Sequestration Under a Continuing Resolution

Sequester seems to be the only thing people are talking about these days in the defense community, and with good reason. As we reported in an earlier post, congressional leaders announced earlier this month that they will most likely move to a “clean” stop gap spending measure through a six-month continuing resolution (CR).

Operating under a CR at FY12 spending levels when sequestration kicks in wont necessarily make it easier for the Pentagon. In an analysis by the Center for Strategic Budgetary Assessment (CSBA), a nonpartisan policy research institute, Todd Harrison provides a bleak outlook for defense accounts under the ax of sequestration:

The FY 2013 budget request projects nearly zero real growth in the base defense budget over the coming years and a gradual shift in resources to focus more on air and sea power. Sequestration would alter virtually every aspect of DoD’s planning by forcing a uniform reduction in budget authority of roughly 10.3 percent across all accounts other than military personnel. Outlays, however, lag behind budget authority and would only be reduced by 4.6 percent in FY 2013. The delayed effect between budget authority and outlays means that defense contractors would not feel the full effect of sequestration immediately. Sequestration would, however, force layoffs of DoD civilian employees soon after it takes effect. Base closures are specifically prohibited under sequestration, and because the president has exempted military personnel accounts, no uniformed military personnel would be separated from the service or receive a cut in pay because of sequestration.

Given the tremendous amount of fiscal uncertainty the Department faces in the coming months, it is difficult to imagine how the Department can plan for the FY 2014 FYDP, which is due in less than six months. Regardless of what happens to the FY 2013 budget and sequestration, two areas of the budget will require particular attention in the coming years: military personnel, and readiness and training. Together these two areas consume more than half of the base defense budget. Further cuts to overall defense spending will not only require a fundamental rethinking of strategy, but also a new approach to get better value from the resources DoD devotes to military compensation and readiness.

If DOD continues to operate at FY12 levels, there could be an increase of some $5 billion more than the budget topline proposed by the President's FY13 budget. This means if Congress eventually approves the Fiscal 2013 legislation at the President's level, DOD would have to shed not only $56.5 billion from the topline, but also take out the extra $5 billion from the CR to meet the sequestration cap. Depending on when a budget is passed, some of this money may already be in use. Ultimately the longer DOD has to wait to make cuts, the steeper they will be.

Read more about the impact on sequestration across all government accounts: The Center on Budget and Policy Priorities report on How the Across-the-Board Cuts in the Budget Control Act Will Work.

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