Association of the Unite� States Army

Army Budget Fiscal Year 1995

An Analysis

May 1994

Institute of Land Warfare

Association of the United States Army

Army Budget Fiscal Year 1995

An Analysis

May 1994

Institute of Land Warfare

COMPILED BY THE STAFF OF THE AUSA INSTITUTE OF LAND WARFARE

May 1994

Reproduction of this report, in whole or in part

is authorized with appropriate acknowledgement of the source.

ASSOCIATION OF THE UNITED STATES ARMY

2425 Wilson Boulevard, Arlington, Virginia 22201-3385 (703)841-4300

CONTENTS

GLOSSARY ........................................................................................................................ vi

INTRODUCTION ............................................................................................................. vii

THE FEDERAL BUDGET ................................................................................................ 1

General. .......................................................................................................................... 1

Framework for Defense .................................................................................................. 3

THE DEPARTMENT OF DEFENSE BUDGET .............................................................. 5 General .............................. ............................................................................................ 5

Formulation of the FY 1 995 DoD Budget. ..................................................................... 6

Budget Numbers ............................................................................................................ 6

Bottom-Up Review (BUR) ............................................................................................ 7 Force Structure and Manpower ...................................................................................... 7

Manpower . . . ................. .......................................................................................... 8 Readiness . . . . . . . . . . . ............................. . ... . . . . .................... . . . . . . . . ........................................... 8 Modernization ............................................................................................................... 1 0

RDT&E ................................................................................................................ 11 Procurement. ................................. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................................. . . . . . 12

Ballistic Missile Defense ............................................................................................... 13 Strategic Mobility ......................................................................................................... 14 Military Construction and Family Housing .................................................................... 14 Other Budget Considerations .................................................................... .................... 15

Environment .. ....................................................................................................... 15 Infrastructure and Base Closures ........................................................................... 15 Acquisition Reform ............................................................................................... 16 Masking Defense Costs ......................................................................................... 16

Key Factors Affecting Future Budgets: .......................................................................... 17 Roles and Missions Commission ............................................................................ 17 Future Years Defense Program (FYDP) ................................................................ 17

Defense Outlook ........................................................................................................... 18

THE ARMY BUDGET ..................................................................................................... 19 Army Budget Trends and Patterns ................................................................................. 19 Army Budget Breakout for FY 1995 ............................................................................. 21 Strategic Construct. ...................................................................................................... 21 Structure ....................................................................................................................... 22 Manpower ..................................................................................................................... 25

Drawdown ............................................................................................................ 25

Pay Costs .............................................................................................................. 26

Recruiting ............................................................................................................. 27

Training ........................................................................................................................ 27 Readiness ...................................................................... .................... ........................... 28 Operation and Maintenance (O&M) .............................................................................. 28

iii

The Legacy of FY 1994 .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 O&M for FY 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. .. .. 29

Modernization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . .......... 30

Procurement. . . . .... .. . . ... .... . . . . . . ......... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Aircraft ................................................................................................................. 33 Missiles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Weapons and Tracked Combat Vehicles (WTCV) ........... . . . . . . . .. . . . . . . . . . . . .... . . ... . . . . . .. . . 35 Ammunition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Other Procurement Army (OPA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Research, Development, Test and Evaluation (RDT &E) .... ... . . . .... . . . . .. . . . . . . . . . . . . . . . . . . . . . . .. . . . 40

Military Construction and Family Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Military Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Family Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Strategic Mobility ... . . . . . . . . . . . . . . . . . ...... ....... ......... ...... . . .... . . . ... . .. . . . . .... .. ..... . . . ... . . . . ... . . . .... . . ..... 44 Other Budget-Related Items .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Chemical Demilitarization . . . . . . . . . . . . . . . . . . . ...... . ...... ...... ........... .... .. .... . ....... . ... . . . . . . . . . . . . . . 44 Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... . ..... ................................ . . . . . . . . . . . . . . . . . . . . 45 Infrastructure and Base Closures ....... . . . ... ............... .. . . ..... ...... . . . . ... . . ... . . . . . . . . . . . . . . . . . . . . 46

Reserve Components Summary ..... .............. . ..... . . ..... . . ..... . . ..... . ..... . . . ... . . . . ... . . . . . . . . ... . . . . .... . 46 U.S. Army National Guard .. . . . . .... . ..... ... ... . . . . . . . ... .. ................................ . ............. .... 46 U.S. Army Reserve ......................... . . . . . . . . . . . . . ..... . ...... ....... . . . ... . . . .... . . . . . . . . . . . ... . . . . . . . . ... 47 Additional Notes on the Army RC Program .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... . . . . . . . . . . . . . . . . . . . . . 47

An Assessment of the Army Budget. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 49

APPENDIX I

Budget Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . .... .. ... . . . . . . . . . . I-1

APPENDIX II FY 1995 Army Budget Summary/Appropriation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. . II- 1 Operation and Maintenance Army Budget Summary Data .. . . . . . .................................. II- 3 Procurement Budget Summary Data ................................ . .... . ...... . ..... . . .... . . . . ... . . ... ... . . . II- 5 Research, Development, Test and Evaluation Army Budget Summary ..... . . . . . ... . . ..... . . IT-10

TABLES

1. Outlays, Receipts and Deficits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. National Defense Topline . . . . . .... . .. . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... . . . . . . . . . . . . . . . . . 5 3. DoD FYDP vs. Topline . . . . . . . ... . . . ....... ... ... .. . . . ....... .. ... . . . .... . .... . . . ................. . . . . .. . . . . . . . . . 6 4. Budget Authority by Title . . . . . . . . . . . . . . . . . . . . . ... . . ... . . . . ... ....... . ... .... ... ...... . . ... . . . . . ... . . . ......... . . 6 5. Budget Authority by Pay and Nonpay Categories ................................................... 6 6. Force Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . .. . . . .......... . . . . . . . . . . . . . . . . . 8 7. Operational Training Rates . . . . . . . . . . . . .... .. . . . . .. . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . 9 8. RDT&E Profile for FY89 to FY95 . . . . . . .. . . .. ... . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ........ ..... .. 1 1 9. Selected Programs RDT&E .. . . . ........ .... . . . . . . . . . . . . . . . . . . . . ..... . . ..... . . . . . ... ........ . . . . . . . . . . . . . . . . . . l1

10. Selected Procurement Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . ....................... . . . . . . . . . . . . . . . . ...... ... 12 11. Ballistic Missile Defense............... . . . . . . . . . . . . . . . . ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 12. National Defense Sealift Fund . . . . . ...... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 13. Military Construction and Family Housing .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........... ... ........... . .... 15

iv

14. Army Budget Summary . . . . . . . . . . . . . . . . . ...... . . . . . . . . . . . . . ... . . . . . . . . . . . . . . . . . . ... . . . . .... . . . . . . . . . ... . . . ...... 19 1 5 . Total Obligational Authority Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 16. Combat Force Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 17. A Shift to CONUS ............................................................................................... 23 18. Army End Strength . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 19. Army Military Personnel Costs . . . . . . . . . . . . . . . . . . . . . . .. . .. . .. ... .. . . . . . .. .. ... . .. ... ... . . .. . . . . . . . . . .... ... . 27 20. Army Operation and Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 21. Procurement Summary by Appropriation .. . . . . . . . . . . . . . . . . . . . . . . .. . . . . .. . . . . . . . . . . . . . . . . . . . . .. ........ 32 22. RDT&E Summary by Budget Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 23. Army Military Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . ... .. . 43 24. Army Family Housing .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 25. Chemical Agents and Munitions Destruction, Defense ........................................... 44 26. ARNG Budget Summary . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 27. ARNG Force Structure and Manning Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 28. USAR Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 29. Army Reserve Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

FIGURES 1 . FY 1995 Federal Outlays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2. Domestic Discretionary, Defense and Mandatory Outlays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3 . Defense Outlays as a Share of GDP . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . .. . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4. Defense Outlays as a Share of Federal Outlays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 5 . 1995 DoD Budget by Service ......... .................... ........ ............. ................................ ? 6. DoD Manpower Levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 7. Procurement Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 8. Army Real Growth Trends FY70-FY95 ...... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . 20 9. Army Dollar Resource Trends . . . . . . . . . . ..... . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

10. Army Program Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 1 1 . Force Closure Timeline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 12. Division Stationing by the End of FY95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 1 3 . The Army Engaged (as of April 1 994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 14. Army Active Component Personnel Strength FY93-99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 15. Army Reserve Components Personnel Strength FY 93-99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 1 6. Army Civilian Personnel Strength FY 93-99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . 26 17. Procurement Funding Profile ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 18. Aircraft Procurement. . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . ..... . . . . . . . . . . . .. . . . . .. . . .. . . . . . . . . . . . . . . . . . . . . 33 19. Missile Procurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 20. WTCV Procurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 21 . Ammunition Procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 22. Other Procurement. . . . . . . . . . . . . . . . . . ...... . . . . . . . . . . . . . . . . . . . . .... .. ... .. . . .. ....... .. .. . . ..... ..... .. ... .. ... ... 39 23. Army RDT&E Funding Profile ..... . .. ... ........................ ........................................... 40 24. Environmental Funding (Total Army) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

v

GLOSSARY

AFAS Advanced Field Artillery System MRC Major Regional Conflict

AFH Army Family Housing MSE Mobile Subscriber Equipment AGS Armored Gun System MSL Missile ARNG Army National Guard MYP Multiyear Procurement ASM Armored System Modernization NBC Nuclear-Biological-Chemical BA Budget Authority NFIP National Foreign Intelligence Program BA 1 Budget Activity 1 NG National Guard BA 2 Budget Activity 2 NMD National Missile Defense BA 3 Budget Activity 3 NTC National Training Center BA 4 Budget Activity 4 O&M Operation and Maintenance BAT Brilliant Anti-Armor Submunition OPA Other Procurement-Army BMAR Backlog of Maintenance and Repair OPTEMPO Operating Tempo BMD Ballistic Missile Defense OSD Office of the Secretary of Defense BMDO Ballistic Missile Defense Organization PAC Patriot Advanced Capability BRAC Base Realignment and Closure PIP Product Improvement Program BUR Bottom-Up Review POMCUS Prepositioning of Materiel Configured C2 Command and Control to Unit Sets C3 Command, Control and Communica-

RC Reserve Component tion

RCAS Reserve Component Automation CINC Commander in Chief

System CONUS Continental United States

RDA Research, Development and Acquisition CTC Combat Training Center

RDT&E Research, Development, Test and DA Department of the Army

Evaluation DERA Defense Environment Restoration

ROTC Reserve Officer Training Corps Account

DoD Department of Defense RPM Real Property Maintenance

ED Engineering Development SAD ARM Sense and Destroy Armor

EMD Engineering and Manufacturing S&T Science and Technology

Development SATCOM Satellite Communications

ERINT Extended Range Interceptor SAW Squad Automatic Weapon

FARV Future Armored Resupply Vehicle SOF Special Operations Forces

FY Fiscal Year SSB Special Separation Benefit

FYDP Future Years Defense Program STARS Surveillance Target Attack Radar

GDP Gross Domestic Product System

HMMWV High Mobility Multipurpose Wheeled THAAD Theater High Altitude Area Defense

Vehicle TMD Theater Missile Defense

HIV Human Immunodeficiency Virus TOA Total Obligational Authority

JCS Joint Chiefs of Staff TSSAM Tri-Service Standoff Attack Missile

LAM Louisiana Maneuvers USAR United States Army Reserve

MCA Military Construction-Army V SI Voluntary Separation Incentive

MLRS Multiple Launch Rocket System WTCV Weapons and Tracked Combat Vehicles

vi

INTRODUCTION

This year's defense budget is the product of several converging thrust lines: the administration's plan to reduce military structure and costs while maintaining modem forces; the Bottom-Up Review's vision of a military strategy which could effectively handle two nearly simultaneous major conflicts, plus peacekeeping missions and missions short of war; and a total defense package within a preset but declining fiscal top line through 1 999.

The FY 1 995 budget analyzed here is simply the first step on the way to the 1 999 objective.

Several major questions loom: Are the forces now projected adequate to meet the future requirements spelled out in the Bottom-Up Review? Will the dollars be made available over the next five years to meet modernization demands, even with the reduced force? While the administration contends all this can be done if assumptions hold, there are other serious challengers who say that we are simply cutting too much, too fast.

There is very little slack if the assumptions are not valid or are overtaken by events, and the probability of this is very high.

What is sadly lacking for proper analysis of this budget and the five-year plan that accompanies it is a clear statement of national military strategy derived from an equally clear statement of national security policy. With such statements, we could judge and debate security needs much more intelligently. What we are now using is the vision of military strategy from the Bottom-Up Review. This, by itself, lacks the depth and legitimacy to make all the important decisions that commit major defense resources into the next cen­tury.

All the military departments share concerns for the future, i.e., the apparent gap between future capabili­ties and future mission requirements, and the uncertainty of future funding, particularly investment and modernization. The Army is particularly vulnerable in both respects.

Focusing on the Army, over the next five years it will face a modernization crisis unless adequate fund­ing is forthcoming. By all comparisons, the Army is running a poor third in relation to the other military departments. The Army's research, development, test and evaluation and procurement combined is only 14 percent of the DoD total. The adequacy of future Army forces directly depends on maintaining technical superiority; the existing research, development and acquisition (RDA) funding levels of $11 billion or less per year will not get it there. It is my judgment that about $3 billion more per year is needed to meet minimum Army RDA needs into the next century.

In the meantime, Congress is debating the FY 1995 budget. Facing real uncertainties with respect to the nation's security policy and needs over the next few years, Congress should avoid making major changes or cuts in the President's budget. It should especially refrain from imposing future outlay cuts without a program rationale. This simply mortgages the future without considering the resulting force implications.

May 1994

Jack N. Merritt General, USA Retired President, AUSA

vii

---------------------------------------------------------------------------------,

THE FEDERAL BUDGET

GENERAL

The proposed federal budget for FY 1995 re­flects outlays of $ 1 .518 trillion, FY 1995 estimated receipts of $1 .342 trillion and an estimated deficit of about $ 1 76 billion.

The state of the national economy and deep public concerns over deficit spending are driving federal policy through the budget. The FY 1 995 budget is just one segment in a series through the rest of the decade and it is necessary to look at the full five­year extension. This is the span considered by Con­gress in the Budget Resolution. The FY 1995 Bud­get of the United States Government with extensions through 1 999 is shown in table 1 .

4.4 percent and o n 10-year Treasury notes at 5.8 percent; and overall real growth in the Gross Do­mestic Product (GDP) from three percent initially, but slowing somewhat to about 2.5 percent by 1999. These assumptions, however, are now the best bases for macro projections.

How does all this affect national security and defense spending, both for FY 1995 and beyond? First, let us look at where the outlays are expected to go for FY 1995 (see figure 1 ).

When Congress addresses possible tradeoffs or reductions to improve the deficit situation, the only flexible part of the federal budget over which they have direct control is that segment called discretion­ary spending. This is the part Congress must ap-

Table 1

OUTL AYS, RECEIPTS A ND DEFICITS ($ billions*)

FY94 FY95

Outlays 1,484 1 ,5 1 8 Discretionary (550) (542) Mandatory (730) (763) Interest (203) (21 3)

Receipts 1 ,249 1,342

Deficit 235 176

*Numbers may not add due to rounding.

Source: Budget of the United States FY 1995

It should be noted that the above numbers re­flect no changes resulting from a new health care plan. Also, the estimates are based on certain eco­nomic assumptions which could vary, to include: a consumer price index ranging from 3.0 percent in 1994 to 3.4 percent in years 1997 to 1 999; interest rates on 91-day Treasury bills ranging from 3.8 to

1

FY96 FY97 FY98 FY99

1,584 1,660 1,738 1,830 (544) (544) (548) (554) (8 15) (88 1 ) (945) ( 1 ,021 ) (225) (235) (245) (255)

1 ,410 1 ,480 1,55 1 1 ,629

173 1 8 1 187 201

prove and appropriate on a regular basis. Altogether, this represents about one-third of the budget today, but it is a decreasing share as mandatory costs rise. The current ratios are 35 percent discretionary, 14 percent interest on the federal debt and 51 percent mandatory. By 1999 they are expected to change to about a 30: 14:56 ratio.

Fig. 1. FY 1995 Federal Outlays

DEBT INTEREST 14%

Mandatory Spending

ENTITLEMENTS 50%

$1.52 Trillion

17%

INTERNATIONAL 1%

Discretionary Spending

r---- DEFENSE 18%

Source: Budget of the United States FY 1995

Discretionary spending is where the action is played, and about half of the discretionary spending in the budget is attributed to defense. Any initia­tives to cut outlays overall or to beef up other do­mestic programs would clearly target defense and,

furthennore, would be applied to defense budgets

which are already programmed on a downward slope

in real tenns. Trends in mandatory, domestic discre­

tionary and defense outlays as projected through

1999 are shown in figure 2.

Fig. 2. Domestic Discretionary, Defense and Mandatory Outlays

40

20

0

-20

-40

% Cumulative Real Changes FY 1990 - FY 1999

································•·························································· ·································

Domestic Discretionary

Spending Increases 12%

Defense Outlays Decrease 35%

I····································································································· ·······················

Source: Budget of the United States FY 1995

2

FRAMEWORK FOR DEFENSE

Defense spending has gone down some 35 per­cent in real (inflation-adjusted) terms since FY 1985. This will probably increase to about 40 percent by FY 1 999.

Figures 3 and 4 show the relationship of defense spending, in outlays, as a share of the GDP and as a share of federal spending. Figures for FY 1 994 and beyond are estimates. Both of these will represent the lowest percentages for defense since pre-World War II.

Fig. 3. Defense Outlays as a Share of GOP

12

10 fi------------------· ·····---------··············· -----·············--- ----········ ·-··-·--------· ···········-----··············· ··-----------·········· ··· ·--··--··········

1-z 8 w () 0:: w 6 a..

4

2

0 50 55 60 65 70 75 80

FISCAL YEARS

85 90 95

Source: Budget of the United States FY 1995

Fig. 4. Defense Outlays as a Share of Federal Outlays

50

1-z 40 w ()

ffi 30 a..

20

10

0 50 55 60 65 70 75 80

FISCAL YEARS

3

85 90 95 99

So urce: Budget of the United States FY 1995

Congressional caps have been placed on total discretionary spending, of which defense spending is about half, but there is no longer the "firewall" barrier that existed from FY 1991 through FY 1993 precluding the diversion of defense funds for other purposes. This leaves defense in a vulnerable posi­tion in which the budget could shape future national military policy.

Congress has (as of May 12) completed its rec­onciliation of the FY 1995 Federal Budget and, by

- -· --

=· ---------------------------

4

vote of both houses, approved a $1 .518 trillion bud­get in terms of outlays. The allocation for national defense was $270.7 billion in outlays.

This action is directive to the rest of Congress but does not need the President's signature. Further suballocations must be made by the Appropriation Committees. While this establishes broad spending limits, it is not binding on specific programs.

---- -

__ = --------

THE DEPARTMENT OF DEFENSE BUDGET

GENERA L

The Department of Defense(DoD) budget (of­ten identified as the Pentagon Budget) represents 95.6 percent of the total national defense funding. National defense also includes about $11.5 billion for Department of Energy military activities and cer­tain other military-related activities such as the Fed­eral Emergency Management Agency (FEMA).

The FY 1995 budget request is now before Con­gress and was accompanied by the required five-year projection (through FY 1 999).

An overall display of national defense top line fig­ures in terms of budget authority and outlays is con­tained in table 2.

Both budget authority and outlays are impor­tant. Budget authority is the language of congres­sional appropriations and provides legal authority

to obligate these funds for buying goods and ser­vices, including pay for military and civilian person­nel. Outlays, on the other hand, are the actual pay­ments made in any particular year.

Outlays are important because these payments are dollar outflows which impact directly on the defi­cit. They are the key considerations in setting bud­get caps. In defense, with heavy investments which spend out over a period of time, about 35 percent of the outlays in any particular year are based on prior­year contracts (or obligations). Only pay and oper­ating costs can provide a high percentage of outlays during the first year of obligation. If outlays have to be curtailed with a short planning lead time, this in­variably hits current operations, since pay is usually fixed in the near term.

Unless otherwise indicated, the rest of this sec­tion on the DoD budget will be in terms of budget authority.

Table 2

NATIONAL DEFENSE TOPLINE (Current$ billions)

FY94 FY95 FY96 FY97 FY98 FY99 Budget A uthority

DoD Military 249.0 252.2 243.4 240.2 246.7 253.0 DoE and Other 1 1.9 1 1.5 11.9 1 1 .8 12.0 12.1 Total National Defense 260.9 263.7 255.3 252.0 258.7 265. 1 % Real Change -9.0 -0.9 -5.9 -4.0 -0.2 -0.3 (adjusted for inflation)

Outlays DoD Military 267.4 259.2 249.1 244.6 244.7 245.5 DoE and Other 1 2.5 1 1.5 1 1 .9 1 1 .8 11.9 12.0 Total National Defense 279.8 270.7 261.0 256.4 256.6 257.5 % Real Change -6.0 -5.2 -6.4 -4.5 -2.7 -2.4

Source: DoD

5

FORMU LATION OF THE FY 1995 DOD BUDGET

The FY 1995 budget reflected the results of the Bottom-Up Review directed by then Secretary of Defense Les Aspin. This generated the concept of the two almost simultaneous rna jor regional conflicts (MRC) with other requirements for humanitarian activities and peacekeeping, as well as domestic mis­sions. From this, the force structure and manpower criteria through FY 1999 were developed.

FY 1995 is the first step in the five-year journey to the new 1999 objectives. Congressional action of the prior year (FY 1994) budget and continuity with FY 1994 were also key factors. Radical changes were avoided. Overall sizing of the FY 1995 bud­get, however, was already dictated by the administration's imposed budget cap.

When the budget was prepared, adjustments were made in the Future Years Defense Program (FYDP) through FY 1999. These figures were pro­vided with the budget. It was acknowledged, how­ever, that the costing of the revised FYDP through FY 1999 was about $20 billion higher than estab­lished ceilings during this same period (see table 3). How this will be absorbed is still to be determined.

Table 3

DOD FYDP VS TOPLINE (Current$ billions)

Cumulative FY96-

FY95 FY99 Budget A uthority FYDP 252.2 Topline 252.2

Funding Difference

Source: DoD

BUDGET NUMBERS

1 ,003.4 983.3

20.1

A breakout of the DoD FY 1995 budget in sev­eral different configurations is reflected in tables 4 and 5 and in figure 5.

6

Table 4

BUDGET AUTHORITY BY TITLE ($ billions*)

FY93 FY94 FY95

Military Personnel 76.0 70.8 70.5 Operation & Maintenance 89.2 88.0 92.9 Procurement 52.8 44.5 43.3 RDT&E 38.0 34.8 36.2 Military Construction 4.6 6.0 5.0 Family Housing 3.9 3.5 3.3 Other 3.0 1 .5 0.9

Total 267.4 249.0 252.2

*Numbers may not add due to rounding.

Source: DoD

Table 5

BUDGET AUTHORITY BY PAY A ND NONPAY CATEGORIES

($ billions*)

Pay Civilian Payroll Active Military Pay Retired Pay Accrual Other Military Personnel

Total Pay

Nonpay O&M Excluding Pay Procurement, RDT &E

and Construction Total Nonpay

Total DoD

FY94 43.3 49.2 1 2.1

9.4 114.1

FY95 41.6 48.4 11.9 10.2

112.1

52.9 59.1

82.0 80.9 134.9 140.1

249.0 252.2

*Numbers may not add due to rounding.

Source: DoD

Fig. 5. 1 995 DoD Budget by Service (Percentage)

Air Force

Navy 31.1

(Includes Marine Corps)

29.5

Defensewide

15.3

Army

24.1

FY 1995 = $ 252.2 billion

BOTTOM-UP REVIEW (BUR)

Guidelines for the budget and revision of the

FYDP were derived from the Bottom-Up Review,

conducted in the Office of the Secretary of Defense last year and made public in September 1993.

•

•

•

Stated goals of the Bottom-Up Review were to:

establish essential force structure- two nearly­

simultaneous major regional conflicts;

sustain overseas presence;

ensure continuing readiness of forces;

• launch initiatives to reduce threats;

•• military-to-military cooperation;

•• cooperative threat reduction;

•• counterproliferation;

•• expanded peacekeeping capabilities;

• preserve key elements of modernization and in­

dustrial base;

7

• strengthen defense foundations; •• environmental security; •• defense reinvestment.

Source: DoD

From this came the strategic visualization, force structure, manpower levels, modernization guidelines and priorities. The Bottom-Up Review did not ad­dress nuclear forces, but DoD is now conducting a study, the Nuclear Posture Review, to address this range of issues.

Because the Bottom-Up Review focuses on a 1999 objective force, and since the FY 1 995 budget needs to be discussed in a broad context, projec­tions in this paper will extend through 1999 when applicable.

FORCE STRUCTURE AND MANPOWER

The Bottom-Up Review would cut major com­bat forces below those projected in the Base Force, which was the end-state structure projected in the last Bush budget and prior to BUR. Some of the reductions are already reflected in FY 1995.

Table 6

FORCE STRUCTURE

Cold War Base FY90

Land Forces Army Active Divisions 18 Army Reserve Component Divisions 10 Marine Corps (3 Active/1 Reserve) 4

Navy Ship Battle Forces 546 Aircraft Carriers

Active 15 Reserve 1

Navy Carrier Wings Active 13 Reserve 2

A ir Force Active Fighter Wings 24 Reserve Fighter Wings 12

Source: DoD

Manpower

Manpower adjustments follow force structure changes. Civilian reductions are based largely on assumed shrinkage of infrastructure over time. Al­together, the cost of personnel has a large impact on the budget and accounts for $112.1 billion out of $252.2 billion in the FY 1995 budget.

For projected manpower levels by category, see figure 6.

The budget provides for a 1.6 percent pay in­crease for both military and civilian personnel.

The budget also includes more than $1 billion to continue transition assistance to separating person­nel, both military and civilian.

8

Base BUR Force FY95 Plan

1 2 1 2 10 8 8 5 plus 4 4 4

430 373 346

1 3 1 1 1 1 1 1

1 1 10 10 2 1 1

15.3 13 13 1 1 .3 7.5 7

READINESS

The DoD budget submission emphasizes readi­ness as its top priority. This is reflected in the FY 1995 budget with an increase of $5 billion (plus 5.6

percent) in Operation and Maintenance (O&M) fund­ing over the FY 1994 level.

While there are many aspects to total force readi­ness, the Operation and Maintenance appropriations provide funding for training, maintenance, base sup­port, and other requirements to keep soldiers and units in a ready-to-fight condition.

Of course, not all of the $5 billion goes directly to readiness-related items or activities. A substan­tial portion must be applied to price increases and civilian pay raises, but the overall thrust is clear.

Fig. 6. DoD Manpower Levels

Active Military Down 32% 2151

(End Strengths in Thousands)

Selected Reserves Down 20%

*Bottom-Up Review

Civilians Down 29%

804

Source: DoD

Table 7

One measure used to gauge training is the oper­

ating tempo (OPTEMPO) from which costs of fuel,

parts, maintenance and other support are derived.

These are largely O&M funded. The FY 1995 bud­

get fully funds the service operational training rates,

as outlined in table 7.

OPERATIONAL TRAINING RATES

Another important aspect of readiness is main­

tenance. To curtail a growing depot maintenance

backlog, the FY 1995 budget increased the a11oca­

tion for this purpose more than 20 percent, from $5.1

billion in FY 1994 to $6.3 billion.

As pointed out in the interim report on readiness

by the Defense Science Board (DSB) Task Force,

the real question is, readiness to do what? The task

force emphasized that readiness must be viewed in a

joint perspective involving all ofthose things which

relate to the ability of forces to react to contingen­

cies. This includes readiness at home stations,

deployability, and ability to perform the necessary

missions in the theater of operations. In this respect, the whole mission environment needs a more com­

prehensive definition with meaningful readiness in­dicators, thus permitting better resource allocations.

9

Army Annual Tank Miles Flying Hours per Crew

per Month Navy

Flying Hours per Crew per Month

Ship Steaming Days per Quarter

• Deployed Fleet • Nondeployed Fleet

Air Force Flying Hours per Crew

per Month • Fighter/Attack

Aircraft • Bombers

Source: DoD

FY93 FY94 FY95

588 620 800

13.5 14.5 14.5

24 24 24

54.9 50.5 50.5

28.3 29 29

20.7 19.7 19.7

21.8 18.0 19.9

In the past when readiness has been seriously degraded, it usually meant that O&M had taken sig­nificant budget cuts or had been used to fund other things. When the damage is done, it takes consider­

able time to rebuild and retrain. Readiness remains DoD's primary peacetime mission.

MODERNIZATION

Modernization, as discussed here, refers to all

aspects of research, development and acquisition (RDA).

Guidelines prescribed by the Secretary of De­fense for modernization consistent with the Bottom­Up Review include:

• sustainment of a strong science and technology base;

• continuation of investment in next generation weapon systems;

• refocusing of ballistic missile defense program;

• sustainment of a strong intelligence program;

• preservation of key elements of the industrial base

that would otherwise disappear.

The constrained budgets for RDA, particularly procurement, make these guidelines difficult to achieve. It is clear for FY 1995, at least, that pro­curement had to pay for a big portion of the Opera­

tion and Maintenance increases. RDT &E fared rea­sonably well, however. RDT &E funding levels ($36.2 billion for FY 1995) have been fairly consis­

tent over the past five years. The science and tech­nology program (basic research, exploratory devel­opment and advanced development) enjoys a prior­ity status. Plans are to continue the level of effort for RDT&E.

Procurement was a different story. The DoD FY 1995 level of $43.3 billion is the lowest in many years. The drop in buying power since FY 1989

10

alone was about 54 percent. The plan to invest in the next generation of weapon systems must, of ne­cessity, be very selective.

The rationale, as explained by Secretary of De­

fense William Perry in his testimony on the budget, is based on several factors: The force is smaller, so future buys will be smaller than in the past; also, there is the cushion of existing inventory built up during the Cold War. Perry acknowledges, however, that levels of procurement cannot remain this depressed and will have to increase sometime between 1996 and 1999. The key question, however, is how the dollars will be generated to do this.

As indicated in the guidelines, the Ballistic Mis­

sile Defense program will give priority to the The­ater Missile Defense (TMD) portion. (See the sec­

tion on BMD.)

Of special concern are the status and health of the defense industrial base. Clearly it is being eroded by the drastic drop in defense contracts as well as the closing down of major segments in the industrial side of defense.

The Bottom-Up Review stressed the importance of maintaining an adequate industrial and techno­logical base. A vigorous research and development program and emphasis on dual-use programs pro­vide some effort in this direction, along with greater emphasis on buying commercial items and using commercial specifications where possible. It is rec­ognized, however, that some military systems are unique and that funding for certain critical defense­unique capabilities is in order. Items which fall un­der this industrial base rationale, along with FY 1995 budgeted amounts where applicable, include:

• nuclear aircraft carrier ($2.5 billion), justified on the basis of maintaining nuclear ship production

capability;

• upgrade of Bradley Fighting Vehicle and Abrams tank ($335 million); this upgrade program, in

conjunction with foreign sales, is needed to main­tain production base for tracked combat vehicles;

• sustaining selected plant capacity for ammuni­tion production ($75 million);

• Sealift Mobility Program ($600 million); while

fully justified by requirements for strategic lift, this program, which includes about $3 billion over the entire FYDP, will help sustain the fal­tering shipbuilding industry;

RDT&E

• submarine construction to keep the submarine industrial base at a minimum sustaining level. FY 1 995 shows $507.3 million (all RDT&E) in a new class of attack submarine, and the Secre­tary of Defense has stated a plan to invest in a new Seawolf nuclear submarine in the next few years because of the industrial base consider­ations.

Table S

RDT&E PROFILE FOR FY89 TO FY95 ($ billions)

FY89 FY90 FY91 FY92 FY93 FY94 FY95

Constant (FY 1995 dollars) 45.0 42.1 40.3 39.7 40.0 35.7 36.2

Current 37.5 36.5 36.2 36.6 38.0 34.8 36.2

Source: DoD

Table 9

SELECTED PROGR AMS RDT&E ($ millions)

Program Army

Navy

Armored System Modernization Comanche Longbow

FA-18 Squadrons (C/D and ElF) V-22A New Attack Submarines

Air Force F-22 Advanced Tactical Fighter B-2 Advanced Technology Bomber MILSTAR Satellite Communications Joint Surveillance(farget Attack Radar System (JSTARS)

Defensewide Ballistic Missile Defense

Source: DoD

11

FY94

147.9 366.7 277.7

1 ,454. 1 5.2

389.7

2,082.9 785.8 91 8.4 283. 1

2,617.2

FY95

1 75.5 525.2 1 9 1 .3

1 ,4 1 1 .9 496.9 507.3

2,461 . 1 408.5 648.0 190.4

2,979.9

Procurement

Fig. 7. Procurement Profile

100 {$ bil l ions)

80

60

40

0 FY89 FY90 FY91 FY92

Table 10

•constant FY 1995 $

(;2] Current $

FY93 FY94

SELECTED PROCUREMENT PROGR A MS ($ millions)

Program FY94 Army

UH-60 Black Hawk Helicopter (63) 427.6 (60) Bradley Fighting Vehicle Base Sustainment 192.4 Abrams Tank Upgrade Program 96.7 Self-Propelled Howitzer 155rnrn M 109 A6 159.5 SINCGARS Radio System 352. 1

Air Force C-1 7 Airlift Aircraft (6) 2,157.8 (6) E-8A Joint STARS (2) 560.0 (2) Tri-Service Attack Missile 159.6 (48) AMRAAM Air-to-Air Missile ( 1 ,007) 487.2 (413)

Navy FA-18C/D Hornet (36) 1 ,648. 1 (24) T45 Goshawk Trainer (12) 289.6 ( 12) Trident II Ballistic Missile (24) 1 ,098.6 ( 1 8) Tomahawk Cruise Missile (216) 257.5 (217) Nuclear Aircraft Carrier 1 ,200.0 (1 ) Aegis Destroyer (3) 2,637.9 (3)

Source: DoD NOTE: Quantity in parentheses.

12

FY95

Source: DoD

FY95

393.1 145.4 175.2 237.6 367.4

2,661.9 564.2 373.9 309.5

1 , 1 17.2 245.4 696.0 302.0

2,447.0 2,697.7

Procurement for FY 1995 represents 17 percent of the DoD budget, down from more than 33 per­cent in FY 1985. Also, Procurement is down about 23 percent in buying power since FY 1993 and some 54 percent below the peak in FY 1989. The ratio of Procurement to RDT &E is now close to 1.2: 1, while the ratios for many years prior to FY 1993 ranged from 1.7:1 to more than 3 :1. All this points to the fact that the present budget is indeed procurement poor.

BALLIS TIC MISSILE DEFENSE

The Ballistic Missile Defense program, fonnerly known as the Strategic Defense Initiative (SDO, was changed in early 1994 by direction of then Secretary of Defense Les Aspin to downgrade the strategic focus of a national missile defense and give the pri­ority of effort and funding to a more urgent need -an effective theater missile defense. This was done in recognition that the threat of massive nuclear at­tack on the United States was not realistic in the foreseeable future, but that the proliferation of short­and medium-range missiles, along with weapons of mass destruction, was a growing threat.

The name of the program was changed to Bal­listic Missile Defense and the old SDIO became the BMD Organization (BMDO). Priorities were also revised.

• First priority would go to the development and deployment of theater missile defense (TMD) to meet the growing threat from ballistic missiles to forward deployed forces.

• Second priority would be a scaled-back program for national missile defense of the United States. Efforts would be focused on maintaining the option to deploy a missile defense system of the United States, one capable of providing a de­fense against limited attacks by ballistic missiles. Most of the elements of the national defense sys­tem would remain as research and technology development programs.

• Third priority would be for advanced follow-on technologies.

13

Funding for Ballistic Missile Defense is now man­aged on a defensewide basis by the Ballistic Missile Defense Organization, which reports to the Under Secretary of Defense for Acquisition and Technol­ogy. In general, execution of the program is through the military departments, with allocation of funds from DoD to the services.

BMDO appropriation summaries for FY 1994 and FY 1 995 are shown on table 11.

Table 11

BALLISTIC MISSILE DEFENSE ($ millions)

FY94 FY95 ( Est.) ( Est.)

RDT&E 2,617 2,980 Procurement 12 1 273 Military Construction 3

Total 2,741 3,254

Source: DoD

At this stage, the program is essentially all RDT&E and represents about 8.2 percent of total DoD RDT &E funding for FY 1995.

The whole program was squeezed down when

Congress cut about $1 billion from the $3.8 billion BMD request in the FY 1994 budget, and it remains an attractive target for congressional budget cutters in FY 1995.

The major research and development (R&D) portion of TMD programs in the FY 1 995 budget includes Theater High Altitude Area Defense (THAAD), Ground Based Radar (GBR), the Arrow Continuation Experiment with Israel, Patriot PAC-3 and Extended Range Interceptor (ERINT). Deci­sions are still pending for the Corps Surface-to-Air

Missile (Corps SAM), the boost phase interceptor

and the sea-based wide-area TMD.

The National Missile Defense (NMD) program for the defense of the United States has shifted to advancing technical readiness for possible future de­ployment. Funding for the NMD portion amounts to about $584 million for FY 1 995. The previous Brilliant Pebbles program was tenninated and re­search on directed energy and particle beam tech­nology cut way back. The main focus will be an exoatmospheric kinetic kill vehicle. Brilliant Eyes, a mid-course missile tracking program, will continue as an acquisition program because it can substan­tially increase the defended area of a TMD system like THAAD, which can be used for both Theater Missile Defense and National Missile Defense.

STRATEGIC MOBILITY

A critical pillar for the Bottom-Up Review con­cept is strategic mobility. There are four dimensions to this program: airlift, sealift, prepositioned equip­ment, and surface transportation and outloading in the United States.

All have major budget implications which must be funded if the projection concept is to work. Deployability is an important aspect of overall force readiness.

Airlift is tied in with the procurement of the C-17 air lifter. The FY 1 995 budget includes $2.7 bil­lion for six additional aircraft. The Air Force has the authority to purchase 40 (out of a goal of 120) but no assurances beyond that. Since the C-1 4 1 fleet is aging, other needs may have to be met by a com­bination of C-5Bs, which means reopening the line, and purchase of modified commercial aircraft such as the Boeing 7 4 7-400 freighter aircraft. Another air mobility study is now in process. Funding for airlift is included in the Air Force budget.

Sealift is necessary to move heavy equipment. The Joint Chiefs of Staff Mobility Requirements Study represents the guide for additional sealift needs through 1 999 with the addition of nine prepositioning ships and 1 1 ships for surge sealift capability.

A National Defense Sealift Fund was established. The FY 1 995 budget shows the following funding levels.

14

Table 12

NATIONAL DEFENSE SEALIFT FUND ($ millions)

FY93 FY94 FY95

2,463 1 ,541 609

Source: DoD

About $3 billion is allocated to sealift over the

revised FYDP through 1999. Strategic sealift is man­

aged by the Navy.

Prepositioning, the third leg, includes both

ground and floating prepositioning. Budgeted costs

are included in budgets of the military departments

involved.

Improvements for deployability in the United

States, including loading and transportation, are re­

flected in military department budgets.

MILITARY CONSTRUCTION AND FAMILY

HOUSING

Both Military Construction and Family Housing

are contained in the Military Construction Appro­

priations Bill. This is separate and distinct from the

Defense Appropriations Bill, which carries all other

DoD appropriations.

The DoD budget request for these programs for

FY 1 995 total $8.36 billion. Summaries of both

Military Construction and Family Housing are shown

in table 1 3.

Under the Military Construction portion, about

$2.7 billion will go for base closure activities and

$300 million for planning and design, leaving only

about $2.5 billion for construction other than base

closure-related.

Table 13

MILITARY CONSTRUCTION AND FAMILY HOUSING

(BA $ billions*)

FY93 FY94

Military Construction 4.55 5.96

Family Housing 3.94 3.50

Family Housing Construction (.82) (.69)

Family Housing Operations (2.99) (2.66)

Homeowners Assistance Fund (. 13) ( . 15)

Total Milcon and Family Housing 8.50 9.46

FY95

5.05

3.3 1

(.64)

(2.81)

( -. 1 3)

8.36

*Numbers may not add due to rounding.

Source: DoD

OTHER BUDGET CONSIDERATIONS

Environment

This is a comprehensive program covering

cleanup (or restoration), compliance, conservation,

pollution prevention and technology improvements.

Environmental-related costs are increasing with

an estimated $5.7 billion for FY 1 995, up from about

$3.5 billion in FY 1 993. These costs are embedded

in various appropriations and accounts.

DoD has been involved in cleanup at about 1 ,800

military installations and more than 8,000 formerly

used sites.

15

About 40 percent of the costs are going for sur­

veys and studies of potential sites, but emphasis is shifting to actual cleanup. For FY 1995, an esti­mated $2.2 billion will be spent for cleanup of exist­

ing bases and facilities and an additional $560 mil­lion for closed bases. These funds are identified in the Defense Environmental Restoration Account.

About $600 million in FY 1 995 is for Base Re­alignment and Closure actions. These include six military installations scheduled for closure or realign­ment under the presidentially-directed "fast track cleanup program."

Compliance costs for FY 1 995 will be about $2.3 billion and are embedded in budgets across the board.

Infrastructure and Base Closures

As the force is reduced it is imperative that in­frastructure also be reduced and facilities consoli­dated if cost goals are to be achieved.

Base realignments and closures are an inherent part of this. Because of the many competing factors and political sensitivities concerning bases and fa­ci1ities, the process has been controlled by legisla­tion which created nonpartisian commissions to make the closure and realignment recommendations. Com­missions met in 1 988, 1991 and 1 993. Their recom­mendations were approved by the President and Congress and are now being implemented. Another commission will meet in 1 995. This will be the big one, especially if it remains the last one established under the public law.

Infrastructure cuts have not kept pace with ei­ther DoD budget reductions or personnel strength cuts. The 1 5-percent cut in facilities in the United

States through BRAC 93 is only about half the total

reductions called for between now and the end of the decade.

DoD is now preparing lists for the next commis­sion (BRAC 95); this could well double the amount proposed in the past, but anything this big may well

be indigestible or unmanageable. Don't be surprised to see Congress balk, and for Congress and DoD to agree on spreading this out, perhaps with a BRAC 97.

In the meantime, the big challenge is how to pay large base closing costs. Overall savings cannot be

expected for six to eight years. On the first three

rounds, the military departments and agencies had

planned to spend an aggregate of about $7.5 billion,

but total estimates are now higher. BRAC costs in

the FY 1 995 budget are shown as $2.7 billion ( un­der the Military Construction appropriations). These

are for the 1 988, 1991 and 1993 actions. The present

FYDP does not include anticipated base closure costs

for BRAC 95, but this will require a substantial chunk

of money which has to be fitted into the funding guidance for FY 1996 and beyond.

In connection with base closures, the President

has recently directed actions to facilitate early use by affected communities of these assets. This puts local redevelopment on a par with fast-track envi­

ronmental cleanup.

The upcoming BRAC 95 will be an event of

major impact. The big question is the availability of

funds to cover upfront costs. Reducing the infra­structure to include facilities, civilian personnel and

other overhead costs will not produce savings for several years thereafter. To be realistic, most of the benefits (in dollar terms) from this will not accrue

until the next decade.

Acquisition Reform

Acquisition reform by streamlining the way DoD buys its materiel and equipment is being pushed strongly by Secretary of Defense Perry. Major thrusts include:

• simplifying acquisition laws and regulations and

eliminating those not needed. Present require­

ments are both cumbersome and costly. Some estimates indicate additional procurement costs

of 20 to 50 percent because of the complex fed-

16

eral requirements imposed (over those used in

commercial practice). Of particular importance

is the simplification of acquisition procedures for

items under $1 00,000. They represent about 98 percent of all the actions but only 1 1 percent of

the dollars.

• removing impediments to buying commercial

items and services, and restricting the use of spe­cial military standards, except when absolutely

required.

While many things can be done within DoD it­

self, congressional support is needed with respect to

procurement laws. Congress did not act on legisla­

tion in 1994. Several committees have overlapping

jurisdiction, so turf is at stake and compromises will

be necessary, but something positive should happen

during this session.

There are no savings for FY 1 995, but if Perry

gets what he wants, the downstream savings on ac­

quisition costs could be significant.

Masking Defense Costs

Comparisons are often made (on an overall dol­

lars basis) with previous years as a measure of the

nation's relative investment in defense. In the post­Cold War period, however, this can be deceptive.

There are increasing numbers of things being funded

by defense dollars today that did not exist in the past or were not considered traditional defense costs.

Regardless of their necessity or merit, these were

not major budget items in past years and, therefore,

distort historical comparisons.

A March 1 994 Congressional Research Service

(CRS) study estimated that DoD was spending al­

most $13 billion in FY 1994 on projects with limited

defense applications. A Government Accounting

Office (GAO) report issued in November 1993 stated

there was a clear trend of funding civil programs

from defense appropriations. It said that military

budget support went up from $1.4 billion in FY 1 990

to $4.6 billion in FY 1993.

Some major items costing increased dollars for DoD today that we did not see in the past include:

• environment ($5.7 bi11ion in FY 1 995);

• closing down and realigning bases (BRAC ac­tions) ($2.7 billion in FY 1 995);

• transition benefits ($ 1 .2 billion in FY 1 995);

• defense conversion and dual-use technology ($2.2 billion in FY 1995).

Everyone's list can be different, but it is clear that more and more is being included in the defense budget that was not there before, which means that the level of support for traditional warfighting capa­bilities is decreasing even more than the overall sta­tistics would indicate.

KEY FAC TORS AFFEC TING FU T U RE BUDGETS

The FY 1995 budget is undergoing the normal congressional process. Whatever Congress does will clearly affect future budgets, particularly if future outlay cuts are mandated for discretionary spend­ing.

The things to watch in the future are: 1 ) the outcome of the Roles and Missions Commission study; 2) the results of the next OSD Future Years Defense Program (FYDP) review, which matches programs and resources for six years from FY 1996 through FY 200 1 ; and 3) most unpredictable, the course of world events over the next few years. Anything in significant variance with present plan­ning vectors could quickly change national security requirements and perspectives. Some brief com­ments on items 1 ) and 2) above:

Roles and Missions Commission

In February 1993, then JCS chairman Gen. Colin Powell issued his "Report on the Roles, Missions and Functions of the Armed Forces of the United States." This report was forwarded to Congress in

17

March 1 993 by Secretary of Defense Asp in with the comment that this was a first step; at the same time, he directed further study by DoD in a number of areas.

Congress, in general, was not satisfied with the results. The major criticism was that it did not go far enough or deep enough. As a result, the House Armed Services Committee Report (November 1 993) directed a special Commission on Roles and Missions of the Armed Forces to be appointed by the Secretary of Defense. The basic charter given to this commission was to recommend the functions for which each military department would organize, train and equip forces; the mission of combat com­mands; and the roles that Congress should assign to various military elements of the Department of De­fense.

This commission has now been formed, with Dr. John P. White of Harvard University as chairman. There are a total of 1 0 participating members. Com­mission recommendations are due about May 1995, with Secretary of Defense review and comments 90 days later.

Clearly the approved report will not be ready in time to affect formulation of the FY 1996 DoD bud­get, but could have significant bearing on subsequent budgets.

Future Years Defense Program (FYDP)

DoD and the military departments are engaged in the biennial drill to generate the next FYDP, cov­ering the period from FY 1996 to FY 200 1 . De­fense Planning Guidance (DPG) provides instruc­tions on programs and priorities to the submitting military departments and agencies. The instructions are consistent with the objectives of the Bottom-Up Review and Defense Fiscal Guidance (DFG) as de­rived from established budget top line figures.

Theoretically this guidance should be coordi­nated and compatible in advance, but don't expect it this year. There is a looming gap between resources and programs in the next FYDP. The projections are anything but optimistic in terms of the requisite

dollars to support currently defined security require­ments in future years.

Final OSD decisions on the FY 1996-2001 pro­gram should be made by September 1994; the first year of the new FYDP will provide input for the FY 1996 DoD budget.

The wild cards are the happenings on the world scene, along with an evolving U.S. foreign policy.

No long-term assumptions are secure. Surprises will arise, so flexibility in national security planning is essential.

DEFENSE OU TLOOK

The FY 1995 DoD budget is characterized by added funding for O&M in the name of readiness, but with very restricted funding for RDA and Mili­tary Construction.

g ,. 18

What is missing as a basis for measuring the ad­equacy of the DoD budget is a clear written and ap­proved statement of national military strategy. In­stead, the output of the Bottom-Up Review is being used as a surrogate for a more formal presentation of policy, and this can lead to many interpretations and misunderstandings.

The open question now is what Congress will do with the FY 1995 budget. From a programmatic sense, Congress will probably make few, if any, big changes from the President's budget, but there will be the usual juggling ofline items. This is an elec­tion year; Congress doesn't want any more big is­sues on the table - health care is enough - and there is a good chance we could have a defense bill this year by Oct. 1 - almost unprecedented, but possible. The real danger is outlay cutting. This has already surfaced in budget resolution actions. Such action would almost surely hit at Operation and Maintenance funding, the very area where DoD has placed its top priority.

' '"

'\ _ _ -""

"-., ---- · · -.. --..... � . - ..

THE ARMY BUDGET

The Army FY 1995 budget stands at 24.1 per­cent of the DoD FY 1995 budget.

A summary of the top line numbers in the Army budget are shown in table 14.

As with DoD overall, the Army is experiencing its l Oth consecutive year of a budget with less buy­ing power than the year before.

While appropriations are made by Congress in terms of budget authority (BA), they are managed by the military departments and defense agencies in

ARMY BUDGET TRENDS AND PAT TERNS

The next three figures show patterns in Army budgets over time.

Figure 8 shows the percentage change in real terms for each year with respect to the previous year. The early- to mid-1980s increases contrast sharply with the 1 0-year decline since 1985.

Figure 9, shown in FY 1995 constant dollars, graphically portrays the loss of Army buying power over a six-year period, a drop of more than 32 per­cent.

Table 14

ARMY BUDGET SUMMARY ($ billions)

Current Dollars Total Obligational Authority Budget Authority Outlays

Constant (FY95) Dollars Total Obligational Authority

Source: DA

terms of total obligational authority (TOA). DoD uses this financial term to reflect the direct defense

program for the fiscal year. While TOA and BA are

essentially the same, they differ by such adjustments as legislative transfers, reappropriations, recisions

and offsetting receipts. For the Army, these differ­ences are small, resulting largely from revolving and management fund adjustments, and affect only a few of the appropriations for FY 1995.

Unless otherwise indicated, TOA reflecting the direct Army budget plan will be used for discussion

of the Army budget in this section.

19

FY93 66.7 64.8 72.2

69.5

FY94 61 .0 60.6 63.7

62.3

FY95 6 1 . 1 60.8 6 1 .5

6 1 . 1

Figure 10 shows relative comparisons of the Army budget broken out by functional elements for: 1) FY 1989 (before the drawdown) and 2) the cur­rent FY 1995 budget. It demonstrates the sharp cuts

in Research, Development and Acquisition (RDA) and Military Construction.

At the same time, military and civilian pay are taking a substantially larger share of the total de­spite the reduction in strength. Separation incen­tives and other transition costs have kept pay ac­counts higher than strength alone would indicate in recent years.

Fig. 8. Army Real Growth Trends FY70-FY95

1 5

1 0

5

0

-5

- 1 0

- 1 5

Fig. 9.

70 72 7 4 76 78 80 82 84 86 88 90 92 94 95

I• FY95 Constant $ I (Excludes Operation Desert Storm)

Army Dollar Resource Trends

95 90.0

90

85

80 TOA Reduced by over 32%

75

70

65

60

55 1-FY95 Constant $ bill ions I 50

FY89 FY90 FY91 FY92 FY93 FY94

*Does not include Desert Storm

20

Source: DA

61 . 1

FY95

Source: DA

Fig. 1 0. Army Program Balance

Civilian Pay 1 6%

Operations* ** 21 %

Civilian Pay 1 9% Operations**

2 1 % MiiCon * *

2%

24%

MiiCon** 1 %

* I ncludes Defense Medical (2.5%) **Excludes Civilian Pay

ARMY BUDGET BREAKOU T FOR FY 1995

The Army budget by basic title for FY 1993 to FY 1995 is shown in table 15. Army National Guard and Am1y Reserve have been integrated under the appropriate titles. For a more detailed listing by specific appropriation, see Appendix II.

Table 15

TOTAL OBLIGATIONAL AUTHORITY SUMMARY

(Current $ billions*)

Title FY93 FY94 FY95 Military Personnel 28.5 26.8 26.1 O&M 22.6 19.7 2 1 .5 Procurement 7.4 6.9 6. 1 RDT&E 6.1 5.4 5.3 Military Construction .7 .9 .8 Army Family Housing 1 .5 1 .3 1 .3

Total 66.7 61.0 61.1

*Numbers may not add due to rounding.

Source: DA

21

Source: DA

S TRATEGIC CONS TRUC T

Am1y planning is based on national security guidelines emanating from the Bottom-Up Review. This established the concept of being able to fight and win two nearly simultaneous major conflicts with recognition for minor contingencies and a variety of missions short of war such as peacekeeping, humani­tarian assistance and natural disaster.

To accomplish this, the 1999 structure for the Army is projected as 1 0 active and five (plus) re­serve component divisions with 15 enhanced Na-tional Guard combat brigades deployable within 90

I , days. Amly strength was set at 495,000 for the ac-tive force and 575,000 for the RC (combined Na-

tional Guard and Am1y Reserve).

The Am1y would become primarily a projection force from bases in the United States. Forces would be maintained overseas in Korea and Europe, but with a major drawdown in Europe to about 65,000.

The major projection requirement for the Am1y focuses on its five-division contingency corps, illus-

trated in figure 1 1 . This drives the requirement for strategic mobility as well the need for ready support forces, including reserve component units.

To meet future strategic commitments the Army must

• structure itself to respond to two nearly simulta­neous regional crises;

• base the majority of forces in CONUS, but keep 65,000 in Europe and 26,000 in Korea to deter aggression and promote stability;

• ensure sufficient strategic mobility and force modernization to get the force to the fight and to win decisively when it gets there;

• embed capabilities within the force to respond to a range of new requirements (peacekeeping operations, humanitarian assistance, disaster re­lief, etc.);

• engage in aggressive overseas presence opera­tions (exercises, unit and personnel exchanges, security assistance, etc.) to build and strengthen the coalition of democracies.

Fig. 1 1 . Force Closure Timeline

22

S TRUC TURE

The Total Army incorporates the active compo­nent, the reserve components and civilian employ­ees. The military structure consists of a mix of heavy, light and special operations forces along with sup­porting elements and base structure.

The combat structure for FY 1 995 is based on four corps, 1 2 active divisions and eight National Guard divisions, plus five active and 1 3 National Guard separate combat brigades (excluding special purpose brigades and roundout/roundup brigades). Table 16 shows the types of units and any changes from FY 1 994.

Army forces will continue forward presence in Korea with one division (minus) and in Europe with a corps with two divisions of two brigades each. There has been a general shift, however, to the con­tinental United States (table 17 .)

Total Army strength for this force as of the end of FY 1 995 would be 51 0,000 active soldiers, 642,000 RC soldiers, and 278,000 civilians - a drop below FY 1 994 numbers of 93,000 personnel in all three categories.

Source: DA

Table 16

COMBAT FORCE STRUCTURE

UNITS FY94* Changes FY95*

A ctive Corps 4 0 4 Divisions 12 0 12

Mechanized/ Armor (8) 0 (8) Light/ Airborne/ Air Assault (4) 0 (4)

Separate Brigades** 6 - 1 5 Mechanized/ Armor/

Armored Cavalry Regiment (2) 0 (2) Infantry /Light/

Light Cavalry Regiment (4) -1 (3) National Guard

Divisions 8 0 8 Mechanized/Armor (4) 0 (4) Infantry (3) 0 (3) Light/ Airborne/ Air Assault (1) 0 ( 1)

Separate Brigades 1 3 0 1 3 Mechanized/ Armor/

Armored Cavalry Regiment (6) 0 (6) Infantry (7) 0 (7)

A rmy Reserve Separate Brigades - 1 0

* Reflects status at year end. ** Does not include 177th Armor Brigade and 3rd Infantry Regiment.

Source: DA

Table 17

A SHIFT TO CONUS (thousands)

Active A rmy CONUS Europe Pacific Other

*Projected

Source: DA

FY89 FY95* 5 10 410 217 65

34 28 9 7

23

Division stationing as of the end of FY 1995 is reflected in figure 12.

Not shown in the division structure is an impor­tant piece of Army combat and combat support struc­ture: the Army Special Operations Forces (SOF), with a strength of about 29,000 military (active and reserve components). The Army Special Operations Command, located at Fort Bragg, North Carolina, reports to the commander in chief (CINC) of the U.S. Special Operations Command (SOCOM). The budget for special operations is handled separately, with funds provided through DoD and the CINC of Special Operations Command under a separate ma­jor force program. Therefore, SOF operating and

1 ,

Fig. 1 2. Division Stationing by the End of FY95

1995: 4 CORPS - 20 DIVISIONS I Source: DA

acquisition funds are part of the joint command (SOCOM) budget and are not included in the Army budget. Nonoperational requirements, however, in­cluding base operations at Army facilities and bases, are still provided through Army funding.

Even though the Anny is becoming essentially a CONUS-based force, it continues to be engaged

worldwide. In addition to soldiers forward stationed in Korea and Europe, there are Army soldiers in­

volved in all kinds of tasks in 63 countries around the world. During the past 12 months this number has varied from a low of about 12,000 to more than 20,000; these operations actually tie up about three times the number when training, orientation, and

coming and going are considered.

Fig. 1 3. The Army Engaged (as of April 1 994)

Humanitarian Relief . . . Joint Operations . . . Counterdrug ... UN Operations Source: DA

24