MILITARY UPDATE
Cost of re-enlistment bonus soaring, audit shows
Military Update focuses on issues affecting pay, benefits and lifestyle of active and retired servicepeople. Its author, Tom Philpott, is a Virginia-based syndicated columnist and freelance writer. He has covered military issues for almost 25 years, including six years as editor of Navy Times. For 17 years he worked as a writer and senior editor for Army Times Publishing Co. Philpott, 50, enlisted in the U.S. Coast Guard in 1973 and served as an information officer from 1974-77.
By Tom Philpott
With wolves at the door, who cares what the shotgun cost?
That kind of logic might explain why the media, fiscal watchdog groups and White House accountants aren't howling yet over a new congressional audit report that shows the size and number of military re-enlistment bonuses have soared over the past five years.
In fiscal 1998, the military paid $246 million in Selective Re-enlistment Bonuses (SRB), a tool to avoid shortages in critical enlisted skills. By fiscal 2002, which ended Sept. 30, SRB spending had tripled, to $789 million.
From 1997 through 2001, the last year for which official data are available, the number of enlisted personnel getting an SRB increased from 23,000 to 59,000. So many bonuses were paid that, over that period, the services spent $240 million more on SRB than Congress appropriated. Service officials, presumably, shifted money from lower priority accounts.
The General Accounting Office, auditing arm of Congress, studied the re-enlistment bonus program for almost a year. In a report released in late November, GAO attributed much of the rise in SRB costs of late to service mismanagement and lax oversight by the Department of Defense.
Defense officials disagree. Though they credit the GAO for some useful suggestions, Defense officials reject the call to tighten the criteria the services use to determine what job specialties get bonuses and in what amounts. The stakes are too high, it seems, to crimp re-up incentives now.
DOD officials argue that the war on terrorism will inevitably increase pressure on the services to keep people with the right skills. The department opposes any move that places more constraints on the SRB program.
GAO recommended that Defense officials validate service processes for setting bonuses and adopt more centralized control of bonus offers. But the DOD charges that would inhibit the services' ability to retain personnel with the skills needed meet emerging readiness challenges.
Portions of the GAO report are highly critical. The report notes, for example, that the Defense Department canceled its instruction to the services on managing the SRB program in 1996, just about the time bonus costs began to rise. Air Force SRB costs rose tenfold in six years, from $26 million in 1997 to $256 million in 2002. Both the Air Force and Navy haven't followed their own criteria for establishing bonus eligibility. As a result, many more personnel are qualifying for bonuses, GAO said.
In 1997, only 13 percent of members re-enlisting received a bonus. Last year that figure was 37 percent. Typically, half of the SRB is paid up front and the remainder in annual installments over the length of new contract. In 1997, the average initial payment was $5,500. By 2001, that average was up 45 percent, to $8,000.
But service officials point to other factors to explain the sharp growth in SRB in recent years. One is the downsizing of U.S. forces during the 1990s which forced a recruiting slowdown. A higher proportion of that smaller recruit population now must be enticed to re-enlist. Bonuses are a great aid.
Reserve retirement
Legislation to lower from 60 to 55 the age at which reserve retirees begin to draw annuities would be expensive and might encourage reservists to leave the work force at too young an age, said Thomas F. Hall, the new assistant secretary of defense for reserve affairs.
At a Pentagon press conference, Hall said he has thought a lot about lowering reserve retirement age. The Defense Department is studying the issue to be part of a report to Congress next year on ways to reform reserve compensation in light of the expanded role in national security for reserve and Guard forces since the end of the Cold War.
Lowering the start of annuities to age 55, Hall said, would benefit 92,000 reservists immediately and cost up to $200 million the first year. Costs would climb steadily thereafter.
Defense Secretary Donald Rumsfeld also has questioned the wisdom of lowering the reserve retirement age given that Americans are living longer than ever. Hall, former director of the Naval Reserve, retired from active duty in 1996 as a rear admiral. He was executive director of the Naval Reserve Association before being sworn in to his present post on Oct. 9.
Concurrent receipt
President Bush signed the 2003 defense authorization bill Dec. 2, which starts the 180-day deadline for Defense officials to write regulations, establish an application process, screen relevant files and begin paying the new Combat-Related Special Compensation (CRSC).
An unknown number of military retirees with 20 or more years of active service and combat-related disabilities will be eligible. June 1 is the likely start date for CRSC. The payments, in effect, will lift the ban on concurrent receipt for a fraction of retirees who now see a matching drop in retired pay for the amount they draw in tax-free disability compensation.
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