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Dealing a new hand: DOD works the table

Stay tuned this week for the Defense Department to shuffle those budgetary cards and deal them in new ways. Every year, the DOD encounters new needs and changing old needs and submits an altered spending plan to the Congress -- it's called "reprogramming" or "transfers." And every year, it shifts additional funds around without having to notify the Congress.

In addition, thanks to the sequester, the Pentagon may well take full advantage of the special, supplemental war budget it has asked for every year to recover as much as it can from budget cuts.

The Pentagon starts from a high spending base. Even after the cuts of the last three years, defense spending is a good $150 billion above the average for the last 60 years.

The DOD has some unusually generous opportunities to shift funds around. This year, they have a $7.5 billion opportunity -- the amount of funding they can legally reprogram across the budget to meet emerging needs, so long as they seek the approval of the armed services committees and their defense appropriators in Congress.

And this week, the DOD may well come forward with a proposal as to how they intend to use the notification part of that flexibility. Their draft proposal for fund-shifting was leaked to Inside Defense last week, not clear by whom.

The Air Force might have had a reason to leak the draft, since they are paying a heavy bill for the Army's profligate spending on operations in Afghanistan. It seems the Army has underestimated the costs of moving things around in that country, as well as the costs of bringing it home (particularly given the Pakistani border shutdown, which throttled any deliveries via road for a few months). A whole run of Air Force programs may get a spring haircut to pay for these problems, including space-based infrared radar, modifications to the Reaper drone, and a number of other space and missile programs.

My conversations in the Pentagon suggest that neither the Navy (less impacted) nor the Air Force are all too happy about picking up the Army's tab. Mind you, it is war-cost estimates, in addition to the sequester dilemma, that's creating the need to shuffle money around.

Beyond the congressionally notified reprogramming, the DOD has substantial flexibility to move even more money around without telling Congress, so long as they stay within specific accounts and below certain monetary thresholds. Over the past 12 years, they have used this internal flexibility to shift around an average of $14.5 billion a year, according to the Pentagon's own budget execution tutorial. No reports, as yet, as to how much of that is taking place this year.

And right behind the reprogrammings, the Pentagon intends to send Congress a war supplemental -- known as the budget for Overseas Contingency Operations (OCO) -- and it's likely to be a whopper. Back last year, the Pentagon put a 2013 budget plug in for the war, which amounted to $44 billion. Then, this spring, when the DOD sent up its budget, they decided to hold back on sending the OCO budget.

So now we're waiting on yet another budgetary card to be dealt. And given the Army's bad checkbook and the squeeze that the sequester is putting on Pentagon spending this year, the temptation to use the OCO to fix things may just be too great. After all, the war budget is not subject to the DOD ceiling mandated by the Budget Control Act, which leaves room for a major reshuffle of the spending cards.

According to Comptroller Robert Hale, "the placeholder [for OCO] is $88.5 billion. I don't think we'll be above that. I don't know yet how much we will be below that."

Before the final reprogramming and the OCO budget get sent to the Congress, it behooves the Office of Management and Budget to take a good look at the details. The sequester, as I have said, is a lousy way to manage a budget, but the best opportunity the DOD has had in years to set the right priorities and bring some budgetary discipline to the Pentagon, something it has not had for more than a decade.

No dealing from under the deck should be permitted in this game.

Steve Grayson/Getty Images

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