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Defense Budget: Analysis of Operation and Maintenance Accounts for 1985-2001 (Letter Report, 02/28/97, GAO/NSIAD-97-73).


GAO reviewed the Department of Defense's (DOD) budget request for fiscal
year (FY) 1997 for its operation and maintenance (O&M) accounts,
focusing on: (1) how annual funding relates to military and civilian
personnel levels through 2001; (2) overall trends from fiscal years 1985
though 2001; and (3) key areas in which most money has been budgeted
through 2001.

GAO found that: (1) total DOD O&M funds, in constant FY 1997 dollars,
are projected to decline at a slower rate than either civilian or
military personnel levels between fiscal years 1985 and 2001; (2)
however, beginning in FY 2000, projections show that O&M funds begin to
rise at the same time civilian personnel decline and military personnel
remain relative stable; (3) increases in other O&M-funded programs will
more than offset the decline in O&M-funded civilian salaries; (4) since
1993, approximately 85 percent of the funds are concentrated in five
budget accounts; (5) another data view shows that three major defense
programs receive the majority of annual O&M funds; (6) between fiscal
years 1993 and 2001, about 50 percent of annual O&M funds are found in
five of DOD's mission categories; (7) in total, there are about 30
mission categories during the FY 1993-2001 time period; (8) from an
organizational perspective, the military services' portion of total
annual O&M funds declines; (9) beginning in FY 1998, the Army is
projected to receive a smaller proportion of annual O&M funds than
either of the other two services or the combined DOD agencies; (10) even
though the Army will receive the smallest portion of annual O&M funds,
this service will have the second largest active military force and the
largest civilian workforce; (11) the Navy-Marine Corps' share of annual
O&M funds declined by almost 10 percent prior to FY 1996; (12) in
contrast, the Air Force's proportion of annual O&M funds changes the
least of the three services, while Air Force military and civilian
personnel levels fall significantly over the FY 1985-2001 time period;
(13) only the combined DOD agencies' share of annual O&M funds increases
between fiscal years 1985 and 2001 because of the health program funding
consolidation into a Defensewide account; (14) regardless of how the O&M
budget is analyzed, medical is the only area where consistent growth
occurred; (15) O&M funds for medical activities increase by 72.8 percent
from fiscal years 1985 through 2001; (16) the majority of these costs
are for the health care needs of DOD's 8.3 million eligible
beneficiaries; (17) during fiscal years 1985 through 2001, O&M
infrastructure funds that can be clearly identified in the Future Years
Defense Program decline by 22.6 percent and thus mirror total O&M
trends; (18) despite increases, O&M continues to fund about half of DOD*

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-97-73
     TITLE:  Defense Budget: Analysis of Operation and Maintenance 
             Accounts for 1985-2001
      DATE:  02/28/97
   SUBJECT:  Defense budgets
             Future budget projections
             Military personnel
             Civilian employees
             Budget cuts
             Military downsizing
             Health care costs
             Defense cost control
             Budget outlays
             Appropriation accounts
IDENTIFIER:  DOD Future Years Defense Program
             DOD Cooperative Threat Reduction Program
             Defense Business Operations Fund
             Defense Health Program
             DOD Composite Health Care System
             DOD Environmental Restoration Program
             DOD Environmental Compliance Program
             DOD Environmental Conservation Program
             
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Cover
================================================================ COVER


Report to Congressional Committees

February 1997

DEFENSE BUDGET - ANALYSIS OF
OPERATION AND MAINTENANCE ACCOUNTS
FOR 1985-2001

GAO/NSIAD-97-73

Defense Budget

(701094)


Abbreviations
=============================================================== ABBREV

  DMC - Defense Mission Category
  DOD - Department of Defense
  FYDP - Future Years Defense Program
  O&M - Operation and Maintenance

Letter
=============================================================== LETTER


B-275972

February 28, 1997

The Honorable Pete V.  Domenici
Chairman, Committee on the Budget
United States Senate

The Honorable John R.  Kasich
Chairman, Committee on the Budget
House of Representatives

The Honorable Herbert H.  Bateman
Chairman, Subcommittee on Military Readiness
Committee on National Security
House of Representatives

The Department of Defense's (DOD) budget request for fiscal year 1997
includes almost $89.2 billion for operation and maintenance (O&M)
accounts.  This represents about 37 percent of DOD's fiscal year 1997
budget request.  DOD estimates that in fiscal year 2001, O&M will
represent about 36 percent of its total budget.  Because O&M funds
represent the largest share of DOD's budget, we (1) determined how
annual funding relates to military and civilian personnel levels
through fiscal year 2001, (2) identified overall trends from fiscal
years 1985 to 2001, and (3) identified key drivers (areas in which
most money has been budgeted) through fiscal year 2001. 

This report highlights significant information upon which Congress
can focus its future budget deliberations.  Throughout the report, we
present some questions raised by reported O&M trends.  In addition,
we explain the reasons for major changes in funding due to migrations
of funds between O&M programs and activities.  However, we did not
inquire into the reasons for changes in trends and funding
differences among the services after taking the migrations into
account.  We anticipate that our future work will address some of the
reasons for changes concerning specific programs.  Finally, we did
not attempt to determine an appropriate level of O&M funding. 

This review was performed under our basic legislative
responsibilities.  However, because of your expressed interest and
oversight responsibilities in the O&M accounts, we are addressing the
report to you. 


   BACKGROUND
------------------------------------------------------------ Letter :1

O&M is large, diverse, and widespread.  Since 1987, the O&M accounts
have been the largest appropriation group in DOD's budget and are
expected to remain the largest through fiscal year 2001.  O&M is one
of six appropriation groups for DOD.\1 When compared with the federal
budget, DOD's fiscal year 1997 O&M budget request represents
approximately 18 percent of total federal discretionary spending and
is larger than most federal agencies' fiscal year 1997 budget
requests.\2

O&M funds support portions of DOD's readiness and quality-of-life
priorities.  This appropriation funds a diverse range of programs and
activities that include salaries and benefits for most civilian DOD
employees; depot maintenance activities; fuel purchases; flying
hours; environmental restoration; base operations; consumable
supplies; and health care for active duty service personnel,
dependents of active duty personnel, and retirees and their
dependents.  Moreover, each service and DOD agency spends O&M funds. 

Under DOD's measurement of infrastructure, O&M funds approximately
half of DOD's infrastructure costs that can be clearly identified in
DOD's Future Years Defense Program (FYDP).\3 Because DOD wants to
decrease infrastructure costs to help pay for modern weapon systems,
it must look at this appropriation group for some of the intended
savings.  Infrastructure comprises activities that provide support
services to mission programs and primarily operate from fixed
locations. 

O&M funding is affected by civilian and military personnel levels. 
DOD's fiscal year 1997 budget includes funds for about 800,000
civilians and 1.5 million active duty and full-time National Guard
and Reserve military personnel.  Civilian personnel levels have a
direct effect because the majority of civilian salaries and benefits
are funded by O&M.\4 Although O&M does not fund military pay and
allowances, the appropriation group supports many readiness
activities and quality-of-life programs that are affected by the
number of military personnel. 

We examined trends in annual O&M funds and personnel levels and
identified the activities funded by O&M appropriations using DOD's
FYDP.  The FYDP is an authoritative record of current and projected
force structure, costs, and personnel levels that have been approved
by the Secretary of Defense.  The FYDP displays resources and
personnel levels by programs and activities known as program
elements.  There are about 3,800 program elements in the FYDPs
between fiscal years 1985 and 2001.  We analyzed FYDP data from
several different perspectives:  aggregate O&M, federal budget
account structure, DOD organization, DOD's Infrastructure Category
and Defense Mission Category (DMC) analytical frameworks,\5 and DOD's
major defense program structure.  Each perspective produces a
different, but equally valid, overview. 


--------------------
\1 The other appropriations are Military Personnel; Procurement;
Research, Development, Test, and Evaluation; Military Construction;
and Family Housing. 

\2 The Budget Enforcement Act, as amended, categorizes all federal
spending as either discretionary or direct.  "Discretionary" programs
are funded through annual appropriation acts.  Examples of
discretionary spending programs are national defense, education, law
enforcement, and space exploration.  "Direct" spending is often
referred to as mandatory spending because it flows automatically from
authorizing legislation and is not controlled through appropriations. 
Examples of direct spending programs are food stamps, medicare, and
federal pensions. 

\3 In Defense Infrastructure:  Budget Estimates for 1996-2001 Offer
Little Savings for Modernization (GAO/NSIAD-96-131, Apr.  4, 1996),
we reported that 90 percent of planned direct infrastructure costs
are funded out of three appropriations:  O&M (about 50 percent);
Military Personnel (about 30 percent); and Research, Development,
Test, and Evaluation (about 10 percent). 

\4 Approximately 85 percent of DOD civilian payroll costs are paid
from O&M appropriations.  The remainder is funded in the Research,
Development, Test, and Evaluation; Military Construction; and Family
Housing appropriation accounts. 

\5 The DMC structure divides DOD programs into three basic
categories:  major force missions, Defense-wide missions, and
Defense-wide support missions.  Within each basic category, missions
are then divided into five additional levels.  The third level of
detail, the most common, is used in our analysis.  Appendix II
describes the DMC structure in greater detail. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

Total DOD O&M funds, in constant fiscal year 1997 dollars,\6 are
projected to decline at a slower rate than either civilian or
military personnel levels between fiscal years 1985 and 2001. 
However, beginning in fiscal year 2000, projections show that O&M
funds begin to rise at the same time civilian personnel decline and
military personnel remain relatively stable.  Because a significant
portion of O&M funds pay for civilian salaries and benefits, FYDP
projections must show an increase in other O&M-funded programs. 
Increases for these programs will more than offset the decline in
O&M-funded civilian salaries. 

O&M resources are significantly concentrated when grouped by the
federal budget account structure, DOD major defense program, or
defense mission category.  Since 1993, approximately 85 percent of
the funds are concentrated in five budget accounts--Navy, Army, Air
Force, Defense-wide, and Defense Health Program.  Another data view
shows that three major defense programs receive the majority of
annual O&M funds--general purpose forces; central supply and
maintenance; and training, medical, and other general purpose
activities.  Between fiscal years 1993 and 2001 about 50 percent of
annual O&M funds are found in five of DOD's mission categories.  The
five categories are land forces, medical, naval forces, tactical air
forces, and other logistics support.  In total, there are about 30
mission categories during the fiscal year 1993-2001 period. 

From an organizational perspective, the military services' portion of
total annual O&M funds declines.\7 Beginning in fiscal year 1998, the
Army is projected to receive a smaller proportion of annual O&M funds
than either of the other two services or the combined DOD agencies. 
Even though the Army will receive the smallest portion of annual O&M
funds, this service will have the second largest active military
force and the largest civilian workforce.\8 The Navy/Marine Corps'
share of annual O&M funds declined by almost 10 percent prior to
fiscal year 1996.  In contrast, the Air Force's proportion of annual
O&M funds changes the least of the three services, while Air Force
military and civilian personnel levels fall significantly over the
fiscal year 1985-2001 period.  Only the combined DOD agencies' share
of annual O&M funds increases between fiscal years 1985 and 2001
because of the health program funding consolidation into a
Defense-wide account. 

Regardless of how the O&M budget is analyzed, medical is the only
area where consistent growth occurred.  O&M funds for medical
activities increase by 72.8 percent from fiscal years 1985 to 2001. 
The majority of these costs are for the health care needs of DOD's
8.3 million eligible beneficiaries. 

During fiscal years 1985 through 2001, O&M infrastructure funds that
can be clearly identified in the FYDP decline by 22.6 percent and
thus mirror total O&M trends.  Despite decreases, O&M continues to
fund about half of DOD's clearly identifiable infrastructure costs. 
Thus, if DOD is to identify significant savings from infrastructure
to fund modernization, it must look to the O&M appropriations. 


--------------------
\6 Throughout this report, funding levels are presented in constant
fiscal year 1997 dollars. 

\7 Navy and Marine Corps resources are combined in our organizational
analysis. 

\8 The combined Navy/Marine Corps has the largest active military
force and the second largest civilian workforce.  The Air Force has
the smallest active military force and smallest civilian workforce. 
(See table 2.)


   O&M HAS DECLINED MORE SLOWLY
   THAN PERSONNEL LEVELS
------------------------------------------------------------ Letter :3

Total O&M funding for DOD is projected to decline at a slower rate
than either civilian or military personnel levels between fiscal
years 1985 and 2001.\9 Figure 1 shows that, between fiscal years 1985
and 2001, annual O&M funds are projected to decrease by over 20
percent (from $110.4 billion to $87.8 billion), and both civilian and
military personnel levels are also projected to decline, but at
different rates. 

   Figure 1:  Annual DOD O&M
   Appropriations and Personnel
   Levels for Fiscal Years
   1985-2001 (Constant 1997
   dollars in billions)

   (See figure in printed
   edition.)

Note:  Military personnel include active military and full-time Guard
and Reserve personnel.  The surge in fiscal year 1991 funding was due
to an infusion of O&M money for the Army for the Persian Gulf War. 

Source:  Our analysis of DOD FYDP data. 

Between fiscal years 1985 and 1996, the level of annual O&M funding
declined by 13 percent, from $110.4 billion to $96.0 billion. 
However, this decline is projected to end during the 1997 FYDP period
(fiscal
years 1997-2001), and annual O&M funds are projected to increase
slightly in fiscal years 2000 and 2001.  Civilian personnel levels
have fallen steadily since fiscal year 1989 and are projected to
continue to decline through fiscal year 2001.  This is important
because, according to DOD, over 40 percent of annual O&M
appropriations fund civilian salaries and benefits.  O&M is projected
to increase at the same time that the number of civilians is
projected to decline.  This indicates that other O&M-funded programs
are projected to increase to a greater extent than O&M-funded
civilian salaries are projected to decrease. 

The number of civilian personnel in DOD has fallen by about 27
percent between fiscal years 1985 and 1996, from 1.1 million persons
to 830,000.  By fiscal year 2001, DOD plans to have 729,000 civilians
employed, an additional 12-percent decline. 

Although military personnel levels are projected to fall over the
17-year period covered by this report, most of the decline occurred
prior to fiscal year 1996.  Military personnel levels fell by over 30
percent between the peak of 2.2 million persons in fiscal year 1987
to 1.5 million in fiscal
year 1996.  After fiscal year 1996, military personnel levels are
expected to decline by only 4 percent.  Although military personnel
salaries are not paid by O&M funds, O&M funds a variety of activities
and programs that support military personnel and most
readiness-related resources. 

Because personnel levels decline at a faster rate than annual O&M
funding levels, annual O&M funds when allocated per person (military
and civilian) are projected to increase by about 20 percent over the
fiscal
year 1985-2001 period, as shown in figure 2.\10

   Figure 2:  Per Person Annual
   O&M Funding for Fiscal Years
   1985-2001 (Constant 1997
   dollars in thousands)

   (See figure in printed
   edition.)

Source:  Our analysis of DOD FYDP data. 

O&M funding per person increased from $33,100 to $40,400 between
fiscal years 1985 and 1996, a 21.9-percent increase.  Although O&M
funding per person is projected to decline in fiscal years 1997 and
1998, it is expected to increase by 4.2 percent after fiscal year
1998 to $39,700 per person in fiscal year 2001. 

A small portion of the increase in O&M funding per person may be a
result of DOD's transferring functions previously performed in house
to outside providers.  Our analysis of DOD's budget documents shows
that the purchase of goods and services through contracts or from
other federal agencies uses over half of DOD's annual O&M funds.  The
amount of contracting paid by O&M funds is projected to increase
slightly between fiscal years 1988 and 1997. 

The following are some questions raised by the trend information
presented in this section: 

Why are O&M funds not projected to decline during the period covered
by the 1997 FYDP when civilian personnel levels decrease and military
personnel levels stabilize? 

How will outsourcing impact O&M costs in the out-years, that is,
after fiscal year 1997? 


--------------------
\9 Personnel levels are as of the end of a fiscal year, or
endstrength.  Military personnel levels in this report, unless noted
otherwise, include active military and full-time Guard and Reserve
personnel. 

\10 Per person values, unless noted otherwise, are per a combination
of active military, full-time Guard and Reserve personnel, and DOD
civilians. 


   O&M FUNDING IS CONCENTRATED
   WHEN VIEWED BY THE FEDERAL
   BUDGET ACCOUNT STRUCTURE
------------------------------------------------------------ Letter :4

O&M budget accounts are organized in two ways, by service and
program.  The 11 service-oriented accounts include funding for
multiple programs and activities for specific-service, Defense-wide,
and the services' National Guard and Reserve programs.\11 The number
of service budget accounts remained stable at 11 from fiscal years
1985 to 2001.  In contrast, the number of program accounts grew from
4 in fiscal years 1985 to 1989 and peaked at 11 in fiscal years 1993,
1994, and 1997.\12 Projections show that between fiscal years 1998
and 2001, DOD will have 10 program accounts.  Congress created the
largest program account, the Defense Health Program, in fiscal year
1993.  DOD moved all defense health care resources from the service
and Defense-wide accounts to this account.  As a share of total
annual O&M funds, the Defense Health Program budget account is
projected to grow from 10.6 percent in fiscal year 1993 to 11.8
percent in fiscal year 2001. 

Most program accounts were created to increase visibility for certain
efforts or respond to unique needs.  For example, the Former Soviet
Union Threat Reduction budget account was created in fiscal year 1994
to help several newly independent states destroy weapons of mass
destruction; store and transport the weapons to be destroyed; and
reduce the risk of proliferation.  Funds for this account peaked at
$439 million in fiscal
year 1995 and are projected to decline to $395 million in fiscal
year 2001.  The program accounts without the Defense Health Program
represent a small share of O&M funds, from less than one-tenth of a
percent in fiscal year 1989 to a peak of almost 3 percent in fiscal
year 1999. 

The O&M budget accounts vary in size.  From fiscal years 1985 to
1992, approximately 90 percent of O&M funds are concentrated in four
budget accounts:  Navy, Army, Air Force, and Defense-wide.  This
concentration (approximately 85 percent) continues through fiscal
year 2001 with the addition of one account--Defense Health Program. 
Table 1 shows the concentration of resources by budget account for
fiscal year 1996. 



                                Table 1
                
                   Summary of O&M Budget Accounts for
                            Fiscal Year 1996

                  (Constant 1997 dollars in thousands)

                                             Fiscal year
                                              1996 total    Cumulative
                                            obligational    percentage
Budget account title                           authority      of total
------------------------------------------  ------------  ------------
O&M, Navy                                    $21,893,235          22.8
O&M, Army                                     19,819,719          43.5
O&M, Air Force                                19,225,690          63.5
O&M, Defense-wide                             10,416,978          74.4
Defense Health Program                        10,378,416          85.2
Other budget accounts                         14,221,691         100.0
======================================================================
Total                                        $95,955,729
----------------------------------------------------------------------
Note:  Other budget accounts are seven service accounts (Air National
Guard, Army National Guard, Marine Corps, Air Force Reserve, Army
Reserve, Navy Reserve, and Marine Corps Reserve) and eight program
accounts (Defense Environmental Restoration, Drug Interdiction and
Counter-Drug Activities; Former Soviet Union Threat Reduction; Office
of the Inspector General; Payment to Kaho'olawe Island Fund; Overseas
Humanitarian, Disaster, and Civic Aid; Summer Olympics; and Court of
Military Appeals-Defense). 

Source:  Our analysis of DOD FYDP data. 

DOD has considerable discretion in budgeting for and carrying out O&M
activities.  Unlike the military personnel appropriation accounts,
which are primarily composed of entitlements,\13 most O&M spending is
not set by law.  However, the O&M program accounts receive an annual
appropriation separately.  As a practical matter, this means that
funding levels for these specific programs are set by law.  For
example, in fiscal year 1996, Congress appropriated $50 million for
the program account, Overseas Humanitarian, Disaster, and Civic Aid. 

The fact that DOD has discretion over most O&M funds does not mean
that O&M funds are available without any controls.  O&M funds can
only be obligated for authorized programs and purposes and are
available for one fiscal year unless a longer period of availability
is specified.  Further, in annual authorization and appropriation
acts, Congress can impose direction to carry out particular
activities or programs and can limit or prohibit spending for other
activities.  Finally, although reprogramming of funds within an
appropriation is permitted, DOD has committed itself to seek
congressional approval before reprogramming $10 million or more in an
O&M account. 

The following is a question raised by the trend information presented
in this section: 

Should other budget accounts be created to increase visibility for
O&M-funded programs? 


--------------------
\11 The 11 service accounts are:  Navy, Air Force, Army,
Defense-wide, Air National Guard, Army National Guard, Marine Corps,
Air Force Reserve, Army Reserve, Navy Reserve, and Marine Corps
Reserve. 

\12 In fiscal year 1985, the four program accounts were
Claims-Defense, Court of Military Appeals-Defense, National Board for
Promotion Rifle Practice, and Defense Environmental Restoration Fund. 
In fiscal year 1997, the 11 program accounts are Defense Health
Program; Drug Interdiction and Counter-Drug Activities; Former Soviet
Union Threat Reduction; Office of the Inspector General; Overseas
Humanitarian, Disaster, and Civic Aid; Payment to Kaho'olawe Island
Fund; Court of Military Appeals-Defense; and separate Environmental
Restoration accounts for Defense, Navy, Army and Air Force. 

\13 See Defense Budget:  Trends in Active Military Personnel
Compensation Accounts for 1990-97 (GAO/NSIAD-96-183, July 9, 1996). 


   MAJOR SHIFTS IN FUNDS OCCUR
   AMONG THE SERVICES AND COMBINED
   DOD AGENCIES
------------------------------------------------------------ Letter :5

Prior to fiscal year 1992, the three services received about 90
percent of O&M funds, and DOD agencies received approximately 10
percent.\14 During this period, the Navy/Marine Corps' share of O&M
funds declined the most, by almost 6 percent, while the Air Force's
annual share decreased by less than 2 percent.  The significant
decrease in the Navy/Marine Corps' portion of annual O&M funds
occurred even though the Navy/Marine Corps' civilian personnel levels
declined by 5 percent less than the Air Force and the Navy/Marine
Corp's military personnel levels grew slightly over this period.\15

Only the Army experienced an increase in its share of annual O&M
funds.  Between fiscal years 1985 and 1990, the Army's portion of
funding increased by 4 percent, while Army military personnel levels
fell by almost 3 percent and Army civilian personnel levels fell by
about 9 percent.  The Army received an additional increase of 5
percent in its share of annual O&M funds between fiscal years 1990
and 1991, but this surge in fiscal
year 1991 funding was due to an infusion of O&M money for the Army
for the Persian Gulf War. 

After fiscal year 1991, DOD centralized funding for health programs
into a Defense-wide O&M appropriation by shifting the funds for the
program from the services' O&M appropriations.  This change caused a
significant increase in the total annual O&M funds provided to the
combined DOD agencies.  In fiscal year 1992, Defense-wide O&M was
almost 20 percent of total DOD O&M funding.  In fiscal year 1996, O&M
funding became almost equally proportional among the three services
and the combined DOD agencies.  Defense-wide appropriations remain at
about one-quarter of total annual O&M appropriations through fiscal
year 2001. 

Although the proportion of O&M funds received by each of the three
services declined after fiscal year 1991, the Army's share declined
the most.  Beginning in fiscal year 1998, the Army will annually
receive the smallest portion of O&M funds.  By fiscal year 2001, the
Army is expected to receive less than 23 percent of total annual O&M
funds, while the Navy/Marine Corps and the Air Force will each get
approximately 26 percent of total O&M funds.  Figure 3 shows the
changes in O&M funding distribution in fiscal years 1985, 1992, 1996,
and 2001. 

   Figure 3:  Percentage of DOD's
   Annual O&M Funding Allocated by
   Operating Organization in
   Fiscal Years 1985, 1992, 1996,
   and 2001

   (See figure in printed
   edition.)

Note:  Annual percentages may not add to 100 due to rounding. 

Source:  Our analysis of DOD FYDP data. 

The Navy/Marine Corps' annual portion of O&M funds continued to
decline after fiscal year 1991 and by fiscal year 1996 fell to 26.5
percent, almost 10 percent lower than the portion of funding in
fiscal year 1985.  The level of Navy/Marine Corps military personnel
fell almost 10 percent less than the other two services, while
Navy/Marine Corps civilian personnel levels fell by almost 30
percent, similar to the Army.  After fiscal year 1996, the portion of
O&M funding provided to the Navy/Marine Corps is projected to remain
between 25.9 and 26.5 percent, while military personnel levels fall
by 5 percent and civilian personnel levels decrease by 15 percent. 

The Air Force's proportion of annual O&M funds changed the least of
the three services.  Although the Air Force's share of O&M funds fell
by about 2 percent between fiscal years 1991 and 1992, the Air
Force's annual portion of O&M funds are planned to remain between
24.6 and 27.6 percent for the fiscal year 1993 through 2001 period. 
During this period, both Air Force civilian and military personnel
levels are projected to decline by 19 and 17 percent, respectively. 

Of the three services, the Air Force has the highest O&M cost per
military and civilian person.  As shown in table 2, even though the
Air Force had fewer active military, full-time Guard, Reserve, and
civilian personnel than either the Army or the Navy/Marine Corps, the
Air Force's O&M cost per person in fiscal year 1996 was more than
$46,000 per person compared with about $31,000 per person for the
Navy/Marine Corps and the Army.  The Army had approximately 152,000
more military and about 76,000 more civilians than the Air Force but
received $100 million less in O&M funds in fiscal year 1996. 



                                Table 2
                
                  O&M Funding and Personnel Levels in
                      Fiscal Year 1996 by Service

                                             Active
                                         military\b
                                                and
                             Fiscal       full-time                O&M
                          year 1996       Guard and            funding
                                O&M         Reserve  Civili        per
Service                   funding\a       personnel     ans   person\c
-----------------------  ----------  --------------  ------  ---------
Air Force                     $23.6         324,904  183,35      $46.5
                                                          7
Army                           23.5         477,403  259,46       31.8
                                                          2
Navy/Marine Corps             $25.4         576,495  239,96      $31.1
                                                          1
----------------------------------------------------------------------
\a In billions of fiscal year 1997 dollars. 

\b Active military does not include personnel assigned to DOD
agencies. 

\c In thousands of fiscal year 1997 dollars. 

Source:  Our analysis of DOD FYDP data. 


The following are some questions raised by the trend information
presented in this section: 

What factors contribute to the major shifts in funds among the
services and combined DOD agencies (even after taking into account
the DOD health care funding migrations)?  Specifically,

  -- Why is the Army's share of annual O&M funds declining? 

  -- What causes the Air Force to have the highest per person O&M
     costs among the three services? 


--------------------
\14 Annual O&M funds for the three services include the funding for
their respective Guard and Reserve units. 

\15 In this section, service military personnel levels do not include
service personnel assigned to DOD agencies. 


   O&M FUNDING OF DIRECT
   INFRASTRUCTURE IS PROJECTED TO
   DECLINE SLIGHTLY
------------------------------------------------------------ Letter :6

Using the FYDP, DOD has identified program elements that fund
infrastructure activities.  DOD refers to these program elements as
"direct infrastructure." O&M funds about 50 percent of direct
infrastructure during the fiscal year 1985-2001 period.  DOD assigned
each infrastructure program element to one of the following eight
categories on the basis of the program's activities:  acquisition
infrastructure; installation support; central command, control, and
communications; force management; central logistics; central medical;
central personnel; and central training.  These categories are
described in appendix I. 

There are parts of infrastructure that DOD cannot identify using the
FYDP.  According to DOD officials, this is about 20 to 25 percent of
DOD's total infrastructure funding and mostly represents logistics
purchases that cannot be identified specifically.  Funding for
logistics purchases would likely come from O&M appropriations. 
Therefore, the proportion of total DOD infrastructure funded by O&M
is clearly greater than 50 percent. 

During fiscal years 1985 through 2001, direct infrastructure O&M
funds decline by 22.6 percent, similar to total O&M trends.  As shown
in figure 4, O&M funding of direct infrastructure programs decreases
after fiscal
year 1991. 

   Figure 4:  Direct
   Infrastructure Funded by O&M
   Appropriations for Fiscal Years
   1985-2001 (Constant 1997
   dollars in billions)

   (See figure in printed
   edition.)

Source:  Our analysis of DOD FYDP data. 

This decline was primarily in the central logistics infrastructure
category when the Defense Business Operations Fund was created.\16
Moreover, the central logistics category received 35 percent less O&M
funds in fiscal year 1992 than in fiscal year 1991, in part, due to
the conclusion of the Persian Gulf War.  Despite these reductions,
this category accounted for about 27 percent of the total value of
direct infrastructure in fiscal year 1992. 

When O&M funding for the central logistics infrastructure category is
excluded, as shown in figure 5, O&M funding of direct infrastructure
actually increased between fiscal years 1985 and 1996. 

   Figure 5:  Direct
   Infrastructure--Excluding
   Central Logistics--Funded by
   O&M Appropriations for Fiscal
   Years 1985-2001 (Constant 1997
   dollars in billions)

   (See figure in printed
   edition.)

Source:  Our analysis of DOD FYDP data. 

Large increases occurred in four infrastructure categories:  central
medical; central command, control, and communications; central
personnel; and acquisition infrastructure.  The increase in central
medical O&M funding had the largest impact because in fiscal year
1985 central medical accounted for 15 percent of total direct
infrastructure (without central logistics) and, by fiscal year 1996,
central medical's portion had grown to over 20 percent. 

DOD projects a slight decrease, about 3 percent, in O&M-funded direct
infrastructure (with and without central logistics) between fiscal
years 1997 and 2001.  Most of this decline is projected to occur in
the installation support, force management, acquisition
infrastructure, and central personnel infrastructure categories. 

The following are some questions raised by the trend information
presented in this section: 

What causes the projected out-year increases in O&M-funded direct
infrastructure (fiscal years 2000 and 2001)? 

Where will DOD get savings in infrastructure to pay for
modernization? 

How will DOD's modernization plans affect future O&M levels? 


--------------------
\16 The Defense Business Operations Fund is a revolving fund. 
Activities financed by the Fund provide goods and services such as
depot maintenance, spare parts, and supplies in exchange for
reimbursement of total costs incurred in delivering the goods or
services.  When the Defense Business Operations Fund revolving fund
was created, functions like depot maintenance and supply management
were no longer directly funded.  Each of the Fund's customers (that
is, the services and some defense agencies) now pay the Fund the cost
of providing the goods and services to them.  While the funding has
been consistently provided in O&M appropriations, the funding for
these activities has migrated to the customers of the Fund goods and
services.  The Defense Business Operations Fund has been replaced by
four service-specific revolving funds. 


   O&M FUNDS ARE CONCENTRATED IN
   THREE MAJOR DEFENSE PROGRAMS,
   AND ONLY ONE OF
   THOSE--TRAINING, MEDICAL, AND
   OTHER GENERAL PURPOSE
   ACTIVITIES--INCREASED
------------------------------------------------------------ Letter :7

Another way to analyze the changes and components of O&M funding is
to aggregate FYDP data by DOD's major defense programs.  For its own
force programming and budgeting purposes, DOD organizes the defense
budget into program elements that consist of collections of weapons,
manpower, and support equipment.  Program elements are grouped into
11 major defense programs.  Each major defense program reflects a
force mission or support mission of DOD and contains the resources
needed to achieve an objective or plan. 

Three major defense programs--general purpose forces; central supply
and maintenance; and training, medical, and other general purpose
activities--receive the majority of annual O&M funding.  In fiscal
year 1996, these three programs were allocated 65 percent of DOD's
O&M funds.
Figure 6 shows that of the three programs, only the training,
medical, and other general purpose activities program's annual
funding has continued to increase over the fiscal year 1985-2001
period. 

   Figure 6:  Annual DOD Operation
   and Maintenance Appropriations
   for Three Major Defense
   Programs in Fiscal Years
   1985-2001 (Constant 1997
   dollars in billions)

   (See figure in printed
   edition.)

Source:  Our analysis of DOD FYDP data. 

The training, medical, and other general purpose activities program's
annual share of O&M appropriations increased by almost $4 billion
between fiscal years 1985 and 1996 to about $19 billion.  DOD plans
to maintain this level of O&M funding for this program through fiscal
year 2001.  O&M funding per person for training, medical, and other
general purpose activities has almost doubled over the fiscal year
1985-2001 period;\17 most of this growth occurred prior to fiscal
year 1996. 

O&M funding for the general purpose forces program is projected to
fall by 28 percent between fiscal years 1985 and 2001.  This
corresponds to the decline in DOD's overall force level.  The O&M
funding per person assigned to this program is expected to generally
remain between $25,000 and $30,000 per person over the entire fiscal
year 1985 to 2001 period. 

Central supply and maintenance O&M funding declined significantly
(by 34 percent) between fiscal years 1991 and 1992 when the Defense
Business Operations Fund was created.  Many of this program's supply,
maintenance, and service activities were no longer directly funded,
and the funds to pay for the goods and services provided by the
program's activities were allocated to the customers (e.g., strategic
and general purpose forces programs) of these services.  The decline
in program funding continued through fiscal year 1997, albeit at a
slower rate, and is projected to remain fairly stable at about $12
billion annually until fiscal year 2001. 

Of the remaining eight major defense programs, the next two
largest--(1) command, control, communications, intelligence, and
space and (2) Guard and Reserve forces--are projected to receive
approximately $10 billion and $8 billion, respectively, in annual O&M
funds over the fiscal year 1985-2001 period.  (See fig.  7.)

   Figure 7:  Annual DOD O&M
   Appropriations for Command,
   Control, Communications,
   Intelligence, and Space and for
   Guard and Reserve Forces for
   Fiscal Years 1985-2001
   (Constant 1997 dollars in
   billions)

   (See figure in printed
   edition.)

Source:  Our analysis of DOD FYDP data. 

Even with the downsizing of the force, the annual level of O&M
funding for both of these programs has remained fairly constant over
the entire 17-year period covered by this report.  For the Guard and
Reserve program, full-time personnel levels increased by almost
11,000 people over the fiscal year 1985-1996 period, yet part-time
Guard and Reserve personnel levels declined by over 170,000 persons
over the same period.  Both full-time and part-time personnel numbers
are projected to decline through 2001.  Even though the command,
control, communications, intelligence, and space program's annual O&M
funding level has not changed significantly throughout the fiscal
year 1985-2001 period, its level of annual O&M funding per person
associated with this program has increased by 30 percent over these
17 years.  Most of this increase in O&M funding per person occurred
prior to fiscal year 1995. 

The following are some questions raised by the trend information
presented in this section: 

What factors cause the training, medical, and other general purpose
activities program funding to increase steadily while military and
civilian personnel levels decrease? 

Why is central supply and maintenance O&M funding not declining in
the out-years (after fiscal year 1997) if DOD is improving the
efficiency of these activities by using privatization and
outsourcing? 

Why has the command, control, communications, intelligence, and space
program's O&M funding not declined over time as DOD has downsized? 

Why has the Guard and Reserve forces program's O&M funding not
declined as the overall force level has declined? 

Why did the level of full-time Guard and Reserve personnel increase
when part-time personnel declined by 170,000 prior to fiscal year
1996? 


--------------------
\17 Funding per person is per all military (active and full-time
Guard and Reserve) and all DOD civilians. 


   O&M FUNDS ARE CONCENTRATED FROM
   A DEFENSE MISSION CATEGORY
   PERSPECTIVE
------------------------------------------------------------ Letter :8

Partitioning total O&M funds using DOD's DMC analytical framework
shows that funding is concentrated among a few categories.  From
fiscal
years 1985 to 2001, five mission categories received and are
projected to receive about 50 percent of O&M funding.  Between fiscal
years 1993 and 2001, the five largest categories are land forces,
medical, naval forces, tactical air forces, and other logistics
support.  In total, there are about
30 mission categories during the fiscal year 1993-2001 period. 
Figure 8 compares funding for different fiscal years for these five
defense mission categories.\18

   Figure 8:  Comparison of Annual
   O&M Funding for Fiscal Year
   1996 Five Highest Dollar
   Defense Mission Categories
   (Constant 1997 dollars in
   billions)

   (See figure in printed
   edition.)

Source:  Our analysis of DOD FYDP data. 

Among the five largest categories in fiscal year 1996, medical is the
only category that experiences real growth--from $5.9 billion in
fiscal
year 1985 to $10.2 billion in fiscal year 2001, a 72.8-percent
increase.  Most of the growth in medical occurs prior to fiscal year
1997, and the majority of these costs are for health care needs.  In
contrast, the naval forces category experiences the largest decline
in real terms--from $15.2 billion in fiscal year 1985 to $8.4 billion
in 2001, a 44.6-percent decrease. 

Figure 9 shows the distribution of fiscal year 1996 O&M funding by
defense mission category.  Eight categories make up 71 percent of O&M
funding ($68.4 billion), and each category is greater than $5.1
billion.  Remaining resources, $27.6 billion or 28.8 percent, reside
in 22 categories and funding ranges from slightly more than $5
billion (intelligence) to $4.7 million (federal agency support). 
FYDP projections show that resources remain concentrated in the same
eight categories for fiscal years 1997 through 2001. 

   Figure 9:  Percentage of Fiscal
   Year 1996 O&M Funding Allocated
   by Defense Mission Category

   (See figure in printed
   edition.)

Note:  Other defense mission categories are intelligence; strategic
offense; maintenance operations; supply operations; other personnel
support; communications; personnel acquisition; special operations
forces; geophysical sciences; strategic defense; counterdrug support;
space launch support; information management; international support;
strategic command, control and communications; general purpose
support; security and investigative functions; command and control;
nuclear weapons support; individuals; undistributed adjustments; and
federal agency support.  Total shares exceed 100 percent due to
rounding. 

Source:  Our analysis of DOD FYDP data. 

Our analysis of the eight categories with the highest dollar values
in fiscal year 1996 shows that from fiscal years 1985 to 2001, three
categories (medical, mobility forces, and departmental) are projected
to grow and five categories (naval forces, other logistics support,
training, land forces, and tactical air forces) are projected to
decline.  However, as shown in table 3, these overall trends are not
consistent over the 17-year period. 



                                Table 3
                
                  Summary of Changes in O&M Funds for
                  Eight Highest Dollar Defense Mission
                     Categories in Fiscal Year 1996

                  (Constant 1997 dollars in billions;
                         change in percentages)

                                        Fiscal      Fiscal      Fiscal
                            Fiscal       years       years       years
Defense mission          year 1996     1985-96   1996-2001   1985-2001
category                   funding      change      change      change
----------------------  ----------  ----------  ----------  ----------
Land forces                 $13.73        1.63      -23.48      -22.24
Medical                      10.24       73.21       -0.25       72.77
Naval forces                  9.52      -37.48      -11.34      -44.57
Tactical air forces           8.55       -2.76       -9.11      -11.62
Other logistics
 support                      8.02      -13.10      -13.21      -24.58
Departmental                  6.68       13.17       -5.24        7.24
Mobility forces               5.82       54.55       -5.85       45.51
Training                      5.79      -21.35       -2.84      -23.58
----------------------------------------------------------------------
Source:  Our analysis of DOD FYDP data. 

For example, the medical category increased by 73.2 percent between
fiscal years 1985 and 1996 but is projected to decline between fiscal
years 1996 and 2001.  In the land forces category, there is a slight
increase between fiscal years 1985 and 1996 but a substantial
decrease projected for the fiscal year 1996-2001 period.  Although
projections show that all categories will decrease in real terms from
fiscal years 1996 to 2001, medical's projected decrease is
insignificant.  Appendix II provides a detailed analysis of trends
and per person costs for the fiscal year 1996 eight highest dollar
categories:  land forces, medical, naval forces, tactical air forces,
other logistics support, departmental, mobility forces, and training. 

A similar concentration emerges when distributing annual O&M funds by
DMCs for the 11 service budget accounts throughout the 17-year
period.  For example, in fiscal year 1996, over 55 percent of each
account's O&M funds are concentrated in three defense mission
categories.  The three largest dollar categories differ for each
service budget account.  For example, in fiscal year 1996
Defense-wide's three largest categories were intelligence,
departmental, and other personnel support and received about 61
percent of total funding.  In contrast, the Army's three largest
dollar categories were land forces, training, and other logistics
support and received about 70 percent of total funding.  Table 4
shows the distribution of fiscal
year 1996 O&M funds by DMCs for the O&M, Navy budget account.  O&M,
Navy has and is projected to have the largest share of annual O&M
funds compared with the other budget accounts--except in fiscal year
1991.  O&M, Army was the largest budget account in fiscal year 1991. 



                                Table 4
                
                Total Fiscal Year 1996 O&M, Navy Budget
                    Account Funds by Defense Mission
                                Category

                  (Constant 1997 dollars in thousands)

                                                            Cumulative
                                                   Total    percentage
                                            obligational      of total
Defense mission category                       authority       funding
------------------------------------------  ------------  ------------
Naval forces                                  $8,950,562         40.88
Other logistics support                        2,366,699         51.69
Maintenance operations                         1,619,407         59.09
Tactical air forces                            1,447,081         65.70
Training                                       1,311,518         71.69
Strategic offense                              1,297,196         77.62
Departmental                                   1,054,886         82.43
Other categories                               3,845,887        100.00
======================================================================
Total obligational authority                 $21,893,235
----------------------------------------------------------------------
Note:  Fourteen categories make up the other categories:  supply
operations; mobility forces; intelligence; land forces;
communications; other personnel support; personnel acquisition;
geophysical sciences; security and investigative functions; strategic
command, control, and communications; international support;
strategic defense; individuals; command and control. 

Source:  Our analysis of DOD FYDP data. 


The following are some questions raised by the trend information
presented in this section: 

What factors contribute to the significant decline in the naval
forces category between fiscal years 1985 and 2001? 

What factors are projected to contribute to the substantial decline
in the land forces category during the fiscal year 1996-2001 period? 

What factors contribute to the projected real decline during the
fiscal year 1996-2001 period for medical, departmental, and mobility
forces?  (In contrast, these categories experienced substantial real
growth during the fiscal year 1985-96 period.)

Can analyzing trends in concentrated O&M areas help DOD in future
budget plans? 


--------------------
\18 Definitions for the five categories are included in appendix II. 


   SELECTED ACTIVITIES AND
   PROGRAMS SHOW VARYING TRENDS
------------------------------------------------------------ Letter :9

We analyzed trends of three O&M programs--the Defense Health Program
(O&M budget account), environmental spending, and base operating
support--because of congressional interest and relevance in DOD's
effort to reduce infrastructure costs.  DOD's health care system is
considered a critical quality-of-life issue.  The Defense Health
Program budget account emerged in the fiscal year 1993 President's
Budget to centralize O&M health care resources.  Prior to fiscal year
1993, the resources were located in the service and DOD-wide budget
accounts.  This budget account differs from the DMC medical in that
the account does not include resources for medical contingency
hospitals and medical readiness units.  For fiscal year 1997, DOD
estimates that 8.3 million beneficiaries are eligible to use the
Defense Health Program.  Figure 10 shows that trend data for this
budget account remains relatively stable, a 1.1-percent real decline
during fiscal years 1993 through 2001.  However, in the fiscal year
1997 FYDP, DOD projected a 7.2-percent real decline between fiscal
years 1996 and 1997.  Discussions with a DOD official indicated that
fiscal year 1997 health care funds were reduced by the Office of
Secretary of Defense during preparation of the fiscal year 1997
President's Budget submission. 

   Figure 10:  Defense Health
   Program Funding for Fiscal
   Years 1993 through 2001
   (Constant 1997 dollars in
   billions)

   (See figure in printed
   edition.)

Source:  Our analysis of DOD FYDP data. 

The DOD's environment-related programs that we analyzed are the
Defense Environmental Restoration Program, environmental compliance,
environmental conservation, and pollution prevention programs.\19
Annual O&M funding for these environment-related programs more than
doubled between fiscal years 1991 and 1996, as shown in figure 11.\20
Over
90 percent of the funds for these environment-related programs in
fiscal year 1996 was for the Defense Environmental Restoration
Program and environmental compliance.  By fiscal year 2001, the level
of O&M funding for DOD's environment-related programs is projected to
decline by 23 percent from its fiscal year 1996 peak of $3.3 billion. 
Most of this decline is due to a planned 25-percent decrease in
Defense Environmental Restoration Program O&M funds and a projected
18-percent decrease in funding for environmental compliance programs. 

   Figure 11:  Annual DOD O&M
   Funding for Environment-Related
   Programs for Fiscal Years
   1991-2001 (Constant 1997
   dollars in billions)

   (See figure in printed
   edition.)

Note:  Environment-related programs are the Defense Environmental
Restoration Program, environmental compliance, environmental
conservation, and pollution prevention. 

Source:  Our analysis of DOD FYDP data. 

Base operations and maintenance activities are required to sustain
mission capability, quality-of-life, and workforce productivity.\21
Funding for these programs is found throughout DOD, in both force and
support missions, and was analyzed at the FYDP program element level
for this report. 
Figure 12 shows that overall annual funding for base operations and
maintenance activities has declined since fiscal year 1985. 

   Figure 12:  Annual DOD O&M
   Funding for Base Operations and
   Maintenance Activities for
   Fiscal Years 1985-2001
   (Constant 1997 dollars in
   billions)

   (See figure in printed
   edition.)

Note:  Includes base operations, child and family centers, base
communications, and real property maintenance and support. 

Source:  Our analysis of DOD FYDP data. 

The level of O&M funds these programs received decreased by 16
percent between fiscal years 1985 and 1996 and is projected to
decline by an additional 18 percent by 1999.  Most of the falloff in
earlier years is due to a decrease in O&M funding for real property
maintenance and support activities, while after fiscal year 1994 the
level of O&M funds provided annually to base operations activities
decreases, as shown in figure 13.  In fiscal years 2000 and 2001,
base operations and maintenance activities are projected to receive a
slight increase (2 percent) in annual O&M funds as a result of an
increase in funding of real property maintenance and support
activities. 

   Figure 13:  Annual DOD O&M
   Funding for Selected Base
   Operations and Maintenance
   Activities for Fiscal Years
   1985-2001 (Constant 1997
   dollars in billions)

   (See figure in printed
   edition.)

Note:  Base operations activities include child and family centers. 

Source:  Our analysis of DOD FYDP data. 


The following are some questions raised by the trend information
presented in this section: 

Why is funding for environmental-related programs expected to decline
between fiscal years 1996 and 1997?  What factors cause environmental
projections to be considerably lower than prior-year spending (since
fiscal year 1993)? 

What factors cause O&M base operating support projections to increase
after fiscal year 1999? 

What impact has the Base Realignment and Closure decisions had on
base operations and maintenance costs? 

Why are annual base operations O&M funding levels cyclical? 

Why are real property maintenance funding levels not expected to
decline in the fiscal year 1997-2001 period? 


--------------------
\19 The Defense Environmental Restoration Program funds the
investigation and cleanup of hazardous substances and waste,
demolition and removal of unsafe buildings, and research of
technology that could reduce hazardous wastes in the future. 
Environmental compliance funds DOD actions to sustain compliance with
federal, state, and local environmental laws.  Environmental
conservation funds activities that protect or rehabilitate natural
and cultural resources in DOD lands and waters.  Pollution prevention
is any action that will reduce or eliminate future pollutants of the
environment from DOD operations. 

\20 Fiscal year 1991 was the first year funding was clearly
identified for environmental compliance.  Specific program elements
for pollution prevention and environmental conservation appeared in
fiscal years 1993 and 1994, respectively. 

\21 These activities are base operations (including family and child
support programs), base communications, and real property maintenance
(maintenance and repair, minor construction, real property services,
non-Defense Environmental Restoration Program environmental
activities, and installation engineering). 


   AGENCY COMMENTS
----------------------------------------------------------- Letter :10

In oral comments, DOD agreed with the report and offered points of
clarification.  Specifically, DOD said that O&M funding per person is
an inappropriate measure to assess future O&M requirements.  In our
report, we analyzed O&M trends in a number of different ways,
including annual O&M on a per person basis.  We believe each measure
of O&M funding produces a different, but equally insightful and
appropriate, overview.  Furthermore, we did not attempt to determine
an appropriate level of O&M funding. 

DOD noted that answering the questions following each section
requires an understanding of the significant accounting changes that
have occurred since fiscal year 1981.  DOD recommended that future
O&M analysis use normalized FYDP data.  (Normalized FYDP data account
for the movement of funds whether inside the O&M accounts or to and
from other appropriation accounts.) We attempted to obtain the
department's normalized database but at the time of our review it was
unavailable.  Moreover, we recognize that there are significant
accounting changes that impacted DOD's O&M accounts.  We discuss some
of the changes in our report and structured our analysis to minimize
their impact. 


   SCOPE AND METHODOLOGY
----------------------------------------------------------- Letter :11

To identify trends in annual O&M appropriations and personnel levels
and to determine the programs and activities funded by O&M, we
analyzed data contained in DOD's FYDP.  The FYDP is the most
comprehensive and continuous source of current and historical defense
resource data.  We used funding and personnel data from the
historical FYDP update (June 1995) for fiscal years 1985-1993, the
fiscal year 1996 FYDP for fiscal year 1994 data, and the fiscal year
1997 FYDP for fiscal years 1995-2001.  Historical FYDP data reflects
actual (1) total obligational authority for programs and (2)
personnel levels.  We adjusted the nominal dollars to constant fiscal
year 1997 dollars using 1997 DOD inflation indices for O&M costs. 
Since DOD had not yet released its revised FYDP database that adjusts
FYDP data for known accounting and program changes since fiscal
year 1975, while we were conducting our work, we were unable to
normalize the data for these changes.  We do note in the report where
these changes have impacted the trends. 

We analyzed the FYDP data by DOD's major defense programs, federal
budget account structure, and operating organization.  To aid in the
identification and classification of the components that affect
annual O&M funding levels, we also evaluated the FYDP data using two
analytical tools developed by DOD--the DMC and the Infrastructure
Categories.  The DMC structure is used to analyze FYDP data in terms
of a mission-oriented view of DOD resources rather than a
service-specific program view, and the infrastructure categories
structure aids in the analysis of the resources required to support
the combat forces.  We did not verify DOD's allocation of program
elements in its DMC and Infrastructure Category analytical tools. 

In addition, we interviewed officials in the following DOD offices: 
Office of the DOD Comptroller, Office of the Under Secretary of
Defense (Personnel and Readiness), Office of the Under Secretary of
Defense (Acquisition and Technology), Office of Program Analysis and
Evaluation, and the Office of Reserve Affairs.  We also met with
officials from the Institute for Defense Analyses.  We reviewed our
prior reports, pertinent reports by the Congressional Budget Office,
Congressional Research Service, DOD, the Institute for Defense
Analyses, and others. 

Our work was conducted from June 1996 to January 1997 in accordance
with generally accepted government auditing standards. 


--------------------------------------------------------- Letter :11.1

We are providing copies of this report to appropriate congressional
House and Senate committees; the Secretaries of Defense, the Air
Force, the Army, and the Navy; and the Director, Office of Management
and Budget.  We will also provide copies to other interested parties
upon request. 

If you have any questions concerning this report, please call me on
(202) 512-3504.  Major contributors to this report were Robert
Pelletier, Edna Thea Falk, and Deborah Colantonio. 

Richard Davis
Director, National Security
 Analysis


CATEGORIES OF DEFENSE
INFRASTRUCTURE
=========================================================== Appendix I

Installation support consists of activities that furnish funding,
equipment, and personnel to provide facilities from which defense
forces operate.  Activities include construction planning and design,
real property maintenance, base operating support, real estate
management for active and reserve bases, family and bachelor housing,
supply operations, base closure activities, and environmental
programs. 

Acquisition infrastructure consists of all program elements that
support program management, program offices, and production support,
including acquisition headquarters, science and technology, and test
and evaluation resources.  This category includes earlier levels of
research and development, including basic research, exploratory
development, and advanced development. 

Central logistics consists of programs that provide support to
centrally managed logistics organizations, including the management
of material, operation of supply systems, maintenance activities,
material transportation, base operations and support, communications,
and minor construction.  This category also includes program elements
that provide resources for commissaries and military exchange
operations. 

Central training consists of program elements that provide resources
for virtually all non-unit training, including training for new
personnel, aviation and flight training, military academies, officer
training corps, other college commissioning programs, and officer and
enlisted training schools. 

Central medical consists of programs that furnish funding, equipment,
and personnel that provide medical care to active military personnel,
dependents, and retirees.  Activities provide for all patient care,
except for that provided by medical units that are part of direct
support units.  Activities include medical training, management of
the medical system, and support of medical installations. 

Central personnel consists of all programs that provide for the
recruiting of new personnel and the management and support of
dependent schools, community, youth, and family centers, and child
development activities.  Other programs supporting personnel include
permanent change-of-station costs, personnel in transit, civilian
disability compensation, veterans education assistance, and other
miscellaneous personnel support activities. 

Command, control, and communications consists of programs that manage
all aspects of the command, control, and communications
infrastructure for DOD facilities; information support services;
mapping and charting products; and security support.  This category
includes program elements that provide nontactical telephone
services, the General Defense Intelligence Program and cryptological
activities, the Global Positioning System, and support of air traffic
control facilities. 

Force management consists of all programs that provide funding,
equipment, and personnel for the management and operation of all the
major military command headquarters activities.  Force management
also includes program elements that provide resources for
Defense-wide departmental headquarters, management of international
programs, support to other defense organizations and federal
government agencies, security investigative services, public affairs
activities, and criminal and judicial activities. 


ANALYSIS OF EIGHT DEFENSE MISSION
CATEGORIES
========================================================== Appendix II

This appendix describes operation and maintenance (O&M) funding and
military and civilian personnel trends in detail for eight defense
mission categories (DMC) for fiscal years 1985 through 2001.  In
fiscal year 1996, the eight categories were the highest dollar
missions and represented 71 percent of O&M funds. 

With assistance from the Institute for Defense Analyses, Department
of Defense (DOD) developed the DMC structure to display (by mission)
funds, personnel, and forces programmed in the Future Years Defense
Program (FYDP).  The DMC framework is multitiered with each tier
progressively more detailed.  For example, the first tier divides DOD
programs into three basic categories:  major force missions,
Defense-wide missions, and Defense-wide support.  These three
programs are subdivided into five additional levels of detail.  One
of these levels is the training category.  Table II.1 illustrates an
example of the DMC structure for training. 



                               Table II.1
                
                       DMC Structure for Training

                                                 Defense mission
Defense mission category code                    category title
-----------------------------------------------  ---------------------
3                                                Defense-wide support
                                                 missions

32                                               Personnel support

322                                              Training

3221                                             Military personnel
                                                 training

32210                                            Military personnel
                                                 training

32210A                                           Military personnel
                                                 training, active
----------------------------------------------------------------------
Source:  DOD. 

Our analysis of the eight categories aggregates O&M funds and
personnel data at various levels of detail to provide comprehensive
and useful information. 


   LAND FORCES
-------------------------------------------------------- Appendix II:1

For the land forces category, O&M funds consist of Army and Marine
Corps division increments, non-divisional combat units, tactical
support units, base operations and management headquarters, and
operational support; Army systems support; and Army special mission
forces.  Total land forces O&M funds decrease more slowly than
military and civilian personnel assigned to this category between
fiscal years 1985 and 2001 as shown in figure II.1.  O&M funds
decrease by 22.2 percent, with most of the decline projected to occur
between fiscal years 1996 and 2001.  In contrast, between fiscal
years 1985 and 2001 military and civilian personnel levels decline by
34.4 and 36.5 percent, respectively.  Between fiscal years 1996 and
2001 military personnel decrease by an additional 4.6 percent, while
civilians decrease by less than 1 percent.  Annual per person costs
increase from $16,865 in fiscal year 1985 to $20,114 in fiscal year
2001, a 19.3-percent increase. 

   Figure II.1:  Annual Land
   Forces O&M Funds and Personnel
   Levels for Fiscal Years
   1985-2001 (Constant 1997
   dollars in billions)

   (See figure in printed
   edition.)

Note:  Personnel levels are active military, full-time Guard and
Reserve, and civilians assigned to the land forces category. 
Civilian personnel levels reflect those paid with O&M funds. 

Source:  Our analysis of DOD FYDP data. 

As expected, the Army has the largest share of total annual O&M funds
for land forces.  From fiscal years 1985 to 2001, the Army has and is
projected to have about 67 to 80 percent of total annual O&M funds. 
Figure II.2 shows annual land forces O&M funds by federal budget
account for fiscal years 1985 through 2001.  Infusion of O&M funds
for the Persian Gulf War contributed to the Army's higher share of
O&M land forces funds in fiscal year 1991. 

   Figure II.2:  Percentage of
   Annual Land Forces O&M Funds
   Allocated by Federal Budget
   Account for Fiscal Years
   1985-2001

   (See figure in printed
   edition.)

Source:  Our analysis of DOD FYDP data. 

When funds are grouped by missions within land forces, base
operations and management headquarters is the largest category from
fiscal years 1985 to 2001.  This category supports real property
maintenance, base communications, and base operations and management
headquarters at fixed Army and Marine Corps installations.  When
compared with the other three land forces mission categories,\1 as
shown in figure II.3, the base operations and management headquarters
category experiences the largest decline, a 37.4-percent decrease
from fiscal years 1985 to 2001.  Most of the decline takes places
after fiscal year 1991. 

   Figure II.3:  Annual Land
   Forces O&M Funds by Mission for
   Fiscal Years 1985-2001
   (Constant 1997 dollars in
   billions)

   (See figure in printed
   edition.)

Source:  Our analysis of DOD FYDP data. 


--------------------
\1 The three other land forces categories are Army increments and
Marine ground forces, Army special mission forces, and support
activities.  Army increments and Marine ground forces consist of Army
divisions and the non-divisional combat increment and units and
Marine divisions and the non-divisional combat increment.  Support
activities consist of Army and Marine tactical support increments and
operational support and Army systems support. 


   MEDICAL
-------------------------------------------------------- Appendix II:2

The medical category provides funds for care for active duty
personnel, retired military personnel, and dependents.  The fiscal
year 1997 President's Budget estimates that 8.3 million beneficiaries
are eligible to use the health care program in fiscal year 1997. 
Unlike the Defense Health Program budget account, the medical
category includes funds for programs related to medical contingency
hospitals and medical readiness.  Another difference is that the
medical category does not include funds for health personnel
training;\2 however, the Defense Health Program budget account has
funds for education and training programs. 

Total medical O&M funds are projected to increase from $5.9 billion
to $10.2 billion or by 72.8 percent between fiscal years 1985 and
2001.  Although projections show that the fiscal year 1997-99 funding
will be slightly lower than in fiscal year 1996, medical O&M funds
will begin to rise starting in fiscal year 2000.  Moreover, the
fiscal year 2001 FYDP projection almost matches the fiscal year 1996
level. 

When funds are grouped by missions within the medical category,
hospitals and other medical activities is the largest category
between fiscal years 1985 through 2001.  Trends for the hospital and
other medical activities category mirror those of total medical O&M
funds.  O&M funds for the base operations and management headquarters
category also grow between fiscal years 1985 and 2001, a 69.8-percent
increase.  Unlike the hospital category, which declines slightly
between fiscal years 1996 and 2001, O&M funds for base operations and
management headquarters increase by 12.1 percent during this period. 
Figure II.4 compares the trends in funding for hospitals and other
medical activities, base operations and management headquarters, and
overall medical category. 

   Figure II.4:  Annual Medical
   O&M Funds for Fiscal Years
   1985-2001 (Constant 1997
   dollars in billions)

   (See figure in printed
   edition.)

Source:  Our analysis of DOD FYDP data. 

Figure II.5 shows that medical costs per eligible beneficiary will
increase by 86 percent between fiscal years 1985 and 2001.  Further,
the fiscal
year 2001 projected cost per eligible beneficiary of $1,223 nearly
matches the fiscal year 1996 level of $1,229. 

   Figure II.5:  Annual Medical
   O&M Costs Per Eligible
   Beneficiary for Fiscal Years
   1985-2001 (Constant 1997
   dollars)

   (See figure in printed
   edition.)

Note:  Per eligible beneficiary costs were calculated using the
Office of Secretary of Defense (Health Affairs) beneficiary data from
the fiscal year 1997 President's Budget for fiscal
years 1989-2001.  Beneficiary information for fiscal years 1985-1988
is based on Office of Secretary of Defense (Health Affairs)
estimates. 

Source:  Our analysis of DOD FYDP data. 

Although the total number of eligible beneficiaries is projected to
decline between fiscal years 1989 and 2001, starting in fiscal year
1995, the total number of retirees and their dependents exceed the
total number of active duty military personnel and their dependents
(see fig.  II.6).  Between fiscal years 1989 and 2001, retirees and
their dependents increase by 16.7 percent, whereas active duty
military personnel and their dependents decrease by 26.5 percent. 

   Figure II.6:  Defense Health
   Program Beneficiaries for
   Fiscal Years 1989-2001

   (See figure in printed
   edition.)

Note:  Beneficiary information is based on Office of Secretary of
Defense (Health Affairs) data from the fiscal year 1997 President's
Budget. 

Source:  Our analysis of DOD FYDP data. 


--------------------
\2 Funds for the Uniformed Services University of the Health Sciences
are part of the medical category. 


   NAVAL FORCES
-------------------------------------------------------- Appendix II:3

The naval forces defense mission category consists of mission forces
(submarines, surface combat ships, amphibious forces, service forces,
mine warfare forces, maritime patrol, undersea surveillance forces,
and sea based anti-submarine warfare air forces); fleet support
(combat and logistics support, ordnance disposal forces, tactical
communications, shore intermediate maintenance, and aircraft support
squadrons); other operational support (command activities; sea
control operational headquarters; and intelligence, communications,
command, and control activities); and base operations and management
headquarters. 

Annual O&M funding levels for naval forces is projected to decline by
45 percent between fiscal years 1985 and 2001, as shown in figure
II.7.  This decline was primarily caused by a 48-percent reduction in
O&M funds for mission activities.  Although mission activities funds
have decreased,
figure II.8 shows that mission activities still receive about 60
percent of O&M funding. 

   Figure II.7:  Annual O&M
   Funding for Naval Forces for
   Fiscal Years 1985-2001
   (Constant 1997 dollars in
   billions)

   (See figure in printed
   edition.)

Source:  Our analysis of DOD FYDP data. 

   Figure II.8:  Percentage of
   DOD's Annual O&M Funding
   Allocated by Naval Forces
   Activities for Selected Fiscal
   Years

   (See figure in printed
   edition.)

Note:  Annual percentages may not add to 100 due to rounding. 

Source:  Our analysis of DOD FYDP data. 

Almost all of the O&M funding for this category is for the active
forces and, within active naval forces, the majority of O&M funding
is for mission force activities.  As shown in figure II.9, most of
the decrease between fiscal years 1985 and 1996 in active naval
forces O&M funds was for mission activities, although the fleet
support programs' O&M funding levels have declined as well over the
same period. 

   Figure II.9:  Annual O&M
   Funding for Active Naval Forces
   Allocated by Activity for
   Fiscal Years 1985-2001
   (Constant 1997 dollars in
   billions)

   (See figure in printed
   edition.)

Source:  Our analysis of DOD FYDP data. 

The level of O&M funding per person associated with active naval
force mission activities has decreased from its 1985 value, as shown
in
figure II.10, but most of this decline occurred by fiscal year 1990. 
Between fiscal years 1996 and 2001, the O&M funds per person is
expected to decline by only 5 percent.  The level of O&M funding per
person for base operations activities (the second largest activity
within the naval forces mission) remains relatively stable throughout
the fiscal year 1985-2001 period. 

   Figure II.10:  Per Person
   Annual O&M Funding for Selected
   Active Naval Force Activities
   for Fiscal Years 1985-2001
   (Constant 1997 dollars in
   thousands)

   (See figure in printed
   edition.)

Note:  Per person costs for mission programs are for all personnel
(active military, civilians, full-time reserve) associated with the
active force mission activity DMCs.  Per person costs for base
operations is for all personnel (active military, civilians,
full-time reserve) associated with all active naval force activities. 

Source:  Our analysis of DOD FYDP data. 


   TACTICAL AIR FORCES
-------------------------------------------------------- Appendix II:4

O&M funds for the tactical air forces category consists of air-to-air
combat squadrons; air-to-ground combat squadrons; defense suppression
forces; tactical reconnaissance squadrons; tactical command, control,
and communications; tanker/cargo squadrons; other tactical air
warfare forces; non-strategic nuclear tactical forces; operations
support; and base operations and management headquarters support
activities. 

Like aggregate O&M trends, total tactical air forces O&M funds
decrease at a slower rate than military and civilian personnel
assigned to this category between fiscal years 1985 and 2001.  (See
fig.  II.11.) During the fiscal year 1985-2001 period, O&M funds
decrease by 11.6 percent, with most of the decline projected to occur
between fiscal years 1996 and 2001.  In contrast, most of the decline
in both military and civilian personnel levels occurs between fiscal
years 1985 and 1996, a respective 34.4-percent and 24.6- percent
decrease.  Further, projections show that the fiscal year 2001 level
of $7.8 billion slightly exceeds the fiscal year 1997 level.  Annual
per person costs increase from $29,911 in fiscal year 1985 to $41,211
in fiscal year 2001, a 37.8-percent increase. 

   Figure II.11:  Annual Tactical
   Air Forces O&M Funds and
   Personnel Levels for Fiscal
   Years 1985-2001 (Constant 1997
   dollars in billions)

   (See figure in printed
   edition.)

Note:  Personnel levels are active military, full-time Guard and
Reserve, and civilians assigned to the tactical air forces category. 
Civilian levels reflect those paid with O&M funds. 

Source:  Our analysis of DOD FYDP data. 

When funds are grouped by service missions within the tactical air
forces category, as shown in figure II.12, from fiscal years 1985 to
2001, the Air Force is the largest category and experiences the
smallest percentage change in funding, a 5.9-percent decrease, when
compared with the Navy and Marine Corps categories.\3 The Navy
tactical air forces category experiences the largest decline, a
35.9-percent decrease between fiscal years 1985 and 2001.  Most of
the decline occurs between fiscal years 1985 and 1996. 

   Figure II.12:  Annual Tactical
   Air Forces O&M Funds by Service
   Missions for Fiscal Years
   1985-2001 (Constant 1997
   dollars in billions)

   (See figure in printed
   edition.)

Source:  Our analysis of DOD FYDP data. 

In the tactical air forces mission category, when funds are grouped
by primary mission, other tactical support, and base operations and
management headquarters, funds for each category decline between
fiscal years 1985 and 2001.  (See fig.  II.13.) However, these
overall trends are not consistent over the 17-year period.  Between
fiscal years 1985 and 1996, base operations and management
headquarters is the only mission activity that grows, a 5.5-percent
increase.\4 However, projections show that the base operations and
management headquarters category will experience a 19.4-percent
decrease in funds between fiscal years 1996 and 2001.  For the other
tactical support category,\5 funds decrease by 6.7 percent between
fiscal years 1985 and 1996; however, this decrease is nearly canceled
by the projected growth between fiscal years 1996 and 2001, a
5.3-percent increase.  Funding levels for primary missions decrease
in both periods\6 by 5.3 percent between fiscal years 1985 and 1996
and by 8.7 percent between fiscal years 1996 and 2001. 

   Figure II.13:  Annual Tactical
   Air Forces O&M Funds by Mission
   Activities for Fiscal Years
   1985-2001 (Constant 1997
   dollars in billions)

   (See figure in printed
   edition.)

Source:  Our analysis of DOD FYDP data. 


--------------------
\3 The service missions include funds for their respective Guard and
Reserve components. 

\4 Base operations and management headquarters fund real property
maintenance, base communications, base operations and management
headquarters at installations with a primary mission of supporting
tactical air forces and management headquarters at major commands
worldwide. 

\5 Examples of other tactical support mission activities are airwing
staff flying, readiness (training) squadrons, and aviation support. 

\6 Examples of primary mission activities are air-to-air combat,
air-to-ground combat, and defense suppression (tactical electronic
warfare). 


   OTHER LOGISTICS SUPPORT
-------------------------------------------------------- Appendix II:5

The other logistics support mission includes the following
activities:  logistics base operations and management headquarters,
and miscellaneous logistics support activities such as industrial
preparedness, second destination transportation, administrative
support, printing plants and laundries, and information automation. 

Annual O&M funding for other logistics support mission activities
fell to $5.3 billion in fiscal year 1996 from its peak of $8.7
billion in fiscal
year 1987, as shown in figure II.14.  (The surge in fiscal year 1991
O&M funding for this mission was an anomaly caused by a $2.3 billion
infusion of funds for Army and Air Force second destination
transportation programs most probably for Persian Gulf War efforts.\7
The following year, fiscal year 1992, O&M funding for these programs
decreased by more than $2.7 billion and is projected to continue to
decline at a slow steady rate through fiscal year 2000.) The other
decreases are due to consistent annual declines in O&M funding of
logistics base operations and headquarters activities.  The declines
in base operations had a significant impact on other logistics
support O&M funding because base operations activities account for
about 35 percent of total annual other logistics support funds. 
Overall, other logistics support O&M funds fell by 34 percent between
fiscal years 1985 and 1996 but are expected to remain relatively
stable through fiscal year 2001. 

   Figure II.14:  Annual O&M
   Funding for Selected Other
   Logistics Support Activities
   for Fiscal Years 1985-2001
   (Constant 1997 dollars in
   billions)

   (See figure in printed
   edition.)

Note:  Our analysis excludes funding of Defense Environmental
Restoration Program; logistics support to research and development,
procurement, and military construction; Defense Logistics Agency; and
stock fund revenue offsets. 

Source:  Our analysis of DOD FYDP data. 

By fiscal year 2001, O&M funding per person for other logistics
support activities is expected to be at about the same level as it
was in fiscal
year 1985, as shown in figure II.15.  If the surge in fiscal year
1991 funding is ignored, O&M funding per person is planned to remain
between $2,330 and $2,660 per person for the entire fiscal year
1985-2001 period. 

   Figure II.15:  Per Person
   Annual Operation and
   Maintenance Funding for
   Selected Other Logistics
   Support Activities (Constant
   1997 dollars in thousands)

   (See figure in printed
   edition.)

Note:  Per person costs are per all active military, full-time Guard
and Reserve, and DOD civilians.  Our analysis of the other logistics
support mission excludes funding of Defense Environmental Restoration
Program; logistics support to research and development, procurement,
and military construction; Defense Logistics Agency; and stock fund
revenue offsets. 

Source:  Our analysis of DOD FYDP data. 


--------------------
\7 Second destination transportation programs include costs for
commercial land, sea, or air transportation, including contract
service, movements by through bills of lading and the rental and
lease of transportation equipment and service not available on a
tariff basis from common carriers, and funds for reimbursement of
continental U.S.  port terminals. 


   DEPARTMENTAL
-------------------------------------------------------- Appendix II:6

The departmental mission includes a wide range of department-wide
service support activities such as the Army's Adjutant General,
publications centers, and postal service agency; the Navy's
accounting and finance center and its petroleum reserve; and the Air
Force's audit agency, Intelligence Service, and its finance and
accounting center.  The mission also includes department-wide
activities such as public affairs, personnel administration, service
support to the Office of the Secretary of Defense and other defense
agencies, Washington Headquarters Services, and the Office of
Economic Adjustment.\8

O&M funding levels for the departmental mission have grown since
fiscal year 1985.  Between fiscal years 1985 and 1996, O&M funding
for departmental activities grew by 16 percent, and most of this
growth occurred after fiscal year 1991.  Much of the growth between
fiscal
years 1991 and 1996 was due to significant fluctuations in funding
for programs assigned to this mission.  For example, Washington
Headquarters Services' annual O&M funding level grew almost threefold
between fiscal years 1994 and 1995 from $169 million to $498 million,
remained at this high level in fiscal year 1996, but is projected to
decline to $185 million in fiscal year 1997, where its annual funding
level is expected to remain through fiscal year 2001.\9 Other
programs in the departmental mission only have had O&M funding in
selected years, such as the Defense-wide administrative maintenance
and repair program.  O&M funding for this program appears only in
fiscal years 1992 and 1993 for $563 million and $1.9 billion,
respectively. 

O&M funding for the departmental mission decreases by 5 percent
between fiscal years 1996 and 2001.  This slight decline in the
mission's funding levels reflects the relative stability in annual
O&M funding levels for most of the large programs contained in this
mission, such as service-wide support (not otherwise accounted
for),\10 Office of the Secretary of Defense management headquarters,
and Defense Contract Audit Agency activities.  Figure II.16 shows the
trend in O&M funding for departmental mission activities during the
fiscal year 1985-2001 period. 

   Figure II.16:  Annual O&M
   Funding for Departmental
   Mission Activities for Fiscal
   Years 1985-2001 (Constant 1997
   dollars in billions)

   (See figure in printed
   edition.)

Note:  Does not include funds for foreign currency fluctuation
program elements. 

Source:  Our analysis of DOD FYDP data. 

Seventy-five percent of O&M funds for the departmental mission
support the active military, and the remaining 25 percent of O&M
funds for this mission are for departmental activities that support
the National Guard and Reserve.  Figure II.17 shows that O&M funding
for departmental activities that support the active military
generally remained between $4.0 billion and $4.5 billion prior to
fiscal year 1993 and are projected to remain between $4.5 billion and
$5.0 billion for the fiscal year 1996-2001 period.  Since the
programs that caused the fluctuations in the overall departmental
mission's O&M funding levels between fiscal years 1991 and 1996, such
as the Washington Headquarters Service, support the active military,
these same programs caused the fluctuations shown in figure II.17. 
O&M funding for departmental missions that support the active
military are projected to decline between fiscal years 1996 and 2001
by about 4 percent, only slightly less than the 5-percent decline in
the overall departmental mission's O&M funding level during the same
period. 

   Figure II.17:  Annual O&M
   Funding for Departmental
   Mission Activities That Support
   the Active Military for Fiscal
   Years 1985-2001 (Constant 1997
   dollars in billions)

   (See figure in printed
   edition.)

Note:  Does not include funds for foreign currency fluctuation
program elements. 

Source:  Our analysis of DOD FYDP data. 

O&M funding per person for departmental missions that support the
active military has grown by over 50 percent between fiscal years
1985 and 1996 as shown in figure II.18.\11

As the amount of O&M funds provided to the large departmental
programs grew between fiscal years 1991 and 1996, the number of
active military personnel fell and the civilians associated with the
departmental activities that support the active military declined. 
After fiscal year 1996, the level of O&M funds allocated to each
person for this mission is projected to remain virtually unchanged
through fiscal
year 2001. 

   Figure II.18:  Per Person
   Annual O&M Funding for
   Departmental Mission Activities
   That Support the Active
   Military (Constant 1997 dollars
   in thousands)

   (See figure in printed
   edition.)

Note:  Per person values are per all active military and the
full-time Guard and Reserve and DOD civilian personnel associated
with active military departmental mission programs. 

Source:  Our analysis of DOD FYDP data. 


--------------------
\8 The program elements for Foreign Currency Fluctuations, although
categorized by DOD as a part of this mission, were excluded from this
analysis.  These are resources for a transfer fund account that was
established to maintain the budgeted level of operations and thereby
eliminate substantial gains and losses caused by fluctuations in
foreign currency exchange rates that vary substantially from those
used in preparing budget submissions.  The O&M values contained in
these program elements vary significantly from year to year.  These
changes are not a result of a variation in the level of resources
that support a departmental activity and therefore were excluded from
the analysis. 

\9 The Washington Headquarters Services program includes funding for
the equipment, facilities and other associated costs for the
functions, which provide administrative and operating support to the
Office of the Secretary of Defense and other DOD activities. 

\10 This program is a compilation of numerous miscellaneous support
programs such as the Army's Legal Services Agency, Naval History
Center, and the Air Force Safety Agency. 

\11 Per person values are per all active military and the full-time
Guard and Reserve and DOD civilian personnel associated with active
military departmental mission programs. 


   MOBILITY FORCES
-------------------------------------------------------- Appendix II:7

O&M funds for the mobility forces category consist of programs and
activities for multimode and intermodal lift forces,\12 airlift
forces, sealift forces, and land mobility forces.  As shown in figure
II.19, between fiscal years 1985 and 2001, total O&M funds for the
mobility forces category increase from almost $3.8 billion to $5.5
billion, or by 45.5 percent.  Most of the increase occurs between
fiscal years 1985 and 1996, a 54.6-percent increase.  Among the eight
categories in our analysis, this category has the second largest
percentage change in funding during the fiscal
year 1985-2001 period. 

   Figure II.19:  Annual Mobility
   Forces O&M Funds for Fiscal
   Years 1985-2001 (Constant 1997
   dollars in billions)

   (See figure in printed
   edition.)

Source:  Our analysis of DOD FYDP data. 

When funds are grouped by missions within mobility forces, between
fiscal years 1985 and 2001, airlift forces is the largest category
funded by direct O&M appropriations.  (See fig.  II.20.) The surge in
fiscal year 1994 O&M funds was for airlift base operations. 
Throughout the 17-year period, land mobility forces O&M funds
increase from $871 thousand in fiscal year 1985 to almost $653
million in fiscal year 2001 and have the largest percentage change in
funding when compared with sealift and airlift forces. 

   Figure II.20:  Annual Mobility
   Forces O&M Funds by Mission for
   Fiscal Years 1985-2001
   (Constant 1997 dollars in
   billions)

   (See figure in printed
   edition.)

Source:  Our analysis of DOD FYDP data. 

When funds are grouped by missions within airlift forces, during the
fiscal year 1985-2001 period, military intertheater airlift has the
largest percentage change in funding (225.6 percent) when compared
with other airlift forces missions.  Moreover, starting in fiscal
year 1996, military intertheater airlift is projected to have the
largest share of annual airlift forces O&M funds.  Military
intertheater airlift is comprised of active, National Guard, and
Reserve airlift squadrons and support activities.  Figure II.21 shows
the distribution of total fiscal year 1996 O&M funds by mission
within airlift forces.  Projections show that, for the fiscal
year 1997-2001 period, each airlift forces category share of annual
O&M funding closely mirror the fiscal year 1996 share. 

   Figure II.21:  Percentage of
   Fiscal Year 1996 Airlift Forces
   O&M Funds Allocated by Mission

   (See figure in printed
   edition.)

Source:  Our analysis of DOD FYDP data. 


--------------------
\12 During the fiscal year 1985-2001 period, multi- and intermodal
lift forces have O&M funds only in fiscal year 1986. 


   TRAINING
-------------------------------------------------------- Appendix II:8

The training defense mission category consists of all military
personnel training, civilian personnel training, flight training,
intelligence skill training, health personnel training, and training
base operations and management headquarters. 

Figure II.22 shows that the O&M funding level for the training
mission decreased by 22 percent between fiscal years 1985 and 1993
and is projected to remain fairly level through fiscal year 2001.  If
O&M funding for training base operations and management headquarters
is removed from the overall O&M funding level of the training mission
as shown in
figure II.22, the amount of O&M funds provided to this mission is
projected to decrease by only 14 percent between fiscal years 1985
and 2001.  Military personnel training and flight training activities
receive over 85 percent of the remaining annual O&M funds for this
mission. 

   Figure II.22:  Annual O&M
   Funding for Training for Fiscal
   Years 1985-2001 (Constant 1997
   dollars in billions)

   (See figure in printed
   edition.)

Source:  Our analysis of DOD FYDP data. 

Much of the decline through fiscal year 1993 was for training base
operations and management headquarters activities.  Base operations
and management headquarters activities have received and are planned
to continue to receive the largest portion of annual O&M funds for
this mission category, although its portion of the training mission's
O&M funds has declined. 

Figure II.23 shows that military personnel training (mostly general
skills training and support of the training establishment) has
declined as the active force declined, and funding for this activity
is planned to remain fairly constant from fiscal year 1996 to 2001
when military personnel levels are projected to stabilize.  O&M
funding for flight training activities (mostly undergraduate pilot
training), though, has not changed much over the 17 years covered by
this report. 

   Figure II.23:  Annual O&M
   Funding for Selected Training
   Mission Activities for Fiscal
   Years 1985-2001 (Constant 1997
   dollars in billions)

   (See figure in printed
   edition.)

Source:  Our analysis of DOD FYDP data. 

Since civilian and Guard and Reserve personnel training accounts for
a very small portion of the total training mission, we focused our
analysis of O&M funding for the mission by service on active military
personnel training only.  As displayed in figure II.24, the Army has
received and plans to continue to receive more annual training
mission O&M funds than either the Air Force or the Navy/Marine Corps,
although the Army's share of annual O&M funds for this mission has
decreased along with its force structure.  The Army is projected to
receive 35 percent fewer annual training O&M funds in fiscal year
2001 than it received in fiscal year 1985.  This decline is due
mostly to planned declines in military personnel training (general
skills training) and training base operations and management
headquarters.  The only Army training area that received an infusion
of O&M funds in the fiscal year 1985 to 1996 period was flight
training, but after fiscal year 1996, funds for this training are
projected to decline by almost 7 percent.  For the projected period
through fiscal
year 2001, only the military personnel training area is expected to
receive an increase in O&M funds. 

   Figure II.24:  Annual O&M
   Funding by Service for Active
   Military Training Mission
   Activities for Fiscal Years
   1985-2001 (Constant 1997
   dollars in billions)

   (See figure in printed
   edition.)

Source:  Our analysis of DOD FYDP data. 

Figure II.24 also shows that O&M training funds for the Navy/Marine
Corps and the Air Force have declined between fiscal years 1985 and
1996 in concert with declines in their force structure, but similar
to the Army, funding levels are expected to remain fairly stable in
the out-years.  Between fiscal years 1985 and 1996, the Navy/Marine
Corps O&M training mission funds decreased by 24 percent and the Air
Force's funding level decreased by 16 percent.  After fiscal year
1996, O&M funding for the Navy/Marine Corps training base operations
is projected to continue to decrease.  However, O&M funding for
Navy/Marine Corps military personnel, flight, and intelligence skill
training is expected to grow.  Flight training is the only area that
is planned to receive an increase (12 percent) in O&M funds for the
Air Force during the fiscal year 1996 through 2001 period. 

O&M funding for the training mission per full-time military and DOD
civilians declined by 8 percent between fiscal years 1985 and 1993,
but after fiscal year 1993 grew annually through fiscal year 1996, as
presented in
figure II.25.  It is projected to remain stable after fiscal year
1996 until fiscal years 2000 and 2001 when funding per person will
increase by approximately 2 percent per year. 

If base operations and management headquarters is removed from
overall O&M funding of the training mission, the O&M funding per
full-time military and DOD civilians remained fairly stable at about
$1,200 per year through fiscal year 1993, when it began to increase
annually.  The level of O&M funding per person is projected to
increase to over $1,400 by fiscal
year 2001. 

   Figure II.25:  Per Person
   Annual O&M Funding for Training
   Activities for Fiscal Years
   1985-2001 (Constant 1997
   dollars in thousands)

   (See figure in printed
   edition.)

Note:  Per person funding levels are per all active military,
full-time Guard and Reserve, and DOD civilians. 

Source:  Our analysis of DOD FYDP data. 

Figure II.26 shows that the pattern of O&M funding per person for the
training mission for each service's active military differs.  The O&M
funding level per person for active Air Force training grew the most
(over 30 percent) between fiscal years 1985 and 1996 and peaked at
$3,300 per person by fiscal year 1996.  Our analysis of FYDP data
shows that this level of funding per person is projected to be
reached again in fiscal years 1998 and 2001.  Although the O&M
funding for training per active Army military person fell to its
lowest level in fiscal year 1994, it increased annually during fiscal
years 1995 and 1996, and will increase annually again in fiscal years
2000 and 2001, when it will peak at $4,500 per person.  The
Navy/Marine Corps O&M funding per person for active military training
fell by 15 percent between fiscal years 1985 and 1993 but is
projected to increase annually through fiscal year 1997, and fall
slightly in fiscal
year 1998, when it will increase about 1 percent per year again until
it reaches $2,600 per year in fiscal year 2000. 

   Figure II.26:  Per Person
   Annual O&M Funding by Service
   for Active Military Training
   Activities for Fiscal Years
   1985-2001 (Constant 1997
   dollars in thousands)

   (See figure in printed
   edition.)

Note:  Per person funding levels are per all active military in the
specified service and the civilians and full-time Guard and Reserve
personnel associated with the active military training DMCs. 

Source:  Our analysis of DOD FYDP data. 


*** End of document. ***

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