Military Pay raises for 2009

[mickeyd]

I received this interesting email from MOAA. I was unaware of how military pay raises were worked.

The Department of Labor's Bureau of Labor Statistics released the quarterly Employment Cost Index (ECI) changes on October 31, 2007. The ECI measures employee pay growth in the private sector and, by law, is the standard for military pay raises.
The ECI measured the last quarter's private sector pay growth at 3.4%. That means -- unless the Administration or Congress chooses to pick a different number -- active duty, National Guard, and Reserve members will get a 3.4% raise in January 2009 (yes, 2009).

Why does the 2009 pay raise have to be projected this far ahead of time? Unlike retired pay cost-of-living adjustments (COLAs), military pay raises aren't automatic or mandatory. They have to be budgeted for, and the funds have to be appropriated. The Pentagon is preparing the FY2009 budget right now, so October 2007 is the latest they can wait for ECI data to set the 2009 raise.

 

[Nords]

I received this interesting email from MOAA. I was unaware of how military pay raises were worked.

I think they linked pay raises to ECI in the early-mid 1990s to achieve parity with civilian pay scales. Over the last decade there've been even bigger raises at certain ranks (E-5 & E-6, O-3 & O-4) and lots of bonus pay for career-oriented technicians & officers (some Army O-3s are currently eligible for $35K bonus pay).

The biggest improvement, however, has been in housing allowances. As home values & rental markets have risen, the housing allowances have risen at least that fast to go from 85% of a servicemember's off-base expenses to 100%. Even if markets start to sag back down, it's going to be very hard to get away with comparable cuts in military housing allowances. I'd rather have a tax-free boost of a few hundred housing bucks over a taxable pay raise any year.

I remember there was considerable fuss over last year's pay raise because federal civil-service pay is somehow linked to either the military pay raises or the ECI. I don't remember the details-- anyone here recall the issue?

IIRC this is the first time in three years that my spouse's military pay raise has exceeded my retiree COLA. It kinda sucks the motivation right out of those drill weekends...

 

[samclem]

I'd rather have a tax-free boost of a few hundred housing bucks over a taxable pay raise any year.

Agreed, and the housing costs had really outstripped the housing payments before this was addressed. It was the right thing to do. OTOH, if that money had been put into pay raises instead, retirement checks would be bigger.

 

[Nords]

Agreed, and the housing costs had really outstripped the housing payments before this was addressed. It was the right thing to do. OTOH, if that money had been put into pay raises instead, retirement checks would be bigger.

When we bought our first Hawaii home the mortgage was $1894/month on two O-3 housing allowances. Remember the basic allowance (BAQ) plus a variable use-it-or-lose-it supplement (VHA)?

When we both promoted to the O-4 big bucks, that use-it-or-lose-it provision encouraged risky behavior. Faced with losing all of our extra housing allowance at our new paygrade, we refinanced from a 30-year mortgage to a 10-year mortgage with a $2631.97 monthly payment. We'd keep the extra allowance money and pay off the house faster. How could we lose? After all we expected to spend the rest of our careers in Hawaii and it was the only way to keep getting the higher allowance.

I remember those numbers so well because a year later we were transferred to San Diego as the Hawaii real estate market was crashing. Our "better" choice was renting out the house, and we never got more than $2000/month. I wrote three years of checks while contemplating those numbers (and the needs of the Navy's assignment officers) but we eventually clawed our way back to Hawaii.

Sometime during that period the BAQ & VHA system was replaced by BAH and there was no more use-or-lose. We lived under our allowances and banked the difference to lay a pretty solid foundation for ER.

So instead of a bigger retirement check we ended up with a bigger ER portfolio.

Having paid off that first house made all the difference when spouse discovered our current "dream house". I'm 47 years old, and the 7+ years that we've been in this home is my longest at the same address...