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Chairman Durbin, Ranking Member Cochran, members of the committee: thank you for the opportunity to be here today.
The President's Fiscal Year 2015 budget submission for the
With this budget, we are repositioning the military for the new strategic challenges and opportunities that will define our future: new technologies, new centers of power, and a world that is growing more volatile, more unpredictable, and in some instances more threatening to
I have no illusions about the fiscal realities facing DoD. It was one year ago that
We had to implement this
Today, DoD is in a better place as a result of the Bipartisan Budget Act passed last December. It provided DoD with some relief in this Fiscal Year and for Fiscal Year 2015. And it gave us some budget certainty for the next fiscal year.
The Bipartisan Budget Act was possible because members of
But we're not yet where we need to be. So our partnership must continue.
Under the spending limits of the Bipartisan Budget Act, DoD's base budget is roughly
Defense budgets have long included both a one-year budget request, and a five-year plan that indicates expectations for the future. Over the years from FY 2016 to FY 2019, the President's plan projects
Some have asked why the President continues to request budgets above sequestration levels. The reason is clear.
That said, if sequestration returns in Fiscal Year 2016 and beyond, or if we receive funding levels below the President's request, we are prepared to specify the cuts we would have to make, and the risks we would then have to assume. These cuts are described in this testimony and have been sent over to
However, the President, the Chairman, and I do not expect
The President's budget matches resources to the updated defense strategy in this year's Quadrennial Defense Review (QDR), which builds on the President's
The QDR outlines our top strategic priorities, which weighed heavily on the choices presented in this budget:
* Defending the homeland against all threats; * Building security globally by projecting U.S. influence and deterring aggression; and, * Remaining prepared to win decisively against any adversary should deterrence fail.
To fulfill this strategy DoD will continue to shift its operational focus and forces to the
As a whole, this budget allows DoD to implement the President's defense strategy, albeit with some increased risks, which I specify later in my testimony.
The reality of reduced resources and a changing strategic environment requires us to prioritize and make difficult choices. Given the uncertainty about funding levels, our current five-year plan reduces selected end strengths and forces to levels consistent with sequestration-level cuts. Those additional reductions could be reversed if funding rises above sequestration levels. I explain this in greater detail later in my testimony. The way we formulated our budget gives us the flexibility to make difficult decisions based on the likely range of potential fiscal outcomes.
Budget Top-Lines: Balancing Readiness, Capability, and Capacity
Consistent with the strict spending limits of the Bipartisan Budget Act,
In formulating this budget, our priority was balancing readiness, capability, and capacity - making sure that whatever size force we have, we can afford to keep our people properly trained, equipped, compensated, and prepared to accomplish their mission. That's the only reasonable course under constrained budgets. We must be able to keep our military ready and capable.
Accordingly, about two-thirds of DoD's Fiscal Year 2015 budget -
The remaining third of our budget -
Broken down in a more specific way, our budget includes the following categories:
* Military pay and benefits(including health care and retirement benefits) -
So far I have focused on DoD's base budget. We will soon propose an Overseas Contingency Operations (OCO) budget for FY 2015. The OCO budget will cover costs related to
The OCO budget request will also cover other costs related to
The FY 2015 OCO request will also include the President's
* increasing exercises, training, and rotational presence across
The FY 2015 budget request sent to
Being More Efficient
Because we are asking taxpayers for more than half a trillion dollars for defense spending, DoD must make every dollar count - particularly during a period when we are under stringent budget constraints across the Federal government. So we're continuing to find new ways to use our resources more wisely and strategically, be more efficient, reduce overhead, and root out waste, fraud, and abuse.
This year, a new package of reforms in these areas - the second-largest submitted by this Administration - produced
We are also continuing to monitor previous years' initiatives to use our resources more efficiently, as well as making progress toward auditability on our financial statements. DoD expects most of its budget statements to be audit ready by this September, and remains committed to becoming fully audit-ready by 2017. This is an ambitious goal for an organization of our size and complexity, and there is still much more work to do. But we are making significant progress. Several DoD organizations have achieved important, positive audit results. Last year, for example, the
In addition to these efforts, we must take a serious look at responsible procurement and acquisition reforms that will further increase the buying power of defense dollars. This is particularly important if we're going to protect investments in modernized capabilities. DoD officials are already working closely with Congressional Committee staff to go over defense acquisition and procurement laws line-by-line, and we hope to start implementing legislative reforms this year.
No reasonable discussion of allocating our resources more efficiently can avoid the need to reduce excess facilities. With this submission, we are asking
But we must also divest ourselves of excess domestic facilities, and BRAC is the most responsible path. I am fully aware that
We can't keep financing overhead that we don't need, because we're taking that money away from areas that we do need. The more we delay now, the more we'll have to spend later on unneeded installations instead of on training, equipping, and compensating our people - robbing our troops of the resources they need to be able to fight and win decisively when we send them into harm's way.
This issue is only going to get more difficult. Future Congresses and administrations will be dealing with it, with fewer and far less attractive and far more painful options.
Sustaining a Ready and Capable Force - Now and in the Future
This is the lesson of every defense drawdown over the past 70 years. Whether after
We can't afford to repeat those mistakes, which is why we decided to trade some capacity for readiness and modernized capabilities, in order to ensure that our military will be well-trained and supplied. All of our force structure decisions were made strategically - protecting investments in the forces that would be uniquely suited to the most likely missions of the future, and minimizing risk in meeting the President's defense strategy.
Our decisions for investing in a modernized and capable future force were made in a similar way. With the proliferation of more advanced military technologies and other nations pursuing comprehensive military modernization, we are entering an era where American dominance on the seas, in the skies, and in space - not to mention cyberspace - can no longer be taken for granted. Because it is essential for deterring aggression, and because the risk of failure against those potential adversaries would be far greater than against any others, the President's budget puts a premium on rapidly deployable, self-sustaining platforms that can defeat more technologically advanced adversaries.
Sustaining these critical investments under restrained budgets required setting strategic priorities and making difficult tradeoffs. That's why each service's budget allocations were made based on strategy and with the goal of maintaining balance in the readiness, capability, and capacity of the force.
Analysis conducted by the QDR indicated that under the President's budget, the U.S. military's resulting post-war ground force will be sufficient to meet the updated defense strategy: capable of decisively defeating aggression in one major combat theater - as it must be - while also defending the homeland and supporting air and naval forces engaged in another theater. I am aware that pending legislation would establish yet another commission on the size and shape of the
In terms of capabilities, we chose to terminate and reevaluate alternative options for the
The past decade of war has clearly shown that Apaches are in high demand. We need to put the Apaches where they will be ready to deploy fast and frequently when they're needed. This decision will also help the Guard's helicopter force more closely adhere to state and federal requirements for homeland defense, disaster relief, and support to civil authorities while still serving as an important operational and strategic complement to our active-duty military.The Guard's helicopter fleet would only decline by 8% compared to the active
In making these difficult decisions on the Guard and Reserves, we affirmed the value of a highly capable reserve component, while keeping the focus on how our military can best meet future demands given fiscal constraints. I know that pending legislation would prohibit some or all of these changes. Let me emphasize that we made these proposals based on strategic priorities, clear facts, unbiased analysis, and fiscal realities... and with the bottom line focus on how we can best defend
* Virginia-class Attack Submarines: We are requesting
Again, trade-offs were required to prioritize those investments under current budget constraints. In order to help keep its ship inventory ready and modern at reduced budget levels, half of the
Despite preserving the fleet's modernization programs and providing for increases in ship inventory over the next five years, I am concerned that the
The LCS was designed to perform certain missions - such as mine sweeping and anti-submarine warfare - in a relatively permissive environment. But we need to closely examine whether the LCS has the independent protection and firepower to operate and survive against a more advanced military adversary and emerging new technologies, especially in the
Therefore, no new contract negotiations beyond 32 ships will go forward. With this decision, the LCS line will continue beyond our five-year budget plan with no interruptions. Additionally, at my direction, the
While these decisions still keep the
* F-35 Joint Strike Fighter: We are requesting
Because we believe research and development is essential to keeping our military's technological edge, the President's budget also invests
Protecting these investments required trade-offs. In the next five years, in order to free up funding to train and maintain no less than 48squadrons, the
The A-10 "Warthog" is a venerable platform, and this was a tough decision. But it is a 40-year-old single-purpose airplane originally designed to kill enemy tanks on a Cold War battlefield. It cannot survive or operate effectively where there are more advanced aircraft or air defenses. And as we saw in
Defense-Wide: (18% of the President's Fiscal Year 2015 Budget)
The remaining share of the budget - about
For Fiscal Year 2015, this includes about
Since special operations forces play a key role in counterterrorism, crisis response, and building partner capacity, the President's budget for Fiscal Year 2015 allocates
The President's Fiscal Year 2015 budget increases cyber funding to
Compensation Reform & Structural Adjustments to Some In-Kind Benefits
For all the money that goes into maintaining a modernized and capable force, people are the core of our military. In this era of constrained budgets, ensuring that our people are properly trained, equipped, prepared, and compensated requires looking at difficult trade-offs and making some difficult choices. Compensation adjustments were the last thing we looked at, because you take care of your people first.
We could reduce overall payroll spending by further reducing the total number of people in uniform. But since too small a force adds too much risk to our national security, we must also address the growth in pay and benefits for service members so that we can afford to provide them with the training and tools they need to successfully accomplish their missions and return home safely.
But today DoD faces a vastly different fiscal situation - and all the services have consistently met recruiting and retention goals. This year we're concluding combat operations in America's longest war, which has lasted 13 years. Now is the time to consider fair and responsible adjustments to our overall military compensation package.
America has an obligation to make sure service members and their families are fairly and appropriately compensated and cared for during and after their time in uniform. We also have a responsibility to give our troops the finest training and equipment possible - so that whenever America calls upon them, they are prepared with every advantage we can give them so that they will return home safely to their families. The President's budget fulfills both of these promises to our service members and their families by making several specific proposals.
Basic Pay Raises
For Fiscal Year 2015 we are requesting 1% raise in basic pay for military personnel - with the exception of general and flag officers, whose pay will be frozen for a year. Basic pay raises in future years will be similarly restrained, though raises will continue.
DoD rightfully provides many benefits to our people; however, finding the money to meet these commitments while protecting training and readiness under tighter budgets will require some structural adjustments to three of them - housing, commissaries, and
In the early 1990s, DoD covered only about 80% of service members' total off-base housing costs. Since then, we increased that rate to 100%.
To adequately fund readiness and modernization under constrained budgets, we need to slow the growth rate of tax-free basic housing allowances (BAH) until they cover about 95% of the average service member's housing expenses. We would also remove renters' insurance from the benefit calculation.
This change will happen over several years, to ensure that our people have time to adjust to it. And, in order to ensure that military personnel don't have to pay more out-of-pocket after they've signed a lease, a service member's allowance won't be adjusted until they've moved to a new location. This means that no one currently living in a particular area will see their housing allowances actually decrease; only service members moving into the area will receive the lower rate, which is what already happens under the current rules when housing market prices go down.
To account for geographic differences in housing costs, we will also design this adjustment to ensure that all service members in the same pay grade have identical out-of-pocket costs. That way, once the overall change has been fully phased-in for all personnel, service members in the same pay grade but living in different areas would end up paying the same dollar amount toward their housing costs - and they'll know exactly how much that will be so that they can make informed decisions and trade-offs in their own budgets.
All of these savings will be invested back into the force, to help keep our people trained and equipped so they can succeed in battle and return home safely to their families.
There's no doubt that commissaries provide a valued service to our people, especially younger military families and retirees. For this reason, we're not directing any commissaries to close.
Like our base exchanges, commissaries currently do not pay rent or taxes. That won't change under any of our proposals. But unlike base exchanges, commissaries also receive
Stateside commissaries have many private-sector competitors, and it's not unreasonable for them to operate more like a business. Since commissaries still operate rent-free and tax-free, they will still be able to provide a good deal to service members, military families, and retirees as long as they continue to shop there. Going forward, only commissaries overseas or in remote U.S. locations would continue receiving direct subsidies, which, for example, not only helps pay to ship U.S. goods to bases overseas, but also helps those who either may not have the option of a local grocery store or are stationed where food prices may be higher.
In recent years,
Merging three of our
Some important features of the military health care system will not change. The scope of benefits will not change, and we will continue to distinguish between in-network and out-of-network care. Active-duty personnel will still receive health care that is entirely free - that's the promise we make when they sign up, and it's a promise we intend to keep. Medically retired personnel and survivors of those who died on active duty will continue to be treated favorably, with no participation fees and lower co-pays and deductibles. And DoD will continue to support our programs for wounded warriors.
Under this proposal, the share of costs borne by retirees will rise from about 9% today to about 11% - still a smaller cost share than the roughly 25% that retirees were paying out-of-pocket when
Given these proposed efforts to modernize and simplify
For retirees who are old enough to use
Our proposals do not include any recommended changes to military retirement benefits for those now serving in the Armed Forces. Because military retirement is a complex and long-term benefit, it deserves special study. Therefore, we are working with and waiting for the results of the
DoD's military and civilian leaders conducted substantial analysis to arrive at our proposed package of compensation adjustments. We concluded that, even after we make these changes and slow the growth in military compensation, we will still be able to recruit and retain a high-quality force and offer generous, competitive, and sustainable benefits.
These proposed compensation adjustments will be phased in over time, but they must begin now because budget limits are already in place. If we wait, we would have to make even deeper cuts to readiness or force structure in order to comply with the budget caps that
To be clear, our proposals were carefully crafted to reform military compensation in a fair, responsible, and sustainable way, making the most modest adjustments we could afford. We took a holistic approach to this issue, because continuous piecemeal changes will only prolong the uncertainty and create doubts among our personnel about whether their benefits will be there in the future.
We recognize that no one serving our nation in uniform is overpaid for what they do for our country. But if we continue on the current course without making these modest adjustments now, the choices will only grow more difficult and painful down the road. We will inevitably have to either cut into compensation even more deeply and abruptly, or we will have to deprive our men and women of the training and equipment they need to succeed in battle. Either way, we would be breaking faith with our people. And the President and I will not allow that to happen.
We're also recommending freezing generals' and admirals' pay for one year. And as I've already announced, I'm cutting the budget of the
These are tough choices that are made with the full support of the
Risks in The President's Budget
I've outlined the funding levels the Chairman, the Chiefs, and I believe we need to protect this country, and the decisions we had to make to stay within the limits agreed to in the Bipartisan Budget Act. They add some risks to our defense strategy, but manageable ones.
Over the near-term, because of budget limitations even under the Bipartisan Budget Act and after 13 years of war, the military will continue to experience gaps in training and maintenance - putting stress on the force and limiting our global readiness even as we sustain a heightened alert posture in regions like the
We continue to face the constant risk of uncertainty in a dynamic and volatile security environment. Budget reductions inevitably reduce the military's margin of error in dealing with these risks, as other powers continue to modernize their weapons portfolios, to include anti-air and anti-ship systems. And a smaller force strains our ability to simultaneously respond to more than one major contingency at a time. The President's budget allows our military to continue to have the capability to defeat any aggressor.
Sequestration's Effect on Programs and Risk
If sequestration-level cuts are re-imposed in Fiscal Year 2016 and beyond, if our reforms are not accepted, or if uncertainty on budget levels continues, our analysis has shown that we would have to make unavoidable decisions and choices that would significantly increase those risks. As I've made clear, the scale and timeline of continued sequestration-level cuts would require greater reductions in the military's size, reach, and margin of technological superiority. That means fewer planes, fewer ships, fewer troops, and a force that would be under-trained, poorly-maintained, and reliant on older weapons and equipment:
If we don't get some clarity in our future funding, we will have to start implementing those changes. Although future developments in the security environment might require us to modify some of these specific plans, the strategic impacts are clear. Under the funding levels that the President and I are asking for, we can manage the risks. Under a return to sequestration spending levels, risks would grow significantly, particularly if our military is required to respond to multiple major contingencies at the same time.
Our recommendations beyond Fiscal Year 2015 provide a realistic alternative to sequestration-level cuts, sustaining adequate readiness and modernization most relevant to strategic priorities over the long-term. But this can only be achieved by the strategic balance of reforms and reductions that we have presented in this budget. This will require the
Our Shared National Interest
Formulating this budget request required new ways of thinking about both short-term and long-term challenges facing our country.
I look forward to working with the
I appreciate this opportunity to discuss the President's Fiscal Year 2015 budget request for the
Mr. Chairman, thank you.
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