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Thread: BAH Changes???

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    BAH Changes???

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    January 13, 2014

    Big changes to BAH?

    New allowance could combine housing, food subsidies, eliminate 'with dependents' rate

    By Andrew Tilghman
    Staff writer

    Defense officials are considering doing away with Basic Allowance for Housing in favor of a new “locality allowance,” according to several officials familiar with the plan.

    Unlike BAH, which is linked to average rental housing costs in various areas, the new allowance would be linked to the cost of living in the areas where individual troops are assigned.

    The concept under discussion in the Pentagon also would eliminate Basic Allowance for Subsistence, offering troops a combined tax-free stipend on top of basic pay that would vary by paygrade and location, officials said.

    Preliminary proposals also suggest scrapping the “with-dependents” rates under the current BAH program, moving instead to a simpler, flatter benefit that makes no distinction between single troops and those with families, officials said.

    The locality allowance concept is gaining traction at a time when top Pentagon officials have been blunt about their desire to carve long-term savings from the $20 billion spent annually to cover the off-base housing costs of about 1 million service members.

    The proposal remains in its early phases, too early to spell out in detail what the impact might be for individual troops or for the Pentagon’s budget at large. Moreover, experts say, saving money may not be the primary motivation for changing the current allowance system.

    “Yes, you could save money, but a more important question is: Is there an arguably more sensible way to set these allowances that truly reflects the cost of living? Could we do it better?” said Beth Asch, a military personnel expert with the Rand Corp. think tank who recently completed a study on locality allowance that was commissioned by the Pentagon.

    “The devil is going to be in the details of how it is done,” Asch said. “The impact on pay would depend on how it was implemented.”

    Thinking long term

    Officially, the Pentagon will not even acknowledge the locality allowance proposal. Lt. Cmdr. Nate Christensen, a spokesman, stressed that there are no immediate plans to change policy and noted that any substantial change will require congressional approval.

    “The department is not drawing up a proposal to eliminate BAH and replace it with a ‘locality allowance,’ ” Christensen said. “Furthermore, BAH is grounded in law, and the department would need new legislation to change how we set/pay BAH.”

    Nevertheless, the concept appears to have some high-level support inside the Pentagon. It was outlined in a confidential recommendation that the Defense Department drew up last year for the Military Compensation and Retirement Modernization Commission, which is conducting a broad study of military pay and benefits.

    The Pentagon’s underlying recommendations to the commission were not released publicly, but several officials familiar with those recommendations spoke to Military Times on condition of anonymity.

    In addition, Pentagon personnel officials sought to flesh out the details of how a locality allowance might work in practice. Last year, shortly after the budget cuts known as sequestration became law, military officials ordered the study from Rand, technically known as a “proof of concept.”

    It concluded that a locality allowance is a viable alternative to the current BAH and BAS system, Asch said, adding that the study will soon be released publicly.

    Since sequestration took hold last year, top military officials repeatedly have said that the BAH program is a target for budget cuts. They plan to propose potential changes next month along with DoD’s fiscal 2015 budget request.

    Officials said other changes under consideration include leaving the current BAH program in place while asking service members to pay some portion of their housing costs out of pocket, as they did until the late 1990s.

    Winners and losers

    At this point, it’s too early to declare who may win or lose if DoD pushes forward with a locality allowance.

    But an early assessment suggests that such an allowance would benefit officers, in part because their BAS is comparatively low under the current program, so eliminating that would harm them less.

    Moreover, senior officers may be slightly more likely to be assigned to high-cost-of-living areas and thus benefit from a locality allowance, Asch said.

    As a result, such an allowance could affect retention, if only slightly, the Rand study concluded.

    “We found that, for enlisted, there would be some small negative retention effect, and for officers, there may be some positive effect,” Asch said.

    Those effects would have no impact on the military’s ability to meet mission requirements, she noted.

    If the retention issue grew into a concern for military leaders, they could use special pays and incentive pays to help reshape the force, Asch said.

    To ease the impact on individual troops, DoD could seek to adopt an allowance that does not save money initially but would result in slower growth and some savings in the future, said Todd Harrison, a budget expert with the Center for Strategic and Budgetary Assessments, a Washington think tank.

    “You could combine these into one single thing called a locality pay and do it in a way that is budget neutral,” Harrison said. “What they may be thinking is ... combine them, and that’ll grow in the future at a slower rate. That would save you money.”

    Seeking simplicity

    One advantage of a locality allowance would be simplification of the military compensation system, Harrison said.

    “Right now, it is just too complicated for someone to figure out how much they are really being paid,” Harrison said.

    Many troops feel underpaid because they often focus on their basic pay and fail to consider all of their allowances as part of their pay package.

    Replacing both BAH and BAS with a single allowance would make it “easier for folks to understand, and easier for folks to make comparisons with other opportunities that they might have,” Harrison said.

    Yet defining the cost of living might be a challenge in practice. One former DoD official who is familiar with the locality allowance concept said pinpointing housing costs is relatively easy, but defining cost of living may prove contentious.

    For example, should troops with spouses expect to be compensated for assignment to remote areas where their spouses are less likely to find work? Should DoD seek to save money by curtailing locality allowance in highly desirable places such as Hawaii, which many troops will request regardless of the locality allowance?

    Also unknown is whether dual-military couples assigned to the same location would each receive a full allowance, or if one would get a partial allowance. Under BAH, dual-military couples without dependents usually each receive the full BAH rate for their respective paygrade. For dual-military couples with dependents, the higher-ranking member draws BAH at the with-dependents rate and the lower-ranking member receives it at the without-dependents rate.

    Another potential challenge: what to do for the several hundred thousand troops who live in barracks and other military housing. Rand highlighted that as a key issue and suggested one option is to provide those troops with a partial locality allowance, Asch said.

    Privatized housing questions

    A big potential stumbling block for overhauling BAH is the possible impact on privatized housing. Since the 1990s, DoD has signed contracts to turn over thousands of on-base housing units to private companies that promise to remodel, repair and maintain those homes in exchange for receiving a steady stream of service members’ BAH payments.

    Those companies depend on BAH payments as their primary source of revenue, and any substantial reduction could result in fewer renovations, fewer amenities or longer wait times for maintenance.

    In some areas where BAH rates have fallen in recent years due to plummeting housing prices, those companies have reduced some services, claiming that making their own debt payments would be impossible otherwise.

    A total of more than 200,000 homes have been privatized, according to DoD.

    “Various long-term policies to address possible BAH decreases remain under discussion,” according to a DoD report on privatized housing sent to Congress almost a year ago.

    The current BAH program that pays for 100 percent of rental housing expenses — based on local market data — dates to 2005 and is a high-water mark for housing allowance fluctuations that date back decades.

    In the 1980s, the payment known as Basic Allowance for Quarters, or BAQ, was intended to cover about 65 percent of total average rental costs. In the 1990s, the out-of-pocket threshold drifted upward to about 80 percent.

    And at the turn of the millennium, amid concerns about retention and lagging military compensation, Congress passed a law creating the modern BAH system. Over the next five years, average payments rose, in theory, to cover 100 percent of average rental housing costs for all troops in all locations.

    Government models

    The federal government offers a “locality pay” to civilian employees, a percentage added to basic pay. The amount is linked to a job’s location, ranging from 28 percent in New York City to 14 percent in most rural regions.

    That concept is not a model for discussions about a military locality allowance. For one thing, the civilian model is calculated on the variance in local wages, while the military’s proposal would be based on cost of living.

    Also, civilian locality pay is taxable, while the discussions of a military locality pay stipulate that it would be tax-free, as BAH and BAS are now.

    And while civilian locality pay is defined as a percentage of base pay, Rand suggested the Pentagon ultimately could draw up specific dollar figures for each paygrade and location.

    Military housing allowances can make up a far higher percentage of a service member’s total compensation than civilian locality pay does for federal employees.

    For example, BAH for junior enlisted troops can amount to 30 percent to 50 percent of total monthly pay, compared to officers whose housing allowance may make up about 15 percent to 30 percent of their pay.

    Harrison cautioned against taking too much money from housing allowance coffers because that cash flow is highly valued by most troops. Harrison and CSBA conducted an independent survey of troops and found that they value cash today far more than deferred or in-kind benefits, such as commissaries or a promise of future health coverage after retirement.

    “Cutting cash compensation is what is going to hurt the most — that is what’s going to make troops the least happy,” Harrison said. “Cash compensation, to include basic pay and allowances, would be the last thing I’d cut, because it’s giving [DoD and taxpayers] the best value for every dollar spent.”
    Additional Facts

    See the 2014 BAH rates
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    Let's be honest; Okinawa is not Japan.

    I get so irritated when I hear about the billions of $ that are saved by reducing military benefits.

    It's billions of $ taken away from service members.

    Cut it somewhere else, where it is actually a "savings" and not a pay reduction in pay
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    I actually am kind of okay with a combined BAH/BAS type of allowance. Fully based on rank and locale. However, what I do not agree with is getting rid of the 'with dependents'. Those with dependents have greater costs associated. Or maybe it needs to be 'with children' instead of just vague 'with dependents'. Because a single airman or even a married airmen can live in a 1 bedroom apartment, whereas an airman with a child would need at least a 2 bedroom... and a 2 bedroom costs more, not just for rent, but in utilities as well.

    That's where i'd draw the line. I think there needs to be a 'with children' and 'without children' distinction simply because having kids costs more. Now, I know some will be like 'they chose to have kids, yadda yadda yadda'.. but we also didn't choose to move some craphole of a town that costs a ton to live in either.

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    I suppose it wouldn't be so bad if you know, there weren't horrible HORRIBLE defense and other government waste all over the place.
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    I am fine with getting rid of the with dependent. She is required to do the same work, in the same location, whether she is single or has 10 kids.

    I would love to see a comparison chart of the current rates v. the new proposed rates.
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    I'm cool with removing the with dependents part. Yeah it would suck and mean less money for us but I get it. It will be interesting to see how the BAS stuff works out though.
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    I've always thought that the "with dependent" thing is silly, so I have no problem seeing that go. Having a wife costs more than not (though of course she may work); having two kids more than one, three more than 2, 6 more than 5, whatever. But since those are personal choices, I don't think we should pay people more for them any more than we pay people more if they *choose* to have expensive hobbies or cars or travel habits, or whatever. People should be responsible for funding their own choices and lifestyles, and family size falls firmly in that category.

    Other than that, as the article said, whether I could support this depends on how it is done.

    I will say that right now, those who live in high COL areas seem to pay for it, literally, as compared to those in cheap areas. BAH helps close the gap in higher housing costs, but in a city like San Diego, gas costs more, food costs more, car registration costs more, etc. And the service member eats those higher costs. I've long thought that pay should go down and then every location should have COLA, much like is done overseas, since the military claims to want to keep standards of living even regardless of location.

    It would be interesting to see how this plays out with military housing. Housing is a great deal for junior enlisted with large families. For filed grade officers with no or only one child, it is a serious rip off. And that's fine, as the point is sort of to make sure everyone can afford a decent house so it makes sense to mostly provide them for those who'd have the most trouble affording them. But sorting this out in a way that works (especially with privatized companies wanting their $$) would be interesting. It seems like the'd have to set a rate for each house size and for each rank, and that would be what the service member pays out of his overall allowance.

    I think the article is intentionally divisive (which is typical for the Navy Crimes). It jumps to the conclusion that this would benefit Os and hurt Es, but without having any idea how it is implemented, that's impossible to say. WHen they set the rates, they could do so in a way that Es end up making slightly more than they do now, and Os less. It would all depend on the % of whatever # they use to determine COL that they then pay out to each rank. So I think they threw that tidbit in there to stir controversy and outrage.
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    to touch on the with dependent thing...

    I get that its a choice to have kids, just like its a choice to get married. But, none of us choose to move to new areas every 3-4 years. That's what BAH is for. To accommodate the cost of living in a new area. If we were to remain in one location, then we could easily budget and make whatever money we have work, or move as we choose to accommodate our living habits and choices. The military doesn't give us that luxury. We can just go find 'cheaper' places to live because we have kids (or a spouse). Sometimes cheaper is in the crime area and safety is an issue. Yes, a spouse COULD work, but they can't always. I just think its a touchy line if a single member gets the same BAH as a member who has spouse and children.

    However, on the same 'breath' there would be no 'advantage' for a single person to get married sooner than needed. It could potentially eliminate the 'contract' marriages that happen to get higher BAH and such.

    Wasn't it back in the day (like 30 years ago) where BAH didn't increase until you had like 3 or 4 children or more?

    If they can make changes in a way that someone doesn't get screwed then I could be on board. I just think with removing with dependents someone is going to get bent up about it, and feel they've been shafted. Granted, the difference between the two isn't more than $1000 in many locations, even less than others.

    IDK.. suppose i could go either way, if I had more information on how it would actually work.

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    I saw get rid of mil to mil both recieving BAH. Why do they both need it if they live together?
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    It could be worse.
    I think that this is going to go very far in solving the problem of over-retention that the services are facing and that in the future much fewer military members will choose the military as a career long term and will use it more as a stepping stone to other things.

    In fact, I think it would be smart to do this in other areas of government as well. Many types of financial assistance should be cut for dependents as well. This would save the feds tremendous amounts of money.
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