WASHINGTON — The two-year budget deal pending before Congress could benefit Maine’s defense industry and other recipients of federal funds by softening “sequestration” spending cuts and providing additional certainty, observers said Wednesday.

“There may still be some cuts but they may not be as severe as they were going to be, both because the (size) has been reduced and there will be some flexibility,” said Sen. Angus King, I-Maine.

The agreement ironed out by the two chairs of the House and Senate budget committees – Rep. Paul Ryan, R-Wisc., and Sen. Patty Murray, D-Wash. – would cap fiscal year 2014 spending at roughly $1 trillion in each of the next two years. That figure is up from $967 billion authorized under the current budget cap.

As part of the deal, which is still contingent on approval by the full Congress, the negotiators agreed to ease the “sequestration” budget cuts by $63 billion over two years. Sequestration is the term applied to $1.2 trillion in automatic spending cuts – half of which come from defense programs – that are slated to take effect over a decade in absence of an alternate agreement on reducing the federal deficit.

Spending on defense programs would rise to $520.4 billion – about $22 billion more than currently authorized – for the current fiscal year and to $521.3 billion next year. Defense officials welcomed the deal, which is less than the Pentagon requested but more than allowed under the previous budget cap.

It is too early in the process to know how the decision to ease the sequestration cuts will affect Maine’s defense industry. Maine is home to two major shipyards – the Portsmouth Naval Shipyard and the privately owned Bath Iron Works – as well as dozens of smaller defense contractors.

The budget deal ironed out by the House and Senate committee chairs is essentially a budget blueprint that sets federal spending levels for the next two years. If approved by the full House and Senate, the budget bill will be picked up by the two appropriations committees responsible for divvying up the money agency by agency and, in many cases, defense program by defense program.

But in a key difference from the current year, the budget deal not only reduces the sequestration budget cuts by $63 billion but also changes the across-the-board nature of the cuts. Instead, the House and Senate appropriations committees will decide how to allocate the money within the spending caps set by the budget, lawmakers and legislative staffers said.

King, who serves on the Senate Budget Committee, said the agreement gives the Pentagon more flexibility to work with Congress to decide program spending levels.

“If things come together properly, it could be good news for Bath Iron Works and I think it would be good news for Portsmouth in the sense of [providing] the certainty, the predictability and the ability to allocate funds according to priorities,” King said. “So on balance I think it would be a positive, but I can’t guarantee things because there still things that have to be completed.”

Maine Sen. Susan Collins, a Republican who serves on the Senate Appropriations Committee, said the deal was not what she would have written but was still “a step in the right direction” and an improvement over indiscriminate cuts to defense and other programs.

Portsmouth Naval Shipyard workers have arguably felt the biggest pinch from the first year of sequestration.

Most, but not all, shipyard workers escaped furloughs related to the budget cuts. But Navy officials cited the budget cuts as one reason for scrapping instead of repairing the fire-damaged USS Miami submarine.

Adm. Jonathan Greenert, the chief of naval operations, recently warned that the uncertainty from sequestration – combined with the recent furloughs during the government shutdown – could have a “debilitating effect” on shipyards such as Portsmouth. affecting worker retention and recruitment.

“It’s inefficient and you lose productivity,” Greenert said last month. “You can’t hire people, so you can’t distribute your workforce. And you furlough them here and there. So they are going to go elsewhere.”

Bath Iron Works, which is owned by defense contracting giant General Dynamics, is still waiting to hear whether Congress will find several hundred million dollars to pay for a fifth Arleigh Burke-class DDG-51 destroyer at the shipyard.

General Dynamics officials were still waiting to see what happens with the budget and learn the details.

“It’s too early to speculate about what it means for our programs,” said Rob Doolittle, a company spokesman.

The sequestration cuts also threatened to eliminate up to a half-dozen F-35 fighter jets in 2014, military officials told congressional committees in late-October.

Pratt & Whitney manufacturers some of the parts for the F-35 fighters at the company’s North Berwick facility and subcontracts with several other suppliers in Maine, supporting more than 800 jobs that represent nearly $70 million in economic activity for the state.

A representative for Pratt & Whitney could not be reached for comment Wednesday afternoon.

Kevin Miller can be reached at 317-6256 or at:

[email protected]

Twitter: @KevinMillerDC

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