SENIOR DEFENSE OFFICIAL: Okay. Well, today, Secretary Hagel announced -- and I think you now have it -- that as part of DOD's efforts to improve productivity and readiness, we'll be reducing the furlough days for DOD's civilian employees from up to 11 days to six days. And for most DOD civilian employees, that will mean furloughs will end next week.
Last May, when we reluctantly decided to impose furloughs of up to 11 days, we faced a shortfall in our operating budget at that time of about $11 billion, principally our wartime budget. We had already imposed hiring freezes, cut facilities' maintenance, and laid off temporary employees, as well as many other actions. We had sharply cut training and maintenance, which has adversely affected military readiness.
So as of three months ago, furloughs of 11 days, which would have saved about $2 billion, were one of the limited available options that we had to close the remaining budgetary gap without further cuts in training and maintenance. But even at the time he announced -- and so Secretary Hagel reluctantly made the decision to impose them. But even as he made that announcement, the secretary said that he'd try to reduce the number of days if he could do so without further cuts in training and maintenance.
Since then, Congress has improved most of a large reprogramming that we requested to let us move money into our operating accounts. The services have identified some changes that let us reduce costs. And we've been aggressive about shifting funds into those service accounts that have the most problems.
As a result, we've been able to accomplish two goals, two key goals. We've made some modest improvements in training. The Air Force, for example, is flying again for most of its squadrons, and the Army is increasing some organizational training. And we've been able to reduce the number of furloughed days.
While this is very positive news for the department and for our valued civilian workers -- and I can say personally, it's great -- I feel great about it -- we're still facing some major challenges. Military readiness is degraded heading into 2014. We still need several months and substantial funding to recover. And yet, 2014 is a year that's going to feature great uncertainty, as much as I can remember any time in working with the defense budget, and it may feature some additional austerity.
Faced with all of this uncertainty, we cannot be sure what will happen next year, but Secretary Hagel wants to assure our civilian employees that we'll do everything possible to avoid imposing furloughs again next year. The secretary and all of us want to thank our civilian workers for their patience and dedication during these extraordinarily tough times. Our dedicated civilian employees make a major contribution to national security. And we all look forward to one day putting this difficult period behind us.
And with that, I'll stop and we would be glad to entertain your questions.
FACILITATOR: If I could and if it doesn't upset anybody, we've got time to take everybody's questions, I think, just to make it easy, if we start with Tony and just went down the front row and then go to the second row and go down, we can get everybody's questions. If you don't have one or it's been passed, you just pass, okay?
Q: Two questions. One, roughly it's about $1 billion in savings you found. And can you explain how you found it from the retrograde of equipment in Afghanistan? In English, explain what that means.
SENIOR DEFENSE OFFICIAL: Well, yeah, we went from $2 billion in savings, right, Tony, to -- from furloughs to about $1 billion. I mean, there are lots of ways that we accomplished that and the training increases, but let me address the question you ask.
There's a number of pieces of equipment in Afghanistan that we identify that we're not going to have to move in fiscal '13. It doesn't mean at some future point some of them will not need to come home, but that is what led to the containers from the Army to reduce what's called second destination transportation.
Q: Roughly how much was that of the billion?
SENIOR DEFENSE OFFICIAL: That's about a billion dollars that they won't need in fiscal '13 for second destination transportation.
Q: Okay, thanks.
Q: But they will need it in fiscal '14?
SENIOR DEFENSE OFFICIAL: Possibly. I mean, it's a fluid situation. And we'll be making assessments of cost-benefit analyses of what to bring home that's possible.
Q: Sorry, that wasn't my question.
SENIOR DEFENSE OFFICIAL: Okay. That counts. (Laughter.) No.
Q: Yeah. Can you -- can you just give us sort of like a couple of the, like, higher profile or more in English-y kind of explanation of the reprogramming requests? Like can we -- that we can point to as specific things that have made this change possible?
SENIOR DEFENSE OFFICIAL: It totaled $9.6 billion. It primarily moved money from our acquisition accounts, and there, there were about 200 programs that had varying sizes of reductions. Sometimes contracts had been delayed. Sometimes we just made a decision that was lower priority. And most of the money got moved into our operating accounts, principally the overseas contingency operation funds and principally the Army, which had the biggest shortfalls. Does that help?
Q: So -- so money was reprogrammed from other areas into -- primarily into those two accounts? And that was the savings that allowed….
SENIOR DEFENSE OFFICIAL: It was part of it. I mean, you know, we did a lot of different things. It reminds me of pouring water and milk in the glass at some time and when it overflows blaming the milk. I mean, I can't pick one thing. There were a whole series of actions we took, finding reduced costs. Reprogramming was very important. And we are also able to shift around some other funding from the Navy, some lower priority Navy programs into the Army. So it's a bunch of different things.
And it wasn't just furlough days. We brought back some training.
Q: Oh, okay.
SENIOR DEFENSE OFFICIAL: The Air Force, as I said, is flying all its combat -- its squadrons again, though it will take them months to catch up from a three-month stand-down -- or not flying, and the Army has made some small increases in training of about six brigade combat teams.
Q: It's great that you're able to do this, but there are going to be some people who say, well, you know, they cried wolf, basically. They exaggerated the extent of the problem and now they've -- you know, they've fixed it. How do you respond to that?
SENIOR DEFENSE OFFICIAL: Well, I respond by going back three months ago and saying we faced enormous uncertainty, I think as great as I can remember any time in the defense budget. And at that point, we were short $11 billion. Most of it was OCO funding. And I got to tell you, you know, it was one of the things you wake up and night and you go, how am I going to make this work? Or how's the department going to make this work?
We didn't know. I mean, we knew -- the reprogramming was there, but it's not a guarantee. These are single committee veto items. And we didn't get all of it. We didn't know about some of the things like identifying funding we wouldn't need for transportation costs. The Air Force found some reductions in weapons system sustainment. We are able, as I mentioned, to move some lower priority Navy money to areas we needed it more.
So there were a whole bunch of things that broke in our favor, but three months ago, with $11 billion short, I don't think we had a lot of choice, unless we were willing to cut more training and maintenance. And we felt that we had done that as much as we should.
But I hear your point. And, you know, hindsight -- there's a old saying in the budget world that time is the best budget analyst. If you wait longer, you'll know more. And we do know more than we did three months ago.
Q: Just maybe one quick sort of question on the numbers. The buying back the furlough days is going to cost about -- is it $900 million --
SENIOR DEFENSE OFFICIAL: Yeah, about -- a little less than $1 billion. We were going to save about $2 billion with 11 days. It'll be a little more than $1 billion with six.
Q: So there's that. And then how much in some of the other changes for the Air Force combat flying and the Army -- so what's -- can you give us sort of a broad total of the amount savings?
SENIOR DEFENSE OFFICIAL: You know, it's probably another half-billion or so for training, around $400 million in the Air Force, and I don't have a precise number for the Army, but -- but probably around $1 billion in buying back furlough days and then some -- perhaps $500 million of added costs associated with buying back some training.
Q: So -- okay. And then overall, then, that's like $1.5 billion or something that in recent weeks you've been able to find. And was some of that identified, would you say, as a result of, you know, all the services looking for money or everyone looking for money? And have you kind of come -- do you think you're nearing kind of the end of all those little types of savings you can find? Or is this something you can do again and again and again, as next year dawns?
SENIOR DEFENSE OFFICIAL: So, remember, we started $11 billion in the hole three months ago. We had to find that, plus a little more to allow us to make some of these restorals. And as I've said, it came through a variety of factors, reprogramming, identifying some costs we could either put off or, in some cases, do without, put off in the case of a second destination transportation, and some aggressive moving money around of some Marine Corps money, for example, into the Army.
All of those got us to that point. Is there more? Well, probably a little bit, but I suspect that we've largely -- you know, we've largely come to the end of the rope. I mean, sometimes toward the end of the year, there will always be some fallout, but we feel at this point we're confident we can get down to six, but six is where it's going to stop.
Q: Well, I guess, just to make my -- I want to be clear. As you look ahead to next year, I mean, with that whole $54 billion, have you sort of done all the little whittling you can? Or can you just do it all over again?
SENIOR DEFENSE OFFICIAL: Oh, there will be -- there's always -- it probably doesn't sound good [inaudible] to say wiggling, but there are always changes that go on. And, yes, there will be again next year, especially when you're in the middle of a war. I mean, we put together the budget we're going to start executing on October 1st more than a year ago. And then there will -- there are uncertainties and there will be changes.
And, of course, looking forward to next year, we don't really have any idea right now what's going to be appropriated. I mean, if we -- if we go with the sequester-level caps, we're going to be down $52 billion from the president's request.
Q: Two kinds of granular-level questions, first for defense official two. Does this mean that DODEA schools are not going to be furloughed?
SENIOR DEFENSE OFFICIAL: So DODEA schools have several different categories. They have 12-month employees that will be furloughed. And then had the 10-month employees, those that are the educators and the support staff. So they were to be furloughed five days at the beginning of the next school year, which would have still been in fiscal '13.
We have decided to exempt them from furlough, and so their school years will start on time, and then the teachers and the support staff that were initially going to be furloughed are now not going to be furloughed.
Q: Okay. And -- thanks. The second question, defense official one, you mentioned somehow the Navy had given some money to the Army or -- does that -- does that happen normally? And how -- I mean, it's nice of them. How did they do it?
SENIOR DEFENSE OFFICIAL: Well, in that case, they paid a bill that they had the legal authority to pay, one of the OCO bills for LOGCAP. I wouldn't say it's routine, but these are not routine times. And we've had to look across the department and try to make some shifts in order to get through this year.
Q: How much was it?
SENIOR DEFENSE OFFICIAL: It was about $300 million, if I recall.
Q: So they just wrote a check for the Army, so --
SENIOR DEFENSE OFFICIAL: Well, they just paid a bill that they had the legal authority to pay, or the secretary directed them to pay a bill they had legal authority to pay.
Q: My first question for senior defense official number two. Given that we're just less than two months out from fiscal '14, what contingency plans are you making in terms of civilian workforce, either furlough, reductions in force, et cetera, for fiscal '14 if sequestration does occur?
SENIOR DEFENSE OFFICIAL: Well, I -- you know, I'm going to reiterate what -- what defense official number one said, that these are hugely uncertain times. I mean, the department's not gone through this before. And I also reiterate what Secretary Hagel says, that we will try to avoid furloughs as much as we possibly can next year.
But we haven't received our budget. We don't know what we face going into '14. And we're going to have to make plans based upon that number. But right now, we're really going to work to avoid a furlough.
Q: And how about a reduction in force?
SENIOR DEFENSE OFFICIAL: I think every -- you know, everything is on the table. And that can potentially be on the table, should it be needed. And reduction in force is not something that we turn on and turn off. It can -- we've done reduction in forces within the last year, and it has nothing to do with sequestration. It has something to do with shaping the force as it is needed. So it's potentially not as widespread, but it is done as a shaping tool.
Q: And no planning underway at this point?
SENIOR DEFENSE OFFICIAL: Right now, everything is on the table.
Q: Okay. Question for senior defense official number one. Once we're past fiscal '13, is there going to be -- do you have any plan on producing any sort of -- any after-action report on how it achieved the $37 billion cut? Because from the outside, frankly, it looks rather mysterious.
SENIOR DEFENSE OFFICIAL: Well, I mean, we will, in the sense that you'll see a budget next year that has an actual in it. And it's a good point that we maybe need to be helpful. About 20 -- I can give you some rough ideas -- about $20 billion came out of the operations and maintenance accounts. The other $17 billion came out of our investment accounts. We talked a lot about them, but virtually every one of our line items was cut 8 percent, and just the whole array of changes that got made to accommodate those. But I hear you -- in our spare time, we probably owe you some help to understand how we got there.
Q: So you will provide --
SENIOR DEFENSE OFFICIAL: Let me -- let me take that one. I'm concerned -- I mean, we're facing, furloughs or not, an enormous workload as we try to get a new budget for '14 potentially. I hope not, but potentially, and as well as budgets for the out-years.
Q: I guess my only question would be, so these furloughs end this week or next week? I'll have to --
SENIOR DEFENSE OFFICIAL: For most employees, they will end next week.
Q: Do you have a number?
SENIOR DEFENSE OFFICIAL: It really depends upon -- if the individual received their furlough letter on the week of 8 July, and if they participated in the furlough one day a week, that would take them six days, which would equal 48 hours, to the 17th of August. And so that's the calculation. So most of the force that was furloughed was furloughed in that manner.
Q: Senior official two, I'm sorry, can I ask about schools again?
SENIOR DEFENSE OFFICIAL: Yes.
Q: To go through -- are you saying no -- no furloughs now for any school personnel? What's the situation?
SENIOR DEFENSE OFFICIAL: So there was a group of individuals, educators and support staff that were going to be furloughed for five furlough days at the beginning of the next school year, which would start at the end of August 2013. So they were going to have five furlough days between August and September of 2013, which would be the '13-'14 school year. Those individuals will not receive any furlough days. The school year will start and end without furlough days.
SENIOR DEFENSE OFFICIAL: Well, let me say, the school year for fiscal year '13 will not have any furlough days. We are really trying not to furlough in fiscal year '14, but we haven't received a budget yet.
Q: I'll pass.
Q: First of all, I really like the milk-water thing. (Laughter.) I wish it was on the record. Anyway, my real question, I may have missed it at the top, but the $300 million transfer or the bill that the Navy paid, are there other bills like that, that either the Navy or another service paid, say, on behalf of the Army? Or…
SENIOR DEFENSE OFFICIAL: No other services. We were able to transfer some money -- fuel funds by lowering fuel prices that would have come out of the working capital fund, but I don't believe there are any other service bills.
Q: So only that one -- $300 million bill?
SENIOR DEFENSE OFFICIAL: It’s actually the Marine Corps, but in the Department of the Navy, it's Marine Corps.
Q: For defense official number one, you talk about uncertainty in fiscal '14. How helpful would it be to know what post-2014 troop numbers are in Afghanistan for you guys?
SENIOR DEFENSE OFFICIAL: Well, I think that one -- there are bigger issues there than budget. Certainly at some point we're going to need to know that in order to do a fiscal '15 budget, but we're not a -- I think the timing of those depends more -- or is more important than we know it in order to -- to execute a responsible drawdown than it is for the budget.
Q: Question for senior defense official one. You mentioned some of the money was moved using legal authorities given to DOD to shift funds around. There's been some criticism that the Pentagon hasn't fully taken advantage of some of these -- these authorities while, on the same hand, arguing for more flexibility in spending of these funds. I guess what I wanted to ask you is, is this move sort of a precursor to using more of these authorities as -- more of these authorities even more, as the number crunch kind of continues?
SENIOR DEFENSE OFFICIAL: Well, our authorities are pretty limited, frankly, and normally we don't do shifts of that sort, because the other services planned on that funding and how to use it, but these were extraordinary times. If we face extraordinary times again next year, we'll probably look at everything we can legally do.
I realize the issue of flexibility has been raised, but I'm trying to think of specific concerns that have been raised that we weren't using flexibility that we had.
Q: Did you think that -- yeah, there were -- there were some areas, particularly in -- I think it was in O&M that -- that Congress had legislated and that DOD hadn't fully exercised.
SENIOR DEFENSE OFFICIAL: Yeah, I mean, I think we did. We got a budget from them in March, which helped a lot, because we got the money in the right pots, but it didn't add any money, but it would -- things would have been much worse without that, so that was helpful. We certainly made full use of that.
So I'm not sure -- not sure of the specifics, but, you know, we will look again next year. Let's hope next year is more stable, but if it's not, then we will look at everything we can do to try to carry out what was our goal throughout this, and that is to minimize the adverse effects on our mission. Everything we did was with that in mind, including the modest buybacks of training and the -- and the reductions in furlough days.
Q: Are there any others that are being exempted because of this change?
SENIOR DEFENSE OFFICIAL: No, just the teachers, well the teachers and support staff
Q: One minor one. Has anybody --
SENIOR DEFENSE OFFICIAL: I don't know how many teachers, I can take it for the record.
SENIOR DEFENSE OFFICIAL: Let me get back to you with the number about it.
FACILITATOR: A couple more minutes.
Q: I know some people could take like a week or take all -- has anyone taken more six days?
SENIOR DEFENSE OFFICIAL: There is potential.
SENIOR DEFENSE OFFICIAL: We don't know.
SENIOR DEFENSE OFFICIAL: That I don't know.
Q: Could be?
SENIOR DEFENSE OFFICIAL: Pardon me?
Q: That could have happened, if you had the authority to…
SENIOR DEFENSE OFFICIAL: It could have happened, yes.
SENIOR DEFENSE OFFICIAL: I'm pleased to say we didn't manage this from here.
Q: No, but I would assume they would just get their money back.
SENIOR DEFENSE OFFICIAL: Well, we're working through that issue.
SENIOR DEFENSE OFFICIAL: I'm sure we'll hear about it.
Q: Sure. (Laughter.)
Q: How would you characterize the impact of the furloughs on the department? Do you see any lasting repercussions?
SENIOR DEFENSE OFFICIAL: You want to go ahead and I’ll follow?
SENIOR DEFENSE OFFICIAL: I would tell you that this was one of the hardest things we ever had to do. And -- and I can't emphasize enough the uncertainty of the world that we're living in right now. And I also can't emphasize enough the quality and the professionalism and the dedication of our civilian employees. I mean, they -- they really are the glue that holds us together. I mean, they're here all the time doing their job.
So their morale has drastically been affected. And not only that, the productivity of the work that they do has been affected. All across the board -- and if you were here for the first time we had a press conference, what I said was that 80 -- about 85 percent of our civilian workforce works outside of this national capital region. So it's not just a Washington, D.C., phenomenon. This is a worldwide phenomenon, how it affects the total Department of Defense, whether it's in our depots or whether it's in shipbuilding or whether it's people that process promotions or people who work in our hospitals. It is across the board.
And it's been devastating for our civilian employees, and it's been very hard for the servicemember who relies on five days a week, of work from these people.
SENIOR DEFENSE OFFICIAL: Let me give you a couple of examples. It slowed work at depots, which is going to mean we've got maintenance that didn't get accomplished, going to get pushed off until next year. I'm worried about our contracting officials having enough time to get all those funds obligated-- I think they will, and we will -- we will go back to normal overtime rules after the furlough is over. It has certainly adversely affected financial management and how many people aren't getting the reports done on time. We've missed some deadlines at DFAS because we didn't have the people to do it. Our call center times are growing in DFAS. When people ask about their pay, they're having to wait longer. All of these things, I think, are tangible signs that it has reduced our productivity, I think, significantly.
FACILITATOR: Time for one more…
Q: The billion dollars -- the bulk of the furlough buyback was from the Army's decision on the second destination transportation?
SENIOR DEFENSE OFFICIAL: You don't like my water and milk, do you? I mean, look at it that way, but there are a whole bunch of other things that contribute to the plus side and a bunch to the minus side, as well. It's hard to pick one and say that that's what caused it.
Q: You said a billion dollars?
SENIOR DEFENSE OFFICIAL: Yes, I mean, they're about the same size, so I suppose, but -- but, Tony, we made a lot of -- found a number of ways to save funds and a number of ways we wanted to spend money. And it's hard for me to pick one and match it up.
Q: That was one of the biggest categories, though, is that correct?
SENIOR DEFENSE OFFICIAL: It was a significant savings.
Q: Thank you.
SENIOR DEFENSE OFFICIAL: The reprogram was probably the biggest single thing.
FACILITATOR: Well, thank you, again, for short notice and the interest in this topic, but we have to get at least one of our officials off to a meeting right now. So thanks again. If you got additional questions, you should have the secretary's statement. You have the memo going out to the department. And we're happy to take questions in the press office.