Military Personnel Data
Special Pays and Tax Treatment for Deployed Active Duty Military Personnel Enhanced:
Relative to their peers who deployed in 1999 when the bankruptcy data for military personnel were gathered, more recently deployed active duty military personnel may be eligible to receive higher special pays.[Footnote 17] Since April 2003, Congress has temporarily increased the family separation allowance[Footnote 18] by 150 percent and imminent danger pay by 50 percent (see table 3). The April 2003 increases in these special pays would result in deployed active duty personnel's having relatively higher cash incomes today than would their peers who were deployed during the 12 months prior to the 1999 active duty survey.
Table 3: Changes in Two Special Pays for Deployed Active Duty Military Personnel--Before and After April 2003:
Special pay; Family separation allowance: Monthly pay before and after April 2003; Before: $100; Monthly pay before and after April 2003; After: $250; Monthly pay before and after April 2003; Percent Increase: 150%.
Special pay; Imminent danger pay: Monthly pay before and after April 2003; Before: $150; Monthly pay before and after April 2003; After: $225; Monthly pay before and after April 2003; Percent Increase: 50%.
Source: GAO.
[End of table]
Some or all of the income that active duty military personnel earn while serving in combat zones is also tax-free.[Footnote 19] The military pay, up to prescribed amounts, received while in these combat zones is excluded from gross income and is not subject to federal income tax.
Other special pays may be tax-free as the result of service in a combat zone. For example, service members who reenlist while serving in a combat zone are typically eligible to receive any applicable selective reenlistment bonus tax-free. For fiscal years 1999 through 2003, DOD's budget for that program grew from $418 million to an estimated $734 million, a 76 percent increase.[Footnote 20]
DOD Efforts Under Way to Improve Financial Literacy and Responsibility of Military Members:
We recently reported that DOD identified a need to improve the financial literacy and responsibility of military members in its July 2002 human capital strategic plan.[Footnote 21],, As part of DOD's balanced scorecard, the Under Secretary of Defense for Personnel and Readiness reviews issues affecting force management risk. One of the indicators used in the review is personal finances, which is evaluated in terms of the self-reported financial condition of junior enlisted personnel (E1-E4) and their self-reported ability to pay bills on time. Data to support these evaluations are supplied on an annual basis through Defense Manpower and Data Center surveys of active duty service members. Among other things, DOD is reviewing a draft personal financial management policy that seeks to establish a uniform approach to educating and training all military service members.
In May 2003, DOD formally launched a "financial readiness campaign" to address military service members' poor financial habits and to increase financial management awareness, savings, and protection against predatory practices. DOD has also entered into a number of partnerships with nonprofit organizations and government agencies that have agreed to support counselors who offer financial assistance programs to military service members. The services have also made improvements. For example, the Navy has raised its mandatory number of personal financial management training hours, and it is using mobile financial management teams to train financial specialists, including those in geographically remote regions where there are no financial educators to provide training. The services also provide financial planning information on their Web sites.
Agency Comments:
DOD did not provide formal agency comments. Program officials from the Office of the Under Secretary of Defense for Personnel and Readiness and the military services did, however, review a draft of this report and provided technical comments, which we incorporated as appropriate.
As arranged with your office, unless you publicly announce its contents earlier, we plan no further distribution of this report until 14 days from its issue date. At that time, we will send copies of this report to the Secretary of Defense. We will also make copies available to appropriate congressional committees and to other interested parties on request. In addition, the report will be available at no charge at the GAO Web site at http://www.gao.gov.
If you or your staff have questions about this report, please call me at (202) 512-5559 (stewartd@gao.gov) or Jack Edwards at (202) 512-8246 (edwardsj@gao.gov).
Sincerely yours,
Derek B. Stewart:
Director, Defense Capabilities and Management:
