Last Thursday, the Department of Defense directed agency officials to begin cutting administrative, overhead and other costs in response to uncertainty over the looming sequester scheduled to be triggered on March 1, 2013 unless lawmakers act to avoid the across-the-board cuts. A memorandum addressed to military agency heads from the Office of the Deputy Secretary of Defense identified two main sources of budgetary uncertainty for the department: (1) the upcoming expiration of the Continuing Resolution (CR) on March 27, 2013 and (2) the potential sequestration delayed until March 1, 2013 by the American Taxpayer Relief Act of 2012. To respond to this uncertainty, in the memo the defense secretary directs agency heads to begin planning for possible budget challenges, and authorizes actions to freeze civilian hiring, terminate temporary hires, and reduce administrative and travel expenses. In a press conference, also last Thursday, Defense Secretary Leon Panetta stated, “the most immediate threat to our ability to achieve our mission is fiscal uncertainty.” He reported that if Congress extends the CR through the fiscal year, rather than passing a full appropriations bill for fiscal 2013, this will reduce overall operating accounts by approximately 5 percent ($11 billion), and that if the sequester occurs, the department would need to cut an additional 9 percent ($18 billion) from these accounts as well. In addition, further cuts of about 5 percent would need to be made in other places to preserve funding for the war in Afghanistan, therefore adding up to a 19-20 percent reduction in the department’s base operating budget. The secretary called on Congress to pass a balanced deficit reduction plan, cancel sequestration, and approve full-year appropriations bills for fiscal 2013.

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