-pays to help bring costs under control, but has been met with a furious response from the Congress and veterans groups.  The proposals routinely die an ignominious death on Capitol Hill.”

The request for fiscal 2011 did not call for an increase in fees. Health care accounts for about 10 percent of baseline defense spending.

“This same sentiment [of wanting to help service members] motivates the Congress routinely to add an extra half percent to the pay raise that the Department requests every year.  Furthermore, the all-volunteer force, which has been a brilliant success in terms of performance, is a group that is older, more likely to have spouses and children,  and thus far costlier to recruit, retain, house, and care for than the Eisenhower-era military that relied on the draft of young single men to fill out its ranks,” he said.

Earlier at a House Armed Services Committee hearing, Rep. Susan Davis, D-Calif., asked Gates why the requested raise for fiscal 2011 does not continue the pattern of ECI-plus-a-half percent to keep closing the remaining 2.4 percent gap. The request calls for a 1.4 percent pay raise for military and civilian employees.

The secretary put the cost of a half percent increase in the request at $500 million for the first year. As he did in the speech, he said at the hearing that health care costs and additional pay increases were threatening to “eat us alive.”

Gates said that in the past two years he recommended the elimination of a number of major weapons programs, including the Army’s Ground Combat Vehicle portion of the Future Combat System.  The Defense Department estimated the savings at more than $330 billion over the life cycle of the programs if delivered.

“The changes we have made in the procurement arena represent an important start.  But only a start.  More is needed – much more.  The Defense Department must take a hard look at every aspect of how it is organized, staffed, and operated – indeed, every aspect of how it does business.  In each instance we must ask:  First, is this respectful of the American taxpayer at a time of economic and fiscal duress?  And second, is this activity or arrangement the best use of limited dollars?”

He called for reviews of the department’s operations and maintenance budget to look for additional savings.

Gates said, “Another category ripe for scrutiny should be overhead – all the activity and bureaucracy that supports the military mission.  According to an estimate by the Defense Business Board, overhead, broadly defined, makes up roughly 40 percent of the Department’s budget. During the 1990s, the military saw deep cuts in overall force structure – the Army by nearly 40 percent.  But the reduction in flag officers – generals and admirals – was about half that.  The Department’s management layers – civilian and military – and numbers of senior executives outside the services grew during that same period.“

Like civilian industries and businesses, he recommended cutting middle and higher echelons of bureaucracy that were duplicative and in cases where headquarters were reporting to other headquarters and secretariats reporting to other secretariats. He also called for the downgrading of some positions both in the military and civilian secretariats.

Finally looking at requirements, Gates said, “This department’s approach to requirements must change.  Before making claims of requirements not being met or alleged ‘gaps’ – in ships, tactical fighters, personnel, or anything else – we need to evaluate the criteria upon which requirements are based and the wider real world context.  For example, should we really be up in arms over a temporary projected shortfall of about 100 Navy and Marine strike fighters relative to the number of carrier wings, when America’s military possesses more than 3,200 tactical combat aircraft of all kinds?”

AUSA and its Military Coalition partners are vigilant and have already begun to engage Congress to make sure our message on health care fees and military pay is heard.  It is critical that you add your voice to ours by visiting our website, www.ausa.org and send our suggested message to Congress.  Click on Contact Congress, enter your zip code and then click on the AUSA-proposed letter titled, “Support H.R. 816, the Military Retirees’ Health care Protection Act”.  Clearly it is Congress that we must continue to influence.


The Defense Finance and Accounting Service announced last week that recoupment of military retirees' Voluntary Separation Incentive (VSI), Special Separation Benefit (SSB) and other separation payments will resume in August 2010.

VSI, SSB and certain other separation payments, such as severance pay, were offered to active duty military members in an effort to reduce manpower in certain career fields, primarily during the 1990s. Because federal law prohibits military members from receiving both separation and retirement payments for the same period of service, provisions of these programs included repayment should an individual join the Ready Reserve or return to active duty and earn status as a military retiree.

On June 1, 2009, in response to retirees’ concerns, DFAS temporarily stopped deducting these repayments from retirement pay while the DoD conducted a formal review of the recoupment program.  Prior to the review, the federal statutes governing these programs did not allow the Department of Defense or DFAS to alter repayment rates or provide alternative repayment plans regardless of the financial hardships a retiree may be experiencing.

The DoD review is complete, and Congress has amended the law to help limit the financial strain on military retirees as they repay their outstanding balances. The new statutes allow DFAS more flexibility to accommodate for financial hardship and modify payment plans. As a result, DFAS has reduced the maximum recoupment rate from 90 percent to 40 percent. DFAS also will consider more lenient repayment plans for retirees who are experiencing financial hardship.
Affected retirees will receive notification letters at least 90 days before recoupments resume. If they feel the rate of recoupment will create a financial hardship, they may request a more lenient repayment plan by providing financial information on the Financial Statement of Debtor form enclosed with the notification letter.

This monthly recoupment may also affect former spouses who receive Uniformed Services Former Spouse Protection Act payments from such retirees. Former spouses affected by this recoupment also will receive a notification letter prior to the resumption of recoupments.

Retirees and former spouses who have questions may find more information at www.dfas.mil/rapay.html or by calling Retired and Annuitant Pay Customer Service at 1-800-321-1080.