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Testimony of OMB Deputy Director Joel D. Kaplan
Contingent Emergency Reserve Fund Request for FY 2005
Committee on Armed Services
United States Senate

May 13, 2004

Thank you, Mr. Chairman and Members of the Committee, for inviting me to appear before you today to discuss the President’s request for a $25 billion contingent emergency reserve fund for operations in Iraq and Afghanistan, which the President formally submitted to Congress yesterday.

In his remarks at the Pentagon on Monday, the President reiterated this Nation’s commitment to the brave men and women of our Armed Forces who are engaged in Iraq, Afghanistan, and elsewhere around the world in the War on Terror. The President has never wavered in his commitment to provide those men and women in the field the resources they need to accomplish their missions. Consequently, his direction to us has been clear and consistent: make sure the commanders have the resources they need to accomplish the mission and protect our men and women in uniform.

It is with those men and women in mind that the President last week decided to propose this contingency emergency reserve, to provide the commanders and the troops in the field the confidence that the resources they need will be there when they need them. This reserve, if enacted by Congress, will guarantee we have the ability to respond to rapidly changing conditions in the region, while affording the necessary time and experience after the transition in Iraq and the elections in Afghanistan to ensure that a Supplemental request made of the Congress in early 2005 more accurately reflects real needs.

There are several core principles that guided the Administration’s request for this reserve. First, it should be made available as a contingent reserve activated only after the President submits a request designating the funds as an emergency and essential to operations in Iraq or Afghanistan. While the levels requested in the 2005 base Defense request may well be sufficient to meet all operational needs until Congress acts on an FY 2005 supplemental early next year, the President, based on the advice and recommendations of the Secretary of Defense, believed it was prudent to have an insurance policy in place.

Based on our work with the Department of Defense and the Services, it is clear that they will need to--and can without disruption--pull forward funds planned for the second half of the year to use in the first and second quarter for operational needs if the tempo continues at the current high pace. In the current environment, a need to “cashflow” from the last two quarters in 2005 has the potential to raise concern about the reliability of resources later in the year. We wanted to provide commanders, as well as the troops serving in the field, with the confidence that nothing will stand in the way of the President’s pledge to provide them with the resources they need to accomplish their mission. A reserve guarantees they will have what they need when they need it.

Second, the reserve should provide adequate flexibility to allow us to respond to a fluid operational environment and emerging requirements. The Department of Defense and we believe that at the current pace the pressure points in planning and executing are likely to develop in the Operation and Maintenance accounts, and particularly Army and Marine Corps O&M. This understanding is reflected in the allocations we have requested in the language we sent to the Congress yesterday. We also are seeking to assure that these resources are matched with transfer authority to promptly address changing requirements, including emerging procurement requirements related to force protection.

Third, the reserve should address requirements in Afghanistan and Iraq only. We believe the base 2005 request provides ample resources to meet requirements unrelated to the critical operational missions in Iraq and Afghanistan.

Fourth, we want to assure that enactment of the contingency emergency reserve does not come at the expense of the President’s 2005 base request for the Defense Department of $401.7 billion. Early in his Administration, the President determined that predictability in funding was critical to fulfilling the Department’s transformation agenda. That predictability is even more important now as the services are asked to fully engage in the war against terror abroad even as it fundamentally transforms its organization, infrastructure, force, and doctrine. While some may argue to shift requirements identified in the 2005 base request into the proposed reserve, such a shift risks creating uncertainty and disruption in the Department’s planning and execution of key national security missions.

Finally, I’d just like to note that this Administration has tremendous respect for Congress’ Constitutional role, and its responsibility, in authorizing and appropriating resources for our Armed Services. It is in deference to this role that we want to make sure that the next supplemental request you consider is accurate and precise as to the military’s needs. Some have recommended that we simply extrapolate from today’s costs, multiplying those costs over some fixed period as the basis for a request. We have found that such estimates often mean funds are mismatched with accounts and the requirements that actually develop. The combination of a reserve that can be activated as needed with a future supplemental built on actual 2005 conditions assures we will spend what is necessary to support our troops and their vital mission.

Thank you again for the privilege of appearing before this Committee with my distinguished colleagues. I will be happy to take your questions.