Defense Secretary Chuck Hagel answers reporters' questions during a Pentagon news briefing on the Strategic Choices and Management Review. (Defense Department)
To address long-term sequester cuts, the Defense Department is mulling numerous reductions that will affect civilian employees, including doing away with civilian employee pensions for military retirees who go back to work for the government as civilian employees.
The savings could be almost $100 billion over 10 years when combined with a halt to commissary subsidies and restrictions on the availability of unemployment benefits, Defense Secretary Chuck Hagel told reporters last week in summarizing the recommendations of the newly completed “Strategic Choices and Management Review.”
“A sequester-level scenario would compel us to consider these changes because there would be no realistic alternative that did not pose unacceptable risk to national security,” Hagel said.
As of March, more than 134,000 military retirees held civilian jobs at DoD, according to the Office of Personnel Management. For the Pentagon, axing civilian pensions would save money by reducing the amount it has to contribute into the Federal Employees Retirement System and the Civil Service Retirement System, said Larry Korb, who oversaw manpower issues as an assistant Defense secretary during the Reagan administration.
While Korb does not take the idea seriously, he sees it as an attempt by DoD to draw attention to a pension program that often lets soldiers, sailors and airmen retire from the military after 20 years, then return to DoD as civilian employees making more money for doing the same job.
Hagel did not say how aggressively DoD would seek to implement such a step or how much it could save. A Pentagon spokesman later declined to provide additional detail.
But the head of the National Active and Retired Federal Employees Association (NARFE) blasted the idea as “ill-conceived and completely unfair.”
“No civilian employee should receive lower total compensation because they served in the military, ever,” NARFE President Joseph Beaudoin said in a statement. “This proposal should be rejected completely as an option, even under the worst budget scenarios.”
The Defense Department is absorbing a $37 billion cut under this year’s sequester and could face a $52 billion reduction if a second round ensues next year, according to Hagel. He commissioned the strategic choices and management review in March both to help DoD prepare for another sequester and to shape military spending plans through 2019.
Other possible cuts include:
■ Consolidation of regional combatant commands.
■ Defense agency mission cuts.
■ Consolidation of information technology programs.
Because pay and benefits consumes roughly half of DoD’s budget, top officials will put together a package of compensation proposals for both military personnel and civilian employees that would begin to take effect in the 2015 budget.
Hagel’s announcement came as some 650,000 DoD civilians continue to face one-day-a-week unpaid furloughs that are supposed to add up to 11 days by the end of the fiscal year in September. But the Pentagon continues to look for money from other sources to reduce that total, Deputy Defense Secretary Ashton Carter said at a congressional hearing last week.
If surplus funds do turn up by September, “we have two priorities,” Carter told members of the House Armed Services Committee. “One is to restore maintenance and the other is to relax furloughs.” Should next year bring another sequester, however, reductions-in-force are possible, he reiterated.
In a July 31 memo, Carter also fleshed out Hagel’s earlier order for long-term cuts at the Office of the Secretary of Defense, the Joint Staff and the military services’ headquarters. Besides striving to reduce spending by 20 percent from 2015 through 2019, those offices should seek to cut “authorized government civilian staff” by the same proportion, Carter wrote.
Tighter budgets have so far scarcely dented the size of both civilian and military headquarters staffs. Some analysts question whether Hagel will be any more successful, particularly since he will likely have left the Pentagon long before 2019. In the memo, Carter said the cuts should be spaced out proportionally over the five-year period and also fall on contract services, information technology and other support functions.
Carter’s memo drew a scathing protest from the American Federation of Government Employees, which represents many DoD civilian workers.
Imposing “arbitrary cuts and focusing almost exclusively on civilian and military personnel are failed approaches to downsizing,” AFGE President J. David Cox wrote in an Aug. 1 letter to Hagel, adding that Carter should have included a specific target for contract employees cuts.