Julie Hogan SAF/AQPM 9 Jul 13

1. Sequestration 101 Julie Hogan SAF/AQPM 9 Jul 13

2. Overview • Background • Federal Budget Process • Appropriation vs. Authorization • Types of Funding • Continuing Resolution • Defense Budget • Budget Control Act • Sequestration • Illustration Do Ask Questions Do Take Notes Ensure you claim CLP/CLU (8) DO NOT FALL ASLEEP

3. President’s Budget (PB) • Requests funds to run Government • Includes operations, research & development, procurement • Begins authorization and appropriations cycle • Usually submitted to Congress First Monday in February After State of the Union Address • Explained to Congress through additional documentation and hearings

4. Draft Bill • Conf Report • Bill as passed • May include amendments • Draft Bill • Committee Report AUTH CONFERENCE SENATE Passes DoD AUTH BILL AUTHORIZATION PROCESS SASC Final DoD Auth Bill CONGRESS HASC HOUSE Passes DoD AUTH BILL DoD AUTH LAW • Bill as passed • May include amendments PRESIDENT SIGNS BILL • Draft Bill • Committee Report President’s Budget (PB) Sent to Congress in February • Draft Bill • Committee Report CONGRESS • Bill as passed • May include amendments • Draft Bill • Conf Report SENATE Passes DoD APPROP BILL APPROPS CONFERENCE SAC-D HOUSE Passes DoD APPROP BILL • Bill as passed • May include amendments HAC-D APPROPRIATIONS PROCESS CONGRESS Final DoD Approps Bill • Draft Bill • Committee Report DoD APPROPS LAW (FEDERAL BUDGET) PRESIDENT SIGNS BILL How Defense Bills Become Laws: The Products

5. Authorization Appropriation Authorization vs. Appropriation • Constitutionally mandated • Provides budget authority • Permission to draw funds from US Treasury • One-year budget focus • Limited language • Defense is only 1 of 12 Bills • SAC-D and HAC-D (D = Defense) • Statutorily authorized • Provides permission & direction on how to spend funds • Policy oriented • Fiscal Year focus • Extensive language Example:Mom, Can I go to the movies? “Yes, I approve (authorize) you to go, but you cannot see “Zombie Blood Bath” (Prohibitive content) Authorizers: HASC & SASC (House Armed Services Committee & Senate Armed Services Committee) Example: Dad, Can I have money to go to the movies? “Yes, here is $20 (appropriated).” (Cannot spend the $20 to see “Zombie Blood Bath” due to Prohibitive Content) Appropriators: HAC & SAC (House Appropriations Committee & Senate Appropriations Committee)

6. SEARS Real-life Definitions Appropriation Request Authorization You can charge it to us. I need $200 for a new bike. O.K. But you have to wear a helmet. Obligation Expenditure Outlay Bank 1 Aug 1997 SEARS SEARS $200.00 $200 SEARS Bike

7. Types of Funding RDT&E Incremental Procurement MILCON Full O&M MILPERS Annual

8. Continuing Resolution Authority (CRA) • Used by Congress to fund government agencies if a formal appropriations bill has not been signed into law by 30 Sep • Allows operations to continue until formal appropriation is approved • Can last from a few days to several months • Restrictions under CRA • New Starts • Quantity Increases

9. How Big is the DoD Budget?

10. Some Issues • How big should the defense budget be? • Percent of gross domestic product? (currently ~4%) • Percent of the budget? (currently ~20%) • How do we balance the budget? • Raise taxes? • Decrease spending? • Where should we cut defense? • Cancel programs? • Close bases? • Reduce personnel/benefits?

11. Budget Control Act • Created “super committee” to make recommendations (tax increases & spending cuts) – failed • As a result, there is an across the board cut to eliminate excess spending (sequester) Enacted due to debt ceiling crisis Reduces spending by $1.2 trillion over 10 years (2011-2021) Discretionary spending is capped each year for next decade

12. Sequestration • Theory: “Meat-ax” approach to budget-cutting whose consequences were so dire Congress would not let it occur • Reality: It happened! • Enacted 1 March 2013 (after extension) • Drove $42.7B cut to DoD budget in FY13

13. Typical Monthly College Budget Tuition $1,000 Housing 500 Food 400 Car 200 Insurance 175 Gas 100 Cell Phone 50 • Entertainment 50 Savings 25 $2,500

14. 10% Budget Reduction Tuition $1,0001,000 Housing 500500 Food 400340 Car 200200 Insurance 175100 Gas 10070 Cell Phone 5025 • Entertainment 5010 Savings 25 5 $2,500 $2,250

15. Sequestration (10%) Tuition $1,000900 Housing 500450 Food 400360 Car 200180 Insurance 175158 Gas 10090 Cell Phone 5045 • Entertainment 5045 Savings 25 22 $2,500 $2,250

16. Impacts • Tuition – Can’t take a class; may delay graduation • Housing – Move to a cheaper place? Get a roommate? • Food – Buy cheaper food; eat less • Car – Can’t make car payment; defer oil change • Gas – Consolidate trips; take bus • Insurance – Cancel healthcare policy; assume risk • Cell Phone – Use more inefficient processes • Entertainment – Have less fun

17. Air Force Impacts • Limit supply/IT purchases • Defer building maintenance • Cancel trips, conferences, training • Cancel non-mission flying hours (e.g., airshows, flyovers) • Fire temporary employees/impose hiring freeze • Furlough civilians one day per week • Cancel combat exercises • Reduce weapon system sustainment • Ground airplanes

18. Looking Ahead • One time opportunity to move money between accounts • Still waiting for Congress to approve the DoD request • If Congress can’t agree on budget this year, we will sequester again • Continue to trade modernization for readiness