fy19 federal and dod budget · fy20 pom aims to fully align the fydp with the national defense...

Initial perspectives on the FY18 and FY19 budgets

February 13, 2018

FY19 Federal and DoD Budget

PRIVATE & CONFIDENTIAL | AVASCENT | 2

Summary of the Fiscal Year 2019 Budget

The Bipartisan Budget Deal sets topline budgets for Defense and Non-Defense agencies

Non-Defense agencies will see increases above prior Trump Administration plans

– Deep cuts planned in the FY18 President’s Budget should be avoided, but many agencies may see only modest growth from FY17 levels

– Final figures for FY19 may not be fully resolved until the Appropriations process runs its course

The Defense Department will see a big topline increase in FY18

– Topline budget growth of more than 10% from FY17 levels

– The Procurement and RDT&E accounts could each grow by roughly 18%, FY17 to FY18

In FY19 and beyond, however, DoD projects growth only in line with inflation

– This may not be enough to meet SecDef Mattis’ call for sustained growth of 3% above inflation


Continuing Resolution extended through Mar. 23, to allow finalization of FY18 Appropriations in line with Bipartisan Budget Act

The early weeks of 2018 have seen a flurry of events that will shape Federal budgets in FY18, FY19 and beyond

FY18 CR

Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.

FY19 President’s Budget issued Feb. 12

FY19 Authorization and Appropriations FY19 begins

2018 2019

National Defense Strategy released Jan. 19

DoD POM process for FY20-24 Future Years Defense Plan

Mid-term Elections

Jan.

FY20 President’s Budget

Feb.

Bipartisan Budget Act signed Feb. 5

Congressional activities

Administration activities

Other events


The FY19 President’s Budget reflects the 2-year budget deal to increase the Budget Control Act caps in FY18 and FY19

$22 $9$25 $15

$80$85

$300

$350

$400

$450

$500

$550

$600

$650

$700

FY13 FY14 FY15 FY16 FY17 FY18 FY19

$22 $10$25 $15

$74$74

$300

$350

$400

$450

$500

$550

$600

$650

$700

FY13 FY14 FY15 FY16 FY17 FY18 FY19

$B (B

udge

t Aut

horit

y)

$B (B

udge

t Aut

horit

y)

Increases to Original Budget Control Act (BCA) Caps

Defense Non-Defense

The Bipartisan Budget Act allows a big jump in budget authority in FY18, and then a smaller but real increase in FY19

Original BCA Caps (post-sequester)

Congressional Increase in BCA Caps

Source: OMB, DoD; The increased caps on Defense do not include OCO


The Bipartisan Budget Act improves the budget picture for Non-Defense agencies, but many details remain unresolved

$B (B

udge

t Aut

horit

y)

Non-Defense Discretionary Spending

HHS

Veterans Affairs

Education

State / USAID

DHS

HUD

Energy

Justice

Agriculture

Transportation

NASA

Interior

All Other Non-Defense

$83.6

$77.3

$67.8

$56.3

$69.6

$37.4

$30.0

$27.6

$23.7

$18.4

$19.5

$13.4

$61.5

$0

$100

$200

$300

$400

$500

$600

$700

FY17 FY18 FY19

The Trump Administration has not yet stated how it will allocate added Non-Defense funds provided by the Feb. 2018 Bipartisan Budget Act for FY19

~$74 billion

Source: OMB, FY19 Budget; FY17 figures include disaster relief and other funding not counted under BCA caps as shown on the previous slide; FY18 and FY19 are also likely to gain added funding from these sources

FY18 $BDepartment

$88.4

$74.4

$66.9

$56.6

$56.7

$43.7

$30.2

$28.4

$25.2

$20.9

$19.8

$13.5

$89.5

FY17 $B


DoD should see a topline budget increase of more than 10 percent in FY18, and then about 2.3 percent in FY19

Projected DoD Topline Budget

$ Bi

llion

s (Bu

dget

Aut

horit

y)

$526.8

$79.3

$606.1

$600.1

$70.6

$670.7

$617.2

$68.7

$685.7

Base

OCO

Total

FY17 FY18 FY19

Note: Appropriations for FY18 were not complete when the FY19 PB was issued, so FY18 figures will be subject to change

Projected topline budget figures

Source: DoD and OMB, FY19 Budget; Appropriations Committees

$400

$450

$500

$550

$600

$650

$700

$750

FY17 Enacted FY18 BCA Cap FY18 (NewBudget Deal)

FY19 President'sBudget

Base OCO

10.7%2.3%


$-

$100

$200

$300

$400

$500

$600

$700

$800

$900

FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23

After FY19, the President’s Budget forecasts growth with inflation through the Future Years Defense Plan

Curr

ent Y

ear $

Billi

ons

Base BudgetFYDP projects 2% annual growth after FY19

OCO Budget

DoD Topline Budget Through the FYDP

DoD stated in the FY19 budget that it intends to reduce its reliance on OCO after FY19, but the Department has said this before

Source: DoD FY19 Budget

FY19 FYDP


The FY19 DoD budget starts the process of implementing the National Defense Strategy

• Big budget gain allows increases across all categories

• But the largest percentage gains went to areas highlighted in the National Defense Strategy

• Big increases from FY17 to FY19:

• Ground Forces (+59%)

• Space Systems (+48% in unclassified accounts)

• Missiles & Munitions (+32%), including missile defense and strategic nuclear deterrence

• RDT&E overall (+24%)

• Procurement and RDT&E for Ships and Aircraft also grows, but by much smaller margins

• Aircraft (+9%)

• Ships (+8%)

• Moderate increases in force size

• Grow active endstrength by 24,100 (+1.8%) by FY23

• Army gain of 2.4% is smaller than the Service previously envisioned

• Navy on a slower path to 355 ships than advocates hoped for

• Expansion and upgrade of prepositioned equipment in Europe

• Infrastructure investments in Pacific theater

Modernization

Force Size and Posture

Readiness

• Steady increase in O&M funding

• Big increase in missiles and munitions procurement, FY17 to FY19

• Increases in endstrength in the Army, USMC and USAF to close key personnel shortfalls


The FY18 budget will fund a significant expansion in DoD investment accounts

$139.4 $146.2 $152.9

$258.1 $275.1 $283.5

$124.3 $147.6 $144.3

$73.6 $87.0 $92.4 10.6

15.3 $12.9

$0

$100

$200

$300

$400

$500

$600

$700

$800

FY17 FY18 FY19

Curr

ent Y

ear $

Billi

ons

Estimated DoD Topline by Title (Base and OCO)

Military Personnel

Operations & Maintenance

Procurement

RDT&E

All Other Accounts

Increase in endstrength in all Services; 2.6% pay increase

Greater readiness funding and a growing force

Increases nearly across the board; see next slide

Increases nearly across the board; see next slide

Increase in MilCon and other facilities-related spending

Source: DoD and OMB; Avascent will update these data as Appropriations are finalized for FY18

Key Developments

(Estimate Based on FY18 National Defense Authorization Act)

President’s BudgetActuals as shown in FY19 President’s Budget


Preliminary estimates suggest big increases in nearly all investment categories

Estimated DoD Investment Spending by Category

Curr

ent Y

ear $

Billi

ons

$49 $58 $53

$43$47 $49

$28$35 $30

$26

$31 $35$23

$26 $26$18

$18 $19$9

$12 $15$5

$7 $7

$0

$50

$100

$150

$200

$250

FY17 FY18 FY19

Aviation

Classified

Ships

Weapons & Munitions

C4ISR

Other

Ground Systems

Space

8.7%

13.0%

7.5%

32.2%

15.4%

3.4%

58.7%

48.0%

Two-Year Increase, FY17 to FY19

(Estimate Based on FY18 National Defense Authorization Act)

President’s BudgetActuals as shown in FY19 President’s Budget

Source: DoD and OMB; Avascent will update these data as Appropriations are finalized for FY18


What’s Next?

FY20 POM aims to fully align the FYDP with the National Defense Strategy

Mid-term elections could reshape Congress ahead of the FY20 budget cycle

Avascent will continue to update this information as developments warrant

Near-Term

Mid-Term

Long-Term

FY18 Appropriations process could wrap up in March– This will clarify Defence and Civil budgets in FY18, which remain unclear

Appropriations for FY19 may go quicker than recently, given the topline deal– The Bipartisan Budget Act resolved FY19 toplines for Defense and Non-Defense

How long will this up-cycle last?

Is this just a short-lived increase to “get well”? Or is it a sustained increase?


Avascent will integrate this analysis with its market intelligence tools

Program Level Analysis and Forecast

1Forecast of the Most

Likely Budget Outcome

3Detailed Budget Analysis

and Forecast

2

Avascent Analytics subscribers receive a dataset with planned spending through 2028 Program Element; each line item is linked to a market category and prime contractor where possible

Avascent will break this down to the major system level to allow detailed analysis of competitor share and opportunity space in the Global Platforms and Systemsmarket intelligence tool

Actual spending almost always diverges from what is planned in the FYDP; Avascent provides a detailed forecast of how DoD programs are likely to play out over the next 10 years


Doug Berenson, [email protected](202) 452 - 6911

Sebastian Sobolev, Deputy [email protected](202) 280 - 1586

Matt Vallone, Research [email protected](202) 280 - 1572

fy19 federal and dod budget · fy20 pom aims to fully align the fydp with the national defense...

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