Authorization and Appropriations for FY2004: Defense

Congressional research reportDec 9, 2003

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Order Code RL31805

CRS Report for Congress

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Authorization and Appropriations

for FY2004: Defense

Updated December 9, 2003

name redacted

Specialist in National Defense

Foreign Affairs, Defense, and Trade Division

name redacted

Specialist in National Defense

Foreign Affairs, Defense, and Trade Division

Congressional Research Service ˜ The Library of Congress

Appropriations are one part of a complex federal budget process that includes budget

resolutions, appropriations (regular, supplemental, and continuing) bills, rescissions,

and budget reconciliation bills. The process begins with the President’s budget

request and is bounded by the rules of the House and Senate, the Congressional

Budget and Impoundment Control Act of 1974 (as amended), the Budget

Enforcement Act of 1990, and current program authorizations.

This report is a guide to one of the 13 regular appropriations bills that Congress

passes each year. It is designed to supplement the information provided by the House

and Senate Appropriations Subcommittees on Energy and Water. It summarizes the

current legislative status of the bill, its scope, major issues, funding levels, and

related legislative activity. The report lists the key CRS staff relevant to the issues

covered and related CRS products.

NOTE: A Web version of this document with active links is

available to congressional staff at:

[http://www.crs.gov/products/appropriations/apppage.shtml].

Authorization and Appropriations

for FY2004: Defense

Summary

With passage of the FY2004 DOD Authorization Act by the House on

November 7 and by the Senate on November 12, 2003, Congress completed action

on this year’s defense authorization (H.R. 1588/H.Rept. 108-384). The President

signed the bill on November 24, 2003 (P.L. 108-384). On September 30, just in time

for the new fiscal year, the President signed H.R. 2658, the FY2004 DOD

Appropriations Act (P.L. 108-87), completing action on FY2004 defense

appropriations.

The recently enacted FY2004 DOD authorization bill provides a total of $401.3

billion for defense programs, including funds in the DOD and military construction

appropriations as well as several other defense-related programs funded in other

appropriations measures. The total authorized for these defense and defense-related

programs that make up the national defense function is $1.5 billion above the

Administration’s request and $9.3 billion above the FY2003 enacted level.

The conference version of the FY2004 DOD authorization is the culmination

of months of negotiation about several contentious issues: Buy American provisions,

the Air Force’s controversial tanker lease proposal, a new concurrent receipt benefit

for military retirees, a new National Security Personnel System, a new health benefit

for reservists, and special exemptions for DOD to certain environmental regulations.

Substantial differences about these issues between the houses and with the

Administration had stymied completion of the authorization bill.

In conference, Buy American restrictions mandating that DOD rely exclusively

on U.S. suppliers for certain items were dropped in favor of provisions that require

DOD to assess the U.S. industrial base and possibly provide incentives to certain

U.S. producers. In the case of the Boeing 767 tanker aircraft, DOD accepted a

Senate-proposed compromise allowing them to lease 20 and buy 80 rather than

lease100 aircraft.

After the Administration dropped its veto threat, Congress passed a new

concurrent receipt benefit that is expected to provide about 200,000 military retirees

with both their military retirement and disability benefits, reversing a prohibition in

effect for over 100 years. DOD also received new authority to design and implement

its own civilian personnel system and new exemptions to certain environmental rules.

The bill also provides access to DOD’s TRICARE health care to unemployed, nondeployed reservists and maintains current higher levels of imminent danger pay and

family separation allowance for eligible military personnel through December 2004.

The FY2004 DOD Appropriations Act provides appropriations totaling $368.7

billion for the defense programs it covers. That total is $3.5 billion below the

Administration’s request and $4.0 billion above last year’s enacted level. The

programmatic impact of the cut is cushioned, however, because the bill receives

credit for $3.5 billion rescinded from funds provided in the $62.6 billion FY2003

supplemental appropriations bill that Congress approved in April 2003.

Key Policy Staff

Area of Expertise

Acquisition

Aviation Forces

Arms Control

Arms Sales

Base Closure

Defense Budget

Defense Industry

Defense R&D

Ground Forces

Health Care; Military

Intelligence

Military Construction

Military Personnel

Military Personnel;

Reserves

Missile Defense

Naval Forces

Nuclear Weapons

Peace Operations

Radio Frequency,

Military

Readiness

Space, Military

War Powers

Name

Valerie Grasso

(name redacted)

Amy Woolf

Richard Grimmett

David Lockwood

(name redacted)

Jeff Chamberlin

Gary Pagliano

Daniel Else

Michael Davey

John Moteff

Edward Bruner

Steven Bowman

Richard Best

Al Cumming

Daniel Else

David Burrelli

Robert Goldich

Telephone

E-Mail

7-....

[redacted]@crs.loc.gov

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[redacted]@crs.loc.gov

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[redacted]@crs.loc.gov

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[redacted]@crs.loc.gov

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[redacted]@crs.loc.gov

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dacted]@crs.loc.[re

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[redac

dacted]@crs.loc.gov

(name redacted)

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[redacted]@crs.loc.gov

Steven Hildreth

(name redacted)

Ronald O’Rourke

Jonathan Medalia

Nina Serafino

7-....

[redac

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dacted]@crs.loc.gov

[redacted]@crs.loc.gov

Lennard Kruger

7-....

[redacted]@crs.loc.gov

(name redacted)

Marcia Smith

David Ackerman

(name redacted)

Richard Grimmett

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[redac

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[redacted]@crs.loc.gov

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Contents

Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Major Issues in the FY2004 DOD Authorization Act . . . . . . . . . . . . . . . . . . . . . . 2

Buy American Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Concurrent Receipt Adopted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Tanker Lease Compromise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

New Personnel System for DOD Civilians . . . . . . . . . . . . . . . . . . . . . . . . . 10

Environmental Exemptions for DOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

TRICARE For Non-Deployed Reservists . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Lifting the Ban on Research on Low-Yield Nuclear Weapons . . . . . . . . . . 18

Maintaining Current Levels of Imminent Danger Pay and

Family Separation Allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Major Action On FY2004 DOD Appropriations Bills . . . . . . . . . . . . . . . . . . . . . 19

Major Funding In FY2004 DOD Appropriations Act . . . . . . . . . . . . . . . . . 20

Military Construction Appropriations Bills . . . . . . . . . . . . . . . . . . . . . . . . . 22

Overview of Administration Request and Budget Trends . . . . . . . . . . . . . . . . . . 22

Annual Growth for DOD Slows In Later Years in FY2004

Budget Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Trends in DOD Spending Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

DOD Receives $103.1 Billion in Supplemental Appropriations

Since September 11 Attacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Major Themes in the Administration’s FY2004 Request . . . . . . . . . . . . . . . . . . 32

Investment and Other Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Proposed Acquisition and Organizational Changes . . . . . . . . . . . . . . . . . . . 33

Affordability and Mix of DOD’s FY2004 Investment Programs . . . . . . . . 34

Personnel Pay and Benefits Issues and Readiness Issues . . . . . . . . . . . . . . . 61

Basing Structure, Role of the Reserves, and Force Mix Issues . . . . . . . . . . 66

Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

Congressional Budget Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

Defense Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

Defense Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

List of Tables

Table 1A. Status of FY2004 Defense Authorization: H.R. 1588 and S. 1050 . . . 3

Table 1B. Status of FY2004 Defense Appropriations: H.R. 2658 and S. 1382 . . 20

Table 2. FY2004 DOD Appropriations: Congressional Action . . . . . . . . . . . . . . 20

Table 3. National Defense Budget Function and DOD Budget,

FY1999-FY2008, Administration Projections . . . . . . . . . . . . . . . . . . . . . . . 24

Table 4. Status of FY2004 Budget Resolution (H.Con.Res. 95,

S.Con.Res. 23) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Table 5. FY2004 Budget Resolution: National Defense Request and

Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Table 6. Administration Request: National Defense Budget Function

by Title, FY2001-FY2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Table 7. Flexibility in DOD’s Supplemental Funding Since

September 11 Attacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Table 8A. House and Senate Action on Major Army Acquisition Programs:

Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Table 8B. House and Senate Action on Major Army Acquisition Programs:

Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Table 9A. House and Senate Action on Major Navy Acquisition Programs:

Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Table 9B. House and Senate Action on Major Navy Acquisition Programs:

Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Table 10A. House and Senate Action on Major Aircraft Programs:

Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Table 10B. House and Senate Action on Major Aircraft Programs:

Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Table 11: House and Senate Action on Missile Defense Funding . . . . . . . . . . . . 53

Table 12. Estimates of the Cost of Concurrent Receipt and TRICARE

for Reservists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

Authorization and Appropriations for

FY2004: Defense

Most Recent Developments

On November 7, 2003, the House passed the conference report on H.R. 1588,

the FY2004 DOD authorization, by a vote of 362 to 40, after the conference report

was filed early Thursday morning. The Senate passed the bill by 95 to 3 on

November 12. On November 24, the President signed the bill (P.L. 108-136).

Compromises were reached on the main issues that had held up the conference for

several months: Buy American provisions, the Air Force lease of Boeing KC767

aircraft, a new National Security Personnel System, concurrent receipt, and

TRICARE for non-deployed reservists.

The conference version (H.Rept. 108-283) of H.R. 2658, the FY2004

Department of Defense (DOD) appropriations bill, provided $368.7 billion in

funding. It passed the House on September 23, 2003, and the Senate on the

following day, in both cases quickly and with little debate. On September 30, 2003,

the President signed the bill into law (P.L. 108-87).

The FY2004 DOD Authorization Act included several contentious issues, which

were settled only after long negotiations. On domestic preference restrictions in the

Buy American Act and the Berry Amendment, the DOD authorization added

provisions to assess the U.S. defense industrial base and the extent of U.S. reliance

on foreign suppliers but dropped proposals to require DOD to purchase certain items

only from American suppliers. In the case of the tanker lease, DOD agreed to a

proposal by Senator Warner to lease 20 and buy 80 Boeing KC767 tankers rather

than lease 100 aircraft, a proposal less costly than the original lease but more costly

than a straight multiyear buy. The fate of the deal remains uncertain in light of

Boeing’s recent firing of high-level officials for improprieties and an ongoing

investigation by the DOD Inspector General.

Compromises were also brokered on other contentious issues on which the

Administration had threatened a veto. The Administration agreed to a new benefit

that provides concurrent receipt of military retirement and disability payments to all

military retirees with disability ratings of 50% or higher as well as an expansion of

those eligible under the “Purple Hearts Plus” program enacted last year that provides

benefits to military retirees with combat or combat-related disabilities. The

Administration also agreed to a 15-month pilot program to offer access to TRICARE

to non-deployed reservists who are unemployed or do not qualify for health benefits

offered by their employer.

CRS-2

H.R. 1588 also authorizes the Secretary of Defense to develop a new National

Security Personnel System for DOD’s civilian employees, gives DOD special

exemptions to certain environmental statutes, and lifts the current ban on

development of low-yield nuclear weapons.

Both the House and Senate versions of H.R. 1588, the authorization bill, provide

$400.5 billion for national defense programs, about $1.5 billion above the request of

$399.7 billion that the Administration submitted in February. The authorization

covers not only defense programs funded in the defense appropriations bill but also

programs funded in the military construction, energy and water, and some other

appropriations measures.

The FY2004 DOD appropriations bill provides a total of $368.7 billion for the

defense programs it covers, $500 million less than the $369.2 billion that was

included in both the House and Senate versions. The total in the conference

agreement is slightly below the amounts provided for defense by the budget

committees under Section 302(b) allocations of the Congressional Budget Act and

$3.1 billion below the request. This decrease freed up the same amount for other

appropriations bills while staying within the cap on discretionary spending

established by the FY2004 budget resolution (H.Con.Res. 95). Final funding for

DOD could also be affected by a $1.8 billion rescission included in the conference

version of the FY2004 Omnibus Appropriations bill (H.R. 2673) that was passed by

the House on December 8 but is unlikely to be considered by the Senate until January

2004.

The final version of DOD’s FY2004 appropriations cushioned the programmatic

impact of the $3.5 billion cut to the request by making an offsetting rescission of $3.6

billion from the $62.6 billion in FY2003 supplemental appropriations that Congress

approved in April. Under budget scoring rules, rescissions are counted as a credit in

the year when they are enacted, even though prior year monies — in this case,

FY2003 — are cut. This allowed the appropriators to meet their FY2004 targets

without reducing funding for FY2004 programs by $3.5 billion.

Major Issues in the FY2004

DOD Authorization Act

After a conference that spanned over five months, the conferees reached

agreement and filed a report on November 7, 2003, on H.R. 1588, the FY2004 DOD

Authorization Act (H.Rept. 108-354). The bill was passed by the House by a vote

of 362 to 40 on that same day and by the Senate by a vote of 95 to 3 on November

12, the following week. The President signed the bill on November 24, 2003 (P.L.

108-136).

On May 22, the House and the Senate passed their respective versions of the

FY2004 DOD Authorization bills after several days of floor debate. The House

version, H.R. 1588, passed by 361 to 68. Although the Senate passed its version, S.

1050, by 98 to 1 on the same date, the Senate adopted a unanimous consent

agreement on the next day providing for consideration of several specific

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amendments. On June 4 after the Memorial Day recess, the Senate adopted

amendments on concurrent receipt and expedited immigration approval for selected

reservists and their families during wartime and rejected an amendment to cancel the

2005 round of base closures before passing the bill again by voice vote and

appointing its conferees (see Table 1A).1 Debate in the House took place on May 20

and May 21, and in the Senate on May 19, 20, 21, 22, and June 4, 2003.

On May 13, the Senate Armed Services Committee (SASC) reported S. 1050,

after completing markup on May 9 (S.Rept. 108-46). The bill as reported did not

include the DOD proposal to redesign its civilian personnel system. The House

Armed Services Committee (HASC) reported its bill on May 16 after completing

markup on May 14 (H.Rept. 108-106). On May 21, the House adopted a rule (H.Res.

245) that limited general debate to two hours and amendments to those specified in

the rule. The Senate rule required that all amendments be considered relevant by the

Parliamentarian. The House bill included much of DOD’s legislative proposal for a

new civilian personnel system as initially marked up by the House Government

Reform Committee (H.R. 1836).2

Table 1A. Status of FY2004 Defense Authorization:

H.R. 1588 and S. 1050

Subcommittee

Markup

Conference

House House Senate Senate Conf. Report Approval

Public Law

Report Passage Report Passage Report

House Senate

5/16/03

5/13/03

5/22/03

5/14/03 5/9/03 H.Rept.

S.Rept.

(361-68)

108-106

108-46

6/4/03

(voice

vote)a

11/6/03

11/7/03 11/12/03 11/24/03

H.Rept.

(362-0) (95-3) P.L. 108-136

108-354

a. The Senate initially passed S. 1050 by 98 to 1 on May 22, 2003, but then adopted a unanimous

consent agreement on May 23, 2003, to continue debate on selected amendments after the

recess; see Congressional Record, p. S7115. Those amendments were considered on June 4, and

the bill was then passed by voice vote.

Congressional Record, May 23, 2003, p. S7115 and Congressional Record, June 4, p.

S7280-S7295.

For a comparison of all the Administration’s proposed legislative provisions compared to

current law, see CRS Report RL31916, Defense Department Transformation Proposal:

Original DOD Proposal Compared to Existing Law, by (name redacted), (name redacted),

(name redacted), and (name redacted). Other bills that would reform the current civil

service system are S. 129 (introduced by Senator Voinovich) and H.R. 1601 (introduced by

Representative JoAnn Davis). For a review of these measures, see CRS Report RL31516,

Civil Service Reform Proposals: A Side-by-Side Comparison of S. 129 and H.R. 1601 (108th

Congress) with Current Law, by (name redacted)

and (name redacted).

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The conference report reached compromises on seven major issues that held up

the authorization bill for several months:

Buy American restrictions proposed by the House and opposed by

the Senate and the Administration;

! proposals to provide costly concurrent receipt of military retirement

and Veterans Administration (VA) disability benefits;

! proposals to allow the Air Force to initiate acquisition of a $29

billion program to lease and buy 100 Boeing KC767 tanker

airplanes;

! fashioning of the new National Security Personnel System requested

by DOD;

! expanding access to DOD’s TRICARE health system to nondeployed reservists;

! exempting DOD from certain environmental statutes; and

! changing current restrictions on research on low-yield nuclear

weapons.

The compromises reached are described below. Details on other conference action,

including RDT&E and weapon system funding, will be included in a later update.

Buy American Restrictions3

In its request, the Administration proposed a series of changes to long-standing

domestic preference restrictions codified in the Buy American Act and the Berry

Amendment in order to give DOD additional flexibility to buy from foreign sources.

Since 1933, the federal government has been required in the Buy American Act to

purchase from American producers unless the head of the agency finds that it is in

the “public interest” to waive the restriction and purchase items from foreign

sources.4

For specific types of items — food, clothing, tents, textiles, specialty metals and

measuring tools — the Berry Amendment requires that DOD buy from U.S. sources

unless the purchases are in support of combat operations outside the United States.5

In the case of other items such as machine tools and ball bearings, DOD can buy

from foreign sources if the foreign country is part of the U.S. national technology and

industrial base (defined as the United States and Canada), if it is in the “national

security interests of the United States,” or if DOD would face unreasonable costs or

This section was prepared with the help of CRS analyst Daniel Else.

Agencies may also waive the domestic sources preference because of unreasonable cost

or use outside the United States; see CRS Report 97-765A, The Buy American Act:

Requiring Government Procurements to Come from Domestic Sources by John Luckey.

CRS Report RL31236, The Berry Amendment: Requiring Defense Procurement To Come

From Domestic Sources, by (name redacted).

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delays. The Secretary of Defense has waived these various domestic preference

restrictions in certain circumstances.6

This year’s debate focused on the extent of DOD’s waiver authorities in terms

of both the criteria and the items that could be covered. The Administration sought

to widen circumstances permitting waivers, whereas the House would have either

required domestic purchase of additional items (such as machine tools) or made it

more difficult for the Secretary of Defense to waive current restrictions.7 For

example, the House bill required DOD to identify and then buy from U.S. sources

items considered to be “critical” to the U.S. defense industrial base as well as assess

the extent of U.S. dependence on foreign suppliers. The House version also would

have prohibited DOD from purchasing from foreign countries who had restricted

sales of military goods or services because of U.S. operations in Iraq, a provision that

could have affected both France and Germany.

The Secretary of Defense had signaled that the Administration would veto the

bill if the House provisions were included. Concerned about the effects of these

provisions on U.S. trade relations, Senator Warner requested the State Department,

the U.S. Trade Representative, and OMB to address the potential effects of the

legislation on trade relationships and cooperative defense relationships.8

Reflecting a compromise between the House’s desire to expand protections for

the defense industrial base and Senate’s concerns about potential effects on U.S.

trade relations, the conference version dropped the new restrictions on certain items

but required DOD to assess potential U.S. vulnerabilities. To meet Senate and

Administration concerns about potential effects on U.S. trade relations, the

conference bill stated that none of the provisions in this industrial base section would

apply if the Secretary of Defense and Secretary of State determine that U.S.

international agreements would be violated.9

To get a better understanding of the extent of DOD dependence on foreign

sources or single domestic sources for critical items or components of military

systems, the Defense Department is to develop a “Military System Essential Item

Breakout List” and identify where these items or components are produced. DOD

is to contract for a study that will define the criteria for “critical” and recommend

items to be included on the list.

To give additional support to domestic producers of critical items, the

conference agreement establishes a new Defense Industrial Base Capabilities Fund

that DOD can use to provide incentive payments to domestic contractors. No funds

are specifically authorized (or appropriated) for this fund in FY2004, however.

The relevant statutes are in U.S. Code, Title 41, Section 10a-10b (Buy American), Title

10, Section 2533a (Berry Amendment) and Title 10, Section 2534 (Miscellaneous

restrictions).

See H.Rept. 108-354, p. 729 - 730 for provisions not adopted.

Congress Daily, “Surprised Warner Seeks Clarification,” September 26, 2003.

See Section 811 of H.R. 1588 as enacted and H.Rept. 108-354, p. 722.

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Another new industrial base tool for DOD is authority to give preference in source

selection to domestic producers of machine tools or other capital assets used to make

defense goods. The bill also requires a study of the adequacy of U.S. producers in

meeting defense needs for beryllium industrial base.10

To protect U.S. trade relationships, the conference agreement also softened the

House’s proposed prohibition on buying from countries who opposed U.S. actions

in Iraq. Instead, the Secretary of Defense, in coordination with the Secretary of State,

is to identify foreign countries who now restrict military sales to the United States

because of U.S. counterterrorism or military operations; that list can be revised

periodically. Even for those countries, DOD can purchase goods if the department

has a “compelling and urgent” need for the item.11 Congress agreed to broaden

waivers to Berry Amendment restrictions on purchases of food, clothing, and similar

items from combat operations only to include contingency operations as well.

This issue is likely to resurface in the next year or two. By February 2005,

DOD is required to complete an interim report that assesses which items are deemed

essential and the extent of U.S. dependence on foreign sources for those items. At

that point, the debate could revolve around whether additional protections or

incentives should be provided to domestic producers of those items.12

Concurrent Receipt Adopted

Until recently, the Administration threatened to veto congressional proposals to

provide concurrent receipt of military retirement and VA disability benefits to

military retirees because of concerns about the cost and the precedents for other

benefit programs. Military retirees now must reduce their military retirement on a

dollar-for-dollar basis if they wish to receive tax-exempt disability payments, a type

of offset that is required in many benefit programs.

The conference bill provides new benefits to military retirees with twenty or

more years of service and disability ratings of 50% or higher. The conference bill

also expands those who would be eligible for special compensation under the “Purple

Hearts Plus” program enacted last year for those whose disabilities are due to combat

or combat-related activities. The conference version was reached when the Senate

dropped its proposal for full concurrent receipt and the Administration dropped its

veto threat. In response to Administration concerns, the House had not included a

concurrent receipt in its version of the bill even though support among members was

widespread.

See Sections 812, 813, 814, 822, and 824 of H.R. 1588 as enacted and H.Rept. 108-354,

p. 723 - p. 725.

See Section 821 of H.R. 1588 as enacted and H.Rept. 108-354, p. 724.

Section 812 requires DOD to contract with a federally funded R&D center to assess the

criteria and the items on the military essential list.

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Eligibility Criteria and Phase-In of Benefit. Over 200,000 military

retirees are likely to qualify for the new concurrent receipt including military retirees

with 20 years of service if they

have disability ratings of 50% or above;

have any disability ratings as long as they meet the criteria for a

combat-related disability, popularly known as “Purple Hearts Plus;”

! are Guard and Reserve retirees who meet the criteria under “Purple

Hearts Plus” if they have 20 or more years of “creditable” service,

defined as 50 points for performing their annual reserve duties; and

! are disability retirees whose payments exceed their retirement

benefits had they retired under regular retirement.

The first phase of the new benefits are slated to go into effect on January 1, 2004,

with full concurrent receipt for those eligible by December 31, 2013.13

In the first year, monthly benefits for those eligible will be:

! $100 for those with a 50% disability rating;

! $125 for those with a 60% disability rating;

! $250 for those with a 70% disability rating;

! $350 for those with an 80% disability rating;

! $500 for those with a 90% disability rating; and

! $750 for those with an 100% disability rating.

In the following year, those eligible would receive 10% of the difference between the

benefit for the previous year and the lesser of their monthly retirement benefit or their

monthly disability payment. In each succeeding year, retirees will receive an

additional 10% of that difference until the retiree receives the full amount of both

disability payments and retirement benefits.

Cost of New Benefit. CBO estimates that the new benefit would cost $800

million in FY2004 and $22.1 billion over ten years in outlays for current

beneficiaries. The annual cost would increase steadily to $2 billion by FY2008 and

$3.5 billion by 2013.14 Although DOD does not need to include funds in its budget

to cover the costs because the legislation creates a new entitlement program, the

deficit would increase by annual outlays for current beneficiaries.

Unlike current military retirement, H.R. 1588 does not require that DOD

provide funds to cover the accrual cost of the new benefit for today’s military

personnel, a practice designed to capture fully the cost of military personnel. This

means that general revenues would cover this cost rather than the Defense

Department because DOD would not need to budget for this cost.15

See Section 641 of H.R. 1588 as enacted and H.Rept. 108-354, p. 711.

Cost estimate provided by CBO, October 22, 2003.

Accrual funding puts aside today the estimated amount to cover future benefits and is

intended to ensure that agencies understand the full cost of their personnel.

CRS-8

New Commission on VA Benefits. H.R. 1588 also sets up a 13-member

Veterans Disability Benefits Commission to evaluate and make recommendations

about VA benefits for combat-related disabilities or deaths. The Commission is to

report by February 2005, 15 months after enactment.16

Prospect for Next Year. The concurrent receipt issue could well be

revisited next year because of pressures from those not covered by the new benefit

— i.e. those with disability ratings below 50% whose disability is not due to combat

or combat-related circumstances. Budget impacts would continue to be a concern.

Those concerned with the loss of DOD visibility of the full cost of military personnel

that is part of the current provision could also press to require DOD to budget for the

accrual cost of the benefit for its current military personnel.

Tanker Lease Compromise

Another controversial provision included in the FY2004 DOD Authorization

conference is language that would allow the Air Force to proceed with a plan to lease

20 KC767 Boeing tanker aircraft and subsequently buy an additional 80 aircraft as

proposed by the Senate Armed Services Committee Chairman Warner in early

September.17 Signing of the contract has been held up because of questions of

impropriety by two Boeing officials, Darlene Druyan, formerly in charge of Air Force

acquisition, and Michael Sears, the Chief Financial Officer; Ms. Druyan is alleged

to have discussed employment opportunities with Boeing at a time when she was also

negotiating the tanker deal.18 In the past week, Deputy Secretary of Defense

Wolfowitz asked the DOD Inspector General to review this matter, and Senate

Armed Services Committee Chairman Warner called for a broader review.19

Although the conference bill authorizes the lease 20, buy 80 proposal, there

continues to be controversy between the House and Senate interpretation of what the

language requires: a House colloquy between members says that the Air Force can

use options included in the current contract and a Senate colloquy suggests that the

Air Force must negotiate two new contracts, one for the lease and one for the buy.20

See Sections 1501 - 1507 and p. 780 of H.Rept. 108-354.

This leasing proposal was originally authorized in Section 8169 of the FY2002 DOD

Appropriations (P.L. 107-117). See hearing and testimony before the Senate Armed Services

Committee on September 4, 2003, for proposal by Senator Warner. For analysis of the

original Air Force proposal, see CRS Report RL32056, The Air Force KC-767 Lease

Proposal: Key Issues For Congress, coordinated by (name redacted),

Wall Street Journal, “Boeing Dismisses Two Executives for Violating Ethical Standards,”

November 25, 2003.

New York Times, “Air Force Pursued Boeing Deal Despite Concerns of Rumsfeld,”

December 6, 2003; Washington Post, “Pentagon Delays Tanker Contract,” December 3,

2003.

For House colloquy, see Congressional Record, November 7, 2003, p. H10986 - H10987,

p. H10993 - H109994; for Senate colloquy, see Congressional Record, November 12, p.

S14482 - S14483, and p. S14485.

CRS-9

One contract could be implemented more quickly but could mean that the Air Force

would pay unnecessary costs associated with the lease.21

The lease 20, buy 80 alternative differs from the Air Force’s original

unprecedented proposal to contract with Boeing to lease and then buy100 aircraft for

a cost of $29 billion over a 15-year period, including support costs. The Air Force

finds leasing attractive because major funding would not be required until 2006, and

the bulk of the funding would not be needed until 2010-2017. The Air Force argues

that this approach would cause less disruption to current Air Force programs than

would a traditional buy. In later years when the program would cost $2 billion to

$3.7 billion annually, however, competition with other Air Force programs could be

substantial.22

It is not clear, however, whether the Air Force will be able to delay paying for

the planes until delivery as proposed by Under Secretary Wolfowitz in a letter to

Senator Warner on November 5, 2003.23 In his confirmation hearing to be Deputy

Under Secretary of Defense for Acquisition, Technology and Logistics, Michael

Wynne suggested that the conference language may require that the Air Force pay for

the aircraft when ordered rather than delaying payment by three years when the

aircraft are delivered. The Air Force has not identified how to fund the tanker within

its current budget plans, which did not anticipate the tanker lease.

This proposal has been controversial because leases are substantially more

expensive than buying: the Air Force, CBO, CRS, and GAO all found that the lease

would cost $5 billion to more than $6 billion more than a multiyear buy of the

aircraft, because the Air Force planned to rely on a special purpose entity to finance

the deal and because congressional agencies and others have suggested that the

proposed lease did not meet the criteria for an operating lease.24

Under the conference agreement that would allow the Air Force to lease 20

Boeing KC767 aircraft and incrementally buy the remaining 80 aircraft, the Air Force

Congressional Budget Office (CBO), “Letter to Senator John McCain on cost of two

alternative ways to lease 20 tanker aircraft and buy 80 tanker aircraft,” November 13, 2003;

and CBO, “Letter to Senator Warner with CBO evaluation of alternate strategies for

acquiring 100 KC-767A tanker aircraft,” October 16, 2003; see cost estimates in

[http://www.cbo.gov].

For an analysis of the budgetary issues, see “Congressional Oversight and Budgetary

Issues,” by (name redacted) in CRS Report RL32056,

The Air Force KC-767 Lease Proposal:

Key Issues For Congress, coordinated by (name redacted) on p. 53ff. Section 8159 of

the FY2002 DOD Appropriations Act (P.L. 107-117) allows the Air Force to lease up to 100

Boeing KC767 tankers once a new start notification has been approved by the four defense

committees.

See Congressional Record, November 7, 2003, p. H. 10896 for Wolfowitz letter.

Testimony of Robert A. Sunshine, CBO, before Senate Armed Services Committee,

September 4, 2003; Testimony of (name redacted), CRS, before Senate Commerce

Committee, September 3, 2003; and testimony of Neal P. Curtin before the Senate Armed

Services Committee, September 4, 2003.

CRS-10

still plans to delay the lease funding until 2006 and the buy funding until 2008.25

Although leasing 20 rather than 100 aircraft would be less costly than the original

proposal, the extent of the savings depends on how the Air Force implements the

proposal. According to press reports, the Air Force now plans to use two contracts

— one for the lease and one for the buy — costing a total of $18.3 billion in

acquisition costs. That total would be $3.2 billion less than the previous $21.5

billion contract to lease and buy 100 aircraft but still $3.5 billion more than CBO

estimates a straight multiyear contract would cost.26

In its scoring of the FY2004 DOD Authorization Act, CBO considers the new

proposal to lease and then buy 20 aircraft to be a lease/purchase that would require

that the Air Force provide $3.6 billion in budgetary authority in FY2004, although

none is provided in the Act. Because members did not raise a point of order under

budget rules, however, the funding implied by the bill’s language was not

challenged.27

Although the conference reports includes language permitting incremental

funding of the multiyear contract — which would allow the Air Force to spread out

the payments rather than providing the full amount for each year’s buy as is required

under standard acquisition rules — it is not clear whether the new language permits

that. The Air Force has voiced concerns that the compromise could jeopardize

ongoing defense programs.

New Personnel System for DOD Civilians

As part of its April 10, 2003, bill proposal, the Defense Transformation for the

21st Century, the Defense Department requested broad authority to set up a new

National Security Personnel System (NSPS) governing its 735,000 civilian

employees. DOD requested authority to develop a new personnel system that was

“flexible” and “contemporary,” allowing the Secretary of Defense to define positions,

set pay scales, establish hiring and firing rules, bargain with employees at the national

level, and set separate scales for rewarding senior level employees. Although DOD’s

proposal did not include specifics, Under Secretary of Defense for Personnel and

Readiness David Chu stated that it intended to follow “best practices” for current

personnel projects, including pay banding and the use of numerical ratings to link pay

with job performance.28

Congressional Record, October 23, 2003, p. S13113.

Seattle Times, “Delay in Tanker Deal Could Put 500 Jobs ‘At Risk,’” December 6, 2003;

CBO, “Letter to Senator Warner with CBO evaluation of alternate strategies for acquiring

100 KC-767A tanker aircraft;” see cost estimates in [http://www.cbo.gov].

Conversation with CBO staff. With the tanker lease, the bill would be above the spending

levels allocated to the Senate Armed Services Committee in the FY2004 Budget Resolution

(H.Con.Res. 95) and thus could be subject to a 302(f) point of order under the 1974 Budget

Control and Impoundment Act; that point of order could be waived with 60 votes.

Statement of David S.C. Chu, Under Secretary of Defense for Personnel and Readiness

before the House Subcommittee on Civil Service and Agency Organization on April 289,

2003. Washington Post, “Big Changes In Store For Defense Workers Under New Personnel

CRS-11

The chief issues raised about the DOD proposal were

the nature of the proposed new system;

the difficulties in designing an equitable performance rating system

that would be linked to pay;

! the appeals system for employees in case of disputes; and

! the level of bargaining between employees and DOD.

DOD’s proposal was debated within both the armed services and the

governmental affairs committees with concerns raised by both Members of Congress

and government employee unions about the breadth of authority requested and the

potential effects on government workers. In defending new authority, others cited

long-standing calls for reform of the civil service, the broad personnel management

authorities granted to new Department of Homeland Security, and DOD’s twenty

years of experience with alternative “pay for performance” systems for the 30,000

employees in the national labs.

The conference version of the FY2004 DOD authorization modified many of the

Administration provisions that were included in the House version of H.R. 1588. The

Senate version of the FY2004 DOD Authorization bill did not include any provisions

dealing with a new personnel system, but many of the provisions proposed by the

Senate Governmental Affairs Committee in S. 1166, a bill to establish a National

Security Personnel System, were ultimately adopted in the final version (see CRS

Report RL31954, Civil Service Reform: Analysis of the National Defense

Authorization Act for FY2004 coordinated by Barbara Schwemle).29

Phase-In Period, Collaboration, and Criteria for the New Personnel

System. Although H.R 1588 gives the Secretary of Defense broad discretion to set

up the new system, DOD is required to develop its regulations jointly with the

Director of the Office of Personnel Management and to conform those regulations

with criteria included in the law. In addition, any disputed parts of the new system

could not go into effect until 90 days after the proposed system is presented for

comment to labor organizations representing DOD’s civilian employees.

During that period, labor organizations would have 30 days to review the

proposal, DOD would have 30 days to resolve disputes, and Congress would be

notified of remaining disputes 30 days before implementation.30 After this 90-day

period, the new system could be put into place for up to 300,000 DOD civilian

employees but could not be expanded to the remaining employees until DOD has a

performance management system in place that meets criteria in the law.31

System,” November 25, 2003.

See General Counsel, DOD, William J. Haynes III, Letter to Speaker of the House Hastert,

April 10, 2003, for DOD’s proposal; [http://www.defenselink.mil/dodgc/lrs/legispro.html].

S. 1166 was reported from the Senate Governmental Affairs Committee without a written

report.

See Section 9902 (f) of H.R. 1588 as enacted.

See Section 9902 (b) and (l) of H.R. 1588.

CRS-12

In addition to being consistent with merit system principles and antidiscrimination laws, this new system to hire, assign, transfer, evaluate, and fire

employees is required meet the following criteria:

to be “fair, credible, and transparent;”

to link employee performance to agency plans and include

safeguards to ensure fairness;

! to involve employees, supervisors and managers in the design,

evaluation, and training for the new system;

! to include an “equitable method for appraising and compensating

employees” in the pay-for-performance evaluation system.32

In report language, the conferees calls on DOD to set up a pay-for-performance

evaluation system that:

groups employees into pay bands with upper and lower bounds

based on position responsibilities and types of work;

! sets up a performance rating system with rating periods and a

feedback process;

! includes a scoring system that is tied to salary changes and a review

process that addresses those failing to meet performance goals; and

! links individual performance factors to agency’s goals and ensures

scoring comparability.

Although this conference report language is not binding, it signals legislative intent.33

In hearings, DOD policy makers stated that it intended to design a system like the pay

banding system used by DOD’s laboratories for the past twenty years; the labs are,

however, exempt from the new system until 2008 and beyond that unless the new

system gives them greater flexibility.34 Details about the new personnel system are

likely to emerge in the next year.35

New Appeals Process and Labor Management Relations Systems.

As long as it complies with employment anti-discrimination laws, merit principles,

and due process, DOD can set up a new, internal appeals process for handling

disputes about personnel actions. In designing this system, DOD is to consult with

the Merit System Protection Board, the current government-wide appeals board.

Although employees may appeal the decisions of DOD’s new internal board to the

Merit System Protection Board (MSPB), the government-wide board would only hear

See Section 9902 (b) of H.R. 1588 as enacted.

See H.Rept. 108-354, p. 759.

See Section 9902(c) of H.R. 1588 as enacted; DOD was first given the authority to set

up a flexible personnel management system at the national labs in 1995.

DOD Pentagram, “New Pay System for Defense Civilians” by Spc. Joshua McPhie,

November 28, 2003; available online from the Department of the Army’s website at

[http://www.dcmilitary.com/army/pentagram/8_47/national_news/26448-1.html].

CRS-13

cases involving “arbitrary or capricious” actions, violation of due process, or those

not supported by evidence. Decisions by that Board can be reviewed by a court.36

Jointly with the Director of the Office of Personnel Management and in

collaboration with the unions, DOD will also be able to develop its own labor

management system under the new law.37 This “collaborative issue-based approach

to labor management relations” would go into effect 90 days after DOD provides a

written description to unions. During that period, unions have 30 days to review the

proposed system, 30 days to discuss recommended changes, and 30 days of

notification to Congress of disputed areas. To resolve differences, either DOD or

employee representatives can request help from the Federal Mediation and

Conciliation Service.

The new law provides for review of the proposed new system by an unspecified

independent third party. The authority of this new labor-management process

appears to be broad because its decisions can “supercede all other collective

bargaining agreements” in the department if the Secretary of Defense desires [italics

added].38 Unless renewed, however, this new process would only be in effect for a

six-year period. This new system would also not be subject to the collective

bargaining procedures and deadlines that apply to other federal agencies.39

DOD could also continue to bargain with employee unions and follow the

statutory procedures and deadlines for collective bargaining affecting all other

government agencies.40 In another major change, H.R. 1588 gives DOD new

authority to bargain at the national rather than the local level and makes those

decisions binding on all levels. Some critics have raised concerns about how local

circumstances will be taken into account in national decisions. These decisions could

also be reviewed by an unspecified third party.

H.R. 1588 appears to endorse two parallel systems of labor-management

relations: one, a new “collaborative” system, and the other, a traditional collective

bargaining system as defined in current statute. The legislation does not specify what

types of issues would be covered or how responsibilities will be divided between

these two systems. To the extent that the two systems overlap, the law gives

precedence to the new system. The new law appears to adopt a similar approach in

the case of appeals process for employee grievances, allowing DOD to set up its own

board but also permitting a review of those decisions by the Merit System Protection

Board in certain circumstances.

See Section 9902 (h) and CRS Report RL31954, p.13 - 16.

The law allows the Secretary to collaborate with unions “above the level of exclusive

recognition,” a term that refers to local unions.

See Section 9902(m)(8) in H.R. 1588 as enacted.

See Section 9902(m) in H.R. 1588; other federal agencies are subject to the labor

management relations in U.S. Code, Chapter 71; see also Section 9902

See Section 9902(g) of H.R. 1588 as enacted and U.S. Code, Chapter 71.

CRS-14

Funding Levels and Separation Incentive Authorities. Although

increases for individual employees would be likely to vary from the current system,

the new law calls on DOD to “the maximum extent practicable” to budget the same

amount for civilian employees under the National Security Personnel System as

would be the case under the current system so that overall, employees are not

“disadvantaged.”41 At the same time, the law calls on DOD to give civilian

employees the same pay raises as are received by military personnel. As an

additional workforce management tool, the law allows DOD to give separation

incentives of $25,000 to up to 25,000 civilian employees annually for early

retirement.42

The budgetary implications of the new system are not obvious. It is also not

clear whether these provisions would significantly limit DOD’s current plans to

transfer substantial numbers of military jobs to civilian personnel or contract

employees.

Other Civilian Personnel Changes. The new law also provides several

new authorities that would be available to all federal agencies including authorizing

pay for performance pilot projects;

higher pay caps for Senior Executive Service employees; and

$500 million for a new Human Capital Fund to reward exceptional

performance.43

The appropriators have only provided $1 million for this new fund in the final

version of the FY2004 Omnibus Appropriations Act currently awaiting final

congressional action.

Environmental Exemptions for DOD

As it did last year, DOD requested that military readiness-related activities be

exempted from certain provisions of five federal environmental laws, including the

Clean Air Act, the Endangered Species Act, the Marine Mammal Protection Act, the

Solid Waste Disposal Act, and the “Superfund” law that governs cleanup of

hazardous waste. This year, Congress proved to be receptive to proposals to modify

DOD’s responsibilities to protect endangered species and marine mammals, both

very controversial provisions. H.R. 1588 also gives DOD new authority to use

wetlands mitigation banks and modifies regulations governing Restoration Advisory

Boards that inform citizens about environmental cleanup.

DOD has argued that compliance with environmental requirements significantly

affect military training, and hence readiness, while critics have questioned the extent

See Section 9902(k) and 9902(e) in H.R. 1588 as enacted.

See Section 9902(i) in H.R. 1588 as enacted; early retirement is defined as at least 50

years of age and 20 years of service; “early-outs” for base closures could be in addition to

the 25,000 employees annually.

See Sections 1125, 1126 and 1129 of H.R. 1588 as enacted.

CRS-15

of the impact and DOD’s limited use of current waiver authorities. A recent GAO

report found that environmental restrictions are only one of several factors, including

urban growth and pollution, that affect DOD’s ability to carry out training activities

and that DOD continues to be unable to measure the impact of environmental laws.44

The debate centers on whether or to what extent DOD should be exempt from current

environmental statutes.45

Congressional Action on Endangered Species Act.46 Both the Senate

and the House agreed that DOD needed additional authority to consider military

training requirements as well as wildlife protection in managing land on DOD

installations. For that reason, the new law permits DOD to substitute an Integrated

Natural Resources Management Plan (INRMP), required under the Sikes Act, for a

designation of lands as “Critical Habitat” under the Endangered Species Act, as a

way to protect endangered species.47 The authority to substitute a resource

management plan for a critical habitat designation has been under dispute.

Environmental groups are concerned that protection for endangered species may be

weakened with this change.

Under the Sikes Act, the INRMP, which guides the conservation, protection,

and management of fish and wildlife resources, is prepared by the Secretary of the

military department in cooperation with the U.S. fish and Wildlife Service. The “use

of military installations to ensure the preparedness of the Armed Forces,” or military

readiness, however, takes precedence.48 Under the Endangered Species Act, once

land has been designated as “critical habitat,” federal agencies must “consult”

regarding actions that would destroy or adversely affect those habitats or face

penalties.

The substitution is permitted only if the Secretary of the Interior determines in

writing that DOD’s plan provides a “benefit for the species.”49 Critics have

GAO-03-621T, Military Training: DOD Approach to Managing Encroachment on

Training Ranges Still Evolving, April 2, 2003.

Hearings were held by the Senate Subcommittee on Fisheries, Wildlife and Water,

Committee on the Environment, May 6, 2003 and by the House Committee on Resources,

May 6, 2003; see also CRS Report RL31415, The Endangered Species Act (ESA), Migratory

Bird Treaty Act (MBTA), and Department of Defense (DOD) Readiness Activities:

Background and Current Law by (name redacted), p. 12-18, and CRS Issue Brief 10072,

Endangered Species: Difficult Choices by (name redacted), (name redacted) and (name

redacted). See also, CRS Issue Brief IB10072,Endangered Species: Difficult Choices by

(name redacted) and (name redacted).

This section was prepared with the help of CRS analysts, (name redacted) and (name red

acted). See CRS Report RL31415,The Endangered Species Act (ESA), Migratory Bird

Treaty Act (MBTA), and Department of Defense (DOD) Readiness Activities: Background

and Current Law, by (name redacted).

For Sikes Act, see 16 U.S.C., Section 670a.

16 U.S. Code, Section 670a (a) (3).

See Section 318 of H.R. 1588 as enacted and H.Rept. 108-354, p. 667 and General

Counsel, DOD, William J. Haynes III, Letter to Speaker of the House Hastert, April 10,

CRS-16

questioned, however, whether the criterion of “benefit to the species” is likely to be

adequate and whether implementation of the plans can be enforced since the Sikes

Act does not provide for suits by individuals or citizen groups. The final version also

amends the Endangered Species Act rather than Title 10 of the U.S. Code which

governs DOD activities, a choice that created concern among environmental groups

because of the potential precedent for other exemptions. Other environmental

interests opposed amending Title 10 because doing so may give the Secretary of

Defense rather than the Secretary of Interior the primary role in determining whether

integrated management plans provide adequate protection.

According to the Senate Armed Services Committee, portions of about 150

DOD bases could be designated as critical habitat were this exception not

permitted.50 The conference report suggests that the new language will “provide a

balance between military training requirements and protection of endangered or

threatened species.”51

Congressional Action on the Marine Mammal Protection Act. The

conference agreement adopts two of the Administration’s proposed changes to the

Marine Mammal Protection Act, including new two-year exemption authority and a

new definition of “harassment.” Debate about the implications of both of these

changes was heated.

New Exemption Authority. Under a new provision, the Secretary of

Defense, after consulting with the Secretary of Commerce and the Secretary of the

Interior, could “exempt any action or category of actions” from compliance with the

Marine Mammal Protection Act for two years if the Secretary determines “it is

necessary for national defense.”52 At his discretion and after consultation with the

Commerce and Interior Departments, the Secretary of Defense could renew such

exemptions for additional two-year periods.

The conference report suggested that this national security exemption parallels

that included in other environmental laws, while environmental interests argued that

a “national defense” exemption is broader than that provided in other statutes.53 DOD

has not, in fact, used existing exemption authorities, arguing that the threshold was

too high for most activities. Exemptions under the new law must be reported to the

armed services committees.54

2003, proposing legislation, see Title 10, U.S. Code, new Chapter 101A, Section 2017 in

draft legislation; see [http://defenselink.mil/dodgc/lrs/legispro.html].

S.Rept. 108-46, p. 286.

H.Rept. 108-354, p. 668.

See Sec. 319 of H.R. 1588; language is identical to DOD’s request in General Counsel,

DOD, William J. Haynes III, “Letter to Speaker of the House Hastert,” April 10, 2003, Title

10, Chapter 101A, Section 2019, Subsection(e); see online version on the DOD website at

[http://defenselink.mil/dodgc/lrs/legispro.html.]

Other statutes include exemptions for “national security” interests or “paramount interests

of the United States.”

H.Rept. 108-354, p. 669.

CRS-17

New Definition of Harassment. The conference agreement also adopted

the Administration proposal to use narrower definitions of harassment of marine

mammals for DOD’s military readiness and scientific activities of federal agencies

than are applied to other agencies. Under current law, the standard requires that

activities be prohibited if they would have a “potential to injure or disturb” marine

mammals.55 The new language defines DOD’s activities as “harassment” only if an

act “injures or has the significant potential to injure” or disturbs the activities of

marine mammals by disrupting “natural behavior patterns”to a point where those

patterns are “abandoned or significantly altered.”[italics added]56 To limit the

application of the exemption, the Act defines readiness as training, combat

operations, and testing, the definition that was included in the FY2003 DOD

authorization. DOD had asked to broaden the application to include support

activities.57

In reaction to a recent court case that limited DOD’s deployment of the lowfrequency SURTASS sonar because of the potential impact on marine mammals, the

FY2004 DOD authorization exempts DOD from complying with current standards

for evaluating the impact on marine mammals based on “specified geographical

regions,” or the “small numbers.” DOD contended that these standards were

inappropriate for marine mammals that migrate over broad expanses of the ocean and

that using a “negligible impact” standard would be a more scientific way to make

decisions rather than on the basis of the number of mammals affected.58

Other Changes and Future Actions. Congress also made other changes

requested by the Administration, including allowing DOD purchase credits from a

mitigation bank to offset those lost on DOD installations, and exempting DOD’s

Restoration Advisory Boards from issuing financial disclosure statements and from

providing notice of their activities in the Federal Register.59 These boards are the

primary avenue through which local communities learn about cleanup decisions on

military lands.

The issue of when and where to carve out exemptions from environmental

statutes for DOD can be expected to re-surface next year as the Administration

continues its efforts to provide special treatment for the department to protect DOD’s

readiness activities. While Congress did not approve DOD’s requested exemptions

See Section 318 in Congressional Record, May 21, 2003, p. H4428.

See Section 319 of H.R. 1588 as enacted.

See Section 319 (a), which cites Section 315(f) of P.L. 107-314, the FY2003 DOD

Authorization Act rather than the Administration’s request, see DOD’s request in General

Counsel, DOD, William J. Haynes III, “Letter to Speaker of the House Hastert,” April 10,

2003, Title 10, Chapter 101A, Section 2015,(b)(B), also available online at

[http://defenselink.mil/dodgc/lrs/legispro.html.]

See H.Rept. 108-354, p. 669. For Administration rationale, see DOD’s request in General

Counsel, DOD, William J. Haynes III, “Letter to Speaker of the House Hastert,” April 10,

2003, Title 10, Chapter 101A, Section 2019 and section-by-section analysis at

[http://defenselink.mil/dodgc/lrs/legispro.html.]

H.Rept. 108-354, p. 667, H.Rept. 108-106, p. 307.

CRS-18

from other environmental laws, it did require DOD to report by January 31, 2004, on

how environmental statutes and residential development surrounding military bases

affect readiness activities.60

TRICARE For Non-Deployed Reservists

Because of the large number of reservists who have been in Afghanistan, Iraq,

and the United States, Congress considered a number of ways to expand current

benefits and decided to approve a demonstration project to provide access to DOD’s

TRICARE health care system to certain non-deployed reservists. Under current law

and DOD policy, reservists become eligible for TRICARE once they are on active

duty. The FY2004 DOD Authorization Act offers access to TRICARE to nondeployed reservists who receive unemployment compensation or who are not eligible

for coverage offered by an employer. Reservists would be required to pay a premium

set at 28% of the value of the actuarial cost of the plan as is currently required for

civilian employees in the government’s Federal Employees Health Benefits (FEHB)

insurance plan.61 The conference version of the FY2004 DOD authorization bill

provides access to this targeted version of the new benefit through December 31,

2004, three months longer than is provided in the FY2004 supplemental.62

According to the report, CBO estimates that this demonstration project would

cost about $200 million annually compared to the $2 billion annual cost of providing

access to all non-deployed reservists that was proposed in the Senate version of the

bill. Dropped in conference, the Senate proposal had triggered a veto threat from the

Administration. The conferees set a ceiling of $400 million on the cost of the

demonstration project.63

To help Congress assess the health care needs of reservists and their families,

the conference report requires that GAO conduct an evaluation by May 1, 2004.64

With significant numbers of reservists likely to be needed in the next few years for

the occupation of Afghanistan and Iraq, proposals to expand benefits for reservists

are likely to be revisited next year.

Lifting the Ban on Research on Low-Yield Nuclear Weapons

The conferees adopted the Senate version of this change to a ban on R&D of

low-yield nuclear weapons that was enacted in 1989. Rather than modifying the ban

See H.Rept. 108-354, Section 320 and p. 670.

For more detail, see CRS memo, “Health Care for Military Reservists,” by Dick Best;

available by calling the author at [redacted].

See H.Rept. 108-354, Section 702 and p.716.

See H.Rept. 108-354, Sections 702 and 706 and p. 716 - 717; Letter from Comptroller

General David Walker to Senators Ted Stevens and John Warner and Representatives C.W.

Bill Young and Duncan Hunter, September 29, 2003, attributes $5 billion annual cost

estimate to DOD; and Table 12 of this report for CBO estimate of cost.

See H.Rept. 108-354, Section 705 and p. 716 - p.717.

CRS-19

to apply only to R&D at the engineering and development stage, H.R. 1588 repeals

the ban on R&D but requires specific congressional authorization for the Department

of Energy (which funds this program) to proceed to engineering development of lowyield nuclear weapons or a nuclear earth penetrating weapon (see discussion in

section on nuclear weapons for more detail).

In the conference version of the Energy and Water appropriations bill, funding

for the Robust Nuclear Earth Penetrator was reduced from the $15 million request

to $7.5 million; funding for the Advanced Concepts Initiative, which would fund

concept studies on low-yield nuclear weapons, was set at $6 million.65

Maintaining Current Levels of Imminent Danger Pay and

Family Separation Allowance

One less controversial provision was included in H.R. 1588: maintaining the

higher levels of imminent danger pay and family separation allowance adopted in last

year’s supplemental. The DOD Authorization Act adopts the higher levels for all

eligible service members through December 31, 2004. The FY2004 Emergency

Supplemental continues the higher rates through September 30, 2003. At one point,

the Administration had proposed alternative ways to maintain the higher levels, but

these proposals were not adopted.

Major Action On FY2004

DOD Appropriations Bills

The FY2004 DOD Appropriations Act was signed into law (P.L. 108-87) on

September 30, 2003, at the end of the fiscal year. Conferees resolved their issues,

and the bill was passed on September 23 by the House and September 24 by the

Senate after the two-day hiatus in business caused by Hurricane Isabel. Differences

in funding levels were resolved.

See H.Rept. 108-357, p. 156.

CRS-20

Table 1B. Status of FY2004 Defense Appropriations:

H.R. 2658 and S. 1382

Subcommittee

House House Senate Senate Conf.

Markup

Report Passage Report Passage Report

Conference

Report

Approval

House Senate

7/9/03

6/18/03

Public Law

7/2/03 7/8/03 7/10/03. 7/17/03 9/24/03 9/24/03 9/25/03 9/30/03

H.Rept. (399-19) S.Rept. (95-0) H.Rept. (405-15) (95-0) P.L. 108-87

108-87b

108-283

108-187a

a. Full committee markup was completed on June 26, 2003; the report was filed on July 2, 2003.

b. Full committee markup was completed on July 9, 2003; the report was filed on July 10, 2003.

Major Funding In FY2004 DOD Appropriations Act

The major changes to the Administration’s request are shown in Table 2.

Further details on the appropriation conference will be provided in a later update.

Table 2. FY2004 DOD Appropriations: Congressional Action

(in billions of dollars)

Title

Military Personnel

Operation and

Maintenancea

Procurement

RDT&E

Revolving & Management

Funds

Other DOD Programs

Related Agencies

General Provisionsa

Iraq Freedom Fund

Rescissionb

Scorekeeping Adjustment

Consolidated

Appropriations

TOTALc

FY2003

Enacted

93.0

112.9

FY2004

Request

98.9

117.0

House

98.3

113.3

Senate

98.9

115.6

70.5

57.9

2.6

72.7

61.8

3.5

73.6

64.6

2.8

17.4

0.5

[-4.0]

17.8

0.4

[0.1]

0.0

10.0

364.7

Conf. Conf. vs.

Request

98.5

115.9

-.4

-1.1

73.8

63.6

1.7

74.7

65.2

2.7

2.0

3.4

-.8

18.1

0.4

[-4.1]

-2.0

18.3

0.40

[-3.4]

-3.2

18.2

0.4

[-3.5]

-3.5

[-3.5]

-3.5

0.1

—

0.0

—

0.0

—

0.0

—

372.2

369.2

369.1

368.7

-3.5

Sources: H.Rept. 108-187; S.Rept. 108-87, H.Rept. 108-283.

Notes: CRS adjusted title totals for both FY2003 and FY2004 to allocate funding in general

provisions. [ ] Square brackets indicate the total amount of funding for general provisions that is

allocated by title in the table and is not added into the total. For FY2004, see H.R. 2658 and S. 1382.

For FY2003, see P.L. 107-248.

CRS-21

a. Of the $4.0 billion decrease for general provisions in the House version of the FY2004 DOD

appropriations act, H.R. 2658 allocates $2.0 billion to O&M appropriations, and $2 billion is

a rescission to the $15.7 billion provided in the Iraq Freedom Fund for later costs of the war and

occupation in the FY2003 supplemental. According to scoring rules, that decrease counts as a

reduction to FY2004 appropriations. Of the $3.4 billion in reductions from general provisions

in S. 1382, $3.2 billion is from a rescission to the Iraq Freedom Fund. About $1.8 billion of

the deceases in FY2003 that were made in general provisions affected O&M appropriations.

CRS will allocate these general provisions in a later update.

b. The Iraq Freedom Fund is a flexible account set up to cover later costs of the war, which could not

be allocated to specific appropriation accounts.

c. Difference is rounding: total funding is $369.193 billion in the House bill and $3.143 billion in the

Senate bill.

Funding Prohibition And Restrictions On Total Information

Awareness (Terrorist Information Awareness) R&D Program. In the

FY2004 DOD Appropriations Act, the conferees dealt with the controversial Total

Information Awareness (renamed Terrorism Information Awareness) or TIA

program, which was, until recently, run by retired Admiral Poindexter in the Defense

Advanced Research Projects Agency (DARPA). Conferees transferred unspecified

components of the program's classified venues where research can continue but

would be subject to safeguards in the National Foreign Intelligence Program that

restrict the sharing of information on U.S. citizens. Less controversial components

of the program, such as machine translation of languages, remain in DARPA. The

components that were transferred and the amount of funding remaining cannot be

determined because details are in a classified annex.66

This agreement was a compromise between Senate action that prohibited

funding for R&D for the controversial Total Information Awareness R&D program

and the Administration’s objections to cutoff of funding. The TIA program is

designed to develop a system to collect and analyze a wide assortment of information

to detect potential terrorists, and included various restrictions on implementation or

deployment of TIA programs similar to those included in the House version of the

FY2004 DOD Appropriations Act, H.R. 2658. The Administration objected to the

Senate cutoff of funding.67

Similar restrictions on deployment were originally included in the Consolidated

Appropriations Resolution of FY2003 (P.L. 108-7).68 On May 20, 2003, the Defense

Advanced Research Projects Agency (DARPA) avoided a cutoff in funding for TIA

by submitting the report required by P.L. 108-7. On August 29, 2003, retired

Statement by Senator Inouye in Congressional Record, September 25, 2003, p. S11939.

For statutory and conference, see Section 8131 in conference version of H.R. 2658 and p.

H8771, respectively, in Congressional Record, September 24, 2004.

OMB, “Statement of Administration Policy on S. 1382, Department of Defense

Appropriations Bill, FY2004,” July 14, 2003; [http://www.whitehouse.gov/omb/

legislative/sap/108-1/s1382sap-s.pdf].

See Section 8120 in S. 1382 and Section 8124 in H.R. 2658; for previous language, see

Section 111 of P.L. 108-7. For a discussion of the original controversy about this program,

see CRS Report RL31786, Total Information Awareness Programs: Funding, Composition,

and Oversight Issues by (name redacted).

CRS-22

Admiral Poindexter, the head of the program, resigned, partly in response to recent

controversy about another TIA component, FutureMAP, which was designed to set

up a “market” to collect predictions about potential terrorist or terrorist-related

events.69 That program was cancelled in response to public and congressional

concerns.

Military Construction Appropriations Bills

Several months elapsed between the summer passage of H.R. 2559, the FY2004

military construction appropriations bill, and final conference action on November

22, 2003, an uncharacteristic delay for this bill (P.L. 108-132). The conference bill

provides $9.3 billion, about $100 million more than the request.

The long hiatus between House and Senate action and the final conference

reflected controversy about funding for overseas bases in Europe and Korea, which

was opposed by the Senate because of uncertainties about their future. This issue

was finally resolved by the establishment of an eight-member congressional

commission to review overseas base structure and report back to Congress by

December 31, 2004.70 The Administration had signaled earlier that it plans to

propose substantial changes in overseas bases as part of efforts to “reduce the

footprint” of the U.S. military overseas.71 With initial action on the domestic base

closure process kicking off next year, debate about the future of overseas bases can

be expected next year, perhaps even before the new report.

Overview of Administration

Request and Budget Trends

On February 3, 2003, the Administration submitted its FY2004 budget request

to Congress. The Administration proposed $399.7 billion for the national defense

budget function, about $7 billion above the estimated FY2003 level. (Note: This

includes in the FY2003 total $10 billion that Congress appropriated for DOD in the

FY2003 Consolidated Appropriations Act; most OMB and DOD tables prepared for

the February budget release do not include these additional funds.72 This does not

Washington Post, “Poindexter Resigns But Defends Programs,” August 13, 2003; Defense

Advanced Research Projects Agency, Report to Congress Regarding The Terrorism

Information Awareness Program, In Response to Consolidated Appropriations Resolution

2003, P.L. 108-7, Division M, Section 111 (b); see the DARPA website at

[http://www.darpa.mil/body/tia/tia_report_page.htm].

H.Rept. 108-342, Section 128 and p. 25.

See CRS Report RL31810, Appropriations for FY2004: Military Construction, by (name

redacted).

DOD has received $93.1 billion in supplemental funding to combat terrorism since the

September 11 attacks; see below.

CRS-23

include in the FY2003 level, however, $62.6 billion in supplemental defense

appropriations that Congress approved in April for the Iraq war and other costs.73

The FY2004 increase is in addition to substantial increases in FY2002 and

FY2003. The new request is more than $100 billion above the FY1999 level for

defense spending, and it represents an increase over five years of 20% in inflationadjusted constant FY2004 dollars. The FY2004 defense request is almost 25%

higher in real terms than the budget in FY1996 when DOD’s drawdown in spending

and military personnel after the end of the Cold War was completed.

The Administration is proposing continued increases of about $20 billion

annually in the defense budget for the next five years, which would increase national

defense budget authority to $480 billion by FY2008. Table 3 shows the ten-year

FY1999-FY2008 trend in defense spending under the Administration’s plan both for

the national defense budget function and for the Department of Defense budget.74

Of the $399.7 billion requested for national defense in FY2004, $370.6 billion

is for programs covered by the defense appropriations bill, $9.0 billion by the military

construction appropriations bill, $17.3 billion for Department of Energy defenserelated activities funded in the energy and water appropriations bill, and the

remaining $2.8 billion in other appropriations bills.

OMB, Fiscal Year 2004 Historical Tables, Table 5.1 (February 2003) and H.Rept. 108-10,

Conference Report on FY2003 Consolidated Appropriations Resolution, p. 1498.

The National Defense budget function (050 in OMB budget documents) is made up

primarily of the Department of Defense (051), plus about $18 billion in other defenserelated activities, primarily weapons-related activities in the Department of Energy (see

Table 3 for a breakout of these categories).

CRS-24

Table 3. National Defense Budget Function and DOD Budget, FY1999-FY2008, Administration Projections

(current and constant FY2004 dollars in billions)

Actual

1999

National Defense Budget Function

Budget Authority

Current year dollars

292.3

Constant FY2004 dollars

331.1

Real growth/decline

5.1%

Outlays/b/

Current year dollars

274.9

Constant FY2004 dollars

312.2

Real growth/decline

12.1%

Department of Defense

Budget Authority

Current year dollars

278.6

Constant FY2004 dollars

315.5

Real growth/decline

5.1%

Outlays

Current year dollars

261.4

Constant FY2004 dollars

296.9

Real growth/decline

11.7%

Fiscal Year:

Actual

2000

Actual

2001

Actual

2002

Enacted

2003a

Req.

2004

Proj.

2005

Proj.

2006

Proj.

2007

Proj.

2008

304.1

335.8

1.4%

335.5

360.1

7.2%

362.1

378.5

5.1%

392.7

401.8

6.2%

399.7

-0.5%

420.0

410.4

2.7%

440.0

420.0

2.3%

460.3

429.0

2.1%

480.7

437.5

2.0%

294.5

325.3

4.2%

305.5

327.4

0.6%

348.6

363.4

11.0%

376.3

385.1

6.0%

390.4

1.4%

410.1

400.9

2.7%

423.2

394.6

-1.6%

436.4

397.3

0.7%

460.5

409.3

3.0%

290.5

320.8

1.7%

319.5

343.0

6.9%

345.0

360.6

5.1%

374.0

382.7

6.1%

379.6

-0.8%

399.6

390.5

2.9%

419.6

400.5

2.6%

440.3

410.4

2.5%

461.6

420.1

2.4%

281.2

310.7

4.7%

291.0

311.9

0.4%

332.0

346.1

11.0%

358.2

366.5

5.9%

370.7

1.1%

389.6

380.8

2.7%

402.7

375.5

-1.4%

416.3

379.0

0.9%

441.1

392.1

3.5%

Source: Office of Management and Budget, F2004 Historical Tables, and FY2003 Consolidated Appropriations Resolution (P.L. 108-11).

a. Includes $10 billion in budget authority appropriated to DOD in the FY2003 Consolidated Appropriations Resolution (see P.L. 108-11) but not the outlay effects of that addition

because OMB has not re-estimated outlays. Does not include $62.6 billion in FY2003 supplemental appropriations for defense provided in H.R. 1559, P.L. 108-11.

CRS-25

Annual Growth for DOD Slows In Later Years in FY2004

Budget Resolution

The conference agreement on the FY2004 congressional budget resolution

(H.Con.Res. 95, H.Rept. 108-71), which was passed by both houses on April 11, just

before the April recess, endorses the Administration’s proposed growth of $20 billion

annually for defense over the next five years (see Table 4). Over the following five

years, however, defense would grow by about $10 billion annually; the

Administration does not project beyond FY2008. The chief issue in this year’s

budget resolution was the amount to be provided for tax cuts.

Table 4. Status of FY2004 Budget Resolution

(H.Con.Res. 95, S.Con.Res. 23)

Subcommittee

House House Senate Senate Conf.

Markup

Report Passage Report Passage Report

Conference

Report

Approval

House Senate

NAa

Public

Law

4/10/03 3/21/03 3/26/03 3/26/03 4/11/03 4/11/03 4/11/03 NAb

H.Rept. 215-212 (no

56-44 H.Rept. 216-211 51-50

108-37

report)

108-71

Note: Senate substituted S.Con.Res. 23 into H.Con.Res. 95 after passage.

a. Budget resolutions are only marked up in full committee.

b. Budget resolutions guide the action of the authorizing and appropriating committees but are not

signed into law by the President.

Although there has been considerable congressional support for increases in

defense, some observers have questioned whether increases can be sustained in the

future because of high federal budget deficits and the dramatic increases in costs

associated with the retirement of the baby boom generation.75 The FY2004 budget

resolution projects a 40% increase spending on entitlement programs by FY2008 and

an 80% increase by FY2013.76

Center for Strategic and Budgetary Assessment, Analysis of the 2004 Defense Budget

Request by Steven M. Kosiak, p. 5-p.7

CRS calculations based on table in H.Rept. 108-71, Conference Report on Concurrent

Resolution on the Budget For Fiscal Year 2004, p. 68.

CRS-26

Table 5. FY2004 Budget Resolution: National Defense Request and Congressional Action

(billions of dollars)

FY2003

Est.a

FY2004

Proj.

FY2005

Proj.

FY2006

Proj.

FY2007

Proj.

FY2008

Proj.

FY2004FY2008

Proj.

FY2009FY2013

Proj.

FY2004FY2013

Proj.b

Budget Authority

Administration Request

392.7

399.7

420.0

440.0

460.3

480.7

2,200.8

FY2004 Budget Res.

392.5

400.5

420.1

440.2

460.4

480.9

2,202.0

2556.1

4758.2

Administration Request

30.6

7.0

20.3

20.0

20.3

20.4

88.1

FY2004 Budget Res.

8.1

19.5

20.1

20.3

20.5

88.4

48.5

136.9

Administration Request

8.5%

1.8%

5.1%

4.8%

4.6%

4.4%

FY2004 Budget Res.

2.1%

4.9%

4.8%

4.6%

4.4%

Administration Request

48.8%

47.6%

48.2%

48.6%

48.9%

49.7%

FY2004 Budget Res.

51.5%

50.9%

51.7%

52.2%

52.6%

53.2%

Admin. Requesta

376.3

390.4

410.1

423.2

436.4

460.5

2,120.7

FY2004 Budget Res.

386.2

400.9

414.2

426.0

438.7

462.9

2,142.7

2,515.6

4,658.3

-304.0

-307.0

-208.0

-201.0

-178.0

-190.0

Annual Change In Dollars

Annual Change In Percent

Defense Share Of Discretionary BA

Outlays

Estimates Of The Surplus/Deficit

Administration Request

FY2004 Budget Res.

-282.5

-287.3

-218.1

-169.4

-128.1

-113.9

118.8

-798.1

Source: CRS calculations based on OMB, FY2004 Historical Tables, and DOD, Office of the Secretary of Defense, Comptroller, Briefing, FY2004 Defense Budget (February 6, 2003);

Conference Report on FY2004 Budget Resolution, H.Rept. 108-71, and House report on H. Con. Res. 95, H.Rept. 108-71, p. 6.

a. Administration request does not reflect outlays from the $10 billion enacted in the FY2003 Consolidated Appropriations Resolution.

b. OMB does not project budget authority or outlays beyond five years.

CRS-27

House and Senate Differences about Defense Spending. The final

version of the FY2004 budget resolution projects a five-year total for defense

spending of $2.2 trillion, a level comparable to the Administration projection and

matching levels approved in both houses. In later years, however, the House

projected higher funding for defense than the Senate, and the conference

compromised at $4.758 trillion through FY2013, about the midpoint between the two

houses.77

The conference version of the budget resolution also deleted two provisions

proposed by the Senate:

a measure to set aside $100 billion over the next ten years in a

reserve fund to pay for costs associated with the war in Iraq; and

a measure to include $182 million in FY2004 and $12.8 billion in

FY2004-FY2013 to cover the cost of phasing in concurrent receipt

benefits for military retirees with disability levels of 60% or higher.

The Senate bill had included a defense reserve fund that decreased by $100

billion the funds set aside for a tax cut in order to provide $10 billion annually to

cover continued costs of military action or reconstruction in Iraq.78 Funding for Iraq

in FY2003 was provided in the FY2003 supplemental, but there is no funding for

occupation costs in the FY2004 budget, which was submitted before the initiation of

hostilities. Nor is there funding in the FY2004 budget to cover the costs of the

continued U.S. presence in Afghanistan.

The Senate version of the resolution also would have allowed all military

retirees whose disabilities are 60% or higher to receive both military retired pay and

Veterans Administration disability benefits, a proposal considered but rejected in the

final version of the FY2003 DOD Authorization Act. Instead, last year, Congress

provided special compensation for military retirees whose disabilities are a result of

combat or combat-related activities in the FY2003 Authorization Act.79 The

conference version of the resolution deleted both provisions. Without an allocation

in the budget resolution, it appears less likely that benefits for military retirees with

disabilities will be expanded.

Scoring Differences Between Congress and the Administration.

CBO scored the cost of DOD’s request as $400.5 billion, $800 million higher than

the Administration’s estimate (see Table 4 and Table 5). The difference between

the two estimates reflects primarily CBO’s assessment that a DOD legislative

proposal to set up a new account, the Refined Petroleum Products transfer account,

As passed by the House, H.Con.Res. 95 recommended $4.8 trillion for defense and the

Senate recommended $4.6 trillion with a midpoint of $4.7 trillion; CRS calculation based

on House Budget Committee, Majority staffs, Budget Conference for Fiscal Year 2004:

Side-By-Side Comparison of House and Senate Resolutions, April 2, 2003, p. 11.

See H.Rept. 108-71, p. 73.

See H.Rept. 108-71, p. 109 and Congressional Record, March 20, 2003, p. S4209 for

S.Amdt. 341.

CRS-28

would cost about $675 million compared to zero expenditures assumed by DOD.

According to DOD, the rationale for setting up this new account with an “indefinite

appropriation” is to allow DOD to cover the difference between the amount budgeted

for fuel costs and actual market prices.80 Since DOD assumes that its estimate is

correct, the Administration provided no funds for the account. CBO, however,

believes that fuel prices in FY2004 are likely to be about $5 higher per barrel than

DOD assumes — $27 a barrel compared to $22 barrel — and scores the likely cost

of the new account at $675 million based on the level of DOD’s annual fuel

purchases.

Although the FY2004 congressional budget resolution adopted CBO’s higher

scoring, it appears that Congress is unlikely to agree to set up the new account.

Neither the House nor the Senate version of the FY2004 DOD Authorization Act

includes funds for the account.81 Instead, both houses transfer that $675 million in

the CBO estimate for that account to other programs. The House and Senate

appropriators also rejected DOD’s proposal for this new fund and eliminated the

$675 million for the account.

DOD’s Appropriations Allocation. A sign of potential pressure on DOD’s

budget top line in the future is the outcome of decisions about the distribution of

funds to the various appropriations subcommittees to guide their markup, a process

known as setting 302(b) allocations.82 The annual congressional budget resolution

sets the total amount of discretionary spending available to the appropriations

committees and recommends spending allocations for each budget function. The

appropriations committees, however, have discretion to set allocations for each

subcommittee.

The conference agreement on the budget resolution allocates $784.7 billion in

discretionary budget authority to the appropriations committees. For several weeks

after the budget resolution was agreed to, committee leaders debated how to allocate

funds among the subcommittees and, especially, how to absorb what they identified

as a $5 to $7 billion gap in spending requirements and amounts available. Departing

from traditional practices where House and Senate Committees work separately on

subcommittee allocations, committee leaders negotiated across both houses with their

leadership and with the White House to establish a common framework within which

to base their initial allocations.

On June 11, House and Senate Appropriations Committee Chairmen announced

an agreed package that would free up sufficient resources to address the funding gap

and remain within the overall FY2004 discretionary budget cap of $784.7 billion. As

OMB, Fiscal Year 2004 Appendix to the Budget of the United States, p. 298.

The Senate report, S.Rept. 108-46, includes the CBO scoring for the account in its

estimate of the request for working capital funds and then deletes that funding, see p. 10

and p. 298. The House report, H.Rept. 108-106, does not adjust the scoring of working

capital funds and therefore does not include any funding for the new account; see p. 7 and

p. 306.

The 302(b) allocation process was established by the Congressional Budget Act of 1974.

For a brief discussion, see CRS Report 98-815, Budget Resolution Enforcement.

CRS-29

approved by all parties, including the President, the appropriations committees

reduced defense spending by $3.1 billion and moved $2.2 billion in FY2004 advance

appropriations to FY2003.

Trends in DOD Spending Plans

Assessing long-term trends in the defense budget is difficult because of the

effect of the large amount of supplemental funding received since September 11,

2001, in the Emergency Terrorism Response supplemental of 2001 and the FY2002

supplemental. That funding, which is included in figures in Table 6, makes

comparisons difficult, particularly for operation and maintenance spending that

received the bulk of supplemental funding (see below).

Table 6. Administration Request: National Defense Budget

Function by Title, FY2001-FY2008

(in billions of dollars)

Military Personnel

Actual Actual Est.

Req. Proj. Proj. Proj. Proj.

2001 2002 2003* 2004 2005 2006 2007 2008

76.9

87.0

95.1

99.0 103.1 107.4 111.0 114.6

Operation &

Maintenance

115.8

133.2

134.8

133.5

139.3

145.2

150.3

157.6

Procurement

62.6

62.7

73.8

74.4

78.6

85.8

96.1

105.3

RDT&E

41.6

48.7

57.5

61.8

67.1

64.3

64.6

67.0

Military

Construction

5.4

6.6

6.3

5.0

6.1

10.4

13.2

12.2

Family Housing

3.7

4.0

4.2

4.0

4.8

5.1

4.8

3.8

Other

13.5

2.7

2.2

2.0

0.6

1.4

0.3

1.2

Subtotal, DOD

319.5

345.0

374.0

379.6

399.6

419.6

440.3

461.6

Atomic Energy

Defense Activities

14.4

15.3

16.6

17.3

17.7

17.1

16.2

Defense-Related

Activities

1.6

1.8

2.1

2.8

2.9

Total, National

Defense

335.5

362.1

392.7

399.7

420.0

440.0

460.3

480.7

Fiscal Year

Source: Office of Management and Budget, Budget of the U.S. Government, FY2004: Historical

Tables and Budget of the U.S. Government, FY2004: Analytical Perspectives (February 2003), and

H.Rept. 108-10, conference report on FY2003 Consolidated Appropriations Resolution for final

enacted levels, and House Appropriations Committee. OMB figures include DOD’s supplemental

appropriations of $17.3 billion in the FY2001 Emergency Terrorism Response supplemental and $14.0

billion in the FY2002 supplemental.

*Note: Does not include $62.6 billion received by DOD in FY2003 supplemental appropriations.

CRS-30

Figures for FY2003 also include an additional $10 billion provided for DOD in

the FY2003 Consolidated Appropriations Resolution for classified intelligence

programs and for costs associated with the U.S. presence in Afghanistan and the

global war on terrorism. The $62.6 billion provided to DOD in the FY2003

supplemental, however, is not included. DOD’s procurement funding shows little

increase in FY2004. Much of the increase in RDT&E reflects an increase from $7.6

billion to $9.1 billion in DOD’s missile defense program, reflecting DOD’s plan to

begin deployment of 10 land-based interceptors as well as to continue the ramp-up

in R&D. By FY2008, however, DOD plans to increase funding for procurement by

about 40% and RDT&E by over 15% compared to FY2003.

DOD Receives $103.1 Billion in Supplemental Appropriations

Since September 11 Attacks

Since the September 11 attacks, DOD has received $103.3 billion in

supplemental or regular appropriations for the war in Afghanistan, the war in Iraq,

enhanced security at DOD installations, and the global war on terrorism (see Table

7). The most recent supplemental for the Iraq war provides funding for the U.S.

presence in Afghanistan and continued operations in Iraq through FY2003.

The Administration did not include any funding for these costs in its FY2004

budget, however, which suggests that the Administration will propose either a

supplemental or a budget amendment for FY2004. In addition to funding in

supplementals, DOD received $10 billion in the FY2003 Consolidated

Appropriations Resolution to fund the occupation of Afghanistan and

classified/intelligence programs.

In its post-September 11 requests for supplemental funding, DOD has requested

substantial flexibility in its use of funds, citing the uncertainty of estimating the cost

of war and the global war on terrorism. The Administration has reiterated that theme

in its FY2004 request as well, calling for transformation of not only weapon systems

to meet new threats but also transformation of DOD’s business practices and

personnel management systems (see discussion of Major Administration Themes

below).

Although Congress has generally provided the amounts requested by DOD in

its supplemental requests, it has been reluctant to provide the amount of flexibility

requested by DOD. In fact, with each supplemental request, Congress has been less

willing to accept the flexibility proposed by DOD. Congress rejected DOD’s request

that about 95% of the funding be provided in a flexible account, choosing instead to

allocate 45% of the funds in flexible accounts (see below).

Of the $40 billion appropriated in the Emergency Terrorism Response

supplemental (ETR) passed on September 14, 2001, DOD received $17.3 billion,

almost entirely within the Defense Emergency Response Fund, a flexible account.

Of that total, DOD had discretion to allocate funds as long as Congress was

informed. For the remainder, Congress set levels within ten broad categories for

DOD spending. Congress also permitted DOD to move funding into various

CRS-31

appropriation accounts at its discretion in the FY2002 supplemental for the bulk of

the funding requested.

In the most recent supplemental, for FY2003, DOD requested that Congress

provide 95% of the funding in the Defense Emergency Response Fund (DERF) so

that DOD could transfer funds to various accounts as needs arise. Instead Congress

set up an new fund, the Iraq Freedom Fund, and allocated 25% of the funds requested

to that fund but required five-day advance notifications.

Table 7. Flexibility in DOD’s Supplemental Funding Since

September 11 Attacks

(Dollars in Billions)

Funding Level

& Amount of

Flexibility

Emergency

Terrorism

Response

Supplemental

(P.L. 107-38 and

P.L. 107-117)

Total

FY2002

FY2003

ETRSupplemental Supplemental

FY2003

(P.L. 107-206) (P.L. 108-11)

Supp.

Flexible Funda

Request

21.16

11.30

59.86

92.33

Enacted

15.00

11.30

15.68

41.98

Request

0.00

2.72

5.45

Enacted

2.30

2.08

46.91

51.29

Request

21.16

14.02

62.59

97.77

Enacted

17.30

13.38

62.59

93.27

Request

100.0%

80.6%

95.6%

94.4%

Enacted

86.7%

84.4%

25.1%

45.0%

Request

0.0%

19.4%

4.4%

5.5%

Enacted

13.3%

15.6%

74.9%

55.0%

81.7%

95.4%

100.0%

95.4%

Regular Appropriations

Total Funding

As Percent of Total Funding

Flexible Fund

Regular Appropriations

Total Funding Received

Request vs. Enacted

Source: CRS calculations from CRS Report RL31829, CRS Report RL31005, CRS Report RL31406,

and appropriations conference reports and GAO Report, Defense Budget: Tracking of Emergency

Response Funds for the War on Terrorism, April 2003.

a. In the ETR, DOD funds were appropriated into the Defense Emergency Response Fund (DERF)

except for a small amount of military construction funds, procurement funding, and Pentagon

Renovation Revolving Funds. In the FY2002 Supplemental, DOD funds were appropriated to

the DERF, which was made into a transfer account. In the FY2003 supplemental, funds were

appropriated into a new Iraq Freedom Fund, set up as a transfer account, or into regular

appropriations accounts.

CRS-32

Major Themes in the Administration’s

FY2004 Request

The overarching theme in the Administration’s FY2004 request was a call for

flexibility to transform not only U.S. military doctrine and technology, but also

military and civilian personnel systems and defense acquisition practices. According

to Secretary of Defense Rumsfeld, not only do “our armed forces need to be flexible,

light and agile,” but also “the same is true of the men and women who support them,”

in meeting the “frequent, sudden changes in our security environment,”83 including

the global war on terrorism.

To meet this goal, the Administration delivered a broad ranging legislative

proposal, entitled the “Defense Transformation for the 21st Century Act,” to Congress

on April 10, 2003, shortly before Congress’s two-week April recess. Among other

things, the legislative proposal would have given the Secretary of Defense authority

to redesign the civil service system governing the 700,000 civilian employees in the

Department of Defense, provided additional flexibility in managing senior military

officers, modify certain acquisition requirements, and exempted DOD from certain

environmental statutes.

Some members of Congress expressed concern that DOD had delivered such an

ambitious proposal at a time when Congress was about to recess and shortly before

markup of the defense authorization bill was planned. Although DOD witnesses

discussed their plans to submit the proposal earlier in the year and met with

congressional staff in the preceding couple of months, the specific proposals were not

available before April 1084 (as noted above, CRS compares all of the proposed new

measures with current law in CRS Report RL31916, Defense Department

Transformation Proposal: Side by Side with Current Law, by (name redacted),

(name redacted), (name redacted) , and (name redacted)).

The Administration characterized its proposals as the logical followup to earlier

efforts to transform weapons modernization and operational practices. According to

DOD, the FY2004 budget was the first budget to reflect fully President Bush’s

commitment to “challenge the status quo” and balance the need to meet current

challenges from the global war on terrorism and near-term threats with the need to

transform DOD in the longer term.85 DOD contended that transformation is now

fully underway with new emphasis placed on unmanned vehicles, precision guided

munitions, special operations forces, command, control, and communications, and

missile defense (see discussion on modernization below), as well as the

Secretary of Defense Rumsfeld testifying before the Senate Armed Services Committee,

Defense Authorization Request for Fiscal Year 2004 and the Future Years Defense

Program, February 13, 2003, transcript; available from Reuters.

Statement of Deputy Secretary of Defense Paul Wolfowitz before the House Committee

on Government Reform, May 6, 2003, p. 4.

Secretary of Defense Rumsfeld testifying before the Senate Armed Services Committee,

FY2004 Budget, February 13, 2003; transcript available from Reuters.

CRS-33

establishment of a new command, NORTHCOM, to focus on homeland security, and

changes in training practices to emphasize joint operations.

DOD also argued that its proposals for military pay raises and other benefits and

its funding of operational training will ensure that recruitment and retention remain

high and that readiness goals continue to be met. Over the longer term, DOD plans

to review its current basing strategies in Europe and review the role of reserve forces

but these areas are currently under study and not incorporated in the FY2004 budget.

Investment and Other Issues

The major issues in this year’s congressional debate — for example, DOD’s

request for broad ranging authority to manage its civilian workforce, exemptions for

DOD to certain environmental laws — are discussed above. Other issues raised

include

whether DOD’s investment priorities are transformational,

affordable, and consistent with “lessons learned” from the war in

Iraq;

! revising criteria governing the FY2005 base closure round due to be

initiated next year;

! various organizational and acquisition changes; and

! DOD’s proposed changes for management of military personnel.

An update for conference action will be included in a later update.

Proposed Acquisition and Organizational Changes

In its legislative package, DOD included several provisions designed to increase

its flexibility to contract for major defense weapons systems and information

technology programs, receive waivers from Buy America and domestic content

requirements, and buy standardized items.86

Two potentially controversial proposals would allow DOD to contract out for

firefighting and security guards at bases and would allow DOD to count work

performed by contractors at federally owned facilities as part of the 50% minimum

for in-house performance of depot work. Congress has consistently opposed allowing

DOD to hire private security guards and loosening the definition of work that could

be counted as “in-house”.87 A later update will provide the details about conference

action.

General Counsel, DOD, William J. Haynes III, letter to Speaker of the House Hastert,

April 10, 2003, Title 10, Sections 201-206; see [http://defenselink.mil/

dodgc/lrs/legispro.html].

General Counsel, DOD, William J. Haynes III, letter to Speaker of the House Hastert,

April 10, 2003, Title 10, Sections 211 and 214; see [http://defenselink.mil/

dodgc/lrs/legispro.html].

CRS-34

Other Organizational And Financial Proposals To Increase

Flexibility. Other DOD proposals would give the Secretary of Defense broad

discretion to reorganize the department, transfer personnel, and be exempt from

current personnel caps. To increase financial flexibility, DOD requested that the

limit on transfers between appropriation accounts be raised from the current level of

$2.5 billion to 2.5% of total DOD spending or about $9 billion. (DOD made this

same request in the FY2003 supplemental, and received a higher transfer limit but

not the 2.5%.)88

DOD also proposed changing the standard governing awards of contracts to

government entities versus private companies based on the A-76 competitive

sourcing rules. DOD proposed using a “best value” assessment rather than the

current lowest cost standard. A less controversial proposal, which has been endorsed

by both OPM and DOD, would transfer the DOD civilian personnel currently

performing security investigations to OPM. DOD also proposed eliminating 184

reports to Congress that are currently required, ranging from reports on specialized

topics to more general reports on readiness levels and operation and maintenance

funding.89 A later update will summarize conference action.

Authority To Spend $200 million To Support Foreign Militaries. In

its request, DOD asked Congress to give it permanent authority to allocate up to $200

million to support “coalition forces,” or foreign military forces. Although this

request is similar to the request enacted in the FY2003 supplemental for $1.4 billion

for coalition forces who help the U.S. to combat terrorism, DOD’s request for

permanent authority included no provision for congressional oversight. In the

FY2003 supplemental, Congress required DOD to report by July 1, 2003 on its plan

to allocate funding for coalition forces.90 Final action will be included in a later

update.

Affordability and Mix of DOD’s FY2004 Investment Programs

A perennial issue in defense policy has been whether the Defense Department

will be able to afford all of the major weapons modernization programs that have

been on the drawing boards, particularly toward the end of the decade, when a

number of new programs are planned to be in full scale production. The issue has

been complicated by the Defense Department’s growing commitment to defense

transformation, which implies an effort to accelerate selected programs and perhaps

General Counsel, DOD, William J. Haynes III, letter to Speaker of the House Hastert,

April 10, 2003, Title 10, Sections 401-405,411;

[http://defenselink.mil/dodgc/lrs/legispro.html].

General Counsel, DOD, William J. Haynes III, letter to Speaker of the House Hastert,

April 10, 2003, Title 10, Sections 404, 405, and 421; see

[http://defenselink.mil/dodgc/lrs/legispro.html].

General Counsel, DOD, William J. Haynes III, letter to Speaker of the House Hastert,

April 10, 2003, Title 10, Section 441; see [http://defenselink.mil/dodgc/lrs/legispro.html],

and CRS Report RL31829, Supplemental Appropriations FY2003: Iraq Conflict,

Afghanistan, Global War on Terrorism, and Homeland Security, by (name redacted) and (name

redacted).

CRS-35

add some entirely new ones. During the 2000 presidential election campaign, thenGovernor Bush promised to “skip a generation” of weapons programs in order to free

up funds for more transformational priorities. A full update for conference action will

be in a later update.

Last year, and again this year, the Defense Department has tried to calculate the

amount that is being devoted to modernization programs that it regards as particularly

transformational. According to DOD Comptroller Dov Zakheim, these programs add

up to $24.3 billion in the FY2004 budget and $239 billion over the period of the sixyear FY2004-FY2009 future years defense plan (FYDP). Under Secretary Zakheim

said that DOD made room for these programs in part by cutting about $82 billion

from projected service budgets over the course of the FYDP. The cuts include

termination of a number of Army programs to upgrade current weapons, early

retirement of 26 Navy ships and 259 aircraft and an attendant reduction of 10,000 in

the Navy’s personnel end-strength, and early retirement of 115 Air Force fighter

aircraft and 115 mobility/tanker aircraft, as well as efficiencies.91 Final conference

action will be addressed in a later update.

In the FY2004 budget, the Defense Department requested $74.4 billion for

weapons procurement and $61.8 billion for research, development, test, and

evaluation (RDT&E). Major aspects of the Administration request, and some key

issues include the following.

Army Transformation. In recent years, the Army has been pursuing three

major initiatives simultaneously: (1) upgrades to the current “legacy” force,

including improvements in M1 tanks and Bradley Fighting Vehicles; (2)

development and deployment of an “interim” force made up of six brigades equipped

with Stryker wheeled armored vehicles and designed to be more rapidly deployable

than heavy armored forces; and (3) pursuit of an “Objective Force” include the

“Future Combat System,” a family of new armored vehicles and other systems

designed to fundamentally change the way the Army will fight in the future. In

addition, the Army has been continuing to develop the Comanche helicopter, though

late last year, the Defense Department decided to cut planned total Comanche

procurement by about half.

In the FY2004 budget request, the Defense Department cut back a number of

planned upgrades of Army legacy systems, including high-profile M1 and Bradley

upgrades. In the wake of the Army’s success in the Iraq war, there was extensive

discussion in Congress about the wisdom of these planned cuts. The House Armed

Services Committee-reported version of the authorization adds $727 million to the

request to continue M1 and Bradley upgrades along with some related Army upgrade

programs.

Congressional Action. Table 8A shows action on major Army programs

in the House and Senate defense authorization bills, and Table 8B shows action in

Briefing by DOD Comptroller Dov Zakheim, “FY2004 Defense Budget,” February 6,

2003.

CRS-36

the House and Senate versions of the defense appropriations bill. A few issues stand

out.

Legacy force modernization: The House authorization adds

$258.8 million for Bradley Fighting Vehicle upgrades and $424

million for M1 tank upgrades (offset by cuts of $140 million in other

M1 projects).

These are among the programs that the

Administration wants to terminate as part of the $82 billion in 6-year

savings that officials announced when the budget was released. The

House appropriations bill adds the same amount for Bradley

upgrades and $155 million for M1 upgrades. The House

appropriators also urged DOD to budget for enough M1 upgrades in

the future to complete equipping the 3rd Armored Cavalry Regiment

with modernized tanks. In effect, the House rejected DOD plans to

cut back on Army “legacy force” upgrades, though House

appropriators also indicated that they may be satisfied once

sufficient upgraded Bradleys and M1s are procured to equip 2 and

1/3 divisions of what the Army calls its “counterattack” force of

heavy armored units.

Stryker interim combat brigades: The House appropriations also

added $35 million for long lead items for Stryker armored vehicle

procurement to equip the 5th and 6th Stryker brigades. DOD has, in

the past at least, considered halting the interim combat brigade

program after four brigades are deployed. House appropriators sent

a strong message that they expect DOD to fill out the planned sixbrigade force. The Senate Appropriations Committee also added

$35 million for long lead items for Stryker procurement, though its

report language did not specify that it was for the 5th and 6th brigades.

In addition, Senate appropriators added $100 million in other Army

procurement — for communications and other equipment — to

accelerate Stryker brigade deployment, a strong vote of support for

the Army program.

Helicopters: All of the committees add money for UH-60 utility

helicopters, largely for the National Guard, though there are some

differences in how the money is allocated. This is a perennial

congressional addition to proposed budgets. All of the committees

also support continued Comanche helicopter development despite

cost growth and substantial cuts in the planned program.

CRS-37

Table 8A. House and Senate Action on Major Army Acquisition Programs: Authorization

(amounts in millions of dollars)

House

Action

Request

Procurement

R&D

RAH-66 Comanche

—

UH-60 Blackhawk

167.0

UH-60 Blackhawk mods.

—

CH-47 Upgrades

Procurement

— 1,079.3

Senate

Action

R&D

Procurement

Comments

R&D

—

1,079.3

—

1,079.3 —

70.2

279.8

70.2

237.0

74.1 House adds $112.8 million for 9 aircraft for Army National Guard.

Senate adds $70.7 million for 7 aircraft in accordance with Army

priorities and for air inlet upgrades ($0.8 million) and $3.9 million

for R&D for C2 integration..

138.5

—

38.5

100.0

—

38.5

100.0 Both House and Senate transfer $100 million from proc. to R&D

for UH-60M upgrade.

—

516.0

—

522.0

—

531.0

— House adds $6 million for crashworthy seats. Senate adds $15

million for MH-47G mods.

AH-64 Mods

—

58.9

—

74.4

—

58.9

— House adds $15.5 million for bladefold kits.

AH-64D Apache Longbow

—

776.7

—

776.7

—

776.7

—

Bradley Base Sustainment

—

113.3

—

372.1

—

113.3

— House adds $258.8 million for Bradley M3A2 Operation Desert

Storm ``D+’‘ upgrades.

M1 Abrams Mods/Upgrades

—

361.6

—

645.6

—

361.6

— House adds $424 million for M1A2 to M1A2 SEP upgrades, cuts

$108 million from new engine program due to delays and $32

million from other upgrades — net add $284 million.

Stryker Interim Armored

Vehicle

301

955.0

46.0

301

955.0

46.0

301

955.0

46.0 —

HIMARS (Rocket Launcher)

124.2

87.4

124.2

87.4

124.2

— Note: C-130 air transportable version of MLRS.

Hellfire Missiles

—

33.1

—

33.1

—

76.1

— Senate adds $43 million for laser Hellfire II missiles — request was

just for Longbow Hellfires.

Javelin (Anti-Tank Missile)

901

140.7

—

901

140.7

—

901

180.7

— Senate adds $40 million for command launch units for Army

National Guard.

ATACMS Penetrator

—

55.1

—

55.1

—

— House urges no obligation of funds until DOD explores more cost

effective options to attack hardened sites; Senate cuts all funds.

CRS-38

House

Action

Request

Procurement

Logistic/Theater Support

Vessel

R&D

—

Procurement

—

65.7

Senate

Action

R&D

Procurement

33.0

65.7

—

Comments

R&D

—

73.2 House adds $33 million in proc. for Logistic Support Vessel (Army

now has 8); Senate adds $7.5 million in R&D for composite hull

design Theater Support Vessel to replace LSVs.

Sources: H.Rept. 108-106; S.Rept. 108-46.

Note: Figures reflect committee-reported versions of the bills and not changes made in subsequent floor action.

Table 8B. House and Senate Action on Major Army Acquisition Programs: Appropriations

(amounts in millions of dollars)

House

Action

Request

Procurement

R&D

RAH-66 Comanche

—

UH-60 Blackhawk

167.0

UH-60 Blackhawk mods.

—

CH-47 Upgrades

Procurement

— 1,079.3

Senate

Action

R&D

Procurement

R&D

Comments

—

1,079.3

—

1,079.3 —

70.2

—

279.8

79.2

215.7

70.2 House adds $112.8 million in proc. as in House authorization.

Senate adds $70.7 million for 7 aircraft, cuts $20.0 million for

MYP savings and $2.0 million from management costs.

138.5

—

38.5

73.0

—

44.4

92.0 House cuts $100 million from proc. and adds $73 million to

R&D for UH-60M upgrade program. Senate cuts $100 million

from proc. and adds $92 million to R&D for UH-60M. Senate

adds $6.0 million for specified units.

—

516.0

—

516.0

—

474.9

— House rescinds $39.1 million of FY2003 funds. Senate cuts

$41.1 million from unexpended balances and support costs.

AH-64 Mods

—

58.9

—

64.9

—

64.1

— House adds $15.5 million for bladefold kits. Senate adds $5.2

million for other upgrades.

AH-64D Apache Longbow

—

776.7

—

781.0

—

766.7

— House adds $4.3 million for radar upgrades earmarked for 2

CRS-39

House

Action

Request

Procurement

R&D

Procurement

Senate

Action

R&D

Procurement

Comments

R&D

South Carolina National Guard AH-64Ds. Senate cuts $10.0

million from support costs.

Bradley Base Sustainment

—

113.3

—

372.1

—

175.2

— House adds $258.8 million for Bradley M3A2 Operation

Desert Storm ``D+’‘ upgrades. Senate adds $61.9 million for

ODS upgrades for National Guard.

M1 Abrams

Mods/Upgrades

—

361.6

—

376.6

—

291.6

— House adds $155 million for M1A2 to M1A2 SEP upgrades (vs

$424 million in House authorization), cuts $108 million from

new engine program due to delays and $32 million from other

upgrades — net add $15 million Senate cuts $75 million from

new engine program, adds $3 million for X1100-3B engine and

$2 million for diagnostics.

Stryker Interim Armored

Vehicle

301

955.0

61.4

—

990.0

61.4

301

955.0

61.4 House adds $35 million for long lead items for 5th and 6th

brigades. Senate adds $35 million for long lead items.

HIMARS (Rocket

Launcher)

124.2

87.4

—

124.2

87.4

124.2

87.4 Note: C-130 air transportable version of MLRS.

Hellfire Missiles

—

33.1

—

33.1

—

25.1

— No add in House, which follows House authorization. Senate

cuts $8 million from “CAP kits.”

Javelin (Anti-Tank Missile)

901

140.7

—

140.7

—

901

140.7

—

Future Combat System

—

— 1,701.3

—

1,701.3

—

ATACMS Penetrator

—

55.1

—

2.0

—

55.1 House and Senate cut all funds for ATACMS penetrator.

House adds $2 million and Senate adds $4 million for Viper

Strike Munition.

Logistic/Theater Support

Vessel

—

65.7

—

65.7

—

73.2 House does not follow House authorization add. Senate adds

$7.5 million for Theater Support Vessel development,

following Senate authorization.

—

1,701.3 House directs more detailed breakdown of projects in

justification material.

Sources: H.Rept. 108-187; S.Rept. 108-87.

Note: Figures reflect committee-reported versions of the bills and not changes made in subsequent floor action. Note: Future Combat System funding includes PE 0604645A Armored Systems Modernization (ASM)-Eng. Dev. only.

CRS-40

Navy Programs. 92 Key Navy ship-acquisition programs for FY2004 include

the Virginia (SSN-774) class submarine program, the Littoral Combat Ship (LCS)

program, the Arleigh Burke (DDG-51) class Aegis destroyer, the DD(X)

next-generation destroyer program, the San Antonio (LPD-17) class amphibius ship

program, the Lewis and Clark (TAKE-1) auxiliary ship program, the Trident

cruise-missile submarine (SSGN) conversion program, and the Aegis cruiser (CG-47

class) conversion program. The FY2004 budget also includes, among other things,

continued advanced procurement funding for CVN-21, an aircraft carrier to be

procured in FY2007.

One issue in congressional hearings on the FY2004 Navy program concerns the

planned size and structure of the Navy. The 2001 Quadrennial Defense Review

(QDR) revalidated the plan for a 310-ship Navy established by the 1997 QDR, but

also stated that force-structure goals in the 2001 QDR, including the 310-ship goal,

were subject to change pending the maturation of DOD’s transformation efforts.

In February 2003, in submitting its proposed FY2004 defense budget, DOD

officials stated that they had launched studies on future requirements for undersea

warfare and future options for forcibly entering overseas military theaters. These

studies have the potential for changing, among other things, the planned number of

attack submarines and the planned size and structure of the amphibious fleet. Since

attack submarines and amphibious ships are two of the four major building blocks

of the Navy (the others being aircraft carriers and surface combatants), DOD, by

launching these two studies, appears to have taken steps to back away from the

310-ship plan. At the same time, the Secretary of Defense has explicitly declined to

endorse a plan for a 375-ship fleet that has been put forward in recent months by

Navy leaders.

As a result of these events, there is now uncertainty concerning the planned size

and structure of the Navy: DOD may no longer support the 310-ship plan, but neither

has it endorsed the 375-ship plan or any other replacement plan. This uncertainty

over the planned size and structure of the Navy affects surface combatants as well as

submarines and amphibious ships, because the biggest single difference between the

310-ship and 375-ship plans is in the area of surface combatants. The 310-ship plan

includes 116 surface combatants, all of which are cruisers, destroyers, and frigates,

while the 375-ship plan includes 160 surface combatants, including not only cruisers,

destroyers, and frigates, but as many as 60 smaller Littoral Combat Ships as well.

Congressional Action: Senate and House Markup. Table 9A shows

action on major Navy programs in the House and Senate defense authorization bills,

and Table 9B shows House action in the committee-reported version of the defense

appropriations bill. In action on key issues:

Carrier replacement program: A major budget decision in the

FY2004-FY2009 defense plan was to accelerate the transition to the

next generation of carriers by incorporating more advanced

technology into the next carrier to be fully funded in FY2007 or

This section was written by Ronald O’Rourke.

CRS-41

FY2008. In all, the new carrier is projected to cost almost $12

billion for development and production, of which about $5 billion is

for R&D. All of the congressional defense committees supported

the Administration’s revised carrier development program.

Virginia-Class Attack Submarines: The House Appropriations

Committee denied funds requested to sign a multi-year procurement

(MYP) contract for new submarines, saying (1) that the schedule for

delivery of the first submarine remains too uncertain and (2) that the

requirement to buy two submarines each year in FY2007 and

FY2008 may be unaffordable given the $2.6 billion price of each

boat. The Senate Appropriations Committee approved multi-year

procurement of Virginia-Class submarines, but only for 5 boats over

the FY2004-FY2009 planning period rather than the 7 boats that the

Navy had requested. Subsequently, on August 14, the Navy

announced an agreement with contractors on a multi-year

procurement deal for 7 boats, but with an option to reduce

procurement to 5 or 6 boats with some increase in costs per ship.

Attack Submarine Refueling Overhaul: The Senate Armed Services

Committee added $248 million to refuel one Los Angeles-class

attack submarine; the Navy did not request funding for any

overhauls. The Senate Appropriations Committee added $450

million for two refueling overhauls. Neither House defense

committee added any funds.

Littoral Combat Ship: All of the defense committees expressed some

concern about the status of the Littoral Combat Ship (LCS)

development program, though none eliminated funding. The Senate

Armed Services Committee issued the most critical report language,

though it also added $35 million for more experimentation to

determine the utility of the concept. The committee said (1) a Navy

report on the program that Congress required last year did not

adequately review alternatives or establish priorities among Navy

combat requirements, (2) that Navy cost estimates did not include

firm figures on the various modules that would be installed in the

common sea frame, and (3) that costs of the program could compete

with higher priority Navy shipbuilding in a constrained budget

environment in the future. The House Armed Services Committee

added $35 million for module design, while the House

Appropriations Committee added $25 million for module design but

cut $10 million from the overall program.

The Senate

Appropriations Committee added funds for module design.

LPD-17 Class Amphibious Ship: The House Appropriations

Committee added $175 million for advance procurement for the next

ship of the class, the LPD-23, and told the Navy to provide full

funding for the ship in FY2005, as had been planned, rather than in

FY2006, as the Navy projected this year. The Senate Appropriations

Committee added $75 million for the LPD-23.

CRS-42

Table 9A. House and Senate Action on Major Navy Acquisition Programs: Authorization

(amounts in millions of dollars)

House

Action

Request

Procurement

R&D

Carrier Replacement Program

— 1,186.6

Carrier Refueling Overhauls

—

Procurement

339.2

Senate

Action

R&D

Procurement

1,186.6

339.2

—

1,186.6

—

367.8

Comments

R&D

339.2 —

367.8

—

367.8

—

Virginia Class Submarine

1 2,528.1

112.4

1 2,528.1

112.4

Cruiser Conversion Program

194.4

—

194.4

—

194.4

—

Missile Submarine Conversion

2 1,167.3

—

2 1,167.3

—

2 1,167.3

—

164.4

—

164.4

—

— Senate adds $248 million for one overhaul in FY2004

DDG-51 Destroyer

3 3,198.3

205.7

3 3,198.3

250.7

1 3,219.3

LPD-17 Amphibious Transport

1 1,192.0

8.0

1 1,192.0

8.0

1 1,192.0

Submarine Refueling Overhauls

—

1 2,528.1

412.4

—

138.6 House adds $10.0 million in R&D for multi-mission

module. Senate adds $26.2 million in R&D for that and

other specified equipment.

205.7 House adds $35 million in R&D for S-band radar and $10

million for open Aegis architecture. Senate adds $21

million in proc. for ship modernization.

8.0 —

LHD-8 Amphibious Assault

Ship

—

355.0

—

355.0

—

355.0

—

Prior Year Shipbuilding Costs

—

635.5

—

635.5

—

635.5

—

DD (X) Destroyer

—

— 1,038.0

—

— 1,042.0

—

— 1,038.0 House adds $4 million for knowledge projection for

maintenance.

Littoral Combat Ship

—

158.1

—

188.1 Senate adds $35 million for experimentation to determine

the value of the concept.

722.3

—

722.3

—

722.3

— Note: In National Defense Sealift Fund, not in Navy

Procurement.

T-AKE Auxiliary Cargo Ship

Sources: H.Rept. 108-106; S.Rept. 108-46.

Note: Figures reflect committee-reported versions of the bills and not changes made in subsequent floor action.

CRS-43

Table 9B. House and Senate Action on Major Navy Acquisition Programs: Appropriations

(amounts in millions of dollars)

House

Action

Request

Procurement

Carrier Replacement Program

— 1,186.6

Carrier Refueling Overhauls

—

R&D

Procurement

339.2

— 1,186.6

Senate

Action

R&D

Procurement

339.2

—

1,186.6

367.8

—

232.8

1 2,123.2

158.9

339.2 —

367.8

—

Virginia Class Submarine

1 2,528.1

112.4

Cruiser Conversion Program

194.4

—

194.4

—

Missile Submarine Conversion

2 1,167.3

—

2 1,167.3

—

2 1,167.3

—

164.4

—

— Senate adds $450.0 million for 2 attack submarine

overhauls, cuts $144.0 million from advance procurement.

Submarine Refueling Overhauls

—

Comments

R&D

—

1 2,339.1

—

470.4

— Senate cuts $135 million as premature request.

141.6 House cuts $390.0 million in proc. for Multi-Year

Procurement (MYP), adds back $115.0 million for MYP

savings, cuts $129.9 million for advance proc. for FY2008

boats, and adds $46.5 million in R&D for specific

equipment and for overall program. Senate cuts $130.0

million in proc. for MYP, approving MYP for 5 rather

than 7 boats, cuts $59.0 million in advance proc. due to

inadequate Navy justification of request, and adds $29.2

million in R&D for specified equipment.

— Senate eliminates funding.

—

164.4

—

DDG-51 Destroyer

3 3,198.3

205.7

3 3,198.3

205.7

3 3,218.3

205.7 House does not follow House authorization add. Senate

adds $20.0 million for a pricing adjustment.

LPD-17 Amphibious Transport

1 1,192.0

8.0

1 1,367.0

8.0

1 1,192.0

8.0 House adds $175 million to restore FY2005 date for full

funding. Senate adds $75 million in advance

procurement.

LHD-8 Amphibious Assault

Ship

—

355.0

—

355.0

—

591.3

— Senate adds $236.3 million for FY2005 incremental

funding for LHD-8.

Prior Year Shipbuilding Costs

—

635.5

—

899.5

—

635.5

— House adds $264 million to accelerate FY2005 payments.

DD (X) Destroyer

—

— 1,038.0

—

928.0

—

— 1,038.0 House cuts $110 million of which $100 million is for ship

design for lack of definitive requirements and slow release

of prior year funds.

Littoral Combat Ship

—

168.1

—

158.1

158.1 House adds $25 million for module design and cuts $15

million due to lack of final design. Senate adds no funds,

CRS-44

House

Action

Request

Procurement

R&D

Procurement

Senate

Action

R&D

Procurement

R&D

Comments

but directs $76.0 million be used for module design.

T-AKE Auxiliary Cargo Ship

722.3

—

722.3

Source: H.Rept. 108-187, S.Rept. 108-87.

Note: Figures reflect reported bills only, not subsequent floor action.

—

— Senate eliminates funds due to program delays. Note: In

National Defense Sealift Fund, not in Navy Procurement.

CRS-45

Aircraft Programs. One of the most expensive elements of the Defense

Department’s long-term modernization plan is procurement of a number of new

advanced aircraft, including the Air Force F/A-22 fighter, the Navy/Marine Corps

F/A-18E/F aircraft; and the multi-service F-35 Joint Strike Fighter. In addition, the

Air Force is continuing to procure C-17 airlift aircraft, and the Marine Corps is

continuing to develop the V-22 tilt rotor aircraft, while Congress is continuing to

review whether to approve a proposal to allow the Air Force to lease Boeing 767s as

tanker aircraft.

The F/A-22 has been a particular focus of attention recently because of

continued cost growth in the program and because of the Air Force’s desire to expand

it. The Air Force sees the F/A-22 as its highest priority and, in the long run, would

like to increase the total number of aircraft to be procured, particularly to build a

version of the aircraft configured especially for a deep strike ground attack role to

replace F-15E aircraft as they retire in the future. The Air Force even changed the

formal designation of the aircraft from the F-22 to the F/A-22 to emphasize its

ground attack capabilities.

The Department of Defense, however, has approved only three wings of aircraft

for the air superiority mission, and a key budget decision in the FY2004-FY2009

FYDP was that the Air Force may plan to buy only as many aircraft as it can with the

total funds projected last year to be available for the program. With continued cost

growth, this number has shrunk from the 330 aircraft the Air Force has wanted to

outfit three wings (each with 72 deployable aircraft, plus attrition reserves, plus

aircraft in repair and transit, etc.), to 295 and most recently to 276. For its part,

Congress has imposed a cap on the total development cost of the program, which the

Air Force wants Congress to lift.

Another issue that remains contentious is whether to permit the Air Force to

lease commercially produced aircraft for use as tankers. In the FY2002 defense

appropriations act, Congress approved a proposal to allow the Air Force to begin

negotiations with Boeing to lease 100 767 aircraft to be converted to operate as airto-air refueling tankers. This measure was controversial in part because federal

budget rules generally discourage leases on the premise that direct purchase will be

cheaper for the government in the long run, though it may require more up-front

money in agency budgets.

Through all the controversy, the Air Force and Boeing continued to try to

hammer out the details of a lease agreement. After much internal debate within the

Administration, on May 23, the Defense Department announced that it had approved

an agreement under which the Air Force will lease 100 767s through 2017. Delivery

will begin in 2006 and will be completed by 2011, and the cost through 2017 will

total about $13 billion in constant FY2002 dollars. Purchasing the aircraft would

cost an additional $4 billion.

Congressional Action. Table 10A shows action on selected major weapons

programs in the House and Senate versions of the defense authorization bill. Table

10B shows changes made in the House Appropriations Committee markup of the

defense appropriations bill. In action on key issues:

CRS-46

F-22 Fighter: A few years ago, the House Appropriations

Committee proposed terminating F-22 development, though funding

was eventually provided. This year, the F-22 has been an issue in

the Senate, though not in nearly so dramatic a way. The Senate bill

reduces procurement from the 22 aircraft requested to 20 in order to

allow the Air Force to adjust planned production and delivery dates.

None of the other defense committees, however, made cuts in the

number of aircraft.

Boeing 767 Tanker Leases: On May 23, the Defense Department

announced approval of a proposal to lease 100 Boeing 767 aircraft

equipped as tankers to replace existing KC-135 tankers in the Air

Force, as approved by Congress in Section 8159 of the FY2002

defense appropriations act (P.L. 107-117). On July 14, the Air Force

submitted a report to Congress on the lease as required by Section

8159 and subsequently requested approval of the four congressional

defense committees (Armed Services and Appropriations in each

chamber) to reprogram funds to cover initial costs of the lease.

Three of the four committees approved the lease reprogramming, but

the Senate Armed Services Committee has not, pending hearings on

the proposal.93

Next Generation Bomber Development: The House authorizers and

appropriators both added $100 million in a new R&D line item to

begin development of a new bomber. The Senate defense

committees did not provide funds.

For a detailed CRS review of the proposed leasing agreement, see (name redacted),

Coordinator, The Air Force KC-767 Tanker Lease Proposal: Key Issues For Congress, CRS

Report RL32056, September 2, 2003. The Congressional Budget Office and the General

Accounting Office have also released studies of the issue.

CRS-47

Table 10A. House and Senate Action on Major Aircraft Programs: Authorization

(amounts in millions of dollars)

House

Action

Request

Procurement

R&D

Procurement

Senate

Action

R&D

Procurement

Comments

R&D

F-22

22 4,225.4

936.5

4,064.4

936.5

F-35 Joint Strike Fighter

—

— 2,194.1

—

2,194.1

—

F-16C/D Mods./Post

Production

—

314.5

87.5

—

328.7

107.5

—

372.7

87.5 House adds $14.2 million in proc. and $20 million in

R&D for upgrades. Senate adds $48 million in proc.

for engines and $10 million for upgrades.

F-15 Mods./Post

Production

—

204.9

112.1

—

244.9

128.6

—

241.4

128.6 House adds $40 million in proc. and $16.5 million in

R&D for upgrades. Senate adds $36.5 million in proc.

and $16.5 million in R&D for upgrades.

JPATS Trainer

280.6

—

280.6

—

280.6

C-17 Globemaster

11 3,502.1

184.1

3,680.4

—

11 3,498.4

C-130/C130J Airlift

Aircraft/Mods.

660.0

164.2

666.1

164.2

672.9

Next Generation Bomber

—

100.0

—

B1-B Bomber Mods.

—

100.1

88.7

—

120.4

88.7

—

100.1

88.7 House adds $20.3 million for mods.

B-2 Stealth Bomber Mods.

—

114.9

176.8

—

166.7

185.6

—

139.6

152.1 House and Senate transfer $24.7 million from R&D to

proc. House adds $27.1 million in proc. for upgrades,

and $33.5 million in R&D.

F/A-18

42 3,031.1

179.0

3,056.1

179.0

42 3,031.1

179.0 House adds $25 million for armament equip.

V-22*

543.3

875.2

543.3

543.3 —

Air Force Programs

20 4,008.4

936.5 House cuts $161 million Senate cuts 2 aircraft and

$217 million

2,194.1 —

—

— House adds $182 million for 1 aircraft. House and

Senate cut $10 million in proc., add $6.3 million for

mods.

164.2 House adds $6.1 million for radar upgrades. Senate

adds $6.1 for radar and $6.8 million for satellite comm.

— House adds $100 million for new R&D program.

Navy/Marine Corps Programs

875.2

CRS-48

House

Action

Request

Procurement

R&D

F-35 Joint Strike Fighter

—

UH-1/AH-1Z Helicopter

320.1

MH-60S Helicopter

431.5

Procurement

— 2,171.7

Senate

Action

R&D

Procurement

Comments

R&D

—

2,171.7

—

2,227.7 Senate adds $56 million for interchangeable engine

devel.

90.6

320.1

90.6

320.1

90.6 —

59.1

431.5

59.1

431.5

59.1 —

MH-60R Helicopter

398.5

77.1

398.5

77.1

402.0

77.1 Senate adds $3.5 million in proc. for low freq. sonar.

E-2C Early Warning Aircft.

271.6

361.4

271.6

361.4

271.6

361.4 —

UC-35 Support Aircraft

15.6

—

15.6

—

31.2

— Senate adds $15.6 million for 2 additional aircraft.

T-45TS Trainer

339.2

—

339.2

—

339.2

—

JPATS Trainer

—

2.4

—

17.1

—

37.4

— House adds $14.7 million for aircraft and ground

systems. Senate adds $35.0 million for 5 aircraft.

KC-130J Airlift Aircraft

—

79.2

—

79.2

—

79.2

—

EA-6 Series Mods.

—

207.1

36.6

—

339.5

36.6

—

207.1

36.6 House adds $132.4 million for specified upgrades.

AV-8 Series Mods.

—

20.9

10.5

—

20.9

17.5

—

70.9

10.5 Senate adds $50.0 million for specified upgrades.

House and Senate add $7.0 million in R&D for engine

devel.

F-18 Series Mods.

—

335.9

—

335.9

—

335.9

—

P-3 Series Mods.

—

95.0

7.3

—

104.0

24.8

—

134.4

19.6 House adds $9.0 million in proc. for comm. upgrades,

Senate adds $39.4 million for Anti-Surface Warfare

Improvement Program (AIP). House adds $17.5

million and Senate adds $12.3 million in R&D for AIP.

T-45 Series Mods.

—

22.3

3.0

—

41.4

3.0

—

22.3

3.0 House adds $19.1 million for conversions to Model C.

—

Sources: H.Rept. 108-106; S.Rept. 108-46.

Note: Figures reflect committee-reported versions of the bills and not changes made in subsequent floor action.

CRS-49

Table 10B. House and Senate Action on Major Aircraft Programs: Appropriations

(amounts in millions of dollars)

House

Action

Request

Procurement

R&D

Procurement

Senate

Action

R&D

Procurement

Comments

R&D

F-22

22 4,225.4

936.5

4,225.4

936.5

F-35 Joint Strike Fighter

—

— 2,194.1

—

2,128.1

—

F-16C/D Mods./Post

Production

—

314.5

87.5

—

294.8

87.5

—

338.5

97.5 House cuts $25.5 million in proc. for helmet display,

adds $5.8 million for other upgrades. Senate adds

$20.0 million for engine and $4.0 million for other

upgrades in proc. and adds $10 million for radar

upgrades in R&D.

F-15 Mods./Post

Production

—

204.9

112.1

—

204.9

101.1

—

204.9

112.1 House cuts $26.9 million in proc. for display

processor, adds $29.5 million for other upgrades, cuts

$11 million from R&D. Senate adds $21.5 million in

proc. for upgrades, cuts $17.0 million for program

delays and adds $16.5 million for radar upgrade in

R&D.

JPATS Trainer

280.6

—

280.6

—

280.6

C-17 Globemaster

11 3,502.1

184.1

11 3,3437.1

184.1

11 3,552.1

184.1 House cuts $5 million in proc. for slow execution, cuts

$10 million from multi-year proc., adds $6.3 million

for mods., cuts $50 million from interim contractor

support. Senate adds $50 million in proc. for interim

contractor support.

C-130/C130J Airlift

Aircraft/Mods.

13.6

19.7 House cuts $3.2 million in proc. from upgrades.

Senate adds $6.1 million in R&D for C-130 radar

upgrades for National Guard. Senate adds $6.8

million for SATCOM upgrades, $3.1 million for radar

upgrades for Nevada National Guard, and $13 million

Air Force Programs

660.0

656.8

22 4,069.4

682.9

936.5 House cuts $161 million from proc., following House

authorization. Senate cuts $161 million for

efficiencies, adds $5 million for producibility.

2,166.1 House cuts $66 million in overall system design.

Senate cuts $28.0 million for inflation adjustment.

—

CRS-50

House

Action

Request

Procurement

R&D

Procurement

Senate

Action

R&D

Procurement

R&D

Comments

for infrared countermeasures for Alaska National

Guard.

Next Generation Bomber

—

100.0

—

— House adds $100 million, following House

authorization.

B1-B Bomber Mods.

—

100.1

88.7

—

105.4

88.7

—

100.1

88.7 House adds $20.3 million for mods. as in House

authorization, cuts $15 million for Wind Corrected

Munitions Dispenser (WCMD) kits. Senate cuts $15

million for WCMD kits.

B-2 Stealth Bomber Mods.

—

114.9

176.8

—

166.7

185.6

—

134.6

152.1 House and Senate transfer $24.7 million from R&D to

in proc. House adds $27.1 million in proc. for

upgrades, and $33.5 million in R&D, as in House auth.

Senate cuts $5.0 million in proc. for interim contractor

support.

F/A-18

42 3,031.1

179.0

3,031.1

179.0

42 3,031.1

179.0 House does not follow House authorization add of $25

million. Senate adds $29.0 million for aircraft

equipment.

V-22*

543.3

875.2

543.3

875.2

543.3 Senate transfers $43.0 million from R&D Navy to

R&D for Special Operations Command.

— 2,171.7

—

2,105.7

—

2,216.5 House cuts $66 million in overall system design.

Senate cuts $28.0 million for inflation, adds $72.8

million for interchangeable engine design.

Navy/Marine Corps Programs

875.2

F-35 Joint Strike Fighter

—

UH-1/AH-1Z Helicopter

320.1

90.6

320.1

90.6

320.1

92.6 House adds $5.0 million in proc. for AH-1W night

targeting upgrade. Senate adds $10.0 million in proc.

for UH-1 upgrades and $2.0 million in R&D for

diagnostics.

MH-60S Helicopter

431.5

59.1

431.5

59.1

411.5

59.1 Senate cuts $20.0 million in support costs.

MH-60R Helicopter

398.5

77.1

398.5

77.1

388.5

77.1 Senate cuts $10.0 million in support costs.

E-2C Early Warning

271.6

361.4

271.6

356.4

271.6

361.4 House cuts $5.0 million in R&D from management

CRS-51

House

Action

Request

Procurement

R&D

Procurement

Senate

Action

R&D

Procurement

Comments

R&D

Aircraft

costs. Senate adds $5. 0 million in R&D for Network

Centric Warfare test bed.

UC-35 Support Aircraft

15.6

—

15.6

—

31.2

— Senate adds $15.6 million for 2 aircraft, as in auth.

T-45TS Trainer

339.2

—

339.2

—

339.2

—

JPATS Trainer

—

2.4

—

24.1

—

20.4

— House adds $21.7 million for aircraft and ground

equipment. Senate adds $18 million for aircraft.

KC-130J Airlift Aircraft

—

79.2

—

79.2

—

79.2

—

EA-6 Series Mods.

—

207.1

36.6

—

284.1

45.6

—

207.1

49.1 House adds $77.0 million in proc. for specified

upgrades and $9 million for R&D. Senate adds $12.5

million in R&D for upgrades.

AV-8 Series Mods.

—

20.9

10.5

—

57.9

8.0

—

57.9

10.5 House and Senate add $37 million in proc. for

targeting pods. House cuts $2.5 million in R&D to

reduce concurrency.

F-18 Series Mods.

—

335.9

—

341.9

—

370.9

— House adds $6.0 million for specified upgrades.

Senate adds $35 million for ongoing upgrade program.

P-3 Series Mods.

—

95.0

7.3

—

95.0

11.3

—

128.0

19.6 House adds $30.0 million in proc. for upgrades, of

which $6 million is for Anti-Surface Warfare

Improvement Program (AIP). House adds $4 million

in R&D for AIP. Senate adds $26.0 million in proc.

for AIP and $7.0 million for other upgrades, and adds

$12.3 million in R&D for phased capability upgrade.

T-45 Series Mods.

—

22.3

3.0

—

22.3

3.0

—

22.3

3.0 House does not follow House authorization add.

—

Source: H.Rept. 108-187.

Notes: Figures reflect committee markup of the House bill only. V-22 total includes Air Force and Special Operations Command CV-22 R&D funding.

CRS-52

Missile Defense. The Administration requested a total of $9.1 billion in

FY2004 for missile defense programs, including development programs that it

requests be funded through the Missile Defense Agency and procurement of the

Patriot PAC-3 missile that it requests in the Army budget. The Administration’s

major new initiative has been to pursue accelerated fielding of a limited National

Missile Defense capability to include, among other things, up to 20 ground-based

interceptor missiles based in Alaska and California.

Table 11 shows congressional action on funding for missile defense programs.

Congress did not make major changes in the requested program. A few issues stand

out, however.

The Administration requested funding for Patriot PAC-3 and

Medium Extended-Range Air Defense System (MEADS) R&D in

the Army budget rather than in the Missile Defense Agency (MDA)

budget. The Senate authorization and appropriations bills, however,

transfer funding for PAC-3 the MDA, and the House authorization

transfers funding for MEADS.

The House authorization and appropriations bills made a number of

cuts in missile defense R&D programs and added about equal

amounts to Patriot PAC-3 missile procurement. The Administration

requested funds for 108 missiles. The House authorization adds

$126 million for 30 additional missiles, and the House

appropriations bill adds $90 million.

CRS-53

Table 11: House and Senate Action on Missile Defense Funding

(budget authority in thousands of dollars)

Program Element # and Title/Project Title

Request

House

Auth.

Senate

Auth.

House

Approp.

Senate

Approp.

Comments

0603175C Ballistic Missile Defense Technology

Advanced Technology Development

189,056

—

Laser Technology

47,130

—

Kinetic Energy Anti-Satellite

—

7,500

7,500 House and Senate approp. add $7.5 million

Extended Footprint Program

—

1,400

Advanced Metallized Gelled Propellants

—

3,800 Senate approp. add.

Massively Parallel Optical Interconnects for Microsatellites

—

4,500 Senate approp. add.

Chemical Vapor Deposition of Organic Materials

—

3,000 Senate approp. add.

COLD

—

3,000 Senate approp. add.

Improved Materials for Optical Memories

—

4,200 Senate approp. add.

Silicon Carbide Wide Band Gap Research

—

5,500 Senate approp. add.

Wide Bandgap Optoelectronics

—

8,000 Senate approp. add.

Multiple Target Tracking Optical Sensor Array Technology

[MOST]

—

1,000 Senate approp. add.

AEOS MWIR Adaptive Optic

—

2,000 Senate approp. add.

Advanced RF Technology Development

—

4,000 Senate approp. add.

SiC Mirrors

—

2,000 Senate approp. add.

Porous Silicon

—

3,000 Senate approp. add.

Program Operations

4,634

Program Reduction

—

-55,800

—

-55,800

—

240,820

185,020

240,820

193,920

292,320

—

151,696

—

Program Element Total

—

House approp. adds $1.4 million

—

House auth. and approp. cut $55.8 million from overall PE.

0603879C Advanced Concepts, Evaluations And Systems /a/

Program Element Total

CRS-54

Program Element # and Title/Project Title

Request

House

Auth.

Senate

Auth.

House

Approp.

Senate

Approp.

Comments

0603881C Ballistic Missile Defense Terminal Defense Segment

Theater High Altitude Area Defense (THAAD)

730,571

767,571

730,571

Israeli Arrow Program

64,803

74,803

64,803

154,803 Senate approp. adds $90 million.

—

276,259

—

15,066

—

810,440

1,123,699

820,440

810,440

900,440

—

2,810,799

2,910,799

2,810,799

3,010,799 Senate auth. adds $100.0 million. Senate approp. adds $200 million

for additional interceptors.

672,165

679,165

660,465

672,165

672,165 House auth. adds $7.0 million Senate auth. cuts $11.7 million from

program management.

Sea-Based X-Band Radar

—

22,900

—

22,900

—

House auth. and approp. add $22.9 million

Common RF Scene Generation Capability (non-add)

—

[4,800]

—

House auth. earmarks $4.8 million

54,000

Range Command and Control Display Upgrade

—

3,000 Senate approp. add.

Range Data Monitor/Analysis Tool

—

3,000 Senate approp. add.

SHOTS

—

5,000 Senate approp. add.

PMRF Upgrades

—

20,000 Senate approp. add.

Kauai Test Facility

—

[4,000] Senate approp. earmark of appropriated funds.

Program Operations

76,302

69,302

3,613,266

3,643,166

3,701,566

3,629,166

3,844,266

—

Airborne Laser (ABL)

610,035

—

Program Operations

16,229

14,229

16,229 House approp. cuts $2.0 million

626,264

624,264

626,264

Medium Extended Air Defense (MEADS) /b/

Program Operations

Program Element Total

—

House auth. transfers MEADS from Army. House approp. does not

follow auth.

0603882C Ballistic Missile Defense Midcourse Defense Segment

Ground-Based Midcourse Defense (GMD) Test Bed

AEGIS Ballistic Missile Defense

Japanese Cooperative Program

Program Element Total

—

76,302 House approp. cuts $7.0 million

0603883C Ballistic Missile Defense Boost Defense Segment

Program Element Total

—

CRS-55

Program Element # and Title/Project Title

Request

House

Auth.

Senate

Auth.

House

Approp.

Senate

Approp.

Comments

0603884C Ballistic Missile Defense Sensors

Space Tracking and Surveillance System (STSS)

300,195

284,695

300,195

284,695 Senate auth. cuts $15.5 from program management. Senate approp.

cuts $15.5 million by consolidating projects.

Russian-American Observation Satellite Program (RAMOS)

29,623

—

Ballistic Missile Defense Radars

101,000

—

Airborne Infrared System (AIRS)

—

10,000

—

X-Band Radar

—

5,000

—

Senate auth. adds $5.0 million

E-2 Infrared Search and Track (IRST)

—

3,750

—

Senate auth. adds. $3.75 million

7,424

—

438,242

441,492

438,242

437,742

—

295,542

225,542

295,542

85,542 Senate auth. cuts $70.0 million. Senate approp. cuts $210.0 million.

Program Operations

5,510

Program Reduction

—

-150,000

—

-150,000

—

301,052

151,052

231,052

151,052

91,052

—

Test & Evaluation

355,857

—

Targets & Countermeasures

249,089

—

2,100

—

6,576

—

611,522

613,622

611,522

—

Command and Control, Battle Management and

Communications (C2BMC)

168,455

—

Hercules

56,452

—

Joint Warfighter Support Block 2004

24,139

—

Program Operations

Program Element Total

15,000 Senate auth. adds $10.0 million. Senate approp. adds $15.0 million.

0603886C Ballistic Missile Defense System Interceptor

Ballistic Missile Defense Interceptors

Program Element Total

—

House auth. and approp. cut $150 million from PE.

0603888C Ballistic Missile Defense Test & Targets

Proton-Neutron Pulse Research at Indiana University

Program Operations

Program Element Total

House approp. adds $2.1 million

0603889C Ballistic Missile Defense Products

CRS-56

Program Element # and Title/Project Title

Request

House

Auth.

Senate

Auth.

House

Approp.

Senate

Approp.

Comments

Joint National Integration Center (JNIC)

79,122

—

Program Operations

15,476

—

Program Reduction

—

-31,100

—

-31,100

-40,000 House auth. and approp. cut $31.1 million from PE. Senate approp.

cuts $40.0 million from engineering support.

343,644

312,544

343,644

312,544

303,644

—

System Engineering & Integration

208,048

—

Command and Control, Battle Management and

Communications Core

15,556

—

Intelligence

19,362

—

245

—

Producibility & Manufacturing Technology

30,769

—

Countermeasures/Counter-Countermeasures (CM/CCM)

48,000

—

Hercules Core

24,079

—

Modeling and Simulation

98,173

—

BMD Information Management Systems

31,364

—

Program Reduction

—

-45,000

—

-45,000

-60,000 House auth. and approp. cut $45.0 million from PE. Senate approp.

cuts $60.0 million from engineering and other support.

Wide Bandwidth Technology

—

[9,500]

—

5,000

—

House auth. earmarks $9.5 million House approp. adds $5.0 million

Ballistic Missile Launch Canister & Manufacturing

Improvements (non-add)

—

[5,000]

—

House auth. earmarks $5.0 million

Corporate Lethality Testing

—

-5,000

—

Senate auth. cuts $5.0 million

Advanced Research Center

—

2,000

Electro-Optic Components for Missile Defense

—

5,000

—

House approp. adds $5.0 million

Pump Arrays for High Energy Lasers

—

2,500

—

House approp. adds $2.5 million

Carbon Foam Program

—

Program Element Total

0603890C Ballistic Missile Defense Systems Core

Joint Warfighter Support

10,534 Senate auth. adds $2.0 million. Senate approp. adds $10.5 million.

2,500 Senate approp. add.

CRS-57

Program Element # and Title/Project Title

Request

Program Operations

House

Auth.

Senate

Auth.

House

Approp.

Senate

Approp.

Comments

8,400

—

483,996

438,996

480,996

451,496

437,030

—

Transfer from Army MEADS

—

241,325

—

Senate auth. transfers $241.3 million from Army.

Transfer from Army PAC-3 TMD Acquisition

—

174,475

—

Senate auth. transfers $174.5 million from Army.

—

415,800

—

14,481

—

93,441

—

7,728,864

7,790,123

8,173,214

7,484,364

8,199,698

—

0604865A Patriot PAC-3 Theater Missile

Defense Acquisition

174,475

253,475

—

174,475

—

0203801A Missile/Air Defense Product Improvement

Program

44,468

54,468

48,468

44,468

0603869A Medium Extended Air Defense System

(MEADS) Concepts /b/

276,259

—

276,259

—

0605126J Joint Theater Air and Missile Defense

Organization

87,250

—

Total RDT&E Other Agencies

582,452

395,193

135,718

582,452

134,218

—

Program Element Total

0604865C Patriot PAC-3 Theater Missile Defense Acquisition

Program Element Total

395,800 Senate approp. transfers PAC-3 and MEADS from Army and directs

consolidating the programs.

0901585C Pentagon Reservation

Program Element Total

0901598C Management Headquarters - MDA

Program Element Total

Total RDT&E Missile Defense Agency

Other Agency Missile Defense R&D Programs

Army

Senate auth. and approp. transfer all funding to MDA.

46,968 Senate auth. adds $4.0 million for PAC-3 antenna mast group.

Senate approp. adds $1.0 million for mast group and $1.5 million for

radome.

House and Senate auth. and Senate approp. transfer all funding to

MDA. Senate auth. cuts $39.9 million.

Joint Staff

CRS-58

Program Element # and Title/Project Title

Request

House

Auth.

Senate

Auth.

House

Approp.

Senate

Approp.

Comments

Missile Defense Procurement

Army

Patriot PAC-3 (Patriot System Summary)

561,555

687,555

561,555

651,555

561,555 House Auth. adds $126.0 million for 30 missiles (request for 108).

House approp. adds $90.0 million.

Patriot Modifications

212,575

223,575

182,075

212,575 Senate auth. adds $11.0 million for PAC-3 improvements. House

approp. cuts $30.5 million for Patriot-MEADS consolidation savings.

Total Missile Defense Procurement

774,130

900,130

785,130

833,630

774,130

—

Total RDT&E and Procurement /b/

9,085,446

9,094,062

8,900,446

9,108,046

—

Sources: H.Rept. 108-106; S.Rept. 108-46; H.Rept. 108-187.

Notes:

/a/ Project level detail classified.

/b/ Does not include Military Construction funding of $2.6 million.

CRS-59

Nuclear Weapons Programs. Last year, a major debate in Congress

concerned an Administration proposal to study development of a new “Robust

Nuclear Earth Penetrator” warhead and to set limits on R&D on any new or modified

nuclear weapons.94 The debate continued this year in response to an Administration

request that Congress lift a ban on the conduct of R&D into low-yield nuclear

weapons that has been in effect since 1993. Referred to the Spratt-Furse amendment,

the provision was enacted as Section 3136 of the FY1993 defense authorization act

(P.L. 103-160). That section states:

It shall be the policy of the United States not to conduct research and

development which could lead to production by the United States of a new lowyield nuclear weapons, including a precision low-yield warhead.

As part of its Nuclear Posture Review issued in December 2001, the

Administration announced that the United States would investigate the use of

modified nuclear weapons to destroy deeply-buried and hardened targets in rogue

nations such as North Korea and would pursue concept development studies for new

low-yield nuclear weapons for that and some other missions.95 In its legislative

request this year, DOD argues that lifting the ban is necessary to train the next

generation of nuclear weapons scientists and engineers and explore “the full range

of technical options” to respond to “new or emerging threats,” including using lowyield nuclear weapons against buried and hardened bunkers that could contain

chemical and biological agents.96 To carry this out, DOD requested $6 million to

conduct “advanced concepts” research into low-yield nuclear weapons and $15

million to continue R&D to do research on a Robust Nuclear Earth Penetrator that

could modify either the B61 or the B83 nuclear weapons in the current inventory to

be more able to penetrate hardened sites.

Congressional Action: Modify Restrictions on R&D for Low-Yield

Nuclear Weapons. Both houses agreed to modify current restrictions on R&D on

low-yield nuclear weapons (less than five kilotons), though the chambers adopted

different approaches. In the House version, U.S. policy would be modified to ban

“development and production” of low-yield nuclear weapons but DOE would be

allowed to conduct “concept definition, feasibility studies and detailed engineering

design.”97 The Senate version lifts the ban but states that the Department of Energy

H.Rept. 107-772, Conference Report on National Defense Authorization Act for Fiscal

Year, 2003, p. 786-p.788. Sec. 3143 of the FY2003 DOD Authorization Act required that

DOE specifically request funds for R&D for research, development or that could lead to

production of any new nuclear weapon. Section 3146 provided $15 million for the Robust

Nuclear Earth Penetrator program 30 days after the Secretary of Defense submitted a report

that specified military requirements, described targets and assessed conventional

alternatives.

CRS Report RS21133, The Nuclear Posture Review: Overview and Emerging Issues by

(name redacted), p. 5.

General Counsel, DOD, William J. Haynes III, Letter to Speaker of the House Hastert,

March 3, 2003, Subtitle C, Sec. 221; see [http://defenselink.mil/dodgc/lrs/legispro.html].

Section 3111 in H.R. 1588 as engrossed and passed by the House, and H.Rept. 108-106,

p. 434.

CRS-60

may not begin engineering development or any later phase of development or

production of new weapons unless “specifically authorized” by Congress.98 The

Senate also adopted by voice vote an amendment that would require specific

authorization for DOE to pursue engineering development of a Robust Nuclear Earth

Penetrator weapon.99

There was a wide-ranging debate in the Senate about an amendment offered by

Senators Feinstein and Kennedy to restore the ban, but the amendment was tabled by

a vote of 51 to 43 (S.Amdt. 715). Both supporters and opponents of the ban focused

on the Administration’s interest in exploring the possibility of using low-yield

nuclear weapons as a way to attack deeply buried, hardened bunkers that could

contain chemical or biological weapons.100

To those who oppose the ban, research to explore the use of a low-yield nuclear

weapon or a nuclear earth penetrator weapon against hardened, underground bunkers

should be explored as a method that could be effective and could generate less

collateral damage. Supporters of continuing the ban argued that even a 5-kiloton

nuclear weapon would generate large losses of life and much collateral damage.

Supporters of the ban also argued that exploring this new mission for nuclear

weapons could lead to requirements to test new nuclear weapons and undercut the

U.S. commitment to the underground nuclear testing moratorium as well as U.S.

policy to prevent the spread of nuclear weapons to other nations. Those who want to

lift the ban argue that U.S. actions to re-institute research on new nuclear weapons

would not affect U.S. efforts to discourage nations from pursuing nuclear weapons.

Whether a nuclear weapon is necessary for this mission is also controversial.

Some observers believe that only a nuclear version could destroy hardened, deeplyburied bunkers, and others argue that the U.S. could develop precise conventional

bunker-busting weapons or other approaches that could be equally or more effective

than nuclear weapons in disabling a hardened bunker or containing chemical or

biological weapons.101 Some scientists and engineers have questioned whether a lowyield nuclear weapon could be effective against a deeply-buried underground facility,

particularly if its precise location is not known.102 Other conventional alternatives

could include developing non-nuclear bunker-busting weapons with more precise

targeting capability, using several penetrating missiles simultaneously to increase

destructive capability, disabling facilities with electromagnetic pulse weapons, or

Section 3131 in S. 1050 as reported, and S.Rept. 108-46, p. 447-p. 448.

Congressional Record, May 21, 2003, p. S6805.

100

Congressional Record, May 20, p. S6663-S6690, passim.

101

Congressional Record, May 20, 2003, p. S6663 to p. S6690, passim.

102

Geoffrey Forden, “USA Looks at Nuclear Role in Bunker Busting,” Jane’s Intelligence

Review, March 12, 2002, p. 1, 3, 4-5; see [http://www.janes.com/press/pc020312_1.shtml];

see also, Sidney Drell, James Goodby, Raymond Jeanlos, and Robert Peurifoy, “A Strategic

Choice: New Bunker Busters Versus Nonproliferation, Arms Control Today, March 2003.

CRS-61

monitoring any movement of material by maintaining surveillance on exits of

underground bunkers.103

Opponents of the ban also argue that this new research is necessary to train a

new generation of nuclear scientists, a point cited by the Administration in its

request. Supporters argue that nuclear scientists can be trained in other ways.

On th

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