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Media Roundtable on Personnel and Readiness Issues

Presenters: Charles Abell, PDUSD (Personnel and Readiness)
December 23, 2002

Monday, Dec. 23, 2002 - 2:03 p.m. EST

(Media roundtable on personnel and readiness issues.)

Moderator: Thanks for coming this afternoon. This is our last roundtable of the year. We've had several last week, but we figure with the holiday season approaching us here that Monday is -- this is probably the last day we can squeeze out to get you into our briefing room.

Today we have with Charles Abell with us. Many of you know Mr. Abell, but you've probably know him in other capacities here in Defense Department before too. He now serves as the principal deputy undersecretary of Defense for as personnel and readiness, a position that he was nominated for on just this past November, November 15. He serves as the primary assistant to the undersecretary of Defense for personnel and readiness, providing advice to the secretary of Defense for total force management as it relates to manpower, force structure, program integration, readiness, reserve components, health affairs, training, personnel requirements and management -- including equal opportunity, morale, recreation, welfare, and quality of life matters. Mr. Abell is going to talk to you today kind of about the accomplishments that the personnel and readiness community have been able to do during the past year -- areas of recruiting and retention, human resource, strategic plans, review of the reserve component contribution to the national strategy and national defense, civilian best practices, health management, as well as family assistance issues.

So, with that, we have -- Charles, how long do you have for this?

Abell: An hour I think.

Moderator: Okay, good. So we will go for as long as you have questions or when we get to the top of the hour.

Abell: Thank you. If I could start off and run down a little bit of the 2002 from the personnel and readiness perspective. As we saw it, it was a good year for us, a good year for the services in our area of oversight.

Let me first start with recruiting and retention. All the services met or exceeded their recruiting goals, including the quality goals for the fiscal year that ended in 2002. All the services met or exceeded their retention goals as well -- again in all categories -- first term, mid-career and career -- and we are very proud of that.

We have developed and are implementing the human resource strategic plan, which is really comprised of three individual plans -- the military personnel policy strategy, civilian personnel policy strategy, and the social compact. These plans provide guidance and act as a road map for the Office of the Secretary of Defense and the services is developing policies related to military personnel policies, civilian personnel policy, and quality of life.

Our reserve affairs -- the assistant secretary for reserve affairs is completing a study directed by the QDR, a review of the reserve component contributions to national security. This is a look at how we have used the reserves, and the report will suggest ways to improve and enhance the contributions of our reserve components. It will provide a foundation for making recommendations for future use of our reserves, a little closer integration with the active component, ways that we might better reach talent in the civil sector. And we will introduce we'd call a continuum of service to look at probably new ways that reservists could contribute.

Our civilian personnel policy services have looked at the various demonstration programs and pilot projects that have been given to the Department of Defense to manage civilian personnel within the department, and have done a review of all of them, come up with a list of the best practices that are common to all of these various demonstrations and pilot projects. And shortly after the first of the year we will make the official notice that we intend to implement these best practices across all of these demonstrations and pilot programs. We also would look to these best practices as lessons to help us as we look towards how we might improve the management of the civilian personnel force across the whole Department of Defense.

Our reserve call-up -- we have called up about 103,000 -- 52,000 are still on active duty today. At the one year anniversary, most of those that were called up were demobilized, as you all know, about 14,000 -- we asked about 14,000 to serve for an additional year. I will tell you that we are working very hard to ensure that this cadre of 14,000 does not have to serve an entire year. The services are demobilizing as many as they can, and we have some other plans in place that will allow us to demobilize more shortly after the first of the year.

It was a busy year for P&R in the health care arena as well. We awarded three contracts this year -- one for the mail-order pharmacy, one for the retiree dental program, and one for Tricare overseas remote program. We also have seven more contracts that were prepared for reward in the first six months of 2003, including the big daddy of them all, the Tricare Managed Care support contracts in which we will compress the 12 United States regions down into three regions, and we hope -- believe -- fundamentally change the way we exercise the managed care option of the Tricare system. So we are looking forward to that, and those activities are the results of a lot of hard work for folks in the assistant secretary of Defense for health affairs and the Tricare management activity.

We also have implemented this year an employee assistance program. It's being tested in the Marine Corps, but it's also in use with the services recruiting agencies. And following the incidents at Fort Bragg, we were able to institute this employee assistance program there to help those folks. This is a 1-800 number where folks can call in and get assistance on everything from how to get the dishwasher repaired, to "Where can I take my pet?" -- to "Geez, we have some serious financial problems -- what should I do next?" -- very comprehensive, very detailed program, and we believe that it will be very helpful. We look forward to the results of the Marine Corps test to see whether we can implement this department wide. And of course it's a little more confidential for those folks who might be worried about confidentiality than appearing at some building on a military installation and going in to seek some assistance. Although those programs remain in place and very robust as well.

So those are the seven or eight things that are the major areas that P&R worked on this year. I would like to add one more I guess, and that is that we, as part of the secretary's review of all committees and boards and commission, we revamped the Defense Advisory Committee On Women and the Service, and reformed that group with 12 members and retired Marine General Carol Mutter as the chairman, so for a total of 13. And they have met once in December -- had a training session, got to know each other, began to organize themselves, and will meet again immediately after the 1st of the year for some briefings, and then they'll begin their work early in 2003.

So we had a good year in 2002. We are looking forward to a good year in 2003. And now I'd be happy to answer your questions.

Q: Can you tell us anything about initiatives in the 2004 budget that will affect personnel quality of life?

Abell: Well, there are of course a number of initiatives that we will submit with the 2004 budget. But since that budget has not yet been wrapped up nor approved by the president, I think it would be problematic for me to try and talk to you about the specifics that are in there.

Q: Let's try this a different way: What are your priorities for the coming year?

Abell: Well, we want to continue to look at the pay and compensation. We want to look at civilian personnel management practices to see how we can take those lessons learned from these best practices, and maybe apply those across the government. And we are excited about the results of this reserve -- review of how we use the reserve contributions to national security. And we look forward to being able to implement -- or, in some cases, seek statutory authority to implement the things we have learned as a result of that study as well.

Q: If I could follow up on that question, as you may have heard there was a story on the radio this morning out of Fort Drum about military families that are still living at or below the poverty line. And I wonder -- I mean, why is that still occurring, which is sort of a rhetorical question -- and what do you think needs to be done, and how are you going to address that sort of a thing in the budget?

Abell: I didn't see the story, so I --

Q: NPR this morning.

Abell: I'm not exactly sure what the thrust of it was. And we have measured military compensation against a number of standards, the most notable of which is the comparable civil sector pay. And I think the problem of the poverty level is that I can't define what the poverty level is. I know the federal government has guidelines, but I don't know what they used in this story. And my experience in dealing with the issue of food stamps is that it is largely a function of income and family size. And if that guides to the poverty level, I don't -- I would say then that it's sort of a multi-faceted, complex problem. But I don't know what this is, so I would -- I would stop there, I think.

Q: Look, for the last couple of years you've had across-the- board pay raises and then you've had targeted raises at a particular level. Would you expect to see that again in '04, or are the pay tables now about where you would like to have them?

Abell: The pay tables are not quite where we'd like to have them. Our recommendation would be to continue that for at least the near future.

Q: Continue -- (inaudible)?

Abell: The targeted pay raises, especially for the noncommissioned officer corps. The ninth quadrennial review of military compensation gave us a good foundation. It showed us how we might benchmark against the private sector. And for our grades of E-5 through E-9 it shows that we are not as competitive with the private sector as we might want to be. And of course, as you know, retention of those noncommissioned officers is key to our readiness and to our ability to prosecute the mission. So we would hope to continue that.

Q: What about the standard that was set I guess in 1999 of going for the overall raise, ECI plus a half percent? Are you committed still to ECI, and are you still committed to a half a percent? That is tying future pay raises, including the '04 raise, to the employment cost index which is wage growth in the private sector versus moving to an inflation-based pay raise.

Abell: The -- well, we are continuing to use the statutory requirement of ECI plus a half as our guideline. Of course for the last couple of years we have bettered that in a number of pay grades, because we were targeting against where we were -- had the greatest shortfall. I think our analysis will reveal that in some cases we are now paying folks more than their contemporaries in the private sector, and so it may be time to relook whether or not that needs to continue for all pay grades all the time. But of course when the Congress enacted the ECI plus a half, the purpose was to close that gap. And that's why they only put it in for the period from FY 2000 through 2006, and we are prepared to relook it at that time to see whether we had caught up or not. So it is the law of the land. We continue to use it as a guideline, and I think we'll be able to report to the that we have made good progress in some areas, and are still a little short in other areas.

Q: If I can just follow-up on that. Do you -- does that mean that you will wait to make any changes until 2006, or might you abandon ECI plus a half percent earlier than that, seek legislation to change that?

Abell: I think we still have to look at that. I mean, ECI plus a half remains the point of departure. It may well be that in discussions we would indicate that we are doing well enough in some pay grades, and in some years of service which equates to experience in the private sector to recommend a lower number, but we are not there yet.

Q: Personnel policies -- there's been an increasing thrust to privatize, outsource -- whatever you want -- and of course it's raising kind of significant concern. The Army has been most aggressive on it, but I assume that it remains your policy to outsource as many of the government jobs as possible?

Abell: I think our approach is that one must analyst the functions that are being performed today, and then determine whether that's a function that we need to perform in the future, and if so then make a further determination of whether this is a function that should best be done by military personnel, federal civilians, or could it be done by someone in the private sector. I don't think there's any sort of universal that we would apply to this. I think it all has to be done by function and by -- sometimes by geographic location within that function. So to say that we're -- that from the personnel and readiness perspective that we are trying to get rid of all these jobs or privatize all these jobs I think would be incorrect. We think that every job ought to be looked at, and then based on the mission and the requirements we ought to be able to determine how best to do that job -- assuming that it's still a valid function.

Q: Going back to the pay for 2003 for a minute, would it be fair to summarize the Bush position for 2003 as follows: military pay raises -- Bush administration will advocate ECI plus half percent as called for in the law, with the addition of targeted raises for some grades and years of service?

Abell: Well, that is what the Congress has passed for 2003. What the president will propose for 2004 is not yet decided.

Q: For 2004 -- I meant 2004. Is that fair to say, at least the base line will be --

Abell: Again, what the president will send to the Congress is unknown to me. I am talking here about what our recommendation to the secretary of Defense and then we would believe subsequently to the president would be, and what the decisions made are. It's too early to tell. They haven't been made.

Q: Well, all right, is it fair to say that your recommendation to the secretary of Defense and the president is as I stated for 2004? Or can you offer a little more detail about what you recommend for 2004? Is it your understanding decisions have not been made?

Abell: We stated with a baseline of ECI plus a half. We looked at where we stand by grade and years of experience against the private sector, and have recommended some targeting modifications based on that.

Q: What about the use of bonuses? The services all have been using -- I mean -- (inaudible) -- on reenlistment, target reenlistment bonuses to keep some of their skilled personnel. How does that fit in with your plans? It kind of distorts the pay table when some of these people are getting rather sizable bonuses for reenlistment. Is there some place where that instead of bonuses they can be fit into the pay tables?

Abell: I don't think it's incompatible at all. I think -- and I believe bonuses have an important place in our pay and compensation structure. The pay tables are for everyone, so a staff sergeant or a tech sergeant at 12 years of service has a certain expectation based on the pay table. Now, if that noncommissioned officer has a critical skill, then just the economics of the marketplace would say we would need to entice -- incentivize him or her to reenlist and stay with us. Sometimes that's not only for the skill. Sometimes that's in order to serve in a particular geographical location that's less than desirable duty. So that's what the beauty of bonuses are. It allows you to further narrow the audience to which you are appealing, and to craft a bonus system that allows you to fill those critical jobs or those hard-to-fill geographical assignments.

Q: In your opening statement you said the services met all their retention goals. Is that really true, again in the case of aviators, Air Force and Navy still missing their aviator retention goals?

Abell: When I speak of recruiting and retention, of course I speak of the enlisted force where one reenlists and so forth. I don't -- I think the Air Force would probably tell you that they did not retain as many commissioned aviators as they would like, but since officers don't reenlist it's not --

Q: Considered retention --

Abell: It is considered retention. I was referring to the enlisted force in which we all by the way have missed one service or another for the past couple of years. And the aviator retention problem continues to exist. I think that both or all the services, but especially the Department of the Navy and Department of the Air Force are doing great work in that regard.

Q: One problem with good retention is -- can sometime hurt upward mobility. You know, people aren't going out at the top -- end up getting a stagnation in the mid to upper NCO ranks. Is there anything -- do you think we are approaching that kind of problem, or is there any study under way to see whether there's a way around that?

Abell: We watch all those trends, and there is nothing that would alarm us to date. The I guess positive impact of meeting our retention goals is that the force structure and the personnel numbers line up, and the experience for 2002 was that most services hit at 100 percent or 101 percent or something, so it wasn't like they were way out of kilter in their numbers. So they are just about right on their plan. So I don't think at this point that's a problem. It could be if it was way out of kilter, but --

Q: The Navy, because it had good retention, better than expected retention, reduced its recruiting goals. Okay, that's fine for today, but somewhere down the line you have got -- your shortage of seagoing or young people coming up through the ranks. It's almost similar to what we did on the -- when they were downsizing and they stopped recruiting, and they ended up with a shortage of people in certain pay grades and seniority.

Abell: Could happen. The numbers aren't that significant at this point.

Q: A question about Tricare for life. There was I believe a reprogramming in '03, you underspent your budget by, what? -- three quarters of a billion dollars, thereabouts? And most of that money went to homeland security, as I understand it -- not very much of it went back into the military health system. Can you tell us a little bit about what the thinking was there, I mean why money that the Congress had initially intended obviously for health benefits in some form or fashion was redirected away from that area?

Abell: First, the good news is in FY 2002 the defense health program did not require a supplemental to get through the year. We were able to budget in a manner that allowed us to execute the year without seeking a supplemental. Part of that was that we did overestimate the cost of long-term care, custodial care, within the Tricare for Life benefit. So when that was identified, thanks to the Congress, which enacted some legislation that we had requested that allowed us to shape that benefit in a very effective manner, we didn't -- it didn't cost us as much as we had originally budgeted. So it wasn't that the Congress gave us extra in that regard and then we turned it away; it was the matter of what we budgeted we were able to implement the efficiencies that the Congress gave us, and thus we didn't need about that much money which the department has diverted to other uses.

Q: Let me try to rephrase the question.

Abell: Okay.

Q: I mean, we are constantly hearing stories about needs in hospitals, needs in clinics. You had a pot of money over here that was for Tricare that it turned out you didn't need -- you overbudgeted. So why didn't you apply that to other needs elsewhere in the military health system, as opposed to letting it go back or redirecting it to homeland security?

Abell: Well, I don't think any commander out there would tell you that he or she has enough money. But the fact of the matter was that these monies were diverted to the highest priorities of the department, and the defense health program completed the year on budget, and we viewed it as a success story.

Q: May I pick up on a question that was asked earlier? It was about the poverty level. Without actually getting into the issue of what is the exact poverty level, what would you say to those Americans and even those in the military who really are worried that the military is not making enough -- whether they are at the actual poverty level or not -- that too many are not making what they feel they should be making?

Abell: Well, that's very difficult for me to answer. I mean, I don't think I'm making enough, but I suspect you don't think you are making enough. But what is enough? I think we would have to look at not only what the monetary compensation is, but what the non-monetary compensation is, the value of the exchanges, the value of the health benefit, the value of the commissaries, the value of the many services that are available on base. And if those were factored in, it's my guess that the military personnel would do very well. Again, I am not familiar enough with the term "poverty level" to deal with it, but I go back to the days when we were intimately involved in the food stamp things, and it made a difference whether the individual was living on base and thus forfeiting the housing allowance but receiving his or her quarters and all their utilities free, but their cash compensation brought them to a level that qualified them for food stamps; whereas the same individual, if they lived off base, got the housing allowance, whether or not that actually covered their housing expenses would have had enough cash income to not qualify for food stamps. So that's kind of the analogy I am trying to draw here. But I have to warn you I don't know enough about the poverty level to tell you whether that works or not.

Q: But the first question you hear from many of the people in the military is, When are we going to get more money? -- because that's obviously one of their top concerns. And they again argue, well, the Bush administration promised that they were doing to do more when they came in.

Abell: And I believe the record shows that they have -- a pay raise in January 2002, which the president added a billion dollars which was used at targeting, and is 4.1 percent I believe in a couple of days from now, January of 2003. And again, our recommendation is that we continue that trend into 2004. So in addition to that -- I mean, we haven't talked about the activities to reduce the out-of-pocket expenses on the housing allowance. Those are going up at a rate that exceeds the original plan, because of a decision to close that gap, those out-of-pocket expenses for housing -- combine that with the efforts to provide privatized housing out there, the health care benefit -- all those things. I think we are more than competitive with our private sector counterparts, and that's where I am. I will have to review whatever this story is or emerging data is about the poverty level.

Q: Mr. Abell, could you touch upon a little bit -- the secretary of Defense has talked a little bit about perhaps transferring some low-density/high-demand jobs from the reserve components to active component. And is this part of your relook at how reserve components contribute to national defense?

Abell: Well, that certainly is a factor in there. How to deal with high-demand/low-density specialties is again one of those areas in which there's no universal or a solution. I mean, sometimes it's an equipment problem. Sometimes it's a people problem. Sometimes you have to look at it and say, Should we even be doing that thing, whatever it is, anymore? Or could it be done by a civilian, federal civilian, or could it be done by a contractor? So it goes back to the question on contracting out. It's an examination. And many of those we are looking at can we do it by moving some people from the reserves to the active or the active to the reserves, using the reserves in a different way? Others of them it's -- the solution may be in technology vice people. But each one deserves its own review.

Q: Well, in comparing ongoing missions today with the war against terrorism, are we talking about civil affairs folks? Are we talking about security people, MPs? Are we talking about engineers? What kind of MOSs are we talking about that you all have been looking at so far?

Abell: I don't have the list of all the HDLDs in front of me, and I suspect that each service would probably list them a little differently anyway. But they are the things -- I mean, security police are an overworked area -- whether it falls into the category of HDLD I don't know. We have the AWACS crew men who meet themselves coming and going. They clearly are. Some of the civil affairs specialties would certainly fall in that arena. I am sure there's others as well.

Q: Thank you, sir.

Q: If I could just -- a last question on this pay raise issue. The ECI, the employment cost index measures wage growth in the private sector. Beginning January 2000 there was a commitment for six years to close a vague pay gap by tying future raises to ECI plus a half percent. There's a -- I understand that the administration is looking at stopping that in 2004, and tying future raises not to the wage growth but to inflation, which would save them a lot of money. I am trying to understand -- wouldn't this -- isn't this an unbelievably mis-timed recalculation of military pay raises for the future with war about to start possibly -- potentially -- in Iraq? What's your sense?

Abell: Well, I read your article, Tom, and I have heard discussions from those who would make a recommendation that the pay raise in 2004 be linked by inflation by ECI. But those are, from my perspective here in the Department of Defense, they are voices making recommendations. We intend to make a recommendation as well. That will be adjudicated within the Office of Management and Budget recommendation to the president, and he'll make a decision -- all of that being future tense. So it's not possible for me today to tell you what will be in his budget, because it's not in his budget yet.

Q: I understand that. And just one final follow-up though. You've already said though that it does appear that the analysis shows some military people are overpaid. Can you say what ranks, what grades, what specialties might --

Abell: It's based on -- it's not a specialty-based thing. It's a pay table thing. I think it's safe to say that our -- most junior enlisted and our most junior officers are -- their pay is significantly better than the pay of their counterparts based on age and experience and education levels on the outside. Now, that's only at the entry level. Not long after you get in and become a journeyman that tends to get out of kilter a little bit. But for the 18-year-olds coming out of high school, we certainly are paying better than most of his colleagues who don't go -- who go off to the private sector and don't come into the military.

Q: The secretary ordered a study of the overall personnel policy as far as up-or-out -- the rotation of commands and billets, ticket-punching, the whole smear. Where are you all on that? And do you expect a report and some action next year, or is it still further out?

Abell: Some of that -- by the way, all of those are addressed in the various strategic plans that I mentioned, which are available on the website, if you wanted to go look at them. But some of those things take a fairly long time to mature, and we have got research going on to help us find out the best way to do it. But as you know personnel management laws that we have are complex, and so we have to be sure that we are not going to break something by making a change. But I hope to have some of it come out during the calendar year of 2003 -- may come out in the form of a legislative request to the Congress. There may be some policies that we can implement without seeking new legislative authorities. And some of the things that the secretary has asked us to look at are just going to take a little while longer in order to develop the whys and hows. You know, when we'd look at longer tours and longer careers, we have to say, What does that do to -- back to your question -- what does it do to promotion, what does it do to overseas assignments? If some people stay longer, does that mean some people stay less? And, if so, how do we deal with that? So those are all things that it's really -- it gets close to rocket science when you start dealing with that.

Q: Mr. Abell?

Abell: Yes, ma'am?

Q: May I talk about the readiness and just in general how would you assess readiness just speaking to the average American person as the U.S. may be heading toward war with Iraq?

Abell: I think our forces are ready for any mission they are assigned. I expect the commanders to receive their orders and execute them. All the indications that I've seen from the commanders are that they are ready. We have, as you know, some units deployed. They are more ready than those units who aren't yet deployed, but they have time to conduct that necessary training. So I am excited about where the U.S. military is today, and I fully expect them to be able to accomplish whatever the mission the president assigns them.

Q: You mentioned about I think 14,000 of the reservists who were called up -- extended beyond one year.

Abell: Right.

Q: Can you give us an idea if the president were to decide to send troops into Iraq, of those remaining 86,000 that did less than a year, or a year or somewhat less, how many of them would you expect would be called back here within the next few months so that their break would not be considered -- would not be very long?

Abell: Well, a great deal of the folks that were called up in response to the global war on terror were security people, and because we have been able to get more comfortable with the way we do security, to do it more efficiently -- that's what I mean by comfortable -- and we have been able to employ in some cases technology to help us replace demand, the person out there, we were able to let those folks go. Now, if we were to be called upon to do something else, one might expect that the requirement for security personnel would escalate again, even if just temporarily. So some of these people are probably going to get another call, but it is a -- it will be for a new mission. It will be to help us do something that we are not doing today, and my experience with these folks are that they will understand that and come willingly. But that's one of the reasons we are trying to get as many of these 14,000 as we can back off active duty so that we are not continuing to use these people all the time -- that they have got an opportunity to go back home. And we are trying to be sensitive to the individuals and their employers as we do that. We have got so far great support from employers out there, and we have had people approach us and said, "Gee, please don't send me home early, because my employer and I have got this worked out that I am not coming home till September -- so if you send me home before that, he and I are in a trick." So we try to accommodate that as well. But to your bottom line, some of these folks will be called back, but we've -- again, we are trying to -- the services are trying to do what makes the most sense out there to meet the mission needs.

Q: Civilian DOD pay raises -- what's your recommendation in 2004 for civilian DOD pay raises?

Abell: We actually don't get to recommend in that regard. That's a government-wide decision, and we execute. We have made some recommendations just to help our friends at OPM and OMB that we have found the targeted pay for the military to be so effective that we would recommend that they consider -- if not in '04, in the future -- looking at how one might target civilian pay. But, again, that's a free suggestion from us, and it's worth every penny they paid for it. So it's -- that's our input to them -- is that we have found it to be very successful for the military, and we would suggest and offer to be helpful to them in sharing our experience on the military side. But we don't get to participate in setting that number.

Q: Any special level or group of people that you would recommend they take a look at targeted raises for? Is it senior management? Entry level?

Abell: Well, again, this would take -- as we did with the military, it would take some analysis of where we are. And it may be that the civilian work force would not -- would target more against functions and less against years of experience. I don't know. That's the kind of analysis that would have to be done. And we just found that the recruiting and retention and feedback from our force and the fleet is that this targeted pay -- we got it right and we ought to keep doing that. And so we have just made that suggestion, that if it works there it might work in the civilian sector, it might not.

Q: What is the latest on the Bush administration stand on pay raises? Is it still as part of the whole administration deciding against the latest pay raise? What's the latest on that as it would pertain to the DOD civilians?

Abell: I don't know. I don't know where they are on that.

Q: The -- one of the costs, unexpected costs, that came with this year's legislation is the agreement on concurrent receipt, which actually is being called combat-related special compensation, I believe. Is part of the concern about pay raises and any other personnel costs the unexpected cost of trying to handle that in the 2000 budget -- something that hasn't so far been budgeted for? And do you have a better dollar figure on what that might cost you?

Abell: That hasn't entered into our thinking on pay raises. I mean, we -- again, we have got the law and our sort of long-term program for the military pay raises, what we think we need to do. The special compensation for combat-related injuries and diseases -- we haven't yet implemented -- as you know, the law gives us 180 days. We have got some folks upstairs even today who are cranking on how to get that implemented. It's complex. We hope to have something out that we can share with our VA colleagues very soon. Once it's solid than we expect to do some consultation with the Congress, and of course with the veterans and military related associations in town, and have it ready for a rollout at the end of the 180 days, which I believe is like June 2nd or 3rd.

Q: Any ballpark cost on what that might be a year?

Abell: You know, I've seen the estimates on it, but I don't remember, but if you'll give me a minute, I'll see if I've got them here.

No, I don't have the cost figures. I -- it's my understanding that the department and OMB and CBO have all come to consensus on what that number is, but I don't have it with me.

Q: Could you get that to Mr. Whitman [Bryan Whitman, deputy assistant secretary of defense for public affairs] so we might get it later?

Abell: We certainly will. [Since the program is still being refined we cannot confirm all details or all who might be entitled. Keeping this in mind, our cost estimate for the first year (FY03) is less than $100M and for the subsequent years approximately $300M per year.]

Q: Thank you.

Q: The administration remains opposed to the full concurrent receipt proposal that came out of the veterans community?

Abell: Yes, I believe that's true. Clearly we do, and I believe the administration does. But I'm not an administration spokesman.

Q: And also, as you said, one of the great things that's happened to military families particularly over the last several years is the increase in their housing allowances off-base. That's been a consistent thing, also tagged to a series of above rental -- actual rental cost improvements. Do you expect that pattern to continue in the 2004-2005 budget?

Abell: Yes, I would think so. Now, that really wasn't -- it's not above rental -- it's tied to the sample of what actually the rental costs are out in the local area by Zip code around our military installations. What has -- the additional money that is added every year was part of a four- or five-year project to reduce the out-of-pocket from 15 percent to zero. And that's a term that bothers me, because I know, and I believe you know, and I hope our soldiers, sailors, airmen and Marines understand that their out-of-pocket expenses are not going to be zero, because that presumes that they only aspire to live in a house that this formula would drive them to. And our folks are smart, hard-working, dedicated people who want the best for their families, and my experience is that they want their reach to exceed their grasp, and they try for more. So to say that there won't be any out-of-pocket expenses I think is a mischaracterization of it. But certainly we are going to reduce the planned absorption -- that's sort of a techno-geekdom term -- planned absorption so that we pay them 100 percent of what the formula derives, and that they select whatever house they want.

Q: And you'll get that formula on the schedule that had already been adopted several years ago?

Abell: Yes, yes. And I believe that's '05.

Q: And where are you now on that?

Abell: Geez, I don't know -- close.

Q: I think you're now at seven and a half with --

Abell: I think it is. But my understanding or recollection is it's supposed to be closed out in '05 where we will be based on the '04 budget is somewhere between seven and a half and zero. But I haven't done the math.

Q: Are there any other totally different or new benefits that you might be recommending for service members in '04, something that hasn't already been planned and moving up the take?

Abell: Sure if I tell you no there will be one, but I don't think there's anything major out there that we are recommending in the sense of benefits for military personnel. We are always looking to fine-tune. We are always looking to see what we could do better. But, you know, if it's -- if a program is important to you as an individual, then you'd say, Yes, they did something major for me -- whereas it may not apply to as many folks. But I think our priorities, as I gave them to you earlier -- you know, we want to look at civilian personnel management and how we might do that better. We want to look at this -- at the results of the reserve component study and how we might be able to more effectively use the reserve components. And of course we want to continue the work that we've done over the past three or four years on pay and compensation for military personnel.

Q: And is this study -- the reserve component study is completed now or almost done?

Abell: I think it's -- I think it's in the staffing stages, which means it's for all intents and purposes done, but everybody gets the chance to dot "i"s and cross "t"s.

Q: Will it ever be at a point where it will be something that will be shared publicly, or is this going to be --

Abell: Yes, ma'am. I expect early January.

Q: Early January? And where will that be coming out of? Your office, or --

Abell: I would expect that probably Secretary Tom Hall, assistant secretary for reserve affairs, will present that probably in this room -- certainly on the Hill at some point.

Q: And could you just summarize again what it is that you are going to be recommending for pay raises for the average person, just to make it clear?

Abell: Well, our recommendation to the Office of Management and Budget and to the president will be that we continue the pattern of past years where the base was ECI plus a half. Other cells were targeted from there, and that's what our recommendation is going to be.

Q: Let me try it again: For the average person out there.

Abell: See, that's one of the difficulties, and we don't have a percent that we apply to an average person. It's different for different grades and years of experience. It would be my hope that eventually we got away from even a percentage and described pay and what we did for groups of people as opposed to an overall percent. You all will look at our pay table at some point and do some mathematics and say, Okay, the average pay raise is X percent. But that's not our intent. We want it targeted to those areas that need it the most.

Q: Let me pick on that -- if you were to talk to a military person right now, what would you tell them --

Abell: I'd tell them exactly what I told you. (Laughs.)

Q: But in plain English.

Abell: That's exactly -- they understand it when I tell them that. That's exactly what I would tell them. And I am sorry I can't tell you anything more than that.

Q: So I think what you are saying is that some grades may not get it -- ideally from what you are describing there may be some groups of people who may not get a pay raise at all.

Abell: Geez, I hope I didn't say that. I didn't intend to say that, if I did.

Q: You are saying some groups -- we would like to talk about what we are doing for particular groups -- areas that need it the most.

Abell: Right. In other words, once the president's --

Q: -- across-the-board raise?

Abell: Once the president has made his decision, and if he has gone with the targeted pay raise as we would recommend, then we will be able to talk to you about what a staff sergeant at 12 years of service got, and what a first sergeant at 20 years of service would get, and that's how we would prefer to talk about it, or what a major with 10 years of service might get.

Q: Or what an E-1 at a year and a half is getting --

Abell: E-1 at no years of service might get.

Q: Which you have already stated you believe that, according to what your research has shown, many of these individuals are already paid more than their counterparts in the private sector. Therefore these people wouldn't get a raise?

Abell: No, I don't -- that's not my recommendation. Again, I don't know what the president is going to do.

Q: They will get a raise? Or your recommendation is --

Abell: That's our recommendation, yes --

Q: You're saying what again? Say that in your words.

Abell: That -- well, I am trying to make sure that nobody walks away from here trying to say -- believing that I said that some people were not going to get a raise. That's not our recommendation.

Q: On the Tricare situation -- I'm a real generalist, so help me here. Dale asked you a question about a good situation where you had actually budgeted more than you needed, so that's a nice situation to be in. But it's been talked about that this new Tricare for life entitlement is sort of a growing thing, that it will grow and grow and grow and grow. What are your projections now about the rate at which it will grow? And obviously there's one year your predictions were --

Abell: This past year the over-budgeting was because we had estimated what it would cost us for custodial care, long-term care -- whatever term you would like to apply to that. But we were able to implement a long-term care benefit that the Congress passed so that it didn't cost us as much as we budgeted if we had not been able to efficiently do it as the Congress has allowed. So we budgeted for the worst case, and we were fortunate enough to execute the better case.

The cost of long-term care is -- or, excuse me, Tricare for life -- does grow, but at this point beginning in this year it is -- it is -- I don't know what the right term is -- my comptroller friends would kill me, but it's almost off budget. It's paid out of the accrual fund at this point. So we make contributions to the accrual fund, but the Treasury of the United States makes contributions to the accrual fund as well. And so we are given a factor by the actuaries that we provide to the accrual fund, and I -- the rate at which that grows, I think -- we'd have to ask the actuaries what they program. I don't know that I've ever seen that. I have seen when I was still on the Hill the CBO estimates, but I don't know what the actuaries are saying today what the growth rate is.

Moderator: We've got time for one more.

Q: I really need to clarify this pay thing -- I'm sorry. It's very important. I am not as well versed in the intricacies as Tom is, so I need to make sure I understand this. Is this correct -- it sounds to me like there seems to be an argument somewhere in the Bush administration, and I don't know where this is coming from, and I would like to know -- between a recommendation about this ECI thing and a recommendation about this inflation thing. You're saying that we are recommending what you have said, and there are other voices who are talking about this inflation -- tying it to inflation. Who are these other voices, and are they in the Pentagon or outside the Pentagon, and at what level is this debate going on?

Abell: Well, you are starting to get beyond my level of expertise. I mean, I -- it -- there are other folks in government, I suspect not in the Department of Defense, who have alternative recommendations. They are going to make whatever case they make, and that will be decided by the president ultimately, but it will be adjudicated within the Office of Management and Budget. All I know is what our part is, which is to make a recommendation of what we believe the pay structure for the military pay raise ought to be -- which is not a number, but a targeted array -- not unlike we've had for the last couple of years.

Q: But the president already has the budget, does he not, the budget recommendations from the Pentagon?

Abell: My understanding was --

Q: (inaudible)?

Abell: Yeah, my understanding was that that is wrapping up hour to hour, day to day. But I didn't think it was actually --

Q: So you are out of the debate at this point? Because it's up there already?

Abell: I don't know where it is. We've made our recommendation.

Q: Okay.

Abell: Thank you. You all have a good holiday.


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