The FY14 President’s Budget Request for the Department of Defense was finally released on April 10 after a months-long delay. Released in a period of great fiscal uncertainty and political rancor, the base budget’s final figure of $526.6 billion for FY2014 is unrealistic, as it ignores the likely effects of sequestration. The FY13 budget was eventually sequestered. Without new legislation, we should expect the same for FY14. The FY14 budget also provides no further details on where FY13 stands with sequestration applied. While the March appropriation brought the FY13 budget down to $518 billion, sequestration is slated to bring this figure down further to $492.9 billion, according to DoD. But the FY14 budget instead uses original budget request numbers from last spring for FY13.
The FY14 budget likely won’t last in its present form. While the Obama Administration’s FY14 budget plan would roll back sequestration with a series of other spending cuts and tax increases, the chance of this budget plan succeeding is very small. Avascent Analytics believes that a ‘grand bargain’ between the White House and Congress on debt and deficit is unlikely before the start of FY14 in October, and that a continuing resolution will be the most probable outcome. If that is the case, the actual FY14 base budget will be approximately $475 billion, or $52 billion lower than the President’s request.
Regardless of the base budget’s final amount, DoD will try to gain greater control over budget reductions through a reprogramming request to Congress. DoD is expected to release such a request later this month. If passed, it would give the Department greater flexibility to shift funds within accounts to protect critical functions put at risk.
The overall FY14 request may not be entirely realistic, but a comparison of this year’s request with the FY13 budget indicates how DoD has begun to shift priorities to remain in line with an Asia pivot strategy.
These priorities better explain large changes. Compared to the FY13 FYDP, development funding in FY14 for the Army’s Ground Combat Vehicle declined 58%, while funding for the Navy’s Broad Area Maritime Surveillance UAS increased 60%. Other winners were the Virginia-class Submarine, increasing (+15%); the P-8 Maritime Aircraft (+5%); and the EA-18G (+87%). By comparison, investment decreased in land combat systems, such as: mods for the M1 Abrams tank (-31%) and Bradley Fighting Vehicle (-13%); development funding for the Marine Personnel Carrier (-77%); and development funding for the Amphibious Combat Vehicle (-9%). New build AH-64E helicopters and VTOL UAS for the Army were cut entirely.
While some of these program changes indicate a consensus on priorities within DoD leadership, a view at a wider account level indicates that these changes may not be significant enough to meet future budget reductions, given that some accounts less important to an Asia strategy are still set to grow moderately. This applies especially to Army and Marine accounts with CAGRs of steady growth over FY14-18, such as Army Weapons & Tracked Combat Vehicles (+24%), and Marine Corps Procurement (+14%).
It is clear that the Department will not get everything it has requested. Given that a pivot to Asia will require a sizeable investment, significant decisions surrounding major programs are a certainty if sequestration continues its course. While the FY14 request gives some light to major priorities, it does not begin to make any of those hard decisions.