Having been granted a brief reprieve from automatic budget cuts, Pentagon planners are crunching a new set of numbers.
The deal Congress and the White House struck last week created a two month delay in the cuts that were due to take place on Jan. 2. Up until New Year’s Eve, DoD had calculated that two separate budget cutting mechanisms in the sequestration law would have reduced its budget by $62 billion this year. Now, DoD estimates the cuts only will amount to $45 billion.
“It’s smaller because they changed the law,” Pentagon Comptroller Robert Hale told an audience at the Brookings Institution Monday. “They changed some of the caps and reduced the size of the sequestration during the negotiations.”
Shorter time frame to make cuts
But Hale said there’s obvious bad news too. If sequestration really does kick in this time, DoD and other agencies will be dealing with the cuts in a more compressed time frame, with only seven months remaining in the fiscal year. And in DoD, the cuts will be further concentrated in fewer areas. Personnel costs would be exempt from the reductions. Also, DoD still would attempt to protect funding for the war in Afghanistan, Pentagon spokesman George Little told reporters Tuesday.
“This is very serious business. Even though we may be able to still carry out the fight in Afghanistan and protect some programs, overall, our mission as a department could be devastated at least for a short period of time. That’s not a prospect we relish,” he said. “We’ve had the debt ceiling fight, we’ve had continuing resolutions, we have the prospect of sequester. This is not the right way to run a railroad.”
Both Little and Hale complained this week not just about the prospect of cuts, but about the overall lack of budget stability and certainty in the government over the past few years.
“I could try to be artful and diplomatic, but I’ll boil it down to this: at this stage, it’s a mess,” Little said. “We need to avoid the fiscal cliff. It’s time for Congress to avert sequestration once and for all. This is not about cells in an Excel spreadsheet. This is about the defense of the United States, the people who serve in the United States military, and our civilian personnel who carry out missions in support of the defense of this nation.”
Budget request delayed?
DoD and other agencies still are operating under a continuing resolution since Congress never enacted full-year appropriations bills for 2013. At the same time, agencies are preparing their budgets for 2014 in an environment that includes a lot of doubt about the future with more rounds of fiscal negotiations still ahead. In part because of that uncertainty, Hale said the Obama administration budget proposal that would normally be released in early February almost certainly will arrive later than usual.
“I think it’s almost inevitable there will be some delay, I just don’t know what,” he said. “Normally, we would be transmitting data to OMB right now and we’re not ready to do that. It will be OMB’s call as to what delay occurs. We will start to look at alternatives in attempts to be as ready as we can when we get top-line guidance.”
Even if sequestration is averted, many analysts expect DoD to come in for further budget cuts at some level. Hale said almost any alternative would be preferable to sequestration, with would deny the Pentagon the authority to decide which programs and budget accounts to cut.
But if DoD has some say in what to cut, Hale signaled that acquisition programs would probably take a disproportionate hit.
“We will try to do it in a balanced manager, but I think there’s a long history and good reason why early in a draw down, the cuts tend to be heavily on the investment portion of the budget,” he said. “That’s because it takes us a while to make force level decisions and to gradually draw down the size of our forces. To be allowed to do that, we have to not be under sequestration and we’ve also got to get the U.S. Congress to agree, and they’ve got some misgivings about the force level reductions we’ve already proposed, let alone ones that might come in the future. So we’ve got our work cut out for us.”
Planning efforts underway
Congress already said no to several of DoD’s proposed budget reductions in the defense authorization bill it passed last month, for example, turning back a downsizing of the reserve component of the Air Force.
“I’m concerned generally that the Congress votes for lower defense budgets and then says we can’t do the things we need to do to achieve them,” Hale said. “They prohibited, for example, any retirement of Navy ships, which we need to do. They turned down many of our requests to slow down the growth of retiree healthcare. I believe we’ll need to continue to work with them to make changes of that sort and more if we’re going to make further reductions in the defense topline. It is a challenge.”
Little said with the latest sequestration deadline less than two months away, the Pentagon is undergoing intensive planning efforts, although it’s still telling its managers not to expect sequestration, and not to take any actions like slowing down contracts in anticipation of the cuts. And for now, it has no immediate plans to issue furlough notices to civilian employees.
“We’re going to do right by our employees and do what we have to do to follow the law,” he said. “No decisions have been made yet, but we’re actively consulting with OMB to see what actions we need to take in advance of the deadline. We hope to avoid it, but we need to be ready.”