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US Department of Defense FY24 Budget Analysis

The fiscal year (FY) 2024 Department of Defense (DoD) President's Budget Request was released on 13 March 2023, with the request coming in at USD842 billion. The Janes Global Platforms and Systems (GPS) team highlights trends in the defence budget, provides insight into defence investment across the different services covered, and discusses major programs within each service. The FY 2024 FYDP is driven by the 2022 National Defence Strategy's need to modernise the US defence forces to keep up with global challenges.


Today, my team and I will be discussing the Department of Defense's FY24 future years defence plan.

We highlight trends in the defence budget, provide insight into defence investment across the different services covered and then focus on major programs within each service For the FY24 FYDP the Department of defence budget request is $842 billion, about $26 billion over the FY23 budget request prior to appropriations.

The FY24 FYDP is driven by the 2022 national defence strategies need to modernise US defence forces to keep up with global challenges namely China.

While China remains the core focus of the Department of Defense, the US can't obviously ignore Russia's ongoing aggression in Europe and its invasion into Ukraine.

When looking at the chart shown, you'll notice that the FY23 defence budget figure is higher than the FY24 request.

This $848 billion figure represents the defence budget after appropriations passed but the FY23 budget request initially was $816 billion.

Looking beyond the FY24 request, the defence budget increase out to FY28 assumes a 2.1% year over year growth based on the Office of Management and Budgets inflation estimate.

While at the surface level, the defence budget is increasing, the DoD has ambitious modernisation plans across the services to support the national defence strategies mission that the estimated 2.1% growth might not be sufficient to fund those programs and ultimately lessen the purchasing power of the DoD.

The next slide will go into detail about the different accounts driving the defence budget.

Here we break down the defence budget into five distinct accounts. Procurement, RDT&E, O&M, military personnel and military construction.

About 40% of the defence budget across the FYDP is dedicated to operations and maintenance and this is unlikely to change throughout the FYDP.

For the US Air Force and Navy both services requested an increase to their individual O&M budgets for a total of $5.7 billion.

However, the army's O&M funds declined by $2.2 billion. While defence wide experiences a noticeable decline of $25 billion for FY24.

Procurement funding as a whole remains relatively consistent across the FYDP. Hovering at 20% of the overall budget with a slight uptake expected by FY28 to 22% of the overall share excluding other procurement subaccounts from each of the services which is largely driven by classified spending 40% of the overall procurement is being driven by aircraft acquisitions across the different services and the Navy shipbuilding and conversion sub account. RDT&E is expected to decline near term due to next generation programs making the transition from development to production.

I won't get into too much detail here as the other GPS presenters will dive deeper into next generation programs for the services they cover. But the Department of Defense continues to emphasize early stage science and technology programs such as microelectronics, AI, hypersonic and integrated systems, such as sensing and cyber and network system of systems.

RDT&E as a whole makes up 17% of the FY24 defence budget but declines to about 15% of the overall budget share in FY28.

The GPS database primarily focused on defence investment for the US defence budget which are the procurement and RDT&E accounts for each of the services.

The chart you see here represents a high level view of defence investment for each of the DoD services.

When looking at the navy, they requested an increase of 4.5% over the FY23 budget resulting in a total budget of $255.8 billion for FY24.

Of this, nearly 41% of the budget is allocated towards procurement and RDT&E $76.9 billion is being spent for procurement. While RDT&E comes out to be $26.9 billion.

For the US Air Force, their total budget was $185.1 billion which represents a 3.3% increase over the FY23 enacted budget For RDT&E it just outspends through the procurement account with air force allocating $36.2 billion for development and $35.4 billion for procurement.

The army has requested $185.5 billion for their total budget which is a 4.6% increase over the FY23 request Compared with appropriations the current request for procurement and RDT&E is actually coming in a little bit lower at $23.4 billion and $15.8 billion respectively for defence wide most of the money is being allocated towards RDT&E which is $36.5 billion for FY24 and about $7 billion for that was requested for procurement for the for FY24 as well.

For procurement funding, it declined from the FY23 request by about $1.5 billion, although RDT&E saw an increase in about the same amount.

So next, we'll discuss the overall DoD priorities and continuing to look at a defence investment separated now into procurement and RDT&E. You'll notice again the trend where development trades off with procurement, mid FYDP.

Looking at the chart on the left focusing on procurement, several of the services are pushing next generation programs that are beginning to transition to production. So think your next generation fighters, bomber combat vehicles, etc.

A common theme we see in some of the services, notably the Air Force and Navy is the urgency to divest legacy platforms in favour of these next generation platforms, divesting of legacy platforms will free up funds to support these modernisation efforts, so the argument goes. The Air Force was requesting to retire 310 aircraft while the navy is looking to retire 11 ships. However, there is an argument to be made that this could create capability gaps for these services in the near term.

For the army near term procurement increases accommodate current modernisation plans.

However, future costly acquisitions, so think flora and fauna for example, will likely require more funding than one is currently being requested for the future years defence plan looking at the RDT&E account per service. Current development funding supports many of the program's transition into production mid FDYP.

Interestingly for the US Space Force satellite programs, notably the overhead persistent infrared satellites and the resilient missile, resilient missile warning tracking systems are being acquired through the RDT&E account instead of procurement. While there is a decline in funding through FY26 and this course bonds again with the increase in procurement for the same fiscal year nominal growth is still expected for this account beyond the FY26 fiscals. Rounding out the FY24 overview are the main priorities for the Department of Defense.

As I mentioned earlier in this presentation, China remains at the forefront of concern for the Department of Defense with the fiscal year 24 budget highlighting the need to keep up with the military pace China is setting. The Pacific deterrence initiative was allocated $9.1 billion to enhance readiness in the region, improve infrastructure and fund training and exercises with regional allies.

The Department of Defense continues to support European and NATO allies in their efforts to counter Russian aggression following the war in Ukraine, the European deterrence initiative received $3.6 billion in FY24 funding while funding for NATO via the army's O&M account remained stable at $600 million for FY 2024.

Strategic deterrence also continues to be a key priority for the Department of Defense with defence investment increasing across major most major programs resulting in a 7.5% growth over the fiscal year 23 enacted budget.

The Sentinel ICBM, Columbia class submarines and B 21 represent the largest investments under the nuclear modernisation portfolio.

The DoD remains committed to prevent capability gaps with its nuclear arsenal. Current nuclear capabilities are expected to retire over the next decade with the DoD investment anticipated to keep growing to ensure the successful recapitalisation of these programs.

While I focused a majority of the presentation on military platforms and readiness we can't ignore the DoD's ongoing efforts to retain and support personnel.

The FY24 budget highlights the department's taking care of people initiative by emphasising the need to invest in personnel.

Military and civilian DoD personnel will receive a 5.2% pay raise under the FY24 budget request with the Biden administration announcing the increase as the largest in the last two decades for military personnel and four decades for civilian personnel.

Other personnel funding is focused on supporting military families. So think child care, moving, education and housing, suicide prevention and sexual assault response and prevention. All these efforts total $3.2 billion under the FY24 pledger request.