Defense Financial Highlights

CBO projects FY2015 deficit will drop to $426 billion

Wednesday, August 26th, 2015

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The FY2015 baseline federal budget deficit is expected to be $426 billion, according to the Congressional Budget Office’s (CBO) latest Update to the Budget and Economic Outlook. CBO baseline estimates assume a continuation of current law for both expenditures and revenue.

This latest CBO estimate of the FY2015 deficit represents a $60 billion improvement from its March estimate and $59 billion lower than the FY2014 final budget deficit ($485 billion). If realized, this deficit would be the smallest since 2007.

The year-to-year improvement in the deficit results largely from higher estimated receipts (+$230 billion) from individual and corporate income taxes, which more than offsets an increase in expenditures (+$171 billion). The increase in expenditures from the previous year is the result of an almost $200 billion increase in mandatory spending, offset by somewhat lower discretionary spending and interest on the debt.

CBO expects annual deficits to stay at between about $415 billion and $455 billion through 2018 as the economy continues to improve. After 2018, deficits increase again reaching $1 trillion by 2023 as “significant growth in spending on health care and retirement programs and rising interest payments on federal debt would outpace growth in revenues,” according to CBO—unless changes are made to current law. 

CBO expects the deficit as a percentage of Gross Domestic Product (GDP) to decline from 2.8 percent in 2014 to 2.4 percent in 2015 and continue to fall to 2.1 percent by 2017. After that the deficit share of GDP will stay below 3 percent until 2020. However, as the deficit begins to grow again in 2019, deficits will average close to 3.5 percent of GDP from 2020 to 2025.

The improved deficit picture in 2015 will probably affect the timing of a congressional decision to raise the debt ceiling, always a highly-charged proposition. Now, it appears rather than needing to make a decision by October or November (when Treasury will run out of so-called “extraordinary cash management measures), CBO says the decision point could be delayed until early December.

GSA sets higher Per Diem rates for federal employees

Monday, August 17th, 2015

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The General Services Administration (GSA) has announced the daily Per Diem reimbursement rates for federal employees in FY2016.

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

Per Diem rates in Standard areas in the Continental United States (CONUS) for lodging will be $89 in FY2016, up from $83 in FY2015. Rates for and meals and incidental expenses (M&IE) will be $51 in FY2016, $5 higher than those in FY2015.  The Standard area rate covers most of the continental CONUS counties. 

Per Diem rates for lodging for the some 400 Non-Standard areas (NSAs) will vary depending on local conditions. The M&IE rate for NSAs will to range from $54 to $74.

The CONUS MI&E rates for Standard areas will now be based on the change in the Consumer Price Index for “Food Away from Home” while M&IE rates for NSAs will continue to be based on surveys of local restaurants.

All rates become effective on October 1, 2015.

According to the GSA Per Diem Bulletin FTR 16-01, there will be two new NSA’s in FY2016: Grand Lake, CO (Grand County) and Pecos, TX (Reeves County). The Belle Mead, NJ NSA will be renamed to Somerset.

GA also announced that 15 NSA locations will become Standard areas: Huntsville, AL; Modesto, CA; Driggs/Idaho Falls, ID; Springfield, IL; Covington/Slidell, LA; Hattiesburg, MS; Los Alamos, NM; Stateline/Carson City, NV; Oak Ridge, TN; Greenville, TX; Fredericksburg, VA; Norfolk/Portsmouth, VA; Prince William/Manassas, VA; Anacortes/Coupeville, WA; and Shepherdstown, WV.

OMB signals intent to exempt Military Personnel accounts from potential sequester in FY2016

Thursday, August 13th, 2015

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The Office of Management and Budget (OMB) has notified Congress that Military Personnel accounts will be exempt from across-the-board cuts if sequestration is implemented in FY2016.

In a letter to the House and Senate this week, OMB Director Shaun Donovan said the president intends “to exempt all military personnel accounts, including Coast Guard personnel accounts, from any discretionary cap sequestration in FY 2016, if a sequestration is necessary.”

Donovan said the Balanced Budget and Emergency Deficit Control Act of 1985 authorizes such an exemption if Congress is notified by August 10.   The president also exempted military personnel accounts from sequestration in FY2013 and FY2014. Congress and DoD have routinely exempted Military Personnel accounts when implementing across-the board cuts to defense budgets.

Exempting military personnel accounts will mean that cuts to other DoD accounts will be increased if sequester goes into effect, Donovan noted. Unless an agreement is reached to stop sequestration, OMB, in its report on sequestration issued in February, estimated the FY2016 defense spending cap would be reduced by $53 billion. The report also sets the potential cuts to nondefense accounts at $37 billion.

Donovan said the exemption “is considered to be in the national interest to safeguard the resources necessary to compensate the men and women serving to defend our Nation and to maintain the force levels required for national security.”

DoD Secretary Ash Carter has warned Congress that if sequestration returns in FY2016 “our nation would be less secure.” Carter also said that he would join other senior administration officials in recommending the president veto any bill that “locks in sequestration,” because it would be “unsafe and wasteful.”

Navy chief issues Navigation Plan for 2016-20

Thursday, August 6th, 2015

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ADM Jonathan Greenert, Chief of Naval Operations (CNO), issued the Navy’s Navigation Plan for 2016-20 that describes how the Navy will use its resources to sustain a “balanced and capable force.”

The Navigation Plan, Greenert said “highlights our Navy’s key investment’s which support missions and functions outlined in the defense strategic guidance (DSG), Sustaining U.S. Leadership Priorities for 21st Century Defense, and the Quadrennial Defense Review.”

Greenert said “the Navy must have the capability and capacity to conduct war at sea, and win decisively through: deterrence, sea control, power projection, maritime security, and domain access [including cyberspace and the electromagnetic spectrum].”

The Plan emphasizes that “forward naval presence is essential to strengthening alliances and partnerships, providing the secure environment necessary for a global economic system based on the free flow of goods, promoting stability, deterring conflict, and responding to aggression.” The five-year Navy’s budget plan provides for a fleet of about 115 ships by 2020 with an increased presence of some 36 ships in the Middle East. “Innovative, low-cost and small-footprint approaches” will be utilized in the AFRICOM and SOUTHCOM areas, according to the Plan.

Greenert emphasizes that supporting ready sailors, civilians, and families will “remain the foundation of the Navy’s warfighting capability.” He acknowledges that the continuing high demand for Naval forces worldwide is stressing the force, but says the budget plan “continues to provide services and support to ensure that our people remain resilient and ready.”

The budget “emphasizes and rewards sea duty by continuing increased sea duty pay, sea pay premium, and critical skill retention pays,” Greenert stressed. The budget plan uses savings from compensation reforms to improve quality of service for sailors, provide more realistic training, and promote use of smart technology devices.

Gen. Dunford confirmed as Chairman of the Joint Chiefs of Staff

Wednesday, August 5th, 2015

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The Senate confirmed Gen. Joseph F. Dunford Jr., USMC, to be the 19th Chairman of the Joint Chiefs of Staff (JCS) last week before adjourning for the summer recess. Dunford will replace Gen. Martin Dempsey.

Dunford was nominated by President Obama in May to replace current CJCS Gen. Martin Dempsey when his term ends later this year. At that time the president said Dunford “is one of our military’s most highly regarded strategic thinkers” and “is known and respected by our allies, members of Congress—on both sides of the aisle—and by colleagues across our government.”

Although Dunford’s confirmation was held up briefly by Sen. Kirsten Gillibrand (D-NY) because she had not received information on sexual assaults in military installations. Even so, Gillibrand stressed that her hold was not about Dunford’s qualifications.

Gen. Dunford is currently the 36th Commandant of the Marine Corps, a position he has held since October 2014. Before becoming Commandant, Dunford was the Commander International Security Assistance Force and United States Forces – Afghanistan. He has served in joint assignments as Executive Assistant to the Vice-Chairman JCS, Chief of the Global and Multilateral Affairs Division (J5), and Vice Director for Operations (J3). Dunford has also commanded the 2nd Battalion, 6th Marines, the 5th Marine Regiment, I Marine Expeditionary Force, and Marine Forces Central Command.

The Senate also confirmed Gen. Paul J. Silva, USAF, to be the next Vice Chairman of the JCS. Gen. Selva will replace Adm. James “Sandy” Winnefeld, Jr. whose term will also end soon. Gen. Selva is currently Commander of the U.S. Transportation Command. Prior to that, he served as Commander of the Air Mobility Command, Vice commander Pacific Air Forces, Commander Tanker Airlift Control Center, Commander 62nd Airlift Air Wing, and Commander 60th Operations Group.

Secretary of Defense Ash Carter praised the confirmation of both Dunford and Selva. “Both have proven their mettle throughout their careers—from Gen. Dunford’s first years as an infantryman to his leadership both in Afghanistan and of the Marine Corps, and from General Selva’s early days as a pilot to his leadership of our military’s transportation command.” Carter said from the Pentagon.

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