If across-the-board defense cuts start in March, the Pentagon would be forced to furlough nearly all of its 800,000 civilian employees before October, a leading budget analyst said yesterday.
Todd Harrison, the senior fellow for defense budget studies at the Center for Strategic and Budgetary Assessments (CSBA) think tank, said if Congress and the White House don’t craft a plan to stop the so-called sequestration cuts, “one of the first” impacts would be the forced unpaid leave of civilian Pentagon employees for one month this fiscal year.
Harrison gave reporters a breakdown yesterday of how he interprets the American Taxpayer Relief Act of 2012. That’s the fiscal-cliff deal Congress and President Barack Obama reached last week that prevents the first two months of sequestration cuts to the Pentagon. Those politically unpopular sequestration reductions, which could total nearly $500 billion over the next decade, now are slated to start in March.
Harrison estimates the Pentagon sequestration cuts for fiscal year 2013, which ends Sept. 30, would be $48 billion, which is slightly more than the $45 billion figure Pentagon Comptroller Robert Hale provided on Monday. While the two-month sequestration reprieve approved last week means the Pentagon is no longer facing a $62.8 billion cut in FY ’13, Harrison said the smaller $48 billion reduction still would “have a very real impact.”
He estimates the current sequestration cuts would slice 8.8 percent off of all Pentagon accounts, except for military personnel funding, which is exempt from the cuts.
Thus, the $70 billion annual budget for the Pentagon’s 791,000 full-time-equivalent employees would need to be cut by 8.8 percent, and done so from March through September. By March, the Pentagon will already have spent five months’ worth of money in those accounts, and thus would have to “make up” that 8.8. percent reduction in the remaining seven months of the year, Harrison said.
The Pentagon, therefore, would have to reduce its payroll expenses for the remainder of the fiscal year by 15 percent, he said.
“That means you have to furlough virtually every single (Department of Defense) DoD civilian for the maximum amount of time you can under the law, which is one month,” Harrison said at CSBA’s Washington office.
The Pentagon has options to prevent such massive furloughs, such as implementing a hiring freeze, laying off employees, and reprogramming funding within its coffers, he said.
Of course, if Congress and the White House don’t stop sequestration all non-exempt Pentagon accounts would face the 8.8 percent reduction. And larger weapons programs with funding in varied accounts would be hit multiple times. The F-35 Joint Strike Fighter, for example, has both research and procurement accounts in the Air Force and Navy’s budgets, each of which would be cut by 8.8 percent.
The impact of a potential $48 billion FY ’13 sequestration cut in March would not be immediate in the defense industry, Harrison noted. That’s because contractors at that time will be working with obligated Pentagon funding.
Still, unobligated Pentagon funding would be cut. And such reductions would lead to delayed contract awards, reduced quantity orders, and renegotiated contracts with defense companies. Harrison noted that if the Pentagon reduces the number of a particular weapon system it is ordering from industry, that item’s unit cost will rise and lead to an even greater reduction in the quantity purchased.
“So the long-term effect on industry and DoD is that it will reduce DoD’s purchasing power in the future,” if sequestration kicks in, Harrison said. “Unit costs are going to go up. And not to mention it’s going to cause all sorts of contract modifications and renegotiations. It’s going to create a backlog of contracting work.”
He added: “The civilian workers at DoD who process those contract modifications, they’re going to be furloughed for one month at some point in the remainder of the fiscal year. So this is going to be a contracting nightmare at DoD.”
Harrison said he is not confident Congress and the White House will agree on a plan to prevent the sequestration cuts from starting in March. While both largely oppose the cuts, Democrats and Republicans have been at odds over how to reduce the federal deficit.
Harrison said the Pentagon is just coming to realize potential impacts of sequestration, such as the civilian furloughs, because it did not start planning for sequestration until late last year.
“I think it would be a good public service for DoD to continue that detailed planning now, and start to go public with it, where it’s appropriate,” he said. He suggested the Pentagon notify all its civilian employees before March about how the furloughs would be implemented.
“Go ahead and make that planning public,” he said, “I think that would help inform the public debate so we can make a good decision, as a nation, about what we want to do.”