Defense Financial Highlights

House passes FY2016 Military Construction/VA appropriations bill; White House threatens veto

Thursday, May 7th, 2015


The House passed the FY2016 Military Construction/Veterans Affairs appropriations bill (H.R. 2029). The vote (255-163) was essentially along party lines with 19 Democrats joining 236 Republicans in voting for the bill and four Republicans voting with 159 Democrats against passage.

This bill and the FY2016 Energy and Water Appropriations bill, which the House also passed, are the first two appropriations bills to advance in Congress this year.

Before final passage, the House rejected efforts by Rep. Chris Van Hollen (D-MD) and Rep. Mick Mulvaney (R-SC) to prohibit the use of Overseas Contingency Operations (OCO) funds ($532 million) for base budget requirements. The use of OCO funds for base budget requirements is a key element in FY2016 Budget Resolution as a way of increasing defense while staying within the statutory cap levels, because OCO funding is considered emergency spending.

Most Democrats strongly disapprove of this approach because it could lead to large cuts in nondefense spending. In fact, the White House issued a Statement of Administration Policy (SAP) recommending a presidential veto of the bill. The SAP expressed concern that “shifting long-term defense costs to OCO is bad budget policy and bad defense policy, since it undermines long-term planning.” The SAP further stated that the White House “will not accept attempts to fix defense without non-defense by using OCO as a mechanism to evade the defense budget cap.”

The Military Construction portion of the MilCon/VA bill provides $7.151 billion for military construction projects, family housing, Base Realignment and Closure (BRAC), and the NATO Security Investment Program. This amount is $1.3 billion less than the president’s request. However, $532 million of this reduction was funded in the Overseas Contingency Operations (OCO) appropriation (Navy & Marine Corps $244 million, Air Force $75 million, and Defense-wide accounts $213 million). Therefore, the actual cut to requested military construction programs was $755 million.

The bill also reflects $386.5 million in rescissions from prior appropriations Acts. 

The House approved an amendment by Rep. John Ratcliffe (R-TX) that prohibits the use of any funds in the bill for a new Base Realignment and Closure (BRAC) round. The president’s budget request proposes a new BRAC round.

President nominates Gen. Joe Dunford to be next Joint Chiefs Chairman and Gen. Paul Selva to be Vice Chairman

Wednesday, May 6th, 2015


President Obama announced the nomination of Gen. Joseph F. Dunford, Jr. as the 19th Chairman of the Joint Chiefs of Staff (JCS).  If confirmed by the Senate, Gen. Dunford will replace Gen. Paul Dempsey when his term ends later in the year.

Speaking from the White House Rose Garden, the president called Dunford “one of the most admired officers in our military.” “He is one of our military’s most highly regarded strategic thinkers” and “is known and respected by our allies, members of Congress—on both sides of the aisle—and by colleagues across our government,” the president said.

Gen. Dunford is currently the 36th Commandant of the Marine Corps, a position he has held since October 2014. Before becoming Commandant, Dunford was the Commander International Security Assistance Force and United States Forces – Afghanistan. He has served in joint assignments as Executive Assistant to the Vice-Chairman JCS, Chief of the Global and Multilateral Affairs Division (J5), and Vice Director for Operations (J3). Gen. Dunford has commanded the 2nd Battalion, 6th Marines, the 5th Marine Regiment, I Marine Expeditionary Force, and Marine Forces Central Command. Dunford has also served as assistant Division Commander of the 1st Marine Division, Marine Corps Director of Operations, and Deputy Commandant for Plans, Policies, and Operations.

The president also announced the nomination of Gen. Paul Selva to be Vice-Chairman, JCS. Selva will replace Adm. James “Sandy” Winnefeld, Jr. whose term will end this fall. Gen. Selva is currently Commander of the U.S. Transportation Command. Prior to that, he served as Commander of the Air Mobility Command, Vice commander Pacific Air Forces, Commander Tanker Airlift Control Center, Commander 62nd Airlift Air Wing, and Commander 60th Operations Group.

Secretary of Defense Ash Carter said both nominees “are exemplary leaders” who have “strategic perspective—and operational experience to help guide our military and advise the president at a time of much change in the world.”

The president thanked Gen. Dempsey and Adm. Winnifeld for their service. “I’ve relied on you both—your advice, your counsel, your judgment,” he said. He praised them both for helping “to guide our forces through difficult times—especially sequestration.” He said they both “made sure that we’re recruiting and training, and equipping and training the best fighting force on the planet.”

House committee approves FY2016 Defense Authorization bill, including military compensation and defense acquisition reforms

Thursday, April 30th, 2015


The House Armed Services Committee (HASC) approved the FY2016 Defense Authorization bill on a vote of 60-2. The HASC bill authorizes $515 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 $495.6 billion.

The bill also authorizes $89 billion for FY2016 Overseas Contingency Operations (OCO) funding. The president requested $50.9 billion for OCO. The additional $38.3 billion in the HASC bill is for O&M requirements requested in the base bill.

Including base funding in the OCO account, which is considered emergency and not counted against the budget caps, allows the HASC to authorize $585 billion ($496 billion in base funds and $89 billion in OCO) for DoD in FY2016. This is essentially the same as the president’s request for total DoD funding ($534 billion in base funding and $51 billion in OCO). This approach keeps the HASC bill within the Budget Control Act (BCA) discretionary caps while providing additional funding for DoD. The president’s base budget request assumes an increase in the BCA discretionary caps to avoid sequestration.

HASC chairman Rep. Mac Thornberry highlighted the major components of the bill as: major steps to reform military compensation; first elements of long-term acquisition reform; and redistribution of resources to balance tooth to tail. “At a time of unprecedented threats, uncertainty, and technological change, the NDAA [National Defense Authorization Act] strives to ensure that our forces are agile, efficient, ready, and lethal,” Thornberry said.

The bill includes a recommendation from the Military Compensation and Retirement Modernization Commission that called for a “blended” military retirement system. Under the bill, new service members would be automatically enrolled in the Thrift Savings Plan (TSP) with a matching contribution from DoD starting in FY2018. The servicemember’s contribution (3 percent initially) would be matched by a 1 percent contribution by DoD (that could go up to 5 percent). This change would provide retirement benefits to 83 percent of servicemembers currently not eligible, according to the committee. The provision would also mean that retirees after 20 years of service who are enrolled in the new system would have their annuity adjusted to reflect TSP payments. Current servicemembers would have the option to remain in the old system or choose the new TSP option.

The HASC bill also includes the first components of a plan to reform defense acquisition. The bill calls for streamlining the acquisition process by moving some decisions forward to the initial stages of the process. The number of legal certifications would be reduced and acquisition program managers would be given greater flexibility to address programmatic risk under the bill. The HASC would empower acquisition officials by removing barriers so that officers can pursue acquisition as a profession, provide a “Defense Acquisition Workforce Development Fund,” and include expedited hiring authority for hiring and training the acquisition workforce. Chairman Thornberry introduced the plan “Agile Acquisition to Retain Technological Edge” last month.

The HASC would provide military personnel with a 2.3 percent pay raise by not explicitly setting a pay raise amount in the bill. This non-action, would allow the current pay raise calculation procedures to go into effect, unless the president recommends an alternative. The president requested a 1.3 percent military pay raise for FY2016.

The bill rejects administration proposals to increase commissary prices to pay for operating costs, raise TRICARE fees, and lower the Basic Allowance for Housing (BAH). The bill also denies the administration’s proposal to retire the A-10 attack jet fleet and rejects a proposal to initiate another Base Realignment and Closure (BRAC) round.

The HASC bill also adds funding for 12 more F/A 18-F Hornet aircraft for the Navy (+$1.2 billion) and 6 more F-35B aircraft for the Marine Corps (+$1 billion), which were identified as unfunded priorities. The bill also as provides $683 million to keep the A-10s flying, $400 million to restore proposed BAH cuts, and $322 million to restore proposed commissary cuts. Major funding reductions in the bill were made for unobligated balances (-$2.6 billion), fuel prices (-$1.6 billion) and the foreign currency account due to a strong dollar (-$1.4 billion).

The full House is expected to take up the FY2016 Defense Authorization bill before the Memorial Day recess.

President to nominate Coast Guard Vice Commandant to lead TSA

Wednesday, April 29th, 2015


Yesterday, President Obama announced he will nominate Vice Admiral Peter V. Neffenger to be the Assistant Secretary for the Transportation Security Administration (TSA). Currently, Melvin Carraway, former Deputy Administrator, is serving as acting Administrator.

President Obama called Neffenger “a recognized leader in the face of our nation’s important challenges” and said his talents and experience “will be valuable to this Administration’s efforts to strengthen transportation security.”

TSA is responsible for security operations at over 450 U.S. airports, includes the Federal Marshal Service, and has shared responsibility for highways, railroads, ports, mass transit systems, and pipelines.

If he is confirmed by the Senate, Neffenger would remain in the Department of Homeland Security as both the TSA and the Coast Guard are components of the department.

Jeh Johnson, Secretary of the Department of Homeland Security, called Neffenger one of the brightest and most capable flag officers in the U.S. military” he has ever met. Johnson recalled that James Loy, TSA’s second Administrator, had been Commandant of the Coast Guard.

Vice Admiral Neffenger, who has over 30 years of service in the Coast Guard, has been Coast Guard Vice Chairman since May 2014. Prior to that Neffenger served as Deputy Commandant of Operations, Director of Strategic Management and Doctrine, and Commander of the Ninth Coast Guard District. He was the Deputy National Incident Commander for the Deepwater Horizon oil spill and the Sector Commander and Federal Maritime Security Coordinator for the ports of Los Angeles and Long Beach.

House Appropriations Committee approves FY2016 Military Construction funding

Thursday, April 23rd, 2015


Yesterday, the House Appropriations Committee (HAC) approved FY2016 funding for Military Construction (included in the total Department of Defense (DoD) budget request) and the Department of Veterans Affairs.

The MilCon/VA bill and the Energy appropriations bill were the first FY2016 appropriations bills to advance in the House. Noting the beginning of the appropriations season in the House, HAC chair Rep. Harold Rogers (R-KY) said this will be, I think, the earliest time in history, at least since 1974, that we will have marked up bills this early.” Rogers said he hopes both bills will be on the House floor next week.

The Military Construction portion of the MilCon/VA bill provides $7.151 billion for military construction projects, family housing, Base Realignment and Closure (BRAC), and the NATO Security Investment Program. This amount is $1.3 billion less than the president’s request.

However, $532 million of this reduction was funded in the Overseas Contingency Operations (OCO) appropriation (Navy & Marine Corps $244 million, Air Force $75 million, and Defense-wide accounts $213 million). Therefore, the actual cut to requested military construction programs was $755 million.

The HAC bill would reduce the DoD funding request for active component military construction projects by $389 million (excluding funds transferred to OCO) and Guard and Reserve accounts by $39 million. The HAC bill would fully fund the request for Family Housing projects and existing Base Realignment and Closure (BRAC). The bill would also add $30 for the NATO Security Investment Program to support fixed and mobile infrastructure projects for NATO operations and $30 million to the Army for the construction of access roads.

The HAC bill also would rescind $386.5 million from prior appropriations Acts. 

The HAC took no action on the administration’s request to authorize another BRAC round as such an authorization is not under the committee’s jurisdiction.

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