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Department of Defense Press Briefing on Civilian Furlough Planning Efforts from the Pentagon

Presenters: Under Secretary of Defense and Chief Financial Officer Robert F. Hale and Acting Under Secretary of Defense for Personnel and Readiness Jessica Lynn Wright
February 20, 2013

            BRYAN WHITMAN:  Good afternoon, and thank you for joining us today and for your interest in the topic today of sequestration, as well as most of you know by now, in accordance with the law, we have notified Congress today about the potential for furloughs.  Today, with us we have our undersecretary comptroller, Mr. Bob Hale, and our acting undersecretary for personnel and readiness, Ms. Jessica Wright, here to address your questions.  They do have some comments that they'd like to start with, with respect to sequestration and then the actual action that we took today with respect to notifying Congress on furloughs.  And then they'll be available to take your questions.  I'll help them in terms of getting your questions addressed, so -- 

            UNDER SECRETARY ROBERT HALE:  Okay.  Well, good afternoon.  Today, the Department of Defense faces some enormous budgetary uncertainty, really unparalleled in my experience.  The possibility of sequestration starting on March 1.  By the end of March, it could mean a $46 billion reduction in our total top line, nine percent in all of our accounts, except military personnel, including our wartime accounts. 

            We will protect the wartime operating accounts, but that means larger disproportionate cuts in the base budget, operation and maintenance accounts.  This is exacerbated by the continuing resolution, which if it stays in effect in its current form, has the money in the wrong places.  Total dollars are okay, but it's the money in the wrong places.  There are too many dollars in the investment accounts and too few in operation and maintenance. 

            And there's a pattern here.  I already told you, protecting OCO [Overseas Contingency Operations] is going to put pressure on base budget operation and maintenance, so, too, will affect that the continuing resolution has not enough O&M [Operations & Maintenance] money.  

            And finally, we are spending at a higher than expected rate in our OCO budgets and -- we did not anticipate two years ago as much costs for transporting goods in and out of Afghanistan, and we have seen some higher operating tempo.  Again, we will need to meet those costs, which means still further cuts in the base budget side of operation and maintenance.  

            The sum of all those effects means we are seriously short of operation and maintenance funds if sequestration goes into effect and the CR [continuing resolution] stays in effect.  And this will have serious adverse effects on readiness. 

            So we've taken some short-term actions that I think you're generally familiar with to try to slow our spending, avoid more draconian cuts later, hiring freezes for civilians in effect in many of our organizations already, layoffs of temporary and term employees, sharp cutbacks in facilities maintenance, cutbacks in base operations.  

            But if sequestration and the CR last all year, there will have to be much more far-reaching changes.  We will have to make cutbacks and delays in virtually every investment and program in the department, more than 2,500 of them.  It will mean cutbacks in unit buys.  It will mean increases or delays, increases in unit costs.  We will have to cut back training, particularly for non-deployed units, and that will lead to actions such as about two-thirds of the Army combat and brigade teams being at unacceptable levels of readiness by the end of the year, excluding those actually deployed in Afghanistan.  Most Air Force units that aren't deployed would be at below acceptable readiness levels by the end of the year. 

            You'd see cutbacks in Navy and Marine Corps readiness and deployments.  You've already seen that we've decided to take a -- have one fewer carrier in the gulf.  And, unfortunately, along with this long list of items, we will have to do if sequestration and the CR last all year are furloughs for our civilian personnel. 

            We feel we don't have any choice but to impose furloughs, even though we would much prefer not to do it.  We're more than 20 percent short in O&M, with seven months to go, much higher in some of the services, particularly the Army.  Civilian personnel make up a substantial part of DOD O&M funding.  We can't do reductions in force, especially at this point in the year.  They'd cost us money in this year because of unused leave and severance pay, so furloughs are really the only way we have to quickly cut civilian personnel funding.  

            We have established some general approach to furloughs that we'll follow.  One is to make them one of our approaches of last resort.  We'll also insist on consistency across the department.  Essentially, all of our organizations, if we have to furlough, will do so in about the same -- for about the same number of days. 

            There will be some very limited exceptions to these furloughs.  For example, we will except civilians deployed.  We will not furlough civilians deployed in combat zones.  We will not furlough civilians who are required to maintain safety of life or property, but only to the extent that they have to do that to maintain safety of life or property.  And by that, I mean if there are 20 policemen on a base, they don't automatically all -- they're not all automatically exempted from furloughs, only to the extent that commanders and managers determine they have to exempt some or all of them in order to maintain a safety in life and property.  

            We'll exempt employees paid with non-appropriated funds.  It's slightly embarrassing, but it's true by law.  Senate-confirmed political appointees are exempt by law, and we will exempt our foreign national employees.  

            So how would furloughs work in general?  First, there's a whole series of notifications.  We started the first one today, with the notification to Congress, along with a message by the secretary of defense to our civilian employees.  That starts a 45-day clock ticking.  Until that clock has run out, we cannot proceed with furloughs. 

            We will ask the components now to identify specific exceptions, and we'll review those for consistency.  The components will begin required engagements with local unions, and will also – and Jess Wright’s organization would notify unions with national bargaining rights.  

            At some point in mid-March, we will send a notification to each employee who may be furloughed.  That starts a 30-day clock, waiting period, before we can take any action.  And then later on in April, we will send a decision to employees, and they have a one-week period, once we've made that decision, to appeal to the Merit Systems Protection Board. 

            The bottom line is, furloughs would not actually start for DOD employees until late April, and we certainly hope that -- even if sequestration is triggered on 1 March, we certainly hope that in the interim Congress will act to de-trigger sequestration or, if they can't accomplish that goal by March 1, as the president suggested, to take some short-term action while they're dealing with the broader issue. 

            Meanwhile, unfortunately, we'll have to continue our planning for furloughs.  Frankly, this is one of the least -- or the most distasteful tasks I have faced in my four years in this job.  But we will work it out. 

            And with that, I'd like to turn it over to Jess Wright, who will talk more about some of the furlough planning actions.  

            UNDER SECRETARY JESSICA WRIGHT:  Thanks, Bob.  Good afternoon.  

            Let me first say that my focus is clearly on people.  Our civilians around the world provide invaluable support to national security, our nation's warfighters, and our families.  And every day, they make countless contributions to the sacrifice -- and sacrifices in support of national defense.  

            The effects of sequestration and the continuing resolution on our military personnel will be devastating.  But on our civilians, it will be catastrophic.  These critical members of our workforce, they work in our depots.  They maintain and repair our tanks, our aircrafts, our ships.  They teach our kids.  They care for our children.  They provide medical treatment to all of our beneficiaries.  They take care of our wounded warrior.  They provide services and programs such as sexual assault prevention and suicide prevention, just to name a few.  

            So let me be clear.  The first, the second, and the third order of effect on sequestration will be felt in the local commands and will be felt in the local communities all over the United States and, clearly, all over the globe.  This is not a Beltway phenomenon.  More than 80 percent of our civilians work outside of the D.C. metro area.  They live and work in every state of the union.  

            If furloughs are enacted, civilians will experience a 20 percent decrease in their pay between late April and September.  As a result, many families will be forced to make difficult decisions on where their financial obligations lie.  Key benefits, such as life insurance benefits, health care, and retirement will generally continue.  Those programs and policies are important -- these important benefits are mandated by the Office of the Personnel Management and they're applied consistently to all government employees.  

            Loss of pay won't only be felt by each employee, but it will be felt in the business communities where they serve, where their kids go to school and the neighborhoods that they live in.  Furloughs will impact the majority of our civilian workforce, as Sec. Hale said.  And the department will apply those furloughs if necessary in a consistent and an equitable fashion, with only few exceptions, as Sec. Hale said, relatively few exceptions.  

            While civilians will experience the impact directly to their wallets, our servicemembers, retirees, and families will clearly feel the effect of these actions.  If sequestration is not averted, the associated furloughs will impact our warfighters, our veterans, and our family members in untold ways.  So let me talk about a couple of those ways. 

            With respect to our schools, our goal is to preserve the accreditation of our schools and ensure quality education for all of our kids.  As we continue to work with the Department of Defense Education Activity on how they will implement the furloughs, we are committed in mitigating the impact of sequestration on the school year for our kids.  

            Regarding health care, about 40 percent of our medical providers are civilians.  This furlough, if impacted, will affect them greatly.  But the department's intent and our goal is to mitigate that impact and provide quality care and access of care.  And we are thoughtfully working through that process now.  

            And certainly, family members will feel the impact of this sequestration.  While it's our intent to ease the impact of sequestration on family programs, it is clearly possible that operating hours of commissaries will be curtailed.  And while it is our intent to preserve family members to the -- family programs to the greatest extent possible, some family programs may be affected, if the length of sequestration goes long and hard.  

            We understand here in the department that sequestration will be significant, not only to our civilian employees, but to the servicemen and women and their families.  It will affect local communities, it will affect local businesses, it will affect our dedicated men and women that live in the local communities throughout our nation and clearly overseas.  We know this. 

            And that's why our guiding principle throughout this process will be to lessen the impacts wherever we can.  We are clearly grateful for the support of our warfighter, and we're clearly grateful for the support of the men and women of our civilian force that work to help the warfighter protect their mission. 

            Thank you.  

            MR. WHITMAN:  Bob, why don't you start us off, and then Tony has a question. 

            Q:  I have a question for Ms. Wright.  You mentioned that every -- with regard to the furloughs, that every state would be affected.  Can you say which states are affected the most?  

            UNDER SEC. WRIGHT:  We have not done that research to find out where states will be affected the most.  But clearly, where we have our large bases, where we have our large depots, they will be affected.  

            I don't know if you want to add to that, Bob. 

            UNDER SEC. HALE:  We have some state-by-state data.  And it's Virginia, California, I mean, as you might not be surprised, as Jess just said.  

            Q:  We're talking about the furloughs, not sequestration in general?  Or both? 

            UNDER SEC. WRIGHT:  Both. 

            UNDER SEC. HALE:  No, I'm talking about furloughs -- probably both, but I was talking about furloughs specifically.  

            Q:  Virginia and California? 

            Q:  Is that data available? 

            UNDER SEC. HALE:  Yeah, we can get you that.  I don't see why not.  

            Q:  What do you expect (off mic) 

            Q:  I have a broader question for you.  Both the CBO [Congressional Budget Office] and the Center for Strategic and Budgetary Assessments have said that a $45 billion cut would basically take the Defense Department back to 2007, 2006 levels, when you were fighting a huge war in Iraq and Afghanistan.  Why can't the department absorb that kind of cut, rather than lay it all the -- and that experience all these purported draconian consequences?  What's wrong with that picture?  You seem to have a lot of money, if you look back at '07 and '06. 

            UNDER SEC. HALE:  Well, first off, there's a timing issue.  I mean, the $46 billion cut will occur five months into the year, when we have expended a lot of the -- particularly on the operating side, we've extended -- or we'll have expended roughly five-twelfths of the money, so we're going to have to take it in a seven-month period and without, frankly, you know, time to get ready.  

            But more generally, I'd say I’m always troubled, if we're trying to determine the adequacy of defense budgets based on real dollar levels in a particular year.  I mean, I think that you need to look at the threats that we face, and they remain quite substantial, I guess complex set of security challenges is the word.  And, therefore, I don't think returning to some arbitrary past number for defense makes sense.  

            I mean, we need to -- we owe it to the public to figure out the amount that we think needs to be spent to carry out a national defense strategy and then ask for it, and we believe we've done that. 

            Q:  One follow-up.  Weapons programs, a lot of the industrial base is wondering, will this, in fact, lead to terminations of existing contracts?  Or is it more slowing down of dollars for new contracts?  

            UNDER SEC. HALE:  I don't anticipate that we will cancel many, if any contracts, because we'd incur a substantial costs, so it's more the latter, that we will not pick up options, that -- that we may not start or delay starting new contracts, but I wouldn't expect that we will terminate existing contracts.  

            And I would like to say, to reassure them, if you've got a contract with us, we're going to pay you.  And I believe even under sequestration and furloughs, we will find a time to keep our payments to our employers and the vendors on time. 

            Q:  Thank you. 

            Q:  Can I ask a question about -- 

            MR. WHITMAN:  Let's go right here (off mic) 

            Q:  If the base number of civilians that work for the Department of Defense is 800,000, how many do you expect to be furloughed?  And have you said what the estimated savings would be from furloughs? 

            UNDER SEC. HALE:  We don't know the exact number yet, because it will depend on those exceptions.  First off, it will probably be more like 750,000, because about 50,000 of them are foreign nationals, and we decided not to attempt to furlough them.  But there will be some exceptions that will make it smaller. 

            Our estimate is $4 billion to $5 billion of savings in the remainder of fiscal year 13.  And again, it's going to depend on how many exceptions there are, and that's a process we've just started to ask our commands to identify. 

            Q:  On the -- on the number of -- or the percentage that are likely to be furloughed, I realize you just started that, but you -- is it going to be more than 50 percent?  And on the - 

            UNDER SEC. HALE:  Oh, I think so, yeah. 

            Q:  And on the 46,000 temporary and term employees that are being already terminated, can you say how far that process is along, how many of those people have been laid off, what percentage (off mic)

            UNDER SEC. HALE:  I mean, the latest data I saw -- this is an ongoing issue, in -- it was 6,000, 7,000 that are either laid off or are in the process of being laid off, but I don't think that's probably the end.  I think you'll see more, and I -- but I honestly don't know, again -- for those near-term actions, that one in particular, the layoffs, we did allow mission-critical exceptions, and we -- and we don't know exactly what our commands will do.  

            Q:  At what point will you have the mission critical? 

            UNDER SEC. HALE:  Well, I would think, by the end of this month, we'd probably have a pretty good idea, because we'll be heading into more detailed planning at that point and actually -- assuming this goes forward, which I sure hope it doesn't, that we will be going forward. 

            Q:  I have a question about the -- the exemption -- oh, I'm sorry. 

            Q:  Go ahead (off mic)

            Q:  Okay.  The exemptions.  Can you tell us more about who is going to decide -- I mean, who -- which employees to exempt from furloughs and how that process works?  And do you have any estimates on how much -- how many people might be exempted?  

            UNDER SEC. WRIGHT:  We have powered down to the services to have them review their civilian employees with the -- with the exemption process and criteria that we have given them.  

            You know, I want to bring you back to our civilian workforces.  It's hugely invaluable, and they contribute just tons to what we do here in the department and worldwide.  But saying that, if we have to do this furlough, like Sec. Hale said, exemptions will be relatively small.  We've asked the services to come back with a plan, to give us the plan on the 1st of March.  We will review that plan, with the criteria that we've outlined for exemptions, and -- and go forward from there.  So we don't have a correct -- we don't have a number yet that I can give you on who -- on who -- or a percentage that would be exempt. 

            Q:  What will life on a military base look like, as far as, you know, with the closures and the stuff that you're talking about, the shortened hours?  What do you expect to see? 

            UNDER SEC. WRIGHT:  As I said in the opening comments, I -- I truly believe that our civilians add such value to the warfight effort and to life on a military base.  And so, if furloughed, we will see a reduction in some of either the services or, for example, the commissary hours. 

            So life on a military base, if that base has a commissary, that will impact those individuals that use the commissary.  And, frankly, until we find out what the exemptions are, until we find out how this is going to be applied, I can't give you a daily routine of what -- what a generic day would be on a military base, should we face such a catastrophic event as furloughing our civilian employees.  

            UNDER SEC. HALE:  Can I answer that in a broader context and add on to what Jess has said?  Our personnel are committed to carrying out a mission to defend the United States.  And I think one thing you're going to see is a great deal of frustration, because they will see they can't train as much as they feel they need to and that the readiness of their units is degraded.  If they're dealing with investments, they'll see disruption on all the programs they're managing, so there will be some aspects of daily life that will be affected.  But I think that their satisfaction with the mission, if you will, is going to be adversely affected, and that's important to these people, both our civilians and our military. 

            MR. WHITMAN:  Dan, over here. 

            Q:  Does the furlough apply to intelligence employees that are funded by the national intelligence program?  Because, as you know, the director of national intelligence said that those -- the furloughs should not apply to them. 

            UNDER SEC. HALE:  I don't know that a final decision's been made there.  We have said, as I mentioned, that for DOD employees, other than NIP [National Intelligence Program] employees, we will ensure consistency, decided that, but that's a decision that will have to be made by ODNI [Office of the Director of National Intelligence], and I don't know that they've made it.

            Q:  So that's a decision for ODNI, not DOD? 

            UNDER SEC. HALE:  I think it would be, in conjunction with the Office of Management and Budget, which will oversee this for the government as a whole.  

            Q:  And can you give me just a ballpark figure on how many people we're talking about under the NIP? 

            UNDER SEC. HALE:  I want to say 25,000.  Does that sound right, Mary?  All right. 

            MR. WHITMAN:  We can get that number. 

            UNDER SEC. HALE:  Don't hold me.  I think I'd better get back to you.  

            MR. WHITMAN:  Let's go right here and then here. 

            Q:  Okay.  Mr. Hale, you just spoke of frustration on the bases.  You know, what -- is there any type of, you know, study on what impact sequestration and this fiscal uncertainty has had on recruiting or will have on recruitment efforts, perhaps hurting commands themselves, but also just the ability of these services to recruit for the future? 

            UNDER SEC. WRIGHT:  It could potentially affect the process -- military entrance processing stations, because the -- some of those individuals are civilian employees.  So it could potentially affect the slowdown of that processing, the physicals that are performed, the testing that is given. 

            The recruiters are all military.  And they are exempt from -- from a furlough.  So, you know, the -- the second and third order of effect of getting somebody in can slow the process.  

            Q:  You had said that, by the end of this process, it's possible you have two-thirds of troops would not -- be at unacceptable levels of readiness.  Will that affect future deployments?  I mean, after the -- will that slow down and change future deployments? 

            UNDER SEC. HALE:  It could.  I said two-thirds of the Army active combat brigade teams, other than those that are currently deployed, would be at below acceptable levels of readiness.  Yes, it could affect their ability to deploy to a new contingency, if one occurred, or if this goes on long enough, even to Afghanistan and is a concern.  

            Q:  (off mic) you said the OCO budget was higher than expected -- is that entirely because of the Pakistan land route close-down costs were higher there?  Or is that -- 

            UNDER SEC. HALE:  No, there's a variety of reasons.  That's part of it, but we were also -- I mean, you are estimating operating tempo two years ago when we put together the budget for this year, and we underestimated, particularly in the Army and in the Air Force.  

            MR. WHITMAN:  Let's go to Mike and then Justin, and then we'll get over to that side of the room. 

            Q:  Can I just -- just follow on the readiness question?  How much of this -- because we've seen a lot of what appears to be a kind of scare tactics from -- from the services that really seem to be pushing out a message of -- of cutting kind of security issue things, like readiness.  And what's the reality of readiness really being throttled -- throttled back here?  You know, we're still at war, and what the message is, is that this, you know, has a long-term effect and you might have to keep troops on the ground longer.  

            I mean, is this something that will -- kind of allowed to be happening -- you know, that will allowed to be pushed down the road or -- 

            UNDER SEC. HALE:  Well, you know, I mean, we got seven months to go.  We're short in the base budget O&M about $35 billion compared to the president's budget request, about 23 percent, and that's DOD-wide, and it's probably close to twice that in the Army.  We don't have a lot of choices.  

            Now, I can hope several things happen.  That's the -- the result of sequestration, but also the current continuing resolution.  If either got fixed, that would help, and we might see some action on either one.  If both got fixed, that would help a lot.  

            If neither get fixed, if we see the CR extended through the year in its current form and sequestration lasted a year, I think we're going to have serious readiness effects.  I don't -- I don't know where we're going to get the money.  These are legally binding limits.  We will have to cut back on training significantly.  

            Q:  And we've heard -- we've heard, you know, when -- up on the Hill, when some of the service chiefs are pushed, they said, well, you know, we could then move money around – from this account to this account -- for other -- for other options.  I mean, is -- is that an option for -- for readiness, as well? 

            UNDER SEC. HALE:  We could try, but the only means of doing that is reprogramming.  And it is a very limited technique, in that you've got to find -- so for every dollar you add, you have to cut somewhere else.  And especially in an environment like this one, where we've seen sequestration cuts in the investment accounts, I don't think there are a lot of good sources.  And moreover, you've got to get essentially every member of Congress to agree to this, or at least all the committees, and therefore it can't be anything contentious. 

            I've had four years of experience with reprogramming, and I think that it is not -- it's not realistic that we could move multiple billions.  Moreover, there are legal limits on our transfer authority.  Could some of this change?  Yes.  I mean, Congress can change the laws in ways that would make this easier.  We are doing worst-case planning right now; I think that's a fair statement. 

            But if -- again, if the CR stays in effect and sequestration goes into effect for the whole year, I think we're going to see serious effects.  I am worried.  

            UNDER SEC. WRIGHT:  May I add? 

            UNDER SEC. HALE:  Sure.

            UNDER SEC. WRIGHT:  If I can follow up and add the -- the people side of the house, if we do furlough the civilian employees, the civilian employees are the ones that maintain our equipment in -- in a lot of our depots.  They run our ranges on posts, so they -- they, if furloughed, will not be there for that training environment.  

            So it's -- it's a second and third order of effect.  It's just not the training dollars that can potentially be reprogrammed, but it's the people there to utilize and/or perform the jobs that they're required to perform.  

            Q:  So the measures you're talking about are fairly drastic.  Why wait until today, February 20th, to make these announcements?  Do you accept the criticisms that the Pentagon should have been warning about these furloughs sooner so as to give time or urgency to Congress to do something about it?  

            UNDER SEC. HALE:  Well, first, we started some slowdown in spending January 10th, when the deputy issued guidance, and we -- a number of the measures I mentioned went into effect shortly after that, hiring freezes, cut backs on facilities maintenance.  We took significant efforts to try to -- to slow down our spending to avoid more draconian actions later.  

            You know, I know that people feel we should have said more earlier.  I will say, it was 16 months ago Sec. Panetta first sent a letter to the United States Congress, saying the effects of sequestration would be devastating.  That was October 2011.  

            After that, we did a whole series of assessments.  We testified in August, and, again, I personally testified in September.  And we listed every major item we're talking about.  We said we'd have to do furloughs.  We said there'd be cutbacks in readiness.  We said that unit buys would go down and unit costs would go up, I mean, all the same things. 

            What we didn't do is detail budget planning.  And I don't regret that, because had we done it six or eight months ago, it would've all been wrong.  We wouldn't have known the effects of the continuing resolution.  We wouldn't have known that Congress was going to change both the size and the date of sequestration.  And moreover, we would have incurred the degradation in morale and productivity that's going on right now, and we would have done it six months ago. 

            So I don't regret not doing that.  And I think we did sound the alarm in every way we could. 

            MR. WHITMAN:  Let's go over to this side of the room (off mic)

            Q:  I'm wondering what kind of contact you're having with the White House and with Congress.  There's going to have to be some cuts, so are you guys trying to offer up any solutions, like, look, don't do sequestration, we'll find some savings for you here, here and here? 

            And also, I'm wondering, what other things would you be doing right now if you weren't spending all your time dealing with sequestration?  

            UNDER SEC. HALE:  More time with my wife.  No.  

            Well, let me answer your first question, which is really -- I think I'm not the right person to answer.  I mean, we are responsible for providing the nation's security as best we can within the resources that are provided us. 

            We're very interested, obviously, in monitoring closely events, but I think I'd refer you to the White House or OMB.  And to give you a more serious answer, although I would be spending more time with my wife, you know, when I first took this job -- actually, it was the last job I took -- my principal deputy said, you've got an investment and operating problem, Bob.  You're going to be consumed by the operating side.  You got to set aside some things you want to do that will last beyond you.  

            I've tried to do that in a couple of ways.  One is try to improve financial information in the department and achieve auditable statements.  Another one is to bring about a course-based certification program for defense financial managers and some other issues like that that are getting pretty short shrift right now, because I'm pretty much totally consumed with trying to help the department get through this.  

            So I think some longer-term issues that I believe would be good for the Department of Defense -- and I think the nation -- aren't getting the attention they would otherwise get.  

            Q:  But there's no sense of, like, well, if this is going to happen and it's going to hurt so bad, let me give you some other options so that we all can get to this goal of, you know, deficit reduction that everyone seeks.  So I'm just wondering, would that be a strategy for you guys to say, look, we're staring down the barrel here, let's do this instead, and we're cool with this, so let's do it (off mic) 

            UNDER SEC. HALE:  Well, I mean, I think the president has made proposals; the Republicans have made proposals.  I think the adjudication of those or the bargaining probably isn't -- I'm probably not the right guy to -- to be -- to be speaking to that, even though I'm intensely interested in the outcome. 

            MR. WHITMAN:  Dave and (off mic)

            Q:  Can you explain a little bit of the rationale behind exempting foreign nationals from --  

            UNDER SEC. HALE:  They're governed by status-of-forces agreements and probably would require some negotiation.  And in some cases, particularly in Japan, they're paid almost entirely by the local -- by the foreign government, and so that probably wouldn't help us very much. 

            Q:  So these are mostly people who are based overseas? 

            UNDER SEC. HALE:  Oh, I think they're all based overseas.  

            UNDER SEC. WRIGHT:  Oh, absolutely.  Yes, yeah.

            UNDER SEC. HALE:  Yeah, these are foreign -- these are Japanese employees in Japan on our bases.  

            Q:  (off mic) focus on one of the more important benefits that servicemembers see is the medical care.  You mentioned, Ms. Wright, that 40 percent of the folks who provide the care are civilians.  Well, that's going to cut into the services they provide.  I think, like, elective surgeries would be canceled or postponed.  What -- is that going to happen? 

            And in other times, you could actually throw that onto TRICARE, but TRICARE is going to be affected in this also, correct? 

            UNDER SEC. WRIGHT:  Everything is going to be affected, should sequestration go in effect.  That's a guarantee.  I think that everybody will be impacted by this action.  And I think it's incumbent upon us to try to ease that where we can.  

            So, yes, 40 percent of our medical providers are civilian employees.  A couple of things.  Because the war has changed, there are less of our uniformed providers that are in the war zone and -- and more so uniform providers that are within the confines of our medical treatment facilities.  So that is one -- one benefit. 

            It is incumbent upon us to review the plan of Dr. Woodson and the surgeons and the services, as they come in, in March, to decide how we are best going to provide care and access to care.  And so we will do that.  

            I would like to be able to give you more specifics, but until I see those plans, I would be only speculating, and that would be truly unfair.  So after March 1, I will have a better understanding of how exactly we will provide the access and the care to our beneficiaries. 

            Q:  And this gets us through -- even if sequestration comes in.  We're all talking about just through September 2013.  What happens next year?  Does it suddenly get better in fiscal 2014?  Or could we -- you mentioned RIFs [reductions in force] before, but said that there wasn't enough time left this year to do that.  Could the civilian workforce be facing RIFs next year? 

            UNDER SEC. HALE:  Well, I can't rule it out.  I mean, the Budget Control Act actually requires that the caps on discretionary funding beyond fiscal 13 be lowered for defense by $50 billion to $55 billion a year, I mean, the other agencies, as well. 

            If those come to pass, then we will have to look at a new defense strategy.  That would be the first thing we'd do, that would accept more risk and also accommodate a smaller military, and at that point, we would be talking about significant reductions in the size of the military workforce, as well, probably as the civilian workforce and -- and many others.  The only difference is, there we would have some time and the ability to do it in a manner that reflects a new strategy, as opposed to this kind of across-the-board cuts that we face right now.

            Q:  So we still are facing problems? 

            UNDER SEC. HALE:  Yes.  I mean, potentially.  We can hope for a big budget deal that arrives at some accommodation, and that -- and I devoutly would wish for some budget stability right now.  And I think it would benefit the department and the nation.  But absent a deal of that sort, then, yes, I think we'll continue to face some uncertainty into the future. 

            MR. WHITMAN:  We've only got time for a couple more.  Let's get a few folks that haven't had a chance (off mic)

            Q:  Hello.  Are there any estimates of what kind of impact there will be on the contractor working force and what kind of the jobs might be lost? 

            UNDER SEC. HALE:  I don't.  I mean, there are a lot of private-sector agencies that have made job loss numbers.  I'll let them speak for themselves.  

            I can tell you that we -- for sequestration, when you take $45 billion, $46 billion, $4 billion to $5 billion of that will come from furloughs, if we end up doing them for the maximum period of time.  There would be some additional savings from laying off temporary and term employees, and I don't know for sure what that would be. 

            But it leaves maybe $40 billion or that is going to be accommodated by cutbacks in purchases from the private sector, weapons purchases, service contracts, a lot of different kinds, so there will be very substantial effects on the private sector, as well.  And -- but I -- I can't give you job loss numbers, although there are a number of private organizations that have made estimates. 

            Q:  What -- what specific changes in law would you like to see Congress make to give you more flexibility to manage this challenge?  And also, in FY [fiscal year] 14, what sorts of cuts are you having to make?  And what's your top line, do you expect?  

            UNDER SEC. HALE:  Well, first off, the change I want the United States Congress to make is to -- is to pass a balanced budget deficit reduction package that the president can sign and de-trigger sequestration and to pass appropriations bills.  That's what I'd like for Christmas; I know it's late, but I really would like it.  That's what would solve our problem. 

            In terms of -- of flexibility, you know, we're five months into the fiscal year, facing a $46 billion cut, even if you said you can do it wherever you want, we would have to go after just about every dollar that isn't obligated in order to get those cuts that quickly.  

            And -- and I know that there have been suggestions that, well, we can just, quote, "solve this problem" by giving flexibility, I don't think it would help that much this far into the fiscal year.  And if it makes sequestration more likely to either occur or persist, I think it's a bad deal, the flexibility.  

            As far as the future, at the moment, the guidance we have from OMB is not to count on these -- not to plan for these large cuts that could occur under the Budget Control Act if Congress doesn't make some change in the law the president can accept and they go into effect.  Then, yes, we would have to -- as I said to the other question, we would have to look at a new defense strategy, a smaller military, and that would include a smaller civilian workforce and a variety of other changes. 

            Q:  So what number are you planning to in FY 14? 

            UNDER SEC. HALE:  You know, that -- I'm not -- I can't give you that number until they release the budget, but it's not too far off from the numbers we were planning a year ago for fiscal 14.  Does that help?  

            Q:  (off mic) 

            UNDER SEC. HALE:  I wish I knew.  They've said mid-March, they being OMB, and they will make this decision, but I don't have a specific date.  

            Q:  (off mic) mid-March versus mid-April or early (off mic) 

            UNDER SEC. HALE:  I believe they've said mid-March. 

            Q:  Let me try one more specifically on the service contractor workforce.  The department has described them as part of the total force many times.  You seem like you have a pretty solid plan on the civilian workforce and how you're going to handle that and how they're going to contribute to the O&M reductions.  Is there a similar detailed plan on the contractor workforce?  

            UNDER SEC. HALE:  Well, it's managed differently, in the sense that we go out to the private sector and -- and order services, and they, of course, manage their workforce, so we wouldn't be involved in that.  We are developing plans with increasing levels of detail for the -- what we would buy from the private sector, in the process of looking at all of our investment programs, 2,500 of them -- it takes a lot of work -- to figure out what we won't do to accommodate sequestration cuts and similarly in the service contract area.  

            I won't tell you all of that's done, but we're -- we're moving along well.  I think we will be ready for sequestration, if we have to, by March 1.  And under the law, we owe a detailed spend plan by April 1.  And that would give more fidelity on exactly the changes.  But in terms of managing the workforce, that's really something that will be done by the private companies. 

            MR. WHITMAN:  Let’s bring this to an end, but let's go back here and we'll let you finish it (off mic)

            Q:  On the FY 14 budget, do you expect to roll it out in parts, to roll out the base budget and the OCO budget separately, the other parts separately?  Will we be getting it in pieces (off mic)

            UNDER SEC. WRIGHT:  I think that's possible.  I mean, for the OCO budget, we need troop level decisions.  We're getting those now, after the State of the Union message, but we still have to put that budget together, so they may not come out together.  I just don't -- since I don't know the exact timing of release, I can't be sure, but they may come out separately.  

            Q:  Okay, and this is just actually a numbers clarification thing, so it's not a good one to end on.  But given that you're five-twelfths of the way through the year, you've got -- you're exempting military personnel.  There are some civilian exemptions.  And in warzones, there's going to be -- (inaudible) -- exempted.  What percent -- this $48 billion represents what percent of the available pie that could be cut?  I mean, when you take all those other numbers out, it's not just a 20 percent of the last half year, so it's less than that, isn't it?  What's the potential pie that you're cutting? 

            UNDER SEC. HALE:  Oh, I see what you mean.  Well, in the -- you know, the problem is, the investment -- I'd say divide $46 billion by five-twelfths, but that wouldn't be right, because the investment accounts tend to obligate slowly.  And I don't know that I have that number in my head.  I mean, I'm going to guess we're a quarter obligated now overall.

            Does that sound roughly right, Mary? 

            UNDER SEC. HALE:  All right.  And so we've got three-quarters left, and we're taking $46 billion out.  Don't hold me to that too closely, please.  But it's probably in that ballpark, because the investment accounts tend to obligate more toward the end of the year. 

            MR. WHITMAN:  All right, folks.  Thank you again for your interest in this.  And if we have any follow-up questions, please don't hesitate to go to the press office.  We'll try to get an answer for you.

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