What to Know About the Omnibus Spending Bill

Christopher Wiedemann_headshot-65 x 85by Chris Wiedemann, Senior Analyst

The President signed an omnibus spending bill on Friday, January 17 – which means government will be dealing with all-new appropriations for the rest of FY14, instead of last year’s string of continuing resolutions. This is great news, since government now has fiscal certainty for the next 9 months and can finally start some of the projects that have been on hold, waiting for funding. That being said, here are some key points to know about the new appropriations bill:

  • This is a complete omnibus, which means that every government department has new appropriations this year.
  • Appropriations language is generally vague and almost never gets down to the IT level, so we don’t know how this bill will specifically affect IT spending. However, it’s a safe bet that most of our customers’ IT budgets will basically stay flat.
  • One exception to the point above is groups with a specific cyber security mission, which is receiving high priority in this bill. Keep in mind that more money doesn’t always mean more product purchases, especially on the DOD side – but still, we’re seeing growth in cyber spending when other areas are staying flat. Expect cyber-focused elements of DHS and DOJ, as well as USCYBERCOM at DOD, to receive increased funding in the rest of FY14.
  • Although we don’t yet know how agencies will divide their budgets between steady state (SS) and development, modernization, and enhancement (DME)  spending, recent trends suggest that SS levels will be slightly higher this year than last – and since IT top lines are mostly staying flat, government customers will have less DME funding than they did last year. However, because we have new appropriations, there will still likely be more new purchases this year – so get ready for a busy remainder of FY14.

You can also see an agency-by-agency breakdown of top-line funding levels below:

Agency FY14 Funding
Education $70.6B
Veterans Affairs $63.2B
Health and Human Services $62.5B
Homeland Security $39.3B
Justice $27.4B
Energy $26.5B
Agriculture $18.3B
Transportation $17.8B
NASA $17.6B
Treasury $13.02B
Social Security $11.7B
Commerce $8.2B
National Science Foundation $7.2B

Opportunities in the Air Force

Rick Antonucci_65x85By Rick Antonucci, Analyst

The U.S. Air Force is a vast and sprawling organization that relies heavily on technology due to its unique mission. The Air Force’s base budget request for FY14 is $114 billion – 4% higher than FY13’s request (although actual apportionment may differ, depending on the impending omnibus) and the IT budget request is roughly $5.5 billion. The Air Force will likely spend close to that – somewhere around $5.4 billion, which represents a 2% increase from FY13.

Unfortunately its organizational landscape can be complex and even confusing making it difficult to find out where key people and organizations controlling these purse strings reside. It’s important to remember that the Air Force component offices all have unique requirements gathered by representatives from the Air Staff or Air Force Secretariat for the benefit of shared systems that are leveraged across the department. These shared systems range from HR, financial, and logistics systems to those involving networks and infrastructure, operational command and control, as well as cybersecurity. Shared systems and investments such as DEAMS, IPPS, GCSS, and AFNET bring requirements together from multiple disparate component organizations, but are centrally managed.

Learn more as we take an in-depth look at Air Force IT insertion points on January 23 at 2:00 p.m. to gain insight into:

  • How the new omnibus budget could impact IT spending
  • How responsibilities have changed across Air Force organizations
  • How to craft effective messaging to address Air Force’s technology challenges
  • What major technology requirements to expect in FY14
  • Which programs represent actionable opportunities for the IT product community

Don’t Call It a Budget (Yet)

Christopher Wiedemann_headshot-65 x 85by Chris Wiedemann, Senior Analyst

With the Senate passage of the two-year Murray-Ryan budget deal, President Obama is on course to sign the first budget resolution from a divided Congress since 1986. This has caused Washington observers and members of industry some relief, since it looks like we can finally plan for a year and a half of relative budgetary certainty (the bill runs through the end of FY15). In fact, much of the coverage around the bill has suggested that it has solved some of our recent problems, and many in industry – and the general public – are treating this bill as though it gives our customers money to spend for the next 22 months.

This bill raises the sequester spending caps, so once the process is finished the government will have more money to spend than they thought. Unfortunately, the process isn’t quite finished yet.

Most of the confusion here comes down to the difference between a budget – what we have now – and appropriations, the process that actually grants departments and agencies (DOD, DHS, VA, etc.) the money they need to operate and, more importantly, purchase new products. The budget bill that we just got sets a top line number for total federal spending in the rest of FY14 and all of FY15, but it doesn’t divide that money up among the various arms of the government. It now falls on the appropriations committees to allocate funds, and for their recommendations to be rounded up into a spending bill called an “omnibus,” which will outline spending plans department by department.

The good news is that both the House and Senate appropriations committees already have FY14 bills, and although most of them never saw the light of a floor vote, there is already a basis for funding allocations through the rest of the year.

The bad news (sorry if this sounds familiar) is that Congress doesn’t resume until January 2nd. Since our current CR expires on January 15th, that means lawmakers will have twelve days to roll up their draft appropriations bills into omnibuses, reconcile the House and Senate versions (which will certainly be different), then pass the reconciled version through both chambers. That timeframe probably means that some agencies will have to deal with another CR – so the final package will be something called a “minibus,” where some agencies get new appropriations, while others have to work with last year’s numbers again.

The upshot here is that we’re not quite at the finish line yet. Luckily the agreement we have covers most of the areas that cause arguments in Congress. The House and Senate are likely to have different ideas about which agencies should be allocated what, but brass tacks discussions like that tend to be less contentious – and again, there is already a baseline to work off in the form of the FY14 appropriations bills that didn’t pass. All of that adds up to clarity – so even if your customers don’t get new appropriations, they will be able to operate for the rest of the fiscal year without worrying about their funding levels changing. The picture starts to become even rosier when we look at FY15 appropriations. Since the framework for total spending is already in place, it’s very possible that we will have a real budget – 12 separate appropriations bills that all pass into law – for the first time since FY08. If that happens, it would really be cause for celebration.

Disparate Cyber Security Spending Projections Highlight Budget Ambiguities

Lloyd McCoy_65x85by Lloyd McCoy Jr., Consultant

IDC Government Insights recently released “Business Strategy: U.S. Federal Government IT Security Spending Forecast and Market Outlook,” a report which estimates that IT security spending will top $6.1 billion in 2014 and will climb 3-6% each year through 2017. This is in marked contrast to other projections made by industry and government.

immixGroup assesses the federal government will spend about $13 billion on cyber security in FY14 and will surpass $17 billion in spending by 2017. Cyber security spending includes IT investments that help protect federal networks, our critical infrastructure, as well as R&D efforts. Defense cyber security spending alone will account for $4.65 billion this fiscal year, dropping to $4.53 billion by 2017. Our projections are based on analysis of budget documents and federal cyber security programs, as well as official government budget estimates.

However, we acknowledge measuring cyber security spending is an inexact science. Even the federal government has had difficulty determining its cyber security spend. The total federal cyber security spend could in fact be higher than immixGroup’s estimates, as these figures do not account for all of such spending within major weapons programs. Adding to the uncertainty, a portion of cyber security monies are allocated to personnel and other line items that are not products or services related.

Despite these information gaps, we are confident the government will spend far more on cyber security in 2014 than the $6 billion predicted by IDC. According to our market sizing analysis, approximately 10-15% of the $13 billion federal cyber security spend will be dedicated to purchasing cyber security products. Thus the total addressable market for cyber security products vendors in FY14 will be between $1.3 billion and $1.9 billion.

President’s FY14 Budget Request Would Add to Deficit but Bolsters Cybersecurity Spending

photo_Mohamad_65x85by Mohamad Elbarasse, Analyst

In a recent webinar, analysts at Bloomberg Government (BGOV) began what will inevitably be the first of many dissections of President Obama’s FY2014 budget request. The request asks for $3.8 trillion in spending for the next fiscal year. The deficit would be $744 billion next year, with deficits continuing for the next decade.

When compared to the enacted spending amounts from FY2012, many agencies will be seeing a cut in base discretionary spending under Obama’s budget, including USDA, HUD, and Labor. It would initially seem as though the Department of Justice would be facing a whopping 40% decrease in base discretionary spending, but the researchers at BGOV aptly point out the discrepancy is largely due to a change in accounting regarding asset forfeiture and the Crime Victims Fund. Agencies such as Commerce, Energy, VA, and NSF will see increases in their spending requests.

Cybersecurity is one of the few areas enjoying bipartisan support and increased funding in FY2014. The budget outlines $4.7 billion for the Pentagon for cyberspace operations, significantly more than the $3.9 billion it intends to spend on cybersecurity by the end of FY2013. This funding request represents the President’s and the Pentagon’s desire to build out the government’s offensive cyber capabilities. The budget request also asks for $300 million more when compared to the FY2012 number for DHS and a 22% bump for the VA, so the two agencies can further enhance their cybersecurity efforts.

While the federal government is curbing spending, it is no longer treating IT, specifically cybersecurity, as expendable. We can expect another debt ceiling debate this summer and hopefully legislation ending the federal government’s financial gridlock before the August recess.

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