POST U.S. ELECTION WRAP-UP: WHAT’S NEXT FOR DEFENSE SPENDING?
By Ryan Crotty
05 Nov 14. On November 4, the Republicans expanded their majority in the House of Representatives and took the Senate, winning at least a 52-48 majority. What does this mean for the defense budget in the near term? What are the important decision points over the next six months that are critical for defense?
With the midterm elections past, the 113th Congress returns to conclude with a lame duck session on November 12. Since Congress recessed on September 19, the U.S. conducted its first air strikes in Syria, U.S. and Afghan officials signed a bilateral security agreement, and Ebola reached the United States. With this security environment as the backdrop, the next six months harbor significant budget events that will need to be tackled by both the outgoing and incoming Congresses.
There are three core budgetary obstacles for the Department of Defense (DoD) that must be cleared in the next six months: avoiding government shutdown by passing a spending bill, funding ongoing overseas DoD operations, and providing a funding baseline for FY 2016. Then, beyond these three unavoidable requirements are two additional hurdles that will play a role in the defense budget debate: passage of a defense policy bill for 2015 and Congress setting their baseline FY 2016 spending.
Imperative 1: Defense Funding (a.k.a. Avoiding a Shutdown)
The single most important item for the Department of Defense (DoD) is getting its funding for the year. Right now, DoD is operating under a continuing resolution (CR), which extends to December 11, at which point the government will require a new funding vehicle. Step one of clearing all of these hurdles will be simply avoiding a shutdown. The two paths to avoiding a shutdown are to either pass another CR or to pass an appropriations bill.
Passing another continuing resolution would be in keeping with recent experience, as DoD has averaged three CRs per year since the drawdown started in 2010, with an average of 130 days operating under CR in each of those years. One possible driver of another CR would be if Republicans believe that it behooves them to wait until both chambers have become Republican once the new Congress convenes in January before voting on appropriations. This would suggest a CR that extends to March, giving the new Congress time to prepare an appropriations bill.
In contrast, Republicans could desire to get appropriations for 2015 off the table in order to clear the decks for the new session to allow the Republican majority to focus on their agenda. This calculus would lead to either extending the CR for the full year (forgoing appropriations altogether) or passing an omnibus appropriations bill. A CR is more manageable and palatable in 2015 than in most years, because the base budget level for 2014 (which is what the CR is baselined from) is nearly identical in the aggregate to the planned level for 2015. The problem is that a CR has negative effects inside the DoD budget that would make executing in FY 2015 difficult.
Continuing resolutions set the funding level for each appropriation account at the levels of the previous year. While the topline defense budget is likely to be the same whether under CR or new appropriations, the President’s budget request and appropriations bills move funds around to account for changes in priorities and resourcing requirements for 2015. For example, DoD has shifted significant money into Operation and Maintenance (O&M) accounts in the budget request to recover some of the readiness shortfalls over the past two years. In addition, continuing resolutions prevent starting new programs and restrict increasing production levels, constraining DoD’s ability to execute procurement plans. They also compress the budgeting time horizon for executing FY15 and hamstring the planning for FY16, because investment and force structure decisions made in the current year have