Pentagon Furlough of 680,000 Seeks to Save $1.8 Billion

The Pentagon is ordering furloughs of 680,000 civilian workers in an effort to save $1.8 billion of the $37 billion in spending cuts it must make this year.

Defense Secretary Chuck Hagel announced yesterday that most of the Defense Department’s civilian employees will face 11 days of unpaid leave, one day a week starting on July 8 and continuing through September.

The Defense Department “did everything we could” to avert furloughs, Hagel told workers at a Pentagon facility in Alexandria, Virginia. That includes “sharp cuts in the training and maintenance of our operating forces -- cutbacks that are seriously harming military readiness,” Hagel said in a 10-page memo released as he spoke.

While Hagel said he will try to reduce the number of unpaid days later in the year, he made no promises and said more furloughs may be required next year if the budget cuts, called sequestration, continue.

“Major budgetary shortfalls drive the basic furlough decision,” with $20 billion of the $37 billion in cuts falling on operations and maintenance accounts, Hagel said in the memo. Fuel-cost increases that were greater than expected have compounded the shortages in accounts that also account for civilian pay, Hagel said.

The estimate of $1.8 billion in savings was provided by two defense officials who briefed reporters on condition of anonymity to discuss details of the plan.

Training, Maintenance

The furloughs were ordered only after the Pentagon took steps including cuts in training for Army and Marine Corps units in the U.S., grounding Air Force fighter squadrons, postponing Navy ship maintenance and delaying the Persian Gulf deployment of an aircraft carrier.

The 11 days of furloughs is down from as many as 22 days initially projected and 14 days estimated in March.

About 68,500 of 750,000 civilian Defense Department employees who are eligible for furloughs will be exempted, according to Hagel’s memo. The exemptions include 28,000 civilian workers at Navy shipyards who maintain vessels “because it would be particularly difficult to make up delays in maintenance work on nuclear vessels, and these vessels are critical to mission success,” Hagel said.

Employees involved in intelligence and in handling foreign arms sales also will be exempted, Hagel said. About 50,000 foreign nationals employed at overseas locations aren’t subject to furloughs because they are paid by their countries or covered by U.S. agreements with those nations.

‘Deeply Regret’

Sequestration took effect March 1. Furloughs already have begun for certain other federal employees, including the White House staff. Congress moved last month to let the Federal Aviation Administration move around funds to stop furloughs of air-traffic controllers that forced delays at the nation’s largest airports and provoked anger from travelers.

“I deeply regret this decision,” Hagel said in the memo. “I will continue to urge that our nation’s leaders reach an agreement to reduce the deficit and de-trigger sequestration.”

The Pentagon’s estimate that it will need to cut $37 billion in the fiscal year ending Sept. 30 is down from $41 billion previously projected. The amount was reduced after the White House Office of Management and Budget completed recalculations based on a spending bill passed by Congress and signed by President Barack Obama on March 26.

While most of the federal government received stopgap funding that continued at the previous year’s levels, the Pentagon won more flexibility through inclusion of a full appropriations measure.

“I’m sure it’ll ultimately affect some contracts,” Marillyn Hewson, president and chief executive officer of Lockheed Martin Corp. (LMT), told reporters in Arlington, Virginia, yesterday, discussing the effect of the Pentagon’s planned furloughs on contracts.

She said it’s unclear whether weapons testing will be reduced and contracts will be delayed. Lockheed Martin is based in Bethesda, Maryland.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net

Enlarge image Pentagon Said to Furlough Up to 650,000 Civilian Employees

Pentagon Said to Furlough Up to 650,000 Civilian Employees

Pentagon Said to Furlough Up to 650,000 Civilian Employees

Rich Clement/Bloomberg

While most of the federal government received stopgap funding that continued at the previous year’s levels, the Pentagon won more flexibility through inclusion of a full appropriations measure.

While most of the federal government received stopgap funding that continued at the previous year’s levels, the Pentagon won more flexibility through inclusion of a full appropriations measure. Photographer: Rich Clement/Bloomberg

May 7 (Bloomberg) -- U.S. Deputy Defense Secretary Ashton Carter talks about the department's budget and strategy. He speaks at the National Press Club in Washington. (Source: Bloomberg)

April 3 (Bloomberg) -- U.S. Defense Secretary Chuck Hagel talks about the cuts to the Pentagon's budget and the latest threats made by North Korea against South Korea and the U.S. Hagel speaks at the National Defense University. (Source: Bloomberg)

Attachment: Hagel's Furlough Memo

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