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IMMEDIATE RELEASE

Release No: 026-98
February 02, 1998

DEPARTMENT OF DEFENSE BUDGET FOR FY 1999

Secretary of Defense William S. Cohen today released details of President Clinton's Fiscal Year (FY) 1999 defense budget. It requests $257.3 billion in budget authority and $252.6 billion in outlays for the Department of Defense (DoD). The President's proposed defense spending levels for FY 1999-2003 are generally consistent with last year's Bipartisan Budget Agreement.

Release of this budget is the culmination of intense scrutiny of the U.S. defense posture carried out during Secretary Cohen's first year in office. The new budget begins full implementation of the Department's comprehensive Quadrennial Defense Review (QDR). The QDR examined the security threats and opportunities facing the U.S. and developed far-reaching recommendations for the post-Cold War era.

The budget includes $48.7 billion for procurement of more modern weapons. Procurement is projected to reach $61.3 billion in FY 2001, achieving the $60 billion goal previously set by the Clinton Administration. DoD leaders consider this higher modernization spending to be essential to the future readiness and battlefield superiority of U.S. forces.

While highlighting the importance of weapons modernization, Secretary Cohen also is stressing that the long-term readiness of U.S. forces is threatened by the budgetary drain of excess infrastructure. The Department of Defense is burdened with facilities and bases that it neither needs nor can afford. To remedy this, Secretary Cohen today again urged Congress to approve two more base closure and realignment (BRAC) rounds.

For near-term force readiness, Congress's support also is needed for DoD's plans to streamline its business practices and organizational structure. Additionally, Secretary Cohen warns that readiness could suffer late in FY 1998 if Congress does not give timely approval to supplemental appropriations to cover unbudgeted operational costs. Such costs are related to the President's stated intention to extend Bosnia operations beyond June and to this year's increased intensity of operations in Southwest Asia.

With its strong support for both immediate force readiness and cutting-edge technology, the new budget strikes a balance between current and future defense needs, as advocated in the QDR. It continues Secretary Cohen's commitment to enhancing the quality of life of the nation's military people and their families. And the budget reflects changes already underway as a result of last November's Defense Reform Initiative, through which Secretary Cohen and Deputy Secretary Hamre seek to substantially streamline and improve DoD support activities.

Transforming the U.S. Defense Posture

The FY 1999 budget begins implementation of the QDR's plan for transforming U.S. defense strategy and military forces.

Shorthand for the new defense strategy is: Shape, Respond, Prepare. It calls for the U.S. to work to shape the international security environment in ways favorable to American interests, be willing and able to respond to the full spectrum of crises as needed, and prepare now for an uncertain future. The FY 1999 budget supports this strategy primarily by ensuring continued American military superiority, high readiness, and extensive overseas deployment of U.S. forces. It also advances the transformation of U.S. forces and the organizations and activities supporting them so that together they can best guarantee America's long-term security.

The transformation of U.S. military forces seeks to maximize their effectiveness across the full spectrum of future crises and conflict scenarios. While we will transition to forces that are different in character, the hallmarks of America's military will continue to be top quality people, high readiness, and superior doctrine and technology. The FY 1999 budget includes strong funding for all these.

Transforming U.S. forces also requires implementation of Joint Vision 2010, the Department's new conceptual framework for how future U.S. forces will fight and achieve "full spectrum dominance." At the heart of Joint Vision 2010 is the ability to collect, process, and disseminate essential information to U.S. forces, while denying the enemy the ability to gain and use battle-relevant intelligence. Support of Joint Vision 2010 in the FY 1999 budget is primarily for funding relevant new technologies.

The QDR recommended end strengths and force levels that are only slightly below those already planned as a result of the Department's earlier post-Cold War adjustments. It called for additional cuts of about 60,000 active military personnel; 55,000 in Selected Reserves; and 80,000 DoD civilians. End strength trends and goals are shown below:

Department of Defense Personnel End Strengths (End of Fiscal Year in thousands)

Cold War Current Budget QDR
FY 1987 FY 1998 FY 1999 Goals
Active Military 2,174 1,419 1,396 1,360
Selected Reserves 1,151 886 877 835
DoD Civilians 1,127 770 747 640

Ensuring Force Readiness and Enhancing Quality of Life

The continuing high readiness and quality of America's armed forces are evident everywhere that those forces are deployed or training. To preserve this high readiness, the FY 1999 budget provides strong support for training, exercises, maintenance, supplies, and other essentials needed to keep U.S. forces prepared to achieve their combat missions decisively. Traditional operational indicators of readiness – e.g., tank miles and flying hours – are projected to remain stable.

The Department's preparation of the new budget ensured that the military services followed Secretary Cohen's direction that they fully fund their readiness-related accounts. When adjusted for today's lower troop strengths, FY 1999 Operation and Maintenance (O&M) funding is well above levels during the 1980s.

Providing a good quality of life for our nation's uniformed personnel and their families remains essential to sustaining the quality and readiness of U.S. forces. Reflecting that reality, the FY 1999 budget includes strong funding for military pay, housing, medical services, child care, and other important benefits. The budget supports military pay raises up to the maximum percentage established by law. It funds a 3.1 percent pay increase for FY 1999 and a 3.0 percent rise for the outyears.

Bosnia Funding

As he has publicly stated, President Clinton intends to support an extension of the U.S. mission in Bosnia past June of this year in order to ensure continued compliance with the Dayton Accords. The size and structure of U.S. forces that will be committed to Bosnia is still undetermined, and thus a budget-quality cost estimate for the mission extension is not yet available. The President's intent is to provide a request for Bosnia funding before Congress completes deliberations on its FY 1999 Budget Resolution to ensure that Bosnia is considered as Congress sets its spending priorities.

FY 1998 appropriations fund previously planned Bosnia operations, which assumed that U.S. forces would be out of Bosnia by the end of June. However, DoD faces unbudgeted FY 1998 costs related to the proposed extension of Bosnia operations and to this year's increased intensity of operations in Southwest Asia. To cover these costs, the Administration will propose an emergency, non-offset FY 1998 supplemental appropriations. Speedy passage of supplemental FY 1998 appropriations will be crucial to preventing readiness problems during the final few months of this fiscal year.

To cover FY 1999 Bosnia costs, the Administration will submit a non-offset budget amendment, which also will be designated as an emergency. The President's FY 1999 budget request contains an allowance for undistributed funds to cover contingencies, such as Bosnia and natural disasters. The President considers Bosnia funding to have first claim on this undistributed allowance and has informed the relevant committees in Congress of this.

In sum, the Administration has structured its Bosnia-related funding requests so that resources are not diverted from DoD's current and future appropriations, which should avoid damage to military readiness.

Modernization of U.S. Forces

One of the QDR's most important contributions was to detail a plan to ensure that the Department could fulfill its ambitious and essential plans to modernize U.S. weapons. The QDR endorsed the importance of increased procurement funding both to prepare for future challenges and to upgrade aging systems. It also recommended numerous changes to specific major modernization programs and proposed ways to reduce the future likelihood that the Department would need to shift funds out of investment accounts to cover must-pay costs like unbudgeted operating expenses.

To support implementation of the QDR, procurement is funded as follows:

Department of Defense Procurement ($ in billions)

Budget Authority FY 99 FY 00 FY 01 FY 02 FY 03
QDR Goal 49 54 60 61 62
FY 1999 budget 48.7 54.1 61.3 60.7 63.5

Among its major modernization initiatives, the new budget emphasizes the advanced information-technologies needed to fulfill Joint Vision 2010. It accelerates acquisition of new command, control, communications, computers, intelligence, surveillance, and reconnaissance (C4ISR) capabilities. For example, funding was added to accelerate by two years the fielding of the Army's first digitized division and corps. Numerous such advances will enable military commanders to more effectively direct forces, transfer information between them, and dominate future adversaries. Also funded are key surveillance assets such as unmanned aerial vehicles and critical navigation aids like the Global Positioning System.

Modernization of ground forces will stress upgrades of primary combat platforms like the Army's Abrams tank, Bradley Fighting Vehicle, and Apache Longbow helicopter. Major development efforts include the Comanche helicopter and Crusader artillery system. Marine Corps modernization features the V-22 tilt-rotor aircraft, the Advanced Amphibious Assault Vehicle, and the 4BN/4BW helicopter upgrade.

Modernization of naval forces includes procurement of the DDG-51 Destroyer, LPD-17 amphibious transport dock ship, and New Attack Submarine (NSSN). The tenth and final Nimitz-class carrier (CVN-77) is fully funded in FY 2001, a cost-saving acceleration of one year. The budget also supports development of the next generation aircraft carrier and the destroyer.

The QDR confirmed the need for, but made major adjustments to DoD's three major programs for modernizing U.S. tactical aircraft. New budget plans reflect DoD's decision to reduce and delay some planned procurement of the Joint Strike Fighter (JSF), F-22, and F/A-18E/F. The JSF will continue in its concept demonstration phase into FY 2001, in preparation for procurement to commence in FY 2005. Funds for the first two production F-22s are requested for FY 1999, leading to a gradual buildup to procurement of 36 aircraft per year by FY 2004. Production should soon increase for the F/A-18E/F, which has greater survivability and weapons payloads than earlier F/A-18 models. For the longer term the Navy plans to transition from F/A-18E/F to JSF procurement at a time based on the pace of JSF development.

The new budget supports the QDR's emphasis on munitions of superior precision. Substantial funding is provided for ATACMS/BAT, Longbow Hellfire, SADARM, and Javelin for the Army; Sensor Fuzed Weapon for the Air Force; and JSOW, JDAM, and AMRAAM for both the Air Force and Navy. The Navy will continue to improve its inventory of Tomahawk missiles and convert anti-ship Harpoon missiles to SLAM-ER land attack missiles.

The QDR stressed America's ability to project military power to distant regions, and the new budget continues the Department's airlift and sealift investments. Some 120 C-17 aircraft will be procured by FY 2003. All KC-135 tankers will receive major avionics upgrades. To improve sealift, FY 1999 procurement includes the last LMSR transport vessel, needed to move early-deploying Army divisions.

FY 1999-2003 Major Defense Modernization Programs (Procurement $ in billions)

Army FY 99-03
Ammunition 6.6
Trucks/Support Vehicles 5.5
M1A2 Tank Upgrade 3.2
Longbow Apache Helicopter 2.8
Navy
F/A-18E/F Aircraft 15.0
DDG-51 Destroyer 14.1
New Attack Submarine 7.5
LPD-17 Amphibious Transport Dock Ship 6.5
V-22 Tiltrotor Aircraft 5.8
Air Force
C-17 Airlifter 13.4
F-22 Fighter 11.7
CV-22 Tiltrotor Aircraft 1.7

Countering NBC Weapons and Missile Threats

The QDR concluded that nuclear, biological, and chemical (NBC) weapons and the missiles that deliver them will continue to threaten the security of America and its forces, allies, and friends. More specifically, U.S. plans must assume that the threat or use of chemical and biological weapons will be a likely condition of future warfare. The FY 1999 budget includes major investments to stay ahead of these dangers. It adds about $1 billion in spending through FY 2003 to bolster existing U.S. capabilities to counter chemical and biological threats. Much of the increase is for improved protective suits and masks, as well as better detection and decontamination systems. The remainder of it will enhance our capabilities to destroy or neutralize NBC weapons and materials. The budget also continues DoD's strong missile defense programs, which remain critical to a broader strategy seeking to prevent, reduce, deter, and defend against NBC and missile threats.

Our greatest emphasis is on theater missile defense – aimed at meeting today's regional threats. The primary goal is to develop, procure, and deploy systems that can protect forward-deployed U.S. forces. To defeat shorter range missiles, our key lower-tier programs include the Patriot PAC-3 and Navy Area systems. Key upper-tier programs are the THAAD and Navy Theater Wide systems. To defeat theater-range missiles during their boost phase, we are stressing our Airborne Laser development program.

Also a high DoD priority is the National Missile Defense (NMD) program. The primary mission of our U.S. NMD system would be to defeat a limited strategic ballistic missile attack such as could be posed by a rogue nation. The NMD program will develop and test system elements that could be deployed when such a strategic threat begins to emerge.

FY 1999 budget authority requested for missile defense programs is $4.0 billion. For FY 2000 through FY 2003 an additional $12.8 billion is planned. This $16.8 billion total for missile defense programs in FY 1999-2003 includes funds added as a result of the QDR.

Total Force Integration

The QDR concluded that the Reserve components will continue to be essential to the success of U.S. defense strategy and the full spectrum of our nation's military operations. The new budget reflects this conclusion with substantial funding to support both the current readiness as well as future capabilities of the Reserve components.

The Department has moved decisively to integrate more effectively its active and Reserve components. During development of the FY 1999 budget, Reserve component issues were given unprecedented attention. As a result of the review, over $100 million was added for Army National Guard OPTEMPO, over $200 million added for Reserve component equipment funding, and other important adjustments were made. Additionally, Secretary Cohen has established new positions for Reserve component general officers, with the aim of enhancing Reserve component involvement in the DoD management structure.

The FY 1999 budget funds establishment of Reserve component teams to respond to domestic use of weapons of mass destruction. Work also has begun on creating two Army combat divisions that would each integrate three Guard brigades under an active component headquarters. Meanwhile, Reserve components will continue their extensive support of peacetime missions like aerial refueling, strategic lift, exercises, counter-drug operations, and Bosnia peace implementation.

To best support DoD's warfighting plans, allocate scarce defense dollars, and fulfill the Guard's peacetime mission, some combat elements of the Reserve components will be converted over time into support units that are critically short. Projected savings from QDR-directed cuts to Reserve components end strength will go toward increased funding for new equipment, unit conversions, and other requirements of the Reserve components.

Reforming DoD Support Activities

Secretary Cohen's Defense Reform Initiative (DRI) aims to substantially streamline and improve DoD infrastructure and support activities. The plan adopts the best business practices responsible for success in America's private sector. It mandates four major areas for change:

First, the DRI calls for the Department to reengineer its processes and procedures to work better and cost less. Initiatives include paperless contracting, increased use of a purchase card for lower-cost items, use of electronic catalogues, and more.

The second DRI mandate is to consolidate or streamline organizations to remove redundancy and maximize synergy. DoD organizations will be expected to fundamentally transform how they do business, while simultaneously cutting personnel.

In the third Reform area, the Department must compete – that is, to apply market incentives to improve quality, reduce costs, and meet customer needs. The goal is to analyze every activity for which the private sector alternative may be better or helpful in improving DoD operations.

The fourth DRI area requires that the Department eliminate excess support structures and focus on core competencies. As part of this, Secretary Cohen is urging Congress to approve two more base realignment and closure rounds for FY 2001 and FY 2005.

Defense Budget Topline

Plans for FY 1999 through 2003 call for DoD budget authority to generally keep up with projected inflation. In real purchasing power, the FY 1999-2003 FYDP will buy more defense than previously planned because President Clinton allowed the Department to keep about $20 billion in savings projected from lower estimates of future inflation.

Projected spending is shown in the attached three charts.

Copies of Department of Defense budget documents are available at the following Internet address: http://www.dod.mil/comptroller/99budget/.

National Defense Topline (Function 050) ($ Billions)

FY 98 FY 99 FY 00 FY 01 FY 02 FY 03

Budget Authority

DoD Military (051) 254.9 257.3 262.9 271.1 274.3 284.0
DoE and Other 12.7 13.3 13.0 12.7 12.8 13.1
Total (050) 267.6 270.6 275.9 283.8 287.1 297.1
% Real Growth (051)

-

-1.1 0 +.9 -1.1 +1.1

Outlays

DoD Military (051) 251.4 252.6 255.8 257.1 259.7 275.8
DoE and Other 12.7 12.9 12.9 12.7 12.4 12.7
Total (050) 264.1 265.5 268.7 269.8 272.1 288.5

DoD Budget Authority by Title ($ Billions)

FY 98 FY 99 FY 00 FY 01 FY 02 FY 03
Military Personnel 69.7 70.8 70.7 71.6 73.0 74.9
Operation & Maintenance 94.4 94.8 95.9 97.8 99.6 101.9
Procurement 44.8 48.7 54.1 61.3 60.7 63.5
RDT&E 36.6 36.1 33.9 33.0 33.5 34.3
Military Construction 5.1 4.3 4.9 4.4 3.7 4.0
Family Housing 3.8 3.5 3.9 3.9 3.9 4.2
Funds & Other .5 -.8 -.5 -.9 -.1 1.2
Total DoD (Function 051) 254.9 257.3 262.9 271.1 274.3 284.0

DoD Budget Authority by Component ($ Billions)

FY 98 FY 99 FY 00 FY 01 FY 02 FY 03
Army 60.5 63.8 65.2 66.7 69.2 71.0
Navy/Marine Corps 80.9 81.3 82.3 86.8 84.8 87.8
Air Force 74.4 76.7 78.4 81.2 83.3 85.3
Defensewide 39.0 35.4 37.0 36.4 37.0 39.9
Total DoD (051) 254.9 257.3 262.9 271.1 274.3 284.0

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