Sequester Leaves Air Force With $2.4 Billion ‘Bow Wave’ Going Into FY-14 | InsideDefense.com

By Gabe Starosta

The Air Force has estimated that deferred expenses relating to weapon system sustainment, facility maintenance and major command services, caused by sequestration, have created a $2.4 billion “bow wave” of cost in fiscal year 2013 that the service is now scrambling to cover in FY-14, if possible.

Entering FY-14 under a continuing resolution — likely at funding levels reduced by FY-13 sequestration, unlike the Pentagon’s budget request — will cause the Air Force additional trouble, with military construction tied to some of the service’s highest-profile programs likely to be hit, said Maj. Gen. Jim Martin, the Air Force’s deputy assistant secretary for budget.

Martin, a career financial management officer, spoke with Inside the Air Force at the Pentagon on September 11.

Sequestration, which cost the Air Force close to $10 billion this fiscal year, drove the service to delay all non-emergency facility sustainment projects, defer the induction of many military assets for depot maintenance, and truncate or limit the work done under service contracts at its major commands, Martin said, and as outlined by service leaders earlier this year. But with the chances of receiving more money in FY-14 than in FY-13 looking slim as the sequester remains in place, the Air Force and its sister services will be hard-pressed to pay for bills accumulated in prior years.

According to Martin, the deferral of weapon system sustainment activity from FY-13 into FY-14 has generated an outstanding expense of about $1 billion. Deferred facility update costs are estimated at $800 million, and unfunded requirements at the MAJCOM level are worth more than $1 billion, with only a portion of those costs due this fiscal year.

All told, Martin said the “bow wave” of money rolling into FY-14 is projected at about $2.4 billion. And those costs remain even after approval of the Defense Department’s omnibus reprogramming request this summer that allowed many squadrons to resume flying after being grounded and significantly reduced the number of days civilian employees would be furloughed.

“Our FY-13 reprogramming went to cover our [overseas contingency operations, OCO] shortfall,” he said. “We had a $1.8 billion OCO shortfall, and that’s how much transfer authority the Air Force was given for the reprogramming. By covering the OCO shortfall, that allowed us to replenish some accounts that were cashflowing our OCO requirements.” Those accounts included items like civilian pay and flying hours. But because most of the available funding was steered into OCO and those other areas, very little remained to drive down the costs associated with weapon system sustainment and facility restoration.

The weapon sustainment cost is expected to take two to three years to make up, Martin said, because of its size and because of the fixed capacity at Air Force depots; that is, even if the service had an extra $1 billion available, the depots would not be able to accommodate an influx of inductions in a single year.

A rare budget bright spot in FY-13, Martin said, is that the Air Force experienced only a very minor shortfall funding its fuel expenses, which have come out to $1 billion or more above the service’s expectations in prior years. A combination of less flying because of reduced flying hours, the reprogramming’s ability to stabilize the price the Pentagon paid for fuel, and initiatives from Air Mobility Command that saved “hundreds of millions of dollars” in FY-13 made that funding gap negligible.

CR expectations

With Congress far behind regular order in putting together an FY-14 defense appropriations bill, and lawmakers hardly even negotiating to undo sequestration, Martin acknowledged that the Air Force expects to enter the next fiscal year on October 1 under a continuing resolution (CR) that retains sequestration’s budget reductions.

That expectation could be codified into law shortly. House Appropriations Committee Chairman Rep. Hal Rogers (R-KY) introduced a CR this week that would keep the government funded at sequestered budget levels until December 15.

The Pentagon is prohibited from launching new-start programs, increasing procurement quantities, and is restricted in various other ways with a CR in place. Martin said the biggest immediate impact of starting FY-14 under a CR will come in military construction, an area in which the Air Force is working on a number of projects linked to the basing of some of its most high-profile acquisition efforts.

“We have some critical facilities associated with mission beddowns [that] would be our biggest area of concern in the first three months,” he said. “It could potentially impact the standup of [U.S. Cyber Command at Ft. Meade, MD], KC-46, F-35 and F-22 mission beddowns.”

Martin also warned that next year’s options for covering sequestration costs are narrower than this year’s, potentially putting investment programs at more risk. While the Air Force did not have to make major reductions in acquisition quantities, such as in F-35 procurement, in FY-13 because it was able to cover budget cuts with prior-year unobligated balances, much less prior-year money remains available for that function in FY-14.

“This is not free money. [These are] dollars that had valid requirements against them, so that’s where you’re going to start the see the impact of sequestration on the investment accounts — in ’14 and ’15 when those dollars aren’t available and we have to go back to the investment accounts to cover readiness,” Martin said. “That’s where I think you’re going to see decisions that we’ll make for contract delays, quantity decreases, those types of things.”

Finally, regarding the preparation of the FY-15 budget, Martin said the Air Force expects to submit its budget baseline to the Office of the Secretary of Defense later this month. The service and OSD will then go back and forth determining the final makeup of that budget request, which will be presented to Congress and the public in the spring.

via Sequester Leaves Air Force With $2.4 Billion ‘Bow Wave’ Going Into FY-14 | InsideDefense.com