CBO WORKING PAPER ON MILITARY HOUSING ALLOWANCES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90B01370R000200220028-6
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 19
• Document Creation Date: December 22, 2016
• Document Release Date: November 6, 2008
• Sequence Number: 28
• Publication Date: November 15, 1984
• Content Type: MEMO

MEMO FOR: DD/EB&S/OP
OLL 84-4332
15 November 1984
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Chief, Liaison Division/OLL
SUBJECT: CBO Working Paper on Military Housing Allowances
FROM:
VIA:
1. Attached hereto for your information is a
Congressional Budget Office Working Paper on,,"Military
Housing Allowances: An Analysis of Alternatives for Change,"
dated October 1984.
2. Subsequent to this analysis, the Congress adopted
changes in military housing allowances in the FY 1985
budget. The study gives estimates of the cost and
distributional effects of the changes as reflected by the
principal Senate plan (refer to Tablgn2).
Attachment:
as stated
Distribution:
Original - Addressee w/att
1 - C/ Senate Liaison w/o att
STAT
STAT
STAT
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MILITARY HOUSING ALLOWANCES:
Staff Working Paper
The Congress of the United States
Congressional Budget Office
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PREFACE
The level of funding for military housing allowances, particularly the
Variable Housing Allowance (VHA) program, has come under close scrutiny
by the Congress, which has considered several proposals for restructuring
the housing allowances. Of concern are the overall costs and distributional
effects of the various alternatives proposed. This report documents the
analysis and briefings examining this issue that the Congressional Budget
Office prepared during the summer of 1984 at the request of the Subcom-
mittee on Defense of the Senate Appropriations Committee.
Subsequent to completion of the study, the Congress took action that
changes housing allowances. The changes are similar to one of the options
described in the paper. This study documents the results of those changes
and analyzes other alternatives that could be considered in future delibera-
tions. In accordance with CBO's mandate to provide objective and impartial
analysis, the study offers no recommendations.
Marvin M. Smith of CBO's National Security Division prepared the
study with the assistance of Jonathan Woodbury, under the general super-
vision of Robert F. Hale and Neil M. Singer. The author gratefully
acknowledges the technical support provided by Maj. G. Richard Creekmore,
U.S. Air Force, Maj. Roger W. Alford, U.S. Air Force, Lt. Donald G.
Brazelton, U.S. Air Force, David Pomeroy and Roy Samarco, Per Diem
Travel and Transportation Allowance Committee, and Douglas McCormick,
Defense Manpower Data Center. (Outside assistance implies no responsibil-
ity for the final product, which rests solely with CBO.) The report was
edited by Francis Pierce.
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Page
PREFACE ................... ................. ii
INTRODUCTION .................................... 1
CURRENT LAW AND ALTERNATIVE
APPROACHES TO CURRENT LAW ....................... 3
DEFINITION AND COSTS OF
ALTERNATIVE APPROACHES .......................... 4
THEIR IMPACT ON MILITARY PERSONNEL ................ 11
POSTSCRIPT ....................................... 14
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Page
TABLE 1. COSTS OF
CURRENT SYSTEM EXTENDED ............ 6
TABLE 2. COSTS OF PRINCIPAL ALTERNATIVES...... .
TABLE 3. COSTS OF ALTERNATIVES WITH
DIFFERENTIAL ABSORPTION ..............
TABLE 4. COSTS OF ALTERNATIVES WITH
HIGHER ABSORPTION ....................
TABLE 5. MEDIAN UNREIMBURSED HOUSING COSTS
IN FISCAL YEAR 1985 UNDER THE
CURRENT SYSTEM WITH CONTINUATION
OF CAPS, BY PAY GRADE ................ 12
TABLE 6. MEDIAN UNREIMBURSED HOUSING COSTS
IN FISCAL YEAR 1985 UNDER
ALTERNATIVE PLANS, .
BY PAY GRADE ........................ 13
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INTRODUCTION
Military service involves frequent shifts among duty stations. Most
service members are furnished government housing, but some must rely on
the private housing market. The cost of private housing would represent a
severe burden for many military families if they had to bear all of it
themselves. Accordingly, the Congress has established housing assistance
for military personnel who cannot be accommodated in government housing.
Legislative History and Intent of Military Housing Allowances
In general, military housing allowances are designed to provide Uni-
formed Service members and their dependents with nontaxable cash assis-
tance to help defray their expenses in obtaining private housing when they
are not assigned adequate government quarters. Three forms of housing
allowance have evolved to meet the needs of service members stationed
both inside and outside the continental United States (CONUS): the Basic
Allowance for Quarters, the "rent plus" program, and Variable Housing
Allowances.
The Basic Allowance for Quarters (BAQ), the largest of the current
housing allowance programs in both total dollars and number of participants,
was enacted in 1949. BAQ rates, which are differentiated by pay grade and
dependency status, were initially set at 75 percent of the housing cost of
civilians with comparable incomes. In 1971, BAQ rates were increased to
their current statutory level of 85 percent of median housing expenses of
comparable income groups in the United States. Since 1971, however, BAQ
increases tied to changes in military basic pay have failed to keep pace with
rising housing costs, with the result that the current BAQ table falls short of
the 85 percent figure.
In an effort to counter this adverse trend, the Congress established
two additional forms of housing allowances. For members stationed outside
CONUS, the Congress enacted the "rent plus" program in 1981 to offset the
shortfall in BAQ. Rent plus, in actuality, replaced the station housing
allowance (SHA) which had been in existence since 1946. Rent plus
reimburses service members overseas for their actual housing costs up to
the 80th percentile of rents locally based on surveys of the reported housing
costs of military personnel.
For service members assigned to high-cost areas in CONUS, the
Variable Housing Allowance program (VHA) was established in 1981 as an
entitlement to offset disparities in housing costs. The program specifies
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that service members eligible for BAQ also receive VHA if they are
stationed in CONUS locations where the average monthly cost of nongovern-
ment housing for service members exceeds 115 percent of their BAQ. VHA
rates have been based on surveys of service members' housing costs, and
vary with pay grade and dependency status.
Congressional Concern over Cost Growth in the VHA Program
Since its inception, the VHA program has grown over 33 percent (from
$677 million in fiscal year 1981 to $901 million in fiscal year 1984). This
program growth during a period of fiscal austerity has prompted the
Congress to impose various budgetary constraints on the program in 1983-
1984, and to consider revisions in all military housing allowances for 1985
and beyond.
In response to Congressional concern over VHA, a. 1984 Department of
Defense joint services study group examined many aspects of the program.
The study group recommended, and the Administration endorsed, several
changes that would serve as a basis for the restructuring of military housing
allowances. Similar changes were subsequently included in House- and
Senate-passed versions of the 1985 defense authorization bill.
Plan of the Study
This study focuses on alternatives that were of interest to the staff of
the Senate's Appropriations Subcommittee on defense. They included
proposals by the Administration and the changes incorporated in the House
and Senate defense authorization bills. Included also were several alterna-
tive approaches that represent variants of the plans proposed by the
Administration and the Congress. Among these alternatives are plans that
call for differential treatment of officers and enlisted personnel.
The study assesses each alternative on the, basis of two criteria: the
total dollars involved and its equity or distributional impact on the service
member. Specifically, the study presents the total amounts of BAQ and
VHA under each alternative and its overall cost to the government, and also
examines the impact of the various alternatives on service members by rank
and across areas with differing housing costs.
Housing allowances are, of course, a part of military compensation,
which must ultimately be adequate to allow the services to recruit and
retain needed personnel. This analysis did not assess the effects of changes
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in housing allowances on recruiting and retention. Nonetheless, the changes
considered should not have significant effects on recruiting and retention,
and any adverse effects could be offset by other compensation changes.
Finally, the study does not address changes in the "rent plus" program,
although possible changes are currently under consideration by the Adminis-
tration and may be the subject of Congressional review in future years.
CURRENT LAW AND ALTERNATIVE APPROACHES TO CURRENT LAW
Under current law, Basic Allowance for Quarters (BAQ) rates are
graduated by pay grade, both for enlisted personnel and for officers (except
for highest-ranking officers) and further differentiated by dependency status
(namely, with one rate for members without dependents and another for
members with dependents).
The Variable Housing Allowance (VHA) is found by subtracting 115
percent of an eligible member's BAQ from the average monthly housing cost
for service members in the same pay grade. The calculation is done in each
of about 340 local areas.
As part of ~ an effort by the Congress to impose overall budgetary
restraint, increases in VHA were limited to 4 percent in fiscal year 1983 to
accompany the 4 percent limit on increases in cash pay and BAQ. Moreover,
in fiscal year 1984, legislative action resulted in the following additional
restrictions on VHA: fiscal year 1984 VHA rates were frozen at the fiscal
year 1983 rates, and a monthly limit of $800 was placed on total housing
allowances (BAQ plus VHA) for service members with dependents ($600 for
those without dependents). These actions increased the absorption rate (or
out-of-pocket costs) for service members from the statutory level of 15
percent of BAQ to the current average rate of 29.4 percent of BAQ.
Proposed Changes under Administration's Plans
In early 1984, the Administration submitted a proposal to revamp
military housing allowances in several important aspects. One recom-
mended change concerned the structure and level of funding of BAQ.
Although BAQ was -set in 1971 at 85 percent of median housing cost in
CONUS as whole, present allowances represent a smaller percentage. As
the result of limits on BAQ increases and sharp increases in housing costs,
overall BAQ now averages just 65 percent of average housing cost, although
the percentage varies among grades. To remedy this, the Administration
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recommended an increase in BAQ funding and a restructuring of the BAQ
table so that BAQ for each pay grade would equal 70 percent of the median
housing costs incurred by service members of similar rank nationwide.
The Administration further recommended that the link between BAQ
and VHA be severed. Aggregate VHA funds would be set at 15 percent of
the median housing cost of Uniformed Service members nationwide. Funds
would be allocated to local areas on the basis of a survey of military
members' local housing costs. Future VHA funding would be adjusted
according to changes in the housing component of the Consumer Price Index.
With BAQ at 70 percent and VHA at 15 percent, service members would
absorb the same 15 percent of housing costs as they did in 1971.
Finally, the Administration recommended that the VHA surveys be
conducted biennially (instead of annually) and that caps on BAQ and VHA be
rescinded. It also proposed measures to tighten the eligibility rules
governing receipt of VHA payments. Primary among these include the
elimination of VHA payments to service members during permanent change-
of-station moves, and elimination of payments to members who live in
government housing without dependents but receive BAQ at the with-
dependents rate because of child support obligations.
DEFINITION AND COSTS OF ALTERNATIVE APPROACHES
To assess the overall budgetary impact of possible changes in military
housing allowances, this section considers the Administration's proposed
changes along with several. alternative plans. These alternatives can best be
evaluated in comparison to a housing allowance "baseline" reflecting the
current program. For this study, the baseline housing allowance system
chosen is the Administration's definition of "current system extended."
Definition of "Current System Extended" and Costing Assumptions
Several key assumptions underlie the analysis of the costs of the
Administration's proposal and other alternatives presented in this study.
Under the Administration's definition of the "current system extended,"
VHA for fiscal year 1985 is based on the 1982 VHA survey without any caps
or other limits; this allows for some growth in VHA but not a complete
return to the basic law, which would base 1985 VHA on the 1984 survey. On
the other hand, baseline VHA costs for fiscal years 1986 to 1989 start with
the fiscal year 1984 level (which includes the caps on BAQ and VHA) and
adjust for growth due to pay raises and to the Administration's estimates of
the numbers of service members eligible for VHA.
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Under this definition, VHA costs in different fiscal years are calcu-
lated using different surveys. Despite this inconsistency, CBO adopted the
Administration's definition because it has been used widely in the Congres-
sional debate. A consistent definition that used the same base in 1986-1989
as in 1985 would produce higher VHA costs in 1986-1989.
BAQ and median housing costs under this definition are projected to
increase in future years over 1984 levels, based on the Administration's
projection and CBO's baseline economic forecast. BAQ is adjusted in fiscal
years 1985 through 1989 by annual pay increases from the CBO February
1984 baseline for pay allowances of 3.3 percent, 5.4 percent, 5.6 percent,
5.5 percent, and 5.5 percent, respectively. 1/ BAQ also increases in line
with Administration estimates of increases in numbers of persons eligible.
Median housing costs increase by 4.8 percent, 5.4 percent, 5.6 percent, 5.5
percent, and 5.5 percent, respectively; these factors are consistent with the
February 1984 CBO baseline.
Cost of "Current System Extended"
As Table I shows, under the Administration's definition of "current
system extended," BAQ and VHA for fiscal year 1985 are estimated to.be
$4,421 million and $1,185 million, respectively, for a total cost of $5,606
million. The decrease in VHA in fiscal years 1986-1989 relative to fiscal
year 1985 results from the different definition discussed earlier. For 1986-
1989, VHA estimates were based on the the 1984 level of VHA cost that
included the caps. For 1985, the YHA estimate was based on the 1982
survey predating the caps.
Costs of Principal Alternatives
Alternative plans have been proposed in the House and the Senate.
Both the House and the Senate plans adopt the majority of the fundamental
changes recommended in the Administration's proposal as discussed earlier,
but differ in minor respects. The primary difference between the Adminis-
tration and the House, approaches is that the House plan (in H.R. 5167)
proposes that service members stationed in Alaska and Hawaii (who are
currently receiving rent plus) be included under the VHA program. Since
this difference has only minor effects on costs, the analysis presented in this
1. For fiscal year 1985, the Congress actually enacted a 4.0 percent basic
pay increase for military personnel, effective January 1, 1985.
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TABLE 1.
COSTS OF CURRENT SYSTEM EXTENDED
(By fiscal year, in millions of dollars)
Year BAQ
VHA
4,421
1,185
5,606
,4,771
1,073
5,844
1987
5,132
1,109
6,241
5,484
1,137
6,621
5,834
1,154
6,988
Total
25,642
5,658
31,300
study simplifies by assuming that the House plan includes Alaska and Hawaii
under "rent plus" and not VHA. Given this assumption, the Administration
and House plans are identical.
The Senate proposal (in S. 2723) deviates from the Administration plan
by assuming that BAQ equals, 65 percent of national median housing costs
and VHA 20 percent, with absorption at 15 percent. The Administration
assumes BAQ and VHA of 70 and 15 percent, respectively, with absorption
of 15 percent.
With respect to the overall costs of these plans, under the
Administration/House option, Table 2 indicates that BAQ would increase by
$238 million in fiscal year 1985 relative to the "current system extended,"
because the option increases -BAQ to 70 percent of national median housing
costs. VHA in 1985 would decrease by $308 million because the higher BAQ
reduces the need for VHA. Thus there is an overall net savings of $98
million for the year. In later years, however, VHA savings do not offset
BAQ savings largely because of the shift in the definition of baseline VHA
costs discussed earlier. Thus the five-year cost of the option would be $895
million over the current system.
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TABLE 2. COSTS OF PRINCIPAL ALTERNATIVES (By fiscal year, in millions of dollars)
ALTERNATIVE NET CHANGE FROM CURRENT SYSTEM
BAQ VHA Total Other
Option Year Revised Revised Revised BAQ VHA " Reductions a/ Total b/
Administration/
House Plan c/
0.70 BAQ
0.15 VHA
0.15 Absorption
Total
Senate Plan
0.65 BAQ
0.20 VHA
0.15 Absorption
Total
1985
4,659
877
5,536
238
-308
-28
-98
1986
5,110
930
6,040
339
-143
-41
156
1987
5,497
1,000
6,497
365
-109
-43
213
1988
5,875
1,069
6,944
391
-68
-47
276
249
6
137
1
386
7
415
-17
-50
348
1989
,
,
,
_
27,389
5,014
32,403
1,748
-645
-209
895
1985
4,403
1,095
5,497
-18
-90
-23
-132
1986
4,745
1,240
5,985
-26
167
-33
108
1987
5,104
1,334
6,438
-28
225
-35
162
1988
.5,455
1,426
6,881
-29
289
-38
221
1989
5,802
1,516
7,319
-32
362
-41
290
25,510
6,610
32,120
-133
953
-170
650
a. "Other Reductions" reflect changes in Rent Plus, Family Separation Allowances (FSA), and Dislocation
Allowances (DLA), as well as the elimination of VHA during PCS travel status and the discontinuance of VHA
for divorced members with child support living in government quarters.
b. Totals may not add because of rounding.
c. House Plan includes Alaska and Hawaii under Rent Plus and not under VHA.
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In comparison with the Administration/House option, the Senate plan
assumes a lower BAQ percent (65 vs. 70) but more VHA. This change yields
more savings in fiscal year 1985--namely, $132 million compared to $98
million-and lower five-year costs. Savings are larger under the Senate plan
because BAQ is paid to everybody while VHA is paid only where housing
costs are high. Thus the Senate plan avoids paying excess BAQ in low-cost
locations but provides VHA for the high-cost areas.
Costs of Alternatives with Differential Absorption
The options shown in Table 3 are variants of the basic ones just
presented. These options treat officers and enlisted personnel differently,
imposing higher absorption rates on officers than on enlisted service
members. As will be apparent later, this approach tends to equalize the net
cost of housing to officers and enlisted personnel as a percentage of their
cash take-home pay.
In these variants of both the Administration/House and Senate plans,
the absorption rate for officers is 20 percent, while enlisted members are
still assumed to have absorption rates of 15 percent. The higher absorption
rates for officers result in savings of $163 million in fiscal year 1985 under
the modified Administration/House plan and even larger savings of $196
million in fiscal year 1985 under the modified Senate option. The net five-
year costs associated with these plans are $421 million and $175 million,
respectively. Because of the higher officer absorption rates, these options
are less costly than their counterpart plans under the basic Senate and
House alternatives.
Costs of Alternatives with Higher Absorption
Two other variants shown in Table 4 alter the basic plans by assuming
a 20 percent absorption rate for all service members. This could be
consistent with the philosophy that the government should reduce the
portion of military compensation devoted to housing allowances and, if
needed, spend more on cash pays or other allowances. In contrast to the
options presented in the two previous tables, these plans result in net
savings in each of the five years. Under the variant of the
Administration/House plan, a net savings of $310 million occurs in fiscal
year 1985, with overall net savings of $658 million for the five-year period.
The variant of the Senate plan yields even larger net savings of $343 million
in fiscal year 1985, as well as greater net savings of $902 million over the
same five-year period. Indeed, this Senate alternative represents the least
costly of all the options considered in this analysis.
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TABLE 3. COSTS OF ALTERNATIVES WITH DIFFERENTIAL ABSORPTION (By fiscal year, in millions of dollars)
ALTERNATIVE NET CHANGE FROM CURRENT SYSTEM
BAQ VHA Total Other
Option Year Revised Revised Revised BAQ VHA Reductions a/ Total b/
Administration/
1985
4,656
810 51467
238
-375
.-27 -163
House Plan c/
1986
5,111
835 5,946
340
-238
-38 64
With Higher
1987
5,498
898 6,396
366
-211
-41 114
Absorption
1988
5,876
960 6,836
391
-177
-44 170
for Officers
1989
6,250
1,021 7,271
416
-133
-47 236
Total
27,392
4,524 31,915
1,751
-1,134
-197 421
Officers:
0.70 BAQ
Enlisted:
0.70 BAQ
0.10 VHA
0.15 VHA
0.20 Absorption
0. 15 Absorption
Senate Plan
1985
4,400
1,028 5,428
-18
-157
-22 -196
With Higher
1986
4,746
1,145 5,891
-25
72
-31 16
Absorption
1987
5,105
1,231 6,337
-27
122
-33 63
for Officers
1988
5,456
1,316 6,772
-29
179
-35 115
1989
5,804
1,400 7,203
-30
246
-38 178
Total
25,512
6,120 31,631
-129
462
-158 175
Officers: 0.65 BAQ Enlisted: 0.65 BAQ
0.15 VHA 0.20 VHA
0.20 Absorption 0. 15 Absorption
a. "Other Reductions" reflect changes in Rent Plus, Family Separation Allowances (FSA), and Dislocation
Allowances (DLA), as well as the elimination of VHA during PCS travel status and the discontinuing of VHA
for divorced members with child support living in government quarters.
b. Totals may not add because of rounding.
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THEIR IMPACT ON MILITARY PERSONNEL
The discussion of the. various alternatives thus far has focused on their
aggregate costs to the federal government as compared to the continuation
of the "current system" as defined by the Administration. Another
important aspect of the alternative options is their effects on the costs
borne by military service members. This study assesses the distributional
impact of the various options on service members by estimating the
unreimbursed housing cost associated with each alternative plan. Unreim-
bursed housing costs are estimated for members in various pay grades and at
selected locations used by the Administration as examples of "low"- and
"high"- cost areas. Unreimbursed costs are estimated by comparing median
costs to military allowances in each area.
To help assess their impact, these median unreimbursed housing costs
under alternative approaches should ideally be compared to a measure of net
income across pay grades and local areas. Unfortunately, service members'
net income is difficult to estimate because of individual variations resulting
from special pays and allowances, state and local taxes, tax advantages, and
other factors. In order to avoid such complications, in this analysis
unreimbursed housing costs are compared to the cash take-home pay that all
service members receive, defined as basic pay less federal income taxes and
FICA. (Federal taxes are computed assuming standard deductions and a
family of three.)
Median Unreimbursed Housing Costs in Fiscal Year 1985
under the Current System with Continuation of Caps
Table 5 shows median unreimbursed housing costs in fiscal year 1985
under the current system with the continuation of the caps, both in terms of
dollars and as a percent of cash take-home pay, for several pay grades in
two locations-Jacksonville, NC (defined by the Administration as a "low-
cost" area), and Los Angeles, CA (defined as a "high-cost" area). This
system is defined differently from the Administration's "current system
extended" because the caps and other features of the current system remain
fully in effect.
Under this system, unreimbursed costs vary widely. Perhaps the most
important variation occurs across geographic areas. For example, a service
member at the E-3 level in Los Angeles would absorb $1,062 in unreimbursed
costs compared to $955 borne by his counterpart in Jacksonville. Since
military personnel often have little control over assignment or reassign-
ment, such geographical differences can cause unexpected hardships and
morale problems.
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TABLE 5. MEDIAN UNREIMBURSED HOUSING COSTS IN FISCAL YEAR
1985 UNDER THE CURRENT SYSTEM WITH CONTINUATION
OF CAPS, BY PAY GRADE
(In dollars and percent of take-home pay)
City
0-6
0-3 .
E-7
E-5
E-3
Jacksonville, NC
-dollars
29456
19907
19480
988
955
-percent a/
6.9
8.6
9.8
9.1
11.7
Los Angeles, CA
-dollars
4, 224
1,944
19452
1,657
11062
--percent a/
11.9
9.3
9.7
15.3
13.0
a. Unreimbursed housing cost as a percent of basic pay less taxes (federal
and FICA).
Unreimbursed housing costs can. also be dramatically higher for
personnel in the upper grades. This is because the caps impose a relatively
greater burden on upper-grade service members in high-cost areas. For
example, an 0-6 in Los Angeles would have unreimbursed costs of $4,224
while an .0-6 in Jacksonville would absorb $2,456. As a percentage of take-
home pay, however, senior officers' unreimbursed costs are still less than
those of junior enlisted personnel.
Median Unreimbursed Housing Costs in Fiscal Year 1985
under Alternative Approaches
Table 6 presents median unreimbursed housing costs under the various
alternatives to the current system. Unreimbursed costs are shown for 1985
when the alternatives would be in effect.
All the alternatives eliminate much of the wide variation in housing
costs that occurs under the current system. Perhaps most important, under
all the alternatives most persons of the same pay grade who move from
one geographic area to another would continue to absorb the same dollar
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TABLE 6. MEDIAN UNREIMBURSED HOUSING COSTS IN FISCAL YEAR
1985 UNDER ALTERNATIVE PLANS, BY PAY GRADE
(In dollars and percent of take-home pay)
0-6
0-3
E-7
E-5
E-3
Administration/House Plan
and Senate Plan a/
Jacksonville, NC --dollars
196 60
1,166
10032
833
660
-percent b/
4.7
5.5
6.9
7.7
8.1
Los Angeles, CA -dollars
19660
1,166
19032
833
660
-percent b/
4.7
5.5
6.9
7.7
8.1
Administration/House Plan
with Higher Absorption
for Officers
Jacksonville, NC --dollars
1,992
11439
19032
833
660
--percent b/
5.6
6.9
6.9
7.7
8.1
Los Angeles, CA -dollars
2,213
1,554
19032
833
660
-percent b/
6.2
7.4
6.9
7.7
8.1
Senate Plan with Higher
Absorption for Officers
Jacksonville, NC --dollars
2,213
1,554
10032
833
660
-percent b/
6.2
7.4
6.9
7.7
8.1
Los Angeles, CA -dollars
2,213
1,554
1,032
833
-660
-percent b/
6.2
7.4
6.9
7.7
8.1
Administration/House Plan
with Higher Absorption
for All
Jacksonville, NC --dollars
1,992
1,439
1,130
829
667
-percent b/
5.6
6.9
7.5
7.7
8.2
Los Angeles, CA -dollars
2,213
1,554
19376
1,111
880
-percent b/
6.2
7.4
9.2
10.3
10.8
Senate Plan with Higher
Absorption for All
Jacksonville, NC --dollars
2,213
1,554
1,376
1,107
880
-percent b/
6.2
7.4
9.2
10.2
10.8
Los Angeles, CA -dollars
2,213
1,554
1,376
1,111
880
--percent b/
6.2
7.4
9.2
10.3
10.8
a. The Senate plan has the same absorption as the Administration/House
plan in these two areas. But in some lower-cost areas the Senate plan
would impose higher absorption.
b. Unreimbursed housing cost as a percent of basic pay less taxes (federal
and FICA).
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costs. 2/ This would eliminate one major problem associated with the
current system.
All the alternatives also moderate the large out-of-pocket costs
absorbed by those in the upper pay grades. This follows from the
elimination of the caps on VHA that caused high absorption for the upper
pay grades under the current system.
Comparison among the alternatives reveals some differences. Unre-
imbursed costs are obviously higher in alternatives that impose 20 percent,
absorption rather than the 15 percent proposed by the Administration. More
important, in all the alternatives, the dollar amount of unreimbursed costs
increases with rank but decreases as a percentage of take-home pay; but the
alternatives that impose higher absorption on officers modestly narrow the
differences in unreimbursed housing costs as a percentage of cash take-
home pay. To this extent, some might view these alternatives as more
"equitable."
POSTSCRIPT
This study documents analysis done in the summer of 1984 for the
staff of the Defense Subcommittee of the Senate Committee on Appropria-
tions. Subsequent to the analysis, the Congress--as a result of action on the
budget for fiscal year 1985-adopted changes in military housing allowances.
The changes are most similar to those described under the principal Senate
plan. This study thus provides approximate estimates of the cost and
distributional effects of the changes made by the Congress.
2. There are a few exceptions. In some cases--for example, Jacksonville
under the Administration/House plan-a service member's BAQ more
than covers actual housing costs. Thus that member ends up absorbing
lower out-of-pocket costs ' than others of. the same rank in other
locations.
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