Defense Financial Highlights

Senate committee approves FY2017 Coast Guard funding

Thursday, June 2nd, 2016

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Last week, the Senate Appropriations Committee (SAC) approved FY2017 appropriations for the Coast Guard, which are included in the FY2017 Department of Homeland Security appropriations bill.  The SAC approved the FY2017 Homeland Security Appropriations bill 30-0.

The SAC approved $8.7 billion in discretionary appropriations (to be appropriated by Congress) for the Coast Guard, $129 million more than the budget request. The bill also identifies $1.7 billion in Coast Guard mandatory spending for retired pay. The SAC bill includes in the base Coast Guard budget $162 million for Overseas Contingency Operations (OCO).

Operating expenses totaling $7.1 billion are funded in the bill, $153 million higher than the request. The bill fully funds a 1.6 percent military pay raise, requested by the president.  Coast Guard OCO operations costs ($162 million) that were requested in the Navy budget are provided directly to the Coast Guard budget.

The bill would increase the FY2017 request for acquisition, construction, and improvements by $120 million to $1.257 billion.  The SAC would fund $95 million for long-lead time materials for the 10th National Security Cutter (NSC) and an additional $30 million for Structural Enhancement Dry-dock Availability for work on two NSCs.  An additional $85 million will allow for the purchase of two more (total six) Fast Response Cutter (FRC) hulls.  With $1 billion included in the SAC-approved FY2017 Department of Defense Appropriations bill, $133 million is cut from the president’s Coast Guard request for Polar Icebreaker Recapitalization Project, leaving about $18 million for management and support costs.  Another $15 million in the bill would provide In-Service vessel sustainment.  The bill would also add $22 million to the request for shore-side and waterfront planning for future operations in Kodiak.

The SAC would double the Coast Guard research, development, test, and evaluation (RDT&E) request to $36.8 million.  The bill would add $18 million to test the use of ultra-long endurance Unmanned Aircraft System (UAS) for intelligence, surveillance, and reconnaissance (ISR) in source and transit zones.

FY2017 DoD Appropriations bill cleared by Senate panel

Tuesday, May 31st, 2016

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Last week, the Senate Appropriations Committee (SAC) approved the FY2017 Department of Defense Appropriations bill by a vote of 30-0.

SAC Chairman Sen. Thad Cochran (R-MS) said the bill “has broad bipartisan support” and “sustains a strong U.S. force structure, and it makes significant investments in readiness, shipbuilding programs, aircraft procurement, and missile defense.”

The SAC bill would provide $515.9 billion for the DoD base budget (excluding military construction), almost $2 billion less than the request, and $58.6 billion for Overseas Contingency Operations (OCO), the same amount as requested.  The House Appropriations Committee (HAC) approved its version of the bill last month.

Unlike the HAC bill the SAC funded OCO for the entire year (rather than through April 2017) and did not use OCO funding for base budget requirements.  The HAC bill used $15.7 billion in OCO for unrequested base requirements. To provide additional funding for committee priorities and unfunded needs identified by the military services, the SAC made over 450 specific cuts totaling $15.1 billion.

The SAC bill would fund a 1.6 percent military pay raise as proposed by the president and recommended by the  Senate Armed Services Committee (SASC).  The HAC bill would fund a 2.1 percent military pay raise as authorized in the House-passed FY2017 Defense Authorization bill.

The SAC would fund the Defense Health Program (DHP) at $34 billion (and includes over $900 million more for defense medical research.

The bill includes funds to buy 10 ships: two Virginia class submarines; three DDG-51 destroyers; three Littoral Combat ships (LCS); an LHA amphibious assault ship; and a Polar Icebreaker.  The committee noted that the last U.S. icebreaker was funded in the FY1990 DoD Appropriation bill.  The Obama administration has planned to start icebreaker production ion 2020, according to the committee   But the SAC bill includes $1 billion in FY2017 for the first ship in the Polar Icebreaker Recapitalization Project due to “the strategic importance of polar operations to the nation’s future security.” 

The SAC bill would make significant increases to the administration’s request for aircraft, including:  12 F-18’s; four F-35’s (including two vertical take-off F-35s for the Marine Corps); 15 Blackhawk and 28 Lakota helicopters for the Army; two Air Force C-130J’s; and two Marine Corps MV-22 helicopters.

The committee would also add $454 million to the request for Israeli missile defense programs, for a total of $601 million.

No announcement was made regarding the timing of full Senate consideration of the FY2017 DoD Appropriations bill.

Pushing an aggressive appropriations schedule, the Senate passes the FY2017 Transportation/HUD and Military Construction/VA spending bills

Thursday, May 26th, 2016

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The Senate continues its aggressive effort to move FY2017 appropriations bills to completion. 

Last week the Senate passed the second and third appropriations bills for FY2017:  Transportation/HUD bill and Military Construction/Veterans Affairs (MilCon/VA).  The two bills were combined in a single bill and passed the Senate by a significant majority, 89-8.  The Senate passed its first FY2017 appropriations bill, Energy & Water on May 12.

In addition to providing appropriations for military construction spending in the Department of Defense (DoD), the VA, the Departments of Transportation and Housing and Urban Development, the bill also would make available $1.1 billion “for medical and public health preparedness and response capabilities related to the Zika virus.”

Touting the Senate’s progress on FY2017 appropriations bills, Senate Appropriations Committee (SAC) Chairman Sen. Thad Cochran (R-MS) said, “Senators have now worked through three appropriations bills and I look forward to additional cooperation as other FY2017 bills are brought to the [Senate] floor.”

The SAC has approved another five bills (Agriculture, Commerce/Justice/Science, DoD, Homeland Security, and Legislative), which are now ready for full Senate action.

The House also has proceeded apace on FY2017 appropriations bills.  To date, the full House has passed one FY2017 appropriations bill (Military Construction/VA), while another (Energy and Water) failed to achieve enough votes to pass.  The House Appropriations Committee (HAC) has approved another five bills (Agriculture, Commerce/Justice/Science, DoD, Legislative, and Transportation/HD) that await final action by the full House.

The Military Construction portion of the Senate MilCon/VA bill would provide $7.9 billion for military construction projects, family housing, Base Realignment and Closure (BRAC), and the NATO Security Investment Program.  This is $486 million above the FY2017 request.

The House-passed FY2017 MilCon/VA bill provides $250 million more than the request.

The Senate bill would provide $5.9 billion for active and reserve military construction projects: $5.2 billion for active components construction ($170 million above the request) and $673 million for guard and reserve components construction (the requested level). Funding in the bill for Family Housing totals $1.320 billion, the requested amount.

The bill would fund the requested amounts for the North Atlantic Treaty Organization Security Investment Program (NSIP), $187 million and Base Realignment and Closure (BRAC), $200 million

The Senate-passed bill includes another $515 million to be used by the military services for projects identified on the service’s unfunded priority list provided to Congress.

Funding totaling $200 million would be rescinded from prior-year programs if the bill became law.

House passes FY2017 Defense Authorization bill after White House veto threat

Thursday, May 19th, 2016

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Yesterday, the House passed its version of the FY2017 Defense Authorization bill, (H.R.4909) 277-147.  In the final vote, 40 Democrats joined 237 Republicans in the affirmative, while only five Republicans along with 142 Democrats voted against passage, 

House Armed Services Committee Chairman Rep Mac Thornberry (R-TX) said the bill protects U.S. national security by “beginning to correct shortfalls in our military readiness, reversing troop cuts, increasing investments in training and maintenance programs, and rebuilding crumbling facilities.”

During its two-day consideration of the bill, the House considered 180 floor amendments of which 170 were approved. Earlier, the House Rules Committee struck a provision from the House Armed Services Committee-approved bill that would have required women to register for the draft.

The House bill authorizes $543.4 billion for the Department of Defense (DoD) and the Department of Energy (DoE) nuclear weapons program. The authorized amount for the base DoD budget would be $523.6 billion, essentially the same as the president's request.

The bill authorizes $35.7 billion for Overseas Contingency Operations (OCO) available until April 2017.  After that the new Administration would, if needed, have to request additional OCO funds for FY2017.  The president's request included $58.8 billion for OCO in FY2017. 

The House bill would also authorize another $23.1 billion in OCO funding to be used for base budget requirements.  The administration request assumes that only $5 million of OCO funds will be used to pay for additional troops and readiness funding not included in the president’s budget request.

This approach to funding OCO caused the White House to issue a veto threat.  The Statement of Administration Policy (SAP) called it “dangerous” and “wasteful.”  “By gambling with warfighting funds, the bill risks the safety of our men and women fighting to keep American safe, [and] undercuts stable planning,” according to the SAP.  Secretary of Defense Ash Carter called the proposal a “raid on war funding that risks stability.”

The White House also takes strong issue with the bill’s restrictions on detainees at Guantanamo Bay, failure to adopt a proposal to begin another Base Realignment and Closure (BRAC) round, and rejection of reform proposals for military compensation and health care. 

The House bill provides military personnel with a 2.1 percent pay raise, 0.5 percentage points higher than the administration's 1.6 percent request.  The bill also would increase active duty strength by 27,000 over the president's budget request and set total Army Guard and Reserve strength levels 25,000 higher than the request.

The bill adds funding for 14 more F/A-18's, 11 F-35s, three C-130J, and two MV-22 aircraft.  The bill also funds additional Army AH-64 and UH-60M helicopters and two more ships (one LCS and one DDG-51).  The bill rejects the administration’s proposal to retire the A-10 fleet and replace it with F-35’s.

House Appropriations committee approves FY2017 DoD spending bill

Wednesday, May 18th, 2016

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Yesterday, the House Appropriations Committee (HAC) approved the FY2017 Department of Defense (DoD) Appropriations bill. The HAC bill would provide $517 billion for the DoD base budget (excluding military construction).

Committee chairman Rep. Hal Rogers (R-KY) said the bill “provides the resources needed to keep our military trained and well equipped, to ensure success in our missions now and in the future.”

The HAC followed the House Armed Services Committee’s (HASC) plan for funding Overseas Contingency Operations (OCO) only through April 2017 and using some requested OCO funding for base budget requirements.  The HAC bill would appropriate $42.9 billion for OCO requirements and another $15.7 billion to be used to meet base budget requirements.  This total for OCO matches the president’s $58.6 billion OCO request.

The HASC plan for funding OCO was one of the reasons the administration’s Statement of Administration’s Policy (SAP) cited for a potential veto of the HASC bill and will probably draw a veto threat on the HAC bill. Secretary of Defense Ash Carter called the proposal a “raid on war funding that risks stability and gambles with war funding.”

The HAC bill includes an additional $340 million to fund a 2.1 percent military pay raise that is authorized in the HASC-approved bill.  The president’s budget requests a 1.6 percent pay raise for military personnel.  The HAC also would fund the higher active duty (+27,000) and guard and reserve (+25,000) strength levels that would be authorized in the HASC bill.

The base budget bill would fund the Defense Health Program (DHP) at $33.4 billion, $100 million above the request, but another $450 million for base requirements in funded in the HAC OCO account.

Funding in the HAC bill for Operations and Maintenance (O&M) programs would total $179.3 billion for the base budget, about $2.4 billion above the total O&M request. OCO O&M funding of $30 billion includes $5.6 billion for base requirements.  The increase in the base bill funding includes $6.4 billion more than requested for readiness, $1.6 billion more for facility, sustainment, restoration, and modernization programs and another $750 million for depot maintenance.

The HAC bill would provide $104.2 billion for base budget procurement programs ($2.3 billion above the request).  OCO procurement funding totals $16.6 billion, with $7.3 billion for base requirements (including $3.1 billion for shipbuilding and conversion).  The bill would fund the procurement of 15 ships (including three Littoral Combat Ships), 74 F-35 aircraft, 16 F/A-18E/F planes, 72 UH-60 helicopters, 15 KC-46 tanker aircraft, and 123 Stryker upgrades.

Research and development (R&D) funding in the base budget would be $70.3 billion ($1.1 billion less than the request) with another $163 million for base requirements in OCO funding.  Major programs receiving R&D base budget funding include: the new Air Force bomber; a next generation JSTARS aircraft; RQ-4 Triton Unmanned Aerial Vehicle; the Ohio-class submarine replacement; and STRYKER lethality.

The bill rescinds $1.95 billion from prior-year programs in the base bill and $669 million in in prior-year rescissions from OCO funding.  The HAC also would achieve savings of $1.5 billion from lower fuel costs, and almost $600 million because of more favorable economic conditions.

The bill is now ready for consideration by the full House.

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