Welcome back to Holland & Knight's monthly defense news update. We are pleased to bring you the latest in defense policy, regulatory updates and other significant developments. If you would like additional information on anything in this report, please reach out to the authors or members of Holland & Knight's National Security, Defense and Intelligence Team.
LEGISLATIVE UPDATES
NDAA Update
As covered in the December 2023Holland & Knight Defense Situation Report, for the 63rd consecutive year, Congress passed the National Defense Authorization Act (NDAA) for fiscal year (FY) 2024. The Senate and House passed the compromise measure on a bipartisan basis, and President Joe Biden signed the bill into law on Dec. 22, 2023. The FY 2024 NDAA included a topline funding level of $886 billion, which matched the Biden Administration's budget request to Congress that was sent in March 2023. This also matches the topline funding level that appropriators set, though House Speaker Mike Johnson (R-La.) and Senate Majority Leader Chuck Schumer (D-N.Y.) have yet to announce if topline spending levels for defense appropriations will change. The topline funding level in the FY 2024 NDAA represents a $28 billion increase over levels in the FY23 NDAA. View the full text of the FY 2024 NDAA conference report.
Though it's always a feat to pass the annual NDAA, members of congress have already turned their attention toward the FY 2025 NDAA. The House Armed Services Committee (HASC) announced that it will begin accepting requests from HASC committee members on Feb. 1, 2024, and close the internal request process on March 1, 2024. As such, HASC members have begun soliciting requests from stakeholders who want to influence the FY 2025 bill, and they will have only a few weeks to submit requests to the committee.
Should you or your organization have any questions on FY 2025 NDAA requests, please do not hesitate to reach out to your Holland & Knight Defense Situation Report authors.
Defense Appropriations
The Republican-controlled House approved its version of the FY 2024 Department of Defense Appropriations Act (H.R. 4365) on Sept. 28, 2023, by a narrow vote of 218-210. The bill was agreed to after weeks of negotiations among House Republicans that saw the defense appropriations legislation get derailed twice. The draft that passed also included some hotly debated social policy provisions. A measure to provide $300 million in aid for arming and training the Ukrainian military was also removed from the bill to make way for its passage. The House approved the aid to Ukraine separately by a vote of 311-117. Nonetheless, because the FY 2023 was set to end on Sept. 30, 2023, Congress passed a continuing resolution (CR) minutes before a shutdown that extended the funding for federal agencies until Nov. 17, 2023.
Despite Speaker Johnson indicating that he would not support additional stopgap spending measures, Congress has passed two additional CRs. The most recent CR keeps the government funded in laddered steps, with four of the 12 appropriations bills – including the Military Construction, Veterans Affairs, and Related Agencies Act – expiring on March 1, 2024, and the other eight including Defense, expiring on March 8, 2024.
With a topline funding agreement in place by Speaker Johnson and Majority Leader Schumer, the next obstacle for appropriations was finding a topline spending level for each of the 12 appropriations bills, sometimes called "302(b) allocations," referring to the provision in the Budget Act governing subcommittee funding allocations. After much negotiating, reports indicated that House Appropriations Committee Chair Kay Granger (R-Texas) and Senate Appropriations Committee Chair Patty Murray (D-Wash.) finally made a breakthrough at the end of January.
Though the exact 302(b) levels have not been reported publicly, the agreement allows for the subcommittees in each chamber's Appropriations Committee to begin writing the 12 appropriations bills and lawmakers to negotiate the specific funding for agencies, programming and policy provisions of the entire federal government's $1.7 trillion budget.
The defense appropriations bill faces many of the same obstacles in the Senate that the NDAA faced. In the Democrat-controlled Senate, the House's version of the defense appropriations bill is facing steep opposition for its inclusion of contentious social issues and the pared-down efforts to send aid to Ukraine. Further, President Biden has vowed to veto legislation that cuts down on or defunds the Pentagon's diversity programs or rescinds Pentagon policies that provide support for servicemembers seeking gender-affirming care, abortions or other reproductive healthcare.
As reported in the December 2023 Holland & Knight Defense Situation Report, U.S. Secretary of Defense Lloyd Austin warned in a Dec. 12, 2023, letter that a long-term CR would "misalign billions of dollars" and that thousands of U.S. Department of Defense (DOD) programs would be negatively affected. This would include the ability to counter the People's Republic of China (PRC), which is a priority identified in the DOD's National Defense Strategy, and impediments to the country's ability to react to emergent events. Similar letters detailing the harm of a full-year CR for the DOD were sent to Congress by the Chairman of the Joint Chiefs of Staff and secretaries of the U.S. Army, Navy and Air Force.
CBO Sends Letter to Congress Warning Defense Cuts Under Debt Deal
In a letter to House Budget Committee leadership, the Congressional Budget Office (CBO) – an agency within the legislative branch that provides nonpartisan, objective budget and economic information and analysis to Congress, colloquially known as "Congress' scorekeeper" – outlined the potential reductions the government would see under the budget deal struck last year between President Biden and then House Speaker Kevin McCarthy (R-Calif). The Fiscal Responsibility Act (FRA; Public Law 118-5), first outlined in the July 2023 Holland & Knight Defense Situation Report, suspended the nation's debt limit through Jan. 1, 2025, sets spending caps (called "limits" in law) for FY 2024 and 2025, caps defense spending at $886.3 billion for FY 2024 (a 3.3 percent increase over FY 2023) and creates a penalty to incentivize enactment of the FY 2024 and FY 2025 appropriations bills such that if all 12 appropriations bills for FY 2024 are not enacted by the end of April 2024, defense and nondefense spending limits are reduced to 1 percent below FY 2023 levels.
Specifically, the CBO's letter sent to Budget Committee leadership said that the DOD would see a budget cut of approximately $10 billion if mandatory reductions under the FRA take effect in April 2024 should Congress not pass all 12 appropriations bills for FY 2024 by the deadline. Though defense spending would see the mandatory 1 percent decrease under that scenario, the total number for defense spending, the CBO says, may actually grow under the $886.3 billion cap set by the FRA. Despite this, and taking into consideration inflationary pressures, increases in national security programming and other items, the 1 percent cut would cause a strain on the DOD and defense contractors and throughout the defense industrial base ecosystem. It is noteworthy that the CBO also estimates that nondefense spending could be cut 5 percent, or $41 billion below its current level, if the mandatory cuts take effect and could decrease by up to 9 percent, or $73 billion, if Congress adheres to the FRA caps or extends current funding through the end of the year without waiving those caps.
ISRAEL, UKRAINE AND FOREIGN-MILITARY ASSISTANCE
On Feb. 4, 2024, senators unveiled a bipartisan national security supplemental totaling $118.3 billion that includes policy changes for immigration and border security. The bill includes $60.6 billion for Ukraine, $14.1 billion in security assistance for Israel, $4.83 billion to counter China and support regional partners in the Indo-Pacific, and $10 billion for the U.S. Department of State and U.S. Agency for International Development (USAID) to provide humanitarian assistance in Gaza and Ukraine. The bill also includes the FEND Off Fentanyl Act, and the U.S. defense industrial base seeks to gain about $35 billion through programming that would unlock military aid to Ukraine, Israel and allies in the IndoPacific. The deal, struck after months of negotiations by Sens. James Lankford (R-Okla.), Kyrsten Sinema (I-Ariz.) and Chris Murphy (D-Conn.), is in response to the growing national security needs around the globe and at U.S. borders.
The package will need to overcome a filibuster and receive 60 votes in the Senate to pass. Though Senate Minority Leader Mitch McConnell (R-Ky.) gave his support to the negotiator's package, Speaker Johnson declared the package "dead on arrival" in the House, where conservative Republicans have called for much broader changes to U.S. border security and immigration policies.
The bill differs from the Biden Administration's supplemental funding request from Congress worth nearly $106 billion in emergency funds for Israel, Ukraine, the Indo-Pacific and America's borders, which it announced on Oct. 20, 2023. More than half of that request, approximately $61 billion, is assistance for Ukraine. The package also includes approximately $14 billion that would boost Israel's defenses, as well as $10 billion for humanitarian assistance to civilians in Gaza and the needs of IndoPacific allies to counter China.
Across these initiatives, the Biden Administration said that the supplemental funding will ensure American military readiness by investing in the American defense industrial base through replenishment funding and other forms of security assistance, such as foreign military financing and the Ukraine Security Assistance Initiative (USAI). Without additional replenishment funding, the DOD will be unable to continue to backfill the military services for equipment provided via drawdown to Ukraine and Israel, thereby degrading U.S. readiness.
To view the full article, click here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
