Quick Hit – February 11, 2020

The President’s FY21 Budget

Huntington Ingalls Executive Vice President Mitch Waldman

I wish I had coined the phrase, but believe Huntington Ingalls’ Mitch Waldman spoke it first when commenting on the five-year budget forecast that accompanied last year’s FY20 budget – “Flat is the new up!” It’s here. Monday, President Trump delivered the FY21 budget to Congress. It landed as most President’s budgets do when arriving in Congress, with mild interest. Despite the fanfare of any increases, this is a relatively flat spending plan when viewed in the macro.

High level details of the President’s FY21 budget proposal:

    • 4 Trillion dollars in government spending projected in FY21. Of course, much of that is categorized as non-discretionary entitlement funding: social security, Medicare, etc. A balanced budget (where goes in equals goes out) is projected within 15 years. In DC parlance the concept of future years spending is fantasy.
    • Veterans Affairs is the overall “winner” with a 13% increase.
    • Defense is a winner on the surface with a 1.5% increase. But 1.5% growth is a decrease in real terms. Within defense there is reason for concern as very large and expensive programs and initiatives (Columbia class submarine, Space Force, Operations and Maintenance, B-21) are putting serious pressure on more routine investment. Protecting your budget lines and program plans will continue to be a tactical necessity.
    • Non-defense (all other agencies of government) is cut across the board by roughly 5%. Recall the framing of “defense vs non-defense” spending is what brought us sequestration in 2011 – we just got out from under that 10-year piece of terrible legislation last year.

What it Means

    • Space Force Chief of Space Operations General John Raymond

      The President’s budget is an input to the legislative and appropriations process. Although it may have taken years to “build”, it will be scrubbed and reworked in a matter of months in Congress.

    • No secret, it’s an election year. The legislative process will move quickly – until it doesn’t come July. Staffs are aggressively analyzing the details, meeting with industry and coordinating Congressional hearings. The coming 90 days will be a blur of headlines, testimony, third party advocacy and posturing. Then we’ll get to the disconnects between House and Senate, Republicans and Democrats.
    • A continuing resolution (CR) could make sense as an expedient way to punt the ultimate decisions past the elections. We’re a long way from that decision point.
    • While FY21 legislation begins to churn in Congress, remember, your agency customers are executing FY20 and planning for FY22. Know where you need to be, and when you need to be there.

Upcoming speaking events for Gene:

    • Florida Defense Contractors Association (FDCA) B2B/B2G Matchmaking, April 14th, Rosen Centre, Orlando FL. Includes free book and signing session.
    • AUVSI’s Exponential, May 3rd AND May 6th, Boston Convention and Exhibit Center, Boston, MA. Includes free book and signing session.

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