The President released his FY 2015 Federal Budget proposal earlier this week. This proposed budget will get reviewed, discussed, negotiated and beaten up over the next 6 months for sure. This year might be a little different due to the Ryan-Murray budget deal. I think it is worthwhile to examine what the White House considers the highlights and also to see if there are any other major impacts to government contractors.
First, let's examine what the White House summarizes as the highlights to the budget:
- Stronger Growth & Job Creation
- Advanced manufacturing – Invests in American innovation and strengthens our manufacturing base, including a national network of 45 manufacturing institutes
- Research and innovation – Supports ground-breaking research to fight disease, protect the environment, and develop new technologies, and makes permanent the R&D Tax Credit
- Pro-growth infrastructure – Lays out an ambitious, four-year $302 billion surface transportation reauthorization proposal paid for with transition revenue from pro-growth business tax reform
- Government reform - Promotes government management that delivers improved services that are more effective, efficient, and supportive of economic growth
- Opportunity for all
- Tax cuts for working Americans – Doubles the maximum value of the childless worker EITC to build on the EITC’s success in encouraging people to enter the workforce and reducing poverty; improves tax benefits that help middle-class and working families pay for child care and college and save for retirement
- Preschool for all – Invests in the President’s vision of making access to high-quality preschool available to every four-year-old child
- Job-driven training – Invests in new efforts to drive greater performance and innovation in workforce training to equip workers with skills that match the needs of employers
- Fiscal Responsibility
- Continues historic progress in slowing health care cost growth – Builds on the savings and reforms in the Affordable Care Act with additional measures to strengthen Medicare and Medicaid, slow health care cost growth, and improve the quality of care
- Pro-growth tax reform – Curbs inefficient and unfair tax breaks that benefit the wealthiest, and ensures that everyone is paying their fair share
- Immigration reform – Supports comprehensive reform of our broken immigration system, which independent economists say will grow our economy and shrink our deficits
- Further reduces the deficit and debt – By paying for new investments and tackling our true fiscal challenges, reduces deficits to 1.6 percent of GDP by 2024, and stabilizes debt as a share of the economy by 2015 and puts it on a declining path after that
I think there are some good takeaways from this for small business government contractors. First, there seems to be an emphasis on R&D and job creation. These have traditionally been a strong suit of small business. Programs like the SBIR/STTR program should benefit from this emphasis. In conjunction with this the Defense Department released their comments on the proposed budget and they have an emphasis on pursuing investments in emerging military capabilities too. The DoD procurement budget is projected at $90.4B and $198.7B in operations and maintenance. Some increases in investment include army helicopters, Air Force F-35's, USMC Light Armored Vehicle and Science & Technology. Again, the science and technology should be good news for small business. The DoD will also focus on reducing contractor funding as well as retaining pay and benefits for a reduced workforce. This simply means you need to know your customer well and plan accordingly.
So, we can all worry about the budget trend (reductions in the Federal Budget, or equal to last year) but there will be areas of opportunity for those that look for them.