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* Move due to looming $46 billion cut in defense spending
* Plan would reduce costs by up to $5 billion
* Obama aims to increase pressure on Republicans over cuts
By David Alexander
WASHINGTON, Feb 20 (Reuters) - Defense Secretary Leon Panetta formally notified Congress on Wednesday that the Pentagon plans to put civilian defense employees on unpaid leave this year if $46 billion in across-the-board U.S. government spending cuts take effect on March 1.
The announcement of congressional notification begins a 45-day process that could ultimately lead to 22 days of unpaid leave for most of the department's 800,000 civilian employees around the globe.
In a letter released by House of Representatives Speaker John Boehner, Panetta said the furloughs would be "disruptive and damaging" to the Pentagon's defense mission, but there were no "viable alternatives" to reduce spending if the budget cuts occur.
President Barack Obama has been sounding the alarm about the impact of the $85 billion in automatic across-the-board government spending cuts due to take effect starting next month. The president turned to local television stations across the country on Wednesday to increase public pressure on congressional Republicans to avert the cuts.
In addition, Secretary of State John Kerry defended U.S. foreign affairs spending against the backdrop of looming cuts, saying it protects U.S. security and creates jobs.
"Foreign assistance is not a giveaway. It's not charity. It is an investment in a strong America and in a free world," Kerry said at the University of Virginia.
An administration official, who asked not to be named, said that even White House operations will be not spared under the cuts.
Pentagon Comptroller Robert Hale said there would be "very limited exceptions" to the furloughs, including civilians in combat zones, foreign civilians at overseas bases, some police and healthcare workers and political appointees exempted by law.
Hale declined to estimate what percentage of the civilian workers were likely to be furloughed but said it would be more than half. Another defense official said, "we expect more than 80 percent to be furloughed."
The unpaid leave, which will essentially cut the pay of civilian employees by 20 percent, is expected to save up to $5 billion, one of many cuts required as the Pentagon tries to slash $46 billion in spending by the end of the year.
The across-the-board cuts, known as sequestration, are due to take effect on March 1 unless Congress decides to delay them. They were mandated by the Budget Control Act of 2011 because lawmakers and the White House failed to reach a compromise on alternative spending reductions.
The Defense Department, which had warned for weeks about the furlough plan, has imposed a hiring freeze on civilian personnel and ordered the termination of many of its 46,000 temporary and contract workers. Officials said about 6,000 had already been laid off, with more likely to come.
The Pentagon has stressed that most civilian defense employees are not working at desks in Washington but are spread across the country doing jobs like teaching, nursing and maintaining equipment.
The greatest impacts will be in Virginia, which will be hit with lost payroll of $660.8 million; California, with $419.7 million; Maryland, with $359.3 million; Texas, with $290.8 million; and Georgia, with $203.1 million. Vermont will take the smallest hit, with lost payroll of $3 million.
Panetta announced the congressional notification in a message to department employees as he was traveling to Brussels for a NATO meeting, where he was expected to warn Western allies that looming budget cuts would affect U.S. contributions to NATO readiness.
REQUESTS FOR EXCEPTIONS TO BE REVIEWED
"We think the alliance's readiness could be diminished if sequestration takes effect," Pentagon spokesman George Little told reporters flying with Panetta to Brussels. He noted that bilateral training with European allies could be affected, as could rotational deployment of U.S. forces to Europe.
"You put this all together, lack of U.S. readiness equals NATO lack of readiness," Little said, adding that Panetta had been "very unhappy" earlier in the day about having to issue the message on civilian furloughs.
In his note to defense employees, Panetta said the department was "doing everything possible to limit the worst effects" of sequestration, "but I regret that our flexibility within the law is extremely limited."
"The president has used his legal authority to exempt military personnel funding from sequestration, but we have no legal authority to exempt civilian personnel funding from reductions," he added.
The Pentagon is required by law to advise Congress 45 days before furloughing any workers. The department is planning to put most civilian workers on unpaid leave for one day a week for 22 weeks between April and Sept. 30, the end of the fiscal year.
The military services also were formally notified of the decision on Wednesday and have until early March to ask the Pentagon for exceptions, officials said.
The Defense Department will review the requests and approve exceptions by mid-March, after which workers will receive 30 days notice of the impending furloughs, they said.
Hale told reporters that Pentagon officials felt compelled to move ahead with civilian furloughs because of increasing financial pressure on the department's operations and maintenance account, which is used to pay for the war effort in Afghanistan.
"Furloughs are really the only way we have to quickly cut civilian personnel funding," Hale told reporters at a briefing.