How Congress Finances Pork

Several recent press articles identified some of the pork Congress has added to its defense bills. Examples include a new batch of VIP transports, many of the programs Secretary of Defense Gates is attempting to cancel, and hundreds of minor earmarks scattered throughout the bills. Cost estimates range from $2.3 billion to $9 billion. What you haven't read about - yet - is how Congress pays for this pork. The information paper below addresses that.

In September, the Senate will consider its version of the Defense Appropriations bill. That bill is sure to use the same pork-funding mechanism as used by the House Appropriations Committee and the House and Senate Armed Services Committees. The mechanism is quite simple: the committees raid various accounts in their bills to pay for their pork - most prominently the Operation and Maintenance account that pays for military readiness.

When the Senate takes up the Defense Appropriations bill in September, it will be an instructive exercise in ethics and congressional interest in military reform to see if a single senator complains about this pork funding mechanism - let alone acts to do something about it.

Information paper follows:

“How Congress Pays for Its Pork”

by Winslow T. Wheeler

When the Senate voted on July 21, 2009 to strip funding out of the National Defense Authorization Act for additional F-22 fighters, there was an important element to the vote that did not receive the attention it deserved. Like most advocates of “earmarks” in defense bills, the author of the effort to pay $1.75 billion for seven more F-22s, Sen. Saxby Chambliss, R-Ga., did not add any money to the bill to pay for the planes. Instead, he secured reductions in other parts of the legislation (“offsets”), thereby not raising the bill’s total spending.

There was nothing new in this; using offsets is Congress’ standard method to pay for earmarks in defense legislation. For example, according to Taxpayers for Common Sense, the Senate Armed Services Committee (SASC) approved 426 earmarks costing $9 billion in its National Defense Authorization bill.[1] The grand total authorized for all defense spending by the bill was $0.4 billion below the $680.2 billion President Obama had requested. The entire $9 billion tab for pork was offset.

It was the specific offsets that Chambliss selected to pay for his additional F-22s that are particularly interesting; they reveal the values of the congressional pork system. It is also an element of the system that the press has mostly ignored.

The offsets Chambliss selected were to reduce Army, Navy, Air Force and DOD-wide Operation and Maintenance (O&M) spending by $850 million. The Military Personnel (military pay) account was also reduced by $400 million, and a false assumption was made that the recently enacted Weapon System Acquisition Reform Act would save $500 million across the boards in DOD in FY 2010.[2] We focus here on the $850 million extracted out of the O&M account.

O&M is a huge and diverse account. For 2010, President Obama requested $156.4 billion for it. It pays for all civilian salaries in the Department of Defense (DOD), all military training and exercises, fuel for flying, steaming, and driving, and for food, as well as most spare parts for weapons, all maintenance for weapons including depot maintenance and ship overhauls, and several major programs including the huge Defense Health Program. In short, the O&M account is the operational lifeblood of our military forces; without it, the planes don’t fly, the troops don’t train, and the forces can’t fight.

The O&M budget has constantly been under pressure. As weapons become older, they become more expensive to maintain. Also, our new (more complex) weapons are virtually universally even more expensive to maintain than the aging ones they replace.[3] In addition, the Defense Health Plan is on a trajectory of ever-increasing per capita cost; Congress routinely increases civilian pay above the rates recommended by the Office of Management and the Budget, and training and operating costs are always climbing faster than the budget grows – thanks to the increased expense of operating both aging and ever more complex equipment. One would expect substantial annual increases in the O&M budget. Instead, only modest increases usually occur in executive branch budget requests. Congress virtually always decreases them.

There are forces in Congress, and the Pentagon, that seek to behave as miserly as possible with the O&M budget. Always looking to fund the huge increase in the cost of new (more complex) weapons in the separate Procurement and Research and Development (R&D) accounts, program advocates often argue that “modernization” is being retarded by high operating costs and, therefore, the O&M budget must be squeezed to help pay for new acquisitions. The result is to starve important readiness spending. For example, in the 1970s, Air Force pilots were permitted 20 to 25 hours per month for air-to-air combat training, an amount then considered just adequate. Today, F-22 pilots get barely 10 to 12 hours per month in the air; F-16 pilots get more, but only about 17 to 18 hours. This has succinctly been called “the rising cost of lower readiness.”[4]

Senator Chambliss’ $850 million raid on the O&M budget to help buy seven more F-22s was a classic example of this behavior. When the matter was debated on the Senate floor on July 13, the Chairman of the Senate Armed Services Committee, Carl Levin, D-Mich., was as direct as he has ever been about the Chambliss funding mechanism. Levin said:

The amendment also pays for these additional F-22s in the following ways: No. 1, it cuts operation and maintenance. No. 2, it cuts civilian pay funds that need to be available. No. 3, it also reduces the balances that have to be kept available for military personnel. And No. 4, it assumes that there are going to be near-term savings in fiscal year 2010 from the acquisition reform legislation that we recently adopted…

Each of those places cannot afford those cuts. We are talking here about operations and maintenance. This is the readiness accounts of our Armed Forces. These are the pay accounts of our Armed Forces.

Levin continues on a little later, stating:

… readiness rates across the board have continued to suffer after several years in combat. Yet half of the reduction made by the amendment which added the F-22s was assessed against O&M Army. It is a dangerous thing to do. It is an unwise thing to do.[5]

The Chambliss effort offered a stark choice to the Senate: either spending for O&M, including training and maintenance, or more F-22s. To their credit, the authors of the motion to undo Chambliss’ readiness raid, Sens. Levin and John McCain, R-Ariz., made the choice clear in the text of their amendment and Levin orally pointed out the issue.[6]

However, the matter attracted little real attention in the Senate. The F-22 debate focused instead on other issues: whether more F-22s were or were not needed, whether Air Force officials truly did or did not want more F-22s, and the jobs the program brought to various states. That the readiness raid did not attract significant attention was quite predictable – such raids are standard behavior in Congress, and almost no one ever complains about it.

Congress’ four defense committees[7] routinely raid the O&M account to help pay for the pork in their bills. They have been doing it for years. This year, in addition to the $850 million Chambliss raid on O&M for F-22s, others in the Senate Armed Services Committee raided an additional $1.154 billion[8] out of O&M to help offset earmarks the committee distributed throughout the bill.[9]

The Senate Armed Services Committee was hardly alone. The House Armed Services Committee (HASC) added $2.26 billion for 502 earmarks, according to Taxpayers for Common Sense.[10] They cut O&M by $1.962 billion to help foot the bill.

The House Appropriations Committee, chaired by its aggressive earmark advocate John Murtha, D-Pa., cut its O&M account by a total of $2.9 billion[11] to help pay for 1,116 earmarks.[12] Taxpayers for Common Sense measured the cost of these earmarks at $2.75 billion; the committee’s $2.9 billion cut was counterbalanced by $646 million in add-ons, mostly earmarks, in the O&M account to make a total net reduction in O&M of $2.3 billion.[13]

When I asked about the basis for the 2010 hits on the O&M account, congressional staff told me that the cuts were all quite justified. Indeed, the military services were unable to “execute” (spend) the money and would “leave it on the table” at the end of the fiscal year if it were not scooped up and somehow used by Congress now. Indeed, there was even GAO analysis to substantiate that assertion. With the GAO cited as the source, who would question the actions?

Indeed, it is correct that one of the congressional defense committees cites GAO analysis as the justification for many of their O&M cuts. The SASC stated “According to the Government Accountability Office (GAO), the military departments had $1.2 billion in average yearly unobligated balances for fiscal years 2004 through 2008 [in O&M accounts].”[14] The HASC cited $841 million in O&M reductions labeled as “Unobligated Balances Estimate” (but does not attribute the analysis to the GAO).[15] The HAC was more opaque; it labeled many of its O&M reductions variously as “excess Working Capitol Fund cash,” “average underexecution,” “unexecutable growth,” and “undistributed Excessive Growth of Civilian Personnel,” not listing GAO as the source.[16] The explanatory information, if any, in the committees’ reports is extremely sparse, and only the SASC makes GAO’s role explicit. Congressional staff has nonetheless been adamant that the reductions are based on GAO’s analysis.

There are indeed GAO work products that the defense committees use to justify their reductions in O&M. However, the nature of these GAO products raises some interesting questions.

First, the GAO “issue papers” are unpublished. GAO’s letter of March 27, 2009 addressing unobligated balances is addressed to “Congressional Staff Members,” and it is not available at GAO’s website[17], nor do the committees make them available to the public.

Second, the products do not meet standard GAO criteria for reliable and valid audit and evaluation work. That standard is the ability to assert that the analysis was done in accordance with Generally Accepted Government Auditing Standards (GAGAS). A GAGAS statement assures that certain professional standards for independence, ethics, objectivity, quality control and competence were met. The GAO issue paper explicitly states “we did not conduct this work in accordance with generally accepted government auditing standards, which would have required more extensive testing and analysis of the reliability and validity of the data related to the President’s budget request and the agencies’ justification of estimates.”[18]

When I worked in GAO in its Program Evaluation and Methodology Division from 1987 to 1996, it was standard practice for all division work to be performed according to GAGAS standards; draft reports that did not meet them and that could not make a “GAGAS statement” were considered seriously deficient; most would never make it to publication.

Third, the congressional committees appear to be seriously misusing the analysis that GAO, apparently willingly, gives them. GAO did not report to congressional staff members specific amounts it had found to actually be available as unobligated balances; instead, it reported annual averages for the years 2004-2008.[19] In addition, GAO pointed out that although O&M funds are typically appropriated for just one fiscal year, they do not expire and become available for return to the federal treasury for another five years. It is reasonable to conclude that an amount found to be a running average should only be acted on when specific funds are actually identified as excess to DOD’s needs. If they are available for that additional five years, it is reasonable that DOD may find appropriate uses for them, especially in the O&M account, considering the serious readiness problems in our armed forces. Instead, the GAO work provides an unsubstantiated estimate that is then immediately used to fund pork. Finally, if DOD can find no appropriate use for the funds, it would be far more appropriate to return the money to the Treasury Department, rather than use it to pay for pork.

But there is a more fundamental problem with the funds deemed excessive. Other than verify that the numbers used in GAO’s analysis were indeed the numbers given them by DOD, GAO did not validate the data.[20] The DOD data used for the GAO analysis were not tested or analyzed for reliability and validity in any meaningful manner. For a run-of-the-mill federal agency that might not be a big deal. Most federal agencies can and do verify their balances using normal financial accountability standards and techniques; DOD does not; DOD cannot.

The Department of Defense’s financial transactions cannot pass an audit; in fact, they are so chaotic that they cannot be audited, let alone pass one. Put simply, that means that DOD is unable to track and account for what it does with the billions of dollars appropriated to it by Congress. The numbers given to GAO and by GAO to the congressional staff members are what DOD thinks might have happened to the money, but cannot be sure. No one checked; no one was able to.

GAO put it more formally in the letter to the congressional staffers: “GAO has designated DOD's financial management area as high risk due to DOD's pervasive financial and related business management and system deficiencies that continue to adversely affect its ability to control costs; ensure basic accountability; anticipate future costs and claims on the budget; measure performance; maintain funds control; prevent and detect fraud, waste, and abuse; and address pressing management issues.”[21]

Clearly, GAO feels that it is justified in providing the analysis to Congress;[22] however, it is also clear that the work GAO provided can be neither verified nor audited. The ultimate effect of the numbers GAO gave to the congressional staffers was to apply the patina of legitimacy to raids on DOD’s readiness accounts to pay for members’ of Congress parochial interests.

However, let’s assume for the sake of argument that all of the excess funds that GAO and Congress’ pork-interested members and staff declared in the O&M accounts were truly justified by valid, reliable and auditable data and analysis. Why would any politician genuinely concerned about military readiness – the ultimate form of “support the troops” – want to divert money away from O&M? In-air pilot training time is now well below the levels of the “hollow” years of the 1970s; tank driver training miles are now set at a standard well below what the Clinton administration used; a few years ago when Army combat readiness ratings were made public, not one major active duty combat formation in the United States was deemed fully ready for the combat scenarios it was supposed to be able to face.[23] If it is correct that amounts in the O&M accounts are genuinely excessive (which has not been reliably demonstrated), then it would seem indisputable that the money can be well used in training and other readiness activities. Otherwise, it belongs back in the federal Treasury.

Most in Congress have other priorities. One can find them published at the end of defense committee reports in the scores of pages listing the hundreds of earmarks by all but a very few members of Congress.

In no case will anyone find a specific earmark identified in the committees’ reports as paid for by any particular reduction in O&M or any other account. In fact, the SASC report did not even specify how Senator Chambliss paid for his F-22s (that information came to us from the text of the Levin-McCain amendment to take out the funding). Members of Congress leave no obvious trails to show us just how they pay for their pork. But the conclusion is inevitable: the earmarks add spending requirements; they must be funded either by new money or offsets; Congress prefers offsets. The offsets that are used are presented in only the most general terms in the fine print of committee reports, and no specific offset can be linked directly to any specific earmark.

To leave those traces would mean accountability.

# # #

Sources:

[1] See Taxpayers for Common Sense analysis at http://www.taxpayer.net/search_by_category.php?action=view&proj_id=2602&category=National Security&type=Project.

[2] See the Thomas.loc.gov entry for this amendment at http://thomas.loc.gov/cgi-bin/bdquery/z?d111:SP01469:

[3] While the conventional wisdom is that newer weapons are cheaper to maintain, it is almost never the case. The author has available official DOD data comparing new, complex aircraft maintenance and logistics costs to those of the aircraft they replace. The data is available on request.

[4] The description of these budget tensions, the results and the terminology are all borrowed from the work of Franklin C. Spinney, who authored many studies documenting these trends. For example, see “Defense Death Spiral”.

[5] See Sen. Carl Levin floor speech, July 13, 2009, Congressional Record, p. S7384.

[6] Levin’s remarks were the first time this author can recall any member of the Senate Armed Services Committee actually pointing out the use of pork funding mechanisms to this extent.

[7] The four “defense committees” are the House and Senate Armed Services Committees and the Defense Subcommittees of the House and Senate Appropriations Committees.

[8] The grand total cuts in the O&M title of the bill was $2.004 billion. See pp. 711-730 (Title XLII) of S. 1390. Find the bill here. In addition, the SASC extracted $700 million out of an additional O&M account, the Overseas Contingency Operations supplementary O&M account to pay for the wars in Iraq and Afghanistan. This reduction came out of a Pakistan Counterinsurgency Capability Fund.

[9] To pay the entire $9 billion tab for the pork its members added, the SASC extracted many offsets throughout the bill. For example, the committee took $818.5 million from Military Personnel and $660 million from Military Construction. It is also important to note that although the Procurement and R&D accounts were increased by a net $1.4 billion and $1.3 billion respectively, those accounts also included many negative offsets (for example, a $200 million reduction in MQ-1 Predator UAV production in the Army Procurement account (justified in the committee report as to “avoid forward funding of production”).

[10] See this link.

[11] See the O&M tables in the HAC Report, Department of Defense Appropriations Bill, 2010, Report, House Report 111-230, pp. 68-114. Find the HAC Report here.

[12] See the TCS press release here.

[13] The HAC report shows this net reduction on p. 60. That the SASC had 426 earmarks for $9 billion, while the HASC had 502 earmarks costing $2.26 billion and the HAC had 1,116 for $2.75 billion should be interpreted carefully. The significant difference in the $9 billion SASC cost for earmarks and the $2 billion-plus cost of the HASC/HAC earmarks is explained mostly in the criteria the committees used in reporting their earmarks. Specifically, the SASC counted as earmarks major program additions, such as Chambliss’ $1.75 billion for his F-22s and $560 million added for 9 additional F-18 Navy fighter-bombers. The House committees did not consider such major program adds to be earmarks and did not include them in their tallies of pork shown at the end of their committee reports. In addition, the significant difference in the number of earmarks per bill should be seen as mostly transitory. When the committees resolve the differences in their bills in legislative conferences, the typical behavior is simply to add them all together. The final definitive result will occur when the HAC and SAC conference their bills. After the SAC moves its bill in September, the 1,116 earmarks sought by the HAC are sure to be increased.

[14] SASC Report, p. 114.

[15] See HASC report for HR 2647, pp. 282-283.

[16] See HAC Report, pp. 74, 79-80, 82, 89-90, and 94-95.

[17] A copy of this product is available in PDF format upon request to the author.

[18] See p. 1 of the GAO letter available from the author.

[19] GAO described an “unobligated balance” as “the difference between the total appropriation amount and the total obligations.” Obligations are DOD commitments to pay for an expense. See GAO letter footnote 3.

[20] GAO letter, p. 2.

[21] See footnote 5, p. 2 of the GAO letter. See also GAO, High Risk Series: An Update, GAO-09-271, Washington, D.C., Jan. 22, 2009.

[22] GAO responded to the author’s inquiry about the study, as follows: “As you may know from your time at GAO, GAO periodically, at the request of Congress, performs budget justifications and reviews. These are in accordance with the yellow book and our budget analysis is performed as professional services other than audit (non-audit)/technical assistance. This practice goes back from more than a decade and the Congress uses the information we provide along with other sources of information. We do not have visibility into all their data sources and all the factors they consider in making budget adjustments, including specifically how they use the information we provide. As professional services, our budget work is not subject to GAGAS but we do verify data is consistent with source documents and get agency views on our work. The objective of this budget work is to provide pertinent and timely information to the Congress for use in deliberations. This work contains no recommendations and is not released as a GAO product.” E-mail of August 5 from GAO Public Affairs representative to the author

[23] See “House Memo: Army Unit Readiness for Iraq, Afghanistan Is Lagging,” by Elaine Grossman, Inside the Pentagon, July 6, 2006, .