Pentagon & Congress

Budget fix would fall below spending caps for 2016

The ongoing political fight over how to fully fund the defense budget could end up forcing the Pentagon's available funds even lower than the fiscal 2016 spending caps lawmakers wanted to avoid.

But the unexpectedly low "base budget" that is part of the emerging fix could be padded with the temporary war funds that are at the heart of the political stalemate, softening the blow of those lost funds and allowing the Defense Department to carry on with most of its current plans for the fiscal year that starts Oct. 1.

The fiscal 2015 budget cycle ends Sept. 30. Congress must adopt a budget for fiscal 2016 by then or approve a "continuing resolution" to extend this year's spending levels into October and avoid a government shutdown.

House Armed Services Committee Chairman Rep. Mac Thornberry, R-Texas, said he sees a short-term resolution — one that would extend the federal budget into November or December — as the likely outcome in the weeks ahead, with a full annual budget plan to come later in the fiscal year.

"I hope there are enough people in both parties who want to fund the essential parts of government and find a way forward," Thornberry told reporters. "I really don't think it's that hard."

But so far, it has been. Senate Democrats have vowed to stall any federal spending bills that do not undo budget caps for fiscal 2016. Republican plans have hinged on getting around the caps for specifically for the Pentagon by using overseas contingency funds, while leaving caps in place for other federal departments and agencies.

For service members, a continuing resolution would ensure there is no threat of a government shutdown and no risk of a major disruption to military pay and benefits.

But the so-called "CR" would set the Pentagon's base budget for the start of fiscal 2016 at about $496 billion, roughly $3 billion shy of the sequestration-level cap of $499 billion for 2016.

In the short term, at least, that not only would deprive many defense program managers of the annual funding boosts they had hoped for, but they actually would have to make do with even less than the minimum they had anticipated.

Not unexpectedly, the Pentagon is unhappy about that.

"It's important that if we have to have a short continuing resolution to start with, that there are serious negotiations to get a budget deal that gets the government, including the Defense Department, to the right place as soon as possible," said Navy Cmdr. Bill Urban, a Pentagon spokesman.

"The longer we operate under a continuing resolution, the more harm will be done," Urban said.

The legal mechanics of a CR can limit the Defense Department's flexibility by technically requiring it to carry over the same spending priorities from the previous years. In other words, new programs can't start, and existing programs can't expand or adapt.

Sen. John McCain, R-Ariz., Senate Armed Services Committee chairman called the probability of a CR both upsetting and troublesome.

"It's just not in the normal procedure that's necessary to operate effectively," McCain said. "It all worries me a great deal. We should be able to get things to normal order, as we promised."

For years, the Pentagon's top brass and many lawmakers on Capitol Hill have decried the defense spending caps — mandated by Congress as a deficit reduction move in 2011 — as potentially devastating to military readiness.

Congress' backroom deal in late 2013 delayed the primary impact of those spending caps for two years, but that temporary agreement ends Oct. 1. Defense Secretary Ash Carter repeatedly has pleaded with lawmakers to reach a similar compromise to permanently abolish the spending caps, but no credible bipartisan deal has yet emerged.

Lawmakers have begun publicly discussing a full-year CR for the Pentagon if such a budget breakthrough can't be reached. Todd Harrison, director of defense budget analysis at the Center for Strategic and International Studies, called such a move unprecedented — and potentially worse than the budget caps both sides are desperate to avoid.

In that scenario, the saving grace for DoD could be a different workaround using its temporary war funds.

The military received about $64 billion outside its base budget to cover overseas contingency operations in fiscal 2015, meant primarily to pay for the costs of maintaining roughly 10,000 troops in Afghanistan.

For next year, the Pentagon requested far less, about $51 billion, in part because the force level in Afghanistan is expected to drop significantly.

But if Congress includes an extension of the contingency funds in its continuing resolutions — not a guarantee, Harrison said, but a move that has happened in the past — the fiscal 2015 war funding level from this year will carry over into next year.

That would give the Pentagon almost $13 billion extra that, in theory, could be shifted to cover a broad array of costs across the military.

Details of exactly what a CR might and might not cover will not be settled until the waning days of the fiscal year. In the meantime, negotiators on Capitol Hill are trying to remain hopeful that the whole problem can be avoided, and a new, full-year budget compromise can be found soon.

"A full-year CR is a bad idea," Thornberry said. "It's just wasteful and not a good idea."

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