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STRATEGIC ASSUMPTIONS FOR US BUDGET

25 Feb 14. Acting Deputy Defense Secretary Christine H. Fox took to the podium today at the 2015 Defense Programs Conference here to explain the strategic assumptions and analytic basis for the budget and program decisions contained in the department’s fiscal year 2015 budget request.

“About a year ago I addressed this gathering, and that was just as sequestration was going into effect, with the warnings of defense and industry leaders pretty much going unheeded at that point,” Fox said.
The Strategic Choices and Management Review directed by Defense Secretary Chuck Hagel delved into every corner of the budget to identify “how much could be saved, how quickly, and with what consequences for the military and [President Barack Obama’s] defense strategy,” she said.

Following the SCMR, the services were tasked with developing detailed sequestration-level budgets, Fox said.

“It’s a good thing that the secretary required this grim, but necessary exercise,” she said. “While the department received some relief and stability through the Bipartisan Budget Act, under current law, sequestration will return in [fiscal year] 2016.”

Over the next five years, the budget plan proposed yesterday will provide $115 billion more for the department than sequestration would have, the acting deputy secretary said. And even though the department’s budget proposal is less than the president requested last year, it provides enough funding to execute the president’s defense strategy, fill readiness shortfalls and protect the most critical modernization efforts, she added.

“We think this budget is reasonable, realistic and responsible. And we see that it could provide our military, as well as industry, a degree of stability to help plan and invest for the future,” Fox said, though she acknowledged that department had to make some tough choices to craft the budget request.

In enacting managerial efficiencies, accurate comparisons can’t be drawn between the Defense Department and industry, Fox said.
“Political, legal and bureaucratic obstacles preclude the Defense Department — indeed any federal agency — from rapidly shedding people, infrastructure and missions, [especially] when national security is in play,” she said. The SCMR analysis showed that it takes years to realize savings from shrinking personnel end strength, and produces less in bankable savings than is commonly believed, she noted.

Where it was possible to achieve savings by cutting personnel, the department did so, Fox said, most notably by ordering a 20-percent reduction in the operating budgets of DOD’s major headquarters.
The department has achieved all it can in terms of civilian personnel cost reductions, the acting deputy secretary said, and military compensation, which makes up one-third of all defense spending, must be addressed. The SCMR found up to $40 billion in savings in compensation over the next five years, Fox said. “These included aggressive proposals that addressed compensation of all types — pay and benefits, military and civilian, active and retirees,” she noted.

The drive for greater efficiency extends to the military services. Service chiefs were directed to identify $20 billion to $50 billion in potential savings to military compensation over the next five years, she said. The various analyses were pulled together, resulting in “some, frankly, relatively modest reform proposals submitted with the [fiscal] 2015 budget,” she added.

The choices the department made were difficult and are likely to be contentious, she acknowledged.

“They include limiting pay raises, slowing the growth in tax-free housing allowances, phasing out the federal subsidy for U.S. military commissaries, and consolidating TRICARE in ways that incentivize using the most affordable medical care available,” Fox said. “We expect these initiatives to save $11 billion over the next five years.”
While no one looks forward to closing bases or facilities, she said, the dep

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