Order Code RL31829
Report for Congress
Received through the CRS Web
Supplemental Appropriations FY2003:
Iraq Conflict, Afghanistan, Global War on
Terrorism, and Homeland Security
Updated April 18, 2003
Amy Belasco
Specialist in U.S. Defense Budget
Foreign Affairs, Defense, and Trade Division
Larry Nowels
Specialist in Foreign Affairs
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

Supplemental Appropriations FY2003:
Iraq Conflict, Afghanistan, Global War on Terrorism,
and Homeland Security
Summary
On March 25, 2003, President Bush requested $74.8 billion in the FY2003
Emergency Supplemental for ongoing military operations in Iraq, postwar
occupation, reconstruction and relief in Iraq, international assistance to countries
contributing to the war in Iraq or the global war on terrorism, the cost of the
continued U.S. presence in Afghanistan, and additional homeland security.
On April 12, 2003, the House and Senate passed the conference version of the
FY2003 supplemental (H.R. 1559/H.Rept. 108-76/P.L. 108-11). It includes $78.49
billion, $3.7 billion more than requested by the President. Additions made by
Congress include $3.1 billion for assistance to the airlines, $749 million more for
homeland security programs, and $369 million in food aid for Iraq and other
countries.
The Administration asked Congress to approve funding that would be lodged
in several large emergency funds where agencies could determine the actual
allocation of funds to particular purposes or specific countries. The conference
version distributes most of these funds to regular appropriations accounts and
generally requires additional notifications to Congress of transfers in cases where the
Administration is given additional flexibility.
The largest fund proposed was $59.9 billion for the DOD’s Defense Emergency
Response Fund that would cover the costs associated with the war in Iraq, the
continued U.S. presence in Afghanistan, enhanced security at U.S. military bases, and
postwar occupation in Iraq. The conference includes $15.7 billion in a new Iraq
Freedom Fund but distributes the remaining funds to specific accounts.
Congress further provides $2.475 billion for an Iraq Relief and Reconstruction
that will fall under the authorities of regular foreign assistance programs usually
managed by the State Department and the U.S. Agency for International
Development (USAID). H.R. 1559, however, extends considerable flexibility to the
President, allowing him to directly apportion funds to several federal agencies,
including the Defense Department. The FY2003 Emergency Supplemental also
includes $4.7 billion in international assistance for about 22 countries which have
contributed in some fashion to the war in Iraq or the global war on terrorism. This
includes substantial increases in current aid levels for Israel, Egypt, Jordan,
Afghanistan, Pakistan, and Turkey. Israel, Egypt and Turkey would also receive U.S.
government guaranteed loans.
The Administration also requested that substantial appropriations be provided
en bloc for homeland security, including $2 billion for the Department of Homeland
Security (DHS) for grants to states and enhancements of security, and $500 million
for a DHS Counterterrorism Fund for investigations and operations. The conference
provides $749 million more for homeland security but allocates funds to specific
appropriation accounts.

Contents
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Supplemental Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Congressional Action on Administration Request . . . . . . . . . . . . . . . . . 2
Amendments During Floor Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Administration Request for the Department of Defense . . . . . . . . . . . . . . . . . . . . 7
Potential Issues in the DOD Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
House and Senate Floor Action on the Department of Defense Request . . . 9
House and Senate Markup of the Department of Defense Request . . . . . . . . 9
Total Funding Recommended . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Proposed Changes to Funding Requested in the Defense
Emergency Response Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Support of Foreign Military Forces . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Use of Defense Cooperation Account and New Natural Resources
Risk Remediation Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Request for Higher Total on Transfers . . . . . . . . . . . . . . . . . . . . . . . . 15
DOD’s Funding Request by Appropriation Account . . . . . . . . . . . . . . . . . . 18
Ceilings Within DERF Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Accountability Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Operation and Maintenance, Defense-Wide Funds Coalition
Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
A New Natural Resource Remediation Fund . . . . . . . . . . . . . . . . . . . . 20
Issues in Defining DOD’s Postwar Role . . . . . . . . . . . . . . . . . . . . . . . 20
Working Capital Fund, Drug Interdiction in Colombia,
Military Construction, Reimbursement for Afghan Drawdown
Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Proposed Changes to Current Law To Increase DOD Flexibility . . . . . . . . 21
Providing Aid to Regular and Irregular Foreign Forces . . . . . . . . . . . 21
Issues in Cooperation with Foreign Military Forces . . . . . . . . . . . . . . 23
Change in Ceiling on Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Allocation of DOD Funding by Phase of Operations . . . . . . . . . . . . . . . . . 23
“Coercive Diplomacy” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Major Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Transitional and Stability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Reconstitution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Issues about Funding Adequacy in FY2003 and Over the
Long-Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Allocation of DOD Funding by Major Type of Expense . . . . . . . . . . . . . . . 26
Personnel and Personnel Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Military Operation Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Iraq Reconstruction and International Assistance . . . . . . . . . . . . . . . . . . . . . . . . 28
Reconstruction Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
International Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Key Issues Regarding Iraq Reconstruction and International Assistance . . 37

Executive Flexibility and Congressional Oversight . . . . . . . . . . . . . . . 37
Costs of Iraq Reconstruction and the Impact on Other Aid Programs . 39
Country Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
DOD Authorities to Provide Military Aid . . . . . . . . . . . . . . . . . . . . . . 41
Homeland Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Support to State and Local Governments for Terrorism Prevention and
Security Enhancements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Departments of Justice and Homeland SecurityCounterterrorism Funds . . 47
Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Emergency Response Funds for the Executive and Legislative Branches . . 48
Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Aviation Industry Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
List of Tables
Table 1. Emergency Iraq War Supplemental Summary . . . . . . . . . . . . . . . . . . . . 2
Table 2. Comparison of Appropriation or Allocation of Defense Funds in
FY2003 Supplemental: Request, House and Senate Bills as Passed . . . . . . 12
Table 2a. FY2003 Supplemental: Procurement Totals with Classified by
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Table 2b. FY2003 Supplemental: Procurement Totals with Classified by
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Table 3. FY2003 Supplemental by Appropriation Account . . . . . . . . . . . . . . . . 17
Table 4. DOD FY2003 Supplemental Request by Phase . . . . . . . . . . . . . . . . . . 25
Table 5. FY2003 DOD Supplemental, by Purpose, Based on DOD’s
Justification Material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Table 6. Iraq Reconstruction, International Aid, and Related Activities . . . . . . 30
Table 7. Proposed Recipients of Supplemental Foreign Aid . . . . . . . . . . . . . . . 36
Table 8. Homeland Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43


Supplemental Appropriations FY2003:
Iraq Conflict, Afghanistan, Global War on
Terrorism, and Homeland Security
Most Recent Developments
On April 12, the House and Senate approved the conference version of the
FY2003 Supplemental (H.R. 1559/H.Rept. 108-76) providing $78.49 billion to cover
the costs of military operations in Iraq, relief and reconstruction of Iraq, ongoing U.S.
costs in Afghanistan, additional aid to coalition partners and nations cooperating in
the global war on terrorism, and homeland security. This total is $3.74 billion more
than the request and roughly $500 million more than the $77.93 billion passed by the
House and the $77.95 billion passed by the Senate. The conference version includes
a $3.1 billion airline industry relief package that was not requested by the President.1
President Bush signed the legislation on April 18 (P.L. 108-11).
Reflecting Congressional priorities, the conference version of the bill includes
additional funding for homeland security programs, such as customs and border
protection and baggage and passenger screening. H.R. 1559 further includes $700
million for protecting high-threat urban areas, up substantially from $50 million
requested by the Administration. The Emergency Supplemental also provides $2.23
billion for first responders, about 10% higher than requested.
On international assistance issues, the conference version generally provides
amounts proposed, but adds $369 million for food aid for Iraq and elsewhere, and
drops $150 million for a Presidential crisis fund. The $2.475 billion Iraq Relief and
Reconstruction Fund will follow the authorities of regular foreign aid programs that
are usually managed by the Department of State and the U.S. Agency for
International Development (USAID). Nevertheless, Congress agreed to the
President’s request for broad discretion in the allocation of Iraq reconstruction money
that allows direct apportionment to several Federal agencies, including DOD.
For defense spending, H.R. 1559, as enacted, funds the $62.6 billion requested
by the Administration but appropriates all but $15.7 billion in regular appropriations
accounts rather than providing $59.9 billion, as requested, in the Defense Emergency
1 See Congressional Record, April 12, 2003, p. H3400 for tables showing total costs. These
totals include only direct appropriations for airline industry relief and do not include the cost
of suspending airline security service fees and extending unemployment benefits to eligible
airline employees. These elements do not require an appropriation but will result in the loss
of revenue from fee collections and higher unemployment benefit costs. As estimated by
CBO, the inclusion of these additional airline-related costs push the supplemental total up
to $79.19 billion, as enacted, and $78.98 billion as passed by the Senate.

CRS-2
Response Fund to be spent at DOD’s discretion. Instead, Congress appropriated
$15.7 billion in a new Iraq Freedom Fund, where DOD will have spending flexibility
as long as it stays within several ceilings and floors and provides 5-day advance
notifications of transfers. Congress also increased combat pay and separation
allowances for U.S. forces, costing an estimated $650 million.
This report has been substantially updated, except in the defense section, to
reflect changes made in the conference agreement. Further additions to the defense
section will be included in the next update.
Supplemental Overview
Within days of the initiation of U.S. military operations in Iraq, President Bush
sent Congress a $74.75 billion supplemental package largely divided into three parts
– defense, Iraq reconstruction and foreign aid, and homeland security, as shown in
Table 1.

Table 1. Emergency Iraq War Supplemental Summary
($s billions)
Request
House
Senate
Enacted
Dept of Defense
$62.587
$62.464
$62.558
$62.583
Iraq reconstruction and international assistance
$7.791
$7.983
$8.451
$8.179
Homeland Security
$4.375
$4.290
$5.144
$5.124
Aviation industry relief a

$3.178a
[$3.505]a
[$3.091]a
Other

$0.016 $0.321
$0.208
TOTAL Emergency Supplemental
$74.753
$77.931
$77.947a
$78.488a
Sources: House and Senate Appropriations Committees and Congressional Budget Office.
a The aviation industry relief initiative, as structured in H.R. 1559, as passed by the House, provided
$3.178 billion in grants to be made by TSA to U.S. flag air carriers. S. 762, as passed the
Senate, provided a combination of direct appropriations and changes in fees and unemployment
benefits for airline workers that do not require direct appropriations. The enacted version of
H.R. 1559 follows the Senate framework of direct appropriations and other items, although at
different levels. Amounts shown in brackets for the Senate and enacted levels represent CBO
estimates that include both direct appropriations and the costs of fee changes and unemployment
benefits. Total Emergency Supplemental amounts include only direct appropriations and
exclude the non-appropriated costs of the airline industry package. If the airline assistance total
is added to the appropriated amounts, the size of the Emergency Supplemental, as estimated by
CBO, is $78.98 billion (as passed the Senate) and $79.19 billion (as enacted).
Congressional Action on Administration Request. As passed on April
3 in both bodies, the bills were at (Senate) or just below (House) the request for
defense. Both bills increased appropriations for Iraq reconstruction and other foreign
aid – the House slightly, to $7.98 billion, and the Senate more significantly, to $8.45
billion, mainly due to a $600 million amendment for additional food aid for Iraq. For
homeland security, the House measure was slightly below the President’s request,

CRS-3
mainly because of the denial of funding for the White House’s proposed emergency
fund, while the Senate increased homeland security by about $770 million to $5.14
billion. H.R. 1559 provided $3.2 billion for airline industry relief while S. 762
included an estimated $3.5 billion.2
As requested, the conference version of the bill provides $62.58 billion for
defense but, as recommended by appropriators in both houses, the enacted legislation
reduces the flexibility in using those funds that was requested by the Administration.
As passed, H.R. 1559 appropriates most of the funds to regular appropriations
accounts. However, it also sets up a new $15.7 billion Iraq Freedom Fund to give
DOD additional flexibility. Within the new fund established for Iraqi Relief and
Reconstruction, the conference bill appropriates funds to the President, giving him
the flexibility to allocate those funds to various agencies, including the Department
of Defense. In response to Administration concerns, the conference version
eliminated restrictions that would have prevented DOD from administering any of
these funds. The enacted appropriation, however, provides that the funds are to be
designated as bilateral economic assistance and spent consistent with the Foreign
Assistance Act of 1961.3
For homeland security, the conference version provides $5.12 billion, $749
million more than requested. For airline relief, the final bill provides for a $3.1
billion package, including direct appropriations, authority to extend by 26 weeks
unemployment compensation for displaced workers, and a temporary suspension of
certain passenger and air carrier security fees from June 1 to September 30, 2003.4
While details of each of these components are discussed below, one overriding
theme that was apparent throughout the supplemental package was the President’s
desire for the maximum degree of flexibility in managing and allocating these
resources. Under the proposal, most of the funds would be have been placed in
emergency response funds which the President, the Secretaries of Defense, Justice,
and Homeland Security could draw upon. Purposes for which the resources would
be used were justified in general terms, but extensive discretion would have been
allotted to executive officials. Among the proposed emergency funds were:
! Defense Emergency Response Fund – $59.9 billion
! Iraq Relief and Reconstruction Fund – $2.4 billion
! Department of Homeland Security Counterterrorism Fund – $1.5
billion
! Department of Justice Counterterrorism Fund – $500 million
! Executive Office of the President Emergency Response Fund – $250
million
! Legislative Branch Emergency Response Fund – $125 million.
2 See footnote in Table 1, above, regarding costs of the airline industry relief package.
These estimates are based on those issued by the Congressional Budget Office.
3 H.Rept. 108-76, p. 15 and p. 70-72.
4 Airline relief funding costs are based on CBO estimates that include both direct
appropriations and the costs of fee changes and unemployment benefits extension.

CRS-4
Administration officials argued that such flexibility was needed due to
constantly changing circumstances in and around Iraq and uncertainty over the
duration and magnitude of the military campaign, the demands posed for near-term
humanitarian relief, and longer-term reconstruction of the country, and the ongoing
“global war on terrorism.”
In the enacted legislation, reflecting both House and Senate action, funds are
generally directed for more specific purposes than proposed by the White House.
The Iraqi Relief and Reconstruction Fund is the exception where Congress gives the
President flexibility to allocate funds to five federal agencies, including the
Department of Defense. Previous versions of the supplemental appropriation, as
passed by the House and the Senate, would have limited the President’s ability to
apportion the funds directly to DOD, and required that Fund be managed by the State
Department and the U.S. Agency for International Development (USAID).
For defense, the conference version allocates much of the $59.9 billion
requested by the Department of Defense in the Defense Emergency Response Fund
to regular appropriations accounts, reserving $15.7 billion in a new Iraq Freedom
Response Fund to be allocated by the President subject to various ceilings and floors
set in the bill.
H.R. 1559 substitutes the President’s request for two Department of Homeland
Security Funds totaling $3.5 billion with specific allocations for port security, state
and local government law enforcement, and National Guard reimbursements,
checked baggage explosive detection systems at airports, among others. The
conference report also allocates most of these funds to specific accounts.
The enacted supplemental also distributes nearly all of the $500 million
proposed Justice Department Counterterrorism Fund among several activities,
allocating a portion for FEMA disaster relief. H.R. 1559 further requires advance
notification of how the money will be spent and directs the Administration to
reimburse foreign aid accounts that have previously been drawn upon to fund pre-
conflict needs in Iraq.
Amendments During Floor Debate. During floor debate, lawmakers
considered amendments affecting each of the three main areas of the President’s
supplemental request. Defense-related proposals that were adopted included:
! Stevens amendment to increase combat pay ($650 million estimated
cost) – adopted by voice vote and included in the conference
agreement.
! Allard amendment to create a panel to examine claims of sexual
misconduct at the Air Force Academy – adopted by voice vote and
included, with modifications, in the enacted legislation.
! Within Stevens amendment (S.Amdt. 522), a section that would
prohibit contracts for military airlift services to any carrier that is

CRS-5
“not effectively controlled by citizens of the United States.”5 The
amendment, with modifications, remained in the enacted legislation.
The Senate also rejected an amendment by Senator Landrieu that would have added
$1.05 billion for National Guard and Reserves procurement (tabled 52-47).
House and Senate amendments regarding Iraq reconstruction and international
assistance focused generally on efforts to add humanitarian resources for Iraq, cut aid
to Turkey and Colombia, and restrict eligibility of reconstruction contractors. The
Senate approved an amendment by Senator Kohl adding $600 million for PL480 title
II food assistance programs, including a requirement that $155 million be used to
reimburse food accounts from which resources had been previously taken for Iraq.
H.R. 1559 provides $250 million for these same purposes. The enacted bill provides
$369 million for food assistance. The House defeated three amendments cutting
international assistance:
! Cunningham amendment to delete $1 billion in aid to Turkey.
(defeated 110-315).
! DeFazio amendment to cut aid to Turkey by $207 million,
transferring the funds to establish National Guard Weapons of Mass
Destruction Civil Support Teams (defeated 113-312).
! McGovern amendment eliminating $61 million in counter narcotics
funds for Colombia and increasing appropriations for the Office of
Domestic Preparedness (defeated 209-216).
On aid contracting and related issues, the House approved (voice vote) a proposal by
Congressman Kennedy (MN) that prohibits the use of funds for Iraq reconstruction
to purchase goods or services produced by France, Germany, Russia, or Syria,
although U.S. subsidiaries of companies organized in those countries would be
eligible. Two Senate amendments related to this issue were withdrawn:
! Ensign amendment to prohibit reconstruction funds in a way that
would benefit businesses and citizens of France and Germany unless
physically located in the U.S.
! Landrieu/Mikulski amendment to require that American flag
commercial ships be used to transport U.S. assistance.
H.R. 1559, as enacted, however, deleted the House-passed Kennedy amendment.
Most amendments considered in both houses focused on increased spending for
homeland security purposes. The Senate adopted a modified proposal by Senator
Bayh adding $105 million for grants to States for smallpox and other bioterrorism
inoculation programs. Originally, the amendment would have provided $340
million. The conference version of H.R. 1559 includes $100 million for such
inoculation programs. The Senate further agreed to an amendment by Senator
Specter (65-32) adding $200 million to the Office for Domestic Preparedness (ODP)
and rearranging ODP funds so that resources for high-threat urban areas would grow
5 S.Amdt. 522 in Congressional Record, April 3, 2003, Part II, p. S 4868.

CRS-6
from $100 million, as reported in S. 762, to $600 million. H.R. 1559, as approved,
raises this total to $700 million. The Senate also adopted an omnibus amendment by
Senator Stevens that included provisions increasing homeland security by about $150
million, mainly for DOE nuclear security programs. Conferees generally supported
these DOE activities. But the House and Senate rejected several other efforts to add
to the President’s request for homeland security:
! Senator Hollings amendment to add about $1 billion for port security
– tabled 52-47.
! Senator Breaux amendment to add about $2.67 billion for various
homeland security programs – tabled 52-46.
! Senator Schumer amendment to increase ODP funding by $2.33
billion – tabled 51-46.
! Senator Boxer amendment to earmark $30 million for R&D and
deployment of technology to protect commercial airliners from man-
portable defense systems – tabled 50-47.
! Congressman Obey amendment to add $2.5 billion for homeland
security – ruled out of order.
! Congressman Nadler amendment to increase port security funds by
$15 billion – ruled out of order.
The Senate also rejected an amendment by Senators Byrd and Hollings that would
not have increased homeland security spending, but would have allocated resources
to specific accounts rather than leaving the Secretary of Homeland Security with
broad discretion.
The Administration generally supported actions by the House and Senate, but
raised objections in a few areas, largely related to executive flexibility matters. The
White House suggested that Senate language allocating defense funds to specific
accounts might “slow timely and effecting funding of urgent needs.” The
Administration raised the same concern regarding House text that allocated homeland
security resources to specific activities rather than placing the money in a central
fund. This, the White House claimed, would “hinder” the Homeland Department’s
Secretary in applying the funds to the most critical threats. The executive further
expressed concerns about the House bill which directed that Iraq Relief and
Reconstruction Fund resources be managed by the State Department and the U.S.
Agency for International Development (USAID), removing Presidential flexibility
over involving multiple agencies in reconstruction operations. Finally, the White
House considered the airline industry relief packages in both bills “excessive.”6
Details concerning each of the supplemental’s major components are discussed
below.
6 Executive Office of the President, Office of Management and Budget. Statement of
Administration Policy on the Emergency Supplemental Appropriations, FY2003. April 2,
2003.

CRS-7
Administration Request for the
Department of Defense
The Administration is requesting $62.6 billion for the Department of Defense
(DOD) for the cost of the war in Iraq, continued U.S. operations in Afghanistan and
the global war on terrorism, and enhanced security at military bases in the United
States. The DOD FY2003 supplemental request funds the deployment and
redeployment of U.S. forces and equipment to the Persian Gulf and the prosecution
of a short, intense conflict. In addition, the request includes funding for an
occupation force in Iraq for the remainder of FY2003, repair and re-stocking of
military equipment and munitions, as well as a small amount of funding for
humanitarian assistance, to conduct firefighting and restore and repair Iraqi oil fields,
and classified activities.7
Although the amount is not specified, DOD’s request also includes funds to
cover the cost of U.S. forces remaining in Afghanistan (Operation Enduring
Freedom) as well as the cost of enhanced security in the United States (Operation
Noble Eagle) for the remainder of the fiscal year.8 DOD received $6.1 billion for
its first quarter expenses for these missions in FY2003 for these missions in the
FY2003 Consolidated Appropriations Resolution (P.L. 108-7/H.J.Res. 2).9 Expenses
for the remainder of the FY2003 are expected to be about $6 billion because DOD
has pared down costs.
The Department of Defense is requesting that $59.9 billion, 96 percent of its
total, be appropriated to the Defense Emergency Response Fund (DERF), a transfer
account, where DOD can exercise discretion in spending the money for purposes that
it considers appropriate and move funds into the relevant appropriation accounts.
Although DOD’s proposed language would require quarterly reports to Congress
about the allocation of actual expenditures, some Members of Congress have
expressed concerns about the extent of flexibility that DOD would have in allocating
almost $60 billion. The remaining $2.6 billion in DOD funding is being requested
in regular appropriations accounts for specific purposes and projects.
To give DOD flexibility to develop and exploit cooperative military
relationships with other nations in the global war on terrorism, the Defense
Department is also requesting $150 million to support indigenous or irregular forces
7 Department of Defense, FY 2003 Supplemental Request for Military Operation in Iraq and
t h e G l o b a l W a r o n T e r r o r i s m
, M a r c h 2 5 , 2 0 0 3 ; s e e
[http://www.defenselink.mil/comptroller/defbudget/fy2004/DoD_Justification-FY03_Ira
qi_Freedom_Supplemental.pdf .]
8 Department of Defense, FY 2003 Supplemental Request for Military Operation in Iraq and
t h e G l o b a l W a r o n T e r r o r i s m
, M a r c h 2 5 , 2 0 0 3 ; s e e
[http://www.defenselink.mil/comptroller/defbudget/fy2004/DoD_Justification-FY03_Ira
qi_Freedom_Supplemental.pdf .] and Senior Defense Official, Background Briefing on
B u d g e t S u p p l e m e n t a l
, M a r c h 2 4 , 2 0 0 3 ; s e e
[http://www.defenselink.mil/news/Mar2003/t03252003_t0324bgd.html].
9 See Division M, P.L. 108-7.

CRS-8
and $50 million to support the regular forces of foreign nations working with the
United States in the global war on terrorism. The request also proposes to raise
current statutory limits on the amount of funds that can be used at the discretion of
the Secretary of Defense and combatant commanders for unanticipated military
requirements including support for foreign military forces. DOD again cites the war
in Iraq and the global war on terrorism as the rationale for these changes. These
proposals could be controversial. The request also proposes a major increase from
$2 billion to about $9 billion in the total amount of funding that DOD can transfer
between appropriations after notifying the appropriations committees.10
In remarks at the Pentagon, President Bush characterized the FY2003
supplemental as urgent, and DOD officials have called for quick passage to ensure
that DOD does not face shortages in operating expenses. DOD has characterized
$30.3 billion of its $62.6 billion request as incurred costs for the buildup phase of the
Iraqi war including expenses such as transportation of equipment and personnel both
to and from the theater of operations.11 Although DOD may be obligated for these
costs, some of these expenses, which DOD is currently paying for using regular
FY2003 appropriations, will be incurred in the months ahead.
Potential Issues in the DOD Request
Potential issues in the DOD request that may arise during congressional
consideration of the FY2003 Supplemental include:

! The limited congressional oversight of the $59.9 billion requested by
DOD in the Defense Emergency Response Account (DERF);12
! The flexibility requested by DOD to provide funds to foreign
military forces who cooperate in combating terrorism;
! The extent and definition of DOD’s postwar role in Iraq;
! The adequacy of funding in the request in light of current
developments in the Iraqi war; and
! The long-term cost implications of the war.
Further details on the Administration’s request are in the section entitled DOD’s
Funding Request by Appropriation Account.
10 See OMB, Transmittal to Speaker of the House, J. Dennis Hastert, FY2003 Supplemental
Appropriations Request, March 25, 2003, general provisions; see estimate no. 4 on OMB
web site: [http://www.whitehouse.gov/omb/budget/amendments/supplemental_3_25_03.pdf]
11 DOD Press Release, “Supplemental Calls for $62.6 billion for Defense,” March 25, 2003;
DOD Press Release, “Bush Calls Wartime Supplemental Budget Request ‘Urgent’”, March
26, 2003.
12 See CRS General Distribution Memo, “Prior Administration Requests for Funding
Flexibility in Financing Military Operations,” April 3, 2003 by Stephen Daggett, available
from author.

CRS-9
House and Senate Floor Action on the Department of Defense
Request

During floor debate on the FY2003 Supplemental, the House did not adopt any
amendments affecting the Department of Defense. The Senate unanimously adopted
the Stevens-Durbin Amendment (S.Amdt. 436 as modified), which increased,
retroactively to the beginning of FY2003, combat pay from $150 a month to $225 a
month, and increased family separation allowances from $100 a month to $250
month. This change is anticipated to cost $650 million for FY2003. The change is
only in effect for FY2003.13 The Senate also adopted the Allard amendment
(S.Amdt. 451) establishing a seven-member panel to review and report to the
Secretary of Defense and the armed services committees within 90 days about the
effectiveness of policy and actions taken at the Air Force Academy in response to
allegations about sexual assaults.14
A more controversial Senate amendment that was adopted was the Stevens
amendment “to make certain improvements” (SA 522) included a provision that
would prohibit any funding in the bill going to airlift contracts to any firm that is not
U.S. controlled.15 A sense of the senate amendment offered by Senator Hollings (SA
479) that would require the President to submit a proposal to raise revenues to pay
for the cost of the FY2003 supplemental was rejected (79 to 18).16
Both the House and the Senate supported the funding requested by the
Administration but provided different ways to increase Congressional oversight about
the allocation of those funds (see discussion below).
House and Senate Markup of the Department of Defense
Request

Total Funding Recommended. In markup of the FY2003 Supplemental,
the House Appropriations Committee recommended appropriations totaling $62.464
billion and the Senate Appropriations Committee (SAC) recommended the $62.559
billion, both close to the $62.587 billion requested by the Administration. Both
committees used different approaches to allocate or reserve funds to different
accounts rather than providing the bulk of the funds in the Defense Emergency
Response Fund as requested by the Administration. In some cases, the appropriators
also added notification requirements before obligation of funds or reporting
requirements after funds are spent (see below).
Compared to the Administration’s request for flexibility in the use of $59.9
billion of funds in the DERF, the House version would give flexibility in the use of
13 Congressional Record, April 2, 2003, p. S4662 and p. S4676.
14 Congressional Record, April 2, 2003, p. S4719 and p.4697.
15 BNA, Daily Executive, “‘Extraneous’ Add-ons Slow Conferees’ Work
On Finalizing $80 Billion ‘War’ Supplemental
16 Congressional Record, April 3, 2003, p. S4781-p. S4785.

CRS-10
$25.4 billion as long as DOD stayed within certain ceilings while the Senate
distributed all but $11.0 billion of the funds in the DERF to specific appropriation
accounts. At the same time, the House version required a seven-day advance
notification for transfers from the new fund while the Senate permitted DOD to
allocate those funds with quarterly after-the-fact reporting as proposed by the
Administration.
Proposed Changes to Funding Requested in the Defense
Emergency Response Fund. Both the House and the Senate appropriators
placed additional restrictions on the Administration’s request for $59.9 billion in the
Defense Emergency Response Fund account using different mechanisms.
House Appropriations Committee (HAC) Approach. House
appropriators established a new Operation Iraqi Freedom Response Fund totaling
$59.7 billion. Within that fund, the HAC allocated funds by:
! setting ceilings on DOD’s subsequent transfers to various
appropriations accounts that covered $34.3 billion;
! appropriating $2.6 billion into specific accounts; and
! setting up a third category for $25. 4 billion for the later stages of the
war where DOD would have flexibility to allocate funds as long as
it stayed within various floors and ceilings set in the bill.
Within the $34.3 billion where the HAC set transfer limits, DOD could spend less
than or equal to the ceilings for appropriation accounts outlined in the bill. (See
Table 2, Table 2a, and Table 2b below).17 The House appropriators allocated $1.7
billion more than the Administration requested for Military Personnel accounts based
on their belief that the services would need additional amounts to cover such
expenses as imminent danger pay, family separation allowances and the cost of
mobilizing reservists.18
Within the new Operation Iraqi Freedom Response Fund, the HAC set aside
$25.4 billion that would be available for “Combat, Stability Operations, and Force
Reconstitution costs,” a new category included in the bill, and required 7-day
advance notification to Congress of DOD’s transfers of these funds to individual
appropriation accounts. This category appears to cover costs that would occur later
in the war or during an occupation phase.
Within this category, the House appropriators set aside in reserve $4 billion that
DOD could not spend until July 1, 2003, that is to be made available for additional
Military Personnel or Defense Health costs in 2003. The HAC also set ceilings on
the totals for Operation and Maintenance, Procurement, RDT&E accounts, and $400
million for DOD to transfer to the Department of Homeland Security for Coast Guard
operating expenses. The HAC also set a floor of $1.8 billion for classified programs.
For transfers to procurement accounts, the House appropriators requires 30-day
advance notification (see Table 2a below). The House also directed that of the $4.2
17 See H.R. 1559 as passed by the House and H.Rept. 108-55, p.7 - p.23
18 H.Rept. 108-55, p. 15-p.16.

CRS-11
billion ceiling on procurement, up to $3.2 billion would be available to replenish
munitions and equipment used for military operations in or around Iraq.19
The total funding for all the ceilings and floors set in the bill is $30.7 billion,
over $5 billion more than the $25.4 billion reserved for Combat, Stability Operations,
and Force Reconstitution Costs. For that reason, DOD will have to fund some
accounts below the ceilings set in the bill (see Table 2a below.)
Senate Appropriations Committee (SAC) Approach. The Senate
Appropriators reduced the Administration’s $59.9 billion request for the Defense
Emergency Response Fund to $11 billion, transferring the remaining $51.2 billion
to other specific appropriations accounts. Based on discussions with DOD, the SAC
transferred funds that DOD characterized as incurred costs, for example for
deployment of troops and equipment or setting up base camps (see Table 2 and
Table 2a below) as well as other funds where expenses could be more predictable.20
Both House and Senate appropriators provided amounts requested by the
Administration for counter drug activities in Colombia ($34 million) and for
reimbursement for drawdown in its funds and stocks for the Afghan Army.
For procurement, the Administration’s request can only be broken out at the
service level rather than by individual accounts. For that reason, Table 2a compares
Congressional action for procurement by service. The House and Senate bills appear
to distribute some of the $3.7 billion requested by the Administration for munitions
and equipment replenishment in Procurement, Defensewide to individual services.
19 H.R. 1559, p. 15 and H.Rept. 108-55, p. 13 - p. 21.
20 See S. 762 as reported and S.Rept. 108-33, p. 7 - p.14.

CRS-12
Table 2. Comparison of Appropriation or Allocation of
Defense Funds in FY2003 Supplemental:
Request, House and Senate Bills as Passed
(in billions of dollars)
Appropriation Account or
Administration House Passed Senate Passed
Allocation of Fundsa
Requesta
(H.R. 1559)a
(H.R. 1559)a
Operation Iraqi Freedom
Response Fund Totala

0
59.683
0
Ceiling within Operation Iraqi
Freedom Fund for Combat, Stability
Operations, and Force Reconstitution
Costs Subtotal a
0
25.436
0
Defense Emergency Response Fund
(DERF)a
59.863
0
11.019
Military Personnel, Army
6.321
6.975
7.725
Military Personnel, Navy
1.384
1.984
1.784
Military Personnel, Marine Corps
1.355
1.205
1.255
Military Personnel, Air Force
1.335
1.835
2.835
Reserve Personnel, Army
0
0.003
0.006
National Guard Personnel, Army
0
0.093
0.110
Operation and Maintenance, Army
20.790
10.482
16.143
Operation and Maintenance, Navy
6.411
3.940
5.297
Operation and Maintenance, Marine
Corps
3.744
1.384
1.753
Operation and Maintenance, Air
Force
9.970
3.668
7.209
Operation and Maintenance,
Defense-wide, Including b
3.652
2.769
4.674
-Defense Health b
0.302
0.302
0.502
-Coalition Support b
1.565
1.400
1.400
-Reimbursement for Afghan
Drawdownb

0.165
0.165
0.165
Drug Interdiction and Counter Drug
Activities 0.034
0.034
0.034
Operation and Maintenance, Army
National Guard
0
0.058
0.088
Operation and Maintenance, Navy
Reserve
0
0
0.015
Operation and Maintenance, Marine
Corps Reserve
0
0
0.050
Operation and Maintenance, Air
National Guard
0
0
0.020

CRS-13
Appropriation Account or
Administration House Passed Senate Passed
Allocation of Fundsa
Requesta
(H.R. 1559)a
(H.R. 1559)a
Natural Resource Risk Remediation
Fund
0.489
0.489
0.489
Aircraft Procurement, Army
c
0.004
0.004
Missile Procurement, Army
c
0.003
0.003
Procurement of Weapons and
Tracked Combat Vehicles, Army
c
0.053
0.053
Procurement of Ammunition, Army
c
0.448
0.448
Other Procurement, Army
c
0.242
0.242
Marine Corps Procurement
c
0
0.000
Other Procurement, Air Force
c
0.114
0.114
Procurement, Defense-wided
4.308
0.451
0.451
RDT&E, Army
0.015
0.012
0.012
RDT&E, Navy
0.031
0
0
RDT&E, Air Force
0.010
0
0
RDT&E, Defense-wide
0.000
0.090
0
Defense Working Capital Fund
0.430
1.100
0.550
Military Construction, Navy
0.048
0.048
0.048
Military Construction, Air Force
0.129
0.005
0.127
Family Housing O&M, Air Force
0.000
0.002
0.002
Defense Cooperation Account
0.028
0.028
0
TOTAL c
62.587
62.464
62.559
Table 2a. FY2003 Supplemental: Procurement Totals with
Classified by Service
(in billions of dollars)
Subtotal for Procurement Administration
House Ceilings
Senate Passed By
Plus Classified by Service
Request a
(H.R. 1559)a
Accounta
Army
0.017
0.750
0.508
Navy
0.096
0.000
0.000
Marine Corps
0.030
0.000
0.000
Air Force
1.961
0.114
0.114
Defensewide Procurement
4.308
0.451
0.451

CRS-14
Table 2b. FY2003 Supplemental: Procurement Totals with
Classified by Service
(in billions of dollars)
House’s Ceilings and Floors within Combat,
House Bill Ceilings (H.R.
Stability Operations, and Force Reconstitution
1559) a
Costs a
Reserve for Military Personnel and Defense Health
4.000
Floor on Classified Programs
1.817
Ceiling on total Operation and Maintenance Funding
Including: $8 billion for Operation Enduring Freedom
and Global War on Terrorism
20.214
Ceiling on Procurement Including $3.249 billion for
munitions and equipment expended in and around Iraq
4.242
Ceiling on RDT&E
0.057
Ceiling on Department of Homeland Security for: U.S.
Coast Guard, Operating Expenses
0.400
TOTAL of Reserve, Ceilings and Floors
30.731
TOTAL for Combat, Stability Operations, and
Force Reconstitution Costs

25.436
Sources: Department of Defense, FY2003 Supplemental Request for Military Operations in Iraq and
t h e G l o b a l W a r o n T e r r o r i s m , M a r c h 2 5 , 2 0 0 3 ; s e e
[http://www.defenselink.mil/comptroller/defbudget/fy2004/DoD_Justification-FY03_Iraqi_Freedo
m_Supplemental.pdf]; S. 762, Making Supplemental Appropriations to Support Department of
Defense Operations in Iraq, Department of Homeland Security ,and Related Efforts for the Fiscal Year
Ending September 30, 2003 as passed by the Senate, April 3, 2003. H.R. 1559, Emergency Wartime
Supplemental Appropriations Bill, FY2003 as passed by the House, April 3, 2003.
a The Administration request appropriated $59.9 billion of the funds for DOD to the Defense
Emergency Response Fund. Allocations shown in this table for the Administration request are
CRS calculations based on material from DOD. The House bill, H.R. 1559, appropriates $59.7
billion to a newly established account, the Iraqi Freedom Response Fund; the bill then sets
ceilings within that fund by appropriation account as shown in the column for the House bill.
Within the Iraqi Freedom Response Fund, the House bill also sets an overall ceiling on the
amount that can be allocated to Combat, Stability Operations, and Reconstitutions Costs, and
requires 7-day advance notifications to Congress for transfers out of that category. The Senate
bill provides funds in individual appropriations including $11 billion in the Defense Emergency
Response Fund.
b Coalition Support, the Afghan draw down, and Defense Health are included within the O&M,
Defense-wide account but shown separately as memo entries below. The House bill requires
that DOD submit a plan for the $1.4 billion in military and logistical support within 30 days of
enactment or the funds will revert to the Treasury.
c CRS could not allocate the Administration’s procurement request below the service level; see Table
2a for totals by service. The Administration’s procurement requests are included within the
total.
d In the Administration’s request, Procurement, Defense-wide appears to include $3.7 billion for
munitions replenishment.

CRS-15
Support of Foreign Military Forces. Both the House and the Senate
appropriators agreed to the Administration’s request that $1.4 billion be made
available for military and logistical support to Pakistan, Jordan or other “key
cooperating nations,” in the war on terrorism but each house proposed different
restrictions. In addition to quarterly reporting after use of funds, the HAC required
a 7-day notification in advance and required that DOD provide a report within 30
days of enactment about their plans for using the funds or the funds would revert to
the Treasury. The SAC required a 15-day advance notification for use of these funds.
Neither the House nor the Senate approved the Administration’s request that the
Secretary of the Defense be allowed to spend $150 million to support irregular or
indigenous forces. In the case of the Administration’s request that the Secretary of
Defense, with the concurrence of the Secretary of State, be allowed to spend $50
million to support the regular forces of other nations who cooperate in the war on
terrorism, the Senate approved the requested new authority with advance notification
but the House did not include any provision for this funding.
As requested, appropriators in both houses gave the combatant commanders and
the Secretary of Defense flexibility to use certain funds at their discretion. Both the
HAC and the SAC recommended that the combatant commanders (CINCs) be
allowed to double from $25 million to $50 million the amount that they could spend
from the CINC Initiative Fund that could be used to support either U.S. or foreign
military forces. The HAC and the SAC also agreed with the Administration’s request
to increase the amount available to the Secretary of Defense to spend at his discretion
for emergency and extraordinary expenses; the House increased the ceiling from
$34.5 million to $69.0 million as requested and the Senate agreed to raise the amount
to $45.0 million.
Use of Defense Cooperation Account and New Natural Resources
Risk Remediation Account. In response to DOD’s request to be able to use
immediately any foreign contributions to the Defense Cooperation Account,
originally set up to receive donations from foreign nations in the first Gulf War, both
the HAC and the SAC set conditions on use of any such funds. The HAC required
prior approval of any transfers from the fund to an appropriation account. The SAC
did not change current statutory language, which requires that DOD cannot use any
contributions unless included in subsequent appropriations acts.
Both the HAC and the SAC approved the new Natural Resources Risk
Remediation Account, for which the Administration requested $489 million to cover
the cost of firefighting and repair of Iraqi oil wells (see below). For use of foreign
contributions, the SAC agreed to allow DOD to use any contributions without
restrictions. The HAC, however, required prior approval of any transfers of
contributions.
Request for Higher Total on Transfers. In response to the
Administration’s request that the total amount that DOD can transfer annually
between appropriations accounts be raised from $2 billion to almost $9 billion, the
HAC left the current ceiling intact and the SAC proposed a cap of $3.5 billion per
year.

CRS-16
Table 3 shows the Administration’s request and the amounts included in the
House and Senate-passed versions of H.R. 1559 by appropriation account. This table
does not reflect ceilings on subsequent transfers to appropriations accounts that are
included in the House version of H.R. 1559 and shown in Table 2 above.

CRS-17
Table 3. FY2003 Supplemental by Appropriation Account
(in billions of dollars)
Appropriation Account
Request
House
Senate
Military Personnel, Army
0.0
0.0
7.725
Military Personnel, Navy
0.0
0.0
1.784
Military Personnel, Marine Corps
0.0
0.0
1.255
Military Personnel, Air Force
0.0
0.0
2.835
Reserve Personnel, Army
0.0
0.0
0.006
National Guard Personnel, Army
0.0
0.0
0.110
Operation and Maintenance, Army
0.0
0.0
16.143
Operation and Maintenance, Navy
0.0
0.0
5.297
Operation and Maintenance, Marine Corps
0.0
0.0
1.753
Operation and Maintenance, Air Force
0.0
0.0
7.209
Operation and Maintenance, Defensewidea
1.400
1.400
4.008
Operation and Maintenance, Army National Guard
0.0
0.0
0.088
Operation and Maintenance, Navy Reserve
0.0
0.0
0.015
Operation and Maintenance, Marine Corps Reserve
0.0
0.0
0.050
Operation and Maintenance, Air National Guard
0.0
0.0
0.020
Natural Resource Risk Remediation Fundb
0.489
0.489
0.489
Defense Emergency Response Fund (DERF)c
59.863
0.000
11.019
Procurement, Air Force
0.0
0.0
0.004
Operation Iraqi Freedom Response Fundd
0.0
59.683
0.0
Missile Procurement, Army
0.0
0.0
0.003
Proc. of Weapons and Tracked Combat Vehicles,
0.0
0.0
0.053
Army
Procurement of Ammunition, Army
0.0
0.0
0.448
Other Procurement, Army
0.0
0.0
0.242
Other Procurement, Air Force
0.0
0.0
0.114
Procurement, Defensewide
0.0
0.0
0.451
RDT&E, Army
0.0
0.0
0.012
Defense Working Capital Fund
0.430
1.100
0.550
Defense Health
0.0
0.0
0.502
Drug Interdiction and Counter Drug Activities
0.034
0.034
0.034
Reimbursement for Afghan Drawdown
0.165
0.165
0.165
Military Construction, Navy
0.048
0.048
0.048
Military Construction, Air Force
0.129
0.051
0.127
Family Housing O&M, Air Force
0.0
0.002
0.002
Defense Cooperation Account
0.028
0.028
0.000
TOTAL
62.587
62.464
62.559

CRS-18
Sources: Department of Defense, FY2003 Supplemental Request for Military Operations in Iraq and
t h e G l o b a l W a r o n t e r r o r i s m , M a r c h 2 5 , 2 0 0 3 ; s e e
www.defenselink.mil/comptroller/defbudget/fy2004/DoD_Justification-FY03_Iraqi_Freedom_Sup
plemental.pdf] . H.R. 1559 as passed by the House and as passed by the Senate and S.Rept. 108-33,
Report by Senate Appropriations Committee on S. 762, Making Supplemental Appropriations to
Support Department of Defense Operations in Iraq, Department of Homeland Security, and Related
Efforts for the Fiscal Year Ending September 30, 2003, and H.Rept. 108-55.
a In House reported version, if DOD does not submit a newly-required report within 30 days of
enactment of its plans to spend the $1.4 billion in military and logistical support, the funds
would revert to the Treasury.
b In House bill, this fund may receive a transfer of $489.3 million.
c Language in Administration’s DERF account request includes caps of $3.7 billion for munitions
replenishment and $1.0 billion for procurement and RDT&E necessary for war with Iraq and
global war on terrorism, and cap of $50 million to support the military operations of foreign
nations, and a floor of $53.3 billion for military operations in Iraq and the global war on
terrorism.
c Within the Operation Iraqi Freedom Response Fund, DOD can transfer up to $12.095 billion to
Military personnel, $20.737 billion to Operation and Maintenance, $1.314 billion to
Procurement, $101 million to RDT&E accounts, and $25.436 billion to Combat, Stability
Operations, and Force Reconstitution Costs for subsequent transfer to individual appropriation
accounts (see Table 2 for allocations of transfers).
DOD’s Funding Request by Appropriation Account
To maximize flexibility, the Defense Department’s FY2003 supplemental
requests almost all of its $62.6 billion in funding in the Defense Emergency
Response Fund (DERF) transfer account (see Table 3). Although most of DOD’s
funding in the FY2002 supplemental for Afghanistan and enhanced security was also
provided in the DERF transfer account - based on the same rationale that DOD
needed flexibility in its efforts to combat terrorism after September 11th attacks – the
$11 billion in funding was substantially smaller than the current request.
Ceilings Within DERF Account. DOD is proposing language that would
set ceilings and floors within the DERF account in the categories below:
! a cap of $3.7 billion for munitions replenishment;
! a cap of $1.0 billion for procurement and RDT&E necessary for war
with Iraq and global war on terrorism;
! a cap of $50 million to support the military operations of foreign
nations; and
! a floor of $53.346 billion for military operations in Iraq and the
global war on terrorism.
It is not clear, however, how these caps (or floor) could be enforced because the
categories are not defined.
According to DOD, the $59.9 billion in the DERF appropriation account is
intended to cover costs incurred in the war with Iraq – deployment of forces and
equipment and re-deployment costs when they return, DOD’s estimated costs of a
“short but extremely intense” war, repair and replenishment of equipment and
munitions damaged or used during the war, mobilization of reserve forces, and some

CRS-19
RDT&E, as well as other expenses for the war on terrorism.21 As in the FY2002
supplemental, DOD has provided illustrative allocations of DERF funds (see Table
4
below). These allocations are not binding however.
Accountability Issues. Although support for U.S. forces in Iraq and
Afghanistan is widespread, some Members of Congress may be reluctant to permit
DOD the discretion to spend almost $60 billion as it deems appropriate without more
extensive congressional oversight. Congress may decide to include oversight
mechanisms in addition to DOD’s proposal for quarterly, after-the-fact reporting.
Alternatives to appropriating the entire amount in the DERF could include
taking the spending that has already occurred or is more predictable out of the DERF
and appropriating those funds in specific appropriations accounts for specific
purposes. For example, some of the $30.3 billion that DOD has described as
incurred expenses might be removed from the DERF and placed in specific
appropriation accounts. That possibly could include 1) transportation costs for
equipment and personnel; 2) funding for expenses for Afghanistan and enhanced
security at home for the remainder of the year where DOD has estimated costs based
on recent experience; and 3) preparing and setting up bases overseas and
consumables incurred to date. DOD’s proposed RDT&E spending, where projects
are specified in justification materials supporting the request list, could also be
removed from the DERF as could procurement costs, though estimates of munitions
and equipment losses could change with the cost of the war. This would reduce the
amount of the request included in the DERF.
Another alternative would be to develop some kind of reporting mechanism
before the fact with a waiting period, an approach that DOD proposes for military
construction projects in the FY2003 supplemental following the precedent set in the
FY2002 supplemental. This military construction provision requires that DOD
inform the four congressional defense committees of the specific projects to be
funded 15 days in advance of obligating funds.22
Still another approach would be to set caps on certain types of expenses, an
approach that was used in the FY 2001 Emergency Terrorism Response Fund, and
require that DOD return to the Congress for transfers above those limits. That
approach would require that the categories of expenses be clearly defined.
Members of Congress could also request more information about the
assumptions underlying DOD’s cost estimates for the war as well as DOD’s postwar
plans, including, for example, the size and duration of an occupation force or the
21 Department of Defense, FY 2003 Supplemental Request for Military Operation in Iraq
a n d t h e G l o b a l W a r o n T e r r o r i s m
, M a r c h 2 5 , 2 0 0 3 , p . 2 ;
[http://www.defenselink.mil/comptroller/defbudget/fy2004/DoD_Justification-FY03_Ira
qi_Freedom_Supplemental.pdf].
22 See OMB, Transmittal to Speaker of the House, J. Dennis Hastert, FY2003 Supplemental
Appropriations Request, March 25, 2003, general provisions; see estimate no. 4 on OMB
web site: [http://www.whitehouse.gov/omb/budget/amendments/supplemental_3_25_03.pdf]

CRS-20
number of reserves who will be activated over the next year, both areas where there
has been considerable controversy.23
Operation and Maintenance, Defense-Wide Funds Coalition
Support. Continuing a practice begun in the FY2002 supplemental, DOD is
requesting $1.4 billion in the Operation and Maintenance, Defense wide account to
fund coalition support. According to DOD, that support will include payments of
$1.3 billion to Pakistan, Jordan and countries providing logistical support to the U.S.
in Afghanistan, and payments of $.1 billion for logistical support to those supporting
military operations in Iraq. The proposed language does not bind DOD to these
amounts for these countries.
As in the FY2002 supplemental, the proposed language requires that the
Secretary of Defense consult with the Director of OMB, and receive concurrence
from the Secretary of State before providing funds to allies. The current proposal
does not, however, include the 15-day notification to congressional committees
before making payments that was included in the FY2002 supplemental.24
A New Natural Resource Remediation Fund. DOD is requesting $489.3
million for a new transfer fund, the Natural Resource Remediation Fund, that would
cover expenses for emergency fire fighting, repairing damage to oil facilities and
infrastructure and preserving distribution capability. The fund could also receive
foreign contributions. Although the language itself does not identify Iraq, DOD’s
justification states that the funding is intended to ensure that fuel is available to the
Iraqi people.
Issues in Defining DOD’s Postwar Role. The establishment of a new
account for funding firefighting and repair of Iraqi oil wells raises the larger issue of
DOD’s role in postwar Iraq. Although it may be difficult to anticipate the postwar
situation in Iraq, some observers are concerned about the nature and extent of DOD’s
role, with some looking to DOD playing a larger role, and others, hoping to confine
its scope because of concerns about “mission creep,” the expansion of DOD’s role
beyond its traditional missions.
Because the fund is set up so that DOD could receive foreign contributions,
DOD could become involved in managing larger amounts of funds than appropriated.
As proposed, Congress would not have oversight over the allocation or management
of these funds. In contrast, when it provided funds for Operation Desert
Shield/Desert Storm, Congress required that all funds transferred from the Defense
Cooperation Account into which allied contributions were deposited, were subject
to specific appropriation acts.
23 See CRS Report RL31715, Iraq War: Background and Issues Overview, section on Cost
Issues.
24 See Conference Report on FY2002 Supplemental for Further Recovery From and
response to Terrorist Attacks
, H.Rept. 107-593, p. 17, and See OMB, Transmittal to
Speaker of the House, J. Dennis Hastert, FY2003 Supplemental Appropriations Request,
March 25, 2003, Operation and Maintenance, Defense-wide; Estimate no. 4 on OMB web
site: [http://www.whitehouse.gov/omb/budget/amendments/supplemental_3_25_03.pdf]

CRS-21
DOD is also proposing that the Defense Cooperation Account, which still exists,
could continue to be used for foreign contributions. The new request proposes that
any such contributions be considered to have been approved in the FY2003
Supplemental Appropriations Act. This use of the fund does not appear to be
consistent with the practice in the past when Congress approved the transfer of allied
contributions to specific accounts.
Working Capital Fund, Drug Interdiction in Colombia, Military
Construction, Reimbursement for Afghan Drawdown Authority. The
other areas where funds are requested for specific accounts include:
! $430 million to cover higher oil costs that DOD is experiencing
because of the spike in oil prices related to the war;
! funding for several military construction projects at undisclosed
locations overseas;
! an additional $34 million for counter drug activities in Colombia;
($34 million is also provided for the Andean Counter Drug Initiative
in the State Department section.); and
! $165 million for reimbursement to the services for expenses already
incurred in training, and equipping the Afghan Army as well as
assisting Jordan.
Proposed Changes to Current Law To Increase DOD
Flexibility

DOD is requesting several changes to current law to increase DOD’s
management flexibility contending that such changes are necessary to allow DOD to
adapt quickly to the demands of the war on terrorism. Several potentially
controversial proposals include:
! two proposals that would permit the Secretary of Defense to provide
monies to regular foreign militaries and to irregular “ indigenous”
forces;
! two proposals to increase the amounts available to combatant
commanders and the Secretary of Defense to respond to
unanticipated expenses where funds could also be used to provide
support to foreign military forces; and
! a large increase from $2 billion to about $9 billion in the ceiling set
on the total amount of funds that can be transferred between
appropriations.
Providing Aid to Regular and Irregular Foreign Forces. The
supplemental request includes a general provision that would allow DOD to use up
to $150 million of funding in the supplemental to support indigenous forces assisting
U.S. operations in support of the global war on terrorism. The provision is intended

CRS-22
to “clarify DOD’s authority to promote military cooperation in the global war on
terrorism.”25 (See additional discussion in section on Foreign Operations.)
Within the DERF account, DOD also proposes that up to $50 million could be
used to support the regular military forces of foreign nations to further the “global
war on terrorism” as long as the Secretary of State concurred with the Secretary of
Defense in providing funds. According to DOD, this new provision would enable
DOD to provide aid to foreign forces “rapidly, in response to emerging, unanticipated
emergency requirements.”26
The request also raises the total amount available to the combatant commanders
in the Commanders In Chiefs (CINC) Initiative Fund from $25 million to $50
million. This fund is available to combatant commanders for a wide variety of
activities including not only training and selected operations of U.S. military
personnel but also education, training and personnel expenses of foreign defense
personnel in cooperative programs.27
To increase DOD’s flexibility in carrying out these purposes, the supplemental
request also proposes raising the limits that currently apply:
! to purchases, from $7 million to $15 million;
! to payments to foreign countries participating in exercises, from $1
million to $10 million; and
! to military education and training of foreign nationals, from $2
million to $10 million.28
All these proposals would give the DOD additional authority to reimburse
foreign military forces for expenses, including procurement, personnel costs, and
exercises. Although the Secretary of Defense would need the concurrence of the
Secretary of State in order to spend the additional $200 million in funding – $50
million for regular foreign forces and $150 million for irregular forces – the
legislation does not provide a mechanism for congressional oversight of these
25 Department of Defense, FY 2003 Supplemental Request for Military Operation in Iraq
and the Global War on Terrorism
, March 25, 2003, p. 31-p.32;
[http://www.defenselink.mil/comptroller/defbudget/fy2004/DoD_Justification-FY03_Ira
qi_Freedom_Supplemental.pdf].
26 Department of Defense, FY 2003 Supplemental Request for Military Operation in Iraq
and the Global War on Terrorism
, March 25, 2003, p. 23-p.24;
[http://www.defenselink.mil/comptroller/defbudget/fy2004/DoD_Justification-FY03_Ira
qi_Freedom_Supplemental.pdf].
27 Title X, U.S. Code, Section 166. See Department of Defense, FY 2003 Supplemental
Request for Military Operation in Iraq and the Global War on Terrorism
, March 25, 2003,
p. 29 for proposed change.
28 Title X, U.S. Code, Section 166a. See Department of Defense, FY 2003 Supplemental
Request for Military Operation in Iraq and the Global War on Terrorism
, March 25, 2003,
p. 29 for proposed change.

CRS-23
activities before they occur. The Administration’s proposal does include after-the-
fact reporting, on a quarterly basis, for both types of reimbursement.29
Issues in Cooperation with Foreign Military Forces. There could be
debate about an expanded DOD role in developing relations with foreign military
forces by providing assistance in the form of equipment, training, and paying their
personnel. See section on Foreign Operations for additional discussion.
Change in Ceiling on Transfers. DOD is proposing a large increase in the
annual ceiling set on the total amount of funds that can be transferred between
appropriation accounts after enactment from $2 billion to about $9 billion.30 DOD
reprograms or shifts funds between appropriation accounts after enactment to reflect
changes in priorities. DOD states that this additional flexibility, along with a lifting
of the midyear deadline on reprogramming requests, would help DOD to respond to
“emerging requirements, particularly in Iraq.”31 The provisions in the supplemental
request already exempt any transfers from the current $2 billion ceiling. This
proposal would apply to DOD’s regular appropriations.
Allocation of DOD Funding by Phase of Operations
DOD provided a breakout of the $62.6 billion according to several phases of
operations as shown in Table 4 below. In its justification material and recent press
statements, DOD has characterized the $30.3 billion of expenses for “coercive
diplomacy” as incurred expenses.
“Coercive Diplomacy”. Almost half of the $30.3 billion is for personnel
expenses including activation of reservists, and special pay for active-duty military
in combat and support of those personnel for both the Iraqi conflict, Afghanistan, and
enhanced security in the United States. Another $7 billion is for the deployment and
re-deployment of personnel to and from the theater. Although DOD is obligated to
cover these expenses, DOD has not yet had to pay out most of these costs and some
of these expenses could change because they will be incurred over the course of the
next several months or after the war is over.
Major Conflict. DOD’s estimate of the cost of the war itself appears to
assume a short, intense conflict of about a month. Using plans for deployments and
military operations developed by the combatant commanders, DOD estimates these
29 See OMB, Transmittal to Speaker of the House, J. Dennis Hastert, FY2003 Supplemental
Appropriations Request, March 25, 2003, provisions on the DERF and general provisions;
see: [http://www.whitehouse.gov/omb/budget/amendments/supplemental_3_25_03.pdf]
30 The proposed language permits DOD to transfer up to 2.5% of the$355.1 billion
appropriated in the FY2003 DOD Appropriations Act (P.L. 107-248) or $8.878 billion.
31 See OMB, Transmittal to Speaker of the House, J. Dennis Hastert, FY2003 Supplemental
Appropriations Request, March 25, 2003, general provisions; see estimate no. 4 on OMB
web site: [http://www.whitehouse.gov/omb/budget/amendments/supplemental_3_25_03.pdf]

CRS-24
costs relying on a model developed in the mid-1990s for contingency operations.32
Assumptions about these plans underlie DOD’s estimates of costs.
Transitional and Stability. DOD includes its postwar operational costs in
this category, including funding to repair Iraqi oil facilities, and “Lower Intensity
Operations” that may include the operational costs of an occupation force. The initial
size and possible phase down of this force are not specified. Because of concerns
about whether DOD is assuming an adequately-sized force for postwar occupation,
Congress may want additional information about the assumptions behind these costs.
Although the Administration requests for DOD include little funding for the
postwar phases of the Iraqi War, a controversy has developed about the
Administration’s plans for DOD to have a major role in allocating reconstruction
funds requested for the Executive Office of the President that could be transferred to
DOD (see section on Reconstruction Efforts below).
Reconstitution. Reconstitution refers to the repair of damaged equipment and
replenishment of munitions, spare parts, or equipment lost in a war.
Issues about Funding Adequacy in FY2003 and Over the Long-
Term. Given the large uncertainties in the course of the war in Iraq, some Members
of Congress have expressed concern about whether DOD’s request reflects an
adequate level of funding. Because DOD has not revealed the assumptions
underlying its estimates of costs, it is difficult to make judgements of whether
proposed funding levels are adequate.
It is also difficult to predict the course of the war over the longer term.
Responding to these concerns, the Senate recently set up a $100 billion reserve fund
for the war by decreasing the amount allocated to tax cuts by $10 billion annually
over the next ten years.33
32 See DOD Financial Management Regulation, Volume 12, Chapter 23; on DOD web site:
[http://www.dod.mil/comptroller/fmr/12/12_23.pdf]

33 See S.Con.Res. 23 as amended on the floor. See Congressional Record, March 20, 2003,
p. S4071-S4072, and March 21, p. S4230.

CRS-25
Table 4. DOD FY2003 Supplemental Request by Phase
(in billions of dollars)
FY2003
Phase of Operations
FY2003 Subtotals
Coercive Diplomacy Subtotal
30.3
Personnel/Personnel Supporta
15.6
Transportation To & From Theater Of Operations
7.1
Preparatory Tasksb
2.5
Consumables used to datec
2.3
Coalition Supportd
1.6
Othere
1.2
Major Conflict Subtotal
13.1
Spare Parts, Logistics support, Consumables
4.7
Combat Operations
6.8
Transportation Within Theater
1.6
Military Personnel (included above)
NA
Transitional and Stability Subtotal
12.0
Natural Resources Remediation Fundf
1.2
Humanitarian Assistance
0.1
Lower Intensity Operationsg
11.4
Classified Programs
NA
Weapons of Mass Destruction Containment
NA
Reconstitutionh
7.2
Ammunition replenishment
3.2
Depot Maintenance and Other Reconstitution
3.7
Procurement
0.3
TOTAL
62.6
Sources: Under Secretary of Defense (Comptroller), Briefing to the Congressional Oversight
Committees, FY2003 Emergency Supplemental: Military Operations in Iraq and the Global War on
T e r r o r i s m ,
M a r c h 2 5 , 2 0 0 3 ; s e e
[http://www.defenselink.mil/comptroller/defbudget/fy2004/DoD_Justification-FY03_Ira
qi_Freedom_Supplemental.pdf].
a Includes additional pay for active-duty military personnel in combat (e.g. hazardous duty pay), cost
of activating reservists, and personnel support.
b Specific definition not provided; includes setting up overseas bases.
c Consumables include paying higher prices for fuel than anticipated, expended munitions, and food
and medical supplies.
d Includes request of $1.4 billion for payments to Pakistan, Jordan, and “other key cooperating
nations” for logistical and military support in the war on terrorism in Afghanistan; also includes
$0.1 billion for Free Iraqi Forces and $0.2 billion for the Afghan Army.
e “Other” includes enhancements to White House and other communications systems, improvements
to the Navy base at Guantanamo Bay housing prisoners from Afghanistan, logistics support,
other projects and replenishment of equipment.
f DOD is requesting $489 million for emergency firefighting, repair of damage to Iraqi oil fields, and
providing fuel to the Iraqi people.e

CRS-26
g May be operational costs of occupation force.
h Includes replacement of expended munitions and equipment, and depot maintenance for equipment.
Allocation of DOD Funding by Major Type of Expense
Although DOD’s justification materials include an illustrative allocation of
expenses to be covered in the DERF account by appropriation account, these
allocations would not be binding, and could be changed in response to the course of
the war in Iraq or changes in DOD priorities. Table 5 shows these potential
allocations.
Personnel and Personnel Support. Personnel costs account for much of
the total cost of the war in Iraq, continued expenses in Afghanistan, and enhanced
security in the United States. They reflect both increases in overall strength levels
of active-duty military and activation of reservists. The expense breakdown below
does not, however, show either the number of reservists that DOD plans to activate
over the rest of the fiscal year or the allocation of personnel among the different
missions funded in the supplemental or the types of tasks that these personnel are
carrying out.
Starting in January 2003, DOD rapidly increased the number of reservists being
called up for the Iraqi war. Before the buildup, about 50,000 to 55,000 reservists
were on active-duty to provide support for operations in Afghanistan or enhanced
security in the United States, a decrease from the 80,000 called up in the months after
the September 11th attacks. The current level of activated reservists is over 200,000,
according to the Defense Department. DOD’s estimates of cost in Table 5 are built
on assumptions about the number of reservists needed during the war with Iraq and
for the occupation force that would remain afterwards but those numbers are not
provided in its justification material.
Military Operation Support . According to various sources, it appears that
DOD anticipated a short, intense war of about one month, which would be roughly
consistent with the $14 billion in operating support shown below. (This estimate is
considerably higher than a recent CBO estimate of $10 billion based on current force
levels.)34
DOD’s estimated cost of $100 million reflects its expectation that its role in
humanitarian assistance will be limited. Apparently, DOD envisions its major
postwar role in Iraq as providing security through its occupation force, and repair of
Iraq’s oil fields.
Procurement. DOD does not specify the mix of munitions or equipment
which it expects will need replacement. Although there is clearly considerable
uncertainty about replacement costs, the $3.7 billion estimate is predicated on
assumptions about likely loss rates.
34 CBO revised its estimates based on current deployments, see CBO, An Analysis of the
President’s Budgetary Proposals for Fiscal Year 2004,
March 2003, p. 4; see
[http://www.cbo.gov]. CBO’s methodology uses cost factors of the services.

CRS-27
Table 5. FY2003 DOD Supplemental, by Purpose,
Based on DOD’s Justification Material
(in billions of dollars)
FY2003
Purpose/Type of Expense
FY2003 Subtotals
Military Personnel Expenses Subtotal
10.398
Active-Duty Military Personnel Special Pays
2.000
Higher Active-Duty Levels
1.450
Cost of Mobilizing Reservists
6.948
Personnel Support (O&M funded) Subtotal
5.240
Active-Duty Personnel Support
3.365
Mobilized reserve Support
1.541
Defense Health Program
0.302
Other personnel costs
0.032
Military Operation Support (O&M Funded) Subtotal
37.760
Operating Support
14.122
Transportation
10.804
Facilities/Base Support
6.992
Command, Control, Communications and Intelligence
3.177
Guantanamo Bay Improvements
0.010
Preparatory Tasks
2.547
Humanitarian Assistance
0.107
Procurement Subtotal
4.693
Munitions
3.700
Other procurement
0.993
RDT&E
0.058
Working Capital Fund: For Higher Oil Prices
0.430
Military Construction Subtotal
0.177
Military Construction, Navy
0.048
Military Construction, Air Force
0.129
Other Subtotal
3.805
Classified
1.717
Natural Resource Risk Remediation Fund
0.489
Operation and Maintenance, Army
0.035
Operation and Maintenance, Navy
0.075
Operation and Maintenance, Air Force
0.055
Operation and Maintenance, Defense-wide
1.400
Drug Interdiction and Counter-Drug Activities
0.034
TOTAL
62.561
Source: Department of Defense, FY2003 Supplemental Request for Military Operations in Iraq and
t h e G l o b a l W a r o n T e r r o r i s m , M a r c h 2 5 , 2 0 0 3 ;

CRS-28
[http://www.defenselink.mil/comptroller/defbudget/fy2004/DoD_Justification-FY03_Ira
qi_Freedom_Supplemental.pdf].
Iraq Reconstruction and International Assistance
The President’s supplemental proposal included $7.79 billion for near-term Iraq
reconstruction and relief, additional aid to coalition partners and other states
cooperating in the global war on terrorism, and related State Department and USAID
administrative expenses. Most of the funds – $7.6 billion – fell under the jurisdiction
of Foreign Operations appropriations programs. By comparison, the supplemental
request totaled a little less than half of the $16.2 billion appropriated previously by
Congress for FY2003 Foreign Operations activities.
The proposal, as detailed below in Table 5, was roughly divided into two
components: Iraq relief and reconstruction (about $2.85 billion)35 and aid to coalition
partners and other nations engaged in the war on terrorism (about $4.7 billion).
Reconstruction Efforts
Under the Administration’s plan, the bulk of Iraqi reconstruction funds would
be deposited in a special Iraq Relief and Reconstruction Fund, which would be
managed by the White House. Out of this $2.44 billion Fund, resources would be
drawn and transferred to implementing agencies to pay the costs of immediate
humanitarian relief and reconstruction activities over a 12-month period following
the end of hostilities.
Normally, it would be presumed that transfers for reconstruction and post-
conflict aid would be made to USAID, the State Department, and other traditional
foreign assistance management agencies. But with plans for the Defense Department
to oversee the governing of Iraq immediately after the end of hostilities, the White
House wanted to have maximum flexibility over the distribution of resources so the
President could transfer some or all of the funding to DOD. The proposal stimulated
immediate controversy with a number of critics, including Members of Congress,
arguing that aid programs should remain under the policy direction of the State
Department and under the authorities of a broad and longstanding body of foreign aid
laws. They pointed out that during other recent reconstruction initiatives in Bosnia
and Kosovo, resources and policy decisions flowed through the Secretary of State.
Others argued that groups which would play a significant role in post-war
rehabilitation efforts – non-governmental organizations (NGOs), foreign donors, and
international organizations – would be reluctant to take direction and funding from
the U.S. military. This, they contended, would hamper relief activities.36
35 OMB documents estimate the total amount for Iraq reconstruction was $3.5 billion, a
figure that included nearly $500 million from DOD funding for the repair of oil facilities.
36 See, for example, U.S. Bureaucratic Battle Over Postwar Aid to Iraq Heats Up, Agence
France-Presse, April 2, 2003; and Congress: Powell Should Control Postwar Spending,
USA Today, April 4, 2003, p. A.06.

CRS-29
Furthermore, the placement of reconstruction funding in a Presidential account
appeared to grant the White House significant discretion in responding to changing
and unanticipated demands, unencumbered by specific programmatic allocations.
The Administration said only that $543 million would cover humanitarian expenses,
$1.7 billion would be set aside for reconstruction needs, and up to $200 million
would be available to reimburse foreign aid accounts from which funds were drawn
prior to conflict.
According to Administration documents, reconstruction funds would focus
initially on the most urgent needs to restore minimal services to the Iraqi population.
Emphasis would be placed on rebuilding water and sanitation capacity, restoring
public health facilities, refurbishing seaports and airports in order to move
humanitarian supplies into the country, reestablishing a food distribution system, and
generating emergency electricity. Following this early stage, the White House plan
called reconstructing broad economic and institutional capacity. This second phase
would target the restoration of roads, schools, hospitals, markets, irrigation systems,
and electrical generation, together with the construction of a framework within which
to operate education, economic, agriculture, and good governance institutions.
Apart from the Relief and Reconstruction Fund, the Administration also sought
$200 million to replenish refugee, disaster, and other economic aid accounts that had
already financed the costs of food and other commodities. A portion of these funds
would also bolster the size of humanitarian accounts so that future “borrowings”
from other aid sources to meet the needs in Iraq would be minimized. The State
Department and USAID further requested appropriations to establish safe and secure
temporary facilities in Iraq and to eventually build an embassy and aid mission in
Baghdad.
Congressional Action on Iraq Reconstruction. As cleared by Congress,
H.R. 1559 appropriates $2.475 billion for the Relief and Reconstruction Fund,
slightly higher than requested. The President will be able to apportion Fund
resources directly to five federal agencies: the Departments of Defense, State, Health
and Human Services, and Treasury, and USAID. In previous congressional debate,
the House and Senate had each expressed their expectations that these funds would
be channeled to the Secretary of State, and in most instances, further directed to
USAID. The report accompanying S. 762 specifically noted that the funds were not
expected to be transferred to the Secretary of Defense. Nevertheless, the White
House continued to argue for greater flexibility and authority to place reconstruction
resources under DOD auspices, and ultimately conference committee members
agreed. The enacted legislation, however, specifies that the Iraq Fund will fall under
the authorities of the Foreign Assistance Act of 1961 and that Congress will be
notified five days in advance of any obligation of amounts from the Fund. Further,
these advance notifications will be reviewed under the same terms as regular foreign
aid notifications to the Appropriation Committees, a process through which
Members may place “holds” on the obligation of resources pending further
consultation. H.R. 1559, as approved, also strengthens congressional oversight of the
Fund by requiring two reports within the first 45 days of enactment regarding how
the Fund will be organized and other issues such as reconstruction and government-
creation strategies, coordination with other donors, and overall costs. Beginning in
mid-July 2003, H.R. 1559 requires quarterly status reports on Fund operations.

CRS-30
Table 6. Iraq Reconstruction, International Aid, and Related Activities
(in millions of dollars)
Activity
Request
House
Senate
Enacted
Iraq Relief and Reconstruction:
Iraq Relief and Reconstruction Fund
$2,443.3
$2,483.3
$2,468.3
$2,475.0
Of which:
Reconstruction priorities for public health, water and sanitation, seaports/airports, food-
$1,700.0
– – –
distribution networks, and electricity. Post-conflict emphasis on education, governance,
economic institutions, agriculture, and infrastructure repair.
Humanitarian aid, refugee and displaced persons relief, demining
$543.0



Reimbursement to USAID’s Development, Child Survival and ESF aid accounts previously
fully
fully
$200.0
$260.0
drawn upon to provide food commodities.
reimbursea
reimburse
Reimbursement to USAID’s International Disaster Assistance account for previously drawn
upon resources for food distribution, mainly through the UN WFP, and for immediate
$80.0
$160.0 $112.5 $143.8
reconstruction.
Reimbursement to USAID’s Child Survival/Health account for previously drawn upon
$40.0
$40.0 $90.0 $90.0
resources for water and sanitation reconstruction.
Reimbursement to USAID’s Economic Support Fund account for previously drawn upon
$40.0
– $40.0 $40.0
resources for emergency relief and non-health reconstruction.
Reimbursement of PL480 food assistance, including the Bill Emerson Humanitarian Trust

$319.0
$600.0
$369.0
Replenishment of the Emergency Refugee and Migration Aid (ERMA) fund to restore $17.9
million that has been drawn down for Middle East contingencies and to have funds available
$50.0
$80.0 $75.0 $80.0
for needs worldwide.
Peacekeeping funds for coalition partners engaged in post-conflict Iraq
$200.0
$115.0
$150.0
$100.0
Subtotal, Iraq Reconstruction
$2,853.3
$3,197.3 $3,535.8
$3,297.8

CRS-31
Activity
Request
House
Senate
Enacted
Assistance to Coalition Partners & Cooperating States in War on Terrorism
Israel military grant.
$1,000.0
$1,000.0 $1,000.0 $1,000.0
Israel economic loan guarantees. Israel will pay all fees associated with the cost of $9 billion
[$9,000.0]b
[$9,000.0]b
[$9,000.0]b
[$9,000.0]b
in loan guarantees.
Egypt economic grant, a portion of which can be used for up to $2 billion in loan guarantees.
$300.0
$300.0
$300.0
$300.0
Jordan economic and military grants.c
$1,106.0
$1,106.0 $1,106.0 $1,106.0
Palestinian economic grant.
$50.0
NS
NS
NS
Turkey economic grant, a portion of which can be used for up to $8.5 billion in direct loans.
$1,000.0
$1,000.0
$1,000.0
$1,000.0
Philippines economic and military grant.
$30.0
NS
$80.0
$60.0
Pakistan military grant and law enforcement aid.c
$200.0
$200.0
d $200.0
Djibouti economic and military grants.
$30.0
NS
NS
NS
Oman military grant.
$62.0
NS
NS
NS
Bahrain military grant.
$90.0
NS
NS
NS
Colombia military and counter-narcotics grants to support unified campaign against drugs and
$71.0
NS
NS NS
terrorism.e
Afghanistan economic, military, anti-terrorism, and demining grants.
$325.0
$325.0
d $365.0
Middle East Partnership Initiative and Muslim World Outreach.f
$200.0
$105.0
d NS
Central Europe military grants.g
$84.1
NS
d NS
US Emergency Fund for Complex Foreign Crises – aid to support contingencies for coalition
$150.0
$0.0
$150.0
$0.0
countries .
Subtotal, Aid to Coalition Partners & Cooperating States
$4,698.1
$4,488.1
$4,604.0
$4,518.1

CRS-32
Activity
Request
House
Senate
Enacted
State Department Administration & Other Activities
State Department Diplomatic and Consular Affairs
$101.4
$106.4
$93.4
$98.4
Of which:
$5.0
$5.0
NS
$5.0
Task Force Surge Support operations.
Baghdad embassy reopening; enacted amount includes diplomatic security
$17.9
$17.9
$17.9
$35.8
Medical supplies
$15.6
$15.6
$15.6
$15.6
Security upgrades
$10.0
$10.0
$10.0
$10.0
Machine Readable Visa fee shortfalls
$35.0
$35.0
$30.0
$32.0
Consular Affairs
– –
$2.0

Worldwide emergency response

$30.6


State Department embassy construction
$20.0
$71.5
$82.0
$149.5
Of which:
$20.0
– $20.0
$61.5
Temporary facilities in Iraq.
Non-official facilities frequented by U.S. citizens overseas


$10.0
$10.0
Facilities and security in Rome, Italy



$78.0
USAID mission in Iraq, and, as enacted, IG monitoring of the Iraq Fund, and USAID security
$22.0
$23.0 $23.6 $24.5
needs in Pakistan, Afghanistan, and Indonesia.
Potential emergency evacuations of US government employees, families, and private
$65.7
$65.7 $40.0 $50.0
American citizens.
Radio broadcasting to Iraq and Middle East Television Network
$30.5
$30.5
$62.5
$30.5
Iraq War Crimes Tribunal and investigations into war crimes allegations


$10.0
$10.0
Subtotal, State Department & Other
$239.6
$297.1
$311.5
$362.9
TOTAL, Iraq Reconstruction, International Aid, & Related Activities
$7,791.0
$7,982.5
$8,451.3
$8,178.8

CRS-33
NS = Not specified.
a The House Appropriations Committee stated that up to $495 million in reimbursements was included in H.R. 1559.
b No appropriation required.
c DOD funds ($1.3 billion) were requested and enacted for Jordan, Pakistan, and other “key cooperating states” providing logistical and military support to U.S. military operations
in Iraq and in the global war on terrorism.
d Request “supported” in Senate bill.
e DOD funds ($34 million) were also requested and enacted for drug interdiction and counter-drug activities in Colombia.
f House bill funds an Islamic Partnership and Outreach Program.
g Central Europe includes Poland ($15 million); Hungary ($15 million); Czech Republic ($15 million); Estonia ($2.5 million); Latvia ($2.5); Slovakia ($6 million); Romania ($15
million); Slovenia ($5 million); Lithuania ($3.5 million); and Bulgaria ($5 million).

CRS-34
The enacted bill further directs higher and more specific amounts that should be
used to replenish several foreign aid accounts that had been drawn upon in order to
preposition food and medicine stocks in the region and for other pre-conflict
humanitarian purposes. The conference agreement directs “full and prompt”
reimbursement of USAID and State Department accounts from the Iraq Fund. The
supplemental provides $143.8 million for international disaster assistance, $112.5
million of which will restore funds diverted previously for Iraq. The remaining
balance will augment USAID disaster relief resources to respond to foreign
contingencies that may arise through the end of FY2003. Similarly, Congress
increased the State Department’s refugee reserve account from the $50 million
requested to $80 million in order to address needs in the Persian Gulf region as well
as other global requirements. H.R. 1559 also includes $369 million to reimburse
food aid accounts from which commodities for Iraq were drawn. This includes $69
million to replenish stocks in the Bill Emerson Humanitarian Trust. The House had
added $250 million additional food aid while the Senate, by way of an amendment
by Senator Kohl, had recommended $600 million. In total, the enacted legislation
provides roughly $920 million for reimbursing these foreign aid accounts, more than
double the Administration’s $410 million request.
International Assistance. The supplemental appropriation proposal would
have provided about $4.7 billion in additional aid to 23 countries and regional
programs that are contributing to the war in Iraq and cooperating in the global fight
against terrorism. Table 6 provides a complete list of proposed recipients. Among
the largest and most complex aid packages would be:
! Jordan – $700 million in economic grants and $406 million in
military transfers. This would be on top of Jordan’s regular $452 aid
package from the U.S.
! Israel – $1 billion in supplemental military aid (on top of the $2.7
billion regular FY2003 assistance) and $9 billion in economic loans
guaranteed by the U.S. government over the next three years. Israel
would pay all costs – fees that may total several hundred of million
dollars – associated with these economic stabilization loans.
Conditions on the loans, similar to those that were applied in the
early 1990s when Israel drew on a $10 billion U.S.-backed loan
package, would be employed.
! Turkey – $1 billion for economic grants which could be applied to
fees associated with $8.5 billion in direct loans or loan guarantees.
! Afghanistan – $325 million in economic grants, anti-terrorism,
demining, and military transfers. This would be in addition to
roughly $350 million already scheduled for Afghanistan this year.
! Egypt – $300 million for economic grants, a portion of which could
be used to gain access to up to $2 billion in loan guarantees.
Depending on the terms of the loan, if Egypt chose to receive the full
$2 billion, about $120 million or more of the $300 million would be
applied to the costs faced by the United States of guaranteeing the

CRS-35
loans. The Administration further proposes to reprogram $379.6
million in previously appropriated commodity import program aid
to Egypt as a cash transfer. The supplemental would come on top of
$1.9 billion in regular U.S. aid to Egypt.
! Pakistan – $200 million in military grants and law enforcement
assistance. Pakistan currently receives $305 million in FY2003.
The Administration further requested $150 million to initiate a U.S. Emergency Fund
for Complex Emergencies, a contingency account that would allow the President to
address quickly unforseen needs of coalition partners. The Fund, which would be
managed by the White House, had originally been proposed for an FY2004 startup
of $100 million.
Congressional Action on International Assistance. H.R. 1559, as
approved, includes $4.52 billion in additional aid to countries and regional programs,
about $180 million less than requested. Nearly all of this reduction, however, comes
from Congress’ decision not to fund the President’s $150 million emergency account
for complex crises. In most other cases, the Administration will be able to allocate
these foreign aid resources has it had intended. Congress earmarked funding at the
requested levels for Israel, Egypt, Jordan, and Pakistan, while adding resources for
Afghanistan and the Philippines (see Table 6). Turkey may receive “not to exceed”
$1 billion, aid that is conditioned on a requirement for the Secretary of State to certify
that Turkey is cooperating with the United States in Operation Iraqi Freedom,
including the facilitation of moving humanitarian aid into Iraq, and has not
unilaterally deployed forces in northern Iraq. The restriction on Turkey’s aid
package, the size of which could grow to $8.5 billion if the loan option is
implemented, combines text in House and Senate-passed bills. Earlier, the House
had defeated two amendments that would have eliminated aid to Turkey or reduced
it by $207 million.
For Israeli loan guarantees, the enacted supplemental includes the full $9 billion
proposal, but adds conditions not included in the proposal. Loans may be issued in
$3 billion allotments in each of FY2003 to FY2005, a provision that will allow the
President to reduce disbursements in the second and third years Israel violate any of
the loan conditions. One such condition added by Congress prohibits loan resources
from supporting any activity in geographic areas that were not administered by Israel
prior to June 5, 1967. This is similar to a condition attached to the 1992 $10 billion
loan guaranty package for Israel, some of which was not disbursed because of
continued Israeli settlement activity in the West Bank area.

CRS-36
Table 7. Proposed Recipients of Supplemental Foreign Aid
($s millions)
Anti-
Narcotics/
Economic
Loans
Military
TOTAL
Terrorism
Law
Jordan
$700a
– $406a
– –
$1,106
Israel

[$9,000]
$1,000a
– –
$1,000
Turkey
$1,000a
[$8,500]*
– – –
$1,000
Afghanistan
$127b

$170a
$28a

$325
Egypt
$300a
[$2,000]*
– – – $300
Pakistan
– –
$175a

$25a
$200
Bahrain
– –
$90
– – $90
Colombia
– –
$37
– $34a
$71
Oman
– –
$62
– – $62
Palestinians
$50
– – – – $50
Djibouti
$25
– $5 – – $30
Philippines
– c
– $30

– $30
Czech Rep.


$15


$15
Hungary
– –
$15
– – $15
Poland
– –
$15
– – $15
Romania
– –
$15
– – $15
Slovakia
– –
$6 – – $6
Bulgaria
– –
$5
– – $5
Slovenia
– –
$5
– – $5
Estonia
– –
$3
– – $3
Latvia
– –
$3
– – $3
Lithuania
– –
$3
– – $3
* Up to this amount. Loans would not require additional appropriations since economic grants would
be used to pay for loan fees.
a Amount is earmarked or recommended in the enacted supplemental appropriation.
b The enacted supplemental appropriation provides $167 million.
c The enacted supplement appropriation includes $30 million for Philippine economic aid.

CRS-37
Although most of the President’s request for international assistance is
supported in the enacted emergency supplemental, the Administration will have to
reduce economic assistance for a few countries. Congress cut Economic Support
Fund appropriations by $20 million, but because of earmarks and additions for
Afghanistan, the Philippines, and $10 million to investigate possible Iraqi leadership
war crimes, executive officials will have $100 million less than requested in
economic assistance for countries not protected by legislative directives. Non-
earmarked programs include $50 million for the Palestinians, $25 million for
Djibouti, and $200 million for the Middle East Partnership Initiative. Instead of
taking the entire $100 million from these three areas, another option the
Administration might consider is allocating something less than $1 billion for
Turkey. Congress will be notified once those decisions have been made.
Key Issues Regarding Iraq Reconstruction and International
Assistance

The proposed supplemental raised a number of issues and concerns, including
those focusing on the extent of executive flexibility sought by the President, how
much more Iraq reconstruction might cost and whether these demands would erode
funding for other foreign aid priorities, whether the purposes and amounts of country
assistance were appropriate, and whether DOD’s request for authority and funds to
aid indigenous forces was consistent with traditional U.S. military assistance
programs managed by the State Department.
Executive Flexibility and Congressional Oversight. Throughout the
supplemental request, in both the defense and Iraq reconstruction/international
assistance sections, the President sought authorities that would maximize flexibility
in responding to fluid and rapidly changing demands. Among the most significant
authorities affecting the use of foreign aid funds were:
! Iraq Relief and Reconstruction Fund – The Administration’s budget
justification for the White House managed $2.44 billion Fund
offered only broad purposes for which the money would be used and
divided the money into three general categories. Iraq reconstruction
plans submitted by the State Department to Congress offered some
details on specific sectors, how the U.S. would respond, and the
timing of actions over the next year. Funding amounts for each
activity, however, were not provided, as is usually the case with
foreign aid justifications. Moreover, since the funds would be
appropriated into a Presidential fund, it would be possible for the
White House delegate the resources to any agency, including the
Defense Department, for reconstruction implementation. As noted
above, this prospect of DOD management raised disputes within the
Administration and the American international NGO community,
with critics arguing that it would be inappropriate for the military to
control a civilian operation. The proposal to establish a central Fund
most closely resembled how the Administration programmed U.S.
relief for victims of Hurricane Mitch in Central America in 1999 and
Bosnia reconstruction efforts in 1996. In both cases Congress

CRS-38
appropriated money into special funds, but placed them under the
control of USAID and added numerous directives over how portions
of resources should be used and various notifications for informing
Congress in advance of committing the money. Moreover, the
supplemental request for the Relief and Reconstruction Fund would
make the appropriations available “notwithstanding any provision of
law.” This would remove any of the numerous restrictions and
conditions that generally apply to U.S. foreign assistance, including
provisions relating to human rights, proliferation, government
legitimacy, contract negotiations, among others. Waivers of these
restrictions are generally applied only to humanitarian programs.
Congress rejected a similar request last year for supplemental
economic and military aid to the front-line states in the war on
terrorism.
! U.S. Emergency Fund for Complex Crises – For many years,
Administrations have asked Congress for various types of
contingency resources that can be drawn upon immediately to
address unanticipated foreign policy emergencies. Except in the
case of humanitarian situations, however, Congress has been
reluctant to support such requests, stating that the President has other
mechanisms and special authorities for temporarily “borrowing”
funds from other aid accounts over which Congress can more closely
maintain scrutiny and consult in advance as the purposes of the
transfers. The President’s $100 million FY2004 request to create the
Crises Fund had already raised concerns among some Members
during hearings on next year’s budget request.
! Transfer of funds among different accounts – The supplemental
proposed that up to $200 million of international assistance, State
Department money, and the Iraq Relief and Reconstruction Fund
could be transferred between the accounts for any purpose.
Longstanding foreign aid laws place percentage caps on the amount
that can be taken from most accounts (10%) and how much the
receiving account can increase (20%).37 Annual Foreign Operations
appropriations further require the President to consult and justify the
transfer in advance with House and Senate Appropriations
Committees. In some circumstances, the Administration’s
supplemental proposal could have resulted in transfers exceeding the
percentage caps. The request further did not require any
congressional notification or consultation.
As noted above, the enacted supplemental establishes the Relief and
Reconstruction Fund proposed by the President, but with added oversight
mechanisms put in place. Although the President may apportion resources directly
to DOD, as well as the Departments of State, Treasury, Health and Human
Resources, and USAID, the Iraq Fund falls under the authority of existing foreign aid
37 Section 610 of the Foreign Assistance Act of 1961.

CRS-39
laws. H.R. 1559 also adds several reporting requirements, as mentioned above, and
requires notification 5 days in advance of any Fund obligations. The enacted
supplemental further deletes appropriations for the President’s emergency fund for
foreign crises and limits to $100 million the amount that can be transferred among
the various aid accounts.
Costs of Iraq Reconstruction and the Impact on Other Aid
Programs. Like the costs of military operations, it is nearly impossible to estimate
what the longer-term expenses of humanitarian relief and reconstruction in Iraq will
be. The Administration’s $3.5 billion included in the supplemental request
represented a general projection of needs over the next 12 months. But State
Department activity justifications cautioned that the timetable was tentative,
dependent largely on the extent of damage that resulted from the conflict and how
future assessments might alter aid priorities. Some believed that reconstruction needs
beyond this initial allotment would be met largely through proceeds from the sale of
Iraqi oil and the release of frozen assets. The international aid community is
currently discussing how post-conflict relief efforts will proceed, but there is a great
deal of uncertainty over the Administration’s intentions and the actual final outcome.
How soon and in what amounts Iraq might gain access to borrowing from the
International Financial Institutions will also be a factor in how much additional
resources will be needed or expected from the United States.38
In the meantime USAID and the State Department have been drawing resources
for Iraq from emergency refugee and disaster relief accounts, and from other
economic aid programs that had been intended for other countries and purposes. As
of March 25, USAID had utilized an estimated $506 million, including drawdowns
from the Child Survival and Health (CS/H), Development Assistance (DA), and
Economic Support Fund (ESF) accounts. For Child Survival and Development
programs, amounts diverted to Iraq contingency activities represented nearly 8% of
FY2003 appropriations. The supplemental request included about $410 million for
either replenishing CH/H, DA, and ESF accounts, or increasing disaster and refugee
resources so that future “borrowings” might be avoided and adequate funds would
be available for contingencies that might arise later in the year in other regions. But
the supplemental did not appear to fully cover USAID transfers already made for Iraq
programs. Moreover, the supplemental provided “up to $200 million may be used”
out of the Relief and Reconstruction Fund to repay these accounts. This discretionary
language left the final decision up to the White House as to whether these funds
would be available for the purposes and programs for which they were originally
intended.
The conference agreement on H.R. 1559 adds substantial amounts, as noted
above, for replenishing foreign aid accounts from which money has been drawn for
Iraq operations. The enacted supplemental provides over $900 million to restore
38 For more discussion of these issues see CRS Report RL31814, Humanitarian Issues in
Post-War Iraq: An Overview for Congress
; CRS Report RL31759, Reconstruction
Assistance in Afghanistan: Goals, Priorities, and Issues for Congress
; and CRS Report
RL31833, Iraq: Recent Developments in Humanitarian and Reconstruction Assistance.

CRS-40
funds for several programs, including the addition of $369 million in food assistance
that had not been requested.
Country Assistance. The Administration asked not only for funds to assist
coalition partners and nations that face significant economic and political risks due
to the Iraq conflict, but also to augment support for a broader set of countries
cooperating in the global war on terrorism. Some questioned whether a supplemental
appropriation intended to provide resources specifically related to the Iraq situation
should include nearly $700 million for this latter group, especially since Congress
approved in mid-February FY2003 money for this purpose (P.L. 108-7). Among the
countries covered by the request, but which are outside the conflict in Iraq were:
! Afghanistan – The Administration proposed $325 million to “meet
immediate shortfalls” in Afghanistan’s FY2003 program, including
resources for the Kabul-Kandahr-Herat road, budget support for the
Afghan government, President Karzai’s protective detail, demining,
and military training and equipment costs. Although the
Administration did not submit an official FY2003 Afghan aid
request, Congress increased assistance to over $300 million.
! Pakistan – The supplemental proposed an additional $175 million in
military aid to strengthen Pakistan’s ability to track and disable
terrorists operating in its own territory and $25 million for better
border security.
! Colombia – Included in the supplemental request was $71 million in
military and counter-narcotics assistance for supporting Colombia’s
unified campaign against drug cartels and terrorists. The proposal
also included an additional $34 million of DOD funds for narcotics
interdiction operations. In the FY2003 Foreign Operations
Appropriation, Congress approved $700 million for the Andean
Counter-narcotics Initiative for Colombia and other countries in the
region, $31 million less than the President had requested.
! Palestinians – The request would extend $50 million to support
Middle East peace objectives generally, and specifically for
humanitarian activities in the West Bank and Gaza and for
Palestinian civil reforms. Congress had appropriated in August 2002
a similar $50 million package, together with $200 million for Israel,
in the FY2002 Supplemental Appropriation. President Bush chose
not to spend the funds because they were part of a much larger
appropriation for programs he had not requested. Instead, he
amended the FY2003 Foreign Operations request to include the
Palestinian and Israeli funds but Congress did not increase overall
appropriations to accommodate these additions.
! Philippines – The $30 million in military support would allow the
Philippines to upgrade its counterterrorism capabilities. Like the
Palestinian funds above, Congress provided $30 million for the

CRS-41
Philippines in the FY2002 supplemental which the President chose
not to spend.
! Slovenia – Not a member of the coalition, Slovenia would receive
$5 million in military assistance in recognition of its efforts in
providing access and overflight rights in Operating Enduring
Freedom and contributing to the Afghan National Army and
demining program.
Beyond this list, some questioned the Administration’s $1 billion request for
Turkey that could be converted into as much as $8.5 billion in loans. The United
States had negotiated with the Turkish government for months over allowing the
deployment of U.S. forces in Turkey for military operations for a second front in
norther Iraq. Reportedly, the United States offered a $6 billion aid package that
could be leveraged into $26 billion in combined grants and loans. On March 1,
however, the Turkish parliament rejected the U.S. request to base troops for
operations in Iraq and the United States withdrew the aid offer. Turkey’s government
has subsequently granted U.S. overflight rights for the Iraq campaign. The
Administration justifies the $1 billion request on the basis of Turkey’s role as an ally
and frontline state in the war on terrorism, and for the significant political and
economic risks faced by Ankara due to the Iraq conflict.
As noted above, the enacted supplemental, for the most part, supports the
President’s foreign aid allocations for requested countries. Conditions are added to
funds for Turkey but amendments to eliminate or reduce the $1 billion package failed
in the House. H.R. 1559, as approved, however, will require the Administration to
make some economic aid reductions for some countries and programs not earmarked,
possibly including those for the Palestinians, Djibouti, Turkey, or the Middle East
Partnership Initiative.
DOD Authorities to Provide Military Aid. Under sections relating to
Defense Department funds and authorities, the supplemental proposed two items that
drew particular congressional attention. The key issue was whether they infringed
on congressional oversight and the State Department’s traditional role in directing
foreign aid policy and resource allocations. They were both similar to proposals
made last year in the FY2002 supplemental that focused on the war on terrorism and
were closely scrutinized by Congress.
The first would provide $1.4 billion for the Defense Department,
“notwithstanding any provision of law,” to pay Jordan, Pakistan, and other nations
that have provided logistical and military-related support to U.S. military operations
in Iraq or in the global war on terrorism. In the past, Defense officials argue,
competing demands on regular military aid resources have delayed reimbursement
to key friends that provide services to American forces. Congress approved funding
in the FY2002 supplemental for this purpose, but included a 15-day prior notification
requirement that is not part of the FY2003 supplemental draft legislation.
The more controversial authority concerned DOD’s request for $150 million to
support “indigenous forces” assisting U.S. military operations, including those aimed
at the global war on terrorism. Decisions to draw on these funds would be made by

CRS-42
the Secretary of Defense, with the concurrence of the Secretary of State. The
Defense Department defines indigenous forces as “irregular forces and resistance
movements” and notes that such forces “generally conduct military and para-military
operations in enemy-held or hostile territory and conduct direct offensive low-
intensity, cover, or clandestine operations.”39 Although it was unclear from the
budget justification and bill text exactly what groups and under what scenarios the
Administration would utilize these resources, a senior Administration official
suggested that the intent was to have resources available for groups in Iraq. Deputy
Secretary Richard Armitage testified on March 27 that because of the uncertainty of
the war’s duration, it might be necessary to transfer additional arms and equipment
for Kurdish and other forces, and that the $150 million would provide a “hedge” in
case of a more prolonged conflict.40 In last year’s supplemental appropriation debate,
DOD had asked for $30 million to support indigenous forces, funds that would be
exclusively under the control of the Secretary of Defense. Congress rejected the
proposal, however. The House Appropriations Committee observed in deleting the
request that the Secretary of State’s primary responsibility over U.S. military
assistance programs is well established and that the Administration has the necessary
authorities under existing foreign aid laws to undertake the requested activities.41
H.R. 1559, as enacted, provides the $1.4 billion for nations supporting U.S.
military operations in the global war on terrorism but does not authorize the $150
million for aid to indigenous forces.
Homeland Security
The smallest component of the supplemental proposal covered additional
resources for homeland security. Some critics of Administration homeland security
policy, including some Members of Congress, believe that key domestic preparedness
measures have been under-funded and argue for additional resources. In some cases,
as discussed elsewhere in this report, Members offered amendments increasing
amounts for homeland security. Details of congressional action on homeland security
funding matters are included in Table 8.
39 U.S. Office of Management and Budget, FY2003 Request for Supplemental
Appropriations
, March 25, 2003, no pagination. Available on the OMB Web site at
[http://www.whitehouse.gov/omb/budget/ amendments/supplemental_3_25_03.pdf].
40 House Appropriations Subcommittee on Foreign Operations, Hearing on the Iraq War
Supplemental, testimony of Richard Armitage, Deputy Secretary of State, March 27, 2003.
41 Making Supplemental Appropriations for Further Recovery from and Response to
Terrorist Attacks on the United States for FY2002. Report to accompany H.R. 4775.
H.Rept. 107-480, May 22, 2002.

CRS-43
Table 8. Homeland Security
($s millions)
Request
House
Senate
Enacted
Dept Homeland Security: Counterterrorism Fund
$1,500.0
a $1,135.0
$150.0
Dept of Homeland Security:
Operating expenses

$1.0

$3.0
Secret Service

$30.0

$30.0
Customs and Border Protection

$428.0

$333.0
Immigration and Customs

$185.0

$170.0
Transportation Security Administration

$390.0

$665.0
Federal Law Enforcement Training Center

$2.0

$2.0
Office of Domestic Preparedness

$2,200.0
$2,200.0
$2,230.0
Coast Guard

$230.0
$580.0
$228.0
Emergency Preparedness & Response

$45.0

$45.0
FEMA Disaster Relief


$109.5
$54.8
Information Analysis & Infrastructure Protection

$10.0

$0.0
Total Department of Homeland Security
$2,000.0
$3,521.0
$2,889.5
$3,760.8
Dept of Justice:
Counterterrorism Fund
$500.0
$50.0

$20.0
Salaries and Expenses

$5.0

$5.0
Detention Trustee

$15.0
$45.0
$40.0
Inspector General

$2.5

$2.5
US Marshals

$26.1

$8.0
FBI

$398.9
$73.0
$367.2
Interagency Law Enforcement Support


$72.0
$0.0
State & Local Law Enforcement Assistance


$91.0
$0.0
Community Oriented Policing Services


$114.5
$54.8
Total, Department of Justice
$500.0
$497.5
$395.5
$497.5
Supreme Court

$1.5

$1.5
US Court of Appeals

$1.0

$1.0
US Court of International Trade

$0.1

$0.1
Exec Office of President: Emergency Fund
$250.0


$0.0
Legislative Branch Emergency Response Fund:

CRS-44
Request
House
Senate
Enacted
Salaries and Expenses

$11.0

$11.0
Architect of the Capitol


$34.4
$23.8
Architect of the Capitol, Capitol Police Buildings

$63.8
$40.1
$40.1
Capitol Police

$37.8
$38.2
$37.8
Office of Compliance

$0.1
$0.1
$0.1
Library of Congress

$5.5
$5.5
$5.5
Congressional Research Service

$1.9
$1.9
$1.9
General Accounting Office

$4.9
$4.8
$4.8
Total Legislative Branch Emergency Fund
$125.0
$125.0
$125.0
$125.0
Dept of Transportation, Maritime Administration


$50.0
$25.0
Dept of Agriculture Research Service


$98.0
$110.0
Corps of Engineers, infrastructure security


$29.0
$39.0
Dept of Interior, Bureau of Reclamation


$25.0
$25.0
Dept of Energy, nuclear facility security


$11.0
$11.0
Dept of Energy, Natl Nuclear Security Admin


$61.0
$67.0
Dept of Energy, Defense Nuclear Proliferation


$150.0
$148.0
Dept of Energy, Defense Environment Rest.


$6.0
$6.0
Dept of Energy, Other Defense Activities


$18.0
$4.0
HHS, Public Health and Social Services

$94.0

$100.0
HHS, compensation for smallpox volunteers

$50.0
$35.0
$42.0
HHS, grants to States for smallpox inoculation


$105.0
$0.0
National Commission on Terrorist Attacks


$11.0
$11.0
TOTAL, Homeland Security
$4,375.0
$4,290.1 $5,144.0
$5,123.9
a Included under Dept. of Homeland Security items below.

CRS-45
Support to State and Local Governments for Terrorism
Prevention and Security Enhancements42

The Bush Administration’s request for FY2003 supplemental appropriations
included $2 billion for the ODP. These funds would be distributed to state and local
governments “. . . to support federally-coordinated terrorism prevention and security
enhancements at this time of heightened threat, and terrorism preparedness for first
responders.”43 The Department of Homeland Security projected that $1.5 billion
would go to the ODP formula grant program, $450 million to critical infrastructure
security grants, and $50 million to high threat urban areas.44 The Administration’s
request for $450 million for critical infrastructure security grants contained at least
one significant change to the current structure of federal first responder programs.
The request proposed allowing recipients to use these funds for personnel overtime
expenses, an activity not currently authorized in existing terrorism preparedness
programs.
Congressional Action. The House, in H.R. 1559, provided a total of $2.2
billion to ODP, $200 million above the Administration request, specifically
providing the following amounts.45
! $1.5 billion to ODP’s formula grant program, and
! $700 million “... to address security requirements in high threat, high
density urban areas with critical infrastructure.”46
In S. 762, the Senate Appropriations Committee recommended $2 billion for
ODP of which $1.42 billion would have gone to the formula grant program, $450
million to critical infrastructure security, $100 million to high threat urban areas, and
$30 million to technical assistance.47 The full Senate passed an amendment,
however, that added an additional $200 million and allocated more funding to high
threat urban areas.48 The Senate also added additional funding to FEMA and the
42 This section was prepared by Ben Canada, Analyst in American National Government,
Government and Finance Division.
43 OMB, FY2003 Request for Supplemental Appropriations.
44 U.S. Department of Homeland Security, “FY2003 Supplemental Budget Request Fact
Sheet,” March 25, 2003. Available at: [http://www.dhs.gov/dhspublic/display?content=533].
45 At least one amendment proposing additional funding for ODP programs was introduced
but not passed (H.Amdt. 30 to H.R. 1559).
46 House Appropriations Committee, “Full Committee Unanimously Reports Wartime
Supplemental,” press release, April 1, 2003. See the House Appropriations Committee Web
site [http://www.house.gov/appropriations/news/108_1/04warsuppsum.htm], visited April
3, 2003.
47 U.S. Congress, Senate Committee on Appropriations, Report to Accompany S. 762, 108th
Cong., 1st sess., S.Rept. 108-33 (Washington: GPO, 2003), pp. 23-24.
48 S.Amdt. 515 to S. 762, enacted April 3, 2003. The Senate also considered, but did not
pass, at least one amendment to provide an additional $2.33 billion for first responder
(continued...)

CRS-46
Community-Oriented Policing Services program (Justice Department) for
interoperable communications. S. 762, as passed by the Senate, provided a total of
$2.2 billion for ODP programs, matching the House amount. The Senate-passed bill
provided:
! $1.27 billion for the formula grant program,
! $300 million to critical infrastructure protection,
! $600 million to high threat urban areas,
! $30 million for technical assistance and other activities, and
! $219 million for interoperable communications (to FEMA and
COPS).
The enacted supplemental (P.L. 108-11) provides $2.23 billion for ODP, which
is $230 more than the Administration request. In addition, the conference provided
roughly $109.5 million for interoperable communications programs. Total
supplemental funding for first responder preparedness comes to roughly $2.34
billion, which, when added to the FY2003 regular appropriation of $2.045 billion,
comes to a FY2003 grant total of $4.385 billion. Specifically, the conference
agreement provides the following amounts:
! $1.3 billion for ODP’s formula grant programs (80% must go to
localities),
! $200 million for critical infrastructure protection (no less than 50%
going to localities),
! $700 million to high threat urban areas,
! $30 million for technical assistance, and
! $109.5 million interoperable communications (FEMA and COPS)49
A number of observers have argued that the current level of federal assistance
for first responders is insufficient and should be increased above current funding
levels. Other observers, however, point to evidence of slow state and local utilization
of federal grants as an indication that additional funding at this time is not
necessary.50 Still others have suggested that ODP’s distribution formula should be
adjusted to increase assistance to areas perceived to be high-risk.51 The conference
agreement addressed a number of these concerns. It instructed ODP to distribute
formula grant funds to states within 60 days of enactment, and further instructed
states to distribute 80% of funds to localities within 45 days of receipt. Similar
requirements for distribution were applied to the other ODP assistance programs.
Conferees also adopted several reporting requirements in the Senate bill (S. 762).
48 (...continued)
preparedness (S. 514 to S. 762).
49 House Appropriations Committee, “Highlights of Wartime Supplemental Conference
report,” press release, April 12, 2003. Available at: [http://www.house.gov/
appropriations/news/108_1/04warsuppconf.htm], visited April 14, 2003.
50 Sam Dealey, “Anti-terror Funds Left Unspent,” The Hill, March 26, 2003, p. 1.
51 Dale Russakoff and Rene Sanchez, “Homeland Burden Grows for Cash-Strapped States,
Cities,” Washington Post, Apr. 1, 2003, p. A1.

CRS-47
These include reports on risk assessments of high-threat urban areas, cost of securing
such areas, appropriation federal share of security costs, and proposals for new
distribution formulas.52 Conferees also required reports on overtime accountability
and a listing of all federal terrorism preparedness grant programs administered by
DHS.53
Departments of Justice and Homeland Security
Counterterrorism Funds54

The Administration’s FY2003 supplemental request included $500 million to
reimburse Department of Justice organizations for the following purposes: (1) to
reestablish operational capabilities that were lost or weakened as a result of a terrorist
attack; and (2) to pursue counterterrorism investigations, including the payment of
rewards. The request for this account includes language that would authorize the use
of such funding to reimburse any federal agency for costs related to detaining a
terrorist suspect as well.
For the Department of Homeland Security’s Counterterrorism Fund, the
Administration’s FY2003 supplemental request included $1.5 billion to reimburse
any homeland security organization for counterterrorism investigations and
operations, including operations in support of the Department of Defense. Among
other things, such operations could include (1) increasing border and maritime
security; (2) enhancing elements of the strategic national stockpile; (3) providing
increased port security for military outloads; and (4) deploying various biological
attack detection technologies, related countermeasures, and response assets.
Congressional Action. As reported by the Senate Appropriations
Committee, S. 762 provided $500 million, as requested, for the Department of
Justice’s Counterterrorism Fund. However, as part of an omnibus amendment
proposed by Senator Stevens, the Senate voted to re-allocate these funds among
several Department of Justice programs, including FBI salaries and construction,
state and local law enforcement assistance, Community Oriented Policing Services,
and interagency law enforcement support. The Stevens amendment also took $109.5
million of the President’s request for the Counterterrorism Fund and made it
available for additional FEMA disaster relief operations. The House measure
appropriated $50 million for the Fund, and an additional $450 million for several
other Justice Department programs, including $399 million for the FBI. For
Homeland Security Counterterrorism Fund, the Senate recommended $1.135 billion
after shifting $580 million for the Coast Guard to a separate account, but including
$215 million for the President’s Emergency Response Fund. The President had
proposed resources for the emergency fund under a separate line-item.
52 S.Rept. 108-33, pp. 23-24.
53 H.Rept. 108-76, pp. 82-83.
54 This section was prepared by William Krouse, Analyst in Social Legislation, Domestic
Social Policy Division.

CRS-48
As enacted, H.R. 1559 combines approaches taken in the House and Senate bills
of allocating most of the proposed $500 million Department of Justice (DOJ)
Counterterrorism Fund to specific accounts. The FBI receives $367 million, close
to the House recommendation, but Senate proposals for over $160 million for state
and local law enforcement and interagency law enforcement support were deleted.
Similar to the Senate bill, the conference agreement provides additional funds for
FEMA, although the $55 million appropriation is less than half the amount
recommended in S. 762.
Emergency Response Funds for the Executive and
Legislative Branches

Beyond the additional resources for the Departments of Justice and Homeland
Security to bolster their counterterrorism capabilities, the White House asked for a
$250 million fund that could be drawn upon to meet any emerging terrorist related
threat across the entire federal government. Among any authorized activity, this
highly flexible fund could be used to assist first responders and health care workers
who have suffered adverse reactions from voluntary smallpox vaccinations.
The Administration also proposed a $125 million emergency fund for the
legislative branch to meet emerging terrorist-prevention needs.
Congressional Action. House and Senate bills split on the issue of a White
House emergency response fund. S. 762 provided $215 million within Department
of Homeland Security funds, while the House did not include any resources for this
purpose. As enacted, H.R. 1559 does not provide funding for a White House
emergency response fund but includes $150 million for the Department of Homeland
Security’s Counterterrorism Fund. These resources can be used to reimburse any
Homeland Security organization for terrorism-related expenses. The conference
appropriation further includes $125 million for additional legislative branch security
requirements, with specific allocations spread over a number of accounts, as
illustrated in Table 8.
Aviation Industry Relief55
The onset of the war in Iraq has dramatically effected the airline industry. Air
travel in the short term has dropped approximately 10% according to the Air
Transport Association (ATA). More worrisome for the airlines, advance bookings
for the months ahead appear to be dropping approximately 30%. All of this is
happening against the backdrop of the events of September 11th, which also had a
huge negative impact on the industry. The airlines lost record amounts of money in
2002, following what had been the previous record loss in 2001.
Among major airlines, only Southwest was profitable in 2002, and Southwest
is the only major carrier believed to have a chance at profitability in 2003. The
industry’s second largest airline, United, is operating in receivership and the
55 This section was prepared by John W. Fisher, Specialist in Transportation.

CRS-49
possibility exists that other carriers could find themselves in this position in the near
future. There is, therefore, considerable concern that the airline industry is likely to
go through a period of major structural change.
After September 11, Congress and the Bush Administration moved swiftly to
provide the airline industry with $15 billion in federal financial support (Air
Transportation Safety and System Stabilization Act (Stabilization Act), P.L. 107-42).
The first $5 billion provided direct aid to pay for industry losses associated with the
results of the September 11th attacks. The vast majority of these funds have already
been distributed to the airlines (a listing of airlines receiving funds is available from
the Department of Transportation (DOT), [http://ostpxweb.dot.gov/aviation/]). A
second source of funding, access to $10 billion in government backed loans, required
approval by the newly created Air Transportation Stabilization Board (ATSB).
Thirteen airlines applied for the loan program. The majority received some form of
assistance, but the largest single applicant, United, was denied a loan. Of the $10
billion authorized by this program only about $1.5 billion has been committed.
In the FY2003 Emergency Supplemental, Congress again proposed providing
some short term relief to the airline industry. The House-approved package totaled
$3.2 billion in direct assistance while the Senate proposed $3.5 billion, as estimated
by CBO. Both bills had the same intent, but there were significant differences in how
aid would be provided. Both the House and the Senate measures included
significant funding for security costs. In addition, S. 762 would provide a tax holiday
for collections of the existing $2.50 per flight segment security fee charged to airline
passengers. The Senate measure would also extend to the end of 2004 war risk
insurance provisions in existing legislation that expire at the end of this year. In
addition, the Senate bill provided additional unemployment insurance to displaced
airline industry employees. Both bills had provisions that would limit airline industry
executive compensation.
The enacted emergency supplemental includes a relief package estimated by
CBO as totaling $3.1 billion for FY2003. Conferees adopted the Senate approach of
direct appropriations plus authority to temporarily suspend fees, and extend
unemployment and war risk insurance. As calculated by CBO, the airline industry
relief package breaks out as follows for FY2003:
! Grants to U.S. flag carriers for aviation security costs: $2.296 billion
! Compensation to air carriers for secure cockpit doors: $100 million
! Suspension of fees, June 1 to Sept. 30, 2003: $570 million56
! Extension of unemployment benefits: $125 million56
56 OMB further estimates that the costs (budget authority) in FY2004 of suspending fees and
extending unemployment benefits will be $130 million and $135 million, respectively.