- DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR 2004

[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

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

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PART 6

PERSONNEL

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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

S. 1050

__________

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

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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

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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\
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\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\
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\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.
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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.

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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\8\ Attrition is the total number of personnel losses from the
selected Reserves divided by the average selected Reserve end strength
for the year.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
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\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.
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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.
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\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.)

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.]