The Pentagon, like a whole lot of other federal agencies, is famous for last minute spending binges each time a fiscal year draws to a close. But the House is considering legislation that proponents believe would dramatically tamp down on “use-it-or-lose-it” spending by giving DoD more flexibility in its operation and maintenance accounts.
The leading advocate for the idea in the House is Rep. Mac Thornberry (R-Texas), the ranking member on the Armed Services Committee. A measure he introduced Wednesday would allow DoD to roll over 50% of any O&M funding it doesn’t spend in a particular fiscal year into the next one, theoretically reducing the incentive to rush those funds out the door by Sept. 30.
“I’ll bet every single member of this committee has fussed at one time or another about DoD spending tons of money before the end of the fiscal year before they lose it,” he said. “What’s natural for human beings to do? It’s to spend everything they can in September before it’s gone, without the deliberation and consideration that it deserves. And if you look at the percentage of O&M money that is spent in September, it’s an enormous share.”
It’s enormous across the government, in fact. A 2013 study published by the National Bureau of Economic Research found that five times as much spending happens in the final week of the fiscal year compared to an average week.
And researchers showed the last minute scramble goes down to the final hours, with federal officials on the East Coast — where the fiscal year has already expired — making late-night calls to their colleagues on the West Coast —where it hasn’t — to get a final few dollars obligated before they lapse and revert to the U.S. Treasury.
Thornberry tried to add the provision to the committee’s version of the annual National Defense Authorization Act during its annual markup session Wednesday, but a jurisdictional dispute with the House Appropriations Committee prevented that. Thornberry said he still hopes to add the language when the NDAA reaches the House floor.
“We can complain all we want about DoD not spending money efficiently, but here, the problem is us,” he said. “As a Congress, we can fix it. We cannot let territorial parochialism prevent a fix that is working in other departments and that would make such a difference.”
The Pentagon supports the measure as well. Although it did not appear in DoD’s formal package of legislative proposals for this year’s NDAA cycle, David Norquist, the deputy defense secretary, advocated an identical measure when he testified before the House Budget Committee in March.
“This is not how you and I handle our salaries. We do not get to the end of the calendar year and then hand all of our money back to our employer if we didn’t spend it,” he said. “It creates some very bad incentives for people to spend money at year-end. It adds to things being put in inventory that we don’t have awareness of. If what you’re looking at buying isn’t as valuable to you as 50 cents on the dollar next year, we’d rather you not buy it. That sort of incentive, which some of the other federal agencies have, is a step in the right direction.”
There is evidence that the ability to carry funds over into the next fiscal year does affect end-of-year spending. The Justice Department, for example, has long had the authority to do that for its IT purchasing. Governmentwide, 12.1% of IT spending happens in the last week of the fiscal year. At DOJ, it’s only 3.4%.
“Everyone who has ever been a military commander is guilty of this. We’ve all done it. Maybe it’s cynicism, but you say to yourself, ‘Somebody else is going to misspend the money if I don’t spend it, so let’s go ahead and do it,’” he said. “It’s actually criminal, and I’ll probably burn in hell for doing this repeatedly. It’s never been fixed, and it’s wrong.”
Jurisdictional issues notwithstanding, Rep. Adam Smith (D-Wash.), the Armed Services Committee’s chairman, indicated he’d be supportive of the use-it-or-lose-it fix if the measure comes up as an amendment before the full House.
“I would look forward to working with [Rep. Thornberry] because I do think it’s a significant problem, and it absolutely happens — it is not just an old folk tale,” he said. “It’s really important that we consider this, because people absolutely spend money because they know they’ll get less next year if they don’t.”