MILITARY UPDATE
Retiree pay for vets on disability targeted for veto
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, 49, enlisted in the U.S. Coast Guard in 1973 and served as an information officer from 1974-77.
By Tom Philpott
Senior administration officials say they will urge President Bush to veto the 2003 defense authorization bill if, as expected, it supports phase in of full military retired pay to roughly 80,000 seriously disabled retirees who also draw tax-free VA disability compensation.
The White House's Office of Management and Budget delivered the veto warning in a June 19 memo to Sen. Carl Levin (D-Mich.), chairman of the Senate Armed Services Committee.
Congressional plans to allow concurrent receipt of military retired pay and VA compensation for retirees with VA disability ratings of 60 percent or higher, said OMB, "is contrary to the long-standing principle" that no one can receive dual benefits for the same period of service. Also, it would raise mandatory federal spending by $18 billion over 10 years and retirement accrual costs for the Defense Department by $11 billion, forcing tradeoffs with war-fighting capabilities.
The House has passed a partial concurrent receipt provision. The Senate defense bill has similar language, but a different phase-in formula and an earlier start date, Oct. 1, 2002, versus Jan.1, 2003.
On the same day OMB warned of a veto, the Senate by voice vote amended the defense bill to lift the concurrent receipt ban altogether. This was more of a gesture, however, as senators had no plan to finance it. OMB estimates that ending the retired pay offset for all would raise mandatory federal spending by $58 billion and defense retirement accrual costs by $20 billion, over 10 years.
"Should the final version of the bill include either provision affecting concurrent receipt of retirement and disability benefits," warned OMB, the president's senior advisers "would recommend he veto the bill."
The seriousness of the veto threat for concurrent receipt specifically was hard to judge because OMB listed several reasons the Senate bill might be vetoed, including insufficient money for ballistic missile defense and continued financing for the Army's Crusader program, which Bush wants to kill.
One official not afraid to oppose concurrent receipt is David Chu, under secretary of defense for personnel and readiness. He told a group of defense writers May 30 that raising the pay of career disabled retirees could pinch money for more pressing needs such as improved housing for active forces. He said that Congress isn't addressing the right problem. The real question is whether "there is something wrong with our retirement system that, in some sense, does not properly compensate people.''
The "bargain the nation had" with these retirees, Chu said, "is that in return for your service you're going to receive the following pension and ancillary rights" such as lifetime healthcare. Full retired pay on top of VA disability pay was not part of the bargain, Chu said.
Disability pay originally was designed for veterans injured in service who could not serve full careers, he said. Deciding now to combine payments "is not necessarily the right answer," Chu said. "The two systems were constructed with very different purposes in mind."
During this critique, Chu referred to a new study on concurrent receipt that Congress had ordered last year. Two weeks later, in mid-June, Chu's office sent it to Congress. The independent analysis, prepared for the Defense Department by SAG Corp. of Annandale, Va., recommends no changes to the dollar-for-dollar offset in military annuities for retirees drawing VA disability pay.
"Obviously, everybody would like to have a bigger paycheck. That's natural human instinct," said Chu, a former Army officer. But government spending has limits, he said.
"If we dispense it in a way that really isn't answering any problem that's out there, but it's simply making everybody feel better by sending larger checks, (then) we don't have the money to do things like fix family housing or fix the barracks."
His argument that concurrent receipt will tap into defense dollars is correct only under the Senate's initiative, congressional sources said. With an accounting trick that one staff member refused to describe, the House provision would have the general Treasury, rather than the Defense Department, be responsible for making extra deposits in a retirement accrual account each year to cover higher future costs tied to partial concurrent receipt. The Senate plan assumes the Defense Department would cover that tab, $11 billion through 2012.
"This is not free," said Chu. "Buddha is not raining cash on the federal government. If we start paying the accrual charges behind this, which we will do under current law, that means barracks I don't get to fix. And having had the privilege of touring many barracks, even renovated ones, they ain't all so great. So this is not just a theoretical let's-be-nice-to-everybody issue. This is a question of how do we use the nation's limited resources."
Next week: The SAG Corp. report and reaction from service associations.
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