(The Center Square) – The full government cost of an active-duty service member is about $86,000 a year higher than what's reflected in the Department of War's budget.
That's a cost that will ultimately be paid by taxpayers through VA's budget decades from now, according to a Congressional Budget Office estimate of future veterans' benefits that aren't captured in the military's personnel-cost accounting.
CBO's Sept. 25 analysis, presented at the Defense Manpower Roundtable, found that covering the future cost of Veterans Benefits Administration and Veterans Health Administration benefits requires an $86,000 accrual per active-duty service member each year, a cost that sits outside the Department of War's budget and its planning for the size of the force.
The Department of War's fiscal 2026 authorized end strength, set by Congress in the National Defense Authorization Act, is 1.3 million active-duty troops. Applying CBO's $86,000 annual accrual rate across that force, The Center Square calculates that the deferred VA cost amounts to roughly $112 billion a year, an accounting cost that doesn't appear in the Department of War's current personnel budget, not a new expense.
The Department of War already uses accrual accounting for deferred military retirement and most retiree health benefits. CBO developed a similar approach for VA benefits, treating them as deferred compensation because they are directly related to military service. CBO's model follows the 2026 cohort of active-duty troops as they separate and become veterans, with the projected costs peaking in the 2070s, decades after most of today's cohort leaves service, before fading out by 2126.
The shift shows up starkly at the individual level. CBO estimates a median enlisted service member (pay grade E-4) costs $129,000 a year without VA benefits factored in, rising to $215,000 once the accrual is added. For a median officer (O-3), the same shift takes total compensation from $196,000 to $282,000.
According to CBO, VA's total budget is 5.4 times larger in real terms than it was in 1999, even as the living veteran population has been shrinking, and CBO says the cost per veteran is likely to keep climbing. Within that, the Veterans Benefits Administration, which handles disability and other cash benefits, grew from $54 billion in 2005 to $227 billion requested for 2026.
Mark Cancian, a defense budget analyst at the Center for Strategic and International Studies, told The Center Square that Congress currently doesn't factor deferred VA costs into decisions about force size, even though it already does so for other deferred costs like retirement and health care. "At this point, they probably should," Cancian said, "because those are now quite significant."
Cancian said part of the problem is bureaucratic: no agency has an incentive to own the cost. The Department of War doesn't want it counted against its budget, he said, and the Department of Veterans Affairs doesn't want it either, so even if VA did carry the cost, "it wouldn't affect DOD's decision making."
A Department of War duty officer referred questions to VA, saying the department had nothing to provide. A VA spokesperson referred questions about the department's costs and force-planning implications to Congress.
CBO says the gap could widen as VA costs rise. If the cost of VA benefits increases, the agency says, the accrual cost for future cohorts will also increase, pushing the whole-of-government cost of military personnel further above the number reflected in the Department of War's budget.
