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Pentagon Admits Half of War Spending Account Is Slush

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The Overseas Contingency Operations (OCO) account was originally designed to support unanticipated and difficult-to-plan costs for operations in Iraq and Afghanistan. But over time—particularly to circumvent spending caps established by the Budget Control Act and subsequent budget deals—it’s become a slush fund for programs with little connection to our current war efforts. Now a new story by Tony Bertuca at Inside Defense reveals we grossly underestimated just how slushy this fund has truly become.

The Congressional Research Service (CRS) previously found that even according to the Pentagon's own accounting, $71 billion in OCO spending went to non-war programs from 2001 to 2014. The definition for OCO became increasingly squishy as Congress and the Pentagon sought opportunities to increase Pentagon spending to circumvent spending caps first established by the Budget Control Act. For example, in 2014 then-House Armed Services Committee Chairman Buck McKeon expanded the definition of OCO to include “readiness shortfalls.”

Even under this expansive definition Pentagon officials couldn’t come up with enough war costs to hit their OCO spending goal, so this year’s OCO request included $5 billion for non-war related spending. Or so we thought. What Inside Defense reveals is that this was at best a gross understatement. It turns out that $30 billion—more than half of the total $58.8 billion request—is actually for “enduring requirements” that should be funded out of the base budget.

Enduring requirements are relatively foreseeable and usually were included in the base budget to enhance planning. As spending for some of these programs became more predictable DoD even moved programs from OCO to the base budget as appropriate. For example, a recent CRS report points out that the Department of Defense moved funding for the Joint Improvised Explosive Device (IED) Defeat Fund to the base budget in fiscal year 2010 “[d]ue to the enduring nature of the threat.” Similarly, “funding for Operation Noble Eagle, which provides fighter aircraft on 24/7 alert at several U.S. military bases, was moved from the GWOT [Global War on Terror] request to the base request in 2005.” In each of these instances, the Department of Defense determined “that certain elements of the associated military operations have become stable enough to be planned, financed, and executed within the DOD’s base budget.”

Shifting enduring requirements to OCO—and claiming that enduring requirements are no longer something that should be funded through the base budget—seems to be a further break from increased budgetary discipline. This summer Laicie Heeley and Anna Wheeler at the Stimson Center released a report showing how many enduring requirements had slipped back into OCO. They estimated the FY 2017 OCO request—where funding for the renamed Joint Improvised-Threat Defeat Fund appeared as OCO funding—included $22.7 billion for fully or partially enduring requirements that should be fully or partially funded through the base budget. They also found many other ways OCO spending has become increasingly disconnected from actual war spending. For example, in FY 2008—when OCO spending was at its peak to date of $187 billion—the ratio of OCO to troop levels was about $1 million per troop. This year’s request, on the other hand, breaks down to $4.9 million per troop—an increase of nearly 500 percent. The Pentagon’s admission that more than half of these costs are not for current overseas operations may help explain the discrepancy between troop levels and spending.

"As a matter of trust and transparency in a democracy, the public is always entitled to know how its money is being spent," Todd Harrison from the Center for Strategic and International Studies told Inside Defense. “Hiding base budget funding in the OCO request makes deficit projections appear lower than they actually are.”

Misleading Congress and the public about $30 billion in war spending is totally unacceptable. The House’s authorization and appropriations bills include shifting an additional $18 billion in OCO funds to the base budget beyond the $582.7 billion requested. Even a modicum of accountability should compel Congress to not only remove that money lest they reward the Pentagon’s misleading the public about its basic accounting with additional funds, but to also demand an audit of OCO funds to see what other programs slurped up the slush.

UPDATE (10/12/2016): Inside Defense reports the Government Accountability Office (GAO) is in the process of reviewing the OCO account and whether funds have been used on “enduring requirements.” The review comes at the request of Representative Chris Van Hollen (D-MD) and Senator Bernie Sanders (I-VT), who serve as the ranking members of the House and Senate Budget Committees.

OCO is designed to capture short-term costs as a result of overseas contingencies. The name says it. It's not a contingency if it's forever. ~ Representative Chris Van Hollen (D-MD)

But while that review is ongoing it appears the Pentagon is starting to treat OCO funding as another base funding account, giving up one of the last pretenses that this fund is being used for unexpected contingencies:

[G]overnment sources said the Pentagon comptroller has issued fiscal guidance to the military services to begin preparing a five-year plan—known as the future years defense program—for the OCO account. The move would be a departure from today's practice of only building a FYDP for base defense operations.

The only reason to keep up this charade is because OCO continues to be a magic get-out-of-spending-caps-free card to increase Pentagon spending. Defense Secretary Ashton Carter and other Pentagon officials continually whine about budget uncertainty, but it’s important to remember that the failure to adapt is a deliberate choice by current and former officials to resist the budget discipline Congress planned by passing the Budget Control Act. The GAO pointed out in a 2015 report that the Department of Defense could improve its planning for future budget uncertainty by documenting and assessing lessons learned from sequestration. But not doing so, the GAO wrote, “DoD is missing an opportunity to gain institutional knowledge that could facilitate future decision making about budgetary reductions.”

“There's been a lot of dodging and weaving on this,” Van Hollen told Inside Defense. “Are they really saying we are going to be in indefinite war? OCO is designed to capture short-term costs as a result of overseas contingencies. The name says it. It's not a contingency if it's forever.”