    [Senate Hearing 107-355]
    [From the U.S. Government Publishing Office]

                                                    S. Hrg. 107-355, Pt. 6

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2002

    =======================================================================

                                    HEARINGS

                                   before the

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                          ONE HUNDRED SEVENTH CONGRESS

                                 FIRST SESSION

                                       ON

                                    S. 1416

    AUTHORIZING APPROPRIATIONS FOR FISCAL YEAR 2002 FOR MILITARY ACTIVITIES
       OF THE DEPARTMENT OF DEFENSE, FOR MILITARY CONSTRUCTION, AND FOR
    DEFENSE ACTIVITIES OF THE DEPARTMENT OF ENERGY, TO PRESCRIBE PERSONNEL
      STRENGTHS FOR SUCH FISCAL YEAR FOR THE ARMED FORCES, AND FOR OTHER
                                    PURPOSES

                                   ----------

                                     PART 6

                                   PERSONNEL

                                   ----------

                           APRIL 24 AND JULY 18, 2001

             Printed for the use of the Committee on Armed Services

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                            2002--Part 6  PERSONNEL

                                                     S. Hrg. 107-355, Pt. 6

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2002

    =======================================================================

                                    HEARINGS

                                   before the

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                          ONE HUNDRED SEVENTH CONGRESS

                                 FIRST SESSION

                                       ON

                                    S. 1416

    AUTHORIZING APPROPRIATIONS FOR FISCAL YEAR 2002 FOR MILITARY ACTIVITIES
       OF THE DEPARTMENT OF DEFENSE, FOR MILITARY CONSTRUCTION, AND FOR
    DEFENSE ACTIVITIES OF THE DEPARTMENT OF ENERGY, TO PRESCRIBE PERSONNEL
      STRENGTHS FOR SUCH FISCAL YEAR FOR THE ARMED FORCES, AND FOR OTHER
                                    PURPOSES

                                   __________

                                     PART 6

                                   PERSONNEL

                                   __________

                           APRIL 24 AND JULY 18, 2001

             Printed for the use of the Committee on Armed Services

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                          COMMITTEE ON ARMED SERVICES

                        JOHN WARNER, Virginia, Chairman

    STROM THURMOND, South Carolina       CARL LEVIN, Michigan
    JOHN McCAIN, Arizona                 EDWARD M. KENNEDY, Massachusetts
    BOB SMITH, New Hampshire             ROBERT C. BYRD, West Virginia
    JAMES M. INHOFE, Oklahoma            JOSEPH I. LIEBERMAN, Connecticut
    RICK SANTORUM, Pennsylvania          MAX CLELAND, Georgia
    PAT ROBERTS, Kansas                  MARY L. LANDRIEU, Louisiana
    WAYNE ALLARD, Colorado               JACK REED, Rhode Island
    TIM HUTCHINSON, Arkansas             DANIEL K. AKAKA, Hawaii
    JEFF SESSIONS, Alabama               BILL NELSON, Florida
    SUSAN COLLINS, Maine                 E. BENJAMIN NELSON, Nebraska
    JIM BUNNING, Kentucky                JEAN CARNAHAN, Missouri
                                         MARK DAYTON, Minnesota

                          Les Brownlee, Staff Director

                David S. Lyles, Staff Director for the Minority

                         CARL LEVIN, Michigan, Chairman

    EDWARD M. KENNEDY, Massachusetts     JOHN WARNER, Virginia,
    ROBERT C. BYRD, West Virginia        STROM THURMOND, South Carolina
    JOSEPH I. LIEBERMAN, Connecticut     JOHN McCAIN, Arizona
    MAX CLELAND, Georgia                 BOB SMITH, New Hampshire
    MARY L. LANDRIEU, Louisiana          JAMES M. INHOFE, Oklahoma
    JACK REED, Rhode Island              RICK SANTORUM, Pennsylvania
    DANIEL K. AKAKA, Hawaii              PAT ROBERTS, Kansas
    BILL NELSON, Florida                 WAYNE ALLARD, Colorado
    E. BENJAMIN NELSON, Nebraska         TIM HUTCHINSON, Arkansas
    JEAN CARNAHAN, Missouri              JEFF SESSIONS, Alabama
    MARK DAYTON, Minnesota               SUSAN COLLINS, Maine
    JEFF BINGAMAN, New Mexico            JIM BUNNING, Kentucky

                         David S. Lyles, Staff Director

                    Les Brownlee, Republican Staff Director

                                     ______

                           Subcommittee on Personnel

                       TIM HUTCHINSON, Arkansas, Chairman

    STROM THURMOND, South Carolina       MAX CLELAND, Georgia
    JOHN McCAIN, Arizona                 EDWARD M. KENNEDY, Massachusetts
    WAYNE ALLARD, Colorado               JACK REED, Rhode Island
    SUSAN COLLINS, Maine                 DANIEL K. AKAKA, Hawaii
                                         JEAN CARNAHAN, Missouri

                         MAX CLELAND, Georgia, Chairman

    EDWARD M. KENNEDY, Massachusetts     TIM HUTCHINSON, Arkansas
    JACK REED, Rhode Island              STROM THURMOND, South Carolina
    DANIEL K. AKAKA, Hawaii              JOHN McCAIN, Arizona
    E. BENJAMIN NELSON, Nebraska         WAYNE ALLARD, Colorado
    JEAN CARNAHAN, Missouri              SUSAN COLLINS, Maine

                                      (ii)

    ?

                                C O N T E N T S

                                  ----------

                        CHRONOLOGICAL LIST OF WITNESSES
     Recruiting Initiatives of the Department of Defense and the Military
     Services and an Update on the Status of Recruiting and Retention Goals
                                 april 24, 2001

                                                                       Page

    Rodriguez, Senior Airman Eric Ramos, USAF, Recruiter.............     4
    Rodriguez, Gunnery Sergeant Alexander, USMC, Recruiter...........     5
    Strothers, Petty Officer Sherry, USN, Recruiter..................     6
    Streeter, Sergeant First Class Lindsey, USA, Recruiter...........     7
    Maude, Lt. Gen. Timothy J., USA, Deputy Chief of Staff for
      Personnel; Accompanied by Maj. Gen. Dennis D. Cavin, USA,
      Commander, United States Army Recruiting Command...............    20
    Ryan, Vice Adm. Norbert R., Jr., USN, Chief of Naval Personnel;
      Accompanied by Rear Adm. George E. Voelker, USN, Commander,
      United States Navy Recruiting Command..........................    27
    Murray, Maj. Gen. Terrence P., USMC, Acting Assistant Deputy
      Commandant for Manpower and Reserve Affairs; Accompanied by
      Maj. Gen. Garry L. Parks, USMC, United States Marine Corps
      Recruiting Command.............................................    36
    Peterson, Lt. Gen. Donald L., USAF, Deputy Chief of Staff for
      Personnel; Accompanied by Brig. Gen. Paul Hankins, USAF,
      Commandant, Air Force Officer Accession and Training Schools,
      Maxwell AFB....................................................    41

          Active and Reserve Military and Civilian Personnel Programs
                                 july 18, 2001

    Montgomery, Hon. G.V. ``Sonny'', Former Member of Congress from
      Mississippi....................................................    93
    Schwartz, Sue, DBA, RN, Deputy Director, Government Relations for
      Health Affairs, The Retired Officers Association...............    97
    Barnes, MCPO Joe, USN (Retired), Director of Legislative
      Programs, Fleet Reserve Association............................    98
    Raezer, Joyce Wessle, Associate Director of Government Relations,
      National Military Family Association...........................    99
    Olanoff, CMSGT. Mark, USAF (Retired), Legislative Director, The
      Retired Enlisted Association...................................   100
    Chu, Dr. David S.C., Under Secretary of Defense for Personnel and
      Readiness......................................................   134

                                     (iii)

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2002

                                  ----------

                            TUESDAY, APRIL 24, 2001

                                   U.S. Senate,
                             Subcommittee on Personnel,
                                   Committee on Armed Services,
                                                        Washington, DC.

     RECRUITING INITIATIVES OF THE DEPARTMENT OF DEFENSE AND THE MILITARY
     SERVICES AND AN UPDATE ON THE STATUS OF RECRUITING AND RETENTION GOALS

        The subcommittee met, pursuant to notice, at 9:32 a.m.,
    room SR-222, Russell Senate Office Building, Senator Tim
    Hutchinson (chairman of the subcommittee) presiding.
        Committee members present: Hutchinson, Allard, Cleland, and
    Carnahan.
        Committee staff member present: Nora V. Parker, systems
    administrator.
        Professional staff members present: Charles S. Abell,
    George W. Lauffer, and Patricia L. Lewis.
        Minority staff members present: David L. Lyles, staff
    director for the minority; and Gerald J. Leeling, minority
    counsel.
        Staff assistants present: Kristi M. Freddo, Suzanne K.L.
    Ross, and Michele A. Traficante.
        Committee members' assistants present: Charles Cogar,
    assistant to Senator Allard; Michael P. Ralsky, assistant to
    Senator Hutchinson; Kristine Fauser, assistant to Senator
    Collins; Menda S. Fife, assistant to Senator Kennedy; Andrew
    Vanlandingham, assistant to Senator Cleland; and Neal Orringer,
    assistant to Senator Carnahan.

         OPENING STATEMENT OF SENATOR TIM HUTCHINSON, CHAIRMAN

        Senator Hutchinson. The subcommittee will come to order.
    Before I make an opening statement, I want to just say a word
    of appreciation to Charlie Abell. I think this is Charlie's
    last subcommittee hearing that he will be staffing and
    assisting us on and we're very pleased that he has been
    nominated to be the Assistant Secretary of Defense for Force
    Management Policy. We're going to miss him. He has provided me
    the utmost support, and he is meticulous in his work and his
    attention to details, and a patriotic American and we're going
    to miss him greatly on the subcommittee. Charlie we wish you
    the best. Thank you.
        The subcommittee meets today to receive testimony regarding
    recruitment and retention of military personnel within the
    Department of Defense and the military services. This hearing
    is a follow-up to our February 24, 2000 hearing on this same
    subject. I asked for this hearing in order to discuss the
    innovative ideas to enhance recruiting and retention, those
    ideas that you are pursuing and those that you may be
    considering. I also want to get an update on the current status
    of the services' recruiting and retention achievements as
    compared to your goals and to predictions that each of you made
    for fiscal year 2001 during our hearing on February 24.
        The fact that we have devoted five hearings over the past 4
    years to recruiting and retention reflects the priority we
    assign to this issue. Despite tremendous efforts on behalf of
    recruiters, the recruiting chiefs, the personnel chiefs, the
    Department of Defense, and Congress, we're just now beginning
    to reverse the trends that we've seen over recent years in
    recruiting. The military services must be able to recruit the
    best and brightest young Americans to serve in the military. I
    do not have to remind our witnesses today we're experiencing
    one of the most challenging times in recruiting the highest
    quality young men and women.
        As this hearing is a continuation of a series of hearings
    examining the recruiting and retention programs, I want to urge
    our witnesses to speak with utmost candor, and share common
    goals in the interest of men and women serving our Nation.
    Working together I am confident that we can take the necessary
    steps to preserve the finest military system in the world.
        Senator Cleland has been delayed and when he arrives we'll
    give him an opportunity to make an opening statement. Senator
    Allard, would you like to make an opening statement? Following
    your remarks, I will insert for the record the opening
    statement of Senator Strom Thurmond.

                   STATEMENT OF SENATOR WAYNE ALLARD

        Senator Allard. Mr. Chairman, thank you, just a brief
    comment, if I may. This is the first Personnel Subcommittee
    hearing of the year and now I'll tell you, you are to be
    congratulated, Mr. Chairman, for moving on to your second
    chair. I want to congratulate you on the hard work and I look
    forward to working with you in the coming year. Now, while I'm
    extending congratulations, I would like to praise the military
    recruiting commands. I know that 1999 was a bad year for many
    of your commands and through hard work recruiting has much
    improved all around. I want to congratulate you on your hard
    effort in that regard.
        These hearings, I think, Mr. Chairman, serve as a good
    bellwether for the Armed Services Committee. Two years ago we
    were in recruiting and retention paralysis because of pay,
    benefits, and quality of life issues. We were later able to
    substantially address those matters with passage of Senate Bill
    4 at that time.
        Last year we discussed here the importance of referrals
    from former or current military members in the recruits'
    decision-making process and importance of health care issues
    for active duty and retirees. We were then able to develop the
    Tricare-for-Life, the mail order pharmacy benefit, and other
    military health care adjustments. I am sure that whatever we
    learn today will prove just as valuable. Mr. Chairman, I want
    to thank you for all your leadership in those issues. The
    recruiting process and retention of members always shows the
    military life in stark relief.
        When people make a decision to commit or not commit to the
    military they, out of necessity, carefully weigh all sides of
    the equation. Through the results of that process and by the
    testimony of recruiters who witness that process up close,
    we're able to see how years worth of action by us and the
    administration totaled up. It seems to pretty clearly show some
    of the most pressing problems in current trends. So I'm looking
    forward to today's panel and discussions. Thank you, Mr.
    Chairman.
        [The prepared statement of Senator Strom Thurmond follows:]

                  Prepared Statement by Senator Strom Thurmond

        Mr. Chairman, I want to commend you for making recruiting and
    retention, which are the cornerstones for maintaining the viability of
    our Armed Forces, the subject of the subcommittee's first hearing. We
    may have the most sophisticated weapons, however, without the people to
    operate and maintain them, they are useless.
        It appears that after several years of not meeting recruiting and
    retention goals, our services will achieve their recruiting goals for
    the coming year. I want to congratulate our military leaders at all
    levels for this success which is a reflection of the hard work by top-
    notch recruiters and the skillful application of the incentives
    provided by Congress. However, we cannot rest on our laurels. As long
    as our soldiers, airmen, sailors, and marines are subjected to high
    deployment rates, frequent family separations and less than adequate
    living and working conditions, recruiting and retention will remain a
    challenge.
        Mr. Chairman, I congratulate you on your leadership of the
    Personnel Subcommittee and look forward to working with you in our
    joint efforts to improve not only the quantity, but also the quality of
    our military personnel.
        Thank you, Mr. Chairman.

        Senator Hutchinson. Thank you, Senator Allard, and thank
    you also for the leadership you gave this subcommittee as
    chairman preceding me. You've moved on to bigger and better
    things, but continue to serve this subcommittee with great
    distinction. We're grateful for your leadership. We did
    accomplish as a subcommittee, and as a Congress, some great
    things for quality of life of not only our active duty but also
    our military retirees. I think you are probably getting the
    same thank-yous from those folks as I am and that's good news.
    I hope it makes our recruiters' jobs easier.
        Our first panel today consists of field recruiters. I want
    to welcome each of you here today. Please do not worry, do not
    be anxious about appearing before this subcommittee. We are
    interested in learning firsthand from you what it's like to be
    a recruiter, what your workday is like, how Congress can make
    your jobs easier, and what we can do to assist you. Do not
    worry about the generals and the admirals that are seated
    behind you. There are no wrong answers. Would each of you begin
    by telling us your name, where you are assigned, and how long
    you have been recruiting? Let's start from my left to right.
        Airman Rodriguez. My name is Senior Airman Eric Rodriguez
    and I am assigned to the 314th recruiting squadron. I recruit
    out of Jamaica, Queens, New York City and I've been there for 2
    years.
        Senator Hutchinson. Very good.
        Sergeant Rodriguez. My name is Gunnery Sergeant Alexander
    Rodriguez. I recruit out of a recruiting station in New Jersey.
    I've been on recruiting duty approximately 5 years and also a
    native from the State of New Jersey.
        Petty Officer Strothers. My name is Petty Officer Sherry
    Strothers. I'm a yeoman. I'm stationed out of Navy recruiting
    station Oxon Hill, Maryland. I've been recruiting for
    approximately 3 years and my headquarters is NRD Philadelphia.
        Senator Hutchinson. Very good.
        Sergeant Streeter. Good morning sir, I am Sergeant First
    Class Lindsey Streeter. I have been with Army recruiting
    command now for 5\1/2\ years. I have been a station commander
    at two different recruiting stations, my current position is
    recruiter trainer out of Fort Meade, Maryland.
        Senator Hutchinson. Very good and we're going to begin with
    Senior Airman Rodriguez. If you would begin, and try to keep
    your comments 5 minutes or so. Then we will reserve plenty of
    time for questions. You are recognized.

        STATEMENT OF SENIOR AIRMAN ERIC RAMOS RODRIGUEZ, USAF,
                               RECRUITER

        Airman Rodriguez. I recruit like I said out of Jamaica,
    Queens, New York. I have 15 high schools, out of the 15, 13 are
    public, one is private, one is an alternate and I have two 4-
    year colleges. I have no problem getting in my schools
    whatsoever, however I do know of four high schools, three in
    Queens, and one in Brooklyn, that were Air Force responsibility
    that would not let us go in. The Flight Chief Master Sergeant
    Moons and Lieutenant Colonel McAndrews have changed that and
    now we have full access to those schools.
        I'll comment on the quality of life. Because of my rank
    being in New York City it's poor, an E-5 would do okay but an
    E-4 getting good living quarters is not going to happen. It has
    improved a lot though. Before last year I had to pay out of my
    pocket to live in a not so good neighborhood. Now I don't pay
    anything at all but there can be some improvement if that can
    happen or I had better make rank.
        Another thing that's hurting us is very low manning and
    again the Air Force leadership has improved that big time but
    at least in my office, by myself, I can only get probably six
    people, with two people we can get 12. Things that are helping
    me in my recruiting efforts is definitely TV commercials, that
    has helped big time as far as me in Jamaica, Queens. I just
    wish those TV commercials were a little more targeted to inner
    city kids but they're still helping out big time, and of course
    the education benefits that we have to offer are helping me
    out. The bonuses are helping the Military Entrance Processing
    Stations (MEPS) liaison sell the jobs to these applicants, not
    me in recruiting, I don't go into jobs but as far as the
    liaisons is concerned, that helps them sell the job to kids and
    get the reservation.
        Like I said, even though I have access to all my schools, I
    am going to go back on that. I can do lunchroom table set ups,
    sir, which are great. The only bad thing about it is juniors
    and seniors go to eat off the school, so I have no access to
    juniors and seniors and I said I had 15 high schools, four
    allow me classroom presentations. That's where I get all of my
    leads from.
        None of my schools provide a school list and things that
    are hurting also in my area we're trying to get mechanics and
    electricians. New York City is a high resident alien area so we
    can't get these jobs for these kids. It would be nice if we had
    faster laptops or better desk computers and last, but not
    least, parking. It takes me 35 minutes to find a parking spot.
    I can do 15 phone calls in 35 minutes and get five
    appointments, sir. It's ridiculous, plus when we have--worst
    case scenario we'll park in a no parking zone and we'll get a
    ticket so that's a big issue.
        Senator Hutchinson. When you park in a no parking zone, you
    get a ticket?
        Airman Rodriguez. When it says no parking and no standing,
    we will get a ticket in a heartbeat.
        Senator Hutchinson. Anything else?
        Airman Rodriguez. On the parking thing, I think what would
    help out is if the City of New York gave us just a block where
    it would say government vehicles only. Right around my office
    there is a little piece of property that's vacant, they could
    give us that.
        Senator Hutchinson. Very good.
        Airman Rodriguez. That's it, sir.
        Senator Hutchinson. OK. Sergeant.

       STATEMENT OF GUNNERY SERGEANT ALEXANDER RODRIGUEZ, USMC,
                               RECRUITER

        Sergeant Rodriguez. Sir, just like the Airman mentioned,
    the access within the high schools, prior to President Clinton
    moving out of office, there had been a bill signed stating that
    the schools would release the list, that information has been
    filtered down to us but it has not been filtered down to the
    educators at their level so they're not made aware of it and
    what that causes us to do is--causes the recruiter to put them
    in a position where you work so hard to establish rapport
    during that term, some of the recruiters may be perceived as
    being too aggressive and so between educators and the
    recruiter, it almost seems as you're just in here to take us,
    take our young men and women away from us and now you want
    access to their homes, and so a lot of that information has not
    been filtered down to them.
        Each time we do go into a school with the bills and the
    acts that have been passed by Congress they're not made aware
    of it and so they always have a different Privacy Act or some
    form of act that says, well, we're not allowed to do it
    regardless what the government says, so the list, the student
    directory, being one of our biggest and I think all the service
    members here can say across the board that that is one of our
    biggest struggles that we face.
        One of the other concerns for the recruiting force would be
    the quality of life, some of us don't have the opportunities to
    live nearby where there are military installations, the BAH in
    some cases doesn't cover the cost of living to include the
    funds that we receive for the Special Duty Assignment (SDA)
    pay. As far as I can speak on the Marine Corps side a lot of
    that money is spent trying to attract the young men and women.
    We utilize that money aside from conducting our appointments to
    feeding our applicants, to taking them out, taking them to
    organizations that we have set up where we can do our mandatory
    pool functions, as we call them, and try to get T-shirts made
    up and try to promote anything we can do in our area, obviously
    to compete with the other services and stay abreast with the
    trends that we come across on the day-to-day basis in the
    process for these young applicants to enlist in our service.
        The quality of life issue, that money that we need for
    housing, just in talking with some of the recruiters, a
    suggestion would possibly be government leasing. That would
    allow the recruiters who have the access to be able to move
    into an area where it's a lot closer to where they're at.
    Myself, when I first started recruiting duty, had an hour and
    15 minute drive from where I was living, which was on a Navy
    base, to my office and that was without traffic. So being able
    to put the recruiter and have the families close by, nearby,
    also helps out.
        So something that would assist us in being able to get the
    housing that we need and hopefully be able to live within our
    communities which we recruit out of which would also assist in
    the recruiting effort. One of the other concerns is funds being
    evenly distributed across the board. We do have some of the
    Montgomery GI Bill benefits and the educational opportunities.
    Different services offer different incentives. Our plea would
    just be let's make it even across the board for everybody.
    That's it, sir.
        Senator Hutchinson. Very good. Yeoman Strothers.

      STATEMENT OF PETTY OFFICER SHERRY STROTHERS, USN, RECRUITER

        Petty Officer Strothers. Thank you, sir. First I'd like to
    say good morning to everyone and before I say the things that
    I'm not happy with, I'd like to say the things that I've seen
    improved since I've been on recruiting. We had complained about
    the number of vehicles and now in our recruiting station all
    recruiters do have their own cars, we are getting cell phones
    and we all have pretty good laptop computers so that we know
    that you are listening, so we are happy with that.
        In the respect of the things that I as a recruiter have
    seen that I think could be improved, the SDA pay, the $375 a
    month that we receive is significant but I don't think it
    covers all of our needs. As recruiters we work very long hours,
    approximately 45 sometimes 60 hours a week, and as a single
    parent my child care expenses have been excessive because of
    the long hours. I would ask that there be some consideration to
    increase the SDA pay.
        Also as a Navy recruiter, some of our benefits aren't
    comparable to the other branches, one in particular is the one
    where we help pay for college expenses when someone has been to
    college first, we pay back I believe it's $10,000, there are a
    lot of loopholes to get the people this money and they lose
    signing bonuses and I believe the opportunity to get the
    Montgomery GI Bill. The Army's program is much better. We've
    lost applicants because of that particular problem.
        I feel that the quality of life in our recruiting area has
    improved significantly. We do work the long hours but we do see
    the support, and so in our office we try to maintain esprit de
    corps so I don't have any complaints there. Access to the
    schools, we have good access in our schools. We do not get
    school lists when they take the ASVAB test. They are not
    allowed to put their telephone numbers or their desires on the
    sheets, and so that when we get the scores back we don't know
    who to contact, it makes it extremely hard for the applicants
    that want to join the military to get in touch with us, so
    they'll track us down in the hallway and say, hey, I took the
    test, why didn't you come get me? Why did no one call me and
    then I'm like, well, we didn't get your name or your scores, so
    that makes it difficult.
        Private schools do not allow us access at all in the
    schools. We cannot walk around, we can't talk to people without
    making appointments first, so that makes it difficult for us.
    Those are the things that I wanted to hit on the most. Thank
    you.
        Senator Hutchinson. Very good. Thank you.
        Sergeant Streeter.

       STATEMENT OF SERGEANT FIRST CLASS LINDSEY STREETER, USA,
                               RECRUITER

        Sergeant Streeter. Sir, my experience. I recruited out of
    over 20 high schools around the beltway here in our great city
    which I'm from originally. Access I believe--I've been granted
    access, however it has been limited access. I've found that
    schools have their own definition as to what access is. One
    school may let a recruiter come in for classroom presentations,
    table set-ups, the whole nine yards, and the school right down
    the street from that school might only allow you a little cubby
    hole in the library somewhere tucked away in a corner.
        A lot of times they only allow the students to come and
    meet with you that sign up to come and meet with you and they
    don't do a real good job of advertising the day you're going to
    be in the school. So it's a fruitless effort. I haven't
    experienced any directory information being released. I have to
    resort to my own measures of getting it and it's tough, it's
    real tough, sir.
        Quality of life issues. Most of my counterparts from my
    sister services have already touched on the major issues. I
    want to say that the Tricare program, I believe, has made
    significant strides since last year. My experience--my personal
    experience with it has been a great one. My wife had a bout
    with cancer and everything was handled promptly and
    professionally through the use of the program. I understand we
    still have a few problems with some of the providers not
    getting signed on as fast as we would like in the absence of a
    provider or during the loss of a provider.
        I understand that there's a leased housing initiative
    that's going on now. I think that's a great idea. With soldiers
    out in the field deployed as we recruiters consider ourselves
    being, we want to feel as though our families are taken care
    of. We want to make sure that they are in a safe and sound
    environment. I think leased housing would be the fix to that,
    sir.
        Recruiters are allowed an expense account sir of $75 a
    month. I think that that payment or that allowance should
    become a permanent part of the recruiter's salary. A lot of
    recruiters are spending that money, sometimes not even filing
    the claim to be reimbursed just because of the paperwork drill
    and the time-consuming efforts of doing it and just the
    distractions caused by it. So I think that we should maybe look
    at making that a permanent part of what the recruiters get as
    an allowance, because they are spending the money and it's
    probably more cost-effective to give it to them in their pay
    than it is to process the paperwork.
        Technology. I'm very pleased with what I see out in the
    field with the laptops and the new Army technology we've
    gotten. We've come leaps and bounds. It's easy to go represent
    what we consider a leading organization with leading edge
    technology, it's a little easier to sell that organization if
    you're walking into the house with leading edge materials to
    work with.
        The cell phones have been a great plus. I know recruiting
    in the inner city areas, cell phones are very important. The
    phone booths are turned off around 6:00 because of the
    increased drug activity in a lot of the areas and so a cell
    phone is very important. A lot of the dwellings that you have
    to have access to are locked and you can only gain access
    through the use of a telephone outside which in most cases is
    inoperable, so you're able to at least call the applicant and
    let them know that you're there.
        Our new Army ad is working. We've surveyed some of the
    youth out in the different areas. In my new position, I'm a
    brigade trainer, so I handle the northeastern corridor of the
    United States and what I've found is that the kids are
    responding to it well. It kind of fits them and their persona
    and the way they perceive life and themselves to be. So I think
    it's a good thing.
        Senator Hutchinson. Thank you. Excellent presentation.
    Several of you mentioned access. Airman Rodriguez, what were
    the statistics you gave on how many high schools, what
    percentage of the high schools do you have access to?
        Airman Rodriguez. Yes, I have access to all of my 15 high
    schools. The thing is, like the Army Sergeant said, it's not
    too productive. The reason is, like I said, a lunchroom table
    set-up, seniors and juniors don't eat lunch at the school so I
    am just planting the seed pretty much.
        Senator Hutchinson. So what they allow you to do set up a
    table during lunch hour?
        Airman Rodriguez. Yes, sir, they say take this table and
    put your information out and stand there and look pretty,
    that's pretty much what they let me do. Now out of the 15 high
    schools I have, four let me do classroom presentations, that's
    where I get them. I mean, I'll do a classroom presentation and
    guaranteed I'll get two to three people to come in and enlist
    in the Air Force, take the oath, the whole nine yards.
        Senator Hutchinson. What classes do you go into on the
    classroom presentations?
        Airman Rodriguez. I go to hit shop classes, sir, like auto
    hobby, maybe a computer class. I have had regular classes like
    math and science and co-op, co-op classes are very good.
        Senator Hutchinson. To the other recruiters, how much
    access are you given regarding classroom presentations? Do you
    have a chance to do that?
        Petty Officer Strothers. In the Prince George's County
    schools we have pretty free reign. They allow us to come into
    the schools and walk around. We can go to a classroom and set
    up presentations in advance. We don't have any problem gaining
    access to the schools. The private schools we don't have that
    kind of access to. The only complaint we have is that they will
    not give us the school list. We can't get seniors' telephone
    numbers at home or anything like that.
        Senator Hutchinson. Does anybody else want to say anything
    on that?
        Sergeant Streeter. Yes, sir. My experience with the high
    school classroom presentations is it's a little more receptive,
    schools are a little more receptive of the idea as long as I
    bring a message other than the Army's message. Commanding
    General U.S. Army Recruiting Command provided us with several
    different messages to bring to the school. We have a DARE
    program, stay in school, stay off drugs, which addresses
    problems with teens and youth pregnancy. We also do history
    presentations, military history in some of the history classes
    and then we put our Army plug on the end of that. We make a
    little money there, sir.
        Senator Hutchinson. OK. Do you feel that--this is one of
    the issues we tried to address last year and I understand one
    of you testified that the problem is the principals don't know,
    the superintendents don't know, and so while you may know what
    Congress has said, they don't know and they're still falling
    back on privacy provisions. Is the access that you're being
    given equivalent to others that may be recruiting for other
    purposes other than the military. I mean, do you feel like
    there's any discrimination against you as a recruiter or is it
    pretty much across the board with their handling of directory
    lists and so forth.
        Airman Rodriguez. I think you hit it right on the nail.
    Like a college fair, they'll put all the colleges in the front
    where they're very accessible to the students and they'll stick
    us in the corner where you can barely see us.
        Senator Hutchinson. Have the rest of you found the same
    thing? Or less or more?
        Sergeant Streeter. Sir, regardless of the directory
    information, I have had a couple instances where I've had
    friends that were retired recruiters go and work for the
    different vocational technical institutions and they're
    provided a directory from the same school.
        Petty Officer Strothers. Me as well, sir. They will give
    the colleges access and they'll give them telephone numbers,
    they promote college and they always I've experienced use the
    military as a last resort thing. I've had students talked out
    of going into the military because the counselor felt they
    should go to college.
        Senator Hutchinson. Sergeant, how about your experience?
        Sergeant Rodriguez. My experience has pretty much been the
    same across the board. The educators for the most part when you
    go into the high schools when you go to do your lunchroom set-
    ups understand that this is all part of we go in there in order
    to obtain names and those names we try to prospect in order to
    get those young men and women into the office and tell them the
    Marine Corps story. It's very time-consuming and adds to the
    recruiter's hours he has to work.
        Also when you go into the schools for the most part some of
    them will only have two college fairs a year, the first one
    will be for the seniors and that's shortly roughly around the
    October/November time frame, after that they won't let you back
    in until around April or May and that's dealing with the
    juniors and the sophomore class, and so in reality going into a
    high school twice a year if you're only in there for an hour or
    2 hours, generally the information that you are going to need
    in order to prospect those individuals is not sufficient.
        With respect to the directories being given to the
    colleges, I mean, you can walk into a high school any day and
    see a college rep walk in there and actually see the
    transaction happen before you, ask the very same person for
    that same list and they will tell you you need to take it
    through the superintendent of schools.
        Senator Hutchinson. So if I remember from last year, the
    biggest single recruiting tool from these schools that you
    could receive is the directories. The most helpful thing is
    getting the student directories, is that correct?
        Airman Rodriguez. Yes, sir.
        Senator Hutchinson. That's where what we said last year in
    the Defense Authorization Bill was that there should be equal
    treatment, that if they give the directories out to college
    recruiters or industry recruiters they should also give the
    directories out to military recruiters on an equal basis, but
    you're not finding that the case.
        Sergeant Rodriguez. No, sir. In most cases generally the
    schools that do allow me to obtain the directory, usually when
    I go in I go in with a recruiter and I present to them all we
    would like to do is have the student directory info for the
    most part so that way we can submit to our mail-out program.
    Generally, if we can get the information mailed to our young
    men and women contacts, they will fill out the information, go
    on to our websites. They know how to access us but for the most
    part when the young man or woman goes to his high school
    guidance counselor and says, well, I want to make an
    appointment with a marine recruiter or any recruiter, for that
    matter, immediately they're thrown into the ``well, I think you
    need to look at your other options and save that as a last
    resort.'' So immediately we're cut off.
        So if we can get the student directory and have our mail-
    out program work for us generally we will get a good response
    and be able to contact those people and they will also be able
    to help us to refer as to other individuals that are of like
    mind, who also expressing an interest in the military.
        Senator Hutchinson. Let me ask each of you, in your view,
    are the DOD quality standards appropriate from what you now
    have in place? Airman?
        Airman Rodriguez. I'm sorry, sir, can you say that again?
        Senator Hutchinson. The quality standards that the DOD has
    established on recruiting, on the mission, if you will, do you
    find those currently adequate, do you think there should be any
    adjustments in those, do you think they are appropriate as they
    currently are?
        Airman Rodriguez. I think they're appropriate, sir. There
    can always be improvement, but like I've said from the
    stories--I've only been a recruiter for 2 years so I've heard
    stories from folks that have been recruiting longer than I have
    and it used to be a nightmare from what they say, now it's a
    lot better. A lot better. I mean it's working. There can always
    be improvement though, in my opinion.
        Senator Hutchinson. Sergeant, or anybody else, have an
    opinion on that?
        Petty Officer Strothers. I have an opinion.
        Senator Hutchinson. OK.
        Petty Officer Strothers. The DOD standards are good. It
    hurts us, our biggest problem in my area is the marijuana use,
    the policies on the testing in my opinion may be looked at
    perhaps, it's a prevalent thing in our area and we spend a lot
    of time running people around and delaying putting people in
    behind that particular incident, and also I know that it's a
    touchy subject but has it ever been considered to possibly
    sometimes lower the advancement exam. I have people that really
    want to join but cannot get a 31, that probably could be very
    efficient as an undesignated seaman or fireman but they just
    cannot pass that test and they often complain and want to write
    their Congressman for a waiver and I tell them that we can't do
    anything about that and I know that those standards are in
    place for a reason but I'm just asking if possibly it could be
    considered at some point.
        Senator Hutchinson. Good. Anybody else?
        Sergeant Streeter. Sir, I think the quality standards are
    definitely achievable and it's what the Army really needs with
    the way that--the direction that we're headed with technology.
    We need the best qualified person.
        Senator Hutchinson. How will you do this month regarding
    your quotas, will each of you be making your quotas this month?
        Airman Rodriguez. Yes, sir.
        Petty Officer Strothers. Yes, sir.
        Airman Rodriguez. We've already exceeded it actually.
        Senator Hutchinson. Good. Senator Carnahan, thank you for
    joining us, if you would like to make an opening statement or
    have questions you're recognized.

                   STATEMENT OF SENATOR JEAN CARNAHAN

        Senator Carnahan. I may just move on to the questions and
    insert my statement for the record. As far as your outreach in
    recruitment, do you feel like you are restricted in any way,
    that is in the amount that you can travel or the use of your
    cell phones. Are there any restrictions you feel placed on your
    being able to recruit successfully?
        Airman Rodriguez. I am going to have to go with what I said
    at the beginning; the parking stuff, parking access ma'am, and
    where I recruit if you get there in the morning you get a
    parking spot, great, but as recruiters we do school visits,
    once we leave that parking spot and come back you're not going
    to find one.
        Senator Carnahan. I'm speaking in terms of military
    restrictions that are put on you as far as your ability to
    reach out to the people that you're trying to attract.
        Airman Rodriguez. Not at all.
        Senator Carnahan. You have not.
        Sergeant Rodriguez. No, ma'am.
        Petty Officer Strothers. No, ma'am.
        Senator Carnahan. Do you feel that you could better reach
    your goals if there were monetary incentives for recruitment
    rather than commendations and medals and so forth that you
    receive for reaching your goals?
        Petty Officer Strothers. Yes, ma'am, and the reason that I
    say that is I volunteered to be a recruiter. A lot of people
    won't come out here that would probably be very successful but
    they're afraid to come out because of the hours and they feel
    that the money sometimes isn't sufficient enough to compensate
    the hours that they'll put in.
        Sergeant Streeter. In regards to your question, ma'am, I do
    believe that there's a definite need for increase to the
    special duty assignment pay but if the monetary benefit that
    you're speaking of is designed per--to be distributed per
    contract or for recruiter's individual production, then I don't
    think that would be a good idea. I think it should be a flat
    across-the-board increase to the special duty assignment pay
    but not attach it to a specific recruiter's ability to put
    people into the Army. It could create a couple of problems.
        I know in certain regions of the United States recruiting
    is a little more lucrative than in other regions, so you have a
    breakdown in morale in other parts of the nation which don't do
    as well, and the other thing it could do is it could probably
    lead to some morality issues if that money found its way into a
    recruiter's budget and he's used it, there's no telling what he
    may do unethically to continue to receive that type of money,
    but I do again think that the special duty assignment pay
    should be increased.
        Senator Carnahan. Thank you. What methods are you using to
    reach out to attract minorities and women?
        Airman Rodriguez. What are we using to attract?
        Senator Carnahan. Yes, how are you doing this, are you
    using special methods for reaching out to attract the
    recruitment of minorities and women?
        Airman Rodriguez. Well, at least in New York I'll go with--
    we don't tolerate discrimination and that makes them go hey,
    because in New York City you'll get that, they're used to being
    discriminated. When I tell them in the Air Force or in the
    military it will not be tolerated, sexual harassment and all
    that, that makes them feel a lot more comfortable and they want
    to belong to an organization that's going to respect them that
    way.
        Senator Carnahan. Do some of the women recruits express
    concerns about harassment and the possibility of that?
        Airman Rodriguez. Yes, ma'am. As a matter of fact, I have
    spoken to female applicants that heard horror stories from
    their parents. My mother doesn't want me to join because
    there's too many men and they sexually harass the women and
    they don't get treated fairly as far as like job opportunities
    and promotions and I--I overcome the objection because of like
    I said the policy of they don't tolerate that.
        Senator Carnahan. Anyone else?
        Petty Officer Strothers. Well, in our market it's primarily
    minority so that part is easy for us. As far as women I do have
    a lot of the females approach me and ask me how long I've been
    in and what have I experienced and sometimes parents too are
    concerned about their daughters and stuff going in, but I often
    will reassure them that the military as a whole reflects
    society and the things that were not accepted prior to the the
    years of change and society doesn't accept certain actions and
    behaviors and neither do we so that usually will calm people
    and also I'm the recruiter in charge and there are four men
    that work for me. That does a lot for the females that come in.
    They really like that, and I have had instances where I was
    asked to speak to an applicant from another office just to make
    her feel a little bit better.
        Senator Carnahan. Do you feel that there's a
    disproportionate number of recruits from any one segment of the
    population?
        Sergeant Streeter. No, ma'am, I don't. In regards to your
    last question, ma'am, was that question geared towards
    marketing concepts?
        Senator Carnahan. Yes.
        Sergeant Streeter. The Army has a new initiative. We want
    to expand more into the Hispanic community. We understand it is
    the largest growing population in the United States and we do
    have several ad campaigns which some of my counterparts tell me
    are very effective out in California and Texas. The New York
    City recruiters find themselves in the Latino market quite a
    bit. But I don't think that the Army specifically targets or is
    more proportionally recognized or represented by a particular
    race. I really don't.
        Senator Carnahan. So you don't think there's a
    disproportionate number of rural versus urban recruits?
        Sergeant Streeter. No, ma'am.
        Airman Rodriguez. Can I piggyback on that one then. In that
    case I said it earlier, ma'am, the TV commercials do help me
    except the TV commercials I'm seeing are not targeted to inner
    city kids and I'm not talking about black, white, Hispanic, I'm
    talking about inner city kids, always see some farm guy working
    on a car or something like that. How about if we see a kid
    playing ball in a basketball court in New York City and maybe
    those kids can relate more to it.
        Senator Carnahan. Thank you, Mr. Chairman.
        [The prepared statement of Senator Carnahan follows:]

                  Prepared Statement by Senator Jean Carnahan

        Thank you for arranging these panels for today's hearing. You have
    given us a chance to discuss these matters not only with top military
    leaders but with the people who know this subject best--the enlisted
    recruiters, themselves.
        The recruiters testifying today are charged with the task of
    attracting qualified men and women to serve in the Armed Forces.
        Since the Military Selective Service Act expired in 1973, the
    United States has depended on an all volunteer military. Because of
    that, the recruiter has played an increasingly vital role in ensuring
    that our military remains stocked with its most critical resources--its
    personnel.
        Today, however, the military services face greater competition in
    the labor market. Eighteen year olds have many choices. Now, more than
    ever, they are choosing higher education or local employment after
    graduating from high school.
        As a result, the military has had trouble attracting qualified
    young people to meet its recruiting goals and in 1999 experienced one
    of its lowest recruitment years in history.
        Only the Marines consistently met their recruiting objectives.
        The Army fell short of its 74,500 goal by 8.4 percent.
        The Air Force missed its target of 33,800 by 1,500 people.
        The Navy, which fell 12,000 recruits short in 1998, barely
    fulfilled its requirements, after lowering its goal and accepting
    thousands more recruits who earned general equivalency diplomas.
        In response, Secretary of Defense William Cohen oversaw a change in
    recruiting strategies--emphasizing the benefits of military experiences
    rather than citing military service simply as way of financing a
    college education. Modeling their recruiting approach after the Marine
    Corps, our Military Services have pointed to the incomparable rewards
    of life in the Armed Forces namely--instruction in high-technology
    fields, character development, team-building experiences, leadership
    training, and, above all, the distinction of safeguarding our national
    security. In the last Quarterly Readiness Report submitted to Congress,
    the Pentagon has finally announced recruiting figures that have
    exceeded recruiting and retention objectives for the first quarter of
    fiscal year 2001.
        It looks like we are finally beginning to win the battle in
    recruiting and retention. Hopefully, this hearing will uncover reasons
    for our recent success. It is imperative that we continue this upward
    trend. Our missions abroad are too crucial to maintaining peace and
    security throughout the world. With a military confronting myriad
    threats throughout the globe, we cannot risk our forces spreading thin.
    For this reason, I hope that the Department of Defense will eventually
    complement its Strategic Review with an additional assessment of its
    quality-of-life conditions. We cannot expect to continue attracting
    good people to our Armed Services, if we cannot even retain our current
    personnel.
        Having said that, I look forward to hearing the testimony of our
    distinguished panel. Thank you.

        Senator Hutchinson. Thank you, Senator Carnahan. Sergeant
    or Airman, I think that's an excellent point that you make and
    I'm glad we got to hear it today about how we target some of
    those TV ads. I'm sure there are some answers on that and we'll
    be asking some of those questions. Let me just before we
    dismiss this panel, the Montgomery GI Bill, education benefits,
    do you see that currently as a very effective recruiting tool?
    Do you mention it frequently, and how do potential recruits
    respond to that? Are there changes that could be made in that
    bill that would make it an enhanced or more attractive
    recruiting tool?
        Airman Rodriguez. Yes, sir, and actually there was a recent
    change where now they can use the 75 percent and the Montgomery
    GI Bill at the same time if I'm not mistaken. That was great.
        Senator Hutchinson. Do you use it frequently? Do you talk
    about this and do you think it's a very attractive----
        Airman Rodriguez. All the time, sir, all the time.
        Senator Hutchinson. Sergeant Rodriguez.
        Sergeant Rodriguez. Sir, if anything I would say for the
    most part those applicants when they do come into the office
    and they're looking at what they can get through the military
    services as far as their educational opportunities, their
    concern is generally, if someone is coming in and they want to
    pursue a particular occupational field and college is obviously
    going to be their parents' concern, generally when the parents
    are involved and when you look at what the Montgomery GI Bill
    currently offers to an individual, normally the way it's
    explained to them is they can utilize it while they're on
    active duty but for the most part, generally they're going to
    use it if they decide to leave the service after 4 years, or
    depending on how many years they serve.
        Looking at the tuition for colleges nowadays, if that were
    to be the case for most of the people that we're coming into
    contact with, and obviously we're talking about going for the
    higher caliber individuals with the higher test scores, putting
    them in the good occupational fields, $20,000 is really not
    going to cover much of a tuition for them if they decide to
    depart our service after 4 years.
        Petty Officer Strothers. I often discuss the Montgomery GI
    Bill. As a matter of fact when someone does join the Navy, they
    have to acknowledge that on one of the forms that they do
    understand the Montgomery GI Bill. I think it's a great
    program. I personally feel that the money disbursed over a
    period of time, I believe it's $600 a month, while you're
    enrolled in school is not the most effective way. I had a
    person complain to me about that before because she had to pay
    all of the costs of the classes up front which exceeded $1,100
    and she didn't get the check until after she had already paid
    for it. I think that if we paid for the classes up front I
    think it would be a little more effective.
        Sergeant Streeter. Sir, in regards to your question, yes,
    the GI Bill is the center, one of the center focal points of
    any recruiter's day-to-day conversation with an applicant. If
    there are any changes that I think should be made to it is
    probably to do away with the $1,200 initial payment and just
    make it one of the benefits of service.
        Senator Hutchinson. All right. Good point. Now what
    percentage of those that you recruit and sign up are coming
    from families that served in the military? Can you estimate
    that?
        Airman Rodriguez. No, sir, I can't.
        Sergeant Rodriguez. I would say generally probably about 3
    percent, sir.
        Senator Hutchinson. What percent?
        Sergeant Rodriguez. 3 percent.
        Senator Hutchinson. So most of their parents were not
    veterans?
        Sergeant Rodriguez. No, sir.
        Senator Hutchinson. That's surprising to me.
        Petty Officer Strothers. I would say mine is a little bit
    higher, maybe out of five applicants, three or four of their
    parents because I'm right near the beltway and so most of the
    people are retired Air Force or currently in the Air Force in
    the schools that I have.
        Sergeant Streeter. My experience has been the same, sir,
    probably roughly around 10 to 15 percent because I'm in the
    Fort Meade area.
        Senator Hutchinson. But that's still only one out of ten of
    your applicants that came from military families.
        Sergeant Streeter. Yes, sir.
        Senator Hutchinson. Is that typical of other recruiters
    you've talked to, Airman, I didn't mean to cut you off.
        Airman Rodriguez. It depends upon the area. Honestly, sir,
    I've recruited a lot of people and I can think that maybe two
    folks that were prior military.
        Senator Hutchinson. What is the main motivation people have
    when they enter the military for a tour or for a career? What
    is motivating them? Why do they join?
        Airman Rodriguez. In my case, sir, it's to get out of New
    York.
        Senator Hutchinson. To get out to New York?
        Airman Rodriguez. Yes, sir, to get out of New York.
        Senator Hutchinson. OK, we don't want to publicize that too
    much. Sergeant, what do you find?
        Sergeant Rodriguez. Mainly it's for the intangible reasons,
    they're looking for discipline, they're looking for a
    challenge, they're looking for leadership, they're looking for
    a way to prove to themselves and to prove to America for that
    part that they're a part of an organization that stands behind
    our core values and seek to better themselves professionally
    and build themselves physically and mentally and to prepare
    them for whatever life may throw at them later on down the
    road.
        Petty Officer Strothers. In my area, sir, there's not a
    great deal of patriotism. They do it primarily to go to school.
    They do it sometimes because they can't find a good job and
    they know that we can train them and give them the
    opportunities to go further in life, but education is normally
    the biggest thing we face.
        Senator Hutchinson. Sergeant.
        Sergeant Streeter. Sir, I've found that it's kind of the
    same as what the Gunny Sergeant had mentioned, most of my
    applicants want to serve the nation in some shape or form, but
    what they do is they reinforce their decision to join the Army
    by accepting an incentive because they have to defend their
    decision with so many folks, so they need an incentive to go
    home and talk to their parents, they need an incentive to fight
    that guidance counselor off with and that is what I've found.
        Senator Hutchinson. Excellent. That's very helpful. Senator
    Carnahan, did you have any other questions for this panel?
        Senator Carnahan. One other question. Are there any
    programs being offered in the high schools now? I remember when
    I was in school they had cadet programs and that sort of thing
    in high school. Are there programs like that that would
    introduce the young people to a military style of life that
    maybe they might choose then to pursue?
        Airman Rodriguez. In my area junior ROTC and civil air
    patrol. The bad thing is none of them pass the Armed Services
    Vocational Aptitude Battery (ASVAB).
        Senator Carnahan. But there's not much of this----
        Airman Rodriguez. No, now only the junior ROTC and civil
    air patrol. That is it.
        Sergeant Rodriguez. Ma'am, I recruit out of the State of
    New Jersey. We do have a wide variety of different junior ROTCs
    and then I've been in several recruiting stations as a
    supervisor and my first station I recruited out of I had 15
    high schools out of the 15, nine had either Air Force or Army
    or Navy or Marine Corps junior ROTC. So yes, in answer to your
    question, they are out there and they do exist.
        Petty Officer Strothers. We have several JROTCs, junior
    ROTCs in the schools, the sea cadets are really big as well.
    During spring break they came out and and worked in some of the
    recruiting offices and two were in my office and they did
    express that they wanted to serve in the Navy. So the programs
    are working from what I've seen.
        Sergeant Streeter. Ma'am, my experience has taken me in
    over 23 high schools recruiting and I've only had one that had
    a junior ROTC program but in 1 year I was able to put 19 of
    those individuals into the Army, so if I had it in more schools
    I could probably be a more successful recruiter.
        Senator Hutchinson. We have gladly been joined by the
    ranking member of the subcommittee, Senator Cleland. Thank you
    Max for making it. I know you have a busy schedule and before
    we let this panel go I think Senator Carnahan and I have had
    our opportunities but we'll be glad to have an opening
    statement from you or any questions you might have.

                    STATEMENT OF SENATOR MAX CLELAND

        Senator Cleland. Thank you very much, Mr. Chairman, and it
    is an honor to be here with all of you
        Senator Hutchinson. You guys thought you were done didn't
    you? You thought we were going to let you go.
        Senator Cleland. Just when you felt it was safe. I've
    always been fascinated in the role of education particularly
    with the GI Bill and its power to attract recruitment to the
    military services. I'm now very much involved with the
    infatuation and the power of the GI Bill, particularly if we
    can make it more family-friendly in terms of the power to use
    that as a retention tool.
        My basic understanding over the years, and I ran the GI
    Bill when I was head of the Veterans Administration (VA). I can
    remember back about 20 years ago the Commandant of the Marine
    Corps was asked what benefit did he want most and he said a
    strong GI Bill. My understanding is that the GI Bill and the
    educational benefits available in the services is often
    mentioned as a reason for joining the military. As a matter of
    fact, I understand surveys have indicated that three out of
    four reasons why young men and women join the American military
    has to do with education.
        I'd like for you to take that on as a recruitment issue and
    tell me how important you think educational benefits are and
    then if you have an opinion about making the GI Bill more
    family-friendly, that is allowing a serviceman or servicewoman
    to transfer the unused portion of their GI Bill that they've
    earned to their spouse or to their kids thereby creating a
    college fund for their kids, if that would help in retention. I
    know you're experts in recruitment but you're also
    professionals in the military and you talk to professionals in
    the military and so my question is twofold, one, to each of
    you, what is your take on educational benefits today as a
    recruitment tool and, two, what is your take on a more family-
    friendly GI Bill if the serviceman or servicewoman is able to
    transfer the unused portion of the GI Bill benefits to their
    spouse or to their kids, would that help retention, recruitment
    first and then retention?
        Airman Rodriguez. Yes, sir, Eric Rodriguez, recruiting out
    of Jamaica, Queens, New York. As far as a recruiting tool,
    that's definitely my number one tool, so that's how I close my
    sale and get the commitment. As far as retention, that will be
    excellent because sometimes that airman or NCO is getting out
    because if his wife, if she had a little--if she could dig in
    the pot, I think it will help a lot as far as retention.
        Sergeant Rodriguez. Sir, in reference to your question now,
    I commented earlier about the Montgomery GI Bill and what it
    currently offers right now to our young men and women that we
    are seeking to prospect and put them in our service. As far as
    the money that is allocated, for the most part when we're
    talking to family members they're looking at the amount of
    money that they would receive. That money really doesn't help
    out with today's current prices of tuition, with most of our
    local colleges turning into universities. As they change their
    name so is the tuition changing along with that, and so when
    you're talking to a prospect and the issue of how is my son or
    daughter going to go to college, normally it's been my
    experience we would refer them to the tuition assistance
    program which allows them to do their education while they're
    serving on active duty and then save the Montgomery GI Bill for
    if they decide to depart our service.
        In regards to the Montgomery GI Bill being family-friendly,
    I'm a great advocate of that. Myself currently I'm working on a
    masters in theology, my wife is a medical student, both of us
    going to school at the same time, it would definitely help out
    but also at the same time I think there is some restriction
    because that plan would hinder me from paying off my tuition,
    being able to utilize that money, I utilize both, tuition
    assistance and Montgomery GI Bill, and so I would narrow it
    down to one.
        As far as retention goes I think that would be a great tool
    because one of the things that goes through a service member's
    mind is when they're talking about staying in the military, how
    is this going to benefit me and my family and so this is one
    opportunity we can definitely help to solve the retention
    problems. I think it would be a great idea.
        Senator Cleland. Thank you.
        Petty Officer Strothers. I agree with him in that respect.
    Their tuition assistance is the tool that the majority of us
    primarily use to seek our educations. I am too working on my
    masters in business administration and I did not take the
    Montgomery GI Bill initially. However, if I had, it would be a
    wonderful opportunity to pass it on to my spouse or another
    family member while I pursued my education on active duty. So I
    think that would be a wonderful idea and it would help with
    retention because often the spouse feels somewhat neglected if
    they can't pursue an education as well, economically, because
    of the loans and everything.
        Senator Cleland. Thank you very much.
        Sergeant Streeter. Sir, as the Army's educational program
    currently stands, we have a program called the College First
    Program where we can put an individual in the delayed entry
    program for up to 2 years while he attends college and he's
    paid a stipend of $150 per month while he's in the delayed
    entry program. Any modification to our program that I would
    suggest would be to expand that down to the high school level
    so we could target those individuals that are seniors in high
    school that know they're going to go to college for at least a
    year and that's what we get a lot. I'm going to go to college
    for a year and then come on active duty.
        If we can meet those individuals at that point where
    they're making that type of decision--if we can market our
    product down to them at that level I think it would be a little
    more effective program. In regards to your question about the
    GI Bill, I stated prior to you entering the room, sir, that
    most of the individuals that I put into the Army have joined
    the Army for the intangibles, for the sense of belonging, the
    service to country, dedication, the honor of being in a
    uniform.
        They usually defend their decision with an incentive be it
    the GI Bill, the college fund or something of that nature. I
    think by allowing the GI Bill to be transferable it may hurt
    recruiting efforts in the future, sir, because if a recruiter
    came into my house and all he was armed with was money for
    college for my son or daughter to make their decision to
    joining and I had that money in the form of my GI Bill for
    service then I would probably opt to allow my son or daughter
    to enter school, and so I think that if you want to make the GI
    Bill--give it more power as you stated earlier, sir, maybe we
    should look at making it a part of the survivor's benefit
    package or allowing family members, if the individual becomes
    disabled or if the individual is killed on active duty, or
    allow the soldier to cash in on it and get some sort of
    monetary value out of it at the time of his retirement but I
    don't think it should be allowed to be used by family members
    below the spouse.
        Senator Cleland. That's interesting. Of course, if an
    individual is killed on active duty or wounded or disabled the
    VA benefit structure takes over and then VOC rehab under the GI
    Bill is allowable, but that's an interesting observation. Are
    you hindered in some way in terms of marketing your product
    down to the high school level?
        Sergeant Streeter. Yes, sir. As the program currently--the
    College First Program is limited to high school diploma grads,
    sir. It's a new program the Army has that allows us to put
    individuals into a delayed-entry program for 2 years.
        Senator Cleland. You're not able to talk to high school
    seniors about that?
        Sergeant Streeter. Not about the College First Program,
    sir. I can talk to them about it, they just can't join for it
    until they're high school diploma graduates. But a lot of our
    high school seniors we talk to in the beginning of the school
    year know that they're going to enter college for at least a
    year, and so if we could market our product down to those
    individuals, it would expand the use of that product
        Senator Cleland. I know the Reserves can sign up people in
    high school. I had some classmates sign up in the Navy Reserve
    and go to training between their junior and senior years in
    high school.
        Sergeant Streeter. Yes, sir, we can do the same thing but
    the College First Program you're not allowed--under the College
    First Program they aren't allowed to enter into the delayed-
    entry program until after they're holding a high school
    diploma.
        Senator Cleland. Mr. Chairman, that might be something our
    staff might want to look at. Thank you all very much.
        Senator Hutchinson. I thank you also. Excellent testimony.
    I'll tell you, this is the second year I have had the
    opportunity to listen to our recruiters here who are doing the
    tough work in the trenches. This is one of the eye openers
    always for me, and I think you've represented yourselves well.
    You've given us excellent testimony. It has been very
    informative. It's going to assist us a lot as we go through the
    Defense Authorization markup this year. I thank you. You can
    either stay and listen to the admirals and commanders or you're
    certainly free to be dismissed at this time.
        While you make your way out, I will introduce our second
    panel. Representing the Army, Lt. Gen. Timothy Maude, Deputy
    Chief of Staff for Personnel; and Maj. Gen. Dennis Cavin,
    Commander, U.S. Army Recruiting Command; for the Navy Vice Adm.
    Norbert Ryan, Chief of Naval Personnel; and Rear Adm. George
    Voelker, Commander, Naval Recruiting Command; for the Marines,
    Maj. Gen. Terrence Murray, Acting Chief of Staff for Manpower
    and Reserve Affairs; Maj. Gen. Garry Parks, Commander, Marine
    Recruiting Command. Incidentally, General Parks has been
    nominated to be the next Deputy Chief of Staff for Manpower and
    Reserve Affairs, so compliment him. For the Air Force, Lt. Gen.
    Don Peterson, Deputy Chief of Staff for Personnel, and Brig.
    Gen. Paul Hankins, Commandant, U.S. Air Force Officer Accession
    and Training Schools. General Maude, General Cavin, Admiral
    Voelker, and General Murray, we welcome you to our first
    hearing.
        General Parks, I see you have been nominated to replace
    Lieutenant General Klimp as the Deputy Chief of Staff for
    Manpower and Reserve Affairs. Congratulations again on that
    nomination. I look forward to continuing to work with you in
    your new capacity once you are confirmed.
        In order to ensure that we have sufficient time to address
    the important issues of recruiting and retention, I will impose
    some limits on your opening statements. I will ask one
    representative from each service to take no more than 3 minutes
    to summarize your statements and, without objection, I will
    make your entire prepared remarks part of the record of this
    hearing.
        General Maude, if you would begin, then Admiral Ryan,
    General Murray, and General Peterson in that order, please.

     STATEMENT OF LT. GEN. TIMOTHY J. MAUDE, USA, DEPUTY CHIEF OF
    STAFF FOR PERSONNEL; ACCOMPANIED BY MAJ. GEN. DENNIS D. CAVIN,
         USA, COMMANDER, UNITED STATES ARMY RECRUITING COMMAND

        General Maude. Thank you, sir. Good morning.
        Mr. Chairman and members of the subcommittee, thank you for
    the opportunity for the United States Army to appear this
    morning before you and address our recruiting and retention
    status and the challenges that we face. We look forward to
    working with the subcommittee to ensure that the personnel
    needs of the Army are met as we move through this next century.
        The number one priority in the United States Army remains
    manning the force. There are several implied tasks associated
    with this, recruiting, retention, and attrition management just
    to name a few and we recognize the important relationships
    between the ongoing task of manning the organization and
    conducting our successful Army transformation.
        You've heard our Army vision and its three basic tenets:
    quality people, readiness, and transformation. Our quality
    people are the center of our formations and today we have 6,000
    more people on active duty than we did at this time last year.
    As a result of the successful efforts of our recruiting force,
    our retention force, company commanders, and unit leaders in
    both basic training and our field units are working to reduce
    attrition over this past year.
        Two years ago we were only able to execute an average
    strength of 473,000 people for the Active component during the
    course of the year. Last year we improved that to 475,000 and
    this year we will finish the year with an average strength of
    480,000 people and be well within the tolerance for our Army
    end strength. We will achieve this through a healthy manpower
    program that our service leadership has put in place to support
    both recruiting and retention.
        Sir, this past year all three of our components achieved
    their recruiting goals and this was the first time that has
    happened since 1992 and before that it was 1983. Also this past
    year we had a 14 percent increase in our accession production
    between 1999 and 2000.
        Our noncommissioned officers and recruiting command have
    accomplished what few thought they could. They are a
    determined, mission-focused, and extremely hard-working group
    of noncommissioned officers.
        We have also had the successes that we have had because of
    the support from Congress and the members of this subcommittee.
    The work that has been done on pay increases, REDUX reform, our
    College First Program are all examples of resources and action
    that have made our mission possible.
        Over this past year we have also renovated our advertising
    campaign. I have on the display board just to my left here an
    example of our website, which has been very successful in
    attracting young people. Our move to ``An Army of One''
    campaign has been put in place as an effort to present a
    refreshed grand identity for the United States Army. ``An Army
    of One'' means to the children today the same as ``Be All You
    Can Be'' did to children 20 years ago. This message is about
    personal growth, opportunity, and pride. We have retooled our
    message to give our target audience a clear understanding that
    our Army is--what our Army is and to drive them quite frankly
    to the Internet where they find credibility in the message and
    the ability to shop at their own speed.
        Early results from this predominantly web-based advertising
    campaign are very encouraging and we expect in the next weeks
    to receive the results from an independent study that we had
    done by a market analyst that will let us know whether our view
    is the same as their view in terms of the success of the
    program. Additionally, we moved into partnership with the
    National Hot Rod Association which is represented by the car,
    The Sarge, on the next panel. We have been able--this has been
    a dramatically effective tool in reaching high school students
    through the joint education and awareness program that we work
    with the National Hot Rod Association and we think we can say
    that this program has been directly responsible for gaining us
    access to three high schools that for many years before this
    program we have been denied access to.
        Our goal now is to establish a smoother recruiting battle
    rhythm that gets us out of month-to-month recruiting and helps
    us rebuild our delayed entry program. Given the current
    competitive market and demonstrated behavior of our audience,
    we think it will take us just a few more years before we have
    achieved the battle rhythm.
        Our retention program continues to be a good news story for
    the United States Army and we are having great success in
    reenlisting soldiers both in their initial term and mid-career
    and career soldiers. We have also had great success over the
    last couple years, as I mentioned earlier, in reducing our
    first term loss and every improvement we make there is one less
    soldier we have to recruit.
        Over the past several years we have reduced our attrition
    to the net result of saving over 4,600 soldiers to our ranks
    last year that we did not have to replace with recruiting. Our
    one principal challenge that remains today is officer
    retention. Our officer retention is slightly down as compared
    to our predraw-down data, coupled with some deliberate
    management decisions that the Army made during the downsizing
    which caused our current captains to be undersized and our
    current captain grade plate to be short.
        We have a number of ongoing programs to improve our junior
    officer retention and to help us build back the inventory.
    Included among these are timing and integration into the
    regular Army cell count of captains that have been twice
    nonselect for promotion to captain--and a voluntary recall to
    active duty of those officers who separated over the last
    couple years.
        Additionally, we are promoting captains at or just above
    the DOPMA goal which enables us to get the fullest benefit
    possible from the current promotion opportunities. We are
    currently promoting to captain at 42 months of service. We will
    be coming forward to you to ask for your assistance in
    temporarily reducing the minimum point for pin-on to 36 months
    to help us smooth our grade plate between lieutenant and
    captain. We believe that the captain attrition is stabilized
    and the efforts that I've just mentioned will enable us to
    address readiness concerns that remain from the shortages that
    we still have.
        Sir, you can feel confident that the Army remains manned
    today and has a healthy manpower program in place to keep us
    manned through our transformation and ready to do the nation's
    missions. General Cavin and I look forward to answering your
    questions. Thank you, sir.
        [The prepared statement of Lieutenant General Maude
    follows:]

              Prepared Statement by Lt. Gen. Timothy J. Maude, USA

        Mr. Chairman and Members of the committee:
        Thank you for the opportunity to appear today to discuss the
    recruiting and retention status and challenging issues facing America's
    Army. We look forward to working with you to ensure that the personnel
    needs of the Army of the 21st century are met. The transformation of
    the Army continues and we are excited about the challenges that lie
    ahead. With your help, we firmly believe that we can ensure the Army
    remains the absolute best in the world. Briefly, we'd like to discuss
    some of our on-going initiatives in recruiting and retention.

                              ENLISTED RECRUITING

        The Army achieved its recruiting goal in all three components
    (190,724) in fiscal year 2000. The fiscal year 2000 recruiting goal was
    fully achieved for all three components--an achievement realized only
    twice over the 1990s. For fiscal year 2001, we expect to achieve our
    goals in all three components again, achieving the first back-to-back
    successful years in all components in two decades. These successes do
    not come easy or cheap. A large part of our success is due to the help
    this Committee has provided us, and we thank you for that.
        As the Army begins its transformation, we are continuing our
    efforts to improve our recruiting practices and develop innovative
    solutions and business processes more in line with the expectations and
    needs of today's youth. Our vision is an Army recruiting effort that is
    able to connect to the youth of America using a modem with a carefully
    selected and professional sales force that is supported by credible
    research, relevant products, state-of-the-art systems and world-class
    advertising.
        We are continuing to shift our focus from our traditional high
    school senior market to greater emphasis in the college and high school
    graduate markets. As a result, we have made major strategic
    improvements in recruiting production. By enlisting soldiers who have
    already completed high school, we have been able to fill near-term
    training seats at our training installations better than ever before.
    This shift in recruiting focus from high school seniors to high school
    graduates has also allowed us to reduce Delayed Entry Program (DEP)
    losses. The number of enlistees with some college education has
    likewise increased, providing us with soldiers able to meet the demands
    of the many high-tech job requirements of today's Army. In fiscal year
    2000 alone we enlisted over 8,000 soldiers with some level of post-
    secondary education. Of those, over 800 had an Associate's Degree, over
    2,000 had a Bachelor's Degree, and over 150 had a Master's Degree or
    higher.
        We have repositioned our recruiting force to match population
    shifts, more effectively connect with our market, and position
    ourselves for success. In fiscal year 2000 alone, we opened and
    relocated more than 110 recruiting stations. We shifted 24 percent more
    recruiters and associated facilities into the southwestern states and
    more than 36 percent additional recruiters and facilities in the West
    Coast states. In fiscal year 2000, more than 20,000 newly trained
    recruits participated in the Hometown Recruiter Assistance Program,
    going back to their hometowns to provide personal testimony on a peer-
    basis about their experiences in basic training and Army life. We
    continue to emphasize this connection of Army soldiers back to their
    community. They provide leads for our recruiters, which result in
    enlistments, but they also provide a known face of the Army back into
    the youth of their community. Additionally, we continue to allow
    soldiers with as little as 4 years in the Army to serve as recruiters,
    again strengthening our connection with the youth of America.
        We will continue to leverage the growth of technology in automating
    the recruiting force. We've modernized our job placement system Army-
    wide, giving us better visibility of job availability, allowing us to
    offer a greater variety of enlistment packages and options to
    enlistees, and reducing the processing time for our applicants. As a
    result, we have substantially reduced the number of applicants who are
    qualified to enlist but decide not to accept available options.
    Likewise, the enhancements associated with the fielding of the laptop
    computers to our recruiting force are showing positive results. Greater
    appeal with the improved video sales presentation, reduction in the
    number of enlistment packet errors through one-time data entry
    capability, and expanded use of the Internet for college and high
    school recruiting are all beginning to prove effective.
        Closely linked with our improvements in automation is our
    exploitation of the capabilities and opportunities offered through the
    Internet. In fiscal year 2000 we had more than 3,000,000 visitors to
    our web site, providing us with over 90,000 follow-up opportunities
    (recruiter leads). Our `cyber-recruiters' corresponded with more than
    30,000 chat users visiting our chat room, generating over 7,000 follow-
    up e-mail messages. Our enlistment contract per lead rate for leads
    from the Internet is higher than all other lead sources.
        In fiscal year 2000, Senior Army Leadership decided on and
    authorized improvements to the Army's recruiting marketing effort. To
    this end, extensive efforts took place by RAND, Yankelovich and Leo
    Burnett to conduct quantitative research to understand youth.
    Additionally, the Army selected a new Advertising Agency (Leo Burnett)
    and created a new Army Marketing Brand Group, drawn from the leading
    private-sector marketing companies. On 11 January 2001 we implemented a
    new recruiting campaign based on this research. Army leadership's
    decision to head in a new direction has already resulted in the
    following major accomplishments with the new Army advertising
    partnership: Army brand identification, a strategic business plan, a
    communications strategy, a new Army slogan, an Army logo, three new
    television commercials in 45 days, use of the Internet as a focal point
    for Army advertising, and a basic training web series. The campaign is
    designed to drive youth to the Army's web site. The expansion and
    redesign of www.goarmy.com allows us to offer more information for web
    users to surf, click, see and hear. This campaign is based on extensive
    quantitative research conducted by RAND, Yankelovich, and Leo Burnett
    to understand the current youth market. It tackles, head on, the basic
    misconceptions that hinder recruiting--that the Army is not a place I
    want to be. The marketing plan recognizes the Army's on-going dual
    needs, putting people in boots now and improves long-term recruiting
    propensity and accessions by getting the Army into a young person's
    consideration set. Qualitative research among our target audience
    indicates they understand the campaign. Daily web site visits are up
    (+103 percent), on-line cyber-recruiter contacts are up (+92 percent),
    leads generated on the web site are up (+69 percent), and 800# call
    volume remains strong (+7 percent). We expect this to generate
    increased contracts in the coming months.
        The Army has clearly made recruiting a top priority. The
    leadership's willingness to provide the resources and support needed to
    improve the packaging of the Army product has greatly contributed to
    our success. In addition, under the leadership of Training and Doctrine
    Command the school commandants have been mobilized to support
    recruiting resulting in the significant increase to the hometown
    recruiter program. Additionally, the entire Army has engaged in
    ``reconnecting with America'' by sending teams of soldiers with
    equipment displays to hometowns across America.
        Today's young men and women have more employment and educational
    opportunities than ever before. Competition for these young people has
    never been more intense. The Army must have competitive incentives to
    make service to our country an attractive option. To that end, we've
    developed programs we think will attract high quality young men and
    women. The potential impact of these programs is broad-based and far-
    reaching. The recruit, colleges, private industry, the Army, and the
    Nation will all benefit from a better educated, highly skilled Army of
    opportunity that returns a disciplined, mature citizen back to society.
        Announced in June 2000, the Partnership for Youth Success (PaYS)
    program consolidates Army and industry recruiting efforts into a
    partnership that is cooperative rather than competitive. When a new
    soldier enlists under this program, he or she can choose from 94 job
    skills offered by the Army and needed by industry, receive accredited
    certification in that job skill, and upon successful completion of
    their term of service, receive preferential hiring status with a
    participating corporation in need of that skill.
        The Army's high school completion program or GED plus offers high
    quality young people who have not completed their high school
    education, but score high on the Armed Services Vocational Aptitude
    Battery and the Assessment of Individual Motivation test and are
    otherwise qualified, the opportunity to gain their GED and then enlist
    in the Army. We expect this program to pay big benefits not only to the
    new soldiers, but also to the Army and the Nation as well.
        Geared toward vocational or junior college interests, the College
    First program offers high school graduates an opportunity to attend 2
    years of college before joining the Army. The Army provides enlistees
    in this program with a monthly stipend during their time in college in
    exchange for a commitment to service upon graduation. Even though
    research shows this is precisely the type of option that youth are
    looking for, response to the program during its first year has been
    very low (less than 250 contracts). The stipend that we are allowed to
    pay is only $150 per month, and we are finding that it is not enough of
    an incentive to cause youth to commit. We have some proposals on how to
    address this problem to make this a viable program as we continue to
    increase our presence in the college market.
        The Army, with congressional assistance, has resourced most
    recruiting requirements in fiscal year 2001. The new ad campaign has
    $25 million in fiscal year 2001 unfunded requirements. The Army is
    currently reviewing ways to fund this critical program. In addition,
    these new programs initiated to increase the likelihood of success in
    fiscal years 2000 and 2001 have had residual impacts on the out-year
    budgets. We will expect to fund recruiting at a level that will ensure
    success in a challenging environment.
        Business practices, incentives and advertising are a part of
    recruiting but our most valuable resource is our recruiters. Day in and
    day out, they are in the small towns and big cities of America and
    overseas, reaching out to young men and women, telling them the Army
    story. We have always selected our best soldiers to be recruiters and
    will continue to do so. These soldiers have a demanding mission in
    making their individual goals. We owe it to these recruiters and their
    families to provide them the resources, training and quality of life
    environment that will enable them to succeed. The Army appreciates your
    continued support for recruiting programs and also your support for
    improving the quality of life of our recruiting force.

                               ENLISTED RETENTION

        The Army's Retention Program continues to be a success story in
    this very challenging and demanding environment. The focus of our
    program is to sustain a trained and ready force that operates around
    three basic tenets:

             Reenlisting highly qualified soldiers who meet the
            Army's readiness needs,
             Enlisting or transferring qualified transitioning
            soldiers into a Reserve component,
             Maintaining maximum command involvement at every
            echelon of command.

        Ensuring that a viable and dynamic retention program continues is
    critical to the sustainment of the Army. Our retention efforts continue
    to demand careful management to ensure that the right skills and grades
    are retained at sufficient levels that keep the Army ready to fulfill
    its worldwide commitments. Our Selective Retention Budget continues to
    provide the leverage, which ensures a robust and healthy retention
    program.
        Over the past few years, because of the difficult recruiting
    environment, retention has played an even greater role in sustaining
    the necessary manning levels to support our force requirements. Last
    year both our recruiting and retention efforts were highly successful.
    It was the first time in the past 3 years when both of these programs
    met or exceeded their goals, which will in turn provide more soldiers
    in support of both our manning initiatives and transformation plans.
    None of this could have been possible without the concerted effort of
    commanders in the field and their Career Counselors, who are the
    backbone of our retention efforts.
        This year we will have a retention mission that reflects only a
    slightly lower percentage of soldiers necessary to sustain the force
    than in fiscal year 2000, given the reduced eligible population that
    now is coming into the reenlistment window. We will have to sustain
    relatively high levels of retention for the next several years as
    under-assessed cohorts move into the retention window.
        The ultimate success of our retention program is dependent on many
    factors, both internal and external to the Army. External factors that
    are beyond our ability to influence are; the economy, the overall job
    market, and the world situation. While we continue to be enthusiastic
    about the healthy economy and the rapidly expanding job market, we are
    also aware that these factors weigh heavily on the minds of soldiers
    when it becomes time to make reenlistment decisions. Our force today is
    more family based, and spouses, who are equally affected by these
    external factors, often have great influence over those decisions. Also
    more and more of our spouses have careers of their own and are
    reluctant to remain in an organization that is very fluid. The internal
    factors that we all have a hand in influencing are; benefit packages,
    promotions, the number and length and uncertainty of deployments,
    adequate housing, responsive and accessible health care, and attractive
    incentive packages which include reenlistment bonuses. Not all soldiers
    react the same to these factors; it continues to be a challenge facing
    our commanders and their Career Counselors to provide the right package
    of incentives to qualified soldiers that make them want to remain part
    of our Army.
        Our incentive programs provide both monetary and non-monetary
    inducements to qualified soldiers looking to reenlist. The Selective
    Reenlistment Bonus, or SRB, offers a monetary incentive to eligible
    soldiers, primarily in the grades of Specialist and Sergeant, to
    reenlist in skills that are critically short or that require
    exceptional management. The Targeted Selective Reenlistment Bonus
    program, or TSRB, focuses on eleven CONUS installations and Korea where
    pockets of shortages exist in certain military occupational specialties
    (MOS). Commanders like the TSRB program since it also acts as a
    stabilizing force within many of our operationally critical
    installations. The TRSB pays a reenlisting soldier a higher amount of
    money to stay on station at a location in the program or to accept an
    option to move there. Both of these programs, which are paid for out of
    the same budget, play key roles in force alignment efforts to overcome
    or prevent present shortfalls of junior non-commissioned officers
    (NCOs) that would have a negative impact on the operational readiness
    of our force. We use the SRB and TSRB programs to increase
    reenlistments in critical specialties such as Infantry, Special Forces,
    Intelligence, Communications, Maintenance and Foreign Languages.
        Non-monetary reenlistment incentives also play an important role in
    attracting and retaining the right soldiers. We continue to offer
    assignment options such as current station stabilization, overseas, and
    CONUS station of choice. Training and retraining options are also
    offered to qualified soldiers as an incentive to reenlist. By careful
    management of both the monetary and non-monetary incentive programs, we
    have achieved a cost-effective balance that has been proven effective
    in sustaining the career force.
        The Army executes its retention mission through a network of highly
    dedicated, and experienced professional Career Counselors who serve at
    the Brigade, Division, Corps and MACOM level. They are supported by
    unit level personnel who provide retention support to their units as an
    additional duty. Career Counselors and Unit Reenlistment NCOs are
    directly responsible for making the Army's retention program
    successful.
        The Army's retention program today is healthy. We anticipate
    reenlisting 66,000 soldiers against a mission of 64,000 during fiscal
    year 2001. Our fiscal year 2001 Reserve Component Transition Program is
    also successful. By the end of the year, we expect to transfer 10,600
    Active Duty soldiers into the Reserve component units against a mission
    of 10,500.
        Despite these successes there continue to be concerns surrounding
    the direction and future success of the retention program. Support
    skills, which require language proficiency, signal communications,
    information technology, and maintenance present a significant challenge
    caused by those external factors mentioned earlier: the economy and
    growing job market. Civilian employers actively recruit soldiers with
    these skills wherever they are assigned. They offer bonuses and benefit
    packages that we simply can not match under current bonus allocation
    rules and constrained budgets. The Army Retention Program is healthy in
    the aggregate, however, we continue to be concerned with retaining the
    right numbers of soldiers who possess these specialized skills.
        The success of our retention program continues to rest on the
    shoulders of unit commanders, leaders and our retention professionals
    throughout the Army. Our concerns for fiscal year 2002 and beyond
    centers around the momentum that was initiated in Congress last year to
    improve the lives of our soldiers through improved pay, full funding of
    our Selective Reenlistment Bonus Program, and the pay table reform
    initiative. There is still a perception throughout the force that
    benefits have eroded over time, particularly in the areas of health
    care, housing, educational opportunities, continued availability to
    bonus money, and the impact of frequent deployments. That perception is
    an important one, and should give both the key leaders within our Army
    and members of congress a common point in which to proceed in
    addressing these concerns.

                         ARMY UNIVERSITY ACCESS ONLINE

        The Army University Access Online (AUAO) Program is a major new
    Army initiative designed to offer soldiers access to a wide variety of
    online post-secondary programs and related educational services via a
    comprehensive educational portal, www.eArmyU.com. By leveraging
    technology, AUAO enables enlisted soldiers to complete certificate and
    degree requirements ``anytime, anyplace,'' thus making it possible for
    all soldiers to fulfill their personal and professional educational
    goals while simultaneously building the technology, critical thinking,
    and decision-making skills required to fully transform the Army.
        The Army currently provides 100 percent funding for all student
    costs, including tuition and fees, a laptop computer and printer,
    Internet access tutoring and course materials. As of the March
    registration, there were over 800 courses available from 20 academic
    institutions. This number is expected to grow over the contract years.
        To participate, soldiers are required to have 3 years remaining on
    their enlistment before enrolling, and they must complete 12 semester
    hours during the first 2 years of participation or reimburse the Army
    the prorated cost of the technology package. Based on our experience at
    the three initial installations where the program has been
    implemented--Forts Benning, Campbell, and Hood--AUAO is proving to be a
    successful retention incentive. Of the nearly 4,500 soldiers who have
    signed up, 625 reenlisted or extended to qualify for participation. We
    are recommending that this program be extended Army-wide. In addition,
    it has the potential to offer educational opportunities to other the
    other Services, as well.

                        OFFICER RECRUITING AND RETENTION

        The Army finished fiscal year 2000 with officer end strength at
    76,667. This is 1,133 below our budgeted end strength of 77,800. We are
    closely monitoring officer retention rates, particularly at the grade
    of captain. Due course company grade loss rates remain about 1 percent
    higher than pre-drawdown (1987-1988) loss rates and are exacerbated by
    constrained accession cohorts during drawdown years. The impact of the
    captain shortage forecasted for fiscal year 2001 (2,748 captains) is
    largely offset by a lieutenant overage (3,242 lieutenants), so that in
    the aggregate, we will finish with a shortage of 380 company grade
    officers in the Army Competitive Category. There are certain
    experiential factors, however, that cannot be offset. The Army has
    programmed for an increase to 4,100 lieutenant accessions in fiscal
    year 2001 and to 4,300 in fiscal year 2002, and to 4,500 in fiscal
    years 2003-2005 to support immediate and future officer requirements.
        Junior officer career expectations and patterns are impacting
    retention. They include comparisons of Army career requirements with
    the civilian sector and Service impacts on personal and family life
    (PERSTEMPO). Administration and congressional support on REDUX and pay
    table reform serve to redress the pay issues. Additional initiatives to
    increase retention include reviewing the timing and integration of
    officers into the Regular Army, reviewing force structure at the grade
    of captain, strict enforcement of Active Duty service obligations,
    selectively continuing (SELCON) twice non-selected captains for
    promotion to major, and a voluntary recall of captains to Active Duty.
        We will continue to promote to captain at or above the DOPMA goal
    of 95 percent, and are currently promoting all fully qualified
    lieutenants to captain at 42 months time in service. We will need
    Congressional support to obtain authority to temporarily reduce
    promotion point for Captain to 36 months to correct the readiness
    impacts that our Captain shortage is having on the force.
        Army initiatives to improve retention among its warrant officer AH-
    64 (Apache) pilot population have curbed attrition rates from 12.9
    percent in fiscal year 1997 to 8.9 percent in fiscal year 2000. Last
    year we offered aviation continuation pay to 596 eligible officers, of
    which 541 accepted (91 percent take rate). Additionally, we have
    recalled 150 pilots since 1997, and have 34 Apache pilots serving on
    Active Duty in SELCON status.
        The loss rate for Army Competitive Category colonels and lieutenant
    colonels has remained steady at 19.8 percent and 13.2 percent
    respectively. This is slight decrease from fiscal year 1999 for both
    grades. The years of service that these grades are leaving at has
    actually increased. Colonels are departing at 28.9 years of
    commissioned service, and lieutenant colonels depart at 22.5 years of
    commissioned service. This is an increase in service from fiscal year
    1998 of 1 year for colonel and 4 months for lieutenant colonel. The
    Army is forecasted to finish fiscal year 2001 short 221 colonels and
    529 lieutenant colonels in the Army Competitive Category.

                               CLOSING STATEMENT

        The success, prosperity, and security of the United States today
    establishes the most challenging environment for Army recruiting in the
    past 30 years. Over the coming years, we face unprecedented challenges
    in shaping and transforming the Army of the 21st century. We are up for
    the challenge and will do everything we can to succeed. We believe that
    the Army has laid the framework for success and is on the right track.
    Your continued support is essential in setting the conditions for
    future success.

        Senator Hutchinson. Thank you, General.
        Admiral Ryan, good to see you again and you're recognized.

      STATEMENT OF VICE ADM. NORBERT R. RYAN, JR., USN, CHIEF OF
     NAVAL PERSONNEL; ACCOMPANIED BY REAR ADM. GEORGE E. VOELKER,
         USN, COMMANDER, UNITED STATES NAVY RECRUITING COMMAND

        Admiral Ryan. Good morning, sir. Chairman Hutchinson,
    Senator Cleland, Admiral Voelker and I are honored to be here
    this morning with Petty Officer Strothers to talk about the
    Navy's war for talent.
        Our new CNO, Admiral Clark, has set as his number one
    priority manpower. We are attacking this challenge in three
    particular areas. First, is in putting a lot more emphasis on
    retaining those that we recruit into our Navy.
        Second, we are trying to reduce the attrition of our first-
    termers in the Navy. Since the early 1980s, we have lost about
    one-third of the men and women that sign up for a 4-year
    contract before their 4-year time is up. Admiral Clark has set
    a stretch goal for us to cut attrition by 25 percent in each
    command this year. So a CO of a ship, large ship that may have
    lost four individuals due it attrition last year, their maximum
    ceiling is three this year and we expect that each of these
    commanding officers is going to do their best to lower
    attrition.
        Third, in recruiting we are trying to strengthen our
    recruiting as well.
        Now I am happy to report to you this morning that we have
    good news in all three of the three-pronged areas that we are
    attacking. In the reenlistment area we have improved our
    retention by 6.4 percent over last year for this same period of
    time. That is across all of our different pay grades, and so
    that's very good news for us this far.
        In attrition, we cut attrition 1 percent last year. We have
    cut attrition again 1 percent so far this year. Again, good
    news due to the leadership out in the fleet. Then, finally, in
    the recruiting areas, we made our goal last year and, thus far,
    this year both our active and reserve recruiting commands
    expect to meet their goal for the year with the continued
    progress that they're making.
        Now in the interest of time I heard your 3-minute comment,
    Mr. Chairman. I will not talk about those initiatives that have
    really helped us the most in the reenlistment area in the
    attrition area. They're in my prepared statement. I would
    simply say in the recruiting area you met our number one secret
    weapon and that is Petty Officer Strothers and the 5,000 other
    recruiters like her that are out there recruiting for us in the
    Navy.
        We have changed our philosophy we are looking now to young
    petty officers who are volunteers who want to be out there to
    be our recruiters and it is paying off for us in a much higher
    productivity per recruiter. We have also retrained all of them
    with a new sales program that has been very successful with our
    large corporations. We have also given them, as you have heard
    from her, laptops, cell phones, and cars and we find that they
    are doing a fabulous job when we give them the adequate
    resources, and we have resourced them with 5,000 recruiters
    since last September.
        In addition, we are very proud of our new advertising
    campaign that Admiral Voelker has headed and that is accelerate
    your life with our new advertising teammate Campbell-Ewald from
    Detroit. This is a program that now emphasizes the challenges
    and the opportunities of service rather than what's in it for
    you in the way of financial incentives and it is appealing to
    the young person, we are trying to get them to go to the
    Internet, much like the Army and visit our new website and our
    life accelerator that tells them about the experiences and the
    opportunities in the Navy.
        We have been very encouraged by the first month that we
    have had this program in operation. In fact, in the first 10
    days, our web page had more hits than we had been averaging in
    a month prior to the start of our new advertising campaign. So
    we think we have a winner there that is going to help us.
        So in closing, I would simply say we have made progress in
    all three of the pronged areas that we are attacking,
    retention, attrition, and recruiting. But there are still
    challenges out there and we have a long way to go. We know that
    we are still losing too many young men and woman who volunteer
    to come into our service and leave before their obligated
    service is up.
        We know that we are still not retaining as many mid-grade
    and senior petty officers as we would like to and we are
    confident we can do better in that area. Then in the recruiting
    area although we have been making goal and scraping by each
    month with good quality candidates, we are just scraping by
    because our delayed entry pool is not at the level that it
    should be and Admiral Voelker and his team are working to get
    that up, but we still have a long way to go.
        So in summary, I would simply say we are making good
    progress. We are proud of that progress but we are going to
    need the continued support of this administration, this
    Congress, and in particular this subcommittee if we are going
    to continue to make our way ahead. In particular, we have been
    able to run about 2,400 to 3,000 above the end strength that we
    have been funded in the Navy as well, Senator, because of our
    gains and Senator--Admiral Clark has allowed us to do this
    because he knows we still have significant gaps at sea and
    ashore and because of the U.S.S. Cole incident we have
    significant new requirements in the way of anti-terrorism and
    force protection that has allowed us to significantly increase
    our readiness, but those personnel are not funded in our
    current budget. So we will be asking for the support of
    Congress and the administration to help us continue the
    momentum that we have had thus far.
        Admiral Voelker and I look forward to your questions.
        [The prepared combined statement of Vice Admiral Ryan and
    Rear Admiral Voelker follows:]

     Prepared Combined Statement by Vice Adm. N.R. Ryan, Jr., USN and Rear
                             Adm. G.E. Voelker, USN

                                  INTRODUCTION

        Mr. Chairman, and distinguished members of this subcommittee,
    Admiral Voelker and I appreciate this opportunity to discuss the status
    of Navy efforts aimed at winning the ``war for people'' and to point
    out some of the promising initiatives our team has initiated to improve
    retention and recruiting. We have begun to show improvement in most
    areas, but it would be premature to declare victory. I remain concerned
    about our ability to maintain the momentum that we have gained as a
    result of improved retention, the efforts of our dedicated recruiting
    force and resources provided by Congress. Today's hearing provides us
    with an invaluable opportunity to emphasize ongoing efforts to leverage
    the many successes we have experienced thus far and to solicit your
    continued support to help us achieve optimum personnel readiness in the
    near-term and then sustain it in the long-term.
        These men and women, who choose Navy, join a force that commands
    the seas and projects U.S. sovereign power overseas. The return on our
    investment is to provide our Nation a power that is immediately
    employable across the entire spectrum of conflict without foreign
    constraints. These bright, motivated, well-trained men and women on our
    advanced ships, submarines and aircraft make sacrifices every day. Our
    challenge is to first recruit and then retain them through an
    appropriate balance of Total Military Compensation and assured Quality
    of Service.

                                  END STRENGTH

        The single, most important objective in our efforts to establish
    optimum personnel readiness is providing the fleet with the right
    sailor, with the right training, at the right place and time. This has
    become increasingly challenging partly due to circumstances beyond our
    control, such as the flourishing economy, but also partly due to
    situations that are within our ability to influence, like the current
    imbalance in our force profile resulting from an aggressive drawdown
    strategy during the `90s. As we drew down, Navy achieved mandatory
    strength reductions by consciously under-accessing, so as to keep faith
    with an all volunteer force who had earned our loyalty by virtue of
    their having committed to Navy careers during the Reagan-era expansion.
    Those cohorts are now reaching retirement eligibility imposing a
    significant exodus of our corporate knowledge base. As we replace these
    senior, experienced, sailors with new accessions, our force is ``de-
    aging'' resulting in an excessively junior and less-experienced force.
    Our near-term recruiting and retention efforts are focused on
    initiatives that will help us restore balance to the force profile and
    manage to steady-state manning requirements. To achieve the desired
    balance, Navy must continue to improve retention to enhance our
    experience base while continuing to access quality recruits and junior
    officers to provide a steady feed of future Navy leaders across all
    force profile length of service cells.
        At this time last year, we were projecting a fiscal year 2001
    accession requirement of approximately 60,000 new recruits, as many
    experienced sailors were leaving the Navy to pursue lucrative
    opportunities in the private sector. This contributed to an
    unacceptable 11,500 at-sea billet gap. To address this situation, we
    reinvigorated efforts throughout the Navy to retain every eligible
    sailor, thereby easing the recruiting burden by lowering our enlisted
    accession requirement to 56,348. We offered new and enhanced officer
    continuation and enlistment/reenlistment bonus programs, expanded E4
    and E6 High Year Tenure gates, improved advancement opportunities by
    gradually increasing the number of sailors in the top six pay grades to
    more closely match for requirements and concentrated efforts on
    reducing attrition. These efforts are producing desirable results and
    have contributed to reducing the at-sea billet gap to about 6,100,
    permitting us to further reduce fiscal year 2001 accession mission by
    1,348 requirements, to 55,000. At the same time, we project that our
    end of year strength will approach 376,000, above our authorized
    strength of 372,642. The Secretary of the Navy and CNO have allowed us
    to maintain this additional strength to help alleviate the cyclical
    bathtub that has historically presented an inherent readiness challenge
    in our annual manning profile. Maintaining it, however, is not without
    cost and we must now identify the additional resources needed to
    finance the retention benefit to keep this momentum going into fiscal
    year 2002.
        We currently project a significant shortfall across the Military
    Personnel, Navy (MP,N) account due to a number of factors including the
    additional strength, Basic Allowance for Housing revisions and other
    changes enacted in the National Defense Authorization Act for Fiscal
    Year 2001. We will require your assistance to address this shortfall to
    avoid having to cut back on programs contributing to our improved
    readiness profile. Otherwise, it may become necessary to take
    undesirable alternative measures, such as curtailing advancements/
    promotions and permanent change of station reassignments, which would
    hurt morale and adversely impact retention efforts. Our improved
    retention is real, yet fragile. The experience level of Navy's force
    profile will continue declining as drawdown cohorts retire unless we
    take prudent steps now to mitigate the de-aging process and position
    ourselves for long-term success as we transition to a more balanced and
    manageable future force.

                            COMMITMENT TO RETENTION

        In establishing his top five priorities as Chief of Naval
    Operations, Admiral Clark has consistently identified people as #1. At
    every Fleet call, he reminds Navy leaders to remain committed to our
    people and emphasizes that Quality of Service for our people is a top
    priority in readiness and mission accomplishment. Through innovative
    ``Smart Recruiter,'' ``Smart Work,'' and ``Smart Ship'' initiatives we
    have renewed emphasis on the value we place on our sailors and the
    importance we place on convincing them to ``Stay Navy.'' Bolstered by
    resources provided by Congress, these commitments have led to real
    retention gains, permitting us to dramatically reduce our accession
    mission.
    Enlisted Retention
        When I testified before you last year, I discussed the formidable
    retention challenges confronting us. We were faced with reversing a
    declining trend in enlisted retention that was exacerbated by a decade-
    long drawdown. Through a strategy of improving the recruiting and
    retention balance, to correct personnel profile imbalances and manning
    shortages, we experienced impressive fiscal year 2000 retention gains
    that have carried over into this year. Navy leaders and managers at all
    levels have reengaged in the retention battle. Through personalized
    leadership and mentoring, and a variety of innovative initiatives and
    programs, reenlistment rates across all zones of service are up 6.4
    percent over the same time period last year. The combined effects of
    leadership involvement in sailor professional development, expanded
    reenlistment bonuses, enhanced special and incentive pays, increased
    advancement opportunity, and significant Quality of Service
    improvements, have collectively contributed to this welcome turn-
    around. While we remain short of long-range steady-state goals require
    anticipated future manpower needs, we have begun moving in the right
    direction.
        Selective Reenlistment Bonus (SRB). The Selective Reenlistment
    Bonus (SRB) program continues to be our most cost effective and
    successful retention and force-shaping tool. At this point in the
    fiscal year, we have experienced more reenlistments than at the same
    time last year. These gains primarily resulted from reenlistments under
    SRB and we are committed to continuing to maintain a robust SRB
    program. We must now work harder on increasing the number of non-SRB
    reenlistments. We will meet this challenge head-on by continuing to
    enhance Fleet retention efforts, providing valuable career information
    training to counselors and leaders in the Fleet and by responding
    specifically to the needs expressed in Fleet feedback.
        Center for Career Development (CCD). Our Center for Career
    Development (CCD), established 1 year ago, is the centerpiece of Navy's
    focus on retention. It funnels energy and resources toward meeting
    retention challenges and is dedicated to providing the Fleet with the
    tools necessary to enhance their retention efforts. These include
    enhanced professional training for Navy Career Counselors and Command
    Retention Teams, career decision workshops for sailors and their
    families, comprehensive easy-to-use interactive products using the
    latest information technology and consolidation and analysis of Navy's
    retention and Quality of Service data into useful and predictive tools
    to assist senior leadership in making policy decisions. CCD also
    provides attrition and retention policy guidance to senior Navy
    leadership.
        Career Decision Fairs are an excellent example of our aggressive
    efforts to retain high quality sailors. They consist of a four pronged
    approach: First, with the assistance of a retired Navy flag officer,
    sailors are shown a comprehensive view of their Total Military
    Compensation, including pay and allowances, leave, and other related
    benefits, to assist them in making informed decisions about whether to
    stay in or leave the Navy. Second, sailors are provided an opportunity
    to meet face to face with detailers who can discuss career options,
    conduct community status briefs, or even negotiate orders. Third,
    command leadership teams are provided retention best practice briefs
    that are developed and updated from other CCD visits. Fourth, command
    retention teams are given a Professional Selling Skills course
    specifically designed to assist them in ``closing the deal'' with their
    sailors. Since its inception, CCD has visited 33 commands, has hosted
    Career Decision Fairs for more than 5,000 sailors and their families,
    and has convinced over 300 sailors who were planning to separate at the
    completion of their obligation to reenlist for subsequent terms. Had
    these 300 sailors left the Navy as they originally planned, we would
    have spent nearly $10 million in recruitment and training costs to
    replace them. Other initiatives targeted at giving sailors increased
    flexibility in assignment options, collecting feedback from sailors on
    areas of Navy life that they find enjoyable or unattractive, and using
    information technology to provide sailors timely and quality career
    decision information will allow us to expand upon our recent retention
    successes.
        Detailer Communication Initiative (DCI). We have engaged detailers,
    a sailor's assignment and career advisor at the Navy Personnel Command
    (NPC), in our retention challenges through a new Detailer Communication
    Initiative (DCI). DCI is a proactive contact strategy aimed at
    providing improved customer satisfaction to the Fleet by having
    detailers initiate early and frequent contact with sailors and their
    respective command career counselors to discuss future assignment
    options and desires. Through DCI, contact begins 12 months prior to the
    sailor's projected rotation date and allows the command career
    counselor and detailer to spend quality time discussing a variety of
    career options with sailors.
        Guaranteed Assignment and Retention Detailing (GUARD) 2000. The top
    priority for reassignment among sailors is geographic location. GUARD
    2000 provides an incentive that guarantees assignment to a specific
    geographic location and/or waiver of up to 18 months of their
    prescribed sea tour in return for a 4-6 year reenlistment. It also
    gives detailers greater flexibility in the number and type of billets
    they can offer sailors. GUARD 2000 has been well-received by the fleet
    with over 2,500 sailors reenlisting under the program since August
    2000, 1,600 of them reenlisting for their first time. GUARD 2000 is an
    important tool for helping fulfill a sailor's desire for specific
    geographic assignment while helping Navy retain those we worked hard to
    recruit.
        ARGUS Career Milestone Tracking Survey. CCD and NPC developed a new
    web-based questionnaire and report generator system designed to assess
    career decision influences. The web site contains questions
    specifically tailored to capture sailors' perceptions of their current
    quality of service and job satisfaction, and their view of leadership's
    concern over subordinate professional growth and development. Feedback
    from the survey will provide command leadership a resource from which
    to gauge the factors that influence a sailor's career decisions.
        New Stay Navy Website. CCD and NPC launched the newly designed Stay
    Navy Website on 28 March 2001. With more than 50,000 hits in the past
    month, the new site, www.staynavy.navy.mil, is a very popular tool
    providing high-tech, timely and accurate career information to sailors
    and families worldwide. I encourage subcommittee members and
    professional staff to take a moment to peruse the site and would
    welcome any feedback you may wish to provide about the site.
    Enlisted Attrition
        We are working aggressively to overcome a pattern of excessive
    attrition through Fleet initiatives targeted primarily at our first
    term sailors. BEARINGS is a remedial training curriculum targeted at
    young sailors who require additional emphasis on the life skills that
    will see them through their Navy careers and beyond. SECOND CHANCE is
    an initiative aimed at giving young sailors who are struggling in their
    first assignments a fresh start at a new command. Through both
    programs, we are extending to young at-risk Fleet sailors,
    opportunities to successfully complete their initial service
    obligation.
        Additionally, Commander, Navy Personnel Command and the Master
    Chief Petty Officer of the Navy sponsored an attrition summit last
    fall. This brought together Navy's senior enlisted leadership to
    explore the reasons for attrition and establish near-term and stretch
    goals for reducing it. The results of the summit were sent out to all
    flag officers for incorporation into their retention strategies. We are
    committed to keeping every sailor who demonstrates potential for
    productive service, and to providing them with every opportunity to
    succeed.
    Officer Retention
        Improving officer retention is critical to our efforts to meet
    manpower requirements and achieve steady-state force structure. Under-
    accession of junior officer year groups during the drawdown, and
    changes in the post-drawdown force structure, mandate officer retention
    levels significantly above the historical norm. We must continue to
    improve retention to meet officer manning requirements, particularly
    among the Unrestricted Line communities; i.e., aviation, submarine,
    surface and special warfare. While we are beginning to see positive
    retention indicators, largely attributable to effective special and
    incentive pays that target specific officer retention problem areas,
    the strong economy and thriving civilian job market continue to compete
    directly with our retention efforts.
        The Aviation Career Continuation Pay (ACCP) program provides
    incentives for aviators at all levels to make positive career choices.
    In fiscal year 2000, it contributed to a 10 percentage point increase
    in aggregate aviator retention, including an 11 percentage point
    increase in pilot retention and a 6 percentage point increase in Naval
    Flight Officer retention. We are hopeful that the Fiscal Year 2001 ACCP
    program will yield similar results; however, we are currently seeing a
    significant increase in resignations, particularly among the Department
    Head and Department Head eligible aviators.
        Surface Warfare Officer retention at the department head level is
    on a modest, long-term upswing, currently at 26 percent, up from its
    post-drawdown low of 17 percent. This improvement is largely
    attributable to Quality of Service improvements and implementation of
    Surface Warfare Officer Continuation Pay, first authorized in fiscal
    year 2000.
        Although fiscal year 2000 retention for submarine officers dropped
    slightly from 30 to 28 percent, and retention of nuclear-trained
    surface warfare officers dropped from 21 to 20 percent, there has been
    a 30 percent increase among officers in the target year groups (94, 95,
    and 96) signing multi-year continuation pay contracts since
    implementing the fiscal year 2001 Nuclear Officer Incentive Pay rate
    increase.
        Special Warfare Officer Continuation Pay commenced in fiscal year
    2000 and contributed to improvements in Special Warfare Officer
    Retention, which rebounded to 69 percent and 68 percent, respectively,
    in fiscal years 1999 and 2000 from an all time low of 63 percent in
    fiscal year 1998. Special Warfare has the highest URL officer retention
    requirements (74 percent), and SPECWAR retention outlook continues to
    be positive as a result of Navy and SPECWAR Quality of Service
    initiatives, as well as fiscal year 2001 improvements to the SPECWAR
    Officer Continuation Pay program.
        We still have more to do in the current challenging retention
    climate. Navy must continue to approach the officer retention challenge
    from a number of different directions, including implementation of
    initiatives focused on improving Quality of Service. We must sustain
    the push to increase aggregate and individual officer community
    retention to steady-state levels to meet control grade requirements and
    improve military personnel readiness.

                        MEETING THE RECRUITING CHALLENGE

        Thanks to the continued hard work of our recruiters, the
    application of Congressional resources, and initiation of new programs,
    we achieved our fiscal year 2000 accession mission. Ninety percent of
    accessions were High School Diploma Graduates (HSDG) and more than 64
    percent scored in the upper half of the Armed Forces Qualification Test
    (AFQT) (Test Score Category I-IIIA). Additionally, we substantially
    improved our occupational mix, achieved a healthy Nuclear Field posture
    and made significant gains in recruiting within critical ratings.
        Despite last year's accomplishments, we are not yet positioned for
    long-term success. Fiscal year 2001 finds us continuing to face record
    low unemployment, formidable competition with the private sector in
    attempting to hire talented young Americans and low propensity to
    enlist. Our most serious challenge is that we have not restored the
    health of our Delayed Entry Program (DEP) despite our continuing
    efforts to do so. This has forced recruiters to work on a sub-optimal
    month-to-month basis, struggling to meet each month's accession goal.
    This negatively impacts overall productivity and detracts from efforts
    to improve the long-term health of recruiting. We missed accession
    goals for January and February 2001, but rebounded to meet the March
    goal.
    Innovative Approaches to Recruiting
        Given the requirements and conditions we expect to face over the
    next several years, we are working to improve our recruiting force and
    strategies. With continuation of strong Congressional support, fiscal
    year 2000 saw the continuation and establishment of many improvements
    in the recruiter force, professional skills training, advertising,
    incentives, market penetration and attrition reduction. Several
    additional initiatives are currently being considered to help
    capitalize our recent successes.
        Bolstering the Recruiting Force. Our recruiting force is the most
    important factor in the recruiting formula. We are striving to sustain
    a recruiting force of 5,000 with volunteers from the Fleet. We are also
    shifting to a more junior recruiting force. Our analysis indicates a
    more junior, largely volunteer, force will be most productive. We are
    improving recruiter selection with our Recruiter Selection Team (RST)
    and optimizing geographic distribution of recruiters using analytical
    methods and market data. This year we expanded Smart Recruiter
    initiatives to provide cell phones, vehicles and laptop computers to
    virtually all recruiters.
        Professional Selling Skills Program. Starting in fiscal year 2000,
    Navy Recruiting partnered with a commercial firm, with a proven track
    record, to create a customized set of training courses for our entire
    recruiting force. The new selling methodology is based on the
    understanding that today's recruit is better informed and has more
    available options. We anticipate that this training will improve
    producivity, increase the number of DEP referrals and decrease DEP
    attrition rates. All field recruiters receive initial training during
    their recruiter orientation.
        Bluejacket Hometown Area Recruiting Program (HARP). We initiated
    efforts in January 2000 to augment the existing recruiter force with a
    Bluejacket HARP. The aim is to significantly increase the quality and
    quantity of fleet sailors who return home to assist local recruiters.
    The entire fleet is helping identify motivated young sailors, generally
    on their first tour of duty, to participate in this worthwhile program.
    With the program in place just over 1 year, we have already scheduled
    over 9,000 participants and are averaging nearly four new referrals per
    sailor. Along with results of specific referrals and contracts
    attributable to Bluejacket HARP, we are experiencing residual benefits
    of increasing local Navy exposure, introducing recruiters to new
    sources of recruits and exposing fleet sailors to the excitement and
    satisfaction of recruiting duty. If we are to turn the tide in the war
    for talent, each and every sailor must contribute to the recruiting
    effort. Bluejacket HARP moves us in that direction.
        Motivating the Recruiting Force. Along with augmenting and
    equipping the recruiting force, we are exploring a variety of industry
    practices to better motivate recruiters and direct their efforts toward
    Navy priorities. We are benchmarking civilian sales and recruiting
    forces for examples of effective incentives. We have found that
    individuals respond best to monetary and in-kind awards; therefore, we
    are examining the possibility of providing, to top recruiters, in-kind
    awards at some point in the future.
    Advertising--Getting the Message Across
        Throughout fiscal year 2001, Navy has been improving its
    advertising based on an outstanding partnership with our new
    Advertising agency, Campbell-Ewald, which rolled-out our new ``Navy,
    Accelerate Your Life'' advertising campaign and web site this past
    month. Both have been extremely well received. We are engaged in all
    media markets, including television, radio, Internet, CD-ROM direct
    mail, printed materials, newspapers, magazines, job fair and convention
    support (including F/A-18 flight simulators) and public service
    announcements. We are leveraging new communication technologies to
    enhance our message, including streaming video/audio, live web casts
    and virtual ship tours.
        Advertising is vital to the success of Navy's recruiting effort.
    The goal of our advertising campaign is to gain a positive awareness of
    the Navy among our target market (18 to 24 year old men and women),
    motivate their interest in the Navy as a ``Career of Choice,'' provide
    information about Navy opportunities, and reinforce the recruiter's
    message. The advertising is designed to develop leads by attracting
    prospective recruits to our recruiting web site (www.navy.com) or toll
    free telephone number (1-800-USA-Navy) to generate new contracts.
        To continue to be competitive, Navy Recruiting must reach majority
    and minority markets across an expanding media spectrum including
    commercial presence on national and cable TV, radio, print media,
    direct mail, and the Internet. Currently, as a result of inflation and
    a continuing robust economy, we are insufficiently resourced to
    adequately convey our message to our target market.
        CD-ROM. Navy has moved toward the use of CD-ROM for direct mail
    advertising. Increased in-house capabilities have helped Navy fully
    achieve set goals to move several marketing videos and common printed
    information packets to interactive CD-ROM. For fiscal year 2001, Navy
    planned to produce 11 new CD-ROM projects that were to be used in
    marketing Navy's officer and enlisted opportunities. In fact, this
    fiscal year we will produce 18 such products. The rich media
    presentation of compact discs offers a stunning and captivating
    alternative to paper. In the first 3 months of fiscal year 2001, Navy
    completed five new officer CD-ROM projects and embarked on a historic
    recruiter motivational campaign supported by an enlisted recruiting
    support mini CD-ROM. A contest was developed based on the ``Navy,
    Accelerate Your Life'' campaign that allows recruiting stations across-
    the-nation to compete against each other for the recruitment of high
    school and work force youth by addressing known objections of potential
    sailors. The mini CD-ROM was developed based on feedback from
    recruiters and helps dispel many myths our target audience has about
    the Navy by providing interactive responses to frequently asked
    questions. Our CD-ROM products appeal to today's computer-savvy target
    audience and continue to present the Navy message through 3-D motion
    and robust sound with hyperlinks to our new web site and Cyberspace
    Recruiting Station. In the coming months, another 13 projects will be
    completed. Several of these will market Navy directly to an ever-
    growing Hispanic community, our female target market and other
    ethnically diverse communities. We plan to increase exploitation of the
    newest technological advancements in interactive CD-ROM development and
    to produce 18-20 compact discs annually.
        Flight Simulators. We are marketing through such innovative
    approaches as F/A-18 flight simulator rides at fairs and conventions in
    exchange for recruiting lead data. Last year, we leased a 3-D full-
    motion encapsulated ride that simulates a cockpit perspective of a Blue
    Angels flight demonstration. This unit, plus another smaller, F/A-18
    computer-graphics simulator are major attractions at air shows, fairs,
    conventions and high schools and colleges.
        Kiosks. Navy is designated lead agency in developing joint service
    recruiting kiosks. Plans are to explore the use of kiosks as force
    multipliers and leads collection tools, which will be placed in a
    number of venues such as air shows, malls and job fairs.
        Internet Recruiting. We are expanding our presence in the fastest
    growing media market through our Navy web site, our Cyberspace
    Recruiting Station. In March 2001, as part of a coordinated advertising
    campaign launch, we debuted our new web site, ``www.navy.com''. This
    site provides a ``Life Accelerator'' that enables young people to
    discover their interests and explore the opportunities that Navy offers
    relevant to those interests. Within the first week of its debut, the
    site generated over 70,000 visitors, almost as many as the previous
    site produced in its best month. Overall, Navy plans to double
    Internet-generated qualified leads over the past year. For fiscal year
    2002, our plan is to keep pace with emerging technology through
    continuous improvements to the site and again double our presence on
    the World Wide Web. An expanding and increasingly important recruiting
    tool is our Cyberspace Recruiting Station. This station consists of a
    group of handpicked recruiters who conduct online screening and
    blueprinting of all Internet recruiting lead data. This provides
    recruiters with a list of high-quality prospects, and enhances
    efficiency of field operations.
    Enhancing the Appeal
        Throughout this fiscal year, we have offered varying levels and
    combinations of Enlistment Bonuses (EB) and Navy College Fund (NCF), as
    well as a Loan Repayment Program (LRP). We recently initiated an EB
    kicker available to applicants based on pre-accession college credit.
    This initiative was available only to Nuclear Field recruits; however,
    we have expanded eligibility to all recruits eligible for EB. This will
    assist us in better penetrating the college market and will encourage
    candidates to continue pursuing education while awaiting entry into the
    Navy. We are evaluating the awarding of college scholarship loans to
    individuals who enlist in the Navy and attend up to two semesters of
    college while in the DEP. Loans would be converted to grants upon
    successful completion of initial service obligation. This program would
    be consistent with national aspirations to make college education
    attainable for all while providing Navy with the talent pool we require
    in the 21st century.
        Our goal is to provide programs that facilitate the pre-service
    educational aspirations of all qualified candidates and, in combination
    with in-service training, provide new recruits with their most
    efficient path to a college degree. Navy benefits from this approach by
    improving relations with colleges and high school counselors, enhancing
    Navy's appeal among college-oriented youth, increasing entry level
    education of new recruits and positioning the United States Navy as an
    employer of choice. Over time, if enough recruits complete basic
    education and skills training prior to accession, due to Navy
    sponsoring and subsidizing such accomplishments, we could shorten
    training pipelines and realize cost savings.
        Technical Preparation (TechPREP) partnerships and Navy College
    Assistance Student Headstart (NavyCASH) are two examples of educational
    programs we have in place to accomplish the goal described above and
    increase our appeal to the college-bound market. With increasing
    numbers of students choosing to attend college, it is essential to
    portray the Navy as a viable source of higher education, in partnership
    with colleges and universities.
        TechPREP. Navy began forming TechPREP partnerships with community
    colleges in fiscal year 1999. Participants earn some college credit in
    high school, more after high school graduation while in DEP and
    remaining credits through Navy's basic and select advanced technical
    training to receive an associate's degree from a partner community
    college. We currently have standing agreements with 66 community
    colleges, four of which are statewide agreements, with many more
    pending. Several high school students are already participating in
    these programs.
        NavyCASH. Currently limited to Nuclear Field and critical technical
    ratings applicants, NavyCASH offers selected applicants the opportunity
    to attend college for up to one year, in a paid status comparable to
    that of a junior enlisted member, prior to entering active service.
    This exciting program improves the entry-level training of applicants
    and allows Navy to level load the shipping dates of recruits during the
    most challenging accession months of February through May.
    Expanding Opportunities to Serve
        In today's competitive environment, we must explore all avenues to
    increase our existing market without sacrificing quality standards for
    new recruits. We have begun accessing limited numbers of home schooled
    applicants as High School Diploma Graduates (HSDGs), increased our
    accession mission for Prior Service personnel and stepped up our
    efforts, through re-establishment of a Diversity Programs Office, to
    improve our penetration of diverse markets.
        DEP Enrichment Program. The DEP Enrichment Program, begun in Spring
    2000, is designed to enhance the basic skill level of otherwise
    qualified candidates before accessing them into the Navy. We identify
    individuals with high school diplomas and clean police records, but
    whose test scores fall slightly below those required to qualify for
    enlistment. DEP Enrichment provides basic skills training and an
    opportunity to increase their AFQT score to facilitate their enlistment
    into the Navy. These candidates are typically good retention risks
    based on education credentials and are low disciplinary risks based on
    clean police records. By providing basic skills training, provided by
    Education Specialists (Federal employees) at Navy Recruiting Districts,
    we give them a second chance to prove themselves and go on to serve
    with distinction. Since spring fiscal year 2000, 54 recruits accessed
    through the program (in 5 months), 102 accessed through the first 6
    months of fiscal year 2001, 106 additional applicants are in DEP for
    the rest of fiscal year 2001 and two applicants are in DEP for fiscal
    year 2002.
        Diversity Outreach. Navy currently recruits the largest percentage
    of minority accessions, but given the increasing diversity of the
    American people, there is room for improvement. Our Diversity Programs
    Branch is working several exciting initiatives to improve penetration
    of diverse markets. VIP tours of Navy commands are a popular means of
    exposing applicants and their influencers to Navy life in order to
    generate excitement about Navy opportunities. Trips conducted this year
    have been very well received. The Diversity Programs Branch has also
    begun college campus blitzes to spread the word of Navy scholarship and
    job opportunities on traditionally diverse campuses. Navy has
    established corporate board membership in the National Society of Black
    Engineers, Society of Hispanic Professional Engineers, and the Society
    of Mexican American Engineers & Scientists to ensure that minorities
    possessing technical backgrounds are aware of the many exciting
    opportunities available in today's Navy.
    Officer Recruiting
        Fiscal year 2001 has been challenging for officer recruiting. We
    continue to experience significant shortfalls in specialty areas,
    including: Civil Engineer Corps, Chaplain Corps, Naval Flight Officer,
    Orthopedic Surgery, General Surgery, Optometry, Pharmacy and Health
    Care Administrator. Emergent goal increases, specialized skill
    requirements and civilian market competition for these specialties put
    goal attainment at high risk. Emergent goal requirements are especially
    challenging because we have no in-year incentives, such as signing
    bonuses, to offer college graduates or seniors, most of whom are
    receiving lucrative offers and/or have significant college loans to
    repay. We have continued to develop long term recruiting strategies for
    critical program success and the recruiting performance in the programs
    of concern is far exceeding the performance in fiscal year 2000.
    However, without an accession bonus to facilitate short term recruiting
    importance, the nominal time for recovery of a recruiting program
    remains about 2 years.
        Given the challenges described above, fiscal year 2001 has still
    enjoyed several bright spots. The Nuclear Power Officer Candidate
    (NUPOC) program filled over 100 percent of its submarine and surface
    officer goals the second consecutive year after having failed to
    achieve goal since fiscal year 1996. Improved incentives for new
    accessions and strong resource sponsor support of the recruiting effort
    have generated a level of momentum projected to sustain a successful
    NUPOC program in the foreseeable future.
        Along with improving marketing materials, we are pressing for
    individuals in critical specialty fields to participate in our Officer
    Hometown Area Recruiting Assistance Program (OHARP) and working with
    the leadership of several officer communities to take an active role in
    recruiting the talented individuals needed for their designators. We
    are exploring the need for additional accession bonuses and/or loan
    repayment programs to assist with critical in-year officer accession
    requirements. We are also reviewing steps to streamline the officer
    application process by contracting commercial physical examinations and
    establishing web-based applications, blueprinting and electronic
    application routing.

                                    SUMMARY

        Navy is committed to winning its war for people. We need to
    continue leveraging our recent successes, capitalizing on the
    commitment of Navy leadership and innovative recruiting, retention and
    attrition-reduction programs, to maintain the current recruiting and
    retention momentum. Progress made thus far is, in large part, due to
    the strong support and leadership that Congress has shown. With your
    continued help, we remain cautiously optimistic that we will be able to
    sustain efforts to attract America's high-caliber youth as we challenge
    them to ``accelerate their lives''. Navy is an ``Employer of Choice''
    even in the current competitive environment. We will continue
    demonstrating the many rewarding opportunities that await them through
    service in the Navy and we will continue concerted efforts to convince
    sailors to ``Stay Navy'' once they have joined our team.

        Senator Hutchinson. Thank you Admiral Ryan.
        General Murray.

        STATEMENT OF MAJ. GEN. TERRENCE P. MURRAY, USMC, ACTING
     ASSISTANT DEPUTY COMMANDANT FOR MANPOWER AND RESERVE AFFAIRS;
     ACCOMPANIED BY MAJ. GEN. GARRY L. PARKS, USMC, UNITED STATES
                    MARINE CORPS RECRUITING COMMAND

        General Murray. Senator Hutchinson, Senator Cleland,
    General Parks and I are pleased to be here today. We are also
    pleased to report that the Marine Corps will meet its
    recruiting and retention goals this year. We have submitted a
    statement for the record and we look forward to your questions.
    Thank you sir.
        [The prepared combined statement of Major General Murray
    and Major General Parks follows:]

    Prepared Combined Statement by Maj. Gen. Terrence P. Murray, USMC, and
                         Maj. Gen. Garry L. Parks, USMC

        Mr. Chairman and members of the subcommittee: We are pleased to
    appear before you today to discuss recruiting and retention in the
    United States Marine Corps. The Marine Corps achieved its recruiting
    goals for fiscal year 2000 in both quantity and quality. We recruited
    38,574 non-prior service regular and Reserve Marines, with 95.8 percent
    being high school graduates, as well as 1,678 new warrant and
    commissioned officers. Additionally, the Marine Corps will meet both
    enlisted and officer recruiting objectives for fiscal year 2001.
    Currently, we anticipate exceeding our end strength by approximately
    400 marines at the end of this fiscal year, a figure that places us
    within the congressionally-mandated ceiling.

                              RECRUITING OVERVIEW

        The Marine Corps has successfully completed more than 5 consecutive
    years of mission attainment. This success has not come easily. With
    unprecedented low unemployment, rapidly fading numbers of veteran
    influencers, higher college attendance, and lower enlistment
    propensity, today's recruiting environment remains extremely
    challenging for all military recruiters. There is great competition for
    the same highly qualified individuals who we seek to make marines. The
    Marine Corps' achievements are the direct result of our proven doctrine
    of systematic recruiting, an advertising message that clearly supports
    our recruiting strategy, and the tireless efforts of our recruiters. In
    light of the challenging nature of recruiting, the Marine Corps
    Recruiting Command (MCRC) is pursuing a number of strategic support
    initiatives that will help us to remain competitive.
    Technology Enhancements
        Project ``Tun Tavern'' was developed by the Marine Corps
    Warfighting Laboratory in support of MCRC to explore ways that advances
    in communications and computer technology can be used to increase
    recruiter productivity. Based on a favorable examination, the Marine
    Corps Recruiting Command has formed a ``Technology Integration Working
    Group (TWIG)'' to implement the use of cell phones and an automated
    enlistment and waiver documents package. These initiatives are time-
    savings measures for processing prospective applicants which, in the
    end, will result in an improvement to the quality of life for the
    recruiter.
    MCRISS-RS
        MCRC is addressing the need to better manage and analyze
    information by introducing a significantly upgraded automated
    information system, the Marine Corps Recruiting Information Support
    System--Recruiting Station (MCRISS-RS). MCRISS-RS replaces a 20-year-
    old mainframe system that merely captured information on applicants
    after enlistment. The new system allows users to capture data
    electronically, just as soon as an applicant declares intent to become
    a Marine.
        MCRISS-RS will streamline the entire enlistment process and provide
    immediate benefits in man-hour savings by eliminating redundant data
    entry and by improving the quality of information available. Moreover,
    the new system will directly interface with and support key information
    technology initiatives of the U.S. Military Entrance Processing Command
    to electronically schedule applicants for processing and receive
    electronic processing results. MCRISS-RS harnesses state-of-the-art
    technology and provides MCRC with a solid foundation from which to grow
    future manpower information systems.
    Web-Based Initiatives
        Last year Marine Corps Recruiting Command totally revamped its web-
    based recruiting tools and launched the first phase of brand new web
    sites. Targeted for the population interested in opportunities as an
    enlisted Marine is marines.com and for commissioning opportunities,
    marineofficer.com. These upgrades have greatly enhanced our
    effectiveness at Internet-based lead generation.
        With the marines.com site, our aim is to attract, engage, and
    compel the qualified prospects to register their contact information.
    We believe that individuals who actively seek out the marines.com web
    site are generally more interested in opportunities than direct mail
    prospects. The target audiences for this site are predominately male
    high school students, recent high school graduates, and the labor
    workforce.
        The marineofficer.com site provides information to interested
    college students, among whom the recruiting dynamics are very different
    from that of enlisted applicants. Our objective here is to educate
    visitors about the officer programs and to facilitate contact with
    local Officer Selection Officers. Knowing that this audience is more
    educationally aware with goals that are more definitive, the look and
    feel of the site is more academically and historically developed.
        Both these sites are single-minded in scope: to drive prospects to
    recruiters. Our focus with electronic contact is to maximize a ``face-
    to-face'' exchange between a recruiter and a prospect. That is, we do
    not seek to replace Marine recruiters with virtual recruiters. In the
    end, it is, and will continue to be, the Marine recruiter who will
    convince a young man or woman to join the Corps, not a computer
    program.
        In addition to these revised web sites, last year the recruiting
    command launched its first-ever permissive email campaigns to the
    officer and workforce markets. We use this program to follow through
    with our web site hits. Expanded permissive email campaigns are ongoing
    throughout fiscal year 2001.
    Advertising and Marketing Initiatives
        The Marine Corps continually evaluates the most cost effective
    advertising resources to support the recruiting force. We compile and
    analyze information on media costs, the media habits of our targeted
    population, and their perceptions of the Marine Corps. By understanding
    the needs of our prospect audience and communicating to them in a way
    that conveys a consistent and accurate message, we strengthen the
    Marine position against competing agencies. Our communications strategy
    focuses on the benefits derived purely from being a Marine. We avoid
    presenting service in the Marine Corps as the price to be paid in order
    to receive extrinsic benefits like technical training and college
    assistance that are readily attainable from sources other than the
    military.
        The ability to differentiate our image and message has served the
    Marine Corps well during the past 5-plus years. We are examining new
    advertising and marketing initiatives that target ways to build on this
    foundation. MCRC believes in emulating ``best practice'' examples from
    private industry where it makes sense to do so. The Marine Corps is
    most interested in those examples that achieve substantial
    differentiation through innovative sales practices, help reinforce the
    positive reputation of our recruiters, and foster trust.
        The next, ``Millennial,'' generation of prospects, born after 1983,
    is emerging. MCRC recognizes the need to adjust our advertising
    strategy to communicate our message in a way that resonates with this
    new generation. Our message will target a specific segment of
    Millennials, a segment that wants to be challenged and that recognizes
    there are valuable, intangible benefits derived from service to the
    Nation. Consequently, research is currently underway to develop
    additional insights with regards to the attitudes, values and behaviors
    of this generation. Conclusions gleaned from a five-city focus group
    effort will be incorporated in the development of the fiscal year 2002
    advertising campaign.
        Parents appear to play a larger role in the decision-making
    processes of the Millenial generation. Consequently, MCRC created a
    film to reach out to the parents of prospects who are considering the
    Corps. This film will soon be fielded this spring to aid recruiters in
    speaking with parents of graduating students considering military
    service.
        The Marine Corps Recruiting Command has been working on Marine
    Corps participation in a new IMAX film on vertical flight to be a
    future presentation at the National Air and Space Museum. We are
    preparing to commit services of aviation assets for the Marine Corps
    segment of the film. The presentation is designed to increase the
    Marine Corps overall awareness through a dramatic documentary.
        Additionally, the Marine Corps Recruiting Command is preparing for
    the 2001 National Scout Jamboree, an event that takes place every 4
    years. Within the Boy Scouts of America, the National jamboree is the
    equivalent of the Olympics, with a sellout crowd of over 35,000 Boy
    Scouts in attendance. The jamboree is scheduled between July 23 and
    August 1, 2001, at Fort A.P. Hill, Virginia. Even though the Marine
    Corps Recruiting Command supports this event, recruiting is not the
    primary objective. Rather, value development and brand awareness are
    the primary focal points, aimed at a highly desirable target audience
    who are may someday be enlistable, if qualified mentally, morally, and
    physically. The audience represents a unique opportunity to position
    the Corps within this market for future consideration, while espousing
    ethics similar to Marine Corps core values.
    Assignment and Classification Programs Restructuring
        In addition to technological initiatives, MCRC is restructuring the
    way we allocate Military Occupational Specialty (MOS) enlistment
    programs. This restructure, while not directly impacting the accession
    mission, will allow MCRC greater flexibility in providing the Operating
    Forces with the right marines with the right MOSs at the right time.
    This continual process is aligning program allocation with trimester
    phasing, that is the apportionment of the annual accession mission over
    the course of the year. It also will help to overcome shortfalls in
    critical MOSs in the operating forces, increase overall personnel
    readiness, and ultimately reinforce retention.
    Nationwide Restructuring
        Due to dynamic changes that shape our recruiting environment, MCRC
    is undergoing a national restructuring effort to ensure that our
    recruiting resources are properly positioned. Our internal
    restructuring program will result in a better balance of territories
    and an equal opportunity for each recruiter to be successful, based on
    a distribution of assets among the 2 regions, 6 recruiting districts,
    and 48 recruiting stations. Factors considered during this
    restructuring effort include shifting demographics, educational and
    employment opportunity trends, and logistics implications.
    Professionalization of Career Planning
        At the direction of the Commandant of the Marine Corps, the Marine
    Corps' Career Planner school is being realigned under the cognizance of
    the Marine Corps Recruiting Command. This initiative will allow the
    career planning students to receive the same level of training in
    communication and coaching as that received by the recruiting students.
    The end results will be the ability to increase high-quality retention
    in the operational forces, thus stabilizing end strength projections.
    Recruiting Summary
        Marine Corps recruiting initiatives are intended to reinforce past
    successes and to position MCRC for future success by better empowering
    Marine recruiters to do their jobs more effectively. MCRC embraces the
    challenges associated with attracting our targeted population through
    the Internet, broadcast, and print media. While we may change the face
    of our advertising products and the forum used to present them, our
    underlying theme will not change. MCRC will continue to market our core
    values, ethos, history, and traditions because that legacy defines who
    and what we are.

                               RETENTION OVERVIEW

        A successful recruiting effort is merely the first step in the
    process of placing a properly trained Marine in the right place at the
    right time. The dynamics of our manpower system then must match
    occupational specialties and grades to our Commanders' needs throughout
    the operating forces. The Marine Corps endeavors to manage stable,
    predictable retention patterns. However, as is the case with
    recruiting, civilian opportunities abound for our marines as private
    employers are actively solicit our young marines for lucrative private
    sector employment.
    Enlisted
        We are very mindful of our enlisted retention issues. Our enlisted
    force is the backbone of the Corps and we make every effort to retain
    our best people. Even though we are experiencing minor turbulence in
    some specialties, the aggregate enlisted retention situation is
    encouraging. Some shortages exist in a number of high tech MOSs that
    represent an important part of our warfighting capability, and these
    young marines remain in high demand in the civilian sector.
        We are a young force, making accessions a chief concern for
    manpower readiness. Of the 154,000 Active Duty enlisted force, over
    23,000 are still teenagers--108,000 are still on their first
    enlistment. In fiscal year 2001, we will have reenlisted approximately
    27 percent of our first term eligible population. These 6,069 marines
    represented 100 percent of the marines we needed to transition into in
    the career force. This will be the 8th consecutive year we will have
    achieved this same objective. We have seen a slight increase in the
    number of marines we need to have reenlist. The first term reenlistment
    requirement increases to compensate for some of our intermediate force
    losses . . . marines in their 8th through 12th years of service.
        This year we continued to see first term non-EAS attrition rates
    similar to the lower attrition we experienced in fiscal years 1999 and
    2000 compared to previous historical rates. Marines are assuming the
    cultural values of the Corps earlier in their career. The
    implementation of the Crucible and the Unit Cohesion programs are
    contributing to improved retention among our young marines. The impact
    of lower non-EAS attrition alllowed us to reduce our accession mission
    in fiscal year 2000 for our recruiters and may allow us to do the same
    this year if the attrition rate declines further.
        In the larger picture, we are extremely pleased with our recruiting
    and retention situation. We anticipate meeting our aggregate personnel
    objectives and we continue to successfully maintain the appropriate
    balance of first term and career marines. The management of youth and
    experience in our enlisted ranks is critical to our success and we are
    extremely proud of our accomplishments.
        We attack our specialty shortages with the highly successful
    Selective Reenlistment (SRB) program. These shortages persist in some
    highly technical specialties such as intelligence, data communications
    experts, and air command and control technicians. Currently, the Marine
    Corps has allotted $40 million in SRB new payments to assist our
    reenlistment efforts in fiscal year 2001. This amount includes the
    greatly appreciated $13 million congressional plus-up which
    significantly aided our reenlistment retention rates and help improve
    retention for some of our critical skill shortages. We used this
    funding to implement lump sum payments for the program. Lump sum
    payments are increasing the net present value of the incentive and will
    positively influence highly qualified personnel who are currently
    undecided. This is an incredibly powerful incentive for these ``fence
    sitters'' to witness another Marine's reenlistment and award of SRB in
    the total amount.
        In the long-term we would like to reduce the emphasis on bonuses
    and special pays and continue to focus on increases in basic pays. We
    believe this to be a potentially powerful incentive for the youth of
    America to join our Corps and to influence marines already in our Corps
    to stay.
    Officers
        By and large, officer retention continues to experience success
    with substantive improvements in retention, beginning in fiscal year
    2000. Our fiscal year 2001 results continue to reflect that an overall
    attrition rate that is closer to our historical rates of retention. We
    believe that the reduction of voluntary separations may be attributed
    to the administratively proposed and congressionally approved
    compensation triad and the strategic, albeit limited, use of specialty
    pays. As with the enlisted force, we still have some skill imbalances
    within our officer corps, especially in the aviation specialties.
        Although we are cautiously optimistic, pilot retention remains a
    concern. The fiscal year 2010 ACP Plan has had mixed results as of the
    end of the first quarter for fiscal year 2010. Rotary wing pilot (RWP)
    and Naval flight officer (NFO) ``take rates'' for ACP have met
    aggregate retention targets for these communities. Fixed wing pilot
    (FWP) ``take rates,'' while improved over previous years, have not met
    retention targets that increased to compensate for the number of
    previous losses due to civilian airline hiring.
        One specific area of officer retention we are aggressively
    targeting is the FWP major in year of commissioning group 1988-1991.
    Retaining Marine Corps aviators involves a concerted Marine Corps
    effort in multiple areas that have been identified as impacting an
    officer's decision to remain in the Marine Corps. Many recent fiscal
    year 2000 and fiscal year 2001 retention initiatives have made
    substantial corrective strides strengthening the Marine Corps' position
    towards retaining aviation officers (i.e., Marine Aviation Campaign
    Plan, and Pay and REDUX reform). Supplementary pay programs such as ACP
    can provide an additional incentive by lessening the significant
    difference between civilian airline and military compensation. We
    anticipate a significant return on our investment from ACP and will
    continue to reevaluate our aviation retention situation to optimize all
    our resources.
        The Marine Corps officer and enlisted retention situation is very
    encouraging. Through the sensational efforts of our unit commanders, we
    will achieve every strength objective for fiscal year 2001. Even though
    managing our retention success has offered new challenges such as
    maintaining the appropriate grade mix, sustaining quality accessions,
    and balancing occupational specialties, we will continue to press
    forward and meet all challenges head on. We are optimistic about our
    current situation in this difficult retention environment and we expect
    these trends to continue.
        The Marine Corps remains strong in our recruiting and retention
    efforts. We have achieved these successes through the same tenets that
    have won us valor on the battlefield. Marines are proud of what they
    are doing. They are proud of the Eagle, Globe, and Anchor and what it
    represents for our country. It is our job to provide for them the
    leadership, resources, and moral guidance to carry our proud Corps
    forward throughout this new millennium.

        Senator Hutchinson. Thank you.
        General Peterson.

    STATEMENT OF LT. GEN. DONALD L. PETERSON, USAF, DEPUTY CHIEF OF
     STAFF FOR PERSONNEL; ACCOMPANIED BY BRIG. GEN. PAUL HANKINS,
      USAF, COMMANDANT, AIR FORCE OFFICER ACCESSION AND TRAINING
                          SCHOOLS, MAXWELL AFB

        General Peterson. Yes, sir. Mr. Chairman, Senator Cleland,
    it is an honor to be before the subcommittee once again. I
    appreciate the opportunity to come and talk about our
    recruiting and retention initiatives and challenges and where
    we are today.
        Yesterday afternoon I returned from visiting our troops in
    southwest Asia. Once again I was renewed at their commitment
    and their professionalism. It motivated me even more to think
    about what we can do to help them and sustain that force.
        I remember visiting Ali Al-Salain Air Base in Kuwait. It is
    39 miles from the Iraqi border. Our troops are there, of
    course, doing their job in blistering heat and blowing sand, a
    challenging mission and yet you find that their morale is very
    high.
        They are very much professionals. They serve not only with
    other airmen but other members of our services together as a
    real team. They call their place the rock, but you wouldn't
    know that's an affectionate name for it as they do their
    mission of detecting threats from the north. There's only eight
    permanent party members there and 600 deployed folks who are
    operating in our expeditionary forces. They come together like
    a great team that we expect.
        They're doing their best, they're on the front lines and
    they're doing what they signed up to do. Seeing those folks, as
    I said, brings me to the challenges that we have. Today as we
    know in our society only about 6 percent of those under 65 have
    had any military experience, as we talked about earlier in the
    hearing. That leaves us a smaller footprint with a drawdown of
    our forces. We are operating the longest sustained economic
    growth period in our Nation's history which is excellent for
    our Nation and I give great credit to many of our servicemen
    and servicewomen who created those environments by creating
    stability around our world.
        We also find with the challenges of low unemployment, which
    is also a great problem to have for our military and its
    recruiting because it is good for our Nation, but it makes it
    tough as we compete for the quality people out there to come
    into our service.
        We have responded aggressively in meeting this challenge.
    In fiscal year 1999 we had 985 recruiters. Today we have 1,442.
    We are continuing to build that so we can bring in not only the
    numbers we need but also the quality we need.
        We synchronized our marketing and advertising so that it is
    more efficient and more effective. We have targeted bonuses to
    those young people that come in with the skills that we need as
    well as importantly nonprior service, and we have a number of
    prior service now who have come back to us because they've been
    outside working, they find that the pay is good but they miss
    their service, the camaraderie and the people they serve with,
    and they bring valuable experience that we cannot replace with
    a new enlistee.
        The result is in fiscal year 2000 we exceeded our goal in
    recruiting and also brought in, as I said, an important 850
    members who have served in Armed Services before, which brings
    that experience back to us. Just as importantly, we are
    recruiting the people with quality. We maintain our standard at
    99 percent for high school graduates and we brought in about 75
    percent of our folks who score in the top half of all the
    testing.
        We have been successful in our officer recruiting in the
    last couple of years. We have achieved 97 percent rate, even
    though we increased the requirement over those 2 years. We
    think we will make our officer recruiting this year. We see
    challenges in fiscal year 2002 and fiscal year 2003 which we
    are working to attack right now with the help of the
    subcommittee and the resources you've given us and the more
    important flexibility you've given us by giving us
    authorization to allow us to be more flexible.
        We are a retention force. We know that we have strains of
    tempo, continued high tempo. We are trying to attack that
    aggressively with our air expeditionary forces which allow our
    members to see a predictable schedule and depend on some
    stability in their lives, which is important. As I visited
    throughout Kuwait and Saudi Arabia, I found this to be an
    important factor for our troops. They're operating now in the
    second year of an expeditionary force and they do an excellent
    job of falling in together to carry out the mission and the
    expeditionary forces that they're assigned to.
        Also, we worked on our quality of life with a robust set of
    initiatives. We have added an important tool here. These are
    things that our people tell us are important to them and that
    is the balance of our manpower and our tasking, working toward
    adequate manpower and also quality work spaces. We often talk
    about our homes and our dormitories but it is important to our
    members to have adequate not only workplaces but the tools that
    go with those workplaces.
        Fair and competitive compensation and benefits, balanced
    tempo, quality health care, safe and affordable housing,
    enriched community and family programs all certainly an area we
    have been interested in for many years. Enhanced educational
    opportunities round out our quality of life initiatives that
    our people ask us to support and that we drive into our
    budgets.
        We are working overall though to make sure that we manage
    our resources with our taskings, that is, to keep our force in
    balance. That's one of our largest challenges today. Our fiscal
    year 2001 reenlisted rates are a positive indicator of where we
    are heading. It is the first time since August 1998 that we
    actually met our goal and now have exceeded our goal in first
    term reenlistments.
        We are up slightly in our second term reenlistments and
    pretty much steady in our career reenlistment area. If we
    hadn't taken the initiatives we have and had the help you've
    given us over these last few years, I'm certain we would be
    falling well short of these goals and actually going the other
    direction. With your continued help, I think we can keep our
    vector on the upslope.
        Our people have changed in their attitude too because of
    what's happened in the last few years. We have taken surveys in
    fiscal year 1999 and again in 2000, and in every category of
    our servicemen and servicewomen we find that their propensity
    to stay is higher, their appreciation for what the Air Force is
    doing is higher, and they appreciate the benefits and support
    that they have received in increasing their quality of life.
        Our pilot retention remains a tremendous challenge. We have
    increased our pilot production and we have also increased the
    active duty service commitment for our pilots. While it will
    take a while for that part to kick in, we depend on the
    authority you've given us in our aviation continuation pay
    bonuses which we have renewed and provided more options for our
    pilots and that's helping us hold the line but we are still
    short pilots overall. This is a tough struggle in light of
    aviation community growth in the civilian world, so we know we
    are in for a long fight here.
        Our force is a total force and we include about a 160,000
    Air Force civilians. Making sure that we keep that force
    working effectively and well supported is just as important. We
    manage our civilians and our military together in one pool of
    human capital. We have asked for and received support from
    Senator Voinovich and others for some flexibility in adjusting
    that force, both in the renewal of those that we need in the
    front end, to help the skills and the broadening of our force
    in the middle and to handle the accession--excuse me, the draw
    down of those on the high end of our force, so that we have the
    right skills in the right places.
        The strategy we have taken to work the civilian side has
    been one with the same interest and initiative that we have in
    our military side because, as I said, it represents a quarter
    of our force, when you add our Active Force, our Guard and
    Reserve and our civilian force together as part of our Air
    Force.
        We greatly appreciate the support of this subcommittee, as
    I said, and Congress and these initiatives. We know we are in a
    tough fight. If I had to declare where we are right now I would
    say we are probably neutral. I would have said we were
    defensive last year. We want to move to the offensive side now
    and we think we can do that if we stay on the path that we are
    on today, with your support.
        We are all working for the same goal, that's to have a
    better and more capable Air Force and a better and more capable
    military. We think we can get there if we stay, as I said, on
    this vector. I look forward to your questions.
         [The prepared statement of Lieutenant General Peterson
    follows:]

            Prepared Statement by Lt. Gen. Donald L. Peterson, USAF

                                  INTRODUCTION

        Mr. Chairman and members of the subcommittee, it is a great honor
    to come before you to represent the men and women of the United States
    Air Force and report the status of Air Force recruiting and retention.
    Our people are our most crucial readiness component, and as we begin a
    new millennium, we must continue to recruit and retain the best and
    brightest to sustain the force. We rely on a highly skilled, diverse,
    educated and technologically superior force of world-class officers,
    enlisted men and women, and civilians to function as an effective
    warfighting team. Despite the challenges they face, our people remain
    willing to give the extra effort needed to achieve the mission--and our
    families support those decisions. Our people are proud of their
    contributions to our Nation's security and cognizant of how that
    security contributes to our Nation's unprecedented prosperity and the
    freedoms we all enjoy. Air Force leadership values their service and is
    committed to taking care of our people and their families.
        A key to our ability to execute the National Military Strategy is
    establishing end strength at a level where our resources are
    appropriate to our taskings. Then, we must attract sufficient numbers
    of high quality, motivated people, train them, and retain them in the
    right numbers and skills. Meeting end strength--recruiting and
    retaining the right number and mix of people--has been challenging
    during a decade of sustained economic growth, record low unemployment,
    increasing opportunity and financial assistance for higher education,
    and declining propensity to join the military. In fact, exit surveys
    show that availability of civilian jobs is the number one reason our
    people leave the Air Force. In addition, we have severely stressed
    parts of our force, primarily those individuals who man our low-
    density/high-demand (LD/HD) systems. The Quadrennial Defense Review
    (QDR) will help us refine our mission and determine the right end
    strength. However, we already know that the current situation cannot
    persist--we must either add end strength or reduce taskings. With
    Congress' continued support, we will be able to address this issue and
    correctly size and man our force to perform our mission and achieve our
    national objectives.
        During the past year, we averaged over 13,000 Active Duty and
    Reserve men and women deployed daily around the world, and another
    76,000 are forward based on permanent assignment. They do what is
    necessary to execute the mission--work long hours and endure prolonged
    separation from their families. At the same time, individuals at home
    station pick up the duties of those who are forward deployed. Earlier
    this year, I traveled to Europe and the Pacific to talk with our
    people, to see the conditions under which they are working, and to
    listen to their concerns. Despite the fact that our people are tired,
    stressed, and strained, morale is high. Almost universally, our people
    expressed concern for our Air Force and pride in what they do. They are
    interested in understanding and executing leadership priorities. They
    also want their concerns listened to, understood, and acted upon. They
    do not ask for much. They simply want the appropriate tools and enough
    trained people to do the job, and they want to know their families are
    being taken care of. We need to attract America's best and brightest,
    and we must retain them. While patriotism is the number one reason our
    people--both officers and enlisted--stay in the Air Force, patriotism
    alone cannot be the sole motivation for a military career. We must
    provide our people with quality of life commensurate with the level of
    work they perform and the sacrifices they make for their country.

                                   RETENTION

        We are unique among the Services in that we are a retention-based
    force. Our expeditionary mission and our complex weapon systems require
    a seasoned, experienced force and we depend on retaining highly trained
    and skilled people to maintain our readiness for rapid global
    deployment. However, we expect the ``pull'' on our skilled enlisted
    members and officers to leave the Air Force to persist. Businesses in
    the private sector place a high premium on our members' skills and
    training, which makes retaining our people a continuing challenge. In
    addition, manning shortfalls, increased working hours and TEMPO
    continue to ``push'' our people out of the Air Force. The result of
    these ``push'' and ``pull'' factors is that our human capital remains
    at risk.
    Enlisted Retention
        Highly trained, experienced enlisted men and women are the backbone
    of our personnel force; they are vital to the success of our mission.
    Adverse retention trends, particularly for our first-term (4-6 years)
    and second-term (8-10 years) enlisted members, have been our number one
    concern. We measure reenlistment rates by the percentage of those
    members eligible to reenlist who reenlist. For first-term enlisted
    members, our reenlistment goal is 55 percent; for second-term members,
    our goal is 75 percent; and for career (over 10 years) members, our
    goal is 95 percent. In fiscal year 2000, we missed all three goals. The
    first-term reenlistment rate was 52 percent, 3 percent below goal; the
    second-term reenlistment rate was 69 percent, 6 percent below goal; and
    the career rate was 91 percent, 4 percent below goal. However, fiscal
    year 2001 reenlistment rates show some improvement. As of 31 March
    2001, the cumulative reenlistment rate for first-term was 56 percent;
    for second-term it was 70 percent and for career airmen, it was 91
    percent. This is the first time since summer, 1998 that we met our
    first-term retention goal. While second-term reenlistments are slightly
    up from fiscal year 2000, the continued shortfall in this area
    continues to be our most significant enlisted retention challenge.
    Second-termers are the foundation of our enlisted corps; they are the
    technicians, trainers, and future enlisted leaders. Our career airmen
    reenlistment rate also continues to be of concern. While the rate
    remained constant at 91 percent, it is still below goal by 4 percent.
    Figure 1 illustrates retention trends since 1979.

        Retaining the right skills in our enlisted force is just as
    important as retaining the right numbers. Figures 2 and 3 show trends
    in first- and second-term reenlistment rates for critical and key
    warfighting skills. We have shown progress in some areas. However, most
    of these skills are still below goal. For example, while the second-
    term reenlistment rate for communications/computer systems control
    specialists is up 10 percent from fiscal year 1999 to fiscal year 2001,
    the rate is still 30 percent below goal.

        The Air Force, unlike a business, cannot recruit many already
    trained members, such as F-16 avionics specialists. It literally takes
    us 8 years to replace the experience lost when an 8-year
    noncommissioned officer leaves the Air Force. There are no shortcuts.
    In addition, it costs less to retain than to recruit and retrain, and
    when we retain, we maintain skill, experience and leadership. Now, more
    than ever, we must address the factors that encourage our people to
    leave or stay. Approximately seven out of every 10 enlisted men and
    women will make a reenlistment decision between fiscal year 2001 and
    fiscal year 2004--over 193,000 enlisted members. Considering today's
    strong economy, potentially large numbers of our enlisted force, our
    technical foundation, will likely continue to seek civil sector
    employment and more stable lives for themselves and their families. In
    fact, availability of comparable civilian jobs and inadequate pay and
    allowances are the top reasons our people leave the Air Force. We work
    our enlisted retention challenge with this fact in mind.
    Officer Retention
        Officer retention is also challenging our Air Force. We measure
    officer retention by cumulative continuation rates (CCR), the
    percentage of officers entering their 4th year of service (6 years for
    pilots and navigators) who will complete or continue to 11 years of
    service given existing retention patterns. Our navigator and air battle
    manager (ABM) CCRs showed improvement from fiscal year 1999 to fiscal
    year 2000; the navigator CCR increased from 62 percent to 69 percent
    and the ABM CCR from 45 percent to 51 percent. However, our non-rated
    operations and mission support CCRs declined from fiscal year 1999 to
    fiscal year 2000. Our non-rated operations CCR was 51 percent in fiscal
    year 2000, 6 percentage points below the fiscal year 1999 rate, and 8
    percentage points below the historical average of 59 percent--the rate
    as of March 2001 is 49 percent. In fiscal year 2000, our mission
    support officer CCR was at 43 percent, down from 45 percent in fiscal
    year 1999--historical average has been 53 percent. Figure 4 illustrates
    historical CCRs in these specialties.

        As with the enlisted force, we have difficulty retaining officers
    with skills that are in demand in the private sector. We are
    particularly concerned about retaining our scientists, engineers, and
    communications-computer systems officers. We are not meeting our
    desired levels in these critical specialties. In fiscal year 2001, we
    have shown some progress, as CCR for developmental and civil engineers
    and communications-computer systems officers improved slightly.
    However, we remain below historical CCR for these officers. Figure 5
    illustrates historical CCRs for selected critical skills.

    Retention Initiatives
        Through a number of initiatives, we are fighting back; progress is
    slow but steady. For our enlisted troops, we increased the number of
    career specialties eligible to receive a Selective Reenlistment Bonus
    over the past 3 years. Now, 150 of 200 skills (75 percent of enlisted
    specialties) receive a reenlistment bonus. The number of enlisted men
    and women who received initial bonus payments increased dramatically
    from approximately 2,500 in fiscal year 1995 to over 17,000 in fiscal
    year 2000. Over 24,500 members received anniversary payments and nearly
    200 received accelerated payments, which are provided to members
    experiencing hardship situations. The result has been a moderate
    improvement to first-term and second-term retention, and the ability to
    hold steady in career retention.
        We appreciate the legislative authority you granted us to offer our
    people the Officer and Enlisted Critical Skills Bonus of up to $200,000
    over their careers and the increase in Special Duty Assignment Pay to a
    maximum of $600 per month. This will help us turn around the crisis we
    are experiencing in retaining our mission support officers and enlisted
    members in our warfighting specialties. We also implemented a liberal
    High Year Tenure (HYT) waiver policy to allow noncommissioned officers
    with skills we need to stay past their mandatory retirement. In fiscal
    year 1999, we granted nearly 1,600 such waivers, and we granted over
    1,100 in fiscal year 2000. As of 31 March 2001, we granted 593 HYT
    waivers.
        On the officer retention front, our Acquisition community held a
    Scientist and Engineer Summit to review our long-term strategy for
    recruiting, retaining and managing these highly technical officers and
    civilians. A key outcome of the Summit was that our Acquisition
    community was identified to serve as the interim central manager for
    scientists and engineers. They are developing a concept of operations
    for our scientists and engineers, and analyzing scientist and engineer
    manpower requirements. A second summit is being planned to review and
    prioritize the requirements, establish career path guidance and request
    civilian hiring practices to make us competitive with industry. We have
    also outsourced many of our officer engineering and programming
    requirements.

    Pilot Retention
        Management of our pilot force has been a top priority since the
    fall of 1996 and is one of our most difficult challenges. The ``pull''
    of civilian airline hiring and ``push'' of TEMPO continue to impact our
    pilot retention. Major airline hiring is far exceeding predictions.
    Since 1994, annual airline hires have nearly quadrupled: from 1,226 in
    calendar year 1994 to 4,799 in calendar year 2000. The 14 major
    airlines could hire every fixed-wing pilot that the United States Army,
    Navy, Marine Corps, and Air Force produces and still not meet their
    requirements for the foreseeable future. Figure 6 graphically portrays
    this challenge.

        In addition, the overall increase in TEMPO over the past several
    years has affected the pilot force. A recent Air Force study of pilot
    retention concluded that high TEMPO carries significant, adverse
    retention impacts, and recent surveys cite TEMPO as among the leading
    causes of pilot separations. In fiscal year 2000, there were 1,084
    approved pilot separations compared to only 305 separations in fiscal
    year 1995. As a result, we ended fiscal year 2000 approximately 1,200
    (9 percent) below our pilot requirement. Our pilot CCR of 45 percent in
    fiscal year 2000 is down from a high of 87 percent in fiscal year 1995.
    We project a pilot shortage of approximately 1,100 (8 percent) by the
    end of fiscal year 2001.
        We are aggressively attacking the pilot shortage from numerous
    angles. We are focused on fully manning our cockpits and have
    prioritized rated staff manning. We established temporary civilian
    overhire billets and implemented a Voluntary Rated Retired Recall
    Program. We also increased pilot production from 650 in fiscal year
    1997 to 1,100 in fiscal year 2000 and beyond. In October 1999, we
    increased the active duty service commitment for pilot training to 10
    years. Additionally, the Expeditionary Aerospace Force is helping us
    manage TEMPO for our people, affording us greater predictability and
    stability.
        Under a provision of the Fiscal Year 2000 National Defense
    Authorization Act (NDAA), we began offering Aviation Continuation Pay
    (ACP) payments through a pilot's 25th year of aviation service at up to
    $25,000 per year. We also expanded eligibility to include pilots
    through the rank of colonel. This ACP restructuring resulted in a
    substantial increase in committed man-years and improved force
    predictability. We made further enhancements to the pilot bonus program
    in fiscal year 2001. The up-front lump sum payment cap was raised from
    $100,000 to $150,000 and up-front payment options were expanded for
    first-time eligible pilots. These enhancements are designed to
    encourage pilots to take longer-term agreements. Although the bonus
    take rate for first-time eligibles has declined over the past 2 years,
    due in large measure to the growing effects of the sustained ``pull/
    push'' retention forces described, the ACP program continues to play a
    vital role in partially countering these effects.
        All of these efforts, along with significant improvements in
    quality of life, have resulted in a projected increase in our pilot
    inventory over the next decade. While pilot shortages will remain, we
    are holding the line in a tough retention environment.

                                   RECRUITING

        Since our transition to an all-volunteer force in 1973, we met our
    enlisted recruiting goals in all but 2 fiscal years: 1979 and 1999.
    However, the propensity of our youth to serve in the military has
    declined. More high school graduates, approximately 70 percent, are
    choosing to enroll in college versus pursuing a military career--in
    many cases, they don't realize what the military has to offer. Our
    footprint in the civilian community is getting smaller. There are fewer
    military influencers--parents, grandparents, teachers, counselors, and
    community leaders--who have served in the military. In fact, only 6
    percent of our population under age 65 have military experience. These
    factors, combined with the longest sustained economic growth in our
    Nation's history, have made recruiting a diverse all-volunteer force
    extremely difficult. However, we have taken significant steps to
    reverse the downward trend in recruiting. In fiscal year 2000, we waged
    an all-out war to recruit America's best and brightest--and won. We
    increased recruiter manning, developed more competitive accession
    incentives, instituted an expanded and synchronized marketing,
    advertising, and recruiting effort, and broadened our prior service
    enlistment program. Additionally, we targeted minority recruiting
    markets with a goal to increase diversity.
        Using these weapons, we ended fiscal year 2000 at over 101 percent
    of our enlisted accession goal, accessing 34,369 toward a goal of
    34,000. In addition, we did not sacrifice quality. We still require 99
    percent of our recruits to have high school diplomas and nearly 73
    percent of our recruits score in the top half of test scores on the
    Armed Forces Qualification Test. Additionally, 848 prior service
    members returned to active duty, compared to 601 in fiscal year 1999
    and 196 in fiscal year 1998. For fiscal year 2001 year to date, we have
    accessed 487 prior service members.

                                        TABLE 1.--ENLISTED ACCESSION GOAL HISTORY
    ----------------------------------------------------------------------------------------------------------------
      Fiscal      Fiscal      Fiscal      Fiscal      Fiscal     Fiscal     Fiscal     Fiscal     Fiscal     Fiscal
     year 1992   year 1993   year 1994   year 1995  year 1996  year 1997  year 1998  year 1999  year 2000  year 2001
    ----------------------------------------------------------------------------------------------------------------
       35,100      31,500      30,000      31,000      30,700     30,200     31,300     33,800     34,000    34,600
    ----------------------------------------------------------------------------------------------------------------
    Lower than projected retention/accessions increased fiscal year 1999 goal by 2,300, fiscal year 2000 goal
      further increased to 34,000.
    Fiscal year 2001 goal set at 34,600 (Non-Prior Service/Prior Service Goal combined).

        As of 31 March 2001, we had accessed 102 percent of our year-to-
    date recruiting goal and 101 percent of our year-to-date net
    reservation goal. The significance of this achievement is clear when
    you compare it to the same point in fiscal year 2000, when we had
    accessed 83 percent of our recruiting goal and 93 percent of the net
    reservation goal. Being ahead of our year-to-date recruiting targets
    alleviates the pressure associated with surging during the summer
    months to overcome a mid-year deficit--the bottom line is we are
    slightly ahead of schedule for making our fiscal year 2001 recruiting
    goals and should enter fiscal year 2002 with a healthy bank of
    applicants holding enlistment reservations. Also, successful recruiting
    means enlisting airmen whose aptitudes match the technical skills we
    need. Recruiting is more than just numbers--we are concerned about
    accessing the appropriate mix of recruits with mechanical, electronics,
    administrative, and general skill aptitudes. In fiscal year 2000, we
    fell about 1,500 short of our goal of 12,428 recruits with mechanical
    aptitude. In response to this shortfall, we developed a targeted sales
    program that is now being taught to all our field recruiters to
    highlight the many opportunities we offer to mechanics. Additionally,
    we are currently testing a ``prep school'' to improve the basic skills
    of the airmen attending courses in hard-to-fill areas such as jet
    engine repair and avionics maintenance. In just the first 6 months of
    fiscal year 2001, our efforts have begun to pay off--we accessed 6,351
    mechanical recruits against our goal of 5,942 (106 percent). As of
    April 2001, increased focus and targeted bonuses allowed the Air Force
    to meet mechanical requirements, but we are still 176 short in
    electronics aptitudes.
        At the beginning of fiscal year 1999, we had 985 production
    recruiters. Since then, we've made significant improvements in
    recruiter manning. As of April 1, 2001, recruiter staffing was at
    1,442--99 percent toward a goal of 1,450. We are pressing forward to
    meet a goal of 1,650 recruiters by end of calendar year 2001. To help
    us reach this goal, we implemented a new system to select recruiters.
    Historically, filling recruiter requirements through a volunteer system
    served us well, but to get to 1,650 recruiters has required we change
    the way we do business. So, we implemented a process that handpicks
    recruiters and creates a standing pool of eligible noncommissioned
    officers who ably represent the Air Force.

        Bonuses have also proven to be effective in helping meet recruiting
    goals. We expanded the enlistment bonus program from 4 skills in 1998
    to 83 in fiscal year 2000, and increased the maximum payment to
    $12,000--68 percent of our bonus eligible accessions selected a 6-year
    initial enlistment in fiscal year 2000. Additionally, an up to $5,000
    ``kicker'' incentive program helped us fill the ranks during hardest-
    to-recruit months (February through May). To encourage ``trained''
    personnel to return to certain specialties, in April 2001 we introduced
    the Prior Service Enlistment Bonus of up to $14,000 to target a
    previously untapped pool of prior service personnel. The bonus targets
    high-tech, hard-to-fill positions. In fiscal year 2001, the bonus
    program remains an instrumental tool in our recruitment arsenal. The
    effectiveness of the fiscal year 2001 initial enlistment bonus program
    is illustrated by our year-to-date success in making recruitment goals.
    Additionally, the Air Force maintains an aggressive and integrated
    advertising and marketing campaign in order to saturate the applicant
    market and reach a cross section of American society.
    Officer Recruiting
        In fiscal year 2000, we achieved 97 percent of our line officer
    accession target, even though fiscal year 2000 production was 21
    percent greater than fiscal year 1998 and 5 percent above fiscal year
    1999. The Reserve Officer Training Corps (ROTC) anticipates shortfalls
    of 430 officers in fiscal year 2002 and 230 in fiscal year 2003.
    However, we are working on several initiatives to reduce these
    shortfalls, such as offering contracts to non-scholarship ROTC cadets
    after the freshman rather than sophomore year, and some legislative
    initiatives to ensure a strong and viable officer corps in the future.
        Recruitment of health care professionals has also been difficult.
    Many medical, dental, nurse and biomedical specialties are critically
    undermanned--only 80 percent of our clinical pharmacy positions are
    currently filled. In fiscal year 2001, for the first time, we will
    offer a $10,000 accession bonus to pharmacists who enter active duty.

                                QUALITY OF LIFE

        The welfare of our men and women serving our Nation is critical to
    our overall readiness and is essential to recruiting and retention. But
    more than that, providing our people with adequate quality of life is
    the right thing to do. With continued strong support from Congress, we
    will pursue our core quality of life priorities: adequate manpower,
    improved workplace environments, fair and competitive compensation and
    benefits, balanced TEMPO, quality health care, safe and affordable
    housing, enriched community and family programs, and enhanced education
    opportunities.
        This year, we added two new core quality of life priorities:
    manpower and workplace environments. Updated wartime planning factors
    and real-world operations validate increased manpower requirements
    beyond our fiscal year 2000 level. Meeting our current mission
    requirements with our current end strength is wearing out our people
    and equipment at an unacceptable rate. It is essential that we match
    resources to taskings--manpower requirements must be programmed to the
    necessary level to execute today's missions and meet tomorrow's
    challenges. We need to increase our force, primarily in combat, combat
    support, low-density/high-demand, and high TEMPO areas. RAND conducted
    an independent assessment of our requirements and reported that manning
    requirements may be understated. To keep trust with our men and women,
    we must provide the essential manpower to help balance TEMPO and to
    meet the National military strategy.
        The Air Force recognizes that workplace environments significantly
    impact readiness and morale. Our workplace environments have been
    neglected over the years--requirements exceed available resources. Our
    infrastructure accounts have continually been tapped to pay for
    readiness. Real property maintenance (RPM) has been underfunded,
    allowing only day-to-day recurring maintenance and life-cycle repairs,
    creating a backlog of required RPM. Military construction has been
    drastically reduced since the mid-1980s. The resulting degraded and
    unreliable facilities and infrastructure negatively impact productivity
    on the flightline, in maintenance shops and administrative areas, and
    also adversely influence career decisions. In the long term, reduced
    funding results in reduced combat capability and readiness, increased
    RPM, parts and equipment backlogs, and creates larger bills for the
    future.
        Providing our people with safe, affordable living accommodations
    improves quality of life, increases satisfaction with military service,
    and ultimately leads to increased retention and improved recruiting
    prospects. Our unaccompanied enlisted personnel desire and deserve
    privacy; the Air Force will continue to pursue a private room policy
    for our airmen using the 1+1 construction standard. Currently, 86
    percent of our unaccompanied airmen housed on base has a private room
    with a shared bath. This percentage represents airmen living in newly
    constructed dorms configured to the DOD construction standard, as well
    as airmen who are living in 2+2 dorm rooms (rooms once shared by two
    individuals). The Air Force goal is to provide a private room to all
    unaccompanied airmen (E-1 to E-4) by fiscal year 2009. The 1+1
    construction standard will allow our members to live in a private room
    with a private bath. We are also focusing efforts to improve, replace,
    and privatize over 10,000 family housing units for our members with
    families by fiscal year 2010--59,000 of our 104,000 housing units need
    revitalization, as their average age is 37 years. Ensuring members and
    their families have adequate visiting quarters and temporary lodging
    facilities is also a priority.
        We are committed to ensuring our personnel are adequately
    compensated--this is crucial in helping us recruit and retain quality
    personnel. Congressional support in achieving gains in military
    compensation played a significant role in improving overall quality of
    life for our people. We are encouraged by the positive momentum gained
    from the improved compensation packages in the fiscal year 2000 and
    2001 National Defense Authorization Acts. Our 2000 retention survey
    indicated officer and enlisted intent to stay in the military increased
    in nearly all categories over the 1999 survey results--from 24 to 31
    percent for first-term airmen, 36 to 43 percent for second-term airmen,
    and 81 to 84 percent for career enlisted members. Company grade pilots'
    intent to stay increased from 25 to 42 percent, and the intent of other
    company grade officers increased from 52 to 59 percent. Field grade
    pilots' intent to stay increased from 63 to 77 percent, but other field
    grade officers' intent decreased from 87 to 84 percent.
        In the 2000 Chief of Staff of the Air Force Quality of Life Survey,
    First Sergeants ranked pay and benefits as the number one quality of
    life priority within their units, and commanders ranked pay and
    benefits as second--TEMPO ranked first. In the October 2000 Major
    Command Revalidation, all major commands commented that we must
    continue to improve compensation and benefits. All major commands
    ranked pay and benefits in their top three quality of life priorities.
        The 3.7 percent pay raise (one half percent above private sector
    wage growth) authorized in the fiscal year 2001 NDAA and the targeted
    pay raise for E-5s to E-7s ranging from $32 to $58 per month were
    important and positive developments. The need to widen our bonus
    footprint to cover more career fields, coupled with current retention
    rates, is strong evidence that the basic pay structure is too low.
        Out-of-pocket expenses are also an area of concern. Recent
    improvements in the Basic Allowance for Housing (BAH) will help prevent
    further growth of out-of-pocket expenses. In calendar year 2001, our
    members' out-of-pocket housing expenses will be reduced from 18.9 to 15
    percent--the stated OSD goal is zero out-of-pocket costs by calendar
    year 2005. This will be an added expense and is likely to be included
    in the Secretary of Defense's review of quality of life issues. It is
    also important our members are not adversely impacted by moves required
    by the government. Our members are particularly concerned about the
    loss of their spouses' incomes when transferring to an overseas
    location. The Navy conducted an overseas spouse employment survey in
    September 1999 at their 13 overseas locations and found that employed
    spouses lose an average maximum of $27,600 annually. The Cost of Living
    Adjustment (COLA) is designed to defray the difference between the cost
    of living in the CONUS and OCONUS, not to replace lost spousal income.
    Overseas employment for spouses often is not available or is only
    available at reduced income levels due to local custom or Status of
    Forces Agreements.
        The loss of spousal income due to assignment to overseas locations
    is causing difficulties in filling overseas billets and is discouraging
    members from continuing active duty service. Additionally, members who
    are ordered into or out of base housing (including privatization or
    renovation of housing) at their permanent duty station without a
    permanent change of assignment do not receive a dislocation allowance.
    To help reduce out-of-pocket moving expenses, the fiscal year 2001 NDAA
    equalized the Dislocation Allowance for E-5s and below and authorized
    advanced payment of temporary lodging allowance as well as a pet
    quarantine reimbursement up to $275.
        Again, we appreciate the support of Congress. Enhancing community
    and family programs is crucial to the readiness of a force that is 62
    percent married. We created the Community Action Information Board
    (CAIB) to bring together senior leaders to review and resolve
    individual, family, and installation community issues that impact our
    readiness and quality of life and to improve the synergy of our
    resources. The Air Force maintains one of the Nation's largest
    childcare programs--55,000 children per day. As part of a recent force-
    wide retention initiative, we launched a major new child care
    initiative called the Extended Duty Child Care Program to provide child
    care homes for parents whose duty hours have been extended or changed.
    Despite these initiatives, we are able to meet less than 65 percent of
    the need for child care in support of active duty members. We must
    continue to invest in quality childcare facilities and programs.
        We recognize the economic benefits our members and their families
    derive from strong community and family programs such as youth
    programs, family support centers, fitness centers, libraries and other
    recreational programs that support and enhance the sense of community.
    Physical fitness is a force multiplier; thus investments in fitness
    facilities, equipment and programs directly impact our capabilities. We
    also support the commissary benefit as an important non-pay entitlement
    upon which both active duty and retired personnel depend.
        We have an excellent on-line tool available for military members
    and their families to access detailed information on all our
    installations. The website, www.afcrossroads.com, provides a host of
    support programs to include a spouse forum, pre-deployment guide,
    eldercare hotlines, school information, and a spouse employment job
    bank. It also offers an avenue for young people to chat with youth at
    the gaining installations so they can learn from their peers what it is
    like being a young person at the installation to which the family will
    be moving. The job bank allows spouses to search for jobs submitted by
    private industry and post up to three resumes for review by potential
    employers. In further support of spouse employment needs, we are
    participating with other Services in providing IT training to a limited
    number of spouses. This website is receiving seven million hits per
    month.
        Although our current TEMPO can make educational pursuits difficult,
    our Learning Resource Centers and distance learning initiatives offer
    deployed personnel education and testing opportunities through CD-ROM
    and interactive television. The Montgomery GI Bill contribution period
    of one year ($100 a month) is a financial burden for new airmen.
    Additionally, we have joined with the other Services, the Department of
    Labor, and civilian licensing and certification agencies to promote the
    recognition of military training as creditable toward civilian
    licensing requirement.
        We are committed to providing quality, accessible, and affordable
    health care for our Air Force people, their families and our retirees.
    We greatly appreciate the many health care programs authorized in the
    fiscal year 2001 NDAA, such as TRICARE for Life for approximately 1.5
    million retirees over the age of 65. By enrolling in Part B Medicare,
    they will be able to visit any civilian health care provider and have
    TRICARE pay most, if not all, of what Medicare does not cover. We are
    concerned that out-year medical funding could affect delivery of this
    critical medical benefit.
        We look forward to implementing extended TRICARE Prime Remote to
    our family members who are accompanying their military family member on
    assignment to remote areas, eliminating co-payments for military
    members, establishing chiropractic care for active duty members at some
    selected sites, reducing the TRICARE catastrophic cap to $3,000 per
    year, and improving claims processing. We have established patient
    advocates, beneficiary counseling/assistance coordinators and debt
    collection assistance officers at medical treatment facilities to
    assist our people with TRICARE processing issues.

                         CIVILIAN WORKFORCE MANAGEMENT

        No discussion of Air Force recruiting and retention would be
    complete without including our civilian workforce. In fact, our Air
    Force civilians are more critical to our mission than ever before. With
    an expeditionary aerospace force, they provide critical reachback
    capability and we have turned more and more to them for critical
    technical and professional expertise. However, our Air Force civilian
    workforce is not structured to meet tomorrow's mission, a challenge
    that is faced by the entire Federal civilian workforce. Our Air Force
    workforce is out of balance because of significant personnel reductions
    during the drawdown years. As a result of actions taken to effect these
    reductions, in the next 5 years, over 40 percent of our civilian career
    workforce will be eligible for optional or early retirement. This
    contrasts significantly with our civilian force in 1989--16 percent of
    our permanent U.S. professional and administrative personnel were in
    their first 5 years of service. Now, only 8 percent of the workforce
    are in their first 5 years of service. While we are fully meeting our
    mission needs today, without the proper force shaping tools, we risk
    not meeting tomorrow's challenges. Figure 8 illustrates our civilian
    workforce challenge.

        In order to sustain our civilian force, we need a diverse mix of
    developmental, mid-level, and senior employees. We have not been
    complacent. We developed a four-prong strategy to attract and recruit
    civilian employees, streamline our hiring process, better align
    civilian salaries with those of private industry, and pursue special
    salary rates for hard-to-fill occupations. We must invest in civilian
    workforce development to meet today's demands of an increasingly
    technical force. Job proficiency training, leadership development,
    academic courses, and retraining are fundamental in addressing our
    civilian workforce retention concerns.
        We will also use separation management tools to properly shape our
    civilian force. Using methods such as voluntary separation incentive
    pay and voluntary early retirement authority, we will retain employees
    with critical skills and create vacancies so that our workforce is
    refreshed with new talent. Vacancies created as a result of these
    shaping programs will be used to create an increasingly diverse
    workforce with new talent with current skills.

                                   IN CLOSING

        We are concerned about the decline in our experience levels in the
    officer corps and enlisted force, and about our out-of-balance civilian
    work force. We cannot easily replace the experience lost when our
    people depart the Air Force, nor can we assume that a replacement will
    be available. The ``pull'' forces that have severely impacted our
    recruiting and retention will continue, and while these factors are
    good for our Nation overall, they represent a challenge for us. We have
    addressed their impact on recruiting through a strategy that is
    increasing recruiter manning, synchronizing marketing, advertising and
    recruiting programs, targeting our bonuses to critical skills, and
    pursuing prior service members to bring back needed experience.
        Retention is affected by both ``push'' and ``pull'' factors. In
    particular, our members and their families are stressed by a way of
    life that cycles between temporary duty and regular 55-hour work weeks
    at home. Our retention strategy is based on the premise that if we take
    care of our people and their families, many of them will stay with us
    despite the pull factors. Our core quality of life programs underpin
    the strategy. We must match resources to taskings and recapitalize our
    people, readiness, modernization and infrastructure areas. We need to
    upgrade neglected workplace environments, provide safe and affordable
    living accommodations, adequately compensate our people, enhance
    community and family programs, provide educational opportunities and
    affordable health care. Reducing out-of-pocket expenses, and access to
    health care are two areas in which Congress' support is key.
        Finally, we recognize the increasingly important role of civilians
    to our Armed Forces. They are our leaders, scientists, engineers and
    support force that provides reachback for deployed and forward-based
    forces. We need flexible tools and policies to manage this force.
        We depend on a highly skilled, diverse, educated and
    technologically superior force of world-class men and women to function
    as an effective warfighting team. Air Force people are an indispensable
    part of our national military strategy. There is no substitute for
    high-quality, skilled and trained people. Although we will continue to
    have a challenging recruiting and retention environment, the Air Force
    is committed to developing the right programs to recruit and retain
    America's best and brightest. You have provided many of the tools we
    need and we will work hard to gain your continued support for
    legislation, funding and the flexibility we need to manage our force.
    These tools are critical to the Air Force's future and to the future of
    our Nation.
        I appreciate the opportunity to speak to this committee and share
    the initiatives we have taken to combat our retention and recruiting
    challenges and convey to you the appreciation of our extremely capable
    and committed Air Force people.

        Senator Hutchinson. Thank you, General Peterson. I want to
    start with you. I know that the Army and the Navy are beginning
    some new advertising campaigns which were alluded to and which
    I want to follow up with some questions on that. But when we
    have an incident like we did over China with our crewmembers
    who with all the visuals, with CNN covering that, I guess all
    the networks did when they arrived, the homecoming, the
    reunion, the images that were broadcast across America. I think
    Americans were filled with enormous pride at the way they
    conducted themselves.
        Do you see a spike in recruiting and willingness for young
    people to enter the Air Force or enter the services when
    something like that happens or is that so nontargeted to the
    potential recruit pool? What is the impact of something like
    that was?
        General Peterson. Objectively it is hard to measure that
    impact over our country, but subjectively it is not. I often
    hear many comments about our people. As I said before our
    footprint is very small. We are all about a third less the size
    we were and we do not have those role models out there like
    mothers and fathers, aunts and uncles, school teachers,
    coaches, ministers that had any military experience to talk to
    our young people.
        When these incidents come forward I think they send a
    powerful signal to our public. I know in Desert Shield and
    Desert Storm that it provided us a significant boost because
    there were many interviews, as you remember, during that period
    of time with our men and women in the theater.
        What I found consistently in every one of those interviews
    was you saw someone who was a sharp, disciplined, proud
    professional who spent most their time talking about the things
    they were doing that were in fact extraordinary as if they were
    ordinary and oftentimes concentrating on giving the credit to
    someone else like, the young people that supported them.
        I think that image that we saw across the board sent a
    powerful signal to our public and our parents and those have
    influenced our young people as well as, more importantly, the
    young people themselves that said I would like to be a part of
    an organization like that.
        It is a tragic situation when we often have to be in the
    news and that incident you just portrayed is one, but out of
    that it gave a slice of that and I think we need to do more of
    that. I wish we could put more emphasis, we have discussed this
    before and I know you've worked as hard, along with Senator
    Cleland, but to talk about the importance of national service.
    To highlight what our people do day in and day out I think is
    the most powerful thing we can do to recruit.
        We have no problem once we get somebody on an Air Force
    base and recruiting them or getting them where they can see our
    people in action.
        Senator Hutchinson. Admiral Ryan, equal time that was a
    Naval plane; what do you see?
        Admiral Ryan. We are certainly extraordinarily proud of the
    entire crew, all 24 members of the crew. I think Admiral
    Voelker would be more appropriate as far as any impact it might
    have.
        Admiral Voelker. Mr. Chairman, whenever an event like this
    occurs, we generally see, depending on whether it is a positive
    event or negative event, a brief change in recruiting, if you
    will. Following the U.S.S. Cole disaster, for example, we saw a
    slight downturn in the number of people who were in the delayed
    entry pool who decided to continue and come into active duty.
    But that was very transitory.
        Really what we see from events like the EP-3 incident and
    how the positive outcome of that is, as General Peterson
    alluded to, is an awareness of service among influencers and
    that helps us in the long run rather than the short term of
    recruiting right after the event.
        Senator Hutchinson. Good. Thank you. General Maude or
    General Cavin, what is the status of the recruiting
    privatization initiative? We have, I think, established or
    directed the Secretary of the Army to test a program which
    civilian recruiters would actually replace military recruiters
    in several recruiting companies. What's the status of that?
        General Maude. Yes, sir, we have completed the design of
    the program and put together the request for proposal for
    release so that we can get that. We in fact are working through
    some funding issues for this year with our mid-year review and
    supplemental. As soon as we get that, sir, we will be ready to
    go out for proposal. We anticipate a delay over the test period
    that was directed to the National Defense Authorization Act and
    have prepared for the Secretary of the Army a memo to come over
    requesting to adjust the dates so we can get a full 5-year
    test. Once we get the test launched, we are prepared to go,
    sir, as soon as we secure the funding, and we are working
    through that in mid-year.
        Senator Hutchinson. OK. General Maude, the advertising on
    the professional wrestling show, WWF, was an experiment that
    was discontinued. Can you relate to the subcommittee why that
    was discontinued and what the experience was?
        General Maude. Yes, sir, and briefly it was discontinued
    because we were dissatisfied with the content of the
    entertainment package that our advertising was associated with
    and because of that we withdrew our advertising and have not
    gone back to WWF and at the present time have no plan to do
    that, sir.
        Senator Hutchinson. How was the decision made initially,
    the content was pretty well-known.
        General Cavin. Mr. Chairman, the original intent was to
    focus on the target audience which clearly was watching that
    WWF series. We had some agreements with the management of WWF
    that they did not live up to very frankly, and so we elected to
    pull out.
        Senator Hutchinson. All right. We will not ask you to go
    any further with that. [Laughter.]
        General Cavin. Seriously, sir, if I might follow up. The
    Army values and integrity that are embodied in the character of
    a soldier were not well represented in that program and
    therefore we felt it more important to maintain those standards
    and to withdraw from the program.
        Senator Hutchinson. Admiral Ryan, when did the Navy new
    advertising program begin?
        Admiral Ryan. Just in March, Mr. Chairman.
        Senator Hutchinson. You said that you had a lot of hits on
    the website?
        Admiral Ryan. Right, on our Life Accelerator which when you
    go to the Navy website it tells you about the Navy, the
    opportunities, the experiences, and tries to help you get
    familiar with the Navy and where you might find a niche. So in
    the first 10 days we got a hit that equals what we normally get
    in a month.
        Senator Hutchinson. So now because you have a 1-800 number
    on there too I was curious when I saw that, when that flashes
    up on the screen, what is the, with the target audience do you
    see a comparable increase in calls on the 1-800 number in
    relation to the Internet and the website and is there any way
    to compare that? I know it is very early.
        Admiral Ryan. It is very early. I've asked the same things
    of Admiral Voelker. I will let him elaborate a little bit on
    what we have seen in way of leads. It is the first month,
    though, of our campaign.
        Admiral Voelker. Mr. Chairman, if we could choose a way to
    do this we'd prefer to drive them all to the Internet because
    we believe that the Internet is the way of the future and we
    are very comfortable with the content that we have placed on
    there. We really left the 1-800-USA-NAVY number in place to
    make sure people who do not have access to the World Wide Web
    are not precluded from getting information. It just takes them
    longer to get information. They call into the 1-800-USA-NAVY
    number, they leave their name, address, telephone number, et
    cetera, and then we follow up with information that's mailed to
    them. So we feel there's more real time benefit from the Web
    and we have not yet seen the same percentage of increase in the
    telephone numbers that we have via the Internet.
        Senator Hutchinson. The Internet, when someone hits that do
    they enter their name at the time they hit it? Are they able to
    access and look at various, I guess it is kind of interactive,
    is it not?
        Admiral Voelker. It is interactive yes, sir, and they have
    a choice to leave their name. They also are not required to
    leave their name if they do not want to. We can still measure
    the fact that it is been hit whether or not they leave their
    name. One of the things that we are seeing of interest is that
    the average stay time on the new website is more than twice as
    long as the stay time on our previous website.
        Senator Hutchinson. The Marines, Air Force, are you doing
    TV, I assume similar campaigns or any changes?
        General Peterson. Yes, sir, we are. I will let General
    Hankins talk a little bit about our web as well as our TV.
        General Hankins. Yes, sir. We have seen since we are pretty
    new into the TV advertising over the last couple of years, we
    have actually seen a 350 percent increase in the number of
    leads generated that are a direct result of television.
        Our website that's used for recruiting has gone up. We went
    from just over 800,000 to 4.6 million hits last year and we
    have already exceeded 4.6 million in the first part of this
    year. So the Internet recruiting is certainly alive and well
    and the commercials are driving a great deal of that contact.
        Senator Hutchinson. Yes, General Parks.
        General Parks. Yes, sir, in regard to the Internet, I think
    we are very similar to the other services. We continue to use
    the Internet but because everyone is not wired, we also
    maintain the 1-800 number, as Admiral Voelker said. It is
    slower. We'd certainly prefer to drive them to the Net.
        In regard to advertising it may be an appropriate time
    since I brought a video, to refer to that, in the sense that we
    continue to use the fundamental basis that has continued to
    make us successful. We put a quality recruiter out there and
    expect that that quality recruiter is going to come in contact
    with quality young men and women who have character, who will
    ultimately produce quality marines. We believe that that was
    borne out in a statement from James Bradley's best selling
    book, Flags of Our Fathers, when he said in there America's
    steel is in the heart. The raw material is on the streets of
    America. Select, choose, sift, and persist and the raw steel of
    America's heart will be transformed into tomorrow's marine.
        Truly, we believe that what our Marine Corps recruiters,
    and as General Peterson said, that's the secret weapon we have
    out there is that recruiter on the street who comes face to
    face in contact with a prospective applicant and in that regard
    we think that what is true in James Bradley's quote that I just
    referred to and what we have tried to carry on in this----
        Senator Hutchinson. Can I ask you how long this is?
        General Parks. This is 60 seconds, sir.
        Senator Hutchinson. 60 seconds. Fine, please show it.
    [Video was shown.]
        General Parks. Sir, that's a public service advertisement
    versus a paid advertisement but it bears out, again, the appeal
    to the higher ideals that you've heard mentioned by several of
    the panelists today.
        Senator Hutchinson. Do you get a good response from
    stations?
        General Parks. A very good response, as a matter of fact.
    It is--we tend to find if they have a larger military community
    they're more inclined to play something like that or, not
    unlike some of the things you've heard of, access to high
    schools. If you have somebody who has a military association,
    they're more inclined to want to play it if they're a member of
    the staff that way.
        Senator Hutchinson. Now, Army and Navy, I know you have
    used marketing specialists in creating ads. How about the Air
    Force? How was this ad created with the Marine Corps?
        General Parks. Sir, that was created by J. Walter Thompson,
    our advertising agency for the past 54 years.
        Senator Hutchinson. OK. So we all rely upon consulting
    firms and research specialists on this?
        General Parks. Yes, sir.
        Senator Hutchinson. Senator Cleland.
        Senator Cleland. Thank you very much. I'd just like to
    focus on the role of education and recruitment and retention.
    I'd like to ask the panelists exactly the same question I asked
    the recruiters. What is your take on the existing GI Bill
    benefits and educational opportunities on recruiting and what
    is your take on the concept of transferability of those GI Bill
    benefits that are unused to the child or the youngsters to
    create an educational opportunity and to enhance retention?
        Legislation has passed the Senate the last 2 years
    unanimously along those lines. We feel good about the
    legislation that's coming up. Does your service have an
    official position on it, particularly in terms of
    transferability? General Peterson, would you like to start off?
        General Peterson. Yes, sir, Senator Cleland. We do think it
    is an important initiative. We have talked before on this
    within our service. The Air Force is about 62 percent married
    in the enlisted corps and about 72 percent in the officers, so
    families are, as most services are today, a big part of the
    decision for our members. Spouses in particular make the
    sacrifices, as our recruiters mentioned earlier, and often
    delay their education until they get through their early
    childhood rearing years.
        This is a financial thing for many of them too. They also
    have children they need to put through school and so it looked
    to us it is a benefit not only because we can provide them
    education but also we can provide them the opportunity to pay
    for that education and to us that's an important piece of
    quality life and bonus that we offer to them, and it is a
    vector toward something that will be good for not only those
    individuals, but our Nation.
        Senator Cleland. Thank you very much.
        General Murray.
        General Murray. Sir, our general position on the issue of
    the Montgomery GI Bill, is that we see it primarily as a tool
    for the individual in uniform. One of our concerns is the fact
    that the authorization or the appropriation bill each year is
    sort of a zero sum game and a concern would be allowing that
    there could be some retention benefit in this, that in a zero
    sum game that where we would like to see that money focused on
    the servicemen themselves, it could be diverted elsewhere. So
    there are some pros and cons as we look at this.
        Senator Cleland. OK. Admiral.
        Admiral Ryan. Just on the part about recruiting I think our
    recruiters spoke eloquently on the power of the Montgomery GI
    Bill. I personally think that what has helped to bring our
    service momentum back in the right direction is the support
    that Congress has given to restoring the first two legs of the
    triad, as I call it, to let men and women know that service is
    special. Congress restoring our retirement benefits was one of
    those legs. The steps that were taken last year in the health
    care area were huge also. We have the third leg, the Montgomery
    GI Bill.
        I think it is a significant impact on bringing people into
    the service. I think it could be an even bigger impact on
    keeping our top men and women in the service, Senator. I look
    at it as choice and I look at our Navy trying to go to a more
    senior, experienced service as we get more technical. What we
    need to do is develop a stream of incentives that let our men
    and women know at the mid-grade that they are very valuable to
    us and I think in polling our men and women, they would like to
    have choice on what they do with their Montgomery GI Bill.
        That fits very well with the Navy's program. We have a new
    Navy college program as Petty Officer Strothers mentions where
    we are emphasizing get your education and stay in the Navy and
    so we are using tuition assistance and where they need to,
    thanks to your support, some of the Montgomery GI Bill.
        But we think this thing would be a huge incentive for men
    and women at the mid-grade if the Secretary would designate
    that this would be transferable as they determine that they
    want to make a career at the Navy. We think this would be a
    very significant incentive for men and women to stay in the
    service for long periods of time so I personally have been
    supportive of this.
        Our Navy has not taken a position yet although we have been
    working with OSD to get all the services to talk about this and
    there's a meeting scheduled here in the very near future to
    discuss where each of the services are in this program because
    we know there are trade-offs. But I personally, in polling men
    and women throughout the fleet, think this would be a very
    significant incentive to encourage people to make a career of
    the military and restore the three legs that have made service
    special.
        Senator Cleland. Thank you very much. Of course, the
    concept is that the service man or woman would indeed have that
    choice.
        I was in Osaka, Japan and a wonderful admiral there pointed
    out to me that the decision to remain in the Navy is made at
    home. So it was made pretty clear that it was a decision to be
    made around the dinner table by the whole family and to the
    extent to which we can have a sense that the whole family is
    made whole by staying in the military rather than getting out,
    I think it enhances the opportunities to keep them.
        General Maude.
        General Maude. Sir, good morning. United States Army, sir,
    is fiercely dedicated to education as a theme for all we do
    from our stay in school campaign for high schoolers to our Army
    University Access Online and Army continuing education programs
    we have for men and women in the service.
        We agree that the incentive that you've proposed will
    improve recruiting and we think and we also know that it will
    absolutely improve retention. We have a concern that the GI not
    be taken out of the equation of the GI--of the Montgomery GI
    Bill and that any measure put forth provide for protection for
    the individual soldier remains propensed to also want to use
    the education benefit. We are concerned about the cost of such
    a program as we look through it and certainly that will have to
    be worked through but Tim Maude's opinion is this would be a
    significant tool for our retention program.
        Senator Cleland. Well, thank you all very much and thank
    you for the observations. Thank you, Mr. Chairman.
        Senator Hutchinson. Thank you, Senator Cleland. Just a
    couple more questions. General Maude, Admiral Ryan, and General
    Peterson, there have been a number of articles that I have read
    recently saying that the services are having an increasingly
    difficult time recruiting qualified applicants for Special Ops
    Forces. I know in recent years we have been working with the
    Navy to discuss the loss of lieutenants in the SEALs. What's
    the current status in your Special Ops units?
        General Maude. Sir, our Special Ops units, our current
    status is we are slightly behind on our 18 series MOS for our
    enlisted primarily of our own doing because of the way we
    managed the drawdown years and the difficulty in terms of the
    nature in which we assess people into that MOS, it will take us
    a number of years to get back to full strength. But all of our
    operational units, all of our special operation units are
    operationally ready and we are on target for our recruiting and
    accession program for this year, sir.
        Senator Hutchinson. All right.
        Admiral Ryan.
        Admiral Ryan. Mr. Chairman, I just visited our special
    forces training out in California and I'm very encouraged by
    the efforts that our program is making in the way of reducing
    attrition without lowering the standards by being smarter about
    how we build up our young men and women as they come in to SEAL
    training and they're making significant progress out there and
    lowering the attrition without lowering the standards. In fact,
    the commanding officer of the school is the senior SEAL in the
    entire Navy, started as an enlisted person, so he has immense
    credibility in what he's doing out there and they're making
    progress in that area.
        On the officer side, Congress has been very helpful in
    allowing us to have a bonus for our officers in the SEAL
    community and this has turned around our retention. We need
    very high retention among our lieutenants in the SEAL program
    because of the requirements at the senior officer levels and we
    were able to improve our retention by about 8 percentage points
    last year with this bonus program. We need about somewhere
    between 68 and 74 percent of our lieutenants to stay in and
    this bonus program has been working for us.
        We have one or two minor modifications that you've already
    given us permission for that we are going to implement this
    year that we think will get us additional retention in the
    officer corps. So we are positive about where our special
    forces are going, both in the enlisted and the officer side
        Senator Hutchinson. General Peterson.
        General Peterson. Sir, generally speaking, we enjoy good
    retention in that portion of our force because primarily the
    mission and also the command itself is very involved in
    recruiting. We, like the Navy, have gone back and relooked our
    program to reduce attrition in the front end of the course for
    bringing new members on and now we think we have a course that
    builds a more aggressive way and gives us the talent we need.
        We do find, though, that to attract and sustain those once
    they're in, aside from the mission because they have very high
    tempo because of their mission, that selective reenlistment
    bonuses have been very effective and we appreciate the
    authority in that area.
        Senator Hutchinson. In the area of the service academies,
    there are those who argue today that service academies have
    lost their attractiveness to today's youth. It is not what it
    was once was. Can you give me an impression of how difficult it
    is today to recruit to the academies and is there anything that
    Congress can do to make that job easier?
        General Maude.
        General Maude. Yes, sir, I'd like to respond separately for
    the record because I do not have the facts in front of me. But
    as I recall, the last time I discussed it with the
    superintendent their applicant pool and the quality of their
    applicant pool had remained extremely high and a large robust
    pool from which to choose.
        Senator Hutchinson. So the supposition of the question is
    rejected. I said some have argued, but you have not seen that.
        General Maude. We are not seeing a turn down in the number
    of applicants or the quality of the applicant pool for the
    United States Military Academy that I'm aware of, sir, but I
    will check and respond back.
        [The information referred to follows:]

                    RECRUITING POOL TO THE MILITARY ACADEMY

        The number of applicants to the United States Military Academy has
    been on a gradual trend downward during the last 10 years (Class of
    1995), as demonstrated in Chart 1 attached. However, the chart by
    itself does not provide a complete picture. The Military Academy has,
    in recent years, changed its procedures with regard to recruited
    athletes. As a result, there are now fewer recruited athlete
    applicants, which has led to an increase of about 7 percent in general
    candidate applications. In addition, the ratio of admitted to qualified
    remains strong.
        The quality of applicants continues to be high. The Military
    Academy uses a number of factors to determine an applicant's potential.
    One measure of quality are SAT scores, see Chart 2 attached, which have
    remained relatively constant since 1991.

                                    Chart 1

                                    Chart 2

        Senator Hutchinson. Admiral Ryan.
        Admiral Ryan. Mr. Chairman, 2 years ago I think we saw a
    slight declining trend in the number of applicants overall,
    though the quality was still very high. For the last 2 years,
    applicants are up and in fact, the SAT scores, the total person
    scores are up for the candidates. So I think they've done a
    very aggressive job of building the awareness of what the
    academies have to offer and that has paid off. They've brought
    in a lot of different educational groups. They've made
    presentations. In fact, members of Congress here and in
    particular the Black Caucus to make them aware of the
    opportunities that exist for appointments at the academy. So
    for the last 2 years applicants have been up and actually the
    standards, the quality of the applicants has gone up as well.
        General Murray. Sir, from a Marine Corps perspective
    Admiral Ryan provided the details that you need, but we would
    simply emphasize the importance of the Naval Academy and the
    academies in general as institutions from which we get key
    members of our officer corps.
        Senator Hutchinson. General Peterson.
        General Peterson. Sir, we still have a good demand between
    two and a half to three to one highly qualified applicants for
    our academies' positions each year. We are producing just under
    a thousand annually, with an academy size of 4,000. We do think
    that as in all the other programs, more awareness would help us
    in that area as well, general awareness of the U.S. military
    and what the academies do. But our academy is doing well today.
        Senator Hutchinson. Very good, thank you. Let me just throw
    out a general question. The subcommittee has encouraged you to
    look at thinking outside the box. I think you're doing that as
    far as recruiting. You're looking at new approaches, innovative
    techniques.
        Is there anything else that we have not covered today that
    any of you would like to share that the services are doing in
    terms of new, creative approaches to recruiting? We have heard
    about some of the advertising campaigns. Is there anything else
    that you'd like to make the subcommittee aware of?
        General Maude. Yes, sir. If we might, first I will have
    General Cavin talk to the programs that they're putting out on
    the street this year.
        General Cavin. Mr. Chairman, in addition to obviously the
    National Hot Rod Association we are partnering with several of
    the Fortune 500 companies throughout America in something
    called the Partnership for Youth Success. It is a dynamite
    program, kicked it off last year. We have grown to
    approximately 400 young soldiers who have taken advantage of
    the over 4,800 jobs that are available through companies like
    Pepsi Cola, Sears, Halliburton, John Deere, which allows them
    to serve their country with a sense of opportunity, to go back,
    once they've completed, and go into a preferential hiring
    status with those companies. It is going great guns.
        Senator Hutchinson. Good, great.
        Admiral Voelker. Mr. Chairman, we have several issues that
    we are doing that are somewhat outside of the box, although in
    keeping what some of mainstream American recruiters are doing,
    one of them is many of our mail-outs now or several of our
    mail-outs are being, instead of just pieces of paper, we are
    sending mini CD-ROMs which we find the young people are more
    likely to look at, open up and read, if you will, than they are
    pieces of paper we get a much better response rate from those
    than we do from paper.
        Then we are also able to target areas that we are working
    on, for example, high school, female high school graduates, we
    can go target that specific market. Another thing we are doing
    is we built an F/A-18 simulator. It sits on the back of an 18-
    wheeler it is a full-motion simulator that we take to places
    that we cannot take U.S. Navy ships to give people an idea of
    what it is like to be in a Blue Angels airplane. Then finally
    we are executive agent for all of DOD in developing kiosks that
    we can put in places like shopping malls or places where we
    expect large segments of the population to come where people
    can select and get information about any of the services, not
    just the Navy, and we think this has great promise as well,
    because when they enter their name, address, and telephone
    number, it generates a lead and we are able to act on that
        General Parks. Mr. Chairman, I'm not going to talk about
    specifics. I put that in my prepared statement and testimony to
    you, but more in a broader sense of the fact that this
    recruiting is truly sales and as we do that and as we approach
    that task, we have to continually look at what's the market,
    who are we marketing to, how do we sell to them, look at the
    advantages to how do we leverage our own particular service or
    the environment of the day or what works, whether it be
    Montgomery GI Bill or whether it be kiosks or whether it be
    marketing via some specific example.
        It strikes me that some of the challenges that we are
    having in military recruiting at large, as well as your earlier
    question of articles in regard to service academies, tracks to
    the basic issue of our country's awareness of its United States
    military.
        We are representing, and our need to get access to high
    schools is based on the fact that we are an all volunteer force
    and we have the dichotomy between Harris poll voting of the
    United States military as the number one most respected
    institution in the country repeatedly and yet on the other side
    we are struggling to find people to join the services. It is
    because not of lack of interest but lack of awareness and lack
    of knowledge and understanding. So any of the things we can do
    to advertise and enhance the visibility that we have are
    beneficial.
        General Hankins. Yes, sir. Obviously our experience in
    fielding the Air Force Experience, which is the 18-wheeler with
    the F-16, about a year and a half ago has gotten to 600 cities
    and over 85,000 visitors, but that's also led us to field some
    more of the same kind of tractor trailers in different regions
    of the country.
        Probably the most significant thing we have done internally
    is try to create a synergy and to synchronize our recruiting
    efforts with all of the things that are going on between Air
    Force leadership and speaking engagements, community outreach
    and partnerships that we have tried with local high schools and
    base visits. All these efforts--what we have found is that we
    had an awful lot of people recruiting in an awful lot of places
    in a lot of different times, but we did not have a lot of
    synergy in the way we approached those. With the efforts and
    the lessons we have learned and what we have created a kind of
    air tasking order where we actually go out and task our
    recruiters to support those kind of events in areas where in
    the past they were disjointed in their support.
        In addition, the efforts in the Internet have really proven
    to be highly successful and the focus that all the services
    have given in that area to drive people toward the Internet
    certainly in a highly technical service like ours is starting
    to pay significant dividends.
        Senator Hutchinson. Very good, thank you. I've seen a lot
    of the ads on television. I know that you've targeted networks,
    even MTV. How much is being done or is anything being done on
    Hollywood and movie previews and can you target, and is there
    much being done in that area?
        General Peterson. Sir, we have a couple of movies being
    made right now, Blackhawk Down coming to mind real quick.
    Obviously the more we are in the public presence, the greater
    awareness of serving your country, the greater the opportunity
    to educate and enlighten our youngsters to join the service, to
    serve in uniform.
        Senator Hutchinson. Is much of the advertising done on
    previews?
        General Peterson. Yes, sir. We found, I think we picked
    this up from some of our fellow services here, but we found
    that advertising during the previews at movies is very
    effective. I think I first saw it with the Marines and I was
    very impressed myself. But it is very effective and it is very
    cost efficient as well. You're targeting an audience there
    that's just about full of lots of interest.
        General Cavin. Sir, I think we are all doing the same
    thing.
        Senator Hutchinson. General Maude, I'm about done, but will
    the conversion of the Army headgear, the black beret, help or
    hinder retention?
        General Maude. Sir, I believe it is going to help.
    Certainly there's a lot of emotion in the Army today as we move
    towards 14 June when we all don the new headgear and I think
    once we have done that it will be behind us and we will all
    stand proud and ready on the parade field and I think it will
    help retention.
        Senator Hutchinson. Will they say made in China on it? I
    hope not. You're not going to respond to that, are you?
    [Laughter.]
        Let me just wrap it up. Senator Cleland has led a longtime
    effort on the Montgomery GI Bill. All his questions today both
    on the first panel and the second panel were very heavily
    directed toward that education benefit and I've supported him
    in that.
        He's led, I think, a tireless effort to make that GI Bill
    education benefit portable. We are going to be approaching it a
    little different this year. I am, in offering a bill that will
    try to achieve some of the same goals through the use of the
    savings bonds, the government savings bonds. Essentially we
    would aim at critical specialties who enlist or extend for a
    period of 6 years, provide a savings bond benefit.
        We have hit a brick wall sometimes on trying to make that
    Montgomery GI Bill benefit portable and I'm convinced of the
    effectiveness and the value of having an education benefit
    that's going to be able to be used for dependents, spouses, and
    so forth. So by using the savings bonds, that you avoid--you
    already have it in the tax code, as I understand it, allowing
    that to be a tax exempt when used for educational purposes and
    that would apply whether for the member himself or herself or a
    dependent and what I would like to do is submit that
    legislation for you to give us a written comment on that,
    rather than trying to go into that today.
        I would like to commend that to you for consideration and
    ask for you to provide the subcommittee with a written
    evaluation as to whether that would be an effective tool,
    whether it has promise, or any suggestions that you might want
    to make on how the legislation could be changed or modified to
    make it more effective.
        If you would do that for me, and a nod of the head will be
    sufficient on that. I want to thank you.
        [The information referred to follows:]

             Senator Hutchinson's Proposed Savings Bond Legislation

        The proposed bill will receive strong support from the majority of
    the military ranks since the bill will favorably impact quality of life
    and will for many provide a starting education ``nest egg'' for family
    members. The majority of soldiers who will receive the benefits of the
    bill will be soldiers with less than 10 years active federal service
    (AFS) since the proposed eligibility is based in reenlistment. These
    soldiers are also the primary recipient of Selective and Targeted
    Reenlistment Bonuses that are paid at time of reenlistment. Career
    soldiers, at or past 10 years of AFS, who are not yet in the Indefinite
    Reenlistment Program, will reenlist one last time to enter the program.
    These career soldiers would also qualify for the proposed legislation.
    This population of soldiers will slowly disappear as they become
    eligible for reenlistment into the Indefinite Program. Career soldiers
    already in the Indefinite Reenlistment Program (i.e. Section 323(a)(3))
    would not qualify for the proposal since they no longer have an ETS.
    The soldiers can no longer reenlist since their separation/retirement
    date is adjusted out to the retention control point for their grade.
    This group of soldiers will normally have 16 or more years of AFS. The
    soldiers may feel slighted at not being eligible for the education
    incentive. This is especially true considering the fact since this is
    the group who will most likely have teenagers preparing for college and
    would immediately benefit from the proposal. Section 323(c)(2) captures
    the intent of establishing a 6 year Active Duty Service Obligation
    (ADSO). The point at which an officer is first eligible to enter into
    an agreement under this section should be upon completion of any
    initial ADSO (e.g. USMA, ROTC, Scholarship). Any subsequent ADSO as a
    result of training, education, change of station, etc. should run
    consecutively to the ADSO incurred under this section. The proposed
    legislation to present U.S. Savings Bonds to soldiers who reenlist will
    have a favorable impact on reenlistment if the program does not negate
    or reduce any normal bonuses the soldier may be eligible for at time of
    reenlistment. Career soldiers in the Indefinite Program who are not
    eligible for the proposed legislation may see themselves as forgotten
    by senior Army leadership and Congress.

        Senator Hutchinson. You have one of the most difficult jobs
    in the country, certainly one of the most important jobs. I'm
    very pleased with what I've heard today and with the efforts
    that you're making and with the results that you're getting. I
    hope that you'll continue to be aware of the subcommittee's
    support and my personal support for what you're doing. I look
    forward to having the opportunity to visit with you
    periodically in my office or on the phone to do what we can to
    make your job easier and to give you the resources and the
    support from Congress to continue to provide the quality young
    men and women in uniform to do the job for our country.
        I thank you for your time today. We were aiming for 2 hours
    and I think we are going to hit it right on the nose. Thank you
    all very much and the subcommittee stands adjourned.
        [Questions for the record with answers supplied follow:]

                 Questions Submitted by Senator Strom Thurmond

        1. Senator Thurmond. General Maude, Admiral Ryan, General Murray,
    and General Peterson, as you may be aware, I believe the Junior ROTC
    program plays a vital role in instilling a sense of service,
    patriotism, leadership, communications skills, team work and self
    esteem in our Nation's youth. Additionally, statistics demonstrate that
    over 40 percent of the students who graduate from the JROTC program
    choose some form of military service.
        Do your recruiting statistics track the propensity of JROTC
    students to enlist in the military services? If so, what percent of
    your recruits participated in the Junior ROTC program?
        What are your views on the cost effectiveness of the JROTC program
    as a recruiting tool?
        In your view would the expansion of the JROTC program benefit
    recruiting?
        General Maude. While we cannot track the propensity of JROTC
    students to enlist, we can give you a sense of how many enlistments in
    the Regular Army occurred after some attendance in a JROTC Program.
        The following percentages delineate the Regular Army enlistment (by
    fiscal year) of applicants with 1-4 years in a JROTC Program:

    ------------------------------------------------------------------------
                            Fiscal Year                            Percent
    ------------------------------------------------------------------------
    \1\ 2001...................................................        16.6
    2000.......................................................        12.5
    1999.......................................................       13.6
    ------------------------------------------------------------------------
    \1\ Note that fiscal year 2001 is year-to-date (October 2000-May 2001)
      only.

        The JROTC mission remains to motivate young people to be better
    citizens. We are very cautious to avoid calling the JROTC program a
    recruiting tool. Many teachers and counselors are sensitive to the
    perception that recruiters might "sidetrack" their students into a
    military enlistment, rather than going straight into college after high
    school graduation. However, any program that provides a focus on the
    military is a platform for recruiters of all services to discuss
    service opportunities and options. As such a platform, expansion of the
    JROTC program will increase student exposure to service values,
    discipline, and leadership development.
        Admiral Ryan. Yes.
        Our most recent recruit surveys suggest that 10 percent
    participated in NJROTC. However, CNET indicates that of the NJROTC
    graduating seniors approximately 40 percent pursue a career in one of
    the Armed Forces.
        NJROTC is cost effective in that high school funds are paired with
    government funds in order to pay salaries and provide classroom space.
    It also enrolls over 67,000 youths annually. However JROTC is not a
    recruiting tool in that there is no direct linkage into Navy service,
    but instead is a citizenship program to help teach accountability and
    responsibility.
        Yes. Although predominantly a citizenship program, JROTC presents a
    positive presence in schools and in the public, thereby enhancing Navy
    recruiting efforts.
        General Murray. Recruiting statistics do not track the propensity
    of MCJROTC students enlisting in the Marine Corps. The MCJROTC Program
    collects informal statistics from each unit on what senior MCJROTC
    cadets intend to do upon graduation from high school. This report
    demonstrates that approximately 40 percent of the students who graduate
    from the MCJROTC program possibly choose some form of military service.
        By public law, the MCJROTC is not a recruiting tool, and we need to
    take care to not present it to the public as such. The purpose of the
    Junior Reserve Officers' Training Corps is to instill in students of
    United States secondary educational institutions the values of
    citizenship, service to the United States, personal responsibility, and
    sense of accomplishment. Exposure to the Marine Corps and positive role
    models provided by instructors probably influence young men and women
    to join the service. However, we have no statistics to support the
    programs cost effectiveness in recruiting.
        The informal MCJROTC program statistics support this as a
    reasonable expectation.
        General Peterson. Yes, although JROTC is not a recruiting program,
    we believe expanding the JROTC program would benefit recruiting. Our
    recruiting surveys provide information on the propensity of JROTC
    students to enlist in the military, but do not capture the number of
    recruits who participated in JROTC. Currently, 45 percent of Air Force
    Junior ROTC graduates indicate they plan to affiliate with the
    military. We believe JROTC is an important and cost effective
    citizenship program, which allows us to broaden our footprint. The
    program is invaluable in helping to instill the values of citizenship,
    service to our Nation, and personal responsibility. Through the
    program, young people can gain confidence, self-respect and a sense of
    accomplishment. Many students are motivated towards military service
    and expanding the program would benefit recruiting. Currently, we have
    654 active units and, with Congress' help, we hope to have 945 active
    units by end of fiscal year 2005.

        2. Senator Thurmond. General Maude, Admiral Ryan, General Murray,
    and General Peterson, I understand that the Montgomery GI Bill is a
    significant recruiting tool for each service. I also note that because
    of the high demand for technical skills, the services are recruiting
    more individuals with some college credits or degrees.
        Since we offer the opportunity to earn money for a college degree,
    are there any programs that offer college graduates some degree of
    education debt relief for enlisting in the military? If not would such
    a program encourage college graduates to enlist?
        To increase recruiting, what thought has been given to targeting
    individuals who have student loans and have dropped out of school?
        General Maude. A program that offers college graduates some degree
    of debt relief for enlisting in the Army is the Loan Repayment Program.
    This program provides qualified applicants enlisting in any skill, for
    a term of service of at least 3 years, up to $65,000 loan repayment of
    qualifying student loans. Section 2171 of Title 10 U.S. Code describes
    the types of loans that qualify for the Service's Loan Repayment
    programs. In fiscal year 2000, 2,194 new soldiers enlisted for the Loan
    Repayment program.
        As part of its strategy, USAREC has directed that prospecting
    efforts should be focused not only on the high school but also toward
    the post-secondary market. We conduct college campus recruiting, and we
    have directed our market strategy toward college and post-secondary
    vocational-technical school ``stops outs.'' We believe that loan
    repayment programs are a vital part of this strategy.
        Public Law 102-325, Higher Education Amendments of 1992, eliminated
    the deferment for performance of military service. The loss of military
    deferments affects all individuals with Federal student loans enlisting
    in the Regular Army. Without a military deferment, soldiers and other
    service members may find it financially difficult to make regular
    monthly loan payments or interest payments. Request that Congress pass
    legislation that would reinstate military deferments for Federal
    student loans.
        Request that Congress allow the Army to combine the Montgomery GI
    Bill (MGIB) and Loan Repayment Program (LRP). Combining these two
    incentives should have a direct impact on college recruiting,
    especially 2-year college grads. Presently, enlistees have to choose
    between the MGIB and the LRP. For enlistees with 2 years of college or
    less, having their loan paid off leaves them with no money for future
    college. Combining the two incentives will provide recruiters with an
    excellent sale tool in the college market.
        Admiral Ryan. We currently have two programs that offer debt
    relief, the Loan Repayment Program (LRP) and Enlistment Bonus (EB) for
    College Credit. Although a low percentage of recruits qualify, this is
    a useful incentive. Navy is studying the feasibility of expanding these
    two programs.
        This can be done through the Loan Repayment Program (LRP); however,
    those who take LRP cannot, by law, also receive Montgomery GI Bill
    (MGIB) benefits. Consequently, those who wish to be eligible for MGIB
    benefits must forego receiving Loan Repayment.
        General Murray. The Marine Corps does not offer college loan
    repayment programs. The Marine Corps does not see a necessity to target
    those who have student loans and have dropped out of school. Anecdotal
    evidence has suggested that recruits who have dropped out of college
    are more inclined to attrite from recruit training than those who have
    completed high school or college. The Marine Corps continues to believe
    that its ideal enlisted target market for recruiting is the Tier 1,
    Category I-IIIA, 18- to 21-year-old applicant.
        From an enlisted perspective, a program for college graduates with
    loans probably would not have that much impact on enlistments as
    military pay is so low, a college graduate would not be likely to
    enlist. One possible exception to that would be musicians, who often
    need college degrees to attain proficiency in some instruments and then
    enlist in order to work in their chosen career fields. However, such a
    program used in this manner could cause an institutional imbalance by
    placing a higher value on musicians than on officers, many of whom have
    college loans.
        For a college graduate seeking a commissioning program: While a
    college debt relief program would add one more tool to the kit of
    attractive features we can offer prospective Marine officers, we can
    continue to achieve our annual recruiting mission without it. What
    would be much more beneficial, however, is a graduate school deferment
    component to our Platoon Leaders Class (PLC) commissioning program.
    Students enroll in PLC as undergraduates, attend Officer Candidate
    School during summer recess, and then receive a commission and begin
    active duty upon receiving a baccalaureate degree. We would like to see
    a small percentage of these graduates each year offered the chance to
    delay their assignment to active duty in order to complete a graduate
    degree. This proposal will allow us to formally acknowledge the value
    of a graduate degree and further reinforce our recruiting message, as
    well as enroll students in the PLC who might otherwise not pursue a
    marine commission.
        General Peterson. The Air Force does have a program that offers
    debt relief for enlisting. We implemented a College Loan Repayment
    Program (CLRP) in May 2000 that repays up to $10,000 in college loans
    acquired before entry on active duty. This program is available to all
    4- and 6-year enlistees entering in any Air Force occupational
    specialty. However, since its inception, less than 1 percent of
    accessions have accepted CLRP. Air Force members accepting CLRP are not
    eligible for MGIB education benefits unless they serve a second
    enlistment due to a conflict between U.S.C. Title 10 and U.S.C. Title
    38, which stipulates that the same period of service cannot establish
    eligibility for both. Recruits choose MGIB over CLRP.
        We recognized the need for aggressive recruiting on college
    campuses. In 1997, we made junior colleges and other 2-year colleges
    ``priority one'' schools, which required recruiters to visit those
    campuses once a month. Our recruiters team well with Air Force Reserve
    Officer Training Corps (AFROTC) units on campuses. Our Basic Military
    Training surveys indicate that approximately 40 percent of our
    enlistees have at least some college. This has been consistent over the
    last 5 years. At least 15 percent have 15 semester hours (full
    semester) of college credit, so we are attracting college students.
        Our strategy includes a focused advertising campaign. We advertise
    in 447 college newspapers every spring and fall (``drop out time'').
    Also, we are placing posters in over 400 junior colleges in places such
    as bookstores, career rooms and student centers. These posters tie into
    our ``you have dreams, let the Air Force get them off the ground'' ads
    and each poster includes mail-back cards. Further, we put a full-page
    ad in the Job Search Guide mailed to all college counselors and two
    full-page ads in a job search booklet mailed to all college students.
    We recently obtained a national list of students who have dropped out
    of college, which is enabling us to specifically target these
    individuals. We continue to view the college dropout market as an
    excellent source of recruits and believe that our combination of
    advertising, targeted recruiting, and educational incentives is
    achieving positive results.

        3. Senator Thurmond. General Maude, Admiral Ryan, General Murray,
    and General Peterson, what impact do the Department of Defense's
    educational requirements have on recruiting of minority and Hispanic
    youths? Are these standards inadvertently discriminating against inner
    city and poor rural area youths?
        General Maude. The Department of Defense requires that at least 90
    percent of non-prior service accessions be high school diploma
    graduates. The remaining 10 percent may have an alternative educational
    certification such as a General Educational Development (GED)
    certificate, or no high school certification. The GED accounts for over
    14 percent of all high school credentials granted each year.
        The Army remains strongly committed to encouraging America's youth
    to stay in school, stay off drugs, and graduate as the best road to
    success. If a person is in high school, we want them to stay there. If
    a person is eligible to return to high school, we want them to do that.
    However, the Army also wants to provide a road to success for those who
    have high indicators of potential for successful service, but who left
    school for whatever reason and are now unable to return to high school.
    The Army initiated ``GED Plus--The Army High School Completion
    Program'' pilot program in February 2000 to address this population.
    The purpose of the program is to help young people who do not possess
    an education credential, and therefore are currently not eligible to
    enlist, to gain a GED and therefore be eligible to enlist. The
    Department of Defense is allowing the Army to access 4,000 per year
    through this program outside of the 10 percent non-high school diploma
    cap. The test allows the Army to penetrate expanded markets, and
    provide new educational opportunities and education experiences to
    recruits while maintaining the Army's quality criteria. Recruits must
    meet required test scores for the Armed Forces Qualification Test as
    well as an Assessment of Individual Motivation Test and other legal and
    moral selection criteria. These are stricter requirements than what
    high school diploma graduates must meet for enlistment. Race, gender,
    and ethnicity are not factors in the selection process. Any qualified
    applicant will be accepted within program volume limits.
        Admiral Ryan. There is a correlation between graduating from high
    school and completing basic training. Therefore, DOD has established a
    policy that 90 percent of accessions must be high school diploma
    graduates. The impact on minority and Hispanic youths varies depending
    on their graduation rate. For instance, Hispanics have a higher high
    school dropout rate than do other minorities. Consequently, their
    opportunities for enlistment may be limited by virtue of limitations on
    the number of accessions allowed who do not possess a high school
    diploma.
        I do not believe that this policy discriminates against inner city
    and poor rural area youth. I believe it is necessary and appropriate to
    establish standards by which to identify candidates for enlistment who
    demonstrate potential for successful completion of basic training.
    Statistical data suggests that high school diploma graduates generally
    enjoy a higher rate of success in completing recruit training.
    Educational credentials provide a reasonable and reliable indicator of
    potential for success.
        General Murray. DOD educational requirements do not have a
    significant impact on recruiting minority and Hispanic youths. The
    racial demographics that comprise today's Marine Corps are proportional
    to relevant applicant pools, based on the racial demographics of the
    United States as a whole. The standards do not discriminate against any
    ethnic or disenfranchised group of the population.
        General Peterson. The DOD's educational requirements are standards
    or benchmarks prescribed for each of the Services. These education
    standards/benchmarks provide each of the Services the flexibility to
    apply standards to meet their individual Service mission requirements.
    These benchmarks are based on the relationship to recruit quality in
    the areas of persistence, training outcome, and job performance.
        The DOD educational standards of 90 percent high school graduates
    and 60 percent Category I-IIIA (50th percentile and above) on the Armed
    Forces Qualification Test (AFQT) have resulted in accessing high
    quality recruits who perform better on the job and retain at higher
    rates. Air Force policy is more stringent--99 percent high school
    graduates and 80 percent Category I-IIIA. Research continues to show
    that the educational attainment of youth predicts first-term military
    attrition. DOD, in conjunction with the National Academy of Sciences,
    developed a mathematical model that links recruit quality benchmarks
    and job performance.
        These DOD educational standards are equally applied across the
    board without regard to race, ethnicity, religion, sex, or national
    origin. These benchmarks have not been a barrier for the Air Force.
    Last year, the Air Force successfully recruited over 18 percent African
    American, 6 percent Hispanic American, 2 percent Asian-American/Pacific
    Islander and 2 percent Native American/Other non-prior service
    accessions.
        Since fiscal year 1985, the Services have accessed greater numbers
    of Hispanic-Americans each year. Measuring Hispanic-American accessions
    can be misleading as many Hispanic-American recruits self-identify as
    White. This phenomenon means we have more Hispanic-Americans on active
    duty than what the data shows. High school completion rates are up
    among all minority groups with the exception of Hispanic-Americans. The
    Hispanic-American high school dropout rate is increasing and this is a
    big concern. The high school dropout rate among Hispanic-Americans is
    30 percent, 8 percent for Whites and 14 percent for African-Americans.
        We have implemented an aggressive and synchronized marketing
    campaign to all of America. Targeted minority recruitment and marketing
    efforts are directed at high quality recruits in minority-rich
    communities. 22 percent of all Air Force magazine advertising is in 16
    minority publications. We have also increased our televised advertising
    on Black Entertainment Television (BET) and Univision. Additionally,
    recruiting and commissioning materials are published in Spanish.
        DOD educational benchmarks are the foundation for the success of
    our high quality force and they are applied equally to all potential
    recruits and accessions.

        4. Senator Thurmond. General Maude, Admiral Ryan, General Murray,
    and General Peterson, the Department of Defense has at its disposal may
    tools, such as advertisement, enlistment bonuses, the Montgomery GI
    Bill, and preferred assignments, to assist in the recruiting effort.
        Can you give us an estimate of what it costs to recruit a young man
    or women in your service?
        General Maude. The average cost per recruit is calculated by
    dividing the Army's total number of accessions (prior service and non-
    prior service) into the total active enlisted expenditures for
    recruiting and advertising resources. These resources (cost categories)
    include: recruiting personnel compensation (military and civilian pay)
    enlistment incentives (including enlistment bonuses, Army College Fund
    and the Loan Repayment Program expenditures for that year), recruiter
    support (vehicles, equipment, computers, supplies, communications and
    applicant transportation/food/lodging), and advertising. The cost per
    recruit was estimated at $13,030 in fiscal year 2000, pending final
    budget submission.
        Admiral Ryan. The latest figures show that it costs $9,847 on
    average to recruit each person into the Navy.
        General Murray. The ``cost per recruit'' is calculated by the
    Office of the Assistant Secretary of Defense (OASD)--Accession Policy
    based on information furnished by the recruiting services in the bi-
    annual Military Personnel Procurement Resources (Format 804) Report.
    Data collected reflects all actual or estimated resource information
    applicable to enlisted and officer personnel procurement for the
    recruiting and advertising programs for both the Active Force and the
    Reserve components. Resources reported are those funded under the
    Military Personnel Account (personnel, bonuses, college funds), and
    Operation and Maintenance (O&M) funds for supplies, equipment, and
    procurement items. Reports developed are to be consistent with data in
    the President's budget and the Office of the Secretary of Defense (OSD)
    budget requests. The current ``cost per recruit'' for fiscal year 2001
    is $7,010 and is based on our October 2000 804 report.
        General Peterson. Over the last 5 years, the cost per recruit
    increased from $4,423 in fiscal year 1997 to $9,759 in fiscal year 2001
    (fiscal year 1998--$4,755, fiscal year 1999--$6,425, fiscal year 2000--
    $7,989). This cost to access one non-prior service recruit is
    calculated by taking the sum of our recruiting activities and
    recruiting advertising budgets and adding related costs not paid
    directly by the Air Force Recruiting Service (e.g., all Military
    Personnel and leased facility costs), divided by the number of non-
    prior service recruits. The increased cost is due to implementation of
    paid television advertising in fiscal year 1999, increases in the
    number of recruiters, and an expanded enlistment bonus program.
                                     ______

                  Questions Submitted by Senator Wayne Allard

        5. Senator Allard. General Cavin and General Peterson, what can you
    tell us about the current Anthrax Immunization policy's effects on
    retention?
        General Cavin. The Army's retention program is once again exceeding
    its mission in all three (initial, mid-career, and career) categories
    this fiscal year. We have not seen any evidence to date that would
    suggest the Anthrax Immunization policy is having any impact on
    soldiers' decisions to reenlist.
        General Peterson. We are aware of recent GAO testimony indicating
    that up to 25 percent of Guard and Reserve pilots have left or
    transferred because of the anthrax vaccine. However, in the 2000 Air
    Force New Directions Survey, only 16 of 1,047 personnel identified
    Anthrax as a factor affecting their decision to separate from active
    duty. In each case, it was mentioned in conjunction with other reasons,
    i.e., TEMPO, pay and allowances, stability, etc. While immunizations is
    not one of the 38 factors measured in the Air Force New Directions
    Survey as influencing the decision to leave active duty service,
    separating personnel are given an opportunity to list any other factor
    that influenced their separation decision.

        6. Senator Allard. General Peterson, what career fields are you
    having the most difficulty filling and retaining, and why?
        General Peterson. We met our fiscal year 2000 recruiting goals. We
    accessed 34,369 recruits against a goal of 34,000. However, we did not
    meet the desired skill distribution, falling short in mechanical
    specialties. This impacted career fields such as aircraft maintenance
    and crew chiefs. The Air Force has used targeted enlistment bonuses and
    a more robust recruiter force to ensure we meet our fiscal year 2001
    goal and access the specific skills needed to meet our warfighting
    needs. Thus far, we are exceeding our fiscal year 2001 accession goals
    and meeting skill mix requirements in all four categories--electronics,
    mechanics, general, and admin.
        Retention in many highly technical enlisted and officer career
    fields has been challenging. Our people have skills and experience that
    are sought-after and competitive in the civilian employment sector. We
    are experiencing difficulty retaining pilots, developmental engineers,
    scientists, communicators, and acquisition managers--all technical
    officer career fields. Similarly, the enlisted force suffers from
    declining retention in highly skilled fields such as air traffic
    control, air battle management, fire protection, crypto-linguistics,
    communications, and many maintenance specialties. As with the officer
    career fields, these are all marketable skills in the civilian sector.
    Our TEMPO, a thriving economy, and military/public sector pay
    inequities challenge our ability to retain motivated, technologically
    adept, mid-career airmen and commissioned officers.

        7. Senator Allard. General Peterson, what are we doing to work with
    employers to ensure we have access to separated specialists, and
    others, through the Reserve component?
        General Peterson. The Air Force Reserve has in-service recruiters
    at every active duty base to discuss the option of continued service
    through the Air Force Reserve. Every active-duty member must visit this
    recruiter during his/her outprocessing. In addition, the Air Force
    Reserve works closely with the National Committee for Employer Support
    of the Guard and Reserve (ESGR), an organization chartered by the
    Department of Defense in 1972 to inform employers of the ever-
    increasing importance of the National Guard and Reserve and to explain
    the necessity for--and role of--these forces in national defense. ESGR
    is a nationwide network of local employer support volunteers, organized
    into 54 committees (one in each state, the District of Columbia, Guam,
    Puerto Rico, and the Virgin Islands), which seeks to gain and reinforce
    the support of America's employers for a strong National Guard and
    Reserve system.
        With thousands of volunteer executives, senior government
    representatives, educators, and military personnel serving on local
    ESGR committees, a wide variety of informational and assistance
    programs are in place designed to capture the attention of the
    employers and win their support.
        Some of the programs conducted by ESGR to enhance the Reserve
    components' relationship with civilian employers include ``Briefings
    with the Boss'' and ``Bosslifts.'' Briefings with the Boss provide an
    informal forum in which employers, unit commanders, ESGR members, and
    community leaders meet to network and discuss issues that arise from
    employee participation in the National Guard and Reserve. Bosslifts
    transport employers and supervisors to military training sites where
    they observe National Guard and Reserve members on duty as part of the
    Total Force. This provides the employer a better understanding of what
    their Reserve component members do when they are away from their
    civilian occupation for duty with their military units. ESGR Bosslifts
    give employers the opportunity to provide input to the Department of
    Defense leadership and are an excellent way to see the critical role
    National Guard and Reserve members perform in our Nation's defense.
                                     ______

                Questions Submitted by Senator Edward M. Kennedy

        8. Senator Kennedy. Sergeant Streeter, Petty Officer Strothers,
    Sergeant Rodriguez, and Airman Rodriguez, there are many reasons that
    young people join the military right out of high school including the
    ability to earn money to pay for college and on the job training.
        How large a part do enlistment bonuses play in successfully
    recruiting high school students into the Armed Forces?
        Sergeant Streeter. The enlistment bonus plays a significant part in
    recruiting quality high school students into the Army. In fiscal year
    2000 over 26,000 of the total 80,113 enlisted for an enlistment bonus.
    The enlistment bonuses are a key element to channel quality applicants,
    especially quality high school students to the priority skills the Army
    requires.
        Petty Officer Strothers. In my area enlistment bonuses are really
    great incentives. I am in an urban area; many of my applicants are
    really excited about getting $5,000. Also, I feel that bonuses should
    always be given to applicants that ship within 30 days of joining. As a
    recruiter, I am asking people to take days off work and miss days of
    school so that I can process them as soon as possible. I have found
    that applicants are more receptive to these requests when they know
    that they will be getting an enlistment bonus.
        Sergeant Rodriguez. In fiscal year 2000, 16 percent of non-prior
    service regular recruits shipped to recruit training with some form of
    bonus. Of these bonuses, less than 4 percent were tied to a specific
    job field. Five percent were to get recruits to ship during specific
    times of the year, and 7 percent were Marine Corps College Funds.
    Bonuses play a relatively minor role in the enlistment process because
    the Marine Corps emphasizes the intangible benefits of becoming a
    Marine. In many cases, there is less than one bonus program per
    recruiter per year. Recruiters sell the Corps and its legacy; not
    skills, jobs, and travel. The challenge of taking the rite of passage
    to earn the title Marine is our primary sales tool.
        Airman Rodriguez. The enlistment bonus program is a valuable part
    of what attracts applicants into the recruiting office. When added to
    the other benefits (including education, training, and travel), we have
    a good package to offer. The enlistment bonus really plays a vital role
    during the job matching process. Targeting the bonuses allows us to
    fill positions that have historically been difficult to fully man,
    especially in the mechanical field.

        9. Senator Kennedy. General Maude, Admiral Ryan, General Murray,
    and General Peterson, President Bush's budget proposes shifting $5.7
    billion in Pentagon spending for increased pay, health care, and
    housing. Of this, $1.4 billion would go to pay. The proposed fiscal
    year 2002 pay raise of 4.6 percent would cost $400 million, leaving $1
    billion for targeted pay raises, re-enlistment bonuses, and other
    incentives.
        Where do you feel that the money proposed by the President could be
    best used for the retention of qualified people?
        General Maude. It is the Army's position that the entire $1 billion
    be used in a targeted pay raise, which addresses three major concerns:

             NCO Pay. We recognize the emerging findings from the
            9th QRMC that the demographics of the force have changed.
            Personnel in the grades of E5-E9 are attaining higher levels of
            education than they had 10 to 15 years ago. This opens civilian
            employment opportunities, for higher wages, that were not there
            before. Therefore, there is a good argument that we should
            change the standard on which the pay table is based to more
            closely align pay with the civilian sector we are competing
            against for quality soldiers.
             Warrant Officer Recruitment. The Army has begun to see
            a downward trend since last year's pay table reform, which
            raised pay for grades E5-E7s. This reform did not adjust
            Warrant Officer pay to maintain parity. The Army would like to
            make sure that this January's pay raise does not exasperate the
            existing pay differential.
             Captain Attrition. The grade of 03 is the only pay
            grade in the pay table where the Army and other services are
            having problems with retention. We feel that we need to send a
            clear message to Army captains that we too are concerned enough
            to target them with a higher than normal raise.

        Admiral Ryan. Navy supports the DOD position that, in conjunction
    with an across-the-board pay raise, additional funding for increased
    pay should be applied to the basic pay table in a targeted fashion that
    would raise the level of pay and alter the structure of the pay table.
    This approach is consistent with the recommendations of the 9th
    Quadrennial Review of Military Compensation. Structural modifications
    would include targeting pay raises to the enlisted mid-grade ranks to
    better match their earnings profile, over a career, with that of
    comparably-educated civilian counterparts and provide a sufficient
    incentive for these members to complete a military career.
        General Murray. The Marine Corps continues to be concerned with
    creating divisions among those who receive bonuses and those who do
    not; preferring to increase the pay for all marines vice only a select
    few. Our preference is to apply the entire $1 billion to the basic pay
    table in the form of an equal-percentage, across-the-board increase. If
    congressional intent centers on targeted pay raises, we would prefer to
    focus the $1 billion on our mid-career force (E5-E7, O3-O4) to the
    extent that these raises do not adversely impact the promotion
    increases of our more senior members.
        General Peterson. We appreciate Congress and the President
    addressing pay for our military members. The projected 4.6 percent
    increase to basic pay will help in our efforts to retain our best
    people. Based on comparisons with private sector counterparts of
    similar education levels and experience, coupled with our greatest
    retention needs, we believe it is best to target the additional $1
    billion at a pay raise for noncommissioned officers (NCOs) and certain
    commissioned officer grades. This adjustment would make the overall pay
    table more competitive with private sector wages. We are working
    together with the other Services and with OSD to develop a consolidated
    DOD position on this important issue.

        10. Senator Kennedy. General Maude, Admiral Ryan, General Murray,
    and General Peterson, in both our military and in DOD's civilian
    workforce, the need for highly qualified information technology
    personnel is essential.
        How are the services doing in retaining qualified information
    technology personnel?
        General Maude. We have had mixed success over the past several
    years retaining our information technology personnel. This field is one
    that there is great demand for with new recruits and we have had no
    problem getting enough of them to meet our skill level one
    requirements. We have had some difficulty in retaining those who are at
    the end of their initial term of service and have countered that by
    putting reenlistment bonus dollars on those specialties. That has been
    the most effective way we have seen to influence reenlistment behavior.
    Once a soldier reenlists the first time, he or she is likely to stay
    for a full career in the information technology field.
        Admiral Ryan. Information technology crosses several ratings and
    mission areas throughout the Navy. Unlike the other services, Navy does
    not currently have a designated Information Professional (IP) Community
    or Signal Corps providing dedicated Officer and Enlisted community
    oversight and management. As a result, this has made it somewhat
    difficult to gauge the number of personnel performing legitimate IT
    functions but who are not designated as Information Professionals, and
    what the potential loss has been to Navy. The Department of the Navy
    Chief Information Officer (DON CIO) recently completed a study to
    identify those personnel performing Information Management/Information
    Technology (IM/IT) functions that will ultimately support establishment
    of a Navy IP community.
        Retention of Navy personnel designated as Information Systems
    Technicians (IT), and performing information systems-related functions,
    currently exceeds Navy-wide retention rates, 71 percent to 54 percent
    respectively. This figure, however, is artificially high due to the
    relative infancy of this rating (historical data available only since
    1999).
        Our ability to mitigate the affects of ``industry draw'' centers on
    availability of Enlistment and Selective Reenlistment Bonuses (SRB).
    Continued availability and competitiveness of these tools will be
    essential if we are to attract and retain highly qualified Information
    Professionals into several source ratings. An additional challenge
    associated with this issue is our ability to train sufficient numbers
    of highly qualified personnel to meet rapidly growing IM/IT
    requirements.
        General Murray. Our small computer specialists (4,066) and ADA
    programmers (4,067) are currently staffed at 94 and 89 percent of our
    personnel requirements respectively. However, we are only retaining 56
    percent of those marines in the first term force that we need to
    reenlist into the career force. This requires us to laterally move some
    marines from other Military Occupational Specialties (MOS) into this
    specialty, to maintain the overall inventory levels above.
        General Peterson. In fiscal year 2001, we made slight improvements
    in retaining enlisted members in the information technology career
    fields. However, our overall retention in first-term, second-term, and
    career enlisted members in the information technology fields remains
    below Air Force goals. As with our enlisted force, retaining
    communications-computer systems officers is challenging. The civilian
    sector continues to draw our highly skilled people. Cumulative
    continuation rates (CCR) for communications officers have improved
    slightly, although we remain below historical mission support averages.
    CCR is the percent of officers entering their 4th year of service who
    will complete their 11th year of service given existing retention
    patterns. The historical CCR for mission support officers is 53
    percent. The fiscal year 2001 CCR for communications-computer systems
    officers is 45 percent.
        The Air Force also has difficulty retaining newly hired, qualified
    civilian IT professionals. On average, 88 percent of IT professionals
    stay with the Air Force for more than 1 year, compared with a 93
    percent rate for all civilian interns in the Air Force. Further, an
    average of 48 percent of all IT civilian professionals leave the Air
    Force within 8 years of service (YOS). This data reflects the dynamics
    of the current work force and industry. During several years of
    restructuring, downsizing, and outsourcing, we have also been competing
    with industry for scarce numbers of qualified IT workers.

        11. Senator Kennedy. General Maude, it is my understanding that the
    U.S. Army offers a 2-year enlistment that offers the enlistee a bonus
    to join and makes that individual eligible for the GI Bill and other
    educational benefits.
        How many people take advantage of this 2-year enlistment?
        What kind of benefit does it offer the Army to have such a short
    enlistment period?
        General Maude. The total number of applicants that enlisted for a
    term of service of 2 years in fiscal year 2000 was 1981 or 2.1 percent
    of the total enlistments. The number of applicants enlisting for the 2-
    year enlistment bonus was 436 or 2.0 percent of all enlistment bonus
    takers. The benefit to the Army for 2-year enlistment periods is it
    expands the recruiting population to individuals who would not have
    otherwise served based on longer terms of service. This provides more
    people back to society to help bridge the civilian-military gap. Also,
    the 2+2+4 program option directly places Active component soldiers in
    Army Reserve units after a 2-year active duty obligation.

        12. Senator Kennedy. Admiral Ryan, General Murray, and General
    Peterson, do any other branches have a similar 2-year enlistment
    program like the Army?
        Admiral Ryan. Navy offers a limited number of 2-year obligation
    (2YO) enlistments. While we have recently been authorized to offer
    enlistment bonuses to certain 2YO recruits, who are also eligible for
    Montgomery GI Bill (MGIB) benefits, Navy does not have a College Fund
    for 2-year obligors.
        General Murray. The Marine Corps does not have 2-year enlistments
    due to the fact that shorter enlistments would provide less return on
    our training investment, would run counter to our unit cohesion
    program, and would not support our deployment cycle.
        General Peterson. The Air Force is a retention-based force. Because
    we are very technically oriented, many of our career specialties
    require extensive training not suitable for a short enlistment period.
    The average technical training school is approximately 55 days, or 3
    months, duration. Additionally, individuals complete 6 weeks of basic
    training, duty with the first-term airman center, and 15-months for
    upgrade training. Total training time takes 20-21 months. Therefore,
    the Air Force must focus on longer-term enlistments (4-year and 6-
    year). Over 53 percent of all recruits who entered in fiscal year 1999
    were 6-year enlistees; 55 percent in fiscal year 2000. Our analysis
    also shows that a longer-term enlistment results in a higher percentage
    of reenlistments, which is very important for our force.
                                     ______

                   Questions Submitted by Senator Max Cleland

        13. Senator Cleland. General Maude, Admiral Ryan, General Murray,
    General Peterson, Sergeant Streeter, Petty Officer Strothers, Sergeant
    Rodriguez, and Airman Rodriguez, I continue to read article after
    article about service men and women who either are being punished for
    refusing to take the anthrax vaccine or who have experienced adverse
    reactions to the vaccine. Are the potential recruits aware of the DOD
    anthrax vaccination policy? Does the fact that they may be required to
    take these vaccinations deter a significant number of people from
    enlisting?
        General Maude. Recruiters answer questions about the anthrax
    vaccination when asked, but there is no policy to address the subject
    as part of the recruiting process.
        Admiral Ryan. Typically, recruiters do not discuss vaccination
    policy with the recruit. Although there has been much written in the
    news about this vaccine, especially in the Air Force and Army, there
    are no indication that this deterred a significant number of personnel
    from enlisting in the Navy.
        General Murray. Neither the DOD anthrax vaccination, nor
    vaccinations in general are items of discussion unless broached by the
    applicant. Should the matter arise in an objectionary fashion, the
    choice would remain for the applicant to enlist or decline enlistment
    based on personal choice as we are a voluntary force. Because the
    anthrax vaccination policy has not become an issue for recruitment, the
    Marine Corps has not conducted any surveys to ascertain the impact of
    the policy on potential recruits.
        General Peterson. While we do not specifically address the DOD
    anthrax policy with recruits, they must acknowledge that they will be
    required to comply with all vaccination requirements needed to be
    eligible to deploy. However, we have no evidence that fear of the
    anthrax vaccination is keeping young people from enlisting in today's
    Air Force. The greatest barriers to finding qualified young people to
    enlist in the Air Force continue to be a thriving economy, college
    opportunities, and decreasing numbers of military influencers in the
    community.
        Sergeant Streeter. There is no quantifiable data nor anecdotal
    information that would suggest or support any statement that the
    anthrax vaccination policy has had any effect on recruiting.
        Petty Officer Strothers. Applicants in my area are not aware of the
    DOD anthrax vaccination policy. Because my applicants are not aware of
    the policy, it has never been a deterrent.
        Sergeant Rodriguez. Neither the DOD anthrax vaccination, nor
    vaccinations in general are items of discussion unless broached by the
    applicant. Should the matter arise in an objectionary fashion, the
    choice would remain for the applicant to enlist or decline enlistment
    based on personal choice as we are a voluntary force. Because the
    anthrax vaccination policy has not become an issue for recruitment, the
    Marine Corps has not conducted any surveys to ascertain the impact of
    the policy on potential recruits.
        Airman Rodriguez. I totally agree with Lieutenant General Peterson.
    Air Force Policy on anthrax is not specifically addressed with
    recruits. The recruits are told that they will be required to comply
    with all vaccinations requirements needed to be eligible to deploy. The
    fear of anthrax vaccinations is not a factor in finding qualified
    people to join the Air Force. The biggest obstacle is a growing
    economy, college opportunities, and decreasing military influences in
    the community.

        14. Senator Cleland. General Maude, Admiral Ryan, General Murray,
    and General Peterson, several years ago, we were seeing challenges in
    retaining captains in the Army, surface warfare officers in the Navy,
    and pilots across the services. What if any specific technical skills
    professions or grade levels are still experiencing retention problems?
        General Maude. Army Competitive Category (ACC) officer retention
    patterns have changed little from fiscal year 2000. With the exception
    of a small increase in losses at the grade of major, attrition is
    basically flat. Company grade attrition (lieutenants and captains) is
    holding steady at 8.8 percent. The Army is forecasted to lose about 40
    fewer captains in fiscal year 2001 than it did in fiscal year 2000. The
    ACC is projected to be short 2,505 officers in the grades of captain to
    colonel in fiscal year 2001. This shortage is partially offset by a
    lieutenant overage of 1,392. This represents a fill of 47,675 against
    an allocation of 48,788 and an aggregate shortage of 1,113. While
    significant, this problem is manageable. Current remedies include
    increased promotion rates, selective continuation programs, and an
    increase in lieutenant accessions in fiscal year 2001-2006. To help
    offset the current captain shortage the Army has requested a change in
    Title 10, USC that will lower the captain pin-on point to 36 months
    from the current 42 months.
        Warrant officer pilot retention has improved over the past few
    years as a result of recall programs and the implementation of aviation
    continuation pay (ACP). Apache pilot strength has increased from 87
    percent in 1997 to 94 percent today. Special operations aviator
    strength has increased from 80 percent to 94 percent. The take rate for
    ACP exceeds 75 percent for both categories of aviators.
        Admiral Ryan. Navy is meeting overall authorized officer end
    strength; however, shortfalls still exist at different grades and
    within various communities. This problem is most prevalent among mid-
    grade officers within the Unrestricted Line (URL). While various
    community-specific continuation or incentive pay programs are showing
    favorable results, projected retention rates are still less than steady
    state requirements. The following is provided to address specific areas
    of concern within the URL:
        Surface Warfare Officer Retention: The Surface Warfare Officer
    (SWO) community has not retained to department head (mid-grade
    officers, typically with 6-10 years experience) requirements since
    fiscal year 1993. Surface Warfare Officer Continuation Pay (SWOCP) was
    enacted in fiscal year 2000 to help bolster retention of these
    critical, trained, and experienced fleet officers. The following table
    summarizes recent Surface Warfare Officer retention history:

                                    [Percent]
    ------------------------------------------------------------------------
     Fiscal Year 1999   Fiscal Year 2000  Fiscal Year 2001    Steady State
          Actual             Actual            to date          Required
    ------------------------------------------------------------------------
               23                 29                 26             35-38
    ------------------------------------------------------------------------

        The Navy is examining the possible expansion of SWOCP under the
    Critical Skills continuation authority enacted in the Floyd D. Spence
    National Defense Authorization Act for Fiscal Year 2001.
        Nuclear Officer Retention: As with other highly skilled Navy
    communities, retaining the right quantity and quality of officers is a
    challenge for the Nuclear Field.
        Submarine officer fiscal year 2000 (YG-93) retention was 28
    percent, down from 30 percent in fiscal year 1999 (YG-92) and below the
    fiscal year goal of 34 percent. Retention must improve to a nominal 38
    percent to meet department head manning requirements while preventing
    department head tour lengths from increasing significantly. Surface
    Nuclear Officer fiscal year 2000 (YG-91) retention was 20 percent, up
    from 18 percent in fiscal year 1999 (YG-90). Although adequate for now,
    this retention must improve to a nominal steady-state 24 percent to
    maintain manning requirements and desired department head tour length.
    The following table summarizes recent Nuclear Officer retention
    history:

                                                        [Percent]
    ----------------------------------------------------------------------------------------------------------------
                                                                                            Fiscal Year     Steady
                                                                  Fiscal Year  Fiscal Year    2001 To       State
                                                                  1999 Actual  2000 Actual      Date       Required
    ----------------------------------------------------------------------------------------------------------------
    Submarine...................................................          30           28           30           38
    Surface (N).................................................          18           20           19           24
    ----------------------------------------------------------------------------------------------------------------

        The Nuclear Officer Incentive Pay (NOIP) program remains the surest
    and most cost effect means of achieving required retention. A fiscal
    year 2001 increase in NOIP rates is targeted at improving retention of
    these talented officers.
        Special Warfare Officer Retention: SEAL officer retention
    requirements are necessarily high to match the relatively large number
    of Joint and Navy staff officer assignments for SEALs at 0-4, 0-5, and
    0-6. The following table reflects recent Special Warfare Officer
    Retention Trends:

                                    [Percent]
    ------------------------------------------------------------------------
     Fiscal Year 1999   Fiscal Year 2000  Fiscal Year 2001    Steady State
          actual             actual            to date          Required
    ------------------------------------------------------------------------
               69                 68                 60                74
    ------------------------------------------------------------------------

        Retention increased in fiscal year 1999 as a result of the Special
    Warfare Officer Continuation Pay (SPECWAROCP) first authorized in
    fiscal year 2000. SPECWAROCP take-rates exceeded projections in fiscal
    year 2000 and are expected to do so in fiscal year 2001. Additional
    improvements to SPECWAROCP are being staffed to influence first-time
    eligible officers to execute longer agreements in the latter part of
    fiscal year 2001.
        Aviation Retention: After 4 years of decline, naval aviation
    experienced a 10 percentage point increase in retention from 31 percent
    in fiscal year 1999 to 41 percent in fiscal year 2000 through
    department head (12 years of service), a direct result of the fiscal
    year 1999 and fiscal year 2000 Aviation Career Continuation Pay (ACCP)
    bonus programs. Despite these favorable trends, a shortage of over
    1,000 rated aviators existed at the end of fiscal year 2000, influenced
    significantly by a robust economy, airline hiring, and under accessions
    during the drawdown. The following table reflects aggregate aviation
    retention rates:

                                                        [Percent]
    ----------------------------------------------------------------------------------------------------------------
                                                                               Fiscal Year
                                                    ----------------------------------------------------------------
                                                         1997         1998         1999         2000         2001
    ----------------------------------------------------------------------------------------------------------------
    Required.......................................          28           36           40           34           37
    Actual.........................................          40           34           31           41      \1\ 42
    ----------------------------------------------------------------------------------------------------------------
    \1\ Projected retention

        General Murray. In the Enlisted Career force, we are experiencing
    challenges in retaining marines, primarily in the grades of E-6, in the
    technical skills of:

    2823............................  SSgt..............  Technical
                                                           Controller
    2834............................  SSgt..............  Satellite
                                                           Communications
                                                           Technician
    2821............................  Sgt, SSgt.........  Computer
                                                           Technician
    5952............................  SSgt..............  Air Traffic
                                                           Control
                                                           Navigational Aids
                                                           Technician

        In the Officer Career force, we are experiencing challenges in
    retaining marines in the grade levels of Capt. through Lt.Col. in the
    technical skills of:

    0180............................  Major.............  Adjutant
    0202............................  Capt, Major.......  Intelligence
    0602............................  Major.............  Command & Control
    1302............................  Major, LtCol......  Engineer--Construc
                                                           tion
    3404............................  Major, LtCol......  Financial
                                                           Management
    4302............................  LtCol.............  Public Affairs
    6002............................  LtCol.............  Aviation
                                                           Maintenance
    6602............................  Capt, Major.......  Aviation Supply
    75XX............................  Capt, Major, LtCol  Fixed Wing Pilot

        General Peterson. We are experiencing difficulty retaining officers
    in several of our technical career fields that are in high demand in
    the civilian sector, such as developmental engineers, scientists,
    acquisition managers, and communications officers. Retention for each
    of these career fields has declined. Our pilot inventory is still a
    concern and management of our pilot force has been a top priority since
    1996. A robust Aviation Continuation Pay program is helping us ``hold
    the line'' until we benefit from the positive effects of increased
    production and the 10-year active duty service commitment for pilot
    training. Within our enlisted corps, we are particularly concerned
    about retaining our first and second term airmen, those with 4-10 years
    of experience who represent our fully trained airmen and mid-career
    NCOs. Our TEMPO, a thriving economy, and military/public sector pay
    inequities continue to challenge our ability to retain highly skilled,
    technologically adept mid-career airmen and commissioned officers.
                                     ______

                  Questions Submitted by Senator Jean Carnahan

        15. Senator Carnahan. General Maude, Admiral Ryan, General Murray,
    and General Peterson, in less populated areas of the country, such as
    small rural towns in the Midwest, is it more difficult for interested
    high school students to meet with recruiters?
        General Maude. No. Our recruiters are assigned high schools as part
    of their market. Every high school has a representative from the Army
    as a point of contact. Our recruiters have established rapport with the
    high school counselors and work with them to schedule visits, ASVAB
    testing, and presentations.
        Admiral Ryan. No, it is not more difficult for interested high
    school students to meet with recruiters. Every effort is made to place
    Navy recruiting stations so as to optimize visibility and access for
    the geographic territory it is assigned to serve. Recruiters develop
    and execute high school contact itineraries to ensure they visit as
    many high schools as possible within their respective geographic areas
    of responsibility, on a routine basis. This provides opportunities for
    potential applicants to meet with Navy recruiters, even in remote
    locations. Recruiters initiate follow-up phone calls and personal
    visits when a potential prospect is determined, through telephone
    ``blueprinting,'' to be qualified and eligible for enlistment.
    Cyberspace operators (located at Navy Recruiting Command headquarters)
    work with potential applicants, who contact us on the Navy.com website
    or our 1-800-USA-Navy phone line, to ensure timely contact with a
    recruiter from the Navy recruiting station in closest proximity to the
    individual's location.
        General Humble on behalf of General Murray. No. Marine recruiters
    make the extra effort to meet with all qualified applicants and
    potential applicants throughout the Nation. Even though,
    geographically, it may require a longer drive, and greater effort on
    the part of recruiters assigned to rural areas--no stone is left
    unturned and all qualified applicants are actively prospected. Marine
    recruiters in rural America make it a part of their daily and weekly
    regimen to set up appointments and ensure that time is used wisely, as
    travel of great distances is often required.
        General Brown on behalf of General Peterson. The simplistic answer
    would be yes; however, Air Force Recruiting Service has processes in
    place (see answer to Question 16 below) to ensure interested potential
    enlistees have ample access to a recruiter.

        16. Senator Carnahan. General Maude, Admiral Ryan, General Murray,
    and General Peterson, if the closest recruiting station is over 100
    miles from this potential enlistee, are recruiters encouraged to travel
    the distance to meet with him or her? Are there certain limitations
    (high fuel costs or insufficient number of recruiters) on recruiters'
    ability to travel these distances to meet enlistees?
        General Maude. Recruiters in limited rural areas, where distance
    may be a factor, meet prospective applicants at prearranged points that
    are convenient to the prospect. In all areas, applicants are afforded
    the opportunity to speak with recruiters, make appointments in which
    the recruiter will meet with the prospect and parents, and arrange to
    see a recruiter at their local high school. There are no other
    limitations, other than using safety risk management procedures when
    driving long distances.
        Admiral Ryan. Yes, the Navy provides government vehicles
    specifically to permit recruiters to travel to meet with potential
    recruits and this is expected of them. Fuel costs do not inhibit
    recruiters' ability to travel, as may be required to meet with
    prospective recruits, and we are sufficiently manned to achieve the
    mission.
        General Humble on behalf of General Murray. Marine recruiters are
    required to meet with all qualified applicants within their area of
    responsibility (AOR), regardless of travel distance. Leadership ensures
    that appropriate resources are budgeted for and managed to ensure that
    recruiters can enlist all interested qualified applicants regardless of
    where they reside.
        General Brown on behalf of General Peterson. Each recruiter is
    given an area of responsibility. This coverage ensures that every
    school and every area is covered. Some recruiters have hundreds of
    square miles to cover, so they are instructed to use their time wisely.
    If an applicant calls a recruiter and expresses an interest in the Air
    Force, the recruiter has set procedures to follow no matter how far
    away the prospective applicant lives. First, they will try to ensure,
    through a series of questions, whether or not the applicant is even
    minimally qualified. These may include questions about law violations,
    drug involvement, academic qualifications, and dependency status. If
    the applicant still appears to be qualified and shows a sincere
    interest, the recruiter should set up an appointment. The recruiter, in
    most cases, will first ask the applicant to come to his office. If,
    however, this is not practical or an inconvenience, the recruiter will
    schedule a visit in the potential enlistee's hometown. There are no
    travel limitations placed on recruiters (regarding resources, etc.).
    The only caveat may be regarding safety issues.

        17. Senator Carnahan. General Maude, Admiral Ryan, General Murray,
    and General Peterson, are there regulations restricting recruiters from
    expending resources in order to contact recruits, either in person or
    otherwise? Are there some restrictions placed on recruiters' use of
    cell phones during evening or weekend hours, which are good times to
    reach high school students?
        General Maude. There are no resource restrictions on our recruiters
    limiting access to potential recruits. We restrict the use of cell
    phones for official use only, but do not restrict them to any
    particular days or times. However, we do review use of all resources to
    avoid actual and potential fraud, waste, and abuse.
        Admiral Ryan. Recruiters are authorized to travel on Temporary
    Additional Duty orders, at Government expense when overnight travel is
    required. They are also eligible for reimbursement of up to $75 per
    month for out-of-pocket expenses associated with conducting the
    mission. Reimbursable costs include, but are not limited to, the
    purchase of snacks, non-alcoholic beverages, occasional lunches or
    dinners for prospective applicants, and other incidental expenditures
    related to official duties.
        Recruiters call prospective applicants during evening and weekend
    hours, subject to reasonable limitations intended to avoid intruding at
    inappropriate hours.
        General Humble on behalf of General Murray. In response to the
    first question, there are no regulations that restricts recruiters from
    using allocated resources to contact applicants. Responding to the
    second question, recruiters are allowed to use cell phones during
    evening and weekend hours up to their allowable minutes as specified in
    the service contract established with the vendor.
        General Brown on behalf of General Peterson. No. However, a
    responsible use of resources is required. The cell phone is a tool of
    convenience, but if it is not used properly can quickly become a
    financial burden on a small organization. Recruiters can use the phones
    to contact or follow-up with applicants and potential enlistees, but
    cannot use them to ``telephone prospect.''

        [Whereupon, at 11:30 a.m., the subcommittee adjourned.]

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2002

                                  ----------

                            WEDNESDAY, JULY 18, 2001

                                   U.S. Senate,
                             Subcommittee on Personnel,
                                   Committee on Armed Services,
                                                        Washington, DC.

          ACTIVE AND RESERVE MILITARY AND CIVILIAN PERSONNEL PROGRAMS

        The subcommittee met, pursuant to notice, at 9:34 a.m. in
    room SR-222, Russell Senate Office Building, Senator Max
    Cleland (chairman of the subcommittee) presiding.
        Committee members present: Senators Cleland, Akaka, E.
    Benjamin Nelson, Carnahan, and Hutchinson.
        Committee staff member present: Nora V. Parker, systems
    administrator.
        Majority staff member present: Gerald J. Leeling, counsel.
        Minority staff members present: Patricia L. Lewis,
    professional staff member; Suzanne K.L. Ross, research
    assistant; Scott W. Stucky, minority counsel; and Richard F.
    Walsh, minority counsel.
        Staff assistants present: Gabriella Eisen and Michele A.
    Traficante.
        Committee members' assistants present: Menda S. Fife,
    assistant to Senator Kennedy; Andrew Vanlandingham, assistant
    to Senator Cleland; Davelyn Noelani Kalipi, assistant to
    Senator Akaka; Eric Pierce, assistant to Senator Ben Nelson;
    Neal Orringer, assistant to Senator Carnahan; Douglas Flanders
    and Charles Cogar, assistants to Senator Allard; and James P.
    Dohoney, Jr., assistant to Senator Hutchinson.

           OPENING STATEMENT OF SENATOR MAX CLELAND, CHAIRMAN

        Senator Cleland. The subcommittee will come to order. May I
    just say that when I was a young intern on the House side, in
    the summer of 1965, and came in this committee room and saw the
    venerable Senator Dick Russell sit right about here and speak
    to the interns in this august room, I never thought that I'd be
    sitting here as chairman of a subcommittee in the Armed
    Services Committee. As a matter of fact, it was here where
    Senator Russell took pictures with all the interns, and I can
    remember, Sonny, that in order to make us look good, he had a
    copy of the Congressional Record, which we held up like this,
    pretending like we were going to read it, and that somehow
    interns knew something. [Laughter.]
        My first political picture. I was so intimidated by Senator
    Russell that when I got in the presence of this great man and
    looked at the Congressional Record, my eyes shut when the flash
    went off. In my office, I have this great picture of Senator
    Dick Russell studiously looking at the Congressional Record,
    and this young intern, deer-in-the-headlights blank, like this.
    [Laughter.]
        So, it's nice to come back with my eyes open and see all of
    you today. The things that I am committed to in this committee
    are fairness, openness, and informality. I think subcommittees
    are where great work can be done, and it does not always have
    to be formal or structured. We like to proceed along those
    lines and make everyone as comfortable as possible. Having sat
    on the other end of a committee hearing table, I know that at
    best it's an uncomfortable, difficult situation.
        Additionally, we know that the body can only take so much,
    and we intend to have frequent breaks from time to time. I
    sometimes feel like having witnesses and panelists present for
    1, 2, or 3 hours at a time is cruel and unusual punishment and
    outlawed by the Constitution, so we'll take breaks from time to
    time.
        May I just say, it's wonderful to welcome the ranking
    member of our subcommittee, Senator Tim Hutchinson, my dear
    colleague and friend. We have been through so many of these
    personnel issues together. We have co-authored legislation
    together, and it's wonderful to be with him today. Senator Ben
    Nelson has just joined as a member of this subcommittee, and we
    welcome him today. Also present with us is Senator Danny Akaka,
    who we'll recognize in just a moment.
        The subcommittee today meets to receive testimony regarding
    personnel programs for all of our military and civilian
    personnel. Shortly, we'll be marking up the National Defense
    Authorization Request for Fiscal Year 2002. Unfortunately, we
    didn't receive the DOD budget as usual in February. We received
    it in July this year. As a result, we've not been able to have
    the normal array of hearings to prepare our bill. We still
    don't have budgetary details, but we have to proceed with what
    we have in hopes of finishing our bill in a timely manner.
    Although there's no way to make up for the hearings we're not
    able to hold, this hearing is designed to provide an
    opportunity for interested parties to give us their top
    priorities for this year's legislation.
        Today's hearing consists of three panels. I'd like to state
    at the outset that we'll take short breaks between each of the
    panels. We'll start with a discussion of the Montgomery GI Bill
    with Congressman Sonny Montgomery. This benefit has served our
    military and our Nation very well for many years. The
    composition of our military force has changed, though, from the
    time the Montgomery GI Bill was enacted. At that time, our
    military was primarily a drafted force of mostly single males
    who served their obligation and returned to civilian life. I
    was in under those days. Life today in the military is quite
    different.
        The Montgomery GI Bill was a great transition benefit that
    helped people prepare for their civilian careers. Today's
    military is a volunteer force, with both male and female
    service members. Most of them, married with families, make the
    military a career. It's time to update the GI Bill to meet the
    changing needs of our military.
        For the last 2 years, I've proposed legislation to make the
    Montgomery GI Bill more family friendly. As we debated the
    merits of my proposal, we learned a great deal, and my
    legislation has been modified to take this into account. What I
    propose this year gives the service secretaries the discretion
    to allow a service member to transfer up to one half of his or
    her basic GI Bill benefit to family members.
        My proposal is designed to be a tool for the service
    secretaries to retain service members with critical skills.
    Service secretaries will be able to authorize a service member
    who has completed 6 years of service and who agrees to serve at
    least 4 more years in the military, to transfer 18 months worth
    of basic benefits to family members. A spouse would be able to
    use these transferred benefits right away, while children would
    be able to use them once the member completes 10 years of
    service. This gives our service members the ability to create
    an education savings plan for their children, or to help their
    spouses to qualify for better employment. This creates a win-
    win situation. The service members win because they can allow
    their families to use GI Bill benefits that, in many cases,
    would otherwise go unused. The services and our Nation benefit
    because we keep highly-skilled service members in the service.
    It's better to retain than retrain, and keep service members in
    the service with the support of their families. In talking with
    service members upon their departure from the military, we've
    found that family plays a critical role in the decision of a
    member to continue his or her military career.
        I remember last August, I was out in Hawaii, and I talked
    to a young Army sergeant. He said, ``Sir, we're losing a lot of
    good people.'' He said, ``When I talk to my men, they say
    sometimes the wife gives the ultimatum that `It's me or the
    service.' Eighty percent of the time, the service member
    leaves.'' Families and their impact on the military is
    something we have to deal with. Reality dictates that we must
    address the needs of the family in order to retain our
    soldiers, sailors, airmen, and marines.
        Our second panel consists of witnesses who will bring to us
    the concerns and priorities of our service members. The third
    panel is composed of the Under Secretary of Defense for
    Personnel and Readiness and the service personnel chiefs. We
    hope these witnesses will help us to understand their top
    priorities and answer some questions about the department's
    legislative proposals. We've also received a prepared statement
    from Dennis Duggan of the American Legion, and a letter from
    Stephen Ambrose, the great historian, expressing his support
    for the GI Bill and the GI Bill legislation. Without objection,
    these documents will be included in the record.
        [The information referred to follows:]

                     Prepared Statement of Dennis M. Duggan

        Mr. Chairman, the American Legion is grateful for the opportunity
    to present its views regarding the National Defense Authorization Act
    for fiscal year 2002. The American Legion values your leadership in
    improving the quality-of-life, readiness and modernization of the
    Nation's armed forces. As history continues to demonstrate, it is
    important for Congress to meet its constitutional responsibilities to
    provide for the common defense in a highly uncertain world.
        With the end of the Cold War, the clear and identifiable threat
    posed by easily identified foes no longer exists. Today, America faces
    a myriad of threats and challenges that appear more perplexing, complex
    and difficult. Serious regional threats continue to plague freedom and
    democracy, especially in areas like the Balkans, North Korea, the
    People's Republic of China, Iraq and Iran. America now must confront
    the on-going proliferation of weapons of mass destruction and
    international terrorism posed by rogue nations and radical groups.
        The National Commander of the American Legion, Ray Smith, recently
    visited American troops in South Korea, as well as a number of
    installations throughout the United States. During these visits, he was
    able to see first hand the urgent, immediate need to address these real
    quality-of-life challenges faced by servicemembers and their families.
    The marked decline in quality-of-life issues for servicemembers,
    coupled with heightened operational tempos, plays a key role in the
    recurring recruitment and retention woes and should come as no
    surprise. The operational tempo and lengthy deployments must be
    reduced. Military pay must be on par with the competitive civilian
    sector. If other benefits, like health care improvements, commissaries,
    adequate quarters, quality childcare, and improved school systems are
    ignored, it will only serve to further undermine efforts to recruit and
    retain the best this Nation has to offer.
        The American Legion recently developed a new program to encourage
    Legionnaires and their families to spend more quality time with today's
    military members and their families. During visits to Active Duty posts
    and National Guard armories, American Legion leaders are able to
    discuss the issues of concern to today's military member. Soldiers,
    sailors, airman, and marines repeat common themes: inadequate pay, high
    ops tempo, housing problems, health care difficulties, and child care
    concerns.

                                 MODERNIZATION

        The very force projected from the build-up in the early 1980s is
    the one being worn out as a result of extensive operational deployments
    and inadequate funding. As former Secretary of Defense Schlesinger
    previously indicated before the House Armed Services Committee, the
    U.S. military continues to live off and wear out the ``capital'' of the
    Cold War. Modernizing and maintaining even today's smaller mililary
    forces takes the kind of sustained commitment and fiscal investment, in
    the future, that took place in the early 1980s. What this Nation really
    cannot afford is another decade of declining defense budgets and
    shrinking military forces. If America is to remain a superpower able to
    promote and protect its global interests, it must be capable to project
    force with complete confidence, using state-of-the-arts weaponry, in a
    timely manner.
        Just last week, in testimony before the full Committee, Deputy
    Secretary of Defense Paul D. Wolfowitz described the scene of a
    ballistic missile attack on U.S. and allied troops during the Persian
    Gulf War. In the waning days of the Gulf War, a single SCUD missile hit
    a U.S. military barracks in Dhahran, killing 28 U.S. soldiers and
    wounding 99. For American forces, it was the single worst engagement of
    the Gulf War. Deputy Secretary Wolfowitz went on to explain that the
    ability to meet such a threat today is ``hardly any better'' than it
    was 10 years ago. He also stated, ``To those who wonder why so many of
    the regimes hostile to the United States--many of them desperately
    poor--are investing such enormous sums of money to acquire ballistic
    missiles, I suggest this possible answer: They know we don't have any
    defenses.''
        The American Legion believes no soldier, sailor, aviator, or marine
    should go into battle without the very best training, equipment and
    weaponry available to win the war. No enemy should ever have a
    technological edge over U.S. forces. To achieve this objective, defense
    modernization efforts must remain a top priority of the administration
    and Congress.

                                   READINESS

        In recent years, over-optimistic assumptions about actual funding
    requirements, coupled with multiple unbudgeted contingency operations,
    have resulted in a series of unit readiness problems. Training goals
    are not being met. Military readiness ratings have plunged due to
    reductions in operations and maintenance accounts as a result of
    extended peacekeeping operations. Both the 1st Infantry Division and
    the 10th Mountain Division felt the adverse consequences of
    peacekeeping operations on combat readiness. Last year, the 3rd
    Infantry Division was rated as less than combat-ready due to lack of
    combat-oriented training and personnel. Today, thousands of military
    personnel (both Active and Reserve components) are deployed to
    approximately 140 countries around the globe. At any given time, 26
    percent of the active duty military force is deployed to overseas
    commitments. Members of the armed forces have little opportunity to
    spend meaningful time with their families. Junior officers are leaving
    the military in large numbers. Maintenance of equipment and weapon
    delivery systems is in peril because of limited spare parts
    inventories. Due to depleted supplies of parts, the cannibalization of
    parts and creative engineering has become a common practice. Manpower
    shortages have resulted in ships cross-decking or borrowing of
    crewmembers from other ships in order to deploy. Such back-to-back
    tours adversely impact on crew integrity, morale, and readiness. Hands-
    on training, actual flying hours, and ammunition are being restricted
    due to inadequate funding.
        When proficiency cannot be maintained, readiness is compromised and
    this places the Nation's ability to wage high intensity conflict at
    risk.

                           QUADRENNIAL DEFENSE REVIEW

        Since the collapse of the Soviet Union in 1991, America has
    conducted three substantial assessments of its strategy and force
    structures necessary to meet the National defense requirements. The
    assessment by the former Bush administration (``Base Force''
    assessment) and the assessment by the Clinton administration (``Bottom-
    Up Review'') were intended to reassess the force structure in light of
    the changing realities of the post-Cold War world. Both assessments
    served an important purpose in focusing attention on the need to
    reevaluate America's military posture; but the pace of global change
    necessitated a new, comprehensive assessment of the current defense
    strategy for the 21st century.
        The American Legion continues to support the force structure
    proposed by the Base Force Strategy: Maintain 12 Army combat divisions,
    12 Navy aircraft carrier battle groups, 15 Air Force fighter wings and
    three Marine Corps divisions, and a total manpower strength of at least
    1.6 million. The American Legion supports the theory behind the two-war
    strategy: if America were drawn into a war with one regional aggressor,
    another could be tempted to attack its neighbor. Especially, if this
    aggressor were convinced that America and its allies were distracted,
    lacked the will to fight conflicts on two fronts, or did not possess
    the military power to deal with more than one major conflict at a time.
    Determining the right size of U.S. forces for more than one major
    conflict would provide a hedge against the possibility that a future
    adversary might mount a larger than expected threat. It would also
    allow for a credible overseas presence that is essential in dealing
    with potential regional dangers and pursuing new opportunities to
    advance stability and peace. The American Legion believes such a
    strategy, however, should be threat-based rather than budget-driven.
        Furthermore, the strategy must employ more robust force structures
    and increased budgeting for quality-of-life, readiness and
    modernization than that recommended in the Bottom-Up Review or its
    follow-on Quadrennial Defense Review (QDR). The American Legion
    believes that the two-war strategy has not been adequately funded. The
    American Legion believes the ``win-win'' two-war Bottom-Up Review
    strategy was delusional. With growing worldwide commitments, America
    has a ``win-hold'' strategy, at best, with only 10 Army combat
    divisions and three Marine divisions to utilize.
        Peacekeeping and humanitarian operations, that do not serve vital
    national security interests, further detract from America's combat
    power and military readiness. Funding for peacekeeping operations must
    be congressionally approved, on a case-by-case basis, and fully
    appropriated by Congress rather than funded through the Services'
    limited operations and maintenance accounts. America expects its
    civilian and military leadership to develop a reasonable and common
    sense national military strategy. If all other reasonable alternatives
    are explored, U.S. forces must only be committed in response to threats
    against America's vital interests.
        The current national security and military strategies prescribed in
    the QDR fail to match increased military missions with the required
    resources. The QDR, like the Bottom-Up-Review, provides neither the
    forces, lift capabilities, nor budgets to fight two nearly simultaneous
    major regional conflicts and win. Peacekeeping operations fail to
    properly train combat forces to win wars. Congress and DOD need to
    provide a strategy that better matches missions with resources.

                                  PROCUREMENT

        Only a few major systems currently in production would be funded in
    the fiscal year 2002 defense budget. The funding level for weapons
    procurement is one of the lowest of any administration, since 1950 and
    has been some 71 percent less than that of 1985. The American Legion
    fully supports the Army's Transformation Program. Major development
    programs that The American Legion also supports include the Air Force
    F-22 fighter and C-17, F/A-18Es for the Navy and Joint Strike Fighters
    for the Air Force and Navy and more DDG-51 destroyers. Unquestionably,
    the Navy will also need to acquire more submarines.
        If left unadvised, omissions in DOD's modernization budget could
    have the following implications:

             They will result in the continued deterioration of the
            defense industrial base.
             The future technological superiority of American
            forces will be at risk thereby increasing the danger to
            servicemembers should they be called into combat, and
             The failure to replace and upgrade equipment in a
            timely manner will create a massive modernization shortfall in
            each of the military services and possibly, lead to even more
            serious readiness problems in the long run.

        The American Legion further urges Congress to expedite the
    procurement of improved and sensitive equipment for the detection,
    identification, characterization and protection against chemical and
    biological agents. Current alarms are not sensitive enough to detect
    sub-acute levels of chemical warfare agents. Improved biological
    detection equipment also needs to be expedited.
        The American Legion opposes further termination or curtailing of
    essential service modernization programs, diminution of defense
    industrial capabilities, and rejects the transfers of critical defense
    technologies abroad.
        The American Legion firmly believes with the continuing threat of
    nuclear proliferation, America should retain its edge in nuclear
    capabilities as represented by the TRIAD system, and the highest
    priority should be the deployment of a national missile defense.
    Although the development and deployment of advanced theater missile
    defenses to protect U.S. forward deployed forces is imperative; any
    dismantling of acquisition programs to defend the American people is
    imprudent. America should focus on developing and deploying by 2003 an
    anti-ballistic missile detection and interception system that is
    capable of providing a highly effective defense against limited attacks
    of ballistic missiles.

                             ACTIVE FORCE PERSONNEL

        The American Legion is deeply concerned that a number of influences
    pose significant--and often underestimated--recruitment, retention and
    readiness risks for the remainder of the decade.
        Mr. Chairman, The American Legion and the armed forces owe you and
    this subcommittee a debt of gratitude for your strong support of
    military quality-of-life issues. Nevertheless, your assistance is
    needed now more than ever. Positive congressional action is needed to
    overcome old and new threats to retaining the finest military in the
    world. Servicemembers and their families continue to endure physical
    risks to their well being and livelihood, substandard living
    conditions, and forfeiture of personal freedoms that most Americans
    would find unacceptable. Worldwide deployments have increased
    significantly, and a smaller force has operated under a higher ops
    tempo with longer work hours and increased family separations.
        Now is the time to look to the force recruiting and retention
    needs. Positive congressional action is needed to overcome past years
    of negative career messages and to address the following quality-of-
    life features:

             Closing the Military Pay Gap with the Private Sector--
            The Chairman of the Joint Chiefs of Staff previously stated
            that the area of greatest need for additional defense spending
            is ``taking care of our most important resource, the uniformed
            members of the armed forces.'' To meet this need, he enjoined
            Members of Congress to ``close the substantial gap between what
            we pay our men and women in uniform and what their civilian
            counterparts with similar skills, training and education are
            earning.'' But 11 pay caps in the past 15 years took its toll
            and military pay continues to lag behind the private sector by
            about 10 percent. The American Legion applauds the 3.7 percent
            pay raise effective on January 1, 2001 and E-5, E-6 and E-7
            grade-adjustments to pay made in July 2001. With the new
            administration pledging to significantly increase military pay
            raises above that dictated by the ``ECI plus one-half of 1
            percent,'' there is excitement in the field. We urge you to
            support the new administration's plan.
             Basic Allowance for Housing (BAH)--For those who must
            live off base, the provision of the Basic Allowance for Housing
            (BAH) is intended to help with their out-of-pocket housing
            expenses. Former Secretary of Defense Cohen set a goal of
            entirely eliminating average out-of-pocket housing expenses.
            However, at this time it has been estimated that BAH only
            accounts for about 70 percent of out-of-pocket housing costs.
            This committee has taken strong steps in recent times to
            provide funding to move toward lowering such expenses. Please
            continue to work to close the gap between BAH and the member's
            average housing costs.
             Montgomery GI Bill Enhancements (MGIB)--The current
            veterans' educational benefit, the Montgomery GI Bill, has
            failed to keep pace with escalating educational costs and is
            significantly diminished in relation to the unique educational
            benefits offered in the original GI Bill. Today's military
            educational benefits package directly competes with other
            federally funded educational programs, such as AmeriCorp, Pell
            Grants and others that offer equal or greater monetary benefits
            with less personal sacrifice and hardships. The American Legion
            believes that the veterans' educational benefits package for
            the 21st century must be designed to recruit outstanding
            individuals to meet the needs of the armed forces and to serve
            as a successful transition instrument from military service
            back into the civilian workforce.
             Preserving Military Commissaries--The Department of
            Defense has evaluated options to downsize or privatize the
            Military Commissary System by seeking reduced Federal funding,
            reducing the number of operating facilities, and privatizing
            military commissaries. The American Legion strongly opposes
            each of these proposals. The value of commissaries in the
            quality of life equation for junior enlisted families and
            military retirees and others is indisputable. Military
            commissary usage has ranked second only to medical health care
            in the non-pay compensation package according to surveys
            conducted among active duty and retired beneficiaries. With the
            continued downsizing of the military to include reductions in
            force and military entitlements, any effort to reduce or
            dismantle the military commissary system would be seen as a
            serious breach of faith with military beneficiaries. The
            American Legion supports full Federal funding of the military
            commissary system and retention of this vital non-pay
            compensation benefit that is essential to the morale and
            readiness of the dedicated men and women serving in the U.S.
            Armed Forces.

                               RESERVE COMPONENTS

        The advent of smaller Active-Duty Forces reinforces the need to
    retain combat-ready National Guard and Reserve Forces that are
    completely integrated into the Total Force. The readiness of National
    Guard and Reserve combat units to deploy to a second major regional
    conflict will also cost in terms of human lives unless Congress is
    completely willing to pay the price for their readiness. With only ten
    active Army divisions in its inventory, America needs to retain the
    eight National Guard divisions as its life insurance policy.
        Growing concerns are that the Reserve components, especially the
    National Guard, should not be overused in contingency operations, as
    these servicemembers have regular civilian jobs and families as well.
    The American Legion understands that retention rates and, therefore,
    strength levels are falling in those States deployed or scheduled to
    deploy guardsmen overseas. Governors of these states continue to
    express concern that state missions will not be accomplished. The
    National Guard from 44 States has a presence in 35 foreign countries.
        The American Legion is also supportive of all proposed quality-of-
    life initiatives that serve to improve living and working conditions of
    members of the Reserve components and their families, to include
    unlimited access to commissaries.

                                QUALITY-OF-LIFE

        Just as military manpower levels, force structures, operational
    tempos and defense budgets need to be stabilized so must quality-of-
    life features for servicemembers and their families. This includes
    enhancements to compensation and incentives to preclude seriously
    degrading the All-Volunteer Force. The American Legion believes that
    the most important message is to sustain the momentum begun in the
    106th Congress:

             military pay raises;
             improved housing;
             access to quality health care;
             family support activities for the Active Duty and
            Reserve components;
             TRICARE for Life for Medicare-eligible military
            retirees;
             full concurrent receipt of military retirement pay and
            VA disability compensation; and,
             improved Survivors Benefit Plan (SBP) benefits for
            Social Security eligible surviving spouses of military
            retirees.

                     HEALTH CARE FOR MILITARY BENEFICIARIES

        Today, there are approximately 8.2 million beneficiaries in the
    military health care program. Military retirees and their dependents
    make up nearly one half of that number, and over 500,000 retirees have
    lost or will lose their access to military health care as a result of
    the closure of approximately 40 percent of military treatment
    facilities. Access to affordable health care, regardless of age, status
    or location, represents a major concern among military retirees. Until
    recently, military retirees were led to believe that they were entitled
    to free lifetime health care--after having served 20 or more years in
    the most demanding and dangerous of professions. In 1993, the promise
    of lifetime health care was perpetuated in military recruitment
    literature.
        The creation of ``TRICARE for Life'' and a TRICARE Senior Pharmacy
    benefit in Public Law 106-398 was an historic triumph for Congress and
    those 1.4 million Medicare-eligible military retirees and dependents.
    While TRICARE for Life came with its own funding stream in fiscal year
    2001, money must be budgeted to provide for the program for fiscal year
    2002. The American Legion recommends that this important program be
    provided the funding to start the program. The American Legion also
    applauds congressional efforts last year to eliminate TRICARE co-
    payments for Active-Duty family members. However, several other
    important measures signed into law are on hold due to lack of funding.
    These include extending the TRICARE Prime Remote program to family
    members; lowering the TRICARE Standard catastrophic cap (maximum out-
    of-pocket expenses per fiscal year) from $7,500 to $3,000; providing
    TRICARE coverage for school physicals for dependents; and reimbursement
    for certain travel expenses for TRICARE Prime beneficiaries. The
    American Legion recommends that this subcommittee take the next step to
    make sure that the new military health care improvements come to
    fruition.
        Beginning October 1, 2002, TRICARE for Life (TFL) will be fully
    funded through the Medicare-eligible Retiree Health Care Fund. But TFL
    actually will be implemented one year earlier--on October 1, 2001. This
    first-year funding requires an increase in appropriated defense funds
    over and above the normal defense budget amount. TFL will be funded in
    any event, but without the added money, the Pentagon would have to pay
    for it by ``robbing'' other needed DOD programs. Providing the full
    added TFL funds sends a powerful signal that Congress intends to honor
    the lifetime health care commitment to older servicemembers without
    cutting funds for other needed readiness or quality-of-life programs.
        The American Legion recommends that an additional $1.4 billion be
    added to the Defense Health Program to meet health benefit obligations
    to military beneficiaries for the current fiscal year. This program has
    been chronically under-funded for years.
        The American Legion appreciates the significant military health
    care enhancements enacted in the Fiscal Year 2001 Floyd D. Spence
    National Defense Authorization Act. The American Legion recommends that
    Congress reiterate its commitment to authorize and appropriate
    sufficient funds for these improvements within DOD's Health Program,
    and further, to direct the Health Care Finance Administration (HCFA) to
    reimburse DOD for its care of Medicare-eligible military families at
    Military Treatment Facilities (MTFs).
        The Military Health System (MHS) is chronically under-funded,
    resulting in execution shortfalls, lack of adequate equipment
    capitalization, failure to invest in infrastructure and slow
    reimbursement to managed care support contractors. For years, MHS has
    been forced to rely on emergency supplemental appropriations or the
    reprogramming of funds within DOD.
        The military's health care program is one of the most important
    benefits afforded the men and women who serve in or have retired from
    the uniformed services. The promise of free health care in MSFT was a
    major selling point in military recruiters' or career counselors' pitch
    to enlist or retain personnel in the uniformed services.

                         OTHER MILITARY RETIREE ISSUES

        The American Legion believes strongly that quality-of-life issues
    for retired military members and families also are important to
    sustaining military readiness over the long term. If the Government
    allows retired members' quality-of-life to erode over time, or if the
    retirement promises that convinced them to serve are not kept, the
    retention rate in the current Active-Duty Force will undoubtedly be
    affected. The old adage you enlist a recruit, but you reenlist a family
    is truer today than ever as more career-oriented servicemembers are
    married or have dependents.
        Accordingly, The American Legion believes Congress and the
    administration must place high priority on ensuring that these long-
    standing commitments are honored:

             VA Compensation Offset to Military Retired Pay
            (Retired Pay Restoration)--Under current law, a military
            retiree with compensable, VA disabilities cannot receive both
            military retirement pay and VA disability compensation. The
            military retiree's retirement pay is offset (dollar-for-dollar)
            by the amount of VA disability compensation awarded.
              The purposes of these two compensation elements are
            fundamentally different. Longevity retirement pay is designed
            primarily as a force management tool that will attract large
            numbers of high-quality members to serve for at least 20 years.
            A veteran's disability compensation is paid to a veteran who is
            disabled by injury or disease incurred or aggravated during
            active duty military service. Monetary benefits are related to
            the residual effects of the injury or disease or for the
            physical or mental pain and suffering and subsequently reduced
            employment and earnings potential. Action should be taken this
            year to provide full compensation for those military retirees
            who served more than 20 years in uniform and incurred service-
            connected disabilities. Disabled military retirees are the only
            retirees who pay their own disability compensation from their
            retirement pay. It is time to cease this inequitable practice.
            The American Legion supports funding to provide full concurrent
            receipt to all eligible disabled military retirees.
             Social Security Offsets to the Survivors' Benefits
            Plan (SBP)--The American Legion supports amending PL 99-145 to
            eliminate the provision that calls for the automatic offset at
            age 62 of the military SBP with Social Security benefits for
            military survivors. Military retirees pay into both SBP and
            Social Security, and their survivors pay income taxes on both.
            The American Legion believes that military survivors should be
            entitled to receipt of full social security benefits which they
            have earned in their own right. It is also strongly recommended
            that any SBP premium increases be assessed on the effective
            date or subsequent to, increases in cost of living adjustments
            and certainly not before the increase in SBP as has been done
            previously. In order to see some increases in SBP benefits, The
            American Legion would support a gradual improvement of survivor
            benefits from 35 percent to 45 percent over the next 5-year
            period. The American Legion also supports initiatives to make
            the military survivors' benefits plan more attractive.
            Currently, about 75 percent of officers and 55 percent of
            enlisted personnel are enrolled in the Plan.
             Uniformed Services Former Spouses Protection Act
            (USFSPA)--The American Legion urges support for amending
            language to PL 97-252, the Uniformed Services Former Spouses
            Protection Act. This law continues to unfairly penalize Active
            Duty Armed Forces members and military retirees. USFSPA has
            created an even larger class of victims than the former spouses
            it was designed to assist, namely remarried Active Duty
            servicemembers or military retirees and their new family. The
            American Legion believes this law should be rescinded in its
            entirety, but as an absolute minimum, the provision for a
            lifetime annuity to former spouses should be terminated upon
            their remarriage.

                                   CONCLUSION

        Twenty-eight years ago, America opted for an All-Volunteer Force to
    provide for the national security. Inherent in that commitment was a
    willingness to invest the needed resources to bring into existence a
    competent, professional, and well-equipped military. Now is not the
    time to dismantle, through the consequences of under-funding national
    defense, but rather to fully support the All-Volunteer Force.
        What needs to be done? The American Legion recommends, as a
    minimum, that the following steps be implemented:

             Continued improvements in military pay raises,
            equitable increases in Basic Allowances for Housing and
            Subsistence, military health care, improved educational
            benefits under the Montgomery GI Bill, improved access to
            quality child care, and other quality-of-life issues.
             Defense spending, as a percentage of Gross Domestic
            Product needs to be maintained between 3 and 4 percent
            annually. At least $160 billion should be appropriated over 6
            years to address the immediate concerns of the Joint Chiefs of
            Staff.
             The Quadrennial Defense Review needs to be fully
            reevaluated as it provides neither the forces nor the defense
            budgets to fight two nearly simultaneous major regional
            conflicts, while also conducting peacekeeping operations. The
            strategy-resources mismatch needs to be eliminated.
             Force modernization needs to be realistically funded
            and not further delayed or America is likely to unnecessarily
            risk many lives in the years ahead;
             The National Guard and Reserves must be realistically
            manned, structured, equipped and trained; fully deployable; and
            maintained at high readiness levels in order to accomplish
            their indispensable roles and missions.

        Mr. Chairman, this concludes the American Legion statement.

        Senator Cleland. Senator Hutchinson, I'd like to recognize
    you this morning, my dear friend and colleague. I would like to
    give you time to make an opening statement.

                  STATEMENT OF SENATOR TIM HUTCHINSON

        Senator Hutchinson. Thank you, Chairman Cleland. I
    appreciate the opportunity to continue to work with you on the
    personnel subcommittee. We've had a good working relationship.
    I think we've been a good team working this last year on
    vitally important health and compensation issues, and I look
    forward to continuing that teamwork.
        I also want to express my appreciation to you, Senator
    Cleland, for a copy of your recent autobiographical work. I
    always held you in great esteem, but after having recently read
    that and enjoyed it, my admiration for you is only enhanced.
        Senator Cleland. Thank you.
        Senator Hutchinson. It's amazing the things you've gone
    through, how you've persevered, and the example that you've set
    for us.
        Senator Cleland. My book has sold dozens throughout the
    great state of Georgia. [Laughter.]
        Senator Hutchinson. By word of mouth, it's going to sell a
    lot more. I join you in welcoming our witnesses today. In
    particular, I want to express my welcome to a former chairman
    of mine on the House side, Sonny Montgomery. Sonny, we may not
    meet your standard on starting exactly on time, but we came
    close. He was a great chairman of the Veterans Affairs
    Committee and a great member of the House of Representatives.
    He has worked tirelessly for our men and women in uniform and
    our Nation's veterans. You're looking good and it's a delight
    to see you again. Thank you for coming over and for what you've
    done with the Montgomery GI Bill and the lives that you've
    impacted with that one singular piece of legislation.
        In this compressed legislative year, Mr. Chairman, this
    hearing represents an important opportunity to review
    critically important personnel programs. I want to congratulate
    the administration and the department on submitting a budget
    that puts people first. Without this approach, I believe it
    would be impossible for our all-volunteer force to succeed in
    attracting, motivating, and retaining the top-quality people
    essential to our Nation's security.
        We recognize and endorse the budget's increases in pay and
    allowances for military personnel from $75 billion in fiscal
    year 2001 to $82 billion in fiscal year 2002. I believe the pay
    raise is wisely targeted at our mid-career personnel, providing
    for raises of up to 10 percent for enlisted grades E-4 to E-9
    and for mid-grade officers. However, it also ensures at least a
    5-percent pay raise for every service member. It incorporates a
    more realistic estimate for military healthcare costs, at $17.9
    billion for the Defense Health Program, up sharply from the
    $12.1 billion in fiscal year 2001. While I'm concerned about
    the adequacy of even this amount, it does reflect more
    realistic estimates of military healthcare costs, including our
    managed-care support contracts, pharmacy purchases, and $3.9
    billion for TRICARE for Life, as this committee legislatively
    directed last year in the authorization bill.
        All of these initiatives will help, I trust, reverse the
    troubling trends in recruiting and retention; but more needs to
    be done, and I anticipate getting some good ideas today from
    our distinguished panel members.
        Mr. Chairman, thank you for putting this hearing together.
    I want to apologize in advance. I have another hearing, and I
    will be going back and forth. I hope to return, but I'm going
    to have to excuse myself for a few minutes.
        Senator Cleland. Thank you very much, Senator, and thank
    you for your comments about the challenge of addressing the
    retention needs of mid-range NCOs and the mid-career officers.
    The spirit of the pay raise addresses that, and I think that's
    part of the spirit of the transferability legislation terms of
    the GI Bill, to allow service secretaries to have options, some
    arrows in their quiver, that they can use to address those
    critical years where those service men and women are making
    career decisions. Thank you very much, Senator.
        Senator Akaka, we're glad to have you with us this morning
    and thank you for coming. We would appreciate any opening
    remarks you have to make.

                  STATEMENT OF SENATOR DANIEL K. AKAKA

        Senator Akaka. Thank you very much, Mr. Chairman. I'm glad
    to be here with you and your subcommittee. I'm pleased to join
    you this morning to hear from our distinguished witnesses about
    the personnel programs for the Department of Defense. I want to
    particularly welcome my good, and long-time friend from the
    U.S. House, where we served together, the Honorable G.V. Sonny
    Montgomery. I've spent time with Sonny, not only on the floor
    and in committees, but also in meetings, special meetings, and
    also at the gym. [Laughter.]
        Sonny, welcome to the Senate.
        Mr. Chairman, I've long supported initiatives to improve
    recruiting, retention, and quality of life for our service
    members. I believe these issues have a tremendous impact on the
    readiness of our armed forces. I look forward to working with
    the Department of Defense, military organizations, and my
    colleagues to address these matters of concern.
        I'm also interested in the department's civilian personnel
    programs. In my capacity as the chair of the Governmental
    Affairs Subcommittee on International Security, Non-
    proliferation and Federal Services, I have closely examined
    issues involving Federal employees. I agree with Secretary
    Chu's assessment, that the DOD civilian workforce has been, and
    will continue be, a major contributor to military readiness
    because it provides continuity, expertise, and commitment. I
    believe the human-capital issue is significant and that the
    Department of Defense will examine this issue closely. Senator
    Voinovich and I have been working in this particular area and
    want to spend more time on human-capital issues.
        I look forward to hearing the witnesses, Mr. Chairman, and
    I too will have to race to another committee meeting this
    morning. Thank you very much.
        Senator Cleland. Thank you very much, Senator, and I
    appreciate your emphasis and articulation on the need for
    preserving and protecting our human capital in the military. It
    reminds me of the line by General Abrams, the former chief of
    staff of the Army, that people were not ``in'' the Army, they
    ``were'' the Army. In so many ways, people ``are'' our defense,
    and that's one of the reasons I'm so honored to be chairman of
    this panel. I've always believed that the key to defense was
    our defenders. How to keep them and how to retain them are the
    key issues we face today.
        On our first panel we're honored to have, as our first
    witness, the Honorable Sonny Montgomery, my dear friend and
    colleague through many years. I was head of the Veterans
    Administration, and we worked together closely on many issues.
    He is a member of the greatest generation, a distinguished
    veteran of World War II and the Korean War. He brings to his
    task, as a citizen, as a legislator, as a public servant, one
    of the best backgrounds for dealing with the military issues we
    face today, particularly personnel issues, of anyone in
    America. He's a true visionary who made the GI Bill what it is
    today, which is why it bears his name. He recognized the
    importance of education to our service members and to our
    country. Because of his insight, many Americans have served
    their nation in the armed forces and received their education
    because of the benefit that bears his name, the Montgomery GI
    Bill.
        Mr. Chairman, we're delighted to have you with us today,
    and thank you for taking time out to share with us your
    thoughts and recommendations today, particularly on how your
    legislation might be improved or how this committee might learn
    from what you've done. The floor is yours.

     STATEMENT OF HON. G.V. ``SONNY'' MONTGOMERY, FORMER MEMBER OF
                       CONGRESS, FROM MISSISSIPPI

        Mr. Montgomery. Thank you very much, Mr. Chairman, and
    thank you for those very kind and wonderful remarks. I
    appreciate it very much. We've been friends over the years. I
    was chairman of a committee when you were head of the veterans
    department. We worked closely together. We've socialized, we're
    good buddies, and thank you for giving me this opportunity.
        It's great to see Senator Daniel Akaka and Senator Tim
    Hutchinson here. Danny and I have been around, and we've
    enjoyed our fellowship and friendship, and that's the way it's
    going to continue to be.
        Tim mentioned that I always started a committee on time. I
    looked at the clock. Mr. Chairman, you were 4 minutes late,
    after 9:30. That's very good for the Senate. Congratulations.
    [Laughter.]
        Senator Cleland. Normally it's later than that, so thank
    you very much.
        Mr. Montgomery. Well, thank you, sir. To you, Chairman
    Cleland, and to the ranking minority member, I'd like to say,
    Tim Hutchinson and my friend, Danny Akaka, thank you for giving
    me this opportunity. Thanks to Gary Leeling, of the Senate
    staff, for working with us, for the time and place.
        Mr. Chairman, we do have a problem with the Montgomery GI
    Bill in that only 50 percent of those service men and women who
    sign up for the bill are using the benefits after they leave
    the service or while they're in the service. The House of
    Representatives, under the leadership of Chairman Chris Smith,
    and also the ranking minority member, Lane Evans, has passed a
    bill increasing the GI benefits this year. There was a roll-
    call vote in the House that passed the bill, Mr. Chairman,
    without a dissenting vote--it was a recorded vote--and we were
    very proud of that.
        The bill raises the benefits on the GI Bill from $650 a
    month to $1100 per month in the third year. As I've said, this
    bill is now in the Senate VA Committee. But this legislation
    does not include the transferability clause that Senator
    Cleland has worked very hard for in the last several years.
    Senator Cleland had this provision in the 2001 Senate Armed
    Services Bill of last year. When it came to the House Armed
    Services Committee, it included the transferability, and that
    provision was in the conference.
        I personally, as did Senator Cleland, asked Chairman Floyd
    Spence and Congressman Bob Stump, who control the committee, to
    keep this transferability in the final bill, but they would not
    agree. As I recall, the Senator was willing to reduce some of
    the transferability coverage, but it was not accepted.
        I am very proud to support Senator Cleland's new bill
    introduced in this Congress and before this subcommittee. I
    know this bill costs money, but it has the potential to be an
    outstanding recruiting tool and retention factor.
        Every year, I am told recruiting of qualified persons is
    getting harder for the military. In the last 10 years, 4-year
    colleges and 2-year community colleges, including our state
    schools, have developed their own scholarships and loan
    programs to attract the best high-school students to their
    universities and community colleges. This has made it difficult
    for the military to recruit. This transferability will be a
    great incentive to get qualified young men and women into the
    service.
        The original GI Bill, H.R. 1400, introduced in 1984 and
    sent to the Senate, passed the House with the full transfer
    clause with it. To get the GI bill through the Senate, we had
    to agree to drop the transferability in our 1984 bill. Now, Mr.
    Chairman, is the time to put this clause in the law and improve
    the GI bill so more service men and women will use these
    benefits, and they will. Thank you.
        [The prepared statement of Mr. Montgomery follows:]

                Prepared Statement by G.V. ``Sonny'' Montgomery

        To Chairman Cleland and ranking minority member, Senator
    Hutchinson, thank you for giving me this opportunity. Thank you, Gary
    Leeling, of the Senate staff for working with me on the time and place.
        We do have a problem with the Montgomery GI bill in that only 50
    percent of those servicemen and women who sign up for the bill are
    using the benefits after they leave the service or while in service.
        The House of Representatives, under the leadership of Chairman
    Chris Smith and ranking minority member, Lane Evans, has passed a bill
    increasing GI benefits on to the U.S. Senate. There was a roll call
    vote in the House that passed the bill without a dissenting vote. The
    bill raised the benefits on the GI bill from around $650 a month to
    $1,100 per month in the third year. As I said this bill has gone to the
    Senate VA Committee.
        But this bill does not include the transferability clause that
    Senator Cleland has worked very hard for in the last several years.
    Senator Cleland had this provision in the 2001 Senate Armed Services
    bill when it came to the House Armed Services Committee and this
    provision was in the conference. I personally, as did Senator Cleland,
    asked Chairman Floyd Spence and Congressman Bob Stump to keep this
    transferability in the final bill. But they would not agree.
        As I recall, the Senator was willing to reduce some of the
    transferability coverage but it was not accepted.
        I am very proud to support Senator Cleland's new bill introduced in
    this Congress and before this subcommittee.
        I know this bill cost money but it has the potential to be an
    outstanding recruiting tool and retention factor. Every year I am told
    recruiting of qualified persons is getting harder for the military.
        In the last 10 years, 4-year colleges and 2-year community colleges
    have developed their own scholarships and loan programs to attract the
    best high school students to their universities and community colleges.
    This has made it difficult for the military to recruit. So this
    transferability will be a great incentive to get qualified young men
    and women into the service.
        The original GI bill, H.R. 1400, introduced in 1984 and sent to the
    Senate passed the House with the full transfer clause. To get the GI
    bill through the Senate we had to agree to drop the transferability in
    our 1984 bill.
        Now is the time to put this clause in the law and improve the GI
    bill so more servicemen and women will use these benefits and they
    will.

        Senator Cleland. Thank you very much. Mr. Chairman, what a
    powerful statement. With your tremendous historical view of the
    evolution of the GI bill, that was strong information for this
    committee to hear. I agree with you that it does seem as if,
    with the evolution of the new force being a volunteer force and
    basically a married force, we have to adapt our benefits
    structure for retention purposes to become more family
    friendly. That's why I got interested in the GI bill, because I
    knew it was a powerful tool for recruitment.
        In the Principi Commission Report about 3 or 4 years ago, I
    saw a study, authorized by Congress, that looked at the whole
    structure of benefits under DOD and under the VA. It included a
    strong recommendation for the ability of the service men and
    women to have the option of transferring their unused benefits
    to their spouse or to the kids, as a retention tool.
        Is it your understanding that the original, basic precept
    of the GI bill was to reward a service man or woman after they
    got out of the military because we were really under a draft
    environment from World War II through the Vietnam War? That in
    dealing with a disposable force, a grateful nation wanted to
    reward that disposable force with benefits to make up for lost
    time? Now, it seems to me that we want to retain a professional
    force, that it is not disposable. Every time we lose a pilot or
    a pilot decides to get out, we have to spend $6 million more to
    train another pilot. It's better to retain than retrain. Is it
    your understanding that, just since you've been in Congress,
    dealing with this all-volunteer force and a married force
    requires some new thinking about our benefit structure?
        Mr. Montgomery. I think so, Mr. Chairman. Now is the time
    for transferability to be considered and implemented. It was
    passed last year in the Senate, and you had a good vote on it.
    When it got over to the House, we did not get the support of
    the Republican leadership. This time there's some different
    leadership and we hope that it will pass the Senate, under your
    jurisdiction, and come over to the House. Maybe with Democratic
    or minority support we can get the transferability through the
    House this time.
        Senator Cleland. I feel good about it. We have great
    bipartisan support here with Senator Levin, Senator Warner, and
    others. We have great bipartisan support in the House, with
    both Congressman Abercrombie and Roscoe Bartlett very much
    involved in the legislation. We thank you very much for your
    response and your testimony today.
        Senator Ben Nelson, welcome to the committee.
        Senator Ben Nelson. Well, thank you, Mr. Chairman.
        Senator Cleland. If you have any question for the Honorable
    Chairman, we'd like to hear them.

                STATEMENT OF SENATOR E. BENJAMIN NELSON

        Senator Ben Nelson. Thank you very much. I'd like to
    welcome our panelists today. It's a pleasure to be joining this
    subcommittee, and I'm anxious for my responsibilities to truly
    commence. I certainly am glad to be here today and be part of
    this subcommittee, to have the opportunity to learn more about
    and address the critical retention and recruitment issues as
    well as work on improving base pay, healthcare and other
    benefits. I'm truly looking forward to the testimony from the
    panel and I appreciate very much Congressman Montgomery's
    input, from his statement as well as from all of the other
    statements that I've received. I'll be looking forward to the
    next panel as well.
        Senator Cleland. Thank you very much, Senator. Mr.
    Chairman, a couple more questions. I did not realize this
    transferability effort had already been made, and actually
    passed the House, in 1984. I thought the idea came out of the
    Principi Commission about 3 or 4 years ago. But your testimony
    indicates this idea has been around almost 20 years. I'm in
    agreement with you; I think it's time we passed it.
        There was another point you raised, that current usage of
    the GI bill is only 50 percent. What a tragedy. Stephen
    Ambrose, the great historian of the great generation, a citizen
    soldier and author of the marvelous book, Band of Brothers,
    which will come to TV later this fall, has written this
    committee and indicated that the GI Bill is the single-finest
    piece of Federal legislation, in his opinion, to be passed in
    the last 50 years. What a tragedy for that to go under
    utilized.
        When I was head of the Veterans Administration, we did a
    study on the cost effectiveness of the GI Bill, and for every
    one dollar expended by this government on the GI Bill for
    educational benefits for our veterans, this country received,
    in economic benefit, three to five dollars back in higher
    training, wages, and salaries. There is a powerful multiplier
    effect with the GI Bill because this Nation receives back three
    to five times its investment. Of course, Mr. Chairman, so many
    veterans of your generation would have never had a chance to
    even come to Congress or get a good job without using the GI
    Bill. Isn't that true?
        Mr. Montgomery. That's true. Mr. Chairman, I think we have
    a chance to pass the transferability clause this time. I'm sure
    you'll be able to move it through the Senate, but we're going
    to have to have these veterans organizations and military
    service organizations in this country also give us support. If
    they give us that support, I believe we can pass the bill. It
    has a cost to it, but it has so much merit to it: it will
    improve those people staying in the military with the
    transferability going to the loved ones. It's just a win-win.
        Senator Cleland. Thank you, Mr. Chairman. With that, I'm
    going to have to go to the floor to pay a tribute to Senator
    Coverdell, my dear friend and colleague from Georgia who passed
    away a year ago. I'd now like to turn the gavel over to Senator
    Nelson. This is what you get for being on this committee and
    showing up. [Laughter.]
        You get to chair it your first day. So we'll take a break.
    We'll take a 10-minute break, reconvene at 10:15. Senator
    Nelson, if you'll be kind enough to reconvene us at 10:15.
        Senator Ben Nelson. Thank you, Mr. Chairman.
        [Whereupon, at 10:05 a.m., a brief break was taken.]
        Senator Ben Nelson. I want to make certain that my first
    act as the acting chairman is on time. I haven't been here long
    enough to learn how to adjust to being late, but maybe that
    comes with time and experience back here in Washington.
        Our second panel consists of representatives of the various
    military associations that represent our service members and
    their families. I hope that all of you will bring to us the
    perspectives of those who serve our Nation in the military
    forces. We certainly welcome all of you and appreciate your
    commitment to be here. Ms. Sue Schwartz, from the Retired
    Officers Association, will address some health concerns that
    will affect military and their families; Mr. Joe Barnes, of the
    Fleet Reserve Association, will discuss pay and benefits; Ms.
    Joyce Raezer, of the National Military Family Association, will
    talk about the quality of life and OPTEMPO; and Mark Olanoff of
    the Retired Enlisted Association, who will address issues
    related to concurrent receipt and survivor benefit plan.
        Ms. Schwartz, do you have an opening statement?
        Ms. Schwartz. Yes, I do, Mr. Chairman.

    STATEMENT OF SUE SCHWARTZ, DBA, RN, DEPUTY DIRECTOR, GOVERNMENT
     RELATIONS FOR HEALTH AFFAIRS, THE RETIRED OFFICERS ASSOCIATION

        Ms. Schwartz. Mr. Chairman and distinguished members of the
    subcommittee, the Military Coalition appreciates the
    opportunity to present our views on the Defense healthcare
    program for your consideration. The Fiscal Year 2001 Defense
    Authorization Act demonstrated that Congress really does put
    people first and that you did view the fulfillment of a
    lifetime healthcare promise as a top priority. Your response to
    the men and women who dedicated their lives to the service of
    their country shows Congress' recognition of the extraordinary
    demands and sacrifices rendered by these beneficiaries over a
    career of uniformed service. On behalf of our grateful members,
    we say thank you for the leadership role your subcommittee
    played in the development of TRICARE For Life (TFL), the most
    significant retiree benefit improvement in decades.
        In the interest of time, Mr. Chairman, I will simply
    highlight some of the more pressing healthcare issues
    illustrated in our written statement.
        Last year's legislation has given us much to be grateful
    for; however, it has also presented a major funding challenge.
    The coalition urges your continued strong support to ensure
    timely funding and implementation of TRICARE For Life and to
    fully fund the entire Defense health program. Many older TFL
    beneficiaries who declined Medicare Part B because they were
    counseled that they could receive care at military or VA
    facilities, or were residing overseas, are subject to stiff
    Part B late-enrollment fees. The coalition asks the
    subcommittee to consider waiving the Part B enrollment
    requirement for these older beneficiaries, especially those
    residing overseas, as you did last year for the TRICARE Senior
    Pharmacy Program.
        We also urge the subcommittee to ensure that Medicare
    eligibles under the age of 65 are not cut out of the benefits
    of TRICARE For Life. Currently, DOD has excluded them from the
    electronics claims processing system being implemented for
    older TFL beneficiaries. The coalition does not believe
    Congress intended to make them second-class TFL beneficiaries,
    and the coalition hopes you will ensure equal treatment for all
    Medicare eligibles.
        Next, we urge your support to ensure that retired
    beneficiaries are not forced to choose between VA and DOD
    healthcare. They serve two different purposes, and dual-
    eligibles need access to both benefits.
        Despite the many initiatives that this subcommittee has
    promoted, we continue to hear from our members about problems
    in securing TRICARE providers. We ask that you consider
    additional steps as needed to ensure provider participation in
    TRICARE.
        We also need the subcommittee's continued help on four
    persistent administrative problems: ensuring portability and
    reciprocity of the TRICARE benefit between regions; defining
    what medically-necessary care will be provided to custodial-
    care beneficiaries, especially the integration of TFL
    beneficiaries into the individual case-management program for
    persons with extraordinary conditions; eliminating the 115-
    percent billing limit when TRICARE is second payer to other
    health insurance; reinstating the coordination of benefits
    methodology adopted for TFL; and removing the requirements for
    non-availability statements for TRICARE standard beneficiaries.
        Finally, we support action to provide TRICARE coverage for
    Ready Reserve and National Guard members and their families to
    ensure an adequate healthcare safety net for them. With more
    frequent mobilization of the Guard and Reserve, this is an
    important continuity of care matter as well as recruitment and
    retention.
        Mr. Chairman and distinguished members of the subcommittee,
    I thank you for your strong continued efforts to continue to
    meet the healthcare needs of the entire service community.
    Next, Joe Barnes will discuss personnel and compensation
    issues. Thank you.
        Senator Ben Nelson. Mr. Barnes.

       STATEMENT OF MCPO JOE BARNES, USN (RETIRED), DIRECTOR OF
            LEGISLATIVE PROGRAMS, FLEET RESERVE ASSOCIATION

        Mr. Barnes. Thank you, Mr. Chairman. I echo the
    appreciation expressed by Sue Schwartz and thank you for the
    opportunity to present the Military Coalition's views on key
    personnel and compensation issues. I also extend the
    coalition's gratitude for the significant pay and benefit
    enhancements enacted last year. The higher-than-ECI pay hike,
    pay reform for mid-career enlisted personnel, a plan for
    eliminating average out-of-pocket housing expenses and other
    improvements convey a powerful positive message to all
    uniformed services personnel. These are important improvements.
    However, the coalition believes more needs to be done to
    address the formidable challenges facing our military services.
        The coalition continues to believe that additional Active
    Duty and Reserve personnel are required to sustain current
    deployments and long-term commitments. There are too few
    servicemembers to do all the work, and many career personnel
    are opting out of the military requiring relatively junior
    members to assume jobs previously done by more experienced
    personnel. This scenario negatively impacts retention and
    readiness.
        Pay comparability remains a top priority, and the coalition
    strongly supports enhanced raises to close the pay
    comparability gap as quickly as possible with additional
    targeted increases for senior enlisted personnel, warrant
    officers, and certain officer grades. The coalition also
    strongly supports action to eliminate average out-of-pocket
    housing expenses as soon as possible for servicemembers and
    their families, something especially important to junior
    enlisted personnel serving in areas with significantly high
    housing and utility costs.
        The military Thrift Savings Plan, or TSP, provides an
    opportunity for Active and Reserve personnel to save and invest
    for the future. However, the only way many personnel can get
    ahead is by depositing their bonuses. The first personnel
    eligible to receive the $30,000 redux bonus are making their
    decisions. For those taking the bonus, only $10,500 is allowed
    for tax-deferred deposit into their TSP account. To help those
    electing redux, the coalition recommends that members be
    allowed to receive the career retention bonus in a lump sum or
    in two, three, or four installments in order to maximize the
    investment advantage from the benefit.
        Joyce Raezer will now discuss PCS challenges, the
    commissary benefit, and other issues.
        Senator Ben Nelson. Ms. Raezer.

        STATEMENT OF JOYCE WESSLE RAEZER, ASSOCIATE DIRECTOR OF
       GOVERNMENT RELATIONS, NATIONAL MILITARY FAMILY ASSOCIATION

        Ms. Raezer. Thank you, Mr. Chairman. The Military Coalition
    is grateful to you, the members of the subcommittee, and to
    Congress for your attention last year, not only to compensation
    and healthcare, but also to the quality-of-life components such
    as housing, dependent education, and community programs that
    support our military community of Active and Reserve component
    service members, retirees, families, and survivors. The
    coalition asks you to continue your support of a ready,
    motivated force by providing the highest quality of life
    possible for the service member in the workplace and the family
    in the community. The high PERSTEMPO referenced by Mr. Barnes
    affects, not only the functioning of the force, but also the
    family. As operations continue at a high pace, the military
    family's lifeline, its community, feels the strain. Resources
    for family centers, schools, morale, welfare, and recreation
    programs, Guard and Reserve support, and religious programs are
    more essential today than ever to support the community that
    supports the force.
        The commissary system is not only integral to the military
    compensation package, but is also important to the morale and
    well-being of all members of the military community. It is
    especially important to our junior enlisted families trying to
    make ends meet, here and abroad. The coalition applauds the
    Defense Commissary Agency's efforts, not only to achieve
    greater savings for beneficiaries, but also to educate single
    service members and young families about this important
    benefit. The coalition is concerned about DOD proposals to
    conduct a commissary privatization pilot, as well as the
    proposed language that could weaken oversight authority and
    management over these pilots and create the perception in the
    community that the benefit is eroding. The oversight provided
    by the services through the Commissary Operating Board and the
    input provided through the DCA Patron Council are essential to
    preserving a strong benefit.
        Maintaining strong communities and a strong force starts
    with strong families. Permanent change of station, PCS moves,
    are among the biggest stressors for mobile military families.
    Families increasingly weigh whether the prospect of a career-
    enhancing assignment for the member is worth another move that
    disrupts the spouse's career, children's education, damages
    valued possessions, and eats into a family's savings. DOD
    estimates that service members spend an average of $1,100 with
    each move and are reimbursed at only 62 cents on the dollar; 27
    cents for junior enlisted. Per diem and mileage allowances were
    last adjusted in 1986. Military spouses are often denied state
    unemployment compensation when the service member receives PCS
    orders, forcing the family to lose income while facing hundreds
    of dollars in relocation expenses.
        The coalition has been encouraged by programs such as the
    Full Service Move Pilot designed to fix some of the stressors
    of the PCS process. We urge Congress to fully fund this project
    for another year and to restore the intended relationship
    between PCS allowances and the expenses they are intended to
    reimburse.
        Now, Mr. Mark Olanoff of the Retired Enlisted Association
    will speak of the issues facing military families and
    survivors. Thank you very much.
        Senator Ben Nelson. Mr. Olanoff.

     STATEMENT OF CMSGT. MARK OLANOFF, USAF (RETIRED), LEGISLATIVE
               DIRECTOR, THE RETIRED ENLISTED ASSOCIATION

        Mr. Olanoff. Thank you, Mr. Chairman, Senator Carnahan.
    Welcome to both of you in this committee. We look forward to
    working with you, and we'd like to thank the subcommittee for
    everything that you've done for the total force.
        My portion of the coalition's testimony will cover
    retirement and survivor issues. This year, the coalition's top
    retirement priority is the need to correct a longstanding
    inequity that forces disabled retirees to give up a dollar of
    their earned military retired pay for each dollar they receive
    in veteran's disability compensation. This is grossly unfair
    treatment for those whose service to the country also impaired
    their health and, in many cases, their future earning capacity.
    The coalition feels strongly that these two compensation
    elements are paid for different reasons, and one should not
    offset the other. Retired pay is earned compensation for
    ensuring the extraordinary demands and sacrifices inherent in a
    service career. Disability compensation is recompense for pain
    and suffering and reduced post-service earning potential.
        Over 80 percent of the House members and 70 percent of the
    Senate have signed on as cosponsors of legislation to correct
    this obvious and severe inequity. The only issue seems to be
    the cost. The coalition looks forward to working with the
    subcommittee members and staff to find a way to do the right
    thing by those whose service to their country also impaired
    their health.
        Regarding survivor issues, we hope the subcommittee will
    once again support a floor amendment to add Senator Thurmond's
    S. 145 to the Defense Authorization Bill. This is a bill that
    would raise the minimum age-62 Survivor Benefit Plan annuity
    from 35 percent to 45 percent of SBP covered retired pay by
    2004 and ultimately eliminate the age-62 offset entirely. This
    change is badly needed for several reasons; first, to help
    restore the 40 percent government cost share intended by
    Congress. The DOD actuary acknowledges this subsidy has fallen
    below 27 percent; second, to improve parity with SBP coverage
    for Federal civilians whose survivors experience no reduction
    at age 62; and finally, to keep faith with older retirees and
    spouses, many of whom were not told of the age-62 annuity
    reduction when they signed up for the program back in the
    1970s.
        In each of the last 2 years, the full Senate approved this
    initiative. This year, we hope Senate conferees can persuade
    the House to agree.
        Finally, we urge the subcommittee to ensure fair treatment
    for survivors of members who die on active duty. In this
    regard, we must recognize that death is the ultimate disability
    and treat every active duty death as if the member had been
    retired for 100-percent disability on the date of death. This
    will eliminate a current inequity that provides lower survivor
    benefits in cases when the member is killed instantly than when
    the member survives long enough to be disability retired.
    Commanders find this a particularly troubling inequity in mass-
    casualty situations.
        This concludes the coalition's verbal testimony, and we
    appreciate the subcommittee's consideration of these inputs.
        Senator Ben Nelson. Thank you, Mr. Olanoff, and thank you
    to the panel for your insight to many of these personnel
    issues.
        I have a 10:30 meeting, and I will be turning the gavel
    over to my colleague. [Laughter.]
        No good deed goes unpunished when you're here and the chair
    above you leaves for the moment, but I know Senator Carnahan
    will do an outstanding job. She, too, has an obligation at 11
    o'clock to preside. Our hope is, by that time, Senator Cleland
    will return. Such is the plight of your scheduler.
        Before I leave and turn it over to my colleague, who at
    that point will have an opening statement and will introduce
    the third panel, I have a question of Ms. Schwartz. It's a
    TRICARE question. You mentioned that one of the four key
    concerns that we could address as a subcommittee is how to
    provide some help with the TRICARE portability-between-regions
    challenge. Maybe you could explain why there is a difficulty.
    What's the barrier and why is it difficult to move between
    regions?
        Ms. Schwartz. Well, one of the issues that we find most
    distressful is people living on border states. TRICARE is
    divided up into regions. Many times, especially in rural areas,
    the hospital may be located in an urban center, but if you
    happen to live across the state line, like Minneapolis, St.
    Paul, you can't go between regions. So what we would like is
    for the beneficiaries who have to travel maybe 50 miles to get
    to a hospital to receive care within their catchment area, when
    it's reasonable, and to be able to go between the two TRICARE
    regions. Don't put the burden on the beneficiaries. Let these
    people get their healthcare. They can't help it that they live
    across the state line with an arbitrary TRICARE boarder. So
    what it does is preclude them from getting healthcare services
    from the closest provider. The other----
        Senator Ben Nelson. Excuse me. Would that apply, let's say,
    in the case of a veterans hospital or clinic in Omaha with a
    veteran who happens to reside in Iowa, right across the
    Missouri River? Would that apply there?
        Ms. Schwartz. If they're different TRICARE regions.
        Senator Ben Nelson. So you have to know what the TRICARE
    regions are.
        Ms. Schwartz. You have to know--yeah. Well, first of all,
    you have to have a map in your head at all times. I work this
    issue for a living, and I have trouble keeping track. How are
    my E-4 and E-5 family members supposed to keep of--they don't
    know where the regions are. So it is problematic in terms of
    that, and what we would like to see is for the beneficiary to
    simply get the benefit and let DOD do the mathematics and shift
    the cost between the managed-care support contractors.
        Senator Ben Nelson. Because they could do that----
        Ms. Schwartz. Sure.
        Senator Ben Nelson. They could do that through a system----
        Ms. Schwartz. Transfer the account.
        Senator Ben Nelson. Transfer of system, yes.
        Ms. Schwartz. I mean, DOD has to pay for that beneficiary's
    care. I don't care if the money goes to TRI-West. I don't care
    if the money goes to Sierra. All I want is for my members to be
    able to go to the closest hospital. We're willing to accept the
    catchment-area regulations. But for the people along border
    states it is very problematic.
        The second issue is when we PCS. We PCS every 2.9 years.
    When we go from one region to the next, there have been
    problems, in terms of enrollment and dis-enrollment. It's more
    problematic in the summer, and the managed care support
    contractors have had all kinds of issues enrolling and dis-
    enrolling individuals. We're hoping that the national
    enrollment database that's coming up this summer will solve
    that problem, but it remains to be seen.
        Those are some of the issues, in terms of portability and
    reciprocity, that we've seen.
        Senator Ben Nelson. Thank you, and thank you to the
    panelists. Now, the erstwhile chairman, she'll take over.
    [Laughter.]
        Senator Carnahan. I'll take this opportunity to make a
    statement, and then ask a few questions. I have to preside over
    in the Senate at 11 o'clock, so I'll have to be leaving in the
    middle. If Senator Cleland has not returned by then, we'll
    adjourn briefly until he does.

                   STATEMENT OF SENATOR JEAN CARNAHAN

        Senator Carnahan. I'm going to welcome all of you here and
    thank you for your presence. I'm sorry I missed the opportunity
    to see former Congressman Montgomery here today. He has,
    certainly, a special place in history. He'll forever be known
    for the tremendous military benefit that bears his name.
        Since 1984, military personnel, both active and Reserve,
    have been eligible for monthly stipends for tuition and other
    educational expenses. After the Vietnam War, our military faced
    a significant decline in recruitment and retention and morale.
    The Montgomery GI Bill helped us turn the tide. It honors the
    service and the sacrifice that our military personnel made for
    our Nation. It recognizes that our armed forces must remain an
    attractive destination for young adults graduating from high
    school.
        Today I am proud to be a cosponsor of legislation to expand
    the GI Bill, an idea that our chairman has long advocated. The
    HOPE Act will allow a service man or woman to transfer much of
    his or her unused GI benefit to dependent family members. This
    proposal is essential in light of the changing face of today's
    military personnel. More and more troops are raising families
    and sending their children to college. Senator Cleland's bill
    will ensure that our military personnel and their families have
    the same opportunities to pursue higher education as those in
    the civilian sector.
        In addition, we must do more to meet other needs of our
    soldiers, sailors, airmen, and marines. Last year, the Armed
    Services Committee authorized substantial improvements in our
    healthcare delivery systems and expanded coverage of the
    military healthcare system to additional military retirees. I
    support these initiatives, and I'm pleased by the
    administration's commitment to extending healthcare benefits to
    families and retirees.
        I also believe that the Department of Defense must evaluate
    our commitments to reservists and National Guard members.
    Indeed, we have come to depend on our Reserve components in
    almost every major deployment around the world. Since the Gulf
    War, our Army and Marine Corps have increased their operations
    abroad by 300 percent. Air Force deployments have quadrupled
    since 1986. The Navy now deploys 50 percent of its force on any
    given day. Last year, Reserve components served a total of 12.3
    million duty days compared to 5.2 million duty days in 1992.
        Maintaining our commitments around the globe would be
    impossible without Guard members and reservists. Yet we do not
    give them the treatment they deserve. Under current law, when
    Reserve components are deployed abroad, they are temporarily
    considered Active-Duty components. While in harm's way, they
    and their dependents are entitled to TRICARE, the same military
    healthcare coverage as other military personnel. But when they
    return home, their benefits end immediately. Often times,
    civilian employers are unable to restore members' healthcare
    benefits. In some cases, Reserve members quit their jobs before
    deploying and have no source of insurance when they return
    home. I believe that this is another important issue that must
    be addressed. We must examine these circumstances more
    thoroughly and work together to find solutions. I hope that we
    can use this hearing to begin evaluating possible solutions to
    this problem.
        Again, I am thankful for you being here, and I would like,
    before we adjourn, to ask one question of you. As I had
    mentioned, I believe the Government should extend, for 1 year,
    the military health coverage to reservists and guardsmen who
    return home from deployment and have no other healthcare. I was
    wondering if a few of you would comment on how you feel about
    that proposal.
        Ms. Schwartz. The Military Coalition is very supportive of
    efforts to increase healthcare benefits to the Guard and
    Reserve community. As you said, one of the problems that these
    folks face is that when they are activated they're called into
    active duty and they lose their current healthcare program. Now
    the family member is forced to go into TRICARE standard. This
    family member may have a preexisting condition. When you're in
    TRICARE standard, you often have to get a supplemental
    insurance policy. If the spouse happens to have a preexisting
    condition, such as she's pregnant, then she can't even get the
    supplemental insurance. We certainly would support extending
    those benefits, at least a year after activation. We'd also
    like the subcommittee to consider looking at it as a broad
    policy measure to maybe offer it as a recruitment and retention
    inducement to allow folks to participate in the TRICARE
    program, much like the dental program. We would also ask your
    consideration for that.
        Senator Carnahan. Thank you. Anyone else care to comment?
        Mr. Olanoff. Senator Carnahan, if I could comment, I'm a
    retiree of the Reserve and Guard program, although I started
    with active duty, and I'm glad to hear that you're interested
    in this subject of trying to fix some of these inequities. When
    I first started working here, about almost 5 years ago, I was
    told by someone in the Pentagon that there are 186 different
    personnel policies across the total force. We'll be looking
    forward to working with you to help correct some of these
    deficiencies, and I applaud your effort.
        Senator Carnahan. Thank you very much. I see that our
    Chairman has returned, and I respectfully return your gavel.
        Senator Cleland. Well, thank you very much. It's
    interesting being the chairman. I've shared the chairmanship
    now with four different people already, so--[Laughter.]
        --we're an equal-opportunity business here. [Laughter.]
        I was in New Jersey just this past weekend, and a comment
    was made to me by a retiree that the survivor benefit was 35
    percent of base pay and that the desire was to get that ``back
    up'' to 50 percent. Was it ever 50 percent, or has it been 35
    for a long time? I'm not an expert on that at all.
        Mr. Olanoff. Senator Cleland, I went to the Library of
    Congress because I get a lot of phone calls in our association
    about this issue. There's a misconception out there that the
    survivor benefit is going to be brought up to 50 percent, that
    we're trying to lobby to bring it up to 50 percent to get it
    back to where it was. However, the original law, from 1972, has
    a Social Security offset. It's clear, it's not a vague
    statement. Then, in 1985, Congress changed the survivor benefit
    law and created a two-tier system which dictates 35 percent
    after age 62, and 55 percent prior. There's a lot of people out
    there who have a misconception that we're trying to increase
    the benefit back to where it was.
        What we're trying to do is just increase the benefit,
    because it was never there. As we said in our testimony, the
    reason for that is that a lot of people who signed up for the
    survivor benefit plan in the 1970s, when they were counseled by
    whoever did the counseling, I don't think anybody really
    explained this offset rule. Now a lot of them are older, and
    they've realized that there's an offset, and they weren't aware
    of it.
        Senator Cleland. Thank you very much. That's exactly what I
    ran into. I had several questions that came from different
    parts. One was about the offset, and then another was about the
    50 percent level, and I really didn't quite understand what was
    going on there. I promised to check it out.
        Describe the situation that we have now. There is an
    offset. If you're receiving 35 percent of your pay as a
    survivor benefit and if you receive Social Security, then are
    you in effect, deducted dollar for dollar for that?
        Mr. Olanoff. Senator Cleland, the way the law is written
    is, it doesn't matter whether you're drawing Social Security or
    not. The original law that was passed in 1972 explains in the
    legislative history that survivor benefits and Social Security
    were always supposed to be tied together, that you weren't
    supposed to get a double benefit. The law says that age 62 is
    when you're eligible to draw Social Security. So even if a
    widow didn't apply for Social Security at age 62, which
    probably wouldn't happen, but theoretically, even if they
    didn't apply for Social Security, the percentage would be
    lowered from 55 percent to 35 percent.
        The interesting thing about this is that in the 1985 law,
    they actually changed the language. It's no longer technically
    an offset. They said, ``We've eliminating the Social Security
    offset, and we've now put in place a two-tier system, 55
    percent; and then at age 62, it goes down to 35 percent.'' In
    the prior law, in 1972, there were some nuances in there that
    had to do with age. If you were an older man, and you married a
    younger woman the age differences would impact how much money
    you would get. Congress changed it in 1985 to this two-tier
    system, and as soon as you reach age 62, it's 35 percent. It's
    never been 55 percent at age 62. We hope that the subcommittee
    will support Senator Thurmond's bill, and I think you're a
    cosponsor of that, to get this thing increased, to get it back
    to 55 percent.
        Senator Cleland. Right now, if you're 62 or older, can you
    draw the survivor benefit, which is automatically now 35
    percent and Social Security, together?
        Mr. Olanoff. Yes, sir.
        Senator Cleland. There's not an offset?
        Mr. Olanoff. Well, as I tried to explain, the original
    language, or the legislative history of the bill, says that the
    reason why the amount of money is reduced is because we know
    you're going to get Social Security.
        Senator Cleland. I got it.
        Mr. Olanoff. It's two government benefits.
        Senator Cleland. Right. So your point is that you're
    seeking to continue the survivor benefit at 55 percent, that it
    not drop to 35 percent, so that at age 62 you can continue to
    draw the 55 percent.
        Mr. Olanoff. Yes, sir.
        Senator Cleland. All of a sudden, you click into Social
    Security. You just get that, too.
        Mr. Olanoff. Yes, sir. In our testimony, we've put some
    detailed information, to give you some comparisons, about how
    the Federal civil service system works and how the military
    survivor benefit plan works. If you look through that, you'll
    see that there are some inequities in the amount of premiums
    that are paid and that there is no offset for a Federal civil
    service employee survivor at age 62. So we're basically just
    asking for equity.
        Senator Cleland. All right, thank you for that point. We'd
    like for staff, Gary, to take a serious look at this and see
    what we can recommend. Anyone else like to comment on that
    point?
        Mr. Barnes. Senator, I want to add that there's also the
    issue of underwriting the program. The original intent was for
    Congress to underwrite 40 percent, or for the Department of
    Defense to underwrite 40 percent of the program, and I think
    that figure now is about 27 or 28 percent.
        Senator Cleland. Right.
        Mr. Barnes. This is because actuarial assumptions were not
    accurate and did not come to be. So that's also an important
    part of the discussion with regard to SBP.
        Senator Cleland. Thank you. Good point. Would you like to
    comment on the commissary benefit to service families? What's
    your estimate of the state of play now with our commissaries?
    Ms. Raezer, you just want to take that?
        Ms. Raezer. I touched on it briefly in the oral statement,
    and there's more detail in our written statement, Mr. Chairman.
    The commissary is one of the most important benefits to the
    military community, and we're talking Active Duty, Guard, and
    Reserve retirees, survivors, and families. They view it as key
    benefit, a key piece of the compensation and they are very
    concerned when they hear proposals to transfer the operation of
    the commissary somewhere else or to fool with the surcharge and
    other pieces of operation of the commissary. To them, this is
    muddying with a benefit, and it makes a lot of folks concerned.
        The coalition has been very supportive of the Defense
    Commissary Agency's efforts to reduce costs of the commodities
    to the beneficiaries, to improve store hours, to be more
    responsive to beneficiaries. We've appreciated the oversight
    given the commissary agency through the Commissary Operating
    Board, which is made up of representatives of the services. We
    have also applauded efforts to get more patron input through a
    DECA Patron Council that gets patron input from all segments of
    the community. We've applauded these efforts and would urge a
    lot of caution in any attempt to restructure the system and,
    thus, restructure the benefit.
        Senator Cleland. That was my next question. How do you
    think military families will view a proposal to contract out
    the commissary?
        Ms. Raezer. I sense that the folks overseas and in those
    real isolated areas, will become the most nervous. The one
    question is if a supermarket chain would want to provide the
    same level of service DECA does to places like Minot, North
    Dakota, Reykjavik, Iceland, Pusan, Korea, Guantanamo Bay, Cuba,
    which has an X-Mart, places where we have limited facilities. I
    think folks are going to be concerned about a commitment to
    these people in faraway places.
        There's concern about the oversight and the ability to
    provide input. ``People ask how responsive are these folks
    going to be to us?'' When we have service leadership on a
    commissary operating board, we have the folks who are
    responsible for the community providing oversight, and they're
    stakeholders in this. It's good that they're providing some
    oversight.
        Senator Cleland. As a military retiree, service-connected,
    disabled, I use the commissary myself and, emotionally, one of
    the things that I feel about it, other than just whatever the
    price of milk, is that it's something there for me that the
    government, or the system, carved out for me. If I feel
    something is wrong with it, there is a chain of command I can
    go and bitch and moan.
        Ms. Raezer. Yes.
        Senator Cleland. It gives me kind of a little warm and
    fuzzy feeling, despite what I buy. I don't rely on the
    commissary for everyday needs; but occasionally, I go, and I
    take advantage of it, and I feel good about it. I just wanted
    to get a state of play where we were on that, because there may
    be a proposal coming down the pike to have a test demonstration
    of privatization, or contracting out, in a couple of Army or
    Marine facilities. I say that if it ain't broke, don't fix it.
    Is there anything with this commissary system now that you
    would recommend fixing? Are the suppliers overcharging the
    system? Are they ripping it off? Are they abusing it? Are they
    driving prices up to the beneficiaries? You deal with this
    every day. Tell me a little bit about what you think's going
    on.
        Ms. Raezer. I went to the commissary last night and saw
    lots of best-value signs, good prices. DECA has worked very
    closely with its suppliers to get good prices, and our
    commissary patrons do shop around. They will tell you they can
    find better things on sale at other stores. But when you look
    at the total package and you look at the market-basket surveys,
    the commissary agency provides a very good benefit for the
    families. We are constantly working on improving that benefit,
    looking at how to become more efficient, to cut costs, provide
    the specials, and to have not only special good prices, but
    good prices on every day commodities.
        Your talk about how you feel about the commissary as a
    place that's yours and that you have some ownership in, I
    think, is a common feeling among beneficiaries. Military people
    come home to the commissary. It's a draw to the installation.
    It's a draw to keep them part of the community. That's a very
    important thing to consider, because that draw to the community
    helps keep the community strong.
        Senator Cleland. In Georgia we have 13 military bases, and
    partly because of that our state leads the Nation, percentage-
    wise, in the growth of military retirees. In other words, the
    commissary and the PX, to a certain extent, is a magnet. You
    can just see it in these posts, like Benning or Gordon or
    Warner Robins, or Forces Command. It's not just a place of
    active duty personnel coming and going in the middle of the
    night and so forth. There is a military community that builds
    up around it. Part of the value they perceive is their ability
    to use the PX and the commissary.
        Anyway, I just thought I'd point that out. Yes, sir?
        Mr. Barnes. Senator, if I could add to that. We certainly
    appreciate your strong commitment to the commissary system. The
    issue of privatization has been around for a number years. I
    believe this has been studied for the past 40 or 50 years. Most
    recently, there was a proposal, I think, by the Congressional
    Budget Office to privatize, eliminate the subsidy, close the
    commissaries, and take the appropriation and put it in pay.
        The Military Coalition strongly opposes any initiative to
    privatize the benefit or diminish the scope of the benefit.
    DECA is working very closely with its business partners.
    General Courter has done an outstanding job instituting major
    business improvements. Savings are up. I think the goal is to
    increase the average market-basket savings to the 30-percent
    level. Savings are over 29 percent right now and we watch this
    very closely. The annual appropriation is a very sound
    investment that returns its value several times over in the
    benefit. I think the average savings per family is over $2,000,
    annually, using an average market basket of products. So we're
    watching this very closely, and we are very concerned about
    initiatives to privatize this benefit. We would draw the
    committee's attention to the good work that the Defense
    Commissary Agency is doing to achieve savings and maximize the
    savings for all beneficiaries.
        The last point I would make is that the commissary benefit
    is an integral aspect with regard to base closures. The issue
    of additional BRACs is a high priority this year and there's
    been a great deal of discussion about that. There's great
    concern, at the coalition level, that when and if additional
    rounds are considered, that the impact on all beneficiaries is
    taken into account, on not just the active duty community, but
    also the Guard and Reserve community, retirees, and gray-area
    reservist retirees. All have access to this benefit.
        Senator Cleland. That's an excellent point, and I
    appreciate you mentioning that. It's just one of the many
    reasons why I'm opposed to any further--I think we ought to be
    building up our infrastructure, not tearing it down. There is
    so much more to the military since we are relying, more than
    any time in our Nation, on the integration of the Active Force,
    the Reserve component, and the Guard. It is a family business
    now. I sit on the Commerce Committee, and the tendency under
    privatization is to cherry pick. You go with what works, and
    you take the best sale and so forth, but it costs a lot of
    money to get American stuff to Frankfurt. I've been in that PX,
    that wonderful, new PX near Ramstein Air Force Base. It takes a
    lot of effort to get that there. But that's America. You go in
    there, in Germany and you're in America, the pizza and the
    whole deal. I felt very much at home there. For me, it was a
    psychological and an emotional kind of thing, that the country
    is here, backing me and my family up, when I'm out doing all
    these maneuvers.
        A question to Ms. Schwartz. You're a nurse, Ms. Schwartz?
        Ms. Schwartz. Yes.
        Senator Cleland. Thank you very much. Wonderful nurses
    saved my life in the Vietnam War. May I just ask what you'd
    like to share with us about the nursing shortage, particularly
    in terms of military nurses, VA nurses, and government nurses.
    I'm on a bill this week with Senator Rockefeller to try to help
    out in this regard, but would you like to make a response in
    that regard?
        Ms. Schwartz. The Military Coalition doesn't have an
    official position on this, but, as a military spouse who
    happens to be a registered nurse, if I may be so bold to
    suggest, has anyone ever thought of educating military spouses
    to be nurses? As we PCS from region to region, if they would
    facilitate military spouses being nurses, LPNs, even ancillary
    staff, nurses can support the military as we move from base to
    base. They hire civilians within the military bases, on the
    military hospitals, and also within the community. It would be
    a wonderful opportunity to have a resource, a pool of people.
    As we PCS from station to station, we don't always find jobs.
    As Joyce spoke in her testimony, it would certainly be an
    opportunity to educate those folks.
        I appreciate your acknowledgment of the nursing shortage.
    As a nurse who has left bedside nursing, I know there's many
    reasons why we leave, and I think we have to look to the young
    men and women of this Nation and support them going into a very
    noble profession.
        Senator Cleland. Good. The legislation that will be before
    the Senate has bipartisan support here, and hopefully will be
    before the House soon after we pass it. We led off the hearing
    today about the transferability clause in light of the fact
    that the odds are that any service man or woman anywhere in the
    world today has a spouse. We spoke about giving that service
    man or woman the option to transfer, upon their own volition,
    half of their unused GI Bill benefits so their spouse and kids
    can get additional levels of educational training. It seems to
    me that this might open a door to training if a spouse wanted
    to become a trained nurse or anything else that would help
    their family, community, or military. That might be an open
    door and an incentive to go to school and fill a need. Does
    that make any sense at all?
        Ms. Schwartz. Yes. It sounds like a win-win situation. As
    we go to different installations, and we talked to the hospital
    commanders, there's a shortage of all kinds of professional and
    ancillary services, and even in the communities. It would
    certainly be a great source of people power in the medical
    professions. It would be a great opportunity.
        Senator Cleland. Thank you very much for your testimony
    today. Yes, you have one final word?
        Ms. Raezer. I have just something to add on that. Because I
    know there are a lot of different bills in both houses looking
    at training for different specialties such as nursing and
    education, we would ask that Congress makes sure that there's
    nothing in those that would impede the ability of a military
    spouse to take advantage of that training. To make sure, for
    example, if states have residency requirements, military
    spouses wouldn't be cut out. There are a lot of training
    programs out there, and we don't think DOD has to do everything
    itself. But to enable military spouses to take advantage of
    existing programs, sometimes it's just a matter of breaking
    through some barriers.
        Senator Cleland. What we're proposing in our legislation
    authorizing transferability is that wherever you are, obviously
    there would be no residency requirement.
        Ms. Raezer. Right.
        Senator Cleland. If you're in Iceland or Korea, for
    example, and you have a training opportunity there as a spouse,
    the service man or woman could transfer the GI bill. There
    would be no restrictions, no residency requirement. For
    instance, in Georgia, you have to be a Georgia resident to
    qualify for the HOPE scholarship program. After you've been in
    Georgia as an armed services persons, for about a year, you're
    a resident.
        Ms. Raezer. Right.
        Senator Cleland. Then your daughters and sons can qualify
    for the HOPE scholarship program, which is one reason a lot of
    people like to be stationed in Georgia. But then you move to
    another state, they don't necessarily have that offer of HOPE.
        Ms. Raezer. That's why we're hoping that we can really
    expand opportunities in all of these programs, because, as Sue
    said, there's a real shortage. We hear this all the time from
    military commanders, all the way up the line, from techs,
    doctors, nurses, pharmacists. So anything that can be done
    would be wonderful.
        Senator Cleland. As a matter of fact, it was Governor Zell
    Miller who instituted the Helping Outstanding Pupils
    Educationally (HOPE) scholarship program providing lottery
    funds to back up the HOPE scholarship, and we took that name
    for our legislation, H-O-P-E. Professionals in the military who
    want to stay, we give them additional HOPE that they can train
    in the military, both themselves, their spouse, and their
    youngsters, and not have to leave.
        Thank you all very much for coming. We will insert your
    statements into the record. We'll take a 5-minute break before
    our next panel joins us.
        [The prepared statement of the Military Coalition follows:]
                  Prepared Statement by the Military Coalition
        Mr. Chairman and distinguished subcommittee members: On behalf of
    The Military Coalition, we are grateful to the subcommittee for this
    opportunity to express our views concerning issues affecting the
    uniformed services community. This testimony provides the collective
    views of the following military and veterans organizations, which
    represent more than 5.5 million current and former members of the seven
    uniformed services, plus their families and survivors.

             Air Force Association
             Air Force Sergeants Association
             Army Aviation Association of America
             Association of Military Surgeons of the United States
             Association of the United States Army
             Chief Warrant Officer and Warrant Officer Association,
            U.S. Coast Guard
             Commissioned Officers Association of the U.S. Public
            Health Service, Inc.
             Enlisted Association of the National Guard of the
            United States
             Fleet Reserve Association
             Gold Star Wives of America, Inc.
             Jewish War Veterans of the United States of America
             Marine Corps League
             Marine Corps Reserve Officers Association
             Military Chaplains Association of the United States of
            America
             Military Order of the Purple Heart
             National Guard Association of the United States
             National Military Family Association
             National Order of Battlefield Commissions
             Naval Enlisted Reserve Association
             Naval Reserve Association
             Navy League of the United States
             Non Commissioned Officers Association
             Reserve Officers Association
             Society of Medical Consultants to the Armed Forces
             The Retired Enlisted Association
             The Retired Officers Association
             United Armed Forces Association
             United States Army Warrant Officers Association
             United States Coast Guard Chief Petty Officers
            Association
             Veterans of Foreign Wars
             Veterans' Widows International Network

        The Military Coalition, Inc., does not receive any grants or
    contracts from the Federal Government.

      Executive Summary--Recommendations of the Military Coalition to the
                        Senate Subcommittee on Personnel

                 ADEQUATE FUNDING FOR THE DEFENSE HEALTH BUDGET

        The Military Coalition strongly recommends this subcommittee
    authorize sufficient appropriations to fully fund the Defense Health
    Program, to include military medical readiness, TRICARE and the DOD
    peacetime health care mission, and full funding for TFL.

                         Legislative Adjustments to TFL

    Medicare Part B Penalty
        The Military Coalition recommends that individuals who become age
    65 prior to April 1, 2001, who would otherwise be subject to a Medicare
    Part B penalty, should have the option to decline enrollment in
    Medicare Part B, with TRICARE assuming first-payer responsibilities, as
    applicable, for such beneficiaries.
    Inpatient Hospitalization
        The Military Coalition recommends that TFL assume 100 percent of
    the costs for service beneficiaries who incur hospital stays that
    exceed the Medicare maximum (90 days plus 60-day lifetime Reserve).
    Beneficiaries Residing Overseas
        The Military Coalition recommends that this subcommittee eliminate
    the requirement to enroll in Medicare Part B for beneficiaries who
    reside in foreign countries.
    Under 65 Medicare-Eligible Beneficiaries
        The Coalition urges the subcommittee to investigate this issue and
    provide the necessary support in order that the under 65 Medicare-
    eligible beneficiaries benefit from the same electronic claims
    processing afforded to the rest of the TFL beneficiaries and ultimately
    resolve this so TFL can be implemented as Congress intended.
    FEHBP-65 Demonstration
        The Military Coalition recommends that the current FEHBP-65
    demonstration be extended to Dec. 31, 2003.
    Dual Eligible DOD-VA Beneficiaries
        The Coalition strongly recommends that the subcommittee work with
    its counterparts on the Veterans Affairs Committee to ensure that
    disabled military retirees eligible for VA care under Priority
    Categories 1-6, should not be forced to make an election between VA and
    DOD health care.

                            Improvements in TRICARE

    Provider Participation
        The Military Coalition recommends that the subcommittee continue
    monitoring provider participation problems to determine whether
    additional actions will be required to resolve these issues.
    TRICARE Prime Equity Innovations
        The Military Coalition strongly recommends that subcommittee
    authorize TRICARE Prime Remote to be extended to retirees, their family
    members and survivors at the same locations where it is established for
    active duty family members.
    Travel Reimbursement for Prime Beneficiaries
        The Military Coalition recommends that the subcommittee include a
    parent or guardian of minors as eligible for travel reimbursement when
    they accompany their dependents to distant specialty centers.
    Fully Implement Portability and Reciprocity
        The Military Coalition strongly urges the subcommittee to direct
    DOD to expend the resources it needs to facilitate immediate
    implementation of portability and reciprocity to minimize the
    disruption in TRICARE Prime services for beneficiaries.
    Custodial Care
        The Military Coalition recommends Congress provide continued
    oversight to further define what medically necessary care will be
    provided to all Custodial Care beneficiaries; and that Congress direct
    a study to determine how TFL beneficiaries will be integrated into
    ICMP-PEC in an equitable manner; and that Beneficiary Advisory Groups'
    inputs be sought in the integration of TFL beneficiaries into the ICMP-
    PEC.
    Coordination of Benefits and the 115 percent Billing Limit Under
            TRICARE Standard
        The Military Coalition strongly recommends that the subcommittee
    direct DOD to eliminate the 115 percent billing limit when TRICARE
    Standard is second payer to other health insurance and to reinstate the
    ``coordination of benefits'' methodology.
    Requirements for Non Availability Statements under TRICARE Standard
        The Military Coalition strongly recommends that all requirements
    for Non Availability Statements be removed from the TRICARE Standard
    option effective immediately and that members of the subcommittee work
    with their counterparts in the House to enact legislation such as S.
    1096.

                           PRIORITY PERSONNEL ISSUES

    Active Force Issues
        Personnel Strengths and Operations Tempo. The Military Coalition
    (TMC) strongly recommends restoration of service end strengths
    consistent with long-term sustainment of expected deployments and
    fulfillment of national military strategy. The Coalition supports the
    application of recruiting resources/voluntary recall policies as
    necessary to meet this requirement. The Coalition urges the
    subcommittee to consider all possible manpower options to ease the
    operational stresses on active and Reserve personnel that have proven
    so detrimental to retention and readiness.
        Pay Raise Comparability and Pay Table Reform. The Military
    Coalition recommends additional increases in annual pay adjustments
    well above the Employment Cost Index (ECI) with the objective of
    restoring pay comparability for uniformed service personnel as soon as
    possible. The Coalition further recommends that the subcommittee
    consider the recommendations of the Ninth Quadrennial Review of
    Military Compensation to reform basic military pay tables to provide
    more appropriate pay adjustments between grades, including linkages
    between enlisted, officer and warrant officer grades. The Coalition
    further recommends that the commitment made by the administration for
    an additional $1 billion in military pay be used to improve basic
    military pay and expedite the closing of the pay comparability gap at
    the earliest possible date.
        Basic Allowance for Housing (BAH). The Military Coalition urges
    acceleration of projected funding increases to match local housing
    costs, by grade, at every CONUS location as soon as possible. In view
    of the existing pay comparability gap and the rising private sector
    housing costs, the Military Coalition believes it does not serve
    retention and readiness interests to delay elimination of out of pocket
    expenses until 2005.
        Thrift Savings Plan (TSP). The Military Coalition urges enactment
    of authority to allow REDUX-eligible servicemembers the option of
    receiving a career retention bonus in one, two, three or four
    installments. This is essential for these members to realize the full
    tax-deferred value of the bonus.
        Permanent Change of Station Issues. The Military Coalition urges a
    comprehensive updating of permanent change-of-station allowances to
    restore the intended relationship between the allowances and the
    expenses they are intended to reimburse.
        Military Commissaries. The Military Coalition most strongly urges
    the subcommittee to preserve the commissary's important value-added
    benefit for service families and to resist short-sighted efforts to
    privatize the commissary system.
    Reserve and Guard Issues
        Support of Active Duty Operations. The Military Coalition urges
    continued attention to ensuring an appropriate match between Reserve
    Forces strengths and missions. The Coalition further urges a study of
    the extent to which Reserve and Guard forces can be employed in support
    of operational missions without jeopardizing employer support and
    Reserve unit retention.
        Health Insurance for Reserve Members and their Families. The
    Military Coalition recommends a comprehensive analysis of National
    Guard and Reserve member and family health insurance needs and
    development of policy options to ensure an adequate health care
    ``safety net'' for them.
        Selected Reserve Montgomery GI Bill (MGIB) Improvements. The
    Military Coalition supports extending the usage period for Reserve
    Montgomery GI Bill benefits for those who successfully complete the
    requisite 6-year service obligation, an additional 5 years beyond the
    current 10-year eligibility window.
        Retirement Credit for All Earned Drill Points. The Military
    Coalition recommends lifting the 90-point cap on the number of Inactive
    Duty Training (IDT) points earned in a year that may be credited for
    Reserve retirement purposes.
    Retirement Issues
        Concurrent Receipt of Military Retired Pay and Veterans Disability
    Compensation. The Military Coalition urges enactment of legislation
    authorizing the concurrent receipt of military retired pay and veterans
    disability compensation. The two entitlements serve different purposes
    and one should not offset the other.
        Former Spouse Issues. The Military Coalition urges the subcommittee
    to conduct hearings on needed USFSPA changes, both to gather all inputs
    needed for appropriate corrective legislation and to guard against
    inadvertently exacerbating current inequities via well-intended,
    piecemeal legislative action initiated outside the subcommittee.
    Survivor Program Issues
        Age 62 SBP Offset. The Military Coalition strongly recommends an
    immediate increase in the minimum post-62 SBP annuity of 35 percent of
    the member's SBP-covered retired pay. The Coalition further recommends
    subsequent incremental increases to restore SBP to 55 percent of
    covered retired pay.
        30-Year Paid-Up SBP. The Military Coalition strongly recommends
    accelerating the implementation date for the 30-year paid-up SBP
    initiative to 2002, on an incremental basis if necessary.
        SBP Coverage for All Active Duty Deaths. The Military Coalition
    strongly supports enactment of legislation to extend SBP coverage to
    all survivors of members who die on active duty on or after October 1,
    2001, with SBP annuities calculated as if the member had been retired
    with 100 percent disability on the date of death.

                               HEALTH CARE ISSUES

        The Military Coalition (TMC) wishes to express its deepest
    appreciation to this subcommittee for its extraordinary efforts to
    honor the lifetime health care commitment to uniformed services
    beneficiaries, particular those who are Medicare-eligible and have been
    increasingly locked out of military facilities over the last decade.
    The health care initiatives in the Fiscal Year 2001 National Defense
    Authorization Act (NDAA), identified below, represent the most
    significant enhancements in benefits in more than half a century.

             TRICARE For Life (TFL). This highly innovative
            initiative restores lifetime TRICARE coverage for all Medicare-
            eligible uniformed services retirees, their family members and
            survivors, effective October 1, 2001. TFL, if implemented as
            intended by Congress, effectively would fulfill the promise of
            ``lifetime'' health care made to servicemembers who dedicated
            their lives to careers in uniform.
             TRICARE Senior Pharmacy Program (TSRx). TSRx expands
            the Department of Defense pharmacy benefit to all Medicare-
            eligible uniformed services retirees, family members and
            survivors, effective April 1, 2001. The Coalition is pleased to
            report that the implementation of the TSRx program has been an
            overwhelming success.
             DOD Military Medicare-eligible Retiree Health Care
            Fund. Effective October 1, 2002, the Health Care Fund will
            become responsible for funding TRICARE For Life. As a result,
            health care benefits for Medicare-eligible service
            beneficiaries will no longer have to compete with other
            priorities in the Department of Defense's budget.
             $3,000 TRICARE Catastrophic Cap. Reducing the TRICARE
            family catastrophic cap from $7,500 to $3,000 per year for all
            uniformed services retirees, effective October 1, 2000,
            relieves an extraordinary financial burden previously imposed
            on beneficiaries participating in TRICARE Standard.

        The principal beneficiaries of these provisions in the Fiscal Year
    2001 NDAA will be the dedicated servicemembers who fought in World War
    I, World War II, Korea and Vietnam and brought the Cold War to a
    successful conclusion. They did not equivocate when called upon to
    endure the extraordinary hardships and sacrifices of careers in
    uniform; and join us in applauding your efforts to ensure that the
    government does not equivocate now in its determination to restore the
    health care they were promised and earned throughout their careers. The
    Coalition also appreciates the subcommittee's efforts to improve
    TRICARE benefits for active duty family members (ADFMs) through the
    following Fiscal Year 2001 NDAA initiatives:

             Elimination of TRICARE Prime copayments for active
            duty family members, thus ending copayments of $6 or $12 per
            visit, depending on rank, for service family members receiving
            care in civilian networks under TRICARE Prime.
             Expansion of TRICARE Prime Remote, with Prime-level
            benefits for active duty families assigned where Prime is not
            available. The first session of the 106th Congress provided
            servicemembers, on remote assignments, eligibility for a
            managed care benefit, but their families continued to rely on
            the more costly fee-for-service insurance program, TRICARE
            Standard (formerly CHAMPUS). The new provision covers their
            families as well.

    The Coalition gratefully acknowledges the subcommittee's unwavering
    efforts to upgrade the overall TRlCARE program by facilitating
    improvements in claims processing, portability, and access. The
    Coalition is most appreciative of these initiatives. However, much
    remains to be done, both to ensure that programs already approved are
    implemented fairly and successfully and to take the additional steps
    that will be necessary to achieve our mutual goals in the extremely
    important areas of health care quality, cost and access.

             PROVIDE ADEQUATE FUNDING FOR THE DEFENSE HEALTH BUDGET

        One of the Coalition's top priorities for fiscal year 2002 is to
    work with Congress and DOD to ensure adequate funding of the Defense
    Health Budget: to meet readiness needs, to include full funding of
    TRICARE, and to provide access to the military health care system for
    ALL uniformed services beneficiaries, regardless of age, status or
    location. The Coalition believes that an adequately funded health care
    benefit is as critical to the retention of qualified uniformed services
    personnel and to readiness as are pay and other benefits. As the
    Commandant of the U.S. Marine Corps underscored at the annual TRICARE
    Conference on Jan. 22, 2001, ``Medical care is a key component of
    military readiness. . . . TRICARE influences the intangibles of
    military readiness, such as morale, the will to fight and dedication to
    duty. . . . Our men and women perform their daily tasks better if they
    are not distracted by worries concerning their families.''
        The Military Health System (MHS) budget has been chronically under
    funded, resulting in execution shortfalls, shortchanging the direct
    care system, a lack of adequate equipment capitalization, failure to
    invest in infrastructure, and slow reimbursement to Managed Care
    Support Contractors. Each year, the MHS has had to rely upon Congress
    to supply emergency supplemental funding.
        The stakes are even higher this year. As the subcommittee is aware,
    TFL will be funded through a DOD Medicare-eligible Retiree Health Care
    Fund beginning October 1, 2002. However, because the statutory
    effective date for TFL is one year earlier--Oct. 1, 2001--DOD will
    require an increase in appropriated funds over and above the current
    fiscal year 2002 defense budget topline if TFL is to reach its full
    potential, without forcing DOD to absorb its costs ``out-of-hide.''
    Fiscal year 2002 is the landmark year for TFL and adequately funding
    the health care budget is the cornerstone for assuring the program is
    launched successfully. Doing so will eliminate any uncertainty and send
    a powerful signal to all service beneficiaries that Congress is
    resolved to make TFL a reality.
        In years past, the funding problem was tied to some degree to the
    lack of a clearly defined benefit. Uncertain of the benefit, it was
    difficult to identify the level of funding necessary to fully support
    the Defense Health Program. With the introduction of TFL, the benefit
    is defined and funding requirements should now be understood.

    The Military Coalition strongly recommends this subcommittee authorize
    sufficient appropriations to fully fund the Defense Health Program, to
    include military medical readiness, TRICARE and the DOD peacetime
    health care mission, and full funding for TFL.

                              UNFINISHED BUSINESS

        The Coalition is pleased to report that, thanks to this
    subcommittee's focus on beneficiaries, TMC representatives have been
    participating in two OSD-sponsored TRICARE For Life (TFL) action
    groups. The first group is the TFL Steering Level Panel comprised of
    military association CEOs, the acting Assistant Secretary of Defense
    for Health Affairs, members of his staff and members of the TRICARE
    Management Activity. The Steering Panel will address major policy
    decisions, consistent with the latitude provided by existing statutes.
    The second group, the TFL Working Group, has basically the same
    representation and meets bi-weekly, as a minimum, to discuss the ``nuts
    and bolts'' implementation plans and to identify issues that need to be
    referred to the steering panel. From our vantage point, the Defense
    Department is resolved to implement TFL consistent with Congressional
    intent and is working vigorously toward that end.
        In the process of developing TFL implementation plans and how TFL
    will interact with Medicare under various scenarios, the Coalition has
    determined that there are certain statutory limitations that need
    revision to promote an equitable benefit for all beneficiaries,
    regardless of where they reside.
        TFL generally provides a better benefit than any existing Medicare
    supplemental policy--with no premium and only limited liability for
    copayments and deductibles. However, The Coalition has identified some
    potential inconsistencies in TFL that we would like to present for the
    subcommittee's consideration. The Coalition believes the proposed
    changes will promote equity and can be resolved fairly inexpensively
    with some minor adjustments to the statute.
    Legislative Adjustments to TFL
        Medicare Part B Penalty. Currently, about 6 percent of the
    Medicare-eligible beneficiaries residing in the United States would be
    subject to a Medicare Part B penalty if they desire to participate in
    TFL. The penalty, which increases by 10 percent per year, could be
    particularly onerous for more senior retirees (principally the veterans
    of World War I and World War II), lower grade retirees and survivors.
    Under these rules, a 75-year old would have to pay double Part B
    premiums for life. An 85-year old would incur triple Part B premiums
    for life. Although we would prefer to see this penalty waived, TMC
    recognizes that jurisdiction over any aspect of the Medicare program is
    outside the scope of the Armed Services Committees and obtaining a
    waiver of the Part B late enrollment penalty could be a difficult
    hurdle to overcome before TFL is implemented next October. TMC proposes
    an alternative, under the jurisdiction of the subcommittee, which
    parallels the treatment of Medicare Part B for participants in TSRx.
    Specifically, beneficiaries who are 65 prior to April 1, 2001, are not
    required to enroll in Medicare Part B to participate in the TSRx
    program. Those who become 65 after that date must enroll in Part B. TMC
    believes the same ground rules should be extended to TFL. Beneficiaries
    who become 65 before April 1, 2001, should be provided the option of
    declining enrollment in Part B. Under these circumstances, TRICARE
    would be the primary payer for services normally covered by Medicare
    Part B and the beneficiaries would be subject to applicable deductibles
    and copayments for those services. (The individuals in question are
    entitled to Medicare Part A).

    The Military Coalition recommends that individuals who become age 65
    prior to April 1, 2001, who would otherwise be subject to a Medicare
    Part B penalty, should have the option to decline enrollment in
    Medicare Part B, with TRICARE assuming first-payer responsibilities, as
    applicable, for such beneficiaries.

        Inpatient Hospitalization. In cases when the beneficiary's
    inpatient hospital stay exceeds the 150-day maximum Medicare-allowable
    hospital stay, TFL becomes first payer once Medicare benefits are
    exhausted. In this rare circumstance, the beneficiary would be liable
    for TRICARE copayments and deductibles (not to exceed $3,000 per family
    per year, regardless of how long the individual is hospitalized). Based
    on the experience of The Retired Officers Association (TROA), regarding
    hospital stays beyond the Medicare maximum, DOD would save only about
    $150,000 per year by requiring the beneficiaries to pay the $3,000
    TRICARE catastrophic cap, before TRICARE assumes 100 percent of the
    cost. [This estimate was derived by extrapolating the experience of
    TROA (where 5 of 150,000 insured beneficiaries exceeded the 150-day
    Medicare limit in 1 year) to the entire 1.4 million Medicare-eligible
    service beneficiary population.] These relatively rare experiences are
    highlighted by TFL skeptics as examples of how TFL falls short of
    Standard Medicare Supplemental Plan F coverage. The Coalition believes
    strongly that extending full TFL coverage, when hospital stays exceed
    the Medicare maximums, offers administrative and public relations
    benefits that far exceed the tiny dollar savings that would be
    foregone.

    The Military Coalition recommends that TFL assume 100 percent of the
    costs for service beneficiaries who incur hospital stays that exceed
    the Medicare maximum (90 days plus 60-day lifetime Reserve.)

        Beneficiaries Residing Overseas. Under TFL, approximately 11,000
    Medicare-eligible beneficiaries, who reside in foreign countries, are
    required to participate in Medicare Part B, even though Medicare does
    not function overseas. This is a particularly onerous burden for
    elderly retirees who have resided outside of the United States for
    years and, for obvious reasons, did not enroll in the non-existent
    Medicare program at 65. For example, an 80-year old retiree overseas
    would have to pay 250 percent of the normal Part B premium for the rest
    of his life to gain TFL coverage even though Medicare would not pay a
    cent pay for his care. The Coalition believes this situation is highly
    inequitable.
        The Coalition is aware of correspondence sent by the Health Care
    Financing Administration (HCFA) now known as the Centers for Medicare &
    Medicaid Services (CMS) advising beneficiaries: ``Therefore, unless you
    believe that you may be returning to the United States in the near
    future either to live or to receive medical care, it is probably not to
    your advantage to enroll in medical insurance at this time.'' The
    Coalition believes members who were counseled not to enroll in Part B
    because they live overseas where Medicare does not apply should not
    have to enroll in Part B or be subject to penalties.

    The Military Coalition recommends that this subcommittee eliminate the
    requirement to enroll in Medicare Part B for beneficiaries who reside
    in foreign countries.

    Other TFL Considerations
        TRICARE Plus Feature of TFL. Under TRICARE Plus, TRICARE-eligible
    beneficiaries not enrolled in TRICARE Prime will be given the
    opportunity to enroll in a primary care program at selected military
    treatment facilities (MTFs) where capacity exists, beginning as early
    as October 1, 2001. The Coalition is pleased that DOD has made the
    policy decision that Plus enrollees will be guaranteed access for
    primary care on the same basis as other enrolled TRICARE Prime
    beneficiaries. We understand enrollment is limited to the local
    commander's assessment of MTF capacity with enrollees being be chosen
    by lottery. The Coalition is aware that some MTFs facilities may not
    have the capacity to enroll any Medicare-eligibles.
        Plus enrollee specialty care is provided in the direct care system
    where the capability and space is available. When beneficiaries are
    referred to civilian specialists, Medicare will be first-payer and TFL
    second-payer. Plus enrollees are not bound by the managed care rules of
    TRICARE Prime and thus can receive some of their care from a civilian
    provider using TFL as second-payer to Medicare. However, enrollees
    routinely choosing to use civilian primary care providers may be
    disenrolled to allow other beneficiaries to participate in the program.
        The TRICARE Senior Prime (TSP) program is scheduled to end December
    31, 2001. With that date close, the Coalition has been concerned about
    the status of the 35,000 beneficiaries currently in TSP Under Plus,
    current TSP enrollees will be ``grand fathered'' into the Plus program.
    In addition, TRICARE Prime beneficiaries under age 65 will be permitted
    to ``age into'' Plus when they become Medicare-eligible. By allowing
    these participants to remain in the program, DOD is powerfully
    reinforcing the principle that service members' interests come first.
    Other Medicare-eligibles who have been enrolled or empanelled in a
    health program at a MTF will have a higher enrollment priority than
    those with no such prior relationship.
        The Coalition supports DOD's decision to provide TFL beneficiaries
    access to the direct care system through the TRICARE Plus. The
    Coalition is well aware of the finite capacity of the MHS and its
    resource limitations and supports a DOD policy that balances the
    services for TFL Plus enrollees with the readiness mission, as well as
    the primary care access needs for active duty and retiree beneficiaries
    who are also entitled to MHS care.
        Claims Processing. The Coalition is pleased that DOD intends to
    implement automated TFL claims processing to expedite payment and
    eliminate beneficiary claim-filing requirements. Since Medicare, not
    TRICARE, will be adjudicating these claims, TRICARE supplemental
    payments to Medicare providers will be automatic. Failure of TFL claims
    processing to meet the expectations of beneficiaries, who are used to
    the current Medigap insurance system, will result in a lack of
    confidence on the part of beneficiaries, provide a disincentive for
    physicians to treat TFL beneficiaries, and cause undue financial
    hardships on beneficiaries. The Coalition is very concerned that past
    experiences of beneficiaries and providers with a prior TRICARE claims'
    processing experiences will make both beneficiaries and providers
    skeptical of TFL. TMC is pleased that DOD intends to automate the TFL
    claims processing system and to make the process invisible to the
    beneficiary by deeming most Medicare providers as TRICARE providers.
    TMC will closely monitor this development.
        The Coalition is very concerned about the treatment of claims for
    the under 65 Medicare-eligible population. TRICARE Management Activity
    (TMA) has told us, that these TFL beneficiaries will not have access to
    the ``seamless'' electronic claims processing that will be the standard
    for TFL beneficiaries over 65. The under 65s will not have the benefit
    of the seamless claims processing because of the inability to identify
    them in an electronic format. Because of this inability to identify the
    under 65s electronically, these beneficiaries will have to file
    ``paper'' claims for their care and will not benefit from the
    electronic claims processing proposed for other TFL beneficiaries.
        When TFL was enacted last year, it was clearly the intent of
    Congress that ALL Medicare-eligible beneficiaries receive the same
    benefit and the same ``treatment.'' The Coalition is concerned about
    this unequal treatment as it causes an undue burden on beneficiaries,
    many of whom are the most in need of care and often endure financial
    hardship because of their disability. These are also the beneficiaries
    who have treated in the most egregious manner in which the under 65
    Medicare Eligibles' claims have been handled--``benefits less
    benefits''--rather than ``benefits plus benefits.''
        The Coalition fears the under 65s will be required in many
    instances ``to pay upfront'' and await payment through the paper
    system. The Coalition believes that there should be some type of
    electronic ``work around'' developed by DOD and the Centers for
    Medicare & Medicaid Services (CMS) to allow these beneficiaries the
    same electronic claims processing system as the over 65 beneficiaries.
        The Coalition plans to remain vigilant in its efforts to identify
    gaps in coverage between Medicare and TRICARE benefits to make TRICARE
    for Life the true ``wrap around coverage'' as intended by Congress.
    It's extremely important that beneficiaries are confident they will no
    longer require Medicare supplemental insurance policies and are willing
    to rely wholly on TFL. Unintentional gaps in coverage, such as those
    identified above, will result in financial hardships for beneficiaries,
    undermine confidence in the program and once again fuel the demand for
    the Federal Employees Health Benefits Program (FEHBP).

    The Coalition urges the subcommittee to investigate this issue and
    provide the necessary support in order that the under 65 Medicare-
    eligible beneficiaries benefit from the same electronic claims
    processing afforded to the rest of the TFL beneficiaries and ultimately
    resolve this so TFL can be implemented as Congress intended.

        FEHBP-65 Demonstration. By way of background for new subcommittee
    members, the Coalition wishes to update the subcommittee about the
    provision in the Fiscal Year 1999 Defense Authorization Act that
    directed the Defense Department to allow up to 66,000 Medicare-eligible
    uniformed service beneficiaries to enroll in the Federal Employees
    Health Benefit Program (FEHBP-65) at six to ten sites around the
    country. The FEHBP-65 demonstration was programmed to run from Jan. 1,
    2000, through December 31, 2002.
        During the first enrollment period, only about 2,500 beneficiaries
    enrolled, and at the Coalition's request, this subcommittee supported
    an effort to expand the demonstration to two additional sites with
    beneficiary populations of 25,000 or more. During the second open
    enrollment period last November, enrollments tripled from the year
    before and more than 7,500 Medicare-eligible service beneficiaries are
    now enrolled in FEHBP-65. The Coalition believes this is a direct
    result of DOD's much improved marketing and educational program.
        As we anticipated 2 years ago, participation is considerably less
    that the 70 percent rate predicted by the Congressional Budget Office
    (CBO)--in fact, the 6.3 percent participation rate is several orders of
    magnitude less. This is a plus in several significant respects.

             More than 120,000 beneficiaries were given the
            opportunity to switch to FEHBP and thus avail themselves of the
            same health care plan available to Members of Congress and
            virtually all Federal civilians. Thus, denial of the
            opportunity to venture to ``greener FEHBP'' pastures should
            become a non-issue for that group.
             The cost of the demonstration is only about 11 percent
            of what was anticipated--a considerable savings.
             Both the Defense Department (DOD) and Office of
            Personnel Management (OPM) have learned from this experience
            that thrusting the uninitiated into the different world of
            FEHBP requires different marketing techniques than are employed
            for retiring Federal civilians already familiar with FEHBP.
             It would be relatively inexpensive, particularly if
            TRICARE For Life (TFL) cost offsets are considered, to keep
            this demonstration functioning at the current sites, until such
            time as a thorough evaluation of TFL is conducted to determine
            the degree to which TFL is complying with Congressional intent
            for all categories of beneficiaries under the scenarios
            mentioned earlier. Doing so has the added advantage of having a
            joint DOD-OPM venture available for expansion if Congress
            determines the option to enroll in FEHBP is preferable to
            filling in some of the gaps in TFL that TMC believes should be
            addressed.

        Regardless of how successful TFL is--and the Coalition believes it
    will be highly successful--we believe the current FEHBP-65
    demonstration should be extended until Dec. 31, 2003. This would enable
    current enrollees to plan for a smooth transition to TFL without having
    to make an irrevocable enrollment decision this fall, while TFL is
    still getting off the ground.

    The Military Coalition recommends that the current FEHBP-65
    demonstration be extended to Dec. 31, 2003.

        Dual Eligible DOD-VA Beneficiaries. The Coalition was disappointed
    to learn that the President's budget envisions seeking legislation to
    force DOD beneficiaries, who are also eligible for Veterans
    Administration (VA) medical care, to enroll with only one of these
    agencies as their sole source of health care. It is the Coalition's
    view that this policy change will be viewed as a serious breach of
    faith.
        The VA health system delivers specialized care and services for
    members with significant disabilities (e.g., prosthetics and treatment
    of spinal injuries) that are difficult if not impossible to duplicate
    in military facilities. But their needs for such specialized care for
    service-connected disabilities should not be turned to their
    disadvantage--either to compel them to get all their care from the VA,
    or to deny them specialized VA care if they choose routine care for
    themselves and their families through TRICARE.
        We acknowledge that a critical, but not insurmountable, challenge
    for Congress, DOD, and VA will be to implement a suitable policy
    framework under which these beneficiaries will be able to access the
    health care they have earned. Retired veterans with VA-rated
    disabilities (68 percent of enrolled retired veterans are in Priority
    Groups 1-3), or with other factors codified in law (Priority Groups 3-
    6), are entitled to VA health care and, as a matter of principle,
    should not be required to choose between VA health care and TFL. These
    service-connected disabled veterans have earned the right to military
    health care in return for their careers of service in uniform. They
    also have earned access to specialized VA care for the (often severe)
    disabilities that their service has imposed on them.

    The Coalition strongly recommends that the subcommittee work with its
    counterparts on the Veterans Affairs Committee to ensure that military
    retirees, should not be forced to make an election between VA and DOD
    health care.

    Improvements in TRICARE
        The Coalition is pleased that the fiscal year 2001 NDAA addressed
    some of the more egregious problems with TRICARE, and thanks the
    subcommittee for the leading role it played in furthering the following
    provisions to enhance TRICARE delivery/effectiveness by mandating the
    implementation of administrative efficiencies to include:

             Modernization of TRICARE business practices by
            implementing an internet-based system to simplify and make
            accessible critical administrative processes;
             Increasing the capability of MTFs by improving the
            efficiency of health care operations;
             Improvements in claims processing to include:

                     (1) Use of the TRICARE encounter data
                    information system;
                     (2) Elimination of delays in payment of claims
                    that may result from the development of the health care
                    service record or TRICARE encounter data information;
                     (3) Requiring high volume health care
                    providers to submit claims electronically; and
                     (4) Processing 50 percent of all claims by
                    electronic means.

        In addition, the Coalition is thankful that the fiscal year 2001
    NDAA sought to address the lack of physician participation in TRICARE
    by requiring:

             DOD to designate specific rates for reimbursement for
            services in certain localities where access to health care
            services would be severely impaired; and
             Prepare reports analyzing the utility of increased
            reimbursements to ensure the availability of network providers,
            and to determine the extent to which physicians are choosing
            not to participate in contracts to provide health care in rural
            areas.

        While Congress has previously given the authority to the Secretary
    of Defense to increase reimbursements and mandated improvements in
    TRICARE business practices, the Coalition continues to hear countless
    accounts from TRICARE Standard beneficiaries who are frustrated with
    the lack of provider participation in the program. While current and
    previous mandates are greatly appreciated, we have yet to see a
    significant impact as beneficiaries attempt to seek access from
    providers who:

             Tell them they have chosen not to accept TRICARE
            reimbursement and thus will not accept TRICARE patients; or
             Require payment up front because they refuse to accept
            the CHAMPUS Maximum Allowable Charge (CMAC) as an appropriate
            reimbursement rate and/or are unwilling to accept cumbersome
            administrative requirements and slow payments for claims.

        Once providers have left the system, promises of increased
    efficiencies have done little to encourage them to return to the system
    to care for our beneficiaries.

    The Military Coalition recommends that the subcommittee continue
    monitoring provider participation problems to determine whether
    additional actions will be required to resolve these issues.

        TRICARE Prime Equity Innovations. The Coalition is grateful that
    the fiscal year 2001 NDAA eliminated copayments for Active Duty Family
    Members (ADFMs) enrolled in TRICARE Prime. This initiative removed
    financial burdens for those who were only able to access care through
    civilian providers. The Coalition was delighted by the restoration of
    the TRICARE Prime benefit for families of service members assigned to
    remote areas where there is no TRICARE Prime option. These families
    were unfairly burdened by having to pay much higher copayments for care
    than their counterparts assigned to areas where they had the
    opportunity to enroll in TRICARE Prime.
        The fiscal year 2001 NDAA made this a watershed year for military
    beneficiaries. However, the great strides made to improve benefits for
    ADFMs and Medicare-eligible beneficiaries have made apparent the
    continued shortcomings of the TRICARE system for retirees under 65.
    Many of these beneficiaries live in areas not serviced by Prime, thus
    relying on the more expensive Standard benefit. Because many live in
    rural or metropolitan areas that are medically underserved, they
    continue to inform us that they are having difficulty in locating
    TRICARE participating providers. This presents a dilemma for members
    who have no choice but to rely on providers who demand their fees ``up
    front'' at the time of service. Obviously, this places an undue
    financial burden upon these deserving beneficiaries. In the light of
    the benefit enhancements provided to the over 65 retirees (TFL) and the
    ADFM, it is apparent that the needs of the under 65 retirees are not
    being met by the current TRICARE system. The Coalition believes that
    one viable option would be to extend TRICARE Prime Remote to TRICARE-
    eligible retirees, their family members and survivors at the same
    locations where the program is established for ADFMs.

    The Military Coalition strongly recommends that subcommittee authorize
    TRICARE Prime Remote to be extended to retirees, their family members
    and survivors at the same locations where it is established for Active
    Duty Family Members.

        Travel Reimbursement for Prime Beneficiaries. The Coalition also
    appreciates the subcommittee's action to reduce the financial burden
    for TRICARE Prime beneficiaries in areas where specialty care is not
    available. Until the subcommittee interceded, Prime enrollees were
    forced to travel great distances from their MTFs to distant specialty
    centers at personal expense. The provision in the fiscal year 2001 NDAA
    that authorizes TRICARE to cover the expenses of Prime enrollees who
    have to travel more than 100 miles to get specialty care will greatly
    reduce this burden. However, a further refinement is necessary to
    achieve the desired result. If the patient is a minor child, who must
    or should be accompanied by a parent or guardian, there is no authority
    to reimburse that accompanying individual.

    The Military Coalition recommends that the subcommittee include a
    parent or guardian of minors as eligible for travel reimbursement when
    they accompany their dependents to distant specialty centers.

        Fully Implement Portability and Reciprocity. The Coalition
    enthusiastically supports the guidance in the fiscal year 2001 NDAA
    that requires DOD to develop a plan, due March 15, 2001, for improved
    portability and reciprocity of benefits for all enrollees under the
    TRICARE program throughout all regions.
        This is sorely needed and long overdue based on feedback from our
    members. DOD has issued a policy memorandum stating that TRICARE Prime
    enrollees in one region will be able to receive services from Prime in
    another region (reciprocity) and will be able to transfer their
    enrollment when they move (portability). However, because of contract
    complications, the delayed implementation of the National Enrollment
    Database (NED) and other unspecified reasons, this policy has yet to be
    fully implemented in all existing TRICARE regions. Enrollees are still
    experiencing a disruption in enrollment when they move between regions
    and are still not able to receive services from another TRICARE Region.
    The lack of reciprocity is presenting particular difficulties for
    TRICARE beneficiaries living in ``border'' areas where two TRICARE
    regions intersect. In some of the more rural areas, the closest
    provider or pharmacy may actually be located in another TRICARE region,
    and yet due to the lack of reciprocity, these beneficiaries cannot use
    these providers or pharmacies. It is unfathomable that, despite the
    focus on portability and reciprocity, problems still persist. TRICARE
    must become a seamless system if it is to serve a beneficiary
    population that is the most mobile in the country.

    The Military Coalition strongly urges the subcommittee to direct DOD to
    expend the resources it needs to facilitate immediate implementation of
    portability and reciprocity to minimize the disruption in TRICARE Prime
    services for beneficiaries.

        Custodial Care. Once again, the Coalition is particularly grateful
    that Congress included in both the fiscal year 2000 and fiscal year
    2001 Defense Appropriations Acts a definition of Custodial Care that
    meets industry standards to provide medically necessary care. While the
    requirement still has not been fully implemented across all TRICARE
    Regions, it is slowly being put into place. Without Congress'
    intervention, DOD would have maintained its ``unique'' definition of
    medically necessary care for beneficiaries considered as custodial
    patients. The result would have meant cost shifting to Medicaid, loss
    of medically necessary care for the most vulnerable of the DOD
    beneficiary population, or both.
        We urge continued oversight by Congress to monitor the
    implementation of the new case management program mandated by PL 106-
    65, the Individual Case Management Program for Persons with
    Extraordinary Conditions (ICMP-PEC). The Coalition is eager to learn
    the results of the study mandated in PL 106-65, Sec 703, due March 31,
    2000, to determine how other health plans provide care to custodial
    patients.
        The Coalition is aware that TFL will make an additional 1.4 million
    beneficiaries eligible for TRICARE. The Coalition is aware of the
    potential impact these new beneficiaries will have upon the DHS and
    recognizes that some among this population, which is at the greatest
    risk for poor health, will be eligible for the ICMP-PEC. However, the
    Coalition is concerned that the current program has been developed in
    an incremental and piecemeal fashion and is poorly understood by
    providers and beneficiaries. In light of the implementation issues
    concerning the under 65 population in ICMP-PEC, the Coalition urges
    Congress to instruct DOD to develop a program, in concert with
    representatives from advocacy groups, that is equitable to all
    beneficiaries.

    The Military Coalition recommends Congress provide continued oversight
    to further define what medically necessary care will be provided to all
    Custodial Care beneficiaries; and that Congress direct a study to
    determine how TFL beneficiaries will be integrated into ICMP-PEC in an
    equitable manner; and that Beneficiary Advisory Groups' inputs be
    sought in the integration of TFL beneficiaries into the ICMP-PEC.

        Coordination of Benefits and the 115 percent Billing Limit Under
    TRICARE Standard. In 1995, DOD unilaterally and arbitrarily changed its
    policy on the 115 percent billing limit in cases of third party
    insurance. The new policy shifted from a ``coordination of benefits''
    methodology (the standard for FEHBP and other quality health insurance
    programs in the private sector) to a ``benefits-less-benefits''
    approach, which unfairly transferred significant costs to service
    members, their families and survivors.
        Here is TRICARE's Catch 22. Although providers may charge any
    amount for a particular service, TRICARE only recognizes amounts up to
    115 percent of the TRICARE ``allowable charge'' for a given procedure.
    Under DOD's previous, pre-1995 policy, any third party insurer would
    pay first, then TRICARE (formerly CHAMPUS) would pay any balance up to
    what it would have paid as first payer (75 percent of the allowable
    charge for retirees; 80 percent for Active Duty dependents).
        Under its post-1994 policy, TRICARE will not pay any reimbursement
    at all if the beneficiary's other health insurance (OHI) pays an amount
    equal to or higher than the 115 percent billing limit. (Example: a
    physician bills $500 for a procedure with a TRICARE-allowable charge of
    $300, and the OHI pays $400. Previously, TRICARE would have paid the
    additional $100 because that is less than the $300 TRICARE would have
    paid if there were no other insurance. Under DOD's new rules, TRICARE
    pays nothing, since the other insurance paid more than 115 percent of
    the TRICARE-allowable charge.) In many cases, the beneficiary is stuck
    with the additional $100 in out-of-pocket costs.
        DOD's shift in policy unfairly penalizes beneficiaries with other
    health insurance plans by making them pay out of pocket for what
    TRICARE previously covered. In other words, beneficiaries entitled to
    TRICARE may forfeit their entire TRICARE benefit because of private
    sector employment or some other factor that provides them private
    health insurance. In practice, despite statutory intent, these
    individuals have no TRICARE benefit.

    The Military Coalition strongly recommends that the subcommittee direct
    DOD to eliminate the 115 percent billing limit when TRICARE Standard is
    second payer to other health insurance and to reinstate the
    ``coordination of benefits'' methodology.

        Requirements for Non Availability Statements under TRICARE
    Standard. The Coalition is grateful for the provision in the fiscal
    year 2001 NDAA that waives the requirement for a beneficiary to obtain
    a Non Availability Statement (NAS) or preauthorization from an MTF in
    order to receive treatment from a civilian provider. In addition, the
    fiscal year 2001 NDAA waives the requirement to obtain an NAS for care
    in specialized treatment facilities outside the 200-mile radius of an
    MTF. Although the effective date of this measure was October 1, 2000,
    it contained language that does not implement the initiative under
    existing TRICARE managed care contracts, but only for new contracts.
    The problem is compounded because the fiscal year 2001 NDAA extended
    all current TRICARE contracts. This precludes the implementation of
    this benefit for an additional 4 years. There were also several
    provisions for waivers that further diminish the practical effects of
    the intended relief from NAS. For example, the requirement would be
    waived if

             The Secretary demonstrates that significant costs
            would be avoided by performing specific procedures at MTFs;
             The Secretary determines that a specific procedure
            must be provided at the affected MTF to ensure the proficiency
            levels of the practitioners at the facility; or
             The lack of an NAS would significantly interfere with
            TRICARE contract administration.

        The Coalition is disappointed that the waiver of the TRICARE
    Standard NAS requirement has become a ``road paved with good
    intentions,'' but little more.
        The rationale for a complete waiver of NAS requirements is
    compelling. By choosing to remain in Standard, beneficiaries are
    voluntarily accepting higher copayments and deductibles in return for
    the freedom to choose their own providers. The Coalition appreciates
    that the intent of the NAS system, when CHAMPUS was an evolving
    program, was to maximize the use of MTFs. However, when TRICARE was
    created, it offered beneficiaries a choice in how to exercise their
    health care benefit.
        DOD must honor the decision made by the beneficiaries and not
    insist that they ``jump through administrative hoops'' to exercise this
    choice, particularly since most care in MTFs and clinics is being given
    on a first priority basis to Prime enrollees anyway. More importantly,
    this capricious policy frequently denies TRICARE Standard
    beneficiaries, who have chosen the more expensive fee for service
    options, one of the most important principles of quality health care,
    continuity of care by a provider of their choice.
        The Coalition supports S. 1096 introduced by Senators Collins and
    Landrieu which eliminates the requirement that TRICARE Standard
    beneficiaries obtain a NAS for obstetrics and gynecological care
    related to a pregnancy. Elimination of the NAS requirement for
    maternity patients would relieve a burden on military families that
    disrupts the continuity of care for beneficiaries already paying higher
    out of pocket expenses in exchange for the ability to select a provider
    of their choice.

        The Military Coalition strongly recommends that all requirements
    for Non Availability Statements be removed from the TRICARE Standard
    option effective immediately and that members of the subcommittee work
    with their counterparts in the House to enact legislation such as S.
    1096.
    Conclusion
        The Military Coalition would like to reiterate its profound
    gratitude for the extraordinary work this subcommittee has done to
    provide health care equity for all uniformed services beneficiaries,
    particularly those who are Medicare-eligible. The subcommittee's
    efforts to authorize the implementation of TFL and TSRx are giant steps
    toward honoring the lifetime health care commitment. As the Coalition
    discussed earlier in its testimony, TFL with a few minor refinements
    will provide a comprehensive and equitable health care benefit for all
    Medicare-eligible beneficiaries
        Much work remains to be done with the TRICARE program. Immediate
    efforts must be undertaken, both by Congress and DOD, to ensure
    adequate funding for TRICARE to attract and retain quality health care
    providers; implement Congressionally mandated fixes to the claims
    processing system in a timely manner; reduce or eliminate
    preauthorization and NAS requirements; and implement TRICARE Prime
    Remote for all retirees, family members and survivors who are not
    Medicare-eligible. Doing so will help ensure that TRICARE delivers a
    uniform health care benefit across the different regions.

                              ACTIVE FORCE ISSUES

        Since the end of the Cold War, force strengths and real defense
    spending have been cut more than a third. But national leaders also
    have pursued an increasingly active role for America's forces in
    guarding the peace in a still-dangerous world, so that today's
    servicemembers are being deployed up to four times as often as those of
    the mid-1980s.
        For several years, Pentagon leaders and Congress have sought to
    protect the defense budget against excessive reductions, but until the
    106th Congress, these efforts seemed to have been aimed primarily at
    protecting weapons funding. The QDR was forthright about seeking to use
    personnel accounts as funding sources for hardware issues, and its
    influence has been pervasive. However, as noted during last year's
    testimony by several senior military leaders and senior statesmen, the
    United States simply cannot maintain America's military preeminence
    without a substantial increase in defense spending.
        The spending cuts achieved through the QDR budget-driven strategy
    have taken an unfortunate toll in the Services ability to retain highly
    skilled military personnel. Despite the notable and commendable
    improvements made during the last 2 years in military compensation and
    health care programs, retention remains a significant problem,
    especially in technical job specialties.
        From the servicemembers' standpoint the increased personnel tempo
    necessary to meet continued and sustained training and operational
    requirements has meant having to work progressively longer and harder
    every year. ``Time away from home'' has become a real focal point in
    the retention equation. Servicemembers have endured years of longer
    duty days, increased family separations, difficulties in accessing
    affordable, quality health care, curtailed (until recently) pay and
    allowance increases, deteriorating military housing, less opportunity
    to use education benefits, and more out-of-pocket expenses with each
    military relocation.
        Congress recently has taken several essential steps to reverse this
    trend by repealing retirement disincentives and reversing the declining
    trends in pay, allowances and health programs. But even with these
    significant improvements, many problems remain. If anything, mission
    requirements have risen, so operating- and personnel-tempos remain
    high. The enhanced pay raises, along with the repeal of REDUX
    retirement penalties for post-1986 service entrants, were most welcome
    changes But, the current pay raise increase schedule would still take 2
    more decades to make up for past shortfalls.
        There is no question that retention is problematic. There also is
    no question that retention drives recruiting--the ``ultimate
    recruiter'' is a successful NCO or Petty Officer. These experienced
    (and predominantly married) military members are under pressure to make
    long-term career decisions against a backdrop of a strong market pull
    for their skills and services within a booming economy. In today's
    environment, more and more servicemembers and their families are
    debating among themselves whether the rewards of a service career are
    sufficient to offset the attendant sacrifices inherent in uniformed
    service. In the civilian world, they see their peers succeeding in a
    growing economy with a more stable career and family life, often
    including an enhanced compensation package and far less demanding
    working conditions. It is truly unfortunate for the country that too
    many excellent soldiers, sailors, airmen and marines are opting for
    civilian career choices.
        In the final analysis, readiness--the ability to deliver as the
    world's superpower--is directly dependent on the success in sustaining
    an All Volunteer Force of talented, capable men and women. Sadly, as
    the propensity for America's youth to enlist in the Armed Forces
    declines, more young men and women are choosing options other than
    military service. Much has been done by the Services to improve their
    image, and one only needs to watch prime time television to see
    powerful marketing on the part of the Services. But this strong
    marketing needs to be backed up by an ability to keep these talented
    men and women. This is especially true as the Services become more and
    more reliant on technically trained personnel. The need to keep skilled
    NCOs and Petty Officers has never been more important. The subcommittee
    saw the current retention crisis coming before most, and made
    significant efforts to forestall it. We know you do not intend to rest
    on well deserved laurels and that you have a continuing agenda to
    address these very important problems. But we also know that there will
    be stiff competition for any defense budget increases that may be
    authorized. The truth remains that the finest weapon systems in the
    world are of little use if the Services don't have enough high quality,
    well-trained people to operate, maintain and support them.
        The subcommittee's key challenge will be to ease servicemembers'
    debilitating workload stress and rebuild their trust overstrained by
    years of disproportional sacrifice. Meeting this challenge will require
    a substantial commitment of resources on several fronts.
        Personnel Strengths and Operations Tempo. The Coalition has been
    dismayed at past annual Service requests for additional force
    reductions without any corresponding decrease in operational tempo. To
    the subcommittee's credit, these reductions were halted last year.
        But, innumerable newspaper reports have told stories of ships
    deploying with significant manning shortfalls or of hollow and
    overextended units that must cannibalize from others to meet manning
    requirements. Other news reports cite poor unit performance during
    evaluations because units lacked the time or resources, or both, to
    conduct needed readiness training. Still others document the strains on
    families when returning servicemembers still see little of their loved
    ones because they must work longer duty days to address home-station
    workload backlogs and catch-up on training requirements. Service
    leaders have tried to alleviate the situation by reorganizing
    deployable units, authorizing ``family down time'' following
    redeployment, or other laudable initiatives, but such things do little
    to eliminate long-term workload or training backlogs.
        The real problem is twofold: first, there are simply too few
    servicemembers to do all the work that needs to be done; second,
    because career personnel are opting out of the military, relatively
    junior members must assume jobs previously done by much more
    experienced personnel. The result is that today's force is not only
    much smaller than the robust force we had during Operation Desert
    Shield/Storm, but much less experienced, as well.
        Years of force reductions have taken a toll on the Services'
    ability to meet ongoing commitments. Congress held the line on force
    cuts last year and even authorized a small increase for the Marine
    Corps. This must now be expanded to provide needed relief to an already
    overstressed force.

    The Coalition believes strongly that force reductions have gone too far
    and that simply halting force reductions is inadequate. The force is
    already overstrained to meet current deployment requirements, let alone
    address any new major contingency that may arise. The grinding
    operations tempo has become a major quality of life issue that won't go
    away, and it will not be fixed by ``down time'' or expressions of
    understanding and encouragement. Deferral of meaningful action to
    address this problem cannot continue without risking serious long-term
    consequences. Real relief is needed now, and can only be achieved by
    increasing the force, reducing the mission, or both.

        This is the most difficult piece of the readiness pie, and one of
    the most important. Aircraft crash from metal fatigue when overused.
    One major reason that readiness indicators are dropping is growing
    ``OPTEMPO fatigue.'' Pay raises and retirement fixes reduce other
    significant career dissatisfiers, but they can't fix fatigue.
        Some argue that it will do little good to increase end strengths,
    since the Services are already experiencing difficulty meeting current
    recruiting goals. The Coalition believes strongly that this severe
    problem can and must be addressed as an urgent national priority, with
    commensurate increases in recruiting budgets. Failing to do so now will
    only deepen stress-related retention shortfalls and make future
    recruiting challenges even worse. Action is needed now to prevent a
    downward spiral of recruiting, retention, and readiness.

    The Military Coalition strongly recommends restoration of Service end
    strengths consistent with long-term sustainment of current deployments
    and fulfillment of national military strategy. The Coalition supports
    application of recruiting resources/voluntary recall policies as
    necessary to meet this requirement. The Coalition urges the
    subcommittee to consider all possible manpower options to ease
    operational stresses on active and Reserve personnel.

        Pay Raise Comparability and Pay Table Reform. The Military
    Coalition is extremely appreciative of the subcommittee's leadership
    during the last 2 years in reversing the routine practice of capping
    servicemembers' annual pay raises below the average American's. In
    servicemembers' eyes, all of those previous pay raise caps provided
    regular negative feedback about the relative value the Nation placed on
    retaining their services.
        Your determination to begin making up for those past shortfalls by
    setting ``comparability-plus'' pay raises in law through 2006 offered
    much-needed acknowledgment that the commitment between servicemembers
    and their Nation cannot be a one-way street. Likewise, the July 2000
    pay table revision and the targeted pay raises you approved for July
    2001 provided more appropriate financial recognition for mid-career and
    high-performing servicemembers. But the Coalition urges the
    subcommittee not to consider its work on pay matters complete.
        To begin, the Coalition urges the subcommittee to support the
    recommendations of DOD, based on the work of the 9th Quadrennial Review
    of Military Compensation (QRMC), to target added increases in military
    pay to mid and senior grade enlisted personnel, warrant officers, and
    mid-grade officers. Using the administration's most generous addition
    of over $1 billion to the military pay account, this money will provide
    for a higher pay increase for all personnel, but, most importantly,
    recognize the need for reform for deserving pay grades in the career
    enlisted, warrant, and commissioned officer pay tables. Additional work
    is needed to address appropriate pay stratification and make needed
    adjustments in officer versus enlisted, and warrant officer pay table
    ``cross-over'' points (i.e., grade/longevity combinations at which the
    basic pay rates are roughly equal). In addition to career enlisted
    personnel, specific attention is needed for warrant officers. These
    technical experts typically rise from the ranks, based on their skills.
    Many of them feel they were ``lost in the shuffle'' as changes were
    made to the mid-grade enlisted and officer pay tables. As the technical
    needs of the Services increase, specific attention should be focused on
    the warrant officers to ensure their pay table reflects appropriate
    career retention incentives.
        In the past 2 years, TMC has played a major role in Congress'
    endorsement of pay reform for officers in pay grades O-4 to O-6 and
    enlisted personnel in grades E-5 to E-7. At the same time, the
    Coalition realized there was further need for reform in certain warrant
    officer and junior officer pay grades as well as noncommissioned
    officer grades through E-9. This realization was based on a wide range
    of factors, to include the need to recognize inversion between pay
    grades, the need to reward personnel for the additional burden and
    stress associated with the high tempo of operations, the increased
    individual responsibility incurred through a smaller force; and, most
    significantly, the need to retain a high-quality, well-educated,
    capable and ready force.
        Military and veterans associations know only too well the
    tremendous leadership effort required to reverse long-standing trends
    and win allocation of additional resources for programs that have been
    long-constrained. As significant and laudable as those efforts have
    been, it must be acknowledged that the annual increases currently
    programmed will make up only a small fraction of the cumulative pay
    raise sacrifices imposed on servicemembers for almost two decades. As
    important as overturning past pay cap practices has been, we must
    acknowledge that an extra .5 of 1-percent raise does not put a big
    boost in the typical enlisted member's take-home pay. Perhaps the best
    way to put the issue in perspective is to recall that the last time a
    large pay comparability gap coincided with a retention crisis (in the
    late 1970s), the gap was eliminated via double-digit raises in both
    1981 and 1982.
        This is not to imply that the Coalition disagrees with the positive
    actions the subcommittee has already taken in this area. The Coalition
    strongly supported your proposals for ``comparability-plus'' raises
    through 2006 and still does. But econometric models show that each
    year's added 1-percent pay raise (compared to previous law) will have
    only a modest retention impact. Successive raises will have steadily
    increasing effect over time, but the immediate incremental impact is on
    members' morale rather than their wallets--and even this may fade if
    other problems are not also addressed.
        Finally, some have speculated that the cumulative 13.5 percent gap
    between military and private sector pay growth between 1982 and 1999
    would be obviated by the July 1, 2000 and 2001 pay table reforms or
    other ``targeted'' increases. Nothing could be further from the truth.
    In the past, when raises have been allocated differentially by grade or
    allowance, they have been described in ``aggregate equivalent pay
    raise'' terms (i.e., the overall pay raise value of the differential
    increase is calculated as if the cost of the initiative were applied
    equally across the board to all members). In aggregate terms, the
    fiscal year 2000 pay table realignment represented the cost equivalent
    of a 1.4 percent across-the-board pay raise. The targeted raises
    scheduled for this July equate to an additional 0.8 percent increase in
    overall pay.
        As of January 2001, the cumulative gap had been reduced to 10.8
    percent. By 2006, under current law, it will further decline to 8.3
    percent. This is great progress, but we also must acknowledge that this
    schedule, even if the ``ECI plus .5 percent'' pay raise adjustments
    were sustained beyond 2006, would not restore comparability until 2023.
    The administration's proposal to add over $1 billion to military pay in
    2002 will take us another important step toward pay comparability, and
    The Military Coalition strongly supports that initiative. But, further
    steps will be needed to close the gap and restore full pay
    comparability.

    The Military Coalition strongly supports the administration's proposal
    to add an additional $1.4 billion for military pay raises for fiscal
    year 2002, and recommends the subcommittee consider additional
    increases in annual pay adjustments as necessary to eliminate the
    accumulated pay raise shortfalls from previous years, as measured
    against the Employment Cost Index (ECI). The Coalition further
    recommends the subcommittee consider the recommendation of the Ninth
    Quadrennial Review of Military Compensation to reform basic military
    pay tables to provide more appropriate pay adjustments between grades,
    including linkages between enlisted, officer and warrant officer
    grades.

        Basic Allowance for Housing (BAH). The Military Coalition is most
    grateful to the subcommittee for setting the tone in 1999 to reduce
    out-of-pocket housing expenses for servicemembers. Responding to
    Congress' leadership on this issue, DOD proposed plans to reduce out of
    pocket expenses to 15 percent in 2001 and reduce the median out-of-
    pocket expense to zero by fiscal year 2005--a proposal put in law as
    part of the fiscal year 2001 Defense Authorization Act. This action to
    better realign BAH rates with actual housing costs is having a real
    impact and providing immediate relief to many servicemembers and
    families who were strapped in meeting rising housing/utility costs. We
    applaud the subcommittee's action and DOD's approach to improve BAH,
    but we ask that more be done. Housing and utility costs continue to
    rise, and we are decades from closing the existing pay comparability
    gap. For these reasons, we urge the subcommittee to take further action
    to accelerate BAH increases and eliminate all out of pocket expenses
    for servicemembers well before 2005.

    The Military Coalition urges BAH funding as necessary to eliminate
    servicemembers' out of pocket costs as soon as possible.

        Thrift Savings Plan (TSP). The Military Coalition also is very
    appreciative of the subcommittee's efforts to authorize active and
    Reserve participation in the tax-deferred Thrift Savings Plan (TSP).
    The members of today's armed forces, like so many other Americans, are
    more aware than ever of the need to save and invest for the future.
    It's part of today's culture. The TSP will provide members with a way
    to invest; but, unfortunately, many of them already face financial
    strain, living just within their means. The only way many
    servicemembers can get ahead and avail themselves with the opportunity
    to invest is through bonuses. This year, we will see the first wave of
    those eligible to receive the $30,000 career retention bonus authorized
    in the Fiscal Year 2000 Defense Authorization Act. For those electing
    to receive the $30,000 bonus, the ability to invest that full bonus
    would give them an excellent opportunity to ``jump start'' their TSP.
    For many, it would be their only means of investing anything.
    Unfortunately, the maximum amount allowed to be tax deferred in TSP is
    $10,500 per year.
        Without legislative relief to allow full deposit of the career
    retention bonus, members will not be able to realize the intended
    retirement savings, and taxes will reduce the net retention value of
    the bonus by up to one third. To help those electing REDUX to fully
    invest their retirement dollars, the Coalition recommends that members
    be allowed to receive their career retention bonus either in a lump sum
    or in two, three or four installments. To achieve the maximum
    investment benefit from the $30,000 career retention bonus, members
    must be able to deposit the entire bonus in the TSP. Participation
    requires a 1-percent minimum payroll deduction from the member's basic
    pay, which also counts against the annual deposit limit of $10,500.
    Based on this minimum level of participation, the bonus would have to
    be divided into three installments for a mid-grade NCO to tax defer the
    full $30,000 bonus or four installments for senior NCOs and officers.

    The Military Coalition urges the subcommittee to enact legislation to
    allow Redux-eligible servicemembers the option of receiving a career
    retention bonus in one, two, three or four installments. This is
    essential for these members to realize the full tax-deferred value of
    the bonus, and for the Services to realize the bonus' full retention
    value.

        Permanent Change of Station Issues. The Military Coalition is very
    concerned that servicemembers continue to incur significant out-of-
    pocket costs in complying with government-directed relocation orders.
    Department of Defense surveys show the government typically reimburses
    only two-thirds of the costs members actually incur in such moves.
        By any comparison, the servicemember is being short-changed in this
    area. Federal civilian employees receive much more substantial
    reimbursements in conjunction with government-directed moves, up to and
    including reimbursement for house-hunting trips and homeowner closing
    costs.
        It is an unfortunate fact that permanent change of station mileage
    allowances and per diem rates have not been adjusted since 1986. The
    authorized duration for paying Temporary Lodging Expense allowance
    (TLE) was increased to 10 days several years ago, but the maximum
    amount payable per day has not been adjusted since 1986. These
    important reimbursements are sadly overdue for adjustment, and
    servicemembers are paying an unfair price for this delay.
        The Coalition recognizes that the subcommittee has acted in the
    past to implement selected improvements, including periodic increases
    in the Dislocation Allowance to assist with incidental expenses in
    changing households, and certain improvements associated with shipping
    or storing automobiles. We particularly applaud ongoing household goods
    demonstration projects, which have the potential for offering members
    significantly improved quality of service with fewer administrative
    problems.
        But there remain substantial shortfalls that represent a
    significant source of out-of-pocket expenses for servicemembers. We
    cannot avoid requiring members to make frequent relocations, with all
    the attendant disruptions of childrens' schooling, spousal career
    sacrifices, etc. But the grateful Nation that requires them to incur
    these disruptions so often should not be requiring them to bear so much
    of the attendant expenses out of their own pockets.

    The Military Coalition urges a comprehensive updating of permanent
    change-of-station reimbursement allowances in the immediate future to
    ease the financial burdens currently being imposed on servicemembers.
    Increases should match the percentage increase in the Consumer Price
    Index (CPI) since the applicable allowance was last adjusted.

        Military Commissaries. As indicated in TMC testimony presented to
    the House Panel on Morale, Welfare and Recreation earlier this year,
    the Coalition reaffirms its strong commitment to maintaining the
    commissary benefit as a integral part of the total military
    compensation package.
        Thanks to Congressional oversight, essential funding has been
    consistently appropriated for commissary operations, and significant
    progress has been made toward protecting the surcharge fund to ensure
    vital maintenance and the construction of new stores. DeCA is also
    committed to operating commissaries in a more business-like manner,
    controlling operating costs, increasing savings to shoppers, and
    improving communications with its patrons. As a result, sales have
    increased during the past 2 years.
        Commissaries substantially impact the quality of life of the
    stores' patrons and families while contributing to the retention of
    highly skilled personnel. Historically, surveys indicate that
    commissaries are one of the most highly valued military benefits, after
    health care and retirement. Offering 29 percent savings over private
    sector groceries, the commissary benefit is key to making military
    paychecks go farther in meeting the needs of service families--
    particularly for junior enlisted families for whom every dollar counts.
    The annual commissary appropriation is a sound investment that pays
    valuable dividends, while strengthening the sense of community within
    the services.
        Over the course of several decades there have been multiple
    proposals to privatize commissaries or otherwise eliminate the
    commissary subsidy. Congress, in its wisdom, has rejected these
    initiatives, realizing that doing so would result in a significant net
    pay cut for military families.
        Recognizing that the commissary subsidy provides a compensation
    multiplier effect that generates $2 or more in compensation value to
    members for every dollar of subsidy, Congress instead has reformed the
    commissary system to reduce overhead. This process has been successful
    in holding the subsidy at a reasonable level without jeopardizing this
    important benefit for members and their families.
        The Coalition has noted with dismay that some within the new
    administration once again are raising ``penny-wise and pound-foolish''
    proposals to privatize the commissary system. The reality is that doing
    so would create a negative subsidy, since any private sector takeover
    would necessarily entail making a profit on servicemembers' patronage.

    The Military Coalition most strongly urges the subcommittee to preserve
    the commissary's important value-added benefit for service families and
    to resist short-sighted efforts to privatize the commissary system.

                            RESERVE AND GUARD ISSUES

        The Military Coalition applauds the longstanding efforts of this
    subcommittee to address the needs of our Nation's Reserve and National
    Guard forces, to facilitate the Total Force concept as an operational
    reality, and to ensure that Reserve and Guard members receive
    appropriate recognition as full members of the armed forces readiness
    team.
        Support of Active Duty Operations. As Reserve members and units
    shoulder ever-greater day-to-day operational workloads along with
    Active-Duty Forces, they increasingly have come to face many of the
    same challenges as their active counterparts. Unfortunately, these are
    compounded by other challenges unique to the reserve community. In
    particular, the ever-rising Reserve participation in Active Force
    missions is at odds with two other competing trends.
        First, the increasing mission tasking is happening despite plans
    for continued cutbacks in Reserve Forces--mirroring the Active Force
    problems associated with imposing ever-greater requirements on ever-
    smaller numbers of personnel. Continuation of this trend does not bode
    well for Reserve Forces readiness, and the Coalition was happy to see
    that the Secretary of Defense has suspended planned reductions in Army
    units pending further review of this problem.
        Second, increasing use of Reserve personnel in support of day-to-
    day Active Duty operations has placed greater strains on the employers
    of these members. Employer support was always strong when Reserve
    members were seen as a force that would be mobilized only in the event
    of a major national emergency. That support has become less and less
    enthusiastic as reservists have taken longer and more frequent leaves
    of absence from their civilian jobs. Recently, employers' sensitivities
    were subjected to new stress by the first peacetime activation of
    National Guard units in support of a non-emergency mission.
        The Coalition understands and fully supports the Total Force Policy
    and the prominent role of the Reserve Forces' under this policy. Still,
    the Coalition is somewhat concerned that ever-rising operational
    employment of Reserve Forces is having the practical effect of blurring
    the distinctions between the missions of the active and Reserve Forces.
    By the nature of their full-time civilian employment, there is a
    necessary limit to the amount of time Reserve personnel and their
    employers can be expected to devote to day-to-day operational missions.

    The Military Coalition urges continued attention to ensuring an
    appropriate match between Reserve Forces strengths and missions. The
    Coalition further urges a study of the extent to which Reserve and
    Guard forces can be employed in support of operational missions without
    jeopardizing employer support and Reserve unit retention.

        Health Insurance for Reserve Component Members and Their Families.
    Health insurance coverage for Guard and Reserve members varies widely.
    Some have coverage through private employers, others through the
    Federal Government, and still others have no coverage at all. The
    latter group includes an unknown number of junior enlisted members,
    many of whom are seasonal workers or students.
        For Reserve families fortunate enough to have health insurance
    coverage through their private employers, a growing phenomenon is
    cancellation of coverage when extended activation occurs. Although
    TRICARE ``kicks in'' at 30-days activation, many Guard and Reserve
    families would naturally prefer continued access to their own health
    insurance providers. Being dropped from private sector coverage as a
    consequence of extended activation adversely affects family morale and
    ``readiness'' and discourages some from continued participation in the
    National Guard or Reserve.
        A precedent has already been set for Reserve insurance coverage
    under the TRICARE family dental insurance program. Reserve sponsors pay
    family dental premiums until activation. On activation, premiums cease
    and the family is enrolled in the active TRICARE dental insurance
    program.
        A number of options should be investigated to determine the best
    way to provide a realistic and affordable Reserve family health
    insurance ``safety net.'' The Defense Department is exploring paying
    the premiums for employer-sponsored plans during activation. Other
    options include optional enrollment of Reserve and Guard members and
    families in TRICARE in a manner similar to the TRICARE dental insurance
    program; or establishing a government-sponsored group health insurance
    program with activation protection for Reserve families.
        Additional research is needed to determine Guard and Reserve
    servicemember interest in expanded health insurance protection.
    However, insurance protection of some kind is warranted based on the
    increased national reliance on the capabilities and commitment of the
    Reserve Forces to the national security.

    The Military Coalition recommends a comprehensive analysis of National
    Guard and Reserve member and family health insurance needs and
    development of policy options to ensure an adequate health care
    ``safety net'' for them.

        Selected Reserve Montgomery GI Bill (MGIB) Improvements.
    Individuals who initially join the National Guard or Reserve from
    civilian life become eligible for the Selected Reserve Montgomery GI
    Bill (MGIB). Eligibility requirements include possession of a high
    school diploma, agreement to serve 6 years in the selected Reserve, and
    completion of initial active duty for training. In today's high-OPTEMPO
    Guard and Reserve environment, servicemembers find it increasingly
    difficult to juggle employment and school commitments with family and
    Reserve responsibilities. A part-time student-Guardsman or reservist
    could easily exceed the 10 years currently authorized for Reserve MGIB
    benefits to complete an undergraduate degree. To enable successful
    completion of educational goals and access to all earned educational
    benefits, the period of benefit eligibility should be extended 5 years
    beyond completion of the 10-year eligibility period. Successful
    completion of the 6-year service obligation would be a prerequisite to
    the extended usage period.

    The Military Coalition supports extending the Reserve Montgomery GI
    Bill benefits usage period an additional 5 years beyond the current 10-
    year eligibility window for those who successfully complete the
    requisite 6-year service obligation.

        Retirement Credit for All Earned Drill Points. The role of the
    Guard and Reserve has changed significantly under the Total Force
    Policy, especially during the post-Cold War era. Congress responded to
    the need for increased readiness by allowing reservists to credit for
    retirement more of their earned inactive duty training (IDT). During
    most of the Cold War period, the maximum number of IDT points that
    could be credited was 50 per year. The cap has since been raised on
    three occasions to 60, 75 and most recently, 90 points. (Section 652 of
    the Fiscal Year 2001 National Defense Authorization Act, P.L. 106-398).
    The Coalition is most appreciative of Congress' approval of the
    increase. However, the fundamental question is why Guard and Reserve
    members are not permitted to credit for retirement all the training
    that they've earned in a given year The typical member of the Guard and
    Reserve consistently earns IDT points above the new 90-point maximum
    creditable toward retirement. Placing a ceiling on the amount of
    training that may be credited for retirement serves as a disincentive
    to professional development and takes unfair advantage of those
    ``reservists' commitment to the readiness mission.

    The Military Coalition recommends lifting the 90-point cap on the
    number of inactive duty training (IDT) points earned in a year that may
    be credited for Reserve retirement purposes.

                               RETIREMENT ISSUES

        The Military Coalition is grateful to the subcommittee for its
    historical support of maintaining a strong military retirement system
    to help offset the extraordinary demands and sacrifices inherent in a
    career of uniformed service. The Fiscal Year 2000 Defense Authorization
    Act successfully corrected serious problems associated with the REDUX
    retirement system and repealed the dual compensation penalties imposed
    on certain retirees working as Federal civilians. In addition, the
    subcommittee authorized a modest special compensation for certain
    severely disabled retirees that helped ease the financial sacrifices
    experienced by these retired servicemembers. Last year, the Fiscal Year
    2001 Defense Authorization conferees extended the special compensation
    eligibility to qualifying military disability retirees.
        Concurrent Receipt of Military Retired Pay and VA Disability
    Compensation. In approving the new special compensation for severely
    disabled retirees--and subsequently expanding it to include chapter 61
    (military disability) retirees with 20 or more years of service--
    Congress has taken two key steps in acknowledging the significant
    inequity the current law imposes on disabled military retirees. In
    effect, the law compels disabled retirees to fund their own disability
    compensation by requiring forfeiture of $1 of their earned retired pay
    for each $1 received in disability compensation from the Department of
    Veterans Affairs.
        The Military Coalition has long held that military retired pay and
    veterans disability compensation are paid for different purposes, and
    one should not offset the other. Specifically, retired pay is earned
    compensation for completing a career of arduous uniformed service,
    while veterans disability compensation is paid for pain and suffering
    and loss of future earnings' potential caused by a service-connected
    disability. The Coalition strongly believes the time has come to
    recognize this essential distinction by authorizing the concurrent
    receipt of military retired pay and disability compensation paid by the
    Department of Veterans Affairs (VA).
        Legislation introduced by Rep. Michael Bilirakis (HR. 303) and Sen.
    Harry Reid (S. 170) would correct the unfair and outdated retired pay/
    disability compensation offset.
        There is a pressing need for the subcommittee to consider enacting
    this legislation now. Previous attempts to fix this inequity have all
    been met with the same response--the cost is too large. But, the cost
    to men and women in uniform who have been injured while serving this
    Nation is far greater. No one disabled in the course of serving his or
    her country should have to forfeit an earned retirement--for years of
    faithful and dedicated service--in order to receive VA disability
    compensation for the wounds, injuries, or illnesses incurred in such
    service.
        Congress recently affirmed a similar principle in repealing the
    outdated statutory provision that, before October 1, 1999, required
    partial forfeiture of military retired pay by retired servicemembers
    who accepted post-service employment as Federal civilians. The same
    rationale applies to disabled servicemembers. That is, both categories
    of retirees deserve to receive the full retired pay they earned by
    virtue of their career of military service Just as they should not be
    required to forfeit that retired pay based on their subsequent civilian
    employment, they should not have to pay a retired pay penalty because
    their service in uniform caused them long term disability. Compensation
    for the latter condition must be provided in addition to their earned
    retired pay, not in place of it.

    The Military Coalition strongly supports enactment of legislation
    authorizing disabled uniformed service retirees to receive veterans
    disability compensation concurrently with receipt of their full earned
    military retire pay.

        Former Spouse Issues. The Military Coalition is concerned that many
    inequities persist in the application of the Uniformed Services Former
    Spouse Protection Act (USFSPA). The Coalition appreciates the
    sensitivity and complexity of this issue and the need for the
    subcommittee to hear all relevant inputs. Several times in recent
    years, Congress has enacted piecemeal changes to the law prior to
    hearing testimony on the full range of inequities. The Coalition
    believes strongly that such piecemeal changes should be suspended until
    the subcommittee has heard all relevant inputs and can strike a balance
    between the needs and rights of the various affected parties. Although
    the intent of the USFSPA was to assist former spouses in obtaining a
    fair share of their military spouses' retired pay, the law is ambiguous
    and weakly written. This has resulted in state courts awarding
    judgments that ignore the provisions of the USFSPA intended to protect
    the veteran.

    The Military Coalition urges the subcommittee to conduct hearings on
    needed USFSPA changes, both to gather all inputs needed for appropriate
    subsequent legislation and to guard against inadvertently exacerbating
    current inequities via well-intended, piecemeal legislative action
    initiated outside the subcommittee.

                            SURVIVOR PROGRAM ISSUES

        The Coalition is pleased to note the subcommittee's action last
    year in extending automatic Reserve Component Survivor Benefit Plan
    coverage to Reserve personnel immediately upon completion of 20
    creditable years of service, unless the member and his or her spouse
    expressly decline it or elect reduced coverage. The Coalition believes
    this initiative serves the best interests of members, family members
    and the government by guarding against inadvertent loss of survivor
    coverage for Reserve retirees who die before attaining eligibility for
    retired pay at age 60.
        But more serious SBP inequities remain to be addressed The
    Coalition hopes that this year the subcommittee will be able to support
    some increase in the minimum SBP annuity for survivors age 62 and
    older, a more equitable paid-up SBP implementation schedule for pre-
    1978 SBP enrollees, and fairer treatment for survivors of members who
    die on active duty.
        Age-62 SBP Offset. Since SBP was first enacted in 1972, retirees
    and survivors have inundated DOD, Congress and military associations
    with letters decrying the reduction in survivors' SBP annuities that
    occurs when the survivor attains age 62. The amount of the reduction
    varies by the circumstances in each case Before age 62, SBP survivors
    receive an annuity equal to 55 percent of the retiree's SBP covered
    retired pay. At age 62, the annuity is reduced to a lower percentage,
    down to a floor of 35 percent of covered retired pay. For many older
    retirees, the amount of the reduction is related to the amount of the
    survivor Social Security benefit that is potentially attributable to
    the retiree's military service. For members who attained retirement
    eligibility after 1985, the post-62 benefit is a flat 35 percent of
    covered retired pay.
        Although this age-62 reduction was part of the initial SBP statute,
    large numbers of members who retired in the 1970s (or who retired
    earlier but enrolled in the initial SBP open season) were not informed
    of it at the time they enrolled. This is because the initial
    informational materials used by DOD and the services to describe the
    program made no mention of the age-62 offset. Thus, thousands of
    retirees signed up for the program in the belief that they were
    ensuring their spouses would receive 55 percent of their retired pay
    for life. Many retirees who are elderly and in failing health, with few
    other insurance alternatives available at a reasonable cost, are
    understandably very bitter about what they consider the government's
    ``bait and switch'' tactics.
        They and their spouses are also stunned to learn that the survivor
    reduction attributed to the retiree's Social Security-covered military
    earnings applies even to widows whose Social Security benefit is based
    on their own work history.
        If these grievances were not enough, the DOD Actuary has confirmed
    that the 40-percent government subsidy for the SBP program--which has
    been cited for more than 2 decades as an inducement for retirees to
    elect SBP coverage has declined to less than 27 percent. The statute
    assumed that retiree premiums would cover 60 percent of expected long-
    term SBP costs based on the actuary's assumptions about future
    inflation rates, interest rates, and mortality rates. However, actual
    experience has proven these assumptions were too conservative, so that
    retiree premiums now cover almost 73 percent of expected SBP benefit
    costs. In effect, retirees are being charged too much for the long-
    promised benefit.
        The paid-up SBP initiative enacted in 1998 will ease this disparity
    modestly for members retiring after 1978, but even for those members,
    the subsidy will still fall far short of the promised 40 percent.
        Most inequitable from the military retiree's standpoint is the fact
    that the survivor benefit plan coverage provided for Federal civilian
    employees provides both a higher post-62 benefit and a higher
    government subsidy, as indicated in the chart below.

                                  FEDERAL CIVILIAN VS. MILITARY SBP ANNUITY AND SUBSIDY
                                                        [Percent]
    ----------------------------------------------------------------------------------------------------------------
                                                                       CSRS \1\         FERS \2\         Military
    ----------------------------------------------------------------------------------------------------------------
    Post-62 percent Of Ret Pay...................................              55              50O               35
    Gov't Subsidy................................................              50               42              27
    ----------------------------------------------------------------------------------------------------------------
    \1\ Civil Service Retirement System
    \2\ Federal Employees Retirement System

        Some might argue that Federal civilians warrant higher benefits and
    subsidies on the basis of their extended careers, but that is false
    reasoning. Military members, except for disabled members, must serve at
    least 20 years to qualify for retirement and often serve much longer.
    While many Federal civilian employees do, in fact, serve even longer
    periods, this is not necessary to qualify for retirement and survivor
    coverage, as many nondisabled Federal civilians qualify for retirement
    after serving considerably less than 20 years--and can do so with as
    little as 5 years' service, depending on age.
        More importantly, because they retire at younger ages than Federal
    civilians, retired servicemembers pay premiums for a far longer period.
    The combination of greater premium payments and lower age-62 benefits
    leave military retirees with a far less advantageous premium-to-benefit
    ratio--and therefore a far lower Federal survivor benefit subsidy--than
    their retired Federal civilian counterparts.
        Last year, the Senate approved Senator Thurmond's proposal to
    increase the minimum military SBP annuity in two stages--from 35
    percent to 40 percent of SBP-covered retired pay immediately and to 45
    percent as of October 1, 2004. While mandatory spending concerns
    prevented the initiative's inclusion in the final Fiscal Year 2001
    Defense Authorization Act, the conferees did include in the act a
    ``Sense of Congress'' provision specifying that legislation should be
    enacted to increase the SBP age-62 annuity to ``reduce (and eventually
    eliminate)'' the different levels of annuities for survivors age 62 and
    older vs. those for younger survivors.
        The Military Coalition strongly supports this principle, and Rep.
    Scarborough and Sen. Thurmond have reintroduced legislation (H.R. 548,
    and S. 145 respectively) in the 107th Congress that, if enacted, would
    bring this ``Sense of Congress'' provision to fruition. S. 145 and H.R.
    548 would eliminate the disparity in a three-stage process--raising the
    minimum SBP annuity to 40 percent of SBP-covered retired pay on October
    1, 2001; to 45 percent on October 1, 2004; and to 55 percent on October
    1, 2011.
        We appreciate only too well the cost and other challenges
    associated with such mandatory spending initiatives, and believe this
    incremental approach offers a reasonable balance between the need to
    restore equity and the need for fiscal discipline. With a rising
    Federal surplus this year, there is unlikely to be a better opportunity
    for this long-overdue action. Action is needednow, even if a deferred
    effective date is required, to fix a date certain when this long-
    standing inequity will be eliminated. Aging retirees and survivors who
    waited for relief through decades of deficits must not continue having
    their hopes dashed each year when surplus estimates grow ever-larger.
    Last year, the Senate passed relief legislation. This year, our hope is
    that the House can find a way to do the same.

    The Military Coalition strongly recommends elimination of the age-62
    Survivor Benefit Plan annuity reduction. To the extent that immediate
    implementation may be constrained by fiscal limitations, the Coalition
    urges enactment of a phased annuity increase as envisioned in H.R.548
    and S.145.

        30-Year Paid-Up SBP. Congress approved a provision in the Fiscal
    Year 1999 Defense Authorization Act authorizing retired members who had
    attained age 70 and paid SBP premiums for at least 30 years to enter
    ``paid-up SBP'' status, whereby they would stop paying any further
    premiums while retaining full SBP coverage for their survivors in the
    event of their death. Because of cost considerations, however, the
    effective date of the provision was delayed until October 1, 2008.
        As a practical matter, this means that any SBP enrollee who retired
    on or after October 1, 1978 will enjoy the full benefit of the 30-year
    paid-up SBP provision. However, members who enrolled in SBP when it
    first became available in 1972 (and who have already been charged
    higher premiums than subsequent retirees) will have to continue paying
    premiums for up to 36 years to secure paid-up coverage.
        The Military Coalition is very concerned about the delayed
    effective date, because the paid-up SBP proposal was initially
    conceived as a way to acknowledge the particular circumstances of those
    who have paid SBP premiums from the beginning. Many of these members
    entered the program when it was far less advantageous and when premiums
    represented a significantly higher percentage of retired pay In this
    regard, SBP premiums were reduced substantially in 1990, so these older
    members paid the higher premiums for up to 18 years. The Coalition
    believes strongly that their many years of higher payments warrant at
    least equal treatment under the paid-up SBP option, rather than
    imposing an additional 6-year waiting period upon them.

    The Military Coalition strongly recommends accelerating the
    implementation date for the 30-year paid-up SBP initiative to October
    1, 2002, as proposed by Rep. Saxton's H.R. 699, or on an incremental
    basis if necessary.

        SBP Coverage for All Active Duty Deaths. Under current SBP rules,
    only survivors of retired members or those of active duty members who
    have more than 20 years of service are eligible for SBP. This situation
    inadvertently can create significant and inequitable disparities in
    survivor benefits for the respective survivors of two members with
    equal grade and service who die as a result of illnesses or injuries
    incurred on active duty. Particularly in mass casualty situations such
    as aircraft crashes, it is sometimes extremely difficult for commanders
    and casualty assistance officers to explain and justify such
    disparities to the survivors of similar servicemembers who died in the
    same accident. The difference hinges on whether the member survives for
    a time following the accident. Permanently disabled members are
    entitled to retirement with a 100 percent disability rating, which
    automatically entitles them to retired pay (75 percent of basic pay)
    and SBP eligibility, regardless of years of service.
        Specific examples illustrate the disparity. Among the mass
    casualties of an aircraft crash are four members in grade E-8, two of
    whom have 19 years of service and two who have served 24 years. One
    with 19 and one with 24 years are killed instantly in the crash. The
    other two are severely injured, but survive in a coma and are retired
    with a 100 percent disability rating, then expire 2 weeks later. As
    indicated below, the survivors of the members who are killed instantly
    receive benefits that can be hundreds of dollars per month less than
    those of members who survive to be retired for disability:

        Current law penalizes the survivors of the members who suffer the
    most grievous consequence of service-connected injury--those killed
    instantly in the line of duty. We believe the government should
    acknowledge that death is the ultimate disability, and that the
    survivors of active duty deaths should not be penalized because of the
    severity of their sponsor's injuries. Thus, all members who die on
    active duty should be considered, for the purpose of survivors' SBP
    coverage, as having been retired for 100-percent disability on the date
    of the member's death.
        Because the number of annual active duty deaths is small and
    because the only SBP amounts payable would be those in excess of the
    survivors' Dependency and Indemnity Compensation payments, the annual
    cost for each year's group of survivors is estimated at less than $1
    million.

    The Military Coalition strongly supports enactment of legislation, as
    proposed by Sen. Kay Bailey Hutchison's S. 1037 and Rep. Reyes' H.R.
    2203, to extend SBP coverage to all survivors of members who die on
    active duty on or after October 1, 2001, by authorizing 100-percent
    disability retirements on the date of death.

                               CLOSING STATEMENT

        The Coalition very much appreciates being afforded this opportunity
    to submit our views to this distinguished subcommittee. We look forward
    to addressing further details of these and other issues with you and
    the Subcommittee staff.

        [Whereupon, at 11:02 a.m., a brief break was taken.]
        Senator Cleland. If we can convene our third panel? We have
    some distinguished panelists with us today. Thank you all very
    much for coming. I'd like especially to welcome Dr. David Chu,
    the Under Secretary of Defense for Personnel and Readiness. Dr.
    Chu was sworn in as the Under Secretary of Defense for
    Personnel and Readiness on June 1 of this year, a presidential
    appointee confirmed by the Senate. The secretary is a senior
    policy advisor on recruitment, career development, pay, and
    benefits, for 1.4 million Active Duty Military personnel, 1.3
    million Guard and Reserve personnel, and 680,000 DOD civilians.
    He is responsible for overseeing the state of military
    readiness. What a challenge, but he's highly qualified for this
    position. The Under Secretary of Defense for Personnel and
    Readiness also oversees the $15 billion Defense Health Program;
    the Defense commissaries and exchanges, with $5 billion in
    annual sales; the Defense education activity, which supports
    over 100,000 students; and the Defense Equal Opportunity
    Management Institute, the Nation's largest equal-opportunity
    training program. Dr. Chu began his service to the Nation in
    1968 when he was commissioned in the Army and became an
    instructor at the U.S. Army Logistics Management Center in Fort
    Lee. He later served a tour of duty in Vietnam working in the
    office of the Comptroller, Headquarters, First Log Command. He
    obtained the rank of captain and completed his service in the
    Army in 1970.
        Dr. Chu earlier served in government as Assistant Secretary
    of Defense from May 1981 to January 1993. He advised the
    Secretary of Defense on the future size and structure of the
    armed forces, their equipment, and their preparation for crisis
    or conflict. From 1978 to 1981, Dr. Chu served as the Assistant
    Director for National Security and International Affairs in the
    CBO, providing advice to Congress on the full range of national
    security and international economic issues. Prior to rejoining
    the Department of Defense, Dr. Chu served in several senior
    executive positions with RAND, including director of Arroyo
    Center, the Army's federally-funded research and development
    center for studies and analysis, and director of RAND's
    Washington office. Dr. Chu received a bachelor's of arts
    degree, magna cum laude. I graduated from Stetson, ``laude, how
    cum.'' [Laughter.]
        We're delighted to see a magna cum laude in economics and
    mathematics from Yale University in 1964, a doctorate in
    economics, the dismal science, right?
        Dr. Chu. Yes, sir.
        Senator Cleland. His doctorate was also from Yale, in 1972.
    He's a fellow of the National Academy of Public Administration
    and a recipient of the National Public Service Senior Award. He
    holds the Department of Defense Medal for Distinguished Public
    service with Silver Palm. Thank you very much, Dr. Chu.
        In addition to David Chu today, we have Lieutenant General
    Maude, the Deputy Chief of Staff for Personnel for the Army;
    Vice Admiral Ryan, the Chief of Naval Personnel; and Lieutenant
    General Parks, who is the new Deputy Chief of Staff for
    Manpower and Reserve Affairs for the Marines. Congratulations
    on your promotion and appointment to this position. We also
    have Lieutenant General Peterson, the Deputy Chief of Staff of
    Personnel for the Air Force.
        General Peterson, I understand that you'll be retiring next
    month. You'll be dodging these bullets. [Laughter.]
        But culminating 3 years of biting the bullet as Air Force
    Deputy Chief of Staff for Personnel, I want to thank you for
    your service to our country and our airmen. You've served very
    well. You're to be congratulated and commended for a job
    extremely well done. Thanks for all the help you've given to
    this subcommittee as the Air Force's personnel chief. Thank you
    very much.
        Dr. Chu, do you have an opening statement? Would you like
    to lead off?
        Dr. Chu. Yes, sir.

    STATEMENT OF DR. DAVID S.C. CHU, UNDER SECRETARY OF DEFENSE FOR
                        PERSONNEL AND READINESS

        Dr. Chu. Thank you, Mr. Chairman, for that very generous
    introduction. I have submitted my full statement for the
    record, but I'd like, very briefly, to summarize.
        May I begin by thanking this committee, and Congress at
    large, for all it's done over the years, and especially in
    recent years, for the people in the Department of Defense.
    People, as the Secretary and the President have emphasized, are
    the ultimate strength of the department, and I think this
    budget does, indeed, put people first. Indeed, a constant
    question the Secretary of Defense raises throughout the ongoing
    Quadrennial Defense Review is, ``Where is the people element of
    our strategy?'' because he is most concerned that we get the
    answer to that question right.
        This budget, the fiscal year 2002 budget, contains, sir,
    one of the largest pay and benefit packages in a long time,
    perhaps in a generation, and we look forward to the dialogue
    with this committee about its contents.
        On the results from the department over the last year or
    so, I think a word of congratulations to military services is
    in order. All four services in fiscal year 2000, for the first
    time in 3 years, met their active duty recruiting goals, and
    they are--knock on wood--on target, thus far this year, to do
    the same thing again.
        Retention is generally good, perhaps with some exception in
    the Air Force. The Reserve picture is not, perhaps, quite as
    strong as the active, but also reasonably good if considered in
    historical context.
        As Senator Akaka emphasized, the civilian workforce is the
    second of the three pillars in our total force. They provide
    the continuity and the technical skills that the force, as a
    whole, needs. The department is giving a great emphasis in the
    Quadrennial Defense Review to a strategic plan for that
    workforce, which, among its other elements, will emphasize the
    importance of continuing education. That principle has had such
    high payoff for the military force in the United States over
    the last several decades.
        The Reserves are the third component of that total force. I
    think the willingness of this administration to, indeed, make
    them an equal partner in what we do is evidenced in the very
    significant increase in military construction for the Reserves,
    almost 300 percent in this budget request, to a total of just
    over $600 million.
        Several of the earlier witnesses spoke to the issue of
    healthcare coverage for the Reserves. We acknowledge this as an
    issue, and we are exploring solutions to that problem as part
    of a general effort to make the transition from Reserve to
    active service and back again as seamless as possible.
        Healthcare, as you and your colleagues have noted, is a
    subject that has been given great attention by Congress in the
    last 2 years. We look forward to the challenge of implementing
    the full TRICARE For Life program on the first of October. This
    budget attempts to reflect what we think is a reasonable
    estimate of the total cost of that program and all the other
    elements of the Defense health effort.
        I should emphasize that we would very much plead for your
    assistance, sir, in avoiding any decision by Congress to fence
    particular sub-elements of the medical care budget, to allow us
    to manage it as a single whole with some of the outcomes that
    other witnesses have pointed to as legitimate objectives.
        Our greatest strength in the department, as has been
    remarked this morning, is its people. This budget intends to
    keep it that way, and we look forward to working with you and
    members of the committee in achieving that objective.
        [The prepared statements of Dr. Chu, Lieutenant General
    Maude, Vice Admiral Ryan, Lieutenant General Parks, and
    Lieutenant General Peterson follow:]

                    Prepared Statement by Dr. David S.C. Chu

                                  INTRODUCTION

        Mr. Chairman and members of this distinguished subcommittee, thank
    you for the opportunity to be here today and thank you for your
    continuing support of the men and women who serve in our Armed Forces.
        The fiscal year 2002 budget request puts people first. It contains
    a number of strong measures to improve recruiting, retention, and
    morale, including the largest boost in military pay and benefits in a
    generation. This will help pay military people what is needed to
    attract, motivate, and retain the top quality people essential to the
    Nation's security. It will enhance recruiting and retention by
    fundamentally changing the pay structure and increasing pay for grades
    with difficult retention challenges. The budget request further
    improves the military's ability to recruit and retain members of high
    quality, with critical skills, through a robust program of enlistment
    bonuses, selective reenlistment bonuses, and other incentive programs.
        The budget request also proposes major improvements to housing,
    healthcare, and overall quality of life. It increases housing
    allowances to reduce the amount of out-of-pocket expenses and enable
    military personnel and their families the option of living in private
    sector housing. For the first time in recent years, the President's
    budget request funds a realistic estimate of military health care
    costs.
        The budget submitted by President Bush places the highest priority
    on meeting the needs of our people. While it is not sufficient to
    address all problem areas, I believe the fiscal year 2002 budget
    satisfies the most urgent, and gives us breathing room to assess the
    future and identify the next steps leading to next year's budget
    submission based on the results of the Quadrennial Defense Review.
        Today, I would like to outline the initiatives the Department has
    proposed, as well as discuss the challenges we face in meeting these
    priorities.

                               MILITARY PERSONNEL

        Despite improvement in fiscal year 2001 recruiting achievement, the
    recruiting and retention war for talent continues. Although the youth
    population, which sustains our ability to recruit, has grown steadily
    since 1995, the Department finds itself facing several key challenges
    as it looks toward the future. The economy remains strong. College
    attendance is the overwhelming first choice of high school seniors. The
    composition of the youth population is changing.
        All these factors generate on-going challenges in our efforts to
    sustain the force. Not surprisingly, our investments in recruiting and
    retention programs are rising. We have 11 percent more recruiters in
    the field than we did a decade ago. Funding for enlistment bonuses has
    grown by over 500 percent since 1991; and the number of reenlistment
    bonuses has grown from 40,565 in 1991 to 50,868 in 2000, while the
    reenlistment bonus budget has grown from $212.7 million in 1991 to
    $350.5 million in 2000.
        Built over the last quarter of a century, today's volunteer
    military is recognized as the most capable ever fielded. But a
    declining veteran population means that fewer Americans have first-hand
    military experience. Therefore, it is essential that public and private
    sector leaders at every level step up to the challenge of generating
    awareness of the military, communicating the importance of the citizen
    soldier in our history and for our future, and emphasizing the
    ennobling characteristics associated with military service to the
    Nation.
    End-Strength
        Our recruiting and retention programs are the cornerstones for
    ensuring personnel readiness remains high. When retention is high, this
    eases the pressure on recruiting, and vice-versa. This fiscal year, the
    Army, Navy, and Marine Corps have enjoyed high retention, thereby
    reducing their recruiting missions; they also will achieve end strength
    targets in fiscal year 2001. Because the Air Force will not meet its
    second and third term retention goals, and it is too late to adjust its
    recruiting mission upward, the Air Force will not achieve the required
    end strength at the end of the fiscal year. Air Force is projected to
    miss end strength by 4,100, meaning they would be more than 1,000 below
    the authorized one-half percent flex. Meeting end strength in fiscal
    year 2002 requires the accurate development and full funding of our
    recruiting and retention programs. The budget before you provides these
    prerequisites, and we are committed to executing the programs to
    achieve success.
    Recruiting
        Our success in maintaining a military second-to-none depends on
    attracting and retaining people with the necessary talent, character,
    and commitment to become leaders and warriors in the Nation's Armed
    Forces. An asset in that quest is the fact that in today's society, the
    military is consistently ranked first as the most respected American
    institution. However, while the quality, dedication, and
    professionalism of the men and women in uniform command such respect
    from all Americans, this respect currently does not translate to a
    willingness to enlist or to encourage others to serve to the degree we
    need.
        Nevertheless, extraordinary efforts by our recruiting force have
    produced hard-won success. For the first time in 3 years, all Services
    achieved their fiscal year 2000 active duty recruiting goals with
    excellent recruit quality. Through the first 9 months of fiscal year
    2001, all Services have met or exceeded their active enlisted
    recruiting goals. While the Naval Reserve and Air Force Reserve missed
    their recruiting goals in fiscal year 2000, all Reserve components
    achieved desired quality levels. This year, we anticipate that all
    components, with the exception of the Air National Guard, will achieve
    their recruiting missions, even though the Army and Navy will start
    fiscal year 2002 with fewer people enrolled in the Delayed Entry
    Program than they would like.
        This has not come easily. We budgeted over $2.3 billion this year
    for enlisted recruiting including advertising, incentives, and
    recruiter salaries. Our expenditure-per-recruit will be at an all time
    high of $11,471, 53 percent higher than 10 years ago, accounting for
    inflation. Recruiter manning is higher than before the drawdown with
    more than 15,000 Active component production recruiters. Advertising
    budgets have increased 55 percent since fiscal year 1997.
        In addition to expecting to achieve our overall numerical goals, we
    continue to keep a close watch on the quality of new servicemembers.
    For fiscal year 2001, through June, quality remains strong at 91
    percent high school diploma graduates and 66 percent with above-average
    aptitude. Years of research and experience tell us that those with a
    high school diploma are more likely to complete their initial term of
    service. Additionally, research shows a strong correlation between
    above average scores on the enlistment test and on-the-job performance.
        We continue to work to identify ways to expand our target market.
    There are several on-going pilot programs designed to tap the high
    scoring non-high school diploma graduate market. The National Defense
    Authorization Act for Fiscal Year 1999 directed a 5-year project to
    attract more home schooled graduates and ChalleNGe-GED holders to the
    military by treating them as high school diploma graduates for
    enlistment purposes. Attrition data for the early accession cohorts
    have not fully matured, but do provide some basis for comparing
    attrition rates among educational credentials. In general, 12-month
    attrition rates for ChalleNGe-GED holders appear to be similar to those
    of high school diploma graduates while the attrition rates of home
    schooled youth are much higher. As the sample size continues to
    increase, we will assess the military performance and attrition
    behavior of the home schooled and ChalleNGe recruits to determine their
    appropriate enlistment priority. We also are examining the enlistment
    propensity of home schooled youth and ChalleNGe participants. We expect
    to learn about their interest, or lack of interest, in military service
    and use this information to tailor enlistment incentives for youth who
    are likely to be successful military recruits.
        The Army also recently launched a 4-year test program called GED
    Plus. This program will give some individuals who left high school
    before obtaining their diploma an opportunity to earn a GED and enlist
    in the military. GED holders in this special test program will have to
    meet stringent criteria: they must have left school voluntarily, but
    now cannot return because of age; they can not require moral character
    waivers for enlistment; they must score above average in aptitude on
    the enlistment test; and they must receive a passing score on the
    Army's motivational screen (Assessment of Individual Motivation (AIM)).
    (As part of this effort, AIM will be validated as a predictor of first-
    term attrition. If proven successful in the Army pilot, AIM can be used
    as part of the enlistment process across all Services.) Since GED Plus
    graduates will be required to have above average enlistment test
    scores, job performance should not be adversely affected.
        Army also has launched its pilot test of the recently-authorized
    ``College First Program'' which promises to identify better ways to
    penetrate the college-bound market. To improve the quality of the
    pilot, expanded legislative authorities are being proposed by the
    Department, and I hope the Committee will support them. Specifically,
    we are requesting an extended Delayed Entry Program (DEP) period that
    would add 6 months to the currently authorized 2-year DEP; we also are
    requesting an improved stipend, along with authority to permit pilot
    program participants to enroll in the Montgomery GI Bill or the Army
    College Fund. All of those initiatives promise to improve the quality
    of the pilot test and the validity of its conclusions.
        Officer accessions come from three primary sources: the Service
    academies, Reserve Officer Training Corps (ROTC), and Officer
    Candidate/Training School. All Services met their overall active duty
    officer accession goals for fiscal year 2000, although the Navy and Air
    Force both had some deficits in specialized officer communities,
    including naval flight officer, nuclear power, and scientists and
    engineers. The Services are on track to make fiscal year 2001
    commissioning goals, but again anticipate shortages in some
    specialties. To address the skill mix issue, we are proposing an
    accession bonus for those officer specialties that routinely experience
    recruiting shortfalls, and hope the committee will support this
    proposal.
        Our evaluation of recent recruiting challenges suggests that, among
    other issues, some potential recruits have made up their minds against
    military service by the time recruiters approach them. We have expanded
    our market research to include those individuals who influence the
    decisions young people make; parents, teachers, counselors, and
    coaches. Armed with these results, we hope to design communication
    strategies that will increase youth consideration of military service
    as an attractive alternative. Our initial effort is an advertising
    campaign, launched this year, aimed at parents of recruitment-aged
    youth. This campaign is designed to raise the interest of parents in
    learning more about military opportunities. We plan to augment this
    advertising campaign with an integrated communications campaign
    emphasizing the nobility of service to all Americans.
        Additionally, we have initiated a comprehensive advertising
    tracking study. We have hired a renowned firm to track all Department
    and Service national advertising, broad-scale promotional activities,
    and current events that might affect attitudes towards the military.
    The results will be quantifiable measures of the effect of marketing
    activities on the attitudes of target audiences toward the military,
    enabling the prioritization of expenditures on the basis of more
    immediate measures of effectiveness.
        We do not expect the recruiting market to soften. We must equip
    recruiters to succeed in the college-bound market. All of our
    traditional recruiting tactics, techniques and procedures are optimized
    for working the high school senior population. The realities of today's
    demographics require that we undertake an overhaul of our methods and
    our incentives to enable success in the more difficult college market.
    Some initial actions have been taken to tailor enlistment incentives,
    create new programs, and better understand the market. This will be an
    area of specific focus in fiscal year 2002.
    Retention
        Today's economy also competes directly with Services' retention
    efforts. The private sector seeks to employ our personnel for the same
    reasons we must retain them--their skill, experience, technical
    training, and demonstrated leadership.
        The Department's investment in retaining high quality, trained, and
    ready enlisted personnel during fiscal year 2000 yielded mixed results.
    On the Active component side, the Army, Navy, and Marines achieved
    desired levels of aggregate retention; the Air Force struggled during
    fiscal year 2000, missing aggregate retention by 1,700. fiscal year
    2001 projections indicate this trend will continue; the Army, Navy and
    Marine Corps will again achieve aggregate enlisted retention goals.
    Although there are promising indicators that the Air Force will exceed
    their initial term retention goal by about 600, if current fiscal year
    2001 trends continue, the Air Force, as a result of short-falls in
    second and third term retention, will likely miss its overall retention
    goal by 3,000 or more. For all Services, although aggregate enlisted
    retention shows improvement, this comes at the cost of significant
    increases in retention incentive spending reflected in the current
    budget submission, where the funding for special and incentive pays is
    increased by $152 million over the fiscal year 2001 budget. Shortfalls
    persist in a wide range of technical specialties, including:
    communications/computer, aviation maintenance, information technology,
    electronic technicians, intelligence analysts, linguists and air
    traffic controllers.
        We expect officer retention challenges to continue. Although
    Services were not able to implement it in the past fiscal year due to
    funding constraints, we believe that the Critical Skills Retention
    Bonus program authorized in the Fiscal Year 2001 National Defense
    Authorizations Act is an important tool that will help the Services
    tackle continuing shortfalls in specific skills, and we have requested
    this authority be extended in fiscal year 2002. Concern with pilot
    manning continues. While the enhanced aviation continuation pay program
    resulted in a substantial increase in years of committed service
    throughout the Department, it does not appear to have solved the
    problem. Services, already experiencing pilot shortages as a result of
    reduced accessions during the down-sizing, are further being affected
    by the demand caused by pilot retirements in the airline industry.
    Although we are able to fill cockpits now, pilot manning will require
    close attention throughout the Future Years Defense Program.
    Compensation
        Competitive pay is clearly one of the key components to ensuring
    that we attract and retain the high quality, highly skilled men and
    women needed in our armed forces today. Compensation includes all pays
    and allowances: basic pay, housing and subsistence allowances, and
    special and incentive pays. We are grateful to Congress for its work in
    significantly improving each of these areas over the past 2 years.
        Pay raises send a clear signal that our Nation recognizes the
    courage and ideals required for military service. While we have taken
    some important steps in the right direction, we cannot afford to become
    complacent. Analysis in support of the 9th Quadrennial Review of
    Military Compensation (9th QRMC) has taken a hard look at the pay
    comparability of our forces against the levels of pay they might
    command in the private sector based on their skills, experience, and
    education. The results indicate that while NCO pay would be adequate
    for a high school educated force, increasing percentages of the force
    have completed at least a year of college by the time they are E-5s.
    Today's pay table does not compare favorably with the income levels of
    similarly educated civilian workers.
        Accordingly, the Department is recommending pay raises greater than
    those legislated in recent years. While targeted bonuses may be the
    most economic manner to achieve improved retention in specific skill
    areas, we believe the pay table imbalance, due to educational
    attainment changes alone, is of sufficient magnitude that immediate
    permanent corrections are required. Accomplishing these changes should
    begin to ease the growing demand for bonuses, returning them to their
    proper use. Additional money has been budgeted to provide a minimum pay
    raise of 6 percent for all enlisted personnel, 5 percent for all
    officers, and larger increases targeted for mid-grade and senior NCO's
    and mid-grade commissioned officers. The proposed pay raise takes into
    consideration certain fundamental criteria: that raises for each
    successive promotion are larger than the previous, that raises for
    promotion are worth more than raises for longevity, and that meaningful
    longevity increases are still provided to reward continued service
    where advancement opportunity is limited. The proposed pay raise
    addresses several concerns. First, it provides the greatest emphasis to
    the pay grades with the greatest retention concerns, E-5 to E-7 and O-3
    and O-4. While the most junior enlisted pay grades (E-1 to E-3) are
    temporary grades our members pass through fairly quickly, an additional
    1 percent above the minimum 5 percent is provided to address financial
    well-being. Warrant officer pay was targeted due to concerns over pay
    compression between the mid- to senior-enlisted and warrant pay, and to
    provide an accession incentive for Army warrant officer pilots. Senior
    enlisted pay was increased, not only to avoid pay compression, but to
    recognize increased responsibility and, consistent with the advice of
    senior enlisted leadership, larger raises were provided to E-5 and E-7
    in recognition of the achievement of NCO and senior NCO status. E-4 pay
    was adjusted upward consistent with Navy recognition of E-4s as non-
    commissioned officers. Finally, larger increases are provided to E-3s
    with less than 2 years of service, and to E-4s with less than 4 years
    of service to motivate members to seek early promotion. The $1 billion
    increase is equivalent to a 6.9 percent across the board raise. We
    believe that this plan targets the most urgent issues within a balanced
    program.
        The Department intends to sustain its efforts to significantly
    improve military housing allowances and eliminate average out-of-pocket
    costs by 2005. The budget provides for further increases in the
    allowance next year, reducing the average out-of-pocket costs from 18.8
    percent in 2000 to 11.3 percent in 2002. The housing allowance is an
    important element of compensation and the Department has worked hard to
    significantly improve data collection efforts to ensure the allowance
    accurately reflects the rental markets where Service members reside.
        We are also implementing important new authorities provided by
    Congress pertaining to the critical skills retention bonus and Thrift
    Savings Plan (TSP). As mentioned previously, the new critical skills
    retention bonus authority will give Services a broad, flexible and
    highly responsive tool to quickly and effectively target retention
    problems in specific skills. Additionally, the TSP will give every
    Service member an opportunity to build a significant amount of tax-
    deferred savings. We expect the provision allowing deposit of any and
    all special and incentive pays, especially lump-sum bonuses, to be a
    particularly popular option. We have been working closely with the
    Federal Retirement Thrift Investment Board and are confident we will be
    ready to fully implement the program beginning with an October 2001
    open season.
        As you are aware, the Secretary conducted a review of morale and
    quality of life issues confronting our service members. In addition, we
    are in the midst of the Quadrennial Defense Review where we are taking
    a hard look at the future requirements for human resources. Immediate
    needs to stabilize the current force are addressed in this year's
    budget. In the coming months, additional measures will be developed to
    transform force management policies to provide the Services with broad,
    flexible and responsive tools to manage future challenges. Our focus
    will be on a better ability to manage the total force--to preserve the
    advantage provided by top-caliber people.

                               CIVILIAN WORKFORCE

        The DOD civilian workforce has been and will continue to be a major
    contributor to military readiness, providing continuity, expertise, and
    commitment. Civilians are an important and integral part of the DOD
    Total Force for several reasons. The use of civilians frees Service
    members to perform military duties, provides skills unavailable in the
    military, and helps assure continuity of operations. Civilians perform
    critical roles, from keeping war fighting organizations ready for
    worldwide deployment today to building the sophisticated tools
    necessary to maintain readiness tomorrow. DOD civilians provide
    significant support in roles such as depot maintenance, supply,
    acquisition, transportation, training, deployment, medical care,
    research and development, engineering, and facilities operations. With
    increasing frequency, civilians will deploy with the other Total Force
    components. They have provided direct support to operations such as
    Desert Shield/Storm, Haiti, the Balkans, Kosovo, and Operations
    Northern and Southern Watch. Currently, over 43,000 DOD civilians are
    forward stationed throughout the world. In short, DOD civilians have
    global impact on our day-to-day mission accomplishment.
        However, the last 11\1/2\ years has been a time of significant
    turmoil for the civilian workforce. Since the civilian drawdown began
    at the end of fiscal year 1989, DOD has eliminated 430,000 positions,
    reducing the workforce by over 37 percent. Programmed reductions will
    increase that figure to 42 percent by the end of fiscal year 2007. The
    resultant imbalances in age and experience pose problems with the
    orderly transfer of institutional knowledge, as Baby Boomers will begin
    to retire in increasing numbers this year.
        To address workforce shaping needs, DOD has developed a four-
    pronged strategy: (1) workforce analysis and modeling; (2) accession
    management; (3) development and retention; and (4) transition
    assistance.
        In the first area, the Department has commissioned research to
    identify skills needed in the future, as well as occupations where
    substantial change can be expected. This research, plus the workforce
    models for projections, will help the Department anticipate and meet
    changing needs effectively.
        DOD is now able to pay for degrees and increase the repayment of
    student loans to enhance recruitment. The Department is exploring ways
    to expedite the hiring process and provide additional pay flexibilities
    to help make DOD a more enticing place to work. We are also exploring
    initiatives such as expanded childcare access for civilians as well as
    elder care assistance to enhance the Department as an employer of
    choice.
        In the third part of the strategy, DOD created the Defense
    Leadership and Management Program (DLAMP) to prepare competitively
    selected individuals at the GS-13 level and higher for key leadership
    positions in ways that would enable them to function more effectively
    than their predecessors. Now in its fifth year, DLAMP has some 1,172
    competitively selected participants, including 240 admitted in January
    2001.
        Additionally, DOD is taking concrete steps to improve the quality
    and cost-effectiveness of the education and professional development it
    provides to its civilian workforce. DOD is working towards obtaining
    accreditation for all DOD institutions teaching civilians. To measure
    our progress, we will develop and use standards and metrics and a data
    collection system. These will permit our institutions a mechanism for
    benchmarking and will give decision-makers accurate and timely
    information on the quality and cost-effectiveness of DOD educational
    and professional development institutions.
        Managing the workforce transition humanely as well as efficiently
    has led DOD to create an exemplary workforce transition package. Less
    than 9 percent of the reduction in employment has come through layoffs.
    For example, the Voluntary Separation Incentive Payment (VSIP, or the
    ``buyout'') has enabled the Department to avoid approximately 158,000
    layoffs since 1993; and use of the early retirement authority has
    helped avoid approximately 67,000 layoffs. Other transition programs
    provide payment for continuing health insurance and other benefits to
    ease the strain. In the fiscal year 2001 National Defense Authorization
    Act, DOD received the authority to offer buyouts without eliminating
    positions. Though limited in scope, this authority permits reshaping
    the workforce where the number of positions might be right but the mix
    of skills poses a problem. DOD is collecting data on the authority's
    use this year and has requested that Congress extend its use over the
    next 2 years.
        Collectively, these steps will help the Department cope with the
    reality that it currently employs 76 percent fewer people in their 20s
    than it did in the 1980s, and 56 percent fewer in their 30s, but
    actually 6 percent more in their 50s. The median age has risen from 41
    to 46 since the end of fiscal year 1989. Workforce shaping actions are
    therefore a paramount consideration over the coming decade.

                                QUALITY OF LIFE

        Providing a high quality of life for our military members and their
    families is essential to our efforts to attract and retain a quality
    force. Considering changes in the composition of military families
    (such as the increasing number of dual income families), and realizing
    that continued service is a family decision (because how families feel
    affects their satisfaction with military life), force management and
    retention strategies must focus on the entire military family.
        Young people have many choices in today's job market. To compete,
    the Department must create an environment where individuals and their
    families are encouraged to prosper and grow and participate in the
    fruits of the American society which they have sworn to defend. To
    assist them, we must maintain a strong and sustained commitment to
    quality of life. Last year's improvement in pay, revision of the
    retirement system and commitment to reducing out of pocket expenses for
    housing were important steps. We must provide quality of life programs
    and services that set the military apart as a career of choice.
    Family Support and Spouse Employment
        In the area of Family Support, we know that family is the
    foundation of success and family well-being is critical to the peace of
    mind of our Service members. With a force that is comprised primarily
    of families--only 40 percent of the force is single with no family
    responsibilities--we recognize the integral link between family
    readiness and total force readiness. An essential element of the
    quality of life framework is improving the financial stability of our
    military families, which includes improving their personal and family
    financial training.
        We know, for instance, that spouse employment is an issue.
        DOD intends to examine ways to improve employment opportunities and
    transportability of careers. We will continue to work with the private
    sector to develop relationships that provide training and employment
    opportunities for military spouses, focusing on the areas of
    information technology, education and health care. These areas continue
    to show a strong employment picture. To accomplish this the Department
    is partnering with the U.S. Chamber of Commerce and other chambers
    around the country to engage corporate America to provide military
    spouses with training and employment opportunities leading to careers.
    Child Care
        Quality, affordable, and available childcare is a vital quality of
    life issue for the Total Force and their families. We have child
    development programs at over 300 locations with over 800 child
    development centers and 9,000 family childcare homes. DOD centers have
    a much higher level of national accreditation (99 percent compared to
    an approximate 8 percent for civilian sector centers). The Department
    estimates that there is a total need for 270,000 childcare spaces.
    Though its current childcare programs, the Department provides 170,000
    spaces and is working to meet the 215,000 space need. The remaining
    estimated childcare need of 55,000 spaces would be met with alternative
    work schedules and arrangements with neighbors and family members.
    Educational Opportunities
        This year the Department established a new Educational
    Opportunities Directorate to consolidate a number of congressionally
    mandated, education-related programs. These include impact aid, off-
    duty, voluntary education, Troops-to-Teachers, and ensuring compliance
    with laws related to the education of special needs children.
        This new directorate is the focal point for administering financial
    assistance to local education agencies to supplement the Federal impact
    aid program for school districts heavily impacted by the enrollment of
    DOD-connected children. Congress has generally appropriated about $35
    million for this purpose. In addition, for both fiscal year 2000 and
    2001, DOD was appropriated $10.5 million for making grants to eligible
    school districts for the maintenance, repair or renovation of school
    facilities which school districts operate on military installations.
    The Directorate coordinates the off-duty, voluntary education program
    for which Congress gives about $250 million to the Services. Nearly,
    $156 million of these funds are used for tuition assistance. The
    Troops-to-Teachers Program is now the responsibility of the Department
    of Education (ED). However, the DOD is administering the program as
    required by Congress.
        The Department also recognizes that a significant need exists to
    deal with issues and problems related to the transition of military
    dependent students when they are forced to change schools because their
    military sponsor is reassigned. The directorate is collaborating with
    public schools that serve military dependent students to encourage
    practices that will ease such transitions.
        Participation in the off-duty, voluntary education program remains
    strong, with about 600,000 enrollments in undergraduate and graduate
    courses and 33,000 degrees awarded annually. The Department has
    successfully completed 2 years under a uniform DOD-wide tuition
    assistance policy that ensures that all Service members regardless of
    Service have access to the same amount of tuition assistance. During
    fiscal year 2000, 100 percent tuition assistance was extended to
    members serving in contingency areas. In the fall of 2000, Congress
    provided authority for Services to pay all of the costs of members
    enrolled in higher education programs during off-duty hours. It also
    provided for members to use Montgomery GI Bill (MGIB) benefits to pay
    for that portion of tuition and expenses not covered by DOD tuition
    assistance. The Department is currently coordinating the implementation
    of these new provisions.
    Troops-to-Teachers
        In October 2000, DOD transferred responsibility for the Troops-to-
    Teachers Program to the Department of Education (DEd) as required by
    law. Subsequently, DEd received a $3 million appropriation for the
    program and requested that DOD manage the program for military
    personnel. DOD has agreed to do so and the Defense Activity for Non-
    Traditional Education Support (DANTES) will continue to operate the
    program. The Troops-to-Teachers program has successfully injected the
    talent, skills and experience of military service members into public
    school education. Over 3,400 participants have been hired in 49 states,
    and 24 states have Troops-to-Teachers Placement Assistance offices. The
    President's announcement to increase funding for this program to $30
    million will increase the opportunities to place transitioning military
    members who are disciplined, trained and motivated into America's
    critical shortage teaching careers.
    Department of Defense Dependent Schools
        Our Dependent Schools comprise two distinct educational systems
    providing quality kindergarten through 12th grade programs: the DOD
    Domestic Dependents Elementary and Secondary Schools (DDESS) for
    dependents in locations within the United States and its territories,
    possessions, and commonwealths, and the DOD Dependents Schools (DODDS)
    for dependents residing overseas. Today, Department of Defense
    Education Activity's (DODEA) 6,840 teachers serve 112,206 students in
    24 districts and 227 schools located in fourteen countries, seven
    states, Guam, and Puerto Rico. DDESS serves 34,294 students in 70
    schools, while DODDS serves 77,912 students in its 157 schools. DODEA
    students include both military and civilian Federal employee
    dependents.
        The quality of the DOD schools is measured in many ways, but most
    importantly by student performance. DOD students take the same
    standardized tests as students in many other United States school
    systems and score above the national average every year, at every grade
    level tested, and in every subject area tested. DOD Students also
    participate in the National Assessment of Educational Progress (NAEP)
    test, the only nationally administered test of academic performance.
    DOD students consistently score extremely high, and our minority
    student performance is exceptional, with both our African American and
    Hispanic students placing at the top among their peers nationally.
        A higher percentage of DODDS high school graduates attend college
    than nationally (73 percent versus 66 percent). Of those attending
    college about 9 percent of DODEA graduates and high school graduates
    nationally attend top tier universities or colleges in the United
    States as identified in the U.S. News & World Report ``Best Colleges
    2000.''
        The Department is proud of its school system and continues to
    address and support quality issues in the areas of curriculum,
    staffing, facilities, safety and security, and technology. To meet the
    challenge of the increasing competition for teachers, DOD has an
    aggressive U.S. recruitment program, with an emphasis on diversity and
    quality and a focus on placing eligible military family members as
    teachers in its schools.
    Domestic Violence
        I am pleased to report that with your help, the Department is
    making significant progress in dealing with the issue of domestic
    violence in our military communities. There is no more basic quality of
    life issue than providing a safe and secure home environment for our
    Service members and their families. Consequently, DOD has made a
    substantial commitment of manpower and dollars to its Family Advocacy
    Program. As the Nation's largest ``employer-based'' domestic violence
    program, we believe we have the opportunity not only to improve our
    response, but to contribute substantively to the Nation's overall
    effort in this matter. DOD is establishing a central database to track
    incidents of domestic violence and commander disciplinary actions.
        The Defense Task Force on Domestic Violence was established last
    year in accordance with the requirements of Section 591 of the Fiscal
    Year 2000 NDAA (P.L. 106-65). Task force members have been hard at work
    for more than a year and have completed their first annual report and
    strategic plan. When the review is complete, the Secretary will forward
    the task force report to you with an evaluation and comments. We are
    confident that, working together with the task force, we can and will
    continue to make significant progress in our prevention of and response
    to domestic violence in the military.

                        MORALE, WELFARE, AND RECREATION

        Morale, Welfare and Recreation (MWR) programs offer ``hometown''
    support for those separated from extended families and familiar
    settings in over 300 military communities. MWR programs include
    gymnasiums, recreation centers, libraries, sports, outdoor recreation,
    hobby shops, bowling, golf, parks, and other programs normally found in
    civilian communities. Those programs that are most often used are
    fitness, outdoor recreation and libraries.
    Commissaries and Military Exchanges
        Military members and their families consider their commissary
    privilege to be one of their top two non-cash benefits, second only to
    health care. The Defense Commissary Agency (DeCA) operates the
    worldwide system of 283 commissaries. By selling grocery items at cost
    plus 5 percent surcharge, DeCA provides a minimum 29 percent saving on
    comparable market baskets. Beginning in fiscal year 2002, legislative
    authority will permit funding of most DeCA operations from
    appropriations, thereby leaving the Surcharge Trust Fund available for
    capital investment. The fiscal year 2002 major construction program, in
    a significant increase from prior years, contains 10 commissary
    projects at a total surcharge cost of $98 million.
        Secretary Rumsfeld has asked us to consider those services that may
    be performed more efficiently. He has suggested that commissaries be
    considered in that effort. Let me state clearly that this is a proposal
    to improve how the benefit is delivered with the objective being to
    obtain the same benefit at reduced cost to the defense department. We
    will work closely with the congressional oversight committees in
    exploring this issue.
        Currently, the private sector is operating the distribution system,
    performing shelf stocking, and operating some bakery, deli, and seafood
    concessions. These services are transparent to the customer in terms of
    service and savings; assure consistent delivery of the commissary
    benefit at less cost to the taxpayer and with no increase in the
    surcharge rate; and continue employment opportunities for our family
    members. Let me reiterate: as we explore additional opportunities to
    capitalize on private sector competencies, there is no intent to
    decrease the value of the benefit or population served.
        Military exchanges also form a significant portion of the community
    support program. They are the ``home town store'' for our service
    members overseas, in remote locations and deployment sites all over the
    world. It is important to troops and families stationed around the
    world to have American goods and service. Being a long way from home
    should not mean giving up what is familiar and what adds comfort to
    sometimes difficult lifestyles. Today's exchanges operate at 694
    locations worldwide, with annual sales of nearly $9 billion.
        Exchanges offer quality goods at significant savings, and then pass
    the majority of their profits back to the MWR program to support
    essential, morale building programs and make capital improvements. Our
    practice of using exchange earnings to support MWR programs is well
    established; the exchanges provide over $300 million annually.
        The Department has recently taken a very close look at the exchange
    business practices and organizations to maximize efficiencies and
    improve customer service and savings. I will look closely at the study
    results and the service implementation plans to ensure that the
    alternatives pursued reduce costs while improving customer service,
    ensuring competitive pricing, and continue support for MWR.

                            MILITARY FUNERAL HONORS

        The rendering of a final tribute and recognition to our Nation's
    veterans is an important tradition in the Department of Defense. Since
    the signing of the National Defense Authorization Act for Fiscal Year
    2000, the Department has worked diligently to ensure that our Nation's
    veterans receive dignified military funeral honors. Given the
    significant increase in veterans' deaths and the downsizing of the
    active and Reserve Forces, this has been a challenging mission, but one
    to which we are totally committed. We now have a DOD policy directive
    in place that clearly delineates the Military Services' responsibility
    in the provision of military funeral honors upon request, the
    requirement to provide a ceremonial flag, folding and presentation of
    the flag, and the playing of ``Taps.'' The funeral honors detail
    consists of two uniformed personnel with at least one from the parent
    Service of the deceased veteran who presents the flag to the family.
        We have devised a system that coordinates Military Funeral Honors
    requests and it is working well. Additionally, the Military Funeral
    Honors kit that was sent to funeral directors around the country has
    significantly enhanced the ability of the military Services to respond
    to requests. During this first year of full implementation of the law,
    we have seen significant increases in the numbers of military funeral
    honors requests provided by the military. We are currently working on
    our program to partner with members of veterans service and other
    appropriate organizations to augment the two-person detail. This is
    called the Authorized Provider Partnership Program (AP\3\). The AP\3\
    will enhance our ability to provide additional elements to the funeral
    ceremony. Our overall goal is to render appropriate tribute to our
    Nation's veterans and to provide support to the families of these
    patriots who defended our country in times of war and peace.

                            TOTAL FORCE INTEGRATION

        This statement would be sadly incomplete without my highlighting
    the contributions made by the National Guard and Reserve to the Total
    Force. The Reserve components continued to support U.S. military
    operations worldwide, providing over 12 million duty days of effort in
    the areas of contingency support in Bosnia, Kosovo and Southwest Asia;
    counter-drug operations; domestic emergency support; exercises; and
    operational support to combatant commands and military services. This
    high level of effort has remained relatively stable over the past 5
    years, even as the Reserve component force has continued to draw down
    in size.
        Despite maintaining this consistent level of activity, the process
    for employing Reserve component members, given the wide array of
    different duty categories and statuses in which they can serve, is
    unnecessarily complex and confusing. We are undertaking a comprehensive
    review to determine if greater efficiencies and increased flexibilities
    are possible in the process of employing Reserve units and individuals.
    Associated compensation and benefits are also being addressed to
    identify and eliminate any disparities between the active and Reserve
    components.
        The fiscal year 2002 budget request includes important increases
    for the Reserve components. Increases go to personnel accounts for a
    5.0 percent across-the-board pay raise, pay table reform to further
    increase pay for certain personnel grade levels, and additional full
    time support personnel needed to improve readiness management.
    Additions to operating accounts are designed to improve personnel
    training and readiness by increases in flying hours, base operations
    support, depot maintenance.
        Additionally, Military construction (MILCON) investment for the
    Reserve components represents an increase of 280 percent over last
    year's request, and the largest request in the last two decades. The
    facility investment of $615 million represents a first step in the
    Department's commitment to address a failing infrastructure. A 6.5
    percent procurement increase will fund new Reserve component equipment,
    helping to ease the affects of old equipment on readiness.
        Although the Reserve components normally do not rely on housing,
    barracks, and fitness centers for their quality of life, the issue of
    quality of life is equally important for the guardsmen or reservist
    whose quality of life is measured by where they work and train. The
    President's budget begins to address the neglected facility
    infrastructure of the past.

                                  HEALTH CARE

        Another critical quality of life issue facing our service men and
    women and their families is health care. It is a recruiting and
    retention tool and it is the means by which we retain a fit and healthy
    force. The Military Health System (MHS) consists of 78 hospitals and
    more than 500 clinics worldwide serving an eligible population of 8.3
    million. In addition, we have seven TRICARE Contracts that supplement
    our military medical facilities with a network of civilian healthcare
    providers. We emphasize the prevention of illness. We identify
    hazardous exposures, and record immunizations and health encounters in
    a computerized fashion for patient safety and any needed patient care
    events. We deliver the health care benefit as defined by Congress and
    ensure high quality health care to all eligible beneficiaries.
        The passage of the generous new health benefit by Congress last
    year provides additional challenges in our efforts to ensure quality
    health care for our deserving beneficiaries. Our great success to date
    in implementing this broad array of new entitlements reflects the
    support and work of our DOD leadership, the Surgeons General, the
    beneficiary associations and your staffs. The outreach to our
    beneficiaries has been comprehensive, and I greatly appreciate the
    assistance you and your staffs have provided to ensure successful
    implementation.
    Military Health System Funding
        Health care costs in this country continue to rise and the military
    health system is not immune from these escalating costs. This is the
    first time in recent years that the President's budget request
    identifies a realistic estimate of our military health care costs. The
    budget increase funds for the direct care system to sustain military
    treatment facilities (MTFs). It increases funds for pharmacy operations
    by 15 percent, reflecting our own recent experience, as well as what is
    anticipated in the private sector in the coming year. It provides for a
    12 percent increase over the fiscal year 2001 budget for the managed
    care support contracts, which is again consistent with the overall cost
    increases in the private sector. Sufficient funds are also provided to
    implement the fiscal year 2001 NDAA requirements, including TRICARE For
    Life.
        The President's Budget request also reflects requested legislation
    directing the Department to implement prospective payments for some
    health services not currently paid on a prospective basis. The general
    provision would expedite reform of TRICARE payment methods and allow
    the Department to expedite adopting prospective payment rates for some
    civilian institutional services (e.g., skilled nursing facilities (SNF)
    and hospital outpatient services) and for non-institutional providers
    (e.g., ambulance services). We do not expect this change in
    reimbursement method to create barriers for access to SNFs or to cost-
    shift payment liability to the beneficiary by balance billing. We do
    expect it to save $315 million in fiscal year 2002.
        In our fiscal year 2002 budget request, you will see an
    administration proposal to eliminate the duplication in funding and
    services that exists between DOD and the Department of Veterans Affairs
    (VA). Reportedly, there are about 700,000 dual eligible retirees, who
    currently can use both DOD and VA systems. At present, both agencies
    must prepare to care for them, without knowing how many will actually
    use the DOD or VA systems. As a result, the allocation of Federal
    Government resources is not accomplished as efficiently as possible,
    and beneficiaries may not receive the most coordinated healthcare. This
    proposal would require military retirees to select either DOD or VA as
    their source of care. The administration believes this proposal will
    enable DOD and VA to budget and plan more appropriately for their
    beneficiaries. It will also provide beneficiaries greater continuity of
    care.
    Military Health System Challenges
        We face many challenges within the DHP. These can be summarized
    into four major areas:
        1. Creating a stable business environment for the direct care
    system by ensuring that it is funded properly and recapturing workload
    through optimization initiatives;
        2. Developing a new generation of simplified managed care support
    contracts, which have greater financial predictability, create more
    competition, and reduce administrative costs.
        3. Strengthening our ties to other Federal health care systems,
    including the VA and Centers for Medicare and Medicaid Services to
    optimize the utilization of all Federal healthcare resources.
        4. Implementing the new TRICARE benefits for those age 65 and over
    and establishing the accrual fund mechanisms for fiscal year 2003.
    TRICARE Senior Pharmacy
        I would like to take just a moment to describe the successful
    implementation of the pharmacy program for our senior beneficiaries. We
    implemented this benefit just about 5 months after enactment of the
    law. Although the start-up of TRICARE Senior Pharmacy (TSRx) went
    smoothly, many issues had to be resolved because the new program had to
    be explained to a large number of beneficiaries in a very short time.
    We achieved this tremendous effort through the cooperation of our
    military and civilian staff, our contractors, the beneficiary
    associations, our beneficiaries, and with great support from Congress.
    During the first few months of the program, approximately 1.5 million
    prescriptions have been processed, totaling about $80 million in health
    care costs (excluding start-up and ongoing administrative costs). We
    anticipate that healthcare costs will increase as more beneficiaries
    drop other health insurance with pharmacy coverage and come to rely on
    us for their pharmacy needs, particularly after TRICARE For Life begins
    on October 1.
    Expanding TRICARE to Medicare Eligibles
        Congress established October 1, 2001, as the date on which our age
    65 and over beneficiary population will become eligible for TRICARE
    benefits. On that date TRICARE will become a secondary payer to
    Medicare for care received outside military medical facilities. The law
    requires that all Medicare-eligible beneficiaries be enrolled in
    Medicare Part B to receive the new TRICARE benefits. DOD has worked
    with the Centers for Medicare and Medicaid Services (CMS, formerly
    HCFA) in establishing the mechanisms to conduct data exchanges that
    will assist in determining those of our beneficiaries who have
    purchased Medicare Part B, thus verifying eligibility to participate in
    the program.
        Under the new law, Medicare-eligible retirees can continue to use
    military medical facilities for their care. For several reasons,
    Medicare-eligible beneficiaries will not fit into the current structure
    of the triple option benefit when they attain TRICARE eligibility. In
    order to provide beneficiaries an alternative option for using TRICARE
    providers without the need to lock in to a HMO-like program, we issued
    a policy authorizing the establishment of TRICARE Plus, an MTF primary
    care enrollment program.
        Under TRICARE Plus, all beneficiaries who use MTFs but who are not
    enrolled in TRICARE Prime will be offered the opportunity to enroll for
    MTF primary care, to the extent capacity exists. There is no lock-in
    and no enrollment fee. This will facilitate primary care appointments
    when needed. MTF capacity will limit the number of persons accommodated
    at each MTF to assure that their primary care needs and TRICARE access
    standards are met. For care from civilian providers, TRICARE Standard
    or TRICARE Extra rules will apply. If the enrollee is Medicare-
    eligible, for services payable by Medicare, Medicare rules will apply,
    with TRICARE as second payer.
    Accrual Funding
        The Medicare-eligible Retiree Health Care Fund will begin operation
    in fiscal year 2003. At present, discussions are under way with the
    Office of Management and Budget (OMB), and within the Department to
    define the parameters for establishing and implementing the fund. OMB
    has established the fund at the Department of Treasury and placed it in
    the OMB budget database. The Board of Actuaries meets on July 17 to
    determine the major assumptions and methodologies for calculating the
    liability. Within the Department we are developing the procedures to
    implement the fund. Shortly we will forward a report to Congress on the
    concept of operation for how the fund will work, as well as the
    periodicity and amounts for the accrual fund.
    Reserve Component Health Care
        The Department has made great strides in health care for family
    members but nearly 70 percent of Reserve families live outside the
    catchment area of a military treatment facility, which may limit them
    to TRICARE Standard and Extra, thus requiring cost shares and an annual
    deductible. We are exploring alternatives for ensuring continuity of
    health care for the families of Reserve component members, when those
    members are called to Active Duty for more than 30 days. These Reserve
    families are eligible for military health care under TRICARE, but this
    requires a change in health care systems and possibly health care
    providers for short periods of time, only to return to a civilian
    health care plan when the reservist is released from Active Duty. While
    the reservist has the option to continue his or her employer-sponsored
    health care plan, the employer may require the reservist-employee to
    pay the full premium cost of the plan plus an administrative fee.
        It may be possible for the Department to provide a certain amount
    of assistance so that Reserve families remain under their employer-
    sponsored health care plan during periods of service greater than 30
    days but less than 18 months. Under this situation, these families
    would not be eligible for TRICARE and thus there could be some savings
    associated with this limited reduction in TRICARE workload costs. Such
    a program would provide an affordable alternative, which would relieve
    the stress on the family of changing health care systems when the
    reservist is called to Active Duty.

                                   CONCLUSION

        Mr. Chairman, this concludes my statement. I thank you and the
    members of this Subcommittee for your outstanding and continuing
    support for the men and women of the Department of Defense. I look
    forward to working with you closely during the coming year.
                                     ______

              Prepared Statement of Lt. Gen. Timothy J. Maude, USA

        Mr. Chairman and Members of the committee: Thank you for this
    opportunity to report to you today on United States Army personnel
    programs and the fiscal year 2002 budget. As a framework for this
    topic, I intend to focus on how our personnel programs and policies
    contribute to achieving the Army Vision. To meet the national security
    requirements of the 21st century and ensure full spectrum dominance,
    the Army articulated its Vision to chart a balanced course and shed its
    Cold War designs. The Vision is about three interdependent components--
    People, Readiness, and Transformation. The Army is people--soldiers,
    civilians, veterans, and families--and soldiers remain the centerpiece
    of our formations. Warfighting readiness is the Army's top priority.
    The Transformation will produce a future force, the Objective Force,
    founded on innovative doctrine, training, leader development, materiel,
    organizations, and soldiers. Our manpower programs are vital to each
    element of the Army Vision.
        Before I go any further, I want to ensure you realize how much our
    soldiers and leaders appreciate the work of Congress and of this
    committee in addressing our most significant concerns. Soldiers,
    retirees, and their families sense a renewed commitment to their well
    being through your support of fiscal year 2001 pay raises and National
    Defense Authorization Act health care provisions, coupled with the
    President's recently announced initiatives to further increase funding
    for pay raises, retention incentives, health benefits, and housing
    improvements. By increasing funding to our manpower and recruiting
    efforts, you enabled a sustained growth in Army personnel readiness.
    Though the Army must balance priorities to avoid negatively affecting
    our Transformation efforts and near-term readiness, the message to our
    uniformed soldiers, past and present, and their families, is extremely
    positive. We also appreciate your continued support of our Army's
    Transformation. The Army has embarked on a historic endeavor to change
    in comprehensive and profound ways. Our objective remains to be the
    most strategically responsive and dominant land force of the 21st
    century--decisive across the entire spectrum of military operations.

                                     PEOPLE

        The Army is people. People are the core of the Army's strength.
    Three years ago, we completed the Army's draw down to an Active
    component force structure requiring 480,000 Active component soldiers.
    The speed of the draw down, the imperative of taking care of our
    soldiers, and the maintenance of near term combat readiness created
    significant manning challenges. We are addressing those challenges,
    with your support. Since fiscal year 1999, the Army has made
    significant improvements in personnel readiness. This year we will
    achieve congressional guidance for end strength for the third year in a
    row. At the same time, our average strength has steadily increased,
    from 473,000 man-years in fiscal year 1999, to 475,000 man-years in
    fiscal year 2000, and a forecasted level of 479,500 man-years in fiscal
    year 2001. As a consequence, we are manning our 10 Active component
    divisions and two Armored Cavalry Regiments at 100 percent of
    authorized strength, and 94 percent grade and skill match. The fiscal
    year 2001 achievement is particularly notable. This manpower level will
    only be possible should Congress fund additional man-years in the
    fiscal year 2001 supplemental appropriation above our budget request.
    Our fiscal year 2002 budget request includes funding for an average
    strength of 476,900 man-years and 480,000 end strength. However, we are
    fully capable of achieving an average strength of 480,000 in fiscal
    year 2002, and will put in place a strategy to execute a manpower
    program at that level. Increased funding for man-years directly
    translates into more boots on the ground each day in our formations and
    higher levels of personnel readiness.
        Successful recruiting has been a key enabler to our increased
    manning levels. The Army achieved its recruiting goal in all three
    components in fiscal year 2000 for the first time since 1991. (The next
    previous time was 1982.) For fiscal year 2001, we expect to achieve our
    goals in all three components again, achieving the first back-to-back
    successful years in all components in two decades. These successes do
    not come easy or cheap. A large part of our success is due to the help
    this committee has provided us in recruiting support and enlistment
    incentives, and we thank you for that.
        Concurrent with the Army's transformation, we are transforming our
    recruiting practices. We have changed our processes to better align
    with the expectations and needs of today's youth. Our vision for Army
    recruiting is a recruiting program that is able to connect with the
    youth of America through a carefully selected professional sales force,
    supported by credible research, relevant products, state-of-the-art
    systems, and world-class advertising. Our advertising campaign now
    features real soldiers discussing 212 ways they serve in the U.S. Army
    and 180 ways in the U.S. Army Reserve. In these ads, American youth
    learn about intriguing men and women who are their own age, serving our
    Nation proudly. The campaign discusses camaraderie and core values. The
    ads stress overcoming challenges to achieve a better life. ``An Army of
    One'' unites two messages: the teamwork that makes our Army powerful
    and the importance of our greatest strength--the American soldier. The
    response is highly encouraging. After the new campaign's debut on
    January 10, visits to www.goarmy.com were up to 28,000 per day, calls
    to 1-800-USA-ARMY jumped one third, and participation in on-line
    recruiter chat rooms increased 94 percent.
        We are continuing to shift our emphasis from our traditional high
    school senior market to the college and high school graduate markets.
    As a result, we have made major strategic improvements in recruiting
    production. By enlisting soldiers who have already completed high
    school, we have been able to fill near-term training seats. Delayed
    Entry Program (DEP) losses are down. The number of enlistees with some
    college education has increased, providing us with soldiers better able
    to meet the demands of our high-tech job requirements. In fiscal year
    2000, we enlisted over 8,000 soldiers with some level of post-secondary
    education an increase of 30 percent.
        We have repositioned our recruiting force to match population
    shifts and more effectively connect with our market. In fiscal year
    2000, we opened and relocated more than 180 recruiting stations. More
    than 20,000 newly trained recruits participated in the Hometown
    Recruiter Assistance Program, going back to their hometowns to provide
    personal testimony about their experiences. We continue to leverage the
    growth of technology in automating the recruiting force. We have
    modernized our job placement system Army-wide, giving us better
    visibility of job availability, allowing us to offer a greater variety
    of enlistment packages and options to enlistees, and reducing the
    processing time for our applicants. As a result, we have substantially
    reduced the number of applicants who are qualified to enlist but decide
    not to accept available options. Likewise, the enhancements associated
    with the fielding of the Army Recruiting Information Support Systems to
    our recruiting force are showing positive results. Closely linked with
    our improvements in automation is our exploitation of the capabilities
    and opportunities offered through the Internet. The expansion and
    redesign of www.goarmy.com allows us to offer more information for web
    users to surf, click, see, and hear. In fiscal year 2000 we had more
    than 3,000,000 visitors to our web site, providing us with over 90,000
    follow-up opportunities (recruiter leads). Our `cyber-recruiters'
    corresponded with more than 30,000 chat users visiting our chat room,
    generating over 7,000 follow-up email messages. Our enlistment contract
    per lead rate from the Internet is higher than all other lead sources.
    The new Army advertising campaign is intended to drive potential
    applicants to our web site. Since the launch of the campaign in January
    2001, hits on our web site are up 197 percent, and recruiter chat room
    visits are up 94 percent.
        Today's young men and women have more employment and educational
    opportunities than ever before. Competition for these young people has
    never been more intense. The Army needs to have competitive incentives
    to make service to our country an attractive option. To that end, we've
    developed programs we think will attract high quality young men and
    women. The potential impact of these programs is broad-based and far-
    reaching. Our recruits, colleges, private industry, the Army, and the
    Nation all benefit from a better-educated, highly skilled Army of
    opportunity that returns a disciplined, mature citizen back to society.
        Announced in July 2000, the Partnership for Youth Success (PaYS)
    program consolidates Army and industry recruiting efforts into a
    partnership that is cooperative rather than competitive. When a new
    soldier enlists under this program, he or she can choose from 94 job
    skills offered by the Army and needed by industry, receive accredited
    certification in that job skill, and upon successful completion of
    their term of service, receive preferential hiring status with a
    participating corporation in need of that skill. Currently, ten major
    corporations are participating in this program and 1288 soldiers have
    taken advantage of this opportunity.
        The Army's High School completion program or GED Plus offers high
    quality young people who have not completed their high school
    education, but score high on the Armed Services Vocational Aptitude
    Battery and the Assessment of Individual Motivation test and are
    otherwise qualified, the opportunity to gain their GED and then enlist
    in the Army. We expect this program to pay big benefits not only to the
    new soldiers, but also to the Army and the Nation as well. The Army
    accessed 3,449 through this program in fiscal year 2000. By 1 July
    2001, the Army had accessed an additional 4,818 and had another 481 in
    the DEP for 2001.
        Geared toward vocational or junior college interests, the College
    First program offers high school graduates an opportunity to attend 2
    years of college before joining the Army. The Army provides enlistees
    in this program with a monthly stipend during their time in college in
    exchange for a commitment to service upon graduation. Even though
    research shows this is precisely the type of option that youth are
    looking for, response to the program during its first year was very low
    (less than 250 contracts). In fiscal year 2001, the Army contracted 281
    for the program as of July 2, 2001. The stipend that we are allowed to
    pay is $150 per month. We are examining proposals on how to address
    this program and may be asking for your help to make this a viable
    program as we continue to increase our presence in the college market.
        Business practices, incentives and advertising are a part of
    recruiting but our most valuable resource is our recruiters. Day in and
    day out, they are in the small towns and big cities of America and
    overseas, reaching out to young men and women, telling them the Army
    story. We have always selected our best soldiers to be recruiters and
    will continue to do so. These soldiers have a demanding mission in
    making their individual goals. We owe it to these recruiters and their
    families to provide them the resources, training and quality of life
    environment that will enable them to succeed. The Army appreciates
    Congress's continued support for recruiting programs and also for your
    support for improving the quality of life of our recruiting force.
        Like recruiting, retention is critical to our success in manning
    the Army. The Army's retention program remains the most successful in
    the Department of Defense. This year, the Army will meet or exceed its
    retention objectives for the third year in a row. The fiscal year 2001
    mission is 64,000. Fiscal year 2001 accomplishments as of 2 July were:
    Initial term--106 percent; Mid-Career--109 percent, Career--100 percent
    for an aggregate of 105 percent, fiscal year 2001 ETS--117 percent and
    Reserve Transition--127 percent. Funding of retention bonuses is
    paramount to the success of Army retention. Concerns over adequate
    housing, compensation, and deployments are also key factors in a
    soldier's choice to continue service. The Fiscal Year 2001 Defense
    Authorization Bill was a start in addressing many of these concerns,
    but continued attention is needed.
        While we have had significant success in improving enlisted
    manning, we are still working to stabilize the officer corps following
    the decade of draw down. In fiscal year 2001, we expect an aggregate
    inventory shortage of approximately 1,700 officers. A particular
    concern is our shortage of 2,776 Army Competitive Captains. We continue
    to lose Captains with 6 to 10 years of service at levels above historic
    norms. This creates an imbalance between our inventory and structure,
    which is difficult to manage and a readiness concern. In fiscal year
    2001, the Army leadership implemented numerous initiatives to encourage
    officers to continue service. It's too soon to determine the
    effectiveness of these initiatives. We will continue to inform you of
    our progress.
        The Army Vision states, ``the Army will assure our Nation's
    security by equipping, training, caring for our people and their
    families, and enabling their full potential as individuals.'' While
    this has long been our focus, the dynamic and uncertain nature of the
    strategic environment along with evolving societal expectations and
    demographics dictate that we address the human dimension in its
    entirety as part of the overall transformation of our force. To that
    end, we are transforming the cold war concept of ``quality of life''
    into a far more comprehensive system known as ``well-being.''
        Well-being is the personal state of our people that contributes to
    their preparedness to perform and support the Army's mission. The idea
    of well-being significantly expands on the concept of quality of life
    by taking a holistic approach, strategically integrating all related
    programs into a more encompassing and unifying concept based on a
    specific set of well-being functions. Well-being philosophically links
    individual aspirations with the needs of the Army. Well-being
    establishes standards and metrics by which to measure the impact of
    well-being programs on desired military outcomes such as performance,
    readiness, retention, and recruiting. Well-being recognizes the impact
    of a much broader range of factors that effect job satisfaction such as
    turbulence, training, and leadership. Our Well-Being program is focused
    on achieving three strategic goals. We must provide a competitive
    standard of living. Because the Profession of Arms is a unique culture,
    we must provide sense of community and a record of accomplishment that
    engenders intense pride and sense of belonging. Finally, we must
    provide an environment that allows our people the personal enrichment
    that comes from pursuing their individual aspirations. We believe such
    a focus creates the environment where soldiers and family members are
    more self-reliant and exude higher levels of confidence and competence
    in addressing the challenges of military life. Our people will be
    better prepared to perform and support the Army's full spectrum
    mission.
        The Army's readiness is inextricably linked to the well-being of
    its people--soldiers (Active, Guard, Reserve), civilians, veterans,
    retirees, and their families. Recognition of this demands a balanced
    approach to the fulfillment of our strategic goals. The Army has moved
    beyond the narrow cold war focus on standard of living (pay, health
    care, and housing) to add a mix of workplace environment, education,
    and soldier and family programs to this holistic approach to well-
    being. There is no question as to the importance of ``pay'' and
    ``health care'' in terms of the well-being of our people. Together,
    they are a trust we must keep, not just with those currently in uniform
    but with veterans and retirees who served before us. Together with
    ``housing,'' pay and health care form the backbone of the Army's Well-
    Being Goal of providing a competitive standard of living for our
    people.
        For most of the past half century, the military has been closely
    associated with education. With the advent of the information age and
    an increasingly promising economy, this relationship is only getting
    more complex. The results of the Secondary Education Transition Study
    are drawing attention and are certain to be a principal focus in the
    not too distant future. Whether a direct benefit to soldiers or an
    indirect benefit to family members, education remains a critical factor
    in reaching our goals of professional pride and personal enrichment.
        Soldier and family programs such as fitness, sports, libraries and
    recreation, Army Community Service, and Child and Youth Services are
    absolutely critical. In some ways, they are perhaps the easiest to
    overlook, but they also contain some of the most powerful signs of our
    commitment to our people. These diverse programs are tailored to meet a
    variety of individual needs and aspirations. By fulfilling them, the
    Army sends a strong message directly to individual soldiers and family
    members. In many cases, these are the programs that bring volunteers
    from veterans and retiree groups back into contact with the force. They
    solidify the common bond that reinforces the sense of community and
    contributes to readiness and retention. Dollar for dollar, some of our
    most effective and efficient programs reside in this general category.
        In summary, well-being is a strategic human resource program
    critical to the Army's vision of equipping, training, caring for our
    people and their families, while enabling their full potential as
    individuals. It accomplishes this mission by leveraging a competitive
    standard of living, personal enrichment, and pride coupled with a
    strong sense of belonging. With far greater strategic impact than
    quality of life, well-being exists as both a strategic program and
    point of view. It creates an environment where soldiers and families
    are more self-reliant, more competent and confident in addressing the
    challenges of military life, and better prepared to support the Army's
    full spectrum mission.
        Sustained Congressional support for important well-being programs
    help us recruit and retain a quality force. Indeed, the pay raise, pay
    table reform, and retirement reform, as well as diligent efforts by
    leaders at all levels of the Army helped us exceed our recruiting and
    retention goals in fiscal year 2000. It is only through such efforts
    that we maintain our commitment to our people. A comprehensive well-
    being program ensures a quality force both now and in the future.

                                   READINESS

        We have leveraged increased Army strength through the Army Manning
    Initiative. Over a 4-year period beginning in fiscal year 2000, our
    goal is to improve manning levels in units across the Army. We
    initially redistributed soldiers to fill all personnel authorizations
    in every Active component combat division and cavalry regiment. In
    doing so, we accepted some risk in the institutional base. This effort
    exposed the serious gap that has existed in the aggregate between
    manning requirements and authorizations. It is possible that we will
    need to increase personnel authorizations to meet all unit manning
    requirements, dependent upon ongoing reviews of overall Army missions.
    Manning the entire force will reduce operational and personnel tempo
    and improve both readiness and well-being.
        Over the past year, we kept our 10 Active component warfighting
    Divisions, and two Armored Cavalry Regiments manned to 100 percent
    assigned personnel of their authorizations. We made steady increases in
    key units that deploy in the first 30 to 35 days in our Major Theater
    War scenarios. By the end of fiscal year 2001, these units will be
    manned at 100 percent of authorizations. At the same time, we have
    continued to fill key billets in our non-priority units to 100 percent,
    as well as keep their overall manning at a level sufficient for them to
    accomplish their missions by the end of this fiscal year, 67 percent of
    the Army will be at 100 percent strength while at the same time we have
    guarded against ``breaking'' the average strength of the other units.
    Improving Army manning within our overall strength and fiscal
    constraints, particularly in a tight labor market, has been a tough
    challenge. We have not sacrificed our quality standards for recruiting
    and retention. Our sustained improvements in personnel readiness are
    the proof our success in recruiting, retention, and attrition
    reduction.

                                 TRANSFORMATION

        The third component of the Vision is a comprehensive transformation
    of the entire Army. This complex, multi-year effort will balance the
    challenge of transforming the operational force and institutional base
    while maintaining a trained and ready force to respond to crises, deter
    war and, if deterrence fails, fight and win decisively. Transformation
    is far more extensive than merely modernizing our equipment and
    formations. It is the transformation of the entire Army from leader
    development programs to installations to combat formations. All
    aspects--doctrine, training, leaders, organization, material, and
    soldiers--will be affected.
        During this transformation, the Army must become more flexible in
    our personnel management practices as well. This flexibility will allow
    us to react to changes in our strategic environment, and to potential
    enemy adaptations to our capabilities. We need flexibility to take
    advantage of new technologies, and to adjust our plans to the pace of
    change. The Army recently completed an in-depth evaluation of our
    warrant officer and enlisted personnel management systems. The study
    resulted in 23 initiatives being approved for implementation. These
    initiatives, when combined with our revision of the Officer Personnel
    Management System in 1997, refine the Army's leader development and
    personnel management by modernizing personnel business practices,
    aligning warrant officer inventory and structure, and providing agility
    and versatility to the Enlisted Personnel Management System. We call
    this holistic approach to military personnel management the Army
    Development Systems. It includes character development, performance
    evaluation, leader development, and personnel management subsystems.
    The Army Development Systems enhance our ability to support the Army's
    personnel needs by ensuring all personnel life cycle functions are
    efficient and flexible during the Army's transformation to the
    Objective Force, while allowing for the inevitable system adjustments
    generated as the Army's personnel needs evolve.
        We are also supporting Army Transformation by transforming the way
    the personnel support services are provided. Personnel Transformation
    will revolutionize, integrate, and redesign our personnel programs and
    systems to provide simple, accurate, and accessible personnel
    information for commanders, soldiers, and families. It is vital to
    sustaining Army readiness and providing for the well being of soldiers
    and family members.
        Today, the Army employs over 350 legacy personnel automation and
    information systems in support of over 1,170 processes, which are often
    overly complex, burdensome, non-responsive, unnecessary, and redundant.
    With few exceptions, our systems do not facilitate or foster the
    sharing of information between the Army's three components. We continue
    to employ many manual, stove-piped, and duplicative procedures and
    processes. Historically, the personnel function has required a large
    footprint in the operational theater. Our goal is to reduce that
    footprint via modernization of personnel systems and leveraging
    technological advancements in information systems.
        The Army's Personnel Transformation Campaign Plan is comprised of
    three elements. First, the creation of an integrated corporate
    personnel database that is secure, yet accessible and provides
    seamless, timely, accurate, responsive, and reliable information. This
    corporate database will allow the Army to eliminate and collapse
    numerous legacy systems. Second, Personnel Transformation will
    implement ``best business practices'' that streamline and eliminate
    personnel processes. We fully endorse and support the Defense
    Integrated Military Human Resource System (DIMHRS) initiative as part
    of this effort to implement best business practices across the
    Departments and components. In fact, we have asked the Department of
    Defense to consider accelerating the implementation of DIMHRS. Finally,
    Personnel Transformation will reduce the footprint of personnel
    administration on the battlefield while improving strategic
    responsiveness. We will leverage advanced communication technologies
    with our integrated database and best business practices to become more
    efficient and more responsive to our theater commanders.

                               CLOSING STATEMENT

        With the support of the administration and Congress, the Army has
    embarked on a historic enterprise to transform in response to a
    changing strategic environment. People remain the centerpiece of that
    transformation because ultimately, soldiers on the ground are
    responsible for carrying out our Nation's policies. On any given day,
    the Army has over 121,000 soldiers forward stationed in over 100
    countries. The personnel policies and programs I've described are
    essential to their support.
        Mr. Chairman and distinguished members of the Committee, I would
    like to thank you once again for this opportunity to report to you
    today on the personnel readiness of your Army. The statements made in
    this testimony are contingent upon the results of Secretary Rumsfeld's
    strategic review. I ask you to consider them in that light. I look
    forward to working with you on these important issues.
                                     ______

              Prepared Statement by Vice Adm. N.R. Ryan, Jr., USN

                                  INTRODUCTION

        Chairman Cleland, Ranking Member Hutchinson, and distinguished
    members of the subcommittee, I appreciate this opportunity to appear
    before you to discuss active and Reserve military and civilian
    personnel issues in the Department of Defense legislative proposal for
    fiscal year 2002.
        Navy's posture, programs and character are shaped by the fact that
    we are a forward-deployed force, an integral part of the National
    Military Strategy, providing immediately employable combat power for a
    broad range of missions in support of national objectives. This on-
    scene, combat-credible power promotes regional stability, deters
    aggression, dissuades potential adversaries, and--if crisis turns into
    conflict--provides joint force commanders with available, sustainable,
    capable forces for combat operations. Every day, naval forces represent
    sovereign American power in the far reaches of the world's oceans. On
    any given day, one-third of the force--1 out of 6 sailors, 1 out of 3
    ships--is forward deployed in support of the national military
    strategy. Their value is reflected through command of the seas,
    ensuring the free flow of trade and resources; sustained combat-ready
    presence in regions of interest; and assured access to theaters of
    operation for joint forces when needed. To meet the Nation's and the
    CINCs' requirements for forward naval forces, while balancing other
    requirements such as upkeep, some ships and squadrons are homeported
    overseas, but most are deployed rotationally for periods of about 6
    months. Navy has an inherently expeditionary service culture--we're
    either deployed, getting ready to go, or recently home from deployment.
        The requirements for forward, rotational naval forces drive the
    Navy's force structure to a greater extent than any particular
    warfighting scenario. While those warfighting requirements have
    remained relatively unchanged, the assets available to meet them have
    decreased markedly. Our force structure has declined 41 percent over
    the past decade, from 538 ships in 1991 to 316 today, even while our
    operational tempo has remained essentially the same. Today, over 30
    percent of our ships are forward deployed, compared with only 20
    percent in 1992. These forces are fully ready to respond to all
    taskings and in many respects are more capable than their predecessors.
    The real impact of reduced force structure is that we no longer have
    ``excess capacity'' to commit to important but not urgent commitments,
    or to provide flexibility and surge capacity.
        Upon assuming the helm as Chief of Naval Operations, Admiral Vern
    Clark committed to keeping our Navy the finest in the world. He made
    people his top priority because our ability to recruit and retain high
    caliber sailors, while providing a high Quality of Service, is
    paramount to military readiness and combat capability. Admiral Clark
    places such a high premium on our Navy men and women in recognition of
    the significant sacrifices they make every day, in service to their
    country, making our Navy what it is today.

                                  END STRENGTH

        The most important objective in our efforts to establish optimum
    personnel readiness is providing the fleet with the right sailor, with
    the right training, at the right place and time. This has become
    increasingly challenging as end strength and manning requirements have
    grown from our Fiscal Year 2001 National Defense Authorization Act
    authorization of 372,642 to our request for a 376,000 fiscal year 2002
    end strength authorization.
        Navy's commitment to 3,358 additional end strength in fiscal year
    2002 will allow us to meet expanding Anti-terrorism/Force Protection
    (AT/FP) requirements, as well as additional readiness and operational
    demands for ships and squadrons (49 percent of increased strength will
    be placed in ships and aviation squadrons, 26 percent in AT/FP, and the
    remaining 25 percent in support of Fleet Readiness and in the
    Individuals Account for robust training pipelines). Recruiting and
    retention successes have allowed us to execute strength approaching the
    1 percent statutory flexibility above our fiscal year 2001 authorized
    strength. As a result, we will begin fiscal year 2002 close to 376,000
    end strength. This will contribute to continued readiness and manning
    improvements, including further narrowing of the at-sea enlisted
    manning gap, which declined from almost 12,000 in 1999, to just over
    5,000 in May 2001; nearly a 60 percent reduction in the just 2 years.
    This dramatic reduction has led to improved retention (+7 percent) and
    battlegroup readiness by permitting us to move more sailors possessing
    the right training to ships earlier in their pre-deployment cycles. In
    fact, manning for our fiscal year 2001 battlegroup deployers has been
    as much as 3-4 percent greater than our fiscal year 2000 deployers
    across the entire deployment cycle. This has fostered improved Quality
    of Service and allowed for more advanced exercises before heading to
    forward areas.
        We still face long-term personnel challenges stemming from an
    aggressive 1990s drawdown strategy that created imbalances in our force
    profile. As Navy drew down, we achieved mandatory strength reductions
    by consciously under-accessing so that we could keep faith with an All-
    Volunteer Force that had earned our loyalty by committing to Navy
    careers during the Reagan-era expansion. Those cohorts are now reaching
    retirement eligibility resulting in a significant exodus of our
    corporate knowledge base. As we replace these senior, experienced
    sailors with new accessions, our aggregate force is getting younger and
    less experienced. Our fiscal year 2002 recruiting and retention efforts
    have focused on slowing down the loss of our experience base and
    restoring balance to our force profile. To achieve the desired balance,
    Navy must sustain enhanced retention to shore up our mid-career
    experience base while continuing to access a steady flow of quality
    recruits and officers to provide a solid base of future Navy leaders.
        We have been largely successful so far this year in retaining
    sailors across the pay grade spectrum, which has allowed us to reduce
    the fiscal year 2001 accession requirement by almost 10 percent, from a
    preliminary estimate of 60,000 at this time last year, to 54,020. This
    has helped restore that experience base of sailors who might have
    otherwise left to pursue opportunities in a robust economy. With the
    help of Congress, we reinvigorated efforts to retain every eligible
    sailor by offering new or enhanced officer continuation pays and
    enlistment/reenlistment bonuses, increases in base pay, and improved
    advancement opportunities by beginning to gradually increase the number
    of sailors in the top six pay grades. We also expanded E4 and E6 High
    Year Tenure gates and concentrated efforts on reducing attrition. These
    targeted efforts are producing desirable results allowing us to
    establish an fiscal year 2002 accession mission of 53,000.
        Maintaining the end strength and manning gains carries a cost and
    Navy has committed to financing the retention benefit to keep this
    momentum going into fiscal year 2002. We request your support for the
    fiscal year 2001 supplemental appropriation and reprogramming and the
    fiscal year 2002 President's Budget request for increased end strength
    and workyears, and continued targeted investment in people programs.
    Our improved retention is real, yet fragile, and must be sustained to
    realize long-term success. The experience level of Navy's force profile
    will continue declining as drawdown cohorts retire, unless we continue
    prudent steps to mitigate the de-aging process as we transition to a
    more balanced and manageable future force.

                                  COMPENSATION

        Improvements in our recruiting and retention efforts are largely a
    result of strong leadership, mentoring of sailors through our Center
    for Career Development and significant pay raises and bold compensation
    initiatives enacted by Congress in the last 2 years. It would, however,
    be premature to declare victory. Navy remains concerned that much more
    must be done to enhance the effectiveness of the Total Military
    Compensation (TMC) package, such as further reducing the pay gap and
    improving the competitiveness of military compensation with that of the
    private sector.
    Basic Pay
        Recommendations of the Ninth Quadrennial Review of Military
    Compensation (QRMC) formed the basis for the Department of Defense
    proposal to adjust basic pay for calendar year 2002. The proposal,
    which Navy fully supports, simultaneously raises the level of pay
    across-the-board, by a minimum of 5 percent, while altering the
    structure of the pay table, targeting pay raises to mid-grade enlisted
    members. This will serve to better match their earnings profiles, over
    a career, with those of comparably educated civilian counterparts,
    providing incentive for these members to complete a military career.
    Navy believes this plan will contribute to ongoing efforts to leverage
    recent recruiting and retention successes and sustain the momentum
    gained through earlier initiatives. The Navy budget submission includes
    $822.4 million for pay raises.
    Special and Incentive Pays
        Selective Reenlistment Bonus (SRB). SRB continues to be our most
    cost-effective and successful retention and force-shaping tool. At this
    point in the fiscal year, we have experienced about 7 percent more
    reenlistments than at this same point last year. These gains are
    primarily attributed to SRB reenlistments; therefore, we are committed
    to maintaining a robust SRB program. We must continue working to
    increase the number of non-SRB reenlistments. We are meeting this
    challenge head-on by enhancing fleet retention efforts, providing
    valuable career information training to counselors and leaders in the
    fleet, and by responding to specific needs expressed in fleet feedback.
    The Navy budget submission includes $298.9 million for SRB.
        Career Sea Pay (CSP). Changes to the fundamental structure of CSP,
    enacted in the Floyd D. Spence National Defense Authorization Act for
    Fiscal Year 2001, represent one of those bold compensation initiatives
    undertaken by Congress last year. Changes in the act provide the
    Secretary of the Navy with the flexibility needed to restore the pay's
    incentive value for duty at sea. Further, they provide the means of
    ensuring CSP is an effective distribution tool to incentivize sailors
    to go to sea, stay at sea, and return to sea.

                                   RECRUITING

    Enlisted Recruiting
        Thanks to the continued hard work of our recruiters, the
    application of congressional resources, and initiation of new programs,
    we achieved our fiscal year 2000 accession mission. Ninety percent of
    accessions were High School Diploma Graduates (HSDG) and more than 64
    percent scored in the upper half of the Armed Forces Qualification Test
    (AFQT) (Test Score Category I-IIIA). Additionally, we substantially
    improved our occupational mix, achieved a healthy Nuclear Field posture
    and made significant gains in recruiting into critical ratings. On the
    Reserve side, we have added 90 recruiters and tripled the advertising
    budget to $8 million annually in order to compete in this challenging
    recruiting environment.
        Despite last year's accomplishments, we are not yet positioned for
    long-term success. Fiscal year 2001 finds us continuing to face record
    low unemployment, formidable competition with the private sector in
    attempting to hire talented young Americans and low propensity to
    enlist. Our most serious challenge is that we have not restored the
    health of our Delayed Entry Program (DEP) despite our continuing
    efforts to do so. This has forced recruiters to work on a sub-optimal
    month-to-month basis, struggling to meet each month's accession goal.
    This negatively impacts overall productivity and detracts from efforts
    to improve the long-term health of recruiting.
    Innovative Approaches to Recruiting
        Given the requirements and conditions we expect to face over the
    next several years, we are working to improve our recruiting force and
    strategies. With strong congressional support, fiscal year 2000 saw the
    continuation and establishment of many improvements in the recruiter
    force, in professional selling skills training, in advertising,
    enhanced incentives, market-penetration and attrition reduction.
    Several additional initiatives are currently being considered to help
    capitalize our recent successes.
        Bolstering the Recruiting Force. Our recruiting force is the most
    important factor in the recruiting formula. We are striving to sustain
    a recruiting force of 5,000 by bringing in volunteers from the fleet.
    We are also shifting to a more junior recruiting force. Our analysis
    indicates a more junior, largely volunteer, force will be most
    productive. We are improving recruiter selection with our Recruiter
    Selection Team (RST) and optimizing geographic distribution of
    recruiters using analytical methods and market data. This year we
    expanded Smart Recruiter initiatives by providing vehicles, cellular
    telephones and laptop computers to virtually all recruiters.
        Professional Selling Skills Program. Starting in fiscal year 2000,
    Navy Recruiting partnered with a commercial firm with a proven track
    record to create customized training courses for our entire recruiting
    force. The new selling methodology is based on the understanding that
    today's recruit is better informed and has more available options. We
    anticipate this training will improve productivity, increase the number
    of DEP referrals and decrease DEP attrition rates. All field recruiters
    receive initial training during recruiter orientation.
        Bluejacket Hometown Area Recruiting Program (HARP). We initiated
    efforts in January 2000 to augment the existing recruiter force with a
    Bluejacket HARP. The aim is to significantly increase the quality and
    quantity of fleet sailors who return home to assist local recruiters.
    The entire fleet is helping identify motivated young sailors, generally
    on their first tour of duty, to participate in this worthwhile program.
    With the program in place just over 18 months, we have scheduled over
    13,000 participants and are averaging nearly four new referrals per
    sailor. Along with specific referrals and contracts attributable to
    Bluejacket HARP, we are experiencing residual benefits of increasing
    local Navy presence, introducing recruiters to new sources of recruits,
    and exposing fleet sailors to the excitement and satisfaction of
    recruiting duty.
        Motivating the Recruiting Force. Along with augmenting and
    equipping the recruiting force, we are exploring a variety of industry
    practices to better motivate recruiters and direct their efforts toward
    Navy priorities. We are benchmarking civilian sales and recruiting
    forces for examples of effective incentives.
    Enhancing the Appeal
        Throughout this fiscal year, we have offered varying levels and
    combinations of Enlistment Bonus (EB) and Navy College Fund (NCF), as
    well as a Loan Repayment Program (LRP). We recently initiated an EB
    kicker available to applicants based on pre-accession college credit.
    Initially available only to Nuclear Field recruits, eligibility has
    been expanded to all EB-eligible recruits. This will assist us in
    better penetrating the college market and will encourage candidates to
    continue pursuing education while awaiting entry into the Navy. We are
    evaluating awarding scholastic loans to individuals who enlist in the
    Navy and attend up to two semesters of college while in the DEP. Loans
    would be converted to grants upon successful completion of initial
    service obligation. This program would be consistent with national
    aspirations to make college education attainable for all while
    simultaneously providing Navy with the 21st century talent pool we
    require.
        Our goal is to provide programs that facilitate the pre-service
    educational aspirations of all qualified candidates and, in combination
    with in-service training, to provide new recruits with their most
    efficient path to a college degree. Navy benefits from this approach by
    improving relations with colleges and high schools, enhancing Navy's
    appeal among college-oriented youth, increasing entry level education
    of new recruits and positioning the United States Navy as an employer
    of choice. Over time, if enough recruits complete basic education and
    skills training prior to accession, due to Navy sponsoring and
    subsidizing such accomplishments, we realize cost savings by shortening
    training pipelines. The fiscal year 2002 Navy budget submission
    includes $126.4 million for EB and NCF.
        Technical Preparation (TechPREP) partnerships and Navy College
    Assistance Student Headstart (NavyCASH) are designed to accomplish the
    goal described above and increase our appeal to the college-bound
    market. With increasing numbers of students choosing to attend college,
    it is essential to portray Navy as a viable source of higher education,
    in partnership with colleges and universities.
        TechPREP. Navy began forming TechPREP partnerships with community
    colleges in fiscal year 1999. Participants earn college credit toward
    an associate's degree, from a partnering community college, while
    attending high school, after graduation while in DEP and during Navy's
    basic and select advanced technical training. We currently have
    standing agreements with 75 community colleges, four of which are
    statewide agreements, with many more pending. Several high school
    students are already participating in these programs.
        NavyCASH. Currently limited to Nuclear Field and critical technical
    ratings, NavyCASH offers selected applicants the opportunity to attend
    college for up to 1 year, in a paid status comparable to that of junior
    enlisted members, prior to entering active service. This exciting
    program improves the entry-level training of applicants and allows Navy
    to level-load shipping dates of recruits during the most challenging
    accession months of February through May.
    Expanding Opportunities to Serve
        In today's competitive environment, we must explore all avenues to
    increase our existing market without sacrificing quality standards for
    new recruits. We have begun accessing limited numbers of home-schooled
    applicants as High School Diploma Graduates (HSDGs), increased our
    accession mission for Prior Service personnel and stepped up our
    efforts, through re-establishment of a Diversity Programs Office, to
    improve our penetration of diverse markets.
        DEP Enrichment Program. The DEP Enrichment Program, begun in Spring
    2000, is designed to enhance the basic skill-level of otherwise
    qualified candidates before accessing them into the Navy. We identify
    individuals with high school diplomas and clean police records, but
    whose test scores fall slightly below those required to qualify for
    enlistment. DEP Enrichment provides participants with basic skills
    training and an opportunity to increase their AFQT score to facilitate
    enlisting in the Navy. These candidates are typically good retention
    risks based on education credentials and low disciplinary risks. Basic
    skills training, provided by Education Specialists (Federal employees)
    at Navy Recruiting Districts, affords participants a second chance to
    prove themselves and go on to serve with distinction. Since Spring
    2000, 54 recruits accessed through DEP Enrichment in the 5 remaining
    months of the year, 121 accessed through the first 8 months of fiscal
    year 2001 and 161 additional applicants are in DEP for the rest of
    fiscal year 2001 and fiscal year 2002.
        Diversity Outreach. Navy currently recruits the largest percentage
    of minority accessions but, given the increasing diversity of the
    American people, there is room for improvement. Our Diversity Programs
    Branch is working several exciting initiatives to improve penetration
    of diverse markets. VIP tours of Navy commands are a popular means of
    exposing applicants and their influencers to Navy life in order to
    generate excitement about Navy opportunities. Trips conducted this year
    have been very well received. The Diversity Programs Branch has also
    begun college campus blitzes to spread the word of Navy scholarship and
    job opportunities on traditionally diverse campuses. Navy has
    established corporate board membership in the National Society of Black
    Engineers, Society of Hispanic Professional Engineers, and the Society
    of Mexican American Engineers & Scientists to ensure that minorities
    possessing technical backgrounds are aware of the many exciting
    opportunities available in today's Navy.
    CNRC Advertising Campaign
        CNRC began fiscal year 2001 with a new advertising agency and a new
    advertising campaign, ``Accelerate Your Life''. The core objective is
    to raise awareness and familiarity of the Navy brand among young
    adults, age 17 to 24, and drive these prospects to 1-800-USA-NAVY and
    the www.navy.com website, thereby, generating the maximum number of
    qualified leads for field recruiters. The campaign positions Navy as
    the hands-on adventure that will accelerate recruits to their highest
    levels of achievement. The centerpiece of the campaign is the ``Life
    Accelerator,'' an interactive website that matches visitor interests
    with Navy opportunities. The site debuted in mid-March and has already
    exceeded fiscal year 2000 website performance by as much as five times
    in some areas. The ``Life Accelerator'' is the first step toward a
    completely online recruiting process.
        Plans for fiscal year 2002 are to capitalize on the success of the
    ``Accelerate Your Life'' campaign with a $22.8 million media plan that
    includes, $12.4 million for television advertising, $3.6 million for
    radio advertising, $3 million for magazine advertising, and $3 million
    for Internet advertising. Additionally, www.navy.com will be frequently
    refreshed to provide prospective recruits with the most current
    information available about the Navy Experience.
    Officer Recruiting
        Fiscal Year 2001 has been challenging for officer recruiting. We
    continue to experience significant shortfalls among Civil Engineers,
    Chaplains, Naval Flight Officers, Orthopedic and General Surgeons,
    Optometrists, Pharmacists and Health Care Administrators. Specialized
    skill requirements, civilian market competition for these specialties,
    and the potential for emergent goal increases, put goal attainment at
    high risk. Emergent goal requirements are especially challenging
    because we have no in-year incentives, such as signing bonuses, to
    offer college graduates or seniors, most of whom are receiving
    lucrative offers from the private sector and who are carrying
    significant college debt-load. We have continued to develop long-term
    recruiting strategies for critical program success, and recruiting
    performance in the programs of concern is far exceeding fiscal year
    2000 performance. However, without an accession bonus to facilitate
    short-term recruiting importance, the nominal time for recovery of a
    recruiting program remains about 2 years.
        Given the challenges described above, fiscal year 2001 has still
    enjoyed several bright spots. The Nuclear Power Officer Candidate
    (NUPOC) program filled over 100 percent of its submarine and surface
    officer goals the second consecutive year, having previously failed to
    achieve goal since fiscal year 1996. Improved incentives for new
    accessions and strong resource sponsor support of the recruiting effort
    have generated a level of momentum projected to sustain a successful
    NUPOC program in the foreseeable future.
        Along with improving marketing materials, we are pressing for
    individuals in critical specialty fields to participate in our Officer
    Hometown Area Recruiting Assistance Program (OHARP). Senior leadership
    of several officer communities is taking an active role in recruiting
    the talented individuals needed for their respective designators. We
    are exploring the need for additional accession bonuses and/or loan
    repayment programs to assist with critical in-year officer accession
    requirements. We are also reviewing steps to streamline the officer
    application process by contracting commercial physical examinations and
    establishing web-based applications, blueprinting and electronic
    application routing.

                                   RETENTION

    Enlisted Retention
        We have been faced with reversing a downward trend in enlisted
    retention that was exacerbated by a nearly decade-long drawdown.
    Through a strategy of improving the balance between recruiting and
    retention to correct personnel profile imbalances and manning
    shortages, our retention gains in fiscal year 2000 have carried over
    into this fiscal year. With efforts primarily focused on tasking Navy
    leaders and managers at all levels to reengage in the retention battle,
    the compensation and Quality of Service initiatives you have supported
    are critical. Your commitment to improving the lives of sailors Navy-
    wide has helped increase aggregate reenlistment rates in fiscal year
    2001 by 7 percent over the same time period last year. While short of
    our long-range steady state goals required to meet anticipated manpower
    needs, it is a confident step in the right direction. Sustaining this
    level of improvement is vital to correcting force profile imbalances,
    reducing gaps at sea and increasing readiness.
        Center for Career Development (CCD). The centerpiece of our focus
    on retention is our Center for Career Development, established just 1
    year ago. CCD funnels energy and resources toward meeting retention
    challenges and is dedicated to providing the fleet with the necessary
    tools for enhancing their retention efforts. These tools include
    enhanced professional training for Navy Career Counselors and Command
    Retention Teams, Career Decision Fairs for Sailors and their families,
    and comprehensive, easy-to-use, interactive products using the latest
    information technology. Since its inception, CCD has visited 33
    commands, hosted Career Decision Fairs for more than 5,000 sailors and
    their families, and convinced more than 300 sailors who were planning
    to separate upon completion of their obligation to reenlist. Had these
    sailors left the Navy as originally planned, we would have spent nearly
    $10 million in recruiting and training costs to replace them.
        Reenlistments. The Selective Reenlistment Bonus (SRB) program
    continues to be our most cost-effective and successful retention and
    force-shaping tool. This year's improved reenlistment performance is
    primarily the result of a 37 percent gain in SRB reenlistments for
    first term sailors and 16 percent gain for career sailors. We are
    committed to maintaining a robust SRB program and anticipate comparable
    gains in fiscal year 2002. We must also work harder on increasing
    reenlistment behavior in the non-high tech or critically manned skill
    groups that are not SRB-eligible. Increased Basic Allowance for Housing
    (BAH) in fiscal year 2002, targeted specifically at sailors in pay
    grade E4 assigned to sea duty will have a favorable impact on our
    critical first term population.
        Increasing Top Six Pay-Grade Authorizations. As a fiscal savings
    measure during the drawdown, Navy constrained enlisted advancements,
    limiting the top six enlisted pay-grades (E4 to E9) to not more than
    69.9 percent of the force. During this same period, as more labor-
    intensive legacy ships and aircraft were decommissioned, validated
    fleet requirements for petty officers in the top six grew to over 75
    percent of the force. Widening of the top six inventory-to-requirements
    gap has resulted in billet mismatches throughout the force, as we task
    sailors to perform at levels above their pay grade and compensation. In
    fiscal year 2001, Navy leadership began reversing this trend by
    gradually targeting increases in the top six to meet fleet requirements
    and maintain healthy advancement opportunity. In fiscal year 2001, we
    are growing our top six to 70.6 percent of the force, permitting us to
    advance 2,000 more sailors than we otherwise would. We will increase it
    further, to 71.5 percent, in fiscal year 2002. Consistent with force
    requirements and a realistically balanced advancement policy, continued
    increases to the top six remain integral to Navy's long-term personnel
    strategy.
    Enlisted Attrition
        One out of three sailors who enter the Navy does not complete the
    initial 4-year service obligation. This is an unacceptable level of
    return on our recruiting investment and the CNO has set a goal to
    reduce first term attrition by 25 percent. This means, at the unit
    level, if last year there were four attrition losses, this year's goal
    should be three or less.
        We are beginning to focus more analytical efforts at the root
    causes of attrition, and have found that primary contributing factors
    include recruit quality and poor selection and classification. So, we
    are continuing to focus on recruiting higher quality young men and
    women to the extent practical. We are also completely reengineering our
    recruit selection and classification processes and systems to find
    better job matches for new recruits. Finally, seeing a recent increase
    in the number of positive first-day drug screenings at boot camp, we
    have begun administering non-instrumented drug tests within 24 hours of
    new recruits departing for Recruit Training.
        Beyond entry level and training attrition, we are working
    aggressively to overcome a pattern of excessive attrition through fleet
    initiatives targeted primarily at first term sailors. BEARINGS is a
    remedial training curriculum targeted at young sailors who require
    additional emphasis on life skills that will see them through their
    Navy careers, and beyond. SECOND CHANCE is aimed at giving young
    sailors struggling in their first assignments a fresh start at a new
    command. Through both programs, we are offering at-risk fleet sailors
    every opportunity to successfully complete their initial service
    obligations.
    Officer Retention
        Improving officer retention is critical to meeting manpower
    requirements and achieving steady-state force structure. Under-
    accession and over-attrition of junior officer year groups throughout
    the drawdown, coupled with significant changes in the post-drawdown
    force structure, mandate officer retention levels significantly above
    the historical norm. We must continue improving retention to meet
    officer manning requirements, particularly among the Unrestricted Line
    communities; i.e., aviation, submarine, surface and special warfare. We
    are beginning to see positive indicators, largely attributable to
    Quality of Service improvements and effective special and incentive
    pays that target specific officer retention problem areas. However, the
    thriving civilian job market continues to compete directly with
    retention efforts.
        Aviation Career Continuation Pay (ACCP) provides incentives for
    aviators at all levels to make positive career choices. After 4 years
    of decline, naval aviation experienced a 10-percentage point increase
    in aggregate retention, from 31 percent in fiscal year 1999 to 41
    percent in fiscal year 2000. However, increased resignations in fiscal
    year 2001 are beginning to reflect in lower aggregate retention rates.
    At the end of the second quarter of fiscal year 2001, overall aggregate
    retention has decreased to 38 percent. Despite the increase in
    resignations, the aviation bonus program has still had a significant
    impact on retention and is the leading factor for maintaining aggregate
    retention rates well above fiscal year 1999's all time low of 31
    percent.
        Surface Warfare Officer retention through the ninth year of
    service, at which time the officer serves as a department head at-sea,
    has reached its long-term historical level of 26 percent, up from its
    post-drawdown low of 17 percent for some year groups. This is largely
    attributable to Quality of Service improvements and fiscal year 2000
    implementation of Surface Warfare Officer Continuation Pay targeted
    toward department heads serving at sea.
        While fiscal year 2000 submarine officer retention dropped from 30
    to 28 percent, and nuclear-trained surface warfare officer retention
    showed a marginal increase from 18 to 20 percent, there has been a 30
    percent increase among officers in the target year groups (1994-1996)
    who have signed multi-year continuation pay contracts since the fiscal
    year 2001 Nuclear Officer Incentive Pay rate increase was implemented.
    Current legislative limits will provide Navy the necessary flexibility
    to address short-term nuclear officer retention requirements, but the
    possibility of increased retention challenges resulting from renewed
    interest in civilian nuclear power generation may necessitate increases
    to these limits in the out years.
        Special Warfare Officer Continuation Pay commenced in fiscal year
    2000 and contributed to improvements in Special Warfare Officer
    Retention, which rebounded to 69 and 68 percent, respectively, in
    fiscal year 1999 and fiscal year 2000, from an all time low of 63
    percent in fiscal year 1998. While Special Warfare has the highest URL
    officer retention requirements (74 percent), SPECWAR retention outlook
    continues to be positive as a result of Quality of Service improvements
    and SPECWAR Officer Continuation Pay, which provides higher rates for
    3-5 year contracts.
        We still have more to do in the current challenging retention
    climate. Navy must continue to approach the officer retention challenge
    from a number of different directions, including implementation of
    initiatives focused on improving Quality of Service, particularly at
    sea. We must sustain the push to increase aggregate and individual
    officer community retention to steady-state levels to meet control
    grade requirements and improve military personnel readiness, thereby
    providing the experienced warfare officers Navy needs to meet a variety
    of pressing operational requirements.

                      INDIVIDUAL PERSONNEL TEMPO (ITEMPO)

        The National Defense Authorization Acts for Fiscal Years 2000 and
    2001 enacted provisions requiring the military services to begin
    tracking deployment of members on an individual basis, and to provide
    payments to members who deploy for 401 or more days out of the
    preceding 730. We are well underway in our effort to collect individual
    deployment data with more than half a million ITEMPO events posting to
    our database as of mid-June. We are also diligently engaged in
    analyzing the overarching implications of ITEMPO on Navy's global
    operations. We are in the process of reviewing operational scheduling,
    ship maintenance schedules, employment of communities that experience
    historically high OPTEMPO, e.g., Seabees, personnel assignment
    policies, etc. However, ITEMPO's full ramifications are only now
    becoming clear.
        The program is relatively new (we have about 8 months of data).
    Because of its complex properties, the fundamental changes to Navy
    operations necessary to comply with the legislation have ramifications
    for Global Navy Force Presence Policy (GNFPP), training and readiness,
    and personnel assignments. For example, GNFPP dictates the global
    rotation of aircraft carrier battlegroups and Tomahawk missile coverage
    in Theaters and requires National Command Authority and Unified CINC
    approval. This means that the Navy cannot unilaterally change operating
    schedules and that any changes would have national security
    implications.
        This legislation, in its current form, presents Navy with a
    formidable dilemma. About 8,000 sailors at sea today, for a variety of
    reasons, have volunteered for back-to-back sea tours. Many prefer to
    stay on sea duty because remaining in a specific homeport provides
    stability for their families. Others do so because it enhances
    advancement opportunity. Still others remain at sea to reap the
    financial rewards such as entitlement to Career Sea Pay. The personal
    desires of these members are inconsistent with the intent of ITEMPO
    legislation, which discourages prolonged at-sea assignments. But,
    personnel readiness may be adversely impacted and PCS costs might
    increase dramatically if we lose our ability to permit sailors to
    volunteer for back-to-back sea duty assignments.
        We look forward to continuing the current dialogue to find the
    balance between reducing time away from home while carrying out the
    rotational nature of naval operations that require sailors to deploy
    for extended periods. We are committed to ensuring an outcome that
    enhances Quality of Service, while permitting Navy to meet operational
    requirements.

                             PERSONNEL DISTRIBUTION

    Sailor 21
        Three Sailor 21 initiatives are funded beginning in fiscal year
    2002 through Navy's Future Naval Capability (FNC) science and
    technology program: selection and classification, distribution and
    assignment, and personnel planning and policy analysis.
        The selection and classification initiative focuses on building
    technologies to improve the manner and extent to which the skills,
    abilities, and personality traits of incoming personnel are assessed in
    order to better match them to job classifications. Objectives are to
    increase success rates in job performance, service members job
    satisfaction and, as a result, retention and readiness. Fiscal year
    2002 efforts will concentrate on demonstrating innovative job-skill
    matching technologies.
        In fiscal year 2002, the distribution and assignment initiative
    will begin development of a marketplace approach for service members to
    become aware of, and apply for, available assignments. Intelligent
    technologies will ensure the service member's knowledge and skill
    profile match the job requirements and, to the extent possible, the
    location and work environment meet the member's needs and desires and
    provide career enhancement.
        The personnel planning and policy analysis initiative builds an
    integrated monitoring system so that personnel managers are alerted to
    changes (e.g., decreased personnel supply, new skill requirements), can
    observe a family of available response options and their predicted
    outcomes, and choose the action with the greatest likelihood of
    success. Fiscal year 2002 efforts concentrate on establishing
    foundations in predictive measures and effective methods of data
    integration and simulation.
        We are continuing to examine another potential Sailor 21 initiative
    concerning improvement of recruiter selection and productivity. This
    would include developing more effective recruiter screening techniques
    and instruments and tools recruiters could provide to clients with more
    realistic job previews.
    Detailer Communication Program
        The primary objective of the Detailer Communication Program (DCP)
    is to improve retention by increasing sailor satisfaction with the
    detailing process. Detailer/sailor communication is considered key to
    reaching this objective. Since initiation of this program in fiscal
    year 2000, we have made significant strides towards improving the vital
    communication link between command retention teams, sailors and
    detailers. Our initiative has now transitioned into a full-time program
    as we continue to institutionalize our gains into permanent and
    enduring improvements.
        In October 1999, we began a contractor-assisted initiative focused
    on improving customer service in the detailing and assignment process.
    Survey results indicated improvements could be made to distribution
    procedures, which in turn would exert a positive impact on retention.
    In August 2000, four process action teams began executing a three-
    phased implementation plan for improvements. DCP is accomplishing our
    strategic communication goals under the following broad themes:
        Detailer Training Pipeline. Formal communication training has been
    put in place to provide all detailers with the skills to more
    effectively discuss career decisions and implications with sailors. A
    2-day communications skills and strategies course was specifically
    developed for detailing situations. Other recruiter-style selling
    skills courses are being evaluated to augment this training. Our
    training improvements have been incorporated into an 8-week course of
    instruction, which develops detailers into effective and focused
    communicators.
        Detailer Accessibility. Increased detailer accessibility to fleet
    sailors is the goal. Changes were made to the phone system to
    automatically route calls to available detailers, de-emphasizing voice
    mail. Second, civilian assistants were hired to reduce the
    administrative burden on the detailers and increase their time
    available to talk with sailors. The addition of more detailers to the
    staff is under consideration.
        Proactive Detailing. A major thrust of our efforts has been the
    proactive contact with sailors before they enter the assignment
    negotiation window. The intention is to allow the sailor an opportunity
    to discuss career options with a detailer and allow the detailer an
    opportunity to better influence the sailor's career decision. Early
    detailer-initiated discussions, directed straight to the sailor, permit
    the sailor to consult with his family and command to optimize the
    follow-on negotiating process. We have begun contacting sailors as much
    as a year prior to their rotation date and use this discussion to shape
    expectations and uncover needs and desires. To augment this early
    communication, a message is sent which provides the sailor with a
    checklist for preparing for the detailing process. This message is
    followed by a personal phone call from each sailor's detailer. Initial
    reaction to our proactive calling has been quite positive as indicated
    by follow-up surveys. Sailors and commands have found the early contact
    to be helpful in preparing for the negotiation window and providing the
    necessary career counseling that may help retain a sailor in the Navy.
        Detailer Travel. Our detailer travel program has been aggressive as
    we execute a three-fold increase in visits from last year. The impact a
    detailer can have with a sailor in face-to-face communication cannot be
    underestimated. For fiscal year 2001 to date, detailers have conducted
    over 6,800 personal interviews with sailors during 850 opportunities.
    Metrics reflect that accelerated travel efforts have contributed to a
    significant number of wavering sailors to reenlist.
        The way ahead for this program is to continue proactive efforts
    without losing our focus on sailors currently in the negotiation
    window. We are increasing our capacity to communicate with more sailors
    by continuing to streamline processes and we are contemplating
    increasing the number of detailers. Making detailers more available to
    sailors and enhancing detailer communications skills are the major
    focus of this program. An improved training pipeline with emphasis on
    communication skills, plus earlier contact with sailors in the
    detailing process, will enhance retention and increase career
    opportunities for sailors.

                               QUALITY OF SERVICE

    Housing/Basic Allowance for Housing (BAH)
        A sailor's ability to obtain adequate housing for his or her family
    is a critical factor in our commitment to the Quality of Service of our
    people. There are a number of ongoing initiatives designed to provide
    our members with a housing allowance that allows them to find suitable
    housing in safe neighborhoods. The first step is to reduce the amount
    of money a sailor is expected to pay for the rent on a median house. A
    sailor's out-of-pocket expense (OOP) is based on a percentage of the
    national median housing cost, calculated so all members of the same
    pay-grade and dependency status, regardless of location pay the same
    absolute dollar amount out-of-pocket. OOP had been set at 15 percent
    since the inception of the BAH system in 1998, but through your
    actions, the requirement that BAH be set at levels that produce an OOP
    was eliminated. As a result, we continue on a path to reduce OOP over
    the next few years--from the current 15 percent in 2001, to 11.3
    percent in 2002, and to zero by 2005.
        Another Quality of Service initiative set in motion by Congress
    affects our shipboard E4s without dependents. Prior to your efforts
    last year, there was no authorization for this group of sailors to
    receive a housing allowance. Funding for E4 BAH is in the fiscal year
    2002 budget. In October, we plan to implement this authority by
    allowing E4s with more than 4 years of service to move off of their
    ships into barracks (where feasible) or to receive BAH to permit them
    to reside in the local community. This is the next step in an overall
    housing plan that will ultimately permit all shipboard sailors to
    reside ashore while in homeport. Providing single shipboard sailors the
    ability to live ashore is another key element in Navy's retention
    efforts and ``war for talent.''
    Montgomery GI Bill (MGIB) Enhancements
        Raising the monthly MGIB Program benefit greatly increases the
    value of the program. An MGIB benefit worth almost $40,000 in fiscal
    year 2004, as included in H.R. 1291, would certainly serve as an
    attractive recruiting tool, as well as help reduce first-term
    attrition. It would also substantially reduce out-of-pocket costs for
    attendance at higher-cost institutions. The changing demographics of
    the All-Volunteer Force make it abundantly clear that military benefits
    of the 21st century must meet the needs of sailors and their families.
    As the number of sailors with dependents increases so, too, does their
    concern about their ability to pay family educational expenses.
        Of equal importance is providing all active duty members an
    opportunity to participate. Our Veterans Educational Assistance Program
    (VEAP)-era members serving today have stayed with us over 15 years and
    deserve at least the same education benefits as those serving one
    enlistment. The uncertainty of the future viability of VEAP caused many
    senior leaders to caution active duty members prior to their deciding
    whether or not to participate and many members ultimately declined to
    participate.
    Permanent Change of Station (PCS) Household Good Prototypes
        Another Quality of Service initiative for sailors is the Defense
    Department's transportation reengineering efforts, which include two
    Household Good improvement programs. The Full Service Move Program
    (FSMP), and Military Traffic Management Command's (MTMC) Household
    Goods Reengineering Program are intended to provide value-added
    benefits to the move experience above and beyond the fare associated
    with the standard government bill of lading (GBL) service. Benefits for
    sailors include full replacement value of damaged goods, personalized
    service and overall improvement in service.
        Navy plans to resume participating in the ongoing Full Service Move
    Program and Military Traffic Management Command's (MTMC) Household
    Goods Reengineering Program. Ideally, these programs will help address
    a longstanding need to improve the quality of household goods moves.
    Your continued support for these important Quality of Service programs
    is key to retention efforts as success in this area will alleviate a
    significant dissatisfier. The fiscal year 2002 budget includes $22.5
    million for these prototypes.
    Fleet And Family Support Program
        Navy Fleet and Family Support Centers. Navy offers a broad array of
    Quality of Life programs and services through Fleet and Family Service
    Centers (FFSCs) and Family Advocacy Centers in 67 locations Navy-wide.
    These essential programs are offered through a variety of mediums to
    support, teach and facilitate self-sufficiency and family readiness.
    They include a vast array of assistance from financial counseling and
    anger/stress management to marital enrichment and parenting education
    to counseling, intervention and referral for spouse abuse and sexual
    assault awareness and prevention. FFSCs conducted 4 million service
    contacts in fiscal year 2000, including information and referrals,
    education and training classes and counseling sessions for individuals
    and families. The Department's fiscal year 2002 budget includes $46.7
    million to fund staff and support costs for these programs.
        Headquarters Family Support Programs. From our headquarters in
    Millington, Tennessee, we also offer a variety of family support
    programs. These include application assistance for transitional
    compensation for family members subjected to abuse, Exceptional Family
    Member services to match duty assignments with availability of required
    health care services, and partnership with CCD and Service School
    Command to expand the Reverse Sponsor Program. This program ensures
    that sailors on short-fused orders are provided sponsors at their first
    duty station enhancing the likelihood of a positive start to staying
    Navy.
        Sexual Assault Victim Intervention Program (SAVI). Navy's Sexual
    Assault Victim Intervention (SAVI) program is designed to provide a
    comprehensive, standardized and victim-sensitive system to prevent and
    respond to sexual assault in the Navy. It is the only dedicated sexual
    assault victim intervention program in DOD. It is recognized,
    nationally, as being an outstanding victim assistance program by the
    National Association for Victim Assistance and the DOJ Office for
    Victims of Crime. Sexual assault awareness and prevention education is
    now incorporated into Navy student curricula and command leadership
    training, and is a required component of annual General Military
    Training for all service members.
        Spouse Employment Program. The Spouse Employment Program is an
    essential Quality of Life program. The mobile nature of the military
    takes Navy families to locations around the world. Frequent family
    moves make it difficult for spouses to establish meaningful careers and
    additional financial security for themselves and their families. Too
    often, spouses sacrifice careers for the sake of their military spouses
    who serve our Nation. Military spouses are increasingly career
    orientated (65 percent currently in the workforce) and use of Spouse
    Employment Assistance is increasing. In 1998, the program provided
    employment services to 40,000 spouses, and that number steadily
    increased to 54,635 spouses by 2000. This increase has led to new
    initiatives that will improve career options for military spouses in
    their mobile lifestyles.
        Personal Financial Management (PFM). Navy's PFM Program will focus
    on expanding in fiscal year 2002 with emphasis on training, education
    and counseling. We have established a life-cycle approach with
    implementation of a 16-hour ``A'' school financial training. Plans also
    include follow-on training during Petty Officer Indoctrination,
    Leadership Continuum and Senior Enlisted Academy. We also intend to
    conduct a pilot of the curriculum for midshipman at the U.S. Naval
    Academy, for future use of the program among Navy's officer corps.
        Expansion of the PFM Mobile Training Team's function includes a 50
    percent increase in worldwide training of Command Financial
    Specialists. All course materials used in PFM are under review/rewrite
    and an interactive web-based PFM training resource will be available on
    the Navy Learning Network. There are many new programs coming online
    that will impact sailors and their families. Mass education will be
    essential to ensuring sailor familiarity with provisions of the new
    Thrift Savings Plan (TSP), Redux reform, Career Service Bonus (CSB) and
    Family Subsistence Supplemental Allowance (FSSA).
    Morale, Welfare and Recreation (MWR) Programs
        MWR programs are vital to CNO's Quality of Service priority.
    Quality of Service is a combination of ``Quality of Work'', which means
    the general work environment in which sailors operate, and ``Quality of
    Life'', which pertains to all support elements that contribute to
    enhancing Navy life for sailors and their families. MWR is a key
    component of the Quality of Life part of this equation. Another of
    CNO's top priorities is the need to improve alignment, which means
    delivering what we promise. This not only translates into Navy-wide
    access to quality programs but requires us to improve the ways in which
    we communicate what is available to the men and women we serve.
        Navy MWR is actively engaged in supporting CNO's manpower priority
    in a variety of ways:

             We are building a ``culture of fitness'' within the
            Navy. We are working to staff and equip fitness facilities,
            afloat and ashore, to enable sailors to train to meet the
            higher physical fitness standards Navy has established in its
            revised physical readiness program and to enhance the health
            and readiness of the force.
             We have created and expanded our single sailor program
            to create an alcohol-free venue in a ``living room'' setting
            that provides a unique range of activities and services most
            desired by young adults, ages 18 to 25.
             We accommodate the needs of our married sailors who
            have children and may need help balancing their military
            responsibilities with their personal commitments for the care
            of their children. We provide child development and youth
            services making it possible for single parents, dual military
            couples and dual working couples to continue serving as members
            of the active duty military family.
             We also provide community support services and
            employment opportunities for spouses Navy-wide. Military family
            members comprise almost 30 percent of Navy's MWR workforce.

        Sailors view support and delivery of MWR programs as a concrete and
    highly visible symbol of Navy's commitment to maintaining their Quality
    of Life. We intend to continue aligning our actions to meet the
    changing needs of sailors and fulfilling our Quality of Life
    commitments.

                                   CONCLUSION

        Navy is committed to winning its war for talent. We can do this by
    capitalizing on Navy leadership's commitment, as well as on innovative
    recruiting, reenlistment and attrition-reduction programs, and by
    ensuring a competitive Total Military Compensation (TMC) package. We
    must continue leveraging recent successes in order to sustain our
    momentum.
        Navy is an ``Employer of Choice.'' Our success thus far is in large
    part due to the strong support and leadership of the administration and
    Congress. With your continued help, we remain optimistic that we will
    continue attracting America's highest-caliber youth as we challenge
    them to ``accelerate their lives.''
                                     ______

              Prepared Statement by Lt. Gen. Garry L. Parks, USMC

        Mr. Chairman and distinguished members of the subcommittee: I am
    pleased to appear before you today to discuss the many legislative
    initiatives as they relate to United States Marine Corps personnel--
    active, Reserve and civilian. Our current budget funds 17,888 officers
    and 154,712 enlisted, and a selective Reserve strength of 4,101
    officers and 35,457 Reserve enlisted marines. Roughly 60 percent of our
    personnel budget funds manpower programs. The remaining dollars fund
    such items as Basic Allowance for Housing, Permanent Change of Station
    relocations, Subsistence and Social Security. The approximately 7
    tenths of 1 percent then remaining in the Manpower account pays for
    discretionary items such as our Selective Reenlistment Bonus (SRB) or
    College Fund Recruitment programs.
        The Marine Corps welcomes the opportunity to discuss various
    personnel-related legislative initiatives, including their impact on
    the welfare and mission accomplishment of the Corps. Our greatest asset
    is our outstanding young men and women in uniform. Your continued
    support of our marines and their families has directly contributed to
    our success.

                              PAY AND COMPENSATION

        In recent exit surveys, compensation is routinely cited as one of
    the stronger reasons our marines decide not to reenlist. The $1 billion
    earmarked in the President's budget for a basic pay increase will
    maintain competitive military compensation.help to narrow the pay
    disparity between military personnel and their civilian counterparts.
    Increases in pay take care of families, bolster morale and give our
    service members the freedom to focus on their mission. Continued
    adjustments need to be made in the future to help us move toward parity
    with market wages.
        The President's budget reduces our Marines' Out of Pocket (OoP)
    expense between current housing market costs and the housing allowance
    we pay our service members, from a high of 15 to 11.3 percent. We
    remain on course to reduce OoP expense to zero by 2005. Additionally,
    the flexibility that Congress provided in the housing allowance rate-
    setting process was instrumental in addressing the emergent needs of
    our marines in southern California. That is, utility cost increases
    were forecasted in the fall of 2000, and the 2001 housing rates were
    adjusted to meet these rising costs.
    Enlisted Retention
        A successful recruiting effort is merely the first step in the
    process of placing a properly trained marine in the right place at the
    right time. The dynamics of our manpower system then must match skills
    and grades to our Commanders' needs throughout the operating forces.
    The Marine Corps endeavors to attain and maintain stable, predictable
    retention patterns. However, as is the case with recruiting, civilian
    opportunities abound for our marines as private employers actively
    solicit our young marine leaders for lucrative private sector
    employment. Intangibles--such as the desire to serve our Nation and the
    satisfaction received from leadership responsibilities provided in our
    Corps--are a large part of the reason we retain marines beyond their
    initial commitment. Concrete evidence of this is seen in our deployed
    units, which continually record the Corps' highest reenlistment rates.
    Retention success is also due in part to the investment we make in
    supporting our operational forces--to give our marines what they need
    to do their job in the field, as well as the funds for educating and
    training these terrific men and women. Although we are experiencing
    minor turbulence in some specialties, the aggregate enlisted retention
    situation is very encouraging. Shortages exist in some high-tech
    Military Occupational Specialties, because these young marines remain
    in high demand in the civilian sector.
        We are a young force, making accessions a fundamental concern for
    manpower readiness. Of the 154,000 Active-Duty Enlisted Force, 108,000
    are on their first enlistment with over 23,000 of them still being
    teenagers. In fiscal year 2001, we will have reenlisted approximately
    27 percent of our first term eligible population. These 6,069 marines
    represent 100 percent of the marines we need to transition into the
    career force, and marks the eighth consecutive year we will have
    achieved this objective. On balance, however, we have observed a slight
    increase in the number of first term marines we need to reenlist each
    year. To counter this rising first term reenlistment requirement, we
    will focus greater attention on retaining marines in their 8th through
    12th years of service. One of the new initiatives we anticipate
    introducing in fiscal year 2002 is a Subsequent Term Alignment Plan
    (STAP), which emphasizes retaining experience. Due to the strong draw
    of civilian sector opportunity, we must elevate the importance of our
    career force by paying additional attention as well as resources to
    keep the experience level of our force on par with previous years. With
    Congress' assistance, we attack our specialty shortages with the highly
    successful Selective Reenlistment Bonus (SRB) program. Shortages
    persist in some highly technical specialties, such as intelligence,
    data communications experts, and air command and control technicians.
        On the whole, we are extremely pleased with our enlisted recruiting
    and retention situation. The Marine Corps will meet our aggregate
    personnel objectives and continue to successfully maintain an
    appropriately balanced force. The proper management between youth and
    experience in our enlisted ranks is critical to our success and we are
    extremely proud of our accomplishments.
    Officer Retention
        Officer retention continues to experience success with substantive
    improvements in retention having begun in fiscal year 2000. Our fiscal
    year 2001 results continue to reflect an overall officer attrition rate
    that is closer to historical rates. We attribute the reduction of
    voluntary separations may be attributed to the congressionally-approved
    compensation triad and the strategic, albeit limited, use of special
    pays. As with the enlisted force, we still have some skill imbalances
    within our officer corps, especially in the aviation specialties.
        Although we are cautiously optimistic, pilot retention remains a
    concern. The fiscal year 2001 Aviation Continuation Pay (ACP) plan has
    higher aggregate ``take rates'' than in previous years. Retaining
    aviators involves a concerted effort in multiple areas that have been
    identified as impacting an officer's decision to remain in the Marine
    Corps. Many fiscal year 2000 and fiscal year 2001 retention initiatives
    have made substantial corrective strides to strengthen the Marine
    Corps' position toward retaining aviation officers (i.e., Marine
    Aviation Campaign Plan and pay reform). Supplementary pay programs such
    as ACP provide an additional incentive. by lessening the dramatic
    difference between civilian airline and military compensation. As a
    result, we anticipate a significant return on our investment from ACP.
    In fiscal year 2001 and fiscal year 2002 we increased ACP by
    approximately $4 million each year to focus on retaining our mid-grade
    aviators (junior majors and lieutenant colonels) and will continue to
    evaluate our aviation retention status.
        Overall, the Marine Corps officer and enlisted retention situation
    is very encouraging. Through the phenomenal leadership of our unit
    commanders, we will achieve every strength objective for fiscal year
    2001 and expect to start fiscal year 2002 with a solid foundation. Even
    though managing our retention success has offered new challenges such
    as maintaining the appropriate grade mix, sustaining quality
    accessions, and balancing occupational specialties, we will continue to
    press forward in order to overcome these obstacles. In this difficult
    recruiting/retention environment, the so-called ``War for Talent,'' the
    Marine Corps remains optimistic about our current situation and
    anticipates that these positive trends will continue.
    Marine Corps Reserve
        The Marine Corps Reserve continues to make an extraordinary
    contribution at home and abroad. As part of our Total Force, Reserve
    Marines augment and reinforce the Active component by performing a
    variety of missions such as providing civil affairs expertise in the
    Balkans, aviation support in Southwest Asia, and logistics support in
    Central America. This year, Reserve Marines and units participated in
    several exercises spanning the globe from Germany, Romania, Egypt,
    Macedonia, Korea, and Thailand to Australia.
        Given that we expect a continued increase in the employment of the
    Reserve in support of Total Force missions, we must maintain current
    readiness while ensuring that our resources are available for
    modernization. Congressional support for increased use of the Reserve
    has been a key element in providing OPTEMPO relief and training. Your
    support permits us to meet commitments that may go beyond the normal 2-
    week annual training period. While the historical Reserve mission to
    augment and to reinforce our Active component remains our focus, the
    demands of this and emerging missions will increase operational
    challenges and amplify the need to effectively resource the Marine
    Corps Reserve. With proper planning that takes into account the
    specific demographics of the Marine Corps Reserve, and with adequate
    resources, we can do more and still take care of our marines. We are
    not yet approaching the limits on the use of the Marine Corps Reserve,
    but we are watching this closely.
        The most sacred honor we can provide veterans is that of a military
    funeral. The staff members and Reserve Marines at our 185 manned sites
    performed approximately 5,500 funerals last year, a 45 percent increase
    over 1999, and we project a 39-40 percent increase per year giving us
    potentially 7,500 funerals to support this year. The steps that
    Congress took last year to allow Reserve participation at the inactive
    duty drill rate for funeral honors duty helped us meet this growing
    obligation. Our current Reserve end strength supports funeral honors at
    our small sites (where there are less than 10 Active Duty Marines on
    staff), not as a primary duty, but as one of the many tasks incident to
    training and administering the Reserve and providing a military
    connection to the local community. The authorization and funding to
    bring Reserve Marines on `Active Duty for Special Works' to perform
    funeral honors has particularly assisted us. As a result of the
    increase in funeral honors, we have realized increased operations and
    maintenance costs associated with vehicle maintenance and fuel for
    transportation of funeral honors duties and for the cleaning and
    maintenance of dress uniforms. Continued support for military funeral
    honors funding, in our Military Personnel and Operations and
    Maintenance accounts, is critical to ensuring mission success in this
    most worthwhile endeavor.
        Our recruiters continue to be challenged to attract and to retain
    quality men and women in the Marine Corps Reserve as young people are
    presented with numerous alternatives to military service due to the
    positive economic growth in the private business sector. During the
    past fiscal year we achieved 103.4 percent of our recruiting goal for
    prior service and 102.5 percent for non-prior service marines. It was
    not easy! Our retention rates for Reserve enlisted marines who stay
    beyond their initial obligation are also improving. We do, however,
    still have some work to do in keeping non-prior service Reserve Marines
    in a satisfactory participation status for the full length of their
    obligated drilling commitment. The incentives provided by Congress,
    such as the MGIB and the Kicker educational benefits, enlistment
    bonuses, medical and dental benefits, and commissary and PX privileges,
    have all contributed to the stability of our Force. These incentives
    and the continued Congressional support have helped us to attract and
    to retain capable, motivated, and dedicated marines for the future.
    Civilian-Marines
        Our almost 15,000 civilian employees, or ``civilian-marines,'' are
    key members of the Marine Corps team. We rely on our civilians to
    provide continuity and technical expertise in the supporting
    establishment to complement our Active-Duty Marines. The Marine Corps,
    like other Federal agencies, is coping with the challenges brought on
    by an aging workforce and the potential skill imbalances that will
    occur as our civilians begin to retire in large numbers over the next 5
    years. Accordingly, we are now focusing our efforts on planning for our
    future workforce, to include a greater emphasis on career development.
    Toward this end, the Civilian Career Leadership Development program is
    an initiative being implemented to ensure we train and shepherd our
    civilian work force. Our goal is to mesh the leadership abilities of
    our total force into a seamless overall body, both marines and
    civilian-marines.
    Marine Families
        Our future success relies firmly on the Marine Corps' most valuable
    asset and its first pillar of readiness--our marines and their
    families. In fact, the Commandant of the Marine Corps, General Jones,
    has made it clear that combat readiness and personal and family
    readiness are inseparable. As such, we are aggressively working to
    strengthen the readiness of our marines and families by enhancing their
    quality of life (QoL). Our Marine Corps Community Services' (MCCS) many
    programs and services are being tailored and designed to reach all
    marines and their families regardless of geographic location. During
    the past 2 years we have made a considerable commitment and investment
    in building, training, and supporting family readiness teams--comprised
    of marines and volunteers--across the Total Force. In short, these
    teams are vital to our family readiness efforts prior to, during, and
    after a deployment or mobilization. They are making a difference, and
    will only strengthen as our program matures. Our MCCS programs also
    include Chaplain delivered retreats; physical fitness and healthy
    lifestyle programs; children, youth, and teen support; and continuing
    education programs just to name a few. Much work remains to extend MCCS
    programs and services across our Corps of Marines, but even today MCCS
    is contributing to us being ready, willing, and able to contribute to
    the Marine Corps' Total Force effort.

                                    SUMMARY

        Young men and women join the Corps for the challenge, for the
    opportunity to make a difference in the world by serving their country.
    Our marines and their families are committed to the Corps' forward
    presence and expeditionary nature, as evidenced by our continued
    recruiting and retention success. These successes have been achieved by
    following the same core values today that gave us victory on
    yesterday's battlefields. With your support, we can continue to achieve
    our goals and provide our marines with what they need to accomplish
    their tasks. Marines are proud of what they do. They are proud of the
    Eagle, Globe and Anchor and what it represents to our country. It is
    our job to provide for them the leadership, resources, QoL and moral
    guidance to carry our proud Corps forward. With your support, a vibrant
    Marine Corps will continue to meet our Nation's call as we have for the
    past 225 years!
                                     ______

            Prepared Statement by Lt. Gen. Donald L. Peterson, USAF

                                  INTRODUCTION

        Mr. Chairman and members of the Committee, it is a great honor to
    come before you to represent the men and women of the United States Air
    Force and report the status of our Air Force personnel programs and
    policies, including recruiting, retention and quality of life efforts.
    Our people are our most crucial readiness component, and as we begin a
    new millennium, we must continue to recruit and retain the best and
    brightest to sustain the force. We rely on a highly skilled, diverse,
    educated and technologically superior force of world-class officers,
    enlisted men and women, and civilians to function as an effective
    warfighting team. Despite the challenges they face, our people remain
    willing to give the extra effort needed to achieve the mission--and our
    families support those decisions. Our people are proud of their
    contributions to our Nation's security and cognizant of how that
    security contributes to our Nation's unprecedented prosperity and the
    freedoms we all enjoy. Air Force leadership values their service and is
    committed to taking care of our people and their families.
        A key to our ability to execute the National Military Strategy is
    establishing end strength at a level where our resources are
    appropriate to our taskings. Then, we must attract sufficient numbers
    of high quality, motivated people, train them, and retain them in the
    right numbers and skills. Meeting end strength has been challenging
    during a decade of sustained economic growth, record low unemployment,
    increasing opportunity and financial assistance for higher education,
    and declining propensity to join the military. Our exit surveys show
    that availability of civilian jobs is the number one reason our people
    leave the active Air Force. In addition, we have severely stressed
    parts of our force, primarily those individuals who man our low-
    density/high-demand (LD/HD) systems. The Quadrennial Defense Review
    (QDR) will help us refine our mission and determine the right end
    strength. However, we already know that the current situation cannot
    persist--we must either add end strength or reduce taskings. With
    Congress' continued support, we will be able to address this issue and
    correctly size and man our total force to perform our mission and
    achieve our national objectives.
        People are essential to readiness. During the past year, we
    averaged over 13,000 Active Duty and Reserve men and women deployed
    daily around the world, and another 76,000 are forward based on
    permanent assignment. They do what is necessary to execute the
    mission--work long hours and endure prolonged separation from their
    families. At the same time, individuals at home station pick up the
    duties of those who are forward deployed. Earlier this year, I traveled
    to Europe, the Pacific, and Southwest Asia to talk with our people, to
    see the conditions under which they are working, and to listen to their
    concerns. Despite the fact that our people are tired, stressed, and
    strained, morale is high. Almost universally, our people expressed
    concern for our Air Force and pride in what they do. They are
    interested in understanding and executing leadership priorities. They
    also want their concerns listened to, understood, and acted upon. They
    do not ask for much. They simply want the appropriate tools and enough
    trained people to do the job, and they want to know their families are
    being taken care of. We need to attract America's best and brightest,
    and we must retain them. While patriotism is the number one reason our
    people--both officers and enlisted--stay in the Air Force, patriotism
    alone cannot be the sole motivation for a military career. We must
    provide our people with quality of life commensurate with the level of
    work they perform and the sacrifices they make for their country.

                                   RETENTION

        We are unique among the Services in that we are a retention-based
    force. Our expeditionary mission and our complex weapon systems require
    a seasoned, experienced force and we depend on retaining highly trained
    and skilled people to maintain our readiness for rapid global
    deployment. However, we expect the ``pull'' on our skilled enlisted
    members and officers to leave the Air Force to persist. Businesses in
    the private sector place a high premium on our members' skills and
    training, which makes retaining our people a continuing challenge. In
    addition, manning shortfalls, increased working hours and TEMPO
    continue to ``push'' our people out of the Air Force. The result of
    these ``push'' and ``pull'' factors is that our human capital remains
    at risk. At a minimum, the member chooses to separate from active duty,
    we must take extra efforts to inform them of the opportunities in the
    Guard, Reserve and civilian forces, and encourage them to remain a
    valuable contributor to the Air Force team.
    Enlisted Retention
        Highly trained, experienced enlisted men and women are the backbone
    of our personnel force; they are vital to the success of our mission.
    Adverse retention trends, particularly for our first-term (4-6 years)
    and second-term (8-10 years) enlisted members, have been our number one
    concern. We measure reenlistment rates by the percentage of those
    members eligible to reenlist who reenlist. For first-term enlisted
    members, our reenlistment goal is 55 percent, 75 percent for second-
    term members, and 95 percent for career (over 10 years) members. In
    fiscal year 2000, we missed all three goals. The first-term
    reenlistment rate was 52 percent, second-term reenlistment rate was 69
    percent, and the career rate was 91 percent. However, fiscal year 2001
    reenlistment rates show some improvement. As of 31 May 2001, the
    cumulative reenlistment rate for first-term was 57 percent; for second-
    term it was 70 percent and for career airmen, it was 91 percent. While
    second-term reenlistments are slightly up from fiscal year 2000, the
    continued shortfall in this area continues to be our most significant
    enlisted retention challenge. Second-termers are the foundation of our
    enlisted corps; they are the technicians, trainers, and future enlisted
    leaders. Our career airmen reenlistment rate also continues to be of
    concern. While the rate remained constant at 91 percent, it is still
    below goal by 4 percent. Figure 1 illustrates retention trends since
    1979.

                           Figure 1 (As of 31 May 01)

        Retaining the right skills in our enlisted force is just as
    important as retaining the right numbers. Figures 2 and 3 show trends
    in first- and second-term reenlistment rates for critical and key
    warfighting skills. We have shown progress in some areas. However, most
    of these skills are still below goal. For example, while the second-
    term reenlistment rate for communications/computer systems control
    specialists is up 10 percent from fiscal year 1999 to fiscal year 2001,
    the rate is still 30 percent below goal.

                           Figure 2 (As of 31 May 01)

                           Figure 3 (As of 31 May 01)

        The Air Force, unlike a business, cannot recruit many already
    trained members, such as F-16 avionics specialists. It literally takes
    us 8 years to replace the experience lost when an 8-year
    noncommissioned officer leaves the Air Force. There are no shortcuts.
    In addition, it costs less to retain than to recruit and retrain, and
    when we retain, we maintain skill, experience and leadership. Now, more
    than ever, we must address the factors that encourage our people to
    leave or stay. Approximately seven out of every ten enlisted men and
    women will make a reenlistment decision between fiscal year 2001 and
    fiscal year 2004--over 193,000 enlisted members. Considering today's
    strong economy, potentially large numbers of our enlisted force, our
    technical foundation, will likely continue to seek civil sector
    employment and more stable lives for themselves and their families. In
    our 2000 retention survey, availability of comparable, civilian jobs
    and inadequate pay and allowances were cited as top reasons enlisted
    personnel leave the Air Force. It is essential we address these issues
    now to minimize impact on our readiness.
    Officer Retention
        Officer retention is also challenging our Air Force. We measure
    officer retention by cumulative continuation rates (CCR), the
    percentage of officers entering their 4th year of service (6 years for
    pilots and navigators) who will complete or continue to 11 years of
    service given existing retention patterns. Our navigator and air battle
    manager (ABM) CCRs showed improvement from fiscal year 1999 to fiscal
    year 2000; the navigator CCR increased from 62 percent to 69 percent
    and the ABM CCR from 45 percent to 51 percent. However, our non-rated
    operations and mission support CCRs declined from fiscal year 1999 to
    fiscal year 2000. Our non-rated operations CCR was 51 percent in fiscal
    year 2000, 6 percentage points below the fiscal year 1999 rate, and 8
    percentage points below the historical average of 59 percent--the rate
    as of March 2001 is 49 percent. In fiscal year 2000, our mission
    support officer CCR was at 43 percent, down from 45 percent in fiscal
    year 1999--historical average has been 53 percent. Figure 4 illustrates
    historical CCRs in these specialties.

                           Figure 4 (As of 31 Mar 01)

        As with the enlisted force, we have difficulty retaining officers
    with skills that are in demand in the private sector. We are
    particularly concerned about retaining our scientists, engineers, and
    communications-computer systems officers. We are not meeting our
    desired levels in these critical specialties. In fiscal year 2001, we
    have shown some progress, as CCR for developmental and civil engineers
    and communications-computer systems officers improved slightly.
    However, we remain below historical CCR for these officers. Figure 5
    illustrates historical CCRs for selected critical skills.

                           Figure 5 (As of 31 Mar 01)

    Retention Initiatives
        Through a number of initiatives, we are fighting back; progress is
    slow but steady. For our enlisted troops, we increased the number of
    career specialties eligible to receive a Selective Reenlistment Bonus
    over the past 3 years. Now, 154 of 197 skills (78 percent of enlisted
    specialties) receive a reenlistment bonus. The number of enlisted men
    and women who received initial bonus payments increased dramatically
    from approximately over 2,500 in fiscal year 1995 to over 17,000 in
    fiscal year 2000. Over 23,600 members received anniversary payments and
    193 received accelerated payments, which are provided to members
    experiencing hardship situations. The result has been a moderate
    improvement to first-term retention, and the ability to hold steady in
    second-term and career retention.
        We appreciate the legislative authority you granted us to offer our
    people the Officer and Enlisted Critical Skills Retention Bonus of up
    to $200,000 over their careers and the increase in Special Duty
    Assignment Pay to a maximum of $600 per month. This will help us turn
    around the crisis we are experiencing in retaining our mission support
    officers and enlisted members in our warfighting specialties. We also
    implemented a liberal High Year Tenure (HYT) waiver policy to allow
    noncommissioned officers with skills we need to stay past their
    mandatory retirement. In fiscal year 1999, we granted nearly 1,600 such
    waivers, and we granted over 1,100 in fiscal year 2000. As of 31 May
    2001, we granted 643 HYT waivers.
        On the officer retention front, our Acquisition community held a
    Scientist and Engineer Summit to review our long-term strategy for
    recruiting, retaining and managing these highly technical officers and
    civilians. A key outcome of the Summit was that our Acquisition
    community was identified to serve as the interim central manager for
    scientists and engineers. They are developing a concept of operations
    for our scientists and engineers, and analyzing scientist and engineer
    manpower requirements. A second summit is being planned to review and
    prioritize the requirements, establish career path guidance and request
    civilian hiring practices to make us competitive with industry. We have
    also outsourced many of our officer engineering and programming
    requirements.
    Pilot Retention
        Management of our pilot force has been a top priority since the
    fall of 1996 and is one of our most difficult challenges. The ``pull''
    of civilian airline hiring and ``push'' of tempo continue to impact our
    pilot retention. Major airline hiring is far exceeding predictions.
    Since 1994, annual airline hires have nearly quadrupled: from 1,226 in
    calendar year 1994 to 4,799 in calendar year 2000. The 14 major
    airlines could hire every fixed-wing pilot that the United States Army,
    Navy, Marine Corps, and Air Force produces and still not meet their
    requirements for the foreseeable future. Figure 6 graphically portrays
    this challenge.

                                    Figure 6

        In addition, the overall increase in tempo over the past several
    years has affected the pilot force. A recent Air Force study of pilot
    retention concluded that high tempo carries significant, adverse
    retention impacts, and recent surveys cite tempo as among the leading
    causes of pilot separations. In fiscal year 2000, there were 1,084
    approved pilot separations compared to only 305 separations in fiscal
    year 1995. As a result, we ended fiscal year 2000 approximately 1,200
    (9 percent) below our pilot requirement. Our pilot CCR of 45 percent in
    fiscal year 2000 is down from a high of 87 percent in fiscal year 1995.
    We project a pilot shortage of approximately 1,200 (9 percent) by the
    end of fiscal year 2001.
        We are aggressively attacking the pilot shortage from numerous
    angles. We are focused on fully manning our cockpits and have
    prioritized rated staff manning. We established temporary civilian
    overhire billets and implemented a Voluntary Rated Retired Recall
    Program. We also increased pilot production from 650 in fiscal year
    1997 to 1,100 in fiscal year 2000 and beyond. In October 1999, we
    increased the active duty service commitment for pilot training to 10
    years. Additionally, the Expeditionary Aerospace Force is helping us
    manage tempo for our people, affording us greater predictability and
    stability.
        Under a provision of the Fiscal Year 2000 National Defense
    Authorization Act (NDAA), we began offering Aviation Continuation Pay
    (ACP) payments through a pilot's 25th year of aviation service at up to
    $25,000 per year. We also expanded eligibility to include pilots
    through the rank of colonel. This ACP restructuring resulted in a
    substantial increase in committed man-years and improved force
    predictability. We made further enhancements to the pilot bonus program
    in fiscal year 2001. The up-front lump sum payment cap was raised from
    $100,000 to $150,000 and up-front payment options were expanded for
    first-time eligible pilots. These enhancements are designed to
    encourage pilots to take longer-term agreements. Although the bonus
    take rate for first-time eligibles has declined over the past 2 years,
    due in large measure to the growing effects of the sustained ``pull/
    push'' retention forces described, the ACP program continues to play a
    vital role in partially countering these effects.
        All of these efforts, along with significant improvements in
    quality of life, are helping us manage the pilot shortage, allowing us
    to hold the line in a tough retention environment.

                                   RECRUITING

        Since our transition to an All-Volunteer Force in 1973, we met our
    enlisted recruiting goals in all but 2 fiscal years: 1979 and 1999.
    More high school graduates, approximately 70 percent, are choosing to
    enroll in college versus pursuing a military career--in many cases,
    they don't realize what the military has to offer. Our footprint in the
    civilian community is getting smaller. There are fewer military
    influencers--parents, grandparents, teachers, counselors, and community
    leaders--who have served in the military. In fact, only 6 percent of
    our population under age 65 have military experience. These factors,
    combined with the longest sustained economic growth in our Nation's
    history, have made recruiting a diverse All-Volunteer Force extremely
    difficult. However, we have taken significant steps to reverse the
    downward trend in recruiting. In fiscal year 2000, we waged an all-out
    war to recruit America's best and brightest--and won. We increased
    recruiter manning, developed more competitive accession incentives,
    instituted an expanded and synchronized marketing, advertising, and
    recruiting effort, and broadened our prior service enlistment program.
    Additionally, we targeted minority recruiting markets with a goal to
    increase diversity.
        Using these weapons, we ended fiscal year 2000 at over 101 percent
    of our enlisted accession goal, accessing 34,369 towards a goal of
    34,000. In addition, we did not sacrifice quality. We still require 99
    percent of our recruits to have high school diplomas and nearly 73
    percent of our recruits score in the top half of test scores on the
    Armed Forces Qualification Test. Additionally, 848 prior service
    members returned to active duty, compared to 601 in fiscal year 1999
    and 196 in fiscal year 1998. For fiscal year 2001 (as of 30 June 2001),
    we have accessed 811 prior service members.

                                             ENLISTED ACCESSION GOAL HISTORY
    ----------------------------------------------------------------------------------------------------------------
                                                       Fiscal Year
    -----------------------------------------------------------------------------------------------------------------
       1992        1993        1994        1995        1996       1997       1998       1999     2000 \1\     2001
    ----------------------------------------------------------------------------------------------------------------
       35,100      31,500      30,000      31,000     30,700     30,200     31,300     33,800     34,000     34,600
    ----------------------------------------------------------------------------------------------------------------
    \1\ Lower than projected retention/accessions increased fiscal year 1999 goal by 2,300, fiscal year 2000 goal
      further increased to 34,000 . . . fiscal year 2001 goal set at 34,600 (NPS/PS Goal combined this fiscal year)

                                    Table 1

        As of 30 June 2001, we had accessed 101 percent of our year-to-date
    recruiting and net reservation goals. The significance of this
    achievement is clear when you compare it to the same point in fiscal
    year 2000, when we had accessed 83 percent of our recruiting goal and
    93 percent of the net reservation goal. Being ahead of our year-to-date
    recruiting targets alleviates the pressure associated with surging
    during the summer months to overcome a mid-year deficit--the bottom
    line is we have sent enough enlistees to basic training and have enough
    applicants under contract for this fiscal year--exceeding fiscal year
    2001 recruiting goals. We should enter fiscal year 2002 with a healthy
    bank of applicants holding enlistment reservations. Also, successful
    recruiting means enlisting airmen whose aptitudes match the technical
    skills we need. Recruiting is more than just numbers--we are concerned
    about accessing the appropriate mix of recruits with mechanical,
    electronics, administrative, and general skill aptitudes. In fiscal
    year 2000, we fell about 1,500 short of our goal of 12,428 recruits
    with mechanical aptitude. In response to this shortfall, we developed a
    targeted sales program that is now being taught to all our field
    recruiters to highlight the many opportunities we offer to mechanics.
    Additionally, we have targeted enlistment bonuses against the skills we
    need and our efforts have paid off. Through June 2001, we accessed
    9,525 mechanical recruits against our goal of 9,038 (105 percent).
        We've also recognized the need for additional recruiters. At the
    beginning of fiscal year 1999, we had 985 production recruiters. Since
    then, we've made significant improvements in recruiter manning. As of 1
    July 2001, recruiter staffing was at 1,482--nearly 90 percent towards
    our goal of 1,650.

                                    Figure 7

        Bonuses have also proven effective in helping us meet recruiting
    goals. We expanded the enlistment bonus program from 4 skills in 1998
    to 85 in fiscal year 2001, and increased the maximum payment to
    $12,000--69 percent of our bonus eligible accessions selected a 6-year
    initial enlistment in fiscal year 2000. Additionally, an up to $5,000
    ``kicker'' incentive program helped us fill the ranks during hardest-
    to-recruit months (February through May). To encourage ``trained''
    personnel to return to certain specialties, in Apr 01 we introduced the
    Prior Service Selective Reenlistment Bonus of up to $14,000 to target a
    previously untapped pool of prior service personnel. The bonus targets
    high-tech, hard-to-fill positions. In fiscal year 2001, the bonus
    program remains an instrumental tool in our recruitment arsenal. The
    effectiveness of the fiscal year 2001 initial enlistment bonus program
    is illustrated by our year-to-date success in making recruitment goals.
    Additionally, the Air Force maintains an aggressive and integrated
    advertising and marketing campaign in order to saturate the applicant
    market and reach a cross section of American society.
    Officer Recruiting
        In fiscal year 2000, we achieved 97 percent of our line officer
    accession target, even though fiscal year 2000 production was 21
    percent greater than fiscal year 1998 and 5 percent above fiscal year
    1999. The Reserve Officer Training Corps (ROTC) anticipates shortfalls
    of 191 officers in fiscal year 2002 and 169 in fiscal year 2003.
    However, we are working on several initiatives to reduce these
    shortfalls, such as offering contracts to non-scholarship ROTC cadets
    after the freshman rather than sophomore year, and some legislative
    initiatives to ensure a strong and viable officer corps in the future.
        Recruitment of health care professionals has also been difficult.
    Many medical, dental, nurse and biomedical specialties are critically
    undermanned--only 80 percent of our clinical pharmacy positions are
    currently filled. In fiscal year 2001, for the first time, we will
    offer a $10,000 accession bonus to pharmacists who enter active duty.

                                QUALITY OF LIFE

        The welfare of our men and women serving our Nation is critical to
    our overall readiness and is essential to recruiting and retention. But
    more than that, providing our people with adequate quality of life is
    the right thing to do. With continued strong support from Congress, we
    will pursue our core quality of life priorities: adequate manpower,
    improved workplace environments, fair and competitive compensation and
    benefits, balanced tempo, quality health care, safe and affordable
    housing, enriched community and family programs, and enhanced education
    opportunities.
        This year, we added two new core quality of life priorities:
    manpower and workplace environments. Updated wartime planning factors
    and real-world operations validate increased manpower requirements
    beyond our fiscal year 2000 level. Meeting our current mission
    requirements with our current end strength is wearing out our people
    and equipment at an unacceptable rate. It is essential that we match
    resources to taskings--manpower requirements must be programmed to the
    necessary level to execute today's missions and meet tomorrow's
    challenges. We need to increase our force, primarily in combat, combat
    support, low-density/high-demand, and high tempo areas. RAND conducted
    an independent assessment of our requirements and reported that manning
    requirements may be understated. To keep trust with our men and women,
    we must provide the essential manpower to help balance tempo and to
    meet the national military strategy.
        The Air Force recognizes that workplace environments significantly
    impact readiness and morale. Our workplace environments have been
    neglected over the years--requirements exceed available resources. Our
    infrastructure accounts have continually been tapped to pay for
    readiness. Sustainment, restoration, and modernization (SRM) have not
    been fully funded, allowing only day-to-day recurring maintenance and
    life-cycle repairs, creating a backlog of required SRM. Military
    construction has been drastically reduced since the mid-1980s. The
    resulting degraded and unreliable facilities and infrastructure
    negatively impact productivity on the flightline, in maintenance shops
    and administrative areas, and also adversely influence career
    decisions. In the long term, reduced funding results in reduced combat
    capability and readiness, increased SRM, parts and equipment backlogs,
    and creates larger bills for the future.
        Providing our people with safe, affordable living accommodations
    improves quality of life, increases satisfaction with military service,
    and ultimately leads to increased retention and improved recruiting
    prospects. Our unaccompanied enlisted personnel desire and deserve
    privacy; the Air Force will continue to pursue a private room policy
    for our airmen using the 1+1 construction standard. The Air Force goal
    is to provide a private room to all unaccompanied airmen (E-1 to E-4)
    by fiscal year 2009. The 1+1 construction standard will allow our
    members to live in a private room with a shared bath. We are also
    focusing efforts to improve, replace, and privatize over 12,800 family
    housing units for our members with families by fiscal year 2010--59,000
    of our housing units need revitalization, as their average age is 37
    years. Ensuring members and their families have adequate visiting
    quarters and temporary lodging facilities is also a priority.
        We are committed to ensuring our personnel are adequately
    compensated--this is crucial in helping us recruit and retain quality
    personnel. Congressional support in achieving gains in military
    compensation played a significant role in improving overall quality of
    life for our people. We are encouraged by the positive momentum gained
    from the improved compensation packages in the Fiscal Year 2000 and
    2001 National Defense Authorization Acts. Our 2000 retention survey
    indicated officer and enlisted intent to stay in the military increased
    in nearly all categories over the 1999 survey results--from 24 to 31
    percent for first-term airmen, 36 to 43 percent for second-term airmen,
    and 81 to 84 percent for career enlisted members. Company grade pilots'
    intent to stay increased from 25 to 42 percent, and the intent of other
    company grade officers increased from 52 to 59 percent. Field grade
    pilots' intent to stay increased from 63 to 77 percent, but other field
    grade officers' intent decreased from 87 to 84 percent.
        In the 2000 Chief of Staff of the Air Force Quality of Life Survey,
    First Sergeants ranked pay and benefits as the number one quality of
    life priority within their units, and commanders ranked pay and
    benefits as second--tempo ranked first. In the October 2000 Major
    Command Revalidation, all major commands commented that we must
    continue to improve compensation and benefits. All major commands
    ranked pay and benefits in their top three quality of life priorities.
        The 3.7 percent pay raise (one half percent above private sector
    wage growth) authorized in the fiscal year 2001 NDAA and the targeted
    pay raise for E-5s to E-7s were important and positive developments.
    The need to widen our bonus footprint to cover more career fields,
    coupled with current retention rates, is strong evidence that the basic
    pay structure is too low. The Secretary of Defense's revised budget
    submission contains targeted pay raises to help balance military with
    private sector wages for same education and experience and to also
    ensure we continue to reward promotion and avoid pay table compression.
    The revised submission also contains a military pay raise for all
    others of 5 percent. Both are needed to remain competitive in this
    robust economy.
        Out-of-pocket expenses are also an area of concern. Recent
    improvements in the Basic Allowance for Housing (BAH) will help prevent
    further growth of out-of-pocket expenses. In CY 2001, our members' out-
    of-pocket housing expenses were reduced from 18.9 to 15 percent--the
    stated OSD goal is to eliminate them by CY 2005. This is an added
    expense and is likely to be included in the Secretary of Defense's
    review of quality of life issues.
        It is also important our members are not adversely impacted by
    moves required by the government. Our members are particularly
    concerned about the loss of their spouses' incomes when transferring to
    an overseas location. The Cost of Living Adjustment (COLA) is designed
    to defray the difference between the cost of living in the CONUS and
    OCONUS, not to replace lost spousal income. Overseas employment for
    spouses often is not available or is only available at reduced income
    levels due to local custom or Status of Forces Agreements. The loss of
    spousal income due to assignment to overseas locations is causing
    difficulties in filling overseas billets and is discouraging members
    from continuing active duty service.
        Total Permanent Change of Station (PCS) costs associated with
    reimbursable items exceed the amount allotted to relocating families.
    The 1999 Department of Defense (DOD) PCS Cost Survey concluded military
    members are only reimbursed $0.62 per dollar spent. To help reduce out-
    of-pocket moving expenses, the fiscal year 2001 NDAA equalized the
    Dislocation Allowance for E-5s and below and authorized advanced
    payment of temporary lodging allowance as well as a pet quarantine
    reimbursement up to $275. However, members who are ordered into or out
    of base housing (including privatization or renovation of housing) at
    their permanent duty station without a permanent change of assignment
    do not receive a dislocation allowance.
        Again, we appreciate the support of Congress. Enhancing community
    and family programs is crucial to the readiness of a force that is 62
    percent married. We created the Community Action Information Board
    (CAIB) to bring together senior leaders to review and resolve
    individual, family, and installation community issues that impact our
    readiness and quality of life and to improve the synergy of our
    resources.
        The Air Force maintains one of the Nation's largest childcare
    programs--55,000 children per day. As part of a recent force-wide
    retention initiative, we launched a major new child care initiative
    called the Extended Duty Child Care Program to provide child care homes
    for parents whose duty hours have been extended or changed. Despite
    these initiatives, we are able to meet less than 65 percent of the need
    for child care in support of active duty members. We must continue to
    invest in quality childcare facilities and programs.
        We recognize the economic benefits our members and their families
    derive from strong community and family programs such as youth
    programs, family support centers, fitness centers, libraries and other
    recreational programs that support and enhance the sense of community.
    Physical fitness is a force multiplier; thus investments in fitness
    facilities, equipment and programs directly impact our capabilities. We
    also support the commissary benefit as an important non-pay entitlement
    upon which both active duty and retired personnel depend.
        We have an excellent on-line tool available for military members
    and their families to access detailed information on all our
    installations. The website, www.afcrossroads.com, provides a host of
    support programs to include a spouse forum, pre-deployment guide,
    eldercare hotlines, school information, and a spouse employment job
    bank. The job bank allows spouses to search for jobs submitted by
    private industry and post up to three resumes for review by potential
    employers. In further support of spouse employment needs, we are
    participating with other Services in providing IT training to a limited
    number of spouses. It also offers an avenue for young people to chat
    with youth at the gaining installations so they can learn from their
    peers what it is like being a young person at the installation to which
    the family will be moving. This website is receiving nearly 7 million
    hits per month.
        Although our current tempo can make educational pursuits difficult,
    our Learning Resource Centers and distance learning initiatives offer
    deployed personnel education and testing opportunities through CD-ROM
    and interactive television. The Montgomery GI Bill contribution period
    of one year ($100 a month) is a financial burden for new airmen.
    Additionally, we have joined with the other Services, the Department of
    Labor, and civilian licensing and certification agencies to promote the
    recognition of military training as creditable towards civilian
    licensing requirement.
        We are committed to providing quality, accessible, and affordable
    health care for our Air Force people, their families and our retirees.
    We greatly appreciate the many health care programs authorized in the
    fiscal year 2001 NDAA, such as TRICARE for Life for approximately 1.5
    million retirees over the age of 65. By enrolling in Part B Medicare,
    they will be able to visit any civilian health care provider and have
    TRICARE pay most, if not all, of what Medicare does not cover.
        We look forward to implementing extended TRICARE Prime Remote to
    our family members who are accompanying their military family member on
    assignment to remote areas, eliminating co-payments for family members,
    establishing chiropractic care for active duty members at some selected
    sites, reducing the TRICARE catastrophic cap to $3,000 per year, and
    improving claims processing. We have established patient advocates,
    beneficiary counseling/assistance coordinators and debt collection
    assistance officers at medical treatment facilities to assist our
    people with TRICARE processing issues.

                         CIVILIAN WORKFORCE MANAGEMENT

        No discussion of Air Force recruiting and retention would be
    complete without including our civilian workforce. In fact, our Air
    Force civilians are more critical to our mission than ever before. With
    an expeditionary aerospace force, civilians provide critical reachback
    capability and more and more provide our critical technical and
    professional expertise. However, our Air Force civilian workforce is
    not structured to meet tomorrow's mission, a challenge that is faced by
    the entire Federal civilian workforce. Our Air Force workforce is out
    of balance because of significant personnel reductions during the
    drawdown years. As a result of actions taken to effect these
    reductions, in the next 5 years, over 42 percent of our civilian career
    workforce will be eligible for optional or early retirement. This
    contrasts significantly with our civilian force in 1989--16 percent of
    our permanent U.S. professional and administrative personnel were in
    their first 5 years of service. Now, only 8 percent of the workforce
    are in their first 5 years of service. While we are fully meeting our
    mission needs today, without the proper force shaping tools, we risk
    not meeting tomorrow's challenges. Figure 8 illustrates our civilian
    workforce challenge.

                                    Figure 8

        In order to sustain our civilian force, we need a diverse mix of
    developmental, mid-level, and senior employees. We have not been
    complacent. We developed a four-prong strategy to attract and recruit
    civilian employees, streamline our hiring process, better align
    civilian salaries with those of private industry, and pursue special
    salary rates for hard-to-fill occupations. We must invest in civilian
    workforce development to meet today's demands of an increasingly
    technical force. Job proficiency training, leadership development,
    academic courses, and retraining are fundamental in addressing our
    civilian workforce retention concerns.
        We will also use separation management tools to properly shape our
    civilian force. Using methods such as voluntary separation incentive
    pay and voluntary early retirement authority, we will retain employees
    with critical skills and create vacancies so that our workforce is
    refreshed with new talent. Vacancies created as a result of these
    shaping programs will be used to create an increasingly diverse
    workforce with new talent with current skills.

                                   IN CLOSING

        Recruiting and retaining high-quality military members and
    balancing our civilian workforce are key Air Force issues that impact
    our readiness--issues that must be addressed if we are to maintain the
    expeditionary culture of our force. We cannot easily replace the
    experience lost when our people depart the Air Force, nor can we assume
    that a replacement will be available. The ``pull'' forces that have
    severely impacted our recruiting and retention will continue, and while
    these factors are good for our Nation overall, they represent a
    challenge for us. We have addressed their impact on recruiting through
    a strategy that is increasing recruiter manning, synchronizing
    marketing, advertising and recruiting programs, targeting our bonuses
    to critical skills, and pursuing prior service members to bring back
    needed experience.
        Retention is affected by both ``push'' and ``pull'' factors. In
    particular, our members and their families are stressed by a way of
    life that cycles between temporary duty and regular 55-hour work weeks
    at home. Our retention strategy is based on the premise that if we take
    care of our people and their families, many of them will stay with us
    despite the pull factors. Our core quality of life programs underpin
    the strategy. We must match resources to taskings and recapitalize our
    people, readiness, modernization and infrastructure areas. We need to
    upgrade neglected workplace environments, provide safe and affordable
    living accommodations, adequately compensate our people, enhance
    community and family programs, provide educational opportunities and
    affordable health care. Reducing out-of-pocket expenses, and access to
    health care are two areas in which Congress' support is key.
        Finally, we recognize the increasingly important role of civilians
    to our armed forces. They are our scientists, engineers and support
    force that provides reachback for deployed and forward-based forces. We
    need flexible tools and policies to manage this force.
        We depend on a highly skilled, diverse, educated and
    technologically superior force of world-class men and women to function
    as an effective warfighting team. Air Force people are an indispensable
    part of our national military strategy--men and women who are dedicated
    and selfless professionals. There is no substitute for high-quality,
    skilled and trained people. You have provided many of the tools we need
    and we will work hard to gain your continued support for legislation,
    funding and the flexibility we need to manage our force. These tools
    are critical to the Air Force's future and to the future of our Nation.
        I appreciate the opportunity to speak to this Committee and share
    the initiatives we have taken to combat our retention and recruiting
    challenges and convey to you the appreciation of our extremely capable
    and committed Air Force people.

        Senator Cleland. Thank you very much, Dr. Chu. I have
    several questions. Military families regard commissaries, as
    we've just heard, as one of the most important quality-of-life
    benefits of military service. They offer savings of nearly 30
    percent on the food bill for a typical military family. Many
    regard the commissary benefit as an integral part of military
    compensation. DOD has proposed a legislative change that would
    allow the Department of Defense to contract out the operation
    and management of commissaries. This has the potential of
    diminishing this very important benefit. What's your view of
    this proposal? What's the status of that proposal?
        Dr. Chu. Well, thank you, sir, for allowing me to address
    that question, because I think some misunderstanding has
    arisen. I'm particularly sensitive to your evocative comments
    earlier this morning about the emotional bond between our
    service personnel, present and former, and the commissary
    facilities.
        There is no intent in this proposal to change the benefit,
    as far as the beneficiary population is concerned. What the
    Secretary has asked is to explore whether some degree of
    privatization would allow us to do the job better. As you're
    aware, we already have in the commissary system some degree of
    private-sector operation. In some facilities, the stockage
    operation is privatized. In others, we have concessions for
    either bakery or the delicatessen or the seafood element which
    is a private-sector concession. So what the Secretary has asked
    is to explore whether partnering with the private sector would
    allow us to deliver the same benefit either better than we now
    do it or at less cost to the government than we now do so. But
    there is no intent of changing the benefit as far as the
    beneficiary population is concerned.
        Senator Cleland. Thank you. Last year, Congress enacted
    legislation often referred to as TRICARE For Life, which
    provides major new entitlement to older military retirees by
    providing continued access to TRICARE even when they become
    eligible for Medicare. While Congress delayed implementation
    until October 1 of this year, much work still needed to be
    accomplished in a short period of time. DOD has worked hard to
    get ready to implement the benefit. I'm confident the program
    will be implemented as successfully as the new pharmacy program
    that went into effect in April.
        One area put forward that was not completely developed at
    the time of the legislation was the revision of domiciliary and
    custodial care for TRICARE beneficiaries. Do you have any
    suggestions on how we might address this issue in this year's
    legislation?
        Dr. Chu. Yes, sir. We have been in a conversation with the
    committee staffs on this subject. I think the broad outlines of
    a possible outcome that would improve the situation for all
    would be updating, in essence, the rules of the game under
    which this kind of care is rendered. Many of the Department's
    rules, as you are aware, are from an earlier period in American
    healthcare, and so our definitions and practices do not accord
    with the standard practices out there. Ultimately, what may be
    attractive is offering military personnel the right to buy into
    the proposed long-term care insurance that's going to be
    offered to civil employees as part of a larger package in which
    we also improve what the Department of Defense offers, as far
    as home healthcare is concerned. Again, we are still really in
    an earlier era, in terms of how our rules of the game are
    structured, reflecting the fact that we did not care for this
    kind of population.
        Senator Cleland. As the author of the long-term healthcare
    proposal that was signed into law about a year ago authorizing
    Active-Duty Forces, retired-military forces, and their
    families, to be in a group with Federal civilians, allowing
    them to get long-term healthcare insurance at 10 to 20 percent
    off, I look forward to working with you on this issue out.
        Dr. Chu. Thank you, sir.
        Senator Cleland. Social Security and wage credit. The
    administration's budget proposes to eliminate the $1,200 Social
    Security wage credit for uniformed-service personnel. This will
    cause Social Security benefits to be reduced for those who need
    it most, disabled veterans and families of service members
    killed on active duty. How much does this save the department,
    and are these savings reflected in the administration's budget?
        Dr. Chu. Mr. Chairman, we share your concern with this
    inadvertent effect of the broader change the administration
    seeks here. I have the permission of the Office of Management
    Budget to work with your committee to craft a replacement
    program for, specifically, the population you're describing,
    which is a very small element of the total. This is not an
    expensive decision. There are a variety of possibilities here.
        The administration's decision to put it forth this way,
    quite frankly, sir, reflected the inability of Social Security
    Administration data-processing system to set this particular
    group aside and treat it differently from other groups. We look
    forward to working with you and your staff to find a solution
    to this. There is no intent to disadvantage this most
    vulnerable population.
        Senator Cleland. Glad to hear that. Thank you for that
    testimony, and we look forward to working with you on that
    point.
        I'm just fascinated about military pay. In one sense, with
    an All-Volunteer Force, it's obvious that the benefit structure
    has to be pretty competitive. This includes pay. The military
    has the tradition of uniform pay, that if pay benefits go up
    for one, they go up for all. The administration's proposed
    targeted pay raise, ranging from 5 to 10 percent and
    emphasizing those midrange NCOs and officers, is a little bit
    of a departure from the norm. I'd like for you to just respond
    to that, if you will.
        There's a second part to this. One reason I've been so
    fascinated about taking the GI Bill, making it family friendly
    as an extra arrow in the retention quiver, is realizing that
    pay can't solve everything. If it was just a matter of pay and
    retirement, that's pretty simple for Congress to do. However,
    that doesn't seem to be able to just solve recruiting problems
    or retention problems. There's a lot more to the American
    military mind set, there's much more--there's a family mind set
    now, there's a retention mind set, and there's a professional
    development mind set. It's more complex now.
        What we're talking about is putting together an attractive
    package for going in the military and staying in the military.
    It has much more to do with a lot of other things other than
    just pay, although pay is important. I was actually trying to
    structure it so that the Department of Defense would have an
    extra arrow in its quiver other than just pay. We've mentioned
    the almost emotional relationship to commissaries and a
    perception of benefits. Service members say, ``The country is
    either with me or not with me,'' and, ``When I'm away from
    home, they're either taking care of my family, or they're not
    taking care of my family.'' That includes everything,
    healthcare, education, commissary benefits, pay, retirement,
    the whole perception that ``My country's behind me and,
    therefore, I'm going to give it my best shot,'' rather than,
    ``I'm strung out here in Korea, and the country's forgotten
    about me and they're not taking care of me.''
        I wonder if you just want to talk a little bit about the
    targeted pay raise ranging from five percent to ten percent?
    I'm sure there's a rationale for that, and I probably could
    understand it. But on the question of pay and bonuses, one of
    my fears about the All-Volunteer Force was that it would
    become, shall we say, not just a professional force, but a
    mercenary force. In other words, you tack a number up on the
    wall and all those who want that number go to it. That's a
    dislocation or disconnect from the American society, which is
    another problem. I don't want our military to be just hired-gun
    professionals out there making big bucks, separated from the
    average culture of America. On the other hand, we do want to
    take care of our people.
        So do you want to kind of tackle that range of issues,
    particularly in terms of pay?
        Dr. Chu. Absolutely, sir, and I feel privileged by the
    chance to answer your question. Let me begin by agreeing that
    the Department's view is that it's more than pay that counts;
    it's the total package, including the celebration of people's
    service and honoring what they have done, are doing, and will
    do in the future.
        Indeed, I made myself, some years ago, in the debates over
    military healthcare, get out the reports of Congress when it
    wrote the antecedents to modern law on military healthcare. I
    was struck by the degree to which the spirit of those laws back
    in the 1940s was very much as you described, to be sure that we
    took care of the families here at home while the members of the
    services were overseas.
        To the pay issue itself, I think you put your finger on the
    Department's key consideration here, and that is: Are we
    remaining competitive? The first results from the so-called
    ninth Quadrennial Review of Military Compensation began to tell
    the department that we were losing our competitive position for
    the mid-grade NCOs, non-commissioned officers, and for our
    middle-career officers, the O-3s and O-4s in our force. On the
    enlisted side, part of the problem derives from the fact that
    there's been a change in American life. Now almost 70 percent
    of American youth who graduate from high school seek to go on
    to college. The point of comparison the Department had used in
    prior years, which was, ``What does someone with a high school
    diploma make,'' is no longer appropriate. We need to look,
    beginning with, roughly, the E-5 pay grade, at the compensation
    that someone with some college in American life might enjoy.
    It's against that standard that we began to think about how to
    best use the president's decision to increase military pay.
    That led to the philosophy described. There was a base pay
    raise for everyone of five percent for the officers, six
    percent to the enlisted personnel. For the groups where we
    believe we are facing present or near-future competitive
    disadvantage against the civil marketplace, we need to do more.
    Those groups, as you've noted, sir, are basically the E-5 to E-
    9 group. There are some other small additions beyond that in
    the O-3 and O-4 group.
        To the mercenary charge, with due respect to my colleagues
    here, quite candidly, we don't pay enough to call these people
    mercenaries. Without in any way criticizing what Congress has
    done here in its generosity over the years, it's not that
    lavish. We intend to be fair about what we pay to people,
    competitive about what we pay to people.
        You were absolutely right, sir, this is a difference from
    the usual philosophy of the department. I think it's a
    constructive difference. I think it's going to make a
    meaningful difference for our people. I've talked with all five
    of the senior enlisted advisors, including the master chief
    petty officer of the Coast Guard. Everyone of them supports
    this structured raise.
        It is not unprecedented. In, I believe, 1982, Congress
    approved a restructuring of the pay that had some of the same
    flavor that this does today.
        Senator Cleland. Don't misunderstand my remarks, I didn't
    say that they were mercenaries. I just said that that's what we
    didn't want to create the moment we went to an All-Volunteer
    Force. There's a positive side of that, which is what we want
    to stay on. However, the dark side of that is a growing
    disconnect between the civilian population and the American
    culture, setting up an ``us'' and ``them.'' In this country,
    with a tradition of the citizen soldier, we can never allow
    that to happen. It looked like to me, that, although we want
    adequate pay, what we're striving for is not just a moneyed
    force. We don't want some foreign legion that we just pay money
    to join, saying, ``We'll send you somewhere but don't ask us to
    do anything.'' What we were much more interested in, as part of
    our GI Bill tradition, is the response a grateful nation gives
    in response to service, in and outside the military, by
    providing adequate pay, good retirement, and a host of other
    things such as good commissary and PX privileges. By offering
    survivor benefits, educational benefits, and home loan
    guarantees, we create the overall feeling with service men and
    women that, ``I'm doing this cause I love my country. This is
    the job I want to do. I love to do it. While I'm doing it, the
    country is taking care of me.'' It's not just, ``They're buying
    me off and lots of luck,'' but rather, ``I'm connected. I'm
    serving, and they're serving me and my family, and we are
    together. I'm going to do my job and do what I love to do.''
    That kind of sense is where we want to go. Is that your
    feeling?
        Dr. Chu. Absolutely, sir, and I think that's why in this
    budget request, the Secretary so strongly backs the
    improvements in family housing, the improvements in the
    workplace and the infrastructure of the department. I think he
    is very much convinced it is the entire package, and it is
    service to the Nation that we are honoring here with the
    decisions made.
        Senator Cleland. Can I follow up on your point about
    celebration of service? You're a Vietnam veteran and I'm a
    Vietnam veteran. In dealing with military people and veterans a
    long time now, for some 30 years, I think military people don't
    think of service as a monetary thing; it is a psychic thing, a
    psychological sense that the country cares and has not
    forgotten me. One of the ways we do that is with medals for
    service. There is an issue of a Korean service medal; a
    proposal for an award of a new campaign medal has been referred
    to the Senate Armed Services Committee for consideration. The
    proposal would require that the Korea Defense Service Medal be
    awarded to members of the armed forces who were assigned to
    duty in Korea since the Armistice was signed in 1953. I don't
    want to catch you off guard here, but do you have any thoughts
    about that at this point?
        Dr. Chu. Just two, sir. First, we have not come to a
    conclusion, as a department, on this subject. Second, in the
    past the department has been wary of open-ended awards, and
    that's one feature of this. As I understand it, the proposal
    would be ongoing into the future. Generally, awards have been
    for a period concluded already, and therefore honors a specific
    set of circumstances. I do think that the point you're making
    is well taken, that the military personnel who have been
    serving in Korea since the Armistice have been on the front
    line, so to speak, often under difficult circumstances. Perhaps
    something more than we have done in the past to note that is in
    order.
        Senator Cleland. Thank you very much, sir. Senator
    Hutchinson, welcome to our third panel, sir.
        Senator Hutchinson. Thank you, Mr. Chairman. I apologize
    again to our witnesses for my absence. One of the great
    frustrations in the Senate is having multiple committees
    meeting simultaneously and trying to be in more than one place
    at once. So I do apologize, and I beg your indulgence.
        General Peterson, let me join the chairman in
    congratulating you, wishing you the best, and expressing our
    gratitude for your service to our country. We wish you the very
    best.
        General Peterson. Thank you very much, Senator.
        Senator Hutchinson. Secretary Chu, I wanted to bring up a
    subject that certainly is personnel related, something that's
    become of grave concern to me. The issue regards the Department
    of Defense's immunization program. Back in the early 1990s, the
    Pentagon considered the building of a government-owned,
    contractor-operated (GoCo) facility that would meet the very
    unique immunization needs of the military. Many times, they are
    dealing with real or potential viruses that could be biological
    weapons. The protection of our troops would not be sufficient
    to have a general commercial value and be profitable for the
    private sector. The recommendation was made that a GoCo be
    established. However, the recommendation was not followed, and
    the decision was, I think, a terrible mistake. We depend
    entirely upon the commercial sector, which has had grave
    consequences.
        The difficulty now that it's created for the anthrax
    vaccination is pretty well known to everybody. According to a
    recent Chicago Tribune story, recently two Navy recruits died
    as a result of a viral infection. The conclusion was that their
    lives could have been saved. The vaccine was not available
    because the company that had produced it decided it wasn't
    commercially feasible and quit producing it. Therefore, we had
    no means of protecting them from that infection.
        I think it's a serious national security problem, and I
    know the Department of Defense is again looking at the creation
    of a GoCo. I'd like your opinion on the establishment of a
    government-owned facility dedicated to the unique needs of the
    military, whether that's necessary, and whether we could better
    protect our troops with such a facility.
        Dr. Chu. To get to the bottom line, first, and then to
    offer an explanation, we have not yet concluded that a GoCo
    facility is the best option.
        Let me put this in context. Sir, there is a problem with
    vaccine production for the entire American society, given the
    impact of tort litigation on this sector of healthcare. In the
    Department of Defense, we are a particular victim of that
    outcome.
        That said, I think we need to look at the entire vaccine
    picture in coming to a conclusion of how we want to proceed. We
    have just started that enterprise and don't have the answers
    yet, but we know this is something that is urgent.
        On the specific Chicago Tribune issue, there are two points
    I'd like to add. One, part of the difficulty was that the
    manufacturer, as I understand it, had to come up to the newer,
    tighter FDA standards and, as you say, decided that was not
    commercially viable. The Department is pursuing a new contract
    solicitation for that purpose. Second, the real problem here is
    the loss of personnel time in training. While the story
    headlines the two most unfortunate deaths, this is a real
    training issue that we need to solve. But I don't want to be a
    Pollyanna here and promise that the solution is around the
    corner. This is part of a much larger problem, and we're going
    to have to figure out what the right Department of Defense role
    is.
        Senator Hutchinson. I don't know how much evidence we need.
    It was my understanding that the Department of Defense was
    heading toward a very expeditious review and a recommendation
    on what course to take.
        Dr. Chu. Yes.
        Senator Hutchinson. This is news to me, if we're still
    undecided. Clearly, the BioPort is an unmitigated disaster
    recognized by all. It is costing the American taxpayer millions
    and millions of dollars and jeopardizing the safety of our
    troops for whom we are not able to provide that anthrax
    vaccination. We know there are a whole host of needs that the
    military has in regards to vaccinations and immunizations that
    would not be generally available. They are not needed by the
    general population and could never be commercially viable. Tell
    me what the counter-argument is. Why is there still
    consideration of depending upon the commercial sector to
    provide protection for our troops when this is has been such a
    costly disaster in the past?
        Dr. Chu. A GoCo facility would be depending on the
    commercial sector, since it's government-owned contract-
    operated.
        Senator Hutchinson. Shall I say ``solely'' dependent upon
    the private sector then?
        Dr. Chu. I don't think we're disagreeing, sir. We recognize
    we're going to have to take aggressive action in this sphere in
    order to get the kind of vaccine supply we need for a variety
    of ailments, but we're not quite yet at the decision point, I
    can't report exactly what we're going to do this morning.
        Senator Hutchinson. Okay. It would seem----
        Dr. Chu. I apologize for that.
        Senator Hutchinson. Maybe there are more options out there
    than I can imagine. It would seem to me our options are kind of
    limited on what we do and that we made a big mistake in the
    early 1990s when we turned down that solid recommendation. But
    thank you for that.
        Let me bring up another issue that I have been involved in.
    When we had our roles reversed, and I was chairing the
    committee, we had a number of hearings on recruitment and
    retention. Maybe in those early days as chairman, I was naive,
    but I was very shocked to discover the problem that our
    recruiters have in access to our high schools across the United
    States. I'll never forget when we had a panel of front-line
    recruiters. These were the guys out there in the schools, out
    in the communities, and I asked all of them to name the number-
    one problem that they had in recruiting. They said access to
    the students, access to the potential recruits. As the evidence
    accumulated that there were literally thousands of high schools
    that bar recruiters to their campuses, we sought a solution to
    that. Through a lot of good-faith negotiations with those who
    wanted to make certain that we didn't have too heavy-handed
    approach with it, I think we came up with a provision that's
    pretty good. It sets in place a series of steps by which a
    recruiter would report a school that doesn't provide access,
    and there would be the efforts of superiors, right on up to the
    Secretary and to the Governor of the State, if necessary, to
    find out what's the problem and how to get it solved.
    Ultimately, instead of a superintendent or a principal having
    the authority to bar recruiters, it has to be something that
    the school board takes a public vote on if they're going to
    have that policy in place. So I think it was a good compromise.
        My concern now is that a year from now, next July, this new
    policy will kick in. Recruiters are already reporting that
    they're running into superintendents who have no idea about
    this coming change in policy. It's my understanding from other
    hearings, that there are Web sites that are being prepared to
    help get the word out. We put an amendment in the education
    bill, the ESEA, that will hopefully get to the President, that
    actually authorizes money for a joint effort between Education
    and Defense to help educate and get the word out so schools are
    aware of the new policy.
        Could you give me your thoughts on what's being done and
    what kind of preparations are being made?
        Dr. Chu. I personally welcome the attention you've given to
    this issue. The Department is very much concerned with it, and
    is undertaking the kind of preparation that you have indicated.
    It may be useful to get some sense from my colleagues here how
    they feel the trend is in terms of actual behaviors in the
    American community at large, in terms of recruiter access. I'd
    invite their comments on that subject.
        Senator Hutchinson. I would welcome that.
        General Peterson. We're making good progress, I think, sir.
    We haven't, obviously, solved the problem, and most of that's
    from engagement with the schools themselves. We have taken an
    initiative, especially in the area of our installations, to
    have a colonel-level representative on the school boards in our
    communities. We've engaged them with not only our recruiters,
    but with our squadrons where we have military bases in the
    area. In general, we're marching down the line to make contact
    with schools, and we're finding out that a good part of our
    problem has been failure to communicate. We've had less
    problems once we actively engage the senior officers and NCOs
    with the schools than we anticipated.
        We will still have some hard-core ones, I think, that we'll
    have challenges with, and we're not moving as fast as we'd like
    to. It's a matter of getting enough senior NCOs and officers
    out into the school systems themselves, and we've built a game
    plan to do that. I think we're marching down that path.
        Senator Hutchinson. Is this Web site that was mentioned up
    and running where recruiters can report schools that are
    barring access? Is anybody familiar with that issue?
        General Maude. I'm not familiar with the Web site, sir. I
    am familiar with the Department of Defense database that we've
    just finished populating to make sure that we have identified
    all the schools and their status about whether they are
    allowing access to one, all, or none of the services. We can
    then target our efforts to reach out to the school board and
    the school administration. So our effort since the passage of
    the law has been to gather the data and make sure that we are
    working on the right problem.
        Senator Hutchinson. Is there sufficient data yet to
    determine whether there are any trend lines and if the
    situation is improving, even from the publicity that's attended
    the legislation and the issue?
        Admiral Ryan. Senator, from the Navy point of view, I would
    agree with my colleagues. As Don has said, the Secretary of
    Defense's office has organized us, broken down the schools and
    areas that we think are potential problems, and given them to
    each of us to go out and communicate with. That has been very
    helpful.
        I can give you just one example. The Portland, Oregon
    school system was one of our areas, and we had two of our Navy
    flags go and talk to the authorities there. The regional
    superintendents were able to come to an agreement to where we
    could get back into the schools and have our recruiters back in
    there.
        So this has been a very useful forcing function. I think
    we've taken it on methodically to get the database and to
    understand the problem. I think each of us has started to go
    out now, once we've each done our share of the schools, to go
    out to those areas that are in our purview and start to address
    the issues with the principals. We're into phase two now where
    we will be expected to make sure that the schools know what the
    situation is and what the expectations of the law are.
        Senator Hutchinson. You mentioned Portland. Have they
    changed?
        Admiral Ryan. Well, in Portland, we had not been able to
    get into the schools----
        Senator Hutchinson. Right.
        Admiral Ryan. We had two of our Navy flag officers go out
    to that area and talk to the authorities there, the elected
    officials and the school board. We have been able to get back
    into the school systems to make our presentations.
        Senator Hutchinson. Very good.
        General Parks.
        General Parks. Senator Hutchinson, as you may recall from
    previous hearings with you as the chairman, I was in the seat
    as the recruiting commander at that point. I've been working
    and following this issue very closely over the last few years.
    As my colleagues have articulated, I believe we are making
    progress in the one-to-one interface that comes by getting
    someone across the table. We are explaining it at a level where
    there's an influencer, how the process works, what we're trying
    to do, and why we need access to offer the opportunities that
    should be provided to young folks, whether that be in high
    school or college.
        The burden for that, as we start out, falls on the
    recruiter to start through the process and ratchet it up
    through his chain of command. Initially, he has been given one
    extra thing to do. So as we get this rolling, it takes getting
    the senior leadership involved. Again, that will just take us
    time. We are making progress. As we started this out, the
    letter signed by the Secretary of Education was the most
    valuable piece that that recruiter had to go out there and say,
    ``Here's what the Secretary of Education says.''
        So your efforts to work closely with the Secretary of
    Education and the Department of Education will only help our
    efforts to move forward in this regard on behalf of DOD.
        Senator Hutchinson. I'm very pleased with that report. I
    think that's an excellent indication that a lot of these
    situations are going to be resolved fairly quickly. While there
    may be some hard-core schools that resist that change in
    policy, I think that's a very favorable report, and I'm
    pleased.
        Mr. Chairman.
        Senator Cleland. Thank you very much, Senator Hutchinson.
    We thank you for your interest in all these issues. It means a
    lot.
        General Maude, could you share with us your top two
    personnel priorities this year that you would like to have this
    committee address?
        General Maude. Yes, sir, and thank you for the opportunity
    to address the committee and to testify today.
        Army readiness is our primary concern--soldiers in
    foxholes--and I'd like to report to the committee that we've
    had another very successful recruiting year and a very
    successful retention year that has enabled us to man our
    formations in a much better posture than we have in many years.
    By the end of this year, 67 percent of our warfighting
    formations will be at or above a hundred percent, and then
    we'll have about a 94-percent match on grade and skill. That's
    better than we've been in decades. It is the result of the
    great support that we've gotten from this committee and from
    Congress on our programs to support recruiting and our programs
    to support retention.
        There are two issues that are of top concern to us in the
    Army right now, as it pertains to readiness. First, shaping the
    officer corps, because we have not yet got that quite right. We
    continue to have shortages, particularly at the grade plate of
    captain. Our line officers will be about 2,700 captains short.
    Our greatest tool to shape the officer corps, and I think it's
    the intent of Congress, is the promotion system, very well
    articulated in the rules of DOPMA. We think we need some help
    from you in lowering the promotion point--pin-on point to
    captain. Currently, we're constrained to not promoting any
    earlier than 42 months and, with some relief, down to 36
    months, temporarily to the secretary. We believe we can shape
    that captain grade plate, get it healthy quickly, and then
    regain a better readiness posture across our officer corps.
        That's our largest grade plate. If it's not healthy, we
    have trouble sustaining the field-grade ranks from which we
    begin to pull for major and lieutenant colonel. The most number
    of years that anybody serves is at that grade plate.
        Senator Cleland. Thank you for zeroing in on that whole
    pin-on-time-to-captain point. I have two thoughts. First, you
    have two old, burned-out Army captains here--me and Secretary
    Chu here----
        [Laughter.]
        So if things--I'm not sure things are going to get that
    bad, but we're available. [Laughter.]
        Second----
        Dr. Chu. I think I've been volunteered here. [Laughter.]
        Senator Cleland. In other words, I should speak for myself,
    right, Mr. Secretary?
        Dr. Chu. That's okay.
        Senator Cleland. Second, I was promoted to captain the 1st
    of February 1968 and I think it was under 36 months in those
    days.
        General Maude. Twenty-four months, sir.
        Senator Cleland. The day I was promoted, the Tet Offensive
    broke out, and the war went to hell in a handbasket, and all of
    my friends said, ``Yeah, we figured that would happen when you
    went to captain.'' [Laughter.]
        The pin-on time was literally 26 days. The battalion
    commander couldn't even get to me to pin on my captain's bars
    for 26 days. When I saw in my briefing notes that you're
    bringing up the pin-on time, shortening that, I'm all in favor
    of that. I thank you for zeroing in on that point. We will take
    serious note of your request and serious advisement of that.
        General Peterson, I see that the Air Force is requesting an
    active duty end-strength increase of some 1,800 personnel. Do
    you have any idea where this end strength will be used, or will
    it be just be used as yeast to leaven the force?
        General Peterson. Pretty much across the force, sir,
    focused on our maintenance area. If I took it in raw numbers,
    that is the area we're trying to increase. We're going from, as
    you mentioned, 357,000 to 358,800. We'd like to, gradually,
    continue to build our force as we can sustain it. Some of that
    goes into our recruiting and our training piece, as well, so
    that we can bring our overall shortfall up.
        Senator Cleland. You are going to miss your end strength by
    a little more than about 4,000 this year.
        General Peterson. Yes, sir. We think we'll be short, but we
    hope we'll do a little bit better than our estimate right now;
    it's about 2,500 enlisted and about 1,500 officer right now.
    Our recruiting is much better than it was last year, and so
    we're beginning to close the gap there. The area we need to
    work on the hardest is retention.
        Senator Cleland. In terms of recruiting--I don't know
    whether Senator Hutchinson wants to remark on this point--but
    personally, I would much rather have the American military
    stick to quality and emphasize capability, performance,
    professionalism. I don't see that as a great disaster, if you
    don't hit that magic mark that Congress and the budget
    allocated or something. I would much rather have an insistence
    on quality, performance, and quality force than, shall we say,
    lower standards just to get to a number.
        Senator Hutchinson, do you have any reaction to that?
        Senator Hutchinson. Mr. Chairman, I'd only offer my
    agreement. I think that is very true, and in the long run,
    recruitment and retention is enhanced when we maintain a
    quality standard. I think you're right.
        Senator Cleland. Amen.
        General Peterson. In that area, Senators Cleland and
    Hutchinson, we couldn't agree with you more, and we've lagged
    the fight a little bit by maintaining--trying to concentrate on
    our quality as we've built our recruiting force up. It will
    enable us, not only to raise the numbers, but to continue to
    concentrate on quality, and we all, I think, know the value of
    quality. That's what we want to retain.
        Senator Cleland. Thank you. General Maude, a question about
    state forces. My state, and other adjutant generals, tell us
    that full-time support is the top readiness issue of the
    Reserve component. I know the Army developed a plan to
    incrementally increase the full-time support program over an
    11-year period, but I wonder why the Army didn't include the
    first year of this ramp up in the current DOD legislative
    proposal. Any particular reason for that?
        General Maude. Sir, I don't know that I can address that
    adequately. If I could take that for the record and return to
    you on that, I will.
        [The information referred to follows:]

        You correctly state that full-time manning is directly linked to
    readiness in the Reserve components and impacts the ability to train,
    administer and prepare ready units and individuals for the transition
    from a peacetime to a wartime posture. The Army developed the full-time
    support ramp plan to incrementally increase the Reserve Component Full-
    Time Support Program over 11 years, beginning in fiscal year 2002.
    However, for fiscal year 2002, we do not have sufficient funds to
    resource the authorized increases in Active Guard Reserve (AGR) or
    Military Technicians (Mil-Tech). For this reason the first year ramp
    requirement was not included in the proposed legislation.
        For fiscal year 2002, the required full-time support increase is
    724 in the Army National Guard and 300 in the Army Reserve.
    Additionally, there is a requirement for a Mil-Tech increase of 487 for
    the Army National Guard and 250 for the Army Reserve. Without an
    increase in total obligation authority these requirements will not be
    satisfied in fiscal year 2002, which may delay achieving the planned
    FTS manning objective by fiscal year 2012.

        Senator Cleland. Thank you. Admiral Ryan, could I get your
    views about the issue of authorizing transferability of a
    portion of a service member's GI Bill benefits to his or her
    family members?
        Admiral Ryan. Mr. Chairman, Senator Hutchinson, I think the
    Navy has had a lot of success recently in our retention
    efforts. We're up 7 percent. Our recruiting is up. Our gaps at
    sea in the deployed forces are down by over 60 percent in 2
    years. We think we have a strategy that is going to move us to
    a more senior, experienced force. It's going to be a smaller
    force because we're going to be more technical, but we've found
    that we and our sailors both need flexibility and choice. We
    have restored, I think, the choice and the power of service
    with the restored retirement benefit and with the improved
    medical benefit. We think the third part of that triad is to
    put the ``wow'' back into the education benefit.
        The way we would use the transferable education benefit, if
    it was approved, is we would offer this to our personnel that
    have approximately 10 years or greater in service. We think
    this would be a real incentive for them.
        We have polled our men and women on this issue, and this is
    a real winner with them. They like having the choice of what
    they do with their benefit, and they like the fact that we're
    taking into consideration if they have a spouse or a child,
    those needs, and getting the use of this benefit up.
        This would be a good, flexible thing for the Department of
    the Navy, Navy personnel, to have, particularly for personnel
    at about the 10-year-and-out point, Senator.
        Senator Cleland. Thank you very much. I was in Yokosuka
    Naval Base in Japan last August, and a wonderful admiral, when
    I talked to him about this issue, said, ``The decision to
    remain in the Navy is made around the dinner table.'' I thought
    that was a powerful statement, that it's an inclusive decision.
    Maybe with the improved educational opportunity for spouses and
    youngsters, that decision around the dinner table can be more
    positive, in terms of the Navy career.
        General Parks, do you have anything to add, in terms of the
    Marine Corps personnel policy that you'd like to have the
    committee address?
        General Parks. I do, sir. The one item that I would bring
    up that I think is an area that, perhaps, keeps me up at night,
    is the issue of the personnel tempo legislation. In essence, we
    view that, I believe, as paying a premium for doing what we do
    as normal operations or an expeditionary force. We go out and
    about around the world. We're forward deployed, forward based.
    Being a small force, the ability to take people off when we get
    to the 400-day threshold and rearrange them impacts us perhaps
    greater than some of the other services.
        We understand the intent of Congress. We're working very
    diligently toward that. We did not have a mechanism to track it
    previously, and we now do. We're still grasping the total
    impact of it. But at this juncture, it's forcing us, once we
    come to the threshold on 1 October, to use scarce operations
    and maintenance (O&M) funds to compensate for this, to perhaps
    break the continuity and cohesion that has been very valuable
    and extremely successful in our retention. Our re-enlistment
    rates are the highest in our forces, which are the most active
    in doing what they have signed up to do. Perhaps we're going to
    run now counter to that by a legislated direction.
        I believe we understand the intent. I would only ask, until
    we grasp the total impact of this, that we give a little more
    lead time for us before we actually have the threshold in which
    we have to start paying people for this.
        Senator Cleland. Excellent points you raise. I was just
    thinking that the Marine Corps is an expeditionary force, and
    your rationale for being is, in effect, completely mission
    oriented about deployment, movement, and quick response. You're
    right; when a marine signs on, and they get to do that, that's
    why they wanted to be a marine. We don't want to do anything
    that would be counter to that. But we do know that constant
    deployments that aren't properly measured, in terms of impact
    on families and other things, can begin to wear on the force.
    We don't want to throw the baby out with the bath water. We
    want to just be able to support the force in a better manner.
        Senator Hutchinson, do you have any further questions?
        Senator Hutchinson. I have only just one last comment. I
    want to applaud the Department of Defense for their excellent
    implementation of the pharmacy benefit last year. I think one
    of the great things that the committee did, that Congress did
    last year, was the TRICARE For Life. I have had a lot of
    feedback, an enthusiastic response, to the department's
    education information campaign--letting people know about this
    and the way it's been implemented. I think it went in--was it
    April?
        Dr. Chu. April 1, yes, sir.
        Senator Hutchinson. Can you just give us assurances or any
    information of what will be done by the department as we look
    to the full implementation of TRICARE For Life into the year?
        Dr. Chu. Yes, sir, and thank you for those kind words.
    We'll be sure to take them back to our colleagues who were
    responsible for bringing off this important new benefit on,
    really, rather short lead time. I think, as you say, sir, it's
    been to, as far as I can tell, universal applause. I have not
    heard a single complaint. I'm sure there are a few things that
    have gone wrong out there, but it really is quite a triumph.
        One of the most important things that we can do to make
    sure that TRICARE For Life operates properly next year is to be
    sure that we fully fund the present budget request for the
    healthcare system. We put this estimate together as our best
    estimate of what will be needed.
        Obviously, there are uncertainties associated with this.
    This is why the present budget provides for a contingency
    account in the healthcare system. As I said earlier, what would
    help us most is if you could persuade your colleagues elsewhere
    in Congress to avoid fencing any part of the medical care
    budget so we can move the funds as we need to in order honor
    the promise that's been made to our over-65 retirees. This is a
    big, new responsibility. We look forward to meeting the
    challenge, but I would not want to underestimate how much there
    is to do to make this successful.
        Senator Hutchinson. Do you anticipate an information
    dissemination?
        Dr. Chu. Yes, sir. There's a big effort already out there
    starting to explain it, and I think the associations who
    testified earlier this morning have done a terrific job with
    their materials. Unlike the government, they write in plain
    English, and even I find the brochure a useful way to review
    the provisions of the law. [Laughter.]
        Senator Hutchinson. Thank you, Mr. Secretary. Thank all of
    the panel for your valuable service and contribution.
        Mr. Chairman?
        Senator Cleland. On the question of the retired military
    TRICARE For Life option and the pharmacy benefit, we were proud
    to be part of that and push that legislation along,
    particularly Senator Hutchinson and I, on the Personnel
    Subcommittee. It was noted in the testimony that we received;
    that the greatest out-of-pocket expense for a military retiree
    over 65 was the prescription drugs, and we're glad we moved in
    that direction.
        If there are no further comments or questions, the
    committee is adjourned. Thank you.
        [Questions for the record with answers supplied follow:]

                 Questions Submitted by Senator Tim Hutchinson

                                  HEALTH CARE

        1. Senator Hutchinson. Dr. Chu, the Department of Defense has come
    to rely increasingly more on the Reserve components and activation has
    frequently come to mean deployments throughout the world for varying
    periods of time. While I am not proposing total comparability of all
    benefits between the active and Reserve components, I am extremely
    concerned about the continuity of health care for reservists and their
    families, as they transition to and from active military service.
        I applaud the efforts of the Department in assisting those Federal
    employees who are activated in continuing in their health plans. I am
    equally concerned about private sector employees and what options the
    Department may be considering to assist in providing consistent health
    benefits for those reservists and their families.
        Could you please share with this committee what plans you may have
    in addressing this critical issue?
        Dr. Chu. While all Guard and Reserve members have the option under
    the Uniformed Services Employment and Reemployment Rights Act (USERRA),
    as codified in chapter 43 of title 38 of the U.S. Code, to continue
    their employer-sponsored health care plan for themselves and their
    families, this may not be financially viable for the reservist-
    employee. Under USERRA, the employer may require the reservist-employee
    to pay the entire premium share for continuing that coverage plus a 2
    percent administration fee when the period of active duty is for
    greater than 30 days. The additional cost may not be affordable to some
    reservists, or could place an additional financial burden on families
    who may already be financially stressed. While TRICARE is available, it
    requires the family to change health care systems and may require a
    change in health care providers, only to change back again upon the
    member's release from active duty.
        To address this important issue, the Department has taken steps to
    initiate an analysis with RAND's National Defense Research Institute
    that would assess the current health care coverage provided to Reserve
    component members and their families, to identify new options that
    might be more cost effective and to evaluate the likely response of
    Reserve component members to the new approaches. The project will
    consider such factors as: health care for families of reservists when
    the reservist is not on active duty; the disruption and expense of
    health care coverage experienced by Reserve families when the reservist
    is ordered to active duty for greater than 30 days; cost-effective
    options that may be considered to lessen the burden on reservists and
    their families; and the implication for force health protection and the
    medical readiness of Reserve personnel.
        Also we have reviewed a bill introduced by Senator Leahy--S. 1119--
    that would require the Department to conduct a study covering many of
    the same areas that will be studied under the RAND project. The
    Department supports the study of health care coverage for members of
    the Selected Reserve and their families as described in S. 1119. Our
    only concern is that given the level of detail that would be required,
    it may be difficult to meet the March 1, 2002, completion date for the
    Report to Congress.
        Finally, with the recent mobilization of Reserve component members
    following the attacks on the World Trade Center and the Pentagon, the
    Deputy Secretary has approved several TRICARE enhancements for Guard
    and Reserve members called to active duty for more than 30 days in
    response to those attacks and the war on terrorism. Specifically, the
    department will: (1) waive the TRICARE deductible for fiscal year 2001
    and fiscal year 2002 since many reservists may have already met an
    annual deductible payment associated with another health care plan; (2)
    pay civilian physicians who are non-participating providers up to 15
    percent above the allowable TRICARE charges, which will help reduce
    family expenses--particularly for those families who are outside the
    TRICARE provider network; and (3) waive the requirement for a non-
    availability statement, which will allow Reserve component families to
    continue to receive care from their private, civilian providers.

        2. Senator Hutchinson. Dr. Chu, I am pleased that the President's
    Budget Request included an addition to the Defense Health Program of
    $3.9 billion to address implementation of the complete health care
    benefit for older military retirees and their dependents. As you have
    noted, the budget request reflects an increase of approximately 12
    percent for the Defense Health Program over last year's amount.
        I understand there is a great deal of uncertainty with regard to
    the adequacy of these projected amounts. What plans does the Department
    have for dealing with the uncertainty of the health program, both with
    regard to the uncertainty of budgeting for the core program, and with
    the uncertainty of the impact of the new retiree benefit?
        Dr. Chu. For the first time in recent years, the fiscal year 2002
    budget provides a realistic estimate of the Military Health System
    (MHS) required health care costs and adequately funds the Defense
    Health Program (DHP) for known requirements. The MHS continues to face
    challenges, just as the civilian sector does, with such issues as the
    rising costs of health care. It now also faces the expansion of the
    entitlement to health care for our over 65 beneficiaries. The fiscal
    year 2002 budget does include an increase of direct care funding to
    sustain the military treatment facilities; an increase of 15 percent
    for pharmacy operations; provides for 12 percent increase over the
    fiscal year 2001 budget for the managed care support contracts; and
    sufficiently funds the implementation of the Fiscal Year 2001 National
    Defense Authorization Act requirements, including TRICARE For Life. We
    believe the additional funding appropriated to the Department for the
    benefits to the over 65 population will be adequate to fund their
    health care costs. We will closely monitor execution in the coming
    fiscal year of not only the Defense Health Program core program
    requirements, but also the health care of our new beneficiaries to
    determine funding sufficiency.

        3. Senator Hutchinson. Dr. Chu, DOD has partnered with the civilian
    sector through the use of ``managed care support contracts'' to augment
    the capabilities of the ``direct care'' system to provide health care
    to DOD military beneficiaries. These contracts have been in place for
    some time now and there has been a great deal of discussion about how
    future contracts should be structured.
        In your statement you state: ``We face many challenges with the
    DHP. One being developing a new generation of simplified managed care
    support contracts, which have greater financial predictability, create
    more competition, and reduce administrative costs.''
        What time frame do you envision pursuing this new generation of
    contracts and what significant changes do you propose to the current
    contractual process?
        Dr. Chu. The TRICARE Management Activity (TMA) is developing the
    requirements and the new acquisition strategy to support award of the
    next generation of TRICARE contracts. TMA anticipates full
    implementation of the next generation of TRICARE managed care support
    contracts as existing contracts are completed.
        The revised strategy will incorporate significant improvements to
    the current contract architecture. If Congress approves the elimination
    of the current statutory requirements for contractors to ``financially
    underwrite'' the TRICARE contracts, the Department will be able explore
    the use of different contract models, in accordance with the Federal
    Acquisition Regulation, for obtaining cost effective and efficient
    health plan administrative services. The Defense Health Program will
    then assume all risks for health care costs, with appropriate financial
    incentives to control overall program costs. This more flexible
    contract model will enhance competition, facilitate the replacement of
    poor performing contractors, and will reduce administrative costs
    associated with contract change orders. Key business processes will be
    reengineered to simplify claims processing and to synchronize benefit
    changes with the Department's programming, planning and budgeting
    process.

        4. Senator Hutchinson. Dr. Chu, Do you believe that the DOD
    custodial care definition needs to be changed to more closely resemble
    the definition used by other Federal programs?
        Dr. Chu. For the past few months we have been evaluating the
    feasibility of making that type of change. This involved assessing the
    impact on the basic TRICARE benefit that would be associated with such
    a change. The determination is that we should begin steps to make the
    change keeping in mind that it is essential to do so in conjunction
    with other key changes related to skilled nursing facility and home
    health care benefits and reimbursements.

        5. Senator Hutchinson. Dr. Chu, do you support a ``wrap around'' to
    the Medicare benefit for skilled nursing facility care for DOD
    beneficiaries?
        Dr. Chu. We support simplicity and consistency in coordination of
    benefits between TRICARE and Medicare. We support an extension of the
    number of days covered beyond the Medicare benefit with the same
    prerequisites for coverage as Medicare on any ``wrap around'' benefit.
    These prerequisites are a minimum 3 day precedent inpatient hospital
    admission, admission to a skilled nursing facility within 30 days of
    discharge from the hospital, and admission to a Medicare certified
    facility.

        6. Senator Hutchinson. Dr. Chu, do you support implementation of a
    DOD home health benefit along the lines of the Medicare benefit?
        Dr. Chu. We believe that transitioning to a Medicare-like acuity-
    based assessment of medically necessary home health care needs, coupled
    with the latitude to provide some support for assistance with
    activities of daily living using less costly support staff such as
    nurses aides, is in the best interest of our beneficiaries.

        7. Senator Hutchinson. Dr. Chu, do you support integrating the
    provisions of the Individual Case Management Program into the basic
    TRICARE benefit?
        Dr. Chu. It is crucial that action to do so be directly tied to a
    change in the definition of custodial care and action to establish
    Medicare-like benefit and reimbursement systems for both skilled
    nursing facility care and home health care services. We think that
    continuation of comprehensive case management services under the
    TRICARE Basic Program is also essential to ensure the needs of these
    special beneficiaries are effectively met from both a quality and cost-
    effective standpoint.

        8. Senator Hutchinson. Dr. Chu, do you support a supplemental
    program which ensures active duty members' beneficiaries have a
    complete benefit to support the deployability and readiness of our
    active duty troops?
        Dr. Chu. In support of readiness, we would welcome the latitude to
    develop or modify existing TRICARE programs to allow the provision of
    clearly defined and administered medical coverage enhancements and
    support services to those active duty family member beneficiaries with
    special needs.

        9. Senator Hutchinson. Dr. Chu, do you support incentives for
    participation in long term health insurance programs?
        Dr. Chu. We support the concept but until details of the long-term
    care insurance offering for Federal employees and military
    beneficiaries is more clearly defined we cannot determine what
    incentives may be appropriate.

        10. Senator Hutchinson. All Personnel Chiefs: Last year, this
    Committee enacted legislation that fulfilled the promise of lifetime
    health care. Your organizations have been extremely helpful in getting
    the word out on new benefits. Could you share with the Committee,
    information about initiatives you have under way to help educate
    beneficiaries about these new retiree programs?
        General Parks. Numerous articles about TRICARE For Life and the
    TRICARE Senior Pharmacy programs have been included in our Semper
    Fidelis Memorandum For Retired Marines. In Volume 44 No. 4, we provided
    a brief synopsis of the Fiscal Year 2001 National Defense Authorization
    Act that was signed into law on 30 October 2000 which included TRICARE
    For Life. In Volume 45 No. 1, details of TRICARE For Life and the
    TRICARE Senior Pharmacy programs were the lead articles. In Volume 45
    No. 2, we provided additional information about how ``Other Health
    Insurance'' (OHI) impacts on TRICARE Senior Pharmacy, and also an
    update on TRICARE Senior Pharmacy. In Volume 45 No. 3, we will
    introduce TRICARE Plus and identify to our retired component that they
    should have received, or soon will receive, a DOD mailout about TRICARE
    For Life. Additionally, every issue of the Semper Fidelis Memorandum
    For Retired Marines has contact numbers and some form of information
    pertaining to TRICARE. The memorandum is mailed to all retired marines,
    and surviving spouses who are receiving annuity payments from DFAS--
    Denver.
        Our Retired Activities Section web site also has TRICARE For Life
    information contained on the ``Hot News'' page. The Retired Activities
    Section of HQMC Manpower Department (MMSR-6) fields numerous telephonic
    and e-mail inquiries pertaining to TRICARE For Life.
        Admiral Ryan. Navy took several steps to ensure our Retiree
    Families were informed of these significant and beneficial changes.
    Specifically, Navy published several comprehensive articles in ``Shift
    Colors'', a quarterly retiree newsletter, and offered additional points
    of contact should questions arise. We also ensured this information was
    disseminated at annual retiree seminars held throughout the country.
    Detailed information packets, including various pamphlets, were mailed
    to all 68 Navy Retired Activities Offices (RAOs) throughout the world
    in February 2001. The RAOs, staffed with more than 300 volunteers,
    provide valuable support services to our Retiree Family and they
    received in-depth training on TRICARE for Life during our annual RAO
    training conference held in June 2001. Additionally, the Secretary of
    the Navy Retiree Council, comprised of both Navy and Marine Corps
    retirees, was provided extensive information on the program from the
    Surgeon General and several military retiree fraternal groups such as
    The Retired Officers Association (TROA) and the Fleet Reserve
    Association (FRA). Our Casualty Assistance and Retired Activities
    Division (PERS-62) maintains a toll-free number and quickly responds to
    E-mails from retirees, with all information additionally accessible
    from the PERS-62 web page: http://www.persnet.navy.mil/pers62/RetAct/
    newstaff.htm.
        General Peterson. Mr. Chairman, thank you for the opportunity to
    address this issue. The Air Force Medical Service (AFMS) has proudly
    partnered with our sister Services to successfully implement TRICARE
    For Life and other legislative initiatives that improve the health care
    options for our senior patriots and their families. Restoring the
    ``promise'' to our seniors is also a great deposit into the bank of
    trust with the men and women who are currently serving their country
    and will undoubtedly positively influence future retention.
        The AFMS supported numerous initiatives to educate our
    beneficiaries about these new programs. In addition to supporting the
    TRICARE Management Activity (TMA) communications strategy, AFMS
    personnel developed and provided hundreds of briefings nationwide to
    our senior beneficiaries and other interested parties.
        Many military retiree organizations played an invaluable role in
    this endeavor. TMA and The Retired Officers Association surveyed
    Medicare-eligible beneficiaries to determine optimal communications
    strategies. These surveys revealed that more than 80 percent of seniors
    read retiree newsletters, 39 percent read the messages on their retired
    pay statements, 24 percent read the various handouts available in the
    military medical treatment facilities (MTFs), and only 7 percent used
    the Internet as a source of information about changes in health care
    benefits. TMA initially fielded web-based information about the new
    benefits that was later supplemented by mailings to each TRICARE For
    Life household in January 2001 and August 2001. These mailings provided
    detailed information about the new programs.
        The Air Force took the lead in developing a toolkit to provide
    TRICARE Plus implementation and marketing guidance to each of its
    participating MTFs. Letters explaining the TRICARE Plus program were
    mailed to eligible beneficiaries by participating MTFs. Every Air Force
    commander received briefings about the new benefits Congress authorized
    as part of our Operation Command Champion program. In-processing
    programs at every Air Force base now contain information about these
    new programs. Additionally, the TRICARE Plus MTF primary care
    enrollment program was briefed in conjunction with the Nationwide
    TRICARE For Life briefings.
        Congress' leadership in restoring the promise of health care to our
    great American senior patriots has provided a wonderful recruitment and
    retention tool. It has been a privilege for the AFMS to educate our
    active duty and retired service members and their families about these
    benefits.
        General Maude. The Army Retirement Service Office within my
    organization and Retirement Services Officers at military installations
    have gotten the word out to retirees and family members on the
    fulfilled promise of lifetime health care. Three times a year, Army
    Retirement Services publishes the retiree newsletter Army Echoes, the
    Army's way of communicating with our retirees. Through Echoes, the Army
    has been preparing retirees and family members for the start of the
    TRICARE Senior Pharmacy program and TRICARE for Life. Issues 1 and 2
    for 2001 have both featured messages from the Army Surgeon General to
    retirees and family members explaining the new benefits and what
    retirees and family members need to do to plan for them. Both issues
    have also included articles with more information on the new benefits.
    The Army Retirement Services homepage () includes a link to the TRICARE website.
        At Army installations, record numbers of retirees and family
    members have attended Retiree Appreciation Days, which have featured
    speakers on TRICARE for Life. I expect that appreciation days scheduled
    for the rest of the year will draw similar crowds. Some Retirement
    Services Officers also have homepages with links to the TRICARE,
    website.
        The Retirement Services part of my team has done a fine job of
    getting retirees and family members ready for these new benefits.
                                     ______

                  Questions Submitted by Senator Susan Collins

                               EDUCATION BENEFITS

        11. Senator Collins. Dr. Chu, this year, Senator Tim Johnson and I
    introduced legislation, S. 131, which would index (benchmark) the
    Montgomery GI Bill to the cost of education at the average 4-year
    college/university, in an attempt to align and bring up to date the
    cost of tuition reimbursement to our service members. Along those same
    lines of bringing benefit costs into line, and offering equal benefits
    to the total force, would you provide some details and your thoughts on
    the differences which exist for those National Guard members in some
    states receiving 100 percent tuition reimbursement from a combination
    of state and Federal funds, vs. the Reserves, which only receives
    partial reimbursement from our Federal education and training benefits
    programs?
        Further, would you elaborate on the benefits of modeling
    educational benefits for our Reserves based on an index, as S. 131
    would do for the Active components of our Armed Forces?
        Dr. Chu. First, Federal education assistance benefits are available
    to members of the federally recognized portion of the National Guard
    and the Reserves on an equal basis. Also, under the provisions of state
    statutes, some states do offer additional education assistance benefits
    to members of their state militia in recognition of their service to
    the state. This creates the perception that the National Guard is
    offering tuition assistance programs that are far more lucrative than
    those offered to other Reserve component members and may give the
    National Guard an advantage in recruiting. A more realistic view is
    that the combination of Federal and state programs acknowledge the dual
    missioning of the National Guard to perform both state and Federal
    functions.
        Concerns have been voiced that when the various state programs are
    combined with DOD programs, 100 percent tuition assistance is often
    available to members of the National Guard. While most states have some
    type of tuition assistance program, fewer than half of the states offer
    what is called 100 percent tuition assistance. Moreover, these programs
    are often limited. While the state prescribes the scope of its program,
    some of the limitations imposed by various states include: uncertain
    annual funding, a program limited to in-state tuition only, annual
    ceilings per student/member (which may be well below total tuition
    costs), the number of credit hours for which tuition assistance is
    provided, eligibility that extends only to enlisted members, and
    financial assistance may only be used at a state-supported school.
    Other states have considerably more limited programs, which are also
    governed by state laws and funded by state appropriations. Finally, it
    should be noted that the Federal Government does not control, nor
    should it control, these programs.
        With respect to Federal educational benefits, the military
    services, both Active and Reserve components, have the statutory
    authority to offer tuition assistance up to 100 percent of the cost of
    tuition and related expenses. However, DOD regulations require the
    services to be uniform in their tuition assistance programs and to pay
    75 percent of tuition costs up to $187.50 per semester credit hour with
    an annual individual limit of $3500.00. Moreover, Montgomery GI Bill--
    Selected Reserve benefits can be combined with tuition assistance to
    help the Reserve component members meet their educational needs.
    Finally, many Reserve component members who have previously served on
    active duty may also be eligible for additional tuition assistance
    under Chapter 30 of title 38, U.S.C., from the Department of Veterans
    Affairs to help make up the difference between the DOD tuition
    assistance and the actual total cost of tuition and related charges.
        The National Guard does a superb job of advertising their programs.
    The National Guard's proactive, positive, decentralized approach to
    recruiting may make the educational benefits available to members of
    the National Guard appear to be more robust. However, a careful review
    of all options reveals that programs available to the other Reserve
    components can compete very well.
        You also asked about modeling educational benefits for Reserve
    component members based on an index as proposed in S.131. First, for
    the active duty service member, linking the amount of the monthly
    stipend to the actual average monthly cost of tuition and expenses for
    commuter students at public institutions might actually decrease the
    level of the current stipend. While the current $650 stipend amount
    covers only 68 percent of total costs (tuition, fees, and room and
    board) at a public institution, it covers 164 percent of tuition and
    expenses for commuter students. If the formula prescribed in S. 131
    were to be applied directly to the Montgomery GI Bill--Selected Reserve
    program, the result would be an approximate 150 percent increase in the
    monthly stipend authorized for a full-time student, which is currently
    $263. While the President's Budget already includes an annual cost-of-
    living increase, as codified in law, it does not include additional
    benefits. The administration fully supports Montgomery GI Bill benefits
    and has submitted legislation that would extend the Montgomery GI
    Bill--Selected Reserve eligibility period from the current 10-year
    limit to 14 years.

                        UNFUNDED PERSONNEL REQUIREMENTS

        12. Senator Collins. General Parks and Admiral Ryan, please provide
    for the record the Navy and Marine Corps unfunded military personnel
    requirements for fiscal year 2002. Further, would you elaborate on how
    additional funding in these areas would contribute to the recruitment
    and retention of our sailors and marines.
        General Parks. The following information is provided on the Marine
    Corps unfunded military personnel requirements for fiscal year 2002:
    Item and Amount
        Selective Reenlistment Bonus Program (SRB)--$3.6 million.
        An additional $3.6 million request for SRB for fiscal year 2002
    would allow the Marine Corps to offer 307 additional reenlistment
    bonuses to our career force than what is currently contained in our
    fiscal year 2002 budget. This is a particularly important requirement
    since we have recently seen lower continuation rates in our career
    force.
        Marine Corps College Fund (MCCF)--$6.6 million.
        The fiscal year 2002 MCCF budget provides for 1,556 applicants. An
    additional $6.6 million for the MCCF would allow recruiters to offer an
    additional 869 contracts to non-prior service applicants. This would
    greatly assist in our recruitment efforts and increase the number of
    MCCF applicants to a new total of 2,425. As a point of comparison, the
    fiscal year 2002 budget provides for 756 fewer MCCF applicants than in
    fiscal year 2001 and 862 fewer than fiscal year 2000. An additional
    $6.6 million would get us back to the previous number of MCCF contracts
    we have offered to qualified applicants in prior years.
        Enlistment Bonus Program (EB)--$2.0 million.
        An additional $2.0 million would provide monetary incentives, from
    $2,000 to $6,000, for enlisting on active duty in the Marine Corps for
    4 to 5 years in certain enlistment options. In fiscal year 2000 and
    fiscal year 2001 Congress appropriated additional funding to assist in
    meeting retention goals. For fiscal year 2001, we allocated to our
    recruiting force 2,185 EBs to attract qualified applicants to critical
    skill areas. (Most EBs are not paid during the fiscal year allocated)
    The total bonus allocation for fiscal year 2001 combined with residual
    payments will total approximately $7.9 million. The fiscal year 2002
    budget of $5.9 million, does not allow us to offer any bonus
    allocations to the recruiting force.
        Active Duty Special Works (ADSW) for Short Tours and Operational
    Tempo--$8.3 million.
        A total of 13 officers and 250 enlisted marines will be required
    for the fiscal year 2002 portion of the UNITAS deployment to South
    America. Reserve Forces are used to augment active units to provide
    Operational Tempo relief; the cost estimated is $4.8 million. The
    remaining $3.5 million would enable the Marine Corps to increase
    Reserve participation in exercises (Beachcrest, TRUEX/MEUEX and Pacific
    Impact) and in the Family Inter-operational Program (FIOP).
        Camouflage Utility Uniform--$21.6 million.
        An enhancement would allow the Marine Corps to issue the new Combat
    Utility Uniform during fiscal year 2002. Among many improvements, these
    new uniforms are more durable and provide a higher degree of protection
    from observation to marines in various combat environments. Funding of
    new uniforms is potentially a force protection measure and definitely a
    quality of life issue that should not be delayed. This increase would
    fund the basic issue to active marine recruits, maintenance allowances
    and the issue of two sets of the new uniforms (without boots) to every
    active enlisted marine during fiscal year 2002.
        Foreign Language Proficiency Pay (FLPP)--$1.2 million.
        In April 2000, Congress authorized a FLPP increase from $100 to
    $300 per month. Due to authorized increases and emphasis on foreign
    language skill requirements by the Marine Corps, an anticipated
    shortfall of $1.2 million is expected without congressional assistance.
    The $1.2 million will allow the Marine Corps to offer the maximum FLPP
    level necessary to marines achieving the desired proficiency level in
    the languages required to meet operational and intelligence
    requirements.
        Active Duty Special Work--$4.6 million.
        Special training is currently funded at $26 million in fiscal year
    2002. Requirements exceed funding by approximately $20 million
    annually, and execution is historically higher than budgeted funding.
    This item requests $4.6 million to fund special training pay and
    allowances, subsistence, travel, per diem, and social security
    contribution.
        Camouflage Utility Uniforms--$4.9 million.
        An enhancement will allow the Marine Corps to issue the new Combat
    Utility Uniform during fiscal year 2002. Among many improvements, these
    new uniforms are more durable and provide a higher degree of protection
    from observation to marines in various combat environments. This
    request for $4.9 million funds basic issue to reserve recruits,
    maintenance allowance, and two sets to each enlisted Reserve Marine.
        Admiral Ryan. The following military personnel requirements are not
    funded in President's Amended Budget for Fiscal Year 2002:

             Career Sea Pay ($102 million)--Navy received
            authorization in the Fiscal Year 2001 NDAA for enhancements to
            CSP but has been unable to fund it until fiscal year 2003. If
            we are able to begin using the new authority in fiscal year
            2002, it will provide a much needed incentive for sailors to go
            to sea sooner, thereby further reducing unacceptable at-sea
            manning gaps.
             ITEMPO ($160 million)--Navy was unable to budget for
            this in the normal cycle because we were unable to arrive at a
            credible cost estimate (it is still which appropriation line
            item (O&M,N or MP,N) will fund this requirement. If
            implementation is delayed, this item may not required fiscal
            year 2002 funding.
             SRB New Payments ($22 million)--We experienced a
            historically high SRB reenlistment rate in fiscal year 2001 (7
            percent above fiscal year 2900) and are asking for an
            additional $15 million in 2001 in the reprogramming request. We
            anticipate finishing fiscal year 2001 between $190-200 million.
            The fiscal year 2001 and 2002 baseline budget for new SRB
            payments was $165 million. The additional funds in fiscal year
            2002 new money will allow us to carry this momentum into the
            next fiscal year.
             EB New Payments and Navy College Fund ($18 million)--
            This accounts for a higher quality recruit (i.e., growth in
            accession of critical skills) and bringing them in earlier in
            the fiscal year to reduce the summer surge. Revised accession
            plan from when the budget was originally submitted.
             ADSW ($5 million)--This additional funding will permit
            us to bring more reservists on active duty to assist in force
            protection in Fifth Fleet AOR.
             PCS Bow Wave ($16 million)--This is to account for any
            PCS moves originally planned for fiscal year 2001 that roll
            into 2002 because of MP,N shortages in 2001 due to higher end
            strength and SRB reenlistments.
             Distribution Incentive Pay ($3 million)--This funding
            is required to begin IT developments that will be necessary for
            future pursuit of a flexible, market-based incentive to
            encourage members to volunteer for difficult-to-fill jobs or
            less desirable geographic locations.

                         FISCAL YEAR 2002 OMNIBUS BILL

        13. Senator Collins. General Parks and Admiral Ryan, what are the
    Marine Corps' and Navy's most critical personnel policy issues that you
    expect will be identified in the Fiscal Year 2002 Omnibus Bill? Are
    there any issues that will not be identified in the DOD Omnibus
    personnel legislation request that will require further congressional
    attention?
        General Parks. The following information papers address our fiscal
    year 2002 Omnibus issues that were not included in this year's
    submission. They are: Home Sales and Capital Gains Tax, Exception to
    Baccalaureate Degree Requirement for Members of the Marine Corps
    Meritorious Commissioning Program, and Authority to have an Additional
    3-Star Billet-Offset by a 2-Star Billet.

        Admiral Ryan. A number of initiatives included in the DOD Omnibus
    Submission to Accompany the Defense Authorization Act for Fiscal Year
    2002 would provide us with the tools and flexibility needed to
    effectively recruit and manage personnel resources. Their enactment
    would enhance our ability to retain the right mix of skills and pay
    grades required to ensure optimum personnel readiness. The most
    important items for Navy are:

        Authorize Active Duty End Strength of 376,000
        Increase in Authorized End Strength for Members Serving in Pay
    Grade E-8
        Targeted Adjustments to Rates of Basic Pay
        Authorize Secretary of the Navy to Prescribe Submarine Duty
    Incentive Pay Rates and Increasing Maximum Rate of Pay
        Secretarial Option; Promotion to the Grade of Lieutenant without
    Selection Board Action
        Accession Bonus for Officers in Critical Skills
        Extension of Temporary Military Drawdown Authorities through fiscal
    year 2004
        Extension of Authorities for Nuclear Officer Incentive Pay, Nurse
    Officer Candidates, Registered Nurses, Nurse Anesthetists and Dental
    Officers and other bonuses and special pays
        Hazardous Duty Incentive Pay; Visit, Board, Search, and Seizure

        [Whereupon, at 12:07 p.m., the subcommittee adjourned.]