Two-Year Budget Agreement Provides Major Boost for Pentagon

WASHIGNTON --- The U.S. Senate has reached a deal that will increase federal spending limits by $296 billion over two years, including $165 billion for national defense. If passed by the House, the legislation would end a budget deadlock that has resulted in four continuing resolutions and one brief government shutdown since the start of the 2018 fiscal year on October 1, 2017.

A fifth continuing resolution will still be required to allow time for appropriators to craft their final FY18 spending bills in accordance with the revised spending limits. The proposed continuing resolution would run through March 23.

The two-year deal would add $80 billion for national defense in FY18, and $85 billion in FY19, resulting in revised spending limits of $629 billion and $647 billion, respectively. Another $140 billion in war funding would be provided over the two-year period, bringing total spending to around $700 billion in FY18 and $717 billion in FY19.

The Pentagon's base budget typically accounts for approximately 95.6 percent of the national security figure, meaning the deal would give the Pentagon just over $601 billion in base discretionary spending in FY18, and nearly $620 billion in FY19, not counting the money in the war budget.

The agreement is the third of its kind since the passage of the Budget Control Act of 2011, which put into place federal spending limits through FY21. The last two deals covered FY14/FY15 and FY16/FY17, and added $22 billion for the DoD in FY14, $9 billion in FY15, $25 billion in FY16, and $15 billion in FY17. The $80 billion increase for FY18 alone is larger than all of the increases over the last four years combined.

The revised FY18 spending figure is in line with the FY18 defense authorization bill that was already signed into law, which recommended $700 billion in national security funding. That legislation included an additional $20.9 billion for military procurement in FY18, and $2.3 billion for research, development, test and evaluation. While the final appropriations bill will not match the authorization legislation line for line, DoD acquisition will certainly see a substantial increase compared to the FY18 request.

The DoD is preparing to release its FY19 budget request on February 12, despite the lack of a final FY18 appropriations bill. The timing of the release means there will be no time to adjust the FY19 request to account for the increased spending limits provided by the two-year deal. The request could therefore be significantly impacted depending on the assumptions used by the DoD when it crafted the FY19 spending plan.

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