A Defense Budget Primer

Order Code RL30002

CRS Report for Congress

Received through the CRS Web

A Defense Budget Primer

December 9, 1998

(name redacted)

Analyst in National Defense

Foreign Affairs and National Defense Division

and

(name redacted)

Specialist in National Defense

Foreign Affairs and National Defense Division

Congressional Research Service ˜ The Library of Congress

ABSTRACT

This report is a primer for those who wish to familiarize themselves with the defense budget

process. The report defines basic defense budget-related terms, describes the structure of the

defense budget, briefly reviews the budgeting process within the Department of Defense

(DOD), and outlines the successive phases of the congressional defense budget process. It

also provides a short review of the budget execution process. This report will be updated only

in the event of significant changes to the defense budget process.

A Defense Budget Primer

Summary

This report is a primer for those who wish to familiarize themselves with the

process through which Congress acts on the U.S. defense budget. The report defines

basic defense budget-related terms, describes the structure of the defense budget,

briefly reviews the budget planning process within the Department of Defense (DOD),

outlines in some detail the successive phases of the congressional defense budget

process, and provides a short review of budget execution.

The defense budget is not a single document or product, but more a series of

spending commitments that can be measured and broken down in a number of

different ways. It can be defined, first of all, in terms of budget authority, obligations,

and outlays. Congress provides most of DOD's funds in the form of budget authority.

Agencies may then obligate the funds, and outlays occur as paychecks are issued or

progress payments are made on contracts. The defense budget can also be defined

broadly as the National Defense Budget Function or more narrowly as the

Department of Defense budget. The structure of the defense budget as considered in

Congress differs significantly from the structure of the budget as it is formulated by

the Department of Defense.

The defense budget process has three main phases. The first phase is preparation

of a budget request by the Executive Branch. The Department of Defense has

developed a sophisticated mechanism, known as the Planning, Programming, and

Budgeting System (PBS), for formulating long-term budget plans and preparing

annual budget requests to the Congress. The White House Office of Management and

Budget (OMB) is involved in the PBS process and formally submits the defense

budget request to Congress on behalf of the President.

The second part of the process is congressional consideration. The basic process

has three phases: the budget resolution, the defense authorization bill, and defenserelated appropriations bills. The annual budget resolution establishes targets for

defense budget authority and outlays, but the mechanism for enforcing the targets

allows considerable flexibility to appropriators. The authorization and appropriations

bills approve the defense budget at similar levels of detail, though only the

appropriations process actually provides budget authority to agencies. Congress

frequently provides additional funds to the Department of Defense through

supplemental appropriations bills, which may or may not be accompanied by offsetting

rescissions of previously appropriated funds.

The final part of the process is the budget execution stage. After budget

authority is provided by Congress, the DOD may obligate funds to acquire goods and

services. The pace at which funds are made available for obligation is governed in

part by a process of allocations overseen by OMB. Congress allows DOD some

flexibility to reallocate appropriated funds under a process known as reprogramming.

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Chapter 1: Basic Defense Budget Terminology

and Concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

A Snapshot of the Defense Budget Process . . . . . . . . . . . . . . . . . . . . . . . . 2

National Defense Budget Function and Department of Defense Budget . . . 2

Budget Authority, Outlays, and Related Terms . . . . . . . . . . . . . . . . . . . . . 5

Unobligated and Unexpended Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Current and Constant Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Measuring the Impact of Defense Spending on the Economy . . . . . . . . . . 13

Chapter 2: Structure of the Defense Budget . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Defense Budget by Appropriations Title . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Defense Budget by Major Force Program . . . . . . . . . . . . . . . . . . . . . . . . 17

Defense Budget by Component . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Alternative Ways of Analyzing the Defense Budget . . . . . . . . . . . . . . . . . 22

Chapter 3: The Defense Budget Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Executive Stage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Budgeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Congressional Defense Budget Process . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Concurrent Budget Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Authorization Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Appropriations Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

The Relationship Between Authorization and Appropriations . . . . . . 44

Congressional Earmarks and Additions to Administration Requests . 46

Budget Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Transfers and Reprogramming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Expiration of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Repealing Budget Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Appendix B: Department of Defense Budget Appropriations Accounts With

Funding in FY1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Appendix C: Major Congressional Action on the

FY1999 Defense Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Appendix D: Guide to Basic Defense Budget Documents . . . . . . . . . . . 57

Appendix E: Glossary of Defense Budget Terms . . . . . . . . . . . . . . . . . . 60

A Defense Budget Primer1

Introduction

Under the Constitution, Congress is responsible for raising and supporting the

Armed Forces of the United States. The Congress fulfills this responsibility in large

part through reviewing and enacting annual defense budgets. The programs funded

by the defense budget directly affect the ability of U.S. Armed Forces to defend the

country and protect national interests.

The defense budget also has a significant domestic impact. The size and

composition of the defense budget may affect the health of the economy, and the level

of defense spending is often a major issue in debate over national priorities.

Both the defense budget itself and the process of congressional review and

approval are complex. Even observers who regularly track the defense budget may

occasionally be baffled by defense budget terminology and procedures.

This report is a primer for those who wish to familiarize themselves with the

defense budget process.2 The report defines basic defense budget-related terms,

describes the structure of the defense budget, briefly reviews the budgeting process

within the Department of Defense (DOD), and outlines the successive phases of the

congressional defense budget process. It also provides a short review of the budget

execution process. The reader should be aware that there are sometimes differences

between the way the defense budget process works in theory and how it works in

practice — not all variations in procedures are addressed here.

The report is divided into three chapters. The first two chapters describe the

product — the defense budget itself. The first chapter defines basic defense budget

terms, and the second chapter describes the structure of the defense budget. The third

chapter describes the defense budget process from the initial planning stage in DOD

through congressional action and budget execution. Finally, appendices provide

guides to some of the more important defense budget documents and a glossary of

key defense budget terms. A matrix labeled “Legislative History of the Defense

Budget” is also included on the last page of this report to aid the reader in tracking

legislative action on the defense budget as it unfolds over the course of a year.

1

This is a revised version of a report initially written in 1988 by Robert Foelber (CRS Report

88-349F). The report was later updated by Keith Berner and (name redacted) in 1993 (CRS

Report 93-317F). This report supersedes those earlier versions.

2

This report is not , however, a source of up-to-date defense budget estimates, which are

provided in other CRS and U.S. government publications (see Appendix D for a

bibliography). Nor does this report provide an analysis of substantive issues in the defense

budget debate, such as the appropriate level of total funding or priorities among specific

weapon systems. It is, rather, a guide to the defense budget process.

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Chapter 1: Basic Defense Budget Terminology

and Concepts

A Snapshot of the Defense Budget Process

In its outlines, the defense budget process is straightforward. The process begins

with formulation of an annual defense budget request by the executive branch. In the

case of defense spending, the budget request to the Congress is formulated mainly by

the Department of Defense under guidelines established by the President through the

White House Office of Management and Budget (OMB). The request is formally

submitted to Congress by the President.

Submission of the budget is followed by congressional action. Congress

provides funds for defense programs mainly by appropriating funds in annual

appropriations acts, including the Department of Defense Appropriations Act, the

Military Construction Appropriations Act, and other appropriations laws. Congress

also authorizes defense programs through other legislation, mainly an annual National

Defense Authorization Act. The authorization process does not, however, provide

money for defense programs — instead it establishes the organizations responsible for

defense, sets policies, and determines the conditions and limitations under which these

organizations may carry on their activities. Annual authorization acts authorize the

appropriation of funds, but they do not actually provide the money.

The final step in the budget process is budget execution. When Congress

appropriates money for defense programs, it provides budget authority to

government agencies. Agencies are prohibited, mainly by the Anti-Deficiency Act,

from spending funds above the amount of budget authority appropriated or for

purposes other than those for which funds were provided. In order to comply with

these limitations, federal government agencies follow financial procedures that are

governed by official regulations. A key step in the process is when budget authority

provided by Congress is obligated. An obligation occurs when, for example, an

employee is hired or a contract for goods and services is signed. At the end of the

process are budget outlays, which occur when the government actually issues

payments to employees or to private parties.

This chapter reviews basic terms which will be important in following the budget

process discussed in later chapters. Terms discussed in this chapter include the

national defense budget function and the Department of Defense budget; budget

authority, outlays, and obligations; obligated, unobligated, and unexpended funds; and

current and constant dollars. The chapter closes with a brief discussion of measures

of the defense burden on the economy.

National Defense Budget Function and Department of Defense

Budget

The phrase “defense budget” is commonly used both in a narrow and in a broad

sense. In a narrow sense, the defense budget is the budget for the defense programs

administered and managed by the Department of Defense (DOD). In a broad sense,

funding for defense encompasses not only DOD programs but a number of defenserelated activities administered by other federal agencies including: (1) atomic energy

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defense activities, administered by the Department of Energy (DOE);3 (2) civil defense

programs, administered by the Federal Emergency Management Agency (FEMA); (3)

draft registration and preparations to resume the draft, administered by the Selective

Service System; and (4) defense-related activities of some other agencies, including

the Coast Guard, the Maritime Administration, and the Federal Bureau of

Investigation.4

All of these activities are included in the national defense budget function, one

of 19 functions used by the Office of Management and Budget (OMB) to sub-divide

activities in the federal budget into related categories.5 The national defense budget

function, identified by the numerical notation "050," is further divided into three subfunctions, each of which is similarly identified by a numerical notation:

050 — National Defense Budget Function6

051 —

Department of Defense — Military (DOD programs only)

053 —

Atomic energy defense activities (DOE national security programs)

054 —

Defense-related activities (civil defense, operation of Selective Service

System, defense-related activities of the FBI, etc.)

DOD also manages a number of civilian programs that are funded outside of the

national defense budget function. Among the DOD civil programs are civilian

construction projects of the Army Corps of Engineers (in budget function 301),

operation of Arlington National Cemetery (in budget function 705), operation of the

U.S. Soldiers’ and Airmen’s Home (in budget function 602), and a small portion of

wildlife conservation on military reservations (in budget function 303). Funding for

these programs is not generally reported in DOD budget totals and is not discussed

in this report.

Prior to FY1985, the DOD budget included payments to military retirees. In

FY1985, this practice changed, and payments to retirees now are financed through a

trust fund in budget function 600, outside of the 050 National Defense Function.

Therefore, actual payments from the trust fund to retirees are not charged to the

defense budget. The DOD budget, however, does include amounts contributed to

the military retirement trust fund to cover the actuarially determined costs of

3

DOE defense programs include development of nuclear warheads and naval nuclear reactors;

nuclear weapons safeguards and security; development of some arms control treaty

verification systems; production of nuclear materials for defense programs; handling and

reprocessing of defense nuclear waste; maintaining the nuclear stockpile; and environmental

cleanup of weapons production facilities.

4

The Defense Appropriations Act also provides unclassified amounts for CIA retirement and

for intelligence community management and classified amounts for DOD and non-DOD

intelligence activities, including activities of the CIA.

5

For more information on budget functions, see Bill Heniff, Basic Federal Budgeting

Terminology, CRS Report 98-410.

6

What was formerly sub-function 052 (Foreign Military Sales) was transferred to Function

150 (International Affairs) in 1978.

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retirement benefits for current personnel, through a system called "accrual

accounting."

The definition of defense spending has sometimes been controversial. Some

analysts argue that the 050 function does not actually include all the government

programs that properly should be counted as “defense” for purposes of calculating the

cost of military programs to the American taxpayer. These analysts say that the cost

of national defense also includes veterans’ benefits, international military assistance,

military-related activities funded through the National Aeronautics and Space

Administration (NASA), and the portion of interest payments on the national debt

attributable to borrowing in the past for military programs. For some analysts, an

even more comprehensive listing of defense programs would include the unfunded

portion of civil service retirement for DOD civilian employees, the Coast Guard, the

Maritime Administration, and the Impact Aid Program of the Department of

Education.7

Table 1. National Defense Budget Function, FY1997-99

(budget authority in billions of current dollars)

Actual

FY1997

Estimate

FY1998

Enacted

FY1999

051 - Department of Defense, Military

258.0

258.0

265.1

053 - Atomic Energy Defense Activities

11.3

11.7

12.6

054 - Other Agencies - Defense-Related Activities

1.0

1.0

1.1

270.3

270.7

278.8

050 - TOTAL NATIONAL DEFENSE

Sources: U.S. Office of Management and Budget, Budget of the United States Government:

Historical Tables, Fiscal Year 1999, Feb. 1998; Office of Management and Budget, "FY1999 MidSession Review," August, 1998; Congressional Budget Office.

Notes: FY1998 amounts reflect an OMB estimate of FY1998 levels after supplemental

appropriations were enacted. FY1999 levels include supplemental appropriations for FY1999

provided in H.R. 4328 (P.L. 105-277), the omnibus, consolidated appropriations act for FY1999.

More typically, however, the 051 sub-function (DOD programs) is identified

with the defense budget in the narrow sense, and the national defense budget function

(050) is identified with the defense budget in the broad sense. The DOD portion of

the national defense budget function reached a peak of 97 percent of the 050 total in

Fiscal Year (FY) 1985 and held at about 95 percent from FY1993 - FY1999. The

percentage may fall further in the future due to the likely growth of DOE defenserelated activities, especially for environmental clean-up. Table 1 provides budget

totals for the 050 function and sub-functions for FY1997-99.

7

For a discussion, see Paul Murphy, The Military Tax Bite 1986: An Analysis of the Military

Share of the Federal Income Tax, (Washington: Military Spending Research Services, 1986).

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Table 1 and all of the budget tables that follow report annual funding by fiscal

year. A fiscal year is an accounting period of twelve months duration8. The fiscal

year is designated by the calendar year in which it ends. Thus, FY1997 began on

October 1, 1996 and ended on September 30, 1997. The Congressional Budget Act

of 1974 (P.L. 93-344) changed the dates of the U.S. Government’s fiscal year to

October 1-September 30 beginning in 1976. Previously the fiscal year ran from July

1 to June 30.9

There are two important things to notice about Table 1. First, the dollars shown

represent budget authority — the amount which Congress provides when it

appropriates money for defense (and all other federal government) programs.

Second, the dollars shown are current dollars, i.e., they are not adjusted to reflect the

effects of inflation. The following sub-sections discuss these and related concepts.

Budget Authority, Outlays, and Related Terms

The defense budget — defined narrowly or broadly — can be measured in terms

of budget authority or outlays. Budget authority (BA) is the authority provided by

Congress to the Department of Defense and other government agencies to enter into

obligations for the provision of goods and services. Obligations are incurred by

signing contracts, placing orders, hiring personnel, making loans or grants, or the like.

(See 31 USC 1501.) Outlays represent the actual expenditure of funds in payment

for goods and services, usually in the form of a disbursement of cash, a check, or an

electronic fund transfer.10

A common misunderstanding is that the congressional authorization process

provides budget authority and the appropriations process provides outlays. In fact,

the authorization process authorizes the appropriation of budget authority, and

appropriations bills provide budget authority — Congress does not act directly on

outlays levels.11 Rather Congress provides budget authority through the

appropriations process and outlays then occur as executive branch agencies execute

their budgets.

8

For more information on fiscal year, see Bill Heniff, The Federal Fiscal Year, CRS Report

98-325.

9

The three-month period in 1976 from July 1 to September 30 between the end of FY1976 (old

system) and the beginning of FY1977 (new system) is known as the transition quarter and

is frequently labeled “197T” or “TQ” in budget documents.

10

The phrase “defense budget” usually refers to budget authority for defense programs, while

“defense spending” usually refers to outlays for defense programs. The distinction is not

always made, however.

11

The following analogy may help to explain the difference between budget authority,

obligations, and outlays. Suppose a parent decides to give money to a child to purchase a new

automobile. Budget authority is analogous to receiving authority from the parent to draw on

the parent’s bank account to purchase the new automobile. An obligation is incurred when

the contract is signed with the automobile dealer for delivery of the vehicle. The actual

writing of the check in payment for delivery of the automobile constitutes an outlay of funds.

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A budgeting concept related to budget authority but used only by DOD is total

obligational authority (TOA). TOA represents “the value of the direct Defense

program for a fiscal year,”12 and is equivalent to the sum of all budget authority

granted by Congress, plus amounts from other sources authorized to be credited to

certain accounts, plus unobligated balances of funds from prior years which remain

available for obligation. TOA will differ from budget authority for a given year

because of rescissions, reappropriations, new offsetting receipts, and unused budget

authority. In FY1998, Department of Defense TOA equaled $256.8 billion, while BA

amounted to $254.9 billion.13 The difference of $1.9 billion is accounted for by BA

from previous years, transfers, and offsetting receipts.

The process through which budget authority is provided by Congress and leads

to outlays involves several steps, each covered by specific policies and laws. Almost

all budget authority for defense programs is provided by annual appropriations.14

In appropriating funds, Congress grants DOD the authority to incur obligations and

provides the Treasury the authority to make payments for specified purposes. Thus,

as a DOD budget manual explains, “[a]ppropriations do not represent cash actually

set aside in the Treasury for purposes specified in the appropriations act [but rather]

limitations of amounts which agencies may obligate during the time period specified

in the respective appropriations acts.”15

When Congress appropriates money for defense programs, it generally provides

all the costs of the activities approved up front in one fiscal year. This practice is

known as full funding. It was mandated by Congress in the 1950s to give full

visibility to the cost of weapons procured. Full funding means that all the money

estimated to be necessary to complete an entire project — such as production of 21

Trident missiles, overhaul of an aircraft carrier, or construction of an ammunition

depot — is approved at one time by the Congress, even though the actual work may

span many years.

As an exception to this practice, Congress sometimes provides funding for

advance procurement of “long-leadtime” weapons components, such as nuclearpower plants for Navy warships. There has been some congressional debate during

12

Department of Defense Comptroller, National Defense Budget Estimates for FY1999,

March 1998.

13

U.S. Department of Defense, Financial Summary Tables: Department of Defense Budget

for Fiscal Year 1999, Feb. 1998, p. A1. RD&TE historical accounts are often reported in

TOA.

14

Two other forms of budget authority are: (1) contract authority, or statutory authority that

permits obligations in advance of appropriations but requires a subsequent appropriation or

the collection of receipts to liquidate (pay) these obligations; and (2) borrowing authority,

statutory authority that permits obligations to be incurred but requires that funds be borrowed,

generally from the Treasury, to liquidate these obligations.” U.S. Office of Management and

Budget, The Budget System and Its Concepts: FY1999, February 1998, p. 9.

15

Department of Defense Comptroller, Financial Management Regulation (DOD 7000.14-R),

Volume 2A: Budget Presentation and Formulation, July 1996, p. 1-2.

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the 1990s about full funding, especially for Navy shipbuilding, and a number of ship

programs have been only partially funded in annual appropriations measures.16

Full funding does not guarantee that the project can be completed within the

amount appropriated, because costs may turn out to be higher than estimated due, for

example, to an inflation rate higher than expected, unforseen technical problems, or

subsequent design changes.17 In the late 1970s, inflation consistently was higher than

assumed in the budget estimates for purchases of weapons and fuel.18 As a result, the

services were often forced to buy fewer items than Congress planned when defense

appropriations were approved. From 1982 to 1987, however, inflation was less than

projected, resulting in what some commentators called an inflation dividend.

According to several estimates, defense was overfunded by anywhere from $18 billion

to over $50 billion for the FY1982-86 period.19 In recent years, inflation has again

frequently been overestimated, and inflation "savings" have sometimes been used as

offsets for supplemental appropriations or for congressional additions to the defense

budget.

After budget authority is appropriated by Congress, it becomes available for

obligation by the relevant agency. Funds are obligated when the agency signs a

contract with a supplier or otherwise makes a formal commitment to pay for goods

and services. Appropriated funds must normally be obligated during the first fiscal

year for which they are provided, otherwise they expire. Appropriations bills typically

make money for some defense activities available for obligation for more than one

year. The length of time for which funds are made available for obligation is specified

16

According to the Department of Defense, advanced procurement is: “Authority provided

in an appropriations act to obligate and disburse during a fiscal year before that in which the

related end item is procured. The funds are added to the budget authority for the fiscal year

and deducted from the budget authority of the succeeding year. Used in major acquisition

programs for advance procurement of components whose long-lead-time requires purchase

early in order to reduce the overall procurement lead-time of the major end item. Advance

procurement of long lead components is an exception to the DOD ‘full funding’ policy.”

(Financial Management Regulation, Volume 2A, p. 1-2.)

17

In 1970, DOD began including an inflation allowance in its estimates of the costs of major

systems and construction. By 1976, costing to include inflation had been extended to all DOD

purchases and operation and maintenance activities.

18

According to the Congressional Budget Office, DOD budgets were underfunded by over $11

billion in the FY 1978-81 period compared to the level of growth anticipated by Congress.

See: U.S. Congressional Budget Office, Budgeting for Defense Inflation, Jan. 1986.

19

These estimates are summarized in: U.S. House of Representatives, Armed Services

Committee, "Coverage, Cumulation, and Compensation or Wherefore Art Thou Inflation

Dividend?" by Les Aspin, Mimeo, Sep. 3, 1986. Rep. Aspin concluded that the inflation

dividend probably amounted to between $35 billion and $50 billion. He also attempted to

determine what happened to the excess funds. He concluded that no more than about $18.5

billion of these funds could be accounted for through reprogrammings, expired appropriations,

and/or congressional funding cutbacks, with some portion of the rest going to defense

contractors in the form of excess payments.

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in annual appropriations legislation. For example, the Navy has been given up to five

years to sign contracts for shipbuilding projects funded by Congress.20

After funds are obligated, the Department of Defense will expend the funds only

as progress payments on contracts come due or as paychecks are issued. These

expenditures constitute outlays by the government. Some defense programs (such

as weapons procurement and military construction projects) may take several years

for a contractor to complete, so outlays may occur only quite slowly over a period of

time.

As a result of these and other factors, the spend-out rate — or the rate at which

appropriated funds are converted to outlays — varies with different programs.21 For

some activities, such as military personnel and operation and maintenance (O&M),

most of the money appropriated is spent in the first fiscal year for which it is provided.

DOD estimates that 94 percent of budget authority provided in FY1999 for military

personnel and 75 percent of budget authority for O&M will be expended as outlays

during the fiscal year. For other activities, such as procurement of complex weapons

and military construction projects, both of which take several years to complete, only

a small amount of the appropriated funds is spent in the first fiscal year for which it

is provided (about 22 percent and 15 percent, respectively of FY1999 funds). The

rest is spent in the years beyond the budget year, or the out-years, at rates that vary

from program to program.

The relationship between budget authority and outlays is perennially an

important factor shaping how Congress acts on the defense budget. In recent years,

defense budgets, like other parts of the federal budget, have been constrained by strict

limits on outlays imposed in an effort to meet deficit reduction targets. The ability to

control defense outlays, however, is circumscribed by the fact that a large share of

outlays in any one year actually results from budget authority provided in prior years.

Thus, only part of the defense budget, measured in outlays, is controlled by

congressional action on annual defense appropriations acts.22 In FY1999, for

20

Note that these periods of availability are specified in each appropriations act every year.

For example, the FY1999 Defense Appropriations Act [P.L. 105-262] opens by saying, "That

the following sums are appropriated, out of any money in the Treasury not otherwise

appropriated, for the fiscal year ending September 30, 1999," and Section 8003 specifies

that "No part of any appropriation in this Act shall remain available for obligation beyond

the current fiscal year, unless expressly so provided herein." Exceptions to the one-year

availability of funds under this clause are specifically noted in the text of the law. For

example, the section of the FY1999 Defense Appropriations Act that provides funds for the

Aircraft Procurement, Army, account reads, "For construction, procurement, production,

modification and modernization of aircraft, ...$1,388,268,000 to remain available for

obligation until September 30, 2001." Appropriations bills typically make research and

development (R&D) funds available for two years; procurement funds (with the exception of

shipbuilding) for three years; and military construction funds for five years.

21

U.S. Department of Defense, Financial Summary Tables: Department of Defense Budget

for Fiscal Year 1999, Feb. 1998 Table K.

22

Congress may, however, eliminate budget authority provided in prior years by means of

(continued...)

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example, DOD estimated that about 67 percent of outlays would result from budget

authority provided in FY1999 appropriations acts — the rest, 33 percent, would

result from budget authority provided in prior years.23 (For further discussion, see

Appendix A, Spend-Out Rates and Defense Budget Reductions.)

Moreover, because different parts of the defense budget "spend out" at different

rates, Congress must carefully manage the balance between "fast spending" and "slow

spending" accounts when it makes adjustments to the defense request. If Congress

is concerned about military readiness, for example, it may wish to add money for a

military pay raise to the military personnel accounts or increase funding for training

in the operation and maintenance accounts. Because these accounts spend out very

rapidly, the effect would be a large, immediate increase in outlays as well as in budget

authority. If Congress wants to trim other, slower spending accounts to offset the

increases, a problem arises — it would require a disproportionately large cut in

budget authority for weapons procurement to balance the outlay impact of a relatively

small increase in personnel or O&M. The balance between budget authority and

outlays, therefore, is often a major consideration in the defense budget process.

The relationship between budget authority and outlays has also affected the

defense budget process in recent years simply because it is difficult to calculate

precisely the outlay impact of new defense budget authority. Outlays in any given

year, resulting from new budget authority and from budget authority provided in prior

years, must be projected based on historical experience. Because these numbers are

estimates, the Office of Management and Budget (OMB) and the Congressional

Budget Office (CBO) often disagree on projected outlays. In 1997, OMB estimated

that defense outlays in FY1998 would total $259.4 billion if Congress were to

approve the Administration request for $265.3 billion in new budget authority for

national defense. In its assessment of the same Administration plan, CBO estimated

that approval of the Administration program would entail defense outlays in FY1998

of $265.0 billion -- $5.6 billion higher. The concurrent budget resolution that year

resolved the issue by providing $266.0 billion in national defense outlays, enough to

accommodate CBO scoring with room for an additional $2.6 billion in budget

authority. The same problem, however, recurred in congressional action on the

FY1999 budget. This time, Congress dealt with the problem by allowing collections

from sales of Navy ships to foreign nations to be counted against the overall defense

budget and by instructing CBO to score outlay savings from changes in managing

DOD revolving funds — two exercises in accountancy designed to avoid painful cuts

in defense programs.24

22

(...continued)

budget “rescissions” — see below for a discussion.

23

U.S. Department of Defense, Financial Summary Tables: Department of Defense Budget

for Fiscal Year 1999, Feb. 1998, Table J. Congress can reduce outlays from budget

authority provided in prior years by rescinding funds, but the use of rescissions to control

outlays presents the same problems as cutting funds from the annual budget — i.e., large cuts

in budget authority for weapons procurement would produce only limited outlay savings in

a given year.

24

For a thorough discussion of the issue, see Congressional Budget Office, "An Analysis of

(continued...)

CRS-10

Unobligated and Unexpended Funds

Two budget concepts related to budget authority and outlays are unobligated

funds and unexpended funds. Unobligated funds refer to budget authority that has

been appropriated by Congress for specific programs, but has not yet been obligated.

Unexpended funds include both unobligated and obligated funds which have not yet

been spent as outlays. These two concepts — unobligated and unexpended funds —

represent intermediate points in the process that extends from the provision of budget

authority to the creation of outlays, discussed above. Appropriations create

unobligated budget authority. Then, when contracts are signed or other financial

commitments are made, the funds are obligated, but are still unexpended. Only when

the funds are paid out (by check or otherwise) do the appropriated amounts result in

outlays. It is important to note that unexpended funds, whether obligated or not, can

only be used for specific programs that have been congressionally approved.

Unobligated and unexpended funds are a normal byproduct of the obligation and

expenditure process. Unusually high unexpended and unobligated balances for

particular programs, however, sometimes act as red flags for congressional

appropriators overseeing military spending. Appropriators may consider the inability

to spend already appropriated funds in a given area as a sign of problems in a program

and as an indication that reductions in the next year's budget may be called for.

Moreover, amounts of unobligated and unexpended funds may increase if inflation

rates decline or if the dollar rises relative to foreign currencies in countries where the

U.S. military operates. In recent years, appropriators have used unobligated funds

caused by economic changes as a source of funds to offset supplemental defense

appropriations (see below for a discussion of rescissions of appropriated funds).

Constant FY99 $ in Billions

Trends in the total Figure 1: Department of Defense, Unobligated and

amount of unobligated and

Unexpended Balances, FY1980-1999

unexpended balances have

sometimes been construed

350

as an indication of the ability

Unexpended Balances

300

of the Department of

250

Defense to manage its

25

200

funding. As Figure 1

150

100

Unobligated Balances

50

0

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

Fiscal Year

24

(...continued)

CBO's Outlay Estimates for Appropriation Bills, Fiscal Years 1993-1997," CBO

Memorandum, October 1998.

25

Sources for Figure 1: CRS calculations based on Department of Defense, Financial

Summary Tables: Department of Defense Budget for FY1999, February 1998, and versions

(continued...)

CRS-11

illustrates, unobligated and, especially, unexpended balances of funds grew

substantially in DOD over the course of the military buildup of the 1980s. At the

time, some analysts argued that the growth of these balances was evidence that DOD

was not efficiently spending the money appropriated by Congress and that the rapid

growth of funding for new weapons programs was unwarranted.26 In recent years,

some Members of Congress have proposed measures to transfer a portion of

unobligated balances of DOD funds to other, non-defense purposes.

DOD officials point out, however, that unobligated and unexpended balances of

funds may grow for many reasons. In general, one would expect unobligated and/or

unexpended balances to grow (1) along with growth in the overall budget and (2) as

the share of the budget devoted to procurement programs with relatively slow spendout rates increases. In addition, part of the growth in unexpended balances may be

explained by lower than expected inflation rates, which means that costs of various

programs are lower than anticipated when funds were appropriated, so not all the

appropriated funds must be obligated or expended.27 Finally, changes in contracting

practices mandated by congressionally initiated procurement reforms may lower rates

of payments to contractors, thereby adding to unexpended balances.28

Current and Constant Dollars

Budget authority and outlays can be measured in either current dollars or

constant dollars. Current (or “then-year”) dollars measure the cost of goods and

services in terms of prices prevailing at the time of purchase. Constant dollars

measure the cost of goods and services in terms of prices in a given (constant) year.

Fixing the purchasing power of the dollar to a given year eliminates changes in prices

due to inflation in comparing budgets from year to year. By calculating defense

funding in constant dollars, one can measure real growth (or real decline) in the size

of the defense budget — that is, changes in purchasing power — over time. Growth

in the defense budget measured in current dollars is called nominal growth.29

25

(...continued)

from prior years.

26

See, for example, Jeffrey Colman and Raul Madrid, The Pentagon Funding Backlog: Can

the Defense Department Manage More Growth?, Washington, Defense Budget Project, May

12, 1986.

27

U.S. General Accounting Office, Government-wide Analysis of the Growth in Unexpended

Balances, GAO/AFMD-86-24BR, Jan. 1986, pp. 27, 30.

28

See (name redacted), "'Midnight Surprise' Sparks Questions in Congress,"

Congressional

Quarterly, June 1, 1985, p. 1066.

29

Real growth is a measure of the change over time (increase or decrease) in funding for a

program after the effect of price changes (inflation) has been eliminated. Real growth can be

positive or negative; “negative real growth” is a decline in funding after inflation has been

eliminated. Nominal growth measures both program growth and the effect of price changes

over time without distinguishing between them.

CRS-12

Billions of Dollars

The importance of the Figure 2: National Defense Outlays, Current and

distinction between current

Constant FY1999 Dollars, FY1940-2003

and constant dollars can be

1,000

seen in Figure 2.30 The

figure

shows

national

800

defense

outlays

from

Current Year $

Constant FY1999 $

FY1940 through FY1998

600

(1) in current and (2) in

constant FY1999 dollars.31

400

While defense spending has

almost always grown in

200

nominal terms from year to

year since World War II, the

0

1940

1950

1960

1970

1980

1990

real amount of spending has

Fiscal Year

fluctuated, with periods of

rapid real growth coming

during the Korean War, the Vietnam War, and the Carter-Reagan defense buildup of

the late 1970s and early 1980s.

A failure to distinguish between current and constant dollars, therefore, may be

misleading in analyzing budget trends. A focus on current rather than constant dollars

will either exaggerate the amount of growth or understate the extent of decline in

defense spending. For example, in current dollar terms, U.S. national defense budget

authority declined by 9 percent between FY1985 and FY1998. In real terms,

however, defense budget authority for the period declined by 36 percent.

A useful concept for measuring the direction of the defense budget is that of

average real growth or decline, which in effect smooths out all the “ups and downs”

in the defense budget over a given period of time to give an indication of a general

trend. The U.S. defense budget has fluctuated considerably over the past 25 years.

When the “ups and downs” are smoothed out, however, national defense budget

authority grew in real terms by about 5.3% percent per year on average from FY1975

to FY1985 and declined by about 3.4% percent per year from FY1985 to FY1998.32

30

Sources for Figure 2: CRS calculations based on U.S. Office of Management and Budget,

Historical Tables: Budget of the U.S. Government for Fiscal Year 1999, Feb. 1998;

Department of Defense Comptroller, National Defense Budget Estimates for FY1999, March

1998; deflators from Department of Defense Comptroller.

31

For purposes of measuring real growth in the defense budget the choice of “base year” is

largely immaterial. The percentage change from one year to another will remain

approximately the same for any base year chosen. FY1999 dollars were chosen as the

constant dollar base to provide a measure of the size of the defense budget in currency

meaningful to the contemporary defense budget debate. FY1999 budget deflators were

obtained from the Department of Defense Comptroller.

32

To calculate the average annual real growth between two years X and Y, first calculate the

size of the defense budget in constant dollars for years X and Y. Next, divide the defense

budget for the later year DB(Y) by the defense budget for the earlier year DB(X). Then take

the nth root of the result, where n = the number of years between X and Y (including Y but

(continued...)

CRS-13

Measuring the Impact of Defense Spending on the Economy

Percentage of GDP

Resources devoted to

Figure 3: National Defense Outlays,

defense are not available for

Percentage of GDP, FY1947-2003*

FY1953: 14.2%

competing public or private

14%

uses and, in this sense,

12%

constitute a cost to the

FY1968: 9.4%

American economy. The

10%

most common measure of

8%

the defense cost is defense

FY1986: 6.2%

6%

outlays as a percentage of

Gross Domestic Product

4%

FY1979: 4.7%

FY1948: 3.5%

(GDP). GDP represents the

2%

FY2003: 2.8%

total value of goods and

0%

services

produced

by

1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002

Fiscal Year

people, government, and

*FY1998-2003: Administration projections

firms in the United States,

whether the firms and

individuals involved are foreign or domestically owned.33 Figure 3 shows defense

spending as a percentage of GDP from FY1947 through FY1998 and projected

through FY2003.34

32

(...continued)

not X) and subtract 1 from that result.

33

Similar to GDP is Gross National Product (GNP). GNP includes income earned by

American firms and individuals abroad and excludes income earned by foreign firms and

individuals in the United States. Because GDP is generally considered to correspond more

closely to other indicators used in short-term economic analysis than GNP, the federal

government shifted its emphasis from GNP to GDP in December 1991. See Council of

Economic Advisors, Economic Report of the President, Washington, 1992, p. 246.

34

Sources for Figure 3: Office of Management and Budget, Historical Tables: Budget of the

United States Government for Fiscal Year 1999, Feb. 1998 and Office of Management and

Budget, "Midsession Review of the Budget, FY1999," August 1998.

CRS-14

Percentage of Expenditures

Another common Figure 4: National Defense Outlays, Percentage of

measure of cost is Federal and Total Public Expenditures, FY1945-2003

defense outlays as a

percentage of total

80%

federal spending or of

total

government

60%

spending

(including

federal, state, and local).

40%

Figure 4 shows defense

spending as a percentage

20%

of total federal spending

and of total public

% Federal Outlays

% Public Expenditures

expenditures

from

0%

1945

1955

1965

1975

1985

1995

FY1940

projected

Fiscal Year

35

*FY1998-2003: Administration projections.

through FY2003.

By

this measure, defense

spending has steadily declined since the end of the Korean War, though the trend was

briefly interrupted by the Vietnam War and the build-up of the 1980s.

Percentage of Federal Outlays

Much of the increase in Figure 5: National Defense Outlays, Percentage of

total federal spending since

Total Discretionary Outlays, FY1962-2003

100%

the end of the 1960s has

90%

been in areas of the budget

80%

such as Social Security,

70%

Medicare, and Medicaid,

60%

which are described as

50%

"mandatory" programs (see

40%

below for a further

30%

discussion). As Figure 5

20%

shows, defense spending has

10%

not declined nearly as

0%

rapidly as a share of so1962

1972

1982

1992

2002

Fiscal Year

called "discretionary" federal

FY1998-2003: Administration projections.

spending.

This is the

amount controlled by annual

appropriations bills, which Congress must approve each year.

Two other measures of defense costs are also frequently cited. One is defense

research and development spending as a share of government or of total of

government plus private R&D expenditures. Another is defense-related employment

as a percentage of the federal, total government, or total national labor force. Data

on all of these measures are readily available from government sources, and are

regularly reported to Congress.

35

Source for Figure 4: Department of Defense Comptroller, National Defense Budget

Estimates for FY1999, March 1998.

CRS-15

Chapter 2: Structure of the Defense Budget

The DOD budget is traditionally presented in three ways — (1) by

appropriations title, (2) by major force program, or (3) by component. Other ways

of breaking down the budget are also common and may be more useful for specific

analytical purposes. This chapter briefly describes the three formats generally used

in presenting defense funding and reviews some other useful ways of categorizing the

defense budget.

Defense Budget by Appropriations Title

The defense budget -- as enacted by Congress through the DOD and military

construction appropriations bills (with smaller amounts in other appropriations bills) -is divided into appropriations titles. The appropriation structure of the

congressional defense budget has evolved over time, reflecting changing congressional

interests. Since FY1960, the congressional defense budget has included the following

major titles:36

Military Personnel: includes pay and allowances (housing and other) for active

duty officers and enlisted personnel and for cadets at the Service academies,

contributions to military retirement funds, subsistence of enlisted personnel,

permanent change of station travel, bonuses, National Guard and Reserve paid

drill and initial training, and some other training and support costs.37

Operation and Maintenance (O&M): includes salaries, benefits, and retired

pay (DOD contribution) for most civilian DOD employees,38 flying hours, ship

operations, training of land forces, individual training and exercises, real property

maintenance and minor construction projects, equipment maintenance and

system overhauls, refits and refurbishment, the purchase of fuel, repair parts,

supplies, minor items of repair equipment, and various personnel, base operating,

and administrative support activities.

Procurement: includes acquisition of weapons and components of weapons,

communication and support equipment, munitions, initial and replenishment

spares, modernization equipment, and kits to upgrade existing equipment.

36

In addition to these major titles, there are also minor titles which may vary from year to year.

Recently, separate titles have addressed such things as defense conversion programs and

disarmament aid to the former Soviet Union.

37

Until FY1985 military retirement was paid out to retirees each year on a cash basis and was

funded within the Military Personnel title. The FY1984 defense authorization act (P.L. 9894), however, established an accrual accounting system for military retirement beginning in

FY1985, whereby the Services are charged (in the military personnel title) for the future costs

of retirement for military personnel currently on active or reserve duty. The actual payment

of benefits to current retirees is made from a newly created Military Retirement Trust Fund

in budget function 600.

38

Some pay for civilians is also funded in the RDT&E and military construction titles.

CRS-16

Research, Development, Test, and Evaluation (RDT&E): includes

development and testing of weapons and equipment, development of prototypes,

fabrication of technology-demonstration devices, and support of basic research

and exploratory development of technologies with potential military applications.

Military Construction:39 includes acquisition, construction, installation, and

furnishing of temporary or permanent public works, military installations,

facilities, and real property of the armed forces, as well as major repair and

minor construction projects.

Family Housing:

includes construction, improvements, operations,

maintenance, and leasing of military family housing.

Revolving and Management Funds: includes DOD stock funds, industrial

funds, management funds, and various trust funds.40 Since December 1996, the

Pentagon has used four Working Capital Funds for this purpose — the Army

Working Capital Fund, the Navy Working Capital Fund, the Air Force Working

Capital Fund and Defense-Wide Working Capital Fund.41

Funding for military personnel, procurement, O&M, and RDT&E programs has

accounted for about 95 percent of the DOD budget in recent years. The other titles

listed represent only a small percentage of the total DOD budget, though, in absolute

terms, the dollars involved are sizable ($9.8 billion in FY1998),42 and these titles

finance important defense activities. The allocation of funds among appropriations

titles has shifted substantially over time, reflecting trends in the overall defense budget

total and changing defense priorities.

39

Construction performed by the Army Corps of Engineers (ACE) on civilian projects is

excluded. ACE civilian projects are funded in the Energy and Water appropriations bill.

40

DOD revolving funds support self-sustaining activities in the Department of Defense that

“sell” a product or service to DOD customers and then use the receipts from sales to pay

operating expenses and purchase new stock. The funds finance a continuing cycle of

operations without fiscal year limitations; hence the term "revolving fund". Examples are

stock funds and industrial funds. Stock funds provide such things as clothing, medical

supplies, fuel, construction supplies, ordnance repair parts, consumable aircraft and missile

parts, tank and automotive supplies, and general retail supplies. Industrial funds provide

services such as equipment overhauls and transportation services. Management funds were

established to simplify financing and accounting for operations supported by two or more

appropriations. Trust funds are used to carry out a business activity in accordance with a

trust agreement or statute and are credited with offsetting receipts.

41

Beginning in FY1992, the Pentagon combined five industrial funds, four stock funds, and

several appropriated fund support activities, including the Defense Finance and Accounting

Service and the Defense Commissary Agency into a single revolving fund. This fund was

called Defense Business Operations Fund (DBOF), and the DOD comptroller centrally

managed the cash balance of this single fund. In December 1996, DBOF was abolished and

replaced with four Working Capital Funds in order to devolve responsibility for cash balances

to each DOD component.

42

Based on the Office of Management and Budget, Historical Tables: Budget of the United

States Government for Fiscal Year 1999, Feb. 1998.

CRS-17

Appropriations titles are further subdivided into appropriations accounts — a

complete list of accounts for the FY1999 DOD budget can be found in Appendix B.

(The number and denotation of the appropriations accounts in the DOD budget has

varied over time.) Appropriations accounts are further disaggregated into budget

activities, line-items, and program elements.43 For example, one of the 15 accounts

in the FY1999 procurement title is “Aircraft Procurement, Navy.” This account is

divided into five budget activities (combat aircraft, trainer aircraft, modification of

aircraft, aircraft spares and repair parts, and aircraft support equipment and facilities),

which are in turn composed of line-items (e.g., the “F/A-18 aircraft,” which is

included under the budget activity “Combat Aircraft”).

The level of program detail in line-items varies with the appropriations title. For

the Procurement, RDT&E, and Military Construction accounts, the congressional

defense budget shows thousands of line-items for individual weapons and military

construction programs. There are far fewer line-items in the Military Personnel

accounts and, until recently, in the O&M accounts. Beginning with the FY1993

budget, Congress has reported action on O&M accounts in much finer detail than in

the past. The term "program element" is used in the congressional defense budget

structure only to refer to programs funded in the RDT&E title — it is equivalent to

"line items" in other parts of the budget.

Defense Budget by Major Force Program

DOD organizes the defense budget for its own force programming and budgeting

purposes into a format different from that used by Congress. The basic building

blocks of the DOD budget are “program elements,” which, in this context, are

collections of weapons, manpower, and support equipment. “F/A-18 squadrons,” for

example, constitutes a program element, which is defined as follows:

43

Technically, “line item” refers to programs in the procurement title only. The RDT&E title

is composed of “program elements” and the O&M title is composed of “programs.” In

common parlance, the basic building blocks of all the appropriations titles are generally

referred to as line items. Line items are roughly equivalent to the formal term "Program,

Project or Activity (PPA)" as defined in the Balanced Budget and Emergency Deficit Control

Act of 1985. Conference reports on the annual defense appropriations bills regularly include

the following statement:

DEFINITION OF PROGRAM, PROJECT, AND ACTIVITY

The conferees agree that for the purposes of the Balanced Budget and Emergency Deficit

Control Act of 1985 (Public Law 99177) as amended by the Balanced Budget and

Emergency Deficit Control Reaffirmation Act of 1987 (Public Law 100-119) and by the

Budget Enforcement Act of 1990 (Public Law 101-508), the term program, project, and

activity for appropriations contained in this Act shall be defined as the most specific

level of budget items identified in the Department of Defense Appropriations Act, 1999,

the accompanying House and Senate Committee reports, the conference report and

accompanying joint explanatory statement of the managers of the Committee of

Conference, the related classified annexes and reports, and the P-1 and R-1 budget

justification documents as subsequently modified by Congressional action. (Conference

Report on the FY1999 Defense Appropriations Act, H.Rept. 105-746, p. 69).

CRS-18

0204136N F/A-18 Squadrons; X-4-03; Includes manpower authorizations,

peculiar and support equipment, necessary facilities and the associated costs

specifically identified and measurable to the following: Strike Fighter

Squadrons. Planned follow-on for A-7 and F-4 Squadrons. Proposed missions

are close tactical air support, deep strike and interdiction missions, air

superiority, fleet air defense, air-to-ground weapons delivery and strike escort.

Excludes Aircraft Readiness Squadrons — (see appropriate element in this

program).44

In the congressional budget format, the resources composing F/A-18 squadrons

would be funded in separate appropriations titles, including Military Personnel,

Procurement, O&M, RDT&E, and Military Construction. In presenting its budget

request to Congress, DOD recasts its data into appropriations categories.

Program elements in the internal Department of Defense budget are grouped into

eleven Major Force Programs (MFPs), as follows:45

Program 1: Strategic Forces. Strategic forces are those organizations and

associated weapon systems whose force missions encompass intercontinental or

transoceanic inter-theater responsibilities. Program 1 is further subdivided into

strategic offensive forces and strategic defensive forces, including operational

management headquarters, logistics, and support organizations identifiable and

associated with these major subdivisions.46

Program 2: General Purpose Forces. General purpose forces are those

organizations and associated weapon systems whose force mission

responsibilities are, at a given point in time, limited to one theater of operation.

Program 2 consists of force-oriented program elements, including the command

organizations associated with these forces, the logistic organizations organic to

these forces, and the related support units that are deployed or deployable as

constituent parts of military forces and field organizations. Also included are

other programs, such as JCS-directed and coordinated exercises, Coast Guard

ship support program, war reserve material, ammunition, and equipment.

Program 3: Command, Control, Communications, Intelligence and Space

(C3, I & Space). Consists of intelligence, security, communications and

functions, such as mapping, charting, and geodesy activities, weather service,

oceanography, special activities, nuclear weapons operations, space boosters,

satellite control and aerial targets. Intelligence and communications functions

that are specifically identifiable to a mission in the other major programs are

included within the appropriate program.

44

Department of Defense Comptroller, FYDP Program Structure (DOD 7045.7-H), January

1996, p. 2-59.

45

Ibid. Chapter 3, pp. 6-8.

46

MFP 1 includes funds for acquiring strategic nuclear delivery systems but not funds for

acquiring nuclear warheads — warhead acquisition is funded through the Department of

Energy, not the Department of Defense.

CRS-19

Program 4: Mobility Forces. Consists of program elements for airlift, sealift,

traffic management, and water terminal activities, both direct-funded and

through the Working Capital Funds, including command, logistics, and support

units organic to these organizations.

Program 5: Guard and Reserve Forces. The majority of Program 5 resources

consist of Guard and Reserve training units in support of strategic offensive and

defensive forces and general purpose forces. In addition, there are units in

support of intelligence and communication; space; airlift and sealift; research and

development; central supply and maintenance; training, medical, and general

personnel activities; administration; and support of other nations.

Program 6: Research and Development. Consists of all research and

development programs and activities that have not yet been approved for

operational use, and includes: (a) basic and applied research tasks and projects

of potential military application in the physical, mathematical, environmental,

engineering, biomedical, and behavioral sciences; and (b) development, test, and

evaluation of new weapons systems equipment and related programs.

Program 7: Central Supply and Maintenance. Consists of resources related

to supply, maintenance, and service activities, both direct-funded and funded

through the Working Capital Funds, such as first and second destination

transportation, overseas port units, industrial preparedness, commissaries, and

logistics and maintenance support, depot maintenance and supply management.

These functions or activities provide benefits and support for overall DOD

activities.

Program 8: Training, Medical, and Other General Personnel Activities.

Consists of resources related to training and education, personnel procurement

services, health care, permanent change of station travel, transients, family

housing, and other support activities associated with personnel. Excluded from

this program is training specifically related to and identified with another major

organic program. Housing subsistence, health care, recreation, and similar costs

and resources that are organic to a program element, such as base operations in

other major programs, are also excluded from this program. Program 8

functions and activities, which are mainly centrally managed, provide benefits

and support necessary for the fulfillment of DOD programs.

Program 9: Administration and Associated Activities: Consists of resources

for the administrative support of departmental and major administrative

headquarters, field commands, and administration and associated activities not

accounted for elsewhere. Included are activities such as construction planning

and design, public affairs, contingencies, claims, and criminal investigations.

Program 10: Support of Other Nations. Consists of resources in support of

international activities, including support to the Military Assistance Program

(MAP), foreign military sales, and the North Atlantic Treaty Organization

(NATO) infrastructure and humanitarian assistance.

CRS-20

Program 11: Special Operations Forces. Consists of force-oriented special

operations forces (Active, Guard and Reserve), including the command

organizations and support units directly related to these forces.

Table 2 shows the defense budget by MFP for FY1996-99.

Table 2. Department of Defense Budget by Major Force Program

(total obligational authority in millions of current dollars)

Actual

FY1996

Actual

FY1997

Estimate

FY1998

Request

FY1999

1. Strategic Forces

7,456

6,141

6,718

6,708

2. Gen’l Purp. Forces

88,234

88,981

91,189

92,748

3. C3, I & Space

30,083

29,970

30,357

31,523

4. Mobility Forces

10,314

10,556

10,304

10,944

5. Guard & Reserve

21,085

20,934

20,945

20,792

6. Research & Devel.

25,874

26,026

26,258

25,103

7. Cent. Sup. & Maint.

16,728

16,397

16,234

16,119

8. Train., Med. & Gen’l

Personnel

44,181

43,713

43,166

42,992

9. Admin. & Assoc. Act.

6,879

7,331

7,279

7,330

10. Sup’t Other Nations

890

999

900

974

11. Special Ops Forces

3,197

3,179

3,411

3,374

MFP

Undistributed

TOTAL DOD

1

254,919

254,224

256,760

258,610

Source: U.S. Department of Defense, National Defense Budget Estimates for FY1999, March 1998,

p.78.

Notes: Figures for the year preceding the request (FY 1998) represent an estimate and include

Administration-proposed supplemental appropriations and rescissions. Totals may not add due to

rounding.

While this breakdown of the budget is useful to DOD in managing its activities,

it must be used carefully in analyzing defense programs. It is sometimes assumed, for

example, that Program 1 is roughly equivalent to nuclear forces. In fact, funding to

develop strategic nuclear weapon systems is included in Program 6, funding for

theater nuclear weapons falls into Program 2, and funding for nuclear warheads is not

in the DOD budget at all, but, instead, is funded through the Department of Energy.

Moreover, even within DOD there have been questions about the value of this

means of categorizing costs. Support programs (Programs 7, 8, & 9), are separated

from force activities (Programs 1, 2, 4, & 5). Some argue that these costs should be

connected to the actual forces. This has happened to some degree in recent years as

an increasing number of functions in Central Supply (Program 7), especially, have

CRS-21

been financed indirectly through service operation and maintenance budget accounts

that are reflected in force activities (Programs 1, 2, 4, & 5).

Defense Budget by Component

The third traditional method of aggregating defense funding is by component of

the Department of Defense. The five major components are: (1) Army, (2) Navy (of

which the Marine Corps is a part), (3) Air Force, and (4) Defense-Wide.47 Table 3

shows the defense budget by component for FY1995-98.

Table 3. Department of Defense Budget by Component

(budget authority in millions of current dollars)

Component

Actual

FY1996

Actual

FY1997

Estimate

FY1998

Request

FY1999

Army

64,505

64,418

60,534

63,815

Navy/Marine Corps

79,966

79,531

80,921

81,337

Air Force

72,992

73,216

74,410

76,658

Defense-Wide

36,955

40,810

39,043

35,448

TOTAL DOD

254,418

257,975

254,908

257,258

Source: U.S. Department of Defense, National Defense Budget Estimates for FY1999, March

1998, p. 111.

Notes: Figures for the year preceding the request (FY 1998) represent an estimate and include

Administration-proposed supplemental appropriations and rescissions. Totals may not add due to

rounding.

47

The Defense-Wide component encompasses programs that support the entire Pentagon. It

is comprised of the Office of the Secretary of Defense, the Unified Commands, Defense

Agencies, and Field Activities. As of October 1, 1998, there are 14 Defense Agencies and 7

Field Activities. The Defense Agencies include the Ballistic Missile Defense Organization,

the Defense Advanced Research Projects Agency, the Defense Commissary Agency, the

Defense Contract Audit Agency, the Defense Finance and Accounting Service, the Defense

Information System Agency, the Defense Intelligence Agency, the Defense Legal Services

Agency, the Defense Logistics Agency, the Defense Security Assistance Agency, the Defense

Security Service, the Defense Threat Reduction Agency, the National Imagery and Mapping

Agency, the National Security Agency. The Field Agencies include the Armed Forces

Information Service, the Defense Prisoner of War/Missing Personnel office, the Defense

Civilian Personnel Management Service, the DOD Education Activity, TRICARE

Management Activity, the Office of Economic Adjustment, and Washington Headquarters

Services.

CRS-22

Alternative Ways of Analyzing the Defense Budget

To some observers, the three traditional ways of organizing the DOD budget

discussed above are of limited utility because they focus on artificial accounting inputs

instead of mission outputs. Some critics have proposed reorganizing DOD budget

submissions along so-called “mission” lines in order to more clearly reflect what

military capabilities the United States is buying.48 Missions might include, for

example, strategic offense, sea control, or air superiority. Proponents say that such

a reorganization would help coordinate DOD management and budgeting processes

and aid in setting priorities.

An alternative analysis of the defense budget utilized frequently by some analysts

shows spending in three other categories: manpower, readiness, and modernization.

Manpower. So-called "defense manpower" program costs are frequently

contrasted with costs for major weapon systems and other procurement items to give

some indication of relative spending for people versus hardware in the armed forces.

The DOD appropriations title for military personnel, however, covers only the cost

of pay and benefits for uniformed military personnel. Funding for DOD civilian

personnel is provided mostly in the operation and maintenance account, with smaller

amounts provided in the RDT&E and military construction accounts. DOD regularly

provides a breakdown of the DOD budget that shows pay and benefits for civilian as

well as uniformed personnel -- in FY1998, 44 percent of DOD budget authority was

for pay and benefits of military and civilian employees.49

Even this breakdown of the budget does not, however, capture all the DOD

personnel-related costs. A broader definition of DOD "manpower" costs might

include pay and benefits plus family housing, individual training, medical support,

recruiting and examining, overseas dependent education, a portion of base operating

support costs, and various other personnel support programs.50

Readiness and Modernization. A major debate in recent years has revolved

around the balance of funding between readiness and modernization. As defined by

DOD, readiness is "the collective capability of the elements of the force to deliver

outputs for which they were designed." Modernization is the "technical sophistication

of all the elements of the force." Readiness and modernization are two of four pillars

of military capability commonly defined by DOD.51

48

U.S. Congress, Senate, Committee on Armed Services Staff Report Defense Organization:

The Need for Change, S. Rept. 99-86, October 16, 1985, pp. 596-98.

49

Department of Defense Comptroller, National Defense Budget Estimates for FY1999,

March 1998, p. 123.

50

Department of Defense, Manpower Requirements Report FY1998, September 1997.

Section IX -- Cost of Manpower, p. 6.

51

The other two pillars are force structure (the numbers, size, and composition of the units that

comprise our defense forces) and force sustainability (the "staying power" of the force during

(continued...)

CRS-23

There are no categories in the three traditional DOD budget formats, however,

called "readiness" and "modernization." Analysts frequently associate readiness with

the O&M appropriations title and modernization with the procurement and R&D

titles. This approach is imprecise, however. Many readiness-related items are funded

in the procurement title (e.g., replenishment spares and ammunition for training).

More importantly, much of O&M funding is for activities only indirectly related to

readiness, including base operations, environmental cleanup, financial management

and other overhead activities, and many other support functions.

Even with only rough measures available, however, certain trends stand out. A

general trend is that the "modernization" part of the budget tends to vary much more

than the "readiness"-related part of the budget. When total defense budgets are

growing, modernization funding typically rises faster. When total defense budgets are

declining, modernization funding plummets. Readiness-related budget accounts, in

contrast, have grown at a fairly steady, modest pace relative to the size of the force,

with variations due to increases or cuts in the number of troops.

Constant FY1999 $ in Billions

This trend has been

Figure 6: Department of Defense

especially striking in recent

Budget Authority by Title, FY1985-2003

years — total budget

140

authority

for

national

defense declined by 36% in

120

real terms between peak of

Operation & Maintenance

100

the Reagan buildup in

FY1985 and FY1998, while

Military Personnel

80

weapons

procurement

60

RDT&E

declined by 67% and O&M

Procurement

by just 17% over the same

40

period. Figure 6 illustrates

20

Other

the trend. This has kindled

an ongoing dispute about

0

1985

1990

1995

2000

the adequacy of the Clinton

Fiscal Year

Administration's

defense Note: FY1998-2003, Administration projection

budget plans. Critics argue

that tight budgets in the 1990s have led the Administration to cut weapons

modernization too deeply to protect near-term readiness. Low rates of

modernization, they contend, will jeopardize the "future readiness" of the force, which

depends on modern weaponry. Critics also believe that the industrial base needed to

produce new weapons in the future is languishing.

For their part, Administration officials acknowledge that procurement levels have

been extremely low in recent years. But, they argue, a "procurement holiday" was

acceptable, first, because the new weapons bought during the buildup of the 1980s

have only recently been delivered, so the current force is very modern and, second,

because the drawdown in the size of the force led to the retirement of older equipment

51

(...continued)

combat operations, often measured in number of days). In popular parlance, sustainability

is often included as a part of readiness.

CRS-24

so that the average age of weapons in the field has declined. Weapons procurement

funding must now begin to turn up, they say, and, since the fall of 1995, the Joint

Chiefs of Staff have urged that a procurement funding level of $60 billion be achieved

by the end of the decade.

The dispute over the adequacy of long-term modernization funding has been

accompanied by a debate about the adequacy of readiness-related funding as well.

Even with readiness-related funding apparently being protected, reports of shortfalls

in training, spare parts, equipment repairs, and real property maintenance have grown

over time. Meanwhile, the Department of Defense had projected that O&M funding

growth would level off in the future because of several efficiency measures, including

base closures that were approved in earlier years and ongoing efforts to reduce costs.

These expectations have proven increasingly difficult to sustain, and, it now appears

that the Department of Defense, with White House support, will propose substantial

increases in planned budgets over the next few years in an effort to protect both

readiness and modernization.

CRS-25

Chapter 3: The Defense Budget Process

The three major stages of the defense budget process are (1) formulation of the

defense budget proposal by the executive branch; (2) review and approval of the

budget by Congress; and (3) budget execution.52 As Figure 7 shows, the two key

benchmarks in the process dividing the three stages are (1) submission of the defense

budget to Congress by the President — which, under current law, must take place by

the first Monday in February53 — and (2) the beginning of the new fiscal year on

October 1.54

Figure 7: Time Line of Defense Budget Process*

President Submits

Defense Budget

Beginning of

Fiscal Year

Executive Preparation &

Submission (Planning,

Programming & Budgeting

System in DOD)

Congressional

Defense Budget

Process

Budget Execution

Obligation and Expenditure

of Funds

Aug.

Feb.

Oct. 1 & continuing

Jan.

FY Minus

26 Mos.

FY Minus

8 Months

*

For the first year of the biennial budget cycle. An abbreviated process is used for the

executive preparation phase within DOD for the second year of each cycle

While many aspects of the budget process apply equally to all programs in the

national defense budget function, this section discusses the defense budget process as

it relates to the DOD budget only. The description provided here is based on the

formal process as defined in DOD directives and legislation. Practice sometimes

deviates from the formal procedure.55

52

A fourth stage in the budget process — review and audit — is sometimes identified, but is

not discussed in this primer.

53

As specified in the Budget Enforcement Act (BEA) of 1990, as amended. The 1985

Balanced Budget and Emergency Deficit Control Act (“Gramm-Rudman-Hollings” or GRH)

required that the President submit a budget to Congress on the first Monday after January 3,

but this deadline was seldom met. The BEA permits submission of the budget as late as the

first Monday in February, but the conference report accompanying the legislation urges earlier

submissions.

54

In practice, Congress very often doesn't complete the budget process until after the end of

the current fiscal year. Temporary funding is generally provided in a continuing resolution.

(See discussion below.)

55

For a general description of the federal budget process, see (name redacted) and Allen Schick,

Manual on the Federal Budget Process, CRS Report 98-720.

CRS-26

Executive Stage

Since 1961, the formal process that the Department of Defense has followed in

preparing its budget has been known as the Planning, Programming, and

Budgeting System (PPBS).56 The whole PPBS process, from the beginning of

planning to commencement of the budget year, takes about 26 months — from the

start of the planning phase to the time the budget request is submitted to Congress in

February is about 18 months, while the budget year begins some 8 months later on

October 157 (see Figure 8).

Figure 8. Department of Defense PPBS Timeline

(beginning 26 months before Fiscal Year)

Planning

Programming

Budgeting

Dates

August to January

February to July

August to December

Action

Inputs from Office

of the Secretary of

Defense (OSD),

Services, and Joint

Chiefs of Staff (JCS)

Program Objective

Memoranda (POMs)

developed to meet

requirements of

DPG

Review of POMs

and PDMs;

restructuring of

program elements

into appropriations

accounts

Actor

Office of the

Undersecretary of

Defense for Policy

Defense Resource

Planning Board

DOD Comptroller

and OMB

Outcome

Defense Planning

Guidance (DPG)

Program Decision

Memoranda (PDMs)

Budget (and

justification

materials)

*For the first year of the biennial budget cycle. An abbreviated process is used for the executive

preparation phase within DOD for second year of each cycle.

Until recently, this process was followed for each annual budget, which meant

that parts of the process for one year overlapped with the process for the following

year. In 1985, however, the Congress mandated a change to a biennial budget cycle

beginning with preparation of the FY1988-89 budget — i.e., the budget that began

to be prepared in mid-1986 and that was submitted to Congress in January 1987.58

As a result, DOD now goes through the whole PPBS process only every other year.

An amended budget is submitted for the second year of each cycle, but this amended

56

The PPBS process was introduced in 1961 by then-Secretary of Defense Robert McNamara.

57

For more detailed information on the PPBS

http://www.dsmc.dsm.mil/pubs/pmnotebook/pmntoc.htm.

58

system,

see

the

website:

The change was mandated by Congress in 1985 in Section 1405 of the FY1986 National

Defense authorization Act, P.L. 99-145.

CRS-27

budget is prepared through a more limited process that generally follows the

procedures used in the "budgeting" part of the full PPBS exercise.

The PPBS process is designed not only to prepare a budget for submission to

Congress but also as the principal mechanism through which the Department of

Defense prepares its own, internal, long-term financial plan. Indeed, the system

produces not only an annual or biennial budget for congressional consideration, but

also a long-term defense plan for the following four years. When the budget

submission to Congress covered only one year, PPBS produced a Five-Year Defense

Plan, or FYDP (pronounced “Fiddip”). Now, with a two-year budget submitted to

Congress, the long-term plan extends over a six-year period and is known as the

Future Years Defense Plan (i.e., still the FYDP).59

As its name implies, the PPBS process can be divided into the three distinct

phases of (1) planning, (2) programming, and (3) budgeting, each of which produces

a specific product.

Planning. The planning phase of the PPBS process is designed to integrate

assessments of potential military threats facing the country, overall national strategy

and defense policy, ongoing defense plans and programs, and projected financial

resources into an overall statement of policy. The formal outcome of the process is

the Defense Planning Guidance (DPG), which provides the basic rationale for DOD

programs and budgets in the next FYDP. The planning phase formally begins in

August, a year-and-a-half before the next biennial budget is scheduled to be submitted

to Congress. Even before this time, civilian officials in the Office of the Secretary of

Defense (OSD) as well as military officials in each of the and, especially, on the Joint

Staff (i.e., operating under the Chairman of the Joint Chiefs of Staff), are reviewing

and commenting on the earlier DPG. The Joint Chiefs of Staff (JCS) also issue their

own policy overview, called the Joint Strategic Planning Document (JSPD), which

provides formal JCS recommendations to the Secretary of Defense on the DPG. The

DPG, which is prepared in the Office of the Undersecretary of Defense for Policy,

provides official guidance to the military services on the basic principles that they are

to follow in preparing their own long-term budget plans.

Programming. The programming phase of the PPBS process lasts from about

February through July of the year before the budget goes to Congress. In this phase,

each military service prepares a Program Objective Memorandum (POM), which

details the specific forces and programs that the service proposes over the FYDP

period to meet the military requirements identified in the DPG within the financial

limits that are mandated by the Secretary of Defense. Each service has its own

process for preparing its POM, and service procedures differ substantially from each

other. The service POMs are reviewed by the Defense Resource Planning Board

59

Section 1203 of the National Defense Authorization Act for FY1988 and FY1989 (P.L. 100180) requires the Secretary of Defense to submit the FYDP to Congress by April 1 of each

year. Since the FYDP is a working financial plan, its evolution does not stop after it is

initially formulated. The FYDP is updated to reflect congressional changes in requested

programs and other major and minor, short- and long-term adjustments. The FYDP is usually

updated three times within each cycle.

CRS-28

(DRPB), a high-level group chaired by the Deputy Secretary of Defense and including

representatives from organizations within OSD and the Joint Chiefs. The POM

review process often involves vigorous back and forth debate, with key issues being

identified by DRPB subgroups, decided initially by the DRPB, appealed by the

services, and reviewed and decided again. Ultimately the DRPB makes final decisions

about service plans in the form of Program Decision Memoranda (PDMs) that are

officially approved and signed by the Secretary of Defense.

Budgeting. The budgeting phase of the PPBS process generally lasts from

about August through late December. Primary responsibility for the budgeting

process lies with the Office of the DOD Comptroller, which draws on other

organizations within OSD for support and which works closely with the White House

Office of Management and Budget (OMB).60 In part, the budget review is a fairly

technical exercise in which earlier budget allocations made in terms of program

elements used in the FYDP and the POMs are restructured for submission to

Congress according to appropriations accounts. The budget review also involves

preparation and approval of justification material for submission to Congress with the

budget request and, in some cases, a project-by-project review to ensure that

programs are sufficiently well-justified to secure congressional support. As a result,

the budget review is inherently a policy-oriented process, and the services sometimes

complain that decisions presumably made during the POM process are revisited

during the budget review. The outcome of the budgeting phase is the final

preparation of the DOD budget request that is submitted through the White House

to the Congress.

Even after the defense budget is submitted to Congress, the executive branch can

revise its budget request. Major budget amendments are often submitted by

incoming Administrations to modify budgets prepared by their predecessors.61 Minor

budget revisions in response to changing threat perceptions, international events, or

the domestic political and economic situation, may be submitted either formally or

informally. Budget revisions can complicate the process of tracking congressional

action on the budget because House and Senate committees reviewing the President’s

proposals may actually be considering different requests.

60

In fact, OMB officials are involved in the PPBS process throughout — OMB staff work

directly at the Pentagon and participate in the POM review process as well as in the budget

review. The defense budget is unique in the extent to which OMB is directly involved

throughout the budgeting process.

61

When it came into office in 1989, the Bush Administration proposed a budget amendment

revising the Reagan budget request for FY1990. It also submitted minor (though formal)

budget amendments for FY1991 and FY1992. When it was leaving office, the Bush

Administration did not submit a budget to Congress, so the Clinton Administration simply

submitted its own request. The Clinton Administration has frequently submitted minor

defense budget amendments, such as an amendment to the FY1999 request asking Congress

to provide emergency funding for operations in Bosnia. Formal budget amendments are

printed as House documents.

CRS-29

Congressional Defense Budget Process

The Congressional Budget Act (CBA) of 1974 (P.L. 94-344), as amended,62

establishes the timetable for congressional action on the federal budget.63 As currently

practiced, the congressional budget process stems from the CBA of 1974. The

authorization and appropriations process stems from House and Senate rules. These

different processes are linked together in various ways.

Congressional action on the defense budget is a three-step process.64 Step 1 is

passage of the Concurrent Budget Resolution (CBR), which is designed to provide

an overview of the entire federal budget, creating a framework for consideration of

subsequent revenue and spending measures. Step 2 is the defense authorization

process, which establishes the statutory authority for defense programs. Step 3 is the

appropriations process, which creates the budget authority to fund defense programs.

Table 5 provides a timetable of the congressional budget process.65 The actual

sequence of events in Congress rarely adheres to the timetable prescribed by the

Congressional Budget Act, but the timetable serves as a guideline and may, to some

extent, exert pressure on Congress to act.66

62

The CBA of 1974 has been amended by these five laws, among others:

1. the Balanced Budget and Emergency Deficit Control Act of 1985 (P.L. 99-177),

which is known as the Gramm-Rudman-Hollings (GRH) Act;

2. the Balanced Budget and Emergency Deficit Control Reaffirmation Act of 1987 (P.L.

100-119);

3. the Budget Enforcement Act (BEA) of 1990, which was part of the Omnibus Budget

Reconciliation Act (OBRA) of that year (P.L. 101-508);

4. the Omnibus Budget Reconciliation Act (OBRA) of 1993 (P.L. 103-66); and

5. the Budget Enforcement Act of 1997, which was part of the Balanced Budget Act of

1997 (P.L. 105-33).

63

The Congressional Budget Act of 1974 (P.L. 94-344) established the timetable for the

congressional budget process; the Budget and Accounting Act of 1921 established the

executive budget process; and the Balanced Budget and Emergency Deficit Control Act of

1985 established the sequestration process (see footnote 63 below).

64

There is a fourth step in GRH Act called sequestration, meaning a process that withholds

or cancels already appropriated funds. An elaborate sequestration procedure comes into play

if the spending caps and pay-as-you-go requirements (governing mandatory spending and

revenues) are not met through the budget process. Funds are then sequestered through a

formula set out in the law. Sequestration procedures have not been invoked since 1990, due

to changes in congressional budget practices.

65

See Appendix D for the actual timetable of congressional action on the FY1999 budget.

66

See (name redacted), The Appropriations Process and the Congressional Budget Act

(CBA), CRS Report 97-947, for details on the timing of appropriations consideration and the

CBA.

CRS-30

Table 5: Congressional Defense Budget Process

Timing

Action

By the first Monday in February

President submits defense budget to Congress

Budget, Senate Armed Services & House

National Security, and Appropriations

Committees and relevant Sub-Committees

commence hearings on the defense budget

Six weeks after budget submission

Senate Armed Services & House National

Security and Appropriations Committees

submit “views and estimates” on the defense

budget level to Budget Committee

Apr. 1

Senate Budget Committee reports CBR

Apr. 15

Congress completes action on the CBR

setting levels of budget authority and outlays

for the national defense budget function

No Formal Deadline

Congress approves defense authorization act

June 10

House Appropriations Committee reports last

annual appropriations act

June 30

House completes action on annual

appropriations acts

Oct. 1

Beginning of new fiscal year. Funding

provided either in regular appropriations acts

or continuing resolutions

The congressional committees responsible for the defense budget are the Budget

Committees, the Appropriations Committees, and the defense authorizing

committees — the House National Security Committee and the Senate Armed

Services Committee. As Table 6 shows, the defense budget is voted on a minimum

of 12 times on the floor, and 10 times in committee over the course of the annual

congressional defense budget process.67 The following discussion reviews the budget

resolution, authorization, and appropriations processes in sequence. It also reviews

related matters, such as the relationship between authorization and appropriations.

67

A form labeled “Legislative History of the Defense Budget” is printed on the last page of this

report to help the reader track the defense budget through the major stages of the

congressional budget process.

CRS-31

Table 6. Milestone Votes on the Defense Budget

(major stages of congressional action at which votes occur)

House

Action

Budget Resolution

Budget Committee

Floor Action

Conference Report Approval

Authorization Legislation

Armed Services/

National Security Committees

Subcommittee Markup

Full Committee Markup

Floor Action

Conference Report Approval

Appropriations Legislation

Appropriations Committee

Defense Subcommittee Markup

Full Committee Markup

Floor Action

Conference Report Approval

Total Votes

Committee

Senate

Floor

X

Committee

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

5

Floor

6

X

X

5

6

Notes: Represents the minimum number of votes likely to occur. Does not include possible

votes on floor and committee amendments.

Concurrent Budget Resolution. The first formal defense budget action in each

legislative year is consideration of the Concurrent Budget Resolution (CBR).68 The

Congressional Budget Act of 1974 mandated the consideration of a budget resolution

as a means for Congress to review overall national budget priorities. The budget

resolution allows Congress to review funding for particular programs in the context

of the entire federal budget, instead of dealing with each budget activity in isolation.

There has, however, been a great deal of controversy about how program-specific

Congress should be at this stage of the budget process. Under the terms of the 1974

Budget Act, as amended, the budget resolution establishes revenue floors and sets

ceilings on total budget authority and outlays. The concurrent budget resolution also

allocates spending among functions, including the national defense budget function

(i.e. the 050 function).69 These functional allocations are not binding on subsequent

appropriations however, since the means of enforcing budget ceilings and revenue

floors allow considerable flexibility to revise functional allocations in the subsequent

68

A concurrent resolution must pass both houses of Congress but is not submitted to the

President.

69

For more details, see (name redacted), The Appropriations Process and the Congressional

Budget Act, CRS Report 97-947.

CRS-32

course of the budget process. The Concurrent Budget Resolution also sets separate

targets for spending within two broad categories of expenditures — discretionary and

mandatory.70 Discretionary funds must be appropriated each year. Mandatory (also

known as direct) spending, in contrast, is established by standing law for programs

like Medicare and Social Security. The amount spent for such programs, therefore,

can be adjusted only if Congress amends the underlying statutes.

Consistent with ceilings on total budget authority and outlays, the concurrent

budget resolution allocates funds to the appropriations committees and may include

so-called "reconciliation" instructions to congressional authorizing committees to

achieve specified amounts of changes in standing laws governing so-called direct or

mandatory accounts. These instructions may include directions to the defense

authorizing committees to make adjustments in total amounts of money for military

retirement benefits, which are a form of direct spending.

Action on the Concurrent Budget Resolution is formally governed by a timetable

established by the Congressional Budget Act as amended. Within six weeks after

submission of the President’s budget proposal, the House and Senate defense

authorizing and appropriations committees are required to submit their “views and

estimates” on the size of the defense budget to the two budget committees. These

"views and estimates" letters often make a case for an increase in defense spending,

usually with little effect on the process, and may also call attention to particular issues,

such as the balance between budget authority and outlays under Administration plans

as reestimated the Congressional Budget Office (see below). The Senate Budget

Committee is to report its version of the Budget Resolution by April 1. Congress is

to complete action on the Budget Resolution by April 15. In practice, these

timetables often slip. Indeed, in 1998, Congress did not pass a Congressional Budget

Resolution at all — instead, action on authorization and appropriations bills for

FY1999 proceeded on the basis of funding targets established by the long-term budget

agreement reached in 1997.71

The CBA of 1974 provides for both substantive and procedural points of order

to block violations of budget resolution policies and congressional budget procedures.

For example, total discretionary amounts are binding only for the Senate, where bills

or amendments that would lead to a violation of the ceilings are subject to a point of

order. There is no binding ceiling on mandatory spending in the CBR, however.72

70

“The Budget Enforcement Act (BEA) divides spending into two types — discretionary

appropriations and direct spending. Discretionary spending is controlled through annual

appropriations acts. ...Direct spending is more commonly called mandatory spending.

Mandatory spending is controlled by permanent laws.” (Office of Management and Budget,

The Budget System and Concepts: Budget of the United States Government, Fiscal Year

1999, Feb. 1998, p. 3.)

71

In acting on FY1999 appropriations bills, the Senate approved resolutions (S.Res. 209 on

April 2, 1998 and S.Res. 312 on October 21, 1998) which provided a formal allocation of

funds to the Appropriations Committee in lieu of the concurrent budget resolution. These

resolutions allowed action on appropriations bills under Senate rules.

72

For more information about budget enforcement procedures and points of order, see Robert

(continued...)

CRS-33

It is important to note that the annual budget resolution simply establishes overall

targets for budget authority and outlays for the national defense function (050) — the

resolution does not specify how these funds should be allocated among specific

defense programs. The House and Senate Budget Committees sometimes include

language in their reports on the budget resolution explaining the assumptions

underlying recommended functional funding levels, but these recommendations have

no binding effect. Actual decisions on defense funding priorities, therefore, are made

only in the defense authorization and appropriations bills. Moreover, even the total

level of defense spending is not firmly established by the budget resolution.

Mechanisms for enforcing budget targets in the budget resolution allow considerable

flexibility to the appropriations committees in allocating total discretionary spending

(see the discussion of the appropriations process, below, for an explanation of this

point).

Though the annual budget resolution does not do so, in recent years Congress

has sometimes established more rigid limits on defense discretionary spending as part

of legislation implementing long-term White House-congressional budget agreements.

The Budget Enforcement Act of 1990 established enforceable caps on defense

discretionary spending (and on other categories of discretionary expenditures) in

FY1991, FY1992, and FY1993, and set a cap on total discretionary spending through

FY1995. These caps were enforced through automatic across-the-board reductions

in spending known as sequestration. The caps on total discretionary spending, but not

the separate caps on defense expenditures, were extended through FY1998 by the

Omnibus Budget Reconciliation Act of 1995. The Budget Enforcement Act of 1997

further extended caps on total discretionary spending through FY2002 and reimposed

separate caps on defense discretionary expenditures in FY1998 and FY1999.73 Table

7 shows the limits on defense and other categories of discretionary expenditures under

the BEA of 1997 as estimated at the time the Act was approved.74 Both the CBR

levels and discretionary spending limits are adjustable for various factors, such as

emergency spending.75

72

(...continued)

Keith, Manual on the Federal Budget Process, CRS Report 98-720, esp. page 78.

73

For a more detailed discussion of the most recent amendment to the Congressional Budget

Act - BEA of 1997, see (name redacted),

Budget Enforcement Act of 1997: Summary and

Legislative History, CRS Report 97-931.

74

For more information on discretionary spending limits, see: (name redacted), The

Appropriations Process and the Congressional Budget Act, CRS Report 97-947. The

Budget Enforcement Act of 1990 and subsequent legislation also established mechanisms for

controlling mandatory spending and revenues. Changes in tax revenues and in mandatory

spending programs are required to balance each other in such a way that there is no net

increase in total federal spending — these mechanisms are know as the “Pay-As-You-Go” or

“PAYGO” process.

75

Discretionary spending limits can change over time, in accordance with the parameters

established in Section 251(b) of the Balanced Budget and Emergency Deficit Control Act, as

amended by Section 10203(a) of the Budget Enforcement Act of 1997 (P.L. 105-33). Under

the 1997 changes, discretionary spending limits apply separately to defense and nondefense

spending for FY1998-1999 and to violent crime reduction spending for FY1998-2000; for the

(continued...)

CRS-34

Table 7. Initial Discretionary Spending Limits in the

Budget Enforcement Act of 1997 (P.L. 105-33)

(budget authority and outlays)

Fiscal

Year

Defense Spending

Nondefense

Spending

Total Discretionary

Spending

1998

ba $269,000,000,000

o $266,823,000,000

ba $252,357,000,000

o $282,853,000,000

ba $5,500,000,000

o $3,592,000,000

1999

ba $271,500,000,000

o $266,518,000,000

ba $255,699,000,000

o $287,850,000,000

ba $5,800,000,000

o $4,953,000,000

2000

ba $532,693,000,000

o $558,711,000,000

2001

ba $542,032,000,000

o $564,396,000,000

2002

ba $551,074,000,000

o $560,799,000,000

Violent Crime

Reduction

Spending

ba $4,500,000,000

o $5,554,000,000

Source: (name redacted), The Appropriations Process and the Congressional Budget Act, CRS

Report 97-947, August 5, 1997.

Authorization Process. The next phase in the congressional defense budget

process is passage of authorizing legislation, a process which long predates the

enactment of the 1974 Budget Act.76 Authorization laws have two basic purposes.

First, they establish, continue, or modify programs. Second, they are a prerequisite

under House and Senate rules (and sometimes under statute) for the Congress to

appropriate funds for programs77. Authorization acts define the scope of programs

and authorize funding levels for them, providing either a specific amount or “such

funds as may be necessary” to implement the program. Authorization does not create

budget authority — this is done only by appropriations acts.

Established in 1946, the Senate Armed Services Committee and its House

counterpart, known as the House Armed Services Committee until 1995 and now as

the House National Security Committee, are responsible for reporting defense

authorization legislation to Congress. The breadth and detail of their work have

evolved considerably over the years. Until 1959, most authorizations were permanent

— with no time limit. The only programs authorized annually were manpower end-

75

(...continued)

remaining fiscal years, all discretionary spending is merged into a single category. In 1998,

as part of the Transportation Equity Act for the 21st Century (P.L. 105-178), Congress added

separate categories for highway and mass transit spending. See (name redacted),

Introduction

to the Federal Budget Process, CRS Report 98-751 for more information on discretionary

spending limits.

76

Defense authorization bills were common in the early nineteenth century.

77

Congressional Budget Office, Unauthorized Appropriations and Expiring Authorizations,

January 15, 1998. p. 1-2.

CRS-35

strengths, military construction, and family housing programs. Since 1959, more and

more defense programs have been made subject to annual authorization, beginning

with procurement programs for aircraft, missiles, and naval vessels and continuing

through working-capital funds, for which annual authorizations were first required in

1983 — Table 8 provides a year-by-year list of authorization requirements.

The defense authorizing committees’ work has become more extensive not only

in the number of programs requiring annual authorization, but also in the level of

detail in which programs are reviewed. While authorizations were originally quite

broad,78 the defense authorizing committees now authorize funding in their committee

reports at the same line-item level as the Appropriations Committees.

The process by which annual defense authorization bills move through Congress

is the same as for any other regular piece of legislation. Defense authorization bills

are “marked up” in each committee, first by the relevant subcommittees and then by

the full committee.79 Following mark-up, each House begins floor action on its

respective bill, with amendments offered and voted on followed by floor votes on

approving the amended bill. Differences between the House and Senate versions of

the bill are resolved in a conference committee, the results of which are returned to

each House for final floor votes, following which the approved measure is then sent

to the President for approval or veto.

There are no deadlines in law for action on authorization acts80, and defense

authorization bills are sometimes delayed past the beginning of a new fiscal year.

Authorization bills have been held up because of extended debates over the budget

resolution, disputes over major defense programs, veto threats, and, in the case of the

FY1996 bill, by a presidential veto.

78

For example, in the 1950s, standing law authorized “for the Air Force 24,000 serviceable

aircraft or 225,000 airframe tons of serviceable aircraft, whichever the Secretary of the Air

Force considers appropriate.” At no time since FY1947, however, has the inventory of U.S.

Air Force aircraft exceeded 9,519 — the FY1955 level. (Jeffrey Record, Revising U.S.

Military Strategy (Washington: Pergamon Publishers, 1984), p. 103.)

79

A bill mark-up involves “going through the contents of a piece of legislation in committee

or subcommittee, considering its provisions in large and small portions, acting on amendments

to provisions and proposed revisions to the language, inserting new sections and phraseology,

etc.” Congressional Quarterly, Congressional Almanac, Volume XXXIX, 1983, p. 7.

80

The Congressional Budget Act of 1974 originally established a May 15 deadline for the

reporting of authorizing legislation, but this requirement was later repealed.

CRS-36

Table 8. Addition of Annual Authorization Requirements

Year

Public

Law

1959

86-149

Procurement of aircraft, missiles, and naval

vessels

1962

87-436

RDT&E for aircraft, missiles, and naval vessels

1963

88-174

Procurement of tracked combat vehicles

1967

90-168

Personnel strengths of each of the Selected

Reserves

1969

91-121

Procurement of other weapons

1970

91-441

Procurement of torpedoes and related support

equipment; active duty personnel strengths of

each component of the Armed Forces

1973

92-436

Average military training student loads of each

component of the Armed Forces

1975

94-106

Military construction of ammunition facilities

1977

95-91

National defense programs of the Department of

Energy

1980

96-342

Operation and maintenance of DOD and all its

components

1982

97-86

Procurement of ammunition and “other”

procurement

1983

98-94

Working capital funds

Programs Added

Source: U.S. Congress. Senate. Committee on Armed Services. Defense Organization: The Need

for Change. S. Prt. 99-86, Oct. 16, 1985. Washington, 1985. p. 575.

The fact that biennial defense budgets have been required each year since 1987

has not fundamentally affected either the authorization or the appropriations process

in Congress. Authorizers bowed in the direction of biennial budgeting for three cycles

— in calendar year 1989, Congress approved a defense authorization bill that formally

covered the years FY1990-91; in 1991, Congress approved a bill for FY1992-93; and

in 1993, Congress approved a bill for FY1994-95. In each of these years, however,

Congress formally authorized funds only for relatively non-controversial programs in

the second year of the biennial cycle along with funds for all defense programs in the

first year of the cycle.81 In the following year of each cycle, Congress then passed a

81

In 1991, for example, Congress passed a “National Defense Authorization Act for Fiscal

Years 1992 and 1993" that authorized $213.3 billion for FY1992 and $165.9 billion for

FY1993. All of the FY1993 funding, however, was revisited in action on the “National

(continued...)

CRS-37

one-year authorization bill that approved all programs for that year. Since 1993,

authorizers have acted on only one year of the cycle. Appropriators have consistently

provided only one-year appropriations.

Appropriations Process. The third major step in the congressional defense

budget process is the appropriations process, which provides budget authority to

fund defense and other discretionary programs. Each year, Congress acts on 13

regular appropriations bills, each of which is initially approved by a separate

subcommittee of the appropriations committee in each House. The bulk of national

defense funding is provided in three appropriations bills (1) national security

(House)/defense (Senate), (2) military construction, and (3) energy and water

development (for Department of Energy defense-related activities). Minor amounts

of funding are provided in three other acts (see Table 9.)

The first formal step in the appropriations process is when the appropriations

committee in each House decides how much money will be allocated to each

subcommittee. While the Concurrent Budget Resolution establishes targets for the

national defense budget function, these targets are only advisory. Under the

Congressional Budget Act, the appropriations committees in each House have

flexibility to allocate total discretionary funding — for defense and non-defense

programs alike — as they see fit. If, for example, the annual budget resolution

recommends $270 billion in new discretionary budget authority for the national

defense budget function, and includes another $270 billion for various non-defense

programs, the total amount of discretionary funding, $540 billion, is available to the

appropriations committees to allocate among the subcommittees as appropriators

decide. Appropriators may decide to allocate only $265 billion to subcommittees for

defense programs, and $275 billion for domestic programs or vice versa.

Section 302 of the Congressional Budget Act establishes procedures through

which budget resolution ceilings on spending are implemented in the appropriations

process. Under Section 302(a) the Concurrent Budget Resolution makes

"allocations" of funds to committees. Section 302(b) requires that the appropriations

committee in each House report how funds under its jurisdiction are then subdivided

among the appropriations subcommittees. These suballocations of funds to the

appropriations subcommittees are therefore commonly referred to as the "302(b)

allocations."82 A point of order may be raised in the House and Senate against any

appropriations bill or any amendment to an appropriations bill that would exceed the

amounts provided in the 302(b) allocation. It is important to note that the 302(b)

81

(...continued)

Defense Authorization Act for FY1993" which Congress approved in 1992.

82

The Budget Enforcement Act of 1990 temporarily created a slightly different process under

a new Section 602, and the appropriations committee distributions were known as "602(b)

allocations" from FY1992 through FY1997. Following passage of the Budget Enforcement

Act of 1997, however, the FY1998 procedure reverted to the earlier "302(b)" process.

CRS-38

Table 9: FY1999 Appropriations for National Defense by Act and

Programs Contained in Each Act*

(current year dollars in millions)

Department of Defense Appropriations Act

Military Personnel

Operation and Maintenance

Procurement

Research, Development, Testing, and Evaluation

Revolving & Mgt Funds

Total DOD Appropriations

Military Construction Appropriations Act

Military Construction

Family Housing

Total Military Construction Appropriations

DOD Offsetting Receipts (Net) & Other

TOTAL - Department of Defense, Military 051

053 - Energy & Water Development Appropriations

Weapons Activities

Environmental Restoration & Waste Management

Defense Facilities Closure Projects

Other Defense Activities

Defense Waste Disposal

Nuclear Facilities Safety Board

Privatization

Remedial Action Program

TOTAL - Department of Energy Defense-Related 053

054 - HUD - Independent Agencies Appropriations

Federal Emergency Management Agency (FEMA)

US Antarctic Logistics Support Act (NSF)

Selective Service System

Subtotal

054 - Department of Defense Appropriations Act

Community Management Staff

CIA Retirement & Disability Fund

Coast Guard (Defense Related)

Subtotal

054- Commerce-Justice-State Appropriations Act

Maritime Security Program

Radiation Exposure

Export Administration

FBI (Defense Related)

Subtotal

TOTAL - Other Defense Related 054

TOTAL - Atomic Energy/Other Defense Related 053/054

TOTAL National Defense 050 (051/053/054)

70,579

93,376

48,870

36,561

1,521

250,907

4,908

3,542

8,450

(2,020)

257,337

4,400

4,310

1,038

1,697

189

17

228

140

12,019

44

63

24

131

102

202

329

633

90

2

2

292

386

1,150

13,169

270,505

Source: Congressional Budget Office.

*Note: Does not include FY1999 supplemental appropriations in H.R. 4328 (P.L. 105-277).

CRS-39

allocations are adjusted frequently over the course of the appropriations process as

appropriations bills are acted on.

In the Senate, the Defense Subcommittee of the Appropriations Committee and

the Military Construction Subcommittee and, in the House, the National Security

Subcommittee and the Military Construction Subcommittee have jurisdiction over

military programs administered by the Department of Defense. The Energy and

Water Development Subcommittee in each House chamber has jurisdiction over

Department of Energy defense activities. These subcommittees hold hearings to

review the President’s defense budget request and to mark up defense appropriations

legislation before full committee mark-up.83 Floor action and conference committees

then proceed in the same manner as with the authorization acts.

Under the Congressional Budget Act (CBA), as amended, the House

Appropriations Committee is required to report all annual appropriations acts by

June 10 and the House must complete action on them by June 30. These deadlines

are rarely met. The CBA bars consideration of appropriations bills before the

concurrent budget resolution is adopted. Under an exception, however, the House

Appropriations Committee can proceed on May 15th. In the past, the Senate has

waived the requirement for a concurrent budget resolution to permit consideration of

individual appropriations bills. In acting on FY1999 appropriations bills, the Senate

met the requirement by approving measures (S.Res. 209 on April 2, 1998 and S.Res.

312 on October 21, 1998) which provided a formal allocation of funds to the

Appropriations Committee in lieu of the concurrent budget resolution. There is no

formal deadline for final congressional action on appropriations, though government

agencies must shut down non-essential operations if funding is not provided in some

form (either in regular appropriations bills or in one or more continuing resolutions)

by the beginning of the fiscal year on October 1.

Some particular characteristics of defense appropriations acts are worth noting.

First, the national defense budget function is made up almost entirely of programs that

require annual appropriations. The exceptions are a small amount of DOD trust funds

that are funded through permanent appropriations.84 In the case of annual

appropriations, Congress must pass new appropriations acts every year to sustain

a program. Permanent appropriations, in contrast, are usually made in substantive

legislation and make funds available each year without new action by Congress.

Second, Congress does not formally specify in the language of the appropriations

acts themselves levels of funding for every item in the defense budget. Instead, for

the most part, defense appropriations acts appropriate a “lump sum” for all the

programs funded in a given appropriations account, although specific amounts may

be appropriated for individual programs of particular concern to Congress. The

83

Appropriation acts usually originate in the House, but because of delays in House action the

Senate Appropriations Committee has occasionally proceeded to mark up its version of the

defense appropriations act before House passage of its version.

84

For example in FY1998, budget authority for DOD Trust Funds equaled $246 million.

There are 16 small trusts, including funds such as: General Gift Funds for the Army, Navy

and Air Force.

CRS-40

FY1998 defense appropriations act (P.L. 105-56), for example, provides

$6,535,444,000 for Navy aircraft procurement without specifying how much is for the

F-18 aircraft or other particular weapons. Authorization acts approve funding at a

similar level of detail.

While the acts themselves do not specify funding by line item, committee reports

on the defense appropriations acts do specify levels of funding at the line item level.

Moreover, the military departments provide detailed budget information on programs

in “justification” material presented to Congress, and if appropriations reports do not

specifically change the request, Congress assumes that DOD will carry out the

programs as requested. In a strict legal sense nothing requires DOD to adhere either

to the recommendations in congressional reports or to its own program budget

proposals in spending money appropriated by Congress at the line item level. A

failure to spend funds in accordance with the detailed justification material and

committee reports, however, could cause Congress to lose confidence in the requests

and might result in reduced appropriations or in line item appropriations acts.85 As

a result, DOD procedures require officials to act in accordance with congressional

intent, as expressed in committee reports.

A third characteristic is that the overall funding level in the annual defense

appropriations act is difficult to compare directly to the level in the annual defense

authorization act. One reason, as noted earlier, is that the defense authorization bill

includes funding for activities financed in several different appropriations bill. For

example, the defense appropriations bill does not include funding for military

construction and family housing, which is provided in the military construction

appropriations bill. Nor does it include funding for Department of Energy defenserelated activities, which is provided in the energy and water appropriations bill. Also,

funds for the selective service system and for civil defense are provided in other

appropriations bills. The defense authorization bill, in contrast, authorizes funds for

all of these defense-related activities.

The defense authorization bill also takes account of offsetting receipts for sales

of surplus equipment to the public and sales from the national defense stockpile, for

example, while the defense appropriations bill does not. Moreover, until FY1998, the

annual defense authorization bill did not specifically authorize an amount of money

for military personnel, while the defense appropriations bill has always included such

amounts. The defense appropriations bill also provides funds for some other

functions, such as intelligence community management, which the authorization bill

does not address.

Finally, within the total, the authorization and appropriations bills use a

somewhat different account structure — the most significant difference is that the

authorization bill includes defense health program funding within the operation and

maintenance account, while the appropriations bill provides defense health funding

85

U.S. Congress, House Committee on Appropriations, "Report to accompany H.R. 11575,

the Department of Defense Appropriation Bill 1974," H.Rept. 93-662, p. 16. Quoted and

discussed in (name redacted),

The Constitution Between Friends: Congress, the President, and

the Law (New York, St. Martin’s Press, 1979), pp. 33-36.

CRS-41

under a separate account for "Other Defense Activities." Table 10 compares the

FY1999 national defense authorization act to the FY1999 DOD appropriations act.

Three major kinds of appropriations acts may be used to fund defense (and

other) programs: (1) regular appropriations acts, (2) continuing appropriations

resolutions, and (3) supplemental appropriations acts.

Regular Appropriations Acts. Five major regular appropriations acts, listed

in Table 9, in whole or in part provide national defense funding. The largest of the

defense measures is the annual defense appropriations act, which, for FY1999,

provided about 95% of the 050 budget function.

Continuing Appropriations Resolutions. If Congress fails to pass regular

appropriations acts by the beginning of the fiscal year on October 1, DOD (and other

affected agencies) can be left with no money to pay personnel, fund daily operations,

or execute new contracts.86 Standing law allows essential government activities,

including national security-related functions, to continue even in the absence of

funding, but non-essential programs may not continue, and day-to-day agency

operations are disrupted. To avoid the disruptive effects of such funding cut-offs,

continuing appropriations legislation is often enacted by Congress to provide

“stop-gap” budget authority until regular appropriations acts are approved.87 “Stopgap” continuing appropriations resolutions sometimes provide funds for DOD for a

certain specified time period at the level approved for the prior fiscal year or at the

President’s requested level, whichever is less, with the restriction that these funds

cannot be used for new programs. Additional restrictions, however, are often

included. A continuing resolution may, for example, specify that defense programs

will be funded at levels recommended in committee reports on defense appropriations

acts or in bills passed by one or both Houses of Congress.

Some continuing appropriations resolutions substitute for regular appropriations

acts and provide full-year funding.88 The language in these resolutions is the same

86

For more information on continuing appropriations acts, see (name redacted),Continuing

Appropriations Acts: Brief Overview of Recent Practices, CRS Report 97-892.

87

Short-term continuing resolutions were used for defense funding in FY1996, FY1997,

FY1998, and FY1999. The longest recent period of time for which defense funding was

provided under a continuing resolution was in FY1996. Of the thirteen regular FY1996

appropriations bills, only the military construction bill was completed by the September 30,

1995 deadline, and there were a series of temporary continuing resolutions for the FY1996

budget. DOD, along with other government agencies, was funded by three continuing

resolutions in October and November and suffered a government shutdown from November

14 to 18, 1995. The defense appropriations bill finally passed the House and Senate on

November 16, 1995 and became law without the President's signature on December 1, 1995.

88

For example, in FY1988 DOD was funded by a full-year continuing resolution, passed by

Congress after four temporary continuing resolutions had expired. The House incorporated

the version of the DOD appropriations act that it had earlier passed into its version of the

continuing resolution (H.J.Res. 395), and the Senate followed the same strategy. Differences

in defense funding levels were then resolved in the conference on the continuing resolution.

CRS-42

Table 10: Comparison of FY 1999 Defense Appropriations and

Authorization Budget Amounts

(budget authority in billions of dollars)

Title

Military Personnel

Operation & Maintenance /a/

Procurement /b/

RDT&E

Military Construction

Family Housing

Revolving & Mgmnt. Funds

Other Defense Programs /c/

Related Agencies /d/

Other Defense-Related Activities /e/

General Provisions

Scorekeeping Adjustments

Trust Funds

Receipts/Other

Atomic Energy Defense Activities

Total DOD

National Defense

Authorization

70.6

93.5

49.5

36.0

4.9

3.5

1.5

NA

NA

1.0

NA

NA

0.3

-2.3

12.0

270.5

Department of Defense

Appropriations

70.6

84.0

48.6

36.8

NA

NA

0.8

11.8

0.4

NA

-2.4

0.0

NA

NA

NA

250.5

Sources: Conference reports on the FY1999 Defense Appropriations bill (H.Rept. 105-746) and the FY1999

National Defense Authorization bill (H.Rept. 105-736).

Notes:

a. O&M in the appropriations bills differs from O&M in the authorization bills mainly because the Defense

Health Program and Drug Interdiction are included in O&M in the authorization but in "Other Defense

Programs" in appropriations.

b. Procurement in the appropriations bills differs from Procurement in the authorization bills mainly because

Chemical Agents and Munitions Destruction is included in Procurement in the authorization but in "Other

Defense Programs" in appropriations.

c. Includes Defense Health Program, Chemical Agents and Munitions Destruction, Drug Interdiction, and

Office of the Inspector General.

d. Includes CIA Retirement and Disability System Fund, Intelligence Community Management Account,

Payment to Kaho'olawe Island Fund, and National Security Education Trust Fund.

e. Includes Selective Service System and defense-related civil defense activities of the Federal Emergency

Management Agency.

as a regular appropriations act, with specific sums appropriated for all the

appropriations accounts and for whatever individual programs Congress specifically

mentions.

Supplemental Appropriations Acts. Frequently, Administrations request funds

from Congress to cover additional expenses during the current fiscal year. Congress

may approve such funding in supplemental appropriations acts. Prior to passage

of the Congressional Budget Act in 1974, supplemental funding bills were regularly

used to provide funding for day-to-day agency operations — pay raises for DOD and

other federal employees, for example, were usually funded in supplemental

appropriations measures. In recent years, supplemental appropriations bills have been

CRS-43

used mainly to provide funding for unanticipated expenses — though there is

sometimes an argument about whether the requirements should have been anticipated

or not.

In 1991 and 1992, for example, the Congress approved supplemental

appropriations to provide funds for Operation Desert Shield/Desert Storm. Every

year since then, Congress has provided some supplemental funding for the

Department of Defense, mainly to cover costs of unplanned military operations

abroad, including operations in Somalia, Haiti, Bosnia, and the Persian Gulf.

Supplemental funds have also frequently been provided to cover storm damage to

defense facilities and equipment — indeed, funds for defense programs have often

been provided in supplemental appropriations measures that also include substantial

amounts to respond to domestic disasters, such as earthquakes and floods. There also

remain some vestiges of the older procedure — cost of living adjustments for

veteran's benefits, for example, are annually approved as part of a supplemental

appropriations bill. Still, there is no longer an expectation that an annual supplemental

will be considered as part of the regular, yearly budget process.

Generally, supplemental funds are provided in response to Administration

requests, and the Administration frequently sends one or more packages of

supplemental appropriations requests to Congress for activities in the current year at

the same time as it sends the regular budget request for the next fiscal year to Capitol

Hill.89 Congress often adds funding for unrequested items to the supplemental

appropriations bills, however, and such "must pass" bills also often become vehicles

for policy "riders" that may be controversial.

Over the past few years, procedures for acting on supplemental appropriations

measures have been altered further by provisions of the Budget Enforcement Act

(BEA) of 1990. As noted earlier, the BEA established enforceable caps on total

discretionary spending and, in some years, it set separate caps on defense and other

types of discretionary expenditures. In order to allow for supplemental appropriations

to respond to emergencies without requiring offsetting rescissions, the BEA provided

that the discretionary spending caps would be increased by amounts specifically

designated as emergency appropriations by the President and Congress. The BEA

also specifically provided that funding for Operation Desert Shield, which was

underway when the Act was passed, would be counted as emergency appropriations.90

These emergency spending provisions were included in later extensions of the BEA

in 1993 and 1997.

The use of the emergency designation for defense — and other — supplemental

funding has frequently been controversial, however. Some Members of Congress

have argued that funding for military contingency operations, in particular, should be

anticipated and should, therefore, either be absorbed within amounts provided in the

regular defense appropriations bills or should be offset with rescissions of other

defense funds. Others have argued that defense readiness will suffer if offsets are

required. The 104th Congress (1995-96) generally tried to identify offsets for most

89

Supplemental appropriations requests are printed as House documents.

90

This provision was also interpreted to apply to Operation Desert Storm.

CRS-44

supplemental appropriations, including defense funds, in order to avoid adding to the

federal budget deficit, and the issue continued to be debated in the 105th Congress

(1997-98). The result, for defense programs, at least, has been inconsistent —

Congress has sometimes offset supplemental defense funding with rescissions and

sometimes has not.91

The Relationship Between Authorization and Appropriations. Some

confusion, and occasionally some controversy, has arisen over time concerning the

role of the defense authorizing committees compared to that of the defense

appropriations committees. Some argue that the authorizing committees should focus

their attention on larger defense policy issues, leaving line-item oversight and review

to the appropriations committees. Others argue that line-item authorization

contributes to more comprehensive congressional oversight of defense programs. The

activities for which authorizations are required has expanded over time along with the

growing breadth of annual authorization acts. (See Table 8.)

The issue of unauthorized appropriations can be particularly contentious. Title

10 of the U.S. Code — the body of law that governs the Department of Defense and

the military services — provides that “no funds may be appropriated for any fiscal

year to or for the use of any armed force or obligated or expended” for specified

categories of expenditures “unless funds therefor have been specifically authorized by

law.”92 Moreover, the rules of the House and the Senate each generally prohibit

appropriation of funds for programs that have not been authorized, and these rules

can be enforced by parliamentary points of order.

In practice, however, appropriations bills often provide funds over and above

amounts approved in authorization bills and for activities that have not been

specifically mentioned in authorization acts or governing report language. Legal

opinions have consistently held that appropriations acts may provide more or less

money for particular programs than has been authorized; may earmark funds for

projects not specifically authorized; may, if enacted after an authorization measure,

alter the purpose of a program established by an authorization; and may extend the

availability of funds beyond the period provided in authorizing legislation. The

general rules are (1) that later legislation prevails — which is almost always the

appropriations bill — and (2) that more specific provisions of law prevail over less

specific provisions.93

In any event, defense authorization and appropriations laws themselves seldom

conflict directly on particular programs because the laws usually do not specify

funding levels for particular line items or program elements. Instead, both kinds of

91

For a thorough review of the debate over emergency supplemental defense appropriations

since enactment of the Budget Enforcement Act, see (name redacted), "Emergenc y

Appropriations for the Department of Defense," CRS General Distribution Memo, August 18,

1998.

92

10 U.S.C. 114.

93

For an extensive, definitive discussion of the legal relationship between authorizations and

appropriations, see U.S. General Accounting Office, Principals of Federal Appropriations

Law, Second Edition, GAO Report Number OBC-91-5, July 1991, Vol. I, Chapter 2.

CRS-45

laws provide specific amounts at the “account” level — for example, the FY1999

authorization act authorizes $7,642,200,000 for Navy aircraft, while the FY1999

defense appropriations act provides $7,541,709,000. Levels of funding for particular

programs, like the F/A-18 fighter, are specified in committee reports, but, except in

unusual circumstances, not in the language of the law. Differences in report language

are not matters to be settled in the courts or even by points of order in Congress.

Instead, disputes between the authorization committees and appropriations

committees over funding for particular programs are matters that the committees have

periodically tried to work out through consultation and informal compromises.94

An obvious question then arises: What happens if the authorization bill is not

passed at all or is substantially delayed? Sometimes, as in FY1996, the defense

authorization bill has been vetoed and then has not been enacted until several months

after the fiscal year has begun. In such cases, what happens to the workings of the

Pentagon?

The answer is that without a defense authorization act for the current fiscal year,

the Pentagon cannot make policy changes that are normally included in an

authorization. As long as the appropriations act passes, the Pentagon has funding —

but certain activities may be limited because of the lack of authorization by Congress.

Under standing law, new military construction projects cannot go forward without

both authorization and appropriations.95 Moreover, authorization acts often make

changes in standing law governing, for example, military end-strength levels and

regulations regarding military pay and benefits. Finally, if a particular program has

been authorized for only a limited period of time, and funding is not specifically

provided in an appropriations act, and the authorization is delayed, that program may

not continue.

In debate over the FY1998 defense authorization bill, Senator Bob Smith of New

Hampshire outlined how the Pentagon would be affected if the bill were not enacted:96

1.

2.

3.

4.

Higher end strengths will remain in effect without funding to sustain them;

There will be no reform of basic allowances for subsistence and quarters;

All bonuses will continue at present levels, which prevents authorized

increases to aviation and nuclear officer bonuses;

The Navy will lose the ability to have the Chief of Naval Operation's choice

for Chief of Chaplains;

94

The Budget and Accounting Act of 1921 provides that the Comptroller General may issue

legal decisions regarding the availability of appropriated funds for particular purposes, a

function earlier performed by officials of the Treasury Department. Decisions are binding on

federal agencies. In some cases, private parties may request a decision by the Comptroller

General or may have recourse to the courts. See U.S. General Accounting Office, Principles

of Federal Appropriations Law, Second Edition, GAO Report Number OBC-91-5, July 1991,

Vol. I, Chapter 1, Part E.

95

10 U.S.C. 2802 states "The Secretary of Defense and the Secretaries of military departments

may carry out such military construction projects as are authorized by law."

96

Congressional Record, November 6, 1997, pp. S11817-11818.

CRS-46

5.

Construction of 385 military construction and 45 family housing projects

will not be initiated;

6. There will be no authority to continue the [National Guard] Challenge

program [for youth];

7. There will be no authority to expand the counternarcotics Riverine Program

in Peru and Colombia;

8. There will be no authority to increase counternarcotics support to Mexico;

9. There will be no authority for the Department of Navy to reprogram

funding for the advanced procurement and construction of components for

the next nuclear aircraft carrier; and

10. There will be no authority to accelerate the NATO JSTARS [aircraft]

Program.

Some of these consequences refer to changes in legislation that are considered in

authorization bills, but not in appropriations measures. Other consequences concern

matters that happened to be addressed in the authorization bill, but not in the

appropriations measure then being considered. If, as in other areas of the budget,

defense authorization bills were not regularly enacted, it is likely that appropriations

bills would begin to address issues now considered in the authorization process.

Congressional Earmarks and Additions to Administration Requests. Two

other occasionally contentious issues — in the appropriations process, particularly —

concern (1) congressional earmarking of funds for particular projects and

(2) unrequested congressional additions to defense budget requests. What it means

to "earmark" funds in appropriations bills is difficult to define precisely. One quite

carefully worded definition was provided by Congressional Quarterly in a glossary of

legislative terms — according to this definition to "earmark" is:

To set aside funds for a specific purpose, use, or recipient. Generally speaking,

virtually every appropriation is earmarked, and so are certain revenue sources

credited to trust funds. In common usage, however, the term is often applied as

an epithet for funds set aside for such purposes as research projects,

demonstration projects, parks, laboratories, academic grants, and contracts in

particular congressional districts or states or for certain specified universities or

other organizations.97

Congressional reports on the defense authorization and appropriations bills

allocate funds to particular programs in great detail, specifying, for example, how

many weapons of what types are to be procured, how much money is available for

recruiting, and which military construction projects may proceed. In a sense,

therefore, funds in all defense bills are fully earmarked (directed). Usually, however,

the term "earmark" is used in the case of defense-related legislation to mean allocating

funds at a level of specificity below the normal line item level. Understood in this

way, a congressional committee would not be said to earmark funds if it adds money

to buy additional fighter aircraft, for example, but would be said to earmark funds if

97

From Congressional Quarterly's "Glossary of Congressional Terms," updated as of August

1997. The Glossary can be found at http://www.loc.gov/crs/legproc/frames/ glossary/cq.html.

CRS-47

it specifies that a particular kind of radar is to be incorporated into an aircraft upgrade

program.

Defined in this way, defense appropriations bills normally contain earmarks of

funds for a variety of purposes. Occasionally, certain kinds of earmarks have come

under criticism, and procedures have subsequently been devised to avoid them.

Research grants to particular universities, for example, were once quite frequent, but

such grants are now mainly made through a peer review process. Defense

appropriations bills continue to earmark funds for a wide variety of research projects,

for acquisition of particular items of hardware, and for a broad range of medical

research programs. Defense authorization bills also often include such earmarks, and,

unless appropriations measures specifically reject them, they are equally binding on

federal agencies.

A closely related issue concerns congressional additions of funding for particular

items to annual defense budget requests. In some years, Congress has added

substantial amounts to the overall defense budget. Congress added almost $7 billion

in FY1996, $10.5 billion in FY1997, and $2.6 billion in FY1998 to Pentagon requests.

For FY1999 Congress provided $8.3 billion in a separate supplemental appropriations

measure, of which it is estimated more than half was not requested. Obviously, in

such years, Congress has added money for programs that the Administration did not

include in its proposed budget. In other years, however, Congress has approved

roughly the level of defense spending requested, or it has reduced funding. Even in

those years, however, Congress has always trimmed funding for some programs and

increased funding for others, so some items have been added.

Some Members of Congress and others have occasionally cited congressional

earmarks of defense funds and congressional additions of unrequested projects as

examples of wasteful practices. The counterargument is that congressional oversight

of defense policy necessarily involves making adjustments in defense plans. The

simple fact that the Department of Defense did not formally request something does

not mean it is undeserving of funding — part of Congress's job is to determine

whether agency priorities are appropriate. For their part, senior Defense officials have

been more critical of some congressional additions to the budget than of others.

Clinton Administration officials frequently have argued that if Congress is going to

add money to the budget, the additions should be for items that are included in future

plans of each of the .

Many recent congressional additions to the budget have, indeed, been within the

DOD's future plans. In some cases, however, Congress clearly has had different

priorities than those reflected in Administration defense plans. During the Bush

Administration, for example, Congress insisted on continued development of the V-22

"Osprey" tilt-rotor aircraft, which Secretary of Defense Cheney wanted to cancel.

During the Clinton Administration, Congress has frequently added money for missile

defense programs and for programs like the B-2 bomber. Congress consistently has

added money for National Guard and Reserve programs.

CRS-48

Budget Execution

The third stage of the defense budget process is budget execution. It begins

with the Treasury authorizing agencies to draw funds from an account established by

an appropriation and ends with the expenditure of appropriated funds.98 As discussed

earlier, the appropriations process makes budget authority available for obligation.

Usually, budget authority is then obligated and spent for the purpose specified in

legislation and in report language, but other dispositions are possible — specifically,

funds may be reprogrammed or transferred to other programs or accounts; may expire

without being expended; or may be deferred or proposed for rescission under

procedures governed by the Impoundment Control Act of 1974.

Transfers and Reprogramming. Under procedures worked out between

congressional committees and executive branch agencies, funds can be obligated for

purposes other than originally approved. In technical language, they can be

transferred or reprogrammed. Such flexibility is provided for many reasons. Often

pay raises are not fully funded in annual defense appropriations bills, for example, so

money must be reprogrammed from other accounts to meet payroll needs. Unplanned

military operations may require funding if not financed through supplemental

appropriations. Procurement, medical, or other operating costs often grow beyond

planned levels. Conversely, extra money may be available from some sources.

Program delays may prevent the timely obligation of funds. Savings may accrue from

foreign currency fluctuations or from lower fuel costs or from lower than expected

inflation.

Technically, a reprogramming is any shift of funds from one program to another

within the same budget account, while a transfer is a shift of funds from one program

to another in different accounts (either in the same budget year or from one budget

year to another). DOD, however, uses the term "reprogramming" for both kinds of

transactions. In annual appropriations bills, Congress formally grants the Department

of Defense authority to transfer up to specified amounts between accounts. In recent

years DOD has been given general transfer authority of $2 billion per year, and

additional amounts have been made available for transfer for specific purposes.99

DOD regulations, reflecting instructions from the appropriations committees,

distinguish between three different kinds of reprogramming actions:

! actions requiring congressional notification and approval, including (a) all

transfers between accounts, (b) any change to a program that is a "matter of

98

After the Treasury issues warrants that authorize agencies to draw funds from their

accounts, OMB apportions the funds by time period and by activity, function, project, or

object classification. The agency then allocates the funds to administrative units.

99

Some appropriations accounts are established specifically as "transfer" accounts to which

funds are appropriated in order to be transferred to other operating accounts. Drug

interdiction, environmental restoration, and overseas contingency operations are all transfer

accounts. Transfers from these accounts do not count against the limit on general transfer

authority.

CRS-49

special interest" to Congress, and (c) increases to congressionally approved

procurement quantities;

! actions requiring only notification of Congress, including reprogrammings that

exceed certain threshold amounts; and

! actions not requiring any congressional notification, including reprogrammings

below certain threshold amounts and those that reclassify dollar amounts

"within an appropriation without changing the purpose for which the funds

were appropriated."100

The Department of Defense has also developed detailed procedures, first, to track

congressional interest items and, second, to provide a basis for making the requests

to Congress.

Over the years, Congress has provided various instructions to the Department

of Defense governing reprogramming actions. Thresholds for congressional

notification have changed only rarely — appropriations conference report language

established the current thresholds for military personnel, procurement, and RDT&E

in 1988 and for O&M in 1989. The appropriations committees have instructed DOD

not to use reprogramming actions to alter items that Congress has added to the

budget or to restore funding that Congress has denied, and they have strongly

discouraged the use of reprogramming procedures to initiate new programs. In recent

years, Congress has required that DOD provide a single annual request for

reprogramming actions that require congressional approval.

Expiration of Funds. When provided in an appropriations bill, budget authority

is generally made available for obligation within a specified period of time. In the case

of defense funding, the period of availability varies depending on the account — funds

in military personnel accounts and operation and maintenance accounts are available

for obligation only for one year, in most procurement accounts for three years, and

in the shipbuilding account for five years. Funding that is not obligated during its

period of availability expires and may no longer be used to incur new obligations.101

100

For a discussion of the evolution of the reprogramming process, see, David W. Roberts, "A

Historical Analysis of the Defense Reprogramming Process," Armed Forces Comptroller, Fall

1985. p. 21. As directed by Congress, current regulations establish the following thresholds

for congressional notification: for military personnel, an increase of $10 million or more in a

budget activity; for O&M an increase of $10 million of more in a budget activity; for

procurement, an increase or decrease of $10 million or 20 percent (whichever is greater) to

a line item; for RDT&E, an increase or decrease of $4 million or 20 percent to a line item.

101

Under P.L 84-798 (passed in 1956), the Congress established "M accounts" for expired

budget authority which had been obligated and not expended and "merged surplus accounts"

for expired budget authority which was unobligated. Money could be drawn from these

accounts to meet certain obligations. The use of these accounts became a matter of contention

in the 1980s, when tens of billions of dollars accumulated in them. Congress abolished these

accounts in the FY1991 Defense Authorization Act (P.L. 101-510).

CRS-50

The Department of Defense and other agencies maintain separate expired

appropriations accounts including both obligated and unobligated balances for five

years.102 These accounts may continue to be used to pay for existing obligations, but

after five years, expired accounts will be closed and no further disbursements from

them will be possible.103 The availability of funds can be extended for an additional

period of time only if reappropriated in later appropriations acts. Reappropriated

funds are counted as new budget authority in the year in which they are made

available.

Repealing Budget Authority. The President has two ways NOT to spend

appropriated funds — deferral and rescission. The Impoundment Control Act of

1974 allows the President to delay the expenditure of funds (deferral authority) and

to cancel funds (rescission authority). The Line Item Veto Act of 1996 (P.L 104-130,

110 Stat. 1200) provided the President with enhanced rescission authority, but it was

subsequently ruled unconstitutional.

Deferrals are unobligated or unexpended funds, which are held back for later

obligation or expenditure. Deferrals are permitted only for limited reasons,

specifically, "contingencies, greater efficiency, and as otherwise specifically provided

by law." Deferrals cannot extend beyond the end of the fiscal year in which the

deferral message is reported to Congress. They are not to be used to institute

changes in policy. Deferrals can be disapproved by both houses of Congress, at which

time the funds in question must be released for obligation.104

Rescission, which cancels appropriated funds, is a procedure which may be

initiated either by the President or by the Congress. According to the 1974

Impoundment Control Act, all rescissions proposed by the President must be reported

to Congress, following which Congress has 45 days of continuous session to approve

102

As opposed to the process under the 1956 law, expired appropriations accounts now

maintain their fiscal year identity, which imposes restrictions on how they can be used.

According to the Antideficiency Act (31 U.S.C. 1341(a)), agencies are prohibited from

making expenditures or incurring obligations in excess of available appropriations. As long

as expired appropriations had no fiscal year identity, the Antideficiency Act did not apply to

their use. Currently, their use is limited by the amount appropriated for a specific

appropriations account in a specific fiscal year — see U.S. General Accounting Office,

Expired Appropriations: New Limitations on Availability Make Improved Management by

DOD Essential, GAO/NSIAD-91-226, July 1991, pp. 8-9.

103

Note that the closing of expired accounts does not involve the "return" of money to the

Treasury, since funds only leave the Treasury when they are expended, not when they are

appropriated. Closing an expired account is simply a bookkeeping transaction preventing the

obligation or expenditure of the funds in question.

104

A controversy regarding deferral of funds occurred during the Bush Administration when

the Department of Defense imposed a "moratorium" on military construction programs from

January, 24, 1990 until April 16, 1991. Responding to complaints by Members of Congress,

the General Accounting Office (GAO) judged the moratorium to be a deferral which should

have been reported and made subject to congressional approval. See Martin Cohen and

(namer edacted), Military Construction: Current Controversies and Long-Term Issues,

CRS Report 91-669 F, Sep. 3, 1991, pp. 19-24.

CRS-51

the proposal. If Congress fails to approve a proposed rescission, it is void and the

executive branch must make the budget authority available for obligation. Rescission

proposals often accompany supplemental appropriations requests. (See above.)

The line item veto procedure which Congess approved in 1996 represented a

form of enhanced rescission authority.105 In contrast to the rescission procedures of

the Congressional Budget Act, the Line Item Veto Act of 1996 (P.L. 104-130) put

the burden on Congress to disapprove a presidential veto within a 30-day period.

Under the law, the President could propose rescission of certain items specifically

identified in an appropriations law or in governing report language. Congress could

overturn a presidential rescission only by passing a bill specifically rejecting the

rescission. Any bill or joint resolution of disapproval could be vetoed by the President,

so it would ultimately require a two-thirds majority in each chamber to override. In

1998, the Supreme Court found this to be an unconstitutional cession of congressional

powers to the executive branch, which voided President Clinton's line item vetoes.106

105

For details on the line item veto process see (name redacted) and Virginia McMurtry,

The Line

Item Veto Act: Procedural Issues, CRS Report 96-973 and Virginia McMurtry, Item Veto

and Expanded Impoundment Proposals, CRS Issue Brief 89148.

106

President Clinton used the line item veto authority in the FY1998 appropriations cycle. In

October 1997, the President vetoed $144 million from the FY1998 DOD Appropriations Act

and $287 million from the FY1998 Military Construction Act. In November 1997, the

Congress passed H.R. 2631 disapproving the President's line item vetoes in FY1998 Military

Construction Act. The President vetoed H.R. 2631 in November 1997, but the Congress then

overrode the President's veto in February 1998.

CRS-52

Appendices

Appendix A: Spend-Out Rates and Defense Budget Reductions

Because Congress votes annually on budget authority (BA), not outlays, any

strategy that calls for reducing the defense budget in order to cut the federal budget

deficit must take into consideration the relationship between BA and outlays. The

fact that funds for different defense programs are spent at different rates means that

outlay savings resulting from cuts in budget authority in a given year depend on which

programs are reduced.

Table 11 shows that funds for military personnel and O&M programs spend out

at a higher rate than other national defense programs do. Hence, the quickest way to

achieve outlay savings in defense is to cut budget authority in these areas. For every

$1 cut in BA for military personnel programs, for example, a 95¢ cut in outlays is

achieved. The disadvantage of cutting mainly fast-spending accounts is that such

reductions result in large cuts in personnel end-strengths (and, therefore, in force

structure) or in "readiness" programs (such as training and equipment overhauls)

which may dramatically reduce the effectiveness of defense forces.

Table 11. Estimated Outlay Rates for

FY1999 DOD Appropriations by Title

(outlays as percentage of budget authority)

Title

FY1999

FY2000

FY2001

FY2002

FY2003

FY2004

Military

Personnel

94.4

4.8

0.4

0.1

Operation &

Maintenance

75.5

18.9

3.1

1.1

0.4

0.1

Procurement

22.3

30.4

23.6

11.3

5.7

3.5

Research,

Development

Test, &

Evaluation

51.3

36.6

7.7

2.2

0.9

0.4

Military

Construction

13.5

36.1

26.3

14.1

6.2

1.7

Family Housing

54.0

28.7

9.8

3.9

2.0

0.8

Revolving &

Management

Funds

44.5

24.6

17.0

4.4

4.1

Source: U.S. Department of Defense, Financial Summary Tables: Department of Defense Budget

for Fiscal Year 1999, Feb. 1998, Table K.

Notes: Spend-out rates vary widely within the procurement title. First fiscal year outlay rates range

from 4.9% for Shipbuilding and Conversion, Navy, to 55.9% for Other Procurement, Air Force.

CRS-53

Reducing funding for procurement programs is another way of achieving

reductions in the defense budget. Cutting budget authority for weapons procurement,

however, generally achieves relatively small outlay savings in the first budget year

because of the relatively slow rate at which procurement funds are spent. Savings

achieved in this manner could be substantial in the long run, but would not cut the

deficit by much in the current fiscal year.107

107

One analyst pointed out in 1990 that eliminating the entire procurement account for

FY1991 (totaling $66.5 billion in budget authority) would result in first-year outlay savings

of only $12 billion. MacKubin Thomas Owens, "Micromanaging the Defense Budget," Public

Interest, no. 100, Summer 1990, p. 142.

CRS-54

Appendix B: Department of Defense Budget Appropriations

Accounts With Funding in FY1999

Military Personnel

Military Personnel, Army

Military Personnel, Navy

Military Personnel, Marine Corps

Military Personnel, Air Force

Reserve Personnel, Army

Reserve Personnel, Navy

Reserve Personnel, Marine Corps

Reserve Personnel, Air Force

National Guard Personnel, Army

National Guard Personnel, Air Force

Operation and Maintenance

Operation and Maintenance, Army

Operation and Maintenance, Navy

Operation and Maintenance,

Marine Corps

Operation and Maintenance, Air Force

Operation and Maintenance,

Defense-Wide

Operation and Maintenance,

Army Reserve

Operation and Maintenance,

Navy Reserve

Operation and Maintenance,

Marine Corps Reserve

Operation and Maintenance,

Air Force Reserve

Operation and Maintenance,

Army National Guard

Operation and Maintenance,

Air National Guard

Overseas Contingency Operations

Transfer Fund

United States Court of Appeals for the

Armed Forces

Environmental Restoration, Army

Environmental Restoration, Navy

Environmental Restoration, Air Force

Environmental Restoration, DefenseWide

Environmental Restoration, Formerly

Used Defense Sites

Overseas Humanitarian, Disaster, and

Civic Aid

Former Soviet Union Threat Reduction

Pentagon Reservation Transfer Fund

Contingency Operations MWR Fund

Quality of Life Enhancements, Defense

Procurement

Aircraft Procurement, Army

Missile Procurement, Army

Procurement of Weapons and

Tracked Combat Vehicles,Army

Procurement of Ammunition, Army

Other Procurement, Army

Aircraft Procurement, Navy

Weapons Procurement, Navy

Procurement of Ammunition, Navy

and Marine Corps

Shipbuilding and Conversion, Navy

Other Procurement, Navy

Procurement, Marine Corps

Aircraft Procurement, Air Force

Missile Procurement, Air Force

Procurement of Ammunition, Air

Force

Other Procurement, Air Force

National Guard and Reserve

Equipment

Procurement, Defense-Wide

Research, Development, Test and

Evaluation

Research, Development, Test and

Evaluation, Army

Research, Development, Test and

Evaluation, Navy

Research, Development, Test and

Evaluation, Air Force

Research, Development, Test and

Evaluation, Defense-Wide

Developmental Test and Evaluation

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