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Pentagon’s new problem after years of low funding: Spending all the cash

After saying for years that it was starved for cash, the Pentagon now says it may have more money than it can possibly spend.

The windfall is due to a budget deal between Congress and the White House last month that promises an added $80 billion for defense this fiscal year, including a requested $19.6 billion hike for “operations and maintenance” — an all-purpose Pentagon account used to fund troop training, ammunition, maintenance of tanks, warplanes and ships, and other daily needs.

Defense Secretary James M. Mattis pushed for a sharp increase in the account this year, arguing that years of budget wrangling had degraded the military’s readiness to wage war.

Congress is still finalizing 2018 appropriations levels for the Pentagon, a delay that has generals and admirals worried about spending all the promised cash in the five months remaining before the end of the fiscal year.

“We have a year’s worth of money … and five months to spend it,” Gen. Glenn Walters, the assistant commandant of the Marine Corps, warned at a Senate Armed Services Committee budget hearing.

Critics say that giving the military more money than it can absorb invites waste and abuse, warning that the Pentagon has a long history of overpayments, cost overruns and fiscal shenanigans.

“They cried wolf and now they have more than they can possibly put to use,” said Mandy Smithberger, the director of the Center for Defense Information, a policy organization critical of Pentagon budget practices. “I think it’s dangerous because you are going to see a use-it-or-lose-it kind of spending.”

Pentagon officials are worried about giving money back after claiming that mandatory spending caps since 2011, known as a sequester, had affected training, planning and maintenance. There is no guarantee Congress or the White House will prove so generous next year.

Due to Congress’ delay in passing appropriations bills, Pentagon officials are urging lawmakers to allow them to carry over unspent funds into 2019 or to shift them to other accounts if they are unable to disburse all the operations and maintenance money by Sept. 30, the end of the fiscal year.

“We’re going to do our best to spend it in that time frame,” Gen. Stephen Wilson, the vice chief of staff of the Air Force, told Congress at a hearing. “The add is so significant that we’re going to have to look at having the ability to transfer some of that money from account to account.”

By long-standing tradition, the House and Senate appropriations committees require the Pentagon to spend operations and maintenance funds the same year they are provided — or turn the money back to the Treasury.

That’s different than other categories of defense spending, like research and development money, which is usually available for up to two years, or procurement funds for buying ships, planes and vehicles, which are provided for up to three years.

At $206 billion in 2017, the operations and maintenance account is around 40 percent of the Pentagon’s annual base budget of $523 billion. Its spending has been under tight control since Congress imposed budget caps aimed at reducing the deficit in 2011.

The additional funds are earmarked for stepped-up training, spare parts, fuel, and restocking supplies of bombs and bullets, among other items.

The increase comes on top of a decades-old expansion in operations and maintenance funding, according to a report made public in January by the Congressional Budget Office, a federal agency that provides nonpartisan analysis to Congress.

Adjusted for inflation, the account “has grown fairly steadily since 1980 and, over that time, taken up an increasing share of DOD’s base budget,” the report concluded.

From 2000 to 2012 alone, it expanded by $64 billion, the report noted, largely to pay for healthcare for military personnel and their families, Defense Department civilian pay, and fuel.

With even more money coming their way, Pentagon officials say it will take time to sign contracts and allocate the additional dollars, perhaps well into next year.

Army Secretary Mark Esper told reporters that allowing operations fund to be spent through 2019 will “make better use of taxpayer dollars.”

“I can ensure more soldiers are trained and well-trained and I think overall we can deliver a much better product,” he added.

“I think it is a completely reasonable request, especially given how late Congress is in passing appropriations this year,” said Todd Harrison, a Pentagon budget expert at the Center for Strategic and International Studies, a Washington policy analysis organization. “The rush to spend money before it expires at the end of the fiscal year puts pressure on managers within (the Department of Defense) to sign contracts quickly rather than in a fiscally responsible manner.”

Sens. John McCain, R-Ariz., and Roger Wicker, R-Ala., have sponsored a bill that would give the Navy two years to spend operations and maintenance funds. They said the Navy had sought the expanded timeline to help prevent more accidents like the two deadly collisions involving U.S. warships and cargo carriers in the western Pacific last year.

“The significant shortcomings in our Navy’s readiness can have disastrous results,” McCain, the chairman of the Senate Armed Services Committee, said in a statement referring to the accidents involving the two guided missile destroyers, the Fitzgerald and the McCain. “The status quo is unacceptable. Congress must provide the funding and oversight required to keep our military safe in peace and effective in combat.”

Unless they substantially trim the Trump administration hike in operations funds, lawmakers on the House and Senate appropriations committees face a difficult choice between giving the Pentagon more money than it can spend this year or more time to spend it — either of which, critics say, could lead to wasteful spending.

“It makes me question whether there are really plans to put that additional money to work,” Smithberger said.

The appropriations panels have long blocked two-year budgeting, arguing that keeping tight control of operations and maintenance funds through annual appropriations helps prevent wasteful spending.

They are even more reluctant to give Pentagon officials discretion to move money from one item to another without case-by-case congressional approval, another Pentagon request.

“That provides a check on the system to ensure the money is actually needed,” said Harrison. “But the costs of incentivizing reckless spending at the end of each fiscal year far outweigh the benefits of additional oversight.”

©2018 Los Angeles Times

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