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Release No: 061-04
February 02, 2004

Fiscal 2005 Department of Defense Budget Release

President George W. Bush today sent Congress his fiscal 2005 defense budget. The budget requests $401.7 billion in discretionary budget authority for the Department of Defense (DoD). This represents a seven percent increase over fiscal 2004 funding levels, after taking into account Congressionally directed rescissions.

The budget maintains implementation of the Bush Administration defense strategy and continues the transformation of the U.S. military to ensure that it has the capabilities needed to counter 21st century security threats most effectively and efficiently. The budget balances support for this long-term transformation with resources for current global operations and requirements.

Successfully Pursue the Global War on Terrorism

The fiscal 2005 budget includes robust readiness and acquisition funding, important legislative authorities, and other essentials for winning the global war on terrorism.

Readiness. The request funds the militarys training and readiness requirements and sustains prudent readiness standards, e.g., for flying hours. Ongoing initiatives include:

  • Improving metrics to evaluate force readiness, with emphasis on evaluating readiness relative to a full range of missions, not merely the traditional major regional contingency operation.

  • Fleet Response Plan, adopted in fiscal 2004, expands in fiscal 2005 and will increase the availability of naval assets for duty worldwide.

Transformation/acquisition overview. Recent operations in Iraq, Afghanistan, and the global war on terrorism have reinforced the importance of transforming U.S. military capabilities, and the FY 2005 budget continues the presidents strong commitment to defense transformation and force modernization. This transformation and other acquisition of new capabilities are funded in the appropriation titles of research, development, test, and evaluation (RDT&E) and procurement. The fiscal 2005 request is:

  • $74.9 billion for procurement up from $60 billion in fiscal 2001.

  • $68.9 billion for RDT&E up from $41 billion in fiscal 2001.

Lessons learned. The Department of Defense is continuing to compile and take action on lessons learned from U.S. operations in Iraq, Afghanistan, and the global war on terrorism.

  • Some lessons are not new, and already are addressed in DoD programs notably, the importance of readiness, training, force protection, operational speed, joint interoperability, intelligence, precision weapons, unmanned vehicles, communications and command and control. Already in DoD plans, for example, are cutting-edge communications systems to eliminate bandwidth problems and improve interoperability.

  • New lessons learned mostly involve advanced capabilities that U.S. forces require in order to counter more decisively unconventional threats like those encountered in Iraq and Afghanistan. Some of these capabilities can be and are being fielded rapidly such as better systems to detect explosives and other terrorist threats. Other lessons will require more time and investment, and these will be addressed during the next year as the department develops its defense program for fiscal 2006 and beyond.

Legislative support. The fiscal 2005 budget includes legislative authorities vital to the fight against terrorism, notably:

  • Train and equip support (up to $500 million) to the military and security forces in Iraq, Afghanistan and friendly nearby regional nations to enhance their capability to combat terrorism and support U.S. operations in Iraq and Afghanistan.

  • Commanders Emergency Response Program (up to $300 million) to enable military leaders in Iraq and Afghanistan to respond to urgent humanitarian relief and reconstruction needs.

  • Increased drawdown authority ($200 million) under the Afghanistan Freedom Support Act to provide added help for the Afghan National Army.

Supplemental appropriations. The fiscal 2004 supplemental appropriations bill signed into law last November will provide sufficient resources to enable DoD to finance its incremental costs for operations in Iraq, Afghanistan and the global war on terrorism. For fiscal 2005, the department cannot yet determine the scope of these operations nor their incremental costs, and so these possible costs are not budgeted for in the fiscal 2005 request. The department does not anticipate that supplemental appropriations will be requested during the rest of calendar year 2004.

Doing Right by our Military People

The fiscal 2005 budget will support the high morale and quality of our military people through good pay and benefits. It requests a 3.5 percent military base pay raise and completes the elimination of average out-of-pocket housing costs for military personnel living in private housing. Prior to fiscal 2001, the average servicemember had to absorb over 18 percent of these costs.

Military health care. The fiscal 2005 DoD budget for military health care costs includes $17.6 billion for the defense health program, $7.3 billion for direct medical personnel costs and $0.2 billion for medical construction. The budget also includes a $10.3 billion payment into the Medicare-eligible retiree health care fund to finance the future benefits of current active duty personnel. A $5.3 billion payment out of the Fund will finance health care for the departments 1.7 million current Medicare-eligible military retirees, family members and survivors.

Housing. The fiscal 2005 budget keeps the department on track to eliminate nearly all its inadequate military family housing units by fiscal 2007, with complete elimination in fiscal 2009. The budget continues the departments extensive use of privatization to advance this goal and to get maximum benefit from its housing budget.

Facilities. Taking good care of the departments people, both military and civilian, includes providing them quality facilities in which to work. To that end, in the fiscal 2005 request all the military services fund 95 percent of facilities sustainment (maintenance) requirements up from 94 percent in fiscal 2004. To modernize DoD facilities at a satisfactory pace, Secretary Rumsfeld established the goal of achieving a facilities recapitalization rate of 67 years. The fiscal 2005 request keeps DoD on track to reach that goal in fiscal 2008. The fiscal 2005 rate is about 107 years.

Managing Demand on the Force

Recent operations have placed a heavy demand on Americas military, and the Department of Defense is working to avoid overloading its military people with excessive, unsustainable stress. DoD leaders believe that a permanent increase to military personnel levels would be the most expensive option for managing demand on the force, and has other disadvantages as well. Instead, the department is developing and advancing numerous initiatives that can reduce demand more quickly and produce other benefits as well. These initiatives include:

Expanding military capabilities. DoD is expanding military capabilities available for meeting national security requirements by divesting the military of lower-priority functions and by enabling it to perform its missions more efficiently. Additionally, ongoing transformation initiatives will allow the military to fulfill many missions with greater speed, precision and effectiveness, and often with fewer troops.

Rebalancing forces. Recent operations have shown that certain military skills and types of units are being stressed far more than others. DoD is rebalancing its military units and people to enhance the total forces responsiveness to crises and resolve stressed career fields. DoD objectives include:

  • Structure forces to reduce the need for involuntary mobilization of Reserve components during the early stages of a rapid response operation.

  • Structure forces to limit involuntary Reserve mobilization to reasonable and sustainable rates.

  • Use innovative management to improve the mobilization process, enhance volunteerism and establish a more predictable rotational overseas presence.

Rebalancing includes, for example, increasing the active Armys early responsiveness in such functions as transportation, quartermaster, medical and engineer. Rebalancing within the Reserve components includes phasing out some late-deploying artillery, air defense and heavy engineer units and adding high-demand military police, transportation, medical, civil affairs and psychological operations units. Progress in rebalancing forces:

  • Fiscal 2003 about 10,000 military spaces.

  • Fiscal 2004 about 20,000 military spaces.

  • Fiscal 2005 about 20,000 military spaces.

Military-to-civilian conversions. Essentially the same benefit as a permanent military personnel increase could come from converting positions currently filled by military personnel to positions that could be supported by DoD civilians or contractors. The department has identified more than 50,000 positions to begin such conversion. Already underway:

  • For fiscal 2004, the services will begin converting 10,000 positions from military to civilian.

  • The fiscal 2005 budget includes $572 million to achieve the conversion of another 10,070 positions.

Personnel management. The department is working to achieve more flexibility to manage its military people, which could help relieve stress on military skills that have been in high demand during recent operations. One example is the continuum of service concept, which instead of being constrained by the distinction between active and Reserve components would permit a range of participation from full-time to available only during crises. It would make it easier for skilled individuals to perform military duty without the current accounting and management constraints. Throughout their career, individuals could have a continuum of participation geared to their lives and DoD needs.

Emergency authorities. Existing authorities give the department critical tools to manage an intense operating tempo by exceeding its authorized military personnel level. However, DoD leaders will continue to assess the adequacy of the current authorized level to ensure its sufficiency for meeting Americas security needs without excess stress.

Reshaping Defense Global Posture and Basing

The results of two comprehensive initiatives will be of great importance in the years ahead: The DoD U.S. Global Defense Posture Review and the 2005 Base Realignment and Closure (BRAC) Commission.

Global Defense Posture Review. DoD is continuing its comprehensive review to scrutinize all aspects of Americas global defense posture including personnel, infrastructure, equipment, sourcing, and surge capabilities. The goal is to ensure that U.S. military capabilities are configured to make them optimally deployable and best able to meet the challenges of the new global strategic environment. The United States is seeking the full participation of its allies and global partners in this review. The Bush Administration has begun and will continue to consult with the Congress. The fiscal 2005 budget does not include any proposals reflecting any findings from this review. Possible shifts of military capabilities from overseas to U.S. locations will be considered in conjunction with BRAC 2005.

BRAC 2005. The work of this commission will be critical to streamlining DoD facilities and saving billions of dollars that would be better spent on transformation, not excess facilities. The budget includes funding beginning in fiscal 2006 for implementation of BRAC 2005 decisions.

Transforming Military Capabilities

The transformation of Americas military capabilities involves developing and fielding new military systems to achieve a new portfolio of military capabilities to decisively combat the full range of security threats now and well into the future. A key objective is to provide robust capabilities and innovative approaches for the full spectrum of potential missions. For example, unmanned aerial vehicles continue to provide new capabilities and advantages that have proven critical in the global war on terrorism. Transformation will continue to require a strong science and technology (S&T) program. The fiscal2005 S&T request is $10.5 billion, a 1.6 percent real increase over the fiscal 2004 request.

DoD continues to emphasize realistic cost and schedule estimates for acquisition programs, as demonstrated in the fiscal 2005 program by its additional funding for Future Combat Systems, and schedule adjustments for the Joint Strike Fighter. Below are highlights of transformation and acquisition programs of special interest in the proposed budget and their total fiscal2005 RDT&E and procurement funding:

Missile Defense

Missile Defense Agency. $9.2 billion, $1.5 billion above fiscal 2004. The increase includes $0.9 billion to continue to field an initial defensive capability for the Ballistic Missile Defense System and $0.6 billion to begin fielding its next increment. This initial capability for defending the United States from ballistic missile attack is scheduled to be operational by the end of 2004 and, by the end of 2005, is scheduled to include 20 ground-based interceptors, up to 10 sea-based interceptors and upgraded radars and command and control.

Cruise Missile Defense. $239 million to accelerate the Joint Land Attack Cruise Missile Elevated Netted Sensor System, begin integrating the Surface Launched Advanced Medium-Range Air-to-Air Missile into the projected Cruise Missile Defense architecture and accelerate development of a joint integrated fire control capability. Goals include contingency capabilities in 2008 and first units equipped in 2010.

Army Transformation

Future Combat Systems (FCS) and Stryker Brigade Combat Teams (SBCT). $3.2 billion to support the transformation of the Army by fully funding the FCS and $1.0 billion to procure the combat vehicles for the 5th SBCT. The fiscal 2005 budget supports the fielding of the 4th SBCT and sustains the three SBCTs already in the force.


Total program. $11.1 billion to support procurement of nine ships in fiscal 2005 up from seven ships for fiscal 2004. Fiscal 2005 begins a period of transition and transformation for shipbuilding as the last DDG 51 destroyers are built, and the first DD(X) destroyer and Littoral Combat Ship are procured. This increased commitment is further shown in the average shipbuilding rate from fiscal 2005-2009 of 9.6 ships per year. This will sustain the current force level and significantly add to Navy capabilities.

CVN-21. $1.0 billion to continue development of and to procure long-lead equipment to support this planned 2007 aircraft carrier, whose innovations include an enhanced flight deck, a new nuclear power plant, allowance for future technologies and reduced manning.

New ship classes/technologies. $1.6 billion to continue development of technologies to be applied to a new generation of 21st century surface ships including DDX destroyer, littoral combat ship, CG(X) cruiser and the Maritime Preposition Force (Future) ship.

Communications, Intelligence, and Related Systems

Space Based Radar. $408 million to continue development of a system to identify and track moving ground targets, which will significantly strengthen U.S. intelligence capabilities.

Transformational Satellite Communications. $775 million to continue development of a new system based on laser communications and greatly enhanced radio-frequency capability, which would free users from current bandwidth constraints and provide greatly enhanced interoperability and connectivity to support net-centric operations.

Joint Tactical Radio System. $600 million to provide Internet protocol-based, ad-hoc mobile wireless networking capability enabling information exchange among joint warfighting elements, civil and national authorities for seamless networking.

Unmanned Vehicles

Joint Unmanned Combat Air Systems. $710 million. J-UCAS consolidates all previous unmanned combat air vehicles programs. It will develop a common operating system and enhance competition to achieve the best capabilities. The program will accelerate key capabilities leading to an operational assessment in fiscal 2007-2009.


EA-18G. $0.4 billion to develop the next generation solution to detect, identify, locate and suppress hostile emitters for decades to come, providing electronic attack and information operations capability against integrated air defense systems and adversary infrastructure while supporting strike forces and ground assets.

Joint Strike Fighter (JSF). $4.6 billion. The JSF program is being restructured to provide for cost growth in its system development and demonstration (SDD) phase. The total cost estimate for SDD increases from $33.0 billion to $40.5 billion. Schedule delays on this very complex aircraft are prudent and necessary to mature its design and ensure its ultimate success.

V-22. $1.7 billion to support ongoing development and procurement of 11 aircraft. The program has been structured to enhance interoperability in the next increment, implement additional cost-reduction initiatives, and pursue a more executable production ramp following operational testing, Milestone C review and DoD certification.

Improve and Integrate Intelligence Capabilities

Recent operations have reinforced the criticality of timely intelligence about threats to Americas security. The fiscal 2005 budget reflects this lesson by sustaining robust funding to strengthen intelligence activities and capabilities. The department also is advancing several ongoing and planned initiatives, to include:

  • Improve information sharing and the horizontal integration of organizations producing and using intelligence.

  • Improve human intelligence collection worldwide.

  • Increase the development and use of promising technologies.

  • Enhance the effectiveness and coherence of signal intelligence systems focus on terrorism.

Further Streamline DoD Management Processes

Recent operations reinforce the importance of transforming DoD management processes so they work better and cost less. The new budget supports ongoing and planned initiatives, including:

National Security Personnel System. The department is continuing to implement the National Security Personnel System (NSPS), the much-needed new way to manage DoD civilian personnel, to provide needed flexibility and incentives without eliminating important safeguards. Initial implementation will cover 300,000 employees.

Business Management Modernization Program (BMMP). This is a comprehensive, multi-year initiative to overhaul DoD management processes and the information technology systems that support them. The budget includes almost $100 million per year in RDT&E funding for fiscal 2005-2009 to continue the evolution and extension of BMMP.

Better budget execution. The fiscal 2005 budget urges Congress to increase general transfer authority to $4 billion (from $2.1 billion for fiscal 2004 DoD budget) to give DoD greater ability to shift funding from lower to high priorities during this period of increased military operations. Also needed is to make O&M funds available for two years to help the department ensure, during budget execution, that funding goes to the militarys most pressing readiness, training and support requirements.

Fiscal 2005 DoD Budget by Title

(Discretionary budget authority $ in billions)

Fiscal 04 Fiscal 05 Fiscal 06 Fiscal 07 Fiscal 08 Fiscal 09

Military Personnel 97.9 104.8 109.4 113.1 116.8 120.4

Operation & Maintenance *127.6 140.6 146.1 151.2 156.3 163.9

Procurement 75.3 74.9 80.4 90.6105.1 114.0

RDT&E 64.3 68.9 71.0 70.7 71.6 70.7

Military Construction 5.5 5.3 8.8 12.1 10.8 10.2

Family Housing 3.84.2 4.6 4.5 3.6 3.5

Revolving & Mgmt Funds

& Other **0.8 3.0 2.3 1.6 1.4 4.9

Total ***375.3 401.7 422.7 443.9 465.7487.7

* Includes $3.5 billion rescission to the fiscal 2003 Iraq Freedom Fund.

** Includes $1.8 billion rescission to DoD appropriations in fiscal 2004 Omnibus Appropriations Act.

*** Also includes $.8 billion in prior-year program rescissions to Procurement, RDT&E, Military Construction, Family Housing and National Defense Sealift Fund.

Fiscal 2005 DoD Budget by Component

(Discretionary budget authority $ in billions)

Fiscal 04 Fiscal 05 Fiscal 06 Fiscal 07 Fiscal 08 Fiscal 09

Army 95.4 97.2102.7 108.0 113.7 116.5

Navy/Marine Corps 115.1 119.3 125.5 130.2 137.5 148.2

Air Force110.9 120.5 128.2 132.6 138.8 142.7

Defense-wide *53.9 64.7 66.3 73.0 75.7 80.3

Total**375.3 401.7 422.7 443.9 465.7 487.7

* Includes $3.5 billion rescission to the fiscal 2003 Iraq Freedom Fund and $1.8 billion rescission to DoD appropriations in the fiscal 2004 Omnibus Appropriations Act.

** Includes $.8 billion in prior-year program rescissions to Procurement, RDT&E, Military Construction, Family Housing and National Defense Sealift Fund.

(Some columns may not add correctly due to rounding)

Copies of DoD budget documents are available at the following Internet address: http://www.dod.mil/comptroller/defbudget/fy2005/.

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