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DoD Personnel Costs Could Force Program Cuts

May. 4, 2014 - 03:45AM   |  
By JOHN T. BENNETT   |   Comments
US House lawmakers have rejected proposed changes to DoD personnel accounts, raising the possibility that savings will come from other accounts.
US House lawmakers have rejected proposed changes to DoD personnel accounts, raising the possibility that savings will come from other accounts. (Huntington Ingalls Industries)
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WASHINGTON — The first of several fiscal 2015 Pentagon spending bills began to come into focus last week, signaling something the defense sector has been lacking for years: Stability. But that could change dramatically in 2016.

The House Armed Services Committee (HASC) is rejecting personnel-reform plans proposed by the Pentagon, which already has directed expected savings to other things. And that means lawmakers could end up raiding procurement accounts to keep military personnel programs whole, to the tune of hundreds of millions of dollars.

That threat, however, is unlikely to materialize in fiscal 2015, say budget experts. That’s because only a small amount of the proposed personnel reforms would occur in 2015, meaning the amount to offset is relatively low.

“They need to find less than $2 billion in 2015,” said Todd Harrison of the Center for Strategic and Budgetary Assessments. “Remember, Congress doesn’t do five-year budgets. So they only have to worry about one year: 2015.”

Kate Blakeley, a analyst at the Center for American Progress who also has studied the defense budget at the Congressional Research Service, said it’s more likely that, for fiscal 2015, they will find the money to keep the personnel programs within the operations and maintenance account (O&M).

That’s because O&M is just more “fungible,” and a lot of the things Congress wants to keep are already in O&M, Blakeley said. She also expects some could come from the [Pentagon’s] civilian payroll.

The Pentagon’s request for O&M in 2015 is $198.7 billion, and experts say it won’t be difficult to find around $2 billion there.

Both Harrison and Blakeley said that means procurement accounts likely will survive another substantial hit in each of the four defense committees’ annual authorization and appropriations bills.

Even if the Pentagon determines while building its 2016 request that lawmakers are too skittish to enact its personnel reforms and removes the proposals, it already has used the potential savings for other things.

“So the Pentagon would have to find that $22 billion somewhere,” Harrison said. “And that could mean they would raid the procurement accounts. ... That’s a real threat over the long-term.”

A House Armed Services Committee spokesman did not respond to a reporter’s question about how the panel will pay to reject the personnel programs the Pentagon has budgeted to change.

Despite that threat, HASC’s subcommittees released portions of the lower chamber’s 2015 defense authorization bill that mostly endorsed the services’ plans.

The subcommittees that oversee the four armed services’ weapons-acquisition efforts largely backed the services’ plans for new fighter jets, tilt-rotor aircraft, helicopters, surface ships, submarines, surveillance drone aircraft and combat vehicles.

For instance, the Tactical Air and Land Forces subcommittee largely backed the Air Force’s plans for new fighter jets, the Marine Corps’ proposal for 19 new MV-22 tilt-rotor aircraft and the Army’s plans for nearly 200 new helicopters. It also endorsed the Air Force’s plans for surveillance drones and the Army’s proposals for combat vehicles.

That’s good news for MV-22 makers Bell Helicopter and Boeing. Bell got more good news when the subcommittee supported 26 new H-1 series helicopters. A Bell rival, Sikorsky, also received good news: the subcommittee signed off on plans for “continued development of the CH-53K heavy lift helicopter,” according to a subcommittee document.

Defense behemoth Lockheed Martin also scored a victory, with the Tactical Air subcommittee backing the Pentagon’s plans to buy 34 Lockheed Martin F-35 joint strike fighters in 2015. That amounts to a strong start to the congressional defense budget cycle for a company and Defense Department with much to lose if lawmakers begin chipping away at buy rates of the fifth-generation jet. The F-35 program continues to battle developmental issues that have caused substantial delays and budget overruns.

Since the threat of sequestration reared its much-maligned head in late 2011, Pentagon brass and industry executives have warned about too much uncertainty to properly build the military’s annual budget or adequately make long-term business decisions.

But spending caps put in place by the same legislation that created sequestration and extended in a late 2013 bipartisan budget pact brought back certainty — for one year, at least. There is little maneuver room for lawmakers to tinker too much with weapons program funding levels, and even less political goodwill to use offsets from elsewhere in the federal budget.

The Lexington Institute’s Loren Thompson, who also advises defense firms, says election-year politics also is driving a rather predictable NDAA process.

“The HASC mark follows the traditional election-year practice of rewarding home-state constituencies while hurting as few other players as possible,” Thompson said. “That has become harder with the imposition of spending caps and limits on earmarks, but this bill is all about making the largest number of people happy.

“So pretty much every weapon the Pentagon requested is funded, while benefit reductions and base closures are off the table,” Thompson said. “Other committees will likely follow the HASC’s lead, because neither party can afford to throw away votes on good-government initiatives that potentially destroy jobs.”

Though the subcommittee-level part of the HASC’s authorization bill process went down with nary a contentious moment, aides and lawmakers say the sharks are circling already in anticipation of the full panel’s marathon May 8 mark up of the version that will go to the House floor.

Strategic Forces subcommittee Ranking Member Rep. Jim Cooper, D-Tenn., last week predicted the full panel’s mark up will be nothing shy of an “amendment fest” that will feel like a “horrendous, one-day ordeal.”

“We kick all of our problems upstairs to the full committee,” Cooper griped.

To that end, the subcommittee marks mostly did just that. For instance, subcommittees opted against weighing in on the Air Force’s plan to allegedly save $3.5 billion over a number of years by retiring its A-10 attack plane fleet.

The subcommittee’s portions of the bill also are silent on the administration’s plans to shrink the Army and Marine Corps, and on the notion of an independent commission on the Army’s future rotorcraft plans.

Fights on all of those proposed cuts are expected during the full panel’s session. Democratic members are busily warning their GOP mates that, given the spending caps, something simply has to go.

HASC Ranking Member Rep. Adam Smith, D-Wash., said that if lawmakers “don’t accept some cuts, we will put ourselves in an untenable situation … down the road.”

Without allowing some of the administration’s proposed cuts, such as retiring the A-10 fleet, “we won’t be able to sustain 11 carriers” or buy as many other new combat platforms in coming years, he said.

“The worst thing [lawmakers] can do is protect program after program after program … because the first thing to go in that scenarios is readiness,” Smith said.

Yet, this is precisely how Democrats see HASC’s version of the 2015 National Defense Authorization Act shaping up.

“We’re scrambling” to find $700 million to refuel an aircraft carrier so the fleet remains at 11 active flattops, and another $400 million for 2015 to keep the A-10 fleet fully operational. Both moves would create future budgetary problems, Smith warned.

Cooper said members have not worked very hard to find budgetary offsets or “don’t seem to care” from where they come — as long as their pet initiative is saved.

Perhaps the most-surprising proposed change to the Obama administration’s 2015 proposal came from the Seapower subcommittee. Its version of the bill proposes cutting the Navy’s request for three littoral combat ships to only two. ■

Christopher P. Cavas, Aaron Mehta and Paul McLeary contributed to this report.

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