DOD funding hangs in the balance

Congress is again poised to spin the mystery wheel of full budget, continuing resolution, omnibus or shutdown by April 28, and the outcome could have dramatic consequences for the Department of Defense.

Like the rest of the federal government, the DOD is operating under a continuing resolution that sets 2017 defense spending at 2016 levels. In March, the House finally passed a 2017 defense budget for $578 billion, which is a small bump from 2016. The DOD is also seeking an additional $30 billion amendment to the 2017 budget.

The Trump administration is calling for cuts in domestic spending to offset increases to defense spending for the remainder of 2017. Multiple sources told FCW that there is little appetite on the Hill to cut domestic spending in this go around, but there is concern that Trump could veto a deal that does not include substantial discretionary cuts.

Mark Cancian, a former OMB official now with the Center for Strategic and International Studies, told FCW the conventional wisdom is for Congress to pass a full-year continuing resolution for domestic spending with DOD getting the 2017 House appropriations number, plus some additional amount from the amendment request, but not the full $30 billion.

"The clear deal is to execute the bipartisan [defense spending] agreement and throw some extra money into [overseas contingency operations]...so that they get a little bump up, maybe another $5-10 billion," he said. While Cancian thinks that is possible next week, he said he is sensing pessimism among Hill staffers that such a deal will happen.

Todd Harrison, CSIS' director of defense budget analysis, is more optimistic.

"I think there is a good chance Congress will be able to pass a regular defense appropriations bill as part of a larger omnibus bill by the end of the week," he said.

Mike McCord, formerly the chief financial officer at DOD, agreed that an omnibus budget is ideal scenario at this point.

"I think that the overwhelming desire is to do something they think they can pass and then come back and have one more bite at the apple of FY17 discretionary funding," he said, noting that this approach would allow legislators to continue to haggle over additional defense and border spending.

One Democratic staffer told FCW that a short-term CR is likely in order to finalize a deal. McCord agreed, and said that DOD can handle a two-week punt.

"The longer it goes, people have to start making decisions about summer training cycles…that's going to start to become a problem," he said. It also puts new acquisition on hold and can slow existing contracts as well -- which increases acquisition costs over the long term.

"That's one of the most aggravating things to me is the hidden waste that's hard to put a number on, hard to make real to taxpayers," he said.

On April 6, the service chiefs testified before the House Armed Services Committee and warned of dire consequences if the DOD has to live with a continuing resolution for the rest of the year -- something that has never happened in the history of the department.

"I think DOD is kind of like a customer now more than a driver," said McCord. "They've identified their needs, the committees have already reached a deal that they consider a fair deal between House and Senate, so I think that DOD is going to kind of be just sort of a passenger on this train whether it goes off a cliff or gets a two-week extension."

At this point, he said, the Pentagon can only prepare for the worst-case scenario of a continuing resolution. The comptroller's office would work with OMB and Congress to squeeze out any additional money and get the authorities to reallocate funds so they can be spent on priorities.

When Congress passed the current funding bill in December, the DOD was able to eke out an additional $5.8 billion for some immediate needs, and McCord expects the department would have a long list of additional items to present to OMB.

"You can't be too greedy," he said. "We did fairly well in the one in December, we asked for five or six things...and we did very well on those things."

Cancian, meanwhile, said the results of this showdown will have repercussions well beyond this year.

"The fate of the Trump defense buildup is in the balance," he said. "If they don't get any more money for defense in '17, then the ability to do '18 is up in the air, and they've created such big expectations about defense buildup."

"If it turns out the best he can do is buy the Obama program, that's going to be a huge problem," he said.