The Pentagon on Monday proposed a fiscal 2025 budget of just under $850 billion, about 1% more than the department requested for the current year’s budget that’s still awaiting Congressional approval.

The top line figure came as little surprise: it was in line with the Fiscal Responsibility Act lawmakers passed last year to set caps on both defense and non-defense discretionary spending. Comparing it to 2024 defense spending is difficult since Congress still hasn’t agreed on a full-year appropriation, but Defense officials said the 2025 figure would likely represent a net decrease in purchasing power, considering the department’s estimate of 2.2 percent inflation between 2024 and 2025.

However, the real-dollar decrease is manageable as long as the department sees meaningful increases in 2026 and beyond, Deputy Defense Secretary Kathleen Hicks said.

“Because of these statutory caps, and as good stewards of taxpayer dollars, we made smart responsible choices to work within those limits,” she told reporters Monday. “But to be clear, we must grow the defense budget in the out-years of our future years defense program if we want to achieve the goals of the National Defense Strategy, especially in the face of rapid modernization by [China].

The budget also includes a proposed 4.5% pay increase for uniformed servicemembers, making them the only members of the federal workforce who would receive a sizeable raise in 2025. It would be the third significant pay increase for military members in three years, totaling nearly 15% since the start of the Biden Administration. Under the administration broader budget proposal, civilian employees, including DoD civilians, would receive 2% raises.

“That was an administration-wide decision, but I do think it’s fair to assume that the pressure of the Fiscal Responsibility Act cap was a factor in the thinking about why the civilian pay raise could be less this time than what the military pay rates is,” said Mike McCord, DoD’s comptroller and chief financial officer. But even so, across the last three years, the civilian pay raise would total 12.2%.

The Pentagon’s proposal also includes several proposed structural reforms to the budget process — some of them in line with recent recommendations from the Congressional commission on Planning, Programming, Budgeting and Execution Reform — and many of them intended to help the department cope with perennially late budgets from Congress.

For instance, one change would allow DoD to carry over up to 50% of its unspent operation and maintenance dollars from one year to the next; a similar proposal would allow a 2% carryover for National Guard components. Likewise, the Defense Health Agency would be allowed to place any expiring funding it has at the end of the fiscal year into a “transformation fund” to help cover items like facility maintenance. Another proposal would give the department up to two fiscal years to spend its funding for military members’ permanent change of station moves.

And, the Pentagon is asking Congress to increase the amount of money it’s allowed to reprogram between its accounts during a fiscal year without prior approval from lawmakers. The new thresholds would be $15 million for military personnel funding, $30 million for operations and maintenance, $25 million for research and development, and $40 million for procurement.

Officials said those higher amounts were meant to reflect growth in the Defense budget over the past 20 years and “are more consistent with historical percentages of inflation and the DoD budget.”

“This increase is needed to minimize delays in the execution of funds and provide greater flexibility to address unanticipated requirements in the year of execution,” Defense officials wrote in Monday’s proposal.

However, the most important thing Congress can do to alleviate those year of execution challenges is to begin passing budgets on time, Hicks said.

“Congress’ inability to pass the FY 24 budget, holding back much needed funding, hinders our ability to execute our strategy. The department has no way around that reality,” she said. “Instead, we have been strapped with a series of continuing resolutions. CRs are a significant constraint on our ability to advance our defense strategy, forcing the department to operate with one hand tied behind our back for months out of the year even as we confront new and evolving security challenges each and every day. We cannot continue this cycle of continuing resolutions.”

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