I spoke to a 2 star general not long ago about all of this, and he was visibly shaken by what is happening. He told me even when service money was found (due to incredible cut backs to readiness and cost saving efforts) to use that money saved in order to fully pay people, they were told, in very direct terms by Washington DC: "No!"
And to see Obama pledge $7,000,000,000 last week as a give away to Sub-Saharan African dictators to reduce power blackouts, while cutting hard working American's salaries by 20% is simply evil.
I believe Obama and Hagel are deliberately punishing the DoD workforce as a way to get back at Congress. The Republican's hands are not clean on this either - they voted over 85% through their ranks in approval of the Budget Control Act of 2011 that punished Defense way, waaaaaaay more than any other agency while completely exempting exploding Entitlement spending.
I saw the same thing at my level. There was no saving the gov’t civilians, but we got full funding for our contractors. We were specifically prevented from spending that money on our people. Now they’re gone and we’re severely understaffed.