Mr. Chairman, Ranking Member Visclosky, and members of the committee let me -- before I begin my prepared remarks on the budget today -- let me say a few words about what happened in Boston yesterday.
Like all Americans, the thoughts and prayers of our people at DOD and all of Washington are with the people of Boston today, especially the families of the victims and those injured by what appears to be a cruel act of terror.
As the President said yesterday, we still do not know who did this or why. And a thorough investigation will have to determine whether it was planned and carried by a terrorist group, foreign or domestic.
It's important not to jump to conclusions before we have all the facts, but as the White House said last night, Any event with multiple explosive devices, as this appears to be, is clearly an act of terror and will be approached as an act of terror.
The President has made clear that we will find out who did this. We will find out why they did this. And any responsible individuals or groups will be brought to justice.
I'd like to commend local, state and federal law enforcement agencies for their quick response to yesterday's tragic events, and also express our gratitude to the members of the National Guard, supporting the Marathon who were among the first on the scene.
I'm also mindful that many members of the military community had traveled to Boston to participate in this race, and our thoughts are with all of them today. The Department of Defense is prepared to respond quickly to any response for additional support from domestic law enforcement agencies.
I will continue to consult closely with DOD's senior leaders and my counterparts in other agencies on how we can best support the government's response and investigation.
And Chairman Dempsey may have additional comments regarding this event as well.
Mr. Chairman, I will now turn to my opening statement for this hearing. This year's 2014 budget request for the Department of Defense is, as Congresswoman Lowey noted, a budget that was put together over many months. An enterprise as large as the Department of Defense, $600 billion is not collaborated with or on or numbers or budgets constructed in a matter of two or three months. And as we proceed in this hearing this morning, Mr. Chairman, we will get into some of the specifics of the budget, and why some of the decisions were made on the basis of what the numbers will reveal and our responsibilities.
Allow me to express my appreciation to this subcommittee for its continued support of our men and women in uniform, and our civilian work force. They are doing tremendous work, as you all know, and are making great sacrifices. They're making great sacrifices along with their families, as they have for more than 11 years of our nation's wars.
Their dedication and professionalism are the foundation of our military strength. And as we discuss numbers and budgets and strategic priorities today I know we will not lose sight of these men and women and their families serving across the globe at great sacrifice.
As you all know their well-being depends on the decisions we make here in Washington. Today, the Department of Defense faces the significant challenge of conducting long-term planning and budgeting at a time of considerable uncertainty, both in terms of the security challenges we face around the world, and the levels of defense spending we can expect here at home.
Even as the military emerges and recovers from more than a decade of sustained conflict in Iraq and Afghanistan, it confronts an array of complex threats in varying vintage and degrees of risk to the United States. These include:
the persistence of violent extremism throughout weak states and ungoverned spaces in the Middle East and North Africa;
the proliferation of dangerous weapons and materials;
the rise of new powers competing for new influences;
the risk of regional conflicts which could draw in the United States; faceless, nameless, silent and destructive cyberattacks.
The debilitating and dangerous curse of human despair and poverty as well as the uncertain implications of environmental degradation.
Meanwhile the frenetic pace of technological change and the spread of advanced military technology to state and non-state actors pose an increasing challenge to America's military.
This is the strategic environment facing the Department of Defense as it enters a third year of flat or declining budgets. The onset of these resource constraints has already led to significant and ongoing belt-tightening in military modernization, force structure, personnel costs and overhead expenditures. It has also given us an opportunity to re-shape the military and reform defense institutions to better reflect 21st century realities.
The process began under the leadership of Secretary Gates. Secretary Gates canceled or curtailed more than 30 modernization programs and trimmed overhead costs within the military services and across the defense enterprise.
The realignment continued under Secretary Panetta who worked closely with the President and the Joint Chiefs of Staff to craft new defense strategic guidance and an F.Y. 2013 defense budget plan which reduce the Department's top line by $487 billion over the course of a decade.
The President's request to $526.6 billion or the Department of Defense's base budget for F.Y. 2014 continues to implement the President's defense strategic guidance, and enhances the Department's efforts at institutional reform. Most critically, it sustains the quality of the all-volunteer force, and the care we provide our service members and their families, which underpins everything we do as an organization.
Before discussing the particulars of this budget request, however, allow me to address the profound budget problems facing the Department in F.Y. 2013 and beyond as a result of sequester. The Congress and the Department of Defense have a responsibility to find answers to these problems together, because we have a shared responsibility to protect our national security. DOD is going to need the help of Congress. We're gonna need the help of Congress, this subcommittee, to manage through this uncertainty.
The F.Y. 2013 DOD appropriations bill enacted by the Congress last month addressed many urgent problems in our budget by allocating DOD's funding more closely in line with the President's budget request, giving the Department authorities to start new programs and allowing us to proceed with important military construction projects. Nonetheless, the bill still left in place the deep and abrupt cuts associated with sequester, as much as $41 billion in spending reductions over the next six months.
Military pay and benefits are exempt from the sequester. And we made a decision to shift the impact of sequester away from those serving in harm's way. Furthermore, the military is experiencing higher operating tempos and higher transportation costs than expected when the budget request was formulated, more than a year ago. As a result of these factors, the Department is now facing a shortfall in our operation and maintenance accounts for F.Y. 2013 of at least $22 billion in our base budget for active forces.
In response, the Department has reduced official travel, cut back sharply on facilities maintenance, imposed hiring freezes and halted many other important but lower priority activities. However, we will have to do more. We will soon send to Congress a large reprogramming request designed to offset some of our shortfalls, especially shortfalls in wartime funding. And we ask your help with expedient review and approval. This reprogramming will be limited by ceilings on transfer authority, and so it can only solve part of the problem.
We will have to continue to consider furloughing the civilian personnel in the months ahead. There will also be significant cuts in maintenance and training, which further erodes the readiness of the force and will be costly to regain in the future. As the Service Chiefs have said, we are consuming our readiness. Meanwhile, our investment accounts and the defense industrial base are not spared damage, as we also take indiscriminate cuts across these areas of the budget. We will continue to need the strong partnership of this committee to help us address these shortfalls.
If the sequester-related provisions of the Budget Control Act of 2011 are not changed, the F.Y. 2014 funding for national defense programs will be subject to a steeply reduced cap, which would further cut DOD funding by roughly $52 billion. And if there is no action by the Congress, roughly $500 billion in reductions to defense spending would be required over the next nine years.
As an alternative, the President's budget proposes some $150 billion in additional defense savings over the next decade. These cuts are part of a balanced package of deficit reduction. Unlike sequester, these cuts are largely backloaded, occurring mainly in the years beyond F.Y. 2018, which gives the Department time to plan and implement the reductions wisely and responsibly, anchored by the President's defense strategic guidance.
Now let me turn to the details of the President's budget request.
The $526.6 billion F.Y. 2014 budget request continues to balance the compelling demands of supporting troops still at war in Afghanistan, protecting readiness, modernizing the military's aging weapons inventory and in keeping with the President's strategic guidance and sustaining the quality of the all-volunteer force.
Today's budget request also contains a place-holder request, Mr. Chairman, for overseas contingency (OCO) at the F.Y. 2013 level ($88.5 billion). The submission does not include a formal OCO request, because Afghanistan force levels and deployment decisions for this year were delayed in order to provide commanders enough time to fully assess requirements. We will soon be submitting an OCO budget with the revised spending level and account level detail.
The base budget being presented today continues the Department's approach of the last several years, first, to target growing costs in areas of support, acquisition and pay and benefits before cutting military capabilities and force structure. This budget identifies new savings of about $34 billion in F.Y. 2014 through 2018, including $5.5 billion in F.Y. 2014 from all of these areas.
In order to maintain balance and readiness, the Department of Defense must be able to eliminate excess infrastructure, as it reduces force structure. DOD has been shedding infrastructure in Europe for several years, and we are undertaking a review of our European footprint this year. But we also need to look at our domestic footprint. Therefore, the President's F.Y. 2014 budget requests authorization for one round of Base Realignment and Closure, BRAC, in 2015.
BRAC is a comprehensive and fair tool that allows communities a role in re-use decisions for their property and provides redevelopment assistance. BRAC is an imperfect process, as we all know. And there are upfront costs for BRAC. The future year defense program adds $2.4 billion to pay for these costs. But in the long-term, there are significant savings for BRAC. The previous five rounds of BRAC are saving $12 billion annually, and those savings will continue.
In this budget, the Department has also achieved $8.2 billion in savings from weapons program terminations and restructuring. For example, by revising the acquisitions strategy for the Army's Ground Combat Vehicle, the GCV program, the Department will save over $2 billion in development costs. In other cases, the Department used evolutionary approaches to develop new capabilities instead of relying on leap-ahead gains in technology.
The cost of military pay and benefits are another significant driver of spending growth that must be addressed in the current fiscal environment. In this budget, the Department is submitting a new package of military compensation proposals that take into consideration the congressional concerns associated with those from F.Y. 2013. These changes save about $1.4 billion in F.Y. 2014 and a total of $12.8 billion in F.Y. 2014 through 2018.
This package includes a modest slowing of the growth of military pay by implementing a one percent pay raise for service members in 2014. The Department is also seeking additional changes to the TRICARE program in the F.Y. 2014 budget to bring the beneficiaries' cost share closer to the levels envisioned when the program was implemented, particularly for working-age retirees, survivors of military members who died in office and on active duty, or medically retired members who would be excluded from all TRICARE increases.
Even after the proposed changes in fees, TRICARE still remains a very substantial benefit. These adjustments to pay and benefits were among the most carefully considered and difficult choices in the budget. They were made with the strong support of the Joint Chiefs of Staff and the senior enlisted leadership in recognition that in order to sustain these benefits over the long-term without dramatically reducing the size or readiness of the force, these rising costs need to be brought under control. The longer we wait, the more difficult it will be.
Nevertheless, spending reductions on the scale of the current drawdown cannot be implemented through improving efficiency and reducing overhead alone. Cuts and changes to capabilities, force structure, and modernization programs will also be required. The strategic guidance issued in January 2012 set the priorities and parameters that informed those choices, and the F.Y. 2014 budget submission further implements and deepens program alignment to this strategic guidance.
The new strategy calls for a smaller and leaner force, a more agile force. Last year we proposed reductions of about 100,000 in military end-strength between 2012 and F.Y. 2017. Most of those reductions occur in the ground forces and are consistent with the decision not to size U.S. ground forces to accomplish prolonged stability operations, while maintaining adequate capability, should such activities again be required. By the end of F.Y. 2014, we will have completed almost two-thirds of the drawdown of our ground forces and the drawdown should be fully complete by F.Y. 2017.
Increased emphasis on the Asia-Pacific and Middle East represents another key tenet of the new defense strategic guidance. This budget continues to put a premium on rapidly deployable, self-sustaining forces, such as submarines, long-range bombers and carrier strike groups that can project power over a great distance and carry out a variety of missions.
This new strategy leverages new concepts of operation enabled by advances in space, cyberspace, special operations, global mobility, precision strike, missile defense and other capabilities. By making difficult trade-offs in lower priority rates and areas, the F.Y. 2014 budget protects or increases key investments in the critical areas of critical capabilities.
Another critical area of focus in this budget request is sustaining the readiness and quality of the all-volunteer service. The high quality of our all-volunteer force continues to be the foundation of our military strength, and the F.Y. 2014 budget request includes $137.1 billion for military personnel, as well as $49.4 billion for military medical care. Together, these make up roughly one-third of our base budget.
This budget seeks to ensure that our troops receive the training and the equipment they need for military readiness and the world-class support programs they and their families have earned. The Department continues to support key programs in F.Y. 2014 that support service members and their families, spending $8.5 billion on initiatives that include Transition Assistance and Veteran’s Employment Assurance, Behavioral Health, Family Readiness, Suicide Prevention, and Sexual Assault Prevention and Response.
The F.Y. 2014 budget is a reflection of DOD's best efforts to match ends, ways and means during a period of intense fiscal uncertainty.
It is obvious that significant changes to the Department's topline spending would require changes to this budget plan. The Department must plan for any and all additional reductions to the defense budget that might result in the Congress and the administration agreeing on a deficit reduction plan. It must be prepared in the event that sequester-level cuts persist for another year or over the long-term.
Consequently, I directed a Strategic Choices and Management Review. I asked for that review in order to assess the potential impact of further reductions up to the level of full sequester. The purpose of this review is to reassess the basic assumptions that drive the Department's investment and force structure decisions.
The review will identify the strategic choices and further institutional reforms that still may be required, including those reforms which should be pursued regardless of fiscal pressure. It is designed to help understand the challenges, articulate the risks, and look for opportunities for reform and efficiencies presented by resource constraints. Everything will be on the table -- everything will be on the table during this review -- roles and missions, planning, business practices, force structure, personnel and compensation, acquisition and modernization investments, how we operate, and how we measure and maintain readiness.
This review is being conducted by Deputy Secretary Carter, working with General Dempsey. The service secretaries and service chiefs, Office of the Secretary of Defense Principals, and combatant commanders all serve as essential participants. Our aim is to conclude this review, which is now underway and has been underway, by May 31st of this year. The results will inform our 2015 budget request and will be the foundation for the Quadrennial Defense Review due to Congress in February of next year.
It is already clear to me that achieving significant additional budget savings, without unacceptable risk to national security, will require not just tweaking or chipping away at existing structures and practices, but if necessary, fashioning entirely new ones that better reflect 21st century realities. That will require the partnership of Congress.
The F.Y. 2014 budget and the ones before it have made hard choices. In many cases, modest reforms to personnel and benefits, along with efforts to reduce infrastructure and restructure acquisition programs met fierce political resistance and were not implemented. We are now in a different fiscal environment, dealing with new realities that will force us to more fully confront these tough and painful choices and to make the reforms we need to make to put this Department on a path to sustain our military strength for the 21st century. But in order to do that, we will need flexibility. We will need time. And we will need some budget certainty.
We will also need to fund the military capabilities that are necessary for the complex security threats of the 21st century. I believe the President's budget does that. With the partnership of Congress, the Defense Department can continue to find new ways to operate more affordably, efficiently and effectively. However, multiple reviews and analyses show that additional major cuts, especially those on the scale and timeline of sequestration, would require dramatic reductions in core military capabilities or scope of our activities around the world.
As the executive and legislative branches of government, we have a shared responsibility to ensure that we protect national security and America's strategic interests. Doing so requires that we make every decision on the basis of enduring national interests and make sure every policy is worthy of the service and sacrifice of our service members and their families.
Mr. Chairman, thank you.