Resolutions, Sequestration and Furloughs

There has been much discussion during the first half of this year surrounding government budget cuts. From talk of Continuing Resolution (CR) to sequestration to furloughs, it’s not just federal employees caught in the crosshairs. Defense companies and subsequently their suppliers, are experiencing the far-reaching effects of these important decisions.

With a large concentration of defense-related businesses on the Space Coast, shifts in federal funding can adversely impact the financial security of these companies, as well as the security of those who live and work in Brevard. While Brevard has a diverse business environment, the Space Coast and the state of Florida are heavily dependent on defense spending. The situation continues to be fluid, but several developments are driving how companies react to federal cuts.

Government Shutdown Averted

Before adjourning for a two-week recess in late March, Congress passed a CR to keep the government funded through the remainder of the fiscal year (September 30, 2013) and avert a government shutdown. On March 20, the Senate approved the short-term measure, which included five appropriations bills at Fiscal Year (FY) 2013 levels. These appropriations bills include the Defense Appropriations, Military Construction/Veterans Affairs, Agriculture, Commerce Justice and Science (CJS), and Homeland Security. The CR maintains funding for the remaining seven appropriations bills at FY 2012 levels.

The House followed suit, passing the Senate version of the measure on March 21. The President signed the bill into law several days later. Included in the CJS appropriations was over $17 billion for NASA, which represents an increase of $151 million over the President’s FY 2013 budget request. The five appropriations bills funded at FY 2013 levels will allow for new starts on contracts by the departments associated with those bills.

FY 2013 military construction projects that could not be put under contract during a CR will now be started, which is a benefit to military services, although there is no effect on Patrick Air Force Base or Cape Canaveral Air Force Station. The most recent military construction project on Patrick AFB is the $158 million Air Force Technical Applications Center headquarters building which will be completed in January 2014.

Sequester Remains Despite Furlough Decrease

While the CR averts a government shutdown, it does not include a legislative fix for sequestration. Federal agency and program budgets are still subject to across-the-board sequester cuts. Federal employees, including Department of Defense (DoD) civilians, will face unpaid furlough days this year. While DoD civilians were originally slated to take 22 furlough days, the Pentagon announced on March 27 that number would decrease to 14. This reduction of furlough days is a result of the Congress increasing the DoD operations and maintenance account by $10 billion in the final version of the Defense Appropriations Bill. Military pay is exempt from sequester cuts and there are limited exceptions to the furloughs for emergency personnel to maintain minimum essential services. The DoD recently stated they can work the FY 2014 budget so there will be no civilian furloughs for that fiscal year.

Budget Resolutions & President’s Budget

President Obama submitted his budget request to Congress on April 10. Both the House and Senate approved budget resolutions prior to adjournment for recess. On March 21, the House of Representatives passed the budget resolution offered by Budget Committee Chairman Paul Ryan. The Senate approved the budget proposed by Senate Budget Chairwoman Patty Murray on March 23. This was the first budget resolution passed in the Senate in four years.

Congress will need to raise the debt ceiling later this summer, potentially priming another battle between the House Republican majority and the White House. The House Armed Services Committee has begun taking up the National Defense Authorization Act beginning with Secretary of Defense Hagel and General Dempsey, chairman of the Joint Chiefs of Staff testifying on April 11. The delay of submitting the FY 2014 budget by the White House, which is normally submitted to Congress the first week of February, will force Congress to move quickly through the hearing and committee process if they are to pass bills in time to ensure that there is not a continuing resolution for the beginning of FY 2014. Unfortunately, CRs have become the “new norm” in Washington.

 

Paul Hirsch is president of Madison Government Affairs, a strategic federal consultant to the Economic Development Commission of Florida’s Space Coast.