Defense Financial Highlights

President will nominate David Berteau to top DoD logistics post

Wednesday, November 5th, 2014


President Obama will nominate David J. Berteau to be Assistant Secretary of Defense for Logistics and Material Readiness (L&MR). Paul D. Peters, Principal Deputy Assistant Secretary (L&MR), is currently serving as Acting ASD (L&MR).

As ASD (L&MR) Berteau would manage logistics policy and program oversight within the Department of Defense (DoD). The L&MR organizational structure includes: Maintenance Policy and Programs; Material Readiness; Program Support; Resource Management; Supply Chain Integration; and Transportation Policy.

Berteau is currently the Senior Vice President and Director of the National Security Program on Industry and Resources at the Center for Strategic and International Studies (CSIS). His portfolio at CSIS consists of the study and analysis of national security plans, programs, and budgets as well as defense management, contracting, acquisition, logistics, and industrial base issues. Berteau also serves as a director of the Procurement Round Table and is a fellow at the National Academy of Public Administration and the Robert S. Strauss Center at the University of Texas.

Prior to joining CSIS in 2008, Berteau was a director at Clark and Weinstock (2003-2008), and directed the National Security Studies Program at Syracuse University (2001-2003). From 1993 to 2001, he served in various senior positions with Science Applications International Corporation (SAIC).

Berteau would bring a wealth of experience in DoD resource management and acquisition policy to the job. Between 1981 and 1993, Berteau held senior staff and management positions at DoD. From 1981 to 1986 he served in numerous staff positions. Berteau was Deputy Assistant Secretary for Resource Management and Support from 1986 to 1989. In 1989 he was Acting Assistant Secretary for Force Management and Personnel and was the Principal Deputy Secretary for Production and Logistics from 1990-1993. He also served as the Chairman of the Defense Conversion Commission from 1992-1993.  

Hagel and Army leaders call for sequestration fix in 2016

Friday, October 31st, 2014


Secretary of Defense Chuck Hagel blamed many of the readiness problems the Army and other military services are experiencing on the deep cuts forced by sequestration

Speaking at the Association of the United States Army (AUSA) Annual Meeting and Exposition earlier this month, Hagel warned that failure to fix sequestration risks a return to an Army that is undertrained, under-equipped, outnumbered, and unprepared.” Because of sequestration, last year the Army had to cancel so many training rotations that we had only two active-duty brigade combat teams who were fully ready and available to execute a major combat mission,” he charged.

Hagel acknowledged that some budget relief has been enacted, but stressed that sequestration is still law. Unless there is an agreement to fix sequestration, Hagel said, “it will return in 2016—stunting the Army’s readiness just as we’ve begun to recover, and requiring even more dramatic reductions in force structure.”

Hagel also pressed for congressional approval of DoD’s proposed program reductions, trade-offs, and compensation reforms to mitigate the stress on readiness levels and modernization plans. If Congress does not act, Hagel warned, DoD “could face a $70 billion cut in our budget over the next five years.” As a result, the military services “would have little choice but to make up the differences through cuts to readiness,” he said.

Hagel urged Congress to be “a partner in responsible, long-term planning and budgeting” and to end sequestration, which he called “an irresponsible deferral of responsibility.”

Army Secretary John McHugh, opening the AUSA meeting, voiced similar concerns. He warned that if sequestration is implemented in 2016 “another round of indiscriminate cuts will gut our force so we’re unable to meet the president’s defense strategic guidance.” He called on Congress to support predictable, long-term funding plans. “This is a time for predictability,” he said

Army Chief of Staff Gen. Ray Odierno has echoed Hagel’s and McHugh’s remarks. Odierno called 2016 a “breaking point.” He said if sequestration returned in 2016 it would take the Army budget down $9 billion from the current plan. He emphasized this cut would significantly degrade the force “because I cannot take people out fast enough.”

Odierno called for a “balance” between manpower, modernization and training, which sequestration make difficult to maintain. “This is a lousy way to do business,” he said.

Federal civilian retirees to get 1.7 percent COLA in 2015

Thursday, October 23rd, 2014


Federal civilian retirees are set to receive a 1.7 percent cost-of-living adjustment (COLA) in 2015.  Retirees covered under the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS) will see the increase reflected in their January 2015 payment.

The increase is slightly higher than the 1.5 percent COLA federal retirees received in 2014.  The 2013 COLA was also 1.7 percent and the 2012 COLA was much higher at 3.6 percent. No adjustment was paid to retirees in 2010 and 2011. 

The annual retiree COLA is calculated as the change in the average Consumer Price Index for Wage Earners and Clerical Workers (CPI-W)—published by the Bureau of Labor Statistics (BLS)—from the third quarter of the previous year to the third quarter of the current year. 

This is the same calculation for the Social Security COLA.  Social Security recipients will also receive a 1.7 percent increase.

In early September, President Obama notified Congress that he determined that federal civilian employees should receive a 1 percent across-the-board pay raise in 2015. Congress passed and the president signed a FY2015 Continuing Resolution that runs until December 11, 2014, which did not address the federal civilian pay raise. By remaining silent on the pay raise, Congress appears to support the president’s proposed 1 percent pay increase in January. If Congress takes no further action on the pay raise when it completes the FY2015 appropriations bills, the president can issue an executive order implementing the raise.

President orders agencies to upgrade government payment card security

Tuesday, October 21st, 2014


Federal agencies will soon be implementing greater security measures and new technology in their payment card programs to improve the data security of financial transactions.

Citing the significant economic consequences of recent data breaches (such as Target and Home Depot), President Obama issued an Executive Order directing “to transition payment processing terminals and credit, debit, and other payment cards to employ enhanced security features, including chip-and-PIN technology.”

Even though the government’s payment card program includes many safeguards against fraud and abuse, the president determined that “the Government must further strengthen the security of consumer data,” by upgrading its payment card program.

Agencies are to use the National Technology Transfer and Advancement Act of 1995 and Office of Management and Budget (OMB) Circular A-119 as guides to determine which security enhancement to use.

By January 1, 2015, new payment processing terminals will “include hardware necessary to support such enhanced security features,” according to the Order. By the same date, the Treasury Department will develop a plan for installing “enabling software that supports enhanced security features.”

Existing government credit, debit, and payment cards (used for official business) that do not have enhanced security features will have to be replaced. The General Services Administration (GSA) will begin replacing such cards provided through GSA contracts no later than January 1, 2015.

Other agencies with such card programs will also have to provide OMB (by January 1, 2015) with plans that will ensure that their cards have enhanced security features.

The Executive Order also addresses the security of federal online transactions. The president orders the National Security Council (NSC), the Office of Science and Technology, and OMB to develop a plan that ensures “that all agencies making personal data accessible to citizens through digital applications require the use of multiple factors of authentication and an effective identity proofing process,” within 90 days. These plans will have to be implemented within 18 months.

CBO estimates FY2014 budget deficit drops to $486 billion

Friday, October 10th, 2014


The Congressional Budget Office (CBO) estimates that the final FY2014 federal budget deficit was 486 billion, $195 billion lower than FY2013.  The decline in the deficit resulted from higher government revenues (+$239 billion), while federal spending increased only $44 billion.

This is the lowest recorded annual budget deficit since FY2008 (-$458 billion) and is almost $100 billion lower than the Office of Management and Budget (OMB) projected in its Mid-Session Review in July.

When measured as a percent of Gross Domestic Product (GDP), the deficit dropped to 2.8 percent from 4.1 percent in FY2013.  This is below the average for the past 40 years and significantly lower than the 9.8 percent recorded in 2009.

According to CBO, revenue growth was led by a seven percent increase (+$114 billion) in individual income and payroll tax withholding due to higher wages and salaries and the expiration in the temporary 2 percent reduction in payroll taxes (for social security). Other nonwitholding individual income tax receipts (principally estimated tax payments) rose by $43 billion. Corporate incomes tax receipts increased by $48 billion mainly due to higher taxable profits.

Federal spending grew by only one percent (+$44 billion) in FY2014, according to CBO. Spending on federal discretionary and mandatory programs increased by only +$9 billion (0.3 percent) as increases for Social Security, Medicare, and Medicaid (totaling +$87 billion) were offset somewhat by declines in military spending (-$30 billion), unemployment insurance payments (-$24 billion), and other program outlays (-$24 billion). However, spending on interest on the debt rose by $12 billion and lower net payments to government sponsored enterprises (such as Fannie Mae and Freddie Mac, which are considered offsetting receipts) resulted in a $23 billion increase to outlays.

Data on government expenditures and receipts and the deficit are reported in the Monthly Statement of Receipts and Outlays of the United States Government (MTS) prepared by the Treasury Department. Treasury will report the official FY2014 budget deficit later this month.

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