Pentagon increases reliance on supplemental budget requests

As lawmakers brace for the Bush administration's forthcoming fiscal 2005 emergency defense spending request in February, defense budget experts warn they can expect the administration to rely for the next few years on wartime supplemental funds for operations in Iraq.

Such requests are generally viewed as "must pass" legislation, but many lawmakers are increasingly irked by the Pentagon's inability to predict future costs, and some have urged the administration to plan for such expenses within the confines of the annual defense appropriation.

One Republican lawmaker seeking some predictability in the Pentagon's spending future is House Budget Committee Chairman Jim Nussle, R-Iowa, who is likely to engage senior White House officials as the Office of Management and Budget reviews the Pentagon's supplemental spending package and the fiscal 2006 budget request. Nussle has asserted that a certain degree of future planning is needed.

Last year, as the administration defended its $87 billion supplemental on Capitol Hill, Nussle told then-Pentagon Comptroller Dov Zakheim that lawmakers were "growing frustrated" with the Defense Department's lack of fiscal planning, and that he found its inability to provide specific figures troubling.

"Can we continue to fund our war efforts on this type of ad hoc basis?" Nussle asked Zakheim one year ago. "This committee and this Congress must have a solid plan, a blueprint, a financial blueprint to set our priorities for the year and for long-term."

This year the Pentagon is expected to request between $65 billion and $75 billion in supplemental appropriations for both Iraq and Afghanistan, and it is realistic to expect the Bush administration to rely on supplemental funding for another year.

"The pace of operations has picked up, and the level of intensity of operations in Iraq is quite different than we expected," said Zakheim. "But the insurgency has to be dealt with and that costs money," he said, noting that it is reasonable to expect supplemental funding for operations and personnel in Iraq to continue for the next few years.

Continued supplemental funding for Afghanistan is another story, however.

"Next year, it becomes highly problematic," said Zakheim, now vice president at Booz Allen Hamilton, a Washington-based consulting firm. Given that the United States has been operating in Afghanistan for several years, "all indications, based on past practice, point to incorporating [Afghanistan] funding into the baseline budget" in fiscal 2007, he said.

Many lawmakers see this as a step in the right direction.

But with the White House expected to push tax overhaul and changes in Social Security in Bush's second term, increased costs for Iraq could disrupt that agenda.

Analysts project the total cost of the war in Iraq will exceed $225 billion by September 2005. But Pentagon leaders insist they cannot foresee future costs associated with Iraq, where the number of troops needed and the duration of their deployments remain unknown, so supplemental funds will be needed.

Because supplemental funds fall outside the normal budget process and do not count toward spending ceilings set in the annual budget resolution, they often cloud long-term budget projections used to determine the cost of other major spending initiatives, like tax and Social Security overhaul.

"You really need some assumptions in there on these contingencies, or you'll overestimate the money available for tax cuts and other things," said Steve Kosiak, a budget analyst with the Center for Strategic and Budgetary Assessments.

But Zakheim blames Congress for the administration's reliance on emergency supplemental funding to cover costs in Iraq. If lawmakers would instead approve a contingency fund for the operation, he said the Pentagon could build it into its baseline budget.

"Congress hates contingency funds," Zakheim said, noting that Defense Secretary Donald Rumsfeld called for such a $10 billion pot of money in the FY03 budget to cover unforeseen costs in Afghanistan. But Zakheim admitted the request offered few details as to how the money would have been spent, leaving Congress to question its legitimacy.

"However specific you make them, they're not specific enough, and Congress doesn't like that," he said.

As a result, he said, the Pentagon is left to shift funding around budget margins and to request supplemental funding. Zakheim said the Pentagon comptroller has the power only to move "less than three-quarters of three-quarters of a percent" of total Pentagon spending without permission from Congress.

"If we had instant access to money movements in the Defense Department and identified cash balances that could be moved around, we couldn't do it anyway, because Congress won't allow us to move it," he said. Thus, "the congressional answer is to tell us to ask for supplementals."