Since 2000, spending on military personnel has grown at an average annual rate of 3.3 percent. This increase in spending threatens to undermine readiness and crowd out future efforts to modernize key military capabilities. A new tool simulates how various Department of the Air Force personnel policy changes could affect spending, allowing users to view cost variances when adjusting such factors as personnel count, rank, and experience levels.

Cover: Assessing the Implications of Policy Options for the Military Personnel Budget
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Assessing the Implications of Policy Options for the Military Personnel Budget

An Analytic Framework for Evaluating Costs and Trade-Offs

by Matthew Walsh, Thomas Light, Raymond E. Conley

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Research Questions

  1. What are the factors that affect MILPERS spending?
  2. How and why do MILPERS costs vary over time and among services?
  3. How can the DAF assess solutions to reducing MILPERS spending while considering affordability objectives and other goals?

Since 2000, spending on military personnel (MILPERS) has grown at an average annual rate of 3.3 percent to approximately $36 billion in 2021. This outpaced growth in prices in the overall economy, which averaged 1.9 percent per year for the same period. To ensure a ready workforce without undercutting modernization efforts, the U.S. Department of the Air Force (DAF) must explore options to maximize MILPERS affordability. At the same time, it must consider the nonmonetary trade-offs and risks that these options entail. A new analytic framework allows users to view savings, trade-offs, and risks of different solution options alongside one another.

Key Findings

  • The DAF MILPERS budget is developed by multiplying the estimated work years in various end strength subcategories by discrete cost elements and by summing the totals. The MILPERS budget can be controlled by reducing end strength or the average cost of an airman.
  • Basic pay makes up much of the standard composite pay rates. Solutions that involve limiting the rate of growth of basic pay and other personnel costs might require coordination across the military services and Congressional approval.
  • Grade and years of service affect basic pay along with several other elements of the standard composite pay rates. Personnel policies that alter these factors could reduce the cost of an airman, and they would not require Congressional approval.
  • The DAF's average cost of an active duty person exceeds those of the U.S. Army and U.S. Marine Corps. This is because of the greater share of officers and the more-senior grade mix in the DAF. Solutions that involve reducing the ratio of officers to enlisted personnel or shifting toward a less-senior grade mix could reduce the average cost of an airman.
  • Certain personnel policies would allow the DAF to achieve annual savings of tens of millions to hundreds of millions of dollars annually.
  • Larger levels of savings require changes to compensation, end strength, or grade strength.

Recommendations

  • The DAF could use a simulation capability like the one described in this report to link workforce and policy changes to MILPERS spending. This capability could be used to explore how personnel policies might be used to decrease MILPERS spending. In addition, this capability could be used to explore how personnel policies designed to meet nonfinancial objectives will affect future MILPERS spending.
  • Improve the fidelity and breadth of the simulation capability. The analytic tool described in this report establishes a basis for continuing lines of development. These include capturing year-over-year dynamics produced by changes in workforce and personnel policy, increasing the fidelity of monetary outcomes represented in the analytic tool, and incorporating additional nonfinancial outcomes in the analytic tool.
  • Refine and evaluate solution options to reduce MILPERS spending. Several solution options showed considerable potential to reduce future MILPERS costs. In particular, the DAF should reconsider personnel requirements for platforms, missions, and operations and examine ways to apply workforce and personnel policies in a targeted manner tailored to characteristics of different career fields.
  • Develop solution options with input from operations, plans, programs, financial management, logistics, engineering, and force protection communities. Approaches for reducing MILPERS spending might introduce risk throughout the DAF enterprise. The problem cannot be solved in the silo of manpower, personnel, and services. Additional perspectives from across the air staff and secretariat are needed to identify risks associated with different solution options and to develop mitigating COAs.

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    Drivers of MILPERS Spending

  • Chapter Three

    Historical and Cross-Service Analysis of MILPERS Spending

  • Chapter Four

    Analytic Framework for Evaluating Implications of MILPERS Affordability Efforts

  • Chapter Five

    Application of the Analytic Tool

  • Chapter Six

    Conclusion

  • Appendix A

    Decomposing Changes in the DAF MILPERS Budget over Time

  • Appendix B

    Description of the Manpower Realignment Tool

Research conducted by

The research reported here was commissioned by the U.S. Air Force and conducted within the Workforce, Development, and Health Program of RAND Project AIR FORCE.

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