Appropriations for FY2005: Military Construction
Released: 2004-11-15T00:00:00

Most Recent Developments

The President signed H.R. 4837 , the Military Construction Appropriations andEmergency Hurricane Supplemental Appropriations Act, 2005 , into law on October 13, 2004 ( P.L.108-324 ).

The President signed H.R. 4200 , the Ronald W. Reagan National DefenseAuthorization Act for Fiscal Year 2005 , into law on October 28, 2004 ( P.L. 108-375 ).

Background

Content of Annual Military Construction Appropriations and Defense Authorization Bills

The Department of Defense (DOD) manages the world's largest dedicated infrastructure,covering more than 29.2 million acres of land with a physical plant worth almost $647 billion,housed within buildings encompassing more than 2.2 billion square feet of floor space. More than2.36 million men and women, including 1.7 million military personnel, 465,000 civil servants, and195,000 other U.S. and foreign nationals, work on U.S. military installations. Eighty-eight percentof military personnel, 95 percent of civil servants, and more than half of other employees work onthe 3,842 listed installations that constitute the 98 percent of Department of Defense land locatedwithin the United States and its territories. The remainder work at 860 listed installations located inforeign countries.

The military construction appropriations bill provides a large part of the funding to enhanceand maintain this infrastructure. The bill funds construction projects and some of the facilitysustainment, restoration, and modernization of the active Army, Navy and Marine Corps, Air Force,and their reserve components; (1) additional defense-wide construction; U.S. contributions to theNATO Security Investment Program (formerly known as the NATO Infrastructure Program); (2) and military family housingoperations and construction. The bill also provides funding for the Base Realignment and Closure(BRAC) account, which finances most base realignment and closure costs, including constructionof new facilities for transferred personnel and functions and environmental cleanup at closingsites. (3)

The military construction appropriations bill is but one piece of annual legislation thatprovides funding for the country's "national security." Other national security appropriationlegislation includes the national defense appropriations bill, which provides funds for allnon-construction military activities of the Department of Defense and constitutes more than 90% ofnational security-related spending, and the energy and water development appropriations bill, whichprovides funding for atomic energy defense activities of the Department of Energy and for civilprojects carried out by the U.S. Army Corps of Engineers. Two other appropriations bills,VA-HUD-Independent Agencies and Commerce-Justice-State, also include small amounts fornational defense. (4) Supplemental appropriations bills may be passed to provide additional Department of Defensefunding as needed.

No funds may be expended by any agency of the federal government before they areappropriated. (5) In addition,for nearly half a century Congress has forbidden the Department of Defense to obligate funds for anyproject or program until specific authorization is granted. (6) This explains why, for defense funds, both authorization andappropriations bills are required. The annual Military Construction Appropriations Act is dedicatedto military construction, and the annual National Defense Appropriations Act covers all otherDepartment of Defense appropriations. (7) Normally only one National Defense Authorization Act is passedeach year to authorize both of these appropriations. (8) Therefore, major debates over defense policy and funding issues,including military construction, can be associated with any of these bills. Because issues in thedefense authorization and appropriations bills intertwine, this report includes salient parts of theauthorization bill in its discussion of the military construction appropriation process.

The separate military construction appropriations bill dates back to the late 1950s.Traditionally, military construction was funded through annual defense or supplementalappropriations bills. However, the Korean War prompted a surge of military construction, followedby a steady increase in military construction appropriations. The strong and enduring security threatposed by the Soviet Union drove a relatively high and continuous level of spending on militaryinfrastructure. The congressional appropriations committees established military constructionsubcommittees and created a separate military construction bill. The first stand-alone militaryconstruction bill was written for FY1959 (P.L. 85-852).

It should be pointed out that, first, military construction appropriations are not the sole sourceof funds available to defense agencies for facility investment. The national defense appropriationsbill funds so-called minor construction and property maintenance within its operations andmaintenance accounts. Construction and maintenance of Morale, Welfare, and Recreation-relatedfacilities are partially funded through proceeds of commissaries, recreation user fees, and othernon-appropriated income. Second, several special accounts are included within the militaryconstruction appropriation. Among these are the Homeowners Assistance Fund (Defense), (9) and the Department of DefenseFamily Housing Improvement Fund, (10) both of which perform functions ancillary to the direct buildingof military infrastructure.

Most congressional appropriations must be obligated in the fiscal year for which they areappropriated. Military construction appropriations, though, are an exception. Because of thelong-term nature of construction projects, these funds can generally be obligated for up to five fiscalyears.

Consideration of the military construction budget begins when the President's budget isdelivered to Congress each year, usually in early February. This year, the President submitted hisFY2005 budget request to the Congress on February 2, 2004.

Bill Status

Table 1 shows the key legislative steps necessary for the enactment of the FY2005 militaryconstruction appropriations. It will be updated as the appropriation process moves forward.

Table 1. Status of Military Construction Appropriations,FY2005

Note: Dashes indicate no action yet taken.

Appropriations Action

An emergency supplemental appropriation, H.R. 5212 ,introduced on October 5, and the continuing resolution, H.J.Res. 107 ,enacted on September 30, 2004, are discussed in the Legislation section below.

House Appropriations Action. TheHouse Committee on Appropriations Subcommittee on Military Construction heldnine hearings between February 25 and June 22, 2004. The topics addressed includedQuality of Life (senior enlisted and military family representatives, February 25),family housing privatization and Central Command programs (March 3), overviewof military construction (Department of Defense representatives, March 10),European Command programs (March 25), Pacific Command programs (March 31),Navy programs (June 15), Army programs (June 16), and Air Force programs (June22). The subcommittee reported its bill to the full committee by voice vote on July6, and the full committee reported its mark on H.R. 4837 on July 15,2004 ( H.Rept. 108-607 ). The bill was then placed on the Union Calendar, CalendarNo. 365.

H.R. 4837 was introduced on the floor of the House on July 21.Debate centered on Section 129 of the bill, a provision that would raise the limitationon the budget authority that could be applied to the military housing privatizationinitiative and would exempt such budget authority from scoring ( CongressionalRecord , H6460-6469). A more extensive discussion of the issue is included in the Military Housing Privatization Budget Authority Cap portion of the Key PolicyIssues section of this report. A separate bill, H.R. 4879 , whichincorporated the budget authority language of Section 129, was introduced inmid-afternoon and passed under suspension of the rules (requiring a two-thirdsmajority) on a vote of 423-0-11 (Roll no. 406, Congressional Record , H6489-95,H6498).

H.R. 4837 was brought up again as unfinished business on theevening of July 22. Mr. Nussle raised a point of order against the content of themeasure, citing Section 129 as seeking to change existing law (violating House RuleXXI). The point of order was sustained by the Chair, thereby striking Section 129from the bill. Mr. Obey moved to recommit the bill to the Committee onAppropriations with instructions to increase the military housing privatization budgetauthority limitation referred to above. Mr. Nussle raised a point of order against themotion and was again sustained by the Chair. Mr. Obey then moved to recommit thebill to the Committee on Appropriations with slightly different instructions. TheHouse then engaged in ten minutes of debate on the motion, whereupon it wasordered. The motion failed on a vote of 201-217-16 (Roll no. 416). H.R.4837 was then passed on a vote of 420-1-11 (Roll no. 417).

On October 8, after the return of the amended bill from the Senate (see SenateAppropriations Actions , below), the House agreed without objection to disagree withthe amendment and appointed conferees.

Senate Appropriations Action. The Senate Committee on Appropriations Subcommittee on Military Constructionheld two hearings on Defense-Wide and Air Force construction projects (March 30)and Army and Navy projects (April 7, 2004). The subcommittee completed theinformal markup of its bill on July 14, and the full committee reported its mark on S. 2674 on July 15 ( S.Rept. 108-309 ). (11) The billwas placed on the Legislative Calendar under General Orders (Calendar No. 637).

The Senate received H.R. 4837 from the House on September7, 2004, read it twice, and placed it on the Legislative Calendar (Calendar No. 690).On September 15, S. 2674 was brought to the floor. Senator Hutchison,on behalf of herself and Senator Feinstein, offered two amendments, S.Amdt. 3660 and S.Amdt. 3661 (see CongressionalRecord S9242). S.Amdt. 3660 (new Sec. 130) would make availableadditional funds in the sum of $1.5 million for the Commission on Review ofOverseas Military Facility Structure of the United States. S.Amdt. 3661 (new Sec. 131) would require the Department of Defense to assess the impact on themilitary family housing program of having the total value of contracts andinvestments undertaken under the Military Housing Privatization Initiative reach thelimitation on budget authority (both of these issues are addressed at length elsewherein this report). Both amendments were agreed to by Unanimous Consent, and the billwas returned to the Calendar (Calendar No. 637).

The Senate then incorporated the language of S. 2674 into H.R. 4837 as an amendment. The Senate passed the amendedH.R. 4837 on September 20 by recorded vote 91-0-9. The Senate sent amessage on its action to the House on September 22, 2004.

Conference Action. Senateconferees were appointed on September 20. The House disagreed with the Senateamendment, and conferees were appointed on October 8.

The conferees added Division B, the Emergency SupplementalAppropriations for Hurricane Disasters Assistance Act, 2005 , and Division C, the Alaska Natural Gas Pipeline Act , to the basic bill. (12)

The conferees filed the conference report ( H.Rept. 108-773 , text at Congressional Record H9054-9113) on October 9. The House considered the report ( Congressional Record H9175-9176) and agreed by the Yeas and Nays, 374-0-58(Roll no. 529). That same day, the Senate began consideration on the conferencereport, and a cloture motion was presented ( Congressional Record S10978-10979).The cloture motion was withdrawn by unanimous consent on October 11, and theSenate agreed to the conference report by Voice Vote ( Congressional Record S11223-11228).

The bill was presented to the President and signed on October 13, 2004 ( P.L.108-324 ).

Key Policy Issues

Several issues regarding military construction have gained visibility duringthe legislative deliberations of the current session of Congress. Among these areoverall funding levels, realignment of overseas bases, base realignment and closure(BRAC), and perchlorate ground water contamination remediation.

Overall Funding Levels. TheFY2005 budget submitted by the President on February 2, 2004, as subsequentlyamended, requested $9.6 billion in new budget authority, an amount $112.7 millionbelow the 2004 enactment. (13) As shown in Table 4 , Active Component militaryconstruction requested is $378.7 million below that enacted for FY2004, withincreases in the Army and Defense-wide accounts being more than offset bydecreases for the Navy and Air Force. (14) Requests for every account within the ReserveComponents , save for the Air Force Reserve, are below the amounts enacted lastyear, with the net impact being a $110.5 million decline from the previous year. Theoverall military construction request for FY2005 is $489 million below the enactmentfor FY2004.

Family housing construction and operation and debt servicing, as requestedfor FY2005, represents an increase of more than $351.5 million over that enacted forFY2004. Caution should be exercised in interpreting these figures, however, becausethe military services are responsible for satisfying their own family housing needs,and the Department of Defense and military services are engaged in an extensiveprogram of privatizing (i.e., removing from direct support by military constructionappropriations) a significant portion of military housing. In addition, the services arecompleting a nine-year effort to substantially increase the military pay supplement(the Basic Allowance for Housing, or BAH, that is funded in the personnel accountin the national defense appropriation) to a level that will eliminate out-of-pocketexpenses should a military member choose to live in his or her local civiliancommunity.

Realignment of Overseas Bases. The armed services are in the midst of a global reassessment study of theirinfrastructure inventory, with an eye toward reducing the number and realigning theconcentration of troops stationed outside the United States and its territories. Thisclosely parallels, but is separate from, the process of realigning military installationswithin the United States, known as Base Realignment and Closure, or BRAC. Detailsof what is variously known as the Global Posture Study, "global sourcing," efficientbasing, or the "global BRAC," have not yet been released by the Department ofDefense. The Senate Committee on Armed Services has scheduled a hearing on thematter for Thursday, September 23, 2004. The Secretary of Defense and the unifiedcommand commanders are scheduled to appear as witnesses.

In addition, Congress created the Commission on Review of OverseasMilitary Facility Structure of the United States last year to determine for itselfwhether the eventual Department of Defense plan for altering overseas basingrequirements and stationing of troops will be adequate to national securityneeds. (15) The commission is tasked with conducting "a thorough study of matters relating tothe military facility structure of the United States overseas" and assessing "whetheror not the current military basing and training range structure of the United Statesoverseas is adequate to meet the current and future mission of the Department ofDefense, including contingency, mobilization, and future force requirements," amongother duties. The commission's report, containing its findings, conclusions, andrecommendations for legislative and administrative actions, is due to the Congressnot later than December 31, 2004 (though language in the report accompanying theSenate version of the Military Construction Appropriations Act for Fiscal Year 2005, S. 2674 , extends the report deadline to August 15, 2005, as indicatedbelow). The commission is also to propose an overseas basing strategy for theDepartment of Defense that will meet its current and future mission requirements.

The law established a commission of eight members, appointed asfollows: (16)

1.Two appointed by the Majority Leader of the Senate: Maj. Gen. Lewis E.Curtis, III, U.S. Air Force (retired), of Texas; Vice Adm. Anthony A. Less,U.S. Navy (retired), of Virginia;

2.Two appointed by the Minority Leader of the Senate: Al Cornella, of SouthDakota (chair), and James A. Thomson, of California;

3.Two appointed by the Speaker of the House of Representatives: noneappointed; and

4.Two appointed by the Minority Leader of the House of Representatives: Lt.Gen. H. G. (Pete) Taylor, U.S. Army (retired), of Texas, and Keith Martin ofPennsylvania.

A major issue for Congress is the absence of a formal Department of Defenseplan for the future of its overseas basing. For this specific reason, Congress did notfund some of the construction projects requested by the Department at overseaslocations for FY2004. In its report to the Senate on the FY2005 appropriations bill,the Senate Committee on Appropriations noted that the Department of Defense isnow more than two years overdue in forwarding its master overseas basing plan tothe committee and again recommended against funding several requested overseasconstruction projects. (17)

In its report on the FY2005 appropriations bill, the Senate Committee onAppropriations noted that the creation of the commission had met with significantDepartment of Defense opposition. Nevertheless, the committee went on to state:

Because of delays in the appointmentof commissioners, the establishment of suitable Commission facilities, and thesubmission to the Congress of the Department's global basing and presence plan, thedeadline for the Commission's final report is extended to August 15, 2005. This willmake the Commission's life coterminal with its funding, which under current lawexpires September 30, 2005, and will provide an opportunity for the Commission tointeract with the Base Closure and Realignment Commission, whose members neednot be appointed until March 15, 2005. However, in order to inform both BRAC andconsideration of the fiscal year 2006 military construction appropriations bill, thecommittee urges the Overseas Basing Commission to present its preliminaryconclusions to the Congress no later than March 31, 2005. (18)

Section 2518 of the House-passed version of the National DefenseAuthorization Act for FY2005 would repeal the provision of law that established thecommission. There is no such provision in the bill as it was passed by the Senate.The conference report retained the Senate's due date extension for the Commission'sfinal report, but eliminated additional funding that the Senate had provided.

Redeployment of U.S. Troops from OverseasGarrisons to Bases within the United States, 2004-2014.

Presidential Announcement. OnAugust 16, 2004, President George W. Bush included the following remarks in hisaddress to the national convention of the Veterans of Foreign Wars (VFW) inCincinnati, Ohio:

I'm announcing today, over the next 10years, we will bring home about 60,000 to 70,000 uniformed personnel, and about100,000 family members and civilian employees. (19)

The Redeployment in Context. Analysts expect that the majority of the forces redeployed to the United States willbe drawn from those countries that currently host the largest overseas U.S. garrisons. These are the Federal Republic of Germany, the Republic of Korea, and Japan.

It may be helpful to place this redeployment in historic context by comparingthe numbers of troops in garrison in these three countries in 1986 with those ingarrison in 2003. The figures for 1986 reflect U.S. overseas force posture during theclosing years of the Cold War. (20) In addition, the United States then maintainedsizable garrisons in both the Republic of the Philippines and the Republic of Panamathat would be redeployed to the United States, its possessions, or other overseaslocations during the late 1980s and 1990s. Therefore, these troops have beenincluded in the construction of Tables 2 and 3 .

Table 2. Selected U.S. Overseas Garrisons, 1986 and 2003

(As of September 30 of the respectiveyears)

Source: Department of Defense Base Structure Reports for Fiscal Years 1987 and2004.

Table 3. Selected U.S. Overseas Garrisons, Grouped Totals, 1986 and 2003

(As of September 30 of the respectiveyears)

Source: Department of Defense Base Structure Reports for Fiscal Years 1987 and2004.

These figures indicate that although the announced redeployment is substantial, it has precedent in the post-Cold War era when examined in the contextof the entire military force or when focused on the U.S. garrisons in Germany, Korea,and Japan.

Base Realignment and Closure(BRAC). Four BRAC rounds have been completed since the firstin 1989. Under statutory language included in the National Defense AuthorizationAct for FY2002, the Secretary of Defense is authorized to carry out a fifth round ofrealignment or closures during FY2006 through FY2011.

The Secretary has established a list of criteria that he will use to recommendbase closure and realignment actions and has certified to the Congress the need tocarry out this fifth BRAC round. The Department of Defense is in the process ofevaluating the base infrastructure needs of its future military force. This processincludes the detailed assessment of each installation's capacity as measured along anumber of dimensions, such as potential for hosting additional troops, ease of accessto major transportation resources, proximity to training and operating areas, etc., andthe changes needed in order to make it conform to the needs of the future force. Thisevaluation will result in the creation of a list of BRAC actions that the Secretary isrequired to submit in May 2005 to an independent BRAC Commission for review.The BRAC Commission is scheduled to forward this list, including any revisions, tothe President in September 2005. The final presidential list of BRAC actions is dueto the Congress on November 7, 2005. (21)

The House-passed version of the National Defense Authorization Act forFiscal Year 2005 ( H.R. 4200 ) contains a provision that wouldeffectively delay the remaining steps in the BRAC process for two years. (22) In itsStatement of Administration Policy issued on May 19, 2004, the Office ofManagement and Budget stated:

Base Realignment and Closure (BRAC).The Administration strongly opposes any provision to weaken, delay, or repeal theBRAC authority passed by Congress three years ago. If the President is presented abill that weakens, delays, or repeals the BRAC authority, the Secretary of Defense,joining with other senior advisors, will recommend that the President veto thebill.

Appearing before the Senate Committee on Armed Services on September 23,2004, Secretary of Defense Donald Rumsfeld reiterated his opposition to delay of theBRAC round in a response to a question posed by Senator John McCain:

McCain: I want to thank the witnesses.Mr. Secretary, I was very pleased to hear your comments in response to SenatorWarner's question about the necessity of BRAC. Would you recommend a veto if adefense bill came to the president that had a two-year delay in BRAC?

Rumsfeld: Yes, I certainly would. Itwould be a terrible thing, Senator. (23)

Press accounts on the deliberations of the conference committee cited theissue of BRAC delay as one of three or four most significant issues confronting theconferees. (24)

Conference Report, Ronald Reagan National DefenseAuthorization Act for Fiscal Year 2005 (H.R.4200). The conference report for the RonaldReagan National Defense Authorization Act for Fiscal Year 2005 does not delay theimplementation of the 2005 BRAC round, but several sections in the bill do addressBRAC issues:

Sec. 2831. The Secretary of Defense is required to submitan updated force-structure plan and infrastructure inventory not later than March 15,2005. Existing law states that these are to be submitted along with the Department'sFiscal Year 2006 budget justification material.

Sec. 2832. This section specifies the final criteria that areto be used by the Secretary of Defense in calculating the "military value" ofinstallations considered for closure or realignment and "other criteria" that theSecretary shall consider in making his recommendations. Previous law establishedseveral criteria for the evaluation of military value and "special considerations" thatare to be included "at a minimum" in the writing of the Secretary's recommendations.The Act's language appears to remove some flexibility in the ability of the Secretaryto choose those factors he deems relevant to the calculation. Previous law specifiedthat military value is the primary consideration in creating the recommended BRACaction list. The Act's language requires the Secretary to "give priority" to militaryvalue. The section goes on to state that the "final selection criteria specified in thissection shall be the only criteria to be used, along with the force-structure plan andinfrastructure inventory ... in making recommendations for the closure or realignmentof military installations inside the United States under this part in 2005."

Sec. 2833. Existing law authorizes the Secretary of Defenseto place a military installation in an inactive status as an alternative to closure orrealignment. The Act's language repeals this authority.

Sec. 2834. Previous law required the Commission to givethe Secretary of Defense a 15-day warning before adding an installation to his list ofrecommendations for closure or realignment and demanded that seven of the nineCommissioners then vote for the addition. The Act's language made the samerequirement applicable to Commission consideration for adding an installation to theSecretary's list of recommendations and requires that at least two members of theBase Realignment and Closure Commission visit any installation for which theCommission intends to add a closure or realignment recommendation not made bythe Secretary of Defense or to expand a realignment that the Secretary hasrecommended.

Military Housing Privatization Budget AuthorityCap. In the late 1990s, Congress granted to the Department ofDefense specific "alternative authorities" by which the Department could enter into"public-private partnerships" with private enterprise. (25) Thesepartnerships are corporations that assume responsibility for the construction,maintenance, and operation of housing for military personnel on, or adjacent to,military installations. To date, the military services have negotiated contracts for 32separate projects that will create or refurbish more than 61,000 military familyhousing units. (26)

This Military Housing Privatization Initiative leverages, but does not replace,the use of appropriated funds to provide military housing. The budget authorityneeded to support the initiative is calculated, or "scored," by the Department ofDefense according to guidelines established by the Office of Management andBudget. (27) 10 U.S.C. 2883(g) imposes limitations on thetotal value in budget authority of all contracts and investments undertaken using thealternative authorities, restricting the Department of Defense to $850 million for theacquisition or construction of military family housing and $150 million for theacquisition or construction of military unaccompanied housing (barracks ordormitories).

Contract negotiations for the creation of almost 74,000 privatized militaryfamily housing units are ongoing, and the Department of Defense is planning toprivatize an additional 34,000 units during the next few years. The Department ofDefense estimates that it will exhaust the budget authority granted to it under theprogram before the end of the current fiscal year. The Department, therefore, hasrequested that this budget authority limitation be raised. (28)

Efforts to Raise the Budget AuthorityCap. Section 2806 of H.R. 4200 , the NationalDefense Authorization Act for Fiscal Year 2005 (engrossed as agreed to or passedby House) would repeal the limitation on budget authority applied to military familyhousing. (29) The Senate version of the bill ( S. 2400 , incorporated into H.R. 4200 as an amendment in the nature of asubstitute) does not contain similar language, and the difference between the tworemains to be worked out in conference. In the meantime, Section 129 of the MilitaryConstruction Appropriations Act for FY2005 ( H.R. 4837 ), as it wasreported to the House, would have raised the budget authority cap on military familyhousing by $500 million to $1.35 billion. This section was struck when a point oforder was raised and sustained during floor debate.

An independent bill, the Military Housing Improvement Act of 2004( H.R. 4879 ), accomplishing the same goal, was introduced and passedby the House on July 21, 2004 (see "Military Construction Appropriations," in the Legislation section, below, for more information on legislative action). It wasreceived by the Senate on September 7, 2004, and referred to the Committee onArmed Services. Senator Hutchison, on behalf of herself and Senator Feinstein,offered S.Amdt. 3661 to the Senate version of the Military ConstructionAppropriations Act for Fiscal Year 2005, S. 2674 , when it was laidbefore the Senate on September 15. This amendment would require the Departmentof Defense to assess the impact of the exhaustion of new budget authority on themilitary family housing program. The amendment was accepted into the bill, whichwas then incorporated into the House version of the Military ConstructionAppropriations Act ( H.R. 4837 ). Because the language raising thebudget authority cap was struck from the House bill on a point of order, the principaleffect of this amendment is to allow the issue to be raised in conference. The Senatepassed the amended bill on September 20, 2004.

Section 2805 of the Ronald Reagan National Defense Authorization Act forFiscal Year 2005 ( H.R. 4200 ) repealed both the budget authority cap andthe termination date for the use of the alternative authorities, which had been set forDecember 31, 2012.

The Budget Scoring Issue -- Differences Between OMB andCBO. The Congressional Budget Office has taken issue withthe Office of Management and Budget interpretation of federal accounting standardsin its scoring of the Department's alternative authorities. The OMB calculated itsscoring according to the financial liability each authority places on the government,thereby recording costs incrementally over time. The CBO, on the other hand, arguesthat the Department is engaging in a "governmental activity" by supplying familyhousing in whatever form, either government or privately owned, to militarypersonnel. (30) The CBO contends that the Department ofDefense exercises significant control over the operation of these housing projects andthat the government is the dominant or only source of project income, rendering thepartnered private-sector corporation effectively an instrument of thegovernment. (31)

The "leveraging" in the privatization initiative occurs when appropriatedfunds are used, either in the form of a loan guarantee, direct loan, or equity stake, toassist the private-sector corporation in securing the additional commercial financingnecessary to capitalize the project. Because the CBO regards privatization projectsas inherently governmental, it considers all such investments as borrowing authority,a form of budget authority, that should be recorded up front rather than scored overtime.

For its part, the Department of Defense maintains that privatized housing iscontrolled by a private corporation, not the government, that military members arefree to use their housing allowance wherever they wish, and that the budget authorityrecorded is properly limited to the amount of financial liability incurred by theDepartment, as calculated by the OMB scoring rules.

In awarding its 32 family housing projects, the Department of Defense hasused OMB's accounting methodology to record obligations of approximately $580million. The CBO, using the rationale explained above, contends that the full amountof the Department's commitments to date approximates $6 billion.

The Office of Management and Budget devoted a significant portion of itsStatement of Administration Policy on S. 2674 , the Senate version ofthe Military Construction Appropriations Act for Fiscal Year 2005, issued onSeptember 20, 2004, to an explanation of its position on the issue of the housingprivatization cap, stating:

The President's Budget included arequest that would increase the military housing privatization cap from $850 millionto $1.85 billion. This increase will help improve the quality of life of our militaryfamilies by eliminating inadequate housing and allowing them the option to renthigh-quality homes at prices covered by housing allowances. Furthermore, withoutthis increase, the current limit would be reached by November 2004. OMB would notscore any additional cost to this provision, because it does not increase the amountof budget authority available to the Department of Defense (DOD). Moreover, DODdoes not need additional budget authority to cover the construction cost of theseprivate projects. These projects receive private sector funding and are controlled andmanaged by private owners, and DOD does not require service members to live inthe units and does not guarantee their occupancy. Any immediate costs to DODassociated with these contracts, such as credit subsidies or cash investments, are paidfor out of funds appropriated to the Department's housing accounts. Additional coststo the Department in the form of allowances paid to service members are offset byavoidance of costs associated with building and maintenance of government housing.The Administration urges the Senate to either eliminate the cap or raise the cap to therequested $1.85 billion, which is essential to meet the FY2007 DOD goal ofeliminating inadequate housing units. (32)

Significant Funding Trends

Between FY1985 and FY1998, funding devoted to military constructiondeclined steadily as DOD and Congress struggled with a changing strategicenvironment, a shrinking military force, and the uncertainties associated with severalrounds of base realignments and closures. Appropriations began to rise with FY1998as Congress sought to replace outdated facilities and improve the quality of life formilitary personnel at home and in the workplace. Administration requests for militaryconstruction funding (not including BRAC and family housing) continued to declineuntil FY2000, but have risen for FY2001 and FY2002. The request for FY2005 risesabove the level requested for FY2004, but falls short of projections made severalyears ago. In FY2001, DOD anticipated that its annual construction requests wouldapproximately triple between FY2003 and FY2007, which would have led anobserver to anticipate an FY2005 request approximately $1 billion higher than thatsubmitted (see Figure 1 ).

Figure 1. Military Construction Funding, FY1989-FY2005

Note: Does not include BRAC or Family Housing funding

Source: Department of Defense, Financial Summary Tables , successive years

Table 4 breaks down the FY2005 request by appropriations account and compares it to FY2004 enacted levels. Table 5 shows congressional action on currentmilitary construction appropriations by account. Table 6 compares Administrationmilitary construction requests and enactments for Guard and Reserve projects fromFY1995 to FY2005.

Several issues were singled out for special attention in the appropriationscommittee reports. Among these were the inadequacy of Department requests forsustainment, restoration, and modernization funds and the inappropriate use ofunprogrammed minor construction funding.

The House Appropriations Committee noted the long-standing tensionbetween funds needed for construction of new buildings and the funds that arededicated to the maintenance of existing facilities. The former is funded through themilitary construction appropriation, while the latter is supported by sustainment,restoration, and modernization (SRM) accounts in the national defense appropriation.The committee remarked that the majority of military installations are rated by theservices at the lowest two of four possible facility readiness grades (C-3 and C-4),while SRM appropriations are often diverted to support base operations. (33)

The Senate Appropriations Committee highlighted what it determined to bethe inappropriate use of minor construction funds for construction not authorized bycongressional committees. According to 10 U.S.C. 2805, the Secretary of Defenseis permitted to initiate construction projects that have not been either authorized orspecifically appropriated for using funds in what is referred to as the "unspecifiedminor construction" appropriation account. This authority is intended for use onlyunder circumstances where the need for construction could not have been foreseenin time to request an appropriation through the normal process and, in the case wheresuch construction would correct a deficiency that threatens life, health, or safety;authority is limited to projects that will cost $3 million or less. (34) Thecommittee observed that in the period since September 11, 2001, this authority hasbeen frequently used to justify projects, such as gates, inspection facilities, and evena firing range, that are primarily intended as anti-terrorism/force protection measures,all of which should by now be readily identifiable sufficiently far in advance toappear in the normal appropriation process. (35)

Legislation

Military Construction Appropriations

H.R. 4837 (Knollenberg). Making appropriations for militaryconstruction, family housing, and base realignment and closure for the Departmentof Defense for the fiscal year ending September 30, 2005, and for other purposes.The House Committee on Appropriations, Subcommittee on Military Construction,held nine hearings between February 25 and June 22, 2004. The subcommitteereported its mark of the bill by voice vote to the full committee on July 6, 2004. Thefull committee mark was completed, also by voice vote, on July 9, and the committeereported its bill on July 15 ( H.Rept. 108-607 , CR H5907). The bill was then placedon the Union Calendar, Calendar No. 365.

The House Committee on Appropriations, in its report accompanying its markof the Military Construction Appropriations Act, endorsed the privatization effortsof the Department of Defense, stating, "The Committee therefore strongly supportscurrent efforts to raise or eliminate the budgetary cap on MHPI and address scoringmethodology changes proposed by CBO" (36) (see the "Military Housing Privatization BudgetAuthority Cap" portion of the Key Policy Issues section above). Section 129 of itsreported bill, H.R. 4837 , would have increased the 10 U.S.C. 2883(g)(l)limit on available budget authority from $850 million to $1.35 billion and wouldexempt the funds from scoring for purposes of the Congressional Budget andImpoundment Control Act of 1974. This language, appearing in an appropriationsbill, presented several procedural challenges to existing House rules, though theRules Committee had waived all relevant points of order except a potential Rule XXI(legislating in an appropriations bill) challenge to Section 129. (37)

Debate on H.R. 4837 began on July 21 ( Congressional Record ,H6460-6469). Later that day, Mr. Nussle introduced a separate bill, H.R. 4879 , that would raise the budget authority cap without invoking questions ofCommittee of the Budget jurisdiction. This measure passed on a vote of 423-0-11(Roll no. 406, Congressional Record , H6489-95, H6498). (38) H.R.4837 was again considered on July 22 ( Congressional Record ,H6660-6675), when Mr. Nussle raised a Rule XXI point of order against Section 129.He was sustained by the Chair, striking the section from the bill ( CongressionalRecord H6667). Mr. Obey then made two motions to recommit the bill to committeewith instructions, neither of which was successful, and the amended bill was passedon a vote of 420-1-13 (Roll No. 417).

The Senate replaced the original language of H.R. 4837 with thatof S. 2674 on September 15, passing the amended bill on September 20,with a vote of 91-0-9 (Record Vote No. 185) and appointed its conferees. The Senatetransmitted a message on its action to the House on September 22, 2004.

On October 8, the House agreed without objection to disagree with the Senateamendment and appointed its conferees.

The conferees added Division B, the Emergency SupplementalAppropriations for Hurricane Disasters Assistance Act, 2005 , and Division C, the Alaska Natural Gas Pipeline Act , to the basic bill, (39) filing theconference report ( H.Rept. 108-773 , text at Congressional Record H9054-9113) onOctober 9. The House considered the report ( Congressional Record H9175-9176)and agreed by the Yeas and Nays, 374-0-58 (Roll no. 529). That same day, the Senatebegan consideration on the conference report, and a cloture motion was presented( Congressional Record S10978-10979). The cloture motion was withdrawn byunanimous consent on October 11, and the Senate agreed to the conference report byVoice Vote ( Congressional Record S11223-11228).

The bill was presented to the President and signed on October 13, 2004 ( P.L.108-324 ).

S. 2674 (Hutchison). An original bill making appropriationsfor military construction, family housing, and base realignment and closure for DODfor the fiscal year ending September 30, 2005, and for other purposes. The SenateCommittee on Appropriations Subcommittee on Military Construction held the firstof its annual series of hearings on the Defense-wide and Air Force appropriationsrequests on March 30, 2004. It held a hearing on the Army and Navy appropriationsrequests on April 7. After informal subcommittee markup, the full committeereported its bill on July 15, 2004 ( S.Rept. 108-309 , Congressional Record S8228).The bill was then placed on the Legislative Calendar under General Orders (CalendarNo. 637).

S. 2674 was laid before the Senate on September 15, 2004. TheSenate amended the text twice ( S.Amdt. 3660 and 3661, CongressionalRecord S9242) by Unanimous Consent, returned it to the Calendar (Calendar No.637), and incorporated its language into companion measure H.R. 4837 .Subsequent action is described in the relevant section above.

H.J.Res. 107 (Young). Mr. Young introduced an emergencysupplemental bill on September 28 that would enable the continued funding throughNovember 20, 2004, of previously authorized military construction projects andoperations at a rate consistent with that appropriated for Fiscal Year 2004. The Houseconsidered the measure on September 29 under the provisions of rule H.Res. 802 ( Congressional Record H7778-7786). Mr. Obey moved torecommit with instructions to Appropriations (text and consideration, CongressionalRecord H7783-7785), but the motion to recommit with instructions failed by theYeas and Nays: 200 - 221 (Roll No. 478). The bill then passed by recorded vote: 389- 32 (Roll No. 479). The bill was received by the Senate on the same day, passedwithout amendment by Unanimous Consent (consideration, Congressional Record S9993), and cleared for the White House. The Senate sent a message on its action tothe House on September 30, and the bill was presented to the President, who signedit into law the same day ( P.L. 108-309 ).

H.R. 5212 (Young). Mr. Young introduced an emergencysupplemental bill for hurricane disaster relief on October 5, 2004. The bill included$148.9 million in construction and repair funding related to damage caused byHurricanes Ivan and Jeanne ($147.6 million to rebuild Ivan-damaged Navy and ArmyReserve infrastructure at NAS Pensacola, Florida, and the remainder dedicated torepairing damage caused by Jeanne to the former Naval Station Roosevelt Roads andat Ft. Buchanan in Puerto Rico and Patrick AFB, Florida). (40) The billpassed the House by recorded vote 412-0-20 (Roll No. 501) on October 6and wasreceived in the Senate on October 7, 2004. (41) The bill'slanguage was incorporated into H.R. 4837 as Division B of the bill.

Defense Authorization

H.R. 4200 (Hunter, by request). To authorize appropriationsfor FY2005 for military activities of the Department of Defense, for militaryconstruction, and for defense activities of the Department of Energy, to prescribepersonnel strengths for such fiscal year for the Armed Forces, and for other purposes.Introduced on April 22, 2004, and referred to the House Committee on ArmedServices, it was further referred to the Subcommittees on Strategic Forces, TacticalAir and Land Forces, Readiness, Projection Forces, Total Force, and Terrorism,Unconventional Threats and Capabilities (several subcommittees held hearings priorto the introduction of the bill). The subcommittees completed markup and returnedthe bill to the full committee by May 6. The Subcommittee on Readiness, whichexercises jurisdiction over the military construction portion of the authorization bill,inserted an amendment to the basic bill requiring the Department of Defense tocomplete and provide to Congress a series of reports related to the ongoing 2005round of Base Realignment and Closure (BRAC) actions. These reports would besubmitted by the end of calendar year 2005, and the amendment would bar theDepartment from taking any BRAC-related action until 18 months after the lastreport is delivered to Congress. The subcommittee approved the amendment byunanimous voice vote. The bill was reported out on May 14, 2004 ( H.Rept. 108-491 ),and placed on the Union Calendar (Calendar No. 278). Brought to the floor on May19, 2004, subject to a rule ( H.Res. 648 ). H.R. 4200 wasdebated, amended, and passed by recorded vote (391-34, Roll no. 206) on May 19and 20.

The bill was received in the Senate on May 21, 2004, read twice, and placedon the Legislative Calendar under General Orders (Calendar No. 537). It was laidbefore the Senate by Unanimous Consent on June 24, 2004, whereupon the Senatestruck all after the Enacting Clause and substituted the language of S. 2400 . The bill then passed with an amendment by Unanimous Consent on the sameday ( Congressional Record , S7300).The Senate then insisted on its amendment andappointed conferees, sending a message to the House informing it of its action onJuly 6, 2004. Conferees met between September 29 and October 8, 2004.

The conferees filed their report ( H.Rept. 108-767 , text in CongressionalRecord H9187-9683) in the House on October 8. Mr. Hunter brought up the reportfor consideration under the provisions of H.Res. 843 the same day( Congressional Record H8995-9007). The House agreed by the Yeas and Nays:359-14-59 (Roll no. 528, Congressional Record H9175) on October 9.

The Senate agreed to the conference report by Unanimous Consent(Congressional Record S10945-10954) on October 9, 2004.

The bill was presented to the President on October 21, and signed into law onOctober 28, 2004 ( P.L. 108-375 ).

S. 2400 (Warner). An original bill to authorize appropriationsfor FY2005 for military activities of the Department of Defense, for militaryconstruction, and for defense activities of the Department of Energy, to prescribepersonnel strengths for such fiscal year for the Armed Services, and for otherpurposes. Ordered to be reported from the Committee on Armed Services as anoriginal measure on May 6, 2004. The original bill was reported to the Senate fromthe Committee by Senator Warner on May 11 ( S.Rept. 108-260 , with additionalviews). Laid before the Senate by Unanimous Consent on May17, 2004. Debated onthe Senate floor between May 17 and June 23, 2004. Passed the Senate withamendments on June 23 by Yea-Nay vote (97-0, Record Vote No. 146). Incorporatedby the Senate into H.R. 4200 as an amendment in the nature of asubstitute. (42)

Table 4. Military Construction Appropriations by Account: FY2004-FY2005

(new budget authority in thousands ofdollars)

Source: Department of Defense.

*: FY2004 Enacted amounts reflect the original new budget authority enacted in theMilitary Construction Appropriations Act for Fiscal Year 2004 as subsequentlyadjusted by rescissions and emergency appropriations ( P.L. 108-106 ).

â : FY2005 Request includes $30 million in three Army National Guardaviation-related construction projects added in May 2004 subsequent to thecancellation of the RAH-64 Comanche helicopter program.

â¡: Sec. 118 refers to the transfer of expired funds into the "Foreign CurrencyFluctuations, Construction, Defense" account, where they become available forexpenditure as new appropriations.

Table 5. Military Construction FY2005 Appropriations by Account: Congressional Action

(in thousands of dollars)

Sources: H.Rept. 108-607 , S.Rept. 108-309 , H.Rept. 108-773 .

Table 6. Congressional Additions to Annual DOD Budget Requests for National Guard and Reserve Military Construction,FY1995-FY2005

(current year dollars in thousands)

Source: Department of Defense, Financial Summary Tables, successive years; H.Rept 108-773 .

For Additional Information

CRS Products

CRS Report RL31810 . Appropriations for FY2004: Military Construction , by DanielElse.

CRS Report RL32305 . Authorization and Appropriations for FY2005: Defense , by[author name scrubbed] and [author name scrubbed].

CRS Report RL31305 . Appropriations and Authorization for FY2003: Defense ,coordinated by [author name scrubbed] and [author name scrubbed].

CRS Report RL30002(pdf) . A Defense Budget Primer , by [author name scrubbed] and[author name scrubbed].

CRS Report RL31039(pdf) . Military Housing Privatization Initiative: Background andIssues , by [author name scrubbed].

CRS Report RS21822 . Military Base Closures: DOD's 2005 Internal SelectionProcess , by [author name scrubbed] and [author name scrubbed].

CRS Report RL32216 , Military Base Closures: Implementing the 2005 Round , by[author name scrubbed].

CRS Report RL30440 . Military Base Closures: Estimates of Costs and Savings , by[author name scrubbed].

CRS Report RL30051 . Military Base Closures: Agreement on a 2005 Round , by[author name scrubbed].

CRS Report RL31443(pdf) . The "Deeming Resolution": A Budget Enforcement Tool , by[author name scrubbed].

CRS Videotape MM70068. Military Base Closures: DOD's Internal 2005 BRACSelection Process , by [author name scrubbed] and [author name scrubbed], availableonline at http://www.crs.gov/products/multimedia/sem_bc-040422.shtml .

CRS Report RL32581 . Assistance After Hurricanes and Other Disasters: FY2004and FY2005 Supplemental Appropriations , by [author name scrubbed] and [author name scrubbed].

CRS Report RL32315 . Oil and Gas Exploration and Development on Public Lands ,by [author name scrubbed]

Selected World Wide Websites

Legislative Branch Sites

House Committee on Appropriations http://appropriations.house.gov/

Senate Committee on Appropriations http://appropriations.senate.gov/

CRS Appropriations Products Guide http://www.crs.gov/products/appropriations/apppage.shtml

CRS Multimedia Library http://www.crs.gov/products/multimedia/multimedialibrary.shtml

Congressional Budget Office http://www.cbo.gov/

General Accounting Office http://www.gao.gov/

U.S. Department of Defense Sites

U.S. Department of Defense, Office of the Under Secretary of Defense (Comptroller),FY2004 Budget Materials http://www.dod.mil/comptroller/defbudget/fy2005/index.html

U.S. Department of Defense, Installations & Environment Home Page http://www.acq.osd.mil/ie/

U.S. Department of Defense, Office of the Deputy Under Secretary of Defense(Installations and Environment) Military Housing Privatization Program http://www.acq.osd.mil/housing/

White House Sites

Executive Office of the President, Office of Management and Budget, BudgetMaterials http://www.whitehouse.gov/omb/budget/fy2005/

Office of Management & Budget http://www.whitehouse.gov/omb/