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COVID-19 Response: Pentagon Gets A Real $8.3B Slush Fund « Breaking Defense







Mark Cancian, who used to help build and oversee execution of the defense budget at the Office of Management and Budget, peels apart the second big spending bill President Trump has proposed to help the government battle the COVD-19 virus.. From his perch at the Center for Strategic and International Studies, Cancian, a member of the Breaking D Board of Contributors, makes clear this money has few restrictions and less oversight than the annual Overseas Contingency Operations funding. Read on to see if he thinks this is a good thing. The Editor.

The president has proposed a $45.8 billion government-wide funding package that would provide DoD with $8.3 billion to help it cope with the disruptions of sickness and quarantine from the COVID-19 virus. This money is inwardly focused and does not explicitly include military support to the civilian sector, so it is probably just the beginning. Much of the $45.8 billion in this package goes into “slushy” funds to get money to the agencies quickly to hasten the fight the spread of COVID-19/coronavirus. DOD is no exception, its money going into a “transfer account” that is a classic “slush fund.” In emergencies, normal budget procedures and controls go out the window. 

The White House Package

Many departments and agencies get money in the 118-page, $45.8 billion request, with individual amounts ranging from $30,000 to $13.1 billion. (This package provides additional money to government agencies and is completely different from the $1 trillion-plus stimulus package for the economy and private sector currently blocked in the Senate.) 

It is worth taking a quick look at this to put DOD’s role into perspective. 

The largest total amount, $16.6 billion, goes to the Department of Veterans Affairs to cover increased expenses for veterans and the facilities. Because VA hospitals are apparently at near capacity, the civilian sector will provide most of this care. Thus, officials looking to the VA as a source of medical capacity in this crisis may be disappointed.

Department of Health and Human Services (HHS) would get a total of $6.6 billion mainly for “development and manufacturing of vaccines, therapeutics, and diagnostics” but also for procurement of supplies for triage and treatment capacity, telehealth and rural hospital technical assistance. The Centers for Disease Control and Prevention (CDC) would get $3.4 billion for lab capacity and “comprehensive COVID response and preparedness efforts.” These amounts are on top of the $8 billion HHS and CDC received last week.

Then there are smaller pieces: 

  • Customs and Border Protection ($567 million) and Immigration and Customs Enforcement ($249 million) for migrant quarantine facilities; 
  • Small Business Administration ($562 million) for disaster loans; 
  • Indian Health Service ($532 million) for operational costs; 
  • AMTRAK ($500 million) for revenue loss; 
  • General Services Administration ($500M) for lease extensions and building cleaning;
  • National Institutes for Health ($441 million) to accelerate and expand the evaluation of therapeutics;
  • Housing and Urban Development ($400 million) for assistance to homeless persons;
  • Internal Revenue Service ($241 million) for the extended filing season and new tax credit questions.

Recent reports have this package growing to $242 billion, mainly because of $186 billion in aid to states and some money for airlines. There does not seem to be more money for DoD.

DOD’s Share

The $8.3 billion is meant to cover a variety of purposes: “Mitigate the risk of COVID–19 on United States servicemembers, their dependents, and DOD civilians, minimize the impacts of the virus on strategic mission readiness; and support national response efforts.” 

It’s worth citing the justification in its entirety, because it is so short: “The request includes resources to facilitate changes in servicemember personnel policy; expedite access to rapid COVID-19 diagnostics; ensure access to medical care, including additional medical countermeasures; address the impacts of the pandemic on logistics and supply chains, including pharmaceuticals and personal protective equipment; and bolster the overall national response.”

Although this money could be used for virtually anything (see below), the purposes cited focus inward on the Defense Department and helping the services cope with the disruptions of sickness and quarantine. Despite the general language about “bolstering overall national response”, there is no specific mention of reserve mobilization or troop deployments in support of civilian communities. That implies that there could be a future DOD supplemental that pays for these activities, which have barely begun. As the separate $1 trillion bill being debated shows, these are likely to become substantial. Indeed, senior military officials have stated that they expect increased military commitments, and governors are demanding military support. 

The “Slushy” Funds Mechanism

The military’s money goes into the Defense Emergency Response Fund (DERF). This existing account used to provide Pentagon assistance to civil authorities in disaster and humanitarian-related emergencies. The Defense Secretary must determine the need for DoD assistance is too urgent to wait for a formal reimbursable request for help.

DERF is a “transfer account.” These are holding accounts until DoD decides how to use the money. The Pentagon then moves the money into the account where the money will be spent, such as O&M, Army or MilPers or Navy. Congress used the DERF after the 9/11 attacks to fund an initial military response. The MRAP program was also funded through a transfer account.

DERF is also “no-year” money, meaning that the funds do not expire, unlike most appropriations that have a lifespan of 1 to 5 years. It’s a classic “slush fund” in that DoD has discretion about where to spend the money and does not require congressional approval beforehand. But the building must report to Congress later how it spent the money. Such funds increase speed and agility at the cost of accountability, which, of course, is exactly why they are being used now.

Note to critics of Overseas Contingency Operations (OCO) funding. While critics often call OCO a slush fund, it is budgeted and accounted for in the same way as the base budget. The DERF is what a real slush fund looks like.

If Congress approves this proposed legislation — and Congress has been inclined to move quickly — DOD will have the resources it needs to cope with the disruptions it is experiencing. Some part of this may go to its suppliers in ways yet to be determined.

Slush Funds Everywhere

DERF is not the only transfer account in the proposed legislation. The Office of Management and Budget would get a $3 billion “unanticipated needs fund” to cover “unanticipated costs associated with mitigating the impacts of COVID–19 virus.” This fund would be modeled on the DERF and require congressional notification but not congressional approval. Conceivably, DoD could receive some of this money.

Many other elements of the proposed legislation look slushy, even if destined for existing accounts.  For example, the $16.6 billion for the VA comes with transfer authority to move the money around internally so we can be spent where needed. The $2 billion for Federal Emergency Management Agency and the large increases for HHS and CDC are placeholders for future activities that are as yet unclear. Indeed, much of the CDC’s money goes into a transfer account, the Infectious Diseases Rapid Response Reserve Fund for use at the director’s discretion. The aid to states is likely a large fund with state allocations to be decided later.

This Is A Wartime Budget Strategy

Throwing money at problems is generally not a good strategy because it allocates money the way institutions desire, which often produces overlap, inefficiency, and duplication. But by pursuing multiple channels of action, such an approach can get results quickly. The United States fought World War II this way, and it will apparently fight COVID-19 this way. Let’s hope we beat the virus as soundly as we did the Germans and Japanese.

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