WASHINGTON: The current fiscal crisis slams the entire military, keeping aircraft carriers in port and fighter pilots on the ground for lack of funds, but of all the services, said Pentagon comptroller Robert Hale today, “the Army has by far the worst problem.”

That’s because the Army faces a unique triple-barreled budget problem, known with grim humor as “6-6-6” because each part takes $6 billion out of Army readiness accounts: the automatic cuts known as the sequester, which began March 1st; the Continuing Resolution now funding the government, which continues spending at 2012 levels without any flexibility to start new programs or even adjust existing ones; and the shortfall in wartime supplemental funding (called OCO, for Overseas Contingency Operations) caused by unexpectedly high costs in Afghanistan.

“The Navy and the Air Force are only hit with two out of the three; we’re the ones who are hit with three out of the three,” said the Army’s senior uniformed budgeteer, Lt. Gen. Joseph Martz. Martz, like Hale, spoke this morning at the Newseum to a conference organized by McAleese & Associates and Credit Suisse. [Click here for full coverage]

Congress is currently working to fix the most pressing problem, the arbitrary limits of the Continuing Resolution, by passing a defense appropriations bill. (Most other federal agencies will simply get an extension of the current CR to prevent a government shutdown on March 27th). Hope is not a strategy, Martz said — “everyone was hoping sequester wouldn’t happen” — but “we really have some hope” Congress will act.

“If they can come up with an appropriation, it will go a long way to helping us. It will not fully solve our problem,” Martz said. Since Army spending for operations and maintenance (O&M) went up from 2012 to 2013 while spending in other areas, such as new weapons, went down, O&M was hammered by the CR requirement to keep spending on autopilot at 2012 levels in every account; with a proper appropriation, the Army will have the legal authority to spend less where it needs less and more in O&M. That funding reshuffle will make up for the sequestration cuts. “[Fixing] the CR will pay for the sequester,” said Martz. “That kind of zeroes out.”

“But you’ve [still] got this emerging OCO requirement,” Martz went on.

And Congress doesn’t seem to be addressing the shortfall in war funding. Said Hale, “there’s nothing in either of the bills” so far — though he cautioned that his staff is still going over the Senate language made public late yesterday. So, Hale said, “we will have to look for other approaches. It just depends, frankly, on what happens with the Hill. If they pass [a defense] appropriations bill, I’ll assume we’ll look for reprogramming” — i.e. authority to transfer money from one account to another, on a small scale and with Congressional approval. But the reprogramming relief-valve has strict legal limits, Hale warned.

“Houston, we have a problem,” Hale said.

“The holes we’re uncovering,” said Martz, “they’re just damn depressing, there’s no good news.”

The Army has preserved full funding for forces in Afghanistan and South Korea and for those units next in line to deploy. The other 78 percent of the Army is having to cancel most training. But an Army brigade only stays in the warzone for nine months — which may well be extended — so some of the units that can’t train now will be needed to go to Afghanistan in 2014. “We have to start making decisions [by] next month on the guys who are going to be there next year,” Martz said.

“You can’t just look at ’13 as a discrete event,” Martz went on. “Everything that gets moved out of ’13 gets moved into ’14…. You start to create this bow wave of problems. And compounding the knock-on effect from the 2013 cuts is that sequestration is just the first year of a 10-year, half-trillion-dollar cut across the Department of Defense. “The potential to be sequestered for the next nine years exists,” said Martz.

The force won’t return to the “Hollow Army” days of the 1970s in terms of its people or its equipment, Martz said. As manpower declines, the Army has pledged to dissolve brigades rather than leave them on the books but cripplingly undermanned, as they were after Vietnam — although sequestration may require it to cut 180,000 personnel instead of 80,000 by 2017. Vehicles and weapons are being “reset” and refurbished as they come out of Afghanistan, so the current hardware is pretty healthy.

Going forward, Martz said, the Army is able to protect its programs to upgrade command-and-control networks upgrades and develop a new Ground Combat Vehicle (GCV) as well: “The network, GCV, these are the top priorities for our Secretary and Chief,” he said. “So far they’ve been protected in ’13 and ’14 and fully negotiated with Under Sec. [Frank] Kendall,” the Pentagon’s acquisition chief.

Both GCV and the network — really a package of programs from the WIN-T command system to handheld radios to IT upgrades at Army bases — have “undergone an enormous amount of scrutiny” from top levels in the Office of the Secretary of Defense, added Maj. Gen. Thomas Spoehr, director of program analysis and evaluation for the Army staff. In contrast to overly ambitious programs of the past (e.g. the Future Combat Systems), he said “they have been necked down and made very executable.”

With the service about to roll out a new “Army Equipment Modernization Strategy” for the age of austerity, “we have become very disciplined in our look at the long-term implications of procurement decisions,” Spoehr said. “We think it’s reasonable what we’re proposing in light of the current fiscal forecast even as far out as 2030” — assuming, he admitted, that sequestration doesn’t go into full effect, with a half-trillion cut to defense spending over the next 10 years.

That’s hardly a safe assumption for Army planning, said Heidi Shyu, Assistant Secretary of the Army for Acquisition, Logistics, and Technology, aka ASA(ALT). “It would be awfully naive of me to think the cuts are only one time,” Shyu said. What’s more, while the current Continuing Resolution and the first year (2013) of sequestration cuts apply to every program according to automatic formulae — whose combined effect actually (and inadvertently) protects weapons programs at the price of operations and maintenance — budgeteers will have leeway to raid modernization funds in 2014 and after. “Once you give us some leeway, I’m the target that people will come after because i am the acquisition piece,” Shyu said.

That’s next year’s nightmare, however. In the near term, both the Army’s people and its equipment are weathering the storm. The urgent problem, said Martz , is training funds: “This Army will be hollow in readiness.”

Updated 6:10 pm with Hedi Shyu’s comments.