Budget Issues

The Pentagon must cut $41 billion in fiscal year 2013 due to sequestration, not $46 billion as anticipated, Defense Secretary Chuck Hagel said today. The continuing resolution signed into law this week "did fix some of our urgent problems," Hagel told reporters. "In particular, it put some of the dollars back in the right accounts. We still don't have the flexibility that we had hoped to get. But having money in the right accounts is particularly important."

The legislation reduces a shortfall in the operations budget, he said. "You also know that we came out better than we went in under the sequester, where it looks like our number is $41 billion now, versus the $46 [billion]," he said. "It gives us program authorities to start new programs . . . and military construction, which is significant."

Hagel also said the overseas contingency operations budget is about $7 billion higher than DOD had estimated, in part due to the cost of removing troops and equipment from Afghanistan.

"In the operation and maintenance account, we're going to be short, at least $22 billion for FY-13," he said. "We're going to have to deal with that reality, and that means we're going to have to prioritize and make some cuts and do what we got to do." DOD will slash base operating support, reduce training for nondeployed units and face furloughs, he said.

"I suspect overall the biggest issue that we're going to be dealing with and concern is the department's people and its mission, how these numbers are going to affect all that," Hagel added, citing DOD's new ongoing review of strategic choices and management.

"The uncomfortable truth is that . . . on Monday, we'll be halfway through the fiscal year and we'll be 80 percent spent in our operating funds," Chairman of the Joint Chiefs of Staff Gen. Martin Dempsey said during the same briefing. "We don't yet have a satisfactory solution to that shortfall, and we're doing everything we can to stretch our readiness out. To do this, we will have to trade, at some level and to some degree, our future readiness for current operations. It will cost us more eventually in both money and time to recover in the years to come."

DOD will be trying to recover lost readiness and reshape the force concurrently. "We can do it, but that's the uncomfortable truth," Dempsey said. "We simply can't do this, though, without additional budget certainty in the outyears, time to absorb the reductions and flexibility."

That doesn't simply mean having the authority needed to transfer and reprogram funds, the general said. "I mean what I would describe as full flexibility," Dempsey added. "I'm talking about the unpopular but unavoidable institutional reforms that will be necessary. We can't afford excess equipment. We can't afford excess facilities. We have to reform how we buy weapons and services. We have to reduce redundancy. And we've got to change, at some level, our compensation structure.

"Without that kind of reform, we will lose the human capital, the important talented young men and women, and we'll lose combat capability," he continued. "But with that kind of reform, we have it within us to stay strong despite declining dollars and increasing risk. If our elected leaders can help us with full flexibility, our people will do the rest."

The FY-14 budget will be released April 10, Principal Deputy White House Press Secretary Josh Earnest told reporters today.