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Budget cut likely to hit most Pentagon civilian workers: analyst

By David Alexander

WASHINGTON (Reuters) - Almost all of the Pentagon's nearly 800,000 civilian employees would likely have to be placed on unpaid leave for a month this year if automatic defense spending cuts go into effect in March as now planned, a top defense budget analyst said on Wednesday.

Todd Harrison, a defense analyst at the Center for Strategic and Budgetary Assessments think-tank, predicted the across-the-board spending cuts, which were delayed until March 1 under a law passed on New Year's Day, were more likely than before.

"(The Department of Defense) dodged a bullet once on this. There's another round locked and loaded in the chamber. I'm not sure they can keep dodging those bullets every time ... Eventually one of them is going to hit," he told a briefing.

The Pentagon faces $500 billion in across-the-board cuts to projected spending over the next decade under a process known as sequestration. The cuts, part of an effort to address the huge U.S. budget deficits, were supposed to go into effect on January 2, but Congress passed a law delaying them until March 1.

The Pentagon's base budget under the current funding mechanism is $534 billion. Harrison said the new law had reduced the size of the cuts expected during the 2013 fiscal year, which began in October. He calculated that the cuts on January 2 would have been $62.8 billion, while the March 1 reductions are more likely to be around $48.1 billion.

Those figures are similar to the projections made by Pentagon Comptroller Robert Hale, who said on Monday the cuts expected on January 2 had been about $62 billion but had been reduced to about $45 billion under the New Year's agreement.

Just before lawmakers agreed to delay the cuts, the Pentagon began preparing official notification to Congress that all civilian defense employees faced furloughs of up to 22 work days - about one calendar month.

But it was not clear how many employees might actually be furloughed or for how long. The congressional notification was put on hold after the cuts were postponed.

Harrison said according to his rough calculations, if sequestration takes effect March 1 virtually every civilian employee would have to take unpaid leave for a month before the end of September to achieve the required savings.

The budget for civilian pay and benefits is about $70 billion a year for about 791,000 employees. Under sequestration, spending would have to be cut 8.8 percent for the year. But since five months of the fiscal year have passed, the necessary cut to the remaining funds would be about 15 percent.

"If you're going to reduce your payroll expenses by 15 percent for the remainder of the year and you're going to do it through furloughs, that means you have to furlough virtually every single DoD (Defense Department) civilian for the maximum amount of time you can under the law, which is one month," Harrison said.

He said the spending reductions also would create a "nightmare" by forcing the renegotiation of many Pentagon weapons contracts, work that would have to be done by some of the same civilians forced to take unpaid leave.

Harrison said he wasn't convinced the cuts were "the most likely outcome yet" but said "the odds of sequestration going into effect now, I think, have gone up." Delay was also a possibility, he said, "but at some point delays run out."

While sequestration would "create a real mess" for the Pentagon, Harrison said he disagreed with some of the "over-the-top rhetoric that has been coming out about this."

"I don't think this is the apocalypse," he said. "I think it forces a lot of really stupid decisions. I think it's very short-sighted. But it's not the end of the world. We'll survive it if it happens."

If Congress does reach a deal to avoid sequestration, Harrison said he thought it would include some $200 billion to $300 billion in defense cuts over 10 years, with the Pentagon being given the latitude to target the reductions over time.

"If you have a more gradual ramp-down at about 1- to 2-percent real decline per year, that would give you significant deficit reduction and it would enable DoD to start making smart, strategically informed choices about what they put in their budget request," he said.

(Reporting by David Alexander; Editing by Lisa Shumaker)

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