Defense Budget and Financial Management

Congress passes FY2017 CR to avert government shutdown

Thursday, September 29th, 2016

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Yesterday, Congress approved a Continuing Resolution (CR) that will keep the government running until December 9, 2016.  The House passed the CR (H.R. 5325) by a bipartisan vote of 342-85 as 170 Republicans and 172 Democrats voted for passage.  Earlier in the day, the Senate passed the CR 72-26. The president is expected to sign the bill before the fiscal year begins on Saturday.

Final negotiations on the CR were stalled because Senate Democrats would not let the bill proceed without funding for the water contamination crisis in Flint, Michigan.  They argued that just as the proposed CR includes assistance for flood damage in Louisiana and other states, the bill should also include assistance for Flint.

With the Senate deadlock continuing, and the possibility of a government shutdown rising as the Friday midnight deadline approached, House Democrat and Republican leaders agreed to a deal that would provide assistance to Flint.  House Speaker Paul Ryan (R-WI) and Minority Leader Nancy Pelosi (D-CA) agreed to include funding for Flint assistance in the Water Resources Development Act.  Flint assistance is already in the Senate version of the water resources bill.  Senate leaders accepted the deal and the Senate and House passed the CR.

Commenting on the bill, House Appropriations Committee Chair Rep. Hal Rogers (R-KY) said “a continuing resolution is a last resort. But, it is what we must do to fulfill our congressional responsibility to keep the lights on in our government.”  Senate Appropriations Committee chair Sen. Thad Cochran (R-MS) called the CR “a short-term fix that will allow the Senate and the House to complete work on the FY2017 appropriations bills later this year.”

The CR is included in the FY2017 Military Construction/Veterans Affairs appropriations bill, which funds DoD military construction and Veterans Affairs appropriations for the full year.

The CR essentially allows agencies to fund FY2017 programs at the FY2016 level ($1.067 trillion for the total government and $74.1 billion for Overseas Contingency Operations (OCO)) until December 9.  During the CR period, no new starts are permitted nor are programs allowed to increase production rates above the FY2016 rate

The bill also includes $1.1 billion in emergency funding for preventing the spread of the Zika virus, funding to address the opioid crisis, and $500 million in rebuilding and recovery grants to families and communities affected by recent flooding.

Congress will be in recess until after the November elections, returning for a “lame duck” session beginning on November 14.  They will work to pass 11 individual FY2017 appropriations bills, a series of “mini-buses that include some individual appropriations, or more likely an omnibus appropriations bill containing the 11 remaining appropriations bills.

Carter presses Congress to act on FY2017 DoD budget

Friday, September 23rd, 2016

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Department of Defense (DoD) Secretary Ashton Carter urged Congress to end budget gridlock and achieve budget stability through bipartisanship.

Testifying before the Senate Armed Services Committee yesterday, Carter said budget stability is “critical in order for DoD and our people to address all the national security challenges we face.”

Carter identified three areas in the congressional review process that are of great concern to DoD: 1) budget gridlock and instability; 2) micromanagement; and 3) over-regulation.  But at this hearing, he concentrated on budget stability saying he would work with congress on micromanagement and over-regulation when Congress finalizes the FY2017 National Defense Authorization bill. Congress is not expected to complete action on the FY2017 Defense Authorization bill until after the election.

Carter told the committee that budget instability is “one of the biggest strategic risks” to DoD’s enterprise.  Such instability undercuts budget planning for warfighters and commanders, “baffles our friends and emboldens foes,” he said.

The inability for Congress to complete action on defense budget bills in a consistent, timely manner is “managerially and strategically unsound” and inhibits industry partners from operating efficiently on technology’s cutting edge, he stressed. 

Carter lamented the ongoing use of continuing resolutions to fund defense damages readiness and modernization, as the Joint Chiefs told the committee last week. “Even a short-term CR slows our shipbuilding program,” Carter cited as an example.

He argued that and the possible return to sequestration would devastate military readiness and modernization efforts.  Carter warned that the use of budget gimmickry, such as using Overseas Contingency Operations (OCO) funding to fund base budget requirements, could make the return to sequestration more likely.  Not only that, Carter said, it “harms readiness of our troops in order to buy more force structure than we can afford.” 

The House version of the FY2017 DoD Appropriations bill would provide only $42.9 billion through April 2017 and use $16 billion in OCO funding for base budget requirements.  The Senate Appropriations Committee bill would provide the full requested amount ($58.6 billion) for OCO.

Carter also rejected congressional proposals that would cut DoD investment priorities to fund programs that were unrequested or of lower priority.  These proposals could “seriously imperil our future strength,” he said. 

With a little over a week remaining until the beginning of FY2017, Carter pressed Congress to complete action on the FY2017 defense budget and avoid a lengthy continuing resolution.  Unless Congress acts, he said FY2017 will begin with another CR for the eighth year in a row.  Carter decried this as “a deplorable state of affairs.”

Military leaders tell Congress budget uncertainty and funding constraints threaten readiness and modernization

Friday, September 16th, 2016

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Continuing budget uncertainty, constrained funding levels, and the threat of sequestration are threatening the military’s ability to achieve and sustain readiness levels necessary to meet current mission demands and build the forces capable of meeting future security threats, military leaders told Congress this week.

Testifying before the Senate Armed Services Committee (SASC), Gen. Mark A. Milley, Army Chief of Staff, Adm. John M. Richardson, Chief of Naval Operations, Gen. Robert B. Neller, Commandant of the Marine Corps, and Gen. Gen. David L. Goldfein, Air Force Chief of Staff, said budget caps and annual continuing resolutions are worsening already difficult readiness and modernization challenges.

Gen.  Milley warned that the Army will not be able to meet its readiness needs or “build the Army our Nation needs in the future” if sequestration (automatic cuts) returns.  The Army continues to make readiness its number one priority and has balanced competing needs to meet requirements, Milley said.  However, he stressed years of reduced funding levels are beginning to have a serious impact on Army units and installations.  The key to improving readiness is sustained, predictable funding levels, he said.  “Predictable and consistent funding is absolutely essential for the Army to build and sustain current readiness and progress toward a modern, capable future force,” Milley told the committee.  Without such funding the Army will have to “reduce funding future readiness in modernization and infrastructure maintenance, and continue programmed end-strength reductions.”

Adm. Richardson told the committee his main concern is that “the gap between the demands the Navy is facing and the solutions available to address them is growing.”  The funding limitations established in the Budget Control Act (BCA) and the continuing threat of possible sequestration cuts are making it more difficult to balance current readiness and preparations for the future, he said. These funding cuts are occurring when mission demands are increasing Richardson said.  The situation is worsened by continuing uncertainty caused by recurring continuing resolutions, he stated.  “Our ability to achieve true effectiveness and efficiency has been undermined by budget instability, workforce limitation, and eight—now likely nine—straight years of budget uncertainty and continuing resolutions, he said.  The result, he added, is “increased wear and tear on ships, aircraft, and people.”

Gen. Neller stressed that funding cuts and budget instability have had a negative effect on the Marine Corps’ current and future readiness.  “As resources have diminished, the Marine Corps has protected the near-term operational readiness of its deployed and next-to-deploy units in order to meet operational readiness,” he said.  However, he warned this action has come at the cost of increased operational risk.  Continued constrained funding constraints are stretching the Marine Corps, he said.  And, he stressed, “unstable fiscal environments prevent the deliberately planned, sustained effort needed to recover current readiness of our legacy equipment in the near term, and to modernize in the longer term.”  The “harmful effects of ‘sequestration’ are well known and will continue to harm the Marine Corps if they continue,” he cautioned.  “Without consistent sustained funding we cannot rebuild and capitalize our readiness, he said.

Gen. Goldfein warned that “the technology and capability gaps between America and our adversaries are closing dangerously fast,” and stressed that significant investment and sustained funding is required to ensure that forces remain “ready and credible” in the future.  In the current fiscal environment, the Air Force is striving to balance the needs of current readiness and ongoing modernization with limited and uncertain resources.  But, Goldfein stressed, “the Air Force will be challenged to sustain legacy fleets and simultaneously invest in developing and procuring systems required to counter threats in FY2018 and beyond.”  Unstable funding levels “make it difficult to deliberately balance investments to modernize, recover readiness, right-size the force, win today’s fight, and fully execute the Defense Strategic Guidance,” Goldfein said. Predictable funding levels and an end to sequestration “is absolutely critical to rebuilding Air Force capability, capacity, and readiness,” he emphasized.

Congress returns to address Zika funding and avoid a government shutdown

Tuesday, September 6th, 2016

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Congress returns this week (after a seven-week recess) with less than four weeks until the end of the fiscal year and nine weeks until the November elections.

Facing this time constraint on FY2017 funding and the desire by members to get back out on the campaign trail, House and Senate leaders will meet this week to decide on their strategy to address legislative priorities before recessing again in early October.  Most of the discussions and negotiations will center around funding to fight the Zika virus and dealing with FY2017 appropriations to avoid a government shutdown.  The FY2017 Defense Authorization bill (passed by both the House and Senate and now in conference) is also seen as pressing legislation, but the limited schedule and disagreement on defense funding levels makes movement doubtful at this time.

Zika virus funding.  The House passed legislation providing $1.1 billion in funding to combat the Zika virus. However, Democrats blocked consideration of the bill in the Senate because of attached legislation that prohibited Zika funding from going to Planned Parenthood and weakened some environmental regulations.  Senate Republican leaders look to bring up this funding bill again, but Democrats are determined to block another vote. 

Continuing stalemate in the Senate could push consideration of Zika funding into the debate on the CR or a possible omnibus appropriations bill.  Complicating the politics of this issue, the Center for Disease Control (CDC) has said that funding for Zika programs could run out by the end of the month.  Nevertheless, supporters of Zika funding on both sides of the aisle are confident that the funding issue will be settled before congress adjourns.

FY2017 Appropriations.  With only three and a half weeks left before the start of FY2017, the House and Senate will be forced to come up with a Continuing Resolution (CR) to keep the government from shutting down; an outcome that both Republicans and Democrats want to avoid.  A CR is necessary because to date no FY2017 appropriations bills have been signed into law.  The House has passed only six FY2017 appropriations bills (Defense, Energy and Water, Financial Services, Interior and Environment, Legislative, and Military Construction/Veterans Affairs) and the Senate has only passed three appropriations bills (Energy and Water, Military Construction/Veterans Affairs, and Transportation/HUD).  The Senate Republican leadership will again try to pass the FY2017 DoD Appropriations bill (already passed in the House), but Democrat leaders will move to block action, just as they did in July. 

Debate on a CR will be over content (whether the CR will be clean or will include legislation to address particular concerns) and time frame (short-or long term).  Republicans and Democrats often push for legislation on their interests in a CR and the White House will surely weigh in as well.  For example, Republicans will press for increased defense funding and restrictions on nondefense spending and Democrats will advocate for stronger environmental legislation, gun control, and health and safety issues.  Zika funding could be included in a CR if an agreement is not reached and emergency funding for flood damage resulting from recent storms could be addressed.  But, final decisions on what is in a CR or what will be included in an omnibus appropriations bill will not be made until the length of the CR is settled.

Conservative Republicans in the House are arguing for a six-month CR that would carry over into next year when a new president and congress are in place.  They are concerned that a short-term CR will lead to an omnibus FY2017 appropriations bill in a lame duck session that will result in higher spending.  Certainly supporters of higher defense funding (including Republicans and Democrats) see a time-pressed omnibus appropriations bill as the leverage for higher defense appropriations in FY2017.  This is also true for other high interest issues on both sides of the aisle.

Democrats want a short-term CR, possibly up to mid-December, followed by an omnibus appropriations bill.  Senate Democrat Leader Sen. Harry Reid (D-NV) has stated flatly the Democrats will not agree to a six-month CR, warning that any push for a long-term CR could lead to a government shutdown.  Both Republican and Democrat leaders have expressed a strong desire to avoid a shutdown and the blame that would come with it right before the elections. And, House Republican leaders might see a short-term CR as the way to maintain control of the process in a lame duck session, especially if it appears that Democrats could control the Senate in the new Congress.

President recommends 1.6 percent pay raise in 2017 for federal civilian and military personnel

Friday, September 2nd, 2016

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President Obama notified Congress this week that he has determined federal civilian employees should receive a 1.6 percent across-the-board pay raise in 2017. This is the same civilian and military pay raises the president included in the FY2017 federal budget request in February.

Each year the president is required under Title 5 U.S.C., sections 5303(b) and 5304a, to present an alternative pay plan for across-the-board pay and locality pay adjustments. Unless Congress acts the president’s alternative proposal automatically will go into effect in January 2017.

The 1.6 percent pay raise is a combination of a 1.0 percent across-the-board raise announced in the letter and an increase in locality pay the president said he will announce by November 30, 2016.  “The alternative plan for locality payments will be limited so that the total combined cost of the 1.0 percent across-the-board base pay increase and the locality pay increases will be 1.6 percent of the basic payroll,” the president said in his letter.

In a separate letter to Congress, the president determined that members of the uniformed services should also receive a 1.6 percent pay raise in 2017. The president proposed a 1.6 percent military pay raise in his FY2017 budget request.  The president acknowledged the contributions made by military personnel “over more than a decade of war,” but said the need to “keep our nation on a sustainable fiscal course…requires tough choices, especially in light of budget constraints.”

To date, Congress has expressed general support for a 1.6 percent civilian pay raise.  The House-passed FY2017 Financia

Services and General Government Appropriations bill was silent on the pay raise, which indicates passive support for the president’s 1.6 percent pay raise proposal in that it does not reject it. The Senate has not completed action on its version of the bill.

The 2017 military pay raise will be at least 1.6 percent as proposed by the president. The House-passed FY2017 DoD Appropriations bill funds a 2.1 percent military pay raise that is authorized in the House-passed FY2017 Defense Authorization bill.  However, the Senate-passed Defense Authorization bill would approve the president’s 1.6 percent military pay raise request and the Senate Appropriations Committee supports the president’s military pay raise proposal in its bill.  The full Senate has not yet acted on the committee-recommended bill.  A House-Senate conference on the bill will determine Congress’s final, position on the military pay raise.

 

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