Bloomberg News

Pentagon to Cut $41 Billion After Getting More Funding

March 29, 2013

Defense Secretary Chuck Hagel

U.S. Secretary of Defense Chuck Hagel said, “We are going to be able to reduce and delay these furloughs, but not eliminate furloughs. It’s good news from where we were two weeks ago.” Photographer: Paul J. Richards/AFP via Getty Images

The Pentagon must cut about $41 billion this fiscal year, not the $46 billion anticipated before Congress passed a stopgap spending bill providing some relief from automatic reductions, Defense Secretary Chuck Hagel said.

Hagel also confirmed yesterday at a Pentagon news conference that furloughs for the Defense Department’s civilian workers will be reduced to 14 days from the 22 days originally planned.

The unpaid leave, which had been slated to begin next month for as many as 750,000 workers, won’t start until June, according to a Pentagon official who briefed reporters yesterday and asked to not be named to discuss details that haven’t been announced. Government analysts are still assessing how many workers will be affected.

“We are going to be able to reduce and delay these furloughs, but not eliminate furloughs,” Hagel said. “It’s good news from where we were two weeks ago.”

The reduction in the number of days means the Pentagon will save about $2.5 billion through furloughs instead of $4 billion, he said.

President Barack Obama signed legislation on March 26 to fund the federal government through the fiscal year that ends Sept. 30. Congress incorporated a defense appropriations measure that gave the Pentagon more flexibility in applying the across- the-board cuts called sequestration.

Penalty Spared

The measure spared the Pentagon from as much as $6 billion in “penalty” cuts because the defense measure came in under caps set by previous legislation, according to a second Pentagon official who briefed reporters and also asked to not be identified in discussing the budget.

The spending measure signed by Obama includes $10 billion more for operations and maintenance accounts than allocated in the fiscal 2012 “continuing resolution” the Pentagon would have operated under if the new measure hadn’t passed.

Those funds will still fall short by at least $22 billion this year, according to Hagel. He said that will require cutting back “sharply” on operating support for military bases and reducing training for units that aren’t deployed.

At the same time, war costs have risen by about $7 billion more than anticipated, partly because of the expense of bringing troops and equipment home from Afghanistan, he said.

“We don’t yet have a satisfactory solution to that shortfall, and we’re doing everything we can to stretch our readiness out,” said Army General Martin Dempsey, chairman of the Joint Chiefs of Staff, who joined Hagel at yesterday’s press conference.

Alternative Package

Dempsey said the Pentagon is still analyzing the budget cuts that will be required and he expects to have a better understanding in about two weeks of what must be done to maintain readiness.

In one sign that pressures are easing, the Navy said yesterday that it will begin a refueling and overhaul of the aircraft carrier USS Abraham Lincoln after a six-week delay caused by budget uncertainty.

The work, which includes refueling the nuclear reactors and upgrading ship systems, is valued at more than $3 billion and will be conducted by Huntington Ingalls Industries Inc. (HII:US), the only U.S. builder of aircraft carriers, in Newport News, Virginia.

The Pentagon will have to slice as much as $500 billion from planned spending over the next nine years unless Congress and Obama agree on an alternative deficit-reduction package.

The government spending legislation is Public Law No. 113-6.

To contact the reporters on this story: David Lerman in Washington at dlerman1@bloomberg.net; Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net


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