Defense Financial Highlights

OMB provides operating guidance to agencies for FY2016 CR

Tuesday, October 6th, 2015


The Office of Management and Budget (OMB) has issued guidance setting the rules under which federal agencies will operate during the FY2016 Continuing Resolution (CR) enacted (H.R. 719) last week. The CR period runs from October 1 through December 11, 2015.

Under guidance in a memo from Director Shaun Donovan, OMB will apportion (distribute funds to agencies to be available for obligation) funds automatically to appropriations accounts during the CR period, unless language in the CR provides for specific levels of funding or special rules.

The amount provided in the FY2016 CR is the “rate for operations provided in the applicable appropriations acts for fiscal year (FY) 2015 and under the authority and conditions provided in such Acts,” according to the OMB memo. The amount is net of any rescissions, plus or minus mandated transfers, and includes a 0.2108 percent reduction required in the CR (Section 101(b). However, funds designated for Overseas Contingency Operations/Global War on Terrorism and disaster relief are excluded from the 0.2108 percent cut.

OMB calculates the automatic apportionment rate by multiplying the annualized amount by the percentage of the year covered in the CR.  In this case the automatic apportionment rate is 19.67 percent to cover the 72-day CR period.

Not all accounts receive funding during the CR period.  Agencies cannot obligate funds for accounts for which no funding was included in an FY2016 appropriations bill that has been passed or reported out of committee in either the House or the Senate. If a program (PPA) within an account has not been funded (zero-funded) by the House or Senate, the account will receive an automatic apportionment and the agency can, at its discretion, fund the program within the account total.

The CR does provide limited authority (Section 112) to mitigate civilian furloughs during the CR period. The bill does not provide additional budget authority for this purpose, but allows OMB to apportion for civilian personnel compensation and benefits higher than the pro-rata share.  However, OMB advises that agencies must receive written pre-approval to receive a higher rate, but expects few if any written apportionments using this authority.

OMB advises that written requests for amounts higher than the automatic apportionment (“exception apportionments) must include a written justification based on legal grounds. OMB expects, according to the memo, to grant approval for such requests “only in extraordinary circumstances.”

Federal employee health insurance premiums to increase 6.4% in 2016

Thursday, October 1st, 2015


Health Insurance premiums for employees covered under the Federal Employees Health Benefits (FEHB) Program will increase an overall average of 6.4 percent in 2016, the Office of Personnel Management (OPM) announced this week.

This average increase is twice the increase registered in 2015 and higher than the increases in 2014 (3.7 percent) and 2013 (3.4 percent).

OPM attributed some of the increase to higher drug costs, which are a higher percentage of FEHB spending than private employers.

The FEHB program covers over 8 million people who can choose from among more than 250 health plans.  FEHB plans cover about 85 percent of all federal employees and 90 percent of federal retirees. According to OPM, FEHB is the largest employer-sponsored health benefits program in the U.S.

This year FEHB will offer a Self Plus One enrollment type that will provide coverage for an enrollee and one designated family member (spouse or child). Enrollees can switch to this enrollment type during the open season in November.

While premiums vary with each plan, enrollee’s average bi-weekly payments next year will increase by $5.50 for self-only and by $19.61 for family plans.  The federal government pays an average of 72 percent of total premium cost. Premiums for specific plans are available on the OPM website.

The Open Season for health, dental and vision, and flexible spending accounts will start on November 9, 2015 and end on December 14, 2015.  Open season allows federal employees and retirees to make changes to their plans and eligible employees to enroll in the plan of their choice.

Congress passes CR to keep government running until December 11

Wednesday, September 30th, 2015


This afternoon, the House passed (277-151) a Continuing Resolution (CR) that funds federal government agencies through December 11, 2015. In the final vote, 91 Republicans joined all voting Democrats (186) in passing the CR.

Earlier today, the Senate passed the CR 78-20 as 32 Republicans joined all 44 Democrats and two Independents (who caucus as Democrats) in voting for passage. The president is expected to sign the bill before the fiscal year begin tomorrow.

The final, fairly bipartisan votes today ended a dramatic week of action on the CR. Last Thursday, the Senate blocked a vote on a CR that would have defunded Planned Parenthood. The 47-52 vote fell far short of the 60 yes votes needed to proceed to a vote. Eight Republican Senators joined 42 Democrats and two Independents in voting against the motion. Then on Monday, the Senate voted 77-19 to proceed to a vote on a CR that does not defund Planned Parenthood.

The CR essentially allows agencies to fund FY2016 programs at the FY2015 level ($1.017 trillion for the total government).  The CR also includes funding for Overseas Contingency Operations (OCO) at an annual rate of $74.8 billion and provides $700 million in emergency funding to fight wildfires. The bill also extends authority for the Federal Aviation Administration (FAA) for six months. During the CR period, no new starts are permitted nor are programs allowed to increase production rates above the FY2015 rate.

The stage is now set for House and Senate leaders to work with the White House to agree on a budget deal before the CR ruins out on December 11. House Speaker John Boehner (R-OH) and Senate Majority Leader Mitch McConnell (R-KY) want to begin talks with the White House on a two-year deal. House Minority Leader Nancy Pelosi (D-CA) and Senate Minority Leader Harry Reid (D-NV) have been pressing Republicans for months to start discussions on a deal.

However, the bipartisan nature of the final votes on the CR in the House and the Senate today mask the deep divisions that remain between Republicans and Democrats on FY2016 and future appropriations.

Speaker Boehner is scheduled to resign at the end of October and many House Republicans will press for their new leaders to take a hardline position on defense increase, while maintaining budget caps. This would mean cutting nondefense programs, which the Democrats and the White House strongly oppose. At the same time, Senate Democrats continue to threaten to block votes on FY2016 appropriations bills (none of which have moved through Congress) until budget deal discussions show progress. And, the fight to defund Planned Parenthood is not finished.

So, while one fight on FY2016 appropriations has ended, a much larger one, with possibly far greater implications looms.

Senate blocks vote on proposed CR that excludes funding for Planned Parenthood

Thursday, September 24th, 2015


Today, the Senate defeated a motion to proceed to a vote on a Continuing Resolution (CR) that would fund the government until December 11, 2015, but provide no funding for Planned Parenthood in FY2016.

The 47-52 vote fell far short of the 60 yes votes needed to proceed to a vote on the CR. Eight Republican Senators joined 42 Democrats and two Independents in voting against the motion. Only one Democrat (Sen. Joe Manchin, D-WVA) voted to proceed.

Even if the Senate had passed a CR that defunded Planned Parenthood, the president would not have signed the bill. The White House issued a Statement of Administration Policy (SAP) that threatened a veto of any CR that defunds Planned Parenthood or any other so-called “policy riders.”

With a government shutdown looming on Midnight Wednesday, September 30th, Sen. McConnell will propose a “clean” CR until December 11th. The Senate is expected to begin debate on the CR on Monday.

If the Senate passes a CR early next week, the House only have a day or two to act quickly to keep the government open after September 30th. This time constraint puts pressure on Speaker Boehner come up with a majority vote on a “clean” CR. Sentiment in the House among Republicans appears divided on including a provision to defund Planned Parenthood in a CR. Thirty-one Republicans have pledged to vote against a CR that includes funding for Planned Parenthood. On the other hand, 11 Republican freshman stated their opposition to shutting down the government over such a policy dispute. Democrats appear overwhelmingly to support a clean CR. The question will be how to put together enough votes by next Wednesday to keep the government open.

President will nominate Eric Fanning to Secretary of the Army

Monday, September 21st, 2015


President Obama announced that he will nominate Eric Fanning to be Secretary of the Army. If confirmed by the Senate, Fanning would succeed John McHugh who has served as Army secretary since September 2009. McHugh has announced he will step down from the post in November.

Secretary of Defense Ash Carter praised the selection calling Fanning “one of our country's most knowledgeable, dedicated, and experienced public servants.” Carter said he has confidence that Fanning “will strengthen our Army, build on its best traditions, and prepare our ground forces to confront a new generation of challenges."

Fanning is currently serving as Acting Under Secretary of the Army since June 30, 2015. Prior to that he served as The Special Assistant to the Secretary and Deputy Secretary of Defense.

Mr. Fanning has also held senior leadership jobs in the Department of the Air Force and the Department of the Navy. From April 2013 to February 2015 he served as the Under Secretary of the Air Force during which time he was Acting Secretary of the Air Force for six months. Fanning was the Deputy Under Secretary of the Navy/Deputy Chief Management Officer for four years beginning in 2009.

Prior to serving in the Department of Defense, Fanning held a number of jobs related to national security. In 2009 he was Deputy Director of the Commission on the Prevention of Weapons of Mass Destruction Proliferation and Terrorism. Prior to that, he was managing director of CMG, a strategic communications company, and Senior Vice President For Strategic Development at Business Executives for National Security (BENS). Fanning was also a Senior Associate for Robinson, Lere & Montgomery (a strategic communications firm) and worked for CBS News in New York. Fanning also served on Capitol Hill as a research assistant with the House Armed Services Committee.

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