DOD’s Unspent Billions Wane, Raising Doubts About Blunting Sequestration | Inside

By Christopher J. Castelli

The stockpile of unspent funding the Defense Department will carry over from prior fiscal years is billions of dollars smaller than last year’s total, raising questions about whether DOD will be able to continue to use unobligated funding to blunt sequestration in FY-14.

The Pentagon ended FY-12 with $107 billion in unspent funding and was able to use about $6 billion of that money in FY-13 to offset a $37 billion sequestration cut. DOD is still in the process of determining how much unspent money will carry over from FY-13 to FY-14, but the latest data shows it will clearly be less than last year.

As of Aug. 30, the unobligated balance of discretionary DOD accounts that would carry forward into FY-14 was approximately $102.4 billion, said Pentagon spokesman Cmdr. Bill Urban. Of this amount, approximately $73.8 billion was provided in FY-13 appropriations, he said. And once the Pentagon takes into account billions of dollars in contract awards issued last month in the twilight of FY-13, the $102.4 billion figure will shrink even further. DOD plans to finish reviewing the data and come up with the new lower total next month.

The remaining unspent billions might yet be enough to provide DOD some flexibility to mitigate further sequestration effects in FY-14, said Roman Schweizer, a defense policy analyst for Guggenheim Securities.

“If the Pentagon ended FY-13 with a significant amount of funds carried over into this year, it could definitely provide another cushion to help blunt the impact of sequester,” said Schweizer. “I do not think people have been expecting that to happen because defense officials have publicly stated the department wouldn’t be able to do that again. That may not exactly be the case.”

A “a hefty unspent balance again” could “raise questions about whether these funds will be raided again this year, and it could also provoke questions about whether there are budgeting and contracting efficiencies yet to be squeezed out of the Pentagon,” he added.

Last month at the American Enterprise Institute, Chief of Naval Operations Adm. Jonathan Greenert described the use of unobligated funding to mitigate sequestration in FY-13 as a “one-time operation that we were able to do.”

Rep. Kristi Noem (R-SD) raised the subject at a Sept. 18 House Armed Services Committee hearing on planning for sequestration in FY-14, which featured testimony from top military officials. “We understand that prior-year funds can be used to reduce the impact of sequestration on current year accounts,” she said. “However, many available prior year funds have already been utilized to buy down FY-13 sequestration. To what magnitude does the lack of available prior year funds impact fiscal year ’14?”

“We’ve been successful in doing that in the past,” replied Marine Corps Commandant Gen. James Amos. “And as you implied in your statement, as we move into a fully sequestered budget, that flexibility is not there. As we move into procurement and even in some cases military construction accounts, there are opportunities to be able to realign monies and be able to reach and move monies across what might be a boundary, a real boundary. All I would like to see in the future, especially as we go into a sequestered budget, would be the ability to be able to take a look at how we are doing in execution and as things become — or it becomes apparent that you can’t do things, I’d like the opportunity and flexibility to be able to move it.” Such flexibility is eroding as sequestration continues, he said.

“The prior unobligated funds question that was asked a moment ago is significant,” Air Force Chief of Staff Gen. Mark Welsh said at the same hearing. “We paid a full 25 percent of our FY-13 sequestration bill with prior year unobligated funds which are now not available.”

via DOD’s Unspent Billions Wane, Raising Doubts About Blunting Sequestration | Inside