[Senate Hearing 108-241]
[From the U.S. Government Publishing Office]




                                                 S. Hrg. 108-241, Pt. 6
 
DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR 
                                  2004

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

                                HEARINGS

                               before the

                      COMMITTEE ON ARMED SERVICES
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                                   ON

                                S. 1050

     TO AUTHORIZE APPROPRIATIONS FOR FISCAL YEAR 2004 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

                               ----------                              

                         MARCH 11, 19, 27, 2003


         Printed for the use of the Committee on Armed Services
DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR 
                        2004--Part 6  PERSONNEL

                                                 S. Hrg. 108-241, Pt. 6


DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR 
                                  2004

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

                                HEARINGS

                               before the

                      COMMITTEE ON ARMED SERVICES
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                                   ON

                                S. 1050

     TO AUTHORIZE APPROPRIATIONS FOR FISCAL YEAR 2004 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

                               __________

                         MARCH 11, 19, 27, 2003


         Printed for the use of the Committee on Armed Services



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                      COMMITTEE ON ARMED SERVICES

                    JOHN WARNER, Virginia, Chairman

JOHN McCAIN, Arizona                 CARL LEVIN, Michigan
JAMES M. INHOFE, Oklahoma            EDWARD M. KENNEDY, Massachusetts
PAT ROBERTS, Kansas                  ROBERT C. BYRD, West Virginia
WAYNE ALLARD, Colorado               JOSEPH I. LIEBERMAN, Connecticut
JEFF SESSIONS, Alabama               JACK REED, Rhode Island
SUSAN M. COLLINS, Maine              DANIEL K. AKAKA, Hawaii
JOHN ENSIGN, Nevada                  BILL NELSON, Florida
JAMES M. TALENT, Missouri            E. BENJAMIN NELSON, Nebraska
SAXBY CHAMBLISS, Georgia             MARK DAYTON, Minnesota
LINDSEY O. GRAHAM, South Carolina    EVAN BAYH, Indiana
ELIZABETH DOLE, North Carolina       HILLARY RODHAM CLINTON, New York
JOHN CORNYN, Texas                   MARK PRYOR, Arkansas

                    Judith A. Ansley, Staff Director

             Richard D. DeBobes, Democratic Staff Director

                                 ______

                       Subcommittee on Personnel

                   SAXBY CHAMBLISS, Georgia, Chairman

SUSAN M. COLLINS, Maine              E. BENJAMIN NELSON, Nebraska
ELIZABETH DOLE, North Carolina       EDWARD M. KENNEDY, Massachusetts
JOHN CORNYN, Texas                   MARK PRYOR, Arkansas

                                  (ii)



                            C O N T E N T S

                              ----------                              

                    CHRONOLOGICAL LIST OF WITNESSES
      Active and Reserve Military and Civilian Personnel Programs
                             march 11, 2003

                                                                   Page

Chu, Dr. David S.C., Under Secretary of Defense for Personnel and 
  Readiness; Accompanied by Dr. William Winkenwerder, Jr., 
  Assistant Secretary of Defense for Health Affairs; and Hon. 
  Thomas F. Hall, Assistant Secretary of Defense for Reserve 
  Affairs........................................................     3
Le Moyne, Lt. Gen. John M., USA, Deputy Chief of Staff for 
  Personnel, United States Army..................................    40
Hoewing, Vice Adm. Gerald L., USN, Chief of Naval Personnel, 
  United States Navy.............................................    52
Parks, Lt. Gen. Garry L., USMC, Deputy Chief of Staff for 
  Manpower and Reserve Affairs, United States Marine Corps.......    65
Brown, Lt. Gen. Richard E., USAF, Deputy Chief of Staff for 
  Personnel, United States Air Force.............................    75
Barnes, Joseph L., National Executive Secretary, Fleet Reserve 
  Association....................................................   123
Raezer, Joyce W., Associate Director of Government Relations, 
  National Military Family Association, Inc......................   130
Anderson, Steve, Legislative Counsel, Reserve Officers 
  Association....................................................   142
Lokovic, James E., Deputy Executive Director and Director, 
  Military and Government Relations, Air Force Sergeants 
  Association....................................................   143
Schwartz, Susan, PhD, Deputy Director of Government Relations/
  Health Affairs, Military Officers Association of America.......   153

  National Guard and Reserve Military and Civilian Personnel Programs
                             march 19, 2003

Hall, Hon. Thomas F., Assistant Secretary of Defense for Reserve 
  Affairs; Accompanied by Bob Hollingsworth, Executive Director, 
  National Committee for Employer Support of the Guard and 
  Reserve........................................................   171
Schultz, Lt. Gen. Roger C., ARNG, Director, Army National Guard..   196
Rees, Major Gen. Raymond F., ARNG, Acting Chief, National Guard 
  Bureau.........................................................   196
James, Lt. Gen. Daniel, III, ANG, Director, Air National Guard...   198
Helmly, Lt. Gen. James R., USAR, Chief, Army Reserve; Accompanied 
  by Command Sergeant Michelle Jones, Army Reserve...............   215
Totushek, Vice Adm. John B., USNR, Chief, Naval Reserve..........   223
McCarthy, Lt. Gen. Dennis M., USMCR, Commander, Marine Forces 
  Reserve........................................................   229
Batbie, Major Gen. John J., USAFR, Vice Commander, Air Force 
  Reserve Command................................................   232

              Compensation for Disabled Military Retirees
                             march 27, 2003

Reid, Hon. Harry, U.S. Senator from Nevada.......................   260
Abell, Hon. Charles S., Principal Deputy Under Secretary of 
  Defense for Personnel and Readiness............................   263

                                 (iii)

Cooper, Hon. Daniel L., Under Secretary for Benefits, Department 
  of Veterans' Affairs...........................................   271
Jennings, Sarah, Principal Analyst, Defense Cost Estimate Unit, 
  Congressional Budget Office....................................   281
Merck, Carolyn L., Former Specialist in Social Legislation, 
  Congressional Research Service (CRS), The Library of Congress 
  (and Coauthor of the CRS Report, Military Retirement and 
  Veterans' Compensation)........................................   293
Bascetta, Cynthia, Director, Veterans Health and Benefits, 
  General Accounting Office......................................   297
Strobridge, Col. Steve, USAF (Ret.), Director of Government 
  Relations, Military Officers Association of America............   312
Butler, Master Gunnery Sergeant Benjamin H., USMC (Ret.), Deputy 
  Legislative Director, National Association for the Uniformed 
  Services.......................................................   318
Duggan, Col. Dennis M., Deputy Director for National Security-
  Foreign Relations, American Legion National Headquarters.......   321


DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR 
                                  2004

                              ----------                              


                        TUESDAY, MARCH 11, 2003

                               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 2:37 p.m. in 
room SR-232A, Russell Senate Office Building, Senator Saxby 
Chambliss (chairman of the subcommittee) presiding.
    Committee members present: Senators Warner, Collins, 
Chambliss, Dole, E. Benjamin Nelson, and Pryor.
    Committee staff members present: Judith A. Ansley, staff 
director; and Cindy Pearson, assistant chief clerk and security 
manager.
    Majority staff members present: William C. Greenwalt, 
professional staff member; Gregory T. Kiley, professional staff 
member; Patricia L. Lewis, professional staff member; Scott W. 
Stucky, general counsel; and Richard F. Walsh, counsel.
    Minority staff members present: Gerald J. Leeling, minority 
counsel; and Peter K. Levine, minority counsel.
    Staff assistants present: Michael N. Berger, Leah C. 
Brewer, and Andrew W. Florell.
    Committee members' assistants present: James P. Dohoney, 
Jr., assistant to Senator Collins; James W. Irwin, assistant to 
Senator Chambliss; Henry J. Steenstra, assistant to Senator 
Dole; Russell J. Thomasson, assistant to Senator Cornyn; Eric 
Pierce, assistant to Senator Ben Nelson; and Terri Glaze and 
Walter Pryor, assistants to Senator Pryor.

     OPENING STATEMENT OF SENATOR SAXBY CHAMBLISS, CHAIRMAN

    Senator Chambliss. Good afternoon. The subcommittee will 
come to order. The subcommittee meets today to receive 
testimony on active and Reserve military and civilian personnel 
programs under review, the Fiscal Year Defense Authorization 
Request for 2004. This is the first meeting of the subcommittee 
this year, and we have a very ambitious agenda before us today.
    Before we get started, I want to take the opportunity to 
let Senator Ben Nelson know how pleased I am to have him as 
ranking member of this subcommittee. Senator Nelson is a man 
who I have come to have a great respect for and have a great 
friendship with. I am truly pleased that you are here. I look 
forward to working in a very bipartisan way to make sure that 
our military personnel, active, Guard, and Reserve and their 
families, are well-taken care of as we move into this 
authorization process.
    As Senator Nelson knows, this subcommittee has a strong 
tradition of operating in a bipartisan spirit on behalf of 
soldiers, sailors, airmen, and marines. I look forward to 
working with him on matters of such critical importance to the 
mission of our armed services and to the welfare of its great 
personnel, military, civilian, and their families.
    In recent years, Congress, working closely with the 
Department of Defense, and in partnership with private groups 
like those represented here today, has accomplished a great 
deal to better compensate our personnel for their service and 
sacrifices, and to enhance the attractiveness of military 
service. These efforts have been successful. Recruiting and 
retention are strong. The caliber of our people has never been 
higher, and the Armed Forces are ready for the challenges that 
they will face, but we are mindful of the high tempo of 
operations and extended deployments that have been sustained 
for so long. We appreciate the sacrifice of the heavy reliance 
on the Guard and Reserve and the personal sacrifices being made 
all over our Nation by our active duty, National Guard, and 
Reserve personnel and their families.
    At this critical moment in our Nation's history, when our 
Nation depends so heavily on the performance of the men and 
women of the Armed Forces, it is vital that we continue to 
provide the support and quality-of-life programs that 
demonstrate our commitment to the well-being of our troops and 
their families. This hearing is designed to be a broad overview 
of the proposed budget for fiscal year 2004, and the 
legislative recommendations of the Secretary of Defense, the 
military services, and the advocates for those who rely on the 
personnel programs of the Department of Defense.
    While in the past recruiting and retention have been issues 
before this subcommittee, I believe our focus this year will be 
a little bit different. Reserve call-ups increase by the week. 
Programs for family members have taken on increased importance. 
Protection against chemical and biological hazards is foremost 
in our thoughts. The readiness of our Armed Forces and how we 
provide for them and their families is at the forefront of our 
minds.
    We have three panels before us this afternoon. First, we 
will hear from Dr. David Chu, Under Secretary of Defense for 
Personnel and Readiness. Joining Dr. Chu will be Dr. William 
Winkenwerder, Assistant Secretary of Defense for Health 
Affairs; and Thomas Hall, Assistant Secretary of Defense for 
Reserve Affairs.
    Our second panel will consist of the personnel chiefs of 
the military services. They will be followed by a third panel 
of representatives of The Military Coalition who will present 
the concerns and interests of military personnel, active, 
Reserve and retired, and their family members.
    Before we hear from the witnesses, I would like to call on 
my friend and colleague, Senator Ben Nelson, for any comments 
he might have.

            STATEMENT OF SENATOR E. BENJAMIN NELSON

    Senator Ben Nelson. Thank you very much, Mr. Chairman. I, 
too, look forward to working with you and the members of this 
subcommittee as we spend time dealing with some very important 
personnel issues with our military and civilian personnel 
attached to and supporting the military. I know that we will 
work together. This has been a very bipartisan subcommittee in 
the past, and will be no less bipartisan this year, and I 
respect you. I will certainly enjoy working with you as we take 
on this mutual challenge.
    Working together I think it will be privilege to address 
issues that impact directly on the quality of life of our 
soldiers, sailors, airmen, and marines, active and Reserve, 
currently serving and those retired. These young men and women 
are prepared to lay down their lives in service to our Nation, 
and we therefore must make sure that we take care of them and 
their families.
    Our job is to make sure that service members are adequately 
compensated for their duties, and that we offer them a 
meaningful career progression. We must ensure that their 
families are well taken care of, that they receive quality 
medical care, their children receive a quality education, and 
their spouses and children have a quality of life that is at 
least comparable to what they would experience in the civilian 
world, and we have similar responsibilities for the careers of 
the Department of Defense civilian workforce.
    I want to thank our witnesses today for appearing before 
us. I am very anxious to hear what you have to say about the 
status of the personnel system of our Services, and how we can 
help to make those systems even better. Senator Chambliss and I 
may be new to this subcommittee, but I think that you will find 
that we are every bit as dedicated to our military personnel as 
our predecessors have been, and I look forward to your 
testimony.
    I thank you, Mr. Chairman, and at this point the ball is in 
your court.
    Senator Chambliss. Thank you, Senator.
    Dr. Chu, I understand you will be making a joint statement 
for the panel, and we will take your full statement into the 
record, and we will turn it over to you now for any comments 
you want to make to move us forward.

STATEMENT OF DR. DAVID S.C. CHU, UNDER SECRETARY OF DEFENSE FOR 
      PERSONNEL AND READINESS; ACCOMPANIED BY DR. WILLIAM 
 WINKENWERDER, JR., ASSISTANT SECRETARY OF DEFENSE FOR HEALTH 
   AFFAIRS; AND HON. THOMAS F. HALL, ASSISTANT SECRETARY OF 
                  DEFENSE FOR RESERVE AFFAIRS

    Dr. Chu. Thank you, Mr. Chairman, Senator Nelson, Senator 
Dole. It is a great privilege for myself and my colleagues, Tom 
Hall and Bill Winkenwerder, to appear before you this 
afternoon. This committee and its members in their various 
roles over the years have given the Department of Defense 
tremendous support and have helped make successful what I would 
argue is one of the great military transformations of the 
second half of the 20th century in the United States, and that 
was the advent of the All-Volunteer Force.
    It has been 30 years now since that began. It had a rough 
first 10 or 15 years, as we all know. It has now become so 
successful that I think it is the envy of the world, and many 
other nations are emulating the American approach to the 
manning of their military forces.
    I am very pleased that this subcommittee and Congress as a 
whole have supported efforts of the Department to build on that 
record, have supported recommendations that we target military 
pay increasingly to areas of greatest need. We are very much 
appreciative of what you have done in that regard, because I 
think it has helped solve some of the recruiting and retention 
problems we suffered through in the late 1990s.
    Indeed, as you note from the President's budget request, 
the civil sector is seeking to emulate this precedent with the 
President's desire to create a central $500 million fund in 
which civil employees would be rewarded on the basis of 
performance, starting in fiscal 2004.
    It is our ambition to continue with the transformational 
agenda that history has bestowed upon us. I have, of course, a 
number of specific programmatic requests to advance in this 
testimony, but I would like to speak, if I might, to the 
broader picture for just a few moments.
    On the miliary side, and specifically for serving officers 
in active status, we are desirous of encouraging longer careers 
than are now typically the norm. A good deal of this can be 
accomplished through administrative steps. It would be very 
helpful to have some changes in statute, specifically lifting 
or raising the maximum age for service, increasing the maximum 
tenure, and reducing time and grade restrictions for general 
and flag officers.
    Likewise, we would like to be sure that our management of 
joint specialty officers is more nimble, more responsive to 
actual needs. In that regard, we would like the authority to 
allow qualification based upon receipt of both education and 
experience in whatever order that might occur, not just in the 
sequence specified by statute. We also would like the tour 
length to be determined by the normal policies of the 
Department, not mandated, as it currently is in the present 
law.
    On the Reserve front, I will ask my colleague, Tom Hall, to 
speak to this in more detail. I believe the current 
mobilization demonstrates, as you suggested in your opening 
remarks, Mr. Chairman and Senator Nelson, that we indeed have 
one force today, and the Reserves are just as much part of this 
volunteer force as the active element.
    I do think there are a number of things that we could do to 
encourage what we would like to call a continuum of service for 
our Reserve personnel that would facilitate their movement back 
and forth between active and Reserve status, that would make 
the provision of benefits more alike between active and Reserve 
members. I am also pleased to report that today we will be 
announcing that we will make reservists called up for more than 
30 days eligible for TRICARE Prime. Just as you have in the 
recent past mandated they are made eligible for TRICARE Prime 
Remote, we are going to take that further step, effective 
immediately. We will also be refining the definition of 
``resides with,'' which is an important element in terms of how 
this force can benefit from eligibility.
    But there are some things that require statutory 
organization to assist establishing this kind of continuum.
    That continuum might also include the ability of members of 
the active military who would like to take 2 or 3 years off, so 
to speak, but maintain their tie to the Nation's uniformed 
forces to do so, and then return to an active career.
    On the civilian side, we have a terrific set of civilians, 
as I think Senator Nelson intimated in his comments, in the 
Department of Defense, but we believe for the future, as a 
matter of national security, we need to have improved 
flexibility and strengthened powers to deal with the issues in 
front of us, to transform our civil personnel system as far as 
the Department of Defense is concerned.
    The Secretary of Defense has spoken in terms of a national 
security personnel system, and I think that goes immediately to 
the reason for these requests. We also hope will be coming to 
you in the form of legislative language within the next 2 weeks 
or so, and that is, we will need greater agility than the 
present system provides us. We need greater agility so we can 
convert posts that are now taken by uniformed personnel that 
could be performed easily by civilians to Civil Service status, 
if that is appropriate, greater agility because, as we all 
appreciate, within the next 10 years we must replace a 
significant fraction of the present generation of serving Civil 
Service members.
    At present, it takes the Department of Defense an average 
of 90 days to hire someone from the time the supervisor decides 
that he or she has a need to fill. That is inadequate in 
today's market for talent. If you go to a college job fair, 
often you are competing with a firm that has a form for the 
individual to sign right there accepting the post that you have 
offered. We cannot do that today. Instead we tell the young man 
or woman, you can take our test, you can fill out our forms, 
and in 3 months or so we will let you know. You can imagine how 
successful we are competing in that environment.
    We need greater agility to adjust job responsibilities as 
circumstances change. That is one reason why in the Secretary's 
judgment so many posts have migrated to the uniformed force, 
because that is a force where you can adjust job 
responsibilities promptly. We do not want to be in the position 
when people's response to an entreaty from their supervisor is, 
``that is not in my job description.''
    What do we want? We would like greater hiring flexibility. 
You might call it categorical ranking plus. We would like 
authority to hire on the spot in the case of college job fairs. 
We would like more flexible powers to hire senior Americans and 
those who are already annuitants from the Federal Service.
    We would like to build on the kind of demonstration project 
that Congress authorized for us at China Lake, where pay 
banding has been used better to reward the workforce and also 
to position the salary structure so it is competitive with the 
civil sector. It allows a supervisor to adjust job 
responsibilities promptly as circumstances change without the 
need to recompete the position and put at risk the ability to 
achieve the mission.
    I do think that we want to begin a dialogue about the right 
to bargain on certain human resource issues at the national 
level. Two years after we started an effort to put in place 
collections from civil servants for misuse of travel cards, we 
are still negotiating with a number of unions over that 
specific remedy and cannot put it fully into place.
    I think there is ample evidence for the propositions we 
will be advancing in terms of Civil Service improvement. 
Congress has given this Department over the last 20 years a 
great deal of opportunity to demonstrate principles like this. 
We have touched over 30,000 civil servants very successfully. I 
think that record can speak for itself.
    We spent the last year, since March 2002, reviewing what we 
would call the best practices as far as those civil personnel 
demonstrations are concerned, and we will be using the full 
extended authority that you have already given us to apply 
those best practices, which importantly affects the acquisition 
workforce of the Department of Defense.
    Again, Mr. Chairman, my colleagues and I feel privileged to 
be here to explain the programs for which we seek your support. 
We want to express our appreciation for the support you have 
given us. It has made the civil and military force of the 
Department of Defense of the United States the finest in the 
world.
    Thank you.
    [The prepared statement of Dr. Chu follows:]

                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.
    A recent Volker Commission report noted that ``Executive 
Departments should be . . . given the authority to develop management 
and personnel systems appropriate to their missions.'' Today, I will 
discuss a wide array of initiatives that do just that.
    I will begin with the ``Defense Transformation for the 21st Century 
Act of 2003'' (DT-21), a proposal that is under review in the 
administration. This four-part legislative proposal will change the way 
we manage people, acquisition processes, installations, and resources.
    In DT-21, personnel changes are based on one concept: agility. 
Agility is our response to the extreme uncertainty of the national 
security environment. In obtaining that agility, we propose to change 
the processes by which we manage military and civilian personnel, even 
as we keep the value systems embodied in existing legislation including 
the Civil Service Reform Act. The values continue to be relevant, but 
the processes, many of them legislated, have not kept pace with 
national security realities.

Transforming Civilian Personnel
    For civilians, the Department is considering a National Security 
Personnel System (NSPS) as a key part of our transformational agenda. 
We are working to promote a culture in the Defense Department that 
rewards unconventional thinking--a climate where people have freedom 
and flexibility to take risks and try new things. Most would agree that 
to win the global war on terror, our Armed Forces need to be flexible, 
light and agile--so they can respond quickly to sudden changes. Well, 
the same is true of the men and women who support them in the 
Department of Defense. They also need to be flexible, light and agile--
so they can move money, shift people, and design and buy weapons 
quickly, and respond to sudden changes in our security environment. 
Today, we do not have that kind of agility.
    Congress has recognized these shortcomings by consistently 
advancing the cause of flexibility and competitiveness in DOD civilian 
human resources management. Congressional action paved the way 20 years 
ago for the groundbreaking work in pay banding at the Navy's China Lake 
facility, enacted the first Federal program of separation buyouts that 
avoids the human and economic toll of reduction in force, authorized 
critical personnel demonstration projects in the defense acquisition 
workforce and in defense laboratories and centers, provided flexibility 
in paying for degrees, and created scholarships to attract, advance, 
and keep those with information assurance skills. These innovations and 
experiments over many years have demonstrated that a more flexible and 
collaborative system of human resources management, providing greater 
opportunity for employees and more responsibility for managers, can 
lead to higher productivity and improved morale that are critical to 
mission support. In a related action, Congress recognized the need for 
much greater flexibility in the management of national security 
personnel in the enactment of the new Department of Homeland Security.
    The Department now needs to fold these innovative pieces into a 
more joint, flexible, and expanded plan of civilian human resources 
management. The Department cannot continue to operate effectively or 
efficiently with the current fragmentation of civilian personnel 
management authorities. The National Security Personnel System will 
give the Department the flexibility to manage its civilian personnel--
so we can attract and retain and improve the performance of our 
700,000-plus civilian work force.

Transforming Military Personnel Management
    Modernizing and streamlining officer management for both the active 
and Reserve components is key to defense transformation. As with 
Department of Defense civilians, we need flexibility for our military 
personnel, and we need to be able to assure a prompt response to 
changing circumstances. We seek to accomplish this by modernizing and 
streamlining officer management, and creating a ``continuum of 
service'' in our Reserve component.

General and Flag Officer Management
    The Secretary of Defense has underscored the need for greater 
flexibility in managing job tenure and career length for general and 
flag officers with a view toward longer time in a job and longer 
careers. Present laws frequently operate against those objectives.
    The current system rapidly rotates general and flag officers 
through their positions. Moving senior officials through career paths, 
as private sector organizations do, provides experiences that develop 
leadership and management skills. But officials must serve in these 
positions long enough to acquire these skills, to demonstrate their 
capabilities, and to manage the organization effectively. CEOs average 
more than 8 years in a job and many serve more than a decade. In 
contrast, the average tour length for the military senior leadership is 
between 22 and 31 months.
    We are proposing several provisions that would allow longer tours 
and longer careers by eliminating mandatory retirement for time in 
service, time in grade, and age; mandatory time-in-grade requirements 
for retirement in grade; and mandatory tour lengths. We propose to 
eliminate the authorized general and flag officers serving in the grade 
of O-7 distribution cap to allow flexibility in filling O-7 and O-8 
jobs. Other proposals would sanction the President's authority to 
immediately reassign senior general and flag officers, who were 
initially confirmed in grade, to another position authorized to carry 
the same grade.

Joint Officer Management
    We are requesting several provisions to streamline joint officer 
management. The Secretary of Defense requires the authority to define 
the standards for joint tour lengths and have the discretion to 
recognize situations in which officers should receive full joint 
credit. We also require greater flexibility in assigning officers 
following graduation from joint education institutions. Another 
requested provision concerns lengths of joint officer duty assignments.
    We are refining our strategic plan for joint officer management, 
education and training. As part of this effort, the Department is using 
an on-going, congressionally mandated, Independent Study of Joint 
Management and Education to help evaluate and validate our ideas for 
transformation. The study will determine which processes have ``added 
value,'' and which ones do not. Ultimately we look forward to working 
with Congress to strengthen joint management and training.
    We are proposing now two modest changes: creating a single standard 
for achieving joint credit (i.e., 24 months); and eliminating the 
sequencing requirement for Professional Military Education (PME) and 
joint tours.
    The Department is assessing the entire career continuum of officer 
education with the goal of reducing the amount of in-residence time 
required, maximizing viable advanced distributed learning (ADL) 
opportunities and integrating joint requirements. We want to train and 
develop our leaders like we fight--in a joint environment.

Measuring the Force
    We believe there is a better way to manage and measure personnel 
strength. We propose to change the metric used to measure authorized 
force levels to average strength measured across the entire fiscal 
year, rather than reporting strength attainment on the last day of the 
fiscal year. Using average strength will improve visibility on the 
actual force manning and improve personnel readiness. A one-day 
reporting metric can conceal force shortfalls in the 364 days a year 
not captured in the end-year snapshot, and actually leads to 
inefficient management practices.

Recruiter Access to High Schools
    Through coordination with the Department of Education, Congress 
included language requiring military recruiter access to high schools 
in the 2002 No Child Left Behind Education Act. Having the benefit of 
this coordinated Defense and Education emphasis on the importance of 
this issue has engendered profound improvement in the access our 
recruiters have received.
    Currently, however, there is a disconnect between titles 10 and 20 
that cause confusion among both recruiters and secondary schools as to 
what is actually required by law. Title 10 permits schools to deny 
access to high school student directory information if a school board 
policy restricts release; title 20 does not provide that exception for 
school districts. We would like to correct this conflict by making 
title 10 read as title 20 does, thereby allowing military recruiters 
access to all secondary school information unless the school maintains 
a bona fide, verifiable religious objection to service in the Armed 
Forces.

Continuum of Service
    As we meet the challenges of today and the future, it is essential 
that the Reserve components be part of this transformation. Over the 
past year, my office has worked with other agencies inside and outside 
the Department to address contributions of the Guard and Reserve--in 
both new and traditional roles and missions. The ``Review of Reserve 
Component Contributions to the National Defense,'' establishes 
strategic principles to guide future structure and use of the Reserve 
components and proposes innovative management initiatives to meet the 
requirements.
    A key element in transforming our military forces is to ensure 
efficiency and effectiveness in the use of our part-time Reserve 
Forces. There is a need for streamlined personnel management practices 
that offer greater flexibility in accessing and managing personnel 
throughout a military career that may span both active and Reserve 
service--in other words, a career that spans a ``continuum of 
service.''
    Levels of military service and mission support can vary 
substantially throughout a military career and between the extremes of 
non-participating individual reservists and the 365 days per year 
performed by members serving on full-time active duty. We know some 
Reserve members are willing to serve more than the 39 days of training 
(drill periods and annual training) required in law, but less than 
full-time. This variable pool of reservists could be more effectively 
managed to better support certain selected mission areas and functional 
requirements.
    Operating within a continuum of service paradigm necessitates 
simplifying the rules for employing Reserve component members, 
enhancing combined active component/Reserve component career 
development, and creating conditions for the seamless flow of personnel 
from active to Reserve and Reserve to active over the course of a 
military career. Barriers to such service must be minimized, thereby 
eliminating the need for the workaround solutions often in effect 
today. A more flexible Reserve compensation and benefit system can 
serve to encourage volunteerism.
    Managing within a continuum of service can help to attain and 
retain skills that are hard to acquire and maintain in the military, 
including those in cutting edge technologies. It will provide 
opportunities to establish new and innovative affiliation programs and 
DOD partnerships with industry. Adopting a new availability and service 
paradigm as the basis for managing Active and Reserve Forces would 
allow individuals to change levels of participation with greater ease 
and better leverage the DOD investment in training and education to 
meet operational requirements.
    Today the Department is limited to using active component forces to 
provide assistance to civil authorities during emergency situations. In 
an age of competing resource requirements, the Department would like to 
enable all Reserve component members to assist local first responders 
in a domestic natural or manmade disaster, accident, or catastrophe. 
The Department is reviewing the possibility of creating Service 
auxiliaries, based on the Coast Guard auxiliary model, to address 
potential personnel tempo problems.

Range Sustainment
    A critical element to sustaining requisite force readiness levels 
is unimpeded access to test and training ranges. However, a number of 
encroachment issues expose our military personnel to increased combat 
risks as their ability to train as they expect to fight is compromised. 
These influences may be urban sprawl, loss of frequency spectrum, 
restrictions on air space, and endangered species-related restrictions 
on training lands. Loss or restricted use of combat training ranges and 
operating areas force units in all Services to use either less 
effective workarounds or in extreme cases to forego needed training 
altogether. Loss of radio frequency spectrum reduces the Department's 
ability to test new weapons, increasing program risk and potentially 
raising the cost of acquisition. Urban encroachment pressures around 
training areas inhibit development of new tactics to meet emerging 
threats, restrict altitudes for flight training, limit application of 
new weapons technologies, complicate night and all-weather training, 
and reduce live fire proficiency. Ranges in the southwest United States 
(for example, San Diego, Camp Pendleton, and San Clemente Island) are 
prime examples of how endangered species critical habitat designations, 
frequency spectrum restrictions, clean air compliance, maritime 
encroachment, and other externalities can cumulatively constrain the 
use of combat training ranges and operating areas. Such constraints 
force the Services to alter or compromise training regimens. This 
increasingly inhibits the ability to ``train as we fight,'' eventually 
degrading combat readiness.
    Solutions to this broad issue are being pursued through a variety 
of Department of Defense internal initiatives, interagency means, and 
administration legislative proposals. Ongoing DOD policy, organization, 
and programming changes support range sustainment efforts, with 
increased emphasis placed on outreach and stakeholder involvement to 
resolve encroachment issues. DOD is working with other Federal agencies 
on regulatory or administrative solutions to issues that can be 
addressed without changing existing Federal law.
    In 2002, the administration submitted the DOD Readiness and Range 
Preservation Initiative (RRPI) to Congress, which included eight 
legislative proposals that addressed a number of encroachment concerns. 
We are grateful to Congress for the three provisions enacted last year, 
including addressing the serious readiness concerns raised by the 
Migratory Bird Treaty Act. The Department of Defense intends to work 
with the Department of the Interior on a lasting solution to this act's 
unintentional takes issue within the framework of Congress' temporary 
exemption provision. However, the other five elements of our Readiness 
and Range Preservation Initiative remain essential to range sustainment 
and will continue to be addressed. This year's RRPI continues to seek 
clarifications to aspects of the Marine Mammal Protection Act (MMPA), 
the Endangered Species Act (ESA), the Clean Air Act (CAA), and two 
solid waste management and disposal laws known as the Resource 
Conservation and Recovery Act (RCRA) and the Comprehensive 
Environmental Response, Compensation, and Liability Act (CERCLA). For 
example, the proposal to clarify the Endangered Species Act would 
enable our installation commanders to work more effectively with the 
U.S. Fish and Wildlife Service to continue to protect imperiled species 
without compromising military testing and training. My office will 
remain committed to working with stakeholders in this multi-year plan 
of action to develop viable solutions that appropriately balance our 
environmental stewardship and military readiness responsibilities.
    We believe that this year is the appropriate time to implement the 
transformation initiatives I have just discussed. Our world has 
changed. As a consequence, people and personnel systems must be agile 
and responsive.

                FORCE MANAGEMENT RISK BALANCED SCORECARD

    There is much change being worked in personnel and readiness. As 
diverse as these efforts are, we have aligned outcomes associated with 
many of our efforts under the new Force Management Risk Balanced 
Scorecard. The Balanced Scorecard strategically aligns our personnel 
management objectives, the variety of current and planned research 
efforts, human capital plans, and policy revisions within personnel and 
readiness under five major goals. These goals include: maintain a 
quality workforce; ensure a sustainable military tempo; maintain 
workforce satisfaction; maintain reasonable costs; and shape the force 
of the future. Our goals focus on accomplishing the initiatives set 
forth in the President's Management Agenda, with particular emphasis, 
of course, on the Strategic Management of Human Capital initiative. The 
Balanced Scorecard will allow us to track progress toward short- and 
long-term objectives like meeting high quality recruit goals, 
commitment of members and spouses to the military lifestyle; costs per 
enrollee for health care; transforming training; shortening the 
civilian hire fill time; and implementing the new active component/
Reserve component management paradigm. In turn, the Force Management 
Risk Balanced Scorecard serves as one quadrant of four risk areas 
within a Secretary of Defense instrument panel of metrics that will be 
used to balance force management risks, operational and institutional 
risks, as well as future challenges across the Department. This is an 
ambitious charter, but we are committed to this strategic course.

                           MILITARY PERSONNEL

    Last year the Department presented a comprehensive Human Resource 
Strategic Plan. With direction from the Quadrennial Defense Review and 
Defense Planning Guidance, we collaborated with the secretaries of the 
military departments and the component heads to develop a strategic 
human resource plan that encompasses military, civilian, and contractor 
personnel. The plan identified the tools necessary to shape and size 
the force, to provide adequate numbers of high-quality, skilled and 
professionally developed people, and to facilitate a seamless flow of 
personnel between the Active and Reserve Forces.
    The Department continues to refine the Human Resources Strategy 
designed to provide the military force necessary to support our 
national defense strategy. We face an increasingly challenging task to 
recruit, train, and retain people with the broad skills and good 
judgment needed to address the dynamic challenges of the 21st century, 
and we must do this in a competitive human capital environment. 
Consequently, we seek a mix of policies, programs, and legislation to 
ensure that the right number of military personnel have the requisite 
skills and abilities to execute assigned missions effectively and 
efficiently.

End Strength
    At the end of fiscal year 2003, the Department of Defense as a 
whole exceeded its end strength target for the Active and Reserve 
Forces by approximately 31,400 service members, or 2.3 percent. This 
was due to the number of personnel still in stop loss status at the end 
of the fiscal year.
    The requested active duty military end strength for fiscal year 
2004, as reported in the Service budget submissions, show a net 
decrease of 1,600 spaces from the fiscal year 2003 authorization. The 
Army continues at an end strength of 480,000; the Navy projects a 
decrease of 1,900 from 375,700 to 373,800; the Marine Corps remains 
steady at 175,000; and the Air Force increases slightly from 359,000 to 
359,300.
    The fiscal year 2004 Defense budget recognizes the essential role 
of the Reserve components in meeting the requirements of the National 
Military Strategy. It provides $31.3 billion for Reserve component 
personnel, operations, maintenance, military construction, and 
procurement accounts, which is approximately 1 percent above the fiscal 
year 2003 appropriated level.
    Significantly, this is only 8.2 percent of the overall DOD budget, 
which represents a great return on investment. Included are funding 
increases to support full-time and part-time personnel, and the 
required sustainment of operations. It also continues last year's 
effort toward Reserve component equipment modernization and 
interoperability in support of the total force policy.
    These funds support nearly 863,300 Selected Reserve personnel. The 
Selected Reserve consists of the following: Army National Guard 
350,000; Army Reserve 205,000; Naval Reserve 85,900; Marine Corps 
Reserve 39,600; Air National Guard 107,000; and Air Force Reserve 
75,800, Coast Guard Reserve 10,000 (funded by DOT). Our total Ready 
Reserve, which also includes the Coast Guard Reserve, Individual Ready 
Reserve and Inactive National Guard is 1,190,009 personnel.
    Maintaining the integrated capabilities of one force is key to 
successfully achieving the Defense policy goals of assuring allies, 
dissuading military competition, deterring threats against U.S. 
interests, and decisively defeating adversaries. Only a well-balanced, 
seamlessly integrated military force is capable of dominating opponents 
across the full range of military operations. DOD will continue to 
optimize the effectiveness of its Reserve Forces by adapting existing 
capabilities to new circumstances and threats, and developing new 
capabilities needed to meet new challenges to our national security.
    The Reserve components exceeded their 2002 recruiting and strength 
goals in spite of market challenges. The success the Reserve components 
experienced in achieving end strength was a combination of recruiting 
successes and excellent retention in most components (only the Army 
National Guard exceeded its programmed losses). Although limited stop 
loss will assist in managing departures, the Reserve components will 
continue to optimize use of retention incentives while sustaining their 
recruiting efforts.

Stop Loss
    Stop loss is the involuntary extension on active duty of service 
members beyond their date of separation in times of war or national 
emergency when the need arises to maintain the trained manpower 
resident in the military departments. During fiscal year 2002, 5,800 
personnel were effected by the stop loss. For officers, the Army 
continued a limited program impacting only pilots and special 
operations officers. Affected Navy officers include the special 
operations community, limited duty security officers, physicians in 
certain specialties and the nurse corps. In addition to C-130 aviators 
and infantry officers, the Marine Corps expanded their program to 
include the newly formed Antiterrorism Brigade. The Air Force released 
all members from stop loss over the course of the year.
    For the enlisted forces, the Army implemented a limited skill-based 
program in increments. The initial increment included soldiers 
primarily assigned in Special Forces specialties; the second increment 
expanded the program to include Ready Reserve personnel in the same 
specialties already stopped in the Active Force and added three 
additional specialties (enlisted and officer psychological operations, 
and enlisted supply and services) to the program. The Army released 
certain skills throughout the year and adjusted its policy from an 
indefinite hold to a 12 month maximum time period. The Army is 
currently working on the details of lifting more skills from stop loss.
    The Navy enlisted program affected sailors in five different 
specialties deemed critical to current operations, including SEALs, 
special warfare combatant craft crewman, explosive ordnance disposal 
specialists, and certain linguists. The Navy ended their program in 
August and all affected sailors were released by the end of 2002.
    The Marine Corps implemented an incremental program that coincided 
with current operations that the Marine Corps was tasked to support. 
The first increment addressed marines assigned to Marine Forces 
Atlantic, as they were needed to staff the anti-terrorism brigade. The 
second increment included marines assigned to C-130 aircrew positions 
across the Corps. The third increment was used to meet force protection 
requirements.
    The initial Air Force program applied to all enlisted skills. As 
with its officer program, the Air Force released all enlisted 
specialties from the program.
    Fiscal year 2003 stop loss programs brought about new programs in 
light of the continuing war on terrorism, as well as the build up for a 
possible war with Iraq.

------------------------------------------------------------------------
                  Service                          Stop Loss Plan
------------------------------------------------------------------------
Marine Corps..............................   Applies to entire
                                             Corps and addresses growing
                                             number of units already
                                             engaged in operations.
                                             Provides
                                             stabilization of units
                                             while potential operational
                                             demands of an Iraqi
                                             scenario are evaluated.
------------------------------------------------------------------------
Army......................................   Focuses exclusively
                                             on members of units alerted
                                             for deployment. This
                                             approach places a premium
                                             on unit cohesion and
                                             trained teams.
                                             Incrementally
                                             executed only for Army
                                             forces in Southwest Asia.
------------------------------------------------------------------------
Air Force.................................   Ensures units
                                             remain adequately manned
                                             for all current and future
                                             operational requirements.
                                             Applied to most
                                             stressed officer and
                                             enlisted specialties.
                                             Specialties will be
                                             evaluated every 60 days to
                                             align force mix to
                                             identified operational
                                             demands.
------------------------------------------------------------------------
Navy......................................   No plan to use at
                                             this time.
------------------------------------------------------------------------

    While the Services have used stop loss authority to some degree 
during the past year, the Department expects this ebb and flow of 
specialties and the use of the program to insure unit cohesion and 
enhanced readiness to be included in the Service stop loss programs to 
continue until appropriate force manning adjustments are achieved.

Conscription
    There has been some debate recently about this Nation returning to 
conscription. Throughout most of American history, our military has 
been composed of volunteers. However, conscription was the primary 
means of obtaining sufficient numbers of military personnel during 
World Wars I and II and the Korean Conflict, to the point that its 
renewal became perfunctory. In the late 1960s, a presidential 
commission studied how best to procure military manpower--retain the 
draft or institute a volunteer military. After much debate within the 
administration, Congress, and across the country, it was decided that 
an All-Volunteer Force was feasible, affordable, and would enhance the 
Nation's security. The debate concluded that, under a draft in which 
not all served, it was inequitable for only some to bear the burden and 
responsibility of military service. Thus, the authority for 
conscription was allowed to lapse on July 1, 1973.
    The All-Volunteer Force has served the Nation for more than a 
quarter century, providing a highly effective military that continues 
to exceed the expectations of its framers. It has also proven more 
cost-effective than a conscripted force according to many studies, 
including an external review by the congressional auditing arm, the 
U.S. General Accounting Office. The Department respectfully seeks your 
support to ensure that our fighting force comprises individuals who 
have voluntarily made the decision to defend this Nation.

Recruiting
    We are optimistic that all active Services will achieve their 
recruiting goals this fiscal year. Through November 2002, all Services 
were ahead of their year to date recruiting goals as they entered 
fiscal year 2003 with a sizable delayed entry program. The Department, 
however, will continue to face stiff competition for high-quality youth 
from both private sector industry and colleges.

Expanding the Target Market
    The Department continues to identify ways to expand our target 
market. Of particular interest this year is the new short-term 
enlistment option offered in the National Defense Authorization Act for 
Fiscal Year 2003. This program, the National Call to Service, is 
designed to promote national service. This is in keeping with the 
increased awareness of the value of service to the Nation, as 
highlighted by the President's USA Freedom Corps initiative. It allows 
the Services to enlist high-quality young men and women for 15 months 
of active duty following initial entry training, with a 2-year Selected 
Reserve obligation after that active duty. Uniquely, this program 
allows participants to serve a portion of their 8-year service 
obligation in another national service program, such as Americorps or 
the Peace Corps. We hope that this program will expand the recruiting 
market to young Americans interested in alternatives to more 
traditional terms of enlistment.
    Today, nearly two-thirds of high school seniors enroll in college 
immediately after graduation. Enlistment often is viewed as an 
impediment to further education. To address this trend, the Army 
launched its ``College First'' test program in February 2000. This 
program is designed to identify better ways to penetrate the college-
oriented market. In fiscal year 2002, the Army had over 600 program 
participants. We appreciate congressional support of ``College First'' 
in permitting increases in the monthly stipend, authorizing a loan 
repayment incentive option, and allowing a recoupment clause for those 
who default on their ``College First'' responsibilities. These program 
improvements should make the ``College First'' program more viable, and 
we hope that Congress will remain open to further changes that will 
enhance the program's chance of success.
    In addition to targeting the college market, we have several on-
going pilot programs designed to tap the high aptitude, 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. 
Early analysis indicates that results in those experiments are mixed. 
As the sample size continues to increase throughout the pilot test, we 
will assess the military performance and attrition behavior of the home 
schooled and ChalleNGe recruits to determine their appropriate 
enlistment priority.
    The Army will continue the GED Plus test program in fiscal year 
2003. This program provides for up to 4,000 individuals who left high 
school before obtaining their diploma with an opportunity to earn a GED 
and enlist in the military. GED Plus applicants have to meet stricter 
screening criteria than high school diploma graduate applicants. They 
must all be Armed Forces Qualification Test score category I-IIIA (top 
50th percentile), they must score well on an Assessment of Individual 
Motivation (AIM) test (which is correlated to attrition), and they 
cannot require a waiver for morals or drug and alcohol. Because GED 
Plus graduates are required to have above average enlistment test 
scores, job performance should not be adversely affected. The GED Plus 
program is scheduled for completion in fiscal year 2004.

Fiscal Year 2002 Enlisted Recruiting Results
    During fiscal year 2002, the military Services recruited 259,290 
first-term enlistees and an additional 84,312 individuals with previous 
military service for a total of 343,602 recruits, attaining 104 percent 
of the DOD goal of 331,622 accessions. All active and Reserve 
components achieved their numeric goals.
    The quality of new recruits remained high in fiscal year 2002.\1\ 
DOD-wide, 93 percent of new recruits were high school diploma graduates 
(against a goal of 90 percent) and 68 percent scored above average on 
the Armed Forces Qualification Test (versus a desired minimum of 60 
percent).
---------------------------------------------------------------------------
    \1\ Although the Army National Guard and Naval Reserve fell short 
of the desired high school diploma graduate (HSDG) rate.
---------------------------------------------------------------------------
    The Montgomery GI Bill continues to be an extremely popular 
recruiting incentive. Over 96 percent of all new accessions enroll in 
this program which provides over $35,000 in benefits to a new active 
duty recruit in return for a $1,200 contribution from current pay. An 
additional option allows a service member an opportunity to contribute 
up to an additional $600 in return for $5,400 of potential benefits 
over a 36-month period. The Department continues to view the MGIB as 
one of our Nation's best investment programs--a military recruiting 
tool for the Services today, and a more educated veteran for our 
country in the future.

Fiscal Year 2003 Year-to-Date Results
    Through the first quarter of this fiscal year (October to December 
2002), the Services achieved 99 percent of their ``shipping mission,'' 
enlisting 71,194 young men and women. All active components met or 
exceeded their first quarter goals. The Reserve components achieved 97 
percent of their first quarter mission, with the Army National Guard 
achieving 86 percent. It is too early to determine if the Army National 
Guard shortfall is an anomaly or a trend; but plans are already in 
place to monitor it. Overall, recruit quality in both the active and 
Reserve components remains high.
    Unlike the active component, the Reserve components do not 
routinely contract recruits for accession into a future period. So, 
while the active components entered fiscal year 2003 with healthy 
delayed entry programs, the Reserve components must recruit their 
entire goal in this current fiscal year. The recruiting goals for 
fiscal year 2003 are higher for 4 of the 6 Reserve components, with a 
total Reserve component recruiting goal of 141,450 (a 3.8 percent 
increase over the fiscal year 2002 goal).
    The trend of increasing the percentage of Reserve component 
recruits without prior military service continues. Approximately 50 
percent are now expected to come from civilian life. This is a result 
of high active component retention and lower Individual Ready Reserve 
populations.
    For 2003, all Reserve components are continuing to focus their 
efforts on maintaining aggressive enlistment programs by targeting both 
enlistment and re-enlistment incentives in critical skill areas. 
Emphasis will be placed on the prior service market for both officers 
and enlisted personnel. The Reserve components will expand their 
efforts to contact personnel who are planning to separate from the 
active component long before their scheduled separation and educate 
them on the opportunities available in the Guard and Reserve. In 
addition, the Reserve components will increase their efforts to manage 
departures.

Officer Programs
    All Services met their numerical commissioning requirements in 
fiscal year 2002. However, both the Navy and Air Force continued to 
experience shortfalls in certain specialties, usually those that 
require a specific educational background. The Navy missed its goals 
for pilots, naval flight officers, civil engineers, chaplains, and most 
medical and medical support specialties. The Air Force was short 
navigators, intelligence officers, weather officers, physicists, and 
engineers. Many of these career fields offer higher pay and more 
opportunity in the civilian workforce. Also, these career fields are 
academically challenging and it takes more people on scholarships to 
produce just one graduate. Both Services have faced this problem for 
the past several years and continue to utilize the various incentives 
available, such as scholarship for specific degree programs, to ensure 
they attract enough individuals with the required prerequisites.
    Overall in fiscal year 2002, the Reserve components achieved over 
97 percent of their officer accession goals. The Services continue to 
work on reducing shortfalls in the Reserve officer ranks through 
emphasis on both recruiting and retention.
    Active duty officer accessions are on track in all Services for 
numerical success this year, but the Navy and Air Force continue to pay 
special attention to the specialty mix.

Retention
    Retention results for 2002 were strong and the positive trends 
continue. Each Service met or exceeded its aggregate retention goals. 
The improved result for all Services is due importantly to strong 
retention programs, including the targeted pay raises Congress has 
approved in the last 2 years.
    The enlisted retention outlook for fiscal year 2003 is good, 
although the full effects of stop loss are yet to be felt. For example, 
some service members previously affected by stop loss, who had planned 
to separate may decide to reenlist; while others who had planned to 
extend their tours of duty may not want to be involuntarily extended 
again under a future stop loss program.
    Despite success in meeting the numeric goals, shortages in a number 
of technical enlisted specialties persist in all Services. Examples of 
shortage skills include special operations, aviation maintenance, 
information technology specialists, electronics technicians, 
intelligence linguists, and air traffic controllers. We will continue 
to depend on judicious use of bonuses and special pays to achieve 
desired retention levels in these skills. The Army is targeting 
experienced noncommissioned officers with special operations skills 
with the Critical Skills Retention Bonus (CSRB) program.
    Officer retention challenges from fiscal year 2002 are expected to 
continue into fiscal year 2003. This primarily involves career fields 
whose technical and scientific skills are easily transferable to the 
private sector. The Army, Navy, and Air Force are banking on the CSRB 
program, enacted by Congress in the National Defense Authorization Act 
for Fiscal Year 2001, to help improve retention in targeted critical 
skills. But appropriations for these bonuses were cut in the past 2 
years. We hope Congress will support these important investments this 
year. Targeted skills include: developmental engineers, scientific/
research specialists, acquisition program managers, communication-
information systems officers, civil engineers, surface warfare and 
submarine support officers, and designated health professionals across 
all the Services.

Compensation
    Attracting and retaining high caliber individuals for a trained and 
ready All-Volunteer Force requires a robust, competitive, and flexible 
compensation system. In addition to basic pay, compensation includes 
all pays and allowances, such as housing and subsistence allowances, 
and special and incentive pays.
    Targeted pay raises are needed because increased educational 
attainment on the part of the enlisted force has made the existing 
military pay structure less competitive. We appreciate Congress' 
direction on the 2002 and 2003 pay raises to target additional raises 
for NCOs, as well as mid-level officers. We recommend Congress adopt 
our proposed targeted pay raises for our mid-level and senior NCOs and 
warrant officers for fiscal year 2004.
    In addition to maintaining efforts to achieve competitive pay 
tables, the Department recommends continuing to increase military 
housing allowances significantly, with the goal of eliminating average 
out-of-pocket costs by 2005. Building on the current year's increases, 
the fiscal year 2004 budget requests further improvements in the 
allowance, reducing the average out-of-pocket costs from 7.5 to 3.5 
percent.
    In January 2002, the Department implemented a new authority 
provided by Congress to allow the uniformed forces to participate in 
the Thrift Savings Plan (TSP). This opportunity represents a major 
initiative to improve the quality of life for our service members and 
their families, as well as becoming an important tool in our retention 
efforts. In its first year of operation, TSP attracted nearly 303,000 
enrollees, 241,000 active duty and 62,000 Guard and Reserve members. 
The Department projected that 10 percent of active duty members would 
enroll in the first year; in fact, we had 17 percent sign up, exceeding 
our expectations.
    The National Defense Authorization Act for Fiscal Year 2003 
provided a new Combat-Related Special Compensation for military 
retirees with combat-related disabilities. Eligible recipients are 
those retirees who have 20 years of service for retired pay computation 
and who either have disabilities because of combat injuries for which 
they have been awarded the Purple Heart or who are rated at least 60 
percent disabled because of armed conflict, hazardous duty, training 
exercises, or mishaps involving military equipment. We are working 
closely with the Department of Veterans Affairs to identify potentially 
eligible members and establish and implement application procedures and 
requirements. We intend to have applications and instructions available 
by late spring so eligible retirees can begin applying. The retiree 
newsletters for each branch of Service should provide the first 
information about when and where eligible retirees may submit claims 
for compensation. We will keep the Service-related associations and 
other appropriate organizations informed as well.
    In 2003, we are examining compensation programs for Reserve 
component members. The current and anticipated military environments 
require employment of Reserve Forces in ways not imagined when current 
compensation programs were designed. Current thresholds for housing 
allowances, per diem, some special skill and duty pays, and a range of 
benefits may not fully support the manner in which Reserve component 
members may be employed in the future. Compensation programs must be 
sufficient to attract and retain capabilities to meet continuous, surge 
and infrequent requirements. As we examine options and formulate 
alternatives, we will adjust DOD regulations and include proposed 
statutory changes as part of the Department's legislative program.

Managing Time Away From Home (PERSTEMPO)
    Although the provisions of law that require specific management 
oversight, tracking and payment of PERSTEMPO per diem have been waived 
during the current national emergency, the Services are continuing to 
track and report PERSTEMPO data. We understand the effects of excessive 
time away from home on the morale, quality of life and, ultimately, the 
readiness of service members even during wartime conditions. That is 
why we have asked the Services to continue efforts to improve their 
data tracking and to explore ways to further reduce PERSTEMPO while 
still meeting mission objectives.
    Despite our best efforts, however, a number of specialties in each 
Service will continue to experience high deployment rates until we can 
fully adjust our force structure, force stationing and deployment 
practices. We are recommending changes to the current law that provide 
a better way to manage this challenge and compensate the individuals 
affected. The proposal would replace the current $100 High Deployment 
Per Diem with a progressive monthly High Deployment Allowance (HDA), 
authorize the Services to compensate members for excessive deployments 
based upon the duration as well as the frequency of their deployments, 
and set the statutory limit for HDA at $1,000 per month.

Training Transformation
    Our ability to successfully defend our Nation's interests relies 
heavily upon a military capable of adapting to rapidly changing 
situations, ill-defined threats, and a growing need to operate across a 
broad spectrum of missions. The Services have been highly successful 
for many years by possessing a training superiority over all real and 
potential adversaries. We intend to maintain that critical edge in the 
future by continuing to move our training methods and capabilities 
beyond those of the Cold War. We will no longer simply deconflict or 
synchronize unique Service warfighting instruments, but rather 
integrate them into a single, focused capability. We will also expand 
``jointness'' beyond the Services and into intergovernmental, 
interagency, and coalition realms so that, as Secretary Rumsfeld has so 
often noted, ``we train like we fight and fight like we train.''
    Transformed training is a key enabler to transforming this fighting 
force. DOD plans to link joint training and readiness assessments and 
reporting through the Defense Readiness Reporting System (DRRS) and 
continue development of a core on-line curriculum for expanded access 
to joint military education and training. Our offices will also review 
and update acquisition and maintenance policies, plans, programs, and 
procedures related to training to include embedded training in 
operational systems.
    As we have witnessed in the skies above and on the ground within 
Afghanistan during Operation Enduring Freedom, it is not easy to plan 
and execute complex combat operations when the Services have not fully 
trained in accomplishing those tasks. We are committed to meeting joint 
mission requirements of our regional combatant commanders and must 
ensure that headquarters and component staffs deploying to a combatant 
command are fully trained to joint standards and in the concepts of 
network-centric warfare. The Department of Defense is implementing its 
Strategic Plan to transform training, with the establishment of a Joint 
National Training Capability by October 2004 as a key component. The 
U.S. Joint Forces Command will work with the military Services and 
Joint Staff to achieve a realistic, global combat training and mission 
rehearsal capability that incorporates interagency, intergovernmental, 
and coalition partners. Our focus is to better enable joint operations 
so that we never conduct an operation for the first time in combat.

Readiness Assessment and Reporting
    We are currently in the process of transforming how we report and 
assess the readiness of our forces to meet the challenges of today's 
defense environment. Our new Defense Readiness Reporting System (DRRS), 
is an output focused, near-real time assessment system that measures 
the capabilities of our military units, defense agencies, and 
supporting infrastructure to perform their assigned missions. We have 
already established the policy and direction, and are now developing 
the methodologies and analytic tools to enable rapid readiness 
evaluation and risk assessment across the entire Defense enterprise. 
DRRS builds upon the best characteristics of our current readiness 
systems, and uses information technology to capture key transactional 
data from our personnel and equipment management systems. DRRS uses 
modeling and simulation to test the feasibility of our operational 
plans, and helps to frame the significant risk and planning issues. We 
expect to have an initial capability for DRRS in late 2004, with a 
fully operational system by 2007.

                            QUALITY OF LIFE

    A partnership exists between the American people and the military 
community that is built on the understanding that both service members 
and their families are vital to the readiness and strength of our Armed 
Forces. Today, over 60 percent of today's military service members have 
family responsibilities, necessitating a firm commitment to underwrite 
family support. President Bush has repeatedly stressed the need to 
improve the quality of life of our men and women in uniform, and in one 
of his first presidential directives upon taking office, he asked the 
Secretary of Defense to ``undertake a review of measures for improving 
quality of life for our military personnel.'' The sentiment was later 
echoed in the 2001 Quadrennial Defense Review, which declared that the 
Department ``must forge a new compact with its warfighters, and those 
who support them.''
    The fruit yielded by those early instructions is the new Social 
Compact, an ambitious review and long term plan for quality-of-life 
programs that renews the Department's commitment to our Service men and 
women and their families. Unprecedented in its scope, the Social 
Compact is built on the input from each of the Services as well as the 
Office of the Secretary of Defense. It seeks to address the issues of 
greatest importance in the lives of our service members and their 
families.
    As we move forward, the military departments will improve family 
support to meet the needs of the changing demographics of the force, 
with specific emphasis given to meeting the needs of the off-base 
population and Reserve components families. Delivery of services and 
information by exploiting technology will be a priority. Further, 
today's issues of spousal careers and quality education for military 
children are family concerns of high importance.

Family Assistance/Toll Free
    When our service members deploy around the world, whether to 
Afghanistan, Iraq, or one of numerous other posts, their families on 
the home front are first and foremost in their thoughts. They want to 
know how the family is getting along, how the kids are doing in school, 
if the bills are being paid, and if there's someone to lend a hand when 
problems arise.
    With the majority of the force having family responsibilities, we 
must ensure that the families have the support and assistance they need 
when they need it, or our war-fighters might arrive on the battlefield 
distracted by concerns for the welfare of their loved ones. This is not 
an acceptable risk. That is why we must reach out to every military 
family, be they active duty, Reserve or National Guard. We want every 
service member to have a lifeline to support and assistance and to know 
that the same is available to his or her family. Someone they can call 
on, day or night, who will help them solve the crises they often face 
alone.
    We have begun implementation of a toll-free 24 hour, 7 day a week 
family assistance service. This service puts families and service 
members in contact with experienced, professional counselors who can 
provide immediate assistance with issues ranging from parenting and 
child care to financial counseling to how to find a plumber at 
midnight. Ultimately, this service will provide all of our service 
members and families with immediate information on support available on 
the installation or in their community. This will include, among a 
range of services: child care, domestic violence prevention and family 
advocacy, educational opportunities, and spouse employment resources.

Domestic Violence
    The Department continues to make significant progress in addressing 
the issue of domestic violence within military families. We have 
reviewed two reports from the Defense Task Force on Domestic Violence 
and anticipate receipt of the final report shortly. We fully support 
more than three quarters of the recommendations, and anticipate that we 
will support 90 percent of them when we have completed studying a few 
issues. We have created an implementation team that is working to 
ensure that these Task Force recommendations are incorporated into DOD 
policy. The Task Force is preparing key response and intervention 
protocols for law enforcement and commanders and we are preparing to 
implement these in Service training programs. To improve DOD's response 
to domestic violence in the community, the Department will develop a 
confidentiality policy to protect appropriate communications.
    The Army reviewed the domestic violence tragedies at Fort Bragg and 
identified some policies and practices that may need changing. The 
Department is looking at which of these apply to all Services, and if 
so they will be changed in the implementation process.

Family Support and Spouse Employment
    There is a symbiotic link between family readiness and force 
readiness. We have worked hard this past year to reinforce the family 
and personal readiness posture of the active and Reserve component 
members.
    We continue to support the families of military personnel involved 
in Operation Enduring Freedom. This includes deployment support 
programs for spouses, children, parents and extended family whose loved 
one has deployed as part of the global war on terrorism. In 
anticipation of a major contingency, DOD established a working group 
with representatives from all active and Reserve components and several 
Defense agencies. The purpose of the group is to assess the family 
support capability of each organization and make recommendations to 
strengthen programs and services for the families. As a result, we 
issued comprehensive guidance to reinforce the importance of family 
support, focus on specific areas based on proven practices, and 
encourage creative responses to new challenges. Most important, the 
family support strategy is one force-based, which is critical to 
overall success.
    We know that providing accurate information is the most supportive 
effort we can make to assist families. As a result, we are making 
maximum use of Web sites to communicate important information to 
families affected by deployment and family separation. Each of the 
military Services and the office of Reserve Affairs have established 
comprehensive and effective Web sites to support the families as well. 
The most popular of these pages attract over 2 million hits per 
quarter. We are also using other technologies, such as e-mail, to help 
maintain contact between deployed service members and their families. 
Our goal is to ensure that every family of a deployed service member 
has direct access to the support and services they need.
    Our ``Guide to Reserve Family Member Benefits'' is designed to 
inform family members about military benefits and entitlements, 
including medical and dental care, commissary and exchange privileges, 
military pay and allowances, and reemployment rights of the service 
member. Additionally, a Family Readiness Event Schedule was developed 
to make training events and opportunities more accessible for family 
support volunteers and professionals. It also serves to foster cross-
Service and cross-component family support, which supports the desired 
end-state of any service member or family member being able to go to a 
family support organization of any Service or component and receive 
assistance or information.
    The family readiness ``tool kit'' is available to assist 
commanders, service members, family members and family program managers 
with pre-deployment and mobilization information.
    At the same time, long-range recruiting and retention roles 
continue to drive family readiness programs such as spouse employment. 
Recent initiatives, like the Navy's partnership with an international 
staffing firm and entrepreneurial initiatives focused on virtual 
business opportunities, have begun to yield significant results in 
terms of spouse employment and spouse morale. In addition, new 
measurement strategies at the installation and national level promise 
better, real-time assessment and analysis of spouse employment program 
effectiveness.
    Financial well-being of military families is seen as a critical 
part of the Department's new Social Compact. The military Services have 
provided financial training and counseling services to aid military 
families in using their resources wisely. However, we have found that 
our junior enlisted service members and families continue to experience 
financial problems in larger numbers than their civilian counterparts. 
As a result, the Department is engaging in a financial literacy 
campaign focused on improving financial management abilities and 
changing behavior to improve resource management for current and future 
needs. The primary market for this campaign will be the junior enlisted 
member and the spouse, who though often the primary financial manager 
for the family, may not have received any guidance in managing home 
finances. Several Federal agencies and non-profit organizations have 
pledged their support to accomplish these goals through the financial 
literacy campaign. Their participation will enhance our expertise and 
also provide an avenue for the American public to support its troops.

Employer Support
    A Guard and Reserve employer database was established in late 2001 
to enable the Department and others to communicate directly with 
employers on appropriate Reserve component issues. In addition to the 
Department's need for employer information, military leadership 
continues to express interest in the civilian-acquired skills and joint 
operations experience of Guard and Reserve members. Building employer 
support requires a strong network comprised of both military and 
civilian-employer leaders, capable of providing communication, 
education and exchange of information. Employers need to understand 
their legal requirements for Guard and Reserve employees and also the 
importance of the Reserve components' contribution to our national 
defense.
    Since most Reserve component members have a full-time civilian job 
in addition to their military duties, civilian employer support is a 
major quality-of-life factor. The Department recognizes the positive 
impact employer support has on Reserve component readiness, recruiting 
and retention, and accomplishment of the Department's missions. The 
National Committee for Employer Support of the Guard and Reserve (ESGR) 
is charged with enhancing employer support and coordinating the efforts 
of a community based national network of 55 committees consisting of 
4,200 volunteers in every State, the District of Columbia, Europe, 
Guam, Puerto Rico, and the Virgin Islands to meet their important 
requirement.
    ESGR has greatly expanded its ``Statement of Support'' Program in 
the past year, which highlights the public signing by an employer of a 
statement pledging to publish and implement personnel policies 
supportive of employee service in the National Guard and Reserve. 
Forty-four Governors have signed Statements of Support and two more are 
scheduled to sign very soon. Many nationally known companies have also 
signed Statements of Support and hundreds of small and mid-sized 
companies, communities, and local chambers of commerce have also 
publicly signed ESGR Statements of Support in the past year.

Child and Youth Development
    Affordable, quality child care remains one of the most pressing and 
persistent needs of families throughout the Department. The Department 
considers child care to be a workforce issue with direct impact on the 
effectiveness and readiness of the force. The fiscal year 2004 budget 
request continues to maintain child development programs at over 300 
locations with 900 child development centers and over 9,200 family 
child care homes. Even with this vast system of support, we still 
project a need for an additional 40,000 spaces. Expansion efforts are 
continuing.
    As contingency operations increase, Services are customizing and 
expanding child care programs to meet specific mission requirements. 
Various installations offer extended hours care, care for mildly ill 
children, and child care so that both service members and spouses can 
attend deployment briefings.
    Partnerships with other agencies have really paid off for our 
youth. One example is the dynamic collaboration with Boys & Girls Clubs 
of America. DOD youth programs benefited from expanded scholarships 
opportunities and marketing initiatives. Program upgrades of computer 
centers allow youth and children to stay in touch with a mom or dad 
deployed many miles away. To address the concerns of youth at risk, we 
improved the Military Teens on the Move Web site for youth relocation 
issues and deployed the Community Assessment for Youth tool to assess 
community issues and to assist commanders to find solutions.

Educational Opportunities
    With the support of Congress, last year the Department provided $30 
million to heavily impacted school districts serving military dependent 
students and an additional $3.5 million to eligible school districts to 
reduce the cost of providing services to military children with severe 
disabilities.
    The Department has reached out to public school districts and State 
education authorities to engage them in helping ensure military 
dependent students receive a quality education. We have asked districts 
to share best practices with one another to help eliminate problems 
experienced by children of military personnel who are forced to change 
schools frequently due to the reassignment of the parent or guardian. 
Within the last 2 years we have brought together over 300 students, 
parents, military leaders, school personnel and State policy makers to 
address and give visibility to these issues which affect about 600,000 
children. We will soon activate a Web site that will provide 
information to help make transfers smoother.
    Once we begin the base realignment process, a careful look at the 
quality of life of civilian communities where our military families 
live is warranted. We owe children a good education no matter where 
their parents may serve, as well as good child care, homes, and spousal 
career opportunities. It will be important to tie base closure and 
realignment discussions to the quality of life in the local community.
    The Department continues to operate one of the Nation's largest 
post-secondary education programs. Service members' participation in 
the off-duty voluntary education program remains strong with annual 
enrollments exceeding 600,000 courses. Last year, service members were 
awarded over 30,000 higher education degrees by hundreds of colleges 
and universities. Policy increasing tuition assistance became effective 
October 1, 2002. New levels of support virtually eliminate service 
members' out-of-pocket costs for earning a degree. Army, Air Force and 
Marine Corps have implemented the new policy. Navy has indicated it has 
insufficient funds to implement the policy and has restricted sailors 
to a maximum of 12 credits for which tuition assistance has been 
authorized.

                   RESERVE MOBILIZATION AND TRAINING

    Reserve Forces continue to exhibit their willingness and 
preparedness to support the one force during rapid mobilizations and 
deployments in the various ongoing contingencies and emerging 
operations around the globe. In addition to the traditional methods of 
employing Reserve Forces, the Department has engaged in some visionary 
new projects that have expanded the capabilities to support combatant 
commanders virtually.
     We are in the midst of one of the longest periods of mobilization 
in our history. The men and women of the National Guard and Reserve 
have responded promptly and are performing their duties, as the Nation 
requires. For the past 18 months, we have mobilized over 230,000 
Reserve personnel, who are performing and have performed magnificently 
throughout the world. We are managing these call-ups in a prudent and 
judicious manner, assuring fair and equitable treatment as we continue 
to rely on these citizen-soldiers.
    As of 7 March 2003, there are 178,886 mobilized under 10 U.S.C. 
(12302).

         Army National Guard (ARNG): 67,652
         Army Reserve (USAR): 60,764
         Air National Guard (ANG): 12,762
         Air Force Reserve (USAFR): 10,957
         Navy Reserve (USNR): 8,005
         Marine Corps Reserve (USMCR): 15,798
         Coast Guard Reserve (USCGR): 2,948

Support to Mobilized Reservists
    Taking care of our mobilized Guard and Reserve members and their 
families is a top priority for the Department. While we can draw on our 
experience from past call-ups, we continue to examine our policies and 
programs to ensure that our mobilized reservists do not feel 
disenfranchised and that we have systems in place that support 
families.

Screening and Key Employee Exemption Process
    To preclude conflicts between Ready Reserve members' military 
mobilization obligations and their civilian employment requirements 
during times of war or national emergency, the Department conducts a 
``screening'' program to ensure the availability of Ready reservists 
for mobilization. Once a mobilization is declared, all screening 
activities cease and all Ready Reserve members are considered 
immediately available for active duty service. At this time, no 
deferments, delays, or exemptions from mobilization are granted because 
of civilian employment.
    However, due to the unique situation that was created by the events 
of September 11, the Department immediately recognized that certain 
Federal and non-Federal civilian employees were critically needed in 
their civilian occupations in response to the terrorist attacks on the 
World Trade Center and Pentagon. Accordingly, the Department 
established a special exemption process to help accommodate overall 
national security efforts.
    We are developing new policies that would require members of the 
Ready Reserve, especially the Selected Reserve, to provide the 
Department with limited information about their civilian employers. 
Having employer information will not only assist us in improving our 
employer outreach programs, but more importantly, it will provide a 
better understanding during mobilization planning of the impact 
mobilizations will have on local communities and industries. The need 
for better employer-related information is a priority for us in the new 
threat environment we are facing. Additionally, obtaining accurate and 
current employer information is critical for the Department to comply 
with our statutory responsibilities for continuous screening of Reserve 
units and individuals.

Training
    Training is a fundamental pillar of readiness and Reserve component 
issues and concerns must be addressed as an integral part of defense 
training--specifically that Reserve component training issues must be 
developed concurrently with active issues and included in new training 
transformation initiatives. We have made a concerted effort to ensure 
that the unique requirements of our reservists are highlighted and 
given every consideration as we implement Reserve component training 
under a one force approach. This approach will continue to pay great 
dividends, not only for the Reserve component, but for the entire force 
as the Reserve components blaze the trail for distributed learning and 
other ``virtual'' approaches.
    In the past year, we've experienced some very exciting developments 
in the training environment that will leverage use of new technologies 
to ``just in time'' training, and training oriented to improved job 
performance. This focus on distributed learning strategies and 
employing more robust communications tools will continue to pay great 
dividends for the total force. The National Defense Authorization Act 
for Fiscal Year 2002 included changes that allow the Reserve components 
to receive compensation for completion of electronic distributed 
learning, adding significantly to the opportunities of our personnel to 
embrace these concepts. We are undertaking a study to develop policy 
recommendations for the implementation of a Department-wide 
compensation policy for the completion of training required by 
individual Services. These new and emerging technologies provide 
exciting training opportunities across all components--not just the 
Reserve component.

               MODERNIZING CIVILIAN PERSONNEL MANAGEMENT

    On September 27, 2002, the Department completed deployment of the 
modern Defense Civilian Personnel Data System (DCPDS), DOD's enterprise 
civilian human resources information system. With the final deployment, 
the system reached full operational capability, and has now been 
fielded to all DOD civilian human resources (HR) Regional Service 
Centers and Customer Support Units. The system supports over 800,000 
civilian employees in the Department worldwide, including appropriated 
fund, non-appropriated fund, demonstration project, and local national 
employees in 13 host countries. DCPDS also provides operational and 
corporate-level information management support to all management levels 
within the Department. The deployment of DCPDS caps the largest HR 
transformation initiative in the Federal Government: the DOD HR 
Regionalization and Systems Modernization Program, which has generated 
savings through the consolidation of DOD civilian HR operations into a 
regionalized environment, based on standardized and reengineered 
business processes, supported by a single HR information system.
    The Human Resources Strategic Plan for Fiscal Year 2002-2008 is a 
living document. Adjustments are made on a continual basis, with the 
changes published in an annual annex. Twenty-six performance indicators 
were completed during fiscal year 2002, including implementing HR 
system changes to enhance recruitment; benchmarking HR processes and 
practices against industry best practices; promoting diversity 
initiatives; and maintaining high-level strategic alliances with other 
public and private HR organizations. DOD experienced successful 
completion of the first year goals and we are well on the way with the 
fiscal year 2003 accomplishments.
    An excellent method to develop, nurture and sustain the best and 
brightest members of our current workforce is the Defense Leadership 
and Management Program (DLAMP). DLAMP is the premier leadership 
development program for senior DOD civilians and a key component of the 
succession planning program. Full and complete funding of this program 
is vital to DOD to ensure the proper development and education of 
future senior civilian leaders, prior to the departure of any eligible 
senior executives.
    Additionally, DOD is continuing efforts to improve the academic 
quality and cost-effectiveness of the education and professional 
development provided to its civilian workforce. We have made good 
progress towards obtaining accreditation for DOD institutions teaching 
civilians. DOD anticipates that all but one of these institutions will 
have gained accreditation by the end of this year. We are also working 
towards implementing the academic quality standards and metrics and 
associated data collection system developed last year. These will 
provide our institutions a mechanism for performance benchmarking and 
will give decision-makers accurate and timely information on the 
quality and cost-effectiveness of our institutions. Finally, we have 
progressed well in our research to identify the lessons learned and 
best practices used by educational institutions, corporate 
universities, and government agencies; we are applying those lessons 
and practices to improving the academic quality and cost-effectiveness 
of DOD civilian education and professional development.

                              HEALTH CARE

Military Health System Funding
    In the President's budget request for fiscal year 2004, the Defense 
Health Program (DHP) submission is based on realistic estimates of 
delivering health care. It includes assumptions for growth rates in 
both pharmacy (15 percent) and private sector health costs (9 percent). 
Still, we need flexibility to manage our resources. We seek your 
assistance in restoring the contract management flexibility you 
provided in the National Defense Authorization Act for Fiscal Year 2002 
and in alleviating restrictions on moving resources across budget 
activity groups. Our beneficiaries who are not enrolled in TRICARE 
PRIME make their own choices about where they receive their health 
care. When they choose purchased care, and our private sector care 
costs go up, we need to be able to realign funds to cover these bills. 
If the Department has to wait several months for a prior approval 
reprogramming, contractors and providers are essentially ``floating'' 
the government a loan. This is contrary to good business practice and 
harms our relationships with our contracting partners and participating 
providers. Health care costs for the TRICARE for Life benefit will be 
received from the Medicare-eligible Health Care Accrual Fund, and are 
not reflected in this appropriations request.
    The Department has developed, and is implementing, a 5-year 
strategic plan for the Military Health System. The plan was developed 
using a balanced scorecard methodology and focuses on the successful 
implementation of the dual mission of providing support for the full 
range of military operations and sustaining the health of all those 
entrusted to our care. Key measures in the plan include readiness, 
quality and efficiency.

Force Health Protection and Medical Readiness
    Even before the global war on terrorism, the Military Health System 
(MHS) had numerous activities underway to ensure force health 
protection and medical readiness. These efforts include development of 
a joint medical surveillance capability, joint medical response 
operations, and an aggressive immunization program to counter possible 
exposure to anthrax or smallpox. The fiscal year 2004 budget continues 
to support these efforts.

TRICARE
    TRICARE's success relies in part on incorporating best business 
practices into our administration of the program, specifically in 
regard to how our managed care contracts operate. We have carefully 
coordinated and planned for the next generation of TRICARE contracts 
(T-Nex). A basic tenet of the T-Nex acquisition is to exploit industry 
best practices to support the basic benefit structure of the TRICARE 
program. We enter this new generation of contracts with a commitment to 
our beneficiaries to earn their satisfaction, and to provide a near-
seamless transition to our future providers.
    Delivery of TRICARE for Life benefits continues to be a great 
success. In the first year of the program, we processed over 30 million 
claims; the overwhelming majority of anecdotal information we receive 
is that our beneficiaries are extremely satisfied with TRICARE for 
Life. They speak very highly of the senior pharmacy program as well. 
This program began April 1, 2001, and in the first year of operation, 
11.6 million prescriptions were processed, accounting for over $579 
million in drug costs.

Reserve Component Health Care Benefits
    The Department has introduced several health care demonstration 
programs since September 11, 2001, to provide an easier transition to 
TRICARE for the growing number of Reserve component members and their 
families who are called to active duty. These demonstrations have 
helped to preserve continuity of medical care and reduce out-of-pocket 
costs for these families. We are revising our administration of Reserve 
benefits to ensure that families are not arbitrarily excluded from 
benefits that were intended for them. We have also revised our policies 
to ensure that family members of reservists who are activated are 
eligible for TRICARE Prime Remote benefits when they live more than a 
one hour's commuting distance from a military medical facility, 
regardless of the mobilization site of the service member. In addition, 
reservist families can enroll in TRICARE Prime if a member is activated 
for 30 days or more.

Coordination, Communication, and Collaboration
    The MHS has built many strong relationships among other Federal 
agencies, in addition to professional organizations and beneficiary and 
military service associations. The Department's relationship with the 
new Department of Homeland Security will demand effective cooperation 
across the spectrum of functions across the Department.
    MHS collaboration with the Department of Veterans Affairs dates 
back many years, but we are especially proud of recent accomplishments. 
We have made great strides this year in partnering to provide health 
care to DOD and VA beneficiaries in areas such as North Chicago/Great 
Lakes and Southern Texas. We are pursuing other opportunities for 
resource and facility sharing and will report on them to Congress over 
the next few months as required by the National Defense Authorization 
Act (PL 107-314). We have experienced remarkable success in our joint 
pharmaceutical-related efforts. In fiscal year 2002, our joint 
pharmaceutical contracting resulted in over $100 million in cost 
avoidance for the Department. We continue to collaborate with the VA 
through the VA-DOD Joint Executive Council, where senior healthcare 
leaders proactively address potential areas for further collaboration 
and resolve obstacles to sharing. The Department has worked with the 
Department of Veteran's Affairs throughout the past year as an active 
participant on the President's Task Force to Improve Health Care 
Delivery for Our Nation's Veterans. The Task Force has reviewed many 
aspects of each department's health care business. As stated in their 
Interim Report released in July 2002, the Task Force ``is encouraged by 
the establishment of the VA/DOD Joint Executive Council . . . (which) 
recently agreed to undertake a strategic planning initiative, the first 
time such a joint planning endeavor has been initiated." We look 
forward to receiving their final recommendations.

Military Medical Personnel
    The added flexibility for administering health professions' 
incentives that you included in the National Defense Authorization Act 
for Fiscal Year 2003, including increasing the cap for clinical 
professions up to $50,000/year for some of our accession and retention 
bonuses, and improving the Active Duty Health Professions Loan 
Repayment Program authority, are greatly appreciated. The Services are 
working with Health Affairs to develop plans for future targeted pay 
increases in those clinical areas where there is difficulty in filling 
requirements.

                               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 would like to take this opportunity to note that the joint 
efforts of Congress and the Department are beginning to pay off. 
Service members who completed the web-based 2002 Status of Forces 
Survey opinion survey expressed greater satisfaction with almost all 
aspects of service life than they had 3 years earlier. For instance, 
results show a significant gain in satisfaction over compensation. This 
is directly attributed to the annual pay raises that exceeded wage 
growth in the private sector, and housing allowance hikes set higher 
than the yearly rise in local rents. Congress was instrumental in 
making this happen.
    Even better news is that more than 80 percent feel they are ready 
to perform wartime duties. This is certainly a positive endorsement for 
the programs that you have helped us enact. I am hopeful that I can 
count on your support in the future. I look forward to working with you 
closely during the coming year.

    Senator Chambliss. Thank you very much, Dr. Chu, and we 
appreciate your brevity and your directness with respect to 
these issues. First of all, let me just say that the budget 
request for 2004 for active duty end strength is very similar 
to last year's. Most notable is the Navy's reduction of some 
1,900 sailors.
    As the service chiefs testified before the full committee 
last month, the real challenge appears to be finding the right 
mix of active, Reserve, and civilian personnel to best 
accomplish this mission. What is your view about the adequacy 
of the end strength being requested to successfully support the 
wartime operational demand being placed on the Armed Forces?
    Dr. Chu. Sir, we think it is adequate. It is important to 
be able to shift the application of that end strength. That is 
one of the reasons the Secretary of Defense would like a 
national security personnel system, because he would like to 
move some of the posts that are now uniformed to civil status 
and allow that head room to be applied to new missions that 
only a uniformed force can discharge. We believe that the 
numbers in the budget request for military personnel, active 
and Reserve, are adequate to our need.
    Senator Chambliss. Secretary Hall, let me ask you a 
question along that same line. We are calling up the Guard and 
Reserve at a greater pace than ever before. It is not something 
new just for this current potential conflict, but over the last 
several years we have certainly called on the Guard and Reserve 
more and more. What is your opinion as to whether or not the 
Active-Duty Forces are sufficient to fight the battles that 
need to be fought without continuing to rely heavily day to day 
on both the Guard and Reserve?
    Secretary Hall. I think the active duty end strength is 
adequate, and with our Reserve end strength and Guard of about 
870,000. When you add the IRR to it, it comes to about 1.2 
million. I think that is adequate for both the Guard and 
Reserve.
    I think the real issue is if the balance is exactly right, 
and we have over a period of the past 10 years called up our 
Guard and Reserve about seven times. We have examined the ones 
that have been called up, and in many specialties those are the 
ones that might get called up the most often. What I think we 
need to do is perhaps look at rebalancing. A small amount of 
those that should perhaps move to the active side, and a small 
amount from the active side doing other missions move to the 
Reserve. I think we can rebalance within current end strength 
on both the active and Reserve side, and we are looking at 
that, of not requesting any more, but obtaining the proper 
balance between the two.
    Senator Chambliss. Dr. Chu, I hear you talking about the 
modifications in hiring of civilian personnel, and you and I 
talked about this in my office a week or so ago. I was thinking 
about that this morning as I was contemplating what we are 
going to be discussing here today.
    I had a gentleman in my office yesterday applying for a 
staff position, and admittedly we had 24 hours to check out his 
resume and his references but we hired him yesterday. As we 
move into the proposed changes that are going to be forthcoming 
from a legislative standpoint to try to give you this 
flexibility, tell us what it takes you to hire somebody for a 
Civil Service position in whatever circumstances you want to 
use as an example.
    Dr. Chu. The average is 3 months. At the Secretary's town 
hall meeting just this week, a young lady stood up who works 
for the General Counsel's Office and complained that she is 
trying to place college graduates, and she lamented it took her 
8 weeks. I actually congratulated her for coming in below our 
usual number.
    You first must write the job description, you must post it 
correctly, you must compete the position, you must consider the 
applicants, and then you can finally make a choice. It is a 
lengthy process both from the individual's perspective and from 
the supervisor's perspective. I think it deters the use of the 
Civil Service as one of our key instruments for staffing the 
Department, and it makes it hard for the Civil Service to be a 
responsive instrument, as needs change quickly, particularly 
the description of what your job entails.
    In your office I suspect what you do is, you tell a young 
man or young woman, here is what I want you to do. If we do 
that, we have to go and rewrite the job description, recompete 
the job, and we must hope that the current incumbent, if that 
is the manager's desire, successfully win, that revamped post.
    Senator Chambliss. The flexibility you are going to be 
asking for, is that going to have to be done legislatively, or 
can we do any of it by regulation?
    Dr. Chu. Largely, sir, this is a legislative issue in terms 
of powers that would need to be given to the Department of 
Defense in order to move in that way. I think Congress has 
blazed a path here, with the homeland security bill, which 
contains some of these elements, and some of these elements are 
Government-wide in scope and will be applied, but we would like 
to go a bit further than that bill does.
    I would mention specifically the right to make prompt--on-
the-spot, if possible--job offers at college job fairs. I think 
that is going to be important as the market tightens again for 
talented young men and young women, as it was during the so-
called dot com bubble. We were frankly not competitive in that 
environment.
    Senator Chambliss. Thank you. Senator Nelson.
    Senator Ben Nelson. Thank you, Mr. Chairman, and thank you, 
Dr. Chu.
    The first question I have relates to the President's 
budget, and the budget request combines the active and Reserve 
pay accounts into a single appropriation with separate budget 
activities. Can you explain the rationale for this budgeting 
change, and also what safeguards will exist to preclude the 
active Services from utilizing Reserve training and pay 
accounts in the last quarter of the fiscal year?
    Dr. Chu. I am going to let Secretary Hall also offer his 
views if I may, sir. I pointed out to the Reserve community 
that that opportunity works both ways, and they might be the 
beneficiary of that.
    Senator Ben Nelson. I think they are more worried about 
being on the short end.
    Dr. Chu. I understand that, sir. Each side is always 
worried that it is going to be the billpayer. I do think, all 
levity aside, that the safeguard is the fact that there still 
would be separate budget activities, so this is not something 
where one could raid one in order to support the other, in my 
judgment.
    It would enhance our ability to manage the Department and I 
think that is really the key. Flexibility in fund transfers, 
which are now problematic, given the limited transfer authority 
available to the Comptroller, could be managed better.
    Tom, did you want to add a word or two?
    Secretary Hall. I think it gives more flexibility to the 
Secretary of Defense, and when I commanded the Reserve from 
1992 to 1996, one of my worries was always not having the 
flexibility within all of my accounts to manage, so on that 
micro scale, I worried about that.
    I think the Secretary of Defense worries about it on the 
macro scale, and certainly we have no indication that this 
would not work, and I think part of my obligation and all of 
ours is, if we see what you indicated, that the accounts are 
migrating in the wrong way, we have the obligation to look at 
that and make that known, but I do not see at the present time 
that we should not try this. It gives more flexibility, and 
then we should report back to you if it does not work and 
monitor it ourselves.
    Senator Ben Nelson. How would you determine what is 
migrating to the wrong way, because if you have the 
flexibility, anything you do by definition will be right.
    Secretary Hall. I think as Dr. Chu said, the appropriations 
accounts will still be maintained. We will have visibility on 
them, and as they start out the year by quarter monitor, and 
see if you should see any one move to the other, I do not think 
there is a right or wrong. You can just monitor the movement 
and make a judgment on it.
    Senator Ben Nelson. With respect to civilian personnel 
policies, Dr. Chu, the Department has made it known that it 
wants to implement this national security personnel system for 
DOD civilian employees, and of course, as you make these 
changes and envision these changes, do you plan to negotiate 
these proposed changes with the personnel of the affected 
employees in the process of making the changes?
    Dr. Chu. Of course, in those cases where we are subject to 
union bargaining, we will respect that. This is not in any way 
an attempt to change that relationship, except insofar as I 
indicated about bargaining on future issues is concerned. We 
are intent on preserving merit principles, on preserving 
veterans' preferences, on preserving equal opportunity 
protections, but what we do need, in our judgment, is a system 
that can respond more promptly, more agilely both to changes in 
needs and changes in job requirements.
    As we move to try to hire this replacement generation of 
Federal Civil Service workers, most estimates suggest the next 
5 years, a quarter of the present Federal workforce could 
retire without waivers, a second quarter could retire with 
waivers within 5 years. Not everyone will seek to retire the 
first year he or she is eligible. I understand that, but it 
certainly means in the next decade we have to hire several 
hundred thousand people, a new generation of talent. It is 
going to be very hard to do that and compete successfully in 
the marketplace with what we have today.
    Senator Ben Nelson. But you envision that raising the age 
will encourage less retirement? In other words, more people 
continuing in their positions because of the increased age?
    Dr. Chu. I am delighted, and I think it is a tribute to 
their dedication to the mission that not every, in fact most 
defense civil servants do not retire the first year they are 
eligible. Generally, they wait a period of time. Now, they 
eventually do retire, and that is why we cannot ignore this 
problem, or put it off forever. We have time, I think, to 
consider what changes you in the legislative branch think are 
meritorious and to put in place a system that will serve us 
well in these early years of the 21st century.
    Senator Ben Nelson. With respect to deployment policies--
compensation issues continue to be of paramount concern to both 
the Guard and Reserve members, especially those who have been 
ordered to active duty. Many report significant cuts in pay. 
Some are more fortunate than others because civilian employees 
have supplemented their military pay.
    What can we do to assist members of the Guard and Reserve 
who lose income because of their activation and because the 
activation can be for a continued and sustained period of time 
and/or reactivation at other periods of time? This becomes more 
important. Do you have any thoughts about what we could do to 
help in that regard?
    Dr. Chu. I think obviously we want to start policy debates 
with a clear view of what is actually happening out there. I 
think it is interesting that if we look at the survey results 
from the recent past the Department has undertaken, that at 
least one-third, the most recent survey is perhaps as much as a 
half, say that their household income is actually slightly 
greater under mobilization than in their civil occupation.
    In the earlier survey, about a third say it is less, a 
third say it is about the same, if I remember these numbers 
correctly, Tom, so the reduced pay is not something everyone 
suffers.
    Second, in the end it is the lifetime compensation that 
counts. Reservists who complete 20 good years are eligible for 
an annuity at age 60 and for TRICARE for Life, which is a 
terrific benefit enacted by Congress just a few years ago. 
There is a set of lesser benefits, commissary privileges, and 
exchange privileges. I do think we have to take a lifetime view 
of what the compensation effect on the reservists might be. In 
my judgment it is the decision of that individual reservist to 
the question: are we being fair to him or her in terms of what 
we are offering versus what they are asked to do. I think the 
answer can be seen in our Reserve recruiting results over this 
last year or so.
    Despite all the burdens, and those burdens started right on 
September 11, 2001, and indeed to some extent reached back 
before that year, with the deployment to the Balkans. Despite 
those burdens, our Reserve community has maintained its 
recruiting and retention success. Our Reserve components are 
right up there at their authorized numbers, so to me that 
argues we are about right. We may need to make some small 
changes at the margin. We are studying, as Congress directed, 
Reserve compensation programs.
    I believe, Tom, you are planning to have that study ready 
at the middle or late summer period. You might want to say a 
word about that.
    Secretary Hall. We are undertaking now a pay and 
compensation study to look at the full collage of benefits, 
from retirement to the ones that you mentioned, and we hope to 
have that ready by August, and we will report back to you. One 
other thing, Senator, that I have a great deal of interest in 
is the issue of whether our reservists and guardsmen lose any 
money. As Dr. Chu said, it looks like almost 66 percent 
actually hold even or gain some, and we took a look at--I did 
it in Nebraska from the Department of Labor statistics, and 
just looked at firemen, policemen, and teachers, because many 
of our people are in those particular areas, and the Department 
of Labor statistics indicated about $36,000, $37,000 for those 
particular ones.
    We took an E-5, and we took an 03 and an 04, because in the 
E-5 and 03 and 04, those are many ones that are in those 
particular specialties, and asked ourselves, what would they do 
when they went on active duty? An E-4 or an E-5 with 7 years 
would actually get about $37,000, so they would be just the 
same if they were a fireman, policeman, or a teacher. An 03 
with 7 years would have $60,000, an 04 with 12 years would have 
$70,000. We see in those specialties in your State, and I think 
it is representative of others, that in fact many of them would 
get a pay raise.
    Senator Ben Nelson. You might get an aberration where 
someone has a high income and has a mortgage and ongoing 
expenses, as was recently pointed out in a story that probably 
highlighted the difficulties of individual cases. They would 
take a substantial pay cut, even though their obligations would 
continue, and create quite a hardship for the family.
    Secretary Hall. We have looked at that, and one of the 
exciting things is that with the employer's support of the 
Guard and Reserve we have now pulled some statistics, and 
almost 300 of our companies in America today are supplementing 
the differential in pay and are paying health benefits for the 
time that those guardsmen and reservists are on active duty. 
Over 44 of our Governors within the different States have 
signed statements of support, and I know in Oklahoma and 
Florida and others, if you are a State employee and also in the 
Guard and Reserve, the State is paying the differential in your 
pay and health care benefits. Many of our private and 
Government industries are stepping up to the plate to assist in 
that.
    Senator Ben Nelson. Thank you very much. I would like to 
turn it over so others can ask their questions. Thank you, Mr. 
Chairman.
    Senator Chambliss. Senator Dole.
    Senator Dole. Mr. Chairman, I certainly want to welcome all 
of our witnesses, but I especially want to mention Dr. 
Winkenwerder, because he is a fellow North Carolinian. I know 
his family well in Asheville, North Carolina. I dare say that 
you enjoyed that Duke-Carolina basketball game more than I did 
Sunday afternoon.
    Dr. Winkenwerder. I did. It was great. [Laughter.]
    Senator Dole. Dr. Winkenwerder, I would like to ask you 
about an issue that relates to the relationship between the 
Department of Defense and the Department of Veterans Affairs. 
This has to do with a memorandum of understanding that was 
signed last year with regard to medical and health records. I 
am interested in how well that memorandum is working. Is it 
accomplishing the goal?
    Mr. Chairman, I would like to ask that our staff also make 
this request of the VA chief information officers so that we 
could determine what their view is of this memorandum as well.
    Dr. Winkenwerder. Senator, thank you for saying that, and 
thank you for asking that question. We are very committed to 
improving the relationship, the working relationship between 
the DOD and the VA with respect to a wide variety of health 
care issues. Most particularly and very importantly with 
respect to the transfer of information, because it is very 
difficult for care to take place once a service member's 
service is terminated and he or she becomes eligible for VA 
benefits, unless that information is there from the prior 
history.
    I am pleased to say that both our Chief Information Officer 
within the DOD health care system and the Chief Information 
Officer within the VA health care system have worked very 
closely together and now we are, as recently as about 3 months 
ago beginning to regularly transfer information as soon as 
service members are discharged so that those medical records 
are available. It is not the complete composite medical record, 
but it is the basic information, and they indicate that they 
are using it, it is helpful, and so we are pleased about that.
    Senator Dole. So we have made some real progress.
    Dr. Winkenwerder. Yes, we have.
    Senator Dole. That is great.
    I understand the estimate for the current fiscal year for 
health care costs is in the range of 24 to $28 billion, and I 
would like to ask you what the Department of Defense is 
planning to do to control costs? Are there plans under 
consideration to consolidate the health care systems of the 
Services, and is that actively being discussed at this point?
    Dr. Winkenwerder. The cost of care for all of the 
Department of Defense health programs is a very important issue 
for me personally and for all of us to manage. We consume 
increasing resources with each year, and now we are spending 
into the tens of billions every year. I believe that money is 
being well spent, and that we are getting very good value for 
it.
    That said, we have to be mindful of continually improving 
the way we do business so that, not unlike the personnel system 
changes that Dr. Chu described, we are agile and we can make 
changes and adjustments, whether that relates to where our 
services are provided, the benefit itself, the way we manage 
things.
    For example, pharmacy, which I think everyone knows is 
probably the fastest-growing segment of health care. We have 
taken some changes just in the past year to consolidate all of 
our pharmacy management to create one national mail order 
pharmacy operation. We are soon to release a bid, request for 
proposal, which we will award several months from now for a 
consolidated national single retail pharmacy benefit. Those are 
competitively bid business activities.
    With that buying power aggregated and, frankly, working 
together with the VA, this is one of the great benefits of our 
relationship with the VA. We aggregate-buy together and save 
hundreds of millions of dollars. I think there is more money to 
be saved in that area, and that would probably top the list of 
opportunities in terms of saving dollars and maintaining 
quality, improving quality at the same time.
    There are some other things that we can do in terms of our 
fixed infrastructure to better use that, if we are not fully 
utilizing facilities to make them clinics, or not to have a 
fixed facility if we do not need it.
    Senator Dole. Right.
    Dr. Winkenwerder. So those are a couple of things that we 
are doing, but it is very important to us that we manage those 
dollars.
    Senator Dole. Good. Thanks very much.
    Dr. Chu, I would like to ask you a question that is a 
follow-up from my visit to a number of our bases in North 
Carolina last week. I was at Seymour Johnson Air Force Base and 
Marine Corps Air Station Cherry Point, Fort Bragg, and I met 
with the commanders, with the enlisted personnel, met with the 
spouses separately, and, where I could just one-on-one talk to 
them about the various issues. One thing that I was interested 
in is the issue of special stresses of repeated deployments for 
families that may be under stress already, where supervisors 
have determined this may be a marriage in stress, and when the 
young person comes back from that deployment, are there some 
special procedures in place to handle those kinds of 
situations?
    If you could describe to me how you handle what might be 
called high stress cases, both from the perspective of the 
military member and the family member. I am interested in that 
particularly with what happened at Fort Bragg, with the 
terrible tragedy there.
    Dr. Chu. Yes, ma'am, we have the tragic lessons of that 
experience very much in mind. I think we recognize now that 
when the individual returns home, if there is a high stress 
situation, we need to provide the right support both to the 
family and to the returning service member. We cannot count on 
their seniority as giving them sufficient insight to know 
exactly how to manage that situation.
    More broadly, we think we need to put more tools in place 
that military families can use easily with confidentiality. We 
are running a major pilot, as you may be aware, of a nationwide 
1-800 number where families can call up for a wide range of 
family services, including issues at the high stress end.
    The Marine Corps has--and General Parks who is going to 
testify later this afternoon has been a leader in advancing 
that idea, and the entire Marine Corps is going to try that 
out, or is really on the road already to trying that out. We 
will evaluate that. We think that is a significant potential 
help to us in these kinds of situations, but we also believe 
there is a strong role for the classic family assistance center 
and its staff.
    We are particularly attentive to the support that needs to 
be offered to our Reserve families, who often may be the only 
persons in their small local circle with this experience and do 
not have the same kind of resources that someone living on or 
near a military base might possess. We are trying to think 
through what we need to do for those families as well.
    Senator Dole. From your comments about the 800 number, I 
assume that across a broader spectrum, too, our Services are 
talking to each other and determining what the best practices 
are.
    Dr. Chu. Absolutely, ma'am. We hold a quarterly meeting on 
quality-of-life issues, a Quality-of-Life Council. I am pleased 
the combatant commanders, including General Franks, have made a 
point of coming personally to discuss with us what works in 
their theater for their command, for their people. I think it 
is a very healthy dialogue within the Department. It is a 
dialogue that allows us to try to construct what we call our 
social compact, the set of understandings between us and our 
people as to what we offer them as they take up the significant 
burdens they bear for the Nation.
    Senator Dole. Again, having visited with these families 
just recently, something that came up often was the fact that 
with these repeated deployments, one thing that they want to 
feel certainty about is that their children are going to have a 
quality education in well-funded schools. My view is that if 
these young men and women are going into harm's way to protect 
our freedoms, they certainly deserve to have certainty about 
that, and I wonder, is the Department of Defense looking to 
find ways to restore the funding for impact education in the 
2004 budget?
    Dr. Chu. I think we are all dedicated to the same outcome, 
which is that each child of a military family has the 
opportunity for a first-class education wherever he or she may 
go.
    On the specific issue raised, a decision was made by the 
Office of Management and Budget and Department of Education in 
submitting its budget, where those funds reside, that they 
would only seek funds to support impact aid for those children 
of families living on military posts. As you appreciate, the 
children of families living off military posts pay property 
taxes, pay taxes in local communities through the sales tax and 
other instruments.
    This is an old issue where Congress and the executive 
branch have had different views over the years, I recognize. 
Ultimately it is going to be for Congress to decide whether you 
agree with the executive branch proposition in this regard, and 
it is ultimately a Department of Education budget issue in the 
end, because that is where those funds are lodged.
    Senator Dole. I think I have made it clear where I stand. 
Thank you.
    Dr. Chu. I hear you, ma'am. Thank you.
    Senator Chambliss. I think we all understand and take your 
position, Senator Dole.
    We are very pleased to be joined by--I hate to say he is an 
ex officio member, because as far as Senator Nelson and I are 
concerned, Senator Levin and Senator Warner are very official 
parts of this subcommittee, but Senator Warner, we are pleased 
to have you with us.
    Senator Warner. Thank you, Mr. Chairman.
    Senator Chambliss. I will be glad to turn it over to you 
for any questions or comments.
    Senator Warner. Thank you. I would like to take a few 
minutes, if I may, Senator Chambliss, Senator Nelson.
    Gentlemen, the subject which I would like to address today 
is the Air Force Academy. You are aware that I wrote a letter 
to the Secretary regarding my deep and grave concern about this 
problem. Senator Allard joined me on that, and he has worked 
along with me, as Senator Ben Nighthorse Campbell has also. I 
have kept him informed of my views on this.
    I would like to take a few minutes to talk with you about 
this situation, and I do so with a deep sense of humility, 
because I have had over 30 years of responsibility for the 
military academies, over 5 years in the Navy Secretariat during 
the war in Vietnam, and now my 25th year here in the Senate. 
Like my colleagues, I have taken enormous pride in working with 
the young people, men and women, by the hundreds that approach 
each Member of Congress seeking those coveted appointments, so 
the academies are very special to the Congress of the United 
States. They are symbols of recognition all throughout our 
Nation, not only just in the educational sector, but for the 
excellence and the standards that they uphold for the men and 
women of our respective military Services. I really wanted to 
ask just what participation the Secretary of Defense and 
yourself are currently undertaking, and what participation you 
may anticipate to be taking as this investigation unfolds.
    I have received a number of letters on this, and I am going 
to forward to the Secretary of the Air Force and the Secretary 
of Defense several letters which I think are quite pertinent. I 
would urge other Members who are receiving correspondence to 
likewise, within the parameters of permission of people who 
write to us in confidentiality, to share this information, 
because as a Nation, we have to come to grips with this 
problem.
    So I draw on the experience of when I was Secretary of the 
Navy. When we had a major problem with any one of the 
academies, the three Secretaries of Defense under whom I served 
for that period of 5-plus years, at least two of them convened 
the three Service Secretaries together and said, I want a joint 
addressing of this problem.
    Now, for example, one of the issues related to the honor 
codes, and a cheating scandal at another time. Those problems 
just happened. They are facts of life, and we did work as a 
team and make recommendations to the Secretary of Defense. That 
is just a thought that you might entertain as Secretary 
Rumsfeld and you look at this situation.
    In no way do I suggest that the Secretary of the Air Force 
is not handling this thing correctly, but the other Service 
Secretaries have their respective academies, and I happen to 
know from our hearing the other day that one of the other 
academies is now looking into situations comparable to this. It 
is not of the magnitude, but comparable, and I think the policy 
of the Secretary of Defense with regard to this type of offense 
should really be uniform among the three academies.
    So my first question to you is, given that the Department 
of the Air Force is now conducting its own investigation, and I 
presume the Secretary of Defense in response to my letter will 
entertain the Inspector General reviewing the Secretary of the 
Air Force investigation at some appropriate time, and he then 
may decide to institute his own separate investigation, so the 
proper steps are being taken, but was any consideration given 
to transferring the Superintendent and the Commandant of Cadets 
out of their chain of command for such period as these 
investigations are underway, transfer them in such a manner in 
no way to prejudice their rights under the Uniform Code of 
Military Justice, or the eventual determination as to whether 
or not they are in any way in part accountable for these tragic 
situations? Was any consideration given to that?
    Dr. Chu. Senator, let me begin by agreeing with your great 
concern. It is a matter of great concern to the Secretary of 
Defense. I spoke, in fact, to Secretary Roche and General 
Jumper just today again about this situation and how we are 
approaching the very disturbing reports that have been 
received. I do want to say that we would welcome, consistent 
with whatever privacy or confidential restrictions the letters 
to you might impose, any information about specific situations 
to be communicated to us, because one of our challenges is, 
indeed, getting our arms completely around the situation.
    We anticipate receiving both the Air Force report and the 
Inspector General's review before the end of this month. 
Obviously, we would like to receive this just as soon as we 
could. That will be our basis for action, and I think we do not 
wish to do anything that is prejudicial to anyone until that 
set of reports is received and, obviously, what that set of 
reports says, whether it gives us an understanding of what has 
caused this tragic situation, will determine what course of 
action is most appropriate to take.
    Let me, if I might, personally and officially, agree with 
you that the academies are repositories of standards and values 
for the military specifically and society as a whole. The 
alleged conduct is unacceptable. There is no excuse for this 
kind of conduct, and we are determined to get to the bottom of 
this and to take appropriate corrective action.
    Senator Warner. So the issue of a temporary transfer out of 
the direct chain of command was reviewed, and you decided not 
to take that step, is that correct?
    Dr. Chu. I think I would like to emphasize that we have 
considered a wide range of alternatives, that at the moment we 
are staying with leaving everything in place as it is while the 
investigation proceeds. As it concludes, which we expect it to 
conclude in a very short period of time, we will decide what 
action is appropriate.
    Senator Warner. All right. Having conducted some of these 
investigations myself, there is always the question of the 
whole framework of subordinates, not the cadets, but the 
subordinates in that chain of command as they are approached by 
the inspectors and the manner in which they feel free to reply 
to the inquiries by the, now the IG for the Air Force, but for 
the moment I would hope that you would reflect on this.
    Dr. Chu. I will sir, and we appreciate the suggestion.
    Senator Warner. Now, in today's paper--this is The 
Washington Post as of today. Did you see page A2, male and 
female cadets to be separated in dorms?
    Dr. Chu. I have discussed that with both General Jumper and 
Secretary Roche, yes, sir.
    Senator Warner. Two observations on that. First, it seems 
to me before you take actions like this you want to look at the 
totality of the reports and review them, because this is a very 
significant action and the other two academies will have to now 
examine their policies as a consequence of this step, wouldn't 
you think?
    Dr. Chu. I think so, at least from my discussion with 
General Jumper, and I certainly agree with you, and that is why 
in general I would prefer, as I suggested, that we wait for the 
reports so, as you suggest, we understand fully what we have in 
front of us.
    Senator Warner. So in other words, your thinking is in 
parallel with mine that remedial actions should await the 
totality of the report to be examined so as to not let this 
situation persist and to prevent it in the future?
    Dr. Chu. Yes, sir, and I think on the specific issue what 
General Jumper is contemplating has been a bit overdescribed in 
the news article. As I appreciate his description, what he 
would like to do is in the future think about grouping more of 
the women's rooms together for----
    Senator Warner. I do not need to get into those details. I 
just suggest that until the entire report has been reviewed, 
and until the action that I and others request, that the 
Department of Defense IG review the work of the Department of 
the Air Force, it would seem to me premature to take steps like 
this.
    Dr. Chu. I agree, sir.
    Senator Warner. This article infers by the verb tense, the 
two leaders yesterday outlined for the first time steps they 
expect to take in response to, so forth and so forth--I would 
suggest that actions await the orderly review of these reports, 
because as I said from my own experience, this impacts on the 
other academies, which do not have this degree of separation.
    As a matter of fact, with the one exception, Mr. Chairman 
and other members of the committee, the military Services have 
tried the integration of males and females throughout training 
periods. The only exception is one that I fully understand, 
having gone to Parris Island, to some extent myself, but Parris 
Island I think for the first initial period the males and 
females are separated, but elsewhere, throughout the training 
command of the three Services, there is pretty much a degree of 
integration, am I not----
    Dr. Chu. Absolutely, sir, and there is no--again, I do not 
want to get mired in details. There is no intent here to think 
about changing that in any way. What is being contemplated is a 
change in how the dormitory arrangements are structured, a 
little different issue than the training arrangements. But I 
fully agree with you, sir, we ought to wait to take action 
until we have the full reports in front of us, understand the 
problem that we face, its causes as best we can know them, and 
what the preferred remedies will be.
    Senator Warner. Well, then, I conclude. I am very 
encouraged by your responses.
    Dr. Chu. Thank you, sir.
    Senator Warner. I would say that Congress, given its unique 
role with regard to the academies, should be thoroughly 
consulted before decisions of this type should be made with 
respect to addressing this problem, and that you should also be 
prepared to respond as to how such decisions with respect to 
this problem with the Air Force might impact on the other two 
Service academies. Are we clear on that?
    Dr. Chu. Agreed, sir. Thank you.
    Senator Warner. I thank the chair and I thank the ranking 
member. That concludes my remarks.
    Senator Chambliss. Thank you very much, Mr. Chairman, for 
your leadership on this issue and other issues relative to our 
military men and women, and let me just assure you that this 
subcommittee is going to move forward to do everything within 
our jurisdiction to make sure that when appointments to 
academies are made, that the parents of those young men and 
women who receive those appointments are going to take 
continued great comfort in knowing that they are well looked 
after and that these situations are going to be discontinued 
and are going to be taken care of.
    Senator Warner. I thank you for your leadership, Mr. 
Chairman, and that of your Ranking Member.
    Senator Chambliss. I will tell you, too, that Senator 
Nelson and I have already discussed the fact of having the 
three Service Secretaries testify because even though the Air 
Force Academy has this problem now, we have had it at the Naval 
Academy. It has been public. The U.S. Military Academy also is 
subject to having this, and we are going to have all three of 
those gentlemen before us to testify.
    Senator Warner. That is the way we did it in the old days.
    Senator Chambliss. Senator Pryor.
    Senator Pryor. Thank you, Mr. Chairman, and I also share in 
the concerns that Senator Warner just expressed. I have a 
follow-up from Senator Dole's question, and I do not know which 
of the three should best handle this, so I will just throw it 
out openly. You mentioned prescription drug costs and the high 
cost of prescription drugs, and in most health care plans in 
the private sector, that seems to be the leader in the growth 
cost of those plans, and I am certain that is true in the 
military as well, and I would like to know what you are doing.
    You mentioned a systematized mail order, and then more of a 
systematized retail situation, and it seems to me that we as 
the Government and as the military have quite a bit of 
bargaining power when it comes to purchasing these drugs, and I 
would just like to hear your experience and where you think we 
are going with that.
    Dr. Chu. Let me defer to Dr. Winkenwerder.
    Dr. Winkenwerder. I mentioned a couple of our key 
initiatives. There are others. One of the changes we plan to 
implement about this time next year will be the institution of 
a formulary, and with that a change in the benefit that creates 
three tiers: a generic choice, a brand, and then kind of a 
superbrand, and with that high end being the one where members 
would have the most cost-sharing for the most expensive drug. 
Those are very important initiatives.
    Mass purchasing is also very important, and right now, as I 
alluded to, we do joint purchasing with the VA. With our large 
numbers and their large numbers added in together for a 
particular drug or drug class, we feel like we get very good 
deals. In fact, our prices are probably among the very best 
anywhere.
    Senator Pryor. Yes, I think that is true.
    Dr. Winkenwerder. We want to continue that. Our main 
strategies are the assimilation of a national contract for mail 
order retail, continuing what we think is very good cost and 
service in our military treatment facilities, and then the 
institution of a formulary and a tiered copayment system. If we 
get all that done within the next 14 months, we think we will 
have put into place the basic building blocks to better control 
pharmacy costs.
    Senator Pryor. Do you think some of what you are doing may 
work out in the private sector for general health insurance 
plans, or is the military organized in such a way that it just 
really does not transfer out to the private sector?
    Dr. Winkenwerder. Having just come from the private sector 
and managing a large health plan in New England, I can tell you 
what we are trying to do is just what most plans in the private 
sector, the well-run plans, are already doing, but that said, 
even in spite of all that they are doing, I think that they are 
still struggling to stay up with this issue.
    Senator Pryor. Sure.
    Dr. Winkenwerder. New drugs bring great innovations. In 
some cases they save lives and keep people out of hospitals.
    On the other hand, where it is possible for a 
pharmaceutical company to place a very high price on a drug and 
make that work, they do and they will, and so we have a number 
of drugs that are very expensive today, and I think we have 
also learned that drug producer advertising to everybody is 
effective, causing people to want to go to their doctor and get 
a drug to treat something.
    In some cases that is needed. In other cases it is probably 
not needed.
    Senator Pryor. Right.
    Dr. Winkenwerder. Part of our program also is to educate 
doctors for cost-effective prescribing and also to educate our 
own service members in terms of things that they can get more 
cheaply for the same cost or lower.
    Senator Pryor. Do you internally, with the people that 
access the program, push generics with them?
    Dr. Winkenwerder. Absolutely. Absolutely we do.
    Senator Pryor. Do you feel like, even with the new drugs 
that are coming online, that are much more expensive--some are 
much more expensive, not all, but for those that are much more 
expensive, do you still feel like you are getting the best, or 
about the best price you can possibly get for those?
    Dr. Winkenwerder. We are in our military treatment 
facilities. We have that authority in law to extend that both 
to our retail and the mail order, but the actual transition to 
using that pricing power awaits the transition of this whole 
program. It takes quite a lot of work to set these national 
contracts up, but when they go into effect, we plan to use that 
pricing power.
    Senator Pryor. Great. Dr. Chu, did you have something to 
add? It looked like you were about to say something there a 
minute ago.
    Dr. Chu. Yes. I realize that some of this will be a change 
for some of our military members in terms of how we do things. 
We think it is necessary in order to get people the right drug 
for their disease problem. As Dr. Winkenwerder indicates, the 
advertising may sometimes lead you to something inappropriate 
that may have side effects that are not really the best for 
your particular case.
    We do review--the establishment of this formula is the 
product of a review by our best minds in terms of what is the 
right drug for your problem, and I think channeling our 
patients into the right place is ultimately our objective, 
because in the end it is their health care status we care most 
about.
    Senator Pryor. Right. That is all I have, Mr. Chairman.
    Senator Chambliss. Dr. Winkenwerder, probably the most 
consistent complaint I get from personnel and their families 
when I have the opportunity to visit with them is the issue of 
TRICARE, and it seems that TRICARE Prime has answered a lot of 
the concerns that we have had since the original implementation 
of TRICARE, but the standard TRICARE program appears to 
continue to have difficulties with respect to providers, and 
that is primarily due to the low reimbursement rates. Can you 
tell us where we are going as we are looking at a point in our 
history now where we have so many spouses who have been 
deployed and separated from their families. One concern we do 
not want them to have is the fact that their families are going 
to have access to good quality medical care. Can you tell us 
where we are with respect to ensuring that providers are going 
to be there for TRICARE Standard participants, and what are we 
doing with respect to reimbursement rates?
    Dr. Winkenwerder. Yes, sir. Let me just touch on again the 
issue that Dr. Chu raised, the change that we are implementing 
as of now for the reservists, because we believe this is a very 
important change.
    Senator Chambliss. Before you leave that, you said 
reservists. What about guardsmen?
    Dr. Winkenwerder. Guardsmen would also be covered--yes.
    Dr. Chu. May I--if they are called to active duty for more 
than 30 days.
    Dr. Winkenwerder. Correct. If they are called to active 
duty for more than 30 days they are now eligible for TRICARE 
Prime. There was a 180-day or 179-day hurdle that people had to 
get over until now, so that caused that group of people to have 
to utilize Standard as a benefit, and now they will be able to 
utilize Prime, which is a better benefit in terms of its not 
having copayments and deductibles and so forth associated with 
it, so that is a real positive, we think, for the reservists 
and the guardsmen.
    The other change relates to this, resides with, so we have 
had in all the call-ups, frankly maybe it is self-imposed, but 
we have had some confusion about what does that mean for the 
family, having to reside with a service member, and did that 
mean that they had to actually be residing with them at the 
mobilization site or when they got deployed somewhere.
    No. What it means is, if a serviceman or servicewoman is 
from South Dakota and then goes to Nebraska to mobilize, they 
do not have to move. They are eligible right there in South 
Dakota, where they have been living with their family, and then 
they could get into TRICARE Prime at that place. That will 
improve things.
    Now, as to the issue of TRICARE Standard, what are we 
doing? We do face some challenges. We have about 2.5 million 
people. It is an entitlement, so people have eligibility for 
this benefit, but one of our challenges, we do not know who 
those individuals are. We do not require an annual, or some 
kind of, enrollment into Standard. It is something they could 
choose to use at any time, and that poses some challenges.
    There is also the challenge you mentioned of payment rates, 
and ensuring that the doctors who would care for these 
individuals are paid sufficiently. I think that was 
particularly a concern here recently when Medicare was looking 
at reducing payment rates to providers by another, whatever it 
was, 4.5 percent, and it ended up that a change was made to 
increase it slightly. We believe that helps us as well, because 
our payment rate is tied to Medicare, so that is a concern.
    It is also a concern, without knowing who those 
beneficiaries are, our ability to communicate with them and 
make them aware of their benefits, make them aware of where 
doctors are located so as to ease any access to care issues 
that they might have.
    So the bottom line is, we are going to be taking a look at 
that whole TRICARE Standard. I am assembling a group of people 
to provide a report to me that I will in turn share with you 
and Members of Congress about what we need to do to improve 
TRICARE Standard, making some changes in it that will better 
hit the mark.
    Senator Chambliss. What is your time line for that report?
    Dr. Winkenwerder. I think it is weeks to months. We are not 
talking next year. I have asked for this to be done promptly.
    Secretary Hall. Senator, can I add one thing to that? On 
behalf of the Guard and Reserve, after September 11 and before 
I got to this job, the TRICARE demonstration project for our 
Guard and Reserve was implemented, and it basically said that 
for TRICARE Standard and Extra, what we will do for our 
guardsmen and reservists recalled, we will waive the family 
deductible part for you, the $300, we will also waive the 
requirement for nonavailability statements to have to go out, 
and third, we will provide up to 115 percent of pay to 
providers who are not in the system, so that greatly assisted 
them.
    The next thing we did, not tied directly to that, but which 
is in effect today, upon demobilization, recognize that as 
guardsmen and reservists you might need some time to transition 
to your civilian health care plan. We allowed up to 60 days for 
a segment of the people to transition, for others that had 
served a longer time on active duty, 120 days, so that has 
provided a lot of flexibility for our guardsmen and reservists.
    We have extended that demonstration project for the current 
mobilization so that our guardsmen and reservists and their 
families will be taken care of. That has been well-received 
within that community.
    Dr. Winkenwerder. Just to be clear about that, even though 
we have made these new changes that I described earlier for 
TRICARE Prime, we are going to extend the demonstration project 
so we do not adversely affect anyone who is now taking 
advantage of that demonstration project through until its end, 
which is in November 2003, so we implemented that last year and 
will continue it until it ends.
    Senator Chambliss. Senator Nelson.
    Senator Ben Nelson. Thank you, Mr. Chairman.
    Dr. Winkenwerder, following the conclusion of the Gulf War, 
many service members and veterans experienced a variety of 
different kinds of medical illnesses, the causes of which have 
really never been determined. The National Defense 
Authorization Act for Fiscal Year 1998 requires the Secretary 
of Defense to establish a system to assess the medical 
condition of members of the armed services, including members 
of the Reserve components, who were deployed outside the United 
States on a contingency operation.
    This system is to include the use of predeployment medical 
examinations and the drawing of blood samples to record the 
medical condition of service members before their deployment, 
and then any changes in their medical condition during their 
deployment.
    Does every deploying service member receive a complete 
predeployment medical examination at the present time?
    Dr. Winkenwerder. Every member of the armed services who is 
deploying should receive a health assessment. That is how we 
have interpreted the law, and we believe that is the 
appropriate way to interpret the law. A full laying-on-the-
hands physical examination, we believe, is probably not the 
most appropriate or most effective way to screen those 
individuals.
    We believe--and we have a questionnaire which we are glad 
to share with you that we use, where people are very carefully 
questioned about their current health status. All questions are 
asked to make sure they are up to date with their 
immunizations, and that their blood sample has been given. If 
it has not been given, we would obtain it at that time.
    So it is a careful review. If there is any concern on the 
part of the service member about a current or recent problem, 
he or she then would receive a more comprehensive and complete 
examination, and the same kind of thing is done on the back end 
of the deployment.
    Senator Ben Nelson. Then is blood drawn on every individual 
in that case?
    Dr. Winkenwerder. It would have either been drawn as a 
matter of routine--we screen people every year, or 2 years for 
HIV, so that blood has already been drawn. If, again, it is out 
of date, then it should be drawn at that predeployment 
assessment time.
    Senator Ben Nelson. Then I assume that sample is retained 
so that if there needs to be further testing in the future it 
is available for that type of testing.
    Dr. Winkenwerder. That is exactly right.
    Senator Ben Nelson. Not just about HIV, but other----
    Dr. Winkenwerder. That is the purpose for maintaining it.
    Senator Ben Nelson. What you are doing is establishing a 
medical baseline, and then any variation from that would be 
more easily chronicled as the additional tests at a later date 
are taken.
    Dr. Winkenwerder. That is exactly right, and that was a big 
problem in the Gulf War. We really did not know the baseline 
health status of people, so it was very difficult to compare 
when they came back, as to what their status had been before 
they left. We believe we are in a much better position today 
with respect to that baseline health information.
    Senator Ben Nelson. Thank you, doctor.
    Dr. Winkenwerder. Thank you.
    Senator Ben Nelson. Dr. Chu, in your prepared statement you 
describe the DOD screening program designed to preclude, 
attempting to preclude, conflicts between ready Reserve 
members' military mobilization obligations and their civilian 
employment, and although screening normally ceases once a 
mobilization is declared, you indicate that DOD has established 
a special exemption process to address the circumstances where 
certain Federal and non-Federal civilian employees were 
critically needed in their civilian occupations in response, 
for example, to the terrorist attacks on the World Trade Center 
and the Pentagon.
    Now, obviously, this is consistent with our concerns about 
mobilizing first responders, the firefighters, police officers, 
paramedics, and others, who would be needed for home town 
defense in the case of a terrorist attack. Can you give us some 
examples of the kinds of civilian occupations that are 
considered for this special exemption? I have named a few, but 
are there some others?
    Dr. Chu. Yes, sir, I would be delighted to.
    First of all, let me go back, as you have suggested, to the 
underlying system, which has been available since 1979, and 
that is that you can screen your employees, designate someone 
as key or critical, essential--various terminology is used.
    Senator Ben Nelson. That is not new.
    Dr. Chu. That is not new. That has been on the books for a 
long time. I should acknowledge that I think some employers or 
employees have been a little reluctant to use that system, 
because it does require the individual member of the Guard or 
Reserve to transfer out and into an essentially inactive 
status. It makes it much harder to earn your 20 good years for 
retirement, so it does require the individual to make a choice. 
Are you available for mobilization, which is the basic compact 
between us and that member? Would you respond when the Nation 
calls? Or are you in a position that you cannot respond? If you 
cannot respond, you need to acknowledge that up front--that is 
the whole spirit of the system--and put yourself in a different 
situation.
    It does not mean you can't come back to Reserve service at 
a later date. It does not mean you cannot take courses or do 
certain other things that would still accumulate you some 
credits.
    We did recognize on September 11, 2001, this is very 
different from before. We want to be sensitive to those 
differences across the board. I have been impressed at the good 
sense of employers, both Federal and non-Federal, in terms of 
whom they ask to be excused. We have had just over 200 formal 
applications in that period of time.
    We have granted about 50 exemptions in that period of 
time--granted, there has been a large number of delays. We work 
with each case. This is a case-by-case process, in which we 
understand the individual's situation, the military 
department's situation, et cetera, and it boils down in the end 
to balancing the competing needs of the Nation against the 
particular Federal or non-Federal agency.
    If there is a compelling civil need--the key linguist at an 
intelligence agency, for example--we defer to that civilian 
need, if it really is weightier than the military need.
    In many cases, what really works for a civilian 
organization is delay, enough time so that the organization can 
identify the replacement, train that person, put them in place, 
and continue to function. I indicated with these figures, that 
has been the most frequent outcome of these adjudications, and 
I think that system is working.
    I think the concerns of first responders, while 
meritorious, reflect the worst case. If we mobilized the entire 
Selected Reserve, that would be close to 900,000 people. I do 
not think anyone believes we are going to those kinds of 
numbers. I think we do have a process that will be sensitive to 
local needs, should a local agency find itself with everybody 
gone, as the extreme situation. We are sensitive to that.
    Senator Ben Nelson. It would be difficult to be home alone, 
so I appreciate that reaction.
    Secretary Hall. Could I add just one comment to that? Of 
that group of people, the 209 or so that have asked for 
exemptions, we have further broken that down to look at first 
responders and have said, how many of that group are first 
responders, firemen, policemen, and only about 10 percent of 
that group qualified. So, not a large amount of the first 
responders, the employers, and the individuals, have actually 
asked for exemptions under that authority. We wanted to take a 
particular look at those first responders, and it is only about 
10 percent.
    Senator Ben Nelson. We could be in a situation, though, 
where they would not ask for the exemption, and you could 
create a critical shortage back in the home town because of the 
number of firefighters and/or police officers who are also part 
of the Guard, or other first responders.
    Dr. Chu. I think, sir, that requires us--and we are 
proposing to take that step to make it mandatory that you tell 
us who your employer is. Under current law, we cannot mandate 
that information. It is not so we go back to the employer and 
check up on you. It is so that we can understand exactly what 
you propose, what is the dimension of the issue, do we need to 
take any special steps in this regard, do we need to guard 
against any untoward outcomes? We would look forward to this 
subcommittee's support for that proposal, because I think it is 
critical to managing this issue going forward.
    But we are very comfortable with where we are. We think we 
have good safeguards in place. We think we will be careful 
about any unfortunate outcome as some fear.
    Senator Ben Nelson. Thank you. Thank you, Mr. Chairman.
    Senator Chambliss. Mr. Pryor, do you have anything else?
    Senator Pryor. I do not, thank you.
    Senator Chambliss. All right, gentlemen. We appreciate your 
testimony before this subcommittee, and we thank you and look 
forward to continuing to work with you.
    Dr. Chu. Thank you, Mr. Chairman.
    Senator Chambliss. I would like to welcome our next panel, 
which consists of the personnel chiefs of our respective 
military Services. With us today is Lieutenant General John Le 
Moyne, United States Army, Deputy Chief of Staff for Personnel; 
Vice Admiral Gerald Hoewing, United States Navy, Chief of Naval 
Personnel; Lieutenant General Garry Parks, United States Marine 
Corps, Deputy Chief of Staff for Manpower and Reserve Affairs; 
and Lieutenant General Richard Brown, United States Air Force, 
Deputy Chief of Staff for Personnel. Thank you all for being 
here.
    We have received your written statements. They will be 
incorporated into the record. We look forward to your testimony 
today, and we would appreciate a brief summary of any comments 
you want to make. General Le Moyne, we will start with you.

 STATEMENT OF LT. GEN. JOHN M. Le MOYNE, USA, DEPUTY CHIEF OF 
            STAFF FOR PERSONNEL, UNITED STATES ARMY

    General Le Moyne. Mr. Chairman, thank you very much, 
Senator Nelson, sir, it was good to see you this morning. Sir, 
nice to see you here also. Thank you for this opportunity to 
give you an update on America's Army, and I would ask that you 
do accept my written statement for the record, and let me 
start, sir, by expressing our thanks to you for your assistance 
in the major successes in the human resource environment of 
your Army this past year.
    Right now, sir, you have over 198,000 soldiers deployed in 
forward stations in 120 countries. Soldiers from both the 
active and Reserve components remain on point for our Nation, 
and let me assure you, sir, that they are committed, they are 
disciplined, and they are focused on the mission that is at 
hand.
    Today's threats to security and our commitments throughout 
the world highlight the critical importance of manning our 
forces. This manning begins with recruiting. We have been very 
successful in the past 3 years in both numbers and the quality 
of our new soldiers. In addition, our retention goals in all 
categories reflect the same success.
    This year, for the fourth year in a row, we are on track to 
fulfill both the accession mission and our retention goal. At 
the same time, our attrition rates continue to show 
improvements, and officer attrition is at the lowest in over 15 
years.
    Sir, the Army appreciates Congress' continued support for 
our soldiers and our families. Survey after survey reflects the 
positive aspects of the congressional initiatives to increase 
our military pay, benefits, and the efforts to improve the 
overall well-being of our soldiers and their families. These 
increases not only improve quality of life and retention, but 
greatly embrace our recruiting effort by making us more 
competitive with the private sector. Recruiting will continue 
to be our first priority for manning the force in the future.
    The resources, sir, that you have provided to the Army for 
these missions are some of the most important reasons for our 
recent successes. In the past, when manpower programs were 
successful, resources were cut to the point of hurting manning 
efforts. Together, sir, we need to avoid this pitfall, and 
carefully manage our resources to ensure the long-term 
continued success of our volunteer force.
    Sir, the Army is proud of our progress, we are grateful for 
the strong congressional support that you have given us to help 
us offer these opportunities for America's youth. We ask for 
your continued support and assistance as we demonstrate our 
commitment to fulfilling the manpower needs of the Army, 
active, Guard, Reserve, Department of the Army civilians, and 
our retirees.
    Sir, thank you for the opportunity to appear before you 
today. I look forward to your questions.
    [The prepared statement of General Le Moyne follows:]

          Prepared Statement by Lt. Gen. John M. Le Moyne, USA

    Mr. Chairman and distinguished members of the subcommittee, on 
behalf of the men and women of the United States Army, thank you for 
this opportunity to appear before this subcommittee today to give you a 
military personnel overview of America's Army. I would like to start by 
publicly expressing our thanks for your support and assistance in the 
major successes and achievements in the human resources environment 
this past year.
    Since before the birth of the Nation, American soldiers have 
instilled hope in a noble dream of liberty. Magnificent in their 
selfless service, long in their sense of duty, and deep in their 
commitment to honor, soldiers have kept the United States the land of 
the free and the home of the brave. This is our legacy. While helping 
to fight the global war on terrorism, the Army is in the midst of a 
profound transformation. Personnel transformation remains our constant 
imperative--today, tomorrow, and for the future.
    After 3\1/2\ years of undiminished support from the administration 
and Congress, and the incredible dedication of soldiers and Department 
of the Army civilians, we have begun to deliver the Army's Vision. With 
continued strong support, we will win the war against global terrorism, 
meet our obligations to our friends and allies, remain ready to prevail 
over the unpredictable, and transform ourselves for decisive victories 
on future battlefields.
    Today, more than 198,000 soldiers remain deployed and forward 
stationed in 120 countries around the globe, conducting operations and 
training with our friends and allies. Soldiers from both the active and 
the Reserve component have remained ``on point'' for the Nation.

                              END STRENGTH

    While the congressionally-mandated fiscal year 2002 active Army end 
strength was 480,000, the Army exceeded this end strength target, as 
well as the budgeted average strength of 474,000 manyears. The Army 
finished fiscal year 2002 with an end strength of 486,543 (78,158 
officers, 404,305 enlisted, and 4,080 cadets). Stop loss accounted for 
2,217 of the total fiscal year 2002 end strength. Our average strength 
was 482,733 manyears. Stop loss accounted for 827 of the total fiscal 
year 2002 manyears. The Army recruited 79,585 new soldiers and met its 
accession quality marks. The Army exceeded its retention goals by 1,437 
for initial term, mid career, and career categories and 2,961 for end 
term of service category.

                               RECRUITING

    Today's threats to security and military commitments throughout the 
world highlight the critical importance of manning our Army, which 
begins with recruiting. The Army continues to recruit in a tough 
environment. The private and public sectors, to include post-secondary 
educational institutions, are all vying for high quality men and women. 
Additionally, the propensity of America's youth to enlist is at one of 
the lowest levels since we started measuring. Despite these challenges, 
Army recruiting was extremely successful for the past 3 years. The 
resources provided to the Army for this important mission are some of 
the most important reasons for our recent success. In the past when 
recruiting was successful, resources were diminished to the point of 
hurting the recruiting effort. Together we need to avoid this pitfall 
and manage the resources to ensure continued success and economy of 
resources. Recruiting will continue to be our first priority for 
manning the force.
    The Army's recruiting requirements are developed from projected 
needs based on a steady state of 480,000 soldiers. Even with the 
slowing economy, youth unemployment remains relatively steady. This 
makes for a very tight labor market. The Army must recruit far more 
than any other Service. To make this possible, the Army must continue 
to be equipped and resourced to succeed in this task. Properly 
resourced, the Army will meet its recruiting goals.
    For the third year in a row, the Army made mission and met or 
exceeded all three DOD quality goals in fiscal year 2002 with 91.1 
percent having a High School Diploma, 68.0 percent scoring in the top 
50th percentile on the Armed Forces Qualification Test (categories I-
IIIA) and only 1.4 percent scoring in category IV (26th to 30th 
percentile).
    To fulfill the fiscal year 2003 enlisted accession mission, the 
active component must write 71,200 net contracts to cover the 73,800 
accession requirements and build an adequate Delayed Entry Program 
(DEP) of 35 percent to start fiscal year 2004. The lower contract 
requirement is because we had a large DEP going into this year and we 
want to accomplish that again. The Army Reserve must access 42,400, and 
the Army National Guard 62,000. We are on track to meet our goals. We 
are fully engaged to meet this year's accession missions and believe we 
can accomplish all three components' missions.
    We are implementing initiatives to expand the recruiting market in 
cost effective ways, without degrading the quality of the force. 
Hispanics are underrepresented in the Army relative to their share of 
the U.S. population. We made efforts through marketing and our 
recruiters to expand this market and have seen improvement. Enlistments 
from the Hispanic population increased from 9.1 percent of the Army in 
fiscal year 2000 to 9.7 percent in fiscal year 2001 and 11.5 percent in 
fiscal year 2002.
    We implemented the ``College First'' test program to further 
increase our recruitment from the bound-for college market. As of 13 
February 2003, 1,393 college students contracted to enlist in the Army 
after they finish college through this program. You granted us changes 
to the College First program for fiscal year 2003 that will improve the 
test and the ability to determine expansion to the bound-for college 
market.
    You gave us the opportunity to provide a 15-month enlistment option 
as part of the National Call to Service. We look forward to executing 
this program in fiscal year 2004 to help penetrate new markets and 
increase the participation of prior-service soldiers in the Reserves 
and provide motivated young men and women for continued volunteer 
service to our Nation. We will target this enlistment option at the 
college and quality markets. This option will be offered to 24 of our 
military occupational skills.
    Additionally, you directed us to conduct a test of contract 
recruiters replacing active duty recruiters in 100 recruiting 
companies. The Army is implementing this initiative. The 10 companies 
are on mission and will run the full test from fiscal year 2003 through 
fiscal year 2007.
    We have awarded this pilot program to two independent contractors 
each receiving contracts to perform the full complement of recruiting 
services, including prospecting, selling, and pre-qualifying 
prospective applicants for the Regular Army and Army Reserve, and 
ensuring that contracted applicants ship to their initial entry 
training. We estimate it will take at least 18 months of production 
evaluation to make an accurate assessment on the effectiveness of this 
program.
    The Army placed 300 Corporal Recruiters on recruiting duty in 1999 
and this program has brought a total number of on-production recruits 
to 6,161. This program has proven effective by using young leaders to 
recruit young soldiers. The Special Forces Candidate ``Off the Street'' 
Enlistment Initiative will continue its highly successful program in 
fiscal year 2003. This effort seeks to enlist motivated, highly 
qualified, and dedicated individuals desiring the adventure and mission 
focus inherent in the U.S. Army Special Operations Forces. In fiscal 
year 2002, the Army exceeded its assigned mission of 400 applicants, 
enlisting 465 candidates. Capitalizing on the success of this program, 
the fiscal year 2003 mission has increased to 600.
    Army University Access Online offers soldiers access to a variety 
of on-line, post-secondary programs and related educational services. 
Hyperlink ``http://www.eArmy.U.com'' www.eArmyU.com is a comprehensive 
web-portal widely accessible to soldiers, including those in 
Afghanistan, Bosnia, and Kuwait.
    Competition for America's young people is intense. The enlistment 
incentives we offer appeal to the dominant buying motive of young 
people and allow us to fill the skills most critical to our needs at 
the time we need them most. The flexibility and improvements you 
provided to our incentives in the past have helped us turn the corner 
regarding recruiting.
    Last year we achieved 99.9 percent MOS accuracy, which was 
significantly better than any previous year. The combination of all 
incentives will help fill critical specialties as the Army continues 
its personnel transformation. The combined Montgomery GI Bill and Army 
College Fund, along with the Army's partnership with education, remain 
excellent programs for Army recruiting and an investment in America's 
future. While the actions we have taken will help alleviate some of the 
recruiting difficulties, we also know more work has to be done to meet 
future missions. We must continue to improve the recruiting efforts 
from developing a stable, robust resourcing plan to improving our core 
business practices. We must capitalize on the dramatic improvements in 
technology from the Internet to telecommunications and software. We 
must improve our marketing and advertising by adopting the industry's 
best business practices and seeking the most efficient use of our 
advertising dollars. As we improve our efficiency, we are able to 
reduce the size of our recruiting force and return seasoned soldiers to 
other parts of the Army that need their skills and leadership. We are 
in the first year of a 3-year plan of reducing Army recruiters by 1,166 
positions.
    Business practices, incentives and advertising are a part of 
recruiting, but our most valuable resource is our recruiters. Day in 
and day out, our Army recruiters 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. We owe it to these recruiters and their families to provide 
them the resources, training, and quality of life that will enable them 
to succeed.
    The Army appreciates Congress's continued support for its 
recruiting programs and for improving the well-being of our recruiting 
force. We are grateful for recent congressional initiatives to increase 
military pay and benefits and improve the overall well-being of our 
soldiers. We believe these increases will not only improve quality of 
life and retention, but will greatly enhance our recruiting effort, 
making us more competitive with private sector employers.

                           ENLISTED RETENTION

    The Army's retention program continues to succeed in a demanding 
environment. Our program is focused on sustaining a trained and ready 
force. Our retention efforts 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, though significantly reduced in fiscal year 2003, 
continues to provide this advantage, which ensures a robust and healthy 
retention program.
    Over the past decade, retention has played an essential role in 
sustaining manning levels necessary to support our force requirements. 
This past year was an excellent example of the delicate balance between 
our recruiting and retention efforts. Through a concerted effort by the 
Department of the Army, field commanders and career counselors, the 
Army not only achieved it's fiscal year 2002 recruiting mission, but 
finished the year by retaining 1437 soldiers above mission for a 
reenlistment percentage of 102.5 percent. Our Reserve component 
transition results in fiscal year 2002 were equally successful. We 
transferred 9,545 active component soldiers into Reserve component (RC) 
units against a mission of 9,500 for a 100.4 percent success rate.
    This year's retention mission of 54,000 soldiers requires us to 
retain 67 percent of all separating soldiers. Although the annual 
mission is less than the 56,000 soldiers who reenlisted last year, the 
decreasing separating soldier population will make the annual mission 
just as difficult.
    At the heart of our retention mission, we concentrate efforts on 
our first-term and mid-career soldiers. The foundation for the career 
force is built upon these two mission categories. Retention decisions 
are influenced in significantly different ways between these two 
groups. First-term soldiers cite educational opportunities and 
availability of civilian employment as reasons for remaining in the 
Army or separating. Mid-career soldiers are affected more by health 
care, housing, compensation, and availability of commissary, exchange, 
and other post facilities. Consistent with these influencing factors, a 
higher percentage of mid-career soldiers are married, although the 
number of married first-term soldiers continues to increase. We closely 
monitor both groups for change in reenlistment behaviors, as they are 
the keys to continuing a successful retention program. Our results tell 
their own positive story. First-term retention rates during fiscal year 
2000, fiscal year 2001, and fiscal year 2002 exceeded the 52 percent 
historic achievement levels. Mid-careerists are staying at a roughly 78 
percent rate, again well above early to mid-1990s pre-draw down levels. 
At the senior end of the spectrum, 98 percent of all non-retirement-
eligible career soldiers continue to Stay Army.
    The ultimate success of our retention program is dependent on many 
internal and external factors. External factors beyond our ability to 
influence include: the economy, the overall job market, and the world 
situation. While the economy has not been the strongest, our soldiers 
continue to be highly marketable. The global war on terrorism and other 
missions are also key factors. We are well aware that these factors 
play heavily on the minds of soldiers when it comes time to make 
reenlistment decisions. Our force today is increasingly family 
oriented. Our current Army is 52 percent married. Army spouses are 
equally affected by these external factors and have great influence 
over reenlistment decisions.
    The internal factors that we can influence include: benefit 
packages, promotions, the number of deployments, adequate housing, 
responsive and accessible health care, attractive incentive packages, 
and reenlistment bonuses. Not all soldiers react the same to these 
factors. These factors challenge our commanders and their retention 
non-commissioned officers (NCOs) to provide incentives to qualified 
soldiers that encourage them to remain as part of our Army. In order to 
address the total spectrum of soldier and family member needs, our 
incentive programs provide both monetary and non-monetary inducements 
to qualified soldiers looking to reenlist. These programs include: the 
Selective Reenlistment Bonus, or SRB, offers money 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, is a sub-program of the SRB that focuses on 11 
installations within the continental United States and Korea where 
pockets of shortages have historically existed in certain military 
occupational specialties (MOS). The TSRB 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. The Critical Skills Retention Bonus or 
CSRB offers soldiers in critical MOS a bonus at 18 to 24 years of 
service. The CSRB pays a lump sum bonus to career soldiers serving in 
MOS that have projected shortages and low continuation rates. Special 
Forces Sergeants First Class and Master Sergeants are currently 
receiving the CSRB. This program has experienced great success and has 
significantly benefited our Special Forces soldiers who are on the 
front line in the war on terrorism.
    All of these programs, paid from the same limited budget, play key 
roles in force alignment efforts to overcome or prevent present 
shortfalls of mid-grade and senior NCOs that would negatively affect 
operational readiness of our force. We have used the SRB/CSRB program 
with tremendous success to increase reenlistments in such critical 
specialties such as Infantry, Armor, 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 
tours, and CONUS station of choice. Training and retraining options 
offer qualified soldiers yet another alternative incentive to reenlist. 
By careful management of both the monetary and non-monetary incentive 
programs, we have achieved a cost-effective program that has proven 
itself in sustaining the Army's career force.
    The Army's retention program today is healthy. Well into the 2nd 
quarter of fiscal year 2003, we have reenlisted 105 percent of our 
year-to-date mission and are on track to make the 54,000-reenlistment 
mission required to sustain a 480,000 soldier Army. We likewise expect 
to exceed our RC transition mission again this year. In fiscal year 
2003 year-to-date, we have transferred 3,008 soldiers into RC units 
against a mission of 2,766 for a rate of 109 percent. The Army is 
retaining the best qualified, and correct number of, soldiers necessary 
to maintain the highest levels of readiness that we have ever 
experienced. This is due in large part to the great support from 
Congress to protect existing incentive programs, and the continued 
involvement of Army leaders at all levels.

                           OFFICER RETENTION

    The Army today has the lowest officer attrition rate since 1997. It 
is anticipated that the Army will finish fiscal year 2003 above our 
officer budgeted end strength of 77,800. Retention in all Army 
Competitive Category (ACC) officer ranks, from lieutenant to colonel, 
improved in fiscal year 2002. Specifically, the ACC captain due-course 
loss rate was 11 percent in fiscal year 2002. This represents a 
significant reduction over the captain due-course loss rate of 12.5 
percent in fiscal year 2001 and a return to the 11 percent loss rate in 
fiscal year 1999. This results in an overall company grade loss rate 
improvement from 8.1 percent in fiscal year 2001 to 6.5 percent in 
fiscal year 2002. Over the same period the major loss rate fell from 
3.4 percent to 2.7 percent, the lieutenant colonel loss rate fell from 
14.1 percent to 10.8 percent and the colonel loss rate fell from 19.0 
percent to 15.9 percent. While the inventory of company grade officers 
exceeds requirements, minor shortages still remain at the field grade 
ranks.
    The Army has successfully used increased accessions and enhanced 
promotion rates to maintain manning levels and overcome the impact of 
under-accessed cohorts during the draw down years. The Army steadily 
increased basic branch accessions beginning in fiscal year 2000 with 
4,000, capping at 4,500 in fiscal year 2003, to build a sustainable 
inventory to support captain requirements. The Army has been promoting 
to captain at or above the DOPMA goal of 90 percent since fiscal year 
1995. Higher than DOPMA promotion rates will continue for the next 2 to 
4 years depending on attrition behavior.
    Army initiatives to improve retention among its warrant officer 
AH64 (Apache) pilot population have stabilized attrition trends 
resulting in an attrition reduction from 12.9 percent in fiscal year 
1997 to 7.5 percent in fiscal year 2002. Since fiscal year 1999 we have 
offered Aviation Continuation Pay to 1,765 eligible warrant officers, 
of which 1,590 accepted (90 percent take rate). Additionally, we have 
recalled 272 warrant officer pilots since 1997, and have five Apache 
pilots serving on active duty in selective continuation status. The 
Warrant Officer Corps is healthy in the aggregate with inventory 
slightly exceeding the budgeted end strength of 11,800.

                          LEADERSHIP/TRAINING

    The Army is a profession--the Profession of Arms. The development 
of each member of the Army is the foundation of lifelong devotion to 
duty--while in uniform and upon returning to the civilian sector. 
Profession of Arms must remain firmly grounded in constitutional values 
and constantly change to preserve its competitive advantage in an 
evolving strategic environment. At all levels, our military and 
civilian leaders--must apply their professional knowledge in 
increasingly varied and unique situations that are characteristic of 
today's strategic environment. Ultimately, we must grow professional 
Army leaders who provide judgments founded on long experience and 
proven professional expertise. This capacity is developed only through 
a lifetime of education and dedicated service--in peace and in war.
    Soldiers serve the Nation with the full realization that their duty 
may require them to make the supreme sacrifice for others among their 
ranks. Soldiers fighting the war on terrorism today, those who will 
fight our future wars, and those who have fought in our past wars are 
professional soldiers and a precious national asset. To ensure we 
remain the greatest land power in the world defending our Nation, the 
Army and the Nation rely upon our soldiers' unique and hard-earned 
experiences and skills. To develop the operational skills required to 
defend the Nation, training must remain our number one priority.
    The evolving strategic environment, the gravity of our 
responsibilities, and the broad range of tasks the Army performs 
require us to review and update the way we educate, train, and grow 
professional warfighters. The Army's strategic responsibilities to the 
Nation and Combatant Commanders now embrace a wider range of missions. 
Those missions present our leaders with even greater challenges than 
previously experienced. Therefore, leader development is the lifeblood 
of the profession. It is the deliberate, progressive, and continuous 
process that trains and grows soldiers and civilians into competent, 
confident, self-aware, and decisive leaders prepared for the challenges 
of the 21st century in combined arms, joint, multinational, and 
interagency operations.
    In June 2000, we convened the Army Training and Leader Development 
Panel (ATLDP) to assess the ability of current training and leader 
development systems and policies to enhance these required skills of 
soldiers and civilian leaders. In May 2001, the Army Training and 
Leader Development Panel Phase I (Officer Study) identified strategic 
imperatives and recommendations. From those, we validated the 
requirement to transform our Officer Education System (OES)--from the 
Officer Basic Course through the Command and General Staff Officer 
Course. Additionally, the panel reconfirmed the value of Joint 
Professional Military Education II (JPME II) in preparing our leaders 
for joint assignments.
    ATLDP Phase I (Officer Study) identified three high-payoff 
institutional training and education initiatives for lieutenants, 
captains, and majors. The first of these is the Basic Officer Leader 
Course (BOLC). BOLC will provide a tough, standardized, graduate-level, 
small-unit leadership experience for newly commissioned officers. The 
second of these initiatives is the Combined Arms Staff Course (CASC) 
for staff officers, and the Combined Arms Battle Command Course (CABCC) 
for company commanders. Both courses will capitalize on advanced 
distributed learning and intensive resident training methods. The third 
initiative, Intermediate Level Education (ILE), will provide all majors 
with the same common core of operational instruction, and it will 
provide additional educational opportunities that are tailored to the 
officer's specific career field, branch, or functional area. Beyond 
ILE, Army officers continue to attend Joint or Senior Service Colleges 
to develop leader skills and knowledge appropriate to the operational 
and strategic levels of the profession.
    Completed in May 2002, the ATLDP Phase II (NCO Study) resulted in 
findings and recommendations--Army culture, NCO Education Systems 
(NCOES), training, systems approach to training, training and leader 
development model, and lifelong learning. Among others, the ATLDP Phase 
II recommended building new training and leader development tools for 
NCOs to replace current methods, as required. The ATLDP Phase III 
(Warrant Officer Study) culminated with recommendations to clarify the 
warrant officer's unique role in the Army and improve the Warrant 
Officer Education System (WOES) to ensure timely training and 
promotion.
    The Army Civilian Study is Phase IV of the largest self-assessment 
ever done by the Army. Completed in January 2003, the Army Civilian 
Study panel's purpose was to identify training and leader development 
requirements for current and future Army civilians. The panel 
emphasized Army civilians are part of the total force--active, Reserve, 
Guard, retirees, and family members--and serve to support soldiers. The 
study concludes that growing civilian leaders has fallen short of the 
Army Plan that states the Army requirement with respect to people is to 
``Train soldiers and civilians to grow them into leaders through 
training and leader development programs.'' The study also concludes 
that Army policies are out of balance with the expectations of Army 
civilians. It believes that the future environment, in which Army 
civilians will operate, will require a higher level of adaptability and 
self-awareness.
    The study culminated with recommendations and imperatives 
surrounding accountability--we need to make developing civilians a high 
priority, tie personal and professional and job performance together, 
accomplish this study's recommendations, and evaluate their 
effectiveness. Lifelong Learning--make it the standard, revamp career 
management with ``gates'' for progression, and build an effective 
Civilian Education System (CES). Interpersonal Skills--acknowledge they 
are pivotal to leader competence, teach them, and select leaders that 
exhibit them. Army Culture--integrate civilians fully into the Army 
culture--recognizing differences but embracing commitment to our 
national defense mission.
    The study highlighted five recommendations, which the panel said 
were especially significant: first, make Army civilian training, 
education and leader development a priority; second, integrate civilian 
and military individual training, education, and development where and 
when appropriate; third, improve the relationship among the four Army 
cohorts (officer, noncommissioned officer, warrant officer, civilian); 
fourth, create a training and development paradigm that incorporates 
lifelong learning; and last, make interpersonal skills development a 
priority.
    The Panel completed Phase I (Officer Study) in May 2001, Phase II 
(NCO Study) in May 2002, and Phase III (Warrant Officer Study) in July 
2002. The Army instituted a management process under the proponency of 
the Army G3 to determine the feasibility, suitability, and 
acceptability of the recommendations. The Army integrated the 
recommendations into its Transformation Campaign Plan and has 
implemented a number of the recommendations and developed actions, 
decisions and resources required to implement the others.
    The ATLDP will conclude its mission by developing a final report on 
training and leader development for the Army that fosters battlefield 
and operational success and develops our operational commanders and 
leaders to meet the demands of our National Military Strategy.

                               PERSTEMPO

    To meet the demands of the current national emergency, the Army has 
experienced substantial increases in Personnel Tempo (PERSTEMPO). By 
necessity, due to global operational commitments, soldier deployments 
and Reserve component mobilizations have combined to increase the 
turbulence and uncertainty felt by soldiers and their families who 
serve our Nation. In defense of our Nation, soldiers in all components 
are being tasked to spend significant time away from home, for missions 
both foreign and domestic. We have not yet turned the tide in the 
upward spiral of these requirements, but wish to assure you that the 
Army is doing what it can to track and monitor deployments at the 
individual soldier level.
    The Army employs various measures to actively manage and minimize 
the effects of PERSTEMPO and coordinates with OSD to manage force 
requirements. The Army seeks to reduce PERSTEMPO by rotating units, by 
selectively using Reserve component forces, and through a post-
deployment stabilization policy. The Army endeavors to manage 
contingency operations requirements through global sourcing, as well as 
through use of career and contract civilians where feasible.
    We considered the effects of PERSTEMPO and implemented tracking and 
reporting the number of days a soldier is deployed in fiscal year 2000. 
The statutes surrounding PERSTEMPO for tracking, reporting and payment 
procedures were imposed to encourage the Services to reduce, where 
possible, excessive individual deployments vice payment of an 
entitlement for the soldier. The Army places priority on our mission 
requirements over the high deployment per-diem and will not compromise 
readiness nor unit cohesion to avoid future potential high deployment 
per diem payments. Army deployments will continue based on the needs of 
the Nation, the Army and the best interest of the soldier, in that 
order. The Army has a duty to comply with PERSTEMPO requirements and to 
manage them for the welfare of our soldiers, their families and the 
future of the Army.
    The Army will continue to manage deployments with an emphasis on 
maintaining readiness, unit integrity, and cohesion while meeting 
operational requirements.

                               STOP LOSS

    The present national emergency warrants that certain soldier skills 
are essential to the national security of the United States under the 
provisions of 10 U.S.C. 12305. Selected soldier skills and officer/
warrant officer specialties will be retained on active duty and will 
not otherwise be separated or retired. Those affected by the order 
cannot retire or leave the Service as long as Reserves with those same 
skills are called to active duty or until otherwise released by proper 
authority.
    On 30 November 2001, the Assistant Secretary of the Army for 
Manpower and Reserve Affairs (ASA (M&RA)) approved a limited stop loss 
for soldiers of the active Army (Stop Loss 1). On 27 December 2001, the 
ASA (M&RA) expanded Stop Loss 1 to include the Ready Reserve and 
additional skills and specialties for both the active Army and the 
Ready Reserve (Stop Loss 2). On 8 February 2002, a third increment of 
stop loss was approved to include additional skills and specialties for 
both the active Army and the Ready Reserve (Stop Loss 3). On 4 June 
2002, the ASA (M&RA) approved partially lifting stop loss for skills 
and specialties affected by Stop Loss 1-3, and approved a fourth 
increment of stop loss to include additional skills and specialties for 
both the active Army and the Ready Reserve (Stop Loss 4). Stop Loss 4 
ensured a zero sum gain against fiscal year 2002 end strength. Active 
component soldiers who have completed their obligation under the Army's 
12-month, skilled-based stop loss will not be subject to this new stop 
loss (soldiers however, will be given the choice to continue serving). 
Active component (AC) unit stop loss, for selected forces that deploy 
in support of operations in the CENTCOM AOR, was approved on 14 
February 2003. Potential impact to fiscal year 2003 Army end strength 
if this stop loss initiative is approved ranges from 492.7K to 504.6K 
(2.7 percent to 5 percent over 480K end strength). Partial Lift #3 is 
for the MP Corps.
    The global war on terrorism is projected to take years to 
successfully complete. Stop loss was not designed to preclude soldiers 
from voluntarily separating for an indefinite period of time. The time 
has come to provide soldiers affected by stop loss more predictability 
on when it will be lifted.

                               STOP MOVE

    Stop move for selected AC units supporting operations in the 
CENTCOM AOR was announced 22 December 2002. Units in support of 
Operations Enduring Freedom (OEF) or Noble Eagle (ONE) are currently 
not affected by stop move. The intent of the Army's stop move program 
is to maintain personnel operating strengths, readiness, and cohesion 
for deploying units, while ensuring we do not deplete the rest of the 
Army (i.e., Korea) effective 21 December 2002. Soldiers in deploying 
units with PCS report dates between 31 Dec 02 and 28 Feb 03 continued 
to PCS while enlisted soldiers with report dates of 1 Mar 03 or later 
will deploy with the a unit. Officers and warrant officers with report 
dates between 1 Mar and 31 May 03 will be initially deferred for 90 
days; additional deferrals and modifications for these officers with 
report dates 1 Jun 03 or later may be made pursuant to future 
operational assessment.
    Stop move will affect Korea through the Involuntarily Foreign 
Service Tour Extensions (IFSTE) for up to approximately 2,900 soldiers 
in Korea for 90 days beyond DEROS. Soldiers involuntarily extended will 
not be further extended for operational reasons or be required to meet 
service remaining requirements for PCS back to CONUS. Soldiers who 
would undergo undue hardship because of short-notice IFSTE (e.g., 
already shipped HHG, started terminal leave, or moved family members) 
are also exempt.

                              UNIT MANNING

    Unit manning seeks to synchronize the life cycle of a unit with the 
life cycle of the soldier within that unit. Soldiers and leaders will 
be stabilized, resulting in a significant increase in cohesion and 
combat readiness over our present individual replacement system. Such a 
system has significant second and third order effects across the 
force--training and leader development, recruiting and retention, unit 
readiness levels, and total Army end strength, among others. All of 
these systems are being studied intensively.
    The objective of our manning strategy is to ensure we have the 
right people in the right places to fully capitalize on their 
warfighting expertise. Correctly manning our units is vital to assuring 
that we fulfill our missions as a strategic element of national policy; 
it enhances predictability for our people; and it ensures that leaders 
have the people necessary to perform their assigned tasks. In fiscal 
year 2000, we implemented a strategy to man our forces to 100 percent 
of authorized strength, starting with divisional combat units. The 
program expanded in fiscal year 2001 and fiscal year 2002 to include 
early deploying units. Fiscal year 2002 represented the third year of 
implementation for the Army manning strategy and we have maintained our 
manning goals and continued to fill our Divisions, Armored Cavalry 
Regiments, and selected Early Deploying Units to 100 percent in the 
aggregate, with a 93-95 percent skill and grade-band match. We remain 
on target to accomplish our long-term goal of filling all Army units to 
100 percent of authorized strength. Our manning initiatives have filled 
our line divisions and other early deploying units to reduce the 
internal turbulence of partially filled formations and help put a 
measure of predictability back into the lives of our families.

                        PERSONNEL TRANSFORMATION

    At war and transforming, the Army is accelerating change to harness 
the power of new technologies, different organizations, and revitalized 
leader development initiatives that enable flexible, cost effective 
personnel policies for reshaping the Interim and the Objective Force 
for 2015.
    To accomplish this, we must transform our current personnel systems 
to meet the Army's vision of being more strategically responsive across 
the full spectrum of military operations. While the Army's eight 
Personnel Life Cycle functions (acquire, distribute, develop, deploy, 
compensate, sustain, transition, and structure) do not change under the 
Army vision, how we do them does change as we migrate legacy systems to 
web-based technology.
    New capabilities under Army eHR will include paperless electronic 
workflow, digital signature, passive personnel tracking, predictive 
analytics, unobtrusive record keeping, and a variety of on-line 
services. Overall customer service to the soldier, staff officer, and 
commander on the battlefield will be significantly more timely and 
accurate.
    In preparation for the Objective Force, and with the infusion of 
enterprise commercial off-the-shelf (COTS) technology, a complete 
realignment of the personnel structure and workforce is well underway. 
Implementing new technology is absolutely key therefore we must invest 
in HR systems through fiscal year 2005. This will enable the reshaping 
of personnel units to become more responsive to the needs of commanders 
from a smaller footprint in the battle space.
    As the integrating framework, five personnel transformation themes 
synchronize the personnel life cycles to form the sync matrix for 
concept development, decision-making, and resourcing. These five themes 
are Personnel Enterprise System, which forms the operational 
infrastructure and the knowledge architecture, which is the vehicle for 
revolutionizing the delivery of personnel services to soldiers and 
commanders and enhancing operational readiness. The resulting 
capabilities include online services, transactional capabilities, and 
analytical decision support with accurate and timely data. Second, 
Manning is the key and essential part of readiness. Our plan is to man 
the future force employing a Rotational Unit Manning concept. A major 
change in the way we do business is necessary given a dramatic increase 
in deployments, the global war on terrorism, coupled with the fielding 
of an increasingly complex force. Significant changes in how we 
structure, recruit, manage our personnel, develop soldiers and leaders 
must be reconsidered to create degrees of freedom currently resident in 
the individual, equity based personnel system. Third, Force Structure 
changes are already underway, especially in the personnel community's 
workforce and organizations. From HQDA to unit level, a variety of 
multi-functional units are being structured and redesigned to meet the 
future needs of the Army. Fourth, Training and Leader Development must 
be mutually supportive. We will work diligently to develop policies 
that meet the readiness goals inherent in unit manning while at the 
same time support the professional development needs of our Army and 
our people. Fifth, Well-Being is key to both individual and unit 
readiness. It is also critical to sustainment of our Army of today as 
well as that of the Objective Force. More specifically, it is an 
integrated system that: recognizes the institutional needs of the Army; 
designed and resourced to successfully account for the dynamic nature 
of the Army's operational challenges; maximizes outcomes such as 
performance, readiness, retention, and recruiting; and contributes to 
an institutional strength that enables the Army to accomplish its full 
spectrum mission.
    Our efforts in transforming the Army's personnel system are 
progressing. To date, we have successfully used technology to webify or 
digitize various personnel systems (i.e. OMPF On-Line and 2X Citizen, 
PERSCOM Online, PERSTEMPO, automated selection boards, etc.). Working 
together with all components, we are confident that when the Army gets 
to the Objective Force in 2015, the personnel and pay communities will 
be transformed and ready. One of the five personnel enterprise systems, 
Unit Manning deserves additional attention as a significant factor of 
personnel transformation.

                               WELL-BEING

    Well-Being is the Strategic Human Capital Management System for the 
Army. When applied at every level of leadership, this system provides 
the focus for balancing the needs of the Army and the expectations of 
our people--soldiers, retirees, veterans, DA civilians, and their 
families. Well-Being is oriented on developing strategic outcomes 
within the human dimension, and measuring progress and results in 
achieving those strategic ends.
    To measure these results, the Army designed a Well-Being Status 
Report (WBSR). The WBSR serves as a feedback mechanism designed to 
track the current and future status of Well-Being as it impacts the 
personnel dimension of readiness, enabling the senior leadership of the 
Army to make informed decisions.
    The Army is testing the concept at five locations for an entire 
year (June 2002 to May 2003). Additionally, the National Guard Bureau 
has funded a Well-Being laboratory site to explore methods to improve 
the effective delivery and receipt of Well-Being services and products 
to guardsmen, civilians, and their family members. The NGB site is 
scheduled to stand up the first week of April 2003.
    Well-Being initiatives over fiscal year 2002 have resulted in the 
largest pay raise for soldiers in a generation, as well as a 4.6 
percent pay raise for civilians. There was an 18 percent increase in 
military construction for new barracks, family housing and medical 
facilities. The medical component of Well-Being resulted in full 
funding for TRICARE military health care--a $6 billion increase over 
the past year. Included in this initiative is TRACARE for Life for 
Medicare-eligible uniformed services retirees, family members and 
survivors. Well-Being's impact on our Reserve and National Guard 
constituents resulted in improved pay, benefits and quality-of-life 
initiatives for Reserve component soldiers and their families, such as 
TRICARE eligibility for the military sponsor beginning on the effective 
date of their orders to active duty. For those soldiers ordered to 
active duty for more than 30 consecutive days, their families are 
eligible for health care under TRACARE Standard or TRICARE extra.
    Given the competing demands for limited resources we must ensure 
the Well-Being of the force by making informed decisions about which 
Army Organizational Life Cycle functions provides largest ``payoff'', 
in terms of Well-Being of its people, while achieving the tasks to 
assess, recruit, train, retain and meet the Army's mission. Well-Being 
allows the Army leadership to focus the application of resources with a 
measurable result.

                        RETIREE/SURVIVOR SUPPORT

    Our Army retirees and their families are highly valued partners 
with our active duty and Reserve component soldiers. Their rich legacy 
of sacrifice and service inspires today's soldiers. Many continue to 
serve America in a wide variety of positions both in and out of 
government and are a strong bridge between the Army and their 
communities.
    The Army remains committed to insuring that retirees and their 
families, as well as soldiers and families about to retire are well 
provided for. Insuring that health care systems remain robust for those 
who have borne the brunt of battle continues to be a major goal. The 
Army is very appreciative of recent congressional support in this arena 
and hopes that congressional commitment never wanes. Likewise, it's 
very important to insure that surviving family members of retirees, as 
well as soldiers who die on active duty, receive the strongest possible 
financial support. This is especially true for our soldiers who die in 
combat related incidents. The Army urges strong support of the Survivor 
Benefit Plan, especially in situations where small children suffer the 
loss of a parent in service to country. Severely disabled retirees 
deserve continued recognition of their precarious financial situation, 
especially if that disability resulted from a combat related incident.

                           CIVILIAN PERSONNEL

    As of fiscal year 2002, the Army employed 277,786 civilian 
personnel. To forecast future civilian workforce needs with precision, 
we developed the Civilian Forecasting System (CIVFORS), a sophisticated 
projection model that predicts future civilian personnel requirements 
under various scenarios. The Army is working closely with the Office of 
the Secretary of Defense (OSD) and other Federal agencies to 
demonstrate the power of this system so they can fully leverage its 
capabilities, as well.
    The Civilian Personnel Management System XXI (CPMS XXI) has 
identified the reforms necessary to hire, train, and grow a civilian 
component that supports the transforming Army. To achieve this, we have 
redefined the way civilians are hired, retained, and managed. Mandatory 
experiential assignments will become the vehicle by which we develop 
future leaders. CPMS XXI fully responds to current mandates in the 
President's Management Agenda and incorporates the results of the Army 
Training and Leader Development Panels. Here are two initiatives for 
recruiting well-trained civilians, The Army Civilian Training, 
Education, and Development System (ACTEDS)--a centrally managed program 
that accesses and trains civilian interns and grows a resource pool of 
personnel who can accede to senior professional positions and second 
the Direct Hire Authority for critical, hard-to-fill medical health 
care occupations which reduces in average fill-time for these positions 
to 29 days.
    The Army is firmly moving in the right direction to provide greater 
flexibility and opportunity for employees, supervisors, managers, and 
executives in the area of human resources management. We will transform 
the way we recruit, compensate, assess, assign, and separate defense 
civilians.

                           DOMESTIC VIOLENCE

    As you recall in June-July 2002, five homicides occurred at Fort 
Bragg North Carolina and the Army took action at both the local and 
Department of Army level. Fort Bragg conducted a review of the existing 
responses to domestic violence and developed a strategy focused on 
increasing awareness of domestic violence incidents and reviewed the 
existing support programs for victims and families. Additionally, Fort 
Bragg leadership encouraged and expanded outreach to victims and 
families residing in the surrounding area and promoted community 
accountability and responsibility.
    The ASA (M&RA) directed a review and evaluation of Army domestic 
violence prevention and intervention programs/policies. The team 
focused their efforts on study conclusions of what the Army did well, 
what areas needed improvement, and recommendations that pave the way 
ahead for the Army. Team efforts are targeted at developing an Army-
wide domestic violence program and culture that is compassionate, 
responsive, accountable, career safe and targets prevention and early 
intervention for high-risk groups. Additionally, ASA (M&RA) engaged the 
services of civilian consultants to evaluate Army programs/policies and 
make recommendations for program enhancement.
    The Chief of Staff of the Army directed the G-3, Deputy Chief of 
Staff for Operations, to look at developing a program to facilitate the 
reintegration of soldiers returning from contingency operations into 
their family and domestic environments. The intent is to provide 
redeploying soldiers with proper psychological screening, debriefing, 
mandatory briefings, and more importantly, identify those ``at risk'' 
soldiers that require immediate and longitudinal services. Army teams 
will continue to develop and then execute an action plan that addresses 
the key issues identified.

                               THIRD WAVE

    The primary objective of the Third Wave is to make sure we are 
properly utilizing the military manpower we have before asking for 
additional resources. This is necessary because we are operating within 
fixed constraints, a 480K-end strength, in an environment where there 
may be increasing demands for military capabilities for the global war 
on terrorism and worldwide contingencies. We will leverage our current 
end strength by converting non-core military positions to civilian 
employees or contract, where appropriate. We will pay for these 
conversions through savings generated from public-private competition 
and divestitures. The Third Wave supports the President's Competitive 
Sourcing Initiative, which is one of five government-wide initiatives 
on the President's Management Agenda. The Third Wave analysis is based 
on the Inventory of Commercial and Inherently Governmental Activities 
(which includes functions in the FAIR Inventory) and Senior Executive 
Council memorandum, subject: Using Core competencies to Determine DOD's 
Sourcing Decisions. Third Wave study costs will be programmed in POM 
05-09.

    ACTIVE GUARD AND RESERVE SEPARATE PROMOTION COMPETITIVE CATEGORY

    Army promotion policy requires mandatory Reserve components 
centralized promotion selection boards to consider all eligible 
officers of a grade and competitive category regardless of the Ready 
Reserve component to which they may be assigned. This policy further 
requires that mandatory boards address Army mobilization requirements, 
rather than consider specific Selected Reserve vacancies.
    The Reserve component promotion competitive categories remain the 
same as those in effect prior to October 1, 1996, the implementation 
date for the Reserve Officer Personnel Management Act. Even though the 
act authorizes the Secretary of the Army to establish separate 
promotion competitive categories for Reserve component officers, to 
include those serving in an AGR program, the Army has elected not to do 
so.
    The Army has twice considered proposals to initiate a separate U.S. 
Army Reserve AGR promotion competitive category. There has been no 
proposal for a separate Army National Guard AGR promotion competitive 
category. Army National Guard AGR officers may be promoted to fill AGR 
positions of the higher grade under the Title 32, U.S. Code, Federal 
recognition process. U.S. Army Reserve AGR officers may be promoted to 
fill AGR positions of the higher grade under the Title 10, U.S. Code, 
position vacancy board process.
    The Army Staff reviewed both proposals to initiate a separate U.S. 
Army Reserve AGR promotion competitive category. It did not give a 
favorable endorsement to either request. The Army Staff did not 
favorably consider establishing a separate U.S. Army Reserve AGR 
promotion competitive category, because of a number of management and 
parity concerns. The Office of the Judge Advocate General, in its 
independent review of the concept, expressed concern that a separate 
U.S. Army Reserve AGR promotion competitive category might be contrary 
to the congressional intent authorizing the Secretary of a Military 
Department to establish a separate promotion competitive category.
    There is an on-going study of the pending implementation of the 
Reserve components Officer Personnel Management System XXI. Part of its 
study, is reviewing the Reserve components officer promotion selection 
system. This officer promotion selection system review is intended to 
determine whether current promotion selection policy meets the needs of 
the Army and, if not, what changes need to be made. Included in this 
promotion selection system review are consideration of an Office, Chief 
Army Reserve request for the Army to initiate a separate U.S. Army 
Reserve AGR promotion competitive category, and alternatives to that 
proposal, to include extensive use of statutory position vacancy boards 
to meet specific U.S. Army Reserve AGR position vacancy needs.

                               IMPACT AID

    Impact Aid funds are an important source of Federal income for 
school districts that educate federally connected children. These funds 
help to ensure our military children are provided quality education. 
Education has always been and continues to be a very high priority for 
not only the Army, but for our soldiers. This is keenly evidenced by 
results from our yearly Army Family Action Plan (AFAP) conferences 
where education issues consistently rank among the top issues that our 
soldiers and their families vote as the most important to resolve. As 
you are no doubt aware, the Impact Aid program is a U.S. Department of 
Education (DoED) function and responsibility. The Army supports the 
Department of Defense (DOD) position that Impact Aid funding and 
management is correctly positioned within DoED.
    The Army's strategy is to continue to work with DoED and DOD, to 
find solutions to current issues with Impact Aid. Recognizing the 
importance of Impact Aid funding to our local schools, the Army has 
funded 117 ``dedicated'' School Liaison Officer (SLO) positions 
effective fiscal year 2003. One of the functions of the SLO is to 
ensure installation commanders and parents understand the Impact Aid 
program and serve as informed consumers for the funding of programs/
services that address the specific needs of our military children. 
Through School Liaison Services, the Army supports partnerships with 
school systems and school boards to facilitate opportunities to notify 
school personnel, parents, and community leaders about the importance 
and potential benefits of Impact Aid. In July 2002, the Military 
Impacted Schools Association (MISA) partnered with the National 
Military Family Association (NMFA) to brief the Army's School Liaison 
Officers on the Impact Aid program to include funding, legislation, and 
developing effective partnerships.
    The Army has made great strides in finding ways to institutionalize 
strong partnerships among our military communities and our local 
education agencies. We will continue to work with our local schools and 
partner organizations to find creative solutions for the often-unique 
school transition and educational issues that our mobile military 
children face. We are committed to doing everything we can to ensure 
our children receive the quality education that they deserve.

                               CONCLUSION

    We are proud of our progress. We are grateful for the strong 
congressional support that has helped offer tremendous opportunities to 
America's youth. Our soldiers return to America's communities better 
educated, more mature and with the skills and resources to prepare them 
for a productive and prosperous life. They make valuable contributions 
to their communities.
    We are hopeful that your support and assistance will continue as we 
demonstrate our commitment to fulfilling the manpower and welfare needs 
of the Army; active, Reserve, civilian, retirees, and families.
    Again, thank you for the opportunity to appear before you today.

    Senator Chambliss. Thank you, General.
    Admiral.

 STATEMENT OF VICE ADM. GERALD L. HOEWING, USN, CHIEF OF NAVAL 
                 PERSONNEL, UNITED STATES NAVY

    Admiral Hoewing. Good afternoon, Mr. Chairman, Senator 
Nelson, Senator Pryor. It is truly an honor to be here as the 
Chief of Naval Personnel to represent those dedicated men and 
women of our United States Navy. Our CNO, Admiral Clark, made 
manpower his number one priority, and since that time we have 
showed tremendous success. Today we have more than 382,000 
sailors out there doing our Nation's work.
    In fact, as of today, we have 76,600 active duty sailors 
forward-deployed on ships, squadrons, and submarines, ready to 
support the war on terrorism. 165 of those ships and 
submarines, 54 percent of the fleet, are forward-deployed as we 
speak. In addition to that, we have over 8,000 mobilized 
reservists supporting us back here, mostly in the States.
    Our budget for fiscal year 2004 will continue the momentum 
that we have seen over the last couple of years. We have, as we 
speak, with those seven carrier battle groups, two-thirds of 
our amphibious force forward-deployed. Every single one of 
those battle groups and amphibious readiness groups is fully 
manned and ready for combat.
    Our CNO challenged us to improve readiness, reduce 
attrition, and create a positive environment with opportunities 
for the personal growth and development of our sailors. We have 
increased our retention rates to the highest we have seen in 
the history of the United States Navy, while simultaneously 
reducing our attrition rates to the lowest that we have seen in 
the last decade.
    Our recruiting has met its mission now for the last 4 
consecutive years, and in our higher objective, new contract 
objective, with greater quality and greater number of high 
school diploma graduates. We have grown our Top Six of the Navy 
from less than 70 percent to now 72.5 percent, and will 
continue to grow over the next several years to not only 
increase our experience, but increase the technical ability of 
our force. In spite of these accomplishments, we can and will 
do better.
    I want to make a short announcement here that our strategic 
principle is ``mission first, sailors always.'' Everything we 
do in manpower and personnel is focused on accomplishing the 
mission and, at the same time, we want to make sure that our 
sailors are well taken care of, including their families.
    Our request for fiscal year 2004 will ask to help us shape 
the force even better than we have in the past. We want to 
thank you for the opportunity to pilot a program called 
assignment incentive pay. We will be transforming the way we 
assign, distribute, and train our sailors in fiscal year 2004 
with a system we call Sea Warrior that is fundamental to the 
application of the CNO's sea power vision for the 21st century, 
and meaningful, positive experience for our Navy.
    We call it quality of service. Quality of service includes 
both quality of life and the quality of work environment. The 
pay raises, the bonus and incentive programs, BAH buy-down to 
reduce out-of-pocket expenses, spouse employment and other 
morale, welfare, and family support initiatives fit into this 
category.
    At the same time, we also want to make sure that we bring 
our civilians at even a greater rate into our process, to grow 
and develop our civilians in the same manner that we grow and 
develop our military people.
    We look forward to the challenges ahead, working with Navy, 
the Department of Defense, under the direction of the Commander 
in Chief, and with the guidance and support from Congress. The 
challenges are many, but the potential for success abounds.
    Thank you, Mr. Chairman, for the opportunity to address you 
today.
    [The prepared statement of Admiral Hoewing follows:]

         Prepared Statement by Vice Adm. Gerald L. Hoewing, USN

    Mr. Chairman, and distinguished members of this subcommittee, I am 
deeply honored to have been chosen last year to take the helm as the 
53rd Chief of Naval Personnel, a career opportunity that permits me the 
honor of leading a team of consummate professionals responsible for 
providing direct support to sailors and civil servants world-wide who, 
together, comprise the most formidable force in the history of naval 
warfare.
    I also want to express my sincere gratitude for the outstanding 
support Congress, especially this subcommittee, continues to show for 
all military personnel and their families during this unprecedented 
time in our Nation's history.
    Two years ago the Chief of Naval Operations (CNO) established 
manpower as his number one priority. As a direct result of this 
commitment, we commenced the war against terrorism in a very high state 
of readiness. As I speak to you today, over 380,000 active duty and 
156,000 Reserve personnel are participating in preserving freedom and 
ensuring our Nation's security as volunteers in the world's premier 
Navy--your Navy! Nearly 70,000 of those active duty sailors are 
currently forward deployed on over 150 ships and submarines in direct 
support of the war on terror bolstered by a dedicated cadre of 
approximately 8,000 mobilized naval reservists, among the finest to 
ever serve.
    The pay raises, both across the board and targeted; enhancements to 
special and incentive pays, especially career sea pay; efforts to 
improve housing and reduce out-of-pocket housing expenses; the 
authorization to participate in the Thrift Savings Plan and 
improvements in medical care and retirement reforms are among the most 
significant factors that have helped us attract and retain the sailors 
we need today, many of whom will form the core of tomorrow's Navy 
leadership. As a result of these and other accomplishments, battle 
groups deploying to execute the Nation's global objectives are better 
manned than at any time in recent history--departing homeport at or 
above 99 percent manned.
    The Fiscal Year 2004 Navy Military Personnel budget request of 
$25.7 billion (Active $23.6 billion/Reserve $2.1 billion) seeks to 
continue building momentum as we pursue our Vision as the world's most 
powerful maritime force, of becoming the premiere military and 
governmental institution, attracting and retaining the Nation's most 
talented, service-seeking men and women.

                         PAST YEAR ACHIEVEMENTS

    Last year the Chief of Naval Operations challenged us to improve 
retention, reduce attrition, and create an environment that offers 
opportunities, encourages participation, and promotes personal and 
professional growth. We have met that challenge--recruiting, training, 
and retaining a more qualified and educated workforce--but these 
successes are about more than numbers. They are about real people being 
encouraged to succeed by real leaders who appreciate their service and 
their commitment to our Nation.

         Recruiting. In fiscal year 2002, recruiters met all 
        accession requirements every month throughout the year. As of 
        February 2003, Navy Recruiting Command met all accession 
        requirements for 19 straight months. The fiscal year 2003 
        beginning of year Delayed Entry Program was at the highest 
        level (54 percent) since record keeping began in 1980, and the 
        quality is very good. Last year we accessed 92 percent high 
        school graduates (up from 90 percent), and nearly 6 percent of 
        new recruits had some college education prior to joining.
         Retention. Record reenlistment rates allowed us to 
        retain vital fleet experience. In fiscal year 2002 Zone A (0-6 
        years of service) reenlistment was 58.7 percent; Zone B (6 to 
        10 years of service) reenlistment was 74.5 percent; and Zone C 
        (11 to 14 years of service) reenlistment was 87.4 percent. 
        Improved retention reduced at-sea manning shortfalls by more 
        than 36 percent last year and reduced our fiscal year 2002 
        recruiting goal from 54,000 to 46,150; saving precious 
        recruiting resources.
         Attrition. Here too, the trend is positive. In 2002, 
        we reduced Zone A attrition by over 23 percent. Also, Recruit 
        Training Command (RTC) drug losses declined more than 27 
        percent, largely due to drug testing within 24 hours prior to 
        shipping to RTC.
         Advancement. Last year, advancement opportunities were 
        20.1 percent for E-5, 19.3 percent for E-6, 26.7 percent for E-
        7, and 13 percent for E-8. Through careful management of Top 
        Six (E-4 to E-9) growth, high year tenure, retirements, and 
        reenlistment rates, we anticipate advancement opportunity will 
        remain stable through fiscal year 2007 as we work toward a more 
        senior force. Toward that end, in fiscal year 2002 we increased 
        the overall number of E-4 to E-9s in our Navy by 2.5 percent to 
        71.4 percent, heading toward 73.3 percent in fiscal year 2004 
        and ultimately 75.5 percent by fiscal year 2007.

    As impressive as these gains are, there are still areas where we 
can do better, and we will. The challenge comes in prioritizing 
resources and implementing programs and initiatives, many of them truly 
transformational, which will ensure our Vision is achieved and 
sustained. I recently conveyed my 2003 guidance to my team of 
professionals that comprise the manpower and personnel directorate of 
the Chief of Naval Operations staff and each of our integral field 
activities, following a Navy Military Personnel Strategy we developed 
last year. Among the more significant challenges facing Navy Manpower 
this year are:

         Shaping our Inventory Profiles. We must maintain a 
        balanced inventory of qualified people to meet fleet needs as 
        well as ensure the proper levels of experience at sea and 
        ashore.
         Satisfying the demands of an All-Volunteer Navy in the 
        21st century. We must apply our concepts for sailor advocacy 
        and Distribution Transformation.
         Determining Total Force Requirements. We must balance 
        our inventory of people with valid billet requirements, reduce 
        the overhead in officer and enlisted personnel accounts, and 
        validate proper active/Reserve/civilian/contractor work force 
        mix.
         Growing a more Experienced and Technical Force. We 
        must enrich our current force knowledge and experience levels 
        to meet the demands of our advanced combat systems.
         Providing Meaningful Work. We must adopt alternative 
        strategies to positively influence our levels of general 
        sailors assigned to meet non-technical requirements.

    Our fiscal year 2004 budget request fully supports these objectives 
and every member of my personnel team clearly understands their role in 
supporting Navy's bottom line of delivering combat capability, whenever 
required, anywhere in the world. That capability starts and ends with a 
fully trained force of highly educated sailors. As we move forward, we 
carry with us a simple strategic principle that we internalized last 
year:

                   ``Mission First, Sailors Always''

    This principle means that we evaluate our plans and actions against 
two complimentary criteria:

         Does this meet mission needs?
         Does this meet sailors' needs?

                        A VISION FOR THE FUTURE

    I mentioned that there is much that remains to be done. I'd like to 
share with you my vision of where Navy's manpower and personnel 
programs are headed over the next few years.
    As part of the CNO's Sea Power 21 initiative, we are developing and 
implementing a program, called ``Sea Warrior''. This web-based, human 
resource management system reflects an unprecedented commitment to the 
growth and development of our people. It serves as a foundation of 
warfighting effectiveness by ensuring that sailors with the right 
skills are in the right place at the right time. Sea Warrior will 
develop naval professionals who are highly skilled, powerfully 
motivated, and optimally employed for mission success. Historically, 
our ships have relied on large crews to accomplish their missions. 
Future all-volunteer service members will be employing new combat 
capabilities and platforms that feature dramatic advancements in 
technology and reductions in crew size. The crews of modern warships 
will be streamlined teams of operational, engineering, and information 
technology experts who collectively operate some of the most complex 
systems in the world. As optimal manning policies and new platforms 
further reduce crew size, we will increasingly need sailors who are 
highly educated and expertly trained. Introducing our people to a life-
long continuum of learning will be key to achieving this vision.
    Within the next few years, I want sailors and their families to be 
able to easily access an enhanced wide range of professional 
information to assist them in making better career decisions. We will 
have in place a process by which advancements will be achieved through 
a performance-based system, and enlisted members will be detailed in a 
manner similar to how our officers are currently detailed. The ratings 
in which sailors serve will be fully manned, and personnel readiness 
for all deploying units will be at the highest levels.
    Unrestricted line officer's career paths will better train, educate 
and develop them to meet operational requirements and lead our sailors. 
Our officer corps will fully represent the talents of our society, as 
we penetrate and access a greater share of the college-graduate 
minority market and retain those officers at a rate on par with all 
others.
    Our sailors and officers serving at sea will be supported ashore by 
a leaner, more efficient manpower team that is optimally manned for 
mission success. New IT solutions will provide more information to 
sailors and civilians and provide leaders with more accurate, real-time 
data upon which to make better manpower, personnel, and financial 
decisions all yielding improved combat effectiveness. People will also 
be an integral factor in the acquisition process, as investment 
decisions will consider life-cycle manpower costs in our acquisition 
programs. Families will have an increasingly more active role in our 
Navy as their direct inputs are used to produce a continuum of new 
family related initiatives. Spouse employment will be an even greater 
element of the sailor assignment process. When a leader says, ``We 
recruit a sailor, but we retain a family,'' every sailor and family 
member will nod their head in agreement.
    I foresee our sailors being supported by a dedicated civilian 
community that has been developed through our ability to recruit top-
notch people to serve in a structured program that provides superb 
training and education, personal development and pathways to success. 
We will integrate the civilian leaders of this talented group, members 
of the Senior Executive Service, with their uniformed flag officer 
counterparts, to take better advantage of their collective knowledge, 
skills and abilities.
    Within the next 3 years, our personnel strategy will be fully 
transformed into an effective human resources strategy that ensures the 
readiness of tomorrow's integrated force structure. Fusing currently 
segregated manpower, personnel, and training processes into a single 
integrated human resources (HR) philosophy will allow us to more 
acutely focus on the clear relationships between Navy's work (manpower) 
and our sailors (personnel and training). The transformational HR 
process will build and enhance these relationships through integration 
of positions, knowledge, skills, abilities, tools (KSAT), and personnel 
competencies. Ultimately, the HR integration will allow Navy to frame 
manpower requirements, as well as recruit, distribute, train, and 
professionally develop our sailors based on a common competency 
network.
    Many of the items I've just mentioned are already close to 
realization. As I stated earlier, the focus of these initiatives will 
be a tangible improvement in combat readiness and mission execution. 
Improvements in the recruiting, manpower, and personnel business will 
further reduce gaps at sea, gain efficiencies necessary to fund valid 
requirements and give every commanding officer, afloat and ashore, the 
talent needed to carry out any assigned mission.

                         A FRAMEWORK FOR TODAY

    Shaping the Force: In fiscal year 2003, we are executing 
approximately 3,900 in strength higher than authorized--consistent with 
our need to fill Antiterrorism/Force Protection (AT/FP) and readiness 
requirements, yet well within the +3 percent authority provided by 
Congress. Our end strength request for fiscal year 2004 reflects a 
reduction in strength (1,900 active and 2,044 Reserve) that is largely 
the result of the manning delta associated with planned 
decommissioning/disestablishment of older ships and squadrons. For the 
Reserves, we have decommissioned one F/A-18 squadron to conform with 
the Navy/USMC TACAIR integration/reduction plan and have taken cuts in 
Seabee and medical personnel in order to rebalance the active/Reserve 
mix. We have embarked upon various efforts to help improve manpower 
efficiency and reduce future manpower requirements. This year, as we 
continuously evaluate our evolving strength requirements, we will seize 
upon the opportunity to shape the force, improve overall quality and 
enhance the skill mix. The result will be increased mission readiness 
and better advancement opportunity across all ratings.
    - Meeting the Recruiting Challenge. As previously stated, our 
fiscal year 2002 recruiting efforts were unprecedented and this success 
has continued through the beginning months of 2003. Although recruiting 
has benefited somewhat from current economic conditions, the positive 
results of the recruiting effort can be attributed to a professional 
recruiting force, properly supported to achieve their mission 
objectives.
    Fiscal year 2002 marked the fourth consecutive year in which Navy 
met its enlisted accession mission, including a string of 18 
consecutive months (through January 2003) in which Navy attained new 
contract objective--a feat the Navy has not accomplished in at least 
two decades. Meeting new contract objective is important because it 
builds the number of recruits in the Delayed Entry Program (DEP) to a 
level that provides a higher probability of long term recruiting 
success.
    Improving Quality. This strong DEP position, far better than it has 
been in the recent past, has given Navy a strategic opportunity to 
improve recruit quality. Our data indicates that a higher quality 
recruit is less likely to attrite in the first term of enlistment. A 
higher quality recruit is also better suited for today's highly 
technical Navy that requires sailors to develop and maintain 
increasingly complex skill sets through higher levels of education and 
a broader range of training. In this context, we measure recruit 
quality by:

         the percentage of High School Diploma Graduates 
        (HSDGs),
         the percentage scoring in the upper half of the Armed 
        Forces Qualification Test (AFQT),
         the number enlisting with college credits, and
         the number requiring waivers of standards.

    Nearly 92 percent of fiscal year 2002 accessions were HSDGs, a 
significant improvement over the DOD minimum of 90 percent achieved in 
fiscal year 2001. We are confident that we can continue this trend and 
have established a stretch goal of 94 percent in fiscal year 2003--
which we are on track to achieve. We have also increased the percentage 
of recruits who scored in the top half of the AFQT from 63 percent, in 
fiscal year 2001, to 65 percent, in fiscal year 2002. We shipped nearly 
2,500 applicants with college experience in fiscal year 2002, and the 
percent of non-prior service recruits with college experience improved 
from 4.5 percent, in fiscal year 2001, to 5.6 percent, in fiscal year 
2002. To find the most cost-effective ways to attract these high 
quality recruits, we are exploring college-market penetration pilots as 
well as increased enlistment incentives specifically targeted to 
attract applicants with college experience. We have also tightened 
waiver standards. On a case-by-case basis, we approve waivers for high-
quality individuals who have minor inconsistencies with Navy enlistment 
standards in areas such as physical standards, age, and number of 
dependents. The number of recruits requiring waivers dropped to just 
17.8 percent in fiscal year 2002.
    Officer Recruiting. Fiscal year 2002 was also a very successful 
year for officer recruiting. We met all requirements in the Nuclear 
Officer, Unrestricted and Restricted Line and Staff communities. Among 
healthcare providers, Medical and Nurse Corps met their respective 
goals, while the Dental Corps and several Medical Service Corps 
specialties narrowly missed their requirements. Overall, this 
represented a significant improvement over the previous year.
    We have already met fiscal year 2003 requirements for pilots, 
surface warfare officers (conventional and nuclear), SEAL and Explosive 
Ordnance Disposal officers, aviation maintenance duty officers, 
oceanographers, intelligence officers, public affairs officers and 
supply corps officers. We still have some work to do to find the 
required number of Naval reactor nuclear power instructors, Medical 
Corps, Dental Corps, and Medical Service Corps officers.
    Diversity. At the start of fiscal year 2003, Navy Recruiting 
committed to making officer diversity recruiting a top priority, 
another example of how recent recruiting success has allowed us to 
focus on more than just the numbers.
    Navy's fiscal year 2002 enlisted accession cohort generally matched 
the diversity of the American population. However, fiscal year 2002 
officer new contracts statistics fall short of minority representation 
among those Americans receiving Bachelor's Degrees.

                                [Percent]
------------------------------------------------------------------------
                                                           Asian/Pacific
                                  African                    Islander/
                                  American     Hispanic       Native
                                                             American
------------------------------------------------------------------------
Fiscal Year 2002 Enlisted             18.1         15.5             9.7
 Accession Cohort.............
16-24 year old data (2000             15.1         15.2             5.2
 census)......................
Fiscal Year 2002 Officer New           5.1          4.8             8.0
 Contracts....................
Bachelor Degrees in the                5.6          5.8            13.4
 Engineering Field (2000
 Digest of Education
 Statistics)..................
------------------------------------------------------------------------

    We are aggressively pursuing new strategies and policies to aid our 
diversity recruiting goals. Instructors at Navy Recruiting Orientation 
Unit (NROU) are now presenting diversity programs briefings to all 
recruiters attending training, and we are emphasizing the importance of 
diversity throughout curriculum courses. Additionally, the NROU 
National Training Team (NTT) has incorporated diversity into the 
Command Inspection Checklist to ensure that each Naval Recruiting 
District implements a systemic approach to diversity planning and 
production.
    Campbell-Ewald of Detroit, MI, our strategic partner in advertising 
and marketing, is also increasing its focus on diversity. Agency 
representatives are currently conducting research to identify any 
misperceptions among minority communities about Navy service. The 
results of these research studies will help shape and direct future 
marketing and advertising efforts designed to target minority recruits 
and their influencers.
    Statistical evidence demonstrates that increased focus on diversity 
is producing results. A comparison of new contract percentages attained 
through the first quarter of fiscal year 2003 to the entire 2002 fiscal 
year reflects improvements in all areas.

                                [Percent]
------------------------------------------------------------------------
                                                           Asian/Pacific
                                  African                    Islander/
                                  American     Hispanic       Native
                                                             American
------------------------------------------------------------------------
Fiscal Year 2003 1st Quarter           6.8          5.0            11.1
 Officer New Contracts........
Fiscal Year 2002 Officer New           5.1          4.8             8.0
 Contracts....................
------------------------------------------------------------------------

    Advertising. Navy's ``Accelerate Your Life'' advertising campaign 
was rolled out approximately 2 years ago and has been an unquestionable 
success, winning over 38 competitive awards spanning the entire 
spectrum of the advertising and marketing field. The campaign 
communicates Navy as a hands-on adventure that will accelerate one's 
life to the highest level of achievement. Its objectives have included 
building awareness and consideration of the Navy as a career option and 
generating leads for recruiter follow-up. During the campaign's second 
year, the strategy has continued to focus on media channels and 
creative solutions targeted at the 18-24 year-old audience.
    The centerpiece of our campaign is the Interactive Life Accelerator 
found on the NAVY.COM Web site. During the 2002 International Web 
Awards Best Of Industry Awards competition, the site took home Best Of 
Show and Best Of Government Agency Web Awards. This prestigious 
recognition placed NAVY.COM among the best in the world in a 
competition featuring 3,600 entries from 19 countries. The site enables 
individuals to indicate their likes and dislikes, and then translates 
their interests into a range of possibilities for a rewarding Navy 
career. Leads are captured and sent directly to the National 
Advertising Leads Tracking System, providing recruiters with timely and 
invaluable prospect information. Since its launch in March 2001, over 
540,000 people have logged on to the Life Accelerator with 85 percent 
completing the assessment. Many recruiters report prospects walking 
into recruiting offices with Life Accelerator results in hand. Today, 
the NAVY.COM Web site averages over 24,500 visitors per day.
    The advertising campaign is a key tool in increasing Navy's ability 
to attract recruits from both the college and the high quality 
diversity markets. For example, in recent months, we tested an 
accredited junior college marketing course centered on Navy recruiting. 
The test clearly showed this approach to be extremely helpful to 
recruiters' efforts to engage with junior college students and their 
influencers. We have also completed specific research in attracting 
African Americans who score in the top half of the AFQT, and the 
resulting advertising is in development for release in late spring or 
early summer. Finally, Navy's recognition of rapid growth in the 
Hispanic community has led to measured research resulting in messages 
that recognize the community's unique language, culture and areas of 
interest within Navy.
    The success of our recruiting efforts, coupled with outstanding 
retention has allowed us to make some strategic reductions in both our 
advertising budget and the number of recruiters we have in the field. 
The fiscal year 2004 budget request for recruiting advertising is $87.9 
million, essentially the same as the fiscal year 2003 advertising 
budget. I feel comfortable with what amounts to a reduction in real 
buying power, but have asked recruiting command to closely watch for 
any indication of a change in our overall recruiting success as we try 
to attract approximately 43,900 accessions in fiscal year 2004.
    National Call to Service. One final subject that falls under the 
category of recruiting is the National Call to Service (NCS) program. 
Navy is proactively engaged with the Office of the Secretary of Defense 
in developing NCS policies as we prepare to make this option available 
to those entering into an enlistment contract in fiscal year 2004. As 
currently envisioned, NCS will be made available to approximately 450 
of the fiscal year 2004 accession mission across a variety of ratings. 
To qualify, participants must have no prior military service; meet 
existing physical, aptitude, and moral standards for enlistment; and be 
both a HSDG, possibly with some college, and score in the top half of 
the AFQT. Navy plans to make the program available to ratings that will 
best facilitate meeting out-year SELRES accession requirements.
    - Retention. As important as new recruits are to our organization, 
we invest a great deal of resources in each sailor's personal and 
professional development. It is imperative that we receive optimal 
return on that significant investment in people. Upon assuming his 
assignment as our Chief of Naval Operations in 1999, Admiral Vern Clark 
challenged Navy leadership to retain our best and brightest sailors in 
order to achieve Navy's long-term personnel readiness success. In fact, 
he made it his Number 1 priority. Increased retention results in 
reduced training costs, fewer recruiting requirements and, most 
importantly, improved mission readiness. The greatest challenge to 
retention is attrition--sailors lost to the Service before fulfilling 
their service obligation. Historically, 10-15 percent attrition rates 
were the norm among initial-term sailors. With renewed vigor, we are 
providing our people compelling reasons to stay early in their service, 
developing and mentoring every sailor with an eye for potential 
productive performance, and providing them every opportunity to 
succeed. We have been successful in this endeavor. For example, in Zone 
``A'', attrition declined by 23 percent in fiscal year 2002 alone. This 
means that we retained around 4,700 sailors with less than 6 years of 
service who would have been previously lost to our rolls. In the first 
quarter of fiscal year 2003, we have already seen another 11 percent 
reduction in Zone ``A'' attrition, to 7.6 percent. Our vision is to 
cultivate a Navy-wide personnel climate that offers plentiful 
opportunities, encourages participation and is conducive to personal 
and professional growth.
    Center for Career Development (CCD). Admiral Clark brought with him 
a new vision and directed establishment of a Center for Career 
Development to focus on improving retention and reducing attrition. 
Enhanced professional training for command retention teams and Navy 
Career Counselors, Career Decision Fairs (CDFs) for sailors and their 
families, and comprehensive, user-friendly, interactive products using 
the latest information technology are helping sailors and their 
families to make informed decisions. Statistics show that the Stay Navy 
Web site is becoming increasingly more relevant as it accrued over 
889,000 visitors during calendar year 2002. Direct involvement of the 
CCD staff with command-level leadership continues to be the key to 
maintaining focus and shaping Navy's retention culture.
    Reenlistments. Proactive and personalized leadership involvement, 
as well as across-the-board and targeted compensation initiatives, 
additional career choices and availability of quality career 
information have resulted in historically high numbers of sailors 
deciding to stay Navy. While overall reenlistment rate improvements 
have been modest over the past 2 years, the trend continues to be 
positive as we are on track to attain fiscal year 2003 Retention 
Targets.
    Selected Reenlistment Bonus (SRB). Although substantial 
improvements in the quality of service have been obtained through items 
such as pay raises and housing allowance increases, the most important 
reenlistment tool we have is the SRB program. This force shaping tool 
allows us to pay bonuses to specific sailors in return for an extension 
of time on active duty. Through constant and precise management of this 
program, bonuses are targeted to specific skill sets, taking into 
account overall retention of all members within that specific skill and 
the cost-benefit of replacing an existing service member with a new 
recruit. The fiscal year 2004 budget request for SRB new payments is 
$192 million, which should cover approximately 18,000 reenlistments. 
This year's submission also includes a request to raise the maximum 
bonus award ceiling by $30,000 to allow much needed maneuvering room 
for our future efforts to retain the Navy's most critical and highly-
trained sailors.
    As a result of our enhanced retention and reduced attrition, we 
have achieved a relatively stable end-strength. This affords us the 
opportunity to concentrate on ``shaping the force'' in order to ensure 
Navy has sailors with requisite skills who are properly placed, 
enhancing not only our daily mission accomplishment but also ultimately 
our overall combat readiness.
    Perform To Serve. ``Mission First, Sailors Always'' is the concept 
behind the ``Perform to Serve'' (PTS) initiative. The Navy must balance 
its skill inventory with its billet requirements to optimize fleet 
readiness. PTS will strive to accomplish this while simultaneously 
providing increased promotion opportunity and professional growth for 
today's sailors. A significant improvement in reenlistments and reduced 
attrition, coupled with recruiting success, has presented us with an 
opportunity to improve the skill mix of our force. With PTS, we are 
centralizing reenlistment authority using a fully automated system that 
will align Navy requirements and personnel by providing sailors with 
reenlistment options. While the majority of sailors will be granted 
reenlistment authority within their current rating, others will be 
guided to convert to undermanned ratings. In those cases requiring 
conversion, sailors will be provided formalized training to ensure 
success in their new rating.
    Lateral Conversion Bonus. The fiscal year 2004 submission also 
includes a request to establish a new Lateral Conversion Bonus 
authority. Where PTS is focused at rating conversions at the end of a 
member's initial obligation, the lateral conversion bonus would be 
targeted at encouraging non-EAOS, career sailors (second term and 
beyond) to convert to undermanned ratings. These types of conversions 
would help us retain valued experience while avoiding additional costs 
incurred by recruiting and training a new service member.
    Active Reserve Force Mix. Another important element of force 
shaping concerns the overall Active and Reserve Force mix. The CNO has 
initiated a major review to examine the desired active and Reserve mix 
for the future, specifically addressing potential shortfalls and high 
demand-low density unit demands. To date, the major area of change in 
Active/Reserve Force mix has been with antiterrorism/force protection 
personnel. To complement the 1,888 active members being converted into 
Master At Arms (MA) ratings (with a future goal of growing the MA force 
to approximately 9,000), the Reserve Force is growing an additional 
3,085 MAs in order to meet the requirements of higher threat 
conditions. Additionally, newly established active component security 
force assets are being created to provide a unit/point defense 
capability to the fleet, a mission previously filled by Naval Reserve 
NCW forces. Integration of the active mobile security force with 
existing Naval Reserve coastal warfare forces is underway.

                 TRANSFORMING SAILOR CAREER MANAGEMENT

    Sea Warrior Project. Borrowing the name from CNO's overall concept 
for personnel development within the Sea Power 21 initiative, the Sea 
Warrior project is the key enabler that drives the systematic 
transformation of our current Manpower, Personnel and Training (MPT) 
Strategy to meet changing missions and workforce environments. It is a 
web-based, comprehensive, career management system, which incorporates 
current and future human resource products, including Task Force Excel 
(Excellence Through Education and Learning), Project SAIL (Sailor 
Advocacy through Interactive Leadership), and Improving Navy's 
Workforce, exploiting advanced technology and best business practices, 
to enable rapid sequential prototype development. A synchronization 
plan for an end-to-end transformation of Navy's Human Resource system 
began in July 2002 through a formal partnership between the OPNAV 
manpower and personnel directorate, Commander Naval Reserve Force, and 
the Naval Education and Training Center, with collaboration of Navy 
Personnel Development Command, SYSCOM, fleet representatives, and 
community managers.
    Just last week, we demonstrated the first Sea Warrior prototype, 
Career Management System (CMS), to the Chief of Naval Operations. CMS 
is a web enabled single entry point into a self-service information-
rich environment. The system employs a market place approach 
incorporating dynamically applied monetary and non-monetary incentives 
to place the right sailor in the right billet at the right time with 
the right motivation, resulting in an increase to combat/mission 
readiness.
    We will continue refining milestones, focusing vital resources and 
leveraging investments in world-class information technology to realize 
the combined benefits of new technology and business best practices.
    - Distribution. ``Sailor Advocacy'' aptly captures the fundamental 
philosophical change that we have injected into the distribution 
process. For example, seeking to give sailors a stronger voice and 
greater control over their career decisions, we have fully implemented 
the ``Team Detailing'' program by establishing Command Teaming 
Coordinators who facilitate coordination between each command and Navy 
Personnel Command throughout an individual's detailing process. This 
results, systematically, in better pairing of every sailor with the 
right job. We are convinced that the pay off for Navy will be improved 
manning, an even more motivated force and increased readiness.
    - Assignment Incentive Pay. We are just about ready to implement 
our new Assignment Incentive Pay (AIP) program that was authorized last 
year. AIP is intended to help attract qualified volunteers to 
difficult-to-fill jobs. Our initial pilot will be focused overseas in 
Naples and Sigonella, Italy and Misawa, Japan and will be structured in 
a format that will allow the market to drive the applicable level of 
financial incentivization (within established controls).
    - ``Noble Eagle'' Sailor Advocacy Team: Improved Mobilization. 
Through our Noble Eagle Sailor Advocacy (NESA) team at Navy Personnel 
Command we are managing mobilized Reserve personnel more professionally 
through inter-active career counseling and assistance. This team 
provides professional career management advice and assistance to 
mobilized members, and assists order writers through a database that 
reflects current career choices and preferences of mobilized members. 
We have also standardized and streamlined our mobilization and 
demobilization processing through the development of a new, web-based, 
Navy-Marine Corps Mobilization Processing System (NMCMPS), leveraging 
an existing and proven Marine Corps system and adapting it for use 
throughout DON.

                        POSITIVE NAVY EXPERIENCE

    Sailor Satisfaction. The Navy is a positive lifestyle, which also 
becomes a lifetime influencer. Every sailor, and former sailor, as well 
as their families, are potential Navy recruiters. Our sea service is 
challenging, and deployments away from loved ones are never easy. We 
must make the naval experience a rewarding one--a period of time in 
which sailors and their families embrace the Navy as an essential 
element of their identities. We must provide services that minimize the 
stress on them during deployments, enhancing their Quality-of-Life 
(QOL) when at home, and making the transition between the two less 
stressful.
    The fiscal year 2004 budget request includes $473 million to 
continue Pay Table Reform for both active and Reserves. Sailors will 
receive an average 4.1 percent increase in Basic Pay with some rates 
receiving slightly more, others slightly less (2 percent for E1s to 
6.25 percent for E9s). The budget also includes $210 million to fund 
increased BAH rates and reduce out-of-pocket housing expenses to 3.5 
percent.
    - Personnel Tempo (PERSTEMPO). Fiscal year 2000 legislation 
established the PERSTEMPO program, the intent of which was for Services 
to improve the quality of life and retention of their service members 
by reducing/eliminating excessive deployments. Since implementation, we 
have been carefully managing our sailors time away from home, closely 
monitoring deployment periods consistent with operational requirements.
    Although suspended by OSD following 11 September 2001, Navy has 
continued to track and report the deployments of its members throughout 
the national security waiver timeline. The following table provides 
detailed Navy (active and Reserve) PERSTEMPO data based on including 
PERSTEMPO days accumulated during the suspension period (Included), as 
well as eliminating those days (Eliminated).

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                At least
                                                                                                                                        400 &      one
            Suspension days              >=600   500-599  400-499  300-399  220-299  182-219   100-181    1-99        0       Total     more     ITEMPO
                                                                                                                                                   day
--------------------------------------------------------------------------------------------------------------------------------------------------------
Included..............................    3,469    2,830    4,933   25,873   51,707   24,943    44,104   110,881   223,421   492,161    11,232   268,740
Eliminated............................        0        0        0        0    2,702   16,099    44,740   131,311   297,309   492,161         0  194,852
--------------------------------------------------------------------------------------------------------------------------------------------------------
Data as of 10 Jan. 2003.

    We strongly support the fiscal year 2004 alternative legislative 
proposal that would replace the current PERSTEMPO HDPD of $100 per day, 
with a progressive, monthly high deployment allowance of up to $1,000. 
The revised payment schedule fairly compensates members for both 
excessively frequent and excessively long deployments. The inclusion of 
both a ``frequency piece'' and a ``duration piece'' for the proposed 
high-deployment allowance is more reflective of sailor hardships 
produced by ``burdensome'' deployments, especially since extended 
deployments often occur suddenly, in response to a crisis or 
warfighting necessity.
    - Fleet and Family Support Center Programs. Navy Fleet and Family 
Support Centers (FFSCs) exist to provide services that facilitate 
fleet, force and family readiness. The primary mission is to assist 
commands in achieving operational readiness, superior performance, 
member retention and an optimal quality of life for service members and 
their families. Navy operates 55 FFSCs, providing services at 67 
service delivery sites throughout the United States and 9 foreign 
countries. A new Navy-wide marketing campaign that emphasizes specific 
programs and services is expected to steadily increase command, sailor 
and family knowledge and use of services.
    - Morale, Welfare, and Recreation (MWR). Navy MWR continues to 
provide a wide array of recreation, social and community support 
activities at U.S. Navy facilities, worldwide. Our mission is to 
provide quality support and recreational services that contribute to 
the retention, readiness, mental, physical, and emotional well being of 
our sailors. The estimated fiscal year 2004 funding of $843 million 
(includes non-appropriated and appropriated funds) will provide active 
duty, Reserve, and retired Navy personnel and their families with 
sports and physical fitness activities, outdoor recreation, value-
priced tickets to entertainment and tours, and a variety of food and 
beverage services. Child development and youth programs provide safe, 
affordable, quality childcare for over 44,000 children of Navy 
families. In an effort to meet the demands of our mission, to include 
increased shift work, changing schedules, and deployments, the Navy has 
instituted a 24/7 childcare pilot in Norfolk and Pearl Harbor. Under 
this pilot project, childcare will be provided after hours and on 
weekends. MWR has been very active in supporting sailors and their 
families and has focused its efforts in four key areas:

         support for deployed and isolated forces;
         child development and youth programs;
         the Navy Movie program; and
         entertainment/special events.

    In the past year, Navy MWR has continued its rich tradition of 
offering sailors and their families exceptional opportunities. We:

         Hired and assigned civilian Afloat Recreation and 
        Fitness Specialists in major fleet units to provide state of 
        the art programs and availability of fitness and recreation 
        gear in deploying ships.
         Increased live entertainment opportunities for afloat 
        forward-deployed personnel by 60 percent.
         Provided every sailor a free phone card permitting 
        sailors to stay in touch over the holidays with loved ones back 
        home.
         Initiated a ``sneak preview'' program allowing sailors 
        and their families to advance-screen major motion pictures. 
        Provided early release videotaped movies to ships in the 
        Persian Gulf and Mediterranean Sea. Created ``Theater-in-a-
        Box'', a self-contained unit that takes videotapes, screens, 
        and players direct to the front lines.
         Offered contests and special events through the 
        ``Saluting Sailors and their Families Program'' in appreciation 
        of the sacrifices of Navy personnel.
         Developed extended-hour childcare programs to help 
        families cope with long hours and night shift work.

    All these programs are aimed at improving the readiness and quality 
of life of our sailors and their families to meet the challenges they 
face every day. MWR is also a major contributor to retention by making 
the Navy lifestyle attractive to both married and single sailors. MWR's 
focus on readiness and retention will become even more important in the 
years ahead. As Navy deals with the challenges of allocating limited 
resources, MWR will continue to show its value as a vital tool in 
helping retain the best sailors and keeping them, and their families, 
physically and mentally fit.
    - Family Advocacy. The Navy Family Advocacy Program (FAP) functions 
within Navy Fleet and Family Support Centers. This organizational 
structure provides maximum coordination of efforts at the installation 
level for families who are at risk of family violence and decreases the 
stigma associated with seeking professional assistance. As such, the 
Navy provides a continuum of response to troubled families that is in 
keeping with recommendations in the Fort Bragg Epidemiological Report.
    Navy FAP is also working closely with the Department of Defense and 
Service FAP Counterparts on implementation of Defense Task Force on 
Domestic Violence (DTFDV) recommendations. Navy FAP is increasing and 
formalizing partnerships in communities where Navy installations are 
located to increase access to services not provided by the military and 
to ensure seamless community coordination when responding to alleged 
family violence. Further, FAP has increased efforts to market the full 
range of prevention and intervention services available to sailors and 
their families, which includes publicizing resources for domestic 
violence victims seeking information and confidential support. Navy FAP 
has also moved forward on Task Force recommendations pertaining to 
increased awareness, education and training.
    - Spouse Employment Assistance Program. The Spouse Employment 
Assistance Program (SEAP) has made great strides in continuing to reach 
out to spouses seeking help in training and employment opportunities. 
Over 99,000 spouse contacts occurred at our 67 sites in fiscal year 
2002, and we intend to help even more spouses by increasing the number 
of contacts to over 100,000 in fiscal year 2003. We also engaged with 
the world's leading employment agency, Adecco to provide temporary and 
full-time employment and training for our spouses. Building 
partnerships will be our watchword this year as SEAP explores 
agreements with industry leaders and conducts forums on a local and 
national level to encourage mobile careers. Other initiatives include 
assisting spouses in updating professional credentials to meet state 
requirements, collaborating with detailers during the assignment 
process, and advising them of the potential for spouse employment in 
the assignment areas being considered.

                 TECHNOLOGY-BASED HUMAN RESOURCE SYSTEM

    Human Resource Computer Programs. In concert with our deployment of 
a comprehensive Total Force Management Strategy, we have developed a 
supporting information technology strategy. Information technology is 
the essential enabler that must be employed quickly, efficiently and 
smartly to carry out the Total Force strategy, improve quality of 
service for sailors, and achieve CNO's Sea Warrior vision. Much of the 
existing Navy manpower and personnel information systems infrastructure 
consists of a patchwork of stove-piped systems, some more than 25 years 
old, with duplicative collection and storage of data. These legacy 
systems are difficult to maintain, resistant to change, and expensive 
to operate. They hinder decision-making and represent a significant and 
unnecessary obstacle to our transformation efforts. If we hope to 
transform our force management processes in order to provide our 
sailors with the interactive web-based tools and training they need, we 
must first transform our information infrastructure.
    - Single Integrated Human Resource Strategy (SIHRS). SIHRS is our 
vision and strategy for this transformation. It was developed in 
response to recommendations of the Recruiting, Retention, Training, and 
Assignment (RRTA) working group of the Revolution in Business Affairs 
(RBA), which found that many manpower and personnel functional problems 
result directly from systemic problems in the IT infrastructure. 
Designed to break down legacy stovepipes and respond to those systemic 
problems, the strategy is composed of essentially three parts: 
modernization of field collection systems, development of a single 
authoritative data source, and the reengineering and/or migration of 
applications to this authoritative data source. The vision/goal is 
single data entry to a single authoritative data source; icon driven 
access to integrated applications; self-service, wherever it makes 
sense; and broad access to data at all levels, from sailors and their 
families to commands and headquarters. We have developed this strategy 
and we are working systematically to transform the manpower and 
personnel business and achieve the single integrated IT capability 
through business process reengineering, technology insertion, and by 
leveraging DOD and DoN enterprise initiatives. Implementation of this 
strategy will allow us to streamline internal practices and provide 
unprecedented access for all of our customers. This access will 
dramatically reduce routine administrative requirements at headquarters 
and increase the quality of time spent focusing on communication and 
practices that result in providing the fleet motivated, dedicated, and 
combat ready sailors. The Navy Human Resources Board of Directors 
(NHRBOD) has adopted SIHRS as the ``Way Ahead''.
    - Navy Standard Integrated Personnel System (NSIPS). NSIPS is the 
Navy's initiative to consolidate active and Reserve field personnel 
data collection systems into a single integrated personnel system. 
NSIPS has already deployed worldwide at 103 Personnel Support 
Activities or Detachments, 278 Reserve Centers, and 178 ships serving 
Navy Active and Reserve Forces. This month, the web version of NSIPS 
will begin incremental deployment. When fully deployed (first quarter 
2004), web NSIPS will allow approximately 600,000 users (with a 
projected daily user rate of 60,000 to 75,000 users) to access their 
personnel records. The Electronic Service Record (ESR) is being fully 
integrated into the web-enabled version of NSIPS. This initiative 
completely automates the service record and provides full electronic 
forms, viewing, and updates via NSIPS, providing a virtually paperless 
field service record. ESR is scheduled for deployment in May 2003. 
NSIPS is scheduled for final milestone decision this month, which will 
provide full pay and personnel functionality.
    - The Defense Integrated Military Human Resources System (DIMHRS). 
DIMHRS (Personnel and Pay) is a joint Services program to provide a 
single, fully integrated, military personnel and pay system for all 
military components. DIMHRS goal is to provide the military Services 
and their components the capability to effectively manage personnel 
across the full operational spectrum--during peacetime and war, through 
mobilization and demobilization capturing accurate and timely data 
throughout. DIMHRS will collect, store, pass, process, and report 
personnel and pay data for all active, Reserve, Guard, and retired 
personnel. It will provide Joint Commanders with access to accurate and 
timely data on the number, characteristics, location, and status of all 
deployed personnel. With the new system, actions such as changing 
personnel location, personnel status and unit assignment updates for a 
member of any Service or component could be accomplished by a servicing 
technician from any other Service or component. DIMHRS' scope 
encompasses core functionality required by all Services and any 
Service-specific functionality required to turn off their legacy 
systems.
    Navy fully supports DIMHRS program objectives and considers it to 
be the Navy HR system of the future. DIMHRS will provide core personnel 
and pay functionality and a common Enterprise Resource Planning 
software platform, PeopleSoft Human Capital Management (HCM), for 
integration across Navy HR functions. A governing principle of our IT 
strategy is to leverage the infrastructure to accelerate the 
transformation of Navy HR. This strategy capitalizes on DIMHRS 
enterprise software to extend industry best practices to Navy functions 
outside the scope of DIMHRS. To that end, we are currently engaged in 
data cleansing, Business Process Reengineering and prototyping to align 
our processes with the DIMHRS enterprise COTS processes. When fully 
developed, the PeopleSoft enterprise solution will enable sailors to 
access their personal information, track their training and manage 
their career paths from their home, ship, or base--all through a web 
browser.
    Over the past year, I have been engaged in a collaborative effort 
with PEO-IT, SPAWAR, SPAWAR Information Technology Center, Naval 
Reserve Force, Navy Personnel Command, and the Naval Education and 
Training Command to develop a plan to accelerate SIHRS, and the 
migration to a single integrated capability. The cornerstone of SIHRS, 
and the focus of the migration planning, is an architecture that 
provides a single authoritative source for all manpower and personnel 
data. The SIHRS migration strategy developed by this partnership will 
capitalize on existing acquisition programs and ease the Navy's 
transition to DIMHRS. DIMHRS current schedule calls for the replacement 
of Navy personnel systems by fiscal year 2007. In the interim, we will 
use NSIPS and the Electronic Military Personnel Records System (EMPRS), 
the Navy's personnel records repository, as the staging ground for the 
transition to DIMHRS. This migration strategy will position Navy 
manpower and personnel systems to transition to DIMHRS and allow us to 
work toward a single authoritative data source as the IT foundation for 
Sea Warrior in advance of DIMHRS availability. Consistent with CNO's 
direction, it will consolidate and reduce the number of legacy systems 
from 78 to 9 modernized systems.
    - Web-Enabled Systems. Improved communications capability and web-
enabling technology offer the opportunity to radically improve customer 
service and access to Navy HR data for headquarters, commands, 
individual sailors and Navy families. Industry has shown both the 
direction and the potential gains from enterprise adoption of web 
technology and data consolidation. As Task Force Web's Capstone 
Document notes, ``while their [industry's] line of business processes 
such as manufacturing and supplier relations have been deeply affected, 
the true revolution is in administrative processes.'' Broad access to 
data is a key enabler for the Sea Warrior cultural change. The 
combination of NMCI and Task Force Web are establishing the foundation 
for Navy's goal of integrated and transformational data exchange and a 
web-based business and operations capability.
    Navy's Task Force Web project team has cited our Task Force Web 
Team for its progress toward web-enablement. Six BUPERS applications 
have migrated to the Navy's pilot portal, an additional 19 applications 
have achieved a basic level of web accessibility. These web 
applications are making available the information needed by sailors to 
track, manage and make decisions about their careers, and moving us 
toward a sailor-centric career management process. Sailors are able to 
access their physical readiness test scores, performance summary 
records and promotion lists online, keep up-to-date on retention and 
distribution programs and incentives, and view and apply for jobs via 
the Web. In addition, the BUPERS Online Media Modernization initiative, 
a collaborative effort between BUPERS and the SPAWAR Information 
Technology Center (SITC), has converted over 95 percent of all paper-
based personnel, distribution, and manpower reports produced by 
mainframe systems to online access. The reports, which previously were 
available only in hard copy, represent an annual volume of 800 million 
lines of print. Currently, we have deployed a web-based Mobilization 
Tracking System with a centralized order writing capability for 
deployment at headquarters and Naval Reserve Activities. The system 
will replace a paper-based, manpower-intensive process and allow end-
to-end tracking of recalled/mobilized reservists as they move through 
mobilization and demobilization processes.

                                SUMMARY

    I have informed my team that vision without execution is a recipe 
for disappointment; and that our number one customer is the Combatant 
Commander requiring combat capability when requested, anywhere in the 
world. Our Navy Sea Warriors deliver that combat capability. Our fiscal 
year 2004 budget request fully supports our personnel policies and 
programs and will help to improve operational readiness and ensure 
mission success.
    I look forward to the challenges that lie ahead, working with Navy 
and Defense leadership, under the direction of our Commander in Chief 
and with guidance and support from Congress. The challenges are many, 
but the potential for success abounds. Together--we must win; America 
and the free world are counting on it; and, they deserve nothing less 
than our total commitment.

    Senator Chambliss. Thank you, Admiral.
    General Parks.

  STATEMENT OF LT. GEN. GARRY L. PARKS, USMC, DEPUTY CHIEF OF 
 STAFF FOR MANPOWER AND RESERVE AFFAIRS, UNITED STATES MARINE 
                             CORPS

    General Parks. Mr. Chairman, Senator Nelson, Senator Pryor, 
it is my pleasure to report on the personnel status and future 
manpower picture of your Marine Corps. Thank you for your 
support of our marines and their families.
    Today, our Corps is comprised of men and women of character 
with a strong work ethic and a desire to be challenged, and 
certainly we do not disappoint them. They are obviously very 
busy today. These are demanding times for our Armed Forces. As 
my colleagues have mentioned, we have 63 percent of our 
operating forces currently deployed and, as of yesterday, 
17,716 Reserve marines have been mobilized in support of the 
global war on terrorism. Our selected Marine Corps Reserve and 
Individual Ready Reserve are instrumental in the support that 
we need to have a total force warfighting organization.
    Again, like my colleagues, our current picture is very 
healthy. Our superb recruiters have met their mission for the 
past 7\1/2\ years. Our first term retention program will cap 
its 10th year of success this year. A new program we 
established for career marines will also meet its target this 
year, and we will have an 18-year high on retention for our 
officers.
    Last year, Congress upon our request granted us a 2,400 
marine increase. That could not have come at a better time, 
based on the demands placed on our force, and with the 
accession and retention postures that I have described, we are 
well situated to enter the environment that we are currently 
in.
    In large part, marines join and remain because of the 
institutional culture and the core values that we have, but 
they also expect and rate reasonable pay and compensation. The 
fiscal year 2004 budget continues to raise basic pay and reduce 
out-of-pocket expenses for housing, and provides valuable 
funding for our retention and recruiting programs.
    Currently, in addition to the things I have outlined, we 
are obviously very focused on taking care of those marines who 
are not forward-deployed, and also for their wonderful families 
who are so supportive. Thank you for your support, and 
everything that you do for your Marine Corps, and I look 
forward to answering your questions.
    [The prepared statement of General Parks follows:]

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

    Chairman Chambliss, Senator Nelson, and members of the 
subcommittee: I am honored to appear before you today to provide a 
personnel overview on the United States Marine Corps. The continued 
commitment of Congress to increasing the warfighting and crisis 
response capabilities of our Nation's Armed Forces and to improving the 
quality of life of marines is central to the strength that your Marine 
Corps enjoys today. We thank you for your efforts to ensure that 
marines and families are poised to respond to the Nation's call in the 
manner Americans expect of their Corps.

                              INTRODUCTION

    Marines are fully engaged around the world proudly meeting our 
commitments in support of national security requirements. Today 63 
percent of our operating forces are forward deployed. In support of 
this and other requirements, 15,022 Reserve Marines are mobilized. As 
with all the Armed Forces, it is a demanding time for the Corps. 
However, this is what marines train for and this is why we serve, to be 
ready to answer our Nation's call. As busy as we have been, and are 
today, indicators for the health of the Corps remain strong.

         Our superb recruiters continue to meet their mission, 
        as they have month after month for the last 7\1/2\ years.
         As has been the case for the past 9 years, we are on 
        track to meet our annual retention goal for first term marines 
        electing to become members of the career force. This year, 
        6,014 first term marines will reenlist, 26 percent of the 
        eligible population.
         Last year we implemented specific targets for 
        subsequent retention within the career force to further manage 
        the health of our Corps; targets we met. We are well on our way 
        to meeting the fiscal year 2003 career force retention goal of 
        6,172.
         Last year we achieved an 18-year high in officer 
        retention, 92.8 percent.

    Obviously, the recognition of and support by Congress to ensure 
reasonable pay and compensation improvements provides the environment 
crucial to the success experienced to date.
    The end strength increase for the Marines Corps authorized by 
Congress for fiscal year 2003, to 175,000, complements the demanding 
environment we face. By the end of this fiscal year we will essentially 
complete the ``making'' of these additional 2,400 marines, allowing for 
redistribution of the marines pulled from other requirements to 
activate the 4th Marine Expeditionary Brigade (Antiterrorism).
    The fiscal year 2004 budget funds a force of 175,000 active duty 
marines and 39,558 Reserve marines. Roughly 70 percent of our manpower 
personnel budget funds basic pay and retired pay accrual. Essentially 
all of the remaining funds address regulated and directed items such as 
Basic Allowance for Housing, Defense Health Care, Subsistence, 
Permanent Change of Station relocations, and Special and Incentive 
pays. Only 1 percent of the manpower budget is available to pay for 
discretionary items such as our Selective Reenlistment Bonus, Marine 
Corps College Fund recruitment program, and Aviation Continuation Pay. 
While this is a manageable amount, it is one with little flexibility.
    The Marine Corps appreciates the efforts by this committee to raise 
the standard of living for our marines. Being a marine is challenging 
and rewarding. America's youth continue to join the Marine Corps, and 
remain, in a large part because of our institutional culture and core 
values. However, it is important that the environment--the other 
factors in the accession and retention decision--remain supportive, to 
include compensation. Compensation is a double-edged sword in that it 
is a principle factor for marines both when they decide to reenlist and 
when they decide not to reenlist. Private sector competition will 
always seek to capitalize on the military training and education 
provided to our marines--marines are a highly desirable labor resource 
for private sector organizations. The support of Congress to continue 
reasonable increases in basic pay, eliminating ``out of pocket'' 
expenses associated with the Basic Allowance for Housing, and ensuring 
sound compensation and entitlements will greatly assist efforts to 
recruit and retain the quality Americans you expect in your Corps.

                               RECRUITING

    In fiscal year 2002, the Marine Corps realized unprecedented 
recruiting success, achieving 102.6 percent of enlisted contracting and 
100.1 percent of enlisted shipping objectives. Over 97 percent of those 
shipped to recruit training were Tier 1 high school diploma graduates, 
well above the Department of Defense (DOD) and Marine Corps standards 
of 90 percent and 95 percent, respectively. In addition, 69.6 percent 
were in categories I-IIIA; again well above the DOD and Marine Corps 
standards of 60 percent and 63 percent, respectively. For officers, 
over 100 percent of objectives in all categories were achieved.
    The Marine Corps is grateful to Congress for the legislation 
enabling recruiter access to high school student directory information. 
As a result, the number of high schools not providing directory 
information has decreased 99 percent. America's youth can learn of 
career opportunities in both the public and private sectors now that 
our recruiters are afforded access equal to other prospective 
employers. We look forward to your continued support as we strive to 
meet the increasing challenges of a dynamic recruiting environment.
    The key tenants of our fiscal year 2003 recruiting strategic plan 
are:

         Exploiting success through focused leadership; 
        selecting the Corps' best for recruiting duty and innovative 
        marketing;
         Achieving the next level of organizational efficiency 
        and effectiveness with a renewed emphasis on fiscal 
        accountability and comprehensive organizational review and 
        restructure;
         Recruiting our own recruiters, by making recruiting 
        duty a place where marines want to be assigned; and
         Improving safety and quality of life for marines and 
        families.

Exploiting Success
    The Marine Corps' recruiting environment is dynamic and 
challenging, particularly as regards market propensity. Nevertheless, 
we have met the challenges of this dynamic environment for 7\1/2\ years 
and we plan to ``Sustain Success,'' the motto for our strategy. Our 
success, as we face the challenges of the future, will hinge on our 
ability to overcome the low propensity of our target market that enlist 
and the increased cost of advertising, while maintaining innovation in 
our marketing campaign. Marketing by its very nature requires constant 
change to remain virulent and relevant. While our brand message of 
``Tough, Smart, Elite Warrior'' has not changed in theoretical 
perspective, the Corps continues to explore the most efficient manner 
to communicate and appeal to the most qualified young men and women of 
the millennial generation; our target market.
    This year, as in the past, our core programs that generate leads 
and provide effective sales support materials are augmented with 
several innovative programs. The new Marines.com Web site is already 
attracting attention and recently received a Gold ``ADDY'' award from 
the American Advertising Association in the Southeast regional 
competition. The new Public Service Announcement, ``Origins,'' was also 
recognized with a Bronze ``ADDY'' award in the same competition.
    All aspects of our marketing strategy encompass diversity. It is 
this approach, combined with exploiting success of past years, that 
will sustain success in fiscal year 2003.

Achieve the Next Level of Organizational Efficiency and Effectiveness
    The structure of our recruiting organization is an essential 
foundation for success, particularly in operating effectively and 
efficiently. Therefore, we have completed the reorganization of Marine 
Corps Recruiting Command (MCRC) Headquarters to mirror that of our 
subordinate commands and other operational commands in the Marine 
Corps. In fiscal year 2002, MCRC assumed responsibility for prior 
service Reserve recruiting operations, to truly become a total force 
recruiting service. Combining Reserve prior service recruiting with 
regular recruiting produces a synergistic effect, which allows MCRC to 
``by all means available'' seek out and close with our target market, 
in the face of uncertain economic and world political events.

Recruit the Recruiter
    Because recruiters who volunteer for this demanding duty perform 
better and subsequently experience a better quality of life, MCRC has 
taken some cost effective measures to recruit our own recruiters. 
Incorporating some of the marketing techniques and web design that have 
supported our regular recruiting efforts, we have been able to reach 
out to the remainder of the Marine Corps with a message capturing the 
benefits and rewards of recruiting duty. As a result of this ``Recruit 
the Recruiter'' initiative, our recruiter volunteer rate in fiscal year 
2002 rose by nearly 10 percent over that realized in previous years.

Safety and Quality of Life
    Marine Corps recruiting remains committed to improving the health 
and safety of all marines, sailors, civilian marines, and members of 
the officer and enlisted entry pools. Operational risk management and 
traffic safety are emphasized at all levels and in both on and off duty 
activities. Our goal is to continue to attain the recruiting mission 
while minimizing risk, and the potential for loss of life and 
equipment.
    Continuous improvement in quality of life for our personnel is 
vitally important as well. Our marines and families are dispersed 
throughout America, away from the traditional support systems of our 
bases and stations. Therefore, we expend great effort to ensure 
awareness of numerous support programs adapted for their benefit. One 
such program is a DOD pilot, MCCS One Source, being offered Marine 
Corps wide. MCCS One Source offers assistance, advice, and support on a 
wide range of everyday issues. This 24/7, 365 day-a-year, enhanced 
employee assistance service can be accessed anytime via toll free 
numbers, email, or the Internet and is especially useful for remote 
marines, such as recruiters.
    Our success in recruiting hinges on our recruiters whose efforts 
and dedication to the task provide our institution with its next 
generation of warriors. Our recruiters are the Corps' ambassadors to 
the American public and represent the virtues of the Marine Corps in a 
single individual.

                               RETENTION

    A successful recruiting effort is but one part of placing a 
properly trained marine in the right place at the right time. The 
dynamics of our manpower system 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 employers actively solicit our 
young Marine leaders for private sector employment. Leadership 
opportunities, our core values, and other similar intangibles are a 
large part of the reason we retain dedicated men and women to be active 
duty marines after their initial commitment. Of course retention 
success is also a consequence of the investments made in tangible forms 
of compensation and in supporting our operational forces--giving our 
marines what they need to do their jobs in the field, as well as the 
funds required to educate and train these phenomenal men and women.

Enlisted Retention
    Our enlisted force is the backbone of our Corps and we make every 
effort to retain our best people. Although we are experiencing minor 
turbulence in some specialties, the aggregate enlisted retention 
situation is extremely encouraging. Primarily because these young 
Marines remain in high demand in the civilian sector, some shortages 
exist in high-tech Military Occupational Specialties that represent an 
important part of our warfighting capability.
    We are a young force, making a continued flow of quality new 
accessions of foundational importance to well-balanced readiness. Of 
the 156,912 active duty enlisted force, over 25,000 are still teenagers 
and 104,000 are on their first enlistment. As noted at the outset, in 
fiscal year 2003 we will reenlist approximately 26 percent of our first 
term eligible population. These 6,014 marines represent 100 percent of 
the career force requirement and will mark the 10th consecutive year 
that the Corps will achieve this objective. Prior to fiscal year 2002, 
we recognized a slight increase in the number of first term marines 
that we needed to reenlist. To counter this rising first term 
reenlistment requirement, the Corps focused greater attention on 
retaining marines during their 6th through 12th years of service. 
Specifically, in fiscal year 2002 we introduced the Subsequent Term 
Alignment Plan (STAP) to focus on retaining experience. The first year 
of STAP proved to be a huge success meeting our goals and achieving a 
96 percent MOS match. A stabilized continuation rate ensures manageable 
requirements for first term reenlistments. Given the strong draw from 
the civilian sector, further emphasis in retention of our career force 
was achieved by effectively targeting 40 percent of our Selective 
Reenlistment Bonus program resources to maintain this experience level 
on par with previous years.
    A positive trend is developing concerning our first term non-
Expiration of Active Service (EAS) attrition. As with fiscal years 2001 
and 2002, we continue to see these numbers decrease. The 
implementation, now nearly 7 years ago, of the Crucible and the Unit 
Cohesion programs is contributing to improved retention among our young 
marines who assimilate the cultural values of the Corps earlier in 
their career. The impact of lower non-EAS attrition allowed a reduced 
accession mission in both fiscal year 2002 and fiscal year 2003.
    The Marine Corps fully expects to meet 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 
pleased with the accomplishments thus far.
    Specialty shortages are addressed 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. The Marine Corps 
allocated $51.7 million in fiscal year 2003 toward new SRB payments to 
assist our reenlistment efforts. These payments, just one-half of 1 
percent of our manpower personnel budget, are split 60/40 between first 
term and career force reenlistments, respectively. The SRB program 
greatly complements reenlistment efforts and clearly improves retention 
within our critical skill shortages. In fiscal year 2003, the Corps 
continues to pay lump sum bonuses, thus increasing the net present 
value of the incentive and positively influencing highly qualified, yet 
previously undecided, personnel. It is a powerful incentive for the 
undecided to witness another marine's reenlistment and receipt of his/
her SRB in the total amount. With the added benefit of the Thrift 
Savings Program, our marines can now confidently invest these funds 
toward their future financial security.

Officer Retention
    Overall, officer retention continues to experience great success. 
In fiscal year 2002, our aggregate officer retention rate reached an 
18-year high of 92.8 percent. The significant increase in our officer 
retention rate involves a reduction in voluntary separations. This has 
likely been positively influenced by the terrorist attacks of September 
11 and the current economic conditions. As with the enlisted force, we 
have some skill imbalances within our officer corps, especially 
aviation, intelligence, and command and control.
    Although we are cautiously optimistic, fixed wing pilot retention 
remains a concern. Fixed wing pilot ``take rates'' for the fiscal year 
2002 Aviation Continuation Pay plan did not meet retention targets due 
to an inadequate eligible population resultant from previous years' 
losses. We will likely meet the aggregate fiscal year 2003 retention 
target for aviators based on ``take rates'' from the rotary wing and 
naval flight officer communities. Retaining aviators involves a 
concerted effort in multiple areas. Recent retention initiatives (i.e., 
Marine Aviation Campaign Plan, reducing the time to train, and pay 
reform) provide corrective steps to strengthen the Marine Corps' 
position toward retaining aviation officers. Additionally, 
supplementary pay programs such as Aviation Continuation Pay provide a 
proactive, long-term aviation career incentive to our field grade 
aviators. We remain focused on retaining mid-grade aviators (junior 
majors and lieutenant colonels) and will continually review our overall 
aviation retention posture to optimize all our resources. 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 2003 and 
expect to start fiscal year 2004 poised for continued success. Even 
though managing our retention success offers new challenges--sustaining 
quality accessions, maintaining the appropriate grade mix, and 
balancing occupational specialties--we will press forward and 
effectively manage this process. In this challenging recruiting and 
retention environment, the Marine Corps remains optimistic and 
anticipates these positive trends will continue, thanks in large 
measure to the continued support of Congress.

                              END STRENGTH

    The congressionally-authorized increase in Marine Corps end 
strength to 175,000 allows us to sustain the increased missions 
associated with the activation of the 4th Marine Expeditionary Brigade 
(Anti-Terrorism), in response to the global war on terrorism. As 
previously noted, we are well along the way in ``making'' these 2,400 
marines. Yet it will take the remainder of fiscal year 2003 to complete 
this process. This additional end strength allows us to replace marines 
in the active units that we ``borrowed'' standing up the Brigade, which 
not only provides the Nation with a robust, scalable force option 
specifically dedicated to anti-terrorism, but also a fully mission 
capable Marine Corps. The timing of the increased end strength could 
not have been more fortuitous given world events and demand for Marine 
forces. The increased end strength, our recruiting success, the strong 
retention of our first term population as well as the career force, our 
18-year high retention rate for officers--these factors combine to 
allow your Marine Corps to be well postured for the uncertain times 
that lie ahead as we continue to prosecute the war on terror and 
respond to the call of our Nation.

             MARINE CORPS RESERVE--PARTNERS IN TOTAL FORCE

    The integration of active and Reserve components of the Marine Air-
Ground Task Force (MAGTF) into a Total Force Marine Corps is the 
foundation of our operational fighting force. We advance this Total 
Force capability by ensuring the integration of the active and Reserve 
components in all aspects of our training and operations, to include 
the primary mission of augmentation and reinforcement. Reserve units 
and Individual Ready Reserve Marines provided over 1.8 million man-days 
in fiscal year 2002 through support at all levels within the Marine 
Corps and within the Joint communities, to include Joint Task Forces, 
Combatant Commands, and Interagency Staffs.
    Reserve participation in the South American UNITAS exercise, 
security assistance at Guantanamo Bay, KC-130 support of the 13th MEU 
(SOC) in Afghanistan, ``on call'' forces to support the Federal 
Emergency Management Agency's role in homeland security and support of 
Joint Task Force 6, and Joint Interagency Task Forces--East and West in 
our Nation's continued counter drug effort are but a few examples of 
our Reserve's involvement and commitment to the Total Force effort.
    The Marine Forces Reserve will retain their current basic 
structure. However, we are currently working to transform this 
structure and create new capabilities through a comprehensive review 
designed to adapt the Reserve Force to the changing demands of the war 
on terrorism and conflicts of the future.

Active Duty Special Work
    The Active Duty Special Work (ADSW) Program funds short tours of 
active duty for Marine Corps Reserve personnel. This program continues 
to provide critical skills and operational tempo relief for existing 
and emerging augmentation requirements of the Total Force. The demand 
for ADSW has increased in order to support pre-mobilization activities 
and will be further challenged during post mobilization. In fiscal year 
2002, the Marine Corps executed 907 work-years of ADSW. Continued 
support and funding for this critical program ensures our Total Force 
requirements are fully met.

Reserve Recruiting
    As presented earlier, fiscal year 2002 marked the first year that 
Marine Corps Recruiting Command assumed responsibility for recruiting 
prior service marines. The synergy achieved by placing all Reserve 
recruiting within Marine Corps Recruiting Command will keep our Reserve 
Force strong and manned with the proper MOS distribution. The fiscal 
year 2002 recruiting goals were met, accessing 5,904 non-prior service 
marines and 4,213 prior service marines. Fiscal year 2002 success in 
prior service accessions is significant as our active component 
retention rates are at historic highs, reducing the number of marines 
leaving active duty and concurrently reducing the pool for prior 
service recruiting. This successful accession rate reflects the 
professionalism of our Marine Forces Reserve, a professionalism that 
attracts these individuals.
    Our most challenging recruiting and retention issue is manning our 
Selected Marine Corps Reserve units with qualified company grade 
officers--lieutenants and captains. The Marine Corps recruits Reserve 
officers almost exclusively from the ranks of those officers who have 
first served an active duty tour. This practice ensures our Selected 
Marine Corps Reserve unit officers have the proven experience, 
knowledge, and leadership abilities when we need them the most--during 
mobilization. However, at the same time, this limits the recruiting 
pool we can draw from to staff our units. We are attempting to improve 
Reserve participation of company grade officers through increased 
recruiting efforts, greater command focus on Reserve participation upon 
leaving active duty, and Reserve officer programs for qualified 
enlisted marines.

Marine for Life
    The Marine For Life Program is an initiative reinforcing the value 
of honorable service and commitment to our ethos ``Once A Marine, 
Always A Marine.'' Annually, we transition back to society nearly 
27,000 marines who have served honorably. The Marine For Life Program 
enhances the transition support for these marine citizens and utilizes 
our Marine Corps Reserve serving in local communities around the 
country to act as hometown links. These links build relationships with 
veteran marines and marine-friendly organizations that have a desire to 
help transitioning marines. We realize that we will all spend more time 
as marines out of uniform than we will spend in uniform. Marine For 
Life embraces this reality, to the benefit of marines and society.

                              MOBILIZATION

    Since the tragic attacks of September 11, the Marine Corps 
judiciously activated Individual Ready Reserve (IRR) marines in 
response to both internal and joint operational requirements. The 
Marine Corps maximized the use of volunteers to meet these 
requirements, primarily in the areas of staff augmentation and force 
protection. In addition, Selected Marine Corps Reserve (SMCR) units 
were activated for force protection requirements in support of homeland 
security. In late February 2002, the Marine Corps reviewed requirements 
and reduced the number of reservists on active duty from a high of 
4,445 to approximately 3,900. We held this prudent course until early 
in this calendar year. Due to the emerging requirements associated with 
the war on terrorism, it was necessary to involuntarily recall some 
IRRs beginning January 17, 2003. As of March 5, 2003 we have 15,022 
marines mobilized; 13,189 SMCR, 1,132 IRRs, 668 Individual Mobilization 
Augmentees, 25 voluntary retired recalls, and 8 SMCR ADSW-Contingency 
Operations. For further specificity, we have 404 volunteer IRR marines 
in their second year of mobilization.
    The Marine Corps sincerely appreciates the support of the public 
and private sector employers of our men and women serving in the 
Reserve component. Their sacrifices and commitment to these special men 
and women are exceptional, and often at levels that far exceed their 
mandates. Without this supportive environment it would be difficult to 
envision the ability to properly man our critical Reserve Forces.

                               STOP LOSS

    As we did with mobilization, the Marine Corps consciously exercised 
judicious use of its Stop Loss authority. Between September 11, 2001 
and January 15, 2003, the Marine Corps retained only 337 marines beyond 
their end of active service. At any point in time this number averaged 
approximately 100. However, driven by prudent planning and a dynamic 
situation, on January 15, 2003, the Marine Corps instituted Stop Loss 
across the Corps to meet the emerging requirements associated with the 
expanding war on terrorism. Stop Loss was initiated to provide unit 
stability/cohesion, sustain small unit leadership, maintain unit 
readiness, meet expanded force protection requirements, and to reduce 
the requirement to activate IRR personnel. We will ensure judicious use 
of this authority and continue to discharge marines for humanitarian, 
physical disability, administrative, and disciplinary reasons. We have 
instructed our general officers to continue to use a common sense 
approach and have authorized them to release marines from active duty 
if it is in the best interest of the Marine Corps and the marine. 
Currently, we have 1,566 active and 2,668 Reserves on Stop Loss. Only 
197 of the reservists on Stop Loss have been mobilized.

       MANAGING TIME AWAY FROM HOME--(PERSONNEL TEMPO--PERSTEMPO)

    The Marine Corps is in compliance with PERSTEMPO legislation, and 
continues to maintain the OSD tracking and reporting criteria. We 
remain committed to maintaining the proper balance between operational 
deployments and the quality-of life of our marines and their families. 
Having said this, marines join to train and deploy, and we do not 
disappoint them. Service in the Marine Corps requires deployments for 
readiness and mission accomplishment. The existing PERSTEMPO 
legislation is inconsistent with the Marine Corps' expeditionary, 
forward deployed nature and could have adverse effects on our unit 
cohesion, stability, training, and readiness. We support changes that 
retain the original intent of the legislation, better balance the needs 
of the Services with the needs of the service members and their 
families, and provide compensation to members for excessive deployments 
that is better aligned with similar payments for burdensome duties. 
Currently, we have 382 marines in excess of the 400-day threshold 
identified in the original legislation.

                        NATIONAL CALL TO SERVICE

    The Marine Corps is working with DOD to establish implementation 
guidance for the National Call to Service (NCS) requirement contained 
in the Bob Stump National Defense Authorization Act for Fiscal Year 
2003. We desire to link active and Reserve service periods together to 
meet the needs of the Corps, primarily in the homeland security areas. 
Marines accessed via the NCS program would serve their 15 months of 
active duty with the 4th MEB AT Battalion, Chemical Biological Incident 
Response Force, Marine Security Forces, or base/station AT/FP units. 
Reserve service would be aligned to the counterpart units of the active 
component. We are also considering providing a limited number of the 
NCS accessed marines with training in high demand/low density Reserve 
MOSs, such as intelligence, linguists, and aerial navigation. These 
marines would spend their active duty period primarily in training, but 
then would be assigned to SMCR units where their skills could be 
readily utilized. We anticipate commencing the recruiting for this 
program in October 2003.

                             IT INNOVATION

    To properly manage the resources entrusted to us, it is necessary 
to have and maintain capable tools. Planning for and managing manpower 
requirements--including addressing mobilization challenges, determining 
stop loss requirements, and tracking PERSTEMPO information mentioned 
previously--requires effective and relevant automation and IT systems 
for manpower modeling, manpower management, and personnel servicing. 
When competing with weapons systems and near term resource 
requirements, it is easy to bypass proper investment in these 
management systems. However, though not perfect, we are proud of the 
portfolio in place to support our manpower processes and are committed 
in the budget to continuing appropriate reinvestment.
    The Marine Corps benefits from a fully integrated pay and personnel 
system. This system, the Marine Corps Total Force System (MCTFS), 
incorporates all active, Reserve, and retired pay and personnel 
records. Having an integrated Total Force System minimizes difficulties 
for our Reserves as they are mobilized. The MCTFS serves as the 
foundation for ongoing re-engineering of our administrative 
occupational field into the Total Force Administration System (TFAS). 
This TFAS will execute a web-based, virtually paperless self-serve 
capability for all marines via our web portal, Marine On-Line.
    We have also integrated data via MCTFS by leveraging the 
information contained in the Operational Data Store Enterprise and the 
Total Force Data Warehouse to create the foundation of a shared data 
environment. This allows full integration of our digitized personnel 
files with the Marine Corps promotion board process, giving us the most 
advanced and comprehensive promotion process among the Services.
    In addition, the Marine for Life and Civilian Marine Web sites 
provide valuable tools to our uniformed and civilian marines. Marine 
for Life provides an electronic reach back to those Marines who 
honorably leave the Corps as they return to civilian life. The maturing 
Civilian Marine Web site will provide a ``one-stop'' site to allow our 
civilian marines to manage their careers from their desktops.

                            CIVILIAN MARINES

    Civilian marines are integral to the Corps' Total Force concept. We 
have approximately 25,000 civilian marines, of which 13,000 are 
appropriated fund (APF) employees and about 12,000 are nonappropriated 
fund (NAF) employees. Our APF civilian marines comprise just 2 percent 
of the total DOD civilian workforce. The Marine Corps has one APF 
civilian marine per 12 active duty marines. The remaining half of our 
civilian marines, our NAF personnel, are primarily resourced by 
revenue-generating activities and services such as exchanges, clubs, 
golf courses, bowling centers, gas stations, and dry cleaners. Our 
civilian marines fill key billets aboard Marine Corps bases and 
stations, thus freeing active duty marines from supporting 
establishment responsibilities to perform their warfighting 
requirements in the operating forces.
    This past December we introduced our Civilian Workforce Campaign 
Plan, covering the period 2002-2007, that outlines the Corps' strategy 
to enhance civilian workforce management and development. As with the 
challenge faced across the Federal Government, 30 percent of our APF 
civilian marines will be retirement eligible within the next 5 years. 
Though we project that just 25 percent of those eligible will retire, 
our growing retirement eligible population further necessitates prudent 
planning and consideration. By investing up front in our civilian 
marine workforce, we believe we can recruit, develop, and retain 
quality workers in both the near and long term.
    To increase the technical expertise and improve career 
opportunities for our civilian marines, we have established 21 civilian 
``Communities of Interest'' with a senior civilian heading each 
community. Similar to our military occupational fields, these career 
communities have identified job competencies and training requirements, 
and defined career paths. Through a corporate approach to attract, 
develop, and retain an expert civilian workforce, and with the 
concentrated effort of the general officers and senior executives in 
our Corps, we will successfully ensure the needs of the Marine Corps 
and our civilian marines are met.
    We continue to make strides in how we recognize the value of our 
civilian workforce and its contributions to the success of the Corps. 
From the symbolic, such as our Marine Corps Civilian Service Pin, to 
the investment we are making in civilian career and leadership 
development, our efforts will support our positioning to be the 
employer of choice.

                    CARING FOR MARINES AND FAMILIES

    The Marine Corps cultivates an ethos of taking care of marines and 
their families. Our continuum of care begins with the ``yellow 
footprints'' at basic training and continues throughout the life of a 
marine. Marines are marines for life. Legendary hallmarks of ``Once A 
Marine, Always A Marine'' and ``Semper Fi'' prove our long-term 
commitment and provide convincing testimony from marines that they are 
forever changed and a part of a society that is sustained through self-
perpetuation and shared culture.
    Beyond the superb quality of our recruiters, accomplishment of our 
recruitment mission is enhanced by our study and knowledge of the 
demographics of the American public--the potential market for our 
Corps. As it is with recruiting, our ability to sustain or take care of 
marines and their families is based on a thorough understanding of 
Marine Corps demographics. Consider the following facts that outline 
the Marine Corps as the youngest, most junior, and least married of the 
four Military Services.

         66 percent of marines are 25 or younger.
         27 percent of marines are under 21.
         42 percent of marines are Lance Corporals (pay grade 
        E3) or below.
         40 percent of marine spouses are age 25 or younger.
         Average marine is 23 years old at the birth of his/her 
        first child.
         Only 5,300 marines are single parents.
         Average age of a married enlisted marine is 28.
         44 percent of active duty marines are married.

                 Among Privates and Lance Corporals, 19 percent 
                are married.
                 Among Corporals and Sergeants, 51 percent are 
                married.
                 Among Staff Non-Commissioned Officers, 84 
                percent are married.

    Understanding these marine specific demographics helps us 
effectively identify needs and target support. It also orients our 
program planners and ensures we balance the support provided between 
groups, younger versus older, and married versus single. In this way, 
we stay connected and maintain our leading edge.
    Quality of Life (QOL) in the Marine Corps has been studied for over 
10 years. Our third administration of the Marine Corps Quality of Life 
Study was conducted in 2002 and we are now beginning the hard work of 
in-depth analysis. The results of this study and our subsequent work 
are important given the qualitative and quantitative link between QOL 
satisfaction and recruitment, retention, and readiness. Over the last 
decade, the Marine Corps, through congressional support, invested 
resources designed to increase income and standard of living, 
revitalize housing, and enhance community services for our marines. The 
living conditions for our marines and families have been objectively 
improved by almost any measure. Yet, a significant finding from the 
2002 study was an ``across-the-board'' decrease in the QOL satisfaction 
of marines when compared to measurements from the 1998 QOL Study, most 
substantial for junior enlisted marines (Sergeant and below).
    The reasons for this decline will be closely examined. However, one 
important finding identified that ``expectations'' are a relevant 
dynamic to QOL satisfaction. When measuring QOL satisfaction, we in 
large part measure the delta between what the Marine Corps provides and 
the internal expectations marines and their families have as they 
compare themselves to peers, civilian counterparts, or family members.
    Understanding what drives expectations and determining the 
appropriate response is clearly a challenge in taking care of marines 
and their families. We accept the challenge and believe that our 
efforts will help shape the future of QOL support. We expect to gain 
knowledge of the influence of generational and societal changes on the 
Marine Corps and the subsequent impact to QOL support and the manner of 
service delivery. This knowledge will assist with better definition of 
the ``benefit package'' provided by the Corps. Additionally, we will 
assess the relationship of QOL to other human resources strategies to 
ensure we are achieving our goals.
    While it is important to plan for the future of Marine Corps QOL, 
it is equally important to evaluate the current state. With 63 percent 
of our operating forces forward deployed, our ``taking care'' mission 
is both expeditionary to support them, and fixed at needed levels 
aboard Marine Corps bases and stations to sustain the marines and 
families left behind. Depending on the intensity and duration of the 
deployment or contingency, deployment recreation support kits (``mount 
out blocks'') are provided to meet operational command requirements and 
can include fitness equipment; sports equipment; electronic equipment; 
and leisure items. In addition, Tactical Field Exchanges, ``theaters in 
a box,'' and miscellaneous books and recreational supplies may also be 
provided to embarked or ``in-country'' marines depending on the 
operational command requirements. By February of this year, five Marine 
Corps Exchange/Army Air Force Exchange Tactical Field Exchanges had 
been established in Southwest Asia.
    When deployed, marines depend upon the Corps to support their 
families. Our major bases and stations provide the needed comfort and 
support specifically designed to address the challenges of the military 
lifestyle. Supporting reservists on active duty provides an added 
challenge as their families are spread throughout America. The Key 
Volunteer Program serves as the official communication link between the 
deployed command and the families. To build awareness of life in the 
Marine Corps, our Lifestyle Insights, Networking, Knowledge and Skills 
(L.I.N.K.S.) Program is provided to new marine spouses to acquaint them 
with military lifestyle and the Marine Corps. We are currently 
preparing an online and CD-ROM version of L.I.N.K.S., which we expect 
to make available early this summer. Special deployment support links 
have been built on Marine Corps Web sites to connect families and 
provide information. Finally, we are proud to be the Department of 
Defense pilot for implementation of an enhanced employee assistance 
program. Marine Corps Community Services One Source is a 24/7, 365 day-
a-year, information and referral service designed to reach both active 
duty and Reserve families wherever they may be located. It can be 
accessed anytime via toll free numbers, email, or the Internet. The 
support includes parenting and childcare, education services, financial 
information and advice, legal, elder care, health and wellness, crisis 
support, and relocation. The Corps just implemented its pilot program 
across the United States and overseas in December 2002. We are excited 
about the possibility of extended support capabilities and how that 
will contribute to the well being of marines and their families.
    For Marine Corps families, Marine Corps Family Team Building 
(MCFTB) and other Marine Corps Community Services programs provide 
support for the whole family: the marine, the spouse, new parents, and 
children. General counseling, personal financial management assistance, 
family advocacy programs, and substance abuse avoidance are just some 
of the support programs available.
    Every day, regardless of duty assignment or mission, the Marine 
Corps takes care of marines and their families. We work hard to provide 
program support that is relevant to the QOL improvement of marines and 
their families. In addition, taking care of marines and their families 
through QOL and community services programs contributes to readiness 
and thus is relevant to the operating forces. As the Marine Corps is 
predominantly comprised of young, single, junior marines, we have 
specifically built programs to support their development and growth.
    The Single Marine Program provides needed recreation and stress 
outlets that are both wholesome and support development of social 
skills. Just as importantly, the Single Marine Program stresses the 
responsibility that young single marines have to identify solutions to 
QOL issues and resolve them through working with the chain of command.
    Many young marines joined the Corps for a challenge. This desire 
for physical and mental challenge is met through our world-class health 
and fitness program, Semper Fit, and our Lifelong Learning program. 
Tuition assistance is part of the Lifelong Learning program and in 
fiscal year 2002, approximately 20,000 marines enrolled in almost 
60,000 courses.
    Within the Corps taking care of marines and their families is a 
point of pride and constancy. As the Commandant has charged all 
marines, we will proceed with boldness, intellect, and confidence in 
our mission. Today, we know more than we ever have about the 
demographics and needs of marines and their families. We will use our 
knowledge of marines and their families to properly frame expectations 
and forge an even stronger compact that continues to support the legacy 
of taking care of our own.

                               CONCLUSION

    Through the remainder of fiscal year 2003 and into fiscal year 2004 
our Nation will likely remain challenged on many fronts as we conduct 
the global war on terrorism. Services will continue to be pressed to 
meet commitments, both at home and abroad. Marines, sailors, airmen, 
and soldiers are the heart of our Services, our most precious assets, 
and we must continue to attract and retain the best and brightest into 
our ranks. Transformation will require that we blend together the 
``right'' people and the ``right'' equipment as we design our ``ideal'' 
force. Manpower associated costs are a major portion of the DOD and 
Service budgets, and our challenge is to effectively and properly 
balance personnel, readiness, and modernization costs to provide 
mission capable forces. The DOD is undertaking numerous studies in the 
area of human resources strategy designed to support an integrated 
military, civilian, and QOL program, within which we must balance the 
uniqueness of the individual Services. In some cases a one-size fits 
all approach may be best, in others flexibility to support service 
unique requirements may be paramount. Regardless, we look forward to 
working with Congress to ``do what's right'' to maintain readiness and 
take care of your marines.
    The Marine Corps continues to be a significant force provider and 
major participant in joint operations. Our successes have been achieved 
by following the same core values today that gave us victory on 
yesterday's battlefields. Our active, Reserve, and civilian marines 
remain our most important assets and with your support, we can continue 
to achieve our goals and provide what is required to accomplish 
assigned 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 227 years. Thank you for the opportunity to present this 
testimony.

    Senator Chambliss. Thank you, General Parks.
    General Brown.

 STATEMENT OF LT. GEN. RICHARD E. BROWN, USAF, DEPUTY CHIEF OF 
          STAFF FOR PERSONNEL, UNITED STATES AIR FORCE

    General Brown. Mr. Chairman, Senator Nelson, Senator Pryor, 
it is my honor to come before you to address our current 
challenges and key initiatives on behalf of the dedicated men 
and women in the United States Air Force. First and foremost, 
you need to know our airmen are ready, willing, and able to 
meet any contingency. Patriotism is high, morale is up, in 
spite of very high increased tempo.
    We exceeded our enlisted recruiting goals and our line 
officer accession targets in fiscal year 2002, and we expect to 
do that again here in fiscal year 2003. We found the high 
OPTEMPO in response to the global war on terrorism has not 
impacted retention, as one might think. In fact, our retention 
is healthier than it has been in the last 2 or 3 years.
    Much of the credit for this goes to this committee and your 
staunch support to improve military pay and compensation, and 
continued support of bonus authorities. I thank you on behalf 
of every airman.
    Today, we continue to face one of our greatest challenges. 
How do we adapt to what we see as the new steady state of 
accelerated operations in personnel tempo? We cannot conduct 
business as usual. We must transform our forces to be 
successful. One of our top priorities is shaping our force mix 
with the skills required to make optimal use of our finite 
personnel resources, which, in fact, is our greatest asset.
    This is a complicated and difficult task, and over the long 
term, we envision that conversion of substantial numbers of 
military Air Force positions to civilian or contract will 
enable us to realign military end strength to satisfy our core 
competency requirements, which are developing airmen, 
technology for warfighting, and integrating operations.
    We will continue to need your support as we work to relieve 
our most stressed specialties. For example, we recently 
partnered with the Army to deploy Army National Guardsmen and 
Reserve Forces to augment Air Force protection force 
operations. We thank you for this. We thank you for the needed 
authority, and we thank the Army for their support, and this is 
just one example of the joint effort we do together.
    We continue to develop programs and initiatives that are 
helping us now and in the future, as we adapt our force to the 
demands of the global war on terrorism. We greatly appreciate 
Congress', and especially this committee's, tremendous support 
and recognition of our troops by providing them a top-notch 
quality of life.
    I look forward to discussing our challenges and our 
progress with you. Thank you.
    [The prepared statement of General Brown follows:]

       Prepared Statement by Lt. Gen. Richard E. Brown III, USAF

                              INTRODUCTION

    Mr. Chairman and distinguished members of the committee, it is a 
tremendous honor to appear before you to present our Air Force 
personnel priorities on behalf of the dedicated men and women of the 
United States Air Force. Today, we are facing one of our greatest 
challenges--how we adapt to the new steady state of accelerated 
operations and personnel tempo. The Secretary of Defense understands we 
can't conduct business as usual; we must transform our forces for new 
and unexpected challenges. As part of our transformation process, 
senior Air Force leadership conducted a complete review of what makes 
us the preeminent air and space force in the world, our ``Core 
Competencies.'' They agreed our institutional air and space core 
competencies are: Developing Airmen, Technology-to-Warfighting, and 
Integrating Operations. In personnel, we concentrate on developing 
airmen. Currently, one of our top priorities is shaping our force 
content with the skills required to make optimal use of finite 
personnel resources. By concentrating on what constitutes core tasks, 
we will in turn provide leadership with the critical information needed 
to free up resources and realign those resources into stressed core 
warfighting areas.

Developing Airmen: The Heart of Combat Capability
    The ultimate source of combat capability resides in the men and 
women of the Air Force. This competency is fundamentally about 
transformation--taking our Nation's youth, our citizenry, and shaping 
them into airmen-warriors. These aspirants represent the full range of 
our Nation's diversity of culture and geography. Diversity of thought 
and experience at all levels of the organization unleashes the talents 
of the total workforce to guard America with patriotism, intelligence, 
and passion. In spite of disparate backgrounds, these young people grow 
into one team made up of young airmen and officers. They embrace and 
internalize our core values. They leave behind that which they were and 
become, first and foremost, America's airmen. The Air Force helps shape 
their identity and becomes a way of life. Our civilians also undergo a 
transformation from mere employees--holders of a job--to civilian 
airmen who share our core values and our ethos of service. Our total 
force of active, Guard, Reserve, and civilian personnel represent a 
large and long-term investment and our most critical asset. While we do 
this better than anyone, we are currently facing several challenges in 
getting the right person, with the right training, to the right place 
at the right time in support of our national security mission.

Challenge: Adapting to New Steady State Workload and TEMPO
    The number one crisis we face is ``Adapting to the New Steady 
State'' which has both PERSTEMPO/WORKTEMPO and skill mix dimensions. 
The current OPTEMPO is driving personnel pressures causing uneven 
workload and deployment taskings. To meet mission requirements after 
September 11, we mobilized the Air Reserve component (ARC) and 
implemented Stop Loss. Both mobilization and Stop Loss are very serious 
actions that pose many difficult challenges for our people and their 
families. We intentionally built in ARC capability as part of our total 
force construct to be used when Air Force mission taskings exceeded the 
capacity of active component forces and available ARC volunteers. We 
mobilized ARC units according to these deliberate plans. In addition, 
we activated Stop Loss to enhance our ``steady state'' accession and 
retention programs to give us time to fill units with adequate numbers 
of people possessing the requisite skills and experience needed to 
operate successfully in the new expeditionary steady state environment. 
As we adapted to the current OPTEMPO after the tragic events of 
September 11, we began to demobilize. However, there are areas where 
the ARC continues to meet Air Force mission needs through extensions of 
its members, in critical specialties, into their second year of 
mobilization as we continue to prosecute the global war on terrorism.
    The Air Force remains committed to returning our ARC members to 
their roles as citizen-airmen. For each new mobilization order or 
extension request, we now require the gaining command to develop and 
submit to the Assistant Secretary of the Air Force for Manpower and 
Reserve Affairs (SAF/MR) a plan for accomplishing assigned tasks 
without reliance on long term ARC mobilization. Our current plan is to 
fill the majority of future requirements with active duty, ARC 
volunteers and limited period mobilization. If world conditions 
escalate to a higher level, we plan to invoke Stop Loss for selected 
career fields beginning with the most stressed.
    We are carefully reviewing our Air Force active end strength to 
ensure it is sufficient to meet missions; we know we have skill mix 
challenges. To meet these challenges, the Air Force is conducting an 
extensive manpower review. We critically scrubbed all our functions to 
determine which ones are needed for success on the battlefield to 
fulfill our role as being truly expeditionary and deployment-based. We 
identified candidate positions to help resolve the stressed military 
career field problem and begin to buy-down manpower requirements 
associated with new or growing missions in the global war on terrorism. 
The additional cost to implement these new requirements is under active 
consideration within our Air Force corporate structure. Over the long 
term, we ultimately envision that conversion of substantial numbers of 
military Air Force positions to civilian or contract will enable us to 
realign military end strength to satisfy our core competency 
requirements--Developing Airman, Technology-to-Warfighting, and 
Integrating Operations. The result will be an Air Force that 
``transforms'' into a more flexible, higher tech force--postured for 
21st century warfare, and consisting of the right total force mix of 
active duty, Reserve, Guard, Government civilian, and contract 
personnel.
    Parallel to this review, we developed a formula to quantify stress 
in each career field. This tool provides the analytical foundation to 
allow us to begin redirecting manning to the most critical specialties, 
increasing our training pipelines and expanding our schoolhouses where 
needed. In addition, we've aggressively pursued accession adjustments 
during fiscal year 2002-2003 to increase manning in the most stressed 
specialties. The ARC has identified the need to shift more traditional 
reservists and guardsmen to full-time status in critically manned 
career fields (e.g. Security Forces). To relieve the significant burden 
placed on our Security Forces, both in-garrison and deployed locations, 
the Secretaries of the Army and Air Force signed a Memorandum of 
Understanding in December 2002, to deploy Army National Guard and 
Reserve Forces to augment USAF force protection operations worldwide 
for a period of 2 years. The temporary authority provided in the 
National Defense Authorization Act (NDAA) for Fiscal Year 2003 for 
contractor performance of security-guard functions has helped us meet 
our increased requirements since September 11, and we thank you for the 
much needed flexibility. We would appreciate your continued support to 
allow us to contract for the performance of a firefighting function for 
a period of 1 year or less to fill vacant positions created by deployed 
military fire fighters. The end result of our actions is to ensure we 
have a ready, trained force available to meet the mission needs.
    We are also reviewing our manpower requirements determination 
program in an effort to streamline processes and align with the Air 
Expeditionary Force construct. This new effort will incorporate a 
quicker method of determining manpower requirements that focus on 
wartime capabilities first, and then work back to the home station 
peacetime requirement. The process turns around our current Cold War 
in-garrison focus and adapts to the expeditionary nature of today's 
operations. This will give us increased visibility to any shortfalls or 
deficiencies in required capabilities. The Secretary of the Air Force 
has also begun an innovative effort to examine the distribution of 
airmen assigned to organizations outside the Air Force.
    These, and similar initiatives will show us how to adapt our force 
to the demands of the global war on terrorism, or, alternatively, to 
provide the compelling rationale needed to justify any increase in end 
strength. The bottom line is we must reengineer, reorganize, reinvent, 
rework, and revisit how we utilize active duty military, ARC, 
civilians, and contractors.
    Civilian Issues
    Since 1989, we've eliminated or realigned over 100,000 positions as 
we downsized our civilian force. We constrained civilian hiring to 
minimize the impact of downsizing on our existing employees. We now 
have a civilian workforce that requires refreshing and re-skilling. 
Within 5 years, approximately 42 percent of the officer equivalent 
civilian force will be eligible to retire either through voluntary 
retirement or early out--an estimated 20 percent of this force will 
retire by 2005.
    The Air Force is finding it challenging to retain its mid-career 
employees and to attract younger candidates who possess state-of-the-
art technical skills. In addition to positions that have been 
traditionally hard-to-fill (environmental engineers, bench scientists, 
medical personnel), we are finding it difficult at specific locations 
to recruit support personnel such as contracting specialists and 
aircraft mechanics. One of the factors contributing to civilian 
recruitment and retention problems is the civilian personnel management 
system. The current system was developed to meet the challenges of the 
early 20th century and cannot quickly or adequately respond to the 
needs of the 21st century. The hiring process, classification system, 
pay authorities and performance management programs reflect a 
different, less technical environment and impede our ability to recruit 
and retain the best and the brightest.
    For several years now, the Department of Defense has been actively 
testing many management flexibilities, such as pay banding, pay for 
performance and simplified classification. Acknowledging the success of 
the demonstration projects and alternate personnel systems, the Under 
Secretary of Defense for Personnel and Readiness began a review of 
personnel management flexibilities already in use within the Federal 
Government. Multi-component, multi-functional work teams and senior 
functional executives completed this year long review that identified 
``best practices''--those with the highest rate of success. The 
Department is now reviewing how to incorporate these best practices.
Challenge: Creating Air and Space Leaders for the 21st Century
    Force development is a concept that will guide our investments in 
human capital. To prepare for the future more ably, we introduced a 
systemic, deliberate force development construct that develops 
professional airmen to instinctively leverage their respective 
strengths in concert. We envision a transition in total force 
development from rigid, ``one size fits all,'' functionally independent 
career path pyramids to flexible, competency-based, deliberate 
development model that rests on institutional needs and requirements 
and responds to corporate guidance. The force development construct is 
focused on the systematic, deliberate development of the necessary 
occupational skills and enduring competencies required to be an 
effective leader in today's and tomorrow's expeditionary air and space 
force. As we transform our Cold War structure into an Air and Space 
Expeditionary Force, it follows that we transition the way we train, 
educate, promote, and assign our total force for the contingency world 
we find ourselves in today. Training and development are critical to 
this transition. Our goal is to invest in all ranks, according to 
institutional requirements a significant improvement over today's 
approach to prepare us for the future.
    Force development will be executed in three parts--Officer, 
Enlisted, and Civilian across the active and Reserve components. The 
construct focuses on training, education, and experience, with special 
focus on how we assign a member to gain that experience. We will tailor 
each program to meet the different needs of our varied career paths. We 
will also design each development program to insure the individual's 
experience emphasizes a breadth of exposure to the Air Force mission 
while focusing on the depth of experience an individual needs to 
perform in his or her functional area of expertise.
    Education and Technical Training: Emphasis on Joint Leadership/
        Warfare
    We've been able to meet current challenges and take advantage of 
advancing technologies because of our investment in education and 
training. Initial investment and reinvestment in aggressive and 
innovative initiatives to enhance the abilities and breadth of our 
force are the keys to our success.
    Force development provides individuals with tailored, connected 
education and training. It focuses on three levels: (1) Tactical--
gaining knowledge and experience in primary skill, combined with 
education and training experiences; (2) Operational--continued widening 
of experience and increased responsibility within a related family of 
skills; and (3) Strategic--breadth of experience and leadership 
perspective at the joint, inter-government, and international levels.
    We will develop programs that provide our airmen the opportunity to 
pursue skill sets and experiences through regional and international 
study degree programs, foreign languages, and overseas assignments. The 
Air Force Chief of Staff recognizes we need to produce airmen who are 
professionally diverse. In his words:

        ``The global war on terrorism reinforces the reality that 
        future missions and contingencies will require greater 
        sophistication and understanding of our international security 
        environment. Just as we need pilots, intelligence specialists, 
        satellite operators, and jet engine mechanics, our 
        expeditionary force requires airmen with international insight, 
        foreign language proficiency and cultural understanding. To be 
        truly successful at sustaining coalitions, pursuing regional 
        stability and contributing to multi-national operations, our 
        expeditionary forces must have sufficient capability and depth 
        in foreign area expertise and language skills.''

    To keep abreast and to prepare for future needs, we increased our 
funding for graduate education at the Air Force Institute of Technology 
(AFIT), the Naval Post Graduate School, and civilian institutions 
beginning in the summer of 2003. Also in August 2002, we initiated the 
enlisted to AFIT Program. This program offers commanders a diverse and 
renewable resource of highly proficient career airmen, technically 
experienced in career field service and highly educated through 
resident graduate degree programs, contributing to greater innovation 
and improved readiness. Another important tool is Advanced Distributed 
Learning. This program efficiently delivers agile and flexible training 
and is our ``training multiplier.'' It provides our expeditionary 
forces anytime, anywhere training using various delivery methods 
including CD-ROM, paper-based, web-based, and satellite.

Challenge--Sustaining Our Recruiting and Retention Successes
    The current recruiting and retention initiatives are imperative to 
replenishing our force, and they must be fully funded or we risk 
failing to meet our goals. Our greatest recruiting competition comes 
from colleges offering numerous financial incentives. In addition, the 
general public has less military experience than past generations, 
which makes recruiting more challenging. Increases in advertising, an 
expanded recruiting force with broader access to secondary school 
students and competitive compensation prepare the Air Force to meet its 
recruiting goals. We achieved our fiscal year 2002 enlisted recruiting 
goals, although we fell short in our technical areas, and are currently 
on target to meet our goal for fiscal year 2003. For officers, we have 
met our overall recruiting goals; however, we continue to fall short in 
scientists and engineers.
    Because about one third of our force is eligible to reenlist each 
year, we continually have an opportunity to influence their decision at 
key career phase points to or not to reenlist. There are numerous 
intangible factors such as leadership and job satisfaction, and 
tangible factors such as pay and compensation and quality of life 
issues that affect an airman's decision, which we must constantly and 
proactively manage.
    For fiscal year 2002, officer and enlisted retention rates are 
slightly inflated due to Stop Loss. Our retention is healthy; however, 
we must continue to monitor our stressed career fields and provide 
adequate compensation and quality of life initiatives to maintain our 
capability. Although the current economy doesn't have the pull it did 
pre-September 11, we anticipate the high OPTEMPO/WORKTEMPO will affect 
our members' career decision in all components. We are addressing the 
tempo issues and will continue to monitor pay and compensation as they 
play a vital role in retaining our enlisted force.
    To compensate members for increasing levels of deployments, the 
NDAA for Fiscal Year 2001 mandated the Services pay a high deployment 
per diem amount of $100 per day with a progressive monthly allowance. 
However, the Services suspended payment due to the global war on 
terrorism, and pursuant to the Presidential Declaration of a National 
Emergency. As we continue to track tempo, we find that there has been a 
significant increase in tempo levels across the total force when 
comparing levels from fiscal year 2001 to fiscal year 2002. For 
example, on average those who were away from home station were gone 38 
days in fiscal year 2001 and 48 days in fiscal year 2002 (21 percent 
increase). Further, in fiscal year 2001 crews from only 6 of our 38 
major weapon systems were away from home station above 25 percent of 
their available time. In fiscal year 2002 that number increased to 17. 
Reserve components have seen similar increases. For the ANG there was 
an increase in days away from home station from 34 to 74 between fiscal 
year 2001 and fiscal year 2002. In the same timeframe the Air Force 
Reserves increased from 35 to 66 days. According to our data, if High 
Deployment Pay were in affect today, 1,586 total force personnel (519 
active duty, 403 ANG, 664 Air Force Reserve) would receive High 
Deployment Pay.
    We ask your support in changing the current law to provide the 
flexibility to compensate members for long and or frequent deployments 
at thresholds that better meet the Service's unique mission 
requirements. Our proposal would range from $100-$600 per month; 
eliminate the current 182-day and 211-day thresholds; and reduce the 
level of oversight required to the first general in the member's chain 
of command.
    Retention remains a concern for active duty officers in key 
specialties. The continued downturn in airline hiring will help slow 
the pull of our experienced pilots to the airlines; however our pilot 
shortage is projected to continue for at least the next decade until we 
fully realize the effects of the 10-year active duty service commitment 
for undergraduate flying training and increased pilot production. We've 
been able to fill the gap caused by the pilot shortage with navigator 
rated expertise. Navigators, backfilling for pilots raised overall 
rated Headquarters level staff manning from 58 percent to 76 percent. 
However, 48 percent of the current navigator force will be eligible to 
retire within the next 4 years. We are closely monitoring navigator 
retention and distribution, especially large numbers of senior 
navigators on the rated staffs currently or soon to be retirement 
eligible as well as low production year groups. In addition, we have an 
acute problem with Air Battle Managers driven by extraordinarily high 
OPTEMPO.
    The Air Force has taken a number of steps to address rated 
shortfalls. We increased the pilot training active duty service 
commitment to 10 years (8 years prior to 1 Oct 99) and pilot production 
to a steady state of 1,100 new pilots per year. Legislation such as the 
Permanent Rated Recall program has allowed nearly 260 pilots to return 
to active duty in fiscal year 2002, helping to offset rated shortfalls. 
Bonuses continue to be an effective tool in retaining our members.
    For the first time, we are offering Aviation Continuation Pay (ACP) 
in fiscal year 2003 to select groups of active duty navigators and air 
battle managers and continue to offer aviation continuation pay bonuses 
to pilots who have completed their initial pilot training active duty 
service commitment. In addition, we implemented in fiscal year 2003 the 
Critical Skills Retention Bonus (CSRB) authorized by the NDAA for 
Fiscal Year 2001 for the ``Big 5'' active duty officer specialties 
(Developmental Engineers, Scientists, Acquisition Program Managers, 
Comm/Info, and Civil Engineers). The Air Force now is offering $10,000 
per year up to 4 years to eligible officers who agree to an active duty 
service commitment contract; we expect retention to improve by 15 
percent or more as a result.
    In April 2002, the Air Force completed its initial ``re-
recruiting'' the force test program. The program concentrated on 
developmental engineers entering critical career decision points. The 
Air Force is institutionalizing the ``re-recruiting'' program and 
expanding it to other critical Air Force specialties such as air battle 
managers and acquisition managers.
    Quality of Life
    How our airmen perceive their quality of life directly and 
fundamentally impacts recruiting and retention. We place intense 
demands on our mission-focused total force and it is imperative that we 
provide our airmen and their families with the quality of life they 
have earned and deserve. We are reviewing our manning and workload to 
realign resources across the Air Force to alleviate stress on our high 
demand assets. We seek to improve workplace environments; provide fair 
and competitive compensation and benefits; provide safe, affordable, 
and adequate housing; enhance community and family programs; improve 
educational opportunities; and provide quality health care, as these 
have a direct impact on our ability to recruit and retain our people 
and sustain a ready force.
    We thank Congress for approving another significant overall pay 
raise to include targeting for our military personnel in the NDAA for 
Fiscal Year 2003. We support the proposed pay raise for fiscal year 
2004 plus targeting. Targeted pay is important in meeting our toughest 
retention challenges. In addition, you improved the Basic Allowance for 
Housing (BAH) rates effective 1 Jan 03, based on 7.5 percent out-of-
pocket for the National Median Housing Cost for each grade and 
dependency status, continuing toward our goal of eliminating out of 
pocket expenses. The NDAA for Fiscal Year 2003 also authorizes 
increases in minimum caps on health profession special and incentive 
pays, increases to Reserve component prior service enlistment bonus 
amounts, and several additional travel and transportation entitlements 
that will continue our effort to reduce other out-of-pocket expenses 
for our military personnel. These critical compensation initiatives are 
keys to meeting our retention challenges, and directly improve the 
readiness of our force.
    The NDAA for Fiscal Year 2003 also provides many TRICARE 
initiatives designed to improve the quality of service for our 
beneficiaries. The NDAA for Fiscal Year 2003 extends TRICARE 
eligibility to Reserve dependents residing in remote locations without 
their Reserve sponsors. Additionally, eligibility for the TRICARE 
Dental Program is expanded to surviving dependents, providing much 
needed dental benefits to surviving family members. It also approves 
the use of Medicare providers as TRICARE providers, expanding provider 
availability to improve beneficiary access to care.
    Providing safe and adequate housing enhances readiness and 
retention. The NDAA for Fiscal Year 2003 included $125 million to 
construct and renovate more than 1,500 rooms toward the Dormitory 
Master Plan. Our fiscal year 2004 budget includes nearly $190 million 
to construct and renovate another 1,900 rooms. We are on track to 
provide all unaccompanied E-1s to E-4s private rooms on base by 2009. 
The NDAA for Fiscal Year 2003 also included more than $680 million to 
replace, improve, and privatize nearly 8,500 family housing units. The 
fiscal year 2004 budget request includes $700 million to replace, 
improve, and privatize another 10,500 units. With the exception of only 
four U.S. locations, the AF will meet OSD's goal to eliminate 
inadequate housing in the U.S. by 2007.
    Programs like child development, child-care, youth programs, 
fitness centers, libraries, skills development, clubs, golf courses, 
and bowling centers all offer programs and services that support and 
enhance the sense of community and meet our members' needs for 
relaxation and stress reduction. The Air Force invested nearly $211 
million in fitness centers between fiscal year 2000-2003 and will 
continue this focus with more than $40 million in fiscal year 2004. The 
Air Force supports its families by setting the standard in providing 
affordable, quality child-care in child development centers, school age 
programs, and family child-care homes. Air Force child-care centers and 
all of its before- and after-school programs for children 6-12 are 100 
percent accredited. Over the last 2 years, the Air Force expanded its 
family child-care program so it can offer free emergency child-care for 
its members who have to work late, on the weekends, or who experience 
shift changes. This program also serves parents who are assigned to 
missile sites and need around-the-clock care. The most recent variation 
of this program, spurred by Operation Enduring Freedom, provides a 
limited number of hours of free child-care for members who are 
returning home after an extended TDY. Beyond these benefits, on-base 
programs are part of the non-pay benefit system providing savings over 
the cost members would pay to receive similar services off base.
    We strongly support voluntary education; we increased tuition 
assistance from 75 to 100 percent, provided distance-learning 
initiatives through the Air Force Portal and civilian institutions, and 
increased Learning Resource Centers at forward deployed sites. In 
addition, the NDAA for Fiscal Year 2002 provided the transfer of 
educational benefits to family members; we began a 1-year test program 
on 26 Sep 02 to select career fields.
    The Air Force continues to support the commissary and exchange as 
vital non-pay compensation benefits upon which active duty, retirees, 
and Reserve component personnel depend. Commissaries and exchanges 
provide: value, service, and support; significant savings on high 
quality goods and services; and a sense of community for airmen and 
their families.
    Taking a more collaborative approach to community and family 
service delivery, we created the Community Action Information Board and 
Integrated Delivery System working groups at Air Staff, MAJCOM, and 
Installation levels. The Community Action Information Board brings 
together senior leaders to review and resolve individual, family and 
installation community issues that impact military readiness and 
quality of life. The Integrated Delivery System working group brings 
together all community and family agencies to ensure our military 
members and their families have access to the services and activities 
they need. We continue to encourage the use of Air Force Crossroads as 
an excellent tool to promote community and family programs: 
www.afcrossroads.com.

Challenge: Seamless Integration of Total Force
    We've already touched on the fact that the Guard and Reserve are 
fully integrated partners of the Air Force--and that we are 
interdependent on each other for mission accomplishment. Operationally, 
we've seamlessly integrated the ARC into our business. We've created 
unit equipped, associate, and blended units and we'll continue to 
innovate. We must review and streamline the process of mobilization and 
volunteerism to facilitate the utilization of our ANG and Reserve 
members. It is important to destroy the Cold War paradigm (and 
lingering perceptions) of the strategic Reserve ``weekend warrior.'' 
The next step is to revise our laws, policies, and practices to 
accommodate the new steady state of the ARC.
    The Air Force is working to identify the right force mix and 
capability to maintain in the active, Guard, and Reserve. The new 
steady state will require examination of capabilities spread between 
the active Air Force and the Air Reserve components (e.g. MC-130s, 
AWACS, CSAR, etc). For example, of the total force realignment of 
scarce Low Density/High Demand resources, the 939th Rescue Wing's HC-
130s and HH-60s will transfer to the active component in order to 
reduce the PERSTEMPO in the Low Density/High Demand Combat Search and 
Rescue (CSAR). The transfer of these assets to the active component 
increased full-time personnel without increasing already high 
volunteerism rates or having to mobilize a significant number of CSAR 
reservists. The activation of the 939th Air Refueling Wing, Portland, 
OR, addresses the need for more aerial refueling assets on the West 
coast enhancing our ability to rapidly respond to any crisis. The Air 
Force continues to review our force mix.
    Another key component in our strategy is to reduce the complexity 
of Reserve Force volunteer employment. Our process should consist 
simply of validating the requirement, and identifying the Reserve 
resource to meet mission demand, whether that is through volunteerism 
or mobilization for wartime surge. We are reviewing these issues to 
determine the optimal use of our active military, ARC, civilian, and 
contractor mix.

Challenge: Transformation of Air Force Business Practices
    The process of transformation begins and ends with people. We are 
confident in the ability of our warriors to innovate, adapt and lead 
the enemy in development of operational concepts, doctrine and tactics. 
Implementing the warfighter's visions through development and delivery 
of forces, systems and support demands equal flexibility and agility in 
the Air Force's business operations--our personnel, finance, 
acquisition, technology, and supply systems. If we are to keep pace 
with and support innovation in the methods and modes of air and space 
combat, we must break out of ``industrial-age'' business processes and 
embrace ``information-age'' thinking.
    In other words, we must be as business efficient as we are combat 
effective. We seek--relative to today's status quo:

         An improvement in the effectiveness of operations 
        resulting in higher customer satisfaction ratings;
         A reduction of average process cycle time by 75 
        percent;
         Work processes and work loads enabling our people to 
        accomplish routine (non-crisis, non-exercise) organizational 
        missions within a 40 to 50 hour work week;
         Empowerment of personnel and enrichment of jobs; and
         A 20 percent shift in business operations resources 
        (dollars and people) to warfighting operations and new/modern 
        warfighting systems.

    Fundamentally transforming our application of technology, concepts 
and organizational structures will produce dramatic results. This 
departure from business as usual is not a luxury, but a necessity. 
While we are not a business, many of the challenges we face have been 
met and mastered in America's private sector. We must adopt their best 
business practices, ``de-layer'' our organization, push decisions down 
to the level best able to make the call, and manage for results.

                                SUMMARY

    The Air Force is the master of warfare in the domain of air and 
space. We are stressed by the challenges of asymmetric threats, but 
adapting and innovating to meet these challenges and guarantee success. 
Regardless of AEF deployment or home station missions, our airmen 
accomplish their duties with firm commitment and resolute action. We, 
in turn, are taking action to shape our force for the future under an 
innovative competency-based force development construct focused on our 
core competencies. We do this because we know whom we do it for--those 
who cannot help themselves and those who defend and cherish freedom.
    The global war on terrorism has imposed a new steady state of 
radically accelerated operations and personnel tempo as well as a 
demand for unprecedented speed, agility, and innovation in adapting to 
unconventional and unexpected threats. While our tools and technology 
are impressive, it is our airmen who will fight and win the Nation's 
wars.
    We will continue to rely on Congress as we seek to improve and 
innovate the total force to meet the challenges of the ``new steady 
state.''

    Senator Chambliss. Thank you very much. I told the Chiefs 
the other day, as I get around to visit all the bases around 
the country, in every branch I continue to be impressed with 
the quality of young men and women that each of you are 
recruiting. We are truly getting our fair share of America's 
finest out of our educational institutions at different levels, 
and we appreciate your comment about the small part this 
committee plays, but it is you gentlemen and your leadership 
that is allowing that to happen. On behalf of all of us we 
appreciate the great job you all are doing in making our job a 
lot easier.
    General Le Moyne, I want to talk to you about an issue that 
I have a particular interest in, and that is the situation in 
Korea with respect to the level of pay. General LaPorte, the 
Commander of U.S. Forces in Korea, has described the difficult 
leadership challenge in motivating soldiers to accept orders to 
Korea, indicating, for example, that officers eligible for 
command have been prone to retire or resign rather than accept 
an assignment to Korea.
    While both General Schwartz and General LaPorte have 
emphasized the need for construction of new barracks and family 
housing, they have underscored the fact that the duty in Korea 
results in soldiers taking a pay cut in terms of future 
incentive pays and allowances.
    Would the Department support an initiative to increase the 
compensation given to personnel who are assigned to Korea, and 
do you have any recommendations on how to best proceed on this 
particular issue?
    General Le Moyne. Sir, if I may, a couple of points. We 
have studied this very closely with General LaPorte and his 
predecessor, and we did have a spike 2 years ago in some 
declinations of command, but a couple of things to keep in 
mind. You have a single declination of command in Korea, and 
that is 5 percent compared to the rest of the Army, and he had 
a total of five that one year, and it did surprise us.
    We took that into consideration and, in fact, we reviewed 
our command policy and how we slate people for command, and 
this year there has been a significant change in the 
declinations to Korea. On average, sir, across the Army, we 
average about 6 percent declinations of command for lieutenant 
colonel and colonel level. I think that Korea will come very 
close to this.
    In addition, sir, we have looked at offering to our members 
of the Armed Forces what we call a high school senior 
deferment, and so if you come up for orders and you have one of 
your children in high school who is going to be a senior that 
following year, it is a no-cost and no-penalty waive, and we 
defer everything for a year. That is also having a major impact 
on our success rate.
    This carries over into the no-show rate in Korea and, in 
fact, sir, today, although Korea still is one of our highest 
no-show rates, but that also includes people we take off orders 
to send to other priority assignments. Fort Hood and Fort Bragg 
are higher no-shows than Korea right now. It is averaging about 
17 percent total, sir.
    On the point about pay, sir, General LaPorte and I have 
talked about this a number of times in great detail. The point 
I have made to General LaPorte, sir, is that Korea is not like 
Bosnia or Kosovo or Macedonia, where they cannot go off the 
base and they are restricted to just the base. We have 
recognized the hardship duty that our soldiers take in Korea 
and, in fact, give them a hardship duty allowance for location, 
and if you are north of the Han River it is $150 a month, if 
you are south of it, it is $50 a month.
    We are looking at that again, sir, to see, if we should 
make some adjustments on this. Having said that, sir, it is a 
joint issue. I have to work this with OSD. I can assure you, 
sir, we are very sensitive to it. I visit there every year, and 
I have members of my staff who visit there every quarter.
    Senator Chambliss. Admiral Hoewing, I noted with some 
concern the Navy's request for an additional $326 million in 
fiscal year 2004 to cover increased costs associated with 
personnel. This includes work year costs for almost 1,500 
sailors, shortfalls in various pays and allowances, and 
additional funding for a new personnel management system called 
the Sea Warrior. In your judgment, which are the most pressing 
requirements that should be funded by Congress, and are you 
satisfied that you have the effective means to effectively 
control these costs in both 2003 and 2004?
    Admiral Hoewing. Sir, as we end up fiscal year 2003, we 
have been operating approximately 2 percent above the end 
strength floor, and we will enter fiscal year 2004 slightly 
above the program of record. I would say our most pressing need 
as we move into fiscal year 2004 will be the requirement for 
what we call work year funding. There is a difference between 
end strength, which we have used to manage for many years, and 
the work years. That is what you actually have to pay sailors.
    We manage through the end strength process. What we are 
finding is that our processes do not necessarily or adequately 
reflect the work years in order to meet the end strength needs, 
so these dollars that you mentioned are largely due to work 
year funding that does not necessarily match the strength as 
you come down. As you get a little bit smaller, the work years 
will exceed the end strength costs.
    As far as the most pressing, I would say work year funding 
is the most pressing. You mentioned the Sea Warrior project, of 
which we are extremely proud. In fact, we have had the 
opportunity to show this web-based human resource system to 
some of the staff members so that they would become familiar 
with it.
    This is a very high priority system for us, because it 
invests in the growth and development and the assignment and 
the career perspective of each of our sailors, so I would say 
that that career management system associated with Sea Warrior 
is also a pressing need for our fiscal year 2004 budget.
    Senator Chambliss. Thank you.
    Senator Nelson.
    Senator Ben Nelson. Thank you, Mr. Chairman.
    Admiral, most members of the Reserve components who are 
ordered to active duty are being ordered to active duty for a 
year, with the possibility of being extended longer, and we 
have been informed that the Navy is issuing multiple 29-day 
orders to some Navy reservists who agree to serve on active 
duty. It appears that the Navy is asking them to reschedule all 
drills for the year into a 29-day block. Issuing orders this 
way precludes the reservist's family members perhaps from 
qualifying for TRICARE, and therefore creates some awkward 
situations for their employers.
    Can you tell me, is the Navy practice to encourage 
reservists to combine all their drills into 29-day blocks so 
that they can be ordered to active duty?
    Admiral Hoewing. Senator Nelson, sir, we have mobilized a 
majority of our reservists for 1 year and, in fact, one of the 
things we are very proud of is the fact that when we were in 
the demobilization process, about a year or so after the 
September 11 event, we had many of our mobilized reservists 
that did not, in fact, want to go home. They were just true 
patriots, and we really appreciate that. We have some 
reservists that, because they have volunteered to do so, are 
actually staying more than 1 year, or staying on the second 
year.
    Regarding the 29-day orders, I am going to have to take 
that question for the record. I do not believe that it is our 
policy to do that unless we are working with the individual to 
specifically be able to group those drill days together in 
order to help the benefit of the sailor, so let me take that 
question for the record, and we will get back to you, sir.
    Senator Ben Nelson. It would not be to try to negate the 
qualification under TRICARE. It would be to try to block the 
time frame to, in fact, help the sailor's interest in becoming 
part of the Active-Duty Force.
    Admiral Hoewing. Yes, sir. We believe that if a sailor does 
have the opportunity to do his drills together for a longer 
period of time, there is more synergy associated with that, but 
I believe there is no intent to avoid having that sailor be 
able to reap the benefits of the TRICARE process. That would be 
counter to our ethics.
    Senator Ben Nelson. It seems like it would be 
counterproductive and counter to the efforts that you are 
taking, so we would appreciate a response, if you would, 
please.
    [The information referred to follows:]

    No. Normal training is conducted one weekend a month using drill 
(IDT) periods, and two weeks a year using Annual Training (AT). 
However, the Navy recognizes that every naval reservist has unique 
civilian work schedule requirements, and that their active gaining 
command may require support throughout the year. Therefore, naval 
reservists are authorized and many times are encouraged to drill on a 
``flexible schedule.'' This may include single or multiple drills 
during the week, or they may combine drills and other periods of active 
duty for an extended time of training or contributory support. These 
blocks of additional active duty for training (ADT) may be as short as 
1-2 days for flight training, or 1-3 weeks for school training, or 
multiple months at time to fill a critical contributory support 
requirement for a gaining command. Active duty for special work (ADSW) 
may run for a few weeks up to 179 days. Also, it is Navy policy to 
mobilize reservists for a period of 365 days. If the requirements for a 
mobilized reservist change prior to the expiration of their 
mobilization orders, Navy policy is to either reassign the mobilized 
reservist to meet other requirements or to demobilize them. In either 
case,  reservists receive full mobilization benefits. Since a 365-day 
mobilization is so disruptive to a reservist's family and civilian job, 
when a requirement can be fulfilled by a shorter period of active duty, 
we will utilize that option. For example, there have been instances 
where naval reservists performed short duration training periods to 
meet requirements and take advantage of exceptional training 
opportunities. There are also instances in which a reservist's 
contributory support role may require flexibility in performing 
scheduled drill periods to accommodate the needs of his/her gaining 
command. None of these variations are in any way intended to prevent or 
circumvent the reservist from obtaining access to entitlements, 
including TRICARE.

    Senator Ben Nelson. General Brown, obviously we are 
concerned about reports that the Air Force extended some 
mobilized reservists for a second year of active duty at the 
same time the Air Force was releasing active component 
personnel of the same grade and scale, some of whom left active 
duty to take the civilian jobs vacated by reservists who were 
being extended, sort of an interesting turn of events here.
    Is the Air Force releasing from active duty active 
component airmen with the same grade and scales as mobilized 
reservists who are being extended for a second year?
    General Brown. Sir, when we initiated mobilization right 
after September 11, we very quickly put on a stop loss for our 
entire active and Guard and Reserve Air Force. We then analyzed 
in 60-day increments how long we needed to continue in a stop 
loss effect, where we effectively take the volunteer force and 
tell them they cannot separate or retire in their personal 
plans. We eventually weaned ourselves of stop loss over about a 
1-year time period, and so our stop loss was taken off of our 
force in about October or so 2002.
    Now, we tried to also bring down the mobilization effort, 
which got up in the neighborhood of around 38,000 airmen, both 
Guard and reservists, at its high water mark in about June 
2002, and we brought almost, the vast majority of those back 
off of mobilization at the 1-year point. There were some who 
reextended for a second year. Most of those, because they 
wanted to extend for a second year, much like what Admiral 
Hoewing described with the Navy. It was to their benefit.
    Now, if it was to an individual's benefit and our force 
needed that kind of skill, then we extended for a second year. 
We certainly are now facing somewhere in the next few months, 
in the late summer, early fall, a point when those folks will 
hit their 2-year mark and must go home. That is of concern to 
us, especially in critical skills.
    We are on the edge of enacting, potentially--another stop 
loss in the critical skill areas, which would be the similar 
skills where we have needed to mobilize, in many of our rated 
skills, and some of those high-density, low-demand--low-
density, high-demand efforts.
    I will have to get back with you on specifics and take for 
the record if there are exact AFSCs and/or ranks mixes where we 
have released, but did not stop, because I just do not have 
data that would indicate that problem exists, so I can tell you 
we are generally very concerned about how we mix the release of 
the Active Force when we are mobilizing in great numbers the 
Guard and Reserve.
    Senator Ben Nelson. I can appreciate, General, that it is 
probably a byzantine exercise to try to make it all work 
appropriately. That is why we will appreciate your getting back 
to us on that answer.
    [The information referred to follows:]

    The answer is yes. However, we are addressing two separate 
and distinctive elements of the law. In its enabling 
legislation, Congress recognizes the difference between 
mobilization and Stop Loss. The law specifies mobilization as a 
pre-condition for Stop Loss (S/L), but allows mobilization to 
occur on its own. These two force management tools are not 
welded together because they serve two separate purposes.
    Mobilization is effected to augment the Active Force with 
fully trained, fully equipped and fully manned Reserve 
component units or UTCs to enhance the combat capability of the 
Air Force. Reserve personnel are fulfilling their agreement 
with the Service by being available when their unit (UTC) is 
mobilized. Reserve personnel, under the current partial 
mobilization, may be required to remain on active duty for up 
to 24 months. Mobilization is not initiated because active duty 
members are separating from the Air Force and need to be 
replaced. Mobilization is used to meet exigent requirements.
    Stop Loss, on the other hand, is a tool the armed services 
use to ensure units are adequately manned for emergency 
requirements, and it applies equally to the total force--
active, Guard, and Reserve members. By invoking Stop Loss we 
involuntarily extend the agreement between the Service and the 
member. We do this to ensure there are adequate numbers of 
people having the requisite skills, experience, and maturity 
needed to operate successfully in a wartime, expeditionary 
environment. Since this is an ``involuntary'' extension of the 
agreement, we use Stop Loss as a last resort and strive to lift 
the restrictions as quickly as practical to preserve the ideals 
of a ``volunteer'' force. The good news, many of those 
individuals previously under the restrictions of Stop Loss 
choose to re-enlist and stay with the Air Force. For those who 
have met their obligation and choose to separate, we backfill 
them with trained individuals who have been recruited by the 
active, Guard, or Reserve units, accordingly.
    Air Force leaders are acutely aware of the stress caused by 
the continuous mobilization of the ARC. We are committed to 
reducing the number of ARC units and personnel needed to meet 
the current emergency. The Assistant Secretary of the Air Force 
has ordered that every new mobilization order or extension 
request be accompanied with a plan for accomplishing assigned 
tasks without reliance on long term mobilization of the ARC. It 
is also required that a demobilization timeline be included to 
assure the plan is executed and in compliance with the 
directive. Air Force leadership is committed to returning our 
ARC members to their roles as citizen-airmen.
    The total force has responded well to the global war on 
terrorism. Both active and Reserve components have been 
stretched, and in our policies, we will continue to pursue a 
balanced and even-handed approach to ensure its viability in 
the future.

    Senator Ben Nelson. General Brown, last week, when asked 
about Air Force end strength, Secretary Roche testified that 
there are 12,000 airmen not working for the Air Force, and that 
he was seeking to have them returned to the Air Force, which 
seemed an appropriate thing. Do you know what kind of duties 
these 12,000 airmen might be performing, and where they are if 
they are not working for the Air Force?
    General Brown. Yes, sir. What our Secretary is referring 
to--and really all of our Services have a similar pattern. We 
each would have our own set of numbers. These are, in our case, 
Air Force people wearing a blue suit uniform who are not 
working for or in a direct Air Force unit. Now, many of them 
are doing very important work in a joint command.
    Senator Ben Nelson. They could be detailed to another 
Service, apparently.
    General Brown. They could be in CENTCOM. They might be 
stationed right now in McDill, or maybe forward in Southwest 
Asia, or they may be at STRATCOM. Some of these are in Joint 
Command and some of them are off in some of the agencies, the 
Defense agencies. Some of them are in other parts of our 
Nation, in assignments that are listed as duty to be filled by 
Air Force officers and enlisted, but our Secretary has asked us 
to review where we have airmen stationed outside of the 
mainstream Air Force.
    All 12,000 will not come back to the Air Force, because we 
need Air Force presence in many of those, but where we might 
have too much Air Force presence, or could it be done in some 
other way, civilian or contractor, or some other effort, we 
would like to try to get those blue suits back into the tooth 
and out of tail, which is an effort we are doing within the Air 
Force also, as well as those outside.
    Senator Ben Nelson. General Le Moyne, do you have something 
you want to add?
    General Le Moyne. Senator Nelson, if I may, sir, because 
all four of us have scrubbed this hard this past year under OSD 
guidance. We looked at the personnel, commissioned, 
noncommissioned, and enlisted who are detailed or pulling 
duties away from our parent Service, and as General Brown says, 
those that are on Nation-type duties, those that have been 
certified are still there.
    The ones that are, as we say, detailed on a nonreimbursable 
basis away from our Services, we have reduced that number. All 
four of us, over this past year significantly, and in our case, 
sir, by about half, and we are still working that hard.
    Senator Ben Nelson. There is no suggestion that there is 
something inappropriate about it. There could be a good basis 
for having them detailed off somewhere else. We do not suggest 
that, but I appreciate your answers.
    General Le Moyne, it is clear that the Army has a shortage 
of military police officers. Your active duty military 
policemen are constantly deployed, and some Reserve and 
National Guard military policemen have been ordered to take 
active duty more than once because of the shortage and, of 
course, we discussed this during our meeting earlier today.
    Could you tell the committee what you and Mr. Brown told me 
this morning about how we got to where we are with respect to 
MP mobilizations and deployments? What is the Army doing to 
attempt to correct this shortage?
    General Le Moyne. Thank you, sir, I will.
    We build our force structure based upon a procedure that we 
try to forecast what our Nation's needs are 4 to 10 years in 
advance, and so we develop a structure to show that, but we 
have incidents like September 11 that pop up that we had not 
anticipated to that degree, and we have to, as a result, 
mobilize some elements of the Armed Forces to a higher number 
for a longer period of time than we had ever anticipated, and 
then you run into a problem like we are today, to where MPs are 
in short supply.
    Let me emphasize, MP units. Within the Guard, the Reserve, 
and the Active Force, the individual MP numbers are very 
healthy. In the Active Force right now, we are running about 
109 percent. We just took the MP Active Force off the stop loss 
restrictions. Their departure rates are in keeping with 
historical norms. We did not see a large spike in their 
departure, as thought. These young men and women served an 
additional year beyond their obligated service, and they are 
staying. We anticipate the same thing in the Guard and Reserve.
    What we are doing now is, we have added to our force 
structure in the outyears, starting with 2004, to increase the 
number of MP units we are going to have on the books. We are 
looking for, inside our current structure, the units and 
positions that we can change to give us that structure. That 
will start in 2004, sir. It is on the books through 2009, and I 
anticipate it will continue in the outyears.
    Senator Ben Nelson. I appreciate your response, General.
    Mr. Chairman, those are my questions, and I turn it back to 
you.
    Senator Chambliss. General Brown, I have not followed this 
issue in detail, but I know that Senator Allard and other 
Members are concerned that we do not have in the Air Force or 
the other Services the expertise and experience needed to 
oversee the development of very sophisticated space systems. I 
understand that the Air Force was tasked almost 2 years ago in 
the National Defense Authorization Act for Fiscal Year 2002 to 
develop a space career field for officers involved in space 
operations, and the development of space systems, doctrine, and 
concepts of operations. What is the status of that effort, and 
why is it taking so long?
    General Brown. Sir, Air Force Space Command and General 
Lord specifically, who is the Commander of Air Force Space, he 
is the lead, and has a group that has been meeting on a regular 
basis and determining exactly how we would come about with a 
Space Force, and studying the personnel aspects of that.
    We have an AFSC today for a space officer. We have missile 
officers who very often move back and forth from the space and 
missile business, so we have in existence today a force within 
our Air Force that cares for and watches the capability of the 
space business, but taking a report that came from the 
commission, General Lord is leading the effort, and I know he 
is, I think very close to sending the report to the Chief of 
Staff and to the Secretary with some ideas of what we can do 
different, the ways ahead to make for a better, improved----
    Senator Chambliss. Do you have any time line on that 
report?
    General Brown. Sir, I believe it is within the next 3 to 4 
months, and it could be even sooner than that, but I think it 
is very soon, from one of the reports that I received recently.
    Senator Chambliss. Okay. General Parks, you mentioned in 
your written statement the Marine Corps quality of life study, 
which I compliment you on having initiated in 2002. I noted, 
however, the initial analysis of the survey showed an across-
the-board decrease in quality of life satisfaction of marines 
compared to the 1998 study. Can you give us some additional 
insight into the significance of that finding, and how it 
should be interpreted, and what is the next step for review of 
that survey, and when can we expect some responses by the 
Marine Corps?
    General Parks. I can, sir. What we have found is, just as 
you outlined from having read my testimony and statement, is 
that we saw an across-the-board reduction in satisfaction with 
quality of life. We are now, having only recently received a 
report, in the process of analyzing that report and trying to 
determine what were the pertinent reasons behind that. From a 
speculation standpoint, was it an expectations issue, wherein 
the individual marine thought they would get something, or had 
their expectation been much higher than what the reality was?
    An example of that could be that when you are satisfied 
with the Government quarters that you are in, but when you see 
the private-public venture results of another base across town, 
or across the country, you realize all of the sudden that the 
expectation is a lot different from what you are currently 
looking at.
    Another piece is, we are a very young force, as you are 
aware, and we bring in because of that a youthful population, 
some call it the millennial generation, whose expectations and 
ideas of success and what their standard point of departure is 
much higher. Many terms have been associated with them from the 
standpoint of the baby-on-board generation, and those who have 
the soccer moms or dads who continue to reward them, and 
therefore, the expectations may be higher because of that. That 
may be a factor that we are dealing with.
    We believe that the end product to it is just to ensure 
that we articulate fully what we provide in our quality of life 
services, as Dr. Chu alluded to, to provide a social compact 
that is articulated as to what they can expect, and better 
present that to them so that in the future, they know what they 
can expect. We can judge accordingly from that, and how we will 
resolve it.
    As far as the latter part of your question as to when you 
can expect the results of that, we hope to do that within the 
next 6 months as we analyze the information and assess what the 
findings are from our perspective.
    Senator Chambliss. Can you give us an update on that at the 
time you get it?
    General Parks. I would be happy to, sir.
    [The information referred to follows:]
      
    
    
      
      
    
    
      
    
    
      
    
    
      
    Senator Chambliss. What did you say, 6 months, you think?
    General Parks. Just estimated it at 6 months, sir.
    Senator Chambliss. All right.
    Gentlemen, thank you all very much. We appreciate your 
continued efforts.
    We welcome the representatives from The Military Coalition 
for their participation and testimony today. It is critical we 
hear the views of the members you represent so that we can 
appropriately respond to issues of importance to them. With us 
today is Joseph Barnes, National Executive Secretary of the 
Fleet Reserve Association--Mr. Barnes, thank you for being 
here. Joyce Raezer, Associate Director of Government Relations 
for the National Military Family Association--Ms. Raezer, thank 
you for being here. Steve Anderson, Legislative Counsel for the 
Reserve Officers Association. Mr. Anderson, thank you for being 
here. James Lokovic, Deputy Executive Director and Director, 
Military and Government Relations of the Air Force Sergeants 
Association. Mr. Lokovic, thank you for being here. Dr. Susan 
Schwartz, Deputy Director of Government Relations/Health 
Affairs of the Military Officers Association of America. Dr. 
Schwartz, thank you for being here.
    Your prepared statements will be entered into the record, 
and it is important we get to your specific issues, as we have 
already consumed a lot of time here, but we appreciate your 
patience. We thank you for being here, and we look forward to 
your remarks.
    [The prepared statement of the Military Coalition follows:]

           Prepared Statement by The Military Coalition (TMC)

    Mr. Chairman and distinguished members of the subcommittee. On 
behalf of The Military Coalition, a consortium of nationally prominent 
uniformed services and veterans' organizations, 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 approximately 5.5 million current and 
former members of the seven uniformed services, plus their families and 
survivors.

         Air Force Association
         Air Force Sergeants Association
         Air Force Women Officers Associated
         AMVETS (American Veterans)
         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 Officers Association 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
         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

Active Force Issues
    Personnel Strengths and Operations Tempo. The Military Coalition 
strongly recommends Service end strengths be increased immediately to 
balance today's operational requirements with the personnel resources 
needed to perform these missions. The force was already stressed before 
September 11 and the pace of operations--especially for those serving 
in low density, high demand skills--has only increased, worsening the 
operational and personal stresses on active, National Guard and Reserve 
personnel, and their families.
    Pay Raise Comparability and Pay Table Reform. The Coalition urges 
the subcommittee to restore full pay comparability on the quickest 
possible schedule and to revise the permanent law that caps annual 
military pay raises below comparable private sector wage growth, 
effective in 2007. The Coalition also urges the subcommittee to ignore 
requests from the administration to cap future military raises. The 
Coalition believes all members need and deserve annual raises at least 
equal to private sector wage growth. To the extent targeted raises are 
needed, the Department of Defense needs to identify the ultimate 
``objective pay table'' toward which the targeted raises are aimed. 
Specific objectives for inter-grade relationships must be established, 
publicized, and understood, or members will perceive repeated 
differential pay raises as unfair. The Coalition is also extremely 
disappointed that the administration is proposing to cap the pay of 
NOAA and USPHS officers at 2 percent. The Military Coalition strongly 
objects to this disparate treatment of members in those uniformed 
services and urges you to intercede in their behalf with your 
colleagues on the appropriate oversight committees for NOAA and USPHS 
personnel.
    Basic Allowance for Housing (BAH). The Military Coalition urges the 
subcommittee to adjust grade-based housing standards to more accurately 
reflect realistic housing options and members' current out-of-pocket 
housing expenses. The Coalition further urges the subcommittee to 
accelerate the plan to eliminate service members' out-of-pocket housing 
expenses from fiscal year 2005 to fiscal year 2004.
    Basic Allowance for Subsistence (BAS). The Military Coalition urges 
the subcommittee to repeal the statutory provision limiting BAS 
eligibility to 12 percent of single members residing in government 
quarters. As a long-term goal, the Coalition supports extending full 
BAS eligibility to all single career enlisted members, beginning with 
the grade of E-6 and extending eligibility to lower grades as budgetary 
constraints allow.
    Permanent Change of Station (PCS). The Military Coalition urges 
continued upgrades of permanent change-of-station reimbursement 
allowances in fiscal year 2004 to recognize that the government, not 
the service member, should be responsible for paying the cost of doing 
the Government's business.
    Education Benefits for Career Service Members. The Military 
Coalition urges the subcommittee to provide those career service 
members, who have not had an opportunity to sign up for a post-service 
educational program, an opportunity to enroll in the Montgomery GI Bill 
(MGIB).
    Family Readiness and Support. The Military Coalition urges improved 
education and outreach programs and increased childcare availability to 
ensure a family readiness level and a support structure that meets the 
requirements of increased force deployments for active, National Guard 
and Reserve members.
    Commissaries. The Military Coalition opposes privatization of 
commissaries and strongly supports full funding of the benefit to 
sustain the current level of service for all commissary patrons.

National Guard and Reserve Issues
    Support of Active Duty Operations. The Military Coalition urges 
continued attention to ensuring an appropriate match between National 
Guard and Reserve Force strengths and missions. The Coalition also 
urges further improvements to the Soldiers and Sailors Civil Relief Act 
(SSCRA) to protect National Guard and Reserve families from economic 
disruption when they are called to extended active duty.
    Healthcare for Members of the National Guard and Reserve. The 
Military Coalition urges making the TRICARE medical program available 
for members of the National Guard, Reserves, and their families on a 
cost-sharing basis in order to ensure medical readiness and provide 
continuity of coverage to members of the Selected Reserve. In addition, 
to further ensure continuity of coverage for family members, the 
Coalition urges allowing activated Guard/Reserve members the option of 
having the Department of Defense pay their civilian insurance premiums 
during periods of activation.
    Selected Reserve Montgomery GI Bill (MGIB) Improvements. Basic 
benefits under the MGIB program (Title 38) have increased almost 50 
percent over the last 3 years, but during the same period, have not 
increased, proportionally, in the Reserve MGIB program (Title 10). The 
Military Coalition recommends that the Reserve MGIB authority be 
transferred to Title 38 so that those benefits are applied consistently 
and equitably to all members of the total force.
    Tax issues. The Military Coalition urges restoration of full tax-
deductibility of non-reimbursable expenses related to military 
training. The Military Coalition urges authorization of tax credits for 
employers of National Guard and Reserve employees.
    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 
National Guard and Reserve retirement purposes.
    Unlimited Commissary Access. The Military Coalition recommends 
doing away with the 24-visit access cards and extending unrestricted 
commissary access to members of the National Guard and Selected 
Reserve.
    Academic Protections for Mobilized Guard and Reservists. TMC 
recommends that the committee endorse legislative proposals to afford 
academic and financial protections to National Guard and Reserve post-
secondary students activated into extended Federal service.

Retirement Issues
    Concurrent Receipt of Military Retired Pay and Veterans Disability 
Compensation. The Military Coalition thanks the subcommittee leaders 
and members for the National Defense Authorization Act for Fiscal Year 
2003 provisions that eliminate the disability offset for combat and 
operations-related disabilities, and urges continued progress to 
eliminate the offset for all disabled retirees. The Coalition 
specifically requests the immediate inclusion of deserving National 
Guard and Reserve retirees, Early Retirement Authority retirees, and 
enlisted retirees with high decorations for extraordinary valor--all of 
whom completed careers and suffered combat, or operations-related, 
disabilities.
    Final Retired Pay Check. The Military Coalition strongly recommends 
that authority be provided to allow the survivors to retain the final 
retired pay check received during the month in which the retiree dies. 
Current policy requires the final check to be returned and a prorata 
check be reissued based on the number of days the retiree was alive in 
that final month--an agonizing and arduous experience for many 
survivors.
    Former Spouse Issues. The Military Coalition strongly recommends 
corrective legislation be enacted to eliminate inequities created 
through years of well-intended, piecemeal legislative action initiated 
outside the subcommittee.
    Involuntary Separation Pay. The Military Coalition urges 
reinstatement of involuntary separation pay eligibility for officers 
twice deferred from promotion who decline continuation to 20 years.
    Tax Relief for Uniformed Services Beneficiaries. The Military 
Coalition urges the subcommittee to support legislation to provide 
active duty and uniformed services beneficiaries a tax exemption for 
premiums and enrollment fees paid for TRICARE Prime, TRICARE Standard 
supplements, the active duty dental plan, TRICARE Retiree Dental Plan, 
FEHBP and Long-Term Care.

Survivor Program Issues
    Age 62 SBP Offset. 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 S. 451 and H.R. 548.
    30-Year Paid-Up SBP. The Military Coalition strongly recommends 
accelerating the implementation date for the 30-year paid-up SBP 
initiative to October 1, 2003.
    Active Duty SBP. The Military Coalition recommends that payments of 
benefits to children of active duty members, who die while serving on 
active duty, be authorized if the surviving spouse remarries, as is the 
case for the children of retired members.
    Death Gratuity. The Military Coalition strongly recommends the 
death gratuity paid to survivors of members who die on active duty, be 
raised from $6,000 to $12,000.
    SBP-DIC Offset. The Military Coalition strongly recommends that the 
current dollar-for-dollar offset of Survivor Benefit Plan (SBP) 
benefits by the amount of Dependency and Indemnity Compensation (DIC) 
be eliminated, recognizing that these two payments are for different 
purposes.

Health Care Issues
    Adequate Funding For The Defense Health Budget. The Military 
Coalition strongly recommends the subcommittee continue its 
watchfulness to ensure full funding of the Defense Health Program, to 
include military medical readiness, TRICARE, and the DOD peacetime 
health care mission. The Defense Health Budget must be sufficient to 
provide financial incentives to attract increased numbers of providers 
needed to ensure access for TRICARE beneficiaries in all parts of the 
country.
    TRICARE For Life Implementation
    Claims Processing for Under-65 Medicare-Eligible Beneficiaries. The 
Military Coalition urges the subcommittee to change the law to require 
that all Medicare-eligible uniformed services beneficiaries, regardless 
of age or status, shall be entitled to the same TFL benefits, claims 
processing treatment, and benefits information notification currently 
afforded to Medicare-eligible beneficiaries over age 65, effective upon 
enactment.
    Education for Under-65 Medicare-Eligible Beneficiaries. The 
Military Coalition urges the subcommittee to require DOD to develop a 
mechanism to inform retiree beneficiaries of the Part B requirement and 
to continue their TRICARE benefit until the first date their Medicare 
coverage can take effect, contingent on the beneficiary's participation 
in the next Part B open enrollment period.
    Medicare Part B Penalty. The Military Coalition recommends that 
individuals who attained age 65 prior to October 1, 2001, who would 
otherwise be subject to a Medicare Part B late enrollment penalty, 
should have the ability to enroll in Medicare Part B during a special 
enrollment period and to have penalties waived.
    Dual-Eligible DOD-VA Beneficiaries. The Coalition urges the 
subcommittee to remain vigilant in its efforts to ensure that military 
retirees also eligible for VA care should not be forced to make an 
election between VA and DOD health care and to take further steps to 
permit dual eligibles access to both systems.
    TRICARE Improvements
    Distinction between TRICARE Prime and Standard. The Military 
Coalition urges the subcommittee to focus its primary energies on 
revitalizing the TRICARE Standard program. To this end, the Coalition 
recommends requiring that any reports from the Department of Defense, 
the Comptroller General or other sources specify separate assessments 
of TRICARE Prime and TRICARE Standard statistics, problems, policies, 
procedures, and impacts on beneficiaries.
    Provider Reimbursement. The Military Coalition requests the 
subcommittee's support of any means to raise Medicare rates to more 
reasonable standards and to support measures to address Medicare Part 
Bs flawed reimbursement formula.
    The Military Coalition most strongly urges the subcommittee to 
institute a pilot project at several locations of varying 
characteristics to test the extent to which raising TRICARE Standard 
rates increases the number of providers who are willing to accept new 
Standard patients.
    The Military Coalition urges the subcommittee to further align 
TRICARE with Medicare by adapting the Medicare Disproportionate Share 
payment adjustment to compensate hospitals for the care of TRICARE 
beneficiaries.
    Network and Standard Provider Availability. The Military Coalition 
urges the subcommittee to require DOD and its MCSCs to assist Standard 
beneficiaries in finding providers who will accept new TRICARE Standard 
patients, including interactive on-line lists and other means of 
communication.
    FEHBP Option. The Military Coalition urges the subcommittee to 
authorize a demonstration program to test interest, feasibility, and 
cost-effectiveness of providing uniformed services beneficiaries, 
family members, retirees and survivors under the age of 65 an option to 
enroll in FEHBP on the same basis as their Federal civilian 
counterparts.
    Administrative Burdens. The Military Coalition urges the 
subcommittee to continue its efforts to make the TRICARE claims system 
mirror Medicare's, without extraneous requirements that deter providers 
and inconvenience beneficiaries.
    Prior Authorization. The Military Coalition urges the 
subcommittee's continued efforts to narrow and ultimately eliminate 
requirements for pre-authorization.
    TRICARE Prime (Remote) Improvements. The Military Coalition 
requests that the subcommittee authorize TRICARE Prime Remote 
beneficiary family members to retain their eligibility when moving to 
another remote area when such move is funded by the government and 
there is no reasonable expectation that the service member will return 
to the former duty station.
    The Military Coalition urges the subcommittee to expand TRICARE 
Prime Remote coverage to include reservists called to active duty for 
31 to 179 days who reside within MTF catchment areas.
    The Military Coalition recommends that subcommittee authorize 
extension of TRICARE Prime Remote coverage to retirees and their family 
members and survivors at the same locations where it is established for 
active duty families.
    Healthcare for Members of the National Guard and Reserve. The 
Military Coalition urges making the TRICARE medical program available 
for members of the National Guard and Reserve component and their 
families on a cost-sharing basis in order to ensure medical readiness 
and provide continuity of coverage to members of the Selected Reserve. 
Alternatively, the Coalition urges allowing activated Guard/Reserve 
members the option of having the Department of Defense pay their 
civilian insurance premiums during periods of activation.
    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.
    Nonavailability Statements under TRICARE Standard. The Military 
Coalition strongly recommends that all requirements for Nonavailability 
Statements be removed from the TRICARE Standard option and that all 
waivers be eliminated, effective upon enactment. Should the 
subcommittee deem this impractical at this time, the Coalition urges 
the subcommittee to build on the maternity care precedent by 
incrementally eliminating NAS authority for additional kinds of care.
    TNEX--TRICARE Next Generation of Contracts. The Military Coalition 
recommends that the subcommittee strictly monitor implementation of the 
next generation of TRICARE contracts and ensure that Beneficiary 
Advisory Groups' inputs are sought in the implementation process.
    Uniform Formulary Implementation. The Military Coalition urges the 
subcommittee to ensure a robust uniform formulary is developed with 
reasonable medical-necessity rules along with increased communication 
to beneficiaries about program benefits, pre-authorization 
requirements, appeals, and other key information.
    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 services for 
beneficiaries.
    TRICARE Benefits For Remarried Widows. The Military Coalition urges 
the subcommittee to restore equity for military widows by reinstating 
TRICARE benefits for otherwise qualifying remarried widows whose second 
or subsequent marriage ends in death or divorce.
    Deduct TRICARE Prime Enrollment Fees From Retiree Pay. The Military 
Coalition urges the subcommittee to require DOD to implement existing 
authority to deduct TRICARE Prime enrollment fees from enrollees' 
retired pay.
    Codify Requirement to Continue TRICARE Prime in BRAC Areas. The 
Military Coalition urges the subcommittee to amend Title 10 to require 
continuation of TRICARE Prime network coverage for all uniformed 
services beneficiaries residing in BRAC areas.
    TRICARE Retiree Dental Plan. The Military Coalition urges the 
subcommittee to consider providing a subsidy for retiree dental 
benefits and extending eligibility for the retiree dental plan to 
retired beneficiaries who reside overseas.
    Commonwealth of Puerto Rico CONUS Designation. The Military 
Coalition urges the subcommittee to support administrative inclusion of 
the Commonwealth of Puerto Rico with the CONUS for TRICARE purposes, so 
that retired beneficiaries in Puerto Rico may be eligible to enroll in 
TRICARE Prime.
    Tax Relief for Uniformed Services Beneficiaries. The Military 
Coalition urges the subcommittee to support legislation to provide 
active duty and uniformed services beneficiaries a tax exemption for 
premiums paid for TRICARE Prime enrollment fees, TRICARE Standard 
supplements and FEHBP premiums.
    Custodial Care. The Military Coalition recommends the 
subcommittee's continued oversight to assure that medically necessary 
care will be provided to all custodial care beneficiaries; that 
Congress direct a study to determine the impact of the new legislation 
upon all beneficiary classes, and that beneficiary groups' inputs be 
sought in the development of implementing regulations.

Personnel Issues
    Mr. Chairman, The Military Coalition thanks you and the entire 
subcommittee for your unwavering support for fair treatment of all 
members of the uniformed services and their families and survivors. We 
are most grateful to the subcommittee for its strong support of 
significant improvements in military pay, housing allowances, and other 
personnel programs for active, Guard, and Reserve personnel and their 
families. The Coalition is especially grateful for the subcommittee's 
support of last year's authority to eliminate the offset of retired pay 
for veterans' disability compensation for certain disabled retirees, 
even though the final authority was significantly narrower than we had 
hoped. These and the many other important provisions of the National 
Defense Authorization Act for Fiscal Year 2003 will pay strong 
retention and readiness dividends in the years ahead.
    Congress has clearly made military compensation equity a top 
priority and has accomplished much over the past several years to 
improve the lives of men and women in uniform, and their families.
    But this year, we have heard recommendations from some in the 
administration to return to the failed policies of the past by capping 
future military pay raises below private sector wage growth. 
Shortchanging compensation for military personnel has exacted severe 
personnel readiness problems more than once in the last 25 years--
problems that led the Joint Chiefs to testify before you in September 
1998 about a significant pay gap that threatened the ability to sustain 
a quality All-Volunteer Force.
    Although the President rejected the pay cap proposal this year, we 
expect it will resurface in the future as it has in the past. When it 
does, we trust that you will again recognize the fallacy and personnel 
readiness risks inherent in any such ill-considered recommendation.
    Today's reality is simple--the uniformed services still find 
themselves facing significant personnel challenges, with ever-smaller 
numbers of service members and their families being asked to incur 
ever-greater workloads and ever-greater sacrifices. They need relief.
    While progress has been made in improving active duty, Guard and 
Reserve members' compensation and benefit package, the hard fact is 
that we don't have a large enough force--in any component--to 
adequately carry out all current missions and still be prepared for new 
contingencies that may arise elsewhere in the world. In the historical 
sense of the term, the country no longer has a Reserve Force, as we 
must routinely use a substantial share of our Reserves to accomplish 
day-to-day defense missions.
    Significant inequities also persist for retirees and survivors, 
whose service preserved the freedoms we enjoy today. Congress made 
significant strides in restoring lifetime health coverage for this 
population, and last year passed significant ``first-ever'' legislation 
to eliminate the disability offset for a select group of disabled 
retirees. But hundreds of thousands of disabled retirees and survivors 
continue to experience unfair reductions in their retired pay and 
survivor annuities. Correcting those problems remains a major Coalition 
priority.
    In testimony today, The Military Coalition offers its collective 
recommendations on what needs to be done to address these important 
issues and sustain long-term personnel readiness.

Active Force Issues
    Since the end of the Cold War, the size of the force and real 
defense spending have been cut more than a third. In fact, the defense 
budget today is just 3.2 percent of this Nation's Gross National 
Product--less than half of the share it comprised in 1986. But national 
leaders also have pursued an increasingly active role for America's 
forces in guarding the peace in a very dangerous world. Constant and 
repeated deployments have become a way of life for today's service 
members, and the stress is taking a significant toll on our men and 
women in uniform and their families, as well.
    Despite the notable and commendable improvements made during the 
last several years in military compensation and health care programs, 
retention remains a significant challenge, especially in technical 
specialties. While some service retention statistics are up from 
previous years' levels, many believe those numbers are skewed by post-
September 11 patriotism and by Services' stop loss policies. That 
artificial retention bubble is not sustainable for the long term under 
these conditions, despite the reluctance of some to see anything other 
than rosy scenarios.
    From the service members' 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. Service members have endured years of longer 
duty days; increased family separations; difficulties in accessing 
affordable, quality health care; deteriorating military housing; less 
opportunity to use education benefits; and more out-of-pocket expenses 
with each military relocation.
    The war on terrorism has only heightened already burdensome mission 
requirements, and operating--and personnel--tempos continue to 
intensify. Members' patriotic dedication has been the fabric that 
sustained this increased workload for now, and a temporarily depressed 
economy also may have deterred some losses. But the longer-term outlook 
is problematic.
    Experienced (and predominantly married) officers, NCOs and petty 
officers are under pressure to make long-term career decisions against 
a backdrop of a demand for their skills and services in the private 
sector, even through the recent economic downturn. In today's 
environment, more and more service members and their families debate 
among themselves whether the rewards of a service career are sufficient 
to offset the attendant demands and sacrifices inherent in uniformed 
service. They see their peers succeeding in the civilian world, and 
when faced with repeated deployments, the appeal of a more stable 
career and family life, often including an enhanced compensation 
package with far less demanding working conditions, is attractive. Too 
often, our excellent soldiers, sailors, airmen, and marines are opting 
for civilian career choices, not because they don't love what they do, 
but because their families just can't take the stresses any more.
    On the recruiting front, one only needs to watch prime-time 
television to see powerful marketing efforts on the part of the 
Services. But this strong marketing must be backed up by an ability to 
retain these talented men and women. This is especially true as the 
Services become more and more reliant on technically trained personnel. 
To the subcommittee's credit, you reacted to retention problems by 
improving military compensation elements. We know you do not intend to 
rest on your well deserved laurels and that you have a continuing 
agenda in place to address these very important problems. But we also 
know that there will be stiff competition for proposed defense budget 
increases. 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 service members' 
debilitating workload stress and continue to build on the foundation of 
trust that you have established over the past 4 years--a trust that is 
being strained by years of disproportional sacrifice. Meeting this 
challenge will require a reasonable commitment of resources on several 
fronts.
    Personnel Strengths and Operations Tempo. The Coalition has been 
dismayed and deeply disappointed at the Department of Defense's 
reluctance to accept your efforts to increase Service end strength to 
meet today's much-increased operations tempo. The Department's response 
is to attack the problem by freeing up resources to realign to core 
warfighting skills. While the Department's transformation vision is a 
great theory, its practical application will take a long time--time we 
don't have after years of extraordinary OPTEMPO that is already 
exhausting our downsized forces.
    Administration and military leaders warn of a long-term mission 
against terrorism that will drive more service members' deployment to 
Central Asia and other foreign countries. The Services simply do not 
have sufficient numbers to sustain the global war on terrorism, 
deployments, training exercises, and other commitments, so we have had 
to recall significant numbers of Guard and Reserve personnel. 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, and pale in the 
face of ever-increasing mission requirements. For too many years, there 
has always been another major contingency coming, on top of all the 
existing ones. If the administration does not recognize when extra 
missions exceed the capacity to perform them, Congress must assume that 
obligation.
    The Coalition strongly believes that earlier force reductions went 
too far and that the size of the force should be increased, 
commensurate with missions assigned. The force was already overstrained 
to meet its deployment requirements before September 11, and since then 
our forces have absorbed major contingency requirements in Afghanistan 
and Iraq.
    Deferral of meaningful action to address this problem cannot 
continue without risking serious consequences. Real relief is needed 
now. With no evidence of declining missions, this can only be achieved 
by increasing the size of the force.
    This is the most difficult piece of the readiness equation, and 
perhaps the most important under current conditions. Pay and allowance 
raises are essential to reduce other significant career dissatisfiers, 
but they can't fix fatigue and rising family separations.
    Some argue that it will do little good to increase end strengths, 
questioning whether the Services will be able to meet higher recruiting 
goals. The Coalition believes strongly that this severe problem can and 
must be addressed as an urgent national priority, with increases in 
recruiting budgets if that proves necessary.
    Others point to high reenlistment rates in deployed units as 
evidence that high operations tempo actually improves morale. But much 
of the reenlistment rate anomaly is attributable to tax incentives that 
encourage members to accelerate or defer reenlistment to ensure this 
occurs in a combat zone, so that any reenlistment bonus will be tax-
free. Retention statistics are also skewed by stop loss policies. Over 
the long run, past experience has shown that time and again smaller but 
more heavily deployed forces will experience family-driven retention 
declines.
    Action is needed now. Failing to do so will only deepen the burden 
of already over-stressed troops and make future challenges to sustain 
retention and recruiting worse.
    The Military Coalition strongly recommends restoration of Service 
end strengths consistent with long-term sustainment of the global war 
on terrorism and fulfillment of national military strategy. The 
Coalition supports application of recruiting resources as necessary to 
meet this requirement. The Coalition urges the subcommittee to consider 
all possible manpower options to ease operational stresses on active, 
Guard and Reserve personnel.
    Pay Raise Comparability. The Military Coalition appreciates the 
subcommittee's leadership during the last 5 years in reversing the 
routine practice of capping service members' annual pay raises below 
the average American's. In service members' eyes, all of those previous 
pay raise caps provided regular negative feedback about the relative 
value the Nation placed on retaining their services.
    Unfortunately, this failed practice of capping military raises to 
pay for budget shortfalls reared its head again earlier this year when 
the Director of the Office of Management and Budget proposed capping 
2004 and future military pay raises at the level of inflation. The 
Coalition was shocked and deeply disappointed that such a senior 
officer could ignore 25 years of experience indicating that pay caps 
lead inevitably to retention and readiness problems. Not only was the 
proposal ill timed as troops are massed for a potential war with Iraq--
it's just bad, failed policy.
    The President rejected his senior budget official's advice for five 
of the seven uniformed services--but, unfortunately, the 
administration's budget for fiscal year 2004 proposes to cap the pay of 
NOAA and USPHS officers at 2 percent. The Military Coalition strongly 
objects to this disparate treatment of members in those uniformed 
services. The Coalition urges the subcommittee to intercede in their 
behalf with colleagues on the appropriate oversight committees for NOAA 
and USPHS personnel to ensure that these commissioned officers receive 
the same treatment as their fellow comrades-in-arms.
    Pay raise comparability with private sector wage growth is a 
fundamental underpinning of the All-Volunteer Force, and it cannot be 
dismissed without severe consequences for national defense.
    When the pay raise comparability gap reached 13.5 percent in 1999--
resulting in a predictable readiness crises--this subcommittee took 
responsible action to change the law. Largely because of your efforts 
and the belated recognition of the problem by the executive branch, the 
gap has been reduced to 6.4 percent as of 2003.
    Fortunately, the President rejected his budgeteers' advice, and has 
proposed an average 4.1 percent raise for fiscal year 2004, which would 
shrink the gap another full percentage point to 5.4 percent. Even at 
that rate, it would take another 5 years to restore full comparability. 
So this is no time to reinstitute pay caps.
    On the contrary, we urge the subcommittee to consider that the law 
mandating increased military raises will expire in 2006, after which 
military raises will again be capped one-half percentage point per year 
below private sector wage growth (see chart below).
      
    
    
      
    The Military Coalition urges the subcommittee to restore full pay 
comparability on the quickest possible schedule, and to change the 
permanent law to ensure all future military raises match private sector 
wage growth, as measured by the Employment Cost Index.
    Pay Table Reform. The subcommittee also has worked to address some 
shortcomings within the basic pay table by authorizing special 
``targeted'' adjustments for specific grade and longevity combinations 
in recent years. The Coalition has supported these raises to recognize 
the education and technical expertise of certain career officers and 
enlisted members. However, the Coalition is concerned about potential 
perceptions of creating annual ``haves and have nots'' among members in 
different grades.
    Service members have a right to know and understand the objectives 
of such differential raises, or they will be perceived as arbitrary, 
capricious and unfair. Once the objective of such targeting has been 
achieved, equal-percentage annual raises should be restored for all 
service members.
    The Military Coalition believes all members need and deserve annual 
raises at least equal to private sector wage growth. To the extent 
targeted raises are appropriate, the Department of Defense needs to 
identify the ultimate ``objective pay table'' toward which the targeted 
raises are aimed.
    Basic Allowance for Housing (BAH). The Military Coalition supports 
revised housing standards that are more realistic and appropriate for 
each pay grade. As an example, enlisted members are not authorized to 
receive BAH for a 3-bedroom single-family detached house until 
achieving the rank of E-9--which represents only one percent of the 
enlisted force. TMC believes that as a minimum, this BAH standard 
should be extended to qualifying service members in grades E-7 and 
above, immediately.
    The Coalition is most grateful to the subcommittee for acting in 
1999 to reduce out-of-pocket housing expenses for service members. 
Responding to the subcommittee's leadership on this issue, the 
Department of Defense proposed a phased plan to reduce median out of 
pocket expenses to zero by fiscal year 2005. Through the leadership and 
support of this subcommittee, these commitments have been put into law. 
This aggressive action to better realign BAH rates with actual housing 
costs is having a real impact and providing immediate relief to many 
service members and families who were strapped in meeting rising 
housing and utility costs.
    We applaud the subcommittee's action, and hope that this plan can 
be accelerated as we near the completion date. Housing and utility 
costs continue to rise, and we are years away from closing the existing 
pay comparability gap. Members residing off base face higher housing 
expenses along with significant transportation costs. Relief is 
especially important for junior enlisted personnel who live off base 
and do not qualify for other supplemental assistance.
    The Military Coalition urges the subcommittee to direct adjustments 
in grade-based housing standards to more adequately cover members' 
current out-of-pocket housing expenses and to accelerate the plan to 
eliminate out of pocket housing expenses from fiscal year 2005 to 
fiscal year 2004.
    Basic Allowance for Subsistence (BAS). The Coalition is grateful to 
the subcommittee for establishing a food-cost-based standard for BAS 
and ending the one percent cap on BAS increases. But more needs to be 
done to permit single career enlisted members more individual 
responsibility in their personal living arrangements. In this regard, 
the Coalition believes it is inconsistent to demand significant 
supervisory, leadership and management responsibilities of 
noncommissioned and petty officers, but still dictate to them where and 
when they must eat their meals.
    The Military Coalition urges the subcommittee to repeal the 
statutory provision limiting BAS eligibility to 12 percent of single 
members residing in government quarters. As a long-term goal, the 
Coalition supports extending full BAS eligibility to all single career 
enlisted members, beginning with the grade of E-6 and extending 
eligibility to lower grades as budgetary constraints allow.
    Permanent Change of Station (PCS). The Military Coalition is most 
appreciative of the significant increases in the Temporary Lodging 
Expense (TLE) allowance authorized for fiscal year 2002 and the 
authority to raise PCS per diem expenses to match those for Federal 
civilian employees in fiscal year 2003. These are very significant 
steps to upgrade allowances that had been unchanged in over 15 years. 
Even with these much-needed changes, however, service members continue 
to incur significant out-of-pocket costs in complying with government-
directed relocation orders.
    For example, PCS mileage rates have not been adjusted since 1985. 
The current rates range from 15 to 20 cents per mile--significantly 
lower than the temporary duty mileage rate of 36 cents per mile for 
military members and Federal civilians. PCS household goods weight 
allowances were increased for grades E-1 through E-4, effective January 
2003, but weight allowance increases are also needed for E5s and above 
and officers as well, to more accurately reflect the normal 
accumulation of household goods over the course of a career. The 
frequency of PCS moves coupled with the spotty quality record of many 
carriers requires continued improvements to the household goods 
movement process, to include an increased emphasis on measurable 
accountability standards for the evaluation of carriers. In addition, 
policies are needed to promote full replacement value reimbursements 
for lost or damaged household goods.
    The overwhelming majority of service families own two privately 
owned vehicles, driven by the financial need for the spouse to work, or 
the distance some families must live from an installation and its 
support services. Authority is needed to ship a second POV at 
government expense to overseas' accompanied assignments. In many 
overseas locations, families have difficulty managing without a family 
vehicle because family housing is often not co-located with 
installation support services.
    Last, with regard to families making a PCS move, members are 
authorized time off for housing-hunting trips in advance of PCS 
relocations, but must make any such trips at personal expense, without 
any government reimbursement such as Federal civilians receive. 
Further, Federal and state cooperation is required to provide 
unemployment compensation equity for military spouses who are forced to 
leave jobs due to the service member's PCS orders. The Coalition also 
believes continuation of and adequate funding for the Relocation 
Assistance Program is essential.
    We are sensitive to the subcommittee's efforts to reduce the 
frequency of PCS moves. But we cannot avoid requiring members to make 
regular relocations, with all the attendant disruptions of childrens' 
schooling, spousal career sacrifices, etc. The Coalition believes 
strongly that the Nation that requires them to incur these disruptions 
should not be requiring them to bear the resulting high expenses out of 
their own pockets.
    The Military Coalition urges continued upgrades of permanent 
change-of-station reimbursement allowances in fiscal year 2004 to 
recognize that the Government, not the service member, should be 
responsible for paying the cost of government-directed relocations.
    Education Benefits for Career Service members. Active duty career 
service members who entered service during the VEAP-era (1977--30 June 
1985) but who declined to take VEAP are the only group of currently 
serving members who have not been offered an opportunity to enroll in 
the Montgomery GI Bill (MGIB). There are about 115,000 service members 
in this situation. Many actually were discouraged from signing up for 
VEAP as it was acknowledged to be a woefully inferior program compared 
to the Vietnam-era GI Bill and the subsequent MGIB that started on 1 
July 1985. As the backbone of today's force, these senior leaders are 
critical to the success of ongoing and pending military operations. 
When they complete their careers, they should have been afforded at 
least one opportunity to say ``yes'' or ``no'' to veterans' education 
benefits under the MGIB.
    TMC strongly recommends allowing a MGIB sign-up window for career 
service members who declined VEAP when they entered service.
    Family Readiness and Support. The family continues to be a key 
consideration in the readiness equation for each service member. The 
maintenance of family readiness and support programs is part of the 
cost of performing the military mission. We must ensure that families 
have the opportunity to develop the financial and readiness skills 
needed to cope with deployment situations. It is important to meet the 
childcare needs of the military community including National Guard and 
Reserve members. Overall family support programs must meet the needs of 
National Guard and Reserve members being called to active duty in ever-
increasing numbers.
    The Military Coalition urges improved education and outreach 
programs and increased childcare availability to ensure a family 
readiness level and a support structure that meets the requirements of 
increased force deployments for active duty, National Guard and Reserve 
members.
    Commissaries. The fiscal year 2003 budget reduced Defense 
Commissary Agency funding by $137 million and envisioned eliminating 
over 2,600 positions from stores and headquarters staff by September 
30, 2003. While DeCA indicates there will be no loss in service to the 
customer, the Coalition is concerned that the size and scope of the 
reductions may negatively impact quality and service to customers, 
including additional store closings, reduced hours, longer cashier 
lines and reduced stock on store shelves. This would have a 
significantly adverse impact on the benefit, which is widely recognized 
as a valuable part of the service member's compensation package and a 
cornerstone of quality of life benefits. As it has in the past, The 
Military Coalition opposes any efforts to privatize commissaries and 
strongly supports full funding of the benefit in fiscal year 2004 and 
beyond.
    The Military Coalition opposes privatization of commissaries and 
strongly supports full funding of the benefit to sustain the current 
level of service for all commissary patrons.

National Guard and Reserve Issues
    The Military Coalition applauds the longstanding efforts of this 
subcommittee to address the needs of our Nation's National Guard and 
Reserve Forces, to facilitate the total force concept as an operational 
reality, and to ensure that National Guard and Reserve members receive 
appropriate recognition as full members of the Armed Forces readiness 
team.
    Support of Active Duty Operations. National Guard and Reserve 
members and units shoulder ever-greater day-to-day operational 
workloads. They increasingly have come to face many of the same 
challenges as their active counterparts.
    Compounding the problem for National Guard and Reserve personnel, 
their increasing support of day-to-day active duty operations also has 
placed greater strains on the employers of these members. Employer 
support was always strong when National Guard and 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 certain as 
National Guard and Reserve members have taken longer and more frequent 
leaves of absence from their civilian jobs. Homeland defense and war-
on-terror operations continue to place demands on citizen soldiers that 
were never anticipated under the total force policy.
    The Coalition understands and fully supports the total force policy 
and the prominent role of the National Guard and Reserve Forces under 
this policy. Still, the Coalition is concerned that ever-rising 
operational employment of National Guard and Reserve Forces is having 
the practical effect of blurring the distinctions between the missions 
of the active and National Guard/Reserve Forces. National Guard and 
Reserve members could eventually face resistance with employers and 
increased financial burdens when activated which would negatively 
impact their ability to perform assigned missions and reduce their 
propensity to remain in Reserve service.
    The Military Coalition urges continued attention to ensuring an 
appropriate match between National Guard and Reserve Force strengths 
and missions.
    Healthcare for Members of the National Guard and Reserve. Health 
insurance coverage has an impact on Guard and Reserve medical readiness 
and family morale. Progress has been made during transitional periods 
after call-ups but more needs to be done to provide continuity of care 
coverage for Reserve component members.
    Health insurance coverage varies widely for members of the Guard 
and Reserve: some have coverage through private employers, others 
through the Federal Government, and still others have no coverage. 
Reserve families with employer-based health insurance must, in some 
cases, pick up the full cost of premiums during an extended activation. 
Although TRICARE ``kicks in'' at 30 days activation, many Guard and 
Reserve families would prefer continued access to their own health 
insurance. Being dropped from private sector coverage as a consequence 
of extended activation adversely affects family morale and military 
readiness and discourages some from reenlisting.
    In 2001, DOD recognized this problem and announced a policy change 
under which DOD would pay the premiums for the Federal Employee Health 
Benefit Program (FEHBP) for DOD reservist-employees activated for 
extended periods. However, this new benefit only affects about 10 
percent of the Selected Reserve. As a matter of morale, equity, and 
personnel readiness, more needs to be done to assist reservists who are 
being called up more frequently in support of national security 
missions.
    The Military Coalition urges making the TRICARE medical program 
available for members of the National Guard and Reserves and their 
families on a cost-sharing basis in order to ensure medical readiness 
and provide continuity of coverage to members of the Selected Reserve. 
In addition, to further ensure continuity of coverage for family 
members, the Coalition urges allowing activated Guard/Reserve members 
the option of having the Department of Defense pay their civilian 
insurance premiums during periods of activation.
    SSCRA Issues. The Coalition very much appreciates the 
subcommittee's approval of the change in law to permit SSCRA 
protections for National Guard service members activated by State 
Governors under Title 32, at the request of the President, in support 
of homeland defense missions.
    The Military Coalition recommends that the SSCRA be brought up to 
date to fully protect Guard and Reserve families from economic 
calamity.
    Selected Reserve Montgomery GI Bill (MGIB) Improvements. 
Individuals who first become members of the National Guard or Reserve 
are eligible for the Selected Reserve Montgomery GI Bill (MGIB-SR).
    Unlike the basic MGIB authorized under Title 38, the Reserve GI 
Bill program is governed by Chapter 1606 of Title 10. The problem is 
that the Reserve MGIB-SR program competes with National Guard and 
Reserve pay accounts for funding. Over the last 3 years, there have 
been no increases to MGIB-SR benefits.
    During the same period, basic benefits for full-time study under 
the regular MGIB (Title 38) have gone up 46 percent. In October 2003, 
the monthly rate will increase to $985.
    In addition, the MGIB-SR is paid out of the National Guard and 
Reserve personnel appropriations, and the Reserve chiefs are forced to 
absorb any MGIB-SR increases out of these accounts. The Coalition 
believes that total force equity requires automatic proportional 
adjustments to the MGIB-SR whenever benefits rise under the regular 
MGIB. One way to facilitate this objective is to transfer the MGIB-SR 
program to Title 38.
    The Military Coalition recommends transfer of the Reserve MGIB-SR 
authority from Title 10 to Title 38 to permit proportional benefit 
adjustments in line with the basic MGIB program and to ensure this 
program is applied consistently and equitably to all members of the 
Total Force.
    Tax Issues. The Coalition understands that tax matters fall under 
the purview of a different committee. But there are unique issues 
affecting members of National Guard and Reserve Forces, and we hope 
that members of the subcommittee will seek the support of the Ways and 
Means Committee in addressing them.
    Guardsmen and reservists are being asked to train more to enhance 
their readiness to support contingency missions, and are incurring 
considerable unreimbursed expenses for such training-related items as 
travel, overnight lodging, meals and uniforms. Prior to the 1986 tax 
code revision, these expenses were fully deductible; under current law, 
they are only deductible to the extent they exceed two percent of 
adjusted gross income. In a case where the member and spouse combined 
earn $40,000, the member must absorb the first $800 per year of 
training-related expenses. A member and spouse earning $30,000 each 
must absorb $1,200 per year. This is a significant financial penalty 
for members who serve their country, and needs to be corrected. 
National Guard and Reserve members should not be required to subsidize 
their own military training.
    The Military Coalition urges the subcommittee's active support for 
restoration of full tax-deductibility of non-reimbursable drill-related 
expenses for Guard and Reserve members.
    With today's increasing operations tempo, the support of National 
Guard and Reserve members' employers is more essential than ever. Yet 
more frequent absence of National Guard and Reserve employees for 
training or operations is undermining that support, as mentioned above. 
The subcommittee's help is needed to foster additional incentives for 
employers to help offset their costs associated with their employees' 
military activities.
    The Military Coalition urges authorization of tax credits for 
employers of National Guard and Reserve employees.
    Retirement Credit for All Earned Drill Points. The role of the 
National Guard and Reserve has changed significantly under the total 
force policy. During most of the Cold War era, the maximum number of 
inactive duty training (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, to 90 points in fiscal year 2001. The Coalition is most 
appreciative of Congress' approval of the increases.
    However, the fundamental question is why National Guard and Reserve 
members are not permitted to credit all the training that they've 
earned in a given year towards their retirement. The typical member of 
the National Guard and Reserve consistently earns IDT points above the 
90-point maximum. 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 National Guard and Reserve 
service members' commitment to mission readiness.
    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 National Guard and Reserve retirement purposes.
    Unlimited Commissary Access. National Guard and Reserve members are 
authorized 24 commissary visits per year. Visits are tracked by a 
cumbersome and costly access card that must be reissued each year by 
Reserve component commands. The process of issuing, checking, and 
accounting for these separate cards contradicts DOD's policy of a 
``seamless, integrated total force'' symbolized by the issuance of 
green ID cards to all members of the Selected Reserve. Because only 35-
40 percent of National Guard and Reserve members live close enough to 
commissary stores to be able to use them conveniently, there is little 
chance of excessive use by National Guard and Reserve members. In fact, 
the 24-visit limit is tantamount to full privileges for the vast 
majority of National Guard and Reserve personnel. Thus, the sole effect 
of the 24-visit limit is to treat National Guard and Reserve members as 
second-class citizens and to impose burdensome administrative 
requirements on Guard and Reserve units. Equal access to commissary 
stores by the National Guard and Reserve is an imperative that 
recognizes the increased responsibility of National Guard and Reserve 
Forces for the national security.
    The Military Coalition recommends doing away with the 24-visit 
access cards and extending unrestricted commissary access to members of 
the National Guard and Selected Reserve.
    Academic Protections for Mobilized Guard and Reserve Service 
members. TMC is aware of a growing number of cases of denied academic 
credit, lost academic status, and financial difficulties experienced by 
student-reservists called to extended active duty. The problem is not 
new and occurred widely during the Gulf War, but no corrective action 
has been taken since then. If the Nation is to routinely mobilize large 
numbers of Guard and Reserve service members, they must be assured of 
reasonable protections when their academic work is interrupted. 
Comparable economic and legal protections are available under the 
Soldiers and Sailors Civil Relief Act and the time has come to 
authorize similar protections for reservists who lose their academic 
standing through no fault of their own.
    TMC recommends that the committee endorse legislative proposals to 
afford academic and financial protections to National Guard and Reserve 
post-secondary students activated into extended Federal service.

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.
    Concurrent Receipt of Military Retired Pay and VA Disability 
Compensation. The Coalition was disappointed that agreement could not 
be reached by last year's conference committee to provide unconditional 
concurrent receipt in the National Defense Authorization Act for Fiscal 
Year 2003, but appreciates the ``first ever'' provisions that were 
provided to eliminate the disability offset for certain retirees who 
were severely disabled by combat and operations-related incidents. The 
subcommittee's action to establish a ``beachhead'' in law is very 
significant in recognizing that military retired pay and veterans 
disability compensation are paid for different purposes, and one should 
not offset the other.
    The Coalition has long held that retired pay is earned compensation 
for completing a career of arduous uniformed service, while veterans 
disability compensation is paid for loss of function and future earning 
potential caused by a service-connected disability.
    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. 
Because of cost concerns, last year's authority was limited to a very 
special group of disabled retirees--those injured in combat, or other 
combat related operations. But there are thousands of deserving 
disabled retirees who have been left behind.
    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.
    The Coalition believes strongly that the 90 percent cosponsorship 
support that existed in the 107th Congress was inconsistent with the 
outcome, and that further action is essential to address the grossly 
unfair financial penalties visited for so long on those who already 
have suffered most for their country--military retirees disabled as a 
result of their service.
    The Coalition is particularly concerned that, during last-minute 
final negotiations on the National Defense Authorization Act for Fiscal 
Year 2003, changes in eligibility language inadvertently omitted three 
classes of disabled retirees who otherwise fall within the criteria 
enacted into law.
    First, technical language in last year's limited concurrent receipt 
provision effectively excluded virtually all National Guard and Reserve 
retirees with 20 years of creditable service and combat-related 
disabilities. There are many retired reservists who were awarded Purple 
Hearts and have combat-related disabilities. Their Guard and Reserve 
status did not protect them from being wounded on the battlefield, and 
they should not be discriminated against by this legislation.
    Second, there are a very limited number of retirees who received 
nondisability retirements with 15 to 19 years of service during the 
drawdown of the early 1990s and who also have otherwise-qualifying 
combat-related disabilities. These members earned their military 
retirement independently of their disability and should be eligible to 
receive the special compensation if their disabilities would otherwise 
qualify.
    Finally, enlisted retirees who were awarded one of the top two 
decorations for valor are authorized an extra 10 percent in retired pay 
(within the maximum limit of 75 percent of basic pay). The Coalition 
believes strongly that the modest extra retired pay awarded these 
members for their combat heroism should not be subject to the 
disability offset.
    The Military Coalition urges subcommittee leaders and members to 
expand on last year's concurrent receipt provision and eliminate the 
disability offset for all disabled retirees. As a priority, the 
Coalition urges the subcommittee to amend last year's authority to 
include certain otherwise-qualifying Guard and Reserve retirees, early 
retirement authority retirees, and enlisted retirees with high 
decorations for extraordinary valor.
    Final Retired Pay Check. The Military Coalition believes the policy 
requiring the recovery of a deceased member's final retired pay check 
from his or her survivor should be changed to allow the survivor to 
keep the final month's retired pay payment.
    Current regulations led to a practice that requires the survivor to 
surrender the final month of retired pay, either by returning the 
outstanding paycheck or having a direct withdrawal recoupment from his 
or her bank account. The Coalition believes this is an insensitive 
policy coming at the most difficult time for a deceased member's next 
of kin. Unlike his or her active duty counterpart, the retiree will 
receive no death gratuity. Many of the older retirees will not have 
adequate insurance to provide even a moderate financial cushion for 
surviving spouses. Very often, the surviving spouse has had to spend 
the final retirement check/deposit before being notified by the 
military finance center that it must be returned. Then, to receive the 
partial month's pay of the deceased retiree up to the date of death, 
the spouse must file a claim for settlement and wait for the military's 
finance center to disburse the payment. Far too often, this strains the 
surviving spouse's ability to meet the immediate financial obligations 
commensurate with the death of the average family's ``bread winner.''
    The Military Coalition strongly recommends that surviving spouses 
of deceased retired members should be allowed to retain the member's 
full retired pay for the month in which the member died.
    Former Spouse Issues. The Military Coalition recommends corrective 
legislation be enacted to eliminate inequities in the Uniformed 
Services Former Spouse Protection Act (USFSPA) that were created 
through years of well-intended, piecemeal legislative action initiated 
outside the subcommittee.
    The Coalition supports the recommendations in the Department of 
Defense's September 2001 report, which responded to a request from this 
committee for an assessment of USFSPA inequities and recommendations 
for improvement. The DOD recommendations to allow the member to 
designate multiple survivor benefit plan beneficiaries would eliminate 
the current unfair restriction that denies any SBP coverage to a 
current spouse if a former spouse is covered, and would allow dual 
coverage in the same way authorized by Federal civilian SBP programs. 
The Coalition also recommends that the Defense Finance and Accounting 
Service (DFAS) be required to make direct payments to the former 
spouses, regardless of length of marriage; the one-year deemed election 
period for SBP eligibility be eliminated; and if directed by a valid 
court order, DFAS should be required to deduct SBP premiums from the 
uniformed services retired pay awarded to a former spouse. Also, DOD 
recommends that prospective award amounts to former spouses should be 
based on the member's grade and years of service at the time of 
divorce--rather than at the time of retirement. TMC supports this 
proposal since it recognizes that a former spouse should not receive 
increased retired pay that is realized from the member's service and 
promotions earned after the divorce.
    In addition, with the exception of the National Military Family 
Association and the Association of the United States Army, the 
Coalition supports legislation planned to be introduced by Rep. Cass 
Ballenger (R-NC) that would limit the duration of payments to former 
spouses whose marriage to the service member did not encompass 20 years 
of the member's uniformed service. This proposal would limit the period 
of a former spouse's retired pay payments to the number of years the 
former spouse's marriage overlapped with a retired member's uniformed 
service. The Coalition believes strongly in the simple equity premise 
of this legislation--that if a service member must serve 20 years to 
acquire lifetime retirement benefits, a former spouse should meet the 
same standard to acquire a lifetime share in those benefits.
    The Military Coalition recommends corrective legislation as 
envisioned by Rep. Ballenger and the proposals submitted by the 
Department of Defense be enacted to eliminate inequities in the 
administration of the Uniformed Services Former Spouse Protection Act.
    Tax Relief for Uniformed Services Beneficiaries. To meet their 
health care requirements, many uniformed services beneficiaries pay 
premiums for a variety of health insurance programs, such as TRICARE 
supplements, the active duty dental plan or TRICARE Retiree Dental Plan 
(TRDP), long-term care insurance, or TRICARE Prime enrollment fees. For 
most beneficiaries, these premiums and enrollment fees are not tax-
deductible because their health care expenses do not exceed 7.5 percent 
of their adjusted gross taxable income, as required by the IRS.
    This creates a significant inequity with private sector and some 
government workers, many of whom already enjoy tax exemptions for 
health and dental premiums through employer-sponsored health benefits 
plans. A precedent for this benefit was set for other Federal employees 
by a 2000 Presidential directive allowing Federal civilian employees to 
pay premiums for their Federal Employees Health Benefits Program 
(FEHBP) coverage with pre-tax dollars.
    The Coalition supports legislation that would amend the tax law to 
let Federal civilian retirees and active duty and retired military 
members pay health insurance premiums on a pre-tax basis. Although we 
recognize that this is not within the purview of the Armed Services 
Committee, the Coalition hopes that the subcommittee will lend its 
support to this legislation and help ensure equal treatment for all 
military and Federal beneficiaries.
    The Coalition urges the subcommittee to support legislation to 
provide active duty and uniformed services beneficiaries a tax 
exemption for premiums or enrollment fees paid for TRICARE Prime, 
TRICARE Standard supplements, the active duty dental plan, TRICARE 
Retiree Dental Plan, FEHBP and Long Term Care.
    Involuntary Separation Pay. A law change enacted in 2000 denies 
separation pay to officers twice deferred for promotion who decline 
continuation to 20 years of service.
    The Coalition urges the subcommittee to reconsider. This 
legislation is particularly unfair to officers deferred a second time 
for promotion to 0-4 (at approximately 13 years of service), who can 
find themselves coerced into an untenable choice between serving an 
additional 7 years without advancement opportunities or separating 
after more than a decade of service without any separation pay. 
Previously, officers could decline such an offer and still receive 
separation pay, in recognition of the inconsistency between deeming an 
officer noncompetitive for advancement in the military and 
simultaneously creating financial barriers to allowing the officer to 
pursue civilian career opportunities.
    The Coalition believes such an insensitive practice can only 
encourage officers to leave service early rather than risk investing 13 
years of service and be treated so unfairly if deemed noncompetitive. 
Perceptions of this unfairness have led to varied applications in 
different services, which only heightens the inequity.
    The Military Coalition urges reinstatement of involuntary 
separation pay eligibility for officers twice deferred from promotion 
who decline continuation to 20 years.

Survivor Program Issues
    The Coalition thanks the subcommittee for past support of 
improvements to the Survivor Benefit Plan (SBP); most recently the 
provision in the National Defense Authorization Act for Fiscal Year 
2002 that extended SBP eligibility to members killed on active duty, 
regardless of years of service. This action helped a great deal in 
addressing a long-standing survivor benefits disparity.
    But serious SBP inequities remain to be addressed. The Coalition 
hopes that this year the subcommittee will be able to support an 
increase in the minimum SBP annuity for survivors age 62 and older, and 
consider a more equitable paid-up SBP implementation schedule for pre-
1978 SBP enrollees.
    Age-62 SBP Annuity Increase. 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. 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's Social Security benefit that is 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, or offset, 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.
    To add to these grievances, the originally intended 40-percent 
government subsidy for the SBP program--which has been cited for more 
than two decades as an inducement for retirees to elect SBP coverage--
has declined to less than 25 percent. This is because retiree premiums 
were established in statute in the expectation that retiree premiums 
would cover 60 percent of expected long-term SBP costs, based on the 
DOD Actuary's assumptions about future inflation rates, interest rates, 
and mortality rates. However, actual experience has proven these 
assumptions far too conservative, so that retiree premiums now cover 75 
percent of expected SBP benefit costs. In effect, retirees are being 
charged too much for the long-promised benefit, and the Government is 
contributing less to the program than Congress originally intended.
    This is not the first time the subsidy has needed to be addressed. 
After the subsidy had declined to similar low levels in the late 1980s, 
Congress acted to restore the balance by reducing retiree premiums. Now 
that the situation has recurred, the Coalition believes strongly that 
the balance should be restored this time by raising the benefit for 
survivors.
    The chart below highlights another significant inequity--the much 
higher survivor annuity percentage and subsidy percentage the 
government awards to Federal civilian survivors compared to their 
military counterparts.

          FEDERAL CIVILIAN VS. MILITARY SBP ANNUITY AND SUBSIDY
                                [Percent]
------------------------------------------------------------------------
                                     CSRS \1\     FERS \2\     Military
------------------------------------------------------------------------
Post-62 percent of Ret Pay.......          55           50           35
Gov't Subsidy....................          48           33          25
------------------------------------------------------------------------
\1\ Civil Service Retirement System
\2\ Federal Employees Retirement System

    Because service members retire at younger ages than Federal 
civilians, retired service members 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.
    The National Defense Authorization Act for Fiscal Year 2001 
included 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 versus those for younger survivors. But that statement 
of support remains to be translated into substantive relief.
    The Military Coalition strongly supports legislation sponsored by 
Sen. Olympia Snowe and Rep. Jeff Miller (S. 451 and H.R. 548, 
respectively) that, if enacted, would eliminate the disparity over a 5-
year period--raising the minimum SBP annuity to 40 percent of SBP-
covered retired pay on October 1, 2004; to 45 percent in 2005; and to 
50 percent in 2006 and finally to 55 percent in 2007.
    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. The cost could be 
partially offset by authorizing an open enrollment season to allow 
currently non-participating retirees to enroll in the enhanced program, 
with a late-enrollment penalty tied to the length of time since they 
retired. A similar system was used with the last major program change 
in 1991.
    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 
S. 451 and H.R. 548.
    30-Year Paid-Up SBP. Congress approved a provision in the National 
Defense Authorization Act for Fiscal Year 1999 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, 
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 grant relief to 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 partial recognition of this 
problem, SBP premiums were reduced substantially in 1991, but these 
older members still 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 forcing them to wait five more years for relief, or as many 
retirees believe, waiting for them to die off.
    The Military Coalition recommends accelerating the implementation 
date for the 30-year paid-up SBP initiative to October 1, 2003.
    Active Duty SBP. Active duty SBP provisions in the National Defense 
Authorization Act for Fiscal Year 2002 gave active duty members a 
significantly enhanced SBP benefit. However, the law inadvertently set 
different rules for active duty and retired members and survivors 
regarding payment of SBP benefits to eligible children. Currently, in 
the case of survivors of retirees with ``spouse and child'' coverage, 
the payments transfer from the spouse to the minor child(ren) if the 
spouse remarries before the children lose their dependent status. But 
an inadvertent inconsistency in the fiscal year 2002 law change does 
not allow such transfer in the case of a remarriage of a survivor of a 
member who died on active duty. In such cases, the children can receive 
SBP payments only if the surviving spouse dies.
    Payment of benefits to children should be authorized if the 
surviving spouse remarries, regardless of whether the member died on 
active duty or in retirement.
    In addition, SBP eligibility should switch to the children if a 
surviving spouse is convicted of complicity in the member's death.
    The Military Coalition recommends authorizing transfer of SBP 
payments to surviving children in the event that any surviving spouse 
remarries or is convicted of complicity in the service member's death.
    Death Gratuity. The current death gratuity amount was last 
increased in 1991 when it was raised from $3,000 to $6,000. This amount 
is insufficient to cover costs incurred by families responding to the 
death of an active member. The Coalition believes the subcommittee was 
correct last year in seeking to double the death gratuity and making it 
tax-free.
    The Military Coalition recommends increasing the military death 
gratuity from $6,000 to $12,000, and making the gratuity tax-free.
    SBP-DIC Offset. Currently, SBP survivors whose sponsors died of 
service-connected causes have their SBP annuities reduced by the amount 
of Dependency and Indemnity Compensation payable by the VA.
    The Coalition believes this offset is not appropriate, because the 
SBP and DIC programs serve distinct purposes. SBP is a retiree-
purchased program, which any retiring member can purchase to provide 
the survivor a portion of his or her retirement. DIC, on the other 
hand, is special indemnity compensation to the survivor of a member 
whose service caused his or her death.
    The Coalition believes strongly that the government owes extra 
compensation (``double indemnity compensation,'' in essence, rather 
than ``substitute compensation'') in cases in which the member's death 
was caused by his or her service.
    Although the survivor whose SBP is reduced now receives a pro-rata 
rebate of SBP premiums, the survivor needs the annuity, not the premium 
refund. Award of DIC should not reduce award of SBP any more than it 
reduces payment of SGLI life insurance benefit.
    The Military Coalition recommends eliminating the DIC offset to 
Survivor Benefit Plan annuities, recognizing that the two compensations 
serve different purposes, and one is not substitutable for the other.
Health Care Testimony 2003
    The Military Coalition is most appreciative of the subcommittee's 
exceptional efforts to honor the government's health care commitments 
to uniformed services beneficiaries, particularly for Medicare-
eligibles and active duty members and families. These and other 
subcommittee-sponsored enhancements represent the greatest military 
health care advancements in a generation and save uniformed services 
beneficiaries thousands of dollars a year. The Coalition also thanks 
the subcommittee for its continuing efforts to facilitate improvements 
in TRICARE claims processing, portability, and access.
    However, much remains to be done. Today, we wish to address certain 
chronic problem areas, and some additional initiatives that will be 
essential to providing an equitable and consistent health for all 
categories of TRICARE beneficiaries, regardless of age or geography.
    We urge the subcommittee to particularly turn its attention to the 
situation of beneficiaries under age 65. While the subcommittee has 
substantially eased cost burdens for Medicare-eligibles and for active 
duty families in TRICARE Prime and Prime Remote, 3.2 million TRICARE 
Standard beneficiaries still face increasingly significant provider 
accessibility challenges.
    The Coalition looks forward to continuing its productive and 
cooperative efforts with the subcommittee's members and staff in 
pursuit of this common objective.

Adequate Funding for the Defense Health Budget
    Once again, a top Coalition priority is to work with Congress and 
DOD to ensure full funding of the defense health budget to meet 
readiness needs and deliver services, through both the direct care and 
purchased care systems, for ALL uniformed services beneficiaries, 
regardless of age, status, or location. An adequately funded health 
care benefit is essential to readiness and the retention of qualified 
uniformed service personnel.
    The subcommittee's oversight of the defense health budget is 
essential to avoid a return to the chronic underfunding of recent years 
that led to execution shortfalls, shortchanging of the direct care 
system, inadequate equipment capitalization, failure to invest in 
infrastructure and reliance on annual emergency supplemental funding 
requests as a substitute for candid and conscientious budget planning.
    While supplemental appropriations were not required last year, we 
are concerned that the current funding level only meets the needs of 
the status quo and does not address the growing requirement to support 
the deployment of forces to Southwest Asia and Afghanistan. Addressing 
funding for these increased readiness requirements; TRICARE provider 
shortfalls and other needs will require additional funding.
    The Military Coalition strongly recommends the subcommittee 
continue its watchfulness to ensure full funding of the Defense Health 
Program, to include military medical readiness, TRICARE, and the DOD 
peacetime health care mission. The Defense Health Budget must be 
sufficient to provide financial incentives to attract increased numbers 
of providers needed to ensure access for TRICARE beneficiaries in all 
parts of the country.

TRICARE for Life Implementation
    The Coalition is pleased to report that, thanks to this 
Subcommittee's focus on beneficiaries, TMC representatives continue to 
be engaged in an OSD-sponsored action group, the TFL Working Group. The 
Working Group has broadened its scope from its original TFL focus, and 
has been redesignated accordingly as the TRICARE Beneficiary Panel. The 
group continues to meet on a regular basis to further refine TFL and 
tackle other TRICARE beneficiary concerns. We are most appreciative of 
the positive working relationship that has evolved between the 
Beneficiary Panel and the staff at TMA. This collegiality has gone a 
long way toward making the program better for all stakeholders. From 
our vantage point, DOD continues to be committed to implement TFL 
consistent with congressional intent and continues to work vigorously 
toward that end.
    The Coalition is concerned that some TFL implementation 
``glitches'' remain. The Beneficiary Panel has provided a much-needed 
forum to exchange DOD and beneficiary perspectives and identify 
corrective actions. The majority of issues, especially with regard to 
TFL claims processing appear to be resolved. The Coalition will 
continue to work closely with DOD to monitor remaining issues and any 
others that may arise.
    The Coalition has identified certain statutory limitations and 
inconsistencies that we believe need adjustment to promote an equitable 
benefit for all beneficiaries, regardless of where they reside.
    Claims Processing for Under-65 Medicare-Eligible Beneficiaries. 
When TFL was enacted, the Coalition believes Congress intended that ALL 
Medicare-eligible beneficiaries should receive the same benefit and the 
same claims-processing treatment. Unfortunately, this has not turned 
out to be the case as DOD has interpreted and implemented the TFL 
statute.
    The Coalition is very concerned about claims processing limitations 
that persist for the estimated 48,000 under-65 Medicare-eligible 
population. These TRICARE beneficiaries (who are eligible for Medicare 
due to disability) continue to be left out of the electronic claims 
processing--the standard for TFL beneficiaries over 65. Eligibility for 
automated claims is essential to make TFL work smoothly, since it 
allows TFL beneficiaries access to any Medicare-participating provider. 
In this regard, Medicare providers incur no extra paperwork with TFL 
patients, because Medicare automatically processes the claims to TFL. 
Without inclusion in the electronic claims process, younger disabled 
beneficiaries must still find a provider who accepts TRICARE in 
addition to Medicare, and their providers are still saddled with filing 
individual paper claims with TRICARE for each episode of care. Since 
this entails much slower processing and payment, many providers are 
unwilling to care for under-65 Medicare-eligibles or require payment 
upfront at the time of service.
    House report language accompanying the NDAA for Fiscal Year 2003 
(P.L. 107-107) directs DOD to provide Medicare-eligibles under 65 the 
ability to participate in the electronic claims process and to provide 
a report by March 31, 2003. However, DOD has shown little initiative to 
expedite a fix for these deserving beneficiaries. The Department has 
indicated its intent to delay inclusion of under-65 retired Medicare-
eligible beneficiaries in the electronic claim system until the new 
TRICARE contracts are implemented at some point in 2004. This means 
disabled Medicare-eligibles under age 65 face a delay of over three 
years in receiving the benefit of Congress' action. The Coalition 
believes this situation is extremely unfair and imposes an undue burden 
on these disabled beneficiaries who most need care and often endure 
financial hardship because of their disability.
    The Military Coalition urges the subcommittee to change the law to 
require that all Medicare-eligible uniformed services beneficiaries, 
regardless of age or status, shall be entitled to the same TFL 
benefits, claims processing treatment, and benefits information 
notification currently afforded to Medicare-eligible beneficiaries over 
age 65, effective upon enactment.
    Education for Under-65 Medicare-Eligible Beneficiaries. Unlike 
Medicare-eligibles over the age of 65, disabled beneficiaries under 65 
receive no formal communication from DOD about how their TRICARE 
benefits change upon becoming eligible for Medicare Part B. (Under-65 
Medicare eligibles retirees must enroll in Part B in order to keep 
their TRICARE benefits.)
    Many beneficiaries are unaware of this requirement, only to find 
their TRICARE claims denied when it is discovered they are also 
eligible for Medicare. The Coalition values TMA's willingness to make 
good faith payments for these beneficiaries and to provide a 5 day 
grace period where the claims are paid to date and the benefit is 
terminated on day five. However, this is not enough. The annual open 
enrollment season for Medicare is the 1st quarter of the year, with 
benefits beginning in the 3rd quarter. Therefore, many who are in the 
greatest need of care are now having their TRICARE benefit terminated 
and being left in the lurch without coverage until the following July 
1st.
    The Coalition does not understand why the beneficiary is 
subsequently cut off from TRICARE before they can get into CMS's 
arbitrary open enrollment season--especially when they were 
inadequately informed of the Part B requirement in the first place.
    Through the Beneficiary Panel, the Coalition has continued to urge 
DOD to take a more proactive stance in aggressively educating this 
group about the benefits changes associated with Medicare eligibility. 
While the revision of the September 2002 TRICARE Handbook was a 
monumental effort, the education of dual eligibles about the Part B 
requirement as stated on page 9 remains woefully inadequate and there 
still remains NO effort to contact these beneficiaries.
    The Military Coalition urges the subcommittee to require DOD to 
develop a mechanism to inform retiree beneficiaries of the Part B 
requirement and to continue their TRICARE benefit until the first date 
their Medicare coverage can take effect, contingent on the 
beneficiary's participation in the next Part B open enrollment period.
    Medicare Part B Penalty. Currently, an estimated 6 percent of the 
Medicare-eligible beneficiaries residing in the United States would be 
subject to a Medicare Part B late enrollment penalty if they desire to 
participate in TFL. The penalty, which increases by 10 percent per 
year, is particularly onerous for more elderly retirees (principally 
the veterans of World War I and World War II), lower grade retirees and 
survivors. Last year, the House passed H.R. 4546 to authorize an open 
enrollment season to relieve TFL-eligibles from this penalty, 
recognizing that many older military beneficiaries (especially those 
residing overseas, where Medicare does not pay) had no previous 
incentive to enroll in Medicare Part B. Unfortunately, the Senate did 
not complete action on a similar bill. The Coalition strongly supports 
this initiative, but recognizes that jurisdiction over any aspect of 
the Medicare program is outside the purview of the Armed Services 
Committees. We ask for the subcommittee's support for new legislation 
to provide for a special enrollment period.
    The Military Coalition recommends that individuals who attained age 
65 prior to October 1, 2001, who would otherwise be subject to a 
Medicare Part B late enrollment penalty, should have the ability to 
enroll in Medicare Part B during a special enrollment period and to 
have penalties waived.
    Dual-Eligible DOD-VA Beneficiaries. The Coalition is very grateful 
to the subcommittee for the National Defense Authorization Act (NDAA) 
for Fiscal Year 2002 (P.L. 107-107) provision that prohibits the 
Secretary of Defense from forcing DOD beneficiaries who are also 
eligible for Veterans Administration (VA) medical care to choose 
between DOD and VA care.
    We support the subcommittee's rational approach, and its resistance 
to the efforts of those who would force disabled retirees to choose one 
system or the other, or who would try to merge parts or all of the two 
systems. We agree strongly with the subcommittee that the right 
approach is to avoid trying to solve the government's budgetary and 
oversight issues by restricting beneficiary options or forcing them 
into a health care system that was not designed to meet their needs.
    However, the Coalition was distressed to learn that Chapter 10, Sec 
1.1 and Chapter 13, Section 12.1 of the TRICARE Policy Manual state 
that when an individual is entitled to VA services because of a 
service-connected disability and is TRICARE-eligible, the individual 
must choose the program to use for each episode of care. Once that 
individual has selected the program of choice, crossover is not 
permitted for that episode of care. DOD will not care for a TRICARE 
beneficiary who has been receiving VA care for their service-connected 
disability for that episode of care. The Coalition appreciates the 
subcommittee's effort in the NDAA for Fiscal Year 2003 to takes steps 
to address access for dual-eligible beneficiaries and better define the 
term ``episode of care'' for this purpose.
    The Coalition contends that dual-eligibles should be allowed access 
to both systems and the two agencies should resolve reimbursement 
issues. This situation is made more complex because of the long waiting 
times for VA care. The VA has no enforceable access standards to speak 
of, while Prime beneficiaries have the right to stringent access 
standards. In addition, the Coalition is not aware of any circumstances 
where beneficiaries are educated about the limitations in their TRICARE 
benefit--should they coincidentally have a service-connected 
disability.
    The Coalition rejects DOD's rationale for this egregious policy--
which it is allegedly meant to preserve continuity of care. When the 
Coalition has sought to abolish Nonavailability Statements (NAS) based 
on continuity of care concerns, DOD vigorously argues the other side of 
the case.
    The Coalition is concerned about the double standard that is in 
place:

         If you are a service connected disabled Veteran--
        despite your wishes to be treated elsewhere, continuity of care 
        keeps you out of TRICARE.
         If you are a Standard beneficiary, your desire for 
        continuity of care is disregarded and you are forced into the 
        military's direct care system.
         If you have other health insurance, you can get 
        continuity of care wherever you want, and DOD will bill your 
        other insurance should you use the TRICARE benefit.

    The Coalition believes that the reality of the situation is that 
DOD selectively supports or opposes continuity of care depending on 
which position is to DOD's financial advantage, regardless of 
beneficiary inconvenience or continuity of care concerns.
    The Military Coalition urges the subcommittee to remain vigilant in 
its efforts to ensure that military retirees also eligible for VA care 
should not be forced to make an election between VA and DOD health care 
and to take further steps to permit dual eligibles access to both 
systems.

TRICARE Improvements
    Access to Care. Access to care is the number one concern expressed 
by our collective memberships. More and more beneficiaries report that 
few, if any, providers in their area are willing to accept new TRICARE 
Standard patients. Enhanced benefits for our seniors and decreased cost 
shares for active duty beneficiaries will be of little consequence to 
beneficiaries who cannot find a TRICARE provider.
    Distinction between TRICARE Prime and Standard. The Coalition 
believes that a further distinction must be made between TRICARE 
Standard and Prime in evaluation of the TRICARE program. Our members 
report increased problems and dissatisfaction with the Standard benefit 
that far exceed complaints about Prime. There certainly are success 
stories to be told about the Prime benefit, but glowing reports from 
TMA on the Prime benefit in documents such as the TRICARE Stakeholder's 
Repot obscure the very real and chronic problems with the Standard 
benefit.
    The Coalition thanks the subcommittee for their efforts in Sec. 712 
of the NDAA for Fiscal Year 2003 (P.L. 107-314) to require a 
Comptroller General report evaluating TRICARE network provider 
instability, along with the effectiveness of the MCSCs' efforts to 
measure and alleviate the issue. But here again, we are concerned that 
the report may focus on Prime networks, when the real problem concerns 
access for over 3.2 million beneficiaries to TRICARE Standard 
providers. We are hopeful that this report will delve into the unique 
problems associated with the latter issue.
    The Military Coalition urges the subcommittee to focus its primary 
energies on revitalizing the TRICARE Standard program. To this end, the 
Coalition recommends requiring that any reports from the Department of 
Defense, the Comptroller General or other sources specify separate 
assessments of TRICARE Prime and TRICARE Standard statistics, problems, 
policies, procedures, and impacts on beneficiaries.
    Provider Reimbursement. The Coalition is greatly troubled that 
because of a flaw in the provider reimbursement formula, the Centers 
for Medicare and Medicaid (CMS) have cut Medicare fees 9.8 percent over 
the past 2 years. Changes to the Medicare fee schedule directly affect 
uniformed services beneficiaries. Since 1991 by statute (10 U.S.C. 
1079(h)), DOD is required to establish TRICARE Maximum Allowable 
Charges (TMAC) based on Medicare's fee schedule. Cuts in Medicare 
provider payments, on top of providers' increasing overhead costs and 
rapidly rising medical liability expenses, seriously jeopardizes 
providers' willingness to participate in government programs like 
TRICARE and Medicare. Provider resistance is much more pronounced for 
TRICARE than Medicare for a variety of social, workload, and 
administrative reasons. Provider groups tell us that TRICARE is the 
lowest-paying program they deal with, and often poses them the most 
administrative problems. This is a terrible combination of perceptions 
if you are a TRICARE Standard patient trying to find a doctor.
    The Coalition is seriously concerned that the war on terrorism and 
the war in Southwest Asia are straining the capacity of the military's 
direct health care system, as large numbers of medical corps members 
are deployed overseas. As a result of this increased activation, more 
and more TRICARE patients will have to turn to the civilian sector for 
care--thus putting more pressure on civilian providers who already have 
absorbed significant fee cuts for providing care to TRICARE 
beneficiaries.
    The Coalition firmly believes that our deployed service men and 
women need to focus on their mission, without having to worry whether 
their family members back home can find a provider. Uniformed services 
beneficiaries, their family members, and survivors deserve the Nation's 
best health care, not the cheapest.
    We are grateful that the 108th Congress took action to pass 
legislation P.L. 108-7 (H.J. Res 2) to increase Medicare and TRICARE 
payment rates. Congress did the right thing by reversing the erroneous 
4.4 percent provider payment cut due to be implemented March 1, 2003, 
providing a 1.6 percent payment increase and giving the Centers for 
Medicare and Medicaid (CMS) the authority to fix the flawed Medicare 
reimbursement formula. The Coalition is aware that jurisdiction over 
the Medicare program is not within the authority of the Armed Services 
Committees, but believes it has a particular interest in raising 
Medicare rates because of the adverse impact of depressed rates on all 
TRICARE beneficiaries, not just Medicare-eligibles.
    The Military Coalition requests the subcommittee's support of any 
means to raise Medicare rates to more reasonable standards and to 
support measures to address Medicare Part B's flawed reimbursement 
formula.
    In order to achieve parity and encourage participation, both 
Medicare and DOD have the ability to institute locality-based rates to 
account for geographical variation in practice costs as necessary to 
secure sufficient providers to meet beneficiary needs. DOD has had 
statutory authority (10 U.S.C. 1097 (b)) to raise rates for network 
providers up to 115 percent of TMAC in areas where adequate access to 
health care services is severely impaired.
    To date, the Secretary of Defense has resisted using his existing 
authority to increase participation by raising reimbursement levels. 
The Coalition is eager to see the evaluation of the use of this 
authority in the Comptroller General report mandated in Sec. 712 of the 
NDAA for Fiscal Year 2003 (P.L. 107-314). But here again, the focus on 
Prime networks can obscure the larger problems with Standard providers.
    The Coalition believes that raising TRICARE payment rates to 
competitive levels with other insurance is essential to solving the 
TRICARE Standard access problem. We appreciate the cost implications of 
doing this, and understand the preference in both the executive and 
legislative branches to focus on administrative issues rather than 
payment levels. But providers indicate overwhelmingly that it is a 
money issue. They may be willing to accept low payments from Medicare 
out of a sense of obligation to the elderly and the volume of elderly 
patients, and because Medicare has a reasonably reliable electronic 
payment system. They are not so willing to accept low TRICARE payments.
    The Coalition supports past and current efforts to improve TRICARE 
administrative issues, and believes headway is being made. But 
providers know, as we do, that these problems have persisted for 
decades, and they are skeptical about the likelihood of significant 
change in the near term. Meanwhile, TRICARE beneficiaries need access 
to doctors, and they should not have to wait years in hopes of getting 
it.
    Other insurance programs pay providers rates that are significantly 
higher than TRICARE Standard's. The Coalition is very doubtful that 
access problems can be addressed successfully without raising rates. We 
believe the only way to assess the merits is to institute a pilot 
project to test if raising TRICARE Standard payment rates improves 
access for beneficiaries.
    The Military Coalition most strongly urges the subcommittee to 
institute a pilot project at several locations of varying 
characteristics to test the extent to which raising TRICARE Standard 
rates increases the number of providers who are willing to accept new 
Standard patients.
    Medicare has recognized that in order to ensure continued access 
for its beneficiaries, it must supplement its basic reimbursement rates 
in a variety of specific areas. This summer, DOD will make an 
additional step toward the same understanding with a commitment to pay 
a 10 percent quarterly bonus to both Standard and network providers in 
Health Professional Shortage Areas (HPSAs).
    The Coalition is pleased that DOD plans to make these bonus 
payments that parallel Medicare's HPSA program. By adapting this plan, 
DOD makes the same commitment to access for TRICARE beneficiaries, as 
does Medicare. TRICARE's medically underserved areas will be the same 
as those determined by the Secretary of Health and Human Services for 
the Medicare program.
    The Coalition urges the subcommittee to further align TRICARE with 
the Medicare program by authorizing increased payments to hospitals in 
areas, which serve a disproportionately large number of TRICARE 
beneficiaries, thus mirroring Medicare's Disproportionate Share (DSH) 
payment adjustment. Since TRICARE rates are based upon Medicare, it 
makes sense that TRICARE follow this supplemental payment concept of 
Medicare, as it is every bit as important that DOD safeguard access to 
care for uniformed services beneficiaries as does Medicare.
    The Military Coalition urges the subcommittee to further align 
TRICARE with Medicare by adapting the Medicare Disproportionate Share 
payment adjustment to compensate hospitals for the care of TRICARE 
beneficiaries.
    FEHBP Option. The Coalition is the first to acknowledge the ongoing 
interest and effort being invested in improving TRICARE. But the 
Coalition is also frustrated that many of TRICARE's difficulties are 
chronic ones with which TRICARE beneficiaries have been struggling with 
for many years. If past experience is any indicator, solving the 
TRICARE provider access problem is years away from reality. In the 
meantime, military beneficiaries need an additional option for access 
to health coverage that larger numbers of providers will accept in all 
areas of the country.
    One ``off the shelf'' option that is available immediately, with 
legislative authority, is to allow uniformed services beneficiaries the 
option of enrolling in the same Federal Employees Health Benefits 
Program the government already provides for Federal civilian employees 
and retirees. FEHBP requires a substantial premium payment, so we do 
not expect military beneficiary participation would be widespread. But 
an FEHBP option would provide one way for beneficiaries to improve 
their access to health care immediately, particularly in areas (e.g., 
Idaho and certain areas of Colorado) where there are virtually no 
providers accepting new TRICARE patients.
    Uniformed services beneficiaries who now have limited access to 
participating providers should not have to wait years for necessary 
TRICARE improvements. Authorizing an FEHBP option is one important way 
to provide them immediate access.
    The subcommittee previously authorized a test demonstration for 
Medicare-eligible beneficiaries, who now are served by TRICARE For 
Life. Now, the FEHBP option deserves consideration to meet the needs of 
younger beneficiaries who are having difficulty using their TRICARE 
coverage.
    The Military Coalition urges the subcommittee to authorize a 
demonstration program to test interest, feasibility, and cost-
effectiveness of providing uniformed services beneficiaries, family 
members, retirees and survivors under the age of 65 an option to enroll 
in FEHBP on the same basis as their Federal civilian counterparts.
    Network and Standard Provider Availability. Large numbers of 
beneficiaries continue to report increased difficulty locating 
providers who will accept new TRICARE patients, even though the 
Department of Defense indicates that the number of TRICARE providers is 
at near an all-time high.
    Clearly, there is a problem with how provider participation is 
measured and monitored. The current participation metric is calculated 
as the percent of claims filed on an assigned basis. Nowhere does DOD 
or its support contractors ask or track whether participating or 
authorized providers are accepting new patients.
    Since participation is fluid, providers are permitted to accept or 
refuse TRICARE patients on a day-by-day basis; therefore, beneficiaries 
often must make multiple inquiries to locate a provider who is taking 
patients on that day.
    Allegedly, current TRICARE contracts require MCSCs to help Standard 
patients find providers, but this is not the actual practice. Further, 
there is no such requirement in the new TNEX contracts. MCSCs are under 
no obligation to recruit Standard providers or provide up-to-date lists 
of Standard providers, leaving beneficiaries on their own to determine 
if a provider is willing to accept Standard patients. We believe this 
issue is too critical to depend upon the ``chance'' that the civilian 
contractors will voluntarily elect to provide this service in all 
regions.
    As one beneficiary said, ``The TRICARE Standard provider handbook 
list is now the Yellow Pages, and Standard beneficiaries are forced to 
call provider after provider asking, `Do you take TRICARE patients?' '' 
Another beneficiary reported, after calling every provider in the area 
without success, ``It's as if doctors are hanging up signs that say 
`Dogs and service members not allowed.' ''
    The Coalition believes MCSCs must have an obligation to assist 
Standard beneficiaries as well as Prime beneficiaries. Options may 
include providing interactive on-line lists of Standard providers, with 
indications of which ones are currently accepting new Standard 
patients. Where a beneficiary cannot find a provider, the MCSC should 
help them do so.
    The Military Coalition urges the subcommittee to require DOD and 
its MCSCs to assist Standard beneficiaries in finding providers who 
will accept new TRICARE Standard patients, including interactive on-
line lists and other means of communication.
    Administrative Burdens. Despite many initiatives to improve the 
program, we continue to hear complaints from providers of low and slow 
payments, as well as burdensome administrative requirements and 
hassles. Only by decreasing the administrative burden placed on 
providers and building a simplified and reliable claims system that 
pays in a timely way can Congress and DOD hope to establish TRICARE as 
an attractive program to providers and a dependable benefit for 
beneficiaries.
    Once providers have left the TRICARE system, promises of increased 
efficiencies have done little to encourage them to return. Lessons 
learned from TFL implementation demonstrate the effectiveness of using 
one-stop electronic claims processing to make automatic TRICARE 
payments to any Medicare-participating provider.
    The Coalition is grateful to the subcommittee for its actions in 
the NDAA for Fiscal Year 2003 designating Medicare providers as TRICARE 
authorized providers and requiring DOD to adopt claims requirements 
that mirror Medicare's, effective with TNEX. TFL dramatically improved 
access to care for Medicare-eligibles by relying on existing Medicare 
policies to streamline administrative procedures and claims processing, 
make the system simple for providers, and pay claims on time.
    The Coalition remains concerned with the caveat under Sec. 711 of 
the NDAA for Fiscal Year 2003 that claim information is limited to that 
required for Medicare claims ``except for data that is unique to the 
TRICARE program.'' We believe that the proposed requirements are still 
more complex than that of private sector practices. We do not know how 
this extraneous information contributes to effective claims processing, 
but we do know that the private sector adjudicates claims more cost 
effectively and efficiently without such additional requirements. We 
also know that the more requirements the TRICARE claims system imposes 
on providers, the less willing they are to put up with it.
    The claims system should be designed to accommodate providers and 
beneficiaries' needs rather than compelling them to jump through 
additional administrative hoops for TRICARE's convenience. The 
Coalition is hopeful that the Comptroller General report on obstacles 
in claims processing will address this issue.
    The Military Coalition urges the subcommittee to continue its 
efforts to make the TRICARE claims system mirror Medicare's, without 
extraneous requirements that deter providers and inconvenience 
beneficiaries.
    Prior Authorization. While the TNEX request for proposals 
purportedly removes the requirement for preauthorization for Prime 
beneficiaries referred to specialty care, the TRICARE Policy Manual 
6010.54-M August 1, 2002, Chapter 1, Section 7.1, and I., G belies 
that, stating:

        ``Each TRICARE Regional Managed Care Support (MCS) contractor 
        may require additional care authorizations not identified in 
        this section. Such authorization requirements may differ 
        between regions. Beneficiaries and providers are responsible 
        for contacting their contractor's Health Care Finder for a 
        listing of additional regional authorization requirements.''

    The Coalition believes strongly that this regulation undermines the 
long-standing effort of this subcommittee to simplify the system and 
remove burdens from providers and beneficiaries. It is contrary to 
current private sector business practices, the commitment to decrease 
provider administrative burdens, and the provision of a uniform 
benefit. DOD has told the Coalition that they do not believe the 
civilian contractors will impose such limitations in their proposals, 
as it does not make good business sense. If so, why allow them that 
authority? The Coalition does not believe the provision of a uniform 
benefit should be left to the whims of the contractors. The Coalition 
believes it is the intent of Congress that uniformed services 
beneficiaries have earned and deserve a uniform benefit.
    The Military Coalition urges the subcommittee's continued efforts 
to narrow and ultimately eliminate requirements for pre-authorization.
    TRICARE Prime (Remote) Improvements. The Coalition is grateful for 
the NDAA for Fiscal Year 2003 provision (sec. 702) that addresses 
continued TRICARE eligibility of dependents residing at remote 
locations when their sponsor's follow-on orders are an unaccompanied 
assignment. Sec 702 also provides further Prime eligibility for certain 
dependents of Reserve component members ordered to active duty.
    This provision allows these families to retain the TRICARE Prime 
Remote benefit (TPR) and will go a long way to provide support for 
families remotely assigned who face a period of time living without 
their sponsor. The Coalition requests the subcommittee to make an 
additional consideration to enhance this provision. As written, TPR 
benefits are authorized only if the dependents remain at the former 
duty site. In such circumstances, there can be many good reasons why 
the family may wish to relocate to another area while awaiting the end 
of the sponsor's unaccompanied tour. Many dependents wish to relocate 
to be with their families during this time or to another area where 
they can best wait for the service member to return. In those cases 
where the government is willing to pay for the family's relocation for 
this purpose, it seems inappropriate to force the family out of the 
Prime Remote program if TRICARE Prime is not available at the location 
where the family will reside.
    The Military Coalition requests that the subcommittee authorize 
TRICARE Prime Remote beneficiary family members to retain their 
eligibility when moving to another remote area when such move is funded 
by the government and there is no reasonable expectation that the 
service member will return to the former duty station.
    Sec. 702 extends TPR to dependents of Reserve component members 
residing in remote areas when called to active duty for more than 30 
days. While we applaud this enhancement, we would ask the subcommittee 
to consider extending this to dependents that reside within Military 
Treatment Facility (MTF) catchment areas if the sponsor is called to 
active duty for 179 days or less. In such cases, the family members are 
not eligible for enrollment in TRICARE Prime. For them, there is no 
practical difference than if they lived in TRICARE Prime remote area. 
Under MTF optimization, these beneficiaries will most likely be unable 
to receive care from the military's direct care system. The Coalition 
believes the Prime Remote benefit should be standardized for ALL 
Reserve families when the sponsor is called to active duty for 31 to 
179 days, regardless of whether the family resides in a catchment area 
or not.
    The Military Coalition urges the subcommittee to expand TRICARE 
Prime Remote coverage to include reservists called to active duty for 
31 to 179 days who reside within MTF catchment areas.
    The great strides made in recent years to improve benefits for 
Medicare-eligibles and active duty families stand in contrast to 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 and cumbersome Standard benefit. Many, 
especially those who live in rural or metropolitan areas that are 
medically underserved, have great difficulty in locating TRICARE 
Standard providers. This presents a dilemma for members who have no 
choice but to rely on providers who can charge higher prices and 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 enhancements recently provided to the over-65 
retirees (TFL) and active duty beneficiaries, extra steps are needed to 
provide a more consistent benefit to the under-65 retirees whose needs 
are not currently being met by TRICARE Standard.
    The Military Coalition recommends that subcommittee authorize 
extension of TRICARE Prime Remote coverage to retirees and their family 
members and survivors at the same locations where it is established for 
active duty families.
    Healthcare for Members of the National Guard and Reserve. Health 
insurance coverage has an impact on Guard--Reserve (G-R) medical 
readiness and family morale. Progress has been made during transitional 
periods after call-ups, but more needs to be done to provide continuity 
of care coverage for Reserve component members.
    Health insurance coverage varies widely for members of the G-R: 
some have coverage through private employers, others through the 
Federal Government, and still others have no coverage. Reserve families 
with employer-based health insurance must, in some cases, pick up the 
full cost of premiums during an extended activation. Although TRICARE 
eligibility starts at 30 days activation, many G-R families would 
prefer continued access to their own health insurance. Being dropped 
from private sector coverage as a consequence of extended activation 
adversely affects family morale and military readiness and discourages 
some from reenlisting.
    In 2001, DOD recognized this problem and announced a policy change 
under which DOD would pay the premiums for the Federal Employee Health 
Benefit Program (FEHBP) for DOD reservist-employees activated for 
extended periods. However, this new benefit only affects about 10 
percent of the Selected Reserve. The Coalition believes this philosophy 
could be extended to pay health insurance premiums for activated G-R 
members who are not Federal civilian employees.
    As a matter of morale, equity, and personnel readiness, more needs 
to be done to assist reservists who are being called up more frequently 
in support of national security missions. They deserve options that 
provide their families continuity of care, without having to find a new 
doctor or navigate a new system each time the member is activated or 
deactivated.
    The Military Coalition urges making the TRICARE medical program 
available for members of the National Guard and Reserve component and 
their families on a cost-sharing basis in order to ensure medical 
readiness and provide continuity of coverage to members of the Selected 
Reserve. Alternatively, the Coalition urges allowing activated Guard/
Reserve members the option of having the Department of Defense pay 
their civilian insurance premiums during periods of activation.
    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 TFL, 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.
    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, and then TRICARE 
(formerly CHAMPUS) would pay any remaining balance up to what it would 
have paid as first payer if there were no other insurance (75 percent 
of the allowable charge for retirees; 80 percent for active duty 
dependents).
    Under its post-1995 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.
    DOD and Congress acknowledged the appropriateness of the 
``coordination of benefits'' approach in implementing TRICARE For Life 
and for calculating pharmacy benefits. TFL pays whatever charges are 
left after Medicare pays, up to what TRICARE would have paid as first 
payer. The Coalition believes this should apply when TRICARE is second-
payer to any other insurance, not just when it is second-payer to 
Medicare.
    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.
    Nonavailability Statements under TRICARE Standard. The Coalition is 
grateful for the provision in the NDAA for Fiscal Year 2002 that waives 
the requirement for a beneficiary to obtain a Nonavailability Statement 
(NAS) or preauthorization from an MTF in order to receive treatment 
from a civilian provider and appreciates that the time line for 
implementation of this provision has been moved up from the NDAA for 
Fiscal Year 2001 plan. However, except for maternity care, the law 
allows DOD broad waiver authority that diminishes the practical effects 
of the intended relief from NAS. These loopholes provide a great deal 
of leeway for the reinstatement of NAS at the Secretary's discretion. 
NASs can be required 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 except for maternity care, the 
waiver of the TRICARE Standard NAS requirement seems to be a ``road 
paved with good intentions,'' but little more.
    The rationale for a complete waiver of NAS requirements remains 
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.
    The Coalition is pleased to note that the TRICARE Reserve Family 
Demonstration Project (TRFDP) provides for increased access to health 
care for family members of activated reservists and guardsmen--
including a total waiver of NAS requirement for ALL inpatient services. 
While this group of beneficiaries is most worthy of a robust health 
care benefit and deserves to maintain established relationships with 
their health care providers, the Coalition believes this benefit should 
be extended to all uniformed services beneficiaries--active duty and 
retired--as well.
    DOD must honor the decision made by 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 
option, one of the most important principles of quality health care, 
continuity of care by a provider of their choice.
    The Military Coalition strongly recommends that all requirements 
for Nonavailability Statements be removed from the TRICARE Standard 
option and that all waivers be eliminated, effective upon enactment. 
Should the subcommittee deem this impractical at this time, the 
Coalition urges the subcommittee to build on the maternity care 
precedent by incrementally eliminating NAS authority for additional 
kinds of care.
    TNEX--TRICARE Next Generation of Contracts. This year, DOD will 
award the next round of managed care support contracts. The Coalition 
agrees that this is a critically important step, both for the 
Department and for beneficiaries. We acknowledge the complexity of this 
process, are committed to working with Congress and DOD to make 
implementation as effective as possible, and will be vigilant that the 
current level of service is not compromised. As these contracts are 
implemented, a seamless transition and accountability for progress are 
the Coalition's primary concerns.
    The Coalition is anxious that massive system changes are being 
implemented at a time of great stress for uniformed services 
beneficiaries, especially active duty members and their families. 
Transitions to new contractors, even when the contract design has not 
dramatically changed, has historically been tumultuous to all 
stakeholders, and especially to beneficiaries. The Coalition believes 
systems must be put in place that will make the transition to new 
contracts as seamless as possible to the beneficiary.
    One concern with awarding different contract functions to a variety 
of vendors is that beneficiaries should not be caught in the middle as 
they attempt to negotiate their way between the boundaries of the 
various vendors' responsibilities. DOD must find ways to ensure 
beneficiaries have a single source of help to resolve problems 
involving the interface of multiple vendors.
    The Military Coalition recommends that the subcommittee strictly 
monitor implementation of the next generation of TRICARE contracts and 
ensure that Beneficiary Advisory Groups' inputs are sought in the 
implementation process.
    Uniform Formulary Implementation. The Coalition is committed to 
work with DOD and Congress to develop and maintain a comprehensive 
uniform pharmacy benefit for all beneficiaries mandated by Section 701 
of the NDAA for Fiscal Year 2000. We will particularly monitor the 
activities of the Pharmacy and Therapeutics Committee. The Coalition 
expects DOD to establish a robust formulary with a broad variety of 
medications in each therapeutic class that fairly and fully captures 
the entire spectrum of pharmaceutical needs of the millions of 
uniformed services beneficiaries.
    The Coalition is grateful to this subcommittee for the role it 
played in mandating a Beneficiary Advisory Panel to comment on the 
formulary. Several Coalition representatives are members of the 
Beneficiary Advisory Panel and are eager to provide input to the 
program. While we are aware that there will be limitations to access of 
some medications, our efforts will be directed to ensuring that the 
formulary is as broad as possible, that prior authorization 
requirements for obtaining non-formulary drugs and procedures for 
appealing decisions are communicated clearly to beneficiaries; and 
administered equitably.
    The Coalition is particularly concerned that procedures for 
documenting and approving ``medical necessity'' determinations by a 
patient's physician must be streamlined, without posing unnecessary 
administrative hassles for providers, patients, and pharmacists. The 
Coalition believes the proposed copayment increase from $9 to $22 for 
non-formulary drugs is too steep and presents an undue financial burden 
upon all classes of beneficiaries. Beneficiaries' trust will be 
violated if the formulary is excessively limited, fees rise 
excessively, and/or the administrative requirements to document medical 
necessity are overly restrictive.
    DOD must do a better job of informing beneficiaries about the scope 
of the benefit and it works (to include prior authorization 
requirements, generic substitution policy, limitations on number of 
medications dispensed, and a listing of the formulary). The Coalition 
is pleased to note that the Department has improved its beneficiary 
education via the TRICARE Web site. However, we remain concerned that 
many beneficiaries do not have access to the Internet, and this 
information is not available through any other written source. As DOD 
approaches the uniform formulary implementation, it will be critical to 
make this information readily available to beneficiaries and providers.
    The Military Coalition urges the subcommittee to ensure a robust 
uniform formulary is developed with reasonable medical-necessity rules 
along with increased communication to beneficiaries about program 
benefits, pre-authorization requirements, appeals, and other key 
information.
    Fully Implement Portability and Reciprocity. Section 735 of the 
NDAA for Fiscal Year 2001 required 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. DOD has 
issued a memorandum stating that DOD policy requires full portability 
and reciprocity. Despite the efforts of this subcommittee, enrollees 
still experience a disruption in enrollment when they move between 
regions and are still not able to receive services from another TRICARE 
region without multiple phone calls and much aggravation.
    The lack of reciprocity presents particular difficulties for 
TRICARE beneficiaries living in ``border'' areas where two TRICARE 
regions intersect. In some of the more rural areas, the closest 
provider may actually be located in another TRICARE region, and yet due 
to the lack of reciprocity, these beneficiaries cannot use these 
providers without great difficulty. This problem suffers especially by 
comparison with TFL, as TFL beneficiaries have full portability and 
reciprocity of their benefits. Meanwhile, active duty and under-65 
retired beneficiaries remain tied to the region where they reside.
    It is unfathomable that, despite years of focus on the need for 
portability and reciprocity, and the obvious disruptions and financial 
problems imposed on beneficiaries in the interim, this same problem 
persists year after year. Something is seriously wrong when our 
government requires nationwide mobility of military families, but has 
such little sense of urgency about making sure their health benefits 
can follow them.
    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 services for beneficiaries.
    TRICARE Benefits for Remarried Widows. The Coalition believes there 
is an inequity in TRICARE's treatment of remarried surviving spouses 
whose second or subsequent marriage ends in death or divorce.
    Such survivors have their military identification cards reinstated, 
as well as commissary and exchange privileges. In addition, they have 
any applicable Survivor Benefit Plan annuity reinstated if such payment 
was terminated upon their remarriage. In short, all of their military 
benefits are restored--except health care coverage.
    This disparity in the treatment of military widows was further 
highlighted by enactment of the Veterans Benefits Act of 2002, which 
reinstates certain benefits for survivors of veterans who died of 
service-connected causes. Previously, these survivors lost their VA 
annuities and VA health care (CHAMPVA) when they remarried, but the 
Veterans Benefits Act of 2002 restored the annuity--and CHAMPVA 
eligibility--if the remarriage ends in death or divorce.
    The Military Coalition urges the subcommittee to restore equity for 
military widows by reinstating TRICARE benefits for otherwise 
qualifying remarried widows whose second or subsequent marriage ends in 
death or divorce.
    Deduct TRICARE Prime Enrollment Fees from Retiree Pay. Years ago, 
Congress gave DOD the authority to deduct TRICARE Prime enrollment fees 
from retired members' pay. However, the Department has not moved 
forward to make this service available to retirees.
    Many retirees and their families have paid significant penalties 
because of DOD's delay in implementing this authority, because of MCSC 
enrollment and billing errors, primarily in TRICARE Region 1. Because 
the contractor failed to send bills to Prime enrollees, many enrollees 
did not realize their payments were due until the contractor notified 
them that their families had been disenrolled from Prime.
    If DOD had used its authority and permitted retirees to pay for 
Prime through their pay, it could have saved thousands of beneficiaries 
from the hassles encountered when they were disenrolled from Prime 
because the Region 1 contractor failed to develop an adequate billing 
control system. It also would have saved the government thousands of 
the dollars that it took to address this problem.
    Health care is too important to military families to allow it to be 
disrupted by DOD's failure to implement a routine pay deduction that 
will save time, money, and administrative problems for the 
beneficiaries, the government, and the managed care contractors.
    The Military Coalition urges the subcommittee to require DOD to 
implement existing authority to deduct TRICARE Prime enrollment fees 
from enrollees' retired pay.
    Codify Requirement to Continue TRICARE Prime in BRAC Areas. In 
addition to our concerns about current benefits, the Coalition is 
apprehensive about continuity of future benefits as Congress and DOD 
begin to consider another round of base closures.
    Many beneficiaries deliberately retire in localities in close 
proximity to military bases, specifically to have access to military 
health care and other facilities. Base closures run significant risks 
of disrupting TRICARE Prime contracts that retirees depend on to meet 
their health care needs.
    Currently, under current TRICARE Managed Care Support Contracts and 
under DOD's interpretation of TNEX, TRICARE contractors are required to 
provide the Prime benefit in Base Realignment and Closure (BRAC) areas. 
However, these contracts can be renegotiated, and the contracting 
parties may not always agree on the desirability of maintaining this 
provision.
    The Coalition believes continuity of the TRICARE Prime program in 
base closure areas is important to keeping health care commitments to 
retirees, their families and survivors, and would prefer to see the 
current contract provision codified in law.
    The Military Coalition urges the subcommittee to amend Title 10 to 
require continuation of TRICARE Prime network coverage for all 
uniformed services beneficiaries residing in BRAC areas.
    TRICARE Retiree Dental Plan. The Coalition is grateful for the 
subcommittee's leadership role in authorizing the TRICARE Retiree 
Dental Plan (TRDP). While the program is clearly successful, 
participation could be greatly enhanced with two adjustments.
    Unlike the TRICARE Active Duty Dental Plan, there is no government 
subsidy for retiree dental premiums. This is a significant dissatisfier 
for retired beneficiaries, as the program is fairly expensive with 
relatively limited coverage. The Coalition believes dental care is 
integral to a beneficiary's overall health status. Dental disease left 
untreated can lead to more serious health consequences and should not 
be excluded from a comprehensive medical care program. As we move 
toward making the health care benefit uniform, this important feature 
should be made more consistent across all categories of beneficiaries.
    Another problem with the TRDP is that it is only available within 
the continental United States (CONUS). The Coalition requests that the 
subcommittee extend the TRDP to uniformed services beneficiaries 
residing overseas.
    The Military Coalition urges the subcommittee to consider providing 
a subsidy for retiree dental benefits and extending eligibility for the 
retiree dental plan to retired beneficiaries who reside overseas.
    Commonwealth of Puerto Rico CONUS Designation. The Commonwealth of 
Puerto Rico is included in the TRICARE Overseas Program, which means 
TRICARE Prime is available only to active duty service members and 
their families. Retirees living in Puerto Rico are excluded from this 
benefit. Under OCONUS regulations, the more expensive TRICARE Standard 
is the only available option for retired military personnel, their 
families and survivors. DOD has very limited direct care facilities, a 
limited benefit structure, and a severely limited contract provider 
network to serve this growing population.
    We are pleased to note that the Department has finally instituted 
TRICARE network pharmacies for all beneficiaries in Puerto Rico, but 
believe these beneficiaries are deserving of the option of enrollment 
in the Prime benefit.
    In light of the large number of retired beneficiaries residing in 
Puerto Rico and the importance of the Commonwealth as a source for 
recruitment and an initiative for retention, the Coalition believes it 
would be productive for all concerned to extend the Prime benefit to 
retired beneficiaries who reside there.
    The Military Coalition urges the subcommittee to support 
administrative inclusion of the Commonwealth of Puerto Rico with the 
CONUS for TRICARE purposes, so that retired beneficiaries in Puerto 
Rico may be eligible to enroll in TRICARE Prime.
    Tax Relief for Uniformed Services Beneficiaries. To meet their 
health care requirements, many uniformed services beneficiaries pay 
premiums for a variety of health insurance, such as TRICARE 
supplements, the active duty dental plan or TRICARE Retiree Dental Plan 
(TRDP), long-term care insurance, or TRICARE Prime enrollment fees. For 
most beneficiaries, these premiums and enrollment fees are not tax-
deductible because their health care expenses do not exceed 7.5 percent 
of their adjusted gross taxable income, as required by the IRS.
    This creates a significant inequity with private sector and some 
government workers, many of whom already enjoy tax exemptions for 
health and dental premiums through employer-sponsored health benefits 
plans. A precedent for this benefit was set for other Federal employees 
by a 2000 Presidential directive allowing Federal civilian employees to 
pay premiums for their Federal Employees Health Benefits Program 
(FEHBP) coverage with pre-tax dollars.
    The Coalition supports legislation that would amend the tax law to 
let Federal civilian retirees and active duty and retired military 
members pay health insurance premiums on a pre-tax basis. Although we 
recognize that this is not within the purview of the Armed Services 
Committee, the Coalition hopes that the subcommittee will lend its 
support to this legislation and help ensure equal treatment for all 
military and Federal beneficiaries.
    The Military Coalition urges the subcommittee to support 
legislation to provide active duty and uniformed services beneficiaries 
a tax exemption for premiums paid for TRICARE Prime enrollment fees, 
TRICARE Standard supplements and FEHBP premiums.
    Custodial Care. Once again, the Coalition thanks the subcommittee 
for its continued diligence in support of those beneficiaries who fall 
under the category of ``Custodial Care''. We are most appreciative of 
the generous enhancements offered in the NDAA for Fiscal Year 2002. We 
anxiously await the publication of DOD's interim report defining the 
implementing regulations.
    It has been over 2 years since the enactment of these requirements, 
and we hope that these beneficiaries do not have to wait much longer 
for this benefit.
    The Military Coalition recommends the subcommittee's continued 
oversight to assure that medically necessary care will be provided to 
all custodial care beneficiaries; that Congress direct a study to 
determine the impact of the new legislation upon all beneficiary 
classes, and that beneficiary groups' inputs be sought in the 
development of implementing regulations.
Conclusion
    The Military Coalition reiterates its profound gratitude for the 
extraordinary progress this subcommittee has made in securing a wide 
range of personnel and health care initiatives for all uniformed 
services personnel and their families and survivors. The Coalition is 
eager to work with the subcommittee in pursuit of these goals outlined 
in our testimony.
    Thank you very much for the opportunity to present the Coalition's 
views on these critically important topics.
    Senator Chambliss. We will start with Mr. Barnes.

 STATEMENT OF JOSEPH L. BARNES, NATIONAL EXECUTIVE SECRETARY, 
                   FLEET RESERVE ASSOCIATION

    Mr. Barnes. Thank you. Mr. Chairman, Senator Nelson, 
distinguished members of the subcommittee, thank you for the 
opportunity to present The Military Coalition's views on key 
personnel and compensation issues.
    I also extend the Coalition's congratulations on your 
selection to serve as the chairman and ranking member 
respectively of this important subcommittee, and gratitude for 
the pay and benefit enhancements enacted last year. These 
improvements convey a powerful positive message to all 
uniformed services personnel, and will pay high retention and 
readiness dividends in the future.
    I will discuss several personnel issues, followed by my 
colleagues, who will address issues from the family, Guard and 
Reserve, retiree, and survivor and health care perspectives.
    The Military Coalition again recommends increasing service 
end strengths to balance today's demanding operations 
requirements with the personnel needed to perform these 
missions. The Services need adequate personnel to sustain the 
war on terrorism and demanding operational commitments. With 
regard to pay, the Coalition is concerned about the renewed 
interest in capping military pay raises at the inflation level 
due to budget concerns.
    Fortunately, the President rejected this plan for five of 
the seven uniformed Services. However, the administration's 
budget request proposes capping pay adjustments at the 
inflation level for NOAA and the PHS officers. The Coalition 
strongly opposes this. All uniformed services members deserve 
equitable pay increases at least equal to private sector wage 
growth.
    The Coalition strongly supports the targeted plan that 
would authorize average pay increases of 4.1 percent with 
targeted pay hikes for career enlisted and certain officer 
grades. This would reduce the pay gap to 5.4 percent.
    The Coalition also urges a change in the permanent law to 
ensure that at a minimum, all future military raises match 
private sector wage growth, as measured by the employment cost 
index. The Coalition also urges the subcommittee to accelerate 
the plan to eliminate service members' out-of-pocket housing 
expenses and to authorize adjustments in grade-based housing 
standards.
    Education benefits are very important, and the Coalition 
strongly recommends authorizing an MGIB sign-up window for 
senior career service members who declined participation in the 
veterans education assistance program, or VEAP.
    Finally, the Coalition restates its strong commitment to 
maintaining the commissary benefit as an integral part of the 
total military compensation package, and its continuing 
opposition to privatizing the benefit. The tangible and highly 
valued aspect of this benefit is not quantifiable solely in 
monetary terms.
    Again, thank you for this opportunity to present our views. 
Joyce Raezer will now discuss family issues.
    [The prepared statement of The Naval Reserve Association 
follows:]

          Prepared Statement by The Naval Reserve Association

    Chairman Chambliss, Senator Nelson, and distinguished members of 
the subcommittee, on behalf of the 86,000 active naval reservists and 
the mirrored interests of all members of the Guard and Reserve 
components, we are grateful for the opportunity to submit testimony.
    A popular fad in the press is to write about the plight of the 
mobilized reservist. These articles emphasize the anxiety of being away 
from work and or family. As was stated in The Wall Street Journal, 
``The activation of tens of thousands of military reservists is 
beginning to interrupt careers and disrupt workplaces on a scale not 
seen in more than a decade.'' \1\
---------------------------------------------------------------------------
    \1\ Massive Call-Up of Reservists Disrupts Careers, Workplaces; 
Kemba J. Dunham, Kris Maher and Greg Jaffe, The Wall Street Journal, 
Feb. 18, 2003.
---------------------------------------------------------------------------
    A climate of despair is being painted about the reservist. Focus is 
being placed on the needless hardship for too many members of the Guard 
and Reserve, for their families and for their employers. The Naval 
Reserve Association would like to dispel this myth. In defense of the 
reservists, let it be said that it is a statistical few that complain 
about their circumstances. Portrayed as a predicament by the press, 
most reservists, instead, view mobilization as an opportunity to serve 
their country.
    If reservists have an Achilles' heel, it is how often they are 
willing to sacrifice family and employment to serve their country. 
Reservists have shown us time and time again that they'll volunteer 
when asked, despite the impact of their personal and professional life. 
This service beyond self is not appreciated by many on the active side 
or in DOD.
    Since 1990, the active-duty services have grown languorous from a 
diet of contributory assistance, recall, and mobilization support. The 
number of contributory man-days has risen from 1 million in the late 
1980s to nearly 13 million a year over the past few years. Rather than 
confront budget appropriators, the active components have been content 
to fill their force shortfalls with Reserve manpower.
    ``Part-time reservists are being turned into full-time soldiers and 
airmen through extended and unpredictable active-duty assignments,'' 
Congressman David Hobson (OH-7) said in a letter to Secretary of 
Defense Rumsfeld, last year. ``The Services are not properly manned to 
conduct this new type of war in which we now find ourselves, and the 
Reserves are bearing the brunt.'' \2\
---------------------------------------------------------------------------
    \2\ Citizen Soldiers Report Long Tours, Little Support, Gregg 
Zoroya, USA Today, Jan. 16, 2003.
---------------------------------------------------------------------------
    If we want to have a total force, if we want that concept to work, 
we've got to be respectful of the fact that people in the Reserves and 
the Guard have jobs. They're perfectly willing to be called up, but 
they only want to be called up when they're needed and for something 
that's a real job. They prefer not to get jerked around and called up 2 
or 3 or 4 months before they're needed and then found they're not 
needed and sent back home with a `sorry about that,' said Secretary of 
Defense Rumsfeld in a speech in late January.\3\
---------------------------------------------------------------------------
    \3\ Remarks by Secretary of Defense Donald H. Rumsfeld to the 
Reserve Officers Association 2003 Mid-Winter Conference and 18th Annual 
Military Exposition, Washington, DC, January 20, 2003.
---------------------------------------------------------------------------
    If there is a raw nerve among reservists, it is caused by how 
individuals are being utilized, and how often that individual is being 
called up. Pride and professionalism is a large factor in the profile 
of a reservist. They want to be used how they have been trained, and 
they want to complement the Active Forces. Too often, they have been 
called up to do a marginal job, or stand weekend or night watches 
allowing active members time off. In situations like this, we often 
hear from our members that the active-duty personnel of a particular 
command are not working overtime. The model used by the Navy calls for 
active-duty personnel to be working a 60-hour work week before 
reservists would be involuntarily recalled to active duty. Quite often, 
the requirement for recall is nothing more than to fill in the gaps in 
existing active-duty manning. Recall and proper use of reservists needs 
constant monitoring and attention.
    Another raw nerve among reservists is attempts by the Navy to deny 
individuals their full entitlements. Over and over, reservists are 
asked to make a voluntary mid- to long-term commitment of combining 
drills with multiple sets of 29 day orders. There is an institutional 
bias to issuing reservists one set of orders for longer than 30 days 
thereby denying them greater entitlements. We strongly believe that 
this is an injustice to the individual and his/her employer that 
Congress should question.
    Over a year ago, Principal Deputy Assistant Secretary of Defense 
for Reserve Affairs met with the Military Reserve Associations and 
asked how frequently is it acceptable to recall reservists? His hope 
was an answer measured in years that could be programmed into a 
formula. Reservists are not inventory numbers, but individuals. On the 
first recall they will answer smartly, on the second recall they will 
do their duty, by the third they start believing the press reports.
    In today's American way of war, the way a reservist is used and 
recalled is vital to successful military operations, and essential to 
gaining the will of America. As Deputy Secretary of Defense Paul 
Wolfowitz has said, ``How we manage our Reserve components will 
determine how well we as a Nation are prepared to fight, today and 
tomorrow.'' \4\
---------------------------------------------------------------------------
    \4\ Remarks by Deputy Secretary of Defense Paul Wolfowitz, to the 
Reserve Officers Association 2002 National Conference, Philadelphia, 
PA, June 20, 2002.
---------------------------------------------------------------------------
    The question we are asking is: ``Are the DOD legislative 
initiatives taking us in the right direction for a sound military and a 
strong national defense?'' We hope that DOD is learning lessons from 
the past to avoid repeating mistakes in the future, and the Naval 
Reserve Association stands ready to assist in turning lessons learned 
into improved policy.
    Again, thank you for this opportunity. Details of specific concerns 
by our Association on DOD initiatives follow, we hope you can help 
address them:

                   DEPARTMENT OF DEFENSE INITIATIVES

Roles and Missions
    A Pentagon study has highlighted that the Guard and Reserve 
structure, today, is an inherited Cold War relic. As a result, the 
Guard and the Reserve organization has become the focus of 
``transformation.'' While it won't be denied that there could be a need 
for change, transformation for transformation sake could be 
disadvantageous. Visionaries need to learn lessons from the past, 
assimilate the technology of the future, and by blending each, and 
implement changes that improve warfighting.

    The Reserve component as a worker pool.
    Issue: The view of the Reserve component that has been suggested 
within the Pentagon is to consider the Reserve as of a labor pool, 
where reservists could be brought onto active duty at the needs of a 
service and returned, when the requirement is no longer needed. It has 
also been suggested that active-duty members could be rotated off 
active duty for a period, spending that tenure as a reservist, 
returning to active duty when family problems, or educational matters 
are corrected.
    Position: The Guard and Reserve should not be viewed as a 
temporary-hiring agency or as a personnel depot. Too often the active 
component views the recall of a reservist as a means to fill a gap in 
existing active-duty manning. Voluntary recall to meet these 
requirements is one thing, involuntary recall is another.
    The two top reasons why a reservist quits the Guard or Reserve is 
pressure from family, or employer. The number one complaint from 
employers is not the activation, but the unpredictability of when a 
reservist is recalled, and when they will be returned.
    The structure of the Guard and Reserve is a system of billet 
assignments that are tied to progressive training tiers. To yank 
individuals out, or drop in active members who are in hiatus would 
impair training and personnel readiness.

    100 percent mission ownership.
    Issue: Department of Defense is looking at changing the Reserve and 
active component mix. ``There's no question but that there are a number 
of things that the United States is asking its forces to do,'' Rumsfeld 
said. ``When one looks at what those things are, we find that some of 
the things that are necessary, in the course of executing those orders, 
are things that are found only in the Reserves.''\5\
---------------------------------------------------------------------------
    \5\ Secretary of Defense Donald H. Rumsfeld made this observation 
Nov. 4, 2002 to the Pentagon press corps amid questions of reports that 
Reserve and National Guard soldiers were being overtaxed with 
mobilization requirements since last year's terrorist attacks on this 
Nation.
---------------------------------------------------------------------------
    Position: America is best defended through a partnership between 
the Government, the military, and the people. The Naval Reserve 
Association supports the continued recognition of the Abrams Doctrine, 
which holds that with a volunteer force, we should never go to war 
without the involvement of the Guard and Reserve, because they bring 
the national will of the people to the fight. While a review of mission 
tasking is encouraged, the active component should not be tasked with 
every mission, and for those it shares, no more heavily than their 
Reserve counterparts.
    Historically, a number of the high percentage missions gravitated 
to the Reserve components because the Active Forces treated them as 
collateral duties. The Reserve has an expertise in some mission areas 
that are unequaled because reservists can dedicate the time to 
developing skills and mission capability, and sharing civilian 
equivalencies, where such specialization could be a career buster on 
active duty.

    Augmentees.
    Issue: As a means to transform, a number of the Services are 
embracing the concept that command and unit structure within the 
Reserve component is unnecessary. Reservists could be mustered as 
individual mobilization augmentees and be called up because often they 
are recalled by skills and not units.
    Position: An augmentee structure within the Naval Reserve was 
attempted in the 1950s/1960s, and again in the 1980s. In one word: 
Failure. An idle force, reservists of that period could not pass the 
readiness test. The image of the selected reservists, sitting in a 
Reserve Center reading a newspaper originates from the augmentee era. 
Some semblance of structure is needed on a military hierarchy. Early 
on, Naval reservists created their own defense universities to fill the 
training void caused by mission vacuum.

    Combining Active and Reserve Appropriations.
    Issue: The fiscal year 2004 Defense budget request makes it clear 
that OSD intends to consolidate all pay and O&M accounts into one 
appropriation per Service. These consolidations would require various 
legislative changes before they would become law. The rationale for the 
consolidations is to provide greater flexibility for the active chiefs 
to move monies from the Reserve and Guard pay accounts to fund active 
component pay and O&M shortfalls. Managing fewer appropriations would 
also make managing pay and O&M easier.
    Position: The Naval Reserve Association strongly opposes the 
proposed consolidation of all Guard, Reserve, and active pay into one 
service pay appropriation. We similarly oppose the proposed 
consolidation of all Guard, Reserve, and active operations and 
maintenance accounts into one service O&M appropriation. While we 
support seeking efficiencies wherever possible, we view the proposed 
``business'' consolidation as ill conceived, misrepresented as 
inefficient, and as an attempt to reduce congressional oversight. We 
oppose it for a variety of other reasons, as well.
    Under current law, the Reserve chiefs are the directors for their 
respective Reserve pay and O&M appropriations. Public Law 90-168, as 
amended by the NDAA for Fiscal Year 1997, vested in the Reserve chiefs 
full management and control of their respective Reserve financial 
resources. Consolidating Reserve and active pay into one appropriation 
would divest the Reserve chiefs of this authority and preclude their 
executing the programs and responsibilities, and maintaining the 
readiness mandated by Congress.
    Much of the Guard and Reserve annual training occurs during the 
fourth quarter of a fiscal year, the same time frame when the active 
components are most likely to run short of funds and may desire to use 
Reserve pay and O&M to fund their own shortfalls. Allowing the active 
components the ``flexibility'' to use Reserve funds whenever they need 
to pay active component bills means that somewhere a Reserve soldier or 
sailor will not be paid, a Reserve unit will not be trained for 
mobilization, or reservist will not receive the specialized training 
needed for promotion, and ultimately retention. The active component 
will have flexible funding at the cost of Reserve readiness.

    Inferred Changes to DOPMA and ROPMA.
    Issue: It has been suggested within a DOD Roles and Missions study 
that promotions in the Reserve component need not be tied to active-
duty promotion rates. It was further stated that allowing a skilled 
reservist to remain at a certain mid-grade rank enlisted or officer 
rank longer would allow that individual to perform a vital mission 
longer.
    Position: While NRA might support a change to the ``promote up or 
out'' policy; we in no way endorse having the Selected Reserve become 
an advancement wasteland.
    Issue: Secretary Rumsfeld has also publicly stated that he has the 
Personnel and Readiness office looking at how DOD can get the benefit 
of people in a specific job longer, and how we can have people increase 
the number of total years they serve if they want to. He is willing to 
extending military careers beyond 60 years of age.
    Position: While current policy permits individual waivers to retain 
certain skill sets, the Naval Reserve Association feels that 
authorizing changes to the length of tenure would have a negative 
impact and a rippling effect. History has shown time and again, if 
senior leaders are not encouraged to retire, there will be a retention 
collapse in the middle ranks, which erodes the long-term future of a 
component force. Few are so skilled, that a junior member can't fill 
the position with similar qualifications.
Pay and Compensation
    Issue: A premature release of information in the form of a Naval 
Reserve survey, revealed a DOD initiative to end ``2 days' pay for 1 
day's work,'' and replace it with a plan to provide 1/30 of a month's 
pay model, which would include both pay and allowances. Even with 
allowances, pay would be less than the current system. When concerns 
were addressed about this proposal, a retention bonus was the suggested 
solution to keep pay at the current levels.
    Position: Allowances differ between individuals and can be affected 
by commute distances and even zip codes. Certain allowances that are 
unlikely to be paid uniformly including geographic differences, housing 
variables, tuition assistance, travel, and adjustments to compensate 
for missing healthcare.
    The Naval Reserve Association holds reservations with a retention 
bonus as a supplemental source. Being renewed annually bonuses tend to 
depend on the national economy, deficit, and political winds. Further, 
would this bonus just be grandfathered to current reservists, with some 
future generation forfeiting the bonus as an income source?
    As one reservist said, ``With the nonreimbursed expenses for 
commuting and training, I couldn't afford to drill at 1 day's pay.''
Healthcare
    Healthcare readiness is the number one problem in mobilizing 
reservists. The government's own studies show that between 20-25 
percent of guardsmen and reservists are uninsured.
    We applaud the efforts of the TRICARE Management Activity. TMA has 
a strong sense of who the customer is. They emphasize communications, 
and are proactive at working with the military associations. NRA would 
like to see a continued effort at:

        - Ensuring quality coverage for mobilized reservist to provide 
        continuity of healthcare.
        - Seeking consistency of how TRICARE is implemented for 
        mobilized reservists and families between regions, and
        - Establishing a TRICARE Health plan for uninsured drilling 
        reservists, similar to the successful SELRES Dental Program.
Business Initiative
    Issue: Many within the Pentagon feel that business models are the 
panacea to perceived problems within military structure.
    Position: Reservists have the unique perspective of holding two 
careers; many with one foot in business and one foot in the military. 
The Naval Reserve Association suggests caution rather than rush into 
business solutions. Attempted many times in the past, business models 
have failed in the military even with commands that proactively 
support.
    Among the problems faced are:

        Implementing models that are incompletely understood by 
        director or recipient.
        Feedback failure: ``Don't tell me why not; just go do it!''
        The solution is often more expensive than the problem.
        Overburdened middle management attempting to implement.
        Cultural differences.
        While textbook solutions, businesses, too, are frustrated by 
        numerous ``false starts'' with these models.
Retirement: Age 55.
    Issue: A one-sided debate is being held through the press on 
whether changes should be allowed to Guard and Reserve to lower the 
retirement payment age. At a recent Pentagon press conference, Thomas 
F. Hall, the Assistant Secretary of Defense for Reserve Affairs, said 
he has ``thought a lot about'' lowering Reserve retirement age. Hall 
said it would be ``expensive'' and might encourage reservists to leave 
the workforce at too young an age. The Defense Department is now 
studying the issue to be part of a report to Congress next year.
    Position: Over the last two decades, more has been asked of 
guardsmen and reservists than ever before. The nature of the contract 
has changed; Reserve component members would like to see recognition of 
the added burden they carry. Providing an option that reduces the 
retired with pay age to 55 years carries importance in retention, 
recruitment, and personnel readiness.
    Most military associations are hesitant to endorse this because 
they envision money would be taken out of other entitlements, benefits, 
and Guard and Reserve equipment budgets. The Naval Reserve Association 
suggests an approach to this issue where neither cost nor expense would 
be an issue.
    The Naval Reserve Association recommends that Reserve retirement 
with pay be allowed prior to age 60, but it be treated like Social 
Security retirement offset, at lower payments when taken at an earlier 
age. If a reservist elects to take retired pay at age 55, it would be 
taken at an actuarially reduced rate, keeping the net costs at zero.
    Most of the cost projected by DOD is for TRICARE healthcare, which 
begins when retirement pay commences. Again following the Social 
Security example, Medicare is not linked to Social Security payments. 
NRA suggests that TRICARE for reservists be decoupled from pay, and 
eligibility remains at age 60 years
    With Social Security as a model, reservists understand the nature 
of offsetting payments. The only remaining expense in this proposal 
would be the administrative startup costs and adjustments to retirement 
accrual contributed to the DOD retirement accounts.
    Retention concerns should be set aside. Commissioned officers 
typically reach ROMPA limits at age 53. While enlisted are allowed to 
drill to age 60, many in the Navy are limited by High Year Tenure 
policies that take them out of pay before then. Drilling without pay 
motivates many to submit their retirement requests. By age 50, an 
enlisted has either already retired or is a ``career'' sailor.
    At a minimum, hearings should be held to broaden the debate.

                   DEPARTMENT OF THE NAVY INITIATIVES

Restore Reserve Promotions to Reserve Officers on Temporary Recall (3 
        Years or Less)
    Issue: In the Navy, there is a different promotion system for 
recalled and mobilized Naval Reserve officers. Officers who are 
recalled to active duty are placed on the Active-Duty List (ADL) for 
statute promotions. Mobilized officers are kept on the Reserve Active 
Status List (RASL).
    To properly match the Reserve officer's exclusion from the active-
duty list as provided for by 10 U.S.C. 641(1)(D) with a corresponding 
exclusion from the authorized grade strengths for active-duty list 
officers in 10 U.S.C. 523. Without this amendment, the active component 
would have to compensate within their control grades for temporary 
recalled Reserve officers who are considered, selected and promoted by 
RASL promotion selection boards. This compensation causes instability 
in promotion planning and a reduction in ``career'' ADL officer 
eligibility and promotion for each year a Reserve officer remains on 
``temporary'' active duty. Therefore, Naval reservists are temporarily 
recalled to active duty and placed on the ADL for promotional purposes. 
End result--failure of selection due to removal from RASL peer group.
    Position: The Naval Reserve Association strongly supports language 
changes to Title 10 U.S.C. 523 that would enable the Navy to recall 
reservists for 3 years or less and allow them to remain on the RASL 
under 10 U.S.C. 641. A ULB to correct is being submitted by DOD. This 
provides the Services grade strength relief for the small percentage of 
Reserve officers who would possibly be promoted while serving on 
temporary active duty. Granting relief is a win-win situation. By 
removing the instability in promotion planning for the active 
component, Reserve officers can be issued recall orders specifying 10 
U.S.C. 641(1)(D) allowing them to remain on the RASL for promotion 
purposes.

Equipment Ownership
    Issue: An internal study by the Navy has suggested that Naval 
Reserve equipment should be returned to the Navy. At first glance, the 
recommendation of transferring Reserve component hardware back to the 
active component appears not to be a personnel issue. However, nothing 
could be more of a personnel readiness issue and such transfer is ill 
advised. Besides being attempted several times before, the impact of 
this issue needs to be addressed if the current National Security 
Strategy is to succeed.
    Position: The overwhelming majority of Reserve and Guard members 
join the RC to have hands-on experience with equipment. The training 
and personnel readiness of Guard and Reserve members depends on 
constant hands-on equipment exposure. History shows that this can only 
be accomplished through Reserve and Guard equipment, since the training 
cycles of active components are rarely, if ever, synchronized with the 
training or exercise times of Guard and Reserve units. Additionally, 
historical records show that Guard and Reserve units with hardware 
maintain equipment at or higher than average material readiness and 
often better training readiness. Current and future warfighting 
requirements will need these highly qualified units when the Combatant 
Commanders require fully ready units.
    Reserve and Guard units have proven their readiness. The personnel 
readiness, retention, and training of Reserve and Guard members will 
depend on them having Reserve equipment that they can utilize, 
maintain, train on, and deploy with when called upon. Depending on 
active component hardware has never been successful for many functional 
reasons. The NRA recommends strengthening the Reserve and Guard 
equipment in order to maintain highly qualified trained Reserve and 
Guard personnel.

Closure of Naval Reserve Activities
    Issue: A proposal has been made, suggesting that a large number of 
Naval Reserve Centers and Naval Air Reserve Activities be closed, and 
that Naval reservists could commute to Fleet Concentration Areas to 
directly support gaining commands and mobilization sites.
    Position: The Naval Reserve Association is opposed to this plan for 
the following reasons:
    A. The Naval Reserve is the one Reserve component that has Reserve 
activities in every State. To close many of these would be cutting the 
single military tie to the civilian community.
    B. The demographics of the Naval Reserve is that most of the 
commissioned officers live on the coasts, while most of the enlisted 
live in the hinterland, middle America. The Naval reservists who are 
paid the least would have to travel the farthest.
    C. The active-duty concept of a Naval Reserve is a junior force, a 
structure based upon enlisted (E1-E3s) and officers (O1-O2s): billets 
that can't be filled because the individuals haven't left the fleet 
yet. When the Coast Guard ``transformed'' its Reserve Force, it forced 
a restructuring that RIFFed many senior officers and enlisted 
leadership from the USCGR ranks, and caused a number of years of 
administrative problems.
    D. If training at fleet concentration centers was correctly 
implemented, the Navy should bear the expense and burden of 
transportation to, and housing while on site. Additionally, at 
locations such as Naval Station Norfolk, the overlap of active-duty and 
Reserve training has shown an increased burden on bachelor quarters and 
messing facilities. Frequently, reservists must be billeted out on the 
economy. With these extra costs, training would prove more expensive.
    E. Such a plan would devastate the Naval Reserve; retention would 
plummet, training and readiness would suffer.
Replacement of Full Time Staff (TARs) with Active-Duty ``Station 
        Keepers''
    Issue: Another suggested initiative would to the replacement of 
Full Time Staff (TARs) with active-duty ``Station Keepers.''
    Position: This has failed in the past, because the active Navy 
doesn't commit its best or it's brightest to administer reservists. 
Such duty is not viewed as career enhancing, and those who complete the 
assignments tend to do poorly before competitive promotion boards. The 
assignments tend to often gravitate to unqualified second and third 
string players who are dead-ended in their careers, and reservists 
retention, recruitment, readiness and morale tend to suffer.

                               CONCLUSION

    The Four ``Ps'' can identify the issues that are important to 
reservists: Pay, Promotion, Points, and Pride.
    Pay needs to be competitive. As reservists have dual careers, they 
have other sources of income. If pay is too low, or expenses too high, 
a reservist knows that time may be better invested elsewhere.
    Promotions need to be fairly regular, and attainable. Promotions 
have to be through an established system and be predictable.
    Points reflect a reservist's ambitions to earn retirement. They are 
as creditable a reinforcement as pay; and must be easily tracked.
    Pride is a combination of professionalism, parity and awards: doing 
the job well with requisite equipment, and being recognized for ones 
efforts. While people may not remember exactly what you did, or what 
you said, they will always remember how you made them feel.
    If change is too rapid with any of these four, anxiety is generated 
amid the ranks. As the Reserve component is the true volunteer force, 
reservists are apt to vote with their feet. Reservists are a durable 
resource only if they are treated right. Current conditions about the 
world highlights the ongoing need for the Reserve component as key 
players in meeting National Security Strategy, we can't afford to 
squander that resource.

STATEMENT OF JOYCE W. RAEZER, ASSOCIATE DIRECTOR OF GOVERNMENT 
     RELATIONS, NATIONAL MILITARY FAMILY ASSOCIATION, INC.

    Ms. Raezer. Thank you, Mr. Chairman, for your attention to 
the quality-of-life of our military service members and their 
families. Recently in testimony, the senior enlisted leaders of 
the Services spoke about one of the most critical ingredients 
in ensuring service members' readiness, that is, making sure 
those service members know their families are being taken care 
of. Service members look to the Nation to understand that their 
families often drive retention decisions. The family's quality-
of-life is a readiness requirement.
    Quality-of-life is not just about pay. It is about having a 
safe, well-maintained place to live. It is about a quality 
education for their children. It is about meeting the 
aspirations of a spouse for a career, and a couple for a secure 
retirement. It is about respect for a job well done.
    Service members need to know that their families are as 
prepared as possible to handle the stresses of deployment, that 
they can access vital support services wherever they live, and 
that the volunteers and family support personnel on the front 
line of family support have the back-up and resources they need 
to assist families over the long term and in crisis situations.
    Adequate resourcing and staffing for family support is 
especially important for our Guard and Reserve families. 
Despite improvements over the past year, these families still 
tell us that they too often do not receive the information they 
need, or know who to call when there is a question, and that 
they feel isolated from other military families. The total 
force concept has not yet reached the family support arena.
    Service members look for continued upgrades to the 
permanent change of station allowances, and to the process 
itself, so that they are not footing the cost of Government-
ordered moves. Increased weight allowances for E-5s and above, 
full replacement value for lost or damaged goods, and 
authorization to ship a second car overseas at Government 
expense would be most helpful.
    Service members look for the Nation to make sure that their 
children's schools have the funding they need to provide a 
quality education in a safe environment, and provide the extra 
help military children need in dealing with the deployment of a 
parent to a dangerous place in the world.
    Service members need access to quality child care. In 
recent testimony, the Sergeant Major of the Army stated that 27 
percent of enlisted soldiers reported they had lost duty time 
during 2002 because they lacked child care. Resources are 
needed to assist families of all service members called to 
support contingency operations, including the Guard and 
Reserve, in accessing and paying for child care.
    Service members need to know that the resources are 
available to provide vital morale, welfare, and recreation 
programs both to the deployed service member and to the family 
they left behind. They need to know that a spouse does not have 
to put career aspirations on hold because of their service to 
their country. Service members deployed on the Nation's 
business need to know their spouse can get a doctor's 
appointment for their sick child, even when military medical 
personnel deploy.
    Now, more than ever, mission readiness is tied to service 
member readiness, which is tied to family readiness. Military 
members and their families look to you for continued support 
for the task they face. Please do not let them down.
    Now, Steve Anderson will talk about Guard and Reserve 
issues.
    [The prepared statement of Ms. Raezer follows:]
                   Prepared Statement by Joyce Raezer
    Mr. Chairman, the National Military Family Association (NMFA) 
thanks you for the opportunity to present this testimony on behalf of 
military families. We thank you and the members of this distinguished 
subcommittee for your attention to issues affecting the quality-of-life 
of service members and their families and for your understanding of the 
link between quality-of-life and the retention of a quality force. We 
thank you, especially, for your efforts in the 107th Congress, which 
included:

         A pay package that provided an across-the-board 
        increase of 4.1 percent and targeted increases up to 6.5 
        percent;
         Funding increases for the Basic Allowance for Housing 
        (BAH) to decrease average out-of-pocket costs for the DOD 
        standard for each grade to 7.5 percent;
         Improvements and adequate funding for the Defense 
        Health System, including a needed change in eligibility for 
        TRICARE Prime Remote;
         Appropriation of $30 million in DOD supplemental 
        Impact Aid funding for civilian schools serving large numbers 
        of military children, as well as additional funding to help 
        them serve military children with special education needs; and
         Permanent authority for DOD to provide additional 
        family support, child care, and youth programs, especially for 
        families of deployed servicemembers.

    These improvements have not gone unnoticed or unappreciated in the 
military community. NMFA believes, however, that the most important 
message we can bring to you today is that these improvements are not 
enough. The critical issues facing military personnel and families 
prior to September 11, 2001--pay, housing, health care, family support, 
and education for their children--have not gone away. The families we 
represent, including our 120 installation NMFA representatives who 
report to us regularly, say they recognize the support Congress has 
given them over the past few years and see the very real benefits of 
your actions. They also tell us, however, that military families today 
face great challenges.
    Military families are resilient, show amazing strength of spirit 
and energy in times of crisis, and understand the importance of the 
jobs their government is asking their service members to perform. They 
understand the risks of life in today's military and will support the 
service members, their country, and each other however they can for as 
long as a crisis lasts. Unfortunately, many have been providing this 
support for a very long time, without much relief. In recent testimony, 
the Chief Master Sergeant of the Air Force, Gerald Murray, described 
the concern he hears in every visit with airmen about the effects of 
the high operations tempo: ``Wherever I go, our airmen clearly 
demonstrate to me they're highly motivated and ready, but they're also 
tired.'' NMFA believes that CMSAF Murray's statement about the airmen 
he met also most accurately sums up the state of military families 
today: supportive of the mission, but tired, and growing more so.
    NMFA endorses the provisions as outlined in the testimony submitted 
by The Military Coalition, which provides a wide-ranging discussion of 
the issues affecting our active and Reserve component military 
personnel, retirees, and their families and survivors. In this 
statement, we will expand on some of the most urgent needs of military 
families as they support a wartime military mission, including: family 
readiness, the special challenges facing families of mobilized National 
Guard and Reserve members, health care, family member education, and 
child care.

                    FAMILY READINESS IN TIME OF WAR

    The all-volunteer military today is predominantly a young, married 
force with children. Currently, 53 percent of the military is married 
and studies show that military members tend to marry younger and begin 
to have children at a younger age. Nearly one million children, or 73 
percent of all military children, are under age 11; 40 percent are 5 
years of age or younger. Approximately 6 percent of military members 
are single parents, ranging from a low of 3 percent of Marines to a 
high of almost 8 percent of Army members.
    Today, the military family's lifeline--its community--is feeling 
the strain that comes from multiple missions with no end in sight. 
Family services are important even to an installation not pressured by 
high PERSTEMPO or war-related deployments. Family centers, military 
chaplains, and installation mental health professionals help ease the 
transition to the military environment for newly-arrived families. They 
provide financial counseling, information on accessing local social 
services, parenting classes, opportunities to learn about the 
community, as well as opportunities to volunteer to help others. 
Military youth programs offered by installation youth services and 
chaplains provide meaningful activities for many military youth, 
especially in the vulnerable preadolescent years. Additional services 
set up to support families when units deploy include counseling 
services, e-mail and video teleconferencing centers, and special family 
activities. These services ease the strain of deployment for families 
left behind and reassure the service member of the family's well-being.
    Too often, the funding provided for contingency operations does not 
include enough for the support services needed at home. Essential 
family support includes the proper staffing and funding for MWR 
programs at the home installation. During the early years of the Bosnia 
operation, NMFA heard from families in Germany that installation MWR 
programs were cut back in order to make more resources available for 
the service members in Bosnia. While pleased that deployed service 
members had access to a wide range of MWR programs, families faced 
shortened hours for bowling alleys, swimming pools, and other 
activities they depended on to keep children active and their attention 
diverted from their separation from the service member. NMFA hopes that 
the current deployments will not again pull key MWR personnel and 
resources out of communities that rely on the services they provide. 
Commanders should not have to choose between funding recreation 
programs for deployed service members or for the service members' 
children at a time when, as one military spouse told NMFA, we ``have 
the stress of a deployed spouse, single-parenting stressed-out kids, no 
maintenance on our quarters, lots of `isn't this war horrible' news and 
demonstrations and all the `normal' deployment stresses.'' This spouse 
said what we've heard from many other families: ``Keeping the quality-
of-life programs viable is necessary to counter depression, horrid 
morale, and ultimately prevent soldiers from getting out due to the 
discontent of their families.''
    NMFA is grateful to Congress for granting DOD permanent authority 
to provide additional child care, education, and youth services to 
families of service members deployed or ordered to active duty in 
connection with Operation Enduring Freedom and other contingency 
operations. The intent of this provision was to ensure that DOD had the 
authority not only to provide the types of family support services 
provided during the Persian Gulf War, but whatever new types of support 
services are needed in the current environment. Some resources for 
information and support are more accessible now, thanks to the Internet 
and e-mail, than they were in Operation Desert Storm and more units 
have family readiness groups with a network of better-trained 
volunteers than those who rallied to support the troops and each other 
in Operation Desert Storm. Operation Desert Shield and Operation Desert 
Storm came at the end of a decade of military build-up and increased 
resources, but by the end of the war, most observers noted that the 
family support structure was stretched to the end of its limits. The 
current operations tempo began at the end of a decade of military 
downsizing and increased missions. Many volunteers and installation 
support staff were already strained before September 11, 2001--NMFA 
wonders where the back-up is for these dedicated front-line family 
support workers when we will need to rely on them for a long term 
measured in years rather than months.
    NMFA applauds the Office of Military Community and Family Policy in 
the Office of the Secretary of Defense (OSD) for its creation of a 
Joint Family Support Contingency Working Group to promote better 
information-sharing and planning among OSD and the military Service 
headquarters family support staff, including the Reserve components. 
NMFA appreciates the invitation to participate in this working group, 
an innovative concept that grew out of the successful collaboration in 
the operation of the Pentagon family assistance center after the attack 
on the Pentagon. The working group recognizes that most military 
families live off-base and is encouraging better communication and new 
ways of helping families that are not all centered on an installation 
family center. NMFA has long promoted more outreach by family centers 
and installation support personnel into the civilian communities where 
most military families live so that family members unable to get to the 
installation for these programs can still receive the assistance they 
provide. The possibility of further incidents that could heighten the 
demand for support programs while, at the same time, causing 
installations to restrict access makes this outreach even more 
imperative. We are encouraged that outreach to all families is now a 
high priority.
    One new vehicle for communicating with family members and helping 
them access assistance when needed wherever they are located is being 
tested by Marine Corps Community Services (MCCS). The new program 
``MCCS One Source,'' provides 24 hour-a-day, 7 days-a-week, telephone 
and online family information and referral, situational assistance, and 
links to military and community resources. Since February 1, the 
service has been available to active duty and Reserve Marines and their 
family members. The Army has also made this service available to 
soldiers and families at select installations. Employee Assistance 
Programs such as ``One Source'' provide an accessible source of 
information for service members and families and, if properly 
coordinated with other support services, should allow Service family 
support professionals to devote more time and attention to supporting 
unit volunteers and assisting families with more complicated problems.
    NMFA also applauds the high quality coordination between the 
religious ministries and many MWR and other family support programs. 
Religious ministries are active participants in the life of military 
communities. Religious youth programs, for example, supplement the 
program offerings available from the Youth Centers and are highly-
praised in many communities. Religious programs also draw retirees and 
their families back to the installations. A program offered by Army 
Chaplains, ``Building Strong and Ready Families'' is targeted at 
improving relationship skills and assisting initial-entry soldiers and 
their families with making the transition into military culture. The 
skills gained through this program support both mission readiness and 
strong families. Coordination between chaplains, their staff, and other 
recreational and support programs enhances the stability of the 
military communities. Unfortunately, military judge advocates have 
indicated that current guidelines, regulations and laws do not 
establish clear authority for the use of appropriated funds to pay for 
soldiers and immediate family members' meals, lodging, transportation, 
conference fees, and other expenses associated with command-sponsored, 
chaplain-lead training and conferences. The Defense Appropriations Act 
for Fiscal Year 2003 contained a provision clarifying the legal 
authority surrounding the use of appropriated funds in supporting 
military chaplains' programs for strong and ready families. NMFA 
requests that this subcommittee make this language permanent in the 
National Defense Authorization Act for Fiscal Year 2004.
    One very necessary improvement needed in the family support arena 
is closer collaboration between all the various helping individuals and 
agencies who assist in the development and maintenance of strong 
emotional and mental health in both individuals and families in the 
military community. As was seen in the Fort Bragg (NC) domestic 
violence cases during the summer of 2002, not all military family 
members or service members make use of the counseling and support 
services available to them. While the TRICARE benefit is rich by the 
standards of many health plans, it does not have a preventive care 
component. For TRICARE to pay for services, there must be a medical 
diagnosis, thus discouraging many family members from seeking care. 
Many members and families also believe that seeking counseling services 
through military programs may harm their careers or that these services 
are only intended for families identified as having problems. The 
authors of the report examining the Fort Bragg domestic violence 
incidents noted that the various agencies that could have provided 
support to the service members and families do not often coordinate 
their activities. Medical personnel, family centers, chaplains, 
schools, and local civilian agencies must communicate and work together 
to help families deal with stress and promote better mental health. 
NMFA also believes that the TRICARE mental health benefit must include 
a wider range of preventive care services. Just as the TRICARE medical 
benefit covers preventive services such as well baby checks, 
immunizations, and mammograms in order to prevent beneficiaries from 
getting sick and needing more costly care, so should the mental health 
benefit be geared toward helping beneficiaries learn how to cope with 
stress and improve their well-being so that they do not need more 
costly outpatient care. An emphasis on emotional health rather than 
treatment may also make beneficiaries more likely to seek appropriate 
services earlier.
    NMFA applauds efforts to enhance inter-Service coordination on 
family support and readiness issues and to leverage technology and the 
best practices in the civilian sector to provide easily accessible 
information and referral to families regardless of geographic location. 
Since quality family support contributes to the readiness of the 
mission, NMFA believes that the cost of family support must be factored 
into the cost of the contingency and appropriate funding budgeted and 
provided upfront. NMFA also requests that the Services receive the 
authority to allow appropriated funds to be used to support command-
sponsored family training and conferences conducted by military 
chaplains.

                  NATIONAL GUARD AND RESERVE FAMILIES

    As of March 5, 176,533 National Guard and Reserve members were on 
active duty in support of contingency operations around the world. Our 
Guard and Reserve families are meeting the challenge of our rapidly-
changing times and increasing military demands with varying degrees of 
success. While many of the challenges they face are similar to those of 
active component families, these families must face them with a less-
concentrated and mature support network and in many cases without prior 
experience with military life. Although there is much talk within OSD 
and the Services about the ``total force'' comprised of the active and 
Reserve component melded together to accomplish the mission, NMFA hears 
from Guard and Reserve families that the ``total force'' concept has 
not yet fully reached the family support arena.
    Unlike active duty units located on one installation with families 
in close proximity, Reserve component families are often miles from the 
service member's unit. Therefore, when the unit conducts a pre-
deployment briefing, family members are not afforded an opportunity to 
attend unless they pay their own way. NMFA has heard the frustrations 
family members experience when trying to access information and 
understand their benefits. The lack of accurate benefit information and 
unrelenting communication difficulties are common themes among Guard 
and Reserve families.
    NMFA thanks the State family readiness coordinators and unit 
volunteers for helping to provide family members with basic 
information. Unfortunately, some units do not have adequate programs 
because of the lack of volunteers. Additional family readiness staffing 
and support for the unit level volunteers during emergency 
contingencies could ensure information is forwarded the families who 
are unable to attend unit briefings. Guard and Reserve unit volunteers, 
even more than many of their active duty counterparts, are stressed 
because of the numbers of families they must assist and the demands 
placed on them. At the very minimum they ask for funding for child care 
to enable them to more efficiently perform their expected tasks. 
Funding to enable families to attend a pre-deployment briefing would 
also help strengthen the ties between the units and the families and 
the families with each other.
    DOD has developed several key initiatives that address the needs of 
Guard and Reserve families. NMFA applauds this effort, but there is 
still much to be done. For example, the OSD Reserve Affairs office 
maintains an excellent Web site. Its Family Readiness Toolkit and 
Deployment Guide provide practical information; however, many families 
report it difficult to use. Guard and Reserve families ask for 
standardized materials that are appropriate to all Services, so that if 
an Army Reserve member happened to live close to a Navy installation, 
he or she would understand how to access services there. The 
establishment and funding of a joint Family Readiness program would 
facilitate the understanding and sharing of information between all 
military family members within any single community. NMFA suggests that 
DOD also strengthen and perhaps formalize partnerships with national 
organizations such as the American Red Cross and U.S. Chamber of 
Commerce to enlist their assistance through their local chapters in 
setting up community-based support groups for military family members. 
The groups could include not only spouses and significant others of 
deployed members, but also the parents of service members. Involving 
the local community leaders in setting up these support groups would 
address two of the common concerns expressed by some of these isolated 
families: the feeling that they are the only families in town going 
through the strain of deployment and the sentiment that people not 
associated with the military do not appreciate their sacrifice.
    Through our contact with Guard and Reserve families and family 
support personnel over the past year, NMFA has heard wonderful stories 
of individual States, units, and families caring for and supporting 
each other. NMFA is aware of leadership involvement at all levels to 
help ease the challenges faced by service members and families. NMFA is 
especially proud of the efforts of the Employer Support for Guard and 
Reserve (ESGR) as an advocate for the Reserve component member facing 
employment issues. ESGR is encouraging employers to set up their own 
family support programs and to provide information to employers and 
their other employees about the legal rights of Reserve component 
members. By providing this information in the workplace, ESGR is 
helping civilian communities gain a better understanding of the 
valuable role the Guard and Reserve play in the defense of our Nation.
    Compensation issues continue to be of paramount concern among Guard 
and Reserve members. Many have taken cuts in pay, without their 
employer volunteering to pay the difference between their civilian pay 
and the Guard or Reserve salary. In addition to earning less, some 
Guard and Reserve members have experienced some problems with pay 
processing. For some families, the delay in receiving a paycheck has 
led to overdue payments on bills, and occasional threats to foreclose 
on their mortgage or turn them over to collection. Pay and personnel 
systems for activated Guard and Reserve members must work in 
coordination so families do not have to deal with bill collectors.
    The cost of meeting unique family readiness needs for National 
Guard and Reserve families must be calculated in Guard and Reserve 
operational budgets and additional resources provided. These resources 
must include support, training, and assistance with some of the costs 
incurred in the course of their duties by unit family readiness 
volunteers. DOD must partner with other organizations and explore new 
means of communication to provide information and support to 
geographically dispersed Guard and Reserve families.

                HEALTH CARE GAINS FOR MILITARY FAMILIES

    After a rocky start over several years, the TRICARE system is 
providing most of the promised benefit for most active duty military 
families. Recent legislative provisions have improved the benefit, 
especially by providing the correction to the TRICARE Prime Remote 
Program enabling family members in the program to maintain eligibility 
when the service member receives orders for an unaccompanied assignment 
overseas. NMFA is waiting for news of how the new provision opening 
Prime Remote to family members of activated National Guard and Reserve 
members will be implemented. We are concerned, however, that the 
legislation made these family members eligible for Prime Remote if the 
service member is on active duty orders of more than 30 days while 
Guard and Reserve families living in areas where Prime Remote is not 
available can only receive the Prime benefit if the service member has 
orders for more than 179 days. NMFA believes that a goal for the 
Department of Defense and Congress should be that active duty 
families--all active duty families--must have access to the cost 
savings of the TRICARE Prime benefit.
    NMFA is also pleased to report that the partnership established 
between the DOD Office of Health Affairs, the TRICARE Management 
Activity (TMA), and the beneficiary associations continues, to the 
benefit of both beneficiaries and the Department. NMFA appreciates the 
information received in these meetings and the opportunity for dialogue 
with the persons responsible for managing DOD health care policies and 
programs. Through this collaboration, NMFA and other organizations have 
been able to raise areas of concern, provide feedback on the 
implementation of new programs and benefits, and help to provide better 
information to beneficiaries about their health care benefit.

                     HEALTH CARE CHALLENGES REMAIN

    However grateful we are for recent benefit improvements, program 
implementations, and for the increased opportunities for beneficiary 
input, NMFA remains apprehensive about several issues: funding, 
beneficiary access to health care, the implementation of a new 
generation of TRICARE contracts, and the ability of National Guard and 
Reserve families to transition easily into TRICARE when the service 
member is called to active duty. Although the fiscal year 2004 budget 
request calls for what is believed to be an accurate level of funding 
for the Defense Health Program, NMFA urges this subcommittee to 
continue its efforts to ensure full funding of the entire Defense 
Health Program, to include meeting the needs for military readiness and 
of both the direct care and purchased care segments of TRICARE.
    Although recent TRICARE surveys highlight improvements in 
beneficiary access to care, NMFA continues to hear of problem 
geographic locations and scenarios that point to unresolved access 
issues. TRICARE Prime beneficiaries, including active duty members, 
continue to tell NMFA they are unable to obtain an appointment at their 
Military Treatment Facility (MTF) within the Prime access standards. At 
some locations, we suspect that the full range of resources needed for 
MTF optimization have not been provided; we have also been concerned 
about reports of staffing shortages within military Service health care 
specialties. At other locations, we suspect the problem is rooted in 
the alternative financing provisions in the TRICARE regional contracts. 
In TRICARE Regions 1, 2, and 5, the contract calls for the MTF rather 
than the managed care support contractor to pay for care received by a 
Prime beneficiary enrolled to the MTF who must be sent for care in the 
civilian sector. The TRICARE Prime access standard for a specialty 
appointment is 30 days. Beneficiaries tell us, however, they often are 
told by clinics and appointment clerks at the MTFs that appointments 
are not available and that they should ``call back next month.'' They 
are not offered the option to schedule an appointment with a TRICARE 
network provider downtown. They report that when they use the magic 
words ``access standard'' or ask to be referred to a civilian provider, 
an appointment often becomes available. NMFA is concerned that the 
alternative financing contract provision creates a barrier to the 
cooperation needed between the MTF and the managed care support 
contractor to ensure beneficiaries receive care within TRICARE Prime 
access standards.
    Today, NMFA's greatest concern about access is prompted by reports 
from the field that the deployment of military medical personnel is 
causing more MTFs to exceed the promised access standards for families 
enrolled in TRICARE Prime. Access standards are part of the promise 
made to service members and their families when they accepted 
enrollment in Prime. The public-private partnership of TRICARE was 
specifically set up so those enrolled could be referred to civilian 
providers when access standards could not be met using military 
providers. We strongly believe that allowing access standards to go by 
the wayside, even for a short period of time, has the potential to 
negatively harm the readiness of military members who are deployed. A 
soldier in the field who receives an e-mail from his or her spouse that 
the MTF has no appointment for their 6-month old child cannot focus 
completely on the military mission.
    When MTFs cannot meet access standards due to the deployment of 
personnel and are unable to supplement their staffs with Reserve 
component members or contract providers, they must work with the 
managed care support contractors to enable their beneficiaries to 
obtain care in the civilian sector. A robust civilian provider network 
is essential in ensuring that the TRICARE public-private partnership 
works as intended. Although the TRICARE contractors' lists of network 
providers in many communities seem adequate at first glance, 
beneficiaries who call these providers for an appointment are often 
told that they are taking no new TRICARE patients. MTF commanders and 
the managed care support contractors must work together to ensure that 
the proper provider mix is available in the community to handle patient 
demand. MTF staff must also understand the importance of the agreement 
made with Prime patients to provide care within the access standards. 
Anecdotal evidence suggests to us that Prime beneficiaries are more 
likely to be referred to the civilian sector for care within access 
standards when appointments are made through the managed care 
contractors. Prime patients should not be asked to delay health care 
simply because their MTF has deployed staff; families are already 
supporting the war effort in countless other ways. Where civilian 
assets exist in the network, they should be used. Where the number of 
civilian providers is too small to handle the overflow, MTFs must be 
provided the staff and other resources needed to provide this care in 
house.
    This scarcity of providers is not just a problem for TRICARE Prime 
patients. Beneficiaries using TRICARE Standard also report that 
providers are unwilling to have too high a proportion of TRICARE 
patients in their caseloads. Providers cite problems with TRICARE 
claims processing, low reimbursement rates, and the hassles associated 
with becoming authorized as a TRICARE provider as reasons not to 
participate. Beneficiaries look both to DOD and the TRICARE contractors 
to ease the administrative burden on providers, fix the claims 
problems, and ensure that reimbursement rates are set at the proper 
level. On paper, TRICARE is a very robust health care program and 
benefit compared to many other insurance plans; however, a robust 
benefit is no benefit if the beneficiary cannot find a provider willing 
or able to provide the needed health care.
    As we watch DOD prepare to implement a new round of TRICARE 
contracts, NMFA is concerned that some of the issues affecting 
beneficiary access, provider satisfaction, and costs to the government 
may remain unresolved. A clear line of command and accountability must 
be established so that beneficiaries with problems accessing care or 
with concerns about the quality of their care can be assured their 
problem will be fixed. Both MTFs and civilian contractors must be held 
to high standards for meeting access standards. Beneficiary and 
provider education must be consistent across regions and must include 
information not just for Prime beneficiaries and network providers, but 
also for TRICARE Standard beneficiaries and non-network providers. 
Although DOD has made progress in improving portability and providing a 
uniform benefit across the regions, the elimination of regional 
differences and barriers to portability remains a challenge for the new 
round of contracts.
    As the military Services deploy medical personnel to support 
overseas missions, beneficiary access to health care must be 
maintained. Robust provider networks and adequate reimbursement levels 
to encourage providers to treat TRICARE Standard beneficiaries are 
needed in the purchased care segment of TRICARE to provide care to 
beneficiaries unable to obtain care within the MTFs. In the new TRICARE 
contracts, the rules governing beneficiaries' access to the TRICARE 
benefit must be standardized across all regions and communicated in 
multiple formats to beneficiaries and providers.

               HEALTH CARE FOR GUARD AND RESERVE FAMILIES

    Accessing providers willing to accept TRICARE patients and 
understanding the benefit and the rules inherent in the military 
medical system are especially worrisome issues for some of TRICARE's 
newest beneficiaries: the families of Guard and Reserve members called 
to active duty. The varieties of Guard or Reserve orders, the 
complexities of the TRICARE system, and the geographic dispersion of a 
unit's members and families combine to make communication about the 
benefit and access to assistance when there is a problem very 
difficult. TRICARE contractors and representatives of the TRICARE 
region Lead Agents routinely conduct TRICARE briefings for members of 
units about to mobilize; unfortunately, in most cases, family members--
the people who will actually have to deal with the system once the 
service member deploys--are not in attendance. If the service member 
lives in a different TRICARE region from where his or her unit is 
located, he or she will receive the wrong region's information for the 
family at the briefing. A service member's enrollment in Prime at his 
or her mobilization site can also have consequences for family members' 
options for and costs of receiving care.
    DOD eased the transition of Guard and Reserve families into TRICARE 
by creating a demonstration project to help patients maintain the 
continuity of care and continue seeing the family's civilian doctor at 
minimal cost. Many families have not heard about the demonstration, and 
thus are unable to make an informed choice about whether to join 
TRICARE Prime, the lowest cost option in TRICARE. Because Prime is 
managed care, and Prime patients must go to a provider in the Prime 
network, the patient may not be able to continue to see their current 
doctor. The pregnant spouse of a Guard or Reserve member activated for 
over 179 days should be offered the option of remaining in TRICARE 
Standard (with no deductible and higher reimbursements under the 
demonstration) so that she could stay with her civilian doctor even if 
the doctor is not part of the TRICARE network. Unfortunately, because 
all families are not being told about this option, some women are 
signing up for Prime, and then told in the middle of their pregnancies 
that they must switch providers.
    NMFA believes that activated Guard and Reserve members and their 
families deserve access to the same TRICARE benefit as any other active 
duty families. We urge this subcommittee to ensure that legislative 
barriers to this access be eliminated and that it direct DOD to remove 
regulatory barriers, such as the 179-day requirement for eligibility in 
TRICARE Prime. NMFA also believes that the continuity of the health 
care provided to many families of activated Guard and Reserve members 
could also be enhanced if DOD could do on a larger scale what it is 
already doing for its own civilian employees who are called to Guard or 
Reserve duty: paying the cost of their civilian premiums.
    Because of the complexity of the TRICARE system, Guard and Reserve 
families need accurate information tailored for their needs. The number 
one complaint NMFA hears from Guard and Reserve families about TRICARE 
is that they do not understand it and thus may be making costly or 
unwise decisions about how to obtain health care once the service 
member is activated. NMFA applauds the efforts of the TRICARE 
Management Activity, regional Lead Agents, and the managed care support 
contractors for their educational efforts to the Guard and Reserve 
population and have been working with them to ensure that both service 
members and their families receive understandable, accurate, and 
appropriate information concerning their TRICARE benefit and how to use 
it. NMFA believes that every TRICARE region's Lead Agent should have a 
Guard and Reserve liaison to improve the flow of accurate information 
to beneficiaries and provide a reliable source of assistance should 
beneficiaries experience difficulties.
    All families of National Guard and Reserve members mobilized for 
more than 30 days should have access to a Prime-like benefit or the 
option of remaining in their civilian health care plan, with premiums 
paid by the Department of Defense.

            SUPPORTING THE SCHOOLS THAT SUPPORT OUR CHILDREN

    Congressional assistance for schools--both DOD and civilian--that 
educate military children will be very important this year. Schools' 
mission to ensure military children are focused on learning became more 
complicated with the terrorist attacks and the subsequent deployments. 
Children are affected by the absence of a parent, even when the parent 
is just on a civilian business trip. Knowing the parent is away on a 
military mission that is featured on the nightly news adds tremendously 
to the stress for the child. Children under stress may ``act out'' in 
class or may not be able to concentrate on school work. The uncertainty 
of deployment length and, in some cases, the uncertainty about the 
whereabouts of the deployed member raises the stress level even 
further. Fears about possible further terrorist acts in the United 
States make things worse as children ask: ``Why did Mom or Dad have to 
leave when we might be in danger here?''
    NMFA thanks this subcommittee for its support of schools operated 
by the Department of Defense Education Activity (DODEA). DOD schools 
have received a wealth of favorable publicity during the past year on 
their test scores, minority student achievement, parent involvement 
programs, and partnership activities with the military community. The 
quality of these schools is a testament not only to the generous 
support provided by the government, but also military families' 
commitment to quality education. Reports of DODEA cutbacks, 
necessitated by across-the-board rescissions within DOD, raised 
concerns among parents of children in DOD schools that the traditional 
high level of support services and program offerings might not be 
available just when they are most needed. We ask this subcommittee to 
help ensure that DOD schools have the resources necessary to provide 
quality education to military children in this difficult environment.
    Because approximately 80 percent of military children attend 
civilian public schools, NMFA is also grateful for congressional 
support of quality education for these children and their civilian 
classmates. Congressional authorization and appropriations for DOD 
funding to supplement Impact Aid, and the additional funding for 
schools educating severely-disabled military children, helps those 
districts most affected by the military presence. Given the continued 
underfunding of the Impact Aid program as well as the demands placed on 
these schools and the children they serve, NMFA recommends this funding 
be increased to $50 million for fiscal year 2004, with at least 10 
percent designated to support districts educating severely-disabled 
military children. NMFA also encourages the members of this 
subcommittee to communicate the importance of quality schools in the 
military community to others in Congress and seek inclusion of Impact 
Aid funding for all categories of military students in the fiscal year 
2004 budget resolution. Now, in the wake of increased deployments and 
State education budget crises, is not the time to add to military 
parents' stress level by threatening to pull funding away from their 
children's schools.
    Schools near military installations that educate many military 
children understand what happens in a deployment situation, but need to 
ensure that additional counseling and other resources are available to 
help. They often have access to family support personnel at the 
installation for assistance. On the other hand, schools with children 
of now-activated Guard and Reserve members are often dealing with 
``military children'' for the first time and are doing it without that 
safety net of the installation family center, chaplains, health 
professionals, and counselors. While there have been some recent 
stories in the press about school personnel who have harassed or 
allowed the harassment of military children in their charge, NMFA knows 
that most school personnel are doing whatever they can to help children 
during this difficult time. They are calling us, looking for resources 
on how to set up support groups for children and families or on how to 
be aware of problems associated with a parent's deployment. Usually, 
the stresses facing families did not originate with the schools; 
however a school's inability to support a child through the stresses 
will affect that child's ability to learn. School can become the one 
stable element in a family's life during a deployment.
    NMFA also urges Congress to be aware that several school 
districts--both DOD and civilian--are also facing challenges caused by 
the DOD initiative to privatize military family housing. As more 
housing for military families is built either on a military 
installation or in a part of the civilian community, the school 
district serving that committee may see shifts in enrollment and be 
called upon to provide more school facilities. NMFA believes that DOD 
and the Services must share in the solution to the school facility 
problem caused by the privatization initiative. Many schools will not 
have the resources to provide adequate school facilities or even buses 
to move children from the new housing to existing schools within the 
shortened construction timeline under the privatization ventures. NMFA 
believes that the increase in the DOD supplement to Impact Aid we have 
proposed could help school districts deal with facility or 
transportation needs caused by housing privatization. Additional 
funding may also be needed for DOD schools at CONUS installations 
undergoing privatization.
    NMFA urges Congress to ensure that the schools educating military 
children have the resources they need to provide high quality education 
in a secure setting. They must also have the resources to provide 
counseling and other assistance to students and families and training 
to teachers on the issues facing families of deployed service members.

                          MILITARY CHILD CARE

    The military's child care system remains the national benchmark 
against which other programs are measured. High rates of accreditation, 
quality facilities, and well-trained staff are a testament to the 
priority given military child care by Congress and DOD. Despite 
considerable progress, NMFA sees some continuing challenges for DOD in 
meeting the child care needs of the force without breaking the bank or 
compromising quality. Approximately 63 percent of military spouses are 
in the work force. Dual-military members with children make up 2.5 
percent of the force; 6.1 percent of service members are single 
parents. In 2002, the Services met approximately 65 percent of the 
reported child care need and expected to meet only 80 percent of that 
need by 2007.
    NMFA hears of ever-increasing demand for child care and youth 
services from service members and families. In recent testimony, for 
example, Sergeant Major of the Army Jack Tilley noted that during 2002, 
27 percent of enlisted soldier parents reported lost duty time due to a 
lack of child care. Demand is especially growing for after-hours care 
or care closer to families' homes off the installations. Some 
installations have responded with extended duty child care, both at 
Child Development Centers and in Family Child Care homes, or are even 
waiving families' co-payments for these extended hours. As of September 
2002, the Marine Corps, for example, had approved installation requests 
totaling more than $200,000 to support child care needs resulting from 
Operation Enduring Freedom and related contingencies.
    Child Development Centers and Family Child Care homes, however, 
cannot meet all of the need, especially for families living off the 
military installation. Most Guard and Reserve families do not live near 
a military installation where they can access a military Child 
Development Center, even if it had space for their child. Approximately 
53 percent of Selected Reserve members are married with children; 5.4 
percent of Reserve component members are single parents, compared with 
6.2 percent of the Active Force. When the service member is not home to 
help care for children, the family needs more child care. In some 
cases, military spouses are quitting their jobs or dropping out of 
school because they cannot find the child care they need at an 
affordable rate.
    Since 2000, DOD has had the flexibility to increase the 
availability of child care and youth programs through partnerships with 
civilian agencies and other organizations. The Services set up pilot 
programs to take advantage of this flexibility and obtain more care for 
children off the installation; however, less than 10 percent of DOD 
child care is provided off-base. Guard and Reserve families, as well as 
active duty families living and/or working longer distances from an 
installation need assistance not just with finding quality child care 
near their homes, but also in paying for that care. When a military 
family enrolls their child in a military Child Development Center or 
Family Child Care home, the cost of that child's care is shared between 
the government through appropriated funds and the service member. When 
a military family who cannot access child care through the military 
places their child in a civilian child care facility, that family bears 
the entire cost.
    Because the Reserve components are essential to today's military 
mission, the child care needs of activated Guard and Reserve members 
must be calculated in DOD estimates of demand for child care services 
and assistance must be given to these families in accessing child care. 
This should start with referral services, but will probably also need 
to include subsidies for certain members. Another possible way to 
assist service members in paying for child care would be to set up 
flexible spending accounts through which military families could pay 
child care expenses with pre-tax dollars.
    NMFA urges DOD to intensify its efforts to increase access to child 
care for military families unable to use Child Development Centers and 
Family Child Care providers located on military installations. NMFA 
urges Congress to provide the resources necessary to assist families of 
all service members called to support contingency operations in 
accessing and paying for necessary child care services.

                      SSI AND THE COSTS OF SERVICE

    Supplemental Security Income (SSI) is a special monthly payment 
from the Social Security Administration based on disability or 
blindness for persons with limited income and resources. Children under 
age 18 who are disabled or blind and have limited income and resources 
are also eligible. In many States, qualification for SSI automatically 
enables recipients to qualify for extended Medicaid services for the 
disabled. Some of the approximately 78,000 military family members 
enrolled in the Exceptional Family Member Program also qualify for SSI. 
Military families report that, while they appreciate the extra income, 
the real benefit to SSI qualification is that their disabled child can 
receive Medicaid. In many States, Medicaid will cover items such as 
personal care support, respite care, medical supplies, and certain 
therapies that TRICARE does not provide. Although TRICARE pays first 
for covered benefits for military beneficiaries, Medicaid is the safety 
net that enables these families to receive the extra support they often 
need to support the disabled child at home.
    Because SSI eligibility is income-based, the complexities of the 
military pay and allowance system often create difficulties for 
families in qualifying for SSI or for retaining the payments and the 
accompanying Medicaid services. Families understand why they might lose 
certain safety net benefits as they receive pay raises. What puzzles 
them and NMFA is why they lose SSI benefits because of a DOD 
requirement related to the service member's service. Two DOD 
requirements currently threaten some of the most vulnerable military 
families' eligibility for the services they need. When military housing 
is privatized, by law, the service member must be paid Basic Allowance 
for Housing (BAH). When the BAH shows up on the service member's Leave 
and Earnings Statement (LES), it appears that the family income has 
increased even though the family is living in the same house and the 
BAH is immediately paid as an allotment to the developer of the housing 
for rent. Other military members find that, when they are deployed on 
contingency missions, the additional allowances and special pays, such 
as Family Separation Allowance and hazardous duty pay, will also remove 
the child from SSI eligibility.
    Military families are not asking for more benefits than those to 
which they are entitled. They believe, however, that a DOD requirement 
such as payment of BAH for privatized housing or orders to deploy in 
service to their country should not disqualify their disabled child 
from receiving the services he or she needs. Service members look for 
Congress to understand that their child should not be penalized by 
their military service.
    NMFA urges this committee to work with committees with oversight 
over Social Security to help protect service members with severely-
disabled family members from losing access to SSI and other safety net 
programs and benefits when their income is changed due to requirements 
of the Department of Defense.

                       MILITARY SPOUSE EMPLOYMENT

    NMFA looks forward to seeing the DOD report requested in the NDAA 
for Fiscal Year 2002 and still owed Congress on the status of military 
spouse employment programs. A military spouse's ability to gain job 
skills and maintain a career despite multiple moves contributes to the 
financial well-being of the military family and its satisfaction with 
military life. A spouse who is provided with opportunities for 
employment and career advancement will be more likely to encourage the 
service member to remain in the military. Conversely, the prospect that 
the spouse would have to give up a good job--found with difficulty--and 
start over again after the next move with no assistance in finding 
employment may prompt a family decision that the service member should 
leave the military. NMFA is not asking DOD to create a jobs program for 
every military spouse; DOD is needed most to facilitate the transition 
of mobile military spouses into already existing opportunities and to 
target efforts where spouses are having the greatest difficulty 
accessing educational programs or employment.
    Sixty-three percent of military spouses are in the labor force, 
including 87 percent of junior enlisted spouses (E-1 to E-5). The loss 
of the spouse's income at exactly the time when the family is facing 
the costs of a Permanent Change of Station move is further exacerbated 
when a spouse is unable to collect unemployment compensation due to 
provisions of State laws. In many States, the military spouse is not 
eligible to collect unemployment compensation when unemployment is due 
to the service member's change of duty location. States frequently 
determine that the decision of a military spouse to move with the 
service member is a ``voluntary quit'' and the benefit is denied. 
Spouses need the assistance of the military leadership and possibly 
friends in Congress to help raise the level of awareness about the 
inequities of these determinations so that more States will approve 
unemployment compensation for military spouses.

                      FORMER SPOUSE PROTECTION ACT

    NMFA supports the proposals included in the 2001 DOD report on the 
Former Spouse Protection Act (FSPA), including changes to make the 
treatment of survivor benefits fairer to both the current and former 
spouse. For example, under current law if a former spouse is awarded 
benefits under the Survivor Benefit Plan (SBP), a current spouse is not 
also eligible for SBP. NMFA recommends the subcommittee approve a 
prospective provision to permit multiple payments of SBP based on a 
proportional share of the retired pay received by the former spouse(s) 
and the retiree. Thus, if the former spouse is awarded 50 percent of 
the retired pay, a retiree may make an election to award the remaining 
50 percent to the current spouse. NMFA supports a related proposal to 
permit a former spouse to waive SBP coverage. Also under current law, 
even if the retiree and spouse agree and the court issues an order 
directing that SBP premiums be withheld from the former spouse's share 
of retired pay, the Defense Finance and Accounting System (DFAS) will 
not honor the court order. NMFA recommends a change in statute to 
direct DFAS to honor such court orders. Finally, under FSPA, DFAS must 
be properly served with an SBP selection in a divorce decree within 1 
year of divorce or SBP is forever waived. NMFA recommends repeal the 
so-called 1-year deemed election period to permit a former spouse to 
obtain SBP coverage beyond the 1-year limitation.
    We also encourage this committee to seriously consider providing 
medical, commissary, and exchange benefits to 20-20-15 spouses. These 
former spouses were, for the most part, married to enlisted members and 
often have low incomes and a real need for opportunities for savings on 
the necessities of life. As referenced in The Military Coalition's 
testimony, NMFA strongly opposes any provision that would impose 
restrictions on retired pay awarded as property to former spouses in a 
divorce, such as limiting the number of years they could receive the 
retired pay. We believe the DOD proposal of basing property awards on 
the service member's rank and years of service at the time of divorce 
rather than time of retirement more accurately and fairly considers the 
length of marriage.

                    TAX RELIEF FOR MILITARY FAMILIES

    NMFA is pleased that legislation is before Congress that would 
correct the oversight in the 1997 tax law that changed the capital 
gains on the sale of a personal residence without providing specific 
remedies as the previous law had done. We certainly hope that this year 
will finally see the oversight corrected.

      MILITARY FAMILIES AND COMMUNITIES--READY TO MEET THE MISSION

    Members of the Uniformed Services--active and Reserve component--
are doing the Nation's work today all over the world. They ask the 
Nation to give them the tools they need to do that job: equipment, 
training, and leadership. They also look to the Nation for recognition 
that their job is not nine to five and that it involves their families 
in ways few other jobs demand. Military members and their families want 
the Nation to understand that the military family drives retention 
decisions, that the family's quality-of-life is a readiness 
requirement, and that even a community as strong as the military 
community will fall apart if it is asked to do too much with too little 
for too long. They also look to the Nation to understand that quality-
of-life is not just about pay. It is about having a safe, well-
maintained place to live. It is about access to quality health care 
without bureaucratic complexities. It is about a quality education for 
children. It is about meeting the aspirations of a spouse for a career 
and a couple for a secure retirement. It is about respect for a job 
well done.
    We thank this subcommittee and Congress for your advocacy for pay 
and benefit improvements necessary to retain the quality force that now 
protects our homeland and wages war against terror. Your actions have 
helped to rebuild military members' trust and to ease the crisis in 
recruiting and retention. We ask you to remember that in time of war, 
even more than during peacetime deployments, mission readiness is tied 
to service member readiness, which is tied to family readiness. The 
stability of the military family and community and their support for 
the force rests on the Nation's continued focus on the entire package 
of quality-of-life components. Military members and their families look 
to you for continued support for that quality-of-life. Please don't let 
them down.

   STATEMENT OF STEVE ANDERSON, LEGISLATIVE COUNSEL, RESERVE 
                      OFFICERS ASSOCIATION

    Mr. Anderson. Mr. Chairman, Senator Nelson, I am pleased to 
have this opportunity to present the Coalition's legislative 
priorities for the Reserve components of our Armed Forces and 
their families to you today.
    Today, there are more than 175,000 Reserve component 
sailors, soldiers, marines, and airmen on active duty overseas 
in the anticipation of action in Iraq, and serving here at 
home, providing security against terrorism within our own 
borders. Today, more than ever, our Reserve Forces are a 
critical element to the total force equation.
    We stand at a crossroads in the history of the total force, 
a point where we seek to redefine the relationship of the 
Reserve Forces to our national defense establishment. Today, we 
find ourselves considering how to balance Reserve participation 
in a steadily rising number of contingency missions, along with 
the realities of reservists' civilian duties and occupations 
and familial obligations.
    It is imperative that we optimize Reserve missions and, to 
the greatest degree possible, enhance service in the Reserve to 
make it meaningful, rewarding, and attractive for service 
members and their families. To this end, we recommend that the 
committee consider the following provisions for inclusion in 
the National Defense Authorization Act for Fiscal Year 2004.
    Reserve income protection. In the past, Congress has 
recognized the need for some kind of income security 
legislation for mobilized reservists whose military income does 
not match their civilian income. With the prospect of continual 
periodic mobilizations of uncertain length becoming the norm 
rather than the exception in the Reserve careers of our 
soldiers, some provision must be made to ensure that a call to 
active duty is not a call to financial disaster for mobilized 
reservists.
    If reservists see bankruptcy looming behind every 
mobilization, they will not continue to be reservists. If we 
want them to continue to serve, we must find a way, based on 
best business practices, to provide income security for those 
who serve. Failure to do so will fatally undermine the 
readiness of the Reserve components of the Armed Forces and, 
with them, the total force.
    The second issue I would speak to today is academic 
protection for mobilized reservists. The Coalition is aware of 
a growing number of cases of denied academic credit, lost 
academic status, and financial difficulties experienced by 
service members mobilized or deployed in support of contingency 
missions.
    The problem is not new. It occurred widely during the Gulf 
War, but no formal corrective action has been taken since then. 
If the Nation is to routinely mobilize and deploy large numbers 
of service members, they must be assured of reasonable 
protections when their academic work is interrupted.
    Comparable economic and legal protections are available 
under the Soldiers' and Sailors' Civil Relief Act. The time has 
come to authorize similar protections for service members whose 
academic status and standing is threatened through no fault of 
their own. The Military Coalition recommends that the committee 
endorse legislative proposals to afford academic and financial 
protections to military post secondary students mobilized or 
deployed in support of contingency missions.
    That concludes my opening statement. I would be happy to 
answer any questions you may have.
    Senator Chambliss. Thank you.
    Mr. Lokovic.

 STATEMENT OF JAMES E. LOKOVIC, DEPUTY EXECUTIVE DIRECTOR AND 
    DIRECTOR, MILITARY AND GOVERNMENT RELATIONS, AIR FORCE 
                     SERGEANTS ASSOCIATION

    Mr. Lokovic. Mr. Chairman, Senator Nelson, my comments will 
briefly reflect on the Coalition views on two important retiree 
issues from our written statement that we submitted earlier. 
The first pertains to a Survivor Benefit Plan, and the second 
is to briefly underscore the commitment of the Coalition on the 
concurrent receipt issue. These two issues call for immediate 
attention, in light of the current posture of our Armed Forces 
and our ability to deal with those who may pay a severe price, 
or the ultimate price.
    First, the Coalition supports repeal of the age 62 Survivor 
Benefit Plan (SBP) annuity reduction. As a matter of fact, 
Coalition representatives visited several congressional offices 
this morning to underscore that need.
    As this committee knows, when an SBP-enrolled military 
retiree passes away, if the surviving spouse is younger than 
age 62, the survivor continues receiving 55 percent of the 
military member's retirement pay. However, once the survivor 
reaches age 62, that annuity is reduced to 35 percent of that 
retirement base. The Coalition asks this committee to eliminate 
the 20 percent age-62 offset, and while we prefer that this 
offset be removed immediately, S. 451, introduced by Senator 
Snowe recently, is a reasonable approach that would phase out 
the offset increments between the bill's enactment on October 
1, 2007.
    The Coalition urges elimination of the SBP offset for three 
important reasons. First, many retirees who signed up for SBP 
in the 1970s and the early 1980s were not adequately informed 
about the offset. Second, and perhaps most important, the 
Pentagon admits that the 40 percent DOD subsidy that Congress 
intended for SBP has now dropped to approximately 17 percent.
    Let me reiterate that. By congressional intent, under the 
SBP program, DOD was to pay 40 percent and the retirees were to 
pay 60 percent. DOD is now paying approximately 17 percent. The 
retirees are paying approximately 83 percent. I can only 
imagine, if it were the other way around, that there would be 
calls for quick action. Accordingly, we ask for quick action on 
behalf of the retirees and their survivors in eliminating this 
offset.
    Another reason to get rid of the offset, and the final one 
I will mention, is that when you compare the military SBP 
program to that which is available for Federal retirees, they 
enjoy a much higher subsidy, 33 to 48 percent, and receive a 50 
to 55 percent program without any reduction at age 62. We urge 
this committee to work to eliminate that age 62 survivor 
annuity reduction.
    Finally, as regards the concurrent receipt issue, there is 
little that we can say to you. No need to spell the issue out. 
You are well aware of the details of it, and you certainly get 
more mail than we do on the subject.
    While the Coalition regrets that more comprehensive 
concurrent receipt legislation fell by the wayside at the end 
of the 107th Congress, we are grateful that some progress was 
made, and we anxiously await the details of DOD's 
determinations on eligibility and application procedures and so 
forth for the special compensation for the combat-disabled. 
Senator Warner referred to that as the beachhead upon which to 
build towards full concurrent receipt, and we certainly agree 
with that.
    We hope that DOD makes the process as wideranging and fair 
and simple as possible when they announce the details in the 
coming months, and this Coalition will continue to work to 
restore full retired pay for those with VA service-connected 
disabilities, an effort supported during the 107th Congress by 
90 percent of the Members, and certainly the vast majority of 
the retired veterans. With this committee's help, we believe 
that we will ultimately succeed on the effort.
    Mr. Chairman, that concludes my portion. Dr. Schwartz will 
now speak briefly about health care issues.
    [The prepared statement of Mr. Lokovic follows:]

          Prepared Statement by CMSGT (Ret.) James E. Lokovic

    Mr. Chairman and distinguished committee members, on behalf of the 
136,000 members of the Air Force Sergeants Association (AFSA), thank 
you for this opportunity to offer our views on the military personnel 
programs that affect those serving our Nation. AFSA represents active 
duty, Guard, Reserve, retired, and veteran enlisted Air Force members 
and their families. Your continuing effort toward improving the quality 
of their lives has made a real difference for those who devote their 
lives to service, and our members are grateful.
    107th Congress Accomplishments: From the standpoint of enlisted 
members, a few of the more-notable accomplishments of this committee 
during the 107th Congress included:

    (1) higher-than-mandated-by-law military pay raises, with further 
targeting for senior NCOs;
    (2) increased housing allowance dollars for most personnel;
    (3) improvement in permanent change of station (PCS) move out-of-
pocket reimbursement and policy changes;
    (4) an extension of the length of the Selective Reserve Montgomery 
GI Bill program from 10 to 14 years;
    (5) expanded protections for Guard and Reserve members who are 
called up;
    (6) a permanent reduction from 8 to 6 years for the number of years 
of continuous Reserve component service needed immediately before 
retirement;
    (7) inclusion in the Special Compensation for Severely Disabled 
Retirees those who had at a 60-percent or higher VA disability rating 
within 4 years of retirement and who served at least 20 years of 
service;
    (8) coverage of active duty dependents in the Service members Group 
Life Insurance program;
    (9) the provision of Survivor Benefit Plan (SBP) coverage to 
survivors of service members who die on active duty prior to reaching 
retirement age;
    (10) your prohibition against DOD forcing military retirees to 
choose between DOD and VA health care;
    (11) further refinements to TRICARE related to travel, TRICARE 
Prime Remote, and transitional health care benefits; and
    (12) your action to ensure that the retiree health care trust fund 
covers all retired Medicare-eligibles, regardless of age, in private 
sector or military facilities.

    107th Congress Disappointments: AFSA members are well aware that 
this committee worked very hard on some issues that resulted in 
success, and others which we hope you will readdress. Areas that 
various members of Congress pursued on behalf of our members which, 
unfortunately, did not come to fruition during the 107th Congress 
included ``failures'' to:

    (1) allow those receiving VA disability compensation to collect 
full military retirement pay. This was especially disappointing to 
hundreds of thousands of veterans since the legislative branch was 
almost unanimous in its support, but with the executive branch 
prevailing at the 11th hour;
    (2) eliminate the 20-percent reduction in the SBP survivor annuity 
that occurs at age 62, and to accelerate the SBP ``paid-up'' provision 
for those 70 years old who have paid into SBP for at least 30 years;
    (3) provide a waiver of the Medicare Part B late enrollment penalty 
to facilitate TRICARE for LIFE participation;
    (4) reduce the earliest Guard and Reserve retirement age from 60 to 
55; and
    (5) improve the quality of the program used to ship military 
household and personal belongings changing the selection of carriers 
from ``low bid'' to ``high quality and customer satisfaction;'' and 
failure to treat service members fairly and equitably by repealing the 
Uniformed Services Former Spouses Protection Act.

    Mr. Chairman, below are several specific goals that we hope this 
committee will pursue on behalf of current and past enlisted members 
and their families. I will present them in categories with a brief 
explanation for each. Of course, we are prepared to present more detail 
and to discuss these issues with your staff and those of the members of 
this committee as you desire. Our members have tasked us with pursuing 
the following goals through e-mails, letters, phone calls, and personal 
visits throughout the year.

                     MILITARY PAY AND COMPENSATION

    Mr. Chairman, although military members obviously do not serve 
their Nation to gain wealth, we do owe them a decent standard of 
living. This is even more important today because America's is an All-
Volunteer Force, and because this Nation increasingly tasks military 
members and often separates them (for greater lengths of time) from 
their families. We ask this committee to seriously consider the 
following comments relative to military pay and compensation.
     Continue Enlisted Pay Reform. We applaud your efforts in 
recent years to ensure that all military members get the minimum annual 
pay raise in accordance with congressional intent by formula 
(Employment Cost Index [ECI] plus one-half percent). AFSA supports 
further targeting. However, we caution the committee on the perception 
among the force that might be created if the lowest ranking enlisted 
members receive below the congressional formula--so that dollars can be 
transferred to the higher ranking members. We support higher senior NCO 
pay raises, but believe that if a ``rob Peter to pay Paul'' approach is 
to be used, it should not be by taking pay away from the lowest ranking 
military members; perhaps it should come from above.
     Resist Efforts to Change the Military Pay Formula. This 
committee was instrumental in protecting the troops by tying military 
pay growth to the growth of wages in the private sector (by focusing on 
the ECI). Recent administration suggestions to tie future annual 
military pay raises to the Consumer Price Index (CPI) alarm military 
members with the prospect of significantly lower annual pay 
adjustments. AFSA urges this committee to resist administration efforts 
to lower military pay raises by abandoning the current formula.
     Reform the Basic Allowance for Housing (BAH). There is 
room for significant correction and improvement in the methodology used 
to determine BAH. Enlisted members most significantly feel the brunt of 
these problems. For example, the only enlisted members whose BAH 
square-footage and, therefore, dollar amount are based on stand-alone 
dwellings are E-9s. The BAH amount for all enlisted grades below E-9 is 
based on apartments and townhouses. Several BAH-related complaints we 
receive:

         Local commanders should be given significant influence 
        in determining which housing areas should be incorporated in 
        the ``surveys'' that determine BAH amounts. The housing 
        ``surveys'' are done (by a DOD-contracted company) using a 
        limited ``catchment area'' (usually 20 miles) around each base/
        post, regardless of where the population of the base actually 
        resides. For example, half of the base population of Mountain 
        Home AFB, Idaho, lives in Boise, Idaho, about 45 miles away 
        from the base. They live in Boise because that is where 
        adequate housing, malls, stores, schools, job opportunities, 
        etc., are located. However, the only town and, therefore, 
        surveyed housing that falls within the survey catchment is 
        Mountain Home, Idaho, a very small town with very limited 
        housing. Therefore, the dollar amounts that Mountain Home AFB 
        base personnel receive under the BAH system are clearly 
        inadequate for their needs. Also, within given local 
        ``catchment'' areas, there may be unsafe, relatively depressed 
        areas where commanders do not want their people to reside. 
        These commanders should be able to exclude these areas from 
        survey consideration. Once again, AFSA urges this committee to 
        give commanders significant input into what areas should be 
        incorporated in the surveys that determine BAH amounts. 
        Additionally, we ask this committee to mandate that the 
        contracted company which accomplishes the surveys should be 
        required to make details of their surveys (i.e., what housing 
        in which areas were surveyed, when, how, etc.) available to the 
        public.
         Increase the square footage standard used to determine 
        BAH for enlisted members. Frankly, the BAH system is designed 
        in such a way that it relegates part of the force to the 
        ``wrong side of the tracks.'' Because the amount of BAH for 
        each grade is based on designated amounts of square-footage 
        (fewer square-feet for lower grades), the housing available in 
        a given area to include in the survey is usually far more 
        limited (and usually of more inferior quality) for the lower 
        grades. E-1s through E-4s, receive amounts based on more 
        limited, lower standard housing--because that is all that is 
        available within the survey area with the limited square-
        footage allocated to them. Each time Congress has increased BAH 
        ``to eventually eliminate average out-of-pocket expenses,'' 
        some lower ranking service members saw little to no increase in 
        BAH because the inferior housing used to determine their BAH 
        level does not increase in value like it does in the more-
        affluent areas. Remember, the BAH system is designed to provide 
        higher square footage to the higher ranking personnel; it is 
        these members whose BAH is based on better housing in more 
        affluent areas that offer homes with the square-footage that 
        applies to them in the survey.
         Provide those stationed in Korea the same tax 
        advantages and special pays afforded to those stationed in 
        ``hostile'' areas. With the challenges and austere conditions 
        service members face in Korea, the daily threat from North 
        Korea, and the risks inherent in the geopolitical situation 
        relative to the Korean peninsula, it is only fair to provide 
        equitable tax and pay for these members who, in a real sense, 
        are serving on the tip of the sword. We urge this committee to 
        take action on this now in recognition of those who we station 
        in Korea.
         Reduce the threshold of eligibility for CONUS COLA 
        from its current level of 108 percent of the national median. 
        Several large city areas (such as Washington, DC) do not 
        receive CONUS COLA. We urge this committee to take another look 
        at which municipalities receive CONUS COLA.
         Provide Guard and Reserve members equity in Career 
        Enlisted Flier Incentive Pay (CEFIP). It is unfair that members 
        of the Guard and Reserve receive a fractioned CEFIP (based on a 
        1/30 formula for each day flying). CEFIP recognizes the 
        extraordinary challenges and risks associated with military 
        flight. As such, Guard and Reserve fliers should be paid on the 
        same ``whole month'' basis as other military fliers.
         Establish a standard, minimum re-enlistment bonus for 
        all re-enlistments. Air Force enlisted members (particularly 
        those in leadership positions) have told us several times that 
        there ought to be a minimum re-enlistment bonus. Selective re-
        enlistment bonuses are paid to those with between 21 months and 
        14 years of service. Those who re-enlist after the 14-year 
        point receive no re-enlistment bonus. Remember, an enlisted 
        member can serve as long as 30 years. Because we want to keep 
        leaders in critical skills and they must lead those who are 
        receiving these, sometimes lucrative, bonuses, it would help 
        morale to provide some type of re-enlistment bonus to all who 
        re-enlist.
         Pay Hazardous Duty Incentive Pay (HDIP) to military 
        firefighters. Regardless of service, there is no military job 
        inherently more hazardous than firefighters. Civilian 
        firefighters who serve side-by-side with military firefighters 
        already have this risk factored into their Federal civilian 
        wage scale. Military firefighters get no such additional 
        compensation to recognize their extraordinary risk. At a cost 
        of about $9 million per year to cover the military firefighters 
        (those whose AFSA, MOS, or NEC is primarily as a firefighter) 
        for all services, this would be an equitable, relatively 
        inexpensive addition to those entitled to receive HDIP.

                           EDUCATION BENEFITS

    Although some educational programs for military members fall under 
the primary jurisdiction of the Veterans' Affairs Committee, some are 
at least partially a matter of concern of this committee and the 
jurisdiction of the Department of Defense. As we travel to bases around 
the world, AFSA members most often ask us to convey the following 
desires to this committee:

     Provide an enrollment opportunity for those who turned 
down the Veterans Educational Assistance Program (VEAP) to enroll in 
the Montgomery GI Bill. Over 100,000 currently serving military members 
(35,000 in the Air Force alone) turned down the VEAP program when it 
was offered to them. VEAP was a relatively poor, insufficient, poorly 
counseled educational program which preceded the Montgomery GI Bill 
(MGIB). In contrast, the MGIB is a much more realistic, more-beneficial 
program that would help these members in their transition back into 
civilian life after their time in the military. Unfortunately, many of 
those who turned down the VEAP program are now leaving service with no 
transitional education program. The CBO has set the worst-case cost for 
this offering at $143 million over a 5-year period. We believe that 
these members, many of whom brought us through conflicts including the 
Persian Gulf War, Somalia, Bosnia, Kosovo, worldwide peacekeeping 
missions, conflicts not publicly reported, and the more-recent 
worldwide war on terrorism, deserve an opportunity to enroll in the 
MGIB. Many of these men and women would lead us into battle in Iraq if 
that eventuality comes about.
     Increase the value of the MGIB to cover the costs of 
tuition, books, and fees at an average 4-year college or university. 
Just as the World War II MGIB transformed an entire generation and is 
credited with creating the middle class in this Nation, a 
transformation of the MGIB would also have a significant impact on our 
Nation's economy. It is often said that $3 are returned to the economy 
in terms of taxes, productivity, quality, etc., for every dollar the 
Nation invests in education. United States citizens who join the 
military with the understanding that their employer may ask them to 
give up their lives deserve a fully paid education, similar to that 
provided by many companies in civilian industry.
     Ensure that all MGIB enrollees have the same program with 
the same benefits. Due to changes and additions to the law, only some 
MGIB enrollees may transfer a portion of their benefit to family 
members. Similarly, only some MGIB enrollees may pay more into the 
program to increase the value of their program. We urge this committee 
to exert its influence to standardize the MGIB so that it is the same 
for all who are enrolled in the program.
     Allow members to enroll in the MGIB at any time during 
their first enlistment. Regrettably, military members are given only 
one opportunity to enroll in the MGIB. That opportunity occurs very 
quickly during Basic Military Training when most would least appreciate 
the opportunity and can least afford it. Additionally, they must 
``pay'' to have this educational benefit; to enroll in the MGIB they 
must agree to give up $100 per month for the first 12 months of their 
career. Many military members are surprised by this $1,200 fee and view 
it as an insincere military benefit offering because of the one-time 
irrevocable decision--when they are least prepared to take advantage of 
it. However, so long a $1,200 DOD payroll reduction for each MGIB 
enrollee is part of the program, AFSA believes we should at least 
provide young military members an opportunity to enroll at any time 
during their first enlistment. Of course, elimination of the $1,200 
MGIB DOD payroll deduction would make the time of enrollment a moot 
point. We urge this committee to help work to allow members to enroll 
in the MGIB after Basic Military Training.
     Provide military members and their families in-state 
tuition rates at federally supported state universities immediately 
upon arrival at the gaining station. Military members are moved to 
stations around the world at the pleasure of the government. Yet, they 
are treated as visitors wherever they go. Fairness would dictate that, 
for the purposes of the cost of higher education, they be treated as 
residents so that they can have in-state rates at federally supported 
colleges and universities in the state where they are assigned. Some 
States provide in-resident rates after the military member has lived 
there at least 1 year despite the fact that most members are, at a 
minimum, going to be there at least 3 years. Remember, we are talking 
about military members, many of whom are serving their Nation at 
relatively low compensation levels. We would ask this committee to 
exert the necessary influence to require federally-supported 
institution to consider military members assigned in their state as 
``residents,'' for the purposes of tuition levels.
     Remove the annual Tuition Assistance (TA) cap. Military 
members are offered TA to help them advance their civilian educations. 
However, an annual cap of $4,500 is placed on the amount of TA they may 
receive. For those who are working on graduate programs or whose 
programs have laboratory segments, for example, the $4,500 cap may not 
be sufficient. Because the few individuals we are talking about are 
demonstrating the desire to improve themselves and their value to their 
given jobs would most likely be enhanced, it would be a good investment 
to allow them the full TA needed to pursue their educational 
objectives. We ask this committee to remove the annual TA cap.
     Ensure full Impact Aid funding. We would ask this 
committee to closely scrutinize the funding levels for Impact Aid as 
presented in the administration's fiscal year 2004 budget plan which 
has submitted levels that underfund needed Impact Aid by approximately 
$127 million. This is a 9-percent reduction from fiscal year 2002 
levels. 15 million students in 1,331 school districts nationwide 
benefit from this program. Funding is used for a variety of expenses, 
including teacher salaries, text books, computers, after-school 
programs, tutoring, advanced placement classes, and special enrichment 
programs. This money is to compensate local school districts for the 
impact of military bases in their communities. Local schools primarily 
are funded through property taxes. However, those who reside on a 
military reservation do not pay into the property tax base. This 
becomes a burden on local schools if military dependent children attend 
local, off-base schools. We ask this committee to ensure that 
sufficient Impact Aid is provided so that the children of military 
members are not put at risk, or that the military member be required to 
pay tuition.

                              HEALTH CARE

    As AFSA representatives visit bases, one complaint we often hear is 
that the dependent dental insurance plan is a very, very poor one. 
Additionally, in many areas, there is a significant lack of providers. 
Retirees complain that the retiree dental plan is overpriced, provides 
inadequate coverage, and is not worth the investment. This is 
especially upsetting to military retirees since they were led to 
believe they would have free/low cost, comprehensive, lifetime military 
dental care. We would ask this committee to address the quality and 
adequacy of the military dependent and the retiree dental plans. 
Additionally, we ask you to consider:

     Increase provider reimbursement rates to ensure quality 
providers in the TRICARE system. Perhaps the greatest challenge this 
committee faces toward keeping the military health care system viable 
is retaining health care providers in the TRICARE networks. This 
challenge goes hand-in-hand with that which is faced by Medicare. If we 
do not allow doctors to charge a fair price for services performed, 
they will not want to participate in our program. If they do not 
participate, the program will fail. We urge this committee to consider 
increasing the CHAMPUS Maximum Allowable Charge to higher levels to 
ensure quality providers stay in the system. Otherwise, military 
beneficiaries will not be provided adequate health care.
     Provide for a waiver of the Medicare Part B late 
enrollment penalty to facilitate TRICARE for Life participation. When 
this committee wisely created the TRICARE for Life (TFL) program, it 
significantly enhanced the quality of the lives of thousands upon 
thousands of military retirees, families, and survivors. It, in effect, 
eliminated the need for Medicare-eligible military retirees, family 
members, and survivors, to carry a Medicare supplement policy. One 
requirement for participation in TFL is that the member be enrolled in 
Medicare Part B. While the basic Part B enrollment cost is not onerous, 
many military retirees residing near bases declined Part B (some for 
many years). In order for these retirees, family members, and survivors 
who did not enroll in Part B when they were first eligible to 
participate in TFL, they must pay a substantial penalty in order to 
enroll in Part B. We urge this committee for a one-time enrollment 
period where those eligible for TFL who are not enrolled in Medicare 
Part B may do so without penalty. When they declined Medicare Part B 
when it was first offered, they had no way of knowing that a program 
like TFL would be offered in the future.
     Upgrade the dental benefit programs for active duty, 
Guard, and Reserve members, retirees, and their families, especially in 
localities where inadequate facilities and/or insufficient providers 
are available. While this committee has no control over the number of 
providers in a particular locality, it can enhance the programs to 
promote participation. This can be done by (1) ensuring that providers 
are treated fairly in terms of reimbursement for the care they provide, 
and (2) by getting military beneficiaries to (i.e., providing travel 
to) caregiver locations when dental care (especially specialized care) 
is needed. In that regard, S. 336, by Senator Pete Domenici, R-NM, 
would be a good step toward protecting military family members.
     Make all TRICARE enrollment fees and co-payments, TRICARE 
for Life Medicare Part B payments, and military dental plan enrollment 
fees and premium payments tax exempt (pre-tax dollars). In those cases 
where the military member, retiree, family member, or survivor has to 
pay co-payments for medical care, the exemption of the amount they must 
pay would be a great benefit enhancement. This would be particularly 
true for those who are older and on fixed incomes.
     Provide Guard and Reserve members and their families with 
a comprehensive TRICARE benefit. This is critical to ensure the 
deployability of the member, and it is important that his/her family is 
protected when the military member is away from home serving his/her 
Nation. We owe these patriots a comprehensive program.

                        GUARD AND RESERVE ISSUES

     Provide full payment of lodging costs to a lodging 
facility for the duration of a mobilization order when a guardsman or 
reservist is called to active duty by section 12301, 12302, or 12304 of 
Title 10. This adjustment is needed because the payment of lodging per 
diem is not authorized for members on Temporary Duty (TDY) during 
periods of leave or a return to the Place from Which Called (or 
Ordered) to Active Duty (PLEAD). When per diem is not paid, the 
reservist who departs the area, however briefly, has to check out of 
lodging or pay lodging expenses out-of-pocket. For example, we are 
penalizing them if they want to briefly return home to address the 
concerns of the families from which they have been separated by the 
mobilization. This has an extremely negative financial impact, 
particularly for lower-ranking members. It also could have an impact on 
the retention of mobilized members following demobilization. 
Additionally, it is extremely disruptive to lodging facility 
contractors with the members' constantly checking in and out of 
quarters; this can cause financial problems for the facility managers 
who have an expectation of continuous occupancy for a finite period of 
time. Of special significance to this committee, there would be no/
negligible cost to implementing this suggestion since all mobilization 
expenses are budgeted and set aside for the duration of mobilization 
orders.
     Reduce the earliest retirement age (with full annuity) for 
Guard and Reserve members from 60 to 55. These members are the only 
Federal retirees who have to wait until age 60 to enjoy retirement 
benefits. These citizens who fight for our Nation deserve to have a 
better retirement program. Lowering the retirement age would more 
adequately reward their service, and provide for upward mobility in the 
force (ANG and Reserve members are primarily promoted by vacancy). Keep 
in mind that Reserve retirement is significantly lower than that 
provided to active duty members. Reservists accumulate points based on 
their service and training. They must accumulate sufficient points in a 
given year for it to be a ``good year.'' They must achieve 20 ``good 
years'' to qualify for retirement. The amount of their retired pay is 
based on the total points they have accumulated. AFSA believes that 
these members ought to be able to retire upon completion of their 
``good years'' requirements. However, considering funding limitations, 
the least, fair thing that should be done is to provide them Federal 
retirement equity by letting them retire as soon as age 55. We urge 
this committee to do so. Since DOD has conducted and contracted studies 
of reserve compensation in recent years, we believe there is little to 
be gained by the DOD study mandated in the NDAA for Fiscal Year 2003 
other than to delay serious consideration of the issue. We urge this 
committee to support the provisions in H.R. 742 and its pending Senate 
companion legislation. Introduced last year as S. 2250 by Senator Jon 
Corzine, D-NJ, his staff tells us that he will soon reintroduce the 
measure. We urge this committee to support the effort.
     Eliminate the annual cap on inactive duty training points 
creditable for retirement. Guard and Reserve members accumulate points 
based on their service and training. These points eventually determine 
the member's level of retirement pay. However, there is a cap in each 
given year on how many points a member can apply toward retirement. In 
recent years, that cap was increased from 60 to 75, then from 75 to 90 
(where it currently stands). AFSA believes that the member should be 
able to apply all points accumulated toward retirement pay 
calculations. We ask the committee to examine this and, if possible, to 
eliminate the annual point cap.
     Address the concerns of those who employ Guard and Reserve 
members. As members of this committee know, employer support of the 
Guard and Reserve is a critical element of Guard and Reserve success. 
At a time when over 200,000 such members have been called to active 
duty to support the war on terrorism and the impending war in Iraq, we 
need to act now. We urge the committee to provide tax credits to 
employers who employ members of the Guard and Reserve and to self-
employed Reserve component members.
     Reduce out-of-pocket expenses of those who serve. We ask 
this committee to restore full tax-deductibility of non-reimbursed 
expenses related to military training and service for Guard and Reserve 
members. The cost of military service for a guardsman or reservist 
should not be financial.
     Enhance Air Reserve Technician (ART) retirement 
eligibility. ARTs are both military members and civil servants. These 
unique patriot/citizens need unique retirement criteria recognizing 
their singular contribution to our military's success. We urge this 
committee to make all Air Reserve Technicians eligible for an unreduced 
retirement at age 50 with 20 years of service, or at any age with 25 
years of service, if involuntarily separated.
     Provide full Basic Allowance for Housing (BAH) to TDY 
Guard and Reserve members, and those activated (even if less than for 
139 days). Guardsmen and reservists are generally removed from their 
civilian employment when ``called up.'' Once deployed, their need to 
protect their family does not go away nor does their obligation to make 
their full house payments. This committee can greatly assist these 
military members by ensuring that they can continue to provide homes 
for their families through the provision of full BAH.
     Eliminate the Commissary Privilege Card (CPC) requirement 
and provide full, year-round commissary benefits for Guard and Reserve 
members. At the present time, members of the Guard and Reserve are 
limited to 24 visits per year in military commissaries. Allowing full, 
year-round access is a benefit long overdue. The CPC (a card to track 
commissary visits) costs millions of dollars to administer each year; 
we have seen estimates from $2 to $13 million per year. Whatever the 
specific cost, providing full, year-round commissary benefits for 
guardsmen and reservists would eliminate this unnecessary 
administrative expense of the CPC. More important, it would be the 
right thing to do. These military members are critical members of this 
military nation's team; it is time to treat them as such. We urge this 
committee to give them full, year-round commissary benefits.
     Apply the 44-day contingency leave rules for Air Reserve 
Technicians at CONUS locations stationed in response to homeland 
defense taskings. The 44-day leave policy first came out to be used 
only outside of the continental United States (CONUS), its territories, 
and its possessions for noncombatant operations. This ``military 
leave'' is a time set aside for Federal Civil Servants who are military 
members to perform military duty without civil service pay penalties. 
Public Law 106-65, section 1105 (the NDAA for Fiscal Year 2000) 
eliminated most restrictions on the use of 44 workdays of military 
leave. The new law can include any type of operations, combat or 
noncombatant, outside the U.S., its territories and possessions. It is 
time to make this 44-day contingency leave rule apply within CONUS as 
well. It would allow these citizen soldiers to avoid having to use 
Leave Without Pay, and make it more efficient for them to serve and, at 
the same time, protect their families by more easily satisfying their 
financial obligations. We urge this committee to apply the 44-day 
contingency leave rules for Air Reserve Technicians at CONUS locations 
stationed in response to homeland defense taskings.
     Expand the Soldiers' and Sailors' Civil Relief Act (SSCRA) 
to fully protect Guard and Reserve members who are activated, including 
mortgage and interest payment relief. Attention in this area is 
critical at this time. As members of the Guard and Reserve are 
increasingly activated and sent away from their primary civilian 
occupation and their home, they must be adequately protected. We urge 
that this committee expedite consideration of full protection of the 
rights of guardsmen and reservists by their full inclusion in the 
SSCRA.

                            MILITARY STORES

     Ensure the quality of service in military commissaries. In 
the NDAA for Fiscal Year 2003, this committee tasked DOD with ensuring 
that the quality and level of service not be reduced. Your mandate in 
this regard was in response to independently-generated DOD cuts in 
manpower and its own Defense Commissary Agency (DeCA) budget last year. 
AFSA members were alarmed by DOD's decision to cut 2,600 manpower 
positions and its own DeCA budget by over $100 million. During base 
visits, we have received several comments about longer lines, fewer 
registers open, and shelves less stocked. While these comments should 
not be used to indict the entire system, they do suggest that the DeCA 
cuts may be starting to impact the quality of the benefit. AFSA is most 
concerned that once this benefit starts to erode (by DOD actions) such 
a decline in the benefit might continue. We again urge this committee 
to require some type of independent (independent of DOD) assessment of 
the consistency and maintenance of the quality of the commissary 
benefit. We also ask the committee to resist DeCA policy/practice 
changes that would reduce the benefit, increase the surcharge, or 
transfer the program costs to beneficiaries.
     Work to provide full base exchange and commissary benefits 
to retirees at overseas military locations. Overseas commissary and 
base exchange access arrangements are generally the product of Status 
of Forces Agreements (SOFA). At several locations, retirees (who may be 
overseas for government jobs, etc.) are denied access in base 
exchanges, or commissaries, or both on U.S. military reservations. For 
example, retirees in Turkey may not use the commissaries on U.S. 
military reservations. There are many other such examples. While 
adjustments will require changes when each SOFA comes up for review, we 
would urge this committee to communicate with the Department of State a 
desire that such reviews promote the inclusion of full use of these 
facilities by military retirees at overseas locations.

                       MILITARY SHIPMENT PROGRAMS

    One of the greatest complaints from military members during their 
careers is the way their household goods are mistreated during 
permanent change of station (PCS) moves. Current arrangements force DOD 
to select carriers based on the lowest bid, rather than on quality or 
customer satisfaction. Frankly, AFSA considers this a very, very poor 
way to do business; and it sends an extremely negative message to those 
who serve this Nation. It is time to rectify this long-time, clearly 
unacceptable situation. We urge this committee to:

     Improve the quality of the DOD household goods shipment 
program. The Military Traffic Management Command (MTMC) developed a 
test program that was extremely successful. It protected the military 
member's goods, held carriers more accountable, and had extremely high 
satisfaction levels among military members and their families. With 
that test project complete and time passing without DOD implementation 
of an enhanced household goods shipment program, it is time for 
Congress to act. Military members should not be faced with having their 
goods destroyed, lost, or stolen without adequate safeguards and/or 
compensation.
     Increase the household goods weight allowance for 
professional books, papers, and/or equipment to accommodate employment 
support for military spouses. Currently, only the military member is 
entitled to an additional shipment weight allowance for professional 
books, papers, and/or equipment. In recent NDAAs, DOD has been tasked 
by Congress to come up with ways to provide military spouses with 
education, training, and employment assistance. Providing spouses some 
consideration by giving them a shipment allowance to support their 
employment would be a good step forward. For example, a dependent 
spouse (of a military member who is being reassigned) who maintains 
supplies to support a job as a Government-certified family in-home day 
care provider, should not have to sell, discard, or give away his/her 
supplies. Most likely they will perform the same job at the next 
assignment. Similarly, a spouse who is a massage therapist, 
hairstylist, lawyer, etc., ought to be given a shipment weight 
allowance to make them more employable at the next military assignment 
location. This would be in keeping with the congressional mandate to 
help spouses in their employment efforts. As a start, we ask this 
committee to consider adding up to an additional 500 pounds to a 
member's household/personal shipment weight allowance to accommodate 
the needs of their spouse. An alternative approach would be to create a 
new shipment weight category for specific use by the spouse. We ask 
this committee to take action to provide this potentially important 
quality-of-life enhancement.
     Provide all military members being assigned to OCONUS 
locations the option of Government-funded POV shipment or storage. 
Currently, DOD will only store a POV for a member if DOD reassigns that 
member to a location where DOD will not ship the member's POV. AFSA 
believes that this shipment option should be extended to all members 
being stationed anywhere outside of the continental United States 
(CONUS). We believe that a significant part of such storage cost would 
be offset by DOD not having to ship the vehicle. We ask this committee 
to authorize this quality-of-life improvement.

                          RETIREMENT/SURVIVORS

     Allow military members who are also receiving VA 
disability compensation to fully collect their military retired pay. 
AFSA believes this is the right thing to do. Every member of this 
committee is aware of the arguments on this issue, so we will not 
restate them here. However, we do urge this committee, as part of the 
legislative branch of government, to stand fast in finally getting this 
``right thing to do'' legislation completed this year.
     Uniformed Services Former Spouses Protection Act (USFSPA) 
Reform (from PL-97-252). The members of this association strongly urge 
this committee 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 of this 
committee. A military member must serve 20 years to earn a lifetime 
retirement annuity. However, under the USFSPA, any and all former 
spouses of a military members have claim to a portion of the military 
member's eventual retirement pay. Such a former spouse could have been 
married to the military member only for a relatively short period of 
time; yet he/she will have a lifetime annuity if the military member 
goes on to retire. Our members have clearly communicated that this 
anachronistic statute, specifically targeted at military members, is 
not needed to protect former spouses. Provisions in law that apply to 
all other U.S. citizens should apply to the former spouses of military 
members. In that sense, full repeal of the USFSPA would be the fair 
thing to do. While we would favor full repeal of the act; fairness 
would dictate that at a minimum, the ``windfall provision'' of the act 
be amended. This provision bases the portion of retirement that is 
given to a former spouse on the member's military pay at the time of 
retirement, and not that which the member earned at the time of the 
divorce. We would also favor termination of the former spouse's claim 
to part of the military retired pay if/when the former spouse 
remarries.
     Reduce or Eliminate the Age-62 SBP Reduction: Before age 
62, SBP survivors receive an annuity equal to 55 percent of the 
retiree's SBP-covered retirement pay. At age 62, however, the annuity 
is reduced to a lower percentage, down to a floor of 35 percent. For 
many older retirees, the amount of the reduction is related to the 
amount of the survivor's Social Security benefit that is potentially 
attributable to the retiree's military service. For member 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 number of members who retired in the 
1970s (or who retired earlier but enrolled in the initial SBP open 
season) were not informed of the reduction at the time they enrolled. 
As such, many still are very bitter about what they view as the 
government changing the rules on them in the middle of the game. 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. They are further ``stunned'' to find out that the 
survivor reduction attributed to the retiree's Social Security-covered 
military earning applies even to widows whose Social Security benefit 
is based on their own work history. To add further to the need for 
changes in this program, the DOD actuary has confirmed that the 40-
percent government subsidy for the SBP program, which has been cited 
for more than two decades as an enticement for retirees to elect SBP 
coverage, has declined to less than 25 percent. Clearly, this benefit 
has become more beneficial and less costly for the government, and more 
costly and less beneficial for the retirees and survivors the program 
was created to protect. We urge you to step in and correct some of 
these inequities.
     Accelerate the SBP provision so that enrollees aged 70 who 
have paid into the SBP for at least 30 years be considered ``paid-up.'' 
The paid-up SBP initiative enacted in 1998 set an implementation date 
of 2008. We urge this committee to change that implementation date to 
``this year.'' As a practical matter, any SBP enrollee who retired on 
or after October 1, 1978, would enjoy the full benefit of the paid up 
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 if they survive that long. It is 
time to act now. We urge this committee to pass legislation to 
accelerate the ``paid-up'' provision of the Survivor Benefit Program.

    Mr. Chairman, thank you once again for this opportunity to present 
the views of those we represent. We respectfully request your action on 
the items we've explained above. Each of them fall into the arena of 
``quality-of-life'' issues the primary focus of this important 
congressional committee. We are ready to respond to any questions on 
this testimony and, as always, are ready to support your efforts on 
matters of mutual concern.

STATEMENT OF SUSAN SCHWARTZ, PhD, DEPUTY DIRECTOR OF GOVERNMENT 
  RELATIONS/HEALTH AFFAIRS, MILITARY OFFICERS ASSOCIATION OF 
                            AMERICA

    Dr. Schwartz. Mr. Chairman, Senator Nelson, and 
distinguished members of the subcommittee, The Military 
Coalition appreciates this opportunity to present our views on 
the defense health care program. I would like to reiterate our 
appreciation for the landmark health care initiatives that this 
subcommittee has initiated over the past few years, especially 
for Medicare eligibles and active duty families.
    The Coalition urges the subcommittee to now turn your 
attention to revitalizing the TRICARE Standard program. We ask 
you to distinguish between Standard and Prime in your efforts 
to improve TRICARE. Complaints from those in Standard far 
exceed those in Prime. The Prime benefit certainly deserves its 
success stories. However, continued focus on Prime only serves 
to obscure the very real and chronic problems with the Standard 
benefit.
    Simply stated, Standard beneficiaries are neglected by DOD. 
No effort is made to reach out to these beneficiaries, to 
educate them about the extent of the Standard benefit, or to 
support them in locating a provider. The new TRICARE round of 
contracts contains no requirement or incentives to assist 
Standard beneficiaries, to recruit Standard providers, or to 
provide up-to-date Standard provider lists. This leaves 
beneficiaries on their own to use the Yellow Pages as a 
handbook to determine if providers are willing to accept them 
as a patient. We believe the managed care support contractors 
have the same obligation to assist Standard beneficiaries as 
they do Prime.
    Despite the numerous initiatives that this subcommittee has 
promoted, members in many areas still have difficulty finding 
providers willing to accept TRICARE because of low and slow 
payments and burdensome administrative requirements.
    TRICARE rates are tied to Medicare, that have been 
declining despite provider costs. As more providers are 
refusing to take new Medicare patients, or dropping out of the 
program, they are even more reluctant to be TRICARE providers, 
based on past difficulties with the TRICARE/CHAMPUS program.
    We appreciate the recent action that this Congress has 
taken to prevent further cuts in Medicare and TRICARE payment 
rates. Our TRICARE beneficiaries deserve the best health care 
this Nation has to offer, not the cheapest available. We ask 
for the subcommittee's support of any means to raise Medicare 
and TRICARE rates in underserved areas, and to reduce and 
remove administrative impediments to provider participation.
    Your requirements in last year's authorization act to make 
TRICARE forms and procedures match Medicare are good examples 
of needed actions. The Coalition urges the subcommittee to 
consider additional steps to improve provider participation.
    Specifically, we hope you will urge DOD to use their 
existing authority to raise TRICARE reimbursement as necessary 
to track providers, and to further reduce TRICARE 
administrative requirements. We ask the subcommittee consider 
authorizing a demonstration project where we can test if 
raising fees for Standard providers can actually increase 
participation in certain areas.
    The Coalition was dismayed to learn that, despite Congress' 
clear intent to limit the requirement for nonavailability 
statements, DOD affirmed in the fine print of the President's 
fiscal year 2004 budget their intent to pursue the use of these 
statements. This means that DOD will continue to support 
denying Standard beneficiaries who accept higher copayments and 
deductibles in return for the freedom to choose their own 
providers, one of the most important principles of quality 
services, continuity of care by a provider of their choice.
    The Coalition is pleased to hear Dr. Chu's announcement 
today that activated Guard and Reserve families will be 
eligible for Prime and Prime Remote when called to active duty 
for greater than 30 days. However, we urge the subcommittee to 
authorize TRICARE coverage options for Reserve and National 
Guard members before mobilization. In some cases, Reserve and 
Guard families have no healthcare coverage when not activated. 
In others, families experience considerable problems when they 
have to switch from civilian coverage to TRICARE and back to 
civilian coverage again when deactivated.
    During this time of enhanced mobilization of the Guard and 
Reserve, providing improved continuity of care is not only a 
matter of equity, but a recruitment and retention issue as 
well. Another possible alternative to achieve such continuity 
would be to have the Department reimburse the activated 
guardsmen and reservists for part or all of their civilian 
health premiums, as we do now for DOD civilian reservists who 
have FEHBP.
    Mr. Chairman, Mr. Nelson, and distinguished members of the 
subcommittee, we thank you for your strong continued efforts to 
meet the health care needs of the entire uniformed services 
community. I look forward to addressing your questions.
    Senator Chambliss. Thank all of you for that very fine 
presentation by each one of you. Dr. Schwartz, you have 
addressed an issue that is of peculiar concern to me, and that 
is health care. As I said earlier, it is the single most 
consistent complaint I get from families, as well as active 
duty personnel. In listening to the remarks from Dr. 
Winkenwerder earlier, it appeared that we may be making some 
progress there, but listening to you now, it appears we have 
made no progress at all.
    First of all, let me take it one step at a time. With 
respect to Dr. Chu's announcement that now we are going to 
provide active Guard and Reserve personnel with the 
availability of TRICARE Prime after 30 days of deployment, is 
that going to be well-received? Does it address the concerns? I 
understand what you are saying about predeployment, 
preactivation. I think that probably would be difficult 
contractwise, but with a 30-day period there, is that going to 
address the concerns of your folks?
    Dr. Schwartz. Yes, it will, Mr. Chairman. It takes it a 
step further from last year's authorization act. This 
subcommittee authorized the Prime benefit for those Guard and 
Reserve beneficiaries who lived outside of the catchment areas, 
and what this does is, to take the legislation a step forward 
and provides it to all activated Guard and Reserve family 
members called up for greater than 30 days, so we are most 
appreciative of that, and it certainly is a step forward.
    Our concern is before mobilization. We do not have the 
exact numbers of how many guardsmen and reservists lack health 
care, lack that safety net, but we know that 40 million 
Americans do not, and we estimate that about 20 percent of the 
Guard and Reserve families, as the entire population, lack 
health care coverage.
    I believe there is a GAO report that came out last year 
that alluded to that, and there is another study coming out 
later this year that we are looking forward to.
    It certainly is helpful, we appreciate it, but we ask you 
to look at them before mobilization. When our guardsmen and 
reservists do not have health care before mobilization, then 
the service member is not ready to deploy when the time comes, 
or to be activated when the time comes, so we ask you to look 
at that.
    We ask you to look at it like as the dental benefit. They 
can buy into the dental benefit on a percentage basis, so we 
ask that you look at, perhaps they could buy into the TRICARE 
benefit, and then when they become activated, they simply no 
longer have to pay premiums and roll into the program as an 
active duty service member, and their family would.
    Senator Chambliss. I have bases in my State that are 
located both in metropolitan areas and rural areas. From a 
TRICARE Standard standpoint, those participants seem to have 
more problems if the base is located in a rural area versus a 
metropolitan area. Does that appear to be a common situation 
with respect to the availability of providers under TRICARE 
Standard?
    Dr. Schwartz. Absolutely, and it also reflects our society 
as well. In those small communities, there probably are not a 
lot of providers to begin with. There probably are not a lot of 
gastroenterologists, and so as our service members go out and 
try to find these physicians there are just less of them in the 
community to begin with, and as we become the lowest payer, 
Medicare is the lowest payer. Sometimes even Medicaid pays more 
than Medicare, but Medicare, Medicaid, and TRICARE are all 
along the same continuum.
    In that community there probably are not a lot of DOD 
beneficiaries, and so there is no incentive for that provider, 
except for a sense of patriotism, which we believe they all 
have, but in that town, it is probably easy for that provider 
to turn away DOD beneficiaries because it is a rural town and 
there just is not that critical mass to make his or her 
practice buoyant enough. They can turn those beneficiaries 
away.
    Senator Chambliss. Let me ask this, and I am not sure who 
this ought to be directed to, whoever feels compelled to 
answer, because it is another area which I am particularly 
sensitive to, having served 8 years on the MWR panel on the 
House side. There has been a great deal of concern recently 
over the potential privatization of our commissary system, and 
we have opposed it.
    We are going to continue to fight the DOD on this issue, 
but over the course of the past year, DOD has implemented 
improved management practices throughout the commissary system 
to try to improve the financial status and competitiveness of 
the program.
    Let me assure you I understand the importance of this 
system to all of our members and their families, but with 
respect to the implementation of these new business practices 
in commissaries over the course of the past year, what are you 
hearing from your membership about the current operation of the 
commissaries? Are we getting better, or are we still not doing 
the job we need to be doing, or where are we there with respect 
to the services that are being given there?
    Mr. Barnes. Mr. Chairman, I will take a first try at 
answering this. With regard to the benefit, we are tracking 
this very closely and, as noted in our testimony last year, the 
Defense Commissary Agency (DCA) was implementing a multiyear 
staff reduction and a significant budget reduction, and that 
was the result of implementation of some additional management 
reforms.
    We were very concerned about the potential for negatively 
impacting the benefit. However, at this point in time, a year 
later, we only are aware of spotty concerns with regard to 
this, some minor issues with regard to stocking shelves. We 
continue tracking this very closely, but we are encouraged by 
the fact that some of the more negative aspects of implementing 
the cuts have not taken place, but we continue tracking that 
very closely.
    Both Joyce Raezer and myself sit on the DECA Patron 
Council. We meet twice a year with the leadership, and we also, 
as members of the Coalition, solicit input from the 33 member 
organizations within the Coalition, so again we track this very 
closely, and the management initiatives seem to be working 
fairly smoothly at this time.
    Ms. Raezer. Mr. Chairman, I can add to that. We looked at 
the GAO report that talked about some of this. We have heard 
the reduction from the full-time staff to part-time staffing 
caused some concerns. DECA is a good hirer of military spouses, 
and so we were tracking that issue from that angle as well, but 
what we are hearing is that this is running fairly smoothly, 
with just a few exceptions, as Mr. Barnes said.
    We are a little worried--some commissaries in Europe, for 
example, have a little more problem with hiring. Small stores 
seem to have more of a problem with getting the right staffing, 
but the flexibility has helped some stores actually work 
operating hours to be more convenient to the beneficiaries, 
which is something that we have always taken from beneficiaries 
to the DECA leadership. Let us look at how we operate our 
stores to make sure the stores are open when the beneficiaries 
need to shop.
    The flexibility on the part-time actually helps a lot of 
military spouses, especially if they are dealing with 
deployments and child care, and a part-time job fits better 
into their life demands, so we are encouraged that the 
commissary agency appears to be looking at using these staffing 
realignments to add some flexibility to respond to customer 
demands.
    The other thing that we noticed in the GAO report that 
talked about measuring this, and what we hoped that DOD would 
follow, would be to start surveying customers who do not use 
the commissary. DECA talks about the surveys it uses to survey 
commissary shoppers in the commissary, but as we look at how to 
get more of our beneficiaries using this wonderful benefit, we 
need to find out why they do not use the benefit, and so we 
were glad to see that encouragement to go out and survey people 
who do not currently use their benefit to find out why.
    Senator Chambliss. If I am hearing you right, the changes 
being made do appear to have a positive effect on those folks 
using the commissaries.
    Ms. Raezer. Yes, sir. In some small communities we are a 
little worried, but we are going to keep tracking it.
    Senator Chambliss. While I say I am opposed to the 
privatization of it--I am, but that is primarily from a price 
perspective. That is a benefit that our folks need and deserve 
with the pay that they are getting, but by the same token, if 
we are not providing the services there, I am not happy about 
that. I appreciate your comments, and that is an issue we are 
going to continue to follow.
    Ms. Raezer. Thank you.
    Senator Chambliss. Senator Nelson.
    Senator Ben Nelson. Thank you, Mr. Chairman.
    Dr. Schwartz, I was trying to follow what you were 
suggesting about maybe an alternative to TRICARE. If I 
understood you, were you suggesting that perhaps it might be 
advantageous for somebody who was being deployed to be able to 
continue?
    Dr. Schwartz. Not for the service member, sir. The service 
member would come right on to the TRICARE program. We are 
talking about the family, allow the family member to stay in 
the previous program, rather than hopping to TRICARE, out of 
TRICARE, back and forth, those kinds of things.
    Senator Ben Nelson. I see.
    Dr. Schwartz. As a suggestion.
    Senator Ben Nelson. As the family. In other words, you get 
into the situation where you have two different groups, but I 
suspect that could be handled. It is something that is worth 
considering if it is for the family members as opposed to the--
--
    Dr. Schwartz. Right. As we have done for the dental 
program. It is the same theory.
    Senator Ben Nelson. Given the fact that all but perhaps the 
Marine Corps has indicated that morale is high, and the 
recruitment and retention rates are rising, and then listening 
that perhaps the Marine Corps is experiencing a decrease in 
satisfaction with the quality-of-life, not suggesting that 
their morale is not high, but their concern about the lack of 
quality, or of a decreasing quality-of-life, do you have any 
ideas as to why that has happened, or any suggestions as to 
what might be accomplished to change that concern about the 
quality-of-life? Obviously, increasing the quality of life is 
the answer. Do you have any specific ideas, any of you?
    Mr. Lokovic. If I may, Senator, since November we visited 
about 16 or 17 bases and spoke to a lot of folks. Speaking to 
Air Force alone at this point, our troops are working very long 
hours, and we are talking 12 to 16 hours, and you know that 
from your area.
    That is telling, and the kinds of family issues and the 
implications on quality-of-life are inseparable when you start 
talking about those kinds of impacts of manpower, and you 
cannot separate them, and the kinds of family issues that Joyce 
was talking about have to be addressed.
    Good examples are those folks working missile duty, for 
example. Those folks work incredibly long hours, and in effect 
are deployed in place, although not receiving any of the 
monetary benefits, for 4 days out of the week, return to base, 
and then go back out again, and the stress on those families is 
incredible.
    Senator Ben Nelson. But would that be related to the Marine 
Corps, or would it be true of all the Services? It sounds to me 
like it might be true of all the Services.
    Mr. Lokovic. I am speaking of the Air Force in particular, 
and I would imagine it has to be for all of the Services.
    We can talk about recruiting goals and successes. Our 
retention, I think, would be a clearer indicator of the impact 
of the quality of the life that the folks are experiencing.
    Senator Ben Nelson. The suggestion is that there is not a 
problem with retention in the Services, as nearly as I have 
been able to follow the numbers.
    Ms. Raezer. We are very concerned at what happens when 
things quiet down a little bit. You have a lot of service 
members who now are reupping when they are in a zone where the 
reenlistment pay is, they get that tax-free, where there are 
other incentives to reenlist while they are in a deployment 
situation.
    I think looking at some of the surveys of members only 
tells one side of the story. I think we need to ask the 
families how they feel about what is going on. I think that 
some of the Marine Corps surveys have included family members 
in their surveys.
    I think General Parks' reference to expectations is a very 
important one, and that can carry through with all Services and 
families. There are certain things happening in the pay and 
benefits front that are raising expectations. General Parks 
referenced the PPV housing, the public-private venture, getting 
more housing out there. It is wonderful if you are in it. It is 
not wonderful if there is no prospect that you are going to be 
in it.
    With increases in the basic allowance for housing, there is 
a perception created, for example, that by 2005, nobody is 
going to have any out-of-pocket costs for their housing. When 
2005 comes and people are still paying out-of-pocket for 
housing because everybody has been talking about averages and 
basing your housing allowance on a standard for your rank, if 
you have three kids, and you are living in a house a little 
bigger than your standard, so you are paying out-of-pocket, the 
expectation is going to be no out-of-pocket, the reality is 
going to be still housing expenses.
    So I think everybody has to be very careful at counting the 
definite improvements that have been made against the realities 
that people continue to face, and when those two do not mesh, 
you are going to have some of the concerns that showed up on 
the Marine Corps survey.
    Dr. Schwartz. Senator, may I interject? I am an active duty 
Marine spouse, and I filled out one of those surveys, and I put 
on the survey, I am tired of moving every 3 years. I am tired 
of them breaking my stuff. I am tired of pulling up stakes. I 
have a career. I am established. I am a successful 
professional, and if we have to move again, I have to start 
over.
    So I would say that the spousal employment, especially for 
the senior people--my husband is senior, and I am established 
in my career, and I do not want him to move, and decisions are 
made at the dinner table, in terms of where Marine families go, 
and other families, too.
    Mr. Barnes. Senator, if I could add something that has not 
been referenced, General Parks and my colleagues here have made 
some excellent points with regard to expectations. Also, the 
retention levels are very high, and very impressive. However, a 
key part of this is the impact of the negative economy, and 
that should be part of the discussions here with regard to the 
whole overview.
    Senator Ben Nelson. If there is more competition for jobs 
and things like that, then that is probably going to show. It 
is going to be a part of the equation, ultimately.
    Mr. Barnes. Yes.
    Senator Ben Nelson. Dr. Schwartz, you heard that Dr. 
Winkenwerder said that one of the problems reaching out to 
TRICARE Standard beneficiaries is that there is no registration 
requirement, and that DOD does not know who they are, therefore 
it is very difficult to reach out. Do you have any suggestions 
about that, and what would you think of a requirement for 
registration of TRICARE Standard beneficiaries as a means of 
maintaining a list and therefore being able to reach out to 
them?
    Dr. Schwartz. The Military Coalition has not taken a 
position on this. I can tell you as a former hospital 
administrator I do not know how they can manage the program 
until they count the heads, until they know how many people are 
there.
    Senator Ben Nelson. Who they are? Where they are?
    Dr. Schwartz. Yes. Unless I register, how can they know to 
send me the booklet?
    Now, one of the ways they could do it, they could take all 
the Prime beneficiaries that are enrolled and subtract them 
from DEERS, and by default, send out handbooks, but quite 
frankly, I think if we are asking for beneficiaries to be 
communicated with, I think we are going to have to consent to 
enrolling, but we have not taken a formal position on that. 
That is my position on that.
    Senator Ben Nelson. Any of the other advocates have any 
thoughts? There is no magic way without obtaining some sort of 
identity to be able to do it.
    Ms. Raezer. If it would help DOD provide a better benefit, 
and if it would get me my beneficiary information, I would sign 
a card and say yes, I want to stay TRICARE Standard. TRICARE is 
the only, or one of the few health plans, or health benefits 
that do not communicate with all of their beneficiaries on a 
regular basis.
    It is very hit-and-miss, and when I hear families talk 
about, we do not know how to access the benefit, we do not 
understand the benefit, what is our benefit, that tells me we 
need better communication. If the price of better communication 
is getting that beneficiary to say, yes, I am still here, and 
want to use this benefit, then I think that may be a reasonable 
thing to talk about.
    Senator Ben Nelson. What are the stumbling blocks in 
getting that kind of information that follows the location and 
the identity of the members, outside of the obvious, and that 
is the mechanical, or the means of obtaining and keeping it 
current, but beyond that, are there any other inhibitors?
    Dr. Schwartz. I would say distrust of the system. There is 
a distrust. The uniform formulary that Dr. Winkenwerder talked 
about, it is certainly a marvelous way to manage cost and to 
manage utilization. If I were in his shoes, I would say, that 
is great, but you look at the retiree who says, oh well, now 
you have given me this benefit, and now, oh well, 2 years 
later, all of a sudden the pill that costs me $9 today is going 
to cost me $22 tomorrow, and they feel they have earned this 
benefit.
    These are people that have given 20, 30 years of their life 
to their country, and they feel a sense of entitlement that 
goes beyond that of the average citizen, so I think there is 
somewhat of a distrust of the program. If I do this, will I 
still get a better benefit? A lot of them feel burned. They 
cannot find providers.
    So that is what I would think. I do not know if the panel 
has other views.
    Ms. Raezer. I think that is part of it, but probably the 
biggest is going to be the mechanical, just finding everybody--
people have been able to use Standard on a catch-as-catch-can 
basis. A lot of them use it as a supplement to their private 
insurance, if they have another job, so I think finding people 
is going to be a big thing, and this is very important. If we 
are going to find people and ask them to sign up so that they 
get information, the first thing we have to do is find them and 
notify them that this is what is happening.
    So I think as we have seen in any kind of communication 
plan--TRICARE for Life, the dental contract to the Guard and 
Reserves--a basic problem is with finding all the beneficiaries 
to let them know about changes in their benefit.
    Mr. Barnes. I would just add, Senator, that The Military 
Coalition organizations stand ready to assist in any way with 
the communications effort, as we have done with implementation 
of TRICARE for Life and some of the other major enhancements.
    Just an observation about other health insurance, which was 
an issue with regard to TRICARE for Life implementation. There 
was a challenge with regard to the beneficiaries that had other 
health insurance, getting that data.
    A final point, it would appear that the technology we have 
today could make this fairly simple with regard to 
beneficiaries. I know that is a very simplistic overview, but 
there are possibilities.
    Senator Ben Nelson. It may be nearly impossible to track 
everyone, but one would expect that you could track a 
significant number to at least improve the situation from where 
it is at the moment. You could do a better job than is 
currently being done, if an effort is made to continue to track 
or start the process and then continue it.
    That is all of my questions. I appreciate very much the 
panel's response. Thank you.
    Senator Chambliss. Let me thank all of you again, too, and 
we appreciate your recognition that some improvements have been 
made.
    I remember 8 years ago, when I was first elected to the 
House, we were making the conversion from CHAMPUS to TRICARE, 
and you all remember what a nightmare that was. We made some 
great progress in 8 years on that program, which obviously has 
a direct effect on every military family.
    We are going to continue, and look forward to working with 
each of you to make sure that the quality-of-life of all of our 
men and women is absolutely what it needs to be so that that 
retention issue and that recruiting issue are not a problem, 
because Ms. Raezer, I share with you the sentiment that 
patriotism is at a high right now, has been since September 11. 
Where are we going to be 3 years from now? We want to make sure 
that we do not still have recruiting and retention problems, 
and with help from you all and your continued good work, we are 
going to make sure we don't.
    Again, thank you very much. This hearing is adjourned.
    [Questions for the record with answers supplied follow:]

              Questions Submitted by Senator Susan Collins

                           GUARD AND RESERVE

    1. Senator Collins. Dr. Chu and Secretary Hall, historically the 
Guard and Reserve have attracted a number of citizens already engaged 
in public service. Local police officers and firefighters, as well as 
other first responder personnel, often serve proudly as part-time 
soldiers, sailors, and airmen. With the high rate of activations, many 
of these individuals have been called to duty. They do so with the 
dignity and honor that we have come to expect from our Guard and 
Reserve. However, they oftentimes leave huge gaps in the first 
responder capabilities of their local communities. For example, in 
Maine, it is not uncommon for some police departments to consist of 
only a few officers. Removing one officer can create a tremendous 
hardship on the city government. How is the Pentagon ensuring that, in 
the course of Guard and Reserve activations, we don't devastate local 
first responder capabilities?
    Dr. Chu and Secretary Hall. We wholeheartedly agree with your 
comments about how those Reserve members, as well as the rest of our 
reservists, have responded to the Nation's call to duty with dignity 
and honor. They have served well and reflect extreme dedication and 
patriotism.
    However, we must admit that right now we just don't know how many 
of our dedicated Reserve members are actually first responders. We have 
recently overcome Privacy Act concerns and initiated a process that 
will allow us to answer that question in the future. But it will take 
at least several months, or possibly even longer--depending on just how 
quickly we can get members to provide the required information. This 
information will enable us to determine whether we need to establish 
new policies, processes, and procedures to manage our reservists who 
are also first responders.
    However, we think the real issue is the Department's ability to 
ensure that ``we don't devastate local first responder capabilities'' 
as Reserve call-ups continue. First, we have a well-established 
process, initiated in 1979, to screen individuals out of the Ready 
Reserve who are in critical civilian positions effecting national 
security and the safety of the American population. Though we can only 
proactively screen the 2.7 million Federal employees in the ``Ready 
Reserve Screening Program,'' it is available to State/local government 
agencies, as well as the private sector. It requires proactive 
management by employers and the support of the Department in processing 
employer requests.
    Second, recognizing the unique situation created by the events of 
September 11, 2001, we immediately established another program to 
address certain individuals who may not have been screened out of the 
Ready Reserve because of their civilian jobs and may occupy civilian 
positions now regarded as critical to national security and safety. 
This new program processes requests for delay/exemption from 
mobilization for Ready Reserve members who are first responders (as 
well as other critical civilian employees). These requests to delay or 
exempt members of the Ready Reserve based on the critical nature of 
their civilian employment are considered on a case-by-case basis. The 
first case we processed was a request from the New York City Office of 
Emergency Management, in which we accommodated their request not to 
mobilize 17 of their first responders for 90 days. To date, we have 
only received 26 cases on first responders.
    Last, we must emphasize the role of the employer. They must share 
the burden. They must deal with their employees, and, in those cases 
where it is necessary, they must preclude critical civilian positions 
from being filled by Ready reservists. Failure to take these 
precautionary actions will hurt both the civilian and the military 
communities during crises. Reserve duty is not just weekend duty. Our 
Reserve Forces are a critical element of our military and we cannot 
afford to have them be ``unavailable'' when called.
    We will continue to work with State and local governments to more 
proactively facilitate and support the screening of their critical 
employees. 

                            POST-WAR ILLNESS

    2. Senator Collins. Dr. Winkenwerder, a sad part of modern warfare 
is the illnesses that have cropped up after our Nation's last two major 
conventional conflicts. Many of the men and women who served during the 
Vietnam War were afflicted with Post Traumatic Stress Syndrome. As we 
saw over the years, Agent Orange has had devastating long-term impacts 
on some veterans of that conflict. Following our last war against Iraq, 
some veterans suffered as a result of what we now call Gulf War 
Syndrome. There is still debate about its causes. As we stand 
potentially on the brink of another conflict in the Middle East, what 
steps are you taking to adequately track the health of those serving in 
the Persian Gulf?
    Dr. Winkenwerder. The vigorous requirements of medical entrance 
physical examinations, periodic physical examinations, periodic HIV 
screening, annual dental examinations, regular physical training and 
testing, and regular medical record reviews are parts of a continuum of 
care that help us identify any health issues. Improved medical 
surveillance measures will create a database of information that will 
inform us of any health trends.
    The DOD has instituted a deployment health surveillance program 
that includes pre-deployment and post-deployment health assessments 
that validate individuals' medical readiness to deploy and address 
health concerns upon their return. During deployment, improved 
occupational and environmental health surveillance programs protect 
service members' health.
    In the past few months, DOD has developed and implemented the Joint 
Medical Work Station. This is the most recent addition to our 
capability to monitor the health status of our deployed forces. Using 
the Force Health Protection portal to our classified system, DOD now 
has the electronic capability to capture and disseminate near real-time 
information to commanders about in-theater medical data, patient 
status, environmental hazards, detected exposures and critical 
logistics data such as blood supply, and bed and equipment 
availability.
    When service members return home, health care focused on post-
deployment problems and concerns is available through military and VA 
providers using the jointly-developed Post-Deployment Health Clinical 
Practice Guideline. It was designed specifically to address deployment-
related health concerns. The guideline provides a structure for the 
evaluation and management of service members, their families, and 
veterans with deployment-related concerns. It provides access to expert 
clinical support to physicians and other health care professionals for 
patients with difficult symptoms and illnesses, and may provide a 
useful platform for research into post-deployment health concerns. 
Through the use of these guidelines, our medical system will be alerted 
to any illness or health anomaly that appears related to this 
deployment.

    3. Senator Collins. Dr. Winkenwerder, if there is a conflict, will 
we have an adequate foundation of data to ensure that if another 
illness should appear, like Gulf War Syndrome, that we will be able to 
adequately diagnose its causes?
    Dr. Winkenwerder. First, I must point out that no unique and 
previously unrecognized ``Gulf War Syndrome'' has been identified among 
ailing Gulf War veterans. Most veterans who have been clinically 
evaluated have been found to have readily recognizable medical 
diagnoses. We recognize that Gulf War veterans report a wide array of 
chronic symptoms at a rate two to three times higher than service 
members who did not deploy. Medically undiagnosed physical symptoms 
occur in both military and civilian populations. Post-deployment health 
assessments and post-deployment health clinical practice guidelines 
enable us to provide medical care for each individual's health concerns 
or problems at the earliest possible time. With environmental 
surveillance data, unit tracking data, and medical surveillance data, 
health care providers will be able to appropriately address health 
concerns.
                                 ______
                                 
                Questions Submitted by Senator Jack Reed

         PRE-DEPLOYMENT AND POST-DEPLOYMENT MEDICAL EXAMINATION

    4. Senator Reed. Dr. Winkenwerder, following the conclusion of the 
Gulf War in 1991, many service members and veterans experienced a 
variety of medical illnesses, the causes of which are still under 
investigation. Because there was no systematic collection of blood 
before and after deployment, and no comprehensive pre- or post-
deployment medical and mental examinations conducted, there is no way 
of accurately determining how these illnesses occurred, and whether or 
not the cause of these illnesses can be traced to vaccinations our 
service members received before they deployed, or any chemical or 
environmental threat they encountered in the Gulf.
    The National Defense Authorization Act for Fiscal Year 1998 (H.R. 
1119 and Public Law 105-85) required the Department of Defense to 
establish a system by which all service members deploying outside of 
the United States in support of a contingency or combat operation are 
given a pre- and post-deployment medical examination, to include the 
drawing and storage of a blood sample for future study and a complete 
mental examination. Is the law being adhered to by all the Services 
with respect to the current deployment of forces to the Gulf for a 
potential war in Iraq?
    Dr. Winkenwerder. Deploying personnel receive individual health 
assessments that are documented on the DD Form 2795, Pre-Deployment 
Health Assessment. Individual pre-deployment health assessments include 
eight questions and further include reviews by medical providers of 
tuberculosis skin test screenings, prescribed medications, serum (HIV) 
samples (preserved in the DOD serum repository), and dental 
classification prior to determining deployability. Briefings on 
deployment-specific health threats and countermeasures are also 
provided prior to deployment.
    Re-deploying personnel receive individual health assessments that 
are documented on the DD Form 2796, Post-Deployment Health Assessment. 
These assessment forms include six questions on health and exposure 
concerns. Medical personnel review the forms and positive responses 
result in a review of deployment health records and appropriate 
referral for follow-up medical evaluation, testing, and care.

    5. Senator Reed. Dr. Winkenwerder, does every service member in the 
Army, Navy, Air Force, Marine Corps, and Coast Guard receive a complete 
physical and mental examination?
    Dr. Winkenwerder. Each service member receives a complete 
examination as they enter the military and then receives periodic 
follow-up examinations.

                             BLOOD TESTING

    6. Senator Reed. Dr. Winkenwerder, is blood being drawn, and stored 
for future study, from every deploying member of the military?
    Dr. Winkenwerder. The Department of Defense maintains a blood 
sample at the National Serum Repository from every HIV screening test 
done on service members.

    7. Senator Reed. Dr. Winkenwerder, is this blood draw and storage 
separate and distinct from the blood that is periodically drawn to test 
for HIV and catalogue the DNA in all our service members?
    Dr. Winkenwerder. The serum sample in the serum repository is from 
HIV screening samples. Prior to deployment, each individual's health 
record is reviewed to assure an HIV screening has been done within 12 
months, or 6 months for Reserve component personnel. If it has not been 
done, one is done at the time of deployment. DNA samples are taken once 
for each service member.

    8. Senator Reed. Dr. Winkenwerder, is there a plan to conduct a 
complete physical and mental examination of these troops, to include 
another blood draw, upon there return to the United States?
    Dr. Winkenwerder. Our continuum of care, DNA samples, serum 
samples, and pre-deployment assessments give us excellent pre-
deployment health information on each service member. We collect 
medical and environmental surveillance data during deployments. Post-
deployment, service members receive physical or mental examinations as 
called for, based on the judgment of clinicians after a review of post-
deployment health assessments. We are currently reviewing post-
deployment procedures to assure all health concerns are actively 
addressed.

                          END-STRENGTH NUMBERS

    9. Senator Reed. General Le Moyne, Admiral Hoewing, General Parks, 
and General Brown, I would like to thank you all for your efforts in 
improving the quality-of-life for our service members and their 
families. During consideration of last year's Defense Authorization 
bill, there was a great deal of debate about the active duty end 
strengths of each Service. We received indications that perhaps the 
Services required greater numbers than were provided for in the budget 
submission. Are the end strength numbers provided for in this year's 
budget submission optimal to meet our Nation's military requirements?
    General Le Moyne. The congressionally-mandated fiscal year 2002 
active Army end strength was 480,000. However, nothing has changed 
since the budget was submitted--the Army is too small for its current 
mission profile. The reality is that our operations tempo (OPTEMPO), 
already challenging prior to September 11, has increased dramatically 
in the post-September 11 environment. Over the past 18 months, 
mobilizations have maintained a steady state of approximately 30,000 
Reserve component soldiers, effectively increasing our active duty 
strength to approximately 510,000. We recognize the necessity to ensure 
we look internally to obtain all possible efficiencies prior to making 
any determinations on potential end strength increases. A study is 
currently underway to review Army non-core competencies--the Third 
Wave--with the expectation that some personnel savings will be 
generated for use in mitigating ``force stress.'' Additionally, we are 
fully cognizant of the stress that this steady state mobilization is 
placing on our Reserve components. Studies are underway to determine 
the correct balance of Active and Reserve Forces, including an analysis 
exploring options for mitigating the current stress to the Reserve 
component by ensuring that the correct type units are resourced within 
the active component.
    Admiral Hoewing. Navy's end strength numbers are determined, and 
continually refined, during a process that takes into account current 
and future manning requirements of our ships, aircraft, and associated 
supporting functional areas. Based on current events these numbers may 
need to be revised; however, at the time the fiscal year 2004 budget 
was submitted, these end strength numbers reflected our best estimate 
of our requirements.
    General Parks. The Marine Corps asked for and was granted an end 
strength increase of 2,400 marines for fiscal year 2003. This increase 
was greatly appreciated and came at the right time. The 2,400 marines 
were used to replenish units depleted by standing up the 4th MEB (MEB 
Hqtrs/AT Battalion/Chemical Biological Incident Response Force/Security 
Force Company). Coinciding with the end strength increase to 175,000, 
the USMC continues to look at ways to return marines to the operating 
forces. We believe that 175,000 active component end strength is 
sufficient to meet our current mission requirements.
    General Brown. In total, Air Force active duty end strength levels 
are sufficient to meet our missions. However, we have some skill mix 
challenges. To address these, we have conducted studies to clearly 
identify the core military competencies we need in our post-September 
11 steady state. We are in the early stages of realigning military 
positions from our lowest to highest priority missions.
    Though we cannot definitively tell you we will not need additional 
military end strength until we are confident we have our skills mix 
issue resolved, there is little doubt ``solving'' this issue will 
require additional resources. We will look for creative ways to source 
the increase in contractor costs or civilian pay dollars to pay for the 
non-core competency work that is currently being performed by the 
military we will reassign. 

                            QUALITY-OF-LIFE

    10. Senator Reed. General Le Moyne, Admiral Hoewing, General Parks, 
and General Brown, in recent years we have made great strides in 
improving the quality-of-life for our soldiers. Pay raises, improved 
housing, and educational benefits have clearly played a role in 
improving recruiting and retention. Of course, there is always room for 
improvement. In particular, I would like to get your thoughts on how we 
can improve the support we provide to the families of our troops. With 
the high rate of deployment, more and more of them are left at home 
while their family members go abroad in service to our Nation. Do you 
have any specific recommendations that this subcommittee might pursue?
    General Le Moyne. Part of our overall strategy to improve the total 
force family support service provided to the families of our troops is 
the Army Well-Being program. Army Well-Being brings the proponents and 
managers of our various programs together under one umbrella, providing 
an integrated holistic approach to the well-being of the force.
    Contributing significantly to this process are programs that are 
managed by the Army's Community and Family Support Center. The Family 
Assistance Hotline is a recent development used to assist our family 
members. This hotline is set up with 16 stations, each equipped with 
current phone lists, resources, a Smart Book, and useful Web links. 
Presently, Army Community and Family Support Center personnel, spouses, 
and volunteers man these phone lines.
    Other initiatives that have been integrated into the Well-Being 
architecture include the ability to provide Army families the knowledge 
to manage their personal finances, make informed decisions, and develop 
self-sufficiency. Also, family member education is being addressed to 
ensure that family member students maintain quality education without 
disruptions through appropriate funding and staffing of Department of 
Defense Education Agency Schools to meet or exceed academic standards.
    The Army is also taking steps to improve our Family Advocacy 
Program to prevent spouse and child abuse. An Army task force is 
conducting a thorough review and analysis of current polices, 
resources, organizations, and standards relative to domestic violence 
from DA level down through selected `Go-To-War' installations. The Army 
is working in conjunction with the Department of Defense to create a 
cultural shift of non-tolerance for domestic violence, holding 
offenders and commanders accountable.
    In addition, the Army is currently formulating the Deployment Cycle 
Support (DCS) Contingency Plan. The coordinated and resourced plan for 
the total force will provide decompression operations for IRR, RC, and 
returning AC individuals and units. Recommendations will be briefed to 
the senior Army leadership in May 2003.
    We can improve the total force support services to the families of 
our troops by continuing with the aforementioned initiatives through 
funding and support. Continue to eliminate pay gaps for soldiers and 
DOD civilians as compared to the private sector and maintain 
comparability for the future. Continue to advocate for the Employer 
Support for the Guard and Reserve programs. For soldiers and their 
families; modernize barracks and family housing, both in the 
continental United States and abroad. Fully fund sustainment, 
restoration and modernization, and base operations requirements; and 
assist in protecting families living in privatized military housing on 
Federal property. For the Reserve component, provide tax relief for 
Reserve component soldiers and tax credits for their employers and 
adequately resource Reserve component medical and dental readiness.
    Provide unemployment benefits based on a military relocation for 
the service member's spouse; retain Domestic Dependent Elementary and 
Secondary Schools in the Department of Defense Dependent Schools; 
adequately resource Impact Aid in the Department of Educations budget; 
and adequately resource child care needs of service members unable to 
access military Child Development Centers. Additionally, protect the 
gains in benefits under the TRICARE and TRICARE for Life systems.
    Army Well-Being is ``well,'' but it can and must become even 
better. While the Army applauds the passage of recent legislation 
supporting Well-Being initiatives, the gains of the last several years 
will be negated if we do not stay the course and adequately fund and 
support Well-Being programs to their conclusion.
    Admiral Hoewing. Among the proposals DOD has submitted for 
inclusion in the National Defense Authorization Act for Fiscal Year 
2004, are a number of amendments that will provide support, directly or 
indirectly, to family members of deployed troops. For instance:

         The proposed increase in basic pay for fiscal year 
        2004 provides for varying pay raises among military members in 
        further pursuit of reaching the 9th Quadrennial Review of 
        Military Compensation (QRMC) benchmark to have military 
        compensation approximate the 70th percentile of earnings of 
        civilians with comparable education and years of experience.
         Allow two members of the uniformed services in pay 
        grades below E-6, who are married to each other, have no other 
        dependents, and are simultaneously assigned to sea duty, to 
        each receive a Basic Allowance for Housing at the without 
        dependents rate for the pay grade of the member. Currently only 
        one is authorized to draw the allowance. 
         Extend to members serving in contingency operations 
        the same tax filing delays currently provided to members 
        serving in a combat zone or qualified hazardous duty area.
         Allow military dependents, who are students, to store 
        authorized baggage one time per fiscal year, at a time of their 
        choosing, vice, only during their annual trip from school to 
        the military sponsor's overseas duty location.
         Allow military members to retain up to 120 days leave, 
        vice 90, if they serve at least 120 days in areas entitling 
        them to receive hostile fire payor imminent danger pay.
         Streamline current management thresholds and required 
        actions for high deployments (PERSTEMPO) to, among other 
        things, offer a progressive monthly high deployment allowance 
        and permit compensating members for excessive deployments based 
        upon duration as well as frequency of deployments. This 
        approach strikes a more appropriate balance between our 
        commitment to preclude requiring members to deploy excessively 
        and properly compensating them when it becomes necessary to do 
        so to meet mission requirements.

    General Parks. The Marine Corps is an expeditionary force and is 
structured to provide support to deployed marines and their families 
that stay behind. It is possible that the demand placed on our family 
support programs may be stressed somewhat, depending on the intensity 
and duration of current deployments and contingencies, thus your 
continuing support for quality-of-life and family support programs is 
greatly appreciated.
    General Brown. The Air Force has long believed one of its most 
important attributes is a sense of community among its members and 
their families. Air Force families are extremely resilient. We believe, 
positively affecting family life, positively impacts mission readiness. 
The Air Force takes pride in its ongoing and continuous programs that 
directly assist our families--especially those that provide heightened 
support to their needs and concerns during times of national and family 
emergencies. As with any organization, there are programs where we feel 
further expansion is warranted and we look forward to working these 
issues as appropriate with the Office of the Secretary of Defense as 
well as you and other members of the committee.
    Improved Spouse Employment--An Air Force objective is to improve 
retention of military personnel by increasing the employability of 
military spouses. We do that by providing financial support and other 
job assistance training. Although we do not provide job placement for 
spouses or other family members our Family Support Centers do sponsor a 
plethora of employment assistance workshops, skills-building volunteer 
opportunities and counseling, as well as a job bank analysis and spouse 
networking.
    Expanded Spouse Education--It is important for spouses to pursue 
their educational aspirations and given the rising cost of college 
tuition, financial aid in the form of a spouse tuition assistance 
program would likely enhance participation in college-level academic or 
vocational programs.
    Stronger Personal Financial Management Education--Air Force 
Personal Financial Management Program trends show an increasing need 
for comprehensive financial planning and consumer education early in 
the military lifecycle. We continue to look for opportunities to 
strengthen these worthwhile financial management programs to ensure our 
young airmen remain financially solvent.
    Increased Family Advocacy--The Air Force has a special interest in 
the potential impact of separation on families with regard to 
relationship issues and family violence. We assist families with issues 
associated with deployment, separation, and reunion.
    Enlarged Youth Programs--During the air war over Serbia, Congress 
approved funds that permitted our youth programs to offer a variety of 
summer camps for children of our deployed members in such areas as 
archery, cooking, computers, golf, leadership, etc. These camps were 
provided free to children of our deployed members. Similar funding to 
provide homework and other school assistance to children of deployed 
parents would prove beneficial. Also, the Air Force is testing 
purchased childcare at five locations for Air National Guard members 
who are deployed, and will work to expand that program based on test 
results.
    Your continued support in these various program areas not only 
allow us to expand needed services, but ensures Air Force families are 
taken care of and our warriors are as free from worry as possible. 
Subsequently, our Nation directly benefits from the commitment of a 
fully-focused fighting force.

    [Whereupon, at 5:13 p.m., the subcommittee adjourned.]


DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR 
                                  2004

                              ----------                              


                       WEDNESDAY, MARCH 19, 2003

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

  NATIONAL GUARD AND RESERVE MILITARY AND CIVILIAN PERSONNEL PROGRAMS

    The subcommittee met, pursuant to notice, at 3:25 p.m. in 
room SH-216, Hart Senate Office Building, Senator Saxby 
Chambliss (chairman of the subcommittee) presiding.
    Committee members present: Senators Chambliss and E. 
Benjamin Nelson.
    Majority staff members present: Patricia L. Lewis, 
professional staff member; Scott W. Stucky, general counsel; 
and Richard F. Walsh, counsel.
    Minority staff member present: Gerald J. Leeling, minority 
counsel.
    Staff assistants present: Michael N. Berger, Andrew Kent, 
and Nicholas W. West.
    Committee members' assistants present: D'Arcy Grisier, 
assistant to Senator Ensign; James W. Irwin, assistant to 
Senator Chambliss; Mieke Y. Eoyang, assistant to Senator 
Kennedy; Eric Pierce, assistant to Senator Ben Nelson; and 
Terri Glaze, assistant to Senator Pryor.

     OPENING STATEMENT OF SENATOR SAXBY CHAMBLISS, CHAIRMAN

    Senator Chambliss. Good afternoon. The subcommittee will 
come to order. The subcommittee meets today to receive 
testimony on the military and civilian personnel programs of 
the National Guard and Reserve in review of the Defense 
Authorization Request for Fiscal Year 2004.
    I will tell you that we've just come off a vote, and my 
colleagues are going to be joining us here from time to time. 
We're going to proceed without Senator E. Benjamin Nelson being 
here, but we may get interrupted when he comes. Your testimony 
may get interrupted if he wants to make a statement at that 
time, or we'll allow him to make it whenever.
    Our subcommittee hearing last week provided important 
insights into the legislative agenda and priorities of the 
Department of Defense. The DOD and military coalition witnesses 
gave us a broad overview of active duty and Reserve component 
military and civilian personnel programs and offered various 
suggestions for legislation.
    Secretary Hall, you were present with Under Secretary of 
Defense for Personnel and Readiness, Dr. David Chu, at that 
hearing, and you provided very helpful testimony. Thank you for 
returning today to assist the subcommittee in focusing more 
directly on issues affecting the National Guard and Reserve.
    It is well understood that this Nation's reliance on the 
Guard and Reserve to ensure successful achievement of our 
national security mission has never been greater. The Reserve 
components comprise 1.2 million service members, approximately 
47 percent of the Nation's total military force. While they are 
integrated into the total military force, these service members 
are citizen soldiers who play a dual role as both professional 
military personnel and responsible citizens in their 
communities.
    I will say that I am extremely proud of the 116th Air 
Control Wing based at Robins Air Force Base in my former 
congressional district and in my State. This is a program and a 
unit of which I am personally very proud. The blended unit, the 
integrated unit, between the Guard and the Active Force is 
working extremely well. It was a very seamless integration and 
accepted by both sides for exactly what it is, and that is to 
provide a greater benefit for the men and women of every branch 
of our Armed Forces who need the services of the Joint Stars 
Program.
    More than 90,000 reservists have supported Operation Noble 
Eagle and Operation Enduring Freedom alone. They continue to be 
involved in many ongoing contingency operations worldwide and 
represent critical elements in our homeland defense efforts. In 
fact, the contribution of the Reserve has increased 
dramatically since the mid-1980s, from approximately 1 million-
man-days of mission support to nearly 13 million-man-days in 
recent years.
    Several key issues are associated with the activation of 
increasing numbers of reservists. These include potential 
earning reduction, family support issues, and access to 
healthcare. I would like to commend the Department of Defense 
for a rapid implementation of policy changes for Reserve 
members and their families that simplify access to healthcare 
through the TRICARE program.
    Our hearing today will enable us to further examine 
departmental policy regarding the mobilization of reservists 
and the nature of duties they are performing. Additionally, it 
will allow us to focus on the unique problems being experienced 
by Reserve component soldiers, sailors, airmen, and marines, 
and their families as they answer once again the Nation's call 
to action. I anticipate we will learn more about the support 
being provided to Guard and Reserve personnel by their service 
and by their employers.
    I want to emphasize again today, our country has the best 
military force in the world, and that force includes members 
who, in addition to their regular careers and family 
obligations, have agreed, when called upon, to set their lives 
aside and serve their country. The numbers of mobilized 
reservist guardsmen are staggering. From my State of Georgia, 
the 221st Military Intelligence Battalion from Atlanta, the 
94th Airlift Wing from Dobbins, and the 4th Supply Battalion 
from Albany are just a representative few of the many 
components that have been called upon to support this 
contingency. We truly appreciate the service of these men and 
women.
    It is our obligation and responsibility to ensure that the 
transition to and from military service is as least disruptive 
as possible. We must provide the support and quality-of-life 
programs that show our Guard and Reserve members that we will 
take care of them and their families.
    I look forward to hearing the testimony today. We have 
three panels before us this afternoon. First we will hear from 
Tom Hall, Assistant Secretary of Defense for Reserve Affairs, 
and Bob Hollingsworth, Executive Director of the National 
Committee for Employer Support of the Guard and Reserve.
    Mr. Hall, we welcome you back this afternoon, and let me 
assure you that your presence before the subcommittee is not 
going to be required every week. We'll give you a break every 
now and then. We also welcome you, Mr. Hollingsworth.
    Our second panel will be the chiefs of the Guard, and our 
third panel is the Reserve components.
    As I said, if Senator Nelson comes in during the middle of 
your testimony, we'll interrupt or wait, depending on what he 
desires to do.
    So, gentlemen, thank you for being here today, and since 
this hearing is getting started a little bit late, we would 
appreciate your keeping your remarks as brief as possible, but 
we look forward to hearing from you. Thank you.

   STATEMENT OF HON. THOMAS F. HALL, ASSISTANT SECRETARY OF 
DEFENSE FOR RESERVE AFFAIRS; ACCOMPANIED BY BOB HOLLINGSWORTH, 
EXECUTIVE DIRECTOR, NATIONAL COMMITTEE FOR EMPLOYER SUPPORT OF 
                     THE GUARD AND RESERVE

    Secretary Hall. Thank you, Mr. Chairman. I have a combined 
very short statement from Mr. Hollingsworth and myself.
    I thank you for the opportunity to appear again before this 
subcommittee. Today, as we meet, there are almost 212,000 
guardsmen and reservists activated and serving alongside their 
active duty counterparts in virtually every operation or 
military undertaking throughout the world. These young men and 
women are proud to serve and are prepared to meet any demand 
placed upon them. It is our deep commitment to the mothers and 
fathers of America that have entrusted the lives of these young 
men and women to us that we ensure each and every one of the 
guardsmen and reservists are given the right training, the 
right equipment, and the support they need to serve their 
country. In accomplishing this, we don't want to have one more 
or one less guardsman or reservist than we need on active duty 
at any one time. We want to return them to their families and 
to their jobs the moment they are not needed. We are totally 
committed to serving them, their families, and their employers.
    As you mentioned, I am pleased to be accompanied today by 
Bobby Hollingsworth, who is our Executive Director of the 
National Committee for Employer Support of the Guard and 
Reserve. He brings a very unique perspective on the employers 
of America and the challenges we face in this area. In 
addition, I'm happy to report that with Mr. Hollingsworth, as a 
retired two-star Marine General, and me, you have today a Navy 
and Marine Corps team representing 76 years of combined service 
to our Nation.
    Senator Chambliss. Thanks to both of you for that.
    Secretary Hall. We're both very proud of every day of our 
service, and we're both proud to be serving today.
    With that, Mr. Chairman, that's the end of my statement, 
and we stand ready to answer any questions.
    [The prepared statement of Secretary Hall follows:]

               Prepared Statement by Hon. Thomas F. Hall

                              INTRODUCTION

    Good morning Mr. Chairman and members of the subcommittee. Thank 
you for the invitation to testify before you today. Today, I will 
provide you with information to assist you in making the critical and 
difficult decisions you face over the next several months. This 
committee has been very supportive of our National Guard and Reserve 
members and on their behalf, I want to publicly thank you for all your 
help in strengthening our Reserve components. The Secretary and I 
appreciate it, and our military personnel are grateful. Thank you.

                             ASD/RA MISSION

    The mission of the Assistant Secretary of Defense for Reserve 
Affairs (ASD/RA), as stated in Title 10 USC, is the overall supervision 
of all Reserve components' affairs in the Department of Defense. I take 
this responsibility very seriously because our Guard and Reserve 
perform vital national security functions and are closely interlocked 
with the states, cities, towns, and every community in America. During 
my short time in this position, I have made it my business to get out 
to the field--to see and listen to the men and women in our Guard and 
Reserve. My staff and I have spent time with them and we have listened 
carefully to their comments and concerns. We are continuing to closely 
monitor the impact of increased use of our Guard and Reserve members, 
their families, and their employers.
    These circumstances lead me to what I call ``My Acid Test for the 
Guard and Reserve.'' That is to ``Ensure that the Guard and Reserve 
are: assigned the right mission; have the right training; possess the 
right equipment; are positioned in and with the correct infrastructure; 
are physically, medically, and operationally ready to accomplish the 
assigned tasks; are fully integrated within the active component; and 
are there in the right numbers required to help fight and win any 
conflict!''

        RESERVE COMPONENTS ARE FULL PARTNERS IN THE TOTAL FORCE

    Because the Reserve components now comprise almost 50 percent of 
the Total Force, they are an essential partner in military operations 
ranging from homeland defense and the global war on terrorism to 
peacekeeping, humanitarian relief, small-scale contingencies, and major 
crises. The new defense strategy proposed in the Quadrennial Defense 
Review (QDR) calls for a portfolio of military capabilities. This 
capabilities-based approach will continue to find the Reserve 
components supporting the Active Forces across the full-spectrum of 
military missions.
    The fiscal year 2004 defense budget recognizes the essential role 
of the Reserve components in meeting the requirements of the National 
Military Strategy. It provides $31.3 billion for Reserve component 
personnel, operations and maintenance, military construction, and 
procurement accounts, which is approximately 1 percent above the fiscal 
year 2003 appropriated level. Significantly, this is only 8.2 percent 
of the overall DOD budget, which represents a great return on 
investment. Included are funding increases to support full-time and 
part-time personnel, and the required sustainment of operations. It 
also continues last year's effort toward RC equipment modernization and 
interoperability in support of the Total Force policy. These funds 
support more than nearly 863,300 Selected Reserve personnel. The 
Selected Reserve consists of the following: Army National Guard 
350,000; Army Reserve 205,000; Naval Reserve 85,900; Marine Corps 
Reserve 39,600; Air National Guard 107,000; Air Force Reserve 75,800; 
and Coast Guard Reserve 10,000 (funded by DOT). Our total Ready 
Reserve, which also includes the Coast Guard Reserve, Individual Ready 
Reserve, and Inactive National Guard is 1,190,00 personnel.
    Maintaining the integrated capabilities of the Total Force is key 
to successfully achieving the Defense policy goals of assuring allies, 
dissuading military competition, deterring threats against U.S. 
interests, and decisively defeating adversaries. Only a well-balanced, 
seamlessly integrated military force is capable of dominating opponents 
across the full range of military operations. DOD will continue to 
optimize the effectiveness of its Reserve Forces by adapting existing 
capabilities to new circumstances and threats, and developing new 
capabilities needed to meet new challenges to our national security.

             COMPREHENSIVE REVIEW OF THE RESERVE COMPONENTS

    The Reserve component (RC) continues to make significant and 
lasting contributions to the Nation's defense. As the Total Force 
transforms to meet the challenges of today and the future, it is 
essential that the Reserve components be part of the transformation. 
Over the past year, my office has worked with other agencies inside and 
outside the Department to address how the contributions of the Guard 
and Reserve--in both new and traditional roles and missions--can 
enhance the capability of the Total Force. The report, titled ``Review 
of Reserve Component Contributions to the National Defense,'' 
establishes strategic principles to guide future structure and use of 
the Reserve components and proposes innovative management initiatives 
to meet the requirements. Some of our management initiatives were 
included as legislative initiatives that listed later in this 
statement.
    The report looks at ways to address the rebalancing of the Active 
and Reserve Force mix and mission assignments to enhance capabilities 
and to develop management policies that are more flexible. My staff is 
continuing to work hard to find ways and explore ideas to bring about 
meaningful change in the rebalancing effort and the process of 
developing transformational management policies that achieve that 
flexibility.

A Continuum of Service
     A significant portion of the comprehensive review focused on the 
way we utilize the Reserve Force. Building on the past successes to 
fully integrate the Active and Reserve Forces, the next step is to make 
it easier for individual members to move back and forth between active 
and Reserve service, and to leverage the strengths of the National 
Guard and Reserve. We call this the ``continuum of service.'' The 
concept behind a continuum of service sets aside the traditional 
definitions of active and Reserve components and recognizes that 
service may range from full-time duty to individuals who are available 
in the event of mobilization but do not participate in military 
training or perform duty on a regular basis. In between these extremes 
is a pool of individuals who can be involved at any level of 
participation who may move along the continuum as circumstances in 
their lives and needs of the Department evolve, and who may move from 
part-time Reserve to full-time active service and back, several times 
during a career. The advantages of such an approach are many:

         Service members could change the level of 
        participation easily, and as a result, may be more likely to 
        stay engaged and serve the Department at some level for a 
        longer period of time.
         It would provide the Department with better access to 
        and management of trained, skilled service members--the ability 
        to capitalize on the investment it has made in individuals 
        during the course of their career. It may also be possible to 
        build new pools of skilled talent at the ``low end'' of 
        participation, such as military retirees, and members of the 
        Standby Reserve and the Individual Ready Reserve.
         It could help the Department attain skills and 
        talented individuals from the civilian labor market. 
        Increasingly, the civilian labor market contains people who may 
        be able to arrange blocks of time away from school or job for 
        active duty or extended duty in the Reserves.

    The continuum of service offers a model for addressing the changing 
demographics of a workforce that is increasingly more educated and 
inclined to migrate between jobs in pursuit of enhanced career 
opportunities.

New affiliation programs
    Our recently completed and soon to be released ``Review of Reserve 
Component Contributions to the National Defense'' identified 
specialized civilian skills and civilian-acquired skills as a Reserve 
component core competency. The study recommended several new forms of 
affiliation to attract individuals on a part-time basis for skills that 
may be hard to grow, train, and retain in the regular force. This has 
led to several new initiatives.
    For example, we have just succeeded in getting duty in the Guard or 
Reserve approved as one of the alternative forms of service-payback for 
recipients of information assurance scholarships that are now being 
awarded to college juniors and seniors who are pursuing a degree in 
information technology, as well as students working toward a post-
graduate degree in fields relating to information assurance. This is a 
wonderful opportunity for people to pursue study programs at academic 
centers of excellence around the country in exchange for affiliation 
with the Guard or Reserve.
    We have also introduced a business process improvement initiative 
to ``fast-track'' civilians, who have special training or 
qualifications, directly into the Individual Ready Reserve (IRR). These 
uniquely-skilled individuals could participate in the Reserves on a 
very limited basis, but would be available when needed for short 
periods of active duty or longer emergency situations to perform 
specific tasks. Medical, linguist, information technology, and other 
technical skills are examples of those being considered for the IRR 
Direct Entry program.
    We are also looking for ways to better partner with industry to 
further leverage civilian-acquired skills into the military. Such 
partnerships present opportunities to save or reduce overall training 
costs while providing the military with ready access to individuals 
with specialty skills and experience in cutting edge technology. We are 
currently working closely with the Department's spectrum management 
experts in Command, Control, Communications, and Intelligence (C\3\I) 
to develop a pilot program that will allow us to establish a better 
partnership with the wireless industry in order to address our future 
radio frequency spectrum management needs. One of the options under 
consideration includes a Direct Entry program that carves out a portion 
of the IRR to perform duty on an intermittent basis as needs arise.
    We are developing new policies that would require members of the 
Ready Reserve, especially the Selected Reserve, to provide the 
Department with limited information about their civilian employers. 
Having employer information will not only assist us in improving our 
employer outreach programs, but more importantly it will provide a 
better understanding during mobilization planning of the impact 
mobilizations will have on local communities and industries. The need 
for better employer-related information is a priority for us in the new 
threat environment we are facing. Additionally, obtaining accurate and 
current employer information is critical for the Department to comply 
with our statutory responsibilities for continuous screening of Reserve 
units and individuals.

      MOBILIZATION, CONTINGENCIES, AND THE GLOBAL WAR ON TERRORISM

    Today, we are in the midst of one of the longest periods of 
mobilization in our history. However one certainty remains--that when 
called upon, the men and women of the National Guard and Reserve will 
respond promptly and perform their duty. For the past 18 months, we 
have mobilized over 230,000 Reserve personnel, who are performing and 
have performed magnificently throughout the world. As we prepare to 
give the Nation more options in the global war on terrorism, additional 
guardsmen and reservists are being mobilized. We are managing these 
call-ups in a prudent and judicious manner, assuring fair and equitable 
treatment, as we continue to rely on these citizen-soldiers.
    As of March 5, 2003, just over 178,0000 Reserve component personnel 
are on active duty--here at home and in every theater around the world 
supporting the global war on terrorism. They are providing a very broad 
range of capabilities, from Special Operations and Civil Affairs to 
personnel and finance support.
    Morale is high. Reservists do not mind being called to active 
service and they respond positively to multiple call-ups as long there 
is meaningful work and we only keep them on duty for the absolute 
essential period of time. The men and women with whom I have spoken are 
proud of their involvement, fulfilling meaningful missions and 
contributing to the needs of their country. We know there is a clear 
correlation between job satisfaction and proximity to the action and it 
is our intent to make sure when we call guardsmen or reservists we 
assign them to the full range of military missions.
    Reserve personnel (29,944) continue to provide the majority of 
force protection to military personnel and installations worldwide with 
8,200 Army National Guard soldiers currently protecting Air Force 
bases. A good news story of cooperation between the Services, this 
extra effort has relieved some of the burden on the Air Reserve 
component members who have been on duty for over a year.
    Our success in integrating the Reserve components into the Active 
Force continues. It is now routine for the Army Guard to plan and 
execute Bosnia missions. They are scheduled to relieve the active Army 
in Kosovo and have consistently maintained about 529 guardsmen in the 
Sinai. The Army Reserve provides most of the logistics support in 
Kosovo.
    The Guard and Reserve are important partners in daily military 
operations and will play a major role in any future operations while 
maintaining its traditional role as citizen soldiers providing the 
Nation with strategic hedge.

Support to Mobilized Reservists
    Taking care of our mobilized Guard and Reserve members and their 
families is a top priority for the Department. While we can draw on our 
experience from past call-ups, we continue to examine our policies and 
programs to ensure that our mobilized reservists do not feel 
disenfranchised and that we have systems in place that support 
families.

         When the President authorized the mobilization of the 
        Ready Reserve, the Department published detailed personnel 
        policy guidance, which included a limit on the duration of 
        initial orders to active duty of no more than 12 months to 
        reduce disruption for reservists, their families, and their 
        employers. Although we have had to extend reservists into a 
        second year of mobilization--most notably as security forces at 
        Air Force bases, it is worth noting that more have volunteered 
        for a second year. More importantly, we are taking steps to 
        minimize the number of reservists who are involuntarily serving 
        for a second year by taking a critical look at requirements, 
        identifying alternative manpower resources, and reviewing 
        possible force structure changes. We have asked the Services to 
        husband this valuable resource and consider the effect of 
        mobilization on families and employers and to release their 
        Reserve component members as soon as they have completed their 
        mission.
         The Department also established a healthcare 
        enhancement package, which is designed to reduce out-of-pocket 
        expenses for Reserve family members and makes it easier for 
        them to maintain continuity of care with existing providers.
         A comprehensive mobilization information and resources 
        guide and a family ``tool kit'' are available on DefenseLink's 
        Reserve Affairs website for access by military members, 
        families, and employers. It is routinely updated to add 
        information that is useful to mobilized reservists and their 
        families.
         The Department is also engaged in more in-depth 
        studies to strengthen employer support, to review alternatives 
        for ensuring continuity of healthcare for the families of 
        reservists, and to more effectively address Reserve component 
        quality-of-life concerns.

Screening and Key Employee Exemption Process
    To preclude conflicts between Ready Reserve members' military 
mobilization obligations and their civilian employment requirements 
during times of war or national emergency, the Department conducts a 
``screening'' program to ensure the availability of ready reservists 
for mobilization. Once a mobilization is declared, all screening 
activities cease and all Ready Reserve members are considered 
immediately available for Active Duty service. At this time, no 
deferments, delays, or exemptions from mobilization are granted because 
of civilian employment.
    However, due to the unique situation that was created by the events 
of September 11, the Department immediately recognized that certain 
Federal and non-Federal civilian employees were critically needed in 
their civilian occupations in response to the terrorist attacks on the 
World Trade Center and Pentagon. Accordingly, the Department 
established a special exemption process to help accommodate overall 
national security efforts.
    This special exemption process provides for Federal and non-Federal 
agencies to submit mobilization exemption or delay requests for their 
employees, who are Ready reservists, based on the critical nature of 
their civilian employment. The Department considers those requests on a 
case-by-case basis and accommodates those requests when it is able to 
and when it is in the best interests of the Nation. While there have 
been over 1,000 requests from Federal and non-Federal agencies, we have 
worked with these agencies to reduce the number of cases actually 
adjudicated to just over 200. To date, these adjudications have 
resulted in 53 reservists being exempted from mobilization, 88 
mobilizations were delayed--typically for 90 days, and 51 requests were 
denied. We continue to process exemption requests and have several 
pending final decision.

RC Support to Civil Authorities
    The National Guard has played a prominent role supporting local and 
State authorities in terrorism consequence management. At its core is 
the establishment of 32 Weapons of Mass Destruction Civil Support Teams 
(WMD CSTs), each comprised of 22 highly-skilled, full-time, well-
trained, and equipped Army and Air National Guard personnel. To date, 
the Secretary of Defense has certified 31 of the 32 teams as being 
operational and the remaining 2 teams are nearing certification.
    The WMD CSTs will deploy, on order of the State Governor, to 
support civil authorities at a domestic chemical, biological, 
radiological, nuclear, or high yield explosives (CBRNE) incident site 
by identifying CBRNE agents/substances, assessing current and projected 
consequences, advising on response measures, and assisting with 
appropriate requests for additional State and Federal support. These 32 
strategically placed teams will support our Nation's local first 
responders as a State response in dealing with domestic incidents. The 
Reserve components WMD CST funding for fiscal year 2003 is $136 
million, and the budget request for fiscal year 2004 is for $135 
million. In the 2003 NDAA, Congress directed the Secretary of Defense 
to develop a plan to establish an additional 23 WMD-CSTs, in order to 
have at least one in each State and territory.
    The Department is also leveraging the capabilities of existing 
specialized Reserve component units for potential domestic use in 
support of civil authorities. During fiscal year 2001, DOD completed 
the training and equipping of 25 Army Reserve chemical decontamination 
companies and 3 chemical reconnaissance companies to support civil 
authorities in responding to domestic incidents. This enhanced training 
and equipment will improve the readiness of these units to perform 
their warfighting mission, while allowing them to respond effectively 
to a domestic emergency, if needed. A budget request of $12.4 million 
is submitted for fiscal year 2004 to continue training Army Reserve 
chemical soldiers to perform these domestic decontamination and 
reconnaissance missions and also to sustain the specialized equipment. 
Some of this money will also be used to provide training to Army 
Reserve medical soldiers that will better enable them to support a 
domestic medical response to a chemical, biological, radiological, or 
nuclear incident.

Medical
    Nearly 50 percent of the Department's medical personnel are in the 
Reserve components, thus the Reserve components play a significant role 
in the Federal response to any consequence management incident 
requiring assistance from the military. Although not considered first 
responders to civilian emergencies, the active and Reserve component 
assets can provide a full-spectrum of medical support to the civilian 
community, up to and including definitive care facilities.

                         MANPOWER AND PERSONNEL

Recruiting and Retention
    It is still too early into this mobilization to determine the long-
term impacts on National Guard and Reserve recruiting. But through the 
first quarter of 2003, the Reserve components, in the aggregate, are 
within 3 percent of their recruiting goals. Attrition is below 
established ceilings and in line with 2001 and prior years.
    All of the Reserve components achieved their authorized end 
strength in 2002. This represents a significant achievement in a very 
difficult recruiting environment. The Naval Reserve experienced an 
especially remarkable turnaround in strength achievement following 
several difficult years. During the years immediately following the 
Operation Desert Storm involuntary call-up, when nearly 266,000 
personnel were activated, the Reserve components were still able to 
achieve 97 percent of their authorized end strength. In the aggregate, 
Reserve component attrition has decreased to its lowest level in 16 
years. However, this macro view of overall Reserve component attrition 
may mask problems in high demand units, so we must continue to focus on 
attrition in units that have been used frequently to support 
contingency operations. We must also continuously monitor the effects 
of Stop Loss and other factors affecting career decisions.
    Historically, the recruiting market for the Reserve components has 
been a mix of prior service personnel who recently separated from 
active duty and individuals with no previous military experience. Both 
market segments now present significant recruiting challenges. A 
smaller Active Force (36 percent smaller than in 1989) means a smaller 
number of prior service military members available for the Reserve 
Force--a force that is only 26 percent smaller than in 1989.
    The Reserve components previous year's success at achieving their 
end-strength objective in the face of these challenges was due to 
exceptional efforts by our Guard and Reserve recruiters and excellent 
retention by all components. Moreover, the quality of recruits 
increased overall with several components realizing significant quality 
improvement in both high school diploma graduates and mental aptitude 
categories. All components achieved or exceeded the DOD benchmark for 
upper mental aptitude group accessions.
    In achieving this level of success, the components used a 
combination of tools that included: an increase in the recruiter force, 
expanded bonus programs, enhanced advertising campaigns, increased 
focus on retention resources, and increased use of the Montgomery G.I. 
Bill-Selected Reserve kicker benefit.
    For 2003, all Reserve components are continuing to focus their 
efforts on maintaining aggressive enlistment programs by targeting both 
enlistment and re-enlistment incentives in critical skill areas. 
Emphasis will be placed on the prior service market for both officers 
and enlisted personnel. The Reserve components will expand their 
efforts to contact personnel who are planning to separate from the 
active component long before their scheduled separation and educate 
them on the opportunities available in the Guard and Reserve. In 
addition, the Reserve components will increase their efforts to manage 
departures.

Compensation Issues For Guard and Reserve Personnel
    In 2003, we are examining compensation programs for Reserve 
component members. The current and anticipated military environments 
require employment of Reserve Forces in ways not imagined when current 
compensation programs were designed. Current thresholds for housing 
allowances, per diem, some special skill and duty pays, and a range of 
benefits may not fully support the manner in which Reserve component 
members may be employed in the future. Compensation programs must be 
sufficient to attract and retain capabilities to meet continuous, surge 
and infrequent requirements. As we examine options and formulate 
alternatives, we will adjust DOD regulations and include proposed 
statutory changes as part of the Department's legislative program.

Health Care Enhancements
    Dependents of Reserve component members who are ordered to active 
duty for more than 30 days are eligible for TRICARE Standard or Extra--
and for TRICARE Prime if the member is ordered to active duty for more 
than 179 days. Recognizing that changing healthcare systems can be 
disruptive, the Department developed and the Secretary approved a new 
TRICARE Demonstration Program specifically to assist mobilized 
reservists with the transition to TRICARE. The Demonstration Project is 
designed to reduce out-of-pocket expenses for Reserve family members 
and to make it easier for them to maintain continuity of care with 
existing providers.
    The Demonstration Project provides for three important enhancements 
for mobilized Reserve members. First, it waives the annual deductible 
(up to $300 per family) for those members who do not or cannot enroll 
in TRICARE Prime. Second, the requirement to obtain a non-availability 
statement to receive inpatient care outside a military treatment 
facility is waived so Reserve family members can maintain continuity 
with their existing local providers, if they wish. Finally, the 
Department will pay up to 15 percent above TRICARE maximum allowable 
charges for family members receiving care from providers not 
participating in TRICARE, who bill in excess of TRICARE maximum 
allowable charges.
    The TRICARE Dental Program, which was implemented in February 2001, 
offers reservists and their families a comprehensive and affordable 
dental program. The normal minimum 12-month service commitment to 
enroll in this program is waived for Reserve members ordered to active 
duty in support of a contingency operation such as Operations Noble 
Eagle and Enduring Freedom. In an effort to reach out to family 
members, we are developing educational tools such as brochures and 
command briefings, establishing a toll-free number for Reserve 
component families, and constructing a Reserve component TRICARE 
website, all specifically designed to help reservists and their 
families make informed choices about their healthcare options.

Family Readiness
    One of the lessons learned from the Persian Gulf War was the need 
to improve family readiness within the Guard and Reserve. Our first 
initiative was the 1994 publication of a DOD Instruction that provided 
the framework for improving Reserve component family readiness. The 
next major milestone was publication of the first-ever Guard and 
Reserve Family Readiness Strategic Plan 2000-2005, which was developed 
through the collective efforts of the Office of the Secretary of 
Defense (OSD) staff, the military Services, and family readiness 
program managers. In addition to serving as a blueprint for providing 
greater support to National Guard and Reserve families and assisting in 
coping with the stresses of separations and long deployments, the plan 
established a clean link between family readiness and unit mission 
readiness.
    Beginning in 2002 the OSD Office of Family Policy, Reserve Affairs, 
the Services and numerous Federal agencies have been meeting regularly 
in a Joint Service Family Readiness Contingency Assessment Working 
Group. The group representatives work to anticipate challenges and 
disseminate information during ongoing operations such as Operations 
Noble Eagle and Enduring Freedom. The foundation for support of family 
members lies in the preparation and education of professionals and 
family members alike well before a reservist is called to active duty 
or actually deployed. The ability of Reserve component members to focus 
on their assigned military duties is directly affected by the 
confidence a member has that his family can readily access family 
support services.
    From our previous survey of spouses of deployed Reserve component 
members, we know that information and communication are essential to 
Reserve families. In addition to information concerning their deployed 
spouse, family members request information on available benefits, 
services, and programs, to include locations of commissaries, 
exchanges, healthcare, and other facilities.
    Our ``Guide to Reserve Family Member Benefits'' is designed to 
inform family members about military benefits and entitlements, 
including medical and dental care, commissary and exchange privileges, 
military pay and allowances, and reemployment rights of the service 
member. Additionally, a Family Readiness Event Schedule was developed 
to make training events and opportunities more accessible for family 
support volunteers and professionals. It also serves to foster cross-
Service and cross-component family support, which supports the desired 
end-state of any service member or family member being able to go to a 
family support organization of any Service or component and receive 
assistance or information.
    The family readiness ``tool kit'' is available to assist 
commanders, service members, family members, and family program 
managers with pre-deployment and mobilization information.

Personnel and Pay Information Technology Initiatives
    The evolving missions and operations of the Department are creating 
a wider gap between current system capabilities and the Department's 
policy and process needs. Existing systems require improvement to fully 
support the needs of current operations and to provide seamless support 
to active, Guard, and Reserve mobilization or multi-component 
operations. The Defense Integrated Military Human Resource System 
(DIMHRS) will provide an opportunity to plan, develop, and implement 
military personnel and payroll modernization with the overall DOD 
objective of establishing an integrated military personnel and pay 
system. The goal of DIMHRS is to provide the Services and their 
components the capability to effectively manage their members across 
the full operational spectrum--during peacetime and war, capturing 
accurate and timely data as members move between duty statuses such as 
mobilization and demobilization. The system will support the full range 
of personnel life-cycle activities from accessing members to separation 
or retirement. Key functions include ensuring proper pay and benefits, 
tracking personnel in theater, and transferring individuals to other 
Services or components. DIMHRS design will include the capability for 
rapid implementation of system changes to support emerging 
requirements.

Employer Support
    The National Committee for Employer Support of the Guard and 
Reserve (ESGR) is a Department of Defense Field Operating Activity, 
first chartered in 1972. Its mission is to gain and maintain active 
support from all public and private employers for the men and women of 
the National Guard and Reserve as defined by demonstrated employer 
commitment to employee military service. We provide a bridge between 
employers and their employees that serve in the Reserve components. Its 
role is to ensure the transition from civilian employee, to military 
member, then back to civilian employee is as smooth as possible.
    ESGR Headquarters, located in Arlington, Virginia, is a multi-
service organization composed of active duty, National Guard, and 
Reserve component members. We work with a community-based volunteer 
network of 55 committees with over 4,200 members. These local 
committees are in every State, the District of Columbia, Guam, Puerto 
Rico, Europe, and the Virgin Islands.
    There are about 1.3 million men and women in the Guard and Reserve. 
This figure represents nearly 50 percent of our total military 
strength; that's 50 percent, almost half of the force trying to balance 
military duty with civilian employment. This critical balance, between 
military commitments and civilian job commitments, is why it is so 
important for all reservists to have the support of their employers. 
Developing and sustaining this support is the reason ESGR was 
established.
    ESGR programs and services help educate employers and community 
leaders about the important role the National Guard and Reserve play in 
a strong national defense. Other programs educate Reserve component 
members concerning their employment and reemployment rights relative to 
military service, and the actions they can take to build and foster 
good relations with their employers. We strive to build and strengthen 
the employer/employee partnerships essential to ensuring that Reserve 
component members are available and ready when needed. ESGR, along with 
top military leaders, develops solutions to problems that arise because 
of employee participation in the National Guard and Reserve.
    The Statement of Support Program highlights the public signing 
commitment by an employer of a statement pledging to publish and 
implement personnel policies supportive of employee service in the 
National Guard and Reserve. The signing of a Statement of Support 
clearly demonstrates the employer understands the importance of the 
Guard and Reserve and, even more importantly, it sends a clear signal 
to reservists that their participation in the Guard and Reserve does 
not put their civilian job at risk. Forty-four Governors have signed 
Statements of Support and 2 more are scheduled to sign very soon. Many 
nationally known companies have also signed Statements of Support, to 
include Goldman Sachs, UBS Paine Webber, NYSE, American Stock Exchange, 
NASDAQ, NASD, Dell, Oracle, Pfizer, Xerox, Tyson Foods, Commonwealth 
Edison, Boeing, and numerous others, as have hundreds of small and mid-
sized companies.
    Briefings with the Boss (BWBs) bring together employers, unit 
commanders, ESGR members, and community leaders to discuss military 
topics in general and issues relevant to employee participation in the 
National Guard and Reserve in particular. BWBs are a tremendous forum 
for building rapport and support at the local level for Reserve 
component participation. A companion employer outreach program, 
Bosslifts, transports employers and supervisors to military training 
sites where they observe their employees as Guard and Reserve members 
on duty, performing training missions or essential military taskings.
    ESGR's employer awards recognition program centers on Reserve 
component members nominating their supervisors or their companies for 
recognition for their support. As the first level award, the ``My Boss 
is a Patriot'' award recognizes supervisors and employers who support 
National Guard and Reserve employees, and who practice at least those 
personnel policies required by law to support employee participation in 
the Reserve components. From these ``My Boss is a Patriot'' award 
nominees, State local committees select candidates for higher-level 
State awards culminating in the end for consideration for the National 
Committee's Employer Support Secretary of Defense Freedom Award. The 
Employer Support Secretary of Defense Freedom Award was established in 
1996. This award recognizes the Nation's top employers who have 
provided outstanding support to their National Guard and Reserve 
employees far outreaching what is required by law. Each year the 
Secretary of Defense recognizes up to five employers with this 
prestigious award during a formal ceremony in Washington, DC. The 
following employers were selected as Employer Support Freedom Award 
winners in 2002:

------------------------------------------------------------------------
                  Region                            Organization
------------------------------------------------------------------------
Southeast.................................  United Parcel Service
                                             Airlines--Kentucky
North Central.............................  General Dynamics Land
                                             Systems--Michigan
Northeast.................................  Public Service Co. of New
                                             Hampshire--New Hampshire
West......................................  Autoliv, Inc.--Utah
South Central.............................  State of Wyoming--Wyoming
------------------------------------------------------------------------

    In addition to the Employer Support Freedom Awards, two ``Home 
Front Awards'' were also presented this year to Wal-Mart and Dell 
Computer for their outstanding support of their employees who were 
specifically called up for Operations Noble Eagle and Enduring Freedom.
    ESGR's Military Member Support and Ombudsman Services Directorate 
provides an informal mediation service to assist in resolving employer/
employee conflict relative to participating in the National Guard and 
Reserve. The Ombudsman staff has been averaging over 500 calls a week 
since the end of the first week in January of 2003. This is an increase 
of nearly 100 percent over the call volume received in previous months. 
Most of the calls today concern Reserve component members being 
mobilized. The real test will come when reservists and guardsmen return 
and are demobilized, looking to return to the civilian jobs they left 
when called to serve their country.
    The Uniformed Services Employment and Reemployment Rights Act, 
Title 38 USC, Chapter 43, commonly referred to as (USERRA), outlines 
the employment and reemployment rights of service members. This Federal 
law, among other things, provides the legal basis for employment and 
reemployment rights of Reserve component members called to serve their 
country in an active or inactive duty status, as a volunteer or as non-
volunteer. The Ombudsmen strive not to use the law as a threat when 
mediating conflict, preferring instead to find the common ground of 
fair play. The law does provide the basis for explaining minimum legal 
requirements to both the Reserve component members and their employers.
    Our Marketing and Employer Services Directorate is charged with 
developing awareness of ESGR and its services in the public and private 
employer communities. With the recent recognition that nearly 30 
percent of all reservists are engaged in some form of higher education, 
the community of higher education institutions has recently been added 
as an additional target audience, as well. In January of 2003 the 
Marketing team released a 2-minute Video News Release focused on these 
target audiences. This release is a pre-packaged story featuring 
interviews with Montgomery County, MD, Police Chief Charles A. Moose 
(who is also a Major in the Washington, DC, Air National Guard), and 
Dick Grasso, Chairman and CEO of the NY Stock Exchange. Key messages of 
the release alert employers to the USERRA law and the reasons employer 
support of Guard and Reserve is vital to our national defense.
    ESGR is increasingly proactive in creating forums of exchange 
between business leaders and Reserve component commanders to identify 
and resolve areas of potential friction. In addition to an airline 
industry symposium that has been ongoing for several years, we 
organized two general employer symposia in 2002, and in February 2003 
brought together a symposium for ``First Responders'' (Law Enforcement, 
Corrections Officers, and Fire Fighters) Law Enforcement and first 
responders. The response to these symposia has been extremely positive, 
and is leading to improved dialogue and better understanding between 
all parties affected by Reserve component mobilizations.
    Despite the increased utilization of our Reserve Forces since the 
events of September 11, for the global war on terrorism and the obvious 
impact that the call-up of more than 200,000 reservists has had on our 
Nation's employers, they have responded in overwhelmingly positive 
fashion. Many employers have extended benefits for their reservists 
mobilized to support Operations Enduring Freedom and Noble Eagle, 
provided pay differential while they serve, continued their civilian 
health programs, and given both financial and moral support to their 
families, wives, and children. Although many communities have been 
impacted, the dominant response has been to pull together and make it 
work, and to stand behind those called to serve. Our Nation's employers 
have overwhelmingly supported the Guard and Reserve in this war on 
terrorism throughout this challenging time in our Nation's history, and 
we are extremely appreciative of their support to the Nation and to 
those men and women who are engaged in this effort.

                                TRAINING

    Training, based on tough, demanding, and relevant performance 
standards, is the cornerstone of readiness and dominance of our Armed 
Forces in today's evolving world. As a fundamental pillar of readiness, 
the quality of training directly affects our ability to fight and win, 
particularly in the rapidly changing environment of the global war on 
terrorism (GWOT) and the compressed lifecycles of new equipment 
technologies.
    Training must evolve to a lifelong, continuous learning environment 
that also provides as needed, anywhere-anytime learning to improve and 
enhance job performance. Training for dominance in future conflicts 
will depend on dedicating scarce resources of time, funding, and 
availability of our Reserve component personnel, to training that 
aggressively exploits technology and provides both traditional school-
house and distributed performance-enhancing training. Realizing that 
our Reserve component personnel now comprise almost 50 percent of the 
Total Force and are full partners in the prosecution of the global war 
on terrorism, we are working to ensure that the Reserve component is 
fully integrated in DOD's Training Transformation initiatives.
    Cutting edge opportunities are more available for Reserve component 
training than ever before. They include deployment of mobile classrooms 
that, through global reach-back capability, can provide training from 
subject matter experts, embedded interactive modeling and simulation in 
weapons platforms and other equipment that enable ``see, learn, do'' 
training reinforcement.
    This focus on distributed learning strategies and employing more 
robust communications tools will continue to pay great dividends for 
the Total Force. The Fiscal Year 2002 National Defense Authorization 
Act, which included changes to Title 37, will allow our reservists to 
receive compensation for completion of electronic distributed learning 
curricula, adding significantly to the opportunities of our personnel 
to embrace these concepts. We are currently undertaking a study to 
develop policy recommendations for the implementation of a Department-
wide compensation policy for the completion of necessary training.
    An important part of training is the ability of our forces to 
operate effectively and efficiently in a joint environment with other 
governmental agencies and within a multinational framework. Ultimately, 
these joint opportunities, with Reserve component personnel fully 
involved, will result in a significantly improved overall capability of 
our Armed Forces.
    With the use of technology, innovative concepts, and improved joint 
training experiments, we can sustain the well-deserved reputation as 
the best-equipped, best-trained, and best-led Reserve components and 
military in the world.

                        CIVIL MILITARY PROGRAMS

    In support of the President's call for Americans to serve, the 
Department continues to fund two youth outreach programs, Challenge and 
STARBASE. Both programs help improve the lives of children by 
surrounding them with positive civilian and military role models and 
helping them not just dream big dreams, but achieve them. The budget 
request for fiscal year 2004 is $65.2 million for Challenge and $13.8 
million for STARBASE.
    Operating in 25 States, the Challenge program has successfully 
given young high school dropouts the life skills, tools, and guidance 
they need to be productive citizens. The STARBASE program, operating at 
44 military facilities located in 27 States, the District of Columbia, 
and Puerto Rico, has enhanced military-civilian community relations and 
reached approximately 300,000 young children. Active, Guard, and 
Reserve members volunteer their time to the STARBASE program in order 
to provide a military environment/setting in which local community 
youth, especially the disadvantaged, are provided training and hands-on 
opportunities to learn and apply mathematics, science, teamwork, 
technology, and life skills. These two successful DOD outreach programs 
were identified in support of the USA Freedom Corps' effort to provide 
opportunities for Americans to become more involved with serving their 
communities.
    The third Civil Military program is the Innovative Readiness 
Training (IRT) program. IRT is similar to the overseas deployment 
exercise program in that it provides valuable military training that is 
compatible with mission essential training requirements. IRT projects 
help address serious community needs within the 50 States, U.S. 
territories, and possessions. The program is a partnership effort 
between local communities and active, Guard, and Reserve units. 
Individuals and units involved are primarily from medical, dental, and 
engineering career fields.
    All IRT projects are compatible with mission essential training 
requirements. IRT projects must be conducted without a significant 
increase in the cost of normal training and are designed to enhance 
training in a real world scenario without deploying overseas. Program 
expenditures for fiscal year 2003 are $30.9 million. The budget request 
for fiscal year 2004 is $20.0 million.

                    EQUIPMENT AND FACILITY READINESS

National Guard and Reserve Equipment
    The fiscal year 2004 budget includes $1.56 billion to procure 
needed equipment for the Reserve components. In the past the Reserve 
components relied on cascaded equipment from the active to help with 
shortfalls, however, given the fact that the majority of the support 
functions are in the Reserve components there is little equipment 
available to flow from the active component. We are convinced that only 
by the continued equipment modernization of our Reserve Forces will the 
Department reap the full potential of a capabilities based force in the 
future.
    Key equipment items planned for the Reserve components included in 
the fiscal year 2004 President's budget request are:

         Army National Guard and the Army Reserve: Global Air 
        Traffic Management aircraft modifications, airborne 
        communications, HMMWV, Family of Medium Tactical Vehicles 
        (FMTV), Family of Heavy Tactical Vehicles (FHTV), data 
        distribution systems, float ribbon bridges, tactical bridging, 
        generators, and rough container handling systems.
         Air National Guard and Air Force Reserve: Aircraft 
        modifications for the F-16, C-5, C-130, KC-135, and H-60, 
        common aircraft support equipment, vehicles, air traffic 
        control systems, tactical communications, and base 
        communications infrastructure.
         Naval Reserve: C-40 aircraft, tactical vehicles, and 
        mobile sensor platforms.
         Marine Corps Reserve: High mobility artillery rocket 
        system, towed howitzer, night vision equipment, and materiel 
        handling equipment.
                 national guard and reserve facilities
Military Construction
    The fiscal year 2004 military construction investment for new 
facilities affecting all Reserve components is $369 million and 
represents approximately 3.8 percent of the overall military 
construction requests of $9.5 billion. The President's budget request 
will provide new Armed Forces Reserve Centers, vehicle maintenance 
facilities, organizational maintenance shops, and aircraft maintenance 
facilities for the Reserve component missions. These new facilities 
begin to address the needed replacement of the Reserve components' 
infrastructure in support of military transformation programs. The 
fiscal year 2004 budget request continues the Department's efforts to 
improve the quality of life for the Guard and Reserve which for the 
reservist is not normally housing and barracks but rather where they 
work and train.

Sustainment, Restoration, and Modernization
    The Reserve components' fiscal year 2004 facility sustainment, 
restoration, and modernization (SRM) request is approximately $800 
million. Even with the Department's commitment toward restoring and 
modernizing existing facilities, the Reserve component's 
recapitalization rate ranges from 12 years to as high as 475 years. The 
fiscal year 2004 request reflects a concerted effort by the Department 
to reduce the SRM backlog and improve the Guard and Reserve facility 
readiness rating.

Environmental Program
    The installation environmental programs managed by each Reserve 
component continue to be a good news story of professionalism and 
outstanding efforts to protect, preserve, and enhance the properties 
entrusted to the Reserve Forces. The fiscal year 2004 environmental 
programs are budgeted at $253.6 million, which includes $125.2 million 
for environmental compliance requirements that provide 75 percent of 
the overall validated Reserve and National Guard environmental 
requirements for fiscal year 2004.

Joint Construction Initiatives
    The Reserve components are at the forefront of creating innovative 
ways to manage scarce MILCON dollars. They continue to pursue land 
exchanges and joint construction, wherever practicable. Joint 
construction is the practice of building one consolidated facility that 
fills the needs of two or more components. If we are to organize as a 
capabilities-based force, then our infrastructure should be designed to 
support that concept, also. Jointly constructing facilities of similar 
functions and eliminating the need for multiple buildings in the same 
geographic area, helps to transform our infrastructure toward 
operational capabilities and efficiencies. The savings and benefits of 
joint construction go far beyond the concept, intuitively. Most would 
agree one building costs less than two of similar size and function, 
but the benefits extend to reductions in force protection, sustainment 
dollars, contracting costs, and cross-service cultural understandings. 
I thank Congress for their support of this effort and will continue 
pursuing more land exchanges and joint construction opportunities in 
the future.
       legislative initiatives included in the omnibus submission
    Sec 511 - Ready Reserve participation requirement specifies a 
minimum of 38 days of participation (exclusive of travel) each year.
    Sec 512 - Streamlines the process to continue officers on the 
Reserve active status list.
    Sec 513 - Extends the authority to the Federal Long Term Care 
Insurance program to ``Grey Area Retirees.''
    Sec 562 - Provides for a reduction of the basic training 
requirement for certain credentialed individuals e.g., medical, health 
care profession or occupation, or those accessed through a direct entry 
program.
    Sec 563 - Provides the option for a reduced military service 
obligation for certain individuals with specialized skills to be 
accessed in a direct entry program.
    Sec 564 - Authorizes the IRS to release taxpayer address 
information on members of the Reserve components to the Services for 
use in mobilization.
    Sec 614 - Extends hostile fire and imminent danger pay to Reserve 
component members on inactive duty under certain conditions to ensure 
eligibility based on the nature of the danger faced, not based on the 
duty status they serve in.
    Sec 618 - Extends the Ready Reserve enlistment and reenlistment 
bonus authorities that allow the Reserve components to target 
individuals who possess skills that are under-subscribed, but are 
critical in the event of mobilization.
    Sec 1007 - Establishes permanent reimbursement for Guard and 
Reserve personnel providing intelligence and counterintelligence 
support to DOD.
    Sec 1010 - Permits DOD to allocate funds for Reserve component 
Special Operations activities related to clearance of land mines.
    Sec 1105 - Allows position vacancy promotions in time of war or 
national emergency when the member is not mobilized with his or her 
unit.
    Sec 1106 - Provides 22 workdays of military leave for Federal 
civilian employees when serving in support of a contingency operation.

                               CONCLUSION

    This administration views a mission-ready National Guard and 
Reserve as a critical element of our National Security Strategy. As a 
result, the National Guard and Reserve will continue to play an 
expanded role in all facets of the Total Force. While we ask our people 
to do more, we must never lose sight of the need to balance their 
commitment to country with their commitment to family, and to their 
civilian employer.
    Thank you very much again for this opportunity to testify on behalf 
of the greatest Guard and Reserve Force in the world.

    Senator Chambliss. Has a Navy man ever been that short? 
That's pretty good, Mr. Secretary. [Laughter.]
    Thank you very much. Again, we appreciate both of your 
being here. Senator Nelson, we went ahead and started since we 
were running behind.
    Senator Ben Nelson. Absolutely.
    Senator Chambliss. I would like, at this time, to call on 
my good friend and my colleague, Senator Ben Nelson, from 
Nebraska, with whom we have already been working very closely 
to make sure that we do what's necessary from the Personnel 
Subcommittee standpoint to see that our soldiers, sailors, 
airmen, and marines are looked after.
    Ben, any comments you'd like to make at this time?

            STATEMENT OF SENATOR E. BENJAMIN NELSON

    Senator Ben Nelson. Thank you, Senator Chambliss. Mr. 
Chairman, it's really a pleasure to be here. I apologize for 
being a little tardy trying to get out of the vote and get back 
here.
    I want to thank you for being here as part of this panel 
this afternoon. Obviously, it's a very important hearing and a 
very critical time for our military Services. We're here today 
to discuss the future of our Reserve components, National Guard 
and Reserves, as our Nation is prepared to go to war. Our 
Reserve components are almost half of our total military 
forces, and it's common knowledge that our Nation can't carry 
out any significant military operation without the 
participation of the National Guard and Reserves. The Reserve 
components are, without a doubt, full partners in the total 
force.
    In the past 18 months, we've mobilized more than 230,000 
Reserve component personnel for service all over the world, and 
they have performed magnificently. Today we've mobilized almost 
212,000 Guard and Reserve personnel who stand alongside our 
active component personnel poised for war.
    Our troops have responded remarkably well to the call to 
service. Despite the fact that many received what appears to be 
and seems to be unrealistically short notice of their call to 
active duty and some suffered a loss in pay and all had to 
leave their jobs and their families, by and large our Reserve 
component service members have enthusiastically reported for 
duty to do what they've been trained to do, and we are all very 
proud of them.
    Overall, I think that we can grade this mobilization as a 
huge success. However, that doesn't mean that we let down our 
guard and call it good enough. I believe that there are lessons 
to be learned from this mobilization that will help us to do 
even better in the future should we ever have another large-
scale mobilization. I trust that our witnesses will help us 
discern these lessons so that we can learn them and we can 
prepare to respond to them.
    Mr. Chairman, I want to welcome all of the witnesses. I 
look forward to working with you not only today, but in the 
many days ahead on this and other important Reserve and 
personnel issues.
    Thank you.
    Senator Chambliss. Thank you.
    Secretary Hall, you've indicated in your statement filed 
with the committee that the Department is studying pay and 
compensation for reservists, but I'd like to get your thoughts 
today on the importance of the Selected Reserve Montgomery GI 
Bill and the need for improvements in that rate of payment. How 
important do you think the Selective Reserve Montgomery GI Bill 
benefit is in recruiting individuals for service in the 
Reserve? Do you agree that the current rate of payment needs to 
be increased?
    Secretary Hall. The Montgomery GI Bill has always been one 
of our most important tools. We owe a lot to ``Mr. Reserve,'' 
as we call him, Congressman Sonny Montgomery, who introduced 
this. Throughout the time it's been in effect, it's been an 
important recruiting and retention tool. The Department has 
always supported modifications to this bill. We applauded the 
extension of the eligibility period that happened last year, 
from 10 to 14 years.
    The Reserve portion of the bill is different from the 
active duty portion, and it's been tied to a slightly different 
index, the consumer price index. Thus, as we proceeded through 
the economy over the years, there was a gap which has 
developed. A couple of years ago, the gap was about 47 percent 
of the active duty. That is about 30 percent now because of the 
CPI. Senator Collins is going to introduce a bill which might 
move that percentage back to 50 percent. We agree that we need 
to take a look at that percentage and that gap, and we're 
committed in the Department to examining it, because we think 
this bill is one of our finest pieces of legislation throughout 
the years to support the Guard and Reserve. So we're committed 
to looking at it, seeing if the gap is right, and working with 
you, if it's not, to make it right.
    Senator Chambliss. All right, thank you.
    Mr. Hollingsworth, in your written statement, you described 
the efforts of the Military Support and Ombudsmen Services 
Directorate and the informal mediation service that it 
provides. I noted the volume of calls you received, over 500 
calls a week since January 2003. What are the problems between 
employers and reservist employees that typically lead to 
requests for informal mediation? How are we doing, generally, 
with that particular aspect of this program?
    Mr. Hollingsworth. Sir, I have good news to report. As this 
thing has unfolded, the closer we get to the war effort here, 
the more positive the calls have become. In the last week or 
so, they have become, ``What can we do to help?'' That's great 
news from what our employers think of our Guard and Reserve out 
there today and just the incredible job that they're doing.
    Just to give you a synopsis of what happens on a daily 
basis as we get calls that do create some controversy out 
there, most of them are simple misunderstandings of the law 
either on one side or the other, and our job is to mediate 
those. We have 4,200 incredible volunteers throughout the 
country and in Europe that do our mediation for us. We run them 
through our ombudsmen course. A lot of them have some really 
good personal attorney training. Beyond that, these guys are 
really dedicated Americans who care about the young men and 
young women, and they care about the fact that the employers 
tremendously support our Guard and Reserve.
    As we go through the process, when they call our office, we 
refer these young men and young women or the employers back to 
the States so that it can be handled on a local level, because 
that's where we want to develop those personal relationships 
between our ESGR membership and the employers that support our 
Guard and Reserve. So then as they resolve the issues, which in 
over 95 percent of the cases they do, then they can resolve it 
at the local level.
    If there's something that becomes so untenable that there's 
a situation where nothing can be resolved by mediation, then we 
take that, send it to the Department of Labor, and let those 
folks do the litigation part.
    But we're happy to report that those cases are a small 
percentage and the wonderful employers supporting the Guard and 
Reserve guys out there do an incredible job of mediating these 
situations.
    Senator Chambliss. Secretary Hall, in your written 
testimony, you discuss the ongoing examination within DOD of 
the Reserve component to better organize and equip it to 
contribute to national defense. You've had an extensive 
background with the Naval Reserve, and I'd like to know your 
views on the Navy's request to reduce the Selective Reserve end 
strength by 1,900, as well as your views on necessary 
organizational changes. What do you think is the justification 
for the 1,900 reduction? What are your personal views about 
changes needed in the organization and manning of the Naval 
Reserve to better augment the Active Force, achieve the correct 
skills balance, and best contribute to missions assigned to the 
Navy?
    Secretary Hall. I commanded the Naval Reserve for 4 years, 
from 1992 to 1996, and during that time participated in a 
downsizing from about 132,000 to 96,000 when I left. It now 
rests at 86,000. I have spoken with the CNO, Admiral Clark, 
about his views, and what I can tell you is that his 
commitment, I think the Navy's commitment, is to ensure that 
the Naval Reserve is structured correctly, is fully integrated 
on the active side, and meets the mission demands of the Navy. 
In some cases, that will involve change. It will be different 
than when I commanded it 6 years ago.
    I think the ideas that have been proposed that I know 
about, which the Navy could speak to better than me, involve 
better integration of the selected reservists within units. In 
some cases, it involved blended units very much like the Air 
Force has very successfully, blended the units together, flying 
the same kind of equipment with the same training standards. I 
believe it is a commitment on the part of the Navy that that 
particular end strength that they have asked for best supports 
both the active and Reserve side, better integrates the Reserve 
to meet the mission commitments of the Navy.
    Senator Chambliss. Does it have anything to do with the 
lesser number of ships that we're floating in the Navy now?
    Secretary Hall. You would have to ask Admiral Clark that, 
but not in my view. What it is, is an attempt, I think, to 
better use and better integrate the Guard and Reserve, but 
nothing that I know of has to do with less ships.
    Senator Chambliss. Okay.
    Mr. Hollingsworth, I'm sure you'll agree that it's 
troubling that some reservists who are in college and are 
mobilized may be losing credits and tuition. This has been a 
constant problem that we've had to face. I'm glad to see that 
some States have taken action to prevent abuse, but more action 
may be necessary. Please share with us your view of the extent 
of this problem. How responsive have colleges and universities 
been to requests for relief for students? What's the Committee 
on Employer Support to the Guard and Reserve doing to address 
this problem?
    Mr. Hollingsworth. Yes, sir. We'd not deny that there is a 
problem with that, but I would be happy to report, sir, that 
it's not as serious as some think. We don't get many calls on 
that--people think of us as employer support. We try to get the 
word out to the young men and young women that if you do have a 
problem in that area, we're going to take that on for you. As 
we did our strategic planning last year, we looked at where we 
were as an organization and how we were supposed to support all 
those people out there. We found out about one-third of these 
young men and young women are involved in some type of higher 
educational process. We had no programs to support that, so we 
really jumped ourselves into high gear to really start looking 
at that.
    Senator Nelson, you'd be happy to know that one of the 
things I'm trying to do is develop these personal relationships 
with the college and university presidents. I've spoken to the 
University of Nebraska president there in Lincoln, and he's 
really been supportive. What we're trying to do, sir, is beyond 
just getting the folks back their tuition and their room and 
board and the other things that apply there. One of the most 
valuable things we have as human beings is our time, and if you 
take a young man or young woman who spends a certain amount of 
the semester in college trying to earn college credits and 
suddenly we pull them away from there, he's lost that time. We 
can give the money back, but that doesn't solve the whole 
problem.
    We think that we should go further than that. We have the 
capability, from an information technology perspective, that we 
could continue their education through distance learning. Those 
are the things we're approaching. We have a model program 
that's been established that we're going to develop more fully 
and take it to all the States and all the universities, and, so 
far, everyone that I have talked to at the college-president 
level is extremely supportive of this.
    The devil is always in the details, and the people that 
would really make this work or not work are the professors. 
They're the ones who are going to have to do the extra work to 
develop the curriculum that goes into an IT perspective so it 
can push this out.
    This won't work in all cases, because if you're taking a 
chemistry lab you can't do that with the IT. Certainly if a 
young man or young woman is taking some of the humanities 
courses, economics, English, geography, these things lend 
themselves very well to the continuation of their education 
while they're on active duty. Not all the people, because some 
of them are in pretty severe combat conditions, can take 
advantage of that, but if someone is doing things in the Sinai, 
if they're in Kosovo, they have access to IT and they can 
continue their education. That's what we're pursuing, from the 
Employer Support of the Guard and Reserve perspective. We want 
to be proactive. We don't want to wait until problems come 
along and then have to deal with them. We want to take care of 
these before they become an issue with the students and with 
the colleges and universities.
    So you can rest assured, sir, that we're going to attack 
this problem. We're not just going to sit by and wait for 
something to develop. We're going to be really out in the front 
of this thing. It needs to be done, because these folks need 
that kind of protection.
    Secretary Hall. Mr. Chairman, I might say there's another 
element to attack this problem, and it's called the 
Serviceman's Opportunity College. I don't know whether you have 
heard about that, but it's a consortium of about 1,350 
colleges, that have signed up throughout the country. The 
Serviceman's Opportunity College--it's a strange name for it; 
it probably ought to be named something different--but it's a 
group of 1,350 colleges and representatives that have signed up 
to be willing to arbitrate any of the problems with tuition. We 
have used that. We used it in the Gulf War, in the post-Gulf 
War period, and we're using it now, and we refer cases to them, 
and we've been very effective locally, because they see the 
professor, they talk to the college. About 90-percent-plus have 
been arbitrated in favor of the students--in fact, near 100 
percent. We're using that mechanism, and it's a consortium that 
signed up, of 1,350, which blankets the country.
    Senator Chambliss. Thank you.
    Senator Nelson.
    Senator Ben Nelson. Thank you, Mr. Chairman.
    Secretary Hall, in your prepared statement, you discuss a 
DOD legislative initiative to extend hostile fire and imminent 
danger pay to Reserve component members on inactive duty. Now, 
the reason provided for this proposal is to ensure eligibility 
for these special pays based on the nature of the danger faced, 
not based on the duty status of the service member. Can you 
tell us a little bit more about what ``inactive duty status'' 
means and how someone in this status could be in a position 
that would warrant hostile fire and imminent danger pay?
    Secretary Hall. I was not in the Pentagon on September 11, 
but perhaps that tragic event is the one to reference as the 
beginning of this idea while on inactive duty there are many 
different categories that reservists can be in, such as IDT or 
inactive duty for training. You could be in a drill period and 
in the Pentagon--we had people at that time who were on drills, 
they had not been recalled, who could either have been killed 
or maimed--so it is to allow, in those circumstances where you 
might be in an area that no one predicted would be subject to 
hostile fire. No one predicted that would happen. By 
circumstances, you're caught in hostilities on a drill, and 
unless we had this legislation, then those benefits would not 
be available to you and your family.
    I think it came from the tragic events of September 11 and 
a recognition that we must protect our young men and women no 
matter what status they're in.
    Senator Ben Nelson. So the determination would have been 
made after the fact, not prior to the fact.
    Secretary Hall. That's right. We could not, I guess, 
anticipate what would happen, but we would want to in the 
future.
    Senator Ben Nelson. Right.
    Secretary Hall. When that is declared after the fact by 
competent authority, then you would get your benefits.
    Senator Ben Nelson. I understand.
    In your prepared statement, you talk about the challenge in 
STARBASE civilian military programs that you administer, and 
these programs are obviously very highly regarded here in the 
Senate. They are great examples of the how the Department of 
Defense can reach out to disadvantaged youth and guide them 
toward becoming good citizens. Could you describe briefly for 
us these programs and tell us whether State funding shortages 
are having any impact on them at the present time?
    Secretary Hall. Both of you gentlemen, of course, have them 
in your States. They're wonderful groups. I visited them. The 
Challenge Program, which with the 22 weeks of training for our 
at-risk youth, has $65 million in the budget for this year for 
that program. It's been a very successful program.
    Part of the challenge is the State funding. What we're 
discovering is, in many of the States, because of the severe 
pressure on the State budgets, this program is beginning to 
compete with other kinds of programs, and that the State's 
share might not be able to be borne by the State. That should 
be of concern certainly to them, because these are local 
youths. The Federal Government is committed to its share. That 
$65 million appears to be appropriate.
    STARBASE is a little bit different in that that program, in 
which participating young men and women who are also at-risk, 
learn in the area of math and science and go once a week for 5 
weeks to a program which assists them in getting those skills 
in math and science and also in becoming productive citizens. 
We have a little over $13 million in that program.
    I strongly support both of these programs. In Louisiana, 
when I traveled there as the Chief of Naval Reserve, I visited 
the Challenge people on site and I saw those young men and 
women becoming better, productive citizens. I think part of the 
challenge will be for the States to be able to make sure their 
budgets support their share of it.
    Senator Ben Nelson. If they fail to support it, through 
their budgets, does that mean the demise of the program?
    Secretary Hall. We try to help them. They have to make that 
judgment call, and there are a couple of ways you could do 
that, and we have recently talked to a couple of States. You 
might scope down the number of children in the program and be 
able to accomplish it within the funding that you have left. 
What I think would be a mistake would be to cancel the program, 
because these young men and women need that example. We need to 
help them be productive citizens, but the States have to 
decide, do you scope it down and have less people, or do you 
make that tough decision to not support it? I hope we keep 
those programs going.
    Senator Ben Nelson. Secretary Hall, yesterday, I heard that 
top Federal officials have asked many of the 50 States to 
deploy the National Guard or some State Police programs to 
protect sensitive sites across the Nation from possible attack. 
If the National Guard is deployed for this homeland security 
mission, do you know what their status will be for personnel 
purposes?
    Secretary Hall. I read the same thing, and I know Secretary 
Ridge talked to all of the Governors. I know they have 
developed an extensive list of the different facilities that 
need to be looked at, both Federal and State, critical 
infrastructure throughout the country, and to develop the plan 
by which we protect those. Of course, the military force is not 
a first responder. DOD is not. The other agencies are. We're in 
support of that.
    I think there's adequate flexibility within Title 10, Title 
32, or State active duty, using any of those three that is 
appropriate as determined by the Governor in consultation with 
Federal authorities to get the people on scene from DOD that 
you need to support the first responders.
    So I think there's flexibility within those three 
provisions, Senator, to handle what we need, and we are 
cooperating in that review.
    Senator Ben Nelson. In that regard, a number of the States 
have indicated that they don't have the funds to be able to 
activate the Guard. If a State doesn't do it because of the 
lack of money, is there the possibility that the Federal 
Government would reimburse the States for any call to active 
duty?
    Secretary Hall. I guess I can only go back to the past, 
what has happened, and I wasn't here during that time. It's my 
understanding that if it's determined to be a requirement that 
we need those troops, and if it's determined that the 
appropriate way is to take Federal funds to reimburse them to 
go meet that mission, then I think that'll be done. I think 
that's a consultation between the State Governor and the 
Federal Government and a determination how we best get them 
there to do the job. There are provisions, and I think that 
will work.
    Senator Ben Nelson. So you do believe that the Federal 
Government could step up to the plate in those situations? 
Would there be a situation where the Federal Government might 
refuse to?
    Secretary Hall. I couldn't conjecture on that, sir. I think 
the provisions are there, and I have confidence that we'll do 
what's called for to protect that critical infrastructure.
    Senator Ben Nelson. Okay.
    Finally, Mr. Hollingsworth, in June 2002 the GAO reported 
that the DOD does not have complete information on civilian 
employers of the Guard and Reserve members, and this lack of 
information limits the ability of the Department to reach out 
to some of these employers to inform them of their rights and 
obligations and to help mitigate the temporary loss of 
employees who are mobilized. The GAO reported that the 
Department believes that the Privacy Act prevents them from 
requiring members of the Reserve components to provide this 
information. The GAO also recommended that the Department 
reexamine the provisions of the Privacy Act and determine 
whether requiring reservists to report information about their 
civilian employers is consistent with the act.
    Based on your dealings with the service members as well as 
your dealings with employers, can you support a requirement 
that reservists provide information to the Department of 
Defense on their civilian employment so if there is an 
exception as required as part of the Privacy Act or if it's 
determined that an amendment is not necessary to require that?
    Mr. Hollingsworth. Sir, I've got another good news story. 
Since that GAO report has been out, Secretary Hall and his 
staff have been working real diligently with Dr. Chu to bring 
that to fruition, and we're there. We have gotten authority to 
do that. Now we're in the process of establishing the technical 
ability to capture that data. I think by the first of June or 
so, we should start being able to have our ADP systems in place 
to make this happen. So that is a great story, and that's a 
tremendous help to us in ESGR, sir.
    Secretary Hall. I might comment on that. In fact, we will 
in June. Part of our problem--and we get asked questions from 
various sources, how many of your people in the Reserve are 
first responders? How many of them are firemen or policemen? 
Because we want to know. We can't tell now, because we've had 
no requirement for guardsmen or reservists, to tell us their 
occupations and their employers.
    What we intend to do is to make sure the information 
collected is minimal, we protect their privacy rights and only 
collect what we need to know so that we can tell who your 
employer is to make judgments on things like are we mobilizing 
lots of firemen and policemen. We've had no way to do that 
until now--we'll start collecting that in June.
    Senator Ben Nelson. Thank you, both of you, gentlemen. 
Thank you.
    Mr. Chairman?
    Senator Chambliss. Secretary Hall, the Youth Challenge 
Program in my State is one of the most important programs, I 
think, that has ever been implemented, and I commend the 
National Guard on a regular basis for putting that program in 
place.
    I've spoken to one of the graduation classes, and my 
favorite story about them is a day that I happened to be there 
on a Friday afternoon when they were allowing the kids to go 
home. A gentleman came up to me after I spoke to the whole 
group--with parents in attendance who were waiting on their 
kids to take them home for the weekend--a gentleman in overalls 
came up to me with tears in his eyes, and he said, 
``Congressman, I just want you to know were it not for this 
program, my son would be dead.'' Boy, you talk about something 
getting to you. That was about as powerful as it gets, and he 
meant it, and I knew he meant it. That's how important that 
program is.
    Secretary Hall, active duty physicians, nurses, and other 
healthcare providers receive significant compensation through a 
series of special medical pays. Many of these special pays 
require a service commitment; therefore, Guard and Reserve 
healthcare professionals are not eligible for these pays. I 
understand that one of the categories of reservists with the 
greatest income loss when activated is these healthcare 
professionals. Is the Department considering any type of 
medical special pay authorities to address the significant gap 
between active and Reserve healthcare providers?
    Secretary Hall. We are going to be examining that question 
in the pay and compensation study that the Department is 
undertaking. We hope to complete that by August. It's going to 
be a very broad look.
    Some of the things that we need to examine are recruiting, 
retention, and use of medical professionals, where we have 
shortages, and the effect of bonuses or incentive pay and other 
compensation where appropriate, and we're going to look at that 
comparing the Reserve to the active. That will be examined in 
that overall pay and compensation study for Guard and Reserve, 
which we hope to complete by August and report the results to 
you and others.
    Senator Chambliss. Good.
    Medical and dental readiness is a key to having deployable 
personnel, and a significant problem arose during the Gulf War 
when Reserve component service members were not dental-ready. 
This caused delays in the service member's deployment until 
dental issues were resolved, costly alternatives for DOD to 
provide the appropriate dental response, and often dramatic 
measures to correct problems that under other circumstances 
could have been handled with less severe treatment. Mr. 
Secretary, based on the experience gained during the Gulf War, 
what steps have been taken to ensure that dental readiness is 
not a problem this time? What steps still remain to be 
resolved?
    Secretary Hall. You hit upon it. Dental readiness is much 
bigger than just the medical, although it's all medical in 
nature. Based upon the Gulf War, a lot of attention has been 
given to the issue, but it still probably remains the number 
one.
    One of the issues that we have looked at is when are the 
guardsmen and reservists available to get dental care? One of 
the initiatives is to provide a low-cost dental insurance plan 
for our guardsmen and reservists. It's a self-pay, but I think 
the cost is--if I'm not right, we'll get back to you--$8.35 a 
month. Through this dental plan, it affords them the 
opportunity to buy that insurance to get themselves generally 
ready.
    Now, that's only a portion of it. The second is, how can we 
work on those young men and women at other times--can it only 
be when they're on active duty? We're examining the rules about 
being able to, as I've often said, not make light of it--
``drill'' them while they're on drill. So when they're 
drilling, can we provide our dentists to work on them? Because 
that would be very helpful.
    So we're examining a number of those alternatives 
recognizing it's probably our number one problem all with the 
goal of getting better in this mobilization than we were, but I 
don't think that better is quite good enough. Those are 
initiatives we'll look at to continue attacking the problem.
    Senator Chambliss. Ben, do you have anything?
    Senator Ben Nelson. Just one more.
    Senator Chambliss. Okay.
    Senator Ben Nelson. We've all heard stories of reservists 
who have experienced financial difficulty in being called up. 
There have been stories in the paper. Just recently there was 
one in a television program about the challenges that are 
there, what will happen to a family if it loses 60 percent of 
its income with 100 percent of its expenses continuing. Most 
families can't withstand that kind of a shock to their personal 
economy, and obviously it does create quite a challenge in the 
event of mobilization.
    Do you have any thoughts on what we might do in terms of 
dealing with that kind of a challenge?
    Secretary Hall. I have some, and then I would ask Mr. 
Hollingsworth to talk to you a little bit about what some of 
our employers and other people are doing.
    It's a problem which you hear a lot about, and what we're 
attempting to do is get our arms around the truth, because I 
read the same reports that go out about guardsmen and 
reservists that are losing tremendous amounts of money. We have 
attempted to come at it as analytically as we can.
    We have had a couple of surveys, and I add the caution of 
saying one of them was in 2000, one of them was in 2002. They 
surveyed a lower-amount database than we wanted, but we think 
they're statistically relevant. They generally show that about 
one-third of our guardsmen and reservists lose money when they 
go on active duty. About two-thirds, however, hold themselves 
even or actually gain.
    After I was here before, Mr. Chairman, I reviewed for your 
State some of the wages. In some cases--and I hate to say it, 
because I think our teachers are underpaid throughout the 
country in all of our States--our guardsmen and reservists 
would almost double their pay from being a teacher, if they're 
an officer, when they go on active duty.
    So we believe the two studies statistically validate each 
other, that about one-third lose some sort of pay. Of course, 
we'd rather not anyone. But many of our companies have stepped 
up to the plate, and I might ask Mr. Hollingsworth to tell you 
what is being done privately across the board, what is being 
done by some of the States that are picking up the difference 
in the pay.
    Mr. Hollingsworth. Yes, sir. A great news story, and it 
just makes me beam with pride in what our employers are doing 
as they step up to the plate and support our young men and 
young women across the country.
    Now, I have a list here of about 300. Lists are strange 
things around this town, because you have to be careful with 
getting lists because you don't want to have some people not 
wanting their name on a list. We're trying to take the people 
that really care about our Guard and Reserve and make them 
aware of just how proud we are of them. In many cases--we've 
done the surveys, and as we touch people every day in both the 
public and the private sector, we continue to learn about what 
they're doing to support the Guard and Reserve.
    I just heard one case that came out of a company that 
covers six States in New England for their folks in the Guard 
and Reserve who belong to that company, they're going to 
provide the difference in salary. They're going to continue the 
medical benefits. They're going to form, or they have formed, 
family support programs so that if their yards need mowing, if 
their children need to be taken to the doctor, and so forth, 
they can provide babysitting. There's really incredible things 
being done out there. But these people went one step beyond. 
They say if you have a spouse that's in the Guard and Reserve 
and you've been mobilized, we'll give you an opportunity 
without using vacation time--we'll buy you a ticket to wherever 
that person is, if he's in the United States, and let you go 
visit him or her.
    So those are the kind of things people are stepping up to 
the plate to do, and it's a really exciting time to be a part 
of this because the employers really are stepping up to the 
plate.
    I would encourage Congress to just continue to acknowledge 
what our folks are doing. That's both in the private and the 
public sector. We have young businesses in the small townships 
that are really hurting because of the financial situation that 
they may be in. From a tax-base perspective, when their folks 
are mobilized out of their townships, they're meeting their 
salary differential, continuing their medical benefits. It's a 
great news story, sir.
    Secretary Hall. The other thing, if I just might, we also 
want to make sure, and it is a complex problem, but our young 
men and women that are mobilized in the foxhole are earning the 
very same as their active duty people right alongside of them. 
So we have to be careful to balance all of the factors so that 
each and every E-5 Reserve or active are earning the very same 
salary, and we monitor that. It's also something you have to 
consider.
    Senator Ben Nelson. Is there any idea or a ballpark 
estimate of how many people and what percentage of their income 
they're losing? If you're losing only a slight part of your 
income, it's one thing. But the story the other evening of 
losing 60 percent, that's another, you may not have as many 
suffering the hardship, but you could have the few suffering a 
great hardship. I wonder if there's any way of determining what 
hardship is being suffered and by how many.
    Secretary Hall. We haven't had the fidelity that we need 
within our systems. That's one reason we need an employer-based 
system, so we can accurately slice that and cut that and take 
information away from it. Generally, our experience tells us 
that in certain fields, a vast amount of loss is not being 
realized in the firemen and policemen and other skills. In 
doctors, perhaps lawyers, and some of the other information 
technology specialists that are very high-earning there may be 
greater losses.
    Senator Ben Nelson. If they run a solo practice?
    Secretary Hall. Yes.
    Senator Ben Nelson. With an office full of backup 
personnel, they would be more detrimentally hurt, as would 
others, if they had to give up the----
    Secretary Hall. I think that's where you see--and that's 
where the larger differentials--and we need to do a better job 
of cutting it the way you indicated and getting the exact 
ground truth on it. It's hard to come at. I suspect it's in the 
ones that were typically very high wage earners, perhaps 
physicians, and then they would suffer a bit more.
    Senator Ben Nelson. I suspect you're not trying to figure 
out a way, for those who are actually earning more, to give it 
back.
    Secretary Hall. We have seen no one willing to do an income 
distribution so far within that 66 percent----
    Senator Ben Nelson. Redistributions like that happen in 
government, not out there. Yes.
    Secretary Hall. Sir, I've talked to many guardsmen and 
reservists as I travel around the country. They say, ``Yeah, 
we're suffering hardships, but we know it's important for our 
country.'' In large part, they're silent, they're doing what's 
fundamentally right because they know that when they signed up 
to stay in the Guard and Reserve that there's an obligation to 
their country's defense there that they're willing to accept, 
and they know that there's a risk involved, and that makes you 
even prouder to be an American, to see what they're doing.
    Senator Ben Nelson. I think it's important for the record 
to indicate that we are not undersiege by report after report 
by any of the reservists or their families about this 
situation. They will suffer silently because of their sacrifice 
and their commitment to their country. It's because of that 
that I think it's important we bring it up, since they're 
certainly not going to bring it up or raise the issue 
significantly. I think it is important that we make sure we're 
doing everything we can to deal with that issue.
    I think it's also important, as you would agree, to the 
future of the Reserve or Guard components because of the fact 
that if you're going to lose a solo practice or you're going to 
lose a great deal of money and risk financial challenges, you 
may decide that you can't be a part of the process.
    Secretary Hall. Clearly, for recruiting and retention for 
the future, we're all going to be competing for a smaller 
demographic pool of people. We're competing against business, 
and we have to think through this thing regarding total pay and 
compensation for the future. As we compete for that smaller 
base of manpower to retain and recruit people, we're going to 
have to consider that, and that's our commitment in looking at 
this in a very broad-based way with respect to compensation and 
pay for all of the guardsmen and reservists.
    Senator Ben Nelson. Thank you, again.
    Senator Chambliss. Secretary Hall, just one other question 
that I'd like to get you to comment on, and that is the 
proposed merger of the military personnel accounts, Guard and 
Reserve, with the active force. Obviously, this has generated a 
lot of controversy inside and outside of Congress, and I would 
appreciate any comment you would like to make on this proposal.
    Secretary Hall. Certainly, what Congress decides on it 
ultimately will be what we will do on it. I think, if I can 
best characterize the management initiative--and it does 
parallel my experience when I commanded the Reserve and in my 
other military billets--and that was that any commander, 
businessman, or anyone would like to have flexibility within 
their accounts. You would like to have control of all of the 
different kinds of pots, be able to apply those as you best see 
fit, and flexibility.
    The Department feels that there would be more flexibility 
combining the Guard, Reserve, active duty accounts to be able 
to move money from active to Guard or Reserve, or vice versa, 
based upon the need. It could move either way. They will still 
maintain the visibility by appropriation, however, so that it 
could be viewed by the Department, myself, and you to see if a 
balance is being maintained.
    I think it is certainly--from Secretary Rumsfeld's 
position, he would like more flexibility in all of his accounts 
to be able to manage the money in a more flexible way. That is 
what's behind it. There's a lot of concern on behalf of 
associations, guardsmen, and reservists, ``Will this mean 
migration of large amounts of money from Reserve accounts over 
to the active side?'' I don't see that. I think should those 
kinds of things occur, it would be incumbent on all of us to 
explain why, to provide visibility on that, and to make sure 
the right thing is being done.
    We have no indication that this system would not provide 
more flexibility and would not work at this point. I think we 
have to see.
    Senator Ben Nelson. Mr. Chairman, I have one follow-up 
question to that.
    Senator Chambliss. Sure.
    Senator Ben Nelson. In terms of having the flexibility 
here, would this still protect the accounts as it might relate 
to the availability of the Guard at the local level to deal 
with emergencies, or will I be getting a call from the Nebraska 
Adjutant General saying that, ``I'd like to help my Governor, 
I'd like to help the people in the State of Nebraska, but they 
pulled the money out of my account. It's over in another 
account, and I can't mobilize to deal with an emergency?''
    Secretary Hall. I would hope you wouldn't get that call, 
and the panel that follows us might be the first one to get 
that. It certainly would not affect the State funds which the 
Governor could use. I do not think it would affect the overall 
pot of money available in Federal funds to support either Title 
32 or Title 10 requirements, and I don't think that's at all 
the intent of it; it's more one of flexibility.
    Senator Ben Nelson. I understand it wouldn't be the intent; 
I just wanted to make sure it wasn't the unintended 
consequence.
    Secretary Hall. I hope you don't get that call, sir.
    Senator Ben Nelson. All right. Thank you.
    Senator Chambliss. Gentlemen, thank you very much for your 
testimony today. We appreciate your being here.
    I'd now like to ask our second panel to come forward, Major 
General Raymond Rees, Acting Chief, National Guard Bureau; 
Lieutenant General Daniel James, Director, Air National Guard; 
and Lieutenant General Roger Schultz, Director, Army National 
Guard.
    Gentlemen, thank you for being here today, and we look 
forward to any opening statements you have to make.
    General Schultz, we'll start with you.

 STATEMENT OF LT. GEN. ROGER C. SCHULTZ, ARNG, DIRECTOR, ARMY 
                         NATIONAL GUARD

    General Schultz. Thank you, Mr. Chairman.
    Mr. Chairman, if I could, I'd like to introduce the senior 
enlisted member of the Army National Guard, Command Sergeant 
Major Frank Lever. He's with us today. He looks after our 
soldiers in the field, and I just want you to know, Mr. 
Chairman, I'm honored to serve with that soldier.
    Mr. Chairman, today we have over 80,000 members of the Army 
National Guard in a partial mobilized status. That's in 
addition to the other deployments that we have around the 
world. We've already discharged over 20,000 members from 
previous years' mobilization duty. So we had over a third of 
the Army Guard on some duty status since the September 11 
attacks just a couple of years ago.
    Mr. Chairman, I appreciate your interest in looking after 
our team in the field. Today, in a special way, it's not just 
our soldiers; it's our families and our employers, as well. 
``Trained and ready'' is the theme that we carry throughout our 
work. Mr. Chairman, with your support and members of the 
committee's support, that's exactly what we have.
    Mr. Chairman, I'm honored to represent their interests here 
today. Thank you.
    Senator Chambliss. Thank you.
    General Rees.

 STATEMENT OF MAJOR GEN. RAYMOND F. REES, ARNG, ACTING CHIEF, 
                     NATIONAL GUARD BUREAU

    General Rees. Mr. Chairman, I'm grateful to be here and 
have this opportunity to talk about the Guard, and pleased to 
be here with both the Director of the Army Guard, General 
Schultz, and the Director of the Air Guard, General James, and 
their senior enlisted noncommissioned officers that are here 
with us.
    I want to also thank you very much for your support and 
this subcommittee's support. The magnificent effort that's 
going on in the Guard and Reserve right now all across the 
globe couldn't have been done without the help that's been 
given to us over the years.
    I have prepared a written statement that provides detail, 
and would offer that for the record. I just want to take a 
moment here to highlight some key points.
    Perhaps more than any time in modern American history, both 
the Army and the Air National Guard have been responding to the 
call of America. Even prior to the events of September 11, 
2001, the Guard was performing, in unprecedented numbers, in 
support of military operations worldwide and military support 
to civil authorities at home. Since that time, the numbers have 
gone even higher.
    The Guard is well-suited to be flexible and responsive in 
its ability to provide personnel to both combatant commanders 
and Governors in the various duty statuses available to meet 
each need. My written testimony details these duty statuses and 
the means in which they can be employed, and the success in 
which these duty statuses have been used I believe are well-
documented.
    I would also add that at least one of them, in Title 32, 
U.S. Code, in which national guardsmen are under the command 
and control of the Governor but paid for with Federal funds, is 
a template that we believe should be considered for other 
missions as they relate directly to homeland defense.
    I would like to also highlight some success stories of our 
National Guard. While it is true that both the Army and the Air 
National guardsmen that are being called away from careers and 
families for extended periods, that the members are out there 
and are proud to serve. Given a large number of guardsmen that 
are called to duty, as General Schultz just mentioned, 80,000-
plus of the Army National Guard and nearly 17,000 Air National 
Guard, are mobilized. We have individuals in other statuses at 
this moment that, when we look at the complete picture, there 
are over 140,000 national guardsmen that are involved in one 
way or another either in the Gulf, someplace around the globe, 
or in the domestic service. They train for their missions. 
They're ready, willing, and able to perform these missions when 
called upon to do so.
    I'm sure that General Schultz, myself, and General James 
can give you many anecdotes about meeting troops in the field, 
but General James can give you even more detail because of a 
mobilization survey that was just conducted by his 
organization.
    Importantly, in that survey, 89 percent of the Air National 
guardsmen indicated satisfaction with their amount of time in 
uniform, and 82 percent indicated that they intend to stay in 
the Air National Guard. When asked what would increase their 
likelihood of staying, the number one incentive was increased 
pay and benefits. This highlights that our guardsmen are proud 
of what they do and like doing it, and it's pay and parity 
issues that remain to be resolved.
    My written testimony also addresses other issues, such as 
disparity in benefits of national guardsmen serving under Title 
32 who are not protected under the Soldiers' and Sailors' Civil 
Relief Act.
    I'd also like to mention that the increased use of the 
Guard has also intensified our need for more full-time manning. 
That's a very big issue for us across the board.
    The fight against terrorism and the protection of our 
homeland will be a protracted effort. Many policy experts, 
reports, and studies have advocated an expanded role for the 
National Guard in homeland defense. We'd like to think that 
we've been doing this since 1636, and we will continue to do 
so. Our mission under the Constitution is to repel invasions, 
suppress insurrection, and execute the laws of the Union. 
Certainly under both Title 10 and Title 32, our mission there 
is to be an integral part of the first line of defense of this 
Nation.
    The reality is that the National Guard is an integral part 
of the Army and Air Force total mission capability, and that 
role is vital to the Nation. The Guard Bureau is going to work 
with the States, with the Northern Command, with the Services, 
with the new Assistant Secretary of Homeland Defense, and so on 
to identify whatever additional homeland defense capabilities 
are needed, and we plan to consolidate and validate the stated 
requirements and help find solutions. In this capacity, the 
National Guard Bureau, we believe, can serve as a very useful 
channel of communications to all of those entities that I have 
mentioned, as well as be the channel of communication that we 
are traditionally seen as with the Department of the Air Force, 
the Department of the Army, and our role as the Reserve of 
those Services.
    The men and women of the Army and the Air National Guard 
are well-engaged in every aspect of our national response to 
the threats facing our country. They are making significant 
sacrifices. They are enthusiastic about serving and do so with 
pride and determined competence. They prove every day that when 
America needs the Guard, the Guard is there.
    I thank you for this opportunity to testify, and I stand 
ready to take your questions, sir.
    Senator Chambliss. Thank you.
    General James.

  STATEMENT OF LT. GEN. DANIEL JAMES III, ANG, DIRECTOR, AIR 
                         NATIONAL GUARD

    General James. Mr. Chairman, I, too, would like to thank 
you for this opportunity to appear before you today.
    Before I get into my remarks, I also would like to 
introduce the Command Chief Master Sergeant of the Air National 
Guard, Chief Master Sergeant Val Benton, who's in attendance 
here today. Master Sergeant Benton serves as my senior enlisted 
advisor and my link between the Air National Guard directorate 
and the enlisted airmen in the field, and does so very well.
    As we enter yet another phase of challenging times for our 
Nation, the Air National Guard is more involved in global 
operations and the defense of this Nation than any time since 
the Korean War. General Rees pointed out, there are tens of 
thousands of airmen around the globe this afternoon serving 
their country very well.
    Our new motto in the Air National Guard is ``ready, 
reliable, and relevant'' and it is perhaps an understatement of 
the great things our men and women are doing in service of our 
Nation. We have quite a story to tell, and I'm very proud to be 
the conduit of that story on behalf of over 109,000 patriots 
that comprise your Air National Guard today.
    The close relationships we have maintained with our 
members, their families, and their employers are key to the Air 
National Guard's accessibility and reliability during the 
global war on terrorism. We would like to thank Congress for 
recently passing two pieces of legislation that will 
significantly aid the Air National Guard's future recruiting 
and retention efforts--significantly allowing to us to increase 
the prior service accession bonus from $5,000 to $8,000, and 
your initiative to increase the eligibility period for the 
Montgomery GI Bill benefits from 10 to 14 years. We believe 
that both of these programs will pay the Air National Guard and 
the National Guard substantial dividends in the years to come.
    We're striving to retain the core of the Air National 
Guard, our midterm airmen. Those are those members who are 
serving between the 6-year and the 12-year point. By doing so, 
we'll be able to substantially mitigate pressures on our 
training pipeline caused by the projected surge in non-prior-
service members.
    Our retention is the lowest in the mid-career airmen 
category. Currently, our re-enlistment bonus for critical 
specialties is capped at $5,000. We believe a more appropriate 
limit would be $10,000. This would help us sustain our 
readiness posture for rapid mobilization and deployment 
required by today's operations tempo.
    While we strive to ensure parity of pay and benefits for 
all of our members, with deployments at historically high 
levels we must also keep a watchful eye over the families they 
leave behind. The post-September 11 challenges and operations 
tempo of the Air National Guard not only increased our reliance 
on our people, but ultimately placed increased pressures on 
families. We continue to recognize the importance of the family 
as the key tenet of readiness and retention. Family support is 
a readiness issue, and we address it accordingly. We have been 
successful in improving family support because you have given 
us the necessary resources to fund a full-time contracted 
family-readiness position at each wing and combat readiness 
training center.
    Our employers are also a key component of our ability to 
put the right person in the right place at the right time to 
support our national security objectives. The Air National 
Guard could not function without the support of America's 
employers. With the increased utilization of Reserve component 
personnel, employers are being impacted now more than ever.
    In closing, we do not know what the future holds for our 
dedicated men and women. We do know that they have a proven 
track record of rising to every challenge and answering every 
call. We are busier than ever, and we are needed now more than 
ever, and we most certainly need the equipment and resources to 
perform our mission; however, our most precious resource 
remains our people. We are confident that working with you, we 
will remain a premier military organization serving in the 
communities throughout this land, protecting America, at home 
and abroad.
    I thank you again for the opportunity to appear before you 
here today. I look forward to working with you and to answering 
your questions.
    [The prepared joint statement of General Rees, General 
Schultz, and General James follows:]
  Prepared Joint Statement by MG Raymond F. Rees, ARNG; LTG Roger C. 
           Schultz, ARNG; and Lt. Gen. Daniel James III, ARNG
    Mr. Chairman and members of the subcommittee, as always we are 
extremely grateful for this opportunity to talk about the National 
Guard and what it needs to stay strong for America.
    Title 10 of the United States Code invests the Chief of the 
National Guard Bureau with many responsibilities for administering, 
training, organizing, and equipping the National Guard nationwide. I 
appear here today in my capacity as the Acting Chief of the National 
Guard Bureau. I am joined by the Director of the Army National Guard, 
LTG Roger Schultz and the Director of the Air National Guard, Lt. Gen. 
Danny James. Both of them are charged with the statutory duty to assist 
the Chief of the National Guard Bureau in carrying out the functions of 
the National Guard Bureau. They will talk in detail about Army and Air 
National Guard matters respectively. Before they do that, however, I 
would like to mention a few joint, over-arching concerns that apply to 
both the Army and the Air National Guard.
    The issues we address today and many others are covered in the 2004 
National Guard Posture Statement. This document is in the final stages 
of completion and will be available to you and your staff members 
shortly.

                      JOINT NATIONAL GUARD ISSUES

    Perhaps more than at any time in modern American history, both the 
Army and the Air National Guard has responded to the call of America. 
Even prior to September 11, 2001, the National Guard was performing an 
unprecedented amount of duty in support of military operations 
worldwide. Since that time, national guardsmen have come forward in 
huge numbers to fight the war on terrorism both overseas and here at 
home.
The National Guard as a State/Federal Asset--The three duty statuses
    The National Guard can be employed in three separate duty statuses 
and members of the National Guard have been employed heavily in every 
one of them. First is State active duty. State governors call their 
National Guard members to full-time State active duty to provide 
disaster relief or help law enforcement preserve civil order. Since 
September 11, States have also put guardsmen on duty under State-funded 
orders to fight terrorism. They have performed myriad homeland security 
tasks at the State level including guarding ports, bridges, power 
plants, and other key facilities.
    Second, national guardsmen can be employed under 32 USC 502(f) for 
duties funded by the Federal Government but executed under State 
command and control. Nearly all National Guard training is done in this 
status. Civil Support Teams and the National Guard Counter Drug program 
not only train but also conduct operational missions under this status.
    Civil Support Teams use military assets to help State and local 
authorities identify and deal with chemical, biological, radiological, 
nuclear, and high explosive hazards. They are jointly manned by both 
Army and Air National guardsmen. Over the past year the value of these 
teams--and the wisdom of congressional support for them--has been 
demonstrated over and over again. Of the 32 Civil Support Teams that 
have been established, the Secretary of Defense has operationally 
certified 31 of them. We expect the remaining team to be certified 
within days.
    National Guard Counter Drug activities use military assets to help 
law enforcement fight the war on drugs. In many cases, drug money funds 
terrorism. In addition to fighting terrorism indirectly, some of our 
National Guard counterdrug assets have also proven helpful in fighting 
the war on terrorism. Because the military assets are employed by State 
governments, the restrictions of Posse Comitatus do not apply. The 
unique structure of the program allows national guardsmen to provide 
this support to law enforcement without diminishing the readiness of 
National Guard units to perform their Federal mission. Recently we have 
taken steps to ensure that support provided by national guardsmen for 
this mission is reflective military tasks so that doing these missions 
actually strengthens wartime readiness. This program is a valuable tool 
for merging military capabilities with law enforcement. It has 
successfully helped fight drugs. A similar program based on this model 
might be valuable in fighting terrorism.
    Since September 11 the National Guard has also successfully 
performed even more homeland security operations under the Title 32 
duty status as well. When the President asked State governors to employ 
the National Guard to secure America's airports, this was done using 
Title 32 duty. This was highly successful. In addition, Title 32 duty 
is being used to employ national guardsmen for added force protection 
at National Guard facilities nationwide. For homeland security matters 
in which States and the Federal Government have a shared interest, the 
use of the National Guard under Title 32 duty has proven to be a highly 
valuable tool for putting boots on the job.
    The third duty status for national guardsmen, of course, is Federal 
active duty under Title 10 to provide units to the active Army and Air 
Force for war or other national security requirements. This is what we 
train, organize, and equip for. National Guard contributions to the 
Army and the Air Force over the past year will be covered in their 
respective sections below but in both cases, it has been historic.
Mobilization Effects on both Army and Air National Guard
    While it is true that both Army and Air National guardsmen are 
being called away from careers and families for extended periods, the 
members of the National Guard are proud to serve. Given the large 
numbers of guardsmen called to duty, there have been relatively few 
complaints. They train for the mission. They are ready, willing, and 
able to perform the mission when the time comes.
    Even so, there are some issues. One of the negative impacts of the 
increased level of mobilizations has been the disparity in benefits. 
Members of the National Guard mobilized under Title 10 are protected 
under the Soldiers and Sailors Civil Relief Act. Those serving under 
Title 32 are not protected.
    The increased use of the National Guard has intensified our need 
for more full-time manning. We are a force largely of traditional part-
time citizen-soldiers and airmen. The few full-time people we do have 
are crucial to performing the administration and training preparation 
necessary to make productive use of the limited training time available 
to the traditional drilling members.
    We are working successfully with both Services to establish a truly 
joint State headquarters. This will enhance jointness in the National 
Guard right down to the State level. More importantly it has the 
potential to greatly strengthen mobilization as well as operational 
capabilities here in the United States.

Homeland Security
    The National Guard is poised to play important roles in homeland 
defense including missile defense, air sovereignty, and information 
operations among others. In addition to these military missions here 
inside the United States, the National Guard Bureau will also 
facilitate military support to civil authorities by the Army and Air 
National Guard. Military support to civil authorities includes domestic 
disaster relief operations that occur during fires, hurricanes, floods, 
and earthquakes. Our support also includes counter-drug operations and 
incident management assistance, such as would occur after a terrorist 
event employing a weapon of mass destruction.
    Under Title 10, the National Guard Bureau is the official channel 
of communications between the States and the Departments of the Army 
and the Air Force. Recently we have coordinated with the Combatant 
Commander of U.S. Northern Command to perform that same role for 
NORTHCOM. As part of this, the National Guard Bureau provides 
situational awareness on State-commanded National Guard operations to 
the Commander of U.S. Northern Command to augment his ability to 
effectively plan for and manage the overall role of his command.
    The National Guard Bureau's capability as a two-way channel of 
communication to the National Guard of the several States is a valuable 
tool in the homeland defense and homeland security environment. We are 
pursuing some discussions and initiatives inside the Department of 
Defense to better exploit that capability for all segments of the 
Department of Defense.
    The fight against terrorism and the protection of our homeland is 
expected to be a protracted endeavor much like the Cold War. To that 
end, many policy experts, reports, and studies have advocated an 
expanded role for the National Guard in homeland security. While some 
have suggested that the National Guard should be reoriented, 
reequipped, and retrained for the homeland security mission, the 
reality is that the National Guard is an integral part of the Army and 
Air Force Total Force mission capability and that role is vital to the 
survival of the Nation. In the past the resources, personnel, 
equipment, and training provided for the wartime mission were 
sufficient to allow the National Guard to also fulfill its local and 
State support role by responding to local disasters and military 
support to civilian authorities. Times have changed, however. The 
threat posed by well-financed, sophisticated, and determined 
international terrorist groups has raised the bar as to what the 
National Guard must be able to do. While the National Guard will 
continue to maintain a high state of readiness for overseas operations, 
it must also better prepare itself to respond to the homeland security 
mission within the United States. Both at the National Guard Bureau and 
in the States, the National Guard is working hard to find ways to meet 
the increased demands of the homeland security mission while still 
maintaining its ability to execute its Total Force requirements.
    The National Guard Bureau will work with the States as they 
identify what additional homeland security capabilities they need. We 
plan to consolidate and validate the stated requirements and help find 
solutions.
    The road ahead also includes a transformation of National Guard 
counterdrug efforts into an integrated Counter Narcotics/Homeland 
Defense Counterterrorism program. These mission areas employ many of 
the same tactics, techniques, and procedures, as well as equipment, 
training, and skills. Therefore, a great deal of cross-skill transfer 
will begin immediately once the change is effected, and a quick, 
effective, seamless transition between and across mission sets will 
allow Guard troops to readily take their places on the front lines of 
the war against terrorism at home and abroad.

Conclusion
    The men and women of the Army and Air National Guard are extremely 
busy. Thousands are away from their families and their careers, serving 
in uniform for their State or the Nation in the global war on 
terrorism. They are making significant sacrifices. Even so, they are 
enthusiastic about serving and do so with fierce pride and determined 
competence. They prove everyday that when America needs the National 
Guard, the National Guard is there. We have a non-negotiable contract 
with the American people to win our Nation's wars and are entrusted 
with their most precious assets, America's sons and daughters. These 
sons and daughters are proud and patriotic members of the Army National 
Guard family.

                          ARMY NATIONAL GUARD

    The Army National Guard plays a crucial role in providing security 
to the Nation, the Nation's citizens, and the interests of the country 
overseas. We fulfill our role in the National Military Strategy by 
supporting combatant commanders and conducting exercises around the 
world. Within our borders, Guard soldiers continue to provide 
assistance to victims of disaster and protection from our enemies. Our 
soldiers always stand ready to support the United States and its 
citizens whenever and wherever they are needed.

Operations Noble Eagle and Enduring Freedom
    From September 2001 to September 2002, the Army National Guard 
alerted and mobilized more than 32,000 soldiers throughout the country 
and around the world, fighting the global war on terrorism and 
defending freedom with our engagement in numerous operations. Operation 
Noble Eagle has mobilized in excess of 16,000 soldiers from 36 States 
and Territories to provide force protection at various Department of 
Defense facilities and at our Nation's borders. Operation Enduring 
Freedom has mobilized about 16,100 soldiers from 29 States and 
Territories to support the global war on terrorism in Southwest Asia 
through the U.S. Central Command area of operations. Army National 
Guard soldiers are also involved in other peacekeeping operations 
throughout the world.

Army National Guard Anti-Terrorism Force Protection
    In fiscal year 2002, the Army National Guard provided soldiers for 
deployments in the continental United States and overseas. Almost 
20,000 soldiers worked 1,490,000 mandays conducting force protection 
missions and executing border security missions at 83 sites owned by 
the Army Material Command, the U.S. Army Training and Doctrine Command, 
the U.S. Army Forces Command, the Immigration and Naturalization 
Service, and the U.S. Customs Service. The National Guard supported 
homeland defense missions by guarding airports, nuclear power plants, 
domestic water supplies, bridges, and tunnels in support of the State 
Governors.
    The Army National Guard's Anti-Terrorism Force Protection and 
Physical Security programs provide for security and protection of 
facilities, personnel, and equipment, as well as the monitoring and 
maintenance of intrusion detection systems that detect and assess 
threats at 397 critical sites. Intrusion systems, closed circuit 
television, and access control systems decrease the number of personnel 
needed to guard facilities as well as prevent personnel from exposure 
to potentially harmful situations. Increasing security systems saves on 
personnel costs, requiring fewer soldiers to guard Department of 
Defense facilities, equipment, and property and are channeled instead 
into mission deployment or crisis management.

Contingency Operations
    The Army National Guard has assumed the lead as the stabilizing 
force in the Balkans and in Southwest Asia. Six Army National Guard 
brigades and numerous battalions participated in rotations as part of 
the Multinational Force Observers in the Sinai, and in Southwest Asia, 
providing support to the Air Defense Artillery units in Kuwait and 
Saudi Arabia. The Army National Guard is scheduled to provide Division 
Headquarters and maneuver units to four of the next six rotations to 
Bosnia.

Military Support to Civilian Authorities
    Since September 11, 2001, Army National Guard soldiers have 
responded to 263 requests for emergency support for a total of 645,419 
mandays. These soldiers provided security, logistics support, 
transportation, and family care centers. They worked in support of 
World Trade Center relief, the Winter Olympics, and security at 
American icons such as Mount Rushmore, the Boston Marathon, and the 
Superbowl in Louisiana. Major wildfires involving 21 States and 
consuming over 6.6 million acres required 47,519 mandays of support. 
The Army National Guard provided aviation support with water-bucket 
drops, security, and command and control as needed. The Guard's 
soldiers supported flood recovery operations in Kentucky, West 
Virginia, Tennessee, and Texas for a total of 23,882 mandays.

Extensions of Mobilizations Beyond One Year and Repeat Mobilizations
    More than 6,100 ARNG soldiers currently are affected by either 
repeat mobilization or extension of their mobilization for a second 
year. A total of 41 units have been or currently will be mobilized for 
a second time since January 2001. These repeat mobilizations affect 
units either in whole or significant part. These repeat mobilizations 
include units mobilized under Presidential Reserve Callups for Bosnia, 
Kosovo, and Southwest Asia, as well as under Partial Mobilization for 
MFO-Sinai and Operations Enduring Freedom and Noble Eagle. The most 
affected unit type is Military Police. Of the total 41 units and 5,600 
soldiers concerned, more than half--23 units and 3,090 soldiers--are 
Military Police. Other affected unit types include Aviation (Air 
Ambulance), Army Oil Analysis Program Lab, Engineer, Military 
Intelligence and Air Defense.
    The number of soldiers currently in their second year of continuous 
mobilized service is 531. A total of 354 have been extended for 
Operation Enduring Freedom; 177 have been extended for Operation Noble 
Eagle. Extensions primarily are due to High Demand/Low Density nature 
of affected units, or due to the specialized nature of the skills 
required. Units and skills affected include Military Police, Special 
Operations Forces, Military Intelligence, Military History Detachments, 
Chaplains, and Information Operations.

Recruiting and Retention
    The United States cannot undertake any worldwide military 
contingency or operational effort without the National Guard. The 
events of September 11, 2001 have placed increased demands on the Army 
National Guard. Manning and maintaining a viable force is our number 
one priority. There are new challenges today--the unknown impact of 
war, the lowered propensity for enlistment, retention challenges for 
soldiers returning from mobilization, and the continued competition 
with civilian sector all impact our ability to recruit and retain. But 
there are always challenges. Over the course of the last 8 years, the 
Army National Guard has maintained a quality force, meeting our 
congressionally mandated end strength objectives. We will continue to 
be successful in fiscal year 2003 and in the future.
    Last year, fiscal year 2002, we achieved an end strength of 
351,078, representing 36,441 officers and 314,629 enlisted soldiers. 
The Army National Guard met our accession goal, recruiting 32,811 non-
prior service and 30,448 prior service soldiers. We exceeded both our 
first-term and career retention goals.
    In fiscal year 2003, we must enlist 62,000 soldiers, 32,865 non-
prior service enlistments, and 29,935 prior service soldier contracts. 
To date, we are experiencing a slight decrease in both non-prior 
service and prior service accessions. These challenges are not 
insurmountable. We are making adjustments to our national and by-State 
strength plans to meet our objectives. We are not seeing an increase to 
our attrition and retention numbers, based on increased demands. We 
are, however, working plans to address the possibility of higher 
attrition rates upon demobilization of our soldiers. There is no 
current indication that this will be problematic.
    How we treat our mobilized soldiers, and more specifically, their 
families, will determine if our soldiers stay or leave the service 
after deployment. Family readiness, family assistance centers, and 
overall family care is critical to our long-term success. Many of the 
Guard families are not located in close proximity to military 
facilities. We are aggressively establishing and manning family 
assistance centers across America to ensure our family needs are met. 
Our outreach programs are not optional, we have an obligation to 
provide assistance to our Guard dependents. Our goal is to have 100 
percent contact with every family member through active outreach. 
Continued support of these programs is critical.
    Our inducement programs--bonuses, incentives, and education 
programs have been successful in attracting quality enlistments to 
critical positions, and retaining trained, qualified, and ready 
soldiers. As in the past, the Guard places great emphasis on our 
educational benefits which include Federal tuition assistance, 
Mongomery GI Bill, tuition assistance within the States, and 
specialized education programs to assist our soldiers in degree 
planning and lifelong learning. Education increases the wellbeing of 
the soldier, their families, and their potential in society. Soldiers 
that participate in education programs are much less likely to leave 
our ranks.
    Today, we offer a non-prior service and prior service bonus for 
critical skills. We also offer a retention bonus for qualified 
soldiers. These programs have allowed us to meet our strength 
objectives while tailoring the force to meet specific manpower 
requirements. We see continued funding of these incentives as critical 
to our success today and in the future.
    The Army National Guard is active in the Army's Well-Being 
initiative. As Lieutenant General Le Moyne, the Army G-1, testified 
before this committee last week, ``we recruit soldiers, but retain 
families''. The well-being of our soldiers, retirees, veterans, 
civilian workforce, and their families is important to our ability to 
meet the Nation's call to arms. No where else is this more important 
than with our citizen-soldiers. We will continue to work hand-in-hand 
on this important initiative.

Accelerated Officer Candidate School Program
    The Army National Guard initiated a very successful accelerated 
Officer Candidate School Program in 1996. This accelerated program cuts 
11 months off the traditional course duration (8 weeks of full-time 
versus 13 months of part-time training). This is particularly 
beneficial to States experiencing large company-grade officer 
vacancies. Class sizes were increased to 200 students in 2001 and to 
400 students in fiscal year 2002 to meet the forecasted training 
requirements submitted by the States. Moreover, an additional class was 
conducted beginning in January 2003 to support the current war effort. 
The Army National Guard will continue to grow the program to address 
the shortage of company-grade officers.
Initial Entry Training Management
    The Chief of Staff of the Army has provided guidance to the Reserve 
component to have at least 85 percent of assigned soldiers qualified in 
their duty specialties by fiscal year 2005. The Army National Guard 
fully intends to meet or exceed this goal, funding this program at 95 
percent of validated requirements for fiscal year 2004. In the past, 
the Army National Guard has had difficulty getting the proper Initial 
Entry Training quotas to meet the demands of the force. As a result, 
the Army National Guard has been lacking in qualified personnel in 
certain occupational specialties. These shortages affect its ability to 
mobilize and/or deploy.
    In order to meet the quota goal, the Army National Guard has taken 
input from the Adjutants General and has developed a new Initial Entry 
Training management system. This system has refined the Army National 
Guard's ability to accurately forecast Initial Entry Training 
requirements. These forecasts will more closely match those necessary 
to meet Army National Guard readiness goals than previous methods.

The Army School System and Qualifying Army National Guard Soldiers
    The Army School System is a multi-component organization of the 
United States Army Training and Doctrine Command, the Army National 
Guard, and the U.S. Army Reserve that has been organized to deliver 
Military Occupation Skills Qualification Reclassification, 
Noncommissioned Officer Education System, Officer Education System, and 
functional military courses. This system provides the National Guard 
with the means to train and retain quality soldiers and leaders who are 
so essential to rapidly and effectively responding to the Federal 
mission or to missions of homeland defense.
    The Army National Guard has developed an In-Unit Training program 
that has enhanced the ability to produce a larger number of soldiers 
who have achieved Duty Military Occupational Skill Qualification. The 
Army National Guard has also provided Mobile Training Teams overseas to 
sustain the training of its soldiers who are deployed around the world. 
The Army Guard and Reserve instructional, training development, and 
budget management staffs are combining efforts to build a future United 
States Army Training and Doctrine Command that can deliver seamless 
training to standards as part of the institutional training within the 
Army.
    The Army National Guard supports the initiative by the Army Deputy 
Chief of Staff for Personnel to hold selective retention boards that 
will allow selected captains and majors to be retained so that they may 
reach 20 years of active service. The Army National Guard also supports 
the Deputy Chief's initiative to select captains for promotion who do 
not possess a baccalaureate degree or military education certification. 
The actual promotion to the next higher grade will become effective 
once the individual completes the required civilian or military 
education.

Army National Guard Medical and Dental Readiness
    Individual medical readiness of Army Guard soldiers has become a 
heightened priority since September 11, 2001. Individual medical 
readiness requirements include immunizations, dental, and medical 
screenings. The speed at which units deploy today places significant 
time constraints on the Guard to properly identify or correct medical 
or dental deficiencies at mobilization stations.
    In October 2001, the Army National Guard initiated the Medical 
Protection System, an automated tracking system for medical and dental 
records. This system also tracks physical exam readiness data, as well 
as HIV and DNA readiness data on file at the Army and Department of 
Defense repositories; it is used at mobilization stations to verify 
individual medical readiness in the Mobilization Level Application 
Software. When fully implemented, the system will allow commanders and 
human resource managers to monitor individual medical readiness of 
their soldiers. Resources can then be directed where needed, and early 
decisions can be made regarding the readiness of individuals and units 
to be deployed.
    It is important to understand that with very few exceptions, Army 
National Guard soldiers are not entitled to medical or dental care for 
pre-existing disorders, only for injury or illness incurred in the line 
of duty. Dental readiness is particularly problematic. Both Congress 
and Department of Defense have attempted to positively influence dental 
readiness, but the remedy is not yet available. Units are still 
arriving at mobilization stations with soldiers in need of dental care 
to bring them to deployment standards.
    If the Nation continues to utilize the Army National Guard and Army 
Reserve in support of the global war on terrorism, it must ensure that 
these Reserve components maintain the same high level of medical 
readiness as the active component.

Full-Time Support
    Recent events, including fighting the global war on terrorism, 
underscore the vital role full-time support personnel have in preparing 
Army National Guard units for a multitude of missions both in the 
homeland and abroad. Full-time support is a critical component for 
achieving unit-level readiness during this period in the Nation's 
history. To meet readiness requirements, the Chief, National Guard 
Bureau, in concert with the State Adjutants General, has placed 
increasing full-time support authorizations as the number one priority 
for the Army National Guard. Those full-time Guard members are 
responsible for organizing, administering, instructing, training, and 
recruiting new personnel, as well as the maintenance of supplies, 
equipment, and aircraft. Full-time support personnel are critical links 
to the integration of the Army's components and remains the Army 
National Guard's number one priority.
    Three years ago the Army conducted an extensive review of its 
Reserve component FTS requirements. As part of this process, the Army 
developed a FTS ``high risk'' requirement, defined as ``the level of 
FTS below which units cannot maintain minimum standards for 
readiness''. The ASA (M&RA) and Army G3 approved an incremental ramp in 
fiscal year 2000 to achieve the high risk level of support NLT fiscal 
year 2012. Funding for incremental growth along the ramp was programmed 
in POM fiscal year 2004-2009. The ramp increase funds an additional 724 
Active Guard and Reserve (AGR) and 487 Non-dual Status Military 
Technicians each year until the high-risk level is achieved.
    Requirements for ARNG FTS requirements have increased commensurate 
with the global war on terrorism and homeland security. Consequently, 
the ASA(M&RA) and the Army G-3 and have approved a 798 AGR requirement 
increase to support high priority emerging missions/initiatives. These 
requirements have been leveraged across the ARNG AGR FTS ramp, with the 
ramp now reflecting spikes in given years corresponding to respective 
implementation timelines. These increases are in addition to annual 
increases programmed in POM 04-09 for the high risk ramp. Categories 
with FTS increases include Ground-Based Midcourse Defense, NGB Homeland 
Security and Liaison Offices, Weapons of Mass Destruction--Civil 
Support Teams, and Transformation Installation Management.

Mobilizing Active Guard and Reserve Soldiers Under Title 32
    The Active Guard and Reserve program is designed to ensure that the 
training and readiness of Army National Guard soldiers are maintained 
at a high level. These codes have very specific limits on how the Army 
or the States and territories can utilize their Active Guard and 
Reserve Force in times of need.
    The events of September 11, 2001, brought these limitations to the 
forefront. Under Title 32, Active Guard and Reserve soldiers are not 
authorized to support State missions after 72 hours unless specific 
criteria are met, such as the imminent loss of life. The inability of 
State Governors and Adjutants General to utilize all of their full-time 
soldiers caused some significant organizational and leadership problems 
within affected formations.
    Active Guard and Reserve members are critical assets to the force, 
enabling units to rapidly respond to State emergencies and homeland 
defense efforts.

Ground-Based Midcourse Defense Program
    The National Guard is playing a significant role in the defense 
against ballistic missile threat by organizing, manning, and deploying 
Ground-Based Midcourse Defense Units. The Army National Guard received 
approval to activate a Missile Defense Brigade, based on the results of 
the Total Army Analysis 2009. The Brigade Headquarters will be located 
in Colorado and the first Battalion will be located in Alaska. These 
organizations will serve as the cornerstone for the Ground-Based 
Midcourse Defense program.
    The Missile Defense Agency, Ground-Based Midcourse Defense-Joint 
Program Office has agreed to provide pay and allowance for initial 
personnel required for this program in preparation for Initial 
Defensive Operations beginning in fiscal year 2004.
    As critical as this mission component is to the national defense, 
it requires adequate full-time manning to achieve full operational 
capability. By offering the needed manpower to the Army Space Command 
and the Space and Missile Defense Command, the Army Guard will provide 
this primary land-based homeland defense system.

Guard Knowledge Management
    The Guard Knowledge Management Initiative and the Distributive 
Training Technology Project support the Army National Guard's ability 
to maintain and improve individual and unit readiness, the ability to 
mobilize, and quick, efficient deployment.
    Through the effective integration of information technology 
programs and implementation of Knowledge Management initiatives, the 
Army Guard is enhancing its capability to identify, distribute, and 
access critical information that directly impacts the Army Guard's 
ability to meet readiness goals and mission objectives.
    For example, the Army National Guard saves money and resources and 
heightens readiness by providing increased foreign language sustainment 
and enhancement training using distance-learning technologies. 
Courseware is being developed at several sites throughout the United 
States, including Iowa, Pennsylvania, Arizona, Arkansas, and New 
Jersey. In addition, the Vermont Army National Guard has been 
conducting Information Operations training since February 1999 for all 
components of the Army. The Army National Guard made full use of its 
Knowledge Management capabilities to conduct extensive pre-deployment 
training for the 29th Infantry Division (Light) Headquarters for their 
peacekeeping rotation in Bosnia.
    The Army Guard has also partnered with the National Air and Space 
Administration to deliver a wide array of educational content to young 
people to stimulate interest in science, math, and technology. The Army 
National Guard is building on these and other success stories to help 
increase readiness through a vigorous implementation of Knowledge 
Management principles.

Army National Guard Restructuring Initiative
    On September 8, 2002, the Secretary of the Army, Honorable Thomas 
E. White, introduced the Army National Guard Restructuring Initiative 
at the 2002 National Guard Association of the United States Annual 
Conference. Mr. White stated that ``in light of our new plan for 
national defense [we] are now undertaking a new initiative which we 
will call the Army National Guard Restructuring Initiative. Whereas the 
original initiative Army Division Redesign Study converts combat 
formations to support structure, the new initiative restructures a 
sizeable portion of the National Guard combat formations to better 
support our combatant commanders' requirements.''
    The concept is to convert existing heavy and light combat structure 
to new designs that better support Combatant Commanders (including the 
new Northern Command) under the new defense strategy. Tentatively 
called Multi-Functional Divisions and Mobile Light Brigades, these new 
organizations will be first and foremost warfighting organizations 
prepared for full spectrum operations. The first unit could begin 
conversion as early as fiscal year 2005.
    The conversion to these new organizations, combined with efforts 
already under way as part of the Army National Guard Division Redesign 
Study effort, will result in a 30 percent decrease in the current 
number of tracked vehicles in Army Guard Combat Divisions and Brigades. 
Although this constitutes a reduction of heavy assets, the National 
Guard is determined to ensure that the Army Guard does not maintain 
obsolete systems that are inconsistent with future Army operational 
concepts including unit design, support, and sustainment.

Army National Guard Aviation Transformation and Modernization
    Army National Guard aviation is one of the Nation's highest value 
assets for both wartime and peacetime missions. In wartime, these Army 
National Guard aviation units provide the sustaining and reinforcing 
power required for successful execution of the National Military 
Strategy, as well as the most readily available Army aviation assets 
for homeland defense. In peacetime, these critical aviation assets are 
equally important for the widest possible range of missions at both the 
State and regional levels. These peacetime missions range from Air 
Ambulance, Search and Rescue, and Counterdrug support in areas having 
no such civilian capacity, to wide-scale and timely response to both 
natural and man-made disasters.
    The Army National Guard's aviation units continue to contribute 
almost half of the Army's aviation structure, including Counterdrug 
Reconnaissance and Aerial Interdiction Detachments in 37 States and 
Territories, which use specially modified OH-58 observation aircraft to 
support Federal, State, and local law enforcement agencies with 
counterdrug efforts in the U.S. These units are also postured to 
support homeland defense efforts. Six of these units were deployed 
along the northern border supporting the U.S. Border Patrol and 
Operation Noble Eagle during fiscal year 2002.
    Since fiscal year 2002, the Army's aviation transformation effort, 
coupled with other aviation modernization and recapitalization 
improvements, has not only significantly improved the readiness and 
capabilities of Guard aviation units, but also has reduced the overall 
aviation footprint.
    While significant quantities of modern series UH-60, CH-47, and AH-
64 aircraft have been cascaded from active Army units to Army Guard 
units, the associated equipment (tool set, tool kits, test equipment, 
and parts) critical for the successful support of these aircraft has 
not kept pace. Current Army procurement levels will leave the Army 
Guard permanently short of its required number of aircraft. In 
addition, many of the remaining allocated aircraft are not scheduled 
for upgrade to the most current standard configurations.

Army National Guard Permanent Electronic Records Management System
    The Army National Guard's Permanent Electronic Records Management 
System is a web-based system utilizing digital imagery to store and 
retrieve personnel records. The importance of the Permanent Electronic 
Records Management System lies in its seamless records management 
capability throughout the Army, enhancing both mobilization and 
personnel readiness.
    By consolidating the administrative operations of human resources 
in one place, the Permanent Electronic Records Management System allows 
personnel records to follow a soldier regardless of component. In the 
past, the system was slow and labor-intensive, resulting in pay 
problems, promotion delays, difficulties in making new assignments, and 
low personnel morale. Fixing the problem involves the conversion of 
paper files to electronic files; and is a practice currently used by 
the Department of the Army for all of its personnel actions. At present 
the Army National Guard is the only military component that lacks 
electronic records storage capability.
    Under the Department of Defense's vision for a ``paperless 
environment,'' the Army National Guard will be required to provide 
electronic capabilities for personnel records in the 50 States, 3 
Territories, and the District of Columbia.
    The Army National Guard will adopt an Automated Selection Board 
System to support and improve the process under which information and 
votes regarding personnel actions are processed by military personnel 
boards.
    Departing from an obsolete ``paper'' system to a digital system 
that views data and images from the Permanent Electronic Records 
Management System and the Department of the Army Photo Management 
Information System. However, once the Automated Selection Board System 
is adopted, it will save the Army National Guard more than $150,000 per 
year in microfiche production and postage costs.
    This system is essential to achieve and fully support personnel 
transformation. The Army National Guard must remain interoperable with 
the Army and the Army Reserve by adopting this system. The conduct of 
boards at the State level will become extremely cumbersome due to 
unavailability of routine printed information. By failing to adopt the 
Automated Selection Board System, the Army National Guard will be 
required to download paper copies of an automated viewing and storing 
system.

Conclusion
    The Army National Guard comprises diverse individuals from all 
walks of life united by the desire to keep the American people safe and 
secure. Many soldiers in the Guard leave behind promising career tracks 
and loving families to serve their country without compromise or 
hesitation. These soldiers lead dual lives; their sacrifices are 
overwhelming and should not be forgotten nor discounted.
    While it has succeeded on many fronts, certain challenges still 
face the Army National Guard. The issues of recruitment, retention, and 
subsequent development of junior officers continue to be areas of 
discussion. Dental and medical care remains lacking for many soldiers 
in the Guard.
    Army National Guard soldiers have accomplished much work in the 
past fiscal year, providing relief to victims of catastrophes, security 
at numerous vulnerable locations, and mobilization to various military 
operations world-wide. The Army National Guard, the crucial foundation 
of the Army, reinforces and augments the efforts of fellow soldiers to 
ensure that objectives are achieved and initiatives are met.

                           AIR NATIONAL GUARD

    We are pleased to report that your Air National Guard is truly more 
relevant and more involved in global operations and defense of this 
Nation than anytime since the Korean War. The fruits of many years of 
training, preparation, and commitment to combat readiness--made 
possible in no small part by this committee's support--have come to 
fruition in a scope of participation even the most ardent of Total 
Force advocates may not have envisioned.
    Today, nearly 50 percent of the Air National Guard, including 
16,000 plus mobilized members or volunteers are serving around the 
world. Our new motto ``Ready, Reliable, and Relevant'' is perhaps an 
understatement of the great things our women and men are doing in 
service of our Nation. We have quite a story to tell, and are proud to 
be the conduit of our story on behalf of over 110,000 patriots that 
comprise your Air National Guard today.
    The close relationships we have maintained with our communities 
throughout our history make it possible for us to answer our Nation's 
call during this global war on terrorism. Our communities' support, and 
the unselfish support of our employers, has truly been awe-inspiring. 
To provide a historical perspective, our mobilized numbers over the 
last year and a half, totaling over 30,000 people, exceed our 
involvement in all other conflicts in the last 25 years combined. Only 
the Korean War has involved more Air National Guard members in a 
mobilized status. We are proud to serve and solicit your continued 
support as we perform our dual mission as citizen airmen protecting our 
country here at home and around the globe, filling Aerospace 
Expeditionary contingency and steady state requirements. Our members' 
service is not without sacrifice and their sacrifice is not without 
meaning.
    The role of the Air National Guard has evolved dramatically since 
the end of the Cold War to our current war on terrorism. The Department 
of Defense Total Force policy requires a greater integration of the 
Active and Reserve Forces. Our members continue to be to called upon at 
an unprecedented frequency and durations.
    For fiscal year 2002, the Air National Guard's programmed end 
strength was 108,400. For the first time in over 10 years, our assigned 
strength exceeded the programmed end strength throughout the entire 
fiscal year. In fact, the Air Guard's average assigned strength 
throughout fiscal year 2002 was 102.5 percent and we ended this fiscal 
year at 103.4 percent of our programmed strength.
    This situation was primarily a result of two factors; first, the 
implementation of Stop Loss during fiscal year 2002 that served to 
reduce separations; and second, the outstanding work of our recruiting 
force which exceeded their recruiting goal during a very difficult 
year.
    With regard to Air National Guard retention, our rate since fiscal 
year 1997 has averaged approximately 89.5 percent. At the conclusion of 
fiscal year 2002, the Air Guard's retention rate stood at 92.7 percent. 
Personnel shortages remain in some critical specialties, primarily our 
aircraft maintenance career fields. We have placed emphasis on these 
and other career fields by offering enlistment and reenlistment 
bonuses, and other incentives such as the Student Loan Repayment and 
Montgomery GI Bill Kicker programs. As a result, in many of our 
critical maintenance specialties, we have seen real strength growth 
from 2 to 6 percent over the last 2 fiscal years. These incentives have 
contributed greatly toward enticing and retaining the right skill for 
the right job. Your continued support for the Student Loan Repayment 
and Montgomery GI Bill Kicker programs is critical to our success in 
attracting and retaining people in critical skills.
    We would like to thank Congress for recently passing two pieces of 
legislation that will significantly aid the Air National Guard's future 
recruiting and retention efforts. Specifically, allowing us to increase 
the prior service accessions bonus from $5,000 to $8,000. Our 
recruiting depends heavily on our ability to attract former service 
members into the Air Guard, and our combat readiness is greatly 
enhanced through the use of their prior training and acquired skills. 
Second, your initiative to increase the eligibility period for the 
Montgomery GI Bill from 10 to 14 years should be of tremendous 
assistance in further improving the retention of our airmen. Both of 
these programs will pay the Air National Guard substantial dividends 
for many years to come.
    However, for the Air National Guard to adequately compete for 
today's youths and reach prior service members, it is paramount that 
adequate resources be devoted to marketing our message. At our present 
funding level, we are unable to establish or launch any paid broadcast 
advertising for the Air Guard. As a result, we have not optimized the 
opportunity to connect with the American public or to enhance the image 
of the Air National Guard. In today's mass media advertising 
environment, to effectively compete we need to use this medium. The 
next 5 years for the Air National Guard's recruiting and retention 
programs will be crucial. Approximately 47 percent of our Air Guard 
members currently have 16 or more years of service. Without additional 
resources for our advertising and awareness programs, our ability to 
motivate and attract young Americans into the Air National Guard will 
be severely curtailed.
    We must also strive to retain the backbone of the Air Guard--our 
mid-term airmen. Our lowest retention rate among the three enlisted 
career status categories (first term airmen, mid-career airmen, and 
career airmen) is an airman with between 6 and 12 years of service. 
Currently, a reenlistment bonus for critical specialties is capped at 
$5,000. We believe a more appropriate limit would be $10,000. Raising 
this limit would allow us to pay those personnel who have shown a 
commitment to serve a bonus equal to or greater than the amount of that 
allowed for prior service members initially entering the Air Guard. 
Consideration to enhancing the reenlistment bonus is also vital from 
the standpoint of the Air National Guard's recent change in the 
accession force mix. In fiscal year 1997, the Air National Guard 
recruited 64 percent prior service personnel. In the last 5 years 
ending in fiscal year 2002, that figure had dropped to 49 percent. As a 
result, recruiting more non-prior service personnel became the norm in 
order to meet our programmed end strength, and impacted our ability to 
obtain sufficient training slots. Further, with recent declines in our 
School Workday Program, every airman we retain reduces costs and 
relieves the pressure on an already strained training environment. This 
enhancement is essential if we are to retain our highly trained, 
experienced, and skilled mid-term airmen and to sustain our readiness 
posture for rapid mobilization and deployment. By keeping our 
experienced personnel, we reduce recruiting and training requirements 
and continue to build and maintain our technical expertise.
    Despite the current operations tempo, I am confident our retention 
rates will remain high. We have just completed an Air National Guard-
wide survey, and the results indicate that at least 82 percent of our 
people are committed to stay, 7 percent said they will leave, and the 
remaining 11 percent are unsure. The survey also revealed that quality 
of life issues--pay, support for the families, and support for and from 
the employers--are important factors regarding retention, not tempo. 
This is a good news story because it has the potential to positively 
impact those members committed to stay and influence those separating 
or who are unsure, with the proper support. The survey also highlights 
that the most critical element of retention--quality of life--with the 
support of this committee, is within our control.
    We thank Congress for the many TRICARE initiatives outlined in the 
fiscal year 2003 NDAA that were designed to improve the quality of 
service to our beneficiaries. The fiscal year 2003 NDAA extended 
TRICARE eligibility to Reserve dependents residing in remote locations 
without their Reserve sponsors.
    During the past year the Air National Guard continued to see an 
increase in Aviator Continuation Pay (ACP) take rates. Currently 508 
out of 618 eligible (82 percent), Air National Guard Active Guard 
Reserve pilots have signed up for the bonus. ACP has accomplished its 
goal by retaining qualified instructor pilots to train and sustain our 
combat force--a critical force enabler in today's crisis environment.
    The increased emphasis on the Total Force and expanding reliance on 
the Reserve component necessitates equitable pays for equitable work. 
Consideration for payment of special and incentive pays for Reserve 
component personnel, at the same level as their active duty 
counterparts, should be given to those members who meet the same 
thresholds of proficiency.
    Although the Air National Guard received the majority of all formal 
training allocations requested for fiscal years 2004-2006, including 
significant increases in Security Forces, Intelligence Applications, F-
16 Crew Chief and Communications, current fiscal year 2003 execution 
year allocation shortfalls continue in 18 Air Force Specialty Codes. 
Even with the increased allocations in these and other Air Force 
Specialties commencing in the fiscal year 2004 execution year, it 
remains questionable if demand will continue to outpace supply in these 
or other areas in the future.
    We have taken major steps to help offset the training capacity 
shortfalls the Total Force is seeing during these transformation years. 
These include the standup of the following graduate level flying 
training units: KC-135E at McConnell AFB, KS; F-16 units at Kelly 
Field, TX and Springfield, OH; and the F-15C unit at Klamath Falls, OR, 
107th. The Air Control Squadron in Phoenix, AZ has converted to a 
schoolhouse to train Air National Guard and active duty air weapons 
controllers. However, the shortfall in the search and rescue aircrew 
training capacity is a major constraint today and in the foreseeable 
future. This shortfall will negatively impact the operational readiness 
and manning of our operational units. Search and rescue unit readiness 
should be a top priority for all our forces, especially today during 
our ongoing fight against terrorism, when there could be a downed 
aircrew member at any moment. We need to have the resources, parts, and 
manning available to alleviate these training shortfalls.
    The Air National Guard continues to expand Advanced Distributed 
Learning (ADL) as a prime training vehicle for our members. As a 
forerunner in this dynamic medium, the satellite-based Air National 
Guard Warrior Network transports training and information to our 
members at 203 downlink sites throughout the Nation. The Air National 
Guard also uplinks training from three production studios in Knoxville, 
TN; Panama City, FL; and Andrews AFB, MD. In addition to training 
delivery and production, these studios also serve as full communicative 
links to the states and territories in times of national and local 
contingencies. The Andrews studio provided timely updates to the field 
in support of Operation Noble Eagle. From the Air National Guard 
Training and Education Center in Knoxville, TN we transported critical 
information for the F-16 community concerning their new wheel and brake 
assembly. This training saved over $480,000 in costs associated with 
travel and time away from maintainer's home stations. We also continue 
to enjoy good working relations with the Federal Judiciary Training 
Network, providing the uplink for their training to all the Federal 
courts. The Air National Guard has joined with the Army National Guard 
in sharing electronic classrooms and training development in our common 
communities. These partnerships serve to establish a ``Total-Guard'' 
learning network, and are saving millions of dollars by avoiding 
duplication of training systems and products. Furthermore, the Air 
National Guard Warrior Network will serve as a valuable asset to 
homeland security teams, where vast audiences can be connected for 
timely information or training.
    Many National Guard units are developing cooperative agreements 
with local industry and academia to share development of Advanced 
Distributed Learning products and reinforce community relations. 
Project Alert in Nebraska (one such agreement) completed the conversion 
of 23 training courses to CD-ROM and Web-based training during the past 
calendar year, and is currently working to convert 28 more courses. 
These courses not only benefit the National Guard, but are applicable 
to other Federal agencies as well. The Defense Equal Opportunity 
Management Institute will receive the lion's share of these courses for 
use in the upcoming academic year.
    We continue to work with the DOD and all the Federal training 
communities in developing and delivering expedient learning pieces. 
These cooperative efforts are helping to increase unit and member 
readiness. The Air National Guard needs to be positioned to compensate 
learners, to assist with computer acquisition (or accessibility), 
Internet access, and to convert courses into a deliverable format.
    The Air National Guard has continually recognized the importance of 
family readiness as a vital component of overall mission readiness and 
personnel retention. There is a strong connection between how well 
members of the Air National Guard function when called to duty and 
their level of assurance that their families are being well cared for 
at home. The mandate of the Family Program is to help families prepare 
in every way. We have been successful in improving family support 
because you have given us the necessary resources to fund a full-time 
contracted family readiness position at each Wing and Combat Readiness 
Training Center. The post-September 11 changes in operational tempo of 
the Air National Guard increased the reliance on our members and the 
subsequent demand being placed on their families.
    In order to enhance family support and sustain overall readiness, 
the Air National Guard Family Program has identified the need to 
maintain a viable infrastructure and properly staffed family outreach 
program that promotes physical, emotional, mental, and behavioral 
health and well-being. While the relationship between the National 
Guard and their family members is important at all times, it is 
critically necessary today with increasing mobilizations and 
deployments. The Air National Guard Family Program must ensure that 
needed resources are provided during all phases of deployment, from 
preparation, through separation, and reunion. In order to continue to 
promote overall family readiness and subsequently improve military 
readiness and retention, the Air National Guard Family Program needs 
sustained resources to provide outreach directly to family members and 
maintain a support structure for the Wing Family Program Coordinators 
and Combat Readiness Training Center personnel.
    The Air National Guard could not function without the support of 
our Nation's employers. With the increased utilization of Reserve 
component personnel, employers are being impacted more than ever. As a 
result, DOD programs such as the Employer Support of the Guard and 
Reserve are key to our efforts in gaining and maintaining the support 
of our civilian employers. Employer Support of the Guard and Reserve 
helps civilian employers manage their Guard and Reserve employees by 
providing information, rewarding them for their sacrifices, and if 
necessary, resolving disputes. We appreciate your continued support of 
these important programs.
    Outside of our collective efforts to preserve the delicate synergy 
of the member, family, and employer, the Air National Guard needs 
assistance with separation and transition benefits. With the expiration 
of force management transformation authorities in December 2001, the 
Air National Guard lacks the force shaping tools to effectively address 
skill rebalancing and its effect on the current personnel assigned. A 
prime example of this is the 116th Air Control Wing, at Robins AFB, 
Georgia. In addition to being the only Joint Surveillance Target Attack 
Radar System unit, the 116th is the only blended active duty Air Force 
and Air National Guard wing in the Total Force. The flexibility to re-
balance workforce skills, due to mission changes, unit conversions, as 
well as programmatic and/or operational reductions in specific skills, 
presents the need to execute these authorities.
    We look to the future and wonder what more may be asked of our 
brilliant women and men. Our proven track record of rising to every 
challenge and answering every call is the bedrock of our organization. 
We are busier than ever, and we most certainly need ample tools and 
resources to perform our mission. We are confident that working with 
you we will remain a premier military organization, serving in 
communities throughout this great land, protecting America at home and 
around the world.

    Senator Chambliss. Thank you very much, gentlemen.
    To both of your sergeants major, thank you all very much 
for being here and for the great work you all do for our 
country. We know that, just like with the Active Force, you're 
the heart and soul of the Guard and Reserve and we thank you 
for your service to our country.
    Gentlemen, I'll have to tell you, I was in Bosnia a couple 
of years ago when the Georgia National Guard was over there 
doing their tour of duty. I have been to Guantanamo several 
times. We have several Guard units on active duty down there 
from all over the country. Obviously I was particularly 
interested in what was happening with our Georgia folks. Morale 
has always been high. They do a great job. They are there to do 
a job which they know they hired on to do, and you're doing a 
great job in preparing those young men and women to serve their 
country when they are called on.
    General Schultz, Congress has taken the initiative in the 
last 3 years to provide the funding and authorization for 
additional full-time support personnel, both officer and 
enlisted, in the Army National Guard and Reserve units. 
Consistent with an agreed-on plan within the Army, this 
additional manpower is intended to improve the readiness of 
National Guard and Reserve units. How are these additional 
full-time support personnel being used? How do they contribute 
to unit readiness?
    General Schultz. Mr. Chairman, the voucher that I signed 
instructing the Adjutant General on how to distribute these new 
full-time support soldiers authorized basically says this: The 
priority for assigning these soldiers is to deploying units. So 
I'm coaching an adjutant general to put the soldiers in the 
right places, I'm following the intent of what I believe 
Congress has stated to me, and that is, ``Put the soldiers in 
the field.'' Our instructions in the manpower vouchers I send 
to States say just exactly that.
    Senator Chambliss. General James, back in January or 
February 2001, we had an order that came from the Pentagon to 
move the B-1s out of the 116th Wing at Robins. You heard my 
comments, I hope, earlier about the integration of the Guard 
and the active force on JSTARS. From what I see on the ground, 
that is working extremely well. Would you give me the Guard 
perspective on how you think that particular integration is 
working?
    General James. Certainly. I agree that it is working very 
well, especially since it is a landmark initiative. This is the 
first time that the Air National Guard and the active component 
have combined in what we call the ``blended unit,'' as you 
described it earlier, and it has been successful. We've had to 
coordinate a number of different issues because it is the first 
time, but, in fact, I find the morale was very high when I 
visited. I had a town-hall meeting with them. Both the active 
and the Guard folks are getting used to working together. 
They've had different working routines before; the Guard, of 
course, being predominantly a traditional part-time force. But 
the active part of the Guard's force and the active component 
are working very well to solve any challenges that come up.
    There is one issue that remains on the table, and I think 
you're familiar with that, and that is the ability of a Guard 
commander placed in command of an active-duty airman to be able 
to give lawful orders and hold that active-duty airman 
accountable under the UCMJ. If he goes on Title 10, he can do 
that. Once he goes into Title 10 status, however, then he loses 
his ability to do the same thing under Title 32 status, which 
many of his Guard airmen are operating under. That still needs 
to be addressed, and it will take some change in law, in the 
statute.
    However, the other issues that we look at on a daily basis, 
the funding, who the airplanes will belong to, contract and 
logistical maintenance, and all those issues we're working with 
and we solve them just one at a time as they come up. It is a 
success story, and the Secretary is fully committed to that 
continuing to be successful and maybe be a blueprint for the 
future for some of the other organizations we're going to have 
to look at combining in the future.
    Senator Chambliss. I think, without question, it will be, 
and we are working that issue on making sure that the power for 
command and control is there.
    General Rees, successful recruiting for your service I know 
is a key responsibility, and it's a mission you can't be 
complacent about. With a downsized Active-Duty Force, Stop 
Loss, and a demanding operations tempo, this challenge is only 
getting harder for you all as well as for the Active Force. 
What are your biggest concerns about your ability to 
successfully recruit qualified personnel? Tell us some of your 
plans for advertising that you have.
    General Rees. Mr. Chairman, we have a very vigorous program 
out there, and I'm going to have to defer to both of the 
directors here to get into the details of this. But we are 
continuing to be very sensitive to what is termed ``the 
propensity for enlisting, propensity for service.'' We're doing 
a lot of market research. We are working hard to make sure that 
the story of the Guard is out there and in front of everyone as 
to what the benefits are for service in the Guard.
    Certainly with current world events, we are getting a lot 
of additional help from the media. I think there is, despite 
some of the stories of hardships, also a lot of stories here 
that have to do with patriotism and pride in service.
    As far as the specific issues about advertising, let me 
turn to General Schultz.
    Senator Chambliss. Sure.
    General Schultz. Mr. Chairman, we depend on a good 
relationship with State broadcasting associations, I mean, 
that's the team that really holds together our advertising 
account across the Nation, so our return on the investment is 
time and again beyond what we invest in those accounts across 
the country. So we have an agreement of sorts that they look 
after the Guard image, the Guard marketing, for a whole lot 
more value than we currently send them, in terms of an 
investment. That's how the advertising works, and it's a 
success story, to be sure.
    Mr. Chairman, today the Army Guard is short of our 
programmed end strength. Not a crisis, but I want you to know I 
am concerned. We have assembled all the recruiters across the 
Guard today in a single meeting, and we're talking now about 
making certain here that we're focused toward our target of 
350,000 members. I'm short 2,800 members against our program 
strength.
    A couple of points I think have caused that condition. One, 
we spend a certain amount of time getting units ready on very 
short mobilization. Some of our recruiters helped us do that. 
Some of our recruiters also helped with one of the tasks in 
their job description, that is looking after families. So in 
this process, we lost focus on production.
    So if you look at the Army Guard strength today, our 
retention really is at or near the target or the program 
figures; production is where we need to dial the attention, and 
we will meet our 30 September target of 350,000 soldiers. 
Without a doubt, we'll do it. But it requires States' 
attention, adjutant generals, and others to help get there.
    General Rees. Mr. Chairman, there is also, I think, an 
advertising issue in the Air National Guard of significance 
here. Several years ago, the Air Guard did not advertise at 
all, but they've done a magnificent job, and I think there's 
some additional information here from General James.
    General James. Thank you, just very briefly, we have been 
very fortunate to make our end strength. As a matter of fact, 
we're over end strength right now. I would like to say that 
it's all due to the recruiting and retention efforts of all our 
commanders and our recruiting force. But there are a couple of 
other factors that impact that, of course--the Stop Loss that 
the Air Force put in place, and, of course, a somewhat weaker 
economy than many people would like to see.
    However, we were very fortunate, in a way, in that we could 
make our end strength and make our recruiting goals. As a 
matter of fact, we've not missed our recruiting in 5 of the 
last 6 years. We see a need to, as I said, focus on the midterm 
airmen from the 6- to 12-year group.
    Before, we did public service announcements and those kinds 
of things and, because of plus-ups, generally from Congress and 
sometimes additional funds made available to us from the active 
component, we have decided to do some more advertising. We have 
purchased national radio spots for 8 weeks, 2 per week, and 
we've purchased paid ads in all of our base papers and so 
forth. We have looked at using the same advertisement that the 
Air Force uses and purchasing nationwide paid TV advertising of 
$8.7 million and increasing the purchased nationwide paid radio 
advertising of up to $5 million.
    Senator Chambliss. Senator Nelson.
    Senator Ben Nelson. Thank you, Mr. Chairman.
    Now, you all heard my question earlier about the combining 
of the Active and Reserve pay accounts into a single 
appropriation with separate budget activities, and the concern 
that I raised is more specifically directed to you. Was the 
National Guard Bureau given a meaningful opportunity to provide 
input on this policy change?
    General Rees. Senator Nelson, in this particular instance, 
we found out about this particular change after the fact, and 
we were not part of the process.
    Senator Ben Nelson. Then let me ask it this way. Would the 
concern that I raised regarding the ability of the Guard to be 
able to deal with local matters--in emergencies as part of the 
responsibilities of the adjutant general to deal with local 
issues, would those activities be adversely affected?
    General Rees. Senator Nelson, if they were dealt with as 
State active duty, clearly those would be done with State funds 
out of State general treasury and would not be impacted by 
this.
    Senator Ben Nelson. There are some funds at the Federal 
level that assist the States with some of those obligations so 
that some are shared liability, if you will, shared 
responsibility. What about that? Or do you know?
    General Rees. The best way that I think I can answer this, 
Senator, is that in the past I think we have had a successful 
relationship with the States in dealing with the fiscal issues 
that have come up and particularly meeting all of our readiness 
requirements. We have a system we believe works.
    Senator Ben Nelson. Then dealing strictly with the Federal 
level, without regard to State funds or State requirements with 
respect to emergencies, but at the Federal level, if this 
proposal were in effect today, can you determine who would 
stand to gain? Would it be the National Guard or the active 
component?
    General Rees. Senator, I don't believe I could even 
speculate on that. We're in a situation where it has been 
described as creating more flexibility, and that would appear, 
from the larger DOD perspective, to deliver more flexibility.
    Senator Ben Nelson. I'm all in favor of flexibility; I just 
always want to know what consequences flow from flexibility. 
You've answered my question. I understand. I won't put the 
other two of you through the agony. Thank you very much, 
General Rees. [Laughter.]
    That takes care of my questions, Mr. Chairman.
    Senator Chambliss. All right. Gentlemen, we will put your 
full statement in the record. We thank you very much for being 
here. Thank you for your service to our country.
    General Rees. Thank you.
    Senator Chambliss. Our next panel consists of Lieutenant 
General James Helmly, Chief of the Army Reserve; Vice Admiral 
John B. Totushek, Chief, Naval Reserve; Lieutenant General 
Dennis M. McCarthy, Commander, Marine Forces Reserve; and Major 
General John J. Batbie, Vice Chief of the Air Force Reserve.
    Gentlemen, thank you for being here. We welcome these 
representatives of our Reserve components.
    Before I introduce, once again, these gentlemen that are 
appearing on this panel, let me just say, General Batbie, that 
I just learned about General Sherrard's health problems 
yesterday, and I'm sorry Jimmy couldn't be with us today. 
Please, when you get back, let him know that he's in our 
thoughts and our prayers and we wish him a very speedy 
recovery. I understand he's up and about some, but we will sure 
keep him in our prayers.
    I promise you that it will not be held against you that 
you're a close friend of Congressman Steven Buyer. I will not 
let that enter into our thought process here. [Laughter.]
    Gentlemen, we are glad to have you here today. We look 
forward to your statements and your answering questions.
    General Helmly, we'll start with you.

   STATEMENT OF LT. GEN. JAMES R. HELMLY, USAR, CHIEF, ARMY 
 RESERVE; ACCOMPANIED BY COMMAND SERGEANT MICHELLE JONES, ARMY 
                            RESERVE

    General Helmly. Thank you, Mr. Chairman.
    Mr. Chairman, Senator Nelson, members of this distinguished 
subcommittee, thank you for the opportunity and the privilege 
and, indeed, the honor to testify on behalf of the soldiers, 
civilian employees, and family members of the United States 
Army Reserve.
    I previously submitted a written statement, and I would 
respectfully request that that be entered into the record.
    Senator Chambliss. Certainly.
    General Helmly. I'm accompanied today by Command Sergeant 
Michelle Jones, the other half of the command team for the 
United States Army Reserve. She represents our enlisted 
soldiers. I'll be happy to take your questions at the end of my 
opening statement.
    Currently, over 69,000 Army Reserve soldiers are mobilized 
serving courageously, skillfully, and proudly around the world. 
These modern-day patriots willingly answered the call to duty 
as part of a responsive and relevant force, the world's 
greatest ground combat force, the United States Army.
    This committee, through its dedicated support to the men 
and women in the Army Reserve, has played a major role in 
maintaining the relevance and strengthening the readiness of 
the Army Reserve. Your concern for our people, our most 
precious resource, who dedicate a significant part of their 
life to defending our Nation, in addition to honoring 
commitments to employers and families, is appreciated and 
highly respected. Thank you for that.
    Historically, our Nation and its military have placed a 
heavy reliance on its Reserve components as a force in Reserve. 
During the Cold War, the Army Reserve as well as the Army's 
active component and, indeed, the components of the other armed 
services, was not used as heavily as we have experienced in the 
last decade.
    In Operations Desert Shield/Desert Storm, the Army Reserve 
was mobilized heavily--84,000 soldiers answered the call to 
duty and performed with distinction and then demobilized and 
returned home. The success of that operation, to include the 
use of the Nation's Reserve components, became a much forgotten 
issue.
    Now, however, the Army Reserve has been in a continuous 
state of mobilization since December 1995. Since 1996, the 
average number of Army Reserve soldiers mobilized has exceeded 
9,200 per annum. Our soldiers are part of the rotational forces 
keeping the peace in Eastern Europe by providing ongoing 
capabilities in Bosnia and Kosovo. It was not a noticeable 
challenge to mobilize for Bosnia and Kosovo, because the 
requirement was predictable, small in number, and stable. While 
the process we used was not perfect, we were able to accomplish 
our mission of providing trained units and qualified persons 
without stress.
    On September 11, the changing security environment that 
existed in the remainder of the world came rapidly home. The 
very nature of this war--long duration, fluid, and volatile--
dictates that major changes are required to practices, 
procedures, and policies related to how we organize, man, 
train, mobilize, and use our Army Reserve. We are discovering 
that the processes and policies in place were designed for a 
very different time and a very different type of war than we 
are engaged in today. As a result, we have been challenged.
    Further, many have questioned our ability to respond early 
in a contingency operation, to sustain mobilization, and still 
continue to attract and retain quality young men and women such 
as the ones who populate our force today.
    There is an ongoing debate concerning the wisdom of 
reliance on the Nation's Reserve components for operations of a 
smaller scale and early reliance on the Reserve in the opening 
phases of a larger-scale contingency operation. Today, 33 
percent of your Army Reserve strength is mobilized, but raw 
troop-strength numbers are not an accurate indication. There 
are pockets within that force of much greater stress. The Army 
Reserve has been able to meet the challenges to date, but 
clearly our structure requires change to meet the demands for 
capabilities that the Army Reserve excels in. We will do this.
    While changing industrial age mobilization and personnel 
assignment policies is necessary, restructuring our force so 
that we can implement predictable and sustainable rotations 
based upon depth and capability is also necessary. We 
acknowledge that there is no time out from war or preparation 
from war to make these changes. Confronting these dual 
challenges, transforming while at war, is a very necessity 
given the gravity of the world situation as it exists today.
    The accepted sacrifice of our people demonstrated by their 
willingness to serve the Nation when asked to do so deserves 
our courage to make rotation policies more predictable, to 
restructure our force, and to change and refine our 
mobilization, training, and compensation policies and 
processes. The Army Reserve is engaged in developing plans to 
attack each of these issues.
    Thank you again for the opportunity to appear before you 
today. I look forward to answering any questions that you have.
    [The prepared statement of General Helmly follows:]

          Prepared Statement by Lt. Gen. James R. Helmly, USAR

                              INTRODUCTION

    Mr. Chairman, members of this distinguished subcommittee, thank you 
for the opportunity and the privilege to testify on behalf of the 
205,000 soldiers; 11,150 civilian employees, both Department of the 
Army Civilians and Military Technicians; and all of their family 
members in the United States Army Reserve.
    Currently, over 61,000 Army Reserve soldiers are mobilized in 
America's global war on terrorism, serving courageously and proudly 
around the world. These modern day patriots have willingly answered the 
call to duty to perform the missions they have trained for and to honor 
their commitment as part of a responsive and relevant force, an 
indispensable component of the world's finest ground force, the United 
States Army.
    This committee, through its dedicated support of the men and women 
in the Army Reserve, has played a major part in maintaining the 
relevance and strengthening the readiness of the Army Reserve. Your 
concern for the Reserve soldier and employee who dedicates a 
significant part of his or her life to defending our Nation, in 
addition to honoring commitments to employers and families, is 
evidenced by your invitation to review the present state of the United 
States Army Reserve. I am honored by that opportunity.
    The occasion to testify before this subcommittee comes at a time of 
profound importance and immense change in our Nation's history, as well 
as an immense challenge in the international security environment. We 
are engaged with a wily, determined enemy, intent on destroying our 
very way of life; confronting regional powers and potential use of 
weapons of mass destruction at home and abroad; and struggling with the 
challenges of how to secure our homeland while preserving our precious 
rights and freedoms. It is within this very challenging environment 
that the Army Reserve serves with excellence today. Excelling in 
current missions is not sufficient by itself. It is necessary that we 
concurrently confront today's challenges while preparing for 
tomorrow's. The Army must maintain its non-negotiable contract to fight 
and win the Nation's wars as we concurrently transform to become more 
strategically responsive and dominant at every point on the spectrum of 
military operations. The concurrence of these dual challenges, 
transformation while fighting, winning, and preparing for other wars, 
is the crux of our challenge today--transforming while at war.
    This is my first opportunity to address this subcommittee as the 
Chief, Army Reserve. I am humbled and sobered by the responsibility 
bestowed to me. The Army Reserve is an organization that demonstrates 
its ability to be a full and equal partner, along with the active 
component of the Army and the Army National Guard, in being the most 
responsive dominant ground force the world has seen.
    The strength and goodness we bring to that partnership is drawn 
from unique characteristics within the Army Reserve. The Army Reserve 
is the most ethnically and gender diverse force of all the armed 
services. Overall, 92 percent of our force holds high school diplomas. 
Our force consists of individuals who are community and industry 
leaders, highly trained and educated professionals, experts in their 
chosen field who give of their time and expertise to serve our Nation. 
As good as our people are, we are not without serious challenges.
    The Army Reserve has been in a continuous state of mobilization 
since December 1995. Prior to that, our contribution to Operations 
Desert Shield/Desert Storm numbered over 84,000 soldiers. The Army 
Reserve also mobilized over 2,000 soldiers in support of Operation 
Uphold Democracy in Haiti. Since 1996, the average number of soldiers 
mobilized has been 9,265 soldiers per year. Our soldiers are part of 
the rotational forces that are keeping the peace in Eastern Europe. 
Military police, medical, and public affairs soldiers provide ongoing 
capabilities in Operation Joint Endeavor and Operation Joint Guardian 
in Bosnia and Kosovo.
    The attacks of September 11 intensified the pace of operations. 
Within hours of those attacks, the Army Reserve alerted and mobilized a 
mortuary affairs company from Puerto Rico--a company that 10 years 
earlier performed its mission with distinction in Operations Desert 
Shield/Desert Storm--to deploy to the Pentagon to assist with searching 
and recovering the remains of the victims of the attack. They proved to 
be so invaluable to the recovery efforts that they did not return to 
their homes until September 2002, after cataloging not only all of the 
personal effects of the dead but items from the Pentagon as well.
    In downtown Manhattan, Army Reserve soldiers were also assisting 
with the recovery efforts after the attack on the World Trade Center. 
Emergency Preparedness Liaison Officers were on site shortly after the 
attack to assist with rescue and later, recovery efforts. Army Reserve 
units provided equipment, Army Reserve center space, and other 
logistical support throughout the days and months that followed.
    This global war on terrorism is unique for Americans because its 
battlefronts include not only far-off places like Afghanistan and the 
Philippines but our own homeland. What was once a ``force in Reserve'' 
has become a full partner across the spectrum of operations to satisfy 
the demand and need for Army Reserve soldiers and units around the 
world. Wherever the Army committed forces in the world--Afghanistan, 
Uzbekistan, Pakistan, the Philippines, Kuwait, and anywhere else--Army 
reservists are an integral part, providing critical support, force 
protection, and augmentation.
    In the time that has followed those days, our military has been 
engaged in fighting the global war on terrorism around the world. 
Operation Anaconda in Afghanistan seriously impaired Al Qaeda's ability 
to continue to spread terror and ousted the Taliban. While it would 
have been easy for the Nation to walk away after ousting the Taliban, 
it chose to stay and help the nation rebuild itself. Civil Affairs 
units consisting of Army Reserve soldiers who possess civilian acquired 
and sustained skills in the fields of engineering, city planning, and 
education were deployed to the region to assist in these efforts. 
Numerous new schools were built and medical aid offered to the 
Afghanistan people. These soldiers represent the goodwill of the 
American people with every ailment they cure, every classroom they 
build, and every contact they make with the native population. They are 
doing an incredible job.
    Currently, over 61,000 Army Reserve soldiers and more than 500 
units have been mobilized and are serving on active duty in support of 
both Operation Noble Eagle, the mission to defend the homeland and 
recover from the terrorist attacks, and Operation Enduring Freedom, the 
mission of taking the war to the terrorists. The depth of the current 
mobilization reflects a higher percentage of the force since Operations 
Desert Shield/Desert Storm and still our soldiers are raising their 
hands to re-enlist in the Army Reserve, making our enlisted troop 
retention rates the best they have been since 1992.
    Clearly our priorities have changed. We must and will win the war 
on terrorism. But the nature of this very war dictates that major 
changes are required to practices, procedures, and policies relating to 
use of our force. We are discovering that the processes and policies in 
place were designed for a different time and a different type of war 
than we are engaged in today. As a result, we have been challenged 
about our ability to respond early in a contingency operation, 
sustaining continuous mobilization and continually attracting quality 
young men and women such as the ones we currently have with the 
knowledge that almost for certain, they will be mobilized at some point 
in their service.
    The Army Reserve is currently reviewing mobilization processes that 
no longer match the realities we face. We are restructuring how we 
train and grow leaders within the Army Reserve by establishing a 
Trainee, Transient, Holdee, and Student (TTHS) Account, much like the 
active Army, to manage our force more effectively. We are addressing 
the continuum of service concept that would allow ease of movement 
between Army components as dictated not only by the needs of the Army 
but also by what is best for the soldier developmentally and 
educationally.

Civilian Acquired Skills
    Our Civil Affairs units are filled with soldiers that possess 
skills acquired in their civilian occupations or as we refer to them, 
civilian acquired skills. Civil Affairs units perform such functions as 
public works administrators, power plant operators, and public health 
specialists. Their expertise and experience is gleaned from their 
civilian occupations then willingly used when these professionals are 
called to perform their military duties. The very citizens that keep 
our cities lit and our water potable volunteer to do the same, as 
soldiers, when mobilized.
    In the Army, 96 percent of all Civil Affairs units are in the Army 
Reserve. This force is designed to take advantage of civilian skills 
that would be difficult to train and sustain in the active component. 
Civil Affairs units are perfect examples of how the Reserve component 
creates a link to the American People for the Army. Civil Affairs is 
but one example of a central premise that the Army Reserve has 
capabilities that draw from the civilian experience of our soldiers. 
This concept is a cost effective way for the Army to maintain skills 
needed for a variety of missions extending from humanitarian and 
peacekeeping missions to homeland security to wartime operations. It 
makes good business sense to employ soldiers in Army Reserve Civil 
Affairs units with Doctorate Degrees in Curriculum Development to 
assist countries in rebuilding educational systems within a country in 
order to use highly skilled soldiers when needed. Employing the 
civilian acquired skills of our citizen soldiers is a cost effective 
way to accomplish support, humanitarian, and peacekeeping missions.

                          MOBILIZATION ISSUES

    The Nation's existing mobilization process is designed to support 
the linear, gradual build-up of trained forces, equipment, and 
expansion of the industrial base over time. It follows a construct of 
war plans for various threat-based scenarios. It was designed for a 
world that no longer exists. In actuality today, our current multiple, 
limited scale mobilization and new vision for agile, swift, and 
decisive combat power, forward presence, and smaller scale contingency 
operations, demand a fundamentally different approach to the design, 
use, and rotation of the Army Reserve. Rather than a force in Reserve 
it has become and serves more as a force of both individuals and unique 
building blocks for teams and units of capabilities all essential to 
force generation and sustainment. The authority, administration, and 
notification to employ these forces must be streamlined, flexible, and 
responsive to the Army's needs yet support the soldier, family, and 
employer.
    As I stated before, the Army Reserve has been in a continuous state 
of mobilization since December 1995. Rotations in Bosnia and Kosovo, 
participation in East Timor and since September 11, 2001, mobilizations 
and deployments as part of Operations Noble Eagle and Enduring Freedom 
have all become part of what it means to serve in the Army Reserve. 
These recurring deployments have given our units a great deal of 
experience in being able to mobilize quickly and effectively.
    There is an ongoing debate concerning the wisdom of reliance on the 
Nation's Reserve components both for operations of a smaller scale 
nature, such as the Balkans rotations and early reliance in the opening 
phases of a contingency operation. As of March 5, 2003, only 30 percent 
of the Army Reserve troop strength is currently mobilized. But raw 
troop strength numbers are not an accurate indication. Often Army 
Reserve capabilities in Civil Affairs and Medical support are cited as 
examples of over reliance on the Reserve components. There are specific 
types of units that have been used more than others. The demand for 
certain type units to meet the mission requirements of the global war 
on terrorism is higher in some more than others. Military Police, Civil 
Affairs, Military Intelligence, Transportation, and Biological 
Detection and Surveillance capabilities are the highest in utilization. 
As an example, the Biological Detection and Surveillance units consist 
of one active component unit and one Army Reserve unit. The Army 
Reserve unit has mobilized five times since 1997 and is currently in 
their second year of mobilization. A second Army Reserve unit will be 
organized in September 2003 and there are future plans for additional 
units in both the Army Reserve and the active component. This is just 
one example of a high demand, low density unit. Currently, 313 Standard 
Requirements Codes (types of units) are exclusively in the Army 
Reserve. The Army Reserve has been able to meet the challenges to date 
with this structure but clearly the structure requires changing to meet 
the continuing demand of these capabilities--we will do this.

Transformation
    The Army Reserve has been transforming its force since 1993 when it 
reorganized to produce a smaller, more efficient infrastructure. Our 
overall strength was reduced by 114,000 soldiers, or 36 percent, 
leaving us with 205,000 soldiers today. In our transformation from a 
Legacy Force Army Reserve (or a Cold War Force) to an Interim Force, we 
are poised to put changes in place that will keep us moving on the path 
of transformation to the Objective Force. In the 1990s, we cut the 
number of our Army Reserve commands by more than half and re-invested 
that structure into capabilities such as medical and garrison support 
units as well as Joint Reserve Units. We reduced the number of our 
training formations by 41 percent and streamlined our training 
divisions to better meet the needs of the Army and its soldiers. Our 
transformation journey actually began 10 years ago and is accelerating 
today.
    The response to the September 11 attacks in the form of the global 
war on terrorism has exposed our mobilization process as one that is 
more suited for yesterday's requirements and war in a different time. 
The luxury of time when mobilizing for Operations Desert Shield/Desert 
Storm does not exist for current operations. The relatively slow build-
up of forces over a 5-month period for the 1991 liberation of Kuwait is 
a thing of the past. The mass over time concept no longer applies. 
Instead, in its place, is a new standard of mobilizing that is slowed 
and restricted by processes and policies that have not changed with the 
rest of our force. In order for the Army Reserve to provide campaign 
quality units, we must change our mobilization processes.
    Changing the way we mobilize starts with changing the way we 
prepare for mobilization. The current process is to alert a unit for 
mobilization, conduct the administrative readiness portion at home 
station, and then send the unit to the mobilization station to train 
for deployment. This process, mobilize-train-deploy, while successful 
in Operations Desert Shield/Desert Storm, today inhibits 
responsiveness. By changing to train, mobilize, and deploy, we will 
reduce the time needed to bring a unit to a campaign quality level 
needed for operations.
    The Army Reserve is the Nation's repository of experience, 
expertise, and vision regarding soldier and unit mobilization. We do 
have forces capable of mobilizing in 24 hours and moving to the 
mobilization station within 48 hours, as we did in response to 
September 11. This demonstration of quick and precise mobilization 
ability will become institutionalized in the processes and systems of 
the future and give our forces the ability to mobilize as rapidly as 
possible. We will overcome challenges posed by units manned with 
untrained soldiers through initiatives that strengthen soldier 
readiness and leader development.
    One such initiative is the creation of an individuals account: 
Transient, Trainee, Holdee and Student (TTHS). The TTHS account will 
enable our units to be ready before they are mobilized. The intent is 
for the TTHS account to be the management tool to account for all 
officers, enlisted, and warrant officers in resident training (over 139 
days), currently in troop program units (TPU) but unqualified, or in 
transition to fill Selected Reserve (SELRES) authorized positions. The 
concept of training soldiers without impacting end strength 
authorization or unit readiness is the standard in the active 
component. Our soldiers need to be Military Occupational Specialty 
Qualified (MOSQ) before occupying an authorized space. Our junior 
leaders require dedicated time to develop leadership skills and we can 
no longer afford to do this in an environment constrained by current 
practices of balancing untrained soldiers and leaders against unit 
readiness.
    The Army Reserve will reduce over-structure and provide for a TTHS/
Individuals Account within the current Selected Reserve end strength. 
Members of the Selected Reserve who are not qualified for duty in a 
unit, or who are enrolled in professional development education 
courses, or might in a few cases be non-ready due to temporary medical 
holds, transition, or similar statuses will be assigned to the 
Individuals Account. This will increase the readiness of the Army 
Reserve, and the TTHS account will give a true picture of military 
readiness and manpower by using the same methods as the active Army.
    While changing industrial age mobilization and personnel assignment 
policies is necessary, restricting our force so that we can implement 
predictable and sustainable rotation based upon depth in capabilities 
is also necessary. Predictable and sustainable utilization is a key 
factor for campaign quality support. One of the goals of transforming 
our force is to change policies that are harmful to soldiers and 
families. Predictable rotation schedules will allow the Army Reserve to 
continue to be a valued source for small contingency conflicts and 
follow-on operations. It will provide our units with operational 
experience; provide deployment relief for the active Army; impart a 
sense of predictability for our soldiers, and evens out the work load 
across the force. We must begin now to implement new strategies in 
building a force with rotational capabilities.
    This current period of mobilization has had some challenges of 
calling on soldiers to mobilize on short notice, on rare occasions with 
less than 24 hours notice. A rotational strategy for operations and 
force planning policy would begin to overcome this challenge. For the 
short term, I have set in place a policy for the Army Reserve that no 
one moves with less than 5 days notice. This is basic soldiering--
taking care of your people. Despite all of the challenges faced by our 
force during this mobilization period, everyone called to duty has 
shown up, ready to honor their commitment to our Nation. That is what 
the Army Reserve is--great people bending over backwards to serve their 
country.

                        RECRUITING AND RETENTION

    Recruiting and retention is an area of the highest importance to 
the Army Reserve and a volunteer force. Our responsibilites require the 
best soldiers America can provide. In this regard, we are most 
appreciative of the help your subcommittee has provided us. We would be 
remiss if we did not thank you for the attention you have paid to our 
recruiting needs in recent legislation. With your help we have met our 
recruiting mission for 3 straight years from 2000 to 2002. In fiscal 
year 2003, however, we are 213 accessions short of expected year-to-
date mission. While cause for concern, I am not alarmed over this.
    Although generally successful in overall mission numbers, we 
continue to experience difficulty in attracting and retaining qualified 
individuals in certain critical wartime specialties, particularly 
within the Army Medical Department. Your continued support on behalf of 
recruiting and retention incentives, allowing for innovative readiness 
training, and the funding of continuing health and educational 
opportunities will help us with this difficult task.
    The Army Reserve, in partnership with the United States Army 
Accessions Command (USAAC), conducted a thorough review of Army Reserve 
recruiting. This review has helped us forge a stronger relationship 
with the Accessions Command and has streamlined our processes to 
support the symbiotic relationship between recruiting and retention. To 
that end, we will seek to ensure that all Army Reserve soldiers are 
involved in recruiting and retention activities--we all are a part of 
the Army's accessions efforts. We are removing mission distracters 
allowing the Accessions Command to focus on their core competency of 
recruiting non-prior service applicants; we are focusing on life cycle 
personnel management for all categories of Army Reserve soldiers and 
our retention program seeks to reduce attrition, thereby improving 
readiness and reducing recruiting missions.
    During 2003, the responsibility for the entire prior service 
mission will transfer from the Accessions Command to the Army Reserve. 
Tenets of this transfer include: establishment of career crosswalk 
opportunities between recruiters and retention transition NCOs; 
localized recruiting, retention, and transition support at Army Reserve 
units, and increased commander awareness and involvement in recruiting 
and retention efforts.
    To support recruiting and retention, the Army Reserve relies on 
non-prior service and prior service enlistment bonuses, the Montgomery 
GI Bill (MGIB) Kicker, and the Student Loan Repayment Program in 
combinations that attract soldiers to fill critical MOS and priority 
unit shortages. The Army Reserve must be able to provide a variety of 
enlistment and retention incentives, for both officer and enlisted 
personnel, in order to attract and retain quality soldiers. Fully 
funded incentive programs must be made available to ensure success in 
attaining recruiting goals and maintaining critical shortages and 
skills.
    Our retention program is a success. Faced with an enlisted 
attrition rate of 37.5 percent at the end of fiscal year 1997, we 
adopted a corporate approach to retaining quality soldiers. Retention 
management was an internal staff responsibility before fiscal year 
1998. In a mostly mechanical approach to personnel management, strength 
managers simply calculated gains and losses and maintained volumes of 
statistical data. Unfortunately, this approach did nothing to focus 
commanders on their responsibility of retaining their most precious 
resource--our soldiers.
    The Army Reserve developed the Commander's Retention Program to 
correct this shortcoming. A crucial tenet of this program places 
responsibility and accountability for retention with commanders at 
every level of the organization. Commanders now have a direct mission 
to retain their soldiers and must develop annual retention plans. 
Additionally, first line leaders must ensure all soldiers are 
sponsored, receive delivery on promises made to them, and are provided 
quality training. In this way, the Commander's Retention Program 
ensures accountability because it establishes methods and standards and 
provides a means to measure and evaluate every commander's performance. 
Since the introduction of the Commander's Retention Program, the Army 
Reserve has reduced enlisted Troop Program Unit attrition by nearly 9 
percentage points. The enlisted attrition rate in fiscal year 2002 was 
27 percent. Current projection for fiscal year 2003 with an increase of 
28.6 percent, due to demobilization, and a program to reduce the burden 
of non-participants and increased retirements.
    The Army Reserve is experiencing a 4,200 company grade officer 
shortfall. Retention goals focus commanders and first line leaders on 
junior officers. The establishment of a sound leader development 
program is a cornerstone of Army Reserve transformation. Providing 
young leaders the opportunity for school training and practiced 
leadership will retain these officers. A transformed assignment policy 
will enhance promotion and leader development. Increased Army Reserve 
involvement in transitioning officers from active duty directly into 
Army Reserve units will keep young officers interested in continuing 
their Army career. Allowing them managed flexibility during their 
transition to civilian life will be a win for the Army.
    Overall, the Army Reserve successfully accomplished the fiscal year 
2002 recruiting mission while achieving the Department of the Army and 
Department of Defense quality marks. This year our enlisted recruiting 
mission will stabilize at approximately 20,000 non-prior service due to 
the success of our retention efforts. The accomplishment of the 
recruiting mission will demand a large investment in time on the part 
of our commanders, our retention NCOs, and our recruiters as they are 
personally involved in attracting the young people in their communities 
to their units.
    However, the same environmental pressures that make non-prior 
service recruiting and retention difficult affect prior service 
accessions. With the defense drawdown we have seen a corresponding 
decrease in the available prior service market in the IRR. This impacts 
Army training costs, due to the increased reliance on the non-prior 
service market, and an overall loss of knowledge and experience when 
soldiers are not transitioned to the Army Reserve. Consequently, the 
Army Reserve's future ability to recruit and retain quality soldiers 
will continue to be critically dependent on maintaining competitive 
compensation and benefits.
    Special attention needs to be placed on the recruiting budget, for 
advertising, to meet our requirements in the next several years. Young 
people of today need to be made aware of the unique opportunities 
available in the different military components. The best way to get 
this message out is to advertise through the mass media. Funding our 
critical advertising needs is imperative if we are to be honestly 
expected to meet our recruiting goals. Your continued support of our 
efforts to recruit and retain quality soldiers is essential if we are 
to be successful.

                      INDIVIDUAL AUGMENTEE PROGRAM

    Under the current Army posture, there is a growing need to 
establish a capability-based pool of individuals across a range of 
specialties who are readily available, organized, and trained for 
mobilization and deployment as individual augmentees. In spite of 
numerous force structure initiatives designed to man early deploying 
active Army and Reserve component units at the highest possible levels, 
a requirement remains for individual fillers for contingencies, 
operations, and exercises. Therefore, I have authorized the 
establishment of an Individual Augmentee Program within the Selected 
Reserve to meet these needs.
    The purpose of the Individual Augmentee Program is to meet real-
world combatant commander requirements as validated in the Worldwide 
Individual Augmentation System (WIAS). Additionally, this program will 
preclude the deployment of individual capabilities from active or 
Reserve component units adversely impacting their readiness, cohesion, 
and future employment possibilities. It will allow soldiers to 
participate at several levels of commitment and supports the Office of 
the Secretary of Defense proposal for a continuum of service.
    Continuum of service offers the Army flexibility in accessing and 
managing personnel. Soldiers can serve through a lifetime in different 
ways from active duty to troop program unit to individual augmentee to 
retiree. The ability to move seamlessly through components and statuses 
can only benefit the Army and the soldier. Matching the right soldier 
in the right status at the right time makes sense. The Army Reserve 
will lead the way in making a reality of the phrase ``Once a Soldier, 
Always a Soldier''.
    Our initiatives concerning the management of individuals in the 
Army Reserve are the catalyst of Army Reserve transformation--the 
Federal Reserve Restructuring Initiative (FRRI). We developed these 
programs to meet the FRRI objectives: add operational depth to the Army 
through unit readiness and relevance, sustain mobilization to execute 
the global war on terrorism, relieve Army operational tempo through 
rotational force initiatives, and transform the Army Reserve to the 
Objective Force. The Chief of Staff, Army has stated that what will 
really transform the Army will be people. Our Army Reserve 
transformation plan will directly impact our ability to recruit, train, 
sustain, and deploy a ready and capable Federal Reserve Force. Your 
awareness of and congressional support of our efforts is invaluable.
Summary
    In our current military environment, the Army Reserve has many 
challenges that we accept without hesitation. These challenges are 
imbedded the current wisdom of early reliance on the Reserve component 
in early contingency operations and the wisdom of the use of the 
Reserve components in scheduled operational rotations such as Bosnia 
and Kosovo. Historically our Nation has placed great reliance on the 
Reserve components of soldiers, sailors, airmen, and marines, to expand 
the Armed Forces for operations during time of war. The nature of 
warfare has changed drastically and we must also change. This global 
war on terrorism, as our President has described, is a long-term 
campaign of inestimable duration, fought in many different places 
around the planet. The issues we have brought to you today--changing 
how we recruit, prepare, maintain, and resource our force recognizes 
the Commander in Chief's intent, to prepare for future wars of unknown 
duration in places we have yet to fight.
    We are grateful to Congress and the Nation for supporting the Army 
Reserve and our most valuable resource, our soldiers--the sons and 
daughters of America.
    I cannot adequately express how proud I am of our soldiers. They 
are in the hearts and prayers of a grateful Nation and will continue to 
stay there until we finish the job at hand.
    Thank you.

    Senator Chambliss. Thank you, General.
    Admiral.

  STATEMENT OF VICE ADM. JOHN B. TOTUSHEK, USNR, CHIEF, NAVAL 
                            RESERVE

    Admiral Totushek. Thank you, Mr. Chairman, Senator Nelson.
    It's also a real pleasure for me also to be here today to 
talk to you just for a few minutes about the Naval Reserve 
Force. I, too, have submitted a written statement and I'd like 
that put in the record.
    I would like to, instead of my usual summary of the 
accomplishments and the challenges that the Naval Reserve has 
had over the last few years, just talk to you about three myths 
that I think are out there. I think they apply to all the 
Reserve components.
    The first myth that's becoming popular around town is the 
idea that we're overused. The Naval Reserve Force, like the 
Army Reserve and the rest of the components, has been tasked 
over the last few years, but I would tell you that the opposite 
is true. The people that are being used are happy being used. 
They feel like they're contributing to the country, and they 
know that what they're doing is important.
    My attrition in the Naval Reserve Force runs around 28 
percent at the present time. For the people that have been 
mobilized, attrition is less than half of that. So I think that 
data backs up the statement that the people are proud of what 
they're doing, and they feel that they're doing something 
important when they're serving the country, even if they're 
asked to do it once or twice in their lifetime.
    The second myth is that we should not put 100 percent of 
any capability in any one of the components. In the Naval 
Reserve, I think we have the poster child for a successful 
program that we've been able to provide Navy 100 percent of the 
capability, and that's our logistics airlift. Our airplanes 
provide inter-theater airlift for a commander that is in a 
theater such as CINCUSNAVEUR or our NAVCENT folks. All those 
airplanes are flown by naval reservists, they're all owned by 
the Naval Reserve. Through the help of Congress, we've been 
able to upgrade some of those airplanes to the new C-40s, which 
is a 737 variant.
    We do that without even having to mobilize them in great 
numbers. Even with the taskings that we have over in Middle 
East today, we're able to provide that kind of service over 
there day in and day out primarily using people that are on 2-
week detachments or even longer rotations. We do have one 
squadron mobilized, and yet we're able to provide logistics 
airlift support not only in Europe and in the Middle East, but 
also in Japan and at the same time, in the Pacific.
    The third myth is that it takes us too long to mobilize. 
General Helmly referred to the fact that we have outdated 
processes. The problem oftentimes is that the mobilization 
clock seems to start when the requirement is put in, as far as 
the combatant commander is concerned. It goes through several 
levels inside of the Department of Defense before it gets down 
to the Reserves to actually mobilize their people. Once we get 
the requirement, we're able to turn people on in very short 
order. Three days to a week is our nominal processing time.
    So I just want to highlight those three myths I think that 
are out there, and we can talk about them more if you'd like 
to. I think those things have gotten too much play in the 
press, and I wanted to try and set those to rest in the record.
    I look forward to your questions and thank you for your 
support over the years.
    [The prepared statement of Admiral Totushek follows:]

         Prepared Statement by Vice Adm. John B. Totushek, USNR

    It has been a remarkably challenging and successful past year for 
the Naval Reserve. We are continuing at an unprecedented pace in 
support of the war on terrorism, while at the same time navigating the 
Naval Reserve through the complex process of transformation. Today, 
Navy's ability to surge rapidly and decisively to new crisis points 
rests primarily on active force capabilities with some Naval Reserve 
augmentation. Yet, any new crisis could potentially strain Navy's 
ability to sustain existing commitments, thus increasing the value of 
maintaining--and using, when needed--flexible operational capabilities 
resident in the Naval Reserve.
    The Naval Reserve provides Navy with necessary operational and 
organizational agility.

         Operational readiness
         Parallel capability--reinforcing/sustaining/optimizing 
        for crisis
         Incubating new capabilities
         Stand alone missions

    We ask a lot from our individual reservists. They have responded 
heroically. As Operation Noble Eagle demonstrates, mobilized Naval 
Reserve capabilities are often required to meet the risks associated 
with surge, and to sustain Navy commitments. Despite various opinions 
to the contrary, my Reserve force has not been overtasked during the 
continuing global war on terrorism. We've recalled over 8,000 Naval 
reservists to-date, or approximately 10 percent of our force. We've 
recalled entire commissioned units as well as individuals with unique 
skills. While attrition across my force has been averaging in the high 
20 percentile, our Career Decision Surveys targeted to those personnel 
demobilizing indicate that their attrition is holding at a mere 12 
percent. We are confident that we have policies in place to manage and 
mitigate the strains we place on our sailors and their employers. The 
bottom line is that Naval Reserve personnel are staying Navy, and we 
were able to reduce our enlisted recruiting goal by 2,000 end strength 
this year.
    The Naval Reserve: a proven source of Navy flexibility

         Mobilization for war on contingency
         Relieving stress on active PERSTEMPO
         Warfighting and support capability at reduced cost

    Observing the work performed by our Naval reservists over the past 
year, I have concluded that heroes are just ordinary people who do 
extraordinary things.
    Among the Naval Reserve heroes who represent the extraordinary 
sacrifices made by all of our members in support of Operations Enduring 
Freedom and Noble Eagle are people such as these:

         Petty Officer Second Class John Mason, a police 
        officer from New York City whose patrol areas included the 
        World Trade Center. He mobilized to Rota, Spain, to join a 
        Naval security force there and decided to extend for a second 
        full year.
         Commander Neal Bundo, from Crofton, Maryland, and 
        members of Navy Command Center Unit 106 at the Pentagon 
        mobilized and drilled around-the-clock to maintain the watch in 
        the aftermath of the destruction of the center and the murder 
        of fellow sailors.
         Utilityman Second Class Marianne Johnson, who lives in 
        San Diego and is a single parent of two daughters and an 
        accounts receivable clerk for Pepsi. She was mobilized to Pearl 
        Harbor with Construction Battalion Maintenance Unit 303 to 
        provide security support for Commander, Navy Region Hawaii. 
        Although she could have waived her commitment, she arranged for 
        a friend to take her apartment and temporary custody of her 
        children for a whole year.

    There are Naval Reserve heroes among the spouses of our reservists.

         The husband of Susan Van Cleve was also recalled with 
        Construction Battalion Maintenance Unit 303. Without any formal 
        Ombudsman training, Mrs. Van Cleve took on the task of 
        representing the dependents and relatives of more than 180 
        mobilized SeaBees. What's remarkable is that the Van Cleves, 
        from Lake Elsinore, California, have five children at home 
        under age five.

    Ordinary people. Summoned to do extraordinary things. I call them 
heroes. Anyone associated with the Reserve components of this Nation 
could go on and on with such stories because there are thousands of 
them. They are the people whose dedication we honor and must support.
    At the height of the mobilization in 2002, we activated almost 
10,600 Naval reservists, and, as mentioned earlier, we have more than 
8,000 sailors providing support around the world today. A perfect 
example of this is Strike Fighter Squadron (VFA) 201, based at Naval 
Air Station Joint Reserve Base, Fort Worth, Texas, which was ordered to 
active duty by President George W. Bush, as a unit of Carrier Air Wing 
(CVW) 8 embarked aboard the U.S.S. Theodore Roosevelt (CVN 71). Reports 
indicate that the ``Hunters'' of VFA 201 are leading the Air Wing in 
every measurable category.
    The majority of naval reservists that have been mobilized are 
individuals with unique specialties. They included significant numbers 
of law enforcement officers and security specialists. Medical, supply, 
intelligence, and other specialties continue to be heavily tasked. 
Entire units of the Naval Coastal Warfare commands were activated.
    Naval Reserve fighter pilots flew combat air patrol over our great 
cities. P-3C Orion pilots and crews are still flying surveillance 
missions. Logistics aircraft crews maintain a continuous presence in 
Bahrain and their operations tempo has increased by 25 percent, most of 
which is being done without mobilization.
    Top Five Priorities. While our deckplate sailors continue training 
to support combatant commanders, at the headquarters level we are still 
adhering to our top five priorities for the Naval Reserve. Let me 
briefly review highlights of these goals to illustrate how we are 
making progress.

    The Fiscal Year 2003 Top Five Priorities for the Naval Reserve

         Manpower
         Training
         Equipment and Information Technology Compatibility
         Force Shaping
         Fleet Support

    Manpower. Our recruiting numbers look good, and we are meeting 
goal. A continuing challenge is to fill targeted rates. While we 
initially saw that the percentage of prior service Navy entering the 
Naval Reserve bottomed out after September 11, it quickly rebounded, 
and we finished the year over end strength. Our attrition rate hovers 
near 25 percent, sharply down from a few years ago but short of our 
goal of 22 percent. One major improvement is that we are consolidating 
our recruiting efforts with the active Navy and expect that benefits 
will accrue to both.
    Training. Our training emphasis is on supporting the Chief of Naval 
Operation's Task Force Excel and Commander, Naval Education and 
Training, through integration of Naval Reserve personnel at all levels 
in the Navy Training Organization. This integration will enable the 
Naval Reserve to be in a position to take advantage of training 
initiatives underway throughout the Navy. We are also providing Joint 
Professional Military Education and ultimately building a cadre of 
Reserve Officers with joint experience and designated as Fully Joint 
Qualified. This will involve working closely with joint gaining 
commands to identify billets requiring joint experience to be filled by 
Reserve Officers, an opportunity that has previously been non-existent. 
Additionally, in order to take advantage of current and future training 
available through Distance Learning, we have been working hard to 
develop and implement a policy to provide drill pay to those personnel 
completing Distance Learning courseware at the direction of their 
Commanding Officer.
    Equipment and Information Technology Compatibility. In fiscal year 
2004 we see a continuation of the decline in procurement of equipment 
for the Naval Reserve. Total Naval Reserve equipment procurement 
steadily decreased from $229 million in fiscal year 1997 to about $91 
million in fiscal year 2003.
    Among the few bright spots in the fiscal year 2004 equipment budget 
is funding for the acquisition of one new C-40A logistics aircraft. 
These aircraft are of vital importance to fleet logistics since the 
Naval Reserve provides 100 percent of the Navy's organic lift 
capability and direct logistics support for combatant commanders in all 
operating theaters. In addition, the fiscal year 2004 budget calls for 
the procurement of another C-40A aircraft.
    Other programs slated to receive procurement funding in the fiscal 
year 2004 budget include: the C-130T Aviation Modernization Program 
that will make 18 logistics aircraft compliant to fly worldwide; 
surveillance equipment upgrades and small boats for Naval Coastal 
Warfare forces; and ground and communication equipment for the Naval 
Construction Force.
    Despite these welcome Reserve acquisition adds, essential F/A-18 
modifications, P-3C upgrades, and SH-60B helicopters still require 
substantial investments. Currently one squadron of Reserve F/A-18A 
aircraft lack the capability to deliver precision-guided munitions and 
need ECP-560 upgrades to avionics, software, and accessories. Under the 
Navy-Marine Corps TACAIR integration plan, a Naval Reserve squadron is 
slated for disestablishment in fiscal year 2004.
    P-3C aircraft used by the Naval Reserve constitute approximately 40 
percent of the Navy's capability. Currently, these aircraft provide 
only limited support to operational commanders because they lack the 
Aircraft Improvement Program (AIP) upgrade. Active component AIP 
aircraft were used extensively in Afghanistan due to their improved 
communication and surveillance capabilities. To enable our P-3C 
squadrons to fully participate and integrate with the active component 
in support of operational requirements, an investment needs to be made 
to upgrade our 42 P-3C aircraft in the Naval Reserve's 7 P-3C 
squadrons. Improving Reserve squadron integration with active forces 
will reduce active component's operational tempo and increase overall 
Navy mission capability. Spending to achieve equipment compatibility 
and equivalent capability between active and Reserve components is 
always a wise investment.
    Finally, the Littoral Surveillance System (LSS) provides timely 
assured receipt of all-weather, day/night maritime and littoral 
intelligence, surveillance, and reconnaissance data. For fiscal year 
2003, Congress appropriated funds for a second LSS to support Naval 
Coastal Warfare. I'm encouraged that the emerging homeland security 
requirement to secure land and sea borders from potential terrorist 
attack is an emerging mission to which LSS capability can contribute. 
It is joint, transformational, and is consistent with Naval Reserve 
capabilities. I look forward to working with our Coast Guard friends in 
assisting them in protecting our coastal waters and ports.
    In the Information Technology area, we have implemented the New 
Order Writing System (NOWS) online, and it is up and running smoothly. 
Within budget constraints, we continue with implementation of the Navy 
Marine Corps Intranet (NMCI). By the end of 2003, 100 percent of the 
Naval Reserve Force will be on the NMCI. Our goal is a seamless 
information and communication systems integration between the active 
Navy and the Naval Reserve. To meet our primary mission of delivering 
sailors, equipment, and units to combatant commanders requires 
information technology improvements in the manpower, personnel, 
communications, training, and financial management areas.
    Force Shaping. On July 20, 2002, the Naval Reserve stood up the 
Naval Reserve Forces Command. In doing so, it eliminated the old title 
of Commander Naval Surface Reserve Force and merged separate Naval 
Reserve air and surface chains of command. This ongoing alignment, 
which is examining every facet of Naval Reserve operations--is making 
the Naval Reserve more flexible and responsive, improving its systems, 
and focusing on customer service. The alignment of the New Orleans 
headquarters staff allows one-stop shopping for the active duty Navy to 
reach the Naval Reserve Force and has provided additional full time 
support to the fleet.
    Fleet Support. Earlier I mentioned the direct support we have been 
providing to combatant commanders, and we are prepared to do more. 
While we continue monitoring potential risks of sustained and repeated 
recalls, to date we have seen improved retention rates of recallees 
measured against the rest of the force. Every one of our 86,000 naval 
reservists wants to participate in winning the war on terrorism. We 
must ensure that they have the tools to do their jobs and integrate 
smoothly into the Fleet.
    Transformation. Within the think tanks of Washington and in the E-
ring hallways, there is much talk about how the Navy will participate 
in the DOD-wide transformation process. Though the Naval Reserve's 
traditional mission of reinforcing Active Forces and sustaining 
capabilities has always been valid, there are additional ways in which 
we can support transformation.
    The Naval Reserve is the `flex' Navy needs to navigate, and even 
accelerate its passage through a challenging and uncertain future. As 
it did throughout the Cold War, post-Operation Desert Storm and post-
September 11 periods, the Navy will continue to depend on its Reserve 
as a mobilization asset, affordably extending Navy's operational 
availability. At the same time, the Navy will continue to rely on Naval 
Reserve units and individuals to provide day-to-day `peacetime' 
operational capabilities and to reduce the stress on active personnel 
tempo. The extensive operational warfighting and service support 
experience resident in the Naval Reserve will be crucial to assisting 
Navy in achieving its Sea Strike, Sea Shield, and Sea Basing 
capabilities.
    Some of our terminology will change as we transform. We no longer 
talk about CINCs; we talk about combatant commanders. We don't talk 
about TARs; we talk about Full Time Support personnel. We're not using 
the phrase Total Force, but we are talking about a transformational 
force that is simply one Navy.
    The Navy is shaping itself in the 21st century in an environment of 
competitive resources, fluid planning assumptions, and operational 
uncertainty. As it begins the transformation, the Navy is also fighting 
the war on terrorism and maintaining a challenging global forward 
presence. Juggling such priorities involves risk.
    The Naval Reserve's traditional function as a reservoir of 
capabilities that are not needed continuously in peacetime, but are 
needed in crisis, is crucial to mitigate such risks.
    As one example, Naval Coastal Warfare forces have been called upon 
to provide a security framework on the home front as well as overseas. 
The mission--protection of strategic shipping, shallow water intrusion 
detection, traffic control, and harbor defense--has resided exclusively 
in the Naval Reserve for more than 10 years. Today, this force 
protection presence is made up of 100 percent naval reservists, who 
conduct fully integrated command, control, communications, 
surveillance, and harbor defense missions around the globe. Because 
these are ongoing requirements in this mission area, we will be 
integrating an active Mobile Security Force with existing Naval Reserve 
Coastal Warfare forces.
    Another example is also tied to the aftermath of September 11: the 
immediate requirement for Master-at-Arms and law enforcement specialist 
to provide force protection to the Navy. This was a very small mission 
area for the Navy that, when the need arose, they were unable to fill 
with active duty sailors. The Naval Reserve took care of the 
requirement until the Navy could implement long-term measures.
    However, the Naval Reserve can do more. Our agility can spread 
across a spectrum of other challenging areas: manpower, operations, 
planning, force structure, and mix. We can be a great reservoir for 
experimentation and innovation. In these and many other ways, the Naval 
Reserve can mirror and complement the Chief of Naval Operation's 
visions in Sea Power 21: to project power, protect U.S. interests, and 
enhance and support joint force operations.
    Myths. Before I close, since this is probably the last opportunity 
I will have to appear before this committee, I would like to take this 
opportunity to briefly comment on several myths about the Naval Reserve 
that I have encountered during my tour as the Chief of Naval Reserve.
    The first myth is the popular opinion of many that Reserve Forces 
have been overused during the GWOT. As I mentioned in the beginning, I 
can assure you that the Naval Reserve has not been overused and is 
ready and able to do more to support the Navy. I know this not only 
because of the conversations that I have had with Naval reservists on a 
daily basis, but also because of some very interesting statistics that 
have come out of our September 11 mobilizations, such as the one 
measure that indicates our current attrition rate for those mobilized 
for the GWOT is approximately 12 percent, which is considerably lower 
than our historical attrition rate. I'm a firm believer that the Naval 
Reserve Force needs to be used to be relevant.
    The second myth is that it is unwise to place 100 percent of a 
mission within the Reserve. I firmly believe that certain missions are 
designed perfectly for the Reserve and are very cost effective. A 
perfect example is the 14 Naval Reserve squadrons of our Fleet 
Logistics Support Wing which have very successfully provided 100 
percent of the Navy's worldwide intra-theatre airlift support on a 
continuous basis for over a decade. There are currently 14 Naval 
Reserve logistics aircraft deployed outside the continental United 
States, which is a 230-percent increase since September 11, yet we have 
done this while only mobilizing one airlift squadron.
    You may have heard discussions about changing the mix of active 
component versus Reserve component. The Naval Reserve is working 
closely with the Navy to address High Demand/Low Density type units. 
Through innovative sharing of assets and essential skill sets, Reserve 
personnel have been used to train new active component crews as well as 
carry some of the load of the deployment rotation. VAQ 209, flying EA-
6B electronic warfare jets based at NAF Washington, deployed overseas 
for 45 days this past summer flying combat patrols in support of 
Operation Northern Watch, their fifth such deployment in the last 7 
years. Yet when they were here at home, they provided personnel and 
aircraft to the fleet to support multi-week flight training 
detachments. By doing this they maximize the value of the dollars Navy 
has already spent to train and equip them while sustaining and 
exercising their warfighting skills. The renewed demand for Naval 
Coastal Warfare units, as mentioned before, has caused Navy to 
reevaluate the requirement and to create active component units. Naval 
Reserve, in this case, has served to provide the storehouse of skills 
so that as the demands of warfighting changed Navy was able to quickly 
meet the new challenge. These are just two examples of how your Naval 
Reserve Force provides the organizational flexibility needed to 
navigate the rapid changes of a transforming world.
    A myth that certainly has to be dispelled is that Naval reservists 
cost more than their active duty counterparts. A cost comparison done 
for a 7 year period from fiscal year 2003 through fiscal year 2009 
shows that a selected reservist, not mobilized at any time during that 
period, costs approximately 21 percent of the cost of an active member. 
The cost of a selected reservist mobilized for a 2 year period during 
that time frame still reflects a considerable savings--less than half 
of that of an active member. In 2002, Navy estimated that it costs 
$1.26 million to train an F-18 pilot, taking that ``nugget'' pilot from 
``street to fleet.'' By the time that same pilot will become a member 
of the Reserve Force, Navy will have invested many more millions of 
dollars to hone his or her skills. When that pilot joins a Naval 
Reserve squadron we will have recaptured every one of those training 
dollars. My point is that the cost of a valuable mobilization asset 
should not be looked at only in the limited context of the period 
during mobilization, but, rather in the larger context; that of an 
amazingly cost effective force multiplier available both during periods 
when the Nation's active forces are able to handle the PERSTEMPO and 
OPTEMPO without Reserve augmentation and during those periods of crisis 
that require citizen-sailors to leave their civilian lives and jobs and 
be mobilized.
    An additional myth is that the Naval Reserve should only be 
employed for full mobilization scenarios. Much like VAQ 209, which I 
mentioned earlier, our Naval Special Warfare units and Naval Special 
Warfare helicopter squadrons, either by providing personnel or by 
providing deploying units, have participated in smaller scale 
contingency operations such as Operation Uphold Democracy in Haiti. Our 
Naval Reserve intelligence community is contributing daily to the 
processing and evaluation of intelligence information. Our maritime 
patrol squadrons and Naval Reserve Force frigates are continuously 
employed in the war on drugs. These scenarios do not involve full 
mobilization, they involve ad hoc contributions that keep our Naval 
reservists engaged in something that is important to them--the safety, 
security, and preservation of our country. If we want to continue the 
capable Reserve Force we have today, we must utilize their talents or 
they will not stay.
    The last myth is that it takes too long for us to mobilize and be 
ready. Fortunately, I have a timely example to use to dispel this myth. 
On October 4, 2002, a mobilization order was issued to VFA-201. Within 
72 hours 100 percent of squadron personnel had completed the 
mobilization process, and within 90 days, all refresher training had 
been completed and the squadron was deployed on board the U.S.S. 
Theodore Roosevelt. Every aviator has cruise experience, over 1,000 
flight hours, and many have over 1,000 or 2,000 hours in type. Squadron 
aviators provided leadership to the air wing in strike planning, flight 
execution, and carrier operations. Their experience in operations 
around the world and in adversary tactics continue to aid increased air 
wing readiness. Since mobilization, the Hunters of VFA-201 have flown 
more than 990 sorties, 1,650 hours, and recorded 629 day and 392 night 
arrested landings. Not only were we ready to respond to the call 
quickly, but, I am pleased to report that VFA-201 pilots had the 
highest qualification grades in the Air Wing and were awarded the 
Squadron ``Top Hook'' award. I am also pleased to report that VFA-201s 
12 F-18A+ aircraft are equivalent to F-18C aircraft primarily because 
of funding for equipment upgrades provided by Congress via the NG&RE 
appropriation.
    Running Myths about the Naval Reserve

         Naval Reserve forces are being overused
         It is unwise to place a mission entirely in the Naval 
        Reserve
         The Active/Reserve Force mix for High Demand/Low 
        Density units should be changed
         The Naval Reserve should be used only for full 
        mobilization scenarios
         It takes too long for the Naval Reserve to mobilize 
        and get ready

    Summary. The Naval Reserve is meeting big challenges with a force 
that is remarkably fit and ready to continue doing the heavy lifting 
for the Navy Marine Corps team. If we are successful at procuring the 
compatible equipment we need, we can become even more effective at 
world-class service to the fleet. We look forward to meeting the 
challenges ahead, both within the Naval Reserve and in support of the 
Navy's strategic vision.
    As I review the state of our Naval Reserve Force over the past 
year, I take pride in what the Naval Reserve has accomplished. All 
things considered, it has been a remarkable year.

    Senator Chambliss. Thank you, Admiral. There are a lot of 
myths going around town about Members of Congress, too, and 
most of them are true. [Laughter.]
    General McCarthy.

  STATEMENT OF LT. GEN. DENNIS M. McCARTHY, USMCR, COMMANDER, 
                     MARINE FORCES RESERVE

    General McCarthy. Senator Chambliss, Senator Nelson, thank 
you very much for the opportunity to appear on behalf of the 
Marine Corps Reserve.
    General Mike Hagee, the Commandant of the Marine Corps, was 
in visiting marines in the theater a month or so ago, and he 
was quoted as saying, ``I understand that two thirds of you,'' 
in this group that he was talking to, ``are Reserves. I know 
you simply as marines. Looking at performance, I can't tell the 
difference.'' That is the quintessential statement of our 
success as the Marine Corps Reserve.
    I'm very grateful for the support that Congress has 
provided, because it's helped us to do the things that we need 
to do to meet that standard. I'm enormously proud of the almost 
20,000 marines who are currently mobilized. That's about half 
of the selected Reserve in the Marine Corps Reserve.
    It's a combat force. Seventy-five percent of those marines 
and the sailors who serve with us are forward deployed in the 
Central Command area of operations. They're doing what they 
know how to do. They're not overstressed. They're well 
prepared, and, as both General Helmly and Admiral Totushek have 
said, they are glad to be doing what it is they're doing.
    I do thank you for your support, and I look forward to 
answering your questions.
    [The prepared statement of General McCarthy follows:]

        Prepared Statement by Lt. Gen. Dennis M. McCarthy, USMCR

    Chairman Chambliss, Senator Nelson, and distinguished members of 
the subcommittee, it is my privilege to report on the status and the 
future direction of your Marine Corps Reserve as a partner in the Total 
Force. On behalf of marines and their families, I want to thank the 
committee for its unwaivering support. Your efforts reveal not only a 
commitment for ensuring the common defense, but also a genuine concern 
for the welfare of our marines and their families.

                             CURRENT STATUS

    Today's Marine Reserves are ready, willing, and able to support the 
active component and to serve our communities in peace or war. During 
the global war on terrorism, Reserve units have filled critical roles 
in our Nation's defense--whether deployed to Afghanistan, Djibouti, or 
Kuwait or on standby at U.S. bases to quickly respond to homeland 
security crises.
    As of February 27, approximately 15,000 marines were activated as 
part of units or individual augments in support of Operations Noble 
Eagle and Enduring Freedom. This represents approximately 40 percent of 
the Selected Marine Corps Reserve (SMCR) and 1.7 percent of the 
Individual Ready Reserve (IRR). The number has risen sharply since the 
beginning of 2003 in response to the deployment orders for marines to 
reposition to Southwest Asia for possible future contingency 
operations. Roughly 75 percent of the SMCR marines currently activated 
are or will be forward deployed into the U.S. Central Command area of 
operations.
    Reserve integration can readily enhance Marine Corps operational 
capabilities, however, recognizing the Reserve as a finite resource the 
Commandant has insisted on its judicious use. In the first year of 
Operations Noble Eagle and Enduring Freedom we activated no more than 
11 percent of the SMCR (units and Individual Mobilization Augmentees) 
and less than 2 percent of the IRR. All of the IRR members were 
volunteers.
    The men and women in Marine Forces Reserve have responded 
tremendously to the call to duty. Only 1.1 percent of those receiving 
orders have requested delay, deferment, or exemption from duty.
    Mobilization readiness is our number one priority all the time. The 
hard work and dedication of the marines and sailors of Marine Forces 
Reserve to this task has resulted in the efficient execution of the 
mobilization. During the first 2 months of 2003 we moved 7,860 
passengers and 136,220 short tons of cargo directly from Reserve 
training centers to embarkation points using 605 tractor-trailers and 
210 chartered buses and flights--without missing a designated arrival 
date. More than 12,000 Reserve personnel have initiated the anthrax 
vaccine series at their home training centers and most smallpox 
vaccinations are being administered at the gaining force command within 
48 hours of deployment. No Reserve unit has had to ask for relief to 
enter theater without the required inoculations.
    Reserve integration is important to our operational capabilities, 
we have been careful not to over commit our Reserves. In the first year 
of Operation Enduring Freedom we activated less than 3 percent of our 
approximately 57,000 Marine Individual Ready Reservists (IRRs). All of 
the those IRRs were volunteers. These numbers are expected to increase 
as we intensify our efforts. Of the approximately 39,558 marines in 
Selected Marine Corps Reserve (SMCR), no more than 3,700 were mobilized 
in 2002. Even though that number has increased sharply since the 
beginning of 2003, approximately 28,000 SMCR members remain ``in 
Reserve'' as of the first week of February.
    The ability of the Reserve to rapidly mobilize and integrate into 
the active component in response to the Marine Corps' operational 
requirements is a tribute to the dedication, professionalism, and 
warrior spirit of every member of Marine Forces Reserve--both active 
and Reserve. Our future success relies firmly on the Marine Corps' most 
valuable asset--our marines and their families.
    We continue to evaluate personnel policy changes regarding 
entitlements, training, and employment of Reserve Forces, and support 
for family members and employers to minimize the impact of mobilization 
on our marines. Our success in this area will enhance our ability to 
retain the quality marines needed to meet our emerging operational 
requirements.
    We need your continued support to attract and retain quality men 
and women in the Marine Corps Reserve. Our mission is to find those 
potential marines who choose to manage a commitment to their family, 
their communities, their civilian careers, and the Corps. While such 
dedication requires self-discipline and personal sacrifices that cannot 
be justified by a drill paycheck alone, adequate compensation and 
retirement benefits are tangible incentives for attracting and 
retaining quality personnel. This challenge will be renewed when 
mobilized units return from active duty and begin the process of 
reconstitution.
    Last year, the Marine Corps Reserve achieved its recruiting goals, 
accessing 5,900 non-prior service and 4,213 prior service marines. This 
is particularly significant as the historic high rate of retention for 
the active component reduced the pool for prior service recruiting. 
Enlisted attrition rates for fiscal year 2002 decreased approximately 
2.8 percent from our historical 4-year average. Marine Corps Reserve 
officer attrition rates were slightly higher than historical averages 
which can in part be attributed to Reserve officers leaving non-
mobilized SMCR units in order to be mobilized in support of individual 
augmentation requirements.
    The incentives provided by Congress, such as the Montgomery GI Bill 
(MGIB) and the MGIB Kicker (Kicker) educational benefits, enlistment 
bonuses, medical and dental benefits, and commissary and PX privileges, 
have helped us to attract and retain capable, motivated, and dedicated 
marines, which has contributed to the stability of our force. 
Congressional enhancements allowed us to increase our recruiting and 
retention incentive programs during fiscal year 2001. We continued to 
fund these programs to the same levels in fiscal year 2002 and fiscal 
year 2003 through internal realignment. The increase is also reflected 
in our fiscal year 2004 budget request. The tangible results of your 
support for these incentives are the decreased attrition and recruiting 
successes I have just highlighted.
    The Marine Corps is the only service that relies almost entirely on 
its prior service population to fill the ranks of its Reserve officer 
corps. Although the Marine Corps Reserve exceeded its recent historical 
SMCR unit officer accession rates in fiscal year 2002, manning our unit 
officer requirements at the right grade and MOS continues to be our 
biggest recruiting and retention challenge. We are exploring ways to 
increase the Reserve participation of company grade officers.
    The long-term impact of mobilization on recruiting and retention is 
still undetermined. More than 2,000 of our activated Reserves have now 
exceeded the 1-year mark. We will not know the overall retention impact 
until we demobilize a significant number of these marines and they have 
an opportunity to assess the impact of mobilization on their families, 
finances, and civilian careers.
    Combat readiness and personal and family readiness are inseparable. 
Marine Forces Reserve Marine Corps Community Services is working 
aggressively to strengthen the readiness of our marines and families by 
enhancing their quality of life (QOL). Our many MCCS programs and 
services are designed to reach all marines and their families 
regardless of geographic location--a significant and challenging 
undertaking considering the geographic dispersion of our marines and 
their families throughout the U.S. and Puerto Rico. During the current 
partial mobilization we are seeing the payoffs of our significant 
investment over the past several years in family readiness programs. 
Key volunteers and site support personnel are assisting families and 
keeping communities informed.
    In December 2002, the Marine Corps began participating in a 2-year 
Department of Defense demonstration project providing 24-hour 
telephonic and online family information and referral assistance. 
``MCCS One Source'' is similar to employee assistance programs used by 
many of the Nation's leading major corporations as a proven HR strategy 
to help employees balance work and life demands, reduce stress, and 
improve on-the-job productivity. Already we are receiving positive 
feedback from users.
    The support our Reserve Marines receive from their employers has a 
major impact on their ability to serve. We have partnered with the 
National Committee for Employer Support of the Guard and Reserve to 
foster a better mutual understanding and working relationship with 
employers. During the current partial mobilization many employers have 
voluntarily pledged to augment pay and extend benefits which has 
greatly lessened the burden of activation on our servicemembers and 
their families. I would like to acknowledge and thank the public and 
private sector employers of our men and women serving in the Marine 
Corps Reserve for their continued support.
    Like the active component Marine Corps, the Marine Corps Reserve is 
a predominantly junior force with historically about 70 percent of SMCR 
marines on their first enlistment. Many of our young marines are also 
college students. Currently, there are no laws that would provide 
academic and financial protections for students and schools affected by 
mobilization. We support ESGR's new initiative to improve communication 
between Reserve component personnel and their educational institutions.
    In addition to supporting Operations Noble Eagle and Enduring 
Freedom, Marine Reserves continued to provide operations tempo relief 
to the active forces during 2002. Notably, more than 300 Reserves 
volunteered to participate in UNITAS 43-02, creating the first Reserve 
Marine Forces UNITAS. From August to December, the marines sailed 
around South America conducting training exercises with military forces 
from Brazil, Colombia, Ecuador, Argentina, Peru, Chile, and other 
countries. Marine Forces Reserve also provided the bulk of Marine Corps 
support to the Nation's counter drug effort, participating in numerous 
missions in support of Joint Task Force 6, Joint Interagency Task 
Force-East, and Joint Interagency Task Force-West. Individual marines 
and units support law enforcement agencies conducting missions along 
the U.S. Southwest border and in several domestic ``hot spots'' that 
have been designated as High Intensity Drug Trafficking Areas.
    The Active Duty Special Work (ADSW) Program funds short tours of 
active duty for Marine Corps Reserve personnel. This program continues 
to provide critical skills and operational tempo relief for existing 
and emerging augmentation requirements of the Total Force. The demand 
for ADSW has increased to support pre-mobilization activities during 
fiscal year 2002 and fiscal year 2003 and will be further challenged 
during post mobilization. In fiscal year 2002, the Marine Corps 
executed 1,208 work-years of ADSW. Continued support and funding for 
this critical program will ensure our Total Force requirements are 
fully met.
    Maintaining overall SMCR end-strength at current levels will ensure 
the Marine Corps Reserve's capability to provide operational and 
personnel tempo relief to Active Marine Forces, maintain sufficient 
full-time support at our small unit sites, and retain critical aviation 
and ground equipment maintenance capabilities. SMCR units are 
structured along the Marine Air Ground Task Force model, providing air 
combat, ground combat, and combat service support personnel and 
equipment to augment and reinforce the active component. Less than 1 
percent of our SMCR unit strength represents a Reserve-unique 
capablility. The current Marine Forces Reserve Force structure also 
reflects a small tooth-to-tail ratio with a minimal number of active 
duty and Reserve personnel in support roles, and a majority of our 
Reserve and active marines and sailors as deployable warfighters.
    The Marine Corps Reserve also provides a significant community 
presence in and around our 187 sites nationwide. One of our most 
important contributions is providing military funerals for our 
veterans. The active duty staff members and Reserve marines at our 
sites performed approximately 6,170 funerals in 2002 and we project to 
support as many or more this year. The authorization and funding to 
bring Reserve marines on active duty to perform funeral honors has 
particularly assisted us at sites like Bridgeton, Missouri, where we 
perform several funerals each week. We appreciate Congress exempting 
these marines from counting against active duty end strength.

                       FUTURE ROLES AND MISSIONS

    The value of the Marine Corps Reserve has always been measured in 
our ability to effectively augment and reinforce the active component. 
Over the next several years, the overall structure of Marine Forces 
Reserve will remain largely the same, however, we are working to create 
new capabilities to adapt and orient the Reserve Force to the changing 
strategic landscape. The capabilities were identified as part of an 
internal comprehensive review begun in 2001 and do not involve any 
changes to the number of Reserves or the geographic laydown of the 
force.

         Foremost among these capabilities will be the creation 
        of two Security Battalions and an Intelligence Support 
        Battalion. The Security Battalions will provide a dual-use 
        capability consisting of eight Anti-Terrorism Force Protection 
        platoons and an augmentation unit for the Marine Corps Chemical 
        Biological Incident Response Force (CBIRF).
         Recognizing the increased requirements at Marine Corps 
        and Joint Commands for rapid, flexible Staff Augmentation, the 
        Marine Corps Reserve is enhancing and modifying the Individual 
        Mobilization Augmentee program to increase the quantity and 
        distribution of Augmentee billets to better support the 
        Warfighting Commander's needs.
         Additional Reserve capabilities involve Information 
        Technology, Environmental Protection, and Foreign Languages.

                                SUMMARY

    In early February this year while visiting a group of marines in 
Qatar, the Commandant of the Marine Corps made the following comment: 
``I understand from the numbers that two-thirds of you here are 
reservists--I know you simply as marines--and looking at performance I 
can't tell the difference.'' Testaments like this tell the real story 
of our success. Our greatest asset is our outstanding young men and 
women in uniform. Your consistent and steadfast support of our marines 
and their families has directly contributed to our success. The Marine 
Corps appreciates your continued support and collaboration in making 
the Marine Corps and its Reserve the Department of Defense model for 
Total Force integration and expeditionary capability.

    Senator Chambliss. Thank you, General McCarthy.
    General Batbie.

STATEMENT OF MAJOR GEN. JOHN J. BATBIE, USAFR, VICE COMMANDER, 
                   AIR FORCE RESERVE COMMAND

    General Batbie. Mr. Chairman, Senator Nelson, I want to 
thank you for allowing me to be here today and testify on 
behalf of General Sherrard and the nearly 76,000 members of the 
Air Force Reserve. Over 13,000 citizen airmen are mobilized 
today, and, due to our one tier of readiness, they're 
performing brilliantly in today's total force.
    I want to acknowledge that this committee took the lead in 
some key legislation for us this year, including the repealing 
of the prohibition on Active Guard and Reserve (AGR) Forces 
personnel performing installation security functions. Like the 
other witnesses have said, extending from 10 to 14 years the 
time to use the Montgomery GI Bill Selected Reserve 
entitlement, as well as many other initiatives which help us 
recruit and retain our quality people are greatly appreciated. 
With your help, the Air Force Reserve will remain a viable 
force for the future.
    I look forward to answering any questions you might have, 
sir.
    [The prepared statement of General Batbie follows:]

       Prepared Statement by Maj. Gen. John J. Batbie, Jr., USAFR

    Mr. Chairman, Senator Nelson, and distinguished members of the 
subcommittee, I appreciate the opportunity to appear before you today 
and I certainly want to thank you for your continued support, which has 
helped your Air Force Reserve address vital recruiting, retention, 
modernization, and infrastructural needs. Your passage of last year's 
pay and quality of life initiatives sent a clear message to our citizen 
airmen that their efforts are not only appreciated and supported by 
their families, employers, and the American people, but also by those 
of you in the highest positions of governing.

                           HIGHLIGHTS OF 2002

    We culminate 2002 and begin 2003 focused on transforming our air 
and space capabilities as well as streamlining the way we think about 
and employ our forces. We continue to develop our airmen into leaders, 
bring technology to them at their units and in the battlespace, and 
integrate operations to maximize our combat capabilities. These three 
basic core competencies are critical to the Air Force Reserve as we 
become more and more relevant in the future total force.
    The Air Force, with the Air Force Reserve Command (AFRC), has 
enjoyed over 30 years of unparalleled Total Force integration success. 
We were the first to establish associate units which blend Active and 
Reserve Forces into the correct mix. Our members perform in almost 
every mission area and seek involvement in all future mission areas, as 
those areas become relevant. Key to our successes, to date, is the fact 
that AFRC is a very dynamic organization in a dynamic environment, 
still putting our airmen first, and using new technology to seamlessly 
integrate all our forces, whether associate or unit equipped, in both 
peace and war.

                         DEVELOPING OUR AIRMEN

    I am pleased to tell you that the Air Force Reserve continues to be 
a force of choice for the Air Force and the warfighting commanders, as 
we respond swiftly to each phase of the global war on terrorism (GWOT). 
We focus our attention on our people to assure they are provided the 
full spectrum of training opportunities, enhancing their warfighting 
skills, the capabilities of the Air Force Reserve, and thus, the 
capabilities of the Air Force.
    As we strive to retain our best and brightest, we must continue to 
reward them through compensation and benefits. We continue to challenge 
our family support personnel, commanders, and first sergeants to find 
improved ways to look after the families who remain while our members 
deploy. We reach out to their employers with our thanks for their 
sacrifice and support. We encourage open dialogue among the troops, and 
from the troops, through their chain of command, to me, to exchange 
ideas and receive feedback. Finally, it is critical to partner with you 
to ensure we remain the strongest air and space force in the world.
    The Air Force is a team--we train together, work together, and 
fight together. Wherever you find the United States Air Force, at home 
or abroad, you will find the active and Reserve members working side-
by-side, trained to one tier of readiness, READY NOW! and that's the 
way it should be.

                               RECRUITING

    In fiscal year 2002, Air Force Reserve Command (AFRC) exceeded its 
recruiting goal for the second year in a row. This remarkable feat was 
achieved through the outstanding efforts of our recruiters, who 
accessed 107.9 percent of the recruiting goal, and through the superb 
assistance of our Reserve members who helped tell our story of public 
service to the American people. Additionally, AFRC was granted 
permission by the Assistant Secretary of the Air Force, Manpower and 
Reserve Affairs, in coordination with the Under Secretary for Defense 
(Personnel and Readiness), to surpass its fiscal year 2002 end-strength 
due to the ongoing support of current operations. AFRC end strength 
reached 102.59 percent of congressionally authorized requirements.
    Several initiatives contributed to Air Force Reserve recruiters 
once again leading the Department of Defense in annual accessions per 
recruiter. For example, in fiscal year 2001, AFRC permanently funded 50 
recruiter authorizations through accelerated authorizations and 
appropriations by Congress, we extended the much appreciated 
congressional action through the Programmed Objective Memorandum 
process. Further, they instituted a new 1-800 call center, redesigned 
the recruiting web site, launched an advertising campaign targeting 
those accessed from other services, and re-energized the ``Get One'' 
program, whereby Air Force Reserve members receive incentive awards for 
referrals and accessions given to recruiters.
    Moreover, AFRC received permanent funding for an ``off-base'' real 
estate program to set up offices in malls and other high visibility 
areas. This initiative was desperately needed to provide recruiters 
greater exposure in local communities and access to non-prior service 
(NPS) applicants--a significant recruiting requirement since the active 
duty drawdown.
    While fiscal year 2002 was an outstanding year for recruiting, 
fiscal year 2003 is shaping up to be a very challenging year. A 
personnel management program, ``Stop Loss,'' was implemented for Air 
Force members. Historically, Reserve recruiting accesses close to 25 
percent of eligible separating active duty Air Force members (i.e. no 
break in service), accounting for a significant portion of annual 
accessions. Although Stop Loss has since been terminated, the continued 
high OPS/PERS tempo may negatively impact our success in attracting 
separating airmen. As a result, recruiters will have a difficult task 
accessing through other sources, including NPS, Air Force separatees 
with a break in service, and accessions from other services' former 
members.
    Additionally, one of the biggest challenges for recruiters this 
year is a shortage of basic military training (BMT) and technical 
training school (TTS) quotas. BMT and TTS allocations have not kept 
pace with increasing NPS recruiting requirements. Specifically, 
Recruiting Services enlisted almost 1,500 applicants in fiscal year 
2002 without BMT and TTS dates. We are working closely with Air Force 
Specialty Code Functional Managers (FAMs) and the personnel community 
to increase the future number of BMT and TTS quotas available. In the 
interim, when we cannot match basic training and technical training 
schools back-to-back, new airmen can complete basic training, report 
back to their unit for orientation and local training, then attend 
their technical school at a later date convenient to both the Air Force 
Reserve and the applicant.
    Finally, while overall end strength of the Air Force Reserve 
exceeds 100 percent, some career fields are undermanned. To avoid 
possible readiness concerns, recruiters will be challenged to guide 
applicants to critical job specialties. To assist in this effort, we 
continually review enlistment bonus listings to achieve parity with 
active duty listings for our airmen in these critical career fields. It 
is an ongoing management process involving all levels from career 
advisors to those of you on this committee to look into the future, 
anticipate the high demand specialties, and increase bonuses to balance 
supply and demand.

                               RETENTION

    Retention is a major concern within the Air Force Reserve. With the 
lifting of Stop Loss and extended partial mobilizations, the full 
impact on Reserve retention remains to be seen. Nevertheless, our 
overall enlisted retention rate of 86 percent for fiscal year 2002 
exceeded the 5 year average. For officers, retention remains steady at 
approximately 92 percent.
    We continue to look at viable avenues to enhance retention of our 
reservists. We are exploring the feasibility of expanding the bonus 
program to our Active Guard Reserve (AGR) and Air Reserve Technician 
(ART) members; however, no decision has yet been made to implement. In 
addition, the Aviation Continuation Pay (ACP) continues to be offered 
to retain our rated AGR officers. The Reserve has made many strides in 
increasing education benefits for our members, offering 100 percent 
tuition assistance for those individuals pursuing an undergraduate 
degree and continuing to pay 75 percent for graduate degrees. We also 
employ the services of the Defense Activity for Non-Traditional 
Education Support (DANTES) for College Level Examination Program (CLEP) 
testing for all reservists and their spouses. These are our most 
notable, but we continue to seek innovative ways to enhance retention 
whenever and wherever possible.

                      QUALITY OF LIFE INITIATIVES

    In an effort to better provide long-term care insurance coverage 
for its members and their families, the Air Force Reserve participated 
in the Federal Long-Term Care Insurance Program (a commercial insurance 
venture sponsored by the Office of Personnel Management). This program 
affords members of the Selected Reserve insurance coverage for a 
variety of home and assisted living care requirements. Legislative 
changes are being pursued to open program eligibility to those members 
who are ``gray area.'' The Air Force Reserve expanded its Special Duty 
Assignment Pay program to include an additional 17 traditional, 7 
Active Guard and Reserve (AGR), and 10 Individual Mobilization 
Augmentee (IMA) Air Force Specialty Codes, and continues to advance 
staff efforts to mirror the active duty SDAP program. Additionally, an 
initiative to pay congressionally authorized SDAP to members performing 
inactive duty for training was approved on the 13th of February, this 
year.

                            THE BIG PICTURE

    We have learned much from the events of September 11, 2001, as it 
illustrated many things very clearly, not the least of them being the 
need for a new steady state of operations demanding more from our 
people and our resources. Within hours, and in some cases within 
minutes of the terrorist attacks, Air Force Reserve Command units 
throughout the country were involved in transporting people and 
resources to aid in the massive humanitarian relief effort. Air Force 
Reserve aeromedical evacuation (AE) aircrews were among the first to 
respond and provided almost half of the immediate AE response provided. 
However, the larger need was mortuary affairs support, of which the Air 
Force Reserve provides 75 percent of Air Force capability. Again, 186 
trained reservists immediately stepped forward, in volunteer status, 
for this demanding mission. Reserve airlift crews were among the first 
to bring in critical supplies, equipment, and personnel, including 
emergency response teams from the Federal Emergency Management Agency 
(FEMA), fire trucks, search dogs, and earth moving equipment. F-16 
fighters and KC-135/KC-10 air refueling tankers immediately began 
pulling airborne and ground alert to provide combat air patrol support 
over major U.S. cities.
    In direct support of Operation Enduring Freedom, Air Force 
reservists have flown a multitude of combat missions into Afghanistan. 
Most notably, the 917th Wing at Barksdale AFB, Louisiana (B-52s), the 
419th Fighter Wing at Hill AFB, Utah (F-16s), the 442d Fighter Wing at 
Whiteman AFB, Missouri (A-10s), and the 926th Fighter Wing at NAS Joint 
Reserve Base, New Orleans (A-10s). Reserve aircrews have flown C-17 
airdrop missions into Afghanistan delivering humanitarian aid, provided 
refueling tanker crews and support personnel from the 434th Air 
Refueling Wing at Grissom ARB, IN, and 349th Air Mobility Wing at 
Travis AFB, California (KC-10). Additionally, Air Force Reserve F-16 
units have been involved in support of Operation Noble Eagle by flying 
combat air patrols over American cities (301st Fighter Wing, JRB NAS 
Fort Worth, Texas, 482d Fighter Wing, Homestead ARB, Florida, and 419th 
Fighter Wing, Hill AFB, Utah). Our AWACS associate aircrew from Tinker 
AFB, OK, flew 13 percent of the Operation Noble Eagle sorties with only 
4 percent of the Total Force crews. Air Force Reserve C-130s with their 
aircrew and support personnel, under the direction of NORAD, in support 
of Operation Noble Eagle, provided alert for rapid CONUS deployments of 
Army and Marine Quick Response Forces and Ready Response Forces. 
Reserve units were also refueling those combat air patrol missions with 
refueling assets from various Reserve wings. Also in direct support of 
Operations Enduring Freedom/Noble Eagle, Air Force space operations' 
reservists have conducted Defense Meteorological Satellite Program 
(DMSP), Defense Support Program (DSP), and Global Positioning Satellite 
(GPS) operations, providing critical weather, warning, and navigation 
information to the warfighter. Additionally, Air Force reservists have 
supported Aerospace Operations Center efforts providing COMAFSPACE with 
situational awareness and force capabilities to conduct combat 
operations at all levels of conflict.
    What makes these units unique is the fact that our reservists have 
demonstrated time and time again, the success of an all volunteer 
force. In fact, many of those who were mobilized, had volunteered to 
perform duty, and day to day, a significant percentage of Air Force 
missions are performed through or augmented by AFRC. We are no longer a 
force held in reserve solely for possible war or contingency actions--
we are at the tip of the spear. The attacks on our freedom--on our very 
way of life--cemented the Total Force concepts already in place and 
AFRC continues to work shoulder-to-shoulder with the active duty (AD) 
and Air National Guard (ANG) components in the long battle to defeat 
terrorism.
    Effective modernization of Air Force Reserve Command (AFRC) assets 
is our key to remaining a relevant and combat ready force. It is 
apparent to all that the Reserve component is crucial to the defense of 
our great Nation and our modernization strategy is sound, but is 
dependent upon lead command funding. AFRC has had limited success in 
getting the lead commands to fund our modernization requirements (CCIU 
and C-17 sim are two examples), but unfortunately lead command funding 
of AFRC modernization priorities remains below the level needed to 
maximize our capabilities. Although the National Guard and Reserve 
Equipment Appropriation (NGREA) funding helps offset some of these 
modernization shortfalls, the level of funding precludes us from 
addressing our larger modernization priorities. Success in meeting our 
modernization goals depends on robust interaction with the lead 
commands and in keeping congressional budgeting authorities informed of 
AFRC initiatives.

                         INTEGRATING OPERATIONS

    Air Force Reserve Command made major Air Expeditionary Force (AEF) 
contributions in fiscal year 2002. We met virtually 100 percent of both 
aviation and combat support commitments, by deploying over 20,700 
volunteers overseas and another 12,600 supporting homeland defense, in 
volunteer status. The challenge for 2003 will be to meet ongoing AEF 
commitments with volunteers from a Reserve Force which has had much of 
its operations and combat support mobilized for homeland defense and 
the war on terrorism. As of today, over 12,000 Air Force reservists are 
mobilized, and thousands more continue to provide daily support as 
volunteers. Over 1,500 of those mobilized are Individual Mobilization 
Augmentees (IMAs), providing critical support to the Unified Commands, 
active component MAJCOMs, and various defense agencies supporting 
homeland security and Operation Enduring Freedom. Required support 
functions span the entire breadth of Reserve capabilities including 
security forces, civil engineering, rescue, special operations, 
strategic and tactical airlift, air refueling, fighters, bombers, 
AWACs, command and control, communications, satellite operations, 
logistics, intelligence, aerial port, services, mission support, and 
medical.

                          AEF CY02--IN REVIEW

    2002 ended as it began, in transition. It began with surging 
requirements brought on by the GWOT. To manage the surge, we remained 
true to the AEF concept to hold the negative impact of operations and 
personnel tempos to a minimum. AFRC was meeting the new taskings 
brought on by the war and the associated mobilizations while at the 
same time meeting AEF commitments we made prior to September 11. From 
the AFRC AEF Cell perspective it was a magnificent effort by all the 
wings in the command to meet the challenges. The full impact is 
appreciated when it is understood we did not ask to be relieved of any 
AEF tasking, met all new ONE/OEF taskings, and were still able to find 
volunteers to help fill other identified shortfalls. As the year ended, 
we transitioned to a lower activity level through demobilizations, but 
continued to plan for a potential new demanding operation. The constant 
is that we still have our AEF commitments, we are still meeting them, 
and we do not have any shortfalls. For next year we expect the number 
of AEF requirements to reflect the increase brought on by the war on 
terrorism. The culture change to an expeditionary Air Force is being 
realized through all levels of the command and is demonstrated in 
action as well as words by the response to the AEF, ONE, and OEF 
taskings of the past year.
    Air Reserve component participation is central to the AEF 
construct. The ARC normally contributes 10 percent of the Expeditionary 
Combat Support and 25 percent of the aviation for steady-state 
rotations. Air National Guard (ANG) and Air Force Reserve Command 
(AFRC) forces make up nearly half of the forces assigned to each AEF, 
with the ARC making up the majority of forces in some mission areas.

                      TECHNOLOGY TO THE WARFIGHTER

F-16 Fighting Falcon
    Air Combat Command and AFRC are upgrading the F-16 Block 25/30/32 
in all core combat areas by installing a Global Positioning System 
(GPS) navigation system, Night Vision Imaging System (NVIS) and NVIS 
compatible aircraft lighting, Situational Awareness Data Link (SADL), 
Target Pod integration, GPS steered ``smart weapons'', an integrated 
Electronics Suite, Pylon Integrated Dispense System (PIDS), and the 
Digital Terrain System (DTS).
    The acquisition of the LITENING II targeting pod marked the 
greatest jump in combat capability for AFRC F-16s in years. At the 
conclusion of the Persian Gulf War, it became apparent that the ability 
to employ precision-guided munitions, specifically laser-guided bombs, 
would be a requirement for involvement in future conflicts. LITENING II 
affords the capability to employ precisely targeted Laser Guided Bombs 
(LGBs) effectively in both day and night operations, any time at any 
place. LITENING II was designed to be spirally developed to allow 
technology advances to be incorporated as that technology became 
available, and provides even greater combat capability. This capability 
allows AFRC F-16s to fulfill any mission tasking requiring a self-
designating, targeting-pod platform, providing needed relief for 
heavily tasked active duty units. These improvements have put AFRC F-
16s at the leading edge of combat capability. The combination of these 
upgrades are unavailable in any other combat aircraft and make the 
Block 25/30/32 F-16 the most versatile combat asset available to a 
theater commander. Tremendous work has been done keeping the Block 25/
30/32 F-16 employable in today's complex and demanding combat 
environment. This success has been the result of far-sighted planning 
that has capitalized on emerging commercial and military technology to 
provide specific capabilities that were projected to be critical. That 
planning and vision must continue if the F-16 is to remain usable as 
the largest single community of aircraft in America's fighter force. 
Older model Block 25/30/32 F-16 aircraft require structural 
improvements to guarantee that they will last as long as they are 
needed. They also require data processor and wiring system upgrades in 
order to support employment of more sophisticated precision attack 
weapons. They must have improved pilot displays to integrate and 
present the large volumes of data now provided to the cockpit. 
Additional capabilities to include LITENING II pod upgrades, are needed 
to nearly eliminate fratricide and allow weapons employment at 
increased range, day or night and in all weather conditions. They must 
also be equipped with significantly improved threat detection, threat 
identification, and threat engagement systems in order to meet the 
challenges of combat survival and employment for the next 20 years.

A/OA-10 Thunderbolt
    There are five major programs over the next 5 years to ensure the 
A/OA-10 remains a viable part of the total Air Force. The first is 
increasing its precision engagement capabilities. The A-10 was designed 
for the Cold War and is the most effective Close Air Support (CAS) 
anti-armor platform in the USAF, as demonstrated during the Persian 
Gulf War. Unfortunately, its systems have not kept pace with modern 
tactics as was proven during Operation Allied Force. The AGM-65 
(Maverick) is the only precision-guided weapon carried on the A-10. 
Newer weapons are being added into the Air Force inventory regularly, 
but the current avionics and computer structure limits the deployment 
of these weapons on the A-10. The Precision Engagement and Suite 3 
programs will help correct this limitation. Next, critical systems on 
the engines are causing lost sorties and increased maintenance 
activity. Several design changes to the accessory gearbox will extend 
its useful life and reduce the existing maintenance expense associated 
with the high removal rate. The other two programs increase the 
navigation accuracy and the overall capability of the fire control 
computer, both increasing the weapons system's overall effectiveness. 
Recent interim improvements included Lightweight Airborne Recovery 
System (LARS) and LITENING II targeting pod integration.
    With the advent of targeting pod integration, pods must be made 
available to the A-10 aircraft. Thirty LITENING II AT pods are required 
to bring advanced weapon employment to this aircraft. AFRC looks 
forward to supporting the Precision Engagement program to futher 
integrate targeting pods. Looking to the future, there is a requirement 
for a training package of 30 PRC-112B/C survival radios for 10th Air 
Force fighter, rescue, and special operations units. While more 
capable, these radios are also more demanding to operate and additional 
units are needed to ensure the aircrews are fully proficient in their 
operation. One of the A-10 challenges is resources for upgrade in the 
area of high threat survivability. Previous efforts focused on an 
accurate missile warning system and effective, modern flares; however a 
new preemptive covert flare system may satisfy the requirement. The A-
10 can leverage the work done on the F-16 Radar Warning Receiver and C-
130 Towed Decoy Development programs to achieve a cost-effective 
capability. The A/OA-10 has a thrust deficiency in its operational 
environment. As taskings evolved, commanders have had to reduce fuel 
loads, limit take-off times to early morning hours, and refuse taskings 
that increase gross weights to unsupportable limits. Fifty-two AFRC A/
OA-10s need upgraded structures and engines (2 engines per aircraft 
plus 6 spares for a total of 110 engines).

B-52 Stratofortress
    In the next 5 years, several major programs will be introduced to 
increase the capabilities of the B-52 aircraft. Included here are 
programs such as a Crash Survivable Flight Data Recorder and a Standard 
Flight Data Recorder, upgrades to the current Electro-Optical Viewing 
System, Chaff and Flare Improvements, and improvements to cockpit 
lighting and crew escape systems to allow use of Night Vision Goggles. 
Enhancements to the AFRC B-52 fleet currently under consideration are:

         Visual clearance of the target area in support of 
        other conventional munitions employment;
         Self-designation of targets, eliminating the current 
        need for support aircraft to accomplish this role;
         Target coordinate updates to JDAM and WCMD, improving 
        accuracy; and
         Bomb Damage Assessment of targets.

    In order to continue the viability of the B-52 well into the next 
decade, several improvements and modifications are necessary. Although 
the aircraft has been extensively modified since its entry into the 
fleet, the advent of precision guided munitions and the increased use 
of the B-52 in conventional and Operations Other Than War (OOTW) 
operation requires additional avionics modernization and changes to the 
weapons capabilities such as the Avionics Midlife Improvement, 
Conventional Enhancement Modification (CEM), and the Integrated 
Conventional Stores Management System (ICSMS). Changes in the threat 
environment are also driving modifications to the defensive suite 
including Situational Awareness Defense Improvement (SADI) and the 
Electronic Counter Measures Improvement (ECMI), and integration of the 
LITENING II targeting pod. Five LITENING II AT pods are required to 
support this important new capability.
    The B-52 was originally designed to strike targets across the globe 
from launch in the United States. This capability is being repeatedly 
demonstrated, but the need for real time targeting information and 
immediate reaction to strike location changes is needed. Multiple 
modifications are addressing these needs. These integrated advanced 
communications systems will enhance the B-52 capability to launch and 
modify target locations while airborne. Other communications 
improvements are the Global Air Traffic Management (GATM) Phase 1, an 
improved ARC-210, the KY-100 Secure Voice, and a GPS-TACAN Replacement 
System (TRS).
    As can be expected with an airframe of the age of the B-52, much 
must be done to enhance its reliability and replace older, less 
reliable or failing hardware. These include a Fuel Enrichment Valve 
Modification, Engine Oil System Package, and an Engine Accessories 
Upgrade, all to increase the longevity of the airframe.

MC-130H Talon
    In 2006, AFRC and Air Force Special Operations Command will face a 
significant decision point on whether or not to retire the Talon I. 
This largely depends on the determination of the upcoming SOF Tanker 
Requirement Study. Additionally, the MC-130H Talon II aircraft will be 
modified to air refuel helicopters. The Air Force CV-22 is being 
developed to replace the entire MH-53J Pave Low fleet, and the MC-130E 
Combat Talon l. The CV-22 program has been plagued with problems and 
delays and has an uncertain future. Ultimately, supply/demand will 
impact willingness and ability to pay for costly upgrades along with 
unforeseeable expenses required to sustain an aging weapons system.

HC-130P/N Hercules
    Over the next 5 years, there will be primarily sustainability 
modifications to the weapons systems to allow it to maintain 
compatibility with the remainder of the C-130 fleet. In order to 
maintain currency with the active duty fleet, AFRC will accelerate the 
installation of the APN-241 as a replacement for the APN-59. 
Additionally, AFRC will receive two aircraft modified from the `E' 
configuration to the Search and Rescue configuration. All AFRC assets 
will be upgraded to provide Night Vision Imaging System (NVIS) mission 
capability for C-130 combat rescue aircraft.

HH-60G Pave Hawk
    Combat Search and Rescue (CSAR) Mission Area modernization strategy 
currently focuses on resolving critical weapon system capability 
shortfalls and deficiencies that pertain to the Combat Air Force's 
Combat Identification, Data Links, Night/All-Weather Capability, Threat 
Countermeasures, Sustainability, Expeditionary Operations, and 
Pararescue modernization focus. Since the CAF's CSAR forces have 
several critical capability shortfalls that impact their ability to 
effectively accomplish their primary mission tasks today, most CSAR 
modernization programs/initiatives are concentrated in the near-term 
(fiscal year 2000-2006). These are programs that:

         Improve capability to pinpoint location and 
        authenticate identity of downed aircrew members/isolated 
        personnel
         Provide line-of-sight and over-the-horizon high speed 
        LPI/D data link capabilities for improving battle space/
        situational awareness
         Improve Command and Control capability to rapidly 
        respond to ``isolating'' incidents and efficiently/effectively 
        task limited assets
         Improve capability to conduct rescue/recovery 
        operations at night, in other low illumination conditions, and 
        in all but the most severe weather conditions
         Provide warning and countermeasure capabilities 
        against RF/IR/EO/DE threats
         Enhance availability, reliability, maintainability, 
        and sustainability of aircraft weapon systems

WC-130J Hercules
    The current WC-130H fleet is being replaced with new WC-130J 
models. This replacement allows for longer range and ensures weather 
reconnaissance capability well into the next decade. Once conversion is 
complete, the 53rd Weather Reconnaissance Squadron will consist of 10 
WC-130Js. Presently, there are seven WC-130J models at Keesler AFB, MS 
undergoing Qualification Test and Evaluation (QT&E). The remaining 
three aircraft have been transferred to AFRC and are currently at 
Lockheed Marietta scheduled for delivery to Keesler AFB. Deliveries are 
based on the resolution of deficiencies identified in test and will 
impact the start of operational testing and the achievement of interim 
operational capability (IOC). Major deficiencies include: propellers 
(durability/supportability), radar modification to correct (range to 
range inconsistencies), tilt and start up blanking display errors, and 
SATCOM transmission deficiencies. AFRC continues to work with the 
manufacturer to resolve the QT&E documented deficiencies.

C-5 Galaxy
    Over the next 5 years, there will be sustainability modifications 
to the weapon system to allow it to continue as the backbone of the 
airlift community. The fleet will receive the avionics modernization 
which replaces cockpit displays while upgrading critical flight 
controls, navigational, and communications equipment. This will allow 
the C-5 to operate in Global Air Traffic Management (GATM) airspace. 
Additionally, the C-5B models and possibly the C-5As, will undergo a 
Reliability Enhancement and Re-engining program which will not only 
replace the powerplant, but also numerous unreliable systems and 
components. The 445th Airlift Wing at Wright Patterson AFB, OH will 
transition from C-141 Starlifters to C-5As in fiscal year 2006 and 
fiscal year 2007. Finally, the 439th Airlift Wing at Westover ARB, MA 
will modernize its C-5 fleet in fiscal year 2007 and fiscal year 2008 
when it transitions from C-5As to C-5Bs.

C-17 Globemaster
    Beginning in fiscal year 2005, the Air Force Reserve Command will 
enter a new era as the 452nd Air Mobility Wing at March Air Reserve 
Base, CA transitions from C-141s to C-17 Globemasters. Although 
reservists have been associating with active C-17 units since their 
inception in the active Air Force, March ARB will be the Command's 
first C-17 Unit Equipped Unit and will aid in maintaining diversity in 
the Reserve Command's strategic mobility fleet.

C-141 Starlifter
    For the past 30 years, the C-141 has been the backbone of mobility 
for the United States military in peacetime and in conflict. In the 
very near future, the C-141 will be retired from the active-duty Air 
Force. However, Air Force Reserve Command continues the proud heritage 
of this mobility workhorse and will continue to fly the C-141 through 
fiscal year 2006. It is crucial that AFRC remains focused on flying 
this mission safely and proficiently until units convert to follow-on 
missions. Replacement missions must be more than the insertion of 
another airframe. They must be a viable mission that includes 
modernized equipment.

C-130 Hercules
    AFRC has 127 C-130s including the E, H, J, and N/P models. The 
Mobility Air Forces (MAF) currently operates the world's best theater 
airlift aircraft, the C-130, and it will continue in service through 
2020. In order to continue to meet the Air Force's combat delivery 
requirements through the next 17 years, aircraft not being replaced by 
the C-130J will become part of the C-130X Program. Phase 1, Avionics 
Modernization Program (AMP) program includes a comprehensive cockpit 
modernization by replacing aging, unreliable equipment and adding 
additional equipment necessary to meet Nav/Safety and GATM 
requirements. Together, C-130J and C-130X modernization initiatives 
reduce the number of aircraft variants from 20 to 2 core variants, 
which will significantly reduce the support footprint and increase the 
capability of the C-130 fleet. The modernization of our C-130 forces 
strengthens our ability to ensure the success of our warfighting 
commanders and lays the foundation for tomorrow's readiness.

KC-135E/R Stratotanker
    One of Air Force Reserve Command's most challenging modernization 
issues concerns our unit-equipped KC-135s. Five of the seven air 
refueling squadrons are equipped with the KC-135R, while the remaining 
two squadrons are equipped with KC-135Es. The KC-135E, commonly 
referred to as the E-model, has engines that were recovered from 
retiring airliners. This conversion, which was accomplished in the 
early mid-1980s, was intended as an interim solution to provide 
improvement in capability while awaiting conversion to the R-model with 
its new, high-bypass, turbofan engines and other modifications. AFRCs 
remaining two E-models units look forward to converting to R-models in 
the very near future (fiscal year 2004-2005).
    The ability of the Mobility Air Forces (MAF) to conduct the air 
refueling mission has been stressed in recent years. Although total 
force contributions have enabled success in previous air campaigns, 
shortfalls exist to meet the requirements of our National Military 
Strategy. AMC's Tanker Requirements Study-2005 (TRS-05) identifies a 
shortfall in the number of tanker aircraft and aircrews needed to meet 
global refueling requirements in 2005. There is currently a shortage of 
KC-135 crews and maintenance personnel. Additionally, the number of KC-
135 aircraft available to perform the mission has decreased in recent 
years due to an increase in depot-possessed aircraft with a decrease in 
mission capable (MC) rates. An air refueling Mission Needs Statement 
has been developed and an Analysis of Alternatives (AoA) will be 
conducted to determine the most effective solution set to meet the 
Nation's future air refueling requirements.

                             FUTURE VECTOR

    As we think about our future, the nature of warfighting, and the 
new steady state, we anticipate many challenges. While this new mission 
activity continues, we need to keep our focus--assess the impact of 
Stop Loss on our operations, provide adequate funding for continuing 
activations, and keep an eye on sustaining our recruiting efforts. The 
challenge will be to retain our experience base and keep our prior 
service levels high. With your continued support, and that which you 
have already given, we will be able to meet each new challenge head-on, 
without trepidation.
    Our citizen airmen, alongside the active duty and the Air National 
Guard, continue to step through the fog and friction as we prosecute 
the GWOT. Our support for them is not just in the battlespace, but at 
home. We will continue to refine the ways we support their families, 
their employers, and the members themselves as we keep the lines of 
communication open to you. We must ensure that we are doing as much for 
them through increased pay, benefits, and finding the right mix between 
equity and parity with their active duty counterparts, as we continue 
to ask more and more of them. We must continue to think outside the 
box, to protect their rights as students who are called away from an 
important semester, as employees who must turn that big project over to 
someone else in the company for a while, and just as critically, as 
sons, daughters, husbands, wives, and parents who will miss birthdays, 
graduations, and a litany of other events many of us take for granted.
    We are making strides at leveling the operations tempo by finding 
the right skill mix between the ARCs and the AD. In a Total Force 
realignment of scarce LD/HD resources, the 939th Rescue Wing's HC-130s 
and HH-60s will transfer to the active component in order to reduce the 
Total Force PERSTEMPO in the LD/HD mission of Combat Search and Rescue. 
The transfer of these assets to the active component increases full-
time personnel without increasing already high volunteerism rates or 
having to mobilize a significant number of CSAR reservists. The 
activation of the 939th Air Refueling Wing, Portland, OR, addresses the 
need for more aerial refueling assets on the West coast enhancing our 
ability to rapidly respond to any crisis.
    Additionally, AFRC has assumed responsibility for supporting the 
National Science Foundation Deep Freeze mission. The next 3 years, the 
men and women of the 452nd AMW at March ARB, CA, will be flying C-141 
support missions in support of this Antarctic operation. We have also 
assumed 16 percent of the Total Force Undergraduate Pilot Training 
programs at seven bases around the United States and we continue to 
balance, assume, and relinquish missions or parts of missions to 
accommodate the goals of the Air Force and Department of Defense as 
world events unfold and dictate change, and as necessary to lessen the 
burden on our members and the AD.
    All of the distinguished members on the committee, and we in the 
Air Force and Air Force Reserve, have been given an incredible 
opportunity and an incredible responsibility to shape not only the 
structure of the world's premiere air and space force, but to shape its 
environment . . . its quality people, and the quality of their lives. 
Our mission will continue to be accomplished more accurately, more 
timely, and with an even greater pride, as we focus on our best 
resource.
    These and other evolving missions are just some of the areas into 
which we hope to continue to expand, keeping Reserve personnel 
relevant, trained, and ready now when we are called. I'd like to extend 
my thanks again to the subcommittee for allowing me the opportunity to 
testify before you here today and for all you do for the Air Force 
Reserve.

    Senator Chambliss. Thank you, General. We don't have to ask 
for that new headquarters building anymore.
    General Batbie. No, sir. We're half finished right now.
    Senator Chambliss. We're getting there now. There you go, 
and we're proud to have it at Robins, too.
    Admiral Totushek, I appreciated the profiles of the 
individual Naval Reserve sailors that you set forth in your 
written statement and endorse your description of them as true 
heroes, because you're absolutely right. I couldn't agree with 
you more that the ordinary people in the Guard and Reserves 
certainly do extraordinary things day in and day out.
    I asked Secretary Hall this question about the 
justification for the proposed reduction of 1,900 sailors in 
the Navy's Selected Reserve personnel for fiscal year 2004, and 
I'd like your response to that same question. What concerns, if 
any, do you have about this reduction?
    Admiral Totushek. Senator, I am a little bit concerned that 
it might be the beginning of a trend that I would not like to 
see continue. Basically, what happened is, we were doing the 
POM 2004 deliberations. Navy had started to work with the 
Marine Corps on Navy/Marine Corps aviation integration. The 
first steps in that were to do away with a couple of Reserve 
squadrons, a Naval Reserve squadron and a Marine Corps Reserve 
squadron. Part of those reductions are as a result of that 
action. The other parts come from decommissioning of several 
Reserve platforms that were done over the last couple of years. 
Those, all totaled, left us with a net reduction. We don't 
think that is a trend, but we certainly are going to work hard 
to make sure it's not.
    Senator Chambliss. I understand that the Navy and Marine 
Corps are undertaking a TACAIR integration effort to 
consolidate the Department of the Navy's F-18 squadrons and 
prepare the way for the Joint Strike Fighter (JSF). While I 
applaud the effort to create greater efficiencies and I know 
that JSF is going to be a great addition to the Air Force, 
Navy, and Marine Corps, I am concerned about the potential 
impact on the Naval Air Station at Atlanta, particularly given 
the unique arrangement we have at Dobbins Air Reserve Base with 
both Air Force and Navy Reserve personnel and aircraft. The 
presence of both Services allows us to take advantage of common 
runways, facilities, and transportation corridors supporting 
the base.
    What can you tell me about how the Department of the Navy 
is approaching the TACAIR integration effort? Where are you in 
the process? Are you taking into account existing efficiencies 
at installations that have multiple operational missions?
    Admiral Totushek. Yes, sir. We are looking at any place we 
site any of our squadrons to try and make them as joint as 
possible. All of our Naval Reserve installations are joint 
Reserve bases, and we have oftentimes all the Reserve 
components represented there.
    In the case of Robins, the initial reduction was to be one 
Naval Reserve squadron and one Marine Corps Reserve squadron. 
We have not yet determined which Naval Reserve squadron that 
will be. We have undertaken a study at my request at the end 
game of the POM 2004 submission, because I didn't feel like we 
had done enough analysis to get us to the right answer of which 
squadron should go, if at all, because it may turn out, as we 
get through this process that we're doing with Navy right now, 
that it would make more sense for us to keep the three Reserve 
squadrons and do away with an active squadron, for instance.
    So those negotiations are ongoing right now. We brief the 
Vice Chief of Naval Operations within the month, and we'll see 
where we go from there.
    Senator Chambliss. What's your timetable for that? Do you 
know?
    Admiral Totushek. It'll be done here very quickly, because 
we need to put it in for PR-05 to make sure that we have the 
right proposal throughout the FYDP.
    Senator Chambliss. Okay.
    General McCarthy, in your written statement, you indicate 
that the Marine Corps Reserve is preparing to create two new 
security battalions that will provide a dual-use capacity 
consisting of eight antiterrorism force protection platoons and 
an augmentation unit for the Marine Corps' Chemical/Biological 
Instant Response Force (CBIRF). Please explain how these Marine 
Corps reservists will be augmented into these units, what area 
will the marines involved come from, and when will the 
capability be realized.
    General McCarthy. Senator Chambliss, the security 
battalions will be stand-alone Marine Corps Reserve units, and 
the only integrated part of that will be, as you've indicated, 
the augmentation cell that's a part of one of the security 
battalions that will go to CBIRF. We anticipate that most of 
those marines will come from the metropolitan Washington area. 
They will need to drill and work closely with CBIRF, which is 
down at Indian Head, Maryland. So the recruiting draw, the best 
place for us to draw marines for that detachment, will be in 
the metropolitan Washington area. The rest of the two security 
battalions will be scattered all over the country. They'll be 
in about 20 different locations, I think. They will not be a 
blended or integrated unit; they'll be stand-alone Marine Corps 
Reserve units.
    Senator Chambliss. I'd like each of you to comment on this. 
Many of our Guard and Reserve members and their families are 
experiencing extended separation and, in some cases, hardship 
due to reduced earnings and other factors. The stresses that 
are currently at work on many active duty and Reserve personnel 
are severe. We've seen some situations of domestic violence and 
other types of violent activity on the part of some of our 
personnel as a result of the heavy stress that they've all been 
under. What are you doing to ensure that necessary family 
support services are in place to reach out to all Guard and 
Reserve family members? How reliant are you on volunteers to 
perform these outreach efforts?
    General Helmly?
    General Helmly. Thank you, Senator.
    First of all, in the preparation for a mobilization and 
deployment we go through an extensive briefing to families, as 
well as the members. As some of my fellow chiefs have noted, 
the current mobilization tempo with regard to very short notice 
has not provided us the amount of time that we would have 
desired to conduct those activities, but that includes 
briefings by members of the Chaplain Corps, which explains what 
happens to spouse groups or to families upon separation. We 
also provide them briefings before the member returns and 
coaching. I've sat through these myself. The chaplain members 
coach the family members, ``Expect changes in your spouse and 
your father and your mother,'' et cetera.
    We're very reliant on volunteers. Probably 99 percent of 
our family readiness people who do the work, the heavy lifting 
are volunteers. They are, themselves, family members, loved 
ones of members of the Army Reserve.
    We have about a $4 million shortfall, that we should be 
able to make up, in staffing support for family readiness. 
During Operations Desert Shield/Desert Storm, we had virtually 
no family readiness program in place. Now, it is extensive. It 
is functioning. It is working.
    We are concerned about the stresses that you noted. About 
4,000 of our people are on a second consecutive year of 
mobilization. That adds to that challenge.
    I don't want to take up the time from my fellow chiefs, but 
we are addressing the very issues you cited with regard to the 
stresses and strains of the separation, and we prepare them on 
the front end through briefings, through coaching, through 
pamphlets, and we prepare them on the back end before the 
member returns home.
    Senator Chambliss. Admiral Totushek?
    Admiral Totushek. We didn't do a very good job of this in 
Operation Desert Storm and we learned a lot from that. After 
September 11, when it was evident that we were going to start 
mobilizing a lot of people, we put a lot of time and effort 
into establishing groups to make sure that we had the support 
systems in place.
    A couple of things I'll highlight. First of all, we do use 
a lot of volunteers. All of our ombudsmen--and they probably 
should be called ombudspersons, because we do have women doing 
it now, as well--are volunteers. They're at the unit level. 
They're the people that have the information or can get the 
information so that the family member has a point of contact at 
every one of our Reserve centers.
    We also have fallen in on a Navy system to use a web-
enabled product called Family Lines that allows our people to 
go online and find out the question to virtually anything that 
they would need to know, including if you want to talk to 
somebody, some counseling lines, so that you can call and get 
24 hours a day of support.
    I think the systems have been bolstered very well. I'm very 
proud of the effort we've taken to make sure that our folks 
aren't left hanging out there, especially out in the middle of 
the country where there isn't a base around to get that kind of 
support.
    Senator Chambliss. General McCarthy?
    General McCarthy. Senator, I'm in exactly the same 
situation. We are all responding to what we learned 10, 12 
years ago. I think we responded very well. We built a key 
volunteer network in each unit. We require each unit to have a 
key volunteer network and a trained key volunteer coordinator. 
We've just, in the last year or so, started to buttress that in 
another Marine Corps program called Links, which is a spouse-
to-spouse mentoring program, and we're pushing that out in a 
kind of a ripple effect and have gotten that out fairly well to 
the force. We still have a lot more work to do on that.
    We, like everybody else, depend tremendously on volunteers, 
on spouses and mothers and fathers to be these key volunteers, 
and they've responded tremendously. We also require that each 
unit have an officer, and, upon mobilization, have an officer 
who is on active duty, to serve as the family readiness 
officer. That officer becomes a link between the deployed 
commander and the families back home. We feel that that's been 
a pretty effective communications tool.
    Then the last thing, we were given the opportunity, and 
jumped at it, to participate in a Department of Defense-
sponsored and paid-for effort that is called One Source. One 
Source is an 800-telephone number program, like civilian 
employee assistance programs, that enables family members to 
call in and be referred by telephone to professionals around 
the country. We're just getting started with that, but the 
preliminary indications are very good, and I think that's going 
to be a huge plus for us.
    So the proof will be in the pudding when we've been in it a 
while longer and when people start coming back. But in terms of 
doing some things proactively, I'm pleased with where we are.
    General Batbie. Sir, like the others, we didn't do very 
well during Operation Desert Storm. Since that time, we added 
in a bunch of full-time and part-time people that we can call 
up. Last year, we called up 29 family support people and 
brought them to duty along with our full-time people to manage 
some of these issues.
    When the Fort Bragg incidents started happening, we sent 
our medical folks down there to participate in some of the 
panels to learn what we could about what was the root cause of 
those problems. We decided to team up with the medical, the 
family support, and the chaplain folks to be there when the 
people started coming home after the major part of Afghanistan 
was over to try to see if we could short-circuit some of those 
issues that might pop up. I don't know if it's been successful. 
We haven't had any major things pop up in the Air Force Reserve 
since that time.
    We have a critical care or critical incident intervention 
team that we put out there for major things that may happen 
with the unit, if we have major loss of life or something 
overseas, and try to get back to the local unit with experts 
that will come in from the headquarters or from other units to 
try to short-circuit some of the things that might pop up in 
that regard.
    Senator Chambliss. Okay. Thanks very much.
    Senator Nelson?
    Senator Ben Nelson. Thank you, Mr. Chairman.
    This is just a general question for any of you. As you saw 
your Reserve airmen, soldiers, and marines being mobilized and 
as you saw them come into active duty in support of the global 
war on terrorism, did you find that the current statutory 
mobilization authorities were adequate? In other words, was the 
law adequate to permit you to do this, or are there any changes 
that we might consider as it might relate to what you've 
learned from the war on terrorism and mobilization there?
    General Helmly. Senator Nelson, if I may, in my judgment 
the current statutory authorities are adequate. Our 
implementation of those statutory authorities has, candidly, 
been flawed and it has resulted in very short notice--in many 
cases, less then 5 to 10 days' notice. In those cases, the part 
that bothers me is that I had visibility over those 
requirements ahead of time; but without the authority, I could 
not hand a set of orders to the Army Reserve soldier.
    Without those official orders, Reserve members are somewhat 
powerless in terms of official documentation to inform their 
employer, to go to the issues that you discussed with the first 
panel on tuition at school, with regard to severing of 
contracts, rental agreements, leases, placing into abeyance, 
getting a power of attorney, making those kinds of arrangements 
to enter active duty and to subsequently deploy.
    So that's my judgment, that the authorities and legislation 
are adequate. We have to move a World War II linear 
mobilization process to a 21st century model that gives us some 
flexibility, as my peers noted, down at the working level so 
that we can make it more predictable for our members and 
provide them more advanced notice.
    Admiral Totushek. I would agree, Senator Nelson, that 
General Helmly has it right. The thing I would add is that OSD 
is working on the process. I don't think anybody's really happy 
with it, and we are trying to tackle it.
    Senator Ben Nelson. Good, thank you.
    General McCarthy. I adopt entirely the statement of General 
Helmly. The only point I would make in addition is, I'd give 
the administration great credit for going to partial 
mobilization when they did, rather than trying to go through 
the PSRC sort of a stair-step process. That enabled us to 
mobilize people from the Individual Ready Reserve, which was a 
big help, and I think was the right call under the 
circumstances. We do have some execution work to do.
    General Batbie. I can't disagree with anything that's been 
said, but I would point out one thing. We learned during this 
mobilization that it's additive up to the 2-year mark, so you 
can call reservists for 2 months now, let them off, call them 2 
months next year and up to 2 years. We're starting to get into 
that a little bit, but I don't know what kind of long-range 
effect that would have if we did that over an extended period.
    Senator Ben Nelson. Thank you.
    Thank you, Mr. Chairman.
    Senator Chambliss. Thank you.
    We just had another vote called, so we're going to call 
this hearing to a conclusion.
    I appreciate the testimony of all of our witnesses today. 
It's been an excellent review of critical issues that are of 
concern to us every day as we prepare for what is going to be 
an extended war.
    We'll keep your comments and concerns in mind as we review 
the Fiscal Year 2004 Defense Authorization Request, and I look 
forward to working with you and thank you for your 
participation today.
    We do have all of the statements of the respective 
witnesses. They will be entered into the record. They're very 
informative, and we'll consider those as we move forward.
    I'd also like to enter into the record a GAO report titled 
``Preliminary Observations Related to Income, Benefits, and 
Employer Support for Reservists During Mobilizations.'' This 
GAO report was just released today, Wednesday, March 19, 2003.
    [The information referred to follows:]

  Preliminary Observations Related to Income, Benefits, and Employer 
              Support for Reservists During Mobilizations

                      Prepared by Derek B. Stewart

    Mr. Chairman and members of the subcommittee: We are pleased to 
have the opportunity to comment on Reserve personnel income, benefits, 
and employer support. My remarks focus on the more than 870,000 
``selected'' reservists \1\ who generally drill and train part-time 
with their military units (referred to in this testimony as drilling 
unit members). These reservists may be involuntarily called to Federal 
active duty under various provisions of law. They may also be placed 
voluntarily on active duty for training and other purposes. Since the 
1991 Persian Gulf War, reservists have been mobilized or deployed to a 
number of contingency operations, including Operations Noble Eagle and 
Enduring Freedom and operations in Kosovo, Bosnia, Southwest Asia, and 
Haiti. As of early March 2003, 193,270 reservists were supporting 
current contingency operations.
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    \1\ Unless specified, we use the terms ``reserves'' and 
``reservists'' to refer to the collective forces of the Air National 
Guard, Army National Guard, the Army Reserve, the Naval Reserve, the 
Marine Corps Reserve, and the Air Force Reserve. We did not include the 
Coast Guard Reserve in our review.
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    Citing the increased use of the Reserves to support military 
operations, House Report 107-436 accompanying the Fiscal Year 2003 
National Defense Authorization Act directed us to review compensation 
and benefit programs for reservists. Our review is ongoing, but today I 
would like to present preliminary observations based on our review in 
three areas: (1) income protection for reservists called to active 
duty, (2) family support programs, and (3) health care access.\2\ All 
three of these issues are potential areas of concern to a reservist 
called to active duty for a contingency operation. We plan to issue a 
final report on these three issues later this year. In addition, you 
have asked us to discuss the results of our recently completed review 
concerning employer support for reservists, another potential area of 
concern to mobilized or deployed reservists.\3\ Finally, Mr. Chairman, 
while the legislation directed us to review the retirement system for 
the Reserves, we have not yet begun that work. As discussed with your 
offices, we plan to review the Reserve retirement system in the future. 
While we have not conducted a detailed review of this issue, I would 
like to offer some observations.
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    \2\ We plan to address compensation issues in other reviews. For 
example, we have an ongoing review of special and incentive pays for 
reservists who perform duty in the polar regions.
    \3\ U.S. General Accounting Office, Reserve Forces: DOD Actions 
Needed to Better Manage Relations between Reservists and Their 
Employers, GAO-02-608 (Washington, DC: June 13, 2002).
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    Before discussing these issues in more detail, I would like to note 
that one of the Department of Defense's (DOD) guiding principles for 
military compensation is that servicemembers--both reservists and 
active component members--be treated fairly. Military compensation for 
reservists is affected by the type of military duty they perform. In 
peacetime--when a reservist is on active duty for training or on 
military duty not related to a contingency operation--certain 
thresholds are imposed at particular points in service before a 
reservist is eligible to receive the same compensation as a member 
serving full-time. For contingency operations, these same thresholds 
generally do not apply. Reservists activated for contingency operations 
such as Operation Noble Eagle and Operation Enduring Freedom are 
generally eligible to receive the same compensation and benefits as 
active component personnel. I should also note here that in a recent 
report comparing the benefits offered by the military with those 
offered in the private sector, we found no significant gaps in the 
benefits available to military personnel.\4\
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    \4\ U.S. General Accounting Office, Military Personnel: Active Duty 
Benefits Reflect Changing Demographics, but Opportunities Exist to 
Improve, GAO-02-935 (Washington, DC: Sept. 18, 2002).
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    To date, we have met with and gathered information from DOD 
officials in the Office of the Assistant Secretary of Defense for 
Reserve Affairs, the Office of Military Compensation, the Office of 
Family Policy, the National Guard Bureau, the Army National Guard, the 
Air National Guard, the Army Reserve, the Air Force Reserve, the Naval 
Reserve, the Marine Corps Reserve, the TRICARE Management Activity, the 
National Committee for Employer Support of the Guard and Reserve, and 
other organizations. We obtained the results and DOD's preliminary 
analysis of the 2000 Survey of Reserve Component Personnel.\5\ We 
reviewed DOD proposals concerning income loss. We also reviewed DOD's 
progress in implementing recommendations that we made in prior reports. 

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    \5\ The population of interest targeted by the survey consisted of 
all Selected Reserve members of the Reserve components below flag or 
general officer rank, with at least 6 months of service when the 
surveys were first mailed in August 2000. The sample consisted of 
74,487 members. Eligible respondents returned 35,223 completed surveys.
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    Let me turn now to the specific issues.

                                SUMMARY

    The preliminary results of our review indicate that reservists 
experience widely varying degrees of income loss or gain when they are 
called up for a contingency operation. While income loss data for 
current Operations Noble Eagle and Enduring Freedom were not available, 
data for past military operations show that 41 percent of drilling unit 
members reported income loss, while 30 percent reported no change and 
29 percent reported an increase in income. This information is based on 
self-reported survey data for mobilizations or deployments of varying 
lengths of time. DOD's analysis of the data shows that, as would be 
expected, certain groups, such as medical professionals in private 
practice, tend to report much greater income loss than the average 
estimated for all reservists.
    Although reservists called up to support a contingency operation 
are generally eligible for the same family support and health care 
benefits as active component personnel, reservists and their families 
face challenges in understanding and accessing their benefits. Among 
the challenges, reservists typically live farther from military 
installations than their active duty counterparts, are not part of the 
day-to-day military culture, and may change benefit eligibility status 
many times throughout their career. Some of these challenges are unique 
to reservists; others are also experienced by active component members 
but may be magnified for reservists. Outreach to reservists and their 
families is likely to remain a continuing challenge for DOD in the 
areas of family support and health care. We will continue to look at 
DOD's outreach efforts as we complete our study.
    Outreach is also a critical component of maintaining and enhancing 
employers' support for reservists. Although DOD has numerous outreach 
efforts in this area, we found that a sizable number of reservists and 
employers were unsure about their rights and responsibilities. For 
example, a 1999 DOD survey found that 31 percent of employers were not 
aware of laws protecting reservists. Our recent work has shown that 
several factors, such as the lack of data on reservists' employers, 
have hampered DOD's outreach efforts to both employers and reservists. 
However, DOD is taking positive actions in this area, such as moving 
ahead with plans to collect employer data from all Reserve personnel.
    Reservists have identified income loss, family burdens, and 
employer support as serious concerns during prior mobilizations and 
deployments. However, it is unclear how the problems reservists 
experience in these areas affect their overall satisfaction with 
military life and, ultimately, their decision to stay in the military 
or leave.

                               BACKGROUND

    Since the end of the Cold War, there has been a shift in the way 
Reserve forces have been used. Previously, reservists were viewed 
primarily as an expansion force that would supplement Active Forces 
during a major war. Today, reservists not only supplement but also 
replace Active Forces in military operations worldwide.\6\ In fact, DOD 
has stated that no significant operation can be conducted without 
Reserve involvement. As shown in figure 1, Reserve participation in 
military operations spiked in fiscal years 1991 (Operations Desert 
Shield and Desert Storm) and 2002 (Operations Noble Eagle and Enduring 
Freedom).
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    \6\ The average reservist trains 38 or 39 days per year. In 
addition to this training, some reservists provide support for counter-
drug operations, domestic emergencies, exercises, and established and 
emerging operations, including those involving either presidential 
call-ups or mobilizations.
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    There have been wide differences in the operational tempos \7\ of 
individual reservists in certain units and occupations. Prior to the 
current mobilization, personnel in the fields of aviation, special 
forces, security, intelligence, psychological operations, and civil 
affairs were in high demand, experiencing operational tempos that were 
two to seven times higher than those of the average reservist. Since 
September 2001, operational tempos have increased significantly for 
reservists in all of DOD's Reserve components due to the partial 
mobilization in effect to support Operations Noble Eagle and Enduring 
Freedom.
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    \7\ For this testimony, operational tempo refers to the total days 
reservists spend participating in normal drills, training, and 
exercises, as well as domestic and overseas operational missions.
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    For each year between fiscal years 1997 and 2002, the Reserves on 
the whole achieved at least 99 percent of their authorized end 
strength. In 4 of these 6 years, they met at least 100 percent of their 
enlistment goals. During this time period, enlistment rates fluctuated 
from component to component. Overall attrition rates have decreased for 
five of DOD's six Reserve components.\8\ Between fiscal years 1997 and 
2002, only the Army National Guard experienced a slight overall 
increase in attrition. The attrition data suggest there has not been a 
consistent relationship between a component's average attrition rate 
for a given year and the attrition rate for that component's high 
demand capabilities (which include units and occupations). Attrition 
rates for high demand capabilities were higher than average in some 
cases but lower for others. Aviation in the Army National Guard, for 
instance, has had higher than average attrition for 4 of the 5 years it 
was categorized as a high demand capability.
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    \8\ Attrition is the total number of personnel losses from the 
selected Reserves divided by the average selected Reserve end strength 
for the year.
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 RESERVISTS HAVE REPORTED WIDELY VARYING DEGREES OF INCOME LOSS OR GAIN

    Preliminary analysis of income changes reported by reservists who 
mobilized or deployed for past military operations indicates that they 
experienced widely varying degrees of income loss or gain. The source 
for this analysis is DOD's 2000 Survey of Reserve Component Personnel, 
which predates the mobilization that began in September 2001. The data 
show that 41 percent of drilling unit members reported income loss 
during their most recent mobilization or deployment, while 30 percent 
reported no change and 29 percent reported an increase in income (see 
table 1).

   TABLE 1: DRILLING UNIT MEMBERS' TOTAL REPORTED CHANGE IN INCOME FOR
               MOBILIZATIONS OR DEPLOYMENTS PRIOR TO 2001
------------------------------------------------------------------------
                        Income change                         Percentage
------------------------------------------------------------------------
Decreased $50,000 or more...................................         0.9
Decreased $25,000 to $49,999................................        1.5
Decreased $10,000 to $24,999................................         4.1
Decreased $5,000 to $9,999..................................         6.0
Decreased $2,500 to $4,999..................................         8.9
Decreased $1 to $2,499......................................        19.5
No change in income.........................................          30
Increased $1 to $2,499......................................        16.6
Increased $2,500 to $4,999..................................         6.8
Increased $5,000 or more....................................        5.7
------------------------------------------------------------------------
Source: DOD 2000 Reserve Component Survey

    Based on the survey data, DOD estimated that the average total 
income change for all members (including losses and gains) was almost 
$1,700 in losses. This figure should be considered with caution because 
of the estimating methodology that was used and because it is unclear 
what survey respondents considered as income loss or gain in answering 
this question.\9\ Further, reservists are mobilized or deployed for 
varying lengths of time, which can affect their overall income loss or 
gain. About 3 percent of all reservists who had at least one 
mobilization or deployment had been mobilized or deployed for less than 
1 month. For the entire population, members spent an estimated 3.6 
months mobilized or deployed for their most recent mobilization.
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    \9\ The 2000 survey asked respondents: ``Please estimate your (and 
your spouse's) total income change from all sources as a result of your 
most recent mobilization and deployment. If you (and your spouse) have 
continuing losses from a business or practice, include those in your 
estimate.''
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    DOD's preliminary analysis of the survey data show that certain 
groups reported greater losses of income on average. Self-employed 
reservists reported an average income loss of $6,500. Physicians/
registered nurses, on the whole, reported an average income loss of 
$9,000. Physicians/registered nurses in private practice reported an 
average income loss of $25,600. Income loss also varied by Reserve 
component and pay grade group. Average self-reported income loss ranged 
from $600 for members of the Air National Guard up to $3,800 for Marine 
Corps Reservists. Senior officers reported an average income loss of 
$5,000 compared with $700 for junior enlisted members. When asked to 
rank income loss among other problems they have experienced during 
mobilization or deployment, about half of drilling unit members ranked 
it as one of their most serious problems.\10\ DOD's preliminary 
analysis presents little data on those groups who reported overall 
income gain. Two groups who were identified as reporting a gain were 
clergy and those who worked for a family business without pay.
---------------------------------------------------------------------------
    \10\ The survey listed 22 possible problems and asked respondents 
to choose their top 3 most serious problems experienced during 
mobilization or deployment.
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    Concerns were raised following the 1991 Gulf War that income loss 
would adversely affect retention of reservists. According to a 1991 DOD 
survey of reservists activated during the Gulf War, economic loss was 
widespread across all pay grades and military occupations. In response 
to congressional direction,\11\ DOD in 1996 established the Ready 
Reserve Mobilization Income Insurance Program, an optional, self-funded 
income insurance program for members of the Ready Reserve ordered 
involuntarily to active duty for more than 30 days. Reservists who 
elected to enroll could obtain monthly coverage ranging from $500 to 
$5,000 for up to 12 months within an 18-month period. Far fewer 
reservists than DOD expected enrolled in the program. Many of those who 
enrolled were activated for duty in Bosnia and, thus, entitled to 
almost immediate benefits from the program. The program was terminated 
in 1997 after going bankrupt. We reported in 1997 that private sector 
insurers were not interested in underwriting a Reserve income 
mobilization insurance program due to concerns about actuarial 
soundness and unpredictability of the frequency, duration, and size of 
future call-ups.\12\ Certain coverage features would violate many of 
the principles that private sector insurers usually require to protect 
themselves from adverse selection. These include voluntary coverage and 
full self-funding by those insured, the absence of rates that 
differentiated between participants based on their likelihood of 
mobilization, the ability to choose coverage that could result in full 
replacement of their lost income rather than those insured bearing some 
loss, and the ability to obtain immediate coverage shortly before an 
insured event occurred. According to DOD officials, private sector 
insurers remain unsupportive of a new Reserve income insurance 
mobilization program and the amount of Federal underwriting required 
for the program is prohibitive. The Department has no plans to 
implement a new mobilization insurance program.
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    \11\ See section 512, National Defense Authorization Act for Fiscal 
Year 1996 (P.L. 104-106, Feb. 10, 1996).
    \12\ U.S. General Accounting Office, Reserve Forces: Observations 
on the Ready Reserve Mobilization Income Insurance Program, GAO/T-
NSIAD-97-154 (Washington, DC: May 8, 1997).
---------------------------------------------------------------------------
    A 1998 study by RAND found that income loss, while widespread 
during the Gulf War, did not have a measurable effect on enlisted 
retention.\13\ The study was cautiously optimistic that mobilizing the 
Reserves under similar circumstances in the future would not have 
adverse effects on recruiting and retention. However, the effects of 
future mobilizations can depend on the mission, the length of time 
reservists are deployed, the degree of support from employers and 
family members, and other factors.
---------------------------------------------------------------------------
    \13\ RAND, The Effect of Mobilization on Retention of Enlisted 
Reservists After Operation Desert Shield/Storm, MR-943-OSD (1998). The 
study did not include officers.
---------------------------------------------------------------------------
    Certain Federal protections, pay policies, and employer practices 
can help to alleviate financial hardship during deployment. For 
example, the Soldiers' and Sailors' Civil Relief Act caps debt interest 
rates at 6 percent annually. Income that servicemembers earn while 
mobilized in certain combat zones is tax-free. For certain operations, 
DOD also authorized reservists to receive both full housing allowances 
and per diem for their entire period of activation. In addition, some 
employers make up the difference between civilian and military pay for 
their mobilized employees. This practice varies considerably among 
employers. Servicemembers can also obtain emergency assistance in the 
form of interest-free loans or grants from service aid societies to pay 
for basic living expenses such as food or rent during activation. DOD 
is exploring debt management alternatives, such as debt restructuring 
and deferment of principle and interest payments, as ways to address 
income loss. The Army has proposed a new special pay targeting critical 
health care professionals in the Reserves who are in private practice 
and are deployed involuntarily beyond the established rotational 
schedule.

  RESERVISTS AND THEIR FAMILIES FACE CHALLENGES IN UNDERSTANDING AND 
                   ACCESSING FAMILY SUPPORT SERVICES

    Reservists who have been activated for previous contingency 
operations have expressed concerns about the additional burdens placed 
on their families while they are gone. More than half of all reservists 
are married and about half have children or other legal dependents. 
According to the 2000 survey, among the most serious problems 
reservists said they experienced when mobilized or deployed are the 
burden placed on their spouse and problems created for their children.
    The 1991 Gulf War was a milestone event that highlighted the 
importance of Reserve family readiness. Lessons learned showed that 
families of activated reservists, like their active duty counterparts, 
may need assistance preparing wills, obtaining power of attorney, 
establishing emergency funds, and making child care arrangements. They 
may also need information on benefits and entitlements, military 
support services, and information on their reemployment rights. DOD has 
recognized that family attitudes affect Reserve member readiness, 
satisfaction with Reserve participation, and retention. Military 
members who are preoccupied with family issues during deployments may 
not perform well on the job, which in turn, negatively affects the 
mission. Research has shown that families of reservists who use family 
support services and who are provided information from the military 
cope better during activations. Under a 1994 DOD policy, the military 
services must ``ensure National Guard and Reserve members and their 
families are prepared and adequately served by their services' family 
care systems and organizations for the contingencies and stresses 
incident to military service.''
    Although activated reservists and their family members are eligible 
for the same family support services as their active duty counterparts, 
they may lack knowledge about or access to certain services. The 2000 
DOD survey suggests that more than half of all reservists either 
believe that family support services are not available to them or do 
not know whether such services are available. Table 2 shows drilling 
unit members' responses on the availability of selected programs and 
services.
      
    
    
      
    According to DOD officials, Operations Noble Eagle and Enduring 
Freedom have highlighted the fact that not all Reserve families are 
prepared for potential mobilization and deployment. They told us that 
since many families never thought their military members would be 
mobilized, families had not become involved in their family readiness 
networks. DOD has found that the degree to which reservists are aware 
of family support programs and benefits varies according to component, 
unit programs, command emphasis, Reserve status, and the willingness of 
the individual member to receive or seek out information. Results from 
the 2000 DOD survey show that about one-fourth of drilling unit members 
said their arrangements for their dependents were not realistically 
workable for deployments lasting longer than 30 days. Furthermore, 
about 4 of every 10 drilling unit members thought it was unlikely or 
very unlikely that they would be mobilized or deployed in the next 5 
years. Again, this survey predates the events of September 11, 2001, 
and the ensuing mobilization.
    Among the key challenges in providing family support are the long 
distances that many reservists live from installations that offer 
family support services, the difficulty in persuading reservists to 
share information with their families, the unwillingness of some 
reservists and their families to take the responsibility to access 
available information, conflicting priorities during drill weekends 
that limit the time spent on family support, and a heavy reliance on 
volunteers to act as liaisons between families and units. In 2000, 
about 40 percent of drilling unit members lived 50 miles or farther 
from their home units.
    DOD has recognized the need for improved outreach and awareness. 
For example, the Department has published benefit guides for reservists 
and family members and has enhanced information posted on its Web 
sites. DOD published a ``Guide to Reserve Family Member Benefits'' that 
informs family members about military benefits and entitlements and a 
family readiness ``tool kit'' to enhance communication about pre-
deployment and mobilization information among commanders, 
servicemembers, family members, and family program managers. Each 
Reserve component also established family program representatives to 
provide information and referral services, with volunteers at the unit 
level providing additional assistance. The U.S. Marine Corps began 
offering an employee assistance program in December 2002 to improve 
access to family support services for Marine Corps servicemembers and 
their families who reside far from installations. Through this program, 
servicemembers and their families can obtain information and referrals 
on a number of family issues, including parenting; preparing for and 
returning from deployment; basic tax planning; legal issues; and 
stress. Notwithstanding these efforts, we believe, based on our review 
to date, that outreach to reservists and their families will likely 
remain a continuing challenge for DOD.

  CHALLENGES IN ACCESSING DOD HEALTH CARE BENEFITS ARE MAGNIFIED FOR 
                               RESERVISTS

    Reservists who are mobilized for a contingency operation are 
confronted with health care choices and circumstances that are more 
complex than those faced by active component personnel. Reservists' 
decisions are affected by a variety of factors--whether they or their 
spouses have civilian health coverage, the amount of support civilian 
employers would be willing to provide with health care premiums, and 
where they and their reservists dependents live. If dependents of 
reservists encounter increased future difficulties in maintaining their 
civilian health insurance due to problems associated with longer 
mobilizations and absence from civilian employment, they may rely on 
DOD for their health care benefits to a greater degree than they do 
today.
    When activated for a contingency operation, reservists and their 
dependents are eligible for health care benefits under TRICARE, DOD's 
managed health care program. TRICARE offers beneficiaries three health 
care options: Prime, Standard, and Extra. TRICARE Prime is similar to a 
private HMO plan and does not require enrollment fees or co-payments. 
TRICARE Standard, a fee-for-service program, and TRICARE Extra, a 
preferred provider option, require co-payments and annual deductibles. 
None of these three options require reservists to pay a premium. 
Benefits under TRICARE are provided at more than 500 military treatment 
facilities worldwide, through a network of TRICARE-authorized civilian 
providers, or through non-network physicians who will accept TRICARE 
reimbursement rates.
    Reservists who are activated for 30 days or less are entitled to 
receive medical care for injuries and illnesses incurred while on duty. 
Reservists who are placed on active duty orders for 31 days or more are 
automatically enrolled in TRICARE Prime and receive most care at a 
military treatment facility. Family members of reservists who are 
activated for 31 days or more may obtain coverage under TRICARE Prime, 
Standard, or Extra.\14\ Family members who participate in Prime obtain 
care at either a military treatment facility or through a network 
provider. Under Standard or Extra, beneficiaries must use either a 
network provider or a non-network physician who will accept TRICARE 
rates.
---------------------------------------------------------------------------
    \14\ Until last week, family members of reservists generally became 
eligible for Prime when the reservist was activated for 179 days or 
more. Legislation passed in December (P.L. 107-314, Sec. 702) made 
family members of reservists activated for more than 30 days eligible 
for the Prime benefit if they reside more than 50 miles, or an hour's 
driving time, from a military treatment facility. Last week, the 
Defense Department altered TRICARE policy such that all family members 
of reservists activated for more than 30 days are eligible for the 
Prime benefit.
---------------------------------------------------------------------------
    Upon release from active duty that extended for at least 30 days, 
reservists and their dependents are entitled to continue their TRICARE 
benefits for 60 days or 120 days, depending on the members' cumulative 
active duty service time. Reservists and their dependents may also 
elect to purchase extended health care coverage for a period of at 
least 18, but no more than 36, months under the Continued Health Care 
Benefit Program.
    Despite the availability of DOD health care benefits with no 
associated premium, many Reserve family members elect to maintain their 
civilian health care insurance during mobilizations. In September 2002, 
we reported that, according to DOD's 2000 survey, nearly 80 percent of 
reservists reported having health care coverage when they were not on 
active duty. Of reservists with civilian coverage, about 90 percent 
maintained it during their mobilization.\15\ Reservists we interviewed 
often told us that they maintained this coverage to better ensure 
continuity of health benefits and care for their dependents. Many 
reservists who did drop their civilian insurance and whose dependents 
did use TRICARE reported difficulties moving into and out of the 
system, finding a TRICARE provider, establishing eligibility, 
understanding TRICARE benefits, and knowing where to go for assistance 
when questions and problems arose. While Reserve and active component 
beneficiaries report similar difficulties using the TRICARE system, 
these difficulties are magnified for reservists and their dependents. 
For example, 75 percent of reservists live more than 50 miles from 
military treatment facilities, compared with 5 percent of active 
component families. As a result, access to care at military treatment 
facilities becomes more challenging for dependents of reservists than 
their active component counterparts.
---------------------------------------------------------------------------
    \15\ U.S. General Accounting Office, Defense Health Care: Most 
Reservists Have Civilian Health Coverage but More Assistance Is Needed 
When TRICARE Is Used, GAO-O2-829 (Washington, DC. Sept. 6, 2002).
---------------------------------------------------------------------------
    Unlike active component members, reservists may also transition 
into and out of TRICARE several times throughout a career. These 
transitions create additional challenges in ensuring continuity of 
care, reestablishing eligibility in TRICARE, and familiarizing or re-
familiarizing themselves with the TRICARE system. Reservists are also 
not part of the day-to-day military culture and, according to DOD 
officials, generally have less incentive to become familiar with 
TRICARE because it becomes important to them and their families only if 
they are mobilized. Furthermore, when reservists are first mobilized, 
they must accomplish many tasks in a compressed period. For example, 
they must prepare for an extended absence from home, make arrangements 
to be away from their civilian employment, obtain military 
examinations, and ensure their families are properly registered in the 
Defense Enrollment Eligibility Reporting System (DOD's database system 
maintaining benefit eligibility status). It is not surprising that many 
reservists, when placed under condensed time frames and high stress 
conditions, experience difficulties when transitioning to TRICARE.
    We recommended in September 2002 that DOD (1) ensure that 
reservists, as part of their ongoing readiness training, receive 
information and training on health care coverage available to them and 
their dependents when mobilized and (2) provide TRICARE assistance 
during mobilizations targeted to the needs of reservists and their 
dependents. DOD has added information targeted at reservists to its 
TRICARE Web site and last month, in response to our recommendation, 
developed a TRICARE Reserve communications plan aimed at outreach and 
education of reservists and their families. 
    The TRICARE Web site is a robust source of information on DOD's 
health care benefits. The Web site contains information on all TRICARE 
programs, TRICARE eligibility requirements, briefing and brochure 
information, location of military treatment facilities, toll free 
assistance numbers, network provider locations, and other general 
network information, beneficiary assistance counselor information, and 
enrollment information. There is also a section of the Web site devoted 
specifically to reservists, with information and answers to questions 
that reservists are likely to have. Results from DOD's 2000 survey show 
that about 9 of every 10 reservists have access to the Internet.
    The TRICARE Reserve communications plan's main goals are to educate 
reservists and their family members on health care and dental benefits 
available to them and to engage key communicators in the active and 
Reserve components. The plan identifies a number of tactics for 
improving how health care information is delivered to reservists and 
their families. Materials are delivered through direct mailing 
campaigns, fact sheets, brochures, working groups, and briefings to 
leadership officials who will brief reservists and to reservists 
themselves. The plan identifies target audiences and key personnel for 
information delivery and receipt. The plan identifies methods of 
measurement which will assist in identifying the degree information is 
being requested and received. We plan to look at the TRICARE Reserve 
communications plan in more detail as we continue our study.
    Under DOD authorities in the National Defense Authorization Acts 
for 2000 and 2001, DOD instituted several demonstration programs to 
provide financial assistance to reservists and family members. For 
example, DOD instituted the TRICARE Reserve Component Family Member 
Demonstration Project to reduce TRICARE costs and assist dependents of 
reservists in maintaining relationships with their current health care 
providers. Participants are limited to family members of reservists 
mobilized for Operations Noble Eagle and Enduring Freedom. The 
demonstration project eliminates the TRICARE deductible and the 
requirement that dependents obtain statements saying that inpatient 
care is not available at a military treatment facility before they can 
obtain non-emergency treatment from a civilian hospital. In addition, 
DOD may pay a non-network physician up to 15 percent more than the 
current TRICARE rate. As we continue our study, we plan to review the 
results of the demonstration project and its impact on improving health 
care for reservists' family members.

 DOD ACTIONS NEEDED TO BETTER MANAGEMENT RELATIONS BETWEEN RESERVISTS 
                          AND THEIR EMPLOYERS

    Most reservists have civilian jobs. The 2000 survey shows that 75 
percent of drilling unit members worked full-time in a civilian 
job.\16\ Of those with civilian jobs, 30 percent of reservists worked 
for government at the Federal, State, or local level; 63 percent worked 
for a private sector firm; and 7 percent were self-employed or worked 
without pay in their family business or farm. The 2000 survey shows 
that one of the most serious problems reported by reservists in 
previous mobilizations and deployments was hostility from their 
supervisor. It should be noted, however, that many employers changed 
company policies or added benefits for deployed reservists after 
September 11, 2001. In a small nonprojectable sample of employers, we 
found that more than half provided health care benefits and over 40 
percent provided pay benefits that are not required by the Uniformed 
Services Employment and Reemployment Rights Act of 1994.\17\
---------------------------------------------------------------------------
    \16\ This figure does not include reservists who work as civilian 
military technicians.
    \17\ Pub. L. 103-353 (Oct. 13, 1994), 38 U.S.C. secs. 4301-4333.
---------------------------------------------------------------------------
    Maintaining employers' continued support for their reservist 
employees will be critical if DOD is to retain experienced reservists 
in these times of longer and more frequent deployments. DOD has 
activities aimed at maintaining and enhancing employers' support for 
reservists. The National Committee for Employer Support of the Guard 
and Reserve serves as DOD's focal point in managing the Department's 
relations with reservists and their civilian employers. Two specific 
functions of this organization are to (1) educate reservists and 
employers concerning their rights and responsibilities and (2) mediate 
disputes that may arise between reservists and their employers.
    Although DOD has numerous outreach efforts, we have found that a 
sizable number of reservists and employers were unsure about their 
rights and responsibilities. For example, a 1999 DOD survey found that 
31 percent of employers were not aware of laws protecting reservists. 
In a recent report, we listed several factors that have hampered DOD's 
outreach efforts to both employers and reservists.\18\ DOD has lacked 
complete information on who reservists' employers are; it does not know 
the full extent of problems that arise between employers and 
reservists; and it has no assurance that its outreach activities are 
being implemented consistently. We recommended that DOD take a number 
of actions to improve the effectiveness of outreach programs and other 
aspects of reservist-employer relations.
---------------------------------------------------------------------------
    \18\ GAO-02-608.
---------------------------------------------------------------------------
    DOD concurred with most of these recommendations and has taken some 
actions. Most notably, DOD is moving ahead with plans to collect 
employer data from all of its Reserve personnel. The data, if collected 
as planned, should help DOD inform all employers of their rights and 
obligations, identify employers for recognition, and implement 
proactive public affairs campaigns. However, DOD has not been as 
responsive to our recommendation that the Services improve their 
compliance with DOD's goal of issuing orders 30 days in advance of 
deployments so that reservists can notify their employees promptly. 
While our recommendation acknowledged that it will not be possible to 
achieve the 30-day goal in all cases, our recommendation was directed 
at mature, ongoing contingency mobilization requirements, such as the 
requirements that have existed in Bosnia since 1995. We believe that 
DOD needs to return to its 30-day goal following the current crisis or 
it will risk losing employer support for its Reserve Forces.
    I would like to take a moment, Mr. Chairman, to address the issue 
of reservists who are students. Almost one-fourth of drilling unit 
members responding to DOD's 2000 survey said they were currently in 
school. While DOD has an active program to address problems that arise 
between reservists and their civilian employers, there is no Federal 
statute to protect students. Student members of the Reserves are not 
guaranteed refunds of tuition and fees paid for the term they cannot 
complete, and there is no Federal statute for partial course credit or 
the right to return to the college or university upon completion of 
active service. Based on our recent work, we recommended that DOD add 
students as a target population to the mission and responsibilities of 
the National Committee for Employer Support of the Guard and Reserve, 
study in depth the problems related to deployments that student 
reservists have experienced, and determine what actions the National 
Committee for Employer Support of the Guard and Reserve might take to 
help students and their educational institutions. We feel DOD is giving 
this issue an appropriate amount of attention given its resources. 
Employer Support of the Guard and Reserve volunteers are directing 
students to available resources and the Office of the Assistant 
Secretary of Defense for Reserve Affairs has added student information 
and hyperlinks to its official Web site. One available resource, for 
example, is the Servicemembers Opportunity  Colleges, which has 
volunteered to mediate any disputes that arise between reservists and 
their schools.\19\ In addition, 12 States have enacted laws or policies 
to protect student reservists since our report was issued last June, 
making a current total of 15 States with such laws or policies.
---------------------------------------------------------------------------
    \19\ The Servicemembers Opportunity Colleges is a consortium of 
national higher education associations and more than 1,500 colleges. 
The organization helps to coordinate postsecondary educational 
opportunities for servicemembers through voluntary programs that are 
funded by the military services. 
---------------------------------------------------------------------------
                 OBSERVATIONS ON RESERVE RETIREMENT AGE

    The current Reserve retirement system dates back to 1948 with the 
enactment of the Army and Air Force Vitalization and Retirement 
Equalization Act.\20\ The act established age 60 as the age at which 
Reserve retirees could start drawing their retirement pay. At the time 
the act was passed, age 60 was the minimum age at which Federal civil 
service employees could voluntarily retire. Active component retirees 
start drawing their retirement pay immediately upon retirement.
---------------------------------------------------------------------------
    \20\ June 29, 1948, ch. 708, 62 stat. 1081.
---------------------------------------------------------------------------
    Several proposals have been made to change the Reserve retirement 
eligibility age. In 1988, the 6th Quadrennial Review of Military 
Compensation concluded that the retirement system should be changed to 
improve retention of mid-career personnel and encourage reservists who 
lack promotion potential or critical skills to voluntarily leave after 
20 years of service. The study recommended a two-tier system that gives 
Reserve retirees the option of electing to receive a reduced annuity 
immediately upon retirement or waiting until age 62 to begin receiving 
retirement pay. Recent legislative proposals have called for lowering 
the retirement pay eligibility age from 60 to 55, establishing a 
graduated annuity, or establishing an immediate annuity similar to that 
in the active duty military retirement system.
    Mr. Chairman, I would like to make two observations about reforming 
the Reserve retirement system.
    First, equity between reservists and active duty personnel is one 
consideration in assessing competing retirement systems, but it is not 
the only one. Other important considerations are the impact of the 
retirement system on the age and experience distribution of the force, 
its ability to promote flexibility in personnel management decisions 
and to facilitate integration between the active and Reserve 
components, and the cost. Changes to the retirement system could prove 
to be costly. Last year, the Congressional Budget Office estimated that 
lowering the retirement pay eligibility age from age 60 to 55 would 
cost $26.6 billion over 10 years.
    Second, DOD currently lacks critical data needed to assess 
alternatives to the existing retirement system. According to a 2001 
study conducted for the 9th Quadrennial Review of Military 
Compensation,\21\ DOD should (1) assess whether the current skill, 
experience, and age composition of the Reserves is desirable and, if 
not, what it should look like now and in the future and (2) develop an 
accession and retention model to evaluate how successful varying 
combinations of compensation and personnel management reforms would be 
in moving the Reserves toward that preferred composition. DOD has 
contracted with RAND and the Logistics Management Institute to study 
military retirement. RAND will review alternative military retirement 
systems recommended by past studies, develop a model of active and 
Reserve retirement and retention, analyze their likely effects on the 
retirement benefits that individuals can expect to receive, and 
identify and analyze the obstacles and issues pertaining to the 
successful implementation and therefore the viability of these 
alternatives. The Logistics Management Institute will assess 
alternative retirement systems with a focus on portability, vesting, 
and equity. These studies are looking at seven alternatives to the 
Reserve retirement system. Preliminary results from these studies are 
expected later this year. As discussed with your offices, we plan to 
review the Reserve retirement system in the future.
---------------------------------------------------------------------------
    \21\ RAND, Reforming the Reserve Retirement System, PM-1278-NDRI 
(Dec. 2001).
---------------------------------------------------------------------------
Contacts and Acknowledgments
    For future questions about this statement, please contact Derek B. 
Stewart at (202) 512-5140 (e-mail address: [email protected]) or Brenda 
S. Farrell at (202) 512-3604 (e-mail address: [email protected]). 
Individuals making key contributions to this statement include 
Christopher E. Ferencik, Michael Ferren, Thomas W. Gosling, Chelsa L. 
Kenney, Krislin M. Nalwalk, and Timothy Wilson. 

    Senator Chambliss. Gentlemen, once again, thank you for 
your splendid service to our country. We appreciate your being 
here today.
    This hearing is adjourned.
    [Questions for the record with answers supplied follow:]

            Questions Submitted by Senator Lindsey O. Graham

                          COMPENSATION PACKAGE

    1. Senator Graham. Secretary Hall, is it time to revisit the 
overall compensation package (pay, health, retirement incentives, tax) 
in light of the new post September 11 operation tempo?
    Secretary Hall. Yes, we believe it is. The Department has examined 
a number of compensation issues over the past 2 years in the context of 
our Military Human Resources Strategic Plan, and as part of our review 
of Reserve Component Contributions to National Defense. Based on 
preliminary results of our examination, and at the request of this 
committee, we have begun an internal review of Reserve compensation 
issues. In addition, we have contracted for a separate study by RAND of 
the Reserve retirement system. We expect initial results from these 
studies in the late summer and early fall of this year.

                  EFFECTS ON RECRUITING AND RETENTION

    2. Senator Graham. Secretary Hall, how has the increased tempo 
affected recruiting and retention?
    Secretary Hall. To date, we have seen no significant negative 
effects of the post-September 11 use of our Reserve components on 
recruiting and retention. All of the Reserve components achieved their 
recruiting and strength objectives for 2002. Attrition for 2002 was low 
but some of this is attributable to Stop Loss that was in effect for 
much of the year. 2003, year-to-date, provides a better indication of 
the effects of mobilization on attrition, since most Stop Loss was 
lifted during the first quarter. We see that attrition for the first 
part of this year is comparable with previous years and well within 
acceptable limits. All of the Reserve components are exceeding their 
end strength objectives year-to-date, and in the aggregate, they have 
achieved 97 percent of their recruiting goals. However, recruiting and 
strength management continue to present challenges, and we must be 
diligent in watching for trends in both recruiting and retention.

    [Whereupon, at 5:11 p.m., the subcommittee adjourned.]


DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR 
                                  2004

                              ----------                              


                        THURSDAY, MARCH 27, 2003

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

              COMPENSATION FOR DISABLED MILITARY RETIREES

    The subcommittee met, pursuant to notice, at 2:30 p.m. in 
room SH-216, Hart Senate Office Building, Senator Saxby 
Chambliss (chairman of the subcommittee) presiding.
    Committee members present: Senators Collins, Chambliss, E. 
Benjamin Nelson, and Pryor.
    Also present: Senator Harry Reid.
    Majority staff members present: Patricia L. Lewis, 
professional staff member; and Richard F. Walsh, counsel.
    Minority staff member present: Gerald J. Leeling, minority 
counsel.
    Staff assistants present: Michael N. Berger, Jennifer Key, 
and Sara R. Mareno.
    Committee members' assistants present: James P. Dohoney, 
Jr., assistant to Senator Collins; James W. Irwin and Clyde A. 
Taylor IV, assistants to Senator Chambliss; Eric Pierce, 
assistant to Senator Ben Nelson; and Terri Glaze and Walter 
Pryor, assistants to Senator Pryor.

     OPENING STATEMENT OF SENATOR SAXBY CHAMBLISS, CHAIRMAN

    Senator Chambliss. Good afternoon. The subcommittee will 
come to order. The subcommittee meets today to receive 
testimony on compensation for disabled military retirees in 
review of the National Defense Authorization Act for Fiscal 
Year 2004. Today, we are very much aware of the peril our 
military men and women are facing in Operation Iraqi Freedom. 
Our thoughts and prayers go out to all our military personnel 
in Iraq and their families, and especially those whose sons and 
daughters in uniform have been captured, wounded, or killed.
    The lethality of modern warfare and the physical and mental 
demands placed on our troops provide a harsh backdrop for the 
subject we will consider today. Often referred to as concurrent 
receipt, this issue was of key importance in the formulation of 
last year's Defense Authorization Act. Concurrent receipt is a 
shorthand term for proposals that would eliminate a century-old 
barrier in the law to military retirees receiving both their 
retired pay and veterans' disability compensation.
    The arguments for and against the required dollar-for-
dollar offset of military retired pay must be evaluated to 
assess these proposals. The action taken by Congress last year, 
namely, the establishment of a new form of special compensation 
for certain combat-related disabled uniformed service retirees 
is due to become effective on June 1 of this year. It was 
intended to provide additional compensation to those military 
retirees whose VA-related disability is the result of combat, 
combat training, or combat preparation. We look forward to 
hearing about the plans underway in the Department of Defense 
and the Services to implement a program for administering this 
special compensation, and how this program may affect the 
Department of Veterans' Affairs (VA).
    Additionally, we will receive testimony that should inform 
all of those who are concerned about disability and retirement 
systems, and hopefully identify the best path for future 
solutions. Our goal is to ensure that those military retirees 
with disabilities and their families have access to continuing 
health care, receive an equitable level of compensation for 
their sacrifices, in some cases heroic sacrifices, they have 
made and the military service they have rendered, and continue 
to be motivated, like all Americans with disabilities, to lead 
productive, rewarding lives.
    I would like to welcome today Senator Harry Reid of Nevada. 
He has been at the forefront of the efforts to eliminate the 
offset and recently introduced legislation, S. 392, the Retired 
Pay Restoration Act of 2003, to this effect.
    Our second panel will include Secretary Charles Abell, 
Principal Deputy Under Secretary of Defense for Personnel and 
Readiness; and Secretary Daniel Cooper, Under Secretary for 
Benefits of the Department of Veterans' Affairs. These 
witnesses are responsible for administration of the current 
compensation programs within the DOD and the VA for disabled 
military retirees.
    Our third panel will consist of representatives from the 
Congressional Budget Office, the Government Accounting Office, 
and a former member of the Congressional Research Service, now 
retired, Carolyn Merck, who coauthored an important study on 
today's topic. These witnesses will provide important 
perspectives on the history and operation of various benefits 
systems and an explanation of the estimated costs associated 
with changes to existing law and, I anticipate, assist us 
greatly in evaluating the arguments for and against legislative 
changes.
    Our fourth panel is comprised of three representatives of 
private organizations that advocate for military retirees and 
veterans, and who possess extensive experience with military 
disability and compensation programs. We welcome Steve 
Strobridge, of the Military Officers Association of America; 
Master Gunnery Sergeant Benjamin Butler, United States Marine 
Corps, Retired, of the National Association for the Uniformed 
Services; and Michael Slee, of the American Legion. We welcome 
all of our witnesses this afternoon, and we look forward to 
hearing from you.
    Before we turn to Senator Reid, I, of course, would like to 
turn to my colleague, my friend, and my ranking member, Senator 
Ben Nelson of Nebraska, for any comments he might have.

            STATEMENT OF SENATOR E. BENJAMIN NELSON

    Senator Ben Nelson. Thank you, Mr. Chairman. It is really a 
pleasure to serve on this subcommittee and to be working with 
you.
    The topic before this hearing today is a very significant 
one. It is one that is vitally important to military retirees 
who are disabled as a result of their military service. Current 
law prohibits concurrent receipt of military retirement pay and 
VA disability compensation. This law, which dates back to 1891, 
is fundamentally unfair. Military retirement pay and VA 
disability compensation were earned and awarded for different 
purposes. Military retirement pay is awarded for a career of 
service in the armed services. Disability compensation is 
awarded to a veteran to compensate for disability incurred in 
the line of military duty.
    It is clear that Congress recognizes the inequity of this 
prohibition. Each year for the last several years legislation 
has been introduced in both the House and the Senate to appeal 
this inequitable prohibition. Our good friend, Senator Harry 
Reid, our first witness, is the primary sponsor of this 
legislation in the Senate, and an overwhelming majority of 
Senators and Representatives have cosponsored these legislative 
initiatives. Last year, Senator Reid's bill, S. 170, had 82 
cosponsors. H.R. 303, the companion bill in the House, had 403 
cosponsors. This year, Senator Reid's bill, S. 392, has 50 
cosponsors, and obviously that number will likely grow. I am 
privileged to be a cosponsor of this bill.
    Despite this overwhelming congressional support and the 
fact that the Senate has already passed this legislation 
several times, it has not been enacted because it always gets 
dropped or compromised during our conference with the House. 
Last year, the Senate was forced to yield because of a 
threatened veto from the administration. We were put in the 
position of having no defense bill or working out an 
alternative to appealing the prohibition on concurrent receipt.
    Although we have not been successful in repealing the 
prohibition against concurrent receipt, we have chipped away at 
the inequity. In the National Defense Authorization Act for 
Fiscal Year 2000, Congress enacted a limited special 
compensation for military retirees with disabilities rated at 
70 percent or higher. In the National Defense Authorization Act 
for Fiscal Year 2002, we increased the amount of compensation 
and included retirees with disabilities rated at 60 percent, 
and although we still have not repealed the prohibition on 
concurrent receipt, we did enact a new special compensation for 
military retirees with combat-related injuries in last year's 
National Defense Authorization Act. The amount of this special 
compensation is equal to the amount of retirement pay that 
these retirees forfeit as an offset for the amount of VA 
disability compensation they receive.
    That means this limited class of military retirees, those 
with combat-related disabilities, will receive the same amount 
of money through this special pay as they would receive if we 
were successful in repealing the prohibition on concurrent 
receipt, but this is not good enough. We still have thousands 
of retirees who are forfeiting part of their retirement pay 
earned through years of service to their Nation because they 
also receive VA compensation for a service-connected 
disability. We will continue to work at this until we fix it.
    Mr. Chairman, I am most anxious to hear from our witnesses, 
particularly our good friend Senator Harry Reid from Nevada.
    Senator Chambliss. Thank you, Senator Nelson. Senator Reid 
is an advocate of changing the concurrent receipt provision 
similar to what you had proposed on the Senate side while I was 
in the House. I thank you for your strong leadership in this 
area. You have been a great advocate for our retired men and 
women, and you are to be commended for that. We are pleased you 
are here today, and we look forward to hearing from you.
    Senator Harry Reid.

     STATEMENT OF HON. HARRY REID, U.S. SENATOR FROM NEVADA

    Senator Reid. Mr. Chairman, Senator Nelson, I would ask 
unanimous consent of the subcommittee that my full statement be 
made part of the record.
    Senator Chambliss. Without objection, certainly.
    Senator Reid. You two Senators have outlined very clearly 
the objective that we have here. I talked earlier today about 
Senator Pat Moynihan having passed away. What a lot of people 
do not know about Pat is, he was a naval veteran, and he had 
injuries as a result of being in the Navy, and he had surgery 
on his back. You lose track of time, but sometime ago when he 
was still in the Senate, but recently, right before he left.
    You have that example, and then you have in a little place 
called Tonopah, Nevada, a young man who went to high school 
there, who was killed in Iraq. The first fatality we had in 
Nevada was Frederick Pokorney, who died as a result of being 
ambushed, one of nine marines killed at the same time.
    The point I made earlier today that I made to you 
gentlemen, and I know that you understand this, is that the 
pictures we see on TV are not movies. They are not make-
believe. They are real. People are getting shot and injured in 
many different ways in Iraq, and that is the way wars are.
    If you go back to the first Gulf War and you keep tracing 
back through the whole modern period of war, Vietnam, Korea, 
the Second World War, lots of people have been hurt and, of 
course, killed. That is why this is bipartisan legislation. The 
chairman is a Republican. The ranking member is a Democrat. 
Congressman Bilirakis from Florida and I have been working on 
this together for a long time. We have the vast majority of the 
support of Congress, and we need to do this.
    As I mentioned also earlier today, the supplemental has $9 
billion for foreign aid. I support that, but if we can spend $5 
billion on foreign aid for the next 6 months--that is what the 
supplemental is--I think we could spend a few bucks to make 
sure our veterans are treated fairly. There is no reason that a 
veteran who has the ability to retire by virtue of his service 
in the military and who is disabled cannot draw both. That is 
why we have these rules and regulations, so I appreciate both 
of you being supporters of this legislation, but you are going 
to have to help me when we come to the further authorization of 
this. We did very well, and I appreciate your help on the 
Senate floor this week.
    What we have done on the Senate floor this week on the 
budget, we can get this up to where we are covering almost 
100,000 military retirees. We still have about 400,000 to go, 
but we need to do this. We need to phase in up to 100 percent 
of the disability, and you are going to have to help me in the 
authorizing process and also when it comes time for 
appropriations.
    This is something I feel very strongly about. This is 
something that would affect a Pat Moynihan and a Frederick 
Pokorney all wrapped up into one. It is what our country is all 
about, taking care of our soldiers, sailors, airmen, and 
marines who have dedicated their lives to protecting us. I 
recognize that we have a lot of responsibilities as Members of 
Congress, but other than my immediate family, the people who 
have done the most to protect me and allow me to have the 
wonderful life that I do is the American veteran, and that is 
what I hope we tend to remember as we are squeezing dollars 
toward the end of this financial period, which ends October 1. 
I hope we will do what is right for the American veteran.
    [The prepared statement of Senator Reid follows:]

                Prepared Statement by Senator Harry Reid

    Mr. Chairman, members of the subcommittee, I appreciate the 
invitation to be here with you today to speak about ending an injustice 
impacting hundreds of thousands of our disabled military retirees.
    The events of recent days in Iraq have brought to everyone's 
attention the vital role that our armed services play in the very 
fabric of our Nation; and indeed, how our very way of life is indebted 
to the sacrifices and heroism of military personnel throughout the 
Nation's history.
    These ongoing sacrifices struck my home state of Nevada earlier 
this week in a very personal way with the death of Marine 2nd 
Lieutenant Frederick E. Pokorney, Jr. from Tonopah. He served Nevada 
and our Nation so proudly. Our thoughts and prayers are with his family 
and the families of all of our service members who have been killed or 
captured in Iraq.
    But we also remember the sacrifices of our military retirees who 
have nobly served in times of war, as well as in times of relative 
peace.
    We must never forget that military jobs are not routine 9-to-5 
jobs. Military jobs often entail frequent and prolonged family 
separations, long hours with no additional compensation, exposure to 
unusually harsh conditions, isolated assignments, exposure to diseases 
in third-world countries, contact with toxic substances, exposure to 
loud noise, and loss of many daily freedoms that all other Americans 
take for granted.
    Because the military environment is so unique and many medical 
conditions may stem from that environment, the law authorizes VA 
compensation for disabilities that begin during service, are aggravated 
by the service, or are linked to it. The law, however, has an inherent 
unfairness when applied to hundreds of thousands of disabled military 
retirees.
    As you are aware, present law requires military retirees to waive 
an amount of their hard-earned retired pay to offset dollar-for-dollar 
the amount of the VA disability compensation they have been awarded for 
service-connected disabilities. For example, a military retiree with no 
dependents who has been rated 100 percent disabled by the VA will be 
forced to forfeit $2,193 of his retired pay every month in order to 
receive $2,193 in VA disability compensation. This forfeiture consumes 
most, and in many cases ALL, of the retiree's retired pay. The end 
result is that the disabled military retiree loses all of the value of 
his 20 or more years of arduous service to our Nation.
    It is important for us to keep in mind the separate and distinct 
purposes of military retired pay and VA disability compensation. I 
cannot overemphasize the importance of these distinctions. Military 
retired pay is the promised reward for serving 20 or more years of 
uniformed service; it is based on the length of service. VA disability 
compensation is unrelated to the length of service. It is intended to 
recompense the ``pain and suffering'' that results from service-
connected disabilities, and the lost or diminished future earning 
capacity that a typical person with those disabilities would 
experience.
    We must be honest--there can be no ``compensation'' when the 
retiree pays for it by forfeiting retired pay that was earned for 
longevity.
    No other Federal retiree forfeits Federal retired pay to reimburse 
the government. Apparently, other departments recognize that retired 
pay is earned for longevity of employment, and has nothing to do with 
VA disability compensation.
    The disabled military retirees that I hear from in Nevada and 
across the country feel betrayed by this system and this very outdated 
and unjust law. They feel cheated because they lose the vested value of 
their years of service when the government every month seriously 
shortchanges their retirement checks; in many cases, the severely 
disabled do not even receive one penny of their retired pay.
    With the Fiscal Year 2000 National Defense Authorization Act, 
Congress did recognize that our present law is bad, and established the 
Severely Disabled Compensation Program that provides a modest payment 
to severely disabled military retirees.
    In the most recent National Defense Authorization Act, we took 
another small step forward by establishing Combat-Related Special 
Compensation programs, which pertain to Purple Heart recipients, and 
other longevity retirees who are rated at least 60 percent disabled 
because of armed conflict, hazardous duty, training exercises, or 
mishaps involving military equipment. The estimated number to benefit 
from this compensation is somewhere between 15,000 to 30,000 disabled 
retirees. While I welcome even this modest step forward, I say to the 
subcommittee, there is much work remaining to correct this injustice.
    This week, I was grateful that the Senate strongly supported my 
amendment to the budget resolution, which allowed for new budget 
authority and outlays for national defense in order to permit phased-in 
concurrent receipt of retired pay and veterans' disability compensation 
for retirees with service-connected disabilities rated at 60 percent or 
higher.
    While the provisions of this amendment fall short of what I believe 
would be a complete solution, I am pleased that this funding authority 
will benefit close to 90,000 military retirees with VA disability 
ratings between 60 and 100 percent. Surely we can provide relief to 
this especially deserving group.
    The support for this issue in Congress is clear. About 90 percent 
of the entire 107th Congress was on record as supporting full 
concurrent receipt in the 2003 National Defense Authorization Act. 
Disabled military retirees were extremely disappointed when the 
legislation fell short after a veto threat by the White House.
    But let me state for the record that the veterans organizations in 
this country did such incredible work and rallied our Congress to get 
403 cosponsors for H.R. 303 and 82 cosponsors for S. 170. Even the bill 
I just introduced in the Senate for full concurrent receipt--S. 392--
has over 50 cosponsors to date. I congratulate the veterans groups for 
their outstanding legislative advocacy and for their service to this 
country.
    In closing, I urge that, at a minimum, the Committee authorize the 
phased-in concurrent receipt provisions, as now included in the budget 
resolution, for military retirees with 60 to 100 percent service-
connected disabilities.
    It is time for us to demonstrate a sense of fairness, 
proportionality, and balance in how we use the taxpayer dollars that 
have been entrusted to us. Let's take care of our military retirees as 
we recall, day-by-day, how much they have done for us and for people 
seeking freedom around the world.
    Thank you again for the opportunity to be here with you today.

    Senator Chambliss. Thank you very much, Senator. Again, we 
appreciate your leadership, and we look forward to continuing 
to work with you.
    Secretary Abell and Secretary Cooper, and while you are 
coming up, Charlie, it is nice to see you sitting out there. I 
am used to seeing you sitting behind the chairman in the 
conferences between the House and Senate, so we are glad to 
have your expertise where you are.
    Secretary Abell. Thank you, sir.
    Senator Chambliss. All your friends in Georgia send their 
regards to you, and Secretary Abell, we will start with you. We 
look forward to your statement. Whatever written statement you 
want to insert in the record, obviously we will accept that in 
full.

  STATEMENT OF HON. CHARLES S. ABELL, PRINCIPAL DEPUTY UNDER 
        SECRETARY OF DEFENSE FOR PERSONNEL AND READINESS

    Secretary Abell. Thank you, sir. Good afternoon, Senator 
Nelson. I appreciate the opportunity to appear before this 
subcommittee and discuss our plans for the combat-related 
special compensation. With your indulgence, Mr. Chairman, I 
will make a slightly longer statement than I might otherwise 
give in order to describe our plans to implement the combat-
related special compensation program.
    Section 636 of the Fiscal Year 2003 National Defense 
Authorization Act, which was enacted on December 2, 2002, 
provides a new entitlement for certain disabled military 
retirees. While the law is clear that this special compensation 
is not retired pay, this pay does equal the retired pay offset 
resulting from receipt of a VA disability compensation for 
certain retirees.
    A military retiree qualifies if the VA compensation is 
based on either a Purple Heart injury compensated at 10 percent 
or greater, or if the VA compensation is based on a combat 
disability of 60 percent or greater. A combat disability is 
defined as one incurred either as a direct result of armed 
combat, while engaged in hazardous service, while performing a 
duty under war simulation conditions, or through an 
instrumentality of war.
    In developing our procedures, we have met with 
representatives of the military services, the Defense Finance 
and Accounting Service, the Department of Veterans' Affairs, 
and the service associations. We intend to meet with the 
veterans' support organizations and the military support 
associations one more time again before we announce our final 
procedures so that they have an opportunity to review and 
comment one last time.
    Our concept of operations is twofold. For retired members, 
we are identifying potentially eligible members by compiling as 
much qualifying information as possible. Our colleagues at VA 
are helping us in this regard. We are identifying retired 
members with a VA disability of 60 percent or greater. VA has 
shared their list of veterans who have been awarded the Purple 
Heart. VA has provided us a listing of diagnostic codes, 
percentages applicable, and effective date of benefits for 
those that we believe might qualify. We are reviewing the 
records to see what is in them and how best to conduct an 
efficient review.
    For currently serving members, we are developing a system 
to continuously document potentially qualifying injuries over 
their career. As Senator Reid said, some of our soldiers 
unfortunately are suffering injuries today that would qualify 
them for this should they stay in until retirement. This 
applies to those who are in Operation Enduring Freedom and 
Operation Iraqi Freedom. We are trying to document medical 
events, assignments, exercise events, and personal declarations 
so that when they retire we will be able to transition them to 
this pay expeditiously.
    We have developed a draft application form. Our target is 
to have this form available by May 1. We intend to have an 
electronic variation of this form. This will be a form that can 
be completed and printed. Unfortunately at this time we do not 
have the ability to accept electronic filing.
    We have asked the military services to publish the form and 
the accompanying instructions for completing the form in their 
retiree newsletters. I hope that the veterans' support 
organizations and the military support associations will 
publish the form and the instructions in their publications as 
well. It is all part of our outreach to qualified veterans.
    The Defense Manpower Data Center website will include the 
electronic version of the form and instructions for completing 
the application. I hope to enlist the assistance of the 
veterans' support organizations and the military support 
associations to permit their members to visit the local chapter 
and use their computers to help fill out the form.
    As part of the application, we will ask the retired member 
to provide as much information as he or she has to assist us in 
verifying their disability and linking the disability to a 
combat-related incident. We are encouraging retirees not to 
bombard the VA with requests for records. If we need to look at 
a VA record, we will make the request to the VA for their 
review or, if necessary, to retrieve the actual records for a 
service review.
    The military services will process the applications for 
those who retired from their service. The Services already have 
boards and processes to make disability determinations, so this 
will not be a new experience for them. These boards will use 
service and, if necessary, VA records to make their 
determination. Approved claims will be forwarded to the Defense 
Finance and Accounting Service for payment. Claims that cannot 
be verified will be returned to the applicant with an 
explanation of why it could not be verified, describing what 
steps could be taken to provide better information, and also 
what steps are available to appeal the decision.
    We are working with the VA and the Services to conduct a 
preliminary review of a trial group of 100 records. This review 
will assist us in determining how to review records 
efficiently, and how to find pertinent data when it is not 
readily obvious. We are working towards a May 31 effective date 
for this process. The statute specified that we implement 
within 180 days of enactment. We intend to meet that deadline. 
I anticipate that the first payments could begin as early as 
July of this year, and payments for those who are currently 
retired will be retroactive to June 1 without regard to when 
the application is processed.
    Before I close, Mr. Chairman, I would like to take a minute 
to address an issue that Senator Nelson discussed with me at a 
hearing last year. Sir, you may recall that you urged me to 
ensure that we had an effective way to apprise military 
personnel of the value of their benefits. We discussed 
occasional mailings, attachments to their pay vouchers, and 
other means.
    I want to report that in December of last year we initiated 
a website that any service member can access that lists the 
many benefits available to a service member. The site also 
includes calculators that permit the service member to input 
his or her specific data and determine the actual value of 
their retirement or certain other benefits. I heard your 
admonition, and we have taken action to provide our service 
members a user-friendly means to review their benefit package 
whenever they want.
    Thank you, Mr. Chairman. I am prepared to respond to your 
questions.
    [The prepared statement of Secretary Abell follows:]

              Prepared Statement by Hon. Charles S. Abell

                              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. 
Last year the Department developed a comprehensive Human Resource 
Strategic Plan. With direction from the Quadrennial Defense Review and 
Defense Planning Guidance, we collaborated with the Secretaries of the 
Military Departments and the component heads to develop a strategic 
human resource plan that encompasses military, civilian, and contractor 
personnel. The plan identified the tools necessary to shape and size 
the force, to provide adequate numbers of high-quality, skilled and 
professionally developed people, and to facilitate a seamless flow of 
personnel between the Active and Reserve Forces.
    The Department continues to refine the Human Resources Strategy 
designed to provide the military force necessary to support our 
national defense strategy. We face an increasingly challenging task to 
recruit, train, and retain people with the broad skills and good 
judgment needed to address the dynamic challenges of the 21st century, 
and we must do this in a competitive human capital environment. 
Consequently, we seek a mix of policies, programs, and legislation to 
ensure that the right numbers of military personnel have the requisite 
skills and abilities to execute assigned missions effectively and 
efficiently.

                              COMPENSATION

    Attracting and retaining high caliber individuals for a trained and 
ready All-Volunteer Force require a robust, competitive and flexible 
compensation system. In addition to basic pay, compensation includes 
all pays and allowances, such as housing and subsistence allowances, 
and special and incentive pays. Over the past several years the 
administration and Congress have worked closely together to make 
significant strides in improving the pay and allowances of our men and 
women in uniform. We look forward to working together again this year 
to continue this effort that is so important to our troops and their 
families.
Military Pay
    As noted by the 9th Quadrennial Review of Military Compensation, 
increased educational attainment on the part of the enlisted force made 
the existing military pay structure less competitive. We appreciate 
Congress' direction on the 2002 and 2003 pay raises to target 
additional raises for NCOs, as well as mid-level officers. Targeted pay 
raises are again needed but can be more narrowly focused to NCOs and 
some warrant officers. We are proposing raises of up to 6.25 percent 
for NCOs, with most other members getting 3.7 percent, or Employment 
Cost Index (ECI) + \1/2\ percent. The average raise would be 4.1 
percent. We recommend Congress adopt our proposed targeted pay raises 
for our mid-level and senior NCOs and warrant officers for fiscal year 
2004.

Housing Allowance
    In addition to maintaining efforts to achieve competitive pay 
tables, the Department intends to continue significantly increasing 
military housing allowances, with the goal of eliminating average out-
of-pocket costs by 2005. Only a few years ago, members' average out-of-
pocket costs were more than 20 percent. Building on the current year's 
increases, the fiscal year 2004 budget requests further improvements in 
the allowance, reducing the average out-of-pocket costs from 7.5 to 3.5 
percent. Further, continued refinements in data collection processes 
have led to improved allowances in numerous local areas where the 
measured housing costs were understating the costs borne by our members 
in obtaining safe and adequate housing.

Special and Incentive Pays
    While comparability of basic pay and adequate allowances are 
extremely important, special and incentive pays provide the critical 
flexibility for military compensation to be competitive in highly 
technical, scientific areas where we have shortages. Successful 
retention of enlisted members in vital skills such as special 
operations, aviation maintenance, information technology, electronics, 
intelligence, linguists, and air traffic control depend on judicious 
use of bonuses and special pays. Likewise, officer retention challenges 
exist in career fields whose technical and scientific skills are easily 
transferable to the private sector and demand high salaries. In the 
Fiscal Year 2001 National Defense Authorization Act, Congress enacted 
the Critical Skills Retention Bonus (CSRB) program, adding significant 
flexibility that allows the Services to more quickly react to emerging 
shortages and improve retention in targeted, critical skills. But 
appropriations for these bonuses were cut in fiscal year 2003, severely 
limiting the Services' ability to use this new authority. We hope 
Congress will support these important and cost-effective investments 
this year.

Thrift Savings Plan
    In January 2002, the Department implemented a new authority 
provided by Congress to allow the uniformed forces to participate in 
the Thrift Savings Plan (TSP). This opportunity represents a major 
initiative to improve the quality of life for our service members and 
their families, as well as becoming an important tool in our retention 
efforts. In its first year of operation, TSP attracted nearly 303,000 
enrollees, 241,000 active duty and 62,000 Guard and Reserve members. 
The Department projected that 10 percent of active duty members would 
enroll in the first year; in fact, we had 17 percent sign up, exceeding 
our expectations.

Reserve Compensation
    In 2003, we are examining compensation programs for Reserve 
component members. The current and anticipated military environments 
require employment of Reserve Forces in ways not imagined when current 
compensation programs were designed. Current thresholds for housing 
allowances, per diem, some special skill and duty pays, and a range of 
benefits may not fully support the manner in which Reserve component 
members may be employed in the future. Compensation programs must be 
sufficient to attract and retain capabilities to meet continuous, surge 
and infrequent requirements. As we examine options and formulate 
alternatives, we will adjust our regulations and include proposed 
statutory changes as part of the Department's legislative program.

                           RETIREMENT ISSUES

    Military retired pay is a key component of the military 
compensation system. Recent improvements enacted by Congress once again 
make military retirement a strong positive factor in the retention of 
career service members and their overall satisfaction with military 
service. But, one of the most difficult issues that the administration 
and Congress have dealt with over the past several years involves 
military retired pay and the issue of ``Concurrent Receipt.''

Concurrent Receipt
    Concurrent receipt involves the long-standing prohibition against 
retired military personnel receiving both retired pay from the 
Department of Defense (DOD) and disability benefits from the Department 
of Veterans' Affairs (VA). Consistent with long-standing administration 
policy, DOD opposes members receiving both benefits concurrently 
because these two programs were intended for two entirely separate 
populations: retirees and non-retired veterans. Originally, the law 
provided that members, active or retired, could not receive VA 
disability compensation. In the 1940s the law was modified to ensure no 
retiree could get less than a similarly disabled veteran who had not 
retired. If VA compensation was more than military retired pay, the 
member could be paid the higher VA amount. If the military retired pay 
was greater, the retiree could receive all of the VA pay, which is tax 
free, and then any remaining military retired pay in excess of that 
amount. This change, which is reflected in the current law, allows 
retirees to obtain the best combination of tax free and taxable income. 
Unfortunately, some retirees interpret this long-standing provision as 
a denial of entitlements.
    Some military retirees strongly believe they deserve both benefits, 
claiming that one is for years of service and the other is for an 
injury or illness they received during that service. The Department's 
position has been that the purpose of disability compensation is to 
overcome the impact of lost income compared to the person who has no 
disability and should not be additive to retired pay. Providing both 
retired pay and disability compensation is contrary to the long-
standing principle that no one should be able to receive concurrent 
retirement benefits and disability benefits based upon the same 
service. All Federal compensation systems aim for an equitable 
percentage of income replacement in the case of either work-related 
injury or retirement.
    Congress has considered numerous bills over the past few years to 
partially or completely repeal the prohibition against concurrent 
receipt. The 108th Congress so far has been presented with two bills 
that would allow full concurrent receipt for retirees with at least 20 
years of service: H.R. 303 sponsored by Congressman Bilirakis, and S. 
392 sponsored by Senator Reid. Both of these bills would remove the 
prohibition against concurrent receipt for all retirees with 20 plus 
years of service. However, any amount of disability retired pay that 
exceeds what the member would receive for longevity retirement remains 
subject to offset. In effect then, payments under H.R. 303 and S. 392 
would work in much the same way as the recently enacted Combat-Related 
Special Compensation program, but without the requirement that the 
disabilities be combat-related. No added benefits would apply to those 
retired for disability with less than 20 years of service. But, full 
repeal of the existing prohibition is very expensive--our previous 
estimate is $58 billion over 10 years. The administration is on record 
as strongly opposing the changes included in these bills. Last year, 
the President's senior advisors recommended that he veto such 
legislation if it were presented to him.
    Nonetheless, we all acknowledge a great debt of gratitude to all 
veterans, particularly those serving long and faithful careers. In 
response to the veterans' concerns over the last few years, Congress 
passed and the President signed legislation to provide special 
compensation to two groups of retirees. First, Special Compensation for 
Severely Disabled (SCSD) pays up to $300 a month to retirees with 
severe disabilities, those rated as 60 percent or more within 4 years 
of retirement. This is being paid to more than 30,000 of the most 
severely disabled retirees. More recently enacted and pending 
implementation in June, Combat-Related Special Compensation (CRSC) will 
allow many retirees to receive total compensation in an amount 
equivalent to both their military retired pay and their VA disability 
compensation. This program is described in detail below.

Combat-Related Special Compensation (CRSC)
    The National Defense Authorization Act for Fiscal Year 2003 
provided a new Combat-Related Special Compensation for military 
retirees with combat-related disabilities. While this is not concurrent 
receipt of military retired pay and VA disability compensation, the new 
program will have the effect of providing the same total benefit for 
many qualifying retirees. To be eligible, retirees must have 20 years 
of service for retired pay computation and have disabilities resulting 
from combat injuries for which they have been awarded the Purple Heart 
or are rated at least 60 percent disabled resulting from armed 
conflict, hazardous duty, training exercises, or mishaps involving 
military equipment.
    We are working closely with the Department of Veterans' Affairs to 
identify potentially eligible members and establish and implement 
application procedures and requirements. We have so far identified 
16,500 retirees who have the requisite 20 years of service and have 
been awarded the Purple Heart. This list was drawn from a list of 
160,000 veterans who receive disability compensation from the VA and 
who identified themselves (and submitted supporting documentation) as 
Purple Heart recipients. We have thousands of retirees currently 
receiving Special Compensation for the Severely Disabled, many of whom 
will qualify for significantly higher payments of the Combat-Related 
Special Compensation. All of these retirees already meet the criteria 
of having 20 years of service and being rated at least 60 percent 
disabled. The remaining factor to be determined is whether their 
disability is combat-related.
    We intend to have applications and instructions available by late 
spring, as well as a website where members can complete and download 
their application, so eligible retirees can begin applying. The website 
and service retiree newsletters should provide the first information 
about when and where eligible retirees may submit claims for 
compensation. We will keep the service-related associations and other 
appropriate organizations informed as well.
    Of the hundreds of thousands of military retirees, many will 
believe that they qualify for the new payments. Consequently, we expect 
to receive a large number of applications. These will take some time to 
process and make a determination as to whether the retiree is eligible. 
The length of time will vary depending on the adequacy of the 
documentation the retiree is able to provide us or whether we have to 
seek additional documentation from the VA. While it will take us some 
time to process these thousands of claims, all retirees who qualify 
will be paid retroactive to the date they met all criteria for payment, 
but no further back then June 1, 2003, the beginning date of the 
program. We anticipate the first checks will go out in July. If it 
takes us additional time past the start date to approve a retiree's 
claim, their first check will include all payments back to June 1.
    We know there will be honest disagreements regarding this program 
and whether or not a particular retiree qualifies. Determining whether 
an illness or disability that may have been incurred decades ago is 
service connected will continue to be the role of the VA. DOD's role 
will be to make the determination of whether the cause of the 
disability is or is not combat related. We, like the VA, want to ensure 
disabled veterans receive all that they are due. If the retiree can 
show a proximate cause to armed conflict, hazardous duty, training 
exercises, or mishaps involving military equipment and they meet the 
other requirements, we will approve them for payments. We will also 
establish an appeals process so retirees who feel their claims were not 
correctly evaluated can have a venue for formal reconsideration and for 
providing more information.
    We estimate that in fiscal year 2004 we will have more than 33,000 
qualified retirees with total payments of about $327 million.

Examples of Concurrent Receipt
    Because the subject of concurrent receipt can be confusing, I would 
like to show how the compensation of four different personnel of 
various pay grades and circumstances is currently computed, how it will 
change with the recently enacted Combat-Related Special Compensation, 
and what differences would occur under Congressman Bilarakis' or 
Senator Reid's proposals. (All examples are based on a member who 
qualifies for tax-exempt status of his special compensation (SCSD or 
CRSC) under the IRS code.)
    My first example is a mid-grade NCO (E-5) with 8 years of service 
who is totally disabled in combat and who is retired with 100 percent 
disability. He will receive retired pay equal to 75 percent of his 
basic pay, or $1,390 a month. He can apply for VA compensation as well. 
Assuming the VA awards 100 percent disability compensation, they will 
pay him $2,193 monthly tax-free, but his retired pay will be reduced to 
zero. Thus, his monthly income would be $2,193 tax-free.
    The second is an E-6 with 20 years of service, who is also totally 
disabled in combat and retired at 100 percent disability. He will also 
receive retired pay equal to 75 percent of his basic pay, or $1,855 a 
month. If he applies to VA for compensation and is awarded a 100 
percent disability, he too will receive $2,193 monthly on a tax-free 
basis. Like the E-5, his military retired pay will be reduced to zero 
because his retired pay is less than the VA's disability compensation. 
Since he has served 20 years, however, he is eligible for $300 per 
month in SCSD from DOD. Therefore, his total monthly income would be 
$2,493 tax-free.
    The third example is a senior NCO (E-7) with 20 years of service, 
who is also totally disabled and retires with 100 percent disability, 
but his condition is the result of injuries received in a car accident 
off duty. His retired pay will be 75 percent of his basic pay, or 
$2,123 monthly. This member may also apply for VA compensation and if 
rated at 100 percent would receive disability compensation of $2,193 
monthly on a tax-free basis, just like our two previous examples. This 
would reduce his retired pay to zero. However, like the E-6, this 
member can qualify for $300 per month in SCSD since he has served 20 
years. Thus, his total monthly income would also be $2,493 tax-free, 
the same as the E-6.
    My fourth example is an E-8 with 30 years of service who retires 
with no disability, but who is rated by the VA as 100 percent disabled 
shortly after retirement due to a heart problem first diagnosed in 
service. His military retired pay is equal to 75 percent of this basic 
pay or $2,822 monthly. His tax-free VA disability compensation of 
$2,193 will reduce his military retired pay to $629. However, because 
he has served more than 20 years, he will be eligible for the $300 per 
month in SCSD from DOD. His total monthly compensation, therefore, will 
be $3,122 of which $2,493 will be tax-free and $629 will be taxable 
income.
    The following tables will show you how the compensation of these 
four individuals will be affected under the recently enacted Combat-
Related Special Compensation and under the two bills currently proposed 
by Congressman Bilirakis and Senator Reid.

                           E-5 WITH 8 YEARS OF SERVICE, 100 PERCENT COMBAT DISABILITY
----------------------------------------------------------------------------------------------------------------
                               Pay                                Current System       CRSC       S 392 / HR 303
----------------------------------------------------------------------------------------------------------------
VA Comp (Tax Free)..............................................          $2,193          $2,193          $2,193
Retired Pay.....................................................           1,390           1,390           1,390
  Offset........................................................         (1,390)         (1,390)         (1,390)
CRSC............................................................             N/A             N/A             N/A
  Offset........................................................
Special Comp (SCSD).............................................             N/A             N/A             N/A
                                                                 -----------------------------------------------
  Total (Tax Free)..............................................          $2,193          $2,193          $2,193
----------------------------------------------------------------------------------------------------------------

    Here our E-5 with just 8 years of service receives no extra 
compensation under either Combat-Related Special Compensation or the 
two proposed bills since he did not serve 20 years of service. His 
total compensation remains $2,193 per month tax-free.

                           E-6 WITH 20 YEARS OF SERVICE, 100 PERCENT COMBAT DISABILITY
----------------------------------------------------------------------------------------------------------------
                               Pay                                Current System       CRSC       S 392 / HR 303
----------------------------------------------------------------------------------------------------------------
VA Comp (Tax Free)..............................................          $2,193          $2,193          $2,193
Retired Pay.....................................................           1,855           1,855           1,855
  Offset........................................................         (1,855)         (1,855)           (618)
CRSC............................................................             N/A           1,855             N/A
  Offset........................................................                           (618)
Special Comp (SCSD).............................................             300               0             N/A
                                                                 -----------------------------------------------
  Total.........................................................          $2,493          $3,430          $3,430
----------------------------------------------------------------------------------------------------------------

    In the case of the E-6, since he completed 20 years of service, he 
would be eligible for the recently enacted Combat-Related Special 
Compensation. However, his CRSC benefit will be reduced, or offset, 
because he is receiving disability retired pay that exceeds what he 
would receive if he retired on the basis of length of service.

                         E-7 WITH 20 YEARS OF SERVICE, 100 PERCENT NON-COMBAT DISABILITY
----------------------------------------------------------------------------------------------------------------
                               Pay                                Current System       CRSC       S 392 / HR 303
----------------------------------------------------------------------------------------------------------------
VA Comp (Tax Free)..............................................          $2,193          $2,193          $2,193
Retired Pay.....................................................           2,123           2,123           2,123
  Offset........................................................         (2,123)         (2,123)           (708)
CRSC............................................................             N/A             N/A             N/A
  Offset........................................................
Special Comp (SCSD).............................................             300             300             N/A
                                                                 -----------------------------------------------
  Total.........................................................          $2,493          $2,493          $3,608
----------------------------------------------------------------------------------------------------------------

    In the case of the E-7 whose disability is not combat related, he 
receives no additional compensation from the recently enacted Combat-
Related Special Compensation. However, under the proposed bills in the 
House and Senate, he would receive all of his military retired pay, 
subject to the offset imposed for having his retired pay based on his 
disability rather than length of service.

                         E-8 WITH 30 YEARS OF SERVICE, 100 PERCENT NON-COMBAT DISABILITY
----------------------------------------------------------------------------------------------------------------
                               Pay                                Current System       CRSC       S 392 / HR 303
----------------------------------------------------------------------------------------------------------------
VA Comp (Tax Free)..............................................          $2,193          $2,193          $2,193
Retired Pay.....................................................           2,822           2,822           2,822
  Offset........................................................         (2,193)         (2,193)               0
CRSC............................................................             N/A             N/A             N/A
  Offset........................................................
Special Comp (SCSD).............................................             300             300             N/A
                                                                 -----------------------------------------------
  Total.........................................................          $3,122          $3,122          $5,015
----------------------------------------------------------------------------------------------------------------

    In the case of our E-8 member, he receives no additional 
compensation under CRSC since his disability is not combat-related. 
However, under the Bilirakis/Reid proposals, he would receive all of 
his military retirement, with no offset, since he had completed 30 
years of service.
Survivor Benefit Plan (SBP)
    SBP was intended from inception in 1972 to complement Social 
Security benefits and Dependency and Indemnity Compensation (DIC) from 
the Department of Veterans' Affairs (VA). Together, these programs 
ensure survivors' income is at least 55 percent of the member's retired 
pay. SBP has a two-tier payment structure and pays the full 55 percent 
when the spouse is under the age of 62, when a survivor becomes 
eligible for Social Security payments. At age 62 and later, SBP pays 35 
percent and Social Security benefits pay 20 percent or more. Retirees 
pay premiums for the SBP coverage, currently 6.5 percent of retired pay 
using pre-taxed dollars.
    VA pays DIC if the death is service-connected and requires no 
premiums or program participation. Therefore, if a survivor is also 
eligible for SBP, DIC benefits are subtracted from SBP, and the 
survivor gets a full refund of any SBP premiums paid for the offset 
amount of the SBP annuity. In other words, if DIC pays half of what the 
SBP payment would be, then half of all premiums paid for the SBP would 
be refunded. Also, since VA payments are tax free, only the half paid 
by SBP would be taxable. So, this survivor would be receiving a minimum 
of 55 percent of the member's retired pay, half of which is tax free.
    The original SBP had a dollar-for-dollar offset of Social Security 
payments. This offset is still available to those who retired (or were 
eligible to retire) as of October 1, 1985. The offset method is used if 
it pays the survivor more than the 35 percent benefit under the two-
tier system. For example, it is possible that the Social Security 
payment derived from only the member's military earnings was about 10 
percent of current retired pay. Then using the offset would set the 
post-62 SBP payment at 45 percent instead of the two-tiered 35 percent. 
The survivor may in fact receive Social Security in his or her own 
right at 20 percent. So this survivor would actually receive a total of 
65 percent. Again, SBP has been designed from the beginning to work 
together with Social Security and DIC to ensure the survivor gets at 
least a total of 55 percent of the member's retired pay.
    It is important for military members to understand how the system 
works, and there are several sources of information available to help 
them understand this benefit, including mandatory retirement briefings, 
DOD and service websites, service retiree newsletters, military 
association magazines, and press articles. Also, every retiree receives 
an account statement at least once each year that lists his SBP 
coverage, the cost, base amount, 55 percent annuity amount, and 35 
percent annuity amount. Nonetheless, many retirees don't understand the 
program until later in life when they become more aware of and focus on 
their survivor's needs.
SBP Subsidy
    SBP is a subsidized program; while participants pay premiums, a 
portion of the program benefits are paid directly by the Government. 
There is a concern whether the subsidy today is less than it should be, 
and even a question as to what it should be. Evidence suggests that the 
intended subsidy was about 40 percent, but exactly who was to be 
included or how it was to be computed were never specified.
    The idea of a 40 percent subsidy first surfaced when SBP was being 
developed in the early 1970s. We do know SBP was intended to have a 
subsidy similar to that of the Civil Service survivor program, thought 
to be about 40 percent at that time. Much has changed in the program in 
the last 30 years, and it is not clear whether this objective is still 
appropriate.
    One problem is that various groups have different expected 
subsidies as provided by the DOD Actuary and shown below:

                              (Percentage)
Overall....................................................       31.5
Non-disabled...............................................       16.4
Disabled...................................................       54.3
Reserve SBP................................................       58.3
RC-SBP \1\.................................................        0.0
Active duty................................................     100.0
 
\1\ RC-SBP program (pre-age 60) is by law not subsidized.

    We are currently reviewing options that could improve the subsidy 
and make it more equitable among these groups.

                               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 would like to take this opportunity to note that the joint 
efforts of Congress and the Department are beginning to pay off. 
Service members who completed the web-based 2002 Status of Forces 
Survey opinion survey expressed greater satisfaction with almost all 
aspects of service life than they had 3 years earlier. For instance, 
results show a significant gain in satisfaction over compensation. This 
is directly attributable to the annual pay raises that exceeded wage 
growth in the private sector and housing allowance hikes set higher 
than the yearly rise in local rents. Congress was instrumental in 
making this happen.
    Even better news is that more than 80 percent feel they are ready 
to perform wartime duties. This is certainly a positive endorsement for 
the programs that you have helped us enact. I am hopeful that I can 
count on your support in the future. I look forward to working with you 
closely during the coming year.

    Senator Chambliss. Thank you, Mr. Secretary.
    Secretary Cooper.

    STATEMENT OF HON. DANIEL L. COOPER, UNDER SECRETARY FOR 
           BENEFITS, DEPARTMENT OF VETERANS' AFFAIRS

    Secretary Cooper. Mr. Chairman, members of the 
subcommittee, thank you for the opportunity to testify today 
about the VA's role in assisting the Department of Defense 
implement the new combat-related special compensation benefit. 
I would appreciate it if my written statement could be entered 
into the record, sir.
    Senator Chambliss. Certainly.
    Secretary Cooper. VA has extensive experience in 
administrating benefit programs, and obviously we can help DOD 
identify the military retirees who are eligible for this 
benefit now and in the future. A primary criterion for 
eligibility is the veteran's disability rating, which is 
adjudicated by VA, and I would like to briefly explain VA's 
compensation program and how we assign disability ratings.
    The purpose of the VA's compensation program is to provide 
monthly payments and other related benefits to a veteran for 
any injury or disease incurred in or aggravated in the line of 
duty. This includes injuries or diseases that occurred any time 
while a veteran was on active duty. It also includes diseases 
that arise after discharge, which the VA presumes to be the 
result of a particular circumstance of duty. For instance, 
there are 22 presumptives as a result of Agent Orange in 
Vietnam.
    It includes compensation for mental conditions such as 
post-traumatic stress disorder that is linked to a stressful 
incident in the Service. It also includes compensation for 
secondary service disabilities such as, if you had a bad leg 
and later on as a result of that your back became bad, you 
would receive a disability for that also.
    Today, there are approximately 2,433,000 veterans receiving 
compensation benefits. The amount of compensation varies 
depending upon the disability, the severity of that service-
connected disability. As of December 1, 2002, a single veteran 
receives $104 monthly for a 10 percent disability. A single 
veteran rated at 100 percent will receive $2,193 a month.
    The laws and regulations governing the VA's compensation 
program are complex, but the basic claims process is relatively 
simple. Most claimants file an application with the local VA 
regional office, frequently helped by a veterans' service 
organization. The VA then obtains the veteran's service medical 
records and, if necessary, the veteran's military personnel 
records. The VA then obtains any medical records and other 
evidence to substantiate that claim from the VA medical 
facilities, private physicians, and other Federal agencies.
    In most cases, the VA provides the claimant with a medical 
examination and obtains a medical opinion about the disability. 
This examination is useful to determine how disabling the 
veteran's conditions are. We then use a rating schedule to 
determine the disability evaluation assigned to that particular 
condition.
    The rating schedule is divided into sections for 15 body 
systems, such as respiratory system, muscular system, 
cardiovascular. Each disability is described in terms of its 
symptoms. The more severe the symptoms, the higher the 
disability rating assigned to it. The rating schedule itself 
then has 10 grades of disability, beginning with 10 percent, up 
to 100 percent.
    The percentages represent the average impairment of earning 
capacity resulting from similar injuries in civil occupations. 
VA has revised the rating schedule many times over the years to 
try to keep up with new medical principles. We are almost done 
with the comprehensive revision of the entire rating schedule, 
which, in fact, was begun in 1991. We hope to make the criteria 
more clear and objective and consistent with the medical 
advances we have seen.
    When a veteran has more than one compensable service-
connected condition, the VA uses a combined rating table to 
determine the combined service-connected evaluation. This 
combined rating could include both combat-related and 
noncombat-related disabilities, particularly in the case of 
veterans with long military careers.
    To discuss briefly the effects of the CRSC benefit program, 
first, veterans can file for an increase in a disability rating 
when their condition worsens or the law changes. We expect to 
receive additional claims for increased evaluations from the 
military retirees now who are currently receiving compensation 
for conditions less than 60 percent. It is hard to estimate how 
many additional claims we will receive. We also expect to 
receive a number of additional Purple Heart claims for people 
who had not filed a claim, but did, in fact, get a Purple 
Heart. That could be as many as 50,000, as we figure right now.
    VA anticipates a full support role. We can provide DOD with 
the documents from a veteran's claims file, including his 
service medical records that show whether that veteran 
sustained an injury in armed conflict. We can provide military 
personnel records, including the DD Form 214, which will show 
if that veteran has received a Purple Heart, and we will show 
rating decisions that we have made that will show the 
evaluation that we had assigned to a specific condition and the 
effective date of that evaluation.
    We and the DOD have been cooperating fully in developing 
the plans for the most efficient way to get DOD the information 
that they would need to carry this out. We are testing imaging 
possibilities now, as well as other means to exchange this very 
important information. We understand this is a DOD program. 
Nonetheless, our concern is the veteran, and we will do 
everything necessary to ensure a successful deployment. Thank 
you, Mr. Chairman.
    [The prepared statement of Secretary Cooper follows:]

              Prepared Statement by Hon. Daniel L. Cooper

    Mr. Chairman and members of the Senate Armed Services Committee, 
thank you for the opportunity to testify today concerning Section 636 
of the National Defense Authorization Act for 2003. As reflected in the 
language of this new law, enacted as 10 U.S.C. Sec. 1413a, VA's 
disability evaluation process is a major component in determining 
entitlement to Combat Related Special Compensation (CRSC) for certain 
defined combat-related disabled uniformed service retirees, and serves 
as a guide for DOD's own adjudication process.
    VA has extensive experience in administering benefit programs and 
stands ready to advise DOD as it implements the CRSC program. VA can 
assist in identifying the approximately 75,000 to 80,000 military 
retirees whom DOD estimates may be eligible for CRSC. We can also 
execute an ongoing support role as DOD processes applications for this 
benefit to eligible future retirees.
    A primary criterion for eligibility for this benefit is a 
disability rating by VA. My purpose today is to provide an overview of 
VA's service-connected compensation program, including its process for 
assigning disability ratings. I will discuss the important distinctions 
between VA's Compensation Program and the CRSC benefit enacted by the 
National Defense Authorization Act of 2003. We believe that VA can 
assist DOD's effort to ensure that all eligible military retirees 
receive the benefits to which they are entitled.

                  PURPOSE OF VA'S COMPENSATION PROGRAM

    The purpose of VA's Compensation Program is to provide monthly 
payments, or ``service-connected compensation,'' as well as ancillary 
benefits to a veteran, as specified by law, in recognition of the 
potential loss of earning capacity caused by disabilities incurred in 
or aggravated by active military service. The Compensation Program also 
provides monthly payments, as specified by law, to a surviving spouse, 
dependent children, and/or dependent parents in recognition of the 
economic loss caused by a veteran's death during active military 
service, or subsequent to discharge from military service if the death 
is a result of a service-connected disability.
    Today there are approximately 2,433,000 veterans receiving 
compensation benefits. The amount of the compensation varies depending 
on the combined degree of disability resulting from all service-
connected disabilities. As of December 1, 2002, a veteran receives $104 
monthly for a service-connected condition evaluated as 10 percent 
disabling. This amount increases in increments for progressively higher 
disability evaluations, with a single veteran without dependents 
receiving over $2,000 monthly for a service-connected condition or 
conditions evaluated as 100 percent disabling.
    There is no minimum time period that a veteran must serve on active 
duty to qualify for service-connected compensation. However, any injury 
or disease must have been incurred in or aggravated in line of duty. VA 
law interprets line of duty very expansively. VA compensation is 
available not only for those injuries or diseases that were incurred in 
combat, but it is also available for any injuries or diseases that 
simply occurred during the time period in which the veteran was on 
active duty, including periods of leave. VA compensation is available 
for diseases that manifest long after discharge from military duty, but 
which VA considers, by presumption of law, to be a result of particular 
circumstances of service. One example is type II diabetes mellitus for 
which VA has established a presumption, based on National Academy of 
Science research, that this condition is associated with exposure to 
herbicides in Vietnam. Veterans who served in country in the Vietnam 
War who develop diabetes now are eligible for service-connected 
compensation based on this presumption of law. Compensation is also 
available for mental conditions, including post-traumatic stress 
disorder, that are linked to a stressful incident in service.
    Injuries or diseases incurred in line of duty do not, however, 
include any disabilities resulting from a veteran's own willful 
misconduct.
    Entitlement to CRSC, on the other hand, requires a qualifying 
combat-related disability. This includes a disability attributable to 
an injury for which the service member was awarded the Purple Heart 
commendation and which is rated as not less than 10 percent disabling. 
It also includes a disability incurred as a direct result of armed 
conflict, while engaged in hazardous service, in the performance of 
duty under conditions simulating war, or through an instrumentality of 
war. The Secretary of Defense is directed by statute to prescribe 
criteria for making such determinations. For any of these types of 
injuries, the service member must have a disability that is rated as 
not less than 60 percent disabling.

  OVERVIEW OF THE VA COMPENSATION CLAIM PROCESS AND THE SCHEDULE FOR 
                          RATING DISABILITIES

    While the laws and regulations governing VA's Compensation Program 
are complex, the basic claims process is simple. Most claimants 
initiate compensation claims by filing an application with a local VA 
regional office, frequently with the assistance of a representative 
from a veterans' service organization. VA obtains the veteran's service 
medical records and, if relevant, the veteran's military personnel 
records. Based on information provided by the claimant, VA obtains 
information and evidence to substantiate the claim, most often in the 
form of medical records from VA medical facilities or private 
physicians or records from other Federal agencies. If necessary to 
decide entitlement to compensation, VA provides the claimant with a 
medical examination or obtains a medical opinion. This examination is 
useful to determine the disabling nature of the service-connected 
condition.
    Pursuant to statute, 38 U.S.C. Sec. 1155, VA uses a rating schedule 
to determine the disability evaluation to assign to a particular 
condition. The rating schedule determines ``reductions in earning 
capacity'' caused by a particular disease or injury, categorized into 
15 separate body systems, and assigns a disability percentage. The 
rating schedule, contained in 38 C.F.R. Part 4, provides for 10 grades 
of disability, beginning with 10 percent and ending with 100 percent, 
representing, as far as is practicable, the average impairment of 
earning capacity resulting from diseases and injuries and their 
residual conditions in civil occupations. ``[T]he degrees of disability 
specified are considered adequate to compensate for considerable loss 
of working time from exacerbations or illnesses proportionate to the 
severity of the several grades of disability.'' 38 C.F.R. Sec. 4.1.
    Under each body system are listed specific diseases and medical 
conditions, each assigned a diagnostic code. Each disease or medical 
condition is described in terms of its symptoms that signify degrees of 
disability. The greater and more severe the symptoms, the higher the 
disability rating. The maximum disability evaluation that can be 
assigned for a particular medical condition varies depending on the 
disabling effects of its symptoms. For instance, diabetes that is 
managed by a restricted diet warrants a 10 percent evaluation, whereas 
diabetes requiring a restricted diet, regulation of activities, and 
insulin injection merits a 60-percent evaluation.
    There are other regulations that provide for increases or decreases 
in the total evaluation assigned under the rating schedule criteria 
when there are multiple service-connected conditions. For instance, VA 
regulations limit the combined rating percentage that can be assigned 
for multiple disabilities of one arm or one leg. Other regulations 
increase the rating assigned when there is partial disability of both 
arms or both legs, because the combined effect of these impairments 
exceeds the average earning impairment reflected by the single 
disability evaluations for each condition in the rating schedule.
    There are also regulatory provisions that provide for compensation 
for secondary service-connected conditions, that is, those disabling 
conditions that are caused by a service-connected condition, but were 
not themselves incurred in or aggravated by service.
    When a veteran has more than one compensable service-connected 
condition, VA does not simply add up the disability rating percentages 
to arrive at a total evaluation percentage. Rather, it uses a combined 
ratings table to determine the combined service-connected evaluation. 
This combined rating often includes both combat-related and non-combat-
related disabilities incurred in or aggravated by service, particularly 
in the cases of veterans with long military careers who served both in 
wartime and peacetime eras.
    Pursuant to its statutory authority in 38 U.S.C. Sec. 1155, VA has 
revised the rating schedule many times over the years to incorporate 
the increasingly sophisticated diagnostic tools of modern medicine and 
the knowledge that they provide. Most importantly, we are nearing 
completion of an ambitious and comprehensive revision of the entire 
rating schedule, begun in 1991, to incorporate more objective criteria 
for determining the degrees of disability for a particular medical 
condition, remove ambiguous language, clarify medical terminology, and 
add new disabilities under the respective body systems. VA has made 
steady progress in publishing final revised regulations pertaining to 
12 of the 15 body systems in the rating schedule. Public comments to 
the proposed changes to the rating schedule for the Musculoskeletal 
System, one of the most comprehensive sets of rating schedule changes 
we have proposed to date, are under review at the present time.

    EFFECT OF THE CRSC BENEFIT PROGRAM ON VA DISABILITY CLAIM FILING

    There is no limitation period for a veteran to file a claim for VA 
compensation. It is possible for a claimant to establish entitlement to 
compensation benefits regardless of how long after discharge from 
Service the claim is filed. The date a claim is filed does affect the 
period of entitlement.
    Just as there is no limitation period for the filing of an initial 
claim for VA disability compensation, there is no limitation on the 
number of times a veteran may claim entitlement to an increased 
evaluation for a service-connected condition. An increased evaluation 
may be warranted by a change in law, such as a revision to the rating 
schedule regulations, new medical knowledge, or a worsening of the 
service-connected condition.
    VA believes that it is likely that there will be an increase in 
claims for increased evaluations from military retirees who are 
currently receiving VA compensation for combat-related conditions whose 
evaluations combine to less than a 60-percent evaluation. However, we 
are unable to provide an estimate of the number of such claims. While 
VA records will show the number of retirees who served during various 
periods of war as well as whether they have a combined evaluation of at 
least 60 percent for all service-connected conditions, this data is not 
a good indicator of the number of claims we can expect from retirees 
who may seek an increase in their evaluation in order to qualify for 
CRSC. The fact is, the combined service-connected evaluation includes 
both combat-related and non-combat-related conditions. In addition, the 
detailed information DOD will require to determine such eligibility, 
such as whether a particular service-connected condition was sustained 
while a veteran was engaged in hazardous service or sustained through 
an instrumentality of war, is information not historically collected by 
VA. This information, however, may be documented in a veteran's VA 
claims file.
    In addition, we expect to receive new claims from military retirees 
who are not currently service connected for any medical conditions but 
who will file claims now that they may be eligible to receive 
additional compensation, instead of merely a percentage of military 
retirement pay tax free.

                   VA ANTICIPATES A FULL SUPPORT ROLE

    The VA claims folder of a military retiree receiving VA 
compensation will contain various types of records that would be of use 
to DOD in deciding whether a retiree is entitled to CRSC benefits. For 
instance, service medical records may show whether a veteran sustained 
an injury in armed conflict. Military personnel records, including the 
DD-214, usually show whether a veteran received the Purple Heart 
commendation. Rating decisions of record would indicate the evaluation 
VA assigned to a specific condition and the effective date of that 
evaluation. VA can make these types of records, or the information 
contained in them, available to DOD for the CRSC claims process.
    Shortly after the enactment of the National Defense Authorization 
Act for 2003, VA began discussions with DOD in anticipation of DOD's 
effort to implement the CRSC benefit program. VA has shared the 
following with DOD representatives:

         Information concerning the details of the claims 
        process under VA's Compensation Program
         Feedback to DOD on its CRSC policy formulation
         Discussions on possible alternative procedures for 
        information sharing
         Initial analysis of how different procedural scenarios 
        could be adapted to VA's own work processes

    Ongoing discussions continue between VA and DOD in order that we 
can develop a process for information sharing that will result in the 
most efficient transfer of the VA claims data needed by DOD to effect 
the purpose of the CRSC benefit as envisioned by Congress. We 
understand clearly that this is a DOD program. Nonetheless, we want to 
assist in ensuring its successful deployment.

    Senator Chambliss. Thank you, Secretary Cooper. Let me make 
sure I understand something you just said. Did you just say 
that you think you will receive an additional 50,000 
applications from Purple Heart recipients who have not to this 
date filed an application for benefits?
    Secretary Cooper. Yes, sir. We expect 40,000 to 50,000 
applicants who have not filed yet.
    Senator Chambliss. Now, are you saying they have not filed 
yet because they do not think they are entitled to the benefits 
because of concurrent receipt?
    Secretary Cooper. No. I think they have not filed because 
it really was not worthwhile to file for 10 percent. These 
people are retired, so they had the same issue we have 
discussed before; namely, do they want to get just their 
retirement pay or have their retirement pay reduced so that 
they can get VA compensation. Under the new law, it would be 
worthwhile for them to file, so I can expect an increase of 
about 40,000 to 50,000, predicated on the number that we know 
who have been awarded the Purple Heart but have not filed.
    Senator Chambliss. So from the standpoint of trying to 
determine what the cost of this program might be, there is 
really no way to estimate what that number is, or what the 
amount of the benefits might be.
    Secretary Cooper. That is correct. Estimating is very 
difficult, because we have both the Purple Heart recipients and 
also some people who will want to be re-examined to possibly 
increase their disability rating 40 or 50 percent to 60 
percent. We have no idea of what that number might be.
    Senator Chambliss. Thank you.
    Secretary Abell, the subcommittee recognizes that 
implementation is a significant undertaking, but it sounds like 
you are well on your way to making sure that this is done in 
short order. I commend you for that. In working through the 
administration of the new program, have you encountered any 
legislative challenges that this subcommittee should address to 
either streamline the administration of the benefit or remove 
any inconsistencies in its application?
    Secretary Abell. Senator, we have looked at this at each 
one of the reviews in which I have participated on this, and at 
this point I do not see any. We have yet to receive our first 
application, so we may find some, but at this point we think we 
understand the legislation pretty clearly, and we think our 
implementation plan will implement it as you intended.
    Senator Chambliss. I realize you have not been in this 
position that long, but are you aware of whether or not the 
Department has considered any other approaches to providing 
long-term benefits for disabled military retirees?
    Secretary Abell. Senator, we have still on the book, as you 
may recall, a severely disabled special compensation which was 
sort of the first attempt of Congress to deal with overcoming 
the offset, which is still in place. We are paying that, as 
well as the combat-related special compensation that I have 
just discussed earlier. Those are the only two programs in 
which we are participating and those were both initiated in the 
legislative branch, sir.
    Senator Chambliss. Do you feel there is adequate and 
appropriate interaction between DOD and the Department of 
Veterans' Affairs in the area of coordination of health care 
benefits and compensation programs?
    Secretary Abell. I am happy to report that Secretary Cooper 
and his team have bent over backwards to help us. As a matter 
of fact, they have shown us where we, at times, when we first 
went to meet with them, were not asking the right questions, 
and they were able to help us by pointing us in directions that 
we had yet to think of.
    Senator Chambliss. Secretary Cooper, let me ask you that 
same question. Is the communication and dialogue between DOD 
and the Department of Veterans' Affairs what it should be on 
this issue?
    Secretary Cooper. Absolutely. We work very closely, our 
people, at every one of their meetings, so I have no complaints 
at all.
    Senator Chambliss. Secretary Abell, in the 2003 Defense 
Authorization Act, the Department was given the authority to 
establish criteria and procedures for implementing special 
compensation for the combat-related disabilities. Do you agree 
there should be one set of criteria and interpretive guidance 
for all the Services regarding eligibility for this 
compensation, and what is the Department doing to ensure that 
one set of criteria is all that will be used?
    Secretary Abell. We are developing a single set of criteria 
that all Services will use, and the Department's role is to 
monitor what each of the Services do. We plan an annual review 
at this point of the cases that they have adjudicated to make 
sure that we have consistency and common understanding.
    In addition, the appeal process to which I referred will be 
to the Office of the Secretary of Defense, although that part 
is not exactly worked out at this point, again to make sure 
that we have a uniform and consistent approach to this.
    Senator Chambliss. Senator Nelson.
    Senator Ben Nelson. Thank you, Mr. Chairman.
    Secretary Abell, first I want to thank you and congratulate 
you for responding to my suggestion from just a year ago. It is 
good to see that technology can be used to help people 
understand what they have and how they can access it, and I 
appreciate that.
    In your prepared statement, do I understand you to state 
that DOD opposes members receiving both benefits concurrently, 
``because these two programs were intended for two entirely 
separate populations, retirees and nonretired veterans.'' The 
implication is that retirees are not authorized beneficiaries 
of the VA disability compensation system, and I do not think 
that is accurate. VA routinely provides VA disability 
compensation to military retirees. What is the basis, if I 
understand it correctly, to conclude that the programs are 
intended for two entirely separate populations when both 
populations by law and by practice are authorized to receive VA 
disability compensation?
    Secretary Abell. They are both authorized to receive it. If 
you are a retiree, of course, it is offset, as you accurately 
pointed out in your statement, by a law that was passed in 
1891. The position of the Department and, I believe, the 
administration is that this would be two pays for one Service, 
and that is the basis for my statement there. If I was not 
clear in my articulation, that was my intent.
    Senator Ben Nelson. You agree with that?
    Secretary Abell. Yes, sir.
    Senator Ben Nelson. That that is the way it ought to be?
    Secretary Abell. Yes, sir.
    Senator Ben Nelson. Secretary Cooper, Secretary Abell has 
suggested that military retired pay is for military retirees 
and VA disability compensation is for nonretired veterans, as 
we have just discussed. Does the VA agree with this statement, 
that the military retirement system and the VA disability 
compensation system are intended for two entirely separate 
populations?
    Secretary Cooper. That is for me a very difficult question. 
I am trying to deal with all the veterans.
    Senator Ben Nelson. It is hard to distinguish between 
categories of veterans?
    Secretary Cooper. For me it is, yes, sir. Yes, sir. Anybody 
who is a veteran then is eligible for any compensation, any 
program that we have, whether it is education, insurance, or 
disability compensation.
    Senator Ben Nelson. Well, then, I suspect a veteran, as 
specified by law, would include military retirees as well, if 
they have been veterans in the process.
    Secretary Cooper. Our definition of a veteran is a person 
who has been in the military.
    Senator Ben Nelson. I will not belabor the point, Secretary 
Abell. There is no sense in making it more difficult, but it is 
hard to understand an example of two people who are veterans in 
the Navy. They are both injured, both sailors, both injured 
incident to service, no question about that.
    One decides to leave the Navy but somehow is employed as a 
civilian employee by the Department of the Navy, and ultimately 
retires from that position. The other remains in the Navy and 
retires after 20 years plus of honorable service. Both have 
similar disabilities, but they may have different compensation. 
Am I misreading that, or is that the way the law is currently 
interpreted and applied?
    Secretary Abell. That is the way it is interpreted and 
applied, sir.
    Senator Ben Nelson. I do not think I have any further 
questions. Thank you, and thanks for taking care of that 
notification. That is a prompt response and I appreciate that. 
Thank you.
    Secretary Abell. Yes, sir.
    Senator Chambliss. He learned to be that prompt by serving 
on this committee. [Laughter.]
    That is where he got all that good training.
    Senator Collins.
    Senator Collins. Thank you, Mr. Chairman.
    Secretary Abell, without meaning to put you further on the 
spot, I am going to follow up on what Senator Nelson just asked 
you about, because I was going to give exactly the same 
scenario, only I was going to use two soldiers who had entered 
the Service at the same time.
    Senator Ben Nelson. It can be bipartisan.
    Senator Collins. That is right, but it is troubling that if 
you had two soldiers enter the Service at the same time, went 
through the same training, same deployment, were injured in the 
same way, and one soldier stays in the military for a career 
and the other leaves and goes into the private sector, that 
they are treated differently when it comes to retirement.
    That troubles me as a matter of fairness, but I would like 
to ask you a question about it from a different perspective. Is 
the current ban on full concurrent receipt a disincentive for 
members of our Armed Forces to remain in the military if they 
are injured early in their careers but not injured to the point 
where they would have to have a medical discharge?
    Secretary Abell. Ma'am, we have looked at this a number of 
different ways, and I can find no evidence that future 
compensation for an injury would influence the stay-or-go 
decision of a soldier or sailor or airman or marine.
    In fact, I do not know whether you saw it this morning. 
Three marines and two soldiers who had been injured in Iraq 
were interviewed by the press at Landstuhl Army Hospital. One 
of the questions they asked them was, are you going to stay in 
or get out? One Army sergeant who had served 12 years said that 
he was going to get out, but he quickly said, ``my wife and I 
made that decision before I was ever deployed, so I am going to 
get out.'' Both of the other two hoped that they would be 
allowed to stay in, that they wanted to serve even though they 
had injuries, both of which were potentially disabling. One had 
a severe hand injury and the other a severe foot injury, but 
they said they recognized that they may not be able to perform 
the same duties, but they both wanted to serve.
    All three are examples of great young Americans, but the 
point is that these are three anecdotes that reflect what I 
think we have found in our reviews. Most of these folks want to 
stay as long as they can, and their injury notwithstanding, 
they stay. They are not looking for future compensation at the 
time they make those decisions.
    Senator Collins. As Secretary Cooper knows, concurrent 
receipt is a top priority of our veterans' service 
organizations. In fact, every year, when our VFW and our 
American Legion and our disabled vets organizations come to 
Washington, that is always on the top of their list.
    Have you opened a dialogue with the advocacy groups for 
veterans to see if there is another approach to this issue, or 
a different way to work it that would satisfy their concerns 
for fairness, and yet address your understandable concerns 
about the impact on the budget?
    Secretary Abell. I think it is fair to say that over the 
years we have tried to engage in that dialogue and find some 
sort of middle ground on which we could both agree, and the 
situation is that we have agreed to disagree.
    Senator Collins. Secretary Cooper, any better luck on the 
VA side?
    Secretary Cooper. No.
    Senator Collins. Okay. Well, I thought I would ask.
    Secretary Cooper, do you believe that the eligible veterans 
are aware of the new compensation that we authorized last year?
    Secretary Cooper. I believe that the veterans' service 
organizations have done an awful lot in trying to make them 
aware. It is occasionally difficult to figure out across the 
total population all the benefits of which they might be aware. 
I would be very wary of judging that, but I will say I think 
the veterans' service organizations have done a tremendous job 
in trying to get that information out.
    Senator Collins. Is the VA embarking upon any sort of 
campaign to try to reach veterans who might be eligible?
    Secretary Cooper. We will be doing that as soon as we and 
DOD decide on exactly what the process is. We have informed our 
regional offices so they are aware and ready for when something 
happens, but right now we have made them aware of exactly what 
the rules are right now, but people are waiting to see what the 
application process is. I have not noted specifically any 
increase in claims coming to us because of the possibility of 
the CRSC.
    Senator Collins. Thank you, Mr. Chairman, and let me take 
this opportunity to thank you for your leadership in this area, 
for holding this hearing, and since I am going to leave to 
catch a plane to Maine, I would ask unanimous consent that a 
statement that I had be put in the record.
    Senator Chambliss. Absolutely.
    Senator Collins. Thank you.
    [The prepared statement of Senator Collins follows:]

             Prepared Statement by Senator Susan M. Collins

    Thank you Mr. Chairman. I want to express my appreciation both to 
you, and the Chairman of the full committee, Senator Warner, for 
holding this hearing. I am proud to be a cosponsor of the legislation 
that Senator Reid has recently introduced that would allow disabled 
retirees to receive both their full retirement pay and their full 
disability compensation. It is a case of fundamental fairness that 
those who have honorably served our Nation should receive all the 
compensation that they have earned. Retirement pay and disability 
compensation are two separate items, and are provided based on separate 
criteria. Military retired pay is given based on length of service, 
while disability compensation is based on injuries incurred while on 
active duty. It is fundamentally unfair to offset these very different 
forms of compensation.
    Last year, this committee did take a step forward in correcting 
this inequity. The Fiscal Year 2003 National Defense Authorization bill 
included provisions that will, in effect, provide at least partial 
concurrent receipt for some veterans. Those retirees who have received 
a Purple Heart and have at least a 10 percent disability will receive 
payments equal to the amount of VA disability compensation they are 
owed. Also, those retirees with at least a 60 percent disability 
incurred in the line of duty will also receive the equivalent of their 
VA disability compensation. While I believe that we need to do better, 
this legislation provides an important first step to providing full 
concurrent receipt to our Nation's veterans.
    In recent years, the Senate has come out in strong support of full 
concurrent receipt. On a number of occasions, we have passed 
legislation by unanimous consent that was sponsored by Senator Reid. 
Each time, it was met with stiff resistance by the House of 
Representatives. Last year, and largely as a result of intense lobbying 
by the veterans' service organizations testifying before us today, as a 
part of the Fiscal Year 2003 Defense Authorization bill, the House 
approved a limited concurrent receipt provision that would have 
provided compensation for the most disabled veterans. However, the 
administration threatened a veto on this provision.
    We were faced with a very difficult situation. The Defense 
Authorization bill contained provisions vitally important to the well-
being of our Armed Forces. It included a substantial pay raise, 
authorization for military construction projects, and other provisions 
aimed at improving the quality of life for our troops and their 
families. The only way to move forward, and provide the men and women 
of our military with the benefits they need, was to support the limited 
concurrent receipt provisions that were passed into law.
    We cannot allow this situation to be repeated. Our Nation's 
veterans deserve better. I understand that the costs of full concurrent 
receipt are daunting. However, we can never place a price tag on the 
heroic service of our Nation's veterans. It is incumbent on us to work 
with both the veterans' service organizations, as well as the 
administration, to find a solution that will ensure that those who have 
sacrificed so much for our Nation receive the compensation they have 
earned.

    Senator Chambliss. Do you have any follow-up, Senator?
    Senator Ben Nelson. No, I do not have any further 
questions, Mr. Chairman.
    Senator Chambliss. Gentlemen, thank you both for your 
continued cooperation and dialogue on this, and we look forward 
to staying in touch with the implementation of last year's 
provision as we move forward. Thank you.
    Secretary Abell. Thank you, Senator.
    Secretary Cooper. Thank you.
    Senator Chambliss. Our next panel, Sarah Jennings, the 
principal analyst from the Defense Cost Estimate Unit at the 
Congressional Budget Office; Carolyn Merck, former specialist 
in social legislation from the Congressional Research Service; 
and Cynthia Bascetta, Director of Veterans' Health and Benefits 
from the General Accounting Office.
    Ladies, thank you first of all for your work in this area. 
You are three of the real noted experts, and we appreciate your 
being here today, and we look forward to hearing from you. We 
will be glad to put in for the record any full statement that 
you want to submit, and we look forward to your comments. Ms. 
Jennings, we will start with you. Thank you.

 STATEMENT OF SARAH JENNINGS, PRINCIPAL ANALYST, DEFENSE COST 
           ESTIMATE UNIT, CONGRESSIONAL BUDGET OFFICE

    Ms. Jennings. Thank you, Mr. Chairman.
    Mr. Chairman, members of the subcommittee, I am pleased to 
appear before you this afternoon to discuss the Congressional 
Budget Office estimate of the cost of allowing concurrent 
receipt to military retirees and to retirees from the other 
uniformed services. I do have a longer testimony that I would 
like to submit for the record.
    I would like to summarize my testimony by answering the 
following questions. What would it cost to allow concurrent 
receipt, and how many retirees are affected by the prohibition 
on concurrent receipt, and how disabled are they?
    The estimated cost of concurrent receipt: CBO most recently 
estimated the cost of allowing concurrent receipt of full 
retirement annuities and disability compensation in its cost 
estimate for the Retired Pay Restoration Act of 2001--that was 
S. 170--as it was incorporated into the Senate-passed version 
of last year's Defense Authorization Act.
    Senator Reid has introduced a similar bill in this 
Congress, S. 392, the Retired Pay Restoration Act of 2003, but 
we have not completed our estimate of that bill. Nevertheless, 
based on our previous estimates, we expect that legislation 
might increase direct spending for retirement payments and 
veterans' disability compensation by about $41 billion over the 
2004 to 2013 period. We estimate the annual increase in outlays 
would be about $3.3 billion in fiscal year 2004, increasing to 
about $5 billion in fiscal year 2013.
    I would like to refer you to table 1 in my testimony, also 
displayed on the chart here, to give you a brief overview of 
the preliminary estimate.
    [The information referred to follows:]
      
    
    
      
    The Retired Pay Restoration Act of 2001 would have allowed 
uniformed service retirees to receive concurrently veterans' 
disability compensation and a retirement annuity based on years 
of service. Last year, in our estimate for S. 170, we estimated 
that allowing concurrent receipt would have increased mandatory 
outlays by about $46 billion over the 2003 to 2012 period.
    To produce a preliminary estimate of the cost of S. 392 for 
this testimony, we adjusted that cost to account for our latest 
assumptions about cost-of-living adjustments and to encompass 
the 2004 to 2013 period. Our updated estimate of the full cost 
of concurrent receipt would be $49 billion over the 2004 to 
2013 period. The net cost of concurrent receipt, however, would 
be lower.
    Senator Reid's bill, S. 392, would repeal two special 
compensation programs, one for severely disabled retirees, and 
one for retirees with combat-related disabilities. These 
programs were enacted to partially address the concurrent 
receipt issue. CBO estimates that repealing these programs 
would reduce the cost of S. 392 by about $8 billion, to $41 
billion over 2004 to 2013. That spending would increase outlays 
for military retirement by 9 to 10 percent.
    These are preliminary estimates, however. We have not 
incorporated the latest population data from DOD, and even more 
importantly, though, DOD has yet to publish the regulations for 
implementing the program of special payments for combat-related 
disabilities. Once the details of that program are worked out, 
what causes of injuries and diseases will qualify a retiree for 
benefits? What will constitute sufficient documentation of 
those causes, it is very likely that we will adjust our 
estimate of its costs.
    Should we reduce our estimate for this special compensation 
program, the net cost of concurrent receipt would go up. 
Conversely, should our estimate increase, the net cost of 
concurrent receipt would go down.
    How many retirees would be affected by this legislation? 
According to DOD, in 2002, the prohibition on paying both 
retirement and VA benefits affected about 541,000 military 
retirees with normal length of service retirement, and about 
144,000 retirees of the uniformed services with disability 
retirements. These retirees had about $4 billion withheld from 
their annuity checks to offset their VA disability 
compensation. Most of the recent proposals to allow concurrent 
receipt, including S. 392 and S. 170, would offer that benefit 
to all retirees who are eligible to retire based on years of 
service. That includes all longevity retirees, and those who 
received a disability retirement after completing at least 20 
years of service.
    In fiscal year 2002, there were 1.9 million military 
retirees. Of these, over 563,000 would have qualified for 
concurrent receipt under these bills. I will refer to these 
qualifying retirees as eligible retirees.
    The largest and fastest-growing portion of these eligible 
retirees are members who retired from active duty based on 
their years of service, longevity, or, as they are often 
called, nondisability retirees. The number and percent of such 
retirees receiving veterans disability compensation have been 
growing steadily for at least the last 15 years. In 1988, 25 
percent of nondisability retirees from the active duty military 
received disability compensation from VA. That percentage grew 
steadily through the 1990s. By 2002, more than 36 percent of 
nondisability retirees were receiving VA disability benefits. 
This increase is a significant factor in the growth of the cost 
of concurrent receipt.
    CBO expects this growth trend to continue both in 
percentage terms and in the absolute number of retirees 
receiving VA disability benefits, in part because recent 
retiree cohorts are receiving VA disability compensation at 
rates considerably higher than the total retiree population.
    For example, 56 percent of the nondisability retirees from 
active duty in fiscal year 2000 were receiving veterans' 
disability compensation by the end of fiscal year 2002. As long 
as new retirees are receiving disability compensation at rates 
considerably greater than the full population, CBO expects the 
number of retirees receiving VA disability compensation to 
continue to grow, even as the retired population as a whole 
levels off and begins to decline.
    How disabled are these retirees who would be affected by 
this legislation? This first chart here shows the distribution 
of retirees who would be eligible to receive concurrent receipt 
under S. 392 distributed across VA disability ratings, and this 
is the population as of September 2001. This is the last year's 
data that I have totally analyzed the largest number rated at 
10 percent disabled, and over two-thirds are rated 30 percent 
disabled or less. Only 16 percent of these retirees are rated 
by VA as 60 percent or more disabled.
    The second chart, which is coming here, shows how the 
additional benefits that would be paid under concurrent receipt 
are more broadly distributed across ratings than are the 
retirees. While two-thirds of the retirees are rated 30 percent 
or less disabled, they account for only about one-third of the 
cost. The categories of 40 percent to 60 percent, and 70 
percent to 100 percent, each account for 35 percent of the cost 
of concurrent receipt.
      
    
    
      
    
    
      
    Overall, about half the additional benefits would go to 
those rated 50 percent or less, and half to those rated 60 
percent or greater.
    That concludes my statement, Mr. Chairman. I would be happy 
to answer any questions the subcommittee might have.
    [The prepared statement of Ms. Jennings follows:]

                  Prepared Statement by Sarah Jennings

    Mr. Chairman and members of the subcommittee, I am pleased to 
appear before you this afternoon to discuss the Congressional Budget 
Office's (CBO) estimate of the costs of allowing total or partial 
concurrent payment of retirement annuities together with veterans' 
disability compensation to retirees of the military, the Coast Guard, 
the Public Health Service (PHS), and the National Oceanic and 
Atmospheric Administration (NOAA) who have service-connected 
disabilities.
    I would like to summarize my testimony by answering the following 
three questions:

         What is concurrent receipt? Under current law, 
        veterans who are retired from the military, the Coast Guard, 
        PHS, or NOAA cannot receive both full retirement annuities from 
        the Department of Defense (DOD) and disability compensation 
        from the Department of Veterans' Affairs (VA). Allowing the 
        receipt of both benefits is often referred to as ``concurrent 
        receipt.'' Because of the prohibition on concurrent receipt, 
        military retirees must choose between receiving a full, but 
        generally taxable, retirement annuity, or accepting the 
        nontaxable veterans' benefit and, in exchange, forgoing an 
        equal amount of their retirement annuity.
         How many retirees are affected by this prohibition? 
        According to DOD, in fiscal year 2002, the prohibition on 
        receiving both retirement and VA benefits affected about 
        545,000 retirees of the uniformed services with normal length-
        of-service retirements and about 147,000 retirees of the 
        uniformed services with disability retirements; all together, 
        those retirees had about $4 billion withheld from their annuity 
        checks in that year to offset their VA disability compensation.
         How much would allowing concurrent receipt cost? CBO 
        has not yet updated its estimates of the cost of allowing 
        concurrent receipt to reflect the latest data. Last year, CBO 
        estimated that providing concurrent receipt would increase 
        direct spending by $46 billion over the 2003-2012 period. (All 
        years referred to in this testimony are fiscal years.) In late 
        2002, however, lawmakers enacted legislation that authorized 
        some retirees with combat-related disabilities to receive 
        special compensation equivalent to concurrent receipt; that 
        special compensation would no longer be paid if Congress 
        authorized concurrent receipt. Last December, CBO estimated 
        that the special compensation program would cost $6 billion 
        over the 2003-2012 period. After updating last year's estimates 
        of full concurrent receipt to reflect our latest economic 
        assumptions and to encompass the 2004-2013 period and 
        subtracting our estimate of the costs associated with the 
        recently enacted program, we estimate that the net cost of 
        allowing concurrent receipt might be around $41 billion over 
        the 2004-2013 period (see Table 1). The annual cost would start 
        at about $3 billion in 2004 and grow to about $5 billion by 
        2013. The estimated cost may change, however, once we 
        incorporate the latest population data from DOD and the 
        Department determines how it will implement the new program of 
        special compensation for combat-related disabilities.
      
    
    
      
    I will now review several factors in more detail:

         The impact of the current prohibition on the 
        concurrent receipt of those payments,
         Recent congressional actions to provide special 
        payments to certain severely disabled retirees, along with 
        their estimated costs,
         The populations affected by this prohibition and their 
        degree of disability as rated by the Department of Veterans' 
        Affairs, as well as their rate of growth over time, and
         How CBO estimated the costs of providing concurrent 
        receipt to those retirees and the costs of recently enacted 
        legislation that authorized some retirees to receive special 
        compensation equivalent to concurrent receipt.

          THE EFFECT OF THE PROHIBITION ON CONCURRENT RECEIPT

    Data from the uniformed services indicate that in 2002, the 
prohibition on paying both retirement and veterans' disability 
compensation concurrently caused about $2.8 billion to be withheld from 
annuity payments to about 539,000 Department of Defense retirees with 
normal length-of-service retirements (also referred to as nondisability 
retirements) and about 6,000 Coast Guard, PHS, and NOAA retirees who 
fall into that category. That withholding is called the ``VA offset.'' 
In addition, 144,000 DOD retirees and about 3,000 Coast Guard, PHS, and 
NOAA retirees with disability retirements had their annuities reduced 
by $1.3 billion in 2002 because of veterans' disability compensation.
    Beginning in 1999, Congress passed two measures to partially or 
totally compensate some retirees for those reductions in their 
annuities. When fully implemented, those measures would have offset 
about 11 percent of the $4 billion impact of those reductions in 2002. 
The first of those measures, enacted as part of the National Defense 
Authorization Act for Fiscal Year 2000 and enhanced in the Defense 
Authorization Acts for Fiscal Years 2001 and 2002, created a program of 
special compensation for certain severely disabled retirees of the 
uniformed services. Depending on a retiree's degree of disability, that 
program now provides a monthly stipend of between $50 and $325 to those 
retirees who were found, within 4 years of retirement, to have a 
service-connected disability that was rated as 60 percent or greater. 
In September 2004, the stipends will increase for eligible retirees 
whose disabilities are rated by VA or DOD at 70 percent, 80 percent, 90 
percent, or 100 percent by $25 a month to $125, $150, $250, and $350, 
respectively. The stipend for eligible retirees who are rated 60 
percent disabled will remain at $50 a month. According to DOD, that 
special compensation program paid an average monthly benefit of $167 to 
34,533 retirees in February 2003. Including retroactive benefits, the 
program will cost about $77 million in 2003, CBO projects, and an 
average of about $100 million a year over the 2004-2013 period.
    That program has been partially superseded by a second special 
compensation program that provides eligible retirees with a monthly 
benefit equal to the reduction in retirement benefits called for under 
current law, to the extent that the reduction is based on a qualifying 
combat-related disability. Retirees of the uniformed services who 
served for 20 or more years will be eligible to receive those payments 
if they have a service-connected disability that is related to the 
injury for which they received a Purple Heart or if they have a 
service-connected disability that was incurred as the result of certain 
duty-related activities and is rated as 60 percent or more disabling by 
the VA. This measure was enacted as part of the National Defense 
Authorization Act for Fiscal Year 2003 and is scheduled to take effect 
in June of this year. CBO estimates that as many as 40,000 retirees may 
qualify for the new benefit. Many of those retirees also qualify for 
the first special compensation program and will have to stop receiving 
those benefits to qualify for the larger benefits offered under the new 
program. Outlays for both programs will be about $350 million in 2004, 
CBO estimates, and $7.7 billion over the 2004-2013 period.
    Before I present CBO's cost estimates for concurrent receipt and 
the special compensation programs, I would like to give you a brief 
overview of the demographics of this retiree population because this 
data underpins our estimates of concurrent receipt proposals.

                    THE MILITARY RETIREE POPULATION

    Active-duty personnel retire from the uniformed services with 
either a disability retirement or a nondisability one. If DOD 
determines that a service member is unable to perform his or her duties 
for medical reasons, DOD may offer that person a disability retirement. 
Payments under such a retirement are based on the member's highest 3 
years of basic pay and on either the degree of disability or the number 
of years of service, whichever would result in a larger annuity. A 
disability retirement may be granted at any point in a person's 
military career. In 2002, 94,000 active-duty retirees who retired with 
a disability retirement received annuities totaling $1.2 billion from 
the Military Retirement Trust Fund.\1\ Most service members, however, 
do not receive a disability retirement--but rather a nondisability, or 
longevity, retirement. Nondisability retirees usually have 20 years to 
30 years of service, and their retirement annuity is based on both pay 
and years of service. In 2002, 1.4 million nondisability retirees were 
paid $29 billion in retirement annuities. About 75 percent of 
disability retirees and 36 percent of nondisability retirees have their 
annuities offset, or reduced, to account for disability compensation 
payments they receive from the Department of Veterans' Affairs. In the 
absence of those offsets, disability annuities for active-duty retirees 
in 2002 would have been $1.2 billion higher and nondisability annuities 
would have been $2.8 billion higher.
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    \1\ Another 99,000 disability retirees received no annuity payments 
because their retirement annuities were totally offset by their VA 
disability compensation payments. The number of disability retirees who 
retire while on active duty includes reservists who receive disability 
retirements.
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    Members of the National Guard and Reserve are also eligible for 
disability and nondisability retirements. However, while reservists may 
retire from active participation in the Reserves after completing 20 
creditable years of service, they cannot receive nondisability 
retirement annuities before reaching age 60. According to data from 
DOD, 249,000 retirees of the National Guard and Reserve were paid a 
total of $2.8 billion in retirement annuities in 2002. Elimination of 
the VA offset would have added $62 million to that figure.

    THE NUMBER OF RETIREES RECEIVING DISABILITY COMPENSATION FROM VA

    Upon leaving uniformed service, a veteran can apply to the 
Department of Veterans' Affairs for disability compensation if he or 
she believes that a physical or mental condition was caused or 
aggravated by uniformed service. If VA determines that to be the case, 
then it awards disability compensation to the veteran for the service-
connected disabilities. Data provided by DOD indicate that a 
significant and growing proportion of retirees are found by VA to have 
compensable disabilities.
Nondisability Retirees
    CBO's analysis of that DOD data indicates that, in 1988, before DOD 
and VA began working together to streamline the disability application 
process for service members separating from the military, almost 
289,000 (or 25 percent) of nondisability retirees from the active-duty 
military received disability compensation from VA. That percentage 
climbed steadily through the 1990s. By 2002, almost 527,000, or more 
than 36 percent, of the 1.4 million nondisability retirees were 
receiving VA's disability benefits.
    CBO expects that growth to continue, both in percentage terms and 
in the absolute number of retirees receiving VA's disability benefits 
because recent retiree cohorts are receiving VA's disability 
compensation at rates considerably higher than the total retiree 
population. For example, of the 36,584 nondisability retirements from 
active duty in 2000, 20,449 (or 56 percent) were receiving veterans' 
disability compensation by the end of 2002. As long as new retirees are 
receiving disability compensation at rates significantly greater than 
the full population of retirees, CBO expects the number of retirees 
receiving VA's disability compensation to continue to grow, even as the 
retired population as a whole levels off and begins to decline.

Disability Retirees
    Disability retirements from the Active and Reserve Forces have been 
decreasing steadily for many years; the current number of disability 
retirees is about 193,000. At the same time that their total number has 
been declining, the percentage of disability retirees receiving 
veterans' disability compensation has been increasing, up to its 
current level of 75 percent. That growth may be due, at least in part, 
to the fact that the tax treatment of disability annuities has changed 
for members who entered the uniformed services after 1975. The 
disability retirement annuities of the older retirees were partially or 
totally tax free, providing less incentive for those retirees to apply 
for the offsetting, but tax free, veterans' benefits. Only retirees who 
thought the veterans' benefit might exceed their DOD annuity or who 
wanted to use the VA's hospitals had reason to apply to VA. For service 
members who retired after that date, only retirement annuities that 
have been awarded because of combat or combat-related injuries are tax 
free, and only to the extent that they are due to the disability and 
not to years of service. Thus, it appears that those more recent 
retirees have a greater incentive to apply to VA for disability 
compensation. Those two effects--a decreasing number of disability 
retirees, but an increasing percentage of them receiving disability 
compensation from VA--have tended to offset each other in recent years, 
resulting in a relatively stable number of disability retirees with a 
VA offset. CBO expects little change over the next several years.

Reserve Retirees
    About 14,500 retired reservists received disability compensation 
from VA in 2002. That amounts to less than 6 percent of the 251,000 
nondisability Reserve retirees. Because Reserve retirees spend so 
little of their career on active duty, they find it more difficult than 
full-time active-duty retirees to prove that their disabling conditions 
are service-connected. They are also less likely to be injured while on 
active duty. The percentage of Reserve retirees receiving disability 
compensation decreased steadily through the 1990s, down from about 6 
percent in the mid-1980s to less than 5 percent in 1999, before 
increasing suddenly in 2000. Reservists do not receive retirement pay 
before they reach age 60, so there is a gap of 10 years to 20 years 
between the time they end their military service and when they show up 
on the retiree rolls. Thus, the recent increase may be a lagged 
reflection of the streamlined application process that seems to have 
fueled the growth in receipt of disability compensation among active-
duty retirees. CBO expects that trend to continue for the foreseeable 
future.

              DEGREE OF DISABILITY AMONG MILITARY RETIREES

    Most recent proposals to allow concurrent receipt would offer that 
benefit to all retirees who were eligible to retire on the basis of 
years of military service. That category would include all longevity 
retirees and those who received a disability retirement after 
completing at least 20 years of service. Figure 1 shows the 
distribution of such retirees across VA's disability ratings as of 
September 2001. The largest number (roughly 173,000) are rated at 10 
percent disabled, and more than two-thirds (nearly 358,000) are rated 
30 percent disabled or less. Only 16 percent of retirees (about 85,000) 
are rated by VA as 60 percent or more disabled.
    Figure 2 shows how the benefits from concurrent receipt would be 
distributed. When the total amount of the VA offset in 2001 is 
distributed over VA's disability ratings, it becomes clear that the 
aggregate additional benefits would be more broadly distributed across 
ratings than are the retirees. Those rated 30 percent or less account 
for about 30 percent of the cost as compared to two thirds of the 
retirees. The categories of 40 percent to 60 percent, and 70 percent to 
100 percent each account for 35 percent of the cost of concurrent 
receipt. Overall, about half the cost would go to those rated 50 
percent or less, and half to those rated 60 percent or greater.

           THE ESTIMATED COST OF PROVIDING CONCURRENT RECEIPT

    CBO most recently estimated the cost of allowing concurrent receipt 
of full retirement annuities and veterans' disability compensation in 
its cost estimate for the Retired Pay Restoration Act of 2001 (S. 170), 
as it was incorporated in the Senate-passed version of the 2002 Defense 
Authorization Act. Senator Harry Reid has introduced a similar bill in 
this session of Congress (S. 392, the Retired Pay Restoration Act of 
2003), but we have not completed our estimate of that bill as we have 
only recently received updated population data from the Department of 
Defense and are still awaiting information on how the Department will 
implement the new program of special compensation for combat-related 
disabilities. Based on our previous estimates, we expect that 
legislation to allow concurrent receipt might increase direct spending 
for retirement payments and veterans' disability compensation by about 
$41 billion over the 2004-2013 period. Those costs would increase 
outlays for military retirement by about 9 percent and spending for 
disability compensation by less than 1 percent over the 10-year period. 
That preliminary estimate reflects our last estimate for S.170 
(covering the 2003-2012 period), updated to reflect our latest 
assumptions about cost-of-living adjustments and adjusted to encompass 
the 2004-2013 period and the impact of the recently enacted program of 
special compensation for combat-related disabilities.

CBO's Cost Estimate for the Retired Pay Restoration Act of 2001, or S. 
        170
    The Retired Pay Restoration Act of 2001 would have allowed 
individuals who have service-connected disabilities and whose 
retirement annuity was based on their years of service to receive both 
benefits without the reduction called for under current law. 
Individuals whose retirement pay was based on their degree of 
disability would have continued to forego retirement pay equal to their 
disability compensation payment, but only to the extent that their 
disability had entitled them to a larger retirement annuity than they 
would have received solely on the basis of years of service.
    S. 170 would also have repealed the first program of special 
compensation mentioned earlier, which partially compensates certain 
severely disabled retirees for the reduction in their retirement 
annuities. (S. 392 would also eliminate the second special payment 
program that offers payments for combat-related disabilities.)
    CBO estimated that enacting S. 170 would have increased direct 
spending for retirement payments and veterans' disability compensation 
by about $46 billion over the 2003-2012 period (see Table 2). CBO's 
estimate of the total cost of S. 170 can be broken down into four 
components:

         increased payments for military retirement annuities,
         increased payments for veterans' disability 
        compensation,
         loss of premium payments for the Survivor Benefit 
        Plan, and
         savings from repealing special compensation payments 
        for severely disabled retirees.

    In addition, the Department of Defense would have had to make 
payments of about $15 billion over the 2003-2012 period to the Military 
Retirement Trust Fund to cover the increase in future liabilities for 
current military personnel. The increased contributions to the 
retirement trust fund would have come from appropriated funds. CBO 
estimated the cost of this bill on the basis of uniformed services data 
from September 2001.
      
    
    
      
    I will now explain how CBO estimated the cost of each component of 
this cost estimate.
    Increased Payments for Military Retirement Annuities. Since S. 170 
would have treated retirees differently based on their type of 
retirement--normal length-of-service (nondisability) or disability--
CBO's estimate of the potential costs of the legislation depended on 
the number of beneficiaries, their type of retirement, their disability 
levels, and the benefit amounts.
    Nondisability Retirees. A regular, or nondisability, retirement is 
granted on the basis of length of service--usually 20 or more years. 
Like all veterans, regular retirees are entitled to apply to VA at any 
time to receive disability compensation for injuries or conditions, 
incurred or aggravated during military service, that VA determines to 
be partially or totally disabling. The Retired Pay Restoration Act of 
2001 would have allowed those retirees to receive full retirement 
annuities and veterans' disability benefits with no offset. Data from 
the uniformed services indicated that in 2001, the prohibition on 
paying both benefits concurrently caused about $2.4 billion to be 
withheld from annuity payments to about 511,000 DOD retirees with 
nondisability retirements and about 5,200 Coast Guard, 900 PHS, and 50 
NOAA retirees that fall into the nondisability category. CBO estimated 
that caseload would rise to about 614,000 nondisability retirees in 
2004 and 670,000 by 2012. Under the assumption that future benefit 
payments would increase both from cost-of-living adjustments and 
because of growth in average disability levels, CBO estimated that 
implementing the legislation would increase direct spending for DOD 
nondisability retirement annuities by about $40 billion over the 2003-
2012 period. The cost to the other uniformed services (non-DOD) would 
be $430 million over the 2003-2012 period, CBO estimated (see Table 3).
      
    
    
      
    
    
      
    Disability Retirees. Service members who are found to be unable to 
perform their duties because of service-connected disabilities may be 
granted a disability retirement. S. 170 would have allowed disability 
retirees to receive retirement annuities based on their years of 
service and veterans' disability benefits with no offset.
    A disability retirement annuity is usually the product of an 
individual's basic pay and his or her degree of disability. However, if 
the individual has 20 or more years of service and thus is also 
eligible for a nondisability retirement, the disability annuity may be 
calculated on the basis of years of service, if that calculation yields 
a greater annuity. Under S. 170, retirees whose disability retirement 
annuity is greater than the amount they are entitled to receive based 
on years of service would have continued to have that portion of their 
annuity tied solely to their disability, reduced dollar-for-dollar by 
the amount of their VA disability benefit. However, the offset against 
the rest of their retirement annuity would have been eliminated. (We 
will refer to this as partial concurrent receipt.) Disability retirees 
whose annuities are based solely on their disability (that is, those 
retirees with less than 20 years of service) would have continued to 
have their full annuities subject to reduction by the amount of the VA 
disability benefit.
    According to DOD, 145,000 disability retirees had their annuities 
reduced by $1.2 billion in 2001 because of VA disability payments. Of 
those retirees, 22,000 who would have been eligible for partial 
concurrent receipt under S. 170 had their annuities reduced by $253 
million. An analysis of retiree records by DOD indicates that, under 
criteria set forth in the legislation, those retirees would have been 
eligible to receive about 95 percent of their retirement annuity 
concurrently with their VA disability benefit. Assuming continuation of 
current trends in population and benefit growth, CBO estimated that, of 
the disability retirees who would be receiving VA disability benefits 
in 2003, about 23,000 would have been entitled to an additional $254 
million in retirement annuities. CBO estimated the cost of partial 
concurrent receipt would have been almost $3 billion over the 2003-2012 
period. In addition, approximately 850 disability retirees from the 
other uniformed services would have been entitled to an additional $120 
million over the 2003-2012 period.
    Increased Payments for Veterans' Disability Compensation. Enactment 
of the Retired Pay Restoration Act of 2001 would have provided an 
incentive for some military retirees who are eligible for, but not 
currently receiving, veterans' disability to apply for those benefits. 
Before VA and DOD began to work together to make applying for VA 
benefits a part of the separation process, retirees who felt that they 
had a compensable disability had to apply to VA after leaving the 
military and arrange for a VA physical. If retirees were successful in 
obtaining the disability benefit, they would be able to partially 
offset their retirement pay with an equal amount of nontaxable 
veterans' benefits. But if retirees felt that they were likely to 
receive a low disability rating, the tax advantage might not have been 
a sufficient motive for them to go through the VA's approval process. 
If concurrent receipt was approved, however, the incentive for retirees 
to apply to VA for disability benefits would grow significantly. CBO 
estimated that, as a result, outlays for veterans' disability 
compensation under S. 170 would have increased by just over $3 billion 
over the 2003-2012 period.
    CBO expects that those additional benefits would have gone to two 
groups:

         disability retirees who had little incentive to go to 
        VA as their retirement annuity was already nontaxable, and
         nondisability retirees with relatively minor 
        disabilities.

    Data from DOD indicate that 54,000 disability retirees of the 
uniformed services--52,000 from DOD and about 2,000 from the other 
uniformed services--do not currently receive disability benefits from 
VA that they are probably qualified to receive. Because many disability 
retirees are not taxed on their annuities, they have no incentive under 
current law to apply for the tax-free VA benefits, as they would be 
offset, dollar for dollar, against their retirement annuities. S. 170 
would have provided a significant incentive for the more disabled of 
those individuals to apply for disability benefits from VA. CBO 
estimated that about 15,300 disability retirees might have been 
eligible for concurrent receipt under the Retired Pay Restoration Act 
of 2001, but, because many of those retirees are both disabled and 
quite elderly, CBO expected that only about half of that number would 
become aware of this improved benefit and successfully complete the 
application process. On the basis of retirees' DOD-assessed degree of 
disability, CBO estimated that outlays for disability compensation 
would have increased by $1.5 billion over the 2003-2012 period for 
increased benefits for disability retirees.
    CBO also assumed that, had S. 170 passed, additional nondisability 
retirees would also apply for and receive disability compensation. CBO 
estimated that enacting S. 170 might cause the percentage of 
nondisability retirees receiving disability benefits from VA to 
increase gradually from its 2001 level of 34 percent to 45 percent by 
2012. Although CBO's baseline already anticipated that type of rise 
over the next 10 years without concurrent receipt, CBO assumed that 
under S. 170, that level would be reached some years sooner. CBO 
estimated the increased outlays for veterans' disability compensation 
payments to nondisabled military retirees would have been $1.6 billion 
over the 2003-2012 period.
    Loss of Receipts from Premium Payments for the Survivor Benefit 
Plan. Many retirees have a Survivor Benefit Plan (SBP) premium payment 
deducted from their retirement annuity. The SBP was established in 
Public Law 92-425 to create an opportunity for military retirees to 
provide annuities for their survivors. Those retirees who are not 
receiving a paycheck from DOD because their retirement annuity is 
totally offset by their VA disability benefit may still participate in 
the SBP by paying the monthly premium to the U.S. Treasury. Those 
payments are recorded as offsetting receipts (a credit against direct 
spending) to DOD. According to DOD, approximately 34,000 military 
retirees paid $23 million in SBP premiums to the Treasury in 2001. DOD 
also indicated that about $14 million of that amount was paid by about 
15,300 retirees who would begin to receive annuity checks under S. 170. 
CBO's estimate of the increase in retirement outlays presented above 
assumes that the SBP premiums of retirees who benefit from the 
legislation would be deducted from the retirees' annuities, and their 
payments to the Treasury would cease. Under the assumption that current 
trends in population and benefit growth would continue, CBO estimated 
that those offsetting receipts would decrease by about $190 million 
over the 2003-2012 period.
    Repeal of Special Compensation for Severely Disabled Retirees. The 
Retired Pay Restoration Act of 2001 also would have repealed a special 
compensation program for disabled retirees that was then paying a fixed 
benefit of $50 to $300 a month to certain uniformed services retirees 
who were determined to be 60 percent to 100 percent disabled within 4 
years of their retirement. On the basis of information from DOD and the 
assumption that population growth trends would continue, CBO estimated 
that about 36,000 DOD retirees and about 600 retirees of the other 
uniformed services would receive an average monthly benefit of $150 in 
2002 and higher amounts in subsequent years. The savings from repealing 
this program would have been $710 million over the 2003-2012 period, 
CBO estimated.
    Effect of Enacting the Retired Pay Restoration Act of 2001 on 
Spending Subject to Appropriation. The military retirement system is 
financed in part by an annual payment from appropriated funds to the 
Military Retirement Trust Fund, based on an estimate of the system's 
accruing liabilities. If S. 170 had been enacted, the yearly 
contribution to the trust fund would have risen to reflect the added 
liability from the expected increase in annuities to future retirees. 
Using information from DOD, CBO estimated that enacting this 
legislation would have increased such payments by about $15 billion 
over the 2003-2012 period, assuming appropriation of the necessary 
amounts.

CBO's Cost Estimate for the Program of Special Compensation for Certain 
        Uniformed Services Retirees with Combat-Related Disabilities
    Some of the potential costs of S.170 were eliminated by enactment 
of section 636 of the National Defense Authorization Act for Fiscal 
Year 2003, which mandated payments from the personnel accounts of the 
uniformed services to certain of their retirees who are affected by the 
ban on concurrent receipt. Under the special compensation program, 
which DOD must implement by June 2003, retirees of the uniformed 
services will be eligible to receive payments if they served for 20 
years or longer, have a service-connected disability that is related to 
the injury for which they received a Purple Heart, or have an injury 
that was incurred as a result of certain duty- or combat-related 
activities. Last December, CBO estimated that the cost of the new 
combat-related program, net of the savings from the other special 
compensation program, will be about $6 billion over the 2003-2012 
period. We estimated these costs before DOD had the opportunity to 
develop the regulations needed to implement the program. Thus, our 
estimate of the cost of implementing the program could change 
significantly depending on the type of injuries DOD decides to cover 
and the amount of documentation the Department requires retirees to 
submit.
    Under current law, retirees who are eligible for compensation under 
this program and under a similar program that partially compensates 
certain severely disabled retirees would not be allowed to receive both 
benefits. Because the older program offers compensation that is 
significantly less than the full VA offset offered by the program that 
provides compensation for combat-related disabilities, costs of the 
older program should decrease, as retirees who are eligible for both 
switched to the newer program.
    The law authorizes benefits for two categories of retirees from the 
uniformed services. Both groups must have served for 20 or more years 
and have a qualifying combat-related disability. The first group is 
composed of Purple Heart recipients whose disabilities are rated at 10 
percent or greater and are related to the injury for which they 
received the Purple Heart. The second group is composed of retirees 
whose disabilities are rated as 60 percent or greater and whose 
service-connected disability can be attributed to one of the following 
causes or situations:

         as a direct result of armed combat,
         while engaged in hazardous service,
         in the performance of duty under conditions simulating 
        war, or
         through an instrumentality of war.

    CBO estimates that about 35 percent of the benefits paid under this 
special compensation program would go to about 20,000 Purple Heart 
recipients; the remainder would be paid to about 20,000 other retirees.
Other Adjustments
    CBO also updated last year's cost estimate for S. 170 to reflect 
our latest economic assumptions and to encompass the 2004-2013 period. 
Our estimates of increases in the consumer price index, which drive our 
assumptions for cost-of-living adjustments applied to retirement pay 
and veterans' disability compensation have fallen from what we assumed 
in last year's estimate. That change reduces our estimate of full 
concurrent receipt by $500 million over the 10-year period. Conversely, 
dropping the relatively low costs for 2003 and adding the higher costs 
for 2013 adds $2.9 billion to the estimate.

    Senator Chambliss. Thank you, Ms. Jennings.
    Ms. Merck.

  STATEMENT OF CAROLYN L. MERCK, FORMER SPECIALIST IN SOCIAL 
LEGISLATION, CONGRESSIONAL RESEARCH SERVICE (CRS), THE LIBRARY 
     OF CONGRESS (AND COAUTHOR OF THE CRS REPORT, MILITARY 
             RETIREMENT AND VETERANS' COMPENSATION)

    Ms. Merck. Good afternoon, Mr. Chairman and members of the 
subcommittee. My name is Carolyn Merck, and I am pleased to 
have the opportunity to present my statement to you today. I 
recently retired from my position as a specialist in social 
legislation with the Congressional Research Service. Therefore, 
today I am representing myself.
    Ten years ago, when concurrent receipt was an issue before 
Congress, the conference report accompanying the Fiscal Year 
1993 National Defense Authorization Act required CRS to prepare 
a report analyzing precedents for concurrent receipt of 
military retired pay and veterans compensation. I participated 
in preparing that report, and my statement today draws from it.
    Although the CRS analysis was done 10 years ago, program 
rules have not changed. Therefore, the study remains valid. 
Under proposals to permit full concurrent receipt of military 
retired pay and veterans disability compensation, the two 
benefits would flow to an individual based on the same period 
of employment, the same job, and the same employer. This 
employment period concept is key to the issue.
    It is instructive to ascertain if concurrent receipt is 
permitted for beneficiaries of other public programs, 
particularly whether disabled Federal civilian employees may 
receive concurrently a Civil Service retirement benefit and a 
disability benefit based on the same period of Government 
service.
    The CRS study identified 25 pairs of programs under which 
individuals might be eligible for benefits from both programs. 
Of these, 17 program pairs pay benefits derived from the same 
period of employment. In 13 of those 17 program pairs, Congress 
legislated offsets or limits on combined payments in order to 
avoid overly generous benefits or to prevent program abuse. 
Only four program pairs for which benefits flow from the same 
employment permit full concurrent receipt. In these cases, 
Congress expressly combined benefits under two programs in 
order to achieve what they consider to be income adequacy, or 
gave little thought to the effect of the combined benefits.
    In addition, the study notes that benefits from nonmilitary 
disability programs are virtually always limited in some way 
when a disabled person is also eligible for retirement benefits 
or has other income. However, Congress has excluded VA 
compensation from limitations or income caps applicable to 
other disability beneficiaries. Unlike all other disability 
programs that are intended to compensate for lost earnings or 
earning capacity, VA compensation is not reduced if the 
recipient has earned income. The policy is intended to preserve 
the work incentives of disabled veterans.
    Some advocating full concurrent receipt say that disabled 
Federal Civil Service workers may receive concurrently both 
disability and retirement benefits. This is not accurate. 
Federal workers who became disabled from any cause and who are 
determined by the Office of Personnel Management to be unable 
to perform their Federal job may retire, regardless of age, and 
draw a fully taxable retirement annuity. Retirement benefits 
based on disability are payable for the duration of the 
disability or life, but end if the annuitant has earnings above 
a certain amount.
    Benefits for disabled Federal civilian workers whose 
disability is directly related to their Federal job are payable 
under the Federal Employees Compensation Act, or FECA. FECA is 
the Workers' Compensation program for Federal personnel, and is 
administered by the U.S. Department of Labor. Benefits are tax-
free.
    There are two types of FECA benefits. Most FECA payments, 
known as nonschedule awards, are earnings replacement benefits, 
and paid monthly as a percentage of prior salary for the term 
of the disability or until death. Because payments are intended 
to replace lost earnings, they are reduced by the amount of any 
earned income. Recipients who also qualify for Federal 
retirement, based either on disability or age, must choose to 
receive either the FECA nonschedule award or the retirement 
annuity, but may not receive both. It is a strictly a one-or-
the-other choice.
    So-called schedule awards under FECA are indemnity payments 
for permanent, specific physical losses generally resulting 
from injury such as loss of an arm. Unlike nonschedule FECA 
benefits or VA compensation, FECA schedule awards are not 
compensation for lost earnings. Payments are limited to a 
certain number of weeks, and the amount is based on the extent 
of the physical loss and the employee's previous Federal pay. 
They are paid regardless of whether the individual works and 
draws a salary, retires and draws a Civil Service annuity, or 
is also awarded nonschedule FECA benefits for lost earnings.
    A situation some say is a precedent for concurrent receipt 
applies to individuals who: (a) retire from a military career 
and draw retired pay; (b) are eligible for veterans 
compensation; and (c) become Federal Civil Service employees 
and work until eligible for retirement from the Civil Service. 
Such individuals may elect to combine their military service 
years with their civilian service years by waiving their 
military retired pay and applying their combined years of 
service to the computation of their Civil Service annuity.
    Although they must make a cash deposit into the civilian 
retirement system, it may be financially advantageous to do so 
for those whose civilian service started before 1984 and who 
are covered by the Civil Service Retirement System (CSRS). That 
is, their retirement income would be larger than their military 
retired pay and their CSRS if paid separately. Moreover, 
because such retirees do not receive benefits from the miliary 
retirement system once it is folded into their Civil Service 
annuity, there is no offset if they also receive veterans 
compensation.
    Some say it is inequitable to reduce military retired pay 
by the amount of VA compensation received by retirees who do 
not become Federal civilian workers or who do not waive their 
military retired pay while no offset applies to those with 
second careers in the Civil Service and who do waive their 
retired pay. They would resolve that inequity by paying both 
benefits concurrently and in full.
    Others disagree, and suggest two reasons why this atypical 
situation is not a precedent on which changing the offset 
system should be based. First, the group to whom it applies is 
small, and declining in size, and should eventually disappear 
because it benefits only military retirees who started their 
Civil Service jobs before 1984 and are covered under the now-
closed CSRS.
    Those joining the Civil Service in 1984 and thereafter are 
covered by the newer Federal Employees Retirement System under 
which the low benefit accrual rate makes combining service 
years disadvantageous. Second, they suggest that, as an 
alternative, any inequities should be resolved at savings to 
the Government by applying the offset of VA compensation 
against the Civil Service annuities of those who benefit 
financially by combining their military and Civil Service 
years.
    Thank you. That concludes my statement. I would be glad to 
answer your questions.
    [The prepared statement of Ms. Merck follows:]

                 Prepared Statement by Carolyn L. Merck

    Good afternoon, Mr. Chairman and members of the subcommittee. My 
name is Carolyn Merck, and I am pleased to have the opportunity to 
present my statement today. I recently retired from my position as a 
Specialist in Social Legislation with the Congressional Research 
Service (CRS), but today I am representing only myself.
    Ten years ago, when concurrent receipt was an issue before 
Congress, the Conference Report accompanying the Fiscal Year 1993 
National Defense Authorization Act required CRS to prepare a report 
analyzing precedents for concurrent receipt of military retired pay and 
veterans' compensation. I participated in preparing that report, and my 
statement today draws from it. Although the CRS analysis was done 10 
years ago, program rules have not changed, and the study remains 
valid.\1\
---------------------------------------------------------------------------
    \1\ Military Retirement and Veterans' Compensation: Concurrent 
Receipt Issues, by Robert L. Goldich and Carolyn L. Merck, CRS Report 
95-469F, April 7, 1995.
---------------------------------------------------------------------------
    Under proposals to permit full concurrent receipt of military 
retired pay and veterans disability compensation, the two benefits 
would flow to an individual based on the same period of employment, the 
same job, and the same employer. This employment period is the key 
factor. It is instructive to ascertain if concurrent receipt is 
permitted for beneficiaries of other public programs, particularly 
whether disabled Federal civilian employees may receive concurrently a 
Civil Service retirement benefit and a disability benefit based on the 
same period of government service.

                           CRS STUDY FINDINGS

    The CRS study identified 25 pairs of programs under which 
individuals might be eligible for benefits from both programs. Of 
these, 17 program pairs pay benefits derived from the same period of 
employment. In 13 of those 17 program pairs, Congress legislated 
offsets or limits on combined payments in order to avoid overly 
generous benefits or to prevent program abuse.\2\
---------------------------------------------------------------------------
    \2\ The 13 program pairs under which benefits derive from the same 
employment and for which Congress legislated offsets, limits, or choice 
between benefits are: Civil Service retirement plus time-limited FECA 
scheduled awards; Federal, State, and local disability plus Social 
Security disability; FECA plus Federal judicial survivors benefits; 
unemployment compensation plus Social Security; FERS disability 
retirement plus Social Security disability; military SBP and Social 
Security survivor benefits for spouses age 62+; Federal CSRS plus 
Social Security based on military service for retirees age 62+; 
military retired pay plus veterans compensation; military SBP plus DIC; 
black lung benefits plus workers' compensation; unemployment 
compensation plus pension income; military nondisability retired pay 
and military disability retired pay; CSRS or FERS plus FECA non-
schedule awards.
---------------------------------------------------------------------------
    Only four program pairs for which benefits flow from the same 
employment permit full concurrent receipt.\3\ In these cases, Congress 
expressly combined benefits under two programs in order to achieve what 
they judged to be income adequacy (e.g., VA/DIC plus Social Security 
survivor benefits for widow(er)s of deceased veterans), or gave little 
consideration to the effects of combined benefits (e.g., military 
retired pay plus Social Security retirement benefits).
---------------------------------------------------------------------------
    \3\ These four program pairs are: military retired pay plus Social 
Security; FERS retirement plus Social Security; DIC plus Social 
Security survivor benefits; veterans compensation plus unemployment 
compensation.
---------------------------------------------------------------------------
    In addition, the study notes that benefits from nonmilitary 
disability programs are virtually always limited in some way when a 
disabled person is also eligible for retirement benefits or has other 
income. (This is true for private disability benefits as well.) 
However, Congress has excluded VA compensation from limitations or 
income caps applicable to other disability beneficiaries.\4\ Unlike all 
other disability programs that are intended to compensate for lost 
earnings or earning capacity, VA compensation is not reduced if the 
recipient has earned income, a policy intended to preserve work 
incentives for disabled veterans.
---------------------------------------------------------------------------
    \4\ For example, the cap on Social Security disability benefits for 
persons with other public disability benefits does not take veterans 
compensation payments into account.
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        PRECEDENTS IN FEDERAL CIVIL SERVICE DISABILITY PROGRAMS

    Some advocating full concurrent receipt say that disabled Federal 
Civil Service workers may receive concurrently both disability and 
retirement benefits. This is not accurate.
Federal Civil Service Disability Retirement
    Federal workers who become disabled from any cause and who are 
determined by the Office of Personnel Management to be unable to 
perform their Federal job may retire regardless of age and draw a fully 
taxable retirement annuity. Retirement benefits based on disability are 
payable for the duration of the disability or for life, but end if the 
annuitant has earnings above a certain amount.
Federal Employees' Compensation Act
    Benefits for disabled Federal civilian workers whose disability is 
directly related to their Federal job are payable under the Federal 
Employees' Compensation Act (FECA). FECA is the workers' compensation 
program for Federal personnel and is administered by the U.S. 
Department of Labor. Benefits are tax-free.
    There are two types of FECA benefits. Most FECA payments, known as 
``non-schedule awards,'' are earnings replacement benefits, paid 
monthly as a percentage of prior salary for the term of the disability 
or until death. Because payments are intended to replace lost earnings, 
they are reduced by the amount of any earned income. Recipients who 
also qualify for Federal retirement, based either on disability or age, 
must choose to receive either the FECA non-schedule award or the 
retirement annuity, but may not receive both. It is strictly a one-or-
the-other choice.
    So-called ``schedule awards'' under FECA are indemnity payments for 
permanent, specific physical losses generally resulting from injury 
(such as loss of an arm). Unlike non-schedule FECA benefits or VA 
compensation, FECA schedule awards are not compensation for lost 
earnings. Payments are limited to a certain number of weeks, and the 
amount is based on the extent of the physical loss and the employee's 
previous Federal pay. They are paid regardless of whether the 
individual works and draws a salary, retires and draws a Civil Service 
annuity, or is also awarded non-schedule FECA benefits for lost 
earnings.

    WAIVER OF MILITARY RETIRED PAY BY FEDERAL CIVIL SERVICE RETIREES

    A situation some say is a precedent for concurrent receipt applies 
to individuals who: (a) retire from a military career and draw retired 
pay; (b) are eligible for veterans compensation; and (c) become Federal 
Civil Service employees and work until eligible for retirement. Such 
individuals may elect to combine their military service years with 
their civilian service years by waiving their military retired pay and 
applying their combined years of service to the computation of their 
Civil Service annuity. Although they must make a cash deposit into the 
civilian retirement system, it may be financially advantageous to do so 
for those whose civilian service started before 1984 and who are 
covered by the Civil Service Retirement System (CSRS). That is, their 
retirement income would be larger than their military retired pay and 
their CSRS, paid separately. Moreover, because such retirees do not 
receive benefits from the military retirement system, there is no 
offset if they also receive veterans compensation.
    Some say it is inequitable to reduce military retired pay by the 
amount of VA compensation received by retirees who do not become 
Federal civilian workers, or who do not waive their military retired 
pay, while no offset applies to those with second careers in the Civil 
Service and who do waive their retired pay. They would resolve that 
inequity by paying both benefits concurrently, in full.
    Others disagree and suggest two reasons why this atypical situation 
is not a precedent on which changing the offset system should be based. 
First, the group to whom it applies is small and declining in size and 
should eventually disappear because it benefits only military retirees 
who started their Civil Service jobs before 1984 and are covered under 
the now closed CSRS. Those joining the Civil Service in 1984 and 
thereafter are covered by the newer Federal Employees Retirement System 
(FERS), under which the low benefit accrual rate makes combining 
service years disadvantageous. Second, they suggest that, as an 
alternative, any inequity should be resolved, at savings to the 
Government, by applying the offset of VA compensation against the Civil 
Service annuities of those who benefit financially by combining their 
military and Civil Service years.
    Thank you, Mr. Chairman. This concludes my prepared statement. I 
will be glad to answer your questions.

    Senator Chambliss. Thank you. Ms. Bascetta.

 STATEMENT OF CYNTHIA BASCETTA, DIRECTOR, VETERANS HEALTH AND 
              BENEFITS, GENERAL ACCOUNTING OFFICE

    Ms. Bascetta. Thank you, Mr. Chairman, Senator Nelson. I 
appreciate the opportunity to discuss the complex issues 
surrounding retirement pay and disability compensation for 
those who served our country in the military. We owe them all a 
huge debt. Our hearts and minds are certainly focused today on 
those engaged in combat in Iraq.
    To help in your deliberations on special compensation and 
concurrent receipt, I would like to talk briefly about the use 
of offset provisions in other programs, the estimated costs, 
including the potential impact on VA, and the broader issue of 
the need for fundamental disability reform that could serve as 
a context for your decisions.
    You have heard a lot today about offsets from Ms. Merck, 
and I will not repeat what she said. I would simply add that 
our work shows that these offsets that she is pointing out are 
very common not only in Federal, but in State and private 
sector programs as well.
    The cost of eliminating offsets would certainly be 
significant. You have heard CBO's 10-year estimate. Over 
longer-time horizons, the even greater financial liability 
heightens concerns about the long-term fiscal consequences of 
growing Federal entitlements.
    Moreover, eliminating the military retirement offset 
provision could establish a costly precedent for other Federal 
disability programs. Other costs we noted would take the form 
of increased demand on VA's claims processing system, which is 
currently struggling to improve longstanding problems with 
quality assurance and timeliness.
    While VA has made recent progress under Secretary Cooper's 
direction, it still takes about 200 days, on average, to 
process a veteran's disability claim. VA's administrative 
challenges and the costs of new benefits may not provide 
sufficient bases to retain the offset, but we believe they 
warrant consideration in weighing this matter.
    Finally, Federal disability programs, including VA's, face 
more fundamental problems that limit their ability to provide 
meaningful and timely support to their beneficiaries. This 
January, GAO placed these programs on our high risk list 
because they are in urgent need of attention and transformation 
to ensure that they function as efficiently and effectively as 
possible.
    We are concerned, for instance, that VA's disability rating 
schedule, the same schedule DOD uses, has not been updated 
since 1945, despite obvious changes in the nature of work. For 
example, in an increasingly knowledge-based economy, are mental 
impairments adequately compensated? Do physical impairments, 
such as the loss of an extremity, still reduce earnings 
capacity by 40 to 70 percent? These outdated concepts persist, 
despite advances in medicine and science that have redefined 
the relationship between impairments and the ability to work.
    At the same time, the projected slowdown in labor force 
growth and the Americans With Disabilities Act make it 
imperative that those who can work are supported in their 
efforts to do so. In this context, modifying concurrent receipt 
would add to the current patchwork of Federal disability 
policies at a time when modernization should be considered. 
While we are not taking a position on modifying the offset, we 
believe it would be appropriate to consider how it would affect 
the pursuit of more fundamental reform.
    That concludes my remarks, and I would be happy to try to 
answer your questions.
    [The prepared statement of Ms. Bascetta follows:]

               Prepared Statement by Cynthia A. Bascetta

    Mr. Chairman and members of the subcommittee: Thank you for 
inviting me to discuss issues involved with the concurrent receipt of 
military retirement pay from the Department of Defense (DOD) and 
disability compensation from the Department of Veterans' Affairs (VA). 
Pending legislation would modify current law, which requires that 
military retirement pay be reduced by the amount of VA disability 
compensation benefit received. You asked us to discuss the treatment of 
concurrent benefit receipt in other programs as well as our broader 
work on Federal disability programs.
    To help you in your deliberations on this matter, I will explain 
the use of offset provisions in other Federal benefit programs as well 
as in state and private sector programs. I will also discuss some of 
the implications of modifying the concurrent receipt provisions for the 
VA disability compensation program. In addition, I will address the 
more fundamental problems facing VA's disability program. My statement 
is based on a review of GAO reports on Workers' Compensation, Social 
Security, and VA benefit programs and other literature relating to DOD 
retirement and VA disability compensation. I will also draw on our 
broader work on Federal disability programs, which we recently 
designated as high-risk because they are not well positioned to provide 
meaningful and timely support to Americans with disabilities (see 
Related GAO Products). Our work for this testimony was conducted in 
March 2003, in accordance with generally accepted Government auditing 
standards.
    In summary, three factors are important to weigh in your 
deliberations on the merits of modifying the military retirement offset 
provision. First, many benefit programs use offset provisions when 
individuals qualify for benefits from more than one program. The use of 
offset provisions in numerous benefit programs is a common method for 
dealing with the consequences of beneficiaries qualifying for more than 
one benefit program. The rationales for these offset provisions vary, 
but they are generally designed to treat beneficiaries of multiple 
programs fairly and equitably in relation to all other program 
beneficiaries, consistent with the program's purpose. Moreover, 
eliminating the military retirement offset provision could establish a 
precedent for other Federal benefit programs that could prove costly. 
Second, the proposed modifications to the concurrent receipt provisions 
in the military retirement system would have implications not only for 
DOD's retirement costs, but would also increase the demand placed on 
VA's claims processing system. This would come at a time when this 
system is still struggling to correct problems with quality assurance 
and timeliness. Third, the VA disability compensation program, along 
with other Federal disability programs, is facing the need for more 
fundamental reform. Modifying the concurrent receipt provision would 
add to the current patchwork of Federal disability policies and 
programs at a time when transformation and modernization should be 
considered. While we are not taking a position on whether the military 
retirement offset provision should be modified, as Congress and other 
policymakers deliberate this issue, it would be appropriate to consider 
how modifying the offset would affect the pursuit of more fundamental 
reforms.

                               BACKGROUND

    Generally, DOD provides longevity retirement pay to military 
service members upon completion of 20 creditable years of active duty 
service. DOD also provides disability retirement pay to eligible 
service members who are determined unfit for duty--that is, unable to 
perform their military duties. To qualify for military disability 
retirement, the service member's disability must have been determined 
by DOD medical personnel to be permanent and the service member must 
have (1) at least 20 years of creditable service or (2) an evaluation 
board determination that the service member has a physical disability 
rating of at least 30 percent,\1\ and either at least 8 years of 
creditable service or a disability resulting from active duty. Nearly 
1.5 million retired service members received retirement and disability 
retirement pay in fiscal year 2002. In fiscal year 2000, the average 
disability retiree who had been an officer received about $2,022 per 
month, while the average enlisted disability retiree received about 
$698 per month.
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    \1\ A disability rating is essentially an indication of medical 
severity of an impairment: the more severe the medical condition, then 
the higher the percentage of the disability rating, which can range 
from 0 to 100 percent.
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    VA provides monthly disability compensation to veterans who have 
service-connected disabilities to compensate them for the average 
reduction in earnings capacity that is expected to result from injuries 
or diseases incurred or aggravated by military service. The payment 
amount is based on a disability rating scale that begins at 0 for the 
lowest severity and increases in 10-percent increments to 100 percent 
for the highest severity. Many veterans claim multiple disabilities, 
and veterans can reapply for higher ratings and more compensation if 
their disabilities worsen. For veterans who claim more than one 
disability, VA rates each claim separately and then combines them into 
a single rating. About 65 percent of compensated veterans receive 
payments based on a rating of 30 percent or less and about 8 percent 
are rated at 100 percent. Average monthly compensation payments in 2002 
ranged from about $100 for a 10-percent rating to over $2,100 for a 
100-percent rating.
    Military retirees with disabilities incurred during their military 
service may receive military retirement pay (based on either longevity 
or disability, whichever is more financially advantageous to the 
service member) from DOD and disability compensation from VA. For 
example, a service member who incurs a disability may still be fit for 
duty, depending on the nature and severity of the impairment. If that 
service member completes 20 years of creditable service, he or she may 
retire based on longevity and also qualify for VA disability 
compensation for the same impairment or a different impairment that is 
also service-connected. Similarly, a service member who incurs a 
disability and is found unfit for duty may receive military retirement 
pay based on disability if he or she meets additional eligibility 
requirements. This service member may also qualify for VA disability 
compensation for the same impairment or a different impairment that is 
also service-connected.
    Current law requires that military retirement pay be reduced 
(``offset'') by the amount of VA disability benefits received. In 1891, 
Congress passed legislation to prohibit what it regarded to be dual 
compensation for either past or current service and a disability 
pension. Despite the reduction in military retirement pay, it is often 
to a retiree's advantage to receive VA disability compensation in lieu 
of military retirement pay. These VA benefits provide an after-tax 
advantage because they are not subject to Federal income tax, as 
military retirement pay generally is. In addition, the disability 
compensation VA pays can be increased if medical reevaluation of the 
retiree's condition is found by VA to have worsened. Because VA 
disability compensation is based on the severity of the disability and 
not on actual earnings (as is military retirement pay), the VA benefit 
may, in some instances, be larger than the amount of military 
retirement pay.
    For certain retirees with serious disabilities, the National 
Defense Authorization Act of 2000 provides a cash benefit that is less 
than what they would have received through concurrent receipt of their 
military retirement pay and VA disability compensation. The statute 
states that these special compensation payments are not military 
retirement pay. As such, they are not subject to the offset provisions, 
and the legislation did not change the statute that prohibits 
concurrent receipt. The special compensation payments were reauthorized 
in 2001 and 2002.\2\
---------------------------------------------------------------------------
    \2\ The monthly dollar amounts of ``special compensation'' at each 
disability level of 70 percent or more will increase by $25 per month 
on October 1, 2004.
---------------------------------------------------------------------------
    In addition, the 2003 National Defense Authorization Act (P.L. 107-
314) authorized a new category of ``special compensation'' for retirees 
with disabilities, including those who received a Purple Heart or have 
a disability due to ``combat-related'' activities. Under the new law, 
eligible retirees would now be able to receive the financial equivalent 
of concurrent receipt, although, again, the legislation did not repeal 
the statute prohibiting concurrent receipt.\3\ Military retirees may 
become eligible for this special compensation if (1) their disability 
is attributable to an injury for which the member was awarded the 
Purple Heart, and is not rated less than a 10-percent disability by DOD 
or VA; or (2) they receive a disability rating of at least 60 percent 
from either DOD or VA for injuries that were incurred due to 
involvement in ``armed conflict,'' ``hazardous service,'' ``duty 
simulating war,'' and through an instrumentality of war.\4\ Retirees 
who are eligible under this new special compensation category will no 
longer be entitled to the special compensation payments first enacted 
in 2000. The Congressional Budget Office (CBO) estimated that this new 
special compensation would cost about $6 billion over 10 years.
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    \3\ As before, the statute states that these special compensation 
payments are not military retirement pay. As such, they are not subject 
to the offset provisions.
    \4\ To date, regulations have not been promulgated to implement 
this provision, including definitions for these terms.
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    Table 1 shows the 2003 monthly payments amounts of the special 
compensation enacted in 2000 as well as the monthly payment amounts for 
the new category of special compensation.
      
    
    
      
    Current proposals before Congress pertaining to concurrent receipt 
would, if enacted, expand the number of those eligible to 
simultaneously receive the equivalent of their full retirement pay and 
compensation for a disability beyond the 2003 National Defense 
Authorization Act. CBO estimated that an earlier version of these 
proposals would cost about $46 billion over 10 years. Over a longer 
time horizon, the additional financial liability would be of even 
greater significance because of mounting concerns about the long-term 
fiscal consequences of Federal entitlements.

 MANY PROGRAMS USE OFFSET PROVISIONS WHEN INDIVIDUALS ARE ELIGIBLE FOR 
                  BENEFITS FROM MORE THAN ONE PROGRAM

    Among the programs that provide benefits to individuals based on 
their previous work experience or their inability to continue working 
because of disability, many use offset provisions when an individual 
qualifies for benefits under more than one program. The specific 
rationales for these offset provisions vary, but they generally focus 
on restoring equity and fairness by treating beneficiaries of more than 
one program in a similar manner as beneficiaries who qualify for 
benefits under only one of the programs. Table 2 provides examples of 
benefit programs that include offset provisions. (See app. I for a 
description of these programs.)
      
    
    
      
    Some programs use offset provisions to ensure that the total 
benefits received from two programs do not exceed the total income 
received while working. For example, the Social Security Disability 
Insurance (DI) program provides benefits to insured persons to replace 
the income lost when they are unable to work because of physical or 
mental impairments. In addition to DI benefits, some individuals may 
also be eligible for workers' compensation (WC) if the illness or 
injury is work-related. WC benefits are designed to replace the loss of 
earnings resulting from work-related illnesses or injuries. Each state 
and the District of Columbia generally requires employers operating in 
its jurisdictions to provide WC insurance for their employees.\5\ The 
Social Security Administration (SSA) generally requires that DI 
benefits be reduced for persons who also receive WC.\6\ This offset 
applies when combined DI and WC benefits exceed 80 percent of the 
injured worker's average current earnings. The reduction can apply even 
if the DI and WC benefits are for unrelated injuries or illnesses. In 
1971, the Supreme Court validated the WC offset provision stating that 
it was intended to provide an incentive for injured employees to return 
to work because Congress did not believe it was desirable for injured 
workers to receive disability benefits that, in combination with their 
WC benefits, exceeded their preinjury earnings.\7\
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    \5\ These programs established a mechanism to pay injured workers 
predictable levels of compensation without delay. Although WC programs 
exist in all states, the programs are not federally mandated, 
administered, or regulated. Rather, they evolved throughout the 20th 
century under state laws with the support of labor and management.
    \6\ SSA cannot offset disability benefits if the state WC program 
allows the insurers to reduce the amount of WC benefits they would 
normally pay to an injured worker when the worker also receives Social 
Security DI benefits. In 1981, Congress limited recognition of such 
exceptions to the 14 states that had established them by Feb. 18, 1981.
    \7\ Richardson v. Belcher, 404 U.S. 78 (1971).
---------------------------------------------------------------------------
    Some programs use offset provisions to adjust benefit computation 
formulas that were not originally designed to account for individuals 
or their dependents working under more than one retirement system. An 
example is Social Security's Government Pension Offset (GPO) provision, 
enacted in 1977 to equalize the treatment of workers covered by Social 
Security and those with government pensions not covered by Social 
Security. The Social Security Act requires that most workers be covered 
by Social Security benefits.\8\ In addition to paying retirement and 
disability benefits to covered workers, Social Security also generally 
pays benefits to spouses of retired, disabled, or deceased workers. 
Although state and local government workers were originally excluded 
from Social Security, today about two-thirds of state and local 
government workers are covered by Social Security.\9\ Prior to 1977, a 
spouse receiving a pension from a government position not covered by 
Social Security could receive a full pension benefit and a full Social 
Security spousal benefit as if he or she were a nonworking spouse. The 
GPO prevents spouses from receiving a full spousal benefit in addition 
to a full pension benefit earned from noncovered government 
employment.\10\
---------------------------------------------------------------------------
    \8\ Workers contribute to Social Security through payroll taxes.
    \9\ Starting in the 1950s, State and local governments had the 
option of selecting Social Security coverage for their employees or 
retaining their noncovered status. In 1983, State and local governments 
in the Social Security system were prohibited by law from opting out of 
it.
    \10\ If both spouses worked in positions covered by Social 
Security, each may not receive both the benefits earned as a worker and 
a full spousal benefit; rather each member of the couple would receive 
the higher amount of the two.
---------------------------------------------------------------------------
    Offset provisions are also used by state governments. For example, 
29 states and the District of Columbia permit insurers to reduce WC 
cash payments when the beneficiary also receives other types of 
benefits, such as those from Social Security retirement, survivor, or 
disability programs or from government or private pension plans. In 
addition, as required by Federal law, states must deduct from 
unemployment compensation the value of pensions, retirement pay, or 
annuities based on previous work in certain situations. The purpose of 
this offset is to reduce the incentive for retirees who receive 
pensions to file for unemployment compensation and increase their 
incentive to seek work.
    Private sector insurers also use offsets. Our study of three large 
private disability insurers \11\ found that nearly two-thirds of those 
receiving private long-term disability benefits from the three private 
insurers also received DI benefits.\12\ In such cases, the private 
disability benefit payments were generally reduced by the amount of the 
DI benefit payment.
---------------------------------------------------------------------------
    \11\ In 1997, these three companies covered about half of the long-
term U.S. private disability insurance market.
    \12\ U.S. General Accounting Office, SSA Disability: Other Programs 
May Provide Lessons for Improving Return-to-Work Efforts, GAO-01-153 
(Washington, DC: Jan. 12, 2001).
---------------------------------------------------------------------------
MODIFYING THE CONCURRENT RECEIPT PROVISIONS HAS IMPLICATIONS FOR THE VA 
                    DISABILITY COMPENSATION PROGRAM

    In addition to the cost of the benefits, allowing concurrent 
receipt would have implications for VA program management. Allowing 
concurrent receipt of military retirement pay and VA disability 
compensation could provide new incentives for military retirees to file 
for VA compensation or to seek increases in their disability ratings 
for VA compensation that they are already receiving. These new claims 
could further tax VA's claims processing system. We recently reported 
that VA faces long-standing challenges to improve the timeliness and 
quality of disability claims decisions. In addition to creating delays 
in veterans' receipt of entitled benefits, untimely, inaccurate, and 
inconsistent claims decisions can negatively affect veterans' receipt 
of other VA benefits and services, including health care, because VA's 
assigned disability ratings help determine eligibility and priority for 
these benefits.\13\ While the cost of these new benefits and VA's 
administrative challenges in processing the claims may not provide 
sufficient bases to retain the offset, they warrant consideration in 
weighing this matter.
---------------------------------------------------------------------------
    \13\ U.S. General Accounting Office, Major Management Challenges 
and Program Risks: Department of Veterans' Affairs, GAO-03-110 
(Washington, DC: Jan. 2003).
---------------------------------------------------------------------------
            VA DISABILITY PROGRAMS FACE FUNDAMENTAL PROBLEMS

    While VA has had difficulty making decisions in a timely and 
consistent manner, VA's disability programs also face more fundamental 
problems. Our concerns about the long-standing challenges that VA faces 
in claims processing contributed to our recent decision to place 
Federal disability programs, including VA's programs, on our high-risk 
list of programs that need urgent attention and transformation to 
ensure that they function in the most economical, efficient, and 
effective manner possible.\14\ This designation was based in part on 
our finding that these programs use outmoded criteria for determining 
disability. For example, VA's disability ratings schedule is still 
primarily based on physicians' and lawyers' judgments made in 1945 
about the effect service-connected conditions had on the average 
individual's ability to perform jobs requiring manual or physical 
labor. Although VA is revising the medical criteria for its Schedule 
for Rating Disabilities, the estimates of how impairments affect 
veterans' earnings have generally not been reexamined. As a result, 
changes in the nature of work that have occurred over the last half-
century--which potentially affect the extent to which disabilities 
limit one's earning capacity--are overlooked by the program's criteria. 
For example, in an increasingly knowledge-based economy, one could 
consider whether physical impairments such as the loss of an extremity 
still reduce earning capacity by 40 to 70 percent.\15\
---------------------------------------------------------------------------
    \14\ U.S. General Accounting Office, High-Risk Series: An Update, 
GAO-03-119 (Washington, DC: Jan. 2003).
    \15\ GAO-03-110. VA recognizes that there have been significant 
changes in the nature of work, but does not believe that these changes 
need to be reflected in the disability ratings. VA contends that the 
disability rating schedule, as constructed, represents a consensus 
among Congress, VA, and the veteran community, and that the ratings 
generally represent an equitable method to determine disability 
compensation. We continue to believe, as we have said in the past, that 
the current estimates of the average reduction in earning capacity 
should be reviewed. Further, we believe that updating disability 
criteria is consistent with the law. U.S. General Accounting Office, 
SSA, and VA Disability Programs: Re-Examination of Disability Criteria 
Needed to Help Ensure Program Integrity, GAO-02-597 (Washington, DC: 
Aug. 9, 2002).
---------------------------------------------------------------------------
    These outdated concepts persist despite scientific advances and 
economic and social changes that have redefined the relationship 
between impairments and the ability to work. Advances in medicine and 
technology have reduced the severity of some medical conditions and 
have allowed individuals to live with greater independence and function 
in work settings. Moreover, the nature of work has changed as the 
national economy has become increasingly knowledge-based. Without a 
current understanding of the impact of physical and mental conditions 
on earnings given labor market changes, VA and other agencies 
administering Federal disability programs may be overcompensating some 
individuals while undercompensating or denying benefits to other 
individuals because of outdated information on earning capacity. At the 
same time, the projected slowdown in growth of the Nation's labor force 
makes it imperative that those who can work are supported in their 
efforts to do so.
    In reexamining the fundamental concepts underlying the design of 
Federal disability programs, approaches used by other disability 
programs may offer valuable insights. For example, our prior review of 
three private disability insurers shows that they have fundamentally 
reoriented their disability systems toward building the productive 
capacities of people with disabilities, while not jeopardizing the 
availability of cash benefits for people who are not able to return to 
the labor force. As we previously reported, to fully incorporate 
scientific advances and labor market changes into the disability 
programs would require more fundamental change, such as revisiting the 
programs' basic orientation from incapacity to capacity. Reorienting 
programs in this direction would align them with broader social changes 
that focus on building and supporting the work capacities of people 
with disabilities. Such a reorientation would require examining complex 
program design issues such as beneficiaries' access to medical care and 
assistive technologies, the benefits offered and their associated 
costs, and strategies to return beneficiaries to work. Moreover, 
reorientation of the Federal disability programs would necessitate the 
integration of the many programs and policies affecting people with 
disabilities, including those of DOD and VA.
    Mr. Chairman, this concludes my prepared remarks. I would be happy 
to answer any questions that you or the other subcommittee members 
might have.

                      CONTACTS AND ACKNOWLEDGMENTS

    For further information regarding this testimony, please contact me 
at (202) 512-7101 or Carol Dawn Petersen at (202) 512-7215. Suit Chan, 
Beverly Crawford, and Shelia Drake also contributed to this statement.
      
    
    
      
    
    
      
    Senator Chambliss. Ladies, I thought I understood this 
issue, and you all have scrambled my brain. [Laughter.]
    Ms. Merck, I want to go back to your comments about FECA. 
Who actually participates in this program, and walk through 
with me what you said with respect to credit of military 
service under this program, what they do, and what would happen 
if we provide for full concurrent receipt?
    Ms. Merck. Starting with what the FECA program is?
    Senator Chambliss. Yes, ma'am.
    Ms. Merck. The FECA is the work-related disability program 
for Federal employees. It is somewhat analogous to veterans' 
compensation.
    Senator Chambliss. Is it a Workers' Compensation for 
Federal employees?
    Ms. Merck. Workers' Compensation for Federal employees, 
since Federal employees are not covered by their State Workers' 
Compensation programs in their Federal jobs.
    Senator Chambliss. Okay.
    Ms. Merck. Therefore, it compensates them for illness or 
injury incurred on their Federal job.
    Senator Chambliss. Okay.
    Ms. Merck. There are two components of that program. One is 
intended to be strictly indemnity payments, and generally these 
are for loss of a physical extremity, for example, and that is 
paid for a limited number of weeks. You can almost think of it 
as a lump sum payable in installments over some period of time 
that ends.
    The other is, the nonschedule awards is for lost earning 
capacity, not necessarily for loss of a physical member or part 
of your body. It is intended to be replacement, income 
replacement, and is payable for the duration of the disability 
or to death, and is similar to Workers' Comp.
    With regard to the other group of people who are military 
retirees who do their 20 or more years, retire from the 
military, draw their retired pay, then become a Federal Civil 
Service employee, under a provision in current law. When they 
become eligible to retire from their Federal Civil Service job, 
which is a minimum of 5 years (very often it is much more in 
actual service), they may take Civil Service retirement. Again, 
let us say hypothetically it is a 20-year military career. Let 
us say they have had 15 years in the Civil Service. Instead of 
continuing to receive their military retired pay from the DOD 
based on their 20 years in the military and getting a Civil 
Service annuity based on only 15 years of service, they can 
have a combined benefit based on 35 years of service computed 
using their high-three pay as a Federal employee.
    They no longer receive a check, so to speak, from the 
Department of Defense. They waive that. They waive it because 
the combination of their 15-year Civil Service and their 20 
years of military gives them a Civil Service annuity under one 
program. The CSRS, a now-closed program, that is larger than 
the combination of their military retired pay had they 
continued to receive it, plus a 15-year annuity from the Civil 
Service.
    Senator Chambliss. What does Senator Reid's bill do to that 
individual?
    Ms. Merck. I do not believe it would do anything to that 
individual.
    The issue here is, once a retiree, but military/Civil 
Service retiree has waived retired pay and is getting only one 
retirement income through the Civil Service Retirement System, 
he or she may draw in full their veterans compensation without 
any offset.
    It is claimed by some that this is unfair, since part of 
that retirement benefit is based on military service. It is 
just the fact that it no longer flows through the DOD and 
through the military retirement system, but because there is no 
longer any benefit flowing from the DOD to the person. There is 
no provision in law to offset a Civil Service annuity by the 
amount of the veterans compensation, and at this point that is 
all a person is getting in terms of retirement income.
    Senator Chambliss. When does a Federal employee start 
becoming vested under the current retirement system?
    Ms. Merck. Five years for both the CSRS, which as I said is 
a closed system now, although many people are still in it--it 
is 5 years for both CSRS and the Federal Employees Retirement 
System, or FERS, as it is known.
    Senator Chambliss. Okay. Ms. Jennings, with respect to the 
assumptions which you have used in your numbers, and by the 
way, what would the total number be for the light blue bar 
graphs that you have there? Do you have that number, as to what 
the cost would be?
    Ms. Jennings. For that year, September--that was 2001. I 
believe the cost was around $2.6 to $2.8 billion.
    Senator Chambliss. With respect to the assumptions that you 
used in developing your numbers, I assume you heard what 
Secretary Cooper said about these 50,000 additional claimants 
that may be forthcoming under the VA. Was anything like that 
factored in, or did you just use the basic numbers that we have 
of people on the rolls today?
    Ms. Jennings. I did include some analysis, or some 
additional people that would have a new incentive. This is just 
a snapshot of what the actual costs would have been in 2001, so 
no, that would not have changed, but going forward in my cost 
estimate, I assumed a couple of different groups of people 
might decide to apply for veterans disability.
    The first group were people that are receiving a military 
disability retirement. Many of those individuals, the 
retirements are partially or totally tax-free, so unless they 
expected to get a larger benefit from VA than they were getting 
from their retirement, there would be no tax incentive to apply 
to VA for a disability benefit from them, so they would not 
have had cause to apply. Under concurrent receipt they would 
have good cause to apply, and I discovered how many of them 
there were at the current time and the current growth rate of 
that population. I assume those individuals would indeed apply 
for veterans compensation.
    I also looked at the population of nondisability retirees. 
As I mentioned in my testimony, the rate of nondisability 
retirees applying for veterans compensation has been growing 
quite substantially, and so in my baseline of costs I assumed 
that continued growth rate regardless of whether concurrent 
receipt passes or not.
    Under concurrent receipt, I assumed that the growth rate 
would accelerate somewhat, but by the end of the decade we 
would still be where I was predicting that we would be without 
concurrent receipt. That would be that 45 percent of the entire 
nondisability population would be receiving veterans 
compensation.
    We have just gotten into the most recent data, the 2002 
data, and I have slightly underestimated the cost in my last 
year's estimate. This year's estimate, when we put the new 
population in and look at the growth rates, will actually go up 
a little bit. We will see even higher growth rates than I was 
predicting.
    Senator Chambliss. Significantly higher, or minimally?
    Ms. Jennings. Not a huge jump, but I think the 2001 cost 
was around $2.6 billion, if I recall. It looks to me from a 
preliminary look at the data that for 2002 population, had they 
been receiving concurrent receipt, it would have been over $3 
billion, so that is a handsome growth rate, and we are 
projecting that that will continue.
    In the late 1980s, the VA and the DOD started working 
together to make it easier for individuals separating from the 
military to apply for veterans disability. It became part of 
the separation process. An individual from the VA will come 
over to the bases and there will be a class, part of your 
checklist of separating is, you will go to this class with a VA 
individual who will explain all your benefits.
    VA began to use the DOD separation physical as their 
physical so you did not have to go over to VA and arrange for a 
separate physical, and they assisted you before you had 
separated in filing your application to VA. Looking at the data 
since that time there has been a really great increase in the 
percent of retirees that are applying for those benefits and 
receiving them, and as those new cohorts move into the 
population, of course, the population of military retirees is 
people dating back to World War II, and this is just cohorts 
joining that population since the late 1980s.
    As they become a larger and larger part of that population, 
I have been expecting that the percentage would go up to 
something resembling what the current cohorts are receiving, 
but maybe--the most recent one at 56 percent, I just got that 
data, and that is what is making me consider that maybe 45 
percent is too low, and that there will be even more people.
    This is without concurrent receipt being passed, so it 
seems that it is not necessary for concurrent receipt being 
passed for lots of people to be applying to the VA, so I did 
not have an exceptionally large group of additional 
nondisability retirees applying. I think it got up to about 
70,000 in 2006, and after that, I let that group kind of tail 
off. They were already represented within my baseline.
    Senator Chambliss. Senator Nelson.
    Senator Ben Nelson. Thank you, Mr. Chairman.
    Ms. Merck, it seems to be true that a Federal employee 
injured in his or her own Federal employment may not receive 
both disability and retirement benefits, but what about someone 
who is injured while serving in the military who then goes to 
work as a civilian employee of the Federal Government? If this 
employee retires, does he or she forfeit part or all of his or 
her retirement the same way that a military retiree might?
    Ms. Merck. If I follow your question, you are asking if a 
veteran who goes--not a military retiree, but someone who did 
less than 20 years goes to work for the Civil Service, that 
person during his or her employed years draws the VA 
compensation concurrently with the Civil Service salary, and 
then upon retirement from the Civil Service continues to draw, 
draws the Civil Service annuity plus the veterans compensation. 
If the person is injured on the Federal job and draws FECA 
payments and the person is eligible for either disability 
retirement under the Federal program or retirement based on 
age, they must choose either the FECA benefit or the retirement 
benefit, but they may not receive both.
    Senator Ben Nelson. They can choose to their benefit, if 
one is higher than the other?
    Ms. Merck. Absolutely. That is the nature of the choice, 
yes.
    Senator Ben Nelson. Of course, FECA is the Federal approach 
to a State Workers' Comp program or private enterprise 
employment that involves Workers' Comp.
    Ms. Merck. Yes.
    Senator Ben Nelson. Then your report, although it was 
written in 1995, the distinction between military retired pay 
and pensions, I think that is an important distinction. Can you 
help us understand the distinction between military retired pay 
and a pension. Tell us how this distinction should be 
considered in determining whether a military retiree should be 
required to forfeit part of his or her retired pay versus what 
they might receive in a pension?
    Ms. Merck. Now, you are talking about pensions not in the 
VA program sense, which is an earnings based, an income-
determined program.
    Senator Ben Nelson. That is correct.
    Ms. Merck. Military retired pay is not called a pension 
because it is considered reduced pay for reduced duties in some 
ways, and up to a certain age the retiree is eligible, is 
subject to potential recall.
    It is payable earlier, military retired pay, is payable 
without an age constraint. It is only based on years of 
service, 20 years. Virtually all pension programs, as we think 
of them, using that term somewhat generically, as in retirement 
benefit for a retired worker, is virtually always age-
conditioned as well as years-of-service conditioned, 55 being 
occasionally the age for retirement, 62. It is usually timed 
with Social Security, which is first payable under the Social 
Security Retirement System at age 62, so the military retiree, 
as early as age 38, for example, for someone who joins at 18, 
is payable immediately upon completion of 20 years and for 
life.
    Senator Ben Nelson. Even though it is applied in a 
different way, is there truly a meaningful distinction between 
pension and retired pay, a meaningful distinction? I think they 
can be calculated. You can have a benefits-based, or you can 
have contribution-based pensions, and they are different, but I 
fail to see a significant difference between what a pension is 
and what retired pay truly is. They may kick in at different 
time frames and under different circumstances, but the result 
is still the same.
    Ms. Merck. This is an artifact of the military system, in 
that they have never--the term pension, which actually goes 
back to the Revolution when I did the history of these things, 
has been used differently to mean different things, and in the 
military world that word has come to be associated with some 
sort of a disability benefit. It has never been used in the 
military to describe retired pay, because they do--it is said 
that the military retired pay is actually reduced pay for 
reduced duties, given that you are subject to recall for a 
certain period of time. They do not refer to it as a pension.
    Senator Ben Nelson. But even with Social Security you could 
have retired benefits based on early retirement. In other 
words, you retire at 62, you take reduced benefits.
    Ms. Merck. That is right.
    Senator Ben Nelson. Very similar in that regard. I am 
having trouble understanding why the military draws this 
distinction, because the result is the same, but the way in 
which it seems to be applied is different.
    Ms. Merck. Let me see if I understand your question; you 
are asking why the military distinguishes retired pay from a 
pension and they do not consider----
    Senator Ben Nelson. From Social Security, because it has a 
same, similar type of application. It may be different ages 
where it kicks in, it may be different levels of contribution, 
or no contribution.
    Ms. Merck. You could apply the word pension, no reason you 
could not, to the military retirement system. It is just that 
they do not. It is a term that is used in the veterans programs 
already, and so it has a certain meaning within the whole 
sphere of military service and veterans benefits.
    It is, as I said, distinct from pension programs, which we 
call defined benefit pension programs, that is, programs under 
which the benefit is determined only by a formula, not by an 
accumulating account balance of contributions.
    Senator Ben Nelson. As opposed to a defined contribution.
    Ms. Merck. As opposed to a defined contribution plan.
    The military system has only one criteria, and that is 
years of service, which is 20 years of service. Virtually all 
other pension programs--programs that refer to themselves as 
pension programs--have both an age and service requirement 
before benefits are payable. The military sort of implicitly 
has that because of the earliest age at which you----
    Senator Ben Nelson. Just at an earlier retirement----
    Ms. Merck.--can join the military--yes.
    Senator Ben Nelson. Right.
    Ms. Merck. Yes, but they do not require that you wait until 
some older age, as most pension programs in the private and 
civilian public sector do.
    Senator Ben Nelson. Okay. Thank you, Mr. Chairman.
    Senator Chambliss. We keep directing these questions to 
you, Ms. Merck, but I want you ladies to feel free to jump in. 
All of you have so much more expertise than we do.
    Let me give you an example, going back to this situation of 
accumulation of years. Let us say you get an 18-year-old who 
goes into the military, stays there 20 years, goes to work then 
in a Civil Service position for 10 years. That 10 years that 
person is in that Civil Service position, are they eligible to 
draw military retirement?
    Ms. Merck. Yes.
    Senator Chambliss. They do draw it?
    Ms. Merck. Yes.
    Senator Chambliss. Now, at the end of that 10 years, they 
go into the private sector, they are still drawing their 
military compensation, they are actually eligible for Civil 
Service retirement with 30 years of work history.
    Ms. Merck. They may elect to do that.
    Senator Chambliss. Are they eligible to then draw their 
Civil Service retirement?
    Ms. Merck. Yes, if they then move on to a private sector 
employer?
    Senator Chambliss. Right.
    Ms. Merck. Yes, and if they become eligible under that 
employer's retirement system, they may draw a benefit from it 
the way anybody changing jobs throughout life, for employers 
that have retirement programs, you may always draw the benefit 
to which you are entitled, in addition to all your others.
    Senator Chambliss. Okay. Now, in addition to that, they 
draw retirement from their employer, but they have also paid 
into the Social Security system for those 15 years, so they are 
also eligible for Social Security benefits. Now, is there any 
offset other than being able to claim the 20 years in military 
service, to get the Civil Service retirement? Is there any 
other offset involved in that scenario?
    Ms. Merck. This gets very complex. Let us take a simple 
case. The answer is basically no.
    When Congress decided in 1956 to cover active duty military 
service under the Social Security system, they did so primarily 
to improve the adequacy of widows or widowers benefits for 
veterans as I recall in reading through the history of the 
committee's consideration of covering military service with 
Social Security. They wanted, as a result of the Second World 
War, to improve the survivor benefits to the spouses of 
disabled veterans, or veterans who were killed in the war, they 
covered active duty Civil Service with Social Security.
    They realized in the backs of their minds that that would 
mean eventually that an active duty individual could retire, 
could stay for the full 20 years, draw military retirement, and 
draw Social Security. They decided not to think about that at 
the time, and so full Social Security benefits are payable in 
addition to full military retirement benefits based on the same 
period of service.
    Interestingly enough, when that person dies, and if that 
person leaves a surviving spouse, then there is an offset.
    Senator Chambliss. Okay. Let me give you the same basic 
scenario with one exception. Let us say, instead of serving 20 
years, that same individual serves 19 years and then has a 
significant injury that is a 40 or 50 percent disabling injury, 
but the same follow-on scenario is there, that they go to work 
in Civil Service, they are drawing a disability claim then, not 
a retirement claim, and then they ultimately go into the 
private sector. Is there an offset that would take place under 
that scenario since it is a disability claim versus a military 
retirement claim?
    Ms. Merck. Let me--if a person is drawing disability from 
which, the military----
    Senator Chambliss. Let us say, instead of retiring at the 
end of 20 years, at the end of 19 years.
    Ms. Merck. The person leaves the military before being 
vested at 20 years.
    Senator Chambliss. Yes, and he had a limb blown off or 
something, so he has a disability claim.
    Ms. Merck. Against which program, the veterans compensation 
program?
    Senator Chambliss. Yes.
    Ms. Merck. Or the military disability retirement?
    Senator Chambliss. A military disability claim, instead of 
a military retirement claim.
    Ms. Merck. If it is a case of military disability 
retirement, then that person draws a retirement benefit--there 
are two different formulas under which the military computes 
the benefit for the individual. It is one or the other, 
whichever is higher, but that person is treated like a military 
retiree.
    Senator Chambliss. So there is no difference.
    Ms. Merck. There is no difference in that.
    Senator Chambliss. There is no offset in either scenario?
    Ms. Merck. No.
    Senator Chambliss. Okay. Anything else? Ladies, we could 
probably sit here and listen to you all afternoon. You all are 
a great brain trust, and we appreciate very much your being 
here today and giving us your expertise. This issue is not 
going away, and it is an issue we are going to resolve somehow, 
and we would sure appreciate your continued dialogue with us, 
and letting us call on your expertise down the road.
    Ms. Bascetta. If I may just make a quick comment, obviously 
the intricacies are overwhelming, and I can understand why you 
feel like your brain is a bit scrambled, but if I could just 
for a minute offer this, I think the discussion we have just 
been having is a perfect example of why there are three basic 
things we have to keep in mind when we are trying to assure 
fairness, not only for military retirees and veterans, but for 
anybody who is in a situation where they retire with a 
disability.
    Those three things are, what is the underlying purpose of 
the compensation. How do we feel about the adequacy of the 
benefits? What are the rationales for the offsets and are they 
consistent across programs? What are the interactions between 
the programs? In some of these cases where we have been talking 
about a situation where VA disability is not offset, perhaps 
the answer is not concurrent receipt. Looking at whether there 
ought to be an offset in another program to be fair. So that is 
why again we say that we are concerned about adding another 
patch to a disability policy system that really at this point 
is very fragmented. It could have lots of unintended 
consequences.
    Senator Chambliss. I agree with you. If we are going to 
look at this aspect of it, it makes sense probably to look at 
all other forms of compensation to see where the equities and 
inequities are. You make a good point.
    Ladies, again, thank you very much.
    Our next panel, Mr. Strobridge, Mr. Butler, and I think I 
mentioned Mr. Slee, but instead of Mr. Slee, he is being 
replaced by Colonel Dennis Duggan, which I am sorry I did not 
mention that earlier, Colonel Duggan, but we are sure glad to 
have all three of you gentlemen with us today. Thanks to you 
also for your significant interest in this issue, as well as 
your expertise. As I told our previous panels, we certainly 
will be glad to put into the record any written statement you 
would like to have inserted, and we look forward to your 
abbreviated oral comments.
    Colonel Strobridge, we will start with you.

 STATEMENT OF COL. STEVE STROBRIDGE, USAF (RET.), DIRECTOR OF 
 GOVERNMENT RELATIONS, MILITARY OFFICERS ASSOCIATION OF AMERICA

    Colonel Strobridge. Thank you, Mr. Chairman and 
distinguished members of the subcommittee. On behalf of the 33 
associations of the military coalition, I do want to thank you 
for holding this important hearing. Going on the last panel, 
when you hear things you want to add your 2 cents, and I have 
been scrambling through my oral notes trying to cut out some 
things so that I have a little more time to respond to a few of 
the things that I think are important.
    We are encouraged that through the efforts of the committee 
and the committee's leaders that we have at least begun to 
address the current inequity in a substantive way, and we are 
encouraged from our discussions with Defense officials, as 
Secretary Abell said, that they intend to implement by the 1st 
of June. We do hope that there will be an aggressive outreach 
program. We certainly will participate in that, and we hope 
that the Department will work to mail applications to certain 
identifiable people who have high probability of being 
eligible.
    On the legislation itself, we are concerned that last-
minute changes in the eligibility language made last year 
excluded combat-disabled Guard and Reserve retirees. The DOD 
general counsel has ruled that those retirees must have 7,200 
retirement points to qualify. That is the equivalent of 20 
years of full-time active duty, and the coalition believes this 
is an unreasonable and a discriminatory requirement, given that 
those members by law cannot accumulate more than 90 points in 
any given year.
    Many retired reservists, including some from Desert Storm, 
have been awarded Purple Hearts and have serious combat-related 
disabilities. Their Guard and Reserve status certainly did not 
protect them from being wounded, and the coalition believes 
strongly that they should not be discriminated against by this 
legislation.
    Looking to the future, we share Senator Warner's view that 
last year's authority was a beachhead, and that much more 
remains to be done. A member is no less disabled in his or her 
quality of life, and future earnings power is no less 
compromised because the disability was caused by military 
duties that do not involve combat or weaponry.
    Last year, for example, an Air Force senior NCO lost her 
hands when a person she had disciplined sent her a mail bomb. 
Other examples of disabled retirees who probably will not be 
covered by the current law, include a hospital corpsman who was 
exposed to HIV in the course of his or her duties, an MP 
injured while responding to an incident, or a firefighter 
injured in the line of duty.
    The coalition's ultimate objective remains the same as that 
endorsed by 90 percent of the House and 83 percent of the 
Senate last year--full concurrent receipt.
    I would like to take issue with a few of the comments made 
by the previous panel. Many of the offsets mentioned in the 
GAO's study involve welfare aspects of Social Security and 
other programs that are progressive programs that are designed 
specifically to protect people with low incomes. Military 
retired pay and VA disability compensation are very different 
from those programs. Those are both 100 percent earned programs 
as a result of an individual's service, and we do not think 
that that is a good comparison.
    Second, military service to our country is fundamentally 
different from civilian service. The conditions of service are 
much different, and so we are not convinced of the issue of 
consistency between military and civilian treatment. The 
Government has different obligations to military people than a 
private employer does to its workers.
    Third, we do not accept the rationale of administrative 
burdens on the VA claims system as a rationale not to make 
change. That is like saying we do not want to give a pay raise 
because it is too hard to reprogram the computers. In our view, 
the clerk's workload is certainly not more important than 
taking care of the disabled retirees.
    Finally, on the issue of VA reform, reasonable people have 
been arguing over VA reform for decades. Secretary Cooper 
testified that the VA has, in fact, been updating their 
process, and are going to continue to adjust those processes. 
Very frankly, people are going to continue to debate these, and 
there will always be some people who think the VA should go 
farther. To us, we should not wait until that is resolved to 
take care of disabled retirees, because we will wait a very 
long time.
    The other issue that I would like to address is the issue 
about the impact of concurrent receipt on retention. Very 
frankly, people on active duty, most of them do not realize 
that they will lose part of their retired pay if they become 
disabled in the course of service. What they are told, and I 
used to write those retention brochures when I was in the 
Service, if you stay 20 years, you will receive your retired 
pay. There is no asterisk that says, except if you become 
disabled. Retirees are shocked to find out there is a 
disability offset.
    Senator Nelson, you hit the nail on the head when you were 
talking about a veteran who serves a few years and becomes 
eligible for a Federal civilian retirement. It does not take 
very much for that person to roll those few years of military 
service into the Federal retirement. They talk about not 
drawing two benefits for the same service. That is exactly what 
happens in those cases. They are receiving full Government 
retirement and their VA disability compensation, so you are 
very accurate in identifying that situation.
    Sir, that took more time than I had intended to. I 
apologize, and I appreciate your attention.
    [The joint prepared statement of Colonel Strobridge and 
Sergeant Lokovic follows:]

Joint Prepared Statement by Col. Steven P. Strobridge, USAF (Ret.) and 
                  CMSgt. James E. Lokovic, USAF (Ret.)

    Mr. Chairman and distinguished members of the subcommittee. On 
behalf of The Military Coalition, a consortium of nationally prominent 
uniformed services and veterans' organizations, 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 approximately 5.5 million current and 
former members of the seven uniformed services, plus their families and 
survivors.

         Air Force Association
         Air Force Sergeants Association
         Air Force Women Officers Associated
         AMVETS (American Veterans)
         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 Officers Association 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
         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.

       RESTORING EQUITY FOR DISABLED UNIFORMED SERVICES RETIREES

    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.
    We are particularly appreciative of your strong support in last 
year's effort to win concurrent receipt of retired pay and veterans 
disability compensation. The bipartisan support in the subcommittee and 
the full committee, and especially the personal intervention of Senator 
Warner with the White House, was essential to ensuring a positive 
outcome on this long-standing and hard-fought inequity.
    Clearly, the Coalition was disappointed that agreement could not be 
reached by last year's conference committee to provide unconditional 
concurrent receipt in the Fiscal Year 2003 National Defense 
Authorization Act, and we believe the subcommittee shares that 
disappointment. But we very much appreciate the ``first ever'' 
provisions that will effectively eliminate the disability offset for 
certain retirees who were severely disabled by combat and operations-
related incidents. This successful action to establish a ``beachhead'' 
in law is very significant in recognizing that military retired pay and 
veterans disability compensation are paid for different purposes, and 
one should not offset the other.
    The Coalition has long held that retired pay is earned compensation 
for completing a career of arduous uniformed service, while veterans 
disability compensation is paid for loss of function and future earning 
potential caused by a service-connected disability.
    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. 
Because of cost concerns, last year's authority was limited to a very 
special group of disabled retirees--those injured in combat, or other 
combat related operations. But there are thousands of deserving 
disabled retirees who have been left behind.
    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.
    The Coalition believes strongly that the 90 percent cosponsorship 
support that existed in the 107th Congress was inconsistent with the 
outcome, and that further action is essential to address the grossly 
unfair financial penalties visited for so long on those who already 
have suffered most for their country--military retirees disabled as a 
result of their service.
    The Coalition has three particular concerns as we move forward.
    First, we are hopeful that the Department of Defense will exercise 
the full authority provided in the new law, that it will be implemented 
on time, and that the application and approval process will be 
transparent and timely.
    Second, we are concerned that, during last-minute final 
negotiations on the Fiscal Year 2003 Defense Authorization Act, changes 
in eligibility language inadvertently omitted certain classes of 
disabled retirees who otherwise fall within the criteria enacted into 
law.
    Third, we believe that implementation of the new law will highlight 
significant new inequities that illustrate why broader legislative 
authority is essential to provide fair treatment to those retired 
members who became disabled from service-connected causes during the 
course of their military careers.
Implementing the New Authority
    Last December, representatives of the Coalition and other 
associations had an opportunity to meet with Defense and VA officials 
to discuss the numerous issues of principle and process that will have 
to be addressed in implementing the new special compensation rules. In 
the course of that meeting, we offered a number of recommendations for 
consideration by the Departments in constructing their implementation 
plan. These recommendations addressed seven different areas, as 
follows:
    Qualification Criteria
    The Coalition believes qualification guidelines:

          a. Should use a rule of ``substantial evidence,'' consistent 
        with VA guidelines rather than placing the full burden of proof 
        on the disabled retiree;
          b. Should use VA presumptions on disabilities already 
        determined by the VA to be associated with Agent Orange, Gulf 
        War Syndrome, Post-Traumatic Stress Disorder, and atomic/
        nuclear testing;
          c. Should cover any disability incurred in a combat zone;
          d. Should cover secondary conditions determined by the VA to 
        be related to b. and c. above; and
          e. The Government should bear responsibility for mining DOD/
        VA records data for verifying information.
    Due Process
    The Coalition believes:

          a. There should be a three-stage decision process on 
        applications (initial decision, appeal, and review by the Board 
        for Correction of Military Records); and
          b. The applying member should have the right of 
        representation if he/she chooses.
    Timeliness
    The Department of Defense:

          a. Should establish a reasonable timeliness standard for 
        completion of the approval process once an application is 
        received; and
          b. Should seek to identify types of cases in which a 
        qualifying disability is readily verifiable and automate 
        approval in such cases.
    Consistency
    The Department must establish guidelines and feedback mechanisms to 
ensure consistency of approvals among all Services and locations.
    Outreach
    The Departments of Defense and Veterans' Affairs should make 
concerted efforts to notify potentially eligible retirees of the new 
special compensation program by letter, pay statement notice, retiree 
newsletter items, and all other means of communication. Coalition and 
other associations will provide maximum publicity as well, but there 
are many disabled retirees who are not members of such associations. 
This program is too important to them not to make every effort to 
ensure all eligibles are informed of it.
    Payments
          a. Payments should be retroactive to the date of qualifying 
        disability award or June 1, 2003, whichever is later, 
        regardless of when a member applies for the compensation. The 
        precedent should be the previous implementation of the 
        Forgotten Widows Survivor Benefit Plan, which also required an 
        application and approval process. Qualifying disabled retirees 
        should not be penalized financially because they were late in 
        hearing about the program.
          b. If an applicant dies before processing of the application 
        is completed, processing should be continued for payment to the 
        survivor of any amounts (retroactive to the date of the 
        disability award or June 1, as indicated above) the member 
        would have been due up to the date of death.
          c. If a disabled retiree dies after June 1, 2003, but before 
        applying for the new special compensation, his or her survivor 
        should be eligible to apply for any amounts that otherwise 
        would have been payable to the disabled member between the 
        effective date and the date of death.

    The Coalition urges the subcommittee to request an advance letter 
report from the Department of Defense on its implementation progress, 
including the extent to which it plans to incorporate the above 
Coalition recommendations in that process.
Technical Exclusions from Eligibility
    The Coalition is very concerned that eleventh-hour technical 
changes in the eligibility language of last year's special compensation 
compromise effectively--and we hope inadvertently--excluded certain 
categories of disabled retirees who otherwise meet all the criteria for 
payment.
    First, the language change resulted in excluding virtually all 
National Guard and Reserve retirees with 20 years of creditable service 
and combat-related disabilities. This is because the DOD General 
Counsel has interpreted the language of the law as requiring combat-
disabled Guard and Reserve retirees to have accumulated 7,200 
retirement points (the equivalent of 20 years of full-time active duty) 
to be eligible for the special compensation. This is an unreasonable 
and discriminatory requirement, given that members in Guard and Reserve 
status may not, by law, accumulate more than 90 points per year unless 
recalled to full-time active duty. Until a few years ago, the annual 
limit was 75 points.
    There are many retired reservists--including many who were recalled 
for Operation Desert Storm--who have been awarded Purple Hearts and who 
have serious combat-related disabilities. Their Guard or Reserve status 
did not protect them from being wounded on the battlefield, and the 
Coalition believes strongly that they should not be discriminated 
against by this legislation.
    Second, there is a very limited number of otherwise qualifying 
disabled retirees who received nondisability retirements with 15 to 19 
years of service during the drawdown of the early 1990s and who also 
have otherwise-qualifying combat-related disabilities. In some cases, 
these members qualified under the temporary early retirement authority 
for additional military service credit based on their subsequent 
employment in certain DOD-designated public service positions. These 
members earned their military retirement independently of their 
disability and should be eligible to receive the special compensation 
if their disabilities would otherwise qualify.
    Finally, enlisted retirees who were awarded one of the top two 
decorations for valor are authorized an extra 10 percent in retired pay 
(within the maximum limit of 75 percent of basic pay). The Coalition 
believes strongly that the modest extra retired pay awarded these 
members for their combat heroism should not be subject to the 
disability offset.
    The Military Coalition urges subcommittee leaders and members, as a 
minimum, to amend last year's authority to include certain otherwise-
qualifying Guard and Reserve retirees, Early Retirement Authority 
retirees, and enlisted retirees with high decorations for extraordinary 
valor.
Looking to the Future
    The Coalition agrees strongly with the words Senator Warner used 
last year in describing the new special compensation authority as a 
``beachhead'', recognizing that more remains to be done to ensure fair 
treatment for thousands of deserving disabled retirees whose service-
connected disabilities did not happen to occur because of combat- or 
operations-related conditions.
    A member is no less disabled, and his or her quality of life and 
future earnings power are no less compromised, because the immediate 
cause of a significant disability was a circumstance of service that 
did not directly involve weaponry or enemy action. The Coalition is 
convinced that the implementation of the new special compensation 
authority will highlight both the difficulties and the inequities 
associated with attempts to make such distinctions among members with 
equally severe disabilities.
    We know the subcommittee looks forward, as the Coalition does, to 
assessing the kinds of cases that qualify under DOD's implementation 
rules versus those that do not, and identifying ways to address the new 
inequities we believe are certain to arise.
    The Coalition's ultimate objective remains the same as that 
endorsed by 90 percent of the House and 83 percent of the Senate last 
year--full concurrent receipt of uniformed services retired pay and 
veterans disability compensation. If an interim step is required, the 
Coalition believes special compensation eligibility should be extended 
to otherwise qualifying disabled retirees whose disabilities are 
directly related to their performance of their assigned military 
duties.

                               CONCLUSION

    The Military Coalition reiterates its profound gratitude to the 
subcommittee and to the committee's leadership for the important 
philosophical breakthrough achieved last year in taking such a 
significant step toward easing the unfair financial penalties imposed 
on disabled uniformed services retirees. The Coalition is eager to work 
with the subcommittee in continued pursuit of this key goal.
    Thank you very much for the opportunity to present the Coalition's 
views on this very important topic.

    Senator Chambliss. Thank you.
    Master Gunnery Sergeant Butler.

 STATEMENT OF MASTER GUNNERY SERGEANT BENJAMIN H. BUTLER, USMC 
 (RET.), DEPUTY LEGISLATIVE DIRECTOR, NATIONAL ASSOCIATION FOR 
                     THE UNIFORMED SERVICES

    Sergeant Butler. Thank you, Mr. Chairman.
    Mr. Chairman, the National Military Veterans Alliance is 
very grateful for the invitation to testify before you today. I 
want to talk about the combat-related professional compensation 
in a bit, but I would like to talk about full concurrent 
receipt, since our legislative priority continues to be 
concurrent receipt.
    Prevention of concurrent receipt became a law back in 1891 
related to Mexican War veterans. As we all know, the issue of 
pay for Mexican War veterans is now resolved, so it is time for 
a change. It is simply not right that the monthly compensation 
for a service-connected 100 percent disabled retiree, E-8, 
Master Sergeant, with 23 years of service, is $16 per month 
less than that of a Corporal E-4 who served 4 years, and has a 
VA disability of 100 percent for falling off a motorcycle.
    On the new special compensation, and I have heard it called 
CRSC today, and I will call it that, the law for CRSC passed 
late last year, and it gave DOD 180 days to design and 
implement the program. That puts the action date around 1 June 
for implementation. Based on that looming date, I would like to 
make a couple of recommendations.
    First, we would like to provide more input to DOD from our 
constituents as they develop the implementation procedures. So 
far, we have had one very good meeting with the Pentagon. We 
would encourage more. We found that one of the best examples of 
interaction between DOD and the beneficiary associations was 
during the implementation of TRICARE for Life. The TRICARE 
management activity hosted close to 60 meetings, and provided 
us updates, and asked for our input. That interaction we feel 
was very valuable for both parties, and we offer this as a 
model that DOD might consider in their current undertaking, and 
from what I understand, we have one more meeting scheduled 
right now.
    Second, we are concerned about the burden of proof that 
will fall on retirees. Especially those older folks that fought 
in World War II and Korea. We feel the burden to produce 
evidence that may fall on them will be a heavy one. I have 
heard some discussion today about some of the ways they are 
looking at doing that, and it sounds like we are headed in the 
right direction. It is something we need to keep a watchful eye 
on. Really, we would like to see the majority of that burden of 
proof placed on those who have easier access to the records.
    Finally, there is a very worthy group that Colonel 
Strobridge mentioned. I would like to talk about it a little 
bit. That is our retired reservists. As it stands right now, a 
reservist needs 7,200 points to qualify for this special 
compensation. To put that in perspective, a member who spends 3 
years on active duty and then switches to the Reserves, in 
addition to the normal Reserve time of 1 weekend per month and 
2 weeks during the summer, would have to spend 41 percent of 
each year on active duty for 27 years. That is simply 
unattainable. It is particularly outrageous that this includes 
those reservists who have received the Purple Heart.
    Representative Bilirakis has been working with the National 
Military Veterans Alliance and the Military Coalition on 
Language to correct this inequity. We strongly recommend that 
the law be changed to allow any reservist who qualifies for 
retirement and also qualifies for the CRSC to be awarded the 
compensation.
    The bottom line on this is that although it is not full 
concurrent receipt, there continues to be a legislative 
priority for our members. Who among us can deny that the 
combat, combat-related disabled retirees should take the first 
bite of the fruit of our collective efforts. The bottom line 
is, it is a good start, but there is a lot of work left to do.
    On one last related topic, the first group, we always must 
include is our widows. One recent topic that has gained much of 
our interest is concurrent receipt of the survivor benefit 
plan, and dependency and indemnity compensation, or DIC, and 
how it affects our widows. We call this the other concurrent 
receipt issue. The husbands pay for a survivor benefit plan, 
and when the service member dies of a service-related 
condition, the Government offsets this survivor benefit plan 
dollar for dollar by the amount of dependency and indemnity 
compensation the widow receives. We strongly support ending 
this offset.
    There is a bill recently introduced by Senator Nelson from 
Florida. This bill, S. 585, would end the offset. The National 
Military Veterans Alliance strongly supports this legislation, 
and any legislation that takes care of those that we leave 
behind.
    Thank you, Mr. Chairman.
    [The prepared statement of Sergeant Butler follows:]

             Prepared Statement by Sgt. Benjamin H. Butler

                              INTRODUCTION

    Mr. Chairman and distinguished members of the subcommittee, the 
National Military Veterans Alliance (NMVA) is very grateful for the 
invitation to testify before you and present our views and suggestions 
concerning current and future issues of concern to the military 
community.
    The Alliance was founded in 1996 as an umbrella organization to be 
utilized by the various military and veteran associations as a means to 
work together towards their common goals. The Alliance's organizations 
are:

        American Logistics Association
        American Military Retirees Association
        American Military Society
        American Retiree Association
        American World War II Orphans Network
        AMVETS National Headquarters
        Catholic War Veterans
        Class Act Group
        Gold Star Wives of America
        Korean War Veterans Foundation
        Legion of Valor
        Military Order of the Purple Heart
        National Association for Uniformed Services
        National Gulf War Resource Center
        Naval Enlisted Reserve Association
        Naval Reserve Association
        Society of Medical Consultants to the Armed Forces
        Society of Military Widows
        The Retired Enlisted Association
        TREA Senior Citizens League
        Tragedy Assistance Program for Survivors
        Uniformed Services Disabled Retirees
        Veterans of Foreign Wars
        Vietnam Veterans of America

    The preceding organizations have almost 5 million members who serve 
our Nation, or who have done so in the past and their families.
    The National Military and Veterans Alliance would like to thank the 
Personnel Subcommittee and the Full Armed Services Committee for its 
leadership in passing legislation last year that provides special 
compensation for combat, combat-related disabled military retirees and 
the committee's continued support of full concurrent receipt for all 
disabled military retirees. I would like to address these topics 
briefly.

                           CONCURRENT RECEIPT

    Even with special compensation for combat, combat-related disabled 
military retirees, our collective efforts continue towards full 
concurrent receipt. The current law, which has its genesis in 1891, 
long before the military had a longevity based retirement system, is 
unfair, inequitable, and in many cases, results in disabled retirees 
with high VA disability ratings receiving no retired pay. For example, 
the monthly compensation for a service connected 100 percent disabled 
retiree in pay grade E-8 with 23 years of service is $16 per month less 
than that of an E-4 with 4 years of service whose VA 100 percent 
disability rating is for falling off a motorcycle.
    It is unfair that the compensation for the retiree's years of 
military service, achievement, and disability resulting from harm's way 
exposure is discounted. It is especially unfair since the forfeiture 
requirement applies to only military retirees and not the rest of 
society including Federal employees and retirees of the Federal 
Government. This group includes the Civil Service, staff and Members of 
Congress, Federal judges, and members of the administration. None of 
them are required to forfeit their earned retirement benefits to 
receive veterans disability compensation payments.
    We believe that retired pay is a benefit earned by completing 20 or 
more years of qualifying service; and, VA disability payments are 
compensation for loss of a body function or part. They are two separate 
benefits and should be paid in total separately.
    Mr. Chairman, concurrent receipt became a law back in 1891, related 
to Mexican War veterans. As we all know, the issue of pay for Mexican 
War veterans is now resolved, and it is time for a change. The National 
Military Veterans Alliance strongly supports two key bills that will 
make this change, S. 392, introduced by Senator Reid from Nevada, and 
H.R. 303, introduced by Representative Bilirakis from Florida--both 
long time champions on this issue. The bottom line goal of these bills 
is to ensure that service-connected disabled retirees receive the full 
value of their earned retired pay and veterans disability compensation 
without an offset of either.
    One final group we must always include is our widows. One recent 
topic that has gained much of our interest is concurrent receipt of the 
survivor benefit plan (SBP) and dependency and indemnity compensation 
(DIC) and how it affects military widows. We call this ``the other 
concurrent receipt issue''. Their husbands pay for a survivor benefit 
plan, and when the service member dies of a service-related condition 
the government offsets this survivor benefit plan dollar for dollar by 
the amount of dependency and indemnity compensation the widow 
receives--we strongly support ending this offset. There is a bill 
recently introduced by Senator Nelson from Florida. This bill, S. 585, 
would end this offset. The National Military Veterans Alliance strongly 
supports this legislation and any legislation that takes care of those 
that we leave behind.

   SPECIAL COMPENSATION FOR COMBAT, COMBAT-RELATED DISABLED MILITARY 
                                RETIREES

    The Fiscal Year 2003 Defense Authorization Act provides special 
compensation for recipients of the Purple Heart with a disability of 10 
percent or higher, and retirees with a disability rating of 60 percent 
or higher that received that disability for illnesses, injuries 
attributable to combat, combat-related training, hazardous service, 
under conditions simulating war, or caused by an instrumentality of 
war. The law also retains the previously passed special pay provisions 
for retirees with VA disability ratings of 60 percent or more awarded 
within 4 years of retirement.
    The law, passed late last year, gave DOD 180 days to design and 
implement the new program. That will put the action date for 
implementation around the first of June 2003. Based on this looming 
date--less than 3 months away, we would like to offer the following 
suggestions:
    First, we would like to provide input to DOD, from our constituents 
as they develop the implementation procedures. So far, we have had one 
meeting with officials at the Pentagon. We would encourage more. We 
have found that one of the best examples of interaction between DOD and 
the beneficiary associations was during the implementation of TRICARE-
for-Life. The TRICARE Management Activity hosted close to 60 meetings 
with us providing updates on the implementation process and asking for 
our input. This interaction was very valuable for both parties and we 
offer this as a model that DOD might consider for their current 
undertaking.
    Second, we are concerned about the burden of proof that will fall 
on the retirees--especially those older veterans that fought in WWII 
and Korea. We feel that the burden to produce evidence that may fall on 
retirees might be a heavy one, as the records may no longer exist, or 
the retirees may be unaware of the process of attaining such records. 
We would like to see the burden of proof removed and placed on those 
that have easier access to the records.
    Finally, there is a very worthy group that has been left out of all 
special pay provisions. This group is our retired reservists. As it 
stands right now, a reservist needs 7,200 points to qualify for the 
special compensation. To put this in perspective, a member who spends 3 
years on active duty and then switches to the Reserves, in addition to 
the normal Reserve time of one weekend per month and 2 weeks during the 
summer, would have to spend 41 percent of each year on active duty for 
27 years. This is simply unattainable. It is particularly outrageous 
that this includes reservists who have been awarded the Purple Heart. 
Representative Bilirakis has been working with the NMVA and the 
Coalition on language to correct the inequity. We strongly recommend 
that the law be changed to allow any reservist who qualifies for 
retirement and also qualifies for the special compensation to be 
awarded the compensation.
    The bottom line is while this law is not the full concurrent 
receipt that continues to be a legislative priority for our members, 
who among us would deny that the combat, combat-related disabled 
retirees should take the first bite of the fruit of our collective 
efforts. This is a good start, but there is more work to do.

                                SUMMARY

    Mr. Chairman and distinguished members of the subcommittee, we want 
to thank you for your leadership on these issues in past years and for 
holding these important hearings this year. You have made it clear that 
our military personnel, past and present, continue to be a high 
priority and you have our support in seeking successful implementation 
and funding of these initiatives this year.

    Senator Chambliss. Thank you.
    Colonel Duggan, we are glad to have you and look forward to 
your comments.

    STATEMENT OF COL. DENNIS M. DUGGAN, DEPUTY DIRECTOR FOR 
 NATIONAL SECURITY-FOREIGN RELATIONS, AMERICAN LEGION NATIONAL 
                          HEADQUARTERS

    Colonel Duggan. Thank you very much, Mr. Chairman, and 
distinguished members of the subcommittee. On behalf of its 3 
million membership, the American Legion expresses its sincere 
gratitude to you for the opportunity to present its views with 
regard to the issue of the concurrent receipt of military 
retired pay and veterans disability compensation.
    Frankly, concurrent receipt is viewed by our disabled 
retirees as an equity issue and frankly somewhat ironic, in 
that disabled military retirees who have dedicated over 20 
years of service and sacrifices, including engaging America's 
enemies on foreign battlefields, are the only group of 
Government retirees that I know of not authorized to receive 
disability compensation from a grateful Nation. Instead, these 
Americans must pay for their own disability compensation from 
their own retirement pay, earned from longevity of service for 
medical retirement over 20 years.
    Our disabled retirees in the American Legion hail from 
every State in the Union. Many of them retired as 
noncommissioned officers who on the average receive, we 
believe, on the order, say as an E-5, E-6, or E-7 on the order 
of $1,000 perhaps or more a month, which is well below the 
poverty level. In a number of cases, their disability 
compensation would be twice, or even more, their actual 
military retirement pay.
    Just last night, at a well-attended American Legion 
National Security Forum held at the Parkville, Maryland Post, 
which is actually the second-largest post in the United States, 
it is one of 15,000 posts in the American Legion, the issue of 
concurrent receipt became not only the top priority, but the 
most egregious issue still. This is the grassroots level, the 
blue cap legionnaire, and invited congressional representatives 
were present as well, hearing from their constituents. This is 
a very pervasive issue. It will not go away, it will not die 
out, it will not disappear, as the injustice inherent therein 
appears perpetuated as we speak, on the battlefield.
    How many of these would-be careerists in the Army, Navy, 
Air Force, Marine Corps, and Coast Guard are aware, as Steve 
Strobridge pointed out, that if they are wounded or injured or 
sickened, that any disabilities sustained would not be 
adequately compensated?
    We are particularly grateful early on with Senator Harry 
Reid, for his adopted amendment to the Senate's budget 
resolution that includes language to phase out the ban on 
concurrent receipt for service-related injuries or illnesses 
rated at 60 percent or higher. Hopefully, this action by the 
Senate is the expansion of the so-called beachhead, brokered by 
Senator Warner last year, in which the combat-related special 
compensation pay became authorized.
    With regard to that CRSC, we will analyze the implementing 
instructions to ensure that there is an appellate process for 
applicants and, in fact, whether things like PTSD, Agent 
Orange, and Gulf War illnesses are included in these 
instructions.
    Mr. Chairman, we would like to report back to you at about 
this time next year as to the fairness and timeliness of 
applicants' evaluations in this process being conducted by the 
DOD and supported by the VA.
    The American Legion believes the disabled retiree 
reservists and guardsmen also should be able to apply for both 
forms of special compensation pays. These activated reservists 
and guardsmen are serving shoulder-to-shoulder with their 
active duty counterparts and are subject to the same 
disabilities, illnesses, or cancers as their active duty 
component.
    CRSC will only cover a small percentage of disabled 
military retirees. We need not wait to see how this goes. We 
must continue to press on and pass concurrent receipt.
    Thank you.
    [The prepared statement of Colonel Duggan follows:]

              Prepared Statement by Col. Dennis M. Duggan

    Mr. Chairman and distinguished Members of the Subcommittee. The 
American Legion is grateful for the opportunity to present its views 
regarding compensation for disabled military retirees in review of the 
Defense Authorization Request for Fiscal Year 2004. The American Legion 
salutes your leadership in addressing the existing unfair law, which 
prohibits the receipt of both military retirement pay and VA disability 
compensation for disabled military retirees.
    In 1892, Congress enacted a law to prohibit the receipt of military 
pay, not retirement pay, and disability compensation. At that time, 
there was no retirement system and careerists continued on the rolls to 
retain what income they had for as long as they could. Soldiers who 
were wounded and injured, however, were paid compensation for their 
disabilities. The military retirement system, as we know it today, was 
formalized between the World Wars. This new retirement system provided 
a means to maintain the vigor of the force by allowing voluntary 
retirement after a minimum of 20 years active service or equivalent 
creditable, Reserve or National Guard service and mandatory retirement 
at 30 years service. Because the 1892 law only applied to military pay 
and not retirement pay, those disabled military retirees could draw 
both meager retirement pay and disability compensation.
    The current law was passed in May 1944, just before the Normandy 
Invasion, and is the law we have today. The law continued the 
prohibition against military pay and disability pay, but more notably, 
it extended the prohibition to include military retired pay. It allowed 
disabled military retirees to elect to waive an amount of their 
retirement pay equal to their VA disability compensation payments. The 
only benefit from this offset is that VA disability compensation 
portion is not subject to Federal income tax. To most disabled 
retirees, this tax break is minor and in no way compensates for the 
loss of retirement pay offset from VA disability compensation. Disabled 
military retirees are the only government ``employees'' who pay for 
their own disability compensation. This is discriminating, wrong, and 
must be changed. There are those who argue concurrent receipt was never 
promised to military retirees; however, every service member who served 
20 or more years of active military service was promised, at minimum, 
50 percent of earned base pay upon retirement. By withholding, dollar-
per-dollar, military retirement pay for like amounts of VA disability 
compensation, that promise is being violated.
    Military retired pay is compensation for longevity of honorable 
military service and the associated individual hardships and 
sacrifices. VA service-connected disability compensation is for medical 
conditions incurred or aggravated while on active duty. Each earned 
benefit is an award by a grateful Nation for two distinct, different 
reasons.
    Any veteran can receive VA disability compensation without any 
offsets, reductions, or limits with unemployment compensation; Social 
Security; Federal Civil Service pay; pay from a private sector job; 
Federal Civil Service retirement (including disability retirement); 
retirement pension from non-Federal jobs; and, Federal workers 
compensation (benefits for work-caused disability or illness provided 
under FECA). Only a military retiree faces an offset between military 
retirement pay and VA disability compensation.
    America has a daily reminder from Iraq and Afghanistan of the grave 
sacrifices of life and limb that military men and women must endure. 
Each soldier, sailor, airman, or marine placed in harm's way is another 
potential victim of the inequity known commonly as ``concurrent 
receipt.'' With legislation introduced entitled the ``Retired Pay 
Restoration Act of 2003,'' S. 392, this subcommittee has an opportunity 
to correct the unfair law which prohibits these brave men and women 
from receiving both full disability compensation and military 
retirement pay which they justly earned and deserve.
    The American Legion is ever mindful of what happened to the 
concurrent receipt issue during the last session of Congress. The House 
version of the Fiscal Year 2003 National Defense Authorization Act 
(NDAA) authorized concurrent receipt for those with a VA disability of 
60 percent or higher and a phased-in implementation over 5 years, as 
funded by the adopted House Budget Resolution. The Senate version 
authorized full concurrent receipt for all disabled military retirees 
effective October 1, 2003. Congressional leaders, in the face of a 
threatened presidential veto that could have killed the Fiscal Year 
2003 NDAA, convinced the administration to accept a reduced package 
focused only on retirees with disabilities attributable to armed 
conflict, while engaged in hazardous service, in the performance of 
duty under conditions simulating war or through instrumentality of war. 
This newly authorized Combat-Related Special Compensation (CRSC) 
authorizes those with an award of the Purple Heart with a VA disability 
rating of at least 10 percent or those with a 60 percent disability 
rating or higher for other illnesses/injuries attributable to combat 
situations, combat-oriented training, hazardous duty, or the 
instrumentality of war.
    Clearly, the guidelines (as described in DOD Instruction 1332.38) 
allow for judgment, so it is uncertain how many disabled military 
retirees may qualify. Different sources have offered estimates ranging 
from 10,000 to 30,000 eligible disabled military retirees. The 
authorized CRSC is preferable to the alternative of getting nothing, 
but it falls far short of what The American Legion believes is fair. 
There are still too many disabled military retirees paying for their 
own VA disability compensation.
    The American Legion will analyze the implementing instructions when 
they are published and will track implementation of the new plan 
closely to ensure the rules are clearly written and interpreted 
reasonably. We will be apprised if there is an established appeal 
process as well as the fairness and timeliness of Department of Defense 
evaluations. We have already urged DOD to include PTSD, Agent Orange 
and Gulf War illnesses in their implementing instructions. Unlike the 
special compensation already in law, which provides $50 to $300 per 
month for certain severely disabled retirees, this new special 
compensation will not be capped at a specific dollar amount, and it 
will rise each year as the offset rises. Unlike the current $50 to $300 
special compensation, which requires that a qualifying disability must 
have occurred within 4 years after retirement, eligibility for the new 
version will not be restricted by any time limit. Qualifying members 
will be eligible to receive either the ``new'' or the ``old'' special 
compensation amount, whichever is higher.
    The American Legion will continue to argue that simple, equitable 
justice is one reason to allow concurrent receipt. Military retirees 
are the only Federal employees who must offset their retired pay with 
VA disability compensation. Also, proponents claim that the unique 
nature of military service, given their sacrifices and hardships, 
should merit these retirees receiving both military retired pay and VA 
disability compensation. For the past decade, many veterans' programs 
have been pared to the bone in the name of balancing the budget. Now 
military retirees must pay premiums to TRICARE for full health care 
coverage for themselves and their immediate family members. Many 
veterans' advocates feel it is time that retirees receive compensation 
for these fiscal sacrifices.
    Often, VA service-connected disability compensation is awarded for 
disabilities that cannot be equated with disabilities incurred in 
civilian life. Military service rendered in defense, and on behalf of 
the Nation, deserves special consideration when determining policy 
toward such matters as benefits offsets. The American Legion believes 
it is a moral and ethical responsibility to award disability 
compensation to the needs of disabled veterans, given the sacrifices 
and hardships they incurred during honorable military service to the 
Nation. We are also aware that many of the disabled retirees receive 
retirement pay that is beneath established poverty levels and by 
definition in Title 38 are ``indigent'' veterans.
    The American Legion would like to take this opportunity to express 
its sincere gratitude to Committee Chairman John Warner, Ranking 
Democratic Member Carl Levin, and Democratic Whip Harry Reid for their 
advocacy of concurrent receipt and the CRSC. Senator Reid, once again, 
has sponsored legislation calling for full concurrent receipt, which 
the American Legion strongly advocates. Senator Warner acknowledged 
that the final agreement on CRSC was much less than what the Armed 
Services Committees had hoped to achieve but he described it as ``an 
essential beachhead in law'' which the Committees hoped to expand in 
the future.
    The provision for CRSC needs to be more inclusive as well. It does 
not remove the artificial difference between service retirement (active 
duty) and age retirement (Guard/Reserves) which is defined only in 
regulations and not in law, and it does not remove the artificial 
7,200-point threshold which, also, is defined in regulations and not in 
law. All disabled retired reservists and guardsmen should be able to 
apply for either the CRSC or the severely disabled special 
compensation, if they are qualified by virtue of the nature and extent 
of their disabilities. Despite guardsmen and reservists serving 
shoulder-to-shoulder with their active-duty counterparts, and incurring 
the same disabilities, illnesses, or cancers as the active duty 
component, they will not be eligible to even apply for the special 
compensation payments authorized for their active duty retiree 
counterparts. The provisions for authorizing the special compensation 
pays must be amended to include the eligibility of disabled retired 
reservists and guardsmen.
    Mr. Chairman, that future is now. The American Legion urges this 
subcommittee, and indeed Congress, to once again adopt legislation 
calling for the full and rightful concurrent receipt of military 
retirement pay and VA disability compensation to demonstrate the 
Nation's gratitude to the disabled military retirees for their 
sacrifices. What better time, what better occasion, to express our 
gratitude to these veterans than during this epic war on terrorism 
being fought in Iraq and Afghanistan? Frankly, such an expression is 
long overdue.
    Mr. Chairman, this concludes The American Legion's statement.

    Senator Chambliss. Thank you, gentlemen, and on behalf of 
Senator Nelson, Senator Pryor, and all other members of not 
just this subcommittee or this full committee, but of the 
United States Senate we want to say thank you to each and every 
one of you and all of your colleagues that have made America 
the greatest and freest country in the world.
    Today we are reminded of the sacrifices that men and women 
like you who served with you were willing to make to ensure 
that America remains the great and free country that it is. I 
visited with somebody this morning, a pastor friend of mine 
from Georgia, and I told him that every day now I get a list, 
first thing every morning, of all of the wounded, captured, or 
killed members of our Armed Forces that are serving in Iraq 
today.
    It is not a very pleasant thing to start out your day that 
way, but I just thank goodness that we have the dedicated men 
and women, that we have had them in the past, and we have them 
today. I think that sense of patriotism is what drives the 
three of us and every other Member of the House and Senate to 
try to do what we need to do to make sure that our entire 
veterans community receives the benefits to which they are 
entitled.
    We have a package that we are working on now with respect 
to the Guard and Reserve to try to modernize things. As a part 
of rethinking all of our military compensation we are going to 
continue to work on this particular issue. We thank the three 
of you individually for your service, and for your work on 
this.
    Let me ask one question to all three of you. Does the 
Purple Heart plus other provisions that we had in the 2003 
authorization bill get the benefits from a concurrent receipt 
standpoint to those members of your respective organizations 
that you represent that need it the most? Are these, the folks 
who are 60 percent or greater disabled, who got the Purple 
Hearts, the ones that need these benefits the most?
    Colonel Strobridge. I think the answer to that is yes, sir. 
We have discussed this at some length last year, recognizing 
when it was unlikely we would get the entire package. We had a 
great deal of discussion. I think there is a broad consensus 
that the people who are most severely disabled are the ones 
that we need to take care of first.
    Certainly the combat disabled have the greatest emotional 
response. The one thing I think we would urge is, let us not 
forget that we do have very severely disabled people who did 
not happen to get it in combat. We believe those folks--
including the people, the examples that I mentioned, are the 
next priorities.
    Sergeant Butler. It is a great first step, as I said in my 
testimony. They should be the ones to take the first bite of 
the fruit of our collective efforts, we support that, but it is 
just a beginning.
    Colonel Duggan. I think I would echo that, also. It is a 
small number, comparatively speaking, particularly in the 
American Legion. However, the 60 percent or more disabled are, 
in fact--there are a lot of them. There are just an awful lot 
of them, and unfortunately, or fortunately as the case may be, 
they are not combat-related in many cases, but every bit as 
disabled.
    Senator Chambliss. Senator Nelson.
    Senator Ben Nelson. Thank you, Mr. Chairman. I want to 
thank each of you for your commitment to advocacy for this very 
important issue on behalf of your colleagues. I want to assure 
you that we will continue to work on this. It is pretty clear, 
with the troops in combat right now, with an all-voluntary 
military, with an emphasis on recruitment and retention, that 
we want to take care of the kind of benefits and the kind of 
support that is necessary and send a clear message that we 
truly do care. If there is a disability as a result of military 
combat, whereas, and you say a disability that occurs while you 
are in the military, that this country cares enough to take 
care of its veterans. I hope you will take the message back to 
your members that we are very sincere about this. We are going 
to work hard and diligently to get something accomplished.
    It seems from time to time we get a bite out of the apple, 
and we get another bite out of the apple--we are going to 
continue to do that until we have consumed the apple. Please 
bear with us but also continue to put the pressure on. It is 
important.
    Thank you, Mr. Chairman.
    Senator Chambliss. Thank you.
    Senator Pryor.
    Senator Pryor. Thank you, Mr. Chairman. I just have one 
general question really for all three of you. You have heard 
the Department of Defense rationale for why they are opposed to 
this. I do not need to go into the various reasons, there are 
four or five reasons they are opposed to it. I would just like 
to hear your comments on why you--I hate to say why you think 
the Department of Defense is wrong, but why you disagree with 
the Department of Defense? Why you think we should pass the 
concurrent receipt?
    Colonel Strobridge. Sir, I think you can discuss a lot of 
details and compare a lot of things, but it all boils down to, 
are you comparing apples and oranges. We believe military 
service is fundamentally different from Civil Service. From 
civilian service that when you earn your retired pay, you have 
earned your retired pay, and you have not earned it any less if 
you happen to become disabled. That whatever compensation we 
provide for a disability on top of retirement should be paid on 
top of the retirement, and most of the other issues are 
rationales for, we do not want to pay for it.
    Sergeant Butler. As Secretary Abell said, we do agree to 
disagree on this issue, but from our standpoint it is simply 
the right thing to do.
    Colonel Duggan. I do not have much more to add to that. The 
cost thing is just incredible. The costs have been paid 
already, and they are paying for their own disability 
compensation. I can't see a cost part. It is going to cost, and 
the longer it is put off, the more expensive it is going to 
cost. Although we are losing disabled retirees, too, at a 
tremendous rate, World War II vets, Korean vets alone on the 
order of 1,500 or so a day, give or take. That is a lot of 
people.
    Senator Pryor. Yes, I agree with you.
    Colonel Duggan. So that is one way the problem will go 
away. It is not the right way to take care of it, though.
    Senator Pryor. I just want you all to know that I agree 
with the three of you, and as much respect as I have for the 
DOD and all the great things they do and we work with them 
every day in this committee and we are proud of what they do, 
not just right now, but all the time, but I agree with you all 
on this, and I want to try to help you.
    Mr. Chairman.
    Senator Chambliss. Again, gentlemen, thank you very much 
for your testimony. I appreciate the testimony of all of our 
witnesses today. This has been an excellent review of the 
issue, and a good opportunity to hear some new perspectives on 
a key issue affecting military retirees. We will keep your 
comments and concerns in mind as we review the Fiscal Year 2004 
Defense Authorization Request. I look forward to working with 
you down the road, and thank you for your participation today.
    I want to close our hearing by expressing support for our 
troops during these challenging times and ensuring them and 
their families that this subcommittee is going to strive to 
provide them with the most comprehensive support package 
possible.
    I would like to also state that Senator McCain was unable 
to be here today, but he has sent a statement in full support 
of concurrent receipt. He has been a strong advocate of this 
for many years. That statement will be inserted in the record.
    [The prepared statement of Senator McCain follows:]

               Prepared Statement by Senator John McCain

    Mr. Chairman, my distinguished colleagues, for over 10 years now I 
have been engaged in fighting for a cause which I feel strongly about--
the discrimination of disabled veterans who must forego retirement 
benefits. Current law requires a career military service member who 
retires for length of service and is disabled, to offset his or her 
retirement pay with any VA disability compensation the member receives. 
Because the career military service member receives no separate payment 
for his service connected disability, our government is effectively 
requiring career military retirees to fund their own disability 
benefits. I believe it is our duty, as elected officials, to correct 
this gross inequity.
    I first introduced legislation on concurrent receipt all the way 
back in 1992. Then again in 1993, then again in 1994, then again in 
1995. In 1999, I drafted legislation that became law--as a compromise 
measure--that paid special compensation pay for severely disabled 
military retirees with disabilities greater than 50 percent. Here we 
are in 2003 with an opportunity to rectify a problem that has plagued 
our veterans and to rectify it, once and for all, for all military 
retirees who have become disabled during their military service.
    I know personally the character of Americans who take up arms to 
defend our Nation's interests and to advance our democratic values. I 
know of all the battles, all the grim tests of courage and character, 
that have made a legend of the Army, Navy, Marine Corps, and Air Forces 
devotion to duty.
    Let me remind this subcommittee of the grave sacrifice that our men 
and women who risk their lives for their country must endure. The 
United States has exerted military force more than 280 times since the 
end of World Ward II. We are even now engaged not only in the war on 
terrorism, but in combat operations in Iraq that may well continue for 
some time.
    Once again our young men and women are defiantly heading into harms 
way with the understanding that we, as the lawmakers of this great 
Nation, will ensure they are taken care of as citizens and as veterans 
for their actions above and beyond the call of duty.
    We now have an opportunity to show a measure of our gratitude to 
the brave men and women who have served this country in the past, and 
to make a statement to those men and women who continue to serve, 
especially now, during military operations to liberate Iraq.
    The existing law as it stands is simply discriminatory and wrong. 
Concurrent receipt is, at its core, a fairness issue, and present law 
simply discriminates against career military people who have been 
injured or disabled while in conduct of their duties while in defense 
of this great Nation. Retired veterans are the  group of Federal 
retirees who are required to waive their retirement pay in order to 
receive VA disability compensation.
    In my view, the two pays are for very different purposes: One for 
loyal and selfless 20-year service to our country. The other for 
physical or mental `pain and suffering' occurred in that service to 
country.
    For years, Mr. Bilirakis introduced legislation in the House of 
Representatives to correct this long-standing inequity. I first drafted 
concurrent receipt legislation as ranking member of this very 
subcommittee in 1991, and introduced it with my dear friend and former 
chairman of the Personnel Subcommittee, Senator John Glenn, in 1992.
    The Retired Pay Restoration Act has received strong bipartisan 
support in Congress with 396 cosponsors in the House and 82 cosponsors 
in the Senate.
    The Military Coalition, an organization of 33 prominent veterans' 
and retirees' advocacy groups representing 5.5 million veterans, 
supports this legislation, as do many other veterans' service 
organizations, including the Veterans of Foreign Wars, American Legion, 
and Disabled American Veterans.
    For the brave men and women who have selected to make their career 
in the U.S. military, they face an unknown risk. If they are injured, 
they will be forced to forego their earned retired pay in order to 
receive their VA disability compensation. In effect, they will be 
paying for their own disability benefits from their retirement checks.
    We have a unique opportunity to redress the unfair practice of 
requiring disabled military retirees to fund their own disability 
compensation. We need full concurrent receipt for all military 
retirees. It is time for us to show our appreciation to the men and 
women who have sacrificed so much for our great Nation.
    I thank the Chairman for calling this hearing today for all service 
members past and present. The testimony by our witnesses may provide 
the critical foundation to how this committee will act later this year 
when we draft the National Defense Authorization Act for Fiscal Year 
2004.

    Senator Chambliss. Also, we have a statement from the Fleet 
Reserve Association that also will be inserted in the record.
    [The information referred to follows:]

          Prepared Statement by the Fleet Reserve Association

                              INTRODUCTION

    Mr. Chairman and other distinguished members of the subcommittee: 
The Fleet Reserve Association (FRA) is grateful for the opportunity to 
present its views on the concurrent receipt of military retired pay and 
veterans disability compensation.
    First, however, the Association extends sincere gratitude to the 
subcommittee for its outstanding efforts these past 4 years in 
enhancing life in the military for the Nation's service members and 
their families. The result has been nearly miraculous. Recruiting and 
retention is at its highest since the advent of the all-volunteer 
force. The ``magic'' spun by this subcommittee has enriched quality of 
life for the men and women who serve or will serve or have retired from 
the Armed Forces of the United States.
    With 135,000 members strong, FRA presents a well-deserved salute to 
the subcommittee for, among others, adopting the repeal of the 1986 
retirement system, providing ``targeted'' pay increases for NCOs and 
Petty Officers in the grades of E5 thru E9, and initiating the Tricare 
for Life program of health care.
    The subcommittee's commitment to service members, their families, 
and retired military veterans is unmatched. Thanks for doing a superb 
job.

                           CONCURRENT RECEIPT

    The Fiscal Year 2003 National Defense Authorization Act (NDAA) 
authorizes a special compensation that establishes a `beachhead' to 
authorizing full concurrent receipt, a term for the payment of both 
military non-disability retired pay and any VA compensation for 
service-connected disabilities without a reduction in one or the other 
payment.
    Currently, the receipt of VA compensation causes a like reduction 
to a retired service member's military retired pay. This leads to the 
belief that retired service members, earning retired pay as a result of 
20 years or more of service, are forced to pay for their own 
disablement.
    Most disabilities are recognized after the service member retires. 
Some are discovered while the member is still on active duty or as the 
result of a retirement physical. However, it is to the benefit of the 
Department of Defense to retire the member without compensation for any 
disability. Instead, the member is directed to the Department of 
Veterans' Affairs for compensatory relief for the damages incurred by 
the member while serving the Nation in uniform.
    Prior to 1975, all military disability pay was tax exempt. A 
perception of abuse to the system, mostly in the Armed Forces senior 
grades, caused Congress to amend the Internal Revenue Code. The Tax 
Reform Act of 1976 forced the Department of Defense to change the rules 
so that only a percentage of the member's disability retired pay 
attributable to combat-related injuries would be tax-exempt. 
Subsequently, many retiring service members petitioned the VA for 
relief for service-connected injuries.
    Service members, whether in uniform or retired, are considered 
Federal employees subject not only to Title 10, U.S. Code, but Title 5, 
U.S. Code, regulating the conduct and performance of government 
employees, on the job or retired. When retired they are not entitled to 
VA compensation payments for their disabilities without forfeiting an 
equal amount of their retired pay with one exception. Military retirees 
may go on the Federal employee rolls and subsequently retire using 
military service time to calculate their Federal retirement annuity. 
They, then, may receive veterans' compensation as well as Federal Civil 
Service retirement payments with no offsets, reductions, or limits. FRA 
questions why the current law discriminates against the military 
retiree?
    Recommendation: The Fleet Reserve Association encourages Congress 
to take the helm and fully authorize and fund concurrent receipt of 
military non-disabled retirement pay and veterans compensation program 
as currently offered in S. 392, introduced by Sen. Harry Reid (NV), and 
H.R. 303, a bill introduced by Rep. Mike Bilirakis (FL). Congress 
should remember that U.S. service members not only had a major hand in 
the creation of this Nation, but have contributed more than any group 
to the military and economic power of the United States for more than 
200 years. Those who have served in the Armed Forces for 20 years or 
more certainly deserve the opportunity to have equity with their 
counterparts in the Federal service who can earn both without a penalty 
to one or the other.

                               CONCLUSION

    FRA is grateful for the opportunity to submit this statement. If 
there are questions or the need for further information, please call 
Bob Washington, FRA Director of Legislative Programs, at 703-683-1400.

    Senator Chambliss. With that, the hearing will stand 
adjourned.
    [Questions for the record with answers supplied follow:]

               Questions Submitted by Senator Mark Pryor

                       ACCURACY OF DISABILITY PAY

    1. Senator Pryor. Secretary Abell and Secretary Cooper, this may be 
a question more appropriately addressed to both of you. I have some 
understanding of the procedures followed to determine eligibility for 
disability pay. Would you both give a broad outline of the procedures 
and mechanisms in place both at the field level and at the Department 
level to ensure those who receive disability pay are those who are 
meant to receive disability pay?
    Secretary Abell. The Department of Defense (DOD) Disability 
Evaluation System is comprised of: medical evaluation, physical 
disability evaluation, appellate review, counseling, and final 
disposition. The two major elements are the Medical Evaluation Board 
(MEB) and the Physical Evaluation Board (PEB). Members with a medical 
condition that may not be appropriate for continued military duty are 
referred to the local Medical Treatment Facility (MTF) who initiates an 
MEB. The MEB, consisting of three medical doctors, reviews the entire 
record and ensures all required testing is completed and documented. 
The MEB does not make any fitness determination. It merely determines 
if the member meets medical retention standards. The MEB provides 
documentation of the member's complete medical status.
    If the member does not meet retention standards, the case is then 
referred to an informal PEB. The PEB consists of two line officers and 
one doctor who conduct a review of the record and make a finding of 
fit/unfit based on whether the medical condition prevents the service 
member from performing his or her duties. The PEB also determines 
rating of the disability based on DOD guidance and from the Veterans' 
Affairs Schedule for Rating Disability, as required by law.
    If the service member accepts this determination, he or she is 
separated or retired with compensation as appropriate. The member has a 
statutory right to appeal the finding and request a formal PEB with the 
member, counsel, and witness in attendance (if the member desires). 
Appeals after the formal PEB may be made through the Service Disability 
Agency, Board for Correction of Military Records, or through the court 
system.
    Once the Service has processed a member for disability retirement, 
there is a well-established process that the Service follows to provide 
a detailed transmission of information from the branch of Service to 
the Defense Finance and Accounting Service (DFAS) to certify all 
retirement particulars used to set up a retirement account that will 
form the basis for continuing retired pay to the member. DFAS conducts 
extensive reviews for consistency and validity. If the member goes to 
the Department of Veterans' Affairs (VA) and receives disability 
compensation, a data exchange between VA and the Defense Department 
results in offsets to military retired pay. These data exchanges may 
also lead to a determination that a member is entitled to Special 
Compensation for Severely Disabled retirees.
    Secretary Cooper. VA has many systems and processes in place to 
ensure the accurate determination of service-connected disabilities and 
proper rate of payment of disability benefits.
    VA's claim process begins when a veteran initiates a compensation 
claim by filing an application with a local VA regional office. VA 
obtains the veteran's service medical records and, if relevant, the 
veteran's military personnel records. Based on information provided by 
the claimant, VA obtains information and evidence to substantiate the 
claim, most often in the form of medical records from VA medical 
facilities, private physicians, or records from other Federal agencies. 
If necessary, to decide entitlement to compensation, VA provides the 
claimant with a medical examination or obtains a medical opinion. This 
examination is useful to determine the degree of disability of the 
service-connected condition.
    After VA obtains all the information and evidence to substantiate a 
claim for service-connected compensation, VA uses a rating schedule to 
determine the disability evaluation to assign to a particular 
condition. The rating decisions are reviewed and signed by both the 
decision maker and another rating specialist. The award is entered into 
the Benefits Delivery Network (BON), VA's electronic payment processing 
system, by a Veterans Services Representative (VSR). During this 
process, the record is reviewed to verify certain critical facts; for 
example, the veteran's military retirement status. BON has system edits 
to prevent the entry of data that is inconsistent with the law and 
well-defined business rules.
    The award of benefits is reviewed and approved by a Senior VSR. If 
the award results in a retroactive payment of $25,000 or more, a third 
review and signature is required to release payment.
    VA has additional quality controls to ensure the appropriateness of 
current and future payments.
    a. Quality reviews are performed at both the local and national 
level.
    b. VA conducts data integrity matches with other departments and 
agencies, including the Defense Finance and Accounting Service, the 
Internal Revenue Service, and the Social Security Administration. Such 
efforts allow us to compare retired pay and SBP payment records, for 
instance, in order to reconcile discrepancies. .
    c. A physical record of all correspondence and evidence accumulated 
with respect to all claims filed by that veteran or his dependents is 
maintained in his/her VA claims file.

               DETERMINING SERVICE-CONNECTED DISABILITIES

    2. Senator Pryor. Secretary Abell and Secretary Cooper, how do you 
determine ``service-connected disabilities'' at the base or on the 
battlefield and how are the ensuing reports turned into benefits at the 
Department of Veterans' Affairs? You might also add a few words about 
the graduated scale of disability, i.e. the difference between a 10 
percent disability and a 50 percent disability, and the benefits that 
result from those disabilities.
    Secretary Abell. A member separated (at the base or on the 
battlefield) as a result of disability, whether retired or not, may go 
to the VA and apply for disability compensation for any service-
connected disabilities. Generally, the member's medical record forms 
the initial basis for determining VA disability compensation. The VA 
evaluates and determines what compensation is applicable from the 
Veterans' Affairs Schedule for Rating Disability (VASRD). Any VA 
payment results in offsets to military retired pay or has offsets to 
reflect any separation payments from the Service.
    The difference between a 10 percent disability and a 50 percent 
disability is the extent of the disability as measured against these 
VASRD standards, which were originally based on what impact the 
disability had on the veteran's income potential. A 10 percent 
disability has less impact on income potential than a 50 percent 
disability, thus resulting in less disability compensation. The VASRD 
schedule is also used to determine disability percentages for service 
disability retirements.
    Regarding benefits from DOD, a member found unfit for duty due to 
physical disability is entitled to disability severance pay or military 
retired pay. If the member has less than 20 years of service and the 
disability is less than 30 percent, the member will be separated with 
disability severance pay equal to 2 months of basic pay for each year 
of service, up to a maximum equal to 2 years of basic pay. If the 
disability is 30 percent or more or the member has over 20 years of 
service, the member receives military disability retirement pay based 
on the greater of either longevity (2.5 percent times years of service 
times the base-final pay or high-3 average) or disability (disability 
percentage times the base). Disability retired pay is tax-exempt if the 
member was in service or retired before September 25, 1975. For those 
who were not qualified on that date, their disability retired pay is 
tax-exempt if their disability meets certain criteria for being combat-
related or the member could have obtained compensation from the VA.
    Secretary Cooper. For some service members whose claims are 
processed at VA's Benefits Delivery at Discharge (BDD) sites, VA makes 
the determination that certain disabilities are service connected at or 
around the time of discharge. Otherwise, determinations on veterans' 
claims are made at VA regional offices based on service military 
records. These records generally contain evidence of disabilities that 
may have been incurred in Service, including locations at military 
bases or on the battlefield.
    A determination that a medical condition is service connected 
requires all of the following:
    a. The applicant must be discharged from active duty under 
conditions other than dishonorable;
    b. Evidence must show that the applicant has a current disability 
incurred in or aggravated by military service;
    c. The in-service incurrence or aggravation is documented in the 
service medical records or other proper documentation. However, for 
combat-related disabilities where documentation may be limited or 
missing, certifications of fact by service persons having personal 
knowledge of the incident are acceptable;
    d. Presumptions of service connection may be applied to certain 
kinds of disabilities, that have been determined to be related to 
particular kinds of service, such as the POW experience, Gulf War and 
Vietnam service, or exposure to radiation in service.
    e. Once the evidence has established a service connection, a Rating 
VSR uses the VA Schedule of Rating Disabilities to determine the degree 
of disability.
    The rating schedule provides for ten grades of disability, 
beginning with 10 percent and ending with 100 percent, representing as 
far as is practicable, the average impairment in earning capacity in 
civil occupations resulting from disability. It is organized by a body 
system, with each system containing lists of specific diseases and 
medical conditions, each assigned a diagnostic code. Each disease or 
medical condition is described in terms of its symptoms signifying 
degrees of disability. The greater and more severe the symptoms, the 
higher the disability rating. The maximum disability evaluation that 
can be assigned for a particular medical condition varies depending on 
the disabling effects of its symptoms. For instance, diabetes that is 
managed by a restricted diet warrants a 10-percent evaluation, whereas, 
diabetes requiring a restricted diet, regulation of activities, and 
insulin injection would merit a 60 percent evaluation.

      INCREASED WORKLOAD WITH THE ENACTMENT OF CONCURRENT RECEIPT

    3. Senator Pryor. Secretary Cooper, what changes would be necessary 
for your Department to handle the increased workload the enactment of 
concurrent receipt would create?
    Secretary Cooper. VA would require additional full-time employees 
to handle the increased workload associated with the enactment of full 
concurrent receipt benefits. While there is no certain way to quantify 
the number of new claims we can expect, we know that out of a total 
military retiree population of about 2,000,000, almost 700,000 retirees 
or about 35 percent receive VA compensation. In our cost estimating for 
last year's concurrent receipt proposal we assumed that tax advantages 
and the general awareness of concurrent receipt would result in 700,000 
new claims for compensation over a 5-year period. Additionally, we 
estimate that approximately 118,000 retirees currently receiving 
benefits would apply for an increased evaluation due to concurrent 
receipt over a 5-year period. Collectively, this level of claims 
activity would require a cumulative FTE of 5,027 employees to process 
the increased workload. The first year following enactment would 
require 2,514 FTE of that total to process the initial claims activity.
    VA's experience is that lengthy military service (i.e., more than 
13 years) is highly correlated with the incurrence of service-connected 
disabilities. Having large numbers of additional retirees placed in VA 
pay status will also mean a significant increase in account maintenance 
activities.

    [Whereupon, at 5:50 p.m., the subcommittee adjourned.]

                                 
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