A long-term blank check for 'war' spending

In the federal budget, emergency wartime expenses are the new normal



A group of selected Marines representing Camp Pendleton in California listen as Secretary of Defense Chuck Hagel answers their questions during a visit to the base, where he announced the deployment of another 130 U.S. troops to Iraq, in August of 2014.

Paul Rodriguez/The Orange County Register/AP

Correction, Dec. 12, 2014: The budget graphic has been updated to include revised amounts from the Center for Strategic and Budgetary Assessments.

The U.S. military's budget request now pending on Capitol Hill includes a particularly notable oddity inside the special fund meant to support combat operations in Iraq and Afghanistan: a new $810 million U.S. defense initiative to "reassure" Europeans of their security in the wake of Vladimir Putin's Crimean land grab.

This is not how America’s war budget – otherwise known as the Overseas Contingency Operations (OCO) fund – is supposed to work. The White House in 2011 reaffirmed that the OCO, originally established in 2001 under a different name, was for “temporary and emergency requirements” associated with U.S. combat operations in Iraq and Afghanistan. Now, many experts say its continued use is emblematic of a five-year collapse in Washington's fiscal discipline.

The OCO budget isn't subject to spending limits that cap the rest of the defense budget for the next seven years; it's often omitted altogether from tallies of how much the military spends each year; and as an "emergency" fund, it's subject to much less scrutiny than other military spending requests.

This sort of special war funding was supposed to decline and then disappear as combat operations in Iraq and Afghanistan wound down. But that target has receded, if not disappeared altogether, as the OCO fund has become a larger catchall -- a slush fund used by the military services, by lawmakers, and by the White House to escape budgetary constraints, officials and independent experts say.

Although President Barack Obama promised as a candidate in 2008 to “end the abuse” of wartime emergency spending, it’s now clear he will not do so before leaving office in 2016, these experts agree. This year, the main defense authorization budget is likely to come in at a cool $521.3 billion, snugly within the legal limits for federal spending in 2015. But the OCO includes an additional $63 billion. As a result, more than a tenth of all Pentagon spending will remain uncapped and subject to much less scrutiny than the remainder.

The European initiative is just one of many programs in the OCO budget that have little or nothing to do with the Iraq and Afghanistan wars. The new Defense Authorization Act for 2015, which may be signed by the president in coming days, includes $55 million to retain the “air superiority presence” of the U.S. Air Force. Another $351 million of OCO funds would go to Israel for its Iron Dome missile defense system.

In the OCO portion of the separate omnibus appropriations bill for 2015, which Congress is trying to pass before the holidays, another $1.2 billion is set aside for the military’s reserve components to buy “miscellaneous equipment” the Pentagon didn’t even seek. And $3.3 billion is allocated for classified Air Force equipment purchases.

The OCO budget — which is higher than the entire budgets for most federal departments — as a result has become one of those Washington abominations that makes advocates of fiscal discipline inside and outside the Beltway shake their heads in dismay, even as they forecast its continued existence as a supposedly necessary adjunct to the main, or so-called “base” Pentagon budget. It's valued because the OCO fund is able to absorb costs that would otherwise push the base budget over its limit, an event that by law would trigger a variety of punishing mew spending cuts for the Pentagon.

“We figure there’s about — well, there’s a lot of money in the OCO that should probably be in base. It’s not because we didn’t want it to be in the base; it’s just happened over twelve years,” said Deputy Defense Secretary Robert Work in September at a Washington meeting of the Council on Foreign Relations. Going forward, he said, the government has three choices: remove the spending caps on the base budget, combine OCO and base funding without removing the caps, or agree that OCO will continue into the future. He predicted the third option.

“With the crisis in Ebola, with all of these things, the European reassurance initiative, we’re going to have to have overseas contingency operations funding for some time,” Work said.

It’s not much of a secret anymore that OCO spending is only occasionally for emergency military tasks. Todd Harrison, an analyst at the Center for Strategic and Budgetary Assessments, estimates that about half of the OCO budget in the new authorization bill covers expenses that actually should be included in the base budget.

Harrison says that portion has grown since 2012, based on the simple fact that the number of troops deployed in Afghanistan is shrinking faster than OCO spending. The Defense Department’s budget request for 2015 anticipated that troop levels in Afghanistan would drop by two-thirds from the previous year — but requested only a 36 percent cut in OCO funding for Afghanistan. As a result, OCO spending per service member in Afghanistan has risen to more than double what it was last year.

Jamal Brown, deputy press secretary for the Office of Management and Budget, did not return calls for comment. But other sources said that the administration, faced with a $115 billion gap over the next four years between what the budget caps allow and what the Pentagon wants to spend, now appears to regard OCO as a permanent fixture.

The Government Accountability Office noted in a June 2014 report, for example, that most of the Pentagon’s spending for the Central Command is in the OCO budget, even though many of those costs will persist beyond 2016, when U.S. operations in Afghanistan are supposed to end.

In the report, entitled “Guidance Needed to Transition U.S. Central Command’s Costs to the Base Budget,” GAO analyst John Pendleton urged the department to craft that guidance quickly and set a deadline for completing the shift. Although the Defense Department promised to provide such guidance by the end of July 2014, it has not yet done so, according to the GAO.

“This is an iterative process, not a one-time bit of guidance. The question of migrating costs from OCO to Base is being discussed at length throughout the ongoing budget process,” said Bill Urban, Defense Department spokesman, in an emailed comment. He declined to elaborate.

New programs added with little scrutiny

Moreover, the OCO budget isn’t a fiscal salve only once a year. The Defense Department comptroller can — and often does — ask the House and Senate committees on appropriations and armed services for permission throughout the year to add new spending to the OCO budget if programs already in that budget wind up costing less than anticipated. Often, additional non-emergency expenses sneak in during that process.

Over the past four years, for example, the Defense Department’s comptroller has sought congressional approval to add roughly $20 billion worth of expenditures to OCO to cover costs not previously stated in the budget, including many that do not appear to be emergencies or directly related to combat operations, according to a CPI tally.

These “reprogrammings” are typically approved without a public hearing, based merely on written assent from the four chairmen of Congress’s defense-related committees. Their letters are rarely made public.

On occasion, however, the Pentagon submits a reprogramming request for OCO funding so outlandish that lawmakers reject it publicly. That’s what happened on September 8, when Comptroller Michael McCord requested $1.5 billion in OCO funds to purchase 21 Apache helicopters, eight F-35 Joint Strike Fighter planes, and assorted spares and repair parts to replace aircraft that the U.S. Army, Navy, and Air Force had lost in battles over the past two years.

The chairman of the House appropriations defense subcommittee, Rodney Frelinghuysen, R-N.J., responded in a letter that his panel was concerned that OCO funds, “which are provided by Congress specifically for ongoing combat operations and related efforts,” were being used to cover Pentagon purchases that had “only tenuous links” to current combat operations. The Apaches and F-35s were characterized as replacements for lost battle equipment, he said, but were already in the Pentagon’s base budget for future years.

Gordon Trowbridge, spokesman for the Senate Armed Services Committee, said he would try to supply copies of other such letters, but did not. Vince Morris, spokesman for the Senate Appropriations Committee, and Claude Chafin, spokesman for the House Armed Services Committee, said their committees never publicly release such letters and declined to explain why.

A close examination of OCO reprogramming requests that sailed through over the past three years reveals many that seem unrelated to core Iraq and Afghanistan emergency fighting needs: an $86 million request for unemployment compensation for ex-servicemembers; a $13.7 million request for funds to help prosecute alleged 9/11 conspirators; and a $104.5 million request to help test a bomb capable of destroying bunkers 200 feet underground.

Reprogrammings like these are technically allowed only if some of the OCO funding that Congress has already approved suddenly turns out to be greater than necessary. And this winds up happening fairly often. More than half of the nearly $20 billion in recent OCO reprogramming funding has “become available”  because Afghanistan combat or direct support costs were “lower than budgeted,” “overestimated,” “reduced,” “lower than forecasted,” and a host of other synonyms used by the Defense Department comptroller for “wrong.”

Using ongoing combat operations to expand the Pentagon’s budget is of course a time-honored tradition. Former President George W. Bush used “emergency supplemental” funding requests for the wars in Iraq and Afghanistan to add hundreds of billions of dollars to his annual defense budgets. He was able to do so thanks to a section in a budget statute that defined “emergency requirements” as whatever the president and Congress specified, and exempted those funds from the regular budget caps. 

After Obama’s election, many expected him to carry out his campaign pledge to end the abuse of emergency funding. In 2009, the Office of Management and Budget set some firm criteria for OCO expenditures, and in 2010, it tightened them further to restrict the geography, timeframe, and purposes of such spending, as well as to exclude soldier salaries that would be paid whether the soldier was deployed or not. The applicable areas are supposedly only those “in which combat or direct combat support operations occur.”

Defense Department spokesman Urban wrote that the criteria are currently “in force.” But he said the Pentagon sometimes includes “investment-type” funding in OCO. The budget office criteria allow such funding for research and development projects deliverable within 12 months, but Urban acknowledged that for some OCO programs, the funding stream could be used for longer periods.

“Getting an agreement on these criteria was a significant challenge, because OCO is effectively free money,” said Kathleen Peroff, who was the deputy associate director of national security at the Office of Management and Budget until July 2013. And afterwards, the Pentagon sometimes sought — and got — exceptions to the criteria, granted by political officials in the executive office of the president, Peroff said.

“Disciplined intentions sometimes weakened in the face of hard realities of what trade-offs had to be made,” she added.

She said that a $25 million reprogramming request approved in July – after she left – involving software upgrades to Army equipment is a good example of how the OCO budget has been used inappropriately to fund projects that would be needed even if no troops were in Afghanistan.

Gordon Adams, who served as associate director for national security and international affairs at the Office of Management and Budget in the 1990s and returned briefly to OMB as part of Obama’s transition team in 2009, said in an interview that “we had a sort of informal understanding with the Defense Department that they would follow those guidelines when submitting OCO requests. And if you detected that they’d been honored in the breach, you’d be right. Every year, that breach gets a little wider.”

“The trouble with OCO now is that all three stakeholders have discovered it,” he added. “The Pentagon discovered it first. Then the appropriators discovered, ‘Ahh, we’re operating under caps, but if I move some funds over to OCO, I make room for some stuff the Pentagon didn’t ask for.’ And then this year, the White House discovered it, with programs like the European Reassurance Initiative.”

In June, Reps. Mick Mulvaney, R-S.C., and Patrick Murphy, D-Fla., added an amendment to the 2015 defense bill to give the OMB criteria legal standing. But other lawmakers deleted the provision, citing the fact that the criteria had not been updated in more than four years and noting that “there have been significant fact-of-life world events which dictate a need to re-examine and update those criteria.”

“We’ve been told since we got here that OCO was going away. It was for extraordinary programs, it was not part of the base budget. And clearly now this administration wants to have the OCO money available to them as badly as the Bush administration did,” Mulvaney said in an interview.

Obama’s affinity for the spending dodge was evident in his 2015 request, which said OCO funding is necessary to “support DOD’s strong forward presence in the broader Middle East region,” including by “assuring our regional partners, deterring aggression, and working with our partners to counter terrorism.”

Far from the original OCO task of providing direct support for combat operations in Iraq and Afghanistan, the administration’s current OCO mandate anoints the Pentagon a global therapist, bodyguard, and trainer — and gives it uncapped funding to do all that those roles entail.

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