weekly electronic newsletter, and is published every Monday when Congress is in session.   In this issue:

• The Bottom Line

 ★★★THE BOTTOM LINEWhen Congress left town last week for a five-week recess, they left behind a pile of unfinished business that matters a great deal to the Defense Department and to us. All three of the defense-related bills remain in limbo.  Here is the current status of the bills and our expectations.The House passed their version of the Defense Authorization Bill on May 22, which is also the day the Senate Armed Services Committee approved their version.  The Senate bill still has to be passed by the full chamber.  Before they left town, Armed Services Committee leaders urged their members to submit their amendments so that, behind the scenes, staff members could smooth the way for a speedy passage of the bill. The bottom line:  The bill will probably be passed, but not until after the mid-term elections.  Failure to pass it would break a 52-year tradition.  Since both the chairmen of the House and Senate Armed Services Committees are retiring, we would be stunned if lawmakers did not find a way to get this bill approved.  Once it is passed, any differences will have to be negotiated in conference committee.Some of the key issues up for negotiation include: ü   An increase in retail and mail-order TRICARE pharmacy copays (Senate bill - yes; House bill – no)ü   A requirement that all beneficiaries use mail-order pharmacy or military treatment facilities for maintenance medication refills (Senate bill – yes; House bill– no)ü   An increase in out-of-pocket housing costs by 5 percent (Senate bill – yes; House bill – no)ü   Military pay raise for 2015 capped at 1 percent (Senate bill – yes; House bill – no)The status of the Defense Appropriations Bill is similar to the authorization bill.  The House passed it on June 20.  The Senate Appropriations Committee completed its work on July 17.  The full Senate still needs to vote on the measure and it still must be negotiated with the House version.The bottom line:  The future of the defense spending bill is murkier than the authorization bill.  Lawmakers are already resigned to the fact that most (if not all) government agencies will be funded by a continuing resolution (CR) by the start of the new fiscal year on Oct. 1.  The CR could extend into December and even into next year.  It’s possible that some negotiated version of the defense spending bill could be used as a vehicle for the CR; however, it is more than likely that Defense Department funding will be included in the CR.  Operating under a CR requires that all programs, except those exempted by law, would be funded at the fiscal 2014 funding levels and would prohibit any new program starts. As Army Chief of Staff Gen. Ray Odierno has said “Each continuing resolution prevents new starts for needed programs, limits reprogramming actions, creates inefficiency, and often results in wasteful funding for accounts that we no longer want or need.  This uncertainty creates challenges in projecting future funding requirements that inform our annual budgets over time.”AUSA President Gen. Gordon R. Sullivan, USA, Ret., said that “regular order in the defense appropriations process must be restored.”The Military Construction-VA Appropriations passed the House on April 30 and the Senate Appropriations committee on May 20.  Again, the holdup is the Senate. The bottom line:  This measure also faces an uncertain future.  It could be used as a vehicle for the CR, but more than likely, it will also be caught up in a CR.