Supplemental Appropriations FY2003: Iraq Conflict, Afghanistan, Global War on Terrorism, and Homeland Security

Congressional research reportMay 5, 2003

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Supplemental Appropriations FY2003:

Iraq Conflict, Afghanistan, Global War on

Terrorism, and Homeland Security

Updated May 5, 2003

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Supplemental Appropriations FY2003:

Iraq Conflict, Afghanistan, Global War on Terrorism,

and Homeland Security

Summary

On March 25, 2003, President Bush requested $74.8 billion in the FY2003

Emergency Supplemental for ongoing military operations in Iraq, postwar

occupation, reconstruction and relief in Iraq, international assistance to countries

contributing to the war in Iraq or the global war on terrorism, the cost of the

continued U.S. presence in Afghanistan, and additional homeland security.

On April 12, 2003, the House and Senate passed the conference version of the

FY2003 supplemental (H.R. 1559/H.Rept. 108-76/P.L. 108-11). It includes $78.49

billion, $3.7 billion more than requested by the President. Additions made by

Congress include $3.1 billion for assistance to the airlines, $749 million more for

homeland security programs, and $369 million in food aid for Iraq and other

countries.

The Administration asked Congress to approve funding that would be lodged

in several large emergency funds where agencies could determine the actual

allocation of funds to particular purposes or specific countries. The conference

version distributes most of these funds to regular appropriations accounts and

generally requires additional notifications to Congress of transfers in cases where the

Administration is given additional flexibility.

The largest fund proposed was $59.9 billion for the DOD’s Defense Emergency

Response Fund that would cover the costs associated with the war in Iraq, the

continued U.S. presence in Afghanistan, enhanced security at U.S. military bases, and

postwar occupation in Iraq. The conference includes $15.7 billion in a new Iraq

Freedom Fund but distributes the remaining funds to specific accounts.

Congress further provides $2.475 billion for an Iraq Relief and Reconstruction

that will fall under the authorities of regular foreign assistance programs usually

managed by the State Department and the U.S. Agency for International

Development (USAID). H.R. 1559, however, extends considerable flexibility to the

President, allowing him to directly apportion funds to several federal agencies,

including the Defense Department. The FY2003 Emergency Supplemental also

includes $4.7 billion in international assistance for about 22 countries which have

contributed in some fashion to the war in Iraq or the global war on terrorism. This

includes substantial increases in current aid levels for Israel, Egypt, Jordan,

Afghanistan, Pakistan, and Turkey. Israel, Egypt and Turkey would also receive U.S.

government guaranteed loans.

The Administration also requested that substantial appropriations be provided

en bloc for homeland security, including $2 billion for the Department of Homeland

Security (DHS) for grants to states and enhancements of security, and $500 million

for a DHS Counterterrorism Fund for investigations and operations. The conference

provides $749 million more for homeland security but allocates funds to specific

appropriation accounts.

Contents

Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Supplemental Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Congressional Action on Administration Request . . . . . . . . . . . . . . . . . 2

Amendments During Floor Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Congressional Action on the Department of Defense’s Request . . . . . . . . . . . . . . 7

Issues in the DOD Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Conference Resolution of Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Balancing Flexibility with Congressional Oversight . . . . . . . . . . . . . . . 9

Flexibility to Fund Foreign Militaries in the Global War on

Terrorism Increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Increasing Compensation for War Duty . . . . . . . . . . . . . . . . . . . . . . . 17

Defining DOD’s Postwar Role: Natural Resources Risk

Remediation Account and Other Reconstruction . . . . . . . . . . . . 18

Short and Long-Term Costs and Effects of the War . . . . . . . . . . . . . . 18

Previous Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Floor Debate in the House and Senate . . . . . . . . . . . . . . . . . . . . . . . . . 21

House and Senate Markup of Department of Defense Request . . . . . . 22

Administration Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Proposals to Maximize Flexibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Allocation of DOD Funding by Phase of Operations . . . . . . . . . . . . . 28

Allocation of DOD Funding by Major Type of Expense . . . . . . . . . . . 30

Iraq Reconstruction and International Assistance . . . . . . . . . . . . . . . . . . . . . . . . 33

Reconstruction Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

International Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Key Issues Regarding Iraq Reconstruction and International Assistance . . 43

Executive Flexibility and Congressional Oversight . . . . . . . . . . . . . . . 43

Costs of Iraq Reconstruction and the Impact on Other Aid

Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Country Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

DOD Authorities to Provide Military Aid . . . . . . . . . . . . . . . . . . . . . . 47

Homeland Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Support to State and Local Governments for Terrorism Prevention

and Security Enhancements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Departments of Justice and Homeland SecurityCounterterrorism Funds . . 53

Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Emergency Response Funds for the Executive andLegislative Branches . . 54

Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Aviation Industry Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

List of Tables

Table 1. Emergency Iraq War Supplemental Summary . . . . . . . . . . . . . . . . . . . . 2

Table 2. Amount Of Flexibility For DOD In FY2003 Supplemental,

Request and Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Table 2a. Ceilings and Floors Within DOD’s Iraq Freedom Fund in

Enacted Version of FY2003 Supplemental . . . . . . . . . . . . . . . . . . . . . . . . . 11

Table 2b. Funding Allocations or Appropriations in FY2003 Supplemental

for DOD: Request, House and Senate Action, and Enacted . . . . . . . . . . . . 12

Table 3. DOD Estimate of Adequacy of FY2003 Supplemental for

the War in Iraq and Afghanistan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Table 4. DOD FY2003 Supplemental Request by Phase . . . . . . . . . . . . . . . . . . 29

Table 5. FY2003 DOD Supplemental, by Purpose, Based on DOD’s

Justification Material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Table 6. Iraq Reconstruction, International Aid, and Related Activities . . . . . . 36

Table 7. Proposed Recipients of Supplemental Foreign Aid . . . . . . . . . . . . . . . 42

Table 8. Homeland Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Supplemental Appropriations FY2003:

Iraq Conflict, Afghanistan, Global War on

Terrorism, and Homeland Security

Most Recent Developments

On April 12, the House and Senate approved the conference version of the

FY2003 Supplemental (H.R. 1559/H.Rept. 108-76) providing $78.49 billion to cover

the costs of military operations in Iraq, relief and reconstruction of Iraq, ongoing U.S.

costs in Afghanistan, additional aid to coalition partners and nations cooperating in

the global war on terrorism, and homeland security. This total is $3.74 billion more

than the request and roughly $500 million more than the $77.93 billion passed by the

House and the $77.95 billion passed by the Senate. The conference version includes

a $3.1 billion airline industry relief package that was not requested by the President.1

President Bush signed the legislation on April 18 (P.L. 108-11).

Reflecting Congressional priorities, the conference version of the bill includes

additional funding for homeland security programs, such as customs and border

protection and baggage and passenger screening. H.R. 1559 further includes $700

million for protecting high-threat urban areas, up substantially from $50 million

requested by the Administration. The Emergency Supplemental also provides $2.23

billion for first responders, about 10% higher than requested.

On international assistance issues, the conference version generally provides

amounts proposed, but adds $369 million for food aid for Iraq and elsewhere, and

drops $150 million for a Presidential crisis fund. The $2.475 billion Iraq Relief and

Reconstruction Fund will follow the authorities of regular foreign aid programs that

are usually managed by the Department of State and the U.S. Agency for

International Development (USAID). Nevertheless, Congress agreed to the

President’s request for broad discretion in the allocation of Iraq reconstruction money

that allows direct apportionment to several Federal agencies, including DOD.

For defense spending, H.R. 1559, as enacted, funds the $62.6 billion requested

by the Administration but appropriates all but $15.7 billion in regular appropriations

See Congressional Record, April 12, 2003, p. H. 3400 for tables showing total costs.

These totals include only direct appropriations for airline industry relief and do not include

the cost of suspending airline security service fees and extending unemployment benefits

to eligible airline employees. These elements do not require an appropriation but will result

in the loss of revenue from fee collections and higher unemployment benefit costs. As

estimated by CBO, the inclusion of these additional airline-related costs push the

supplemental total up to $79.19 billion, as enacted, and $78.98 billion as passed by the

Senate.

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accounts rather than providing $59.9 billion, as requested, in the Defense Emergency

Response Fund to be spent at DOD’s discretion. Instead, Congress appropriated

$15.7 billion in a new Iraq Freedom Fund, where DOD will have spending flexibility

as long as it stays within several ceilings and floors and provides 5-day advance

notifications of transfers. Congress also increased combat pay and separation

allowances for U.S. forces, costing an estimated $650 million.

Supplemental Overview

Within days of the initiation of U.S. military operations in Iraq, President Bush

sent Congress a $74.75 billion supplemental package largely divided into three parts

— defense, Iraq reconstruction and foreign aid, and homeland security, as shown in

Table 1.

Table 1. Emergency Iraq War Supplemental Summary

($s billions)

Request

House

Dept of Defense

$62.587

$62.464 $62.558 $62.583

Iraq reconstruction and international

assistance

$7.791

$7.983

$8.451

$8.179

Homeland Security

$4.375

$4.290

$5.144

$5.124

Aviation industry relief - direct

appropriationsa

—

$3.170

$1.475

$2.396

Aviation industry relief - fees & benefits

costsa

—

$0.000 [$1.030] [$0.695]

Other

—

$0.016

TOTAL, Supplemental without Aviation

fee and benefits costsb

$74.753

TOTAL, Supplemental including Aviation

fee and benefits costs

$74.753

Senate

$0.321

Enacted

$0.208

$77.923 $77.949 $78.490

$77.923 $78.979

$79.185

Sources: House and Senate Appropriations Committees and Congressional Budget Office.

The aviation industry relief initiative, as structured in S. 762, as passed the Senate, provided a

combination of direct appropriations for grants to the airlines and changes in fees and

unemployment benefits for airline workers that do not require direct appropriations. The

enacted version of H.R. 1559 follows the Senate framework of direct appropriations and other

items, although at different levels. Amounts shown in brackets for the Senate and enacted levels

represent CBO estimates of the costs of fee changes and unemployment benefits.

Includes only direct appropriations and excludes the non-appropriated costs of the airline industry

package shown in brackets.

Congressional Action on Administration Request. As passed on April

3 in both bodies, the bills were at (Senate) or just below (House) the request for

defense. Both bills increased appropriations for Iraq reconstruction and other foreign

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aid — the House slightly, to $7.98 billion, and the Senate more significantly, to $8.45

billion, mainly due to a $600 million amendment for additional food aid for Iraq. For

homeland security, the House measure was slightly below the President’s request,

mainly because of the denial of funding for the White House’s proposed emergency

fund, while the Senate increased homeland security by about $770 million to $5.14

billion. H.R. 1559 provided $3.2 billion for airline industry relief while S. 762

included an estimated $3.5 billion.2

As requested, the conference version of the bill provides $62.58 billion for

defense but, as recommended by appropriators in both houses, the enacted legislation

reduces the flexibility in using those funds that was requested by the Administration.

As passed, H.R. 1559 appropriates most of the funds to regular appropriations

accounts. However, it also sets up a new $15.7 billion Iraq Freedom Fund to give

DOD additional flexibility. Within the new fund established for Iraqi Relief and

Reconstruction, the conference bill appropriates funds to the President, giving him

the flexibility to allocate those funds to various agencies, including the Department

of Defense. In response to Administration concerns, the conference version

eliminated restrictions that would have prevented DOD from administering any of

these funds. The enacted appropriation, however, provides that the funds are to be

designated as bilateral economic assistance and spent consistent with the Foreign

Assistance Act of 1961.3

For homeland security, the conference version provides $5.12 billion, $749

million more than requested. For airline relief, the final bill provides for a $3.1

billion package, including direct appropriations, authority to extend by 26 weeks

unemployment compensation for displaced workers, and a temporary suspension of

certain passenger and air carrier security fees from June 1 to September 30, 2003.4

While details of each of these components are discussed below, one overriding

theme that was apparent throughout the supplemental package was the President’s

desire for the maximum degree of flexibility in managing and allocating these

resources. Under the proposal, most of the funds would be have been placed in

emergency response funds which the President, the Secretaries of Defense, Justice,

and Homeland Security could draw upon. Purposes for which the resources would

be used were justified in general terms, but extensive discretion would have been

allotted to executive officials. Among the proposed emergency funds were:

Defense Emergency Response Fund — $59.9 billion

Iraq Relief and Reconstruction Fund — $2.4 billion

Department of Homeland Security Counterterrorism Fund — $1.5

billion

! Department of Justice Counterterrorism Fund — $500 million

See footnote in Table 1, above, regarding costs of the airline industry relief package.

These estimates are based on those issued by the Congressional Budget Office.

H.Rept. 108-76, p. 15 and p. 70-72.

Airline relief funding costs are based on CBO estimates that include both direct

appropriations and the costs of fee changes and unemployment benefits extension.

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Executive Office of the President Emergency Response Fund —

$250 million

! Legislative Branch Emergency Response Fund — $125 million.

Administration officials argued that such flexibility was needed due to

constantly changing circumstances in and around Iraq and uncertainty over the

duration and magnitude of the military campaign, the demands posed for near-term

humanitarian relief, and longer-term reconstruction of the country, and the ongoing

“global war on terrorism.”

In the enacted legislation, reflecting both House and Senate action, funds are

generally directed for more specific purposes than proposed by the White House.

The Iraqi Relief and Reconstruction Fund is the exception where Congress gives the

President flexibility to allocate funds to five federal agencies, including the

Department of Defense. Previous versions of the supplemental appropriation, as

passed by the House and the Senate, would have limited the President’s ability to

apportion the funds directly to DOD, and required that Fund be managed by the State

Department and the U.S. Agency for International Development (USAID).

For defense, the conference version allocates much of the $59.9 billion

requested by the Department of Defense in the Defense Emergency Response Fund

to regular appropriations accounts, reserving $15.7 billion in a new Iraq Freedom

Response Fund to be allocated by the President subject to various ceilings and floors

set in the bill.

H.R. 1559 substitutes the President’s request for two Department of Homeland

Security Funds totaling $3.5 billion with specific allocations for port security, state

and local government law enforcement, and National Guard reimbursements,

checked baggage explosive detection systems at airports, among others. The

conference report also allocates most of these funds to specific accounts.

The enacted supplemental also distributes nearly all of the $500 million

proposed Justice Department Counterterrorism Fund among several activities,

allocating a portion for FEMA disaster relief. H.R. 1559 further requires advance

notification of how the money will be spent and directs the Administration to

reimburse foreign aid accounts that have previously been drawn upon to fund preconflict needs in Iraq.

Amendments During Floor Debate. During floor debate, lawmakers

considered amendments affecting each of the three main areas of the President’s

supplemental request. Defense-related proposals that were adopted included:

Stevens amendment to increase combat pay ($650 million estimated

cost) — adopted by voice vote and included in the conference

agreement.

! Allard amendment to create a panel to examine claims of sexual

misconduct at the Air Force Academy — adopted by voice vote and

included, with modifications, in the enacted legislation.

! Within Stevens amendment (SA 522), a section that would prohibit

contracts for military airlift services to any carrier that is “not

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effectively controlled by citizens of the United States.”5 The

amendment, with modifications, remained in the enacted legislation.

The Senate also rejected an amendment by Senator Landrieu that would have added

$1.05 billion for National Guard and Reserves procurement (tabled 52-47).

House and Senate amendments regarding Iraq reconstruction and international

assistance focused generally on efforts to add humanitarian resources for Iraq, cut aid

to Turkey and Colombia, and restrict eligibility of reconstruction contractors. The

Senate approved an amendment by Senator Kohl adding $600 million for PL480 title

II food assistance programs, including a requirement that $155 million be used to

reimburse food accounts from which resources had been previously taken for Iraq.

H.R. 1559 provides $250 million for these same purposes. The enacted bill provides

$369 million for food assistance. The House defeated three amendments cutting

international assistance:

Cunningham amendment to delete $1 billion in aid to Turkey.

(defeated 110-315).

! DeFazio amendment to cut aid to Turkey by $207 million,

transferring the funds to establish National Guard Weapons of Mass

Destruction Civil Support Teams (defeated 113-312).

! McGovern amendment eliminating $61 million in counter narcotics

funds for Colombia and increasing appropriations for the Office of

Domestic Preparedness (defeated 209-216).

On aid contracting and related issues, the House approved (voice vote) a proposal by

Congressman Kennedy (MN) that prohibits the use of funds for Iraq reconstruction

to purchase goods or services produced by France, Germany, Russia, or Syria,

although U.S. subsidiaries of companies organized in those countries would be

eligible. Two Senate amendments related to this issue were withdrawn:

Ensign amendment to prohibit reconstruction funds in a way that

would benefit businesses and citizens of France and Germany unless

physically located in the U.S.

! Landrieu/Mikulski amendment to require that American flag

commercial ships be used to transport U.S. assistance.

H.R. 1559, as enacted, however, deleted the House-passed Kennedy amendment.

Most amendments considered in both houses focused on increased spending for

homeland security purposes. The Senate adopted a modified proposal by Senator

Bayh adding $105 million for grants to States for smallpox and other bioterrorism

inoculation programs. Originally, the amendment would have provided $340

million. The conference version of H.R. 1559 includes $100 million for such

inoculation programs. The Senate further agreed to an amendment by Senator

Specter (65-32) adding $200 million to the Office for Domestic Preparedness (ODP)

and rearranging ODP funds so that resources for high-threat urban areas would grow

S.Amdt. 522 in Congressional Record, April 3, 2003, Part II, p. S 4868.

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from $100 million, as reported in S. 762, to $600 million. H.R. 1559, as approved,

raises this total to $700 million. The Senate also adopted an omnibus amendment by

Senator Stevens that included provisions increasing homeland security by about $150

million, mainly for DOE nuclear security programs. Conferees generally supported

these DOE activities. But the House and Senate rejected several other efforts to add

to the President’s request for homeland security:

Senator Hollings amendment to add about $1 billion for port security

— tabled 52-47.

! Senator Breaux amendment to add about $2.67 billion for various

homeland security programs — tabled 52-46.

! Senator Schumer amendment to increase ODP funding by $2.33

billion — tabled 51-46.

! Senator Boxer amendment to earmark $30 million for R&D and

deployment of technology to protect commercial airliners from manportable defense systems — tabled 50-47.

! Congressman Obey amendment to add $2.5 billion for homeland

security — ruled out of order.

! Congressman Nadler amendment to increase port security funds by

$15 billion — ruled out of order.

The Senate also rejected an amendment by Senators Byrd and Hollings that would

not have increased homeland security spending, but would have allocated resources

to specific accounts rather than leaving the Secretary of Homeland Security with

broad discretion.

The Administration generally supported actions by the House and Senate, but

raised objections in a few areas, largely related to executive flexibility matters. The

White House suggested that Senate language allocating defense funds to specific

accounts might “slow timely and effecting funding of urgent needs.” The

Administration raised the same concern regarding House text that allocated homeland

security resources to specific activities rather than placing the money in a central

fund. This, the White House claimed, would “hinder” the Homeland Department’s

Secretary from applying the funds to the most critical threats. The executive further

expressed concerns about the House bill which directed that Iraq Relief and

Reconstruction Fund resources be managed by the State Department and the U.S.

Agency for International Development (USAID), removing Presidential flexibility

over involving multiple agencies in reconstruction operations. Finally, the White

House considered the airline industry relief packages in both bills “excessive.”6

Details concerning each of the supplemental’s major components are discussed

below.

Executive Office of the President, Office of Management and Budget. Statement of

Administration Policy on the Emergency Supplemental Appropriations, FY2003. April 2,

2003.

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Congressional Action on the

Department of Defense’s Request

The Administration requested $62.6 billion for the Department of Defense

(DOD) for the cost of the war in Iraq, continued U.S. operations in Afghanistan and

the global war on terrorism, and enhanced security at military bases in the United

States. The DOD FY2003 supplemental request funded the deployment and

redeployment of U.S. forces and equipment to the Persian Gulf and the prosecution

of a short, intense conflict. In addition, the request included funding for an

occupation force in Iraq for the remainder of FY2003, repair and re-stocking of

military equipment and munitions, as well funds to conduct firefighting and restore

and repair Iraqi oil fields, and a small amount of funding for humanitarian

assistance.7

Although DOD did not specify the amount, its request also included funds to

cover the cost of U.S. forces in Afghanistan (Operation Enduring Freedom) as well

as the cost of enhanced security in the United States (Operation Noble Eagle) for the

remainder of the fiscal year.8 DOD received $6.1 billion to cover its expenses for

these missions in the first part of the year in the FY2003 Consolidated

Appropriations Resolution (P.L. 108-7/H.J.Res. 2).9 DOD has estimated expenses

for the remainder of the FY2003 to be about $6 to $8 billion.10

Citing the “unpredictable nature of the U.S. conflict in Iraq,” the Department of

Defense requested that $59.9 billion, 96% of its total, be appropriated to the Defense

Emergency Response Fund (DERF), a transfer account, where DOD could exercise

discretion in spending the money for purposes that it considers appropriate and move

funds into the relevant appropriation accounts.11 Although DOD’s proposed

language required quarterly reports to Congress about the allocation of actual

expenditures, some Members of Congress expressed concerns about the extent of

flexibility that DOD would have in allocating almost $60 billion. In response to these

Department of Defense, FY 2003 Supplemental Request for Military Operation in Iraq and

the Global War on Terrorism, March 25, 2003; see

[http://www.defenselink.mil/comptroller/defbudget/fy2004/DoD_Justification-FY03_Ira

qi_Freedom_Supplemental.pdf].

Department of Defense, FY 2003 Supplemental Request for Military Operation in Iraq and

the Global War on Terrorism, March 25, 2003; see

[http://www.defenselink.mil/comptroller/defbudget/fy2004/DoD_Justification-FY03_Ira

qi_Freedom_Supplemental.pdf] and Senior Defense Official, Background Briefing on

Budget Supplemental, March 24, 2003; see

[http://www.defenselink.mil/news/Mar2003/t03252003_t0324bgd.html].

See Division M, P.L. 108-7.

In a recent press conference, OSD Comptroller Dov Zakheim estimated that the cost of

Afghanistan and the global war on terrorism was running about $1.1 billion per month.

Department of Defense, FY 2003 Supplemental Request for Military Operation in Iraq

and the Global War on Terrorism, March 25, 2003, p.7; see

[http://www.defenselink.mil/comptroller/defbudget/fy2004/DoD_Justification-FY03_Ira

qi_Freedom_Supplemental.pdf].

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concerns, the enacted version of the supplemental appropriated 75% of the funding

in the supplemental to specific accounts and added various reporting requirements.

To give DOD flexibility to develop and exploit cooperative military

relationships with other nations in the global war on terrorism, the Defense

Department requested $1.4 billion for military and logistical support to Pakistan,

Jordan, and other “key cooperating nations” in the war on terrorism, $150 million to

support indigenous or irregular foreign military forces and $50 million to support the

regular forces of foreign nations working with the United States in the global war on

terrorism. Some of these proposals were controversial and Congress rejected DOD’s

request for indigenous forces and reduced and limited the request for regular forces

but agreed to provide the $1.4 billion for military and logistical support with

additional reporting requirements.

The request also proposed to raise current statutory limits on the amount of

funds to be used at the discretion of the Secretary of Defense and combatant

commanders for unanticipated military requirements including support for foreign

military forces. DOD again cited the war in Iraq and the global war on terrorism as

the rationale for these changes. The request also proposed a major increase from $2

billion to about $9 billion in the total amount of funding that DOD could transfer

between appropriations after notifying the appropriations committees.12 The enacted

version raises the statutory limits and gives DOD additional transfer authority but at

levels lower than requested.

In remarks at the Pentagon, President Bush characterized the FY2003

supplemental as urgent, and DOD officials called for quick passage to ensure that

DOD does not face shortages in operating expenses. DOD characterized $30.3

billion of its $62.6 billion request as costs incurred for the buildup phase of the Iraqi

war including expenses such as transportation of equipment and personnel, or as

committed costs, such as those for the return of troops and equipment theater of

operations.13 In the enacted version of the supplemental, Congress appropriated these

costs in regular appropriations accounts rather than providing them in the Defense

Emergency Response Fund as requested by DOD.

Issues in the DOD Request

The major issues that arose during Congressional consideration of the

supplemental and that are discussed below included the following.

Balancing Congressional oversight and DOD Flexibility: DOD

requested that $59.9 billion be provided in the Defense Emergency

Response Account (DERF) where DOD would have discretion to

See OMB, Transmittal to Speaker of the House, J. Dennis Hastert, FY2003 Supplemental

Appropriations Request, March 25, 2003, general provisions; see estimate no. 4 on OMB

web site: [http://www.whitehouse.gov/omb/budget/amendments/supplemental_3_25_03.pdf]

DOD Press Release, “Supplemental Calls for $62.6 billion for Defense,” March 25, 2003;

DOD Press Release, “Bush Calls Wartime Supplemental Budget Request ‘Urgent’”, March

26, 2003.

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spend the funds, flexibility reduced by Congress because of concerns

about oversight;14

Flexibility to fund foreign military forces: DOD requested funds

for foreign military forces who cooperate with the U.S. in combating

terrorism, and Congress responded by adding reporting

requirements;

Compensation for war duty: Congress increased combat pay and

family separation allowances for military personnel in theater

because of concerns about adequacy;

Defining DOD’s postwar role: The Administration request allowed

the President to allocated funds for reconstruction and relief

activities in Iraq to any agency, including DOD, and Congress

agreed; and

Costs and other effects of the war: Costs beyond FY2003 and

effects on DOD’s readiness and forces over the longer-term are

unclear from DOD’s request and remain concerns of Congress.

There was little debate about the total amount requested by DOD for FY2003

although Congressional action adjusts the mix of funds requested by the

Administration and reduces DOD’s flexibility (see Tables 2, 2a, and 2b and

discussion below). Further details about the Administration’s request are in the

section entitled DOD’s Funding Request by Appropriation Account.

Conference Resolution of Issues

The conference version of H.R. 1559/P.L. 108-11 addressed the issue of

flexibility by reducing the extent and type of funding flexibility for DOD. Congress

did establish a new Iraq Freedom Fund Account with $15.7 billion in funding where

DOD would have discretion over about $10 billion to $11 billion of those funds (see

Table 2 below). The enacted version also allows the Administration to give DOD

a large new role in postwar reconstruction and relief activities (see section on

Defining DOD’s Postwar Role and Key Issues in Iraq Reconstruction and

International Assistance below).

There was little controversy about the total funding level requested for DOD and

the enacted version generally provides amounts consistent with DOD’s request (see

Table 2b below).

Balancing Flexibility with Congressional Oversight. The conference

version of the bill blends the approaches used by the two houses to reduce DOD’s

For information about historical precedents for funding flexibility during war, see CRS

General Distribution Memo, “Prior Administration Requests for Funding Flexibility in

Financing Military Operations,” April 3, 2003 by (name redacted), available on request

from author or (name redacted).

CRS-10

flexibility in funding. The conference adopted the Senate’s recommendation to

appropriate most of DOD’s funds in regular appropriations accounts and the House’s

proposal to set up a new flexible general fund for expenses incurred later in the war.

(See section on Previous Action by the House and Senate for further details.)

Table 2. Amount Of Flexibility For DOD In FY2003

Supplemental, Request and Congressional Action

Request

Defense

Emergency

Response Fund

(DERF)a

House: Combat,

Stability

Operations, and

Reconstitution

Costsb

Senate:

DERFa

Enacted:

Iraq

Freedom

Fundc

Flexible Fund

$59.9

$25.4

$11.1

$15.7

Regular

Appropriations or

transfer ceilingsd

$2.7

$37.0

$51.5

$46.9

TOTAL

$62.6

$62.5

$62.6

$62.8

Flexible Fund

95.7%

40.7%

17.6%

25.1%

Regular

Appropriations

4.3%

59.3%

82.4%

74.9%

100.0%

Funding

Level/Amount of

Flexibility

In billions of dollars

As Percent of Total Funding

TOTAL

Sources: Department of Defense, FY2003 Supplemental Request for Military Operations in Iraq and

the Global War on terrorism, March 25, 2003; see

[http://www.defenselink.mil/comptroller/defbudget/fy2004/DoD_Justification-FY03_Iraqi_Freedo

m_Supplemental.pdf]. House and Senate version of H.R. 1559, H.Rept. 108-56, .S.Rept. 108-33, and

Conference Report, H.Rept. 108-76.

Within the DERF, DOD can transfer funds to specific appropriations accounts at its discretion.

Within its new Operation Iraqi Freedom Response Fund, the House created this new fund where

DOD would have flexibility to transfer funds to specific appropriations accounts as long as

certain ceilings and floors established in the bill were met (see Table 2a below).

The enacted version of H.R. 1559 gives DOD flexibility to transfer funds within the new Iraq

Freedom Response Fund as long as certain ceilings and floors established in the bill are met (see

table 2a below).

In addition to appropriations to regular accounts, the House bill set transfer ceilings which limited

DOD’s flexibility within the new Iraqi Freedom Response Fund except for the $$25.4 billion

in the Combat, Stability Ops, and Reconstitution Fund.

Restrictions Within The New Iraq Freedom Fund. To give DOD more

specific spending guidance, the conference version of the bill appropriates 75% or

$46.9 billion of DOD’s total request of $62.6 billion to regular appropriation

accounts. The remaining $15.7 billion was placed in a new Iraq Freedom Fund

account where DOD can spend the monies for combat, stability operations,

CRS-11

reconstituting forces, replacing munitions and equipment, and other costs as long as

DOD stays within several ceilings and floors that are set within the bill. Any funds

not needed for the Iraqi conflict are to be returned to the Iraq Freedom Fund.

If DOD met the floors and spent up to the ceilings, these restrictions would

affect $5.2 billion of the $15.7 billion in the fund (see Table 2a below).

Table 2a. Ceilings and Floors Within DOD’s Iraq Freedom Fund

in Enacted Version of FY2003 Supplemental

(in billions of dollars)

Category

FY2003 Lower

Range

FY2003 Higher

Range

Spent thus far - thru March 2003

19.0

21.0

Return of troops and equipment

5.0

7.0

Monthly personnel and personnel support costs @ range of

$3.5 billion to $4.0 billion per montha

21.0

24.0

Support of coalition allies b

1.4

Afghanistan and Global War on Terrorism @$1.1 billion to

$1.2 billion per monthc

7.7

8.4

0.7

0.8

0.7

Additional military personnel allocationf

0.0

1.7

TOTAL

55.4

65.0

AVERAGE

60.2

Congressional changes to DOD’s Request

Increase in combat pay and family separation allowancesd

Additional fuel allocation

Note: CRS calculations based on DOD Press Transcript, Dov Zakheim, OSD/Comptroller, April 16,

2003; see [http://www.defenselink.mil/transcripts/2003/tr20030416-0111.html].

Covers personnel and personnel support costs for second half of FY2003; first half is covered in

category, “Spent Thus Far.”

Provides military and logistical support to Pakistan, Jordan and other “key cooperating” nations in

the global war on terrorism.

DOD estimates cost of Afghanistan and global war on terrorism runs about $1.1 billion to $1.2

billion per month; CRS assumes the last seven months of costs are covered in the FY2003

supplemental with the previous months funded in the $6 billion received by DOD in the FY2003

Consolidated Appropriations Resolution (P.L. 108-7)

DOD and Senator Steven’s estimates of effect of Congressional action to increase imminent danger

pay and family separation allowances for deployed troops for FY2003 in P.L. 108-7.

Congress set a floor of $1.1 billion for fuel costs due to higher prices compared to the $430 million

assumed by DOD in its request.

Congress allocated $1.7 billion more for military personnel than DOD included in its request (see

H.Rept. 108-56, p. 10); however, if DOD’s estimates are correct and the funding is not needed,

DOD can transfer the funds elsewhere.

For the long-term, the chief cost issue is likely to be the number of troops who

remain in Iraq. According to a recent study, if U.S. troop levels declined from a level

of 75,000 in the first year to 25,000 by the third year, the five-year cost of that

CRS-21

occupation force would be $45 billion.36 Unlike the experience in Bosnia and

Kosovo, it is unlikely that the U.S. will share these costs with other countries.37

Some observers have also suggested that keeping significant numbers of troops

in Iraq could also affect the readiness of U.S. forces by putting strains on U.S. forces,

both actives and reserves. Those effects are, however, difficult to measure and could

be offset, to some extent, by the elimination of patrolling of Iraqi airspace in

Operations Northern Watch and Southern Watch, missions that have been carried on

for the past ten years.

Previous Congressional Action

The sections below give details on previous action in the House and Senate.

Floor Debate in the House and Senate. During floor debate on the

FY2003 Supplemental, the House did not adopt any amendments affecting the

Department of Defense.

During floor debate, the Senate added an amendment that increased imminent

danger pay from $150 to $225 per month and increased family separation allowances

from $100 to $250 per month, changes that were retained in the conference version.

The Senate also adopted the Allard amendment (S.Amdt. 451) establishing a sevenmember panel to review and report to the Secretary of Defense and the armed

services committees within 90 days about the effectiveness of policy and actions

taken at the Air Force Academy in response to allegations about sexual assaults.38

This amendment was included in the final version.

A more controversial Senate amendment — adopted by the Senate but dropped

during conference — was the Stevens amendment “to make certain improvements”

(S.Amdt. 522), including a provision that would prohibit any funding in the bill going

to airlift contracts to any firm that is not U.S. controlled.39 A sense of the senate

amendment offered by Senator Hollings (S.Amdt. 479) that would require the

President to submit a proposal to raise revenues to pay for the cost of the FY2003

supplemental was rejected (79 to 18).40

Both the House and the Senate supported the funding requested by the

Administration but provided different ways to increase Congressional oversight about

the allocation of those funds (see discussion below).

Center for Strategic and Budgetary Assessments, Backgrounder, “ Potential Cost of a War

With Iraq and Its Post-War Occupation,” by Steven M. Kosiak, February 25, 2003, p. 3.

For additional information, see section on costs in CRS Report RL31715, Iraq War:

Background and Issues Overview.

Congressional Record, April 2, 2003, p. S4719 and p.4697.

BNA, Daily Executive, “‘Extraneous’ Add-ons Slow Conferees’ Work

On Finalizing $80 Billion ‘War’ Supplemental

Congressional Record, April 3, 2003, p. S4781-p. S4785.

CRS-22

House and Senate Markup of Department of Defense Request.

During markup, the House Appropriations Committee recommended appropriations

of $62.464 billion and the Senate Appropriations Committee (SAC) recommended

$62.559 billion, both close to the $62.587 billion requested by the Administration.

Both committees, however, devised different ways to restrict funds to specific

accounts rather than providing the bulk of the funds in the Defense Emergency

Response Fund as requested by the Administration. In some cases, the appropriators

also added notification requirements before obligation of funds or reporting

requirements after funds are spent (see below).

Compared to the Administration’s request for flexibility for $59.9 billion, the

House version gave flexibility in the use of $25.4 billion as long as DOD stayed

within certain ceilings while the Senate distributed all but $11.0 billion of the funds

in the DERF to specific appropriation accounts. At the same time, the House version

required a seven-day advance notification for transfers from the new fund while the

Senate permitted DOD to allocate those funds with quarterly after-the-fact reporting

as proposed by the Administration.

House Appropriations Committee (HAC) Limits. House appropriators

established a new Operation Iraqi Freedom Response Fund totaling $59.7 billion.

Within that fund, the HAC allocated funds by:

! setting limits on DOD’s subsequent transfers to various

appropriations accounts for $34.3 billion in funding;

! appropriating $2.6 billion into specific accounts; and

! setting up a third category for $25. 4 billion for the later stages of the

war where DOD would have flexibility to allocate funds as long as

it stayed within various floors and ceilings set in the bill.

Under the HAC’s transfer limits, DOD could spend less than or equal to the

ceilings for specific appropriation accounts outlined in the bill. (See Table 2b

above).41 The House appropriators allocated $1.7 billion more than the

Administration requested for Military Personnel accounts based on their belief that

the services would need additional amounts to cover such expenses as imminent

danger pay, family separation allowances and the cost of mobilizing reservists.42

Within the new Operation Iraqi Freedom Response Fund, the HAC set aside

$25.4 billion that would be available for “Combat, Stability Operations, and Force

Reconstitution costs,” a new category included in the bill, and required 7-day

advance notification to Congress of DOD’s transfers of these funds to individual

appropriation accounts. This category appeared to cover costs that would occur later

in the war or during an occupation phase.

Within this $25.4 billion category, the House appropriators:

! reserved $4 billion that DOD could not spend until July 1, 2003 for

additional Military Personnel or Defense Health costs in 2003;

! set a floor of $1.8 billion for classified programs;

See H.R. 1559 as passed by the House and H.Rept. 108-55, p.7 - p.23

H.Rept. 108-55, p. 15-p.16.

CRS-23

set a ceiling on total Operation and Maintenance of $20.2 billion;

set a ceiling on procurement of munitions and equipment of $4.2

billion;

! set a ceiling on RDT&E accounts of $57 million; and

! set a ceiling of $400 million for DOD to transfer to the Department

of Homeland Security for Coast Guard operating expenses.43

Since the total funding for all the ceilings and floors in the bill was $30.7

billion, over $5 billion more than the $25.4 billion reserved for Combat, Stability

Operations, and Force Reconstitution Costs, DOD would have had to fund some

accounts below the ceilings.

Senate Appropriations Committee (SAC) Limits. The Senate

Appropriators reduced the Administration’s $59.9 billion request for the Defense

Emergency Response Fund to $11 billion, transferring the remaining $51.2 billion

to other specific appropriations accounts. Based on discussions with DOD, the SAC

transferred funds that DOD characterized as incurred costs, for example for

deployment of troops and equipment or setting up base camps (see Table 2 and

Table 2a below) as well as other funds where expenses could be more predictable.44

Both House and Senate appropriators provided amounts requested by the

Administration for counter drug activities in Colombia ($34 million) and for

reimbursement for drawdown in its funds and stocks for the Afghan Army.

For procurement, the Administration’s request can only be broken out at the

service level rather than by individual accounts. The House and Senate bills appear

to distribute some of the $3.7 billion requested by the Administration for munitions

and equipment replenishment in Procurement, Defensewide to individual services.

Support of Foreign Military Forces. Both the House and the Senate

appropriators agreed to the Administration’s request that $1.4 billion be made

available for military and logistical support to Pakistan, Jordan or other “key

cooperating nations,” in the war on terrorism but each house proposed different

restrictions. In addition to quarterly reporting on the use of funds, the HAC required

a 7-day notification in advance and required that DOD provide a report within 30

days of enactment about their plans for using the funds or the funds would revert to

the Treasury. The SAC required a 15-day advance notification for use of these funds.

Neither the House nor the Senate approved the Administration’s request that the

Secretary of the Defense be allowed to spend $150 million to support irregular or

indigenous forces. In response to the Administration’s request that the Secretary of

Defense, with the concurrence of the Secretary of State, be allowed to spend $50

million to support the regular forces of other nations who cooperate in the war on

terrorism, the Senate approved the requested new authority with advance notification

but the House did not include any provision for this funding.

H.R. 1559, p. 15 and H.Rept. 108-55, p. 13 - p. 21.

See S. 762 as reported and S.Rept. 108-33, p. 7 - p.14.

CRS-24

As requested, appropriators in both houses gave the combatant commanders and

the Secretary of Defense flexibility to use certain funds at their discretion. Both the

HAC and the SAC recommended that the combatant commanders (CINCs) be

allowed to double from $25 million to $50 million the amount that they could spend

from the CINC Initiative Fund that could be used to support either U.S. or foreign

military forces. The HAC and the SAC also agreed with the Administration’s request

to increase the amount available to the Secretary of Defense to spend at his discretion

for emergency and extraordinary expenses; the House increased the ceiling from

$34.5 million to $69.0 million as requested and the Senate agreed to raise the amount

to $45.0 million.

Use of Defense Cooperation Account and Natural Resources Risk

Remediation Account. In response to DOD’s request to be able to use

immediately any foreign contributions to the Defense Cooperation Account,

originally set up to receive donations from foreign nations in the first Gulf War, both

the HAC and the SAC set conditions on use of any contributions. The HAC required

prior approval of any transfers from the fund to an appropriation account. The SAC

retained current statute, which requires that contributions be appropriated in

subsequent appropriations acts before DOD can use the funds.

Both the HAC and the SAC approved the $489 million for the new Natural

Resources Risk Remediation Account to cover the cost of firefighting and repair of

Iraqi oil wells (see below). For use of foreign contributions, the SAC agreed to allow

DOD to use any contributions without restrictions. The HAC, however, required

prior approval of any transfers of contributions.

Request for Higher Total on Transfers.

In response to the

Administration’s request that the total amount that DOD can transfer annually

between appropriations accounts be raised from $2 billion to almost $9 billion, the

HAC retained the current ceiling and the SAC capped transfers at $3.5 billion per

year.

Administration Request

To maximize flexibility, the Defense Department’s FY2003 supplemental

requested almost all of its $62.6 billion in funding in the Defense Emergency

Response Fund (DERF) transfer account.

Proposals to Maximize Flexibility. Although most of DOD’s funding in

the FY2002 supplemental for Afghanistan and enhanced security was also provided

in the DERF transfer account - based on the same rationale that DOD needed

flexibility in its efforts to combat terrorism after September 11th attacks — the $11

billion in funding was substantially smaller than the current request. DOD also

requested various changes to existing law to increase its flexibility to provide aid to

foreign militaries and to transfer funds between accounts.

Ceilings Within DERF Account . To place some limits on the $62.6 billion

requested in the DERF, DOD proposed ceilings and floors within the DERF account

in the categories below:

CRS-25

a cap of $3.7 billion for munitions replenishment;

a cap of $1.0 billion for procurement and RDT&E necessary for war

with Iraq and global war on terrorism;

! a cap of $50 million to support the military operations of foreign

nations; and

! a floor of $53.346 billion for military operations in Iraq and the

global war on terrorism.

It is not clear, however, how these caps (or floors) could be enforced because the

categories were not defined.

According to DOD, the $59.9 billion in the DERF appropriation account was

intended to cover costs incurred in the war with Iraq — deployment of forces and

equipment and re-deployment costs when they return, DOD’s estimated costs of a

“short but extremely intense” war, repair and replenishment of equipment and

munitions damaged or used during the war, mobilization of reserve forces, and some

RDT&E, as well as other expenses for the war on terrorism.45 As in the FY2002

supplemental, DOD provided illustrative allocations of DERF funds but these

allocations were not binding (see Table 2c above).

Funds for Coalition Support. Continuing a practice begun in the FY2002

supplemental, DOD is requested $1.4 billion in the Operation and Maintenance,

Defense wide account to fund coalition support. According to DOD, that support

would include payments of $1.3 billion to Pakistan, Jordan and countries providing

logistical support to the U.S. in Afghanistan, and payments of $.1 billion for

logistical support to those supporting military operations in Iraq. The proposed

language did not bind DOD to any specific amounts for individual countries.

As in the FY2002 supplemental, the proposed language required that the

Secretary of Defense consult with the Director of OMB, and receive concurrence

from the Secretary of State before providing funds to allies. The current proposal did

not, however, include the 15-day notification to congressional committees before

making payments that was included in the FY2002 supplemental.46

New Natural Resource Remediation Fund. DOD requested $489.3

million for a new transfer fund, the Natural Resource Remediation Fund for

emergency fire fighting, repairing damage to oil facilities and infrastructure and

preserving distribution capability, and ensuring availability of fuel to the Iraqi people.

The fund was also to also receive foreign contributions. Some observers were

Department of Defense, FY 2003 Supplemental Request for Military Operation in Iraq

and the Global War on Terrorism, March 25, 2003, p. 2;

[http://www.defenselink.mil/comptroller/defbudget/fy2004/DoD_Justification-FY03_Ira

qi_Freedom_Supplemental.pdf].

See Conference Report on FY2002 Supplemental for Further Recovery From and

response to Terrorist Attacks, H.Rept. 107-593, p. 17, and See OMB, Transmittal to Speaker

of the House, J. Dennis Hastert, FY2003 Supplemental Appropriations Request, March 25,

2003, Operation and Maintenance, Defense-wide; Estimate no. 4 on OMB web site:

[http://www.whitehouse.gov/omb/budget/amendments/supplemental_3_25_03.pdf].

CRS-26

concerned about the nature and extent of DOD’s role, including the potential for

“mission creep,” the expansion of DOD’s role beyond its traditional missions.

DOD also proposed that any contributions to the Defense Cooperation Account,

set up after the first Gulf War for foreign contributions would be considered to have

been approved in the FY2003 Supplemental Appropriations Act. This proposal to

give DOD discretion in advance to use foreign contributions was not consistent with

the practice in the past when Congress approved the transfer of allied contributions

to specific accounts.

Requests in Specific Accounts. DOD requested funds a total of $2.6

billion for specific accounts including:

$430 million to cover higher oil costs that DOD experienced in the

early months of the year because of the initial spike in oil prices

related to the war;

! funding for several military construction projects in Guantanamo

and at several undisclosed locations overseas;

! an additional $34 million for counter drug activities in Colombia;

($34 million is also provided for the Andean Counter Drug Initiative

in the State Department section.); and

! $165 million for reimbursement to the services for expenses already

incurred in training, and equipping the Afghan Army as well as

assisting Jordan.

Proposed Changes to Current Law To Increase DOD Flexibility.

DOD requested several changes to current law to increase DOD’s management

flexibility contending that such changes are necessary to allow DOD to adapt quickly

to the demands of the war on terrorism. Several controversial proposals included:

two proposals to permit the Secretary of Defense to provide monies

to regular foreign militaries and to irregular “ indigenous” forces;

! two proposals to increase the amounts available to combatant

commanders and the Secretary of Defense to respond to

unanticipated expenses where funds could be used to provide

support to foreign military forces; and

! a large increase from $2 billion to about $9 billion in the ceiling set

on the total amount of funds that could be transferred between

appropriations.

Providing Aid to Regular and Irregular Foreign Forces. The

supplemental request also included a general provision that would have allowed

DOD to use up to $150 million of funding in the supplemental to support indigenous

forces assisting U.S. operations in support of the global war on terrorism. The

provision was intended to “clarify DOD’s authority to promote military cooperation

CRS-27

in the global war on terrorism.”47 (See additional discussion in section on Foreign

Operations.)

Within the DERF account, DOD also proposed that up to $50 million could be

used to support the regular military forces of foreign nations to further the “global

war on terrorism” as long as the Secretary of State concurred with the Secretary of

Defense in providing funds. According to DOD, this new provision would have

enabled DOD to provide aid to foreign forces “rapidly, in response to emerging,

unanticipated emergency requirements.”48

The request also raised the total amount available to the combatant commanders

in the Commanders In Chiefs (CINC) Initiative Fund from $25 million to $50

million. This fund is available to combatant commanders for a wide variety of

activities including not only training and selected operations of U.S. military

personnel but also education, training and personnel expenses of foreign defense

personnel in cooperative programs.49

To increase DOD’s flexibility in carrying out these purposes, the supplemental

request also proposed raising the limits that currently apply:

to purchases, from $7 million to $15 million;

to payments to foreign countries participating in exercises, from $1

million to $10 million; and

! to military education and training of foreign nationals, from $2

million to $10 million.50

All these proposals would have given DOD additional authority to reimburse

foreign military forces for expenses, including procurement, personnel costs, and

exercises. Although the Secretary of Defense would need the concurrence of the

Secretary of State in order to spend the additional $200 million in funding — $50

million for regular foreign forces and $150 million for irregular forces — the request

did not provide a mechanism for congressional oversight of these activities before

they occur. The Administration’s proposal did include after-the-fact reporting, on a

Department of Defense, FY 2003 Supplemental Request for Military Operation in Iraq

and the Global War on Terrorism, March 25, 2003, p. 31-p.32;

[http://www.defenselink.mil/comptroller/defbudget/fy2004/DoD_Justification-FY03_Ira

qi_Freedom_Supplemental.pdf].

Department of Defense, FY 2003 Supplemental Request for Military Operation in Iraq

and the Global War on Terrorism, March 25, 2003, p. 23-p.24;

[http://www.defenselink.mil/comptroller/defbudget/fy2004/DoD_Justification-FY03_Ira

qi_Freedom_Supplemental.pdf].

Title X, U.S. Code, Section 166. See Department of Defense, FY 2003 Supplemental

Request for Military Operation in Iraq and the Global War on Terrorism, March 25, 2003,

p. 29 for proposed change.

Title X, U.S. Code, Section 166a. See Department of Defense, FY 2003 Supplemental

Request for Military Operation in Iraq and the Global War on Terrorism, March 25, 2003,

p. 29 for proposed change.

CRS-28

quarterly basis, for both types of reimbursement.51 The final version rejects DOD’s

request for $150 million for irregular forces and reduced the request for regular

forces to $25 million.

Requested Change in Ceiling on Transfers. DOD proposed a large

increase in the annual ceiling set on the total amount of funds that can be transferred

between appropriation accounts after enactment from $2 billion to about $9 billion.52

DOD reprograms or shifts funds between appropriation accounts after enactment to

reflect changes in priorities. DOD stated that this additional flexibility, along with a

lifting of the midyear deadline on reprogramming requests, would help DOD to

respond to “emerging requirements, particularly in Iraq.”53 In the enacted bill,

Congress provides $2 billion in transfer authority for funds in the FY2003

supplemental.

Allocation of DOD Funding by Phase of Operations. DOD provided

a breakout of the $62.6 billion according to several phases of operations as shown in

Table 4 below. In its justification material and recent press statements, DOD

characterized the $30.3 billion of expenses for “coercive diplomacy” as incurred

expenses.

“Coercive Diplomacy”. Almost half of the $30.3 billion was for personnel

expenses including activation of reservists, and special pay for active-duty military

in combat and support of those personnel for both the Iraqi conflict, Afghanistan, and

enhanced security in the United States. Another $7 billion was for the deployment

and re-deployment of personnel to and from the theater.

Major Conflict. DOD’s estimate of the cost of the war itself appeared to

assume a short, intense conflict of about a month. Using plans for deployments and

military operations developed by the combatant commanders, DOD estimated these

costs relying on a model developed in the mid-1990s for contingency operations.54

Assumptions about these plans underlay DOD’s estimates of costs.

Transitional and Stability. DOD included its postwar operational costs in

this category, including funding to repair Iraqi oil facilities, and “Lower Intensity

Operations” that may include the operational costs of an occupation force. The initial

size and possible phase down of this force was not specified.

See OMB, Transmittal to Speaker of the House, J. Dennis Hastert, FY2003 Supplemental

Appropriations Request, March 25, 2003, provisions on the DERF and general provisions;

see [http://www.whitehouse.gov/omb/budget/amendments/supplemental_3_25_03.pdf]

The proposed language permits DOD to transfer up to 2.5% of the $355.1 billion

appropriated in the FY2003 DOD Appropriations Act (P.L. 107-248) or $8.878 billion.

See OMB, Transmittal to Speaker of the House, J. Dennis Hastert, FY2003 Supplemental

Appropriations Request, March 25, 2003, general provisions; see estimate no. 4 on OMB

website, [http://www.whitehouse.gov/omb/budget/amendments/supplemental_3_25_03.pdf].

See DOD Financial Management Regulation, Volume 12, Chapter 23; on DOD website,

[http://www.dod.mil/comptroller/fmr/12/12_23.pdf].

CRS-29

Although DOD included little funding in its request for the postwar phases of

the Iraqi War, a controversy developed about the Administration’s plans to transfer

funds to DOD from reconstruction funds requested for the Executive Office of the

President (see section on Reconstruction Efforts below).

Reconstitution. Reconstitution referred to the repair of damaged equipment

and replenishment of munitions, spare parts, or equipment lost in a war.

Table 4. DOD FY2003 Supplemental Request by Phase

(in billions of dollars)

Phase of Operations

FY2003

Coercive Diplomacy Subtotal

Personnel/Personnel Support

30.3

15.6

Transportation To & From Theater Of Operations

Preparatory Tasks

Consumables used to date

7.1

2.5

2.3

Coalition Supportd

Other

1.6

1.2

Major Conflict Subtotal

13.1

Spare Parts, Logistics support, Consumables

4.7

Combat Operations

6.8

Transportation Within Theater

1.6

Military Personnel (included above)

Transitional and Stability Subtotal

Natural Resources Remediation Fund

12.0

1.2

Humanitarian Assistance

0.1

Lower Intensity Operationsg

11.4

Classified Programs

Weapons of Mass Destruction Containment

Reconstitutionh

7.2

Ammunition replenishment

3.2

Depot Maintenance and Other Reconstitution

3.7

Procurement

0.3

TOTAL

FY2003

Subtotals

62.6

Sources: Under Secretary of Defense (Comptroller), Briefing to the Congressional Oversight

Committees, FY2003 Emergency Supplemental: Military Operations in Iraq and the Global War on

Terrorism, March 25, 2003; see

[http://www.defenselink.mil/comptroller/defbudget/fy2004/DoD_Justification-FY03_Iraqi_Freedo

m_Supplemental.pdf].

Includes additional pay for active-duty military personnel in combat (e.g. hazardous duty pay), cost

of activating reservists, and personnel support.

CRS-30

Specific definition not provided; includes setting up overseas bases.

Consumables include paying higher prices for fuel than anticipated, expended munitions, and food

and medical supplies.

Includes request of $1.4 billion for payments to Pakistan, Jordan, and “other key cooperating

nations” for logistical and military support in the war on terrorism in Afghanistan; also includes

$0.1 billion for Free Iraqi Forces and $0.2 billion for the Afghan Army.

“Other” includes enhancements to White House and other communications systems, improvements

to the Navy base at Guantanamo Bay housing prisoners from Afghanistan, logistics support,

other projects and replenishment of equipment.

DOD is requesting $489 million for emergency firefighting, repair of damage to Iraqi oil fields, and

providing fuel to the Iraqi people.e

May be operational costs of occupation force.

Includes replacement of expended munitions and equipment, and depot maintenance for equipment.

Allocation of DOD Funding by Major Type of Expense. Although

DOD’s justification materials included illustrative allocations of expenses to be

covered in the DERF account by appropriation account, these allocations were not

binding, and could be changed in response to the course of the war in Iraq or changes

in DOD priorities. Table 5 shows these potential allocations.

Personnel and Personnel Support. Personnel costs accounted for much

of the total cost of the war in Iraq, continued expenses in Afghanistan, and enhanced

security in the United States. They reflected both increases in overall strength levels

of active-duty military and activation of reservists. The expense breakdown below

did not, however, show either the number of reservists that DOD plans to activate

over the rest of the fiscal year or the allocation of personnel among the different

missions funded in the supplemental or the types of tasks that these personnel carry

out.

Starting in January 2003, DOD rapidly increased the number of reservists being

called up for the Iraqi war. Before the buildup, about 50,000 to 55,000 reservists

were on active-duty to provide support for operations in Afghanistan or enhanced

security in the United States, a decrease from the 80,000 called up in the months after

the September 11th attacks. The current level of activated reservists is over 200,000,

according to the Defense Department. DOD’s estimates of cost in Table 5 are built

on assumptions about the number of reservists needed during the war with Iraq and

for the occupation force that would remain afterwards but those numbers are not

provided in its justification material.

Military Operation Support.

According to various sources, DOD

anticipated a short, intense war of about one month, which would be roughly

consistent with the $14 billion in operating support shown below. (This estimate was

considerably higher than a recent CBO estimate of $10 billion based on current force

levels.)55 DOD’s estimated cost of $100 million reflected its expectation that its role

in funding humanitarian assistance would be limited.

CBO revised its estimates based on current deployments, see CBO, An Analysis of the

President’s Budgetary Proposals for Fiscal Year 2004, March 2003, p. 4; see

[http://www.cbo.gov]. CBO’s methodology uses cost factors of the services.

CRS-31

Procurement. DOD did not specify the mix of munitions or equipment which

it expected would need to be replaced. Although there was clearly considerable

uncertainty about replacement costs, the $3.7 billion estimate was predicated on

assumptions about likely loss rates.

CRS-32

Table 5. FY2003 DOD Supplemental, by Purpose,

Based on DOD’s Justification Material

(in billions of dollars)

Purpose/Type of Expense

FY2003

Military Personnel Expenses Subtotal

Active-Duty Military Personnel Special Pays

2.000

Higher Active-Duty Levels

Cost of Mobilizing Reservists

1.450

6.948

Personnel Support (O&M funded) Subtotal

Active-Duty Personnel Support

Mobilized reserve Support

3.365

1.541

Defense Health Program

Other personnel costs

0.302

0.032

5.240

Military Operation Support (O&M Funded) Subtotal

Operating Support

Transportation

Facilities/Base Support

14.122

10.804

6.992

Command, Control, Communications and Intelligence

Guantanamo Bay Improvements

3.177

0.010

Preparatory Tasks

Humanitarian Assistance

2.547

0.107

Procurement Subtotal

Munitions

Other procurement

37.760

4.693

3.700

0.993

RDT&E

Working Capital Fund: For Higher Oil Prices

Military Construction Subtotal

Military Construction, Navy

0.048

Military Construction, Air Force

0.129

0.058

0.430

0.177

Other Subtotal

Classified

Natural Resource Risk Remediation Fund

1.717

0.489

Operation and Maintenance, Army

0.035

Operation and Maintenance, Navy

Operation and Maintenance, Air Force

Operation and Maintenance, Defense-wide

0.075

0.055

1.400

Drug Interdiction and Counter-Drug Activities

0.034

TOTAL

FY2003

Subtotals

10.398

3.805

62.561

CRS-33

Source: Department of Defense, FY2003 Supplemental Request for Military Operations in Iraq and

the Global War on Terrorism, March 25, 2003;

[http://www.defenselink.mil/comptroller/defbudget/fy2004/DoD_Justification-FY03_Iraqi_Freedo

m_Supplemental.pdf].

Iraq Reconstruction and International Assistance

The President’s supplemental proposal included $7.79 billion for near-term Iraq

reconstruction and relief, additional aid to coalition partners and other states

cooperating in the global war on terrorism, and related State Department and USAID

administrative expenses. Most of the funds — $7.6 billion — fell under the

jurisdiction of Foreign Operations appropriations programs. By comparison, the

supplemental request totaled a little less than half of the $16.2 billion appropriated

previously by Congress for FY2003 Foreign Operations activities.

The proposal, as detailed below in Table 5, was roughly divided into two

components: Iraq relief and reconstruction (about $2.85 billion)56 and aid to coalition

partners and other nations engaged in the war on terrorism (about $4.7 billion).

Reconstruction Efforts

Under the Administration’s plan, the bulk of Iraqi reconstruction funds would

be deposited in a special Iraq Relief and Reconstruction Fund, which would be

managed by the White House. Out of this $2.44 billion Fund, resources would be

drawn and transferred to implementing agencies to pay the costs of immediate

humanitarian relief and reconstruction activities over a 12-month period following

the end of hostilities.

Normally, it would be presumed that transfers for reconstruction and postconflict aid would be made to USAID, the State Department, and other traditional

foreign assistance management agencies. But with plans for the Defense Department

to oversee the governing of Iraq immediately after the end of hostilities, the White

House wanted to have maximum flexibility over the distribution of resources so the

President could transfer some or all of the funding to DOD. The proposal stimulated

immediate controversy with a number of critics, including Members of Congress,

arguing that aid programs should remain under the policy direction of the State

Department and under the authorities of a broad and longstanding body of foreign aid

laws. They pointed out that during other recent reconstruction initiatives in Bosnia

and Kosovo, resources and policy decisions flowed through the Secretary of State.

Others argued that groups which would play a significant role in post-war

rehabilitation efforts — non-governmental organizations (NGOs), foreign donors,

and international organizations — would be reluctant to take direction and funding

from the U.S. military. This, they contended, would hamper relief activities.57

OMB documents estimate the total amount for Iraq reconstruction was $3.5 billion, a

figure that included nearly $500 million from DOD funding for the repair of oil facilities.

See, for example, U.S. Bureaucratic Battle Over Postwar Aid to Iraq Heats Up, Agence

(continued...)

CRS-34

Furthermore, the placement of reconstruction funding in a Presidential account

appeared to grant the White House significant discretion in responding to changing

and unanticipated demands, unencumbered by specific programmatic allocations.

The Administration said only that $543 million would cover humanitarian expenses,

$1.7 billion would be set aside for reconstruction needs, and up to $200 million

would be available to reimburse foreign aid accounts from which funds were drawn

prior to conflict.

According to Administration documents, reconstruction funds would focus

initially on the most urgent needs to restore minimal services to the Iraqi population.

Emphasis would be placed on rebuilding water and sanitation capacity, restoring

public health facilities, refurbishing seaports and airports in order to move

humanitarian supplies into the country, reestablishing a food distribution system, and

generating emergency electricity. Following this early stage, the White House plan

called reconstructing broad economic and institutional capacity. This second phase

would target the restoration of roads, schools, hospitals, markets, irrigation systems,

and electrical generation, together with the construction of a framework within which

to operate education, economic, agriculture, and good governance institutions.

Apart from the Relief and Reconstruction Fund, the Administration also sought

$200 million to replenish refugee, disaster, and other economic aid accounts that had

already financed the costs of food and other commodities. A portion of these funds

would also bolster the size of humanitarian accounts so that future “borrowings”

from other aid sources to meet the needs in Iraq would be minimized. The State

Department and USAID further requested appropriations to establish safe and secure

temporary facilities in Iraq and to eventually build an embassy and aid mission in

Baghdad.

Congressional Action on Iraq Reconstruction. As cleared by Congress,

H.R. 1559 appropriates $2.475 billion for the Relief and Reconstruction Fund,

slightly higher requested. The President will be able to apportion Fund resources

directly to five federal agencies: the Departments of Defense, State, Health and

Human Services, and Treasury, and USAID. In previous congressional debate, the

House and Senate had each expressed their expectations that these funds would be

channeled to the Secretary of State, and in most instances, further directed to USAID.

The report accompanying S. 762 specifically noted that the funds were not expected

to be transferred to the Secretary of Defense. Nevertheless, the White House

continued to argue for greater flexibility and authority to place reconstruction

resources under DOD auspices, and ultimately conference committee members

agreed. The enacted legislation, however, specifies that the Iraq Fund will fall under

the authorities of the Foreign Assistance Act of 1961 and that Congress will be

notified five days in advance of any obligation of amounts from the Fund. Further,

these advance notifications will be reviewed under the same terms as regular foreign

aid notifications to the Appropriation Committees, a process through which

Members may place “holds” on the obligation of resources pending further

(...continued)

France-Presse, April 2, 2003; and Congress: Powell Should Control Postwar Spending,

USA Today, April 4, 2003, p. A.06.

CRS-35

consultation. H.R. 1559, as approved, also strengthens congressional oversight of the

Fund by requiring two reports within the first 45 days of enactment regarding how

the Fund will be organized and other issues such as reconstruction and governmentcreation strategies, coordination with other donors, and overall costs. Beginning in

mid-July 2003, H.R. 1559 requires quarterly status reports on Fund operations.

CRS-36

Table 6. Iraq Reconstruction, International Aid, and Related Activities

(in millions of dollars)

Activity

Request

House

Senate

Enacted

Iraq Relief and Reconstruction:

Iraq Relief and Reconstruction Fund

$2,443.3

$2,483.3

$2,468.3

$2,475.0

Of which:

Reconstruction priorities for public health, water and sanitation, seaports/airports, fooddistribution networks, and electricity. Post-conflict emphasis on education, governance,

economic institutions, agriculture, and infrastructure repair.

$1,700.0

—

Humanitarian aid, refugee and displaced persons relief, demining

$543.0

—

Reimbursement to USAID’s Development, Child Survival and ESF aid accounts previously

drawn upon to provide food commodities.

$200.0

fully

reimbursea

$260.0

fully

reimburse

Reimbursement to USAID’s International Disaster Assistance account for previously drawn

upon resources for food distribution, mainly through the UN WFP, and for immediate

reconstruction.

$80.0

$160.0

$112.5

$143.8

Reimbursement to USAID’s Child Survival/Health account for previously drawn upon

resources for water and sanitation reconstruction.

$40.0

$90.0

Reimbursement to USAID’s Economic Support Fund account for previously drawn upon

resources for emergency relief and non-health reconstruction.

$40.0

—

$40.0

Reimbursement of PL480 food assistance, including the Bill Emerson Humanitarian Trust

—

$319.0

$600.0

$369.0

Replenishment of the Emergency Refugee and Migration Aid (ERMA) fund to restore $17.9

million that has been drawn down for Middle East contingencies and to have funds available

for needs worldwide.

$50.0

$80.0

$75.0

$80.0

Peacekeeping funds for coalition partners engaged in post-conflict Iraq

$200.0

$115.0

$150.0

$100.0

$2,853.3

$3,197.3

$3,535.8

$3,297.8

Subtotal, Iraq Reconstruction

CRS-37

Activity

Request

House

Senate

Enacted

$1,000.0

Israel economic loan guarantees. Israel will pay all fees associated with the cost of $9 billion

in loan guarantees.

[$9,000.0]b

Egypt economic grant, a portion of which can be used for up to $2 billion in loan guarantees.

$300.0

$1,106.0

$50.0

$1,000.0

Philippines economic and military grant.

$30.0

$80.0

$60.0

Pakistan military grant and law enforcement aid.c

$200.0

Djibouti economic and military grants.

$30.0

NSe

Oman military grant.

$62.0

NSe

Bahrain military grant.

$90.0

NSe

Colombia military and counter-narcotics grants to support unified campaign against drugs and

terrorism.f

$71.0

NSe

Afghanistan economic, military, anti-terrorism, and demining grants.

$325.0

$365.0

Middle East Partnership Initiative and Muslim World Outreach.h

$200.0

$105.0

NSg

Central Europe military grants.i

$84.1

NSi

US Emergency Fund for Complex Foreign Crises — aid to support contingencies for coalition

countries .

$150.0

$0.0

$150.0

$0.0

$4,698.1

$4,488.1

$4,604.0

$4,518.1

Assistance to Coalition Partners & Cooperating States in War on Terrorism

Israel military grant.

Jordan economic and military grants.c

Palestinian economic grant.

Turkey economic grant, a portion of which can be used for up to $8.5 billion in direct loans.

Subtotal, Aid to Coalition Partners & Cooperating States

CRS-38

Activity

Request

House

Senate

Enacted

State Department Administration & Other Activities

State Department Diplomatic and Consular Affairs

$101.4

$106.4

$93.4

$98.4

Of which:

Task Force Surge Support operations.

$5.0

Baghdad embassy reopening; enacted amount includes diplomatic security

$17.9

$35.8

Medical supplies

$15.6

Security upgrades

$10.0

Machine Readable Visa fee shortfalls

$35.0

$30.0

$32.0

Consular Affairs

—

$2.0

—

Worldwide emergency response

—

$30.6

—

State Department embassy construction

$20.0

$71.5

$82.0

$149.5

Of which:

Temporary facilities in Iraq.

$20.0

—

$20.0

$61.5

Non-official facilities frequented by U.S. citizens overseas

—

$10.0

Facilities and security in Rome, Italy

—

$78.0

USAID mission in Iraq, and, as enacted, IG monitoring of the Iraq Fund, and USAID security

needs in Pakistan, Afghanistan, and Indonesia.

$22.0

$23.0

$23.6

$24.5

Potential emergency evacuations of US government employees, families, and private

American citizens.

$65.7

$40.0

$50.0

Radio broadcasting to Iraq and Middle East Television Network

$30.5

$62.5

$30.5

—

$10.0

$239.6

$297.1

$311.5

$362.9

$7,791.0

$7,982.5

$8,451.3

$8,178.8

Iraq War Crimes Tribunal and investigations into war crimes allegations

Subtotal, State Department & Other

TOTAL, Iraq Reconstruction, International Aid, & Related Activities

CRS-39

NS = Not specified.

The House Appropriations Committee stated that up to $495 million in reimbursements was included in H.R. 1559.

No appropriation required.

DOD funds ($1.3 billion) were requested and enacted for Jordan, Pakistan, and other “key cooperating states” providing logistical and military support to U.S. military operations

in Iraq and in the global war on terrorism.

Request “supported” in Senate bill.

Although the enacted supplemental does not set a specific level for this country, the Administration has allocated the full amount requested.

DOD funds ($34 million) were also requested and enacted for drug interdiction and counter-drug activities in Colombia.

Due to Congressional reductions in overall ESF funding and increases for Afghanistan and the Philippines, the Administrations allocated $100 million for MEPI.

House bill funded an Islamic Partnership and Outreach Program.

The Administration requested funds for 10 Central European nations but has altered the list of recipients and the allocation of military grants following enactment of the supplemental,

as follows: Poland ($15 million requested and allocated); Hungary ($15 million requested; $8 million allocated); Czech Republic ($15 million requested and allocated); Estonia

($2.5 million requested, $2.75 million allocated); Latvia ($2.5 requested, $2.75 million allocated); Slovakia ($6 million requested, $6.5 million allocated); Romania ($15 million

requested and allocated); Slovenia ($5 million requested, $0 allocated ); Lithuania ($3.5 million requested, $4 million allocated); Bulgaria ($5 million requested, $10 million

allocated); Albania $0 requested, $3 million allocated); Macedonia ($0 requested, $1 allocated); and Ukraine ($0 requested, $1.5 million allocated).

CRS-40

The enacted bill further directs higher and more specific amounts that should be

used to replenish several foreign aid accounts that had been drawn upon in order to

preposition food and medicine stocks in the region and for other pre-conflict

humanitarian purposes. The conference agreement directs “full and prompt”

reimbursement of USAID and State Department accounts from the Iraq Fund. The

supplemental provides $143.8 million for international disaster assistance, $112.5

million of which will restore funds diverted previously for Iraq. The remaining

balance will augment USAID disaster relief resources to respond to foreign

contingencies that may arise through the end of FY2003. Similarly, Congress

increased the State Department’s refugee reserve account from the $50 million

requested to $80 million in order to address needs in the Persian Gulf region as well

as other global requirements. H.R. 1559 also includes $369 million to reimburse

food aid accounts from which commodities for Iraq were drawn. This includes $69

million to replenish stocks in the Bill Emerson Humanitarian Trust. The House had

added $250 million additional food aid while the Senate, by way of an amendment

by Senator Kohl, had recommended $600 million. In total, the enacted legislation

provides roughly $920 million for reimbursing these foreign aid accounts, more than

double the Administration’s $410 million request.

International Assistance. The supplemental appropriation proposal would

have provided about $4.7 billion in additional aid to 23 countries and regional

programs that are contributing to the war in Iraq and cooperating in the global fight

against terrorism. Table 6 provides a complete list of proposed recipients. Among

the largest and most complex aid packages would be:

Jordan — $700 million in economic grants and $406 million in

military transfers. This would be on top of Jordan’s regular $452 aid

package from the U.S.

Israel — $1 billion in supplemental military aid (on top of the $2.7

billion regular FY2003 assistance) and $9 billion in economic loans

guaranteed by the U.S. government over the next three years. Israel

would pay all costs — fees that may total several hundred of million

dollars — associated with these economic stabilization loans.

Conditions on the loans, similar to those that were applied in the

early 1990s when Israel drew on a $10 billion U.S.-backed loan

package, would be employed.

Turkey — $1 billion for economic grants which could be applied to

fees associated with $8.5 billion in direct loans or loan guarantees.

Afghanistan — $325 million in economic grants, anti-terrorism,

demining, and military transfers. This would be in addition to

roughly $350 million already scheduled for Afghanistan this year.

Egypt — $300 million for economic grants, a portion of which could

be used to gain access to up to $2 billion in loan guarantees.

Depending on the terms of the loan, if Egypt chose to receive the full

$2 billion, about $120 million or more of the $300 million would be

applied to the costs faced by the United States of guaranteeing the

CRS-41

loans. The Administration further proposes to reprogram $379.6

million in previously appropriated commodity import program aid

to Egypt as a cash transfer. The supplemental would come on top of

$1.9 billion in regular U.S. aid to Egypt.

Pakistan — $200 million in military grants and law enforcement

assistance. Pakistan currently receives $305 million in FY2003.

The Administration further requested $150 million to initiate a U.S. Emergency Fund

for Complex Emergencies, a contingency account that would allow the President to

address quickly unforseen needs of coalition partners. The Fund, which would be

managed by the White House, had originally been proposed for an FY2004 startup

of $100 million.

Congressional Action on International Assistance. H.R. 1559, as

approved, includes $4.52 billion in additional aid to countries and regional programs,

about $180 million less than requested. Nearly all of this reduction, however, comes

from Congress’ decision not to fund the President’s $150 million emergency account

for complex crises. In most other cases, the Administration will be able to allocate

these foreign aid resources has it had intended. Congress earmarked funding at the

requested levels for Israel, Egypt, Jordan, and Pakistan, while adding resources for

Afghanistan and the Philippines (see Table 6). Turkey may receive “not to exceed”

$1 billion, aid that is conditioned on a requirement for the Secretary of State to certify

that Turkey is cooperating with the United States in Operation Iraqi Freedom,

including the facilitation of moving humanitarian aid into Iraq, and has not

unilaterally deployed forces in northern Iraq. The restriction on Turkey’s aid

package, the size of which could grow to $8.5 billion if the loan option is

implemented, combines text in House and Senate-passed bills. Earlier, the House

had defeated two amendments that would have eliminated aid to Turkey or reduced

it by $207 million.

For Israeli loan guarantees, the enacted supplemental includes the full $9 billion

proposal, but adds conditions not included in the proposal. Loans may be issued in

$3 billion allotments in each of FY2003 to FY2005, a provision that will allow the

President to reduce disbursements in the second and third years Israel violate any of

the loan conditions. One such condition added by Congress prohibits loan resources

from supporting any activity in geographic areas that were not administered by Israel

prior to June 5, 1967. This is similar to a condition attached to the 1992 $10 billion

loan guaranty package for Israel, some of which was not disbursed because of

continued Israeli settlement activity in the West Bank area.

CRS-42

Table 7. Proposed Recipients of Supplemental Foreign Aid

($s millions)

Jordan

Economic

Loans

Military

$700a

—

$406a

Israel

—

Turkey

$1,000a

Afghanistan

$127

[$9,000]

$1,000

[$8,500]*

—

$170

AntiNarcotics/

Terrorism

Law

—

$1,106

—

$1,000

—

$1,000

—

$325

—

TOTAL

$28

Egypt

$300

[$2,000]*

—

$300

Pakistan

—

$175a

—

$25a

$200

Bahrain

—

$90

—

$90

$71

Colombia

—

$37

—

$34

Oman

—

$62

—

$62

Palestinians

$50

—

$50

Djibouti

$25

—

$30

Philippines

—c

—

$30

—

$30

Czech Rep.

—

$15

—

$15

Hungary

—

$15

—

$15d

Poland

—

$15

—

$15

Romania

—

$15

—

$15

Slovakia

—

$6d

Bulgaria

—

$5d

Slovenia

—

$5d

Estonia

—

$3d

Latvia

—

$3d

Lithuania

—

$3d

* Up to this amount. Loans would not require additional appropriations since economic grants would

be used to pay for loan fees.

Amount is earmarked or recommended in the enacted supplemental appropriation.

The enacted supplemental appropriation provides $167 million.

The enacted supplement appropriation includes $30 million for Philippine economic aid.

Following enacted of the supplemental, the Administration has modified its plans to allocate funds

for this recipient. See footnote “i” in Table 6, above, for the allocated amounts.

Although most of the President’s request for international assistance is

supported in the enacted emergency supplemental, the Administration had to reduce

economic assistance in one instance. Congress cut Economic Support Fund

appropriations by $20 million, but because earmarks and additions for Afghanistan,

the Philippines, and $10 million to investigate possible Iraqi leadership war crimes,

CRS-43

executive officials had $100 million less than requested in economic assistance for

countries not protected by legislative directives. Non-earmarked programs included

$50 million for the Palestinians, $25 million for Djibouti, and $200 million for the

Middle East Partnership Initiative. The Administration chose to fully allocate

amounts for the Palestinians and Djibouti, but cut resources for the Middle East

Partnership Initiative (including Muslim Outreach) to $100 million, half of the level

requested.

The State Department also chose to modify its distribution of military aid grants

to several Central Europe states. Most significantly, the executive branch decided

to add funds (not requested) for Albania, Macedonia, and Ukraine, and increase

amounts above the requested levels for Estonia, Latvia, Lithuania, and Bulgaria. As

off-sets, the State Department cut funds for Hungary and eliminated the $5 million

request for Slovenia. See footnote “i” in Table 6 above for specific amounts

allocated to each recipient.

Key Issues Regarding Iraq Reconstruction and International

Assistance

The proposed supplemental raised a number of issues and concerns, including

those focusing on the extent of executive flexibility sought by the President, how

much more Iraq reconstruction might cost and whether these demands would erode

funding for other foreign aid priorities, whether the purposes and amounts of country

assistance were appropriate, and whether DOD’s request for authority and funds to

aid indigenous forces was consistent with traditional U.S. military assistance

programs managed by the State Department.

Executive Flexibility and Congressional Oversight. Throughout the

supplemental request, in both the defense and Iraq reconstruction/international

assistance sections, the President sought authorities that would maximize flexibility

in responding to fluid and rapidly changing demands. Among the most significant

authorities affecting the use of foreign aid funds were:

Iraq Relief and Reconstruction Fund — The Administration’s budget

justification for the White House managed $2.44 billion Fund

offered only broad purposes for which the money would be used and

divided the money into three general categories. Iraq reconstruction

plans submitted by the State Department to Congress offered some

details on specific sectors, how the U.S. would respond, and the

timing of actions over the next year. Funding amounts for each

activity, however, were not provided, as is usually the case with

foreign aid justifications. Moreover, since the funds would be

appropriated into a Presidential fund, it would be possible for the

White House delegate the resources to any agency, including the

Defense Department, for reconstruction implementation. As noted

above, this prospect of DOD management raised disputes within the

Administration and the American international NGO community,

with critics arguing that it would be inappropriate for the military to

control a civilian operation. The proposal to establish a central Fund

CRS-44

most closely resembled how the Administration programmed U.S.

relief for victims of Hurricane Mitch in Central America in 1999 and

Bosnia reconstruction efforts in 1996. In both cases Congress

appropriated money into special funds, but placed them under the

control of USAID and added numerous directives over how portions

of resources should be used and various notifications for informing

Congress in advance of committing the money. Moreover, the

supplemental request for the Relief and Reconstruction Fund would

make the appropriations available “notwithstanding any provision of

law.” This would remove any of the numerous restrictions and

conditions that generally apply to U.S. foreign assistance, including

provisions relating to human rights, proliferation, government

legitimacy, contract negotiations, among others. Waivers of these

restrictions are generally applied only to humanitarian programs.

Congress rejected a similar request last year for supplemental

economic and military aid to the front-line states in the war on

terrorism.

U.S. Emergency Fund for Complex Crises — For many years,

Administrations have asked Congress for various types of

contingency resources that can be drawn upon immediately to

address unanticipated foreign policy emergencies. Except in the

case of humanitarian situations, however, Congress has been

reluctant to support such requests, stating that the President has other

mechanisms and special authorities for temporarily “borrowing”

funds from other aid accounts over which Congress can more closely

maintain scrutiny and consult in advance as the purposes of the

transfers. The President’s $100 million FY2004 request to create the

Crises Fund had already raised concerns among some Members

during hearings on next year’s budget request.

Transfer of funds among different accounts — The supplemental

proposed that up to $200 million of international assistance, State

Department money, and the Iraq Relief and Reconstruction Fund

could be transferred between the accounts for any purpose.

Longstanding foreign aid laws place percentage caps on the amount

that can be taken from most accounts (10%) and how much the

receiving account can increase (20%).58 Annual Foreign Operations

appropriations further require the President to consult and justify the

transfer in advance with House and Senate Appropriations

Committees. In some circumstances, the Administration’s

supplemental proposal could have resulted in transfers exceeding the

percentage caps. The request further did not require any

congressional notification or consultation.

As noted above, the enacted supplemental establishes the Relief and

Reconstruction Fund proposed by the President, but with added oversight

Section 610 of the Foreign Assistance Act of 1961.

CRS-45

mechanisms put in place. While the President may apportion resources directly to

DOD, as well as the Departments of State, Treasury, Health and Human Resources,

and USAID, the Iraq Fund falls under the authority of existing foreign aid laws. H.R.

1559 also adds several reporting requirements, as mentioned above, and requires

notification 5 days in advance of any Fund obligations. The enacted supplemental

further deletes appropriations for the President’s emergency fund for foreign crises

and limits to $100 million the amount that can be transferred among the various aid

accounts.

Costs of Iraq Reconstruction and the Impact on Other Aid

Programs. Like the costs of military operations, it is nearly impossible to estimate

what the longer-term expenses of humanitarian relief and reconstruction in Iraq will

be. The Administration’s $3.5 billion included in the supplemental request

represented a general projection of needs over the next 12 months. But State

Department activity justifications cautioned that the timetable was tentative,

dependent largely on the extent of damage that resulted from the conflict and how

future assessments might alter aid priorities. Some believed that reconstruction needs

beyond this initial allotment would be met largely through proceeds from the sale of

Iraqi oil and the release of frozen assets. The international aid community is

currently discussing how post-conflict relief efforts will proceed, but there is a great

deal of uncertainty over the Administration’s intentions and the actual final outcome.

How soon and in what amounts Iraq might gain access to borrowing from the

International Financial Institutions will also be a factor in how much additional

resources will be needed or expected from the United States.59

In the meantime USAID and the State Department have been drawing resources

for Iraq from emergency refugee and disaster relief accounts, and from other

economic aid programs that had been intended for other countries and purposes. As

of March 25, USAID had utilized an estimated $506 million, including drawdowns

from the Child Survival and Health (CS/H), Development Assistance (DA), and

Economic Support Fund (ESF) accounts. For Child Survival and Development

programs, amounts diverted to Iraq contingency activities represented nearly 8% of

FY2003 appropriations. The supplemental request included about $410 million for

either replenishing CH/H, DA, and ESF accounts, or increasing disaster and refugee

resources so that future “borrowings” might be avoided and adequate funds would

be available for contingencies that might arise later in the year in other regions. But

the supplemental did not appear to fully cover USAID transfers already made for Iraq

programs. Moreover, the supplemental provided “up to $200 million may be used”

out of the Relief and Reconstruction Fund to repay these accounts. This discretionary

language left the final decision up to the White House as to whether these funds

would be available for the purposes and programs for which they were originally

intended.

For more discussion of these issues see CRS Report RL31814, Humanitarian Issues in

Post-War Iraq: An Overview for Congress; CRS Report RL31759, Reconstruction

Assistance in Afghanistan: Goals, Priorities, and Issues for Congress; and CRS Report

RL31833, Iraq: Recent Developments in Humanitarian and Reconstruction Assistance.

CRS-46

The conference agreement on H.R. 1559 adds substantial amounts, as noted

above, for replenishing foreign aid accounts from which money has been drawn for

Iraq operations. The enacted supplemental provides over $900 million to restore

funds for several programs, including the addition of $369 million in food assistance

that had not been requested.

Country Assistance. The Administration asked not only for funds to assist

coalition partners and nations that face significant economic and political risks due

to the Iraq conflict, but also to augment support for a broader set of countries

cooperating in the global war on terrorism. Some questioned whether a supplemental

appropriation intended to provide resources specifically related to the Iraq situation

should include nearly $700 million for this latter group, especially since Congress

approved in mid-February FY2003 money for this purpose (P.L. 108-7). Among the

countries covered by the request, but which are outside the conflict in Iraq were:

Afghanistan — The Administration proposed $325 million to “meet

immediate shortfalls” in Afghanistan’s FY2003 program, including

resources for the Kabul-Kandahr-Herat road, budget support for the

Afghan government, President Karzai’s protective detail, demining,

and military training and equipment costs.

Although the

Administration did not submit an official FY2003 Afghan aid

request, Congress increased assistance to over $300 million.

Pakistan — The supplemental proposed an additional $175 million

in military aid to strengthen Pakistan’s ability to track and disable

terrorists operating in its own territory and $25 million for better

border security.

Colombia — Included in the supplemental request was $71 million

in military and counter-narcotics assistance for supporting

Colombia’s unified campaign against drug cartels and terrorists.

The proposal also included an additional $34 million of DOD funds

for narcotics interdiction operations. In the FY2003 Foreign

Operations Appropriation, Congress approved $700 million for the

Andean Counter-narcotics Initiative for Colombia and other

countries in the region, $31 million less than the President had

requested.

Palestinians — The request would extend $50 million to support

Middle East peace objectives generally, and specifically for

humanitarian activities in the West Bank and Gaza and for

Palestinian civil reforms. Congress had appropriated in August 2002

a similar $50 million package, together with $200 million for Israel,

in the FY2002 Supplemental Appropriation. President Bush chose

not to spend the funds because they were part of a much larger

appropriation for programs he had not requested. Instead, he

amended the FY2003 Foreign Operations request to include the

Palestinian and Israeli funds but Congress did not increase overall

appropriations to accommodate these additions.

CRS-47

Philippines — The $30 million in military support would allow the

Philippines to upgrade its counterterrorism capabilities. Like the

Palestinian funds above, Congress provided $30 million for the

Philippines in the FY2002 supplemental which the President chose

not to spend.

Slovenia — Not a member of the coalition, Slovenia would receive

$5 million in military assistance in recognition of its efforts in

providing access and overflight rights in Operating Enduring

Freedom and contributing to the Afghan National Army and

demining program.

Beyond this list, some questioned the Administration’s $1 billion request for

Turkey that could be converted into as much as $8.5 billion in loans. The United

States had negotiated with the Turkish government for months over allowing the

deployment of U.S. forces in Turkey for military operations for a second front in

norther Iraq. Reportedly, the United States offered a $6 billion aid package that

could be leveraged into $26 billion in combined grants and loans. On March 1,

however, the Turkish parliament rejected the U.S. request to base troops for

operations in Iraq and the United States withdrew the aid offer. Turkey’s government

has subsequently granted U.S. overflight rights for the Iraq campaign. The

Administration justifies the $1 billion request on the basis of Turkey’s role as an ally

and frontline state in the war on terrorism, and for the significant political and

economic risks faced by Ankara due to the Iraq conflict.

As noted above, the enacted supplemental, for the most part, supports the

President’s foreign aid allocations for requested countries. Conditions are added to

funds for Turkey but amendments to eliminate or reduce the $1 billion package failed

in the House. H.R. 1559, as approved, however, will require the Administration to

make some economic aid reductions for some countries and programs not earmarked,

possibly including those for the Palestinians, Djibouti, Turkey, or the Middle East

Partnership Initiative.

DOD Authorities to Provide Military Aid. Under sections relating to

Defense Department funds and authorities, the supplemental proposed two items that

drew particular congressional attention. The key issue was whether they infringed

on congressional oversight and the State Department’s traditional role in directing

foreign aid policy and resource allocations. They were both similar to proposals

made last year in the FY2002 supplemental that focused on the war on terrorism and

were closely scrutinized by Congress.

The first would provide $1.4 billion for the Defense Department,

“notwithstanding any provision of law,” to pay Jordan, Pakistan, and other nations

that have provided logistical and military-related support to U.S. military operations

in Iraq or in the global war on terrorism. In the past, Defense officials argue,

competing demands on regular military aid resources have delayed reimbursement

to key friends that provide services to American forces. Congress approved funding

in the FY2002 supplemental for this purpose, but included a 15-day prior notification

requirement that is not part of the FY2003 supplemental draft legislation.

CRS-48

The more controversial authority concerned DOD’s request for $150 million to

support “indigenous forces” assisting U.S. military operations, including those aimed

at the global war on terrorism. Decisions to draw on these funds would be made by

the Secretary of Defense, with the concurrence of the Secretary of State. The

Defense Department defines indigenous forces as “irregular forces and resistance

movements” and notes that such forces “generally conduct military and para-military

operations in enemy-held or hostile territory and conduct direct offensive lowintensity, cover, or clandestine operations.”60 Although it was unclear from the

budget justification and bill text exactly what groups and under what scenarios the

Administration would utilize these resources, a senior Administration official

suggested that the intent was to have resources available for groups in Iraq. Deputy

Secretary Richard Armitage testified on March 27 that because of the uncertainty of

the war’s duration, it might be necessary to transfer additional arms and equipment

for Kurdish and other forces, and that the $150 million would provide a “hedge” in

case of a more prolonged conflict.61 In last year’s supplemental appropriation debate,

DOD had asked for $30 million to support indigenous forces, funds that would be

exclusively under the control of the Secretary of Defense. Congress rejected the

proposal, however. The House Appropriations Committee observed in deleting the

request that the Secretary of State’s primary responsibility over U.S. military

assistance programs is well established and that the Administration has the necessary

authorities under existing foreign aid laws to undertake the requested activities.62

H.R. 1559, as enacted, provides the $1.4 billion for nations supporting U.S.

military operations in the global war on terrorism but does not authorize the $150

million for aid to indigenous forces.

Homeland Security

The smallest component of the supplemental proposal covered additional

resources for homeland security. Some critics of Administration homeland security

policy, including some Members of Congress, believe that key domestic preparedness

measures have been under-funded and argue for additional resources. In some cases,

as discussed elsewhere in this report, Members offered amendments increasing

amounts for homeland security. Details of congressional action on homeland security

funding matters are included in Table 8.

U.S. Office of Management and Budget, FY2003 Request for Supplemental

Appropriations, March 25, 2003, no pagination. Available on the OMB Web site at

[http://www.whitehouse.gov/omb/budget/ amendments/supplemental_3_25_03.pdf].

House Appropriations Subcommittee on Foreign Operations, Hearing on the Iraq War

Supplemental, testimony of Richard Armitage, Deputy Secretary of State, March 27, 2003.

Making Supplemental Appropriations for Further Recovery from and Response to

Terrorist Attacks on the United States for FY2002. Report to accompany H.R. 4775.

H.Rept. 107-480, May 22, 2002.

CRS-49

Table 8. Homeland Security

($s millions)

Request

Dept Homeland Security: Counterterrorism $1,500.0

Fund

House

Senate

Enacted

$1,135.0

$150.0

Dept of Homeland Security:

Operating expenses

—

$1.0

—

$3.0

Secret Service

—

$30.0

—

$30.0

Customs and Border Protection

—

$428.0

—

$333.0

Immigration and Customs

—

$185.0

—

$170.0

Transportation Security Administration

—

$390.0

—

$665.0

Federal Law Enforcement Training Center

—

$2.0

—

$2.0

Office of Domestic Preparedness

—

$2,200.0 $2,200.0 $2,230.0

Coast Guard

—

$230.0

$580.0

$228.0

Emergency Preparedness & Response

—

$45.0

—

$45.0

FEMA Disaster Relief

—

$109.5

$54.8

Information Analysis & Infrastructure

Protection

—

$10.0

—

$0.0

Total Department of Homeland Security $2,000.0 $3,521.0 $2,889.5 $3,760.8

Dept of Justice:

Counterterrorism Fund

$500.0

$50.0

—

$20.0

Salaries and Expenses

—

$5.0

—

$5.0

Detention Trustee

—

$15.0

$45.0

$40.0

Inspector General

—

$2.5

—

$2.5

US Marshals

—

$26.1

—

$8.0

FBI

—

$398.9

$73.0

$367.2

Interagency Law Enforcement Support

—

$72.0

$0.0

State & Local Law Enforcement Assistance

—

$91.0

$0.0

Community Oriented Policing Services

—

$114.5

$54.8

$500.0

$497.5

$395.5

$497.5

Supreme Court

—

$1.5

—

$1.5

US Court of Appeals

—

$1.0

—

$1.0

US Court of International Trade

—

$0.1

—

$0.1

$250.0

—

$0.0

$11.0

—

$11.0

Total, Department of Justice

Exec Office of President: Emergency Fund

Legislative Branch Emergency Response Fund:

Salaries and Expenses

—

CRS-50

Request

House

Senate

Enacted

Architect of the Capitol

—

$34.4

$23.8

Architect of the Capitol, Capitol Police

Buildings

—

$63.8

$40.1

Capitol Police

—

$37.8

$38.2

$37.8

Office of Compliance

—

$0.1

Library of Congress

—

$5.5

Congressional Research Service

—

$1.9

General Accounting Office

—

$4.9

$4.8

$125.0

Dept of Transportation, Maritime

Administration

—

$50.0

$25.0

Dept of Agriculture Research Service

—

$98.0

$110.0

Corps of Engineers, infrastructure security

—

$29.0

$39.0

Dept of Interior, Bureau of Reclamation

—

$25.0

Dept of Energy, nuclear facility security

—

$11.0

Dept of Energy, Natl Nuclear Security

Admin

—

$61.0

$67.0

Dept of Energy, Defense Nuclear

Proliferation

—

$150.0

$148.0

Dept of Energy, Defense Environment

Rest.

—

$6.0

Dept of Energy, Other Defense Activities

—

$18.0

$4.0

HHS, Public Health and Social Services

—

$94.0

—

$100.0

HHS, compensation for smallpox

volunteers

—

$50.0

$35.0

$42.0

HHS, grants to States for smallpox

inoculation

—

$105.0

$0.0

National Commission on Terrorist Attacks

—

$11.0

Total Legislative Branch Emergency

Fund

TOTAL, Homeland Security

$4,375.0 $4,290.1 $5,144.0 $5,123.9

Included under Dept. of Homeland Security items below.

Support to State and Local Governments for Terrorism

Prevention and Security Enhancements63

The Bush Administration’s request for FY2003 supplemental appropriations

included $2 billion for the ODP. These funds would be distributed to state and local

This section was prepared by Ben Canada, Analyst in American National Government,

Government and Finance Division.

CRS-51

governments “... to support federally-coordinated terrorism prevention and security

enhancements at this time of heightened threat, and terrorism preparedness for first

responders.”64 The Department of Homeland Security projected that $1.5 billion

would go to the ODP formula grant program, $450 million to critical infrastructure

security grants, and $50 million to high threat urban areas.65 The Administration’s

request for $450 million for critical infrastructure security grants contained at least

one significant change to the current structure of federal first responder programs.

The request proposed allowing recipients to use these funds for personnel overtime

expenses, an activity not currently authorized in existing terrorism preparedness

programs.

Congressional Action. The House, in H.R. 1559, provided a total of $2.2

billion to ODP, $200 million above the Administration request, specifically

providing the following amounts.66

$1.5 billion to ODP’s formula grant program, and

$700 million “... to address security requirements in high threat, high

density urban areas with critical infrastructure.”67

In S. 762, the Senate Appropriations Committee recommended $2 billion for

ODP of which $1.42 billion would have gone to the formula grant program, $450

million to critical infrastructure security, $100 million to high threat urban areas, and

$30 million to technical assistance.68 The full Senate passed an amendment,

however, that added an additional $200 million and allocated more funding to high

threat urban areas.69 The Senate also added additional funding to FEMA and the

Community-Oriented Policing Services program (Justice Department) for

interoperable communications. S. 762, as passed by the Senate, provided a total of

$2.2 billion for ODP programs, matching the House amount. The Senate-passed bill

provided:

$1.27 billion for the formula grant program,

$300 million to critical infrastructure protection,

$600 million to high threat urban areas,

OMB, FY2003 Request for Supplemental Appropriations.

U.S. Department of Homeland Security, “FY2003 Supplemental Budget Request Fact

Sheet,” March 25, 2003. Available at: [http://www.dhs.gov/dhspublic/display?content=533].

At least one amendment proposing additional funding for ODP programs was introduced

but not passed (H.Amdt. 30 to H.R. 1559).

House Appropriations Committee, “Full Committee Unanimously Reports Wartime

Supplemental,” press release, April 1, 2003. See the House Appropriations Committee Web

site [http://www.house.gov/appropriations/news/108_1/04warsuppsum.htm], visited April

3, 2003.

U.S. Congress, Senate Committee on Appropriations, Report to Accompany S. 762, 108th

Cong., 1st sess., S.Rept. 108-33 (Washington: GPO, 2003), pp. 23-24.

S.Amdt. 515 to S. 762, enacted April 3, 2003. The Senate also considered, but did not

pass, at least one amendment to provide an additional $2.33 billion for first responder

preparedness (S. 514 to S. 762).

CRS-52

$30 million for technical assistance and other activities, and,

$219 million for interoperable communications (to FEMA and

COPS).

The enacted supplemental (P.L. 108-11) provides $2.23 billion for ODP, which

is $230 more than the Administration request. In addition, the conference provided

roughly $109.5 million for interoperable communications programs. Total

supplemental funding for first responder preparedness comes to roughly $2.34

billion, which, when added to the FY2003 regular appropriation of $2.045 billion,

comes to a FY2003 grant total of $4.385 billion. Specifically, the conference

agreement provides the following amounts:

$1.3 billion for ODP’s formula grant programs (80% must go to

localities),

! $200 million for critical infrastructure protection (no less than 50%

going to localities),

! $700 million to high threat urban areas,

! $30 million for technical assistance, and,

! $109.5 million interoperable communications (FEMA and COPS)

A number of observers have argued that the current level of federal assistance

for first responders is insufficient and should be increased above current funding

levels. Other observers, however, point to evidence of slow state and local utilization

of federal grants as an indication that additional funding at this time is not

necessary.71 Still others have suggested that ODP’s distribution formula should be

adjusted to increase assistance to areas perceived to be high-risk.72 The conference

agreement addressed a number of these concerns. It instructed ODP to distribute

formula grant funds to states within 60 days of enactment, and further instructed

states to distribute 80% of funds to localities within 45 days of receipt. Similar

requirements for distribution were applied to the other ODP assistance programs.

Conferees also adopted several reporting requirements in the Senate bill (S. 762).

These include reports on risk assessments of high-threat urban areas, cost of securing

such areas, appropriation federal share of security costs, and proposals for new

distribution formulas.73 Conferees also required reports on overtime accountability

and a listing of all federal terrorism preparedness grant programs administered by

DHS.74

House Appropriations Committee, “Highlights of Wartime Supplemental Conference

report,” press release, April 12, 2003. Available at: [http://www.house.gov/

appropriations/news/108_1/04warsuppconf.htm], visited April 14, 2003.

Sam Dealey, “Anti-terror Funds Left Unspent,” The Hill, March 26, 2003, p. 1.

Dale Russakoff and Rene Sanchez, “Homeland Burden Grows for Cash-Strapped States,

Cities,” Washington Post, Apr. 1, 2003, p. A1.

S.Rept. 108-33, pp. 23-24.

H.Rept. 108-76, pp. 82-83.

CRS-53

Departments of Justice and Homeland Security

Counterterrorism Funds75

The Administration’s FY2003 supplemental request included $500 million to

reimburse Department of Justice organizations for the following purposes: (1) to

reestablish operational capabilities that were lost or weakened as a result of a terrorist

attack; and (2) to pursue counterterrorism investigations, including the payment of

rewards. The request for this account includes language that would authorize the use

of such funding to reimburse any federal agency for costs related to detaining a

terrorist suspect as well.

For the Department of Homeland Security’s Counterterrorism Fund, the

Administration’s FY2003 supplemental request included $1.5 billion to reimburse

any homeland security organization for counterterrorism investigations and

operations, including operations in support of the Department of Defense. Among

other things, such operations could include (1) increasing border and maritime

security; (2) enhancing elements of the strategic national stockpile; (3) providing

increased port security for military outloads; and (4) deploying various biological

attack detection technologies, related countermeasures, and response assets.

Congressional Action. As reported by the Senate Appropriations

Committee, S. 762 provided $500 million, as requested, for the Department of

Justice’s Counterterrorism Fund. However, as part of an omnibus amendment

proposed by Senator Stevens, the Senate voted to re-allocate these funds among

several Department of Justice programs, including FBI salaries and construction,

state and local law enforcement assistance, Community Oriented Policing Services,

and interagency law enforcement support. The Stevens amendment also took $109.5

million of the President’s request for the Counterterrorism Fund and made it

available for additional FEMA disaster relief operations. The House measure

appropriated $50 million for the Fund, and an additional $450 million for several

other Justice Department programs, including $399 million for the FBI. For

Homeland Security Counterterrorism Fund, the Senate recommended $1.135 billion

after shifting $580 million for the Coast Guard to a separate account, but including

$215 million for the President’s Emergency Response Fund. The President had

proposed resources for the emergency fund under a separate line-item.

As enacted, H.R. 1559 combines approaches taken in the House and Senate bills

of allocating most of the proposed $500 million DOJ Counterterrorism Fund to

specific accounts. The FBI receives $367 million, close to the House

recommendation, but Senate proposals for over $160 million for state and local law

enforcement and interagency law enforcement support were deleted. Similar to the

Senate bill, the conference agreement provides additional funds for FEMA, although

the $55 million appropriation is less than half the amount recommended in S. 762.

This section was prepared by William Krouse, Analyst in Social Legislation, Domestic

Social Policy Division.

CRS-54

Emergency Response Funds for the Executive and

Legislative Branches

Beyond the additional resources for the Departments of Justice and Homeland

Security to bolster their counterterrorism capabilities, the White House asked for a

$250 million fund that could be drawn upon to meet any emerging terrorist related

threat across the entire federal government. Among any authorized activity, this

highly flexible fund could be used to assist first responders and health care workers

who have suffered adverse reactions from voluntary smallpox vaccinations.

The Administration also proposed a $125 million emergency fund for the

legislative branch to meet emerging terrorist-prevention needs.

Congressional Action. House and Senate bills split on the issue of a White

House emergency response fund. S. 762 provided $215 million within Department

of Homeland Security funds, while the House did not include any resources for this

purpose. As enacted, H.R. 1559 does not provide funding for a White House

emergency response fund but includes $150 million for the Department of Homeland

Security’s Counterterrorism Fund. These resources can be used to reimburse any

Homeland Security organization for terrorism-related expenses. The conference

appropriation further includes $125 million for additional legislative branch security

requirements, with specific allocations spread over a number of accounts, as

illustrated in Table 8.

Aviation Industry Relief76

The onset of the war in Iraq has dramatically effected the airline industry. Air

travel in the short term has dropped approximately 10% according to the Air

Transport Association (ATA). More worrisome for the airlines, advance bookings

for the months ahead appear to be dropping approximately 30%. All of this is

happening against the backdrop of the events of September 11th, which also had a

huge negative impact on the industry. The airlines lost record amounts of money in

2002, following what had been the previous record loss in 2001.

Among major airlines, only Southwest was profitable in 2002, and Southwest

is the only major carrier believed to have a chance at profitability in 2003. The

industry’s second largest airline, United, is operating in receivership and the

possibility exists that other carriers could find themselves in this position in the near

future. There is, therefore, considerable concern that the airline industry is likely to

go through a period of major structural change.

After September 11, Congress and the Bush Administration moved swiftly to

provide the airline industry with $15 billion in federal financial support (Air

Transportation Safety and System Stabilization Act (Stabilization Act), P.L. 107-42).

The first $5 billion provided direct aid to pay for industry losses associated with the

results of the September 11th attacks. The vast majority of these funds have already

This section was prepared by John W. Fisher, Specialist in Transportation.

CRS-55

been distributed to the airlines (a listing of airlines receiving funds is available from

the Department of Transportation (DOT), [http://ostpxweb.dot.gov/aviation/]). A

second source of funding, access to $10 billion in government backed loans, required

approval by the newly created Air Transportation Stabilization Board (ATSB).

Thirteen airlines applied for the loan program. The majority received some form of

assistance, but the largest single applicant, United, was denied a loan. Of the $10

billion authorized by this program only about $1.5 billion has been committed.

In the FY2003 Emergency Supplemental, Congress again proposed providing

some short term relief to the airline industry. The House-approved package totaled

$3.2 billion in direct assistance while the Senate proposed $3.5 billion, as estimated

by CBO. Both bills had the same intent, but there were significant differences in how

aid would be provided. Both the House and the Senate measures included

significant funding for security costs. In addition, S. 762 would provide a tax holiday

for collections of the existing $2.50 per flight segment security fee charged to airline

passengers. The Senate measure would also extend to the end of 2004 war risk

insurance provisions in existing legislation that expire at the end of this year. In

addition, the Senate bill provided additional unemployment insurance to displaced

airline industry employees. Both bills had provisions that would limit airline industry

executive compensation.

The enacted emergency supplemental includes a relief package estimated by

CBO as totaling $3.1 billion for FY2003. Conferees adopted the Senate approach of

direct appropriations plus authority to temporarily suspend fees, and extend

unemployment and war risk insurance. As calculated by CBO, the airline industry

relief package breaks out as follows for FY2003:

Grants to U.S. flag carriers for aviation security costs: $2.296 billion

Compensation to air carriers for secure cockpit doors: $100 million

Suspension of fees, June 1 to September 30, 2003: $570 million77

Extension of unemployment benefits: $125 million77

OMB further estimates that the costs (budget authority) in FY2004 of suspending fees and

extending unemployment benefits will be $130 million and $135 million, respectively.

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