WASHINGTON — Top Army officials breathed a sigh of relief when the Biden administration released the fiscal 2022 budget request in May.

The service was able to preserve its top six modernization priorities, which includes 35 signature systems, as well as programs that officials view as key enablers to achieving a modernized force by 2035.

But the budget proposed cuts to existing procurement programs “down into the bone,” as the Army official overseeing the service’s equipping peg at the time, Lt. Gen. James Pasquarette, told Defense News ahead of the release.

If budgets continue to decline, he warned, the Army will have to slice into the muscle of untouchable modernization programs.

As budget experts caution the Army will see reduced or — at best — flat budgets in the coming years, service officials are readying for a more difficult look at how to cut costs to preserve modernization momentum. This could mean making harder decisions about the future of its inventory or making cuts to reduce readiness or end strength.

There aren’t many palatable choices left on the menu.

Army Secretary Christine Wormuth, in an exclusive interview with Defense News ahead of the Association of the U.S. Army’s annual conference, said the budget plan for FY23 isn’t as grim as some experts imagined, but acknowledged the difficult path ahead.

“I feel comfortable that we have protected our modernization and been able to take care of our people and maintain readiness,” Wormuth said. “It’s really, as I looked ahead, more to the latter years of the [Future Years Defense Program] where I think that becomes more challenging because of downward pressures … and because, frankly, there’s nothing but minnows left in the pond.”

Service leaders are “really going to have to look across the whole enterprise and look at the levers to see what makes the most sense for the Army and the most sense for us as contributors to the joint war fight,” she said. “In my view, it’s inevitable that we will have to continue to really ask hard questions across the portfolio.”

Unexpected challenges

The service is expecting additional financial burdens from some of its new strategic initiatives, such as the Arctic strategy and a soon-to-be released climate strategy.

Though they are expected to produce efficiencies, “there may be some costs associated with our climate initiatives,” Wormuth said.

The Army is also coping with unanticipated costs related to Operation Allies Welcome, which helps bring Afghans that helped American personnel during the war there to the United States.

But the service has experience managing unexpected costs: In 2020 and 2021, it faced operations on Capitol Hill related to the insurrection; at the southwest border; combatting and coping with the coronavirus pandemic; and evacuating Americans and Afghans from Afghanistan, said Lt. Gen. Paul Chamberlain, military director of the Army budget, who spoke to Defense News in an Oct. 1 interview.

For example, he said, while the Army recouped $1.3 billion through the Coronavirus Aid, Relief, and Economic Security Act in FY20 for costs related to the pandemic, it incurred another $250 million in expenses in FY21.

“In some instances, when we have efficiencies or savings, that then allows us to fund such unexpected expenses,” Chamberlain said. “However, when you have three or four or five unexpected, unprogrammed events, it’s just all consumed on you.”

Personnel costs have long put pressure on the Army’s ability to pay for other priorities, and these costs could rise significantly in the near term. Military basic pay is typically set to the employment cost index; pay in the private sector is rising, which means military pay is likely to increase as well. Already, about 40 percent of the Army’s budget goes to military pay.

“To the extent that elements of our budget like military pay are increasing at a rate faster than inflation, or faster than our top line — if the top line stays fixed, it’s a concern,” Caral Spangler, the Army’s comptroller, said in the same interview with Chamberlain.

If personnel funding makes up a higher percentage of the overall budget than it already does, Chamberlain added, “there’s less money that goes to other operational requirements or readiness, and that will end up having to be something that we have to balance.”

Nothing is ‘untouchable’

The Army began a budget review process ahead of its FY20 funding request meant to be an all-encompassing deep dive to ensure the service would properly allocate money to cover its ambitious modernization efforts. The process was coined “night court” after the 1980s television show about an eccentric New York judge.

The service continues to use this approach each year as part of budget deliberations, and as it seeks to adjust programs and keep modernization priorities on track. But the results are changing, as officials are finding less funding they can ransack for modernization efforts.

In the Army’s first round of night court, the service moved more than $33 billion from programs across the FY20 through FY24 five-year plan. The second round found another $13.5 billion. By the third round, the Army shifted $9.1 billion and identified just seven programs to cancel after shuttering 93 programs in FY20 and 41 in FY21.

Through the annual process, which has been used four times, “we’ve gone through the tough choices. We may be faced with the excruciating choices,” Lt. Gen. Erik Peterson, the Army’s new G-8 chief, said in an interview with Defense News last month.

“Those include the modernization portfolio, not necessarily just the [35 signature systems] but the other portions of that portfolio, as well as just the Army’s top line overall,” he explained.

Army leaders from the G-8 to the budget office to Army Futures Command are readying for Wormuth, the new Army secretary, to take a fresh look across every priority and program to ensure plans align with the new administration’s objectives and policies.

Wormuth has held leadership roles at both the Pentagon and in D.C.-based think tanks. She’s experienced in national security policy and previously worked with both Defense Secretary Lloyd Austin and Deputy Defense Secretary Kathleen Hicks.

During her previous stint at the Pentagon, Wormuth led the 2014 Quadrennial Defense Review process and pushed for realism about how to manage the budget. That year, she said if Congress wouldn’t allow either a base realignment and closure effort or major internal reforms, the department would have to find internal cuts.

The administration has not yet released a new National Defense Strategy or a new global force posture review, both of which could generate shifts in Army priorities.

“I wouldn’t consider anything untouchable, period,” Peterson said. “I think our senior leadership will consider all options with balanced risk, threat informed; and none of their decisions, from my perspective, are static.”

‘Gives and takes’

Many of the service’s modernization programs are racing toward ambitious fielding timelines. Some major capabilities, like long-range precision fires and hypersonic weapons, could be fielded to units as soon as FY23.

Others, like a new optionally manned fighting vehicle and two new future vertical lift aircraft, are slated for fielding later on and are undergoing design, development and prototyping.

The Army is also working to field its new Armored Multipurpose Vehicle, or AMPV, albeit slower than anticipated, and a series of major upgrades to its Stryker combat vehicles, such as a new 30mm cannon, will be delivered soon.

“There is clearly momentum associated with programs that are in production” Peterson said. However, he added, that doesn’t mean they’re safe from the cutting block. For example, the Army deliberately delayed the AMPV effort.

To make funding adjustments, Peterson said, the Army could alter a system’s program timeline as well as its quantities or rates.

“There are gives and takes with all of those decisions that we engage in from the beginning,” he said, such as “balancing requirements against resources potentially available, [or] understanding and measuring the operational and strategic value of those capabilities to the joint force as well as the constraints to our top line. And we do that iteratively.”

The Army also wants to find ways to maintain capability and readiness while saving money, Army Vice Chief of Staff Gen. Joseph Martin told Defense News in a recent interview.

“A great example of what I’m talking about is this joint Pacific multinational range capability that we’ve got where we are going to — instead of taking brigades from Hawaii and Alaska, and putting them on ships and putting them on planes, and bring them to one of our combat training centers — we’re going to train them in the environment that they exist in,” he said.

This means bringing observers, coaches and trainers to those environments, he added. As a result, “they’re not spending all this time and resources to the tune of tens of millions of dollars on shipped transportation and air transportation.”

But painful choices are inevitable, says Todd Harrison, director of defense budget analysis at the Center for Strategic and International Studies.

“For the Army, I think it’s a more acute situation because more than half of their budget goes to personnel costs. And for the Army, it is very directly a trade-off between end strength and modernization,” he told Defense News. “There’s really no way around it.

“The sooner they start making those choices — particularly the sooner they start scaling back end strength — the better situation they’ll be in and the less end strength they’ll have to end up cutting down the road.”

Army Chief of Staff Gen. James McConville previously said the service won’t reduce its force strength any lower than it already has in its FY22 budget.

But the chief added in an interview with Defense News last month that the Army is committed to modernization efforts that ensure the force can meet its operational requirements and defeat adversaries.

“As we look at ‘23, that’s just one year to get these systems, which are starting to come to fruition, much closer to get into the hands of soldiers,” he said. “We are committed to making that happen.”

Jen Judson is the land warfare reporter for Defense News. She has covered defense in the Washington area for 10 years. She was previously a reporter at Politico and Inside Defense. She won the National Press Club's best analytical reporting award in 2014 and was named the Defense Media Awards' best young defense journalist in 2018.

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