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93–413 PDF 2015

S. HRG. 113–572 

DEPARTMENT OF DEFENSE PROPOSALS RELATING 

TO MILITARY COMPENSATION 

HEARING 

BEFORE THE

COMMITTEE ON ARMED SERVICES 

UNITED STATES SENATE 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

MAY 6, 2014 

Printed for the use of the Committee on Armed Services 

( 

Available via the World Wide Web: http://www.fdsys.gov/ 

COMMITTEE ON ARMED SERVICES 

CARL LEVIN, Michigan, Chairman 

JACK REED, Rhode Island 

BILL NELSON, Florida 

CLAIRE MCCASKILL, Missouri 

MARK UDALL, Colorado 

KAY R. HAGAN, North Carolina 

JOE MANCHIN III, West Virginia 

JEANNE SHAHEEN, New Hampshire 

KIRSTEN E. GILLIBRAND, New York 

RICHARD BLUMENTHAL, Connecticut 

JOE DONNELLY, Indiana 

MAZIE K. HIRONO, Hawaii 

TIM KAINE, Virginia 

ANGUS KING, Maine 

JAMES M. INHOFE, Oklahoma 

JOHN MCCAIN, Arizona 

JEFF SESSIONS, Alabama 

SAXBY CHAMBLISS, Georgia 

ROGER F. WICKER, Mississippi 

KELLY AYOTTE, New Hampshire 

DEB FISCHER, Nebraska 

LINDSEY GRAHAM, South Carolina 

DAVID VITTER, Louisiana 

ROY BLUNT, Missouri 

MIKE LEE, Utah 

TED CRUZ, Texas 

PETER K. LEVINE, Staff Director 

JOHN A. BONSELL, Minority Staff Director 

(II) 

C O N T E N T S 

MAY 6, 2014

Page 

DEPARTMENT OF DEFENSE PROPOSALS RELATING TO MILITARY COMPENSATION . 1 

Dempsey, GEN Martin E., USA, Chairman of the Joint Chiefs of Staff ............ 3 

Winnefeld, ADM James A., USN, Vice Chairman of the Joint Chiefs of Staff .. 8 

Odierno, GEN Raymond T., USA, Chief of Staff of the Army ............................. 10 

Greenert, ADM Jonathan W., USN, Chief of Naval Operations ......................... 11 

Welsh, Gen. Mark A., III, USAF, Chief of Staff of the Air Force ........................ 13 

Amos, Gen. James F., USMC, Commandant of the Marine Corps ...................... 14 

Grass, GEN Frank J., ARNG, Chief of the National Guard Bureau .................. 15 

Tilelli, GEN John H., Jr., USA, Ret., Chairman of the Board, Military Officers 

Association of America ......................................................................................... 55 

Sullivan, GEN Gordon R., USA, Ret., President and Chief Executive Officer, 

Association of the U.S. Army .............................................................................. 63 

Totushek, VADM John B., USN, Ret. Executive Director, Association of the 

U.S. Navy .............................................................................................................. 70 

Questions for the Record ......................................................................................... 148 

(III) 

(1) 

DEPARTMENT OF DEFENSE PROPOSALS 

RELATING TO MILITARY COMPENSATION 

TUESDAY, MAY 6, 2014 

U.S. SENATE, 

COMMITTEE ON ARMED SERVICES, 

Washington, DC. 

The committee met, pursuant to notice, at 9:35 a.m. in room SH– 

216, Hart Senate Office Building, Senator Carl Levin (chairman) 

presiding. 

Committee members present: Senators Levin, Reed, Nelson, 

Hagan, Manchin, Shaheen, Gillibrand, Blumenthal, Donnelly, 

Hirono, Kaine, King, Inhofe, McCain, Sessions, Ayotte, Fischer, and 

Graham. 

OPENING STATEMENT OF SENATOR CARL LEVIN, CHAIRMAN 

Chairman LEVIN. Good morning, everybody. 

The committee meets this morning to review Department of Defense (DOD) proposals relative to the growth of personnel costs. We 

welcome the Joint Chiefs of Staff to testify on these proposals, to 

explain why they support them, what their impact is on the force, 

and their impact on other areas of the defense budget. 

Our witnesses on the first panel are General Martin E. Dempsey, 

USA, Chairman of the Joint Chiefs of Staff; Admiral James A. 

Winnefeld, Jr., USN, Vice Chairman of the Joint Chiefs of Staff; 

General Raymond T. Odierno, USA, Chief of Staff of the Army; Admiral Jonathan W. Greenert, USN, Chief of Naval Operations; 

General Mark A. Welsh III, USAF, Chief of Staff of the Air Force; 

General James F. Amos, USMC, Commandant of the Marine Corps; 

and General Frank J. Grass, ARNG, Chief of the National Guard 

Bureau. 

We will have a second panel consisting of non-government witnesses which I will introduce later. 

It is not often that all the members of the Joint Chiefs of Staff 

testify before us at a single hearing. It is not often that we have 

the opportunity to thank them as one group for the contributions 

that they and those that they lead make to the well-being of our 

Nation. Thank you, gentlemen. Thank you for the service of you 

and yours. 

The distinguished nature of this panel reflects the importance of 

the questions before our committee this year. When we mark up 

the National Defense Authorization Act (NDAA) for Fiscal Year 

2015 later this month, the decisions that we make on compensation, force structure, end strength, readiness, and modernization 

2 

will have a far-reaching impact on the men and women of our 

Armed Forces and on the future of our military and our country. 

The DOD 2015 budget request comes at a time of tremendous 

challenge and great uncertainty for the Nation and for the military. 

DOD faces a highly constrained fiscal environment in 2015. The 

$496 billion top line for DOD remains the same from the funding 

levels in fiscal years 2013 and 2014 and remains more than $30 

billion below the funding provided to DOD in fiscal years 2010, 

2011, and 2012. Sequestration has already taken its toll on training, readiness, and modernization, and sequestration threatens to 

return full blast next fiscal year unless, hopefully, we act to mitigate its impact before then. 

These fiscal constraints have led DOD to propose a number of 

painful measures to reduce future expenditures. The budget before 

us proposes significantly lower end strengths for the ground forces 

through 2019, including a reduction of 50,000 more than had been 

previously planned in Active Duty Army end strength with smaller 

percentage reductions in the Guard and Reserve, as well as a reduction of over 16,000 in Active Duty Air Force end strength this 

year alone. The budget calls for retiring the Air Force’s A–10 and 

U–2 aircraft, inactivating half of the Navy’s cruiser fleet, reducing 

the size of the Army’s helicopter fleet by 25 percent, and terminating the Ground Combat Vehicle program. Those are among 

other cuts. 

If the budget caps in law remain in effect in fiscal year 2016 and 

beyond, DOD has informed us that, among other cuts, it would request further reductions in end strength, the retirement of the entire KC–10 tanker fleet and the Global Hawk block-40 fleet, reduced purchases of Joint Strike Fighters and unmanned aerial vehicles, the inactivation of additional ships, and the elimination of 

an aircraft carrier and a carrier air wing. 

The legislative proposals that we are considering this year include a number of measures relative to military pay and benefits, 

and that is what we will be discussing here this morning. These 

include setting a pay raise for servicemembers below the rate of inflation, freezing pay for general and flag officers, limiting increases 

in the housing allowance below the rate of inflation, reducing the 

subsidy to commissaries, and making changes to TRICARE that 

would result in increased fees and cost-shares for most non-Active 

Duty beneficiaries. In all, these pay and benefit proposals would result in savings to DOD of over $2 billion in fiscal year 2015 and 

more than $31 billion over the Future Years Defense Program 

(FYDP). 

General Dempsey and his senior enlisted advisor, Sergeant Major 

Bryan Battaglia, recently wrote to this committee that ‘‘these difficult choices will reap large savings over time to address the growing imbalance in our accounts, allow us to invest in combat readiness and force modernization, and still enable us to recruit and retain America’s best.’’ The letter went on to say that ‘‘delaying adjustments to military compensation will cause additional, disproportionate cuts to force structure, readiness, and modernization.’’ 

We surely must do all that we can to minimize the adverse effect 

of the personnel proposals. But as long as the statutory budget 

3 

caps remain in place, we do not have the option of simply rejecting 

the compensation proposals. Under the statutory budget caps, we 

would then have to make alternative cuts. 

I look forward to, as we all do, the testimony of our witnesses. 

Again, we thank you all and those with whom you serve for your 

great service to our country. 

Senator Inhofe. 

STATEMENT OF SENATOR JAMES M. INHOFE 

Senator INHOFE. Thank you, Mr. Chairman. 

Over the last decade, our Nation has depended upon the courageous service and sacrifice of our military members and their families for its security. In return, we have steadily increased their pay 

and benefits, and rightly so. We should be proud of this. It is exactly what we should do for those who risk their lives to keep us 

safe. 

However, misguided fiscal priorities of the Obama administration 

and the runaway entitlement spending have forced massive cuts to 

national security spending such as we have never seen before. 

These cuts have driven our military into a readiness crisis. Squadrons have been grounded. Ships have been tied to piers. Training 

rotations for ground forces have been cancelled while much needed 

modernization programs have been delayed or cancelled. We all 

know this. 

Retired Navy Admiral John Harvey recently said that we are 

sending the wrong signal to the force that is serving today, the one 

that fought two wars in the last decade, and the force we are dependent upon to re-enlist tomorrow. We are telling them they just 

cost us too much, that they constitute a ticking time bomb, and 

that their sacrifice is eating us alive. We are telling them that we 

are looking for a way out of fulfilling our commitments to them. 

This is not the right signal to send those who volunteered to serve 

in a time of war. 

I think the chairman did a good job of listing the systems that 

we have that we are no longer going to be able to keep. The effects 

of these cuts are undermining the military’s ability to protect the 

Nation. Our military leaders have painted a stark and troubling 

picture of this reality. Because of misguided fiscal priorities, we are 

now being forced to make false choices between paying our troops 

and their families what they deserve and giving them the training 

and capabilities required to accomplish their mission and return 

home safely to their loved ones. This is an irresponsible and reckless choice. If we spent what I think is necessary on national security, we would not be in the mess that we are in today. 

I am looking forward to hearing from our witnesses. 

Thank you, Mr. Chairman. 

Chairman LEVIN. Thank you very much, Senator Inhofe. 

General Dempsey, welcome. 

STATEMENT OF GEN MARTIN E. DEMPSEY, USA, CHAIRMAN OF 

THE JOINT CHIEFS OF STAFF 

General DEMPSEY. Mr. Chairman, thank you, and Ranking Member Inhofe, and other distinguished members of the panel. 

4 

You are right, Mr. Chairman, we do not often appear as a group 

before you and, in particular, with our senior enlisted leaders right 

behind us. What I would like to do at the beginning here is since 

it is unlikely we will see you as a group in your role as chairman 

between now and the end of the year—at least I hope not—we 

would like to thank you very much for your steadfast and passionate support of America’s Armed Forces, the men and women 

who serve and their families. Thank you. 

Chairman LEVIN. Thank you very much, General. 

General DEMPSEY. I want to thank you all for the opportunity to 

discuss military pay and compensation, but as you mentioned, this 

is only one part of a much broader effort to bundle reforms in order 

to keep ourselves in balance. This particular issue, pay, compensation, and health care, is an important and deeply personal issue for 

our servicemembers and their families. 

As I have testified in the past, we are working to make sure that 

the joint force is in the right balance to preserve military options 

for the Nation in the face of a changing security environment and 

a declining budget. We have been tasked to reduce the defense 

budget by up to $1 trillion over 10 years while upholding our sacred obligation to properly train, equip, and prepare the force. This 

requires carefully allocating our resources across the accounts, restoring the readiness we have already lost, and continuing to make 

responsible investments in our Nation’s defense. 

As I have testified before, this requires certainty. It requires time 

and it requires flexibility. While we have a degree of certainty in 

our budget for the next 2 years—really for this year—we still do 

not have a predictable funding stream nor the flexibility and time 

we need to reset the force for the challenges ahead. We cannot do 

this alone. Our recommendations have lacked congressional support, notably our request to reduce base infrastructure and retire 

weapon systems that we no longer need and cannot afford. 

In the meantime, we are continuing to hemorrhage readiness and 

cutting further into modernization. Risk to the performance of our 

mission and risk to those who serve continues to grow. 

As one part of a broader institutional reform, the Joint Chiefs, 

our senior enlisted leaders, and select mid-grade level leaders have 

examined pay and compensation options for more than a year. We 

support the three DOD-wide principles guiding our proposals to rebalance military compensation. 

First, we are not advocating direct cuts to troops’ pay. Rather, 

this package slows the growth of basic pay and housing allowances 

while reducing commissary subsidies and modernizing our health 

care system. 

Second, we will ensure that our compensation package allows us 

to continue to attract and retain the quality people we need. If we 

step off on this path—and we will watch the way the force reacts, 

and if it reacts, we will be back to you with recommendations on 

how to adjust, but we have to take that step. 

Third, the savings will be reinvested into readiness and into 

modernization. 

In all cases, we will continue to prioritize our efforts that focus 

on wounded warriors and on the mental health challenges facing 

our force. 

5 

We have not requested any changes to military retirement. We 

are awaiting recommendations from the Military Compensation 

and Retirement Modernization Commission (MCRMC) expected in 

February 2015. But to be clear and to restate it, we do support 

grandfathering any future changes to the retirement program. We are seeking $31 billion of savings in pay, compensation, and 

health care over the FYDP. If we do not get it, we will have to take 

$31 billion out of readiness, modernization, and force structure over 

that same period. Delaying the decision until next year will likely 

cause a 2-year delay in implementation, which would force us to restore approximately $18 billion in lost savings. 

In short, we have submitted a balanced package that meets 

budgetary limits, enables us to fulfill the current defense strategy, 

and allows us to recruit and retain the exceptional talent that we 

need. Our people are our greatest strength, and they do deserve 

the best support we can provide. 

As leaders, we must also exercise proper stewardship over the resources entrusted to DOD. We have enough information to make 

these changes now. We remain committed to partnering with Congress to make these and other difficult choices facing us. 

Thank you. 

[The joint prepared statement of General Dempsey, Admiral 

Winnefeld, General Odierno, Admiral Greenert, General Welsh, 

General Amos, and General Grass follows:] 

PREPARED STATEMENT BY THE JOINT CHIEFS OF STAFF

Chairman Levin, Ranking Member Inhofe, and distinguished members of the committee, thank you for your invitation to address the critical issue of pay and compensation. As the Joint Chiefs testified in March and April 2014, we must rebalance 

the Joint Force to preserve military power and maximize options for the Nation in 

the face of an uncertain security environment and a declining budget. Achieving the 

right balance is a significant challenge, but it remains a strategic imperative for the 

Department of Defense (DOD) and our Nation. 

It requires that we carefully allocate our resources across readiness, modernization and force structure accounts, and that we sufficiently compensate the Joint 

Force—while seeking to restore the readiness and modernization we have already 

lost. Above all, we must fulfill our sacred obligation to properly train, equip, and 

prepare the Joint Force to fight and win. We cannot do this alone. 

The Department needs congressional support to achieve institutional reform on all 

fronts. We cannot continue to expend scarce resources on unneeded and 

unsustainable weapons systems and infrastructure. These reforms have often lacked 

congressional support, notably our requests to reduce infrastructure and weapon 

systems. 

We have examined pay and compensation options within our budget for more than 

a year. This process included our most senior officer and enlisted leaders and select 

mid-grade servicemembers—leaders who fully recognize that it is our people who 

make us the most capable military in the world. Our men and women will always 

be our greatest strength, and they deserve the best possible support we can provide. 

However, as leaders, we all must exercise good stewardship over the resources entrusted to the Department, including competitive pay and compensation consistent 

with a ready and modern force. 

In our deliberations, we collectively assessed how a wide range of compensation 

proposals would affect our troops at every rank, and over the course of their service. 

We concluded that we can no longer put off rebalancing our military compensation. 

Failure to approve this compensation package will require us to take $31 billion in 

savings over the Future Years Defense Program (FYDP) out of readiness, modernization, and force structure. 

The Joint Chiefs and our senior enlisted leaders support the three DOD-wide 

principles guiding these proposals. First, we are not advocating direct cuts to troops’ 

pay. Rather, this package slows the growth of basic pay and housing allowances in 

addition to reducing commissary subsidies, and simplifies and modernizes our 

6 

health care system. Second, we will ensure that our compensation package allows 

us to continue to attract and retain the quality people we need. Third, the savings 

will be reinvested into warfighter readiness and force modernization. In all cases, 

we will continue to prioritize efforts that focus on wounded warriors and mental 

health. 

Our proposals reflect well-informed choices that will reap significant savings over 

time. They were reviewed by the administration, have the full support of the Secretary of Defense, and are submitted as part of the President’s budget for fiscal year 

2015. Implementing this compensation package now will help us remain the world’s 

best-trained, best-led, and best-equipped military. 

PROPOSED PAY AND COMPENSATION PROPOSALS

In the late 1990s and through the post-September 11 period, with the help of Congress, we substantially increased the glideslope of compensation growth. We are now 

requesting more modest pay increases in fiscal year 2015 to slow the growth rate 

of basic pay beyond 2015. Flag and general officer basic pay will be frozen for at 

least 1 year. We are also requesting that we slow the growth of tax-free housing 

allowances, reduce the direct subsidy to commissaries, and modernize our TRICARE 

health insurance program by creating a single plan that promotes wellness and encourages members to use the most affordable means of care. Slowing the rate of 

growth of these programs will obviously affect buying power over time, but they do 

not directly cut pay. As noted above, we have the predictive tools and can both assess and illustrate the effect by rank and over time. 

We have not requested changes to military retirement benefits. We are awaiting 

the results of the Military Compensation and Retirement Modernization Commission (MCRMC) before considering reforms in that area. But, we want to reiterate 

our ardent support of the principle of grandfathering for any future changes to military retirement plans. 

Congress has taken some important steps in recent years to control the growth 

in compensation spending, but we must do more. A holistic and comprehensive approach is required. Continuous piecemeal changes will only exacerbate uncertainty 

and doubt among our servicemembers about whether important benefits will be 

there in the future. 

The following proposals represent a carefully informed package that enables each 

of the Military Services to invest more in critically-important readiness and modernization while maintaining a well-trained, ready, agile, motivated, and technologically-superior force. These savings will still allow us to offer competitive and sustainable benefits to ensure we recruit and retain the right talent across our ranks. 

We also preserve special pay and incentive authorities which the Services can use 

as levers to ensure they recruit and retain the specialties they need. 

Basic Pay 

For fiscal year 2015, we have requested a 1 percent raise in basic pay for military 

personnel, except general and flag officers whose pay will be frozen for 1 year. Basic 

pay raises in future years will be similarly restrained, though modest increases will 

continue. 

Basic Allowance for Housing 

We request gradually slowing the growth rate of the tax-free basic allowance for 

housing until Basic Allowance for Housing (BAH) ultimately covers approximately 

95 percent of the average servicemember’s housing expenses. We also seek to eliminate renter’s insurance costs from the allowance. This will result in an average 6 

percent increase in out-of-pocket cost from today, but far less than the 18 percent 

out-of-pocket cost in the 1990s. Such changes will be phased in over several years 

to allow members to plan accordingly. 

Additionally, the rate protection feature already in place for BAH will remain. A 

servicemember’s BAH will not be reduced so long as that member retains eligibility 

for BAH at the same location and does not change dependency status or lose rank. 

Servicemembers in the same pay grade but living in different areas would have 

their BAH rates adjusted proportionally to ensure members retain the same purchasing power regardless of the cost of housing in their respective areas. Adjusted 

rates will remain publicly available to allow members to make informed decisions 

about housing. Just like today, depending on servicemembers’ actual housing 

choices, they may or may not have to pay out-of-pocket costs. 

Commissaries 

The DOD today operates 245 grocery stores worldwide and spends about $1.4 billion per year to provide subsidized groceries ‘‘at cost’’ plus a 5 percent surcharge. 

7 

The subsidy pays for employee and overhead costs including transportation. The 

budget proposal would begin phasing out much of the subsidy over 3 fiscal years, 

beginning with $200 million less in fiscal year 2015 and totaling $1 billion by fiscal 

year 2017. This phased approach will ultimately provide the Defense Commissary 

Agency with approximately $400 million per year to continue to pay overhead costs 

of operating about 25 remote locations in the United States and 67 overseas locations. 

We recognize the value of commissaries to our servicemembers, military families, 

and retirees, and our plan does not direct the closure of any location. Once fully implemented, commissary shoppers will receive an average 10 percent discount compared to most private sector grocery stores—and the level of savings may increase 

through internal operating efficiencies. Overall, commissaries will continue to be a 

valuable benefit to our people, particularly to those serving abroad. 

Healthcare 

The costs to the taxpayer for military healthcare have risen from $19 billion in 

2001 to $48 billion in 2013. Increases have been caused both by growth in privatesector healthcare costs and by the creation of a new healthcare program for military 

retirees 65 and older, TRICARE for Life. We propose simplifying and modernizing 

our TRICARE health insurance program, as the fundamental structure has not been 

revised since its inception in the mid-1990s. We would consolidate Prime, Extra, and 

Standard into a single plan that encourages routine wellness visits and use of the 

most affordable means of care such as Military Treatment Facilities (MTF), preferred providers, and generic prescriptions. 

Servicemembers on active duty would have no out-of-pocket expenses regardless 

of the point-of-care delivery (MTFs, network, or out-of-network) and will have the 

highest priority for MTF care. Without question, we will continue to fully fund and 

support our wounded, ill, and injured warrior programs. To protect the most vulnerable, the proposal treats survivors of members who die on active duty and those who 

are medically retired and their family members as active duty family members for 

purposes of enrollment fees, co-pays, deductibles, and the annual catastrophic cap. 

Likewise, family members residing with active duty servicemembers in areas remote 

from MTFs will continue to be treated as ‘‘in network’’ families even if there are 

no network care providers in the remote location. 

In addition to moving to the new TRICARE Single Plan, we have resubmitted our 

fiscal year 2014 proposal which seeks modest annual enrollment fees for TRICARE 

for Life coverage and further adjusts the pharmacy co-pay structure for retirees and 

active duty families. These pharmacy changes provide incentives to use mail order 

and generic drugs. For pharmacies, the increased co-pays will be phased in over 10 

years, while enrollment fees for TFL recipients will only apply to those who turn 

65 after enactment. 

The cumulative effect of the proposed TRICARE fee increases still ensures beneficiary out-of-pocket costs remain far below costs to military beneficiaries in the mid1990s, and remain far better than virtually every comparable employer in the 

United States today. By fiscal year 2019, a retiree family of three utilizing civilian 

care providers will pay about 11 percent of total health care costs—well below the 

original 27 percent of the mid-1990s. Overall, the TRICARE benefit will remain one 

of the most comprehensive benefits in the country, as it should. 

COSTS OF DELAY OR INACTION

Current and future funding levels require adjustments to pay and compensation 

now to avoid further degradation of readiness and modernization. We are working 

with and waiting for the MCRMC recommendations with regard to retirement, 

where we believe special study is required. However, based on multiple internal and 

external analyses as well as our review of Quadrennial Review of Military Compensation (QRMC) efforts since the late 1990s, we possess the needed information 

and senior leader consensus to make proposals now on other aspects of compensation. 

If Congress delays these pay and compensation changes by 1 year, we would forfeit $10 billion in savings over the FYDP. Moreover, waiting for the Commission 

would likely cause a 2-year delay in implementation, and we will be forced to restore approximately $18 billion in lost savings over the FYDP. Conversely, if we 

make these modest changes now, we will see annual savings of nearly $12 billion 

by the mid-2020s. If Congress rejects all of the proposals, we will not only have to 

find $2.1 billion in 2015, but we will also have to find $31 billion over the FYDP 

to pay for the shortfall. In the near-term, we will be forced to take these funds out 

of readiness. In the mid-term, it will diminish our ability to rebalance during the 

8 

FYDP. Beyond the FYDP, we will see substantial impacts to modernization and our 

ability to field the Joint Force we need in the future. 

It is also worth noting that today’s readiness problem will be tomorrow’s retention 

problem. Young men and women who join the U.S. military to lead a tank crew, 

fly an F–16, or serve on a submarine will soon lose interest in joining or staying 

in the military if they lack training or proper equipment to complete their mission. 

Again, we have enough information to request these nominal pay and compensation changes now. We are not infringing on the Commission’s charter. In fact, implementing these proposals this year will allow the MCRMC to account for them in 

their recommendations in February 2015. We look forward to working with Congress and the Commission when the MCRMC recommendations are released. 

We know that this budget features difficult choices. They were difficult for us. Understandably, they are difficult for Congress. But we have created a balanced package of changes that meets budgetary limits and enables us to fulfill the current defense strategy, albeit with increased risk in some areas. 

PART OF BROADER INSTITUTIONAL REFORM

Our pay and compensation proposals are only a part of a wider effort to achieve 

balance across the Joint Force. Before recommending these changes, we first focused 

on implementing management reforms and reducing overhead and operating costs. 

This has included eliminating duplication, reducing management headquarters, and 

pursuing efficiencies from contracting and weapons systems to infrastructure. 

We were successful in identifying approximately $94 billion in efficiencies across 

the FYDP. This included a 20 percent cut in headquarters’ budgets, reduction in 

contractor funding, civilian manpower restructuring, healthcare cost reductions (separate from those affecting beneficiaries), terminating or deferring weapons programs 

and military construction projects, a base realignment and closure round for 2017, 

continued acquisition reform, and auditable financial statements. These efforts are 

in addition to continuing to implement the $245 billion in efficiencies we have submitted over the last three budget cycles. 

Reducing overhead continues to be important, but such savings will not by themselves permit us to meet targets under either the President’s budget or sequestration levels. To meet reductions of the scale required, we also had to reduce the size 

of our military force. As a result, relative to levels expected by the end of this year, 

total active duty military personnel will decline by about 6 percent by the end of 

the FYDP in 2019; Guard and Reserve personnel will decline by 4 percent; and civilian personnel will decline by 5 percent. 

Notably, although military pay and benefits account for about 33 percent of the 

budget, our pay and compensation proposals account for only 10 percent of the 

planned cuts. The remaining 90 percent of the cuts come from readiness, modernization, and force structure—making the need for a balanced application of cuts across 

accounts, wherever possible, even more urgent. 

CONCLUSION

As a global leader, the United States requires a robust national defense strategy 

and a military that can implement that strategy effectively and sustainably. We face 

increasing risk if we do not adapt to provide more responsible stewardship of our 

Nation’s resources and security interests. This can only be achieved by strategic balance across the Joint Force enabled, in part, by the compensation package the DOD 

is presenting to Congress. It will require Congress’ partnership with DOD in making 

these and other difficult choices. 

The opportunity is ours in the months ahead to carry the hard-earned lessons 

from our Nation’s wars into the context of today, to set the conditions to prepare 

the Joint Force to address the challenges of tomorrow, and to sustain and support 

our dedicated men and women in uniform and their families. We look forward to 

seizing this opportunity together. 

Chairman LEVIN. Thank you very much, General. 

Admiral? 

STATEMENT OF ADM JAMES A. WINNEFELD, USN, VICE 

CHAIRMAN OF THE JOINT CHIEFS OF STAFF 

Admiral WINNEFELD. Chairman Levin, Ranking Member Inhofe, 

distinguished members of the committee, thank you also for the opportunity to appear today. 

9 

I would like to add some additional context to Chairman 

Dempsey’s introduction. 

I think it is important to recall that in the 1990s, military compensation had fallen to a deeply unsatisfactory level relative to the 

rest of the working population in America. With the help of Congress, we took action to close that gap which involved raising the 

trajectory of our compensation well above inflation. Those increases 

worked. 

In 2001, U.S. median annual household income equated to the direct pay of an average E–7. Today it is roughly equal to the direct 

pay of the average E–5 and trending towards the average E–4 who 

now surpasses the U.S. median annual household income about 8 

to 10 years earlier in his or her career than before and also receives health care, family services, leave, educational benefits that 

well surpass the civilian sector, along with the potential for a generous retirement. In the process, this E–5 has moved from being 

in the 50th percentile of civilians with comparable education and 

experience in 2000 to being around the 90th percentile today. 

I do not think any of us at this table would say our people are 

overpaid, and we would love to be able to maintain that level of 

compensation. But if our joint force is to be sized, modernized, and 

kept ready to fight, we are going to have to place compensation on 

a more sustainable trajectory. We do not want to return to the 

1990s. We are only asking for gradual adjustments to ensure we 

can recruit and retain the best our Nation has to offer while doing 

everything else that is required to fulfill our obligation to protect 

the United States within the means we are given. 

These changes would only account for about 10 percent of our 

planned cuts within an area that accounts for fully one-third of our 

budget. The other 90 percent of our cuts are going to come out of 

the other two-thirds of our budget that buys things. 

We have carefully thought through every one of these recommendations over the course of many meetings. Even though they 

are fair and they are gradual, there is still some disinformation out 

there. For example, some say we are cutting pay. That is not true, 

as Chairman Dempsey said. We quickly eliminated any proposal 

that would do that. 

Others say we are trying to renege on promised health care benefits. Again, not true. We are actually trying to simplify a bewildering system while incentivizing our people to help us contain 

costs. We will continue to provide the same high quality health 

care to our troops and our retirees, and it will continue to be free 

to those on Active Duty. 

Still others say a 1 percent pay raise is not fair when the Employment Cost Index (ECI) is going up at about 1.8 percent. But 

I would point out that our DOD civilians have just been through 

3 years of no pay increase, and they just received 1 percent this 

year. 

Finally, some are also suggesting that we want to close all Stateside commissaries. We have never considered that in any meeting 

that I have ever attended. In fact, we believe our commissaries are 

an important part of the benefits we offer our families. But we 

want those stores to have to work as hard as our unsubsidized exchanges in providing a good deal for our people. We think the DeVerDate Nov 24 2008 14:57 Feb 24, 2015 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6602 Z:\DOCS\93413.TXT JUNE
10 

fense Exchange Commissary Agency (DECA) can find at least the 

first year’s savings through efficiencies, not price increases, especially since we exempted them from the 20 percent staff cuts that 

everyone else is taking. 

Congress should also repeal legislation apparently lobbied for by 

the food industry that prohibits the sale of generics at our commissaries which takes money right out of our people’s pockets. It 

really does. I recently bought a generic bottle of ibuprofen at a post 

exchange, which is not prohibited from carrying generics, at a 73 

percent savings over the brand name that the commissary is required to carry right next door. Efficiencies in generics could easily 

offset the savings we are asking for in 2015 from our commissaries, 

savings that will enhance the combat readiness of our warriors 

that they count on us to provide. 

Now, we were not confirmed for these positions by the Senate to 

only make the easy choices. We have to make the hard ones too, 

choices that have only gotten harder with recent budget cuts. We 

need your support. My Service colleagues will now describe what 

will happen if we do not receive that support and we have to ask 

our young men and women to fight with $31 billion worth of a 

smaller, less modern, less ready force. 

Thank you again for the opportunity to speak today, and I look 

forward to hearing your views and your questions. Thank you. 

Chairman LEVIN. Admiral, thank you so much. 

General Odierno? 

STATEMENT OF GEN RAYMOND T. ODIERNO, USA, CHIEF OF 

STAFF OF THE ARMY 

General ODIERNO. Thank you, Chairman Levin, Ranking Member 

Inhofe, all the other committee members. It is always a pleasure 

to be here to discuss these important issues. 

I have had the privilege to lead our men and women of all Services in both peace and war. I have witnessed firsthand their selfless service, dedication, and sacrifice. The All-Volunteer Army has 

performed phenomenally during the longest conflicts in our Nation’s history. But it is imperative we discuss and understand the 

appropriate level of compensation not only to recognize the sacrifice 

of our soldiers and their families, but to ensure we sustain the premier All-Volunteer Force. 

Pay and compensation benefits must remain competitive in order 

for us to recruit and retain the very best for our Army and the joint 

force. However, pay and compensation must be balanced, along 

with end strength, readiness, and modernization of our force. Thus, 

it is necessary that we take a comprehensive look at every aspect 

of our budget. 

I fully endorse these DOD proposals that do not directly cut our 

soldiers’ pay but slows the rate of growth from any allowances that 

are simply unsustainable. 

Additionally, it is essential that we gain more efficiencies in our 

commissaries and our health care, specifically TRICARE. I believe 

the proposals recognize the incredible service and sacrifice of our 

soldiers and their families by allowing us to better balance future 

investments in readiness, modernization, and compensation. These 

are difficult but necessary decisions. 

11 

Taking care of soldiers is not just about providing them competitive pay and compensation benefits. It is also about having the 

right capacity in order to sustain a reasonable personnel tempo, invest in the most modern equipment, and maintain the highest levels of training readiness. 

If the Army does not get the $12 billion in compensation savings 

over the Program Objective Memorandum (POM), we will have to 

look at a further reduction in end strength, lower our overall readiness posture, and slow even further our current modernization programs. It is my opinion that if Congress does not approve our compensation recommendations, then you must end sequestration now 

and increase our top line. 

We must keep in mind that it is not a matter of if but when we 

will deploy our joint force to defend this great Nation. We have 

done it in every decade since World War II. It is incumbent on all 

of us to ensure our soldiers are highly trained, equipped, and organized. We must balance our resources effectively to do that. If we 

do not, our soldiers will bear the heavy burden of our miscalculations on the battlefield. 

I am proud to wear this uniform and represent all the soldiers 

of the U.S. Army. Their sacrifices have been unprecedented over 

the last 13 years. We must ensure we provide them with necessary 

resources for their success in the future. 

Thank you, Mr. Chairman. 

Chairman LEVIN. Thank you very much, General Odierno. 

Admiral Greenert? 

STATEMENT OF ADM JONATHAN W. GREENERT, USN, CHIEF 

OF NAVAL OPERATIONS 

Admiral GREENERT. Thanks, Chairman Levin, and many thanks 

to you and Barbara for your service through the years. We appreciate it. 

Senator Inhofe and distinguished members of the committee, I 

am proud to represent 633,000 sailors, Navy civilians, and their 

families and especially the 50,000 sailors deployed around the 

globe today, along with their fellow marines. Their dedication and 

resilience continue to inspire me, and our citizens can take great 

pride in the daily contributions of their sons and daughters in 

places that really matter. 

When I appeared before you in March, I testified that we were 

compelled to make some difficult choices in our President’s fiscal 

year 2015 budget submission. 90 percent of the reductions in our 

President’s fiscal year 2015 submission focused on procurement, 

force structure, and modernization, as well as overhead reduction, 

contract efficiencies, and buying smarter. The area of last choice 

that we addressed in the budget was cost growth of our pay and 

compensation. 

Now, for over a year, as the chairman mentioned, the Master 

Chief Petty Officer of the Navy, who is with me today, and I traveled around the fleet and bases, and we listened to our sailors and 

families, especially those who would be most affected by these proposed changes, both the increases and the decreases. The vast majority of our sailors and families told us that they believe their total 

12 

compensation package matches well with, and in some cases exceeds, their civilian counterparts. 

But let me be clear. I do not believe our sailors are overpaid, nor 

do they believe that. Our sailors and families are not enthusiastic 

about a compensation reform, but they were clear to us that their 

quality of service, their work environment needs to improve. They 

understand that in this fiscal situation we face hard choices. We 

cannot have it all. The reality within this given budget, the one 

that we have been given, is we cannot sustain our current personnel costs trajectory, and we need to address this problem sooner 

than later. 

Today, our total force personnel costs consume about 40 percent 

of our given budget, and that is up from 32 percent in 2000. That 

share continues to rise. In fact, since 2001, we reduced Navy’s end 

strength 60,000 sailors, but the growth in personnel costs alone 

consumed 60 percent of those savings. In other words, although the 

Navy manpower has shrunk significantly, at the same time we reduced 25 ships in our inventory, our personnel costs have spiked. 

That has been a burden in our ability to balance our investments. 

DOD’s compensation reform proposals would generate savings to 

the Navy of $123 million in 2015 and $3.1 billion over the FYDP. 

We would intend to reinvest any and all of these savings into these 

sailor quality-of-service enhancements and that includes increasing 

sea pay and critical skills incentive pay to assure retention, improving 30 barracks, training buildings, morale welfare and recreation and fitness centers, constructing barracks, fitness centers, 

and trainers, providing schools and travel for about 7,500 sailors, 

purchasing tactical trainers and simulators, purchasing spare 

parts, improved tools, and providing more maintenance opportunities. All of these reinvestments would address the disatisfiers that 

I mentioned, our sailors’ quality of their service. They are designed 

to help sailors get their jobs done effectively and safely while addressing our critical man, train, and equip challenges. 

If Congress denies authority for all the compensation savings, 

however, Navy would be forced to back out of these $3 billion sailor 

quality-of-life improvements, and we would also face an additional 

$4 billion cost resulting from pay raises reverting to the ECI. That 

would compel us to reduce readiness, shipbuilding, and aircraft 

procurement even further. We cannot afford the equivalent of another $7 billion bill. Our Navy would be less ready, less modern, 

and less able to execute the missions outlined in our Defense Strategic Guidance (DSG) and the Quadrennial Defense Review (QDR). 

Mr. Chairman, this is a tough decision, but it is also an opportunity. Not seizing the initiative now means billions of dollars of 

additional costs on other programs that we can ill afford. Given our 

current situation, I think it is necessary to better balance our sailors’ needs to ensure our Navy remains forward and, more importantly, ready where it matters when it matters. 

I look forward to your questions. 

Chairman LEVIN. Admiral, thank you so much. 

General Welsh? 

13 

STATEMENT OF GEN. MARK A. WELSH III, USAF, 

CHIEF OF STAFF OF THE AIR FORCE 

General WELSH. Thank you, Mr. Chairman, Ranking Member 

Inhofe, and members of the committee. It is an honor to be here, 

especially with the members of this panel. 

Mr. Chairman, might I add from all the men and women of our 

Air Force thank you for your distinguished service to this country. 

Chairman LEVIN. Thank you. 

General WELSH. You are a statesman, sir, and you have the respect and admiration of everybody on this panel. 

Chairman LEVIN. Thank you. 

General WELSH. For the past 23 years, U.S. airmen have maintained an extremely high operations tempo deploying routinely 

alongside their joint partners to the Middle East, nonstop since Operation Desert Storm ended in 1991, and they performed spectacularly well. I believe they have earned every penny they have made. 

You have been remarkably supportive in increasing their pay and 

benefits over time. 

But today we are in a precarious position. Per capita costs for an 

airman have grown over 40 percent since 2000. Last year, our 

readiness levels reached an all-time low. As we struggle to recover, 

we do not have enough units ready to respond immediately to a 

major contingency, and we are not always able to provide fully mission-ready units to meet our combatant commanders’ routine rotational requirements. 

Our modernization forecasts are also bleak. Roughly 20 percent 

of our aircraft were built in the 1950s and 1960s. Over half of the 

others were built more than 25 years ago. Now, due to sequestration, we have cut about 50 percent of our currently planned modernization programs. 

We cannot ignore the fact that the law, as currently written, returns us to sequester-level funding in fiscal year 2016. 

This has forced us into some very difficult decisions. Pay and 

compensation reform is one of those very tough decisions. No one 

takes this lightly, but we feel it is necessary to at least try and create some savings. If we are not willing to make some tough calls, 

our Air Force will be neither ready to fight today nor viable against 

the threats of tomorrow. 

My most sacred obligation as Chief of Staff of the Air Force to 

my airmen is that when we send them to do difficult jobs in dangerous places, that they are prepared to succeed and to return 

home safely. Although slowing the rate of pay increases, gradually 

reducing Basic Allowance for Housing (BAH) rates relative to the 

market, reforming TRICARE, and reducing commissary subsidies 

will certainly hurt, what my secretary and I owe the Nation, the 

joint team, and our airmen more than anything else are the training and tools necessary to fight and win and survive. 

If the proposed compensation reforms are rejected, the Air Force 

will be forced to cut $8.1 billion from readiness, modernization, and 

infrastructure accounts over the next 5 years. We will take significant cuts to flying hours and weapon system sustainment accounts, 

reduce precision munitions buys, and lower funding for training 

ranges, digging our readiness hole even deeper. We will likely have 

to cancel or delay several critical recapitalization programs. Among 

14 

those probably impacted would be the combat rescue helicopter and 

the T–X trainer. Abandoning the T–X program would mean that future pilots will then continue to train in the 50-year-old T–38. We 

will also be forced to cut spending on infrastructure beyond the $5 

billion we have already recommended to cut over this FYDP. 

Of course, these cuts would be on top of the difficult recommendations we have already made, some of which the Chairman 

mentioned this morning, lowering our end strength by nearly 

17,000 airmen next year, divesting the entire A–10 and U–2 fleets, 

and if sequester-level funding returns, divesting the KC–10 fleet as 

well. 

None of these options are good ones, but we are simply out of 

good options. It is time for courageous leadership. We simply cannot continue to defer every tough decision in the near term at the 

expense of military readiness and capability over time. We need 

your help. 

Chairman LEVIN. Thank you very much, General. 

General Amos? 

STATEMENT OF GEN. JAMES F. AMOS, USMC, 

COMMANDANT OF THE MARINE CORPS 

General AMOS. Chairman Levin, Ranking Member Inhofe, and 

members of the committee, the current period of fiscal austerity 

has exacerbated an imbalance across the Marine Corps’ budget. I 

nor my fellow Service Chiefs and, more importantly, the men and 

women who wear our Service’s cloth, those who have served our 

Nation so faithfully did not set the conditions for the fiscal calamity that we find ourselves in. 

As Service Chiefs, we are obliged to live within the budget and 

the laws passed by Congress. Senators, none of us like where we 

find ourselves today. We have spent a greater part of a year restructuring each of our Services under the cold reality of a fully sequestered budget. While the Bipartisan Budget Act (BBA) provided 

much needed relief in 2014 and 2015, I am advised by many of 

your colleagues in Congress to expect to return to full sequestration 

in 2016 and beyond. 

We have made difficult choices—all of us have—as we have attempted to build a balanced and combat-ready force. We have restructured and downsized our Services to live within our means. 

We have done all of this knowing full well that the world that we 

live in is a dangerous one, an international landscape that is simply getting more challenging as each day goes by. I see no indication there will be a peace dividend once we complete the mission 

in Afghanistan later this year. Mr. Chairman, we will not do less 

with less in the decade to come. We will do the same with less. 

From a personnel perspective, our men and women have been 

compensated appropriately for their many sacrifices over the past 

decade of war. I make no apologies for that. They have deserved 

every penny that Congress has afforded them. They have faithfully 

fought our Nation’s battles, all while successfully keeping the enemies of America far from our shores. 

Because of my loyalty to them, there is much about today’s discussion on compensation reform proposals that frankly I do not 

like, but I am stuck with them. I am stuck with them because I 

15 

have raided every other pot of money available to me to pay for a 

ready Marine Corps. As a Service Chief, I am first and foremost 

responsible for the defense of our Nation. That task comes before 

all others. It is the sole reason why America has a Marine Corps. 

To accomplish this, the Marine Corps must maintain a high state 

of readiness. That is accomplished by having combat units that are 

highly skilled and highly trained. It is done by having the right 

equipment in the hands of warriors who may be headed into 

harm’s way. The most important way that we can keep faith with 

our men and our women is to send them into combat with the best 

possible training and the freshest of equipment and to take care of 

them then when they come home. 

My challenge lies in balancing readiness, manpower, and modernization, all under the umbrella of sequestration. Our goal of consistently fielding a highly trained and combat-ready crisis response 

force for America is pressurized by a military personnel account 

that has grown to 63 cents of every appropriated dollar. Balanced 

against readiness requirements and an anemic military construction account, the Marine Corps’ modernization and investment accounts comprise a mere 8 percent. 8 cents on the dollar. This is the 

lowest it has been in well over a decade. 

At the end of the day, I am ultimately responsible for taking care 

of the marines, the sailors, and our families. This includes ensuring 

our people are well compensated for their service while also afforded the best training and equipment available to fight and win 

our Nation’s battles. For marines, their quality of service is as important as their quality of life. They understand that they must be 

prepared for uncertainty, and they must be prepared for their next 

mission. 

Thank you for the opportunity to represent your Marine Corps 

and its men and women. I thank the committee for your continued 

support and I stand prepared to answer your questions. 

Chairman LEVIN. Thank you so much, General Amos. 

General Grass? 

STATEMENT OF GEN FRANK J. GRASS, ARNG, 

CHIEF OF THE NATIONAL GUARD BUREAU 

General GRASS. Chairman Levin, Ranking Member Inhofe, distinguished members of the committee, it is an honor for me and 

Chief Brush, my senior enlisted advisor, to be here today representing the men and women of the National Guard. 

The men and women of the Guard serve with distinction as a primary combat Reserve of the Army and Air Force. We are also the 

first military responders on site in times of domestic crisis. 

I echo the concerns of the Chairman and my colleagues regarding 

the critical need to achieve fiscal balance across the joint force. Future fiscal challenges will dramatically constrain decision-making 

about the size, shape, and rolls of our military. This certainly will 

be the case when the Budget Control Act (BCA) funding levels return in fiscal year 2016. Therefore, it is important that we act now. 

Despite the Guard accounting for only 8.4 percent of the defense 

compensation and benefit budget, these proposals will significantly 

impact operational Guard. The Guard we have today is equipped, 

trained, and tested over the past 12 years of combat. Modest inVerDate Nov 24 2008 14:57 Feb 24, 2015 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6602 Z:\DOCS\93413.TXT JUNE
16 

vestment keeps your Army and Air National Guard ready. But if 

we do not act now to rebalance military compensation, we risk future training, readiness, and modernization cuts across the joint 

force. 

Our success is unquestionably due to our most important resource, our people. Every servicemember—Active Duty, Guard, and 

Reserve—deserves the best we can provide within a fiscally sound 

solution. I believe the proposal before you provides the level of compensation and is consistent with a ready and modern force. 

Mr. Chairman, Senators, the National Guard has been and will 

remain always ready, always there. 

Thank you and I look forward to your questions. 

Chairman LEVIN. Thank you so much, General. 

I think we have a good turnout here. We also have a vote at 11 

a.m. One vote, I believe. Let us start with a 6-minute first round. 

A number of you have mentioned the impacts of these budget 

caps and the impacts of sequestration. These are legislatively required, but we need to do something about them. I can assure you 

and members that we will have an opportunity to do something 

about the looming sequestration for the next fiscal year. I hope we 

take that opportunity. In the meantime, as you all put very well 

and very clearly, we have to live with the current year’s budget 

caps, and that is what you are trying to help us do with your recommendations. 

By the way, I believe, Admiral, you mentioned something about 

generics in our commissaries. We are going to check that one out. 

We do not think that the law requires it. We think that the commissaries have to be competitive, and so we are going to try to find 

the origin of that additional cost to our men and women in uniform. 

We have a budget in front of us which must meet the caps in 

law. We have no choice. Again, if we do not adopt these particular 

reforms or some of them, we are going to have to make up for it 

with reductions somewhere else, and the somewhere else has taken 

a bit hit already, as you have pointed out, our readiness, our modernization. We have the responsibility of being law-abiding and we 

have the responsibility to the security of this country. We are going 

to do the very best that we can to accomplish both goals. 

Chairman Dempsey, you have mentioned what the impact would 

be if we delayed these kind of changes. Can you be a little more 

specific? You said it would be a 2-year delay, for instance, if we 

waited for the final report of the MCRMC. Why would that be a 

2-year impact? Be a little more detailed as to why you believe, as 

you have testified, that you have sufficient information now to 

make these recommendations even though when it comes to the retirement issues, you believe that we can delay any changes in that 

until the MCRMC reports. 

General DEMPSEY. We believe it will be a 2-year delay because 

the commission will not report out until February 2015, and that 

is inside of our decision cycle for the submission of the budget. 

Waiting until February seems to us to make it clear we would actually have to move along with 2 years at our current state and prevent us from making the changes that we know we need to make 

right now. 

17 

Chairman LEVIN. In terms of your preparation and recommendation, it would be a 2-year delay, but from the congressional perspective, we would have time in the next fiscal year, if we get those 

recommendations in February, to take those recommendations into 

account. Is that correct? 

General DEMPSEY. It seems to me that is correct. I know less 

about your process than I do about our own, and preparing the 

budget to justification book level of detail is a pretty remarkable 

enterprise every year. By the way, for the past few years, we have 

had to prepare budgets against alternative futures. I would be surprised if you could act that quickly on a recommendation that came 

to you in February. 

But more importantly, to the second part of your question, we 

have spent the better part of a year analyzing direct and indirect 

compensation with the team that you see here represented here 

today and our programmers. We believe that we can articulate 

what the impact would be at various grade levels, an E–5, an O– 

5, both what it would do to them today and what it would do to 

them across the course of a career. We have all the information we 

need, and we have actually provided it. We are ready to move on 

it because we need that $18 billion. 

Chairman LEVIN. You have taken steps, you have assured us, to 

consult with others in making these recommendations, including 

your senior enlisted personnel. 

General DEMPSEY. We have, sir. 

Chairman LEVIN. I would just say this that they are all sitting 

here behind you, I believe you have told us, and we again give special thanks for their service as well. I would just invite them, any 

of them, to personally contact me if in fact they do not agree with 

any or all of these cuts. It is very difficult for us to ask them here 

today or to put them on the spot generally. But it is important that 

we hear from them. I would assure them that I would keep the privacy of their remarks, and I would assure them to the best of my 

ability in guaranteeing that privacy and anonymity, share them 

with my colleagues to the best I could. I would welcome any personally delivered comments from those senior enlisted personnel to 

me. 

General DEMPSEY. Sir, if I could. They did testify before the Subcommittee on Personnel. I will also attest to the fact that there is 

not a bashful one among them, and you do not have to ask for their 

views. They will provide them and they are free to do so. 

Chairman LEVIN. We welcome that and I am sure our Subcommittee on Personnel would also welcome any privately delivered comments that might differ from their testimony or from your 

testimony. Thank you very much. 

Senator Inhofe. 

Senator INHOFE. Thank you, Mr. Chairman. 

Not a bashful one among them. Let us see how bashful they are 

here. 

First of all, a lot of us have seen this coming, and I know we do 

not talk about it very much, but when we see money that otherwise 

should have gone into our military, into our defense, we see the 

construction of the biofuel refineries, $160 million. We see the 

Navy purchased the green fuel at $26 a gallon, which could be purVerDate Nov 24 2008 14:57 Feb 24, 2015 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6602 Z:\DOCS\93413.TXT JUNE
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chased on the market for $3 a gallon. The climate change initiatives have gone up now $120 billion since President Obama has 

been in office. I commented the other day, General Welsh, that for 

the $120 billion we could buy 1,400 new F–35s. Food stamps, $42 

billion additional every year. 

I would like to ask you in this climate—and I am going to submit 

for the record, because there is not time to read them all, all of the 

quotes from everyone, up to and including Secretary Hagel, about 

the dilemma that we are in and the fiscal situation that we are in 

right now. 

[The information referred to follows:] 

QUOTES ON MILITARY READINESS AND ABILITY TO EXECUTE STRATEGIC DEFENSE

GUIDANCE

Secretary Hagel said 2 weeks ago, ‘‘American dominance on the seas, in the skies, 

and in space can no longer be taken for granted.’’ 

I believe that under sequestration, we will have to assume so much risk that it 

is immoral. 

• General Dempsey agreed when he told the Senate Armed Services Committee, we are putting our military on a path where the ‘‘force is so degraded and so unready’’ that it would be ‘‘immoral to use the force.’’ 

• Admiral Winnefeld in January 2013, stated that ‘‘there could be for the 

first time in my career instances where we may be asked to respond to a 

crisis and we will have to say that we cannot.’’ 

• General Amos agrees with me on increased risk, ‘‘We will have fewer 

forces arriving less-trained, arriving later to the fight . . . This is a formula 

for more American casualties.’’ 

• The Department of Defense’s Chief of Technology, Under Secretary Frank 

Kendall, said on 3 January: ‘‘We’re cutting our budget substantially while 

some of the people we worry about are going in the opposite direction. 

We’ve had 20 years since the end of the cold war [and sort] of a presumption in the United States that we are technologically superior militarily. I 

don’t think that that’s a safe assumption.’’ 

Each of the Service Chiefs agree. Here’s what they said about the ability to execute the current Strategic Defense Guidance: 

• Army Chief of Staff General Odiemo said that under sequestration: ‘‘Such 

reductions will not allow us to execute the 2012 Defense Strategic Guidance, and will make it very difficult to conduct even one sustained major 

combat operation.’’ 

• Chief of Naval Operations Admiral Greenert said ‘‘[Sequestration] will 

preclude our ability to execute the 2012 Defense Strategic Guidance both 

in the near term and the long term. ’’ 

• Marine Corps Commandant General Amos said: ‘‘To meet the requirements of the Defense Strategic Guidance, we need a Marine Corps of 

186,800 . . . ’’ but a force of 174,000 marines quite simply is the largest force 

that we can afford [under sequestration] . . .’’ 

General Dempsey on Quadrennial Defense Review and Budget: ‘‘The smaller and 

less capable military outlined in the QDR makes meeting these obligations more difficult,’’ Dempsey said. ‘‘Most of our platforms and equipment will be older, and our 

advantages in some domains will have eroded. Our loss of depth across the force 

could reduce our ability to intimidate opponents from escalating conflicts.’’ He 

added, ‘‘Moreover, many of our most capable allies will lose key capabilities. The situation will be exacerbated given our current readiness concerns, which will worsen 

over the next 3 or 4 years.’’ 

Under Secretary Jessica Wright Statements on Readiness: 

• ‘‘The Secretary of Defense has been very clear that sequestration funding 

limits imposed by the BCA of 2011 will yield a force that is too small, and 

not ready enough to meet the Nation’s security objectives.’’ 

• ‘‘The budget does not provide adequate funding for modernization, increased training, and facility sustainment needed to resolve the Department’s readiness challenges.’’ 

19 

Senator INHOFE. Could each one of you briefly describe something in concrete terms that this fiscal climate means in terms of 

what your Service will not be able to do to adequately train men 

or women, to deploy them, and bring them safely home? I would 

like to have some specifics. If you cannot do it now, I would like 

to get that for the record. Would any of you, General Odierno, have 

any specific thing that you would want to do that you are going to 

have to sacrifice doing in terms of training? 

General ODIERNO. Senator, thank you. 

Beginning first in 2015, we have to reduce home station training. 

It all affects the collective level of training, which is the most important for our forces, and it is the ability to synchronize and integrate air, ground, and the many different types of maneuver that 

we have to do in case we have to respond, whether it be in Korea, 

whether it be in the Middle East, whether it be in Europe. We have 

had to cut back on this training. What that means is we have less 

capability and lower readiness levels than we would like to have 

in case we are asked to deploy. 

This will continue to exacerbate itself in 2016 and 2017 and 2018 

until we get our end strength down to a level that would enable 

us to balance, and that will not happen until about fiscal year 

2020. 

If we do not get these, we now add another $12 billion bill that 

I have to find. That means we might even have to take more end 

strength out. I have already testified to the fact that I do not believe we have enough end strength now if we go to sequestration 

in order to meet our national security needs. This will further exacerbate this problem. 

Senator INHOFE. General Welsh, can you think of anything specific in terms of grounding of units? 

General WELSH. Senator, last year was a pretty good example of 

what sequester-level funding will do to our Air Force. We grounded 

about a third of our combat squadrons. We cancelled Red Flag exercises, both U.S. Red Flags and coalition Red Flags, which is the 

full spectrum, high end part of training for the United States Air 

Force. It is what separates us from other air forces. It is where we 

integrate with the other Services and with ground forces and with 

our allies. We cut weapon school classes where we develop our 

Ph.D. warfighters. All the things that take us from doing low intensity work to being able to fight a full spectrum fight were affected 

dramatically. 

Senator INHOFE. Yes. I think we saw after the grounding of the 

squadrons that the cost of getting them back to a state of readiness, as well as the equipment that was grounded with them, exceeds the amount that would have been saved at that time. Is that 

accurate? 

General WELSH. Senator, that is accurate. 

Senator INHOFE. Anybody else? Yes, sir. 

Admiral GREENERT. Senator, you were down in Norfolk. You 

talked to our people, and they said these long deployments are killing us. 

Senator INHOFE. Yes. 

Admiral GREENERT. The problem is if somebody is deployed and 

we need another carrier to deploy due to a contingency in Syria or 

20 

the issues in Europe, those that are out there now have to stand 

that watch because we do not have the response force for a contingency that we would normally have. The folks are not trained up 

to do that. It takes longer to train them up to deploy. We are deploying just on time. We need a better contingency force to deal 

with the contingencies today. 

Senator INHOFE. Okay, I appreciate that. 

General Amos, anything specific that comes to your mind that 

you cannot do now in terms of properly preparing these kids? 

General AMOS. Senator, we have made decisions to move money 

into training and readiness of our units. Those units are at a fairly 

high state of readiness and will be so for the next 2 years. To do 

that, though, we pulled money out of all our other accounts, to include procurement. That is where we are feeling the pinch right 

now. We have $983 million total to reset the Marine Corps and 

modernize the Marine Corps for this year. That is less than 4 percent of our entire budget. We are feeling it in the modernization, 

Senator, because we have paid the bill for readiness and training 

out of that account. 

Senator INHOFE. Yes, and I bring this up because I know this is 

a hearing on compensation, but if you change that, that does not 

happen in a vacuum and it cannot be at the expense of our training 

and, as you say, our modernization. 

My time is about expired, but in terms of our combat readiness 

codes, C–1, C–2, C–3, and C–4, because we have already experienced some losses in terms of our readiness capability, how are we 

doing now on those that we were deploying, General Odierno? They 

should be C–1 when they are deployed. Is that correct? 

General ODIERNO. That is correct. 

We made progress in 2014 because of the BBA. We are beginning 

to increase the readiness of our brigade combat teams, and we have 

added about four to five more brigade combat teams. 

Senator INHOFE. Are they all either C–1 or C–2? 

General ODIERNO. They are C–1 or C–2. The problem is in 2015 

and 2016, that goes down again because of the sequestration. If we 

lose what we have asked for in the compensation savings, that will 

bring the readiness down further. So it will impact readiness in the 

out-years significantly. 

Senator INHOFE. Readiness, risk, lives. Right? 

General ODIERNO. That is right. 

Senator INHOFE. Thank you, Mr. Chairman. 

Chairman LEVIN. Thank you, Senator Inhofe. 

Senator Reed. 

Senator REED. Thank you very much, Mr. Chairman. 

Thank you, gentlemen. 

General Odierno, you are, I think for the first time in decades, 

actually involuntarily separating personnel this year, and that will 

continue if some of these savings are not realized. Is that a fair 

judgment? 

General ODIERNO. That is correct, Senator. We are involuntarily 

separating captains, majors, lieutenant colonels, colonels, and also 

non-commissioned officers. It is also the first year that people who 

are eligible to re-enlist will not be able to re-enlist because of the 

reduction in the size of the Army. 

21 

Senator REED. There are a lot of issues at play here, but we are 

already seeing the effects of these constrained budgets in terms of 

the opportunities for people who are competent, capable in their 

ability to serve until at least retirement and to retire. 

General ODIERNO. That is correct, Senator. 

Senator REED. Some of these savings, if they are realized, will 

help alleviate that pressure. It will not end it, but it will help alleviate that pressure. 

General ODIERNO. It will not end it, but it will help alleviate it. 

If we do not get it, it will increase. 

Senator REED. Accelerate. 

General ODIERNO. Right. 

Senator REED. Admiral Greenert, we talked about the savings. 

Let us assume for the moment you get some savings. How would 

you apply them this year? In what specific programs could we see 

with general savings applications? 

Admiral GREENERT. Getting those savings the first year, it would 

be career sea pay and it would be special pays and allowances, incentive pays. It would be increases to our base operations. Our 

ports shut down. They run 9 a.m. to 5 p.m. We want to keep them 

open so when ships complete training, they can come home Friday 

not go anchor out and then come in Saturday during daylight 

hours. That is 2015. That is about $123 million right there. 

In 2016, it is again starting to repair 30 barracks, buy trainers 

and simulators for small arms for our submarine trainers, for our 

surface trainers to put money in to get people to training, that is, 

travel money and trainers. That is about 7,500 sailors that we just 

have backed up. This is the quality of their service, Senator, as I 

was saying. This is what they are asking for. Spare parts. 

Senator REED. One of the points, I think, in Senator Inhofe’s 

question to General Welsh was it is a more efficient use of resources too. Rather than keeping a ship just standing idle off port, 

that ship could be brought in, the crews could see their family. 

Admiral GREENERT. Yes, sir. Obviously, they will be happier. 

They are back home and their families waiting for them rather 

than just hanging out overnight waiting for the port to open. 

Senator REED. This is a very difficult issue. I do not have to tell 

anyone around this table or at the witness table. There is one view 

and I think a reasonable view that there is no way you can pay 

these men, women, and their families for what they do. There is 

no benefit. There is nothing. But at some point, we have to make 

very difficult judgments about pay, allowances, et cetera. 

But one of the other impressions I have is that training and having the best equipment is really key to the morale and to the sense 

of service. Ironically, we could be increasing compensation, but 

with poor training, and poor equipment, et cetera, the morale and 

the satisfaction and the sense of pride of the service would deteriorate. Is that unreasonable, General Dempsey? 

General DEMPSEY. No. It is absolutely correct, sir. I have said before and I believe it today as well that today’s readiness problem 

is tomorrow’s retention problem. If you came into this military to 

be a man or woman of action and go to sea and fly and train and 

you are sitting around watching your equipment or just simply 

22 

maintaining it with no possibility of training on it, you are not 

going to stick around very long. 

Senator REED. My experience is limited, but it was that good 

training was one of the key factors in any unit. If you did not have 

it, the other was important but not as critical. 

Let me ask a question, General Dempsey, about the commissaries. Essentially your testimony is that you would like to get 

some efficiencies out of the system and that they can generate 

these efficiencies. If that is not the case, then they are going to 

have to curtail some of their operations. Have you thought about 

criteria for curtailment? 

General DEMPSEY. We have, sir. I will tell you that commissaries 

has been the most difficult issue to wrap our arms around because 

it is very difficult to understand the functioning of the commissary 

and the effect that a reduction in the subsidy will have until you 

make the decision to do it. That is why we are supportive of taking 

this first step this year, $200 million. As the senior enlisted, when 

they do talk to you, Senator, will tell you, let us see what happens. 

Let us see how much efficiency we can wring out of it in order to 

gain some savings. But left unaddressed, we will be providing a 

$1.4 billion subsidy in perpetuity, and that just does not seem to 

be a reasonable course of action. 

Senator REED. So your first step—and the number is about $200 

million—would be to essentially charge the system with coming up 

with efficiencies either through operation, techniques, different 

purchasing approaches, different managerial approaches that 

would save the money. There is no thought in this first year of closing any commissary. Is that fair? 

General DEMPSEY. Yes. Let me ask the Vice Chief to comment, 

sir, because he has actually done most of the heavy lifting on this. 

Admiral WINNEFELD. I will be very quick. We have not directed 

any commissaries to close. That is not part of the plan. What would 

happen, as you correctly point out, look for efficiencies first. Whatever they cannot wring out of efficiencies would be a price increase. 

You might go from the 30 percent claimed advantage right now— 

if all $200 million in the first year came out, it looks like that 

would go to 26 percent. We think we can do better than that. Then 

you look at the competitiveness of the commissary in the market 

in which it exists, and most of them, I think, at 26 percent savings 

will remain very competitive. If not, then there are probably situations where you might close one or two, but that is not what we 

have specified. It is, I think, a lot gentler than it looks. 

Senator REED. Thank you very much. 

Thank you, Mr. Chairman. 

Chairman LEVIN. Thank you, Senator Reed. 

Senator McCain. 

Senator MCCAIN. Thank you, Mr. Chairman. 

I thank the witnesses. 

General Amos, with all of these proposals that we are examining 

today, it seems to me from previous testimony that the biggest 

problem really is sequestration. Would you agree? 

General AMOS. Yes, sir, I would. 

Senator MCCAIN. By far? 

General AMOS. By far. 

23 

Senator MCCAIN. General Odierno? 

General ODIERNO. I agree, Senator. 

Senator MCCAIN. Unless Congress and the President act together, all of these savings will pale in comparison to the challenge 

you will face as a resumption of sequestration. Would you agree? 

General ODIERNO. I think we have said before that under sequestration, we cannot meet the DSG. We have many concerns. It also 

affects compensation and other things we want to accomplish within our budget. 

Senator MCCAIN. By the way, on commissaries, I have a thought. 

Why not have people compete to provide those services? Why not 

just open it up for competition? No subsidy. Just see who wants to 

provide the best services. That might be a thought you might consider. 

General Welsh, should we be purchasing rockets for our Evolved 

Expendable Launch Vehicle (EELV) program from Russia, including the fact that the person in charge of that aspect of Russia’s defense has been sanctioned by the United States of America and a 

Federal judge has ruled that that is a process that should not be 

pursued? 

General WELSH. Senator, we already have purchased some of 

those rockets. We have a backlog. We certainly are not purchasing 

them currently as we work through—— 

Senator MCCAIN. You have a backlog? 

General WELSH. Sir, I am sorry. We have an inventory that will 

cover the next 2 years of planned launches, if we are allowed to use 

them. 

Senator MCCAIN. Do you think you should continue to purchase 

them? 

General WELSH. Sir, it is clear that right now we may not continue to purchase—— 

Senator MCCAIN. I am asking your opinion whether you think we 

should continue to purchase them. 

General WELSH. Sir, I think the best answer for the United 

States of America is to have the option of an organic booster. 

Senator MCCAIN. Thank you. 

General Grass, do you believe that the movement of Apaches out 

of the Guard is a wise move? 

General GRASS. Senator, the adjutants general submitted a proposal to me that I have submitted to the Army about that. We actually agree with two-thirds of the move of the trainer and also 

moving the Kiowa Warriors, and we submitted a proposal to keep 

a strategic depth of Apaches in the Guard. 

Senator MCCAIN. It is your view that the Apaches should remain 

in the Guard. 

General GRASS. A certain amount, sir. 

Senator MCCAIN. General Odierno, you mentioned a couple times 

in previous testimony you thought that the A–10 was by far the 

most superior close air support (CAS) weapon that we have. 

General ODIERNO. Senator, what I said is our soldiers have the 

most confidence in the A–10. They are used to working with it. I 

also said that the Air Force is providing CAS with other platforms, 

which has also been successful. 

24 

Senator MCCAIN. Does it give you comfort to know that the B– 

1 is one of the replacement ideas that the Air Force has put forward presently in Afghanistan? That would mean a 6-hour flight 

from its base in a different country as opposed to a minimum of 

1 hour, and those weapons are delivered from very high altitude. 

General ODIERNO. Senator, first off, I have confidence that the 

Air Force understands the immediacy of the necessity of CAS. I believe the systems they have in place will provide us that immediacy. 

Again, as we use different platforms, we will work through with 

the Air Force how we use those and how they are best effective in 

supporting our ground forces as we move forward. 

Senator MCCAIN. I find it curious that you come over here with 

all the necessity for cost savings and the A–10 cost per flying is 

$17,000 per flying hour and the B–1, $54,000 per flying hour. As 

I said before, General Welsh, I challenge you to find an Army or 

Marine Corps commander who has functioned in the field and 

needed CAS that would feel comfortable with the B–1 replacing the 

A–10. I will look forward to you providing me with those individuals. The fact is that the B–1 is much more expensive. It flies at 

high altitude and it attacks static targets. That does not fulfill the 

mission of CAS as I know it. I would be glad to hear your response. 

General WELSH. Senator, the B–1 also provides about 5 hours 

times on station, and up to 32 joint direct attack munitions. 

Senator MCCAIN. At $54,000 per flying hour. 

General WELSH. Yes, sir, and in some scenarios where the 

ground forces are not in direct contact with the enemy, it is an exceptionally good CAS platform. I would be happy to provide people 

who will tell you that. 

It is also not the planned replacement for the A–10, sir. The primary airplane doing CAS to take the place of the A–10 will be the 

F–16. It has already done more CAS in Afghanistan than the A– 

10 has, and it will work with other aircraft, if the scenario allows 

it, to provide the best possible CAS for our troops on the ground. 

We are absolutely committed to it. We have been and we will remain so. 

Senator MCCAIN. Well, you tried to get rid of it before, General, 

and did not succeed. We will try to see that you do not succeed 

again. 

Finally, Mr. Chairman, my time has expired. But I gave a speech 

again yesterday on the floor of the Senate. We have now spent 57 

percent of the $300 billion that was spent in fiscal year 2013 on 

non-competitive contracts, 80 programs, according to the Government Accountability Office, with $500 billion in cost overruns. The 

EELV. The Air Force Expeditionary Combat Support System over 

$1 billion which as of now has no result. The Expeditionary Fighting Vehicle, $3 billion. Former Marine One helicopter, $3.2 billion. 

The acquisition system in DOD is broken. It still has not been 

fixed, and when we have as much as a $3 billion cost overrun for 

a single aircraft carrier, the American taxpayers will not sustain 

it. 

I thank you, Mr. Chairman. 

Chairman LEVIN. Thank you, Senator McCain. 

Senator Blumenthal. 

25 

Senator BLUMENTHAL. Thank you, Mr. Chairman. 

Thank you all for your service, your extraordinary dedication and 

contribution to our Nation. I join Chairman Levin in saying to you 

and the men and women who serve under you that we owe you a 

tremendous debt of gratitude both in peace and war. 

General Dempsey, I had not intended to ask this question, but 

I am encouraged to do so by one of Senator McCain’s questions. On 

the purchase of Russian helicopters for the Afghan military, what 

would it take to convince you that we should stop those purchases 

today since the money that we are spending on them goes to 

Rosoboronexport, the Russian arms agency that, in turn, is fueling 

and financing Assad in Syria and also now the troops that are on 

the border with Ukraine? What would it take to convince you that 

we should stop those purchases right away? 

General DEMPSEY. An alternative, Senator. I just came back from 

Afghanistan on Saturday, and the Afghan Security Forces did an 

absolutely remarkable job of managing their elections. They peaked 

for the big events, but they are not ready to sustain themselves 

over the long term. We have to get them a lift capability and an 

attack capability, and currently there is no alternative. 

Now, we are looking inside DOD to see if we can find an alternative supply chain and repair parts. Believe me. 

By the way, the other thing that it would take is if a sanction 

were to be placed against them, that would be the law and we 

would have to react to that. 

Senator BLUMENTHAL. A sanction against the Russian arms 

agency. 

General DEMPSEY. That is right. A sector sanction. 

But at this point, we do not have an alternative, though we continue to seek one. 

Senator BLUMENTHAL. Is there a military reason that we should 

not impose sanctions on Rosoboronexport, the Russian export agency? 

General DEMPSEY. The military reason is what I just expressed, 

which is a concern that we would leave the Afghan Security Forces 

without an air component for some time. 

Senator BLUMENTHAL. But can we not provide those components 

from another source and the training to fly American helicopters? 

General DEMPSEY. We have talked about the American helicopter, Senator. That would take a very long time, much longer 

than it does with the Mi-17. But we are looking at alternative 

sources of supply and repair parts. 

Senator BLUMENTHAL. I do not want to dwell too long on this 

issue, and you have been very gracious in talking to me about it 

on previous occasions, both on and off the record. I appreciate your 

attention to it. But I would like to follow up further with it, and 

I appreciate your responding. 

A question for you, General Dempsey, and perhaps to General 

Odierno and General Amos. One of the biggest factors as a cause 

of suicide is financial stress, and the rates of suicide I know have 

been of great concern to every member of this panel. Do you anticipate that any of these cuts or changes in compensation will impose 

greater stress? Obviously, that is an emotional term. It may not be 

objectively a cut in the standard of living, but the idea of stress 

26 

comes with reductions in compensation and the threat of additional 

reductions in compensation. 

I ask this question very cognizant of the fact that many of our 

best and brightest who are fortunately serving now go into the 

military without the idea that compensation is going to be the key 

to their future. As the father of two who have served, who are serving, I am well aware that the training and the challenge and the 

mission are the primary motivations for any young man or woman 

who goes into the military. But in terms of retention and continued 

service, are we not creating additional financial stress which, in 

turn, aggravates suicide rates and could have other down sides 

physically and emotionally? 

General DEMPSEY. I will let the Service Chiefs talk about the 

many programs in place to help service men and women deal both 

with stress and, in particular, with their financial well-being. 

Personally, Senator, my belief is that the uncertainty of all of 

this is a greater cause of stress than the slowing of growth that we 

have prepared. As I have gone around into townhall meetings, that 

echoes. That resonates. They are more concerned because they do 

not know what the future will be in terms of our ability to raise 

and maintain a force over time. 

But let me ask if any of the Service Chiefs want to talk specifically about this. 

General ODIERNO. If I could, Senator, I want to really piggyback 

on what the Chairman just said. Their concern is am I going to 

have a job? Am I still going to be part of the best Army? Am I 

going to have the best equipment? Am I going to be ready when 

you ask me to deploy somewhere around the world? Certainly they 

are concerned about their compensation. But in reality, we are not 

reducing their compensation. We are reducing the rate of growth. 

Nobody will see a cut in their paycheck. Their paychecks will continue to increase. In my opinion, that is the bigger issue, sir. 

Senator BLUMENTHAL. Can you talk perhaps, General Dempsey 

or General Odierno, about the Study to Assess Risk and Resilience 

in Servicemembers (STARRS) program, in terms of addressing the 

suicide issues in the Army? 

General ODIERNO. I can, Senator. 

STARRS enters its fifth year of the program. To date, more than 

100,000 soldiers have voluntarily participated. This is allowing us 

to gain new data that is enabling us to see where the stresses are, 

what are causing soldiers to think about suicide, to have suicide 

ideation, in some cases with those who have actually attempted 

suicide. It is really giving us high quality information that we are 

able to put back in our program. We are continuing to fund that 

program because the information we are getting is allowing us then 

to pass that information to the commanders and allowing them to 

better help and understand what the stressors are on our soldiers. 

We are continuing to invest in that program as we move forward. 

Senator BLUMENTHAL. Thank you. 

Thank you very much, Mr. Chairman. 

Chairman LEVIN. Thank you, Senator Blumenthal. 

Senator Fischer. 

Senator FISCHER. Thank you, Mr. Chairman. 

27 

General Dempsey, some have suggested that maybe there are 

other areas in the budget that we can cut. I guess I would like you 

to speak to that. I know that research and procurement funds have 

been cut, but do you believe that there are any additional savings 

in those areas or other areas that can offset these compensation 

changes? How do you weigh that? 

General DEMPSEY. Yes, Senator, not only are there other areas 

that could be cut, we have actually cut nearly every area. In fact, 

I would actually prefer to allow some of the Service Chiefs to talk 

about how they have tried to balance the reductions against pay, 

compensation, health care, modernization, training, infrastructure. 

There are five or six or seven places you can find money in a budget. They have looked. There is nothing left under the mattress. We 

have to do this in a balanced way. 

Anybody want to add to that? 

Senator FISCHER. General Amos? 

General AMOS. Senator, in my Service, as I testified in my opening statement, 63 cents on every dollar goes to manpower. We are 

the highest of all. By the way, that does not mean the marines cost 

more. We actually cost less because we are a younger Service. But 

it is a percentage of budget and a percentage of top line. We are 

at 63 percent. 

That leaves 27 percent available for readiness. You want me to 

be in a high state of readiness so we can deploy today, and we do 

that often. 27 cents of every dollar applies to that. 

Then really all that is left over, for the most part, is about 8 percent, which is equipment, modernization. You mentioned research 

and development (R&D). 4 percent is R&D and 4 percent is modernization. When you think about our Service, we have been at war 

for 12 to 13 years, and 4 cents on every dollar is going to modernize 

the Marine Corps after 12 or 13 years of war. 

General Dempsey’s point is that we have looked in a lot of places. 

For me, my manpower account is 63 cents on every dollar. 64 percent of that is pay, health care, and BAH. If I am going to make 

a change, even if it is a modest change, for me I get a pretty high 

return on the money considering the amount of money I am paying 

for modernization. 

General ODIERNO. Senator, if I could just add to that. 

Currently we are only funding our installations at 50 percent of 

what they should be funded at. We do not have a Base Realignment and Closure (BRAC) round. We are going to have to continue 

to sustain the number of installations that we have. We cannot 

fund our installations fully. That is already the case. We are cutting the Army by 34 percent in the Active component. We are cutting the Army by potentially 20 percent in the National Guard, 10 

percent U.S. Army Reserve. Our research, development, and acquisition account has been cut by 39 percent. We have slowed down 

every one of our programs, which is causing cost overruns because 

we have now slowed down how long it is taking us to procure aircraft. What that means is each aircraft costs more because we have 

slowed it down and we have reduced the amount of aircraft we are 

buying. We are not only past efficiencies. We are becoming more 

inefficient because of how we are trying to deal with the problems 

that we are dealing with. Our military construction (MILCON) is 

28 

at the lowest level ever in the Army right now. We have taken as 

many efficiencies as we possibly can to pay a $170 billion bill that 

we still have to pay over the next several years. 

Senator FISCHER. You have strategic requirements that you have 

to meet. So just how far are you going to fall short of those if the 

sequester continues? 

General ODIERNO. Until we can get the end strength out, which 

is going to take us about 3 or 4 more years, we are going to continue to be out of balance. We are taking a portion of the force, a 

very small portion of the force, and making them as ready as possible to meet our operational commitments. The problem is the rest 

of the force is paying a significant price in readiness. What that 

means is as we get unknown contingencies, we are not going to be 

able to respond with the readiness and capabilities that we are 

used to responding. That is my real concern, Senator. 

Senator FISCHER. We have talked a little bit about the MCRMC 

that is out there and the recommendations that they may come up 

with. I guess I will start with you, General Dempsey. Are any of 

you concerned about the changes that you are proposing here that 

you are contemplating for the budget? What happens if the 

MCRMC rejects those and goes in another direction? How are you 

going to address that? 

General DEMPSEY. The commission’s work is on changes to structure of pay, compensation, and health care and retirement, which 

is a longer look at this than we are proposing right now. I think 

our suggestions are going to harmonize quite well, frankly, with 

what they are doing. 

Senator FISCHER. What would you see for savings if the pay is 

going to be capped at an increase of 1 percent down the line? 

General DEMPSEY. I am not sure I understand the question, Senator. 

Senator FISCHER. If you are looking at savings on pay in the 

budget that you are proposing, you are talking about a 1 percent 

this year or fiscal year 2015 instead of the 1.8 percent? 

General DEMPSEY. Right. 

Senator FISCHER. There will be savings there. Do you anticipate 

that that will continue into the future and how far into the future? 

Would you cap that? 

General DEMPSEY. I think that is one of the things that we would 

expect to get some advice from from the commission because that 

is a structural issue. But the savings on that 1 percent vice 1.8 is 

about $3.8 billion over the FYDP, and that is money we really 

need. 

Senator FISCHER. I see my time is up. Thank you. 

Chairman LEVIN. Thank you, Senator Fischer. 

Senator Donnelly. 

Senator DONNELLY. Thank you, Mr. Chairman, and thank you 

for all your service. 

I want to focus for just a minute on mental health assistance. I 

appreciate all the efforts of all the Services in trying to get this 

right. 

General Grass, the National Guard is limited in its ability to provide medical treatment to its members. You cannot access the Defense Health Program’s funding and have to use operations and 

29 

maintenance funds. Does this impact the quality of mental health 

support that you can provide for your members? 

General GRASS. Senator, we have 167 trained mental health clinicians across the States. Those are primarily in the State headquarters as well as in the flying wings. Thanks to Congress, we got 

a $10 million plus-up for this year. We have been able to bring on 

additional clinicians that we can put in the high risk areas. That 

has been very helpful. 

My concern is probably more looking to the future and especially 

as we bring men and women off of Active Duty into the Guard that 

maybe have had multiple deployments and they are coming back 

to their hometown and will we be able to expand and provide the 

health care they need, as well as our own men and women. In the 

past, we have had a 50/50 split on prior service and non-prior. During the war, that actually went down to a 20 percent prior service 

and 80 percent non-prior. We have to tackle this issue. 

Senator DONNELLY. We continue to need to do a better job of assessing the mental well-being of our servicemembers every year for 

every servicemember regardless of whether deployed or not. This 

goes for Active Duty, Guard, and Reserve. 

General Dempsey, I was wondering your views on conducting annual mental health examinations or screenings for the Active Duty 

and Reserve members. 

General DEMPSEY. We have programs in place pre-deployment 

where we screen them. Let me ask the Service Chiefs if you extend 

those into routine presence deployments. John? 

Admiral GREENERT. We have pre-deployment, as the Chairman 

has said, and then post-deployment, we have a 30-day, 90-day, and 

6-month checks which include—I do not know that I could call it 

a mental health screening but delves into issues of mental health 

of our individuals. When you take that across a spectrum—and 

folks deploy every 2 years or so—that is quite a few checks. 

General ODIERNO. We conduct assessment prior. Then we do one 

during deployment, and then we do one after the deployment. But 

then we are now making a part of the routine sustainment, as we 

do physicals and other things, behavioral health is becoming a part 

of that. 

There are two things with the National Guard, if I could. We 

have increased the tele-behavioral health. We have to continue to 

invest in that because that then allows them from external places 

to get behavioral health. 

The other thing is the TRICARE Reserve Select, which is a lowcost premium that allows them to get care. We are subsidizing 

that. We subsidize that by 72 percent. That is an investment that 

we have made to help them to get care outside of the military 

health structure which should assist our Guard and our Reserve in 

order to get the behavioral health and other care that they need. 

Senator DONNELLY. You in previous hearings here had mentioned about the possibility or the use of off-base mental health assistance as well. That seems like in certain cases that could be a 

very good fit. 

General ODIERNO. We are trying to build a civilian military consortium of capability that allows our soldiers and their families to 

get the care. We are making some progress on that. 

30 

We are also working with many outside organizations on our 

major installations in order to have this cooperative effort because 

sometimes they would much rather go to someone in the civilian 

community than in the military structure because of their concern 

about stigma and other things. We are trying to open that up as 

much as possible as we move forward. 

Senator DONNELLY. General Amos, I just wanted to ask you. You 

mentioned 63 cents of every dollar goes to personnel, 4 percent for 

modernization. With that 4 percent, how modern will that allow 

the Marine Corps to be in about 10 years if it continued at that 

rate? 

General AMOS. Sir, it is part of the decision we made last summer as we were facing sequestration. We said what is good enough. 

So in 10 years, the Marine Corps will not be a very modern Service 

with regard to ground tactical vehicles. It will be modern with regard to aviation and a few other, but we will be living with legacy 

vehicles in the ground tactical vehicle arena. 

Senator DONNELLY. This would be for all of you, and I will do 

it quick. 

Is there an upper limit like on the personnel costs? I remember, 

Admiral Greenert, we were at a dinner with you where you said 

at some point, if things do not change, the Navy’s personnel costs 

will be two-thirds of every dollar and it will be very difficult to run 

the operations of the Navy if that occurs. Is there an X crosses Y 

point for the different Services? 

Admiral GREENERT. That was at a rate that we were on at the 

time, and that would notionally arrest itself. But I think what we 

are suggesting is to slow growth. For the Navy, we are about right 

now at about 25 to 35 percent. Now, if you add reservists, I am 

talking about sailors, reservists, and civilian personnel. We are 

talking about arresting it to the area we are right now. 

Senator DONNELLY. Okay. 

Sir? 

General ODIERNO. For the Army, historically it is 42 to 45 percent. Today we are about 48 percent and growing, and that is the 

concern we have. As the budget comes down, it will probably grow 

as a bigger percentage. We are still working the numbers, but it 

will continue to grow if we do not watch this very carefully. 

General WELSH. Senator, one of the concerns that I have is that 

the percentage for the Air Force has stayed the same between 

2000, 2001, and today. It is roughly in the mid-30s. 30 to 35 percent of our budget is costs we pay to people. The problem with that 

is we have cut 50,000 airmen during that time frame. Our top line 

has gone up. We have cut 50,000 people and the percentage of the 

budget we put toward those people is exactly the same. That is the 

impact of the cost growth. 

Senator DONNELLY. Thank you very much, Mr. Chairman. 

Chairman LEVIN. Thank you, Senator Donnelly. 

Senator Ayotte. 

Senator AYOTTE. Thank you, Mr. Chairman. 

I want to thank all of you for your leadership in the military, for 

your extraordinary service to our country during challenging times. 

I just have a comment up front, and I want to echo the comments 

that Senator McCain made. This really is about sequestration. As 

31 

we look at these issues in terms of compensation and also the readiness issues and challenges that you are facing right now, it seems 

to me that when we look at the overall budget, taking it out of the 

DOD realm, 60 percent of what we are spending our Federal dollars on are on mandatory spending, entitlement programs, that if 

we do not get together collectively as a Congress and address the 

bigger picture in the budget, then those programs, by the way, go 

bankrupt but also it continues to squeeze out the priorities in 

terms of defending this Nation at a very challenging time. 

Sequester, let us not forget, was set up to be something that 

would never happen, and yet, here we are. I think that we need 

to show an iota of the courage that our men and women in uniform 

do every day and really address the big picture problem here with 

sequester because we are going to continue to face this down. 

As I look at it, the one thing that worries me is that when we 

went though the cost-of-living adjustment (COLA) discussion in the 

budget agreement, there seemed to be somewhat of a disconnect 

that there were comparisons made between civilian personnel and 

the sacrifices that our men and women make every day. When you 

are married to someone in the military and you have to move 

around, you cannot have the same career as someone who is on the 

civilian side. When you are missing those weekends, those holidays, it is not the same. You cannot make those comparisons, and 

we cannot lose sight that the 1 percent of this population, the men 

and women in uniform who go out and defend the rest of us, that 

the sacrifices they made are very different. 

What I would like to make sure of is that we do not lose sight 

of that as a Nation and that we actually hopefully can get this Congress to the place where we are taking on the big-picture, hard 

questions that need to be taken on so that we do not diminish the 

best military in the world. 

That is my comment upfront, and I know that many on this committee share those sentiments and really what we need to address 

if we want to make sure that our men and women in uniform are 

supported and the defense of this Nation is sound. 

I want to ask, in particular, just real quick to follow up on what 

Senator McCain had asked General Odierno. Just so we are clear 

on the A–10, our men and women on the ground—do they have as 

much confidence in the F–16 in terms of the CAS mission as they 

do in the A–10? 

General ODIERNO. If you go ask people on the ground, they will 

tell you that they believe in the A–10. They can see it. They hear 

it. I think a lot of times they are not aware of the F–16 as much 

because it is not actually visible to them. If you ask them on the 

ground, they are very clear that they—— 

Senator AYOTTE. Do you believe the F–16 is the equivalent of the 

A–10 on the ground in terms of re-attack times, in terms of ability 

to go low and slow in terms of survivability in those real close settings? 

General ODIERNO. They both have very different capabilities. 

They both can conduct the missions, but the A–10 has certain characteristics that enable them, visual deterrence, able to see, the type 

of munitions. But the F–16 also has been capable of developing and 

delivering. 

32 

Senator AYOTTE. Let us be clear. The F–16 is not the equivalent 

of the A–10 when it comes to the CAS mission on the ground. Is 

it? 

General ODIERNO. It is not the same. 

Senator AYOTTE. General Amos, would you disagree with that? Is 

the F–16 the equivalent of the A–10 in terms of CAS on the 

ground? 

General AMOS. Senator, I cannot comment on the F–16. I can 

comment on the F–18, and the marines would rather have F–18s 

overhead than A–10s. I will say that caveated. During Operation 

Iraqi Freedom-1, I had 60 F–18s, 72 Harriers, and General Mosley 

gave me a 100 sorties of A–10s every day. It was a nice blend. The 

A–10s in those days were nonprecision. I think that is taken care 

of now. I think they have precision systems. 

Senator AYOTTE. They are precision guided now. 

General AMOS. Yes, and so they have all that. That makes them 

the better platform. 

I think it is a blend. But if you ask the marines on the ground, 

they would rather have their F–18s and the Harriers overhead. 

That does not mean they did not appreciate the hell out of the A– 

10s, and I know for a fact that they did. 

Senator AYOTTE. I guess my question is do you think that the F– 

16 is the equivalent of the A–10 on CAS. Yes or no? 

General AMOS. Senator, I do this for a living, and I think they 

are two completely different platforms with overlapping missions. 

Now, one is very old. The other one is not quite so old. I think what 

you would probably like to do is have a blend, if we could afford 

it. We are at a point right now where we are trying to make decisions on what we can afford and modernization. 

Senator AYOTTE. Well, it seems to me when I think about what 

the men and women in uniform on the ground have told me when 

I visited Afghanistan, we should be able to afford what they believe 

is the best CAS platform, especially given the cost per flying hour 

and what we have previously invested in the A–10. 

I have a question for the whole panel that I really think we need 

to get to the bottom of. When we add up the fiscal year 2014, fiscal 

year 2015 pay caps, and the proposed BAH pay reductions, the reductions in commissary savings, and the new TRICARE fee structure, the Military Officers Association of America (MOAA) has 

given us an estimate that an E–5’s family of four would experience 

a loss of about $5,000 in purchasing power annually, thinking 

about their overall compensation package as opposed to just pay or 

one area. 

Do you all agree with that estimate? Have you done the analysis 

in terms of thinking about our junior enlisted officers and what it 

will mean for them in terms of these proposals on a gradation? Because I have not yet seen that. Perhaps you produced it, but I 

think it is important for us to see especially for thinking about the 

sergeants in our Army and our Marine Corps, the staff sergeants, 

the petty officers 2nd class, all of those who are really at the junior 

enlisted level who are making a lot less money. Some of them, unfortunately, in some instances I know in the past have been on— 

it is a shame, but have been on food stamps and other things. I 

think those numbers are particularly important for us to see. 

33 

General DEMPSEY. Senator, we will take it in general for the 

record and give you—we do have that data. The Chief of Naval Operations (CNO) actually has the specific answer to that question 

that you asked. 

[The information referred to follows:] 

We do not agree with the Military Officers Assocation of America’s (MOAA) estimated impact of the Department’s pay and compensation proposals on junior enlisted servicemembers. 

- Baseline: MOAA is inconsistent in base lining each proposal. For example, 

MOAA depicts the total impact of the BAH and Commissary proposals, which 

are not fully implemented until fiscal year 2017, but only depicts the impact of 

slower Basic Pay raises in fiscal year 2014–2015. 

- Timeframe: MOAA includes the impact of the 2014 pay raise, which was less 

than the employment cost index. Analysis should be bounded by the PB15 horizon (fiscal year 2015–2019). 

- Assumptions: The impact to the servicemember varies based on the underlying assumptions, including: dependency status, years of service (YOS), health 

care usage, and shopping habits. In fact, of all the PB15 pay and compensation 

proposals, the commissary impact is the most sensitive to varying assumptions. 

- YOS. MOAA depicts an E–5 with 10 YOS. An average E–5 has about 6 

YOS. 

- Family Size. MOAA depicts a family of four. The average servicemember 

has a family of three. 

- Commissary. MOAA assumes 100 percent commissary usage, resulting in 

annual savings of ∼$4,500. The average servicemember does not shop exclusively at the commissary and independent analysis shows the commissary 

may only save the average servicemember $600–$2,250 annually. 

The below table depicts the OSD estimated average monthly increase in pay and 

benefits from (fiscal year 2014 to fiscal year 2017) after implementing all the PB15 

pay and compensation proposals. 

E-3 

(2 YOS) 

E-4 

(3 YOS) 

E-5 

(6 YOS) 

E-6 

(12 YOS) 

O-1 

(<2 YOS) 

O-2 

(3 YOS) 

O-3 

(6 YOS) 

Single ............................................. $98 $107 $135 $167 $128 $186 $230 

Family ............................................ 52 62 0 35 81 133 185 

Assumptions: 

Single: 

- No dependents 

- Shops at the commissary 80 percent of the time 

Family: 

- E-3–E-4 & O-1–O-3: servicemember is married with no children 

- E-5–E-6: servicemember is married with two children 

- Shops at the commissary 80 percent of the time 

Admiral GREENERT. If you look at the literal pay today—this is 

an E–5 in the Navy, about 6 years in the Navy, three dependents— 

they make $64,300. I will back this up. In 2019, which is at the 

end of this pay period we are talking about, they would make 

$76,000. Now, that gives them inflation. If you look at buying 

power, to be straight with you, they get about a 4 percent loss in 

buying power as a result of this. That is about $2,500, not $5,000. 

Does that make sense? 

Senator AYOTTE. Yes. Basically you would say that the estimate 

that MOAA gave us—your estimate would be half that. 

Admiral GREENERT. Yes, ma’am. 

Senator AYOTTE. I appreciate that. I just think it is important for 

us to understand in the buying power dollars because that is how 

families operate. It is the junior enlisted level that really are going 

to have the toughest time with this, and I want to understand that. 

34 

General AMOS. Senator, on the commissary issue, which is a sore 

point for me personally, DECA advertises 30 percent savings across 

the market for us out there right now. They are saying that as we 

go down and we put these efficiencies in, this over $1 billion worth 

of efficiencies over time, it is going to go down to 10 percent savings. That is a 66 percent drop in savings for my marine. I do not 

like that. I do not think that is the solution set. I think the solution 

set is to force DECA to become more efficient and figure out how 

to do it and do not put that burden on the backs of our young enlisted marines, our lance corporals, our sergeants, our airmen, or 

seamen. 

I think the commissary piece is important. We do not need to 

turn our back on it. But I think we are going at it the wrong way. 

I think we need to force DECA to do some of the things that the 

Services have had to do over the last year to try to live within our 

means, if that makes sense. 

Senator AYOTTE. It does. 

Thank you all. I appreciate it. I know I am beyond my time. 

Chairman LEVIN. Thank you, Senator Ayotte. 

Senator Hagan. 

Senator HAGAN. Thank you, Mr. Chairman. 

Mr. Chairman, I just wanted to express my thanks to Commandant Amos for his incredible leadership over the marines, as 

well as your wife, Bonnie, for all that she has enjoyed and been 

through over these so many years. Thank you for your steadfast 

dedication to our Marine Corps, to our country, and to the State 

of North Carolina. 

General AMOS. Thank you, Senator. I will pass that on to Bonnie. 

Senator HAGAN. Please do. 

We certainly face difficult decisions in fiscal year 2015, as we all 

know and have been discussing. It is something that this committee will be closely examining in the coming weeks as we consider the NDAA. Looking ahead, however, we also face the return 

of sequestration in fiscal year 2016 and beyond. 

North Carolina, as all of you know, has one of the largest military footprints in our Nation. I am particularly concerned about the 

effect that it would have on our servicemembers. I am committed 

to finding a balanced solution that is going to put an end to sequestration in future years. 

My question, General Amos, with this likely being your last appearance before our committee as commandant, I am interested in 

your most blunt view of the impact that the return of sequestration 

would have on our Marine Corps in the future. 

General AMOS. Senator, just trying to pull the figures out—we 

have testified on this so many times on this in the past. There is 

absolutely no doubt in my Service and in particularly your State. 

You are going to go from almost 50,000 marines, a little bit more 

than that, down to just about 41,000 marines in your State alone, 

all as a result of the force drawdown, which is driven a lot by sequestration. It is not dollar for dollar, but it is significant. 

I think more importantly than that is you are going to take a 

force whose raison d’etre is to be ready today, to go tonight. We will 

continue to do that for about 2 more years, but if sequestration returns in 2016, then you are going to see the readiness of those 

35 

units that are designed to and assigned to be ready tonight—you 

are going to see the readiness in those units fall under sequestration. We have not even talked about modernization, equipment, 

and all that other stuff. Just the operation and maintenance, the 

training readiness, the ranges, the ammunition, the fuel, the ability to train those young marines is going fall starting in about 2 

years. 

Senator HAGAN. That is certainly one of the very reasons that I 

think it is very important that we take notice of this. We listen to 

what you all have to say and we certainly work very hard together 

to be sure that we can stop sequestration. 

General Dempsey, as I am chair of the Emerging Threats and 

Capabilities Subcommittee and I am concerned about how, once 

again, the continued sequestration could affect our ability to meet 

the challenges in the future, if sequestration returned in fiscal year 

2016, what threats concern you the most in terms of our ability to 

be prepared? 

General DEMPSEY. I think three things, one I mentioned to Senator Blumenthal, which is the uncertainty that will persist within 

the force, and that is going to have issues in the human dimension. 

These are real people we ask to do this work. We owe them a little 

certainty in their lives. 

Second, it will affect our ability to maintain forward presence to 

the degree we believe we should. When we are forward, we deter 

our adversaries and we reassure our allies. If we have fewer forces 

forward, we will be less deterrent and less reassuring to our allies. 

Third, as General Odierno mentioned, should a contingency 

arise, we will have less in readiness back here to flow forward to 

respond to that crisis. 

Those are the three things I would suggest we should take very 

seriously. In the aggregate, they define a level of risk that at sequestration levels we believe to be unacceptable. 

Senator HAGAN. Thank you. 

I did want to ask a question similar to what Senator Ayotte was 

talking about in her last question. Unlike the private sector, where 

most companies can easily recruit mid-level employees, in the 

Armed Forces we do not have an alternative but to build and develop our mid-grade officers and non-commissioned officers from 

within. As our servicemembers reach that midpoint of their careers, they are making these critical decisions about whether or not 

to make the military a career. These officers and noncommissioned 

officers obviously have a wealth of experience with multiple deployments many times to Iraq and Afghanistan. 

How do you think they will view DOD’s proposed compensation 

proposals? I would put this out to anybody. 

Admiral WINNEFELD. I can give you some numbers that are 

rough numbers. We find that in retention, which is I think the 

question you are asking, that a 10 percent pay increase historically—we have had more increases over the last decade than decreases—for first-term retention increases retention about 10 to 15 

percent. For second-term retention, it increases at about 10 to 13 

percent, and it increases career retention about 5 percent. If you 

were to take a 10 percent decrease, which is not at all what we are 

talking about here—we are just talking about lowering the trajecVerDate Nov 24 2008 14:57 Feb 24, 2015 Jkt 000000 PO 00000 Frm 00039 Fmt 6633 Sfmt 6602 Z:\DOCS\93413.TXT JUNE
36 

tory of increases. They are smaller increases—presumably you 

would have a commensurate effect. 

I think what we are hearing from our people is that there might 

be some small impact on retention but that based on the current 

economy and a number of other factors, we think we are going to 

be okay. We carefully considered that as we designed these proposals to not end up with a break in retention. 

Right now, the Air Force is retaining and I would defer to the 

chief over there. But in 10 of 11 categories, the Air Force is exceeding its goals. In career retention, they are at 96 percent, just as an 

example. 

Senator HAGAN. Thank you. Once again, General Amos, thank 

you. 

Senator NELSON [presiding]. Thank you, Senator Hagan. 

Now, Senator Kaine. 

Senator KAINE. Thank you, Senator Nelson. 

To members of the panel, thank you for your service and your 

testimony today. 

I just want to associate myself with the comments about sequestration. One of the first votes I cast when I came into the Senate 

was to eliminate sequester as needless and poor budgetary strategy. Together with colleagues, Senator Nelson, Senator King, and 

others on the Budget Committee, we worked to at least reduce the 

effect of sequester in fiscal years 2014 and 2015. Those of us who 

are on the Budget Committee, those of us on Armed Services, many 

of us are going to be trying to do the same thing with 2016 and 

carrying it forward. 

General Dempsey, just to open my questions in this vein about 

sequester, are the recommendations that are part of this budget, 

including the compensation recommendations we are discussing 

today, driven primarily by optimal defense strategy or by budgetary caps imposed by Congress? 

General DEMPSEY. This is a bundling of reform. There are some 

things in there that we would have clearly wanted to do whether 

sequestration was a fact or not. Then there are things that are very 

clearly the result of sequestration. 

We are trying to recover from 12 years of conflict, restore skills 

lost, rebuild readiness, recapitalize the force. It is really the aggregate of effects. I would certainly say that sequestration has dramatically exacerbated our challenge. It would have taken us 3 

years or more to reset the force whether sequestration was upon 

us or not, but this really exacerbates it. 

Senator KAINE. I think that is an important thing. The optimum 

for the Nation would be if our budgetary decisions were driven by 

our strategic choices, especially in defense but in other areas as 

well. The distant second place is if we let strategy be dictated by 

budget realities, but what we have really been doing is letting 

strategy be dictated by budget uncertainties, budgetary gimmicks, 

and that is the far distant third in terms of the way we ought to 

be doing defense and other strategy in my view. 

Before I came to the Senate, the Senate agreed, as part of the 

2013 NDAA, to embark upon the MCRMC process. One of the 

issues that I have just found kind of compelling, as folks have advanced it, is regardless of the justifications for particular comVerDate Nov 24 2008 14:57 Feb 24, 2015 Jkt 000000 PO 00000 Frm 00040 Fmt 6633 Sfmt 6602 Z:\DOCS\93413.TXT JUNE
37 

pensation-type changes—and all those that you are advancing seem 

to me to be good faith efforts to tackle budgetary challenges. Nevertheless, there is an argument that is being made that the Senate 

embraced a notion that there ought to be this full-scale, 360 degree 

examination of these changes, and a recommendation would be 

circa February 2015, and that you should not make changes until 

then. 

What is your thought about whether we break faith with a commitment that we made even if these changes are made in good 

faith and they are justified, if we embark on those changes prior 

to the full set of recommendations from the MCRMC early next calendar year? 

Admiral WINNEFELD. I think it is important to reiterate what 

Chairman Dempsey said a minute ago, and that is we fully expect 

the commission to take a holistic look not only at retirement structure but also the pay structure, how do we structure compensation 

for our people, what is BAH, what is basic pay, all those sorts of 

things. What we are talking about here is really tweaks to the existing structure that we would not really expect the MCRMC to 

say, well, we think base pay should be raised at this percent next 

year, whatever. I think they are taking a more fundamental look 

at how we structure compensation overall. 

But we believe we need to get going now. We cannot wait for this 

commission to report to get the savings we need in order to give 

these young men and women the tools they need to fight. We look 

forward to the MCRMC’s recommendation on structure. 

Senator KAINE. Admiral Winnefeld, is it your understanding that 

the commission, just to use one example, would not be addressing 

items like what should the level of subsidy be for the commissaries? Do you think that is outside the scope of the work that 

they are going to be doing? 

Admiral WINNEFELD. They might address the level of subsidy 

there. They can address the full range of things, but our view is 

their principal role is the structure of compensation. Let us take 

a fresh look at how we pay our people to see if we have this right 

in the 21st century. I would not want to rule out that they would 

look at individual numbers, but we felt we had all the data that 

we needed right now to get moving on this so we can get the savings we need sooner to get these young men and women the tools 

they need to succeed in combat. 

Senator KAINE. One of the things that I think is most important 

about the work that the commission does is that they really have 

a great sense, kind of a scientific survey sense, of what service men 

and women at all levels feel about the kind of relative priorities of 

compensation and retirement items. Senator Cornyn and I have 

today introduced a bill, the Servicemember Compensation Empowerment Act, that directs them, as part of their recommendations, to make sure that they have done a survey. They may already be underway in surveys of that kind, but we think that is 

pretty important. 

Let me ask about this idea that the work of this commission 

looks at structure. We had a wonderful hearing last week, General 

Welsh, on the Air Force force structure analysis that really was 

getting at some of these structural issues. There are more ways to 

38 

save money in a personnel system than adjust a COLA or adjust 

a salary increase. The entire structure of a Service operation is a 

way to find savings and promote the mission as well. You talked 

about the continuum of service as an idea within the Air Force. 

Are the other Services doing things similar to the Air Force force 

structure analysis, or is that more being done as part of the 

MCRMC? 

General WELSH. Senator, we look at our structure every single 

year, and we do a comprehensive review of our structure and how 

it fits and what the cost is and how it fits within our requirements. 

We are constantly doing this. 

We also look at optimizing the grade plate within the structure, 

what are the right grades that we should have. What is the right 

leader-to-led ratio? What is the right leader-to-led ratio in the operational force versus the generating force. We are constantly doing 

this assessment. Every year we look at it anew to make sure we 

keep it in balance and have it right, and that is part of this. 

But we are all in different places. We are significantly reducing 

end strength and structure now. We are doing about everything we 

can in that area, and that is why for us it is important to take a 

look at some of these other areas as well. 

Senator KAINE. Admiral Greenert? 

Admiral GREENERT. We do a 30-year shipbuilding plan and submit it to Congress annually and a 30-year aircraft building plan. 

We roll into that the strategy of DOD and the requirements of the 

combatant commanders. Then we do what is called a force structure assessment where we balance predominantly ships, but we 

look at all capabilities, our ability to meet the combatant commanders’ present requirements and the operational plans, as well 

as the scenarios of DOD. We roll those factors in. That is done 

every time we change the strategy or make a tweak to the strategy 

and at a QDR. 

Senator KAINE. Briefly, General Amos? 

General AMOS. Senator, we have done three of them in the last 

31⁄2 years. The first one took over a year, a force structure review 

going on right after I took this job. The last one was in the face 

of sequestration last year. That designed the force to come from 

202,000 down to 175,000. Within that, though, we looked to how 

we can afford that 175,000 force. We looked at pay structure inside 

grade plates, that is what we are talking about. 

We are the youngest of all the Services, and so we have the lowest numbers of what we call top-six ranks. They are the most expensive both in the officer and the enlisted side of the house. We 

look at can we make it even more less top heavy. The answer is 

no because we are so lean right now at that level. We have about 

11 enlisted marines for every officer. That is the ratio. I think it 

is the best. 

The answer is yes, we have looked at it, and sir, we are about 

where we are. 

Chairman LEVIN. [presiding]. Thank you, Senator Kaine. 

Senator King. 

Senator KING. We have just a few minutes left before this vote, 

so I am going to try to be quick. 

39 

These hearings must drive you guys crazy. I have been coming 

to these hearings with you for a year and a half. Everybody talks 

about sequester and yet nobody does anything about it. Then we 

are acting like sequester came from Mount Olympus. It is self-imposed. I call it the Wile E. Coyote budget theory. You remember 

Wile E. Coyote in the Road Roadrunner cartoons? You throw an 

anvil off the cliff, run to the bottom, look at the camera, smile stupidly, and then it hits you on the head. We created this problem, 

and we can do something about it. You guys must go and tear your 

hair out. Perhaps not you, General Odierno. [Laughter.] 

Chairman LEVIN. Actually he did have hair before sequestration. 

[Laughter.] 

Senator KING. That is right. 

But it is entirely self-imposed, and we act like everybody around 

this committee, both parties, talks about how terrible it is, and yet, 

we do not really move to do anything about it. 

General Dempsey, I assume you do not want to make these cuts 

that you have presented, but you have to because it is a zero-sum 

game. Is that not correct? 

General DEMPSEY. I it is certainly in our best interests to be the 

best stewards of America’s resources, and there are some things we 

would do anyway. But as I said earlier to Senator Kaine or to Senator Blumenthal, sequestration has made this almost a mindnumbing experience. 

Senator KING. But the reality of the world that we are in right 

now that you are facing—it seems to me it is a new reality for Congress—is that it is a zero-sum game. If we do not accept your recommendation, then that is $2.1 billion a year, $30 billion over 5 

years that has to come from somewhere else. 

General DEMPSEY. Absolutely, and that is why I mentioned to 

the chairman if we wait 2 years, it is $18 billion. 

Senator KING. Your professional judgment unanimously—and I 

heard on the Personnel Subcommittee from the senior enlisted 

unanimously—was that this is a sensible alternative particularly 

when compared to the cuts to readiness that would otherwise have 

to take place. It is not a ‘‘both/and.’’ It is an ‘‘either/or.’’ Is that correct? 

General DEMPSEY. That is correct. 

Chairman LEVIN. Let me interrupt, if I could, for one second. We 

have a vote. We are near the end of it. When you are done, Senator 

King, if you could recess this, if there is nobody here, for 10 minutes. Senator Nelson is coming back, I know. He has not had his 

first round. If you all could stay during that recess, we would appreciate it. 

Senator KING. I think we can recess now, Mr. Chairman. I am 

set. 

Chairman LEVIN. We will recess until someone else comes back, 

and give you folks a chance—— 

General DEMPSEY. It is the story of our life, Mr. Chairman. 

[Laughter.] 

[Recess.] 

Senator NELSON [presiding]. The committee will come back to 

order after the recess. 

Senator Graham. 

40 

Senator GRAHAM. Thank you, Mr. Chairman-designee. You would 

make a great chairman. 

Thank you all for being here today. 

First, I would just get my advice out of the way. We have a commission that is supposed to report back to Congress here I think 

next year, and I would like to hear from the commission before we 

make any real substantial changes. I understand what you are telling Congress. You have some things that you need to do now because of budget cuts. 

Senator McCain asked a good question. Your big fear is sequestration. I want to turn it around a bit. Even if you had all of the 

money you could possibly ask for within reason, would you still 

want to make personnel changes, reform the personnel system? 

General DEMPSEY. Yes, absolutely, Senator. We have actually 

testified to that in the past. We have a new demographic. Different 

things appeal to different kids, and we would want to take a look 

at all that. 

Senator GRAHAM. Whatever personnel footprint you have, you 

have to make it sustainable. 

We are having a dilemma here. We are trying to make sure the 

pay and benefits are consistent with the sacrifice, as much as possible. It is good for retention. It is fair, and the tie goes to the soldier, sailor, airman, and marine because if there is a doubt, I want 

to give them more, not less. But it has to be sustainable. 

Now, General Grass, we have offered TRICARE to reservists and 

Guard members. Is that correct? 

General GRASS. Yes, Senator. 

Senator GRAHAM. How has that been received? 

General GRASS. Senator, about 12 percent of our force has bought 

into it. 

Senator GRAHAM. I think over time more will buy into it, and I 

think it is a good retention and readiness tool. When we deploy 

from the Guard and Reserve, sometimes we find that health care 

problems are the biggest impediment to getting people in order. 

Having continuity of coverage, I think, makes sense from readiness, and as far as retention, if a member of the Guard or Reserve 

could sign their family up for TRICARE, it is a real inducement to 

stay in. That is an example of expanding benefits. 

When it comes to taking care of our troops, we are doing more 

on the sexual assault front. Is that right, General Dempsey? 

General DEMPSEY. Yes, Senator. 

Senator GRAHAM. I want to applaud everybody on this panel for 

taking the issue seriously. I like the way you are headed. We are 

providing Judge Advocates General (JAG) to every victim. I just 

think what we are doing on the sexual assault front will pay dividends. 

We have post-traumatic stress disorder (PTSD) problems. We 

have suicide prevention programs. All these programs cost money. 

Is that right, General Dempsey? 

General DEMPSEY. They do, Senator, and it is money well spent. 

Senator GRAHAM. I could not agree with you more. 

On one side, you are increasing benefits based on reality of retention and problems associated with long-term service in a very danVerDate Nov 24 2008 14:57 Feb 24, 2015 Jkt 000000 PO 00000 Frm 00044 Fmt 6633 Sfmt 6602 Z:\DOCS\93413.TXT JUNE
41 

gerous world. On the other side, we are trying to create sustainable 

pay and benefits. 

From the Marine Corps point of view, what percentage of your 

budget, General Amos, is personnel cost? 

General AMOS. Sir, it is 63 percent. 

Senator GRAHAM. Navy? Please, everybody answer that question, 

if you could. 

Admiral GREENERT. It is about a third, sir. 

General ODIERNO. 48 percent. 

General WELSH. Sir, roughly 48 percent with the military and civilian together. 

Senator GRAHAM. General Dempsey, one of the things that we 

are looking at is prospectively maybe redesigning retirement. You 

are going to wait on the commission as far as that is concerned. 

Is that correct? 

General DEMPSEY. That is correct, Senator. 

Senator GRAHAM. Count me in the camp of putting retirement on 

the table, making it more sustainable, more efficient, but still generous. 

The real big issue I think is TRICARE. Is that a fair statement 

from all of your perspectives? 

General DEMPSEY. I think the big three are actually pay, 

TRICARE, as well as BAH. 

Senator GRAHAM. Okay. As we look at the big three, we are going 

to be looking at trying to make the pay/benefit system more sustainable but yet still appropriate for the sacrifice. Is that correct? 

General DEMPSEY. Yes, sir. 

Senator GRAHAM. You are asking Congress to be a partner in 

this. 

General DEMPSEY. Yes, sir. 

Senator GRAHAM. I am asking Congress to keep an open mind to 

our veterans organizations. We will listen to you. We should, but 

we have to get a handle on this because over time TRICARE becomes a larger part of the budget. Is that correct? 

General DEMPSEY. That is correct, sir. 

Senator GRAHAM. Very much like Medicare. We are going to have 

to deal with the cost of health care in a responsible way. 

If we make these personnel changes and we adopt a reform package like you just said, some kind of reform, how much do you think 

it would save over time for DOD? 

General DEMPSEY. The submission that we have currently proposed—— 

Senator GRAHAM. No. I am talking about pay and benefits. I 

mean, what is your goal? 

General DEMPSEY. I think the goal is to actually slow the growth. 

As you noticed, each Service has a different model, and each Service would probably be better able to answer that question. 

Senator GRAHAM. What is your goal in the Marine Corps after 

all these reforms, General Amos? 

General AMOS. Senator, right now in this FYDP, I am looking at $1.2 billion over the next 10 years. 

Senator GRAHAM. You do not have to answer this question today. 

Pick a number that you think is a sustainable cost, a percentage 

of your budget, and let that be your goal. The goal is going to be 

42 

each Service is going to pick a percentage of your budget. What do 

we have to do to get there? That is running the place like a business. Personnel costs have to be managed. Let us pick a fair 

amount of the budget to go to personnel, understanding that is the 

heart and soul of the military. They have to be well taken care of. 

Their families have to be well taken care of, but it has to be sustainable. 

Now, I will end with this. Once you put all these numbers together, can you please, for the 555th time, tell Congress that no 

amount of personnel reform is going to save the military from 

being a hollow force if you do not fix sequestration. Is that still a 

true statement? 

General DEMPSEY. It is truer today than the last time we had 

this conversation. 

Senator GRAHAM. Does everybody agree with the Chairman’s assessment? 

General ODIERNO. Yes, Senator. 

Senator GRAHAM. Let the record reflect everybody nodded in the 

affirmative. 

Thank you. 

Chairman LEVIN [presiding]. Thank you, Senator Graham. 

Senator Hirono. 

Senator HIRONO. I got back just in the nick of time. 

I start by thanking all of you for your service, of course. 

I join my colleagues in saying that we need to get rid of sequestration because it has done so much damage to our readiness and 

other aspects of the military. I am with my colleagues who are 

going to commit ourselves to getting rid of sequestration. 

I have a question for General Amos regarding the commissaries. 

That is something that our service people understand. Their families go to the commissaries. They know what the price differentials 

are. General Amos, you said that we should force DECA to become 

more efficient rather than raising the prices so that the differential 

becomes so much less. I am completely in agreement with you. 

Does that mean that you know of examples, or perhaps any of 

the other chiefs? Do you have examples of where commissaries 

need to find efficiencies? What is inefficient that they are doing 

that they should just address right away in your view? 

General AMOS. Senator, first of all, you are absolutely correct on 

what our families are saying. The commissary issue itself is radioactive. Again, our efforts never even suggested closing commissaries. That was never on the table and it is still not today for 

us. 

But we have already talked about some of the efficiencies. Admiral Winnefeld talked about that. 

Senator HIRONO. Excuse me. Are you talking about the generic 

drugs? 

General AMOS. Yes. 

Senator HIRONO. I completely agree with you on that. I cannot 

understand why we do not allow generic drugs to be sold in our 

commissaries. 

Admiral WINNEFELD. It is not just drugs. It is generics across the 

board. I used the drug example because I could compare it to the 

43 

exchange, which does not sell food. But there are similar stories 

across. 

Senator HIRONO. Thank you for that clarification. 

That is a change that should occur, and you are saying that you 

cannot do it on your own, that it would require some change in the 

law? 

Admiral WINNEFELD. That is our understanding. We would like 

to see it happen. I can give you the example. I went out because 

my knees hurt and I use ibuprofen. I went out in town to a chain 

store. $8.99. The commissary sells it for $7.98, a pretty good deal. 

But the chain store sells a generic for $4.49, and the exchange sells 

it for $2.10. I think that there are some substantial savings that 

we could put right back in our people’s pockets that would easily 

offset at least a portion of any subsidy. 

Senator HIRONO. I agree with you. That sounds like low hanging 

fruit that we ought to pick immediately, if not sooner. 

General Amos, do you have any other areas where you can see 

efficiencies by our commissaries? 

General AMOS. Senator, I do not have specific areas, but I will 

just say this across the board. Years ago, the Marine Corps exchange—and I think it was that way in the other Services as 

well—received what they called appropriated funds. In other 

words, they were subsidized so they were not forced into making 

good business decisions. It is a little bit like Senator Graham was 

just talking about being a good steward of your money. That is not 

the case here. This is a subsidized institution, and I think it is time 

to change that. I think it is time to force them to go back and do 

things economically. 

Now, economically in my mind does not equal taking the 30 percent savings away from our families. That is not what I am saying. 

I am saying figure it out. We cannot sit at a hearing and understand all that that means. But I am confident that they can, the 

same way that our Marine Corps exchange did years ago. You can 

go the Marine Corps exchange today and you still get a pretty good 

bargain. 

Senator HIRONO. I agree with you because in earlier hearings, 

the number of the savings or the price differential would go down 

to only 10 percent instead of 30 percent. That sounded like that 

was going to be the result. But now you are saying that, no, there 

should be some other avenues before they start raising those 

prices. I completely agree with you. I hope we are all on the same 

page on that. 

Admiral WINNEFELD. Ma’am, one of the things that I mentioned 

in my opening statement was that we exempted the commissaries 

from the 20 percent staff cuts that the rest of us are taking. We 

did that to help them with the first year’s $200 million. I am not 

even going to suggest that they could make 20 percent. They have 

to run their enterprise. It is a distribution network and they have 

stores they have to man. But we think they ought to look there. 

Certainly it is one of the efficiencies that you talked about. 

Senator HIRONO. General Dempsey, you said that for you to come 

up with the kind of suggested savings in personnel costs, it was a 

1-year process, and it included most senior officers and enlisted 

leaders and select mid-grade servicemembers. That says to me that 

44 

the vast majority of our servicemembers are not aware of your suggestions. Maybe you are doing some things to get the word out because I think it is really important to educate our servicemembers, 

explain to them that the cuts that are being made are not mainly 

coming on their backs because it begins to feel like that if their 

housing allowance is not what it is or that the commissary prices 

are going up or that their pay is slowing down. 

I think it is going to be very important, as we go forward, knowing that these cuts represent just a smaller percentage of what personnel costs actually represent, 30 percent versus these cuts, 10 

percent. I think it is important to get the word out to the 

servicemembers because, believe me, if that does not happen successfully, I do think that we are going to start hearing from our 

constituents and pretty soon it is going to be hard for us to support 

these cuts. 

Can you tell me what you all are doing to get the word out so 

that we know we are all in the same boat here? 

General DEMPSEY. All of us and those behind us and those at 

every echelon of command are engaging our population on this very 

subject. Whenever I travel—and I travel quite extensively—I will 

always hold a townhall meeting. This is always a topic of conversation. 

I offer the chiefs the opportunity to elaborate, if you would like. 

General WELSH. Senator, Chief Master Sergeant of the Air Force 

Cody and I have been visiting Air Force bases all over the world. 

Like the Chairman, we hold large audiences and forums everywhere we go. We talk about this subject every time. We take questions about it. We answer concerns. We make sure they understand 

what the proposals are and what they are not. Our force is actually 

aware of what is going on. I do not think you will find any individual who says he likes the idea of anybody slowing cost growth 

if it benefits their family, but they also will tell you that they 

would really like to have the best tools in the world. They really 

would like to be trained better than anybody else, and they take 

great pride in being the best in the world at what they do. If they 

cannot do that, they will find other employment. 

Senator HIRONO. That is reassuring. Thank you. I believe my 

time is up. 

Chairman LEVIN. Thank you, Senator Hirono. 

Senator Nelson. 

Senator NELSON. Thank you, Mr. Chairman. 

General Dempsey, some have suggested that instead of the recommendations on changes in military compensation, that we 

should cut the civilian workforce. Some estimates are that you 

would need to cut 100,000 in the civilian workforce. Do you believe 

that cuts of that magnitude of civilian workforce is a feasible alternative? 

General DEMPSEY. No, I do not, Senator. In fact, it has been our 

advice in these conversations with DOD that the reductions in the 

size of the end strength of the combat power of the Nation should 

be matched by a commensurate reduction in the overhead of DOD 

and it includes out into what we call the fourth estate, the defense 

agencies. Secretary Hagel has directed a 20 percent reduction 

across the board. But I think that would devalue the contribution 

45 

of the civilians who are our wing men and foxhole buddies and 

swim buddies in this enterprise. 

Senator NELSON. Mr. Putin continues to be very aggressive, and 

whether it is uniformed personnel on the border of Ukraine or 

whether it is the non-uniformed people that are proxies that are 

stirring up things inside, he has now moved on Odessa. 

What can you share publicly are the plans of the U.S. Armed 

Forces, as well as the North Atlantic Treaty Organization (NATO), 

with regard to this aggressive action by Russia? 

General DEMPSEY. What I can say publicly, Senator, is that the 

United States has three instruments of national power: economic, 

diplomatic, and military. They are all being applied to this challenge of an assertive and aggressive Russia. The military instrument at this point with regard to the Ukrainians is support in 

terms of nonlethal assistance, intelligence sharing at some level. 

The military instrument is principally involved in reassuring our 

NATO allies by the deployment of additional resources, the deployment of planners, the conduct of exercises to assure our NATO allies that we will live up to our Article 5 responsibilities under 

NATO. 

Senator NELSON. An example of that would be the F–16s that 

you recently sent to Poland. 

General DEMPSEY. F–16s to Poland, an increase in ship presence, 

deployment of company-sized elements out of the 173rd Airborne 

out of Vincenza into the Baltics and Poland. Yes, sir. 

Senator NELSON. Thank you, Mr. Chairman. 

Chairman LEVIN. Thank you very much, Senator Nelson. 

Senator Sessions. 

Senator SESSIONS. General Dempsey, thank you and thanks to 

all of you for your service. You have been given a thankless task. 

You have led us magnificently in combat. All of you have. I know 

how many hours you work. 

When people think about how much you should pay a person in 

the military, often they forget there is no overtime. There are 

weekends and full deployments of months at a time often in dangerous areas that we are asking them to go. I do believe there is 

a bond that the American people must have with those we send 

into dangerous places—and we ask them to leave their families for 

an extended period of time—that cannot be broken. I think that is 

fundamental. 

Now, I had to leave to go to the Budget Committee where I am 

ranking member. I am seeing this from both sides, and I know how 

much of a danger this Nation faces from the debt. The Congressional Budget Office director, Mr. Elmendorf, told the Budget Committee a few months ago that last year we spent $221 billion on 

interest. That is about half the defense budget. We get nothing for 

that. It has to be paid first. He projects, however—and this is a 

dangerous thing—by 10 years from today, we will pay $875 billion 

in interest in 1 year. That is a $650 billion increase in the amount 

we are paying for interest over this period of time. We had the Secretary of Education before us, and I told him it is going to threaten 

your education budget. 

First of all, I think DOD is taking this seriously, and I respect 

you for it. I am totally of the belief that you are being asked to do 

46 

more than any other department in the Government is being 

asked. I think the numbers will show that. 

But it is a huge department and we have agreed to certain budget limits on spending, and we need to adhere to them. Relief was 

given in Ryan-Murray earlier this year, and I am hopeful that that 

would be sufficient, that we could get through this period with the 

help from that act. Maybe not. We will just have to hear from you. 

This really worries me. It keeps me up at night. It is the toughest thing that causes me frustration because the President is also 

saying if we increase any spending for DOD, we have to increase 

non-defense spending an equal amount, doubling the amount so it 

busts the budget that he signed. He is the Commander in Chief. 

You would think he would be here more forcefully advocating priorities that need to be set. 

General Dempsey, you have heard former members of DOD and 

others question the number of civilian personnel. I believe Senator 

Nelson mentioned that earlier. One estimate that I heard that I 

think is accurate, that since September 11, we have added about 

100,000 civilian personnel. That was presumably to support an increase in Active-Duty Forces which was considerable, but as those 

Active-Duty Forces return to a level, which I understand your 

plans call for—returns to a level of what it was in 2011, why 

should we not be able to reduce civilian personnel by 100,000? 

General DEMPSEY. Senator, there are three groups of individuals, 

all of whom make up the total force, and that is, of course, the 

service men and women, civilian DOD employees, and then contractors. Contractors will take a more significant cut followed by 

the DOD civilians and the uniformed military. 

Senator SESSIONS. But on a percentage basis, General Dempsey, 

personnel—will you not be reducing military uniformed personnel 

in a bigger percentage than civilian? 

General DEMPSEY. That will probably vary slightly. Not slightly. 

It will probably vary Service by Service. 

But you do know, Senator, that 90 percent of the people we are 

talking about are not in Washington, DC. They are out in shipyards and depots and training areas. They are doing important 

work. 

If I could, sir, I think maybe one of the Service Chiefs would 

want to talk about that aspect of the way they build their force. 

Senator SESSIONS. Let me just say I fully respect their contributions, and many of these are former military people. They will deploy. Many of them from Alabama were in Iraq and Afghanistan 

during hostilities assisting the military in their mission. However, 

it may be a bit harder personnel-wise to reduce a civilian employee 

as compared to a military employee. As for me, I do not think that 

should be. I think we should make sure that civilian personnel face 

the same evaluations that uniformed people do. 

General DEMPSEY. I agree with that, Senator. 

Do any of the chiefs want to talk about the civilian aspect of 

this? 

General ODIERNO. Senator, in the Army, we are reducing. As the 

Chairman said, there is a triad of military, civilian, and contractors. The military is much easier because it is a billet, it is a face. 

It is very easy to understand. But we have also cut the budget on 

47 

our contractors. We have cut the budget on our civilians. That is 

what controls the number of civilians and contractors, the number 

of dollars allocated. We have come down about 20,000 civilians so 

far in the Army, and that will continue to come down at a rate 

equal to what our military members will come down as we continue 

to look at out-year budgets. 

We are also looking very hard at reducing our contract support 

to our sustainment and maintenance and try to do more with uniformed personnel, and we are looking at that very carefully. 

We are also looking at the contracts we have that we think are 

more service-related that can be done by others. 

If, for example, I cut contracts and installation, then I have to 

use borrowed military manpower. It is one or the other because it 

still has to get done. If I cut the contracts for cutting grass and 

doing other things, then I have to have military cut the grass. I 

have to have them work in our dining facilities. I have to have 

them do these other things that contractors have been doing. It is 

all things that have to get done. 

We can cut contractors and we will. We will cut some of our civilians, but some of them we cannot because they are too valuable, 

as you mentioned, to everything we do. But if we do, the military 

is going to have to take over some of those responsibilities. It is 

just stuff that has to be done. 

Again, I would just throw out there right now we are not reducing any installations because there is no BRAC. We are reducing 

150,000 men and we have to sustain these installations, and it 

costs us a lot of money. We have to hire contractors. We have to 

hire civilians. If we cannot do that, we are going to have to use borrowed military manpower to do it. That is the bottom line. 

Senator SESSIONS. Thank you. I will submit some questions 

about the numbers. But my impression is that you are having a 

larger percentage of reduction in uniformed personnel than we are 

in civilian personnel, and I am troubled by that. 

Chairman LEVIN. Will you give us that Service by Service for the 

record? Thank you. 

[The information referred to follows:] 

General ODIERNO. The Army’s programmed and projected reductions across the 

Future Years Defense Plan (FYDP) for fiscal years 2015–2019 are as follows. The 

fiscal year 2011 data is provided for comparison only. 

Fiscal Year 

2011 2015 2016 2017 2018 2019 

Active Army Personnel ............................ 565,463 490,000 470,000 450,000 430,000 420,000 

ARNG Personnel ...................................... 361,561 350,200 336,300 328,900 321,500 315,000 

USAR Personnel ...................................... 204,803 202,000 195,000 190,000 185,512 185,000 

Civilian Full-Time Equivalents ............... 260,929 238,300 229,558 225,084 219,043 218,681 

Admiral GREENERT. The Navy has planned modest reductions in active and Reserve component military end strength (700 E/S, 0.2 percent) from fiscal year 2014 

to fiscal year 2019. Conversely, the Navy is reducing Navy Secretariat and Service 

government civilian full-time equivalents (FTE) by 3,800 (2 percent). In addition, 

our fiscal year 2015 President’s budget aggressively pursues contracting efficiencies 

and proposes a collection of business transformation initiatives, including contractual services reductions (about $14.8 billion FYDP). 

In the Navy, the factors used to determine appropriate military end-strength and 

contractor/civilian FTE levels are different. Military end strength is directly tied to 

force structure, or the number of ships, aircraft and equipment the Navy has to 

48 

staff. The Navy mans equipment, vice other Services that equip their manning. Contractor/civilian FTE levels are more aligned to business operations, which are not 

directly tied to force structure. For example, as the Navy builds ships with more 

advanced systems that require smaller crews, military end strength may decrease, 

but contractor/civilian FTE levels may increase as the ship will require more complex maintenance work in the shipyards. Thus, I feel that the planned military endstrength and contractor/civilian FTE levels are right for the Navy, but they are 

largely independent from each other, so there is no right ratio. 

General WELSH. From fiscal year 2014 through fiscal year 2019 we anticipate an 

overall reduction of 4.9 percent of Air Force Total Force military personnel, with a 

reduction of 3.4 percent of our civilian end strength during this same period. This 

equates to an overall Air Force reduction of 4.5 percent in our total workforce. While 

the percentage of change between these types of manpower is relatively comparable, 

the Air Force did not target either of these segments specifically. Rather, the Air 

Force looked at headquarters and whole systems and/or weapon systems to find the 

means of achieving the fiscal savings driven by the Budget Control Act targets. 

The Air Force’s fiscal year 2015 budget submission aligns program priorities and 

resources with fiscal realities and will drive the Air Force to become smaller. The 

resultant personnel reductions are tied directly to the divestiture of weapons systems, headquarters realignments, and a rebalancing of aircrew-to-cockpit ratios in 

a post-Afghanistan environment, the majority of which resulted in military reductions. Efforts to downsize our headquarters activities allowed the Air Force to plan 

civilian reductions. 

Absent changes in Base Realignment and Closure and Depot legislation, the Air 

Force will be hindered in finding additional civilian personnel savings. In the last 

four budget cycles (i.e., fiscal year 2012 PB, fiscal year 2013 PB, fiscal year 2014 

PB, and fiscal year 2015 PB), the Air Force has reduced its civilian workforce by 

∼25,000 billets. These reductions, along with a 3-year pay freeze, furlough, and government shut-down, have significantly impacted the civilian workforce. Arbitrary, 

non-programmatic reductions to the civilian workforce would be untenable and 

would severely compound readiness shortfalls. 

General AMOS. The optimal Marine Corps Active-Duty Force remains 186.8K with 

a commensurate civilian workforce of 17.5K full-time equivalents (FTE). In the 

PB14 submission, the Marine Corps accepted risk in the Active-Duty Force and was 

funded at 182.1K. Solely as a result of the fiscal constraints, particularly with the 

continued threat of sequestration or a significantly reduced top line, the PB15 submission reflects the Marine Corps’ plan to draw down to an active duty end strength 

of 175K and a civilian workforce of 15.7K FTE by fiscal year 2017. This equates to 

a 6 percent and 10 percent reduction respectively from our optimal force structure 

requirements. While the Marine Corps will continue to support the President’s National Security Strategy, the Defense Strategic Guidance, and posture to meet 

steady state forward presence and crisis response requirements around the globe, 

it comes at the expense of risk to major combat operations, infrastructure 

sustainment and equipment modernization, and increased stress on the force. 

Chairman LEVIN. Senator Gillibrand? 

Senator GILLIBRAND. Thank you, Mr. Chairman. 

Thank you all for your service. Thank you for testifying today before our committee. I am very grateful. 

Obviously, these are very tough times, and we are all concerned 

about how to manage our mission and operations to the best of our 

abilities. As the chairman of the Personnel Subcommittee, I am 

very worried about tradeoffs we are making in terms of military 

families, particularly those who are the lowest paid. 

General Dempsey, you mentioned in your opening statement that 

you are unable to retire weapon systems that you no longer need 

and cannot afford. Can you tell us more about these systems and 

what kinds of savings you could find if you do retire them? Every 

time we pass a budget in Congress, it is all about priorities. I want 

to hear a little bit about that as a source perhaps for funding for 

things that we think are higher priority. 

General DEMPSEY. Yes, thanks, Senator. I would like to take that 

one for the record as well. 

[The information referred to follows:] 

49 

The attached document was provided to Senator Gillibrand’s office on 19 May via 

a separate request. 


506ful13.eps
50 

General DEMPSEY. I will give you one example because it would 

cross all Services. Let me take one that is not at all controversial, 

the A–10. [Laughter.] 

If we retire the A–10, it is $3.5 billion in savings to the Air Force 

over the FYDP. If we do not, he has to find $3.5 billion someplace 

else. Each Service has an example of something like that. 

Senator GILLIBRAND. Thank you, and I look forward to your full 

response on the record. 

Another issue that I care deeply about—and General Dempsey, 

we have talked about it, as has Admiral Winnefeld—and that is the 

men and women who serve in our military and their families and 


506ful14.eps
51 

the sacrifices they make to do that. One of the sacrifices I do not 

think they should have to make is not being able to afford treatment for their kids who have autism or other developmental disabilities. I think it is so unfair that just because you will sacrifice 

everything for our Nation and serve for our Nation that your kid, 

your child, who needs these important therapies to learn, to grow, 

and to develop are denied it because we do not want to make them 

a priority. I think that is a mistake. I think it is morally wrong. 

I would like your thoughts on what is going to happen with regard to that process because I know we are combining all the programs specifically for autism. I have not seen what that is going 

to look like yet. But I want to know are there going to be barriers 

to care for children with disabilities and particularly autism. 

Admiral WINNEFELD. Senator, it is a great question. Last time 

you and I dealt with this, we made a little stink over in DOD, and 

I think we actually fixed that problem. But I do not have the specifics for you. I would like to take that for the record. I believe we 

are on track. If we are not, I want to know about it because this 

is something that is terribly important to us. We are on the same 

sheet of music here. 

[The information referred to follows:] 


506ful15.eps
52 


506ful16.eps
53 

Senator GILLIBRAND. You do not want Federal employees’ kids to 

have better access to care than military families’ kids. That is just 

not right. I do want to just raise it because it is one of the most 

expensive and painful things to make sure your child gets the education they need. A lot of the therapies are developmental. It actually affects how their brains form and whether they can reach the 

level of capacity that they can. 

Thank you. 

Admiral WINNEFELD. I think the Assistant Secretary of Defense 

for Health Affairs tackled that, but I do want to get back to you 

to make absolutely certain. 

Senator GILLIBRAND. Thank you. 

Similarly, as I meet with the troops around my State, both National Guard, Active Duty, and Reserve, the stress on mental 


506ful17.eps
54 

health access is very high. Access to mental health services to treat 

PTSD and traumatic brain injury is still quite intense. My question 

is as we have had a number of families coming home, under the 

current TRICARE requirements, there are co-pays for these services. Do you believe that those co-pays will cause barriers to care 

specifically for the mental health of our troops and their families? 

I held a hearing to discuss the increase in suicide rates, 11 suicides a day in our military, but there is also an increase in suicide 

of family members because of multiple deployments, because of 

PTSD of servicemembers coming home. Obviously, that raises serious concerns to me. I would like to hear a little bit from any of you 

who want to talk about whether you see barriers to care here. 

General ODIERNO. If I could, I think we are doing a good job increasing behavioral health to Active-Duty Forces, and we are trying 

to get more access to our Reserve and Guard. My concern I think 

is where you are headed with this—and I agree with you—is for 

family members because, frankly, even under TRICARE it is difficult to always get care covered for behavioral health under 

TRICARE for our family members. Sometimes it is accepted; sometimes it is not. Our behavioral health rules for health care need to 

be looked at, especially as we look at the impacts that the wars 

have had on our families, especially our children, and that is who 

I worry about significantly. 

I know specific cases where a lot of out-of-pocket expense has to 

be expended either because it is not covered or there is a co-pay 

because they do not recognize certain treatments, and so in my 

mind, this is something we have to absolutely get after over the 

long term. 

Senator GILLIBRAND. I would like your commitment that you will 

work with me on this to come up with some solutions for how best 

to protect our servicemembers or their families. Thank you. 

Then my last set of questions are for any who want to take it, 

but what is the DOD’s plan for the increased demands at the medical treatment facilities (MTF)? Does DOD plan to hire more medical providers to handle the increase of patients at the MTFs? What 

will the impact on military families, both Active and Reserve, who 

do not live near the MTFs—are they going to be penalized for not 

being able to use the MTFs? 

General DEMPSEY. I will give you a general answer. That question probably would be best addressed to the Defense Health Agency, and Dr. Woodson. But I can tell you that our recommendation 

on our support for forming a single TRICARE system as opposed 

to multiple systems that are not interoperable with each other is 

to try to encourage use of MTFs and then in-service care or in-network care and then only out-of-network care as a last resort. That 

is our role, working with Dr. Woodson because we want to make 

sure that while we are incentivizing use of MTFs, for example, 

there may be another process that might be trying to reduce the 

level of care at an MTF. We are deeply involved in that process 

right now. 

Senator GILLIBRAND. Thank you. Thank you all. 

Chairman LEVIN. Thank you very much, Senator Gillibrand. 

Gentlemen, thank you. Thank you for all you do for our Nation, 

for our troops and their families. 

55 

We will now move to our second panel. We now welcome our second panel: four so-called outside witnesses. A strange word for 

folks who have been inside just about every important military operation or thinking that we have done in the last few decades. 

Retired Army General John H. Tilelli, Jr., Chairman of the 

Board of the Military Officers Association of America; retired Army 

General Gordon R. Sullivan, President and Chief Executive Officer 

of the Association of the U.S. Army; retired Vice Admiral John B. 

Totushek, Executive Director of the Association of the U.S. Navy; 

and retired Air Force General Craig R. McKinley, President of the 

Air Force Association. 

Gentlemen, we thank you for your past service. We thank you for 

your current service to our servicemembers, the retirees, and their 

families. 

I believe that the order that we are calling on you is to first call 

on General Tilelli. General, thank you for being here and please 

give us your statement. 

STATEMENT OF GEN JOHN H. TILELLI, JR., USA, RET., CHAIRMAN OF THE BOARD, MILITARY OFFICERS ASSOCIATION OF 

AMERICA 

General TILELLI. It is like old home week, Mr. Chairman. Chairman Levin, Ranking Member Inhofe, members of the Senate 

Armed Services Committee, thank you for the opportunity to appear before you today to discuss the administration’s fiscal year 

2015 budget affecting the entire military community. On behalf of 

the over 380,000 members, Active Duty, Guard, Reserve, families, 

veterans, survivors, and retirees, of the MOAA, I have the honor 

and privilege of being here today to represent them. 

At the heart of DOD’s budget challenge is the devastating effect 

of sequestration—and we have heard that several times today—and 

the BCA of 2011. 

While debt reduction is a national priority, we believe that such 

a disproportional share of this burden must not be imposed on 

DOD and especially on the backs of the military members and their 

families. MOAA believes that continued sequestration cuts for 2016 

and beyond will place national security at risk, and we strongly 

urge Congress to eliminate sequestration and fund our military to 

levels that enable all components of the Armed Forces to adequately be manned, trained, equipped, and compensated. No Federal obligation is more important than protecting our national security, and the most important element of national security is the 

sustainment of a dedicated top-quality All-Volunteer Military 

Force. 

The past 12 years of unprecedented demands and sacrifices highlight how radically different Military Services’ conditions are from 

civilian life. These are the things that many budget analysts and 

think tanks do not understand. The times the All-Volunteer Force 

has been jeopardized have been due to budget-driven cutbacks in 

the military compensation packages that gave insufficient weight 

to the extraordinary demands and sacrifices inherent in a service 

career. Yet, today we hear that Congress must slow the growth. 

They state that personnel costs have risen above 40 percent more 

than growth in the private sector since 2000 and are squeezing out 

56 

dollars for training and equipment. We believe that pitting pay and 

benefits against readiness is a false choice. 

It is important to put the growth since 2000 in context. The AllVolunteer Force is the key to readiness. Have costs risen since 

2000? Yes, they certainly have, but using 2000 as a baseline without reflecting that in a historical context is misleading as it implies 

that it was an appropriate benchmark for estimating what reasonable personnel and health care spending should be. Nothing can be 

further from the truth. 

What caused military personnel costs to grow higher than in the 

private sector? By the late 1990s, retention was on the ropes because years of budget cutbacks had depressed military pay to 

where there was a 13.5 percent pay gap. We cut retirement value 

by 25 percent for post-1986 entrants. We had military families paying 18 to 20 percent out of pocket for housing costs, and we moved 

beneficiaries over 65 out of military health care facilities. 

This committee worked diligently—and I thank them for that— 

over the next decade to restore pay comparability, repeal our retirement cuts, zero out housing costs, and restore promised health care 

coverage for older retirees. We thank you and all the members 

thank you. 

Since 2010, Congress has already implemented changes to slow 

the growth. In fact, the growth has slowed. These have included 

significant health care fee changes, end strength reductions, pay 

raises that have either mirrored the private sector or in the case 

of this year, have been capped below the private sector. The fact 

is that between 2000 and 2011, personnel and health care costs experienced an average 7.8 percent rate of growth, but that cost was 

essential to keep the previous commitments and avoid retention 

and reenlistment issues and from breaking this All-Volunteer 

Force. 

However, between 2011 and 2014, personnel cost growth has not 

just slowed, it has declined an average of minus 1.5 percent per 

year, according to the Office of Management and Budget historical 

tables. The growth has slowed. In fact, it is negative at this point. 

When you look at the DOD military personnel costs, which include 

military personnel and the defense health program, these costs average 30 percent of the overall DOD budget. 

Between 2014 and 2015 pay caps, the promised housing reductions, the planned reductions in the commissary savings, and in 

new health care consolidation and fees, an E–5 family of four—that 

is a sergeant—with 10 years of service, looking at the pay tables, 

would lose $5,000 in purchasing power. An O–3, an Army or Marine Corps captain, not a Navy captain, family of four would experience a loss of $6,000, that is a large percentage of their overall pay. 

Contrary to when I came into the military, we have a married force 

today. It is not a single force. 

MOAA believes these budget proposals would be a major step 

backwards towards repeating some of the mistakes and measures 

which led to retention and readiness problems in the past and 

would undo the needed compensation improvements Congress put 

into place since 2000 and again set us up in the future for another 

parity issue that will have to be resolved. 

57 

1 Hagel, Chuck. ‘‘Fiscal Year 2015 Budget Preview.’’ Defense.gov Secretary of Defense Speech: 

Fiscal Year 2015 Budget Preview. http://www.defense.gov/Speeches/Speech.aspx?SpeechiD=l831. 

These piecemeal budget reductions are doubly inappropriate 

since we have a congressional commission that will be offering even 

broader reform proposals next year. 

America will remain the greatest power only if it continues to fill 

its reciprocal obligation to the only weapon system that has never 

let our country down, our extraordinary, dedicated, top-quality volunteer men and women who serve our country and the families 

who stand behind them. 

Now that we are drawing down from Afghanistan, we cannot 

place these volunteer members of our Armed Forces in our rear 

view mirror. They listen. They know what is going on, and they do 

not agree with these proposals. 

I thank you. I look forward to your questions. I thank you for 

your service to our country, and I thank you for all you have done 

for our men and women who serve. Thank you, sir. 

[The prepared statement of General Tilelli follows:] 

PREPARED STATEMENT BY GEN JOHN H. TILELLI, JR., USA (RETIRED) 

Mr. Chairman and Ranking Member Inhofe. On behalf of over 380,000 members 

of the Military Officers Association of America (MOAA), we are grateful for this opportunity to express our views and appreciate the committee for hosting this hearing on the fiscal year 2015 defense budget submission and the related personnel 

program proposals. 

MOAA does not receive any grants or contracts from the Federal Government. 

We are truly grateful for your unwavering commitment to men and women who 

defend our fine Nation and we appreciate that Congress have given personnel issues 

top priority in the past decade. 

You have had difficult choices to make while bolstering a weak economy and addressing budget deficits. The past few years have been arduous, with our military 

winding down operations in Afghanistan and the Nation dealing with the effects of 

sequestration. 

SEQUESTRATION

Sequestration was thought to be so harmful that it would have never come to 

pass. But it is a reality with DOD still taking a disproportionate share of the burden. 

The Bipartisan Budget Act of 2013 mitigated the sequestration spending cuts for 

fiscal year 2014 and 2015. However, the original sequestration cuts of fiscal year 

2016 thru 2021 remain in effect, continuing to place national security at risk. 

This concern for readiness and national security was reinforced during Secretary 

Hagel’s Feb 24, 2014 press conference 1 outlining the fiscal year 2015 budget submission when he stated ‘‘ . . . the only way to implement sequestration is to sharply 

reduce spending on readiness and modernization, which would almost certainly result in a hollow force . . . the resulting force would be too small to fully execute the 

President’s defense strategy.’’ 

The Services have been forced to slash flying hours, cancel the deployment of 

ships, renegotiate critical procurement contracts, temporarily furlough civilian employees, and are in the process of reducing force structure by some 124,000 personnel. 

As a result, sequestration caused the Pentagon to submit proposals in fiscal year 

2014 that have started to reverse some of the needed pay and benefits fixes Congress put in place over the past decade—specifically, the military pay raise cap 

below the Employment Cost Index (ECI) of 1 percent, the lowest pay raise in 50 

years. 

The proposed fiscal year 2015 defense budget assumes some additional monies 

will be forthcoming to mitigate sequestration impacts. However, the budget proposes 

additional force reductions of over 78,000 personnel. If sequestration is not ended, 

additional force reductions will likely go deeper and training and modernization will 

be further impacted—further putting our national security strategy at risk. 

58 

2 Eaglen, Mackenzie. ‘‘There’s a Storm Brewing in the Pentagon’s Budget.’’ US News. http:// 

www.usnews.corn/opinion/blogs/world-report/2013/07/29/congress-ignores-obamas-attempt-torein-in-military-health-care-spending. 3Garamone, Jim. ‘‘DOD Takes Holistic View of Slowing Military Compensation Growth.’’ Defense.gov News Article: DOD Takes Holistic View of Slowing Military Compensation Growth. 

http://www.defense.gov/news/newsarticle.aspx?id=121701 (accessed April 29, 2014). 4 U.S. Senate Committee on Armed Services. ‘‘Testimony on the Impact of Sequestration on 

the National Defense.’’ http://www.armed-services.senate.gov/imo/media/doc/13-68%20-%2011-7- 

1311.pdf. 

What greatly concerns MOAA and should concern the committee are the fiscal 

year 2015 budget submission proposals that impact personnel costs—a second year 

of capping the military pay raise below ECI with the possibility of 4 additional 

years, increasing out-of-pocket housing expenses for military families, significantly 

reducing commissary savings, and a consolidation of TRICARE plans which will 

have all beneficiaries except those in uniform paying more for their health care 

while eliminating access standards. 

Several of these are broken promises to our service members and families. Fortunately the House Armed Services panel agrees and rejected these proposals last 

week. 

While debt reduction is a national priority, such a disproportional share of this 

burden must not be imposed on the backs of military families who already have sacrificed more for their country than any other segment of Americans. Since the conflicts are ending we cannot place those who voluntarily serve in the rear view mirror. 

We believe Congress should end the harmful effects of sequestration by supporting a bipartisan debt reduction package that avoids disproportional penalties on 

the Pentagon and on service members and their families. 

MILITARY PERSONNEL AND HEALTHCARE OVERVIEW

What makes our national defense strong is sustaining a top-quality, All-Volunteer 

Force. This requires a pay and benefits package that is fundamentally different from 

those of the private sector in order to induce young men and women to wear the 

uniform for not only one term of enlistment, but also for 2 decades or more. 

But military pay and benefits continue to come under attack. For many years, 

critics have claimed military personnel costs are rising out of control and, if left unchecked would ‘‘consume future defense budgets.’’ 2

They’ve attacked pay, retirement, health care, and other military benefits in 

hopes of diverting funds to hardware or non-defense programs. But time and some 

hard experiences have proven such claims wrong in the past—and they are still 

wrong today. 

But with this year’s budget rollout, defense leaders are suggesting cuts to pay, 

the housing allowance, the commissary, and health care stating spending on pay 

and benefits for servicemembers has ‘‘risen about 40 percent more than growth in 

the private sector’’ since 2001.3

In addition, late last year there have been other alarming statements on the glide 

path that personnel costs are on, such as: ‘‘by 2025 or so 98 cents of every dollar 

[will be] going for benefits.’’ 4

59 

5 http://www.whitehouse.gov/omb/budget/historicals. 6 Department of Defense. ‘‘United States Department of Defense Fiscal Year 2015 Budget Request Overview March 2014.’’ http://comptroller.defense.gov/Portals/45/Documents/defbudget/ 

fy2015/fy2015—Budget—Request—Overview—Book.pdf. 7Department of Defense. ‘‘Military Compensation Background Papers (Seventh Edition)’’, page 

38. http://www.loc.gov/rr/frd/pdf-files/MilitaryComp-2011.pdf. 

Source: OMB Historical Tables 3.2 and 16.1 5

The truth is the same one-third of the defense budget has gone to military personnel and health care costs for the last 33 years. That’s no more unaffordable now 

than in the past and they are just as important. 

THE FISCAL YEAR 2015 BUDGET

The fiscal year 2015 budget submission proposes several significant pay and benefit cuts which are inconsistent with the sacrifices exemplified by the last 12 years 

of war.6

• Capping pay below the Employment Cost Index {ECI) for a second 

straight year (with more planned) 

• Reducing Basic Allowance for Housing (BAH) by 5 percent, reversing 

DOD’s own initiative to eliminate out-of-pocket housing cost completed in 

2005 

• Reducing commissary savings for uniformed service families 

• Restructuring the TRICARE benefit where active duty families and retiree beneficiaries will pay more for their health care 

The Pentagon is suggesting these cuts, in order to ‘‘slow the growth’’ of personnel 

costs stating personnel costs have ‘‘risen about 40 percent more than growth in the 

private sector’’ since the turn of the century. Growth has slowed significantly since 

2010. 

But this is statement needs to be put in the proper context. Personnel cost growth 

has gone up at a rate greater than the private sector since 2000 . . . that’s true. 

But using 2000 as the baseline without reflecting on the historical context is misleading—it implies that 2000 was an appropriate benchmark for estimating what 

reasonable personnel and healthcare spending should be—it’s not. 

Years of budget cutbacks led to a 13.5 percent pay gap, a 25 percent reduced retirement value for post-1986 entrants, a point where servicemembers were paying 

nearly 20 percent out-of-pocket for their housing costs, and beneficiaries over 65 

were completely thrown out of the military health care system. 

In the late 1990s, retention was on the ropes, and Congress was being asked to 

correct these problems to prevent a readiness crisis. 

Congress did so over the next decade restoring military pay comparability (slide 

next page), repealing the retirement cuts, zeroing-out member out-of-pocket housing 

costs, and restoring promised health coverage for older retirees.7


506ful9.eps
60 

8http://www.whitehouse.gov/omb/budget/historicals. 

Cost growth since 2000–2001 was essential to keep the previous compensation 

cutbacks from breaking the career force. 

Between 2000 and 2011, personnel and health care costs experience an average 

rate of growth of approximately 7.8 percent annually. 

However, between 2011 and 2014, cost growth has slowed and actually declined 

at an average rate of minus 1.5 percent per year. 

Source: OMB Historical Tables 3.2 and 16.1 8

The rate of military personnel and health spending will only decline further in 

the out-years due to: 

• Significant pharmacy copay increases which started last year (fiscal year 

2013) 

• Significant savings from requiring mandatory mail-order/military pharmacy refills of maintenance medications for Medicare-eligible beneficiaries 

starting this year 

• Savings from tying annual adjustments for Prime and pharmacy to retiree’s cost of living adjustment 

• Savings associated with shrinking TRICARE Prime service areas 

• Significant reductions to end strength 

• Recent changes to the retirement system for new entrants (COLA -1 percent provision) 


506ful12.eps 506ful8.eps
61 

9The Washington Post. ‘‘After the Wars—Post-Kaiser survey of Afghanistan and Iraq war veterans.’’ Washington Post. http://www.washingtonpost.com/politics/polling/wars-postkaiser-surveyafghanistan-iraq-war/2014/04/02/3e8f2380-b7a6-11e3-9eb3-c254bdb4414d—page.html. 

• Savings from sustaining pay with private sector pay growth (ECI) since 

2011 

MOAA believes the proposals in this year’s defense budget are a huge step backwards repeating many of the same bad habits during past drawdowns—cutting end 

strength, capping pay, and attacking benefits—that led to the difficult retention 

times of the late 1990s. 

Past experience of capping military raises below private sector pay growth has 

proven that once pay raise caps begin, they continue until they undermine retention 

and readiness—and this is the second year of proposed pay caps with a possibility 

of 4 more. 

One pay cap is a data point, two is a line, and three is a trend. Six years of 

planned caps is definitely a bad trend and does not bode well for the currently serving. 

This proposal is not limited to pay. This ‘‘quadruple whammy’’ of capping pay, increasing out-of-pocket expenses for housing, slashing commissary savings, and having military families pay more for their health care, would be major steps backward 

on the road towards repeating the insidious measures which led to retention and 

readiness problems in the past. 

Each may seem small by themselves . . . a pay cap of .8 percent. A 5 percent outof-pocket housing cost. Copays for family off-post doctor visits. Reduced savings at 

the commissary. However, the elimination of the $1 billion subsidy for the commissary benefit itself will reduce the purchasing power of a military family of four by nearly $3,000 

annually. 

When you add up the fiscal year 2014 and fiscal year 2015 pay caps, the proposed 

BAH reductions, the reductions in commissary savings, and the new TRICARE fee 

structure, an E–5’s family of four would experience a loss of nearly $5,000 in purchasing power annually; and an O–3’s family of four would experience a loss of nearly $6,000. 

These are very conservative projections seeing that it only includes 2 years of pay 

caps and the new TRICARE consolidation/fees will be very dependent on a military 

family’s access to an MTF and special needs. 

In several recent hearings, many Service and Pentagon leaders have stated troops 

are willing to accept the pay and benefit changes as long as they can get the training and equipment needed to do their jobs—feedback that is something we must 

question. 

MOAA conducted a non-scientific survey in March and of over 4,700 currently 

serving who responded, over 65 percent were least satisfied with their basic pay. 

Additionally, in a more recent survey conducted by the Washington Post and the 

Kaiser Family Foundation of post-September 11 veterans and currently serving 

members, 83 percent indicated they do not favor the Pentagon’s fiscal year 2015 proposed reductions.9

TRICARE CONSOLIDATION

DOD again is proposing similar disproportionate pharmacy fee increases and a 

means-tested TFL enrollment fee as they did last year and in the past that thankfully Congress has rejected. 


506ful10.eps
62 

10Garamone, Jim. ‘‘DOD Takes Holistic View of Slowing Military Compensation Growth.’’ Defense.gov News Article: DOD Takes Holistic View of Slowing Military Compensation Growth. 

But it also includes a plan to consolidate the three major elements of TRICARE— 

Prime, standard, and extra—into what is being characterized as ‘‘streamlining’’ or 

‘‘modernizing.’’ 

In this proposal currently serving families and retirees will pay more and get less. 

It retains the TRICARE prime enrollment fee by relabeling it as a ‘‘participation’’ 

fee yet eliminates the one element that the enrollment fee assured . . . guaranteed 

access standards. 

But even more disconcerting is that the proposed change includes fees where fees 

never existed before and provides no discernable value. For the first time, this proposal would have working-age retirees paying to be seen in the military treatment 

facilities. 

The Pentagon proposal will have military families paying more for their health 

care when they have limited or no access to military facilities. 

MOAA wants to make one thing clear. The military TRICARE benefit is by and 

large an excellent one. 

But it has to be, in order to induce large numbers of top-quality people to accept 

the extraordinary demands and sacrifices inherent in a multi-decade military career. 

Military people already pay much steeper premiums for health coverage than any 

civilian ever has or ever will by serving at least 20 years in uniform—most of it 

paid in-kind, not in cash. 

That’s why assertions that military retirees pay far less for their health care than 

civilians do are so aggravating to the military community. 

Defense leaders say they’ll keep faith with the currently serving on retirement reform, and would apply changes only to new entrants. 

But if it’s breaking faith to change the rules for someone with 10 years—or 1 

year—of service, it’s doubly so to impose new fees on military families who don’t 

have access to the MTFs as well as imposing fees for use of the MTF on those who 

already completed 20 or 30, whether they’ll retire next year or are already retired. 

We believe DOD must look at making the system much more efficient instead of 

simply shifting costs. For example, there’s still no single point of responsibility for 

budgeting or delivery of DOD health care. 

We’ve accepted mail-order requirements in lieu of higher pharmacy copays and 

annual adjustments to pharmacy and Prime fees tied to retired pay cost of living 

adjustments. 

All of these changes we accepted will save DOD billions in the coming years and 

has slowed the growth of health care costs. 

Now we think it’s time to develop management efficiencies that won’t impact beneficiary fees, access to care, or delivery of quality care and simply shift more of 

DOD’s costs onto them. 

SUMMARY

In closing, Secretary Hagel stated before the fiscal year 2015 budget release that, 

‘‘Continuous piecemeal changes will only magnify uncertainty and doubts among our 

servicemembers about whether promised benefits will be there in the future.’’ 10

We couldn’t agree more. Any changes to pay, compensation, and benefits, to include health care, should be looked at comprehensively—not in a piecemeal manner. 

Since the congressionally-directed Military Compensation and Retirement Modernization Commission has been tasked to take a holistic and comprehensive look 

at the entire compensation package, and propose broader reform proposals next 

year, these piecemeal, budget-driven changes are even more inappropriate. 

What’s needed is to sustain pay and benefits for the men and women in uniform 

and their families as well as those that have faithfully served 2 decades or more. 

MOAA remains concerned that the Pentagon is heading down a previously taken 

path, repeating some of the very same mistakes that led to significant retention 

problems the Nation experienced by the late 1990s and undoing the needed compensation improvements Congress has made since 2000 to match the extraordinary 

demands and sacrifices of military service and a military career. 

History shows comparability can’t work unless it’s sustained through both good 

and bad budget times. We are still a nation at war-capping pay and forcing troops 

and their families to pay more for their housing, health care, and groceries sends 

the wrong message. 

The most important element of a strong national security is the sustainment of 

a dedicated, top-quality mid-level NCO and office force. These changes will signifiVerDate Nov 24 2008 14:57 Feb 24, 2015 Jkt 000000 PO 00000 Frm 00066 Fmt 6633 Sfmt 6621 Z:\DOCS\93413.TXT JUNE
63 

cantly devalue the compensation and benefits needed to sustain those seasoned, 

trained, and talented troops and ultimately have a negative impact on recruiting, 

retention, and overall readiness. 

Chairman LEVIN. Thank you so much, General. 

General Sullivan. 

STATEMENT OF GEN GORDON R. SULLIVAN, USA, RET., PRESIDENT AND CHIEF EXECUTIVE OFFICER, ASSOCIATION OF 

THE U.S. ARMY 

General SULLIVAN. Mr. Chairman, Ranking Member Inhofe, honorable members of the committee, before I begin my formal remarks, I want to thank each of you for your personal support, certainly the three of you that I have in front of me right now who 

were here when I was battling times such as this back in the early 

1990s. Senator Kaine, we appreciate your support now. 

I want to note that during that time, for some reason we seemed 

to have more stability primarily due to the appropriations and authorization environment, which reflected regular order. I always 

felt as if you had an open ear for me when I came over to talk and 

give you a problem. Sometimes you at least believed me and gave 

me more money, if you had it and if you could get it. But you permitted us to navigate difficult terrain without a lot of constraints 

such as the chiefs have now. You set limits on funding and manpower and let us strike the balance as we saw fit and gave us the 

latitude to act. For that I thank you. 

Senator Levin, I probably will not see you in this kind of a role 

again. I want to thank you publicly for everything that you have 

done for the Services and everything you have done for our country. 


506ful11.eps
64 

Chairman LEVIN. Thank you so much, General. 

General SULLIVAN. Thanks for the opportunity to present the 

views of the Association of the U.S. Army (AUSA). This committee 

has, as I said, provided extraordinary support of our Active Duty, 

Guard, and Reserve, retired members, veterans of the Army and 

the other Services, their families and survivors. Your efforts are 

very positive and have impacted the lives of the entire uniformed 

services community. 

We are keenly aware that Congress and the administration have 

had to make difficult choices while bolstering a weak economy and 

addressing budget deficits. While we recognize that debt reduction 

is a national priority, AUSA believes that a disproportionate share 

of this burden has fallen on DOD. Requiring that 50 percent of 

mandatory budget cuts come from defense, even though the defense 

budget is only 17 percent of the Federal budget, is in my view misguided and misdirected. How in such a dynamic and dangerous 

world can such a system be permitted to continue? 

The result is that defense officials, most of the uniformed people 

involved, sat at this table just 15 minutes ago—is they are trying 

to find balance among readiness, training, education, operational 

activities, and modernization, as well as soldier and family program funding. Uncertain times are demanding agility and adaptability by these defense leaders here in Washington, as well as on 

the front lines wherever they may be. After all, look at what is 

happening now in Eastern Europe. 

Yet, the funding policies in place that are guiding them are so 

rigid and so constraining and damaging to our long-term national 

security that continuing this formula for the better part of the next 

decade defies logic. 

AUSA and its members urge Congress and our elected and appointed officials to eliminate sequestration or modify these unrealistically rigid budget control measures in ways which would enable 

responsible and accountable leaders to exercise their responsibilities in a manner that is consistent with the challenges we all face. 

Now, providing for the common defense—and I do not have to 

tell you, but I need to say it for the record—is a shared responsibility among the American people, Congress, the President, those 

of us in uniform, and the citizens of the United States. Sometimes 

I often get the feeling that shared responsibility is a concept which 

has disappeared somewhere. Shared responsibility and accountability is what we are talking about here, and each one of these 

people who sat here is accountable to the American people. They 

are being asked to make major tradeoffs in a very constrained 

budget environment. 

AUSA believes that the primary source of the budget challenges 

that face DOD is the devastating effect of sequestration and the 

provisions of the BCA of 2011. 

The BBA of 2013 mitigated this, as one of the chiefs pointed 

out—I think it was the Chief of Staff of the Army, General 

Odierno—when he said he could buy back readiness because of the 

Murray-Ryan bill. However, the original sequestration cuts scheduled for 2016 through 2021 remain in effect and will exacerbate the 

situation that existed before the Murray-Ryan bill. You heard General Odierno say that he would see a diminution of readiness in 

65 

some of those units he brought back. It is having a profoundly adverse effect on the defense of this Nation and it will do so well into 

the next decade. 

Over the last 2 years, sequestration has set America on a path 

to reduce military readiness and reduced ability to secure our national security. Sequestered budgets are rapidly shrinking our military forces to unacceptable levels, thereby creating unready forces. 

All of this while even a casual observer might suggest that the 

world is more dangerous today than it has been in recent years. 

Sequestration has also reduced our military’s war-winning capabilities to unacceptably low levels and it has created unnecessary 

divisiveness, acrimony, and tensions within the Armed Forces as 

they struggle to meet budget goals and juggle requirements around 

Active Duty, Guard, and Reserve. I believe we must enable all components of the Armed Forces to be adequately manned, trained, 

and equipped to focus on the mission and not fighting over an arbitrarily depressed defense budget. 

One of the chiefs mentioned—there were a couple of them—that 

developing three POM alternatives in a year is really destabilizing 

both within DOD, and it ripples down to the field because the people at Fort Sill, Fort Benning, Fort Hood—they know when DOD 

is coming up with different alternatives for their particular units. 

It has created an atmosphere of desperation that leads to false arguments and false choices when it comes to compensation and benefits provided to all servicemembers and families who make up the 

All-Volunteer Force. 

Sequestration, by the way, also affects the defense industrial 

base. Whether everybody understands that, that the industrial 

base today is much different than the industrial base which fueled 

World War II, the Korean War, and even the Vietnam war. The industrial base is much more sophisticated and diverse, and some of 

these weapons cannot be made overnight. 

I believe the Services are being forced into a mobilization posture, whether by design or inadvertently. But if we become involved in any kind of a large-scale operation, we must turn inward 

to enhance ourselves or to grow ourselves. That is Active Duty, 

Guard, and Reserve. Interestingly enough, it took the Active Army 

multiple years to create the 4th Brigade or the 101st. It does not 

happen overnight, and there is this great myth, the great American 

myth, that you can just ring the bell on the village green, everybody shows up, and off we go. The world does not work quite like 

that anymore, if it ever worked that way. 

We must rely on the force we have in being, the Active Duty, 

Guard, and Reserve, and we need a balanced force. Sequestration 

is throwing that necessary equilibrium out of whack. 

Now, I would note interesting things were said this morning. 

General Dempsey said if the BCA kicks back in, it will cause unacceptable risk. Unacceptable risk he said. The Chief of Staff of the 

Army and Secretary of the Army John McHugh in their testimony 

last week said ‘‘risk’’ a number of times. Most significantly, the 

Chief of Staff of the Army said there could be serious risk to being 

able to perform his assigned missions in the war plan. 

Gentlemen, this is a huge step, and I do not believe everybody 

is appreciating the implications when the Service Chiefs and the 

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Chairman of the Joint Chiefs says ‘‘unacceptable risk.’’ We have to 

pay attention to these words. They mean something, and they do 

not say these words lightly. 

Not only is sequestration, being combined with the declining defense budget, having an adverse effect on military readiness, we 

are seeing an emergence of international doubt. You can see it on 

the covers of The Economist this week. We can see it in all of the 

national papers on whether the United States is a reliable ally and 

partner. I do not want to go into the politics of that. I do not intend 

to. But we must be seen as a credible ally and a dangerous enemy. 

Credibility in this context is found in the perception of strength 

and national resolve to be responsive to not only our treaty commitments but to our partners with balanced and ready forces. 

Adversaries, by the way, are watching us also, and they could 

make miscalculations and so forth. A credibly sized force, not just 

a reasonably sized force, is what is necessary. We must maintain 

a viable All-Volunteer Force. 

Despite extraordinary demands, men and women in uniform still 

answer the call, thanks in no small measure to the strong and consistent support of this committee, but this is only now at the cost 

of ever-increasing personal sacrifices. 

Service personnel are now facing even greater uncertainties with 

their jobs, force reduction measures, and now compensation adjustments. No Federal obligation is more important than protecting national security. It is principle number one. We all know that. You 

know that, and I know that. The most important element in national security is sustainment of a top-quality career force backed 

by dedicated DOD civilians. 

By the way, I served with General Tilelli for a number of years, 

and interestingly enough, we did not collaborate on what I am 

going to say now. I acknowledge the power of high tech equipment 

and new equipment. But I am convinced, after being in or around 

the Army for 60 years, that it is not equipment which wins wars. 

It is high-quality men and women, our most adaptive weapon system, our most loyal, and people who will never quit. If we can continue to recruit, train, and develop and retain these people, America will remain the world’s greatest power only so long as it fulfills 

its commitment to their training, their well-being, and their education. Our extraordinarily dedicated, top-quality, All-Volunteer 

Force is critical. You have consistently recognized the cost of sustaining this current military career incentive package is far more 

acceptable and affordable than any alternative. 

Now, in the matter of compensation, AUSA does support the 

MCRMC. We do not want to see a return to the recent era of pay 

caps at this critical juncture, but it is imperative that funding be 

available for training and some modernization. Pay caps must not 

be permanent. Military pay comparability is important to the recruiting and retention of high-quality soldiers and will become 

more important in the future. 

We are committed to military pay raises that match the ECI, but 

this year, because of sequestration, the funds freed up by a slightly 

smaller pay increase is the price that had to be paid for soldiers 

who are trained and ready. But I do believe that cuts to COLAs 

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must be reflective of decisions made each year based on the dynamics of the economy and the dynamics within DOD. 

I want to end my testimony as I began it. Sequestration is patently unresponsive to needs of this Nation, which is part of a rapidly changing world which we cannot predict the future. We never 

could predict the future. People a lot smarter than me have said 

that, not the least of whom was the former Secretary of Defense 

Gates and Panetta. I mean, countless people. We all know it. It creates a paradox in my mind in which this Nation is locked into a 

creaky, slow-moving, lockstep budget process that is irresponsible 

and unaccountable. No one seems to be accountable. 

Sometimes it is like people do not listen. The Chairman of the 

Joint Chiefs of Staff said unacceptable risk. The Chief of Staff of 

the Army says he is at risk of performing the mission, his battlefield mission. Those are serious pronouncements. 

Sequestration profoundly affects all parts of the national security 

community, the Department of State, the Central Intelligence 

Agency, National Security Agency, Department of Veterans Affairs, 

and parts of the Department of Energy which are included in that 

particular budget line. The impact on our national security writ 

large must be considered. 

I urge you to pursue some kind of a modification of this budget 

device which is being used so that we can get back to full order so 

that we can have a dialogue like we are having here today and appropriate decisions can be made based on the needs of our Nation 

for our security and our national defense. 

Thank you very much for your patience while I went through 

that. We at AUSA appreciate anything you can do to get rid of the 

burdensome sequestration. There has to be a better way. 

[The prepared statement of General Sullivan follows:] 

PREPARED STATEMENT BY GEN GORDON R. SULLIVAN, USA (RETIRED) 

Mr. Chairman and Ranking Member Inhofe: Thank you for the opportunity to 

present the views of the Association of the U.S. Army (AUSA) concerning issues relating to the Army and its soldiers and families. This committee has provided extraordinary support of our Active Duty, Guard, Reserve, retired members, and veterans of the uniformed services, their families and their survivors and its efforts 

have had an enormously positive impact in the lives of the entire uniformed services 

community. 

AUSA is keenly aware that Congress has had to make difficult choices while bolstering a weak economy and addressing budget deficits. While we recognize that 

debt reduction is a national priority, AUSA believes that a disproportionate share 

of this burden has fallen on the Defense Department. 

Requiring that 50 percent of mandatory budget cuts come from defense—even 

though the defense budget is only 17 percent of the Federal budget—is patently misguided. How in such a dynamic and dangerous world can we be so shortsighted? 

The result is that defense officials now face a no-win situation. They can fund 

readiness, training, education, operational activities, and some modernization but 

doing so requires cutting soldier and family program funding. Continuing this formula for the better part of the next decade defies logic. Uncertain times demand 

agility and adaptability—look at what has suddenly occurred in Eastern Europe. 

AUSA and its members urge that Congress and our elected and appointed officials 

eliminate sequestration or modify these unrealistically rigid budget control measures in ways which would enable responsible and accountable leaders to exercise 

their responsibilities in a manner that is consistent with the challenges they face. 

‘‘Providing for the Common Defense’’ is a shared responsibility among the American people, Congress, the President, and the Army. We have lost that sense of 

shared responsibility because of the mindless, automatic and arbitrary cuts that sequestration brings. 

68 

Military leaders in order to properly execute their national security mission need 

authorization authority and appropriations to be completed on time and with regular order. Operating under a series of continuing resolutions limits the capability 

to properly plan and execute a budget. 

SEQUESTRATION

AUSA believes that the primary source of the budget challenges that face the Department of Defense (DOD) is the devastating effect of the sequestration provision 

of the Budget Control Act of 2011. 

The Bipartisan Budget Act of 2013 mitigated the sequestration spending cuts for 

fiscal year 2014 and 2015. However, the original sequestration cuts scheduled for 

fiscal year 2016 thru 2021 remain in effect and will exacerbate the situation by continuing to place national security at risk. 

Sequestration is having a profoundly adverse effect on the defense of the Nation— 

and it will do so well into the next decade. 

Over the past 2 years sequestration has: 

• Set America on a path to reduced military readiness and national security. Sequestered budgets are rapidly shrinking the Nation’s military forces 

to unprecedented and even unacceptable levels thereby creating unready 

forces unable to accomplish the tasks assigned by the defense strategy. All 

of this while the world security environment is becoming increasingly uncertain and dangerous. 

• Reduced the military’s war-winning capabilities to unacceptably low levels, and has created unnecessary divisiveness, acrimony, and demonization 

within the Armed Forces between servicemembers and leaders who just 

months ago were serving side by side in combat. We must enable all components of the Armed Forces to be adequately manned, trained, and equipped 

to focus on the mission—and not on fighting over an arbitrarily depressed 

defense budget. 

• Created an atmosphere of fiscal desperation that leads to false arguments 

and false choices when it comes to the compensation and benefits provided 

to the servicemembers and families who make up the All-Volunteer Force. 

MOBILIZATION AND THE DEFENSE INDUSTRIAL BASE

Whether by design or inadvertently, sequestration has forced our Armed Forces 

back into a mobilization posture. Many who refuse to acknowledge that the United 

States might again become involved in a large land operation have set us on a path 

where a too-small Active component force can just be reinforced when needed by a 

mobilized Reserve contingent or by simply recruiting more soldiers (as the likelihood 

of a return to the draft is remote). 

GEN George Marshall in 1956 said that ‘‘. . . the hardest thing in the world to 

train is a ground army’’. Marshall had it right some 60 years ago when he concluded 

that the complexity of land conflict (more so in today’s unstable security environment) requires our land forces to maintain ‘‘a very high state of training, higher 

than that of any other force that I know of.’’ George Marshall knew what he was 

talking about. 

Unfortunately, recent history has shown us that it takes the U.S. Army as much 

as 3 years to organize, train, and equip a newly formed brigade combat team—that’s 

not rapid enough in today’s security environment where crises like the Crimea can 

emerge in literally days (think Korea in June 1950 and even today) and linger for 

years as in Syria. The myth of small to big in short order is just that—a myth. 

So, we must rely entirely on the force we have in being—Active, Guard, and Reserve. But with the effects of sequestration steadily decreasing the size and readiness of our military, the depth of the force and its ability to mobilize is being severely degraded. 

What is needed is a balanced force—balanced among land, air, maritime, space, 

cyber, and Special Forces. Balance is also required between Active and Reserve 

Forces. Equally important is the balance between mission readiness and soldier and 

family programs. But sequestration is throwing that necessary balance out of 

whack, especially with land forces, and is creating risky, even dangerous 

vulnerabilities. 

Likewise, sequestration is having a devastating effect on the defense industrial 

base. In both DOD’s own organic industrial base and the commercial industrial 

base, sequestration cuts are putting our ability to equip a mobilized force when it 

is needed at growing risk. I am alarmed that there is a gross lack of awareness 

among national leaders how dire this situation is becoming. Only legislative relief 

from sequestration can rectify this. 

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A CRISIS OF CREDIBILITY

Not only is sequestration and a declining defense budget having an adverse effect 

on military readiness, we are also seeing an emergence of international doubt as to 

the credibility of the United States as a reliable ally and partner. I am convinced 

we must be seen as a credible ally. Credibility in this context is found in the perception of strength and national resolve to be responsive to our treaty commitments 

with balanced, trained, and ready forces. 

Similarly, adversaries are most certainly watching the steady decline of American 

military power and could take more and more risk to challenge U.S. leadership. 

Moreover, the decline in U.S. military strength can lead to strategic miscalculation 

by potential adversaries. A credibly sized force—not just a reasonably sized force— 

provides a deterrent effect that is withering under the constraints of sequestration. 

VIABILITY OF THE ALL-VOLUNTEER FORCE

Sequestration has created a perception that the troops ‘‘cost too much’’ and are 

to blame for our growing military unreadiness. The facts do not bear this out and 

the troops know it. But it has sown a growing distrust among servicemembers who 

are increasingly and unfairly portrayed as an entitlement special interest group. 

The past 12 years of unprecedented demands and sacrifices highlight how radically different military service conditions are from civilian life. Decades of dire predictions about ‘‘unaffordable’’ personnel costs have proved consistently wrong. Yet 

budget critics persist in asserting military pay, retirement, and health care benefits 

are unsustainable and should be slashed to resemble civilian benefit packages. 

Existing career incentives have sustained a strong national defense through more 

severe and protracted wartime conditions than even the strongest volunteer-force 

proponents thought it could survive. 

Despite extraordinary demands, men and women in uniform are still answering 

the call—thanks in no small measure to the committee’s strong and consistent support—but only at the cost of ever-increasing personal sacrifices. 

Service personnel are now facing even greater uncertainties with force reduction 

measures and pay caps. No Federal obligation is more important than protecting national security. The most important element of national security is sustainment of 

a top-quality career military force backed by dedicated DOD civilians. 

America will remain the world’s greatest power only so long as it continues to fulfill its reciprocal obligation to the only weapon system that has never let our country down—our extraordinarily dedicated, top-quality, All-Volunteer career force. 

Congress has consistently recognized that the cost of sustaining the current military career incentive package is far more acceptable and affordable than the alternative. 

COMPENSATION AND BENEFITS

In the matter of compensation, AUSA supports the establishment of the Military 

Compensation and Retirement Modernization Commission. The members of that 

body are fully capable of recognizing the unique contributions and sacrifices required by military service when they consider changes to military compensation and 

the retirement system. AUSA expects that any changes made must and will take 

into account the services’ need to compete for talent in the labor market. 

AUSA does not want to see a return to the recent era of significant pay gaps, at 

this critical juncture in the life of the Army and DOD. It is imperative that funding 

be available for training and maintaining a ready national defense force. The capability to accomplish the mission is of paramount importance. 

Pay caps must not be permanent. Military pay comparability is important to the 

recruiting and retention of high-quality soldiers and will become more so as the 

economy rights itself. AUSA is committed to military pay raises that match the Employment Cost Index, but this year because of sequestration, the funds freed by a 

slightly smaller pay increase is the price that must be paid to have soldiers who 

are trained and ready. However, Congress must ensure that this type of budgeting 

does not become routine as it will have long-term detrimental effects on the All-Volunteer Force. 

In the matter of Military Compensation and Retirement Reform, AUSA believes 

that any permanent changes in the military compensation and retirement system 

should be withheld pending the report of the Military Compensation and Retirement 

Modernization Commission and not be made piecemeal. Further, any changes to retirement benefits must apply only to those who volunteer after the changes are implemented. Grandfathering of the currently serving force and current retirees is imperative. Finally, any change must recognize the unique and extraordinary demands 

70 

and sacrifices that military service requires. The profession of arms is not equivalent to a civilian job. 

SEQUESTRATION

I end my testimony as I began it. 

Sequestration is a disruptive piece of legislation indicative of a government seemingly unable to function as a responsible democracy. Furthermore, sequestration is 

patently unresponsive to the needs of a nation that is part of a rapidly changing 

world in which we cannot predict the future. It creates a paradox in which the Nation is locked into a creaky, slow moving, lockstep budget process that is irresponsible and unaccountable and ignores the world around it, while its defense forces 

must be flexible and agile. 

Further, sequestration profoundly affects all parts of the national security umbrella—the Department of State, Central Intelligence Agency, National Security 

Agency, Department of Veterans Affairs, and parts of the Department of Energy 

budgets. Its impact on national security writ large must be considered. 

Members of the committee, as you pursue your duties related to the personnel 

issues of DOD, I urge you to get at the root cause of the budgetary problems consuming DOD and end sequestration permanently before more damage is done and 

before we are left with an inadequate national defense force in 2021. 

Thank you again for your support of the uniformed services and for considering 

this testimony of the Association of the U.S. Army. 

Chairman LEVIN. Thank you, General Sullivan. 

Admiral Totushek, we are going to have to leave here in about 

15 minutes. We will have to leave a few minutes before 1 p.m. We 

want to leave some time for questions. If you can adjust accordingly, that would be great. We do not want to cut you short. 

STATEMENT OF VADM JOHN B. TOTUSHEK, USN, RET. 

EXECUTIVE DIRECTOR, ASSOCIATION OF THE U.S. NAVY 

Admiral TOTUSHEK. I will endeavor to do that, Chairman Levin. 

Thank you very much. Ranking Member Inhofe, members of the 

committee, it is always a pleasure to be with you, and I thank you 

for your service to our country and the things you have done for 

our men and women in the military. 

I will cut through part of this, just to highlight a few things. 

The first is that we basically heard a lot of people say today that 

cuts will not harm the quality of life for our Navy families, but I 

would say that all aspects of compensation, not just pay, are part 

of what they look at as their pay. It is going to definitely impact 

decisions they make when they are out there trying to live their 

lives, especially things like BAH that are reductions in what they 

take home each month to be able to pay their bills. 

We basically are the voice of sailors at AUSN, and we did a recent study asking some people to tell us what they thought about 

these impending kinds of changes that DOD has proposed. Ninety 

percent of them did not like what is being proposed, a little bit contrary to what I think the chiefs are hearing when they go out 

there. By the way, we do not envy the chiefs—the position they are 

in to try to make this balance that is typical of the tough choices 

they are trying to make today. It is just that we think there is a 

bigger impact to our force than they are seeing when they go out 

and hold their all-hands calls. 

One sailor said the cost of living has not gone down in our area. 

Yet, DOD has made a decision to knock down the BAH for Hampton Roads. 

Another one said I think that DOD is breaking faith with what 

we signed up for. Things are going backwards. 

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Now, you may have seen today that the Web site military.com 

had a survey that said the same thing ours said. 90 percent of 

those surveys—and they surveyed 8,400 Service people—do not like 

the proposed cuts. What the Chiefs are hearing when they go talk 

maybe is not the real thing that is going on. 

I would tell you also that the sequestration, as General Sullivan 

says, makes big impacts to our readiness, to our force structure, 

and to our training, but it also has an impact on Navy families because the CNO said we are now forced into longer cruises and 

when we retain people, we do not retain just that service person. 

We retain the family. The families will vote with their feet. I believe that the committee does not need to be reminded of that fact. 

I will cut to the chase so that my colleague to my left has a couple of moments to spend. But I would tell you that for the last 30 

years, the cost of personnel in the military has remained constant 

at 30 percent to 33 percent. The President’s budget for 2014 is 33 

percent. To say that these compensation percentages are higher, 

you have to be including some things that military compensation 

does not include like the civilians or something else is in those 

numbers that you heard from the Service Chiefs today. 

In summary, we think that really the biggest factor today that 

is keeping people in the military is the poor jobs market on the outside. When you couple these kinds of changes with that, we are actually going to see people walking with their feet despite what the 

chiefs are hearing. 

With that, thank you very much for your attention, and I look 

forward to your questions. 

[The prepared statement of Admiral Totushek follows:] 

PREPARED STATEMENT BY VADM JOHN B. TOTUSHEK, USN (RET) 

SUMMARY

Chairmen Levin, Ranking Member Inhofe, and members of the Senate Armed 

Services Committee, the Association of the U.S. Navy (AUSN) thanks you and your 

Committee for the work that you do in support of our Navy, veterans, retirees, and 

their families. Your efforts have allowed significant progress in creating legislation, 

through 50 plus years of consecutive National Defense Authorization Acts (NDAA), 

that has left a positive impact on our Navy and military community. 

On 4 March 2014, the administration sent to Congress the President’s budget 

(PB) request for fiscal year 2015. The PB requests a total of $495.6 billion for the 

Department of Defense (DOD) budget, about $31 billion less than fiscal year 2014 

requested levels. Despite some programs seeing positive steps forward, there are significant ‘cost saving’ measures being proposed which could impact overall morale, 

recruitment, retention and readiness in the military. Of particular concern are proposals within DOD’s budget to reduce military pay raises, lower Commissary subsidies, reduce the Basic Allowance for Housing (BAH) and merge three different 

TRICARE plans: Prime, Standard and Extra into one Consolidated TRICARE 

Health plan, while instituting TRICARE for Life (TFL) enrollment fees and increasing pharmacy copays. All of these changes are being proposed before the Military 

Compensation and Retirement Modernization Commission (MCRMC), mandated by 

Congress in the NDAA for Fiscal Year 2013, which has finished its work and should 

come up with its final report in February 2015. 

The 6 percent reduction in BAH will result in higher out-of-pocket costs for those 

servicemembers living off base. Base barracks are not built to accommodate 100 percent of the servicemembers stationed there, so this will undoubtedly affect many 

sailors. The housing allowance is calculated based on the average cost-of-housing for 

the area and is meant to provide servicemembers with the ability to live in satisfactory accommodations. The proposed budget also puts the base pay cap below private 

sector pay growth determined by the Employment Cost Index (ECI), with an increase of 1 percent rather than 1.8 percent. This is the second year that DOD has 

72 

tried to cap the pay increase at 1 percent. Before last year, servicemembers’ last 

three pay increases averaged at 1.4 percent, and the NDAA for Fiscal Year 2014 

pay increase was the smallest in almost 50 years. In addition, the proposed reduction in savings at the Commissary would result in a roughly 20 percent price spike. 

The PB also plans for TRICARE pharmacy copay increases and the establishment 

of enrollment fees, while also creating a consolidated TRICARE plan, eliminating 

the managed care option and leaving only a fee-for-service option for retirees and 

families. 

We have heard DOD officials say that the cuts will not harm quality of life; however, there is no doubt that it will have a substantial effect on purchasing power 

and affect day-to-day financial decisions. For instance, the total loss in purchasing 

power for an Active Duty E–5 family of four would be $4,993 per year based on the 

proposed changes to TRICARE, BAH, pay raise cuts and Commissary savings put 

together. For an Active Duty O–3 family, the total loss of purchasing power would 

be $5,890. There are some who justify these cuts by saying military compensation 

is already very generous, but that’s not necessarily true. Military compensation is 

fair and carefully constructed to sustain the stability of the all-volunteer force. 

AUSN shares the concern, along with many lawmakers, that these cuts will end up 

being a disincentive to serve. As the ‘‘Voice for America’s Sailors,’’ AUSN has always 

been a people first association, since it is our servicemembers, Veterans and retirees 

who help/helped make our Navy the finest force in the world. The readiness of our 

Navy follows in importance since our sailors need the training, resources, and modern equipment to carry out its mission. 

AUSN Questionnaire of Active Duty, Reserve, Veteran and Retirees on Fiscal Year 

2015 Proposals 

In order to better understand the concerns of the military and Navy community, 

beginning in mid-April, AUSN conducted a questionnaire of a couple hundred of our 

members who also passed along to friends and shipmates to hear how they were 

impacted or not impacted by the proposals being vetted in regards to military compensation and benefits. Overall, with results compiled on 28 April 2014, of the over 

100 participants in the poll, 59 percent of respondents were Veterans/Retirees and 

41 percent were Active Duty. Respondents were asked, ‘‘In the fiscal year 2015 PB 

request, I am most concerned with . . . ’’ and had the choice of Military Pay Raise 

Cut, BAH Reductions, TRICARE Proposals, Commissary, None or All of the proposals. Comments were also submitted whereby one Active Duty sailor stated, ‘‘I understand the need to tighten our belts, but [military personnel accounts] are not the 

places to do it,’’ whereby another Active Duty sailor stated, ‘‘Enlisted are already 

severely underpaid. Taking away more of their pay would be detrimental to morale.’’ 

An additional comment came from one Active Duty sailor who said that, ‘‘The cost 

of living has not gone down in our area, yet [DOD] has made the decision to knock 

down the BAH for Hampton Roads, VA!’’ A Navy Veteran commented, ‘‘I appreciate 

the opportunity to have my input considered. DOD is breaking faith with all of us 

who serve/served faithfully, and I consider these proposals will negatively affect retention and recruiting.’’ Another Navy veteran stated in his submission, ‘‘While good 

equipment is important, it seems that the DOD has misplaced their priorities and 

are not taking care of the troops.’’ The final compiled results showed that ALL of 

the proposals had a majority of concerns with TRICARE, with the military pay raise 

cuts following behind. 

73 

Before going into detail on the Military Compensation fiscal year 2015 budget proposals, we’d like to take the time to discuss a few pending concerns which are driving many of the proposals coming out of DOD. Most notably we will address sequestration and ask ourselves: is the current military compensation and benefits system 

truly unsustainable as many DOD officials claim, and haven’t we seen the mistakes 

of drastic changes before? 

SEQUESTRATION IMPACT

The national security environment we face today is as perilous as any in recent 

memory. Over the past several years, our defense budget has been struck time after 

time with reductions. The Budget Control Act (BCA) of 2011 started a $487 billion 

loss in the defense budget, and now we are at even greater risk threatened by a 

sequestration law cutting another $500 billion over the next decade. 

We were told sequestration would never happen. But here we are in year two facing the blunt and irresponsible approach to taming our annual deficits and reining 

in the enormous debt we and future generations face. Despite sequestration being 

‘held at bay’ for now due to the Bipartisan Budget Act (BBA) of 2013 agreement, 

the ongoing threat of it returning for fiscal year 2016 continues to have looming consequences that must be paid attention to. 

Under sequestration, defense, which accounts for less than 15 percent of the budget, is forced to take 50 percent of sequester cuts. It is disproportionate by any measure of understanding and incredibly detrimental to our national security. The results of these cuts have already been devastating to our national security, with our 

Navy alone at a historic low level of ships, facing worse than pre-World War II levels, should sequestration persist. 

The readiness impact of sequestration not only threatens our military and forward 

presence but also has a significant impact upon the Navy family. For instance, the 

recent announcement in the fiscal year 2015 PB to defer the decision on whether 

or not to early retire the USS George Washington (CVN–73) in fiscal year 2016 has 

dire consequences for our fleet’s capabilities. Scheduled to undergo Refueling and 

Complex Overhaul (RCOH), this vital but costly regularly scheduled carrier maintenance, threatens to reduce the fleet of Carrier Strike Groups (CSGs) from 11 to 10 

and with any further delays of the Ford-class aircraft carrier, potentially down to 

nine. What is missing from this discussion to the effect on our national security that 

this has is the impact upon our military families, as we have seen with other RCOH 

delays of carriers. Delays and reduction in ships means longer deployments for other 

CSGs and, consequently, more time our sailors are away from their families, impacting overall morale of our Navy community. 


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In addition, DOD recently released an April 2014 report titled ‘‘Impacts of Sequestration Level Funding’’ which noted not only the RCOH concerns with CVN–73 but 

also the Navy consequently having eight fewer ships procured throughout the remainder of the Future Years Defense Program (FYDP). Three fewer Arleigh Burke 

Class destroyers (DDGs) would be procured from fiscal year 2017 through fiscal year 

2019, resulting in a smaller and less capable surface combatant force. Sequester 

level funding would also result in the fiscal year 2016 Virginia-class submarine procurement to be unaffordable and prolong the period where the force is below the 

desired level of fast attack submarines by 4 years. The Navy would also delay six 

P–8A ‘‘Poseidon’’ aircraft until fiscal year 2020, substantially increasing per unit 

costs, and would procure two fewer F–35C variants in fiscal year 2016. The entire 

Armed Services would also lose more than 530 Advanced Medium-Range Air-to-Air 

Missiles, and the Tomahawk Cruise Missile program would be eliminated. Perhaps 

the largest impact would be to the Operation and Maintenance (O&M) accounts, 

which include installation services and service readiness, which could be reduced by 

$40 billion over the course of the FYDP. Not funding Navy O&M accounts severely 

limits force structure, readiness and capability. 

AUSN insists Congress eliminate sequestration and fund our military to levels 

that enable all components of the Armed Forces to be adequately manned, trained 

and equipped to focus on the mission— and not on fighting over an arbitrarily depressed defense budget. While debt reduction is a national priority, we believe that 

such a disproportional share of this burden must not be imposed upon DOD and 

especially on the backs of military members and families who already have sacrificed more for their country than any other segment of Americans. 

SLOWING THE GROWTH? (IS IT REALLY THAT BAD? ARE WE REPEATING PAST MISTAKES?)

Today sequestration is still the ‘law of the land’ and continues to impact the decisions made regarding cost savings within DOD, particularly when it comes to military compensation and benefits. We have faced similar budget scrutiny before, and 

the impact upon our military had significant consequences. AUSN is concerned that 

attempts to change compensation and retirement will cause the same negative effects that have been seen in the past. Military compensation and benefit changes, 

like our overall military readiness, should not be so heavily budget driven but rather should reflect strategy and modernizing for a 21st century force. Recent military 

compensation studies within DOD have leaped to the erroneous conclusion that the 

cost trends of the last decade will continue indefinitely. This is not so. Yet, Pentagon 

leadership continues to focus on ‘‘recent growth trajectory.’’ For example, the military personnel account, according to Office of Management and Budget’s (OMB) historical table 3.2, has doubled between 2000 and 2012, from $76 billion to $152 billion. What the Pentagon doesn’t advertise is that the overall defense budget grew 

over the same period from $281 billion to $651 billion, a 131 percent increase. This 

alone shows personnel costs are consuming a smaller share of the budget. So if any 

costs are ‘‘spiraling out of control,’’ they’re not personnel costs. 


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While AUSN supports responsible spending in defense, past attempts to alter 

military compensation and retirement benefits have had significant negative impacts. For example, the REDUX program in the 1980s comes to mind, which was 

cancelled in 1999, when its attempts to reduce 20-year retirement benefits by 25 

percent caused drops in retention and readiness levels. 

The REDUX system, enacted in 1986, was applied to service entrants on or after 

1 August 1986. It provided 2.5 percent times high-36-month basic pay per year of 

service, except that 1 percent was subtracted for each year of service less than 30 

(e.g., 40 percent of high 36-months basic pay after 20 years of service). Furthermore, 

REDUX retiree Cost-of-Living Adjustments (COLAs) adjusted annually at a rate 1 

percent less than the Consumer Price Index (CPI); (CPI–1). Under the REDUX law, 

retired pay was recomputed on a one-time basis when the retired member attains 

age 62. At that point, retired pay was recalculated to the amount that would have 

been payable under the high 36-month average system. After age 62, CPI–1 COLAs 

continued for life. The REDUX system further reduced lifetime retired pay value by 

up to 27 percent! 

Congress repealed REDUX as the default system for post-1986 entrants in 2000, 

after the Joint Chiefs of Staff (JCS) complained that it was undermining career retention and readiness. At the time, the REDUX system was the most frequently 

mentioned reason for leaving Service among separating personnel. 

Under current law, the high 36-month retired pay system is the default option, 

but servicemembers have the option at the 15-year point of electing the REDUX option in return for a one-time $30,000 taxable career retention bonus. Only a minority of servicemembers choose this option, and AUSN, as well as our counterparts, 

believe strongly that accepting this option is a very unwise decision. 

Additionally, past attempts at military pay caps have caused significant problems. 

A series of annual pay raise caps in the 1970s led to major negative impacts on retention and necessitated a pair of large ‘‘catch up’’ raises in 1981 and 1982. The 

same problem occurred again in the 1980s and 1990s, with pay caps contributing 

to an eventual peak ‘‘pay comparability gap’’ of 13.5 percent below the private sector. 

There have been three areas where DOD has stated that Military Compensation 

and Benefits are becoming ‘‘unsustainable’’ and urged a need to ‘‘slow the growth,’’ 

regarding ‘‘spiraling’’ compensation and benefit costs. Those areas are pay, 

healthcare and retirement. All three areas are vitally important to the recruitment 

and retention of our All-Volunteer Force, and all three are areas that DOD constantly sends proposals to change in each of the President’s Budgets. Personnel and 

healthcare costs have represented the same share of the defense budget, about a 

third, which they have for the last 30 years, indicating that these costs are not spiraling out of control as DOD has claimed. In fact, looking at last year’s fiscal year 

2014 budget alone, as requested in the PB request, there was $412 billion allocated 

for total Military Personnel Costs, less than half of which is actually in the DOD 

budget. That means, of the PB requested $526.6 billion for the base budget of DOD, 

only $176.6 billion, about a third, is dedicated to ALL Military Personnel Costs for 

DOD, which, again, is about the same share of the DOD budget for the past 30 

years. Hardly ‘‘unsustainable.’’ 


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Our successful all volunteer-force has been accomplished with the same portion 

of the DOD budget being allocated for human resources as there has been for the 

last 30 years. Less than one-third, of the total DOD budget goes towards pay, 

healthcare, retirement and other compensation, so, again, these are exaggerated 

claims that military compensation programs are the most impactful financial issue. 

Thus, if we continue to let budget drive the conversation, like REDUX did, then 

we risk consequences of adopting many of the proposals within the fiscal year 2015 

budget request as noted below which may be detrimental to our military’s most important asset, our people. 

MILITARY COMPENSATION PROPOSALS IN FISCAL YEAR 2015 PRESIDENT’S BUDGET

Military Pay Proposals in Fiscal Year 2015 Budget 

Military pay is meant to offset the massive personal cost that accompanies a 

servicemember’s career. In exchange for their pay, members of the military not only 

serve in foreign and often dangerous locations but also accept abridgments of speech 

and organizational rights enjoyed by those they protect. Military pay is a huge motivating factor in attracting new recruits as well who are willing to make these sacrifices as part of joining the all-volunteer force. Pay comparability is also one of the 

most important factors in maintaining stable retention. All of this has been accomplished with the same portion of the DOD budget being allocated for military compensation as there has been for the last 30 years. AUSN is very concerned that 

many in the administration, and some Members of Congress, are unaware of the 

history of compensation changes and their unforeseen outcomes. Moreover, we are 

alarmed that some view these vital compensation programs as a source of budget 

savings without regard to the impact they may have on long term readiness, but 

most importantly, the livelihoods of the All-Volunteer Force. 

The historical context of military pay provides ample evidence that capping military raises is an exceptionally slippery slope which has never ended well with past 

attempts at military pay caps causing significant problems. A series of annual pay 

raise caps in the 1970s led to major negative impacts on retention and necessitated 

a pair of large ‘‘catch up’’ raises in both 1981 and 1982. The same problem occurred 

again in the 1980s and 1990s, with pay caps contributing to an eventual peak ‘‘pay 

comparability gap’’ of 13.5 percent below the private sector. To correct this, Congress has made great strides to restore military pay comparability over the past 13 

years. In 2003, for the NDAA for Fiscal Year 2004, Congress tied the basis of pay 

increases for military personnel to be equal to the Department of Labor’s ECI, so 

that increases in military pay matched the bare minimum increases that civilians 

in the private sector received. Congress has even had the ability to enact raises that 

exceed these ECI percentages, as they did for 2008 and 2009 (see chart on following 

page for recent increase in pay raises). 


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Through these measures, the pay gap was closed, and servicemembers were compensated at a fair rate equal to those in the civilian sector. However, now that erosion of pay and associated retention-related problems have abated, there are renewed calls to cut back on military raises, to either create a new comparability 

standard or substitute more bonuses for pay raises in the interests of deficit reduction. For Congress to override the statutory linkage that they themselves have 

passed does not bode well for our men and women in uniform, especially in the 

midst of an on-going conflict. History shows that, once military pay raise caps are 

implemented, the tendency has been by Congress to continue them until retention 

problems arise, which then have to be addressed through significant pay raise plusups. AUSN believes such proposals are exceptionally short-sighted in light of the extensive negative experiences we have had with military pay raise caps. The whole 

purpose of sustaining pay comparability through both good times and bad is to prevent significant fluctuations in retention and readiness; to avoid going through an 

endless cycle of causing problems and then repairing them. 

A 2010 Congressional Budget Office (CBO) report asserted that, considering adjustments in housing allowances, many military people were actually paid more 

than their civilian counterparts in terms of Regular Military Compensation (RMC), 

composed of basic pay, food and housing allowances and the tax advantage that accrues because the allowances are tax-free. Developed in the 1960s when all 

servicemembers received the same allowances, regardless of location, and the allowances were arbitrarily established, the RMC was an inaccurate calculation of servicemember compensation. Since the 1960s, Congress has transformed the allowances 

into reimbursements for actual food costs and for median locality-based housing 

costs. Consequently, AUSN believes the CBO’s assertions to be fundamentally 

flawed and that Congress would have a hard time explaining to troops why their 

pay raises should be reduced because their taxes are rising. However, in 2013, the 

PB request for fiscal year 2014 established the 1 percent smaller pay raise, instead 

of the 1.8 percent dictated by the current ECI, which affected a total of 2.2 million 

Active Duty and Reserve component members in order to save DOD $536 million, 

a small cut in a $526.6 billion budget. AUSN was then exceptionally disappointed 

that Congress agreed to that cap on Active Duty pay raises, as this sends the wrong 

message to our servicemembers saying in order to save a small amount of money, 

we are cutting your pay raise mandated by current law by almost half. DOD continues to claim it would save over $3.5 billion if pay increases were reduced at this 

rate in future years. Yet, as previously mentioned, personnel costs have represented 

the same share of the defense budget, about a third, for the last 30 years, indicating 

that these costs were not spiraling out of control as DOD claims. 

Furthermore, a 1 percent boost in military pay would continue to be, as it was 

for fiscal year 2014, the lowest pay increase since 1963, when no pay raise was authorized. This would represent a historically significant reduction, as well as explicitly increasing the pay of servicemembers less than the bare minimum that a similarly-employed civilian would receive (which, in all honesty, both career paths cannot and should not be compared). These actions are of significant concern, since annual pay increases are not just raises or bonuses for servicemembers but vital adjustments that are counted on by military families as part of military service. For 


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example, an E–5 Active Duty family of four stands to lose a total of $593, and an 

O–3 Active Duty family of four stands to lose a total of $1,130 aggregate loss for 

fiscal year 2014/fiscal year 2015 in military pay. AUSN advocates for the specified 

1.8 percent increase as determined by the ECI for the current NDAA for Fiscal Year 

2015 to ensure that servicemembers receive a fair increase. AUSN encourages DOD 

and Congress to adhere to this standard of pay increases. As past experiences have 

shown, pay raise caps tend to cause major problems in exchange for minor shortterm savings, which are then undone when larger adjustments must be made to 

make up for the caps. If pay raise caps are instituted again by the administration, 

ignoring current law from the NDAA for Fiscal Year 2004, we will likely see retention problems reemerge in exchange for an extremely small cost reduction. In short, 

pay raise caps are not worth the negative consequences, and therefore, AUSN 

strongly encourages Congress not to approve the fiscal year 2015 PB request for 

having military pay raises set at 1 percent instead of the mandated ECI rate of 1.8 

percent. By adding language to the NDAA for Fiscal Year 2015 supporting current 

law of the NDAA for Fiscal Year 2004 stating military pay should match the ECI 

rate, Congress will have re-asserted it’s authority and counter the administration’s 

use and interpretation of title 37 powers to change military pay rates as they please. 

Basic Allowance for Housing Proposals in Fiscal Year 2015 President’s Budget 

In addition to base pay, servicemembers also receive a supplement for housing. 

BAH is an allowance paid to Active Duty servicemembers based on pay grade, dependency status and geographic location within the United States. The PB request 

for fiscal year 2015 proposes to gradually slow the annual BAH increases until rates 

cover only 95 percent of housing rental and utility costs on average. Additionally, 

it proposes to eliminate renter’s insurance from the housing rates. The administration argues that this change only results in an out-of-pocket cost of 6 percent on 

average, emphasizing that such a change is far less than the 20 percent out-of-pocket costs in the 1990s. However, by the late 1990s, the Defense Department persuaded Congress to make military housing allowances meaningful by setting BAH 

at 100 percent of median local housing costs. This standard was codified after years 

of budget cuts reducing BAH rates below actual housing costs. Furthermore, they 

maintain that in areas where average rates increase, DOD will slow the growth of 

that increase until the 6 percent target is reached. Additionally, the administration 

claims that the actual percentage will vary by area, because it would be unfair to 

those who live in high rental cost areas to make this change on a strict percentage 

basis. Therefore, the administration proposes that servicemembers in the same pay 

grade, but living in different areas, should see the same dollar amount of out-ofpocket cost. In order to accomplish this, the individual servicemember will know the 

amount he will contribute toward housing and can make informed trades in his own 

budget. The rate protection feature will also remain in effect. In other words, no one 

who is currently living in a particular area will see his BAH decrease. If the survey 

data in an area indicate that the BAH rate should decrease, only members moving 

into the area will receive the lower rate, which already happens under the current 

rules. Finally, the administration expects that the out-of-pocket target of 6 percent 

will take several years to achieve because the DOD is just starting to slow the 

growth of future increases. 

AUSN, however, disagrees with the administration’s assessment and asserts that 

the fiscal year 2015 PB proposal of a 6 percent reduction in BAH will, because of 

its even spread over the entire force, prevent troops in high-cost living areas from 

paying out more of their base pay than troops in low cost of living areas. Under 

the administration’s proposal, servicemembers will only receive 95 percent of the 

BAH for their rank and location, resulting in greater out of pocket housing costs. 

This ‘‘slowed growth’’ of the BAH will affect families, whether they rent or own their 

own home. All told, for example, an E–5 Active Duty family of four under this proposal would stand to lose a total of $1,224, and an O–3 Active Duty family of four 

under this proposal would stand to lose a total of $1,584 annually. Additionally, the 

fiscal year 2015 budget eliminates compensation for renter’s insurance, which is an 

important component that goes into a servicemember’s monthly housing cost. While 

AUSN is appreciative that the lower BAH will not affect a military family until 

their next duty assignment, we are concerned about the long-term impact on families’ ability to find and pay for appropriate housing. BAH has a tremendous impact 

on servicemembers and their families’ lives and is an important service that military families depend on to afford reasonable housing wherever it is they are stationed. As a result, AUSN urges Congress to reject the BAH proposals in the fiscal 

year 2015 PB and provide full BAH for any Active Duty servicemember at the current BAH rate. 

79 

TRICARE Proposals in Fiscal Year 2015 President’s Budget 

The military healthcare system is built mainly to meet military readiness requirements rather than to deliver needed care efficiently to beneficiaries. These readiness 

requirements result in increased costs across the healthcare system, as the system 

needs to be able to not only provide for beneficiaries but also be able to meet the 

readiness requirements the military has. But because the increased costs have been 

incurred as a result of military readiness requirements and out of convenience for 

the military, beneficiaries should not be expected to bear any share of the militarydriven costs. Instead of imposing higher fees on beneficiaries as the first budget option, DOD leaders should be required to fix/consolidate redundant, counterproductive DOD health systems. 

Currently, TRICARE is managed by the Defense Health Agency (DHA), formally 

the TRICARE Management Activity (TMA). On 1 October 2013, TMA was disestablished, whereby DHA took over. As a major component of the Military Health System (MHS), TRICARE combines the healthcare resources of the uniformed services 

with networks of civilian healthcare professionals, institutions, pharmacies and suppliers to provide access to high-quality healthcare services, while maintaining the 

capability to support military operations. This integration allows for the men and 

women of our Armed Forces to readily access care whether it is within VA 

healthcare centers or the private sector. The healthcare needed for servicemembers 

varies greatly throughout their military careers as they transition throughout the 

stages of their service. This variety, with multiple TRICARE plans, is designed in 

order to provide for the 9.66 million Americans who are eligible for benefits under 

TRICARE and have different degrees of healthcare. However, out of that 9.66 million, only just fewer than 5.5 million users are actually enrolled in a TRICARE program as many eligible beneficiaries receive healthcare via their current employers. 

In fiscal year 2012, more than 84 percent of eligible TRICARE beneficiaries used 

some form of Military Health System service, highlighting just how important the 

MHS and TRICARE systems are to providing care for the members of our Armed 

Forces and their beneficiaries. 

The fiscal year 2015 PB provides for $47.4 billion, spanning Defense Health Program, personnel and healthcare accrual. Despite large savings in recent years, DOD 

feels it must pursue veteran and military retiree healthcare reform. As part of this 

reform, the DOD has proposed a ‘‘Consolidated’’ TRICARE plan, as opposed to the 

current system with varied plans. Although there would be no change for Active 

Duty servicemembers, the remaining TRICARE beneficiaries would see changes to 

their plan. Cost shares would be implemented across all beneficiary levels, excluding 

Active Duty, in an attempt to facilitate the effective use of military clinics and increase the efficiency of the military’s fixed facility cost structure. Additionally, there 

would be an annual TRICARE participation fee for retirees, their families and survivors of retirees, which if unpaid, would result in the forfeiture of coverage for that 

year. The annual consolidated TRICARE participation fee would be inflated annually according to the COLA but would start at $286 per person or $572 per family 

in 2016. Meanwhile, the cost sharing initiative would see an in-network catastrophic 

cap of $3,000 per fiscal year and a combined (in and out of network) cap of $5,000. 

The budget request goes on to propose increased copays for pharmaceutical prescriptions, with significant increases in what TRICARE beneficiaries must pay every 

time they fill or re-fill a necessary prescription over the next 10 years. Finally, there 

is a proposal to implement an enrollment fee for TRICARE for Life (TFL) beneficiaries. TFL, enacted in 2001, is an additional payment plan for eligible beneficiaries over the age of 65 who are also enrolled in Medicare Part B, which only 

covers about 80 percent of normal healthcare costs. The TFL fee proposal would 

grandfather current members in but would begin charging an annual fee, phased 

in over a 4-year period, based on a percentage of the beneficiary’s military gross retired pay. This would result in annual fee ceilings above $600 per beneficiary starting in fiscal year 2018. 

In recent years, emphasis has been placed on achieving savings and efficiency within the MHS. On the other hand, approximately $3 billion are being saved annually in MHS with programs such as the Prospective Payment system and the Federal Ceiling Pricing (a discount drug program). There have also been increases to 

fees for TRICARE beneficiaries, tied to annual COLA increases, over the past couple 

of years, and those would continue to increase under the current TRICARE system, 

in addition to savings seen via TRICARE Service Center closures. Additionally, as 

mentioned in the Federal Ceiling Pricing program, there have been significant savings achieved in pharmacy costs, as major changes have been enacted to double and 

triple pharmacy copays for military beneficiaries, and these will continue to increase 

in future years. Even more savings would be achieved under the current TRICARE 

system when the significant reductions in end-strength are enacted. Currently there 

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are plans for the end-strength of the Active and Reserve Forces to be cut by 124,000 

troops over 5 years, and the fiscal year 2015 budget proposes an additional cut of 

78,000 troops. Such significant reductions will reduce military healthcare costs, as 

there will be 202,000 fewer troops (and their family members) eligible for TRICARE 

benefits. 

AUSN continues to be alarmed at the many attempts over past PB submissions 

for DOD to find savings off of those who have served and looking at military 

healthcare as a solution. Healthcare costs are only 10 percent of DOD’s base operating budget. Put in the proper context, this is not very much. Healthcare costs account for 27 percent of the Federal budget, 32 percent of the average state budget, 

16 percent of household discretionary spending and 17.2 percent of U.S. Gross Domestic Product. This shows that the current system which DOD uses to provide 

healthcare for nearly 10 million servicemembers and their families does not need 

to see such drastic changes, changes which will greatly impact the standard of living 

and quality of life many of our military members currently experience. AUSN recommends that fee increases be limited to the annual COLA and is opposed to any 

increase in TRICARE costs for users that is not directly related to COLA. AUSN 

also advocates that the healthcare provided by TRICARE (physical, behavioral, mental or otherwise) be up-to-date with the most current form of coverage and not consolidated for the needs of servicemembers and their families, and not just the budget needs of DOD. 

Commissary Proposals in Fiscal Year 2015 President’s Budget 

The military Commissary system is administrated by the Defense Commissary 

Agency (DECA) and provides food supplies, beyond that official rations, and savings 

to supplement the pay received by the military. The Commissary system has been 

a cornerstone of the military’s non-pay benefits and has become an integral part of 

ensuring that our young servicemembers and their families have the best possible 

quality of life. Particularly, the benefits the system provides are of great assistance 

to families stationed in high cost-of-living areas. On average, servicemembers and 

their families save more than 30 percent on grocery bills, which translates to around 

$4,400 in savings per year. All the while, DECA strives to develop the Commissary 

system while balancing cuts to Commissary subsidies. 

The fiscal year 2015 PB proposes that the $1.4 million funding for DECA should 

be reduced to $400 million over the course of the next 3 years. This is a two-thirds 

slash to DECA’s budget and will eliminate many of the discounts Commissaries provide. Overall, a military family stands to lose a total of $2,970 of Commissary savings per year if the fiscal year 2015 proposal is adopted. According to the fiscal year 

2015 PB, for the system to survive, prices will have to be raised, but this could further alienate the customer base who can no longer afford its services. DECA operates 243 stores total, which includes 178 domestic locations. Commissaries overseas 

or in remote American territories are exempt from these cuts, but domestic bases 

will suffer a 20 percent price spike in goods and services based on the proposal. The 

military Commissary exchange and Moral Welfare and Recreation (MWR) programs 

are contributing factors to national defense by sustaining livelihoods and morale of 

its military and improving their quality of life. 

AUSN supports responsible spending; however, lowering Commissary subsidies 

causes several consequences. First, according to Title 10 U.S. Code, section 2485, the 

Commissary stores’ operations are, by law, required to reflect the cost of the items 

to DECA. Therefore, though price changes will vary, the prices in the commissaries 

are only set high enough to cover the recovered item cost. Also, built in Title 10, 

these savings are inherent features of the military Commissary system. Second, the 

savings commissaries provide is known to be a motivating factor in recruiting those 

who are willing to make the sacrifices associated with the military. Lack of proper 

compensation affects the military’s ability to retain and recruit, which adversely affects its readiness capability. Third, these are not only incentives for servicemembers but promises made to protect and benefit their families upon joining the 

military. By cutting benefits there is a direct reduction to quality of life and stability. These are services that our military families rely on to fulfill their needs. 

While it affects military preparedness and readiness, the cuts are a greater disservice to the men and women who have defended our Nation who are left wondering if their families are being properly taken care of on bases when they are 

gone. Finally, AUSN is a strong supporter of two pieces of legislation moving 

through Congress that have recognized the detriment of lowering subsidies. H.R. 

4215 and S. 2075, The Military Commissary Sustainment Act of 2014, both seek to 

prohibit any cuts in DOD’s funding for commissaries until a final report has been 

filed by MCRMC next year. These bills protect against unnecessary stresses that 

81 

military families might suffer due to a rise in cost of living and also provide proper 

focus to an important benefit area that is owed to servicemembers. 

COST-OF-LIVING ADJUSTMENT, RETIREMENT AND PROPOSAL IN DOD WHITE PAPER

The administration has already expressed a desire to wait on decisions regarding 

military retirement overhaul until the report from the MCRMC, established in the 

NDAA for Fiscal Year 2013, is submitted in February 2015. The MCRMC is currently meeting to review findings and come up with options for improvements to the 

current military compensation methodology. However, DOD released its own report 

in early March—‘‘Concepts for Modernizing Military Retirement’’—that proposes two 

slightly different design concepts for modernizing the military retirement system. 

The proposals, which AUSN appreciates and is interested in learning more about, 

would create a ‘‘hybrid’’ structure that combines a defined benefit plan (similar to 

the current system), a defined contribution component (similar to a civilian 401k 

plan) and supplemental pays. Secretary of Defense Chuck Hagel has also made it 

very clear that he would wait to ask Congress for any proposed changes in retirement until next year; however retirement, as well as the ongoing COLA debate, is 

important to mention. 

Ongoing Cost-of Living-Adjustment Concerns 

AUSN was pleased to see the 1 percent reduction of COLA established in the BBA 

of 2013 addressed with the partial fix in the fiscal year 2014 Omnibus Appropriations bill, passed January of this year, which exempted disabled veterans and survivors. Additionally, the passage in February of S. 25 covered the remainder of current retirees under 62. Despite this, there are still many concerns. First, while S. 

25 seemed to have largely bipartisan support, some Members of Congress were disappointed with the ‘‘funny money’’ additional 1 year of sequestration offset, saying 

the Federal Government was ‘‘robbing one part of the budget to pay another.’’ In 

particular, some Members of Congress argue, and AUSN agrees, that no one can 

be sure what the budget climate will be like for all Executive Branch departments, 

including DOD and the Department of Veterans Affairs (VA) after 10 years of sequestration (2013–2023), much less adding on one more for an 11th year of sequester cuts (to 2024). Other Members of Congress were displeased that the mandatory 

sequestered accounts being affected were unrelated to defense spending at all. As 

of now, it appears that there would be only two major DOD mandatory accounts 

that would be impacted by the extension of sequestration: TFL and DOD Retirement 

Contributions. This is, of course, relatively loose and subject to change, but at this 

point, those would be the primary accounts impacted by tagging on an additional 

year of sequestration to offset the COLA cuts from the BBA of 2013. Among the defense community, however, aside from the two mentioned mandatory accounts, it is 

hard to determine what money will be available given the uncertainty surrounding 

the future of sequestration. 

Second, there are additional concerns regarding how the final bill, S. 25, with the 

COLA repeal was negotiated. It appears that the deal was brokered among the senior leadership of the House and Senate and not vetted by major stakeholders such 

as the chairmen and ranking members of the House Armed Services Committee, the 

House Veterans’ Affairs Committee, the Senate Armed Services Committee (SASC) 

and the Senate Veterans’ Affairs Committee. During a 28 January 2014 hearing of 

this committee, both defense officials and SASC members stated that they were not 

consulted during negotiations on the budget deal, the 2013 BBA, and wanted to be 

part of the conversation in the future to exempt current servicemembers and retirees from any changes to the pension system. This continues to set what appears to 

be a dangerous precedent where the process of bringing legislation through committees is undermined by Senate and House leadership taking control of forming bills 

and putting them through each chamber for consideration. AUSN asks the committee to keep these potential consequences in consideration moving forward, as the 

full impact of these repeal provisions will surely manifest themselves in the coming 

years. 

Finally, while Congress has seemingly corrected the wrong that is the reduction 

in COLA calculations (for disabled Veterans and survivors through the fiscal year 

2014 Omnibus Appropriation bill and passage of S. 25 for all other affected current 

and future retirees for their COLA calculations), the impact this will have on future 

servicemembers, Veterans and retirees, moving forward is unclear. Although the 

COLA cut repeal provisions passed earlier this year will grandfather those who 

joined the Service before 1 January 2014, the BBA COLA cut will still apply to all 

those who joined after 1 January 2014. AUSN recommends that that the committee 

keeps an eye on the impact this will have upon the livelihoods of future retirees 

and Veterans who will be joining the Armed Forces after 1 January 2014. 

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Retirement Proposals and DOD White Paper 

Critics of the current military retirement system cite costs spiraling out of control, 

yet as the numbers have shown, retirement as a percentage of DOD’s total budget 

has remained steady for the past decade, while other portions of the DOD budget 

increase every year. Currently, the military retirement system is non-contributory, 

meaning that servicemembers do not have to pay into their own retirement plans. 

To qualify for retirement pay, servicemembers must serve at least 20 years, upon 

which they will be eligible to receive a fixed, inflation-protected lifetime annuity beginning immediately following retirement from service. Generally, members of the 

Reserve Component who qualify for retirement pay do not begin receiving benefits 

until age 60. All retired servicemembers can apply for a Survivor Benefit Plan 

(SBP), providing surviving spouses with a lifetime annuity. Retirees with servicerelated disabilities, who receive both disability compensation and regular retirement 

benefits, experience a dollar-for-dollar offset, also known as concurrent receipt. Programs such as the Combat Related Special Compensation and Concurrent Retirement and Disability Pay are in place to counter this offset. However, the sacrifices 

made by servicemembers are not found in the civilian sector, and this could have 

harmful effects on retention rates if servicemembers decide that the compensation 

they receive does not compare to the unique costs they face in their military careers. 

In both of the DOD’s proposed concepts, servicemembers would qualify for full retirement after 20 years of service, but the annuity would be reduced compared to 

current benefits, resulting in decreased compensation in the long-term. Both design 

concepts plan to offset this reduction by shifting some deferred compensation, payment received upon retirement, to current pay. The difference between the two is 

most apparent in how they actually dispense this pay. 

Concept 1 is a two-tiered system, offering partial benefits to members (both Active 

Duty and Reserve) after their retirement from service but during their employable 

years. It does not begin to pay members their full benefits, calculated with the same 

multiplier as the current system, until after the servicemembers reach their 60s. 

Concept 1 assumes that most servicemembers hold civilian jobs after retiring from 

the military, and therefore, are less dependent on their retirement at that time. 

This might be a harmful assumption, as not all military skills translate to the civilian sector. On the other hand, Concept 2 is a single-tier system that pays the member full benefits each year immediately following retirement from service. However, 

members of the Reserve component would not receive retirement compensation until 

reaching the age of 60, and the multiplier for calculating payments would be lower 

for all members than the one that is used today. 

Both concepts offer supplemental pay: continuous pay after 12 years and transitional pay at retirement, though the amounts would differ slightly. Both concepts 

include a 401K-type contribution-based component as well, the Thrift Savings Plan 

(TSP), for those who serve beyond 6 years. The proposal also calls for modifications 

in the method of calculating disability payments and the elimination of the dollarfor-dollar offset currently required for servicemembers who receive both retirement 

pay from DOD and disability compensation from the VA. This would make the concurrent receipt programs in place today obsolete. Additionally, survivors will also be 

able to receive unused funds in TSP accounts in exchange for a cut in annuity payments from the SBP. The cost for SBP premiums will also increase, from 6.5 percent 

to 10 percent, but this will enable the elimination of the offset when the survivor 

also qualifies for Dependency and Indemnity Compensation (DIC) from the VA. 

The report estimates that the modifications to the military retirement system could save DOD anywhere between $500 million and $2.7 billion for Active Duty 

members and about $200 million for members of the Reserve component. The 

timeline for visible DOD savings is uncertain and will depend on the rate at which 

current servicemembers, who are grandfathered into the current retirement system, 

retire, are paid out and then are replaced by the new servicemembers receiving benefits based on the new system. While overall payouts to retired servicemembers will 

be less under both new proposals than in the current system, the inclusion of TSPs, 

continuation pay and transition pay offset some of the reductions in benefits. AUSN 

appreciates and acknowledges this thoughtful proposal as well as the concept of receiving a payout sooner, which could prove more valuable to some servicemembers, 

as could the opportunity for growth in the TSP accounts, which guarantee retirees 

compensation. 

AUSN is also pleased that the white paper addresses areas of concern such as 

the SBP and DIC offset, concurrent receipt for disability and retirement pay and 

the Integrated Disability Evaluation System. The proposal acknowledges that disabled retirees could have had careers worth more had they been able to continue 

on and earn more benefits in addition to regular pay. The proposed disability benefits would be greater than the current compensation, mostly due to the elimination 

83 

of the offset. However, other issues can be found in the details, such as the fact that 

to claim unused TSP funds and eliminate the offset from the DIC payments survivors would face an increase in SBP premiums and decreased pay-back. This could 

potentially devalue the benefit. 

Retirement Conclusion 

An effective modernization of the retirement system needs to ensure four things: 

that military careers are competitive with other opportunities in the job market, 

that promotion opportunities are available for young servicemembers, that retired 

servicemembers can enjoy a certain level of economic security and that there is a 

pool of experienced personnel capable of being recalled to Active Duty in the event 

of wartime or an emergency. 

AUSN is open to thoughtful dialog on retirement and recognizes the need to ‘modernize’ the current system. The 20-year benchmark has a proven tool useful for recruitment and retention; however, AUSN understands that providing more retirement options and/or a tiered system for certain retirement ‘packages’ that allow sailors to begin to receive compensation earlier in their careers may be better suited 

in the 21st century. Changes that ultimately improve the military retirement system for servicemembers and lead to cost-savings for DOD are welcomed by AUSN, 

provided that current servicemembers are grandfathered into the system into which 

they signed. It is important to keep faith with our men and women currently serving. Nonetheless, AUSN is mindful of lessons of the past, such as the REDUX reforms of the 1990s, where cuts to compensations resulted in harmful effects on recruitment and retention. Grandfathering the current servicemembers at the time 

did not mitigate the negative impact from REDUX, which had to be repealed a decade later, and AUSN asks that the committee also be mindful of the results from 

these changes in the past. 

TESTIMONY CONCLUSION

The Association of the U.S. Navy understands that a good, thorough and honest 

look is needed in regards to the future of military compensation and benefit programs for our current and future force. However, we firmly believe that this must 

be done in a way that doesn’t inhibit the recruitment and retention within our military. Many of these proposals are already being looked at by the MCRMC to examine and send to lawmakers a report on recommendations for establishing a new set 

of pay, compensation and benefits for our future forces. The MCRMC has not yet 

finished its mandated duties and investigations, yet DOD is moving forward with 

an aggressive set of compensation changes in its proposals within the fiscal year 

2015 budget. With an extension on the report going into 2015, and a forthcoming 

preliminary report in May 2014, the Commission itself is still holding hearings, 

open and closed door Executive sessions, listening to testimony and gathering expert 

advice. AUSN’s own Vice-Chairman of the Board, MCPON Jim Herdt, USN (Ret), 

has already testified in a public hearing before the Commission in November 2013, 

in an Executive session in March 2014 and has met with Commission staff many 

times throughout the year. Consequently, it seems rather premature to be taking 

action to change compensation, benefits and retirement when a proper analysis 

being done by the MCRMC is incomplete and such a detailed report with recommendation will not be shown until at least 2015. AUSN has been very pleased 

with the open dialog the MCRMC has had with Military and Veteran Service Organizations (MSO/VSO) and expects their report to reflect many of the thoughtful discussions on these issues being discussed in today’s hearing. 

Finally, while the COLA cut issue has been extremely important to AUSN and 

our members in the past few months, with its ability to affect the finances of a multitude of retired and current servicemembers, there is uncertainty about how the 

COLA reduction impacts our future servicemembers after 1 January 2014. Those 

who have signed up and joined the Armed Forces between 1 January 2014 and 

when S. 25 passed, 13 February 2014, will still see their COLAs reduced when they 

retire before the age of 62. A ‘‘breach of faith’’ with our servicemembers argument 

can be made to that effect and will be a future consequence moving forward. In addition, an argument can be made that we will now have servicemembers who joined 

prior to 1 January 2014 receiving one type of retirement compensation serving with 

servicemembers receiving a different type of compensation, whereby having a scenario of ‘‘haves’’ vs. ‘‘have nots.’’ Again, this is an issue that may or may not manifest itself as a major problem, but concerns and questions on the impact of the passage of S. 25 still lie ahead. 

AUSN appreciates the work of this committee and this hearing which seeks to 

look into how the future of our military compensation system will be sustained to 

reflect the current needs of our military. AUSN stands ready to be the ‘‘Voice for 

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America’s sailors,’’ abroad and upon their return home, and looks forward to working with Congress, the Navy and DOD on serving our Nation’s sailors, veterans, retirees, and their families. Thank you. 

Chairman LEVIN. Thank you so much, Admiral. 

General McKinley? 

STATEMENT OF GEN. CRAIG R. MCKINLEY, USAF, RET., 

PRESIDENT, AIR FORCE ASSOCIATION 

General MCKINLEY. Thank you, Chairman Levin. I agree with 

my colleagues to thank you for your great service to our Nation. It 

has been nothing short of exceptional. Thank you. 

Chairman LEVIN. Thank you. 

General MCKINLEY. Ranking Member Inhofe, members of the 

committee, thank you for staying so late with us today. It has been 

a long day but a very educational day. 

I will try to hit the wave tops because I know we have some 

questions from you and we would like to hear those. 

On behalf of the Air Force Association’s (AFA) 100,000 members 

and our chairman, George Muellner, I would like to thank you and 

the entire committee for your support of our Active Duty, Guard, 

Reserve, civilians, retirees, and veterans of the Air Force, their 

families and survivors, and for the significant concern and effort 

you have put forth for our national security. AFA is grateful for 

your unwavering commitment to the men and women who defend 

our Nation and appreciate the priority Congress has given personnel issues in the past decade. 

We also acknowledge the increasingly difficult choices before our 

Nation. It is an honor to be here with you and my colleagues. I 

know we are all committed to the defense of this Nation, to those 

who serve and have served and their supporting loved ones. 

Our airmen and retirees deserve every dollar they earn. However, as you have heard today, personnel compensation costs continue to climb at unsustainable rates, and for the Air Force, we 

have a much smaller force. If not addressed, they will consume 

much of our combat training and modernization spending over the 

next few decades. 

We along with the other associations believe that the sequestration provision of the BCA of 2011 is destroying military readiness 

and endangering national security. It has normalized a dangerously low level of defense spending, constrained defense decisionmakers, and this new normal has created an unhealthy competition for resources within DOD’s base budget. 

I will cut to the chase. I believe we can never pay a military 

member enough for his or her willingness to risk their life for this 

Nation. However, we can ensure military members are competitively compensated to enable us to retain the All-Volunteer Force. 

Thanks to increases in compensation and benefits since 2001, our 

military members are compensated equivalently with their civilian 

counterparts when all benefits are included. 

To conclude, with last year’s grounding of 13 combat squadrons, 

lost opportunities for real-world training, and numerous course 

cancellations, to include our premier Red Flag exercise, our Air 

Force is at a crossroads. Sending airmen out to any contingency 

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without the best training and equipment we can give them could 

imperil the mission and jeopardize lives. This is unacceptable. 

Our members, stakeholders, and indeed our airmen are committed to keeping faith with the American people by providing 

them with an Air Force that is capable, ready, and resourced appropriately for the future. 

Thanks again for inviting us over here today. I look forward to 

your questions. 

[The prepared statement of General McKinley follows:] 

PREPARED STATEMENT BY GEN. CRAIG R. MCKINLEY, USAF (RETIRED) 

Chairman Levin, Ranking Member Inhofe, on behalf of the Air Force Association’s 

100,000 members, I’d like to thank you and the entire committee for your support 

of our Active Duty, Guard, Reserve, civilians, retirees, and veterans of the Air Force, 

their families, and survivors, and for the significant concern and effort you have put 

forth for our national security. 

We are grateful for your unwavering commitment to the men and women who defend our Nation, and appreciate the priority Congress has given personnel issues 

in the past decade. We also acknowledge the increasingly difficult choices before our 

Nation. 

It is an honor to be here with you, and my fellow colleagues. I know we are all 

committed to the defense of the Nation, those who serve and have served, and their 

supporting loved ones. 

Our airmen and retirees deserve every dollar they earn. However, as you have 

heard today, personnel compensation costs continue to climb at unsustainable rates, 

and, if not addressed, they will consume our combat, training and modernization 

spending over the next few decades. 

We in the Air Force Association believe the sequestration provision of the Budget 

Control Act of 2011 is destroying military readiness and endangering national security. It has normalized a dangerously low level of defense spending, constrained defense decision-makers and this new normal has created an unhealthy competition 

for resources within DOD’s base budget. 

We are facing an even greater hollowing of the military as we strive to meet national security needs in a very dangerous security environment. 

We believe this is a paramount national security issue. We urge lawmakers to end 

the political stalemate over taxes and entitlement spending and agree to a compromise resolution that will replace sequestration. Otherwise we will be forced to 

endure further manpower cuts aircraft reductions and fewer new aircraft to replace 

the aging fleet—creating not only dangerously low readiness levels, but a diminished ability to recover a sufficient state of readiness to meet the continuing challenges of national security. 

We urge Congress to fund our military to levels enabling all components of the 

Armed Forces to be adequately manned, trained and equipped to effectively address 

the Nation’s security challenges today and tomorrow. 

No matter what the funding level is for Defense, we must honor our commitments 

to those serving today and to those who have served this great nation. Any changes 

to the current compensation and retirement system should include grandfathering 

the current force. 

We could never pay a military member enough for his or her willingness to risk 

their life for this nation. However, we can ensure military members are competitively compensated to enable us to retain the All-Voluntary Force. Thanks to increases in compensation and benefits since 2001, our military members are compensated competitively with their civilian counterparts, especially when all benefits 

are included. 

Changes to the military compensation structure should be based on a holistic assessment of the total compensation package, rather than piecemeal cuts. In fact, 

Congress should just as diligently examine the entire Federal employment and benefits system, as it has focused on our men and women in uniform. 

We are working with Secretary Hagel’s office to continue the dialogue about 

changes to the current system, and we have testified before the congressionallymandated Military Compensation and Retirement Modernization Commission. 

We support a compensation package for our All-Volunteer Force allowing us to recruit and retain the quality of Total Force airmen our national security demands. 

These are challenging times. The force is coming home from 13 years of war . . . 

actually 2 decades of continuous deployment since Operations Desert Shield and 

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Desert Storm, for the U.S. Air Force . . . to a nation that is struggling with pervasive 

financial crises. Yet . . . this Nation’s global national security commitments and obligations continue to increase in scope and complexity. 

With last year’s grounding of 13 combat squadrons, lost opportunities for realworld training and numerous course cancellations to include our premier Red Flag 

exercise, our Air Force is at a crossroads. Sending airmen out to battle without the 

best training and equipment we can give them could imperil the mission and jeopardize lives. This is unacceptable. 

Our members, stakeholders and indeed our airmen, are committed to keeping 

faith with the American people, by providing them with an Air Force that is capable, ready and resourced appropriately for the future. 

Thank you again for your support of our force, and for the opportunity to offer 

this testimony from the Air Force Association. 

I look forward to your questions. 

Chairman LEVIN. Thank you so much, General. 

Let us just do 5 minutes here. 

Senator INHOFE. Four. 

Chairman LEVIN. Four minutes. Okay, I take that suggestion to 

make sure we all have a chance to do this before 1 p.m. 

First of all, perhaps two of you have mentioned that the numbers 

that have been provided for us in terms of the increase in personnel costs as percentages of the budgets of the Services are not 

numbers that you think are necessarily on target. What we would 

do is welcome any or all of you on that subject or any other subject, 

but on that subject for the record. Take a look at those numbers. 

I think they are probably available to each of you. Tell us where 

you have differences from those percentages, if you do. Just for the 

record, that would be helpful to us. 

[The information referred to follows:] 


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INFORMATION SUBMTTED BY GENERAL GORDON R. SULLIVAN, USA (RET.) 


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INFORMATION SUBMTTED BY GENERAL CRAIG R. MCKINLEY, USAF (RET.) 


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INFORMATION SUBMTTED BY VADM JOHN B. TOTUSHEK, USN (RET.) 


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AUSN ENCLOSURE 1 


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AUSN ENCLOSURE 2 


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INFORMATION SUBMTTED BY VADM NORBERT R. RYAN, JR., USN (RET.) 


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MOAA ATTACHMENT


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Chairman LEVIN. I think many of us up here do not like sequestration. You have heard me and you have heard others say that it 

is an abominable way to budget. It was never was intended to take 

effect. 

We are going to be offering alternatives to sequestration. We 

have been talking about this now for a long time, working on alternatives for a long time, including frankly closing some of the tax 

loopholes in our law which do nothing in terms of productivity but 

are simply tax avoidance loopholes that I and many others believe 

should be closed. That would be part of an alternative. We also 

have to do something in the entitlement area as well. 

But all of the burdens so far of reductions have fallen on discretionary accounts. There has been nothing done on the revenue side. 

We have to, I believe, address that. I would hope that when we 

come up with a specific bill, that we will send it to you and your 

organizations and that you would then indicate to us whether you 

can support these kind of alternatives to sequestration because I 

happen to agree with Senator King who phrased it I believe earlier 

today about the fact that we talk a lot about getting rid of sequestration, but we have not done much about it. We put in effect these 

budget caps. Nobody else. We can do something to change them. So 

we will send you those proposed alternatives. 

Next would be the following, whether or not you could right now 

indicate which of these proposed changes in these personnel accounts are the most problematical, if you are able to prioritize 

them. I know you probably do not like any of them, and I can understand why. They all have consequences. But if you could very 

briefly indicate if you are able to say which of the ones that are 

in the budget proposal are the worst or the most problematical 

from your perspective. Why do we not start at the other end, but 

we will get to all four of you. Very briefly. I only have about a 

minute left. General McKinley? 

General MCKINLEY. Thank you, Mr. Chairman. 

I think from our membership’s perspective and that of our chairman, we felt that the COLA at 1 percent was a valid approach. As 

General Sullivan said, I think we need to look into the out-years, 

that we cannot sustain that over a period of time. 

TRICARE, commissary, and other issues obviously are a concern 

to our members. But none of them rose to the level of maintaining 

a strong and viable Air Force. I think if I could leave you with one 

point, members do not join the Service, at least the Air Force, for 

pay, benefits, and compensation. They join because of a patriotic 

duty to their Nation. Over time, we have seen adequate compensation provided to our military members. I think we need to look very 

carefully over the next 10 years, look at what the Congressional 

Budget Office is talking about in terms of the rapid growth in some 

of the programs like TRICARE and things like that. But overall, 

our members want to see a strong, viable, modernized, ready Air 

Force. 

Thank you. 

Chairman LEVIN. Thank you. 

Admiral Totushek? 

Admiral TOTUSHEK. We did a survey, as I said, and 90 percent 

of the respondents had a problem with something. The one that 

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was the biggest impact was the COLA actually for them. Second 

was TRICARE. The last was BAH. 

As far as the commissary is concerned, the thing that I kept 

hearing was there are efficiencies to be had, but I do not see a forcing function that is going to require DECA and the commissaries 

to take those efficiencies just instead of doing the easy thing and 

raising prices. Unless we have something in place for that, we are 

going to have that problem as well. 

Chairman LEVIN. Thank you. 

General Sullivan, do you have a priority list? 

General SULLIVAN. We did sign up for the COLA at 1 percent because we felt that General Odierno and Secretary McHugh could 

buy back readiness. We were less enthusiastic about the others. 

Our approach was to go with the COLA. 

Chairman LEVIN. Thank you. 

General Tilelli? 

General TILELLI. Sir, in a real sense, these structural changes 

that we are talking about are a reduction in compensation, earned 

benefits. To prioritize them prior to what we believe Congress’ intent was, the commission who is going to look at all of this, is preemptive. We can continue to piecemeal year on year benefits, compensation for retirees, servicemembers, survivors, and pretty soon 

you have created a volunteer force that is no longer viable. 

At this point, I support the commission and a true vetting of 

their recommendations before we prioritize anything. In a real 

sense, I believe waiting the year is very important to the men and 

women who serve to keep the faith with them. 

Chairman LEVIN. Thank you. 

I take it from your nodding your heads that when I talked about 

sending you proposals to get rid of sequestration, you indicated 

that your organizations would be willing to take a look at them. 

General TILELLI. Yes, sir. 

General SULLIVAN. I want to make one point. I did not sign up 

for every year capping pay. It was 1 year. 

Chairman LEVIN. I understand. I think that came through very 

clearly. Thank you. 

Senator Inhofe. 

Senator INHOFE. Mr. Chairman, one observation, two quick questions. I will not even take my full 4 minutes. 

First of all, we got into this mess because here we have 16 percent of the budget having to take 50 percent of the cuts. That is 

the problem that we have. It is one that is a political problem that 

we cannot seem to address. 

General Sullivan and General Tilelli, you said back on January 

28 that given the choice between compensation and strong national 

defense, strong national defense wins. I assume the other two of 

you agree with that? 

Okay. Here is the problem. I look at strong national defense. 

That is going to have to be modernization, training, and readiness, 

and that is where we are not keeping up. I am going to ask the 

four of you if you agree with the statement by Acting Deputy Secretary of Defense Christine Fox when she said our men and women 

are the first to say that they are well compensated, that DOD does 

not have money to maintain their equipment or supply them with 

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the latest technology or send them to get the training that they 

need and then they are being done a disservice. Do you agree with 

that? I do too. 

The last thing I would mention, would you all agree since we 

have this MCRMC that is supposed to report back February 2015, 

that it might be a little presumptuous to try to do something in 

this year’s NDAA that could constrain the commission with the recommendations that they are studying? They might have to undo 

something that we have done in order to come up with their recommendations. Do you agree with that? 

General TILELLI. Absolutely. I agree with that, and I would hope 

that we have the opportunity to vet that along with Congress as 

we look at it for our servicemembers. 

Senator INHOFE. Good. 

Thank you, Mr. Chairman. 

Chairman LEVIN. Thank you very much, Senator Inhofe. 

Senator Reed? 

Senator REED. First, let me thank you all for your great service 

to the Nation and to the men and women you represent. 

One of the issues here is looking ahead regardless of sequestration. Frankly, you are preaching to the choir. We have to get rid 

of sequestration. Even if we eliminate sequestration, there is a lot 

of analysis that suggests that growing personnel costs will continually erode training, modernization, and we know that is critical 

also. Echoing the chairman, we have to get a handle on these numbers. 

Today, we heard Admiral Greenert suggest that 50 percent of 

every dollar goes to personnel costs in the Navy. It is going to go 

up to 60 percent and then 70 in about a decade. I know a little 

enough about numbers to suggest it all depends what you are 

measuring. 

Admiral, you mentioned a 331⁄3 percent constant figure. Is that 

Active Duty service? Is that the fully discounted cost of a servicemember? 

Admiral TOTUSHEK. If you look over the last 30 years—and that 

is in my testimony for the record—at Total Obligation Authority as 

opposed to the cost of our men and women—and that is total cost, 

it is about 30 percent. It went up to about 33, but remember, over 

these last 10 years, we have increased the size of the force tremendously. You obviously are going to have larger costs, and the percentages pretty much have stayed the same. 

As General Tilelli said, we actually have seen a downtick now in 

the actual costs for DOD. 

Senator REED. We cannot settle it in the next 21⁄2 minutes, but 

this issue of the right metric, of the right measure, which we all 

agree upon, is going to be absolutely critical going forward. I thank 

you and will ask you again as we define what we are measuring 

that we are consistent so we have a baseline. That I think will help 

us a lot. 

Another issue here which we have all touched upon in our question and comments and the chiefs did also. I think we are of the 

vintage where we remember post support. I was shocked going up 

to the Navy base at Newport and having the commander, a relatively young captain, apologize to me because the grass would be 

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little longer because the contractors will not be here as often. I said 

‘‘contractors cut grass?’’ 

But what General Odierno and others suggested too is that if we 

do not get a handle on some of these costs—it is going to be mundane initially—you are going to see the old issue of 1 month not 

seeing your troops in a given month because they are cutting grass 

and painting rocks. That is not the force that we have trained 

today. These are superb professionals because every day we try to 

get every bit of training, every bit of—and that is a cost that we 

have to look at going forward. I do not have much time remaining, 

but I just want to put that one on the record too. 

But I thank you again for your service, your excellent testimony, 

and for what you do for the men and women who served and continue to serve. Thank you. 

Chairman LEVIN. Thank you, Senator Reed. 

Senator Sessions. 

Senator SESSIONS. I will just thank you all. I appreciate your 

contributions to this discussion. It is very important. We need an 

outside view from some former insiders, and I think that helps us. 

The BCA includes the sequester. It was passed in August 2011. 

We are projecting to increase spending over the next 10 years by 

$10 trillion. The BCA allowed it to increase by $8 trillion not $10 

trillion. But as Senator Inhofe said, half the cuts fell on defense. 

Particularly because it was so rapid, it becomes destabilizing, and 

I wish we could have done better. 

I one time proposed just increasing defense at 1 percent a year 

every year instead of going out—and other big cuts and going up 

at 21⁄2 percent a year, which we will soon be in track to do. 

Thank you all for sharing this. The debt threat to America is 

real, but we do not need to break the faith with the men and 

women who say ‘‘yes, sir,’’ and go to be deployed to the worst areas 

on the globe at great risk. 

Thank you. 

Chairman LEVIN. Thank you, Senator Sessions. 

Senator King. 

Senator KING. Very briefly, Mr. Chairman. 

I want to thank you gentlemen for joining us today and hope 

that you can stay engaged in this issue. One question is, are you 

being consulted? Have you been consulted by this commission? 

Have you had an opportunity to testify and provide your input? 

General MCKINLEY. Yes, sir, AFA has and we have also been 

consulted by DOD. It is very helpful. 

Senator KING. We certainly want that to continue and we want 

your good thoughts as we try to work through this. 

You understand the box that we are in. The Chiefs presented it 

very well, that if we do not make these changes, then we have to 

take the money from somewhere else. We do not have the luxury 

of saying, ‘‘oh, well, we will just add to the budget,’’ unless we are 

able to do something about sequestration. 

I appreciate the statesman-like view that you took, for example, 

General, saying that you understand that. It is a tradeoff between 

readiness, training, and compensation. 

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With that, I just hope you will stay engaged with us and help 

guide us through this difficult set of decisions. I appreciate your 

joining us here today. Thank you. 

Chairman LEVIN. Thank you very much, Senator King. 

We have received statements from outside groups and individuals, including from the following: the National Military Family 

Association, the Reserve Officers Association, and the Reserve Enlisted Association. They, and any other statements which may be 

submitted to us, will be made part of the record. 

Chairman LEVIN. We thank you for your service in and out of 

Government. 

We will stand adjourned. 

[Whereupon, at 12:58 p.m., the committee adjourned.] 

[The prepared statement of the National Military Family Association follows:] 

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[Questions for the record with answers supplied follow:] 

QUESTIONS SUBMITTED BY SENATOR RICHARD BLUMENTHAL

ROSOBORONEXPORT

1. Senator BLUMENTHAL. General Dempsey, I understand that 16 Mi-17 helicopters have yet to be delivered by Rosoboronexport to the Government of Afghanistan to fulfill the remainder of the current contract. If the contract were to be terminated before these helicopters are delivered, what is the termination cost? 

General DEMPSEY. Eighteen Mi-17 helicopters have yet to be delivered. Financial 

liability for termination of the contract by either party to the contract would be subject to negotiation. 

2. Senator BLUMENTHAL. General Dempsey, what is the cost of the current contract? 

General DEMPSEY. $552 million for 30 Mi-17s modified to a military configuration 

with U.S. and the North Atlantic Treaty Organization (NATO) standard cockpits, 

mission equipment and weapons; an initial spares package; and a 1-year warranty. 

3. Senator BLUMENTHAL. General Dempsey, how much money has yet to be paid 

to Rosoboronexport for the 16 remaining helicopters? 

General DEMPSEY. $171.3 million has yet to be paid. Advanced payments are 

made as manufacturing progresses with additional payment upon Mi-17 delivery. 

4. Senator BLUMENTHAL. General Dempsey, I understand that $120.0 million is 

spent each year on the repairs and maintenance for the Mi-17 helicopters owned by 

the Afghanistan security forces. How much of that $120.0 million is paid to 

Rosoboronexport? 

General DEMPSEY. The contract with Rosoboronexport is for procurement of aircraft, which does include an initial supply of spares and a 1-year warranty. The 

$120 million for repairs and maintenance are handled through contracts with U.S. 

contractors, specifically Northrop Grumman and Lockheed Martin. 

5. Senator BLUMENTHAL. General Dempsey, of the $120.0 million identified for repairs and maintenance this year, how much has been paid to date? 

General DEMPSEY. Approximately $70 million has been paid to Northrop Grumman and Lockheed Martin for repair and maintenance activities in Afghanistan this 

year. 

6. Senator BLUMENTHAL. General Dempsey, in addition to the Mi-17 and the RD– 

180, please identify all other contractual agreements—research and development 

(R&D), procurement, defense cooperation—between the Department of Defense 

(DOD) and any Russian manufacturer, government agency, or other Russian entity. 

General DEMPSEY. In addition to Mi-17 and RD–180, the United States is engaged 

with Russia concerning contracts in several areas, from small R&D research grants, 

water pollution engineering, supply procurements, to logistics support items (excluding fuel and construction), trucks, guns, laboratory equipment and supplies. One example includes the U.S. Prisoner of War/Missing in Action office’s agreement with 

the Russian Government regarding archival research in the Russian State Military 

Archives. Finally, United Launch Alliance, in addition to using the RD–180 engine, 

purchases Antonov aircraft flights from a private transport company based in the 

United Kingdom. 

PRESCRIPTION OPIATE USE WITHIN THE MILITARY

7. Senator BLUMENTHAL. General Odierno, General Welsh, Admiral Greenert, and 

General Amos, testimony presented by Brigadier General Norvell V. Coots, USA, at 

an April 30 hearing of the Senate Committee on Veterans Affairs indicated that in 

2011 over 26 percent of the Active Duty military force used some form of opiate 

medication. In 2013, over 24 percent of the Active-Duty Force had used opiate medication. I would like to gain clarity on these numbers. Over each of the past 10 years, 

what percentage of your respective Service has been prescribed an opiate medication 

at least once as covered by the previous list? 

General ODIERNO. The proportion of Active Duty Army servicemembers prescribed 

an opiate medication at least once in a year for the last 10 years is as follows: 

2004 - 21 percent 

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* It is possible 2004 data may overestimate prevalence in active duty due to error in source 

data that misclassified beneficiaries as sponsors (i.e. AD). 

2005 - 22 percent 

2006 - 25 percent 

2007 - 26 percent 

2008 - 26 percent 

2009 - 26 percent 

2010 - 27 percent 

2011 - 29 percent 

2012 - 29 percent 

2013 - 27 percent 

General WELSH. The percentage of Active Duty Air Force servicemembers prescribed an opiate medication at least once in a year for the past 10 years is as follows: 

2004 - 22 percent 

2005 - 22 percent 

2006 - 23 percent 

2007 - 24 percent 

2008 - 24 percent 

2009 - 23 percent 

2010 - 24 percent 

2011 - 24 percent 

2012 - 24 percent 

2013 - 23 percent 

Admiral GREENERT. The testimony provided by BG Coots was based on data compiled by the Army Pharmacovigilance Center (PVC) on the proportion of Active Duty 

members with at least one prescription for an opiate agonist or partial agonist. The 

proportion of Active Duty Navy servicemembers prescribed an opiate medication at 

least once in a year is: 

2004 - 27 percent *

2005 - 26 percent 

2007 - 25 percent 

2008 - 25 percent 

2009 - 26 percent 

2010 - 26 percent 

2011 - 26 percent 

2012 - 25 percent 

2013 - 22 percent 

General AMOS. The testimony provided by BG Coots was based on data compiled 

by the Army PVC on the proportion of Active Duty members with at least one prescription for an opiate agonist or partial agonist. The PVC has compiled 5 years of 

data for all Services from 2009 to 2013, and is conducting data analysis to provide 

a response to opioid medication use over the last 10 years. 

The proportion of Active Duty Marine Corps servicemembers prescribed an opiate 

medication at least once in a year is as follows: 

2009 - 26 percent 

2010 - 26 percent 

2011 - 26 percent 

2012 - 26 percent 

2013 - 25 percent 

8. Senator BLUMENTHAL. General Odierno, General Welsh, Admiral Greenert, and 

General Amos, over each of the past 10 years, what percentage of your respective 

Service has been prescribed an opiate medication for a chronic condition—whether 

physical pain or mental health—as covered by the previous list? 

General ODIERNO. Less than 1 percent of our forces are initiating chronic opiate 

treatment at any given year in the past 5 years. All soldiers receive a medication 

evaluation to determine deployment eligibility. This evaluation includes a review of 

prescribed medications. Soldiers who are prescribed chronic opiates require U.S. 

Central Command (CENTCOM) surgeon waiver to deploy. Since the release in December 2013 of Modification 12 to the CENTCOM Individual Protection and Individual Unit Deployment Policy, deployment waivers for chronic opiate use have 

rarely been approved. Those few exceptions tend to be cases of short deployments 

located at or near Medical Treatment Facilities and the low-risk condition of the soldier. 

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General WELSH. At the present time data analysis for opioid medication use over 

the last 10 years is being conducted. We currently have the last 5 years of data. 

Chronic opioid use is defined as cumulative use of 90 or greater days of use in 

a 6 month period for new users. This definition is in agreement with the Veterans 

Health Administration. The percentage of Active Duty Air Force servicemembers 

prescribed an opiate medication for chronic use in a year is as follows. 

2009 - 0.5 percent 

2010 - 0.5 percent 

2011 - 0.5 percent 

2012 - 0.5 percent 

2013 - 0.4 percent 

Admiral GREENERT. The Army PVC conducted data analysis to provide a response 

to chronic opiate medication use over the last 10 years for all Services. 

The Army PVC defines chronic opioid use as, ‘‘cumulative use of 90 or greater 

days of use in a 6 month period’’. Previously, the Army PVC defined chronic opioid 

use as, ‘‘cumulative use of 90 or greater days of use in a 6 month period for new 

users,’’ which resulted in a lower percentage of active duty being considered chronic 

opioid users. The proportion of Active Duty Navy servicemembers with any chronic 

opiate use in a year is as follows: 

2004 - 1.12 percent 

2005 - 1.14 percent 

2006 - 1.24 percent 

2007 - 1.22 percent 

2008 - 0.91 percent 

2009 - 0.81 percent 

2010 - 0.85 percent 

2011 - 0.90 percent 

2012 - 0.90 percent 

2013 - 0.79 percent 

General AMOS. At the present time the Army PVC is conducting data analysis to 

provide a response to opiate medication use over the last 10 years for all Services. 

We currently have 5 years of data. 

The Army PVC defines Chronic opioid use as, ‘‘cumulative use of 90 or greater 

days of use in a 6 month period for new users’’. This definition is in agreement with 

the Veterans Health Administration. The proportion of Active Duty Marine Corps 

servicemembers prescribed an opiate medication for chronic use in a year is as follows. 

2008 - 0.42 percent 

2009 - 0.42 percent 

2010 - 0.45 percent 

2011 - 0.51 percent 

2012 - 0.38 percent 

From 2008 to 2012, the average percentage of U.S. Marine Corps Active Duty 

Servicemembers prescribed an opiate medication associated with a chronic condition 

was 0.44 percent. 

9. Senator BLUMENTHAL. General Odierno, General Welsh, Admiral Greenert, and 

General Amos, what procedural measures have been implemented within your respective Service to mitigate risk with regard to prescription of opiate medication? 

General ODIERNO. Army Medicine uses best practices that are comparable to, or 

exceed, civilian programs, such as prescription drug monitoring to identify 

polypharmacy cases. Positive interventions include comprehensive medication reviews, sole provider programs, limiting the dispensed supply of medication, restricting high-risk patients to the utilization of one pharmacy, informed consent, use of 

non-drug treatment options, clinical pharmacist referrals, and patient and provider 

education. 

General WELSH. Current Air Force practices and programs designed to mitigate 

risk with regard to prescription of opiate medication include: development of comprehensive pain management policy, urinalysis testing, screening controlled substance prescriptions, Air Force Alcohol and Drug Abuse Prevention and Treatment 

and Drug Demand Reduction programs. Other provider specific programs include: 

‘‘Do No Harm’’ training for all prescribing providers, ‘‘Sole Provider’’ prescription restriction program, medication reconciliation, and the use of pain contracts for chronic pain patients. 

With the standup of the Defense Health Agency (DHA) and under the new governance structure of the Military Health System (MHS), a tri-Service/DHA working 

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group has been established to develop a standardized comprehensive pain management policy across the Services which includes a multi-disciplinary approach using 

non-traditional and holistic methods to control pain without or in conjunction with 

prescription medications. This group will develop policy for safe prescribing practices of opioids with tri-Service consensus to include guidelines for urine drug testing, requirements for opioid care agreements and consents, screening guidelines, 

specialty referral, and improved provider education on opioid therapy. In addition, 

the working group will align its efforts with the Defense and Veterans Center for 

Integrative Pain Management which develops consensus recommendations for the 

Air Force, Army, Navy, MHS, and Veterans Health Administration integrated pain 

management communities for improvements in pain medicine policies, practice, education, and research. 

Military treatment facility (MTF) pharmacies screen controlled substance prescriptions, review patient medication profiles, and use the Pharmacy Data Transaction Service (PDTS) to help identify potentially dangerous polypharmacy. PDTS 

monitors medication profiles from MTF, mail-order and retail pharmacy points of 

service. 

Admiral GREENERT. The Navy in collaboration with DOD has undertaken several 

actions to mitigate the risks of related to prescribing pharmaceuticals. Specifically: 

• The DOD Pharmacy Operations Division utilizes the PDTS, an online 

centralized prescription data repository, to automatically check new prescriptions against a patient’s computerized medication history from all 

points of service (Retail, Mail, MTF, and Theater) for possible adverse 

events or therapeutic duplications before the new drug is dispensed. 

• The MTF Prescription Restriction Program allows a provider or a nurse/ 

pharmacist, on behalf of a provider/multi-disciplinary team to restrict a 

patient’s access to controlled substances, or to exclude controlled substances or specific non-controlled substance(s) at mail order or a retail 

pharmacy 

• The TRICARE Pharmacy 1–1–1 Program allows a prescriber to limit atrisk patients’ access to controlled substances to one prescriber, and at 

only one pharmacy. 

• The Patient Centered Medical Home provides a comprehensive, integrated approach to primary care, to include treatment for acute and 

chronic pain. Incorporating a pain management program that collaborates with DOD and VA as well as provider specific training on pain 

management, the Navy looks at a holistic approach to patients needs including non-pharmacological therapies. In addition we have seven pain 

management centers throughout the enterprise providing therapeutic and 

invasive pain management care to Navy Medicine beneficiaries. 

• Lastly, the Navy Alcohol and Drug Abuse Prevention Office, part of the 

Navy’s 21st Century Sailor Office, has also developed the ‘‘Prescription 

for Discharge’’ campaign to educate sailors, marines, and their family 

members on the safe and proper use of prescription drugs. The campaign 

includes, tips for all Navy personnel on the safe and proper use of prescription drugs. Materials are available for distribution and display at 

Navy medical clinics, pharmacies, waiting rooms, barracks, and other locations; and resources are provided for Navy leadership, medical personnel, and drug abuse prevention personnel to present at safety stand 

downs, briefings, or community health fairs. 

General AMOS. The Marine Corps in collaboration with Navy Medicine and DOD 

has undertaken several actions to mitigate the risks related to prescribing opiate 

pharmaceuticals. Specifically: 

• Interactions and duplication warnings are communicated to the provider 

in real time during prescription entry via the Composite Health Care 

System. 

• Provider and patient education related to VA/DOD guidelines for providers prescribing opioids, Complementary and Alternative Medicine 

training and access which provide non-pharmacologic therapeutic options 

for pain management. 

• Medication verification and documentation in the medical record at every 

patient encounter. 

• Force Preservation Councils (FPC) provide a clear formalized process for 

units to identify at-risk marines and focus appropriate attention and resources to assist the individual. Use of opiate medications is a required 

reporting condition for the FPC. 

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• Marine Centered Medical Home (MCMH) provides a comprehensive, integrated approach to primary care, to include treatment for acute and 

chronic pain. The MCMH facilitates education of both the patient and 

his/her family on the etiology and management of acute and chronic pain, 

which may reduce the likelihood of disability, address the under-treatment of pain, and provide for individual tailoring of treatment plans. 

• The Marine Corps also capitalizes on a number of Bureau of Navy Medicine prescription restriction and opioid management programs and processes including the Navy Comprehensive Pain Management Program. 

10. Senator BLUMENTHAL. General Odierno, General Welsh, Admiral Greenert, 

and General Amos, what is your assessment of force readiness with regard to prescription opiate use? 

General ODIERNO. At the present time, the Army Pharmacovigiliance Center is 

conducting data analysis to provide a response to opiate medication use over the last 

10 years. We currently have the last 5 years of data, beginning with 2012. 

Chronic opioid use is defined as cumulative use of 90 or greater days of use in 

a 6-month period. The proportion of Active Duty Army servicemembers initiating on 

an opiate medication for chronic use in a year is as follows: 

2008 - 1 percent 

2009 - 0.9 percent 

2010 - 1 percent 

2011 - 1 percent 

2012 - 0.8 percent 

General WELSH. Force readiness is always our number one priority. Our ability 

to fulfill the readiness mission is not hindered by prescription opiate use. All personnel are medically screened prior to deployment, including any medication therapy they may be on. If servicemembers become ill or injured while deployed, their 

condition and treatment regimen, including medication therapy, are evaluated for 

any impact on their ability to perform the mission. 

We will continue to use and improve current programs and processes to appropriately treat patients and prevent and mitigate the impact of drug use or abuse 

on the readiness of the force. These programs include: development of comprehensive pain management policy through tri-Service working groups, urinalysis testing, 

screening controlled substance prescriptions, Air Force Alcohol and Drug Abuse Prevention and Treatment and Drug Demand Reduction programs. Other provider specific programs include: ‘‘Do No Harm’’ training for all prescribing providers, ‘‘Sole 

Provider’’ prescription restriction program, medication reconciliation, and the use of 

pain contracts for chronic pain patients. 

Admiral GREENERT. Prescription opioid use has been stable over the last 6 years 

in Navy. There are serious risks with opioid use to include the risk of misuse, abuse 

and diversion. Opiate use requires judicious management, education and monitoring 

to ensure appropriate and safe utilization. Our Active Duty servicemembers suffering with chronic pain are provided with interdisciplinary and collaborative pain 

management services. Furthermore, by consistently fulfilling all aspects of the 

Opioid Therapy Clinical Practice Guidelines, we are continuously assured that we 

are safely prescribing opioids for our Active Duty servicemembers who require pain 

care management and opiate prescriptions. 

Illegal use of prescription drugs, including opiates, undermines combat readiness 

and is incompatible with our standards of performance and military discipline. Accordingly, this past month we launched a new ‘‘Prescription for Discharge’’ campaign, designed to educate sailors and their families on the safe use of prescription 

drugs and on the health and career risks associated with misuse. Abuse of prescription drugs is a violation of the Uniform Code of Military Justice. 

General AMOS. Force Readiness is our mission. There are serious risks with opioid 

use to include the risk of misuse, abuse and diversion. Opiate use requires judicious 

management, education and monitoring to ensure appropriate and safe utilization. 

Our Active Duty servicemembers suffering with acute and chronic pain require 

interdisciplinary and collaborative pain management services. We are strengthening 

the patient-provider relationship in our Marine Centered Medical Homes to increase 

the effectiveness of pain management practices and standardizing the care delivered 

using Clinical Practice Guidelines. As we fulfill all aspects of the Opioid Therapy 

Clinical Practice Guidelines that include opioid care agreements, urine drug screening, assessment of contraindications, safe prescribing practices, facilitation of selfcare, patient education and more, we can safely prescribe opioids for our Active 

Duty servicemembers who require pain care management and opiate prescriptions. 

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Prescription opioid use has been stable over the last 6 years in the Marine Corps. 

The data does not support a concern for force readiness. 

QUESTIONS SUBMITTED BY SENATOR JOE DONNELLY

COMPENSATION

11. Senator DONNELLY. Admiral Greenert, in your answer to one of Senator 

Ayotte’s questions, you mentioned that an E–5 (6 years of service) with three dependents currently makes $64,300 and will make $76,000 in 2019, which would 

amount to a 4 percent loss in buying power. Please provide the breakdown of the 

pay of an E–5 and how the pay amounts were determined, to include where the 

basic allowance for housing (BAH) rate was determined, if this was factored into the 

pay. 

Admiral GREENERT. After my testimony, we discovered that the compensation 

amounts I presented for the notional E–5 with three dependents were calculated incorrectly; they used a commissary discount value for a sailor with only one dependent, which understated the calculated purchasing power. The correct amount should 

have been $66,071 for an E–5 today, $78,313 in 2019 (with no compensation reform), 

and $69,804 (with compensation reform). When corrected for inflation, $69,804 represents a 5.5 percent loss in purchasing power. Our methodology and analysis follows: 

Calculated purchasing power is composed of basic pay, basic allowance for subsistence (BAS), BAH, and the commissary discount, less TRICARE cost sharing. The 

notional E–5 has 6 years of service, three dependents, and is stationed in San Diego. 

Calculated purchasing power does not include any special and incentive pays that 

many sailors receive, such as Career Sea Pay or Family Separation allowance (for 

deployed sailors). 


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The table above makes clear that, absent compensation reform, a sailor’s purchasing power is expected to increase faster than the standard measure of consumer 

inflation, CPI. Because BAH is such a large component of sailor compensation, total 

purchasing power without reform is also expected to increase faster than civilian 

wages, as measured by Employment Cost Index (ECI). 

However, the traditional method to compare the purchasing power of nominal 

cash flows at different points in time is to discount using the CPI rate. Using the 

Congressional Budget Office (CBO) discount rate detailed above, the total purchasing power in 2019 for the notional E–5 including proposed compensation reforms and expressed in 2014 dollars, is $62,399, or, a 5.5 percent reduction in total 

purchasing power. 

12. Senator DONNELLY. Admiral Greenert, how was the analysis of buying power 

determined? Please provide the detailed analysis. 

Admiral GREENERT. See response to question 11. 

RETIREMENT PAY FOR GENERAL OFFICERS

13. Senator DONNELLY. General Dempsey, in 2007, Congress passed a DOD-sponsored proposal that increased retirement benefits for three- and four-star generals 

and admirals, allowing them to draw retirement pay based off the basic pay chart 

and not restrained by Level II of the Executive Schedule ($15,125.10 in the 2014 

pay chart). According to a USA Today article (January 9, 2014), this would mean 

that a four-star general retiring with 40 years of service would receive a pension 

of $237,150, when the base pay is only $181,501. Additionally, because time in the 

military academies counts towards the pension, a retired general could receive a 

higher pension. As you have considered changes to the military retirement system, 

have the Joint Chiefs given consideration to this issue? 

General DEMPSEY. While serving, general and flag officer basic pay is limited by 

Level II of the Executive Schedule. Once a general or flag officer retires, that limitation is removed. Retirement pay is based on the appropriate percentage of their actual basic pay. In some rare cases, this results in retirement pay that is greater 

than their capped pay while on active duty. 


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Time at military academies does not count towards pension except in rare cases, 

such as prior service. Date of entry at military academies does determine (in most 

cases) the retirement system that applies to a military member. For graduates of 

a Military Academy with no prior service, the date they entered the Academy is 

called the DIEMS (Date of Initial Entry to Military Service). Academy graduates 

who entered the Academy prior to, but graduated after, September 8, 1980, are 

under the final pay system. For those that entered after that date, the high 36- 

month system applies. 

We do not object to review or recommendations regarding retired pay for general 

and flag officers. However, because of the complexity of the military retirement system, any proposal for change should be part of a holistic, system-wide review under 

the congressionally established Military Compensation and Retirement Modernization Commission (MCRMC). 

14. Senator DONNELLY. General Dempsey, if a general officer or a flag officer has 

over 40 years of service, does the retirement multiplier increase to calculate over 

100 percent of base pay? 

General DEMPSEY. Under the Final Pay and High 36-month retirement systems, 

the retirement multiplier is calculated by multiplying 2.5 percent and the number 

of years of the member’s active service. At 40 years, the retirement multiplier is 100 

percent. For the few officers who retire with over 40 years of service, the retirement 

multiplier is over 100 percent. 

15. Senator DONNELLY. General Dempsey, what would be the implication on the 

retentions of three- and four-star flag officers if the 2007 provision was eliminated? 

General DEMPSEY. We do not object to review or recommendations regarding retired pay for general and flag officers. However, because of the complexity of the 

military retirement system, any proposal for change should be part of a holistic, system-wide review under the congressionally established MCRMC. 

QUESTIONS SUBMITTED BY SENATOR KELLY AYOTTE

UKRAINE

16. Senator AYOTTE. General Dempsey, in your professional military judgment, is 

it in America’s national security interests to deter a Russian invasion of eastern 

Ukraine and to do all we can to help Ukraine protect its territorial integrity and 

sovereignty? 

General DEMPSEY. America’s national security interests are aligned with an independent, sovereign and stable Ukraine, firmly committed to democracy and respect 

for human rights, minorities, and the rule of law. DOD will continue efforts to support this end state. 

17. Senator AYOTTE. General Dempsey, in a conventional battle against each 

other, how do Ukrainian forces compare with Russian forces in terms of size and 

capabilities? 

General DEMPSEY. [Deleted.] 

18. Senator AYOTTE. General Dempsey, what lethal assistance would best help the 

Ukrainian military in the event of a conventional invasion of eastern Ukraine? 

General DEMPSEY. The United States aim is to encourage a diplomatic resolution 

of this crisis. Our continued desire is that Russia will move its forces back to garrison and cease such destabilizing activities on Ukraine’s border. Lethal assistance at 

this stage could be counterproductive and would have very limited utility in deterring Russia from further military actions. 

19. Senator AYOTTE. General Dempsey, what lethal assistance has the Ukrainian 

Government requested from the United States? 

General DEMPSEY. As of 12 June 2014, Ukraine has requested small-arms, ammunition, anti-tank and air defense systems, armored vehicles, combat support equipment, and logistical equipment from NATO and the United States. 

20. Senator AYOTTE. General Dempsey, what, if any, lethal assistance has the 

United States provided to the Ukrainian military? 

General DEMPSEY. As of 12 June 2014, to the best of my knowledge, we have not 

provided any lethal aid to Ukrainian forces. 

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We continue to assess the conditions under which we would provide lethal support 

to Ukraine. Limited lethal assistance at this stage would not deter Russia. Russia 

could use even limited U.S. military assistance as a pretext to conduct further destabilizing activities with respect to Ukraine. 

21. Senator AYOTTE. General Dempsey, in your professional military judgment, 

would providing anti-tank and anti-aircraft weapons to the Ukrainian military decrease the likelihood that Putin would undertake a conventional military invasion 

of eastern Ukraine? 

General DEMPSEY. President Putin’s ultimate objectives for Ukraine are unknown. 

We are working through diplomatic and military channels to ease tensions and dissuade further Russian interventions. 

22. Senator AYOTTE. General Dempsey, what military training is the United 

States providing the Ukrainian military? 

General DEMPSEY. Over the years we have developed a routine training and exercise relationship. We are in contact with the Ukrainian Minister of Defense and the 

Armed Forces to assess future training requirements. 

23. Senator AYOTTE. General Dempsey, can the United States provide more military training to the Ukrainian military? 

General DEMPSEY. We are in the process of assessing Ukraine’s training and capacity needs to best support its requests for military training. 

24. Senator AYOTTE. General Dempsey, if the United States can provide more 

military training to the Ukrainian military, what specific training would you recommend? 

General DEMPSEY. Ukraine’s newly elected government will greatly influence its 

military training requirements. Their specific needs include defense in depth, intelligence-operations fusion, campaign planning, strategic leadership, operational level 

logistics, and interoperability with law enforcement agencies. 

GENERAL OFFICER RETIREMENT PAY

25. Senator AYOTTE. General Dempsey, the 2007 National Defense Authorization 

Act made significant changes to the pay authorities of flag officers. The 2007 legislation provided incentives for senior officers to continue serving by extending the basic 

pay table from a cap at 26 years to providing an increase in longevity pay out to 

40 years of service. According to a January 9, 2014, USA Today report, using 2011 

numbers, the 2007 pay table changes could result in a four-star officer retiring with 

38 years of experience receiving $84,000 more per year in retirement than previously allowed (63 percent more). The 2007 changes not only increased longevity 

pay for senior officers but also allowed senior officers retiring with 40 years of service to receive 100 percent of their Active Duty pay. Unlike the cap on annual pay, 

there is currently no cap on retired pay for these senior officers. Was the purpose 

of this legislation to encourage combat experienced one- and two-star admirals and 

generals to continue to serve during a time of war? 

General DEMPSEY. The legislation provided greater incentive and more appropriate compensation for individuals who the Services retained beyond 30 years of 

service. At the time of the change, with the exception of cost of living increases, 

most O–9s and O–10s were serving for over a decade without adjustments in salary 

or retired pay. The changes provided consistent recognition across an individual’s 

entire career, not just the first 26 years. For certain highly-skilled officers and warrant officers, as well as general and flag officers, the impact of the changes has increased leadership experience and allowed the Services to retain highly-skilled senior leaders. 

26. Senator AYOTTE. General Dempsey, do you believe this program is still necessary given the fact that we have withdrawn from Iraq and we are withdrawing 

most of our troops from Afghanistan? 

General DEMPSEY. I believe we benefit from senior leaders who are more experienced. That said, moreover, although our conflicts in Iraq and Afghanistan are nearing a point of ‘‘normalization,’’ the security challenges facing our Nation are significantly increasing. In my judgment we will need more not fewer experienced leaders 

to operate at the strategic level. I do not object to review or recommendations regarding retired pay for general and flag officers. Because of the complexity of the 

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military retirement systems, any proposal for change should be part of a holistic, 

system-wide review under the congressionally-established MCRMC. 

27. Senator AYOTTE. General Dempsey, what is the justification, if any, for keeping this in place? 

General DEMPSEY. I believe we benefit from senior leaders who are more experienced. The current legislation provides deferred compensation, in the form of retired 

pay, based upon rank and position. Prior to the 2007 legislative changes, O–9s, O– 

10s, the Joint Chiefs and combatant command commanders were compensated without recognition of varying experience or responsibility, while on active duty and 

upon retirement. 

However, I do not object to review or recommendations regarding retired pay for 

general and flag officers. Because of the complexity of the military retirement system, any proposal for change should be part of a holistic, system-wide review under 

the congressionally-established MCRMC. 

28. Senator AYOTTE. General Dempsey, is DOD recommending the repeal of this 

provision? Why or why not? 

General DEMPSEY. We do not object to review or recommendations regarding retired pay for general and flag officers. However, because of the complexity of the 

military retirement system, any proposal for change should be part of a holistic, system-wide review under the congressionally-established MCRMC. 

IMPACT ON JUNIOR ENLISTED SERVICEMEMBERS

29. Senator AYOTTE. Admiral Greenert, the Military Officers Association of America (MOAA) estimates that the family of an E–5 would experience a loss of nearly 

$5,000 in purchasing power annually if the current military compensation proposals 

are enacted. In the hearing, when I brought this to your attention, you stated that, 

‘‘they [E–5] get about a 4 percent loss in buying power as a result of this. That’s 

about $2,500, not $5,000.’’ Please explain the difference between the figure MOAA 

calculated and the figure DOD calculated. 

Admiral GREENERT. We used the below methodology to analyze a notional sailor’s 

buying power as a result of our proposed compensation reforms. That sailor’s total 

loss is approximately $3,700, or 5.5 percent. 

The 5.5 percent calculation reflects one amendment since the hearing. After my 

testimony, we discovered that the compensation amounts I presented for the notional E–5 with three dependents were calculated incorrectly. We used a commissary discount value (one factor among several used in our calculation) for a sailor with only one dependent, which understated the calculated purchasing power. 

The correct amount should have been $66,071 for an E–5 today, $78,313 in 2019 

(with no compensation reform), and $69,804 (with compensation reform). When corrected for inflation, $69,804 represents a 5.5 percent loss in purchasing power (approximately $3,700). 

Calculated purchasing power is composed of basic pay, BAS, BAH, and the commissary discount, less TRICARE cost sharing. The notional E–5 has 6 years of service, three dependents, and is stationed in San Diego. Calculated purchasing power 

does not include any special and incentive pays that many sailors receive, such as 

Career Sea Pay or Family Separation allowance (for deployed sailors). 

158 

The table above makes clear that, absent compensation reform, a sailor’s purchasing power is expected to increase faster than the standard measure of consumer 

inflation, consumer price index (CPI). Because BAH is such a large component of 

sailor compensation, total purchasing power without reform is also expected to increase faster than civilian wages, as measured by ECI. 

However, the traditional method to compare the purchasing power of nominal 

cash flows at different points in time is to discount using the CPI rate. Using the 

CBO discount rate detailed above, the total purchasing power in 2019 for the notional E–5 including proposed compensation reforms and expressed in 2014 dollars, 

is $62,399, or, a 5.5 percent reduction in total purchasing power. 

Æ 


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