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Chapter 18

THE FY 2000 DEFENSE BUDGET AND FUTURE YEARS DEFENSE PROGRAM

The Department of Defense’s FY 2000-2005 Future Years Defense Program (FYDP) is its plan for supporting the National Defense Strategy as effectively and efficiently as possible. President Clinton’s FY 2000 defense budget implements the first year of the FYDP. Both seek to ensure America’s security and sustain the nation’s vital global leadership role.

The new budget and FYDP reflect the recommendations of the Department’s May 1997 Quadrennial Defense Review (QDR), which analyzed U.S. military strategy, force structure, readiness, modernization, and infrastructure. Through the QDR and Secretary Cohen’s Defense Reform Initiative, the Department is working to transform the nation’s security posture, military forces, and defense support activities.

THE DEFENSE TOPLINE

The President’s FY 2000 budget includes $267.2 billion in budget authority and $260.8 billion in outlays for the Department of Defense. Proposed budget authority for FY 2000-2005 reflects President Clinton’s proposal to make available $112 billion in resources to DoD, to be added to previous planned levels for those years. The added resources for FY 2000-2005 consist of:

· $84 billion increase to last year’s projected topline.

· $28 billion in savings from lower inflation projections, lower fuel prices, and other adjustments— savings that the President directed DoD to retain and allocate to pressing needs.

For FY 2000, the budget includes $12.6 billion in additional resources—$4.1 billion from a topline increase and $8.5 billion from economic adjustments and other provisions, including a proposed $1.6 billion from rescissions of unneeded appropriations. These added resources enabled DoD to fund military compensation increases, provide balanced support to readiness and modernization priorities, and fully fund the expected cost of Bosnia and other operations.

For FY 1998, DoD budget authority was, in real terms, about 40 percent below its level in FY 1985, the peak year for inflation-adjusted defense budget authority since the Korean War. As a share of America’s gross domestic product, DoD outlays for FY 1998 were 3 percent, well below average levels during the past five decades. Other trends for defense spending are detailed in Appendix B, as is budget authority by appropriations title and by DoD component, in current and constant dollars.

Table 16

FY 2000 Department of Defense Budget Topline
($ in Billions)

 

FY 1999

FY 2000

FY 2001

FY 2002

FY 2003

FY 2004

FY 2005

Budget Authority

262.6

267.2

286.4

288.3

298.7

307.6

318.9

Outlays

263.6

260.8

268.6

278.3

290.2

300.0

317.6

 

PRIORITIES IN THE FYDP AND FY 2000 BUDGET

Balancing Short-Term and Long-Term Requirements

Both the new budget and FYDP strike a prudent balance between immediate military needs, most notably force readiness and quality of life, and long-term safeguards, most notably the development and procurement of new weapons and technologies. This balanced approach was a critical recommendation of the QDR. Achieving the best balance between short-term and long-term needs has been the most difficult challenge for leaders formulating the DoD budget.

Readiness, People, and Quality of Life

The FY 2000 budget will keep U.S. forces ready to fight and win by means of substantial and sufficient funding for training, supplies, maintenance of weapons and equipment, and other preparedness essentials. Since these requirements are mostly paid for in the Operation and Maintenance (O&M) accounts of the Services, the sufficiency of these accounts was a crucial concern in the formulation of the new budget.

Readiness also requires taking good care of all members of the armed forces and their families. To that end, the FY 2000 budget strongly supports quality of life components like pay, housing, and medical services. To address mounting warnings about retention and recruiting, this year’s budget includes the greatest increase in military compensation in many years. Major components:

· Across-the-board military base pay raises of 4.4 percent for FY 2000 and 3.9 percent annually for FY 2001 through 2005. The FY 2000 raise exceeds forecasted civilian wage growth, is 3 full percentage points above the consumer price index, and is the largest military pay increase since FY 1982.

· Pay increases in connection with military pay table changes, which will make raises for promotion bigger than for years-of-service longevity. This change will reward performance, compensate people for their skills and experience, and encourage them to continue their service. These targeted increases will range up to 5.5 percent, and will be in addition to the across-the-board base pay raises.

· Reversing a change in military retirement by raising retirement benefits from 40 percent to 50 percent of base pay for members who entered service after 1986.

Force Structure and End Strength

The U.S. force structure is roughly two-thirds of its size when the Berlin Wall fell in November 1989. Table 17 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 1,170,600 in FY 1989. 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.

Recapitalization of U.S. Forces

After the end of the Cold War, the Department was able to reduce its purchases of new weapons without undermining the battlefield superiority of U.S. forces due to the modernization achieved during the years of strong defense spending during the 1980s. In spite of the sharp decline in procurement funding, the average age of U.S. military equipment generally did not increase, because as the forces were drawn down, older equipment was weeded out.

Table 17

Department of Defense Personnel
(End of Fiscal Year Strength in Thousands)

 

FY 1987

FY 1999

Percent Change
FY 1987-1999

Active Military

2,174

1,390

-36

Army

781

480

-39

Navy

587

372

-37

Marine Corps

199

172

-14

Air Force

607

366

-40

Selected Reserves

1,151

877

-24

DoD Civilians (FTEs*)

1,133

724

-36

* Full-time equivalents

 

This procurement holiday is now at an end. To ensure military readiness in the long term, the Department must modernize U.S. forces with new systems and upgrades to existing systems. This recapitalization is needed to maintain America’s technological and qualitative superiority on future battlefields. The new budget enables the Department to achieve its goal of increasing procurement funding to $60 billion by FY 2001, a target the Administration established in its FY 1996 budget.

For the modernization of U.S. forces to succeed, Congress must support the spending allocations proposed for DoD weapons development and procurement. Additionally, the Department must have congressional support for infrastructure reductions, acquisition reform, and other initiatives in order to achieve savings needed to help fund modernization.

Defense Reform Initiative - A Revolution in Business Affairs

The FYDP and FY 2000 budget reflect Secretary Cohen’s decisions in his November 1997 Defense Reform Initiative. Both incorporate changed personnel levels and all savings that can be achieved without legislation. The Initiative seeks to ensure that DoD support activities are as responsive as possible to U.S. forces and to produce budget savings to fund warfighting needs.

The resources added by the President for FY 2000-2005 in no way diminish DoD’s resolve to shrink the portion of the defense budget consumed by infrastructure. Nor do they reduce the critical need for congressional approval of two more rounds of base closure and realignment.

Funding for Unbudgeted Contingencies

Each year unbudgeted military operations, natural disasters, and other contingencies occur—often requiring the President to seek congressional support for covering the costs incurred. During 1998, Congress enabled the Department to fund a variety of costs, and thereby obviated the need to divert money from readiness and other budget essentials. Last April, Congress approved President Clinton’s emergency supplemental appropriations request to cover DoD’s FY 1998 costs for the unbudgeted extension of operations in Bosnia, Persian Gulf military buildup, and storm damage to defense facilities. By being designated as emergency spending, this $2.9 billion did not have to be offset by rescissions of appropriated FY 1998 funds.

Similarly, last October as part of the FY 1999 omnibus appropriations bill, Congress approved the President’s request for $1.9 billion for this year’s operations in Bosnia, over $1 billion to boost readiness, and millions of dollars for recovery from natural disasters in South Korea and elsewhere. These appropriations were designated as emergency—as was spending the Congress added for ballistic missile defense, Year 2000 computer remedies, and other defense needs.

The FY 2000 budget includes $1.8 billion for ongoing Bosnia-related operations.

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 2000 defense budget supports that need while remaining fiscally responsible.

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