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Senate Funding Bill Would Rely on OCO Gimmick

The Senate Appropriations Committee earlier this week posted a draft bill that would extend government funding until December 11 and avert a government shutdown. Unfortunately, it also uses the war spending account as a budget gimmick to provide a backdoor increase in defense spending above budget caps. There are no offsets for the additional spending.

The draft did contain language removing funding from Planned Parenthood, which drew a veto threat from the President, but that version did not receive the 60 votes necessary to proceed in the Senate. Press reports indicate that the same continuing resolution (CR) without the section defunding Planned Parenthood will be voted on Monday.

Regardless of the politics on Planned Parenthood, the bill sets regular discretionary levels at the previously-approved levels of $1.017 trillion. It does so by taking the spending levels for Fiscal Year (FY) 2015, which totaled $1.022 trillion after certain one-time savings in the FY 2015 appropriations bills are excluded, and applied a reduction of 0.5 percent (of which about 0.2 percent was an across-the-board reduction and the remaining is from net reductions fromcuts reffered to as "anomalies"). Colloquially, "the sequester" is back in full effect; the sequester refers to the reduced discretionary spending caps mandated after the 2011 "Super Committee" failed to produce savings.

Even though the bill adjusts the spending level for regular discretionary appropriations to set them at exactly the amount of the spending caps for next year, it uses last year's budget to set spending in an uncapped area: $74.7 billion for Overseas Contingency Operations (OCO). This OCO funding is $17 billion above the $58 billion that the Pentagon and President requested as necessary to fund operations in Iraq and Afghanistan. By providing more funding than is necessary, the Senate bill effectively circumvents the caps on defense spending, providing $17 billion of additional defense spending without an offset.

Continuing OCO funding at last year’s levels rather than adjusting the spending caps also results in less Congressional control over the defense budget. The Department of Defense would likely need to shift much of the OCO money from Personnel and Operations & Maintenance accounts (which would be overfunded compared to this year's needs) to Procurement and Research and Development.

The bill also has a smaller, technical problem that violates budget rules and would need to be fixed if the CR were continued for the rest of the fiscal year. Although it sets annualized overall spending at the cap of $1.017 trillion, it doesn't set caps at the defense and non-defense levels: $523 billion and $497 billion, respectively. The current law discretionary caps allow for defense spending to have a slight nominal increase above the FY 2015 level and nondefense discretionary spending to have a slight nominal reduction. However, the CR applies the same across-the-board reduction from the FY 2015 level to both defense and non-defense spending.

As a result, the appropriations are $2.7 billion below the spending limits in the defense category (excluding OCO spending) but $2.7 billion above the spending limits in the nondefense category. If the bill passes and is then used to set yearlong spending levels, there would be a small round of across-the-board budget cuts that would reduce nondefense spending by $2.7 billion. Additionally, Congress would be able to pass a subsequent supplemental appropriations bill providing up to $2.7 billion more defense spending without any budgetary restrictions.

Although it is important to pass a short-term bill in the next week to avoid a government shutdown, Congress should not use this OCO gimmick in future funding bills negotiated before December 11. If Congress wishes to enact sequester relief, they should do so with honest legislation that changes the caps and offsets it with smarter, more targeted savings in other parts of the budget. We offered one possible way to do this in our Sequester Offset Solutions (SOS) Plan, and we've previously suggested ways to strengthen budget caps to prohibit this gimmick in Strengthening Statutory Budget Enforcement.

For more information on government shutdowns see our updated Q&A.