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'Magic Money': DoD's Overseas Contingency Budget Might Dry Up

Jun. 29, 2014 - 01:43PM   |  
By MARCUS WEISGERBER   |   Comments
Last Marines exit Sangin, Afghanistan
Observers expect this year's overseas contingency operations budget will be one of the last war-funding requests to be submitted by the Pentagon as operations in Afghanistan draw down. (Sgt. Frances Johnson / US Marine Corps)
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WASHINGTON — While the US Defense Department’s Afghanistan war budget is expected to receive little resistance from lawmakers, the Pentagon is under pressure from the White House Office of Management Budget to lower, then eliminate supplemental requests, sources said.

The overseas contingency operations (OCO) budget, sent to Capitol Hill last week, requests $58.6 billion in war-related spending in fiscal 2015. That’s about $20 billion less than the Pentagon’s 2014 OCO request.

The OCO request comes on top of the Defense Department’s $496 billion 2015 base budget request, submitted in March.

Such war budgets have served as a relief valve from the federal spending caps that went into effect in 2013. “Everybody’s now discovered the magic money,” said Gordon Adams, an analyst with the Stimson Center and a professor at American University, who oversaw defense budgeting in the Clinton administration.

Over the years, the Pentagon has used the OCO budget to pay for personnel costs associated with the troop surges in Iraq and Afghanistan as well as wartime operations and maintenance. OCO funds have also been used to buy new weapons; the 2015 request includes $6 billion for procurement.

This year, the White House has created a new counterterrorism ac­count, which it aims to fill by requesting $5 billion in the 2015 OCO budget, $4 billion for DoD and $1 billion under the State Department.

“What was Afghanistan and Iraq is now all global counterterror operations,” Adams said.

Weaning the Pentagon off the OCO money will be difficult, Adams said. DoD, the White House and Congress have all used the money as relief from spending caps. But the rationale for using the money — troops fighting in Afghanistan — is disappearing; all forces are expected to leave the country by the end of 2016.

“OCO may survive another year or two, [but] it will be a lot smaller, so it’s still going to force [DoD] into hard choices,” Adams said.

In the 2014 budget, Congress moved $6 billion from DoD’s base budget to the $79 billion OCO request.

At the same time, Congress has rejected many of the larger ways DoD has suggested to help resize itself, including personnel and benefits reforms, end-strength reductions and aircraft retirements.

“This has been the safety valve for readiness for the last couple of years,” Adams said. “You don’t have to make hard choices if you’ve got this safety valve.”

Analysts say DoD has used the OCO budget as a way to circumvent spending caps imposed on the base budget. The war budget, meanwhile, has stopped declining on pace with troop reductions in Afghanistan. Pentagon officials say this is because there are large costs associated with bringing troops and equipment — some which has been there for more than a decade — back from the landlocked nation.

But now as operations in Afghanistan wind down, experts are questioning how much longer the Pentagon will have access to the OCO accounts, and they note the dangers inherent in DoD’s long-term reliance on them. Some sources said the 2016 OCO budget might be the last big one. One said military service leaders believe they will have access to OCO money for two years beyond the last troop leaving Afghanistan.

“I don’t see how they could ween themselves off that [OCO money] in one year,” said Todd Harrison, an analyst with the Center for Strategic and Budgetary Assessments. “That’s going to be a shock to the system.”

Harrison estimated the 2015 OCO budget includes more than $30 billion in base funding that has been transferred.

Harrison said the 9,800 US troops who will operate in Afghanistan in 2015 will cost about $20 billion. The $58.6 billion OCO includes $5 billion for the new counterterrorism fund, plus an additional $1 billion, part of a European Reassurance Initiative. The balance, Harrison said, is likely “base budget funding in there of just regular maintenance, training activities, that kind of stuff.”

The White House and Pentagon say the extra money is related to getting equipment out of landlocked Afghanistan, repairing that equipment when it gets back to the US and funding other items, including the Afghan National Security Forces.

“DoD will still incur significant costs to transport personnel, supplies and equipment back to their home stations. Funding to sustain the [Afghan National Security Forces] will continue to be needed to ensure that Afghan forces can provide sufficient security,” a White House statement reads. “OCO funding will help our military reset from over a decade of fighting by providing the funds needed for DoD to repair and replace equipment and munitions. OCO funding will also continue to support a significant portion of DoD’s forward presence in the broader Middle East region, enabling DoD to support [operations in Afghanistan] and other important missions.”

But retired Gen. William Fraser, who stepped down as commander of US Transportation Command in May, said in April that the cost of removing US equipment from Afghanistan is estimated between $5 billion and $7 billion.

“That’s an all-encompassing figure,” he said. “That is not just the transportation figure.”

Robert Hale, who retired as Pentagon comptroller on June 27, said in an interview last week that he expects the White House’s new $5 billion counterterrorism fund and the $1 billion European initiative to attract a great deal of interest.

“I suspect the biggest news will be the two funds even though they are not dominant in terms of total dollars,” Hale said. “They are new and that always attracts interest.”

Hale said DoD does not have long-term guidance on the future of these two budget accounts.

“We are focusing on ’15 and we will go one year at a time,” he said. “So some of these items are contingencies that may continue.”

Derek Chollet, assistant secretary of defense for international security affairs, said at a June 24 event at the Atlantic Council think tank that the European Reassurance Initiative is one-year money.

“This is not going to be $1 billion for all of eternity,” he said. “This is just a one-time ask. It’s a contingency fund.” ■

Email: mweisgerber@defensenews.com.

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