Defense: FY2014 Authorization and Appropriations
Released: 2014-01-08T00:00:00

Most Recent Legislative Action

On December 11, 2013, Representative Paul C. Ryan and Senator Patty Murray, chairs of the House and Senate budget committees, respectively, and co-chairs of the group appointed to develop a budget compromise to avoid a sequester in mid-January 2014, introduced the Bipartisan Budget Act of 2013, which raises defense and nondefense budget spending limits under the Budget Control Act (BCA) for FY2014 and FY2015. On December 12, 2013, the House passed the proposal as an amendment to H.J.Res.59, the Continuing Appropriations Act of 2014, by a vote of 332-94. The Senate passed the bill on December 18, 2013, by a vote of 64-36 and President Obama signed it into law on December 26, 2013.

For FY2014, the bill raised the original BCA budget limit for National Defense (budget function 050) by $22 billion to a total of $520 billion, or $2 billion above the level set in the Continuing Resolution (CR) of 2014. For the Department of Defense (DOD), the new FY2014 limit was set at $497 billion rather than the current limit of $476 billion, just above the CR. If Congress extended the current CR level for the full year at these new limits, then there would be no sequester in January 2014. For DOD, the new limits would essentially be a nominal freeze, setting DOD spending at $2 billion above the FY2013 post-sequester level. The House and Senate Appropriations Committees are drafting FY2014 funding bills for DOD and other agencies that would conform to the newly revised budget caps.

For FY2015, the new budget limit for National Defense would be $523 billion, or $9 billion above the current $512 billion limit. Similarly, for DOD, the new FY2015 limit would be $498 billion compared to $489 billion in current law, or $9 billion higher than the current limit, and $1 billion above the new limit for FY2014. In later years, budget limits would be the same as current levels. Altogether, over the FY2012-FY2021 decade, National Defense spending would total $5.447 trillion, or $32 billion (or 6%) above the current limit. DOD spending would total $5.206 trillion rather than $5.176 trillion, a $30 billion or 6% increase over current limits.

In addition to these changes in budget limits, the Bipartisan Budget Act also reduces the cost of living adjustments (COLAs) provided to military retirees under the age of 62 from the Consumer Price Index (CPI) to the CPI less 1% while also increasing contributions to retirement by new federal retirees. Military retirees would receive a "catch-up" increase at age 62 that would raise their benefit level to an amount including full CPI adjustments for each year when they received reduced COLAs. and then receive full CPI adjustments after that. According to CBO, this change would save the Department of Defense $6.235 billion over the decade.

This CPI adjustment would apply to nearly all military retirees including those receiving military disability benefits and to people receiving survivor benefits. (This provision would not affect "REDUX" military retirees who already receive reduced COLAs of the CPI minus 1% in return for receiving a $30,000 bonus at 15 years of service.) Some Members have raised concerns about this reduction in retiree benefits. If enacted, this proposal could be re-considered at a later date since it does not go into effect until December 1, 2015.

There are several potential scenarios that Congress may face in January 2014. On January 15, 2014, the current CR ( P.L. 113-46 ) lapses so Congress needs to either extend the current CR or pass individual or an omnibus appropriations act to avoid a government shutdown. To avoid a sequester, Congress needs to appropriate defense spending that complies with BCA limits that are in effect.

If the new limits are adopted, and if Congress provides defense spending at the current CR for the full year, then there would be no sequester because the new defense limit matches the CR. According to press reports, the Department of Defense is currently spending at that level. If Congress adopts the new limits but provides defense appropriations that exceed BCA limits, however, then OMB would levy a sequester to ensure compliance with BCA limits.

Under current BCA spending limits (without assuming passage of the Bipartisan Budget Act of 2013), a sequester would reduce defense spending by $20 billion, about 3.8% overall in mid-January 2014 to bring appropriations into compliance with the BCA. (The percentage cut to affected accounts, excluding exempted military personnel, would be about 5.8%.) This estimate reflects the amount by which the current CR exceeds the estimated $476 billion cap set in the Budget Control Act. If the new limits are adopted and matched by appropriations, the threat of a sequester would disappear.

In other words, to the extent that defense appropriations breach or exceed whatever BCA limits are in effect, OMB must levy a sequester of whatever size is necessary to ensure compliance with BCA limits.

In action on the FY2014 National Defense Authorization Act (NDAA), on December 12, 2013, the House, by a vote of 350 to 69, passed H.Res. 441 , which adopted H.R. 3304 , effectively a conference version of the FY2014 National Defense Authorization Act. The Senate passed the bill on December 19, 2013, by a vote of 84-15 and the President signed it into law on December 26, 2013.

Earlier, on October 17, 2013, the FY2014 Continuing Resolution (CR, P.L. 113-46 ) appropriated funds allowing the DOD and all other federal agencies to resume their normal operations through January 15, 2014, after a 16-day government shutdown went into effect because no FY2014 appropriations had been provided for the new fiscal year. In general, the CR allows DOD and other agencies to spend—during that period—at the rate at which each appropriations account was funded by P.L. 113-6 , the FY2013 Consolidated and Further Continuing Appropriations Act, taking into account the amount sequestered by the March 1, 2013, OMB order mandated by the Budget Control Act, enacted in 2011 ( P.L. 112-25 ). For DOD, the current CR provides about $495 billion.

Before passage of the CR, DOD, like most other agencies, was subject to a lapse in appropriations during which agencies are generally required to shut down because Congress had not acted on legislation to fund the federal government in FY2014 prior to the start of the fiscal year on October 1, 2013. The Office of Management and Budget (OMB), however, identified a number of exceptions to the requirement that agencies cease operations, including a blanket exception for activities that "provide for the national security."

As a result, during the lapse in appropriations, some DOD personnel were "excepted" from furloughs, including all uniformed military personnel and some civilians, while other civilian DOD employees were furloughed and, thus, not permitted to work. Normally, "excepted" military and civilian personnel would continue to work but would not be paid until after appropriations are provided by law. Shortly before and during the shutdown, however, Congress passed and the President signed into law two pieces of legislation that appropriated funds to pay all active-duty military and some DOD civilian personnel costs in the absence of an enacted appropriation, and to provide death gratuities:

The Pay Our Military Act ( P.L. 113-39 ; H.R. 3210 ), signed by the President on September 30, 2013, provided funds to pay all active-duty military personnel, most DOD civilians and possibly some private sector employees working for DOD; The Honoring the Families of Fallen Soldiers Act, ( P.L. 113-44 ; H.J.Res. 91 ), signed by the President on October 10, 2013, provided funds to pay death gratuities to survivors of military personnel who die while on active duty.

For military activities of the Department of Defense that are covered by the FY2014 National Defense Authorization Act (NDAA), the Obama Administration requested authorizations for discretionary budget authority (BA) totaling $632.7 billion, including the following:

$526.6 billion for the so-called "base budget"—that is, for costs not associated with combat activities; $80.7 million for war costs, officially designated overseas contingency operations (OCO); $18.9 billion for defense-related nuclear energy programs conducted by the Department of Energy; and $7.4 billion for other defense-related activities. (See Table 3 ).

For DOD's base budget, both the version of the FY2014 NDAA passed by the House ( H.R. 1960 ) and the version of the bill reported by the Senate Armed Services Committee on June 20, 2013, ( S. 1197 ), differ from the President's overall request by less than $50 million. The House bill, passed by a vote of 315-108 on June 14, 2013, would authorize hundreds of millions of dollars more than requested for various purposes, including a military pay raise, shipbuilding, and ballistic missile defense. However, that gross increase was almost entirely offset by several reductions which, according to the House Armed Services Committee, would have no adverse impact on DOD programs because—in each of the affected accounts—previously appropriated funds could be used in lieu of the requested new budget authority.

For war costs—designated as OCO— S. 1197 , reported by the Senate committee on June 20, 2013, would make few changes to the Administration's request. The House-passed bill, on the other hand, would add $5.4 billion to the request.

On Dec. 26, 2013, the President signed into law H.R. 3304 , a compromise version of the FY2014 NDAA, which authorized nearly the amount originally requested by the Administration. (See Table 1 and Table 9 )

For analysis of congressional action on the authorization bill, see the section of this report entitled " FY2014 National Defense Authorization Act ."

For the FY2014 DOD Appropriations bill, which funds all discretionary DOD military programs except military construction, the Administration requested a total of about $589.5 billion for the base budget and OCO, combined. The version of the bill passed by the House on June 24, 2013, would make a net reduction of about $4.2 billion to the request while the version reported by the Senate Appropriations Committee ( S. 1429 ) would make a net reduction of about $2.2 billion.

For analysis of congressional action the defense appropriations bill, see the section of this report entitled " FY2014 DOD Appropriations Bill ."

Budgetary Context: BCA Spending Caps

FY2014 is the third consecutive year for which Congress and the President have had to come to terms with the spending caps that were set in law by the BCA for each year in the decade FY2012-FY2021. Enacted in 2011 to resolve the impasse that summer about raising the debt limit, the BCA required reductions in discretionary spending totaling about $2.1 trillion through FY2021 in return for raising the debt limit by the same amount. A first tranche of reductions amounting to $900 billion—half of which came from National Defense agencies (primarily DOD but also including Department of Energy and other defense-related activities in other agencies)—was reflected in the Administration's FY2013 budget, which complied with initial caps set in the BCA. Additional reductions of $1.2 trillion, also falling equally on defense agencies and nondefense agencies—are to be achieved through a sequester in FY2013 and by automatic reductions to appropriations that would apply each year between FY2014 and FY2021 unless enacted appropriations in any year meet that year's BCA limits. To the extent that annual appropriations exceed or breach the BCA caps, a sequester would reduce funding to the level of the caps by across-the-board cuts.

President Obama sent Congress his FY2014 budget request on April 10, 2013, more than two months later than the legally prescribed date for submission of the budget. Uncertainties surrounding the final outcome of the legislative battle over appropriations for the preceding year accounted for the delay. The FY2013 appropriations for DOD and all other federal agencies were not enacted until March 26, 2013, when the President signed the Consolidated and Further Continuing Appropriations Act of 2013 ( H.R. 933 / P.L. 113-6 ). The amounts specified in that legislation were not final but, rather, were the points of departure for further reductions (by a process of "sequestration") required to comply with the Budget Control Act of 2011 (BCA), which was enacted on August 2, 2011 ( P.L. 112-25 ). BCA caps apply only to the defense base budget, not to OCO funding.

If current law had not been amended by the Bipartisan Budget Act of 2013 to change the BCA spending caps, the Administration's $552 billion national defense budget request for FY2014 (excluding war costs) would have to be reduced by $53.8 billion (about 9.8%) to a total of $498.1 billion in order to comply with BCA limits. If defense appropriations exceeded the BCA limit, they would have been reduced to the BCA level by an across-the-board sequester to currently appropriated levels that would begin in early to mid-January 2014.

Although the President's FY2014 national defense budget request does not meet the defense limits originally set in the BCA that would avoid a sequester under current law, the Administration argues that the President's budget would achieve—through a combination of revenue increases and reductions to entitlement programs—the $1.2 trillion total reduction through FY2021 that would result from the annual BCA caps. As a part of the Administration's overall program, the BCA would be amended to defer application of the spending caps, thus accommodating the President's FY2014 defense budget request.

Consistent with the President's budget request, the House-passed FY2014 budget resolution ( H.Con.Res. 25 ) proposed $552 billion for national defense (excluding war costs). Subsequently, the House Appropriations Committee reported—and the House passed—the three appropriations bills that would provide defense funding up to that level: Defense ( H.R. 2397 , passed July 24, 315-109), Energy and Water ( H.R. 2609 , passed July 10, 227-198), and Military Construction-Veterans Administration ( H.R. 2216 , passed June 4, 421-4).

To achieve the FY2014 savings mandated by the BCA, the House budget resolution proposes higher cuts to nondefense spending as well as changes to entitlement programs which would bring discretionary spending for the year to $967 billion, the discretionary total allowed by BCA. But, within that total, the BCA establishes separate limits (or caps) for defense and nondefense spending. The House-recommended defense levels exceed the BCA defense cap so, if they were to become law, a 9.8% sequester cut would be levied in January 2014, unless Congress amended the BCA to change the currently binding limits.

Similarly, the Senate's FY2014 budget resolution ( S.Con.Res. 8 ) sets the total for national defense at $552 billion—as requested by the President—and the defense-related bills reported by the Senate Appropriations Committee are consistent with this level. Like the House budget resolution, the Senate measure assumes that BCA's limit on overall discretionary spending for FY2014 would be met. In contrast to the House resolution, however, the Senate resolution proposes to compensate for defense spending above the BCA level with a combination of revenue increases and entitlement spending reductions similar to those proposed by the Administration. However, if the level of national defense spending allowed by the Senate resolution were to be enacted, there would have been a $53.8 billion sequester cut to discretionary spending in early January 2014—if the original BCA caps had not been amended by law.

Sequestration Flexibility in FY2014 and FY2013 Experience

DOD officials have contended that sequestration would have serious adverse impacts on the services' combat readiness and modernization not only because of the size of the funding cuts required but also because of the relatively arbitrary way in which the reductions are made. In a fiscal year in which a sequester is triggered to reduce spending to the levels enacted in the BCA, by law the reduction must be achieved by cutting a uniform percentage from the "budgetary resources" of every program, project, and activity (PPA) in every budget account, except for those budget accounts and PPAs that, by law, either are exempt from a sequester or are subject to a special sequester rule. "Budgetary resources" include new budget authority for both the base budget and OCO and budget authority appropriated in previous fiscal years but not yet obligated.

The sequestration process allows DOD some flexibility in implementing a sequester in ways that DOD used to limit the impact on readiness, investment accounts, and war funding in FY2013 and which might have similar results if sequestration were to be required for FY2014:

The President has authority to exempt the military personnel accounts from a sequester, as he did in FY2013 and as OMB informed Congress on August 9, 2013, he will do, should a sequester occur in FY2014. Exercising this option could allow DOD to avoid involuntary separations of military personnel, but does not reduce the total amount that must be sequestered from DOD funds and, thus, entails correspondingly larger cuts from other DOD accounts. House and Senate conferees on the FY2013 Consolidated and Further Continuing Appropriations Act ( P.L. 113-6 ) defined as a single PPA the entire Operation and Maintenance (O&M) account of each service and reserve component. Therefore, DOD has considerable flexibility in allocating cuts within those relatively large blocks of money. So, DOD could make proportionally larger reductions in some O&M-funded activities—facilities maintenance and training, for example—in order to allow proportionally smaller reductions in other O&M-funded activities such as operational training or support for front-line combat units. DOD could avoid or minimize sequestration cuts in funds for war operations in Afghanistan because, although Congress authorizes and appropriates separate amounts for base budget funding and OCO funding, most funding of both sorts is co-mingled in the PPAs that are subject to sequestration. Thus a service could reduce its O&M funding for OCO by a proportionately smaller fraction provided it was offset by a proportionately larger reduction in the service's base budget O&M spending. DOD did, however, choose to reduce OCO funding by $5.3 billion to meet the FY2013 sequester. This may have reflected a transfer into OCO accounts in mid-May 2013 to meet unanticipated higher needs (see below). In some of DOD's investment accounts, unobligated balances of funds appropriated in earlier budgets were reduced by proportionally larger amounts to allow proportionally smaller reductions to newly appropriated budget authority. Among the 21 procurement accounts, budget authority appropriated for FY2013 was cut by an average of 5.2% while unobligated funds were cut by an average of 11.2%. Since DOD budget authority appropriated for procurement and most other activities expires if not obligated within a certain number of years, sacrificing older budget authority allowed DOD to retain more budget authority that would be available for a longer period. After sequestration, DOD could and did use established reprogramming procedures, which require prior approval by the congressional defense committees in some cases, to shift funds among accounts. In May 2013, the department requested congressional approval of reprogrammings that shifted nearly $9 billion to meet more essential expenses by tapping funds that had been appropriated to other programs. This included shifting some $5.1 billion of OCO funding, about $3.0 billion of which came from cancelled lower priority OCO needs, with the remainder from the base budget.

Sequestration Alternatives in FY2014

In recent months, many observers, including DOD witnesses and some Members of Congress, have raised particular concerns about sequesters, arguing that because they require largely across-the-board cuts to programs, this would not reflect priorities in defense spending. One way to avoid a sequester would be if both houses of Congress passed a budget resolution that amended the BCA caps and achieved savings elsewhere.

Alternatives under Current Law

If current budget law is not changed, however, there are still several ways that the Administration and Congress could avoid a sequester in FY2014 or later years of the decade. These include:

Congress could appropriate amounts for defense that meet the lowered cap of $498 billion for FY2014 before a sequester would go into effect. This could reflect a joint budget resolution passed by both houses of Congress that would presumably be followed by new 302(a) allocations of overall discretionary budget authority and new 302(b) suballocations to individual appropriations subcommittees. With the current CR ( P.L. 113-46 ) slated to expire on January 15, 2014, Congress might pass individual appropriations bills, an omnibus funding bill, or another CR by that time. Section 258B of the Deficit Control Act of 1985 allows the President to submit a report, within five calendar days of the beginning of a new session, detailing an alternative way to meet the defense sequester caps (i.e., a spending plan that would reduce outlays by the same total amount that would result from an across-the board sequester). Congress would consider a resolution approving the alternative plan within five calendar days, under expedited procedures that would preclude a Senate filibuster.

Legislative Proposals

Bills have been introduced that would provide additional flexibility for DOD (and other agencies, in some cases) to meet lower BCA caps by setting higher transfer caps that DOD could use after a sequester went into effect in order to ensure that its higher priority programs were protected.

Introduced by Representatives Cooper and Ryan on July 31, 2013, H.R. 2883 , the Defense Flexibility Act, would permit the Secretary of Defense to transfer funds into an account as necessary to meet "urgent national priorities" up to the amount sequestered in that account. The transfer language in the bill states:

(b) Transfer Authority- In addition to any transfer authority otherwise available, and subject to subsections (c) and (d), of the amounts appropriated to the Department of Defense in any of fiscal years 2014 through 2021, the Secretary of Defense may transfer any appropriation subject in such a fiscal year to reduction under a sequestration order issued pursuant to section 254 of the Balanced Budget and Emergency Deficit Control Act of 1985 between such appropriations, to address an urgent national priority or the consequences of a national emergency resulting from such sequestration, as determined by the Secretary of Defense.

(c) Limitation- The amount transferred to an appropriation under subsection (b) shall not exceed the amount by which such appropriation is reduced under the sequestration order referred to in such subsection.

Some Members may raise concerns that this bill would undermine congressional prerogatives to set funding priorities because the amount of transfer authority could be substantially higher than current annual limits for DOD transfers: $4 billion for the base budget and $3.5 billion for OCO spending in FY2013.

A second alternative, S. 465 , introduced by Senator Collins last March, would give all agencies flexibility to propose an alternative to the FY2013 sequestration that would meet the caps. The bill requires that this "notice of implementation" be submitted to their respective authorization and appropriation committees for approval before going into effect. Including such a requirement could be unconstitutional because it would constitute a legislative veto. If agencies voluntarily submitted such proposed changes, as occurs in current reprogramming and transfers, that would be permissible. S. 465 also would give DOD additional flexibility in multiyear contracts and changes in production rates if a CR limiting those changes is still in effect.

DOD Forecast of FY2014 BCA Impact

In a July 10, 2013, letter to Senate Armed Services Committee Chairman Carl Levin and senior committee Republican James M. Inhofe, Defense Secretary Chuck Hagel predicted "serious adverse effects" on DOD if its FY2014 base budget were reduced by $52 billion from the amount requested to comply with the BCA cap on defense spending for that year.

In the letter—written in response to the two Senators' request—Secretary Hagel said his projections assumed that the entire $52 billion reduction would be applied to the $526.6 billion base budget request, with the $79.4 billion OCO request held harmless. The projection also assumed that DOD would be given a free hand to allocate the reduction, rather than applying the sequestration formula of program-by-program cuts. Even making those assumptions, Hagel asserted, "the cuts are too steep and abrupt to be mitigated by flexibility, no matter how broadly defined."

Secretary Hagel described the five-page document presenting the projected BCA impact as a "high-level summary" of an early version of DOD's approach to accommodating lower annual budgets than the Administration had projected. He said it was "guided by" inputs from the armed services and by preliminary results of a Strategic Choices and Management Review (SCMR)—a DOD-wide assessment Secretary Hagel had ordered to develop budget projections for FY2015-FY2019 that would try to adhere to the Administration's strategic goals at lower funding levels than those currently projected.

Following are some of the negative consequences that Secretary Hagel predicted if DOD were required to cut the President's FY2014 DOD base budget request by $52 billion—nearly 10%:

The reduction in military personnel spending likely would be disproportionately small—that is, appreciably lower than 10%—because the savings in military pay that would result from involuntary separation of military personnel would be largely offset by the cost of severance payments for those with more than six years of service, according to DOD. To cut military personnel costs by 10% would require what Secretary Hagel described as "an extremely severe package of ... actions" including halting the intake of any new personnel, ending all transfers from one base to another, and freezing promotions. While DOD would minimize cuts to those operation and maintenance (O&M) costs most directly tied to training and combat readiness, it would impose civilian hiring freezes and reduce scheduled maintenance of facilities, as it had done in FY2013, and would have to consider laying off civilian employees, Secretary Hagel said. Because of the practical difficulties in applying a proportionate reduction to military personnel costs, accounts funding procurement, R&D, and military construction likely would take disproportionately large cuts, with individual projects subject to reductions of 15% or 20%, he said.

BCA Impact on DOD as FY2014 Begins

On September 30, 2013, Deputy Defense Secretary Ashton B. Carter said that the department would begin operating in FY2014—starting October 1, 2013—as though its FY2014 budget were limited by the BCA cap and, thus, was more than $50 billion lower than the President's FY2014 request:

Last year [FY2013], we didn't start the fiscal year executing as though we had sequester, because we were ready to do so, but we didn't want to start until we had to, because operating under sequester is harmful. It wasn't until January [2013], after the Christmas deal collapsed last year, that we began to execute—that is, to curb spending—in recognition of the fact that sequester was then ... likely to kick in.

Once again, this year, it's looking like we need to be ready to go. And so our plan is to begin the fiscal year executing at the [BCA] cap levels, because it's much easier to start that way and then ramp up your expenditure later in the year [if the caps are lifted] than it is to go the other way.

More recently, after passage of the FY2014 CR setting defense spending levels at the FY2013 level, or some $30 billion below the request but $20 billion above the BCA caps, DOD Comptroller Robert Hale announced that DOD would be spending at—or slightly below—the CR level.

In recent testimony to House and Senate committees, DOD witnesses have argued that there could be a variety of negative effects, particularly in terms of readiness and maintaining current planned procurement schedules, if BCA budget caps remained in effect. Witnesses have also raised concerns that a year-long CR, which pegs funding levels to FY2013 levels, would create problems because of year-to-year program changes.

DOD FY2013 Post-Sequester Funding and the FY2014 Request

The FY2013 DOD sequester totaled $37.2 billion, including $32.0 billion cut from its base budget and $5.3 billion from OCO BA. The sequester tapped all available DOD BA except military personnel accounts. Available BA included not only new BA appropriated in FY2013 in the Consolidated and Continuing Appropriations Act of 2013 ( H.R. 933 / P.L. 113-46 ), but also prior year unobligated BA from previous years, reflecting the fact that BA in DOD's investment accounts (procurement, RDT&E, and military construction) can be obligated (or placed on contract) over several years.

Compliance with budget caps is measured by budget authority (BA) or funding amounts as scored by CBO. Scoring includes all cuts— both reductions to new FY2013 BA and rescissions which cancel unobligated BA from prior years—because it reflects when legislative action is taken. As scored, DOD's FY2013 base funding totaled $495.2 billion after all sequester cuts.

Rescission of prior year unobligated balances, however, cancels BA that was provided for programs in earlier years. Such reductions do not reduce resources available for current fiscal year programs or activities. The total DOD FY2013 sequester to its base budget was $32.0 billion including $26.2 billion in new BA cuts and $5.8 billion in rescissions of prior year unobligated balances. So while DOD's FY2013 post-sequester base budget funding is scored as $495.2 billion (including the full $32.0 billion reduction by sequester), funding available to carry out FY2013 programs and activities totaled $501 billion (excluding the $5.8 billion rescission) (see Table 5 ).

If DOD complies with the current FY2014 BCA caps, annual funding would decrease by an additional $20 billion or about 4% from the FY2013 post-sequester level. BCA caps for defense reach their lowest point for the decade in FY2014, increasing by roughly $10 billion annually from FY2015 to FY2021, not quite sufficient to cover expected inflation.

Some observers would argue that the FY2013 sequester created harmful effects on readiness and investment accounts and that additional spending is necessary to offset those effects. Others might argue that providing for a one-year annual increase in FY2014 would undermine efforts currently underway in the Department of Defense to determine the best way to accomodate lower spending levels evident in the Strategic Choices and Management Review undertaken by Secretary Hagel this summer.

FY2014 National Defense Budget Overview32

The Obama Administration's FY2014 budget request, submitted to Congress on April 10, 2013, includes $641.12 billion for National Defense programs (budget function 050), including military operations of the Department of Defense, defense-related nuclear energy programs conducted by the Department of Energy, and other defense-related activities. Of that total, $625.15 billion is requested for programs falling within the scope of the annual National Defense Authorization Act, with the remainder either permanently authorized or falling outside the jurisdiction of the House and Senate Armed Services Committees. (See Table 3 .)

The Administration's budget includes $607.36 billion for discretionary DOD budget authority, including $526.64 billion for "base" defense budget costs (day-to-day operations other than war costs), and $80.72 billion for OCO—largely in Afghanistan. The Administration's initial FY2014 budget presentation included "placeholder" totals for OCO funding. The actual OCO request for that year was submitted to Congress as an addendum in May 2013.

Included in the DOD discretionary budget is $6.68 billion for the annual accrual payment to the fund that underwrites payments from the so-called "TRICARE for Life" program to Medicare-eligible military retirees. TRICARE is DOD's medical insurance program.

Also included in the $632.74 billion National Defense discretionary total is $17.96 billion for defense-related programs of the Energy Department. This includes funds for renovation of the existing nuclear weapons stockpile, environmental cleanup of past nuclear weapons work, and work related to the development and construction of nuclear powerplants for warships.

The remaining $7.41 billion of discretionary funding for National Defense is requested for defense-related activities in other agencies, the largest share of which ($4.80 billion) is for FBI activity, including counterintelligence operations.

The Administration's overall National Defense budget for FY2014 also includes $8.40 billion in mandatory spending. The lion's share of this amount—$7.13 billion—is the annual payment into the military retirement fund to cover payments to retirees who have become eligible for additional benefits in recent years as a result of legislation that has narrowed limitations on "concurrent receipt" of both military retired pay and disability annuity from the Department of Veterans Affairs.

When President Obama submitted his FY2011 budget request in February 2010, he had projected requesting for DOD's base budget a total of $6.26 trillion in discretionary budget authority over the 10-year period FY2011-FY2020. The Administration reduced its DOD funding projections in each of the three succeeding budgets. (See Figure 1 and Table 4 .)

The 10-year plan accompanying DOD's FY2012 budget request incorporated $178 billion of "efficiencies" that were to be realized in the first five years of that period. Enactment of the Budget Control Act in 2011, however, created a new frame of reference that has shaped much of the subsequent debate over DOD budgets, with the FY2012 request serving as a baseline against which subsequent reductions have been measured.

For the 10-year period from FY2012 to FY2021, the caps set by the BCA would require a reduction in DOD discretionary spending of $977 billion (15.9%) from the total that was projected by the FY2012 DOD 10-year plan (assuming that DOD accounts for the same percentage of the National Defense Budget Function in each year as in the Administration's projected budgets). Under the FY2013 DOD budget plan, funding for the FY2012-FY2021 decade would total $5.65 trillion, a reduction of $487 billion (or 7.9%) compared with the FY2012 plan. Under DOD's FY2014 budget plan, projected spending for that decade would decline by an additional $90 billion, bringing the cumulative total reduction (compared with the FY2012 plan) to $577 billion (or 9.4%).

To realize the total reduction in DOD spending for FY2012-FY2021 required by the BCA caps, an additional reduction of $400 billion would be required.

Based on DOD's sorting of its spending between the base budget and OCO, the base budget—measured in current dollars (i.e., not adjusting for the cost of inflation)—increased at a relatively steady rate between the late 1990s and 2010. After reaching a high point in 2010, the base budget declined in FY2012 and FY2013 because of BCA budget limits. Unless the BCA cap for FY2014 is modified, it would require a further reduction of National Defense spending from the amount requested by the Administration, with DOD's share of the reduced amount estimated to reach $475 billion. From FY2015 through FY2020, the BCA, the President's FY2014 budget projection, and the FY2014 budget resolutions passed by the House and Senate all project a steady increase in DOD funding.

Allowing for the cost of inflation as estimated by OMB, the Administration's projection of discretionary DOD budget authority thru FY2021 would provide a higher level of "real" purchasing power than the department's average annual budget (in FY2014 dollars) for the period since the end of the Vietnam War (FY1976-FY2012). In turn, the average DOD budget for that 36-year period—which included the last 15 years of the Cold War—is higher in real terms than was the department's average budget since the 1991 war with Iraq (FY1992-FY2012). (See Figure 3 )

FY2014 DOD Base Budget Highlights

According to DOD officials, the Administration's $526.6 billion request for discretionary spending in DOD's FY2014 base budget is intended both to sustain current U.S. strategy and continue down-sizing the Army and Marine Corps as one element of that strategy. It incorporates a range of cost-reduction initiatives and various efforts to restrain the growth of personnel costs. However, the budget request would create relatively few major perturbations of planned weapons acquisition programs. (See Table 5 )

At the request of Senate Armed Services Committee Chairman Carl Levin and Senator James M. Inhofe, the committee's ranking minority Member, DOD agreed to present a plan for cutting $52 billion (about 10%) from the FY2014 base budget request, to meet the legally binding BCA spending cap. In addition, Secretary Hagel launched in April a DOD-wide Strategic Choices and Management Review (SCMR) intended to develop three alternative DOD budget plans for FY2015-FY2019: one based on the Administration's current budget projection, a second based on annual funding levels that were 5% lower, and a third based on annual funding levels lower by 10%.

Sustaining Current Strategy

In January 2012, the Obama Administration issued a new Strategic Guidance document to inform DOD planning and budgeting. Among the premises drawn from that document to underpin the Administration's FY2014 base budget request are the following:

DOD will maintain a large enough force to win a major conventional war in one region while, concurrently, being able to inflict enough damage on an aggressor in a second region to deter a second attack. DOD will not maintain an active-duty force large enough to conduct large-scale stability operations on a prolonged basis such as recent operations in Iraq and Afghanistan. Those campaigns required a large enough force so that upwards of 100,000 troops at a time could be periodically deployed and then rotated back home for rest and retraining. In a departure from the practice in recent years of having forces concentrate on training for the types of missions being carried out in Iraq and Afghanistan, forces will train for operating across the spectrum of conflict, from major conventional wars to peacekeeping and stability operations. DOD will try to improve its ability to help other countries bolster their own security forces to partner more effectively with U.S. forces in missions of mutual interest. DOD will "rebalance" its global posture to emphasize operations in the Asia-Pacific region and the Middle East.

Military Personnel

The Administration's FY2014 budget would continue the ongoing reduction in number of active-component Army and Marine Corps personnel to a planned total of 672,100 personnel by the end of FY2017. At that point, the combined, active-duty end-strength of those two services would exceed by more than 18,000 troops their combined end-strength at the end of FY2001, before the services' post-9/11 expansion. In effect, the plan would remove the 92,000 personnel that were added to the two ground combat-oriented services in 2007. (See Table 6 )

As DOD had done in its FY2013 budget request, it proposed to fund in the FY2014 base budget only the "enduring end-strength" of the two services—that is, the number of personnel they would have after the drawdown is complete in 2017: 490,000 for the Army and 182,000 for the Marine Corps. On grounds that the additional Army and Marine personnel were a legacy of the expansion of those services to deal with wars in Iraq and Afghanistan—an expansion now being largely reversed—the remaining personnel would be funded out of appropriations to cover war costs (OCO).

Military Pay and Allowances

The budget request would provide a 1% raise in military basic pay, which typically accounts for between two-thirds and three-quarters of active-duty services members' cash compensation (the balance of which typically consists of allowances for housing and living costs and various special pays and bonuses intended to attract and retain personnel with certain skills). DOD estimates that this 1% raise would save $540 million in FY2014 (and nearly $3.5 billion through FY2018) compared with the 1.8% increase in basic pay that would occur, automatically, under the terms of 37 U.S.C. 1009, which provides that military basic pay will increase by the same annual percentage as pay in the private sector as measured by the Labor Department in the Employment Cost Index (ECI).

Congress can, by law, establish a different pay raise than the ECI and the President asserts that he has authority under subsection (e) of 37 U.S.C. 1009 to set an alternative pay adjustment. On August 30, 2013, the President sent a letter to Congress stating, "I have determined it is appropriate to exercise my authority under 1009(e) of Title 37, United States Code, to set the 2014 monthly basic pay increase at 1.0 percent."

When the Obama Administration presented its FY2013 budget request in February 2012, it had announced plans to increase military basic pay at the ECI rate for FY2014 and to begin proposing pay increases below the ECI rate in FY2015.

TRICARE Fees

As it had done in its FY2013 budget request, the Administration included in its FY2014 DOD budget the creation of some new fees and increases in others for beneficiaries of TRICARE, DOD's medical insurance program. TRICARE covers more than 9.6 million active duty and retired servicemembers as well as their dependents and survivors.

DOD justifies the proposed increases on the argument that, while the costs to beneficiaries remained largely unchanged between 1996 and 2012, DOD's medical costs grew from $19 billion in FY2001 to a projected $49 billion in FY2014. Congress had rejected most of the fee increases proposed for FY2013, but approved a proposed increase in pharmacy copayments.

The TRICARE fee increases proposed for FY2014 would not affect servicemembers currently on active duty except that their dependents would be liable for increased pharmacy copayments. Most of the other proposed fee increases would apply to military retirees under the age of 65, although a proposal to create a new TRICARE for Life enrollment fee was included in the Administration's request for the first time.

"Efficiency" Initiatives

According to DOD, the FY2014 base budget request incorporates some two dozen "efficiency" initiatives that would reduce spending by a total of $17.03 billion over the period FY2014-FY2018. Five of those proposals account for about 80% of the projected five-year savings, namely:

$8.90 billion—more than a quarter of the total reduction—would come from reduced estimates of the cost of DOD's TRICARE medical insurance program, with the cuts based partly on a decline in the rate of medical care cost growth and partly on an Administration plan to reorganize some DOD facilities (FY2014 savings of $1.37 billion); $2.77 billion would be cut from projected payrolls for DOD civilians, partly on the assumption that annual pay raises will be lower than previously projected and partly on the assumption that Congress will approve the closure of some bases and medical facilities (FY2014 savings of $356 million); $1.20 billion would be saved by reducing enlistment bonuses and the budget for recruitment advertising, capitalizing on the improved recruiting environment created by a weak domestic economy (FY2014 savings of $213 million); $625 million would be saved as a result of scaling down Army deployments in the Balkans (FY2014 savings of $106 million); $447 million would be saved by reducing the Navy's projected operation and maintenance budgets on grounds that the service routinely has requested more funding in those accounts than it has spent in recent years (FY2014 savings of $87 million).

Weapons Acquisition Reductions

The FY2014 request incorporates reductions in planned acquisition spending for some five dozen weapons programs by a total of $15.62 billion over the period FY2014-FY2018. Some of the reduction would result from the cancellation of some programs and reductions in the number of items that would be purchased, or the rate at which they would be purchased. Still other savings are projected to result from wider use of multi-year procurement contracts.

Most of the proposed changes would yield savings of less than $150 million each over the five-year period, but 10 of the changes—each projected to save more than $500 million—account for nearly 60% of the projected five-year savings, namely:

$2.06 billion would come from dropping plans to develop a "Block IIB" version of the SM-3 anti-ballistic missile interceptor (FY2014 savings of $216 million); $1.72 billion would come from cancellation of the Precision Tracking Space System, a satellite network intended to provide targeting data on incoming ballistic missiles (FY2014 savings of $270 million); $1.35 billion would be saved by deferring until FY2019 the construction of a new "IIIB" version of the Apache attack helicopter (upgrading existing Apaches to that standard, in the meantime) (FY2014 savings of $475 million); $1.09 billion would come from using Atlas rockets for some planned satellite launches instead of more expensive Delta rockets (FY2014 savings of $106 million); $684 million would be saved in the near term by slowing procurement of the Navy's SM-6 anti-cruise missile interceptor until more ships are equipped with a new version of the Aegis weapons control system that is needed to fully exploit the capabilities of the SM-6 (FY2014 savings of $58 million); $683 million would come from a reduction in the overhead cost budgeted for the carrier-launched version of the F-35 Joint Strike Fighter (FY2014 savings of $8 million); $598 million would come from reducing the number of the Navy's F/A-18 fighters that would be rebuilt to like-new condition (FY2014 savings of $48 million); $593 million would be saved by reducing the Marine Corps ammunition inventory consistent with the retirement of one of three flotillas of pre-positioned supply ships carrying supplies and equipment for Marine combat units (FY2014 savings of $229 million); $528 million would come from savings as a result of buying DDG-51-class destroyers on a multi-year contract (FY2014 savings of $67 million); and $526 million would come from savings as a result of buying C-130J cargo planes on a multi-year contract (FY2014 savings of $83 million).

Proposed Base Closures

Over the FY2014-FY2018 period, DOD projects a total reduction in military construction budgets of $4.13 billion compared with previous projections. Some of those cutbacks are slated to result from the closure of some bases and medical facilities as a result of a Base Realignment and Closure Commission (BRAC), which Congress is asked to authorize. Congress rejected a BRAC proposal included in the FY2013 budget request.

FY2014 OCO Budget Highlights

The Administration's $79.44 billion request for war costs (OCO) represents a reduction of about 3% from the amount appropriated by Congress for war costs in FY2013 (after sequestration). (See Table 7 .)

Although the OCO funding request for FY2014 would drop by 3% compared with the pre-sequester FY2013 appropriation, the number of U.S. personnel deployed in Afghanistan would decline by 39% and the total number of personnel supported by the OCO budget (including forces outside Afghanistan that support operations in that country, in the Philippines and in the Horn of Africa) would drop by about 20%. (See Figure 4 )

According to DOD's functional breakdown of the FY2014 OCO budget (see Table 8 ), three components that, in sum, account for more than 80% of the total request would decline by less than 10% compared with the pre-sequester FY2013 appropriation:

$25.7 billion for U.S. force operations (including force protection); $21.8 billion for activities outside Afghanistan to support operations inside that country; and $8.9 billion to purchase equipment to replace war losses (including 4 Apache attack helicopters and 11 Chinook transport helicopters), replenish ammunition supplies, and refurbish equipment worn out by use in Afghanistan and Iraq.

According to DOD, those costs are declining at a slower rate than U.S. troop levels in Afghanistan because of expenses associated with closing bases in that country and returning thousands of cargo containers, vehicles, and other pieces of equipment to the United States and refurbishing the equipment as necessary.

Afghanistan's Army, projected to number 195,000 at the end of FY2013, and its National Police, projected to number 157,000 at the end of FY2013, are expected to remain at those levels through FY2014. The OCO budget request would increase U.S. support for those forces by 50% (to $7.7 billion) over the pre-sequester FY2013 appropriation. According to DOD, the increase is associated with the Afghan forces' assumption of responsibility for security as well as continued efforts to improve their operational capabilities.

Ship and Aircraft Retirements

The Administration's FY2014 OCO budget request would require $80.7 billion in budget authority. However, the Administration proposes to reduce the budgetary impact of the request by covering part of the costs by rescinding or cancelling $1.3 billion appropriated for FY2013 to retain in service Navy ships and Air Force cargo planes that the Administration's FY2013 budget request would have retired.

Thus, the FY2014 request proposes to reverse Congress's decision to reject the Administration's FY2013 proposals to retire seven Aegis cruisers and two amphibious transport ships and to mothball the fleet of C-27 cargo planes. To fund its FY2014 OCO budget, it would use:

$486 million that Congress had added to the FY2013 DOD appropriation to keep in service the ships the Administration wanted to retire; $749 million that Congress had added to the FY2013 bill to continue purchasing and operating C-27s; and $44 million that had been appropriated for unspecified R&D program in FY2004.

FY2014 National Defense Authorization Act (NDAA): H.R. 1960; S. 1197; H.R. 3304

H.R. 3304 , the version of the FY2014 National Defense Authorization Act signed into law by President Obama on December 31, 2013,—like Administration's budget request and earlier versions of the NDAA passed by the House ( H.R. 1960 ) and reported by the Senate Armed Services Committee ( S. 1197 )—exceeded by more than $30 billion the cap on national defense spending in FY2014 that was established by the FY2014 Continuing Appropriations Resolution ( H.J.Res. 59 ), which the President also signed into law on December 26, 2013.

For DOD's FY2014 base budget, the totals authorized by the final version of the bill ( H.R. 3004 ), the version passed by the House on June 14, 2013, ( H.R. 1960 ), and the version reported by the Senate Armed Services Committee on June 20, 2013, ( S. 1197 ), all come within $228 million of the $526.57 billion requested by the President. (See Table 9 )

For OCO funding (or "war costs"), H.R. 3304 , like the Senate committee versions of the bill ( S. 1197 ), makes few changes to the Administration's $80.72 billion request. The House-passed bill, on the other hand, would have authorized $5.04 billion more than was requested , including the following increases:

$1.68 billion for depot maintenance; $1.50 billion to "reset" (i.e., rehabilitate, reequip, and retrain) Army units after their deployment in Afghanistan; $535.9 million for higher than budgeted fuel costs; $340.9 million to replace FY2013 OCO funds that were reprogrammed to other OCO uses; and $400.0 million for equipment for National Guard and reserve component units.

The enacted version of the bill, authorizing $2.0 million less than the OCO request, dropped about two-thirds of the House-passed increases authorizing an additional $1.10 billion for Army reset, $400.0 for National Guard and reserve equipment; and $130.0 million for depot maintenance.

Because neither H.R. 1960 nor S. 1197 had been passed by both chambers, there was no basis for convening a House-Senate conference to reconcile the House-passed and Senate committee-reported versions of the FY2014 NDAA. In lieu of a formal conference report, members of the House and Senate Armed Services Committees, meeting informally, negotiated a compromise version of the bill. To expedite Senate action on that final version of the bill, the negotiated text was passed by the House and Senate as an amendment to a bill ( H.R. 3304 ) that already had been passed by each chamber, but on the specific language of which the House and Senate had not yet come to agreement.

On December 12, 2013, the House voted 350-69 to adopt the negotiated NDAA text as an amendment to H.R. 3304 and to pass the amended bill. On December 19, 2013, the Senate concurred in the House action—in effect, passing the negotiated NDAA text—by a vote of 84-15.

NDAA: The Broad Outlines

Like the defense authorization act for FY2013 ( H.R. 4310 , P.L. 112-239 ), the final version of the FY2014 NDAA—like the versions of the FY2014 bill that earlier had been passed by the House and reported by the Senate committee—makes relatively few individual additions to the authorization levels proposed by the Administration for specific procurement and R&D programs, compared with the annual defense authorization bills enacted in the first decade of this century. That difference reflects the stringent bars against "earmarks" currently observed in both the House and the Senate.

Proposed Administration Savings

H.R. 3304 bars an Administration proposal to retire several Navy ships ahead of schedule and to increase some TRICARE fees. Congress had rejected these proposals in the FY2013 budget and that also had been rejected in the House-passed and Senate committee versions of the FY2014 authorization bill.

The final FY2014 bill also blocked an Air Force plan to retire its fleet of A-10 ground attack planes as part of its plan to accommodate the anticipated reduction in its FY2014 budget request. The proposal surfaced after the full House and the Senate Armed Services Committee had acted on their respective versions of the bill.

On the other hand, the final NDAA—and the two earlier versions—supported several of the Administration's other cost-cutting proposals. Following are actions incorporated in various versions of the FY2014 NDAA related to selected Administration savings. (See Table 10 )

Other Congressional Additions

Both versions of the NDAA would authorize more than was requested for several large O&M accounts in which the Administration's budget assumed costs would be reduced by "efficiencies." The Senate committee-reported S. 1197 would add $1.8 billion to these accounts, while the House-passed H.R. 1960 would add $5.6 billion, of which $4.6 billion was added to the authorization for OCO funding.

Following are actions selected increases to the Administration's DOD budget request that would be authorized by various versions of the FY2014 NDAA. (See Table 11 )

Military Personnel Issues (Authorization)

The final version of the bill, like the versions passed by the House and reported by the Senate committee, incorporate Administration proposals to reduce the statutory ceilings on the number of military personnel at the end of FY2014. That new ceiling on active component personnel is be 1.36 million, a reduction of just over 40,000 from the FY2013 ceiling on "end-strength" while the new personnel ceiling for the National Guard and other reserve components is 833,700, a reduction of just over 8,000.

In the explanatory statement accompanying H.R. 3304, House and Senate negotiators noted that, because of budgetary constraints, the Army and Marine Corps have accelerated their planned reduction in active-duty personnel and now hope to reduce active component ends-strength by an additional 38,100 troops by FY2015, instead of FY2017. The negotiators supported that plan, but commented:

We remain concerned that unfettered reductions in end-strength will have a detrimental impact on force structure and, ultimately, operational mission capability and capacity among the services, and harm the morale of the force,

Military Pay Raise

The Senate committee's bill included a provision (Section 601) that would have authorized for FY2014 the 1% raise in military basic pay called for by the budget request. On the other hand, the House Armed Services Committee called for a 1.8% military pay raise, as would happen automatically under existing law, which ties the annual raise in military basic pay to the Labor Department's Employment Cost Index (ECI). DOD estimated that the higher raise would increase FY2014 military personnel costs by $540 million.

H.R. 3304 included no provision setting the FY2014 military pay raise. However, the President asserts that the law that ties pay raises to the ECI also includes a provision giving him authority to specify an alternative pay raise, and he has done so by setting the FY2014 pay raise at 1.0%. In the explanatory statement accompanying the bill, House and Senate negotiators acknowledged the President's action.

Sexual Assault Prevention and Treatment

In response to several high-profile cases involving sexual assaults within the Armed Forces, the House-passed and Senate committee-approved versions of the FY2014 NDAA each included several provisions that would address the issue. Some of these provisions would change the provisions of the Uniform Code of Military Justice (UCMJ) pertaining to sexual assault while others would change the rules governing (1) the disposition of sexual assault allegations within the military and (2) the conduct of courts-martial.

Corresponding provisions of the House and Senate bills differ in some respects, particularly in the types of alleged crimes to which they would apply. H.R. 3304 included compromise versions of most of those provisions. Following are selected aspects of the sexual assault issue that are addressed in the legislation ( Table 12 ).

Provisions Relating to Chaplains Corps and Conscience

As passed by the House, H.R. 1960 included a provision (Section 529) providing that, if a military chaplain were called upon to lead a prayer in some context other than a religious service, he or she would have the right to close the prayer "according to the traditions, expressions and religious exercises" of the chaplain's faith tradition. During debate on the bill, the House rejected an amendment that would have authorized the appointment of military chaplains who are endorsed by recognized nontheistic or nonreligious organizations.

Instead of that House provision, H.R. 3304 includes a provision (Section 534) requiring DOD to conduct a survey of military chaplains to ascertain whether restrictions on their role outside a religious service have prevented them from conforming to the tenets of their faith or interfered with their ability to minister to DOD personnel and their families.

Another provision of the House-passed bill (Section 530E) would have required "advance written notice of any meeting to be held between Department employees and civilians for the purpose of writing, revising, issuing, implementing, enforcing, or seeking advice, input, or counsel regarding military policy related to religious liberty." The final version of the bill contained no such provision however, in their explanatory statement, House and Senate negotiators urged DOD and the military services to consult with all faith groups when formulating or change policies that would affect religious freedom or tolerance. They added:

We are becoming increasingly concerned over reports that the Department and the services appear more responsive to some religious groups and interests than others.

Legal Protection for Religious Expression

Like the House and Senate versions of the NDAA, H.R. 3304 also included a provision (Section 532) amending a provision of law enacted as part of the FY2013 NDAA ( P.L. 112-239 ). Section 533 of the FY2013 act requires the armed forces to "accommodate the beliefs of a member of the armed forces reflecting the conscience, moral principles, or religious beliefs and, insofar as practicable ... not use such beliefs as the basis of any adverse personnel action...." The immediately following provision of the act provides that nothing in the preceding provision precludes disciplinary or administrative action for conduct "that threatens good order and discipline."

In the enacted version of the FY2014 NDAA, Section 532 amends the existing law to provide that, "unless it could have an adverse impact on military readiness, unit cohesion, and good order and discipline, the Armed Forces shall accommodate individual expressions of belief," and that such "expression of belief" shall not be used as the basis for any adverse personnel action."

TRICARE

Like the House and Senate versions of the FY2014 NDAA, H.R. 3304 does not authorize the Administration's proposals to:

Raise the premiums paid by military retirees to participate in TRICARE, DOD's private-sector health insurance program for active-duty and retired services members, their dependents, and their survivors; Index increases in TRICARE's "catastrophic cap"—the maximum annual amount a beneficiary should have to pay—to the National Health Expenditure index, which is a federal government barometer of changes in health care costs; and Introduce enrollment fees for certain TRICARE programs, including TRICARE for Life, the program that covers Medicare-eligible military retirees.

Like the Senate committee bill, H.R. 3304 would add $218 million to the requested TRICARE authorization for FY2014, which would restore funds the budget request assumed would not be needed because of the proposed fees. The House-passed bill would have added $164 million for this purpose.

DOD has announced its intention to cut off coverage for TRICARE Prime—a TRICARE option that is similar to an HMO—in certain areas of the United States. The House bill (Section 711) would allow TRICARE beneficiaries who are eligible for TRICARE Prime to enroll in the program, even if they live in those areas in which DOD has barred new TRICARE beneficiaries from enrolling in it. Instead, H.R. 3304 would allow current TRICARE Prime participants to remain in the program, even if they reside in areas in which no new enrollees will be allowed.

Assignment of Women in the Military58

In February 2013, then-Secretary of Defense Leon Panetta rescinded DOD's so-called "combat exclusion rule," which barred the assignment of female military personnel to ground combat units. Panetta also directed the services to open all military assignments to women by January 1, 2016, unless by then they had requested specific exceptions which, in turn, would be subject to approval by the Secretary of Defense and the Chairman of the Joint Chiefs of Staff.

The House-passed FY2014 NDAA, H.R. 1960 , includes Section 530D expressing the sense of Congress that by September 2015, the secretaries of the Army, Navy and Air Force "should develop, review, and validate individual occupational standards, using validated gender-neutral occupational standards, so as to assess and assign members of the Armed Forces to units, including Special Operations Forces." In final version of the bill, H.R. 3304 , Section 524 contained the House-passed provision with a technical amendment.

In its report on S. 1197 , the Senate Armed Services Committee praised DOD for "moving toward an assignment system that is gender-neutral and performance-based." Moreover, the committee encouraged DOD "to work toward full integration of women in all military occupations to the maximum extent practicable, consistent with military capabilities required for our nation's defense." However, the committee also expressed concern "that women may not always be afforded the opportunity to serve a full career." It directed DOD to submit a report examining:

retention rates and career progression opportunities for female servicemembers; "causes of voluntary mid-career separation, especially those related to childbirth"; and personnel management options that might better accommodate servicemembers' personal and family goals, including the use of temporary assignments to the reserve components.

Reserve Component Mobilization Guarantees

Like the House and Senate versions of the bill, H.R. 3304 included a provision triggered by instances in which reserve component units that had been mobilized for deployment overseas had their deployments cancelled on relatively short notice, in some cases causing significant cost and inconvenience to members of the affected units.

In the House bill, Section 511 would require the secretaries of the military departments to provide at least 120 days' notice to reserve units or individual reserve component members if they are to be mobilized for deployment in connection with a contingency operation or if, after such notification has been given, the deployment is cancelled or otherwise altered. If such notification is not given, a report would have to be submitted to the House and Senate Armed Services Committees explaining the reasons and providing the names of the affected units or individuals.

In the bill reported by the Senate Armed Services Committee, Section 508 would require the Secretary of Defense to personally approve any decision to cancel a planned reserve unit deployment within 180 days of the unit's scheduled deployment if an active duty unit is to be deployed, instead, to perform the same mission. In those cases, the provision also would require notification of the House and Senate Armed Services and Appropriations Committees and the governors of the affected states.

In the final version of the bill, Section 513 incorporated the Senate committee provision plus an additional requirement of 120 days prior notice to any reserve component member who is mobilized as an individual (rather than as a member of a unit).

Ground Combat Systems (Authorization)

Congressional action on authorization of funding for selected ground force equipment is summarized in Appendix Table A- 3 . Following are highlights:

Current Generation Vehicles (M-1, Bradley, and others)

The House bill would increase by $274 million the total authorized for procurement of tanks and other armored combat vehicles. In its report on H.R. 1960 , the House Armed Services Committee said the budget request for armored vehicles was too anemic to sustain the specialized network of suppliers and assembly plants needed to build such equipment.

While a number of armored vehicle programs currently are underway, DOD projects a surge in demand for production capacity in about 2019, when new programs are slated for funding. Until then, the Administration maintains, foreign sales combined with projected DOD purchases will keep the production lines warm. The House committee said reliance on foreign sales to keep the industrial base intact was too risky, and that the additional vehicles for which it would provide authorization could replace older equipment in some units.

As passed by the House, H.R. 1960 would add to the budget request authorization a total of $274 million for various armored vehicle programs including $168 million to upgrade M-1 tanks with improved digital communications, night-vision equipment, armor, and transmissions. DOD has not budgeted for this program since FY2012, but Congress funded it in FY2013 in the absence of an Administration request. The House bill also would authorize:

$186.0 million, $75.0 million more than the $116.0 million requested, for so-called armored recovery vehicles, designed to tow disabled 70-ton tanks off the battlefield; and $94.0 million, $31.0 million more than the $63.0 million requested, to buy assault breacher vehicles, which are M-1 tank chassis equipped with a bulldozer blade and other gear for clearing a path through a minefield.

The Senate bill would add no funds to the amounts requested for procurement or major modification of armored combat vehicles.

The final bill would add to the request a total of $165 million: $90 million for M-1 upgrades and $75 million for armored recovery vehicles.

Next Generation Vehicles: GCV, AMPV, MPC, and JLTV

H.R. 1960 and S. 1197 each would authorize the amounts requested to develop four new types of battlefield vehicles for use by the Army and Marine Corps:

$592.2 million for the Army's Ground Combat Vehicle (GCV) intended to replace some Bradley troop carriers; $116.3 million for the Armored Multi-Purpose Vehicle intended to replace the thousands of Vietnam War-era M-113 tracked vehicles still in use for various Army utility tasks; $137.0 million for the Marines' Amphibious Combat Vehicle, intended to replace the 1970s-designed AAV-7 amphibious troop carrier; and $134.6 million for the Joint Light Tactical Vehicle (JLTV), slated to replace the ubiquitous HMMWV (Humm-Vee).

Since the Marine Corps has deferred plans to field a simpler armored troop carrier, not designed for amphibious landings, both bills would drop the requested $20.9 million authorization for this program, designated the Marine Personnel Carrier (MPC).

H.R. 3304 , the final version of the NDAA, authorizes the same amounts for each of those programs except for the Marines' Amphibious Combat Vehicle, for which it would authorize $123 million, a reduction of $14 million, because of delays in the program. The bill also includes a provision (Section 211) requiring the Secretary of the Army to certify the affordability and technical feasibility of the planned new Ground Combat Vehicle and requiring DOD officials—acting independently of the Army—to assess the Army's plan to fund development of the new system using a single contractor (rather than two competing firms).

Naval Systems (Authorization)

In their reports on H.R. 1960 and S. 1197 , respectively, the House and Senate Armed Services Committees each expressed concern that, because of budgetary limits, DOD might not be able to fund the Navy's long-term shipbuilding plan. Each committee highlighted in particular the challenge of replacing the current fleet of Trident missile-launching submarines even within the DOD budgets through FY2021 that were projected by the Obama Administration, let alone within the tighter budgets that might result from the current budget battles. In a House Armed Services Seapower Subcommittee hearing on September 12, 2013, Rear Admiral Richard P. Breckenridge, director of the Navy's Undersea Warfare Division, said that, on top of currently projected shipbuilding budgets, the Navy would need an additional $60 billion over 15 years to replace the missile subs.

In its report on H.R. 1960 , the House Armed Services Committee noted that the most recent version of DOD's annual 30-year shipbuilding plan, sent to Congress in April 2013, assumed that during the middle decade of that period (namely, 2024-2033) annual shipbuilding budgets would average nearly $20 billion in constant dollars. The committee directed DOD to submit a 30-year plan that assumed annual shipbuilding budgets of $16 billion (in constant dollars), which the Congressional Budget Office (CBO) says was the average annual shipbuilding budget over the past 30 years.

Congressional action on authorization of funding for selected naval systems is summarized in Appendix Table A-5 . Following are highlights:

Aircraft Carriers64

The House and Senate versions of the NDAA each would authorize a total of $3.48 billion, as requested, to sustain a fleet of 11 nuclear-powered aircraft carriers by the end of this decade. Slightly less than half that total ($1.53 billion) would provide partial funding for two ships currently under construction:

$944.9 million for the John F. Kennedy (CVN 79), authorized in FY2013 and currently slated for completion in FY2022 at an estimated total cost of $11.33 billion; and $588.1 million for the Gerald R. Ford (CVN 78), authorized in FY2008 and currently slated for completion in FY2015 at an estimated total cost of $12.8 billion.

The balance of the carrier-related funding ($1.96 billion) would partially fund major overhauls for two existing ships, about halfway through their projected 50-year service lives. This would entail refueling their nuclear reactors and upgrading key electronic and weapons systems, for which the House and Senate bills would authorize, as requested:

$1.71 billion for work on the Abraham Lincoln (CVN 72), slated for completion in FY2016 at a total cost of $4.57 billion; and $245.8 million from preliminary work on the George Washington (CVN 73), on which work is scheduled to begin in FY2016.

Both bills also would increase the legislative cap on spending for the Ford (CVN 78), raising it from $11.76 billion to $12.90 billion.

In the final version of the bill, the only change made to the carrier funding request was a reduction of $22.1 million to the $1.96 billion requested for two refueling overhauls on grounds that those expenses had been covered by previously appropriated funds.

Attack Submarines and Missile Submarines

The House-passed H.R. 1960 and Senate Armed Services Committee-reported S. 1197 each would authorize, as requested, a total of $6.42 million to continue construction of Virginia-class submarines, to design and develop a new ballistic-missile sub to replace the Ohio-class ships currently in service, and to design an enlarged version of the Virginia-class that would greatly increase the ship's payload of Tomahawk land-attack missiles. The House-passed H.R. 1960 would increase the total submarine-related authorization by $492 million to compensate for the amount that the sequestration process cut from the FY2013 appropriation for Virginia-class subs.

About three-quarters of the total amount requested ($5.28 billion) would fund continued construction of the Virginia-class subs, including:

$2.93 billion to fully fund one sub and to provide about two-thirds of the cost of a second, for which the remaining $953 million will be requested in the FY2015 budget. The House bill added $492 million—the amount of the FY2013 sequester—to this request. $2.35 billion for long lead-time components that would be used in two additional subs for which the bulk of the funding will be included in the FY2015 budget.

The remainder of the sub-related funding, endorsed by both bills, is for R&D programs:

$1.08 billion to continue developing a next-generation ballistic missile sub ($787.6 million) and the associated nuclear powerplant ($296.1 million); and $59.1 million to continue developing the Virginia Payload Module—an extension of the sub's hull by nearly 100 feet to accommodate four large vertical launch tubes, each of which could accommodate seven Tomahawk missiles.

The final version of the bill mirrored the House-passed version, adding $492 million to the authorization for new construction, to offset the loss of the same amount from the FY2013 budget as a result of sequestration.

Destroyers69

H.R. 3304 , like the versions of the FY2014 NDAA passed by the House and reported by the Senate committee, would support the budget request for construction of new Navy destroyers. But it also would add to the amounts requested funds that would roughly offset the funds removed by sequester from the destroyer programs in FY2013:

For two DDG-51-class ships, the budget requested $1.62 billion; the Senate bill would have increased the authorization by $100 million, while the House bill and the final version added $332 million (which is nearly the amount cut from this program in FY2013 by sequestration); To complete construction of three DDG 1000-class destroyers, authorized in FY2007-FY2009, the Senate bill would have authorized $231.7 million, as requested, while the House bill and H.R. 3304 added $79.3 million, slightly more than was sequestered from the program in FY2013.

The DDG-1000 class had been intended to succeed the DDG-51 class, the first of which was commissioned in 1991. But in 2008, DOD announced that only three ships of the new type would be built, while the Navy would resume procurement of DDG-51-class ships, transitioning to procurement of an enlarged, so-called "Flight III" version of that design to be equipped with a larger radar, designated the Air and Missile Defense Radar (AMDR), intended to improve the ships' missile defense capability.

Section 1025 of the final version of the bill, a modified version of a provision in the House-passed bill, requires the Navy to compare the costs and risks of resuming procurement of DDG-1000 type ships rather than the planned Flight III version of the DDG-51 design.

H.R. 3304 , like the House-passed and Senate committee versions of the NDAA, authorizes $240.1 million, as requested, to continue developing the new AMDR radar, However, in its report on H.R. 1960 , the House Armed Services Committee directed the Secretary of the Navy to submit a report on whether a larger version of AMDR mounted on a larger ship than a destroyer would perform the missile defense mission more effectively than the smaller version that is slated to be installed on DDG-51s.

Littoral Combat Ships70

The final version of the bill, like H.R. 1960 and S. 1197 , authorizes $1.78 billion, as requested, for procurement of four Littoral Combat Ships (LCSs), which are fast, relatively small ships intended to deal with hostile submarines, minefields, and small attack boats in "littoral"—that is, "near to shore"—waters. All three versions of the bill also authorize $143.1 million, as requested, to continue acquisition of the interchangeable weapons modules intended to equip the ships for either mine-sweeping, sub-hunting, or surface combat.

But H.R. 3304 also incorporates provisions, similar to those in the House and Senate versions of the NDAA, requiring reports on certain aspects of the LCS program:

Section 124 of H.R. 3304 (elaborating on Section 125 of S. 1197 ) requires a report by the Navy on its plans for how the LCS vessels would be used, how they compare with other U.S. warships and with the ships of potential adversaries in terms of their combat survivability, and how their capability in particular missions compares with the capability of the older equipment they are slated to replace. It also requires DOD organizations outside the Navy to independently assess the ships' suitability for their proposed missions and the adequacy of the testing program intended to verify their capability. Section 325 of the final bill (based on Section 321 of the House version) requires a detailed report by the Navy on its plan to sustain the ships for extended periods in areas far from U.S. shipyards—for example, in Singapore—using private contractors rather than U.S. government personnel for routine maintenance. In its report to accompany H.R. 1960 , the House Armed Services Committee called on the Government Accountability Office to review the Navy's plan for sustainment of the LCS.

Aircraft and Missile Programs (Authorization)

Congressional action on authorization of funding for selected aircraft and long-range missile programs is summarized in Appendix Table A-9. Following are some highlights:

Long-Range Strike Weapons

H.R. 3304 , like the version of the NDAA reported by the Senate Armed Services Committee, approved requests totaling $1.09 billion to sustain and modernize the Air Force's long-range bomber fleet. Including funds for both procurement and R&D, the final bill authorizes:

$423.7 million to upgrade the 20 B-2 bombers (including $303.5 million to improve the stealth planes' defensive electronics); $151.8 million to modernize B-1s; $135.0 million to upgrade B-52s; and $379.4 million to develop a new, stealthy bomber slated to enter service in the mid-2020s.

The House-passed version of the bill would have authorized the requested bomber funding except that it would deny authorization for $500,000 to modify B-52s in accordance with the New START nuclear arms reduction treaty with Russia, approved by the Senate in 2010.

Similarly, the final version of the bill, like S. 1197 , authorizes, as requested, a total of $1.47 billion for an ongoing program of refurbishing Trident II nuclear-armed, submarine-launched ballistic missiles by replacing their solid-fuel rocket motors and other aging components. The House bill would have reduced the authorization by $717,000 for activities related to compliance with New START.

The final bill, like the House and Senate versions, authorizes, as requested, $65.4 million to continue the Conventional Prompt Global Strike program, aimed at developing a ballistic missile or other vehicle that could strike a distant target with a non-nuclear warhead on short notice. The bill did not include a provision of S. 1197 (Section 211) that would have barred the use of funds to develop a submarine-launched missile for this mission until 60 days after DOD reports to Congress on how it would manage the risk that an adversary might assume that any missile launched from a submarine carried a nuclear warhead. However, in the explanatory statement accompanying H.R. 3304 , House and Senate negotiators directed DOD to submit a report covering not only "ambiguity" problem raised by the Senate committee but also several other matters including possible techniques that could verify the non-nuclear character of a submarine-launched missile.

Other Provisions Related to Arms Control

The House-passed bill would have cut from the budget request a total of $30.2 million for activities to comply with the New START treaty. Nearly half that reduction—$14.7 million—was intended to bar the decommissioning of some ICBM missile silos and the preparation of an associated environmental impact statement.

The House bill also included several provisions policy reflecting opposition to the New START treaty and to President Obama's announcement in his 2013 State of the Union Address that he would seek agreement with Russia for additional reductions in nuclear arms.

The H.R. 3304 did not incorporate any of the House funding cuts related to compliance with New START. However, the final bill did incorporate provisions dealing with some of the arms control issues addressed in the House-passed version of the bill.

Carrier-Based UAVs

The FY2014 budget request includes a total of $167.7 million for two Navy R&D programs aimed at developing a fleet of long-range, armed, drone aircraft to fly reconnaissance and attack missions from aircraft carriers. Of that total, the Senate version of the NDAA would have authorized, as requested:

$21.0 million to conclude the Unmanned Combat Air Vehicle (UCAV) project, which has tested the feasibility of operating large drones off carriers using full-sized, experimental X-47 aircraft, one of which autonomously landed on the carrier George H. W. Bush on July 10, 2013; and $146.7 million for the Unmanned Carrier-launched Airborne Surveillance and Strike (UCLASS) project, which is intended to produce an operational weapon.

In its report on H.R. 1960 , the House Armed Services Committee contended that the Navy was acting prematurely in retiring the X-47s before they had been used to explore all the technical challenges that the operators would encounter when the UCLASS drones were deployed. The committee was particularly critical of the Navy's decision to drop a planned effort to refuel an X-47 in midair while the drone was fully under the control of its on-board computers, with no intervention by a human pilot.

Accordingly, H.R. 1960 would have increased the UCAV authorization by $20.0 million—to $41.0 million—and would have included a provision (Section 217) requiring the Navy to conduct mid-air refueling tests with the X-47. The House bill also would have authorized, as requested, $146.7 million for UCLASS.

The enacted version of the bill authorizes for UCAV $21.0 million, as requested, and does not include the House provision requiring that the Navy conduct mid-air refueling tests with the X-47. In the explanatory statement on the bill, House and Senate negotiators acknowledged the Navy's decision to continue testing the aircraft through FY2014 and "encouraged" the service to demonstrate drone-to-drone refueling using the X-47.

Missile Defense (Authorization)

The FY2014 budget request included $7.68 billion for the Missile Defense Agency (MDA), the bulk of it for R&D efforts aimed to developing an array of sensors to detect ballistic missiles in flight and weapons to destroy them. The House-passed bill would increase the total MDA authorization by $435.4 million, with most of the additional funding directed to several Israeli defense systems and to the Ground-based Midcourse Defense (GMD) currently deployed in Alaska and California, which is intended to protect U.S. territory against a small number of intercontinental ballistic missiles launched from North Korea or Iran. The Senate committee-reported NDAA would increase the MDA authorization by $150.0 million, directing the additional funds to the same Israeli systems.

As enacted, H.R. 3304 would authorize $372 million more than was requested for MDA, with the Israeli systems getting about half the increase and U.S. territorial defense accounting for most of the remainder.

Congressional action on authorization of funding for selected missile defense programs is summarized in Appendix Table A-1 . Following are highlights.

Ground-Based Missile Defense (GMD)

The budget request includes $1.03 billion for the GMD system: some of which is intended to pay for refurbishing and upgrading the 30 interceptor missiles currently deployed; some to prepare for deployment of 14 additional interceptors at the existing launch site in Alaska, as the Administration has announced it may do; and some to survey locations for a potential third launch site for missile interceptors on the East Coast. The FY2013 NDAA ( P.L. 112-239 , Section 227) required DOD to develop a plan for deploying interceptors at an East Coast site, on the grounds that it would increase the likelihood that the GMD system could intercept U.S.-bound missiles from Iran or North Korea. The budget also requests $315.2 million for the network of long-range radars on which the GMD system relies for target data.

As enacted, H.R. 3304 authorizes $1.13 billion for GMD, including additions to the request of $20.0 million for assessment of a potential third site and $80.0 million to assess the causes of a flight test failure of the system on July 5, 2013. It also includes a provision (Section 235) requiring the deployment of an additional missile-detection radar to cover U.S. territory and authorizes an additional $30 million for that purpose.

Following are highlights of the House-passed and Senate committee-reported and finally enacated versions of the FY2014 NDAA that bear on U.S. territorial missile defense:

Israeli Defenses

The House and Senate bills each would authorize significantly more than the $98.0 million requested for three Israeli programs intended to intercept short-range and medium-range ballistic missiles. H.R. 1960 would add $173.0 million while S. 1197 would add $150.0 million.

Both bills would authorize $220.3 million, as requested, to continue acquiring for Israel a fourth weapons system, dubbed "Iron Dome," designed to intercept short-range rockets and artillery shells. But the House bill also would authorize an additional $15.0 million to gear up for U.S. production of the Iron Dome system (Section 237).

As enacted, H.R. 3304 would authorize the increased amounts set by the House bill.

NATO Missile Defense Cost

H.R. 1960 included a provision (Section 238) that would require the President to negotiate with other leaders of NATO, an agreement that the alliance would pay half the cost of deploying and operating a U.S.-designed regional missile defense system intended to protect Europe.

As enacted, H.R. 3304 includes a provision (Section 240) directing the Secretary of Defense to report on NATO's share of the cost of projected missile defense programs for Europe as well as the secretary's assessment of areas in which NATO members could make additional "burden-sharing" contributions.

Provisions Relating to Wartime Detainees78

The version of the FY2014 NDAA initially passed by the House and the version reported by the Committee each contained provisions relating to persons captured in the course of hostilities against Al Qaeda and associated forces, including those detained at the U.S. Naval Station at Guantanamo Bay, Cuba. The detainee-related provisions in H.R. 1960 would have continued until December 31, 2014, restrictions regarding the conditions under which detainees can be transferred to other countries (Section 1033) and barring the use of funds to construct or modify facilities in the United States to house detainees (Section 1032). It would also have barred the use of funds to provide new or improved recreational facilities for detainees and barred the transfer of detainees to Yemen through December 31, 2014.

During floor debate on H.R. 1960 , the House rejected by a vote of 200-226 an amendment that would have eliminated indefinite military detention for any detainee held in the United States by requiring an immediate trial in a state or federal court for any person detained under authority of the Authorization for Use of Military Force (AUMF) resolution ( P.L. 107-40 ).

The Senate bill ( S. 1197 ) would have relaxed some of the restraints in current law on the treatment of detainees. For example, it would have allowed the expiration of the current prohibition on constructing or modifying facilities in the United States to house detainees currently held at Guantanamo Bay. The bill would also have permitted the transfer of Guantanamo detainees to the United States for continued detention or for trial (Section 1033) and provided greater flexibility for the transfer of detainees to other countries than current law (Section 1031).

On November 19, 2013, the Senate rejected two amendments related to detainee issues:

Amendment 2255 (Senator Ayotte) would have dropped from the bill several committee provisions, thus leaving intact the provisions of current law that bar transfer to any other place of any detainees currently held at Guantanamo; rejected by a vote of 43-55 (with 60 votes required for passage); and Amendment 2175 (Senator Levin) stipulated that any detainee transferred to the United States for trial would be barred from requesting asylum while on U.S. territory; rejected by a vote of 52-46 (with 60 votes required for passage).

As enacted, H.R. 3304 retains the strict prohibition on transferring detainees to the United States for any purpose (Section 1034) and the provision barring funding to modify facilities in the United States (Section 1033). Like H.R. 1960 , it would require a report to be submitted to Congress concerning the legal rights that might attach to detainees if they are transferred to the United States .

The final version of the bill adopts the Senate approach with respect to transferring detainees to other countries (Section 1035). Specifically, it would permit the transfer of detainees who have been ordered released by a competent U.S. court or who have been assessed by a Periodic Review Board as no longer posing a threat to the United States, provided that the Secretary of Defense determines that the transfer is in the U.S. national security interest and that actions have been or will be taken to substantially mitigate the risk of recidivism. The bill requires the Secretary to consider several factors in making such determinations, but does not require written certification to Congress that identified goals have been achieved as a prerequisite to executing a transfer.

Like the original House-passed NDAA, H.R. 3304 would require the Executive to report to Congress regarding the capability of Yemen to detain, rehabilitate, or prosecute detainees who might be transferred there. The compromise legislation dispenses with the proposed statutory bar against the transfer of any detainee to Yemen. It adopts a provision similar to one in the original House proposal that would require the Executive to provide information regarding persons held by U.S. forces at the detention facility in Parwan, Afghanistan who have been deemed to constitute an enduring threat to the United States.

House Floor Amendments

Following are selected amendments on which the House took action during its consideration of H.R. 1960 .

FY2014 DOD Appropriations Bill

Overview (H.R. 2397; S. 1429)

Unlike the more inclusive National Defense Authorization Act, the annual DOD appropriation bill covers only DOD military activities and excludes military construction, which is funded in the annual appropriations bill that also funds the Department of Veterans Affairs and related agencies.

The House version of the FY2014 DOD appropriations bill ( H.R. 2397 ), passed on June 24, 2013, by a vote of 315 to 109, would provide $585.1 billion for those activities—including both the base budget and OCO costs—which is nearly $4.4 billion less than the Administration requested. The Senate Appropriations Committee's version of the bill ( S. 1429 ), reported on July 30, 2013, would provide $587.5 billion, which is nearly $2.2 billion less than the request. (See Table 16 .)

Base Budget

For the FY2014 base budget, H.R. 2397 would add $1.20 billion to the Administration's request to offset what the House Appropriations Committee called the budget's "unrealistic" assumptions about the extent to which "efficiencies" would reduce the cost of building maintenance, depot overhauls of major weapons, and other routine operations. The House bill also added to the amount requested $536 million in anticipation of higher-than-budgeted fuel costs and several billion dollars for various weapons and R&D programs, including increases of $950 million for a submarine, $923 million to modernize Navy cruisers the budget would retire, and $667 million for medical R&D projects.

But those additions would be more than offset by reductions to the base budget request, many of which the House Appropriations Committee said would have no adverse impact on DOD operations. Among these are:

a total of $6.06 billion which the committee deemed to be either in excess of what was required for a particular program or else not adequately justified; a total of $1.10 billion from programs that previously have requested and received more funds for a given year than they spend; and a total of $3.04 billion that would be offset by rescinding the same amount appropriated in prior years, thus reducing the need for new budget authority.

The Senate committee's version of the bill would make several relatively large cuts from the base budget, among which are:

a total of $5.06 billion which the committee deemed to be either in excess of what was required for a particular program or else not adequately justified; a total of $1.53 billion from programs that either have relatively large, unspent balances from prior appropriations or have a track record of requesting larger appropriations for a given year than they typically spend; and a total of $578 million that would be offset by rescinding the same amount appropriated in prior years, thus reducing the need for new budget authority.

But the Senate committee would largely offset those reductions by additions to the Administration base budget request, including:

a total of $4.19 billion to compensate for assumed efficiencies in the budget request that the Senate committee deemed unrealistic; and $1.16 billion to fund programs the Administration had included in its budget request for OCO funding.

OCO Funding

For FY2014 war costs, the House-passed H.R. 2397 would appropriate $79.34 billion, which is $59.3 million more than the Administration's request. Among the largest increases in the committee bill are:

$1.50 billion for equipment for National Guard and reserve units; $1.30 billion to accelerate the "reset" process for Army units that had been deployed in Afghanistan; and $1.07 billion for a transfer fund from which amounts could be transferred to regular appropriations accounts to cover unforeseen OCO costs.

As reported by the House Appropriations Committee, the bill would have added $6.3 billion to the OCO request, but amendments adopted by the House eliminated most of that overall increase:

H.Amdt. 392 (Representative Mulvaney) reduced the committee-reported OCO amount by $3.5 billion, eliminating all additions to the Administration's request except procurement funds for the National Guard and reserve forces. H.Amdt. 366 (Representative Terry) reduced the amount appropriated for support of the Afghan Army and National Policy by $2.6 billion (from the $7.73 billion requested and approved by the committee) and added $1 billion to Operations and Maintenance accounts to reduce the need to furlough DOD civilian employees.

The Senate committee's bill, S. 1429 , would provide $77.62 billion in new budget authority for OCO, which is $1.66 billion less than the Administration's request. Among the largest components of that net reduction are cuts of:

$1.16 billion for programs the Senate committee funded in the part of the bill that funds DOD's base budget; $782 million cut from the $7.73 billion request for the Afghan Security Forces Fund; $284 million the committee deemed excess to need for Army basic pay; and $227 million for Coast Guard missions in support of the Navy, which the Senate committee said should be funded through the Department of Homeland Security.

Military Personnel Issues (Appropriations)

Military Compensation

The Senate committee-reported version of the FY2014 DOD appropriations bill ( S. 1429 ) would fund, as requested, a 1% raise in military basic pay. The House-passed version ( H.R. 2397 ) includes Section 8126, which would add to the amount requested $580 million to fund a 1.8% basic pay increase, as would be authorized by the House-passed version of the NDAA. On other military personnel funding issues:

Both bills would cut the $4.03 billion requested for enlistment and reenlistment bonuses and special pays—the House bill by $145 million, the Senate bill by $156 million—on grounds that, in the current civilian jobs market, it was easier than the budget assumed for the services to recruit and retain talented individuals; Both bills would reduce the $4.76 billion requested for "Permanent Change of Station" funding—intended to cover the cost of transferring servicemembers and their dependents from one assignment to another—with the House bill cutting $151 million and the Senate bill cutting $306 million; and Both bills also would add to the request $25 million to expand to all the services the Air Force's Special Victims' Counsel program to provide victims of alleged sex-related offenses with independent legal representation, drawn from outside the military services (see H.R. 2397 , Section 8122; and S. 1429 , Section 8115).

Defense Health Program (including TRICARE)

The FY2014 DOD appropriations bills passed by the House and reported by the Senate Appropriations Committee each would add upwards of $500 million to the $33.1 billion requested in the base budget for DOD's health care system, which serves 9.6 million beneficiaries (active-duty and retired military personnel and their dependents). Nearly half the request ($16 billion) is for TRICARE, DOD's insurance program, to fund contracts for private-sector medical care for active-duty and retired military personnel, their dependents, and their survivors.

Both bills would reduce the TRICARE request on grounds that, in recent years, the program has requested more than it spent in a given year. Those reductions were more than offset by additions in each bill to compensate for rejection of proposed TRICARE fee hikes and to provide roughly $600 million for medical R&D projects. The House bill also would add $225.0 million to the amount requested for maintenance and repair of medical facilities.

Ground Combat Systems (Appropriations)

Congressional action on authorization of funding for selected ground combat programs is summarized in Appendix Table A- 4 . Following are some highlights:

In the reports on their respective versions of the FY2014 appropriations bill, the House and Senate Appropriations Committees each took note of the planned downturn over the next few years in the Army's purchases from the specialized industrial base that builds tanks and other heavily armored combat vehicles. In S. 1429 , the Senate committee added to the request $90.0 million to continue for one more year the conversion of existing M-1 tanks to the M-1A2 SEP variant, with improved digital communications, night-vision equipment, armor, and transmission. The House-passed bill included no additional funds for the tank upgrades but included an additional $75 million for M-88 recovery vehicles—vehicles built on tank chassis that are intended to tow damaged tanks from the battlefield.

The House and Senate bills each made some reductions in the set of R&D programs intended to develop a new generation of armored combat vehicles for the Army and Marine Corps:

For the Army's Ground Combat Vehicle, envisioned as a replacement for the Bradley armored troop carrier, the House bill would provide $592.2 million, as requested, while the Senate bill would cut $169.0 million; For the Armored Multipurpose Vehicle, a replacement for the 1970s-vintage M-113 tracked vehicle which the Army uses for jobs ranging from mobile command posts to battlefield ambulances, the Senate bill would provide $116.3 million as requested, while the House bill would cut $30.0 million; and Both bills would cut $14.0 million from the Marine Corps request for $137.0 million to develop a new amphibious assault vehicle.

Naval Systems (Appropriations)

Congressional action on appropriation of funds for selected naval programs is summarized in Appendix Table A-6 . Following are some highlights:

Submarines

Historically, Congress has insisted on full funding for major weapons programs, with limited exceptions for so-called long lead-time components, such as the nuclear power plants of submarines. For aircraft carriers and helicopter carriers, with price tags of several billion dollars apiece, Congress has allowed "incremental funding"—that is, spreading the cost of the ship across several budgets. However, it has resisted proposals to use that approach for other types of ships.

In a similar vein, Congress has rejected proposals to fund ships and Air Force satellites using "advance appropriations," that is, funding that Congress appropriates in one year's appropriations bill but which will not become available for obligation until a subsequent fiscal year. Nevertheless, the Administration is depending on advance appropriations to fund one of two Virginia-class submarines in the FY2014 budget request.

Of the projected $5.41 billion total cost of two subs:

$1.53 billion was appropriated as "long lead-time" funding in prior budgets; $2.93 billion is requested in FY2014; and $952.7 million is budgeted as an "advance appropriation."

Under DOD's plan, one of the two subs would be "fully funded" by a combination of long lead-time funding from prior years and a portion of the funds requested in FY2014. The second sub would be funded by a combination of long lead-time money, the remainder of the FY2014 request and the FY2015 "advance appropriation" amount.

In its report on H.R. 2397 , the House Appropriations Committee dubbed the advance appropriation proposal a "funding gimmick" and added to the bill $950.0 million to fully fund the second FY2014 submarine.

As reported by the Senate Appropriations Committee, S. 1429 would add to the amount requested $277.0 million, the purpose of which is to "maintain critical industrial base" associated with the Virginia-class subs.

In addition, the Senate bill would deny the $59.9 million requested to continue developing the Virginia Payload Module, an additional hull section—reportedly about 94 feet in length—that would be incorporated into future Virginia-class subs carrying four large-diameter, vertical launch tubes that could carry additional Tomahawk cruise missiles or other payloads, such as unmanned underwater vehicles. In its report, the committee objected that the modification would disrupt a smoothly functioning production line for the subs and that DOD had not yet officially approved the change.

Destroyers

The House and Senate bills each would approve the $1.62 billion requested for a DDG-51-class destroyer. In addition, the House bill would add $100 million to make up for part of a $304 million shortfall in the program's account as a result of the FY2013 sequestration.

Both bills would deny a portion of the $240.1 million requested for the Air and Missile Defense Radar (AMDR) program, intended to replace the current DDG-51 radar on a projected new version of the ship with a radar better able to track long-range ballistic missiles and low-flying or stealthy cruise missiles and aircraft. Citing delays in the development program, the House bill would cut $79.8 million while the Senate bill would cut $87.0 million.

Aircraft and Missile Programs (Appropriations)

Congressional action on appropriation of funds for selected aircraft and long-range missile programs is summarized in Appendix Table A-10 . Following are highlights:

Strike Fighters (Joint Strike Fighter and F/A-18)

The House and Senate bills would make relatively minor reductions to the $5.45 billion requested for procurement of 29 F-35 Joint Strike Fighter, of which there are three versions used by the Navy, Marine Corps, and Air Force, respectively. The House bill would cut $323.4 million while the Senate bill would cut $278.0 million, the reductions being justified, in each case, on grounds of efficiency and sound management.

While both bills thus would fund acquisition of 29 F-35s in FY2014, as requested, the Senate bill also would cut $80.0 million from the $564.8 million requested for long lead-time components with the intention of slowing the planned increase in production for FY2015. In its report on S. 1429 , the Senate Appropriations Committee observed that the DOD budget assumed procurement in FY2014 of 42 F-35s, an increase of 13 planes (about 45%) over the 29 F-35s funded in the FY2014 budget request. By reducing funding for long lead-time components, the Senate bill is intended to reduce the number of F-35s funded in the FY2015 budget request to 36, which would be an increase of about 25% over the number requested in FY2014.

Both the House and Senate bills also would add to the amount requested $75.0 million for long lead-time components that would support the purchase in FY2015 of 22 F/A-18E/F Navy fighters, the type of plane the F-35 is slated eventually to replace on Navy carriers. In its report, the Senate Appropriations Committee opposed DOD's decision to end F/A-18E/F production, noting that the plane would be the "backbone" of the Navy's carrier air wings for the next 25 years. Keeping the F/A-18E/F in production would maintain the U.S. fighter production base and would hedge against the risk that the F-35 might be delayed, the committee said.

Missile Defense Programs (Appropriations)

H.R. 2397 would make a net addition of $323.0 million to the Missile Defense Agency's $7.68 billion FY2014 budget request while S. 1429 would give the agency a net increase over the request of $227.4 million. Each bill would add $173.0 million to the $95.8 million requested for continued development of three Israeli anti-missile systems designed to intercept short-range and medium-range missiles ballistic missiles.

In addition, the House bill would add $177.2 million to the $1.03 billion requested for the Ground-based Midcourse Defense (GMD) currently deployed in Alaska and California, which is intended to protect U.S. territory against a small number of intercontinental ballistic missiles launched from North Korea or Iran. Of the additional funds, $107.0 million is intended to accelerate procurement of 14 additional GMD interceptor missiles and $70.2 million is to expedite consideration of deploying additional interceptors at a third site, located on the East Coast.

The Senate bill would appropriate a total of $1.03 billion for GMD, as requested. However, within that total, it would shift $142.9 million from the R&D account to the operation and maintenance account.

For the Israeli Iron Dome system, designed to intercept short-range rockets and artillery shells, both bills would provide $220.3 million, the amount requested.

Afghanistan Security Forces Fund (OCO)

The House bill would provide the $7.73 billion requested for the Afghan Security Forces Fund, which pays for training, equipping, and sustaining the Afghan military and national police.

But the Senate bill would cut from the request a total of $781.8 million intended to purchase aircraft for Afghanistan's Air Force, including:

$365.0 million to purchase Russian-built Mi-17 helicopters from Rosboronexport, a Russian state-owned company that also has supplied arms to Syrian President Bashar al Assad. The bill also includes a general provision (Section 8113) that would bar DOD from doing business with Rosboronexport. $416.8 million to purchase an additional 20 Super Turcano turboprops, ground-attack planes built by the Brazilian firm Embraer, 20 of which had been purchased with FY2012 funds. In its report, the Senate Appropriations Committee said DOD had not identified a requirement for more than the 20 planes initially planned for.

House Floor Amendments to FY2014 DOD Appropriations Bills

Following are selected amendments on which the Senate took action during its consideration of H.R. 2397 :

Appendix. Selected Program Funding Tables