Defense Secretary Chuck Hagel on Thursday announced the Pentagon's 800,000 civilian employees will be furlouged for 14 days through September.
Hagel touted the move as saving $2.5 billion as the Pentagon grapples with a cut of more than $40 billion from sequestration.
The Pentagon was able to reduce the number of furlough days from 22 to 14 because the government funding measure that passed Congress last week shifted an additional $10 billion into operations and maintenance accounts, which fund civilian pay.
Hagel said the reduction in furloughs was “good news” compared to two weeks ago, when most of the Defense Department’s nearly 800,000 civilian workers were facing a 20 percent pay cut in order to save $4 billion.
Hagel said the Pentagon now thinks it will need to make a $41 billion across-the-board cut under sequestration for fiscal year 2013, down from an initial estimate of $46 billion. Roughly half of that shortfall, $22 billion, is out of operations and maintenance, he said.
Chairman of the Joint Chiefs Gen. Martin Dempsey said that the Pentagon is now dealing with the “uncomfortable truth” that halfway through the fiscal year, it has spent 80 percent of its operations funds.
“We’re doing everything can to stretch readiness out," Hagel said. "To do this, we will trade at some level and some degree our future readiness for current
Hagel said the Pentagon still would have liked more flexibility than it was given under sequester, although that’s something that Pentagon officials had downplayed in importance while Congress debated the continuing resolution earlier this month.
“We still don’t have the flexibility that we had hoped to get, but having money in the right accounts is particularly important,” Hagel said.
Dempsey urged Congress to provide flexibility in more than just transfer authority and reprogramming, saying that lawmakers needed to allow the Pentagon to make major structural reforms.
"I'm talking about the unpopular, but unavoidable institutional reforms that will be necessary," Dempsey said.
His comments alluded to the coming budget fight with Congress, where lawmakers are likely to bristle at DOD attempts to save money through healthcare fee increases and new rounds of base closures.
“We can't afford excess equipment. We can't afford excess facilities. We have to reform how we buy weapons and services. We have to reduce redundancy. And we've got to change at some level our compensation structure,” Dempsey said. “If our elected leaders can help us with full flexibility, our people will do the rest.”
When asked whether the sequester budget cuts had already created a readiness crisis — which Pentagon leaders had warned would happen — Dempsey said it was still too soon to tell.
“Give us about two weeks to answer that question,” Dempsey said. "We're in the midst of trying to figure that out."