For the past 10 years, military personnel have enjoyed an expansion of benefits unrivaled in the history of the nation’s military – salary, health care benefits, pensions, and special pay rates have all risen steadily in the post-9/11 era.

If the recently passed FY 2012 defense budget is any indication, the end of the Iraq war has marked a turning point in the military’s priorities. Rather than growing the force and providing incentives for recruitment and retention, this year’s budget appears to focus on trimming costs where it can, and matching steep post-war cuts in Army and Marine Corps end strengths with modifications to the benefits package.

Though for the past three years the topline amount has risen slightly, Russell Rumbaugh, co-director of the Budgeting for Foreign Affairs and Defense program at the non-partisan Henry L. Stimson Center, points out that the rate of increase has been essentially negated by the rate of inflation.

“We’re now three years into a flat budget,” said Rumbaugh. “What that means is, in real terms, the defense budget is eroding. We’re already in the drawdown. It’s already happening.” In the 2012 budget, while few benefits have suffered an outright cut, some have been frozen or leveled off – which, again, factoring inflation, will result an effective cut for active-duty, reserve, or retired personnel.

Policies behind the provisions of the 2012 budget are detailed in the National Defense Authorization Act for Fiscal Year 2012, which was signed into law by President Barack Obama on Dec. 31, 2011. Many of these provisions will have a direct impact on the bottom lines of active-duty or retired military personnel, including:

• An across-the-board 1.6 percent increase in military pay. The U.S. Code of Federal Regulations (Title 37, Section 1009) provides a permanent formula for an automatic annual military pay raise, indexing it to the annual increase in the Employee Cost Index. For six of the past eight years, Congress has added an additional .5 percent to this raise; this year, as in 2011, the legislature held itself to the indexing formula.

• An increase in TRICARE Prime annual enrollment fees. In a recent report titled “FY 2012 National Defense Authorization Act: Selected Military Personnel Policy Issues,” (www.fas.org/sgp/crs/natsec/R41874.pdf) the Congressional Research Service says that about 700,000 households, or 1.6 million beneficiaries, are enrolled in TRICARE Prime, the military’s HMO-style insurance plan. For working-age retirees, this year’s budget calls for modest enrollment fee increases for the plan, raising them by $30 annually per individual and $60 per year for families.

While modest, the fee increases are the first since the TRICARE program’s establishment in 1995, and Congress has authorized fees to be raised in future years by the same cost-of-living adjustment (COLA) applied to military retired pay. This is also modest, compared to the projected per capita increase in health care costs for Americans over the next decade, which is estimated at about 5 to 6 percent per year by the Centers for Medicare and Medicaid Services.

TRICARE’s 16 years without a fee increase, while the Pentagon’s health care costs have spiraled – tripling over the last decade – has been controversial, and they has become more so in a time of constrained federal budgets. As Todd Harrison, Senior Fellow for Defense Budget Studies at the Center for Strategic and Budgetary Assessments (CSBA), points out, keeping these health care costs artificially low for personnel has the potential to nibble away at other parts of the defense budget.

“Because fees are so low, it’s incentivizing working-age retirees to go on the government military health care system instead of taking health care from the private employer,” Harrison said. “So you want to raise the fee high enough that people won’t have that incentive. It saves DoD a tremendous amount of money that they can put toward better training and better equipment for our troops. That’s the tradeoff:  We’re either subsidizing health care for retirees, or we could use that money for better training and equipment for today’s forces.”

•  The conversion of the High Deployment Allowance (HDA) from mandatory to “authorized.” The HDA was enacted before 9/11, to provide additional pay – $100 a day in addition to other pay and allowances – to service members who are deployed for 401 or more days out of a 730-day span. This provision gives the Pentagon more authority to determine what is meant by ‘deployment’ in the context of HDA, and it seems unlikely that this determination is destined to become more generous.

• Expansion of the Wounded Warrior Careers Program. The authorization obligates funding to provide testing, assistance, and other services to help wounded warriors develop career plans and improve skills at 20 centers nationwide. The Congressional Budget Office estimates that the provision, if implemented, will cost $60 million from 2012-2016.
• Incentives for early retirement or voluntary separation. Several provisions have been included in anticipation of the coming force reductions, including:

•Extension of voluntary separation pay and benefits authority, which was set to expire on Dec. 31, to the end of 2018. The provision, for select enlisted personnel and officers who have served between 6 and 20 years, will reduce the need for involuntary separations over the next several years.

•Temporary Early Retirement Authority (TERA). This will allow certain service members to collect a reduced annuity if they are released after 15 years of service, but before serving 20 years.

•Voluntary retirement incentive pay – up to 12 months of basic pay – for a limited number of officers who elect to retire with 20 to 29 years of service.

•An expanded period – from three months to one year – that an enlisted member may be discharged early without incurring a loss of benefits.

 These are arguably just the first in a series of adjustments in personnel spending to come over the next few years. The national defense strategy outlined by Obama and Secretary Leon Panetta on Jan. 6 (http://www.nytimes.com/2012/01/06/us/obama-at-pentagon-to-outline-cuts-and-strategic-shifts.html?scp=1&sq=defense%20strategy&st=cse), while short on specifics, did ensure a “leaner” military, no longer sized “to conduct large-scale, prolonged stability operations” – though both vowed not to balance the budget on the backs of service members. Panetta ended his remarks, on the day the document was released, by addressing service members directly: “I believe the strategic guidance honors your sacrifice and strengthens the country by building a force equipped to deal with the future,” he said. “I have no higher responsibility than fighting to protect you and to protect your families.”