Congress is using a $28.6 billion fund as a sequestration bargaining chip

Tucked in the House legislation funding the Defense Department for 2018 is a provision that basically gives the Pentagon a $28.6 billion check to spend however it desires.

The Defense Restoration Fund, as the kitty has been dubbed, brings up some important questions about congressional jurisdiction and the possibility of sequestration.

Most notably, why would Congress give up its power to oversee how DoD spends its money and why do lawmakers continue to appropriate over the sequestration caps?

The fund was created by House appropriators as a means to build readiness in the military. The legislation puts $19.6 billion in the base budget and $9 billion in the overseas contingency operations (OCO) account, a war account that is not subject to sequestration caps.

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The 2018 House defense appropriations bill as a whole approves $658.1 billion for DoD. That’s broken down into $582.2 billion for the base budget and $73.9 billion for OCO. Then on top of that is the $28.6 billion Defense Restoration Fund.

The restoration fund specifically gives $5 billion to operations and maintenance, $12.6 billion to procurement, $1 billion to research and development and $1 billion to personnel. The $9 billion in OCO funding is broken down as $2 billion for operations and maintenance, $6 billion for procurement and $1 billion for research and development.

The Constitution gives Congress the power of the purse, but by creating this fund lawmakers seem to be giving that power to Defense Secretary James Mattis.

The fund does require some oversight. DoD must notify the four defense committees with details 30 days prior to spending the money, Lauren Fish, research associate at the Center for a New American Security, told Federal News Radio

But the fund is still strange, especially in Congress where lawmakers cling on to even the slightest foothold of jurisdiction over something.

“It would be really odd for Congress to do this because this is effectively ceding its main power, which is the power of the purse,” Todd Harrison, director of budget analysis at the Center for Strategic and International Studies, told Federal News Radio. “They would be giving up a lot of their power to direct how money is spent and they would lose some insight and oversight in how the money is being allocated within the department.”

House appropriators created the fund to quickly inject money into DoD once it finishes its National Defense Strategy Review, Fish said.

House Appropriations Defense Subcommittee Chairwoman Kay Granger (R-Texas) wanted to make sure Mattis had the funds and flexibility to implement the strategy once it is finished. The strategy is rumored to come out this fall.

“What you see in this step is the goal of Congress to get [the military] out of the readiness and modernization hole that we’ve been trapped in,” Fish said. “From the last five years of the budget caps, we’ve lost about $78 billion in Defense Department funding and that has caused a lot of the problems we are seeing today. By giving [Mattis] this amount of money, some have equated it to how a business would operate. You don’t have everything in a line item. Things are going to come up like contingencies; you’re going to do a strategy review and want to put dollars toward what your plan is.”

But not everyone is convinced Congress is actually going to follow through on the Defense Restoration Fund.

DoD Reporter Scott Maucione discusses this story on Federal Drive with Tom Temin

“I don’t think they plan to keep this in the final bill. I think it’s a placeholder and a negotiating tool,” Harrison said.

Harrison thinks Congress has resigned to the fact it probably won’t be able to eke out that extra $28.6 billion, so lawmakers aren’t going to waste their time putting in specifics for how to spend the money line by line.

Fred Bartels, a policy analyst at the Heritage Foundation, agreed.

“The committee decided to hedge their bets on the outcome of the [Budget Control Act (BCA)]. If they need to restrict themselves to the BCA allotted level, they can just take that fund away without having to go through a lot of troubles to adapt the legislative language,” Bartels said.

Of course all of this is moot if Congress does nothing to fix sequestration. The House and Senate defense authorization bills recommend much more than the $549 billion allowed by the BCA. The House defense appropriations bill also goes more than $30 billion over the caps.

The Defense Restoration Fund will count against sequestration caps, unlike OCO.

Congress has until Sept. 30 to pass a budget that is either under the caps or to come to a budget deal that increases the budget caps.

So are the committees authorizing and appropriating funds above the caps in hopes that Congress will come to a deal before the deadline?

Sort of.

Harrison says all of this is posturing for a budget deal later on down the road. The defense committees are coming out with a big ask so they can get a big return.

“The budget deal has to encompass more than just defense, it has to encompass both defense and nondefense. This is just posturing for where they want to get to in the budget deal,” Harrison said. “What this comes down to is you need 60 votes in the Senate so you are going to have to get Democrats in the Senate. So what kind of deal are you going to make with those Senate Democrats? The way it’s worked in all the deals we’ve had since the BCA was enacted is [the Democrats] have requested dollar for dollar increases in defense and nondefense.”

Harrison said he doesn’t think the Democrats have the leverage to get the dollar for dollar compromise, but they still have a powerful negotiating tool.

Fish said it’s problematic that the committees have moved so far out from the caps without substantial talks on a budget deal in Congress.

One option to get around the caps is to put the funds that go over the caps in OCO. That would most likely give Office of Management and Budget Director Mick Mulvaney severe heartburn considering he is an avid opponent of using OCO for things other than war funding.

Critics of OCO already call it a slush fund and the military warned Congress against using OCO for base budget items because it ruins their future planning.