“The global hub for educating, informing, and connecting Information Age leaders.”
The Fiscal Future:
Issues and Options
Issue: Balance Budget
Debt limit agreements to date do not balance the budget
Current FY 14 President’s Budget plans for deficits into future
Option: Start long-term revenue increases and/or spending cuts
Issue: Pay Down National Debt
Requires initial balanced budgets and long-term surpluses
Option: Control growth in mandatory spending and/or raise revenue
Issue: Ensure Long-Term Social Insurance Programs solvency
Social Security will be able to pay out full benefits until 2036
After this point tax revenue will fund pay outs of 75% of full benefits
Medicare will fund full benefits until 2024.
Option: Reduce benefits and/or increase revenue
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Democrats 199
Republicans 233
Vacant 3
Democrats 55
(including 2 independents)
Republicans 45
Issues:
• October 17, 2013
• December 13, 2013
• January 15-18, 2014
• February 7, 2014
• March 4, 2014
• April 15, 2014
• October 1, 2014
• November 4, 2014
Congressional Issues
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Federal Budget Trends: 1948-2016
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
$5,000
1948
1954
1960
1966
1972
1978
1984
1990
1996
2002
2008
2014
est
Fiscal Year (w/o TQ)
Curr
ent D
olla
rs in
Bill
ions
Receipts Outlays
Source: Office of Management and Budget
Federal Budget Trends
“The global hub for educating, informing, and connecting Information Age leaders.”
Federal Debt Held by the Public and Gross
Dollars
in T
rillio
ns
Source: OMB
11.9 12.9
13.6
4.7
5.0 5.1
0
2
4
6
8
10
12
14
16
18
20
2013 2014 2015
Government Account
Public
0.7 0.6 0.6 Deficit:
18.7 17.9 16.7
“The global hub for educating, informing, and connecting Information Age leaders.”
Entitlement Reform
“The global hub for educating, informing, and connecting Information Age leaders.”
Budget Deficits Around the World
Borrowing relative
to the size of the
economy is a sign
of fiscal stress.
The OECD reports
on the FY 06-09
US stress level
“The global hub for educating, informing, and connecting Information Age leaders.”
Debt Reduction Remaining
All budget-related legislation to date brings annual deficits to
“historic norm” of about 4% of GDP
Most economists agree $4T in savings/revenue increases over 10
years is needed to balance the budget and initially pay down the
debt
Debt Reduction Required:
___ ($T)
Required 4.0
Achieved to date 2.6
Difference 1.4
$1.4T additional still needed to a achieve $4T in savings/revenue
Source: Bi-Partisan Policy Center
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Sequestration’s Effect on Debt
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Fiscal Year 2015 The President’s Budget
Receipts
FY 2015 Deficit = $564B
Average Annual Deficit FY 16-24 ~
$485B
$3,337B
Outlays
$3,901B
Source: OMB
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Defense 16%
Other Discretionary
15%
0%
Social Security 23%
Medicare 13%
Medicaid 9%
Other Mandatory 18%
Net Interest 6%
Immigration Reform**
0%
11
Fiscal Year 2015 President’s Budget (Outlays)
Mandatory $2,709B
(69% of total)
Discretionary $1,192B
(31% of total)
TOTAL $3,901B
* Includes $6B in disaster costs
** About $8B in Implementation costs
Source: OMB
“The global hub for educating, informing, and connecting Information Age leaders.”
Baby Boom Births by Year
2.5
2.7
2.9
3.1
3.3
3.5
3.7
3.9
4.1
4.3
4.5
19
43
19
44
19
45
19
46
19
47
19
48
19
49
19
50
19
51
19
52
19
53
19
54
19
55
19
56
19
57
19
58
19
59
19
60
19
61
19
62
19
63
19
64
19
65
1966
19
67
Mill
ions o
f B
irth
s
= Baby Start/End Year Source: Statistical Abstract
of the United States
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Distribution of Outlays by Agency
0
10
20
30
40
50
60
70
80
90
100
1970
1975
1980
1985
1990
1995
2000
2005
2010
est
imat
e
2015
est
imat
e
Perc
ent
of
Tota
l
Treasury (Int) Soc. Secur. HHS DOD (Military) VA/OPM/AG/DOT/DOL
Growth in Outlays by Agency (includes Mandatory and Discretionary)
DoD has declined and
HHS has increased as
a percent of the total
Competing for less that
10% of all federal
spending (all unlisted
agencies):
NASA
Education
Energy
Interior
Commerce
Foreign Assistance
Homeland Security
Small Business
Environmental
Protection
The Legislative Br
The Judicial Branch
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Fiscal Year 2015 President’s Budget (Revenue)
TOTAL $3,337B
*about $2B in revenue
Source: OMB
Indiv Income Tax 46%
Social Security 23%
Corp Tax 13%
Medicare 7%
Othe Social Insurance
2%
Excise, Estate, Customs
5% Other
Receipts 4%
Immigration Reform*
0%
“The global hub for educating, informing, and connecting Information Age leaders.”
Federal Revenue Sources 1948-2016
0
10
20
30
40
50
60
70
80
90
100
1948
1952
1956
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
2008
2012
est
2016
est
Fiscal Year (w/o TQ)
Perc
en
t o
f T
ota
l
Ind Inc Tax Corporate Inc Tax Social Insurance All other
Source: OMB
Revenue
(As a percent of Total)
“The global hub for educating, informing, and connecting Information Age leaders.”
0%
5%
10%
15%
20%
25%
30%
35%
1994 1997 2000 2003 2006 2009
$1-5M
$5-50M
50-500M
500M+
Corporate Taxes Paid as a Percent of
Taxable Income
Source: Internal Revenue Service
Pe
rce
nt
of
Ta
xa
ble
In
co
me
Asset Value of
Corporation
“The global hub for educating, informing, and connecting Information Age leaders.”
Tax burdens among OECD nations, (Tax revenues as a percent of GDP)
Comparative Tax Burden, 2008
0 10 20 30 40 50 60
MexicoChile
TurkeyUnited States
KoreaAustralia
JapanIreland
SwitzerlandSlovak
CanadaGreece
SpainNew Zealand
IsraelPoland
OECD - TotalPortugal
LuxembourgUnited
Czech RepublicIceland
GermanySlovenia
NetherlandsHungaryNorwayAustriaFinlandFrance
ItalyBelgiumSweden
Denmark
Taxes as Percent of GDP
Source: OECD
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287 328 365 377 400 411 432
479 513 528 528 530 496 496 496 535 544 551 559
91 76 3 116
8 166
187 146 162 159
115
82 85 79
$0
$250
$500
$750
FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
Base Budget OCO
FY10 FY11
Other
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
345
Budget Totals in President’s FY 2015 Budget Request DoD Topline, FY 2001 – FY 2019
(Current Dollars in Billions)
575 565
438 468 479
535
601
666 666 691 687
645
574
316 6
23
3
7 1
17
589
30* 30* 30*
* Reflects FY13 Enacted level excluding Sequestration
* Placeholders only
Focus Only On Base Budget For Remainder Of Briefing
No FY 2015 OCO Budget Yet
*
578 581 30*
2
614* 581
73
“The global hub for educating, informing, and connecting Information Age leaders.”
Since 2001, real growth has occurred in all
major categories, but O&M has grown the most
in dollar terms
FY14$ in billions, base budget FY 2001
Actual
FY 2014
Enacted
Dollar
Growth
Percent
Change
Percent of
Total Growth
Military Personnel 101.1 135.2 34.8 34% 30%
Operation and Maintenance
(ex. DHP) 114.0 160.5 46.5 41% 40%
Defense Health Program (DHP)* 16.0 32.3 16.3 102% 14%
Procurement 81.6 92.4 10.9 13% 9%
Research, Development, Test, and
Evaluation 54.4 62.8 8.4 15% 7%
Military Construction 7.1 8.4 1.3 18% 1%
Family Housing 4.8 1.4 -3.4 -70% -3%
Other 1.4 2.2 0.8 56% 1%
TOTAL 380.5 496.0 115.6 30% 100%
*The DOD Unified Medical Budget ($48 billion in FY 2015) includes both DHP and some additional Military
Personnel funding.
Source: OMB
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475
$26B
Initiative 500
525
550 541
575
($B)
600
FY 2014 President’s Budget (PB14)
FY14 FY15
PB14
FY16 FY17
Sequester - Level Budgets
FY18 FY19
PB15
PB15 DoD Base-Budget Topline (Opportunity, Growth, and Security Initiative)
Sequester - Level Budgets 496
PB15
13
“The global hub for educating, informing, and connecting Information Age leaders.”
475
500
525
FY14 FY15
PB14
FY16 FY17
Sequester - Level Budgets
FY18 FY19
PB15
Sequester - Level Budgets
559
551
550 541
535
575
($B)
600
FY 2014 President’s Budget (PB14)
496 500
537
577
PB15 DoD Base-Budget Topline
PB15
3
“The global hub for educating, informing, and connecting Information Age leaders.”
500
Sequester - Level Budgets
475
525
550
575
FY14 FY15
PB14
FY16 FY17
Sequester - Level Budgets
FY18 FY19
PB15
$115B Cut
($B)
600
FY 2014 President’s Budget (PB14)
PB15 DoD Base-Budget Topline (Effects Of Sequester-Level Budgets)
PB15
15
“The global hub for educating, informing, and connecting Information Age leaders.”
FY 2015 Opportunity, Growth, and Security
Initiative
• Total $26 billion for DoD
• Readiness enhancements
– Training adds in Army
– Spares and logistics in Navy
– Unit training in USMC
– Training in Air Force
• Investment increases
– Army Helicopters (56)
– Navy P-8 (8), E-2D Aircraft (1)
– USMC Light Armored Vehicle
– Air Force F-35 (2), C-130J (10),
MQ-9 Aircraft (12)
– Science and Technology ($335M)
• Installation support increases
– All Services increase base sustainment
– All Services add MilCon funding
14 Source: DoD
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Field Activities/
Bureaus Department
Headquarters
• Addressing New Mission Needs • Protecting traditional “Budget” share • Executing the last budget • Working with Dept HQ, OMB and Congress
• Balancing needs of field activities • Funding new Admin or Dept initiatives • Working with activities/ bureaus OMB and Congress • Overseeing execution
• Balancing needs of all agencies and macro-budget picture • Funding new Admin or Dept initiatives • Working with White House, Congress, and agencies • Overseeing execution
•Balancing budget needs and Member or Party interests • Funding new Congressional and Admin initiatives •Working with all players •Oversight
Budget Lifecycle
Main Players/Overall Process
THE U.S. CAPITOL WASHINGTON
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Department of Defense’s
Planning, Programming, Budgeting
and Execution (PPBE) Process
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The Budget Calendar and
the PPBE Process
FY11 Q3 FY12 FY13 FY14 FY15 FY16 Q2 Q4 Q3 Q2 Q4 Q3 Q2 Q4 Q3 Q2 Q4 Q3 Q2 Q4 Q3 Q2
FY 2014
Budget
FY 2015 Budget
FY 2016 Budget
Planning Prog/Budget Execution
Planning
Planning
Prog/Budget Execution
Execution
Today FY 2014 – 2016 Budget Status
Congressional Action???
Congressional Action Prog/Budget
Congressional Action
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Prog. Review
DoD Planning, Programming, Budgeting, and
Execution (PPBE) System Overview
Yearly PPBE Process and Milestones Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
Planning
(QDR, DPPG, GEF)
Program/Budget
Estimates
Components submit estimates
PDMs 3-Star
Final JCS risk assessment
Execution
Review
OUSD(C) performs an Execution review. Result: Omnibus Reprogramming
Dep. Mgmt Act. Grp
PPBE Phases
Strategic
Planning
Program
Review
Execution
Review
Budget
Review
PBDs
Budget Submission
Budget
Review
Budget
Justification
3-Star
SecDef
Group
JCS Chairman’s Program Assessment
Dep. Mgmt Act. Grp
Prog Decision Memo
Resource Mgmt
Decision
SecDef
Group
JCS Chairman’s Joint Planning Document
Budget Estimate
Submission (BES)
Program Objective
Memorandum (POM)
Cost Assessment and Program Evaluation (CAPE)
Under Secretary of Defense (Comptroller :USD-C)
“The global hub for educating, informing, and connecting Information Age leaders.” 28
Processes/Products
National Security Strategy
National Military Strategy
Quadrennial Defense Review (QDR)
Chairman’s Program Recommendations (CPR)
Defense Planning and Programming Guidance (DPPG)
Players
National Security Council
Under Secretary of Defense (Policy)
Chairman of the Joint Staff
Defense Department PPBE:
Planning Phase
“The global hub for educating, informing, and connecting Information Age leaders.” 29
Processes/Products
Integrated Priority Lists
Program Objective Memorandum (POM)
Chairman’s Program Assessment (CPA)
Program Decision Memorandum (PDM)
Players
Military Departments
Combatant Commanders/Joint Staff
Cost Assessment and Program Evaluation (CAPE)
Office of Management and Budget (OMB)
Three Star Programmers Group
Defense Department PPBE:
Programming Phase
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Strategic Forces
General Forces
Command, Control, Intel & Space
Military Forces
Guard and Reserve Forces
Central Supply & Maintenance
Training, Medical & Other Personnel Activities
Administrative Activities
Support of Other Nations
Special Operations Forces
A
R
M
Y
N
A
V
Y
A
I
R
F
O
R
C
C
E
D
E
F
A
G
E
N
C
I
E
S
O
T
H
E
R
Major Force Programs
Future Years Defense Program (FYDP)
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Some central questions include:
Are the plans resource-constrained or - informed?
Are the budget planners invited to participate in strategic planning?
Are final plans produced in time to influence the program/budget build?
Are program plans realistic over the long term?
Planning and Programming:
General Issues
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Processes/Products
Budget Estimate Submission
Resource Management Decision (RMD)
Players
Military Departments
Combatant Commanders/Joint Staff
Office of Program Analysis and Evaluation
Office of Management and Budget (OMB)
Office of the Under Secretary of Defense (Comptroller)
Deputy (Secretary) Advisory Working Group (DAWG)
Defense Department PPBE:
Budgeting Phase
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The Office of Management
and Budget
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The OMB budget review schedule
July Aug Sept Oct Nov Dec Jan Feb Mar Apr May June
Passback/
Appeals
Program/Budget
Review with
Agency HQ
• Director’s Review • Revised Economic Assumptions
• Review of Congressional Testimony and Actions
• Ongoing Budget Oversight
• Mid-Session Corrections
•Apportionments
Review Proposed Authorizations with Budget impact
MAX Database: Prior Years MAX Database: Budget Years
Budget Chapter Writing
Budget Review Board Meetings
Review Agency
Budget Justifications
July: OMB issueds revised A-1l guidance State of the
Union and Budget Submission
“The global hub for educating, informing, and connecting Information Age leaders.” 35
OMB is very flat – information moves up chain very quickly
Ø OMB leadership responsive to West Wing
Ø OMB leaders deal with macro issues
Almost all budget issues have political/policy component
Ø Examiners work in a fast-paced environment
Ø Program examiners want compelling/well-reasoned info
Ø Communication and integrity are key
New OMB leadership experienced in budget and program issues
Ø Director – Vacant
Ø Deputy – Brian Deese
Ø NSD PAD – Steve Kosiak
Office of Management and Budget:
What do they want from me??!
“The global hub for educating, informing, and connecting Information Age leaders.” 36
Deputy Associate Director
Responsible for multiple Dept budgets or major accounts
Senior Executive with many years experience
May have a small integration staff (1 or 2 people)
Branches (typically 10 people or less)
Focused on one agency or set of budget accounts
Led by Senior Executive and staffed by Program Examiners
Examiner roles
Involved in major budget process issues
Develop quantitative and policy recommendations
Understand budget technical/legal/program implications of issues
Office of Management and Budget:
Typical Division Organization
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Issues Decided on by the OMB Director or taken to the President, include:
Topline for each federal department
Impact of economic factors (inflation, price of fuel, cost of living adjustments, etc) on mandatory and discretionary spending
Major policy issues –
i.e., Economic recovery, funding the overseas contingency operations, etc.
Players
OMB Director
All ExOp Reps (NSC, OSTP, OFFM, OFPP, etc)
OMB Division Staffs
OMB Director’s Review
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The Congressional Budget Office
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CBO:
Divisional Organization
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Success factors:
Relationships
Understand Culture of your organization and those around/above yours
Communicate effectively
Know what to tell, who to tell, and when to tell it
Political Savvy
Understand the programs/activities
Technical knowledge
Summary
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Questions, Comments, Concerns?
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OMB Sources of Power/Influence
The Top Line
Passback
Scoring
Apportionments
Legal/Regulatory
Statements of Administration Policy
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CBO Sources of Power/Influence
10 year baseline
Scoring
Research Reports
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FY 12/13 DoD Requests vs. Appropriation (Budget Authority in $ Billions)
142
Source: OMB
142 135
Does not include $26B from Initiative Fund in FY 15 or $79B OCO
135.4 135.9 135.2
194 192.8 198.7
91.1 92.4 90.4
63.3 62.8 63.5
0
100
200
300
400
500
600
FY 2013 FY 2014 FY 2015
Revolving Funds
Family Housing
Military Construction
Research, Development, Test and Evaluation
Procurement
Operation and Maintenance
Military Personnel
11.8
495.5
12.0
496.0 495.6
7.8
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Defense Department PPBE:
Then and Now
The world in 1961…
U.S. faced U.S.S.R. in Cold War
Stability was key to survival
U.S.:
GDP - $520B
National Security Budget - $50.2B (9.6% of GDP)
USSR:
GDP - $174B
National Security Budget - $16.5B (9.5% of GDP)
The world today …
U.S. faces varied threats…
Flexibility is key
U.S.:
GDP ~ $15T
National Security Budget ~ $700B (5.0% of GDP)
Sources: Bureau of Economic Analysis, Commerce Dept, OECD and
William T. Lee – “Estimation of Soviet Defense Expenditures,”
1977 Praeger Press
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PPBE: Explain the Phases
Processes
Timing
Products
Players
Interests
“The global hub for educating, informing, and connecting Information Age leaders.”
Defense Department PPBE:
Programming Phase
Issues
Do program and budget reviews overlap?
Timing
Scope
What do program/budget staffs need to do to be
successful?
Are program plans realistic over the long term?
What can be done to improve them?
“The global hub for educating, informing, and connecting Information Age leaders.”
Defense Department PPBE:
Budgeting Phase
Issues
Pros/Cons of the Joint Review with OMB
Should it be sequential?
Should it be stay the same?
Is the decision-making process transparent?
What is the budget review’s relationship to performance measurement?
How can OSD (Comptroller) improve the budget process?
Timelines/Deliverables
“The global hub for educating, informing, and connecting Information Age leaders.”
Defense Department PPBE:
Execution Phase
Issues
Is the Execution Phase limited to budget? Should it be?
Pros/Cons: Decentralized Execution/Centralized planning, programming, and budgeting
Is there sufficient feedback on program outcomes to the Secretary?
Should there be a systematic enterprise-wide feedback loop to the Secretary on execution?
“The global hub for educating, informing, and connecting Information Age leaders.”
Defense Department PPBE:
General Issues
Who does PPBE serve? How well?
Is the process flexible enough, given the new threat environment?
Is the 2 year cycle realistic?
How do process owners relate to each other?
Can there be better:
Communication/Transparency
Coordination with OMB