UPDATE 1-U.S. defense chief says more budget cuts will force Pentagon layoffs
* Hagel defends unpaid leave for civilian workers
* Not optimistic there'll be deal to avert new cuts
* On 'listening tour' of bases in U.S. South
JACKSONVILLE, Fla., July 16 (Reuters) - Defense Secretary Chuck Hagel said on Tuesday he would slash spending on his office and those of the top military commanders by 20 percent in the coming years, and he warned that new budget cuts next year would force layoffs across the department.
Hagel, speaking to civilian aircraft maintenance workers at Naval Air Station Jacksonville, said he and the Pentagon's top military chiefs had decided to implement "a 20 percent across-the-top cut in our offices."
He said later the 20 percent cut would also affect the headquarters of the combatant commanders and would be implemented over the 2015-2019 time frame. Pentagon spokesman George Little said the spending cuts would save about $1.5 billion to $2 billion a year.
"Personnel reductions associated with these savings will be determined during the development of detailed execution plans," Little said in a statement. He said the decision was given in fiscal guidance to department leaders earlier this month as a result of an internal review ordered by the secretary.
Some critics have charged that the bureaucracy that supports the secretary of defense and some combatant commanders has become bloated over a decade of war.
Hagel's comments came as he was on a three-day "listening tour" of military bases in the U.S. South to get a look at how an across-the-board $37 billion budget cut this year is affecting Defense Department personnel, including civilians who began taking a day a week of unpaid leave last week.
Some 6,900 civilians at the Jacksonville base had their first day of unpaid leave last week, including 2,700 at the aircraft maintenance facility, officials said. That amounts to an effective 20 percent pay cut through the end of the fiscal year.
Hagel defended the decision to put civilian workers on unpaid leave, saying further cuts in other areas would have jeopardized military training and readiness, which had to be the Pentagon's top priority.
"In the end, I had to make all my final decisions on readiness, supporting our war-fighters and preserving as much combat power as I could," Hagel told the group. "I could not take our readiness down any further, any deeper than where we are. I just couldn't do it."
The defense secretary painted a sobering picture of the uncertainty hanging over the department because of automatic budget cuts known as sequestration.
The cuts, ordered by the White House and the Congress, reduced Pentagon spending by $37 billion this fiscal year, prompting the unpaid leave and other cuts. The reductions are likely to cut $52 billion from defense spending in fiscal 2014 and could continue at that level for a further eight years.
The Pentagon is in the process of reducing spending by $487 billion over a decade as required by the 2011 Budget Control Act, which aimed to reduce massive U.S. deficits. The act also required an additional $500 billion in across-the-board cuts unless Congress and the White House could find an alternative.
So far, the president and lawmakers have been unable to reach a deal to avert the cuts. The first round of automatic cuts began earlier this year after being reduced to $37 billion, and the Pentagon's proposed $526.6 billion budget did not take into account the cuts required by the law.
Responding to questions from the workers, Hagel said an additional $52 billion in cuts in the 2014 fiscal year would inevitably require a reduction in the Defense Department's workforce.
"There will be further cuts in personnel, make no mistake about it," he said. "I won't have any choice. We took a $37 billion cut this year and you see the consequences of that. And then if you take a $52 billion cut, there'll be continuing significant and serious reductions."
The secretary said cuts in the future could eventually affect not only jobs but compensation packages, such as retirement benefits, healthcare and pay, which combined represent about half of the Defense Department's budget.
"That's not going to go untouched," he said. "You don't get the money in the overhead of the office of the secretary of the Defense Department. You need billions and billions of dollars."
Speaking later at a luncheon with members of the Jacksonville Chamber of Commerce, Hagel said he was not optimistic about Congress and the White House reaching an agreement to avert the next round of budget cuts.
"I don't see a lot of hopeful signs that this is going to be resolved," he said.