Defense Budget

The Defense Department's (DOD) budget request for fiscal year 1997 includes nearly $70 billion for pay and allowances for military personnel. This amount represents about 30 percent of DOD's total budget request. DOD projects that during the next five years, pay and allowances will remain about 30 percent of its total budget. This report (1) identifies the various pay categories included in the accounts, (2) describes the trends of those pay categories, and (3) determines how changes in the budget compared with changes in service force levels. GAO also discusses the reasons for some of the service trends and differences among the services.

GAO found that: (1) discounting for inflation by using constant 1996 dollars, there has been a close correlation since 1990 between the decrease in the active component portion of the military personnel accounts and the decrease in active military personnel; (2) specifically, the active component portion of the military personnel accounts is projected to decline between fiscal years (FY) 1990 and 1997 by 30 percent, the same rate of decline as active force levels; (3) about 85 percent of the FY 1997 military personnel accounts consist of five pay categories: (a) basic pay (51 percent); (b) retired pay accrual (17 percent); (c) basic allowances for quarters (7 percent); (d) subsistence (5 percent); and (e) social security tax payments (4 percent); (4) the payments in these and most other categories are requirements or entitlements by law; (5) the services have discretion over some types of compensation, primarily within the special pays category, but the total amount involved is a minuscule portion of the total military personnel budget; (6) because very little of the total military personnel budget is discretionary, it appears that savings in the military personnel part of the infrastructure would have to come from personnel reductions, a lowering of the grade structure, a restructuring of the military compensation and retirement system, or any combination thereof; (7) discounting for inflation by using constant 1996 dollars, the cost of each person in FY 1997 is projected to be about the same as it was in FY 1990; (8) however, per person costs remained about the same from FY 1990 to FY 1997 largely because a substantial decrease in the retired pay accrual category offset per person increases that have occurred in most of the pay categories; (9) there are marked differences in the services' budgets and per person costs for some types of special pay, which are intended to enhance the retention of skilled personnel, and for some incentive pays for hazardous duty; (10) special pays were estimated to cost $1.2 billion in FY 1997, and incentive pays were estimated to cost about $500 million for the same year; and (11) the Navy dominates the special pay category, and the Navy and the Air Force have the largest budgets for incentive pays.