Defense Budget and Financial Management

Senate passes and sends FY2015 Appropriations and Defense Authorization bills to president

Monday, December 15th, 2014

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The Senate has passed and sent to the president the FY2015 Appropriations bill that funds the Department of Defense Appropriations bill and 10 other bills (including Military Construction /VA) through the end of FY2015. The bill also funds the Homeland Security Appropriations bill under a continuing resolution (CR) through February 27, 20015.

The Senate passed the $1.013 trillion government funding bill 56-40 Saturday after defeating moves by Sen. Ted Cruz (R-TX) designed to stop the bill from proceeding to a final vote. The House had passed the bill 219-206 on Thursday. The president indicated he will sign the bill, thus averting a government shutdown.

Senate Majority Leader Sen. Harry Reid (D-NV) acknowledging the compromise cooperation between Democrats and Republicans needed to finish the bill said “this bill is not perfect, but we can all be proud that we voted tonight to make America more secure, put our government on more sound footing than when this Congress began.”

Funding in the bill for DoD base appropriations, less Military Construction, totals almost $490.2 billion, about $1 billion less than the request. Military Construction appropriations funding (in the MilCon/VA bill) is $6.6 billion, essentially the same as the request.The bill also provides $64 billion for Overseas Contingency Operations (OCO).

The bill provides funding for a 1% percent military pay raise. But, it freezes freeze pay for general and flag officers and makes a 1 percent reduction in the Basic Housing Allowance (BAH). The conference agreement adds about $200 million to the Defense Commissary Agency funding request to maintain operations.

The legislation 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 bill also funds continued operations of A-10 aircraft and continues operations of the full Airborne Warning and Control System (AWACS). The administration had proposed retiring both of these aircraft.

The Senate also approved (89-11) the FY2015 Defense Authorization bill, which the House passed earlier this month. The president is expected to sign the bill.

The Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for Fiscal Year 2015,” named after the Senate and House Armed Services Committee chairmen, authorizes $495.9 billion for the Department of Defense (DoD) and $17.5 billion for the Department of Energy (DoE) nuclear weapons program.  The bill authorizes an additional $63.7 billion for Overseas Contingency Operations (OCO).

The legislation authorizes a 1 percent military pay raise, requested by the president. However, the bill rejects proposed changes to TRICARE fees, deductibles, and pharmacy co-pays, but does authorize a $3 increase in pharmacy co-pays for prescriptions filled in non-military treatment facilities by non-Active Duty TRICARE beneficiaries.

The authorization bill rejects the administration-proposed 5 percent cut to Basic Allowance for Housing (BAH), opting instead for a 1 percent reduction in BAH. The bill also rejects another Base Realignment and Closure (BRAC) round in 2017 that was urged by the administration. In recent years Congress has repeatedly rejected administration requests for another BRAC round.

The bill also denies the administration proposal to defer a decision on refueling the USS George Washington, providing almost $800 million for support and advance planning for refueling the aircraft carrier, prohibits the Air Force from retiring or preparing to retire the A-10 aircraft fleet in FY2015, and stops the Air Force from retiring any Airborne Warning and Control System (AWACS) in FY2015.

In a major organizational move, the conference agreement creates an Under Secretary of Defense for Business Management and Information that combines the positions of Deputy Chief Management Officer (DCMO) and Chief Information Officer (CIO).

Before adjourning this week, the Senate will move to complete action on a number of pending nominations proposed by the president and legislation extending for one year tax provisions set to expire at the end of the year. These so-called “tax extenders” include research and development tax credits (highly popular with business), state and local sales tax deductions, tax credits for energy efficient homes, and bonus depreciation tax credits. 

House passes FY2015 appropriations for DoD and 10 other bills; CR for Homeland Security bill

Thursday, December 11th, 2014

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With the Continuing Resolution (CR) on FY2015 funding set to expire at midnight, the House passed a $1.013 trillion FY 2015 Appropriations bill that funds the Department of Defense Appropriations bill and 10 other bills (including Military Construction /VA) through the end of FY2015.

The Homeland Security Appropriations bill, subject to intense debate after the president announced an executive order on immigration, is funded in the bill under a CR through February 27, 2017. This action will allow the Republican-controlled 114th Congress time to address concerns about the immigration order.

The Senate is expected to take up the bill tomorrow. To avert a shutdown until the Senate acts both the House and Senate approved a two-day CR.

This bill is being referred to as a CRomnibus appropriations bill because it is a combination of full-year appropriations for 11 appropriations bills and a two and a half month CR for the Homeland Security bill.

After a day of high drama that included a razor thin vote (214-212) approving the rule to proceed to a final vote and an almost seven hour recess, the House passed H.R. 83 by 219-206. Fifty seven Democrats joined 162 Republicans in supporting the bill. Defections from the bill included Republicans unhappy that the bill did not more strongly rebuke the president’s order on immigration and Democrats who were outraged over provisions that changed the Dodd-Frank law regarding banks trading financial derivatives and relaxed restrictions on campaign contributions by individuals.

The final bill was the result of intense conference negotiations between the House and Senate Appropriations committees. The House had passed its version of the bill in June and the Senate Appropriations Committee approved a bill in July.

In a joint statement House Appropriations Committee (HAC) chair Rep. Harold Rogers (R-KY) and Senate Appropriations chair Sen. Barbara Mikulski (D-MD) said “this bill fulfills our constitutional duty to fund the government, preventing damage from shutdown politics that are bad for the economy, cost jobs and hurt middle class families. While not everyone got everything they wanted, such compromises must be made in a divided government.”

Funding in the bill for DoD base appropriations, less Military Construction, totals almost $490.2 billion, about $1 billion less than the request. Military Construction appropriations funding (in the MilCoN/VA bill) is $6.6 billion, essentially the same as the request.The bill provides $64 billion for Overseas Contingency Operations (OCO).

The bill provides funding for a 1% percent military pay raise as proposed by the president, but freezes freeze pay for general and flag officers. It also allows for a 1 percent reduction in the Basic Housing Allowance (BAH) growth (the administration proposed a 5 percent cut). The conference agreement adds about $200 million to the Defense Commissary Agency funding request to maintain operations and block the president’s proposed cut to the commissary subsidy.

The legislation 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 bill also funds continued operations of A-10 aircraft, blocking the administration proposal to retire the A-10 fleet, and continues operations of the full Airborne Warning and Control System (AWACS), thwarting the administration’s plan to retire some AWACS aircraft in FY2015.

Operations and Maintenance (O&M) funding in the bill totals $161.7 billion, more than $4 billion below the administration’s request. The bill includes finding for a 1 percent civilian pay raise and provides funding increases for facility sustainment (+$900 million) and readiness, depot maintenance, and base operating support shortfalls (+$1.2 billion). Conferees cut $270 million or 2 percent from the information technologies O&M budget request.

Procurement funding in the bill totals $93.8 billion, more than $4 billion higher than the request. Included in the bill’s procurement funding are: two attack submarines and three Littoral Combat Ships; 38 F-35 (Joint Strike Fighter) aircraft and 7 KC-46A tankers; and 15 EA-18G Growlers. The legislation appropriates $1.2 billion for National Guard and Reserve equipment not requested by the administration.

The bill includes $63.7 billion for research and development, slightly more than the request. Among the programs receiving R&D funding are: the Armored Multi-Purpose Vehicle (AMPV); the long-range strike bomber; and the KC-46 tanker. The conferees also included $225 million for the Rapid Innovation Fund to support small businesses provide “leap-ahead” technologies. The bill also adds $1.3 billion for medical research (including about $100 million for the Ebola crisis) with a special focus on Peer-Reviewed Medical Research and Peer-Reviewed Cancer Research.

The conferees essentially continued language from the FY2014 appropriations bill to prohibit the transfer of detainees from Guantanamo to the United States or its territories or the modification or acquisition of facilities used to house detainees and eliminated the 5 percent discount for Military Exchanges sales of tobacco and tobacco-related products.

House passes conferenced FY2015 Defense Authorization bill

Friday, December 5th, 2014

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The House passed (300-119) the FY2015 Defense Authorization bill yesterday with bipartisan support.

The “Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for Fiscal Year 2015,” named after the Senate and House Armed Services Committee chairmen, was agreed to in conference this week. The House had passed its version of the bill in May. The Senate Armed Services Committee approved its version in May, but the full Senate had not acted on the bill.

The agreed-to legislation authorizes $495.9 billion in base discretionary budget authority for the Department of Defense (DoD) and $17.5 billion for the Department of Energy (DoE) nuclear weapons program.  The bill authorizes an additional $63.7 billion for Overseas Contingency Operations (OCO).

The bill authorizes the president’s request for a 1 percent military pay raise and accepts the president’s proposal to freeze pay for General and Flag officers in FY2015. However, the bill rejects proposed changes to TRICARE, but does authorizes a $3 increase in pharmacy co-pays for prescriptions filled in non-military treatment facilities by non-Active Duty TRICARE beneficiaries. The bill also provides an additional $100 million in subsidy funding for the commissary system, restoring the administration proposed reduction

The conferees reduced the administration-proposed 5 percent cut to Basic Allowance for Housing (BAH) to 1 percent. The bill also rejects another Base Realignment and Closure (BRAC) round in 2017 that was urged by the administration.

The bill also rejects other savings proposals made by the administration. The House-Senate bill denies the administration proposal to defer a decision on refueling the USS George Washington until the FY2016 budget. Almost $800 million is provided in FY2015 for support and advance planning for refueling the aircraft carrier.

The bill also prohibits the Air Force from retiring or preparing to retire the A-10 aircraft fleet in FY2015 and stops the Air Force from retiring any Airborne Warning and Control System (AWACS) in FY2015.

The legislation authorizes $1.25 billion for National Guard and Reserve equipment (not requested by the administration) and blocks the Army’s plan to move AH-64 Apache helicopters from the National Guard to active components in FY2015.

In a major organizational move, the conference agreement creates an Under Secretary of Defense for Business Management and Information that combines the positions of Deputy Chief Management Officer (DCMO) and Chief Information Officer (CIO). Currently, the Deputy Secretary of Defense, supported by the DCMO and staff, assumes the CMO roles and responsibilities.

The Senate will consider the bill next week.

Hagel outlines new innovation initiative

Tuesday, November 18th, 2014

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Secretary of Defense Chuck Hagel announced a new department-wide initiative designed to “identify and invest in innovative ways to sustain and advance America’s military dominance for the 21st century.”

Speaking at the 2014 Reagan National Defense Forum, Hagel said in order to “overwhelm challenges to our military superiority” within the current constrained resource environment the U.S “must change the way we innovate, operate, and do business.” The innovation Initiative is based on the lessons learned from previous offset strategies and will “sustain our competitive advantage over the coming decades,” he said.

Hagel has tapped Deputy Secretary of Defense Robert Work to direct the development of the initiative and to head an Advanced Capability and Deterrent Panel implement and integrate the effort throughout DoD. Work will provide quarterly progress reports to Hagel.

In a memo to Department of Defense and Military Service leaders, Hagel called the initiative a “third offset strategy that puts the competitive advantage “firmly in the hands of American power projection over the coming decades.”

The memo describes three main components of the initiative. A long-range research and development planning program will develop and field “breakthrough technologies and systems” to sustain and advance capabilities. This program will look particularly at robotics, autonomous systems, miniaturization, and 3-D printing.

Secondly, a reinvigorated wargaming effort will develop “alternative ways of achieving our strategic objectives.” Thirdly, a new operational concepts will utilize resources for more strategic effect and to address emerging threats more innovatively.

The new initiative will also look at DoD business practices “to find more ways to be more efficient and effective through external benchmarking and focused internal reviews.”

In describing the challenges DoD faces as a modern enterprise, Hagel told the Reagan Defense Forum that the department must upgrade its business and IT systems and processes. And, he reinforced the goal to be “fully, completely, audit-ready by no later than 2017.” Hagel said DoD is on track to meet this goal, which “is essential for DoD’s effectiveness, efficiency, and accountability into the future.”

President requests $3.4 billion for DoD operations against ISIL

Tuesday, November 11th, 2014

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A FY2015 budget amendment submitted to the Congress yesterday would provide the Department of Defense (DoD) $3.4 billion to conduct operations against the Islamic State of Iraq and the Levant (ISIL).

This request comes after the president announced that he is increasing the number of U.S. forces advising and training Iraqi and Kurdish troops by 1,500 to about 3,000.

Operations against ISIL are currently being funded from existing OCO funding, according to DoD. However, DoD has cautioned that additional funding would be required as the pace of operations increased. Secretary of Defense has repeatedly warned that operations against ISIL are long-term.

The $3.4 billion requested for Operation INHERENT RESOLVE will fund: the operations and maintenance (O&M) costs of air, ground and naval forces engaged in the operation; sustain and support forces deployed to “provide training, advice, and assistance to partner security forces engaged in the fight against ISIL;” and replenish and replace munitions expended during airstrikes against ISIL forces. According to DoD justification documents, $2.0 billion will be for In-Theater Support, $0.3 billion for equipment reset, and $1.2 billion for classified programs.

Over two-thirds of the $3.4 billion will be for O&M appropriations ($2.3 billion). Military Personnel costs account for $141 million, Procurement funding will be $827 million, and RDT&E programs will require $145 million.

Air Force requirements are $1.581 billion (46 percent of total funding). The Army receives $957 million (28 percent) for its operations, the Navy gets $260 million (8 percent), and Defense-wide activities are allocated $632 million (18 percent).

In addition to the $3.4 billion, the president requested $1.6 billion to set up the Iraq Train and Equip Fund (ITEF) ”to develop and support Iraqi national security forces, including Kurdish forces, as they confront ISIL in Iraq.”

These amounts (totaling $5 billion) are to be funded in DoD Overseas Contingency Operations (OCO) accounts and are in addition to the $58.6 billion DoD Overseas Contingency Operations (OCO) request the president sent requested in June. The total DoD OCO request for FY2015 is now $63.6 billion.

A DoD spokesperson said Congress will have to act on the president’s funding request before the additional 1,500 troops can be deployed. Congress will begin a lame duck session this week with hopes of completing action on FY2015 appropriations bills, including DoD OCO funding, before adjourning.

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