Pentagon Budget Watchers See OCO Funding Increases In Near Future |

By Tony Bertuca

Many defense budget analysts, regardless of whether they believe the Defense Department’s overseas contingency operations account has become a “slush fund,” nodded in agreement last week when they heard Defense Secretary Chuck Hagel indicate to Congress that the Pentagon’s OCO spending request should be expected to climb.

Gordon Adams, a White House budget official in the Clinton administration and a critic of Pentagon spending accountability, said raising OCO to pay for President Obama’s expanded strategy against Islamic militants in Iraq and Syria — and other unfunded priorities — was an easy call to make because the fund is exempt from the automatic budget caps put in place by sequestration.

“OCO has become everybody’s safety valve,” he told Inside the Pentagon in a September 23 email. “The Pentagon always loved it — used it for other non-war needs for more than a decade. The appropriators discovered it, and love anything that provides fiscal trade space. Now the president has discovered it — the [$5 billion Counterterrorism Partnership Fund] proposal last June used the OCO request for its funds. In my view, OCO is the escape hatch for DOD on the readiness issue — it will never be as bad as they say, because they have a safety valve no other federal agency has.”

Hagel acknowledged those who hold Adams’ view when he appeared before Congress last week, but said OCO was the appropriate mechanism for funding global contingencies like the fight against Ebola and the Islamic State of Iraq and Syria.

“We all have different opinions on whether there should be an overseas account or not and whether it’s a slush fund or not,” he said during a Sept. 18 hearing of the House Armed Services Committee.

When Rep. Mike Rogers (R-AL) noted that the present lack of global stability might drive OCO to grow “a lot bigger to accommodate all the contingencies” facing the United States, Hagel responded: “It may.”

The White House submitted the $60 billion OCO funding request to Congress in July, on top of a $496 billion base budget request for DOD. Congress, however, approved a continuing resolution Sept. 17 that would fund the government at FY-14 levels until December 11, providing an $85 billion OCO budget, or $25 billion above the president’s FY-15 request.

The Pentagon is scheduled, however, to provide the services with guidance for how to begin migrating OCO priorities back into the base budget. But Adams asserts that “OCO is here to stay for the long run and migration guidance is likely to be a paper exercise.”

Todd Harrison, an analyst with the Center for Strategic and Budgetary Assessments, said the president’s new expanded airstrikes and counterterrorism in Iraq and Syria virtually assured the failure of any DOD effort to migrate OCO spending back to the base budget in any meaningful way.

“If things start to drag on, then it makes it harder for [the Office of the Secretary of Defense] to press the services to migrate base budget activities back into the base budget,” he wrote in a September 24 email. “It also makes it more likely OCO funding stays around for longer because Congress and DOD will have a clear justification for using it.”

Harrison said he was unsure if the current congressional support for President Obama’s new military strategy in the Middle East would translate into overturning sequestration.

“It’s too soon to tell,” he wrote. “If things don’t go well and it looks like the U.S. is getting pulled back into a ground war, public sentiment could shift in a way that is negative for defense. On the other hand, these operations (whether they go well or not) could strengthen the argument for those who say we’ve already cut defense too much.”

Diem Salmon, senior policy analyst for defense budgeting at the Heritage Foundation, told ITP that any planning to move OCO spending into the base budget would take far longer than once thought.

“I don’t think OCO is going to become a permanent fixture, but it’ll likely be around for several more years,” she wrote September 23 “I think the migration will still be an objective, though it may take longer now. The biggest hindrance to migrating OCO priorities into the base budget is the defense topline. If sequester isn’t reversed or the defense topline significantly increased, DOD will have a much harder time transitioning OCO priorities back into the base budget.”

Salmon, however, positively highlighted the House Appropriations defense subcommittee’s recent denial of a DOD request to reprogram billions of Army OCO operations and maintenance dollars to purchase more F-35 Joint Strike Fighters. She also pointed to the prominent anti-spending sentiment in the House, which she expects to remain significant regardless of mid-term election results.

“I think Congress is going to expect that [OCO] continues to decrease, eventually hitting zero,” she wrote. “It’s bad fiscal and defense policy to keep relying on OCO as a Band-Aid. Unless there is a clear strategy from the administration on what it will take to defeat ISIS, I think Congress is going to want to see the OCO numbers go down. We’re significantly reducing our troop presence in Afghanistan, therefore the OCO total should be less in FY2016, even if we account for airstrikes in Iraq and Syria. More congressional members are now talking about the security situation, but fiscal responsibility is still a main priority for many.”

Mackenzie Eaglen, an analyst with the American Enterprise Institute, also pointed to the House appropriators’ recent reprogram rejection to buy F-35s with OCO money as evidence that Congress has not completely lost perspective.

“The migration guidance is coming regardless of OCO dependency, especially in light of the recent HAC-D rejection of procurement reprogramming from this same account,” she wrote September 23. “Lawmakers love the cap-busting OCO (for its ability to redress what is increasingly a consensus view that the base defense budget is too low to realistically meet reduced strategic goals for the Pentagon), but they hate when it’s perceived as a slush fund by Pentagon officials.”

Yet, Eaglen said OCO has grown far too vital for lawmakers and Pentagon officials to willingly cap it, especially given the ongoing unrest in the Middle East and Eastern Europe that has become more visible to the American public and Capitol Hill in recent months.

“OCO is here to stay because no one really wants it to go away unless and until (and, in some cases, not even then) there is a larger budget deal to repeal [sequestration],” she wrote. “I think the tide has officially turned in favor of higher defense budgets again in Washington on both sides of the aisle. So the question is not whether the defense budget will grow but by how much in dollar terms and how much will be in the base budget where it really matters in terms of restoring long-term health and stability to the department?”

Joint Chiefs Chairman Gen. Martin Dempsey warned the Senate Armed Services Committee during a September 16 hearing that the Pentagon’s long-term budget challenges cannot be fully addressed by simply upping OCO spending.

“We do have a problem and I think it will become clear through the fall,” he said. “It’s not a problem that we can solve just with OCO. There’s a base budget issue here too we have to get at.”

Pentagon Budget Watchers See OCO Funding Increases In Near Future |