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Pentagon trims $1 billion from budget

pentagon (MGN)

WASHINGTON (CNNMoney) — Defense Secretary Chuck Hagel on Wednesday announced that he’s trimming the budget for Pentagon headquarters by 20% starting in 2014, leading to jobs cuts and reduction in contracts with private companies.

The cuts will happen even if Congress ends sequester, according to the defense agency. Hagel said the time is right to “pare back overhead and streamline headquarters,” after the fast growth of the agency in the wake of the September 11, 2001 terrorist attacks.

“These reductions are only a first step in DoD’s efforts to realign defense spending to meet new fiscal realities and strategic priorities,” Hagel said.

The cuts would trim $1 billion from 2014 through 2019. Hagel said the first jobs to be cut will about 200 workers from his own team of 2,400.

Savings would come mostly by cutting back some contracts with private companies, but the agency said there would be “significant reductions to civilian personnel.”

He stopped short of detailing other potential cuts, like those to commissaries — military grocery stores — and military pay, saying “difficult but necessary choices remain ahead for the Department on compensation reform, force structure, acquisitions and other major parts of DoD” to less than 2,200 personnel.”

The announcement is likely to have wide repercussions, especially for defense companies that rely on government contracts such as Boeing, Northrop Grumman, Lockheed Martin and Raytheon.

The Defense Department is the largest federal agency employing 800,000 civilian workers.

The Pentagon has had to cut $40 billion this year since March from the sequester. That led the agency to furlough workers for six days over the summer.