Other Defense Spending

November 8, 2017  |  Katherine Blakeley

 

Overview

In addition to the major appropriations titles of military personnel; research, development test and evaluation (RDT&E); procurement; and operation and maintenance (O&M), the DoD budget also contains a handful of smaller appropriations titles: military construction (MILCON), family housing, and revolving and management funds. DoD also receives mandatory appropriations for the accrual payments for concurrent receipt of military retirement and Veterans Affairs (VA) benefits for some VA beneficiaries.

Funding for the Department of Defense is about 95 percent of total national defense funding. In Office of Management and Budget terms, national defense funding is budget function 050. Within that, funding for the Department of Defense is budget subfunction 051. Funding for the nuclear weapons activities of the Department of Energy is budget subfunction 053, entitled atomic energy defense activities, while budget subfunction 054 captures other defense-related activities. The limitations on defense discretionary appropriations imposed by the Budget Control Act of 2011 apply to the national defense budget function 050 as a whole. All other discretionary federal spending falls under the parallel cap on non-defense discretionary spending.

In addition to the three constituent elements of the national defense budget function, there are other elements of federal spending that are related to national security that fall within the non-defense category, rather than in the national defense budget function. For example, the Department of State and the Department of Homeland Security, which includes the Coast Guard, are part of the non-defense category. Veterans’ benefits and international affairs funding are major federal budget elements that are not considered part of the national defense budget.

 

Other Funding Within the DoD Budget

Military Construction and Family Housing

Military construction (MILCON) and family housing are a part of DoD’s budget but are authorized in the Military Construction and Veterans Affairs bill instead of in the NDAA. In FY 2018, DoD is requesting $8.4 billion in the base budget for military construction and an additional $638 million in Overseas Contingency Operations funding, for a total of $9 billion. This figure is about $2.4 billion more than the FY 2017 appropriations of $6.6 billion, for an increase of 36 percent. DoD is also requesting $1.4 billion for family housing, an increase of $156 million or 12 percent over the $1.3 billion appropriated in FY 2017. Military construction funds support the ongoing maintenance and renovation of military real property including buildings, structures, and infrastructure like runways and roads. In addition to paying for DoD servicemembers to obtain housing by renting or purchasing private housing stock through the Basic Allowance for Housing (part of the military personnel appropriations title), DoD operates family housing on base, in barracks, and in areas where there is insufficient private housing stock.

Funding for military construction has fluctuated wildly since FY 1948. Higher levels of MILCON funding in recent years were partially driven by the FY 2005 Base Realignment and Closure (BRAC) round. DoD has proposed conducting another BRAC round to divest excess infrastructure in their budget every year between FY 2013 and FY 2018 (after the completion of the FY 2005 BRAC), citing excess capacity in the current and projected force structure levels, but these proposals have met sharp resistance from the Congress.

 

Figure 8-1: MILCON and Family Housing Appropriations and PB18 Request

Source: OUSD (Comptroller), National Defense Budget Estimates for FY 2018, FY 2018 Greenbook (Washington, DC: DoD, June 2017), Table 6-8, “Department of Defense Budget Authority by Public law Title,” available at http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2018/FY18_Green_Book.pdf.

 

Revolving and Management Funds

The Department of Defense operates a number of revolving and management funds. These funds effectively operate as self-funded lines of credit. Frequently, they offer services utilized by the military Services that are organized and run at the DoD-wide level for efficiency; this includes energy, supply chain management, telecom acquisitions, and funds to support financial services. They receive appropriated funds as necessary, but they also charge the Services for the goods or services that they provide. For example, the Defense Logistics Agency—Energy is responsible for procuring, storing, managing, and distributing fuels and other energy products to the Services, which then purchase the energy from their own O&M accounts. Other DoD-wide revolving funds support the various elements of the Defense Logistics Agency, the Defense Finance and Accounting Service, and the Defense Information Systems Agency. The Navy, Army, and Air Force also operate their own working capital funds, principally for supply management and maintenance. Many of these funds are operated as internal revolving or working capital funds that require appropriations on initial startup or in cases where costs are much higher than expected, requiring top-up funding; as a result, the funding profile of this appropriations title is highly erratic. Additionally, Congress may remove money from the funds’ balances in a recession action.

In FY 2018, DoD requested $2.2 billion in revolving and management funds, $1 billion more than the $1.2 billion appropriated in FY 2017.

 

Figure 8-2: Revolving and Management Funds Appropriations, Recissions, and PB18 Request

Source: OUSD (Comptroller), National Defense Budget Estimates for FY 2018, FY 2018 Greenbook (Washington, DC: DoD, June 2017), Table 6-8, “Department of Defense Budget Authority by Public Law Title,” available at http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2018/FY18_Green_Book.pdf.

 

Mandatory Spending

In addition to the discretionary spending outlined in the majority of these briefs, DoD needs mandatory funding, principally for the concurrent receipt accrual payments to the Military Retirement Fund. Congress allowed the concurrent receipt of both military retirement pay and VA disability compensation pay for some disabled military retirees in the FY 2003 National Defense Authorization Act.^[1] As a result, DoD now needs additional military retirement accrual payments to finance the retirement benefits of this eligible pool of beneficiaries. Because Congress appropriates this money automatically (hence the mandatory designation), it does not appear in DoD’s budget documents. However, it is still counted as part of national defense spending. In PB 2018, the estimated accrual payment is $7.5 billion.

 

Defense-related Spending Outside the DOD Budget

Atomic Energy Defense Activities

The FY 2018 budget requests a total of $21.8 billion in discretionary funding for nuclear weapons-related work in budget subfunction 053. The major elements in this total are $5.3 billion for environmental remediation of former defense sites, $816 million for other defense activities, and $10.2 billion for the National Nuclear Security Administration (NNSA). Within the NNSA, the largest funding elements are for nuclear weapons activities ($10.2 billion); nuclear non-proliferation efforts ($1.8 billion); Naval Reactors, which is the sole authority over the Navy’s nuclear reactors for propulsion ($1.5 billion); and salaries and expenses ($419 million). The PB 2018 request also includes $1.2 billion in mandatory funding in budget subfunction 053, mostly for occupational illness payments to former nuclear weapons employees.

 

Figure 8-3: Atomic Energy Defense Activities Appropriations and PB18 Request

Source: Office of Management and Budget, Budget Analysis Branch, Budget of the United States Government Fiscal Year 2018: Public Budget Database, Budget Authority (Washington, DC: OMB, May 2017), available at https://www.whitehouse.gov/sites/default/files/omb/budget/fy2018/assets/budauth.xls.

 

Other Defense-Related Funding

Budget subfunction 054, other defense-related activities, is the final element of national defense funding. This budget subfunction includes some activities of the FBI ($5.1 billion); the Department of Homeland Security, including the National Protection and Programs Directorate, which focuses on threats to physical and cyber infrastructure ($1.5 billion); the Coast Guard ($340 million); the Federal Emergency Management Agency ($96 million); the intelligence community management account ($532 million); and the operation of the selective service system ($23 million). It also includes the CIA’s retirement and disability fund ($514 million). Those other defense-related activities total $7.9 billion in discretionary spending and $564 million in mandatory spending in the FY 2018 request.^[2]

 

Other National Security Spending

In addition to the national defense 050 budget function, funding for veterans’ benefits and services and Treasury payments of unfunded military retirement liabilities could also be considered defense-related. For FY 2018, the total Department of Veterans Affairs budget request was $183 billion, of which $104.1 billion was requested for mandatory benefit programs and $70.7 billion for the Veterans Health Administration. There are also numerous smaller programs serving veterans throughout the federal government, such as funds for veterans training in the Department of Labor ($50 million).^[3] The unfunded military retirement government liability was created at the beginning of FY 1985 when the government shifted from a system of paying for military retirement as benefits paid out to retirees to an accrual system of contributions paid to the Military Retirement Fund to finance the future retirements of current servicemembers. The Department of Defense began paying accrual payments into the Military Retirement Fund, while the government as a whole (through the Department of the Treasury) assumed the responsibility of paying for the retirements of those servicemembers who began their service before the accrual system was adopted.^[4] In FY 2017, the government will pay an estimated $83.8 billion into the retirement fund to cover the unfunded retirement payouts to retired servicemembers and $7.5 billion to cover the additional concurrent receipt of military retirement and VA disability benefits, in addition to the DoD portion discussed above.^[5]

Funding for veterans’ benefits has grown rapidly in the past two decades, rising from $64.4 billion in FY 2000 (in FY 2018 dollars), to a requested $183.5 billion in PB 2018. This growth in costs is due to a larger pool of eligible veterans, the aging of veterans from previous wars, more complex and disabling injuries from the conflicts in Iraq and Afghanistan, and the expansion of veterans benefits to include a wider pool of beneficiaries (see Figure 8-3). 

Spending on international affairs could also be considered part of our nation’s broader national security spending (see Figure 8-4). However, although funding for both veterans’ benefits and services and international affairs has grown over the past two decades, they still represent a much smaller proportion of federal spending than the national defense budget (see Figure 8-5). 

 

Figure 8-4: Veterans Benefits and Services Appropriations and PB18 Request

Source: OMB, Public Budget Database FY 2018, Table 5.1, “Budget Authority by Function and Subfunction: 1976–2022,” available at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/budget/fy2018/hist05z1.xls.

 

Figure 8-5: International Affairs Appropriations and PB18 Request

Source: OMB, Public Budget Database FY 2018, Table 5.1, “Budget Authority by Function and Subfunction: 1976–2022,” available at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/budget/fy2018/hist05z1.xls.

 

Figure 8-6: Total National Defense, Veterans Benefits and Services, and International Affairs Appropriations and PB18 Request

Source: OMB, Public Budget Database FY 2018, Table 5.1, “Budget Authority by Function and Subfunction: 1976–2022,” available at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/budget/fy2018/hist05z1.xls.

ABOUT THE AUTHOR

Katherine Blakeley is a Research Fellow at the Center for Strategic and Budgetary Assessments. Prior to joining CSBA, Ms. Blakeley worked as a defense policy analyst at the Congressional Research Service and the Center for American Progress. She is completing her Ph.D. in Political Science from the University of California, Santa Cruz, where she received her M.A. Her academic research examines Congressional defense policymaking.

 

ABOUT THE CENTER FOR STRATEGIC AND BUDGETARY ASSESSMENTS (CSBA)

The Center for Strategic and Budgetary Assessments is an independent, nonpartisan policy research institute established to promote innovative thinking and debate about national security strategy and investment options. CSBA’s analysis focuses on key questions related to existing and emerging threats to U.S. national security, and its goal is to enable policymakers to make informed decisions on matters of strategy, security policy, and resource allocation.

 

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