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IMMEDIATE RELEASE

Release No: 033-95
February 06, 1995

FY 1996-97 Defense Budget

President Clinton today released his Fiscal Year (FY) 1996-97 defense budget, which Secretary of Defense William J. Perry said strongly supports his two most important initiatives: readiness and quality of life. For 1996 the request seeks $246.0 billion in budget authority and $250.0 billion in outlays for the Department of Defense (DoD).

In detailing the spending plan, Secretary Perry noted that full funding for his initiatives was made possible in December, when President Clinton added $25 billion to defense spending over the next six years. "This higher topline enabled us to fund our plans to provide high readiness, full military pay increases, better quality of life, and prudent weapons modernization," Dr. Perry said.

The FY 1996-97 budget begins implementation of DoD's FY 1996-2001 Future Years Defense Program (FYDP). Last summer when preparing its FYDP, the Department faced a potential shortfall of $49 billion between the likely cost of the FYDP and the projected defense topline for FY 1996-2001. This shortfall was eliminated by the $25 billion added by the President, $12 billion saved because of lower inflation estimates, and a net of $12 billion that DoD cut from lower priority programs.

The new budget and FYDP culminate a year-long DoD assessment of defense strategy, force structure, priorities, and programs. The assessment validated the primary recommendations of the Department's 1993 Bottom-Up Review (BUR). However, this year's budget contains important differences compared to last year's--for example, full military pay raises authorized under current law. In explaining his spending priorities, Secretary Perry said, "People come first."

The new budget plans also begin the "recapitalization" of U.S. forces--that is, the modernization of weapons and equipment, after several years in which the Department lived off its Cold War stocks of equipment. Budget authority for procurement will end its 10-year real decline in FY 1996 and then increase nearly 50 percent by FY 2001. Providing for greater modernization was a major consideration in the President's decision to increase the defense budget.

DEFENSE DRAWDOWN IS NEARLY COMPLETE

BUR-based defense plans and funding projected in the President's budget support a defense posture sufficient to protect U.S. interests worldwide and preserve America's crucial global leadership role. More specifically, the post-Cold War U.S. defense strategy requires combat-ready forces that will be capable of fighting and winning two nearly simultaneous major conflicts. If some U.S. forces are engaged in a major regional conflict, the remaining forces must be sufficient to deter other potential aggressors from taking advantage of the situation. If deterrence fails, these remaining forces will be needed to defeat the aggression. Further, a defense posture designed to deal with two major regional conflicts provides a hedge against the possibility that a future adversary might one day confront this nation with a larger-than-expected threat.

The drawdown of forces to the level called for by the new defense strategy will be nearly complete by the end of FY 1996. At that time, DoD will have reduced active military personnel and force levels by over 30 percent since the beginning of FY 1990, the fiscal year in which the Berlin Wall fell. Highlights of force structure changes by fiscal year, and the DoD goal are:

Force Structure Changes
                               1990     1995     1996     1997     Goal
Army-- active divisions         18       12       10       10       10
  Reserve Component brigades*   57       48       47       42       42
Marine Corps divisions
   (3 active/1 reserve)          4        4        4        4        4
Battle forces ships            546      373      365      358      346
Aircraft carriers-active        15       11       11       11       11
   Training/reserve carriers     1        1        1        1        1
Carrier air wings-active        13       10       10       10       10
   Reserve air wings             2        1        1        1        1
Fighter wing equivalents-active 24       13       13       13       13
   Reserve                      12        8        7        7        7	
*An approximate equivalent. The BUR plan calls for 15 enhanced readiness brigades, a goal that DoD will begin to reach in FY 1996. Backing up this force will be an Army National Guard strategic reserve of 8 divisions (24 brigades), 2 separate brigades, and a scout group.

Reflecting cuts in forces and infrastructure, personnel end strength will fall well below FY 1987 post-Vietnam peaks:

      	                                                  1987-96
	               FY 1987     FY 1995     FY 1996     Change
Active military	     2,174,200   1,523,300   1,485,200	     -32%
Guard and Reserve    1,150,900     965,000     927,100       -19%
DoD civilians	     1,133,100     866,900     828,600	     -27%

By FY 1999 active military end strength will level off at about 1,445,000. DoD civilian end strength will continue its sharp decline--to 729,000 in FY 2001, 32 percent below FY 1990.

America's defense drawdown has been carried out without harming quality and morale. The involuntary release of personnel has been minimized through the use of incentives and careful personnel management. Military promotion opportunities have been relatively constant. Personnel quality has risen, as reflected by standardized tests, percentages of high school graduates, and recruiting success. By virtually every measure, the restructuring of the U.S. defense posture has been a remarkable success. Moreover, during this time of historic adjustment, America's armed forces fought and won the Persian Gulf war, executed complex humanitarian and contingency operations, and all the while sustained the high readiness and vigilance needed to ensure U.S. security. An extraordinary record.

READINESS IS PROTECTED

In formulating the new budget and FYDP, Secretary Perry accorded the highest priority to preserving force readiness and the quality of life of military personnel and their families.

Readiness essentials like training and maintenance are funded primarily in Operation and Maintenance (O&M) accounts. O&M budget authority in FY 1996 is about the same as FY 1995, and declines slightly in FY 1997. Readiness can be protected in spite of this decline because of force reductions and the streamlining of DoD infrastructure and overhead. O&M funding will remain fully sufficient to sustain high operations and training rates, prudent equipment and real property maintenance, and other determinants of readiness.

The FY 1996-97 budget maintains traditionally high rates for the operating tempo (OPTEMPO) of active U.S. forces. Army training rates will hold at 14.5 flying hours per month per tactical aircrew and 800 miles per year for tanks. Navy steaming days per quarter will remain at 50.5 and 29 days for deployed and non-deployed fleets, respectively. Navy flying hours per crew per month hold at 24 hours. Flying hours per month for active Air Force tactical aircrews will stay at about 20 hours.

The readiness of U.S. forces cannot be judged simply by O&M funding and operating tempo measures. Ultimately readiness must be judged by the military leaders who are responsible for it--from front-line commanders up to the Defense Department's senior leadership. Before completing his FY 1996-97 budget request, Secretary Perry asked the Secretary and Service Chief of each military department if the plan enables U.S. forces to remain ready. They said that the requested funding is sufficient so long as any unbudgeted DoD costs for contingency operations are paid for without draining readiness accounts.

In the last quarter of FY 1994, readiness suffered because already strained O&M funds had to be diverted to pay DoD costs for unbudgeted contingency operations in Rwanda, Haiti, and elsewhere. Supplemental appropriations, congressional approval of reprogramming requests, and some of the operations' bills themselves occurred too late in the fiscal year to prevent this diversion of funds. For FY 1995 President Clinton is requesting a supplemental appropriation that should--assuming no new major contingencies emerge--obviate the need to consume funds needed for readiness. The Administration also is requesting authority that will enable it to avoid diverting money from readiness to pay for unbudgeted contingency operations late in the fiscal year.

Reserve Components

The National Guard and Reserve will continue to execute the plan to downsize in FY 1996-97. Only those units needed to support current defense strategy are being retained, but the role of Reserve Component forces is as important as ever. Under the "Mission Readiness" concept, readiness funding for Guard and Reserve units will be directly determined by how early in a crisis they are scheduled to deploy. Proposed funding also supports greater use of the Guard and Reserve for peacetime operations, to help prevent excessive strain on active forces; an added benefit is more realistic training for reservists, creating a double payoff for the dollars spent.

QUALITY OF LIFE IS SUPPORTED

Providing a good quality of life (QOL) for service members and their families is both the right thing to do and crucial to sustaining the readiness of U.S. forces. Reflecting this conviction, the new budget funds the full military pay raises provided for under law. In addition, Secretary Perry has added $2.7 billion over the next six years for family and bachelor housing; cost-of-living and housing allowances; child care; family assistance; and morale, welfare, and recreation programs. This action supplements already strong DoD quality-of-life programs.

To enhance quality of life, the new budget supports:

- Full by-law military pay raises of 2.4 percent for FY-1996 and 3.1 percent for FY 1997.

- A new allowance for military families living in high cost areas. About 30,000 people will

benefit.

- The first step in a phased plan to restore the Basic Allowance for Quarters to the DoD objective

level of 85 percent of average housing costs. Benefits 700,000 people in off-base housing.

- $800 million in voluntary separation programs for military personnel.

- Full protection of commissary benefits.

- Payment of the Basic Allowance for Subsistence (about $200 per month) for most married

service members deployed on operational missions. Previous policy prohibited such payments

to enlisted members.

- Over 49,000 new or renovated living spaces for single service members and over 28,000 new or

renovated quarters for families, during the next six years. For living facilities, DoD will invest

$4 billion for new construction and $2 billion for renovation.

- A 23 percent increase in child care spaces by FY 1997. For FY 1995-96, 20 child care centers

will be constructed or expanded, for $56 million.

- In FY 1995-96, 18 new recreation centers, chapels, and fitness centers, requiring $108 million.

- Increased resources for family assistance.

Beyond these traditional concerns, Secretary Perry recognizes that quality of life can deteriorate when military people spend excessive time away from their home station--such as for lengthy contingency operations. He is taking steps to ensure that DoD standards for length of deployments for service members are maintained, except for unavoidable circumstances. For example, Secretary Perry has ordered the greater use of reserve forces to relieve active duty units that have excessive commitments.

RECAPITALIZATION IS BEGINNING

To ensure that U.S. weapons will remain qualitatively superior to future adversaries, the new FYDP begins the recapitalization of America's armed forces--an undertaking that will continue well into the next century. Real increases in procurement funding will start in FY 1997 and continue through the FYDP period. Adjusted for inflation, budget authority for procurement in FY 2001 is projected to be 47 percent higher than in FY 1996.

Requested budget authority for procurement in FY 1996 is $39.4 billion--which, adjusting for inflation, is a decline of 71 percent from FY 1985 and the lowest level since 1950. The deepest cuts in procurement have come since the fall of the Berlin Wall in November 1989. During FY 1991-96 deep procurement cuts could be made without endangering the superiority of U.S. forces because of the significant modernization of them during the 1980s and the collapse of the Soviet military threat. Additionally, as the force structure came down, the remaining units could be equipped with modern systems already fielded.

America's armed forces must now begin a new phase of modernization. Some systems--like C-141 aircraft--are reaching the end of their service life. Others have not benefited from advances in electronics, lasers, materials, and other technologies.

Much of DoD's recapitalization will focus on upgrading the capabilities of some existing weapons, weapons platforms, and supporting systems. But recapitalization also will include developing and fielding totally new systems.

The FY 1996-97 budget provides for the procurement of:

- Aircraft: Remanufactured AV-8B Harrier, C-17, F/A-18C/D, and F/A-18E/F, plus the E-8

Joint STARS surveillance aircraft.

- Helicopters: UH-60 and Apache Longbow modifications.

- Missiles: Javelin, Hellfire, Patriot (PAC-3), Tomahawk, and Trident II missiles.

- Land systems: upgraded M1 tanks and Bradley fighting vehicles, Paladin Howitzer upgrade,

and new Armored Gun System.

- Ships: Aegis destroyers and the third Seawolf submarine.

Major research and development (R&D) efforts in the new budget and FYDP include: Advanced Field Artillery System, theater ballistic missile Defense, Comanche helicopter (prototype program), New Attack Submarine, V-22 Osprey aircraft, F-22 Advance Tactical Fighter, MILSTAR, JAST, and various precision munitions.

The recapitalization of U.S. forces is part of a broader challenge aimed at improving their capabilities, flexibility, and lethality. For the planned force structure to be sufficient to support the U.S. defense strategy, a series of critical force enhancements are necessary. These are geared especially toward ensuring that our forces will be able to bring substantial firepower to a regional conflict in its opening stages and quickly halt aggression. The new budget and FYDP support enhancements to: munitions and sensors, battlefield surveillance, long-range bombers, carrier-based air power, strategic airlift and sealift, overseas prepositioning, and Army Reserve Component readiness.

OTHER DEFENSE BUDGET AND FYDP HIGHLIGHTS

Defense Topline

The DoD request of $246.0 billion in FY 1996 is, in real terms, 39 percent below FY 1985, the peak year for inflation-adjusted DoD budget authority since the Korean War. Under the President's budget, by FY 1997 the cumulative real decline since FY 1985 will reach 41 percent. Reflecting recapitalization efforts, in FY 1998-99 DoD budget authority will increase about enough to keep pace with inflation, then receive moderate real increases in FY 2000 and FY 2001, primarily because of higher funding for procurement. (See attached chart.) DoD outlays as a share of America's Gross Domestic Product (GDP) will fall to 3.1 percent in FY 1997, half the 6.2 percent of the mid-1980s.

Nuclear Threat Reduction and Ballistic Missile Defense

A top priority of the Clinton Administration is preventing the reemergence of the nuclear threat that attended the Cold War. There are still about 25,000 nuclear weapons in Russia and three other Soviet republics. Today the Department is focused on helping Ukraine, Belarus, and Kazakhstan eliminate the Soviet nuclear weapons on their soil, and assisting Russia to reduce its arsenal. U.S. resources and expertise are helping to dismantle weapons and delivery systems, as well as the rest of the nuclear weapons complex.

A related concern is the spread of nuclear, biological, chemical, and missile capabilities, which pose a growing threat to U.S. global interests. Preventing this proliferation is a paramount DoD objective.

America also must ensure that other nations do not mount a ballistic missile threat against U.S. forces or those of our close allies. To that end, DoD budget plans support the rapid development and deployment of theater missile defenses. This focus on theater missiles addresses the immediate threat to U.S. forces deployed throughout the world, and provides a hedge against the emergence of a strategic ballistic missile threat to the United States. The new budget requests $2.9 billion for the Ballistic Missile Defense program for FY 1996.

DoD's New Technology and Industrial Strategy

With the end of the Cold War, the resulting sharp reductions in defense spending, and the surge of commercial technological innovation, DoD can no longer afford to maintain defense-unique technologies, capabilities, and industries--to ensure the superiority of U.S. forces. Many leading-edge technologies that will be critical to success on future battlefields (e.g., electronics and communications) are available more cheaply and readily through commercial firms. As a result, DoD must increasingly rely on commercial technologies, products, and processes--which are termed "dual-use" when adapted for defense applications. Dual-use also includes adaptation of defense technologies into commercial products, which can create economies of scale for both commercial and defense products.

DoD is pursuing numerous initiatives to advance this new strategy. The Department is working to reform its acquisition system; reduce the use of military-unique specifications; consider commercial technologies and products, when developing new systems; seek integration of defense and commercial production; and increase research and development (R&D) of dual-use technologies.

The cornerstone of this dual-use philosophy is the Technology Reinvestment Program (TRP), funded at $500 million for FY 1996. TRP, along with other dual-use technology investments, is substantially contributing to the vitally needed integration of the military-commercial industrial base.

Streamlining infrastructure and BRAC

Streamlining the U.S. defense infrastructure (bases, facilities, and support organizations) is a critical part of post-Cold War restructuring. It requires major reductions to infrastructure, as well as realignments to achieve optimum effectiveness and efficiency. As it has drawn down, DoD has simultaneously reduced its overseas facilities. For domestic facilities, much progress was made through the base realignment and closure (BRAC) process in 1988, 1991, and 1993. These three BRAC rounds approved the closure of 70 major bases and are projected to save $6.6 billion during their overlapping 6-year implementation periods (FY 1990-99). To date, 33 of these bases have been closed. Once implementation of BRAC I through III is complete, annual savings will be $4.5 billion.

The BRAC process for 1995 is the last one authorized under public law, and DoD recommendations to the BRAC Commission are due by March 1.

Environmental Programs

With $5.0 billion requested for FY 1996, DoD environmental programs support the readiness of U.S. forces by protecting military personnel and their families from environmental, safety, and health hazards. The programs ensure the usefulness and long-term viability of DoD lands and facilities. Major environmental priorities include actions to achieve compliance with existing laws and regulations, pollution prevention, and cleanup of past contamination.

NATIONAL DEFENSE TOPLINE

(Current $ Billions)

BUDGET AUTHORITY

                    1995        1996        1997        1998        1999        2000        2001
DoD military - 051  252.6       246.0       242.8       249.7       256.3      266.2        276.6
DoE $ other          10.9        11.8        10.6         9.9         9.9        9.9          9.9
Total national      263.5       257.8       253.4       259.6       266.3      276.0        286.5
defense
  % Real change      -1.9        -5.3        -4.1        -0.1        -0.2       +1.1         +1.2

OUTLAYS
                    1995        1996        1997        1998        1999        2000        2001 
DoD military - 051  260.2       250.0       246.1       244.2       249.6      257.9        261.6
DoE & other          11.4        11.4        10.9        10.3        10.0        9.9          9.9
Total national      271.6       261.4       257.0       254.5       259.7      267.8        271.5
defense
   % Real change     -5.4        -6.6        -4.4        -3.6        -0.6       +0.6         -1.2

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