Defense Budget: CR's Impact on Military Readiness

Given the loaded legislative calendar and short time frame, it appears unlikely that Congress will pass an omnibus bill to fund the government for the next fiscal year before agencies run out of money on Sept. 30. To buy time, lawmakers are expected to hammer out a stopgap bill that would keep the government running for at least the first quarter of fiscal year 2018.

Pentagon officials have argued time and time again that short-term funding undermines military programs and operations. Air Force Secretary Heather Wilson said last week a CR would have a “devastating impact.”

Another CR is looming — this one possibly packaged with a bill to raise the debt ceiling — and new questions are being raised on how short-term funding might affect military readiness, training and overall health of the armed forces.

Sens. John McCain (R-Ariz.) and Jack Reed (D-R.I.), chairman and ranking member of the Senate Armed Services Committee, this week sent a letter to Defense Secretary James Mattis requesting specific information by Sept. 8 regarding the ramifications of a fiscal year 2018 continuing resolution.

The McCain-Reed letter noted, “Given the limited remaining work period for both the House and Senate prior to October 1st, and the difficulties of negotiating and enacting a major bipartisan budget agreement, it is very likely that the federal government will begin the fiscal year on a continuing resolution yet again.”

Senate Democrats have called for a bipartisan budget agreement on defense and domestic spending, said Reed. “A continuing resolution serves the important purpose of keeping the government running, but could mean real problems for Department of Defense and other agencies.”

The most immediate impact of a CR is that it continues the pre-existing appropriations at the same levels as the previous fiscal year. Another major irritant for the Pentagon is that no new programs can be initiated under such funding.

Industry analysts observe that most defense contractors have adjusted to the instability. “For defense investors, this is nothing new and a CR seems to be built into expectations,” said Cowen research analyst Roman Schweizer. “If a short-term shutdown does occur, we think the impact on DoD program funding will be limited.”

But the CR issue recently has been drawn into a broader and sobering debate on whether unpredictable budgets are putting troops’ lives at risk. Case in point: recent Navy fatal incidents at sea. Two guided-missile destroyers from the Navy’s 7th Fleet based in Japan had deadly collisions with commercial vessels in recent months. A sweeping review of surface warfare operations is underway, and experts already speculate that chaotic budget cycles are partly to blame.

“The loss of 17 sailors has finally brought the spotlight on this issue,” said Thomas Callender, former Navy officer and senior fellow at the Heritage Foundation.

Callender predicts that, if a CR is passed for the first quarter of the year, Congress may take additional actions to prevent disruptions in military training and operations. “You can get permission from Congress to move funds between ‘colors of money.’ But even if that happens, it delays things.” (Colors of money refers to budget categories — such as procurement, operations, maintenance, personnel — from which funds cannot be moved around without congressional approval.)

A CR for the first quarter of fiscal year 2018 is more detrimental than previous ones because the military requested a budget that is $52 billion above last year’s top line. So it would have to significantly curtail spending for the first three months of FY18. A bipartisan budget agreement will be needed to appropriate funding above the BCA caps for the remainder of the fiscal year. 

“DoD has prioritized restoring readiness, added more operations and maintenance funding; the Navy planned to hire over 1,000 shipyard workers with 2018 funding,” said Callender. “Unless Congress approves an anomaly which allows an exception for operations and maintenance money restrictions, readiness efforts will be delayed until the second quarter.”

Congress has done this in the past. For the Navy, specifically, it passed legislation last year to minimize CR-related disruptions to the start of the new Columbia-class ballistic missile submarine. “The legislation gave an exception from CR guidance that allowed the Navy to spend money,” Callender said. “To me that indicates that they are at least going to look at doing this again.”

Besides the two deadly ship collisions, there has been a string of Marine Corps aircraft and Black Hawk helicopter crashes that took the lives of 25 troops. Callender said this has gotten the attention of many lawmakers. Rep. Mac Thornberry, chairman of the House Armed Services Committee, suggested budget cuts have been contributing factors.

Readiness dollars pay for training flight hours, ship hours at sea and other activities that tend to get cut first during CRs on the thinking that they can be delayed for a short time, whereas cutting people from the payroll or weapons systems procurements are long-term actions.

Former Defense Department Comptroller Mike McCord, who served in the Obama administration, cautioned about making direct correlations between fatal accidents and budget issues. “I would be suspicious of linking this to any one cause,” McCord told RealClearDefense. “I do think certain parts of the force are probably tired” from extended deployments.

McCord does worry that DoD will have trouble managing through a three-month CR simply because the FY18 budget request is well in excess of this year’s budget. “They will have less money,” he said. “For better or worse, DoD is not an agency that mentally builds off of last year’s level. DoD is an agency that builds off of ‘I should get what I asked for.’” When it doesn’t get that, McCord added, “havoc starts to ensue.”

There are ways to ease the effects of CR, “but you can’t manage all of them,” he said. “You can manage around it by having contracts not turn over in the first quarter of the year. People have learned that behavior, I think. Or you can do short-term contracts.”

No matter how the Pentagon responds to these repeated cycles of CRs, “there is no question that short-term funding creates enormous inefficiency,” said McCord. “It’s been a pet peeve of mine that people do not appreciate how much money we waste” when the Pentagon does not have proper budgets. It causes managers to take “evasive actions,” he said. “If they keep turning the lights off when you’re trying to do something, you start hiding flashlights in your pocket.”

That is only so much that can be done to avoid this, he noted. “You tread water waiting for the CR to be over, so you have the legal authority to enter into contracts that you wanted to do. People do the best they can.”

McCord often has been asked by the oversight committees to put a dollar figure on the money wasted under CRs. “It’s hard to put an exact dollar figure on it,” he said. “You wish you could put an exact number on it.” More than anything, “you waste time. We struggled when I was there.”

The impact on contractors is mixed, said McCord. “Acquisition programs don’t suffer a great deal if they’re already under contract.”

Sandra Erwin is a national security and defense reporter for RealClearDefense. She can be reached at serwin@realcleardefense.com. Follow Sandra on Twitter @Sandra_I_Erwin.