DoD Budget: Fiscal 2013-17 Highlights, Numbers & Unfolding Events

On normal years the US Department of Defense goes through a complicated-enough process to establish and finalize its budget. But whereas FY 2012 offered a welcome return to normalcy after a very long continuing resolution, the budgeting cycle for fiscal year 2013 unfolded in an unproductive, fractious political environment.

As fiscal year 2012 came to a close Congress bought time with a continuing resolution. And as the new civil year started, Congress begrudgingly applied a short-term patch to avoid the fiscal cliff, while the President eventually signed a FY13 authorization bill containing language he had threatened to veto for months. By March 2013 everyone seemed to capitulate to wrap up appropriations for the rest of the year. But FY13 appropriations ended up including sequestration, an outcome that few had predicted since the Budget Control Act was passed in 2011. The FY14 budget cycle then started late, with only dim hope of a more reasonable outcome.

House Bill

Dec 20/12: The House passes 315-107 the language of the conference report. CBO estimate of PAYGO effects [PDF] | Statement from HASC chairman McKeon | The Hill.

Sept 13/12: The House passes the National Security and Job Protection Act (HR 6365, PDF – CBO assessment), a bill sponsored by Rep. Allen West [R-FL] to amend the BCA and elimitate some of its spending cuts. Unsurprisingly the Administration opposes it [PDF] as vehemently as earlier defense funding bills originating from the House in past months. It is the House’s second attempt at rolling back sequestration after passing the Sequester Replacement Act (HR 5652) in May.

Meanwhile the House Appropriations Defense subcommittee approved and submitted its draft report and bill [PDFs]. At $519.2B, their baseline comes $3.1B above the CBO scoring of the President’s request while war funds equal the $88.5B asked by the Administration. A few amendments have been made since May 7’s draft, including one by Jeff Flake [R-AZ] that “requires that OCO funding be used only for programs, projects, or activities that are categorized as Overseas Contingency Operations in the fiscal year 2013 President’s budget request and justifications.” This is a shot across the bow to Senate appropriators who have been using OCO to keep baseline spending within Budget Control Act (BCA) constraint (see Senate section below).

See this statement by Chairman C.W. Bill Young and Ranking Member Norm Dicks’ release.

May 15/12: The White House sends a statement [PDF] to Buck McKeon that objects to pretty much all the variations from the president’s budget sought by House Republicans, and threatens a veto. Such a threat looks disproportionate and premature. In reality the differences between the House authorization bill in-the-making and the White House are not huge, and threatening a veto months before the House has reconciled its bill with a Democrat-controlled Senate seems odd. In fact, general debate of the bill on the House floor is only starting now.

The points of contention include:

• Nuclear weapons policy, the new START treaty, and missile defense spending
  
• Detainee matters that revive conflicts that already derailed the budget process last year
  
• Whether to enact TRICARE fee increases or proceed with a new round of BRAC
  
• The various programs that the Administration wants to retire or postpone but that the House wants to maintain or upgrade
  
• And also a few things the Administration wants to have, but the House bill may kill, such as biofuel use in the Navy

May 08/12: The House Appropriations Defense Subcommittee passed its bill in a short closed session. They compare their $519.2B baseline request to the Administration’s $516.1B, a number that the House gets from the CBO that is $9B below the actual request from the White House. This is because the CBO and the OMB routinely have rather arcane disagreements [PDF] on the rate at which DoD is actually spending the money it is appropriated.

May 07/12: The House Appropriations Committee releases its defense bill [PDF]. Based on subcommittee markup put together since the end of April, the bill intends to block the cancellation of the Global Hawk Block 30 aircraft. It allocates $102.B to equipment and upgrades, including:

“$15.2 billion to procure 11 Navy ships, including three DDG-51 Destroyers and advance procurement for two SSN-774 Attack Submarines in fiscal year 2014; $5.2 billion for 29 F-35 aircraft; $3.6 billion for 12 E/A-18G Growlers and 37 F/A-18E/F Hornet aircraft, including advance procurement for 15 additional E/A-18G Growlers; $2.5 billion for 69 UH-60 Blackhawk and 42 MH-60S/R helicopters; $2.0 billion for the National Guard and Reserve Equipment Account; $1.7 billion for four Evolved Expendable Launch Vehicles; $1.2 billion for 14 C-130J variants; and $677 million ($792 million bill-wide) to maintain and modernize three Navy cruisers slated for decommissioning.

The 302 (b) House suballocation was set in April [PDF] at $519B for the general purpose discretionary DoD baseline plus $88.5B in OCO budget authority. That places the House baseline DoD number $8B above the Senate’s and above the President’s request as scored by the CBO, though below the actual PB. Meanwhile the House’s OCO number is at the same level as the President’s, unlike the Senate which is using extra OCO spending to pretend it sticks to the Budget Control Act. OCO spending is not subject to the BCA and has thus been portrayed as a war spending “budget gimmick.”

In its March 2012 appraisal, the CBO said its “estimates of defense spending in 2012 [are] $36 billion below the Administration’s, primarily because of differences in estimates for military procurement ($14 billion lower), operations and maintenance ($13 billion lower), and research and development ($6 billion lower).”

Meanwhile full authorization language from the HASC is available in this PDF. It limits the retirement of C-130s to 41 aircraft and delays the decision to terminate C-130 AMP and to divest C-27Js.

While the House is trying to roll back several cuts requested by the White House, in the big picture they are still pretty close. There is no significant disagreement on the biggest programs, and the differences are marginal relative to the sums at stake. The real contention is about what to do with sequestration, which the President Request and FYDP eerily do not reflect.

To that effect, the US House Budget Committee approved a bill to roll back sequestration through reconciliation and instead offers cuts focused on welfare programs. Getting the Heritage Foundation’s seal of approval was a foregone conclusion, but what is missing is a roadmap for such proposals to get any traction in the Senate, let alone get a signature from President Obama. The window of opportunity will be narrow in the lame duck session at the end of the year, and perilously close to the edge of the fiscal cliff. The CBO scored HBC Chairman Ryan’s H.R. 4966 Sequester Replacement Act. HBC Ranking Member Chris Van Hollen [D-MD] had his own, quite distinct take on how to replace the sequester (CBO’s take).

April 25/12: markup begins with hearings scheduled on April 26 and 27 (see videos at the bottom of this entry). Markup bill language was released by 4 subcommittees so far, in PDF format:

• Military personnel
  
• Seapower and projection forces
  
• Strategic forces
  
• Emerging Threats and Capabilities.

April 13/12: HASC Chairman Buck McKeon will use Paul Ryan’s $554.2 billion baseline for markup, according to an aide who talked to the Hill.

March 29/12: The House passed the Budget Committee plan 228-191. It is a bit of a moot gesture given the Senate does not plan to pass a budget and will stick to the terms of the Budget Control Act. The federal government is headed towards another year of continuing resolution (ab)use.

March 21/12: The House Budget Committee approved its Chairman’s plan by a 19-18 majority, with no Democrat voting in favor of the plan and 2 Republicans voting against it.

March 20/12: House Budget Committee Chairman Paul Ryan [R-WI] presented his party’s latest budget proposal. Between spring recess and committee work, this will come to the house floor in May. The House Republicans’ number for DoD in FY13 is $554B. They want to roll back the sequester:

“This budget resolution ensures that the base defense budget will not be cut during wartime. The President’s defense budget request is 2.5 percent lower in real inflation-adjusted dollars than what Congress provided for this year. The House Republican budget provides level funding for defense so that the military has adequate funds to accommodate higher than anticipated fuel prices, to maintain training and readiness, and to keep faith with America’s soldiers, sailors, airmen, and marines.

Over the ten year period covered by the budget resolution, this budget restores about half of the funding cut by the President and ensures that the defense budget grows in real terms in each year – providing adequate funding to maintain a robust end-strength and to address the years of forgone equipment modernization.”

Ryan’s approach to Medicare alone makes this document look pretty far from anything likely to pass in the current Senate. “Path to Prosperity” [PDF] | Politico | The Hill | Christian Science Monitor | CRFB (sequester follow-up) | POGO | Heritage Foundation | OMB response.

Senate Bill

August 02/12: The SACD submits its Appropriations bill [PDF] for HR 5856. The markup comes at $604.5B and doesn’t agree with the recommendation to retire 9 Navy ships early, nor does it side with the Air Force’s request to retire Global Hawk Block 30s.

June 21/12: The Senate approved the farm bill 64 to 35. It contains an amendment meant to compel the Administration to report on the impact of sequestration, based on language from McCain [R-AZ] and Murray [D-WA]. The OMB would have to produce its report by mid-August. The House has not passed its farm bill yet, and the Senate may add that same amendment to another bill if that can expedite its execution.

June 04-08/12: The SASC submits its S. 3254 authorization bill. But it is the effects of sequestration that its members have most on their mind. There is even a bill introduced to try and force the Administration into reporting what would be the effects of the sequester. Knowing how sequestration would exactly play out remains filled with accounting riddles. Though OCO spending was originally thought to be excluded from the sequester, the OMB since then opined to the contrary. Whether in the Senate or in the House, Congressmen think it is a matter of how to interpret the BCA rather than something set in stone.

May 24/12: After a series of close hearings (save one), the Senate Armed Services Committee completed [PDF] its NDAA 2013 markup with bipartisan approval, at baseline and OCO amounts very close to the Administration’s request for a total of $631.4B.

Their version of the bill blocks TRICARE changes and the new BRAC round asked by the White House. It also prohibits funding MEADS. The Army gets GCV, a MYP for Chinooks, JTRS rifleman and manpack radios with strings attached, among others. Aviation and naval programs are affected by minor adjustments but look like business as usual for the most part. Unlike the House, the SASC sided with the White House on terminating Global Hawk Block 30.

The full Senate vote should happen within the next couple of months. If they approve the committee’s language, they will have a $4B gap to reconcile with the House. So far the appropriations process has been remarkably speedy this year.

May 03/12: A group of 6 senators sent a letter [PDF] to the chairman of the SASC Seapower subcommittee to plea in favor of funding up to 10 Block IV Virginia class submarines during FY14-18 and 10 DDG-51s during FY13-17. DefenseNews.

April 20/12: the Senate Appropriations Committee is allocating an extra $5B to OCO to stick to the letter of the Budget Control Act, if not its spirit.

April 19/12: the Senate decided to work on budget material after all, if not a budget resolution, with these 302(b) subcommittee allocations [PDF] that give a framework for appropriations. Defense discretionary budget authority comes at $511B. Senator Thad Cochran [R-MI, Ranking Member of the Defense Appropriations Subcommittee] made this statement:

“[I]t is appropriate in my view for the Committee to proceed on the basis of the discretionary caps enacted into law less than nine months ago. Not all members of the Committee supported the Budget Control Act. Seventy-four Senators did support it, however, including a majority of the members of both parties in the Senate and a majority of members on both sides of the Committee.

I commend the other body [DID: i.e. the House] for developing a comprehensive budget resolution that makes a serious effort to tackle our debt problem, and which involves other Congressional committees in that process, as well. I wish the Senate would do the same. But absent any indication that will happen, it is certainly reasonable for us to proceed consistent with the law.”

April 18/12: the Senate’s Fiscal commission budget plan [PDF] restates that the Budget Control Act will do as the Senate’s FY13 budget resolution.

March 2012: Close to 30 nonprofit organizations dedicated to open and accountable government, including the American Civil Liberties Union (ACLU) and the Project On Government Oversight (POGO), are mounting the Open NDAA campaign to get the Senate to mark up the National Defense Authorization Act in public. As of the end of March 2012 their website thanked 9 Senators for their support, including SASC ranking member John McCain [R-AZ] and Readiness Subcommittee Chairman Claire McCaskill [D-MO].

Conference and Final Bill

December 17/12: House and Senate negotiators finalize a joint bill. The conference report [PDF] shows several points of contention that the Administration has repeatedly objected to, from canning MEADS to pushing for missile defense on the US East Coast. The text yields, but still seeks to somewhat constrain, on biofuel funding. Despite vocal disappointment from some members, the bill is expected to sail through both chambers and end on the President’s desk by the end of the week. The amount authorized – $633.3B – probably will not matter much, with a fiscal year sandwiched between a 6-month continuing resolution and some form of sequestration, which even if watered down looks likely to depress authorization levels.

Statements by: HASC Chairman McKeon, HASC Chairman Levin.

Continuing Resolution & Sequestration

January-February 2013: Stopgap deal. Republicans yield on some of the tax increases they wanted to avoid, agreeing to legislation that postpones the sequester by two months, known as the American Taxpayer Relief Act (ATRA). This is followed by a lot of blustering leading to the March 1st deadline, and against conventional wisdom, sequestration is enacted. On the Republican side, people trying to protect the defense budget above all were outnumbered by those seeing in the sequester a tool to at least start to constraint federal spending. On the Democrat side the Administration overplayed its hand with doom-mongering about what would happen under the sequester that nobody could take seriously.

December 2012: Fiscal cliff. Negotiations between Congress – mostly Speaker of the House John Boehner – unfold without revealing much if any progress through the first two weeks of the month. The daily drama is, from a defense funding perspective, or for any sane person really, as boring as watching paint dry. We will update this space when and if something that looks conclusive emerges. But time is running out and it looks now a distinct possibility that sequestration kicks in on January 3, 2013. As of December 20 Speaker Boehner had withdrawn his ‘Plan B’ for lack of support in the House, with no outline for a potential deal.

September 2012: The House (329 Aye / 91 No) and Senate (62 to 30) agree on a joint Continuing Resolution (H. J. RES. 117) to keep funding government for the next six months, until March 27, 2013. The bill is now waiting for the President’s signature. Continuing resolutions have been more and more common in recent times, with a particularly long one at the tail of FY11. This is not how government is supposed to normally operate. The bill by definition maintains FY 2012 funding levels unless doing so is deemed catastrophic. It includes $88.5B of OCO funds.

The CR lets Congress dodge funding and spending tradeoffs until the election, however the deadline for the Budget Control Act to kick in is coming fast. OMB nominally complied with a law passed during the summer (HR 5872) that compelled it to spell out the effects of sequestration in a report [PDF] that did not end up adding much if anything to the discussion. A couple of weeks later, DoD Comptroller Robert Hale filled in the blanks by saying that the Pentagon might have more flexibility at the program level than first expected.

A small bipartisan group of Senators including SASC leaders Levin and McCain wrote to the Senate leadership to state their commitment to “working together to help forge a balanced bipartisan deficit reduction package to avoid damage to our national security, important domestic priorities, and our economy.” That means swapping a dampening of defense cuts for tax increases, a deal that some Republicans repeatedly said they were not interested in, either because they want bigger cuts than the BCA sets and/or because they can live with a less interventionist US posture supported by a smaller defense budget. And on the Democratic side, additional revenue (i.e. taxes) seems an nonnegotiable fixture.

Sequestration itself is only a component of a broader issue, the “fiscal cliff” where spending cuts intersect with expiring tax cuts and hitting again the federal debt ceiling. As of the end of September the two parties seem as far apart as they were when the Supercommittee tasked with finding a palatable budget compromise failed to do so, leading to the BCA.

President Budget Request (PB13)

Excel
download

The President Budget released on February 13, 2012 by the Obama administration projects a drawdown from Iraq and Afghanistan in the years to come but does not reflect the full effect of sequestration. President Obama said he would veto attempts to undo the sequester, and after the failure of the debt “supercommittee” in 2012, Republicans and Democrats in Congress have found little they agree on when that topic is brought up. Expect nontrivial changes between this set of numbers and the actual numbers that will pan out, especially post-FY13.

Topline Numbers

The FY13PB for DOD comes at a $613.9B total split between $525.4B baseline and $88.5B Overseas Contingency Operations (OCO). Among the large line items, procurement is hit the most with a $12.1B decrease (-10%). In absolute terms Operations & Maintenance contribute almost the same decrease with a $11.2B loss.

Budget by Appropriation Title
(click to view full)

Among the three Departments the Army seems unscathed in the baseline numbers, but it is bearing the brunt of the post-Iraq OCO numbers.

Budget by Department

Procurement

The Navy is seeing the smallest decrease in its overall procurement budget. The use of supplemental funding for procurement is strongly waning, especially for defense-wide initiatives.

Procurement by Department

Terminations

• Global Hawk Block 30 (meanwhile a variation of Block 40 gets funding for NATO’s AGS)
  
• C-27J Joint Cargo Aircraft
  
• HMMWV recapitalization
  
• Defense Weather Satellite System (DWSS)
  
• C-130 Avionics Modernization Program (AMP)
  
• Medium Range Maritime UA

Restructuring

• Joint Strike Fighter
  
• Ground Combat Vehicle (GCV)
  
• Family of Medium Tactical Vehicles (FMTV)
  
• Ohio Class Replacement-SSBN (X)
  
• Joint Air-to-Ground Missile (JAGM)
  
• Joint Land Attack Cruise Missile Defense Elevated Netted Sensor (JLENS)
  
• Rephased aircraft procurement: P-8A Poseidon, V-22 Osprey MYP, E-2D Advanced Hawkeye

Research Development Test & Evaluation (RDT&E)

R&D is hit on average less than procurement, in good part because that line item is actually increasing for the Army.

Research Development Test and Evaluation by Department

Basing, Infrastructure, and Personnel

The Administration’s request to initiate another Base Closure and Realignment Commission (BRAC) process is the one which got the strongest, earliest pushback in Congress and is thus less likely to happen. As March unfolded, opposition became stronger, with a clear statement from Senator Claire McCaskill [D-MO], the chairman of the SASC Readiness and Management Support subcommittee: “I will not support the request for BRAC process to be carried out in 2013.”

Meanwhile, plans to move the homeport of a nuclear-powered aircraft carrier (CVN) from Norfolk Naval Station, Virginia to Naval Station Mayport, Florida are either “on hold” if you ask Floridian representatives, or “called off” according to their counterparts in Virginia. It is more when than if, according to the Florida Times-Union. In April 2012 the Chief Of Naval Operations confirmed his support for the move and said the Navy also wanted to speed up the move of other ships to Mayport.

On March 6, 2012 the Air Force announced its FY force structure changes [PDF]. Manpower by base for FY11-13 can be found in this document [PDF].

Future Years Defense Program (FYDP)

In March 2012 the DoD Comptroller released its FY 2013 Green Book [PDF] with FYDP budget projections until 2017. The sequestration sword hanging over the head of the defense budget is not reflected in these numbers. The Pentagon does not intend to start sequester budgeting before the summer 2012. They hope Congress will somehow reach an escape hatch compromise sometime this year.

The large increase in the “Other” category of the chart below from FY14 on is due to a $44.2B/year OCO placeholder. Presumably a significant part of that line item will ultimately be accounted under O&M. Procurement (again excluding OCO) is projected to bottom out in FY14 at 79% of FY11’s level (OCO included) while RDT&E is less strongly affected, but is showing a slow bleed each year vs. FY11 levels (see data tables in the spreadsheet linked above).

DoD budgets, 2011-2017

Additional Readings & Sources

• DID – Primer on how federal and DoD budgets are made

• DID – FY 2014 defense budget

• DID – Guest Article by Lou Crenshaw, Vice Admiral U.S. Navy (ret.) on the FY2012 budget

• Office of the Under Secretary of Defense (Comptroller) / CFO – FY 13 Request, Green Book [PDF]; FY12 and earlier years

• DOD – News Briefing by Army Maj. Gen. McGhee and Barbara Bonessa

• Budgets from the services: Air Force | Army | Navy | MDA

• Posture Statements: Air Force | Army | Coast Guard [PDFs]

• CBO – An Analysis of the President’s 2013 Budget [PDF]

• Congressional Research Service (CRS) – FY2013 Defense Budget Request: Overview and Context | The Budget Control Act of 2011: The Effects on Spending and the Budget Deficit When the Automatic Spending Cuts Are Implemented [PDFs]

• Center for Strategic and Budgetary Assessments (CSBA) – FY13 Defense Budget, Continuity or Change? [PDF]

• Stimson Center – The Reality of the Defense Builddown [PDF]

• Center for Strategic & International Studies (CSIS) – Industrial Base Implications of the FY13 Defense Budget | The FY2013 Defense Budget and the New Strategy-Reality Gap | Planning for a Deep Defense Drawdown-Part I [PDF]

• Heritage Foundation – Appropriations Tracker FY 2013

• Center for Defense Information (CDI) – America’s $1 trillion “defense” budget

• Loren Thompson – $80 Billion Puzzle: The Part Of The Pentagon’s Budget You Won’t See

• Project on Defense Alternatives & CATO Institute – Defense Sense, Options for National Defense Spending [PDF]

• Project On Government Oversight (POGO) Supports NDAA Amendments in the House

• Office of Congressman John Garamendi – Comparing Defense Savings Plans across the Political Spectrum [PDF]

Appendix I: NDAA FY13 Congressional Hearings

FY13 defense budget hearings, 112th Congress

Date	House	Senate
February 14		SASC: NDAA request video
February 15	HASC: NDAA request video
February 16	HASC: Navy video HACD: NDAA video
February 17	HASC: Army video
February 28	HASC: Air Force video HASC: Personnel (OSD)	SASC: PACOM / TRANSCOM video SBC: NDAA request video
February 29	HASC: EUCOM / AFRICOM video HASC: Science & Technology video HBC: NDAA request video
March 1	HASC: PACOM video HACD: Navy	SASC: EUCOM / AFRICOM video
March 6	HASC: Missile Defense videos: part 1 / pt. 2 HASC: SOUTHCOM / NORTHCOM video HASC: Personnel (services) video HACD: Air Force	SASC: CENTCOM / SOCOM video
March 7	HASC: CENTCOM / SOCOM video HACD: Army	SACD: Navy video
March 8	HASC: BRAC video HASC: Space video HACD: Health video part 1 | pt. 2	SASC: Army video
March 13		SASC: SOUTHCOM / NORTHCOM video
March 14		SACD: Air Force video
March 15		SASC: Navy video
March 20	HASC: IT/Cyber video	SASC: Air Force video
March 21	HASC: Health HACD: CENTCOM	SASC: BRAC video SACD: Army video
March 27		SASC: STRATCOM / Cyber SACD: Military Construction
March 28	HACD: National Guard / Army Reserve HACD: PACOM / Korea (classified)	SASC: Personnel SACD: Health video
March 29	HACD: Intelligence community (classified)
April 17	HASC: Nuclear Forces video: part 1 | pt. 2 HASC: NDAA FY13 Priorities video
April 18		SACD: Missile Defense video
April 25		SASC: Missile Defense video
April 26	HASC Markup: Personnel, Seapower & Projection, Strategic Forces, Emerging Threats	SASC: Marine Corps video
April 27	HASC Markup: Tactical Air and Land Forces, Readiness
May 8	HACD: NDAA Markup
May 9	HASC: Full Markup video	SACD: AFRICOM
May 10		SACD: PACOM
May 15		SACD: Military Construction
May 16		SACD: SOUTHCOM / NORTHCOM
May 17	HACD: Full Committee Mark Up	SACD: EUROCOM / SOCOM
May 22-24		SASC: Full Markup, in closed sessions
June 13		SACD: NDAA request video
Note: does not track some subcommittee hearings on more granular topics.