The White House recently submitted a budget request for defense totaling $850 billion for the fiscal year that begins this coming Oct. 1. The president’s budget, while important, is only the start of the legislative process that determines the final level of funding for the military. Under the Constitution, Congress has the responsibility to “raise and support Armies” and to provide funding for that military. To do this job, Congress has public hearings with key defense leaders, private meetings with experts and internal deliberations among staff.
It also requires submission of the often-misunderstood unfunded priorities lists, or UPL.
As detailed in our newly published analysis, the 12 unfunded priorities lists that have been made public to date this year total $28.7 billion in funding shortfalls and represent the best professional military judgement of our nation’s most senior uniformed leaders.
These unfunded priorities equate to about 3.4% of the $850 billion budget request. Given that inflation remains at about 3.2% and the pay raise for military members is 4.5%, the 1% topline increase in the budget request, when combined with the 3.4% in additional funding within the UPLs, would keep the Pentagon at a roughly zero real growth rate.
As there are two major wars ongoing, several shadow wars and the potential for a major conflict with China, we can expect the Pentagon may also have a fiscal 2025 emergency supplemental in the works. Even with this context, the UPLs contained several interesting surprises.
The first surprise is that, though China is the stated strategic pacing threat, the UPLs are filled with shortfalls in capabilities related to this challenge. In fact, the commander of Indo-Pacific Command monopolizes the list in asking for $11 billion, which is 38% of the entire UPL requests, and tops its own previous-year needs by more than $7.5 billion.
Research and development UPLs related to the Pacific and space make up 83% of shortfalls. Similarly, military construction gaps are up $4 billion over last year, an increase that is almost entirely for INDOPACOM needs. High-dollar requirements listed include facilities in Guam; harbor improvements in Palau; runways, wharfs and harbor projects in Micronesia; and water treatment and hangar projects in Hawaii.
Large shortfalls to counter China signal what we already know: The defense budget is too small. But it also may indicate priority disagreements during program and budget decisions, or that INDOPACOM has a more unrestrained view of the process than the service chiefs, or that Congress tends to support INDOPACOM UPLs in how it rescues the Pentagon budget. It likely means all of these things.
The second surprise is that within the investment accounts, there is a very notable shift in the UPLs away from procurement and into military construction as well as research and development. In FY23, procurement made up 53% of the UPLs. In FY25, that is down to 30%, with well over half (54%) not even submitted by the military departments but instead coming from INDOPACOM and the National Guard Bureau.
With procurement the known bill-payer for this year’s stated budget focus on readiness and the near-term fight, the UPLs were expected to make up for the lack of funding to actually buy the ships, planes, ground vehicles and space systems we know we need to remain competitive and to sustain our industrial base and supply chains struggling under uncertain and insufficient budgets.
The third surprise is in the readiness category, which includes appropriations for operations and maintenance as well as military personnel, along with targeted partner efforts funded through the Defense Security Cooperation Agency. Despite the FY25 budget request’s stated focus on readiness, the Air Force puts forth a single $1.5 billion request for spares, noting a one-time need for aircraft readiness that it could not fully fund in the budget due to fiscal constraints.
In addition, INDOPACOM lists a $581 million gap, which essentially means that the day-to-day operating forces and contracted logistics support functions of the Army, Navy, Air Force and Marine Corps components in the Pacific are underfunded, at least in the view of the INDOPACOM commander.
In conclusion, three key points stand out. The FY25 defense budget request is too low to meet even those readiness requirements it says it prioritizes, and it loses ground on crucial strategic innovation, posture and procurement efforts necessary for U.S. national security and military competitiveness.
UPLs are important tools in determining where to apply missing resources, but they also signal consequences to budget uncertainty and the resulting disjointed approach to supporting strategic priorities.
And third, as Congress examines the unfunded priorities and the capability gaps they represent to increase the defense budget to minimally required levels, it should also prioritize on-time enactment of annual appropriations as equally important to promoting our national security.
Elaine McCusker is a senior fellow at the American Enterprise Institute think tank. She previously served as the Pentagon’s acting undersecretary of defense (comptroller). Retired U.S. Army Maj. Gen. John G. Ferrari is a senior nonresident fellow at AEI. Ferrari previously served as a director of program analysis and evaluation for the service.
