[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.]

                                 
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