# Defense: FY2014 Authorization and Appropriations > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/crs%3AR43323 ## Record - **Collection:** Congressional research report - **Document type:** CRS Report - **Published:** January 8, 2014 - **Citation:** R43323 ## Text Defense: FY2014 Authorization and Appropriations (name redacted) Specialist in U.S. Defense Policy and Budget (name redacted) Specialist in U.S. Defense Policy and Budget January 8, 2014 Congressional Research Service 7-.... www.crs.gov R43323 Defense: FY2014 Authorization and Appropriations Summary Congressional action on DOD’s FY2014 budget was hobbled by the prevailing uncertainty over the entire federal budget that dissipated only in mid-December, when Congress passed and the President signed H.J.Res. 59, which set binding caps on discretionary spending for defense and nondefense programs in FY2014. The bill’s defense cap, while about $31 billion below the amount requested for defense programs by President Obama, was more than $20 billion higher than the FY2014 defense cap that had been set by the Budget Control Act (BCA) of 2011 (P.L. 112-25). President Obama’s FY2014 base budget request of $552.0 billion in discretionary budget authority for the Department of Defense (DOD) and defense-related programs of other agencies (excluding war costs), exceeded by $53.9 billion the legally binding cap on defense funding for FY2014 that was enacted in 2011 as part of the BCA. Similarly, in their initial actions on the annual defense funding bills for FY2014, the House and the Armed Services and Appropriations Committees of the Senate approved defense funding totals (excluding war costs) that were very close to President Obama’s so-called “base budget” (i.e., nonwar) request, regardless of the BCA cap. For DOD’s base budget, both the version of the FY2014 National Defense Authorization Act passed by the House (H.R. 1960) and the version reported by the Senate Armed Services Committee (S. 1197) also exceeded the BCA cap, differing from the President’s request by less than $50 million. For war-related operations (“overseas contingency operations” or OCO), the Senate committee version of the authorization bill made few changes to the Administration’s $80.7 billion request, while the House-passed bill added $5.4 billion. Similarly, the versions of the FY2014 DOD Appropriations Bill (H.R. 2397) passed by the House and reported by the Senate Appropriations Committee—in conjunction with funding for military construction and for defense-related spending in other agencies in other appropriations bills passed by the House and reported by the Senate committee—would result in total DOD base budget appropriations that would exceed the BCA defense limit for FY2014 by nearly as much as President Obama’s initial request. Because legislation to fund the federal government in FY2014 had not been enacted prior to the start of the fiscal year on October 1, 2013, DOD, like most other agencies, was then subject to a lapse in appropriations during which agencies are generally required to shut down. Under an OMB-defined exception for “national security activities,” all active-duty military personnel and many DOD civilian employees remained on their jobs through October 17, 2013, when H.J.Res. 59, the FY2014 Continuing Resolution (P.L. 113-46) was enacted, allowing DOD and all other federal agencies to resume their normal operations through January 15, 2014. The resolution set funding at an annualized level equal to that provided by the FY2013 Consolidated and Further Continuing Appropriations Act (P.L. 113-6) after reductions made on March 15, 2013, by the BCA-mandated sequestration process. Excluding war costs, the FY2014 CR funds DOD and defense-related programs of other agencies (which comprise the “National Defense” budget function) at an annual budget of $518 billion for about one-quarter of the year . That annual total amounts to a $34 billion or 6.2% decrease from the President’s request for the FY2014 DOD base budget. However, it would exceed the BCA cap on National Defense spending in FY2014 by $21 billion (or about 4%). Congressional Research Service Defense: FY2014 Authorization and Appropriations If the BCA had not been amended, Congress would have had to cut the Administration’s National Defense request by $53.9 billion (about 9.8%) to meet the BCA cap of $498.1 billion. But the FY2014 Continuing Resolution (H.J.Res. 59), which President Obama signed into law on December 26, 2013, raised the BCA caps on defense and nondefense discretionary spending for FY2014 and FY2015 in addition to funding the operations of the federal government through January 15, 2014. For National Defense, the new FY2014 budget limit is $520 billion rather than the original BCA limit of $498 billion. DOD’s share of this new, higher total amounts to about $497 billion rather than $476 billion DOD would have been allowed under the original BCA cap. If Congress appropriates to these new limits, there would no longer be a need for an additional $20 billion sequester in January 2014. For FY2015, the new limit, higher limits set by H.R. 59 (compared with the original BCA caps) are $521 billion rather $512 billion for National Defense and $498 billion rather than $489 billion for DOD. In each case, the FY2015 spending limit is increased by $9 billion over the original BCA limits. The spending cap in FY2015 thus would be $1 billion above the FY2014 level. In subsequent years, the original BCA spending limits would remain in force, rising by FY2021 to $590 billion for National Defense and $564 billion for DOD in nominal dollars. In sum, the effect of the Murray-Ryan budget agreement embodied in H.J.Res. 59 is to set a cumulative limit for National Defense spending in FY2012-FY2021 totaling $5.447 trillion, which is $32 billion higher than the original BCA limit for that period. For DOD, the spending caps would total $5.202 trillion rather than $5.176 trillion, a $30 billion increase over the current limit. The FY2014 Administration’s DOD budget plan for that decade totals $5.533 trillion, exceeding the proposed new limits by $326 billion or 6%. On December 26, 2013, the President signed into law H.R. 3304, a compromise version of the FY2014 NDAA. It authorizes appropriation of nearly the amount the Administration originally requested for the DOD base budget, taking no account of the new BCA defense spending limit, which it would exceed by more than $30 billion. Like the earlier versions of the NDAA passed by the House and reported by the Senate committee, H.R. 3304 also includes provisions bearing on several controversial policy issues including the armed services’ handling of sexual assault cases and the treatment of detainees currently held at the U.S. naval base at Guantanamo Bay, Cuba. DOD and the House and Senate Appropriations Committees are drafting FY2014 appropriations bills that would comply with the new spending caps by cutting about $32 billion from the Administration’s FY2014 DOD budget request. Pending enactment of those bills, funding for DOD (and all other federal agencies) currently is slated to expire on January 15, 2014. Congressional Research Service Defense: FY2014 Authorization and Appropriations Contents Most Recent Legislative Action....................................................................................................... 7 Budgetary Context: BCA Spending Caps................................................................................ 11 Sequestration Flexibility in FY2014 and FY2013 Experience ................................................ 13 Sequestration Alternatives in FY2014 ..................................................................................... 15 Alternatives under Current Law ........................................................................................ 15 Legislative Proposals......................................................................................................... 16 DOD Forecast of FY2014 BCA Impact .................................................................................. 17 DOD FY2013 Post-Sequester Funding and the FY2014 Request ........................................... 18 FY2014 National Defense Budget Overview ................................................................................ 19 FY2014 DOD Base Budget Highlights ......................................................................................... 25 Sustaining Current Strategy ..................................................................................................... 27 Military Personnel ................................................................................................................... 27 Military Pay and Allowances ............................................................................................ 28 TRICARE Fees ................................................................................................................. 29 “Efficiency” Initiatives ............................................................................................................ 29 Weapons Acquisition Reductions ............................................................................................ 30 Proposed Base Closures .......................................................................................................... 31 FY2014 OCO Budget Highlights .................................................................................................. 31 Ship and Aircraft Retirements ........................................................................................... 34 FY2014 National Defense Authorization Act (NDAA): H.R. 1960; S. 1197; H.R. 3304.............. 35 NDAA: The Broad Outlines .................................................................................................... 37 Proposed Administration Savings ..................................................................................... 37 Other Congressional Additions ......................................................................................... 39 Military Personnel Issues (Authorization) ............................................................................... 40 Military Pay Raise ................................................................................................................... 41 Sexual Assault Prevention and Treatment ......................................................................... 41 Provisions Relating to Chaplains Corps and Conscience .................................................. 42 TRICARE .......................................................................................................................... 43 Assignment of Women in the Military .............................................................................. 44 Reserve Component Mobilization Guarantees .................................................................. 44 Ground Combat Systems (Authorization) ............................................................................... 45 Current Generation Vehicles (M-1, Bradley, and others) .................................................. 45 Next Generation Vehicles: GCV, AMPV, MPC, and JLTV ............................................... 46 Naval Systems (Authorization) ............................................................................................... 46 Aircraft Carriers ................................................................................................................ 47 Attack Submarines and Missile Submarines ..................................................................... 48 Destroyers ......................................................................................................................... 49 Littoral Combat Ships ....................................................................................................... 49 Aircraft and Missile Programs (Authorization) ....................................................................... 50 Long-Range Strike Weapons ............................................................................................. 50 Other Provisions Related to Arms Control ........................................................................ 51 Carrier-Based UAVs .......................................................................................................... 52 Missile Defense (Authorization) ............................................................................................. 53 Ground-Based Missile Defense (GMD) ............................................................................ 54 Israeli Defenses ................................................................................................................. 55 NATO Missile Defense Cost ............................................................................................. 55 Congressional Research Service Defense: FY2014 Authorization and Appropriations Provisions Relating to Wartime Detainees .............................................................................. 56 House Floor Amendments ....................................................................................................... 57 FY2014 DOD Appropriations Bill ................................................................................................. 60 Overview (H.R. 2397; S. 1429) ............................................................................................... 60 Base Budget ...................................................................................................................... 62 OCO Funding .................................................................................................................... 63 Military Personnel Issues (Appropriations) ............................................................................. 64 Military Compensation...................................................................................................... 64 Defense Health Program (including TRICARE) ............................................................... 64 Ground Combat Systems (Appropriations) ............................................................................. 64 Naval Systems (Appropriations) ............................................................................................. 65 Submarines ........................................................................................................................ 65 Destroyers ......................................................................................................................... 66 Aircraft and Missile Programs (Appropriations) ..................................................................... 66 Strike Fighters (Joint Strike Fighter and F/A-18).............................................................. 66 Missile Defense Programs (Appropriations) ........................................................................... 67 Afghanistan Security Forces Fund (OCO) .............................................................................. 67 House Floor Amendments to FY2014 DOD Appropriations Bills .......................................... 68 Figures Figure 1. Successive Administration DOD Budget Plans, FY2011-FY2014 ................................ 21 Figure 2. Estimated DOD Funding Projections, FY2013-2021 ..................................................... 24 Figure 3. Projected DOD Purchasing Power in Perspective, 1976-2021 (Base Budget)............... 25 Figure 4. OCO Funding and Troop Level Trends: FY2008 through FY2014 Request.................. 32 Tables Table 1. FY2014 National Defense Authorization Act .................................................................. 11 Table 2. FY2014 DOD Appropriations Bill ................................................................................... 11 Table 3. FY2014 National Defense Budget Function (050); Administration Request .................. 20 Table 4. DOD Budget Plans and BCA Caps .................................................................................. 23 Table 5. DOD Discretionary Base Budgets, FY2012-FY2014 ...................................................... 26 Table 6. Active Component Authorized End-Strength................................................................... 28 Table 7. Administration’s FY2014 Discretionary OCO Budget Request ...................................... 31 Table 8. OCO Funding by Mission Category ................................................................................ 34 Table 9. FY2014 National Defense Authorization Act (H.R. 1960; S. 1197: H,R, 3304) ............. 36 Table 10. Selected Administration Cost Cutting Initiatives ........................................................... 37 Table 11. Selected Additions to the Administration Request ......................................................... 39 Table 12. Selected Sexual Assault-related Provisions, FY2014 NDAA ........................................ 42 Table 13. Selected Nuclear Arms Control Provisions, FY2014 NDAA ........................................ 52 Table 14. Selected U.S. Territorial Missile Defense Provisions, FY2014 NDAA ......................... 54 Congressional Research Service Defense: FY2014 Authorization and Appropriations Table 15. Selected House Floor Amendments to FY2014 National Defense Authorization Act (H.R. 1960) .......................................................................................................................... 57 Table 16. FY2014 DOD Appropriations Act (H.R. 2397; S. 1429) ............................................... 61 Table 17. Selected House Floor Amendments to FY2014 DOD Appropriations Act (H.R. 2397) ........................................................................................................................................... 68 Table A-1. Congressional Authorization Action on Selected FY2014 Missile Defense Programs ..................................................................................................................................... 73 Table A-2. Congressional Action on Selected FY2014 Missile Defense Funding Appropriation.............................................................................................................................. 77 Table A-3. Congressional Action on Selected FY2014 Army, Marine Corps Ground Combat Programs: Authorization ............................................................................................... 80 Table A-4. Congressional Action on Selected FY2014 Army Ground Combat Programs: Appropriation.............................................................................................................................. 82 Table A-5. Congressional Action on Selected FY2014 Shipbuilding and Modernization Programs: Authorization ............................................................................................................. 83 Table A-6. Congressional Action on Selected FY2013 Shipbuilding and Modernization Programs: Appropriation ............................................................................................................ 84 Table A-7. Congressional Action on Selected FY2013 Space Programs: Authorization ............... 85 Table A-8. Congressional Action on Selected FY2013 Space Programs: Appropriation .............. 86 Table A-9. Congressional Action on Selected FY2014 Aircraft and Long-Range Missile Programs: Authorization ............................................................................................................. 87 Table A-10. Congressional Action on Selected FY2014 Aircraft and Long-Range Missile Programs: Appropriation ............................................................................................................ 91 Appendixes Appendix. Selected Program Funding Tables ................................................................................ 73 Contacts Author Contact Information........................................................................................................... 95 Key Policy Staff ............................................................................................................................. 95 Congressional Research Service Defense: FY2014 Authorization and Appropriations Most Recent Legislative Action On December 11, 2013, Representative Paul C. Ryan and Senator Patty Murray, chairs of the House and Senate budget committees, respectively, and co-chairs of the group appointed to develop a budget compromise to avoid a sequester in mid-January 2014, introduced the Bipartisan Budget Act of 2013, which raises defense and nondefense budget spending limits under the Budget Control Act (BCA) for FY2014 and FY2015.1 On December 12, 2013, the House passed the proposal as an amendment to H.J.Res.59, the Continuing Appropriations Act of 2014, by a vote of 332-94. The Senate passed the bill on December 18, 2013, by a vote of 64-36 and President Obama signed it into law on December 26, 2013. For FY2014, the bill raised the original BCA budget limit for National Defense (budget function 050) by $22 billion to a total of $520 billion, or $2 billion above the level set in the Continuing Resolution (CR) of 2014.2 For the Department of Defense (DOD), the new FY2014 limit was set at $497 billion rather than the current limit of $476 billion, just above the CR. If Congress extended the current CR level for the full year at these new limits, then there would be no sequester in January 2014. For DOD, the new limits would essentially be a nominal freeze, setting DOD spending at $2 billion above the FY2013 post-sequester level. The House and Senate Appropriations Committees are drafting FY2014 funding bills for DOD and other agencies that would conform to the newly revised budget caps. For FY2015, the new budget limit for National Defense would be $523 billion, or $9 billion above the current $512 billion limit. Similarly, for DOD, the new FY2015 limit would be $498 billion compared to $489 billion in current law, or $9 billion higher than the current limit, and $1 billion above the new limit for FY2014. In later years, budget limits would be the same as current levels. Altogether, over the FY2012-FY2021 decade, National Defense spending would total $5.447 trillion, or $32 billion (or 6%) above the current limit. DOD spending would total $5.206 trillion rather than $5.176 trillion, a $30 billion or 6% increase over current limits. 3 In addition to these changes in budget limits, the Bipartisan Budget Act also reduces the cost of living adjustments (COLAs) provided to military retirees under the age of 62 from the Consumer Price Index (CPI) to the CPI less 1% while also increasing contributions to retirement by new federal retirees. Military retirees would receive a “catch-up” increase at age 62 that would raise their benefit level to an amount including full CPI adjustments for each year when they received 1 H.J.Res. 59. Section 101(a)(3) in P.L. 113-46, H.J.Res. 59. 3 CRS calculations based on Section 101(a) in the Bipartisan Budget Act of 2013 as introduced, OMB, OMB, “Final Sequestration Report to the President and Congress for Fiscal Year 2013,” April 9, 2013; http://www.whitehouse.gov/ sites/default/files/omb/assets/legislative_reports/sequestration/sequestration_final_april2013.pdf; OMB, FY2014 Budget, Analytical Perspectives, Table 31-1; http://www.whitehouse.gov/sites/default/files/omb/budget/fy2014/assets/ 31_1.pdf. The budget limits set for FY2014 and FY2015 reflect post-sequester levels and those for FY2016-FY2021 reflect pre-sequester levels; see Section 101 in Senate Budget Committee, “Section By Section Analysis of Bipartisan Budget Act;” http://www.budget.senate.gov/democratic/index.cfm/files/serve?File_id=9d3728aa-cf0a-4ddf-bfd4d02ed4de570f. See also see Section 111 (b)(10(B) which states that the new discretionary limits would not be lowered by an OMB calculation of a reduction to caps. 2 Congressional Research Service 7 Defense: FY2014 Authorization and Appropriations reduced COLAs. and then receive full CPI adjustments after that.4 According to CBO, this change would save the Department of Defense $6.235 billion over the decade.5 This CPI adjustment would apply to nearly all military retirees including those receiving military disability benefits and to people receiving survivor benefits.6 (This provision would not affect “REDUX” military retirees who already receive reduced COLAs of the CPI minus 1% in return for receiving a $30,000 bonus at 15 years of service.) Some Members have raised concerns about this reduction in retiree benefits. If enacted, this proposal could be re-considered at a later date since it does not go into effect until December 1, 2015.7 There are several potential scenarios that Congress may face in January 2014. On January 15, 2014, the current CR (P.L. 113-46) lapses so Congress needs to either extend the current CR or pass individual or an omnibus appropriations act to avoid a government shutdown. To avoid a sequester, Congress needs to appropriate defense spending that complies with BCA limits that are in effect. If the new limits are adopted, and if Congress provides defense spending at the current CR for the full year, then there would be no sequester because the new defense limit matches the CR. According to press reports, the Department of Defense is currently spending at that level. If Congress adopts the new limits but provides defense appropriations that exceed BCA limits, however, then OMB would levy a sequester to ensure compliance with BCA limits. Under current BCA spending limits (without assuming passage of the Bipartisan Budget Act of 2013), a sequester would reduce defense spending by $20 billion, about 3.8% overall in midJanuary 2014 to bring appropriations into compliance with the BCA. (The percentage cut to affected accounts, excluding exempted military personnel, would be about 5.8%.) This estimate reflects the amount by which the current CR exceeds the estimated $476 billion cap set in the Budget Control Act.8 If the new limits are adopted and matched by appropriations, the threat of a sequester would disappear. In other words, to the extent that defense appropriations breach or exceed whatever BCA limits are in effect, OMB must levy a sequester of whatever size is necessary to ensure compliance with BCA limits.9 4 See Section 403 of the Bipartisan Budget Act of 2013 as introduced. The CPI-W tracks price changes for urban consumers; see http://www.bls.gov/news.release/cpi.nr0.htm. 5 CBO, “Bipartisan Budget Act of 2013 as posted on the House Rules Committee website, December 10, 2013,” December 11, 2013; http://www.cbo.gov/sites/default/files/cbofiles/attachments/ Bipartisan%20Budget%20Act%20of%202013.pdf. 6 H.J.Res. 59 amends Title 10, Section 1401a(b), which sets COLAs for both military retirement and survivor benefits. 7 See Section 403 (c) of H.J.Res. 59 as passed by the House. 8 H.R. 2775/P.L. 113-46 set the FY2014 Continuing Resolution spending at the FY2013 enacted level with sequestration. CBO estimated that post-sequester level as $518 billion in “CBO’s Estimate of Discretionary Budget Authority for Fiscal Year 2013, Showing Amounts for Defense and Nondefense Programs,” supplementing Table 3 in Updated Budget Projections: Fiscal Years 2013 to 2023, May 2013. The FY2014 defense caps is shown as $497 billion in Table 1-5, “Discretionary Spending Projected in CBO’s Baseline,” in The Budget and Economic Outlook: Fiscal Years 2013 to 2023, February 2013; http://www.cbo.gov/sites/default/files/cbofiles/attachments/43907BudgetOutlook.pdf. 9 If the current level of appropriations breaches caps set in budget law, 2 U.S.C. §901 (§251 of the Deficit Control Act of 1985) requires that there be a sequestration within 15 calendar days after Congress adjourns to “eliminate a breach within that category . . . “ Since the Constitution requires that a new session start by January 3 of each year, the latest a (continued...) Congressional Research Service 8 Defense: FY2014 Authorization and Appropriations In action on the FY2014 National Defense Authorization Act (NDAA), on December 12, 2013, the House, by a vote of 350 to 69, passed H.Res. 441, which adopted H.R. 3304, effectively a conference version of the FY2014 National Defense Authorization Act. The Senate passed the bill on December 19, 2013, by a vote of 84-15 and the President signed it into law on December 26, 2013. Earlier, on October 17, 2013, the FY2014 Continuing Resolution (CR, P.L. 113-46) appropriated funds allowing the DOD and all other federal agencies to resume their normal operations through January 15, 2014, after a 16-day government shutdown went into effect because no FY2014 appropriations had been provided for the new fiscal year. In general, the CR allows DOD and other agencies to spend—during that period—at the rate at which each appropriations account was funded by P.L. 113-6, the FY2013 Consolidated and Further Continuing Appropriations Act, taking into account the amount sequestered by the March 1, 2013, OMB order mandated by the Budget Control Act, enacted in 2011 (P.L. 112-25).10 For DOD, the current CR provides about $495 billion. Before passage of the CR, DOD, like most other agencies, was subject to a lapse in appropriations during which agencies are generally required to shut down because Congress had not acted on legislation to fund the federal government in FY2014 prior to the start of the fiscal year on October 1, 2013. The Office of Management and Budget (OMB), however, identified a number of exceptions to the requirement that agencies cease operations, including a blanket exception for activities that “provide for the national security.” As a result, during the lapse in appropriations, some DOD personnel were “excepted” from furloughs, including all uniformed military personnel and some civilians, while other civilian DOD employees were furloughed and, thus, not permitted to work. Normally, “excepted” military and civilian personnel would continue to work but would not be paid until after appropriations are provided by law. Shortly before and during the shutdown, however, Congress passed and the President signed into law two pieces of legislation that appropriated funds to pay all active-duty military and some DOD civilian personnel costs in the absence of an enacted appropriation, and to provide death gratuities: • The Pay Our Military Act (P.L. 113-39; H.R. 3210), signed by the President on September 30, 2013, provided funds to pay all active-duty military personnel, most DOD civilians and possibly some private sector employees working for DOD; • The Honoring the Families of Fallen Soldiers Act, (P.L. 113-44; H.J.Res. 91), signed by the President on October 10, 2013, provided funds to pay death gratuities to survivors of military personnel who die while on active duty. (...continued) FY2014 sequester could occur would be January 18, 2014 assuming the previous session ended at midnight January 2, 2014. 10 As typically has been the case with continuing resolutions in recent years, the FY2014 act funded activities for a time certain (in this case, through January 15, 2014) under a formula commonly referred to as a “funding rate.” Under a funding rate, the amount of budget authority available for an account is calculated as the total amount of budget authority annually available based on a reference level (in this case, the post-sequester amounts resulting from the FY2013 consolidated appropriation bill), multiplied by the fraction of the fiscal year for which the funds are made available by the continuing resolution—in this case, about 24.6% (90 days out of a 366-day fiscal year that includes the 29-day February of a leap year). Congressional Research Service 9 Defense: FY2014 Authorization and Appropriations DOD Operations During a Government Shutdown For information and analysis of the impact on DOD of a lapse of appropriations, including an analysis of special DODrelated legislation that operated during the funding lapse in the fall of 2013 during the period October 1-October 17, see CRS Report R41745, Government Shutdown: Operations of the Department of Defense During a Lapse in Appropriations, by (name redacted) and (name redacted). For military activities of the Department of Defense that are covered by the FY2014 National Defense Authorization Act (NDAA), the Obama Administration requested authorizations for discretionary budget authority (BA) totaling $632.7 billion, including the following: • $526.6 billion for the so-called “base budget”—that is, for costs not associated with combat activities; • $80.7 million for war costs, officially designated overseas contingency operations (OCO); • $18.9 billion for defense-related nuclear energy programs conducted by the Department of Energy; and • $7.4 billion for other defense-related activities. (See Table 3). For DOD’s base budget, both the version of the FY2014 NDAA passed by the House (H.R. 1960) and the version of the bill reported by the Senate Armed Services Committee on June 20, 2013, (S. 1197), differ from the President’s overall request by less than $50 million. The House bill, passed by a vote of 315-108 on June 14, 2013, would authorize hundreds of millions of dollars more than requested for various purposes, including a military pay raise, shipbuilding, and ballistic missile defense. However, that gross increase was almost entirely offset by several reductions which, according to the House Armed Services Committee, would have no adverse impact on DOD programs because—in each of the affected accounts—previously appropriated funds could be used in lieu of the requested new budget authority. For war costs—designated as OCO—S. 1197, reported by the Senate committee on June 20, 2013, would make few changes to the Administration’s request. The House-passed bill, on the other hand, would add $5.4 billion to the request. On Dec. 26, 2013, the President signed into law H.R. 3304, a compromise version of the FY2014 NDAA, which authorized nearly the amount originally requested by the Administration. (See Table 1 and Table 9) For analysis of congressional action on the authorization bill, see the section of this report entitled “FY2014 National Defense Authorization Act.” For the FY2014 DOD Appropriations bill, which funds all discretionary DOD military programs except military construction, the Administration requested a total of about $589.5 billion11 for the base budget and OCO, combined. The version of the bill passed by the House on June 24, 2013, 11 Summary tables in House and Senate Appropriations Committees’ reports on their respective versions of the FY2014 DOD appropriations bill differ slightly in their presentations of the Administration request. Most of the difference reflects the committees’ different treatments of an Administration proposal to rescind $1.28 billion appropriated in FY2013. For additional detail, see text box “Differing Presentations of FY2014 Budget Request,” below. Congressional Research Service 10 Defense: FY2014 Authorization and Appropriations would make a net reduction of about $4.2 billion to the request while the version reported by the Senate Appropriations Committee (S. 1429) would make a net reduction of about $2.2 billion. For analysis of congressional action the defense appropriations bill, see the section of this report entitled “FY2014 DOD Appropriations Bill.” Table 1. FY2014 National Defense Authorization Act (H.R. 1960; S. 1197; H.R. 3304) Subcommittee Markup House 5/2223/2013 House Report on H.R. 1960 Senate H.Rept. 113-102 6/1213/2013 6/7/2013 House Passage of H.R. 1960 315-108 6/14/2013 Senate Report on S. 1197 S.Rept. 113-44 6/20/2013 Approval of H.R. 3304a House Senate Public Law 350-69 84-15 12/12/2013 12/19/2013 Notes: An explanatory statement on the compromise bill, functionally equivalent to a conference report, was printed as “Joint Explanatory Statement to Accompany the National Defense Authorization Act for Fiscal Year 2014,” House debate, , Congressional Record, daily edition, vol. 159 (December 12, 2013), pp. H7894-H8037. a. In lieu of a formal conference committee to reconcile House and Senate versions of the FY2014 NDAA, members of the House and Senate Armed Services Committees, meeting informally, negotiated a compromise version of the bill. To expedite Senate action on that final version of the bill, the negotiated text was passed by the House and Senate as an amendment to a bill (H.R. 3304) that had been passed by each chamber with slightly different form. The votes recorded in these columns had the practical effect of approving the final version of the NDAA. Table 2. FY2014 DOD Appropriations Bill (H.R. 2397; S. 1429) Subcommittee Markup House 6/5/2013 Senate Conference Report Approval House Report House Passage Senate Report H.Rept. 113-113 315-109 S.Rept. 113-85 6/12/2013 6/24/2013 8/1/2013 Senate Passage Conf. Report House Senate Public Law Budgetary Context: BCA Spending Caps FY2014 is the third consecutive year for which Congress and the President have had to come to terms with the spending caps that were set in law by the BCA for each year in the decade FY2012-FY2021.12 Enacted in 2011 to resolve the impasse that summer about raising the debt limit, the BCA required reductions in discretionary spending totaling about $2.1 trillion through 12 For each year in the decade FY2012-FY2021, the BCA caps require roughly equal reductions (from a projected baseline) in appropriations for defense agencies and non-defense agencies. From FY2013 onward, the category of “defense” agencies is defined, for purposes of this law, as being those agencies funded in the “National Defense” budget function (Function 050). The Department of Defense typically accounts for more than 95% of spending in Function 050. See the text box, “Estimated impact on DOD of Budget Caps,” below. Congressional Research Service 11 Defense: FY2014 Authorization and Appropriations FY2021 in return for raising the debt limit by the same amount. A first tranche of reductions amounting to $900 billion—half of which came from National Defense agencies (primarily DOD but also including Department of Energy and other defense-related activities in other agencies)— was reflected in the Administration’s FY2013 budget, which complied with initial caps set in the BCA. Additional reductions of $1.2 trillion, also falling equally on defense agencies and nondefense agencies—are to be achieved through a sequester in FY2013 and by automatic reductions to appropriations that would apply each year between FY2014 and FY2021 unless enacted appropriations in any year meet that year’s BCA limits. To the extent that annual appropriations exceed or breach the BCA caps, a sequester would reduce funding to the level of the caps by across-the-board cuts. President Obama sent Congress his FY2014 budget request on April 10, 2013, more than two months later than the legally prescribed date for submission of the budget. Uncertainties surrounding the final outcome of the legislative battle over appropriations for the preceding year accounted for the delay. The FY2013 appropriations for DOD and all other federal agencies were not enacted until March 26, 2013, when the President signed the Consolidated and Further Continuing Appropriations Act of 2013 (H.R. 933/P.L. 113-6). The amounts specified in that legislation were not final but, rather, were the points of departure for further reductions (by a process of “sequestration”) required to comply with the Budget Control Act of 2011 (BCA), which was enacted on August 2, 2011 (P.L. 112-25).13 BCA caps apply only to the defense base budget, not to OCO funding. If current law had not been amended by the Bipartisan Budget Act of 2013 to change the BCA spending caps, the Administration’s $552 billion national defense budget request for FY2014 (excluding war costs) would have to be reduced by $53.8 billion (about 9.8%) to a total of $498.1 billion in order to comply with BCA limits. If defense appropriations exceeded the BCA limit, they would have been reduced to the BCA level by an across-the-board sequester to currently appropriated levels that would begin in early to mid-January 2014. Although the President’s FY2014 national defense budget request does not meet the defense limits originally set in the BCA that would avoid a sequester under current law, the Administration argues that the President’s budget would achieve—through a combination of revenue increases and reductions to entitlement programs—the $1.2 trillion total reduction through FY2021 that would result from the annual BCA caps. As a part of the Administration’s overall program, the BCA would be amended to defer application of the spending caps, thus accommodating the President’s FY2014 defense budget request.14 Consistent with the President’s budget request, the House-passed FY2014 budget resolution (H.Con.Res. 25) proposed $552 billion for national defense (excluding war costs). Subsequently, the House Appropriations Committee reported—and the House passed—the three appropriations bills that would provide defense funding up to that level: Defense (H.R. 2397, passed July 24, 315-109), Energy and Water (H.R. 2609, passed July 10, 227-198), and Military ConstructionVeterans Administration (H.R. 2216, passed June 4, 421-4). 13 The reductions pursuant to the BCA were mandated by the Office of Management and Budget (OBM) sequestration order of March 1, 2013. 14 See chapter entitled “Reducing the Deficit in a Smart and Balanced Way” in OMB, The Budget of the United States Government, FY2014; http://www.whitehouse.gov/sites/default/files/omb/budget/fy2014/assets/reducing.pdf. Congressional Research Service 12 Defense: FY2014 Authorization and Appropriations To achieve the FY2014 savings mandated by the BCA, the House budget resolution proposes higher cuts to nondefense spending as well as changes to entitlement programs which would bring discretionary spending for the year to $967 billion, the discretionary total allowed by BCA. But, within that total, the BCA establishes separate limits (or caps) for defense and nondefense spending. The House-recommended defense levels exceed the BCA defense cap so, if they were to become law, a 9.8% sequester cut would be levied in January 2014, unless Congress amended the BCA to change the currently binding limits. Similarly, the Senate’s FY2014 budget resolution (S.Con.Res. 8) sets the total for national defense at $552 billion—as requested by the President—and the defense-related bills reported by the Senate Appropriations Committee are consistent with this level. Like the House budget resolution, the Senate measure assumes that BCA’s limit on overall discretionary spending for FY2014 would be met. In contrast to the House resolution, however, the Senate resolution proposes to compensate for defense spending above the BCA level with a combination of revenue increases and entitlement spending reductions similar to those proposed by the Administration. However, if the level of national defense spending allowed by the Senate resolution were to be enacted, there would have been a $53.8 billion sequester cut to discretionary spending in early January 2014—if the original BCA caps had not been amended by law. Estimated DOD Impact of Budget “Caps” The Budget Control Act of 2011 (P.L. 112-25) and the annual congressional budget resolutions all set discretionary spending caps for “budget functions”—broad categories of activity that encompass all relevant funding, regardless of the agency performing the activity. The “National Defense” function (Function 050) encompasses military functions of DOD (i.e., it excludes the domestic public works program of the Army Corps of Engineers) as well as defense-related activities of the Department of Energy and other agencies. In recent years, DOD funding has accounted for about 96% of the Function 050 total. To analyze the implications for DOD funding plans of the legally binding BCA spending cap on the broader National Defense category, CRS estimated the DOD share of the Function 050 funding cap for each future year in the BCA and in any congressional budget resolution. In this report, those estimates are arrived at by using data from the Office of Management and Budget (OMB) to determine for each year in the period FY2014-FY2021 what percentage of the Administration’s projected Function 050 budget request consists of the projected DOD request. For purposes of this analysis, it is assumed that DOD spending would account for the same share of Function 050 spending in that year. The data from which this report calculates an imputed DOD share of Function 050 caps are in OMB’s FY2014: Analytical Perspectives, Budget of the U.S. Government, Table 32-1 “Policy Budget Authority and Outlays by Function, Category, and Program,” accessible at http://www.whitehouse.gov/omb/budget/Analytical_Perspectives. Sequestration Flexibility in FY2014 and FY2013 Experience DOD officials have contended that sequestration would have serious adverse impacts on the services’ combat readiness and modernization not only because of the size of the funding cuts required but also because of the relatively arbitrary way in which the reductions are made.15 In a fiscal year in which a sequester is triggered to reduce spending to the levels enacted in the BCA, by law the reduction must be achieved by cutting a uniform percentage from the “budgetary resources” of every program, project, and activity (PPA) in every budget account, except for those budget accounts and PPAs that, by law, either are exempt from a sequester or are subject to a special sequester rule. “Budgetary resources” include new budget authority for both the base 15 Testimony before the House Armed Services Committee by Undersecretary of Defense Ashton B. Carter and Vice Chairman of the Joint Chiefs of Staff, Adm. James A. Winnefeld, “Hearing on the Defense Strategic Choices and Management Review,” August 1, 2013. Congressional Research Service 13 Defense: FY2014 Authorization and Appropriations budget and OCO and budget authority appropriated in previous fiscal years but not yet obligated.16 The sequestration process allows DOD some flexibility in implementing a sequester in ways that DOD used to limit the impact on readiness, investment accounts, and war funding in FY2013 and which might have similar results if sequestration were to be required for FY2014: • The President has authority to exempt the military personnel accounts from a sequester, as he did in FY2013 and as OMB informed Congress on August 9, 2013, he will do, should a sequester occur in FY2014.17 Exercising this option could allow DOD to avoid involuntary separations of military personnel, but does not reduce the total amount that must be sequestered from DOD funds and, thus, entails correspondingly larger cuts from other DOD accounts. • House and Senate conferees on the FY2013 Consolidated and Further Continuing Appropriations Act (P.L. 113-6) defined as a single PPA the entire Operation and Maintenance (O&M) account of each service and reserve component.18 Therefore, DOD has considerable flexibility in allocating cuts within those relatively large blocks of money. So, DOD could make proportionally larger reductions in some O&M-funded activities—facilities maintenance and training, for example—in order to allow proportionally smaller reductions in other O&Mfunded activities such as operational training or support for front-line combat units. • DOD could avoid or minimize sequestration cuts in funds for war operations in Afghanistan because, although Congress authorizes and appropriates separate amounts for base budget funding and OCO funding, most funding of both sorts is co-mingled in the PPAs that are subject to sequestration. Thus a service could reduce its O&M funding for OCO by a proportionately smaller fraction provided it was offset by a proportionately larger reduction in the service’s base budget O&M spending. DOD did, however, choose to reduce OCO funding by $5.3 billion to meet the FY2013 sequester. This may have reflected a transfer into OCO accounts in mid-May 2013 to meet unanticipated higher needs (see below).19 16 See CRS Report R42972, Sequestration as a Budget Enforcement Process: Frequently Asked Questions, by (name redacted). 17 See OMB notification letter at http://www.whitehouse.gov/sites/default/files/omb/legislative/letters/militarypersonnel-letter-biden_080913.pdf. 18 The House and Senate came to agreement on the enacted version of the bill through a process of sequential amendments rather than by a formal conference committee, so—technically speaking—there was no conference report, in which conferees could elaborate (in a so-called “joint explanatory statement”) on their intent in drafting the law. Nevertheless, the terms of the final bill were the product of negotiations between House and Senate conferees who drafted a “joint explanatory statement” which they inserted in the Congressional Records of March 6, 2013, and March 11, 2013. The definition of each O&M account as a single PPA is found at Congressional Record, March 6, 2013, p. H1029 and Congressional Record, March 11, p. S1316. 19 CRS analysis of DOD, “May 2013 Prior Approval Request, Reprogramming Action, FY13-09,” approved May 17, 2013; see http://comptroller.defense.gov/execution/reprogramming/fy2013/prior1415s/1309_PA_May_2013_Prior_Approval_Request_Implemented.pdf; and CRS analysis of OSD,C table, “DOD Base and OCO funding by account as appropriated, and post-sequester,” November 2013. Congressional Research Service 14 Defense: FY2014 Authorization and Appropriations • In some of DOD’s investment accounts, unobligated balances of funds appropriated in earlier budgets were reduced by proportionally larger amounts to allow proportionally smaller reductions to newly appropriated budget authority. Among the 21 procurement accounts, budget authority appropriated for FY2013 was cut by an average of 5.2% while unobligated funds were cut by an average of 11.2%.20 Since DOD budget authority appropriated for procurement and most other activities expires if not obligated within a certain number of years, sacrificing older budget authority allowed DOD to retain more budget authority that would be available for a longer period. • After sequestration, DOD could and did use established reprogramming procedures, which require prior approval by the congressional defense committees in some cases, to shift funds among accounts. In May 2013, the department requested congressional approval of reprogrammings that shifted nearly $9 billion to meet more essential expenses by tapping funds that had been appropriated to other programs.21 This included shifting some $5.1 billion of OCO funding, about $3.0 billion of which came from cancelled lower priority OCO needs, with the remainder from the base budget.22 Sequestration Alternatives in FY2014 In recent months, many observers, including DOD witnesses and some Members of Congress, have raised particular concerns about sequesters, arguing that because they require largely acrossthe-board cuts to programs, this would not reflect priorities in defense spending. One way to avoid a sequester would be if both houses of Congress passed a budget resolution that amended the BCA caps and achieved savings elsewhere. Alternatives under Current Law If current budget law is not changed, however, there are still several ways that the Administration and Congress could avoid a sequester in FY2014 or later years of the decade. These include: • Congress could appropriate amounts for defense that meet the lowered cap of $498 billion for FY2014 before a sequester would go into effect. This could reflect a joint budget resolution passed by both houses of Congress that would presumably be followed by new 302(a) allocations of overall discretionary budget authority and new 302(b) suballocations to individual appropriations subcommittees. With the current CR (P.L. 113-46) slated to expire on January 15, 2014, Congress might pass individual appropriations bills, an omnibus funding bill, or another CR by that time.23 20 Capital Alpha, “FY13 Sequestration Cuts Applied Unevenly With Some Surprises,” June 18, 2013, http://www.capalphadc.com/wp-content/uploads/2013/06/2013-06-18-sequester-surprises.pdf. 21 Inside Defense, “Draft Reprogramming would Shift $9 Billion, Cut $4 Billion From Modernization,” May 16, 2013. 22 CRS analysis of DOD, “May 2013 Prior Approval Request, Reprogramming Action, FY13-09,” approved May 17, 2013; see http://comptroller.defense.gov/execution/reprogramming/fy2013/prior1415s/1309_PA_May_2013_Prior_Approval_Request_Implemented.pdf; and CRS analysis of OSD,C table, “DOD Base and OCO funding by account as appropriated, and post-sequester,” November 2013. 23 Within 15 days of the end of a congressional session, budget law requires that OMB to determine whether budget (continued...) Congressional Research Service 15 Defense: FY2014 Authorization and Appropriations • Section 258B of the Deficit Control Act of 1985 allows the President to submit a report, within five calendar days of the beginning of a new session, detailing an alternative way to meet the defense sequester caps (i.e., a spending plan that would reduce outlays by the same total amount that would result from an acrossthe board sequester). Congress would consider a resolution approving the alternative plan within five calendar days, under expedited procedures that would preclude a Senate filibuster. Legislative Proposals Bills have been introduced that would provide additional flexibility for DOD (and other agencies, in some cases) to meet lower BCA caps by setting higher transfer caps that DOD could use after a sequester went into effect in order to ensure that its higher priority programs were protected. Introduced by Representatives Cooper and Ryan on July 31, 2013, H.R. 2883, the Defense Flexibility Act, would permit the Secretary of Defense to transfer funds into an account as necessary to meet “urgent national priorities” up to the amount sequestered in that account. The transfer language in the bill states: (b) Transfer Authority- In addition to any transfer authority otherwise available, and subject to subsections (c) and (d), of the amounts appropriated to the Department of Defense in any of fiscal years 2014 through 2021, the Secretary of Defense may transfer any appropriation subject in such a fiscal year to reduction under a sequestration order issued pursuant to section 254 of the Balanced Budget and Emergency Deficit Control Act of 1985 between such appropriations, to address an urgent national priority or the consequences of a national emergency resulting from such sequestration, as determined by the Secretary of Defense. (c) Limitation- The amount transferred to an appropriation under subsection (b) shall not exceed the amount by which such appropriation is reduced under the sequestration order referred to in such subsection.24 Some Members may raise concerns that this bill would undermine congressional prerogatives to set funding priorities because the amount of transfer authority could be substantially higher than current annual limits for DOD transfers: $4 billion for the base budget and $3.5 billion for OCO spending in FY2013.25 A second alternative, S. 465, introduced by Senator Collins last March, would give all agencies flexibility to propose an alternative to the FY2013 sequestration that would meet the caps. The bill requires that this “notice of implementation” be submitted to their respective authorization and appropriation committees for approval before going into effect. Including such a requirement could be unconstitutional because it would constitute a legislative veto. If agencies voluntarily (...continued) caps are breached and if necessary, order a sequestration. Since the Constitution requires that Congress meet on January 3 of each year (unless an alternate date is set), the latest date that the old congressional session could end would be midnight January 2. This would mean that a breach determination for FY2014 could be made as late as January 18, 2014. CRS Report R42977, Sessions, Adjournments, and Recesses of Congress, Sessions, Adjournments, and Recesses of Congress, by (name redacted) and (name redacted). 24 H.R. 2883. 25 Joint Explanatory Statement, Congressional Record, March 11, p. S1520 and S1543. Congressional Research Service 16 Defense: FY2014 Authorization and Appropriations submitted such proposed changes, as occurs in current reprogramming and transfers, that would be permissible. S. 465 also would give DOD additional flexibility in multiyear contracts and changes in production rates if a CR limiting those changes is still in effect.26 DOD Forecast of FY2014 BCA Impact In a July 10, 2013, letter to Senate Armed Services Committee Chairman Carl Levin and senior committee Republican James M. Inhofe, Defense Secretary Chuck Hagel predicted “serious adverse effects” on DOD if its FY2014 base budget were reduced by $52 billion from the amount requested to comply with the BCA cap on defense spending for that year.27 In the letter—written in response to the two Senators’ request—Secretary Hagel said his projections assumed that the entire $52 billion reduction would be applied to the $526.6 billion base budget request, with the $79.4 billion OCO request held harmless. The projection also assumed that DOD would be given a free hand to allocate the reduction, rather than applying the sequestration formula of program-by-program cuts. Even making those assumptions, Hagel asserted, “the cuts are too steep and abrupt to be mitigated by flexibility, no matter how broadly defined.” Secretary Hagel described the five-page document presenting the projected BCA impact as a “high-level summary” of an early version of DOD’s approach to accommodating lower annual budgets than the Administration had projected. He said it was “guided by” inputs from the armed services and by preliminary results of a Strategic Choices and Management Review (SCMR)—a DOD-wide assessment Secretary Hagel had ordered to develop budget projections for FY2015FY2019 that would try to adhere to the Administration’s strategic goals at lower funding levels than those currently projected. Following are some of the negative consequences that Secretary Hagel predicted if DOD were required to cut the President’s FY2014 DOD base budget request by $52 billion—nearly 10%: • The reduction in military personnel spending likely would be disproportionately small—that is, appreciably lower than 10%—because the savings in military pay that would result from involuntary separation of military personnel would be largely offset by the cost of severance payments for those with more than six years of service, according to DOD. • To cut military personnel costs by 10% would require what Secretary Hagel described as “an extremely severe package of ... actions” including halting the intake of any new personnel, ending all transfers from one base to another, and freezing promotions. • While DOD would minimize cuts to those operation and maintenance (O&M) costs most directly tied to training and combat readiness, it would impose civilian hiring freezes and reduce scheduled maintenance of facilities, as it had done in 26 http://www.congress.gov/cgi-lis/query/z?c113:S.465: This interpretation reflects consultation with CRS procedural experts. 27 Defense Secretary Hagel’s July 10 letter is available on the website of Senate Armed Services Committee Chairman Carl Levin, at http://www.levin.senate.gov/newsroom/press/release/dod-responds-to-levin-hagel-request_for-guidanceon-defense-budget-cuts/?section=alltypes. Congressional Research Service 17 Defense: FY2014 Authorization and Appropriations FY2013, and would have to consider laying off civilian employees, Secretary Hagel said. • Because of the practical difficulties in applying a proportionate reduction to military personnel costs, accounts funding procurement, R&D, and military construction likely would take disproportionately large cuts, with individual projects subject to reductions of 15% or 20%, he said. BCA Impact on DOD as FY2014 Begins On September 30, 2013, Deputy Defense Secretary Ashton B. Carter said that the department would begin operating in FY2014—starting October 1, 2013—as though its FY2014 budget were limited by the BCA cap and, thus, was more than $50 billion lower than the President’s FY2014 request: Last year [FY2013], we didn’t start the fiscal year executing as though we had sequester, because we were ready to do so, but we didn’t want to start until we had to, because operating under sequester is harmful. It wasn’t until January [2013], after the Christmas deal collapsed last year, that we began to execute—that is, to curb spending—in recognition of the fact that sequester was then ... likely to kick in. Once again, this year, it’s looking like we need to be ready to go. And so our plan is to begin the fiscal year executing at the [BCA] cap levels, because it’s much easier to start that way and then ramp up your expenditure later in the year [if the caps are lifted] than it is to go the other way.28 More recently, after passage of the FY2014 CR setting defense spending levels at the FY2013 level, or some $30 billion below the request but $20 billion above the BCA caps, DOD Comptroller Robert Hale announced that DOD would be spending at—or slightly below—the CR level.29 In recent testimony to House and Senate committees, DOD witnesses have argued that there could be a variety of negative effects, particularly in terms of readiness and maintaining current planned procurement schedules, if BCA budget caps remained in effect. Witnesses have also raised concerns that a year-long CR, which pegs funding levels to FY2013 levels, would create problems because of year-to-year program changes. DOD FY2013 Post-Sequester Funding and the FY2014 Request The FY2013 DOD sequester totaled $37.2 billion, including $32.0 billion cut from its base budget and $5.3 billion from OCO BA. The sequester tapped all available DOD BA except military personnel accounts. Available BA included not only new BA appropriated in FY2013 in the Consolidated and Continuing Appropriations Act of 2013 (H.R. 933/P.L. 113-46), but also prior year unobligated BA from previous years, reflecting the fact that BA in DOD’s investment 28 Deputy Secretary of Defense Ashton B. Carter, “Remarks on the U.S;-India Defense Partnership at the Center for American Progress,” September 30, 2013, http://www.cq.com/doc/newsmakertranscripts-4353176. 29 Department of Defense Press Briefing by Secretary Hagel and Under Secretary Hale in the Pentagon Briefing Room, October 17, 2013, http://www.defense.gov/transcripts/transcript.aspx?transcriptid=5321. Congressional Research Service 18 Defense: FY2014 Authorization and Appropriations accounts (procurement, RDT&E, and military construction) can be obligated (or placed on contract) over several years.30 Compliance with budget caps is measured by budget authority (BA) or funding amounts as scored by CBO. Scoring includes all cuts—both reductions to new FY2013 BA and rescissions which cancel unobligated BA from prior years—because it reflects when legislative action is taken. As scored, DOD’s FY2013 base funding totaled $495.2 billion after all sequester cuts. Rescission of prior year unobligated balances, however, cancels BA that was provided for programs in earlier years. Such reductions do not reduce resources available for current fiscal year programs or activities. The total DOD FY2013 sequester to its base budget was $32.0 billion including $26.2 billion in new BA cuts and $5.8 billion in rescissions of prior year unobligated balances.31 So while DOD’s FY2013 post-sequester base budget funding is scored as $495.2 billion (including the full $32.0 billion reduction by sequester), funding available to carry out FY2013 programs and activities totaled $501 billion (excluding the $5.8 billion rescission) (see Table 5). If DOD complies with the current FY2014 BCA caps, annual funding would decrease by an additional $20 billion or about 4% from the FY2013 post-sequester level. BCA caps for defense reach their lowest point for the decade in FY2014, increasing by roughly $10 billion annually from FY2015 to FY2021, not quite sufficient to cover expected inflation. Some observers would argue that the FY2013 sequester created harmful effects on readiness and investment accounts and that additional spending is necessary to offset those effects. Others might argue that providing for a one-year annual increase in FY2014 would undermine efforts currently underway in the Department of Defense to determine the best way to accomodate lower spending levels evident in the Strategic Choices and Management Review undertaken by Secretary Hagel this summer. FY2014 National Defense Budget Overview 32 The Obama Administration’s FY2014 budget request, submitted to Congress on April 10, 2013, includes $641.12 billion for National Defense programs (budget function 050), including military operations of the Department of Defense, defense-related nuclear energy programs conducted by the Department of Energy, and other defense-related activities. Of that total, $625.15 billion is requested for programs falling within the scope of the annual National Defense Authorization Act, with the remainder either permanently authorized or falling outside the jurisdiction of the House and Senate Armed Services Committees. (See Table 3.) 30 Availability (or life) varies with the type of account with two years for RDT&E accounts, three years for all procurement accounts except shipbuilding available for five years, and five years fo military construction accounts. 31 CRS analysis based on table provided by DOD that segregates sequester cuts from unobligated and new FY13 BA and by base and OCO BA. 32 In this section of the report, statements concerning the National Defense budget refer to OMB’s National Defense “budget function”—designated function 050—which is one of several “functions” (or categories) intended to encompass all relevant federal funding, regardless of the agency performing the activity. Function 050 includes funding for military activities of DOD (i.e., not including Army Corps of Engineers public works) as well as the defense-related activities of the Energy Department and other agencies. In recent years, DOD has accounted for about 96% of the Function 050 total. Congressional Research Service 19 Defense: FY2014 Authorization and Appropriations The Administration’s budget includes $607.36 billion for discretionary DOD budget authority, including $526.64 billion for “base” defense budget costs (day-to-day operations other than war costs), and $80.72 billion for OCO—largely in Afghanistan. The Administration’s initial FY2014 budget presentation included “placeholder” totals for OCO funding. The actual OCO request for that year was submitted to Congress as an addendum in May 2013. Included in the DOD discretionary budget is $6.68 billion for the annual accrual payment to the fund that underwrites payments from the so-called “TRICARE for Life” program to Medicareeligible military retirees. TRICARE is DOD’s medical insurance program.33 Also included in the $632.74 billion National Defense discretionary total is $17.96 billion for defense-related programs of the Energy Department. This includes funds for renovation of the existing nuclear weapons stockpile, environmental cleanup of past nuclear weapons work, and work related to the development and construction of nuclear powerplants for warships. The remaining $7.41 billion of discretionary funding for National Defense is requested for defense-related activities in other agencies, the largest share of which ($4.80 billion) is for FBI activity, including counterintelligence operations. Table 3. FY2014 National Defense Budget Function (050); Administration Request (budget authority in billions of dollars) Discretionary Funding Mandatory Funding Department of Defense (DOD) Base Budget 526.64 6.45 533.09 Department of Energy; Atomic Energy Defense Activities 17.97 1.36 19.33 Department of Justice and Other Defense-related Activities 7.41 0.60 8.01 National Defense, Base Budget 552.02 8.41 560.43 DOD Overseas Contingency Operations (OCO) 80.72 0.00 80.72 National Defense, Total 632.74 8.40 641.14 DOD Subtotal (Base Budget plus OCO) 607.36 6.45 613.81 Department Total Source: Based on Office of Management and Budget, Analytical Perspectives: Budget of the U. S. Government (FY2014), Table 31-1; OCO data from DOD FY14 Budget, Overview, Addendum A: Overseas Contingency Operations, May 2013. Notes: Numbers may not add due to rounding The amounts summarized by the table include some funds that are not covered by the annual legislation that authorizes and appropriates funds for DOD, which are the bills that are the focus of this report. The “Mandatory” column includes certain offsetting receipts. The Administration’s overall National Defense budget for FY2014 also includes $8.40 billion in mandatory spending. The lion’s share of this amount—$7.13 billion—is the annual payment into the military retirement fund to cover payments to retirees who have become eligible for additional 33 Although the TRICARE for Life accrual payment is “discretionary” funding and is authorized annually, the Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005 (P.L. 108-375) provides a permanent, indefinite appropriation to this fund each year of whatever amount is deemed necessary by a board of DOD actuaries. Congressional Research Service 20 Defense: FY2014 Authorization and Appropriations benefits in recent years as a result of legislation that has narrowed limitations on “concurrent receipt” of both military retired pay and disability annuity from the Department of Veterans Affairs.34 When President Obama submitted his FY2011 budget request in February 2010, he had projected requesting for DOD’s base budget a total of $6.26 trillion in discretionary budget authority over the 10-year period FY2011-FY2020. The Administration reduced its DOD funding projections in each of the three succeeding budgets. (See Figure 1and Table 4.) Figure 1. Successive Administration DOD Budget Plans, FY2011-FY2014 (amounts of budget authority in billions of current dollars) 800 700 600 FY2011 budget plan 500 FY2012 budget plan FY2013 budget plan 400 FY2014 budget plan 300 Reduced BCA caps (current law) 200 100 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Sources: Data for FY2012, FY2013, and FY2014 budget plans from DOD Comptroller, National Defense Budget Estimates for FY2014 (The Green Book), Table 1-12, “Discretionary Budget Authority for Past Defense Budgets to the Present as reported by OMB.” Data for FY2011 budget plan from OMB, Analytical Perspectives: Budget of the U.S. Government, Fiscal Year 2011, Table 32-1, “Policy Budget Authority By Function, Category, and Program.” Note: Implication for DOD of the Budget Control Act of 2011 (P.L. 112-25) is a CRS estimate. The 10-year plan accompanying DOD’s FY2012 budget request incorporated $178 billion of “efficiencies” that were to be realized in the first five years of that period. Enactment of the Budget Control Act in 2011, however, created a new frame of reference that has shaped much of 34 For background, see CRS Report R40589, Concurrent Receipt: Background and Issues for Congress, by (name red acted). Congressional Research Service 21 Defense: FY2014 Authorization and Appropriations the subsequent debate over DOD budgets, with the FY2012 request serving as a baseline against which subsequent reductions have been measured. Congressional Research Service 22 Defense: FY2014 Authorization and Appropriations Table 4. DOD Budget Plans and BCA Caps (amounts in billions of dollars of discretionary budget authority) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Total 20122021 FY2012 Budget Plan 553.03 570.73 586.35 598.17 610.58 621.57 632.76 644.15 655.74 667.54 6,140.61 n/a Estimated BCA Cap 530.36 495.20 475.07 487.95 498.12 509.97 522.36 534.74 548.07 561.41 5,163.23 977.38 FY2013 Budget Plan 530,55 525,43 533,55 545,93 555,91 567,34 579,29 592,396 605,43 617,91 5,653.39 486.88 FY2014 Budget Plan 530.42 525.43 526.62 540.84 551.37 559.97 568.57 577.15 586.73 596.30 5,563.39 577.22 Additional Reduction (from FY2012 Total) Required to Meet BCA Cap Total 400.16 Sources: Data for FY2012 and FY2014 DOD budget plans are from DOD Comptroller, National Defense Budget Estimates for FY2014 (The Green Book), Table 1-12; “Estimated BCA Cap” is a CRS estimate. For the 10-year period from FY2012 to FY2021, the caps set by the BCA would require a reduction in DOD discretionary spending of $977 billion (15.9%) from the total that was projected by the FY2012 DOD 10-year plan (assuming that DOD accounts for the same percentage of the National Defense Budget Function in each year as in the Administration’s projected budgets). Under the FY2013 DOD budget plan, funding for the FY2012-FY2021 decade would total $5.65 trillion, a reduction of $487 billion (or 7.9%) compared with the FY2012 plan. Under DOD’s FY2014 budget plan, projected spending for that decade would decline by an additional $90 billion, bringing the cumulative total reduction (compared with the FY2012 plan) to $577 billion (or 9.4%). To realize the total reduction in DOD spending for FY2012-FY2021 required by the BCA caps, an additional reduction of $400 billion would be required. Congressional Research Service Reduction from FY2012 Plan 23 Defense: FY2014 Authorization and Appropriations Figure 2. Estimated DOD Funding Projections, FY2013-2021 (amounts in billions of dollars of discretionary budget authority) 700 600 500 400 300 200 100 0 DOD budget Senate bud res House bud res Lowered BCA cap postsequester FY2013 496 2014 2015 2016 2017 2018 2019 2020 2021 527 527 527 475 541 534 541 488 551 541 551 498 560 548 564 510 569 555 576 522 577 563 589 535 587 571 602 548 596 579 615 561 Source: DOD data derived from DOD Comptroller, National Defense Budget Estimates for FY2014 (“The Green Book”), Table 5-4, Table 2-1, and Table 1-12. Data on the “Lowered BCA cap” derived from P.L. 112-25 (“Budget Control Act of 2011”). Data on House and Senate budget resolutions derived from H.Con.Res. 25 (House budget resolution for FY2014), and S.Con.Res. 8 (Senate budget resolution for FY2014). Notes: Implications for DOD of the Budget Control Act of 2011 (P.L. 112-25), the Senate budget resolution (S.Con.Res. 8) and the House budget resolution (H.Con.Res. 25) are CRS estimates. See text box, “Estimated DOD Impact of Budget ‘Caps’,” above. Based on DOD’s sorting of its spending between the base budget and OCO, the base budget— measured in current dollars (i.e., not adjusting for the cost of inflation)—increased at a relatively steady rate between the late 1990s and 2010. After reaching a high point in 2010, the base budget declined in FY2012 and FY2013 because of BCA budget limits. Unless the BCA cap for FY2014 is modified, it would require a further reduction of National Defense spending from the amount requested by the Administration, with DOD’s share of the reduced amount estimated to reach $475 billion. From FY2015 through FY2020, the BCA, the President’s FY2014 budget projection, and the FY2014 budget resolutions passed by the House and Senate all project a steady increase in DOD funding. Allowing for the cost of inflation as estimated by OMB, the Administration’s projection of discretionary DOD budget authority thru FY2021 would provide a higher level of “real” purchasing power than the department’s average annual budget (in FY2014 dollars) for the period since the end of the Vietnam War (FY1976-FY2012). In turn, the average DOD budget for that 36-year period—which included the last 15 years of the Cold War—is higher in real terms than Congressional Research Service 24 Defense: FY2014 Authorization and Appropriations was the department’s average budget since the 1991 war with Iraq (FY1992-FY2012). (See Figure 3) Figure 3. Projected DOD Purchasing Power in Perspective, 1976-2021 (Base Budget) (amounts in billions of dollars of discretionary budget authority) 700 600 500 400 300 200 100 0 DOD discretionary (Base budget only for 2001-21) Senate budget resolution (DOD impact estimated) House budget resolution (DOD impact estimated) reduced BCA cap (DOD impact estimated) average 1992-2012, DOD base budget average 1976-2012, DOD base budget Sources: CRS analysis of inflation-adjusted amounts based on budget data from DOD Comptroller, National Defense Budget Estimates for FY2014 (“The Green Book”), Table 5-4, Table 2-1, and Table 1-12. Other data are from P.L. 112-25 (“Budget Control Act of 2011”), H.Con.Res. 25 (House budget resolution for FY2014), and S.Con.Res. 8 (Senate budget resolution for FY2014). Defense deflators from OMB, Historical Tables: Budget of the U.S. Government, Fiscal Year 2014. Table 10-1, “Gross Domestic Product and Deflators Used in the Historical Tables, 1940-2018,” converted to base year 2014. Notes: Implications for DOD of the Budget Control Act of 2011 (P.L. 112-25), the Senate budget resolution (S.Con.Res. 8), and the House budget resolution (H.Con.Res. 25) are CRS estimates. FY2014 DOD Base Budget Highlights According to DOD officials, the Administration’s $526.6 billion request for discretionary spending in DOD’s FY2014 base budget is intended both to sustain current U.S. strategy and continue down-sizing the Army and Marine Corps as one element of that strategy. It incorporates a range of cost-reduction initiatives and various efforts to restrain the growth of personnel costs. Congressional Research Service 25 Defense: FY2014 Authorization and Appropriations However, the budget request would create relatively few major perturbations of planned weapons acquisition programs.35 (See Table 5 ) Table 5. DOD Discretionary Base Budgets, FY2012-FY2014 (amounts in billions of current dollars of budget authority) FY2012 Enacted Appropriation FY2013 PostSequester (as scored)a and FY2014 Continuing Resolution (P.L. 113-46) Military Personnelc 141.68 135.39 135.39 137.08 Operation and Maintenance 199.21 193.04 193.98 209.44 Procurement 102.26 92.17 95.85 99.31 RDT&E 71.51 63.35 63.98 67.52 Military Construction 11.37 7.67 8.04 9.47 Family Housing 1.68 1.46 1.53 1.54 Revolving and Management Funds 2.70 2.15 2.22 2.28 530.41 495.22 500.99 526.64 Total: Base Budget FY2013 PostSequester Resources Availableb FY2014 Administration Request Sources: Data for FY2012 and FY2014 Administration Request from DOD Comptroller, National Defense Budget Estimates for FY2014 (“The Green Book”), Table 2.1, pp. 40-41. Data for the two FY2013 columns are from DOD Comptroller data provided to CRS showing track from enacted level to post-sequester level with separate figures for base budget and OCO funding. a. Amounts “as scored” reflect sequester cuts to both new FY2013 BA and to unobligated balances from prior years that are credited in FY2013. FY2014 CR reflects scored levels because unobligated balances from prior year cancelled by the FY2013 sequester are not available to finance FY2014 programs. b. Resources funds available for FY2013 programs and activities including only sequester cuts from FY2013 BA. c. Includes annual accrual payment into the budget account that funds TRICARE-for-Life, which is the program that allows military retirees who are eligible for Medicare to remain enrolled in DOD’s TRICARE medical insurance program. TRICARE-for-Life funds are not provided by the annual defense appropriations bills but, rather, by permanent law according to calculations by DOD actuaries ($6.68 billion in FY2014). At the request of Senate Armed Services Committee Chairman Carl Levin and Senator James M. Inhofe, the committee’s ranking minority Member, DOD agreed to present a plan for cutting $52 billion (about 10%) from the FY2014 base budget request, to meet the legally binding BCA spending cap.36 In addition, Secretary Hagel launched in April a DOD-wide Strategic Choices and Management Review (SCMR) intended to develop three alternative DOD budget plans for 35 DOD Comptroller, Overview: U.S. Department of Defense Fiscal Year 2014 Budget Request, April 2013, pp. 2-1 to 2-7. 36 Senators Carl Levin and James M. Inhofe, Letter to Secretary of Defense Chuck Hagel, May 2, 2013, http://www.armed-services.senate.gov/press/releases/upload/SASC-Budget-letter-to-Hagel-050313.pdf. Congressional Research Service 26 Defense: FY2014 Authorization and Appropriations FY2015-FY2019: one based on the Administration’s current budget projection, a second based on annual funding levels that were 5% lower, and a third based on annual funding levels lower by 10%. Sustaining Current Strategy In January 2012, the Obama Administration issued a new Strategic Guidance document to inform DOD planning and budgeting.37 Among the premises drawn from that document to underpin the Administration’s FY2014 base budget request are the following: • DOD will maintain a large enough force to win a major conventional war in one region while, concurrently, being able to inflict enough damage on an aggressor in a second region to deter a second attack. • DOD will not maintain an active-duty force large enough to conduct large-scale stability operations on a prolonged basis such as recent operations in Iraq and Afghanistan. Those campaigns required a large enough force so that upwards of 100,000 troops at a time could be periodically deployed and then rotated back home for rest and retraining. • In a departure from the practice in recent years of having forces concentrate on training for the types of missions being carried out in Iraq and Afghanistan, forces will train for operating across the spectrum of conflict, from major conventional wars to peacekeeping and stability operations. • DOD will try to improve its ability to help other countries bolster their own security forces to partner more effectively with U.S. forces in missions of mutual interest.38 • DOD will “rebalance” its global posture to emphasize operations in the AsiaPacific region and the Middle East.39 Military Personnel The Administration’s FY2014 budget would continue the ongoing reduction in number of activecomponent Army and Marine Corps personnel to a planned total of 672,100 personnel by the end of FY2017. At that point, the combined, active-duty end-strength of those two services would exceed by more than 18,000 troops their combined end-strength at the end of FY2001, before the services’ post-9/11 expansion. In effect, the plan would remove the 92,000 personnel that were added to the two ground combat-oriented services in 2007. (See Table 6) 37 For further analysis, see CRS Report R42146, In Brief: Assessing the January 2012 Defense Strategic Guidance (DSG), by (name redacted) and (name redacted). 38 For further analysis, see CRS Report R42516, In Brief: Clarifying the Concept of “Partnership” in National Security, by (name redacted). 39 For further analysis, see CRS Report R42448, Pivot to the Pacific? The Obama Administration’s “Rebalancing” Toward Asia, coordinated by (name redacted). Congressional Research Service 27 Defense: FY2014 Authorization and Appropriations Table 6. Active Component Authorized End-Strength FY2001 FY2013 FY2014 FY2017 Army 480,000 552,100 520,000 490,000a Navy 372,642 322,700 323,600 319,500 Marine Corps 172,600 197,300 190,200 182,100a Air Force 357,000 329,460 327,600 328,600 Total 1,382,242 1,401,600 1,361,400 1,320,200 Sources: Data for FY2001 from H.Rept. 106-945, Conference Report on H.R. 4205, Enactment of Provisions of H.R. 5408, the Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001, p. 777; data for FY2013 and FY2014 from DOD Comptroller, National Defense Budget Estimates for FY2014 (“The Green Book”), Table 3-2, p. 53; data for FY2017 from DOD Comptroller, Briefing on the FY2013 Budget Request, at http://comptroller.defense.gov/defbudget/fy2013/FY2013_Budget_Request.pdf, slide 9. Notes: In the Administration’s FY2014 budget request, 490,000 Army personnel and 182,000 Marines would be funded in the base budget with the remainder of each service—30,000 Army and 8,100 Marines—being funded with OCO appropriations. a. Citing budgetary pressures, the Army and Marine Corps each have accelerated their drawdowns by two years, planning to reach the lower manpower levels in FY2015 rather than in FY2017. As DOD had done in its FY2013 budget request, it proposed to fund in the FY2014 base budget only the “enduring end-strength” of the two services—that is, the number of personnel they would have after the drawdown is complete in 2017: 490,000 for the Army and 182,000 for the Marine Corps. On grounds that the additional Army and Marine personnel were a legacy of the expansion of those services to deal with wars in Iraq and Afghanistan—an expansion now being largely reversed—the remaining personnel would be funded out of appropriations to cover war costs (OCO). Military Pay and Allowances The budget request would provide a 1% raise in military basic pay, which typically accounts for between two-thirds and three-quarters of active-duty services members’ cash compensation (the balance of which typically consists of allowances for housing and living costs and various special pays and bonuses intended to attract and retain personnel with certain skills).40 DOD estimates that this 1% raise would save $540 million in FY2014 (and nearly $3.5 billion through FY2018) compared with the 1.8% increase in basic pay that would occur, automatically, under the terms of 37 U.S.C. 1009, which provides that military basic pay will increase by the same annual percentage as pay in the private sector as measured by the Labor Department in the Employment Cost Index (ECI). Congress can, by law, establish a different pay raise than the ECI and the President asserts that he has authority under subsection (e) of 37 U.S.C. 1009 to set an alternative pay adjustment.41 On 40 See CRS Report RL33446, Military Pay and Benefits: Key Questions and Answers, by (name redacted). Section 1009 (e) allows the President to submit a plan for an alternative pay adjustment to Congress before September 1 of the year preceding the pay raise. This provision does not explicitly state that any such plan overrides the automatic adjustment tied to the ECI, but it could be argued that the authority nonetheless exists because subsection (e) refers to “alternative pay adjustments as the President considers appropriate” and subsection (b) states that “an adjustment under this section [1009] shall have the force and effect of law.” 41 Congressional Research Service 28 Defense: FY2014 Authorization and Appropriations August 30, 2013, the President sent a letter to Congress stating, “I have determined it is appropriate to exercise my authority under 1009(e) of Title 37, United States Code, to set the 2014 monthly basic pay increase at 1.0 percent.”42 When the Obama Administration presented its FY2013 budget request in February 2012, it had announced plans to increase military basic pay at the ECI rate for FY2014 and to begin proposing pay increases below the ECI rate in FY2015. TRICARE Fees As it had done in its FY2013 budget request, the Administration included in its FY2014 DOD budget the creation of some new fees and increases in others for beneficiaries of TRICARE, DOD’s medical insurance program. TRICARE covers more than 9.6 million active duty and retired servicemembers as well as their dependents and survivors. DOD justifies the proposed increases on the argument that, while the costs to beneficiaries remained largely unchanged between 1996 and 2012, DOD’s medical costs grew from $19 billion in FY2001 to a projected $49 billion in FY2014.43 Congress had rejected most of the fee increases proposed for FY2013, but approved a proposed increase in pharmacy copayments. The TRICARE fee increases proposed for FY2014 would not affect servicemembers currently on active duty except that their dependents would be liable for increased pharmacy copayments. Most of the other proposed fee increases would apply to military retirees under the age of 65, although a proposal to create a new TRICARE for Life enrollment fee was included in the Administration’s request for the first time. “Efficiency” Initiatives According to DOD, the FY2014 base budget request incorporates some two dozen “efficiency” initiatives that would reduce spending by a total of $17.03 billion over the period FY2014FY2018.44 Five of those proposals account for about 80% of the projected five-year savings, namely: • $8.90 billion—more than a quarter of the total reduction—would come from reduced estimates of the cost of DOD’s TRICARE medical insurance program, with the cuts based partly on a decline in the rate of medical care cost growth and partly on an Administration plan to reorganize some DOD facilities (FY2014 savings of $1.37 billion); • $2.77 billion would be cut from projected payrolls for DOD civilians, partly on the assumption that annual pay raises will be lower than previously projected and 42 Letter available at http://www.whitehouse.gov/the-press-office/2013/08/30/letter-president-regarding-alternate-payplan-members-uniformed-services. 43 See CRS Report RS22402, Increases in Tricare Costs: Background and Options for Congress, by (name redacted). 44 DOD Comptroller, Operation and Maintenance Overview: Fiscal Year 2014 Budget Estimates, April 2013, pp. 210235. This CRS report discusses separately additional savings projected by the Administration to result from base closures and reduced military construction. Congressional Research Service 29 Defense: FY2014 Authorization and Appropriations partly on the assumption that Congress will approve the closure of some bases and medical facilities (FY2014 savings of $356 million); • $1.20 billion would be saved by reducing enlistment bonuses and the budget for recruitment advertising, capitalizing on the improved recruiting environment created by a weak domestic economy45 (FY2014 savings of $213 million); • $625 million would be saved as a result of scaling down Army deployments in the Balkans (FY2014 savings of $106 million); • $447 million would be saved by reducing the Navy’s projected operation and maintenance budgets on grounds that the service routinely has requested more funding in those accounts than it has spent in recent years (FY2014 savings of $87 million). Weapons Acquisition Reductions The FY2014 request incorporates reductions in planned acquisition spending for some five dozen weapons programs by a total of $15.62 billion over the period FY2014-FY2018. Some of the reduction would result from the cancellation of some programs and reductions in the number of items that would be purchased, or the rate at which they would be purchased. Still other savings are projected to result from wider use of multi-year procurement contracts. Most of the proposed changes would yield savings of less than $150 million each over the fiveyear period, but 10 of the changes—each projected to save more than $500 million—account for nearly 60% of the projected five-year savings, namely: • $2.06 billion would come from dropping plans to develop a “Block IIB” version of the SM-3 anti-ballistic missile interceptor (FY2014 savings of $216 million); • $1.72 billion would come from cancellation of the Precision Tracking Space System, a satellite network intended to provide targeting data on incoming ballistic missiles (FY2014 savings of $270 million); • $1.35 billion would be saved by deferring until FY2019 the construction of a new “IIIB” version of the Apache attack helicopter (upgrading existing Apaches to that standard, in the meantime) (FY2014 savings of $475 million); • $1.09 billion would come from using Atlas rockets for some planned satellite launches instead of more expensive Delta rockets (FY2014 savings of $106 million); • $684 million would be saved in the near term by slowing procurement of the Navy’s SM-6 anti-cruise missile interceptor until more ships are equipped with a new version of the Aegis weapons control system that is needed to fully exploit the capabilities of the SM-6 (FY2014 savings of $58 million); • $683 million would come from a reduction in the overhead cost budgeted for the carrier-launched version of the F-35 Joint Strike Fighter (FY2014 savings of $8 million); 45 See CRS Report RL32965, Recruiting and Retention: An Overview of FY2011 and FY2012 Results for Active and Reserve Component Enlisted Personnel, by (name redacted). Congressional Research Service 30 Defense: FY2014 Authorization and Appropriations • $598 million would come from reducing the number of the Navy’s F/A-18 fighters that would be rebuilt to like-new condition (FY2014 savings of $48 million); • $593 million would be saved by reducing the Marine Corps ammunition inventory consistent with the retirement of one of three flotillas of pre-positioned supply ships carrying supplies and equipment for Marine combat units (FY2014 savings of $229 million); • $528 million would come from savings as a result of buying DDG-51-class destroyers on a multi-year contract (FY2014 savings of $67 million); and • $526 million would come from savings as a result of buying C-130J cargo planes on a multi-year contract (FY2014 savings of $83 million). Proposed Base Closures Over the FY2014-FY2018 period, DOD projects a total reduction in military construction budgets of $4.13 billion compared with previous projections. Some of those cutbacks are slated to result from the closure of some bases and medical facilities as a result of a Base Realignment and Closure Commission (BRAC), which Congress is asked to authorize. Congress rejected a BRAC proposal included in the FY2013 budget request. FY2014 OCO Budget Highlights The Administration’s $79.44 billion request for war costs (OCO) represents a reduction of about 3% from the amount appropriated by Congress for war costs in FY2013 (after sequestration). (See Table 7.) Table 7. Administration’s FY2014 Discretionary OCO Budget Request (amounts in billions of dollars) FY2012 Enacted Appropriation FY2013 PostSequester (as scored)a and FY2014 continuing resolution (P.L. 113-46) FY2013 PostSequester Resources Availableb FY2014 Request as Amended May 2013 Military Personnelc 11.29 14.26 14.26 9.85 Operation and Maintenance 86.78 58.38 58.38 63.63d Procurement 16.05 8.89 9.33 5.62e RDT&E 0.53 0.19 0.19 0.07f Military Construction 0.00 -0.01 -0.01 0.00 Revolving and Management Funds 0.44 0.24 0.24 0.26 115.08 81.96 82.40 79.44 Total: OCO Budget Congressional Research Service 31 Defense: FY2014 Authorization and Appropriations Sources: Data for FY2012 from DOD Comptroller, National Defense Budget Estimates for FY2014 (“The Green Book”), Table 2.1, pp. 40-41. Data for the two FY2013 columns are from DOD Comptroller data provided to CRS showing track from enacted level to post-sequester level with separate figures for base budget and OCO funding. Data for FY2014 request from DOD Comptroller, Overview: United States Department of Defense Fiscal Year 2014 Budget Request, Addendum A, Overseas Contingency Operations, Table 1, “OCO Funding by Appropriations Title,” p. 11. a. Amounts “as scored” reflect sequester cuts to both new FY2013 BA and to unobligated balances from prior years that are credited in FY2013. FY2014 CR reflects scored levels because unobligated balances from prior year cancelled by the FY2013 sequester are not available to finance FY2014 programs. b. Resources funds available for FY2013 programs and activities including only sequester cuts from FY2013 BA. c. Includes annual accrual payment into the budget account that funds TRICARE-for-Life, which is the program that allows military retirees who are eligible for Medicare to remain enrolled in DOD’s TRICARE medical insurance program. TRICARE-for-Life funds are not provided by the annual defense appropriations bills but, rather, by permanent law according to calculations by DOD actuaries ($164 million in OCO funds in FY2014). d. Assumes Congress will transfer to this account an additional $486 million that Congress had added to the FY2013 DOD appropriation to keep in service several Aegis cruisers the Administration wants to retire. e. Assumes Congress will transfer to this account an additional $749 million that Congress had added to the FY2013 DOD appropriation to continue purchasing C-27 cargo planes, a program the Administration wants to terminate. f. Assumes Congress will transfer to this account an additional $44 million that was appropriated for unspecified R&D program in FY2004. Although the OCO funding request for FY2014 would drop by 3% compared with the presequester FY2013 appropriation, the number of U.S. personnel deployed in Afghanistan would decline by 39% and the total number of personnel supported by the OCO budget (including forces outside Afghanistan that support operations in that country, in the Philippines and in the Horn of Africa) would drop by about 20%. (See Figure 4) Figure 4. OCO Funding and Troop Level Trends: FY2008 through FY2014 Request Proposed OCO Funding by Country Proposed U.S.Troops by Country amounts in billions of dollars thousands of personnel 200 200 180 180 160 160 140 140 120 120 100 100 80 80 60 60 40 40 20 20 0 2008 Iraq 148 Afghanistan 39 2009 94 52 2010 62 100 2011 45 114 2012 10 105 2013 3 85 2014 1 78 0 2008 Iraq 154 Afghanistan 33 2009 141 44 2010 96 84 2011 47 98 2012 9 90 2013 0 63 2014 0 38 Source: DOD Comptroller, Overview: United States Department of Defense Fiscal Year 2014 Budget Request, Addendum A, Overseas Contingency Operations, Figure 2, “OCO Funding and Troop Level Trends,” p. 2. Congressional Research Service 32 Defense: FY2014 Authorization and Appropriations According to DOD’s functional breakdown of the FY2014 OCO budget (see Table 8), three components that, in sum, account for more than 80% of the total request would decline by less than 10% compared with the pre-sequester FY2013 appropriation: • $25.7 billion for U.S. force operations (including force protection); • $21.8 billion for activities outside Afghanistan to support operations inside that country; and • $8.9 billion to purchase equipment to replace war losses (including 4 Apache attack helicopters and 11 Chinook transport helicopters), replenish ammunition supplies, and refurbish equipment worn out by use in Afghanistan and Iraq. According to DOD, those costs are declining at a slower rate than U.S. troop levels in Afghanistan because of expenses associated with closing bases in that country and returning thousands of cargo containers, vehicles, and other pieces of equipment to the United States and refurbishing the equipment as necessary.46 46 DOD Comptroller, Overview: United States Department of Defense Fiscal Year 2014 Budget Request, Addendum A, Overseas Contingency Operations, p. 1. Congressional Research Service 33 Defense: FY2014 Authorization and Appropriations Table 8. OCO Funding by Mission Category (amounts in billions of dollars) FY2013 Enacted Appropriation PRE-SEQUESTERR FY2014 Request Operations and Force Protection 27.7 25.7 In-Theater Support 23.0 21.8 Military Intelligence Program 4.4 3.8 Afghanistan Security Forces Fund 5.1 7.7 Afghanistan Infrastructure Fund 0.3 0.3 Commander’s Emergency Response Program (CERP) 0.2 0.1 Coalition Support Funds 2.1 2.0 Procurement and Equipment Reset 11.1 8.9 Temporary End-Strength 5.8 5.1 Other 9.5 5.3 Prior-Year Cancellations -2.0 -1.3 Net Total 87.2 79.4 Source: DOD Comptroller, Overview: United States Department of Defense Fiscal Year 2014 Budget Request, Addendum A, Overseas Contingency Operations, Figure 3. “OCO Functional/Mission Category Breakout,” p. 5. Postsequester estimates are not available. Afghanistan’s Army, projected to number 195,000 at the end of FY2013, and its National Police, projected to number 157,000 at the end of FY2013, are expected to remain at those levels through FY2014. The OCO budget request would increase U.S. support for those forces by 50% (to $7.7 billion) over the pre-sequester FY2013 appropriation. According to DOD, the increase is associated with the Afghan forces’ assumption of responsibility for security as well as continued efforts to improve their operational capabilities.47 Ship and Aircraft Retirements The Administration’s FY2014 OCO budget request would require $80.7 billion in budget authority. However, the Administration proposes to reduce the budgetary impact of the request by covering part of the costs by rescinding or cancelling $1.3 billion appropriated for FY2013 to retain in service Navy ships and Air Force cargo planes that the Administration’s FY2013 budget request would have retired. Thus, the FY2014 request proposes to reverse Congress’s decision to reject the Administration’s FY2013 proposals to retire seven Aegis cruisers and two amphibious transport ships and to mothball the fleet of C-27 cargo planes. To fund its FY2014 OCO budget, it would use: • 47 $486 million that Congress had added to the FY2013 DOD appropriation to keep in service the ships the Administration wanted to retire; Ibid., p. 7. Congressional Research Service 34 Defense: FY2014 Authorization and Appropriations • $749 million that Congress had added to the FY2013 bill to continue purchasing and operating C-27s; and • $44 million that had been appropriated for unspecified R&D program in FY2004. FY2014 National Defense Authorization Act (NDAA): H.R. 1960; S. 1197; H.R. 3304 H.R. 3304, the version of the FY2014 National Defense Authorization Act signed into law by President Obama on December 31, 2013,—like Administration’s budget request and earlier versions of the NDAA passed by the House (H.R. 1960) and reported by the Senate Armed Services Committee (S. 1197)—exceeded by more than $30 billion the cap on national defense spending48 in FY2014 that was established by the FY2014 Continuing Appropriations Resolution (H.J.Res. 59), which the President also signed into law on December 26, 2013. For DOD’s FY2014 base budget, the totals authorized by the final version of the bill (H.R. 3004), the version passed by the House on June 14, 2013, (H.R. 1960), and the version reported by the Senate Armed Services Committee on June 20, 2013, (S. 1197), all come within $228 million of the $526.57 billion requested by the President. (See Table 9) For OCO funding (or “war costs”), H.R. 3304, like the Senate committee versions of the bill (S. 1197), makes few changes to the Administration’s $80.72 billion request. The House-passed bill, on the other hand, would have authorized $5.04 billion more than was requested49, including the following increases: • $1.68 billion for depot maintenance; • $1.50 billion to “reset” (i.e., rehabilitate, reequip, and retrain) Army units after their deployment in Afghanistan; • $535.9 million for higher than budgeted fuel costs; • $340.9 million to replace FY2013 OCO funds that were reprogrammed to other OCO uses; and • $400.0 million for equipment for National Guard and reserve component units. The enacted version of the bill, authorizing $2.0 million less than the OCO request, dropped about two-thirds of the House-passed increases authorizing an additional $1.10 billion for Army reset, $400.0 for National Guard and reserve equipment; and $130.0 million for depot maintenance. Because neither H.R. 1960 nor S. 1197 had been passed by both chambers, there was no basis for convening a House-Senate conference to reconcile the House-passed and Senate committeereported versions of the FY2014 NDAA. In lieu of a formal conference report, members of the 48 The spending cap applies to DOD’s base budget, but not to funding for war costs (or OCO). 49 The House-proposed increases in OCO funds would not count against the caps set by the Budget Control Act. However, OCO funds would have be subject to sequestration, if that occurs. Congressional Research Service 35 Defense: FY2014 Authorization and Appropriations House and Senate Armed Services Committees, meeting informally, negotiated a compromise version of the bill. To expedite Senate action on that final version of the bill, the negotiated text was passed by the House and Senate as an amendment to a bill (H.R. 330450) that already had been passed by each chamber, but on the specific language of which the House and Senate had not yet come to agreement. On December 12, 2013, the House voted 350-69 to adopt the negotiated NDAA text as an amendment to H.R. 3304 and to pass the amended bill. On December 19, 2013, the Senate concurred in the House action—in effect, passing the negotiated NDAA text—by a vote of 84-15. Table 9. FY2014 National Defense Authorization Act (H.R. 1960; S. 1197: H,R, 3304) (amounts in millions of dollars of discretionary budget authority) FY2014 Administration Request FY2014 House-passed H.R. 1960 FY2014 Senatecommittee reported S. 1197 H.R. 3304 enacted Base Budget Procurement 98,227 99,666 98,151 98,442 Research and Development 67,520 68,079 67,541 67,739 Operations and Maintenance 175,098 174,672 176,632 176,420 Military Personnel 137,077 136,896 136,807 136,394 Defense Health Program and Other Authorizations 37,639 37,362 37,775 37,438 Military Construction and Family Housing 11,012 10,056 9,662 10,367 Subtotal: DOD Base Budget 526,572 526,732 526,568 526,800 Atomic Energy Defense Activities (Energy Dept.) 17,858 17,696 17,842 17,623 TOTAL: FY2014 Base Budget 544,430 544,428 544,411 544,424 Subtotal: Overseas Contingency Operations 80,722 85,766 80,704 80,720 625,153 630,194 625,115 625,143 GRAND TOTAL: FY2014 NDAA Sources: House Armed Services Committee, H.Rept. 113-102, Report on the National Defense Authorization Act for Fiscal Year 2014 (H.R. 1960), June 7, 2013, pp. 363-67; Senate Armed Services Committee, S.Rept. 11344. Report to accompany the National Defense Authorization Act for Fiscal Year 2014 (S. 1197), June 20, 2013, pp. 268-72. 50 As originally passed by the House and Senate, H.R. 3304 would have requested that the Medal of Honor be awarded to two veterans of the Vietnam War and to certain other veterans who had been recommended for the award. Congressional Research Service 36 Defense: FY2014 Authorization and Appropriations NDAA: The Broad Outlines Like the defense authorization act for FY2013 (H.R. 4310, P.L. 112-239), the final version of the FY2014 NDAA—like the versions of the FY2014 bill that earlier had been passed by the House and reported by the Senate committee—makes relatively few individual additions to the authorization levels proposed by the Administration for specific procurement and R&D programs, compared with the annual defense authorization bills enacted in the first decade of this century. That difference reflects the stringent bars against “earmarks” currently observed in both the House and the Senate. Proposed Administration Savings H.R. 3304 bars an Administration proposal to retire several Navy ships ahead of schedule and to increase some TRICARE fees. Congress had rejected these proposals in the FY2013 budget and that also had been rejected in the House-passed and Senate committee versions of the FY2014 authorization bill. The final FY2014 bill also blocked an Air Force plan to retire its fleet of A-10 ground attack planes as part of its plan to accommodate the anticipated reduction in its FY2014 budget request. The proposal surfaced after the full House and the Senate Armed Services Committee had acted on their respective versions of the bill. On the other hand, the final NDAA—and the two earlier versions—supported several of the Administration’s other cost-cutting proposals. Following are actions incorporated in various versions of the FY2014 NDAA related to selected Administration savings. (See Table 10) Table 10. Selected Administration Cost Cutting Initiatives Administration Proposal House-passed H.R. 1960 Senate committeereported S. 1197 Final Version H.R. 3304 Annual Raise in Military Basic Pay 1.0% 1.8% (added cost of $580.0 million) 1.0% 1.0% Recruiting and Retention Bonuses and Advertising Reduce FY2014 request by $213 million Add $5.4 million for bonuses for flight paramedics in Army Reserve and National Guard no change Cut an additional $115.9 million from the request DOD Civilian Pay Cut by $346.1 million compared with current policy Cut an additional $341.5 million (lower projection of number of employees) no change Cut an additional $621.7 million (lower projection of number of employees) TRICARE medical insurance costs Cut by $1.37 billion in anticipation of higher fees Add $164 million; bar fee changes Add $218 million; bar fee changes Add $218 million; bar fee changes Congressional Research Service 37 Defense: FY2014 Authorization and Appropriations Senate committeereported S. 1197 Administration Proposal House-passed H.R. 1960 Retirement of seven Navy cruisers and two amphibious landing transport ships (proposal rejected by Congress in FY2013 budget) Cancel $486 million (of $1.4 billion) that Congress added to the FY2013 DOD appropriation to keep in service the ships the Administration wanted to retire. Use those funds to cover part of the cost of the FY2014 budget request Bar retirement of the seven cruisers and one of the two amphibious ships; Authorized use of up to $915 million (of the funds authorized in FY2013 to keep the ships in service) to modernize the cruisers Reject Administration proposal and direct DOD to use funds appropriated in FY2013 to continue operating the ships Bar retirement of the seven cruisers and one of the two amphibious ships; no additional transfer authority. (Section 1023) Retirement of C-27 cargo planes (proposal rejected by Congress in FY2013 budget) Cancel $749 million that Congress had added to the FY2013 bill to continue purchasing and operating C-27s; Use those funds to cover part of the cost of the FY 2014 budget request no change no change Require the Air Force to transfer 14 C-27s to the Coast Guard as part of a multi-agency reassignment of various aircraft (Section 1098) AH-64 Apache helicopter Defer until FY2019 the manufacture of new AH-64s; Continue upgrade of existing helicopters to AH-64 Block IIIB configuration; Reduce FY2014 request by $475 million no change no change no change UH-72 Lakota helicopter for noncombat missions Buy the final 10 UH72s in FY2014 in lieu of planned 31 in FY2014 and 10 more in FY2015; Reduce projected FY2014 request by $163 million Add $135 million to buy 21 additional UH72s in FY2014 no change Add $75 million to buy 10 additional UH-72s in FY2014 Standard SM-3-IIB antiballistic missile interceptor Cancel development of a new variant of the SM-3 IIA antimissile interceptor; Reduce FY2014 request by $216 million no change no change no change Precision Tracking Space System (PTSS) missile defense tracking satellite Cancel development of PTSS missile defense tracking satellite; Reduce FY2014 request by $270 million no change no change no change Congressional Research Service Final Version H.R. 3304 38 Defense: FY2014 Authorization and Appropriations Other Congressional Additions Both versions of the NDAA would authorize more than was requested for several large O&M accounts in which the Administration’s budget assumed costs would be reduced by “efficiencies.” The Senate committee-reported S. 1197 would add $1.8 billion to these accounts, while the House-passed H.R. 1960 would add $5.6 billion, of which $4.6 billion was added to the authorization for OCO funding. Following are actions selected increases to the Administration’s DOD budget request that would be authorized by various versions of the FY2014 NDAA. (See Table 11) Table 11. Selected Additions to the Administration Request Administration proposal House-passed H.R. 1960 Senatecommittee reported S. 1197 Facilities maintenance and upgrades $9.38 billion request assumes unspecified efficiencies Add $809 million for facilities maintenance and repair Add $286 million for facilities maintenance and repair Add $635 million for facilities maintenance and repair Depot maintenance $14.04 billion request assumes unspecified efficiencies Add $1.68 billion million for depot maintenance (nearly all OCO funding) Add $608 million for depot maintenance Add $924 million for depot maintenance (of which $130 million is OCO funding) “Reset” of equipment deployed in Afghanistan and Iraq Request $2.24 billion for Army “reset” (in OCO funding) Add $1.50 billion for reset (OCO funding) no change Add $1.10 billion for reset (OCO funding) Other “add-backs” n/a Add $329 million for additional training and other readinessrelated O&M costs (OCO funding) Add $885 million for additional training and other readinessrelated O&M costs Add $802 million for additional training and other readinessrelated O&M costs no change no change Final version H.R. 3304 Add an additional $341 million to replace FY2013 OCO funds that were reprogrammed to other OCO uses; Fuel costs Request assumes unspecified efficiencies Congressional Research Service Add $536 million for fuel costs. (OCO funding) 39 Defense: FY2014 Authorization and Appropriations Senatecommittee reported S. 1197 Administration proposal House-passed H.R. 1960 Final version H.R. 3304 Ballistic Missile Defense system deployed in Alaska and California to intercept intercontinental missiles aimed at U.S. territory Request $1.03 billion to continue upgrading Ballistic Missile Defense system deployed in Alaska and California to intercept intercontinental missiles Add $140 million; require construction of the third site for defense of U.S. territory against long-range ballistic missiles(Section 232); Also add $107 million to begin procurement of 14 additional interceptor missiles no change Add $80 million to analyze causes of a flight test failure; Add $20 million to continue evaluation of possible additional missile defense sites (as required by FY2013 NDAA); Requires a briefing on that study (Section 239) Three Israeli missile defense systems Request $96 million to continue development of the three missile defense systems Add $173 million Add $150 million Add $188 million “Iron Dome” Israeli system designed to intercept shortrange rockets and artillery shells Request $220 million for procurement Add $15 million to facilitate U.S. production of Iron Dome no change Add $15 million to facilitate U.S. production of Iron Dome Upgrades to Abrams tanks and Bradley troop carriers Request $171 million for Bradley mods and $178 million for Abrams mods but no funds for more complex upgrade of Abrams tanks to socalled M-1A2 SEP configuration Add $168 million to continue M-1A2 SEP upgrades no change Add $90 million to continue M-1A2 SEP upgrades Virginia-class nuclear submarine Request $2.93 billion to fully fund one sub and partly fund a second Add $492 million to fully fund the second sub no change Add $492 million to fully fund the second sub Equipment for National Guard and reserve component forces Request $4.25 billion distributed through the appropriations accounts that fund equipment for activecomponent forces Add $400 million for procurement in the National Guard and Reserve Equipment Account (NGREA) (OCO funds) no change Add $400 million for procurement in the National Guard and Reserve Equipment Account (NGREA) (OCO funds) Military Personnel Issues (Authorization) Military Personnel Policy Issues For additional background and analysis of selected military personnel issues dealt with in the FY2014 NDAA (endstrength, pay raise, TRICARE fees, chaplains’ rights, and reserve component mobilization), see CRS Report R43184, FY2014 National Defense Authorization Act: Selected Military Personnel Issues, coordinated by (name redacted). Congressional Research Service 40 Defense: FY2014 Authorization and Appropriations The final version of the bill, like the versions passed by the House and reported by the Senate committee, incorporate Administration proposals to reduce the statutory ceilings on the number of military personnel at the end of FY2014. That new ceiling on active component personnel is be 1.36 million, a reduction of just over 40,000 from the FY2013 ceiling on “end-strength” while the new personnel ceiling for the National Guard and other reserve components is 833,700, a reduction of just over 8,000. In the explanatory statement accompanying H.R. 3304, House and Senate negotiators noted that, because of budgetary constraints, the Army and Marine Corps have accelerated their planned reduction in active-duty personnel and now hope to reduce active component ends-strength by an additional 38,100 troops by FY2015, instead of FY2017.51 The negotiators supported that plan, but commented: We remain concerned that unfettered reductions in end-strength will have a detrimental impact on force structure and, ultimately, operational mission capability and capacity among the services, and harm the morale of the force,52 Military Pay Raise The Senate committee’s bill included a provision (Section 601) that would have authorized for FY2014 the 1% raise in military basic pay called for by the budget request. On the other hand, the House Armed Services Committee called for a 1.8% military pay raise, as would happen automatically under existing law, which ties the annual raise in military basic pay to the Labor Department’s Employment Cost Index (ECI). DOD estimated that the higher raise would increase FY2014 military personnel costs by $540 million. H.R. 3304 included no provision setting the FY2014 military pay raise. However, the President asserts that the law that ties pay raises to the ECI53 also includes a provision giving him authority to specify an alternative pay raise, and he has done so by setting the FY2014 pay raise at 1.0%.54 In the explanatory statement accompanying the bill, House and Senate negotiators acknowledged the President’s action.55 Sexual Assault Prevention and Treatment Sexual Assault-Related Provisions For more extensive description and analysis of sexual assault-related provisions of H.R. 1960 and S. 1197 relating to sexual assault, see CRS Report R43213, Sexual Assaults Under the Uniform Code of Military Justice (UCMJ): Selected Legislative Proposals, by (name redacted). 51 For additional background and analysis on the Administration’s manpower plan, see CRS Report R42493, Army Drawdown and Restructuring: Background and Issues for Congress, by (name redacted). 52 “Joint Explanatory Statement” on the FY2014 NDAA, House Armed Services Committee website, at http://armedservices.house.gov/index.cfm/files/serve?File_id=8A5E9112-80EF-43E1-A4E9-9AB0C0C107D8, pp. 5253. 53 37 U.S.C. 1009. 54 See “Military Pay and Allowances” above. 55 “Joint Explanatory Statement” on the FY2014 NDAA, House Armed Services Committee website, at http://armedservices.house.gov/index.cfm/files/serve?File_id=8A5E9112-80EF-43E1-A4E9-9AB0C0C107D8, p. 97. [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/crs%3AR43323. Public record. Not legal advice.