Senator CANNON. Now the basic pay for those with under 2 years of service has not been increased since 1952 when a 4-percent increase was granted.

Mr. Secretary, the Department of Defense in its original pay proposal recommended certain increases for personnel with under 2 years of service, whereas in your revised proposal you agree with the House bill and recommend no increases for such persons.

We all know those affected are those in the lower commissioned and enlisted grades. The Department of Defense originally recommended for a second lieutenant, with under 2 years, a basic pay increase of $27.70 and a subsistence increase of $29.12, for a total of $56.82. -der your revised version this officer would receive no increase in basic pay or subsistence.

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Now when we compare other military grades with over 2 years service in this bill and the 1952 rates, we find that increases have been granted ranging from 43 to 79 percent.

I know there is an argument made that a second lieutenant is serving a probationary period for the first 2 years, but it is a fact that about 55 percent of them do get married during this period, and they must assume responsibilities.

Would it be the view of the Department of Defense that something should have been done in this bill to at least recognize some of the grades with under 2 years of service?

Mr. PAUL. Mr. Chairman, you are quite correct in saying that we had recommended an increase in our original proposals for these service members.

However, I think it is fair to say that we had always attached the higher importance to the people who had completed their obligated tours of service.

In assessing what had been done by the House in H.R. 5555, where as I say they included in the bill a number of allowances which we had not recommended we felt that we had to find the highest priority items in recommending to this committee what we would like to have restored.

There undoubtedly is a strong equity argument in favor of increasing the pay of the lowest officer grade. I believe about half of them are married and therefore have dependents and attendant financial responsibilities, but we do not place this individual in as high a priority as the person who has completed his obligated service, or who is about to complete his obligated service and is at the decision point, as Senator Engle pointed out, where he has got to decide whether or not to stay with the Armed Forces as a career. So in summary, Mr. Chairman, it was a matter of priorities as far as we were concerned.

Senator CANNON. But you still agree that certainly there is some -equity in that position.

Mr. PAUL. I do indeed.

Senator CANNON. Now, Mr. Secretary, in the Military Pay Act of 1958 a separate pay table was enacted for officer O-1, second lieutenants through O-3, captain with over 4 years of active enlisted service, in order to give this group greater longevity increases than the normal junior officers in these grades whose longevity increases were cut off at the promotion point where they were expected to either go up or

.out.

Such increases cut off after over 3 years for the second lieutenant and over 6 years for the O-2, the first lieutenant. The separate table among other things extended the longevity increases for the first and second lieutenants for over 14 years in both cases.

Now the pending bill reflecting departmental recommendation consolidates the table. The result is that the typical junior officer, if he is not promoted, would receive the same increases as the group in the separate table.

Under the House bill, the typical first lieutenant with over 14 years. of service would receive a 39.5 percent increase going from $380 to $500 a month. Under your recommendation he would receive an even greater increase of 47.4 percent, going from $380 to $560 per month. When we compare this to the fact that a first lieutenant with under years will receive no increase, does not this consolidation make for a very bad distortion of the pay system?

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Mr. PAUL. Mr. Chairman, I would like to be able to study that a little bit more. I can give you a general answer now.

We had proposed, and the House had accepted, a single table. This would allow credit for inactive enlisted service but we felt this was appropriate and consistent with existing law pertaining to service creditable for computation of basic pay for all grades.

If you would like a more detailed explanation now, I would like to ask your permission to have Colonel Benade, who is with me, explain in more detail what we had in mind.

Senator CANNON. You can either have Colonel Benade explain that or submit it for the record if you prefer. If the colonel is prepared to explain it now, I think the committee might find it helpful,.. because it is a serious problem.

Mr. PAUL. Yes, sir.

Colonel BENADE. I would be very happy to try to do so, Senator. Prior to 1958 there was a single pay table. The 1958 dual table for officers marked the first time that that had ever been done.

The reason for it, I think, was that in 1958 the Department of Defense recommended a step in grade system and abandonment of the longevity system. That was rejected by Congress, and the longevity system was retained.

However, to meet some of the objections that were made at that time to the longevity system, the longevity increments were cut off at what were considered to be the normal promotion points for officers in the grades 0-1, O-2, and 0-3.

At the same time, however, a new table was instituted which continued the previous number of longevity steps for officers who had more than 4 years of active enlisted service, so that the effect of the separate tables was simply to differentiate between officers who had more than 4 years of active enlisted service as opposed to those who had less than 4 years of active enlisted service.

It produces the result, Senator, that only in these three grades are some officers not able to count inactive service for pay purposes. In all of the enlisted grades, warrant officer grades and in the officer grades of O-4 and above, service members can count inactive service as well as active service for pay purposes.

Consequently, it is only three pay grades 0-1, O-2, and O-3, that are treated differently in the existing pay system. It was our belief, after

I will just run through the retention rates of physicians and dentists in the services because they may be of interest to the committee. Of the 2 years obligated personnel, the retention rate in the Army is 1.5 percent for physicians, 4.9 percent for dentists. In the Navy it is 3.2 percent for physicians and 10.5 percent for dentists. In the Air Force it is 1.3 percent for physicians and 7.1 percent for dentists.

The average resignation rate of medical and dental officers after they have completed their "pay back" time following residency training under Government sponsorship is over 50 percent. In short, there is a very serious problem.

We did not propose in our bill an increase in the special pay for physicians and dentists. We recognized we had this retention problem, but we were hopeful that the increased pay rates themselves might serve to alleviate the problem.

Our initial thought had been that we wanted to have a little experience behind us with the new pay rates to see what would happen. However, the question has been raised with us as you indicated as to whether we would support an increase at the 6-year point and at the 10-year point.

I believe you mentioned going to $300 at 6 and $350 at the 10th year of service. I would like to qualify my answer in this manner, Mr. Chairman.

We have canvassed the services on this issue, and we received different recommendations from each of them. In general, they would support an increase of the rate at the 6- and 10-year points.

However, in no case did the services suggest an increase to more than $250 at the 6-year point. Most of the services had recommended going from $200 to $250 at the 6-year point instead of to $300.

And also, most of them recommended going from $250 to $350 at the 10-year point, as you had indicated. So I would say, Mr. Chairman, we would support the desire of Congress to raise this pay, we would certainly not object with the one question of whether you need to go the extra $100 at the 6-year point.

I believe the cost differential, of what you have indicated would run in the vicinity of $6-plus million a year compared to an increase of perhaps $5 million if we went to $250 a month at the 6-year point.

Senator CANNON. Will you supply for the record your exact projection on the increase in cost if you go from $200 to $250 at the 6-year point as compared to $200 to $300 at the 6-year point, and, also, then the same comparison from $250 at the 10-year point to $300, and a comparison of $250 to $350 at the 10-year point, so that we will have before us the cost estimates on that type of an approach.

Mr. PAUL. Yes, sir.

Senator ENGLE. May I ask a question here? What does a doctor in the military service get in monthly pay?

Mr. PAUL. In addition to his regular salary as an officer, if he is serving under 2 years, he gets $100 a month extra.

Senator ENGLE. I know, but what does he get if he is a captain, say? Mr. PAUL. You want a captain, for example?

Senator ENGLE. Yes, that is a good place to start. What I am driving at is I don't think you can pay these doctors enough to keep them in the service. Any doctor who can't make $1,000 a month ought to be a veterinarian.

Mr. PAUL. They get a special pay, too.

Senator ENGLE. And I am for veterinarians.

Mr. PAUL. Senator Engle, a captain, Medical Corps, with over 4 years of active service now gets $460 a month in basic pay, plus $150 in special pay, plus a rental and subsistence allowance for a total of $787.93 a month.

Senator ENGLE. What you propose is nitpicking the case by adding a couple of hundred dollars, is that it?

Mr. PAUL. No. As a matter of fact, we don't propose doing anything about that category. The proposal we have is at the 6-to-10-year point. This is where we are really losing our specialists, because it's at that point that they complete their "payback" time following residency training under Defense sponsorship. For example, a physician who receives residency training for 3 years has to stay on duty 3 years following completion of his training, so he has already arrived at the 6-year point by the time he has completed his obligation. And just as we have made our recommendations with respect to line and other officers, we think that is the point where this problem should be hit. Senator ENGLE. I suspect you are not touching the top nor bottom of this problem, because if I was a doctor, I would get out of the armed services just as fast as I could and get into private practice.

Now, how are you going to meet that problem? I say that any doctor who can't make a thousand dollars a month out in private practice isn't even a good pill dispenser. So how are you going to meet that?

Senator CANNON. Senator Engle, if you will yield there, if you will note the chart on page 2, a captain with 8 years of service, a doctor under the DOD's proposal would get $11,364 a year.

Senator ENGLE. I don't see $11,000. I see $8,000.

Senator CANNON. That is because you haven't added the $200 a month to what he gets already.

Senator YOUNG. Rental allowance.

Senator CANNON. If you add $2.400 on to that which he gets because he is a doctor now, he ends up with $11,364 a year under the DOD proposal. We are discussing now whether an additional $50 a month or an additional $100 a month would help solve this problem.

If he got an additional $100 a month, that would throw him $12,500, roughly.

Senator BEALL. After how many years?

Senator CANNON. That is at the 8-year point that I took right there. Mr. PAUL. Mr. Chairman, may I add this? I do think we have got to keep in mind that over the period of a 30-year career, a medical officer draws something like $100,000 more than an officer who is not

Senator ENGLE. Say that again, he draws more what?

Mr. PAUL. $100,000 more over a 30-year career than an officer in the line or any other officer who doesn't receive this special pay. So the additional compensation provided for medical officers is not peanuts, Senator. But we would agree that it is probably not enough at this serious retention point.

Senator CANNON. The initial theory of paying that pay was solely on a retention basis, was it not, to try to keep doctors, who were urgently needed, with some experience?

Mr. PAUL. Yes, sir; that was the intention.

Senator CANNON. Now, Mr. Secretary, you have a rather confused position here with respect to subsistence pay. Initially, you requested some changes in subsistence. The House didn't go along with you on part of those changes and came up with some rather minor changes in some particulars, some major ones in others.

I wonder if it would be fair to say that it is the view of the Department in recommending the elimination of all subsistence increases at this time that it would be more proper to place this money in the junior officer pay scales.

I am referring now to the $3 increase that the House provided.

Mr. PAUL. Yes; that is a very fair statement, Mr. Chairman. I feel, to be perfectly frank, that the pay and allowance system is complicated enough as it is. We may have erred in recommending in the first place an increase in the subsistence allowance for officers, although we feel it was justified.

It's awfully hard to say whether you can or cannot justify subsistence allowance increases. You can always find statistics that will tend to justify certain increases. However, we feel, and we are now looking into this as part of our compensation study, that we ought to try to seek to simplify the whole compensation system. Therefore, we think that at this time, if the Congress were to add another statutory provision, for example, on the commuted ration, which is the most expensive of the items the House put in this bill, it would make our job that much more difficult.

The commuted ration, for example, is now at $1.03 a day. That doesn't sound like very much. But it is computed on the basis of the cost of he food, and that is the cost of the food. We review it annually. It could go anywhere, it could go up to $1.20 depending on the cost of food. It has never, I might add, gone to $1.25.

So we are principally interested in simplifying the system, and we feel that it would give much more visibility to what a man makes if you put it in basic pay.

Senator CANNON. Your objection to the fixing of the $1.25 then is because that has no relation to the actual cost of the food insofar as the commuted rations are concerned?

Mr. PAUL. I don't want to appear to say that the House committee did not have any good rationale for this figure, but it was a rationale dependent on certain existing circumstances, and I think it should not be done because the factors in this equation change from year to year, such as the cost of food.

Senator ENGLE. What do you say that was per day?

Mr. PAUL. $1.25 per day is the

Senator ENGLE. I see my wife's grocery bills.