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What does the skinny budget mean for government contractors?

Amentum Government Relations

Government Relations Skinny BudgetIn early April, the Biden Administration released its first (skinny) budget. The skinny budget is a bird’s eye view of President Biden’s spending priorities to include important topline and discretionary funding amounts for fiscal year 2022 (FY22). The full budget details are not expected to be released until (earliest) mid-May.

This initial budget’s discretionary total for FY22 tops out at $1.52 trillion. This includes $769 billion for non-defense discretionary programs – a 16% increase from FY21 – and $753 billion for national defense funding – a 1.5% increase from FY21. So what is in the skinny budget?

Defense
National defense spending includes $715 billion for the Department of Defense (DoD) and eliminates requests for Overseas Contingency Operations (OCO) as a separate funding category. The remaining national defense spending, $38 billion, will likely be allocated to the National Nuclear Security Administration (NNSA).

As we await the full details of the budget, there are a few defense items that are clearly top of mind for the administration:

  • Challenges from China. With the rolling out of the Pacific Deterrence Initiative (PDI) we anticipate the budget will focus a significant amount of funding towards this effort.
  • R&D. There is a strong emphasis on the need for breakthrough technologies to remain competitive as a nation.
  • Redirecting Resources. With the small DoD budget increase and the need to fund R&D resources, funding will have to be redirected and legacy programs will be divested.
  • The Triad. There is a big question as to how the administration will spend money on the nuclear triad. Decisions need to be made on nuclear spending, and specifically around the Ground Based Strategic Deterrent (GBSD).
  • Climate Change / Energy. Secretary Austin has made it clear that climate change is a top priority and that mitigation and resiliency of the defense complex must be addressed.

State and international topline
The FY22 skinny budget includes $63.5 billion for the State Department and other international programs, a $6.8 billion or 12% increase from the FY21 enacted level. The total amount includes, $58.4 billion for the Department of State and USAID, an increase of $5.4 billion or 10% over FY21. It also includes $3.3 billion for the international programs at the Department of the Treasury, an increase of $1.4 billion or 73% over FY21. The Biden Administration is focused on restoring diplomatic relations, encouraging countries to reduce their carbon footprint, providing greater aid to Central America, and supporting global health to prevent future pandemics.

Department of Energy
With few details included in the skinny budget, there will be more to come on the Department of Energy’s (DOE) budget. What we do know is that the topline request includes $46.1 billion in discretionary spending, a $4.3 billion or 10.2% increase over FY21.

As previously mentioned, the skinny budget emphasized the need for R&D and includes historic increases across a range of scientific agencies including DOE, NASA, and NIST. The administration is laser focused on sparking innovation and sees it as an important factor in maintaining America’s position as a global leader. A few areas of interest include, launching the next generation of satellites and upgrading DOE National Laboratories.

The skinny budget provided some great insights for government contractors, including the focus on innovation. As we anticipate the full spending budget, Amentum is perfectly poised to serve our government customers in these new focus areas. We continue to help as they pivot to new technologies with our state-of-the art Advanced Technology Office developing applications for AR/VR, synthetic training, 3D modeling and digital twins. We stand ready to support as our customers find new efficiencies, identify opportunities to modernize and align with new missions and priorities as the budget environment comes into focus.

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