Hearings

reaching this decision, the Comptroller argued that the phrase "as now existing" contained in Section 8 of the 1899 act (providing for retirement "with the rank and three-fourths the sea pay of the next higher grade, as now existing, including the grade of Commodore,") clearly referred "to the grade and not to the pay or the rank of the grade." "The position of words in the sentence shows that they modify the grade and do not limit the pay of the grade to the rate existing at the passage of the act." "7

The Comptroller further held that the Act of 1899 entitled Naval officers retiring after June 30, 1899, and receiving the pay of retired Army officers of equivalent rank to receive the same longevity increases that retired Army officers received. This ruling was based on a construction of the provision in Section 13 of the 1899 Act equalizing Navy line officers' pay with that of their Army counterparts, on principles enunciated in the Supreme Court's decision in 1881 in the case of United States v. Tyler (105 U.S. 244), which held that Army officers were entitled to such increases for length of service whether on the retired list or on active duty," and on the Supreme Court's decision in 1885 in the case of Thornley v. United States (113 U.S. 244)." The Comptroller concluded: "It would follow from the principles of these decisions that, as section 13 of the Navy personnel act provides for Army pay to all commissioned officers of the line and Medical and Pay Corps, officers retired on Army pay under the act are entitled to longevity pay as retired officers in the same manner as retired Army officers."

Congressional debate on act of March 3, 1899

Most of the floor debate on the Act of March 3, 1899, centered around the cost of Naval personnel, particularly in contrast to the Army, and in neither body was the retirement system discussed in particular detail. Congressman Joseph Bailey of Texas, in what he freely acknowledged was a futile effort. sought to strike out the entire retirement section of the bill on the principle that "when the work ceases, the pay ought to stop." Bailey charged that the existing retirement law "either compels the taxpayers of this country to pay these gentlemen something for nothing, which, of course, offends all sense of justice, or else it is based upon the theory that the Government does not pay these men the full value of their services while they work and retains each year something from what they have earned as a fund to support them in their old age." He added: "From the foundation of this Government to the beginning of the civil war we had no retirement list. We paid our officers in the Army and Navy what they earned, and left them, like other men, to spend it or save it as their own prudence might dictate." 51

In the Senate, where there was less opposition to the retirement provisions. Senator Ben Tillman of South Carolina defended this part of the bill as follows: "We offer premiums here for retirement for the purpose of getting some of the younger men up toward the top before they have to be retired. before they get so old that they are not fit to fight." 52 In neither body of the Congress was the question of the relationship between active duty pay and retirement compensation dealt with at this time.

Retirement legislation in 1908

The relationship between active duty pay and retirement compensation was not discussed during the lengthy debate over the Navy Appropriation Act of May 13, 1908, even though this bill contained explicit statutory authority for recomputing the pay of retired Navy personnel. The Act provided that "The pay of all commissioned, warrant and appointed officers and enlisted men of the Navy now on the retired list shall be based on the pay, as herein provided for, of commissioned, warrant and appointed officers and enlisted men of corresponding rank and service on the active list." 63

47 Ibid., p. 810.

48 See page 9.

49 See page 9.

505 Comp. Dec. 811. Longevity increases for retired officers were eliminated by the Act of March 2, 1903 (32 Stat. 932).

51 Congressional Record, January 17, 1899, p. 709.

52 Congressional Record, February 17, 1899, p. 1972.

53 35 Stat. 128.

When Congressman George Foss of the House Committee on Naval Affairs introduced an amendment which, he said, "provides that the pay of officers in the Navy shall be the same as those in the Army," the text of that amendment contained in its third paragraph the exact language of the retirement provision cited above. However, in the brief discussion that followed, no mention was made of retirement." Similarly, there was no discussion of this point in the Senate, where the retirement provision was passed as a part of an amendment introduced by Senator Eugene Hale of Maine."

In the House debate on the Army appropriation bill, on the other hand, the recomputation issue emerged in a manner which in many respects was prophetic of future debates over this question. When the House Committee on Military Affairs reported the Army bill (H.R. 17288) to the House on February 24, 1908, it contained a provision which stated: "That nothing in this act shall be construed to increase the pay of enlisted men now on the retired list." 5" The reference to enlisted pay only was due to the fact that the House version of H.R. 17288 increased only the pay of enlisted men.

When Congressman Edgar Crumpacker of Indiana asked if it would not be better, "in the interest of good feelings and simple justice," to treat enlisted men already on the retired list the same as those retired later in regard to pay, Congressman John Hull of Iowa, who was presenting the Committee bill, replied: "that question was discussed, and while there is an element of justice in saying that those now on the retired list shall have all the benefits of his act, yet there is nothing in equity that demands it." Observing that "one of the great problems was that of cost," Hull said it was his judgment that "something over $400,000 would be required to meet the conditions in this bill applied to the retired list, which would be more than in equity and justice they are entitled to." Stressing the prospective intent of this legislation, Hull added: "What we want today is an active Army, to fill up the depleted ranks, to make it possible to secure for the service of the country in the future the number of men prescribed by law for the size of the Army in time of peace. I do not be lieve that there is any reason why this provision should apply to the retired list. I will say that when the pay of the officers was up the Secretary of War [William H. Taft] was exp icit that, in his judgment, the officers and men on the retired list had their status fixed and had no reason to come to Congress for an increase."

Although the Congressman from Indiana was clearly troubled by what he regarded as a violation of the principle of equality in this matter, he offered no amendment to the retirement provision, which remained in the version of the bill passed by the House on February 29, 1908.57

The version of H.R. 17288 which was reported out by the Senate Military Affairs Committee did not contain a comparable provision prohibiting recomputation, however, and the issue did not arise on the floor of the Senate when the Army bill was debated and passed by that body in early April."

In the conference committee, the House conferees accepted the Senate's deletion of the House provision that would have denied recomputation of the retirement pay of enlisted men already retired. When the conference committee report was submitted to the House, several Congressmen voiced objections to the fact that the bill would provide pay increases for retired officers as a result of the higher pay scale for active duty officers which the Senate had added while deleting the House prohibition of recomputation of retired pay. However, there was no direct reference to this deletion.

In defending the conference report, Congressman Hull argued: "This bill does not deal with the retired officers at all; there is a law now on our statute books

54 Congressional Record, April 13, 1908, p. 4674. Congressional Record, April 21, 1908, p. 5007.

Congressional Record, February 28, 1908, p. 2664. Debate began on February 24 (pp. 2399-2415), continuing on February 25 (pp. 2483-2510), February 26 (pp. 25422572), February 27 (pp. 2610-2627), February 28 (pp. 2664-2685), and February 29 (pp. 2697-2717).

Congressional Record, February 28, 1908, pp. 2665-2667.
Ibid., April 6-7, 1908, pp. 4413-4425, 4459-4470.

Congressman Hull estimated the cost of increasing the pay of the 942 Army officers on the retired list in 1908 to be between $200,000 and $225,000. The total increase in the Army appropriation for FY 1909 over FY 1908 was given as $17 million. Congressional Record, May 8, 1908, pp. 5945–5946.

which provides that every officer retired shall receive three-quarters of the pay of his grade on the active list. .., without any allowances. So by increasing the pay of. the active list we increase the pay of... the retired list, . . .` Although Hull did not indicate the specific statute to which he was referring at this point in the debate, it would appear that he had in mind the Revised Statutes of 1874 (see above).

When Congressman Marlin Olmsted of Pennsylvania asked if under the “act of 1861" a man did not go into the Army "under a contract that if he spends forty years in the service he will be retired on three-quarters of the amount of pay he would get if he was on the active list," Hull agreed but added, "but we could abrogate that if we wanted to by law." No one challenged Olmsted's erroneous interpretation of the "act of 1861"-presumably the Act of August 3, 1861which in fact did not establish the 75 percent formula for retirees but did call for "pay proper of the highest rank held at the time of retirement" plus four rations per day.

Admitting that the cost of living probably affected equally both active duty and retired personnel, Hull stated: "Now, it has been contended that if those on the retired list should not have any benefit of this bill.... then the men that were to be retired tomorrow... would have one class of pay, and another officer living right beside him would have another class of pay. Of course there is some weight to that, but it is not conclusive."

Later, when Congressman James Slayden of Texas again brought up the contract argument, Hull accepted Slayden's contentions that "an executed contract" was involved, adding that "the Secretary of War took that ground." " Congressman Hull then stated that he was not arguing the point, "but I do want to call attention of the House to this point that seems to me will appeal with force to any man who has had any experience in it. The very minute you undertake this discrimination-and that is what they would call it-life would not be worth living to any Member of Congress."

When the conference report on the Army appropriation bill came to a vote, the House passed the measure as the Senate had done two days before. As finally enacted, the Army appropriation Act of May 11, 1908,2 provided pay increases for both officers and enlisted men and contained no language prohibiting recomputation of retired pay on the basis of these higher rates of active duty pay, the House provision against recomputation of retirement pay having been deleted in the House-Senate conference committee on the Army bill.

Although there was a lack of consistency in the legislation enacted between 1861 and 1899 as it applied to the Navy's retirement pay and that of the Army and Marine Corps, in the latter case there was no successful challenge during this entire period to the concept of relating retired pay to active duty pay. However, it is equally apparent from the record of debates and committee reports that until the end of the century Congress was not much concerned about the question of retirement pay and probably made no attempt to develop a clear philosophy on this subject for application to all the military services. There were of course a number of reasons for this: the concept of retired pay for non-military retirees was not fully accepted; pay increases for the military were few and far between; and the budgetary impact of retired pay was minor because of the small size of the regular active-duty force during that period.

PART II-1909 TO 1958

Beginning in 1917 a series of events occurred which forced Congress to focus its attention on the hitherto inconsequential budgetary item of retired pay for the military. First, there was the drafting of men for World War I, followed some 25 years later by all-out mobilization during World War II and, soon there

Secretary of War Taft apparently changed his position on recomputation between February and May. 61 Congressional Record, May 8, 1908, p. 5946.

62 35 Stat. 106.

63 Between the fiscal year 1909 appropriations acts and the fiscal year 1917 naval appropriation act, certain laws were enacted affecting retirees but not directly relating to recomputation. They are therefore not treated in this study.

after, another partial mobilization for the Korean conflict. Then came a change in national security policy which involved maintaining for the long haul a large peacetime armed force. Meanwhile, following World War II a grateful Congress enacted legislation liberalizing the eligibility rules for non-disabiltiy retirement. No one could have foreseen in 1861, when the first non-disability retired list of 200 officers was established, that the cost of such military retirement annuities would increase during the twentieth century to approximately one half billion dollars in fiscal 1958 and to four billion dollars in fiscal 1973.

It is understandable, therefore, that as these costs mounted, the subject of military retired pay received increasingly frequent attention in Congress, leading to the decision in 1958 to abandon the traditional recomputation formula and to substitute another based on the actual cost of living. The new method, it was hoped, would slow the rising costs of retirement benefits. In the following pages, the significant events leading up to the action of 1958 are traced by considering the changes in military pay beginning with that marking United States entry into World War I.

The Act of August 29, 1916

With the outbreak of World War I in Europe, there was considerable effort in the United States to strengthen the armed forces against the possibility of the United States' being drawn into that conflict. The naval appropriations act for fiscal year 19174 included a provision authorizing the involuntary retirement of senior naval officers by reason of age. The act further stipulated that "the total retired pay shall not exceed seventy-five per centum of the shore-duty pay they were entitled to receive while on the active list."

This provision had been inserted in the 1916 act by the committee of conference although there was no comparable language in either the House or Senate versions of the naval appropriations bill. The record of floor debate on the bill manifests no interest in naval officers' retired pay. However, there are two considerations that should be noted in regard to this retirement provision: (1) The naval appropriations bill for that year contained no provision for a pay increase. Had it included one, the question of an increase in retired pay would probably have been raised. (2) The total number of officers to be retired under this provision was probably quite small.

Act of May 18, 1920

This act to increase the Efficiency" of the armed services granted a temporary twenty percent pay increase to all military personnel. It stipulated that the "increases provided in this Act shall not enter into the computation of the retired pay of officers or enlisted men who may be retired prior to July 1, 1922.” Thus, there was to be no increase in the retired pay of those already on the retired list, nor for those who were to retire during the lifetime of the act, which was temporary and expired on June 30, 1922.

There had been substantial differences between the House and Senate versions of the bill (H.R. 11927 and S. 3383, respectively). The former had no provision for the recomputation of retired pay; the latter embraced the recomputation principle.

In its original form, H.R. 11927 dealt specifically with increased compensation for Navy and Coast Guard warrant officer and enlisted personnel. Although it had no recomputation clause for those on the retired list, it did have a provision allowing members of the Fleet Naval Reserve who had been recalled to active service and subsequently retransfered to inactive duty to recompute their retainer pay."

439 Stat. 579,

Conference Report No. 1099, 64th Congress. Congressional Record, August 15, 1916, pp. 12652-12655. H.R. 15947, 64th Congress.

741 Stat. 599.

At the time of the passage of the act, the Fleet Naval Reserve list contained those persons who had completed an enlistment (usually four years active service), Naval Reservists who were obligated to attend drills, and those enlisted men who had completed at least sixteen years but less than thirty years active service. The last named group received retainer pay, which was a percentage of active duty pay. When total active and Fleet Naval Reserve service equaled thirty years, these persons were transferred to the retired list and received retired pay. While in the Fleet Naval Reserve they were subject to involuntary recall to active service.

The Senate bill, S. 3383, which had passed the Senate on February 3, 1920, granted pay increases of ten to twenty percent depending on particular categories of personnel involved. Section 4 of that bill provided that--.

"the compensation of all officers and enlisted men on the retired list shall here'after be computed on the pay established by this Act, and on all allowances provided for officers and enlisted men of corresponding rank and rating on the active list."

The report of the Senate Committee on Military Affairs justified an increase in retired pay commensurate with that granted to active duty personnel on grounds of an increase in the cost of living. The report stated:

"The bill was drafted to meet fluctuations in the cost of living so far as it affects commissioned officers and certain noncommissioned officers and is intended to be flexible and elastic. Undoubtedly, a large portion of the present high cost of living is due to inflation, and, while it is extremely improbable that a level as low as that of 1908 will ever again be reached, it is almost certain that some reduction will take place in the future. In 1908, the records show that the average cost of the daily ration was 19.7 cents. The present cost is 55.6 cents.

"The Committee also proposes to grant a proportionate increase to officers and enlisted men on the retired list. They are confronted by the same distressing situation.'

H.R. 11927 was sent to the Senate after passage in the House. The Senate Committee on Naval Affairs struck out the entire content of the House bill and replaced it with the provisions of S. 3383, which had already passed the Senate." In this form the bill passed the Senate on February 11, 1920.

The House disagreed with the Senate amendment. A committee of conference rewrote H.R. 11927, incorporating most of the features of the original House bill and some of the features of the original S. 3383. The Senate provision allowing recomputation of retired pay was stricken, and a provision specifically prohibiting recomputation was added.

Considering the support for recomputation on the Senate side (evinced through the legislation that body passed in the form of S. 3383 and H.R. 11927), it would appear that the opposition to recomputation came from the House managers of the committee of conference (although this is not directly supported by either House or Senate documents). The conference committee bill, however, provided for the creation of a special committee (composed of five Members of the House and five Members of the Senate) to “make an investigation and report recommendations to their respective Houses not later than the first Monday in January, 1922, relative to the readjustment of the pay and allowances of the commissioned and enlisted personnel of the several services. . ."" This may well have constituted a compromise on the part of the House managers with those of the Senate who presumably supported recomputation.

The special joint committee submitted its report " together with draft legislation providing new pay scales as well as sliding scale of allowances tied to changes in the cost of living. The draft legislation also included provisions for the recomputation of the retired pay of officers and enlisted men.73

Act of June 10, 1922

The Pay Adjustment Act of 1922" provided permanent pay increases for active duty officers, warrant officers, and enlisted men. Enlisted retirees were permitted to recompute their retired pay based on the pay scales established by the act. However, retired officers and warrant officers were specifically prohibited from recomputing their pay.

The initial Senate version of the pay adjustment bill, S. 3326, differed only slightly from the special committee's draft legislation." and both the Senate and the House bills authorized the recomputation of retired pay for officers and enlisted men based on the pay scales established by the bill.78

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