INTRODUCTION
President Clinton's FY 1997 defense budget continues implementation of the FY 1996-2001 Future Years Defense Program (FYDP), which is the DoD blueprint for ensuring America's security and sustaining the nation's vital global leadership role. The new budget and FYDP strike a prudent balance between immediate military needs, like high readiness and troop morale, and long-term safeguards, like basic scientific research and selective support for the defense industrial and technological base. Both the budget and FYDP also are consistent with the nation's pressing fiscal pressures.
THE DEFENSE TOPLINE
The President's FY 1997 budget requests spending of $243.4 billion in budget authority and $248.3 billion in outlays for the Department of Defense. In terms of real growth, FY 1997 budget authority is 6.0 percent below the FY 1996 budget. This large a real decline is partially due to the fact that last year Congress added $7 billion to the President's budget request for FY 1996. In FY 1998 and FY 1999, DoD budget authority will rise to keep pace with inflation, then experience a real increase in FY 2000 and FY 2001, primarily because of higher funding for procurement.
| Table V-1 | ||||||
| Department of Defense Budget Topline ($ in Billions) | ||||||
|---|---|---|---|---|---|---|
| FY 1996 | FY 1997 | FY 1998 | FY 1999 | FY 2000 | FY 2001 | |
| BUDGET AUTHORITY | ||||||
| FY 1997 Topline | 251.8 | 242.6 | 248.1 | 254.3 | 261.7 | 269.6 |
| Percent Real Growth | -3.7 | -6.0 | -0.2 | 0 | +0.5 | +0.6 |
| OUTLAYS | ||||||
| FY 1997 Topline | 254.3 | 247.5 | 243.9 | 246.5 | 253.9 | 256.6 |
| Percent Real Growth | -4.1 | -5.1 | -3.8 | -1.4 | +.6 | -1.3 |
In determining funding needed to support the FYDP, individual programs were properly priced based on current estimates of inflation and the latest information on the execution of those programs. The Department also used realistic projections for future program costs and likely savings from reforms and other changes.
Requested FY 1997 DoD budget authority is, in real terms, 40 percent below FY 1985, the peak year for inflation-adjusted defense budget authority since the Korean War. (See Table V-2.)
| Table V-2 | |||
| DoD Budget Authority * (Dollars in Billions) | |||
|---|---|---|---|
| Growth Year | Current Dollars | Constant Dollars | Real GrowthPercentage |
| 1985 | 286.8 | 404.7 | -- |
| 1986 | 281.4 | 387.3 | -4.3 |
| 1987 | 279.5 | 373.2 | -3.6 |
| 1988 | 283.8 | 365.5 | -2.1 |
| 1989 | 290.8 | 360.4 | -1.4 |
| 1990 | 293.0 | 352.7 | -2.2 |
| 1991 | 276.2 | 317.5 | -10.0 |
| 1992 | 281.9 | 318.0 | 0.2 |
| 1993 | 267.4 | 292.8 | -7.9 |
| 1994 | 251.4 | 268.8 | -8.2 |
| 1995 | 255.7 | 268.1 | -0.3 |
| 1996 | 251.8 | 258.1 | -3.7 |
| 1997 | 242.6 | 242.6 | -6.0 |
| FY 1985-97 real change: -40% | |||
| * Both discretionary and direct spending | |||
As a share of America's gross domestic product, DoD outlays are expected to fall to 3.2 percent in FY 1997, well below any time since before World War II. (See chart on Defense Outlays as a Share of the Gross Domestic Product.) Other long-term trends for defense spending are detailed in Appendix B. Requested budget authority by appropriations title and by DoD component, in current and constant (inflation-adjusted) dollars, is also shown in Appendix B.
PRIORITIES IN THE FYDP AND FY 1997 BUDGET
People, Quality of Life, and Readiness
The FYDP and FY 1997 budget give top priority to keeping U.S. forces ready to fight and win. Above all, this means taking good care of uniformed people and their families, which in turn requires strong support for quality of life (QOL) issues like pay, housing, and medical services. During his tenure, Secretary Perry has placed great emphasis on QOL issues and that is reflected in current defense budget plans. For example, DoD budget plans fund the full military pay raises provided for under law through 2001. It also continues implementing last year's decision by Secretary Perry to substantially boost, through FY 2001, funding and support for construction and maintenance of family and bachelor housing; cost-of-living allowances; child care; family assistance; and morale, welfare, and recreation programs. This boost in support supplements already strong DoD quality of life programs.
A rough measure of DoD support for readiness is funding for its various Operation and Maintenance (O&M) accounts, which pay for training, supplies, maintenance of weapons and equipment, and other preparedness essentials. In real terms, FY 1997 O&M budget authority is only about 19 percent below its FY 1985 Cold War peak. This is less than half the 40 percent decline in overall DoD budget authority for FY 1985-1997. Moreover, the 1996 size of U.S. forces and inventories of equipment and facilities is roughly 30 percent or more below 1985 levels. Thus, FY 1997 O&M funding compares even more favorably with Cold War levels, since it supports fewer forces and less infrastructure.
The preceding data corroborates what is the real measure of readiness -- the actual preparedness and performance of U.S. forces. When called upon for a wide variety of missions, America's armed forces continue to react swiftly and decisively. However, when unbudgeted missions arise, O&M funds often must be diverted from forces not involved, unavoidably hurting the readiness of those forces. The FYDP and FY 1997 budget provide strong support for readiness, but they cannot accommodate major diversions of O&M funds to unrequested or unbudgeted uses. When O&M dollars and other resources decline unexpectedly, readiness will suffer unless those resources are replaced and/or supplemented expeditiously. Therefore, during this or any future FYDP period, when unbudgeted contingencies arise, their costs must be covered -- before they can erode the readiness of U.S. forces.
Force Structure and End Strength
As shown in Table V-3, DoD has virtually finished the BUR-based restructuring of U.S. forces, undertaken to reflect the end of the Cold War and the collapse of the Soviet Union.
Table V-4 shows the decline in personnel strengths since FY 1987, the post-Vietnam War peak for the end strength of both active duty military and DoD civilians. Selected Reserve strength peaked at 1,137,600 in FY 1991. The decrease in DoD civilians reflects reductions in forces and facilities, as well as reforms to streamline defense infrastructure and improve management. Other personnel data is in Appendix C.
Research and Development (R&D)
The new budget and FYDP support R&D funding and programs that will ensure the future superiority of U.S. forces and weapons. Of particular note, the Science and Technology program, described early in this report, seeks to foster both established technologies as well as longer term ones that promise greater military capabilities and/or reductions in costs. Additionally, the Advanced Concept Technology Demonstration (ACTD) initiative, detailed in Part II of this report, seeks to accelerate the fielding of maturing technologies that are likely to yield high payoffs for U.S. forces.
Streamlining Defense Infrastructure
Streamlining the U.S. defense infrastructure (bases, facilities, and support organizations) is a critical part of the restructuring of America's defense posture. It requires both reductions to infrastructure, as well as realignment to achieve optimum effectiveness and efficiency. Acquisition reform initiatives are achieving significant cost avoidance, as well as exploring applications of world-class practices to accomplish cost and time reductions in the defense acquisition process. Major reductions are being accomplished through the base realignment and closure process described in the chapter on Installations and Logistics.
Recapitalization of U.S. Forces
For the past five years, the Department has taken advantage of the post-Cold War drawdown of forces to reduce its purchases of new weapons without undermining the battlefield superiority of U.S. forces. As a result, FY 1997 DoD budget authority for procurement is the lowest inflation-adjusted level since 1950. Requested FY 1997 budget authority for procurement is $38.9 billion -- in real terms only about one third the FY 1985 level of $96.8 billion ($134.3 billion in constant 1997 dollars).
In spite of this decline in funding, however, the average age of U.S. military equipment has not increased, because as the forces were drawn down, the older equipment was weeded out. But now that the drawdown in forces is nearly over, DoD's reprieve from equipment aging is nearly over as well.
To ensure military readiness in the long term, the Department must modernize U.S. forces with new systems and upgrades to existing systems in order to maintain America's technological and qualitative superiority on the battlefield. Over the next several years, DoD will begin a recapitalization of U.S. forces which will be critical to the readiness of U.S. forces in the next century. By FY 2001, funding to procure equipment to modernize U.S. forces will increase to $60.1 billion -- in real terms 41 percent higher than the $38.9 billion requested for FY 1997.
The goal of DoD's modernization/recapitalization plan is to ensure a ready, flexible, and technologically superior force for a changing security environment. Numerous programs will help preserve America's battlefield dominance by exploiting information-age technology such as advanced sensors, computers, and communications.
The DoD modernization plan reflects several priorities:
DoD modernization plans call for other new systems as well, including: the Comanche armed reconnaissance helicopter, F-22 and F/A-18E/F fighter/attack aircraft, the Joint Strike Fighter, V-22 Osprey, LPD-17 Amphibious Transport Dock ship, DDG-51 guided-missile destroyers, and new attack submarine.
For these DoD modernization programs to be fulfilled, the President's defense topline for FY 1998-2001 must be approved by Congress. (For these years the President's defense budget keeps ahead of inflation and enables increased procurement funding.) The Department also must achieve its projected savings from infrastructure reductions, most importantly base closings, and from acquisition reform.
Furthermore, it is critical that appropriated funds for procurement get allocated as planned in DoD's Future Years Defense Program. In other words, achieving the Department's modernization goals depends on Congress' supporting the specific spending allocation in DoD development and procurement plans and refraining from the diversion of funds to unrequested uses.
The Department of Defense modernization/recapitalization plan is the result of intense assessments by many highly experienced defense leaders. They have produced a balanced, prudent plan to ensure the long-term readiness of U.S. forces well into the 21st century.
Further details on DoD's modernization/recapitalization plans are included throughout this Annual Report:
DEFENSE BUDGET ISSUES
Readiness and Contingency Operations Costs
The FY 1997 budget includes funds for the contingency operations that the Department knows will carry over into the coming fiscal year. Congress has indicated that this is the approach it will support and that bodes well for protecting force readiness while pursuing contingency operations. If Congress approves these funds, and no unexpected new costs are encountered, then DoD's O&M accounts will not have to be drawn down, thereby hurting readiness.
Regarding costs for contingency operations during this current fiscal year of 1996, Congress funded the Southwest Asia portion of DoD's costs when it added money to last year's President's budget. The Department's remaining unfunded requirements total $2.1 billion, almost all of it for operations to support the peace agreement in Bosnia and Herzegovina. Nearly half this total can come from a reprogramming of savings from lower-than-expected inflation. Another $620 million is included in a supplemental appropriations request. These two proposals were submitted to Congress early in calendar year 1996, with Secretary Perry's recommendation that they be approved as expeditiously as possible. The Department must know how these contingency costs will be financed. Otherwise, DoD leaders will have to move to curtail training and take other measures to divert O&M funds to cover contingency operations bills.
Unrequested Spending
Each year Congress includes substantial spending in the defense budget that was not requested by the President, and this invariably drains money from expenditures that would better enhance the nation's security. Sometimes the additions are for weapons or other uses included in the FYDP, but not planned for inclusion until some time after the budget year. In these cases, the issue is the timing of the expenditures -- not whether the spending is needed. But when the additions are for non-FYDP uses, there is a more clear-cut diversion of funds from the spending requirements determined during the Department's rigorous program and budget review. Unrequested spending is especially damaging when it fails to take account of the future spending that it will generate.
CONCLUSION
Events since the end of the Cold War have demonstrated the need for America to retain a strong global leadership role and a prudent defense posture. President Clinton's FY 1997 defense budget, and the strategy and plans on which it is based, support that need while remaining fiscally responsible.
Table V-3 Force Structure [a] Cold War FY 1990 Base Force Plan [b] FY 1996 FY 1997 BUR-Based Plan [c] Army -- active divisions 18 12 10 10 10 Reserve component brigades [d] 57 34 47 42 42 Marine Expeditionary Forcee 3 3 3 3 3 Navy aircraft carriers (active/reserve) 15/1 12/1 11/1 11/1 11/1 Carrier air wings (active/reserve) 13/2 11/2 10/1 10/1 10/1 Battle force ships (active/reserve) 546 430 359 357 346 Fighter wing equivalents (active/reserve) 24/12 15/11 13/8 13/7 13/7
[a] Dual entries in the table show data for active/reserve forces, except for carriers, which depicts deployable/training carriers.
[b] Bush Administration's planned FY 1995 force levels, as reflected in the January 1993 Annual Defense Report.
[c] Shown are planned force levels, which may differ slightly from those recommended by the BUR, but which are consistent with its proposals.
[d] An approximate equivalent. The BUR plan calls for 15 enhanced readiness brigades, a goal that DoD will begin to reach in FY 1996. Backing up this force will be an Army National Guard strategic reserve of eight divisions (24 brigades), two separate brigade equivalents, and a scout group. One reserve Marine division, wing, and force service support group supports the active structure in all cases.
Table V-4 Department of Defense Personnel
(End of Fiscal Year Strength in Thousands) FY 1987 FY 1996 FY 1997 Goal Percent Change
FY 1987-1997Active Military 2,174 1,482 1,457 1,418 -33 Army 781 495 495 475 -37 Navy 587 424 407 394 -31 Marine Corps 199 174 174 174 -13 Air Force 607 388 381 375 -37 Selected Reserves 1,151 931 901 893 -19 DoD Civilians 1,133 841 807 728 -27
