US Experts Bank on $50B to $70B Overseas Contingency Ops Budget | Defense News


WASHINGTON — Even though US President Barack Obama announced last week that the Defense Department would leave only 9,800 American troops in Afghanistan in 2015, experts expect the Pentagon to ask Congress to approve $50 billion to $70 billion for war-related efforts.

That range is lower than the $79 billion placeholder submitted to Congress in March, but higher than the $20 billion it will take to fund those troops in Afghanistan.

The high estimate, despite the removal of more than 22,000 troops in the coming months, these experts said, shows the Pentagon will continue using the overseas contingency operations (OCO) funding to soften the blow from defense spending caps in 2015 and beyond.

“If I had to guess where the [stock] market is pegging this, it’s probably in the $50 [billion] to $70 billion range,” said Byron Callan, an analyst with Capital Alpha Partners.

Todd Harrison, an analyst with the Center for Strategic and Budgetary Assessments think tank, said he expects the Pentagon’s OCO budget request will be in the $50 billion to $60 billion range.

Moreover, sources said the military services expect the OCO budget to remain in place for two years after the US military fully withdraws from Afghanistan, which Obama said would be by the end of 2016. Funding in those years would go toward repairing and replenishing equipment and weapons expended in the war.

The administration has never announced a final year for OCO funding.

The White House last week said it is finalizing its 2015 OCO request. An administration official told Defense News that the request would be less than the $79 billion DoD requested for Afghanistan in 2014.

“[T]his year’s request will include costs incurred inside Afghanistan, certain expenses in the theater more broadly, and various related support costs,” the official said. “For example, these costs include returning personnel and equipment from theater to their home stations, repairing and replacing equipment and munitions, and resetting our military forces as they return from war.”

The 9,800 troops would cost about $20 billion, Tony Blinken, Obama’s deputy national security adviser, said in a May 27 interview with CNN.

“We’re looking at probably in the vicinity of about $20 billion, when you factor everything in,” Blinken said.

Blinken’s $20 billion figure was interpreted by some as possibly being the total DoD OCO request, but there was not much reaction on Wall Street.

“The market I don’t think took that number and ran,” Callan said.

If the entire OCO proposal was lower, in the $20 billion range, “the market probably would have been taken aback by that,” Callan said.

Still, the $20 billion estimate is consistent with Harrison’s cost-per-troop calculations.

Historically, it has cost DoD about $1.3 million per year for each troop it has in Afghanistan, Harrison said.

“Twenty billion [dollars] is a reasonable estimate for what it will cost for 9,800 troops in Afghanistan next year,” Harrison said. “It’s a legitimate number. In fact, it’s a little above the trend line, but pretty close to it.”

That trend was bucked in 2014 when DoD submitted an OCO request that was nearly double what it should have needed, based on troop numbers.

This is because DoD has shifted billions of dollars from its base budget, which is subject to federal spending caps, to the unconstrained OCO budget, Harrison said.

Harrison estimates that about $30 billion of the DoD’s $85 billion 2014 OCO budget is money that was moved out of the base budget. DoD shifted about $20 billion and Congress moved the additional $10 billion from the base to OCO accounts, he said.

Since 2008, Pentagon officials have said they would migrate billions of dollars in funding from the war budget to the base budget. However, in recent years, since the federal spending caps were put in place, DoD has moved money the other way — from the base budget to the war budget — to soften the blow of spending caps, analysts said.

In addition to troop costs, the OCO budget includes billions of dollars for the Afghan military, money to repair battle-worn equipment and to pay for transporting equipment back to the US.

This year’s OCO request will also include up to $5 billion in a “counterterrorism Partnerships Fund” that would go toward US training and partner-building of foreign troops, Obama announced last week.

“[T]hese resources will give us flexibility to fulfill different missions, including training security forces in Yemen who have gone on the offensive against al-Qaida; supporting a multinational force to keep the peace in Somalia; working with European allies to train a functioning security force and border patrol in Libya; and facilitating French operations in Mali,” Obama said in his May 28 speech.

The new fund announced by Obama would become the fifth counterterrorism account in the DoD budget, said Gordon Adams, an analyst with the Stimson Center and a professor at American University, who oversaw defense budgeting in the Clinton administration.

The Pentagon submitted a $496 billion 2015 base budget request to Congress in March. That spending plan did not include an OCO request, as US troop levels in Afghanistan after this year had not been finalized. Instead, DoD sent Congress a $79 billion “placeholder” for the war budget.

Congress has been largely supportive of DoD’s war budget requests, but has at times removed weapon purchase requests, which it said were not justified. For example, lawmakers rejected a 2008 Air Force request to replace an F-16 that crashed with a new, not-yet-operational F-35 joint strike fighter.

Still, some lawmakers have sought to curb the OCO funding stream, which they say amounts to nothing more than a slush fund. But at the same time, Congress last year approved an $85 billion OCO budget for 2014, adding $5 billion to DoD’s request.

House lawmakers approved an amendment to the 2015 defense authorization bill that would place restrictions on the types of items the Pentagon could fund with OCO budget. Advocates say they are pushing for a similar amendment in the Senate version of the bill.

“The [House] amendment takes a major step toward ensuring that more military spending will take place above board, subject to stricter definitions of what is and isn’t an overseas contingency,” Pete Sepp, executive vice president of the National Taxpayers Union, said in a May 22 statement. “The people who pay government’s bills deserve more transparency and accountability for the dollars they send to Washington, including those that end up on the Pentagon’s doorstep.”

via US Experts Bank on $50B to $70B Overseas Contingency Ops Budget | Defense News.