1. 1 Hon. Robert Hale Booz Allen Fellow Former DOD Comptroller/CFO March 16, 2015 FY16 DOD Budget: Association of Defense Communities

2. 2 The FY16 Budget Reverses Recent Base-Budget Declines 585

3. 3 Areas of Budget Emphasis  Strategy-based budget  DoD seeking innovations through Defense Innovation Initiative  Including implementation of 21 st century business practices  Nuclear enterprise gets more attention  More people, bonuses, support equipment  Cyber continues to grow ($5.5 billion)  Many budgetary reform proposals repeated from earlier budgets, but some new items  Full review of business and management systems (especially 4 th estate)  Commission offers new ideas on slowing growth in military compensation  Budget dollars emphasize procurement, but operating dollars also fare well  Procurement growth in FY15-16 fully offsets earlier cuts  Operating accounts grow to support full spectrum readiness and base support

4. 4 FY16 Request$534 Billion FY16 Budget Cap$499 Billion Excess over legal cap $35 Billion Key Issue: What happens in Congress?   Least likely: Formal sequestration ‾ ‾Congress appropriate $534B but does not increase caps ‾ ‾Across the boards cuts occur in January 2016   More likely: a mini-budget deal ‾ ‾Congress increases cap and appropriates more for defense ‾ ‾But probably not $35B   Another possibility: Congress appropriates at cap level ‾ ‾A lot less money than requested but cuts are not across the board

5. 5 Selected Budget Proposals That May Interest ADC  Modest pay raises of 1.3% for military and civilian personnel  Below level (2.3%) called for in current-law formula  Base support dollars up 7% to $23.2B  Facilities sustainment/restoration/modernization (FSRM) up 20% to $10.8B  Makes up for low levels in FY13 and FY15  Military construction up 29% to $7B  Still probably at low end of long-term sustaining level  Base Realignment and Closure (BRAC) authority requested for 2017  Would eventually save at least $2B a year

6. The Congressional Perspective Lucian Niemeyer (Lucian@Niemeyergroup.com) March 2015

7. Congressional Issues Affecting Defense Communities Federal Budget Resolution Federal Budget Resolution Sequestration of Defense Budgets Sequestration of Defense Budgets Force Structure Reductions Force Structure Reductions Specter of BRAC Authorization Specter of BRAC Authorization Weapon System Terminations Weapon System Terminations Decreased Facility Sustainment, Restoration, and Modernization Accounts Decreased Facility Sustainment, Restoration, and Modernization Accounts Whether the “331 fix” actually fixed anything Whether the “331 fix” actually fixed anything

8. Specter of BRAC Authorization Depends on the Positions of the “Big 4” HASC Chairman – No BRAC until sequestration fixed and force structure stabilized HASC Chairman – No BRAC until sequestration fixed and force structure stabilized HASC RM – Supports BRAC and has drafted legislation HASC RM – Supports BRAC and has drafted legislation SASC Chairman – Included in letter to the Budget Committee an endorsement of management reforms “that could reduce or consolidate military headquarters, commands and infrastructure.” SASC Chairman – Included in letter to the Budget Committee an endorsement of management reforms “that could reduce or consolidate military headquarters, commands and infrastructure.” SASC RM - Endorsed a need for a BRAC round in a hearing on March 3 with Secretary Carter SASC RM - Endorsed a need for a BRAC round in a hearing on March 3 with Secretary Carter Scorecard - That’s 2 for, 1 against, and 1 unknown who was a primary BRAC advocate in 2001 for the 2005 round.

9. Specter of BRAC Authorization Other Positions SASC Readiness Chair – “Even after acknowledging the shortcomings of the 2005 round, the department continues to request the same legislative framework…I remain opposed to BRAC and do not want to give the department the open-ended authority to pursue another BRAC round that has the potential to incur significant upfront costs.” SASC Readiness Chair – “Even after acknowledging the shortcomings of the 2005 round, the department continues to request the same legislative framework…I remain opposed to BRAC and do not want to give the department the open-ended authority to pursue another BRAC round that has the potential to incur significant upfront costs.” HASC Readiness Chair – Will again propose legislation for a BRAC facility capacity analysis – this time with force structure assumptions HASC Readiness Chair – Will again propose legislation for a BRAC facility capacity analysis – this time with force structure assumptions OSD/Installations – Open to discussion on changes to legislation – offered an overall cap on total BRAC implementation costs OSD/Installations – Open to discussion on changes to legislation – offered an overall cap on total BRAC implementation costs USAF – Updated estimate of 30% excess facilities (24% last year) USAF – Updated estimate of 30% excess facilities (24% last year) Army – Even at 490,000 soldier end strength – 18% excess facilities Army – Even at 490,000 soldier end strength – 18% excess facilities Navy/Marine Corps – “We’re good.” Navy/Marine Corps – “We’re good.”

10. Specter of BRAC Authorization One Guy’s Predictions… The current legislation will substantially change The current legislation will substantially change 2019 round more likely than 2017 2019 round more likely than 2017 More Members of Congress will support More Members of Congress will support BRAC will only be authorized this year with a White House deal on Defense Sequestration relief BRAC will only be authorized this year with a White House deal on Defense Sequestration relief Deal may also include curtailing current proposed force structure reductions Deal may also include curtailing current proposed force structure reductions

11. Hope for the Best. Plan for the Worst. Prepare for the Future. ADC Defense Policy and Budget Town Hall Stephen Browning Chief Strategy and Development Officer Weston Solutions, Inc. March, 2015 11

12. Hope for the Best 12 President’s $4 Trillion Fiscal 2016 request would boost defense spending: -Environmental programs: Army (+16.5%) and Navy (+5.5%) -SRM: Army (+21%), Navy (+40%) and Air Force (+37%) - MILCON: Receives an overall increase of +24% However, installations still funded about 81% of infrastructure requirements Proposed funding levels are sensible – BUT THEY AREN’T REALISTIC

13. Plan for the Worst 13 Congress may reject Pentagon’s request for a new BRAC round for the 4 th year in a row. Reinstitution of sequestration in FY 2016 will result in Army end strength of 420,000 by FY 2019 – down from a wartime peak of 570,000 soldiers. The Navy must still absorb roughly $10 billion in sequestration cuts in FY 2016, alone. Most MILCON recapitalization efforts would be deferred, increasing risk and the degradation of overall facility conditions. EVERY installation will feel the pain.

14. Plan for the Worst - Impacts 14 -Continued cuts in force structure and associated community impacts. -Significant cuts to O&M of installation assets. -“Warm basing” vs. disposition of underutilized installation assets. -Piecemeal reduction in mission support activities with little support for impacted communities. -No strategic realignment and closure activities (accompanied by support from OEA for post-BRAC support). -DoD driven by budget realities vs. strategic planning.

15. Prepare for the Future: We’re All In This Together 15 Communities and Installations communication and partnerships need to step up to a new level of interaction. In the absence of BRAC, all Communities will be impacted: collaboration is key. Communities and Installations need to engage at the master planning level; ADC can help share and build on successes. ADC can continue to identify strategic issues relevant to both DoD Installations and Communities (i.e., water shortage in the SW) where collaboration on solutions is essential. ADC can support interactions by collecting and publicizing best practices for communities and installations. ADC can promote alternative venues (i.e., webinars) to actively share best practice intelligence. Interaction. Communication. Collaboration. Results.