A Pentagon Memo Says the Navy Is "Raiding" Its Own Payroll Accounts to Pay for the Iran War — and the Chief of Naval Operations Says He Needs $8 Billion More Just to Stay Solvent

August 28, 2026

On August 27, 2026, the Guardian reported, based on internal documents and interviews, that Operation Epic Fury — the war with Iran — has pushed the US Navy into a severe financial crisis. One Pentagon memo on Navy funding warns of "shortfalls in payroll" accounts because the department has been "raiding" them to cover combat operations, backfilling with money not yet spent elsewhere. Equipment and facility maintenance accounts are being drained the same way, and exercises and training have been limited or canceled to bridge the gap until the 2027 fiscal year begins on October 1. A Navy spokesperson disputed that pay is at risk, saying the department "is actively managing its resources to meet current pay obligations on time." The next day, August 28, Chief of Naval Operations Adm. Daryl Caudle used his State of the Navy address in Norfolk to put a number on it: the Navy needs $6 billion to $8 billion above what was budgeted "to be whole and solvent for [Fiscal Year] 26." More than 27,000 sailors and two dozen ships supported the Iran campaign. Asked about the size of the administration's proposed $1.5 trillion defense budget, Caudle said he was not offended by it — "I need my money." Caudle had warned Congress in May that the Navy could run out of money by July: "The FY '26 budget didn't bake in Epic Fury." The White House has asked Congress for an emergency infusion of $67 billion; House Republicans floated $73 billion through reconciliation. At a July 21 Senate Appropriations hearing, Sen. Susan Collins (R-ME) said she had been told "some military services face near-term solvency challenges." House Armed Services member Rep. Pat Harrigan (R-NC) told colleagues to "get rid of the complacency," and Rep. Betty McCollum (D-MN), the top Democrat on the House defense appropriations panel, said Congress needs "to know what we're purchasing and why."