Base Budget

base budget
The Defense Department publishes its base budget each year. Photo: Chris Hondros/Getty Images

Definition: The base budget is the ongoing funding to keep a department functioning. It's used by the U.S. federal government, businesses, and other organizations.

Departments use the base budget when planning for more than 12 months at a time. For example, they can get lower costs on contracts that are multi-year. The base budget assures contractors they will get paid. That's because departments depend on the U.S. Congress for funding each year.

The base budget assures continuity. Without it, the department can't make legal commitments for more than one year. This would cost them, and the government, more.

The base budget is not used to cover extraordinary events. These need to be paid for under a contingency budget.  How can departments plan for unexpected costs? They often know an unusual event is coming. Perhaps it's not every year. For example, private companies might host a convention every five years. Even if it occurs every year, the organization might not know how much it will cost. For example, a government might need funds for snow removal or hurricane disaster relief.

Examples

In the U.S. Federal budget, the term is especially important when reviewing military spending. That's because the Department of Defense (DoD) relies heavily on multi-year contracts. That's the most cost-effective way to buy expensive military equipment.

These include fighter jets, aircraft carriers, and amphibious vehicles.

DoD must assure Congress that it can be in a state of readiness in case of war. That requires ongoing personnel training. It takes years to master sophisticated defense equipment.

The United States does not want to repeat the experience of mobilizing for World War II.

The government had to take over private companies to produce a state of readiness. This created painful shortages of everyday supplies for civilians. (Source: Department of Defense, Base Budget Fact Sheet)

How Base Budgeting Works: Defense Department Base Budget

The U.S. Department of Defense starts with a base budget each year. It then adds additional spending for wars and other contingencies.

Here is a record of the DoD's base budget since FY 2006.

  • FY 2006 -- $410.06 billion.
  • FY 2007 -- $431.5 billion.
  • FY 2008 -- $479.0 billion.
  • FY 2009 -- $513.2 billion.
  • FY 2010 -- $527.2 billion.
  • FY 2011 -- $528.2 billion.
  • FY 2012 -- $530.4 billion.
  • FY 2013 -- $495.5 billion.
  • FY 2014 -- $496.3 billion.
  • FY 2015 -- $496.1 billion.
  • FY 2016 -- $521.7 billion.
  • FY 2017 -- $523.9 billion.

This is usually what's quoted as military spending. However, it doesn't tell the whole story. This only pays for the day-to-day operations of the Defense Department. It does not pay for The War on Terror That's what's known as the Overseas Contingency Operations (OCO). It paid for the Wars in Iraq and in Afghanistan. Here's the OCO spending, and what the new total is when it's added to the base budget.

FYOCO (in Billions)   New Total  
2006  $124.0  $534.6  
2007  $169.4     $600.9
2008  $186.9  $665.9
2009  $153.1    $666.3
2010  $163.1  $691.0
2011  $158.8  $687.0
2012  $115.1  $645.5
2013     $82.1  $577.6
2014    $85.2  $581.5
2015 Actual     $64.2  $560.3
2016 Enacted    $58.6  $580.3 
2017 Budget    $58.8  $582.7

 

If you only look at the base budget, it appears that military spending remained less than $550 billion a year. Once you add in the OCO, you see it was actually greater than $650 billion for several years.

The base budget says that military spending peaked in FY 2012, at $530.4 billion. However, if you add in OCO, it peaked at $691 billion in FY 2010.

Review Each Year's Budget