ASMC Viewpoint

DEFENSE FINANCIAL HIGHLIGHTS

DoD on the Hill

Senate passes and President signs FY2010 DoD Appropriations bill:  The Senate passed the final FY2010 DoD Appropriations bill early Saturday morning and the President signed it on Monday.  Overall, the DoD bill provides over $507 billion (excluding Military Construction, which is funded in a separate appropriations bill) for the FY2010 DoD baseline budget, $3.5 billion below the request.  The bill funds the 3.4 percent military pay raise that was approved in the FY2010 Defense Authorization Act.  Procurement funding is $800 million below the request, while R&D is almost $2 billion above the request.  Congress did agree to some of the President's proposals to reduce or terminate a number of programs (e.g., F-22).  However, the final bill is at odds with the request on some high profile programs.  Over the threat of a presidential veto, the bill includes funds to develop a second engine for the F-35 (Joint Strike Fighter) and to capture technology already developed for the presidential helicopter program.  Congress also added nine more F/A-18E/F aircraft and 10 more C-17s than requested.  In addition to the baseline budget, the bill appropriates $128 billion for Overseas Contingency Operations (OCO), essentially the same as the request.  New funds for the surge in Afghanistan announced last month will be provided in a supplemental appropriations bill the President is expected to request early in the new year.  For those keeping score with the numbers published in the committees' bill summary, the bill also includes $1 billion in appropriations for non DoD programs.  As stated in ;last week's Highlights, the bill also includes nondefense items, such as extended unemployment benefits and subsidized health insurance (COBRA) for people who have lost their jobs in the current economic downturn and assistance for highways and transit systems.

Defense Budget and Financial Management News

President issues guidance for Quadrennial Review of Military Compensation:  Every four years, DOD reviews the compensation system for the uniformed services of DoD, the Coast Guard, and those commissioned officers in the National Oceanic and Atmospheric Administration (NOAA) and the Public Health Service.  In a memorandum to the Secretary of Defense, President Obama identified four focus areas he would like addressed in this year's review: 1) compensation for service in combat zones, combat operations, hostile fire areas, or exposure to a hostile fire event; 2) Reserve and National Guard compensation; 3) benefits for wounded warriors, caregivers, and survivors; and 4) incentives for critical career fields (mental health professionals, linguists, remotely piloted vehicle operators, and special operations personnel).  The President also directed that other relevant agencies, principally Homeland Security (Coast Guard), Commerce (NOAA), and Health and Human Services (Public Health Service) participate as appropriate. 

GAO analyzes new rules for preparing Overseas Contingency Operations budgets:  The General Accountability Office (GAO) issued a report this week that describes and evaluates the revised guidance used by DoD to prepare the FY2010 budget for Overseas Contingency Operations (OCO).  According to GAO, some of the assumptions used by the Joint Staff were inconsistent with the Army's rotational plans and may not have considered factors that effect funding estimates, such as continuing changes in security conditions and decisions on plans for equipment disposition.  GAO also questions the reliability of DoD's financial obligations reporting.  The GAO report, issued in briefing form, provides a description of how DoD developed the FY2010 OCO budget and allocated related cost between the OCO budget and the DOD baseline budget.  There has been a running debate in recent years over which costs, especially for war-related equipment, should be moved from the war budget to the baseline.  The FY2010 budget marks a significant change in how these costs were allocated.  The GAO report shows how this allocation was changed and the effect of these changes on the baseline budget.

Other Issues of Interest

DoD issues guidance on NSPS transition:  Earlier this month, the National Security Personnel System (NSPS) Program Executive Office issued guidance on how vacancies should be filled while it transitions personnel out of NSPS.  (The FY2010 Defense Authorization Act repealed the authority for the NSPS.)  The transition period is between October 28, 2009 and January 1, 2012.  In all cases, transitions from the NSPS to a General Schedule (GS) or other statutory pay system are to result in no pay loss.  As NSPS jobs become vacant, DoD will begin to appoint replacements to non-NSPS statutory pay systems.  However, federal employees union representatives have criticized the plan because it would allow the categorizing of new hires under NSPS until March 2010.    DoD will continue to issue transition guidance as appropriate.  You can follow them on the NSPS website. 

DEFENSE FINANCIAL HIGHLIGHTS

DoD on the Hill

President signs one of two remaining FY2010 Appropriations bills:  The President signed on Wednesday the FY2010 Consolidated Appropriations bill.  This bill includes six appropriations bill wrapped up in the FY2010 Transportation/HUD Appropriations bill.  The other five bills are Military Construction/VA (see below), Commerce/Justice/Science, State/Foreign Affairs, Financial Services, and Labor/Health and Human Services/Education.  The remaining bill, FY2010 DoD Appropriations, is being considered separately.

A new CR may not be necessary:  The current Continuing Resolution (CR) expires tonight, so the House passed an extension of the CR until December 23rd.  However, according to reports, OMB has told the Hill that an extension would not be needed if the Senate passed the final FY2010 DoD Appropriations bill (the House has already passed it) and sent it to the President Saturday.

FY2010 Military Construction/VA Appropriations bill increases Homeowners' Assistance:  The President signed the Military Construction/VA bill this week (Division E of the FY2010 Consolidated Appropriations bill highlighted above).  The bill provides $23.3 billion for total Military Construction appropriations, more than $300 million above the request.   Congress added $300 million to the Homeowners Assistance Fund for the remaining requirement for the temporary expansion of the Homeowners Assistance Program (HAP) provided in economic stimulus legislation.  This expansion provides additional funding to assist military members and certain civilians who have orders to relocate and have difficulty selling their homes or experience extreme losses as a result of the current economic downturn.  For military facilities construction, the bill increases active forces funding by over $360 million and adds $560 million to reserve forces construction.  Congress made no change to the request for Family Housing construction and operations request, added over $70 million to funding for base closures costs (BRAC), and reduced the request for NATO National Security Investment Program (NSIP) projects by over $70 million.  The funding request for Chemical Demilitarization Construction projects was increased only slightly.  To pay for some of these increases, Congress reduced FY2010 military construction funds by $500 million for lower inflation and bid savings and rescinded prior-year Military Constructions appropriations by $400 million.

House passes FY2010 DoD Appropriations bill; Senate to act soon:  The House passed the FY2010 DoD Appropriations conference agreement this week and sent it to the Senate.  The Senate voted at 1:00 am this morning to cut off debate on the bill and has scheduled a vote for Saturday morning.  One of the last issues resolved was funding for a new presidential helicopter.  The House had included funding to keep the program going in its version of the bill.  The Senate, however, had bowed to the President's veto threat and excluded funding from its bill.  But, the veto threat notwithstanding, conferees agreed to provide enough funds to keep the program alive.  They also funded a second engine for the F-35 (Joint Strike Fighter), for which the President had threatened veto (although only halfheartedly, it seems).  Overall, the bill provides $507.4 billion for the FY2010 DoD base program (excluding Overseas Contingency Operations), $3.5 billion below the request.  (Next week's Highlightswill include a more complete explanation.)  The bill also carried a few nondefense items, such as extended unemployment benefits and subsidized health insurance (COBRA) for people who have lost their jobs during the economic downturn.  Earlier, Hill watchers thought that the bill would also include an increase in the debt ceiling and major jobs growth legislation.  However, resistance by Republicans and some Democrats to adding major non-appropriations item to the bill forced Congress to consider separate legislation for these items.

Defense Budget and Financial Management News

OMB asks for help to improve payment accuracy and efficiency:  As part of the "Open Government" initiative, OMB has asked taxpayers, state and local government officials, and contractors for ideas on ways to improve government's financial and management efficiency.  OMB will collect ideas and recommendations on: 1) delivery of services; 2) accuracy in payments; and 3) efficiency in administering programs via a Partner4Solutions website The White House notes that state and local government have had good success in soliciting innovative approaches to improving service to taxpayers, and hopes to replicate this success at the federal level.

Other Items of Interest

Some NSPS employees likely to see smaller future pay raises:  Some DoD employees, who are under the National Security Personnel System (NSPS) that was canceled in the FY2010 Defense Authorization Act, could see their future pay raises reduced significantly.  As reported on FederalTimes.com, up to 4,000 NSPS employees moving back into the GS pay framework will probably see only half of future designated pay raises.  These employees' past pay raises have moved their pay to levels higher than the salary caps that exist for GS employees of equal grade.  According to a statement to FederalTimes.com by acting NSPS program executive Tim Curry, former NSPS employees whose pay exceeds the salary cap will be placed in pay retention, which means they will get half of future annual GS pay raises until their pay falls below the cap.  You can keep up with the effects of the NSPS transition on the NSPS website.

Defense Financial Highlights

DoD on the Hill

House passes first of two final FY2010 Appropriations bills:  With the end of the current Continuing Resolution (CR) approaching, the House passed the FY2010 Transportation/HUD Appropriations bill that carried with it five other appropriations bills (Military Construction/VA, Commerce/Justice/Science, State/Foreign Operations, Financial Services, and Labor/HHS/Education).  This so-called "minibus" appropriations bill (because it contains most, but not all, remaining bills) also includes $600 billion for Medicare and Medicaid benefits, as well as $3.7 billion in state and local law enforcement grants, $2.5 billion for high-speed rail projects, and $2,2 billion for community health centers.  The Senate then turned from its debate on Health Care Reform to consider the bill.  But, because there was opposition from some Senators to adding extraneous material to appropriations bills, Sen. Harry Reid (D-NV) called for a vote to cut off debate (cloture) and force a final vote.  Final action in the Senate could some as early as Sunday.  The remaining FY2010 Appropriations bill--DoD--will most likely be considered next week.  However, because the bill may include an increase in the federal debt ceiling and jobs creation legislation, there is some uncertainty of its passage before the CR runs out next Friday.  So, there may have to be another CR after all. 

Senator proposes War Bonds to fund Afghanistan costs:  This week, Sen. Ben Nelson (D-NB) proposed legislation to authorize the Treasury Department to sell war bonds to fund the war in Afghanistan.  (As an historical note, the Congressional Research Service reports that the U.S. Treasury sold almost $186 billion in war bonds to fund WWII.)  This proposal has generated some interest, but does not have widespread support as it competes with other congressional suggestions such as, tapping unused stimulus funds, cutting nondefense budgets, or passing a war surtax.  Debate on how to pay the war costs will not begin in earnest until the President sends a supplemental request to the hill early next year.

Defense Budget and Financial Management News

OMB issues directive on open government:  Federal agencies must become more open and transparent and post public data online.  In a memo to federal departments and agencies, OMB Director Peter Orszag said the "Open Government Directive" (included in the memo) implements the principles of transparency, participation, and collaboration set forth by the President earlier this year.   Among the steps and deadlines for the agencies in the directive are:  1) post three "high-value" data sets online within 45 days; 2) designate a senior official within 45 days to be accountable for the "quality and objectivity of and internal controls over" spending information released to the public; 3) develop and publish on its website an "Open Government Plan" that describes how it will improve transparency, public participation, and collaboration of its activities.  Agencies will also have to track compliance with their plans.  These efforts will ave to be consistent with privacy and security rules.

Other Issues of Interest

Congress gives Federal civilian workers a 2 percent pay raise:  Federal civilian workers will get a 2 percent pay raise beginning January 1, 2010.  The FY2010 Financial Services Appropriations bill (included in the "minibus" Appropriations bill passed by the House and described above) provides an across-the-board raise of 1.5 percent and an average .5 percent locality pay increase.  The Senate will act on the bill this weekend or early next week.  According to House Majority Leader Steny Hoyer (D-MD), the bill's 2 percent pay raise, which includes a locality pay increase, is better than the President's proposal, which had no locality pay increase.  Hoyer also said that the White House told him that next year's budget request will provide civilian pay raises equal to military raises.

OPM issues guidance on payment of Reservist Differential:  Eligible federal employees who are also members members of the Reserve or National Guard will receive a "reservist differential" when called to active duty.  In a memo to department and agency heads, Office of Personnel Management (OPM) Director John Berry issued implementing guidance on payment policy and procedures for the differential.  If an eligible federal employee is called to active duty as a member of the Reserves or National Guard, the employee's agency must pay the difference between the employee's estimated federal basic pay and the actual military pay and allowances during the pay period.  The payment, authorized in the FY2009 Omnibus Appropriations Act, is effective beginning the first pay period after March 11, 2009.  Eligible employees must be called up under a call or order to active duty under sections of Title 10 and must be entitled to reemployment rights.  OPM provides further information in summary form or complete detail on its website.  

DEFENSE FINANCIAL HIGHLIGHTS

DoD on the Hill

Afghanistan and Health Care reform dominate Congress's' attention:  The President's troop increase announcement on Tuesday night and the Senate's continuing debate on Health Care reform (with a sidebar issue of White House security and party crashers) captured most of Congress' time and attention this week.  There was no movement on Appropriations bills.  It is likely that these two major issues will continue to command members' attention until adjournment later this month.  The Senate majority leadership's goal of finishing its Health Care bill before the end of the year means that only limited Senate floor time will be available to debate other legislation.  The President's announcement to commit an additional 30,000 troops to Afghanistan has already spawned four committee hearings  with testimony by State Sec. Hillary Clinton, Defense Secretary Robert Gates, and JCS Chairman ADM Mike Mullen and focused Appropriators' attention on how to pay for this deployment (see below).

FY2010 Omnibus Appropriations Bill(s) growing more certain:  With the end of the current Continuing Resolution (Dec. 18) approaching, congressional appropriators are working to come up with a plan to complete FY Appropriations Bills.  House Majority Leader Steny Hoyer (D-MD) expressed hope that final action on appropriations bills could be completed in the next two weeks.  But, the question now is:  In what form will the endgame be accomplished?  For some time, Hill observers have speculated that the remaining seven appropriations bills would be wrapped up into one bill, possibly the DoD bill.  Now they are talking about two bills.  GovernmentExecutive.com reported today that House Democrats are considering one bill that would include six Appropriations bills, as well as some job-related legislation and a short-term expansion of the Patriot Act.  The second bill, according to the report, would be the FY2010 DoD Appropriations bill, which could include an increase in the debt ceiling.  This latter approach might change due to strong opposition to including debt limit increases in other legislation. 

Defense Budget and Financial Management News

Congress proposes ways to fund Afghanistan troop increase:  When the President announced an increase in troop strength in Afghanistan by 30,000, he said he would work with Congress to fund his plan and strategy.  He didn't have to wait long for Congress' response.  Even before the announcement was made, members of Congress had begun sharing their ideas on how the $30 billion (Administration estimate) should be funded.  House Appropriations Chair Dave Obey (D-WI) proposed a special surtax to fund the additional costs.  Some Senate Democrats are taking about a special war tax.  Rep. Jerry Lewis (R-CA), also an appropriator, recommended reducing all nondefense agencies' FY2010 budgets by two percent.  Others have recommended transferring unused stimulus funding to DoD for the war.  In any case, Congress is likely to press for early consideration of a supplemental so they will have the opportunity to debate not only the funding but the strategy.

Other Issues of Interest

President formally recommends a 2 percent civilian pay increases 2010:  In a letter to House Speaker Nancy Pelosi (D-CA), President Obama reiterated his support for a two percent pay raise for federal civilian personnel and a freeze on locality pay at the 2009 level and issued an executive order to this effect,  The President cited sacrifices being made by employees in the private sector during the current economic downturn and budget affordability given the high deficits as the main reasons for his decision.  The Congress could still overrule the President if they pass and the President signs legislation providing for a higher raise.  This has often been done in past years.  Legislation for a higher raise would come in the FY2010 Financial Services Appropriations bill.  The House version of the bill, passed earlier this year, provides a 2 percent raise.  The Senate Appropriations Committee's bill, which has yet to come to the Senate floor, supports a 2.9 percent pay increase.  Hill observers think that is unlikely that the final bill will include a raise above 2 percent.