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National Defense Budget Estimates for FY 2020 Summary

Core Content

The National Defense Budget Estimates (The Green Book) for FY 2020 provides comprehensive data on the Department of Defense (DoD) budget, including historical trends from FY 2018 to FY 2024, and details on how budget authority (BA), total obligational authority (TOA), and outlays are calculated and presented. It also includes information on the treatment of inflation, the distinction between discretionary and mandatory spending, and the role of emergency and supplemental funding.

Main Points

1. Budget Overview

• The Green Book serves as a reference document for the DoD budget estimates, offering both current (nominal) and constant (real) dollar data.
• It includes data on discretionary and mandatory funding, as well as outlays.
• The document reflects the FY 2020 President's Budget submitted to Congress in March 2019.
• It is used in conjunction with the Budget Request Summary Justification Book.

2. Key Budget Categories

• Budget Authority (BA): Legal authority to incur obligations, including both discretionary and mandatory funding.
• Total Obligational Authority (TOA): Total amount of funds available for obligation in a given fiscal year, which may differ from BA due to factors like reprogramming and expired funds.
• Outlays: Actual cash spent by the DoD, reflecting the liquidation of obligations over time.

3. Discretionary vs. Mandatory Funding

• Discretionary funding is annually appropriated by Congress and includes:
  • Military Personnel
  • Operation and Maintenance
  • Procurement
  • RDT&E (Research, Development, Testing, and Evaluation)
  • Revolving and Management Funds
  • Military Construction
  • Family Housing
• Mandatory funding is derived from permanent laws and includes:
  • Military retirement and Medicare-Eligible Retiree Health Fund Contributions
• The majority of DoD funding is discretionary, unlike most of the federal budget which is mandatory.

4. Inflation Adjustments

• The Green Book presents data in current dollars and constant dollars.
• Current dollars reflect the actual price levels, including inflation.
• Constant dollars adjust for inflation to show real changes in spending.
• Deflators are used to convert between current and constant dollars, with the base year being FY 2020 (except for Chapter 7, which uses FY 2012).

5. Funding Trends and Projections

• Table 1-1 provides a long-range forecast for the National Defense budget from FY 2018 to FY 2024.
• Table 1-2 outlines the breakdown of discretionary and mandatory budget authority for the same period.
• Table 1-3 presents outlay trends for the National Defense budget.

6. Differences Between DoD and OMB Data

• Discrepancies arise due to scoring rules, rounding differences, and different methodologies in reporting.
• OMB uses chain-weighted inflation indices, while DoD includes military and civilian pay increases.
• Some offsetting receipts and reprogramming actions are reported differently by OMB and DoD.

Key Tables

Table 1-1: National Defense Budget - Long Range Forecast (FY 2018 to FY 2024)

• Provides a forecast of the total National Defense budget in current and constant dollars.
• Includes data on function and subfunction breakdowns.

Table 1-2: National Defense Budget Authority - Discretionary and Mandatory

• Breaks down budget authority by function and subfunction for each year.
• Includes categories like Military Personnel, Operation and Maintenance, Procurement, and RDT&E.
• Highlights emergency requirements, OCO (Overseas Contingency Operations), and supplemental funding.

Table 1-3: National Defense Outlays - Discretionary and Mandatory

• Shows the outlay trends for the National Defense budget in both current and constant dollars.
• Includes data on outyears placeholder for OCO, scoring and rounding, and outlay rates.

Important Definitions and Concepts

• Budget Authority (BA): Legal authority to spend funds.
• Total Obligational Authority (TOA): Total amount of funds that can be obligated.
• Outlays: Actual cash spent, reflecting the liquidation of obligations.
• Discretionary Spending: Funded annually through the appropriations process.
• Mandatory Spending: Funded through permanent laws, not subject to annual appropriations.
• Emergency Funding: Special funding for urgent needs, such as border security and hurricane reconstruction.
• Current vs. Constant Dollars: Current dollars reflect nominal values; constant dollars adjust for inflation.
• Deflators: Used to convert between current and constant dollars, calculated using the formula:
  $$
  \text{Deflator} = \frac{\text{Current $}}{\text{Constant $}} \times 100
  $$

Calculation Methodology

• The DoD uses inflation rates provided by the Office of Management and Budget (OMB).
• The OMB bases its rates on GDP composite indices.
• The DoD includes military and civilian pay increases, fuel rates, and medical cost factors in its inflation rate calculations.
• Rounding differences and scoring adjustments cause variations in reported totals between DoD and OMB.

Conclusion

The FY 2020 National Defense Budget Estimates provide a detailed overview of DoD funding, highlighting the distinction between discretionary and mandatory programs, the impact of inflation, and the methodology used to report budget data. It serves as a critical reference for understanding how defense spending is structured, managed, and adjusted over time, with a focus on real growth and nominal spending. The document also emphasizes the importance of deflators and rounding differences in interpreting the data accurately.