JUST IN: Army Facing Fiscal Headwinds

By Sean Carberry

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NOVI, Michigan — For much of this century, Congress has failed to pass a defense budget prior to the start of a fiscal year. That trend will continue this year, and it will be particularly painful for the Army, Congress and budget experts said on Aug. 18.

There are 11 working days left for lawmakers before the start of fiscal year 2023, and part of that time will be spent crafting a continuing resolution to keep the government funded, said panelists during a budget discussion at the Ground Vehicle Systems Engineering and Technology Symposium organized by the Michigan chapter of the National Defense Industrial Association.

That means the Defense Department and the Army will start fiscal year 2023 at the same funding level as the current year. Because of inflation, this translates to a funding cut. That’s one of many fiscal headwinds the service faces, said Thomas “TJ” Stapleton, president and founder of consulting firm Stapleton & Associates.

“So, the Army’s budget has been flat or declining in real terms for the past couple of years,” he said. “And the service did not fare well in the 2023 budget request that went to Congress,” he added.

In the past, the Army’s share of the defense budget was around 26 percent, and it has dropped to about 23 percent, he said.

Gen. James McConville, the Army chief of staff, has been a strong voice for Army modernization and funding, Stapleton said. The service breaks down its modernization priorities into six categories: long-range fires, ground combat vehicle, future vertical lift, the network, air and missile defense and soldier lethality.

McConville works the Hill, think tanks and other influencers to advocate for funding, and that is going to be needed in the coming days, Stapleton said.

Because of the focus on the Pacific and the threat from China, "The Navy could get a much larger part of the budget if they have stronger advocates, and if they get their act together on their messaging,” he said. “There's definitely some headwinds out there, and we’ve got to battle very hard.”

The Army and its advocates need to be more aggressive about showing the service’s relevance to the Pacific theater, said Mark Haaland, government affairs director for the Association of the United States Army. He added that the Army has been very active in supporting Ukraine and providing training and equipment.

“The Army is not really maybe getting the credit vocally,” he said. “And so, we just need to continue to help build that echo chamber with Congress to support Army modernization.”

Another major headwind for the Army is its sagging recruiting. “We’re woefully behind where we need to be,” he said.

The Army needs to recruit 60,000 soldiers a year based on retention rates, and that is getting more difficult as the interest in serving is in decline, he said.

“If you look at the Army budget, about 37 percent of it is people and that percentage is probably going to grow looking at what we have to do to get people in uniform,” he said.

The personnel shortfall is an argument in favor of funding modernization priorities, Haaland said.

“[It is] all the more important for us to equip our soldiers, our units, with the best equipment possible,” he said. “So, we try to emphasize with Congress how important that is to support the modern modernization budget for the army.”

However, modernization programs are likely to be some of the most affected by a continuing resolution. Panelists said they did not see Congress passing a budget until early 2023, and that means delays and possibly cuts to some modernization priorities.

The Future Attack Reconnaissance Aircraft — the new scout helicopter program that is part of the future vertical lift priority — is particularly vulnerable, said Stapleton.

“I think there's a lot of headwinds against it, not a lot of support,” he said. “Support in industry is definitely waning, and the Army is re-baselining the program. … I think it's in a lot of trouble.”

Adding even more complexity to the Army budget woes is inflation, which affects the cost of everything from acquisitions to training to sustainment, panelists said.

“The [Defense Department] and the Congress, and the appropriations committees haven’t had to deal with this kind of inflationary environment in a long, long time,” said Arun Seraphin, deputy director of the National Defense Industrial Association’s Emerging Technologies Institute.

Most of the people on the Hill and in the department were not around the last time the country had to deal with budgeting in a time of high inflation.

“If we ever had the skill to do that, maybe back in the 70s and 80s, it has certainly been lost now,” he said. “There needs to be a high-level conversation about how to readjust dollar flows in this inflationary environment.”

One area where panelists saw some hope for additional funding is through the Army’s $5.1 billion unfunded priorities list it submitted to Congress. That has a good chance of making the cut when Congress finally passes a budget, said Stapleton.

The unfunded priorities list used to be just a piece of paper that went nowhere, but in recent years that has changed, he said.

“It's now a very powerful weapon. It has been fully funded the last few years in a row,” he said, adding that he is instructing clients to make sure they get their projects on the list.


Topics: Budget, Army News

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