Gambar halaman
PDF
ePub

EXPLANATION

The basic cost-of-living formula is designed to protect the purchasing power of both civilian and military retired pay. The 3-percent formula already discussed was liberalized for Federal civil service employees by virtue of the legislation approved October 20, 1969, and effective October 31, 1969. Even though the present cost-of-living system is based on increases in the Consumer Price Index, there is some loss of purchasing power because of the timelag between the increases in the Consumer Price Index and the time of the increased adjustment of retired pay. During the period when the Consumer Price Index is building up to the 3-percent level, the value of military retired pay is somewhat eroded since it is not adjusted until the 3-percent formula has been complied with. While the purchasing power of retired pay is substantially restored on the effective date of each adjustment, the restoration is only momentary during periods of rapidly continuing inflation and the diminution of purchasing power of retired pay resumes and continues until the next adjustment.

As an example of the operation of the formula proposed by the bill, if the Consumer Price Index presently calls for an increase of 3.5 percent, the retired pay would be increased by 4.5 percent, representing the 1-percent add-on. By way of further example, the statutory formula for the Consumer Price Index required an increase of 4 percent. in civil service pay effective November 1, 1969; however, with the added 1 percent, the net increase became 5 percent.

This system will substantially offset the loss of purchasing power of retired pay which occurs under the present system.

It should be noted that the effective date of this legislation would be October 31, 1969, which is the same date on which the 1-percent add-on legislation became effective for those under the civil service retirement system.

FISCAL DATA

The Department of Defense advised that based upon the retired pay budget for fiscal year 1970, the cost of a 1-percent increase in retired pay for 1 year would be approximately $27 million.

EXECUTIVE BRANCH POSITION

The Department of Defense, by letter dated October 23, 1969, advised the House Committee on Armed Services that it supported H.R. 14227 and urged its early enactment and the Bureau of the Budget interposed no objection. The departmental letter follows and is hereby made a part of this report.

GENERAL COUNSEL OF THE DEPARTMENT OF DEFENSE,

Hon. L. MENDEL RIVERS,

Washington, D.C., October 23, 1969.

Chairman, Committee on Armed Services,

House of Representatives, Washington, D.C.

DEAR MR. CHAIRMAN: Reference is made to your request for the views of the Department of Defense with respect to H.R. 14227, 91st Congress, a bill to amend section 1401a(b) of title 10, United States Code, relating to adjustments of retired pay to reflect changes in the Consumer Price Index.

S. Rept. 623

Under the existing formula, for adjusting retired pay, whenever the Consumer Price Index increases by 3 percent over the index which was the basis for the most recent increase in military retired pay, and remains at or above that level for a period of 3 consecutive months, military retired pay will be increased on the first day of the third month following that 3-month period, by the highest percentage of increase attained during that period.

While this formula does much to protect the purchasing power of retired pay, it is not wholly effective. During the period of time between adjustments of retired pay, the purchasing power of retired pay is gradually eroded so that at the time of the adjustment in retired pay, the purchasing power is at least 3 percent below what it was when retired pay was last increased. This timelag has a cumulative effect. over the years.

In order to overcome this deficiency in the present retired pay adjustment formula, the bill would add 1 percent to the amount of the percentage increase under the present formula whenever military retired pay is increased. For example, if the Consumer Price Index is increased by 3.5 percent, retired pay would be increased by 4.5 percent. This system will substantially offset the loss of purchasing power of retired pay which occurs under the present system. This change in the formula for adjusting military retired pay is identical to the change included in Public Law 91-93 for adjusting the annuities of retired civil service employees.

Because of the facts outlined above the Department of Defense supports H.R. 14227 and urges its early enactment.

Based on the retired pay budget for fiscal year 1970, the cost of a 1-percent increase in retired pay for 1 year would be approximately $27 million.

To conform to the style of title 10, United States Code, the word "percent" should be substituted for the words "per centum" wherever they appear in the bill.

The Bureau of the Budget advises that, from the standpoint of the administration's program, there is no objection to the presentation of this report for the consideration of the committee.

Sincerely,

JAMES P. NASH, (For L. Niederlehner, Acting General Counsel.)

CHANGES IN EXISTING LAW

In compliance with subsection 4 of rule XXIX of the Standing Rules of the Senate, changes in existing law proposed to be made by the bill are shown as follows: Existing law to be omitted is enclosed in black brackets, new matter is printed in italic, and existing law in which no change is proposed is shown in roman.

[blocks in formation]

§ 1401a. Adjustment of retired pay and retainer pay to reflect changes in Consumer Price Index

(a) Unless otherwise specifically provided by law, the retired pay retainer pay of a member or former member of an armed force may

S. Rept. 623

« SebelumnyaLanjutkan »