Military Budget Includes 6% BAH Cut, 1% Pay Raise

For the latest updates to the BAH rates mentioned in this article, visit the Military.com BAH section. You can also get the latest military pay charts at the Military Pay Charts page.

U.S. service members would receive a 1 percent pay raise and eventually lose an average of 6 percent in housing allowances under the Defense Department’s proposed budget for next year.

The recommendations were made public on Tuesday with the release of the federal government’s spending plan for fiscal 2015. The changes are part of a larger effort by Pentagon officials to cut rising personnel costs by scaling back military compensation, consolidating health care plans and reducing commissary subsidies.

While Defense Secretary Chuck Hagel previously announced the lower basic pay raise and basic allowance for housing (BAH), documents released on Tuesday provided more information about the proposals, which would limit pay raises to 1 percent for the next three years and have troops pay an average of 6 percent -- not 5 percent, as previously stated -- of their future housing costs.

"This is a budget that recognizes the reality of the magnitude of our fiscal challenges," Hagel said during a press conference at the Pentagon.

He said the changes are needed to curb personnel costs, which are budgeted at $177 billion in fiscal 2015, beginning Oct. 1, or more than a third of the department’s non-war budget of $496 billion. Including civilian personnel, the percentage rises to almost half of the spending plan.

At least some of the proposals to restructure how the Pentagon pays for an all-volunteer force are likely to meet stiff resistance from veteran service organizations and lawmakers on Capitol Hill who have rejected similar ideas in the past.

"I share the broad dismay about the shrinking might of the military reflected in this budget," Rep. Howard "Buck" McKeon, R-Calif., chairman of the House Armed Services Committee, said in a statement. "We must resist the President’s compulsion to continually trade national security for financial responsibility, while getting neither."

By law, military pay raises are supposed to track growth in private-sector wages and salaries -- a level recently estimated at 1.8 percent. While Congress sets military pay increases on an annual basis, the defense budget includes proposed limits to the rises over the next five years for planning purposes.

Specifically, it recommends capping the basic pay raise for troops at 1 percent for the next three years through fiscal 2017, then increasing it to 1.5 percent in fiscal 2018 and 1.8 percent in fiscal 2019. Under the five-year plan, general officers and flag officers would see their pay frozen at current levels.

The smaller military pay raises would save the Pentagon an estimated $3.8 billion over five years, according to the budget overview.

Under the proposal, basic allowance for housing would be reduced over several years by an average of 5 percent. The benefit would also no longer cover renter’s insurance, meaning troops would have to cover closer to 6 percent of their housing costs.

"The proposal gradually slows annual BAH increases until rates cover 95 percent of housing rental and utility costs on average and eliminates renter’s insurance from the housing rates," the budget document states. "Overall, this results in an out-of-pocket cost of 6 percent on average."

By comparison, troops in the 1990s paid an average of 20 percent of their housing costs.

The actual percentage they’d have to cover would vary by area. Existing rates would be protected for troops already living in a given location, so the reduced allowance would only affect troops moving to a new area.

"No one who is currently living in a particular area will see their BAH decrease," the document states. In addition, reaching the target out-of-cost expense of 6 percent "will take several years to achieve because the Department is just slowing the growth of future increases."

Slowing growth in housing allowances would save the department an estimated $5 billion through fiscal 2019, according to the budget overview.

Norb Ryan, president of the Military Officers Association of America, an Alexandria, Va.-based advocacy group, has previously said that capping military raises below private-sector pay growth will "undermine retention and readiness."

With two years' worth of pay caps and the 5 percent housing-cut proposal, an Army sergeant with 10 years of service and a family of four would lose $1,400 a year, while an Army captain would lose $2,100 by the end of fiscal 2015, according to the association.

All told, the military compensation reforms -- reducing pay raises, freezing general officer pay, curbing basic allowances for housing, reducing commissary subsidies, consolidating Tricare plans and adopting travel restrictions -- are estimated to save the Pentagon almost $23 billion over five years, though almost half of that has already been budgeted for under previous health care initiatives.

-- Brendan McGarry can be reached at brendan.mcgarry@monster.com