Pentagon Unveils $527B 2014 Budget

The U.S. Defense Department announced a $527 billion base budget for 2014 that would limit pay raises for military personnel, cancel and delay some weapons systems, and improve missile-defense sites to counter threats from North Korea.

The spending plan the White House unveiled on April 10 -- two months late -- would replace automatic, across-the-board cuts known as sequestration with an alternative deficit-reduction plan. Yet with Republicans and Democrats at a stalemate over taxes and spending, it probably won't get anywhere in Congress, especially the House.

The budget reflects the Obama administration's military priorities for the fiscal year that begins Oct. 1 and five-year period ahead. It supports last year's strategy to shift emphasis toward the Asia-Pacific region, with more money for the Air Force and less for the Army, while acknowledging the damaging effects of the budget impasse in Washington.

"Training cutbacks, civilian furloughs, deferral of equipment and facility maintenance, reductions to energy conservation, contract inefficiencies, and curtailed deployments will inevitably have rippling effects," Defense Secretary Chuck Hagel said in a statement.

The Defense Department's so-called base budget doesn't include the automatic cuts or funding for the war in Afghanistan.

The White House's $3.77 trillion federal budget assumes lawmakers will reach a deal to avoid sequestration, including reducing automatic defense cuts over the next decade to about $100 billion, down from $500 billion, according to a fact sheet from the White House. The reductions are would mostly occur later in the decade.

Because of the budget gridlock in Washington, that assumption is probably unrealistic, analysts said.

Without a bipartisan deal, the Pentagon will likely see its budget cut to $475 billion next year, Todd Harrison, a senior fellow at the Center for Strategic and Budgetary Assessments, a Washington think tank, wrote last week in a budget briefing.

During a press conference, Hagel defended the administration's proposal, saying it "gives the department time – and that's important, time – to achieve these longer-term savings." He also said, "This is a $600 billion enterprise, the Department of Defense. You can't just shift budget dynamics and planning in a month or two. These are long-term dynamics."

An ongoing study to examine other budget scenarios, called the Strategic Choices and Management Review, including the possibility of a $52 billion cut in 2014, is expected to be completed by late May, Hagel said. Details about the review will be released afterward.

A separate war-funding request to support 34,000 U.S. troops in Afghanistan will be made in late April or early May, according to Pentagon Comptroller Bob Hale.

That request, for Overseas Contingency Operations, known as OCO, will probably be less than the $88 billion placeholder figure listed in the budget materials, Hale said. The cost of withdrawing troops from the country is higher than expected due in part to a slow opening of ground-supply routes in the south through Pakistan and rising fuel expenses, he said.

The Pentagon's base budget request is about what it's estimated to receive this year under the automatic reductions.

It would shrink the size of the active-duty military by 40,200 troops -- mostly soldiers and Marines -- to 1.36 million troops. The budget proposal would also reduce annual pay raises for military and civilian personnel to 1 percent, down from 1.8 percent.

In a move that's expected to receive resistance from Congress, the Pentagon also proposed consolidating installations in a process overseen by a Base Closure and Realignment Commission. Hagel made his case for it as he will receive push back from lawmakers in coming budget hearings.

"BRAC is a comprehensive and fair tool that allows communities a role in re-use decisions for the property and provides redevelopment assistance," Hagel said. "There are up-front costs for BRAC, and this budget adds $2.4 billion over the next five years to pay them, but in the long-term there are significant savings."

The group would convene in 2015 and begin closing bases in 2016, Hale said. The move would help to reduce the headcount of civilian personnel by about 6 percent, or 50,000 workers, he said.

"I would hope that given the time to prepare we could do this through attrition, but we aren't far enough along to know for sure," Hale said. "We know we need it. It's the only effective way to consolidate infrastructure. I think it would be irresponsible of us not to go up there as say, ‘As part of a package, we need you to let us do this,'" he said, referring to Capitol Hill.

The budget includes $168 billion to buy and develop weapons systems, including those designed to counter threats from countries such as Iran and North Korea, which Hagel described as "unpredictable." North Korean dictator Kim Jong Un is thought to be planning attacks against the South.

The budget would fund improvements to the F-22 fighter jet and missile-defense sites in Fort Greely, Alaska, and Vandenberg Air Force Base, Calif., and efforts to develop new tanker aircraft and Littoral Combat Ships.

It would also boost "priority investments" such as cybersecurity operations, Virginia-class submarines, EA-18G surveillance plane, C-130J cargo planes, precision munitions, P-8A Poseidon surveillance planes and medium- and heavy-lift rockets to launch military and spy satellites.

The Pentagon would save money in part by canceling the Missile Defense Agency's Precision Tracking Space System, developed partly by Northrop Grumman Corp., "due to high technical risk and greater than anticipated cost." It would also cancel the Air Force's Expeditionary Combat Support System, developed by Oracle Corp., for similar reasons.

The spending plan would postpone by another 18 months the Army's Ground Combat Vehicle program, being developed by General Dynamics Corp. and BAE Systems Plc. Hagel estimated that the delay would save the Army $2 billion in developmental costs.

The Pentagon's budget would also delay the Standard Missile-3 Block IIB program, developed in part by Raytheon Co.

"In this budget, the Department has continued to shift priorities within modernization portfolios to achieve $8.2 billion in savings from weapons program terminations and restructuring over the next five years," Hagel said.