The Cable

Pentagon hides $3 billion in budget accounting maneuver

The Pentagon's new budget request moves $3 billion of military pay and benefits out of the base budget into the war budget in an accounting maneuver experts and congressional staffers say is meant to get around legally mandated budget caps and bolster the administration's plan to cut the size of the Army and Marines.

According to the military personnel section of the Pentagon's fiscal 2013 budget request, released Feb. 13, the cost of pay and benefits for the military next year will go down by $6 billion in the "base budget," which is meant to fund the ongoing costs not related to the wars in Iraq and Afghanistan. But in the war-funding section of the budget request, known as the Overseas Contingency Operations (OCO) account, next year's request for military personnel goes up by $3 billion, even though the actual costs of paying for troops in Iraq and Afghanistan would have no reason to rise as the United States withdraws.

What the Pentagon did was simply to move $3 billion from its regular budget to the war budget, where it does not count against the discretionary spending caps put in place by the Budget Control Act of 2011 and where it does not count against the deficit.

It's a $3 billion accounting trick that allows the Pentagon to wiggle out of the spending caps by manipulating the war budgets, as it has done for years, said Gordon Adams, the former head of national security budgeting at the Office of Management and Budget during the Clinton administration, now a professor at American University.

"It's just too much temptation to resist," he said. "Just a little budgetary slight of hand, as DOD tries to create pockets of room for things shrinking budgets make it hard to afford. We've been pouring programs back and forth between the OCO account and the base [budget] for a decade."

Overall, military personnel spending in 2012 totaled $141.8 billion in the base budget and $11.3 billion in the war budget. In the fiscal 2013 request, the Pentagon is asking for $135.1 billion in the base budget and $14.1 billion in the war budget for the same accounts.

Adams said the administration is acting as if its recently released strategy, which would cut the size of the Army and Marines by 67,100 and 15,200 troops, respectively, has already been implemented. The actual troop reductions would take three years to complete and face stiff opposition in Congress, but the administration is trying to cut their pay and benefits out of the base budget now.

"It means pocketing savings from reducing the size of the force by taking them early in the base budget, while the force is only shrinking over three years," he said. "The administration clearly intends to cut end strength by 2015, but scoop out room in the base budget by the slight of hand of jiving the continuing payroll costs over into the war budget."

The accounting manuever does track the amount of money that would be saved by cutting the number of troops in the Army and Marines, as the new strategy envisions. In fiscal 2012 Army personal costs totaled about $53 billion, with about $7 billion in the OCO account. For fiscal 2013, the Pentagon is requesting $52 billion, but this time, $9.4 billion is in the OCO section of the budget.

For the Marines, the fiscal 2013 OCO budget request for military personnel would result in an increase of about $1 billion.

In response to questions from The Cable, Pentagon spokesman George Little confirmed that troops above the level envisioned in the new strategy would now be funded in the war budget, but he disputed that this was an abuse of the war budgeting mechanism or an accounting trick.

"Now that we have clearly identified a long-term end state level for our ground forces, we can more clearly delineate the cost of our current forces in excess of that level, and as a result we do have more funding budgeted for personnel in FY2013 in OCO than we did in FY2012... That is completely consistent with, not an abuse of, the concept of using OCO funds to budget for costs you would not be incurring were it not for operations in Iraq and Afghanistan," said Little.

"People cost what they cost, and the total cost of all Army and Marine Corps personnel, base and OCO combined, is what it is.  Even if someone takes issue with our categorization of those costs between the base and OCO budgets, our request to Congress is a comprehensive one that includes both base and OCO funds," Little said. "We are not hiding the costs, either in the base budget or the OCO side.  The total size of the defense budget request is not affected by the categorization of these costs."

For military staffers on Capitol Hill, especially those gearing up to fight the troop cuts when Congress tackles the Pentagon budget, the administration is trying to have it both ways by playing games with the money and by shrinking the force in a way that can't easily be reversed.

"The real world requires a large force to meet insurgent threats on the ground -- the defense strategy only has room for a small force to deter neatly drawn challenges. The temporary answer seems to be to push the troops you need and the real conflict you are fighting off the books into OCO," one GOP congressional aide close to the issue said.

"Should the president decide to accelerate withdrawal from Afghanistan, there won't be room to pay for these troops in the base budget. Future presidents will pay for that folly in the years to come, but the troops who get shoved prematurely into the unemployment line will have to pay for it much sooner."

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