The budget Hagel unveiled Monday would cut the growth of housing allowances for troops and their families, reduce subsidies provided to military commissaries, and increase healthcare co-pays and deductibles for retirees and active-duty family members, the Hill reported. The medically retired would be exempt from the healthcare-related increases.
When discussing the budget proposal, Hagel acknowledged a battle was likely with Congress, saying that while the budget blueprint wouldn't cut military pay, it nonetheless would be controversial.
"Congress has taken some important steps in recent years to control the growth in compensation spending, but we must do more," Hagel said.
Hagel said the Pentagon plans to reduce the size of the active-duty Army to between 440,000 and 450,000 soldiers.
"As we end our combat mission in Afghanistan, this will be the first budget to fully reflect the transition [the Defense Department] is making after 13 years of war, the longest conflict in our nation's history," Hagel said.
A smaller Army "entails some added risk" if it were caught in extended or simultaneous ground battles, he said. But, he explained, a smaller force could still decisively defeat an enemy in one theater while defending the homeland, and simultaneously support air and naval forces in another arena.
The budget also includes cuts to specific programs, including the retirement of the entire fleet of Air Force A-10 Thunderbolt IIs, that provides close air support for ground troops, the Hill said.
Eliminating the fleet would save an estimated $3.5 billion over five years, Hagel said.
The Pentagon also proposed retiring the Air Force's fleet of U-2 manned spy planes, and replacing them with unmanned Global Hawk aircraft, the Hill said
Hagel said the Pentagon also decided to cap new contract negotiations for the Navy's littoral combat ship at 32, rather than the 52 currently planned.
Defense officials also warned that more cuts would loom if budget caps created by sequestration are not reversed for 2016.
The Pentagon's 2015 budget request meets the $496 billion cap imposed by Congress, but also includes spending $115 billion more than the cap over the next five years, the Hill said.
Defense officials say unless sequestration is reversed, the Army may have to be lowered to 420,000 active-duty personnel, a number Army Chief of Staff Ray Odierno warned would be too small.
Hagel's plan calls for a one-year pay freeze for the Defense Department's top military leaders -- a gesture the Wall Street Journal said was meant to show that even the best-compensated leaders would make sacrifices.