The Pentagon’s Special War Funding Account Isn’t Going Away

Pentagon officials likely will keep using for the foreseeable future a controversial war spending account that is exempt from federal budget caps, but with some new strings attached, Deputy Defense Secretary Robert Work said Tuesday.

Work kicked off the latest round of debate over the Overseas Contingency Operations, or OCO, account that was originally created last decade to pay for the wars in Afghanistan and Iraq.

“We’re going to have to have Overseas Contingency Operations funding for some time. That is in debate now,” Work said at the Council on Foreign Relations.

Work said DOD has three options for future of the OCO budget:

• Move the money into the base budget and increase the Pentagon’s top line budget cap;
• Move the money into the base budget and don’t increase the top line, a move Work said “really constrains us;” or
• Allow the OCO account to remain “and we’ll establish the rules to do it.”

“I believe that latter one is what we’re going to have to do,” Work said.

Placing stricter restrictions on how OCO money is spent likely means the spending account will remain in place, said Todd Harrison, senior fellow for defense budget studies at the Center for Strategic and Budgetary Assessments. “That is part of keeping it around long-term is changing the criteria for what counts as OCO."

The Pentagon has requested $58.6 billion for war-related operations in fiscal year 2015. Of that, about $20 billion is going toward operations in Afghanistan. The rest is being spent on counterterrorism operations across the globe. And air strikes in Iraq and Syria, which are currently costing as much as $10 million a day, are being funded through the OCO accounts, according to Pentagon officials.

(Related: The Pentagon Will Need More Money from Congress To Fight ISIL)

“[W]e are going to require additional funding from Congress as we go forward,” Defense Secretary Chuck Hagel said at a Pentagon briefing last week.

Gordon Adams, analyst with the Stimson Center and a professor at American University, estimated that operations in Iraq and Syria could cost about $15 to $20 billion per year, should the U.S. military put a total of 3,000 soldiers on the ground.

Harrison, in a CSBA report released this week, estimates a high-end ground campaign involving 25,000 troops would cost up to $22 billion per year, though President Barack Obama has made clear that he doesn’t intend to send a large ground force into Iraq or Syria.

The Pentagon has been using OCO money, formally called the war supplemental, since 2006. While it mainly funded operations for the war, the money also paid for administrative functions and task forces stateside. Soon after Obama took office in 2009, DOD had started moving money for institutionalized war efforts back into the base budget. But that process has slowed in recent years, particularly due to the federal budget caps, since OCO is not subject to sequestration. Critics in Congress, and some budget analysts, have called the OCO account a slush fund, a characterization Harrison and others take issue with. “The money is being spent for legitimate military purposes, that’s not the question,” he said. “The question is: Is it actually related directly to operations in Afghanistan?”

At a House Budget Committee hearing in July, members from both sides of the political aisle criticized the Obama administration’s OCO request. House Budget Committee Chairman Paul Ryan, R-Wis., called the Obama administration’s OCO request “vague” and an “abuse of the OCO designation.” Most of the objections were against a new $5 billion counterterrorism account, which lawmakers said had unclear justification and amounted to a blank check. 

But historically, Congress has rarely made any changes to the OCO request. In recent years, lawmakers have regularly backed the request so they would not appear weak on national security issues.

Work acknowledged that “there’s a lot of money in OCO that should probably be in the base budget.”

In 2010, the Obama administration put forth criteria that DOD should use for deciding whether an item should funded through the base budget or OCO. But the Pentagon has at times stretched the rules, critics say. For instance, DOD is not supposed to pay for personnel with OCO, however the Pentagon has asked Congress for $2.4 billion more in OCO funding for Army and Marine Corps end strength. They have also used the account and reprogramming to pay for upgrading of equipment coming when it returns from combat, which is also prohibited in the rules.

(Read More: Obama's War Budget: 'Slush Fund' or the New Normal?)

The State Department and the Department of Homeland Security also have OCO funds. The White House, in its 2015 budget plan, proposed a government-wide $450 billion OCO spending cap between 2013 and 2021. Discounting money that has already been spent or allocated, $199 billion – or about $33 billion per year – would be left for 2016 through 2021. Considering the latest uptick in missions, the administration would likely need to increase that cap, Harrison said. But if Pentagon planners want to keep a global footprint, they will need funding above existing spending caps, Work argued. Plus there have been several high-profile, new missions since Pentagon officials built their 2015 budget, including helping contain the Ebola outbreak in Africa, supporting NATO allies in Eastern Europe against Russia and fighting the Islamic State militants in Iraq and Syria.

“Right now we are able to execute the sustained operations against [the Islamic State] in both Iraq and Syria with the forces that were already forward,” Work said.

U.S. forces in the Middle East are “largely paid for in a combination of base budget and Overseas Contingency Operations” funds, he said.

“Right now, the cost for operations in Iraq are coming out of Overseas Contingency Operations,” Work said. “For the foreseeable future, we believe that is the case.”