Order Code RL31005

CRS Report for Congress
Received through the CRS Web

Appropriations and Authorization for FY2002: Defense

Updated February 2, 2002

Coordinated by: Amy Belasco and Stephen Daggett Foreign Affairs, Defense, and Trade Division

Congressional Research Service ~ The Library of Congress


Appropriations are one part of a complex federal budget process that includes budget resolutions, appropriations (regular, supplemental, and continuing) bills, rescissions, and budget reconciliation bills. The process begins with the President's budget request and is bound by the rules of the House and Senate, the Congressional Budget and Impoundment Control Act of 1974 (as amended), the Budget Enforcement Act of 1990, and current program authorizations. This report is a guide to one of the 13 regular appropriations bills that Congress considers each year. It is designed to supplement the information provided by the House and Senate Defense Appropriations Subcommittees. It summarizes the current legislative status of the bill, its scope, major issues, funding levels, and related legislative activity. The report lists the key CRS staff relevant to the issues covered and related CRS products. T his report is updated as soon as possible after major legislative developments, especially following legislative action in the committees and on the floor of the House and Senate.

NOTE: A Web version of this document with active links is available to congressional staff at: [http://www.crs.gov/products/appropriations/apppage.shtml].


Appropriations and Authorization for FY2002: Defense
Summary
On June 27, the Administration submitted an amended fiscal year 2002 defense budget request to Congress. The request totaled $343.5 billion in funding for the national defense budget function, $32.9 billion above the amount originally enacted for FY2001, an 11% increase. The total included funding for the Department of Defense and for defense-related activities of the Department of Energy and other agencies. Both House and Senate versions of the DOD appropriations bill provided the total for national defense that the Administration requested. To accommodate that level, Congress adjusted limitations in the 1997 Balanced Budget Act and set aside provisions in this year's concurrent budget resolution that were designed to protect the social security surplus. With the onset of a recession last spring, along with higher defense spending and additional federal spending in response to the terrorist attacks, and lower revenues due to the tax cut, the government is expected to run a deficit as well as use all of the surplus generated by social security revenues. With the destruction of the World Trade Center and the extensive damage to the Pentagon by terrorists on September 11th, congressional concerns shifted from whether the overall federal budget could accommodate higher defense expenditures without spending the budget surplus to adding funding for defense programs that combat terrorism. Funding to aid the victims and provide for recovery from the attacks, for the ongoing conflict in Afghanistan, and for other programs to combat terrorism, was approved in the $40 billion Emergency Terrorism Response supplemental appropriations act (P.L. 107-38) that passed Congress September 14, 2001. Of that total, DOD receives $17.5 billion of the total funding in the Emergency Terrorism Response supplemental, about 44% of the total (see P.L. 107-117 and H. Report. 107-350) with about 56% going to other agencies. Allocation of half of the $40 billion was included in P.L. 107-117/H.R. 3338, the FY2002 DOD appropriations act, which was signed by the President on January 10, 2002. Although there had been broad bipartisan support for adding funds for recovery and response to the September 11 terrorism attacks, sharp differences emerged about whether the total amount was sufficient and whether the allocations matched the most critical priorities, particularly for New York and other homeland security needs. The President, however, threatened to veto any spending measure this year that went beyond the $40 billion. Faced with this threat, both the House and the Senate rejected proposals to add more emergency funding to H.R. 3338 when they passed the bill. Instead, within the $20 billion total that was acceptable to the President, the conference bill shifts $3.4 billion of the $7.3 billion funds allocated to Defense by the Administration to homeland security and recovery of New York. The conference version of the National Defense Authorization Act for FY2002 was passed by the House and the Senate on December 13, 2001, and signed by the President on December 28, 2001 (P.L. 107-107/S. 1438,H.Rept. 107-333). The Act provides $343.3 billion as requested by the Administration and authorizes another round of base closures but delays the date to 2005, settling the chief issue in contention.


Key Policy Staff
Area of Expertise
Acquisition Aviation Forces Arms Control Arms Sales Base Closure Defense Budget Defense Budget Defense Budget Defense Industry Defense R&D Ground Forces Ground Forces Health Care; Military Intelligence Military Construction Military Personnel Military Personnel Military Personnel; Reserves Missile Defense Naval Forces Nuclear Weapons Peace Operations Radio Frequency, Military Readiness Space, Military War Powers War Powers War Powers

Name
Valerie Grasso Christopher Bolkcom Amy Woolf Richard Grimmett David Lockwood Stephen Daggett Mary Tyszkiewicz Amy Belasco Gary Pagliano John Moteff Edward Bruner Steven Bowman Richard Best Richard Best Daniel Else David Burrelli Robert Goldich Lawrence Kapp Steven Hildreth Ronald O'Rourke Jonathan Medalia Nina Serafino Lennard Kruger Amy Belasco Marcia Smith David Ackerman Louis Fisher Richard Grimmett

CRS Division
FDT FDT FDT FDT FDT FDT FDT FDT FDT RSI FDT FDT FDT FDT FDT FDT FDT FDT FDT FDT FDT FDT RSI FDT RSI ALD G&F FDT

Telephone
7-7617 7-2577 7-2379 7-7675 7-7621 7-7642 7-3144 7-7627 7-1750 7-1435 7-2775 7-7613 7-7607 7-7607 7-4996 7-8033 7-7633 7-7609 7-7635 7-7610 7-7632 7-7667 7-7070 7-7627 7-7076 7-7965 7-8676 7-7675

Abbreviations: FDT = Foreign Affairs, Defense, and Trade Division G&F = Government and Finance Division RSI = Resources, Science, and Industry Division


Contents
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Debate on Funding to Combat Terrorism . . . . . . . . . . . . . . . . . . . . . . . . . . Total Funding for National Defense in FY2002 . . . . . . . . . . . . . . . . . . . . . Enacted Version of FY2002 DOD Appropriations Bill . . . . . . . . . . . . . . . . Prior Congressional Action on FY2002 Appropriations and Authorization Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4 4 7 8

Funding to Combat Terrorism: Congressional Action . . . . . . . . . . . . . . . . . . . . . 9 Composition of Anti-Terrorism Supplemental . . . . . . . . . . . . . . . . . . . . . 11 The President's $20 Billion Allocation Request . . . . . . . . . . . . . . . . . . . . 17 Administration's Defense Funding Request to Combat Terrorism . . . . . . 25 Previous National Security Funding to Combat Terrorism . . . . . . . . . . . . 30 Changes in the Budgetary Context since the Terrorist Attacks . . . . . . . . . . . . . 32 Likely Reductions in the Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Other Potential Claims on the Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Action on the FY2002 DOD Appropriations Bill . . . . . . . . . . . . . . . . . . . . . . . Enacted Version of DOD Appropriations Bill . . . . . . . . . . . . . . . . . . . . . . Previous Congressional Action on FY2002 DOD Appropriations . . . . . . Military Construction Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . FY2001 Non-Emergency Supplemental Appropriations . . . . . . . . . . . . . . Action on FY2002 DOD Authorization Act . . . . . . . . . . . . . . . . . . . . . . . . . . . Conference Version of FY2002 DOD Authorization Act . . . . . . . . . . . . . House Action on S. 1438, FY2002 DOD Authorization Bill . . . . . . . . . . . Senate Action on S. 1438, FY2002 DOD Authorization Bill . . . . . . . . . . 37 37 38 40 40 41 42 43 44

FY2002 Congressional Budget Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 302 (b) Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Overview of the Bush Administration Request . . . . . . . . . . . . . . . . . . . . . . . . . Initial Budget Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . June 27 Budget Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Future Defense Spending Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Composition of Changes in the FY2002 Amended Budget . . . . . . . . . . . . Major Issues in the FY2002 Amended Defense Budget . . . . . . . . . . . . . . . . . . Accommodating the FY2002 Increase Within Budget Constraints . . . . . . Missile Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adequacy of Funding for Procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . Implications of Recent Rise in Defense Health Costs . . . . . . . . . . . . . . . . Spending for Operation and Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . 47 47 48 50 52 57 57 59 63 64 65


Other Important Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Personnel-Related Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Major Weapons Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Defense R&D Spending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chemical Weapons Destruction, and Cooperative Threat Reduction . . . . . Military Bases, Competitive procurement, and Defense Industry . . . . . . . Space, Intelligence, and Communications Issues . . . . . . . . . . . . . . . . . . . . Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Budget Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Supplemental Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Emergency Supplemental Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . Authorization for Use of Military Force . . . . . . . . . . . . . . . . . . . . . . . . . . Continuing Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Defense Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Defense Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

67 67 69 75 77 78 80 82 82 82 83 83 83 83 84

For Additional Reading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 CRS Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Selected World Wide Web Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

List of Tables
Table 1a. Status of FY2002 Defense Appropriations . . . . . . . . . . . . . . . . . . . . . 3 Table 1b. Status of FY2002 Defense Authorization . . . . . . . . . . . . . . . . . . . . . . 4 Table 2. National Defense Function by Appropriations Bill, FY2001 to FY2002 Enacted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Table 3. Department of Defense Appropriations Bill by Title, FY2002 to FY2002 Enacted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Table 4. Allocations of Anti-Terrorism Supplemental by Agency . . . . . . . . . . . 14 Table 5. Congressional Action on DOD's Share of $20 Billion Supplemental . . 20 Table 6. DOD Allocations under $40 billion Emergency Terrorism Response Supplemental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Table 7. OMB Estimate of National Security Community Funding to Combat Terrorism, FY2000 - FY2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Table 8. Bipartisan Estimate of the Post September 11, 2001 Budgetary Outlook: FY2002-FY2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Table 9. Other Potential Claims on the Surplus . . . . . . . . . . . . . . . . . . . . . . . . 36 Table 10. Department of Defense Funding, FY2000 through the Amended FY2002 Budget Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Table 11. Changes in Administration's Estimates for National Defense, FY2000 - FY2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Table 12. Composition of Changes Between FY2002 Amended Request and FY2001 Enacted Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Table 13. Major Changes in FY2002 Amended Bush Budget . . . . . . . . . . . . . 54 Table 14. Congressional action on Ballistic Missile Defense Funding: FY2001 to FY2002 Enacted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Table 15. Department of Defense RDT&E: Total Obligational Authority . . . . 76 Table A1. Defense Appropriations, FY1998 to FY2002 . . . . . . . . . . . . . . . . . 89 Table A2. Congressional Action on Major Weapons Programs, FY2002: Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 Table A3. Congressional Action on Major Weapons Programs, FY2002: Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92


List of Figures
Figure 1. Composition of $40 billion Supplemental Request . . . . . . . . . . . . . . Figure 2. Composition of $40 Billion Supplemental Enacted . . . . . . . . . . . . . . Figure 3. Allocation of $40 Billion by Major Purposes: Administration Plan . . Figure 4. Allocation of $40 Billion by Major Purposes: Actual . . . . . . . . . . . . Figure 5. Enacted Allocation of Second $20 Billion . . . . . . . . . . . . . . . . . . . . . Figure 6. Enacted Allocation of Second $20 Billion . . . . . . . . . . . . . . . . . . . . 12 13 16 16 17 18


Appropriations and Authorization for FY2002: Defense
Most Recent Developments
On January 10, 2002, the President signed P.L. 107-117, the FY2002 DOD Appropriations Act (H.R. 3338). On December 20, 2001, the House and the Senate passed H.R. 3338 by 408 to 6 and 94 to 2, respectively. In addition to providing the funding requested by the Administration for DOD, the act allocates $20 billion in Emergency Terrorism Response supplemental (P.L. 107-38) funding among all federal agencies to combat terrorism and provide aid and recovery to the victims of the attacks. The debate on the FY2002 DOD appropriations act centered on the allocation of the $20 billion in funding to combat terrorism. The conferees resolved the significant differences between the House and Senate versions by shifting $4.3 billion in funding requested by the Administration for DOD to non-defense agencies to combat terrorism and provide aid to New York city. Efforts in both houses to increase funding for antiterrorism beyond the $20 billion already enacted in the emergency supplemental failed after President Bush threatened to veto any bill that exceeded that amount. The final version of the bill provides $317.2 billion to the Department of Defense in regular appropriations. The DOD Authorization Act (S. 1438) was passed on December 13 and also provided the amount requested by the Administration. The authorizers resolved the chief item of contention - base closures - by delaying the date to 2005. There was little controversy about the total amount of regular appropriations for DOD. Along with funds for military construction and other defense-related programs, the $317.2 billion for DOD in the final version of H.R. 3338 provides $343.3 billion, about the same amount in total as requested by the Administration. Because of the recession that began last spring, along with accommodating the full defense request, emergency spending to combat terrorism, and lower tax revenues because of the tax act, funding government expenditures in FY2002 will require not only using all of the social security surplus but also returning to deficit spending.


CRS-2

Background
Congress provides funding for national defense programs in several annual appropriations measures, the largest of which is the defense appropriations bill. Congress also acts every year on a national defense authorization bill, which authorizes programs funded in all of the regular appropriations measures. The authorization bill addresses defense programs in almost precisely the same level of detail as the defense-related appropriations, and congressional debate about major defense policy and funding issues usually occurs mainly in action on the authorization. Because the defense authorization and appropriations bills are so closely related, this report tracks congressional action on both measures. The annual defense appropriations bill provides funds for military activities of the Department of Defense (DOD), including pay and benefits of military personnel, operation and maintenance of weapons and facilities, weapons procurement, and research and development, as well as for other purposes. Most of the funding in the bill is for programs administered by the Department of Defense, though the bill also provides (1) relatively small, unclassified amounts for the Central Intelligence Agency retirement fund and intelligence community management, (2) classified amounts for national foreign intelligence activities administered by the CIA and by other agencies as well as by DOD, and (3) very small amounts for some other agencies. Five other appropriations bills also provide funds for national defense activities of DOD and other agencies including:
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!

!

the military construction appropriations bill, which finances construction of military facilities and construction and operation of military family housing, all administered by DOD; and the energy and water development appropriations bill, which funds atomic energy defense activities administered by the Department of Energy. the VA-HUD-independent agencies appropriations bill, which finances civil defense activities administered by the Federal Emergency Management Agency, activities of the Selective Service System, and DOD support for National Science Foundation Antarctic research; the Commerce-Justice-State appropriations bill, which funds national security-related activities of the FBI, the Department of Justice, and some other agencies; and the transportation appropriations bill, which funds some defenserelated activities of the Coast Guard.


CRS-3

Status1
On January 10, 2002, the President signed P.L. 107-117 (H.R. 3338), the FY2002 DOD Appropriations Act, including both the regular funding for defense and the allocation of $20 billion among all government agencies that was provided in the Emergency Terrorism Response supplemental to combat terrorism (see H.Rept. 107350 and Table 1a). On December 20, 2001, the House and the Senate passed H.R. 3338/P.L. 107-117, the conference version of the FY2002 Department of Defense (DOD) appropriations bill. Although Congress provided $343.3 billion for National Defense, close to the total requested by the Administration, Congress re-allocated the funding   providing $1.7 billion less than requested for the Department of Defense, and $500 million more for military construction, and $750 million more for the Department of Energy's defense programs.2 Of the $20 billion in emergency supplemental funding that was allocated in H.R. 3338, DOD received $3.5 billion. Although P.L. 107-117 (H.R. 3338) makes various changes to the Administration's FY2002 request for regular DOD appropriations, the Administration's basic priorities are preserved, including a substantial increase in overall resources for defense, a large increase in military pay and full funding of defense health benefits, and a major jump in spending for missile defense. Congress does, however, reduce spending on operations and maintenance on the basis of various pricing adjustments and efficiency measures in order to accommodate increases to the procurement and RDT&E accounts (see below for a fuller discussion). A week earlier, on December 13, 2001, both houses passed S. 1438, the conference version of the FY2002 DOD authorization bill (see S.Rept. 107-333 and Table 1b). The conferees resolved the chief issue in contention - authorizing another round of base closures as requested by the Administration - by delaying the date to 2005. In addition, the authorizers set upward limits on the amounts that could be provided in the emergency supplemental to combat terrorism.

Table 1a. Status of FY2002 Defense Appropriations
Subcommittee Markup House 10/24/01 and 11/14/01 Conference House House Senate Senate Conf. Report Approval Report Passage Report Passage Report Senate House Senate Public Law

11/19/01 12/5/01 12/7/01 12/19/01 1/10/02 11/28/01 12/20/01 12/20/01 11/4/01 H.Rept. S.Rept. (voice H.Rept. P.L. 107(406-20) (408-6) (94-2) 107-298 107-109 vote) 107-350 117

1

For an overview of the defense budget process in Congress, see CRS Report RL30002, A Defense Budget Primer, by Mary Tyszkiewicz and Stephen Daggett. The total amount provided for the national defense function by Congress was $343.3 billion compared to the Administration's request of $343.5 billion, but the $220 million difference reflected different estimates of spending in mandatory programs.

2


CRS-4

Table 1b. Status of FY2002 Defense Authorization
Full Committee Markup House Senate 8/1/01 9/4/01 House Report House Senate Senate Conf. Passage Report Passage Report Conference Report Approval Public Law House Senate

9/4/01 9/12/01 12/12/01 9/25/01 10/2/01 12/13/01 12/13/01 12/28/01 H.Rept. S.Rept. H.Rept. (398-17) (99-0) (382-40) (96-2) P.L. 107-107 107-194 107-62 107-333

Debate on Funding to Combat Terrorism
During floor consideration of the bill in both houses, the debate centered on the adequacy and allocation of the $20 billion in emergency supplemental funding to combat terrorism. In response to concerns raised by members that more funding was needed for the recovery of New York and homeland defense, the conferees shifted $4.3 billion from funding requested by the Administration for DOD to those purposes. Several members suggested that the Administration could request additional funding for defense in a FY2002 supplemental. Earlier attempts to provide funding above the $20 billion already appropriated were stymied by the threat of a presidential veto. Of the total $40 billion provided by the emergency supplemental, DOD received $17.5 billion, including $14 billion that was allocated at the discretion of the President and $3.5 billion that was allocated in the FY2002 DOD appropriations act (see below).3 Non-defense agencies received a total of $22.5 billion, including $16.5 billion that was allocated in the FY2002 DOD bill. Within that $16.5 billion for non-defense agencies, the major programmatic emphasis is for:
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recovery for New York and other affected areas ($5.0 billion); bioterrorism $2.8 billion); and investigatory activities ($2.3 billion).

(See discussion below and CRS Report RL31187, Terrorism Funding: Congressional Debate on Emergency Supplemental Allocations, by Amy Belasco and Larry Nowels).

Total Funding for National Defense in FY2002
Total funding appropriated for the national defense function in FY2002, including the $3.5 billion of funding from the Emergency Terrorism Response supplemental that was allocated in the DOD bill, is $346.8 billion (see Table 2). DOD also received $14.0 billion in funding from the Emergency Terrorism Response

3

Of the $40 billion appropriated In P.L. 107-38, the terrorism supplemental, the President could allocated $20 billion at his discretion, and $20 billion became available only when included in a subsequent appropriation bill.


CRS-5 supplemental that was distributed by the President (see below).4 Those funds are included in DOD's FY2001 appropriations. Including those funds along with $5.8 billion provided last summer in a non-emergency supplemental, funding for national defense in FY2001 totaled $330.5 billion, or $16.3 billion below the total for FY2002. Since the advent of the new Administration, resources available to DOD have increased by a total of $56 billion, including:
! !

!

$5.8 billion appropriated in the non-emergency supplemental in late June 2001; $32.6 billion increase for FY2002 provided by Congress in the regular defense appropriations as requested by the Administration; and $17.5 billion in emergency supplemental funding to combat terrorism.

President Bush's increase in resources for defense of $56 billion or 18% in real growth for defense within a year is comparable to the $61.6 billion, or 19% real growth in defense resources, added by President Reagan between 1981 and 1982 in his first year in office (all figures in FY2002 dollars).5 In comparison to growth in defense spending between 1965 and 1966, the beginning of the buildup for the Vietnam war, the additions by President Bush are somewhat larger - $56 billion compared to $53.5 billion (in 2002 $) for Vietnam.6 Combined with the emergency funding allocated to non-defense agencies and the impact of the recession that began in the spring of 2001, this additional funding for Defense required that Congress set aside earlier budgetary guidelines designed to protect the surplus generated by the Social Security and Medicare trust funds and return to deficit spending (see below).

P.L. 107-38 permitted the President to allocate $20 billion of the $40 billion in emergency supplemental funding at his discretion whereas the second $20 billion would not become available until the allocation was included in a subsequent appropriation act. Because no additional legislative action was necessary for agencies to receive allotments from the first $20 billion, CBO counts (or `scores') allocations of the first $20 billion as FY2001 appropriations. Since allocations of the second $20 billion required additional legislation that occurred in FY2002, those funds are counted (or `scored') as FY2002 funds.
5

4

The comparison is between the total for national defense originally enacted for FY1981 $323.2 billion in FY2002 dollars - and the final level in FY1982 of $384.8 billion. When the late-President Reagan came to office, he proposed supplemental appropriations for FY1981 and an amended FY1982 budget.
6

Between 1980 and 1982, funding for national defense grew from $310.3 billion to $384.8 billion (all in 2002 dollars), including supplemental funding provided by Congress in response to President Reagan's request in 1981 and the enacted version of Reagan's amended FY1982 budget. See Table 10 in CRS Report RL30976, Defense Budget for FY2002: Data Summary, Final Version, by Mary T. Tyszkiewicz.


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Table 2. National Defense Function by Appropriations Bill, FY2001 to FY2002 Enacted
(in millions of dollars a)
Appropriations Bill and Budget Function Regular Appropriations Defense appropriations Military Construction & Family Housing Offsetting Receipts and other mandatory Total, Department of Defense (051) FY2001 enacted FY2002 Amended Request 318,945 9,971 -1,134 327,782 FY2002 Enacted FY2002 Approps vs. Request -1,750 516 27 -1,207 FY2002 Enacted vs. FY2001 29,822 1,528 165 31,515

287,373 8,959 -1,272 295,060

317,195 10,487 -1,107 326,575

Atomic Energy (053) 14,065 Other appropriations 1,518 (054) Total, National Defense 310,643 (050) Supplemental Appropriations FY2001 Non-emergency 5,820 suppb 316,463 Total, National Defense (050) with NonEmergency Supp Emergency Terrorism Response suppc National Defense function with NonEmergency and Emergency Supp 14,041 330,504

14,252 1,470 343,504

15,002 1,703 343,280

750 233 -224

937 185 32,637

NA 343,504

NA 343,280

NA -224

NA 26,817

7,349 350,853

3,500 346,780

-3,849 -4,073

-10,541 16,276

Notes: a. Includes discretionary and mandatory funding. b. P.L. 107-20, Supplemental appropriations for FY2001. c. P.L. 107-38, the Emergency Terrorism Response supplemental, appropriated $40 billion in emergency supplemental funding to respond to the terrorist attacks of September 11,2 001. Of that total, $20 billion was available to be distributed by the President without further congressional action; for that reason, the Congressional Budget Office scored or considered those funds as FY2001 appropriations. Because the second $20 billion became available only when included in a later appropriation act, those funds are FY2002 appropriations. Sources: House Appropriations Committee, appropriations tables for FY2002, Conference report on H.R. 338, FY2002 DOD Appropriations, H.Rept. 107-350, Conference report on S. 1438, FY2002 DOD Authorization, CBO cost estimates for S. 1438, Pay-as-you-Go, DOD (Comptroller), National Defense estimates for FY2002, OMB, Budget of the United States (April 2001), and Mid-Session Update, August 2001, and CRS calculations.


CRS-7

Enacted Version of FY2002 DOD Appropriations Bill
In the enacted version of H.R. 3338, P.L. 107-117, the FY2002 DOD appropriations bill, Congress endorses most of the Administration request. Despite some concerns raised by members, Congress funds most of the substantial increase in funding requested for the Ballistic Missile Defense program. P.L. 107-117 also provides the full increases in pay and benefits requested by the Administration, and in all but a couple of cases, the funding requested for major weapons systems (e.g. JSF, F-22 Captor, Comanche, Crusader, DDG-51 cruiser). Those major programs in which Congress reduces funding   the V-22 tilt rotor aircraft and the Navy's new surface combatant   are troubled programs that the Department of Defense is in the process of designing (for more detailed discussion, see below). The overall RDT&E funding level is higher than requested (see Table 3 and Summary Tables A2 and A3). The greatest divergence in funding priorities is for Operation and Maintenance, (O&M) where Congress reduces the Administration's request for O&M at funding by $3.1 billion in FY2002 to reflect anticipated savings from a variety of management reforms, as well as cuts in administrative areas (like headquarters) and various pricing adjustments (e.g. fuel and foreign currency). O&M funds not only training that ensures readiness but also support of the military infrastructure (see below). Congress also all but eliminates the Overseas Contingency Operations Transfer Fund, a revolving and management account that funds ongoing continency operations (like Bosnia), as well as unanticipated operations. Congress transfers the funds designated for Bosnia to the services and cuts $650 million from the request, suggesting that the accounting of funds needed to be improved.7 This issue is likely to resurface in the FY2003 budget request. For additional information on congressional changes, see individual sections on "Major Issues" and "Other Important Issues" below.

7

See H.Rept. 107-350, p. 209. This fund was not used for operations in Afghanistan because of the passage of the Emergency Terrorism Response supplemental on September 14, 2001.


CRS-8

Table 3. Department of Defense Appropriations Bill by Title, FY2002 to FY2002 Enacted
(in millions of dollars)
Title FY2001 without supps
a

Military personnel Operation and Maintenance Procuremenc t Research, Development, Test & Evaluation Revolving & Management Funds Counter-terrorism & Defense agst. Weapons of Mass Destruction Legislative proposals for savings Total DOD appropriations

75,435 107,954 62,111 40,829 1,044 0

FY2002 FY2002 FY2002 FY2002 Amended Enacted b Enacted vs. Enacted vs. Request FY2001 Request 82,284 82,141 6,706 -143 125,730 122,541 14,587 -3,189 61,595 61,333 -778 -262 47,429 48,704 7,875 1,275 2,237 0 1,595 881 551 881 -642 881

0 287,373

-330 318,945

0 317,195

0 29,822

330 -1,750

Notes: a Reflects FY2001 enacted level prior to non-emergency and emergency supplementals, P.L. 10720 and P. L. 107-38. b Reflects effect of rescissions include in the FY2002 DOD appropriations bill. Sources: OMB, CBO, House Appropriations Committee, and conference reports on H.R. 3338 (H.Rept. 107350), and CRS calculations.

Prior Congressional Action on FY2002 Appropriations and Authorization Bills
Action on the defense appropriations bill was delayed by the debate about the amount and the distribution of the emergency supplemental funds. On December 7, 2001, the Senate passed by voice vote H.R. 3338, the FY2002 DOD appropriations bill after making major changes to the bill as reported by Committee (S.Rept. 107109). Both the Senate and House bills appropriated $317.6 billion for the Department of Defense and allocated $20 billion in emergency supplemental funding to combat terrorism that was previously appropriated on September 14 in response to the terrorist attacks of September 11 (P.L. 107-28), but there were significant differences between the bills. As in the House, debate on the defense appropriations bill in the Senate focused on the adequacy and allocation of the emergency funding (see below).8 During Senate

National Journal's Congress Daily, "Appropriations: White House Urges Hard Line on Defense," December 5 2001, and National Journal's Congress Daily, "Appropriations: Senate Approps Panel Turns to Final FY02 Spending Bill," December 5, 2001, and BNA, Daily (continued...)

8


CRS-9 floor debate, the additional $15 billion in funding for homeland security that was included by the Appropriations Committee was stripped from the bill through a series of procedural motions.9 The President threatened to veto any funding beyond that already appropriated in the emergency supplemental. Once the additional funding was deleted, the allocation of the $20 billion was adjusted in response to the policy priorities of Senator Byrd and other members pressing for additional funding. The Senate bill as passed shifted $5.3 billion in funds requested for Department of Defense to homeland security and aid to New York, a compromise that laid the groundwork for the final version of the bill. On November 28, 2001, the House passed the FY2002 DOD appropriations bill, H.R. 3338, by 406 to 20 after turning aside attempts by Representatives Obey, Walsh, Lowey, and Murtha to add funds for homeland security for both defense and nondefense needs. In a compromise agreement worked out with the Administration several days earlier, an additional $1.5 billion out of the $20 billion was allocated to New York in the House version of H.R. 3338. Action on the major defense funding bills was delayed by a series of events in addition to the dispute between the Administration and congressional leaders about funding to combat terrorism. Before that, the week-long evacuation of some congressional offices for anthrax testing, a dispute between the Administration and Congress about the total amount for discretionary spending, and congressional passage of the $40 billion emergency supplemental for FY2001 in response to the terrorist attacks on the World Trade Center and the Pentagon all moved consideration of the Defense bill to late in the congressional session.

Funding to Combat Terrorism: Congressional Action
The President had requested that DOD receive a total of $21.1 billion in emergency supplemental funds, including $14 billion that was distributed by the President, and $7.3 billion, which would become available if included in an appropriations act (see above).10 With enactment of the FY2002 DOD appropriations bill, the total amount that DOD receives from the emergency supplemental is $17.5

8

(...continued) Report For Executives, "Senate panel Backs Homeland Funds, as GOP Readies to Defeat Defense Bill," December 5, 2001. The emergency designation of the funds was successfully challenged in a point of order. Once the emergency designation was removed, a point of order was raised that the total funding in the bill exceeded the funding allowed in the 302 (a) allocation for defense.
10 9

Of the emergency funding, $8.2 billion became available 15 days after the allocations were sent to Congress; the latest allocation, on November 9 became available November 25.


CRS-10 billion, or $3.8 billion less than requested by the Administration (see Table 2). All but $57 million of the $40 billion in emergency funds has now been allocated.11 Passed on September 14, 2001, P.L. 107-38/H.R. 2888, the FY2001 Emergency Appropriations Act for Recovery from and Response to Terrorist Attack on the United States provided $40 billion in emergency spending to be allocated by the Administration in consultation with Congress. The funds are to be spent for the following purposes:
! ! ! ! !

federal, state, and local preparedness for relief from and for responding to the attack; support to counter, investigate and prosecute domestic and international terrorism; increased security for transportation; repairing damage to public facilities and transportation systems; and supporting national security.

Funds designated as emergency spending are not subject to the limitations set in concurrent budget resolutions. The President was required to consult with the chairmen and ranking minority members of the appropriations committees prior to the transfer of the funds to individual agencies. After consultation with the appropriations committees about the allocation of the funds, the initial $10 billion becomes available immediately. (DOD refers to these funds as `cash'.) The second $10 billion became available 15 days after the Office of Management and Budget submitted a proposed allocation and plan for use of the funds to the appropriations committees. (DOD refers to these funds as `15 day notification' funds). An additional $20 billion became available if included in a later appropriation bill. These funds are included in P.L. 107-117, the enacted version of H.R. 3338 (see above). According to the Emergency Terrorism Response supplemental, P.L. 107-38, not less than $20 billion of the $40 billion "shall be allocated for disaster recovery activities and assistance related to the terrorist acts in New York, Pennsylvania, and Virginia on September 11, 2001."12 The law also provides that the President may submit detailed requests to Congress if further funding is required. Although the emergency supplemental required that the Director of OMB was to provide quarterly reports to the appropriations committees on the use of funds, beginning on January 2, 2002, that reporting requirement was superceded by the one included in the DOD appropriations act, calling for quarterly reports 30 days after enactment (by February 9, 2002).

11

The total of $17.5 billion includes $300 million that Congress of unobligated funds that Congress allocated in the FY2002 DOD bill (see Section 305 of H.R. 3338); with that transfer, all but $57 million of the total $40 billion in the emergency supplemental has been distributed.
12

P.L. 107-38, "Making emergency supplemental appropriations for fiscal year 2001 for additional disaster assistance, for anti-terrorism initiatives, and for assistance in the recovery from the tragedy that occurred on September 11, 2001, and for other purposes."


CRS-11 On September 14, Congress also passed S.J.Res. 23 authorizing the President to use military force against those responsible for the terrorist attack. Three weeks later, on October 7, the U.S. initiated the bombing of Afghanistan to destroy the terrorist training camps of Osama bin Laden and dislodge the Taliban government. Funding for the war is included in the emergency supplemental (see section on defense spending below). Since September 21, OMB has sent Congress eight notifications of intended and requested allocations of the $40 billion emergency supplemental, including a notice on October 16 that contained details of the $20 billion proposal that needed to be approved by Congress in an FY2002 appropriation bill.13 Both the House and Senate Appropriations Committee included their allocations of the Administration's request for that $20 billion in a separate section of the FY2002 DOD Appropriations bill (H.R. 3338, H.Rept. 107-298, S.Rept. 107-109). As costs of recovery and response efforts have risen, however, policy differences emerged over the amount, timing, and priorities of the supplemental spending. The White House, concerned over potential rising budget deficits for FY2002, argued that the $40 billion emergency total was sufficient for the moment, but that the President would entertain more spending next year if needs exist. Many lawmakers, including senior Appropriations Committee members, however, called for the infusion of immediate resources well above the $40 billion figure, with an emphasis on funds for New York City in order to meet the $20 billion allocation directive in P.L. 107-38. President Bush said that he would veto legislation that would spend more than the $40 billion already enacted. These issues were considered during floor debate on the DOD appropriations bill in both the House and the Senate floor debate.14

Composition of Anti-Terrorism Supplemental
Of the total $40 billion supplemental, the White House had proposed that the majority of funds be allocated to the Defense Department, with a lesser share for nondefense agencies, specifically: ! $21.1 billion for DOD (53%); ! $18.6 billion for non-defense agencies (47%); and ! $.3 billion (less than 1%) not yet allocated (see Figure 1 below).15
See Letters from President George Bush to Speaker of the House, J. Dennis Hastert, authorizing transfers from the Emergency Response Fund under provisions of P.L. 107-38, with attachment from the Office of Management and Budget, dated Sept. 21, 28, Oct. 5, 16, 22, and Nov. 5, 9, and 30, 2001; [http://w3.access.gpo.gov/usbudget/FY2002/amndsup.html].
14 13

See CRS Report RL31187, Terrorism Funding: Congressional Debate on Emergency Supplemental Allocations, by Amy Belasco and Larry Nowels for further discussion of these issues and more detailed information on the allocation of non-defense funds. See also, CRS Report RL31173, Terrorism Funding: Emergency Supplemental Appropriations Distribution of Funds to Departments and Agencies, October 25, 2001, and CRS Report RL31168, Terrorism Funding: FY2002 Appropriation Bills, and individual CRS appropriation reports on [http://www.crs.gov/products/appropriations/apppage.shtml].
15

For

the Administration's allocations of the emergency supplemental, see (continued...)


CRS-12 As illustrated in Figures 1 and 2, Congress, through enactment of H.R. 3338, altered the President's plan by providing that $22.5 billion or 56% of the total is provided to non-defense activities, and $17.5 billion, or 44%, supports defense programs. A small amount remains unallocated. Allocation by Federal Agency. Other than the Department of Defense, the other major recipients of funds based on notified and proposed allocations thus far are the Federal Emergency Management Agency ($6.6 billion), which provides disaster assistance relief, Health and Human Services ($2.9 billion), Housing and Urban Affairs ($2.7 billion), Justice, ($2.2 billion), and Transportation ($2 billion) (see Table 4). Figure 1. Composition of $40 billion Supplemental Request

($s - billions & % of total)
Non-defnse $18.6

46.5%

Unallocated $0.3

0.8%

52.8%

Defense $21.1

Policy Priorities of Emergency Supplemental Allocations. There has been broad bipartisan support for the enactment of significant additional resources for recovery and response to the September 11 terrorism attacks. Nevertheless, sharp differences emerged as to whether the original $40 billion package is sufficient, whether the allocations matched the most critical priorities, especially regarding homeland security needs, and whether New York and other jurisdictions directly affected by the attacks are received adequate funds. Many assumed that New York would receive about half, or $20 billion of the total emergency supplemental. (For additional information about current and proposed spending for non-defense agencies. see Appendix A1, and CRS Report RL31187, Terrorism Funding: Congressional

15

(...continued) [http://w3.access.gpo.gov/usbudget/FY2002/amndsup.html].


CRS-13 Debate on Emergency Supplemental Allocations by Amy Belasco and Larry Nowels, CRS Report RL31168, Terrorism Funding: FY2002 Appropriation Bills, by Larry Nowels, CRS Report RL31173, Terrorism Funding: Emergency Supplemental Appropriations - Distribution of Funds to Departments and Agencies, by James R. R i e l , and individual CRS appropriations reports available at [http://www.crs.gov/products/appropriations/apppage.shtml]. Table 4 and Figures 3 and 4 provide estimates of how Congress changed the Administration's planned and proposed allocations of the $40 billion by ten major policy priorities.16 The two chief areas reduced by Congress are defense activities decreased to $17.5 billion or 44% of the total - and recovery resources, which were cut slightly. The areas receiving more emphasis are bioterrorism, aviation and infrastructure protection, and investigation and law enforcement activities. Figure 2. Composition of $40 Billion Supplemental Enacted

($s - billions & % of total)
Non-defnse $22.46

56.1%

0.1% Unallocated $0.03

43.8%

Defense $17.54

16

These figures area based on CRS analysis and should be regarded as illustrative rather than a precise calculation of allocations.


CRS-14

Table 4. Allocations of Anti-Terrorism Supplemental by Agency
(in billions of dollars and percentage of total)
Department/ Agency Totals Total Supplemental Not yet allocated Total allocated Defense subtotal Non-defense subtotal FEMA HHS HUD Justice Transportation USAID Treasury U.S. Postal Service State Labor Other non-defense Executed Fifteen-day Admin. Total Transfers Wait Request Enacted Supplement $10.0 0.03 9.97 5.9 4.1 2.0 0.1 0.0 0.0 0.2 0.6 0.1 0.0 0.3 0.0 0.8 $10.0 0.0 10.0 8.1 1.9 0.0 0.0 0.7 0.0 0.5 0.1 0.0 0.2 0.3 0.0 0.1 $20.0 0.0 20.0 7.3 12.7 5.5 1.6 0.0 1.1 0.7 0.0 0.3 0.0 0.0 2.0 1.5 $20.0 0.0 20.0 3.5 16.5 4.6 2.8 2.0 2.1 1.3 0.1 0.6 0.5 0.0 0.2 2.3 $40.0 0.03 39.97 17.5 22.5 6.6 2.9 2.7 2.1 2.0 0.8 0.7 0.7 0.6 0.2 3.2 As % of $40 Bil. 100.0% 0.1% 99.9% 43.8% 56.3% 16.5% 7.3% 6.8% 5.3% 5.0% 2.0% 1.8% 1.8% 1.5% 0.5% 8.0%

Note: Totals may not add due to rounding. Sources: OMB, House and Senate Appropriations Committees, CRS calculations.

Changes to Defense Request. Despite Congress' cut of $3.5 billion in the $7.3 billion DOD request for the emergency supplemental, the President's general priorities for defense spending to combat terrorism remained largely intact. In both the President's request and in the enacted bill, about 30% of the $17.5 billion allocated for Defense in the Emergency Terrorism Response supplemental is for funding of the Afghan war and related operations, and another 30% is for intelligence and surveillance activities. The remaining funds are distributed among self-defense weapons for ships and upgraded security at bases (8.6%), improved command and control (8%), precision-guided munitions (10%), repair and upgrade of the Pentagon, and initial crisis response (8% and 4% respectively ). For more detail, see Table A1 in the Appendix. Congress was able to accommodate the $3.5 billion cut to defense by providing funding within the regular defense bill, by deferring less urgent requests, and by inserting a provision that permits DOD to transfer up to $1.65 billion, or 1.5% of the FY2002 appropriations, for RDT&E and procurement to fund the Afghan war or


CRS-15 DOD's homeland defense activities, should that prove necessary.17 Congress also restored the funding requested to repair and upgrade the Pentagon by transferring $300 million of the funds remaining in the emergency supplemental that were to be distributed by the President.18 Finally, in floor debate, several members of Congress noted that the President was expected to submit another supplemental with additional funding for defense when Congress reconvenes in January 2002.

17

In the regular DOD appropriations bill, Congress provided $478 million to improve protection of DOD's weapons and facilities, thus restoring roughly half of the President's request (see Title IX of H.R. 3338). In the allocation of the emergency supplemental in H.R. 3338, Congress inserted a provision that permits DOD to transfer up to 1.5% of RDT&E and procurement funds to Operation Enduring Freedom (Afghan war), and Operation Noble Anvil (combat air patrol activities on both coasts for homeland defense), thus providing another mechanism to ensure that adequate funding would be available. Congress transferred $300 million of the funds that were to be allocated by the president from the first $20 billion to upgrade the Pentagon, thus matching the total requested by DOD (see H.Rept. 107-350, p. 424, and Section 305(b) of H.R. 3338).
18


CRS-16 Figure 3. Allocation of $40 Billion by Major Purposes: Administration Plan

Defense Preparedness 53.3% 2.2% 7.9% 2.5% Foreign aid 4.0% 3.6% 8.3% Recovery Bioterrorism Investigation Victim Relief 18.2% Security

Figure 4. Allocation of $40 Billion by Major Purposes: Actual

Defense Preparedness 43.9% 1.1% 11.8% 2.6% Foreign aid 7.6% 6.5% 8.8% Bioterrorism Investigation Victim Relief Recovery 17.7% Security


CRS-17

The President's $20 Billion Allocation Request
The allocation process established in P.L. 107-38 for the Emergency Supplemental spending measure guaranteed Congress a central role in deciding how half of $40 billion anti-terrorism money would be spent. On October 16, OMB submitted its plan for the second $20 billion portion of the supplemental that must be subsequently approved by Congress. Under the President's plan for use of that $20 billion (see Figure 5 below), the two largest shares of the supplemental request were to go to DOD (over one-third) and to recovery activities (over one-quarter), for a total of $12.5 billion. Assistance to victims of the terrorist attacks represented about 11%, or $2.3 billion. Infrastructure and aviation security would have received 9%, or about $1.8 billion, while funding to combat bioterrorism and investigative activities represented slightly smaller shares of 7% or $1.4 billion, and 6% or $1.2 billion, respectively. There was no humanitarian and other foreign assistance proposed in the second $20 billion request.

Congressional Priorities in Funding to Combat Terrorism
On December 20, 2001, Congress cleared for the White House H.R. 3338, including $20 billion in emergency supplemental spending for homeland security, increased defense needs, and other efforts to combat terrorism. The package sent to the President, however, differs significantly from what had been proposed in midOctober for allocating the second $20 billion. The legislation roughly doubles the request for bioterrorism, law enforcement, and infrastructure security activities, while reducing by more than half the $7.3 billion proposed for defense. The final Figure 5. Enacted Allocation of Second $20 Billion
Defense

Preparedness

17.5% Bioterrorism 14.2%

2.2% 16.9% 0.3%

Security

Foreign aid 11.4% 25.1% Investigation 12.4%

Recovery Victim Relief


CRS-18 compromise   to increase homeland security and New York aid and decrease defense resources   partially accommodates the position of those who sought more spending for domestic programs, but without exceeding $20 billion. (See Figure 6.) Figure 6. Enacted Allocation of Second $20 Billion
Defense

Preparedness

17.5% Bioterrorism 14.2%

2.2% 16.9% 0.3%

Security

Foreign aid 11.4% 25.1% Investigation 12.4%

Recovery Victim Relief

Conference Agreement for Defense Funds. To accommodate higher funding for non-defense needs, H.R. 3338, as enacted, cuts the amount requested by the President for Defense from $7.3 billion to $3.5 billion. Although particular categories of defense spending to combat terrorism are reduced, the Administration's overall programmatic priorities for DOD remain intact. Congress was also able to provide funding from other sources to offset the cuts (see discussion above and Table 5). The Administration has also signaled that it plans to request additional emergency funding for Defense later this winter.19 The major changes to the request are:
!

halving the funding for "increased situational awareness" (intelligence and surveillance activities) from $1.74 billion to $850 million; eliminating $881 million in funding for "enhanced force protection" (self-protection systems for weapons and protection to DOD facilities), offset in part by an increase of $478 million provided in the regular FY2002 DOD appropriations for similar activities;

!

19

James Dao, "Pentagon Seeking a large increase in its next budget, " New York Times, January 7, 2002.


CRS-19
!

eliminating $219 million in funding for improved command and control; halving the funding for "increased worldwide posture" (funding for the Afghan war and DOD's homeland defense activities) from $2.9 billion to $1.45 billion, although up to $1.64 billion can be t ransferred to those activities from regular FY2002 appropriations for RDT&E and procurement should it prove necessary (see Section 306 of P.L. 107-117). decreasing funding for "offensive counter-terrorism" (munitions) from $545 million to $372 million; decreasing funding for "initial crisis response" from $106 million to $39 million; reducing funding for repair and upgrade of the Pentagon from $925 million to $640 million, offset by a transfer of $300 million remaining in the emergency supplemental but not yet allocated by the President; and an increase of $104 million for military construction projects.

!

!

!

!

!

To track the expenditure of these funds, Congress requires DOD to provide quarterly reports to the defense committees showing the appropriation accounts where funds have been transferred, obligations of those funds, and a forecast of expenditures. Because DOD's funding is being provided in these unique and fairly general categories, the reports are to be more detailed, showing spending by project, and by categories for military personnel and operation and maintenance spending that have been used to report previous contingency operations. The reports are also to identify offsetting savings due to cancellation of peacetime training or other activities. The first report is due 45 days after enactment (February 26, 2002), and quarterly thereafter.20

See H.Rept. 107-350, p. 425; the conference report references the House bill for reporting requirements, see H.Rept. 107-298, p. 295, and Section 3012 of the House version of H.R. 3338.

20


CRS-20

Table 5. Congressional Action on DOD's Share of $20 Billion Supplemental
(As of December 20, 2001)
In millions of dollars Category Increased Situational Awareness Enhanced Force Protection Improved Command and Control Increased Worldwide Posture Offensive Counter-terrorism Initial Crisis Response Pentagon Repair and Upgradeb Airport Security Other
d e

As percent of total H.R. 3338 H.R. Admin. as 3338 as Request enacted enacted 850 0 0 1,495 372 39 640 0 0 104 [130] [1,648] 3,500 23.6% 12.0% 3.0% 40.0% 7.4% 1.4% 12.6% 0.0% 0.0% 0.0% NA NA 100.0% 24.3% 0.0% 0.0% 42.7% 10.6% 1.1% 18.3% 0.0% 0.0% 3.0% NA NA 100.0%

Admin. Requesta 1,735 881 219 2,938 545 106 925 0 0 0 0 0 7,349

House actiona 1,735 743 162 2,801 769 108 925 0 0 105 [30] 0 7,348

Senate actiona NSc NSc NS
c

NSc NS NS
c c

475 NSc NS
c

Other military construction Transfers
f g

0 0 0 2,000

Potential transfers DOD Total

NS = Not specified. Notes: a. P.L. 107-38, theFY2001Emergency Terrorism Response supplemental provides that a total of $10 billion is available immediately (`cash'), another $10 billion is available 15 days after the request is submitted to Congress, and $20 billion is available to agencies after being enacted in a subsequent appropriations act. b. H.R. 3338 transfers $300 million in `cash' resources remaining in the emergency supplemental (P.L. 107-38) for reconstruction, and hardening of command centers in the Pentagon; these funds were to be distributed by the President. c. Except for the Pentagon, the Senate-passed version of H.R. 3338 does not specify how individual categories would be affected. d. The category `other' includes potential increases in fuel costs. e. Funding added by Congress for military construction. f. The House and conference version of H.R. 3338 transfers $30 million of DOD funds to the Former Soviet Union Threat Reduction appropriation in the Department of State, and the conference version also provides up to $100 million for military and logistical support to Pakistan and Jordan for their support in the Afghan war. g. Section 306 of the conference version provides that up to 1.5% of the total in FY2002 funding for RDT&E and procurement can be transferred to support the Afghan war (Operation Enduring Freedom) or DOD's homeland defense activities (Operation Noble Anvil). Sources: P.L. 107-38, 2001 Emergency Response Terrorism supplemental; OMB submissions on allocations for s upplemental, dated September 21, 28, October 5, 16, 22, November 5, 9, 30, see [http://w3.access.gpo.gov/usbudget/FY2002/amndsup.html]; see also materials provided to Appropriations committees; House of Representatives, H.Rept. 107-299, Report of Committee on Appropriations to accompany H.R. 3338, DOD Appropriations Bill, 2001, and supplemental appropriations; U.S. Senate, S.Rept. 107-109, Report of Committee on Appropriations to accompany H.R. 3338, and Department of Defense Appropriation Bill, 2002, and supplemental appropriations, and H.Rept. 107-350, Conference report to accompany H.R. 3338, Department of Defense Appropriations Bill, and supplemental appropriations.


CRS-21 Conference Agreement for Non-Defense Funds. H.R. 3338, as enacted, follows much of the framework proposed by the Senate: transfer of defense resources to fund homeland security and recovery needs. Major non-defense elements of the conference agreement include:
!

Bioterrorism   $2.84 billion, nearly double the Administration's $1.59 billion request. Recovery for New York and other affected areas   $8.2 billion, slightly higher than the amount proposed by the President, but programmed in a way that more directly targets New York. The House Appropriations Committee estimates that amounts provided in H.R. 3338 for recovery efforts in New York and other jurisdictions, when combined with previously allocated funds, will bring the total to $11.2 billion out of the entire $40 billion supplemental. Border security   $759 million, mostly for the Coast Guard and the Immigration and Naturalization Service to upgrade border and port security, compared to $600 million requested by the President. Aviation security   $540 million, one-third higher than the $405 million requested. Counterterrorism aid   $2.1 billion, 75% more than the $1.2 billion request. The agreement includes $745 million for the FBI, more than requested and passed by either the House or Senate, and $400 million for counterterrorism aid to state and local governments, as proposed in both bills but not in the request. Postal Service assistance   $500 million to repair Postal Service facilities destroyed in the attacks, protect workers handling the mail, and establish a system to sanitize and screen the mail, an addition to the $175 million allocated from the first $20 billion portion of the supplemental. Securing nuclear materials   $226 million, including $135 million to secure nuclear materials at sites in Russia and other former Soviet states, and for nonproliferation programs aimed at retaining Russian nuclear scientists.

!

!

!

!

!

!

Senate Passage of Funding to Combat Terrorism. During Senate debate of H.R. 3338 on December 6 and 7, 2001, a number of Senators objected to the extra $15 billion funding for homeland security and New York added to the bill by the Senate Appropriations Committee. In a procedural motion, the Senate voted to remove the emergency designation for those funds. By doing so, the homeland security and New York funds were added to the other non-emergency funding in the bill, which pushed the total amount appropriated over the allowable allocation under Section 302 (a) of the concurrent budget resolution. That made the entire bill subject to a point of order.


CRS-22 On December 7, the Senate adopted a compromise amendment offered by Senators Byrd, Stevens, and Inouye that reduced the emergency anti-terrorism spending to $20 billion but retained many of the program spending priorities adopted by the Committee, although at lower levels. Relative to the House bill and the Administration request, the Senate version of the bill reduced the amount for the Department of Defense (see below), and added funds for bioterrorism, New York recovery, and security of infrastructure, nuclear facilities airports, and borders (For additional information, see CRS Report RL31187, Terrorism Funding: Congressional Debate on Emergency Supplemental Allocations by Amy Belasco and Larry Nowels). With some adjustments in specific funding levels, this formula of reducing funding for defense in order to add monies to non-defense needs proved to be the basic compromise that was reached in the conference version. Senate Consideration of Defense Request. Under the Byrd, Stevens, Inouye amendment that was adopted on the Senate floor, the Department of Defense would have received $2.0 billion of the $20 billion included in the Senate bill, a reduction of $5.3 billion from the funding included in the House bill and from the Administration's request. Of that $2 billion, $475 million was designated as military construction funding to be used for reconstruction and renovation of the Pentagon. The bill did not specify where the remaining $1.53 billion would be spent among the categories developed by the Administration to describe DOD spending; those categories range from funding for the Afghan conflict to increased funding of intelligence and surveillance activities (see Figure 6 and Table 5). Under the President's proposed allocations, the Defense Department would have received a total of $21.1 billion, the largest share of both the total funding available under the supplemental (53%) and of the $20 billion supplemental request currently under consideration in Congress (37%). Under the Senate bill, however, DOD's share of the $40 billion would have totaled $15.7 billion or 39% of total supplemental funding, smaller than proposed by the House or the Administration. Of that $15.7 billion, $13.7 billion was already available to Defense from the first $20 billion allocated by the President; the remaining $2 billion was in the Senate bill.21 Secretary of Defense Rumsfeld called on Congress to give DOD the entire $7.3 billion requested by the President in order to "maintain the president's priorities for fighting this war [in Afghanistan]," and to ensure that DOD would not need to curtail training and operations.22 In floor debate, Senator Stevens suggested that the Department of Defense had already received a large increase of over $42 billion compared to the previous year, and under the emergency supplemental, the President could submit requests for additional supplementals for any further requirements to combat terrorism. Senator Stevens also mentioned that the Department of Defense has authority under the Food and Forage Act (Section 3732 or Title 41 U.S.C. Section 11) to obligate monies in advance of appropriations for emergency

21

Of that $13.7 billion, $5.6 billion was available immediately and $8.1 billion became available on November 25, 2001 at the latest, 15 days after the President submitted the proposed allocation to Congress.
22

National Journal's Congress Daily, "House Democrats Demand More Funding for Homeland," December 11, 2001.


CRS-23 expenses.23 DOD also had already been allotted $3.6 billion for expenses associated with the conflict in Afghanistan from the first $20 billion distributed by the President Table 6 describes the purposes for the Administration's defense requests, ranging from support for the conflict in Afghanistan to repair and renovation of the Pentagon, and compares the amounts provided by the House and Senate with the Administration's request. Unlike submissions by other agencies and normal budget proposals, the funding for DOD is appropriated to a central fund, the Defense Emergency Response Fund, rather than to individual appropriation accounts in order to give DOD additional flexibility and to ensure separate tracking of these emergency funds.24 If necessary, DOD could, for example, transfer additional funds from one category to "Worldwide Military Posture, " the category that provides monies for the conflict in Afghanistan or for additional training (see Table 6).25 Senate Markup of DOD Appropriations Bill. H.R. 3338, as reported by the Senate Appropriations Committee on December 4, 2001, not only allocated the $20 billion in funding provided by P.L. 107-38 in the amounts that were requested by the President but also included an additional $15 billion in funding as proposed by Senator Byrd. The additional $15 billion was to be split evenly between homeland security and recovery activities and aid to New York, Virginia, and Pennsylvania. (See section on action on FY2002 DOD Appropriations bill for change to regular DOD appropriations.) For aid to New York, the Senate bill provided an additional $7.5 billion to FEMA for recovery activities. For other non-defense homeland security, the Senate bill emphasized the following areas:
! ! ! !

bioterrorism prevention and response and food safety; federal anti-terrorism law enforcement; security for borders; and security for nuclear power plants and federal facilities.

For more details about increases provided for non-defense activities, see CRS Report RL31187, Terrorism Funding: Congressional Debate on Emergency Supplemental Allocations, by Amy Belasco and Larry Nowels. House Passage of Funding to Combat Terrorism. Attempts to add funding for homeland security in both defense and non-defense programs were rejected during floor debate on the House side. After negotiations between

23

For Senator Steven's statement, see Congressional Record, December 6, 2001, p. S12515. The Department of Defense invoked its authority to use the Food and Forage Act on September 16, 2001 but no obligations have been incurred by the services. DOD can also transfer funds using reprogramming authority.
24

Under the Senate bill, the Defense Emergency Response Fund can reimburse the services for expenses incurred by other appropriations between September 11, 2001 and December 31, 2001.
25

DOD would need to get approval from OMB for such transfers.


CRS-24 Committee leaders and the White House, Representative Walsh reached an agreement with the Administration to provide an additional $2.1 billion for New York that would be drawn from other programs to provide a total of $11.5 billion. The House endorsed many of the funding priorities recommended by the President, including the amounts proposed for defense and those for investigation and law enforcement programs in the Department of Justice (see discussion below). The House bill, however, also made various changes to the allocations in both defense and non-defense programs (see CRS Report RL31187, Terrorism Funding: Congressional Debate on Emergency Supplemental Allocations, by Amy Belasco and Larry Nowels). During House consideration, several amendments that would have added funding to the Administration's request were rejected by the Rules Committee or on the floor:
!

!

!

!

Representative Obey's amendment to add $6.5 billion in funding primarily for non-defense agencies (rejected 31 to 34 and ruled out of order on the floor); Representative Walsh's amendment to add $9.7 billion to meet the needs of those people most directly affected by the attacks in New York, Pennsylvania, and Virginia (rejected 31 to 33); Representative Lowey's amendment to add $10.4 billion in additional aid for New York, Virginia, and Pennsylvania by setting up a contingent emergency fund (ruled out of order); and Representative Murtha's amendment to add $6.5 billion to the Department of Defense primarily for intelligence and precisionguided munitions and other equipment (rejected by voice vote).

Prior to markup, some Members questioned whether $20 billion was sufficient to meet all of the pressing needs related to the terrorist attacks. Some argued that the President's proposal lacked enough funding for such things as law enforcement, bioterrorism preparedness, border protection, and other homeland security priorities. Others, especially Members from New York, contended that the President's plan fell far short of the $20 billion that they anticipated would be allocated out of the $40 billion total to meet the specific needs of New York City, Virginia, and rural Pennsylvania where the attacks had the most direct impact. They estimated that only about $9.7 billion was slated for New York. Still others believed that additional defense resources were required beyond the $7.3 billion recommended by the Administration in the $20 billion plan. This issue became more controversial when President Bush, on November 6, said he would veto the appropriation measure if it exceeded the $20 billion he had proposed. House Consideration of the Defense Request. Although the House provided the same amount as requested by the Administration for the Department of Defense   $7.3 billion   H.R. 3338 shifted more than $600 million in funding from the allocation proposed by the Administration to reflect House priorities. Indicating its policy priorities, the House Appropriations Committee added funds in for precision guided munitions ($79 million), for equipment for special operations forces ($145 million), for chemical-biological protection projects ($105 million) and other areas.


CRS-25 House Consideration of the Non-Defense Request. The most significant change during floor debate was the reallocation of an additional $1.5 billion to New York in the Rules Committee amendment that reflected an agreement reached between Representative Walsh and the White House.26 With this change, some estimated that the total for New York out of the entire $40 billion supplemental would have been about $11.5 billion. The Committee also recommended significant increases bioterrorism ($600 million) and included funds for counterterrorism aid to state and local governments that was not requested ($400 million), and passenger and baggage screening activities ($1.25 billion) that was to be offset by fees collected from passengers and airlines. The House also proposed reductions to the President's non-defense request, including transferring funds for dislocated workers assistance ($2 billion) and FEMA grants ($500 million) to New York. Similarities in House and Administration's Priorities for NonDefense Programs. H.R. 3338 as passed by the House supports many of the funding priorities recommended by the President including $4.9 billion for FEMA to remove debris in New York City ($2.15 billion), reconstruct buildings ($1 billion), and repair highways and subways in New York ($1.75 billion). Other major policy priorities endorsed by the both the committee and the President include:
! ! !

Dislocated worker grants to States   $2 billion Medicines and other supplies for the National Pharmaceutical Stockpile and smallpox vaccines   $1.15 billion Operation expenses of the FBI, INS, and U.S. Marshals   $1.05 billion.

See CRS Report RL31187, Terrorism Funding: Congressional Debate on Emergency Supplemental Allocations for more details on the actions taken by Congress in H.R. 3338 to change non-defense funding.

Administration's Defense Funding Request to Combat Terrorism
Under the President's proposed allocations of the Emergency Terrorism Response supplemental, the Defense Department was to receive a total of $20.7 billion constituting both the largest share of total funding available under the supplemental (52%) and the largest portion of the $20 billion supplemental request currently under consideration in Congress (37%). DOD received a total of $17.5 billion in funding under the Emergency Terrorism Response supplemental, including $14.0 billion in funding that was immediately available or subject to the 15-day wait

Although the total amount of funds shifted was $2.1 billion, the net increase was $1.5 billion because some of the funds had already been slated for New York. The major change was to add $1.825 billion to HUD Community Development Block Grants to aid New York businesses to recover from the terrorist attacks by shifting funds from DOL programs designed to extend unemployment benefits and health insurance to displaced workers; those funds would have been widely distributed across the country. See CRS Report RL31187, Terrorism Funding: Congressional Debate on Emergency Supplemental Allocations by Amy Velasco and Larry Nowels for additional detail on non-defense programs.

26


CRS-26 period, and $3.5 billion that was provided in DOD's FY2002 appropriations act.27 (See discussion above for congressional action on the Administration's request.) Table 6 shows the Administration's request and congressional action on DOD's share of the $40 billion, using the categories developed by the Administration specifically for the emergency supplemental.28 Those purposes range from support for the conflict in Afghanistan to repair and renovation of the Pentagon. Unlike submissions by the domestic agencies and normal budget proposals, the funding for DOD is being appropriated to a central fund, the Defense Emergency Response Fund, rather than being appropriated to specific accounts. (Funds will be transferred from the central fund to particular accounts in the services.) This approach was adopted to give DOD additional flexibility and to ensure separate tracking of these emergency funds. The discussion below describes the rationale for the Administration's allocation of funds; for congressional action on those allocations, see discussion above. Estimating the Cost of the Afghan Conflict. The largest single category in the Administration's request was $6.5 billion to support the higher operating tempo associated with ongoing operations in Afghanistan or elsewhere - categorized by DOD as "Increased worldwide posture." (Since the funding is not specifically tagged for Afghanistan but rather for higher operating costs, the Administration can use the funding for operations elsewhere.) That funding covers the cost of higher operating tempo for forces that are deployed, the cost of airlifting supplies and setting up operations, and additional pay for activating reservists and for active-duty forces (e.g., hazardous duty pay). According to DOD, that $6.5 billion request represented a rough estimate of the additional funding that may be necessary to conduct operations in Afghanistan for six months, or until mid-March, 2002. The estimate reflected a 15% increase above normal operating tempo costs (i.e. for unit training and related areas) of all of DOD's forces, rather than the number and makeup of forces likely to be deployed, and is intended to ensure funding for the Afghan conflict through mid-March after the convening of the next Congress.29 With rapid and unpredictable changes in the situation in Afghanistan, any estimate of costs is uncertain, and initial estimates are likely to be revised in the coming months. The Department of Defense has not released any estimates of costs incurred in the conflict thus far. This funding is to be administered centrally by the
27

Of that $13.4 billion, $5.3 billion was available immediately and $8.1 billion became available15 days after the allocation was sent to Congress, by November 25, 2001 at the latest.
28

The Office of Management and Budget will apportion (or release) funds in these categories, and any DOD proposals to shift funds among categories will require OMB approval.
29

DOD provided the Appropriations Committees with additional descriptive materials concerning their $7.3 billion request. According to policy guidance, funding for Afghanistan is to represent incremental operating costs, i.e. taking into account offsets for peacetime exercises funded in the normal budget that would not occur because units are deployed to the conflict.


CRS-27 Department of Defense with the services submitting requests as expenses for deployments and other areas are incurred. Improving Intelligence and Surveillance. The second largest category of funding   $5.8 billion, referred to by DOD as "Increased situational awareness"  covers classified programs, including upgrades to reconnaissance platforms (aircraft, unmanned vehicles, communications stations), and improvements to intelligence collection and processing. Early reports suggested that the funding would include the purchase of additional unmanned vehicles such as RC-135 and EP-3 reconnaissance aircraft, assets in heavy use in Afghanistan. Enhancing Physical Security. An additional $2.4 billion has been requested by DOD for "Enhanced Force Protection," to purchase a variety of self-defense weapons and sensors for ships, aircraft and other forces, upgrades to and more physical security systems at bases, and increases in the number of active-duty military personnel doing security duty at bases. Some of the purchases were based on the recommendations of the Cole Commission, which reported on ways to improve security after the terrorist attack on the USS. Cole. Purchasing More Precision Guided Munitions. DOD requested another $2 billion for "Offensive Counter-terrorism" to purchase additional precision-guided missiles and other munitions (Tomahawks, JDAMS, ALCMs, laser-guided bombs) that are being heavily used in the bombing attacks in Afghanistan. These expensive missiles are the `weapon of choice' in conflicts where the military is particularly concerned about accurate targeting. The funding level in the supplemental was set to buy the maximum number of missiles that could be produced by defense contractors in FY2002 rather than a specific estimate of the number that would be used in the conflict. Improving Command and Communication Systems. DOD requested another $1.5 billion to improve connections both within the military and to local, state, and federal governments. Repairing the Pentagon. Repair, renovation, and removal of debris at the Pentagon, as well as leasing of temporary space was anticipated to cost another $1.5 billion. Aiding New York, Patrolling the Coasts, and Protecting Airports . The initial response to the bombing of the World Trade Center, as well as the new mission of conducting combat air patrols off the east and west coasts, and stationing National Guard personnel at airports   was estimated to cost almost $1 billion. The additional funding provided to DOD in the supplemental appeared to include a mixture of one-time or temporary expenses (such as the cost of the conflict in Afghanistan and repair of the Pentagon), accelerations in current programs now given higher priority, and recurring costs reflecting longer-term changes in mission. In the months and years ahead, Congress may assess whether these programmatic changes are permanent, requiring continuing investments in people, equipment or facilities, or whether DOD will need to reorient its missions, and force structure to reflect the new emphasis on combating terrorism.


CRS-28

Table 6. DOD Allocations under $40 billion Emergency Terrorism Response Supplemental
In millions of dollars Category Increased Situational Awareness Enhanced Force Protection Improved Cmd and Control Increased Worldwide Posture Offensive Counterterrorism Initial Crisis Response Pentagon Repair and upgradeb Airport security Other
c

As percent of total Enacted total 5,122 1,509 Admin Total 28.1% 11.2% Enacted 29.2% 8.6% Description of category Upgrades to reconnaissance aircraft, unmanned aerial vehicles, sensors, and classified programs. Self-defense weapons for ships, aircraft, and other forces; physical security system upgrades, personnel alerting systems, and more security personnel. For connecting to local, state, and federal governments, and for military communication systems. Funds increased operating tempo and higher personnel costs associated with Afghan war or related conflicts. Additional buys of precision-guided missiles and other munitions Costs of deploying ships and combat air patrols off coasts, DOD support to FEMA, and to NYC. Debris removal, engineering studies, repairs, and renovation. Funds National Guard providing airport security Potential cost of higher fuel prices. Military construction funding added by Congress. See note below. DOD can transfer up to 1.5% of total funding for RDT&E and procurement for Afghan war and homeland defense. Not applicable

Cash

a

15Admin. day $20B wait requesta fundsa 2,347 734 1,735 881

Admin. total 6,007 2,390

1,925 775

666 890 252 561 739 30 100 0 0

737 2,713 1,207 76 91 198 0 0 0 0 8,103

219 2,938 545 106 925 0 0 0 0 0 7,349

1,622 6,541 2,004 743 1,755 228 100 0 0 0 21,390

1,403 5,098 1,831 676 1,470 228 100 104 [130] [1,648] 17,541

7.6% 30.6% 9.4% 3.5% 8.2% 1.1% 0.5% 0.0% NA NA 100.0%

8.0% 29.1% 10.4% 3.9% 8.4% 1.3% 0.6% 0.6% NA NA 100.0%

Other mil. con. Transfersd Potential transfers DOD Totalf
Notes:
e

0 5,938


CRS-29
a. P.L. 107-38, making emergency supplemental appropriations for FY2001 in response to the September 11, 2001 tragedy, provides that a total of $10 billion is available immediately, another $10 billion is available 15 days after the request is submitted to Congress, and $20 billion is available to agencies after being enacted in a subsequent appropriations act. b. H.R. 3338 allocates $300 million that was available for additional `cash' transfers by the President to reconstruction and hardening of command centers in the Pentagon. c. The category `other' includes potential increases in fuel costs. d. The conference version of H.R. 3338 transfers $30 million of DOD funds to the Former Soviet Union Threat Reduction appropriation in the Department of State, and provides that up to $100 million can be provided to Pakistan and Jordan for their military and logistic support in the Afghan war. e. Section 306 of H.R. 3338 provides that up to 1.5% of the total amount appropriated in FY2002 for RDT&E and procurement can be transferred to support the Afghan war (Operation Enduring Freedom) or DOD's homeland defense activities (Operation Noble Anvil). f. The total for the Administration includes the $300 million in `cash' resources transferred by Congress for reconstruction of the Pentagon in H.R. 3338. Sources: P.L. 107-38, 2001 Emergency Response Terrorism supplemental; OMB submissions on allocations for supplemental, dated September 21, 28, October 5, 16, 22, November 5, 9, 30, see [http://w3.access.gpo.gov/usbudget/FY2002/amndsup.html]; see also materials provided to Appropriations committees; House of Representatives, H.Rept. 107-299, Report of Committee on Appropriations to accompany H.R. 3338, DOD Appropriations Bill, 2001, and supplemental appropriations; U.S. Senate, S.Rept. 107-109, Report of Committee on Appropriations to accompany H.R. 3338, and Department of Defense Appropriation Bill, 2002, and supplemental appropriations, and H.Rept. 107-350, Conference report to accompany H.R. 3338, Department of Defense Appropriation Bill, and supplemental appropriations. See also, Tony Capaccio, "Emergency Defense Funds going to improve military intelligence," [http://www.bloomberg.com], September 27, 2001; Frank Wolfe, "Zakheim: supplemental includes RC-135 Upgrades, Global Hawk Acceleration, Defense Daily, September 25, 2001; and "Zakheim: New Defense Spending in 2001 will lead to increases in 2002 and 2003," Aerospace Daily, September 25, 2001, and CRS calculations.


CRS-30

Previous National Security Funding to Combat Terrorism
There is no consensus about either the definition of activities that are designed to combat terrorism or the categories to use to describe spending for those activities. Some use the term `homeland defense' for programs designed to combat terrorism. In its 2002 report to Congress, OMB uses a set of categories for spending to combat terrorism that differs from those used by the Department of Defense for its current spending in response to the terrorist attacks, making a comparison between previous and current spending impossible based on the reporting provided thus far (see below). In an amended version of its August 2001 report to Congress, OMB estimated that the national security community funding to combat terrorism in FY2001 totaled $5.5 billion, or 57% of that total.30 That total includes funding for both the Department of Defense and intelligence agencies; for security reasons, OMB did not segregate the portion for the Department of Defense. The OMB report also estimates that DOD was spending an additional $1.8 billion in FY2001 to protect critical infrastructure, such as computer and communications networks. For FY2002, the Administration's estimated request for funding for the national security community to combat terrorism was $6.4 billion, or $930 million more than the previous year. This revised estimate reflected the amended budget request sent to Congress by the President on June 27 rather than the initial "current services" estimate included in OMB's annual report to Congress that was issued in August 2001. (Table 7 shows the revised estimates from OMB.) Using a set of categories that apply to all government agencies, the table below divides DOD's spending into five categories:
! ! ! ! !

Law enforcement and investigative; Physical security of government; Physical security of national populace; Preparing for and responding to terrorist attacks; and Research and Development.

With the attack on the World Trade Center and the Pentagon, both these estimates and the amount of funding, as well as the role of the various federal agencies, are being reviewed both within the executive branch and by Congress on an ongoing basis.

See amended September version, "Annex 1: Funding to combat terrorism (including Defense against WMD) by Bureau and Category," included in OMB, Annual Report to Congress on Combating Terrorism, August 2001.

30


CRS-31

Table 7. OMB Estimate of National Security Community Funding to Combat Terrorism, FY2000 - FY2002
(in millions of dollars and percent of total)
Category National Security Total a
Law enforcement and investigative Physical security of government Physical security of national populace Preparing for and responding to . . . Research and development

FY2000 $ $5,368
$2,644 $2,231 $0 $303 $190

FY2001 $ $5,503
$2,732 $2,300 $0 $238 $235

FY2002 $ $6,433
$2,888 $3,098 $0 $249 $199

FY2000 % 100%
49% 42% 0% 6% 4%

FY2001 % 100%
50% 42% 0% 4% 4%

FY2000 % 100%
45% 48% 0% 4% 3%

Sources: OMB, "Annual Report to Congress on Combating Terrorism," revised estimates as of September 2001 [http://www.whitehouse.gov/omb/legislative/nsd_annual report2001] and CRS calculations. a. Figures include funding for both the Department of Defense and intelligence agencies and an estimated $609 million in FY2002 for defense against weapons of mass destruction.

Prior to the terrorist attacks, 93% of the national security funding for FY2002 was concentrated in two areas   $2.9 billion for law enforcement and investigative activities and $3.1billion for physical security of government (see Table 6). Funding for law enforcement, as described by OMB, includes all monies provided to DOD's investigative services and military police even though some of those assets may not be specifically directed against terrorism. In a similar fashion, the funding for physical security includes protection of federal facilities, including those located overseas where DOD has a substantial presence along with the State Department. The remaining funding included $249 million for preparing for and responding to terrorist attacks and $199 million for R&D. The total for preparing for and responding to terrorist attacks includes funding to protect DOD facilities against attacks that rely on weapons of mass destruction (WMD), and DOD's role as a coordinator of the actions by federal, state and local agencies who are the first to respond to terrorist incidents. R&D efforts include funding to develop responses to biological warfare and DOD's contribution to interagency efforts to develop new technologies and equipment to counter terrorism. Because DOD adopted a unique set of categories in its request under the Emergency Terrorism Response supplemental, and because few details are available about the composition of both sets of categories, it is difficult, if not impossible, to compare funding to combat terrorism before and after the September 11th attacks.


CRS-32

Changes in the Budgetary Context since the Terrorist Attacks
Since the terrorist attacks of September 11, the budgetary context for decisions on spending levels for federal programs has changed dramatically. At the beginning of September, leaders of both parties were debating whether higher spending for discretionary programs   including an additional $18.4 billion above the Administration's initial request for the Department of Defense   could be accommodated after the tax cut in the spring without tapping the surplus generated by social security revenues. With the recession that began in the spring of 2001 and the new spending to combat terrorism, the possibility of keeping the social security surplus "off-limits" has disappeared, and both the Administration and the Congressional Budget Office are predicting deficit spending in 2002 and 2003.31 In August 2001, CBO estimated that the total surplus in 2002 would be $176 billion (see Table 8), with all but $2 billion resulting from the surplus in social security revenues.32 The lower CBO estimate reflected primarily the effects of the tax decreases enacted in the spring as well as the downturn in the economy.33 With higher funding for DOD as well as other agencies under consideration, it was likely that Congress would have to tap the surplus in the Medicare Hospital Insurance Fund (HI) and social security revenues. After the attacks of September 11, however, with the new concern about combating terrorism, and the ongoing conflict in Afghanistan, the fiscal debate shifted from the potential problem of tapping the social security surplus to adding funding for defense programs and homeland security. That additional spending, coupled with the recession, made worse by the terrorist attacks, made that prospect inevitable.

Likely Reductions in the Surplus
A bipartisan estimate, "Budget Committees Lay Out Revised Surplus Estimates," released on October 4, 2001, by the House and Senate Budget Committees suggested that the effects of a recession, coupled with additional emergency spending to combat terrorism, as well as additional discretionary spending for defense, education, and disasters agreed to by the Administration and Congress, could reduce the total surplus to $52 billion in FY2002 and $65 billion in FY2003.34 That would absorb much of

31

Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 20032012, (January 31, 2002), p. xiv; and New York Times, "Security Buildup and Tax cuts Win Protection from the Deficit, January 30, 2002.
32

Congressional Budget Office, The Budget and Economic Outlook: An Update, (August 2001), p. ix.
33 34

Ibid, pp. ix-xi and pp. 5ff.

Senate Budget Committee, Senators Kent Conrad, Chairman and Senator Pete V. Domenici, Ranking Member, and House Budget Committee, Representative Jim Nussle, Chairman, and Representative John M. Spratt, Jr., Ranking Member, House Budget Committee, tables accompanying "Budget Committees Lay Out Revised Budget Outlook, Principles for (continued...)


CRS-33 the social security surplus that the Administration and congressional leaders had hoped to reserve for debt reduction (see Table 8). Endorsed by the Chair and Ranking Minority of both budget committees, that estimate reflected the following factors:
! !

!

! !

the possible economic effects of a recession; the effect of holding spending to $686 billion for discretionary programs, as agreed to by the Administration and Congress at the end of September;35 the effect of the $40 billion emergency anti-terrorist supplemental spending passed by Congress in the wake of the September 11 attacks; the effect of the Airline Assistance Act; and the higher interest costs associated with servicing a larger public debt than previously assumed.

34

(...continued) Economic Surplus," October 4, 2001; see [http://www.house.gov/budget].
35

New York Times, "White House and Congress Reach Deal on Budget," September 28, 2001.


CRS-34

Table 8. Bipartisan Estimate of the Post September 11, 2001 Budgetary Outlook: FY2002-FY2011
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 Total FY0211a Total Surplus (as of August 2001 176 172 201 244 289 340 389 450 507 628 3,397 Update by CBO) b On budget surplus c 2 -18 -3 21 47 78 106 147 184 283 847 Of which: Medicare HI c [38] [41] [42] [42] [45] [43] [43] [42] [39] [31] [404] Off-budget surplus d 174 190 204 224 242 262 283 303 323 345 2549 Changes to Date e Possible economic effects of a 80 56 8 0 0 0 0 0 0 0 144 recession and technical changes f Total for discretionary spending of 10 14 16 17 17 18 18 19 19 20 167 $686 billion g Emergency anti-terrorism 25 22 21 21 22 22 23 23 24 25 229 supplemental h Airline Assistance Act i 6 4 6 2 0 0 0 0 0 0 17 j Higher interest costs 4 10 15 19 22 25 29 33 37 41 236 Sum of Changes k 124 106 66 59 61 65 70 75 80 86 793 65 135 186 228 275 318 375 427 543 2,604 Staff Estimate of the Effect on 52 the Surplus l Sources: Adapted from Senate Budget Committee, Senators Kent Conrad, Chairman and Senator Pete V. Domenici, Ranking Minority Member and House Budget Committee, Representative Jim Nussle, Chairman, and Representative John M. Spratt, Jr., Ranking Minority Member, House Budget Committee, tables accompanying "Budget Committees Lay Out Revised Budget Outlook, Principles for Economic Surplus," October 4, 2001; see [http://www.house.gov/budget]. For breakout of surplus, see Congressional Budget Office, The Budget and Economic Outlook: An Update, (August 2001), Table 1-1, p. 1. a. Totals may not add due to rounding. b. Reflects estimate of the surplus included in CBO's mid-session update of August 28, 2001, which assumes that discretionary spending continues at the level enacted in 2001 with increases in later years for inflation, and that current tax policies, including the tax cuts enacted this spring are in effect. c. On-budget surplus includes the Medicare Hospital Insurance (HI) surplus. d. Off-budget surplus is made up of surplus in the social security trust fund as well as net cash flow of the Postal Service. e. Reflects congressional actions as of October 4, 2001, including passage of the Airline Assistance Act, the $40 billion Emergency Anti-Terrorism supplemental, and agreement between Congress and the Administration to hold total discretionary spending to $686 billion in 2002. f. Reflects estimate by budget committee of potential effect on the surplus of a recession; the estimate is higher than the Congressional Budget Office's estimates that are based on the 1990-91 recession - reducing the surplus by $47 billion in the first year and $63 billion in the second year; see Congressional Budget Office, The Budget and Economic Outlook, January 2001, p. 102. g. Reflects agreement between the Administration and Congress reached at the end of September that total discretionary spending would be held to $686 billion in FY2002, $24.2 billion more than was included in the Concurrent Budget Resolution passed by Congress; that total includes $18.4 billion for defense, $2.2 billion for emergencies, and $4 billion for education. Out year estimates assume a level of $686 billion adjusted for inflation after 2002. h. Reflects outlays from $40 billion emergency supplemental enacted on September 14, 2001 (P.L. 107-38). Assumes $20 billion to combat terrorism, adjusted for inflation, in each subsequent year. i. Preliminary staff estimates of costs of the Air Transportation Safety and System Stabilization Act (H.R. 2926). j. Higher interest costs associated with a larger public debt. k. Does not include "other possible claims on the surplus," listed in the following table. l. Difference between initial surplus and the effect of congressional actions as of October 4, 2001.

(Outlays in billions of dollars)


CRS-35 These estimates were uncertain. For example, estimating the effect of a recession - shown below as $80 billion in the first year, $56 billion the second year, and $8 billion the third year - will vary with the length, depth, and timing of a downturn, none of which is easily predicted. Although the budget committee staff estimates below were somewhat larger than CBO's estimates of the effects of a recession - $47 billion the first year, $63 billion, the second year, tapering off to $18 billion in the third year - that were included in CBO's January 2001 report ( modeled on the experience of the 1990-1991 recession), those estimates have turned out to be too low.36 New predictions from CBO, in its latest update in January 2002, predict that economic and technical changes will reduce the surplus by $242 billion rather than $80 billion as predicted by the budget committees last October.37 On the other hand, the estimate of $686 billion for total discretionary spending, $10 billion in outlays more than assumed in the concurrent budget resolution, turned out to be correct as Congress did, in fact, conform to the agreement reached between the President and Congress to allow $24.6 billion more in new discretionary budget authority - $18.4 billion more for defense, $4 billion more for education, and $2.2 billion more for disasters that would together increase government outlays by about $10 billion.38 Although Congress also conformed to the $40 billion emergency supplemental as assumed in the October. estimates of anti-terrorism spending in future years are uncertain. Estimates by the budget committee staff estimates below generally assumed a continuation of the policies agreed to in 2002, for example, a continuation of $686 billion (with increases for inflation) for discretionary spending and an additional $20 billion for emergency anti-terrorism spending each year.

Other Potential Claims on the Surplus
The two budget committees also noted that Congress is considering a variety of other changes to current entitlement programs and tax policies that could place additional demands on the budget. Those policy changes - ranging from additions for the farm bill to coverage of prescription drugs for seniors and changes to the alternative minimum tax - could reduce the surplus further (see Table 9). In addition, because of a lack of consensus, the budget committees did not include two other changes that could place large additional demands on federal spending - an economic stimulus package that could reduce revenues by $50 billion to $100 billion and additional unspecified increases for the Department of Defense apart from the emergency supplemental. In light of these various demands, along with the ongoing recession, deficits are predicted to resurface in 2002 and 2003 if not beyond.

The staff estimates also include an unspecified amount for "technical changes, " which are not included in the CBO estimates. See Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2002-2011, (January 2001), p. Table 5-5, p. 102.
37

36

Congressional Budget Office, The Economic and Budget Outlook, FY2002-FY2012 (January 2002), p. xiv.
38

New York Times, "White House and Congress Reach Deal on Budget," September 29, 2001.


CRS-36

Table 9. Other Potential Claims on the Surplus
(In billions of dollars)
Potential Claims on the Surplus Budget Resolution Policies One-year extension of tax provisions 1 expiring in 2001 Veterans programs Other revenue policies All other resolution policies 0 3 3 2 0 2 5 0 1 2 -0 0 1 2 4 0 1 3 2 0 1 1 5 0 1 1 5 0 1 1 5 0 0 1 5 0 0 1 5 3 7 18 39 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 Total FY02-11a

Budget Resolution Reserve Fund Policies b Prescription drugs Farm program Expanded health coverage Home health, student Opportunity Act 0 7 8 0 8 10 1 NS NS 10 8 10 2 NS 21 8 0 3 NS 28 7 0 3 NS 39 7 0 3 NS 44 6 0 4 NS 47 6 0 4 NS 52 7 0 4 NS 58 7 0 5 NS 300 74 28 29 NS

loans, Family 0

Department of Defense House- and Senate-Passed Bills Faith-based Initiative (House) Railroad Retirement (House) Energy (House) Patients Bill of Rights (Senate) Elementary and Secondary Education 0 (Senate) Natural Disasters c Permanent Extension of Expiring Tax Provisions d Elimination of 2001 Tax Bill Sunsets e Alternative Minimum Tax Economic Stimulus Package Range of Cost of Specified Possible Claimants 2 1 0 0 0 16 2

1 0 3 -0 1 6 4 2 1 0 NS 0 to 43 NS 0 to 46

1 0 4 -0 10 5 4 1 0 NS 0 to 58

1 -0 5 0 13 6 9 1 2 NS 0 to 76

1 -0 5 2 15 6 13 1 12 NS 0 to 99

1 -0 4 3 18 6 17 2 22 NS 0 to 129

2 -0 3 3 20 6 20 1 30 NS

2 -0 3 3 21 6 22 2 39 NS

2 -0 2 3 21 7 25 3 48 NS 0 to 180

2 -0 2 4 22 7 29 100 54 NS

13 15 34 18 145 55 142 113 208 NS

0 to 0 to 146 162

0 to 0 to 1241 296

Sources: Adapted from Senate Budget Committee, Senators Kent Conrad, Chairman and Senator Pete V. Domenici, Ranking Minority Member and House Budget Committee, Representative Jim Nussle, Chairman, and Representative John M. Spratt, Jr., Ranking Minority Member, House Budget Committee, see tables accompanying "Revised Budgetary Outlook and Principles for Economic Stimulus, October 4, 2001;" see [http://www.house.gov/budget]. Notes: NS = Not specified a. Numbers may not add due to rounding. b. Includes increases for particular programs that are specified in the "reserve" funds set up in the 2002 Concurrent Budget Resolution. A "reserve" fund was set up for additional defense spending but no specific amount was specified. c. Assumes annual outlays (adjusted for inflation) that would result from average historical spending of $5.6 billion for emergencies.


CRS-37
d. Assumes extension of expiring provisions in H.R. 1836, the "Economic Growth and Tax Relief Reconciliation Act of 2001," as estimated by the Joint Committee on Taxation. e. Includes Alternative Minimum Tax Relief provision in Joint Committee on Taxation document #01-1-144R, excluding the treatment of non-refundable personal credits.

Action on the FY2002 DOD Appropriations Bill
On December 20, 2001, the House and the Senate passed the conference version of H.R. 3338, the FY2002 DOD appropriations bill (H.Rept. 107-350) by 408-6 in the House and 92-2 in the Senate. In addition to DOD's regular appropriations, the FY2002 Defense bill allocates the $20 billion in funding from the Emergency Terrorism Response supplemental that had to be included in an appropriation act (see discussion above).

Enacted Version of DOD Appropriations Bill
For regular defense appropriations, the enacted version of H.R. 3338 provides DOD with $317.2 billion, $1.7 billion below the Administration's request. Congress reduced the amount for DOD in order to provide higher funding for defense-related activities that are funded in the Department of Energy (+$750 million), Military Construction (+$500 million), and defense-related activities that are funded in other appropriations (+$200 million) (see Table 2). With these adjustments, the $343.3 billion appropriated by Congress for national defense, including all defense-related funding, is close to the total requested by the Administration.39 Congress also significantly changed the allocation of the emergency response terrorism supplemental funds in the enacted bill by reducing the Administration's request for emergency spending for DOD from $7.3 billion to $3.5 billion and shifted those funds to homeland security and recovery activities. On the non-defense side, the chief changes in funding for homeland defense activities are a doubling of the Administration's funding requests for bioterrorism, law enforcement, and infrastructure security activities. On the defense side, the enacted version halves the Administration's request for funding for intelligence-related activities, higher operating tempo related to the Afghan war and homeland defense, and efforts to protect DOD facilities, personnel, and weapons (see discussion above). Throughout the fall, much of the debate on the defense bill focused on the emphasis to be given to various policy priorities (see CRS Report RL31187, Terrorism Funding: Congressional Debate on Emergency Supplemental Allocations, by Amy Belasco and Larry Nowels).

The $224 million decrease in total funding for National Defense primarily reflects differences between the Administration and CBO in estimates of the cost of the Energy Employee Compensation Fund, a mandatory program that provides benefits for Department of Energy Employees who contract illness related to exposure to radiation.

39


CRS-38

Previous Congressional Action on FY2002 DOD Appropriations
Senate Action on H.R. 3338. On December 7, the Senate passed H.R. 3338, which reflected the markup by the Senate Appropriations Committee on December 5; (the committee substituted its version in H.R. 3338, see S.Rept. 107109). That bill included $317.6 billion for regular Department of Defense spending, the same amount as in the House-passed bill. With the amounts already appropriated for Military Construction and national security-related programs for DOE, the total for the national defense function is the same as requested by the President. (The Senate provided $1.9 billion less than requested for the Department of Defense, and $500 million more for military construction and $1.2 billion more for DOE Nuclear Weapons Activities.) Military Pay and Benefits. Following the authorizers, the Senate Appropriations Committee endorsed the Administration's proposals for increases in military pay and benefits, accelerating increases to housing allowances, and fullyfunding the Defense Health program, including the new benefit for seniors, TRICARE for life. The committee also provided $60.9 billion for procurement, $440 million more than requested by the President and made a variety of changes to particular programs (see Summary Tables A2 and A3). Missile Defense. The Senate appropriators provide $8.3 billion for missile defense, but provided that the President could re-allocate $1.3 billion of that total to combat terrorism, a provision that is not included in the House bill. The Senate bill also does not transfer missile defense programs to a separate title as provided in the House bill, a provision that is opposed by the Administration (see below). Savings in Operation and Maintenance. Like the House, the Senate appropriators include several general provisions that would reduce funding for Operation and Maintenance (O&M) for pricing adjustments or savings as a result of management reforms while preserving funding in readiness-related programs. In the Senate version, these adjustments total $1.9 billion in O&M (for contract savings, travel, and foreign currencies), less than half the amount that is included in the House bill (see below). Proposal on Tanker Aircraft. The Senate Appropriations Committee also included a potentially controversial provision to lease commercial transport aircraft for up to ten years and eventually convert them to military tanker aircraft. As written, the language in the bill was categorized by CBO as an operating lease, which permits Congress to fund the proposal on an annual basis rather than provide $20 billion in funding upfront as would be required in a lease/purchase arrangement. An operating lease, however, can only be used for commercial assets, but the aircraft would need to be modified for use as military tankers, a modification permitted by the legislation at a later date. The validity of this approach was debated on the Senate floor. The House bill does not have a similar provision. Major Procurement Programs. Both the Senate and the House version of the bill fully-funded the Air Force's F-22 Captor program and criticized the Navy for


CRS-39 poor management of its shipbuilding program (including large cost growth of $3 billion in the next five years for current ships) and poor definition of its new cruiser program (DD-21/DD(X)). Both houses cut the troubled V-22 tilt-rotor Osprey helicopter (see below) and added funds to accelerate conversion of retiring ballistic missile submarines (SSGNs) to use conventional cruise missiles. The Senate, like the House, also added $500 million for procurement of equipment for the Guard and Reserve (see Table A3).

House Action on DOD Appropriations Bill
Overall Level. On November 28, 2001, the House passed its version of H.R. 3338. In its first markup of the regular DOD bill on October 24, 2001, the House Appropriations Committee provided a total of $317.5 billion for the Department of Defense, about $2 billion below the Administration's request, and almost $24.3 billion above the amount available to the Department of Defense in 2001.40 For national defense as a whole, however, both houses provided the same amount in total. The Committee reduced the Administration's request in order to meet funding guidelines set by the full committee that allocated additional amounts   beyond the Administration's request   to defense-related programs in other appropriations, i.e. the Military Construction and the Department of Energy bills. Military Pay and Benefits. In large part, the committee endorsed the Administration's request, including providing an across-the-board pay increase of 4.6% plus additional targeted pay raised, improved housing allowances, and full funding of the 50% increase in the Defense Health Program to cover the new Tricare for Life program for over-65 military retirees. Ballistic Missile Defense. The House Appropriations Committee approved $7.9 out of the $8.1 billion request, all but $300 million, of the funding for ballistic missile defense programs but transferred the programs to a separate title covering all counter-terrorism funding. New Appropriations Title for Counter-terrorism. The House bill created a new appropriations title, "Counter-terrorism and weapons of mass destruction," with $11.8 billion including:   the transfer of funding requested for ballistic missile defense, RDT&E for chemical and biological weapons, Patriot PAC-3 procurement, and the Defense Threat Reduction Agency; and   an additional $1.7 billion in funding for enhancements to intelligence and military capabilities to prosecute Operation Enduring Freedom, the conflict in Afghanistan, and other actions to combat terrorism, to be split between the CIA

This comparison includes $5.5 billion provided in a non-emergency supplemental appropriations for FY2001. These totals do not include additional funding for defense-related programs that are provided in other appropriations such as for military construction bill and the Department of Energy.

40


CRS-40 ($451 million), DOD ($1,219 million), as well as transferring $180 million to other agencies.41 Savings in O&M and Military Personnel. The House appropriations bill preserved funding in readiness-related accounts but decreased funding by $5.3 billion, $4.4 billion in Operation and Maintenance (O&M) accounts, and the remaining $.8 billion in military personnel to reflect various pricing adjustments (e.g. more favorable foreign currency rates), efficiencies (e.g. a saving of almost $1.2 billion from reducing the number of contractor workyears and headquarters staff), and fact-of-life changes (e.g lower utilities rates).42 This amount is considerably larger than similar savings included in the Senate bill and is opposed by the Administration. Major Procurement Programs. The House bill added funding for an additional DDG-51 ship ($820 million) to offset a decrease of $493 million in the RDT&E for the DD-21, the new surface combatant, eliminated one LHD-1 amphibious assault ship (-$267 million), and funded the conversion of four rather than two Trident submarines from a strategic platform to a cruise missile carrier (+$463 million). Like the Senate, the House also added about $500 million for National Guard and Reserve equipment (see Table A3 for changes to major weapon programs).

Military Construction Appropriations
The conference version of the Military Construction appropriations bill was passed by the House and Senate on October 17 and October 18, respectively, and signed by the President on November 6, 2001 (P.L. 107-64 ). The Act provides $10.5 billion in funding, $500 million above the Administration's request (see CRS Report RL31010, Appropriations for FY2002: Military Construction, by Daniel Else). Earlier, the House Appropriations Committee passed its FY2002 Military Construction appropriations bill (H.R. 2904) on September 21 after completing its markup the previous day. The Senate Appropriations Committee passed its version on September 26 (S. 1460) after completing markup on September 25th.

FY2001 Non-Emergency Supplemental Appropriations43
On July 20, both houses approved a conference agreement on a bill (H.R. 2216) providing supplemental appropriations for FY2001. The measure includes $5.5 billion for the Department of Defense, and $5.8 billion for national defense as a whole.

41

See Title IX, Counter -Terrorism and Operational Response Transfer Fund in bill for allocation of funds among various purposes and agencies.
42

Of the total $5.3 billion in reductions, $4.4 billion affects Operation and Maintenance (O&M) accounts, $788 million is in military personnel accounts, $61 million in RDT&E, and $14 million in working capital funds. Most of these reductions are implemented through general provisions.
43

For detailed information on the FY2001 supplemental appropriations, see CRS Report RL30995, Supplemental Appropriations for FY2001: Defense Readiness and Other Programs, by Stephen Daggett.


CRS-41 Unlike other recent supplementals for defense, which typically provided funds mainly for contingency operations, this bill   submitted by the new Administration on June 1   provided additional funding for day-to-day operating expenses and unanticipated cost growth in health and other areas. The bill was initially passed by the House on June 20, (H.R. 2216) and by the Senate on July 10 (S. 1077), and signed into law on July 24 (P.L. 107-20).

Action on FY2002 DOD Authorization Act
On December 13, the House and Senate passed the FY2002 DOD Authorization Act by 382 to 40 in the House and 96 to 2 in the Senate (P.L. 107-107, H.Rept. 107333, see Table 1b). The Act provides the $343.3 billion as requested by the Administration, an 11% increase over FY2001 without taking into account funding from the emergency supplemental. Like the appropriators, the authorizers' action reduces the amount for the Department of Defense by $1.2 billion, and re-allocates those funds to military construction (+$600 million) and defense-related activities of the Department of Energy (+$600 million). Passage of the FY2002 DOD Authorization Act was delayed by the difficulty in resolving the issue of authorizing another round of base closures in 2003 as proposed by the Administration. Initially, the House opposed an additional round and the Senate supported another round.44 In the final compromise included in the conference version, Congress agreed to authorize a round of base closures but delayed the date until 2005. As part of the compromise, the conference version also requires that a `super-majority' of at least seven of the nine commissioners approve any decision to add bases to those suggested by the Secretary of Defense.45 During House floor debate, several members raised concerns about the base closure provision. On the Senate side, the chief concern raised during floor debate was the potentially destabilizing effects of President Bush's decision to withdraw from the ABM Treaty announced on December 13, particularly at a time of rapid buildup in the U.S.'s ballistic missile defense program, an increase that was largely endorsed by Congress in the 2002 budget. Completion and passage of the conference report was also delayed by the need to resolve the issue of the Navy's access to the training vase at Vieques (see below), and by the debate about the allocation of emergency supplemental spending (see above). Earlier, congressional action on FY2002 defense authorization and appropriations bills had been delayed because the Administration did not submit its amended request until June 27 because of the ongoing review of military strategy and because of the evacuation of Congress due to the delivery of anthrax-laden letters.

See House did not include any provision for base closures in its version of the authorization bill (see H.Rept. 107-194), and Senate authorized a round of base closurs in FY2003 (see p. 405 in S.Rept. 107-62)
45

44

See Section 2914 of Title XXX, P.L. 107-107 or p. 331 of H.Rept. 107-333; for floor debate, see Congressional Record, December 13, 2001, H. 10070-10080, and S. 13113 to S. 13138.


CRS-42 Major issues resolved in the conference report and changes made in each house are discussed below.

Conference Version of FY2002 DOD Authorization Act
The conference version of S. 1438 resolve several contentious issues as follows:
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Approves the President's request for another round of base closures, but delayed the date to 2005, and changed the procedures proposed by DOD; Authorizes the Secretary of the Navy to close the training facilities at Vieques (and transfer the facility to the Department of the Interior) after certifying that alternative training sites are available; Provides $7.0 billion for ballistic missile defense as requested by the President but authorizes the President to transfer $1.3 billion of that total to efforts to combat terrorism, permitting the President to fund the request fully; Adopts provisions that reduced non-readiness related spending for Operation and Maintenance by $2.1 billion and Working Capital Funds by $400 million to reflect savings in management reforms, fuel and utility prices, foreign currency decreases.46

The conference version of the bill also authorizes the increases in pay (5% across-the-board and up to 10% for targeted skills) and housing allowances as requested by the Administration, and fully funds the increase for the Defense Health program, including the new benefit for seniors, TRICARE for life. The conference bill also increases funding beyond that requested by the Administration for military construction and family housing and equipment and training for the reserve components. Congress also authorizes $21.2 billion in emergency funding to combat terrorism (see above), providing an upward limit on spending.47 ( Combining the funding allocated at the Administration's discretion with the amounts provided by the appropriators, DOD received a total of $17.5 billion as discussed above.) Although the act endorses the proposal to authorize military retirees to receive VA disability compensation without a reduction in retirement benefits (known as "concurrent receipt"), the bill provides that the program will not go into effect until the President submits legislation and Congress offsets the $55 billion in costs over the next 10 years (see below). DOD objects to this additional benefit both because of its high cost and because the two programs (retirement and disability payments) were

46

House Armed Services Committee, Chairman Bob Stump, "Conferees Reach Bipartisan Accord on Fiscal Year 2002 Defense Authorization Bill," and "Summary of Major Provisions, December 12, 2001, and H.Rept. 107-333, pages 601ff.
47

National Journal's Congress Daily AM, "Conferees Reach Base Closing Pact," December 13, 2001; H.Rept. 107-333, p. 729.


CRS-43 designed to reach two different groups of beneficiaries.48 For changes to specific programs, see below.

House Action on S. 1438, FY2002 DOD Authorization Bill
The House matched the total amount requested by the Administration and made relatively few changes to individual programs. House Floor Action. After considering the DOD Authorization bill, H.R. 2586, on September 20, 24, and 25, the House passed the bill by a vote of 398-17. The act provided a total of $343.5 billion for the national defense function, matching the Administration's request. The Rules Committee limited the number of floor amendments, and debate was less extensive because of the bipartisan support for defense spending in response to the terrorist attacks.49 The major amendments passed were the following:
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an add of $250 million for testing of the F-22 aircraft; a $400 million increase for combating terrorism that was offset by cuts to BMD programs and consulting services (see discussion above); and an amendment offered by Representative Traficant permitting the Secretary of Defense to assign active-duty military personnel to assist with border patrol.

Other amendments that were passed would (1) permit military installations to be used as polling places; (2) allow private donations to repair the Pentagon; and (3) establish a new medal to be awarded to civilians who are killed or wounded as a result of hostile action. (See Summary Tables A2 and A3 for changes to major weapon system programs.) Markup by House Armed Services Committee. The House Armed Services Committee markup of H.R. 2586 provided $343.5 billion for the national defense function, generally endorsing the Administration's request. In military personnel, the Committee not only supported the Administration's requests for substantial improvements in military pay but also provided for other improvements in compensation and health care. In the case of funding for Operation and Maintenance (O&M), the Committee supported the Administration's request for additional funding for readiness-related funding but cut non-readiness related O&M by about $1 billion and redistributed some of those funds to enhancement of training of reserve forces. See below for more detailed discussions of individual issues.

DOD estimated that concurrent receipt would require an additional $41 billion in mandatory spending, which would have to be offset by cuts to other entitlement programs, and $14 billion in additional costs to the Department of Defense; see Letter from Secretary of Defense David Rumsfeld to the Honorable Carl Levin, Chair, Committee on Armed Services, October 25, 2001.
49

48

See H.Rept. 107-218, Providing for further consideration of H.R. 2586, National Defense Authorization Act for Fiscal Year 2002, September 24, 2001, for amendments ruled in order.


CRS-44 The Committee provided $47.4 billion for RDT&E, $300 million more than the Administration's request, and supported all but $135 million of the President's request for $8.2 billion for missile defense (see CRS Report RL31111, Missile Defense: The Current Debate, coordinated by Steven A. Hildreth and Amy F. Woolf). The Committee also added $525 million to the Administration's request for procurement funds, citing it as the "weakest link" in the Administration's budget because decisions about modernization are awaiting completion of the Quadrennial Defense Review.

Senate Action on S. 1438, FY2002 DOD Authorization Bill
Although the Senate bill, S. 1438, provided total funding of $344.8, $1.3 billion above the Administration's request, the Senate initially included more changes likely to be controversial. In a bipartisan compromise, however, the most controversial provisions requiring congressional approval of anti-ballistic missile testing were removed prior to floor debate (see below). Senate Floor Action. On October 2, as a bipartisan compromise in the wake of the terrorist attacks, the Senate considered a new version of the DOD Authorization Act on the floor that stripped the bill of controversial provisions. ( The new version, S. 1438, replaced S. 1416, the bill that was reported out of committee.) The new version passed unanimously. The compromise version no longer required that the President to certify and Congress to approve the funding of any activity that could violate the ABM Treaty.50 The President had threatened to veto the bill if these provisions were included. Those provisions were included in a separate bill, S. 1439. The Senate permitted the President to restore $1.3 billion in funding cut from ballistic missile programs by authorizing the President to allocate those funds either to combating terrorism or to the BMD program, a compromise that was adopted in the final version of the bill. That change increased the total amount authorized to $344.8 billion, or $1.3 billion above the Administration's request. The Senate passed S. 1438 by a vote of 97 - 0 on October 2.51 In floor action, the Senate included the following significant amendments:
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adopted a provision restoring $1.3 billion that the Senate Armed Services Committee cut from ballistic missile defense (BMD) programs, and allowing the President to allocate those funds to either RDT&E for BMD, or combating terrorism; and rejected an amendment that would have removed provisions adopted by the Senate Armed Services Committee providing for a new round of base closures in 2003; and adopted the Reid amendment permitting "concurrent receipt" of benefits for military retirees with service-connected disabilities that would increase entitlement spending by $2.9 billion in FY2002 by

50

See Subtitle C - Missile Defense, Sections 221 to 224; these provisions also included reporting requirements for missile defense programs. The Senate passed S. 1438 after debate over six days: September 21, 24, 25, and October 1 and October 2.
51


CRS-45 allowing eligible persons to receive both retirement and VA disability payments without the reduction required in current law. Long-Term Effect of Expanded Benefits to Veterans. Authorizing "concurrent receipt" to improve the benefits received by military retirees with serviceconnected disabilities would have a significant effect on future budgetary requirements for the government as a whole. According to cost estimates from CBO, authorizing "concurrent receipt"of both retirement benefits and VA disability payments without requiring an offset to those eligible for benefits under both programs would increase mandatory or entitlement spending by $2.9 billion in FY2002 and $40.6 billion over the next ten years. In addition, the Defense Department would have to provide about $1 billion annually to cover the estimated cost of providing this benefit in the future for service members currently in the force.52 (The House version of the bill contained the language that was originally included in the Senate bill, which stated that the benefit would not be provided until the Administration provided an offset to cover the mandatory or entitlement spending.) The Administration supports current law. Markup by Senate Armed Services Committee. Like the House Armed Services Committee, the Senate Armed Services Committee markup of S. 1416 provided $343.3 billion for the national defense function, the same amount as the Administration's request. The Senate Armed Services Committee, however, required that authorization of $15.2 billion of the Administration's $18.4 billion increase would be contingent upon approval of additional funds for Defense by the Chair of the Senate Budget Committee as provided in the FY2002 concurrent budget resolution (see section below for a more detailed discussion of the budget resolution).53 The Senate Armed Services Committee also adjusted the Administration's request to reflect the Committee's priorities (see Summary Tables A2 and A3 for changes to major weapons programs.) The Committee's markup included the major changes outlined below. The committee added funds in the following areas:
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$450 million for family housing and military construction; $250 million for military compensation (primarily to reduce out-ofpocket housing costs for military personnel); $400 million for procurement of additional helicopters and other equipment; $307 million to convert four Trident ballistic missile submarines (SSBNs) to carry Tomahawk cruise missiles; $625 million more for theater missile defense systems like PAC-3 and THAAD;

This accrual funding, where the agency is required to include the anticipated cost of providing benefits to its current members, is also used to fund military retirement. The cost of providing the benefit to current recipients is mandatory spending that is not part of the DOD budget.
53

52

The Senate Armed Services Committee exempted the funding requested for military pay and Defense Health, which totals $3.6 billion out of the $18.4 billion increase requested on June 27 by the Administration (see Section 1302 of S. 1416).


CRS-46
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over $800 million for "transformational" RDT&E programs, including over $250 million for science and technology programs; over $600 million for new initiatives to deal with non-traditional threats including over $200 million to combat terrorism (see section below); and $270 million to Operation and Maintenance to improve readiness.

At the same time, the Senate Armed Services Committee reduced the Administration's request in the following areas:
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$590 million less for the V-22 tilt-rotor Osprey aircraft; $247 million less for the Joint Strike Fighter; $1.3 billion less for ballistic missile defense; and $1.6 billion reduction for savings from management efficiencies