In the absence of legislation to repeal or modify the automatic sequestration provisions contained in the Budget Control Act of 2011 (“BCA”), federal defense and non-defense programs will face automatic, across-the-board cuts of $109 billion on January 2, 2013. Under the Fiscal Year 2013 sequestration process, Congressional appropriators will not have much of a say in determining how the sequestration is applied, since each non-exempt account will be cut by a uniform percentage, regardless of the discretionary spending levels set by Congress. With sequestration for FY 2014 - FY 2021, however, discretionary cuts would be implemented by reducing the original BCA caps on those appropriations, giving Congress discretion to implement the cuts through the annual appropriations process.

As Defense Secretary Panetta testified to Congress last week, the sequester “was designed to be a disaster. Because the hope was, because it’s such a disaster, that Congress would respond and do what was right.” While legislation has been introduced to repeal or modify the scheduled sequestration, the current focus in Congress appears to be on determining exactly how the sequestration, which is implemented by the Office of Management and Budget (“OMB”) would affect individual agency programs, projects and accounts (“PPAs”). As the Government Accountability Office (“GAO”) noted in recent Congressional testimony, “the BCA vests in OMB the authority to implement sequestration. The execution and impact of any spending reductions will depend on the legal interpretations and actions taken by OMB.”

During the recent consideration of the FY 2013 Defense Authorization bill, both the House and Senate included provisions requiring the Department of Defense to provide them with detailed reports on the impact of sequestration for FY 2013. As Congress returns to the consideration of annual appropriations bills this month, there will likely be increasing calls for the Administration to provide specifics on the sequestration process and how sequestration would be implemented with respect to each federal agency. In the Senate, for example, Appropriations Committee Ranking Member Thad Cochran (R-MS) has included language in the FY 2013 Financial Services Appropriations bill that would require OMB to provide Congress with a list of each federal funding account targeted by the FY 2013 sequestration, as well as a report describing how the sequestration would be implemented with respect to appropriations bills or a continuing resolution.