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Department of Defense News Briefing on the President's Fiscal Year 2018 Defense Budget

May 23, 2017
Performing the Duties of Under Secretary of Defense (Comptroller) and Chief Financial Officer John Roth; Director, Force Structure, Resources and Assessment, Joint Staff Lt. Gen. Anthony R. Ierardi

 

      STAFF:  Welcome, everybody. And happy budget release day.

 

      (Laughter.)

 

      Today, we are grateful to have with us Mr. John Roth, performing the duties of the undersecretary of Defense for Comptroller and Lieutenant General Anthony Ierardi, joint staff director for Force Structure, Resources and Assessment.

 

      This briefing will be 40 minutes in duration and on the record. We'll start off with a few opening comments from both gentlemen, and then we'll open the floor to questions.

 

      So, with that, Mr. Roth, sir, over to you.

 

      UNDER SECRETARY OF DEFENSE JOHN ROTH:  Thank you, Eric.

 

      And good morning or good afternoon almost here I think. Good to see you all.

 

      I'm not going to do a dramatic reading of the book, I promise you. It's just there for reference in case I have to go to it. So, again -- so, we will walk through our -- our presentation of the budget here. And between General Ierardi and -- and myself here, we'll try to answer your questions as best we can.

 

      So, again, as you -- as you know, today, the president -- President Trump, sent to Congress his proposed F.Y. 2018 budget request. What we will do here this afternoon is outline the -- the request for the Defense Department.

 

      And so, go to the first slide please. And so, the message is really the -- one the first slide is the intent is that F.Y. '18 budget request be -- be the next step in rebuilding the U.S. armed forces. And Secretary Mattis, from -- from virtually the first day that he was in the building, had talked in terms of -- of a three-step process here initially on how to get there in terms of getting ready, getting balanced, and getting bigger and more lethal.

 

      And so, our request in fiscal year 2017 for the additional resources and finally culminating in the F.Y. '17 Appropriations Act was intended to -- to address near-term readiness. And so, with the additional resources, we did in fact get any F.Y. 2017 budget, we are in the process of -- of implementing that as we speak.

 

      With this F.Y. 2018 budget request, we will build on the readiness improvements that we will make here for the remainder of this fiscal year and add resources in order to balance the force. And we will walk through a little bit of some of these examples where we're going to do that.

 

      Ultimately, that's not the end of the journey. Our goal is -- and in fiscal year 2019 will be to sustain the gains that hopefully we will be able to make in fiscal year 2017 and 2018. And by that time, informed by the new defense strategy, we'll build further to achieve a bigger, more lethal and ready force. Next slide, please. So, the numbers. The base budget request is $574.5 billion. The overseas contingency operation budget, $64.6 billion for a total of $639.1 billion.

 

      This base budget request is $52 billion above the Defense Department's share of the F.Y. 2018 defense budget cap in the current law, the Budgeting (sic) Control Act. It is absolutely essential for us in order to achieve the goals and in order to meet the strategy, we must increase the defense budget cap. We have to reverse defense sequestration in order to adequately protect U.S. national security.

 

      Since enactment of the Budget Control Act in 2011, the world has become a more dangerous place with rising terrorism and more aggressive potential adversaries. Under the Budget Control Act, the military has, during that same period of time, become smaller, readiness has eroded, and modernization has been deferred. That's not a good place to be.

 

      So this budget begins to balance the defense program and establishes a foundation for re-building the U.S. military into that more capable, lethal and ready force.

 

      MR. ROTH:  Next slide, please.

 

      So here are some of the major themes in terms from a budget perspective that inform the building of this budget. Again, as I continue to emphasize, improving war-fighter readiness has been priority one for Secretary Mattis since he walked in the door.

 

      What does improving war fighter readiness mean? Whether it will -- what will it result in? More aircraft in the air, more ships at sea, more troops in the field, and more munitions on hand, in order to rebuild the current force.

 

      This budget also addresses the evolving national security challenges. First and foremost, we need to retain our counterterrorism and counterinsurgency competencies. We want to seek to preserve our competitive advantage, versus our major adversaries, and we look to sustain our capability development for new war fighter concepts.

 

      A number of recapitalization area, of one of the highest priorities, is to recapitalize and modernize the nuclear enterprise across the entire nuclear triad. We prioritize key investments in cyber and space capabilities. We continue to focus on innovation as a way to maintain our technological advantage, and we seek to sustain the finest fighting force in the world. Sensitive to the fact that we're asking for an awful lot of money from the American taxpayer, we look to continue to identify and pursue reforms to improve efficiencies and achieve cost savings. So those are the major themes in the budget.

 

      So like any good budgeteer, I have a couple of drafts that will make your eyes glass over here for the next two slides. What this slide is, is essentially, a picture of the defense budget since 9/11. The blue is the base budget, and the gray is the overseas contingency operation budget.

 

      I draw your attention to the most important thing in the slide, are the last two bars on the right, and particularly, the one on the -- yeah, for fiscal year '17 -- through '17 and '18. Again, there is (sic) the numbers I just alluded to, the $574 billion. And you can see, in addition to being above the budget cap, it's also a significant increase over the enacted F.Y. '17 level there, which is $523 billion.

 

      You'll see on the top there in the gray, the overseas contingency operation budget. That is a distorted picture, and so I caution you, I think, as many of you are aware, that as the F.Y. '17 Appropriations Act was finalized, the Congressional -- the Congressional committees put all the additional resources we requested for particularly, the readiness improvements. They put it all in the overseas contingency operation budget. And so that F.Y. '17 number is distorted, and so that makes your comparison from '17 to '18 a little difficult.

 

      That also offers me an opportunity to -- to, in a sense, apologize for what's going to be a difficult comparison between any of the F.Y. '17 numbers and the F.Y. '18 numbers. And it has to do with sort of the tyranny of what was happening in the calendar, and when we had to lock this F.Y. '18 budget, and the fact that the F.Y. '17 appropriations process had not concluded yet. And so it was in late April, early May, as we were wrapping up this budget, we didn't have the final F.Y. '17 appropriations.

 

      So depending on which book you have, we have -- are providing to you today, for example, an overview book and a weapons book, and the like. The numbers you see there for the F.Y. '17 column are the F.Y. '17 budget request number. They're not the enacted numbers, and that's because we didn't have those numbers available to us as we put those books to bed.

 

      If you look at the Office of Management and Budget's documentation, and all the books that they have, virtually all their F.Y. '17 numbers are essentially a mathematical calculation of a year- long continuing resolution. And so it's a mathematical number that doesn't have any particular programmatic basis. And so that distorts all the comparisons between '17 and '18.

 

      MR. ROTH:  And as we go forward here, selectively, or hopefully, we've made some sense. For example, in this graph, I did pick up the enacted numbers. But be aware that we've been playing catch up since we locked this budget in terms of trying to catch up to when the actual F.Y. '17 budget was enacted and we were making our final decisions here on F.Y. '18.

 

      So it's unfortunately, just the nature of the timing as we put these two processes through their -- through their paces. Next slide.

 

      Just basically a bit of an expansion of the previous slide to show you the plus $52 billion. So you see it there on the right, that the calculated budget and control act DOD cap for F.Y. '18 would be around $522 billion. Our request is $52 billion above that. Some of you may have seen numbers in the press in terms of plus $54 billion. That is the whole defense function which includes the Department of Energy portion of -- of the budget as well. So that is also in -- particularly in the OMB material, you'll see the plus 54.

 

      So our portion of that increase was the $52 billion you see on this graph. So let me pause and hand off to General Ierardi here to walk through a little bit of our readiness story.

 

      LIEUTENANT GENERAL ANTHONY R. IERARDI:  Next chart please.

 

      The F.Y. '18 request picks up after the supplemental appropriation for fiscal year '17. '17 was about addressing immediate war fighting readiness. In '18, we want to continue to build a baseline from which to move forward from regarding readiness.

 

      And so you see continued significant investment in the aspect of unit preparedness, training, maintenance, and modernization to restore war fighting readiness while setting the conditions for future, sustained, comprehensive readiness. When we say comprehensive readiness, this being the balance between the capacity, the capability, and mission preparedness of our units.

 

      This budget also supports combatant commander exercises and engagements to increase joint training capability and invest in critical aviation munitions and ISR in support of combatant commander theater activities. Next chart.

 

      This chart describes the service -- but just highlights service specific increases or investments intended to increase readiness. And so you see here under each of these service entries, areas that would be -- that we will invest in regarding training, equipping, maintaining the force at higher levels than we had been under previous years.

 

      Where decisions were made to ensure that the force is always ready to accomplish the mission to deploy, to the theaters of operation that we're engaged in today, while in some ways, sacrificing the long term readiness of the force and the modernization of the force. Fiscal year '18, as we say, fills those holes. And allows us to recover our readiness in the -- in the aspect of full spectrum readiness, readiness to operate in different theaters against different adversaries over different periods of time.

 

      This budget allows us to be able to recover that readiness. And as I've said, establish a base line from which to move forward from as we look to the future.

 

      (CROSSTALK)

 

      MR. ROTH:  Next slide. Next slide, a very busy slide with lots of numbers. Mostly just to provide that for your information. I draw your attention to really the only important message on this slide is the right hand column and the bumper sticker.

 

      What this budget does is pick up and sustains essentially increase in end strength over 56,000 from what the '18 column in the F.Y. '17 budget was. To some extent, particularly the Army end strength increase was inherent in the F.Y. '17 Authorization Act we pick up and continue to fund that.

 

      MR. ROTH:  There some minor increases you'll see there in the middle column there in -- in the Navy, Marine Corp and Air Force. But for -- for the most part, this continues the momentum to -- to building the force as we go forward. We will first work on, as I alluded to, the national defense strategy and we will figure out what is the appropriate force structure in order to execute the new defense strategy when that's done. And it'll inform to F.Y. '19 budget. Next slide, please.

 

      This gives you just the market basket of some of the major acquisition programs. It's not all inclusive, it's just sort of the big-ticket drivers if you will. The dollars you see on this slide are a combination of -- of procurement and R&D dollars in the base budget.

 

      You'll see there, in terms of air craft, you see this -- the biggest acquisition program we continue to have is in fact the F-35 Joint Strike Fighter program. We're requesting 70 aircraft in fiscal year '18.

 

      Those 70 aircraft are broken down into 46 aircraft for the Air Force Variant, which is the F-35A. We're asking for 20 aircraft for the Marine Corps Variant, which is the F-35B. And four aircraft for the Navy Variant, which is the F-35C.

 

      So, you'll see there, market basket, we're asking for four Fs in '18 and other aircraft as well. The B-21 dollars there are purely R&D. We don't start procuring the B-21 until 2020s.

 

      We have essentially eight combat ships that are -- eight battle force ships we're requesting in F.Y. '18. These are the six biggest ships here. In addition, there's a fleet oiler, a so-called T-AGOS, and a towing, salvage, and rescue ship, a TATS as well.

 

      So, we're asking for eight battle force ships. These are the six major ships in terms of two submarines, two destroyers, an LCS. And this is the -- the second of the four class aircraft carriers, the USS Enterprise.

 

      You see the continued investment in space programs. Three launches are being financed in F.Y. '18. All three will be procured under our competitive acquisition process. Next slide.

 

      What I want to foot-stomp on this particular slide are the preferred munitions. As we closed out this budget over the last two or three weeks in particular, a great deal of concern was -- was being raised with current inventory levels, and particularly given some of the expenditures in the CENTCOM area of operations as we talk.

 

      And so, the Secretary mandated and insisted that we fully fund this maximum extent possible, the full production capability for a certain selected preferred munitions. Things like the HELLFIRE. Things like the JDAM and the guided multiple-launch rocket system.

 

      This is really only half the story. This is the base budget. There is another $1 billion of preferred munitions that is in the overseas contingency operation budget as well.

 

      You see there, selected ground system, particularly for the amphibious combat vehicle for the Marine Corps and the armored multi- purpose vehicle in the Army. This is the first-year procurement for both of those programs. And then, you see just a couple selected examples out of the missile defense program. The total missile defense program in F.Y. '18 is $10 billion. And these are the two major programs that are in that portfolio. Next slide, please.

 

      And so, this, again, is just a selected set of examples, largely because A, they were unclassified, and B, just to give you some of the examples of some of the things we've done in past years in terms of the focus on technology and the innovation.

 

      In our mind, we have funded a pretty robust science and technology program, $13.2 billion. And then, we offer you here just a couple of examples in terms of the -- a alternate navigation technology, directed energy kinds of efforts, high-speed strike weapons, low-cost unmanned systems. And in particular, on a bottom there, reacting to current changes in the threat in the field, we're investing across DOD to counter the illicit unmanned aerial systems that we're -- we're encountering even today.

 

      MR. ROTH:  So, this -- a market basket of our continued -- our continued concern with investing in new innovation and new technologies.

 

      Next slide, please.

 

      We're pretty pleased with our situation with facilities investment. This is an area where, when you get constrained budgets and you have lower top lines, you tend to take risk and you tend to defer. It's sort of like you -- you're going to wait to fix that window until the next year, as long as the roof's not leaking, or something like that. And so we've had pretty anemic military construction facilities budgets here over the last four or five years.

 

      So this year reflects a 25 percent increase in the military construction budget, going from $7.8 billion to $9.8 billion. There's a readiness -- nexus with this as well, the investing in operational and training facilities and maintenance and production facilities in particular. As far as overseas, we continue to invest in the infrastructure to -- to support the relocation of Marines from Japan to Guam.

 

      And my foot stomp on this slide is that we are seeking the authority, once again, to commence a new base realignment and closure round in 2021. We need to -- in order to get a round done in 2021, you have to begin the analysis and begin the process here.

 

      It has been over 10 years since we've had a BRAC round; 2005 was the last year. The sum total of the four or five rounds that we've had since the 1990s and 2005, has resulted in approximately $12 billion a year in savings by having done that. That is a gift that keeps giving.

 

      All we're asking for at this stage is the authority, we can't even do the detailed analysis under current law. What we have is a parametric estimate that tells us we've got about 20 percent excess capacity. If that number is anywhere near correct, we estimated we could save about $2 billion a year that we can reinvest into readiness and modernization kinds of requirements. And so we are forgoing, we think, a very significant opportunity to get some savings. It's a very structured, systematic, rigorous process that ultimately, Congress has the final say on.

 

      So again, we are asking for the authority for -- for BRAC. We think we're getting some signals from at least a couple of committees that are more amenable to it and so we will be pushing that pretty hard.

 

      Next slide, please.

 

      We're also, again, as I noted, we continue to look at our business processes. The secretary, when he came in as well, said that he had a rebuilding and reform agenda that he has in mind. And so there's a number of ongoing activities that we continue to pursue. We're continuing to look at the major headquarters, and to reduce them by 25 percent. We continue with acquisition reform, particularly to better buying power 3.0. We continue to look at -- take a hard look at our service support contracts, and make sure that they're appropriate.

 

      And then, particularly for us in the financial management world, 2018 is an extremely important year. We're going to move from getting ready for an audit, to actually beginning the audits. And so that's an extraordinarily important year. We're going to learn a lot from it. There's going to be wins and losses that'll come out of that process. But what I always describe a little bit, spring training's over, we need to get on with the season, okay. We need to get on to actually doing the audits, and we think we'll learn an awful lot in terms of getting us to where we need to be.

 

      Next slide.

 

      Similar here, with the -- with the theme in this slide, is just some of the -- some of the reforms that came out of the 2017 Authorization Act. As many of you are aware, we are re-organizing the acquisition community, breaking it into two undersecretaries, one a chief technology officer; another one in charge of acquisition and sustainment.

 

      We are in the process of standing up a chief management officer. We're going to elevate the cyber command into a stand alone combatant command, and we're going to develop and implement a plan to reform the administration of the Defense Health Agency in the military treatment facilities.

 

      MR. ROTH:  Again, smart things to do in terms of reorganizing the department. And hopefully we'll illicit a fair amount of savings. Next slide, please.

 

      We have actually a relatively modest set of compensation reforms this year, mostly, sort of tweaking things at -- at the margins. The goal here throughout this, in terms of -- of our compensation packages is -- is to maintain the health of the force through a competitive compensation package that reflects the unique demands and sacrifices of our service members. And so, our sense is, this budget does that.

 

      This budget is going to ask for a 2.1 percent pay raise for military members and a 1.9 percent pay raise for the civilians, which is the government-wide rate for all civilians. We're going to seek some modifications to the military health care system. We continue to look at efforts, and, for example, to rely on telehealth and some additional nurse advice lines, and those kinds of things to try to improve the -- the beneficiary's experience with the process.

 

      We'd like to exempt from any cost-sharer increase, the medically retired and family members of those who die on active duty. We think that's just a tweak in a law that perhaps the Hill has overlooked.

 

      We look to -- what we did get from last year and both in F.Y. '16 and '17, we did get a fair amount of the -- the revised and simplification of the fee structure in the military health care system. But they grandfathered the provision for anybody who comes in at January 1, 2018. And what that did is in effect is pretty much wiped out any to near-term savings and created what we think is an awkward two-tier system from those that'll be under one system versus those that'll be under another. So, we're going to ask the Congress if they would consider eliminating the grandfathering.

 

      And we're very pleased with where we are with the blended retirement system. There is a wide-spread education and training program that is going on as we speak in order to educate the members in terms of the kinds of choices they now have, which are very similar to some of the choices many civilians have and the like.

 

      We're going to ask Congress if they would, the current law basically ends the matching for the military members at 26 years of service. And we're going to ask at least for the enlisted members, that they be allowed to have the matching beyond the 26 years of service. Next slide, please.

 

      There's nothing particularly new on this slide. Just want to emphasize, we continue to have what we think is a -- a very healthy and robust family assistant program, a family of benefits that you see there. We're investing $8 billion in -- in this range of services, everything from -- from spouse educations career assistance, morale recreation and welfare and things like the schools and the commissaries and the like. So, again, just to emphasize, continue support to members and -- and their families. Next slide, please.

 

      As far as the overseas contingency operations request $64.6 billion, it basically supports the level of ongoing operations in Afghanistan, Iraq and Syria. It also includes some additional security cooperation money for looking at -- at counterterrorism crisis response and other things throughout -- throughout the globe. It reflects a -- a force-level structure in Afghanistan of about 8,448, a force structure in Iraq of 5,765. And in particular, there is a major commitment to the European Reassurance Initiative. That goes up from $3.4 billion in F.Y. '17 to $4.8 billion in F.Y. '18.

 

      MR. ROTH:  The only thing I would caution is, there's a number of plans in terms of change of plans that are under consideration by both the -- the building and the White House right now that are going through the vetting process and the discussion stage and like. This particular request does not reflect approval of those plans. And so, once those plans are approved, we'll have to take a look at this and reassess what the resource requirements might have to be. And work with both the White House and Congress to see if there is any -- any changes to the request that might be necessary.

 

      Next slide please.

 

      So at the end I want to talk briefly about one concern that has been raised in the run up to this rollout briefing and that is whether or not there would be a future year defense program plan or not.

 

      What I am here to tell you is what we have done to date under that three-step process that I alluded to on the very first slide, is we have focused on getting a budget ready for F.Y. '17 and we're very pleased that we found an Appropriations Act for fiscal year '17. And then we pivoted it and worked on getting the F.Y. '18 budget done and -- and in order to meet this date as well.

 

      The secretary has not spent any time at all looking at anything beyond F.Y. '18 to date, in large part because what we have stood up, as I alluded to earlier, is we begun the process of developing the new defense strategy and the intent and the goal was that new defense strategy would be in -- would inform anything beyond F.Y. '19 in terms of the F.Y. '19 to 23 program, for example.

 

      So what you have and what OMB has provided to date for the Defense Department is a flat top line beyond F.Y. '18, which is simply the F.Y. '18 number that is extrapolated and inflated across the out years. That is not the top line that we will be seeking here particularly as we go to the F.Y. '19 budget.

 

      That line that you have in -- that flat line is not informed by strategy and it's not informed by policy. And so I actually feel that any analysis or any comparisons of what is that out-year profile now is a relatively empty exercise. Because one of the standard answers are going to be, we're going to have to go back and look at that this fall. That is not the number. You will not see a growth in force structure. You will not see a growth in the shipbuilding plan. You will not see a robust modernization program in the so-called current FYDP. And so therefore I caution anybody from trying to make any comparisons. And I'm actually -- of the school that -- that providing it -- is -- is -- really doesn't provide anything that's particularly insightful.

 

      Words make sense in terms of the acquisition exhibits and some of the military construction exhibits and all. We will in fact be providing out-year data, but it is all tempered by the fact that I essentially have a flat top line that goes anything beyond F.Y. '19 at this point.

 

      So my get off the stage, comments here are, we need to sustain and build on readiness improvements, that where we begun in F.Y. 2017. We need to begin the process of balancing the force to become bigger and more lethal. And we absolutely, essentially need to reverse defense sequestration. We must increase the defense budget caps in order to support financial security strategy and any new defense strategy as well.

 

      So we have a few charts there, some pie charts that break it by appropriation, title, and military department. Those are there for your information. And so were open to answer any questions that you might have.

 

      STAFF:  I know most of you, but not all, if you could, when I call on your, just name your -- your media affiliation and give us your name please. Yes ma'am.

 

      Q:  Hi -- (inaudible). I just wanted to clarify something a few months back, General Bogdan was talking about the possible delay that occur with F-35 testing. And he said that his office, the JPO would take money out of follow-on modernization to finish SDD. Is that still the plan right now, as of this budget? Because it seemed from the recent GAO report on F-35 in April that they're not going to finish that testing on time.

 

      MR. ROTH:  Yeah, I -- I would differ to -- to discussing it particularly with the Air Force and Navy, they will be following us in terms of those kinds of details.

 

      We did look at the F-35 program as we finalized this budget. We did adjust both procurement and R&D funding appropriately to bring it up to date with where the program is today. And so I will mostly intuitively, I think we have in fact accommodated what General Bogdan was -- was alluding to, but I'd differ to the Air Force and Navy to fill in more of the blanks for you.

 

      Q:  Idrees Ali, Reuters – Can you talk about, I mean sort of the funding for the counter Islamic State campaign. I see 1.7 billion in the OCO. Could you talk a bit about the training and the training and equip fund and the rational for that was?

 

      MR. ROTH:  Well, the rational again is -- is in fact -- I mean to provide -- I mean our -- our -- our idea in terms of fighting the campaign is essentially a by, with and through our partners kind of a campaign. So the train and equip money continues to be very important. All we really did -- and the only change -- and then I'll differ to General Ierardi perhaps to fill in some more blanks here.

 

      All we did from a budget perspective is we had a separate Iraq train and equip fund in the F.Y. '17 request and a separate Syria train and equip fund. So what we did is actually with approval from last years Authorization Act, is we combined those into a single train and equip fund to give us somewhat more flexibility. And the $1.8 billion request for that right now our estimate is 1.3 of that would be for Iraq and .5 would be for Syria. But those are just notional estimates at this point.

 

      GEN. IERARDI:  Yeah, I don't have anything to add.

 

      MR. ROTH:  Yeah.

 

      Q:  Hi. Aaron Mehta with Defense News. Just a couple of quick clarifying things.

 

      One, I think you said, but I just want to make sure, the munitions request you put in was the maximum amount the companies could handle actually producing.

 

      MR. ROTH:  Yes, for those selected munitions. Yes.

 

      Q:  Number two, there's a bunch of reform efforts that are mentioned in some of the budget documents. Are any of those new for F.Y. '18 or were those all NDAA?

 

      MR. ROTH:  Yeah, for the most part, there are no particular new ones. But we're -- I mean we haven't stopped looking is the partial answer to your question. Okay, those -- the ones you see that were alluded to on that chart are the (Renne ?) overview book and those kinds of things for the most part are continuation of -- of efforts we already had on hand.

 

      And so again part of this has to do with the short period of time the secretary has been here, but he has made it clear this is important to him and so we will continue particularly as we stand up a chief management officer, okay, and we will continue. One of their charters will be to take a look at the business processes of the department when in fact we get a new deputy secretary that will be pretty much one of his jobs, will be to take that on as -- in terms of looking kind of end to end in terms of our business processes and where -- and try to seek savings and improvements where we can.

 

      Q:  And just one last real wonky one. There's a note in the budget documents about NNSA funding, essentially it looks like DOD shifting some funding from DOD to NNSA, kind of clear that up.

 

      MR. ROTH:  That happens is -- before the -- that's always -- that's been an annual -- you we have -- we in the past had some money set aside to help support NNSA. And the thinking there is we drive a lot of the requirement and so in putting this budget to bed this year, essentially we shifted that top line to NNSA now. Okay. And so their budget stands on its own, our budget stands on it's own.

 

      Q:  Marcus Weisgerber, Defense One. You two gentlemen have been through this a number of years, what's your level of confidence this year that this budget will get enacted at the levels that they're -- you've proposed them at.

 

      MR. ROTH:  I mean it's hard to predict, let me start there. Take the chicken way out and say it's hard to predict.

 

      The answer is I think we've made our case. Okay. I think our service chiefs have been up there over the last few months on many different occasions testifying before the Armed Services Committee, before the Appropriations Committees and have laid out the concerns and erosion of readiness that exists today.

 

      I think there is a -- you know, in my personal opinion, I think there is some recognition on -- on the Hill that there is a mismatch between what we're being asked to do, and the resources that have been made available in order for us to do what we're being asked to do.

 

      That said, it all gets embroiled in the political process, okay? And so asking for elimination of -- of the defense sequestration's not an easy thing, and I understand it'll probably take some trade-offs on the Hill that is, frankly, outside our control.

 

      So the answer to your question is, I'm actually fairly sanguine. Actually, a lot of the reaction we've gotten so far from our meetings with some of the members is, you know, "Why didn't you ask for more?" kinds of a thing. For a budget guy, that's -- that's always good to hear. You know, why didn't I ask for more? Okay.

 

      So we'll -- we'll have to see. It -- it's going to -- it -- obviously, it -- it's going to take a lot in Congress, in both the House and Senate, to try to get it done. And -- and we're -- we're here to help anyway we can. We'll make our case. What you'll see here over the next two or three weeks -- each of the military departments, both the secretary and the service chiefs, will go up and testify, and lay out their case. And I'm very comfortable, we have a good case to make, here.

 

      Q:  Ryan Browne with CNN. Just to follow up on that really quickly, I mean, why didn't you ask for more? Obviously, Capitol Hill's already sounded that this number is too small to address the readiness short -- shortfalls currently faced by the services. So can you explain the delta between what Capitol Hill's saying is needed and what's being proposed?

 

      MR. ROTH:  Well, again, it's a bit of a judgmental thing, because there's not a point total that anyone can point to say, "That's the perfect number." Again, what I will -- what I will say, largely, is to fall back on the three-step process that we think we're in. We asked in '17 for what we thought was -- was politically palatable and as -- as you're aware, we didn't get everything in '17 that we asked for, but we got a healthy increase, and we're, frankly, very pleased and -- and grateful for what the Hill provided in the F.Y. '17 Appropriations Act.

 

      So in a similar fashion, we're asking for an increase. I mean, $52 billion, I would argue, is not chump change. So that's a pretty significant increase in the defense budget that we're requesting here, and we're not done. We'll take a look, once we have the new defense strategy. We'll look at, what seems to be, the appropriate amount of resources to support that strategy and we'll probably go in with a request that will have some -- some degree of growth from F.Y. '18 as well.

 

      So we're not going to solve the readiness problem in one year. We're not going to modernize overnight. All this is a multi -- what we need more is sort of a stabilized multi-year commitment to defense spending, more than anything else. So that's what we're seeking.

 

      GEN. IERARDI:  The erosion of the readiness didn't occur in one year, and we're not going to be able to satisfy the requirements in one year. It's going to be a -- it's going to be a while for us to be able to do the -- with sustained funding.

 

      Q:  David Wood from the Huffington Post.

 

      Mr. Roth, would you talk about the audit that you say is going to start? When is it going to start? How long will it take? When will it be finished? And what do you have to say about -- you've been here probably as long as I have, to remember the last time an audit was successfully done.

 

      First of all, how can we have any confidence in the numbers you've got here, since they're unaudited? And what makes you confident, if you are, that this audit will get completed?

 

      MR. ROTH:  Okay. Fair questions. I love references to how old I am, so thanks -- thanks for that.

 

      (Laughter.)

 

      But -- but beyond that, okay -- the answer is, yeah, we -- we -- we cannot pass a clean audit yet and -- and we are the last federal agency to do so. That's not a good place to be in. We recognize that. There's a lot of -- a lot of issues in terms of complexity and a number of systems, and a legacy I.T. systems we have that we're going to have to work our way through.

 

      MR. ROTH:  The answer to your question is, we have been spending, particularly in the last five to six years, management actually turned to and focused on this as a priority. One of the reasons we are where we are is for about 20 years, no one really cared. And so that's why we -- we didn't move the ball.

 

      But -- but basically somewhere in the -- in the last six or seven years, particularly with Secretary Gates and beyond, it became a high priority for the entire department. This isn't something that only a comptroller and financial manager can do, it needs a buy-in from the entire enterprise. And so we've had that.

 

      And so therefore, we've made an enormous amount of progress getting, quote "ready" for the audit. Now the answer is to begin the audit. Okay. And to answer your question, that is not -- we're not going to get to a clean audit in one year. I don't want to oversell this. Okay. But we won't know until we start the audit. And so as we start the audit, we're going to get what's called disclaimers. We'll get some good audit opinions and frankly we'll get some bad audit opinions.

 

      And those will lead to remediation efforts and look at things in terms of either changing business processes or changing accounting processes and the like. So the answer is I don't -- it's going to take more than a year.

 

      I don't have a good feel. Anything I would predict now would be foolish. And I try most of the time to avoid being foolish. So it's going to take more than a year to get there. So -- but we have to start and that's the importance of 2018.

 

      As far as, you know, the trust and credibility is, we do in fact know we spend. I mean, the problem is we can't technically pass a clean audit and I take that as a point. And so that's something we need to correct. But we do over the years, know exactly where we spend the money by every appropriation to the decimal point. Okay.

 

      What we have to do is build up the credibility in terms of actually passing a clean audit. And we understand that.

 

      STAFF:  We have time for a couple more.

 

      Q:  Tony Bertuka from Inside Defense.

 

      This budget has been criticized on Capitol Hill for being only three percent more than what the Obama administration had planned. What is it about this budget that is a departure from what the Obama administration had planned? Or how can you say that this three percent is -- is taking us in a different direction? What would you say to those critics about?

 

      MR. ROTH:  Well, first of all, three percent is not inconsequential. But having said that, what we had was a notional budget in the -- at the tail end of -- of the previous administration that hadn't gone anywhere. And by the way, the important fact is, the one I keep foot stomping is the Budget and Control Act of 2011. Those caps are still in place. Okay. And they kick in again. We had a couple years here where we had an amended budget. Or that the BCA have been amended, which gave us a little bit of headroom but not a lot.

 

      And so the important thing is something has to be done about the defense budget cap. So there is your commitment. Okay. The $52 billion is real. It's a real request. Anything before this was sort of just a notional paper exercise up to this point. So it is a significant increase as you saw when I showed you on the graph and what was actually appropriated in fiscal year '17 was somewhere around $523 billion.

 

      We're asking for $574 billion. That is a significant increased commitment on the part of this administration to defense spending. And so that's really the answer to your question.

 

      Q:  (inaudible) -- sorry, General.

 

      GEN. IERARDI:  I was just going to say reflected in terms of size -- size increases in the force. Additional capabilities in the -- in the -- in the services and -- and the joint force that result as, you know, in the cumulative effect of both the 17 budget and supplemental appropriation in this budget request.

 

      So our footing is firmer where the comprehensive readiness of the joint force is concerned from which we would then depart from to become bigger and more lethal.

 

      Q:  And then quickly for ‘19. Should we expect that request then to go to Congress and say this is how much above the caps the department would like to see Congress raise the caps for defense spending?

 

      MR. ROTH:  Well, I would hope. I am not here to tell Congress, I would hope they would increase the caps when they -- when the do tackle the caps, if they would do it over multi years. I mean, that's when they happened when they amended the budget here last couple times. They did it either in two-year windows or four-year windows, or five-year windows.

 

      So, we -- we would hope that those caps frankly would be increased before we get to F.Y. '19. But then, the answer to your question is, if not, then yes, we're -- we would have the same dialogue with the F.Y. '19.

 

      STAFF:  Last question, Tony Capaccio.

 

      Q:  You had an eloquent disclaimer about the FYDP danger. I need to ask you, the services are all telling us that they can't do FYDP figures for major acquisition programs because the comptrollers offices sent a word and you don't do it.

 

      The Navy's budget books got a lot of white space from where they would've had five years. It's like an 18-minute gap here in the FYDP.

 

      (Laughter.)

 

      Are you going to allow them to give up the numbers for the Columbia-class B-21, a lot of the big programs? Because you've cast -- your office has cast a pall over the services on those specific kinds of figures.

 

      GEN. IERARDI:  The answer is, word makes sense. I think we should provide the out-year numbers. I simply caution people that those numbers are constrained by what we would think is a placeholder top-line that we have in the out-years right now.

 

      So, actually, I'm not particularly -- I haven't seen the Navy exhibits yet. But I think the guidance we had -- actually had provided to them was -- for example, in the procurement and R&D exhibits, the acquisition exhibits that were appropriate. They actually should show the out-year numbers.

 

      And particularly, we're asking for a couple of multi-year contracts for example, the V-22 being one of them. They -- they need to show the seven-year profile for the -- for the V-22.

 

      So, no, it -- it -- just -- I think there's been a bit of a misreading of the guidance from this office. What -- what I am not particularly crazy about is -- is providing an entire FYDP at this point in time because I think it has no analytical stamping. But we're appropriate, we ought to provide the information, yeah.

 

      Q:  Well, the Tomahawk and out years, that has big implications to Arizona.

 

      GEN. IERARDI:  I get it. But again, I would caution even for the Tomahawk, any out-year number is going to be constrained by the fact that we don't really have a real top-line.

 

      Q:  But the elephant in the room here that you haven't addressed is that the chief's eloquent -- they made their case before the headlines came out yesterday of major cuts to Medicaid, the foods -- the equivalent Food Stamp program, the SNAP program. The $54 billion you're seeking is to be offset by domestic spending.

 

      Among many of the 98 percent of the people in the -- the United States aren't connected to the military, depend on those programs. The -- to what extent does -- do those cuts now complicate your efforts to gain support among the 98 percent of the public who aren't connected to the military?

 

      MR. ROTH:  Yeah, it's -- it's not my place to comment on -- on the politics of the matter, okay. And so, others will have to work through the -- and so, the answer to your question is, that gets into the political dynamic of dealing with the Budget Control Act and how you balance.

 

      There -- there's a lot of imperatives at play here, okay. This administration, as previous administrations, were -- are -- are committed to balancing the budget as well and -- and those kinds of goals and objectives. All I can tell you is, and all I can do, and the only thing appropriate for me to do is to -- to outline what the defense -- Defense Department needs and requirements are. And then, let it go into the public forum and let people debate that as they will and should.

 

      Q:  But General, I mean, you're going to go out to sell a budget to – to articulate to a lot of people who aren't connected to the military. And they say, why should we buy the F-35 if you're going to be cutting off our food stamp equivalence?

 

      GEN. IERARDI:  It's -- it's our responsibility to advocate for the force, for the need for a -- for a joint force that can do what the nation asks us to do to defend the nation. And so, the world is a very -- is a very dangerous place these days.

 

      And so, there's a -- I think there's a -- a -- a compelling -- there is, I don't think, I know there is a compelling justification for this budget to enhance the readiness of the force to the -- to the levels at which we -- we -- we request.

 

      STAFF:  That's all the time we have, folks. Thanks a lot. Appreciate it.

 

      Q:  Thank you.

 

      Q:  Thank you.

 

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