U.S. Navy photo courtesy Austal USA

Unintended headache: More money, more problems for the Pentagon

January 10, 2018Roxana Tiron,  Cameron Leuthy  & Robert Levinson

This analysis was first available to Bloomberg Government subscribers

The Pentagon may soon face a problem rare for a government agency: too much money and too little time to spend it. As Congress tries to hammer out a deal to add tens of billions of dollars to the annual defense funding, the Pentagon may run the risk of not being able to spend some of it by the end of the fiscal year on Sept. 30.

That could hamper Congress’ main goal of lifting the U.S. military out of what defense hawks have called a readiness crisis by providing $700 billion for national defense in fiscal 2018. Some veteran lawmakers are already raising concerns about planning snafus and possible waste if the Pentagon receives an infusion of cash but can’t spend it all before the end of the budget year.

“Having starved the beast, we are putting too big a meal in front of it at one time,” Rep. Tom Cole (R-Okla.), a senior member of the Appropriations Committee and its defense panel, said in an interview. “If we have a lot of examples of waste or frivolity in spending then that will make the case harder for sustained” increases in the defense budget, he said.

“There are going to be inevitable problems” as a result of stopgap funding, House Armed Services Committee Chairman Mac Thornberry (R-Texas) said during a panel hearing today.

At issue is the Pentagon’s operations and maintenance account, a critical pot of money used for everything from ensuring that troops are properly trained and their weapons maintained to keeping the power on and the lawns mowed at military bases. Spending in that account expires at the end of each fiscal year.

In contrast, acquisition program funds are available for multiple years: two years for research funding, three years for most procurement and five years for shipbuilding so spending increases can be managed more easily for those accounts.

‘Danger Zone’

The Defense Department, like the rest of the federal government, is funded through Jan. 19 by a stopgap measure (Public Law 115-96) at last year’s spending rate (actually a little bit lower in order not to bust budget caps in law). Congress and the White House are still struggling to strike an agreement over spending legislation for fiscal 2018, increasing the likelihood of yet another short-term continuing resolution.

Lack of clarity on how much funding they’ll have to work with and when it will become available creates headaches for Pentagon planners. It would also make submitting a fiscal 2019 budget request more difficult if solid numbers for 2018 have not been finalized.

“The danger zone for CRs creating lasting disruptions ramps up from January through March,” said Todd Harrison, a senior fellow at the Center for Strategic and International Studies “After March it is a virtual certainty that lots of things will have to slip into the next fiscal year.”

Pentagon Comptoller David Norquist told the House Armed Services Committee today that the shortened time line would make it difficult to negotiate good prices for contracts and plans for contracting will get compressed.

“The CR says ‘wait, wait, wait’ and then when you are down to only a couple months left in the year, ‘ok here, have it all, spend, spend, spend,” Norquist said.

Thornberry said the committee staff has reached out to Norquist to figure out a way to give the Pentagon greater flexibility to spend money after the end of the fiscal year.

“I think about our maintenance problems. They are enormous,” Thornberry said. “And we don’t want to waste money but we also want to get our planes and ships fixed.”

While lawmakers wrote defense authorization and spending bills to give the military more than $70 billion, the Pentagon can’t yet spend at higher levels because Congress hasn’t agreed on final spending package for the remainder of fiscal 2018.

“What that means is they are likely delaying some maintenance activities until the budget is passed,” Harrison said. “If the CR keeps getting extended again and again then at some point this stuff will have to slip until fiscal year 2019 because there won’t be enough time left to obligate the money.”

That possibility has not escaped the notice of the Pentagon or senior congressional appropriators, according to a Republican aide who asked not to be named to talk about the issue. The Defense Department’s ability to execute and spend the funding will definitely be considered as part of an omnibus spending bill once a budget deal is struck, the aide said.

Compressing Spending

Pentagon officials have a “a real planning process they have to go through, and they can’t really plan until we give them a solid number,” Cole said.

If defense appropriations for fiscal 2018 are significantly increased over fiscal 2017 as the result of a deal between Congress and the White House around the mid-February Presidents Day holiday, the funding wouldn’t be substantially boosted until well into the second quarter of the year. That means the higher spending would be compressed into about half a year.

While the Pentagon can manage increased funding for acquisition programs more easily, military officials face more difficulties figuring out how to spend more money than last year on operation and maintenance programs.

Ramping up training rates is more difficult than pouring money at the last minute into facilities or equipment maintenance, because some activities, such as troop training exercises, have to be booked well in advance, said Thornberry.

“The Department has reported to us that after three months of a CR, it is training that can never be recovered, because those demands keep rolling and you can never catch up,” Thornberry said.

That means the pressure would shift to improve readiness – which both Congress and the military want – at home bases. But even then, there are limits to the number of flying hours each pilot can log safely, for example, so spending the extra money could be a problem.

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