Defense Financial Highlights

Per Diem rates for federal employees unchanged for FY2015

Tuesday, August 19th, 2014

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The General Services Administration (GSA) has announced the daily Per Diem reimbursement rates for federal employees in FY2015.

Per Diem rates in Standard areas in the Continental United States (CONUS) for lodging will be $83 in FY2015, unchanged from rates in FY2014. Rates for and meals and incidental expenses (M&IE) will also remain unchanged at $46.  The Standard area rate covers most of the continental CONUS counties. 

GSA sets per diem rates for locations in CONUS.  These rates are the maximum amounts a federal employee can receive as reimbursement for allowable expenses while on official duty travel. 

The GSA Per Diem Bulletin FTR 15-01 states that Per  Diem rates for lodging for the some 400 Non-Standard areas (NSAs) will vary depending on local conditions. The MIE rate for NSAs will to range from $46 to $71, also unchanged from FY2014. 

All rates are effective on October 1, 2014.

There will be two new NSAs in FY2014: Kayenta, AZ (Navajo County) and San Angelo, TX (Tom Green County).

GSA also announced changes for some locations in FY2015. Elmore County, ID will be included with Sun Valley, ID NSA. Middlebury, VT (Addison County) NSA will be combined with the Burlington/St. Alban’s, VT (Chittenden/Franklin Counties) NSA. And, the Manhattan NSA has will be renamed New York City (NYC). GSA no longer sets rates for individual NYC boroughs.

In addition, the following NSAs will move to the Standard category: Glenwood Springs/Grand Junction, CO; Lakeville, CT; Chesapeake/Suffolk, VA; Lake Geneva, and WI; Sheridan, WY.

White House establishes U.S. Digital Service

Thursday, August 14th, 2014

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The Office of Management and Budget (OMB) announced this week the establishment of the U.S. Digital Service. OMB called this initiative a key component of efforts to improve and simplify the government’s delivery of services through information technology (IT).

This initiative follows on the successful efforts last fall by a group of IT experts brought into government to fix the HealthCare.gov. website.

According to a blog posted on the OMB website, “the Digital Service will be a small team made up of our country’s brightest digital talent that will work with agencies to remove barriers to exceptional service delivery and help remake the digital experience that people and businesses have with their government.”

The first administrator of the Digital Service will be Mikey Dickerson, who was an integral part of the group that worked to fix HealthCare.com. Dickerson, a former Google site reliability engineer, will also become the Deputy Federal Chief Information Officer. He has described himself not as a policy expert but as one who knows “how to make big distributed systems work technically.”

The new team expects to hire people who “have talent and expertise in a variety of disciplines, including procurement, human resources, and finance.”

OMB expects the Digital Service to achieve its mission by: 1) establishing standards to align the government’s digital services with best in the private sector; 2) identifying common technology patterns to scale services effectively; 3) collaborating with agencies to fix gaps in their ability to design, develop, deploy, and operate top-notch customer interface services; and 4) to provide accountability to ensure results.

Concurrent with this announcement, OMB released two critical components of the IT toolkit to support the work of the Digital Service. The Digital Services Playbook will guide leveraging private-sector best practices and the TechFAR Handbook will help ensure agencies get the right technical tools to buy digital services consistent with the Federal Acquisition Regulation (FAR).

OMB will fund the Digital Team in FY2014 with existing funds and “will scale in 2015 as outlined in the President’s FY 2015 Budget.”

OPM finalizes Phased Retirement rule

Monday, August 11th, 2014

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Last week, the Office of Personnel Management OPM) issued the final rule for implementation of the phased retirement program for eligible federal employees.

Congress approved the phased retirement program (Sec. 100121 H.R. 4348) in July of 2012. Last year, OPM issued a draft rule for comments.

Phased Retirement offers an innovative alternative to traditional retirement for the 21st century workforce,” OPM Director Katherine Archuleta said in announcing the final rule. Archuleta said the program also gives federal managers a new tool to “provide unique mentoring opportunities for employees while increasing access to the decades of institutional knowledge and experience that retirees can provide.”

Under the program, federal employees approaching retirement are able continue working part time, while beginning retirement. 

The final rule includes information on employee eligibility, benefits received during phased retirement, and how OPM will calculate the annuity during and after retirement, and how employees can fully retire after a phased retirement period.

To be eligible for the program employees must have been in full employment status for the previous three years and be eligible for immediate retirement under either the Federal Employees Retirement System (FERS) or the Civil Service Retirement System (CSRS). Employees subject to mandatory retirement, such as law-enforcement officers, firefighters, air traffic controllers, and most Border Protection officers are not eligible for phased retirement. An employee in phased retirement status is considered a part-time employee, not a reemployed annuitant.

The eligible employee receives income from a combination of part-time salary (50%) and partial annuity payments (50%). The phased retiree also accrues future retirement benefits proportional to the time they work. Phased retirees are expected to spend 20 percent of their time mentoring other employees.

The final rule goes into effect in 90 days. Agencies can begin to submit phased retirement applications to OPM on November 6, 2014.

Senate committee approves FY2015 DoD appropriations bill

Wednesday, July 23rd, 2014

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The Senate Appropriations Committee (SAC) approved its version of the FY2015 DoD Appropriations bill last week.

The SAC bill provides $490 billion for DoD appropriations in the base budget (excluding military construction, which is provided in a separate bill), $1 billion below the request. The bill also includes $58.3 billion for Overseas Contingency Operations (OCO), $200 million below the president’s request.

Sen. Barbara Milkulski (D-MD) called the bill “a good bill for our men and women in uniform.” “It emphasizes readiness, cares for our wounded warriors, takes steps to improve health on our military bases and provides resources needed to keep our nation secure”, she said.

The House bill, passed last month, provides $491 billion for the base DoD budget and $79.4 billion for OCO.

The SAC bill would provide funding for 1 percent military pay raise as proposed by the president. The House-passed bill funds a 1.8 percent military pay raise as authorized under the House-passed FY2015 Defense Authorization bill. The SAC also approves the administration request to freeze pay for general and flag officers and allow for slower Basic Housing Allowance (BAH) growth.

The bill also funds a 1 percent civilian pay raise requested by the president.

The SAC bill would fund the Defense Health Program (DHP) at $31.6 billion ($400 million below the request), essentially the same level as the House-passed bill. The bill would add $200 million to the Defense Commissary Agency funding request to maintain operations and block the president’s proposed cut to the commissary subsidy. The bill also cuts $20 million from Office of the Secretary of Defense (OSD) funding to reflect a five percent personnel reduction.

Operations and Maintenance (O&M) funding in the SAC bill would total $165.8 billion, only slightly below the administration’s request, but $1 billion more than the House-passed bill. The SAC includes funding increases for facility sustainment (+$1 billion) and depot maintenance ($+360 million).

The SAC bill includes about $850 million to refuel the USS George Washington, denying the administration’s plan to defer a decision on refueling until the FY2016 budget. The House also provided funding for refueling. The SAC also funds continued operations of A-10 aircraft, blocking (like the House) the administration proposal to retire the A-10 fleet.

Procurement funding in the bill totals $91.4 billion, $1.7 billion higher than the request and about $200 million over the House-passed bill. Included in the SAC procurement funding are: two attack submarines and three Littoral Combat Ships; 34 F-35 (Joint Strike Fighter) and 7 KC-46A tankers, 12 EA-18G Growlers, and 79 H-60 Blackhawk and 37 MH-60S/R helicopters.

The SAC bill includes $62.6 billion for research and development, almost $1 billion less than the request and about $200 less than the House. Among the programs receiving R&D funding are: the Armored Multi-Purpose Vehicle (AMPV); the long-range strike bomber; and the KC-tanker. The SAC also added almost $800 million for medical research with a special focus on Peer-Reviewed Medical Research and Peer-Reviewed Cancer Research.

To reallocate funding to higher priorities identified by the Committee, the SAC made 517 separate program cuts totaling $11.7 billion. The funding reductions include: $6.6 billion for excess prior-year unobligated balances and forward financing; $2.7 billion due to schedule delays, cost growth, program concurrency and poor contractor performance; $1.3 billion to eliminate unnecessary program growth; and $1.1 billion for program redundancy, insufficient documentation, and program terminations. The SAC bill also cuts $500 million (3 percent) form the IT budget request to encourage prioritization of non-cybersecurity investments.

Given the Senate’s stalemate over the amendment process for floor action on appropriations bills, it is unclear when the defense bill will be considered on the Senate floor. To date the full Senate has not considered any FY2015 appropriations bill, while the House has passed seven (including the DOD bill). It is also unclear whether the defense bill will be a stand-alone bill or will be included in a continuing resolution (CR). With the August recess less than two weeks away and the mid-term congressional elections looming, it is becoming more likely that a CR may be considered sooner rather than later and final congressional action on most appropriations bills will be deferred until after the election.

OMB Mid-Session Review shows short-term improvement in budget deficit

Monday, July 14th, 2014

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The FY2014 federal budget deficit will be $66 billion lower than the previous administration estimate, according to the Office of Management and Budget (OMB). 

In its annual Mid-Session Review of the budget and the administration’s economic projections, OMB now expects the FY2014 deficit to be $583 billion compared to $649 billion projection made when the FY2014 budget was released in March.  

Measured as a share of total Gross Domestic Product (GDP), the deficit will decline from 3.7 percent in FY2014 (down from the previous estimate of 3.4 percent) to 2.2 percent by 2018. OMB projects the deficit share of GDP to rise to 2.6 percent through FY2022 before falling again to 2.1 percent by FY2024.

The lower deficit estimate in FY2014 is due almost entirely to lower estimated mandatory (-$53 billion) and discretionary (-$27 billion) spending. Total discretionary outlays are expected decline due to slower spending patterns for defense and nondefense programs and reduced expenditures for Overseas Contingency Operations (-$6 billion).

However, this improvement will be short-lived according to OMB estimates. While the FY2014-16 deficits are lower than OMB previously projected, deficits for FY2017-24 are estimated to be $600 billion higher than OMB’s March projections. This adjustment is due primarily to lower revenue (-$745 billion), resulting mostly from a lower economic growth forecast, offset slightly by higher projected outlays (+$31 billion) and lower interest payments (+$123 billion). Discretionary outlays are expected to stay essentially flat between 2017 based on administration long-term spending plans.

The OMB projections are based on the administration’s economic assumptions and its proposed spending and revenue proposals. The unemployment rate is expected to average 6.3 percent in 2014 and is projected to decline to 5.4 percent in 2017 and stay 5.4 percent through 2024. OMB expects the annual change in consumer prices (CPI-U) to be 1.8 percent in 2014, increase to 2.2 percent by 2017 and level off at 2.3 percent for the period 2018 to 2024.

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