Key facts
- The US Navy is reportedly transferring money from payroll and other accounts to fund combat operations in Iran.
- Non-emergency maintenance on shore-based facilities has been deferred due to cash shortages.
- The war, initiated by Donald Trump, has depleted US munitions stockpiles and led to retaliatory Iranian strikes.
- A Pentagon memo warns of payroll shortfalls due to funds being 'raided' for combat operations.
- Adm Daryl Caudle had previously cautioned Congress about impending budget crunches impacting force generation decisions.
- The defense secretary stated the Iran war cost $35.7 billion, though full accounting is unclear.
Donald Trump's military campaign against Iran has severely strained the US Navy's budget, forcing the service to reallocate funds from payroll and defer maintenance, according to documents and interviews obtained by The Guardian. The conflict, which began on February 28, has depleted munitions and led to retaliatory Iranian strikes across the Middle East, placing significant pressure on military finances.
A Pentagon memo indicated that payroll accounts are experiencing shortfalls as funds are diverted to cover combat operations, with plans to backfill these accounts using unspent money. Experts and former officials describe the financial situation as dire, with one retired naval officer stating, "The piggy bank is broken."
Navy officials and contractors confirmed that non-emergency maintenance on shore-based facilities has been postponed due to the cash crunch. The Navy's nearly $300 billion budget for 2026, allocated by Congress for specific requirements like personnel, shipbuilding, and operations, has legal limitations on how funds can be moved between these categories.
Senator Susan Collins noted in a Senate Appropriations Committee hearing that some military services are facing "near-term solvency challenges," with a staffer indicating the Navy was among those referred to. A Navy spokesperson stated that maintenance and operations funds have not been depleted and that the department is managing resources to meet pay obligations, working with Congress to address operational demands.
Inside the service, the financial strain is an open secret, with defense analyst Todd Harrison suggesting that civilian leaders in the Pentagon are deliberately not speaking publicly about it for political reasons, to avoid appearing to damage military readiness over a politically unpopular war.
In mid-May, Adm Daryl Caudle had warned Congress that the budget crunch would hit in July, potentially forcing decisions on force generation, exercises, and routine operations to ensure funds for the war effort. Pete Hegseth also highlighted critical shortfalls without emergency funding. The defense secretary testified that the Iran war cost $35.7 billion, though the full accounting remains unclear.
The White House requested $67 billion in emergency funds for the defense department, but the breakdown for the Navy was not specified. While the House passed a defense bill and a separate budget authorization providing $73 billion for the war, their passage into law is unlikely. Harlan Ullman noted that unlike past conflicts like Iraq and Afghanistan, there is no congressional authorization for the current conflict, questioning Congress's obligation to fund it.
One former military officer involved in Navy contracting described the situation as dire, stating, "They’re fucked. They shot all their weapons; they trashed all their ships; they ran out of their money."