Army budget leaders talk spending smarter, audit pressure

The Army has faced flat budgets for several years, making it harder to invest in modernizing the force while paying for equipment maintenance and personnel bills. Now, the rising cost of living in the United States is exacerbating the challenge for the 2026 budget cycle, officials have said.

The service last year ditched underperforming or unpromising programs, including a future aircraft and a long-range cannon, as budgets remain tight and global conflicts spiral. Additional decisions are expected as the service scrambles to balance its books.

Defense News sat down with Caral Spangler, the Army’s comptroller, and Lt. Gen. Paul Chamberlain, the military deputy in the service’s budget office, to talk about the challenges of crafting budgets that square the eternal circle of paying today’s bills while anticipating the warfare needs of tomorrow.

What challenges exist in this cycle that you are working through now?

Spangler: As we built the five-year plan, we had a lot of discussions about what the soldiers needs were, including installations and housing requirements. Our perpetual thing that we talk about in the Army is balancing modernization and readiness. We have to align that with our military personnel accounts because that really is our biggest, single program.

Then, what are the economic factors? We don’t have the new economic assumptions yet from the Office of the Secretary of Defense. It’s always a concern for us, including what is the pay raise going to be? Do we pay for that ourselves, or will we get a top line increase? That affects the Army significantly.

The Army has about $40 billion in discretionary spending in its roughly $186 billion budget. In your view, is this discretionary spending pool getting more shallow?

Chamberlain: We can assume that the Army’s probably going to be in that $185.5 billion to $186 billion range. For the last two years, we only had a $200 million — $300 million top line increase. It’s tiny, around 0.2% of our discretionary spending pot, not factoring in inflation.

That is squeezing all of our ability to go after some of the modernization accounts or support the modernization that the Army wants to do.

Our senior leaders historically have said that we probably need between 3% and 5% real growth. Not the negative purchasing power that we’ve experienced the last couple of years, but real growth to affect the modernization that we need to do. Forty billion is a big number, but it continues to get squeezed. We’ll continue to try to find ways to give ourselves an advantage, whether that’s flexible funding.

We’ll continue to look for efficiencies. And we’ll continue to do what the chief has got us doing now, which is how do we transform in contact? How do we take some of the new kit or using some of the old kit in different ways in order to enhance our ability to conduct operations and provide that overmatch to our forces?

Spangler: Harken back, last February or thereabouts, to the Army making hard choices when it needs to make hard choices. We canceled the Future Attack Reconnaissance Aircraft program to invest in things that we need. So we are demonstrating that we are mindful of some of those challenges and doing what’s appropriate.

What efficiencies are you finding that could help during this budget cycle?

Chamberlain: A lot of that will be down at the command as we’re working with them, to continue to do some consolidation of efforts that we’re seeing there. How do we make certain decisions as we’re doing either some of our construction or sustainment that will ensure that we have better and perhaps cheaper maintenance sustainment costs in the future? Those are sort of the things that we’re looking at.

Last year you felt positive about certain aspects of the Army’s ability to pass an audit. So how are you feeling one year later about the possibility of the Army passing a full audit by the deadline of FY28?

Spangler: The auditors are not finished with their work yet for this year, either. It’s a little bit of an unknown where we are today, but we have good confidence that we are going to see some more material weaknesses get retired this year, which is a measure of progress. And we have also made some great progress in getting more whole Army participation and awareness and knowledge of the audit, and so I think that’s very helpful.

We’ve had some conversations with some of the senior leaders throughout the Army, at the different commands and stuff. So they are now turning focus.

Having the different elements of the Army, the logistics community, the sustainment community, the manpower guys, being under that audit scrutiny gives them an opportunity to streamline things and figure out what improvements can be made. We are seeing that happening as well.

The Pentagon is living under its annual three-month continuing resolution. What are some of the effects for the Army?

Spangler: Before we started with getting this relatively clean CR, there was a lot of discussion about it being a six-month CR instead. So we had done quite a bit of work to think about what government programs and what things were going to be impacted by a six-month CR. The really interesting dynamic for the Army, in particular, is the fact that under a CR you’re cash-flowing so many significant bills with last year’s resources.

And since we haven’t had much growth in our budget, regular things like the pay raises and the cost of living adjustments and housing and subsistence and all those things, if the CR continues we have to pay those at the higher rates. So that puts pressure there.

You have things going on in the real world that we’re having to cash-flow, some of the Ukraine operations, things that we’re doing to support the theater in Central Command, all those things. We’re having to bear the cost of the operations on the Southwest border until we get money in for those things. And sometimes people don’t give us those reimbursements until kind of late in the fiscal year.

Chamberlain: In fact the reimbursement for some of the support that we provided really didn’t come until the middle of September. So 11-and-a-half months. We’re doing all the base requirements, plus the additional operations or missions that come in. And we’re doing that within the funding that we have.

That does create a lot of rework for the commands, as well as our analysts here in the Pentagon, in the Army budget office. The level of work that we have to do to move money around and then get the money back into the right account when we do get the reimbursement – the team is great, they do it, they’re awesome at it because they’re practiced at it – but it does create a lot of rework for everyone across the Army.