THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Wednesday, January 31, 1996 TAG: 9601310464
SECTION: MILITARY NEWS PAGE: A6 EDITION: FINAL
SOURCE: BY DALE EISMAN, STAFF WRITER
DATELINE: WASHINGTON LENGTH: Medium: 79 lines
The new, more conciliatory tone surrounding federal balanced-budget negotiations, sparked by President Clinton's State of the Union address last week, could wind up hitting military retirees in the pocketbook.
Balanced-budget plans offered by both Clinton and Congress' Republican majority assume that military and federal civilian pensions, along with Social Security, will grow at smaller-than-now-expected rates over the next seven years.
Slower-growing federal pensions also are part of a budget alternative put forward by ``the Coalition,'' a group of conservative Democrats whose initiative has been praised by both Clinton and House Speaker Newt Gingrich.
Suspended in early January, and apparently unsalvageable, the drive for a balanced-budget came back to life last week when Clinton addressed a joint session of Congress. The president's suggestion that Republicans join him in passing a budget now that includes cuts embraced by both sides, while putting off disputes over Medicare and Medicaid, has renewed hope on Capitol Hill that a deal might yet be struck.
Under White House and Republican plans now being discussed, the pension declines would result from changes in the formula used to calculate the Consumer Price Index, or CPI. Cost-of-living increases in federal pensions and Social Security are tied to the index, so a slower-growing CPI means slower-growing pensions.
There's a growing consensus among economists that the CPI now overstates actual increases in consumer prices. Thus, the pension formula theoretically gives military and other federal retirees larger increases than they actually need to keep up with the cost of living.
The Bureau of Labor Statistics is widely expected to change the formula. Budget plans proposed by Clinton and the Republicans assume the formula will be changed but don't speculate on how much smaller pension increases may become and how much the government might save.
The Coalition alternative includes a specific savings for military pensions - just over $2 billion during the seven-year drive toward a balanced budget. It would not change the CPI directly, but would limit pension increases to half a percent less than any increase in the CPI.
The Coalition plan also would give all federal civilian and military pensioners the same actual dollar increase in their pensions. It calls for a calculation of the average benefit paid to all pensioners in each group, applies the cost of living increase to that figure, and pays the average to everyone.
Currently, the cost-of-living adjustment is applied to each pensioner's payment. Thus, a 2 percent increase in a $500-per-month pension generates more money for that recipient than the same percentage increase applied to a pension of $300 per month.
The coalition plan would average those pensions at $400, calculate the cost-of-living allowance on that figure, and pay the same dollar amount to each pensioner.
Two Hampton Roads congressmen, Democrats Owen B. Pickett of Virginia Beach and Norman Sisisky of Petersburg, are Coalition members. But Pickett has taken pains to distance himself from the proposed cost-of-living changes and Sisisky predicted last week that those changes won't pass.
The lower CPI and the flat-rate pension increases ``were put in there to get the ball rolling'' toward a balanced budget deal, Sisisky said, ``and that's what we've done.'' The plan's drafters applied the same cut to federal pensions and Social Security, he said, so that the sacrifices required to balance the budget were distributed among everyone.
As a result, Sisisky said, complaints to his office from military retirees about the plan have been limited. But a spokesman for Pickett said his boss had heard plenty of protests and noted that despite the congressman's membership in the group, Pickett voted against an early version of the Coalition plan when it was brought to the House floor in October. ILLUSTRATION: Photo
ASSOCIATED PRESS
President Clinton's State of the Union speech last week breathed new
life into a balanced-budget plan that would limit increases in
military pensions.
by CNB