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Statement on FY 2014 Budget Request

As Delivered by Secretary of Defense Chuck Hagel, Pentagon Press Briefing Room, Wednesday, April 10, 2013

Good afternoon.

Today I'm announcing the President's fiscal year 2014 budget request for the Department of Defense.

This budget request represents a base budget of $526.6 billion.  This budget continues to balance the compelling needs of supporting troops at war in Afghanistan, implementing the President's defense strategic guidance, and sustaining the quality of the all-volunteer force, all while ensuring we maximize the use of every taxpayer dollar and addresses internal imbalances within the Department of Defense budget.

As I discussed in my speech last week at the National Defense University, the cost of infrastructure and overhead, acquisitions, and personnel compensation must be addressed in order to put the Department of Defense's budget on a sustainable path, particularly given the pressures on our top-line budget.  The request being presented today takes important steps in each of these areas.

First, the budget continues to maximize our use of resources.  It proposes a set of initiatives that saves an additional $34 billion over the next five years by changing the way we do business and reducing support costs.  This savings is on top of the approximately $211 billion in ongoing overhead reductions and business efficiencies identified in the last two budget requests, which are still being implemented.

The new initiatives being proposed include a restructuring of the civilian workforce to meet key needs with fewer personnel and overhaul military treatment facilities and efforts to control health care costs by taking advantage of lower prices for private-sector care.  These efforts are having some success, with projected health care spending in this budget declining by some four percent compared to our budget two years ago.

With this budget, the Department is requesting to consolidate infrastructure with the authorization of a round of Base Realignment and Closure, BRAC, in 2015.  BRAC is a comprehensive and fair tool that allows communities a role in reuse decisions by them for their property.  And it provides redevelopment assistance.

This process is an imperfect process, and there are upfront costs for BRAC. This budget adds $2.4 billion over the next five years to pay for those costs.  But in the long term, there are significant savings, as we've seen from past BRAC decisions.  This budget also continues the Department's efforts to better align acquisition programs with the President's strategic guidance and to eliminate or restructure those programs that are performing poorly.

Over the last four years, the Department has canceled or curtailed more than 30 major acquisition programs, rebalancing our portfolio towards platforms better suited to 21st century security challenges, and making new investments in areas like cyber and advanced intelligence, surveillance and reconnaissance capabilities.

In this budget, the Department has continued to shift priorities within modernization portfolios, shifting to achieve an $8.2 billion in savings from weapons programs, terminations, and restructuring over the next five years.  As one example, by revising the acquisition strategy by the Army's Ground Combat Vehicle program, the Department will save over $2 billion in development costs.  This budget also increases DOD's investments in its cyber workforce, continues to implement our rebalance to Asia, and makes new investments in the flexible platforms needed for the future.  Another area of significant spending growth has been pay and benefits for our military personnel.  The current fiscal environment has demanded that we take another look at these costs, which would represent $170.2 billion, or roughly one-third of the fiscal year 2014 budget request.  In this budget, the Department is submitting a new package of military compensation proposals, including a modest slowing of the growth of military pay by implementing a one percent pay raise for service members in 2014.

The Department is also seeking additional changes to the TRICARE program and the FY 2014 budget to bring the beneficiaries' cost share closer to the levels envisioned when the program was first implemented.  Particularly, this goes for working-age retirees.  These changes, which have the strong support of the Joint Chiefs of Staff, save about $1.4 billion in FY 2014 and a total of $12.8 billion over the next five years.

I am committed, as well as all of the leadership at the Pentagon, to working in partnership with Congress and all stakeholders to implement needed reforms, because current fiscal realities demand that we make tough decisions that have been deferred in the past.  The longer we put this off, the harder it's going to be, particularly given the uncertainty that still exists about future levels of defense spending.

Let me now address that uncertainty.  As we all know, the Department is in the process of implementing steep budget cuts for the current fiscal year as a result of sequester, reductions of up to $41 billion, $41 billion that will lead to the suspension of important activities, curtailed training, and could result in furloughs of civilian personnel.  If these cuts persist, the defense budget would be reduced by another $500 billion over the next decade.

The President's budget request offers a comprehensive deficit reduction plan that would permit Congress to eliminate sequestration.  That plan averts what would otherwise be another significant reduction in the defense budget, some $52 billion in fiscal year 2014 alone and $500 billion over a decade.  Instead, it calls for $150 billion in additional defense savings over 10 years.

Unlike sequester, these cuts are backloaded, occurring mainly in the years beyond FY 2018. While no agency welcomes further budget cuts, the President's deficit reduction proposal requested in this budget gives the Department time, and that's important, time, to achieve these longer-term savings, without disproportionate harm to modernization and readiness, the budget categories what will provide the most immediate savings, but also encompass most of our military capabilities.

We need to plan wisely for a long-term future of budget constraints, with thorough, clearheaded analysis that is anchored in the President's defense strategic guidance.  That is why I directed the strategic choices and management review.  This review will examine the choices that underlie our defense strategy, posture, and investments, identify the opportunities to more efficiently and effectively structure the Department, and develop options to deal with the wide range of future budgetary circumstances, and that review is underway.

The purpose of the review is to ensure that the Department is prepared to defend the nation and America's strategic interests.  No matter the outcome of this budget debate, going forward, every decision must be carefully weighed against our national interests and it must be worthy of the service, sacrifice and loyalty of our men and women in uniform and their families.

These decisions must also be made with the partnership of Congress, and I look forward to having this important discussion about our national security priorities and interests in the days and the weeks ahead.

With that, I'll turn to General Dempsey, chairman of the Joint Chiefs, and then we'll ask our comptroller, Bob Hale, and General Ramsay from the Joint Chiefs to respond to specific questions, but General Dempsey and I will take a few questions when he's complete before we ask Comptroller Hale and General Ramsay.  

Thank you.

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