The Overseas Contingency Operations (OCO) designation has often been used to circumvent spending limits, and the budget resolution released by House Budget Committee Chairman Tom Price (R-GA) is no exception.
The budget goes beyond what the Bipartisan Budget Act of 2015 already did to explicitly rely on OCO to backfill the normal defense budget. Even more troubling, the budget appears to greenlight Fiscal Year 2017 appropriations that would underfund true war-related spending needs, setting the stage for a supplemental appropriations request next year to cover the shortfall.
Because the statutory limits on discretionary spending are automatically increased by the amount of spending designated as OCO spending, it is effectively exempted from spending limits. The OCO designation creates a loophole to circumvent discretionary spending limits when regular funding in the base defense budget is designated as OCO.
For many years, this loophole was used in small ways, with Congress providing slightly less than the administration requested for OCO needs and funding some items in the base defense budget through OCO to keep total spending in line with the administration’s request.
The bipartisan budget agreement last year relied on a much larger and more blatant use of the OCO gimmick to backfill both the defense and non-defense budget. The agreement called for OCO spending of $74 billion in Fiscal Years 2016 and 2017, $15 billion more than the President’s request for OCO in FY 2016. The increased spending above the caps was divided evenly between defense and international affairs function, effectively freeing up room to backfill the defense and non-defense appropriations by $7.5 billion in each of those years.
The President requested $74 billion for OCO for FY 2017, with $10 billion split equally to backfill non-war defense and international spending and the remainder for legitimate OCO needs. The budget resolution released by Chairman Price sets OCO spending at $74 billion, but supporting materials explicitly assume $23 billion of the OCO allocation is used to backfill regular defense needs. By increasing the amount of normal defense funding provided through the OCO designation while keeping the same total amount for OCO, the budget is effectively underfunding true OCO needs requested by the Defense Department by $18 billion.