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American Forces Press Service

Pentagon Comptroller Outlines Budgetary Challenges

By Army Sgt. 1st Class Tyrone C. Marshall Jr.
American Forces Press Service

WASHINGTON, March 12, 2013 – The Defense Department faces many fiscal challenges, but is doing what it can to reduce impacts on national security, the department’s comptroller said here today.

Robert F. Hale spoke to businessmen and women at the Newseum for the McAleese/Credit Suisse Defense Programs Conference about the “far-reaching” set of problems in fiscal year 2013, which ends Sept. 30.

“We obviously have to provide national security in an environment that is going to be a lot leaner in terms of budgets,” Hale said, citing three things he thinks the department should do to do that.

“One, we’ve got to find a new strategy for defense -- one that provides a reasonable level of security, but also complies with the budgets that we can expect,” he said. “Second, we’ve got to do everything we can to make more disciplined use of resources and stretch our dollars. And finally, we desperately need more stability, both in terms of our top line and the process.”

Hale explained the two major problems the Pentagon faces for the remainder of 2013: sequestration and the continuing resolution that is funding the department in the absence of a budget.

The first part, a nearly $41 billion cut went into effect on March 1 when a sequestration mechanism in budget law triggered because Congress couldn’t agree on an alternative.

An additional cut of $5 billion to $6 billion could occur March 27, when the current continuing resolution expires, Hale said.

“Everything gets cut in our budget, including our wartime costs, with a notable exception of military personnel,” he said. “The president used his authority to exempt it in the summer.”

Hale said that if sequestration goes into full effect, “it’ll be a 9-percent cut in every account in the Department of Defense except [military personnel].”

The cuts, by design, are “mindless and dumb” in the way they’re made, the Pentagon’s chief financial officer said. In the operating portion of the budget, the cuts must be equal in percentage terms at the account level across the board, he said.

Hale described the continuing resolution as “kind of a ‘Groundhog Day’ approach to budgeting,” referring to a 1993 movie in which the main character repeatedly relives the same day. “The Congress said, ‘Since we couldn’t decide on a budget, we will just tell you to do the same thing this year that you did last year,’” he added.

The problem with that, Hale said, is that the budget changed a lot from 2012 to 2013. “So we have too few dollars in the operating and maintenance accounts that affect readiness, [and] too much in the investment accounts.”

A decision to protect overseas contingency operations funds means disproportionate cuts in the base portion of the operating accounts, Hale said.

“We need an appropriations bill that gets the money in the right accounts so we don’t have that -- too much investment, too little [operating and maintenance],” he said. “Until we get a bill from Congress, … we’ve got to assume the worst case, so I will do that.”

Hale said people question how a 9-percent cut from sequestration could be so much trouble.

“Well, it’s a lot more than that,” he said. “If you look at our operating and maintenance budget, sequestration is 9 percent -- it’s about $13 billion.”

The disproportionate cuts in base funding protecting overseas contingency operations funds creates another $5 billion cut, Hale said, bringing the total to $18 billion before the continuing resolution adds another $11 billion to the shortfall.

“We’re at about $29 billion, and we’re at least 6 [billion] to 7 billion dollars short of what we need for OCO funding in fiscal [2013],” he said. “So it’s roughly a 40-percent cut.”

Hale said this poses serious problems for the services, with the Army having “by far” the worst problem, facing a “catastrophic cut on the order of 80 percent in their remaining [operations and maintenance funds] in the rest of the year.”

Pentagon officials remain concerned about sequestration and other budgetary uncertainties, Hale said. “We’re heading for a readiness crisis,” he added. “We’re heading potentially for heavy disruption of our investment programs.”

Hale said he hopes one of his favorite quotes from Winston Churchill comes true.

“Churchill once said, ‘You can always trust Americans to do the right thing -- after they’ve tried everything else first,’” he said. “It seems to me we have, so I’m hoping.”

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