Defense Budgeting and the Dilemma of Lost Time

commentary

Aug 16, 2023

(l-r) U.S. Defense Secretary Lloyd Austin, Secretary of State Antony Blinken, and Commerce Secretary Gina Raimondo during a Senate Appropriations Committee hearing on the president’s fiscal year 2024 budget request on Capitol Hill in Washington, D.C., May 16, 2023, photo by Elizabeth Frantz/Reuters

(l-r) U.S. Defense Secretary Lloyd Austin, Secretary of State Antony Blinken, and Commerce Secretary Gina Raimondo during a Senate Appropriations Committee hearing on the president’s fiscal year 2024 budget request on Capitol Hill in Washington, D.C., May 16, 2023

Photo by Elizabeth Frantz/Reuters

This commentary originally appeared on The Hill on August 15, 2023.

A flawed federal budget process that relies on temporary fixes is hampering Pentagon planning and could pose long-term risks to U.S. military readiness and competitiveness.

Some argue that the United States zoomed in its focus narrowly on the terror threat permeating from the Middle East at the expense of future planning. Others argue that previous administrations have not funded the military adequately to meet rising strategic intent. Still others argue that the budget process itself needs reform (PDF). Finally, some also argue the U.S. defense budget is too large relative to domestic programs and therefore should be cut.

Perhaps an underappreciated contributor has been budget uncertainty. This is reflected in the inefficiency in the way the United States budgets, placing arbitrary budget caps on the Department of Defense through the Budget Control Act (PDF) as well as continuing resolutions (PDF). These legislative measures have resulted in lost time.

While the Pentagon continues to increase its budget, to paraphrase Defense Secretary Lloyd Austin, “money can't buy time.”

In 2011, Congress attempted to reduce the budget deficit by placing caps on federal spending from fiscal year 2012 through fiscal year 2021 by passing the Budget Control Act. A 2022 CBO report estimated that the Defense Department lost $1.17 trillion in budget authority when adjusted for inflation.

This is roughly the equivalent of a full fiscal year of defense spending. The Defense Department chose to take these cuts disproportionally in procurement in order to preserve funding for research, development, test and evaluation programs, and operations in the Middle East. This choice enabled the department to continue progress in developing the next generation of military capabilities, but at the expense of bolstering capacity.

On average, the department was appropriated $123.8 billion (PDF) a year for procurement between fiscal year 2011 and fiscal year 2021. Thus, the Budget Control Act's cuts equate to roughly 10 years of procurement.

Congress and the Pentagon developed mechanisms to mitigate the impact of the Budget Control Act by passing four bipartisan budget acts (PDF) to increase budget authority. Alternatively, overseas contingency operations were exempt from budget caps. The department used overseas contingency operations funding to supplement programs that should have been funded in the base budget between 2013 and 2021 to increase its overall budget by $742 billion—even with the wars in Iraq and Afghanistan winding down. But these mechanisms provided only one or two years of budgetary clarity, and did not allow for long-term capital investment planning.

Since 2011, Congress has routinely struggled to pass a budget on time. Instead, Congress leverages continuing resolutions to fund the government and prevent shutdowns. These continuing resolutions “lock in” funding from the previous year.

This inefficient approach arbitrarily adds or subtracts funding to programs regardless of life changes in a program's life cycle. For example, the Air Force attempted to retire 47 F-16s in FY2022 (PDF). They were unable to do so without a final appropriation and were forced to spend money to keep them flying until a full appropriations bill was passed into law in March 2022. In addition, continuing resolutions prevent the Defense Department from starting new programs unless an exception is made.

A RAND analysis investigated the impact of continuing resolutions on major defense acquisition programs between fiscal years 2013 and 2015. RAND researchers noted that continuing resolutions appeared to have minimal impact on increasing unit costs and delays in delivering systems. The researchers noted, however, this analysis only looked at procurement impacts, and further analysis was required.

Annual continuing resolutions also impact the Defense Industrial Base's (PDF) workforce in a fixed contract schedule, often resulting in delays and unpredictable cash flows. Stop work orders affect the retention and recruitment of high-skilled labor for the defense sector, often in competition with other commercial companies in a tight labor market.

In total, the Pentagon has been under a continuing resolution for 1,527 days—nearly 51 months—since 2011. On average, it is under a continuing resolution for 117 days, nearly a third of each year.

The Pentagon has been under a continuing resolution for 1,527 days—nearly 51 months—since 2011. On average, it is under a continuing resolution for 117 days, nearly a third of each year.

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A RAND analysis investigated the impact of continuing resolutions on major defense acquisition programs between fiscal years 2013 and 2015. RAND researchers noted that continuing resolutions appeared to have minimal impact on increasing unit costs and delays in delivering systems. The researchers noted, however, this analysis only looked at procurement impacts, and further analysis was required.

Annual continuing resolutions also impact the Defense Industrial Base's (PDF) workforce in a fixed contract schedule, often resulting in delays and unpredictable cash flows. Stop work orders affect the retention and recruitment of high-skilled labor for the defense sector, often in competition with other commercial companies in a tight labor market.

In total, the Pentagon has been under a continuing resolution for 1,527 days—nearly 51 months—since 2011. On average, it is under a continuing resolution for 117 days, nearly a third of each year.

Figure 1: Length of Continuing Resolutions (in Days)

Fiscal Year Fiscal Year Start Appropriation Enacted Days
FY2011 10/1/10 4/15/11 196
FY2012 10/1/11 12/23/11 83
FY2013 10/1/12 3/26/13 176
FY2014 10/1/13 1/17/14 108
FY2015 10/1/14 12/16/14 76
FY2016 10/1/15 12/18/15 78
FY2017 10/1/16 5/5/17 216
FY2018 10/1/17 3/23/18 173
FY2019 10/1/18 9/28/18 0
FY2020 10/1/19 12/20/19 80
FY2021 10/1/20 12/27/20 87
FY2022 10/1/21 3/15/22 165
FY2023 10/1/22 12/29/22 89

Consequences of These Decisions

Since the DoD has been unable to afford to buy new things, this has resulted in sustaining ships and aircraft longer than they were originally intended.

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The Budget Control Act and annual continuing resolutions have limited the Defense Department's ability to invest in the future—in terms of researching new technologies and buying new equipment. Since the Department of Defense has been unable to afford to buy new things, this has resulted in sustaining ships (PDF) and aircraft (PDF) longer than they were originally intended.

Deferring procurement could be partly attributed to increasing operations and maintenance bills (PDF). In 1990, operations and maintenance represented approximately 32 percent of the total department budget, while investment (a combination of research, development, test and evaluation, and procurement) represented nearly 36 percent. The proportion of investment remained relatively constant over time. Operations and maintenance has grown to nearly 42 percent in 2023.

Figure 2: Budget Share for Investment, Military Personnel, and O&M

Public Law Title FY 1990 FY 1991 FY 1992 FY 1993 FY 1994 FY 1995 FY 1996 FY 1997 FY 1998 FY 1999 FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024
Military Personnel 78,876 84,213 81,221 75,974 71,365 71,557 69,775 70,338 69,821 70,650 73,838 76,888 86,957 109,062 116,111 121,279 128,483 131,756 139,033 149,290 157,100 158,389 158,352 153,531 150,186 145,859 145,446 146,147 150,854 157,293 163,348 172,869 178,094 183,057 199,570
Operations and Maintenance 88,409 117,234 93,791 89,172 88,640 93,751 93,658 92,353 97,215 104,992 108,776 125,238 133,851 178,316 189,763 179,215 213,532 240,252 256,223 271,564 293,630 305,235 286,775 258,353 262,453 246,572 245,150 258,707 274,091 283,129 301,494 285,606 320,208 352,786 330,751
Procurement 81,376 71,740 62,952 52,789 44,141 43,647 42,572 42,963 44,818 51,112 54,973 62,607 62,740 78,490 83,073 96,614 105,371 133,772 165,006 135,438 135,817 131,898 118,316 97,763 100,405 102,110 118,895 124,337 147,488 146,800 140,987 140,890 153,644 167,084 170,348
RDT&E 36,459 36,193 36,623 37,974 34,567 34,522 34,972 36,404 37,089 38,290 38,706 41,594 48,718 58,103 64,641 68,825 72,855 77,549 79,567 80,005 80,234 76,687 72,034 63,347 63,483 63,869 69,543 74,129 91,957 95,534 105,226 106,119 119,347 140,650 145,791
292,999 276,208 281,883 267,402 251,364 255,727 254,569 258,006 258,583 278,595 290,534 319,428 345,632 437,801 471,011 483,913 536,462 602,246 673,487 664,524 695,673 690,781 655,388 585,361 595,740 570,844 595,724 626,239 694,453 712,546 738,755 719,496 795,730 863,153 863,437
Investment (Procurement and RDT&E) 40.2% 39.1% 35.3% 33.9% 31.3% 30.6% 30.5% 30.8% 31.7% 32.1% 32.2% 32.6% 32.2% 31.2% 31.4% 34.2% 33.2% 35.1% 36.3% 32.4% 31.1% 30.2% 29.0% 27.5% 27.5% 29.1% 31.6% 31.7% 34.5% 34.0% 33.3% 34.3% 34.3% 35.7% 36.6%
Operations and Maintenance 30.2% 42.4% 33.3% 33.3% 35.3% 36.7% 36.8% 35.8% 37.6% 37.7% 37.4% 39.2% 38.7% 40.7% 40.3% 37.0% 39.8% 39.9% 38.0% 40.9% 42.2% 44.2% 43.8% 44.1% 44.1% 43.2% 41.2% 41.3% 39.5% 39.7% 40.8% 39.7% 40.2% 40.9% 38.3%
Military Personel 26.9% 30.5% 28.8% 28.4% 28.4% 28.0% 27.4% 27.3% 27.0% 25.4% 25.4% 24.1% 25.2% 24.9% 24.7% 25.1% 24.0% 21.9% 20.6% 22.5% 22.6% 22.9% 24.2% 26.2% 25.2% 25.6% 24.4% 23.3% 21.7% 22.1% 22.1% 24.0% 22.4% 21.2% 23.1%

Continued growth in operations and maintenance has resulted in the military continually reducing its force structure over time—as can be observed with the relative decline in military personnel as well as retiring weapons systems. It should be noted that operations and maintenance growth is also attributed to other factors (PDF), including increasing civilian pay and health care costs. This strategy has come to be known as “divest to invest.”

Thus, an ugly cycle begins where the department sustains older weapons systems (either by its choice or by direction), which often cost more. However, by holding onto older weapon systems, the share of operations and maintenance continues to increase over time.

To restore the U.S. military's primacy, it requires budget certainty. We are not arguing for a particular funding level, but the Pentagon should have clear guidance on budget authority. And where continuing resolutions have cost a substantial amount of time, the Defense Department should have timely appropriations.


John Hoehn is an associate policy researcher at the nonprofit, nonpartisan RAND Corporation and former military analyst with the Congressional Research Service. Paul Cormarie is a policy analyst at RAND.