    [Senate Hearing 108-440]
    [From the U.S. Government Publishing Office]

                                                     S. Hrg. 108-440, Pt. 6

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2005

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

                                    HEARINGS

                                   before the

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                          ONE HUNDRED EIGHTH CONGRESS

                                 SECOND SESSION

                                       ON

                                    S. 2400

         TO AUTHORIZE APPROPRIATIONS FOR FISCAL YEAR 2005 FOR MILITARY
    ACTIVITIES OF THE DEPARTMENT OF DEFENSE, FOR MILITARY CONSTRUCTION, AND
       FOR DEFENSE ACTIVITIES OF THE DEPARTMENT OF ENERGY, TO PRESCRIBE
    PERSONNEL STRENGTHS FOR SUCH FISCAL YEAR FOR THE ARMED FORCES, AND FOR
                                 OTHER PURPOSES

                                   ----------

                                     PART 6

                                   PERSONNEL

                                   ----------

                              MARCH 2, 4, 31, 2004

             Printed for the use of the Committee on Armed Services

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                            2005--Part 6  PERSONNEL

                                                     S. Hrg. 108-440, Pt. 6

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2005

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

                                    HEARINGS

                                   before the

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                          ONE HUNDRED EIGHTH CONGRESS

                                 SECOND SESSION

                                       ON

                                    S. 2400

         TO AUTHORIZE APPROPRIATIONS FOR FISCAL YEAR 2005 FOR MILITARY
    ACTIVITIES OF THE DEPARTMENT OF DEFENSE, FOR MILITARY CONSTRUCTION, AND
       FOR DEFENSE ACTIVITIES OF THE DEPARTMENT OF ENERGY, TO PRESCRIBE
    PERSONNEL STRENGTHS FOR SUCH FISCAL YEAR FOR THE ARMED FORCES, AND FOR
                                 OTHER PURPOSES

                                   __________

                                     PART 6

                                   PERSONNEL

                                   __________

                              MARCH 2, 4, 31, 2004

             Printed for the use of the Committee on Armed Services

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                          COMMITTEE ON ARMED SERVICES

                        JOHN WARNER, Virginia, Chairman

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

                        Judith A. Ansley, Staff Director

                 Richard D. DeBobes, Democratic Staff Director

                                     ______

                           Subcommittee on Personnel

                       SAXBY CHAMBLISS, Georgia, Chairman

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

                                      (ii)

                                C O N T E N T S

                                  ----------

                        CHRONOLOGICAL LIST OF WITNESSES
      Active Component, Reserve Component, and Civilian Personnel Programs
                                 march 2, 2004

                                                                       Page

    Chu, Hon. David S.C., Under Secretary of Defense for Personnel
      and Readiness..................................................     5
    Brown, Hon. Reginald J., Assistant Secretary of the Army for
      Manpower and Reserve Affairs...................................    26
    Navas, Hon. William A., Jr., Assistant Secretary of the Navy for
      Manpower and Reserve Affairs...................................    35
    Dominguez, Hon. Michael L., Assistant Secretary of the Air Force
      for Manpower and Reserve Affairs...............................    44
    Hagenbeck, LTG Franklin L., USA, Deputy Chief of Staff for
      Personnel, United States Army..................................    65
    Hoewing, VADM Gerald L., USN, Chief of Naval Personnel, United
      States Navy....................................................    73
    Parks, Lt. Gen. Garry L., USMC, Deputy Chief of Staff for
      Manpower and Reserve Affairs, United States Marine Corps.......    85
    Brown, Lt. Gen. Richard E., USAF, Deputy Chief of Staff for
      Personnel, United States Air Force.............................    98

    Compensation, Benefits, and Health Care for Active and Reserve Military
                          Personnel and Their Families
                                 march 4, 2004

    Daschle, Hon. Tom, U.S. Senator from South Dakota................   125
    Abell, Hon. Charles S., Principal Deputy Under Secretary of
      Defense for Personnel and Readiness............................   130
    Winkenwerder, Hon. William, Jr., Assistant Secretary of Defense
      for Health Affairs.............................................   145
    Raezer, Joyce Wessel, Director, Government Relations, National
      Military Family Association....................................   243
    Schwartz, Sue, D.B.A, RN, Co-Chair, The Military Coalition Health
      Care Committee.................................................   258
    Cline, Master Sergeant Michael P., USA (Ret.), Co-Chair, The
      Military Coalition, and Executive Director, Enlisted
      Association of the National Guard of the United States.........   259
    Holleman, Deirdre Parke, Legislative Director, The Retired
      Enlisted Association...........................................   290
    Duggan, COL Dennis M., USA (Ret.), Deputy Director, National
      Security-Foreign Relations Division, The American Legion.......   294

                                     (iii)
           Active and Reserve Military and Cvilian Personnel Programs
                                 march 31, 2004

    Hall, Hon. Thomas F., Assistant Secretary of Defense for Reserve
      Affairs........................................................   367
    Blum, LTG H. Steven, USA, Chief, National Guard Bureau, Army
      National Guard.................................................   391
    Schultz, LTG Roger C., USA, Director, Army National Guard........   394
    James, Lt. Gen. Daniel III, ANG, Director, Air National Guard....   395
    Helmly, LTG James R., USAR, Chief, U.S. Army Reserve.............   459
    Cotton, VADM John G., USNR, Chief, U.S. Naval Reserve............   471
    McCarthy, Lt. Gen. Dennis M., USMCR, Commander, Marine Forces
      Reserve........................................................   478
    Sherrard, Lt. Gen. James E., III, USAF, Chief, U.S. Air Force
      Reserve........................................................   487

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2005

                                  ----------

                             TUESDAY, MARCH 2, 2004

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

      ACTIVE COMPONENT, RESERVE COMPONENT, AND CIVILIAN PERSONNEL PROGRAMS

        The subcommittee met, pursuant to notice, at 2:30 p.m. in
    room SR-232A, Russell Senate Office Building, Senator Saxby
    Chambliss (chairman of the subcommittee) presiding.
        Committee members present: Senators Chambliss, Dole,
    Cornyn, Levin, and E. Benjamin Nelson.
        Committee staff member present: Leah C. Brewer, nominations
    and hearings clerk.
        Majority staff members present: Scott W. Stucky, general
    counsel; Diana G. Tabler, professional staff member; and
    Richard F. Walsh, counsel.
        Minority staff member present: Gabriella Eisen, research
    assistant.
        Staff assistants present: Sara R. Mareno and Pendred K.
    Wilson.
        Committee members' assistants present: Clyde A. Taylor IV,
    assistant to Senator Chambliss; Christine O. Hill, assistant to
    Senator Dole; Eric Pierce, assistant to Senator E. Benjamin
    Nelson; and Terri Glaze, assistant to Senator Pryor.

         OPENING STATEMENT OF SENATOR SAXBY CHAMBLISS, CHAIRMAN

        Senator Chambliss. This hearing will come to order.
        Let me, first of all, apologize to all of our witnesses.
    Senator Nelson and I are having to do what you citizens pay us
    to do, which is get over there and vote. When 10-minute votes
    extend into 25 minutes, it gets a little frustrating. We have
    one more vote that we're going to have to cast, and hopefully
    we can get statements out of the way, and we'll go vote at the
    end of the next vote, and come back and complete our hearing.
        I want to go ahead and get started. We know you folks are
    busy and have schedules that you operate on, so I'm going to
    try to rush through my statement quickly here and get right to
    our witnesses.
        The subcommittee meets today to receive testimony on active
    component, Reserve component, and civilian personnel programs
    in review of the National Defense Authorization Act for Fiscal
    Year 2005.
        Dr. Chu, you're getting to be a regular over here. We're
    always happy to see you, and we're glad to have you back today.
        Dr. Chu. Thank you, sir.
        Senator Chambliss. We also welcome the Assistant
    Secretaries for Manpower and Reserve Affairs of each of the
    Services, Reginald J. Brown, of the Army; William A. Navas, of
    the Navy; and Michael L. Dominguez, of the Air Force.
        Our second panel will consist of the personnel chiefs of
    the military services, and I'll introduce them at the
    conclusion of our first panel.
        Our All-Volunteer Force reached its 30th anniversary last
    year. This is an achievement for which we are all proud. We
    truly have the finest military in the world. But it is
    essential that we continue to work together to create the
    incentives that will continue to result in good recruiting,
    retention, and quality of life, and, through these means,
    outstanding readiness.
        Now, Dr. Chu, as you know, and I'm sure all of the other
    gentlemen know, we had a hearing last week on sexual assaults
    in the military, and we look forward to continuing the dialogue
    on that issue to make sure that all of our men and women live
    in safe and secure living, as well as working, environments. I
    will tell you, too, that we are treating the situation relative
    to the Air Force Academy (AFA) as a separate issue, and we're
    going to be doing some follow-on relative to that. It will be
    related to, but not in conjunction with, the issue of sexual
    assaults in the military.
        I want to just say that I will put my full statement in the
    record.
        [The prepared statement of Senator Chambliss follows:]

                 Prepared Statement by Senator Saxby Chambliss

        Good afternoon. The subcommittee will come to order. The
    subcommittee meets today to receive testimony on active
    component, Reserve component, and civilian personnel programs
    in review of the National Defense Authorization Request for
    Fiscal Year 2005.
        Dr. Chu, welcome. We're pleased to have you appear again
    before the subcommittee. We also welcome the Assistant
    Secretaries of each of the Services for Manpower and Reserve
    Affairs: Reginald J. Brown of the Army, William A. Navas of the
    Navy, and Michael L. Dominguez of the Air Force. Our second
    panel will consist of the personnel chiefs of the military
    services, and I will introduce them at the conclusion of our
    first panel.
        Our ``All-Volunteer'' Armed Forces reached its 30th
    anniversary last year. This is an achievement for which we are
    proud. We truly have the finest military in the world. But it
    is essential that we continue to work together to create the
    incentives that will continue to result in good recruiting,
    retention, quality of life, and, through these means,
    outstanding readiness.
        Last week, Dr. Chu and the Vice Chiefs of Staff of each of
    the Services testified before this subcommittee about the
    deeply troubling issue of sexual assault in the Armed Forces.
    We had a good exchange of views, and we received very useful
    information about the current policies and programs within the
    Department of Defense (DOD) for responding to victims of sexual
    assault. I was encouraged by the determination that you, Dr.
    Chu, and the Vice Chiefs expressed to take steps that will
    prevent sexual assaults, provide vital services to victims of
    rape and sexual assault, and ensure vigorous identification and
    prosecution of offenders. All of the Senators present at that
    hearing made it very clear that they will carefully review the
    progress of the DOD Task Force and its findings and
    recommendations. As I discussed at that hearing, I hope to see
    changes implemented that will bring standardization of programs
    and resources throughout the Services, thus ensuring safe
    living and working environments for all women in uniform.
        I want to start today by praising the performance of the
    men and women of the United States Armed Forces over the past
    year. At this time last year, our forces were massed on the
    Iraqi border, in Kuwait, Qatar, the Persian Gulf and throughout
    the Central Command (CENTCOM) Area of Operations (AO). In early
    March 2003, they were only days away from the start of
    Operation Iraqi Freedom (OIF)--a brilliant military campaign
    that swept Saddam Hussein and his gang of murderers out of
    power and created a new era of hope for the Iraqi people. Our
    soldiers, sailors, airmen, and marines performed magnificently,
    and continue to do so today, but we mourn for those who have
    paid the ultimate price in defense of freedom. Our prayers go
    out to the families of those who have died, and those who have
    been injured, and we pray for the safety of those on duty today
    carrying out the noble mission of OIF.
        I am also mindful today of the high tempo of operations and
    extended deployments that continue for so many service members.
    We recognize the contributions of our active-duty, National
    Guard, and Reserve personnel in protecting our freedom, and of
    the sacrifices they and their families have made. We thank them
    for their service.
        There are many important issues that must be resolved in
    the months ahead. For example, the appropriate manpower
    strength for the active and Reserve components of the Services
    is a central issue. General Schoomaker has testified that each
    additional 10,000 soldiers would cost the Army $1.2 billion
    and, if directed by Congress, an increase in authorized end
    strength would jeopardize the Army's ability to modernize and
    transform. Rebalancing the total force to enhance the Services'
    ability to respond to emergencies and mobilize rapidly is a key
    issue. Another matter of concern is whether--and how--to
    enhance benefits and compensation. Dr. Chu, in your written
    statement you noted the benefits of permissive pay authorities
    such as hardship duty pay and assignment incentive pay in
    responding flexibly to personnel shortfalls, and you
    recommended linking pay improvements to effects on readiness.
    The subcommittee will carefully consider your recommendations
    and the budgetary implications of proposals affecting pay. In
    this regard, the DOD's ongoing preparation of reports on the
    sufficiency of the Reserve pay structure and of existing death
    benefits for service members would be very useful. We urge you
    to conclude those reports and get them to Congress as soon as
    possible.
        This year, the subcommittee will again work closely with
    the DOD to ensure that the quality of life of the men and women
    of the Armed Forces and their families continues to improve.
    Our subcommittee was successful last year in focusing attention
    on the level of support being provided to military families.
    Our field hearings at Robins Air Force Base in Georgia and
    Offutt Air Force Base in Nebraska focused on these issues and
    included panels of spouses of deployed service members and
    military parents. They articulated the problems they, as
    spouses and parents, face in striving to raise strong families
    while their loved ones are deployed, and during frequent career
    moves. We will continue to focus on these issues during our
    deliberations of the fiscal year 2005 budget.
        I want to thank the subcommittee's ranking member, Senator
    Ben Nelson, for his great support in the subcommittee's efforts
    and how much I look forward to working with him this year. As
    he knows, this subcommittee has a strong tradition of operating
    in a bipartisan spirit on behalf of soldiers, sailors, airmen,
    and marines. Senator Nelson, would you like to make any opening
    remarks?

        Senator Chambliss. I want to turn now to my good friend, my
    close colleague, from the great State of Nebraska, my ranking
    member, Senator Nelson, for his comments and to once again just
    tell him how much I appreciate his support and his working
    together in a bipartisan way to make sure that our soldiers,
    sailors, airmen, and marines have the very best military in
    which to serve.
        Senator Nelson.

                  STATEMENT SENATOR E. BENJAMIN NELSON

        Senator Ben Nelson. I thank you, Mr. Chairman. I appreciate
    those kind remarks.
        I also appreciate the fact that we're having this hearing
    today, because of the importance of the subject as it relates
    to the future of our military. We're all proud of the work that
    they're doing around the world. Our forces just recently
    deployed to Haiti to deal with issues that are of critical
    importance to us and to others around the world.
        I, too, would like to have my entire statement put into the
    record.
        [The prepared statement of Senator Ben Nelson follows:]
                Prepared Statement by Senator E. Benjamin Nelson
        Thank you Senator Chambliss. I join you in welcoming all of our
    witnesses here today. I certainly look forward to their testimony.
        This should be a very interesting hearing, and fiscal year 2005
    should be a very interesting year from a military and civilian
    personnel perspective. Even though we don't yet have the DOD's
    legislative proposals for fiscal year 2005, we do know of some very
    interesting personnel issues in the works.
        End strength will be a very important issue in the next few years.
    The Secretary of Defense has exercised the authority delegated to him
    by the President to authorize the Army to go above its congressionally
    authorized end strength by up to 30,000 soldiers. This is good news. It
    appears that the DOD has finally acknowledged what we have been saying
    for several years--that the Army is too small for all the missions
    assigned to it.
        While Congress and the DOD agree on the need for a larger force, we
    still have an issue of how to pay for the increase. We can pay for more
    end strength through the normal appropriation and authorization
    processes, so that the cost of defense is clearly portrayed for the
    American taxpayer, or we can pay for it through emergency supplemental
    appropriations so that the cost doesn't impact as much on other Army
    and Defense programs.
        At the same time the Army will be increasing the number of soldiers
    on active duty, the Air Force will be attempting to reduce its active
    duty end strength by over 16,000 airmen. This is no easy task if it is
    done in a way that honors the great service these airmen have so
    admirably provided to their Nation when the Nation needed them. The
    Navy will be facing a similar problem--the administration's budget
    request proposes to cut Navy active duty end strength by 7,900 sailors.
        Assignment processes are also changing. The Army plans to move from
    an individual replacement system to a unit manning system as part of
    its ``Force Stabilization'' initiative. The Army has tried on 11
    different occasions to transition to some type of unit manning to
    increase unit cohesion and combat readiness, but none of these attempts
    have succeeded in the past. I hope that this 12th attempt will be
    successful. The Navy is also changing to a new system for manning its
    ships--a system the Navy refers to as ``Sea Swap.''
        Our Guard and Reserve personnel have been mobilized and are being
    employed like never before. They are making significant contributions
    to our Nation's defense. The Secretary of Defense has initiated a plan
    to rebalance the capabilities of the active and Reserve components to
    make more judicious use of our citizen-soldiers. We are anxious to see
    the results of this effort. Although some aspects of the use of our
    Guard and Reserve personnel will be discussed today, we will have
    another hearing completely devoted to Guard on Reserve issues on March
    31.
        As you can see, there are a lot of changes in the works for our
    military personnel. There are also significant changes taking place
    with respect to management of DOD civilian personnel. We will be paying
    very close attention to how the DOD implements the new National
    Security Personnel System (NSPS). So far, it has gotten off to a rocky
    start.
        At the same time this new civilian personnel system is being
    implemented, each of the Services will be converting a large number of
    military positions to civilian positions so that uniformed personnel
    can be returned to the operating force. This will work only if the DOD
    adequately funds the resulting increase in the civilian workforce.
        Senator Chambliss, I see a lot of turbulence in the military and
    civilian personnel area for the next several years. This will be
    particularly challenging for the Services as it will take place while
    they are heavily engaged in military operations.
        I know that this committee will take seriously its oversight
    responsibility to our soldiers, sailors, airmen, and marines to ensure
    that their quality of life is enhanced, and will not be adversely
    affected by these changes.
        Senator Chambliss, I'm anxious to hear from our witnesses.

        Senator Ben Nelson. I think it's important to say, at the
    outset, that I'm very anxious to hear how we're going to
    increase the end strength by 30,000 troops in the Army, how
    it's going to impact a force reduction in the Air Force and in
    the Navy, and how we're going to balance those interests.
        On other occasions, the Army has attempted to reorganize--I
    think, 11 times--and hasn't had a great deal of success, so I'm
    sort of anxious to find out why we think the 12th time is the
    charm. Not because I'm skeptical, but I'm one who recognizes
    the importance of history as a prologue for the future. So I
    would be very anxious to hear about that.
        Of course, in terms of our Guard and Reserve personnel, I
    think it's extremely important to find out how we're going to
    reorganize the skill sets for different units of our military
    so that our Active-Duty Force can be supplemented, augmented by
    the inclusion of Guard and Reserve units, as additional sources
    of military personnel, as opposed to a very critical part of
    the personnel, from the ground up, as opposed to a top layer.
    The status of the military that we're discussing today is
    strong, but it suffers from overuse and over-deployment, in
    many cases, of our Guard and Reserve units. It is, in fact,
    going to create a problem for us at some point with recruitment
    and retention. Just as a matter of fairness, I don't think that
    the Guard and Reserve units should be activated and deployed
    more frequently and for longer deployments than the active-duty
    military. It was never intended for that, and so I'd be anxious
    to get your thoughts on that.
        So thank you very much, Mr. Chairman. Thank you to the
    panelists for being here. It's good to see you again. I look
    forward to your thoughts and comments.
        Senator Chambliss. Thank you very much, Senator Nelson.
        Dr. Chu, we'll start with you.

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

        Dr. Chu. Thank you very much, Mr. Chairman and Senator
    Nelson. It's a great privilege to be here this afternoon with
    my colleagues.
        I do have a much longer statement that I hope you will
    accept for the record.
        Senator Chambliss. Certainly.
        Dr. Chu. Let me summarize the main points that I'd like to
    advance very briefly.
        As you noted, Mr. Chairman, we have just passed the 30th
    anniversary of the All-Volunteer Force. Since September 11,
    2001, it has faced a series of the most significant challenges
    in its history. I would argue, as I think you do, that the
    performance of the All- Volunteer Force in the last 2\1/2\
    years has been magnificent. Our job is to sustain that
    magnificent performance with the steps available to us.
        Let me briefly touch on four subjects: first, how we
    propose to ease the strain on that force, as Senator Nelson has
    pointed out as an issue; second, the incentives that we seek
    from Congress to ensure a steady flow of recruits and a good
    level of retention of experienced personnel in that force;
    third, I'd like to say a word about the results to date, in
    terms of recruiting and retention; and, fourth, very briefly,
    cover important management changes we're making inside the DOD
    as to how we manage our forces.
        To the issue of strain on the force, we recognize that
    current operations do place a strain on our personnel, and we
    have a series of initiatives to alleviate that strain. You've
    heard a great deal about the Army's plan to increase the number
    of brigades within the existing divisional structure. We think
    this will be helpful. It will require some increase in the
    Army's end strength over the course of the next several years,
    although the Army does intend to return to the level outlined
    in the National Defense Authorization Act for Fiscal Year 2004,
    as a long-term objective.
        We are in the process, in fiscal years 2004 and 2005, of
    converting 20,000 military slots across the DOD to civilian
    status. That will give additional military head-room for truly
    military tasks. We're very grateful to Congress for the NSPS
    authorities that we think will advantage this process, both
    immediately and over the long term.
        We are, as Senator Nelson indicated, re-balancing both the
    Active and Reserve Forces, with a total of 50,000 spaces,
    changing skill designations in the period starting with fiscal
    year 2003 and running through fiscal year 2005.
        We are trying to do a better job at providing all Reserve
    units at least 30 days notice on alert before they report for
    mobilization. We are trying to adhere to the Secretary's
    standard that a reservist would be called, at most, for 1 year
    of service in 6 years time. We are trying to avoid second
    mobilizations of any reservist, unless he or she is a
    volunteer. Indeed, the use of volunteers is one of the
    principles that we are underscoring in present operations.
        We recognize, at the same time, that it is critical to
    support the families in these circumstances, both active and
    Reserve. My colleagues can speak to some of the innovations in
    that regard, especially what we are calling the Military
    OneSource approach to family support.
        To the question of incentives, we are seeking in this
    budget a 3\1/2\ percent across-the-board pay raise, a
    continuation of an initiative begun some years ago to buy down
    the out-of-pocket housing allowance, and, of course,
    continuation of the important bonus authorities that are so
    critical to our retention effort. We are, in parallel, seeking
    an increase in the ceiling for what we call hardship duty pay,
    which we think is a very important instrument under the present
    circumstances.
        As we look at the compensation changes made in concert
    between the executive and legislative branches over the last 5
    or 6 years, we do notice a trend that we would like to call
    your attention to. That is, we have added a variety of benefits
    that largely accrue to those personnel who have left active
    service--post-service benefits, for the most part. I do think
    in the present circumstances, we will want to focus our
    attention on what we need to do for those currently serving on
    active duty, as opposed to those who are finished with their
    service or in a non-active status.
        As to results, all of our components made their end
    strength numbers last year. That's a product of recruiting,
    retention, and attrition management. All of the various
    components made their recruiting goals, except for the Army
    National Guard, and I'm pleased to say that the Army National
    Guard, in the first quarter of 2004, made its recruiting goal.
    All components made, or very nearly made, their retention
    objectives in the last fiscal year. Equally important, quality
    indicators for the new recruits in the military services are at
    high levels--near record levels, in fact. But this does require
    constant vigilance, given the demands made of this force, and
    we hope that we can work with you over the course of this year
    to make sure that we maintain this strong track record.
        On the management front, we are seeking in this budget
    request a series of statutory changes that will enable us to
    keep some of the most senior officers for longer periods of
    time in their specific jobs, and a few for longer careers, as a
    whole. At the same time, we'd like to streamline some aspects
    of joint officer management while we look to the longer-term
    issues that Congress has asked us to address with the special
    studies now underway.
        We are seeing, for the Reserve components, a more flexible
    set of instruments that we have gathered together under the
    heading of continuum of service, basically allowing us to take
    advantage of the variation in individual circumstances
    pertaining to that individual's ability to serve his or her
    Nation, to participate in Reserve service.
        We are proceeding with implementation of the NSPS. We hope
    to have the first major group of employees under that system at
    the start of fiscal year 2005. We have a Web site on which we
    post developments, and on which we call the public's attention
    to as a source of information as to how that is proceeding.
        We have begun the dialogue, in concert with our Office of
    Personnel Management (OPM) colleagues and with our unions. A
    joint 2-day meeting was held just this last week.
        We are proceeding with the Joint National Training
    Capability that we hope to stand up in its initial version
    during fiscal year 2005 to ensure that we train as we fight.
    The first exercise in that effort was held this past January,
    and, indeed, the participants reported how valuable it can be.
    We would invite members of the subcommittee to visit these if
    you're interested, as we proceed with this exercise regimen. We
    certainly want to make those schedules available to you.
        Defense health is one of the most important programs of the
    DOD. We have a new set of contracts that we think will be more
    effective in both delivering services and in controlling costs.
    We have consolidated the 11 regions we had before to just
    three, which will make it easier for military personnel to use
    the system. There is significant growth in the cost of military
    healthcare, both because of the general increase in healthcare
    costs in our society at large, but also because more people are
    coming back to the military health system as it proves a more
    attractive benefit for retired families.
        The results, the good results, that I can report on today,
    and about which my colleagues can provide you with further
    detail, these results reflect, I think, a very constructive
    partnership between Congress and the executive branch. I hope
    we can continue that constructive partnership, and I look
    forward to working with 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.
        Today's personnel overview is much more than a ``report card'' or a
    request for new legislation. I will be addressing the many ways that we
    are supporting our troops and their families, and the many issues that
    confront them. With your continuing support, I know that we can
    continue to attract and retain the best and brightest, and sustain the
    high quality of our All-Volunteer Force. Our young men and women and
    their families deserve the best we can give them.
        In my overview, I will outline the critical steps we have taken to
    attract and retain talent in our Armed Forces--including targeted pay
    raises and numerous quality of life improvements for the service
    members and their families. Today, I will discuss a number of
    initiatives we are undertaking, such as reducing stress on our forces,
    rebalancing capabilities in the active and Reserve components, building
    a foreign language capability, making military families a top priority,
    and improving Department of Defense (DOD) healthcare management, to
    name but a few.
        Using authorities and flexibility you have provided us, we have
    numerous initiatives underway to improve management of the force, and
    to increase readiness. With your help last year, we are now
    establishing a new National Security Personnel System (NSPS) that
    should help us better manage our 746,000 civilian employees. Similarly,
    we are using the new authorities granted us last year to preserve
    military training ranges while keeping our commitment to responsible
    stewardship of the environment. Flexible authorities that leverage
    readiness best serve our national defense.
        We do face some challenges, such as the growing list of military
    entitlements that do not leverage readiness. With your continuing
    support, however, I am confident we can appropriately compensate our
    service members and their families for their sacrifices, yet maintain
    fiscal integrity.

                                  END STRENGTH

        Reducing stress on our forces is a top priority. Some have called
    for a permanent increase in end strength. We do not believe this is
    wise. We continue to review the adequacy of our military capabilities
    to ensure that we meet our Nation's security needs. End strength is a
    critical determinant of capability, but only one of many other factors.
    A permanent increase is not in the Nation's long-term interest. We have
    a number of other initiatives underway to increase our near-term and
    long-term capabilities while relieving near-term stress on the force.
        The Services have begun converting 10,000 military positions to
    civilian in fiscal year 2004 and have programmed an additional 10,000
    conversions for fiscal year 2005. The military end strength made
    available from these conversions will be used by the Army, Air Force,
    and Marine Corps to significantly improve long-term military capability
    and reduce stress on the active and Reserve components. The Navy's
    military-to-civilian conversions will result in military end strength
    reductions and substantial cost savings, thanks in part to fleet
    modernization.
        Moreover, by employing transformational force management practices,
    the Services can perhaps achieve the greatest degree of flexibility in
    utilizing the total force, while reducing both the stress on critical
    career fields and the need for involuntary mobilization. Force
    rebalancing, continuum of service, reach-back operations, rotational
    overseas presence, and improvements in the mobilization process can
    help to ensure that the Services have quick access to individuals with
    the skills and capabilities required for both emergency operations and
    sustained, day-to-day activities.
        Given the flexibilities the law accords to the Secretary and the
    military departments, adequate temporary end strength increases can be
    pursued as necessary. As you will recall, Congress amended title 10 in
    the National Defense Authorization Act for Fiscal Year 2003 to allow
    the Secretary to temporarily exceed end strength by 3 percent instead
    of the previous 2 percent authority. Such temporary authority provides
    an efficient and timely way to meet Service requirements. The Army is
    using this flexibility while it continues current operations and
    reconfigures for future engagements. We anticipate that the requirement
    for this end strength ``spike'' will dissipate as the global war on
    terrorism military manpower needs abate, the Army transition
    stabilizes, and our other initiatives take effect.
        The United States can afford whatever military force level is
    necessary and appropriate to ensure our national security, but adding
    permanent military end strength should be the last choice . . . not the
    first. The costs are sizable over the lifetime of each added service
    member. Further, it takes time to recruit, train, and integrate new
    military personnel--the desired results will not materialize in the
    short run. Additionally, the funds required for a permanent increase in
    military end strength would crowd out funding for the transformational
    capabilities that are essential for our future security and offer the
    best way to reduce stress on both our current and future forces.
    Consequently, we should focus our efforts on making better use of our
    existing end strength so that we can reduce stress on the force while
    concomitantly increasing our capability.

                             REBALANCING THE FORCE

        The Reserve components are making significant and lasting
    contributions to the Nation's defense and to the global war on
    terrorism while the DOD transforms to a more responsive, lethal, and
    agile force. However, it has become evident that the balance of
    capabilities in the active and Reserve components is not the best for
    the future. There is a need for rebalancing to improve the
    responsiveness of the force and to help ease stress on units and
    individuals with skills in high demand.
        Ensuring we have the right balance of our capabilities requires a
    multifaceted approach by the DOD--no single solution will resolve the
    challenges faced by the Services. To achieve this goal, we have engaged
    in a cohesive rebalancing strategy to achieve the right force mix. The
    strategy consists of the following points:

             Move later deploying active component (AC) forces
            forward in operations plans and early deploying Reserve
            component (RC) forces later in the plan; shift assets among
            combatant commanders.
             Introduce innovative management techniques (such as
            enhanced volunteerism, expanded use of reachback, and
            streamlining the mobilization process to improve
            responsiveness).
             Rebalance capabilities by converting lower priority
            structure to higher priority structure both within and between
            the AC and RC.

        Through a comprehensive rebalancing strategy, we will gain added
    efficiencies from the existing force structure that may preclude any
    necessity to increase force end strength. The rebalancing strategy has
    as its objectives: to enhance early responsiveness by structuring
    forces to reduce the need for involuntary mobilization during the early
    stages of a rapid response operation; to spread mobilizations/
    deployments across career fields by structuring forces to achieve
    reasonable and sustainable rates; and to employ innovative management
    practices. By employing innovative force management practices, the
    Services can perhaps achieve the greatest degree of flexibility in
    utilizing the total force, while reducing repeated use in certain
    career fields and the need for involuntary mobilization.
        Rebalancing efforts will not happen overnight. This process will be
    iterative and ongoing, as demands on the total force change and new
    requirements demand different skill sets. Already, in 2003, the
    Services have rebalanced some 10,000 positions within and between the
    AC and RC. For example, the Army is transforming 18 Army Guard field
    artillery batteries into military police (MPs). We intend to expand
    those efforts this year by rebalancing an additional 20,000 positions
    and will rebalance another 20,000 in 2005--for a total of 50,000
    rebalanced positions by the end of next year. Rebalancing is planned
    for such critical fields as civil affairs, psychological operations,
    chemical, Special Operations Forces, intelligence, and MPs. Indeed, we
    are accelerating the creation of 19 MP provisional units through
    conversions.

                  ACTIVE DEPLOYMENT AND RESERVE MOBILIZATIONS

        Since the beginning of the global war on terrorism, approximately
    171,250 active duty members have been deployed (Operation Enduring
    Freedom (OEF) and Operation Iraqi Freedom (OIF)). As of December 31,
    2003, 1,423,341 service members were on active duty.
        In the Reserve components, 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. As of 31 December
    2003, we had mobilized 319,193 Reserve personnel, since the beginning
    of the global war on terrorism, 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 31 December 2003, there were 181,459 mobilized under 10 USC
    Sec. 12302.

             Army National Guard: 91,079
             Army Reserve: 65,079
             Air National Guard: 6,420
             Air Force Reserve: 9,376
             Navy Reserve: 1,562
             Marine Corps Reserve: 6,774
             Coast Guard Reserve: 1,169

    Managing Force Capabilities in High Demand Skills
        With the global war on terrorism and the ongoing mobilization of
    Guard and Reserve members, we are monitoring the capabilities in the
    RCs that are in high demand. We have identified actions necessary to
    reduce the demand on these capabilities, where necessary.
        About 320,000 RC members have been called to active duty in support
    for the global war on terrorism since September 11, 2001. To assess the
    capabilities that are projected to be in demand as we prosecute the war
    on terrorism, the DOD has conducted an analysis of what elements of the
    RC have been called-up--evaluating that usage in terms of:

             Frequency of call-up--the number of times members have
            been called to active duty since 1996,
             Percentage of available pool--what percent of the RC
            force has already been used to support current operations, and
             Duration--how long the members served when they were
            called-up.

        Frequency of call-up--to date, a relatively small number of RC
    members have been called up in support of the current operation who
    were called up for other contingency operations in the last 8 years.
    Less than 12,000 out of the 876,000 members in the Selected Reserve (or
    just over 1 percent) have been called up in support of multiple
    contingencies since 1996. Another 16,000 (or about 2 percent of the
    Selected Reserve) have been called up more than once for the global war
    on terrorism. Overall, the frequency of call-ups does not indicate an
    excessively high demand on the Reserve Force at this time.
        Percent of available pool--Through December 2003, 36 percent of the
    Selected Reserve Force was mobilized in just over 2 years of this
    operation. However, the usage rate is not consistent across the force.
    Some career fields--like force protection assets, civil affairs,
    intelligence, and air crews--have been used at a much higher rate.
    Other career fields--like medical administration, legal, and dental
    care--have been used at a much lower rate. Currently, the utilization
    is concentrated in about one-fourth of officer career fields and about
    one-third of the enlisted career fields; furthermore, the highest
    utilization is concentrated in a relatively small number of selected
    career fields.
        Duration--Tour lengths for RC call-ups have increased for every
    operation since Operations Desert Shield/Desert Storm. The average tour
    length for Operations Desert Shield/Desert Storm was 156 days. For
    operations in Bosnia, Kosovo, and Southwest Asia, tours were for about
    200 days. For those members who have completed tours of duty during the
    current contingency, tour lengths have averaged about 320 days. To
    mitigate the depletion of the available pool of Reserve assets, the DOD
    policy is to utilize volunteers to the maximum extent possible. RC
    members will not serve involuntarily more than 24 cumulative months.
    Continuum of Service
        We are in our second year of implementing a new approach in force
    management called ``continuum of service.'' The continuum of service
    will facilitate varying levels of participation and enable military
    personnel to move back and forth between full-time and part-time
    service. Particularly for reservists, this approach would make it
    easier for them to voluntarily move up to full-time service for a
    period of time, or into a participation level somewhere between full-
    time and the traditional 38 days of Reserve training each year. Or it
    would allow them to move in the other direction--fewer days of
    participation as their circumstances dictate. Similarly, an active
    service member could move into a RC for a period of time, without
    jeopardizing his or her career and eventual opportunity for promotion.
    Just as the continuum of service model encourages volunteerism among
    the standing force, it also creates opportunities for military retirees
    and other individuals with specialized skills to serve on a more
    flexible basis, if their skills are needed.
        The continuum of service model has a number of important
    advantages: in addition to capitalizing on volunteerism, it will
    enhance the ability of the Armed Forces to take advantage of the high-
    tech skills many reservists have developed by virtue of their private
    sector experience--while at the same time creating opportunities for
    those in the Active Force to acquire those kinds of skills and
    experiences. It improves our capability to manage the military
    workforce in a flexible manner, with options that currently exist only
    in the private sector. Finally, there are certain skills that are hard
    to grow or maintain in the full-time force, but may be ideally suited
    for part-time service in a RC, such as certain language skills and
    information technology specialties. The continuum of service can
    provide the opportunity for highly-trained professionals to serve part-
    time and provide a readily available pool of these highly-specialized
    individuals who would be available on an as-needed basis.
        There are several areas in which we need your assistance to
    implement the continuum of service. They include providing more
    consistency in management and accounting of reservists serving on
    active duty, providing greater flexibility in using inactive duty for
    reach-back and virtual duty, allowing for an alternative military
    service obligation and streamlined basic training for certain
    individuals accessed into the force with unique civilian acquired
    skills, and providing the authority to establish auxiliaries for the
    Army, Navy, and Marine Corps, modeled after the very successful Coast
    Guard Auxiliary. These modest, but significant changes will help the
    DOD optimize the use of the force and facilitate volunteerism, thus
    reducing the need to involuntarily call-up Guard and Reserve members.
    Legislative proposals to effect these changes will be forwarded to
    Congress for your consideration.
    Balancing Critical National Security Resources
        To preclude conflicts between Ready Reserve members' military
    mobilization obligations and their civilian employment requirements
    during times of war or national emergency, the DOD conducts a
    continuous ``screening'' program to ensure the availability of Ready
    reservists for mobilization. Once a mobilization is declared--as
    occurred on September 14, 2001--all screening activities cease and all
    Ready Reserve members are considered immediately available for active
    duty service. At that 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, 2001, the DOD 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 DOD established a
    special exemption process to help accomplish overall national security
    efforts. As of December 31, 2003, we have processed 263 requests from
    civilian employers to delay or exempt a reservist-employee from
    mobilization. We approved 98 requests for exemptions, 90 reservists
    were authorized a delay in reporting to give the employer time to
    accommodate the pending mobilization of the employee, and 75 requests
    were denied. We continue to receive exemption requests as additional
    reservists are identified for mobilization and process them as
    expeditiously as possible.
    Employer Support of the Guard and Reserve
        Employer support for employee participation in the National Guard
    and Reserve is absolutely critical to recruiting and retaining quality
    men and women into our Reserve Forces. Building employer support
    requires a strong network comprised of both military and civilian-
    employer leaders, capable of fostering communication, education and an
    exchange of information. Employers' understanding of their legal
    requirements concerning support for Guard and Reserve employees is
    imperative.
        The National Committee for Employer Support of the Guard and
    Reserve (ESGR) is the DOD's primary office for outreach and education
    to employers. ESGR coordinates, trains, funds, and directs the efforts
    of a community-based national network of over 4,200 volunteers,
    organized into 55 committees located in every State, the District of
    Columbia, Guam, Puerto Rico, the Virgin Islands and in Europe. ESGR has
    developed and implemented new training programs for their volunteers,
    planned new industry symposia to bring together industry segments with
    military and DOD leaders, expanded their presence at industry
    conferences, and further developed and enhanced their partnerships with
    the National Chamber of Commerce, State and local Chambers of Commerce,
    and local and national human resource organizations.
        Although we established a Guard and Reserve Employer Database in
    late 2001 in which reservists could voluntarily provide information
    about their civilian employers, we were having limited success in
    populating the database. However, information about the civilian
    employers of reservists is necessary for the DOD to meet its statutory
    responsibilities to consider . . . ``civilian employment necessary to
    maintain national health, safety, or interest'' (10 USC, Sec. 12302) .
    . . when determining members to be recalled, especially members with
    critical civilian skills and to inform employers of reservists
    concerning their rights and responsibilities under the Uniformed
    Services Employment and Reemployment Rights Act (USERRA).
        Last year we began laying the groundwork for a mandatory reporting
    program. That effort will culminate with the rollout of a new Civilian
    Employment Information (CEI) program this spring. Under the CEI
    program, reservists will be required to provide information about their
    employers. We have been working closely with the Services and the RCs
    in the development of this program to ensure we protect the privacy of
    reservists with respect to the use of this information on their
    civilian employers. For example, we would not directly contact an
    employer about an individual reservist unless the reservist asked for
    our assistance with an employer issue. But we could work with an
    employer as part of our broader efforts to inform all employers about
    the Guard and Reserve.
        Populating the Guard and Reserve Employer Data Base is critical in
    order to clearly focus employer outreach efforts. It will enable us to
    work closely with the civilian employers who are directly affected by
    the mobilization of reservists. The use of this program will also
    assist in other research projects we have undertaken to determine if
    and when significant problems with employers are emerging.
    Understanding the challenges civilian employers must address will help
    us identifying steps we can take that will be most beneficial to them--
    strengthening our employer support program and making service in the
    Guard and Reserve easier for our members.
    The Value of the Reserve Components
        The fiscal year 2005 Defense budget recognizes the essential role
    of the RCs in meeting the requirements of the National Military
    Strategy (NMS). It provides $31.3 billion for RC personnel, operations,
    maintenance, military construction, and procurement accounts, which is
    approximately 1 percent above the fiscal year 2003 appropriated level.
    This represents 8.3 percent of the overall DOD budget, providing a
    great return on the Nation's 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 nearly 862,900 Selected Reserve personnel
    requested in the President's budget. The Selected Reserve consists of
    the following: Army National Guard 350,000; Army Reserve 205,000; Naval
    Reserve 86,000, Marine Corps Reserve 39,600, Air National Guard
    106,700, and Air Force Reserve 75,600, Coast Guard Reserve 11,000
    (funded by the Department of Homeland Security (DHS)). Our total Ready
    Reserve, which also includes the Coast Guard Reserve, Individual Ready
    Reserve (IRR), and Inactive National Guard is 1,188,074 personnel.

                              ENTITLEMENTS GROWTH

    Military Compensation
        Sound compensation practices are essential to attracting and
    retaining the caliber of individuals needed for a robust All-Volunteer
    Force. With the support of Congress, we have made great progress over
    the last few years in improving our members' basic pay. Since fiscal
    year 2000, basic pay has increased 29 percent. Particularly noteworthy,
    mid-grade noncommissioned officers, who represent the core of
    experience and talent in our military services, have seen their pay
    increase an average of 35 percent.
        Likewise, we applaud Congress' continued support for reducing
    military members' out-of-pocket housing costs, which stood at nearly 18
    percent in fiscal year 2000. Through Basic Allowance for Housing (BAH)
    increases during each of the past few fiscal years, we will achieve our
    goal of totally eliminating average out-of-pocket housing costs with
    this year's President's budget.
        To capitalize on our successes in recruiting and retention and
    sustain that momentum, we must continue to invest in items that
    leverage readiness. Authorities for flexible compensation tools enable
    the DOD to tailor incentives to respond to specific readiness demands
    and provide the capacity to efficiently start and stop them. For
    example, we are seeking an increase in the ceiling for Hardship Duty
    Pay, which will furnish the DOD with the ability to compensate
    appropriately members who are repeatedly deployed away from their
    families and placed in harm's way in support of contingency operations.
    Additionally, increased use of the recent Assignment Incentive Pay
    (AIP) authority will provide a viable means of incentivizing hard-to-
    fill duty stations, such as Korea and other remote locations, which
    directly impacts unit readiness in a positive way.
        Conversely, we discourage the expansion of entitlements and the
    creation of new ones that do not leverage readiness. For example,
    TRICARE for non-active reservists and their families could have a long-
    term fixed cost of $1 billion annually with little payoff in readiness.
    The phase-in of concurrent receipt for retirees with at least a 50-
    percent disability and expansion of the Combat-Related Special
    Compensation program, while not directly reflected in the DOD's budget,
    will cost $6.1 billion a year within 10 years ($4.1 billion from the
    DOD retirement fund and $1.5 billion from Veterans' Administration
    entitlements), funds that could potentially be applied to areas that
    better address national security needs. The chart below illustrates the
    growth in the cost of recent new entitlements since 2000, projected out
    to 2010.

        This year, we understand Congress may be considering additional
    expansions of entitlements programs, such as lowering the age Reserve
    retirees receive their annuity from 60 to 55. Preliminary, rough
    estimates indicate that this could cost $6.6 billion in payments,
    nearly $4 billion in added health care costs, and $14 billion in
    Treasury outlays over the next 10 years. Yet, we have no evidence this
    would help shape the force or improve readiness; most reservists who
    would immediately benefit are already retired. Proposals to eliminate
    the reduction in survivor benefits that takes place at age 62, from 55
    percent to 35 percent of military retired pay, when social security
    provides the difference, could cost $800 million the first year and
    exceed $1 billion per year within 5 years. A 5-year phase-in has been
    scored by Congressional Budget Office (CBO) to cost $7 billion over 10
    years. The phase-in of concurrent receipt, if expanded to full
    concurrent receipt, would equal $8.4 billion a year within 10 years
    (almost 40 percent greater than the newly-passed benefits).
        More long-term entitlements are not the answer to our readiness
    issues. We need flexible compensation and benefit authorities that can
    focus benefits to support members deployed to a theater of hostilities,
    as well as their families, and can be terminated when no longer
    necessary. We firmly believe authorities of the type that leverage
    readiness best serve the national defense.
    Military Health System (MHS) Funding
        Defense Health Program (DHP) costs continue to rise, reflecting
    increased utilization by beneficiaries returning to the MHS for their
    care. In 2003, the DHP experienced a 7 percent increase in new users;
    we anticipate that the growth rate in 2004 will also be 7 percent.
    These growth rates reflect healthcare increasing costs in the private
    sector and the consequent election of MHS-eligible beneficiaries to
    return to TRICARE. Activation of Reserve component members brings
    additional eligible beneficiaries to the MHS.
        The DOD has initiated several management actions to use resources
    more effectively and thus help to control the increasing costs of
    healthcare delivery. The MHS will implement performance-based budgeting
    that focuses on value rather than cost of healthcare. An integrated
    pharmacy benefits program including a uniform formulary based on
    relative clinical and cost effectiveness is being established. Federal
    pricing of pharmaceuticals in the TRICARE retail pharmacy program will
    be used to generate significant cost avoidance. Utilization management
    programs continue to ensure that all provided care is clinically
    necessary and appropriate.
        We need your assistance by restoring the flexibility to manage DHP
    resources across budget activity groups. Our new healthcare contracts
    use best-practice principles to improve beneficiary satisfaction and
    control private sector costs. Our civilian partners must manage their
    enrollee healthcare and can control their costs by referring more care
    to our military treatment facilities (MTFs), or our direct care system.
    In concert with the new contracts, we will implement a Prospective
    Payment System to create the financial incentive for our MTFs to
    increase productivity and reduce overall costs to the DOD; funds will
    flow back and forth from the MTFs to the private sector. Currently,
    MTFs' revised financing funds are in the private sector budget activity
    group. Fencing DHP funds not only prevents transfer of funds from MTFs
    to the private sector, but also prevents transfer of private sector
    funds to the MTFs. Fencing DHP funds does not allow MTFs to use these
    revised financing funds to increase their productivity and workload
    without prior approval reprogramming. We understand and appreciate that
    the congressional intent was to protect direct care funding; however,
    fencing the DHP funds will adversely affect both the MTFs and care in
    the private sector. We urge you to allow the MTFs and the MHS to manage
    the DHP as an integrated system. Funds must be allowed to flow on a
    timely basis to where care is delivered. Reprogramming is a 3 to 6
    month process.
    Reserve Health Benefits
        In addition to the enhanced benefits the DOD offered to activated
    RC members and their families during 2003, the fiscal year 2004 DOD
    Supplemental Appropriations Act included even more new benefits. The
    new temporary Reserve Health program offers us the ability to assess
    its benefits after the trial period is over. We will look to see if
    they adequately enhanced access to care for our RC members and their
    families and improves our readiness as a fighting force. Assuring the
    medical readiness of reservists when they are called to active duty
    registers as one of our highest priorities. Plus, providing excellent
    benefits to the families of activated reservists and supporting them in
    the transition to and from active duty are vitally important
    responsibilities. Looking to the future, we need to proceed cautiously
    in considering costly new entitlements for reservists who have not been
    activated. A key issue would be the effect of a new entitlement on
    recruitment and retention of both Reserve and active duty component
    members.

                    IMPROVING MILITARY PERSONNEL MANAGEMENT

    Recruiting
        The success of our All-Volunteer Force starts with recruiting.
    During fiscal year 2003, the military services recruited 178,350 first-
    term enlistees and an additional 6,528 individuals with previous
    military service into their active duty components, for a total of
    184,878 active duty recruits, attaining over 100 percent of the DOD
    goal of 184,366 accessions.
        The quality of new active duty recruits remained high in fiscal
    year 2003. DOD-wide, 95 percent of new active duty recruits were high
    school diploma graduates (against a goal of 90 percent) and 72 percent
    scored above average on the Armed Forces Qualification Test (versus a
    desired minimum of 60 percent).
        In the RCs, during fiscal year 2003, 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 AC and RC, except the Army National Guard, achieved their accession
    goals.
        We are closely monitoring the effects of mobilization on recruiting
    and retention, especially for the RCs. The Reserve end strength
    objective for fiscal year 2003 was achieved. Despite a recruiting
    shortfall, the Army National Guard did achieve its end strength, thanks
    to low attrition. The recruiting picture for the Army National Guard is
    much better through the first quarter of fiscal year 2004--achieving
    102 percent of mission thus far.
        We are optimistic that all Services will achieve their active duty
    recruiting goals this fiscal year. All Services entered fiscal year
    2004 with a sizable delayed entry program, and all Services are ahead
    of their year-to-date goals for active duty recruiting. Unlike the AC,
    the RCs do not routinely contract recruits for accession into a future
    period. So, while the ACs entered fiscal year 2003 with healthy delayed
    entry programs, the RCs must recruit their entire goal in this current
    fiscal year.
        The trend of an increasing percentage of RC recruits without prior
    military service continues. Approximately 50 percent are now expected
    to come directly from civilian life. This is a result of high AC
    retention contributing to lower IRR populations.
        For 2004, all RCs are continuing to focus their efforts on
    maintaining aggressive enlistment programs by using 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 RCs 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 RCs will increase their efforts
    to manage departures. All RCs are achieving success in retention, with
    year-to-date attrition well below previous years.
        The Services accessed 17,909 commissioned officers to active duty
    in fiscal year 2003. The Marine Corps met its numerical commissioning
    requirement, with the Army and Navy finishing the year within 1.5
    percent of their requirement. The Air Force finished with a shortfall
    of 4 percent, almost exclusively in medical specialty direct
    appointments. In fiscal year 2004, active duty officer accessions are
    on track in all Services for numerical success this year. In fiscal
    year 2003, the RCs reduced the shortfall of junior grade officers by
    adding an additional 1,455 officers to the force.
    Retention
        In fiscal year 2003, retention was good. Services met virtually all
    of their retention goals. The Marine Corps barely missed its goal for
    retaining first-term personnel and the Air Force fell slightly short of
    its goal for retaining individuals in their second term of service.
    Despite extended deployments, long separations, and dangers of combat,
    soldiers are staying with the Army. This year's fiscal year outlook
    remains optimistic as evidenced by our first quarter achievements.

    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                              Fiscal Year      Fiscal Year
           Active Duty Enlisted Retention, 1QTR Fiscal Year 2004            Reenlisted      1st QTR Goal   Percent of Goal     2004 Goal        2005 Goal
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Army
      - Initial........................................................            6,121            6,141     99.7 percent           23,000           19,949
      - Mid Career.....................................................            5,046            5,276     95.6 percent           20,292           23,528
      - Career.........................................................            3,411            3,330    102.4 percent           12,808           11,881
    Navy
      - Zone A.........................................................     63.1 percent       56 percent         Exceeded       56 percent    Not available
      - Zone B.........................................................     76.3 percent       70 percent         Exceeded       70 percent    Not available
      - Zone C.........................................................     88.5 percent       85 percent         Exceeded       85 percent    Not available
    Air Force
      - 1st Term.......................................................       67 percent       55 percent         Exceeded       55 percent       55 percent
      - 2nd Term.......................................................     75.5 percent       75 percent         Exceeded       75 percent       75 percent
      - Career.........................................................     97.5 percent       95 percent         Exceeded       95 percent       95 percent
    Marine Corps
      - 1st term.......................................................            4,351            3,813      114 percent            5,958            5,850
      - Subsequent.....................................................            2,299            1,407      164 percent            5,628            5,900
    --------------------------------------------------------------------------------------------------------------------------------------------------------

        The Services are adequately resourced to meet their retention goals
    provided the tempo and economic conditions remain at the same level as
    the last fiscal year. We will be monitoring retention carefully should
    the tempo increase further, or if economic developments require us to
    consider implementing additional incentives.
    Joint Officer Management (JOM)
        The mission requirements of the military are more focused on joint
    tasks; in fact, Joint Task Forces now define the way in which we array
    our forces for war and that has filtered down into our training
    methods. Military organizational structures have evolved to meet these
    new joint warfighting requirements. The DOD's management processes for
    joint duty assignments, education and training are governed by the 1986
    Goldwater-Nichols Act.
        Although we have experienced profound success, the operating
    environment we face has changed since the early days of the Goldwater
    Nichols Act. In response, the DOD is refining our strategic plan for
    joint officer management, education and training, and is using the
    ongoing, congressionally-mandated, Independent Study of Joint
    Management and Education to help evaluate and validate how we best meet
    the challenges of the early 21st century.
        We look forward to working with Congress in strengthening joint
    management and training. As a modest start, we are proposing several
    administrative reforms to simplify and streamline processes and program
    requirements: modifying the definition of a ``tour of duty'' to count
    multiple consecutive joint tours as one continuous tour; modifying
    annual reporting requirements by adding more meaningful metrics for
    measuring joint compliance; allowing the accomplishment of Phase II
    Joint Professional Military Education (JPME) in less than 3 months; and
    making permanent the joint promotions policy objective for the ``other
    joint'' category, which includes Joint Staff Officers (JSOs), to
    greater than or equal to the Service board average.
        The DOD is assessing the entire career continuum of officer
    education and training, including joint requirements, 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, and we are moving quickly to match
    policy to today's operational environment. We seek Congress' assistance
    in making these changes in law that might be necessary to support those
    common objectives.
    Building a Foreign Language Capability
        Lessons from current operations and the global war on terrorism
    have demonstrated the need for increased language ability and
    accompanying area knowledge within our Armed Forces, and an increased
    emphasis on languages reflective of the post-Cold War threat.
        We need to change the way foreign language expertise is valued,
    developed and employed within the DOD, and language needs to be viewed
    as a military readiness capability. For present and future operations,
    we need members of the Armed Forces who can understand and communicate
    in languages other than English. This includes service members with
    language ability more sophisticated than that routinely achieved
    through our current language training and public and private education
    systems. We need a way to equip deploying forces with a sufficient
    ability to communicate in the language of the land. We also need a plan
    for surging capability beyond that of the military forces, when
    required. We need service members and leaders who understand the
    complexities of languages and cultures in a global society.
        Much work needs to be done in this area, and we have engaged a
    number of studies to inform our decisions. We have already initiated
    the development and employment of crash courses for troops deploying to
    Iraq. The Army is executing a pilot IRR program that targets the
    enlistment of Arabic speakers for support as linguists.
        With over 1,300 faculty and 3,800 students, the Defense Foreign
    Language Institute's Foreign Language Center (DLIFLC) is the world's
    largest foreign language school--and our primary source of language
    instruction. An oft-quoted statistic is that DLIFLC has more faculty
    teaching DOD's five highest enrollment languages than all U.S. students
    graduating in those languages nationwide. It is an institution whose
    product--a language qualified graduate--is critical to global U.S.
    military operations. Our first area of emphasis is to ensure that this
    school house can support our language capability requirements.
        Our fiscal year 2005 goal is to ensure the center can meet critical
    requirements by teaching basic language to troops prior to deployment,
    to improving training development, and to improving the capability to
    produce linguists with an advanced degree of language competence.
    Rest and Recuperation (R&R) Leave
        Over 46,000 service members and DOD civilians have participated in
    the R&R Leave Program in support of OIF and OEF. The R&R Leave Program
    is vital to maintaining combat readiness when units are deployed and
    engaged in intense operations. Feedback from Service members
    participating in the R&R Leave Program indicates it is a successful
    program offering service members a respite from hostile conditions, an
    opportunity to leave the area of responsibility (AOR), release stress,
    spend time with their family/friends and return reenergized. R&R Leave
    will continue to be offered to military members and DOD civilians
    deployed in Central Command (CENTCOM) AOR in support of the global war
    on terror at the discretion of the theater commander.
    Citizenship
        The DOD is working closely with the DHS's Citizenship and
    Immigration Service (CIS) to expedite citizenship applications for
    immigrants who serve honorably as members of our Armed Forces.
    Approximately 37,000 active duty and Reserve personnel are non-U.S.
    citizens and approximately 7,000 of these personnel have applied for
    U.S. citizenship. The CIS established a special office in their
    Nebraska Processing Center to expedite military member citizenship
    applications. Section 329 of 8 USC provided an exception where the
    President can authorize immigrants serving in the U.S. Armed Forces
    during times of conflict to apply for citizenship after 3 years of
    honorable service. Public Law 108-87 reduced this waiting period to 1
    year. The average time for processing expedited citizenship
    applications has been reduced from 9 months to approximately 90 days.
    The military services are informing non-U.S. citizen military members
    of the opportunity for expedited citizenship through radio and
    television, press releases and periodic messages through command,
    personnel, legal and public affairs channels. However, finalizing
    citizenship requirements for military members overseas has been
    problematic. We are working with the CIS to expand authority for
    conducting naturalization interviews and swearing-in ceremonies
    overseas. In the meantime, the DOD authorizes emergency leave for
    service members who need to complete citizenship processing, and seeks
    to identify members with pending citizenship applications in order to
    ensure they are processed and finalized before they deploy.
    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 evolving and emerging missions, including joint urban
    operations, joint information operations, stability and support
    operations, and asymmetric warfare. 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, and to integrate them into a
    single, focused capability.
        Transformed training is a key enabler to transforming this fighting
    force--and the Training Transformation (T2) Initiative is vital to the
    DOD's transformation efforts. I am pleased to report that since my last
    testimony to you, the DOD, with your assistance, has made significant
    progress in transforming DOD training to improve joint operations. We
    have developed and implemented three supporting joint capabilities.
    Collectively, these capabilities, when mature, will provide a robust,
    networked, live, virtual, and constructive training and mission
    rehearsal environment that enables DOD to build unparalleled military
    capabilities that are knowledge-superior and adaptable. First, the
    Joint Knowledge Development and Distribution Capability (JKDDC) is
    working to prepare individuals by developing and distributing joint
    knowledge via a dynamic, global-knowledge network that provides
    immediate access to joint education and training resources. Second, the
    Joint National Training Capability (JNTC) is preparing forces by
    providing command staffs and units with an integrated live, virtual,
    and constructive training environment with joint global training and
    mission rehearsal in support of specific operational needs. This
    January, we completed our initial JNTC event at the Western Range
    Complex. It has been deemed a very successful first step with great
    leadership and support from the Services and Joint Forces Command.
    Three additional events will be conducted through the remainder of
    fiscal year 2004. Lastly, the Joint Assessment and Enabling Capability
    will develop and three levels of strategic performance assessment to
    determine: the training value provided by JNTC and JKDDC with regard to
    combatant commander needs; how well training transformation is
    integrated with DOD-wide policies, procedures, and information systems;
    and to what degree are the outcomes of training transformation aligned
    with the DOD's strategic transformation goals.
        It is not easy to plan and execute complex joint combat operations
    when the Services have not fully trained in accomplishing those tasks.
    Consequently, during the January JNTC event, our forces honed their
    warfighting skills in joint close air support and other challenging
    joint tactical tasks that were used on the battlefields of Afghanistan
    and Iraq. Admiral Edmund G. Giambastiani, Commander, U.S. Joint Forces
    Command, said it best when he reflected on the importance of JNTC--
    ``What the joint community has been able to do with the JNTC is begin
    the second wave of training transformation--where we can now link the
    service training ranges with forces around the country--and in time,
    around the world--to a common joint environment at the operational
    level. In a sense, this new training transformation is producing `Born
    Joint Training' that seamlessly brings together a combination of live,
    virtual, and constructive capabilities to create a common joint
    training environment. An important aspect of the JNTC is that it also
    avoids any additive requirements to Service training. . . .''
        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 prior to
    their deployment. Our focus is to prepare for joint operations so that
    we never conduct an operation for the first time in combat.
    Range Sustainment
        Continued and assured access to high-quality test and training
    ranges plays a critically important role in sustaining force readiness
    levels. The DOD has increasingly come to recognize that encroachment
    issues may limit the military's ability to train as they expect to
    fight. Urban sprawl, loss of frequency spectrum, restrictions on air
    space, and endangered species--related restrictions on training lands
    may cause some restrictions on training. Such constraints force the
    Services to alter or compromise training regimens. Over the past
    several years, we have discussed these problems with Congress, and we
    appreciate your concern and assistance in achieving meaningful
    solutions. We will continue to work closely with you as we grapple with
    how best to sustain our training capabilities at the same time we seek
    to transform our Armed Forces.
        The DOD Range Sustainment Initiative is pursuing a comprehensive
    solution to encroachment pressures on test and training ranges. The
    initiative addresses policy, organization and leadership, programming,
    outreach, and legislative clarification. In addition, the DOD has
    initiated a significant compatible land use and buffer zone planning
    effort intended to mitigate further range encroachment based on
    authorities provided to the DOD in the National Defense Authorization
    Act for Fiscal Year 2003.
    Sexual Assault
        Sexual assault will not be tolerated in the DOD--that message is
    clear throughout the chain of command. It is a crime that is punishable
    under the Uniform Code of Military Justice (UCMJ). Commanders at every
    level have a duty to take appropriate steps to prevent it, to protect
    victims, and hold those who commit such offenses accountable.
        Each of the Services has sexual assault policies for the health
    care support of victims. This support is available to service members
    both in the United States, at overseas duty stations, and in the
    current deployment theater.
        Last summer the Fowler Panel, an independent panel, investigated
    allegations of sexual misconduct at the Air Force Academy (AFA). Their
    report made recommendations with a single priority in mind: the safety
    and well-being of the women at the AFA. Air Force senior leaders are
    implementing those recommendations now. In addition, the Defense Task
    Force on Sexual Harassment and Military Service Academies will assess
    and make recommendations, including any recommended changes in law,
    relating to sexual harassment and violence at the United States
    Military and Naval Academies.
        However, prevention through education, review and reinforcement of
    what constitutes sexual assault and related crimes, and their
    consequences is key. Development and sustainment of working
    environments that instill trust among all members must begin at the
    lowest level of leadership and continue to the top of the DOD. My
    Deputy Assistant Secretary of Defense for Force Health Protection and
    Readiness, Ellen Embrey, now leads a Secretary of Defense-appointed
    task force to ensure proper command climate and infrastructure support
    is in place to safeguard the victims of sexual assault.
    Domestic Violence/Victims Advocacy
        As with sexual assault, domestic violence will not be tolerated in
    the DOD. It is an offense against our institutional values and
    commanders at every level have a duty to take appropriate steps to
    prevent it, protect victims, and hold those who commit them
    accountable.
        The DOD continues to make significant progress in addressing the
    issue of domestic violence within military families. We remain
    committed to implementing the recommendations made by the Defense Task
    Force on Domestic Violence and have made major strides toward that
    goal. Our efforts encompass a range of activities including legislative
    and policy change, training for key players in our efforts to prevent
    and effectively respond to domestic violence, and collaboration with
    civilian organizations.
        We worked closely with Congress last spring and summer to create or
    change legislation pertaining to transitional compensation for victims
    of abuse, shipment of household goods for abused family members, and a
    fatality review in each fatality known or suspected to have resulted
    from domestic violence or child abuse. These changes are reflected in
    the National Defense Authorization Act for Fiscal Year 2004.
        The DOD has partnered with the Office on Violence Against Women of
    the Department of Justice (DOJ) for several joint initiatives that
    include training for law enforcement personnel, victim advocates,
    chaplains, and fatality review team members. As a part of our
    collaboration with the DOJ, we are conducting demonstration projects in
    two communities near large military installations. The goal of the
    projects is to develop a coordinated community response to domestic
    violence focusing on enhancing victim services and developing special
    law enforcement and prosecution units. We know that military and
    civilian collaboration is critical to an effective response to domestic
    violence since the majority of military members and their families live
    off the installations.
        The DOD partnered with the Battered Women's Justice Project and the
    National Domestic Violence Hotline to conduct training for the hotline
    staff to provide information about the military to enhance hotline
    staffs' ability to assist military related victims who contact the
    hotline. We are also working with the Family Violence Prevention Fund
    to develop a comprehensive domestic violence public awareness campaign
    that will be disseminated throughout the DOD.
        We have initiated implementation of 45 of the nearly 200 task force
    recommendations, focusing on recommendations pertaining to victim
    safety and advocacy, command education, and training key players who
    prevent and respond to domestic violence such as law enforcement
    personnel, health care personnel, victim advocates, and chaplains.
        We are pleased with the progress we have made but realize there is
    more work to be done. We are working to ensure that the policies we
    implement are viable across all Services both in the continental United
    States and overseas, and minimize the possibility of unintended
    consequences that compromise the safety of domestic violence victims
    and their children. We collaborate closely with those who will be
    responsible for implementing the policies we write to maximize their
    effectiveness across the DOD.

                      IMPROVING DOD HEALTHCARE MANAGEMENT

    The DOD-Department of Veterans' Affairs (VA) Partnership
        We have successfully shared healthcare resources with the
    Department of Veterans' Affairs (VA) for 20 years, but many
    opportunities remain. In the past year, we introduced a common national
    billing rate for our sharing agreements, greatly simplifying
    administrative issues and paving the way for increased agreements at
    the local level.
        In 2003, the President's Task Force to Improve Health Care Delivery
    for our Nation's Veterans outlined a broad and substantive agenda to
    foster even greater collaboration in the coming years. We have taken
    action on a number of the recommendations already. We initiated a joint
    strategic planning process, began the process of electronically sharing
    medical information, identified additional joint contracting
    opportunities, included the VA as network providers in all of our
    TRICARE contracts, and other activities to promote access to quality,
    affordable care for veterans and retirees. In the coming years, greater
    collaboration on our capital planning and facility life-cycle
    management efforts will benefit all of our beneficiaries and the
    American taxpayer.
    TRICARE--The Military Health Plan
        We have initiated a wholesale redesign of how we will organize,
    manage and motivate our health delivery system in service to our
    beneficiaries. In August 2003 we awarded new TRICARE contracts--one
    major piece of our TRICARE redesign.
        Contracts
        The first step in redesign of TRICARE was to simplify. We reduced
    the number of TRICARE regions from 11 to 3. We reduced the number of
    contracts from seven to three; and the three TRICARE regions match the
    geographic span of the three TRICARE contracts. With these new
    contracts, beneficiaries will realize easier access to care, better
    customer service, and enhanced quality of care. The current and future
    contractors have committed to smoothly transition every aspect of their
    responsibilities while maintaining the highest standards of care and
    service. Throughout the transition, we have promised to keep
    beneficiaries well informed.
        We have ``carved out'' some major elements of the old TRICARE
    contracts into separate and discrete contracts. These new contracts
    will leverage the expertise resident in companies whose core competency
    is pharmacy management or claims processing or marketing. With this
    carve out, we have established an integrated pharmacy benefits program
    that includes a uniform formulary based on relative clinical and cost
    effectiveness. The national retail pharmacy contract provides for use
    of Federal pricing of pharmaceuticals and will allow better management
    while improving beneficiary satisfaction by making it easier to obtain
    prescriptions while traveling.
        Governance
        The new organizational structure of TRICARE will transform and
    streamline healthcare management to enhance efficiency, productivity
    and customer service in support of our commitment to the best
    healthcare possible for all entrusted to our care. The restructuring
    will strengthen the delivery system through partnering of our MHS
    personnel and our purchased care contractors. TRICARE Regional
    Directors will integrate military treatment facilities with civilian
    networks, ensure support to local commanders, and oversee performance
    in the region.
        We enlarged the role and responsibilities of medical commanders in
    their local health care markets--the focus for accountability.
    Commanders will better manage services and support to their patients--
    activities previously managed by the TRICARE contractor--including
    patient appointing, utilization management, the use of civilian
    providers in military hospitals and clinics (i.e., resource sharing
    providers), and other local services.
        The central management effort in TRICARE will be to establish and
    then manage toward objectives set in annual business plans; plans
    developed locally and then built into Service and regional plans. The
    new regional directors have a key role in gaining participation of
    providers in TRICARE and in implementing the plan to improve TRICARE
    Standard. This health delivery option has served beneficiaries for over
    35 years and we have underway efforts to improve it for those who
    choose use it. Gaining beneficiary support and satisfying their
    healthcare needs serve as the objectives for which the TRICARE
    contracts and organization are designed.
    Force Health Protection
        The DOD Force Health Protection program is comprised of a broad
    constellation of activities designed to preserve and protect the health
    and fitness of our service members from entrance into the military
    until separation or retirement. Preventive measures, environmental
    surveillance, and advances in military medicine have supported our
    worldwide operations with remarkable results. Despite deployments to
    some of the most austere environments in the world, we have seen the
    lowest rates of non-battle illnesses and injuries in the history of
    warfare. This is the result of increased focus, resources, line
    commitment, and service member education.
        Health assessments
        We ensure a healthy force through high medical standards at the
    time of accession, periodic medical and dental examinations, routine
    and special-purpose immunizations, and ready access to high quality
    healthcare. Learning from the Gulf War, prior to and following
    deployment, service members now receive health assessments to ensure
    they are fit for deployment and to identify any health issues once they
    return from deployment. Deployment health records are maintained in the
    individual's permanent health record and an electronic copy of the
    post-deployment health assessment is archived for easy retrieval and
    research. We have begun an aggressive quality assurance program to
    monitor the conduct of these assessments.
        Immunization programs
        Protecting our forces involves countering potential health threats.
    Among the numerous preventive health measures in place for our service
    members today, we have vital immunization programs. These programs
    offer protection from diseases endemic to certain areas of the world
    and from diseases used as weapons, specifically anthrax and smallpox.
    These vaccines are highly effective and we have based our programs on
    sound scientific information that independent experts have verified.
    They are essential to keep our service members healthy.
        Medical Technology on the Battlefield
        Last year we introduced elements of the Theater Medical Information
    Program (TMIP) and Joint Medical Work Station to OIF. These
    capabilities provide a means for medical units to electronically
    capture and disseminate near real-time information to commanders.
    Information provided includes in-theater medical data, environmental
    hazards, detected exposures and critical logistics data such as blood
    supply, beds and equipment availability. New medical devices introduced
    to OIF provided field medics with blood-clotting capability while
    light, modular diagnostic equipment improved the mobility of our
    medical forces, and protective gear served to prevent injuries and save
    lives.
        Medical hold
        One consequence of the pre- and post-deployment health assessments
    is the identification of more service members as medically unqualified
    for deployment and even for military service. This has generated
    additional Medical Evaluation Board processing than previously
    experienced; it has contributed to the large numbers of service members
    awaiting healthcare and specialty consultations. Another contributing
    factor to the ``medical hold'' issue is the number of RC personnel
    activated who are determined to be medically unqualified for
    deployment. The Army has taken a series of actions to alleviate the
    problem, and has significantly reduced the numbers of individuals in
    this category. We are committed to deploying healthy and fit service
    members and to providing consistent, careful post-deployment health
    evaluations with appropriate, expeditious follow-up care when needed.
        Individual medical readiness
        Among the many performance measures tracked within the MHS is the
    readiness health status of individual members, both active and Reserve
    components. Determining individual fitness for deployment and for
    continued service is an important determination. For the first time,
    the MHS will track individual dental health, immunizations, required
    laboratory tests, deployment-limiting conditions, Service-specific
    health assessments and availability of required individual medical
    equipment. This tracking should assist in alleviating the RC medical
    holdover issues in the future.
        Transition to VA
        After service members return from deployments, healthcare is
    available through military and VA providers. While our collaborative
    efforts with the DVA span the entire MHS, there is no greater
    imperative than to ensure we successfully manage the transition of
    service members from active to veteran status. A significant advance
    was made with the establishment of the Federal Health Information
    Exchange, allowing for the electronic transfer of essential medical
    information. Improved communication and education for service members
    as well as enhanced case management for patients have improved the
    transition to veteran status.
    Readiness Assessment and Reporting
        We are dramatically improving the way we measure the readiness of
    our military units and support structure-finally answering the elusive
    ``ready for what'' question. Our new Defense Readiness Reporting System
    (DRRS) provides a near real time assessment of military capabilities,
    and uses this information to improve the way we plan and manage our
    forces. Our partnerships with United States Pacific Command (PACOM) and
    the Navy have produced working, scalable versions of measurement and
    assessment tools over the past year. PACOM designed the Joint Military
    Assessment Tool to allow organizations from the combatant commander-
    level down to tactical units to assess their ability to perform
    assigned missions. Navy's DRRS-Navy expanded PACOM's effort by
    including nearly all operational naval units and creating the ability
    to view related, output-focused metrics. Over the course of the year,
    we will continue expanding our scope to include key Army units and
    introduce initial scenario assessment tools into the DRRS suite. We
    expect to have an initial operational capability for DRRS by September
    (2004), with a phased implementation throughout DOD over the next 3
    years (2007).

                     RECRUITING AND RETENTION OF CIVILIANS

        I want to take this occasion to again thank the committee and
    Congress for enacting the NSPS in the National Defense Authorization
    Act for Fiscal Year 2004. In developing NSPS, our pledge to you and our
    workforce is this: our civilian employees deserve a flexible personnel
    management system, and we will make sure it's fair.
        The purpose of NSPS is to strengthen the ability of commanders and
    employees to meet their mission requirements in an ever-changing
    national security environment. A commander has three personnel cadres
    with which to perform the mission: military, civilian, and contract.
    The opportunity for the civilian employee and commander to respond
    rapidly to changing requirements is seriously compromised by a rigid
    and fragmented system of civilian personnel management. Additionally,
    motivation is key to employees performing well on the job and we must
    change the recognition system to respond to employee concerns that good
    work is not recognized as it should be. A rigid, slow system of
    personnel management does not motivate our employees to do their best.
    Installation commanders have to meet a number of mission objectives and
    these objectives are constantly changing. NSPS will allow us to develop
    a more rational personnel management system, provide employees new
    opportunities, and give commanders and managers more flexibility to
    accomplish the mission.
        In a government-wide survey, DOD employees made it clear that the
    current personnel system is not working even though they like their
    work, believe they do it well, and have a good work-life balance.
    However, only 47 percent said they are satisfied with the recognition
    they receive for doing a good job, only 40 percent said that creativity
    and innovation are rewarded, only 32 percent said that the awards
    programs provide an incentive to do their best, only 31 percent said
    they are satisfied with the opportunity to get a better job in the
    organization, and only 26 percent said that steps are taken to deal
    with poor performers. We can and should do better than that; NSPS gives
    us that opportunity.
        How are we doing in implementing NSPS? We begin with the following
    tenets:

             We recognize that a new system that is both fair and
            perceived to be fair is essential to the accomplishment of our
            mission.
             We recognize that serious collaboration with
            stakeholders and continuous communication with employees is
            critical to making the new system work.
             We recognize, as the law prescribes, that NSPS must
            preserve basic employee protections, including merit
            principles, veterans' preference, anti-discrimination rules,
            due process, prohibited personnel practices, and the right to
            join unions and bargain.

        We are committed to implementing NSPS fairly and responsibly. We
    have established a cross-component program management office to guide
    implementation. In January, we met with union representatives to begin
    the development of a new system of labor-management relations. In
    February, we provided the unions, upon their request, a concept paper
    to begin the dialogue and collaborative process. Last week, we met with
    the unions to discuss these concepts and afford the unions an
    opportunity to provide their concepts. We are close to identifying
    those organizations that will initially participate in NSPS. By the end
    of this calendar year, we plan to begin implementing NSPS within the
    DOD following an intensive training program for supervisors, managers,
    human resources specialists, employees, as well as commanders and
    senior management.

                            TAKING CARE OF FAMILIES

        Military families are a top priority for the DOD, especially those
    impacted by deployment. The DOD is sensitive to the hardships and
    challenges faced by military families when the service member is away
    from home for a long period. Service members perform tough duty in
    austere locations, while their families deal with the stress and
    anxiety associated with extended separations. Current deployments
    necessitate robust support. The military family is an integral
    component of the military community and an essential ingredient in
    military strategy and planning.
        America wants to support its troops and families. Service members
    and families have been almost overwhelmed with the outpouring of
    support. Donations, such as frequent flier miles to help with family
    reunions, special televised tributes, celebrity entertainment, and
    corporate contributions from firms like Home Depot are but a few of the
    ways America has shown support for its troops. This support has been
    key to their continuing good morale.
        Each of the Services has built a highly-responsive family support
    system that incorporates the best resources available to help families
    cope with the demands of military life. Reserve families who live
    across America present a particular challenge. An aggressive effort to
    reach Reserve families is under way.
        Since October 2002, a joint family readiness working group has been
    meeting to share strategies, identify gaps in service and review
    lessons learned. This group has promoted the sharing of best practices
    and pushed to increase mutual support across Service and component
    boundaries. Consequently, we have seen an increase of shared support
    and practices carry down to the lower unit level. The working group
    approach has worked well in facilitating family readiness and creating
    a mutually supportive network focused on the total force.
        Joint collaboration has contributed to widespread increases in
    support to vital family readiness and support programs to help support
    Guard and Reserve families, including the establishment of
    approximately 400 National Guard family assistance centers to augment
    the family support system and Reserve and Guard component inclusion in
    the popular Military OneSource program, which provides 24/7 individual
    and family support. The National Guard has taken the lead for
    supporting families that are geographically isolated from military
    installations, working through 54 state and territory offices to
    provide family support and training. Unit Family Readiness Groups,
    staffed by volunteers, actively maintain communication with families in
    outlying areas through newsletters, Web sites, and direct communication
    to enhance unit-to-family communication.
    Family Assistance Centers
        Family assistance centers have increased operations to
    unprecedented levels to meet family needs. These centers serve as the
    primary delivery system for military family support programs, including
    deployment support, return and reunion, and repatriation for active
    duty, Guard and Reserve members and their families. Family support
    programs assist unit commanders, service members, and families affected
    by deployment and mobilization and directly contribute to mission
    readiness.
        Specifically for Reserve families, there has been a tremendous
    improvement in Reserve family access to resources since the 1991 Gulf
    War. Today, families have multiple sources that may support them while
    their Service member is deployed, and the Services continue to improve
    programs and expand outreach in order to make access to support systems
    even better. Thanks to the National Guard Bureau, over 400 family
    assistance centers have been brought online to meet the unique needs of
    our families. These joint centers provide an outreach capability not
    only to Guard and Reserve families that are not located near an
    installation, but they also support the large number of active service
    and family members who reside off the installation. Civilian community
    support services available to families range from help with household
    repairs to financial planning, childcare, legal services, family
    counseling, and free or discounted services. The DOD has also partnered
    with USA Freedom Corps to facilitate volunteer efforts to aid and
    assist military families through the Freedom Corps Web site and
    volunteer network. Other partnerships have been established with public
    schools to develop support programs and teacher training materials to
    meet the unique needs of our military children.
        We published a ``Guide to Reserve Family Member Benefits,'' which
    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. The benefits guide is also available on
    the DefenseLink Web site.
        We developed a family readiness ``tool kit'' that contains a wealth
    of information to assist commanders, service members, family members
    and family program managers with information to help Reserve families,
    and Guard and Reserve members, prepare for mobilization and
    deployments.
    Military OneSource
        ``Military OneSource'' provides a customized approach to individual
    information and referral services for military families. It is
    available 24 hours a day, 7 days a week, 365 days of the year, from any
    place, any time, tailoring services specifically to individuals and
    individual families. ``Military OneSource'' is an augmentation, not a
    replacement, for the family centers that are cherished, and it brings
    services to all members of the Armed Forces. This includes Reserve and
    National Guard members and families who do not live on military
    installations, and often can't take advantage of what DOD has to offer.
    This service provides all of our service members and families with
    immediate information concerning support available on the installation
    or in their community. We have budgeted $20 million in 2005 to sustain
    ``Military OneSource.'' The toll-free telephone, e-mail and Web site,
    all include information and referrals on parenting and child care,
    education, deployment and reunion, military life, health, financial,
    relocation, everyday issues (i.e. pet care, plumber), work and career,
    to name a few. Each of the military services will have fully
    implemented the service by the end of fiscal year 2004. Marine Corps
    was first to stand-up the program and is enjoying positive feedback and
    results.
        Additionally, we are building upon this outreach by implementing a
    program of prepaid face-to-face counseling for a specified number of
    sessions. Families who contact the toll-free number but need face-to-
    face assistance can schedule counseling from a licensed counselor
    within their immediate geographic area in the continental United States
    (CONUS). This is particularly important for remote families of
    mobilized Guard and Reserve units who may also have a deployed service
    member and may live a great distance from the programs provided on
    installations.
    Child and Youth Development Programs
        Military child development continues to be important to families
    and remains a top priority for the DOD. During OEF and OIF, child care
    presented a major challenge for the families of deployed troops. To
    support families during deployment, $8 million of emergency
    supplemental funding was used in 2003 to provide over 412,000 hours of
    additional child care programs to meet specific mission requirements.
    Installations provided child care for extended hours on nights and
    weekends; added drop-in, respite, and mildly ill care; and extended
    services to the Guard and Reserve. For 2004, $13.5 million of emergency
    supplemental funding is designated to continue these vital efforts and
    to explore new ways to expand child care availability in the civilian
    community.
        In 2003, the DOD invested approximately $400 million to provide
    over 174,000 child care spaces and is making progress to expand the
    number of available spaces (in 2003, almost 2,000 spaces, primarily
    through growth in the family child care program). RAND is in the
    process of reviewing the child care need formula. The DOD has initiated
    a Business Initiative Council (BIC) effort that will focus on
    increasing child care spaces in civilian communities through subsidies
    and partnerships. It is anticipated that sustaining on-base programs
    while maximizing resources in the civilian community will close the
    child care gap more quickly than an approach based primarily on
    construction. The DOD's budget of over $400 million in fiscal year 2004
    and fiscal year 2005 reflects a continued commitment to provide child
    care for military families.
        Because deployment of a family member can adversely affect a
    child's behavior both academically and socially, the DOD has developed
    several avenues to support children of military families, their parents
    and the teachers that educate military children. Skilled educators,
    counselors and mental health workers associated with the public schools
    attended by military children generally are often unaware of the
    lifestyle, issues and challenges of the military child. With a focus on
    the children of deployed personnel, the DOD reached out to public
    school districts to alert them to and engage them in addressing the
    unique needs children from families in which at least one parent was
    deployed. Efforts included the development of booklets, posted on a new
    Web site, for use by educators and parents. Also posted on the Internet
    were best practices used by exemplary schools.
        DOD has worked with renowned experts, such as Ms. Marleen Wong, a
    national expert on terrorism, trauma and children, regarding
    publications, Web site information and program development for students
    of deployed families, their parents and teachers. Ms. Wong's
    contributions to the DOD Educator's Guide to the Military Child During
    Deployment; Educator's Guide to the Military Child During Post-
    Deployment: Challenges of Family Reunion and Readjustment; and Parent's
    Guide to the Military Child During Deployment and Reunion have provided
    support through information for our military families and educators.
    Dr. Robin Goodman, a director and psychiatrist at the Child Study
    Center, New York University School of Medicine, has also contributed
    her book, Caring for Kids After Trauma and Death: A Guide for Parents
    and Professions for the benefit of all who serve our children. All
    publications are on a special Web site designed to meet the needs of
    children of deployed parents, www.MilitaryStudent.org.
    Department of Defense Education Activity (DODEA)
        The DODEA has been an active partner in supporting students and
    families during the war. All schools within DODEA have Crisis
    Management Teams to assist students and teachers during stressful
    times. Working in collaboration with military and civilian communities,
    they provide support before, during and after each deployment.
        The DOD has a school system to be proud of, and we continue to
    address quality issues in the areas of curriculum, staffing, facilites,
    safety, security and technology. Our dependent schools comprise two
    educational systems providing quality pre-kindergarten through 12th
    grade programs: the DOD Domestic Dependent Elementary and Secondary
    Schools (DDESS) for dependents in locations within the United States
    and its territories, possessions, and commonwealths, and the DOD
    Dependents Schools (DODDS) for dependents residing overseas. Today,
    approximately 8,800 teachers and other instructional personnel serve
    more than 101,000 students in 223 schools. They are located in 13
    foreign countries, 7 states, Guam, and Puerto Rico. Students include
    both military and civilian Federal employee dependents.
        The quality of DOD schools is measured in many ways, but most
    importantly, as in other school systems, by student performance. DOD
    students regularly score substantially above the national average in
    every subject area at every grade level on a nationally standardized
    test.
        In addition, students participate in the National Assessment of
    Educational Progress (NAEP) tests. NAEP is known as ``the Nation's
    Report Card'' because it is the only instrument that permits a direct
    comparison of student performance between states and jurisdictions
    across the country. DODEA students, and in particular its African-
    American and Hispanic students, score exceptionally well on this test,
    often achieving a first or second place national rank when compared
    with their peers.
        DODEA's 2003 graduates were awarded nearly $33.5 million in
    scholarship and grant monies for further education. Graduates in 2003
    reported plans to attend over 800 different colleges and universities
    worldwide.
        To meet the challenge of the increasing competition for teachers,
    DOD has an aggressive U.S. recruitment program. The program emphasizes
    diversity and quality, and focuses on placing eligible military family
    members as teachers in its schools.
    Morale, Welfare, and Recreation Initiatives
        The Services have implemented a broad assortment of Morale, Welfare
    and Recreation (MWR) program initiatives aimed specifically for forces
    deployed to fight the war on global terrorism and their family members.
    These include free, MWR operated, internet cafes at 30 locations in
    Iraq, computers and internet service at home station libraries and
    youth centers to ensure families can send and receive e-mails from
    their loved ones who are deployed. Additionally, there has been library
    book and periodical kits, recreation kits that include large screen
    televisions, DVD/CD players, movies, up-to-date video games and game
    CDs, exercise equipment, sports equipment, pool and ping pong tables,
    movie projectors, and first run movies. Auto skills centers have also
    set up special programs to assist spouses of deployed personnel with
    emergency auto repairs.
    Armed Forces Entertainment
        Armed Forces Entertainment, in cooperation with the United Services
    Organization (USO), continues to provide much welcomed celebrity and
    professional entertainment to our forces engaged in the war on global
    terrorism. Robin Williams, Robert De Niro, Conan O'Brian, David
    Letterman, Drew Carey, Arnold Schwarzenegger, Gary Senise, Paul
    Rodriquez, George Gervin, Kid Rock, Lee Ann Womack, Miss Universe,
    several National Association for Stock Car Auto Racing (NASCAR) and
    World Wrestling Federation (WWF) stars, and several National Football
    League (NFL) cheerleading squads are some of the many celebrities and
    entertainers who have generously donated their time to bring a taste of
    home to deployed forces.
    Field Exchanges
        There are 52 Tactical Field Exchanges, 69 exchange supported/unit
    run field exchanges, and 15 ships' stores in the OIF/OEF theaters
    providing quality goods at a savings, and quality services necessary
    for day-to-day living. Goods and services offered include phone call
    centers, satellite phones, internet cafes, video films, laundry and
    tailoring, photo development, health and beauty products, barber and
    beauty shops, vending and amusement machines, food and beverages, and
    name brand fast food operations. Goods and services vary by location
    based on troop strength and unit mission requirements.
    Telecommunications
        It is a longstanding DOD practice for service members to be able to
    make subsidized or free telephone calls home. The frequency and
    duration of calls using official phones for health, morale, and welfare
    calls are determined by the commander so as not to interfere with the
    mission.
        The National Defense Authorization Act for Fiscal Year 2004
    requires that prepaid phone cards, or an equivalent telecommunications
    benefit, be provided without cost to enable service members serving in
    OEF and OIR to make telephone calls. The telecommunications benefit may
    not exceed $40 or 120 calling minutes. The Secretary of Defense may
    accept gifts and donations in order to defray the costs of the program.
    The program continues through September 30, 2004.
        On the average, 50,000 health, morale, and welfare calls are made
    each day. As we implement the act, we are identifying the value of the
    subsidized health, morale, and welfare calls and continuing efforts
    with our telecommunications partners to reduce the cost of calls from
    the theater. We have mounted an information campaign to insure that
    members choose the most economic calling method available and are
    looking at more convenient ways for the American public to purchase and
    donate the best value of calling minutes to service members.
    Financial Stability
        The financial stability of military families is another initiative
    that the DOD is addressing, particularly in light of large troop
    deployments and mobilization. To help families achieve financial
    stability, the DOD has embarked on an initiative that combines
    educating Service members and their families on using their finances
    wisely with expanding employment opportunities for military spouses.
        The DOD has emphasized financial well being through a Financial
    Readiness Campaign designed to enhance the education and awareness
    programs of the military services through the support of 26 Federal
    agencies and non-profit organizations. We have already begun to see
    positive changes in the self-reported assessment of financial condition
    of service members. The DOD sees that this campaign will evolve into
    new practices to support service members and their families. The
    lessons learned through this campaign will be shared with the National
    Commission for Financial Literacy and Education, established by Title V
    of the Fair and Accurate Credit Transaction Act of 2003, and assist the
    commission in developing a financial literacy strategy for the Nation.
        We are employing a similar collaborative approach to improve
    employment opportunities of military spouses by partnering with
    Federal, State, and local governments to address legislative and
    regulatory barriers that may inhibit financial stability and
    portability of jobs, and developing partnerships with government, non
    profit and private sector organizations to increase the number of
    opportunities available to spouse to develop careers. Through these
    initiatives the DOD seeks to enhance financial stability by promoting
    consistent reliable sources of income and the ability to use it wisely
    to support quality of life needs and for attaining future life goals.
    Commissaries
        I'd like to thank Congress for enacting legislation to provide
    unlimited commissary benefits for Reserve and Guard members. The DOD
    implemented the new authority the same day the President signed it into
    law. You recognize, as do we, that the commissary benefit is an
    important and valued component of non-pay military compensation and it
    is vital to the quality of life of our service members.
        We are working to provide the commissary benefit in the most
    efficient and cost-effective manner to be able to guarantee that each
    dollar from the American taxpayer is well spent to support the quality
    of life of our military members and their families. To do so means new
    stores may open where warranted, existing stores expand hours and stock
    assortment, while commissaries that are no longer justified by their
    customer bases may close or be scaled back.
        We believe that lowering the taxpayer subsidy while sustaining and
    improving the benefit are mutually compatible. Through comparison to
    commercial industry best practices and performance indicators, we
    believe we can deliver the benefit in the most efficient and effective
    manner possible.
        We have asked the Defense Commissary Agency (DeCA) to conduct a
    study to determine the feasibility of adopting variable pricing while
    sustaining an average 30 percent savings on all products. Industry
    research and best practice suggest that we could more consistently
    deliver the desired 30 percent savings to more commissary customers by
    using this approach.
    Casualty Assistance
        The DOD continues to explore new methods and procedures to support
    our family members better during the most tragic of times, the loss of
    their loved one in the active service to our Nation. One such
    initiative is the expedited claims process (ECP) with the Social
    Security Administration. During March 2003, we partnered with the
    Social Security Administration to study the possibility of
    institutionalizing the ECP that was so effective in the tragic
    aftermath of September 11, 2001. The ECP incorporates post-adjudicative
    development of evidence, as well as the use of a special toll free
    number for applicants and casualty assistance officers to call when
    they are ready to file. This process has been extremely successful in
    providing swift financial assistance to our families. The final results
    of the pilot program showed the average claims processing time dropped
    from several weeks to an average of just over 2 days time. Accordingly,
    the ECP was made permanent in January 2004 for surviving family members
    of all active duty casualties. We established a similar arrangement
    with the DVA several years ago. That program, has also significantly
    expedited the delivery of compensation and benefits to our families who
    have suffered the greatest loss.

                                   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 DOD. Our objective is to ensure
    that our Armed Forces remain the best-trained, best-equipped fighting
    force in the world--and that we treat the volunteers who make up the
    force with respect commensurate with their service, their sacrifice,
    and their dedication.

        Senator Chambliss. Thank you.
        Secretary Brown, we're glad to have you today.

    STATEMENT OF HON. REGINALD J. BROWN, ASSISTANT SECRETARY OF THE
                 ARMY FOR MANPOWER AND RESERVE AFFAIRS

        Mr. Brown. Thank you, Mr. Chairman.
        I, too, have a more comprehensive statement which I'd
    submit for the record. I'd also like to make a few introductory
    remarks.
        I feel really privileged to have been given the opportunity
    to serve again with this great Army. It's been some 40 years of
    my life that I've had an association with it.
        Our Army is a vital component of the joint warfighting
    team, and it has successfully prosecuted a very challenging
    military campaign with that team. It has met the challenges of
    a volatile post-war period with resolve and flexibility. It has
    deployed hundreds of thousands of military personnel around the
    world, and it is in the process of the largest force rotation
    we have seen in decades. Even as it engages around the world in
    these numerous operations, it accelerates its efforts to
    transform to meet future challenges.
        There's one overriding reason for the success, so far, of
    this Army, and that is our people. The young men and women of
    this Nation continue to answer the call to service. This is a
    testament both to their patriotism and to the innovative
    programs we have in place to bring them onboard. The retention
    story is also good. The willingness of soldiers to remain in
    uniform is a critical indicator of the health of the Army as a
    whole. These are people who understand the situation, who
    recognize the risks, and who choose to continue their service.
    In my view, each and every one of them is a hero. The
    willingness of Americans to serve has set the conditions for
    our success in the short-term.
        That said, however, important steps have to be taken to
    transform our Army for the long haul. As you well know,
    fundamental changes in any organization as large as ours tend
    to be difficult. While the Army's current efforts at
    transformation predate today, they've been going on for
    sometime. We have dramatically increased the pace at which we
    want to achieve this change.
        I'm particularly proud of the force stabilization
    initiative, which General Schoomaker and Secretary Brownlee
    have told you about. This will result in a far more flexible
    and cohesive force for our Army. Other efforts include
    military-to-civilian conversions, which we intend to implement
    in order to achieve some of these new brigades, and the NSPS
    will help us in that regard. Also, the continuum of service,
    another concept involving Reserve component service, will
    provide critical enablers for us as we move towards achieving
    this transformation.
        Even as we reflect on the past year with justifiable pride,
    much remains to be done. This war is not over, and our planning
    and management efforts must reflect this. We must continue our
    efforts to recruit and retain America's best. We must make
    every effort to take care of our soldiers and their families.
    They are truly a national treasure.
        At the same time, we must recognize that our enemies are
    both adaptable and persistent. The threats facing our Nation at
    home and around the world require an Army personnel system that
    is both flexible and innovative. We've successfully met the
    challenges for the past 12 months. With your continuing
    support, we're absolutely confident in our ability to overcome
    the obstacles ahead.
        Thank you, and I look forward to your questions.
        [The prepared statement of Mr. Brown follows:]
                  Prepared Statement by Hon. Reginald J. Brown

        Mr. Chairman and members of the subcommittee, on behalf of the men
    and women of the United States Army, I thank you for the opportunity to
    appear before you today to discuss the active and Reserve military
    programs of America's Army. Our soldiers are bright, honest, dedicated,
    and totally committed to the Army's mission and to defeating our enemy.
    The Army and its leaders continue their commitment to taking care of
    soldiers and their families.

                                   RECRUITING

        The Army is at war. The global war on terrorism and engagements
    around the globe are our first sustained combat operations since the
    end of conscription in the 1970s. Recruiting and retaining the soldiers
    who will fight and win on the battlefield is critical. These young men
    and women must be able to handle the full complexity of 21st century
    warfare in a combined, joint, and expeditionary environment. We are in
    a highly-competitive recruiting environment. Industry, post-secondary
    institutions and other services compete for prospects very effectively.
        We have been successful. The active Army and Reserves met their
    recruiting goals in fiscal year 2003. The active Army is at 100 percent
    of it fiscal year 2004 mission through January. On October 1, 2003, we
    began the National Call to Service (NCS) program; 153 recruits have
    already selected this program. The Reserve and National Guard are at
    98.7 percent and 94.9 percent of their respective missions. We are
    recruiting a high-quality force; high school graduates are 96.5 percent
    of active Army recruits, 94.0 percent of Reserve recruits, and 84.6
    percent of National Guard recruits year to date. We remain confident we
    will meet the fiscal year 2004 mission due to our recruiting force and
    incentives.
        Our recruiting force is the best in the world. Our accession
    mission is over 165,000 this year (active 75,000, Reserve 34,804, and
    National Guard 56,000). Every day, recruiters are in our communities
    across the country, communicating the virtue of military service. They
    are recruiting young men and women who possess the potential to embrace
    the Army values and develop the character of the soldier's ethos.
        Without the support of Congress in providing recruiting tools,
    advertising, and incentives we could not achieve this recruiting and
    retention mission. Incentives are a key enabler of the Army's accession
    mission in terms of military occupational skill (MOS) precision fill,
    quality, and quantity. Incentives include enlistment bonuses, the Army
    College Fund, and the Loan Repayment Program.
        Bonuses are the most effective tool for MOS recruitment. The
    bonuses help us compete under current market conditions and beat
    competitors, but also best allow us the maximum flexibility to react to
    unanticipated changes in the economic and social environment of
    tomorrow. We are able to use the bonuses to target critical MOSs, and
    to target the college market to fill critical MOSs.
        The Army College Fund is a proven expander of the high-quality
    market. College attendance rates are at an all-time high and continue
    to grow, with 67 percent of the high school market attending college
    within 1 year of graduation. The Army College Fund allows recruits to
    both serve their country and earn additional money for college.
        The Loan Repayment Program, with a maximum of $65,000, is another
    means of entry into the high-quality market. While the Army College
    Fund primarily targets those who have not yet gone to college, the Loan
    Repayment Program is the best tool for those who have college credit
    and loans. This has proven to be a great tool to reach potential
    recruits with at least some college credit. In fiscal year 2003, 24
    percent of our recruits had some college credit.
        The Army's most effective recruiting tools are its recruiters,
    incentives, and advertising. We have always selected our best soldiers
    to be recruiters and will continue to do so. We owe these recruiters
    and their families the resources, training, and quality of life that
    will enable them to succeed. The recruiting environment remains a
    challenge in terms of economic conditions and alternatives. The Army
    appreciates Congress's continued support for its recruiting programs
    and for improving the well being of our recruiting force.

                               ENLISTED RETENTION

        The Army has achieved all retention goals for the past 5 years.
    This result can be directly attributed to the Army's Selective
    Reenlistment Bonus (SRB) program. The Army re-enlisted 54,151 soldiers
    in fiscal year 2003, including 15,213 soldiers whose enlistments would
    have expired before September 30.
        Fiscal year 2004 retention missions for the active Army and the
    Army Reserve are below glide path and are being closely monitored. Thus
    far, the active Army has achieved 94 percent of year to date mission,
    while the Army Reserve has achieved 90 percent of year to date mission.
    Meanwhile, the Army National Guard is more than holding its own in
    fiscal year 2004 and has reenlisted 160 percent of their year to date
    mission. In fiscal year 2004 alone, the Army must retain approximately
    58,100 soldiers to maintain desired manning; this equates to a
    retention mission increase of 2,000 soldiers. We will depend upon a
    robust SRB program to enable achievement of our retention goals.
    Developing ways to retain soldiers directly engaged in the ongoing
    global war on terrorism is critical. We are now using a ``targeted''
    bonus, the Targeted Selected Reenlistment Bonus (TSRB), as a tool to
    attract and retain quality soldiers. The TSRB aggressively targets
    eligible soldiers assigned to units in, or deploying to, the Central
    Command (CENTCOM) area of responsibility (AOR). Soldiers receive no
    less than a lump sum $5,000 bonus to reenlist for their present duty
    assignment while deployed in support of Operation Iraqi Freedom (OIF)
    or Operation Enduring Freedom (OEF). Introduction of the TSRB on
    January 1, 2004, caused an immediate increase in reenlistments,
    however, did not make up the total Army shortfall from the first
    quarter of the fiscal year. We anticipate another significant increase
    occurring in March/April coincident with the force rotation changeover
    from OIF 1 to 2 and OEF 4 to 5.
        Worldwide deployments, an improving economy, and the Army's Stop
    Loss/Stop Movement program could potentially affect retention. All
    components closely monitor leading indicators including historic
    reenlistment rates, retirement trends, first term attrition, Army
    Research Institute Surveys, and Mobilization/Demobilization Surveys to
    ensure we achieve total success.
        All components are employing positive levers including Force
    Stabilization policy initiatives, updates to the reenlistment bonus
    program, targeted specialty pays, and policy updates to positively
    influence retention program. Ultimately, we expect to achieve fiscal
    year 2004 retention success in the active, Guard, and Reserve.

                               OFFICER RETENTION

        The Army continues to monitor officer retention rates as an
    important component of readiness. Overall retention of Army Competitive
    Category officers improved in both the company grade and field grade
    ranks with aggregate fill rate of 103.7 percent. There was a slight
    increase in attrition for lieutenants and colonels, but the loss rate
    for captains decreased almost 3 percent from fiscal year 2002 to fiscal
    year 2003.
        The Army has steadily increased basic branch accessions beginning
    in fiscal year 2000 with 4,000, capping at 4,500 in fiscal year 2003
    and returning to 4,300 for fiscal year 2004 and beyond, to build a
    sustainable inventory to support captain requirements. We achieved
    4,443 accessions in fiscal year 2003. The Army can meet current and
    projected active component officer accession needs through current
    commissioning sources (Reserve Officer Training Corps (ROTC), Officer
    Candidate School, United States Military Academy, and direct
    accessions). Reserve component lieutenant accessions present near- and
    long-term challenges, but have improved significantly over the past few
    years, and are expected to continue to improve.
        We continue to promote officers at all ranks at or above the
    Defense Officer Personnel Management Act (DOPMA) goals and expect these
    rates to continue for the next 2-4 years.

                             END STRENGTH/STOP LOSS

        The congressional-mandated end strength for fiscal year 2005 is
    482,400. This consists of 78,500 officers, 399,700 enlisted, and 4,200
    cadets at the United States Military Academy. However, due to the
    global war on terrorism and the ongoing actions to transform America's
    Army, we expect to have 500,830 on active duty at the end of fiscal
    year 2005. The breakout by category will be: 81,630 officers, 415,000
    enlisted, and 4,200 cadets.
        The recently announced force rotational plans will begin the
    monumental task of rotating forces in support of ongoing operations in
    Iraq and Afghanistan. During this spring and summer the Army will have
    8 of its 10 active duty divisions either deploying or redeploying from
    operations in support of the global war on terrorism. Consequently, the
    current and projected operational tempo continues unabated, placing
    enormous stress on units, soldiers, and their families. Based on the
    commitment to pursue the global war on terrorism for the foreseeable
    future, which means providing our combatant commanders the force to
    decisively defeat the enemy and ensure our formations are ready for
    warfighting we re-instituted the active Army Unit Stop Loss program and
    maintained the Reserve Component Unit Stop Loss program currently in
    effect.
        The two Stop Loss models being used in support of the Army's effort
    in the global war on terrorism are:

            -- Active Army Unit Stop Loss. This applies to all regular Army
            soldiers assigned to active Army units alerted or participating
            in OIF 1 and 2 and OEF 4 and 5.
            -- Reserve Component Unit Stop Loss. This applies to all Ready
            Reserve soldiers who are members of Army National Guard or
            United States Army Reserve and assigned to Reserve component
            units alerted or mobilized for partial mobilization or
            Presidential Selected Reserve call-up to participate in
            Operations Noble Eagle (ONE), OEF, and OIF.

        The Active Army and Reserve Component Unit Stop Loss program
    affects soldiers upon a unit's mobilization/deployment date minus 90
    days and continues through the demobilization date, plus 90 days. The
    90 days after demobilization is used to ensure sufficient time for
    soldiers to complete mandatory transition, participate in the Army
    Career Alumni Program and finish deployment cycle events/activities. In
    addition the 90 days permits us to redistribute the force to reduce
    risks to readiness, and distribute soldiers across the Army to satisfy
    Department of Defense (DOD) guidance to the Services to back out of
    Stop Loss policies as soon as operationally feasible. Consequently, our
    policy requires a quarterly review of the programs to determine
    continuation or termination.
        As of February 2004, the Stop Loss program affects a total of
    44,535 soldiers of all components.

                               RESERVE COMPONENTS

        The exemplary performance of our Army this past year is testimony
    that we are one Army--an Army whose components are practically
    indistinguishable from one another. Whether as volunteers or called up
    under partial mobilization, the soldiers of the Army Reserve and Army
    National Guard have come forward to serve proudly and honorably, I know
    our Nation is proud of their performance. The Army continues to rely on
    the Reserve components to carry a significant portion of the load in
    the global war on terrorism. The capabilities they bring to the fight
    are indispensable, their skills are top notch, and their morale is
    high.
        We have called nearly 250,000 Guard and Reserve soldiers to active
    duty since September 11 for operations spanning the globe. That is just
    over 35 percent of the Ready Reserve. Today we have 160,000 Reserve
    component soldiers on active duty. That number is about 30,000 higher
    than we have been averaging in the past because we are in the middle of
    exchanging units in Iraq and Afghanistan, which has caused an overlap
    of mobilized soldiers. By the end of this calendar year we should have
    less than 125,000 Reserve component soldiers on active duty.
        In addition to mobilizations in support of the global war on
    terrorism, we continue to have soldiers mobilized in the Balkans, the
    Sinai, Europe, and the Pacific. The Reserve components have performed
    missions in Bosnia for the past 3 years. Mobilized soldiers in Europe
    and the Pacific have proved invaluable in helping move active units in
    and out of their respective theaters on their way to and from the
    CENTCOM AOR. The Army assisted the Air Force last year by providing
    security forces for Air Force installations both in the continental
    United States (CONUS) and in Europe. At its peak, this program provided
    9,000 Army National Guardsmen. We also have over 600 guardsmen from
    Puerto Rico providing security to Military Sealift Command ships
    carrying cargo from the CONUS to AORs.
        We must maintain the right balance of capabilities between our
    active and Reserve components. Our Reserve components are embarked on a
    significant transformational process--one that will enhance jointness,
    responsiveness, and relevance to emerging missions. Last summer the
    Secretary of Defense gave the military departments guidance to
    structure the force to reduce the need for mobilization to no more than
    once every 6 years, and to reduce the need for mobilization within the
    first 15 days of a rapid response operation. In this President's budget
    we have incorporated changes rebalancing Active and Reserve Force
    structure in the amount of 10,000 spaces: 5,000 spaces are associated
    with critical early deployment capabilities from the Reserve to the
    Active Force, and 5,000 spaces are to realign the current active-
    Reserve component mix required for ongoing operations, homeland
    defense, and critical post-hostilities operations. At the same time, we
    are converting both the active and Reserve components Cold War
    structure to meet the capabilities required of the Army for the global
    war on terrorism.

                          PERSONNEL TEMPO (PERSTEMPO)

        The strategic and operational environment has significantly changed
    in light of the large-scale engagement of Army forces in OIF and other
    expeditionary operations. Soldiers and their families who serve our
    Nation feel this increase of turbulence and uncertainty. The time
    soldiers spend away from home is directly related to the increase in
    unit and individual deployments and other operations.
        The Army actively manages the effects of PERSTEMPO through force
    management options as well as working with the Office of the Secretary
    of Defense (OSD) to manage force requirements in response to the global
    war on terrorism. Army initiatives to reduce PERSTEMPO include
    resetting the force, force stabilization, modular reorganization, post
    deployment stabilization policy, use of contract civilians where
    possible, and rebalancing Active and Reserve Forces. The Army is
    committed to managing force deployments with an emphasis on maintaining
    readiness, unit integrity, and cohesion while meeting operational
    requirements.

                            PERSONNEL TRANSFORMATION

        Army personnel transformation will profoundly impact how the Army
    delivers human resources services to commanders, soldiers, government
    civilians, and families. More than improving information technology and
    systems, personnel transformation is about rethinking programs,
    policies, and processes to enable the Army to provide optimal use of
    human capital including; the right information, with the right mix of
    individuals and units at the precise place and time with the correct
    skills. Personnel transformation initiatives directly support the goals
    of making the Army more ``joint, ``expeditionary,'' and ``modular.''
    These personnel transformation changes will enhance the individual and
    unit readiness of the Army across all components--active Army, Army
    National Guard, and Army Reserve.
        The Enterprise Human Resources System forms the information
    technology infrastructure and the knowledge architecture for personnel
    transformation. It includes the Defense Integrated Military Human
    Resources System (DIMHRS), an OSD-directed software capability that
    maximizes the potential of Web-based technology and commercial off-the-
    shelf software. The Army is the first Service to undertake the
    implementation of DIMHRS and has dedicated resources to assist in the
    development and review of functional human resources requirements. The
    Army is counting on DIMHRS to replace its legacy systems with a single,
    multi-component, integrated database across the DOD, enabling
    management of soldiers, Army civilians, and contractors.
        The Enterprise Human Resources system will provide passive, full
    visibility across all Services and components, and will enable
    visibility in support of joint partners. It will be composed of one
    single authoritative source database, and will serve all echelons of
    command and will include the individual soldier and family member. The
    system will also provide access to leaders, individuals, and human
    resource providers. The system will allow leaders to manage their
    organization across components, and will be linked to the Army's
    command and control operational architecture for battlefield functions,
    such as casualty reporting and strength accounting. A transformed Human
    Resources Information System will provide the tools necessary to make
    critical combat and non-combat human resources support relatively
    routine.
        Force structure changes are already underway in the personnel
    community's workforce and organizations. From headquarters to unit
    level, a variety of modular, multi-functional units are being
    structured and redesigned to meet the future needs of a modular and
    expeditionary Army. For example, at Headquarters Department of the
    Army, the Army Reserve and Active Army Personnel Commands have merged
    into the United States Army Human Resources Command. The civilian
    equivalent, the Army's Civilian Human Resources Agency is now approved
    for inclusion within the command, and will be supported by the Human
    Resources Information System. Likewise, military personnel occupational
    specialties will be merged into a multi-skilled human resources
    specialty, providing more flexibility and support to an Army at war.
        Continuum of service is the idea of establishing a personnel system
    that spans operational possibilities from high intensity combat to
    weekend duty at a local armory. The continuum of service will break new
    ground for us. It has the potential to offer soldiers more choices than
    they have today. Soldiers will be able to move back and forth between
    full-time and part-time service. Taken to its fullest, some soldiers
    will be able to serve less than full time but more than the current
    Reserve model of 39 days a year active soldiers would be able to serve
    in a Reserve status for a portion of their careers. As a soldier's
    personal circumstances change they will have more freedom of choice
    between active or Reserve service and should be able to traverse the
    continuum in either direction as they progress through the rank
    structure. This type of movement is nearly impossible today. If we are
    to continue to attract bright and ambitious people we need to offer
    them a range of opportunities comparable to what they could find in the
    civilian sector. It will open more career opportunities for soldiers to
    optimize civilian training and will help our efforts to increase
    volunteerism within the Reserves and National Guard.
        The continuum of service idea when implemented, will facilitate
    sustaining support to the global war on terrorism. It will give us the
    ability to use critical skills found in the Reserve component with more
    precision. To name a few, information technology, civil affairs, and
    language skills are frequently needed during specific missions for
    limited periods of time. If we let these highly-skilled people move
    between active and Reserve duty on schedules that meet mission needs
    while permitting these soldiers to maintain their skill on the cutting
    edge in the civilian sector the Army will benefit. This is good human
    resources management. It gives the Army additional agility and
    flexibility to fight the global war on terrorism with our most valuable
    resource--our people. I seek your support for the DOD's initiatives in
    this area.
    Force Stabilization
        The Army is transitioning to Force Stabilization, a personnel
    manning initiative designed to enhance unit readiness by increasing
    stability and predictability for soldiers and families. Force
    Stabilization places greater emphasis on building and sustaining
    cohesive, deployable combat-ready units for combatant commanders. Home-
    basing and Unit Focused Stability are two new manning strategies that
    will keep soldiers in units longer and will serve the purpose of
    fostering cohesive and combat ready forces.
        Under home-basing, all initial entry soldiers and their families
    assigned to selected installations in the continental United States
    will remain at that installation for 6 to 7 years. The 7-year career
    mark was established because it is at that point the Army's manning
    needs outside tactical units significantly increases.
        Unit Focused Stability synchronizes a soldier's assignment to the
    unit's operational cycle. Under Unit Focused Stability all members of a
    unit arrive at the same time and remain in that unit for 3 years. This
    strategy sets the conditions for achieving higher levels of training
    effectiveness, deplorability, and combat readiness. By synchronizing
    soldier's assignments based on the operational cycle of their unit,
    personnel turbulence will be reduced.
        Military to civilian conversions are a way to improve the
    efficiency of manpower and make more military deployable by moving
    military personnel out of positions that can be prudently performed by
    civilians. As part of the Army's long-term transformation strategy, it
    is essential that we start realigning military positions from existing
    infrastructure organizations to staff field units. This effort relieves
    stress in the operating forces and facilitates the formation of
    additional combat brigades. Although we are still working out the
    details of implementation and funding, we intend to convert at least
    10,000 to 15,000 military over the next 3 to 4 years starting in fiscal
    year 2004, as we increase to 10 active brigades.

                       NATIONAL SECURITY PERSONNEL SYSTEM

        We want to take this occasion to thank again the committee and
    Congress for enacting the National Security Personnel System (NSPS) in
    the National Defense Authorization Act for Fiscal Year 2004. The act
    authorized a more flexible civilian personnel management system for the
    DOD that allows the DOD to be a more competitive and progressive
    employer at a time when our national security demands a highly-
    responsive system of civilian personnel management. The legislation
    ensures that merit system principles govern any changes in personnel
    management, whistleblowers are protected, discrimination, and nepotism
    remain illegal, and veterans' preference is protected. The DOD will
    collaborate with employee representatives, invest time in trying to
    work our differences, and notify Congress of any differences before
    implementation. In January, DOD officials met with union
    representatives to begin the development of a new system of labor-
    management relations. Later this year, the DOD plans to begin
    implementing NSPS following an intensive training program for
    supervisors, managers, human resources specialists, employees, as well
    as commanders and senior management.

                           ARMY REVIEW BOARDS AGENCY

        Army Review Boards Agency (ARBA) has taken the lead for all the
    Services in developing an online application program for the Army Board
    for Correction of Military Records and the Army Discharge Review Board.
    This is an initiative to comply with the Government Paperwork
    Elimination Act. The electronic online application will allow the
    applicants to apply securely online through the Internet. The ARBA
    online application process will be an important tool in fulfilling the
    vision of improved customer service and governmental efficiency through
    the use of information technology. The online application is expected
    to be fully operational by May 2004.

                                   WELL-BEING

        For an Army at war, the well-being of soldiers, civilians, and
    their families is inextricably linked to the relevance and readiness of
    the force. As Army Chief of Staff, General Peter Schoomaker so
    eloquently puts it, ``The Army has to invest in the soldier.'' His
    statement recognizes that people are the heart and soul of The Army and
    their preparedness to carry out the Army's mission is directly linked
    to their sense of well-being. Much has been done to ensure that the
    soldier remains the centerpiece of Army transformation. But as we move
    into the 21st century, the needs and aspirations of our people continue
    to evolve along with the changes in the operational and societal
    environments. Every effort must be made to ensure the Army's investment
    in its people is in keeping with the commitment and sacrifices expected
    of them. As part of the Army's Well-Being Initiative, efforts are
    ongoing to expand the scope of people-oriented initiatives beyond a
    traditional active Army focus to include consideration of the veterans,
    retirees, civilians, and associated family members.
    Deployment Cycle Support Program
        We have demanded levels of excellence from soldiers and they have
    risen to the task. Deployment Cycle Support (DCS) assists soldiers and
    Department of the Army civilians redeploying from combat or other
    operations, and their family members, in meeting the challenges of
    returning to ``home station. For deployed soldiers and Army civilians,
    the DCS process begins in-theater and continues at demobilization sites
    and home station. For family members, training is conducted at home
    stations for reunion with the soldier. Additionally, health care, and
    an individual assessment is conducted by the unit leadership. The key
    element of DCS is the re-establishment of soldier readiness to include
    personnel readiness, deployment readiness and family readiness. During
    the development of DCS, the Army identified areas that needed
    enhancements in providing necessary assistance to deployed soldiers,
    Army civilians, and their families. To resolve those shortfalls the
    Army has funded a program called Army One, an information and referral
    resource that has been readily available to soldiers and their
    families.
    Disabled Soldiers Support System
        The Disabled Soldier Support System consists of a centralized
    management program operated at the Department of the Army headquarters.
    The program will expand to include placing a representative at each of
    the seven Installation Management Regions to further facilitate and
    follow-up with severely disabled soldiers in their communication and
    connections to local, Federal, and national agencies and organizations.
    The Disabled Soldier Support System will provide personal liaison
    support between soldiers, families, commands and communities regardless
    of the component. It is the Army's intent to monitor disabled soldiers
    as individuals, while monitoring trends to ensure their needs are met.
    Rest and Recuperation (R&R) Leave Program
        At the present time, the R&R Leave program is a highly visible and
    critical component of the Army Well-Being Initiative. R&R opportunities
    are vital to maintaining combat readiness when units are deployed and
    engaged in intense, sustained combat operations. The R&R Leave program
    provides a means whereby soldiers deployed in the CENTCOM AOR are able
    to temporarily lay aside the stress and rigors of service in a combat
    zone and focus critically needed attention on their own physical,
    emotional and spiritual well-being as well as that of their families
    and loved ones. To date more than 46,500 soldiers and DOD civilians
    have participated in program.

                         SOLDIER EDUCATION INITIATIVES

    In-State Tuition Initiative
        As part of the Army's well-being programs, we continue to expand
    the scope of people-oriented initiatives beyond a traditional focus to
    a more inclusive consideration of the entire Army Family. Making post-
    secondary education affordable for our soldiers and their families is
    one example. The difference between paying in-State or out-of-State
    tuition to go to college is a significant factor in whether soldiers
    can afford to send their families to college. The mobility of the
    military community, coupled with the State-specific criteria for
    determining eligibility for in-State tuition, results in the military
    spouse/family member facing a variety of rules and procedures that may
    not result in designation as in-State residents for tuition purposes.
    The Army is still working with our sister Services to encourage states
    to grant in-State tuition in both the place of official residence and
    the place of assignment. The program also establishes continuity of the
    benefit until graduation for the children and spouses of soldiers who
    transfer overseas or to another State following matriculation. We are
    making progress; Texas and Georgia recently passed legislation to
    provide both in-State tuition and continuity of the benefit upon
    reassignment. We have also created an in-State tuition Web site to
    serve as a valuable source of information for military members and
    their families, educators, and State legislators alike.

    eArmyU
        Launched in 2001, the eArmyU program has enhanced traditional Army
    distance learning programs and services with an anytime, anywhere
    program that ensures eligible enlisted soldiers have access and support
    to fulfill their educational goals. The key objectives of eArmyU are to
    improve well-being, increase retention, and enhance readiness by
    providing learning opportunities that develop the critical thinking and
    decisionmaking skills required on today's battlefields. By leveraging
    the technology provided through the world's largest education portal--
    eArmyU.com--soldiers currently access curricula at 28 regionally
    accredited universities offering virtual classrooms and libraries,
    academic counseling, administrative, and technical support. Together,
    these institutions offer soldiers a choice of 143 degree programs.
    eArmyU is currently offered at 14 installations, and more than 43,400
    soldiers are enrolled. As of February 5, 2004, more than 10,196
    soldiers have permanently changed duty stations from their original
    enrollment installations and are now participating in eArmyU from
    locations worldwide, to include 50 countries, 4 U.S. territories, and
    50 States. We are now assessing the feasibility of deploying eArmyU to
    soldiers in the CENTCOM AOR. The program has made education viable for
    soldiers; 27 percent of soldier-students have never enrolled in post-
    secondary education. Of those soldiers who signed participation
    agreements, 21 percent have reenlisted or extended to take advantage of
    eArmyU. As of February 2004, 3,418 soldiers have earned degrees through
    eArmyU. eArmyU is a streamlined and effective learning opportunity
    that, due to its unique portal technology, advances the Army into the
    rapidly developing e-learning market.

    Education Support to Deployed Soldiers
        Two mobile teams from the Army Continuing Education System (ACES)
    in Europe have administered Army Personnel Tests (APTs) in Iraq and
    Afghanistan to soldiers eligible for reenlistment. Mobile team APTs
    will continue until Army Education Centers are established in-theater.
    Soldiers in Iraq and Afghanistan are also currently enrolled in
    distance learning college courses using tuition assistance. The Army's
    goals for fiscal year 2005 are to: (1) expand eArmyU enrollment to
    deployed soldiers; (2) continue installation reachback support for
    soldier continuing education; and (3) to open education centers in
    Afghanistan Uzbekistan, and Iraq.

                       MILITARY COMPENSATION AND BENEFITS

        A competitive compensation package is critical to ensuring we are
    able to recruit and retain a high quality force. The fiscal year 2004
    budget contains an average 4.1 percent pay raise. The fiscal year 2005
    President's budget if enacted would provide pay raises at Employment
    Cost Index plus 0.5 percent, which helps the Army to compete with the
    civilian sector employment. This equates to 3.5 percent for fiscal year
    2005.
        The President's fiscal year 2005 budget puts us on track to
    eliminate average out-of-pocket housing costs for our men and women in
    uniform by 2005 and is reflected in the Basic Allowance for Housing
    (BAH) portion of the Military Personnel Army (MPA) budget request. This
    initiative improves the well being of our soldiers and families and
    contributes to a ready force by enhancing morale and retention.
        With your support, we have undertaken a number of initiatives to
    provide special compensation for our soldiers who serve their country
    under hazardous conditions and we continue to look for ways to
    compensate our soldiers for the hardships they and their families
    endure during time of war. We will continue to emphasize fair and
    equitable compensation and benefits for our soldiers and their families
    and thank you for continued support for the men and women of the Army.

                               MILITARY RETIREES

        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 link between the Army and their
    communities.
        Soldiers, past and present, continue to serve selflessly. In the
    same tradition, the Army remains committed to serving the survivors of
    soldiers who die on active duty and paying special compensation to
    retirees who are severely and combat-disabled.

                                MEDICAL HOLDOVER

        The Army has been intensively managing the health care and
    disposition of Reserve component soldiers in a medical holdover (MHO)
    status. Of particular interest are the soldiers who have been in a MHO
    status since before November 1, 2003, such as those at Fort Stewart and
    Fort Knox. Although the soldiers were being provided quality medical
    care, the timeliness of the health care was not sufficient. Similarly,
    medical holdover soldiers were housed in transient billets, which were
    not suitable, nor in some cases, met their medical conditions. The Army
    has taken the following actions since November 2003 to provide more
    timely medical service and better support to soldiers in MHO status.

        --  Acting Secretary Brownlee directed standards for more rapid
    delivery of care (e.g. screening, specialty appointments, surgery). The
    delivery of these standards is monitored at every Medical Treatment
    Facility (MTF), and emphasis is place on timely delivery of medical
    services.
        --  The Army increased medical infrastructure (e.g. increased
    numbers of physicians, case managers, diagnostic capability) to provide
    more readily available, high quality treatment in MTFs.
        --  We upgraded billets in which MHOs are housed to ensure that
    facilities will accommodate soldiers' medical conditions and are
    commensurate with active component soldiers on the same installations.
    In some cases MHOs have been relocated off the installation until
    adequate quarters can be provided on the installation. The Army is
    spending an estimated $15.7 million to ensure facilities are adequate
    so that soldiers in an MHO status are housed in a manner that is
    commensurate with permanent party soldiers on the same installation.
        --  We established a dedicated chain of command at each
    installation to monitor progress and provide necessary support for
    soldiers in an MHO status.
        --  Finally, the Army authorized Reserve component soldiers
    mobilized after October 25, 2003, to be released from active duty if
    found medically unfit to deploy within the first 25 days of
    mobilization. These actions have resulted in a reduction in the number
    of pre-deployment medical holdovers, and have postured the Army to more
    effectively deal with this problem. On February 20, 2004, there were
    4,135 soldiers in MHO status.

        During the period of the rotation of units to and from Iraq,
    Afghanistan, and the Balkans, the largest number of active and Reserve
    component soldiers since World War II will rotate through Army
    installations. The Army is committed to ensuring that soldiers are
    medically qualified for service in a theater of operations, and
    provided comprehensive care and treatment to soldiers who have served
    and incurred illness or injury. By law, each soldier is required to
    undergo a health assessment before deployment and upon returning from
    deployment to the theater of operation. The Army anticipates that the
    health assessments on the large numbers of forces rotating in and out
    of theater will increase the number of MHOs. However, it is not
    possible to anticipate the exact number.

                                    CLOSING

        Our Army's commitment to the future is certain. We remain dedicated
    to training and equipping our soldiers and growing leaders so they can
    win the fight against the global terrorism. We fully appreciate the
    congressional support provided to us this past year. With your support
    and the support of the American people, we will continue to carry the
    fight to our enemies to provide security here at home.
        Again, thank you for the opportunity to appear before you today.

        Senator Chambliss. Thank you.
        Mr. Navas, we're pleased to have you with us.

    STATEMENT OF HON. WILLIAM A. NAVAS, JR., ASSISTANT SECRETARY OF
               THE NAVY FOR MANPOWER AND RESERVE AFFAIRS

        Mr. Navas. Mr. Chairman, Senator Nelson, I'm delighted to
    be here. It's my pleasure to be here to appear before you and
    represent the outstanding active, Reserve, civilian, and
    contractor personnel of the Navy and the Marine Corps team.
        Also, like my colleagues, I would like to make a brief
    statement and have my complete statement entered as a matter of
    the record.
        Let me begin, sir, by thanking the subcommittee for the
    superb support it has consistently provided to our personnel
    over the years, in particular after our Nation was attacked
    2\1/2\ years ago on September 11. Your support of critical
    investments and personnel programs affirms our Nation's
    commitment to the outstanding men and women who serve in our
    military. The DOD has worked very hard to convert your support
    into actions to sustain our activities in the global war on
    terrorism and increasing personal readiness and, ultimately,
    our warfighting capability.
        Secretary England, Admiral Clark, and General Hagee are
    providing the Department of the Navy and the Services with
    extraordinary leadership during this pivotal time in our
    Nation's history. I would also be remiss if I didn't give due
    credit to the Service Personnel Chiefs, who will be testifying
    later on today, Lieutenant General Garry Parks and Vice Admiral
    Gerry Hoewing. I have a very close working relationship with
    them, and it's a pleasure working with them as we plan and
    execute the excellence that the American people deserve. My job
    as Assistant Secretary of the Navy is considerably easier
    thanks to their support, capabilities, and their forward-
    looking vision and dedication.
        Sir, today we're engaged in two major campaigns. One is
    fighting the global war on terrorism, and the other is
    transforming our military as it needs to transform to deal with
    this new environment.
        On the global war on terrorism, the Navy and Marine Corps
    are forward-deployed and valiantly prosecuting the enemy around
    the globe. On the campaign for people, as we work to recruit,
    retain, and shape the best naval force that our Nation can
    muster, we have turned the tide, and we're making great
    progress in that regard.
        Unlike a few years ago, our forward units are fully manned.
    The Navy and Marine Corps are meeting both their retention and
    recruiting goals, and quality has never been better. This is
    not to say that we don't have some areas that we need to still
    consider and remain focused on to make sure that we are
    building on this record of success.
        The DOD's fiscal year 2005 budget submission strives to do
    that. It provides, like Dr. Chu has said, a 3\1/2\ percent pay
    increase for our personnel, and it eliminates the out-of-pocket
    expenses for housing. It supports our Services' end strength
    requirements, and it continues to give us critical force-
    shaping tools, such as the selective re-enlistment bonus and
    special incentives. It also provides, in general, for our
    personnel readiness program.
        Our vision is based on our seminal documents, Seapower 21
    and Naval Power 21. As part of that vision, it's an integrated
    human-capital strategy that we have developed for delivering
    that total force. It is critical that we have the right mix of
    active, Reserve, civilian, and contractor personnel to be able
    to accomplish this vision. What we learned during the global
    war on terrorism was that our personnel systems were not as
    agile and flexible and integrated, as they needed to be. They
    were, rather, in some cases a unique stove-piped system that
    made it very difficult to apply the right person to the right
    job at the right time, especially in an era of a volunteer
    force where people are one of our most precious resources, but
    also one of our most expensive resources. We need to leverage
    technology, which is becoming increasingly less expensive.
        So what we're trying to do is to assess our core
    competencies, concentrate on those core competencies, and then
    try to basically shed ourselves of things that we might not
    need to be doing, or that we could outsource. This is the
    Department of the Navy's vision for human resources. The
    Secretary of the Navy has made this his top priority. Our
    philosophy is to leverage the best technologies. We will
    concentrate on our core competencies. We'll eliminate those
    activities that are no longer relevant, and we will carefully
    determine and find personnel who are best suited to those
    functions.
        In order to carry this out, the Department of the Navy has
    established three thrust areas for this year. The first is to
    implement the NSPS, which the Secretary of the Navy has asked
    and authorized us to take the early lead on, because I think
    that this is a critical piece in our human resources strategy.
    The second piece is to transform our Naval Active Personnel
    System, in support of Seapower 21 and Naval Power 21. Third, in
    the aftermath of September 11, to rebalance and realign our
    Reserve components from a Cold War structure to a more agile,
    more supportive force.
        So, in closing, sir, we are prosecuting successfully the
    global war on terrorism at the same time we are transforming
    our force. We cannot succeed in this without the support that
    your subcommittee and Congress has provided us before, and we
    look for that type of support in the years to come.
        So, Mr. Chairman, again, I'm grateful for having this
    opportunity, and I would be ready to answer any questions that
    you might have.
        [The prepared statement of Mr. Navas follows:]

                Prepared Statement by Hon. William A. Navas, Jr.

        Mr. Chairman and distinguished members of the subcommittee, it is
    my pleasure to appear before you today to testify on behalf of the
    outstanding active duty, Reserve, civilian, and contractor personnel of
    our Navy and Marine Corps team. I am pleased to be able to share with
    you the remarkable progress that the Department of Defense (DOD) has
    made since I last testified before you regarding the Department of the
    Navy's personnel programs, including exciting developments in our
    transformational efforts to implement the National Security Personnel
    System (NSPS), modernize the Navy's human resource system, and
    rebalance our mix of Active and Reserve Forces.
        Let me begin by thanking this subcommittee for the superb support
    it has consistently provided our personnel over the years, and in
    particular, during the challenging 2\1/2\ years since our Nation was
    attacked on September 11, 2001. This subcommittee's support of critical
    investments in our personnel programs affirms our Nation's commitment
    to ensuring the highest levels of personnel readiness and mission
    effectiveness.
        My intent today is to highlight several specific issues that are of
    particular interest rather than listing all of the program areas that
    fall under the oversight of Manpower and Reserve Affairs. I
    respectfully refer you to the DOD's fiscal year 2005 budget submission
    that contains more specific details on a myriad of manpower issues.

                         ONE NAVY AND MARINE CORPS TEAM

        Secretary England, Admiral Clark, and General Hagee are providing
    the Department of the Navy and the naval services extraordinary
    leadership during a pivotal time in our Nation's history. I must also
    give due credit to our two Service Personnel Chiefs, Lieutenant General
    Parks and Vice Admiral Hoewing, with whom I have the pleasure of
    working very closely to plan and execute the excellence that the
    American people deserve. My job as the Assistant Secretary of the Navy
    is made considerably easier thanks to their impressive capabilities,
    forward looking vision, and dedication.
        As I speak to you today, our sailors, marines, civilians, and
    contractors are waging the war against terrorism on many fronts, while
    aggressively transforming the force as we recapitalize the fleet to
    meet future challenges. These are demanding times for our Services, but
    I can report to you with great confidence that, with your continued
    support, the men and women of the Department of the Navy are up to the
    task and we are succeeding!
        The Navy and the Marine Corps exist and operate as one integrated
    force. We share one common vision as captured in our capstone document,
    Naval Power 21. We are proud of the fact that our people operate as one
    integrated force without losing the two Services' unique missions,
    organizations, and heritage. That is why the Department of the Navy has
    one integrated human capital strategy focused on optimizing and
    delivering a total force to support our Nation's warfighting
    capability.

          CONTRIBUTIONS OF OUR MEN AND WOMEN IN A GLOBAL WAR ON TERROR

        In the global war on terrorism, Navy and Marine Corps personnel are
    valiantly prosecuting the enemy around the globe. Forward deployed and
    operating on the ground, in the air, on the seas, and under the oceans,
    they are demonstrating the highest levels of professionalism and
    heroism.
        Last year, over 50 percent of the Navy's fleet and over 70,000
    marines were forward deployed in support of Operation Iraqi Freedom
    (OIF) 1. Post-September 11, 2001, the Marine Corps mobilized over
    22,000 reservists, including 3,500 from the Individual Ready Reserve
    (IRR), and the Navy mobilized over 22,000 reservists with a peak of
    over 12,000 during OIF 1. Mobilized commissioned naval units included
    coastal warfare, construction battalion, and aviation communities,
    while individuals were mobilized primarily from security, intelligence,
    law enforcement and physical security augmentation units. Today, the
    Navy has less than 2,500 personnel mobilized and the Marines
    approximately 5,500. Our Reserve Forces ably demonstrated their ability
    to surge on short notice and deliver ready, well-trained personnel
    where they were needed, when they were needed.
        Now we are engaged in the re-deployment of Navy and Marine forces
    in preparation for OIF 2. Beginning this month, Navy and Marine Corps
    personnel will deploy in two 2-month rotations, with the initial ground
    rotation including approximately 25,000 active duty marines, 2,300
    Marine reservists, 5,000 active duty Navy, and 800 naval reservists. We
    are proud of the contributions they will be making, and we are honored
    to support them.

                            INVESTING IN OUR PEOPLE

        People are central to the Department of the Navy and the Services.
    Without our men and women to carry out our mission, our investments in
    ships, modern weaponry, and warfighting skills would be without
    purpose. That is why the Department is keenly focused on making
    investments in people that improve capabilities, readiness, and
    willingness to serve.

    Pay and Benefits
        The fiscal year 2005 budget continues to enhance the
    competitiveness of military compensation, and includes a basic pay
    raise for military personnel of 3.5 percent. In accordance with our
    plan to address the housing needs of our personnel, Basic Allowance for
    Housing (BAH) programs have been funded to reduce out-of-pocket
    expenses from 3.5 percent in fiscal year 2004 to zero in fiscal year
    2005. These investments help us to compete for talent in the workforce
    while keeping faith with those we wish to retain.

    Supporting Personnel Readiness
        Personnel readiness support programs demonstrate the DOD's
    commitment to our people. The Department continues to emphasize and
    fully fund a wide range of programs to improve the quality of life for
    our military personnel and their families. In support of the global war
    on terrorism, the fleet and family support centers and the Marine Corps
    Community Services continue to address the increasing needs of our
    deploying service members and their families. These programs cover a
    wide spectrum of support and community activities, including fitness,
    recreation, and other community services. In the past year, we have--
    with a number of partners--actively improved communications between
    deployed sailors and marines and their families at home by distributing
    free phone cards. We continue to provide affordable, high quality
    childcare to help relieve members from their worries that can limit
    their ability to get the job done, and we are expanding our efforts to
    identify and facilitate spouse employment opportunities. The Department
    continues to emphasize voluntary education programs as essential
    elements of individual growth and job performance.

    Medical Readiness
        The recent experiences of DOD medical systems in OIF and Operation
    Enduring Freedom (OEF) have become the catalysts for a careful
    evaluation of the requirements of military medicine looking to the
    future. It is critical that our sailors and marines receive quality
    medical care in-theater and on the job in the continental United States
    (CONUS) to ensure that our military personnel are deployable and
    mission-capable. To that end, Navy medicine is aligning in support of
    the operational Navy, responding to needs arising from high operational
    tempo (OPTEMPO) and growing commitments overseas, while aggressively
    striving to contain costs. The Department is committed to providing
    timely access to quality health care for all beneficiaries--active
    duty, reservists, retirees, and family members. Health productivity
    management is an emerging business strategy that can yield tremendous
    dividends for the Department by utilizing health interventions that
    reduce both direct and indirect costs. Disease prevention and personal
    fitness are key to maintaining a fit and healthy force.

    Wisely Managing Force Strengths
        We are carefully considering the cost of personnel and actively
    working to reduce overall manpower expenses by streamlining, enhancing
    efficiency, and eliminating unneeded work. As technology grows more
    affordable and the cost of personnel grows more expensive, it is
    imperative that we move away from labor-intensive work by maximizing
    the benefits of technology. We will not assign smart, talented people
    to do mindless drudgery work as we did during the conscription era.
        The Navy is reducing active duty and Reserve personnel strength in
    fiscal year 2005 by decommissioning older ships and replacing manpower-
    intensive work by leveraging technology more efficiently. The Marine
    Corps end strength remains steady providing sufficient resources to
    meet mission requirements, while shifting some work currently performed
    by marines to civilians, freeing up more marines for direct military
    functions.
        The fiscal year 2005 budget reflects our commitment to our
    personnel and to the American taxpayers. It is a balanced budget that
    is in line with fiscal realities and one that can maintain force
    readiness and operations. Your subcommittee's support of the Navy
    budget will further strengthen the Department's ability to ensure
    current readiness.

                        WINNING THE CAMPAIGN FOR PEOPLE

        Our investments are helping us to win the campaign to attract the
    highest quality, and retain the best people, to man our forces in the
    future. Today, our forward deployed units are fully manned. The key
    challenge will be sustaining the gains we have made and continuing to
    build upon our successes to attain the highest level of battle
    readiness.

    Recruiting the Force
        Fiscal year 2003 was another outstanding recruiting year for both
    the Navy and the Marine Corps. Thanks to the dedicated efforts of our
    recruiters--and, in particular, this subcommittee's funding of
    enlistment incentives and advertising--we were able to attain or exceed
    our goals for active and Reserve, as well as officer and enlisted
    personnel. The quality of our personnel continues to improve, and the
    Services remain on track to continuing our successes in fiscal year
    2004.
        The Navy attained its annual enlisted recruiting goal for the 5th
    year in a row, and met both new contracts and accessions goals for the
    30th consecutive month. The Navy also succeeded in achieving 40 percent
    increases in the percentage of recruits with college experience to 6
    percent, and increased the percentage of high school diploma graduates
    from 92 to over 94 percent. The Marine Corps met or exceeded its
    recruiting goals last year for the 8th year in a row, and quality
    remains high with over 97 percent of new recruits being high school
    diploma graduates.
        Recruiting programs for both the Navy Reserve and the Marine Corps
    Reserve remain strong, meeting recruiting mission in fiscal year 2003.
    In fiscal year 2003, the Navy consolidated both active duty and Reserve
    Force recruiting activities under one command for a total force Navy
    Recruiting, as a streamlining initiative to enhance force management.
        The National Call to Service (NCS) program, initiated this year for
    the first time, has the potential for further enhancing the Services'
    personnel strength by attracting a limited number of high quality
    recruits for shorter active duty enlistment periods in hard to fill
    ratings or military occupational specialties (MOS). The Navy has
    already written enlistment contracts for NCS since it was made
    available in mid-January, and intends to write 1,000 contracts this
    year and another 2,000 in fiscal year 2005. The first recruits will
    report for basic training in May. The Marine Corps intends to recruit
    175 for the program this year, increasing the goal incrementally until
    reaching 350 in fiscal year 2006. We will be carefully evaluating the
    results of this program and report back to Congress as data become
    available.

    Retention of Our Best People
        Retaining the best and brightest sailors and marines has always
    been a core objective of the Department of the Navy and key to our
    continued success in combat. With retention, success tends to breed
    further success: better retention allows the Services to become more
    selective, targeting higher quality and specific skills and
    experiences, thereby facilitating more favorable force shaping.
    Currently, the Navy is actively maturing its force to operate
    increasingly complex systems by retaining more of our highly-skilled
    sailors and maintaining advancement opportunities. The Marine Corps, a
    youthful force by design, is focused on retaining the highest quality
    marines to grow the ranks of our staff noncommissioned officers (NCOs)
    whose combat leadership is the basis for much of the Marine Corp's
    historical success.
        In fiscal year 2003, the Navy exceeded all of its aggregate
    retention goals for the third year in a row, and reduced first term
    attrition another 10 percent from fiscal year 2002 levels. Despite
    these successes, which have led to the Navy removing 41 ratings from
    the critically manned ratings list and attaining 95 percent of goal in
    five other critically manned ratings, we remain keenly focused on
    addressing the shortfalls that remain.
        The Marine Corps succeeded in achieving first-term reenlistment
    goals for the past 9 years and reduced attrition to its lowest level
    ever. This year, the Marine Corps has already achieved 76 percent of
    first term retention and 47 percent of second tour and beyond goals
    only a third of the way into the fiscal year.
        Officer retention in both Services is high--the Marine Corps at a
    19-year high and the Navy is showing continued improvement. Despite the
    current positive trend, we do have problems in certain communities,
    particularly in the Navy O3-O4 aviation and O4-O6 surface and submarine
    unrestricted line communities. The Navy plans to continue using special
    pays to target specific qualifications and skills through continuation
    pay.
        Our experience and research indicates that programs targeted to
    specific skill shortages, such as the Selective Reenlistment Bonus
    (SRB), continue to have the strongest impact on reenlistments, while
    helping us to better target specific skills. This subcommittee's
    support of continued funding of these important retention and force
    shaping tools are critical to sustaining our record of retention
    successes.

                       NAVAL HUMAN CAPITAL TRANSFORMATION

        Transforming human capital management is central to the
    Department's strategy for optimizing and delivering a total force in
    support of our Nation's warfighting capability. The success of Naval
    Power 21 depends on our ability to produce the right mix of active,
    Reserve, civilian, and contractor personnel when and where it is
    needed, at the right cost, now and in the future.

    Changing Workforce Requirements
        From 1947 to 1989, our national security efforts were defined by
    the Cold War. We built and poised naval forces for large-scale, blue
    water, prolonged warfare operations, and we designed personnel systems
    based on conscription to maintain large standing forces, favoring mass
    over agility, redundancy over efficiency, and simplicity over
    flexibility. Industrial age business and management processes were
    effective for building and maintaining these massive forces and surge
    capacities.
        Since the fall of the Berlin Wall in 1989, globalization has shaped
    a ``new world order.'' Nations, cultures, businesses, and people have
    become more accessible and more exposed than ever before. Threats to
    homeland and international security come from multiple directions in
    diffused and difficult to predict ways. As a result, the men and women
    of the Navy and Marine Corps are responding to new requirements,
    deploying more often, and more quickly, to more places, and conducting
    more complex tasks than ever before.
        As the challenges we face grow more complex and demanding,
    information technology and modern business processes are required to
    effectively support the naval response to the global war on terrorism.
    Accelerated accessibility and abundance of information is enhancing the
    performance of our warfighters and those who support them.
        As a result, the workforce has been evolving, resulting in people
    learning to operate in knowledge-centric environments; increased career
    mobility and flexibility; expectations of higher responsiveness from
    management; and significantly increasing productivity. This requires
    personnel systems that are agile, flexible, and integrated.

    Three Separate Personnel Systems
        What we have learned in the global war on terrorism is that our
    human resource systems were not as agile, flexible, and integrated as
    we needed them to be. The systems did not enable total force
    management--rather, active duty, Reserve, and civilian personnel were
    managed under separate systems with separate sets of non-complementary
    and inflexible statutes and rules. We often did not have the ability to
    easily assign the most effective individuals to do our work and
    properly balance the skills inventory of the workforce, creating
    significant inefficiencies.
        The President and the Secretary of Defense have given us the
    mandate for addressing these issues, and Secretary England has made it
    a top priority for the Department of the Navy. We are striving to
    implement our vision for human capital management with a modern
    integrated human resource system that can respond quickly and with ease
    to support changing mission requirements. We are seizing this historic
    opportunity to take an important step forward, and I am pleased to
    share with you what the DOD is undertaking to meet this requirement.

    Our Philosophy on Human Resource Management
        People are our most valuable asset and, when properly supported and
    managed, critical force multipliers. The DOD will lead in the
    development of a 21st century human resources approach to support our
    people, leveraging the best technologies, business efficiencies and
    practices to gain the highest levels of organizational effectiveness.

             We are assessing our core competencies and determining
            which functions contribute to mission accomplishment. Those
            activities and functions that are no longer relevant to our
            core mission will be eliminated.
             Functions that are core to our mission will be sorted
            into three categories: those that should be done just by
            civilians; those that may be done by either military or
            civilians; and those that must be done just by military
            personnel. As a general rule, we will contract out non-core
            functions when it is cost-effective to do so. For those
            functions that can be done by either military or civilians, the
            NSPS will provide the flexibility and performance initiatives
            needed to enhance the assignability of civilians to these
            military-civilian jobs. In those functions that require
            military personnel, we will strive for the right balance and
            leverage Reserve component capabilities.

    Our Strategy for Naval Human Capital Transformation
        The Department's strategy is to modernize our human resource
    systems into one total force manpower management program that enables
    flexible, agile, and integrated responses to changing manpower demands.
    The 21st century total force manpower management program would
    incorporate state-of-the-art workforce planning and labor-capital
    assessment tools, an integrated information technology architecture,
    and flexible policies that allow optimal matching of people and skills
    to the required work. The ``continuum of service'' model advocated by
    Dr. Chu for enabling military personnel to move easily between the
    active and Reserve components is an important step towards enhancing
    the Department's vision.
        In 2003, the DOD established the Force Management Oversight Council
    (FMOC) as the senior policy-making and oversight authority integrating
    departmental manpower and personnel policies. Through the FMOC, the
    secretariat and the Services are now able to coordinate and align
    cross-cutting policies and initiatives, and oversee the development of
    the DOD's total force manpower management program.
        This year, the Department is implementing three major initiatives
    for transforming human capital management:

    1. Transforming the Civilian Personnel System
        Implementation of the National Security Personnel System
        We are pleased that the Secretary of Defense, at Secretary
    England's request, has authorized the Department to be in the first
    wave of conversions to NSPS. Thanks to the support of Congress in
    passing NSPS, the Department will have at its disposal much-needed
    authority to overhaul an outdated and antiquated system of civilian
    human resource management, and to create a new work culture based on
    performance instead of entitlement. This new system will provide the
    flexibility and agility critical to meeting mission readiness
    requirements, and enable the recruiting and retaining of high
    performing workers.
        Most Department of the Navy civilian employees, with the exception
    of those specifically excluded by law, will be a part of the first
    conversion to NSPS. We have established an NSPS Project Management
    Office (PMO), which will work closely with the DOD, to develop and
    execute the Department of the Navy's strategy for implementation. The
    Department intends to facilitate military-to-civilian assignments using
    streamlined classification and pay banding systems, which will have the
    effect of proper balancing the workload military and civilian employees
    and freeing up more warfighters for ``the tip of the spear.''

    2. Transforming the Navy Personnel System
        Modernizing Navy's human resource system to support Sea Power 21
        The Navy is in the midst of aggressively modernizing its human
    resource management system to support Sea Power 21's transformation
    strategy. At the heart of the Navy's workforce shaping agenda is its
    focus on developing and maintaining the right capabilities for the 21st
    century fleet, not on simply managing to specific numbers of personnel.
    The goal is to grow and optimize a force with the proper skills mix
    that can be applied where and when it is needed in support of the
    Navy's mission.
        The fiscal year 2005 budget request plans for the Navy's end
    strength to decline to 365,900, reflecting the decommissioning of older
    manpower-intensive platforms, improved training and employment
    processes, more efficient infrastructure manning and efficiencies
    gained through technology, new manning practices, and altering the
    workforce mix (including military to civilian conversions). A major
    effort is underway to accurately assess jobs, functions, and workload
    to aid in the drawing down of active duty end strength.
        A variety of initiatives are required for an organization as large
    and complex as the Navy to effectuate the necessary force shaping. The
    Sea Warrior initiative serves as both the concept and the tool for
    maximizing personnel readiness by improving the assessment, assignment,
    training, and education of sailors. It aligns the skills, experiences,
    and capabilities of the worker to current and future jobs, and empowers
    the sailor to make informed career choices. The Navy is also actively
    employing optimal manning practices onboard certain vessels to reduce
    excessive crewing; experimenting with swapping out crews to extend
    ships' time on station and reduce in-transit sailing time; creating
    technologically-enabled learning and training programs to increase
    availability and cut costs; channeling personnel in overmanned ratings
    to those that are undermanned; and designing Navy systems that require
    fewer people to operate. One of the Navy's exciting new manning
    experiments includes U.S.S. Coronado. The Coronado is the first command
    ship manned by a mix of Navy and civilian mariner personnel to optimize
    personnel-function assignments. As Navy designs and deploys new ships,
    aircraft, and systems, we are paying serious attention to issues of
    operability and maintainability in the arena of Human Systems
    Integration to ensure that we can reduce the need for scarce and
    expensive manpower in the future.

    3. Transforming the Reserve Force
        Rebalancing the Mix of Active and Reserve Forces
        The DOD's goal is to ensure that the Services are properly balanced
    between active and Reserve resources to ensure operational readiness
    for forward presence and surge capabilities. The global war on
    terrorism tested our surge capabilities for meeting rapid-response
    contingencies, and the Services ably applied judicious and prudent use
    of valuable Reserve assets. In the process, the Navy and the Marine
    Corps proactively took steps to immediately address imbalances that
    were identified, with particular focus in three areas: enhancement of
    early responsiveness; resolving stressed career fields; and the
    employment of innovative Reserve management practices. I would like to
    share with you several examples of what the Services are doing to
    rebalance the force mix and enhance Reserve mobilization.
        Navy: Developed a plan for converting 525 vacant, non-hospital
    corpsman Reserve billets to active corpsman billets for assignment to
    Marine Corps combat units; streamlined and automated the mobilization
    process; established a new Reserve flexible drilling contracts program;
    combined active and Reserve recruiting commands; and developed a new
    concept that would allow rapid accessing of a limited number of key
    Selected Reserves through volunteerism. The Navy also rebalanced its
    Antiterrorism/Force Protection inventory in fiscal years 2003-2004 by
    adding over 7,200 new active component and over 1,800 Reserve component
    billets.
        Marine Corps: Stood up an Air Naval Gunfire Liaison Company in the
    active component with two more planned for 2004-2005; developed the
    plan for establishing two additional Reserve military police (MP)
    companies and four new Reserve Antiterrorism/Force Protection
    companies; created the Intelligence Support Battalion to consolidate
    command and control of Reserve intelligence billets beginning as early
    as 2005; developed a plan for reassigning 93 active personnel from a
    Reserve component squadron to the Active Force in 2004; and embedded
    active component personnel (instructors/inspectors) in all Reserve
    component units.
        To further enhance the integration of the Naval Reserve into the
    Navy mission, the Naval Reserve is undergoing a ``redesign'' based on a
    comprehensive study co-sponsored by the former Vice Chief of Naval
    Operations (CNO) and myself. We have identified 14 key points for
    addressing in the redesign. The three main areas of focus are:
    Personnel Management; Readiness and Training; and Organizational
    Alignment. Implementation of the redesign transformation will more
    fully integrate the Reserves into Sea Power 21 and reservists into the
    Sea Warrior initiative.

                                CHALLENGES AHEAD

        The Department has a good story to tell but we also acknowledge
    that this would not be possible without the help that we receive from
    this subcommittee and Congress. We need your continued support for full
    funding of our manpower and personnel requests, as well as flexibility
    to properly manage the force. Broad flexible authority to prudently
    manage our personnel, coupled with sustained funding for the SRB
    program and other programs targeted to specific skill shortages are
    critical tools that enable success. The information and infrastructure
    programs that support our personnel must also be funded. They will aid
    us in keeping the momentum going on our transformational efforts to
    optimize and maximize our human capital in support of Naval Power 21.

    Diversity as Readiness Issues
        The changes that require us to transform are occurring in an
    environment in which the demographics of the Nation and the force are
    rapidly shifting. As our people are developed as information-age
    workers--and we recruit and grow the whole individual--our
    organizations must be prepared to fully capitalize on their knowledge,
    experiences, backgrounds, and motivations. Today, the Department of the
    Navy is maturing in its understanding of human capital and the
    optimization of people in the workplace. Diversity is not simply a
    compliance program. We fully appreciate the fact that diversity is
    truly a readiness issue: we need to maximize our investments in every
    single individual, and we want our organizations to have the most
    robust personnel capabilities that can be drawn upon from American
    society. This means that our organizations, and our leaders, should
    reflect the broader society, and our people must be given the
    opportunity to thrive as they make their contributions in service to
    our Nation.

                           FULFILLING NAVAL POWER 21

        In closing, I am grateful for having this opportunity to share with
    you the many new developments that are occurring in our Department
    today. We are successfully conducting our mission, fighting the global
    war on terrorism, and we are aggressively transforming for the future.
    We have one integrated human capital strategy focused on optimizing and
    delivering a total force to support our Nation's warfighting
    capability. Our manpower and personnel programs exist, and are aligned,
    to support Naval Power 21.
        President Bush may have described our situation best, when in
    December 2001 he said: ``What's different today is our sense of
    urgency--the need to build this future force while fighting a present
    war. It's like overhauling an engine while you're going at 80 miles an
    hour. Yet we have no other choice.''
        The Department of the Navy has the right sense of urgency and we
    are moving full speed ahead!

        Senator Chambliss. Secretary Dominguez, before we get to
    you, we have that last vote. We have about 5 minutes left. So
    we'll run and vote. We'll be right back, as soon as we can get
    over there and back.
        Mr. Dominguez. Yes, sir. [Recess.]
        Senator Chambliss. All right. Secretary Dominguez,
    hopefully that's our last interruption, and we'll proceed
    immediately to you and look forward to your comments.

    STATEMENT OF HON. MICHAEL L. DOMINGUEZ, ASSISTANT SECRETARY OF
             THE AIR FORCE FOR MANPOWER AND RESERVE AFFAIRS

        Mr. Dominguez. Thank you, sir.
        Mr. Chairman, thank you for this opportunity to meet with
    you and talk about Air Force personnel.
        The Deputy Chief of Staff of Personnel, Lieutenant General
    Tex Brown, and I prepared and submitted to you a joint written
    statement for the record. In my opening oral comments, I would
    like to briefly touch on the highlights of that document.
        First, the Air Force is a force under stress, but that
    stress is unevenly distributed across our force. Where it is
    felt most strongly, that stress is a manageable cause for
    concern, for watchfulness, for a careful and measured response.
    The strength and resilience of our force in its third year of
    the war on terror is a tribute to the investment in people this
    subcommittee made and sustained over the years. The Air Force
    is under stress, but it is not in crisis, in large measure
    because of your concern, attention, and leadership.
        Second, Lieutenant General Brown and I, along with the
    Chief of the Air Force Reserve and the Director of the Air
    National Guard, have developed a comprehensive, coherent human
    resources plan that will guide our efforts to relieve the
    stress on our force and to transform that force so that it can
    more effectively meet the demands of the global war on terror.
    We have a plan, and we are executing to our plan.
        Third, the NSPS is a critical component of our plan. The
    modern management concepts included within that system provide
    flexibility and agility needed to integrate our civilian airmen
    fully, completely, and seamlessly into our total force. The
    devil is in the details, of course, and we are working now with
    Dr. Chu to define those details in a way that will be fair to
    our civilian airmen, but they will also meet our national
    security needs. The NSPS puts the last piece of the total force
    in place.
        Finally, our plan recognizes and emphasizes the value of
    people as our most important warfighting asset, as the key to
    successful dominance of air and space, and as the source of our
    combat power. It is in this spirit, with people at the heart of
    our actions, and in our hearts, that we are moving to attack
    the scourge of sexual assaults.
        Thank you for the opportunity to be here today, and I look
    forward to your questions.
        [The joint prepared statement of Mr. Dominguez and General
    Brown follows:]

    Joint Prepared Statement by Hon. Michael L. Dominguez and Gen. Richard
                                 E. Brown, USAF

                                  INTRODUCTION

        Over the last decade, and especially in the past 3 years, America's
    airmen have responded to dramatic changes in our force structure and
    the world security environment. Since 1991, we have reduced our Active-
    Duty Force by nearly 40 percent--from 608,000 to 375,000--while
    remaining engaged around the world at levels higher than at any time
    during the Cold War. To prevail in a dangerous and ever-changing world,
    we have completely transformed our Air Force, from a heavy, forward-
    based presence designed to contain the Soviet Union and allied
    communist governments into an agile expeditionary force, capable of
    rapidly responding on a global scale, with tailored forces ready to
    deal with any contingency. Since the attacks of September 11, 2001,
    that transformation has taken on an even more urgent and accelerated
    pace to respond to the world situation as well as our domestic security
    environment. This transformation has produced outstanding initial
    results. But the journey is just beginning.
        Many challenges remain before us, but we believe we have our focus
    in the right place: towards the future. At the heart of our efforts is
    our plan to create an environment, and the associated tools necessary,
    to more deliberately develop airmen to be the leaders of tomorrow at
    all levels. This culture of force development extends across our force,
    encompassing officers, enlisted, civilians, and Guard and Reserve
    members. This developmental change is driving major cultural changes in
    your Air Force. Beginning with a common airman culture that embraces
    diversity of thought, diversity of talent, and diversity of background
    and experience. This culture emphasizes the manner in which
    professional airmen relate to each other, and includes a zero tolerance
    approach to inappropriate behavior of all kinds. Obviously, that
    encompasses a straightforward, determined approach to issues such as
    sexual harassment and sexual assault. We will do all in our power to
    prevent such behavior, root it out when we find it and apply
    appropriate justice while providing all the support we can muster to
    victims of this behavior. These issues, as tough and complex as they
    are, need to be fully embraced and understood at all levels of our
    force, to ensure every member of our team experiences the mutual
    respect, teamwork and esprit de corps they have earned and truly
    deserve. Our culture is grounded in our core values as airmen:
    integrity, service, and excellence, which form a solid foundation for
    the total force team--active duty, Guard, Reserve, and civilians.
        We recognize the herculean effort put forth by all members of the
    force to defend America and her interests abroad. We recognize in
    particular the stress we have placed on members of the Air National
    Guard and Air Force Reserve. We are making every effort to relieve the
    stress on the airmen who make up those mission-essential forces, just
    as we are making every effort to relieve the stress on many of our
    active duty members in critical warfighting skills while we work to get
    down to our end strength objectives. As we respond to the many
    challenges we face, it is important that we take time to recognize and
    support the tremendous sacrifices made by Air Force family members,
    whose contributions to the overall Air Force team are as crucial as
    those of any other team members. Sometimes more so.
        Finally, as airmen, we have taken a renewed look at the very real
    demands that our people must endure, as well as their long-term well-
    being. We have refocused our health and physical conditioning efforts
    to emphasize fitness for life, a vision, with the needed leadership
    behind it that recognizes the inherent relationship between physical
    fitness, mental acuity, and battlefield survival. Balancing all of
    these inter-related priorities is a complex task, and an important one.
    These priorities are extremely important to our force, to our culture
    of service, and to the Nation. We must get them right: to always be
    ready to respond to our Nation's call.
        None of this would be possible without the exceptional support Air
    Force personnel receive from Congress. Over the last several years, you
    have approved significant advances in pay, benefits, and retention
    incentives for the men and women who serve in all of the military
    services. These initiatives have made a significant difference for the
    readiness of your Air Force and the quality of life of our members and
    their families. They improved retention and increased enlistments,
    essential to keeping the highly-trained professionals in the ranks. The
    poor retention we experienced in recent years has been reversed, a
    testimony to both your support and the patriotism of young Americans
    who join and continue to serve. But we have to keep our focus. As we've
    experienced in the past, positive retention trends are dependent on
    many rapidly changing dynamics and we can't afford to take our eyes off
    the ball. Thus, in the coming years we will continue to watch our
    retention of key warfighting career fields. The battle is not won. But
    we have made much progress.
        In addition, we would like to thank Congress for taking the
    initiative to approve the Department of Defense's (DOD) National
    Security Personnel System (NSPS). NSPS allows us to modernize our
    civilian personnel management system to meet the unique demands of the
    national security mission. We believe NSPS is essential to the Air
    Force's ability to accomplish its air and space mission in these
    challenging times. NSPS' flexibilities will allow us to attract and
    retain ``the right people for the right jobs at the right time,''
    expedite military to civilian conversions, and quickly meet the ever
    changing demands for support of the global war on terrorism.
        The Air Force enthusiastically and energetically supports NSPS and
    is committed to implementing it aggressively and responsibly. While
    some of NSPS' elements may be considered radical departures from
    current processes, it is critical that we are not diverted from moving
    forward on executing NSPS. Any delay will be detrimental to our
    transformation efforts and our ability to move toward a more responsive
    posture.
        This combined statement of both the Assistant Secretary for
    Manpower and Reserve Affairs and the Air Force Deputy Chief of Staff,
    Personnel, develops each of the themes just mentioned in greater
    detail. This statement represents our vision of the way ahead for Air
    Force people.
        To place these issues in context, we will begin by discussing the
    Air Force core competency that directly affects every Air Force member:
    Developing airmen. This core competency is at the heart of our
    strategic vision for Air Force personnel.

            DEVELOPING AIRMEN--RIGHT PEOPLE, RIGHT PLACE, RIGHT TIME

        At the heart of our combat capability are the professional airmen
    who voluntarily serve the Air Force and our Nation. Airmen create air
    and space power. Our airmen turn ideas, tools, tactics, techniques, and
    procedures into global mobility, power projection, and battlespace
    effects. It is with this understanding that the Air Force embraced a
    new Personnel Vision and Strategic Planning Construct to help transform
    management of ``airmen'' across the total force (active duty, Air
    National Guard, and Reserve; officer, enlisted, and civilian).
        We are refocusing our personnel processes and delivery systems on
    achieving the capabilities and creating the effects which produce for
    our Air Force the right people, possessing of the skills, knowledge and
    experience necessary to perform their missions at the right place and
    right time. This new vision succinctly states the role of our manpower,
    personnel, and training professionals: defining mission requirements;
    continually refreshing the pool to maintain an effective balance of
    youth and vigor, age and experience; deliberately developing the
    skills, knowledge and experience required by our combatant and support
    missions; sustaining the force by meeting the needs of our airmen and
    their families; and providing synchronized and integrated program
    management and service delivery systems.
        Our strategic goals focus on the effects of the personnel mission
    and the specific capabilities our system offers to our airmen and their
    leaders:

              Define: Implement a capabilities-based requirements system
            that meets surge requirements and optimizes force mix (active
            duty, air Reserve component, civilian, and contractors) to
            produce a flexible and responsive force.
              Renew: Maintain a diverse, agile workforce that leverages
            synergy between active duty, air Reserve, and civilian
            components, and private industry to meet requirements and
            sustain capabilities.
              Develop: Synchronize training, education, and experience to
            continuously create innovative, flexible, and capable airmen to
            successfully employ air and space power.
              Sustain: Sustain required force capabilities through focused
            investment in airmen and their families
              Synchronize: Implement a robust strategic planning construct,
            understand Air Force Human Resource investment, and link
            programming and legislative development to the plan
              Deliver: Transform customer service by delivering a leaner,
            more cost-effective, customer-focused Human Resource Service to
            support the Air Expeditionary Force

        The four overarching goals (define, renew, develop, and sustain)
    will serve as our framework for the written testimony that follows,
    just as they serve as the underlying framework for our personnel
    vision. In each of these areas we will discuss key issues facing the
    Air Force today, and what we are doing in each of those cases to look
    forward and ensure we are building the right force for tomorrow. (Note:
    The goals ``synchronize'' and ``deliver'' focus on the specific means
    by which we achieve the four overarching goals).

                                     DEFINE

        As we define the Air Force of the future we must determine our end
    strength needs, we must shape the force to meet those needs, and we
    must relieve the current stress on our most heavily stressed career
    fields. These are complex and inter-related issues. The process by
    which we approach this challenge involves how we manage our total force
    of Air Force active duty members, Air National Guard, Air Reserve, and
    Air Force civilians. It also encompasses the steps we are taking to
    relieve pressure on our Guard and Reserve Forces.

        --  End Strength:
        During the last several years, the Air Force has brought thousands
    of sharp, motivated people into our ranks--essentially, those who
    wanted to serve in the Air Force were welcomed. To meet end strength,
    we rolled up our sleeves and increased recruiting. Incredible
    patriotism prompted by the attacks on September 11, 2001, surged our
    growth and put us well above end strength. We are proud of the efforts
    of our outstanding Air Force professionals in the war on terrorism and
    are delighted that so many people want to be a part of our winning
    team. This very positive fact and the slowed economy have reduced what
    would have been normal attrition. In other words, not as many people
    left the Air Force in the last several years as we had anticipated.
        As a result, for the last several years we have exceeded our
    mandated active duty end strength of 359,000. Air Force active duty
    military end strength (i.e. billets) are capped at 359,300 for fiscal
    year 2004, 359,700 for fiscal year 2005, and 360,000 for the years
    fiscal year 2006 through fiscal year 2009. The actual number of
    personnel assigned to the Air Force at the end of fiscal year 2003 was
    375,000--approximately 16,000 personnel above our currently authorized
    limit. This is a temporary situation fueled by the global war on
    terrorism, and we are working to get in compliance. As we work to
    reduce the size of our Active Force by 16,000 people over the next
    several years, we will also work to reshape the force to correct
    existing skill imbalances and account for a new range of missions in
    the global war on terrorism.
        Because we have more people in the Air Force than the number of our
    currently authorized billets, it has led some to ask: ``Do we need to
    increase the size of the force to accomplish the mission especially
    with increased/extended mobilization?'' The answer is that first we
    need to ensure that we are using the people we have in the most
    efficient and effective way. The Air Force and DOD are constantly
    reviewing end strength needs and we feel we have not exhausted all
    potential internal sources to address stress on the force. People costs
    account for a significant portion of the Department's budget--we feel
    strongly that the Air Force must exhaust all other possibilities before
    requesting an expensive increase to military end strength.
        The Guard and Reserve Forces that support our total force team are
    designed to meet the Nation's call in times of crisis, such as the
    current global war on terrorism. Activation of the Guard and Reserve in
    times of crisis is not, in and of itself, a reason to seek an increase
    to end strength. As part of our review, we are taking a hard look at
    missions currently assigned to active, Guard, and Reserve in light of
    the foreseeable future requirements for conflicts. Our goal is to
    minimize the times the Air Force needs to call on the Guard and Reserve
    and to minimize the length of time they are activated.

        --  Shaping the Force:
        The Air Force is planning to implement several measures to shape
    the force back toward our authorized end strength--knowing as we do so
    that we must also reduce the stress on many of our ``over stressed''
    career fields. This will be a many step process, but our guiding
    principles will be simple. We want to properly size the Air Force to
    meet the needs of our Air Expeditionary Force (AEF) construct, our in-
    garrison requirements and our training requirements. We want to ensure
    that we draw down smartly, by specialty (and by specific year groups
    within those specialties) where we have more people than we need. At
    the same time, we want to correct our skill imbalances. But perhaps
    most importantly, as we shape the force we want to be sure that we
    avoid involuntary ``draconian'' measures that break faith with our
    people. With these guiding principles in clearly in view, we are taking
    a number of deliberate and very specific steps to shape the force.
        In broad terms, we are addressing force shaping in two ways: first,
    by reducing personnel overages in most skills; and second, by shaping
    the remaining force to meet mission requirements. To reduce personnel,
    we will employ a number of voluntary tools to restructure manning
    levels in Air Force career specialties, while adjusting our Active
    Force size to our authorized end strength requirements. As we progress,
    we will evaluate whether we need to modify these steps, or implement
    additional force shaping measures.
        We are taking a hard look at where our people are. We have airmen
    serving in jobs outside the Air Force who don't deploy as part of an
    AEF. Some of these, such as joint positions and some defense agency
    positions, require uniformed people, and we benefit by having an
    airman's perspective in those jobs. Others, however, may not require an
    airman or a military person at all. These are positions that we are
    working to legitimately reclaim into our ranks. By taking the steps to
    return these airmen ``to the fold'', we will ensure we have more people
    available to support our critical warfighting skills, as well as
    increasing the number of personnel available to support our AEF
    rotations overseas, which in turn will reduce stress on the rest of the
    force.
        Until very recently, we had not implemented all the manpower cuts
    at unit level we agreed to during the 1990s. We've now made the
    adjustments in our books--over 13,000 positions eliminated--but we
    still need to move some of the people. That means we have airmen with
    advanced training and professional skills filling positions that no
    longer exist.
        The Air Force Deputy Chief of Staff for Personnel is overseeing a
    program that will move us toward our goal of getting our strength and
    skill mix right. This program includes initiatives such as restricting
    reenlistment in overage career fields, voluntary transfers from active
    duty to the Guard and Reserves, shortening service commitments,
    limiting officer continuation for those deferred for promotion,
    commissioning Reserve Officer Training Corps (ROTC) cadets direct to
    the Guard and Reserves, limiting reclassification of those eliminated
    from technical school, rolling back separation dates, and officer and
    enlisted retraining.
        If at all possible, our goal is to give every qualified airman who
    wants to stay in the Air Force the opportunity to do so. In addition,
    we will use every tool to shape the force we have available to avoid
    the extreme measures used in the early 1990s, which undermined the
    morale and confidence of the force.

        --  Stressed Career Fields:
        The events of September 11 and the subsequent increase in
    deployments to support a variety of operations around the globe have
    resulted in a significant increase in operations tempo and sharply
    accelerated the existing stress on the force. Complicating this problem
    is the fact that the additional stress is unequally distributed across
    the various Air Force skill sets. Nevertheless, the Air Force is
    working to level the stress across the force to an acceptable rate,
    albeit higher than pre-September 11 stress levels.
        The DOD initiated 20,000 military to civilian replacements
    beginning in fiscal year 2004. The Air Force share was 4,300 of these.
        The Air Force had also been working on realigning our military into
    stressed career fields that better address post-September 11 workloads.
    The Air Force has addressed reducing and balancing stress with numerous
    manpower and personnel initiatives. These efforts to relieve stress go
    back to the fiscal year 2004 Program Objective Memorandum (POM) when
    approximately 1,400 authorizations freed up by programmatic changes
    were redirected to security forces to address pressing security and
    force protection requirements. In addition, 1,110 initial accession/
    training students were redirected to stressed skills in fiscal year
    2003--plus an additional 1,060 training redirects for fiscal year 2004.
    Currently, we are finalizing the required training adjustments for
    fiscal year 2005.
        Significant technology solution purchases made during fiscal year
    2003 are also offsetting manpower requirements. A security forces $352
    million technology purchase reduced unfunded security forces manpower
    requirements by 3,000 (with 1,600 of these in the active duty)
    beginning in fiscal year 2004.
        The Air Force will realign approximately 4,600 military positions
    to our most stressed career fields (such as security forces and
    intelligence) in fiscal year 2004 and fiscal year 2005. During fiscal
    year 2004, 1,800 military authorizations are being realigned from less
    stressed skill sets to more stressed career fields. In the fiscal year
    2005 Presidents budget, the Air Force is dedicating an additional 3,800
    military authorizations to relieve stress across the force in fiscal
    year 2005. Additional significant efforts are underway to further
    relieve and balance stress. We continue to work with defense agencies
    to reduce our total number of military positions in these functions,
    replacing them with civilians where appropriate. Collectively, these
    efforts provide examples of the kinds of steps the Air Force is taking
    to meet the Secretary of Defense's vision of moving forces ``from the
    bureaucracy to the battlefield.''

        --  Total Force Management--active, Guard, Reserve, and civilian:
        Today we are also shaping what our total force will look like in
    the future. As we carefully review what each component brings to the
    fight, we work to ensure the best capabilities are retained and
    nurtured. Just as in combat overseas, we are continuing to pursue
    seamless Air Reserve component (ARC) and active duty integration at
    home, leveraging the capabilities and characteristics of each
    component, while allowing each to retain their cultural identity. We
    continue to explore a variety of organizational initiatives to
    integrate our Active, Guard, and Reserve Forces. These efforts are
    intended to expand mission flexibility, create efficiencies in our
    total force, and prepare for the future. Today's future total force
    team includes a number of blended or associate units that are
    programmed or already hard at work. The creation of the ``blended''
    unit, the 116th Air Control Wing at Robins Air Force Base, Georgia,
    elevated integration to the next level. With an initial deployment of
    over 730 personnel, and significant operational achievements in
    Operation Iraqi Freedom (OIF), we are now examining opportunities to
    integrate active, Guard, and Reserve units elsewhere in order to
    produce even more measurable benefits, savings, and efficiencies. The
    reasons for this type of integration are compelling. We can maximize
    our warfighting capabilities by integrating Active, Guard, and Reserve
    Forces to optimize the contributions of each component. Reservists and
    guardsmen bring with them capabilities they have acquired in civilian
    jobs, leveraging the experience of ARC personnel. As an added benefit,
    this integration relieves personnel tempo (PERSTEMPO) on the Active-
    Duty Force. Because ARC members do not move as often, they also provide
    much needed corporate knowledge, stability, and continuity. Finally,
    integration enhances the retention of airmen who decide to leave active
    service. Because the Guard and Reserve are involved in many Air Force
    missions, we recapture the investment we've made by retaining
    separating active duty members as members of the ARC.

        --  Relieving Pressure on the Guard and Reserve:
        We are reviewing our Guard and Reserve manpower to minimize
    involuntary mobilization of ARC forces for day-to-day, steady state
    operations while ensuring they are prepared to respond in times of
    crisis. Since September 11, we've mobilized more than 62,000 Air Force
    Guard and Reserve personnel in over 100 units, and many more individual
    mobilization augmentee. Today, 20 percent of our AEF packages are
    comprised of citizen airmen. In addition, members of the Guard or
    Reserve conduct 89 percent of Operation Noble Eagle (ONE) missions. We
    recognize these demands have placed significant stress on our ARC
    forces, and we are taking steps to relieve the pressure on the Guard
    and Reserve.
        In fiscal year 2005, we plan to redistribute forces in a number of
    mission areas among the Reserve and active components to balance the
    burden on the Reserves. These missions include our Air and Space
    Operations Centers, remotely piloted aircraft systems, combat search
    and rescue, security forces, and a number of high demand global
    mobility systems. We are working to increase Guard and Reserve
    volunteerism by addressing equity of benefits and tour-length
    predictability, while addressing civilian employer issues.
        We are entering the second year of our agreement to employ Army
    National Guard soldiers for force protection at Air Force
    installations, temporarily mitigating our 8,000 personnel shortfall in
    security forces. As we do this, we are executing an aggressive plan to
    rapidly burn down our need for Army augmentation and working to
    redesign manpower requirements. Our reduction plan maximizes the use of
    Army volunteers in the second year, and allows for demobilization of
    about one third of the soldiers employed in the first year.
        At the center of our efforts to relieve pressure on the Guard and
    Reserve are our efforts to use innovative personnel management
    initiatives to enhance flexibility and reduce involuntary mobilization.
    A number of these initiatives focus on promoting volunteerism among
    Guard and Reserve members. For example, relative to the aforementioned
    efforts to mitigate the security forces shortfall is the ARC Security
    Forces Augmentation Program. In December 2003 the Air Force initiated a
    prototype program to use ARC volunteers (of all specialties) to assist
    in installation force protection. The initiative allows ARC members to
    serve flexible tours as force protection augmentees, assisting in such
    duties as vehicle inspection and entry control. This centrally funded
    program allows commanders to access a ready pool of willing volunteers
    and enables reservists to augment their military skills.
        We are also exploring a concept called Sponsored Reserve. This
    initiative involves a pre-contracted, voluntary agreement among the
    military, the ARC member, and industry to fill high-demand, critical
    skills that are honed in the civilian sector and that the Air Force
    requires for contingency situations.
        An essential element in our efforts to promote volunteerism is to
    provide predictability via the AEF rotation schedule. Not only are ARC
    members integrated into a predictable total force AEF schedule, but
    units are also afforded flexibility through internal Guard and Reserve
    rotations for AEF support in the case of high-demand/low density
    specialties. For example, in executing the Commando Solo Special
    Operations mission, the Pennsylvania Air National Guard's 193d Special
    Operations Wing uses predictable 45-day rotations. In this way, even
    with a high operational tempo, members are afforded a high degree of
    predictability, which eases pressure on them, their families, and their
    employers.
        There is no doubt that in the global war on terror, the United
    States Air Force has relied on the critical mission skills that our
    Guard and Reserve warriors bring to the fight. Simply put, we could not
    have accomplished the mission without them. But we also recognize that,
    in the long-term, we must make every effort to relieve the pressure on
    our ARC forces. Just as we must take steps to ensure the long-term
    health of our Active-Duty Forces, so too must we ensure the long-term
    health, combat capability, and career viability of our citizen soldiers
    in the Air Guard and Reserve. We are committed to doing so.

                                     RENEW

       Our focus on renewing our force will examine the issues of
    recruiting, retention, and diversity, and their overall effect on the
    health of our force.

        --  Recruiting:
        To renew our force, we target our recruitment to ensure a diverse
    force with the talent and drive to be the best airmen in the world's
    greatest Air Force. We will recruit those with the skills most critical
    for our continued success. In fiscal year 2003, our goal was 5,226
    officers and 37,000 enlisted; we exceeded our goal in both categories,
    accessing 5,419 officers and 37,144 enlisted. For fiscal year 2004, we
    plan to access 5,795 officers and as many as 37,000 enlisted. We are
    considering whether to reduce our recruiting goal below 37,000 enlisted
    this year to complement our overall force shaping goals. In fiscal year
    2005 we plan to reduce new accessions from 37,000 to 35,600. In fiscal
    year 2006 they have been revised still lower to 34,600.
        These measured decrements in our recruiting goals are part of our
    very deliberate effort to bring down the overall size of the force (to
    meet our end strength objectives) without jeopardizing the long-term
    health of the force by drastically slashing the number of our new
    accessions. As we learned after the post-Cold War drawdown when we
    slashed the number of accessions and associated training (we cut pilot
    training, for example, from 1,500 per year to 500 per year) we
    discovered that by doing so we build long-term structural personnel
    deficits into our inventory of trained personnel, with the result that
    shortages of particular year groups will be with us for up to 20 years.
    This time, in our efforts to solve a short-term problem, we are
    determined not to create a long-term problem of even greater
    significance. This is the one of the cornerstones of our approach to
    renewing the force in the environment of the early 21st century.
        We also closely monitor recruitment for the ARC. Historically, the
    ARC--comprised of the Air National Guard and Air Force Reserve--access
    close to 25 percent of eligible, separating active duty Air Force
    members with no break in service between their active duty and ARC
    service.
        Although we are currently meeting our recruiting goals and
    maintaining high standards for accessions, we need to keep our focus.
    Your continued support of our recruiting and marketing programs goes a
    long way to keeping the Air Force competitive in an uncertain job
    market. We are mindful of our experience of a decade ago. In a period
    when recruiting and retention looked positive, we allowed our
    recruiting investments to lag behind the growing challenges of the
    market place and found ourselves chasing a ``sine wave.'' In the past
    several years, we reversed course and made the investments needed to
    tune our recruiting engine. We need to sustain that engine now with
    proper care and maintenance. Additionally, these investments contribute
    to improved esprit de corps within our force, and further our efforts
    to retain the right people and shape our force for the future.

        --  Retention:
        The Air Force is a retention-based force. Because the skill sets of
    our airmen are not easily replaced, we expend considerable effort to
    retain our people, especially those in high technology fields and those
    in whom we have invested significant education and training. In 2003,
    we reaped the benefits of an aggressive retention program, aided by a
    renewed focus and investment on education and individual development,
    enlistment and retention bonuses, targeted military pay raises, and
    quality of life improvements. While we are still grappling with skewed
    retention numbers affected by Stop Loss in 2002, we are nevertheless
    seeing very positive signs overall. Our officer retention rates for
    fiscal year 2003 and so far in fiscal year 2004 are above previous
    years. For the enlisted force, our retention is healthy, but we must
    continue to actively manage our force. Our current first term retention
    rate is 67 percent which is well above our goal of 55 percent. For
    second term, we are on the mark with 75 percent and we are exceeding
    our 95 percent goal with 98 percent of our career airmen being
    retained.
        Part of our ability to succeed in our recruiting and retention
    efforts stems directly from our ability to offer bonuses and incentives
    to groups where we have traditionally needed the extra help. Our
    retention efforts reflect what has already been stated about
    recruiting: Our efforts right now are paying dividends for the Air
    Force and we must sustain this trend for the future. We fully recognize
    our ability to offer bonuses is a valuable and scarce resource, which
    is why we've ensured active senior leadership management in these
    programs, including semi-annual reviews of which career specialties,
    and which year groups within those specialties, are eligible for
    bonuses.

        --  Diversity:
        In this new era, successful military operations demand much greater
    agility, adaptability, and versatility to achieve and sustain success.
    This requires a force comprised of the best our Nation has to offer,
    from every segment of society, trained and ready to go. In the Air
    Force, the capabilities we derive from diversity are vital to mission
    excellence and at the core of our strategy to maximize our combat
    capabilities. Our focus is building a force that consists of men and
    women who possess keener international insight, foreign language
    proficiency, and wide-ranging cultural acumen. Diversity of life
    experiences, education, culture, and background are essential to help
    us achieve the asymmetric advantage we need to defend America's
    interests wherever threatened. Our strength comes from the collective
    application of our diverse talents, and is a critical component of the
    air and space dominance we enjoy today. We must enthusiastically reach
    out to all segments of society to ensure the Air Force offers a
    welcoming career to the best and brightest of American society,
    regardless of their background. By doing so, we attract people from all
    segments of society and tap into the limitless talents resident in our
    diverse population.

                                    DEVELOP

        Over the past year, the Air Force has implemented a new force
    development construct to get the right people in the right job at the
    right time with the right skills, knowledge, and experience. Force
    development combines focused assignments and education and training
    opportunities to prepare our people to meet the mission needs of our
    Air Force. Rather than allowing chance or happenstance to guide an
    airman's experience, we will take a deliberate approach to develop
    officers, enlisted, and civilians throughout our total force. Through
    targeted education, training, and mission-related experience, we will
    develop professional airmen into joint force warriors with the skills
    needed across the tactical, operational, and strategic levels of
    conflict. Their mission will be to accomplish the joint mission,
    motivate teams, mentor subordinates, and train their successors.
        One of the first steps in implementing our development efforts was
    the creation of individualized development plans. These plans are a
    critical communication tool capturing the member's ``career''
    development ideas, including desired career path choices, assignment,
    and developmental education preferences. These plans are routed through
    the chain of command, to include their most senior commanders, for
    endorsement. The newly created Development Team (DT), comprised of
    senior leaders from the functional community, carefully reviews each
    individualized career plan, along with commander's comments, and Senior
    Rater input. Targeting Air Force requirements, the teams place a
    developmental ``vector'' into the plan as input for our assignment
    teams, and immediate feedback to the member and commander regarding
    their expressed development plans. Assignment Teams match members to
    assignments using DT vectors; thus, ``developing'' our people to meet
    Air Force requirements.
        This year also saw a continued focus on Developmental Education
    (DE) with continued expansion to include not only traditional
    Professional Military Education (PME), but also advanced academic
    degree programs, specialty schools, fellowships, education with
    industry, and internships. Our development teams are using the
    individualized development plans, along with the member's record and
    Air Force requirements, to make educational recommendations to the
    Developmental Education Designation Board. This board designates the
    right school for the right member at the right time. Intermediate DE
    and Senior DE prepare members for a Developmental Assignment (DA)
    following the respective schools. This two-dimensional process
    facilitates the transition from one level of responsibility to the
    next. All developmental education assignments are made with the
    emphasis on the best utilization the member's background, functional
    skills, and valuable time.
        One of our most recent development efforts has been broadening the
    focus to include our enlisted corps. Beginning with the next promotion
    cycle, we will stand up a new top-level course of enlisted PME designed
    specifically for those selected to serve as Chief Master Sergeants. The
    course will focus on leadership in the operational and strategic
    environments, and will constitute a substantial leap forward in the
    development of our chiefs.
        Another segment of warriors requiring special attention is our
    cadre of space professionals, those that design, build, and operate our
    space systems. As military dependence on space grows, the Air Force
    continues to develop this cadre to meet our Nation's needs. Our Space
    Professional Strategy is the roadmap for developing that cadre. Air
    Force space professionals will develop more in-depth expertise in
    operational and technical space specialties through tailored
    assignments, education, and training. This roadmap will result in a
    team of scientists, engineers, program managers, and operators skilled
    and knowledgeable in developing, acquiring, applying, sustaining, and
    integrating space capabilities.
        The bottom line of our force development efforts is to provide an
    effects and competency based development process by connecting the
    depth of expertise in the individual's primary career field (Air Force
    Specialty Code) with the necessary education, training, and experiences
    to produce more capable and diversified leaders. Every aspect of the
    total force development construct develops professional airmen who
    instinctively leverage their respective strengths as a team. The
    success of this effort depends on continued cultivation and
    institutional understanding of and interest in force development,
    promoting an understanding of the competency requirements of leaders,
    and funding for the associated development initiatives.

                                    SUSTAIN

        Under this final area of our strategic goals, we will focus on two
    issues of great importance to the health of our force: quality of life
    (QOL) for our Air Force members (to include their families), and
    physical fitness.

        --  Air Force QOL Program:
        A cornerstone of the Air Force's efforts to sustain the force
    centers on the ``Air Force QOL Program.'' In the Air Force we define
    QOL as a system of networks--formal and informal--leveraged by
    leadership to provide superior support and services to our total force
    members and their families. We assess Air Force QOL based on the level
    of satisfaction of our service members in eight areas: compensation and
    benefits, workplace environment, OPTEMPO and PERSTEMPO, health care,
    housing, community, and family programs and educational programs.
        The most recent Chief of Staff of the Air Force (CSAF) QOL survey
    was a good news story for Air Force QOL initiatives. The survey
    validated the current Air Force perspectives on QOL priorities. The
    overall response rate to the survey was 45 percent, the highest in the
    past five survey administrations. Air Force senior leaders use the QOL
    survey data to establish working priorities, develop or update Air
    Force policy, build justification for new legislative initiatives and
    budget plans and establish new road maps to improve Air Force QOL.
        The Community Action Information Board and Integrated Delivery
    System processes have made great progress in providing families access
    to the services the need vice trying to fit their needs around an
    existing menu of programs. The Air Force, in conjunction with DOD and
    the other Services is launching ``OneSource'' a service that provides
    families with 24/7 access to information through a Web site and 1-800
    call-in number. The 1-800 number is staffed with highly-trained
    personnel who can rapidly assess the needs of those who call and match
    them to the services they need.
        One additional highlight of our QOL focus is housing investment.
    Through military construction and housing privatization, we are
    providing quality homes faster than ever before. Over the next 3 years,
    the Air Force will renovate or replace more than 40,000 homes through
    privatization. At the same time, we will renovate or replace an
    additional 20,000 homes through military construction. With the
    elimination of out-of-pocket housing expenses, our Air Force members
    and their families now have three great options--local community
    housing, traditional military family housing, and privatized housing.

        --  Physical Fitness:
        The final area we will examine concerns our new vision for the
    physical health and fitness of our force. The reasons for this emphasis
    are a reflection of our change in culture, and the realities of the
    world situation. Today's demanding missions require Air Force personnel
    to deploy for long periods of time away from family, sometimes to
    austere conditions to work long hours in extreme temperatures. With
    those demands comes a renewed focus on the health and fitness of our
    Air Force. We have instituted new standards and regulations that
    require leadership at every level to take responsibility for a fitness
    standard that prepares our airmen for the rigors of the mission.
        The increased recognition of the fitness impact on readiness has
    driven emphasis on fitness center repair and construction. We will
    continue to aggressively provide the necessary resources to support and
    maintain all areas of fitness, including construction, equipment and
    training. These facilities, coupled with the focus of unit leaders,
    will give our airmen the means to maintain and improve their health and
    fitness, ensuring our force is ``fit to fight'' now, and in the future.

                                   CONCLUSION

        The Air Force team is moving into the 21st century assured of only
    three things: That the challenges will be great, that the resources
    given to us by the American people--to include their sons and
    daughters--are resources that require our best possible stewardship,
    and--most importantly--that superior leadership will be indispensable.
    We are committed to providing the Nation with the best-trained, best
    led, personnel on the planet. It's that simple and that important.

        Senator Chambliss. Thank you very much.
        Dr. Chu, this morning at a hearing with the Service
    Secretaries, Senator Warner expressed concern to them about the
    cost and budgetary impact of the increases in pay and benefits.
    The context in which the question was asked was with respect to
    new benefits, such as TRICARE or retired-pay benefits for Guard
    and Reserve members. I'd like each of you to address that issue
    as to whether or not you see the increase in benefits for our
    Guard and Reserve as putting pressure on your particular
    budgets that you're going to have difficulty handling.
        Dr. Chu, I'd like to start with you to get your comments.
        Dr. Chu. Thank you, Senator. I appreciate your raising this
    important issue.
        I believe that we have to watch very carefully the balance
    among the various elements here, the balance between benefits
    to those who are in service right now, who are the ones we are
    most concerned with attracting and retaining, balanced against
    those who have left the Service, whether retired or having
    departed earlier than retirement. It is also balanced, as you
    suggest, between the active and Reserve components of the
    force. We are concerned that some proposals that we have seen
    others make would up end that set of balances, and we want to
    be careful to ensure that there is a strong incentive to active
    service. If we make Reserve service benefits the same as active
    service, then there isn't that kind of incentive, and I think
    that's the future that we want to be careful about here as we
    go about designing the best program to sustain a volunteer
    force.
        The Secretary is very concerned with the growth over the
    last 5 or 6 years of entitlement or entitlement-like benefits
    that accrue principally to those who have left the Service,
    especially the retired community. Those are meritorious
    programs. The Nation adopted them for good reason, but they are
    posing a significant cost issue for future defense budgets. I
    think we want to be careful, in the present era, to focus our
    attention, to the extent we make further changes, on what we
    need to do for the active force, those currently serving.
        Senator Chambliss. Secretary Brown.
        Mr. Brown. Yes, Mr. Chairman. I'd like to follow up on Dr.
    Chu's statement about balance.
        When you talk about healthcare benefits for the Reserve
    components, of course when they're on active duty they get the
    same benefits as active-duty personnel. When they're not on
    active duty, the rationale that we saw in extending some
    benefits was to deal with the medical readiness issue. When we
    had these recent mobilizations, there were significant numbers
    of personnel that were not deployable; they hadn't had a
    physical in 5 years. So in the effort to address the readiness
    issue, I think the benefits discussion got kind of mixed up in
    it. The readiness issue needs to be addressed. The benefits
    subject is a separate subject.
        Senator Chambliss. Secretary Navas.
        Mr. Navas. Sir, this is one of those tough issues that we
    try to deal with on almost a daily basis, striking the right
    balance between the benefits of those who are willing--
    especially in the Reserves--to come and serve their country in
    time of need, and then basically the cost of these benefits
    that are sometimes perceived as entitlements. These start
    crowding the investment account and the operational accounts.
    One of the reasons for our human-capital strategy that I
    espoused in my statement and my opening remarks is that
    basically we need to, in the case of the United States Navy,
    per se, leverage technology and try to minimize the personnel
    costs. If you take an aggregate of most of the personnel-
    related costs and the direct payment for retirement medical
    benefits, pay and allowances in that, it takes almost 70
    percent of the Navy's budget. These costs are expected to grow.
        So we are looking very closely at how we can strike that
    adequate balance, where we take care of those who serve, but
    not do it in a way that we might wind up like Bethlehem Steel.
        Senator Chambliss. Secretary Dominguez.
        Mr. Dominguez. Sir, I'd answer this question by first
    recognizing the invaluable contribution the Air Reserve
    components make, not just to the global war on terror, but to
    the day-to-day operations in the United States Air Force. They
    are so totally integrated into what we do, we cannot do our job
    without them.
        That said, I'll go back to what I said in my oral comments.
    We are not overusing them. There are elements or aspects of
    that force that we're flogging pretty hard, but they're not
    being overused. We need to temper our enthusiasm with some real
    facts about the level of use of the Guard and Reserve--again,
    understanding the real commitment that they make.
        As to the benefits, we would approach this calculus looking
    carefully at any increases in benefits in terms of the shaping
    the force, helping the Guard and Reserve adapt to the demands
    of the future. For example, one of the things I'm trying to
    push pretty hard is trying to understand how changes in the
    benefits compensation package might increase the amount of
    volunteerism that we get so that we don't have to keep relying
    on this mobilization tool. So I would like to look at any
    potential increase in benefits in that kind of light.
        Senator Chambliss. Okay.
        We are pleased to have been joined by Senator Dole, as well
    as the ranking member of the full committee, Senator Levin.
    Both these Senators have provided strong leadership on
    personnel issues, and we're pleased to have both in here. I
    think Senator Levin has a comment he would like to make at this
    time.
        Senator Levin.
        Senator Levin. Mr. Chairman, thank you for allowing me to
    go out of order here just with a very brief statement on one
    aspect of your hearing this afternoon. I just want to take a
    moment to address the issue of the DOD's proposed
    implementation of the new civilian personnel system.
        Last year, our bill included a provision authorizing the
    establishment of the NSPS within the DOD. This is a very hard-
    fought compromise, which Senator Collins led and our chairman
    was instrumental in fashioning. Other members of our committee
    were involved in it, as well.
        It now appears that the DOD is ignoring the limited
    protections that we wrote in for DOD employees and their
    representatives. In particular, the law requires the DOD to
    work with the OPM on the development of the new personnel
    system. It is my understanding that the DOD developed its
    initial proposals without any input from the OPM.
        Two, the law requires the DOD to ensure that employees have
    the right to collective bargaining. The DOD's initial proposal
    is that it will talk to the unions if it wants to, but it
    doesn't have to listen to what the unions have to say, and it
    won't be bound by any agreement that may be reached. That is
    not my definition of collective bargaining.
        Third, the law expressly prohibits the waiver of the
    employee protections in chapter 71 of title 5. The DOD proposal
    turns this provision on its head by saying that, ``The new NSPS
    labor-relations system will not employ any provisions of 5 USC
    Chapter 71.'' So the waiver is prohibited, but the proposal of
    the DOD says it's not going to employ any provisions of the
    chapter which cannot be waived.
        The Department of Homeland Security (DHS), Mr. Chairman,
    spent more than a year developing proposals in close
    consultation with employee unions and other interested parties
    in this area. The DHS presented a broad range of options,
    solicited views on all of the options, developed a proposed
    system based on elements of the various options, and promised
    continuing discussions before the new system is finalized. The
    DOD, by contrast, presented a single approach right out of the
    box, without consultation in advance with anybody outside of
    the Department. This creates the appearance that the DOD had
    already decided where it wants to go and used the consultative
    process as a formality.
        The DOD's approach, so far, is needlessly confrontational,
    and risks seriously undermining labor-management relations in
    the DOD. If the leadership of the DOD has a serious interest in
    fostering a constructive relationship with its civilian
    employees, they're going to need to start over and pursue a
    more collaborative approach and a more constructive solution to
    these issues.
        Again, Mr. Chairman, thank you for allowing me to make a
    very brief opening statement, probably out of turn.
        Senator Chambliss. That is quite all right. Senator Levin,
    I will tell you Secretary Navas made some brief comments
    relative to this in his opening statement, and, of course, Dr.
    Chu has been very much involved. While we're on this subject,
    if either of you want to make a comment at this point in time
    on that particular subject, we'd welcome it.
        Dr. Chu. I'd be delighted to. Let me emphasize, we have not
    come to any conclusions here. We have just started the process
    of collaboration with the unions. We met with the unions for
    the first time, as the statute required, on January 22. We
    invited the unions to present their proposals in regard to
    collective bargaining. The unions declined and asked the DOD to
    put some concepts forward, which we did on February 6. I should
    stress, these are concepts. This is not an answer, not a
    solution, not a decision.
        We had a 2-day meeting with the unions, which OPM co-
    chaired with us. I'm hopeful that it'll provide the foundation
    for constructive bargaining, just as Senator Levin has called
    for. We have a considerable amount of work ahead of us. We have
    no illusions on that point.
        These are hard issues, and this is, as the underlying
    statute calls for, a different approach--I believe the words
    the statute cites are ``collaborative issue-based,'' which is
    not the way this relationship has been constructed in the past.
    I recognize that defining what that means specifically, and how
    it's going to proceed so we can get to a different place, is
    going to be challenging. But we are ready for that, we are
    eager to participate in that, and we look forward to these
    further meetings.
        Senator Chambliss. Secretary Navas, do you wish to add
    anything?
        Mr. Navas. I defer to Dr. Chu. Secretary England
    volunteered the Navy to take the lead in the DOD because we see
    NSPS as a fundamental piece in our human resources
    transformation effort in the Navy. We are working very
    diligently. We have stood up a program management office and we
    have a senior advisory group, which is comprised of most of the
    Senior Executive Service individuals in the Department of the
    Navy. I chair a steering committee with the other assistant
    secretaries and the vice chiefs of the Services to make sure
    that we implement this in an effective and timely manner,
    because it's a fundamental piece of our strategy.
        Senator Chambliss. Secretary Brown, in October of last year
    we learned of problems with the Reserve and Guard personnel at
    both Fort Stewart and Fort Knox. They had been mobilized, or
    they were in the process of demobilization, but they were put
    on hold under unsatisfactory living conditions due to delays
    and medical disability evaluation. We're now in the process of
    continuing to rotate our men and women out of Iraq. While the
    numbers may not be as large, there are still pretty significant
    numbers being rotated in and out. What steps has the Army taken
    to ensure that the situation we had last fall does not happen
    to guardsmen and reservists in the future, particularly as they
    do rotate out of Iraq? What's the Army doing to ensure the
    medical readiness of guardsmen and reservists, who are supposed
    to be mobilization-ready and who are counted as mobilization
    assets?
        Mr. Brown. Well, thank you, Mr. Chairman.
        The situation at Fort Stewart called our attention very
    vividly to the problems that were associated with the medical
    situation in the Reserves. As of October 25, there were 4,400
    Reserve component medical holds. Forty percent of those became
    medical holdovers at the mob station and could not deploy. This
    highlighted the problem of medical readiness for us, which we
    all became aware of.
        Nevertheless, there was a need to deal with that problem.
    They were experiencing extended waits. Their billeting was
    inadequate, and there was the perception of unequal treatment
    and an unresponsive chain of command.
        Secretary Brownlee addressed this situation very
    vigorously. He established a set of standards that all of our
    commands were supposed to meet. On the medical side, it
    required a 72-hour consultation period, 1-week of diagnosis, 2
    weeks to surgery, and 30 days before a medical evaluation
    board. On the billeting side, he directed that the billeting be
    commensurate with the billeting available to a permanent party
    on the post. Now when people are moving through the
    mobilization stations, they're not planning to stay there that
    long. It's 2, 3 weeks, and then they're on their way. These
    people in medical hold, sometimes they have to stay a little
    longer because it takes awhile to deal with their problems. For
    those people, the requirement was that they have billeting
    comparable with a permanent party, which includes climate
    control, indoor latrines, privacy, and security.
        These programs are well underway as we speak. We have
    increased the medical infrastructure, increased the number of
    physicians and case managers, and upgraded the billets. We've
    spent $15.7 million to do that. We've established dedicated
    chains of command for these people. About 6 months ago, we
    authorized the 25-day rule, which deals with people coming on
    mobilization. They are checked out. If they're medically unfit
    within the first 25 days, they're released from active duty.
        Currently, we have 1,582 of that original 4,450 still in a
    medical hold status. They have problems that need to be dealt
    with. But they're in the right kind of billets. We've been
    offered support from the Navy, the Air Force, and the
    Department of Veterans' Affairs (VA). All of those resources
    are available for us to deal with medical hold as the people
    that are coming back from Iraq now come through. We think we're
    on top of the problem, as we speak now, sir.
        Senator Chambliss. Senator Nelson.
        Senator Ben Nelson. Thank you, Mr. Chairman.
        I am concerned, with respect to the NSPS, that the effort
    to put in place a system that is consistent with what Congress
    intended is accomplished. I understand that you're in the midst
    of putting together this plan, in consultation with the
    collective bargaining units, and I hope that the discussions
    that occur right now about unilaterally superceding collective
    bargaining agreements will be taken very carefully and very
    cautiously, because it undermines the whole concept, and that
    clearly was not the intent of Congress.
        The second thing is, currently DOD has submitted a proposal
    that would allow it to interfere in internal union procedures
    by requiring unions to provide a new fee-for-service
    arrangement for employees who do not wish to join unions, but
    like union representation on specific matters. How do these
    changes in any way advance the DOD's national security mission?
    I understand that what we were trying to do was to cut through
    existing processes and systems to advance the national security
    mission, but I'm not sure I understand how this particular one
    would do that. What is the relationship between national
    security interests and this particular provision? The others
    have to do with the personnel system in one way or the other.
    This one catches me cold.
        Dr. Chu. I'm delighted to be able to address these two
    questions, sir.
        First of all, let me stress that we have not put a formal
    proposal forward. We have merely put on the table, as the
    unions requested, a set of ideas as a place to begin the
    dialogue. You have to start someplace. You have to have some
    point of departure.
        Second, on the fee-for-service issue, we were trying to
    respond to what we understood to be a longstanding union
    complaint that there are a significant number of individuals
    who are covered by agreements, but don't pay anything to the
    union, yet the union has to service their needs. So we tried to
    reach out with this proposal. Clearly, what I conclude from the
    reaction of the union leaders thus far is, they're not
    interested. If that's true, fine, we have no agenda to pursue
    that, except insofar as they would find it advantageous.
        Senator Ben Nelson. I'm still not sure I see where it has
    anything to do with national security interests.
        Dr. Chu. Well, I think the connection, sir, is, as the
    statute emphasizes, and as I think the contemporary approach to
    bargaining with union leaders would underscore, is to get to a
    collaborative issue-based process. To replace the old
    loggerhead if-I-gain-something-you-have-to-lose-something
    philosophy, which is what we're trying to move away from. We
    think it interferes with the national security issue because it
    becomes virtually impossible to get certain commonsense things
    accomplished--like, for example, drug testing. The United
    States Air Force still has a few places where we have not
    successfully bargained that issue, and yet that is central to
    our ability to ensure the performance of our personnel and the
    security information that they must deal with, and the systems
    with which they must work. So we're trying to replace that
    construct with one that is more constructive.
        In that spirit, knowing this was a longstanding issue with
    some of the unions, we offered this as one of the things--we
    were basically saying, with this concept, by putting it on the
    table, we're ready to go there if that would be helpful to a
    better relationship. That better relationship, in our judgment,
    is the underpinning of a different approach to using Federal
    civil servants in support of the national security mission. An
    approach that's more effective, that makes the civil service
    the first choice of leaders when it comes to new issues, just
    as we've had a whole set of new issues since September 11,
    2001. That's the agenda, that's the connection. But if that's
    not helpful, from their perspective, we have no particular
    reason to promote it.
        Senator Ben Nelson. In other words, if they say no, then
    that's----
        Dr. Chu. If they say no, it's off the table.
        Senator Ben Nelson. All right.
        As everyone knows, there will be an election this fall, and
    we've worked very carefully to try to improve the ability and
    the capacity of our military to vote when they're not at a
    station that would permit them to vote at home. The National
    Defense Authorization Act for Fiscal Year 2002 required the
    Secretary of Defense to conduct an electronic voting
    demonstration project for the 2002 Federal elections, unless
    delayed to 2004. The Secretary of Defense exercised authority
    to delay until the upcoming election. But the DOD recently
    announced it's canceled plans to allow military personnel to
    vote online in the November 2004 elections, based upon a
    determination that Internet voting could not be carried out
    securely. How do we have compliance with the statutory
    requirement in light of what the Secretary of Defense's
    position is with respect to this?
        Dr. Chu. We will carry forward, to an appropriate point,
    the exploration of technologies involved, which I think was the
    heart of the statutory direction. The conclusion that was
    reached is that the issues that had been raised about the
    security of voting in this environment were so fundamental to
    confidence in the process that we could not, in good
    conscience, use this approach in this particular election. But
    we are committed to honoring the statutory direction. This does
    create some tension, I recognize, and I think that's the
    importance of your question. We'd like to work out a solution
    between the integrity of the voting process and the confidence
    of our people and the Nation in it, and the statutory direction
    that is comfortable, from the committee's perspective.
        Senator Ben Nelson. Well, if we're unable to effectively
    and securely implement electronic voting to facilitate the
    process, are there other avenues that the DOD is undertaking to
    try to improve the situation so we don't have in 2004 what we
    had in 2000? In that election, there were questions about the
    military being second class in terms of not knowing whether
    they could vote or whether their votes really got counted in
    the process.
        Dr. Chu. Absolutely, sir. We've undertaken a number of
    improvements, starting with emphasis on the importance of the
    voting officer in each unit taking his or her responsibilities
    very seriously. I think that's the core of success. That
    officer has to ensure that everybody gets his or her materials,
    because they come from different States around the Union, and
    different processes are involved. We have taken a variety of
    steps to ensure that the returning mail is processed promptly,
    which was one of the issues before, and that the necessary
    postmarks are there. That is important from the State law
    perspective.
        I believe that we will be in a much stronger position for
    this election than was true in prior elections.
        Senator Ben Nelson. I thank you, Mr. Chairman.
        Senator Chambliss. Senator Dole.
        Senator Dole. Dr. Chu, since September 11, 2001, 21 North
    Carolina National Guard units have been mobilized. Of those,
    only one unit was given anywhere close to a 30-day notice. With
    the announcement of the OIF 2 rotation, the 37th Enhanced
    Separate Brigade received their orders 4 days prior to
    mobilization date. While I understand the urgent requirements
    immediately following September 11, this holding of notice
    orders for an anticipated rotation is unacceptable, especially
    given the additional preparations required for our citizen
    soldiers. What is being done to address this ongoing problem?
        Dr. Chu. We agree with you, ma'am. That is unacceptable. As
    you look at the alert orders for the next set of units, the
    units that will go to OIF 3, you are going to consistently see
    at least 30 days between alert and mobilization. We have just
    announced--Mr. Brown could fill in the details here--the Guard
    units that'll be participating in that rotation.
        We can't do anything about the past. I regret that. We
    understand the inconvenience. I will note that, in general,
    unit commanders did know somewhat in advance of those dates.
    But that's informal, that's not adequate. You're absolutely
    right, that's not where our standard should be. It's not where
    our standard is. I think with the coming rotations, we will be
    able to honor the 30-day window.
        Senator Dole. Let me ask you about Guard and Reserve
    recordkeeping.
        Dr. Chu. Yes, ma'am.
        Senator Dole. Just last month, a National Guard member from
    my State was charged as absent without leave (AWOL) for not
    attending a monthly drill. This particular individual was
    actually serving in Iraq. All charges have been dropped. But
    this, on top of numerous pay issues, indicates a systemic
    personnel accounting problem. National Guard recordkeeping
    needs to be a responsive, integrated subsystem of the overall
    DOD database. Once again let me ask you, what is being done to
    correct the problems that are evident within the personnel
    accounting systems of our Reserve Forces?
        Dr. Chu. Ma'am, you're absolutely right, this is
    unacceptable. It does parallel, I think, General Schoomaker's
    untimely demise in the Army pay system, which you may have read
    about. They assumed, since he disappeared from the retired
    rolls, that he had passed away, since it's normally the only
    way you move off.
        All levity aside, we recognize it's a serious problem.
    That's why this administration has put substantial funds into
    what we believe is the future solution, the Defense Integrated
    Military Human Resources System (DIMHRS). This is an integrated
    pay and personnel system, with one set of records, a common
    system for the entire DOD, one common system for Guard,
    Reserve, and active. It will give the combatant commander much
    better visibility into the skills of the people that can be
    called on to fulfill his or her needs. But we believe it will
    deal decisively with the issues that you have properly raised,
    which represent an unacceptable standard of performance, as far
    as DOD is concerned.
        The software underlying our current financial system is
    old, and it is creaky. It is composed of many patches, which,
    when you make the latest adjustments, cause sometimes new
    problems that you can't anticipate. We plan to stand up the
    first elements of the DOD in the DIMHRS in the first quarter of
    2006. I know that's a year-plus away. I merely have to ask for
    everyone's patience as we go forward. I will be delighted to
    act on individual cases as you bring those to our attention,
    and we'll fix these problems one by one. The systemic solution,
    though, is the advent of DIMHRS in the first quarter of 2006.
    It will deploy across the DOD over approximately a 2-year
    period.
        Senator Dole. Okay.
        Mr. Chairman, as you noted, personnel issues have been of
    particular concern to me, especially the welfare of our
    military family. So let me ask all of you a couple of questions
    in that respect. It's certainly a key to the success of our
    All-Volunteer Force.
        I want to first of all take this opportunity to thank the
    countless volunteers in the military family advocacy mission,
    who have done such a tremendous job over these past months. How
    are your Services formalizing the family advocacy mission, and
    how is this mission included in your transformation vision?
        Then let me just add to that, as you're answering this,
    given that our current deployments are drawing heavily on Guard
    and Reserve Forces, what are you doing to ensure necessary and
    appropriate support for all families, especially for those who
    are out in rural areas and not anywhere close to military
    installations where they would have more of the regular
    support?
        Dr. Chu. Let me offer a brief comment, if I may, and we
    perhaps should turn to Secretary Brown for his detailed views
    from the Army. We have created approximately 400 Reserve family
    outreach units to deal specifically with the problem that you
    have raised. I think even more effective over time--and by the
    end, I hope, of this year--we'll have the entire DOD on what we
    call Military OneSource--that's to say, a 1-800 number
    available 24 hours a day, 7 days a week, in which a master's
    degree-level expert is available to deal with the family's
    issues, whatever they might be. The Marine Corps was willing
    early to try this out for us. There are skeptics in the DOD as
    to whether this will work. I think Mr. Navas ought to speak to
    this. It's been a terrific success. The Marine Corps is
    enthusiastic and will be the first service to be completely on
    it. The Air Force and the Navy are starting on this, and the
    Army is partway there, but perhaps Mr. Brown would like to add
    a few words about what the Army is specifically doing.
        Mr. Brown. Well, the only thing I'd like to add to that is
    that there are stay-behind detachments at every base where
    units are deployed from, and we've put a lot of emphasis
    recently on ensuring that those stay-behind detachments include
    the Reserve units associated with that deployment. For example,
    at Fort Hood, we have the 39th Enhanced Brigade. We've worked
    diligently with the people at Fort Hood to make sure their
    family action program includes the 39th. That doesn't cover
    everything, but it's a big start, and it's a big step up. I've
    visited those bases and talked with the spouses that were
    engaged, and it seems like it's well underway, and it is the
    same thing at Fort Bragg. So that's what we're doing, in
    addition to the things that Dr. Chu has mentioned.
        Mr. Navas. In the case of the Navy and Marine Corps, since
    they deploy routinely, this issue has been something that is a
    part of life of the Navy and Marine Corps community, where the
    members deploy, there are solid family support programs both
    run by the Personnel Chiefs out of Millington and Quantico.
        We learned some lessons in Operations Desert Storm and
    Desert Shield, especially with mobilizing reservists, and we've
    come a long way in our Reserve family support. That's DOD-wide,
    and in particular with the Services. Of course, we have and are
    again leveraging technology. I'm starting to sound like a
    broken record here, but I think this along with this pilot
    program that the Marine Corps has done--and I would suspect
    that Lieutenant General Garry Parks, the Deputy Commander for
    Manpower Reserve Affairs in the next panel, could espouse a lot
    more details on how well that is working.
        The Navy had a Web site called Lifeline that is still in
    operation where family members can go in and get information
    all the way from medical benefits to Reserve benefits.
        So this is something that we take very seriously, and
    especially when we have a very young, married force that, as
    they deploy, we need to take care of those family members. So
    this is something that we take very seriously.
        Senator Dole. Thank you.
        Mr. Dominguez. The Air Force, too, has, over the last 10
    years, adapted to become an expeditionary force. We don't have
    the 200 years of history that the Navy and Marine Corps team
    does, but we're learning fast. Part of what we learned is that
    in an expeditionary force, the responsibility for families is a
    command responsibility. Commanders own this program, and they
    have a cross-functional support network, called the Community
    Action Integration Board (CAIB) that works for them. This is at
    every Air Force installation, at every Air Force major command.
    That board is specifically chartered to find out what family
    needs are and get resources to them, oversee the operation of
    all the different aspects of family support, and make sure that
    those different stove-pipes are talking to each other in
    support of families. That happens at the Reserve bases, as well
    as at the active bases.
        In our Reserve organizations, we have a much larger
    component than our sister Services of full-time support.
    Included in that full-time support is a director of family
    support services, so there's somebody chartered there to manage
    this issue full time for the Reserve components. The next issue
    is that we deploy differently, so it would be very rare to take
    up an entire U.S. Air Force Reserve or National Guard unit and
    move it. There's a lot of the infrastructure and a lot of the
    core operations of that Reserve base--well, a piece of it has
    been deployed. All that support structure is out there, aware
    of family needs, and working to keep the families together.
        Then the final thing is that we do have also these
    geographic-independent ways of reaching out to people and
    establishing networks. Air Force Crossroads is a Web site. The
    chat room is available to people. OneSource, as well, is a 1-
    800 number. So there are lots of different ways we do this for
    our families.
        Senator Dole. Thank you very much.
        Thank you, Mr. Chairman.
        Senator Chambliss. Senator Nelson.
        Senator Ben Nelson. Thank you, Mr. Chairman.
        One further question regarding phone-home fees. A family
    support group president for a deployed National Guard unit has
    informed me that soldiers have to, in many cases, wait in line
    3 to 4 hours to use the phone for 15 minutes, and when they do
    get their calls through, they're charged a connectivity fee
    that ranges from $6.95 to $8.95, based on the particular
    calling card they're using. After that, they're charged a fee
    that ranges from $4.95 to $5.95 per minute, again depending on
    the calling card.
        Now, last year's authorization act required that the
    service members serving in Operation Enduring Freedom (OEF) and
    OIF be provided, without cost, prepaid phone cards, or an
    equivalent telecommunications benefit, not to exceed $40 or 120
    minutes. That isn't quite going to make it, clearly. Can you
    give us some information about these connectivity fees and/or
    the per-minute charge schedule that they're receiving and see
    how that's going to score? Apparently we haven't gotten the
    $40, that probably is not going to go very far, given these
    fees--but we haven't even done that. So maybe you can give me
    some clarification. Dr. Chu, do you want to pass it off?
        Dr. Chu. Perhaps my colleagues have some more information.
    I am surprised at numbers in that range, given what I know of
    the telephone program.
        Senator Ben Nelson. I am only told this.
        Dr. Chu. I understand that. I think what I might wish to do
    is work with your staff about the specific location where this
    is alleged to have occurred. There are, of course, really two
    levels of phone service. There are those calls that,
    essentially on a space-available basis, soldiers can make,
    using our lines as a morale element.
        Senator Ben Nelson. Yes.
        Dr. Chu. That's up to the commanders. It can't interfere
    with the mission, obviously, but that gives an important
    resource to everyone, at essentially low or no cost. Then there
    are, of course, the prepaid phone cards, and we are carrying
    out Congress' direction. I am surprised at allegations of fees
    in this range. That's not where it's supposed to be. Maybe Mr.
    Brown has more information, but we'd be delighted to look into
    the specific site where this is alleged to have occurred.
        Mr. Brown. I can add a couple of points to that. As of
    December 3, we have received 156,000 AT&T cards valued at $20
    each, and I believe the authority does allow for donated cards
    to fill part of that requirement, so that's happening. We do
    have this situation where people are waiting in line is for
    what we call Defense Switched-Network Calls. Those are the
    calls that the DOD operates. On average, 50,000 health, morale,
    and welfare (HMW) calls are made each day using this system,
    for all military services. So it is helping, but, indeed, there
    are lines for those kind of calls.
        Senator Ben Nelson. Do you know anything about the
    connectivity fees and the----
        Mr. Brown. The Defense Switched-Network is free. It's at no
    cost to the service member. It's a military phone, basically.
    The commercial ones have the fees, and I don't know the rates.
    We'd have to look into what those rates are because $20 isn't
    going to go far if that's the rate.
        Senator Ben Nelson. Half a call.
        Mr. Brown. There are e-mail and Internet services that
    we're also providing. There are 124 morale, welfare, and
    recreation (MWR)-operated Internet cafes, with 2,100 laptops
    and 105 mobile Internet cafes in Iraq. We're planning to add 40
    more. These mobile cafes provide a satellite terminal, laptops,
    and Internet Protocol (IP). The charge to the service members
    for that is five cents per minute for the IP phones. So there's
    work in progress. We're working with our counterparts in the
    Under Secretary of Defense's office to try to improve this.
    We'd like it to get a lot better. But we have a good start.
        Dr. Chu. Let me just emphasize, sir, that to my knowledge
    the fees are not supposed to be at that level. We will look
    into that specific allegation.
        Senator Ben Nelson. I would appreciate it. Thank you, Mr.
    Chairman.
        Senator Chambliss. Dr. Chu, once you make your
    investigation, just report back your findings to staff, if you
    will.
        Dr. Chu. I'd be delighted to.
        [The information referred to follows:]

        U.S. Central Command (CENTCOM) provides two phone services that
    enable service members to call anywhere in the world--Health, Morale
    and Welfare (HMW) calls using official phone lines and unofficial
    telecommunications provided by the Armed Service Exchanges.
        In general, HMW calls are made over the official Defense
    Information System Network during non-duty hours and are limited to 15
    minutes per call. On average, 50,000 HMW calls are made each day. The
    frequency and duration of HMW calls are determined by the commander so
    as not to interfere with the mission.
        Additionally, the Armed Services Exchanges provide the unofficial
    telecommunications systems using the AT&T network. Monthly call volume
    is nearly 10 million minutes. The Army and Air Force Exchange Service
    (AAFES) operates 54 call centers (1,605 phones) and 640 satellite
    phones.
        We share your concern about the extensive fees and charges that
    some have experienced. We are working to ensure our service members and
    their families are well informed and avoid unnecessary expenses. For
    instance, calls made from the exchange call centers using AT&T
    telephone calling cards, commercial credit cards, and AT&T prepaid
    phone card calling cards are not charged a connection fee. If the
    member places a collect call, there is a connection fee ranging from
    $.89 to $6.50. The AAFES posts advisory signs in all call centers to
    warn customers of these rate differences. An informed consumer can
    avoid the extremely high charges.
        The DOD continues to work with AT&T to reduce the costs of all
    unofficial calls made by members serving in direct support of OIF and
    OEF. We have mounted an information campaign for members and their
    families to assist them in selecting the lowest cost option available
    during deployment.
        Though the DOD has made tremendous strides in improving the lines
    of communication between our troops and their loved ones (49 call
    centers, and nearly 1,400 phones have been added since July 2003),
    demand for these services continues, at times, exceeds our
    capabilities, and it would not be unusual to encounter a long wait for
    either official or unofficial service during peak calling hours. The
    DOD and AAFES continue to strive to alleviate this difficulty.
        Detailed information will be made available to staff.

        Senator Chambliss. Senator Dole, any further questions?
        Senator Dole. No, thank you, Mr. Chairman.
        Senator Chambliss. Gentlemen, again, thank you very much
    for being here. Thanks for your service to our country and our
    men and women, and we apologize, once again, for having to make
    you sit for awhile and wait on us to get started. But thank
    you.
        Dr. Chu. Thank you, sir. I thank you for your courtesy.
        Senator Chambliss. We'd now ask our next panel to come
    forward. [Pause.]
        I'd now like to welcome our next panel, the Personnel
    Chiefs of the military services. With us today is Lieutenant
    General Franklin L. Hagenbeck, 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.
        We have received your written statements, and they will be
    incorporated into the record. We look forward to your testimony
    today.
        General Hagenbeck, we're going to start with you. Just on a
    very quick personal note, we know that you commanded the 10th
    Mountain Division in Afghanistan. We appreciate your great
    service to our country, your leadership, and the great service
    you all provided in Afghanistan. We're pleased to have you back
    here where you are, but we were very proud of you and very
    proud of all the men and women under you.
        General Hagenbeck. Thank you very much, sir.

     STATEMENT OF LTG FRANKLIN L. HAGENBECK, USA, DEPUTY CHIEF OF
                STAFF FOR PERSONNEL, UNITED STATES ARMY

        General Hagenbeck. It is, indeed, a pleasure to be here
    with you this afternoon and to have the opportunity to appear
    before you and the subcommittee.
        On behalf of the men and women of the United States Army,
    let me begin by expressing my sincere gratitude for your
    continued and committed support for our soldiers.
        As I speak to you today, our Army has over 300,000 soldiers
    deployed in 47 regions around the world, and we've embarked
    upon the largest movement of soldiers in our 229-year history.
    This movement, of course, is a result of our soldiers'
    commitment to continue to fight for what we, as Americans,
    value most, which is freedom.
        Current operations have accelerated the requirement to
    transform our Army. The continuing global war on terrorism has
    brought major successes in the past year and moved us toward
    new initiatives, some of which I would like to share with you
    this afternoon.
        We're experiencing our first sustained combat operations
    with our 30-year-old All-Volunteer Force. Because we're at war,
    and will be for the foreseeable future, our goal is to continue
    to recruit soldiers who have the warrior ethos and who seek to
    serve our Nation fully in these very difficult times.
        Last year, the active and Reserve components of the Army
    met their recruiting goals, and the National Guard met its
    target end strength. Recruiting incentives, such as the
    Enlistment Bonus Program, the Army College Fund Program, Loan
    Repayment Program, and the National Call to Service (NCS) have
    successfully enabled the Army to execute precision in its
    recruiting. With your support, we remain confident that we will
    meet our recruiting goals this fiscal year.
        Also, in the previous year, the Army achieved all retention
    goals, a result that can be directly attributed to the Army's
    Selective Re-enlistment Bonus (SRB) program. We anticipate that
    retention for this year will spike in the March and April time
    period as OIF and OEF units transition and soldiers will take
    advantage of our present duty assignments and selective re-
    enlistment bonus in-theater.
        In recent years, the administration and Congress have
    supported compensation and entitlement programs as a foundation
    of a soldier's well-being. We believe a strong benefits package
    is essential to recruit and retain quality soldiers. Among our
    recent successes are the congressionally-mandated increases in
    imminent-danger pay, family-separation pay, and targeted pay
    raises. With your support, we have undertaken a number of
    initiatives to provide special compensation for our soldiers
    who serve their country under hazardous conditions, and we
    continue to look for ways to compensate our soldiers for the
    hardships they and their families endure.
        The great demands placed on our Army have forced us to
    reexamine many of our longstanding personnel and basing
    practices. As a result, the Army is transitioning to a new
    personnel manning initiative for force stabilization, and it's
    designed to enhance unit readiness by increasing stability and
    predictability for our soldiers and families. Force
    stabilization places greater emphasis on building and
    sustaining cohesive, deployable, combat-ready units for
    combatant commanders. We believe a stabilized force increases
    unit readiness and combat effectiveness by reducing turbulence
    and uncertainty.
        Before I conclude, I would be remiss if I did not mention
    the contributions of our Department of the Army civilians this
    last year. They're essential to our readiness and our ability
    to sustain operations. Nearly 2,000 Army civilians deployed to
    the global war on terrorism. Our civilians are a part of our
    Army team, and their sacrifices during the past year
    demonstrate that we're truly an Army of one.
        Our Army's commitment and dedication are undaunted during
    this time of unparalleled challenge to our country. I'm proud
    of our young men and women, America's sons and daughters, for
    their selfless service every single day. Your commitment to
    change in our Army and your support for our current
    initiatives, such as recruiting and retaining a quality force,
    will ensure that our Army remains the best in the world.
        Once again, thank you for the opportunity to appear before
    you today, and I'll look forward to answering your questions.
        Thank you, sir.
        [The prepared statement of General Hagenbeck follows:]

              Prepared Statement by LTG Franklin L. Hagenbeck, USA

        Mr. Chairman and members of the subcommittee, thank you for the
    opportunity to appear before you today on behalf of America's Army. I
    want to first express my sincere gratitude for your continued and
    committed support to the human resources environment. As I testify
    before you today, the Army has embarked upon the largest movement of
    soldiers in our 229-year history. Our soldiers and Department of the
    Army civilians remain fully engaged across the full spectrum of the
    globe with more than 297,000 soldiers deployed to more than 47
    countries. Both our soldier's and Department of the Army civilian's
    commitment to our Army and to our Nation is unparalleled at this time
    as evidenced by multiple deployments, family separations and at times
    giving the ultimate sacrifice.
        The momentum of the professional Army is marked by dramatic change
    and proud accomplishments as we move forward in the global war on
    terrorism. The operational tempo (OPTEMPO) today has accelerated the
    requirements to change our Army with initiatives such as Force
    Stabilization, active component/Reserve component (AC/RC) rebalancing,
    and modularity. We are swiftly moving changing while maintaining our
    current focused goals. Your commitment to these changes and support for
    our current initiatives (recruiting and retaining a quality force) will
    ensure our Army remains the best in the world. To this end, I would
    like to share with you some of our major successes and highlight some
    of our challenges for the coming year.

                                   RECRUITING

        The continuing global war on terrorism and engagements around the
    globe are our first sustained combat operations with our 30 year-old
    All-Volunteer Force. Recruiting the soldiers who will fight and win on
    the battlefield is critical. These young men and women must be
    confident, adaptive, and competent; able to handle the full complexity
    of 21st century warfare in this combined, joint, expeditionary
    environment. We are in a highly-competitive recruiting environment;
    competing with industry, post-secondary institutions and other services
    for the country's high-quality young men and women.
        We have been successful. The active Army and Reserves met their
    recruiting goals in fiscal year 2003. The active Army is at 100 percent
    of its year-to-date fiscal year 2004 mission through January. On
    October 1, 2004, we began The National Call to Service (NCS) program,
    and 153 recruits have selected this program. The Reserve and National
    Guard are at 98.7 percent and 94.9 percent of their respective
    missions. We are recruiting a high-quality force; our high school
    degree graduates are 96.5 percent of active Army recruits, 94.0 percent
    of Reserve recruits, and 84.6 percent of National Guard recruits, year
    to date. We remain confident we will meet the fiscal year 2004 mission
    due to our recruiting force and incentives.
        Our recruiting force is the best in the world. Our accession
    mission is over 165,000 this year (active 75,000, Reserve 34,804, and
    National Guard 56,000) and will likely increase with the 30,000
    temporary manning increases. We must continue to have Congress's
    support of recruiting tools, advertising, and incentives. Incentives
    are a key enabler of the Army's accession mission in terms of military
    occupational skill (MOS) precision fill, quality, and quantity.
    Incentives include enlistment bonuses, the Army College Fund, and the
    Loan Repayment Program.
        Bonuses are the primary and most effective tool for MOS precision
    fill: the accession mission. The bonuses help us react to current
    market conditions and competitors, today and tomorrow. We are able to
    use the bonuses to target critical MOSs, the college market, and
    ``quick-ship'' priorities.
        The Army College Fund is a proven expander of the high-quality
    market. College attendance rates are at an all-time high and continue
    to grow, with 67 percent of the high school market attending college
    within 1 year of graduation. The Army College Fund allows recruits to
    both serve their country and earn additional money for college.
        The Loan Repayment Program, with a maximum payout of $65,000, is
    another expander of the high-quality market. Whereas the Army College
    fund primarily targets those who have not yet gone to college, the Loan
    Repayment Program is the best tool for those who have college credit
    and loans. In fiscal year 2003, 24 percent of our recruits had some
    college credit.
        The Army's recruiters are most effective when given the proper
    tools, such as incentives and advertising. The recruiting environment
    remains a challenge in terms of economic conditions and alternatives.
    Your continued support with resources, including funding for personnel,
    incentives, and advertising is necessary to compete in the current and
    future markets and to ensure our goals are met.
    Enlisted Retention
        The Army has achieved all retention goals for the past 5 years, a
    result that can be directly attributed to the Army's Selective
    Reenlistment Bonus (SRB) program. The Army re-enlisted 54,151 soldiers
    in fiscal year 2003, including 15,213 soldiers whose enlistments would
    have expired before September 30.
        Although we are behind the historical glide path, the Army remains
    optimistic that we will achieve all assigned retention goals. Thus far,
    the active Army has achieved 94 percent of year-to-date mission, while
    the Army Reserve has achieved 90 percent of year-to-date mission.
    Meanwhile, the Army National Guard is more than holding its own in
    fiscal year 2004 and has reenlisted 160 percent of their year-to-date
    mission. In fiscal year 2004 alone, the Army must retain approximately
    58,100 soldiers to maintain desired manning; this equates to a
    retention mission increase of 2,000 soldiers. We will depend upon a
    robust SRB program to enable achievement of our retention goals.
        Developing ways to retain soldiers directly engaged in the ongoing
    war on terror is critical. We are now using a ``targeted'' (TSRB) as a
    tool to attract and retain quality soldiers. The TSRB aggressively
    targets eligible soldiers assigned to units in, or deploying to, the
    Central Command (CENTCOM) area of responsibility (AOR). Soldiers
    receive no less than a lump sum $5,000 bonus to reenlist for their
    present duty assignment while deployed in support of Operations Iraqi
    Freedom (OIF) or Enduring Freedom (OEF). Introduction of the TSRB on
    January 1, 2004, caused an almost immediate increase in reenlistments,
    but not enough to make up total Army shortfall from the first quarter
    of the fiscal year. We anticipate another significant increase
    occurring in March/April along with the force rotation changeover from
    OIF 1 to 2 and OEF 4 to 5.
        Worldwide deployments, an improving economy, and the Army's Stop
    Loss/Stop Movement program could potentially affect retention. All
    components closely monitor leading indicators including historic
    reenlistment rates, retirement trends, first term attrition, Army
    Research Institute Surveys, and Mobilization/Demobilization Surveys, to
    ensure we achieve total success.
        All components are employing positive levers including Force
    Stabilization policy initiatives, updates to the reenlistment bonus
    program, targeted specialty pays, and policy updates to positively
    influence retention program. Ultimately, we expect to achieve fiscal
    year 2004 retention success in the active Army, the National Guard, and
    the United States Army Reserve.

                               OFFICER RETENTION

        The Army continues to monitor officer retention rates as an
    important component of readiness. Overall retention of Army Competitive
    Category officers improved with increased retention at both the company
    grade and field grade ranks, with an aggregate fill rate of 103.7
    percent. There was a slight increase in attrition for lieutenants and
    colonels, but the attrition rate for captains decreased almost 3
    percent from fiscal year 2002 to fiscal year 2003.
        The Army has steadily increased basic branch accessions beginning
    in fiscal year 2000 with 4,000, capping at 4,500 in fiscal year 2003
    and returning to 4,300 for fiscal year 2004 and beyond, to build a
    sustainable inventory to support captain requirements. We achieved
    4,443 accessions in fiscal year 2003. The Army can meet current and
    projected active Army officer accession needs through current
    commissioning sources (Reserve Officer Training Corps (ROTC), Officer
    Candidate School, United States Military Academy, and United States
    Army Recruiting Command). Reserve component lieutenant accessions
    present near- and long-term challenges, but the numbers have improved
    significantly over the past few years, and are expected to continue to
    improve.
        We continue to promote officers at all ranks at or above the
    Defense Officer Personnel Management Act (DOPMA) goals and expect these
    rates to continue for the next 2-4 years.

                          PERSONNEL TEMPO (PERSTEMPO)

        The strategic and operational environment has significantly changed
    in light of the large-scale engagement of Army forces in OIF and other
    expeditionary operations. Soldiers and their families who serve our
    Nation feel this increase of turbulence and uncertainty. The time
    soldiers spend away from home is directly related to the increase in
    unit and individual deployments and other operations.
        Although we are an Army at war, we support the congressional intent
    of PERSTEMPO legislation that encourages the Army to reduce excessive
    individual deployments in a peacetime environment. Section 991(d) of
    title 10, U.S.C., authorizes the suspension of certain PERSTEMPO
    management constraints if required by national security interests. The
    Services suspended the accrual of days for PERSTEMPO per diem by
    invoking the national security waiver, which serves as a safeguard for
    Department of Defense (DOD) resources during a time of war. The timing
    to lift the suspension must support the Army by allowing sufficient
    time to secure funding, because payment of this allowance is an
    unprogrammed expense that could remove operational flexibility with
    second and third order effects, including operational risks to the
    soldier in-theater. Meanwhile, the Army continues to track and report
    PERSTEMPO deployments for management purposes and works closely with
    the Office of the Secretary of Defense (OSD) on policy and system
    adjustments for the National Defense Authorization Act for Fiscal Year
    2004.
        The Army actively manages the effects of PERSTEMPO through force
    management options as well as through working with OSD to manage force
    requirements in response to the global war on terrorism. Army
    initiatives to reduce PERSTEMPO include resetting the force, Force
    Stabilization, modular reorganization, post-deployment stabilization
    policy, use of both Department of Army and contract civilians where
    possible, and rebalancing of AC/RC forces. The Army is committed to
    managing force deployments with an emphasis on maintaining readiness,
    unit integrity, and cohesion while meeting operational requirements.

                                   STOP LOSS

        The Army has begun the monumental task of rotating forces in
    support of ongoing operations in Iraq and Afghanistan. During this
    spring and summer, the Army will have 8 of its 10 active duty divisions
    either deploying or redeploying from operations in support of the
    global war on terrorism. Consequently, the current and projected
    OPTEMPO continues unabated, placing enormous stress on units, soldiers,
    and their families. Based on the commitment to pursue the global war on
    terrorism for the foreseeable future, to provide our combatant
    commanders the force to decisively defeat the enemy, and to ensure our
    formations are ready for the warfight, required us to re-institute the
    active Army Unit Stop Loss program and to retain the Reserve Component
    Unit Stop Loss program currently in effect.
        The two Stop Loss models currently being used in support of the
    Army's effort in the global war on terrorism are the following.

            --  Active Army Unit Stop Loss: Applicable to all regular Army
            soldiers assigned to organized active Army units alerted or
            participating in OIF I and II and OEF IV and V.
            --  Reserve Component Unit Stop Loss. Applicable to all Ready
            Reserve soldiers who are members of Army National Guard or
            United States Army Reserve and assigned to RC units alerted or
            mobilized in accordance with section 12302 or 12304, title 10,
            U.S.C., to participate in Operations Noble Eagle (ONE), OEF,
            and OIF.

        The Active Army and Reserve Component Unit Stop Loss programs
    affect soldiers at the unit's mobilization/deployment date minus 90
    days, continues through the demobilization/redeployment date, plus a
    maximum of 90 days. The 90 days after return to the unit's permanent
    duty station ensures sufficient time for soldiers to complete mandatory
    transition, participate in the Army Career Alumni Program, and
    deployment cycle events/activities. In addition the 90 days permits us
    to re-distribute the force to reduce risks to readiness and distribute
    soldiers across the Army to satisfy professional development needs.
        DOD guidance to the Services is to discontinue Stop Loss policies
    as soon as operationally feasible. Consequently, our policy requires a
    quarterly review to determine continuation or termination. As of
    February 2004, the current Stop Loss program affects a total of 44,535
    soldiers, of all components.
    Reserve Component
        The Army continues to rely on the National Guard and Reserve to
    shape the fighting force in the global war on terrorism. The National
    Guard and Reserve are involved in the full spectrum of operations, from
    necessary tasks of guarding installations at home to full combat
    operations in Iraq. Their performance has been nothing short of
    magnificent. The capabilities they bring to the fight are
    indispensable. There have been challenges in this largest call-up of
    Reserves since Korea. However, this mobilization is a major success
    story and proves this is the Army, an Army of one, and that all
    components of the Army are vital and necessary to the success of our
    Nation.
        We have mobilized nearly a quarter million soldiers from our
    Reserve Forces since September 11 for operations spanning the globe.
    This number of soldiers equates to just over 35 percent of the Ready
    Reserve. Today we have 160,000 RC soldiers on active duty. That number
    is 30,000 higher than average due to the ongoing mobilization/
    demobilization of units in Iraq and Afghanistan. By the end calendar
    year 2004, we will have fewer than 125,000 RC soldiers on active duty.
    That decrease will be due to our concerted efforts to employ Iraqis in
    the running of Iraq, to engage coalition partners, to seek joint
    solutions to missions, and to maximize the use of contractors whenever
    possible.
        The RCs comprise 42 percent (55,000 RC over 130,000 total) of the
    Army force in Iraq to date. When this current rotation is complete, RC
    soldiers will comprise 43 percent (51,000 RC over 119,000 total) of the
    Army force. Although there is some decrease in some of the RC support
    missions as we have replaced them with host nation support, coalition,
    and contractors, there has been an increase in National Guard combat
    forces in order to give active army combat forces a chance to reset.
    The RCs have met the challenge by continually proving to be an integral
    part of and a combat multiplier to the total force.

                       MILITARY BENEFITS AND COMPENSATION

        Maintaining an equitable and effective compensation package is
    paramount to sustaining a superior force. A strong benefits package is
    essential to recruit and retain the quality, dedicated soldiers
    necessary to execute the National Military Strategy (NMS). In recent
    years, the administration and Congress have supported compensation and
    entitlements programs as a foundation of soldier well being. An
    effective compensation package is critical to efforts in the global war
    on terrorism as we transition to a more joint, expeditionary, unit-
    centered, and cohesive force. The fiscal year 2004 budget contains an
    average 4.1 percent pay raise, which exceeded the Employment Cost
    Index. The fiscal year 2005 President's budget continues providing pay
    raises at Employment Cost Index plus 0.5 percent, which helps make the
    Army more competitive with the civilian sector. This equates to 3.5
    percent for fiscal year 2005.
        With congressional support, we have undertaken a number of
    initiatives to provide special compensation for our soldiers who serve
    their country under hazardous conditions, and we continue to look for
    ways to compensate our soldiers for the hardships they and their
    families endure. We appreciate your commitment in this regard.

                 FISCAL YEAR 2005 PERSONNEL BUDGET AND MANNING

        The fiscal year 2005 budget provides military pay to support an
    active Army 482,400 end strength (78,500 officers and 399,700 enlisted
    and 4,200 cadets) and the RCs at 555,000-end strength. It fully funds
    the Army Reserve Annual Training (109,000 participating soldiers),
    Active Guard and Reserve (AGR) (14,970 soldiers), and Individual
    Manning Augmentees (IMA) (6,000 soldiers). The Army Reserve is funded
    at 70 percent of the Inactive Duty Training (IDT) program (83,000
    soldiers out of 123,000 participating soldiers). The fiscal year 2005
    budget funds the Army National Guard Annual Training at 82 percent
    (170,000 soldiers), IDT program at 85 percent (194,000 soldiers), and
    AGR (25,000 soldiers) including 102 Ground Missile Defense and 76 AGRs
    for 4 additional Civil Support Teams (CSTs). The fiscal year 2005
    budget also continues the Residential Communities Initiative (RCI)
    program, bringing the number of installations operating under the RCI
    program to 20. Additionally, the budget virtually eliminates the median
    out-of-pocket housing costs for our men and women in uniform by 2005
    and is reflected in the Basic Allowance for Housing (BAH) portion of
    the Military Personnel Army (MPA) budget request. This initiative
    improves the well-being of our soldiers and families and contributes to
    a ready force by enhancing morale and retention.

    Personnel Transformation
        Army personnel transformation will profoundly impact how the Army
    delivers human resources services to commanders, soldiers, government
    civilians, and families. More than improving information technology and
    systems, personnel transformation is about rethinking programs,
    policies, and processes to enable the Army to provide optimum human
    capital, and the right information, individuals, and units, at the
    right place, at the right time, with the right skills. Personnel
    transformation initiatives directly support the goals of making the
    Army more ``joint, ``expeditionary,'' and ``modular.'' These personnel
    transformation changes will enhance the individual and unit readiness
    of the Army across all components--active Army, Army National Guard,
    and Army Reserve.
        The Enterprise Human Resources System forms the information
    technology infrastructure and the knowledge architecture for personnel
    transformation. It includes the Defense Integrated Military Human
    Resources System (DIMHRS), an OSD-directed software capability that
    maximizes the potential of Web-based technology and commercial off-the-
    shelf software. The Army is the first Service to implement DIMHRS and
    has dedicated resources to assist in the development and review of
    functional human resources requirements. The Army is counting on DIMHRS
    to replace its legacy systems with a single, multi-component,
    integrated database across the DOD, enabling management of soldiers,
    Army civilians, and contractors.
        The Enterprise Human Resources system will provide passive, full
    visibility across all Services and components, and will enable
    visibility and support of joint partners. It will be composed of one
    single authoritative source database, and will serve all echelons of
    command from home station to in-theater, including the individual
    soldier and family member, and will provide access to leaders,
    individuals, and human resource providers. Routine personnel procedures
    will happen ``on line, not in line.'' The system will allow leaders to
    manage their organization across components, and will be linked to the
    Army's command and control (C2) operational architecture for
    battlefield functions, such as casualty reporting and strength
    accounting. A transformed human resources information system will
    provide the tools necessary to make critical combat and non-combat
    human resources support relatively routine.
        Force structure changes are already underway in the personnel
    community's workforce and organizations. From headquarters to unit
    level, a variety of modular, multi-functional units are being
    structured and redesigned to meet the future needs of a modular and
    expeditionary Army. For example, at headquarters Department of the
    Army, the Army Reserve and active Army Personnel Commands have merged
    into the United States Army Human Resources Command.
        The civilian equivalent, the Army's Civilian Human Resources Agency
    is now approved for inclusion within the command, and will be supported
    by the Human Resources Information System. Likewise, military personnel
    occupational specialties will be merged into a multi-skilled human
    resources specialty, providing more flexibility and support to an Army
    at war. Under the concept of ``continuum of service,'' the Army is
    working to streamline the transition of soldiers between AC and RC, and
    to develop options that will allow the soldier to potentially serve in
    a multi-component career path across the Army team. The flexibility to
    seamlessly move from AC to RC status and back will allow trained and
    experienced soldiers and leaders to serve continuously, and provide
    needed talent to the Army and the Nation.
        Recognizing that joint operations are now an integral part of
    warfighting, the Army is also reviewing ongoing initiatives, policies,
    and programs to ensure that joint requirements and concepts are
    integrated into career progression and soldier development. Advances in
    human resource information systems will streamline and optimize the
    employment of Army and joint capabilities across the full spectrum of
    operations.

    Force Stabilization
        The Army is transitioning to Force Stabilization, a personnel
    manning initiative designed to enhance unit readiness by increasing
    stability and predictability for soldiers and families. Force
    Stabilization places greater emphasis on building and sustaining
    cohesive, deployable combat-ready units for combatant commanders. Home-
    basing and Unit Focused Stability are the two new manning strategies
    that will keep soldiers together in units longer, fostering cohesive,
    seasoned forces.
        Under home-basing, most initial entry soldiers and their families
    assigned to selected installations in the continental United States
    (CONUS) will remain at that installation for 6 to 7 years. The 7-year
    career mark was established because it is at that point the Army's
    manning needs outside the tactical units significantly increases.
        Unit Focused Stability synchronizes a soldier's assignment to the
    unit's operational cycle. Under Unit Focused Stability most members of
    a unit arrive at the same time and remain in that unit for 3 years.
    This strategy sets the conditions for achieving higher levels of
    training effectiveness, deployability, and combat readiness. By
    synchronizing soldier's assignments to the operation cycle of their
    unit, personnel turbulence will be reduced.
        Force Stabilization supports the Chief of Staff of the Army's
    strategic objectives improving stability and predictability for
    soldiers and their families. A stabilized force increases unit
    readiness and combat effectiveness by reducing turbulence and
    uncertainty.

                                   WELL-BEING

        The well-being of soldiers, civilians, and their families is
    inextricably linked to the relevance and readiness of the force. Well-
    being is the human dimension of readiness; expanding on the concept of
    quality of life by adopting the science of human behavior and
    integrating functional responsibilities for the Army's people programs.
    Beyond the traditional view of ``personnel,'' well-being leverages the
    concept of human capital--soldiers and civilians, in whom the Army
    strategically invests to achieve and maintain a competitive advantage.
        Well-being integrates people-oriented initiatives and programs,
    linking their combined results to the institutional outcomes of
    improved recruitment, development, and retention of its people to
    ultimately improve readiness. It incorporates `measurable' objectives
    that are associated with these institutional outcomes, monitoring the
    well-being of the force and thus improving programs and services for
    Army constituents. Through this integrated management process,
    imbalances in the physical, material, mental, and spiritual state of
    soldiers, retirees, veterans, DOD civilians, and their families are
    identified and improved.
        The philosophy of well-being establishes four strategic goals that
    address the basic aspirations of individuals--to serve, to live, to
    connect, and to grow. ``To serve'' personifies professional development
    and the intangibles of military service, such as values and
    camaraderie. ``To live'' refers to the physical and material needs
    related to shelter, pay, and healthcare. ``To connect'' refers to
    programs that create acceptance, contribution and social interaction by
    instilling pride and a sense of belonging--a connection to the Army
    team through leadership, family support, and programs that look after
    their welfare. ``To grow'' refers to an individual's need to expand
    his/her capabilities creatively and intellectually through citizenship,
    education, and recreation.
        Ongoing well-being initiatives that directly support the global war
    on terrorism include Deployment Cycle Support (DCS), CENTCOM Rest and
    Recuperation (R&R) Leave Program, and the Disabled Soldier Support
    System (DS3).
        Deployment Cycle Support
        The DCS program was established to prepare soldiers and Department
    of the Army civilians for returning to spouses and families. DCS
    assists soldier and Army civilians redeploying from combat or other
    operations, and their family members in meeting challenges of returning
    to ``home station.'' To ensure smooth transitions, soldiers, Department
    of the Army civilians, and family members participate in class
    discussions and assessments. The process begins in-theater and
    continues at demobilization sites and home station.
        R&R Leave Program
        The R&R Leave Program is a highly visible and a critical component
    of the Army Well-Being Program. R&R opportunities are vital to
    maintaining combat readiness and capability when units are deployed and
    engaged in intense, sustained combat operations. The R&R leave program
    provides a means where by soldiers deployed in the CENTCOM AOR are able
    to temporarily lay aside stress and the rigors of service in a combat
    zone by returning them home at government expense. To date more than
    51,000 soldiers and DOD civilians have participated in the program.
        The Disabled Soldiers Support System (DS3)
        The DS3 consists of a centralized management program operated at
    the Department of the Army headquarters. The program will expand to
    include placing a representative in each of the seven Installation
    Management Regions to further assist severely disabled soldiers in
    their communication and connections to local, Federal, and national
    agencies and organizations. The DS3 will provide personal liaison
    support between soldiers and their families, commands, and communities
    regardless of component. The Army intends to monitor disabled soldiers
    as individuals, while monitoring trends to ensure the soldiers' needs
    are met.

                         SOLDIER EDUCATION INITIATIVES

    In-State Tuition Initiative
        The Army is committed to ensuring soldiers and their families are
    afforded educational opportunities equal to the general citizenry.
    Together with the DOD and the Services, we continue to ask all States
    to adopt in-State tuition policies favorable to the military and their
    families. Education is primarily a State responsibility; therefore, we
    ask each State to review its policy and determine how it affects the
    military family. The mobility of the military community, coupled with
    the State-specific criteria for determining in-State eligibility status
    for college tuition, often deprives the military family of this
    benefit. This lack of consistency in-State policies, combined with the
    loss of continuity in retaining the benefit once started, negatively
    impacts military families. This impact undermines morale and retention.
    The Army's goals for this effort are in-State status in the State of
    legal residence, in the State of assignment, and continuity of the
    benefit once started. Presently, 43 States have favorable policies
    (with the first two of the Army's goals) for service members and their
    family members. Twenty-two States meet all goals. Several States have
    proposals before their legislative sessions now that would grant
    military families this benefit consistent with our request. As the
    number two active issue in the Army Family Action Plan, the Army will
    continue working this initiative in a concerted effort involving State
    governments, State Higher Education Executive Officers, senior military
    leadership, the Civilian Aides to the Secretary of the Army, and
    installation commanders.

    Education for Deployed Soldiers
        Many soldiers in Iraq, Afghanistan, and Uzbekistan are currently
    enrolled in distance learning college courses using tuition assistance.
    The Army Continuing Education System's goals for this year and next are
    to continue installation reachback support for soldier continuing
    education, implement eArmyU for deployed and deploying soldiers, and
    open Army Education Centers in Afghanistan, Uzbekistan, and Iraq. Army
    educators continue to support soldiers assigned to the Balkans and
    other remote locations. Education programs and services have been
    deployed to Bosnia and Hungary since March 1996, Macedonia since May
    1997, and Croatia from 1996-1998. Soldiers in Kosovo have had education
    services available since February 2000.

    eArmyU
        Launched in 2001, the eArmyU program has enhanced traditional Army
    distance learning programs and services with an anytime, anywhere
    program that ensures eligible enlisted soldiers have access and
    scholastic support to fulfill their educational goals. The key
    objectives of eArmyU are to improve well-being, increase retention, and
    enhance readiness by providing learning opportunities that develop the
    critical thinking and decisionmaking skills required on today's
    battlefields. By leveraging the technology provided through the world's
    largest education portal--eArmyU.com--soldiers currently access
    curricula at 28 regionally accredited universities offering virtual
    classrooms and libraries, academic advisement, and administrative and
    technical support. Together, these institutions offer soldiers a choice
    of 143 degree programs. eArmyU is currently offered at 14
    installations, and more than 43,400 soldiers are enrolled. As of
    February 5, 2004, more than 10,196 soldiers have permanently changed
    duty stations from their original enrollment installations and are now
    participating in eArmyU from locations worldwide, to include 50
    countries, 4 U.S. territories, and 50 States. We are now assessing the
    feasibility of deploying eArmyU to soldiers in the CENTCOM AOR. The
    program has made education viable for soldiers; 27 percent of soldier-
    students have never enrolled in post-secondary education. Of those
    soldiers who signed participation agreements, 21 percent have
    reenlisted or extended to take advantage of eArmyU. As of January 12,
    2004, 350 soldiers have earned degrees through eArmyU. eArmyU is a
    streamlined and effective learning opportunity that, due to its unique
    portal technology, advances the Army into the rapidly developing e-
    learning market.

    The Civilian Component
        Military/Civilian Conversions
        The evolving nature of our current force and its greater
    requirement to have ``green suiters'' deployed has required us to
    relook the shape of the Army. Military to civilian conversions are a
    way to improve the efficiency of manpower and make more military
    deployable by moving military out of positions that can be prudently
    performed by civilians. As part of the Army's long-term transformation
    strategy, it is essential that we start realigning military positions
    from existing infrastructure organizations to staff field units. This
    effort relieves stress in the operating forces and continues to
    transform the Army with additional combat brigades. We anticipate that
    most of the initial conversions will take place in the installation and
    training support functional areas.
        National Security Personnel System
        The enactment of the National Security Personnel System (NSPS) in
    the National Defense Authorization Act for Fiscal Year 2004 has called
    to action reform in the civilian personnel community. The act
    authorized a more flexible civilian personnel management system for the
    DOD that allows the Department to be a more competitive and progressive
    employer at a time when our national security demands a highly-
    responsive system of civilian personnel management. The legislation
    ensures that merit system principles govern any changes in personnel
    management, whistleblowers are protected, discrimination and nepotism
    remain illegal, and veterans' preference is protected. The DOD is
    collaborating with employee representatives, will invest time in trying
    work out differences, and notify Congress of any differences before
    implementation. In January, DOD officials met with union
    representatives to begin the development of a new system of labor/
    management relations. Later this year, the DOD plans to begin
    implementing NSPS to include an intensive training program for
    supervisors, managers, human resources specialists, employees, as well
    as commanders and senior management.
        To complement the flexibilities inherent in NSPS we are planning to
    implement changes in how we train, develop, and manage leaders in our
    civilian workforce. The same challenges that are driving the
    transformation of the military component of the Army dictate that we
    have a cadre of senior civilian leaders who are prepared to fully
    support the Army and the Nation. Increasingly, we see a need to deploy
    civilians in support of our soldiers and operations and to move
    civilians with the right skills to critical combat support positions.
    The transformation we plan in the civilian arena will assure that our
    senior civilians are ready to respond when needed.

                                   CONCLUSION

        Our Army's commitment and dedication is undaunted during this time
    of unparalleled challenge in our country. I am proud of our young men
    and women, America's sons and daughters for their selfless service
    everyday. I am hopeful that your support and assistance will continue
    as we demonstrate our commitment to fulfilling the manpower and welfare
    needs of the Army, Department of the Army civilians, and retired
    personnel.
        Once again thank you for the opportunity to appear before you
    today. I look forward to answering your questions.

        Senator Chambliss. Thank you, General.
        Admiral.

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

        Admiral Hoewing. Mr. Chairman, Senator Nelson, thank you
    very much for the opportunity to appear before you today. On
    behalf of the men and women of the United States Navy, I'd like
    to thank you very much for the wonderful work and the continued
    support of programs and initiatives that provide our sailors
    high quality of service, better growth and development
    opportunities, and ever-increasing opportunities in their
    futures.
        From record retention and record recruiting to enhanced
    compensation and quality of service, the fleet is now the most
    capable and talented that I've ever seen it. It's also fleet
    battle-tested and sharp. Our Navy's performance in OEF and OIF
    demonstrated more than just combat excellence. It reaffirmed
    the greatest advantage we hold over every potential adversary,
    and that, sirs, is the genius of our people. I've visited them
    in the fleet, and I can tell you that they are proud. They want
    to serve, and the tone of our force has never been better.
    That's a direct result of your support, to be sure, but it also
    reflects the innovative organizational and operational changes,
    as well as the technology investments that have improved, and
    will continue to improve, the way we get work done in the Navy.
        Under Admiral Clark's leadership these last few years,
    we've become a better aligned and much more effective fighting
    force. Through the Fleet Response Plan, like never before, we
    are able to support the national security strategy with
    persistent rotational and surge-capable naval-capabilities.
    These capabilities are enhanced by innovative new manning
    practices, such as our fleet experimentation projects, our sea
    swap, and our optimal manning experiments. We're investing
    heavily in technology, designing affordable mixed-generation
    ships engineered with the systems in mind to maximize the
    performance of our sailors, while decommissioning legacy
    platforms and manpower-intensive platforms. The truth is, we're
    still burdened by a Cold War industrial-age manning construct
    that will not suffice for the 21st century. We can and will do
    better.
        The end result will be a more capable Navy of fewer, but
    even more talented people. That is why we are confident in
    proposing a fiscal year 2005 end strength reduction of 7,900
    active-duty personnel. Our approach to creating this smaller,
    smarter workforce is deliberate and careful, and built on three
    supporting tasks.
        The first is determining true manpower requirements. We
    must evaluate not only the relevance of every given task to
    combat capability, but whether or not that task is best
    performed by an active sailor, reservist, a civilian, or even a
    contractor. The total force, then, is a requirements-driven
    total-force approach.
        Second, we're shaping the force smartly by using existing
    tools to better meet those requirements. We introduced a
    program called Perform To Serve, where we have converted from
    one skill set to a second skill set more than 2400 first-term
    sailors from overmanned skill sets to undermanned skill sets.
    Our SRB program was refined to improve manning without our--we
    call them Navy enlisted classification codes, or specific skill
    sets, and it remains our most effective retention tool. Our
    assignment incentive paid-pilot programs have encouraged
    hundreds of qualified and talented sailors to take orders to
    those billets that we find most dear and essential to our
    operational readiness. We'll continue to evaluate our process
    to make sure we're getting the right sailors to the right place
    at the right time.
        Finally, we continue to work hard in the development of a
    program we call Sea Warrior, our new human resources management
    system that integrates the currently segregated processes of
    manpower, personnel, and training. Eventually, this Web-based
    system will manage our total force to within a very narrow
    margin of the true requirement, so that the force-shaping tools
    and the strength management tools literally become
    automatically and intrinsically linked.
        In conclusion, Mr. Chairman, let me thank you and the
    entire committee for the extraordinary support you've provided
    to our Navy. The dedicated men and women of the strongest Navy
    that the Nation has ever known will continue to carry that
    freedom to the far corners of the Earth, taking sovereignty of
    this great Nation in our ships, submarines, and aircraft. Your
    continued support and guidance will maintain that high quality
    and prepare us to meet the challenges of the 21st century.
        Thank you very much.
        [The prepared statement of Admiral Hoewing follows:]

               Prepared Statement by VADM Gerald L. Hoewing, USN

                                  INTRODUCTION

        Mr. Chairman and distinguished members of this subcommittee, thank
    you for this opportunity to appear before you again this year to
    apprise you of our recent successes and ongoing efforts in pursuit of
    optimum personnel readiness within the world's finest navy.
        On behalf of the men and women of the United States Navy, I would
    like to express our collective gratitude for your exceptional and
    sustained support in ensuring we have the right people, both in number
    and quality, as well as the proper tools necessary to correctly man our
    current and future naval forces. Your continuing support of initiatives
    that provide high quality of service and quality of life for sailors
    and their families is among the most influential factors in our success
    in recruiting the very best young men and women this nation has to
    offer, and in our subsequent ability to retain them in unprecedented
    numbers in an All-Volunteer Force during a time of war. Continued
    congressional support for improvements in compensation, special and
    incentive pays, health care and quality of service enhancements are
    sending the right signal--we value your service and we want you to stay
    Navy. Your support for the Department of Defense's (DOD) fiscal year
    2005 request for a 3.5 percent basic pay raise, our efforts to
    transform our manpower structure, and further reduction in average out-
    of-pocket housing costs, from 3.5 percent to 0, will enhance our
    ability to properly size and shape the 21st century workforce that is
    our future.
        As Chief of Naval Operations (CNO), Admiral Vern Clark, recently
    informed the full Senate Armed Services Committee, we are winning the
    battle for people. Higher quality recruits, historic retention rates,
    innovative incentive pay programs, reduced attrition, competitive
    reenlistments and detailing, and outstanding leadership have all
    contributed to making our current workforce the very best the United
    States Navy has ever seen. Admiral Clark has consistently placed
    manpower at the top of his priority list and has made sure it is the
    highest priority of all who serve in positions of leadership. As a
    direct result of initiatives he has supported, we have retained sailors
    at near historic rates, while focusing even more on the quality of both
    those we keep on the rolls and those we bring in through recruiting.
    Such efforts have combined to allow us to dramatically reduce accession
    goals. This, in turn, has saved literally millions of dollars in
    training replacement personnel while preserving knowledge, skills,
    abilities, and leadership experience within our ranks.
        In 2003, we exceeded all aggregate retention goals for the third
    straight year; our recruiters reached their new contract objective for
    the 29th consecutive month and met our annual active enlisted accession
    goal for the fifth straight year; we reduced attrition 10 percent from
    the previous year's levels; and, through decommissioning older,
    manpower-intensive platforms, improving training and employment
    processes, and more efficient infrastructure organization, we have
    further reduced gaps at sea. These accomplishments are helping develop
    the 21st century workforce needed for Sea Power 21, our vision for how
    we will organize, integrate, and transform the United States Navy as we
    defend our Nation and defeat our enemies in the uncertain century
    ahead. As Navy's force structure becomes more technical, so must our
    workforce. Our people will be a more educated and experienced group of
    professionals in the coming years, and we must properly employ their
    talents.
        The CNO has stated that we will spend whatever it takes to equip
    and enable these outstanding Americans, but we do not want to spend one
    extra penny for manpower we do not need. This places us at a unique
    crossroads . . . Navy manpower today exceeds that which is required to
    most efficiently and effectively man our current and anticipated force
    structure. Our people are better, smarter, and more talented than they
    were in years past but not as good as they will be tomorrow. The CNO
    refers to this as the ``genius of our people'' and because of it, we
    can sustain our high degree of combat readiness with fewer people.

            ``One thing we have learned in the global war on terror is
            that, in the 21st century, what is critical to success in
            military conflict is not necessarily mass as much as it is
            capability.''
                                       Donald H. Rumsfeld,
                                               Secretary of Defense,
                                                 February 4, 2004.

                           PROPERLY SHAPING THE FORCE

        As we continue to pursue the kind of new technologies and
    competitive personnel policies that will eliminate non-productive work,
    streamline both combat and non-combat personnel positions, improve the
    two-way integration of active and Reserve missions, and reduce the
    Navy's total manpower structure, we are proposing a fiscal year 2005
    end strength reduction of 7,900 personnel. It is important to note that
    we have deliberately positioned ourselves for this potential success.
    Navy has historically been a capital-intensive service. ``Manning the
    equipment'' as opposed to ``equipping the man'' has been our
    traditional approach. But as we introduce in coming years more
    sophisticated systems that are designed with the human operator in
    mind, reductions in manpower, and therefore, end strength naturally
    follow. Personnel reductions will include both uniformed and civilian
    positions as we shape manpower requirements to match the significant
    investments of the past several years.
        Our force will be smaller and present a ``flatter'' profile,
    meaning, we are reducing the number of junior sailors who historically
    have performed menial labor tasks, and we are generally increasing the
    longevity of our force; thereby reducing the costs associated with loss
    of experience and retraining. The environment in which our sailors
    operate is becoming increasingly more competitive and, by extension,
    more effective. Achieving and sustaining membership in the 21st century
    Navy is based on the potential for further growth and the ability and
    initiative to make measurable contributions to mission effectiveness.
    We are fostering a climate that, while recognizing the importance of
    all supporting elements, places greater emphasis and rewards on those
    filling operational roles directly associated with warfighting. We are
    capitalizing on the ability of the individuals without being
    constrained by labels of active, Reserve, civilian or contractor. We
    are taking new approaches that, in many cases will de-link unit
    operational tempo (OPTEMPO) from individual personnel tempo (ITEMPO).
    At every turn we are carefully targeting the educational needs and
    desires of our people to enhance their professional and personal
    competence in a directed manner that supports mission accomplishment
    and stimulates personal growth and development.

                               THE RIGHT APPROACH

        The path on which we have embarked to properly shape our force
    structure may appear contrary to conventional wisdom. The prevailing
    argument seems to be that with a war ongoing against global terrorism,
    no individual Service can afford to reduce the size of its workforce.
    Nothing could be farther from the truth for the Navy. In fact, we think
    we can be an even more effective fighting force with fewer people on
    the rolls than we are today. There are two principal reasons: first, we
    are fundamentally changing the way in which work gets done. Technology
    and better manning practices have permitted us to simply accomplish a
    given task with far fewer people than it might have required even a
    decade ago. Consider the manning of one of our destroyers, which now
    requires a crew of 320, but in the future will be manned a crew of 165.
    Second, we are approaching manpower from a total force perspective,
    closely evaluating not only the relevance of a given task to combat
    capability, but whether or not that task is best performed by an active
    duty or Reserve sailor, a civilian employee, or a contractor. If it
    doesn't contribute to combat readiness and if it doesn't need to be
    done by a sailor or one of our talented civilians, we don't need to be
    doing it. At its heart, this is requirements-driven force shaping. We
    know that the non-productive work must go before the personnel numbers
    can be significantly reduced over time.
        We are reducing excess infrastructure, mostly at large shore
    installations, that is not immediately and directly tied to the fleet.
    Most importantly, we are eliminating non-productive work before
    removing the people. We are abandoning a Cold War era industrial-age
    manning construct that no longer makes sense in an information-rich
    world or against the diverse threats now facing our national security.
    This is all about how best to employ precious human resources; making
    sure highly-talented sailors are not engaged in low production work.

                       SEA WARRIOR: INVESTING IN SAILORS

        Sea Warrior, the manpower component of Sea Power 21, implements the
    Navy's commitment to the growth and development of our people. It
    serves as the foundation of warfighting effectiveness by ensuring the
    right skills are in the right place at the right time. Traditionally,
    our ships have relied on large crews to accomplish their missions.
    Today, our All-Volunteer Force is developing new combat capabilities
    and platforms that feature dramatic advancements in technology and
    reductions in crew size. The crews of modern warships are 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. Sea Warrior is designed to enhance the assessment, assignment,
    training, and education of our sailors. Our fiscal year 2005 request
    sustains our Sea Warrior momentum to change the tools used to assess
    mission accomplishment and individual growth:

             Innovative personnel employment practices are being
            implemented throughout the fleet.
                     Optimal manning--Experiments in U.S.S. Boxer
                    (LHD-4), U.S.S. Milius (DDG 69) and U.S.S. Mobile Bay
                    (CG 53) produced revolutionary shipboard watch standing
                    practices, while reducing overall manning requirements
                    and allowing sailors to focus on their core
                    responsibilities. The fleet is implementing best
                    practices from these experiments to change Ship Manning
                    Documents in their respective classes. Optimal manning
                    means optimal employment of our sailors.
                     Sea Swap--Building on the success of the first
                    crew change in U.S.S. Fletcher (DD 992) in Fremantle,
                    Australia, we expanded the Sea Swap initiative to four
                    Spruance-class destroyers (DDs) and three Arleigh
                    Burke-class guided missile destroyers (DDGs). The Sea
                    Swap initiative has saved millions of dollars in
                    transit fuel costs and increased forward presence
                    without lengthening deployment times for our sailors.

             Commander, Naval Installations (CNI) Command--
            Established this past October, CNI is responsible for
            consolidation of all Shore Installation Management Functions
            (SIM), e.g., facility maintenance, firefighting, security, mail
            services, etc. It serves as a single and centralized advocate
            for shore installations, to establish Navy-wide business
            practices and generate savings for future investments. The
            overarching objective is to eliminate redundancy in the SIM
            process and enable activities to focus on their respective
            technical missions. CNI's core responsibility is to provide
            uniform program, policy and funding for the management and
            oversight of shore installation support to the fleet. CNI is an
            important tool in implementing changes in the Navy's internal
            framework as well as rationalizing Navy's infrastructure within
            the larger context of DOD transformation initiatives.
             Fleet Response Plan (FRP)--Our Nation must provide for
            homeland defense, while concurrently being forward deployed and
            ready to surge to deliver overwhelming and unparalleled combat
            power wherever and whenever needed. In response to this
            mandate, CNO launched the FRP. This innovative approach allows
            us to surge about 50 percent more combat power on short notice,
            while simultaneously reducing some of the personnel strain of
            forward rotations. The FRP allows us to consistently deliver
            six forward deployed or ready-to-surge Carrier Strike Groups
            (CSGs), almost immediately, plus two additional CSGs in the
            basic training phase in 90 days or less (6+2). To make this
            work, we have fundamentally reconfigured our employment policy,
            fleet maintenance, deployment preparations and fleet manning
            policies to expand operational availability of non-deployed
            fleet units. We have shifted the readiness cycle from one
            centered solely on the next-scheduled-deployment to one focused
            on returning ships to the right level of readiness for both
            surge and deployed operations. The net result is a fleet that
            is more ready, with more combat power, more quickly than was
            possible in the past.
             Integrated Readiness Capability Assessment (IRCA)--
            IRCA was developed to permit us to more carefully examine our
            readiness processes. Starting with the FRP, we took a hard and
            realistic look at what we need to deliver required combat
            readiness. The IRCA helped us understand the collective
            contributions of all components of readiness, accurately define
            requirements, align the proper funding and provide a balanced
            investment to the right accounts. It improved our visibility of
            the true requirements and gave us a methodology by which to
            assess and understand acceptable and unacceptable risks to our
            readiness investments. The bottom line is--we have carefully
            defined the readiness requirement and identified those areas
            where we can streamline or cease activities that do not add to
            readiness.

            ``We will deliver the right readiness at the right cost to the
            Nation.''
                                       Admiral Vern Clark,
                                               Chief of Naval Operations,
                                                 February 10, 2004.

             Professional Military Education (PME)--We are taking a
            more comprehensive approach toward educating our people than we
            have done in the past. Our PME program will allow us to fully
            incorporate personal growth and development as part of our
            mission. We are broadening the professional and intellectual
            horizons of our members to better prepare them to operate
            tomorrow's fleet and to assume key naval and joint leadership
            roles. The PME continuum we are developing, will integrate
            general education, traditional Navy-specific Professional
            Military Education (NPME) and Joint Professional Military
            Education (JPME) curricula.
             A Human Performance Center (HPC) has been established
            to optimize naval warfighting performance by applying the Human
            Performance Systems Model and the science of learning to all
            facets of naval operations. In doing so, we will eliminate
            barriers to achieving required performance and ensure that
            training solutions are effective, thereby, saving money and
            improving readiness.
             Integrated Learning Environment (ILE) is a family of
            systems that, when linked, will provide our sailors with the
            ability to develop their own learning plans, diagnose
            performance strengths and weaknesses, and tailor education to
            support both personal and professional growth. Most
            importantly, these services will be provided anytime, anywhere
            via the Internet and the Navy-Marine Corps Intranet (NMCI).
             Five Vector Model (5VM)--is an innovative assessment
            tool currently in use to improve the professional development
            and growth of our sailors, both officer and enlisted, active
            and Reserve. The enlisted tool is being used at this time and
            the officer tool is under development. The 5VM in coordination
            with the Career Management System (CMS), will use the latest in
            systems technology to create an integrated career management
            tool allowing sailors to more successfully plan and execute
            their careers, and then reap the rewards of serving. Accessed
            through Navy Knowledge Online (NKO), the 5VM is both a roadmap
            and a resume, showing sailors what they need to know, when they
            need to know it, and how to go about getting that knowledge,
            skill or ability. Tailored to each individual, it offers a
            single point of access for all information and resources
            related to planning and managing their professional and
            personal lives. Sailors can access their professional and
            personal development, leadership, certifications and
            qualifications, and performance vectors. As each vector
            requirements, or milestones, are plotted, these are linked to
            the supporting courses (residency, computer-based, Web-
            delivered), tools and available resources. Based on achieved
            milestones, the 5VM tracks a sailor's ranking among his or her
            peers; identifies promotion potential and feeds various
            databases from which the electronic training jacket is created.
            Through the 5VM, sailors will also link to the CMS to identify
            duty assignments that will best meet their individual
            development and promotion needs, as well as alternative duty
            assignments and non-military educational opportunities. Sea
            Warrior will ultimately bring together the 5VM and CMS to
            create an integrated detailing system, allowing sailors to
            apply for duty assignments online.

                 NAVY MANPOWER AND PERSONNEL STRATEGY (N-MAPPS)

        We decided several months ago to adopt the Balanced ScoreCard
    management system as a means of translating our organizational strategy
    into action and better focusing our activity and budget decisions on
    achieving our strategic priorities. Under our own brand, N-MAPPS, the
    Balanced ScoreCard approach provides an effective means by which to
    measure the things we do against the performance outcomes we expect.
    For example, one goal is to improve the quality of the force. We need
    to be able to say how we are going to do it as well as how we will know
    when we have successfully achieved our goal. In this way we will be
    better able to measure our success and determine whether or not the
    goals we set for ourselves were the right ones. Using techniques on how
    to improve government efficiency employing Balanced ScoreCard, we have
    streamlined our strategy map, making it tighter and more focused. We
    are also honing our metrics, paring them down to those most essential,
    as well as sharpening the tolerances. With the proper emphasis on how
    to measure success, ensuring that we measure the right things, in the
    right numbers and within appropriate tolerances, we are sure to reach
    the right conclusions.

                             HOW WE WILL GET THERE

        We have a variety of tools currently available to us that we will
    employ to ensure we make the right decisions about whom to retain and
    in what skills and who we separate:

             Perform to Serve (PTS)--Last year, we introduced PTS
            to align our Navy personnel inventory and skill sets through a
            centrally managed reenlistment program and to instill
            competition in the retention process. Most sailors are
            authorized to reenlist within their current ratings, because
            that is where we need them most. It's cost-effective and it
            benefits our readiness posture. Others, however, will be
            encouraged to convert from ratings in which we have excess
            inventory, to undermanned ratings where vacancies are really
            hurting us. Those sailors asked to convert will be provided
            with the necessary training to ensure their success in their
            new skill areas and they may be eligible for a bonus upon
            incurring a specified period of obligated service to work in
            that rating. As you can see, we further enhance readiness in
            this way, because, by moving experienced and disciplined
            sailors from overmanned skill sets into undermanned skill sets,
            we are balancing our force profile, while capitalizing on the
            investments we have made in these proven professionals by
            keeping them in our ranks. The pilot program has proven so
            successful in steering sailors in overmanned ratings into skill
            areas where they are most needed, that the program has been
            expanded. More than 16,000 sailors have applied to reenlist
            through PTS since the program began just 1 year ago and we will
            continue this effort in 2005.
             Lateral Conversion Bonus (LCB)--Another available
            method relies on a tool authorized in last year's authorization
            bill that we refer to as the Lateral Conversion Bonus. While
            PTS focuses on rating conversions at the end of a sailor's
            service obligation, LCBs would be targeted at sailors we need
            to convert to undermanned ratings in the middle of a period of
            obligated service. The benefit to this approach is that, the
            sooner we can get them into the skill areas in which we need
            them, the sooner we begin to realize a return on investment, in
            terms of enhanced personnel readiness and that's what we're all
            about. Earlier conversion also accelerates their
            competitiveness and enhances their chances for advancement
            within their new rating.

        PTS and LCB were emphasized first because we want you to know that
    we place great value on the professionalism of our dedicated and
    experienced sailors. We will make every reasonable effort to retain
    these sailors by considering them for rating conversion prior to any
    decision to release them from our ranks. It makes good sense from a
    readiness perspective and it is responsible stewardship of taxpayer
    dollars to do so. Additionally, it keeps faith with those who
    voluntarily serve, and their families, by affording them the
    opportunity to remain a part of our team even if the job they
    originally enlisted in the Navy to perform is no longer needed. These
    methods have shown great utility in our efforts to shape the force for
    the 21st century.

             Assignment Incentive Pay (AIP)--Authorized in the
            fiscal year 2003 Defense Authorization Bill, AIP attracts
            qualified sailors to a select group of hard-to-fill duty
            stations. It allows sailors to bid for additional monetary
            compensation in return for service in these locations. An
            integral part of our Sea Warrior strategy, AIP is enhancing
            combat readiness by permitting market forces to efficiently
            distribute sailors where they are most needed. Since the pilot
            program began last June, more than 1,100 AIP bids have been
            processed, resulting in 238 sailors receiving an average of
            $245 extra pay each month. More importantly, challenging duty
            assignments have been filled without forced assignment of
            service members contributing to our improvements in quality of
            service.
             Selective Reenlistment Bonus (SRB)--While we have
            enjoyed much success in our retention efforts of recent years,
            we must not presume that we can rest on these accomplishments
            or surrender to the notion that the tools that made such
            successes possible are no longer needed. SRB authority has come
            increasingly under fire because of the funding required to
            support it. This has been, and continues to be, our most
            valuable incentive, directly responsible for much of our
            unprecedented retention successes in the key skill sets
            required to maintain our combat readiness. Indeed, SRB
            adjustments were repeatedly refined last year to improve
            manning within specific skills (Navy Enlisted Classification
            (NEC) Codes), vice overall ratings. The direct cost avoidance
            associated with not having to access, train and grow
            replacement personnel far outweighs the funds expended to
            retain sailors in critical skills using the SRB. Added to that
            is the costs we would have paid in decreased personnel and
            military readiness, had we not been so successful in retaining
            these outstanding professionals in needed ratings. I strongly
            encourage your continued support for this vital program. I
            cannot overemphasize the importance that it continues to play
            in the readiness and capability you observe in our Navy today.
             Military to Civilian Conversions--We are conducting a
            careful review of military billets in our shore infrastructure
            to determine if they truly require a sailor, or if the task
            could be performed as effectively, and at lower cost, by a
            civilian or by private industry. We want to emphasize shore
            billets where sailors need, and continue to hone, those skills
            required by the fleet. In conducting this review, we are using
            several tools, for example: ``zero-based reviews'' of
            individual officer communities and enlisted ratings, functional
            reviews of service delivery for various infrastructure
            requirements, and a review of the model for providing total
            force health care requirements. We will phase in the results of
            this analysis to ensure that sailors continue to have a career
            path that supports professional growth and that we continue to
            support the fleet with an appropriate mix of manpower.

        To achieve the necessary end strength to match manpower
    requirements necessary to support our combat readiness requirements,
    additional methods of shaping the force are currently available for
    use. These methods, though not preferable, may be used to achieve our
    manpower goals. We are exploring methods that would allow voluntary
    decisions by sailors in targeted skill sets to ``right size'' the force
    to match manpower requirements. The tools that are being explored would
    allow us to effectively, and more precisely, shape the force while
    contributing to continued success in recruiting, retention and quality
    of service, thereby avoiding the adverse impacts experienced as a
    result of using such draconian involuntary separation methods during
    the post Cold War drawdown.

                   NATIONAL SECURITY PERSONNEL SYSTEM (NSPS)

       Last year, Congress authorized NSPS, a new, more flexible, more
    user-friendly, personnel system, which will undoubtedly help us better
    manage our civilian workforce. Navy has offered to serve as the testing
    ground to launch this new and innovative Federal employee management
    system, and we are confident that it will contribute immensely to our
    ability to get the best-qualified, best-trained, best-educated, and
    most highly-motivated civilian Federal employees into key positions
    that are integral to our total force manpower effort. It is imperative
    that we have the kind of flexibility this system affords us as we
    identify, through such innovative tools as the previously mentioned
    IRCA, positions currently filled with uniformed personnel that could
    more appropriately be performed by talented professionals in the
    civilian workforce, freeing up sailors to fill positions more closely
    tied to fleet operations.
        We are in the initial stages of identifying competencies required
    by our civilians to support current and future work requirements. This
    competency identification provides the basic structure for workforce
    development, recruitment, succession planning and strategic human
    capital planning. It also provides a framework supportive of the NSPS
    and the changes Navy needs to make in the performance planning process.
    We believe these changes to how Navy manages its human capital will
    enhance employee work-life and demonstrate that Navy is an ``employer
    of choice.''
        For sailors ready to leave the Navy, we continue to remind them
    that Navy is an ``Employer of Choice'' in the civilian world to our
    mutual benefit. As we expend significant effort and resources to
    recruit the best and brightest into the Navy, and subsequently in their
    training and leadership skills, it stands to reason that when these
    professionals leave the Navy, they are among the most attractive and
    logical applicants for potential placement in civilian positions. They
    have a great education, thanks to our PME program that allows us to
    fully incorporate personal growth and development as part of our
    mission. Their leadership skills are unparalleled since we have
    invested in broadening their professional and intellectual horizons in
    order to better prepare them to operate tomorrow's fleet and to assume
    key naval and joint leadership roles. There are many employers who make
    the mistake of investing in the career development of employees only to
    lose their talent and experience to employers elsewhere. After
    investing in sailors' career development for many years it makes sense
    to encourage them to continue contributing to Navy as a civilian
    employee. In doing so, we retain the knowledge, skills, and abilities
    they acquired through years of service and specialized training in the
    Navy.

                                   DIVERSITY

        The Navy has embarked on a more strategic approach to managing the
    diversity of our force. During the past year, we have concentrated on
    three main areas: understanding the current diversity environment,
    defining our strategic diversity framework, and making a commitment to
    execution. The implementation plan is concentrated in four major areas,
    each of which is led by a specific work team: Accessions, Training and
    Career Development, Organizational Alignment, and Communications. We
    will also establish a Senior Diversity Leadership Forum that will
    include membership from the highest levels of the Navy, as well as
    distinguished leaders of the civilian community. This forum will
    monitor the execution of our efforts. We envision it becoming the model
    for our Government and our Nation in this critical endeavor. Further,
    the Diversity Visioning Group, which was formed last year to develop
    the Strategic Framework for Diversity, will evolve into the Fleet
    Diversity Council, continuing to lead the effort on the waterfront.
        Implementation of the strategic plan will be a multi-year effort
    that will require us to remain engaged and steadfast. Change will be
    achieved over time, with continued diligence, commitment and execution
    from all hands. Evaluating and communicating progress will be key to
    ensuring we stay the course and succeed. Achieving key milestones,
    derived from the implementation timelines, we will provide a structure
    from which to assess progress and identify critical junctures.
    Implementation milestones will also serve as incremental measures of
    change and provide opportunities for `small wins' to be celebrated. The
    end result, we believe, will be the ability to sew diversity into the
    fabric of our Navy's culture.

                          HEALTH OF THE OFFICER CORPS

        While we have made significant inroads in addressing many officer
    community shortfalls that plagued us for a time after the post-Cold War
    drawdown, we continue to experience specific challenges in our efforts
    to retain the correct numbers and skill mix of warfighters within our
    unrestricted line community.
    Surface Warfare Officer (SWO) Community
        Retention among Surface Warfare Community department head (mid-
    grade) officers, typically with 6-10 years experience, has been a
    problem since fiscal year 1993. Community management of officers in
    year groups (YGs) 1994-1998 remains a challenge as we strive to ensure
    annual O-4 requirements are met and preclude excessive department head
    tour lengths. How successful we are will directly influence the career
    decisions of division officers approaching the end of initial service
    obligations. Meeting department head requirements is essential to
    ensuring a sufficient inventory of post-department head officers to
    support shore requirements at the O-4 level. We closed fiscal year 2003
    with shortfalls in meeting our control strength goals. Implementation
    of a Surface Warfare Critical Skills Bonus has contributed towards
    reversing the downward trend in retention among O-4 SWOs. An aggressive
    program of engagement with junior officers and tying key graduate
    education programs to department head billets has helped mitigate the
    problem. This, along with a program that accelerates assignment of our
    most promising division officers to department head billets afloat, is
    helping ease the adverse effects of undermanned YGs in today's
    department head inventory. Availability of sufficient numbers of
    quality department heads to serve in the fleet remains the community's
    top priority.
        Surface Warfare Officer Continuation Pay (SWOCP) continues to
    contribute to improved retention among these skilled and highly sought
    after fleet-experienced officers. The number of officers committing to
    serve as at-sea department heads continues to be encouraging and
    validates the effectiveness of SWOCP. We closed out fiscal year 2003
    meeting 90 percent of department head requirements and have over 90
    percent of department head school seats filled. The SWO career path
    nominally contains a 2-year shore tour prior to an officer returning to
    sea as a department head. This is where most SWOs make their first
    career decision on whether to commit to serve as department heads. SWO
    retention is measured at 9 years of commissioned service (YCS).
    Retention improved to 31 percent in fiscal year 2003, but remains below
    goal. Early commitments and take-rates for SWOCP by YG-97 and later
    foretell continued improvement in SWO retention. Due to lower-than-
    historical retention following the Cold War, and under-accessing
    several year groups at the height of the drawdown, SWO community
    retention must be at least 35 percent to fully support department head
    at-sea requirements, while 38 percent (goal) will restore much needed
    selectivity and flexibility in the distribution process.
    Submarine Warfare Officer Community
        Submarine community officer accession and retention requirements
    are based upon manning at-sea billets. Changes in the force structure
    directly impact at-sea billet requirements and increase necessary out-
    year accessions and retention. Submarine force structure projections
    were increased the last 2 years, following a decision to convert, vice
    decommission, four SSBNs to SSGNs, resulting in eight additional crews
    being retained in the force structure. The impact of additional force
    structure is felt most significantly at the department head level. This
    increases our accession mission, to meet future requirements, and our
    retention requirement, to fill the near-term increase in department
    head requirements. The submarine community measures retention as the
    continuation rate of officers from three to seven YCS, for a particular
    YG. This provides a measure of officers available for assignment to
    submarine department head, nominally at the eight YCS point. Fiscal
    year 2003 (YG-96) retention was 43 percent, which exceeded a 41-percent
    goal required to return department head tour lengths to 36 months.
    Although retention has improved in the near term, under-accessed year
    groups (YG-97 and YG-98) are approaching their ``stay-leave'' decision
    windows (7 YCS), and retention requirements for these year groups
    average 40 percent to meet department head manning requirements. For
    example, YG-97 will require a 43-percent retention rate just to meet
    requirements for that YG.
        Nuclear Officer Incentive Pay (NOIP) has proven to be an effective
    tool in shaping submarine officer retention. NOIP rate increases in
    fiscal years 2001 and 2003 favorably impacted YG-96 retention. The 2001
    increase yielded a 25-percent increase in the number of contracts
    executed for YG-96 compared with YG-94. The 2003 increase further
    boosted contracts executed to 41 percent. Continued stiff competition
    from the private sector for these officers remains a significant cause
    for concern. Submarine officers possess highly-specialized and unique
    skills associated with their lengthy and costly technical training.
    Having graduated at the top of their classes from some of the Nation's
    premier educational institutions, these officers are aggressively
    pursued for positions in a variety of career fields, many of which are
    outside the nuclear power industry. Inadequate retention imposes
    extension of demanding sea tours on officers still serving in order to
    meet safety and readiness requirements. Excessively long department
    head tours adversely impact junior officer retention creating a
    downward spiral. NOIP remains the surest and most cost-effective means
    of achieving required retention. With forecasts predicting substantial
    economic growth, and under-accessed YGs approaching department head
    tours, we must maintain competitive retention incentives so that we can
    lead, vice chase, the retention challenge.
    Naval Special Warfare (NSW)/SEAL Officer Community
        The retention metric utilized for SEAL officers is the average
    retention of officers with 7-10 YCS. SEAL officer retention
    requirements are necessarily high to meet the demand for a relatively
    large number of joint and Navy staff officer assignments for SEALs in
    pay grades O-4 through O-6. While we have sufficient numbers of
    volunteers for the SEAL officer program, accessions are limited due to
    the finite number of junior officer operational assignments. Navy
    implemented a Special Warfare Officer Continuation Pay (SPECWARCP) for
    officers with 6-14 YCS, and whose continuation is important to the
    health of the NSW community. Each of the first 3 years this was
    offered, the results exceeded the projected 74 percent goal of eligible
    officers to contract. While many of those contracts during the first 2
    years were 1- and 3-year contracts, indicating a number of officers
    remained uncertain about their long-term service plans, contracts for
    fiscal years 2002-2003 tended to reflect longer commitments due to a
    contract rate-realignment. This coupled with increasing accessions
    beginning in fiscal year 1995, has contributed to community stability
    and a favorable long-term retention outlook. Additionally, realignment
    of SEAL teams under Force-21, creating more operational opportunities
    among mid-grade officers, is expected to further increase overall
    retention since most individuals enter NSW to serve as warfighters.
    Aviation Warfare Officer Community
        Naval aviation retention in fiscal year 2003 was 49 percent through
    department head (12 YCS), surpassing last year's mark by 6 percentage
    points. Continued improvement can be partially attributed to 4
    consecutive successful years of our Aviation Career Continuation Pay
    (ACCP) program and the sluggish economy. Despite this favorable
    retention trend, we remained over 600 junior officers below
    requirements at the end of fiscal year 2003. Aviators retained above
    fiscal year 2003 required Cumulative Continuation Rate, will help
    alleviate expected shortfalls this year. Required retention rates due
    to the T-Notch, caused primarily by under-accessing year groups during
    the drawdown, exceed 55 percent this year and will peak at 81 percent
    in fiscal year 2005, as under-accessed year groups enter their
    department head tours. Additionally, these ambitious, but necessarily
    high retention goals clearly illustrate the importance of retaining as
    many junior aviators as possible. Naval aviation shortages are due to a
    combination of low accessions, increased time-to-train and retention
    rates below requirements between fiscal years 1996-1999.
        To maintain optimum combat readiness, Navy has identified and
    prioritized billets to ensure operational sea duty billets are manned
    at 100 percent. Next in priority are production billets ashore (pilot
    and Naval Flight Officer training). Aviator tour lengths have also been
    adjusted to ensure billet prioritization is maintained. We have been
    working aggressively to reduce time-to-train as well as increase
    aviator production throughput in the training command and Fleet
    Replacement Squadrons. By accessing to meet steady-state requirements,
    rated aviator shortages will begin to diminish by fiscal year 2007 and
    should be alleviated when fully accessed year groups enter their
    department head tours in fiscal year 2012 and beyond.
        ACCP continues to be our most efficient and cost-effective tool for
    stimulating retention behavior to meet current and future requirements
    and overall manning challenges. Recent indicators of recovery within
    the airline industry, which may be expected to lead to increased
    hiring, suggest the need to continue offering competitive ACCP to
    address the continuing aviator shortfall and anticipated increasing
    challenges to aviator retention efforts. Targeted, stable, efficient,
    and judicious use of limited resources are hallmarks of Navy's ACCP
    program, which continues to offer the incentive necessary to stabilize
    our aviation manning profile; thereby sustaining operational combat
    readiness within naval aviation.

                    MAINTAINING A VIBRANT RECRUITING PROGRAM

    Enlisted Recruiting and a Healthy Delayed Entry Program (DEP)
        As mentioned earlier, Navy Recruiting experienced a highly-
    successful year in fiscal year 2003 and this success has continued
    through the first quarter of fiscal year 2004. A lower accession
    mission, professional and properly resourced recruiting force, and
    favorable economic conditions have all contributed to this success.
    Improving economic conditions and increased emphasis on higher recruit
    quality have not hurt overall recruiting efforts, thus far. Despite the
    fact that retention successes have allowed us to reduce the accession
    mission over the last several years, we must remain ever vigilant that
    prevailing winds could change quickly, for any number of reasons,
    necessitating a sudden surge in our recruiting goal. Economic
    conditions that have proven so favorable to Navy retention and,
    likewise, recruiting successes, are not expected to continue. The 6.4
    percent national unemployment rate of June 2003 decreased to 5.7
    percent by December and is projected to continue declining over the
    next 2 years. With such uncertainty looming on the recruiting horizon,
    it is critical that advertising and recruiting budgets remain
    sufficiently robust to adjust for swiftly improving economic
    conditions, but also to support continued pursuit of increasing recruit
    quality. Despite declining accession goals in recent years, the smaller
    more technical force we are building mandates additional emphasis on
    recruit quality and education.
        Our success in meeting new-contract-objective has helped to restore
    the health of our DEP, which signals a high probability of long-term
    recruiting success. It has also allowed us to focus more closely on
    meeting goals for critically manned ratings. We were able to remove 41
    ratings from the critically manned ratings list this past fiscal year
    and we recruited greater than 95 percent of the mission in five of the
    six remaining critically manned ratings. Another major advantage of a
    strong DEP is that it provides a strategic opportunity to improve
    recruit quality. Higher quality recruits are less likely to attrite
    during the first term of enlistment and are better suited for the
    increasingly technical 21st century Navy. A healthy DEP posture
    alleviates the necessity for crisis-managing each month's accession
    mission, permitting recruiters to be more selective in the quality of
    recruits processed. Recruit quality is primarily measured by the
    percentage of High School Diploma Graduates (HSDGs), recruits scoring
    in Test Score Categories I-IIIA (CAT I-IIIA) or the top half on the
    Armed Forces Qualification Test (AFQT), and recruits possessing prior
    college experience.
        In fiscal year 2003, we accessed 94.3 percent HSDGs, a significant
    improvement from the previous year's level of 91.9 percent and well
    above the DOD minimum standard of 90 percent. We accessed 65.7 percent
    CAT I-IIIA recruits against a DOD minimum standard of 60 percent and we
    achieved a 40-percent increase in the percentage of recruits with prior
    college experience. We are confident in our ability to improve upon
    these positive trends; therefore, we have set this fiscal year's bar
    even higher, 95 percent HSDGs, 67 percent CAT I-IIIA, and a 20-percent
    increase in the percentage of recruits with college experience. Through
    December 2003, we are on track to meet each of these objectives. Of
    particular note on the quality front, last fiscal year, 43.8 percent of
    African-American recruits were in CAT I-IIIA. During the first quarter
    of fiscal year 2004, 52.4 percent of African-Americans who have
    accessed, or who are contracted to access, are in CAT I-IIIA, allowing
    greater diversity representation among Navy's more technical ratings.

    Penetrating the College Market
        In fiscal year 2003, Navy accessed 7.8 percent recruits with prior
    college experience, largely attributable to aggressive recruiting
    efforts on junior college campuses. However, the need to improve
    college market penetration in the future will likely present a
    formidable challenge without incentives targeted towards college youth.
    As ships and aircraft become increasingly technically complex, the
    Navy's need for recruits with college experience and advanced
    vocational and technical training is increasing dramatically. The CNO
    Strategic Studies Group has foreseen a requirement for Navy to recruit
    40 percent of its enlisted force through programs that result in an
    Associates Degree or directly from the Associates Degree market. Navy
    is exploring the need for authorities that would provide increased
    access to this market which is expected to become of significant
    importance to our future recruiting requirements.

    Officer Recruiting
        Fiscal year 2003 proved successful for active officer recruiting,
    as well. We met 23 of 24 officer community goals, including all goals
    in the unrestricted line, restricted line, and staff corps communities.
    We anticipate similar levels of success this fiscal year. The Dental
    Corps, in which we attained only 67 percent of mission, was the only
    officer community that did not achieve annual goal. We continue our
    efforts to increase minority recruiting into the officer corps to more
    closely mirror diversity representation among Americans receiving
    Bachelor's Degrees. We increased minority officer new contracts from
    17.9 percent to 21 percent between fiscal years 2002 and 2003. Through
    the first 3 months of fiscal year 2004, we achieved 24.8 percent
    minority officer new contracts. Hispanic and African-American
    communities comprise the largest proportion of improvements between
    fiscal year 2002 and the first quarter fiscal year 2004.

    Total Force Recruiting
        Last fiscal year, we consolidated active and Reserve recruiting
    efforts under Commander, Navy Recruiting Command (CNRC) to establish a
    Total Force Recruiting mission through unity of effort and command to
    maximize effectiveness and efficiency. Several pilot programs involving
    various levels of the chain of command and both enlisted and officer
    recruiting are underway to evaluate the impacts of the organizational
    change on active and Reserve accession missions. Additionally,
    beginning with fiscal year 2005 President's budget submission, active
    and Reserve component recruiting Operations and Maintenance (O&M)
    Accounts have been merged in support of the consolidation effort.
        While Navy recruited 106 percent of the overall enlisted Selected
    Reserve (SELRES) goal in fiscal year 2003, several ratings, including
    Master-at-Arms and hospital corpsman, achieved less than 70 percent of
    their respective goals. In fiscal year 2004, Navy plans to access about
    1,000 National Call to Service (NCS) candidates to meet near-term
    active duty manning requirements, as well as future SELRES drilling
    requirements in hard-to-fill ratings, including significant numbers of
    Master-at-Arms and hospital corpsman. Through the first quarter, fiscal
    year 2004, we are on track to meet our overall enlisted SELRES
    accession mission. Three years of experiencing the highest retention
    rates among active enlisted personnel in our history has led to an
    inevitable decline in the number of prior service veterans available to
    enter the Naval Reserve. Consequently, we were compelled to increase
    non-prior service Reserve accessions to 39 percent in fiscal year 2003,
    in stark contrast with 18 percent and 32 percent in fiscal years 2001
    and 2002, respectively. This clearly has its downside in that a greater
    percentage of SELRES accessions are not deployable until they receive
    extensive training and experience; thereby, adversely impacting
    personnel readiness with the Naval Reserve. Through enhanced aggressive
    prior service recruiting, we hope to limit non-prior service accessions
    to approximately 18 percent this fiscal year. Similar retention
    behavior among active component officers yielded a similar impact on
    officer SELRES recruiting mission in fiscal year 2003. Several officer
    communities requiring prior service experience did not meet accession
    goals and contributed to attainment of just 91.2 percent overall
    officer SELRES accession mission. Through first quarter fiscal year
    2004, we are on track to meet our overall officer SELRES accession
    mission this year.

                                   CONCLUSION

        Mr. Chairman and distinguished members of this Personnel
    Subcommittee, the dedicated men and women of the world's premier naval
    force continue to sustain our forward worldwide presence on a daily
    basis in this third year of the global war on terrorism. As our CNO has
    made very clear, ``At the heart of everything good in our Navy today is
    this: we are winning the battle for talent. This is the highest quality
    Navy the Nation has ever seen.'' Your continued support for our force-
    shaping initiatives and programs will maintain that high quality and
    prepare us to better meet the challenges of the 21st century. In this
    way, we will collectively set the stage to project greater power and
    provide greater protection to our Nation--enhancing our security in the
    dangerous and uncertain decades ahead.

        Senator Chambliss. Thank you, Admiral.
        General Parks, we're pleased to have you with us.

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

        General Parks. Thank you, Mr. Chairman and Senator Nelson.
        It's my pleasure to appear before you this afternoon to
    report on the personnel status and future manpower picture of
    your Marine Corps, and to thank you for your support of our
    dedicated marines and your support of their families.
        Today's Marine Corps is comprised of young men and women of
    character who have a strong work ethic, sound moral fiber, and
    the desire to be challenged. The President's budget continues
    to raise their basic pay and reduces their out-of-pocket
    expenses for housing. Additionally, the President's budget
    provides valuable funding for recruiting and retention
    programs, foundational areas in today's challenging personnel
    environment. A comprehensive compensation strategy is important
    to continued future success.
        Due to the hard work of our recruiters and marine leaders
    all across the Corps, we will once again exceed our recruiting
    and retention goals. The Corps remains on pace for our 9th
    consecutive year of achieving our recruiting mission.
        As our Marine Expeditionary Units maintain their regular
    performance worldwide, a contingent of marines will arrive in
    Haiti, and we are currently deploying 35,000 marines to OIF 2.
    In support of the global war on terrorism, the Corps has less
    than 4,000 Selected Marine Corps Reserve unit marines
    mobilized, and 1,300 individual volunteers, who are filling
    important joint and internal billets. Our marines are working
    hard. They are clearly stretched, but they are doing what they
    trained to do. We're watching our recruiting and retention
    numbers and other indicators more closely than I have ever seen
    in the past, and to date they remain strong. We remain
    optimistic about the overall health of the Marine Corps in this
    challenging personnel environment.
        Lastly, as evident in recent testimony, interest concerning
    sexual assault is high, and appropriately so. Eliminating
    sexual assault is a leadership issue and one that Marine Corps
    leaders will confront directly.
        Again, the Marine Corps expresses its sincere thanks for
    the support of Congress and of this subcommittee. Your desire
    to safeguard the needs of the Marine Corps is vital as we seek
    to positively affect readiness, retention, and morale by
    increasing pay, benefits, and the quality of life of our
    marines and their families.
        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 an
    overview of your United States Marine Corps, from the personnel
    perspective. 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 their families are poised to
    continue to respond to the Nation's call in the manner Americans expect
    of their Corps.

                                    OVERVIEW

    General
        Up front I will highlight a few key points. The Navy-Marine Corps
    team continues to play a critical role in the global war on terrorism,
    and in the establishment of stability and security throughout the
    world. During this past year, the Marine Corps, both active and
    Reserve, was engaged in operations from Afghanistan, to the Arabian
    Gulf, the Horn of Africa, Liberia, the Georgian Republic, Columbia,
    Guantanamo Bay, and the Philippines. Currently, I Marine Expeditionary
    Force is deploying 25,000 active and Reserve marines to Iraq as part of
    Operation Iraqi Freedom (OIF) II. Stated succinctly, your marines are
    working hard, but the force remains strong.
        Our superb recruiters continue to meet their mission, as they have
    month after month for over 8 years. Through their hard work we continue
    to exceed the goals for quality recruits established by the Department
    of Defense (DOD), as well as the higher standards established by the
    Commandant of the Marine Corps. Similarly, as has been the case for the
    past 10 years, we remain postured to attain our annual retention goal
    for first-term marines electing to become members of the career force;
    this year 5,974 first term marines will reenlist, 25 percent of the
    eligible population. We completed the second year of our subsequent
    term retention plan for the career force, meeting our targets in this
    category, and are well on our way to meeting the fiscal year 2004
    career force retention goal of 5,628 marines. Finally, last year we
    achieved a 19-year high in officer retention, with 93 percent of our
    officers staying in the Corps. Obviously, the support of Congress to
    ensure appropriate pay and compensation improvements provides the
    environment crucial to the success experienced to date.

    Funding
        The fiscal year 2005 budget provides for a total force of 175,000
    active duty marines, 39,600 Reserve marines, and 13,200 appropriated
    fund civilian marines. Approximately 59 percent of our military
    personnel funds are targeted toward basic pay and retired pay accrual.
    Essentially all of the remaining funds address regulated and directed
    items such as Basic Allowance for Housing (BAH), Defense Health Care,
    Basic Allowance for Subsistence, Permanent Change of Station
    relocations, and special and incentive pays. Only 1 percent of the
    military personnel budget is available to pay for discretionary items
    such as our Selective Reenlistment Bonus (SRB), Marine Corps College
    Fund recruitment program, and Aviation Continuation Pay. While this is
    a manageable amount, it provides little flexibility. Of the few
    discretionary pays that we utilize, the SRB is crucial. We take pride
    in our prudent stewardship of these critical resources. For fiscal year
    2005 we are seeking a judicious increase in funding to $56.7 million,
    from $51.8 million in fiscal year 2004. This remains just one-half of 1
    percent of our military personnel budget, but it allows us to
    effectively target our retention efforts. Military personnel funding,
    as a whole, represents 60 percent of the U.S. Marine Corps' Total
    Obligation Authority (TOA), leaving just 40 percent for infrastructure,
    investment, and operations and maintenance requirements. Similar to our
    minimal level of discretionary military personnel funding, the Marine
    Corps, with the smallest budget of the four Services, has limited
    flexibility overall to respond to additional unprogrammed mandates.
        The Marine Corps appreciates the efforts by this subcommittee 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 BAH, and ensuring a sound
    comprehensive compensation and entitlements structure greatly assists
    efforts to recruit and retain the quality Americans you expect in your
    Corps.

                                   RECRUITING

    Active Duty
        In fiscal year 2003, the Marine Corps realized unprecedented
    recruiting success, achieving 103.5 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 DOD and Marine Corps standards of 90 percent and 95
    percent, respectively. In addition, 70 percent were in the I-IIIA upper
    mental testing categories; again well above the DOD and Marine Corps
    standards of 60 percent and 63 percent, respectively. Lastly, for
    officers, 100 percent of mission was achieved.

    Reserve Component
        The Marine Corps Reserve, similarly, achieved its fiscal year 2003
    recruiting goals with the accession of 6,174 non-prior service marines
    and 2,663 prior service marines. For our Reserve component, officer
    recruiting and retention to fill out the requirements of our Selected
    Marine Corps Reserve units remains our most challenging recruiting
    concern. This challenge exists primarily due to the low attrition rate
    for company grade officers from the Active Force. The Marine Corps
    recruits Reserve officers almost exclusively from the ranks of those
    who have first served a tour as an active duty marine officer. We are
    exploring methods to increase the Reserve participation of company
    grade officers in the Selected Marine Corps Reserve through increased
    recruiting efforts, increased command focus on emphasizing Reserve
    participation upon leaving active duty, and Reserve officer programs
    for qualified enlisted marines.

    Recruiter Access
        The Marine Corps is grateful to Congress for the benefits derived
    from legislation enabling recruiter access to high school student
    directory information. America's youth can learn about 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.

    Fiscal Year 2004
        The key tenants of the fiscal year 2004 recruiting strategic plan
    are to: (1) continue long-term recruiting success by placing mission
    accomplishment above all else; (2) emphasize the benefits of early
    mission attainment in ``quality of life terms'' that will influence the
    recruiter; (3) stress safety in all that we do; and (4) continue to
    enhance the image of recruiting duty in order to ensure we replace our
    recruiters with the same high quality marines who have laid the
    groundwork for our success.

    Accomplishing the Mission
        The Marine Corps' recruiting environment is dynamic and
    challenging, particularly with regards to market propensity.
    Nevertheless, for more than 8 years in this dynamic environment we have
    met our mission. We intend to continue this success, in the future, but
    it will hinge on our ability to overcome our target market's low
    propensity to 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.
        Ensuring young men and women hear and understand the recruiting
    message requires continual reinforcement through marketing and
    advertising programs. To do this we continue to emphasize our core
    competencies of paid media, generating leads for recruiters, and
    providing the recruiters with effective sales support materials.
    Quality advertising aimed at our target market provides the foundation
    for establishing awareness about Marine Corps opportunities among young
    men and women.
        Paid advertising continues to be the most effective means to
    communicate our message and, as a result, remains the focus of our
    marketing efforts. As advertising costs continue to increase it is
    imperative that our advertising budgets remain competitive in order to
    ensure that our recruiting message reaches the right audience. Marine
    Corps recruiting successes over the past years are not only a direct
    reflection of a quality recruiting force, but also an effective and
    efficient marketing and advertising program.

    Quality of Life and Safety
        Continuous improvement in quality of life for our personnel is
    vitally important. 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
    instituted in 2003 is a Marine Corps Community Services (MCCS)
    OneSource, a program offering 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.
        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 involve both on and off
    duty activities. Our goal is to continue to accomplish the recruiting
    mission while minimizing risk and the potential for loss of life and
    equipment.

    Recruit the Recruiter
        Our success in recruiting hinges on the marine--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.
        Because recruiters who volunteer for this demanding duty perform at
    a higher level and, subsequently, experience a better quality of life,
    the Marine Corps Recruiting Command has taken cost effective measures
    to recruit our own recruiters. Through education, media venues, and the
    Headquarters Recruiter Screening Team process, the Marine Corps
    Recruiting Command will continue to shape the image of recruiting as a
    desirable duty that will attract the best and brightest to the
    recruiting force. As a result of this ``Recruit the Recruiter''
    initiative, our percentage of recruiters who volunteer continues to
    rise.

                                   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 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 operating 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
        We are a young force. Achieving a continued flow of quality new
    accessions is of foundational importance to well-balanced readiness.
    Within our 154,600 marine active duty enlisted force, over 27,000 are
    still teenagers and 104,000 are on their first enlistment. As noted at
    the outset, in fiscal year 2004 we will reenlist approximately 25
    percent of our first-term marine population. These 5,974 marines
    represent 100 percent of the career force requirement and will mark the
    tenth consecutive year that we will achieve this objective. To better
    manage our career force, we introduced the Subsequent Term Alignment
    Plan in fiscal year 2002 to track reenlistments in our career force. In
    fiscal year 2003, our second year, this proved to be a huge success as
    we met our career reenlistment goals and achieved a 94-percent skill
    match. 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 SRB program resources to maintain an experience level
    on par with previous years. As commented before, the SRB is a powerful
    tool and we take great pride in our prudent stewardship of these
    resources. In the aggregate, we are seeking a judicious increase in SRB
    funding for fiscal year 2005 to $56.7 million, from $51.8 million in
    fiscal year 2004. While just one-half of 1 percent of our military
    personnel budget, it allows us the means to effectively target our
    retention efforts.
        A positive trend is developing concerning our first term non-
    expiration of active service attrition--those marines who depart before
    their enlistment is completed. As with fiscal years 2002 and 2003, we
    continue to see these numbers decrease. The implementation of the
    Crucible and the Unit Cohesion programs continues to contribute to
    improved retention among our young marines who assimilate the cultural
    values of the Corps earlier in their career. The impact of this lower
    attrition allowed a reduced recruiting mission in both fiscal years
    2003 and 2004.
        Our enlisted force is the backbone of the Corps and we make every
    effort to retain our best people. Although we regularly experience
    minor turbulence in some specialties, the aggregate enlisted retention
    situation continues to be encouraging. We are segmenting and tracking
    retention indicators closer than ever and the numbers remain solid.
    Given the demands on our Corps, we will continue a watchful eye on the
    numbers.
        Primarily because these quality young marines remain in high demand
    in the civilian sector, some shortages continually exist in high-tech
    Military Occupational Specialties (MOS) that are an important part of
    our warfighting capability. These highly-technical specialty shortages
    include intelligence, data communications experts, and air command and
    control technicians. As mentioned, specialty shortages are addressed
    with the highly-successful SRB program. These funds are targeted 60
    percent and 40 percent between first term and career force
    reenlistments, respectively. The SRB program greatly complements our
    reenlistment efforts and clearly improves retention within our critical
    skill shortages. In fiscal year 2004, the Corps is continuing 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 influence for the undecided to
    witness another marine's reenlistment and receipt of his or her SRB in
    the total amount. With the added benefit of the Thrift Savings Program
    (TSP), our marines can now confidently invest these funds toward their
    future financial security.

    Officer Retention
        Overall, officer retention continues to experience great success.
    Our aggregate officer retention rate reached a 19-year high of 93.5
    percent in fiscal year 2003. The significant increase in our officer
    retention rate directly corresponds to a reduction in voluntary
    separations. Nevertheless, as with the enlisted force, we have some
    skill imbalances within our officer corps; fixed-wing aviation,
    intelligence, and command and control.
        While fixed wing pilot retention remains a concern, we are
    cautiously optimistic. Aggregate fiscal year 2003 retention targets for
    aviators were met, though deficiencies remain in some fixed wing pilot
    year groups based on attrition from the late 1990s. In the interim
    these gaps are covered by rotary wing pilots and naval flight officers
    filling a larger share of staff billets, thereby not impacting the
    flying squadrons. Retaining aviators involves a concerted effort in
    multiple areas. Important elements include recent retention initiatives
    that reduce the time to train, and 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 through lieutenant
    colonels--and will continually review our overall aviation retention
    posture to optimize our resources.
        Overall, the Marine Corps' officer and enlisted retention situation
    is very encouraging. With the phenomenal leadership of our unit
    commanders, we expect to achieve every strength objective for fiscal
    year 2004, and start fiscal year 2005 poised for continued success.
    Again, while the Corps is stretched to meet our current operational
    commitments, this has not negatively impacted our recruiting nor our
    retention; however, we continue to monitor both very closely. The
    Marine Corps remains optimistic, thanks in large measure to the
    continued support of Congress.

                                  END STRENGTH

        The Marine Corps is assimilating the congressionally authorized
    increase in Marine Corps end strength to 175,000. The increase of 2,400
    marines addressed an urgent need to train and maintain additional
    marines for the long-term requirements associated with the global war
    on terrorism. It has been particularly important in enabling us to
    provide the Nation with a robust, scalable force option specifically
    dedicated to antiterrorism--the 4th Marine Expeditionary Brigade
    (Antiterrorism).
        The Marine Corps is expeditionary by nature and therefore
    accustomed to deploying in support of contingency and forward presence
    missions. We are structured in such a way as to satisfy our enduring
    requirements and meet operational contingencies as long as the
    contingencies are temporary in nature. The question concerning
    increasing end strength hinges on the duration of our commitments. If
    the current commitment is short term and represents a spike, then we
    believe that we can sustain the pace through initiating measures
    utilizing our current authorizations and flexibilities. Using measures
    such as increased accessions, expanded cross year extensions, targeted
    SRBs, directing non-infantry units such as artillery into a more
    traditional infantry role, and continued measured use of reservists
    will allow us to satisfy our requirements. Further, we are looking at
    several initiatives to enhance and better target our Reserve
    capabilities. Similarly, we will continue to pursue complementary
    initiatives, such as military to civilian conversions in order to
    realign more marines into the operating forces.
        Again, while stretched, we are meeting our challenging
    international commitments. Our higher operational and personnel tempos
    have not decreased the propensity of great Americans to either enlist
    or reenlist.

                              MARINE CORPS RESERVE

        From immediate support on September 11, 2001, to combat operations
    in Afghanistan in 2002 and Iraq in 2003, the Marine Corps Reserve has
    demonstrated its ability to rapidly mobilize combat ready marines to
    augment and reinforce the active component. In support of Operation
    Noble Eagle (ONE) and Operation Enduring Freedom (OEF), 4,463 Reserve
    marines were on active duty in March 2002. Just over a year later
    21,316 Reserve marines were on active duty in May 2003 to support OIF,
    representing 52 percent of the Selected Marine Corps Reserve. Marine
    Corps Reserve units and individuals were ready and rapidly integrated
    into gaining force commands, fighting along side their active component
    counterparts and making a difference, demonstrating a key core
    competency emphasized in Marine Corps Strategy 21. Of the over 5,400
    reservists currently on active duty, almost 1,300 Individual Mobilized
    Augmentees, Individual Ready Reserves (IRR), and retirees fill critical
    joint and internal billets. As of January 2004, the Marine Corps
    Reserve began activating the approximately 7,000 marines that will
    ultimately support some segment of OIF II. Judicious employment of
    Reserve marines remains a top priority of the Marine Corps to ensure
    they retain the capability to augment and reinforce the active
    component.
        A strong inspector-instructor system and a demanding Mobilization
    and Operational Readiness Deployment Test program ensure Marine Corps
    Reserve units achieve a high level of pre-mobilization readiness.
    Marine Corps Reserve Units continuously train to a C1/C2 readiness
    standard, eliminating the need for post-mobilization certification.
    Ninety-eight percent of selected Marine Corps Reserve marines reported
    for mobilization and only .4 percent requested a deferment, delay, or
    exemption. For OIF the Marine Corps Reserve executed a rapid and
    efficient mobilization with units averaging 6 days from notification to
    being deployment-ready and 32 days from deployment order to arrival in-
    theater. Many Reserve units activated were ready to deploy faster than
    strategic lift was available.
        Building on the important lessons learned of the last year, the
    Marine Corps is pursuing several initiatives to enhance the Reserves'
    capabilities as a ready and able partner of the total force Marine
    Corps. These pending initiatives include: increasing the number of
    military police (MP) units in the Reserve component; establishing a
    Reserve Intelligence Support Battalion that will enhance command and
    control of Reserve component intelligence assets, to include placing
    Reserve Marine Intelligence Detachments at the Joint Reserve
    Intelligence Centers; returning some of our civil affairs structure to
    the active component to provide enhanced planning capabilities for
    operational and Service headquarters; and introducing an improved
    Individual Augmentee management program to meet growing joint and
    internal requirements.

                                CIVILIAN MARINES

        Civilian marines are integral to the Corps' Total Force concept. We
    have approximately 25,000 civilian marines, of which about 13,000 are
    appropriated fund employees and about 12,000 are nonappropriated fund
    employees. Our appropriated fund civilian marines comprise just 2
    percent of the total DOD civilian workforce, the leanest ratio of
    civilians to military in DOD. Our remaining civilian marines, our
    nonappropriated fund personnel, are primarily resourced by revenue-
    generating activities and services such as exchanges, clubs, golf
    courses, bowling centers, and gas stations. Our civilian marines fill
    key billets aboard Marine Corps bases and stations, thus freeing active
    duty marines to perform their warfighting requirements in the operating
    forces.

    Civilian Workforce Campaign Plan
        The Marine Corps' strategic road map to achieving a civilian
    workforce capable of meeting the challenges of the future is the
    Civilian Workforce Campaign Plan, a 5-year plan to address the entire
    life cycle of a civilian marine, from recruitment to career development
    to retirement and separation. We enlisted the active involvement of our
    Senior Executive Service members as advocates to significantly enhance
    the management of our civilian workforce. The clear objective is to
    make the Marine Corps the ``employer of choice'' for a select group of
    civilians who are imbued with the Marine Corps values of honor,
    courage, and commitment and who seek challenging and rewarding careers.
    We are committed to building leadership skills at all levels, providing
    interesting and challenging training and career opportunities, and
    improving the quality of work life for all civilian marines.

    National Security Personnel System (NSPS)
        We look forward to executing the authorities enacted in the
    National Defense Authorization Act for Fiscal Year 2004, providing for
    the NSPS. We believe this will allow us to be a more competitive and
    progressive employer at a time when our national security demands a
    highly-responsive system of civilian personnel management. Later this
    year, following an appropriate training program for supervisors,
    managers, human resources specialists, employees, as well as commanders
    and senior management, the Marine Corps, along with the entire
    Department of the Navy, expects to be in the first wave of
    implementation.

    Military-Civilian Conversions
        Military to civilian conversions offer the Marine Corps an
    opportunity to continue to move more marines into the operating forces.
    From fiscal year 2002 to fiscal year 2007 the Marine Corps planned to
    move 3,019 marines back to the operating forces through outsourcing and
    military to civilian conversions. The fiscal year 2005 President's
    budget converts an additional 1,372 billets, providing more options to
    increase manning in the operating forces. The commandant has directed
    the Marine Corps to pursue this program aggressively--to get marines
    back to the ``fleet'' and to do what is right for the Corps. We view
    this as an integral part of our rebalancing the force and end strength
    determinations.

                                  MOBILIZATION

        Since September 11, the Marine Corps has had to rely on the
    mobilization of both the Selected Marine Corps Reserve and IRR marines
    in response to both internal and joint operational requirements. The
    Marine Corps maximized the use of IRR volunteers to meet these
    requirements, primarily in the areas of staff augmentation and force
    protection. As previously mentioned, at the height of OEF and OIF, the
    Marine Corps had 21,316 Reserve marines on active duty. As of February
    20, 2004, we had 5,479 marines mobilized; 4,323 in Selected Marine
    Corps Reserve units, and 1,276 individual augmentees, and we have
    approximately an additional 7,000 marines that will be mobilized for
    our OIF II requirements.
        Since September 11, we have only had 1,169 marines activated more
    than once, of which 387 are currently activated. Furthermore, the
    Marine Corps ``involuntarily'' activated 2,063 IRR marines for use as
    linguists, intelligence specialists, and for force protection
    requirements. Of these 2,063 only 307 remain activated; 271 have
    voluntarily extended their activation orders and the remaining 36 asked
    to complete their existing activation orders, the last the 36 will
    deactivate in April 2004. Since September 11, 47 percent of our
    Selected Marine Corps Reserve Marines, 59 percent of our Individual
    Mobilization Augmentees, and 5 percent of our IRR marines have been
    activated at least once.
        Similar to the active component, the burden of activation for the
    Reserve component has been within the high demand/low density
    specialties such as civil affairs, KC-130, MPs, and intelligence. To
    date, 96 percent of the civil affairs, 89 percent of the KC-130, 72
    percent of law enforcement, and 69 percent of the intelligence marines
    have been activated as compared to 50 percent of Reserve infantry
    marines. The continuing growing demands being placed on the high
    demand/low density skills is not a problem unique to the Marine Corps,
    and is something that we, along with the other Services, will address
    as we rebalance the force.

                          MANAGING TIME AWAY FROM HOME

        The Marine Corps remains 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.
        As a result of the current operational requirements, the Personnel
    Tempo (PERSTEMPO) of our marines has increased. Currently, there are
    1,959 active component marines and 2,079 Reserve component marines who
    have exceeded the 400-day PERSTEMPO threshold as compared to 331 active
    component marines and 891 Reserve component marines at this same time
    last year. Additionally, we have 42,721 active component marines and
    17,099 Reserve component marines who have accumulated between 182 and
    399 PERSTEMPO days, as compared to 29,831 and 6,199 1 year ago,
    respectively. The significance and impact of the increased numbers of
    marines with high PERSTEMPO numbers remains to be seen. The Marine
    Corps benefits by being largely composed of first-term marines, whose
    retention is less affected by increased operational requirements. Of
    primary concern, then, is the impact on our career force, especially
    the officers and the staff noncommissioned officers in the 8 to 12 year
    range. Whether increased levels of PERSTEMPO adversely affect the
    retention of our marines, to what extent, and whether they are
    sustainable, depends upon the duration of the increased PERSTEMPO. To
    date, there is no evidence that this has adversely affected the
    retention of marines.
        Each individual marine is different, but all are influenced to some
    degree by intangible factors such as the quality of leadership and the
    care and concern shown for family members who must endure long
    separations. In general, marines are recruited based on these
    intangibles and they will accept greater hardships and longer
    deployments as leaders inspire trust and link them personally to the
    fulfillment of national and strategic goals.

         CARING FOR MARINES AND FAMILIES DURING OPERATIONAL DEPLOYMENTS

        This has been a very busy year for the Marine Corps, and the
    marines who marched into Baghdad certainly rose to the challenge. In
    support of these warfighters, the installation commanders and quality
    of life program managers also rose to the challenge providing
    outstanding support at home and abroad. As an expeditionary force, the
    Marine Corps must provide quality of life support to deployed marines
    based on the duration and intensity of the operation. Programs for
    those deployed are designed to provide health and comfort with a touch
    of home during a mission. The Marine Corps also must continuously take
    care of marines and families left behind on the home front. As they
    carry out their mission, marines trust us to see that their families
    are part of a community that takes care of its own. Programs and
    services for those on the home front are designed to provide a sense of
    community, and to proactively address potential areas of concern for
    the marine and his or her family.

    Casualty Reporting
        The most challenging time to provide support is after the death of
    a beloved marine. The marines and civilian marines performing casualty
    assistance duties are truly special people. One of the challenges faced
    last year during OIF, and that we will continue to face moving forward,
    involves the ``CNN effect''--the expectation for instant information in
    a 24-hour news society. We must balance the public's desire for
    immediate information with the military's responsibility to ``get it
    right'' and focus on the family's needs. During OEF and OIF, next of
    kin notification occurred within the 8 hour DOD goal, and generally
    within 2 to 4 hours. Based on our lessons learned, we are using a new
    set of software tools to enhance our deployed commanders capability to
    communicate with the Headquarters Marine Corps Casualty office, and to
    track an injured/ill marine throughout the entire medical process.

    Tactical Field Exchanges
        Deployed marines are provided ``all the comforts of home'' through
    tactical field exchanges that provide everything from health and
    comfort items, to movies, CDs, and snack foods. For OEF and OIF, the
    Marine Corps successfully partnered with the Army and Air Force
    Exchange Service. We provided marines to run the tactical field
    exchanges in Iraq at Camps Edson, Bush Master, Viper and Chesty; in
    Kuwait at Camps Fox, Marine Land, Commando, and Coyote; and in Djibouti
    in the Horn of Africa. Mobile tactical field exchanges were also
    operated off the back of seven-ton trucks to provide service to front
    line camps. This partnership will continue for OIF II.

    Postal Support
        It is no great surprise that one of the best morale boosters for
    any deployed service member is receiving mail from loved ones at home.
    Postal marines delivered nearly 7.5 million pounds of mail to marines
    deployed to OIF. Delivery times averaged between 10 to 14 days. While
    we know of some complaints about delays in mail delivery, it occurred
    largely during the offensive phase when commanders asked that mail be
    held due to the fluidity of the battle, limited convoy operations, and
    security issues.
        As 66,000 marines were deployed away from their home installations
    at the height of operations last year, program managers carefully
    captured lessons learned, such as the ``CNN effect'' and the subsequent
    desire for immediate information, and the overwhelming generosity of
    the American people in providing gifts to deployed marines. By
    incorporating lessons learned, we will ensure quality of life programs
    continue to meet the needs of deployed marines and families who remain
    at home. We are very proud of our success on the battlefield and
    greatly appreciate the support and concern for deployed marines and
    their families displayed by Congress and the American people.

    Other Deployed Support
        In addition, support for deployed marines can include open-air or
    make-shift fitness centers; telephones to call home; miscellaneous
    recreation supplies such as sports equipment, games, books, and
    camcorders; and voluntary education opportunities while afloat. For
    longer deployments and in areas where electricity can be sustained for
    some period of time, commanders can have access to Internet cafes,
    Playstation game systems, VCRs/DVD players, and more extensive fitness
    equipment. As an example, current facilities/programs in Djibouti
    include a 24-hour per day, 7 day per week operation that includes a
    recreation center, two fitness centers, a library, a running trail, an
    outdoor swimming pool, scuba certification classes, United Service
    Organization (USO) entertainment, and cultural tours of the local area.

    Taking Care of the Families of Deployed Marines
        While marines are focused on the mission in Iraq and Afghanistan
    and other places around the world, back at home, MCCS has been
    established at our major bases and stations to not only support marines
    and their families in their daily lives, but also during deployments.
        As I mentioned, one of the key issues for families of marines
    deployed last year was the 24-hour news cycle, replete with embedded
    reporters and continuous images of operations, creating uncertainty for
    our families. An immediate need for information became the expected
    norm. Community and Family Assistance Centers were established at Camp
    Lejeune, Camp Pendleton, Miramar, Yuma, and Twentynine Palms, and
    operated 24/7 as necessary to provide information and referral services
    related to deployed marines and their family members, and others who
    support and care for marines. At the height of OIF, these centers were
    receiving an average of 150-300 calls per day.
        During deployments, marine families bear the burden of waiting, and
    the added responsibility of keeping the family together and functioning
    as normally as possible. Just as described for our recruiters, MCCS
    OneSource is a valuable asset that provides marines and their families
    with helpful information before, during, and after deployment in
    support areas including parenting and childcare, education services,
    financial information and advice, legal, elder care, health and
    wellness, crisis support, and relocation. Available Corps-wide
    beginning January 2003, over 26,000 calls and emails had been received
    by the end of fiscal year 2003, with about 80 percent of the usage
    occurring online. MCCS OneSource is especially useful to quickly
    acclimate our activated Reserve Marines and their families to the
    requirements and procedures associated with utilization of military
    programs such as TRICARE and other benefits and services, in addition
    to off-base customers like the recruiters I mentioned earlier.
        At each of our bases or stations, the Key Volunteer Network Program
    serves as the official communication link between the deployed command
    and the families. Additionally, the Lifestyle Insights, Networking,
    Knowledge and Skills (L.I.N.K.S.) Program is offered to new marine
    spouses to acquaint them with the military lifestyle and the Marine
    Corps, including the challenges brought about by frequent deployments.
    We have recently developed an online and CD-ROM version of L.I.N.K.S,
    which makes this valuable tool more readily accessible for working
    spouses or those located away from Marine Corps installations. Families
    of deployed marines can also receive assistance in developing
    proactive, prevention oriented plans such as family care plans, powers
    of attorney, family financial planning, and enrollment in the Dependent
    Eligibility and Enrollment Reporting System. The Family Readiness
    Officer and the support structure within the Marine Corps Family Team
    Building staff play a key role in this area. Additional services are
    provided to those who need respite childcare, assistance coping with
    separation, or specialized support in areas such as spiritual guidance,
    coping, and social skills. Our deployed commanding officers have
    confirmed the importance of this family readiness support while they
    were away and as part of their homecoming.

    Local Community Support For Our Deployed Marines and Their Families
        Local communities outside our installations' gates are
    significantly impacted by marine deployments, not just because local
    businesses experience sales and revenue declines, but because marines
    and family members often immerse themselves in the local community by
    volunteering as coaches, Boy and Girl Scout leaders, and fire fighters,
    to name a few. Feeling the loss and an overwhelming desire to support
    our marines and families, local Chambers of Commerce and other civic
    leaders at Camp Lejeune, Camp Pendleton, Twentynine Palms, Miramar, and
    Yuma, for example, made a special effort to interact and engage with
    those who remained. We sincerely appreciate their specific support and
    the outpouring of love from all the others who took the time to write a
    letter, send a package, or keep us in their prayers.

    Return and Reunion
        Separation is one of the challenges of the military lifestyle. We
    specifically program help to meet this challenge. For the deployed
    marine and his or her loved ones, the return home is especially
    emotional and highly anticipated. In recognition of the importance of
    the transition home after deployments for both marines and their
    families, the Marine Corps developed standardized return and reunion
    aids such as warrior transition briefs and counseling for the returning
    marine, and a return and reunion guidebook to help marines and family
    members prepare for and enjoy their reunion.

           EVERYDAY SUPPORT FOR MARINES AND FAMILIES ON INSTALLATIONS

        When deployments are over for marines, and their families are
    settling into their ``normal'' or more daily lives, our bases and
    stations serve as home. We strive to provide them hometown services and
    support that contribute to their need for ``normalcy.'' Along the way,
    through these hometown services, we also seek to improve personal and
    family readiness in recognition of the important role that military
    families play in mission readiness by focusing on the following six
    goals: (1) increase family readiness; (2) help marines and families
    live healthy lifestyles; (3) help to develop and return responsible
    citizens after military service; (4) connect marines and families with
    America and the Marine Corps way of life; (5) help marines and families
    pursue lifelong learning goals; and (6) provide valued goods and
    services to marines and their families.
        Family readiness programs, such as the Key Volunteer Network and
    L.I.N.K.S. programs already mentioned, support families in a manner
    that allows the marine to focus on their duty, which enhances the
    mission readiness of their unit. As an example, the Marine Corps
    provides for the children of marines so that the marine parent is more
    mission ready because they are confident that their children are in a
    safe, quality, affordable childcare setting. The Marine Corps provides
    childcare at 24 Childcare Development Centers, 577 Family Child Care
    Homes, and 15 School Age Care Programs. In addition, there are 17 Youth
    Programs serving over 125,000 youth and teens. An example of the
    additional support we will be providing with fiscal year 2004
    supplemental funds is a new initiative to provide enhanced extended
    childcare. The Marine Corps is piloting this program for 36 months at
    Camp Lejeune, Camp Pendleton, and Twentynine Palms to provide extended
    childcare free of charge for eligible patrons when they have an
    unanticipated emergency or mildly ill children and their regular
    childcare arrangements are not available. We plan to begin the pilot
    this quarter.
        Healthy lifestyles are important not just for marines who must meet
    the physical challenges of duty, but also for family members. Our
    Semper Fit program meets these needs with quality fitness centers and
    health promotion efforts. Recreation activities like sports programs,
    bowling centers, marinas, and theatres along with leisure activities
    like block parties, concerts, picnics, parties, and information fairs
    complement the Semper Fit program by providing wholesome, affordable,
    and quality leisure and recreation time.
        Lifelong learning is achieved through a variety of educational
    programs valuable to the development of marines. Library services on
    bases and deployed with marines, as well as distance learning
    opportunities, make continuing education available to marines
    regardless of their location. In addition, tuition assistance is
    available for those marines interested in pursuing continuing education
    opportunities. During fiscal year 2003, there were 25,662 marines
    enrolled in almost 80,000 courses with the help of the tuition
    assistance program.
        Quality and responsible citizenship traits begin in childhood and
    are fostered and further developed throughout life. Programs like the
    Single Marine Program help the approximately 60 percent of our enlisted
    marines that are single develop into productive, responsible citizens.
    The Single Marine Program provides needed recreational and stress
    outlets that are wholesome and support development of social skills,
    and opportunities for marines to support the local community. Through
    the Single Marine Program council meetings, single marines make
    recommendations for improvements to: hours of operations; access to
    computers and the Internet; parking lots; safety issues related to
    intersections, sidewalks, crosswalks, and barricades; and television
    options such as cable, satellite, and digital for the barracks. Single
    marines also donate thousands of hours of volunteer labor each year
    involving community support efforts such as Special Olympics, Toys for
    Tots, adopt a school programs, chaplains' community programs, food
    drives, beach cleanups, veterans and nursing home visits, local youth
    programs/events, and other volunteer organizations that teach the
    rewards that come from service to others.

    Domestic Violence
        Domestic violence is a very serious matter throughout the world,
    and the Marine Corps is actively engaged in developing family advocacy
    programs and initiatives that help marines and their family members
    prevent incidents of violence to the extent possible, and treat them
    when necessary. I was privileged to co-chair the Defense Task Force on
    Domestic Violence, which for 3 years assessed the military services'
    domestic violence prevention and response mechanism. The Task Force's
    nearly 200 recommendations are being implemented across the DOD, to
    include within the Marine Corps. I am happy to report that domestic
    violence in the Marine Corps continues to decline. We attribute much of
    this decrease to outreach preventative services and programs, such as
    the Mentors in Violence Prevention Program and the New Parent Support
    Program. The Mentors in Violence Prevention Program was established to
    encourage the participation of male marines in efforts to prevent rape,
    battering, sexual harassment, and all forms of male violence against
    women. This program is a ``marines helping their fellow marines''
    program, which encourages marines to become involved when they see
    abusive situations. The New Parent Support Program educates and
    supports families with children up to 6 years of age. This program
    consists of home visitation, classes and outreach through Play Morning,
    single parent support groups, Mom's Basic Training, parenting classes,
    and Daddy's Baby Boot Camp. We believe this program has helped
    successfully reduce the number of child abuse/neglect cases.

    Sexual Assault
        Similar to domestic violence, sexual assault is a very serious
    matter, and the Marine Corps is actively engaged in policies, training,
    and programs for both the prevention of sexual assault and the
    treatment of victims. Rape and other sexual assaults are violent crimes
    that violate human dignity and deeply held values of the Marine Corps
    and the military as a whole. Sexual assault is unacceptable and will
    not be tolerated. The Marine Corps is fully engaged in the DOD's 90-day
    review of this issue. We will continue to expand our current training
    initiatives on sexual assault and prevention at all levels. For
    example, during OIF II, deployed marines will have the same level of
    support available in-theater as they would have at their home station.
    This will include selected medical and religious support as well as
    marines who have received Victim Advocate Training, to allow them to
    perform the role as victim advocates. The Marine Corps deployed a total
    of 3,439 females out of the total of marines supporting of OEF and OIF,
    and we are aware of seven allegations of sexual assault. Of these, two
    marines have been found guilty and received punishment, and the
    remaining five are awaiting conclusion of investigations. Of the
    marines scheduled to deploy for the upcoming OIF II-1, approximately
    750 will be female.

    Suicide
        For the Marine Corps, losing one marine to suicide is too many. In
    a year of combat stress in addition to the common stressors of military
    life, the Marine Corps is focused on improving our Suicide Prevention
    Program through strategies that include: (1) developing a Leaders'
    Quick Reference Guide to help leaders quickly and effectively react to
    marines in distress; (2) reducing the stigma associated with seeking
    help; (3) improving the coordination of prevention and intervention
    services at installations; (4) integrating mental health resources into
    Marine Divisions through the Operational Stress Control and Readiness
    program; and (5) improving deployment cycle screening and treatment as
    part of our Return and Reunion program. From 1993 to 2003, the Marine
    Corps suicide rate per 100,000 has been gradually declining. Even with
    the stresses associated with OIF, the overall Marine Corps suicide rate
    remained relatively stable from calendar year 2002 to calendar year
    2003, rising slightly from 12.6 to 13.2 per 100,000. The Marine Corps
    will continue to strive to improve its prevention programs to further
    reduce this tragic and unnecessary loss of our most valuable asset, our
    marines.

    Other MCCS Services
        MCCS connects marines and families to military installations
    through services that provide the top to bottom information necessary
    to quickly acclimate to new duty stations. Relocation assistance also
    helps to equip marines and families in transition with kitchen kits or
    other necessary services. Transition Assistance and Family Member
    Employment Assistance Programs help marines and their families prepare
    for a new life in civilian communities by providing briefs, sponsoring
    job fairs and workshops, and providing employment referrals.
        Last, but certainly not least, the Marine Corps Exchange, 7-day
    stores, barber shops, dry cleaners, uniform shops, vending operations,
    auto skill centers, clubs, and recreation centers are filled with
    outstanding civilian marines who are providing valued goods and
    services that are competitively priced, and in the case of low or fixed
    income individuals or families, depended upon for basic standard of
    living needs.

                    QUALITY OF LIFE--THE EXPECTATIONS FACTOR

        One final component of quality of life that cannot be overlooked is
    the effect of demographics and expectations on the ultimate success of
    a vibrant quality of life program. The Marine Corps is comprised of the
    youngest, most junior, and least married members of the four military
    services. Our most recent demographic data shows that 66 percent of
    marines are 25 or younger, 27 percent of marines are 21 years old, 42
    percent of marines are Lance Corporals (pay grade E3) or below, and 60
    percent of enlisted marines are single. As with American society as a
    whole, the pool of young people from which we recruit have increased
    levels of expectations because they were raised in an environment that
    provides many things for them.
        Since 1992, three surveys have been administered to determine how
    marines' perceptions of, and satisfaction with, quality of life have
    changed over the past 10 years. The results of our third survey in 2002
    revealed a decline in the satisfaction of marines relative to quality
    of life in the Corps. The decline was not substantial in practical
    terms but confirmed the relationship of ``elevated expectations'' and
    quality of life satisfaction. As a force comprised primarily of those
    under the age of 25, we are particularly interested in the role of
    ``expectations'' in relation to our holistic approach. Although quality
    of life is important to all ages, those under 25 have expressed
    increased expectations for their quality of life. American youth are
    naturally exuberant, but the urgency and expectation for their quality
    of life is increasing according to our results. Therefore, we know that
    we must maintain our efforts to improve the objective quality of life--
    the ``standard of living'' of marines and families. But, when new
    marines enter the Corps we must also help them to better understand
    what to expect in the military lifestyle, so our continued efforts at
    improving quality of life gain more traction (i.e., more quickly close
    the gap between expectations and reality). Our understanding of
    expectations and the relationship to quality of life satisfaction will
    be further studied as we continue to pulse the attitudes and concerns
    of marines and families relative to their quality of life expectations
    and concerns into the future.
        Whether we are taking care of marines in the desert or families
    back at home, quality of life support programs are designed to help all
    marines and their families, which in turn helps to ensure continued
    readiness, retention and recruitment success. Marines and their
    families make great sacrifices in service to their country. The Marine
    Corps prides itself on the legacy of rewarding that sacrifice by taking
    care of its own.

                       INFORMATION TECHNOLOGY 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 and tracking
    PERSTEMPO information mentioned previously--requires effective and
    relevant automation and information technology systems for manpower
    modeling, manpower management, personnel servicing, and joint
    requirements. When competing with weapons systems and near term
    resource requirements, it is easy to bypass proper investment in these
    somewhat bland information systems. However, though not perfect, we are
    proud of the Manpower Automated Information System 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, incorporates
    all active duty, Reserve, and retired pay and personnel records. The
    Marine Corps has now developed an interface between this system and the
    Standard Accounting, Budgeting, and Reporting System. This interface of
    pay and personnel data with the accounting and budgeting data provides
    the Marine Corps with a truly one-of-a-kind integrated pay, personnel,
    manpower, and accounting system, able to streamline budget execution
    and reconciliation. Having an integrated Total Force system has been a
    key to minimizing difficulties for our Reserves as they are mobilized.
    The Marine Corps Total Force System serves as the foundation for
    ongoing re-engineering of our administrative processes into the Total
    Force Administration System. This new system will provide a Web-based,
    virtually paperless self-serve capability for all marines via our Web
    portal, Marine On-Line. This year, we will not only increase our
    individual self-serve capability, but will automate many unit
    capabilities such as leave, morning reports, and promotion
    recommendations. For the first time commander's will have the
    flexibility to decide at what level information is input into our
    Marine Corps Total Force System. In a tremendous advance, marines at
    all levels will access Marine On-Line to view information on themselves
    and the marines in their charge.
        We have created the foundation of a shared data environment by
    leveraging the data contained in the Marine Corps Total Force System
    via the Operational Data Store Enterprise, our database of current
    personnel information, and our Total Force Data Warehouse, our database
    of historical personnel information. This shared data environment
    allows full integration of our digitized personnel files with the
    Marine Corps promotion board process, giving us as advanced and
    comprehensive a promotion process as there is among the Services.

    Marine For Life
        The commitment to take care of our own includes a marine's
    transition from active service back to civilian life. The Marine For
    Life Program's mission is to provide sponsorship for our more than
    27,000 marines who honorably leave active service each year. The
    program was created to nurture and sustain the positive, mutually
    beneficial relationships inherent in our ethos, ``Once a Marine, Always
    a Marine.'' In cities across the United States, Reserve Marines help
    transitioning marines and their families get settled in their new
    community. Sponsorship includes assistance with employment, education,
    housing, childcare, veterans' benefits, and other support services
    needed to make a smooth transition.
        To provide this support, Marine For Life taps into the network of
    former marines and marine-friendly businesses, organizations, and
    individuals that are willing to lend a hand to a marine who has served
    honorably.
        Initially begun in fiscal year 2002, the program will reach full
    operational capability in fiscal year 2004. In addition to 110 Reserve
    Marines serving as ``Hometown Links,'' an enhanced Web-based electronic
    network, easily accessed by marines worldwide, will support the
    program. The end state of the Marine For Life Program is a nationwide
    marine and marine-friendly network available to all marines honorably
    leaving active service that will improve their transition to civilian
    life and ensure that no marine who honorably wore the Eagle, Globe, and
    Anchor is lost to the Marine Corps Family.

                                   CONCLUSION

        Through the remainder of fiscal year 2004, and into fiscal year
    2005, our Nation will likely remain challenged on many fronts as we
    prosecute the global war on terrorism. Services will be required to
    meet commitments, both at home and abroad. Marines, sailors, airmen,
    and soldiers are the heart of our Services--they are 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. We are involved in numerous studies in
    the area of human resources strategy designed to support an integrated
    military, civilian, and quality of life 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 the requirements of the Nation. 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, quality of life, 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 228 years!
    Thank you for the opportunity to present this statement.
        Semper fidelis.

        Senator Chambliss. Thank you, General Parks.
        General Brown, we look forward to hearing from you.

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

        General Brown. Mr. Chairman, Senator Nelson, thank you for
    the opportunity to talk to you today about the most important
    resource in the United States Air Force, and that's our people.
        Earlier today, you heard Assistant Secretary Dominguez talk
    about the transformation of our Air Force and how that affects
    the way we develop our people. Well, I'm going to talk to you a
    little bit about some interrelated issues currently affecting
    our Air Force--the fact that we're over our authorized
    peacetime end strength, the steps we're taking to get our force
    to the right size to do the job, and, in the process, as we
    draw down the overall size of the force, how we're going to do
    that without putting additional stress on our busiest
    warfighters.
        Before I begin, let me recognize two groups for their
    outstanding support to our men and women in uniform. That first
    group is Congress, and specifically this subcommittee. Over the
    last few years, you've shown strong sustained support for our
    airmen. You've approved significant advances in pay, benefits,
    and retention incentives to the men and women who serve all of
    the military services. These initiatives have made a
    significant difference in the readiness of your Air Force and
    the quality of life of our members and their families. Our
    airmen recognize your support and what a difference it makes.
        The other group I want to acknowledge is the families of
    the men and women in our Air Force. The support and sacrifices
    made by the Air Force family members are critical force
    multipliers to the overall success of our Air Force. Their
    service is crucial to the overall effectiveness of our team,
    and we salute them, and we're certainly proud of our families.
        Now I will address a few issues that are affecting our
    people. Over the past year, the Air Force has implemented a new
    method of developing our force. Our intent is to get the right
    people in the right jobs at the right times with the right
    skills, knowledge, and experience. This new approach is called
    force development. It combines focused assignments and
    education and training opportunities to prepare our people to
    accomplish the mission of the Air Force. Rather than allowing
    chance or happenstance to guide an airman's experience, we take
    a deliberate approach to develop officers, enlisted, and
    civilians throughout the total force. Through targeted
    training, education, and mission-related experience, we'll
    develop professional airmen who are the joint force warriors
    with the skills needed across the tactical, operational, and
    strategic levels of competence.
        The bottom line of our force development effort is that we
    want to provide an effective and competency-based development
    process. We want to connect the depth of expertise in an
    individual's primary field with the necessary education,
    training, and experiences to produce more capable and
    diversified leaders. Every aspect of the total force
    development construct develops professional airmen, who
    instinctively leverage their strengths as a team. Force
    development centers on developing people to become better
    leaders.
        Now I want to address the macro-issue of the overall force
    size and capabilities. For the last 2 years, we've exceeded our
    mandated active-duty end strength of 359,000. This is a
    temporary situation. It's been fueled by the global war on
    terrorism.
        I was here with you shortly after September 11, when we
    were under strength as an Air Force. So now, for the last 2
    years, we have been above our authorized end strength--some of
    that brought on by Stop Loss. Many of our Services experienced
    that situation. We weren't sure how we would have to live
    through the stop-loss situation. Currently, we have too many
    people in some career fields while at the same time, we don't
    have enough in others. So we're going to take steps to shape
    our force as we get back to our authorized end strength. But we
    need to do this smartly.
        We need to avoid imposing draconian measures that break
    faith with our people. If at all possible, our goal is to give
    every qualified airman who wants to stay in the Air Force the
    opportunity to do so. But, as you can imagine, these are
    complex and interrelated issues, and getting it right will
    present a challenge. We know that. We're taking deliberate
    steps toward our objective.
        As we move into the 21st century, there are three things we
    know for sure. First, the challenges will be great. Second, the
    resources given to us by the American people, their sons and
    daughters, are resources that require our best possible
    stewardship. Third, and most importantly, superior leadership
    will be indispensable. We're committed to providing the Nation
    the best-trained, best-led airmen on the planet. It's that
    simple, and it's that important.
        I look forward to your questions.
        Thank you.
        Senator Chambliss. Thank you very much, General Brown.
        Let me just say that each of you have a base, or bases, in
    my State, and I've had the pleasure of visiting all of those
    bases on numerous occasions during my 8 years in the House, as
    well as my year-plus here. I often comment that I don't know
    how you do it, but I am so impressed every time I go on one of
    your installations with the quality of the young men and women
    that we have serving, particularly at the enlisted level. I
    always take the opportunity to visit with those folks. You're
    doing a terrific job of getting our fair share of America's
    finest young men and women at an early age to enlist in your
    branch of the Service, and we want to make sure that we
    continue to give you the tools to get those young men and
    women, to train them, equip them, and prepare them for whatever
    may lie ahead of them in your particular branch. So I commend
    you for the great job you've done on recruiting.
        Now, that having been said, there's been a lot of
    speculation by Congress, the Pentagon, and military
    associations about how the current high operational tempo
    (OPTEMPO) will affect retention. I agree that the jury is still
    out on what the effect will be, but I believe that we should do
    whatever we can to minimize the impact and keep our valuable
    service members in the military.
        General Hagenbeck, I had a particular experience over at
    Fort Stewart and at Hunter with the spouses of a number of the
    helicopter pilots over there. The OPTEMPO for those--in this
    case, they were all men pilots--created some serious problems
    back home, relative to them just not being there. We heard
    stories about some children being 4 years old and seeing their
    daddy for 6 months out of 2 years. That concerns me, relative
    to the retention issue.
        My sense is that predictability in lifestyle is far more
    important than any kind of pay or benefit increase, and I'd
    like each of you to comment on what can be done to increase the
    chances our service members are going to stick around for the
    long term.
        General Hagenbeck, we'll start with you.
        General Hagenbeck. Sir, it's a great question, and one we
    pay particular attention to. The OPTEMPO is clearly high, and
    most certainly with the 3rd Infantry Division.
        There are a couple of things that the Army's doing. First
    of all, we're paying day-by-day attention to what the re-
    enlistment rates are across our Army and within each of our
    formations. Right now, we're cautiously optimistic that we're
    going to meet our retention goals. In fact, I've spoken to
    every division commander in Iraq or Afghanistan within the last
    7 days, and they're convinced, also, that we'll meet those
    retention goals.
        But we all are particularly concerned about what will begin
    beyond next year, and what this means, because we're walking
    into some uncharted waters with this OPTEMPO.
        With that in mind, a couple of things are happening. Our
    initiative to create more brigade combat teams (BCTs), going
    from 33 to 43, and potentially to 48, will give us more units
    that will be deployable. Then we can have a larger number,
    which means that we'll be able to keep some at home for longer
    periods of time before they're forced to rotate or deploy
    overseas.
        Another piece of that, of course, is the length of the
    rotations. By and large, rotations recently have been for 12
    months at a time. Our chief is looking at, right now, what
    conditions have to be met overseas for us to have shorter
    rotations, rates somewhere between 6 and 12 months. He's
    working with combatant commanders in that discussion, and
    models are being developed. No conclusions have been reached
    yet. But it gets to the issue of predictability on the length
    of rotations and when soldiers can go. Our model--and it's
    purely a model at this point--is currently for a BCT 12 month
    deployment within a 36 month period. It could be two 6-month
    rotations within that 36 for the active component. One year's
    worth of deployments, or 12 months, out of every 6 years for
    our Reserve components, and that's what we're moving towards
    today, sir.
        Senator Chambliss. Admiral Hoewing.
        Admiral Hoewing. Mr. Chairman, the Navy has been an
    expeditionary force for many years, and deployments are what we
    do. We're prepared for that, our families are prepared for
    that, and we have been very successful in that process.
        One of the things that our Chief of Naval Operations (CNO)
    talks about all the time, though, is what he calls quality of
    service. Quality of service is a combination of quality of
    work, meaning job content--good, solid jobs, where you have the
    opportunity to be able to contribute to your maximum--as well
    as quality of life, which are the things that have to do with
    the support for the sailors and their families. We believe in
    that totally, that quality of service is an area of maximum
    importance, whether it be for the sailor or for the family.
        The second piece is what we call our Fleet Response Plan
    (FRP). We deploy. We do it often. Our FRP is designed, in the
    CNO's terms again, as deployments with a purpose. Rather than
    deploying for the sake of deploying, we will focus our
    deployments, where we actually put our ships and squadrons and
    our submarines forward, to make sure that we are always
    supporting the combatant commander's needs out there. That way
    we are not excessively deploying when we don't need to.
        Finally, I would continue to say that our sailors are
    retaining at record levels in the Navy. We've never seen
    retention so high. We've made our recruiting goals. It is never
    anything that we want to rest our laurels on. We still believe
    that the continued funding of the incentive programs, the bonus
    programs for our officer communities, and our re-enlistment
    bonus and assignment incentive programs--it's absolutely key to
    make sure that we are able to provide that quality of service
    that our sailors need.
        Senator Chambliss. General Parks.
        General Parks. Mr. Chairman, the Marine Corps is structured
    to satisfy our enduring requirements, and, as a result of that,
    we are continuing to make our operational contingencies. As
    long as those contingencies are temporary in nature, we don't
    see a need to change our structure.
        Like my counterparts, we have experienced some very
    successful years in recruiting and in retention. We use two
    retention measures to monitor and gauge our success. The first
    one is the First-Term Alignment Plan, which is the first tour
    after the individual's first enlistment. With just 4 months of
    the fiscal year out of the way, we have achieved 85 percent of
    the annual fiscal year mission. Regarding our subsequent second
    Tour Alignment Plan, we're at almost 63 percent of that goal,
    and ahead of last year's phenomenal pace. On the officer side,
    we're at a 19-year high on our officer retention.
        So from a personnel standpoint, we are continuing to do
    very well. On the same point, as General Hagenbeck mentioned,
    we're looking ahead to the future, and we're dissecting the
    data more than we've ever done in the past. Congress has
    authorized us a number of selective valves that we can use as
    we monitor and control the manpower, and we're evaluating those
    both for the near term and the long term. In looking at that,
    we're looking out for the need for a yet-to-be-determined
    requirement for OIF 3, how we would mold and shape our units.
    Perhaps some units that haven't been used in the past at all
    would become provisional units to be deployed, use unlimited
    voluntary extension to those marines that want to stay but are
    not ready to re-enlist yet, put some bonuses in place in areas
    that we have not done in the past. Then for the longer term,
    look at such things as increasing our First-Term Alignment Plan
    and our second subsequent term, which are the two retention
    vehicles that we have, looking at incorporating military-
    civilian conversions that were addressed earlier, and
    integrating them in. Then we could realign our active and
    Reserve component structure that has been talked about by a
    number of people. Then, finally, our last approach would be to
    reflect an end strength increase to balance all of these. It's
    a very delicate and challenging task, and one that has our
    direct attention, square on, on a daily basis.
        Senator Chambliss. General Brown.
        General Brown. Mr. Chairman, that's a great question, about
    deployment and activity. For almost 50 years, the Air Force was
    not a force that did a lot of heavy rotational deployment like
    the Navy and Marine Corps. We were more like the Army. We were
    stationed overseas. We were stationed in the Western Pacific or
    in Europe during the Cold War time frame. We fought from where
    we were stationed. But that changed. It changed in the mid-
    1990s. We saw that change coming, and we started what we today
    call the Air Expeditionary Force (AEF) construct, and we
    started working into this. We're going to deploy into locations
    as we're needed around the world. While it was highlighted with
    September 11, 2001, and now the last 2 years, in the late 1990s
    we had already stepped into the AEF construct. We are still
    today, now, using the AEF construct for our deployment of what
    today is about 16-17,000 airmen. The whole purpose of that was
    to put predictability and planning into an individual or a
    unit's time frame for rotation.
        Our rotation policy was built on about a 90-day rotation.
    Airmen would come back for a stand-down period, a train-up
    period, and then, about 15 to 18 months later, that individual
    in that organization could expect to deploy again for 90 days.
    I will tell you that is stretched. It's stretched to about 120
    days right now. We are having a tough time in some career
    fields trying to maintain the 90, so we're having to keep folks
    for 120.
        There is a young Lieutenant Brown, my daughter. A few
    months ago, she was deployed with fairly short notice. She went
    on what she thought at first would be a 90-day rotation; she
    stayed for 120 days. She's since returned to her unit. It's
    interesting to see my Air Force through the eyes of a young,
    brand-new person. It's been pretty good therapy for this old
    codger.
        So, number one, the construct is now much improved for us
    to handle what we're about today. The second issue I'd
    highlight is that we're also moving into trying to fill up
    those critically manned career fields, the ones which are most
    needed. We go fill those positions, whether it be in
    intelligence or the rated force, or those combat controllers,
    because those are the ones that are shorthanded, those are the
    ones being called on the most often to deploy. So we're working
    hard to fill up those career fields by moving people out of
    some of those lesser stressed career fields. We're doing some
    shaping of our force, which I alluded to a little bit. That is
    going to help with the planning and predictability of those--
    especially those individuals who find themselves more on the
    call to go to the front line and serve us in a deployment.
        Senator Chambliss. I don't know what percentage or whether
    there's a varied percentage of folks who are leaving each
    Service after 20 years. That has always been a benchmark, I
    guess. But are we seeing any trends in your personnel, both
    enlisted and officer-wise, tending to leave after 20 years on a
    more regular basis, or are we seeing re-enlistments by officers
    and enlisted personnel to longer terms, 25, 30 years or so?
    General Hagenbeck?
        General Hagenbeck. Sir, our numbers are pretty precise
    right now. Our retention rates for all officers and
    noncommissioned officers (NCOs) are as high as or higher than
    they have been in the recent past, really since 1999 and 2001
    as a benchmark, as well. Attrition is lower by several
    percentage points. So they're staying on longer than before.
        But, to be candid with you, we're paying a lot of attention
    to this and doing scientific surveys with our Army Research
    Institute and with RAND Corporation on our soldiers, both while
    they're in-theater and upon their return. We have to get a
    sense of what's going to translate into some of the comments
    that you may have heard during your visits to your troops down
    in Georgia, on what their behavior is going to be here in the
    next year or 2 or 3, about whether that door will open and they
    will start to leave at a faster rate than they are today.
        So we don't have any indications at this point, and we're
    trying to track those trends, and we'll pay attention to it to
    see if it translates into actual behavior in the future.
        Senator Chambliss. As you comment on that, are the bonuses
    and other incentives that we're providing for them, do they
    seem to be making a difference?
        General Hagenbeck. Sir, it's a huge difference. You
    approved a targeted SRB for soldiers in-theater that went into
    effect this past January, and that had a huge effect. We
    anticipate some of the units that are getting ready to go into
    Iraq and Afghanistan here, beginning again this summer, on OIF
    2 and OEF, they're waiting to re-enlist until they get in-
    theater because there's a tax exclusion associated with that.
    So it's the money piece balanced with the predictability of the
    future for them that they're looking at, but those incentives
    are absolutely crucial to retaining this quality force.
        Admiral Hoewing. Likewise, in the Navy, our officer
    retirements are down, the numbers are down, the percentages are
    down, and our officers are continuing to stay. Our resignations
    are down--in fiscal year 2003, we had almost 600 less
    resignations in our officer corps than we had in years before,
    and that was during a time that our continuation rates in the
    officer corps were very high.
        On the enlisted side, fleet Reserve requests for
    retirement-eligible, that percentage--we call it Zone E re-
    enlistment rates--our re-enlistment rates are, in fact, up in
    our retirement-eligible people.
        So across the board, we are in very good shape with our
    continuations and retention rates. I would also add that the
    bonuses are, in fact, having an immense contribution. You've
    given us opportunities for increasing the continuation bonuses
    in our Service warfare community, which is keeping an area
    where we have had shortfalls going into these last several
    years--those officers are now staying at greater rates also.
    That's continuing them on to 20 years. An area that I would
    always be concerned about is, right now, our aviation bonuses
    are exactly what we need. I worry about the future, when those
    airlines start to hire again. We're doing extremely well right
    now in naval aviation, and, in fact, have made up some
    shortfalls that we have had in the lieutenant areas because of
    these exceptional continuation rates. But it's an area that I
    would be concerned about in the future, when those airlines
    start to hire again.
        General Parks. Sir, I pretty well addressed our retention
    issues among the enlisted and the officer ranks in my previous
    response. I would say as we look ahead, we see a combination of
    deployments, the continuing deployments, and perhaps the
    improving economy, as a real issue that we'll have to watch in
    the future. Not after the 20-year point, but at the mid-career
    point is where we see the area that we think will have the
    biggest area of concern, the 9- to 13-year time frame, when an
    individual has yet to make that 20-year commitment. That's the
    area we are watching most closely. The young person comes on,
    they expect to have a challenge, they expect to be deployed,
    they want to be deployed. The career individual knows this,
    they have bought into it. It's that decision-point marine, in
    our case, who we're watching very closely. In fact, in some
    cases, we have increased the SRB in selected skills that we
    need the most.
        As my colleagues have said, your SRBs, the bonuses that
    you're providing in a multitude of areas, are helping
    immensely. In that regard, we've come back in this budget
    request to increase our SRBs.
        General Brown. Mr. Chairman, I have a similar view that
    SRBs, both targeted by career field and by where the individual
    is in his or her career, have been absolutely critical for us
    to make sure we fill those gaps that can develop.
        I would also add that we've specifically had some high-tech
    officer career fields that we asked for and received some bonus
    authority for, and that has made a huge difference in keeping
    engineers and acquisition officers, the ones who are in great
    demand out in society. We can't match what society can pay them
    in big industry. But when we show them some concern and some
    financial incentive, they want to keep the uniform on, and they
    stay with us.
        We have specifically looked at the 20-year retirement. Do
    we have more or less going out the door today than we have in
    the last few years in the past? I can tell you that right now
    we're within one-half of 1 percent of the same retirement
    percent today as we've had over the last 2 or 3 years, so we
    have not seen----
        Senator Chambliss. For 20-year-plus?
        General Brown. Twenty-year-plus, yes, sir. So we're right
    on the same percentage of retirements that has been historical
    now for a couple years running.
        When the law changed that allowed an officer to retire and
    come back into government service and not lose part of his
    pay--I don't remember the name of the law--but we thought that
    was going to have a significant impact. A bunch of folks would
    retire, and could come back into government service. We have
    found it to be very beneficial that it didn't change the number
    of folks who took 20 years to the day and suddenly separated
    from the Service, took the uniform off.
        Senator Chambliss. Last week, the Pentagon announced that
    the DOD will begin issuing the Global War on Terrorism Medal
    for troops that served in Iraq. There will be two medals, one
    for those who participated in expeditionary operations, and
    another for those who served in a supporting or service role.
    There have been views expressed that separate medals, not just
    battle stars, should be awarded based on service in Afghanistan
    and Iraq and other locations. As Personnel Chiefs of your
    Services, please give me your views about this. Do you believe
    that there should be separate medals for those who participated
    in OIF?
        General Hagenbeck. Sir, from where I sit, both in this
    position, as well as from previous experience, I think that
    we've come to the right conclusion with the campaign ribbons
    that have been so designated. I understand that there are a lot
    of soldiers out there that would like to see additional
    ribbons. However, I think the Global War on Terrorism
    Expeditionary Medal serves the purpose. As we look towards
    being able to wear battle stars, as was done during World War
    II, Korea, and Vietnam, for particular campaigns, in
    conjunction with campaign ribbons that can be awarded to units
    for particular periods or phases of their duty in Afghanistan
    or Iraq, I think that is going to meet the test for all the
    soldiers, and that's the right answer for us.
        Admiral Hoewing. Yes, sir, I concur with my colleague that
    we're on the right track, that this represents the opportunity
    to recognize and reward our sailors and all the military
    members for their service in the global war on terrorism.
    Battle stars will continue to do that, as they have before. It
    keeps with the traditional way of doing it in the past. So we
    believe we're on the right track, also.
        General Parks. Sir, I'll echo the same thing. As with many
    medals that come out, there are views on both sides of the
    fence and will, no doubt, continue to be. In this particular
    case, probably more than any conflict or war that I've
    experienced while I've been uniform, the uniqueness of it, the
    fact that people are serving around the world in support, they
    may not be deployed to Afghanistan or to Iraq, but they're
    freeing up someone else who happens to be going to do that at
    this time. The emphasis may lie somewhere else at this
    particular time, and the way it rotates around--I think we've
    come to the right conclusion.
        General Brown. Mr. Chairman, I agree. It's absolutely the
    right answer. We probably, in our force, have the most people
    that will be in the support role, running that satellite or
    running that information operation, or the Global Hawk from a
    thousand miles away. But there ought to be something different
    for the boots on the ground. So to acknowledge both is
    important.
        Senator Chambliss. Thank you.
        Senator Nelson.
        Senator Ben Nelson. Thank you, Mr. Chairman.
        General Parks, I noted that you have served as the co-chair
    of the DOD Task Force on Domestic Violence. Last week, Deborah
    Tucker, your co-chair, testified before our subcommittee. She
    testified that there was a basic disagreement between the
    civilian task force members and the military task force members
    about the need to change the Uniform Code of Military Justice
    (UCMJ). I'm interested in your perspective on whether the UCMJ
    is adequate to deal with sexual assaults and domestic violence
    offenses, or whether we ought to be looking at some
    modifications.
        General Parks. Sir, I think based on where it is right now,
    the jury is still out. We spent 3 years examining and
    evaluating domestic violence in the United States military, and
    we came to nearly 200 recommendations in that task force that
    we felt were appropriate. One of the things was that we believe
    we need to make a cultural shift to take care of the multitude
    of issues, whether the violence that occurs, to women
    primarily, is domestic violence, which is the root of the
    question, or the sexual assault and sexual harassment that were
    in the context of last week's hearing.
        We made a number of different recommendations, one of which
    was extremely complex. That was the aspect of confidentiality,
    and the discussion of that and whether that was right or wrong.
    We had the representatives and lawyers from each of the
    military services on the task force, who debated, themselves,
    and wrestled with it. We came to some conclusions and
    recommendations that we now believe reflect the collective view
    of 24 members of that task force, both military and civilian,
    that will now go forward to be vetted in a broader audience of
    the DOD among the Services to determine where we really feel
    that we need to go to protect the interests of all our service
    members under consideration.
        Senator Ben Nelson. Thank you.
        General Hagenbeck, we're really concerned about the
    recruiting in the Army National Guard. Do you think the
    recruiting funds that have been cut back in the budget this
    year are going to be sufficient to be able to do the work
    necessary?
        General Hagenbeck. Sir, at this juncture, I would say yes,
    but I would be less than candid if I didn't say we may want to
    come back to the well once we see the behavior of the returning
    troops from the National Guard and the Reserve units that are
    coming home.
        Senator Ben Nelson. Do you know what the logic was in
    recommending a reduction there?
        General Hagenbeck. No, sir. I'll have to get back to you on
    that.
        [The information referred to follows:]

        Senator Ben Nelson. Do you think the recruiting budgets that have
    been cut back in the budget this year are going to be sufficient to be
    able to do the work necessary?
        General Hagenbeck. The budget funds National Guard recruiting and
    retention efforts at our base level in a peacetime environment. To meet
    global war on terrorism related challenges, we will include resources
    in a supplement request, as appropriate.
        Senator Ben Nelson. Do you know what the logic was in recommending
    a reduction there?
        General Hagenbeck. In building budget requests, the Army takes
    great care in balancing risks across all elements of the Army to
    maximize funding.

        Senator Ben Nelson. As it relates to end strength, a lot of
    discussion has occurred so far, as we all know, about how to
    strengthen the Army by 30,000 soldiers above the
    congressionally authorized end strength of 482,400. I
    understand that even if the Army were to recruit an unlimited
    number of enlistees, your actual ability to be able to process
    and prepare them for service is limited by the training
    pipeline that is involved.
        Given the current recruiting environment and existing
    training infrastructure, what is the maximum increase that we
    can reasonably expect that the Army can sustain on an annual
    basis?
        General Hagenbeck. Sir, we're still doing the analytics on
    that. I could tell you that our training and doctrine command,
    in conjunction with our sessions command, is looking at all of
    that right now. The number that we can put through the training
    pipeline, as you well know, is going to be a function of
    resources: dollars, what's available at the installations where
    they do the training, the number of drill sergeants that we
    have to push them through the training and, on the front end,
    of course, how we fund both with people and money, the
    recruiters on the street.
        So we have some pretty good models on what that looks like,
    and I'll be prepared to come back to you. I think the answer is
    due back to our chief at the end of this month.
        Senator Ben Nelson. Do you believe there'll be sufficient
    funds in the budget to be able to provide for the personnel to
    do the training? It's not just the enlistees, but it's also, as
    you say, having the personnel available to provide the
    training. Do you think the budget will provide sufficiently for
    that?
        General Hagenbeck. Sir, very frankly, we're very much
    dependent upon the supplemental. There's no question about it.
    That's a major piece of it, and I would have to defer to the
    money managers, if you will, on exactly how that will all fall
    back. But that's a major foundation of our approach to this.
        Senator Ben Nelson. So that'll be available in that report
    that we're going to get at the end of the month?
        General Hagenbeck. Yes, sir. We'll show you that.
        Senator Ben Nelson. It's hard to put the personnel and the
    plan in place without knowing the financial impact, as well, I
    would imagine.
        General Hagenbeck. Sir, I'm not sure I can tell you that
    we'll have the approved solution, in terms of the dollars
    across all the Army systems, but I can tell you that we will
    have the projected costs associated with it for this entire
    training base piece that I addressed a few moments ago.
        Senator Ben Nelson. I didn't mean to inquire as to whether
    or not you knew where the dollars were going to come from, but
    if you know the entire cost as a part of that project or that
    plan, then where the money comes from and how it is shifted
    around probably would be a secondary issue. It would be an
    important one, but it would be secondary to the plan.
        General Hagenbeck. Yes, sir. One of the major variables, of
    course, is what kind of soldiers we're going to train for what
    military occupational specialities (MOS). We know that, over
    time, in this ramp-up our chief has articulated we are going to
    need more infantrymen. So we know, right now, that we're going
    to need more training seats at Fort Benning, Georgia, to bring
    folks through the pipeline. What remains to be determined by
    our training and doctrine command, as I mentioned, until the
    end of this month, will be the aggregate numbers in each of the
    other MOSs. That will drive where we train them. That will, of
    course, then be a determination of how we come to conclusions
    on the cost associated with that.
        Senator Ben Nelson. I would assume that, in trying to
    determine the skill sets required as part of the Active Force,
    you will take into account what supplemental and augmented
    skills the Guard and Reserve have been providing
    disproportionately, in terms of deployments.
        General Hagenbeck. Sir, that is the underpinning of this
    entire reorganization plan, you are exactly right. We are,
    right now, taking structure out of the Active Force, out of
    some of the combat arms, armor, artillery, air defense, as well
    as some engineer units, and we're standing up those units that
    we have had to lean on very heavily in the Guard and Reserves.
    We are talking about military police (MP), civil affairs,
    psychological operations (PSYOPs), and special operations. We
    are going to absolutely create additional units on the active
    side so that we do not have to go to the well as frequently as
    we have had to here in recent years.
        Senator Ben Nelson. Thank you.
        General Parks, in connection with end strength, in your
    prepared statement, you say the question concerning end
    strength hinges on the duration of our commitments. You inform
    us that the Marine Corps is structured to satisfy enduring
    requirements to meet operational contingencies as long as the
    contingencies are temporary in nature. Now, I have to ask you,
    how do you define a temporary contingency? Do you have some
    thought in mind as it relates to that? For example, is
    Afghanistan temporary, or do you consider OEF and OIF to be
    temporary contingencies? I'm not trying to pin you down. I'm
    just trying to get some idea of what you have in mind on
    temporary.
        General Parks. Sir, you bring up a very good question, and
    it's one that we are wresting with on a daily basis, from the
    standpoint of: How much is enough, and how long can we sustain
    this? I think clearly, if what we are doing right now--we're
    going back in with 25,000 OIF II followed by another 25,000 OIF
    II for the next year. That is temporary. What will come after
    that for OIF-3, if you will, and we are talking about a 5-year
    commitment, or, for that matter, a 10- to 15-year commitment?
    That's the difference, from our standpoint, in what would be
    temporary, versus long term. Nevertheless, we're not sitting on
    our laurels as we think about that. We're looking at the near
    term--what can we do today to modify, alleviate, and mitigate
    the impact on our forces, and, at the same time, look out for
    the long term, if it turns out to be long term. The term
    ``temporary'' is up to debate, so there is not a simple answer
    to that question. For long-term contingencies we're going to do
    some internal realignment, as is the Army, as was just
    outlined, to reorganize and adjust and realign, based on our
    findings to date. All those things will be taken into
    consideration as we look at the future.
        Senator Ben Nelson. We almost need to know what the end
    plan is, the end game, and what the exit scenario is, before we
    can determine what temporary versus long term is. I suspect you
    could make the case that our commitment in South Korea since
    the 1950s is temporary every year. [Laughter.]
        So I would hope that we would keep that in mind. Temporary
    has a tendency to become long-term. But if we define it as
    temporary, it can be a series of temporary commitments, as
    opposed to something we really ought to be looking at on a
    longer-term basis. Not to be argumentative about it, but I
    suspect that somebody is considering that possibility, as well.
    On the other hand, I don't want it to become a self-fulfilling
    prophecy by saying it's long-term and then it becomes long-
    term, if it should be temporary.
        I hope that you are taking that into consideration, both as
    to staffing and as to financing it as part of your budget and
    for future budget planning.
        General Parks. Indeed, we are, sir.
        Senator Ben Nelson. Thank you, Mr. Chairman.
        Senator Chambliss. Thank you, Senator Nelson.
        Gentlemen, Senator Nelson and I have been both very
    concerned and have worked hard to try to increase both pay and
    quality-of-life benefits for the Guard and Reserve. There have
    been a number of things that we could do that didn't really
    cost money, whether it was commissary use or whatever. Last
    year, we were successful in getting some additional benefits to
    the Guard and Reserve since the OPTEMPO for them has increased,
    as we've discussed. Now we are starting to get into some items
    that are much more expensive, and they're going to encroach on
    your ability to maybe do some things for the Active Force, both
    affecting recruiting and retention and other ongoing issues.
        Dr. Chu made the point earlier this afternoon that if we
    ever get to the point where we equalize pay and benefits for
    the Guard and Reserve and the Active Force, then it's going to
    create a problem, because we're going to have everybody going
    into the Guard and Reserve. We need some help in thinking
    through this issue as to how far we need to go. Have we gone
    far enough? What else can we do? There may not be any specific
    things that jump out at you right now, but as you think through
    this, if there are any ideas you can give us about it over the
    next several days or weeks as we move into the budget process,
    we certainly would appreciate that.
        I want to make sure that we're doing everything possible to
    increase our benefits for our Guard and Reserve if we're going
    to keep calling on them, and it looks like we're going to have
    to. But, by the same token, I do understand what Dr. Chu is
    saying there. It is one of those things that does not
    necessarily jump out at you as you think through it from our
    legislative side. If any of you have any comments on that, we'd
    welcome them, but, most importantly, as you see us going
    through this over the next weeks and months, I just wish you'd
    stay in touch with us and give us your thoughts and ideas. But
    if anybody has a comment, I'd appreciate it.
        General Brown. Mr. Chairman, my comment would be, we
    appreciate your concern for that. If everything were to be
    totally equal, it would be difficult for us to recruit for the
    Active Force. But to give benefits and entitlements to those
    Guard and Reserves who we're calling up to meet our needs
    today, we absolutely salute that. So we'll take that challenge
    to come back to you if we can think of ideas that would be
    helpful. We appreciate the fact that you and your subcommittee
    are dealing with that very issue and want to make things better
    for those guardsmen and reservists who come to our aid and are
    part of our Total Force.
        Senator Chambliss. Anything else?
        Senator Ben Nelson. I don't have anything further. I want
    to thank you for your candor and for being here with us. Thank
    you.
        Senator Chambliss. We do appreciate your being here. Thanks
    for your patience today. You sat there while everybody waited
    on us to vote and through the first panel. Thank you for what
    you do for our country. You four folks are in very critical
    positions relative to where each branch of our Service is going
    to be, not just tomorrow or the next day, but years down the
    road. The decisions you're making now and the leadership you're
    providing is going to be critically important for the military
    that my grandchildren see.
        So we appreciate very much your service to our country.
    Thank you for being here today. This hearing will be concluded.
        [Questions for the record with answers supplied follow:]

                   Questions Submitted by Senator John Warner

                  MORALE, WELFARE, AND RECREATION BUDGET CUTS

        1. Senator Warner. Secretary Brown and Secretary Navas, morale,
    welfare, and recreation (MWR) programs are essential to support our
    troops and their families, yet in your testimony you acknowledge that
    appropriated funds for the Army and Navy decline by $140 million in
    fiscal year 2005. What is the reason for these declines in both
    appropriated fund support and non-appropriated fund revenues?
        Mr. Brown. The Army's portion of the decline in appropriated funds
    between fiscal year 2003 and fiscal year 2005 is approximately $40
    million. The fiscal year 2005 appropriated fund budget takes risk in
    the installation programs including MWR due to other higher priority
    Army missions. Nonappropriated fund (NAF) revenues have declined
    worldwide due to several factors. Force protection requirements for
    installation access and the associated inconvenience experienced by
    authorized patrons and guests have negatively impacted patron
    participation in MWR programs worldwide. In addition, deployments have
    temporarily reduced participation of our primary customers--the
    soldiers--at some installations. Finally, unusually adverse weather
    (Hurricane Isabel and excessive snowfall) caused a reduction in NAF
    revenue in our programs that are primarily outdoors (golf and outdoor
    recreation) in the eastern and southern United States.
        Mr. Navas. In keeping with the Department of Defense's (DOD)
    strategy of transformation in the 21st century, the Navy is engaged in
    an aggressive search for efficiencies in all facets of shore
    installation management, including MWR programs. The effort is linked
    to the Chief of Naval Operation's (CNO) Sea Power 21 initiative to
    identify shore installation management savings that can be realigned to
    modernize the Navy's combat platforms that are increasingly being
    called upon to serve and protect this Nation on multiple fronts.
        Our focus is on streamlining, consolidating, and implementing all
    potential business improvement techniques to deliver as much output as
    possible given the available funding and to aggressively reduce
    overhead. While the Navy-wide MWR budget in fiscal year 2005 was
    reduced by 28 percent, we will continue to fully support our core MWR
    programs, including fitness, afloat recreation, movies, single sailor,
    youth and Information, Travel and Tours, as well as outside the
    continental United States (CONUS) and afloat commands.
        NAF revenues have declined slightly, less than 5 percent, due to
    increased deployments around the globe, which effectively reduce the
    patron base at our installations. Also, with greater force protection
    initiatives underway, many of our routine, repeat customers find access
    to military bases much more difficult after the September 11 terrorist
    attacks.

        2. Senator Warner. Secretary Brown and Secretary Navas, what will
    be the impact of these reductions on our troops and their families?
        Mr. Brown. Programs and services will be curtailed or eliminated at
    installations across the Army. Army headquarters and field staff are
    developing contingency plans to implement program reductions and
    eliminations based on current funding levels. Installations may have to
    increase use of special duty soldiers to operate MWR facilities (i.e.
    gyms, recreational centers, pools), diverting these soldiers from their
    primary missions. In addition, in circumstances where family members
    are also employees, the family's income may be lost or reduced. The
    Army is working toward resolving these shortfalls to mitigate negative
    impacts on soldiers and families.
        Mr. Navas. The Navy is currently engaged in a complete review of
    fiscal year 2005 MWR funding and the potential impacts of reductions
    across the board. Although it would be premature to speculate, some of
    the possible impacts to sailors and their families might include:
    modified hours of operation and/or levels of service; regional service
    consolidations without degradation in the quality of programs provided;
    closures of under-utilized programs; and increased or new user fees.
    The Navy intends to ensure that outside the CONUS and all afloat
    programs are funded to meet the unique requirements of those
    populations. Navy does not intend to discontinue any MWR CONUS programs
    that are well supported by patrons; if necessary, Navy plans to
    reprogram funds internally to ensure continuation of these programs.
        It should be noted that Navy has worked diligently to maximize
    efficiencies within the MWR program while maintaining a focus on
    minimizing any degradations to quality of services provided.
    Additionally, future yields from efficiencies may be used to provide
    greater support to our sailors forward deployed in support of Operation
    Enduring Freedom (OEF) and Operation Iraqi Freedom (OIF).
                                     ______

                Questions Submitted by Senator Edward M. Kennedy

                       NATIONAL SECURITY PERSONNEL SYSTEM

        3. Senator Kennedy. Dr. Chu, the recently passed National Security
    Personnel System (NSPS) contained a provision, section 9902(c) of the
    National Defense Authorization Act for Fiscal Year 2004, which excluded
    certain laboratories from inclusion in NSPS. A number of Senators have
    written to the Secretary of Defense describing the legislative intent
    of section 9902(c) as prohibiting the Department from also including
    the labs in your Best Practices Personnel Initiative. Your response
    indicated that you intended to move the labs into Best Practices, but
    did not address the issue of whether this action violates the intent of
    the law prohibiting moving the labs into NSPS. How is the Best
    Practices Initiative distinct from the National Security Personnel
    System?
        Dr. Chu. Best Practices is not NSPS. In the opinion of the DOD
    General Counsel, the statutory language that proscribes the DOD from
    implementing NSPS in selected laboratories does not prohibit
    implementing Best Practices in the laboratories.

        4. Senator Kennedy. Dr. Chu, what independent analysis has been
    done to indicate that the Best Practices Initiative is an improvement
    over the lab demonstration programs and the modifications to those
    programs that are permitted under existing authorities?
        Dr. Chu. The flexibilities available in Best Practices are based
    upon a review of the various demonstration programs undertaken within
    the DOD. The demonstration programs were evaluated independently by the
    Office of Personnel Management (OPM); its comments were incorporated in
    the development of Best Practices.

        5. Senator Kennedy. Dr. Chu, what is the cost of moving the
    employees who are in lab demonstration systems into the Best Practices
    system?
        Dr. Chu. Moving lab demonstration employees into Best Practices
    would not affect salary costs. Employee base salaries would be
    preserved and not adjusted upon conversion to Best Practices. Unlike
    the General Schedule system, the lab demonstrations do not provide
    periodic within-grade increases to basic pay. Thus, there is no need
    upon conversion to ``buy in'' lab demonstration employees--that is, to
    pay them a percentage of the next within-grade increase, based on the
    time each employee has already served toward the next increase.
    Training and systems modifications needed to implement Best Practices
    would be approximately offset by eliminating the costs of redundant
    payroll and personnel data, policies, and administration.

        6. Senator Kennedy. Dr. Chu, will the employees who are moved from
    lab demonstration programs into a Best Practices system will they be
    forced to move again into a NSPS at some future date?
        Dr. Chu. It is the DOD's intent to eventually have everyone on the
    new flexible personnel system created under NSPS. Moving the labs to
    Best Practices would give them a head start in enjoying some of the
    flexibilities to which they would have access in the future NSPS.

        7. Senator Kennedy. Dr. Chu, what will be the status of the
    employees of the Natick Soldier Center as a result of the NSPS
    legislation?
        Dr. Chu. The Natick Soldier Center is part of the Soldier and
    Biological Chemical Command, which is 1 of the 10 named DOD
    laboratories that are excluded from coverage under NSPS until 2008.
                                     ______

               Question Submitted by Senator Joseph I. Lieberman

                                 LAB WORKFORCE

        8. Senator Lieberman. Dr. Chu, when the National Defense
    Authorization Act became law on November 24, 2003, DOD research
    personnel were excluded from the NSPS established for the DOD, to
    continue to provide the flexibilities granted by section 342 of the
    National Defense Authorization Act of Fiscal Year 1995 and section 1101
    of the Strom Thurmond National Defense Authorization Act of Fiscal Year
    1999. The research labs were given flexibilities to establish
    innovative human resources systems necessary for scientific and
    technical excellence. The congressional intent for this was confirmed
    by the passage of section 1101 of the National Defense Act for Fiscal
    Year 2004, chapter 99, section 9902(c), where the labs are to be
    excluded from NSPS until after October 1, 2008. Moreover, the law
    states that after that date the labs may be included in NSPS only if
    the Secretary determines that the flexibilities provided by NSPS are
    greater than those already provided to the labs.
        In a January 6 letter, Senators Voinovich, Lieberman, Collins,
    DeWine, and Sessions expressed their concern regarding DOD's intent to
    standardize the personnel flexibilities currently enjoyed by the labs
    under a Best Practices Initiative that mirrors the not yet established
    NSPS, which would undercut broad initiatives and authority the labs
    already have. The February response from you insists on moving the
    defense laboratories to the Best Practices Initiative, despite
    congressional disapproval of this position as summarized in the January
    6 letter. This move clearly violates congressional intent. Implementing
    Best Practices, an integral part of NSPS, on the lab personnel is
    contrary to the section 9902(c). What are your intentions regarding
    efforts to include the labs in NSPS?
        Dr. Chu. Best Practices is not NSPS. In the opinion of the DOD
    General Counsel, the statutory language that proscribes the DOD from
    implementing NSPS in selected laboratories does not prohibit
    implementing Best Practices in the laboratories.
                                     ______

                 Questions Submitted by Senator Daniel K. Akaka

                               LANGUAGE TRAINING

        9. Senator Akaka. Dr. Chu, your testimony cites the need for
    increased language ability and accompanying area knowledge within our
    Armed Forces. Besides using the Defense Language Institute and
    commissioning studies on additional action, what are you doing to
    increase the recruitment and training of individuals possessing these
    skills?
        Dr. Chu.

    The Heritage Language Translator Program
        In the summer of 2003, the Deputy Secretary of Defense tasked the
    Army to conduct a pilot test to recruit Arabic speakers into the
    Individual Ready Reserve (IRR). Initially, this program is an outreach
    to members of Arab-American communities desiring to serve America's
    efforts in the reconstruction of post-conflict Iraq by applying their
    linguistic and cultural knowledge and expertise to the success of that
    endeavor.
        During the period October 2003 through March 2004, the Army has
    received 858 leads, pre-qualified 265 of those leads, and enlisted 138
    into the program for fiscal year 2004. The first 17 graduates from this
    program graduated on March 12, 2004. They have received mobilization
    orders and are currently at Fort Hood, Texas. They will serve with Ill
    Corps in Iraq.

    The Defense Language Transformation Team
        The DOD considers language capability a matter of national
    security. Recent events in Afghanistan, Iraq, and elsewhere have
    demonstrated the undisputed importance of understanding another's
    culture and communicating in his language.
        In order to improve the DOD's development, maintenance, and
    employment of foreign language capability, we have initiated an
    aggressive plan for transforming our approach to language and regional
    area expertise. A Defense Language Transformation Team whose primary
    goal will be to transform the way these critical assets are valued,
    developed, and employed within the DOD will undertake this effort. The
    result of this work will not only yield a new DOD policy directive
    governing the foreign language program but, more importantly, institute
    systemic changes to improve our management of language capability.
        At present there is no clear picture of the resources available to
    operational planners, and policies and procedures for integrating
    language and regional expertise into operational planning are
    inadequate. We intend to review current processes for establishing
    requirements and identify options for best embedding language ability
    in, or providing language ability to, operational units. We need three
    language capabilities: sufficient resources in the force with necessary
    clearances to meet operational requirements; the ability to surge to
    meet extended or expanded requirements, and a cadre of highly-skilled
    language speakers.
        It is a well-shared belief among educators and other civilian and
    military experts alike, that true language and cultural expertise is
    acquired only through immersion and study, over a long period of time.
    With over 1,300 faculty and 3,800 students, the Defense Foreign
    Language Institute's Foreign Language Center (DLIFLC) is the world's
    largest foreign language school and our primary source of language
    instruction.
        We have increased funding in fiscal year 2005 to ensure the center
    can meet critical requirements, and added funds for ``crash courses''
    to teach basic language to troops prior to deployment, improved
    training development, and improved capability to produce linguists with
    an advanced degree of language competence.

        10. Senator Akaka. Dr. Chu, what steps, such as outreach to
    students, are being taken to encourage students to study foreign
    languages and increase the applicant pool of individuals possessing
    these critical skills?
        Dr. Chu. From June 22-24, 2004, the DOD and the Center for the
    Advanced Study of Language are convening The National Language
    Conference to bring together leaders of Federal and State government
    agencies, industry, international language experts, academia, and
    language research to discuss and lay the foundation for an initial
    strategic approach to meeting the Nation's language needs in the 21st
    century.
        Federal, State, and industry leaders will discuss the language
    skills needed to:

             Maintain the United States as a secure nation and
            world leader
             Ensure cohesiveness, stability, wellness, and economic
            standing of communities
             Sustain the economic posture of the United States

        National and international experts will present:

             Best practices.to recruit, train, and retain personnel
            with language skills, and partner with academia and
            associations
             International school system models that have succeeded
            in inculcating multiple languages within their citizenry
             Proposals for changes in the U.S. education system
            that address emerging needs

        The conference proceedings will provide the foundation for a white
    paper recommending the initial steps toward a national language agenda.
    The document will outline reciprocal responsibilities within the
    Federal and State governments, industry, education system, and research
    community for actions that will move the United States forward as a
    language-competent nation.

                                 SPECIAL SKILLS

        11. Senator Akaka. Dr. Chu, the DOD recently announced a new policy
    to attract experts with skills important to the DOD's mission. I
    understand that new policy allows the DOD to employ as many as 2,500
    employees under a more competitive compensation package so long as the
    individual possesses uncommon or special knowledge or skills. Could you
    please define the types of skills that would fall into this category?
        Dr. Chu. This new authority provides the DOD with the ability to
    attract eminent experts in an array of occupations critical to the
    DOD's national security mission. The skills needed will be determined
    by the military department or defense agency on a case-by-case basis.
    For instance, a Service or defense agency might use this authority to
    hire a world-class expert in a certain area of medicine or someone with
    highly-specialized scientific knowledge for a limited-term project.

        12. Senator Akaka. Dr. Chu, would this include language, science,
    or math skills?
        Dr. Chu. Yes, it could.

                             STUDENT LOAN REPAYMENT

        13. Senator Akaka. Dr. Chu, I have strongly advocated student loan
    repayment as an important tool for agencies to recruit and retain
    Federal workers with critical skills in foreign languages, math, and
    science. Would you please clarify how many employees have participated
    in the DOD's student loan repayment program, the criteria for
    participation, and what the DOD is doing to offer this incentive to
    more of its workforce?
        Dr. Chu. As of March 6, 2004, six employees are participating in
    the DOD's student loan repayment program. The DOD student loan
    repayment program authorizes use of this incentive when DOD components
    encounter difficulty in filling positions with highly-qualified
    candidates or when they experience difficulty in retaining highly-
    qualified employees. The DOD does not limit student loan repayment to
    specific categories or occupations. Therefore, the incentive is
    available for use whenever the component has recruitment or retention
    difficulties.
        Because of the higher annual and total payment limits authorized by
    Congress in the National Defense Authorization Act for Fiscal Year 2004
    (Public Law 108-136, signed November 24, 2003) and in the Federal
    Employee Student Loan Assistance Act (Public Law 108-123, signed
    November 11, 2003), we are developing new materials that emphasize and
    encourage our managers to use this important authority. A consortium of
    our component recruiters and recruitment coordination offices are very
    aware of the need to use this authority to seek and retain new college
    graduates.

                              APPEALS FLEXIBILITY

        14. Senator Akaka. Dr. Chu, Congress provided the DOD with
    personnel flexibility similar to that granted to the Department of
    Homeland Security (DHS), and I am sure that you are monitoring the
    proposed regulations of DHS and OPM. Last week, I, along with several
    of my colleagues, expressed concern over the appeals system proposed
    for DHS. I believe the proposal lacks independence, is unfair to
    employees by lowering the agency's burden of proof, and eliminates the
    ability for a true independent agency, the Merit Systems Protection
    Board (MSPB), to alter penalties. While the appeals flexibility granted
    to the DOD differs from that granted to DHS, I am interested in your
    views on the DHS appeals proposals and whether it is being considered
    for the NSPS?
        Dr. Chu. As you pointed out, the DHS appeals legislation is
    different than the NSPS legislation. Just as DHS has proposed a system
    they need to accomplish their mission, we will develop a system that we
    need to accomplish DOD's mission. We are early into this process; while
    eventually there may be similarities there may also be significant
    differences. We won't know the final result until we complete our
    design process.

                               MONRONEY AMENDMENT

        15. Senator Akaka. Dr. Chu, during the Governmental Affairs
    Committee hearing on the NSPS last June, I asked Secretary Rumsfeld
    whether the DOD would retain the Monroney Amendment as it relates to
    blue collar workers. The Monroney Amendment requires that in
    determining the prevailing rates for Federal Wage System employees,
    when the Government has a dominant industry in a particular area, the
    private sector data must come from that same industry. In response to
    my question, you noted that no decision had been made on the
    applicability of Monroney. Have there been discussions on the Monroney
    Amendment?
        Dr. Chu. The DOD is still looking at options with regard to Federal
    Wage System. Until the system design is completed, we cannot determine
    if the DOD will continue to follow the Government-wide rules or utilize
    the flexibility in NSPS to modify the pay methodology for blue-collar
    pay.

                        MILITARY TO CIVILIAN CONVERSION

        16. Senator Akaka. Dr. Chu, when Congress was considering the
    National Defense Authorization Act for Fiscal Year 2004, you stated
    that the NSPS would allow the DOD to convert 300,000 jobs performed by
    the military to the civilian workforce. However, now the DOD plans to
    only convert 20,000 positions over the next 2 years. What are these
    positions and how were they identified for conversion?
        Dr. Chu. The estimate of 300,000+ refers to military positions that
    could be converted to civil status. A careful review process will help
    determine which should be converted.
        When implemented, NSPS will greatly facilitate the use of civilian
    personnel to perform duties formerly fulfilled by the military. We are
    beginning the conversion process even as NSPS is being implemented. Of
    the 20,070 military identified for conversion in fiscal year 2004 and
    fiscal year 2005, 10,968 are Army; 2,648 are Navy; 4,338 are Air Force;
    and 2,116 are Marine Corps billets.
        These military billets were identified for conversion during our
    annual review of the DOD workforce. In this iterative process, the DOD
    conducts an inventory of its military (active, Reserve, and National
    Guard) and civilian (U.S. and foreign national) manpower. As a part of
    this review, we assess what is military and civilian essential and
    identify what should be converted to DOD civilian or private sector
    performance occupations such as personnel, medical, guards, and
    mariners will be the types that will be the focus of the initial
    conversions.

        17. Senator Akaka. Dr. Chu, do you have a timeline for when DOD
    plans to convert the remaining 280,000 positions?
        Dr. Chu. The 20,000 conversions programmed for fiscal year 2004 and
    fiscal year 2005 are only the beginning. Additional conversions for
    fiscal year 2006 and the succeeding years are being identified. We are
    giving the Services the flexibility of determining the most
    expeditious, feasible and economical plan for the conversions. The pace
    of conversions will be importantly influenced by the pace of NSPS
    implementation.

        18. Senator Akaka. Dr. Chu, if not all of the 300,000 positions
    will be converted, please explain the discrepancy between your
    statements last June and today?
        Dr. Chu. There is no discrepancy. Over the past year, the DOD has
    been reviewing over 300,000 active duty military in commercial
    activities that were exempted from conversion. These are positions that
    can be considered for DOD civilian or private sector performance and
    the minimum number the DOD is committed to reviewing.
        However, even as we identify additional positions for conversion,
    there are several reasons why not all of the military in commercial
    activities can be converted. A portion is needed for overseas and sea-
    to-shore rotation, career progression, wartime assignments, and other
    similar requirements. The ultimate size of the larger conversion will
    depend on the merits of each situation within the 300,000+ positions up
    for review.

               DEVELOPMENT OF NATIONAL SECURITY PERSONNEL SYSTEM

        19. Senator Akaka. Dr. Chu, you testified about the work the DOD is
    doing to develop NSPS, including meeting with unions. However, the
    National Defense Authorization Act for Fiscal Year 2004 requires the
    DOD to work jointly with OPM in developing regulations for the new
    personnel system. Please describe the level of collaboration with OPM
    to date and plans for future collaboration.
        Dr. Chu. The DOD has engaged the OPM as a full partner in the
    development of NSPS.

        20. Senator Akaka. Dr. Chu, in regards to OPM involvement, when did
    you unveil your proposed labor-management system and when did OPM
    become involved with the proposal?
        Dr. Chu. No final proposals have been released. The only materials
    released previous to this date were initial concepts for discussion
    purposes only, at the request of the unions. OPM was provided this
    information before it was released to the unions. The DOD will continue
    to work with OPM as labor proposals as well as the other pieces of NSPS
    are developed.

        21. Senator Akaka. Dr. Chu, you testified that DOD has engaged in a
    dialogue with employee unions to bring them into the development of the
    new labor-management relations system. Yet, I have heard from union
    representatives that no effective communication has taken place in the
    meetings between DOD and employee unions. What is your perception of
    these meetings, and what would you suggest to ensure better
    communication and collaboration with Federal employee unions?
        Dr. Chu. At the January 22 meeting with union representatives, we
    offered to develop the new labor and management relations via an open
    discussion about how we can effectively change the labor system in DOD.
    The unions were opposed to that idea and requested that we provide them
    a concept paper to which they could react. The unions then denounced
    the DOD for meeting their request! We seek fruitful discussions with
    the unions and look forward to a dialog that will help shape positive
    change.

        22. Senator Akaka. Dr. Chu, can you describe the process by which
    you are receiving union proposals and incorporating their suggestions?
        Dr. Chu. The DOD is now engaged in a strategic assessment of the
    NSPS. The reengineered process will have frequent and meaningful union
    participation.

        23. Senator Akaka. Dr. Chu, you testified that the NSPS must be
    fair and perceived as fair to accomplish DOD's mission. I agree.
    However, I feel that giving the Secretary of Defense the final word in
    bargaining impasses and discretion over bargainable issues is not fair.
    Please describe what steps you are taking to ensure that the new system
    is both fair and perceived as fair.
        Dr. Chu. The DOD will build a system that allows both employees and
    their representatives a fair way to address the issues of concern. The
    approach to determining bargainable issues and resolving impasses is
    laid out in the statute Congress enacted.

        24. Senator Akaka. Dr. Chu, the initial DOD proposal on labor-
    management relations states that NSPS will not employ any provisions of
    chapter 71 of title 5, which relates to labor-management rights.
    However, chapter 71 is non-waivable under the law. Please describe how
    your initial proposal is consistent with the law if chapter 71 is
    essentially waived. Why did the DOD decide to waive chapter 71?
        Dr. Chu. Section 9902(m) of the National Defense Authorization Act
    for Fiscal Year 2004 provided the authority to build a new labor
    management relations system not withstanding section 9902(d)(2).

        25. Senator Akaka. Dr. Chu, your written testimony describes the
    NSPS as preserving DOD employees' rights to join unions and bargain.
    The DOD's labor-management proposal for NSPS also states that
    collective bargaining in the DOD will allow parties to collaborate by
    focusing bargaining on issues of significant impact. In addition to
    concerns over communication with the DOD, Federal employee unions have
    expressed concern over the meaning of significant impact and how the
    DOD would define collective bargaining and consultation. How is the DOD
    defining the terms ``significant impact, collective bargaining,'' and
    ``consultation?''
        Dr. Chu. Terms associated with the labor concepts provided to the
    unions on February 6 have not yet been defined. The definition of these
    terms or the need to define these terms is part of the development
    process that is not yet complete.

        26. Senator Akaka. Dr. Chu, what is the status of the DOD's work on
    the employee appeals system under NSPS? In developing this proposal,
    and that on the labor-management system, did you examine the impact the
    new systems would have on other agencies' cases before the MSPB and the
    Federal Labor Relations Authority (FLRA)?
        Dr. Chu. The DOD has engaged in some preliminary work on the
    appeals process. The DOD is not looking at other agency cases before
    MSPB or FLRA, as the system DOD is building is a DOD system, not a
    government-wide system.

        27. Senator Akaka. Dr. Chu, the National Defense Authorization Act
    requires DOD and OPM to jointly prescribe regulations for NSPS. Do you
    believe the act requires regulations to be published in the Federal
    Register, and if not, why? If your answer is no, will you publish them
    anyway to preserve openness and transparency?
        Dr. Chu. The Act does not require regulations to be published in
    the Federal Register; however, the DOD will use the Federal Register
    process when the regulations are developed. DOD will provide employee
    access to the regulations in whatever venue is used to publish them.
                                     ______

                    Questions Submitted by Senator Evan Bayh

                       MILITARY FAMILY RESEARCH INSTITUTE

        28. Senator Bayh. Dr. Chu, please describe the mission of the
    Military Family Research Institute (MFRI), headquartered at Purdue
    University.
        Dr. Chu. The MFRI performs basic research on quality-of-life
    aspects for DOD personnel and their families, with emphasis on those
    areas most affecting job satisfaction, performance, and employee
    retention. The MFRI also provides venues for informing senior DOD
    personnel and others of the personnel policy-relevant aspects of such
    research findings. The primary goals are to: (1) stimulate research, of
    high scientific merit, on the subject of retention-related quality of
    life issues; (2) develop/implement/conduct DOD approved educational
    efforts that inform senior DOD leaders and selected others of research
    findings relevant to employee quality of life, job satisfaction,
    performance, and retention; and (3) investigate the effectiveness of
    innovative approaches to improving employee retention/job satisfaction
    and the quality of life of employees and their families.

        29. Senator Bayh. Dr. Chu, what is the relationship between Purdue
    and the DOD?
        Dr. Chu. The DOD holds a Cooperative Agreement, entitled the
    ``Military Family Research Institute,'' with Purdue University. This
    agreement was awarded in 2000 on a competitive basis to run through
    April 2004. The MFRI has been granted a no-cost extension to operate
    through April 2005.
        The MFRI has developed into an integral component necessary to the
    strategic development of quality of life programs and services for
    military personnel and their families. In a precedent setting
    initiative for the DOD, the MFRI has developed a commitment index to
    measure service members' and their spouses' commitment to continuing
    military service. The commitment index will identify key life events
    impacting the normative, affective, and continuance forms of
    commitment. This index, crossing all the military services, will track
    the levels of commitment over time through the causal structure of
    factors contributing to changes in commitment levels. Without properly
    identifying changes in the commitment of the force, unforeseen
    decreases in retention could result.
        MFRI has also made significant contributions to policy development
    in other areas. Child care is one of the most important mobilization
    and deployment issues for military families, and becomes even more of a
    challenge as the DOD implements rebasing. The MFRI study on the
    Financial Landscape for Military Parents of Young Children focuses on
    the child care arrangements used by military families with children
    younger than 6 years of age. MFRI also conducted an exhaustive salary
    and benefits study of staff in military Child Development Centers
    relative to comparable employees inside and outside of the military.
        MFRI developed an annotated bibliography focusing on family
    separation and deployment, posted on the MFRI Web site, which has been
    downloaded over 3,000 times.
        MFRI is also working on a comprehensive study to examine the impact
    of Permanent Changes of Station on military children and families.
        The MFRI brings a rigorous academic and research perspective within
    which to examine military quality of life issues.

        30. Senator Bayh. Dr. Chu, what are your future plans for
    continuation of the MFRI?
        Dr. Chu. MFRI has made significant contributions to the body of
    research supporting quality-of-life policies and programs. The DOD will
    make its decision about continuing this effort based on the best way to
    pursue quality-of-life improvements.

        [Whereupon, at 5:49 p.m., the subcommittee adjourned.]

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2005

                                  ----------

                            THURSDAY, MARCH 4, 2004

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

    COMPENSATION, BENEFITS, AND HEALTH CARE FOR ACTIVE AND RESERVE MILITARY
                          PERSONNEL AND THEIR FAMILIES

        The subcommittee met, pursuant to notice, at 2:32 p.m., in
    room SR-222, Russell Senate Office Building, Senator Saxby
    Chambliss (chairman of the subcommittee) presiding.
        Committee members present: Senators Chambliss, Collins, E.
    Benjamin Nelson, and Pryor.
        Committee staff member present: Leah C. Brewer, nominations
    and hearings clerk.
        Majority staff members present: Gregory T. Kiley,
    professional staff member; Diana G. Tabler, professional staff
    member; and Richard T. Walsh, counsel.
        Minority staff members present: Gabrielle Eisen, research
    assistant; and Gerald J. Leeling, minority counsel.
        Staff assistants present: Sara R. Mareno, and Pendred K.
    Wilson.
        Committee members' assistants present: Derek J. Maurer,
    assistant to Senator Collins; Clyde A. Taylor IV, assistant to
    Senator Chambliss; Aleix Jarvis and Meredith Moseley,
    assistants to Senator Graham; Eric Pierce, assistant to Senator
    E. Benjamin Nelson; and Terri Glaze, assistant to Senator
    Pryor.

         OPENING STATEMENT OF SENATOR SAXBY CHAMBLISS, CHAIRMAN

        Senator Chambliss. Good afternoon, ladies and gentlemen.
    The subcommittee will come to order. The subcommittee meets
    today to receive testimony on compensation benefits and health
    care for our active and Reserve military personnel and their
    families in review of the Defense Authorization Request for
    Fiscal Year 2005.
        We will receive testimony from three panels of witnesses
    this afternoon. On the first panel, we are very pleased to
    welcome Senator Tom Daschle, the Democratic leader, and Senator
    Lindsay Graham, our colleague on the full committee.
        In a letter to Chairman Warner last month, Senators Daschle
    and Graham requested an opportunity to testify on the issue of
    health care for members of the Guard and Reserve. Without
    objection, I will enter their letter into the record. We
    welcome those colleagues and hopefully they'll be here by the
    time we complete our opening statements.
        [The information referred to follows:]

        Senator Chambliss. On our second panel we will hear from
    Charles S. Abell, Principal Deputy Under Secretary of Defense
    for Personnel and Readiness, and Dr. William Winkenwerder, Jr.,
    Assistant Secretary of Defense for Health Affairs.
        Our third panel will consist of representatives of military
    and veterans' organizations and the American Legion. I will
    introduce each witness at the beginning of that panel. We
    welcome all of you to this hearing this afternoon.
        I want to start today by recognizing the magnificent
    performance of the men and women of the United States military,
    both active and Reserve, in Operation Enduring Freedom (OEF)
    and Operation Iraqi Freedom (OIF). I want to also commend their
    families for the sacrifices they have made and for the support
    they provide to our military personnel.
        One year ago, we were only days away from the start of OIF,
    a brilliant military campaign that swept Saddam Hussein from
    power and liberated the people of Iraq. Our soldiers, sailors,
    airmen, and marines performed magnificently and continue to do
    so today. They did very well.
        We mourn for those who have paid the ultimate price for the
    defense of freedom. Our prayers go out to the families of those
    who have died and to those who have been injured, and we pray
    for the safety of those returning and those beginning new
    missions in the defense of freedom in Iraq and throughout the
    globe.
        Our American military personnel work tirelessly to preserve
    our freedom. In short, they are the best at what they do and
    they deserve the best that our country can give them. The
    Personnel Subcommittee has worked hard to ensure that
    compensation continues to improve for our military forces, that
    health care is of the highest quality and accessible to all who
    are eligible, and that families receive the support they need.
        Quality of life programs, such as schools, child care
    services, commissaries, exchanges, and morale and welfare
    programs are essential elements of the compensation and
    benefits we provide to military families.
        Our field hearings this year at Robins Air Force Base in
    Georgia and Offutt Air Force Base in Nebraska focused on these
    issues. Spouses of deployed service members and military
    parents articulated the problems they face in striving to raise
    strong families while their loved ones are deployed and during
    frequent career moves. We will continue to focus on these
    issues during our deliberations on the fiscal year 2005 budget,
    for never have these programs been more important than in the
    environment of increased operational tempo (OPTEMPO) that our
    forces and their families are experiencing today.
        In the National Defense Authorization Act for Fiscal Year
    2004, we undertook several initiatives to support military
    members and their families, such as increases in basic and
    special pays, phase in of concurrent receipt of military
    retired pay, veterans' disability compensation for certain
    military retirees, an increase in death benefits, reduction in
    out-of-pocket expenses for base housing, and improving the
    survivors benefits plan.
        Many initiatives were enacted for Reserve component
    members, who now comprise some 40 percent of the deployed
    forces in Iraq, including enhanced health care benefits and
    access to services including commissaries. We also directed
    that the Department of Defense (DOD) take steps to ensure that
    military families and retirees who choose the TRICARE standard
    option have better information and access to civilian
    providers, and we enacted new flexible civilian hiring
    authorities for the Secretary of Defense (SECDEF) in the
    National Security Personnel System.
        The subcommittee will closely monitor the progress the DOD
    is making in implementing these new benefits in the weeks and
    months ahead. Compensation benefits and health care continue to
    be of paramount concern to us all.
        Once again, I want to thank my colleague and my good
    friend, Senator Ben Nelson, the subcommittee's ranking member.
    The hallmark of the Subcommittee on Personnel is a strong
    bipartisan spirit and I know that I speak for all members of
    our subcommittee in saying that this is our continuing
    commitment. At this time I'll turn to Senator Nelson for any
    comments he might have.

                STATEMENT OF SENATOR E. BENJAMIN NELSON

        Senator Ben Nelson. Well, thank you very much, Mr.
    Chairman, for those kind comments and also for holding this
    very important hearing so that we can focus on matters that
    contribute to the quality of life for our soldiers, sailors,
    airmen, and marines, active and Reserve, currently serving and
    retired, and their families.
        It's my privilege to work with you on this occasion and so
    many other occasions where we are concerned with adequate
    compensation for our service members. We strive to compensate
    them for their duties and offer them a quality of life that
    will enable them to continue to serve and live comfortably.
        Service families deserve a quality of life comparable to
    that of their civilian counterparts. Anything less is
    inadequate and inappropriate. Quality of life for our service
    members is particularly important now when the extensive
    commitments of our military forces are pushing our military
    families to the limit.
        It's no simple matter to address all of the quality of life
    issues for our diversified armed services. Our military make-up
    has undergone a significant demographic change since we
    initiated the All-Volunteer Force in 1973. Before that, our
    military was mainly a conscripted force, mostly male,
    unmarried, and without children. The composition of our
    military is a lot more complex today.
        Many more military members today have family obligations,
    and this has a profound impact on the variety and kinds of
    programs needed to support our military personnel. To
    demonstrate the complexity of the family make-up of our Armed
    Forces, let me list just a few of the combinations that we see.
    More than half of the force is married, many with children. We
    have dual military couples, where in some cases both husband
    and wife are in the same Service, and in others they're in
    different Services. Normally, the husband is the service member
    in those families where only one spouse is in the military, but
    we also have a number of families where the wife is the service
    member and the husband is the civilian.
        We also have a number of single-parent families, some where
    the mother is the single-parent service member and a surprising
    number where the father is the single-parent service member.
        The reason that I listed all of these different family
    configurations is to demonstrate the wide variety of programs
    that we need to care for these families. Each family make-up
    has unique needs. We need child care programs that address the
    needs of single military parents as they work unpredictable
    shifts or are subject to short-term military exercises, or
    longer-term or shorter-term deployments.
        We need programs for children when one parent is in the
    Service and the other is a civilian working at what some would
    refer to as a normal job. We need education programs that meet
    the needs of children who relocate every few years. We need
    after-school programs and summer youth programs for every age
    group to provide a healthy environment for military children.
        Now, in addition to the programs that are specifically for
    the children, the Services provide many other support programs
    for families and spouses. These include deployment mobilization
    support programs, family advocacy programs, parenting programs,
    financial management programs, relocation assistance programs,
    spouse employment assistance programs, and comprehensive health
    care programs.
        Health care is one of the most important benefits affecting
    the quality of life of our service members. The DOD provides an
    excellent health program to active-duty service members,
    military retirees, and their families. But one of the issues
    we'll grapple with this year is whether we can provide a
    similar health care benefit to members of the Guard and Reserve
    who have responded so well to the Nation's call to service in
    the war on terror. I'm pleased that Senators Daschle and
    Graham, have taken the lead on expanding health care benefits
    for members of the Guard and Reserve and their families, and
    that they're going to testify today about the growing need for
    this benefit. I'm proud to be a co-sponsor of their bill,
    S.2035.
        Senator Levin, the ranking member of the full committee,
    asked that I express his apologies for not being able to be
    here today. He is unavailable at the present time, as he's
    participating in a very significant Intelligence Committee
    hearing where the Director of Central Intelligence (DCI) is the
    principal witness, and I know that the chair intends to be at
    that hearing rather shortly.
        So, Mr. Chairman, again, thanks for holding the hearing and
    I look forward to hearing from the panelists, as always.
        Senator Chambliss. Thank you, and we have half the tag-team
    match here with Senator Graham being present. We're joined by
    Senator Pryor and Senator Collins. Do either of you have any
    comment before we move on?
        Senator Collins.
        Senator Collins. Thank you, Mr. Chairman. Until Senator
    Daschle comes, that's an invitation for Senator Pryor and I to
    give our opening statements after all.
        Senator Chambliss. Certainly.
        Senator Collins. Let me start by first commending you and
    Senator Ben Nelson for your leadership in improving the support
    that we give to our troops. I'm very proud of all of our
    troops. They do an extraordinary job. I have a particular
    interest in making sure that we continue the efforts begun last
    year in improving the benefits that we are giving to our
    Reserve and National Guard.
        My State has the third highest percentage in the Nation of
    deployed members of the National Guard and I'm very much aware
    of their sacrifices. I've introduced a bill to increase the
    educational benefits that we give the Reserves. I hope this
    subcommittee will look favorably on it.
        I see that we have been joined by the Democratic leader
    now, so I will just ask that the balance of my statement be put
    in the record.
        [The prepared statement of Senator Collins follows:]

                 Prepared Statement by Senator Susan M. Collins

        Thank you Mr. Chairman. I'd like to thank our panels for their
    commitment to our troops to ensure that our men and women in the
    military are receiving as much support as possible from the Department
    of Defense and from Congress and that they remain the best paid, best
    equipped, and best trained in the world.
        Virtually all Service recruitment and retention goals were met in
    fiscal year 2003. I think this is an extremely healthy sign that
    military service is an attractive career option for young men and
    women.
        I'm also pleased that the Department of Defense is investing in
    increased language ability. Our war on terrorism is being fought on too
    many fronts to rely any longer on only the languages of the Cold War
    era.
        Our Government is doing a great service in pursuing the expedition
    of citizenship applications for immigrants who serve in the military.
    If individuals are willing to serve in the military and take the same
    risks as any other soldier, sailor, or airman, they should have all the
    benefits associated with being citizens of this great Nation.
        This was one of the reasons that I introduced the Selected Reserve
    Educational Assistance Act of 2003 to extend the opportunity of higher
    education to those men and women in uniform. This legislation provides
    our National Guard and Reserve personnel, many of whom are currently
    mobilized, deployed, and fighting around the globe, with educational
    opportunities as intended by the Montgomery GI Bill.
        Mr. Chairman, I thank you and look forward to hearing the testimony
    of our witnesses.

        Senator Chambliss. Certainly, without objection. Senator
    Pryor, any comments?
        Senator Pryor. No, except to thank you and Senator Nelson
    for your leadership. I certainly look forward to hearing from
    Senator Daschle and Colonel Graham.
        Senator Chambliss. Right. Brand-new Colonel Graham.
    Gentlemen, we would welcome you, and Senator Daschle, you and
    Senator Graham, if you will come forward. We thought about
    putting you guys under oath here. [Laughter.]
        First of all, let me just say that we appreciate the
    leadership both of you have provided on the issue of providing
    additional benefits to our Guard and Reserve. Senator Nelson,
    Senator Pryor, Senator Collins, and I all worked very closely
    together during the Defense Authorization Bill last year with
    leadership being provided by you two on this issue, and on
    behalf of all the service men and women, on behalf of this
    subcommittee, we appreciate your leadership there.
        Senator Daschle, we look forward to your comments and
    welcome to the subcommittee.

     STATEMENT OF HON. TOM DASCHLE, U.S. SENATOR FROM SOUTH DAKOTA

        Senator Daschle. Mr. Chairman, thank you very much, Senator
    Nelson, Senator Collins, Senator Pryor. It is an honor for me
    to be here with our colleague, Colonel Graham. He is really one
    of the most persistent members that I have had the opportunity
    to work with. Because of his persistence and our determination
    to see this through, I am confident that one day we will do so.
        I have an extended statement that I would ask your consent
    to be placed in the record, Mr. Chairman.
        Senator Chambliss. Certainly. Without objection.
        Senator Daschle. Let me just say that first I thank you for
    your commitment to providing the kind of support to the Guard
    that is so critical. I was looking at numbers the other day
    that really surprised me: 180,000 members of the Guard and
    Reserve are on active duty today. That's 40 percent of our
    entire force in Iraq.
        It's a reminder of the extraordinary change that has
    occurred since the end of the Cold War with the integration of
    the Guard. Active and Reserve Forces have never been as
    integrated. We have never seen the call-up of the Guard in
    South Dakota that we've seen here since World War II. Seventeen
    hundred members are serving on active duty as we speak, and
    like Senator Collins, it's one of the highest percentages per
    capita in the country.
        I think the time has come for us to recognize this new
    integration. It seems to me that if you're doing the same job,
    you ought to have access to the same benefits. That's really
    what we're saying with this legislation. We'll never be in a
    position where reservists and active duty personnel have
    exactly the same benefits, but we should try to do so when it
    comes to providing access to health care. Trying to do so is
    important when you have to recognize that 30 percent of all
    members of the Guard, at least in South Dakota, don't have
    health insurance today, yet they too defend our country. We
    believe they ought to have that same opportunity to access
    health care.
        What a lot of people don't realize, and I know that the
    four of you realize this all too well, is that under our bill
    this isn't a free handout to members of the Guard. They'll pay
    a premium if this legislation is enacted. Unlike their active
    duty counterparts, this is something they will pay for. So
    we're only asking for that access, that opportunity to ensure
    these troops and their families have access to affordable
    health care when they're fighting for their country and when
    they have served their country as well as they have in this
    integrated new force.
        I think it also is good policy because it reflects the
    growing concern that many of us have about retention. Our Guard
    members are now making a tremendous sacrifice for their country
    and its getting harder and harder to recruit and retain
    personnel. It seems to me that we ought to be doing all we can
    to retain the high-qualified, well-trained personnel that we
    have serving in the Guard today. We're told that there is no
    better recruiting tool than providing reservists access to
    health care. This is the highest priority of many members of
    the Guard and Reserve. If we can provide them that opportunity,
    they're going to serve for a much longer period of time and our
    country will be well-served.
        So, Mr. Chairman, and members of the subcommittee, I know
    we're almost preaching to the choir. You share our commitment
    and we're grateful to each of you for your willingness to be so
    supportive. Again, let me start where I ended. It's a delight
    to work with Senator Graham on this and I'm hopeful and
    somewhat confident that at the end of the day we're going to
    get this job done.
        [The prepared statement of Senator Daschle follows:]

                   Prepared Statement by Senator Tom Daschle

        Thank you, Chairman Chambliss and Ranking Member Nelson, for the
    opportunity to appear today. This subcommittee has played an important
    role over the years in supporting men and women of the Reserves, and
    it's an honor to testify. I am pleased to be joined by Senator Graham--
    or should I say, Colonel Graham. Congratulations, Colonel, on your
    recent promotion!
        This Nation's security increasingly rests on the contributions of
    our Guard and Reserve personnel. To ensure that these brave men and
    women will continue to be there when their Nation calls, Senator Graham
    and I believe we need to demonstrate that we appreciate their service
    and sacrifice.
        There can be little doubt that our Nation has placed an
    increasingly heavy burden on reservists in recent years. For example,
    the Guard has been assigned the entire peacekeeping mission in the
    Balkans and the Sinai Peninsula. As of this week, 180,000 reservists
    have been mobilized. Reserve personnel play an important role in
    Afghanistan. In Iraq, Reserve personnel have been critical to all that
    has been accomplished to date.
        That our Reserve personnel have done much and sacrificed much in
    Iraq is borne out by the fact that over 40 Army reservists have been
    killed in action and over 500 wounded. That they will be called upon to
    do even more is demonstrated by the fact that when the ongoing troop
    rotation is complete, Reserve personnel will comprise 40 percent of our
    total force in Iraq.
        Given our current and projected security needs, it seems clear this
    Nation's dependence on our Guard and Reserve personnel will not
    diminish and may well grow. Our Nation's increased reliance on
    reservists means these citizen-soldiers are more likely to be soldiers
    and less likely to be citizens. More likely to be with their comrades-
    in-arms and less likely to be in the arms of their loved ones. More
    likely to be working with their fellow soldiers to make this Nation
    more secure and less likely to be at work in their communities.
        We believe that at the same time we are asking for this additional
    sacrifice from our reservists and their families, it is unworthy of
    this great Nation to do nothing in return. Although we recognize that
    some in the Pentagon assert there is no hard data that demonstrates
    recruitment and retention problems, we believe there is plenty of
    evidence of a looming problem, and if we wait for the so-called
    ``hard'' data, it will be too late.
        On this we agree with Governor Mark Sanford from Senator Graham's
    home State, Lt. General James Helmly, head of the Army Reserve, and
    Eric Parnell, a guardsman from Oregon. Last week Governor Sanford told
    the Nation's governors that a flood of grocers, insurance agents, small
    business owners, and others who make up the Guard will be reluctant to
    re-enlist because of the increasing demands on their time.
        General Helmly said that stop loss orders are masking a potential
    crisis in troop retention. He said, ``we must apply proactive,
    preventive measures to prevent a recruiting-retention crisis.''
        This from reservist Parnell, who is shipping out soon for Iraq but
    has already decided to leave the Guard when he returns: ``It's going to
    be testing time for the Guard It's transformed from a weekend with the
    boys to an integral part of the Army.''
        General Mike Gorman, leader of South Dakota's Guard, as well as
    many South Dakota Guard families have told me that offering our Reserve
    personnel an option to purchase TRICARE coverage would be a powerful
    incentive to ensure that our Guard continues to attract and retain the
    best and brightest our Nation has to offer. I want to stress the word
    purchase. We recognize there is still a difference between active and
    Reserve duty. That is why rather than providing reservists free
    coverage, our proposal requires them to make a monthly contribution to
    access coverage.
        Ensuring these troops have ongoing health care, even when not on
    active duty, would also promote unit readiness. As this subcommittee
    well knows, there are continuing questions and challenges with regard
    to the health readiness of reservists at time of mobilization. There
    are too many delays while units struggle to assemble medical records,
    schedule exams and arrange routine inoculations. TRICARE would improve
    health readiness, and health readiness means unit readiness.
        Our Nation now has 180,000 reservists on active duty. I am proud to
    report that, on a per capita basis, few states are providing more of
    that force than South Dakota.
        But at a time when we are asking more of reservists and their
    families in South Dakota, South Carolina, and all over this Nation,
    Senator Graham and I believe it is in our national interest that we do
    more for them. We ask that you join with us to allow our troops to
    purchase TRICARE health coverage for themselves and their families.
        Thank you.

        Senator Chambliss. Thank you very much.
        Senator Graham, welcome.
        Senator Graham. Thank you, Mr. Chairman. That's a tough act
    to follow. It has been an unusual year-plus for all of us in
    the Senate, particularly you, Mr. Chairman, and myself being
    freshmen members. It's been tough, it's been contentious, but
    there are some islands of agreement and this is one of them.
    I'd like to pay my respects to Senator Daschle. This bill would
    not have gone as far as it's gone without you, Senator Clinton,
    Senator Leahy, Senator Dewine, Senator Chambliss, Senator
    Allen--you can go down the list. This is one thing, it seems,
    that Republicans and Democrats seem to have a common view of,
    that the Guard and Reserve has been hit hard and it's time to
    upgrade their benefits.
        It's been a bipartisan exercise I'm proud to be part of,
    and Senator Daschle has made it possible to get this far. We're
    close to the goal line. Mr. Chairman, part of this bill we
    stole from you about reducing the retirement age, and these
    ideas are a composite of ideas that have been out there for a
    long time. What we've done is put them together under one roof
    while trying to get as big a support network as possible.
        What Senator Collins said about her State is the same in my
    State. South Carolina has the highest number of people deployed
    in support of the war since World War II. You go down to any
    State and you'll find the same response.
        Lieutenant General James Henley said of the Army Reserve
    that this is the first extended duration war our Nation has
    fought with an all-volunteer force. As Senator Daschle said, 40
    percent of the boots on the ground in Iraq are going to be
    Guard and Reserve. Everybody in Bosnia is a Guard member. Let's
    not forget about Bosnia. The same ratio is going to apply to
    Afghanistan. We must be sensitive to that and we must apply
    proactive preventive measures to prevent a recruiting retention
    crisis.
        You mentioned my military rank and that shows you how
    desperate we are if I got promoted. [Laughter.]
        The military needs some help because they're right at the
    bottom now. I am honored to be part of the Reserve community.
    It is a big part of my life. I've served on that duty for 6\1/
    2\ years, 4 years overseas. I know what it's like to be
    stationed overseas and what families go through there. I served
    in the Air National Guard during the last war. I was a lawyer,
    so the only people mad at me were my clients. They probably
    wanted to kill me, but I've never been in harm's way. But I've
    been around the pilots and air crews that were deployed and my
    job was to take care of their families' legal needs and to take
    care of their legal needs when they deployed.
        When a military Reserve or Guard unit is deployed, it is a
    traumatic, patriotic event. Unlike an active duty base, there
    is no service where you can go down the street for counseling.
    There is no day care service where you can go down the street
    and have your children taken care of. The spouse left behind
    has to manage the world totally differently. We have to make it
    up as we go.
        The one thing I've learned from Operation Desert Storm to
    now is that if we do not do better with a benefit package,
    we're going to lose a lot of dedicated, patriotic people,
    because the stress on their families is immense.
        People ask, won't this take away from the Active Forces?
    Absolutely not. We're all here to help the active duty troops,
    but if we don't upgrade our benefit packages, people are just
    literally going to have to get out because they're leaving
    their jobs behind every 3 or 4 years and their families do not
    have the support network they deserve.
        Recruiting, retention, and readiness are what this bill's
    about, and very quickly, here's how it works. If you get
    activated, the first thing that happens to you is you get
    briefed up and trained up and you have a medical exam. Twenty-
    five percent of the people called to active duty from the Guard
    and Reserve community are unable to be deployed because of
    health care problems. We have a readiness problem in the area
    of health.
        The leading disqualifier health-wise is dental problems.
    One reason is most private plans don't have dental care. I
    would argue this proposal, for whatever it costs, pays for
    itself just by having the force more ready.
        Here's what happens when you're called up, because I've
    lived this. More times than not, your salary goes down and your
    mortgage payment and all the other obligations you have can be
    renegotiated in the short term, but it takes a long time to get
    there. There's a tremendous amount of stress on a family when
    they're called to active duty.
        More times than not, you have to leave your health care
    providers, if you have health insurance, that you've become
    accustomed to. When I was in Iraq, and I know the chairman and
    almost everyone I'm sure has been to Iraq at some point in time
    by now, eight of the nine flights that we took in theater were
    flown by Guard members. Seventy-five percent of people flying
    C-130s into theater are Guard crews or Reserve crews. The night
    crew was the Air Reserve crew.
        There were two pilots in one plane, both about to be first-
    time dads. One person worked for Southwestern Bell and the
    company had voluntarily extended health care coverage to his
    family so his wife did not have to change doctors and
    hospitals. The other guy was a realtor. His wife had to change
    doctors and hospitals because they went into TRICARE and that
    caused a great upheaval.
        What I am suggesting, along with Senator Daschle and the
    members of this subcommittee, is that if you're willing to
    serve your country as a Guard or Reserve member, and if you
    choose to and you're willing to be a premium, you can have
    access to the same doctors and hospitals year-round whether
    you're deployed or not. That will provide continuity of health
    care and it will be a great recruiting tool, because when I was
    called to active duty I served 100 days. I was one of four
    lawyers, and the chairman knows this very well. My partners
    took up the slack while I was gone, and let me tell you, the
    small business community is suffering greatly during this war.
        If you could pick up the health care costs by having the
    Guard or Reserve member contribute, it would be a great relief
    to the employer community out there. It would provide
    continuity of health care for readiness and it would be a great
    recruiting retention tool.
        When you serve and you get your 30 years in, and you have
    to wait until you're 60 to retire, that's the Cold War model.
    We need to change that model. The chairman has introduced an
    idea that will allow you to retire at 55 if you'll serve 30
    years, and it works this way. For every 2 years you serve past
    20, you retire a year earlier. I believe that's right, Mr.
    Chairman. If you serve 22, you get to retire at 59.
        I cannot stress enough that people when they hit 20 are
    punching out in droves because they can't take a another
    deployment cycle. It's too stressful on their employer and
    their family. If you want to keep the best and brightest around
    that extra 10 years, we need a hook.
        Small things go a long way in this community. If you ever
    go to a Guard or Reserve unit and you mention the idea of
    lowering the retirement age from 60 to 55, they will blow the
    roof off. They are paying attention to what we're doing here,
    their families are paying attention. They want to serve, they
    want to defend their country. That's what drives them to this,
    because it certainly is not the money. If we don't meet them
    half-way, we're going to have a blood-letting down the road.
        I know this bill is expensive--it's about $7 billion over 5
    years--but the question is, can you afford not to? My opinion
    is, it is time for us in a bipartisan fashion to act before we
    lose great Americans for no good reason. Thank you, Mr.
    Chairman.
        Senator Chambliss. Gentlemen, again, thank you very much
    for your leadership, and I will tell you we had a hearing on
    Tuesday of this week. We had a lot of stars in the room on the
    shoulders of the men and women that day. One of the witnesses
    came up to me afterwards and he told me he had a son who is in
    the Reserve who's serving in Iraq today, and he said, the most
    significant thing you all did for my son and his family was to
    allow her to have access to the commissary 12 months out of the
    year. He said, I know that it seemed like a little thing to you
    all, but it was big in the hearts of the men and women in the
    Guard and Reserve.
        Senator Miller and I co-chair the Reserve caucus. We had
    our first meeting this morning. We had a packed house of men
    and women who are supportive of the Guard and Reserve. It was a
    great meeting, great breakfast this morning.
        Once again, we thank you for your leadership. We look
    forward to continuing the dialogue with you as we move into the
    authorization process for this year. Thank you very much.
        Our next panel will include the Honorable Charles Abell,
    Principal Deputy Under Secretary of Defense for Personnel and
    Readiness, and the Honorable William Winkenwerder, Jr.,
    Assistant Secretary of Defense for Health Affairs. Gentlemen,
    we welcome you too and we look forward to your testimony. We
    have your written statements, but we will be happy to have you
    summarize your written statements, and they, of course, will be
    entered into the record in their entirety.
        Secretary Abell, welcome back to the subcommittee.
    Sometimes we forget you're sitting out there instead of sitting
    behind us like you did for so long and served us so well. But
    welcome here today. We look forward to your comments.

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

        Mr. Abell. Thank you, Mr. Chairman. I want to thank you for
    the opportunity to testify today on compensation, benefits, and
    quality of life programs. I also want to thank the Personnel
    Subcommittee for exercising the strong advocacy and support of
    these important benefits and programs.
        To begin today, I commend the brave men and women in
    uniform who are defending our Nation at home and abroad and the
    DOD civilians and contractors who support them. Like many of
    you, I just returned from Iraq, in fact this past weekend. I
    visited Iraq, Kuwait, and Bahrain, where I found great
    soldiers, airmen, marines, and coast guardmen performing their
    duty with professionalism and enthusiasm.
        I was heartened to see selfless activity throughout the
    theater, as units who have been serving in dangerous and
    austere conditions for a year are preparing to turn over to a
    replacement unit. Everywhere we went, units were working hard
    to leave the bases and facilities better than the condition in
    which they found them, improving the life for the incoming
    units.
        All of these troops realized that their hard work would not
    benefit them, but they are determined to make the quality of
    life for those that follow them better than what they
    experienced. Selfless service, Mr. Chairman, working for the
    welfare of others. That's why I love the members of the Armed
    Forces. They make me proud every day.
        I saw these military personnel on watch, on patrol, and
    while enjoying bustling exchange outlets and morale, welfare,
    and recreation (MWR) programs. Over the past year, I have
    visited many of the installations from which our troops deploy,
    from which Guard and Reserve members mobilized, and where
    families anxiously wait. In every location, I found commissary
    exchange and MWR activities, along with other health care and
    community support programs, are responding to the special needs
    that accompany the global war on terror.
        There have been and will continue to be challenges to
    support the front lines and the home front. At the same time,
    the compensation, benefit, and quality of life programs are
    positioning to change with transformation, a global posture
    review, and a round of base closures in 2005. I'm confident
    that collectively we are up to the task.
        DOD is committed, Mr. Chairman, to providing the best and
    most effective suite of compensation and benefits to our
    forces. We are in a competitive business in which we try to
    recruit the best and brightest young men to serve. We also
    compete with private sector businesses to retain the highly-
    trained professional leaders we develop during their service.
        We must provide our force competitive pay and benefits,
    good training, excellent, well-maintained equipment, and the
    personal attention to their family needs that they expect. The
    non-compensation benefits include world-class health care,
    commissary and exchange benefits, quality housing, and a safe
    place to work and relax.
        DOD is equally committed to the MWR programs, including
    child care and fitness programs that form the military
    community support structure and contribute to mission
    readiness. Further, we recognize that many retirees rely on the
    resale programs and MWR activities to supplement their limited
    incomes.
        We thank you for your support to provide emergency
    supplemental families for family assistance and morale
    programs. Mr. Chairman, I appreciate your support and that of
    this subcommittee. I'm prepared to answer any questions that
    you may have.
        [The prepared statement of Mr. 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. I look forward to answering
    your questions about compensation, benefits, and quality of life
    programs for our service members and their families.
        We are committed to meeting the many different personnel needs of
    the military as it transforms for the 21st century. We are committed to
    providing the most useful benefits and best programs for the active and
    Reserve component members and the military families who support our
    troops. Recognizing the substantial commitment our military members
    make to their professions, we have an important responsibility to
    monitor and manage emerging issues so we can support our total force
    defense strategy.
        In addition to providing an overview of programs that are familiar
    to you, I am happy to discuss the implementation efforts of new
    programs and modifications that you have authorized in the last year.

                                QUALITY OF LIFE

    Mobilization and Deployment Support
        Our service members are performing tough duty in austere locations,
    while their families cope with the stress and anxiety associated with
    extended separations. The American people have responded to Operating
    Enduring Freedom (OEF) and Operation Iraqi Freedom (OIF) with an
    outpouring of support for our troops and their families. Americans from
    every walk of life have extended a helping hand and generous spirit.
    Elementary school children are writing letters, Girl Scout troops are
    donating cookies, church groups are making quilts, and community
    service organizations are donating telephone calling cards and frequent
    flier miles. Corporate America donations are growing and helping to
    sponsor family reunions, special televised tributes, and celebrity
    entertainment. This support has been key to the continuing upbeat
    morale of our troops.
        The military services deserve credit and recognition for the fine
    job being done in quality of life support on the front. Exchange and
    morale, welfare, and recreation (MWR) personnel, including nearly 600
    civilians, are serving with our troops at forward-deployed locations.
    These dedicated personnel are operating exchanges, ships stores, and
    recreational programs--often 24 hours a day, 7 days a week--in the
    Persian Gulf, the Demilitarized Zone (DMZ), the Gulf of Aden, Iraq,
    Tajikistan, to name a few. This endeavor is made possible thanks to the
    support of emergency supplemental funds, assistance from Defense
    Commissary Agency's (DeCA) distribution systems, strong support of our
    industry partners, and donations from the American people.
        There are 52 Tactical Field Exchanges, 69 exchange supported/unit
    run field exchanges, and 15 ships' stores in the OEF and OIF theaters
    providing quality goods at a savings, and quality services necessary
    for day-to-day living. Goods and services offered include phone call
    centers, satellite phones, Internet cafes, video films, laundry and
    tailoring, photo development, health and beauty products, barber and
    beauty shops, vending and amusement machines, food and beverages, and
    name brand fast food operations. Goods and services vary by location
    based on troop strength and unit mission requirements.
        The Services continue to improve their capability to support troops
    in deployed locations, recognizing that recreation supports the
    military mission by sustaining morale and fostering unit cohesion. The
    Army has established 25 large and 17 small MWR sites in Iraq and 3 MWR
    support locations in Afghanistan. The MWR standard is now to provide
    fitness and sports equipment, reading materials and continuing
    education support, movies, video and board games, special events
    generated by the deployed staff, and entertainment through Armed Forces
    Entertainment and the United Service Organization (USO). There are
    computers at free, MWR-operated Internet cafes, to support e-mail
    communication, which are operating at 124 locations in Iraq with
    another 53 locations to be added by this summer.
        Armed Forces Entertainment, in cooperation with the USO, continues
    to provide much welcomed celebrity and professional entertainment to
    our forces engaged in the war on global terrorism. Robin Williams,
    Robert De Niro, Conan O'Brien, David Letterman, Drew Carey, Arnold
    Schwarzenegger, Gary Senise, Paul Rodriquez, George Gervin, Bruce
    Willis, Lee Ann Womack, Miss Universe, several National Association for
    Stock Car Auto Racing (NASCAR) and World Wrestling Federation (WWF)
    stars, and several National Football League (NFL) cheerleading squads
    are some of the many celebrities and entertainers who have generously
    donated their time to bring a taste of home to deployed forces.
        It is a longstanding Department of Defense (DOD) practice for
    service members to be able to make subsidized or free telephone calls
    home. The frequency and duration of health, morale, and welfare calling
    using official phones are determined by the commander so as not to
    interfere with the mission. The National Defense Authorization Act
    (NDAA) for Fiscal Year 2004 requires that prepaid phone cards, or an
    equivalent telecommunications benefit, be provided without cost to
    service members serving in OEF and OIF. The telecommunications benefit
    may not exceed $40 or 120 calling minutes per month. The Secretary of
    Defense (SECDEF) may accept gifts and donations in order to defray the
    costs of the program. The program terminates September 30, 2004.
        On the average, 50,000 health, morale, and welfare calls are made
    each day using the Defense Switched Network (DSN). The health, morale,
    and welfare calls provided at no cost to members serving in OEF and OIF
    approximate $9.36 per member per month. The military departments report
    the value of donated calling cards approaches $1 million a month, or
    about $5.19 per member. In addition, we will consider the value of
    email and Internet communications services provided at no cost to the
    deployed personnel.
        An average of 315,000 minutes of daily calling is made over
    ``unofficial lines'' at exchange operated calling centers ashore and
    afloat where members pay for the calls. The unofficial calling rates
    have dropped from $.375 to $.32 per minute at calling centers and from
    $.90 to $.76 per minute on satellite phones used in remote areas.
    Shipboard, calling rates are still $1.00 per minute. As we implement
    the act, the exchanges continue efforts to reduce the cost of calls
    from the theater.
        While theater conditions are not ideal to provide ``calling
    anytime, anywhere,'' we are committed to expanding available service as
    infrastructure becomes available. We have mounted an information
    campaign to insure that members choose the most economic calling method
    available and are looking at more convenient ways for the American
    public to purchase and donate the best value of calling minutes to
    service members.

    Family and Youth
        Support to family members is important during times of high
    operational tempo (OPTEMPO), both for the families of active duty and
    Reserve service members. Military communities offer comprehensive
    family support systems. Reserve families who live across America
    present a particular challenge. An aggressive effort is underway to
    reach families with easy access to accurate and timely information. The
    Military OneSource provides individual information and referral
    services by professional consultants concerning support available on
    the installation or in the community. The 24/7/365 toll-free telephone,
    e-mail and Web site services include information and referrals on
    parenting and child care, education, deployment and reunion, military
    life, health, financial, relocation, everyday issues (i.e. pet care,
    plumber), work and career, to name a few. Military OneSource is an
    augmentation, not a replacement, for family centers. Military OneSource
    is a joint project: each of the military services will have fully
    implemented the service by the end of fiscal year 2004. The Marine
    Corps was first to standup the program and is enjoying positive
    feedback and results.
        Family assistance centers have increased operations to
    unprecedented levels to meet family needs. Nearly 300 centers serve as
    the primary delivery system for military family support programs,
    including deployment support, return and reunion, and repatriation for
    active duty, Guard, and Reserve members and their families. The Navy
    Exchange System Command has a well-established ``pre-deployment''
    program partnership with the Navy and Marine family assistance centers
    to prepare members and their families for mobilization and deployments.
    The Army and Air Force Exchange Service recently launched a similar
    program designed to explain the exchange services, especially
    telecommunications, available to support deployed members and their
    families at home.
        Reserve Family Readiness remains a critical issue for the DOD as we
    continue to draw upon the skills and capabilities resident in the Guard
    and Reserve to support the global war on terrorism. To assist the unit
    commander to support the unit members and their families, approximately
    400 National Guard family assistance centers have been established to
    augment the family support system. These centers are established in
    communities where large densities of Guard and Reserve members have
    been mobilized. A ``Guide to Reserve Family Member Benefits'' informs
    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.
        We are working on a Web-portal, the new Military Homefront, and
    envision that it will become the central, trusted, up-to-date source
    for service members and families to obtain information about all the
    DOD quality of life programs and services, whether they are planning a
    permanent change of station move, dealing with deployments and family
    separations, or looking for the specials at the commissary and exchange
    stores. The site will contain quick links to Military OneSource, to
    SITES4 (a comprehensive military community information database), and
    to and other sites supporting military families.
        The military child development program continues to be a critical
    component in helping military parents fulfill their mission and focus
    on the job at hand and remains a high priority for the DOD. Stabilizing
    a child care arrangement can present a major challenge for families of
    deployed troops. To support families during deployment, emergency
    supplemental funding of $8 million in 2003 and $13.5 million in 2004
    has been used to provide child care for extended hours on nights and
    weekends; drop-in, respite, and mildly ill care; and extended services
    to the Guard and Reserve. Because deployment of a family member can
    adversely affect a child's behavior both academically and socially, the
    DOD has developed several avenues to support children of military
    families, their parents, the staff who work with children, and the
    teachers who educate military children.
        The DOD has the largest employee-sponsored child care program in
    the country serving over 200,000 children (birth-12 years of age)
    daily. Generally, military parents are young, often far from home, and
    without the support of families and neighbors. Child care for infants
    and toddlers is hard to find and expensive. Because 65 percent of
    military spouses are in the work force, quality, affordable child care
    is an economic necessity and quality of life issue for military
    families. We currently have child development programs at over 300
    locations with over 900 child development centers and 9,000 family
    child care homes. There are 174,410 spaces with a calculated need for
    an additional 41,000 spaces. Military child development programs are
    nationally recognized as models by early childhood advocates and
    professional organizations. Since two-thirds of our families live in
    civilian communities, we are sponsoring demonstrations to partner with
    child care providers outside the gate. This will expand our ability to
    provide more care especially during deployments.
        Installation youth centers provide computer labs with Internet
    connectivity to encourage communication between deployed parents and
    their children. In addition, tutoring programs are offered at youth
    centers to help children with their homework. Military life imposes
    unique demands on families. Military assignments often require families
    to be relocated far from family support networks and frequently require
    remote or temporary assignments. Relocation impacts all aspects of
    family life, spouse employment, family finances, a sense of belonging
    and security. On average, military families move twice as often as
    civilian families. During the adolescent years, relocating requires
    youth to re-establish peer support systems and friends at a very
    difficult stage of development. Further, adolescents tend to believe
    they have little control over the circumstances surrounding a move. The
    Department's Internet Web site-- ``Military Teens on the Move''
    (MTOM)--assists by providing relocation and outreach support to
    military adolescents ages 10-18. The goal of MTOM is to help teens make
    positive connections in their new community. We worked hard to ensure
    it would be appealing to youth and included their perspective and
    reflection of their world as it relates to every aspect of relocation.
    MTOM was expanded to include a second site, designed for school-age
    children ages 6-10.

    Education
        The Department of Defense Education Activity (DODEA) has been an
    active partner in supporting students and families during the war. All
    schools within DODEA have Crisis Management Teams to assist students
    and teachers during stressful times. Working in collaboration with
    military and civilian communities, they provide support before, during
    and after each deployment. This group of professionals fully
    understands the challenges faced by military students.
        The quality of DOD schools is measured in many ways, but most
    importantly, as in other school systems, by student performance. DOD
    students regularly score substantially above the national average in
    every subject area at every grade level on a nationally standardized
    test. On the last National Assessment of Educational Progress tests DOD
    fourth and eighth graders, domestically and overseas, scored
    significantly better than the national average. Eighth grade students
    overseas schools tied with Massachusetts for the highest score in the
    Nation in reading. Eighth graders stateside ranked fourth. Fourth grade
    students overseas scored a third place national ranking in reading. On
    the mathematics assessment, DOD fourth and eighth graders also scored
    significantly better than the national average. Eighth grade students
    overseas achieved the third highest score. African-American and
    Hispanic DOD students scored at the top of the charts when compared
    with their stateside public school counterparts in both reading and
    math.
        We have spent 3 years creating and implementing programs to improve
    the educational opportunities of 1.5 million school-aged children of
    active duty, Reserve and National Guard families attending the Nation's
    public schools. To gather data on issues affecting the mobile military
    child, DOD-sponsored Roundtables across the country in areas selected
    for their high degree of military presence (Texas, Georgia, California,
    and Washington State). Stakeholders included: military installation
    commanders, military parents and students, school superintendents and
    school board members, state legislators, state education department
    leaders, DOD leadership, and Service representatives. Together they
    discovered educational transition issues, discussed solutions, and
    promoted partnerships between military installations and surrounding
    school districts. Our advancements are showcased on the Web site,
    www.MilitaryStudent.org. It provides children, parents and educators
    with important information, articles, videos, guidebooks, and
    resources.
        We have initiated partnerships with the Military Impacted Schools
    Association to sponsor the National Conference for the Military Child
    to highlight national best practices for public school and military
    leaders. In association with Department of Education's Safe and Drug
    Free Schools and the National Child Traumatic Stress Network (sponsored
    by the University of California-Los Angeles (UCLA), Duke University and
    the Department of Health and Human Services) we produced guidebook
    resources.
        While enjoying great academic success, we continue to examine the
    most appropriate way to provide educational opportunities, recognizing
    that 1.5 million school-aged children of active duty, Reserve and
    National Guard families attend the Nation's public schools. As
    responsible stewards of the DOD resources, we began a study of the DOD
    stateside schools 2 years ago. The DOD Elementary and Secondary Schools
    Transfer Study addresses the question, ``Should the DOD operate schools
    in the continental United States?'' The study had no foregone
    conclusions and addressed each school and installation independently.
    Independent contractors performed the data collection phases of the
    study (facility evaluation and cost benefit analysis). DODEA conducted
    the Quality of Life Assessment of the study. A panel of three
    nationally recognized experts in school finance made recommendations
    for each school. We are undertaking a deliberate, thorough review of
    the study and recommendations. Once that is complete, the Military
    Services will be consulted for their input before any final decisions
    are reached.

    Financial Stability
        The financial stability of military families is important,
    particularly in light of large troop deployments and mobilization. To
    help families achieve financial stability, the DOD has embarked on an
    initiative that combines educating service members and their families
    on using their finances wisely, with expanding employment opportunities
    for military spouses. We have gained the cooperation of 26 prestigious
    Federal agencies and non-profit organizations and launched a Financial
    Readiness Campaign to enhance education and understanding of financial
    planning. We have already begun to see positive changes in the self-
    reported assessment of financial condition of service members.
        The Armed Services Exchange Military Star Card credit program helps
    members establish and maintain a good credit history at a favorable
    interest rate (currently 9 percent). During deployment, members have
    two options. Charging privileges may be suspended and no interest is
    charged or payments made to the account. Alternatively, charging
    privileges may be maintained and a 6 percent interest rate is accrued
    (the normal interest rate is 9 percent).
        We are partnering with Federal, State, and local governments and
    non-profit and private sector organizations to improve spouse
    employment and career opportunities and to address legislative and
    regulatory barriers that may inhibit financial stability and
    portability of jobs. Within our own family support structure, the
    commissary and exchange systems are the largest employers of family
    members--in fact, family members represent nearly a third of resale
    employees. The DOD schools and the child development program are also
    big employers of spouses. Through these initiatives the DOD seeks to
    enhance financial stability by promoting consistently reliable sources
    of income and the ability to save wisely to attain future life goals.
    Resale and Morale, Welfare and Recreation Programs
        The commissary benefit is an essential component of the non-pay
    compensation for members. In fiscal year 2003, the commissaries sold
    over $5 billion in groceries, a 1.5 percent increase over fiscal year
    2002. Since last year, the DeCA increased customer savings from 31.6
    percent to 32.1 percent. Customers are responding favorably to
    operating changes geared to improving merchandise selection and
    customer service. Results of the latest Commissary Customer Service
    Survey (CCSS) confirm that DeCA continues to provide both low prices
    and improved customer service. On a scale of 1 (very poor) to 5 (very
    good), commissary patrons ranked service at 4.42.
        I'd like to thank Congress for enacting legislation to carry out
    our Social Compact promise to provide unlimited commissary benefits for
    Reserve and Guard members. The Department implemented the new authority
    the same day the President signed it into law.
        The Under Secretary of Defense for Personnel and Readiness
    (USD(P&R)) seeks the regular advice of the senior military and civilian
    leadership to monitor the commissary operations and to work together to
    guarantee a viable commissary benefit well into the future. This role
    has been formalized through the establishment of the Commissary
    Operating Board (COB). Dr. Chu, USD(P&R), recently appointed Vice
    Admiral Charles W. Moore, Jr., Deputy Chief of Naval Operations, Fleet
    Readiness and Logistics, as Chairman, COB for a 2-year term. We are
    meeting regularly with Vice Admiral Moore to obtain his counsel on the
    commissary benefit and DeCA operations.
        Dr. Chu, Vice Admiral Moore, the senior military and civilian
    members of the COB, Major General Weidemer, Director, DeCA, and I, are
    working together to provide the commissary benefit in the most
    efficient and cost-effective manner to be able to guarantee that each
    dollar Congress provides from the American taxpayer is well spent. To
    do so means that commissaries that are no longer justified by their
    customer bases may close or be scaled back, while new stores may open
    where warranted and existing stores expand hours and stock assortment.
    In August 2003, I asked the military departments to more closely review
    33 commissary operations. Based on their reports, there are no current
    plans to close those commissary stores. While this scrutiny may make
    some uncomfortable, this annual review of the commissary system will be
    increasingly important in view of the Global Posture Review and the
    Base Realignment and Closure (BRAC) Commission round scheduled for
    2005.
        DeCA is fully funded in the fiscal year 2005 budget. DeCA has made
    significant progress by doubling the surcharge capital investment in
    stores, improving customer service ratings, and increasing the savings
    for commissary customers. While the DeCA budget has increased
    moderately each year since fiscal year 2000, sales increases have not
    kept pace. Thus, the taxpayer cost of each unit sold continues to
    rise--from $.2198 in fiscal year 2000 to $.2253 in fiscal year 2005. We
    believe that controlling the taxpayer subsidy while sustaining customer
    savings and improving customer service are mutually compatible. Through
    comparison to commercial industry best practices and performance
    indicators, we believe we can deliver the benefit in the most efficient
    and effective manner possible.
        In fiscal year 2003, DeCA realized $6 million in savings from
    produce acquisition efficiencies of the Defense Supply Center
    Philadelphia. Other areas of opportunity continue to be pursued in
    personnel management and case ready meat. Under competitive sourcing
    provisions, DeCA has competed 3,572 positions from fiscal year 2000-
    fiscal year 2003, out of a Business Initiatives Council target of 6,392
    to be competed by fiscal year 2009.
        Fiscal year 2003 commissary customer savings of 32.1 percent
    continue to exceed the 30 percent target. I stress that this level of
    savings is an average--in some locations savings approach 50 percent,
    while in other locales savings fall below 20 percent. Under the current
    pricing structure of ``cost plus 5 percent,'' DeCA has limited
    management tools to more consistently deliver the desired level of
    savings at each commissary location. Dr. Chu asked DeCA to conduct a
    study to determine the feasibility of adopting variable pricing while
    sustaining an average 30 percent savings on all products. Research on
    industry best practice suggest that DeCA could possibly deliver the
    desired 30 percent savings more consistently to commissary customers by
    using variable pricing. In response to the General Accounting Office
    (GAO) recommendations to consider a private label program, the study is
    also examining the potential for expanding DeCA's best value item
    program. A commercial study is underway and the results are expected in
    mid-March.
        In response to reduced tobacco sales, increased customer savings
    resulting in lower prices, and more accurate projections of the long-
    term effect of September 11, DeCA does not expect sales growth to track
    with the grocery industry. With sluggish commissary sales forecast,
    DeCA expects surcharge collections to continue around $260 million.
    Although several planned surcharge projects will be deferred this year,
    DeCA is maintaining a robust capital investment program with 11 major
    construction projects totaling $106 million.

    Exchanges
        The three exchange systems, the Army and Air Force Exchange Service
    (AAFES), the Navy Exchange Service Command (NEXCOM), and the Marine
    Corps Exchange, continue to operate independently. Each Exchange
    Service provides two important non-pay compensation benefits for
    authorized patrons: selling quality goods and services at low prices
    and distributing earnings as dividends to support the Services MWR
    programs. Typically, the MWR programs use the exchange dividends to
    support their nonappropriated fund construction programs. The armed
    services oversee the operations under broad Department policy.
        The exchanges and ships stores ended fiscal year 2003 with
    estimated sales of $10.5 billion and profits of $539.8 million. Sales
    increased $653 million (6.7 percent) over fiscal year 2002, but profits
    increased only $4.3 million (.8 percent), falling from 5.46 to 5.16
    percent of sales. The decline in operating efficiency is principally
    attributed to OIF expenses that were not fully funded by
    appropriations, pension accounting, and charges for early retirement
    incentives. Fortunately, last year's projections by the exchanges of
    collapsing dividends and capital programs did not materialize due to
    hard work by each of the organizations.
        The exchanges have identified $63 million in fiscal year 2004
    appropriated fund requirements in support of OEF and OIF. Congress
    provided $55 million in response to the DOD fiscal year 2004
    supplemental wartime request. Even with this strong taxpayer support,
    we are experiencing stress on the resale systems, both in terms of
    supporting contingency operations and producing a steady flow of
    funding for capitalization and MWR dividends.
        On a combined basis, the projected fiscal year 2003 MWR dividends
    of $312.4 million represent 58 percent of exchange and ships stores
    profits. MWR dividends increased $2.3 million over last year. However,
    MWR dividends have not recovered to fiscal year 2001 levels of $342.7
    million. In the meantime, the MWR programs are becoming increasingly
    dependent on exchange dividends and are reducing their MWR
    capitalization programs as appropriated funding is reduced, especially
    in the Army and Navy.
        In order to recover the previous levels of MWR dividends and
    capitalization, without adversely affecting exchange customer savings,
    customer satisfaction and capitalization programs, the exchanges must
    find ways to manage more efficiently. The three exchanges continue to
    work independently to reduce costs, especially at headquarters, and to
    raise customer satisfaction through improved business practices and
    information technology, often duplicating investments in systems and
    infrastructure.
        As a means to rectify this situation, I formed the Unified Exchange
    Task Force in response to the decision by the Deputy Secretary of
    Defense to unify the three military exchanges into a single business
    entity. The task is to deliver an actionable plan within 2 years based
    on the principles of the President's Management Agenda and the Defense
    Transformation Plan. The integration process must sustain and enhance
    the current exchange benefit so that service members, their families,
    and retirees continue to have access to quality goods at fair prices.
    Integration should help reduce costs by the elimination of redundancies
    and streamlining of processes. We should also realize greater economies
    of scale as the military and the retail environment continue to change.
        The task force has developed a number of tools and processes to
    guide implementation planning. Two governance groups were established.
    The first, an intermediate level, comprised of current exchange
    commanders and the exchange chief operating officers and chaired by the
    task force director, will monitor, review and approve various
    components of the implementation planning process itself. The second
    senior level of governance, composed of Joint Staff and Service three
    star leaders with exchange cognizance and Assistant Secretaries for
    Manpower and Reserve Affairs of the military departments and chaired by
    me, will resolve any contentious issues that may surface during
    planning and approve the draft implementation plan. Eight work teams,
    comprised of current exchange employees who are experts in their
    respective functional disciplines, have been chartered to develop the
    implementation plan. Two crosscutting work teams, also comprised of
    current exchange experts, will focus on end-to-end process integration
    and operating strategy development. The task force is collaborating
    with all teams providing analytic support, facilitators, and subject
    matter experts from the commercial retail community to assist in
    developing the plan.
        The exchange commanders, their chief operating officers, and the
    exchange experts involved on the teams are working hard to meet
    deadlines and deliver a plan on schedule. I expect to deliver a
    detailed draft implementation plan to Deputy Secretary of Defense
    Wolfowitz and Congress in early 2005. The DOD is keeping the
    subcommittee members and staff apprised of our progress and look
    forward to responding to your questions as we move further down the
    planning path.
        Each of the Service MWR programs is in sound financial condition,
    although nonappropriated fund operating results declined dramatically
    this year. The MWR programs attribute the decreased nonappropriated
    fund (NAF) operating performance to reduced exchange dividends,
    deployment, currency fluctuation, and higher NAF expenses to compensate
    for lower appropriated fund (APF) support. The continued vitality of
    the MWR program depends on sound management, a predictable stream of
    nonappropriated fund revenues, and also solid APF support of Category A
    and B activities.
        Category A activities (fitness, libraries, recreation centers,
    single service member programs, intramural sports, and unit activities)
    should be supported 100 percent by APF. The DOD sets a minimum standard
    requiring at least 85 percent of total expenses being supported with
    APF. Since 1995, DOD has improved APF support to Category A from 83
    percent to 91 percent in fiscal year 2003. Category B activities
    (childcare, youth programs, outdoor recreation, crafts and hobby shops,
    and small bowling centers) should be supported with a minimum APF of 65
    percent of total expense. Again since 1995, DOD has improved APF
    support to Category B from 57 percent to 67 percent in fiscal year
    2003. All of the Services, with the exception of the Marine Corps, have
    met minimum percentages of APF support for Categories A and B for
    fiscal year 2003. The Marine Corps has made a commitment to meet these
    minimum percentages in fiscal year 2004.
        Preliminary estimates indicate fiscal year 2005 APF budgets for
    Army and Navy MWR programs are expected to decline $140 million from
    fiscal year 2003 levels. We are working with the Army and Navy to
    determine the impact of these reductions on troops and families.
        Fitness is vital to force readiness. However, 60 percent of DOD
    fitness centers currently do not meet DOD fitness center program
    standards for facilities, staffing, programs or equipment. In an effort
    to quickly improve DOD fitness program delivery, the DOD has initiated
    a Fitness Business Initiative Council to seek public-private
    partnerships. We have accomplished contracted site surveys at four
    installations and have two more installations scheduled for study.
    These site visits will produce business case analyses and identify
    public-private venture strategies. Our goal is to test promising
    strategies at these six installations by June 2005. Public-private
    venture strategies that prove successful will be conveyed to the
    Services for their consideration to implement at other installations
    having a need to improve their fitness programs.
        Overall, capital investment in support of commissary, exchange, MWR
    and lodging programs is being maintained at about $1.1 billion each
    year, including the major construction programs. We appreciate the
    congressional approval to raise the minor construction threshold from
    $500,000 to $750,000 to coincide with the appropriated fund threshold.
        The NAF capitalization program, for both MWR and exchanges, is
    largely dependent on exchange profits. Last August we submitted and you
    have approved a fiscal year 2004 major construction program that
    included 66 NAF projects for exchange, MWR and lodging activities
    totaling $307 million. Reductions in exchange dividends and
    appropriated fund support of MWR activities have resulted in a 21-
    percent decline in average NAF capital investment for MWR programs,
    primarily in the Army and Navy. Military construction appropriations
    for MWR, including child care, are also declining.

    Transformation
        The DOD has started work on a new global rebasing strategy to
    better meet future national security strategy requirements. Although
    the operational dimensions are paramount, improving the quality of life
    of relocated forces and their families is also important. Therefore,
    the DOD intends to consider quality of life in its rebasing strategy
    recommendations. These considerations will include schools, health
    care, housing, childcare, spouse employment, crime and safety. Overseas
    installations produce significant commissary surcharge funding and
    exchange profits. We will be closely evaluating the base restructuring
    initiatives to assess the impact on surcharge and nonappropriated
    capital investment programs.
        At this juncture, we are not contemplating a moratorium on NAF and
    commissary surcharge construction programs. Concerns have been raised
    regarding the degree to which the DOD can continue to provide the MWR
    and resale benefits to authorized patrons. In preparation for BRAC
    2005, we are evaluating the current policy and statute governing
    commissary and exchange operations on closed installations, to include
    combined store operations, to determine if modifications to statute or
    policy are needed.
        The concept of combined commissary and exchange store operations as
    a mechanism to continue commissary and exchange support at closed and
    realigned installations has not been successful. The AAFES and NEXCOM
    have operated combined stores at four locations for several years:
    Homestead ARB, Florida; Fort McClellan, Alabama; NAS, Fort Worth,
    Texas; and Orlando, Florida. As required by statute, edible groceries
    are sold at cost plus 5 percent and the operations may receive
    appropriated funding up to 25 percent of the amount used by DeCA in the
    last year it operated the commissary. In our experience, the operating
    model results in losing grocery operations that require both
    appropriated funding from DeCA and NAF from the exchanges, which
    effectively reduces the MWR dividend.
        In two cases, Homestead ARB Florida and Fort McClellan, Alabama,
    insufficient usage by authorized patrons and operating losses resulted
    in the decision to close the stores by December 31, 2003. After
    providing the required 90-day advance notification to Congress, we
    delayed the closure date in order to respond to congressional concerns.
    Because of the limited number of active-duty personnel in the Orlando
    area, we propose to convert the combined store to an independent
    exchange operation and cease appropriated funding on July 1, 2004.
    Grocery items would continue to be available, but will be sold at
    exchange prices.
        With over two-thirds of active-duty families living off-base, more
    single parents, working spouses, deployments and OPTEMPO, there are
    special challenges in making sure that military families can and do
    take advantage of these important non-pay compensation benefits.
        To this end, we need to begin to identify and evaluate a variety of
    operating formats and ways to deliver the benefits in those locations
    and situations where the traditional store format is not effective.
    Rather than viewing these options as a death knell for the benefits, we
    aim to encourage DeCA, the Armed Services Exchanges, and our industry
    partners to design new approaches that may better meet the demand for
    these important benefits.
        We have reconfirmed the DOD's commitment to the commissary and
    exchange benefits as core elements of family support that provide
    valuable non-pay compensation to the military. Our aim is for all
    eligible customers to know the value of these benefits and to recognize
    them as measurable elements of compensation. We have set performance
    goals that should more consistently and effectively define, measure and
    communicate the commissary and exchange benefits.
        For the second year, the DOD contracted with CFI Group to measure
    commissary and exchange customer satisfaction and provide comparison to
    industry using the American Customer Satisfaction Index (ACSI). The
    commissary and exchange goals are to meet the ACSI average customer
    satisfaction scores for the grocery and department/discount store
    industries. Although each of the resale activities routinely measures
    their own customer satisfaction, the ACSI survey provides an objective
    assessment that is benchmarked to industry. During the first 3 years of
    their participation in the ACSI survey, we agreed to keep the DeCA,
    NEXCOM, and MCX results confidential so a baseline could be created. I
    think it is appropriate to recognize that, after receiving their first
    scores last year, NEXCOM and the MCX developed special emphasis
    programs, using the ACSI survey results to tailor to the areas of
    greatest importance to their customers. I am told that their customers
    responded to these efforts with higher ratings during the most recent
    survey.
        Work continues to define and measure commissary and exchange market
    basket savings and to benchmark capital investment and MWR dividends.
    The Military Exchanges are developing a uniform market basket and
    methodology for measuring savings and will use the NEXCOM contract to
    conduct the surveys. At this time, NEXCOM and AAFES have completed
    their surveys and report average savings of 15.8--16.7 percent
    (excluding sales tax, alcohol and tobacco products). The MCX results
    should be available mid-year.

                    IMPROVING MILITARY PERSONNEL MANAGEMENT

    Recruiting
        The success of our All-Volunteer Force starts with recruiting.
    During fiscal year 2003, the military services recruited 178,350 first-
    term enlistees and an additional 6,528 individuals with previous
    military service into their active-duty components, for a total of
    184,878 active duty recruits, attaining over 100 percent of the DOD
    goal of 184,366 accessions.
        The quality of new active duty recruits remained high in fiscal
    year 2003. DOD-wide, 95 percent of new active duty recruits were high
    school diploma graduates (against a goal of 90 percent) and 72 percent
    scored above average on the Armed Forces Qualification Test (versus a
    desired minimum of 60 percent).
        In the Reserve components, during fiscal year 2003, 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, except the Army National
    Guard, achieved their accession goals.
        We are closely monitoring the effects of mobilization on recruiting
    and retention, especially for the Reserve components. The Reserve end
    strength objective for fiscal year 2003 was achieved. Despite a
    recruiting shortfall, the Army National Guard did achieve its end
    strength, thanks to low attrition. The recruiting picture for the Army
    National Guard is much better through the first quarter of fiscal year
    2004--achieving 102 percent of mission thus far.
        We are optimistic that all Services will achieve their active-duty
    recruiting goals this fiscal year. All Services entered fiscal year
    2004 with a sizable delayed entry program, and all Services are ahead
    of their year-to-date goals for active-duty recruiting. 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 trend of an increasing percentage of Reserve component recruits
    without prior military service continues. Approximately 50 percent are
    now expected to come directly from civilian life. This is a result of
    high active component retention contributing to lower Individual Ready
    Reserve (IRR) populations.
        For 2004, all Reserve components are continuing to focus their
    efforts on maintaining aggressive enlistment programs by using 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. All Reserve components are achieving success in retention,
    with year-to-date attrition well below previous years.
        The Services accessed 17,909 commissioned officers to active duty
    in fiscal year 2003. The Marine Corps met its numerical commissioning
    requirement, with the Army and Navy finishing the year within 1.5
    percent of their requirement. The Air Force finished with a shortfall
    of 4 percent, almost exclusively in medical specialty direct
    appointments. In fiscal year 2004, active-duty officer accessions are
    on track in all Services for numerical success this year. In fiscal
    year 2003, the Reserve components reduced the shortfall of junior grade
    officers by adding an additional 1,455 officers to the force.

    Retention
        In fiscal year 2003, retention was good. Services met virtually all
    of their retention goals. The Marine Corps barely missed its goal for
    retaining first-term personnel and the Air Force fell slightly short of
    its goal for retaining individuals in their second term of service.
    Despite extended deployments, long separations, and dangers of combat,
    soldiers are staying with the Army. This year's fiscal year outlook
    remains optimistic as evidenced by our first quarter achievements.

    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                           First Quarter                      Fiscal Year      Fiscal Year
      Active Duty Enlisted Retention, First  Quarter, Fiscal Year 2004      Reenlisted          Goal       Percent of Goal     2004 Goal        2005 Goal
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Army
      - Initial........................................................           6,121            6,141             99.7           23,000           19,949
      - Mid Career.....................................................           5,046            5,276             95.6           20,292           23,528
      - Career.........................................................           3,411            3,330            102.4           12,808           11,881
    Navy
      - Zone A.........................................................    63.1 percent       56 percent         Exceeded       56 percent    Not available
      - Zone B.........................................................    76.3 percent       70 percent         Exceeded       70 percent    Not available
      - Zone C.........................................................    88.5 percent       85 percent         Exceeded       85 percent    Not available
    Air Force
      - 1st Term.......................................................      67 percent       55 percent         Exceeded       55 percent       55 percent
      - 2nd Term.......................................................    75.5 percent       75 percent         Exceeded       75 percent       75 percent
      - Career.........................................................    97.5 percent       95 percent         Exceeded       95 percent       95 percent
    Marine Corps
      - 1st term.......................................................           4,351            3,813      114 percent            5,958            5,850
      - Subsequent.....................................................           2,299            1,407      164 percent            5,628            5,900
    --------------------------------------------------------------------------------------------------------------------------------------------------------

        The Services are adequately resourced to meet their retention goals
    provided the tempo and economic conditions remain at the same level as
    the last fiscal year. We will be monitoring retention carefully should
    the tempo increase further, or if economic developments require us to
    consider implementing additional incentives.

    Joint Officer Management (JOM)
        The mission requirements of the military are more focused on joint
    tasks; in fact, Joint Task Forces now define the way in which we array
    our forces for war and that has filtered down into our training
    methods. Military organizational structures have evolved to meet these
    new joint warfighting requirements. The DOD's management processes for
    joint duty assignments, education, and training are governed by the
    1986 Goldwater-Nichols Act.
        Although we have experienced profound success, the operating
    environment we face has changed since the early days of the Goldwater
    Nichols Act. In response, the DOD is refining our strategic plan for
    joint officer management, education and training, and is using the
    ongoing, congressionally-mandated, Independent Study of Joint
    Management and Education to help evaluate and validate how we best meet
    the challenges of the early 21st century.
        We look forward to working with Congress in strengthening joint
    management and training. As a modest start, we are proposing several
    administrative reforms to simplify and streamline processes and program
    requirements: modifying the definition of a ``tour of duty'' to count
    multiple consecutive joint tours as one continuous tour; modifying
    annual reporting requirements by adding more meaningful metrics for
    measuring joint compliance; allowing the accomplishment of Phase II
    Joint Professional Military Education (JPME) in less than 3 months; and
    making permanent the joint promotions policy objective for the ``other
    joint'' category, which includes Joint Staff Officers (JSOs), to
    greater than or equal to the service board average.
        The DOD is assessing the entire career continuum of officer
    education and training, including joint requirements, 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, and we are moving quickly to match
    policy to today's operational environment. We seek Congress' assistance
    in making these changes in law that might be necessary to support those
    common objectives.

    Personnel Management Support
        Today, management of our military personnel is hindered by numerous
    redundant and disconnected systems that do not support streamlined
    business processes. The DOD has taken on the task of developing a
    single, fully integrated military personnel and pay management system.
    The Defense Integrated Military Human Resources System (DIMHRS) will
    provide an end-to-end, integrated personnel and pay system for all
    military services, including their active, Reserve, and National Guard
    components. As the cornerstone for military personnel transformation,
    DIMHRS is the vehicle for enabling reengineered business processes,
    replacing inefficient and failing systems, reducing data collection
    burdens, and, most importantly, ensuring timely and accurate access to
    compensation and benefits for all soldiers, sailors, airmen, and
    marines. We view this system as critical to providing quality of life
    support to our service members and their families as well as
    streamlining personnel and pay management for the Services and
    providing essential management data to all levels of the DOD.
        DIMHRS is being built on a commercial off-the-shelf (COTS) platform
    with full support and participation from all military components and
    the Defense Finance and Accounting Service. We are managing
    requirements and ensuring that the system will implement common
    business rules and common data across the DOD. This system is an
    investment in our infrastructure that will enable us to track personnel
    as they mobilize, deploy, and redeploy while ensuring that all service
    members have a complete record of service that ensures that they will
    receive all benefits to which they are entitled. We appreciate your
    support for this effort.

    Building a Foreign Language Capability
        Lessons from current operations and the global war on terrorism
    have demonstrated the need for increased language ability and
    accompanying area knowledge within our Armed Forces, and an increased
    emphasis on languages reflective of the post-Cold War threat.
        We need to change the way foreign language expertise is valued,
    developed and employed within the DOD, and language needs to be viewed
    as a military readiness capability. For present and future operations,
    we need members of the Armed Forces who can understand and communicate
    in languages other than English. This includes service members with
    language ability more sophisticated than that routinely achieved
    through our current language training and public and private education
    systems. We need a way to equip deploying forces with a sufficient
    ability to communicate in the language of the land. We also need a plan
    for surging capability beyond that of the military forces, when
    required. We need service members and leaders who understand the
    complexities of languages and cultures in a global society.
        Much work needs to be done in this area, and we have engaged a
    number of studies to inform our decisions. We have already initiated
    the development and employment of crash courses for troops deploying to
    Iraq. The Army is executing a pilot IRR program that targets the
    enlistment of Arabic speakers for support as linguists.
        With over 1,300 faculty and 3,800 students, the Defense Foreign
    Language Institute's Foreign Language Center (DLIFLC) is the world's
    largest foreign language school--and our primary source of language
    instruction. An oft-quoted statistic is that DLIFLC has more faculty
    teaching DOD's five highest enrollment languages than all U.S. students
    graduating in those languages nationwide. It is an institution whose
    product--a language qualified graduate--is critical to global U.S.
    military operations. Our first area of emphasis is to ensure that this
    school house can support our language capability requirements.
        Our fiscal year 2005 goal is to ensure the center can meet critical
    requirements by teaching basic language to troops prior to deployment,
    to improving training development, and to improving the capability to
    produce linguists with an advanced degree of language competence.

    Rest and Recuperation (R&R) Leave
        Over 50,000 service members and DOD civilians have participated in
    the R&R Leave Program in support of OIF and OEF. The R&R Leave Program
    is vital to maintaining combat readiness when units are deployed and
    engaged in intense operations. Feedback from service members
    participating in the R&R Leave Program indicates it is a successful
    program offering service members a respite from hostile conditions, an
    opportunity to leave the area of responsibility (AOR), release stress,
    spend time with their family/friends, and return reenergized. R&R leave
    will continue to be offered to military members and DOD civilians
    deployed in central command (CENTCOM) AOR in support of the global war
    on terror at the discretion of the theater commander.

    Citizenship
        The DOD is working closely with the Department of Homeland
    Security's Citizenship and Immigration Service (CIS) to expedite
    citizenship applications for immigrants who serve honorably as members
    of our Armed Forces. Approximately 37,000 active duty and Reserve
    personnel are non-U.S. citizens and approximately 7,000 of these
    personnel have applied for U.S. citizenship. The CIS established a
    special office in their Nebraska Processing Center to expedite military
    member citizenship applications. Section 329 of 8 U.S.C. provided an
    exception where the President can authorize immigrants serving in the
    U.S. Armed Forces during times of conflict to apply for citizenship
    after 3 years of honorable service. Public Law 108-87 reduced this
    waiting period to 1 year. The average time for processing expedited
    citizenship applications has been reduced from 9 months to
    approximately 90 days. The military services are informing non-U.S.
    citizen military members of the opportunity for expedited citizenship
    through radio and television, press releases and periodic messages
    through command, personnel, legal and public affairs channels. However,
    finalizing citizenship requirements for military members overseas has
    been problematic. We are working with the CIS to expand authority for
    conducting naturalization interviews and swearing-in ceremonies
    overseas. In the meantime, the DOD authorizes emergency leave for
    service members who need to complete citizenship processing, and seeks
    to identify members with pending citizenship applications in order to
    ensure they are processed and finalized before they deploy.

    Sexual Assault
        Sexual assault will not be tolerated in the DOD--that message is
    clear throughout the chain of command. It is a crime that is punishable
    under the Uniform Code of Military Justice (UCMJ). Commanders at every
    level have a duty to take appropriate steps to prevent it, to protect
    victims, and hold those who commit such offenses accountable.
        Each of the Services has sexual assault policies for the health
    care support of victims. This support is available to service members
    both in the United States, at overseas duty stations, and in the
    current deployment theater.
        Last summer the Fowler Panel, an independent panel, investigated
    allegations of sexual misconduct at the Air Force Academy. Their report
    made recommendations with a single priority in mind: the safety and
    well-being of the women at the Air Force Academy. Air Force senior
    leaders are implementing those recommendations now. In addition, the
    Defense Task Force on Sexual Harassment and Military Service Academies
    will assess and make recommendations, including any recommended changes
    in law, relating to sexual harassment and violence at the United States
    Military and Naval Academies.
        However, prevention through education, review, and reinforcement of
    what constitutes sexual assault and related crimes, and their
    consequences is key. Development and sustainment of working
    environments that instill trust among all members must begin at the
    lowest level of leadership and continue to the top of the Department.
    My Deputy Assistant Secretary of Defense for Force Health Protection
    and Readiness, Ellen Embrey, now leads a SECDEF-appointed task force to
    ensure proper command climate and infrastructure support is in place to
    safeguard the victims of sexual assault.

    Domestic Violence/Victims Advocacy
        As with sexual assault, domestic violence will not be tolerated in
    the DOD. It is an offense against our institutional values and
    commanders at every level have a duty to take appropriate steps to
    prevent it, protect victims, and hold those who commit them
    accountable.
        The DOD continues to make significant progress in addressing the
    issue of domestic violence within military families. We remain
    committed to implementing the recommendations made by the Defense Task
    Force on Domestic Violence and have made major strides toward that
    goal. Our efforts encompass a range of activities including legislative
    and policy change, training for key players in our efforts to prevent
    and effectively respond to domestic violence, and collaboration with
    civilian organizations.
        We worked closely with Congress last spring and summer to create or
    change legislation pertaining to transitional compensation for victims
    of abuse, shipment of household goods for abused family members, and a
    fatality review in each fatality known or suspected to have resulted
    from domestic violence or child abuse. These changes are reflected in
    the National Defense Authorization Act (NDAA) for Fiscal Year 2004.
        The DOD has partnered with the Office on Violence Against Women of
    the Department of Justice (DOJ) for several joint initiatives that
    include training for law enforcement personnel, victim advocates,
    chaplains, and fatality review team members. As a part of our
    collaboration with the DOJ, we are conducting demonstration projects in
    two communities near large military installations. The goal of the
    projects is to develop a coordinated community response to domestic
    violence focusing on enhancing victim services and developing special
    law enforcement and prosecution units. We know that military and
    civilian collaboration is critical to an effective response to domestic
    violence since the majority of military members and their families live
    off the installations.
        The DOD partnered with the Battered Women's Justice Project and the
    National Domestic Violence Hotline to conduct training for the Hotline
    staff to provide information about the military to enhance Hotline
    staffs' ability to assist military related victims who contact the
    Hotline. We are also working with the Family Violence Prevention Fund
    to develop a comprehensive domestic violence public awareness campaign
    that will be disseminated throughout the DOD.
        We have initiated implementation of 45 of the nearly 200 task force
    recommendations, focusing on recommendations pertaining to victim
    safety and advocacy, command education, and training key players who
    prevent and respond to domestic violence such as law enforcement
    personnel, health care personnel, victim advocates, and chaplains.
        We are pleased with the progress we have made but realize there is
    more work to be done. We are working to ensure that the policies we
    implement are viable across all Services both in the continental United
    States and overseas, and minimize the possibility of unintended
    consequences that compromise the safety of domestic violence victims
    and their children. We collaborate closely with those who will be
    responsible for implementing the policies we write to maximize their
    effectiveness across the Department.

                              ENTITLEMENTS GROWTH

    Military Compensation
        Sound compensation practices are essential to attracting and
    retaining the caliber of individuals needed for a robust All-Volunteer
    Force. With the support of Congress, we have made great progress over
    the last few years in improving our members' basic pay. Since fiscal
    year 2000, basic pay has increased 29 percent. It is particularly
    noteworthy that mid-grade noncommissioned officers, who represent the
    core of experience and talent in our military services, have seen their
    pay increase an average of 35 percent.
        Likewise, we applaud Congress' continued support for reducing
    military members' out-of-pocket housing costs, which stood at nearly 18
    percent in fiscal year 2000. Through Basic Allowance for Housing
    increases during each of the past few fiscal years, we will achieve our
    goal of totally eliminating average out-of-pocket housing costs with
    this year's President's budget.
        To capitalize on our successes in recruiting and retention and
    sustain that momentum, we must continue to invest in items that
    leverage readiness. Authorities for flexible compensation tools enable
    the DOD to tailor incentives to respond to specific readiness demands
    and provide the capacity to efficiently start and stop them. For
    example, we are seeking an increase in the ceiling for Hardship Duty
    Pay, which will furnish the DOD with the ability to compensate
    appropriately members who are repeatedly deployed away from their
    families and placed in harm's way in support of contingency operations.
    Additionally, increased use of the recent Assignment Incentive Pay
    authority will provide a viable means of incentivizing hard-to-fill
    duty stations, such as Korea and other remote locations, which directly
    impacts unit readiness in a positive way.
        Conversely, we discourage the expansion of entitlements and the
    creation of new ones that do not leverage readiness. For example,
    TRICARE for non-active reservists and their families could have a long-
    term fixed cost of $1 billion annually with little payoff in readiness.
    The phase-in of concurrent receipt for retirees with at least a 50-
    percent disability and expansion of the Combat-Related Special
    Compensation program, while not directly reflected in the Department's
    budget, will cost $6.1 billion a year within 10 years ($4.1 billion
    from the DOD retirement fund and $1.5 billion from the Department of
    Veterans' Affairs (VA) entitlements), funds that could potentially be
    applied to areas that better address national security needs. The chart
    below illustrates the growth in the cost of recent new entitlements
    since 2000, projected out to 2010.

        This year, we understand Congress may be considering additional
    expansions of entitlements programs, such as lowering the age Reserve
    retirees receive their annuity from 60 to 55. Preliminary, rough
    estimates indicate that this could cost $6.6 billion in payments,
    nearly $4 billion in added health care costs, and $14 billion in
    Treasury outlays over the next 10 years. Yet, we have no evidence this
    would help shape the force or improve readiness; most reservists who
    would immediately benefit are already retired. Proposals to eliminate
    the reduction in survivor benefits that takes place at age 62, from 55
    percent to 35 percent of military retired pay, when social security
    provides the difference, could cost $800 million the first year and
    exceed $1 billion per year within 5 years. A 5-year phase-in has been
    scored by Congressional Budget Office (CBO) to cost $7 billion over 10
    years. The phase-in of concurrent receipt, if expanded to full
    concurrent receipt, would equal $8.4 billion a year within 10 years
    (almost 40 percent greater than the newly-passed benefits).
        More long-term entitlements are not the answer to our readiness
    issues. We need flexible compensation and benefit authorities that can
    focus benefits to support members deployed to a theater of hostilities,
    as well as their families, and can be terminated when no longer
    necessary. We firmly believe authorities of the type that leverage
    readiness best serve the national defense.
        The recent temporary increases in the rates of Imminent Danger Pay
    (IDP) and Family Separation Allowance (FSA) have certainly been
    beneficial to our deployed forces, but cost us over $200 million
    annually in payments to members not in Iraq or Afghanistan--especially
    the increase in FSA. We would prefer to use more flexible compensation
    tools that allow us tailor incentives to respond to specific readiness
    demands and provide the capacity to efficiently start and stop them.
    But, we also do not want to propose anything that would cut the pay of
    members serving in harms way. While we do not yet have a specific
    proposal for you pertaining to IDP and FSA, we do believe the increase
    in IDP is probably not unreasonable. But the 150-percent increase in
    FSA is excessive, especially considering it is payable worldwide,
    including in the United States. We would probably prefer to see a
    smaller increase, with some form of grandfather at the current rate for
    anyone already receiving that rate. We plan to have a specific proposal
    ready in the near future.

    Payments to Disabled Retirees
        While the DOD does not favor further expansion of the concurrent
    receipt related entitlements, we do take very seriously our obligation
    to fully implement the programs Congress recently established for our
    disabled retirees. In November 2003, the NDAA for Fiscal Year 2004
    provided for a 10-year phase-in of concurrent receipt for retirees with
    at least a 50 percent VA disability rating, effective January 1, 2004.
    Those rated 100 percent disabled would receive $750 a month in the
    first year. On February 2, we made initial payments to over 144,000
    eligible retirees, representing over 90 percent of all those eligible.
    Those who were not paid have records that require manual computations
    due to exclusions for part of their military disability retired pay,
    garnishments, or divisions of retired pay with former spouses.
    Nonetheless, when determined, all their payments will be retroactive to
    the 1st of the year.
        Much more complicated is the 1-year-old Combat-Related Special
    Compensation (CRSC) program. To comply with the law in this program,
    the DOD must make what are often complex determinations of the source
    of a disability using decades old, often incomplete, paper records
    provided by the retiree or the Department of Veterans' Affairs. We have
    been continually adding resources to accomplish this mission and now
    have about 100 people working full-time reviewing records and managing
    the CRSC program. To date, we have received nearly 42,700 applications
    for CRSC, reviewed over 44 percent of them, and approved 10,400. We
    anticipate tens of thousands of new applications following the November
    expansion of the program, but will soon be ready to accept and process
    them. Again, no matter when received or approved, CRSC payments will be
    retroactive to applicable program effective date, with back payments
    made in the first check or payment.

                                   CONCLUSION

        In conclusion, Mr. Chairman, let me emphasize that everywhere I go
    on my visits to military communities, and to visit troops who are
    deployed, I hear of the tremendous value for these programs and
    benefits. In today's world, when we ask so much of our service members
    and their families, it is of paramount importance to provide the
    support they require. I thank you and the members of this subcommittee
    for your own outstanding and continuing support of the military
    personnel community.

        Senator Chambliss. Thank you very much. Dr. Winkenwerder,
    welcome, and we look forward to hearing from you.

        STATEMENT OF HON. WILLIAM WINKENWERDER, JR., ASSISTANT
                SECRETARY OF DEFENSE FOR HEALTH AFFAIRS

        Dr. Winkenwerder. Thank you, Mr. Chairman. Distinguished
    members of the subcommittee, thank you for the opportunity to
    discuss the DOD military health system. Over the past year, the
    military health system has performed superbly on all fronts,
    supporting operations in Iraq and Afghanistan, ensuring troop
    readiness, supporting our activated guardsmen and reservists
    and their families, and we've also awarded a whole new suite of
    TRICARE contracts. There's been significant progress in all
    areas.
        Despite serving in some of the most austere environments on
    earth, our disease and non-battle injury rates among our
    deployed personnel are the lowest ever and the lowest really
    that we're able to determine in military history. The Services
    have improved medical screening to ensure that our forces are
    healthy and fit to deploy and they've increased emphasis on
    theater surveillance, allowing the commanders and the medics to
    identify and then mitigate risks.
        The Services evaluate all members today pre- and post-
    deployment, and permanent health records are maintained. I have
    some good news with regard to our returning service members
    thus far. Over 90 percent of 300,000 re-deploying service
    members who have come back so far have reported that their
    health is either good, very good, or excellent. I think that's
    good news.
        In January, we initiated a quality assurance program to
    monitor Service health assessment programs, including some
    periodic visits to the bases to assess program compliance. We
    continue to immunize troops from diseases and agents that could
    be used as biological weapons, such as anthrax and smallpox.
    Vaccines against these threats are based on sound scientific
    principles and they're verified by outside experts. To date,
    we've vaccinated more than 1 million service members against
    anthrax and about 580,000 against smallpox.
        Ensuring medical readiness of activated reservists and
    providing full coverage for their families is among our highest
    priorities. As we proceed--and I'm pleased to talk about this
    issue further, as I know you have an interest in it--I believe
    we must carefully review the cost of providing increased
    entitlements and benefits to reservists who have not been
    activated and perhaps look at a limited demonstration to test
    the program's feasibility and the assumptions that some have
    about what the beneficial impact may be.
        To support combat operations in Iraq and Afghanistan,
    medical care was deployed far forward, available in many
    instances just within minutes of injury. Over 98 percent of
    casualties who arrived at medical care survived their injuries,
    and one-third of those returned to duty within 72 hours.
        Far-forward medical care, improved personal protection, and
    operational risk management techniques are saving lives. For
    those seriously ill or injured, we rapidly evacuate them to
    definitive care and use intensive care teams to treat patients
    during transit, including in the back of C-130s. Specialized
    treatment programs are available at our larger medical centers,
    like Walter Reed and Bethesda. Walter Reed has a world-class
    amputee management program.
        Mental health is integral and is very important to overall
    health, and the Services have full mental health service
    programs at home and in support of our deployed service
    members. These include prevention--suicide prevention and
    stress management programs that are supported by the leadership
    and that are tailored to the particular environment.
        Increased pre-deployment screening has created a backlog of
    activated reservists who are waiting for clearance to deploy.
    The Army has worked aggressively to reduce this backlog, and
    the number of troops in that status is declining.
        The DOD has approved the transition of care for service
    members to the Department of Veterans' Affairs (VA). VA
    counselors today advise the seriously injured or those that are
    really ill on benefits, disability ratings, and claims
    processing before the member is discharged from the hospital.
    DOD and VA share health information electronically and we've
    implemented the first stage of our computerized electronic
    health record, and we're pursuing full interoperability between
    our record system and the VA's.
        One recent initiative that we've undertaken to better
    support our families is in the area of obstetrical and newborn
    care. Childbirth is a special time for families and it's
    critical that we in the military embrace the unique
    requirements of our beneficiaries. Our health care personnel,
    we believe, know first-hand about the special aspects of
    military life, including the mentioned challenges of family
    separations. We want to be our beneficiaries' first choice for
    health care, and it starts at birth.
        To improve TRICARE, we've reduced the number of TRICARE
    regions from 11 to 3, and the number of contracts from 7 to 3.
    Beneficiaries, as we implement these new contracts over the
    next 6 to 8 months, we believe will realize improved access to
    care, better customer service, and enhanced quality. We've
    markedly improved our claims processing and now enjoy industry-
    leading performance. In 2003, we processed over 104 million
    medical claims. That's a lot of claims. Ninety-nine percent of
    those were processed within 30 days.
        A new TRICARE governance plan will streamline management
    and enhance customer service. We strengthened our direct care
    system, operated by the uniformed medics and our purchased care
    partnerships, by increasing flexibility and interoperability.
    Three new TRICARE regional directors will integrate the
    military direct care system and the civilian networks to ensure
    better beneficiary support.
        We're employing another new position, what we're calling
    the senior market manager in a local area, for example, like
    here in the National Capital area, to optimize the integration
    of service across the Army, Navy, and the Air Force facilities.
        The DOD actively monitors the quality of care within the
    military system. It helps us to use a series of metrics and
    measures and data and benchmarks from the industry, and I'm
    pleased to say that we performed very well in many areas, and
    we're working hard to improve in all areas.
        Defense health program costs continue to rise. In 2003, we
    experienced a 7-percent increase in new users and we expect the
    same this year in 2004. The growth is the result of increased
    use of TRICARE by our eligible beneficiaries. To fund this
    growth, our fiscal year 2005 budget is 15 percent more than
    this year. The costs of the Medicare-Eligible Retiree Health
    Care Fund, which pays for the TRICARE For Life benefit, are not
    reflected in this request, nor is the funding for the global
    war on terrorism.
        We need your help in restoring flexibility to manage our
    Defense health resources. With the new contracts and the
    implementation of a prospective payment system, we need
    flexibility to move funds between the direct care system and
    the private sector care system. Currently, for the military
    treatment facility, what are called revised financing funds are
    in the private sector budget.
        Requiring that we obtain re-programming limits our
    flexibility, so we appreciate Congress' intent and desire to
    protect the military facility funding. However, the current
    restrictions are having an adverse effect. We urge that you
    allow us to manage the Defense health program as an integrated
    system so that funds can flow on a timely basis to where the
    care is needed.
        Let me just close by saying I've been on the job now for
    2\1/2\ years and I've had the opportunity to visit military
    medical units worldwide. I'm extremely proud of the men and
    women who serve their country in the military health system.
    They're courageous, dedicated, and caring professionals whose
    talents, in my judgement, are second to none. They're America's
    best and I'm proud to serve with them.
        The initiatives I've outlined focus on quality,
    effectiveness, and satisfaction. They ensure readiness while
    providing a valued benefit. With your support, we'll continue
    to offer world-class health care to the men and women serving
    in our military. Thank you, and I'd be happy to answer any of
    your questions.
        [The prepared statement of Dr. Winkenwerder follows:]

              Prepared Statement by Hon. William Winkenwerder, Jr.

        Senator Chambliss, Senator Nelson, distinguished members of the
    subcommittee, I am honored to have this opportunity to discuss with you
    the Military Health System (MHS). Military medical personnel have
    superbly supported military operations in Afghanistan, Iraq, and
    elsewhere. We have awarded a full suite of new TRICARE contracts,
    extended our sharing and cooperative efforts with other Federal
    agencies, and continued to provide quality healthcare to our 8.9
    million beneficiaries. Using the balanced scorecard approach to
    strategic planning, we have focused on readiness, effectiveness of our
    health plan and patient satisfaction with access to care.

                         MILITARY HEALTH SYSTEM FUNDING

        Before describing our activities, I would like to address our
    funding situation and highlight initiatives to manage costs. Defense
    Health Program (DHP) costs continue to rise due to increased
    utilization of the MHS. The fiscal year 2005 DHP funding request is
    $17.640 billion for operation and maintenance (O&M), procurement, and
    research, development, test, and evaluation (RDT&E) appropriations to
    finance the MHS mission. We project total military health spending to
    pay for all health-related costs including personnel expenses, and
    retiree health costs, to be $30.4 billion for fiscal year 2005. In
    2003, the DHP experienced a 7-percent increase in new users, and we
    anticipate another 7 percent growth for 2004. This growth is the result
    of increased health care costs in the private sector, and the
    consequent election of MHS-eligible beneficiaries, mainly our retirees,
    to drop private insurance coverage and rely upon TRICARE. Additionally,
    activation of Reserve component members adds to the number of MHS-
    eligible beneficiaries. To fund this growth, the O&M appropriation
    submission is 15 percent more than the fiscal year 2004 appropriated
    amount.
        The DOD has taken several actions to better manage resources. The
    MHS is implementing performance-based budgeting, focusing on the value
    of services delivered rather than using other cost methods. We are
    introducing an integrated pharmacy benefits program that uses a
    standardized formulary that is clinically and fiscally sound. Federal
    pricing of pharmaceuticals in the TRICARE retail pharmacy program will
    significantly contain costs. Quality management programs continue to
    ensure that care provided is clinically appropriate and within
    prescribed standards.

    Performance-based budgeting
        With this budgeting approach, we intend to base military treatment
    facility (MTF) budgets on output or work-related factors such as the
    number of enrollees, hospital admissions, prescriptions filled, and
    clinic visits, rather than on anticipated requirements such as number
    of staff employed, increased supply costs, and historical workload. We
    will institute a Prospective Payment System for MTFs with capitation
    payments for their enrollees. We will also include a fee-for-service
    funding mechanism for MTFs that is tied to the value of care provided
    for beneficiaries not enrolled at their facility.

    Integrated pharmacy benefits program
        The redesign of our pharmacy programs into a single, integrated
    program, beginning in June 2004, simplifies and allows us to more
    effectively manage this $4 billion benefit. We will standardize
    formulary management, achieve uniform access to all medications,
    enhance portability, and involve beneficiaries in formulary decision-
    making. We will promote the use of more cost-effective products and
    points of service. Application of Federal pricing for the retail
    pharmacy benefit will allow the Department to obtain manufacturer
    refunds for medications obtained through this point of service. We
    currently use Federal pricing for mail order and MTF pharmacy services.

    Quality management programs
        We continue to improve the quality of care delivered throughout the
    MHS, employing sound management practices and metrics to ensure
    appropriateness of care. We monitor the health of our population using
    Healthy People 2010 goals as a benchmark, and we measure the quality of
    care provided using Joint Commission on Accreditation of Healthcare
    Organizations Oryx indicators.
        Our new health care contracts use best-practice principles to
    improve beneficiary satisfaction and control private sector costs.
    Civilian partners must manage enrollee healthcare and can control their
    costs by referring more care to MTFs. In concert with these new
    contracts, and the implementation of the Prospective Payment System to
    create financial incentives for MTFs, we need the flexibility to flow
    funds between MTFs and the private sector. Currently, MTF revised
    financing funds are in the private sector budget activity group.
    Restricting the movement of DHP funds does not allow MTFs to use these
    revised financing funds to increase productivity and workload without
    prior-approval reprogramming. We appreciate the congressional intent to
    protect direct care funding. However, the current restrictions on
    funding adversely affect MTFs as well as care in the private sector. We
    urge you to allow MTFs and the MHS to manage the DHP as an integrated
    system. Funds must be allowed to flow on a timely basis to where care
    is delivered. We need your help in restoring flexibility needed to
    manage DHP resources across budget activity groups.

                            FORCE HEALTH PROTECTION

        The Department of Defense's (DOD) Force Health Protection program
    is designed to preserve and protect the health and fitness of our
    service members from the time they enter the service until their
    separation or retirement. The Services have utilized preventive health
    measures, environmental surveillance, and advances in military medicine
    to support military operations worldwide. Despite deployments to some
    of the most austere environments imaginable, observed disease non-
    battle injury and illness rates remain the lowest in modern military
    history. This is the result of increased screening, line commitment and
    service member education.

    Health assessments
        We ensure a healthy force by applying high medical standards at
    accession, conducting periodic medical and dental examinations and
    health assessments, providing required immunizations, and providing
    high quality health care when needed. Learning from the Gulf War, our
    policy now requires that before and after deployment service members
    receive health assessments to ensure health readiness and to identify
    and capture any health issues upon their return. Records are maintained
    in the individual's permanent health record and an electronic copy of
    the post-deployment health assessment is archived for easy retrieval.
    We have started an aggressive quality assurance program to monitor
    conduct of these health assessments.
        Besides conducting a pre-deployment health assessment, deploying
    personnel are provided required personal protective and medical
    equipment, serum samples are obtained, dental readiness is determined
    and health briefings are conducted.
        We use post-deployment health assessments to gather information
    from deployed service members and assist medical personnel evaluate
    health concerns or problems that may be related to deployment.
    Individual discussions with licensed health care providers help to
    determine the need for more detailed medical follow up care. Blood
    samples are collected within 30 days of redeployment and are retained
    in the DOD Serum Repository. Post-deployment health assessments and
    deployment health records are maintained in the permanent health
    record, which is available to the Department of Veterans' Affairs (VA)
    upon the service member's separation from the military.
        In January, I established a deployment health quality assurance
    program. The Defense Medical Surveillance System (DMSS) provides
    periodic reports on centralized pre- and post-deployment health
    assessment programs, as well as reports on service-specific deployment
    health quality assurance programs, and includes periodic visits to
    military installations to assess program compliance. DMSS maintains a
    centralized database of deployment health assessments. DMSS provides
    weekly reports on post-deployment health assessments and monthly
    reports on pre-deployment health assessments. Post-deployment reports
    include data on service members' health status, medical problems,
    mental health and exposure concerns, blood samples, and referrals for
    post-deployment care. Over 90 percent of the 300,000 redeploying
    service members have reported their health status as good, very good,
    or excellent.

    Immunization programs
        Immunizations offer protection from endemic disease, as well as
    from agents that could be used as biological weapons, including anthrax
    and smallpox. Vaccines against these disease threats are highly
    effective. Our programs are based on sound scientific information and
    verified by independent experts. They are essential to keep our service
    members protected. The DOD has succeeded in protecting many hundreds of
    thousands of service members against two deadly infections--anthrax and
    smallpox. We protected over a million service members against anthrax,
    and over 580,000 personnel have received the smallpox vaccination.
        The National Academy of Sciences' Institute of Medicine, in a
    congressionally-mandated report, concluded that anthrax vaccine is both
    safe and effective to protect humans against all forms of anthrax.
    Those receiving the vaccine commonly experience some local discomfort,
    such as redness, itching or swelling; these reactions are comparable to
    those observed with other vaccines. On December 30, 2003, the Food and
    Drug Administration (FDA) issued a final rule and order for a number of
    products, including anthrax vaccine. They concluded, ``the licensed
    anthrax vaccine is safe and effective for the prevention of anthrax
    disease, regardless of the route of exposure.''
        Like the anthrax vaccine, the smallpox vaccine is fully licensed by
    the FDA and is safe and effective. However, there are more risks
    associated with administration of the smallpox vaccine. By carefully
    screening recipients with known risk factors, we have kept serious
    adverse effects well below the number anticipated when the vaccination
    program began. The Centers for Disease Control and Prevention (CDCP)
    tracks possible reactions to these and other vaccines through the
    Vaccine Adverse Event Reporting System (VAERS), which is co-sponsored
    by the FDA. The DOD encourages all service members to report any
    reactions to VAERS. Like all vaccines, most adverse events noted with
    smallpox vaccine are minor and temporary. Serious events, such as those
    requiring hospitalization, are extremely rare.

    Combat casualty care
        For military operations in Afghanistan and Iraq, medical care was
    deployed far forward, available within minutes of injury. Based on our
    current analysis, over 98 percent of those wounded have survived, and
    one-third returned to duty within 72 hours. It is clear that far
    forward medical care, improved personal protection, and operational
    risk management techniques continue to save lives. For Operation Iraqi
    Freedom (OIF), the rate of non-combat disease or injury is lower than
    in any previous U.S. conflict.
        Mental health care is an integral part of the MHS, and we have
    programs in place to identify and support service members and families
    with special needs. The military services have a full range of mental
    health services available for deployed personnel, including suicide
    prevention programs sponsored by the Service leadership and tailored to
    operational environments. Each Service has a program to ease the return
    and reintegration of deployed service members to families and life at
    home.
        For service members sustaining serious injury or illness, the MHS
    can rapidly evacuate them to definitive care. Our aeromedical
    evacuation system has advanced to the point that specialized teams can
    accompany and treat patients during transit to the next level of care.
    In the United States, two of our premier medical centers, Walter Reed
    Army Medical Center and the National Naval Medical Center, provide
    service members extraordinary care. Walter Reed operates the U.S. Army
    Amputee Patient Care Program, featuring a highly skilled multi-
    disciplinary staff and first-of-its-kind technology. In association
    with the VA, this program strives to return patients to pre-injury
    performance levels. Walter Reed is one of two sites worldwide that is
    fitting patients with the Utah33 arm, a technology that permits
    simultaneous motion for the elbow and wrist. It is the only facility
    fitting patients with a fast sensor hand that automatically maintains
    consistent hand pressure. Many soldiers with above-the-knee amputations
    receive the C-leg, a device containing a computerized chip to analyze
    motion 50 times per second, making ambulation on stairs possible.

    Medical technology on the battlefield
        Last year we introduced elements of the Theater Medical Information
    Program (TMIP) and Joint Medical Workstation for OIF. These
    capabilities enable medical units to electronically capture and
    disseminate near real-time surveillance information to commanders.
    Information provided includes in-theater medical data, environmental
    hazard identification and exposure data, and critical logistics data
    such as blood supply, hospital bed and equipment availability. TMIP,
    through the Joint Medical Workstation, links care in theater with the
    sustaining base using interoperable data collection tools. This system
    serves as the medical component of the Global Combat Support System.
        New medical devices introduced during OIF provided field medics
    with enhanced blood-clotting capability, and light, modular diagnostic
    equipment for use by far-forward medical forces. Advanced personal
    protective gear prevents injuries and is saving lives.

    Medical hold
        One consequence of improved pre- and post-deployment health
    assessment screening is the identification of service members medically
    unqualified for deployment, or even military service. This has
    generated additional Medical Evaluation Board processing workload, and
    resulted in large numbers of service members awaiting healthcare and
    specialty consultations at mobilization sites. The Army has acted to
    alleviate this backlog, and has significantly reduced the numbers of
    individuals in this category. We remain committed to deploying healthy
    and fit service members and to providing consistent, accurate post-
    deployment health evaluations with appropriate, expeditious follow-up
    care when needed.

    Individual medical readiness.
        Among the performance measures we track is the individual medical
    readiness status of all service members. For the first time, the MHS
    has a common tool to track individual medical readiness metrics for
    health and dental assessments, immunizations, laboratory tests,
    required medical equipment and limiting medical conditions. This tool
    allows unit commanders to monitor the readiness of their members and
    units.

    Transition to VA Care
        After returning from deployment, service members may receive care
    by military or VA providers. Service members referred for a Physical
    Evaluation Board attend the Disability Transition Assistance Program,
    where VA counselors advise on benefits, disability ratings and claim
    processing procedures. Members voluntarily separating and not referred
    to a Physical Evaluation Board receive mandatory pre-separation
    counseling through the Transition Assistance Management Program,
    receiving briefings on VA benefits and availability of VA health care
    services.
        We achieved a significant advance in our efforts toward a seamless
    transition with the establishment of the Federal Health Information
    Exchange. This exchange transfers electronic health information on
    separating service members to the VA. Currently, we provide the VA
    laboratory results, outpatient pharmacy data, radiology results,
    discharge summaries, demographics admission, disposition and transfer
    information, allergy information and consultation results. We are on
    still on track to have two-way real time exchange of electronic health
    information with the VA by the end of fiscal year 2005. In addition, we
    have created integration points, with VA, that will permit VA to access
    the Defense Enrollment and Eligibility Reporting System (DEERS) in real
    time by the end of 2005.

        BIOLOGICAL, CHEMICAL AND NUCLEAR WARFARE MEDICAL COUNTERMEASURES

        Announced last year, Project Bioshield calls for identification and
    procurement of medical countermeasures to weapons of mass destruction
    (WMD). With the Departments of Health and Human Services and Homeland
    Security, we are actively developing a national priority for medical
    countermeasures to biological, chemical, and nuclear threats. This
    national priority will allow the U.S. Government to attract industry to
    develop and manufacture needed medical WMD countermeasures. The work
    collaboratively done on anthrax and smallpox is a start, but the effort
    is more comprehensive. Future work will include additional medical
    countermeasures.

                               DOD-VA PARTNERSHIP

        We have successfully shared healthcare resources with the VA for 20
    years, but opportunities remain. We recently introduced a common
    national billing rate for our sharing agreements, greatly simplifying
    administrative processes. In 2003, the President's Task Force to
    Improve Health Care Delivery for our Nation's veterans outlined a broad
    and substantive agenda to foster greater collaboration. We have already
    taken action on a number of recommendations. We initiated a joint
    strategic planning process, began sharing medical information
    electronically, identified additional joint contracting opportunities,
    and included the VA in the development of the Request for Proposal for
    the Next Generation of TRICARE Contracts. Greater collaboration on
    capital planning and facility life-cycle management will benefit
    beneficiaries and taxpayers alike.
        We have initiated seven demonstration projects at seven sites with
    the VA. These demonstrations entail budget and financial management,
    coordinated staffing and assignments, and sharing of medical
    information and information technologies. Our joint Health Executive
    Committee approved the following sites for these demonstrations:

             Budget and Financial Management

                     VA Pacific Islands Health Care System--Tripler
                    Army Medical Center
                     Alaska VA Health Care System--Elmendorf Air
                    Force Base, 3rd Medical Group

             Coordinated Staffing and Assignment

                     Augusta VA Health Care System--Eisenhower Army
                    Medical Center
                     Hampton VA Medical Center--Langley Air Force
                    Base, 1st Medical Group

             Medical Information and Information Technology

                     Puget Sound VA Health Care System--Madigan
                    Army Medical Center
                     El Paso VA Health Care System--William
                    Beaumont Army Medical Center
                     South Texas VA Health Care System--Wilford
                    Hall Air Force Medical Center and Brooke Army Medical
                    Center

                       TRICARE--THE MILITARY HEALTH PLAN

        We have embarked on a comprehensive transformation for how we will
    organize, manage and motivate our health delivery system to better
    serve our beneficiaries. Our goal remains constant; providing
    accessible, quality health care that fosters patient satisfaction with
    all aspects of their health care. Highlights of this transformation
    include family centered care, patient safety, health plan governance,
    and new TRICARE contracts.

    Family-centered care
        To improve satisfaction with the MHS, we introduced family centered
    care this year, focusing on obstetrical and newborn care. Using
    beneficiary input, we revised maternal and newborn services in our
    military medical facilities to enhance emotional well-being, privacy
    and personal preferences. This program respects family and cultural
    beliefs and offers treatment choices including pain management, and
    testing options before, during and after childbirth. We encourage
    families to participate in the birth experience. Childbirth is a
    special time for the family. Unfortunately, many service members are
    not available to participate in this experience. We believe it is
    critical that the MHS accommodates the unique requirements of our
    service members and their families. Our health care personnel know
    first-hand about the separation aspects of military life. We want to be
    our beneficiaries' first choice for health care and it starts at birth.

    Patient safety
        We place a high priority on patient safety, and remain committed to
    providing all resources to prevent medical errors and ensure patient
    safety. Our Patient Safety Center collects and analyzes safety data
    from military medical facilities and advises the Patient Safety
    Executive Council, chaired by the Deputy Assistant Secretary of Defense
    for Clinical Programs and Policy. Our safety record is strong, and we
    intend to be a model for other health care systems.

    Governance
        The new TRICARE organizational structure will streamline health
    care management and enhance efficiency, productivity and customer
    service. This restructuring strengthens the partnership between the
    direct care system and our purchased care contractors by providing more
    flexibility and interoperability in the MHS. Three TRICARE Regional
    Directors will integrate military treatment facilities and civilian
    networks to ensure support to local commanders and oversee regional
    performance.
        We increased medical commander responsibilities and accountability
    for their local health care markets. Commanders will be directly
    responsible for all health care services and support provided to their
    patients, including patient appointing, utilization management, the use
    of civilian providers in military hospitals and clinics (i.e., resource
    sharing providers), and other local services. We will have 13 multi-MTF
    markets with Service-assigned senior market managers to effectively use
    available resources.
        The central management effort in TRICARE will be to establish and
    then manage toward objectives set in annual business plans; plans
    developed locally and then built into service and regional plans. The
    new Regional Directors have a key role in improving provider
    participation in TRICARE, and in improving TRICARE Standard support.
    Gaining beneficiary support and satisfying their health care needs
    serve as the objectives for which the TRICARE contracts and
    organization are designed.

    TRICARE Contracts
        The first step in redesigning TRICARE was to simplify. We reduced
    the number of TRICARE regions from 11 to 3, and reduced the number of
    contracts from 7 to 3. With these new contracts, beneficiaries will
    realize improved access to care, better customer service and enhanced
    quality of care. Current and future contractors have committed to
    smoothly transition every aspect of their responsibilities while
    maintaining the highest standard of care and service. The DOD remains
    committed to keeping beneficiaries informed throughout this transition.
        We have ``carved out'' major elements of the current TRICARE
    contracts into separate entities. These new contracts leverage the
    expertise resident in companies whose core competency is pharmacy
    management, claims processing and marketing. We have established
    national contracts that improve management and beneficiary
    satisfaction.

    Pharmacy management
        An integrated pharmacy benefits program brings consistency to our
    military, mail-order, and retail pharmacies. It uses a uniform
    formulary that is clinically appropriate, cost-effective, and developed
    with beneficiary input. This integrated program allows Federal pricing
    of pharmaceuticals for our retail program, allows better management and
    improves beneficiary satisfaction by making it easier to obtain
    prescriptions while traveling.

    Claims processing
        We have markedly improved claims processing performance and now
    lead the industry in all measures. During 2003, we processed 104.6
    million claims, with over 99 percent of clean claims processed within
    30 days. Only 1 percent of claims cannot be processed and are returned
    for correction; the industry experience for returned claims frequently
    exceeds 25 percent. Audits of processed claims show that errors remain
    below 2 percent for payment and 3 percent for other errors. This
    compares favorably with published rates for managed care carriers that
    range from 6 percent to over 30 percent. The claims processing ``carve
    out'' will focus on those claims submitted by our senior beneficiaries
    as supplemental to Medicare in the TRICARE for Life program.
    Establishing a single claims processor for dually eligible Medicare-
    TRICARE patients adds consistency and enhances beneficiary
    satisfaction.

    Marketing
        A consistent approach through a national suite of marketing and
    educational materials will bring clarity and consistency to the TRICARE
    messages. Materials development will involve beneficiaries, research of
    current trends and analysis of past approaches. Materials will include
    beneficiary and provider handbooks, briefings, brochures, health and
    wellness pamphlets, newsletters, and bulletins. Regional content is
    included and templates are created to allow for local modification.

    TRICARE Standard improvements
        To better assist beneficiaries who choose to use the TRICARE
    Standard option, we recently updated our online provider directory,
    streamlining search capabilities and adding questions and answers. We
    have emphasized the need for accuracy and reliability of provider
    information and customer satisfaction in the new TRICARE contracts.
    Based on congressional direction last year to better serve TRICARE
    Standard beneficiaries, we have initiated provider surveys and outreach
    assistance to these beneficiaries. The Regional Director will have the
    responsibility to ensure that TRICARE works for Standard beneficiaries
    in the region.

                            RESERVE HEALTH BENEFITS

        In addition to the enhanced benefits the DOD offered to activated
    Reserve component members and their families during 2003, the fiscal
    year 2004 DOD Supplemental Appropriations Act and the National Defense
    Authorization Act (NDAA) for Fiscal Year 2004 included additional
    benefits. Assuring the medical readiness of reservists when called to
    active duty is among our highest priorities. Providing support to
    families of activated Reserve component personnel is vitally important
    especially in the sponsor's transition to and from active duty. As the
    DOD proceeds in this area, we must carefully review the cost of
    providing increased entitlements and benefits to Reserve component
    personnel who have not been activated--perhaps through a limited
    demonstration program to test feasibility and effectiveness. A key
    issue would be the effect of a new entitlement on recruitment,
    retention, and medical readiness of both Reserve and active duty
    members.

                             INFORMATION TECHNOLOGY

        The MHS continues to introduce state-of-the-art information
    technology solutions and products to our health care team worldwide.
    Some of these solutions--the Pharmacy Data Transaction Service and the
    Defense Medical Logistics Support System (DMLSS) to name two, have
    received national awards for the application of technology in support
    of medical readiness and patient safety.
        This year we will introduce globally the Composite Health Care
    System II (CHCS II), the military electronic health record. After years
    in design, development and testing, we are embarking on one of the most
    comprehensive technology deployments ever undertaken by a health care
    system. By the end of 2005, we will have completed this implementation.
    CHCS II represents a quantum leap in our ability to collect, retrieve,
    and analyze patient data. Clinical applications of CHCS II will
    populate the TMIP in battlefield versions. Clinical information will be
    sent to CHCS II and stored in the DOD Clinical Data Repository. CHCS II
    met the eight functions determined by the Institute of Medicine to be
    essential to enhance safety, quality, and efficiency of health care
    delivery. It ensures health information continuity and patient-centered
    delivery, and is an industry leader. This system will vastly improve
    the quality and efficiency of care, and support medical and line
    commanders.
        Another enhancement to health care delivery is TRICARE Online, our
    enterprise-wide, secure online medical portal for use by DOD
    beneficiaries, providers, and managers to access available health care
    services, benefits and information. This Health Information Portability
    and Accountability Act (HIPAA) compliant tool provides beneficiaries
    with a communication system for appointment scheduling, access to 18
    million pages of quality medical information, interactive health tools,
    and administrative information on our medical facilities and providers.
    Future capabilities will include pharmacy refill and renewal,
    appointment reminders, an ability to request routine tests, structured
    provider to patient messaging, and more. TRICARE Online has received
    the Government Solution Center's 2003 Excellence in Government Pioneer
    Award for Best Practice Application and the International Association
    of Business Communicators' Silver Inkwell Award honoring the industry's
    best in strategic communication.
        Mr. Chairman, distinguished members of the subcommittee, you have
    graciously allowed me to outline many of the programs and activities
    currently under way in the MHS. I would like to take a moment to tell
    you about the men and women who accomplish the mission of the MHS. I've
    been on the job now for 2\1/2\ half years, and I have had the
    opportunity to visit military medical units across the United States,
    Europe, Southeast and Southwest Asia, and at sea. I am extremely proud
    of the military and civilian men and women in the MHS who serve their
    country. They are courageous, dedicated, exemplary professionals whose
    talents are second to none. They are America's best, and I am proud to
    serve with them.
        Health care is a key quality of life issue for our service members
    and their families. We believe that with many of our new initiatives
    focused on our patients, on quality and effectiveness, and on ensuring
    readiness that we offer a valued health care benefit. With your
    support, we will continue to offer the uniformed men and women of the
    United States world-class health care. Thank you.

        Senator Chambliss. Gentlemen, thank both of you very much.
    Secretary Abell, let me start with you. Senator Nelson and I,
    along with Senator Dodd and Senator Alexander, have been
    conducting some hearings around the country relative to
    educating our military children and making sure that the needs
    of the families of deployed men and women are being taken care
    of.
        I'm very interested in the DOD's ongoing review of DOD
    schools. As you probably know, I have several DOD schools in my
    State. I have seven at Fort Benning alone. Last October, Fort
    Benning held a town hall meeting to discuss the future of the
    base schools where over 1,000 parents of military children
    attended. The overwhelming preference of those parents is that
    the base schools should remain open.
        Also, I recently learned of a survey issued to the parents
    of students of Fort Benning schools, the results of which were
    sent to your office, and I understand DOD is going to be making
    decisions relative to the future status of DOD schools this
    summer.
        I appreciate the fact that this is a difficult issue for
    the Department. I guess one could argue that educating young
    children is not a mission of the DOD. But I know that you're
    sensitive and compassionate and that you probably agree with me
    that military children and military families have a very unique
    need that is not shared by the civilian population, and for
    this reason it makes sense that military children should be
    educated in their own environment under a system managed by
    DOD.
        Now, I'd like for you to tell me a little about the content
    and purpose of this survey, the one at Fort Benning. I assume
    it was a standardized survey that was used in other parts of
    the country. I'd like you to provide a copy of that survey for
    the record, and I'd also like your assurance that you will keep
    Senator Nelson, myself, and other members of this subcommittee
    advised of the ongoing thought process as you proceed towards
    making some decisions regarding DOD schools this summer.
        Mr. Abell. To the last point, first, Senator, I certainly
    will.
        [The information referred to follows:]

        As the results of the study in question have not yet been made
    available, the Department is not able to address Senator Chambliss'
    question at this time.
        To date, no decision has been made to make any changes to the 58
    schools involved in the study. The study currently is being reviewed by
    the Deputy Under Secretary of Defense for Military Community and Family
    Policy.
        Any decisions regarding the future of the schools will be made on
    the basis of the most deliberate, thoughtful consideration of all the
    data collected. Decisions will be made on an individual school basis.
        Notification of any changes would be provided at least one school
    year or more before any change(s) become effective. No specific
    timetable has been established for reaching the final decision.
    Congress, military commands, and military and civilian communities will
    be fully informed.
        When the requested information becomes available, the Department
    will share that information as requested.

        To allay some concerns, I don't believe we're even close to
    finalizing this review and having a decision. The packages have
    not even to my understanding come--I know they're not in my
    office yet. I'm not even sure they're in the Pentagon yet.
        We did undertake a two-part study. One was a facilities
    study where we sent some engineers out to look at our
    facilities and determine what their conditions are and what it
    would take to bring them to the various codes. The second part
    was a study that looked at the curriculum of our schools and
    compared it to the curriculum of the schools outside the base.
    That was led by a University of Massachusetts team, and they
    assembled a bunch of educators to do that for us.
        This was the first study. There have been a number of
    studies of the DOD schools, as you might imagine, over the
    years. This was the first one that looked at school systems
    individually, base by base, as opposed to looking at the entire
    thing.
        I have no preconceived outcomes for this, but clearly one
    of the questions that we would hope this would address is, is
    this the right thing to do today or should we be addressing
    this need another way? One of the things that concerns me is
    that only about a third of our people live on base and our
    schools only serve those families who live on base, so we are
    providing this benefit, if you will, to one-third of our
    population while two-thirds of our population get their
    education in the local community.
        So one of the questions we'll get answered is, can we help
    improve the education of our base and the entire community, or
    should we continue as we're going or should we try some yet
    undetermined alternative beyond that?
        If nothing else comes out of this study, we have an
    excellent road map of what the facilities need as far as
    improvements, not only for the physical plant but also to get
    them up to the point where we have world-class education
    facilities.
        I know that there is a lot of emotion out there. I think
    our families view this review with suspicion, that we wouldn't
    do it if we didn't intend to do something untoward. As I said,
    I have no preconceived outcome here. Once we get it, once we
    pore through the information, we'll certainly talk to you,
    we'll talk to the families before we make any decision.
        Senator Chambliss. Just for your benefit I will tell you
    one thing that did come out of our series of hearings.
    Particularly with the most recent conflict in Iraq where we had
    embedded reporters and families were sitting around TV sets at
    night watching in some instances their loved ones being engaged
    in combat on their TV screens, those situations where children
    were in military schools being taught sometimes by civilians,
    sometimes by military personnel or spouses of military
    personnel, were able to adapt much better. They were surrounded
    by other kids who were in the same position they were, or at
    least had similar experiences over the years with their parents
    being deployed. The teachers were also able to deal with the
    needs of those kids in a much better way, and there was sure a
    lot of security among the parents of those children at those
    DOD schools.
        I want to ask you to comment on the testimony submitted by
    Senator Daschle and Senator Graham a little bit earlier
    relative to additional benefits for guardsmen and reservists,
    particularly regarding the retirement reduction rate, as well
    as the availability of health care. Could you give us your
    thoughts relative to that?
        Mr. Abell. Yes, sir. Let me start with the comment that
    reservists should receive the same suite of benefits. I
    couldn't agree more with that. When our Reserve or National
    Guard members are serving on active duty, they can and should
    have the same suite of benefits as the active duty person who
    is serving alongside them.
        The question then comes to what we should provide to that
    reservist when he or she is not serving on active duty. During
    those periods they are back home working in their civilian jobs
    and training on the weekends or during the summer with us.
    That's a more difficult question in my book. Anything that we
    can do, and certainly some of the things that you provided last
    year in title VII of the National Defense Authorization Act
    (NDAA), anything that leads to improved readiness of our
    Reserve Forces I think you'll see us strongly support.
        When it comes to providing health care for those who are in
    a non-activated status, those who have not even been alerted
    for active status, I think, as Dr. Winkenwerder mentioned in
    his opening statement, we'd like an opportunity to see how that
    works and understand more about that. That is a complex benefit
    package. It is complex to administer, and it's complex to
    discover what the driving factors are that influence the
    behavior of our soldiers and their families.
        So what we would appreciate is an opportunity to continue
    that benefit as a demonstration project for a couple of years,
    providing the benefit, but providing it in a setting where we
    can measure the outcomes and the expenses and the return on
    investment. It may be exactly the right thing we need to do,
    but at this point I don't think any of us can pronounce that.
        Senator Chambliss. Dr. Winkenwerder, we applaud the quality
    of health care that's given to our men and women in the
    Service. I think we've assembled a very significant corps of
    men and women who are providing those medical services,
    particularly as we engage in conflicts like we have been in
    Iraq for the last several months.
        What can you tell us regarding the recruiting as well as
    the retention of medical suppliers, particularly physicians who
    have to deal with the type of trauma that battle brings about?
    Are we still recruiting the numbers of quality individuals that
    we need or are we having difficulty there?
        Dr. Winkenwerder. Senator, we are. We're doing fine on that
    front. We continue to access young, aspiring young physicians
    through our health professions scholarship program, in which
    people obtain an obligation after having their medical school
    paid for, and the same is true with residency.
        We, of course, are supported through our direct care system
    by a very broad system of contracted community health care, and
    that is something that we bring into play. For example, in the
    recent call-ups of deployments where we had medical personnel
    deploying forward, we backfilled some of those people with
    reservists or moved people from other locations, but we also
    had people utilize the excellent TRICARE network.
        So I think the way our system is constructed now gives us
    great flexibility, but the bottom line is, we're doing fine as
    far as recruiting and retaining really good people.
        Senator Chambliss. Okay. Senator Nelson.
        Senator Ben Nelson. Thank you, Mr. Chairman. Secretary
    Abell, in response to a question about military voting at our
    hearing on Tuesday, Dr. Chu testified that the military voter
    would be in a much better position during this presidential
    election because of the emphasis on the voting assistance
    officer. But last March, the DOD Inspector General (IG)
    reported that the Services' voting assistance programs for the
    November 2002 Federal elections had many of the same
    deficiencies that were identified during the 2000 election.
        These problems included lack of training for voter
    assistance officers, lack of awareness of voting assistance
    resources, and too large a span of control for voting
    assistance officers. Has the Department addressed the problems
    identified by the DOD IG? Second, what is the DOD going to do
    to ensure that military voters will have a meaningful
    opportunity to be a part of and influence the upcoming Federal
    election?
        Mr. Abell. Yes, sir. Sir, we have placed enormous emphasis
    on the voter assistance program. You have correctly identified
    the critical node in that whole thing, and that is the voting
    assistance officer. It is a collateral duty out in the units.
    It is the farthest point from our reach in the Pentagon, and we
    have spent a lot of time and energy and money producing
    training materials and forcing them out there to the voting
    assistance officers.
        We have urged commanders to select their better officers to
    be the voting assistance officers, as opposed to how it was
    when I served many years ago where it was the junior officer,
    and sometimes the weakest junior officer, who had that
    collateral duty.
        So we have placed a lot of emphasis on it. The NDAA
    requires that if one is assigned the duties of voting
    assistance officer, that their performance in that particular
    function be made a part of their fitness report, and we are
    doing that.
        We have pushed out the materials both in paper copies, on
    CDs, and through the Internet to all of these folks. Our goal
    is that every soldier, sailor, airman, marine, and family
    member overseas who's eligible to vote is handed a ballot
    application. It then becomes the individual's choice and option
    as to whether to fill that out and send it in, but our
    assignment that we've given to the voting officer is to educate
    their folks and to personally hand every eligible voter an
    application.
        Much like the way the DOD schools help deployed parents, we
    have also asked the DOD schools to, as a part of their normal
    civics programs, emphasize voting, to bring the voting
    assistance officers in and give little talks. We hope that when
    Johnny and Mary go home, they ask Mom and Dad, are you going to
    vote this year? Again, that's another way that we hope to get
    to this.
        It's our goal to have everyone vote and every vote counted.
        Senator Ben Nelson. Thank you. The service members in our
    military clearly expect that we're going to do everything we
    can to ensure that their sons and daughters receive a quality
    education wherever they happen to be stationed, and in your
    prepared statement you inform us that the DOD has initiated a
    partnership with the Military Impacted Schools Association
    (MISA) to sponsor the National Conference for the Military
    Child to highlight the best practices for public school and
    military leaders.
        I'm a big supporter of the MISA, and I commend you for
    working closely with them. I think together you can do an
    excellent job.
        Can you tell us a little bit more about what your
    partnership with MISA and the National Conference for the
    Military Child might be about?
        Mr. Abell. We do a lot of sharing of good ideas and best
    practices. We also do a lot of work to try and get the local
    school systems to appreciate and understand the special
    challenges that military children face as they move around so
    much. We're concerned about things like whether or not the
    State history of that particular State should have to account
    for their graduation requirements, if they took a State history
    class in one State, move in their senior year, those kinds of
    things.
        We found the States to be very understanding, very
    cooperative, and we found this forum to be a great place to
    surface that and discuss those issues and look for reciprocity
    in those kinds of things.
        Senator Ben Nelson. Do you think that the military's
    apparent decision not to transfer personnel quite as often as
    they've been transferred in the past might make a difference on
    transferability and stability as well?
        Mr. Abell. Senator, the benefits of that program are huge
    in so many different ways. It certainly helps in the education
    of our children. We hope that now spouses can have careers, not
    jobs. We also think that they will be more integrated into the
    community. Hopefully if they're going to be there longer they
    would find the opportunity to buy a home and begin to build the
    equity that is part of the American dream.
        But in addition, that network of folks begins to get
    stronger and stronger the longer they stay together, so the
    benefits from a more stable basing plan we think are just huge.
        Senator Ben Nelson. Well, it seems to me in the past that
    transplanting and uprooting have been about the same thing, so
    I appreciate that wisdom. One final question, Mr. Secretary. In
    your prepared statement, you indicate that approximately 37,000
    active duty and Reserve personnel are non-U.S. citizens and
    approximately 7,000 of these have applied for U.S. citizenship.
        We understand that the Department is working to expedite
    citizenship applications of those who serve honorably. In
    support of this, the Citizen and Immigration Service has
    established a special office in their Nebraska processing
    center to expedite applications of military members, and my
    office has received a press inquiry suggesting that up to
    16,000 of these members may not have been lawfully admitted to
    the United States for permanent residence, most of them in the
    Army and Navy.
        Do you know whether we have a substantial number of members
    who were enlisted for military service even though they weren't
    lawfully admitted to the United States? I suspect it's an
    ``oops'' or something like that. Is it something that we should
    be concerned about?
        Mr. Abell. I don't know how many, if any. I'm not naive
    enough to say it's zero. There might be folks serving who may
    have presented false documents. They are required to show that
    they are resident aliens, but we don't have a way at this point
    of checking the validity of that.
        Now, we are working with the Immigration and Naturalization
    Service (INS) to have a computerized check at the military
    entrance processing station where we can get an almost instant
    feedback in that case, and it is, as with many things in
    government, two incompatible databases, and we're trying to
    reconcile the interface there. We hope to get that fixed.
        Senator Ben Nelson. Well, without criticizing the military,
    as you might imagine, the INS prosecutes private employers who
    fall for those falsified documents, but I suspect there must be
    some sort of compatibility and courtesy between the branches of
    the Federal Government when it comes to our military. If you
    could get some information to me, I would appreciate it.
        [The information referred to follows:]

        Question. Are there many illegal aliens serving in the military?
        Answer. Individuals must show proof of citizenship or resident
    alien status to legally enlist in the U.S. Armed Forces. In addition,
    background checks are conducted on all recruits to check for criminal
    history or evidence of immoral or unethical character. If someone
    fraudulently enlists, they are subject to disciplinary and
    administrative action and discharge. If they are determined to be an
    illegal alien, they are subject to deportation proceedings.
        Question. Are there 16,000 persons of unknown citizenship serving
    in the U.S. military?
        Answer. The Defense Manpower Data Center (DMDC) reflected
    ``unknown'' for 16,012 mostly Army and Navy personnel in the
    citizenship data element of their military personnel database. However,
    this was caused by data entry procedural errors and does not mean they
    were allowed to enlist without validating their citizenship status.
    DMDC is working with the Services to correct the citizenship data
    entries for these personnel.

        Mr. Abell. Yes, sir.
        Senator Ben Nelson. Thank you very much. Thank you, Mr.
    Chairman.
        Senator Chambliss. Senator Pryor.
        Senator Pryor. Thank you, Mr. Chairman. Dr. Winkenwerder,
    I'd like to ask you a few questions about health care-related
    issues if I may, and I'd like to focus on the Reserve
    component. I know that years ago when we were trying to
    determine how we could best serve military retirees and
    eligible family members 65 and older, Congress authorized a
    number of demonstration projects. These demonstration projects
    were instrumental in crafting the more comprehensive and
    permanent TRICARE for life legislation that was enacted in
    2001.
        With that in mind, I'd like to hear your thoughts on
    whether there's value in establishing some demonstration
    projects to determine the feasibility and effectiveness of how
    we can provide health care coverage to our Reserve component.
        Dr. Winkenwerder. Thank you for the chance to address that
    question, because I think this is an important issue and we
    need to think carefully about how we move forward. If I might,
    I would like to just give a status update on where we are in
    implementing the provisions that Congress passed.
        Last fall, Congress passed a provision allowing our Reserve
    community to do screening medical and dental exams, and I'm
    pleased to say that it has been implemented. It is being
    implemented now. There are service members, reservists, who are
    receiving medical and dental screenings, according to our
    Reserve chiefs, who I spoke with just this week.
        Second, on the 704 provision, which was extending health
    insurance coverage after the period of active duty for a period
    of 6 months, we've issued policy on that and implementation on
    that provision is imminent, and that means within days we'll be
    into an implementation on that.
        The pre-deployment, where we extend the coverage prior to
    deployment, is a bit more complex because we have to identify
    people who are alerted but not yet active, and getting them
    into the system and identifying them from the Reserve community
    is more complex. But our implementation on that we believe is
    nearing, so hopefully it will only be a matter of weeks.
        The aspect of providing insurance coverage now, to get to
    your question, and I apologize for covering the other ones,
    about extending health insurance to the uninsured or unemployed
    is a far more complex issue, and I just want to touch on that.
    I've worked in the health insurance industry in the private
    sector. Typically, when a health insurance company implements a
    new benefit for a large population of people, it takes 12 to 18
    months because of all the complexity.
        So I know there's an urgency on moving forward on this
    benefit, but I just want to caution that it usually takes quite
    a while to identify all the issues. In our case, there are some
    system issues, that is, being able to identify who these
    individuals are and then get them into our personnel system.
        Second, it requires contract modifications with all of our
    managed care contractors. The challenge for us on that front is
    that, as I mentioned earlier, we're transitioning all of our
    TRICARE contracts this year, starting in June through November.
    So if we were to issue contracts to be able to care for these
    inactive reservists without health insurance and to make the
    changes that are required, we'd have to ask our contractors to
    do that and then 2 months later to disband that as the new
    contracts go into place.
        So we have a lot of challenges. Now, because the law has
    the funding for this ending at the end of this year, it is, in
    my judgement, going to make it really difficult for us to come
    to some understanding, as Secretary Abell said, on what the
    impact of this is, and I think that's one reason we believe it
    would be very helpful to be able study this and to actually
    look at the impact on recruitment, retention, and readiness.
        For those reasons, we think this really requires a careful
    look, and we could envision a demonstration that would involve
    thousands or tens of thousands of people to answer those
    questions.
        Senator Pryor. I guess what you're saying is you think one
    or a set of demonstration projects does have value in allowing
    us to determine the best route to take on this?
        Dr. Winkenwerder. Yes, I do.
        Senator Pryor. Now, regarding your answer a minute ago, are
    you trying to tell the subcommittee here that this is so
    complex that you're not going to be able to get it done this
    year?
        Dr. Winkenwerder. We're moving as quickly as we can.
        Senator Pryor. I'm not trying to put words in your mouth,
    but you laid out a number of obstacles to actually getting it
    done and actually getting it down to the people that Congress
    intended it to go to. Do you have concerns that you won't be
    able to get it done this year?
        Dr. Winkenwerder. We are working as quickly as we can, but
    I do have concerns that people's expectations are very high
    that this is something that's easy to do, and it is not. As I
    said, it typically takes much longer than just 3 or 4 months to
    implement something like this, and so I would be hopeful that
    if we were to start something on a more limited basis, it would
    allow us to get started sooner. So that, in my judgement, along
    with the fact that we're working within this $400 million cap
    overall, that's the other things that creates another obstacle.
    We want to move forward, we are moving forward, but I want to
    be realistic.
        Senator Pryor. Mr. Chairman, given that answer, I must tell
    you I now have concerns we're not going to get it done this
    year. It is complex and it's something that clearly Congress
    wants to get done in a bipartisan, non-political way. In fact,
    in Arkansas, I believe about 40 percent of our Guard and
    Reserve are actually activated right now, coming out, or on
    notice that they will be activated.
        When I've been down at Fort Hood, Texas, and Fort Polk,
    Louisiana, watching the 39th Infantry Brigade doing their
    training--they're about to go to Iraq here in the next few
    days--they're excited about this prospect of having access to
    TRICARE. The leadership there, the generals and the other folks
    there that I talked to told me story after story of a number of
    soldiers, many soldiers who just weren't ready and couldn't go
    because of dental or other medical problems that they had.
        This is a readiness issue, I think, for this subcommittee,
    for the full committee, and really for all of Congress. I want
    to continue to work with you to make sure that we get this
    done, and if you want to come in and recommend a demonstration
    project or a series of them, I'm certainly open to listening to
    that. I'll tell you, I think I can speak for Congress in saying
    that we want to see this happen, and we're very serious about
    it.
        Dr. Winkenwerder. Well, I very much appreciate your
    thoughts and views on this and we do want to work with you and
    appreciate that offer. I think it's important for the record to
    just share a somewhat different perspective about the issue of
    readiness than Senator Graham did, because we follow these
    statistics now, and the statistics I have suggest that the
    number of people that are not medically ready on the medical
    front, we'll leave aside the dental, but it's more in the low
    single digits, in the 2 to 4 percent range.
        So I think it would be a mistaken view if we left here
    today thinking that we have a major problem with medical
    readiness among our reservists. They are generally pretty
    healthy. It can be better.
        I want to share with you something we're doing to create
    accountability, which I think helps. It is called the
    individual medical readiness metric, and it's a set of measures
    that both active and Reserve units are now to be accountable
    for and have to submit their performance on a monthly basis.
    I'm getting reports that tell us--and it's really a commander's
    tool--just how ready their people are, and so the individual
    has some responsibility in this and so does the unit commander,
    whether it's a Reserve unit or an active unit.
        But we think this will help, along with being able to do
    the 701 provision, being able to do the medical and dental
    screenings. These two things together should really help a lot.
    They may not do everything we want, but we are optimistic that
    they will help quite a lot.
        Senator Pryor. You mentioned that the number of reservists
    not ready for medical clearance is in the low single digits.
    What about dental?
        Dr. Winkenwerder. Dental is not as good.
        Senator Pryor. Right.
        Dr. Winkenwerder. That is probably the main problem among
    the reservists, though I will say that, for example, in the
    statistics I have here for you today, among Navy personnel it
    is at 74 percent, Air Force 66 percent, and Air Guard 88
    percent. We have lower numbers in the Army.
        Senator Pryor. What's the Army number?
        Dr. Winkenwerder. Forty-four.
        Senator Pryor. You mean 44, only 44----
        Dr. Winkenwerder. Meet the dental--in other words, one or
    two, that means fully ready. So a fair number need some dental
    work. Now, the irony is that we have dental insurance that is
    offered that people can buy into. Unfortunately, I guess it's
    just the pain of going to the dentist. A lot of people just
    don't like to go to the dentist.
        Senator Pryor. I would like to ask about dental insurance.
    Is that available to all Reserve and Guard?
        Dr. Winkenwerder. Yes, I believe it is.
        Mr. Abell. Yes, sir.
        Senator Pryor. Is that just part of the standard package
    they have access to?
        Mr. Abell. Yes, sir.
        Dr. Winkenwerder. It's really inexpensive, actually.
        Mr. Abell. It is not free. There is a premium attached to
    it.
        Senator Pryor. We'll check into that. That's good to know
    about. What about the--I lost my train of thought there
    thinking about the dental--but how do your numbers with Reserve
    and Guard compare with the active duty population? To me,
    looking at those two sets of soldiers is--the comparison may be
    informative because obviously one set has access to TRICARE,
    the other didn't and maybe still doesn't, but what are----
        Dr. Winkenwerder. We'll get those numbers for you. I
    brought the Reserve with me today. I just didn't attach the
    statement on the active, but we'd be glad to share those with
    you.
        [The information referred to follows:]

        It's close. They're not miles and miles apart.
        Senator Pryor. Okay.
        Dr. Winkenwerder. Our goal, Senator, is that they're the
    same.
        Senator Pryor. Right.
        Dr. Winkenwerder. It really needs to be the same and that's
    the whole idea.
        Senator Pryor. Senator Chambliss, I have a number of other
    questions and I'd like to just submit those for the record if
    that's okay with you, except for one last one, because I know
    it's near and dear to both of our hearts given the two States
    that we represent. I'd like to ask about TRICARE access out in
    remote areas of the country, and I know we both get comments,
    e-mails, letters, et cetera, from our constituents who have
    trouble with access generally, and certainly that's true for
    TRICARE.
        So I was curious if you had a plan or an approach that
    you're going to take to try to make TRICARE more accessible to
    these folks who live out in rural and remote areas?
        Dr. Winkenwerder. Yes, sir, we do have a plan for that.
    With respect to our reservists, there is a new provision that's
    called--and I believe it applies to the active duty as well--
    TRICARE prime remote for active duty and family members. It
    allows them to continue to receive medical services in remote
    areas now and not have to change their physician.
        To the question of broader networks and more providers,
    we've been giving that some careful thought and I have some
    ideas on that. I'm not prepared to share those publicly today,
    but we have some ideas about how we might be able to
    significantly increase our networks to include more physicians.
        We don't have a problem, we believe, on the hospital side,
    hospital participation, but we would like more physicians to
    participate and we have some thoughts about that, and I hope to
    be able to share those with you very soon.
        Senator Pryor. Mr. Chairman, with your permission, I'll
    just submit the rest for the record.
        Senator Chambliss. Certainly.
        Secretary Abell, I have one other question. The NDAA for
    Fiscal Year 2004 directed the SECDEF to conduct a study to
    determine the adequacy of death benefits for survivors of
    deceased members of the Armed Forces. As you're aware, there's
    great concern in our committee that the existing structure of
    benefits, including the death gratuity, service members' group
    life insurance, and the survivor benefit plans sufficiently
    provide for the widows and children of those members who are
    killed or disabled as a result of their military service.
        A study was due on March 1, and obviously we haven't
    received it. When can we expect that? Have you reached any
    conclusions about the comparability of existing military death
    benefits with commercial and other private sector death benefit
    plans?
        Mr. Abell. To your first question, Senator, my current
    estimate is that we will have it to you by the end of the
    month, by March 31. I regret that it wasn't done by March 1. As
    to the conclusions, I have not seen the study that's been
    produced yet. It again has not entered the Pentagon, so I don't
    know of anything, but the suite of things we were asked to
    examine is quite extensive, as you've described some of them.
        So I'm looking forward to seeing it, but I'll get it to you
    by the end of the month.
        [The information referred to follows:]

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        Senator Chambliss. Okay. We're going to leave the record
    open. I, too, have some written questions that we want to
    submit to you, and we would ask you to expedite your answers
    and get them back to us. I don't think you're going to find
    them particularly difficult questions, but we do want to make
    sure we get the record complete.
        Gentlemen, thank you very much for your service to our
    country. We appreciate the good work you do and thanks for
    being here today. We'll ask that our third panel come forward
    and have a seat at the table.
        Our final panel this afternoon includes representatives of
    The Military Coalition (TMC) and the American Legion. We
    welcome Joyce Wessel Raezer, Director of Government Relations
    for the National Military Family Association (NMFA) and co-
    chair of the Personnel Compensation and Commissary Committee of
    TMC. It is always good to see you.
        We also have with us Dr. Sue Schwartz of the Military
    Officers Association of America (MOAA) and co-Chair of TMC
    Health Care Committee. Dr. Schwartz, again, we welcome you
    back.
        Next, we have Master Sergeant Michael P. Cline, USA
    Retired, Executive Director of the Enlisted Association of the
    National Guard of the United States, and co-chair of TMC. Mr.
    Cline, welcome.
        Fourth, we welcome Deirdre Parke Holleman, Legislative
    Director of the Retired Enlisted Association and co-Chair of
    TMC's Survivors Committee. We welcome you, Ms. Holleman.
        Finally, we have Colonel Dennis M. Duggan, USA Retired,
    Deputy Director, National Security Foreign Relations Division,
    the American Legion. Ladies and gentlemen, a joint statement of
    TMC will be included in the record of this hearing as well as
    individual statements which have been received from each of
    you. I invite each of you to present a summary of your
    testimony if you so desire, and Ms. Raezer, we'll begin with
    you. Again, welcome.

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

        Ms. Raezer. Thank you, Mr. Chairman. It's nice to be here
    today. Mr. Chairman, TMC, an umbrella organization representing
    35 military-related associations, thanks you for the
    opportunity to present testimony on the wide variety of issues
    facing active and Reserve component personnel, retirees, their
    families, and survivors. We also thank you for your leadership
    in ensuring these service members are adequately compensated,
    that quality of life programs supporting the military community
    remain strong, and that benefits for retirees and survivors
    reflect the promises made to them.
        A detailed discussion of personnel issues affecting today's
    force is contained in TMC's written statement, as well as
    statements submitted by individual associations.
        My task today on the panel is to summarize the variety of
    compensation and quality of life issues affecting active duty
    service members and their families. Because of the range of
    issues facing today's family force and the time I have, this
    will be a very concise summary.
        Compensation. The Coalition thanks the subcommittee for its
    leadership in securing a 3.7 percent across-the-board pay raise
    for members of all uniformed Services in fiscal year 2004, with
    targeted raises for certain ranks. We also thank you for
    ensuring that pay raises after 2006 will be set at the level of
    the employment cost increase. We thank Congress for extending
    last year's increases in imminent danger pay and the family
    separation allowance (FSA) through December 2004.
        We urge you to make these increases permanent and to ensure
    that the amount provided for FSA is the same for all eligible
    service members. FSA is not combat pay. Expenses families incur
    when the service member is assigned away from home, whether in
    Iraq, Afghanistan, Korea, or on a ship in the Pacific, are not
    based on the service member's assignment location. To the
    family, gone is gone.
        The Coalition is aware that DOD is working on new pay
    proposals. We hope these proposals will reflect the importance
    of predictability and equity in a pay structure in addition to
    including targeted compensation tools to retain the well-
    trained force it needs.
        We encourage you to direct DOD to provide its vision of an
    optimal pay table as part of its plan for compensation reform.
    We also hope that DOD is taking tax equity issues into account
    when determining its strategy for pay and allowances.
        The Coalition appreciates congressional interest in whether
    the Services have sufficient personnel to perform ever-
    increasing missions. Longer and more frequent deployments are
    indications that the force is stretched too thin. The Coalition
    believes that increases in end strength, while not immediately
    reducing the burden borne by today's force, send the promise
    that help is on the way. We note, however, that increased end
    strength achieved through stop loss will not reduce the strain
    on the force.
        Because today's force is stretched too thin, military
    families are also stretched too thin. Family support programs
    in many places are improving and new programs such as the
    Military OneSource will make more support resources available.
    However, families say more professional backup is needed for
    the volunteers who are still carrying the largest load and are
    on the front line of family support. Still more needs to be
    done to support our isolated Guard and Reserve families and to
    meet the needs of our families with special needs.
        The lack of predictability in today's military life adds to
    the stress felt by service members and families. Now more than
    ever the military community needs its strong quality of life
    programs, commissaries, DOD schools, child care, military
    exchanges, and MWR programs. We also thank this subcommittee
    for its leadership in ensuring that our Guard and Reserve
    members have unrestricted access to one of those key benefits,
    the commissary. We appreciate the Defense Commissary Agency's
    (DeCA) efforts to implement that benefit immediately when it
    became law. You opened the door to commissary access and DeCA
    indeed rolled out the welcome mat.
        The Coalition encourages the subcommittee to maintain or
    increase the current level at appropriated funds to the
    commissary to protect that benefit and to ensure that
    commissaries' important contribution to the quality of life of
    military communities are not closed, and to continue to
    emphasize the importance of increasing beneficiary savings over
    the adoption of pricing formulas that could negatively affect
    those savings. We also ask that you monitor the initiative to
    consolidate the military exchanges closely.
        We ask that you please assist DOD in furthering the quality
    education for military children, whether they're in DOD schools
    or civilian schools, by ensuring that they have the resources
    they need to meet the challenges that come with deployments,
    Base Realignment and Closure (BRAC), other military
    realignments, military housing privatization, or other military
    policies and procedures.
        We also ask you to evaluate carefully any proposals to
    transfer control of DOD domestic schools to local civilian
    education agencies and appreciate your interest in that
    subject. We applaud DOD's efforts to work with civilian school
    officials to promote quality education and initiatives such as
    the new military student Web site that DOD has launched to
    provide more information to parents, commanders, and educators
    about issues affecting military children.
        We also encourage DOD efforts to improve military spouse
    career progression. These efforts include a partnership with
    the Department of Labor that we find very promising.
        Mr. Chairman, the concern you and other members of this
    subcommittee have expressed today sends an important message to
    service members and their families. Congress understands the
    link between military readiness and the quality of life of the
    military community. Strong families ensure a strong force.
    Thank you for your role in keeping our families and force
    strong. Thank you. Now, Dr. Schwartz will talk about health
    care.
        [The prepared statement of Ms. Raezer follows:]

                   Prepared Statement by Joyce Wessel Raezer

        Mr. Chairman and members of this distinguished subcommittee, the
    National Military Family Association (NMFA) would like to thank you for
    the opportunity to present testimony on quality of life issues
    affecting service members and their families. NMFA is also grateful for
    your leadership in the 1st Session of the 108th Congress in securing
    the inclusion of several key provisions in the National Defense
    Authorization Act (NDAA) for Fiscal Year 2004. These provisions
    include:

             3.7 percent across the board pay raise for members of
            all the uniformed services, plus targeted raises
             Indexing future pay raises to the Employment Cost
            Index
             Increasing Basic Allowance for Housing (BAH) funding
            to cover all but 3.5 percent average out-of-pocket costs for
            rank-based standard of housing
             Maintaining Family Separation Allowance (FSA) at $250
            per month and Imminent Danger Pay (IDP) at $225 per month
            through December 2004
             Enacting enhancements to TRICARE Standard and National
            Guard and Reserve health care
             Authorizing unrestricted commissary access for
            National Guard and Reserve members and their families
             Authorizing full replacement value reimbursement for
            household goods damaged in military Permanent Change of Station
            moves
             Clarifying that military chaplains may use
            appropriated funds to pay family members' expenses for command-
            sponsored, chaplain-lead marriage and family conferences and
            training
             Authorizing $35 million for civilian schools educating
            large numbers of military children (includes $5 million for
            schools educating severely-disabled military children)

        As a founding member of TMC, NMFA subscribes to the recommendations
    contained in the Coalition's testimony presented for this hearing. In
    this statement, NMFA will expand on a few of the issues before this
    subcommittee today:

             Pay and allowances
             Health care
             Family support, including the unique needs of Guard
            and Reserve families
             Education for military children
             Commissaries and exchanges
             Base Realignment and Closure (BRAC)

        As you consider the quality of life needs of service members and
    their families this year, NMFA asks that you remember that the events
    of the past 2 years have left this family force drained, yet committed
    to their mission. Service members look to their leaders to provide them
    with the tools to do the job, to enhance predictability, to ensure that
    their families are cared for, their spouses' career aspirations can be
    met, and their children are receiving a quality education. They look
    for signs from you that help is on the way, that their pay reflects the
    tasks they have been asked to do, and that their hard-earned benefits
    will continue to be available for themselves, their families, and their
    survivors, both now and into retirement.

                               PAY AND ALLOWANCES

        Service members and their families appreciate the dramatic
    improvements in military compensation achieved over the past several
    years. The combination of across-the-board raises at the level of the
    Employment Cost Index (ECI) plus .5 percent and targeted raises for
    certain ranks have improved their financial well-being. The 5-year
    plan, ending in fiscal year 2005, to increase BAH has been especially
    beneficial for military families living in high cost-of-living areas.
    Service members also look forward to the implementation of the special
    deployment payments included in the NDAA for Fiscal Year 2004 that will
    provide up to $600 per month, based on both longevity and frequency of
    deployments. They wonder, however, whether time already spent on
    deployment prior to the law's enactment will count toward receipt of
    the payment.

    Family Separation Allowance
        Military members and their families were most grateful to Congress
    last year for including increases in FSA and IDP in the fiscal year
    2003 Supplemental Appropriations bill. They were relieved when these
    increases were authorized to continue through December 2004 in the NDAA
    for Fiscal Year 2004, yet alarmed at the debate over the FSA, which
    occurred last fall. NMFA understands that the Department of Defense
    (DOD) is looking at the wide range of pays and allowances in order to
    determine their proper mix and use. We believe, however, that the
    amount of FSA must remain the same for all eligible service members, no
    matter where they are deployed. FSA is not combat pay--it is paid in
    recognition of the additional costs a family faces when a service
    member is deployed. It helps pay for the additional long distance phone
    calls the deployed service member and family make; it pays for the car
    or home repairs the service member performs when at home; it pays for
    the tutoring a child needs when the family chemistry or algebra expert
    is deployed. These costs are not incurred just by the families of
    service members in a combat zone: whether the service member is in
    Iraq, Afghanistan, on a ship in the Pacific, or on an unaccompanied
    tour in Korea, to the family, ``gone is gone!.''
        NMFA must also note that, while families of deployed service
    members face similar costs of separation no matter where the service
    member is deployed, other pay and benefits change drastically. Service
    members deployed to certain combat zones not only receive IDP and other
    combat-related pays, but also are entitled to certain tax advantages.
    Service members in other locations, such as Korea or on board ships
    outside combat zones, do not receive the same tax advantage. Thus,
    their families have similar expenses to meet with less income. To these
    families, last year's increase in FSA was an especially welcome relief
    to tight family budgets.
        NMFA asks this subcommittee to ensure that the amount of FSA
    remains the same for all eligible service members. NMFA also asks the
    subcommittee to consider indexing the FSA to inflation so that we do
    not have to wait for another war for this allowance to be increased
    again.

    Basic Allowance for Housing
        As we come to the final year of the funding initiative that has
    substantially bought-down average out-of-pocket housing costs, NMFA
    asks this subcommittee to help address other issues related to the BAH.
    The issue of the housing standard on which the BAH is calculated is
    described in The Military Coalition's (TMC) written statement. NMFA
    joins the Coalition in recommending that this housing standard be
    revised.
        A second issue involves the rate protection put into effect during
    the first year of the increased BAH funding. Originally, DOD planned to
    adjust BAH up or down depending on the housing costs in an area. If
    housing costs declined in the area according to an annual survey done
    by a DOD contractor, then BAH would decline for service members new to
    the installation. Service members already at the location would be
    grandfathered in at the old, higher rate. If BAH increased, all service
    members at the location would receive the increase. After the first
    survey figures proved incomplete or inaccurate for some of the
    communities designated for reductions in BAH, DOD instituted rate
    protection, which kept BAH from decreasing at any location. Rate
    protection both for individuals and locations has been in place since
    2001 at installations where housing costs have declined. DOD has stated
    it will end rate protection after the 2005 BAH increases; BAH rates for
    the area surrounding the installations will then reflect the increases
    and decreases of the rental housing markets. Individual rate protection
    will continue, however. NMFA is concerned that the end of rate
    protection, while reasonable in ensuring that BAH accurately reflects
    local housing costs, could potentially disrupt both private housing
    markets and the military housing privatization projects that depend on
    BAH as their revenue stream.
        If DOD decides to end rate protection, NMFA believes it must have a
    plan in place to ease the transition to lower rates in the affected
    communities. This plan must ensure BAH does not drop significantly in
    any 1 year for certain ranks, accurate housing costs surveys continue
    to be made, and BAH disparities between service members new to the
    installation and those who currently there are not too large.

    Military Allowances and Safety Net Programs
        In testimony in June 2003 before this subcommittee and the Children
    and Families Subcommittee of the Senate Health, Education, Labor and
    Pensions Committee, NMFA highlighted a longstanding frustration for
    military families: the confusion involved in how and when military
    allowances are counted for tax purposes or to determine eligibility for
    military and civilian programs. We presented the following matrix
    showing how the treatment of BAH results in confusion for families and
    disparities as they move from one assignment to another and from on-
    base to off-base housing.

                                BASIC ALLOWANCE FOR HOUSING (BAH) AND PROGRAM ELIGIBILITY
    ----------------------------------------------------------------------------------------------------------------
                                                                      Privatized Military
                                             Value of Government      Family Housing (BAH
                   Program                         Quarters          included on Leave and             BAH
                                                                      Earnings Statement)
    ----------------------------------------------------------------------------------------------------------------
    Earned Income Tax Credit (EITC)......  Excluded...............  Excluded...............  Excluded
    Food Stamps..........................  Excluded...............  Included...............  Included
    WIC (USDA)...........................  Most states exclude....  Most states exclude....  Most states exclude
    WIC Overseas (DOD)...................  Excluded...............  N/A....................  Excluded
    DOD Family Supplemental Subsistence    Included (adds in        Included...............  Included
     Allowance (FSSA).                      amount of BAH service
                                            member would have
                                            received).
    National School Lunch Program (USDA).  Excluded...............  Excluded...............  Included
    DOD Overseas Student Meal Program....  Excluded...............  N/A....................  Excluded
    Head Start Program...................  Excluded...............  Included...............  Included
    Supplemental Security Income (SSI)...  Excluded...............  Excluded...............  Included
    DOD Child Care Fees..................  Includes BAH II (not     Includes BAH II (not     Includes BAH II (not
                                            geographically-based     geographically-based     geographically-based
                                            BAH).                    BAH).                    BAH)
    ----------------------------------------------------------------------------------------------------------------

        As can be seen in the matrix, BAH is not even consistently treated
    under DOD programs. The eligibility puzzle has grown more complicated
    in recent years as the military services have begun to privatize
    military family housing. The promise of privatization is that the
    Services will be able to upgrade their housing stock at a faster pace
    using private capital than by relying on the military construction
    process. By law, when housing is privatized, service members must be
    paid BAH. The inclusion of the BAH on their Leave and Earnings
    Statement (LES) makes it appear that a family's income has increased,
    even though they are living in the same house and the BAH is
    immediately paid out as an allotment to the developer as rent.
    Legislative changes have now exempted BAH received by service members
    in privatized housing from eligibility calculations for free and
    reduced lunch and regulatory relief has been provided by the Social
    Security Administration to protect families' eligibility for
    Supplemental Security Income (SSI) when their housing is privatized.
        While the protection of the status quo in determining eligibility
    for free and reduced lunches and SSI is a boon to families living in
    privatized housing, these changes exacerbate disparities experienced by
    military families based on where they live. Often, whether or not
    families live on the installation in government quarters or privatized
    housing is determined by chance, by the availability of housing, or the
    length of the waiting list, and not by choice. Young families most in
    need of government housing are often forced to seek housing on the
    economy because there is not enough junior enlisted housing available
    on the installation. Their BAH, however, usually does not cover their
    housing costs because the standard on which BAH is based is not the
    same as the standard used to determine the size home service members
    receive when in government quarters. Service members lucky enough to
    receive either government quarters or privatized housing on an
    installation obtain the appropriate size housing for their family size
    and, because the value of their government housing does not count
    toward eligibility for most safety net programs, they find it easier to
    qualify. Families in privatized housing by law may be charged no more
    in rent than their BAH, thus limiting their out-of-pocket costs. Thus,
    families living on-base with fewer expenses qualify for additional
    support programs while families living off-base with higher housing and
    transportation expenses do not.
        NMFA urges members of this subcommittee to assist in bringing a
    sense of order to how military allowances are counted in Federal
    programs to ensure equitable access to these safety net services. We
    also ask you to help protect families against disruptions in benefit
    eligibility caused by the receipt of deployment pays. No family should
    have to face the prospect of losing valuable benefits for a disabled
    child because a service member has received deployment orders, nor
    because they do not forfeit their military housing allowance to live in
    government housing. Ideally, NMFA believes tax free allowances such as
    BAH should not be counted under any safety net programs, which is how
    they are now treated in determining eligibility for the Earned Income
    Tax Credit (EITC). NMFA understands this could increase the number of
    military families eligible for some of these programs, but believes
    this is justified given the loss of spouse income due to military
    relocations and high operations tempo and the need for equitable
    treatment of all service members. NMFA also encourages Members of
    Congress to raise awareness of this issue with State leaders. Military
    allowances also make it difficult for military families to qualify for
    some state safety net programs.
        Inconsistent treatment of military allowances for tax purposes and
    in determining eligibility for safety net programs creates confusion
    and can exact a financial penalty on military families. A start in
    correcting this inequity would be to adopt a common standard in how BAH
    should be counted in eligibility formulas and to ensure that the
    receipt of deployment-related allowances do not cause military family
    members to become ineligible for support services for which they would
    otherwise be eligible.

                                  HEALTH CARE

        This year, NMFA is focused on health care transition issues: the
    transition to the new TRICARE contracts, Guard and Reserve family
    members' transition to the TRICARE benefit when the service member is
    called to active duty, and the transition that occurs during the return
    and reunion process as service members and their families adjust to the
    end of a deployment.

    Transition to New TRICARE Contracts
        NMFA's concerns during the transition to the new TRICARE contracts
    revolve around the ability of families to access care in a timely
    manner and to have continuity of care. We are particularly concerned
    that information regarding any changes in the manner in which they
    access care will be communicated during the normal summer permanent
    change of station (PCS) rotation. A family may need information
    regarding changes that would affect them while in the moving process
    and at their new duty station, when in fact they are sent information
    regarding the changes at their current duty station.
        NMFA is also concerned about the preservation of patients'
    continuity of care and the availability of that care in medical
    treatment facilities (MTF) relying on resource sharing contracts with
    the TRICARE managed care support contractors to supply certain key
    personnel. These arrangements end on the day health care delivery
    begins under the new TRICARE contracts, as the responsibility for them
    shifts from the TRICARE contractor to the MTFs. NMFA is pleased that
    DOD has offered MTFs the opportunity of a bridge process to work with
    outgoing and incoming contractors to keep resource sharing providers in
    place until establishing their own arrangements. This bridge will
    preserve continuity of care for the patients, as well as access to
    care. Unfortunately, NMFA has heard that some MTFs are not taking
    advantage of this bridge option and are looking at other contracting
    options that will not preserve the continuity of care and access
    currently enjoyed by patients. The relationships resource sharing
    personnel have developed with patients in places such as Madigan Army
    Medical Center, where the pediatric clinic is staffed entirely by
    resource sharing, should not be severed abruptly at a time when this
    continuity of care is needed most.
        In addition to following issues of timely access and continuity of
    care as the new TRICARE contracts stand up, NMFA is closely watching
    the simultaneous implementation of a new program, the Extended Care
    Health Option (ECHO). The ECHO program, incorporating changes included
    in the NDAA for Fiscal Year 2002, replaces the current Program for
    People with Disabilities (PFPWD) and is coming on-line at the same time
    as current TRICARE regions transfer into the new three regions. The new
    program has increased benefits for active duty families, but it also
    has different requirements. Since ECHO is to be implemented as current
    regions transition into the new regions, families newly enrolled in
    ECHO may find themselves transferred to a region that has not yet
    transitioned. What will be the status of these ECHO families? Will they
    lose their new ECHO benefits until the region where they now live is
    transitioned? Will they need to re-enroll in the PFPWD?
        It appears to NMFA that for these concerns to be adequately
    addressed each MTF must have a business plan fully integrated into the
    regional business plan several months before the transition is to take
    place. Yet, two of the three regions do not currently have a Director.
    NMFA has been informed that the management of care in the ECHO program
    will be primarily a contractor responsibility. Not only do the new
    contractors have to transition these often very complicated cases, but
    must inform the families of the new benefits and new requirements of
    the program. However, contractors have not yet received the contract
    modifications necessary to implement the program; the Final Rule
    implementing ECHO has not yet been published in the Federal Register.
    The smooth transition of these very vulnerable families from one
    program to the other as each current region is absorbed into one of the
    new three regions is vital to the well-being of the family and the
    ability of service members to perform their missions. NMFA is aware
    that some contractors are going above and beyond to assist with
    transitions; however, the level of cooperation is not the same in all
    areas.
        When each of the current twelve regions started delivery of
    services, significant problems for beneficiaries developed. Over the
    ensuing years, most of the problems have been identified and corrected.
    The acceptance of, and satisfaction with, the Health Maintenance
    Organization (HMO) piece of TRICARE, TRICARE Prime, has steadily
    increased among beneficiaries. The transition to the new contracts must
    not put TRICARE once again at the top of concerns at beneficiary
    forums. Just as service members are stretched thin with repeated
    deployments and time away from home, families are under increased
    stress. Problems accessing health care or difficulty in obtaining
    accurate information on how to do so should not be an additional part
    of this equation.

    Guard and Reserve Health Care
        NMFA is grateful to Congress for its initial efforts to enhance the
    continuity of care for National Guard and Reserve members and their
    families. Unfortunately, as discussed in TMC's statement, the temporary
    health care provisions enacted in the NDAA for Fiscal Year 2004 have
    not yet been implemented. NMFA is grateful to this subcommittee for its
    leadership in directing DOD to establish Beneficiary Counseling and
    Assistance Coordinator (BCAC) positions specifically charged with
    supporting National Guard and Reserve members and their families with
    their transition to TRICARE. We believe that information and support
    are improving for Guard and Reserve families who must transition into
    TRICARE; however, we believe that going into TRICARE may not be the
    best option for all of these families. Guard and Reserve service
    members who have been mobilized should have the same option as their
    peers who work for the DOD: for the DOD to pay their civilian health
    care premiums. The ability to stay with their civilian health care plan
    is especially important when a Guard or Reserve family member has a
    special need, a chronic condition, or is in the midst of treatment.
    While continuity of care for some families will be enhanced by the
    option to allow Guard and Reserve members to buy into TRICARE when not
    on active duty--if ever implemented--it can be provided for others only
    if they are allowed to remain with their civilian health insurance.
    Preserving the continuity of their health care is essential for
    families dealing with the stress of deployment.

    Post Deployment Health for Service Members and Families
        The Services recognize the importance of educating service members
    and family members about how to effect a successful homecoming and
    reunion and have taken steps to improve the return and reunion process.
    Information gathered in the now-mandatory post-deployment health
    assessments may also help identify service members who may need more
    specialized assistance in making the transition home. Successful return
    and reunion programs will require attention over the long term. Many
    mental health experts state that some post-deployment problems may not
    surface for several months after the service members' return. NMFA is
    especially concerned about the services that will be available to the
    families of returning Guard and Reserve members and service members who
    leave the military following the end of their enlistment. Although they
    may be eligible for transitional health care benefits and the service
    member may seek care through the Department of Veterans' Affairs (VA),
    what happens when the military health benefits run out and deployment-
    related stresses still affect the family? As part of its return and
    reunion plan, the Army's OneSource contract will help returning service
    members and families access local community resources and to receive up
    to six free face-to-face mental health visits with a professional
    outside the chain of command.
        Post-deployment transitions could be especially problematic for
    service members who have been injured and their families. These service
    members have received excellent care through military hospitals. In
    many cases, their families have also received superior support services
    through the hospitals' Family Assistance Centers. NMFA has heard
    nothing but praise for the Family Assistance Center at Walter Reed Army
    Medical Center, where most of the most severely-injured service members
    have been sent. Family Assistance Center staff have provided the
    additional support their families have needed as they begin the
    adjustments to changes brought by the service members' injury. Wounded
    service members have wounded families and, just as it will take some
    time for service members physical wounds to heal, it will take time for
    the emotional wounds to heal. The medical handoff of the service member
    to the VA is steadily improving and the VA and DOD are working well
    together to improve the service members' continuity of care. Ensuring
    the handoff to the VA or community-based support services needed by the
    wounded families is just as important.
        The new round of TRICARE contracts must provide standardized ways
    to access health care across all regions and emphasize providing
    continuity of care to beneficiaries during the transition from old to
    new contracts. Families of Guard and Reserve members should have
    flexible options for their health care coverage that address both
    access to care and continuity of care. In addition, accurate and timely
    information on options for obtaining mental health services and other
    return and reunion support must be provided to families as well as to
    service members.

                                 FAMILY SUPPORT

        Since our testimony before this subcommittee last year, NMFA is
    pleased to note the Services continue to refine the programs and
    initiatives to provide support for military families in the period
    leading up to deployments, during deployment, and the return and
    reunion period. NMFA remains concerned that installations must continue
    to divert resources from the basic level of family programs to address
    the surges of mobilization and return. Resources must be available for
    commanders and others charged with ensuring family readiness to help
    alleviate the strains on families facing more frequent and longer
    deployments. As the mobilization and de-mobilization of Guard and
    Reserve members continues, support for their families remains critical.

    National Guard and Reserve Families
        Projected force numbers for the next rotation of troops for
    Operation Iraqi Freedom (OIF) call for 40 percent to be Guard and
    Reserve members. This number does not include service members called
    for duty in Operation Enduring Freedom (OEF) in Afghanistan and those
    who continue to serve in Bosnia. The military family is a growing
    commodity across America, appearing in places where they have not
    usually been before. These families often find themselves a great
    distance from traditional military installation-based support
    facilities. They may also be far from the Guard armory or Reserve
    center where their service member trains. How then does the family
    learn about all their active duty benefits or receive answers about how
    to follow the rules? NMFA appreciates additional funding provided in
    the fiscal year 2004 Supplemental Appropriations for family support
    services provided by the National Guard in areas away from military
    installations. Each state has one or more family assistance centers for
    these families. In some instances, it may only be a phone manned during
    working hours; in others, a fully-staffed information and referral
    office is in operation.
        NMFA hears from Guard and Reserve families that community
    organizations like the Red Cross, the Veterans of Foreign Wars (VFW),
    the American Legion, Employee Support of the Guard and Reserve (ESGR)
    and Chambers of Commerce have pitched in to help when units have been
    deployed. These groups provide moral support and assist when financial
    problems caused by either a decrease in their household income or by
    paperwork complications as service members transfer from a State system
    to the defense pay system plague many families. Some States (with
    Illinois taking the lead) are also instituting a military family relief
    fund to help those families with grants. We would hope pay and
    paperwork problems could be eliminated. National Guard and Reserve
    families are proud of their service members. NMFA appreciates the
    sacrifices they are called upon to make when their service member is
    deployed. They need equitable access to family support programs to help
    them through this stressful period.

    What's Needed for Family Support?
        Family readiness volunteers and installation family support
    personnel in both active duty and Reserve component communities have
    been stretched thin over the past 2 years as they have had to juggle
    pre-deployment, ongoing deployment, and return and reunion support,
    often simultaneously. Unfortunately, this juggling act will likely
    continue for some time. Volunteers, whose fatigue is evident, are
    frustrated with being called on too often during longer than
    anticipated and repeated deployments. We now hear from volunteers and
    family members whose service member is serving in their second long
    deployment to a combat zone since the war on terrorism began. Family
    member volunteers support the service members' choice to serve;
    however, they are worn out and concerned they do not have the training
    or the backup from the family support professionals to handle the
    problems facing some families in their units. Military community
    volunteers are the front line troops in the mission to ensure family
    readiness. They deserve training, information, and assistance from
    their commands, supportive unit rear detachment personnel, professional
    backup to deal with family issues beyond their expertise and comfort
    level, and opportunities for respite before becoming overwhelmed. NMFA
    is pleased that the Army is establishing paid Family Readiness Group
    positions at many installations dealing with deployments to provide
    additional support to families and volunteers.
        NMFA knows that the length of a deployment in times of war is
    subject to change, but also understands the frustrations of family
    members who eagerly anticipated the return of their service members on
    a certain date only to be informed at the last minute that the
    deployment will be extended. The unpredictability of the length and
    frequency of deployments is perhaps the single most important factor,
    other than the danger inherent in combat situations, frustrating
    families today. Families who can count on a set return date cope better
    than those dealing with an unknown return. Families and service members
    who can count on a period at home between deployments will be more
    likely to choose to stay with the military. Because of the
    unpredictable nature of the military mission today, family members need
    more help in acquiring the tools to cope with the unpredictability.
        NMFA applauds the increase in joint coordination to improve family
    readiness. As the military becomes more ``joint,'' it makes sense to
    use a joint approach to family support, providing consistent
    information and using scarce personnel and other resources to the best
    advantage. A start in improved joint family readiness support has been
    DOD's establishment of a common Web portal with links to military
    service, private organization, and other useful government sites
    (www.deploymentconnections.org).
        With the January implementation of Navy OneSource and February
    roll-out of its Air Force counterpart, all active and Reserve component
    personnel and their families can now access the ``OneSource'' 24-hour
    information and referral service previously available only for Marine
    Corps and Army personnel. OneSource provides information and
    assistance, not just for post-deployment concerns, but also in such
    areas as parenting and child care, educational services, financial
    information and counseling, civilian legal advice, elder care, crisis
    support, and relocation information. The service is available via
    telephone, e-mail, or the Web and is designed to augment existing
    Service support activities and to link customers to key resources, Web
    pages, and call centers. It is also available to family center staff,
    many of whom tell NMFA that they regard it as a useful tool to expand
    the assistance they can provide families. OneSource is operated for the
    military services by a civilian company that provides similar Employee
    Assistance Programs for private industry. Early statistics on use
    indicate that service members and families are accessing OneSource
    primarily for everyday issues and basic information about military
    life. Military families who use OneSource are pleased with the support
    and information provided. OneSource also received high marks from a
    panel of military spouses at a quality of life hearing before the
    Military Construction Subcommittee of the House Appropriations
    Committee on February 25.
        While NMFA believes OneSource is an important tool for family
    support, it is not a substitute for the installation-based family
    support professionals or the Family Assistance Centers serving Guard
    and Reserve families. NMFA is concerned that in a tight budget
    situation, family support staffing might be cut under the assumption
    that the support could be provided remotely through OneSource. The
    OneSource information and referral service must be properly coordinated
    with other support services, to enable family support professionals to
    manage the many tasks that come from high operational tempo (OPTEMPO).
    The responsibility for training rear detachment personnel and
    volunteers and in providing the backup for complicated cases beyond the
    knowledge or comfort level of the volunteers should flow to the
    installation family center or Guard and Reserve family readiness staff.
    Family program staff must also facilitate communication and
    collaboration between the rear detachment, volunteers, and agencies
    such as chaplains, schools, and medical personnel.
        NMFA applauds the various initiatives designed to meet the needs of
    service members and families wherever they live and whenever they need
    them and requests adequate funding to ensure continuation both of the
    ``bedrock'' support programs and implementation of new initiatives.
    Higher stress levels caused by open-ended deployments require a higher
    level of community support. Family readiness responsibilities must be
    clearly delineated so that the burden does not fall disproportionately
    on volunteers.

                        EDUCATION FOR MILITARY CHILDREN

        A significant element of family readiness is an educational system
    that provides a quality education to military children, recognizing the
    needs of these ever-moving students and responding to situations where
    the military parent is deployed and/or in an armed conflict. Children
    are affected by the absence of a parent and experience even higher
    levels of stress when their military parent is in a war zone shown
    constantly on television. The military member deployed to that
    dangerous place cannot afford to be distracted by the worry that his or
    her child is not receiving a quality education. Addressing the needs of
    these children, their classmates, and their parents is imperative to
    lowering the overall family stress level, and to achieving an
    appropriate level of family readiness. But it does not come without
    cost to the local school system.
        NMFA is pleased to report that most schools charged with educating
    military children have stepped up to the challenge. They have become
    the constant in a changing world and the place of security for military
    children and their families. The goal, according to one school
    official, ``is to keep things normal for the kids.'' The schools' role
    is to ``train teachers in what to look for and deal with what they
    find.'' NMFA received many positive stories from parents and schools
    about how the schools have helped children deal with their fears, keep
    in touch with deployed parents, and keep focused on learning. We have
    also heard stories of schools helping each other, of schools
    experienced in educating military children and dealing with deployment-
    related issues providing support for school systems with the children
    of activated Guard and Reserve members. In the process, many schools
    have increased the understanding of their teachers and other staff, as
    well as their entire communities, about issues facing military
    families. The DOD is supporting this effort in several significant
    ways. Late last year, DOD launched a new education website
    (www.militarystudent.org) to provide information on a variety of
    education topics to parents, students, educational personnel, and
    military commanders. Its information is especially valuable for schools
    and families dealing with the issues of deployment for the first time.
    NMFA is also pleased to report that other Services are following the
    Army's lead and hiring full-time School Liaison Officers at certain
    installations. The Army not only has School Liaison Officers at all
    locations, but has also expanded to provide these information services
    to the Reserve components, recruiters and other remotely-assigned
    personnel and their families.
        NMFA is appreciative of the support shown by Congress for the
    schools educating military children. It has consistently supported the
    needs of the schools operated by the DOD Education Agency (DODEA), both
    in terms of basic funding and military construction. Congress has also
    resisted efforts by a series of administrations to cut the Impact Aid
    funding so vital to the civilian school districts that educate the
    majority of military children. NMFA is also appreciative of the
    approximately $30 million Congress adds in most years to the Defense
    budget to supplement Impact Aid for school districts whose enrollments
    are more than 20 percent military children and for the additional
    funding to support civilian school districts who are charged with
    educating severely disabled military children. NMFA hopes, however,
    that DOD would request the supplement to Impact Aid, rather than wait
    for Congress to add it. Building this funding into its budget request
    would signal to school districts and military families that the DOD
    wants to ensure better quality in all schools educating large numbers
    of military children, not just those in DOD schools. Requesting this
    funding will also signal that DOD recognizes that it may need to assist
    schools with security, school construction, or special learning
    programs if the presence of military children or DOD programs and
    policies cause a loss of school funding or increased expenditures that
    cannot be met through Impact Aid or other Federal, State, or local
    programs.

    DODEA
        DOD schools are located in overseas locations (DODDS) and on a
    small number of military installations in the United States (DDESS).
    The commitment to the education of military children in DOD schools
    between Congress, DOD, military commanders, DODEA leadership and staff,
    and especially military parents has resulted in high test scores,
    nationally-recognized minority student achievement, parent involvement
    programs and partnership activities with the military community. This
    partnership has been especially important as the overseas communities
    supported by DODDS and many of the installations with DDESS schools
    have experienced high deployment rates. DOD schools have responded to
    the increased operations tempo with increased support for families and
    children in their communities.
        While DOD schools have been immune from some of the constraints
    besetting civilian schools affected by State and local budget
    pressures, military families served by DOD schools have expressed
    concerns in recent years about DOD rescissions that cause cuts in
    maintenance, staff development, technology purchases and personnel
    support and also forced the elimination of some instructional days in
    some districts. Because the timing of the Federal fiscal year is out of
    sync with the school year, NMFA believes this calendar mismatch may
    tend to worsen the impact of mid-year Department-wide budget re-
    allocations on the school system and the children it serves. We urge
    Congress to ensure that DOD schools have the tools they need to plan
    and execute school budgets that support the increased mission these
    schools and their communities face.
        NMFA also asks this subcommittee to understand the importance
    military parents attach to schools that educate their children well.
    DOD is currently preparing a congressionally-requested report to
    determine whether it could turn some DDESS districts over to
    neighboring civilian education agencies. While NMFA does not object to
    the concept of a report to determine whether school systems are
    providing a quality education, using tax dollars well, or are in need
    of additional maintenance or other support funding, we are concerned
    about the timing of the study and the reaction it has caused in
    communities already dealing with the stress of the war and deployments.
    Families in these communities wonder why something that works so well
    now seems to be threatened. NMFA attended an October 2003 community-
    input forum sponsored by the Director of DODEA. We were impressed not
    just with the strong support commanders and other community leaders
    gave to these schools, but also with the efforts they had made to reach
    out to local civilian schools to improve education for all military
    children.
        NMFA applauds the DOD vision that the DOD focus on quality
    education for all military children. We have stated for years that DOD
    needs to do more to support civilian school districts educating most of
    the 85 percent of military children who do not attend DOD schools. We
    believe, however, that shifting children from highly successful,
    highly-resourced DOD schools to neighboring districts may cause more
    harm than good to both military children and their civilian peers.
    Adding to the stress in military communities also harms the education
    of military children. NMFA does not know what DOD's final
    recommendations will be. We encourage Members of Congress to study
    those recommendations closely before making any decision that could
    damage the educational success the DDESS schools have achieved.

    Improving Education Quality for all Military Children
        Despite the success of the DOD schools in raising achievement
    levels, it is important to remember most military children are
    dependent on civilian school districts, often varying in quality and
    responsiveness to their families' concerns and the demands of the
    military lifestyle. Because military families move on average every 2.9
    years, their children are often placed at an educational disadvantage,
    even by many well-intentioned programs and rules designed to improve
    school quality. Military parents applaud higher accountability
    standards--they want the best possible instruction for their children
    as well as the most rigorous course offerings possible. They do not
    want their children punished, however, when the various Federal and
    State initiatives clash, causing difficulties for mobile children.
    Because of varying course standards, school schedules, and State
    graduation requirements, military children sometimes lose credits
    needed for graduation. Currently, at least 18 States have graduation
    requirements linked to performance on State exit exams and several
    others are developing exit exams. With the rise of exit exams and
    increased graduation requirements, transfers are becoming more
    problematic, especially in the high school years.
        NMFA applauds DOD initiatives to work with States to ease these
    transition issues for military children. We commend States that are
    also working to become more military-family-friendly, especially in the
    areas of education and spouse employment. We believe this coordination
    between DOD and the State and local entities charged with educating
    military children will bring an increased awareness to civilian
    neighborhoods about the value the military brings to their communities.
    To the military services, this collaboration will bring a better
    awareness of the burden being shouldered by local taxpayers to educate
    military children. To military children and their parents, this
    collaboration shows that quality education is a shared priority between
    the DOD and their local schools.
        Schools serving military children, whether DOD or civilian schools,
    need the resources available to meet military parents' expectation that
    their children receive the highest quality education possible. Impact
    Aid funding for both on and off-base children and the DOD supplement to
    Impact Aid provide needed funds in lieu of lost tax revenue and help
    districts meet the additional demands caused by large numbers of
    military children. Initiatives to assist parents and to promote better
    communication between installations and schools should be expanded
    across all Services. Military children must not be placed at a
    disadvantage as State and Federal Governments devise accountability
    measures.

                           COMMISSARIES AND EXCHANGES

        Commissaries are consistently valued by all members of the military
    community as a top benefit. In the most recent Status of Forces Survey
    of Active Duty Members, done in July 2002, 67 percent of service
    members surveyed reported they were either satisfied or very satisfied
    with commissaries and exchanges, the highest satisfaction rate for any
    quality of life program. Delegates to the 2003 Army Family Action Plan
    Conference rated the commissary as their fourth most-valuable service,
    following health care, the Army Family Action Plan, and Army Community
    Services. Every time they go to the commissary, families note the
    savings. According to the most recent figures NMFA has obtained from
    the Defense Commissary Agency (DeCA), these savings are 32.1 percent
    compared to commercial super centers and grocery stores--that
    translates to an annual savings of almost $2,700 for a family of four.
    These savings are especially important to young families and to
    families overseas or in remote or high cost areas in the United States.
    An Air Force family member stationed in Hawaii told NMFA what the
    commissary benefit means to her family: ``After a couple of walks
    through the local grocery store here, the commissary benefit is
    obvious--$2.65/gallon instead of $6.85 for milk, 12 cents instead of 30
    cents a package for ramen, 50 cents instead of a dollar/pound for
    bananas, and the list goes on.''

    Commissaries
        The past year has been a challenging one for many of the
    beneficiaries served by DeCA and, we believe for the DeCA itself. A war
    with large-scale deployments and redeployments, a major hurricane in
    the east, a multi-State blackout, wildfires in the west, and a major
    distributor bankruptcy, plus news coming from inside the beltway on
    possible changes to the commissary system, combined to add to the
    stress experienced by military families and the people charged with
    supporting them. NMFA believes these events--and the reactions to
    them--served to highlight the value of the commissary benefit to the
    military community and the high return on investment the government
    receives from its $1.1 billion commissary appropriation.
        NMFA believes DeCA's successes in improving customer service, the
    cleanliness and functionality of its stores, outreach to beneficiaries,
    and the quality of produce and meat, in addition to increasing customer
    savings, have been made possible through its ability to remain focused
    on gaining efficiencies and creating initiatives to enhance its service
    to beneficiaries. We also believe that these initiatives bring value to
    the government and to the American taxpayer by leveraging the
    appropriated funds DeCA receives into a military benefit valued at a
    much higher level by beneficiaries and by the actual savings delivered.
    Because of the value commissaries add to the quality of life of
    individual service members, retirees, families, survivors, and the
    military community, NMFA is very concerned that this benefit be
    preserved as part of the military compensation package.
        During the past year, DOD announced plans to close a number of
    commissaries, replace the traditional three-star officer serving as
    chairman of the Commissary Operating Board (COB) with a political
    appointee, and require a study on instituting variable pricing for
    commissary products. These proposals are apparently intended to save
    money by reducing DeCA's annual appropriation. NMFA is concerned the
    recommendation to ``civilianize'' the chairmanship of the COB is
    another indicator of DOD's ongoing interest in eventually privatizing
    the benefit, which NMFA opposes. NMFA believes uniformed military
    leaders, who are responsible for the well-being of their soldiers,
    sailors, airmen, and marines, must continue to maintain their
    leadership function on the COB to provide oversight of this important
    benefit.
        NMFA is also opposed to the concept of variable pricing. We believe
    it is being proposed solely as a strategy to reduce appropriated
    funding for the commissary benefit. With average savings currently at
    approximately 32 percent, we cannot understand why the administration's
    proposal for variable pricing sets a benchmark of 30 percent. While we
    agree more needs to be done to increase savings in some locations, we
    do not believe a procedure that disrupts the well understood pricing
    formula of cost plus 5 percent provides a better benefit. Encouraging
    DeCA to continue implementing efficiencies and to work with its vendors
    to secure the lowest prices possible will provide the best benefit over
    the long term and increase average savings for the customer. If vendors
    are already selling goods to the commissaries at their best possible
    price, how long will they continue to do so if local commissaries can
    raise those prices simply to compensate for cutting prices on other
    products? It seems to us that implementing variable pricing on a
    worldwide scale would also require increased staffing to manage the
    process. These new positions would either have to come from existing
    staffing levels--which NMFA believes are already dangerously close to
    the minimum needed at the store level to maintain quality customer
    service--or would require more, not less, operating funds. NMFA fails
    to see the benefit to either the customer or the taxpayer in this
    proposal.
        NMFA appreciates the strong stand taken by Members of Congress and
    senior military leaders, including the COB and U.S. Army Europe
    (USAREUR) Commander General B.B. Bell, in support of retaining the
    commissaries recommended for closure. Senior DOD officials have in the
    past cited the special importance of commissaries to service members
    and families stationed overseas and in isolated communities in the
    United States. NMFA, therefore, was dismayed that the list of closures
    released in August 2003 contained so many stores in remote locations.
    Families also were dismayed. NMFA heard from many families who shared
    driving times and distances not just to the nearest commissary, but to
    the nearest civilian grocery store. Quality of life issues, such as
    high cost of living in the surrounding civilian community, remote
    locations, and the need to provide an American-like grocery benefit and
    ``touch of home'' in overseas communities must always take precedence
    over cutting an appropriation that consistently provides the DOD with a
    high return on its investment. NMFA also heard from Guard and Reserve
    service members and families who noted the irony of their receipt of
    full commissary access just at the time when the benefit they had just
    won seemed to be under fire. NMFA would also hope that the impact on
    all categories of beneficiaries--active duty, retiree, National Guard,
    and Reserve--be considered in any decision to close individual
    commissaries.
        NMFA thanks members of this subcommittee for its understanding of
    the commissary's importance to the military community and of the impact
    proposals to change the benefit have on a community under stress. We
    urge you to continue your efforts to keep this benefit strong.
        Quality of life considerations must be given high priority in any
    decision to close individual commissaries. NMFA opposes all
    privatization and variable-pricing initiatives and strongly supports
    full or even enhanced funding of the commissary benefit to sustain the
    current level of service for all patrons: active duty and Guard and
    Reserve service members, retirees, their families, and survivors.

    Exchanges
        Active duty and Reserve component service members, retirees, their
    families, and survivors consistently rate the military exchanges as
    important quality of life components. Beneficiaries value the
    exchanges--to include the vendors in exchange malls and the ancillary
    services such as service stations, barber shops, and shoppettes--
    because they provide a great service to the local community where they
    serve and live. Beneficiaries value low everyday prices on consumer
    goods and the convenience of catalog and Internet mail order services.
    The exchanges' online store, operated by the Army and Air Force
    Exchange Service (AAFES) continues to increase in popularity,
    especially among Guard and Reserve members and retirees who do not live
    near an installation, deployed service members, and families stationed
    overseas.
        The exchange services also bring a touch of home to deployed
    service members, through ship stores in the Navy and through AAFES
    activities in deployed areas. Exchange employees provide retail
    operations, name brand fast food outlets, Internet cafes, and phone
    services in many remote areas. NMFA applauds the exchange employees who
    have deployed with the troops and who serve them in often dangerous and
    remote locations. AAFES ``Gifts from the Homefront'' program allows
    people to purchase AAFES gift certificates that can be sent to
    individual authorized patrons or donated to deployed service members
    through the Red Cross, Air Force Aid Society, or the Fisher House. This
    program operates in a similar fashion to DeCA's ``Gift of Groceries''
    program.
        The exchanges not only provide essential goods and services, but
    also generate vital funding for a variety of important Morale, Welfare
    and Recreation (MWR) programs that are essential to maintaining a high
    quality of life for members of the military community. Funds generated
    for MWR by the exchanges are funds that do not have to be provided by
    the service members and their families to support these programs.
        NMFA applauds outreach efforts by the military exchanges to support
    military families and to recognize the contributions of retirees to the
    military community. We do note that, while improving, exchanges in many
    locations still need to work on their product lines to ensure that
    brand name goods in a variety of price points are available to meet the
    needs of the very diverse beneficiary population. Exchanges must also
    strengthen their promise to the community and ensure that exchange
    prices in the products they carry are comparable, not just to identical
    brands, but to other brands of similar quality in civilian stores.
    Military beneficiaries want to make their exchange their store of
    choice. An exchange that does not carry the goods they need, in the
    price range they can afford, or with the quality they expect will not
    be their first choice.
        Tighter security requirements, reduced ease of access in some
    cases, increased deployments, changing buying habits of beneficiaries,
    and the upcoming round of BRAC pose challenges for the military
    exchange systems. NMFA sees even greater challenges ahead in preserving
    adequate funding levels for MWR programs. NMFA has in the past
    supported the decision to keep the exchange systems separate while
    encouraging the adoption of common behind-the-store systems where
    efficiencies are viable. These areas include purchasing, distribution
    and logistics, finance, information systems, and other administrative
    functions. The exchanges are partnering successfully on certain private
    label brands and NMFA encourages more of these partnerships in the
    future to ensure that funds generated by exchange sales are available
    to be used for MWR programs and not needed to fund the administration
    of the exchange systems.
        NMFA has been following the work of DOD's Unified Exchange Task
    Force (UETF) closely to determine whether the DOD proposal to combine
    the exchange systems will have the potential to increase funding
    available for MWR while ensuring responsiveness to the needs of the
    beneficiaries and their communities. We thank the leadership of the
    UETF for its efforts to keep NMFA and other associations informed about
    its vision, goals, and research into how to design a uniform exchange
    system. While we appreciate the responsiveness of the UETF, however,
    NMFA must note that the Task Force cannot yet answer what is to us the
    critical question: How will this affect the beneficiaries? We believe
    the issue at stake in this discussion is bigger than a question of
    whether or not to combine the exchanges. MWR revenues support a variety
    of the most basic support programs available for families, single
    service members, and other members of the military community. NMFA most
    wants to know whether consolidation will provide enough savings to
    support MWR programs at the level needed to support the community. If
    not, what else do we need to ensure the viability of these programs?
    NMFA also wonders how the costs of transitioning to a consolidated
    system will be covered. We believe the MWR funding stream must be
    protected and do not want to see funds diverted, even with the promise
    of savings and recovered revenue in future years. Families tell us that
    MWR programs are stretched too thin now to be asked to forego revenues
    in order to pay for a transition to a consolidated exchange system. We
    also wonder how funds generated by a consolidated system will be
    reapportioned back to the Services and installations in a way that
    takes into account Service size, sales generated, community needs, and
    the multi-service and combined active and Reserve component missions of
    some installations.
        Consolidation issues that most concern NMFA are those that may
    require the maintenance of a Service-specific program, such as the
    Navy's Ship Stores. We are also concerned about a local exchange
    manager's ability, under a consolidated system, to provide certain
    Service-specific programs or incentives. For example, at the Quantico
    Marine Corps Base, exchange shoppers can receive ``child care bucks''
    when spending certain amounts at the exchange. These coupons can be
    used to pay for child care at the installation Child Development
    Center. NMFA thinks this is a wonderful initiative at an installation
    serving many young families; it helps them pay for child care and it
    makes the exchange their store of choice. We believe this program is
    made possible because of the integration of child care programs and the
    exchange as part of Marine Corps Community Services. We wonder whether
    this program, or similar tie-ins between exchanges and MWR programs,
    could continue under a consolidated exchange system.
        NMFA appreciates the willingness of the UETF to engage in dialogue
    with beneficiary associations and to seek beneficiary input on issues
    related to a potential consolidation of the exchange systems. NMFA
    cannot take a position on exchange consolidation, however, until it is
    presented with more information on the costs involved in moving to a
    consolidated system and the effects on the flexibility of a local
    exchange to respond to the needs of the community and to offer products
    and services tailored to that community. NMFA asks this subcommittee to
    provide the oversight necessary to ensure that the exchanges, whether
    or not they consolidate, continue to provide appropriate product
    choices, competitive prices, and increased funding for MWR programs.

                                      BRAC

        The publication in the Federal Register of the criteria DOD will
    use in developing recommendations for closure and realignment under the
    next BRAC round prompted a heightened concern in the military community
    about the future status of military installations and the continued
    availability of vital quality of life programs. Members of the military
    community, especially retirees, are concerned about the impact base
    closures will have on their access to their health care, commissary,
    exchange and MWR benefits. They are concerned that the size of the
    retiree, Guard, and Reserve populations remaining in a location will
    not be considered in decisions about whether or not to keep
    commissaries and exchanges open.
        NMFA was pleased to see that the DOD's discussion of the comments
    received (included in the Federal Register posting of the final BRAC
    criteria) provide evidence that quality of life issues will be
    considered. In responding to comments arguing that a closure's
    potential impact on retiree access to benefits such as commissaries and
    health care be considered, DOD noted that ``while military value
    criteria must be the primary consideration, the impact of a closure or
    realignment on the local community, including military retirees
    residing therein, will be considered'' in applying several of the other
    criteria. Some comments received by the Department addressed criterion
    #7, ``the ability of both the existing and potential receiving
    communities' infrastructure to support forces, missions, and
    personnel.'' These comments emphasized that the DOD should look at the
    quality of life provided to service members and their families. DOD's
    response is encouraging:

              The DOD agrees that the quality of life provided to its
            military personnel and their families significantly contributes
            to the DOD's ability to recruit and retain quality personnel.
            Military personnel are better able to perform their missions
            when they feel comfortable that their needs and those of their
            families are taken care of. Quality of life is captured
            throughout the criteria, particularly criterion seven.

        NMFA is also concerned about the availability of schools,
    commissaries, exchanges, and MWR programs during shifts in troop
    populations during a domestic BRAC or realignment of troops overseas.
    We look to Congress to ensure DOD's plans for these troop shifts will
    maintain access to quality of life programs and support facilities
    until the last family leaves the installation. In the same manner, we
    ask you to ensure that houses, schools, child development and youth
    programs, and community services are in place to accommodate the surge
    of families a community can expect to receive as a result of the
    movement of troops to a new location.

                     STRONG FAMILIES ENSURE A STRONG FORCE

        Mr. Chairman, NMFA is grateful to this subcommittee for its
    oversight of vital quality of life components for today's force and for
    your advocacy for a better quality of life for service members and
    their families. Just as the family worries about the deployed service
    member, the service member's constant concern is about the well-being
    of his or her family. In the dangerous environment in which they must
    frequently operate, service members cannot afford to be distracted by
    concerns at home. Assuring the service member that the decision to
    serve will not penalize the family is critical to the service member's
    readiness and thus to mission readiness. The stability of the military
    family and community and their support for the forces 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.

        Senator Chambliss. Thank you, Ms. Raezer.
        Dr. Schwartz.

     STATEMENT OF SUE SCHWARTZ, D.B.A, RN, CO-CHAIR, THE MILITARY
                    COALITION HEALTH CARE COMMITTEE

        Dr. Schwartz. Good afternoon, Mr. Chairman, Senator Pryor,
    and distinguished members of the subcommittee. It is truly an
    honor to have the opportunity to address the subcommittee today
    concerning TMC's views on the Defense health care program.
        I want to reiterate our deep appreciation to the entire
    subcommittee for your leadership in sponsoring a wide range of
    landmark health care initiatives over the past year, especially
    for Medicare eligibles and for active-duty families. We are
    most grateful for the subcommittee's leadership last year in
    directing DOD to take specific action to address chronic access
    problems for TRICARE standard beneficiaries under the age of 65
    and to begin to address health care needs for the Selected
    Reserve. We ask the subcommittee for continued emphasis in
    ensuring these enhancements are implemented promptly and
    effectively.
        DOD officials speak of ``funding shortfalls in the out-
    years,'' but there are current problems as well. Bases are
    turning their retirees away from their pharmacies, saying this
    is due to budget cuts. Last year, the Office of Management and
    Budget (OMB) even considered increasing retiree pharmacy cost
    shares significantly, even going so far as to propose charging
    retirees for medications obtained in military pharmacies. We
    ask the subcommittee for continued support in authorizing
    sufficient amounts for the direct and purchase care systems, so
    that the Defense health budget doesn't have to be balanced on
    the back of beneficiaries.
        This year, the new TRICARE contracts will greatly impact
    the program and our members, and with change always comes
    challenges. We are firmly committed to working with Congress,
    the DOD, and contractors to make implementation as smooth as
    possible.
        Service by the previous contractors must not be compromised
    as contracts are phased out. The transition must be seamless
    for the beneficiary. Provider churn must be kept to a minimum
    so beneficiaries don't have to change doctors. Beneficiaries
    must receive timely information on the new contracts, provider
    networks, and where they can go to get help when they need it,
    balancing the need for a uniform benefit with three
    contractors' interpretation of what is their best business
    practices.
        Sometime later this year, DOD will be implementing the
    uniform formulary. The Coalition's concerns about creating a
    third tier of non-preferred drugs include the need for a robust
    formulary that includes the most frequently prescribed
    medications. The program must be streamlined as much as
    possible to avoid unnecessary hassle for both patients and
    providers. Beneficiaries and providers shouldn't have to jump
    through hoops to meet medical necessity requirements, obtain
    prior authorization, or make appeals. Ongoing beneficiary
    education must be made readily available.
        Mr. Chairman, this subcommittee has gone a long way to
    address daunting and significant problems. Many have been
    around for decades. It's going to take continuous monitoring
    and follow-up to ensure that actions are taken with intended
    effects. We hope to work closely with you and the DOD to make
    sure these problems are resolved and that beneficiaries get
    access and the care they deserve.
        We remain deeply appreciative of the subcommittee's ongoing
    leadership and commitment to those who are in uniform today and
    those who have served our Nation in the past. I will now turn
    to my colleague, Master Sergeant Mike Cline, who will share
    with you additional Coalition personnel priorities.
        [Dr. Schwartz's testimony is included in The Military
    Coalition's prepared statement.]
        Senator Chambliss. Thank you.
        Mr. Cline.

     STATEMENT OF MASTER SERGEANT MICHAEL P. CLINE, USA (RET.), CO-
    CHAIR, THE MILITARY COALITION, AND EXECUTIVE DIRECTOR, ENLISTED
         ASSOCIATION OF THE NATIONAL GUARD OF THE UNITED STATES

        Sergeant Cline. Thank you, Mr. Chairman. Thank you for
    giving me the opportunity to present the views of the member
    organizations that comprise the Guard and Reserve Committee of
    TMC.
        Mr. Chairman, as you've heard today, DOD has strongly
    indicated that the chances of implementing TRICARE for Guard
    and Reserve people, for our forces that are now deployed or
    will be deployed, is probably not going to happen. In the last
    session of Congress, you took the first step to provide TRICARE
    for National Guard and Reserve members on a cost-share basis to
    your Guard and Reserve members who either do not have employer-
    furnished health care or are unemployed.
        Why do we need health care for Guard and Reserve members?
    The answer has four parts: quality of life, employer support,
    readiness, and recruiting and retention. I found it interesting
    that the DOD stated it didn't have much impact on the force of
    the people that are not deployable. Well, if you just took 5
    percent of the almost 400,000 Guard and Reserve members that
    were not able to deploy, that represents almost 20,000
    soldiers, airmen, Navy, or Marine personnel that could not
    deploy.
        Mr. Chairman, it's disturbing news that the DOD has
    continued to, in my opinion, drag its feet in the
    implementation of the provisions passed in the law last year.
    Already, 4 months have passed, but no TRICARE for Guard and
    Reserve members has been implemented, and it looks like it
    won't be implemented. The authority for the legislation expires
    at the end of the year, but the call-ups will not. How do we
    expect to have a valid test when time is running out? I urge
    you to send a strong message to the DOD that TRICARE for Guard
    and Reserve members is a priority by passing permanent
    legislation into law. Demonstrations will not fix the problems
    we will face in the four areas I mentioned.
        Another issue I would like to discuss is the Reserve
    retirement upgrade. The fundamental assumption of the Reserve
    Force retirement system that was established in 1947, 58 years
    ago, is that a Guard or Reserve member has a primary career in
    the civilian sector. The time has long passed to recognize the
    great sacrifices these members make to serve their country.
    Demands over the past 14 years have cost tens of thousands of
    Guard and Reserve members significantly in terms of their
    civilian retirement, accrual, civilian 401(k) contributions,
    and civilian job promotions.
        The fact remains that although there are laws like the
    Uniformed Services Employment and Reemployment Act (USERA) on
    the books, discrimination will and does happen in the
    workplace. The DOD routinely relies upon the capabilities of
    the Guard and Reserve across the entire spectrum of conflict
    from homeland security to overseas deployments and combat.
        Since September 11, almost 400,000 Guard and Reserve
    members have been involuntarily called to active duty several
    times. This does not include those who have volunteered to
    serve in various capacities. Almost 40 percent of the Selected
    Reserve structure has answered the call with great personal
    sacrifice.
        The time has come to recognize the Reserve retirement
    system as a complement to civilian retirement, not as a
    supplement. Failing to acknowledge and respond to the changing
    environment that Guard and Reserve members face could have far-
    reaching effects on Reserve participation and career retention.
    The contract with America's National Guard and Reserve has
    changed. It's now the time to reward those who have made the
    change possible. Reward them with a retirement program that
    allows them to draw benefits at an earlier age.
        The final issue I would like to discuss is Montgomery GI
    Bill (MGIB) education benefits for chapter 1606 Selected
    Reserve members who have not kept pace with the active duty
    benefit. Originally, the Guard and Reserve benefit was 47
    percent of the active duty rate. These have been significant
    increases in the active duty benefits in recent years. This has
    left a Selected Reserve benefit at less than 25 percent of the
    active duty rate. The MGIB educational benefits are one of
    those most significant recruiting tools we have to recruit and
    retain members in the National Guard and Reserve. We urge you
    to increase the benefit back to its original 47-percent level.
        Also, currently the benefit expires 14 years after first
    becoming eligible. This clock starts ticking when an individual
    returns from basic training and advanced school. There is no
    incentive for those career members who want to stay after 14
    years. We ask your consideration on making the chapter 1606
    benefits available for as long as a person is in the Selected
    Reserve.
        Mr. Chairman, I will be followed by Ms. Holleman.
        [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 TMC, 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
             American Logistics Association
             American Veterans (AMVETS)
             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 Association
             Military Chaplains Association of the United States of
            America
             Military Officers Association of America
             Military Order of the Purple Heart
             National Association for Uniformed Services
             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 of the United States
             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
        TMC 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
    increases in 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 and Pay Table Reform
        TMC urges the subcommittee to restore full pay comparability on the
    quickest possible schedule, and to reject any request from the
    administration to cap future pay raises or to provide smaller increases
    to service members in the U.S. Public Health Service or National
    Oceanic and Atmospheric Administration. The Coalition believes all
    members of the uniformed services need and deserve annual raises at
    least equal to private sector wage growth. The Coalition supports the
    DOD plan for increased ``targeted'' raises to align the pay of career
    servicemembers with earnings in the private sector for civilians with
    comparable experience and education. However, to the extent that
    ``targeted'' raises are needed, the DOD should define the ultimate
    objective pay table toward which these targeted raises are aimed.
        Commissaries
        TMC opposes all privatization and variable pricing initiatives and
    strongly supports full or even enhanced funding of the commissary
    benefit to sustain the current level of service for all beneficiaries
    including Guard and Reserve personnel and their families.
        Family Readiness and Support
        TMC recommends a family support structure, with improved education
    and outreach programs and increased childcare availability, to ensure a
    high level of family readiness to meet the requirements of increased
    force deployments for active, National Guard and Reserve members.
        Education Benefits for Career Service Members
        Career service members who have not had an opportunity to sign up
    for a post-service educational program deserve an opportunity to enroll
    in the Montgomery GI Bill (MGIB) and TMC urges the subcommittee to
    authorize them to do so.
        Basic Allowance for Housing (BAH)
        TMC urges an adjustment to grade-based housing standards to more
    accurately reflect realistic housing options and members' out-of-pocket
    housing expenses. The Coalition further urges the subcommittee to
    eliminate service members' average out-of-pocket housing expenses in
    fiscal year 2005.
        Permanent Change of Station (PCS)
        TMC urges continued upgrades of PCS reimbursement allowances to
    recognize that the government, not the service member, should be
    responsible for paying the cost of doing the government's business.
        Basic Allowance for Subsistence (BAS)
        TMC 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.
    National Guard and Reserve Issues
        Support of Active Duty Operations
        TMC urges continued attention to ensuring an appropriate balance
    between National Guard and Reserve Force strengths and missions and
    careful congressional oversight of DOD ``transformation'' initiatives
    that could threaten the Nation's ``seamless, integrated total force''
    policy.
        Healthcare for Members of the National Guard and Reserve
        TMC urges permanent authority for cost-share access to TRICARE for
    all members of the Selected Reserve--those who train regularly--and
    their families in order to ensure medical readiness and provide
    continuity of health insurance coverage. As an option for these service
    members, the Coalition urges authorizing the government to pay part or
    all of private health insurance premiums when activation occurs, a
    program already in effect for reservists who work for the DOD.
        Guard/Reserve Retirement Upgrade
        TMC urges a reduction in the age when a Guard/Reserve component
    member is eligible for retired pay to age 55 as an option for those who
    qualify for a non-regular retirement.
        Selected Reserve Montgomery GI Bill (SR-MGIB) Improvements
        TMC recommends a phased increase in SR-MGIB benefits to restore it
    to its original value of 47 percent of basic benefits under the MGIB
    and also recommends transfer of the SR-MGIB authority from title 10 to
    title 38 to permit proportional benefit adjustments in the future.
        Guard/Reserve Family Support Programs
        TMC urges that adequate funding be made available for a core set of
    family support programs and benefits that meet the unique needs of
    geographically dispersed Guard and Reserve families who do not have
    ready access to military installations or current experience with
    military life.
        Retirement Credit for All Earned Drill Points
        TMC 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.
    Survivor Program Issues
        Age-62 Survivor Benefit Plan (SBP) Offset
        TMC strongly recommends elimination of the patently inequitable and
    highly discriminatory age-62 SBP annuity reduction now imposed on
    military survivors. 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. 1916 and H.R. 3763.
        30-Year Paid-Up SBP
        TMC strongly recommends accelerating the implementation date for
    the 30-year paid-up SBP initiative to October 1, 2004.
        SBP-DIC Offset
        TMC strongly recommends that the current dollar-for-dollar offset
    of SBP benefits by the amount of Dependency and Indemnity Compensation
    (DIC) be eliminated, recognizing that these two payments are for
    different purposes.
    Retirement Issues
        Concurrent Receipt of Military Retired Pay and Veterans' Disability
            Compensation
        TMC urges subcommittee leaders and members to be sensitive to the
    need for further adjustments to last year's concurrent receipt
    provision and to eliminate the disability offset for all disabled
    retirees. As a priority, the Coalition urges the subcommittee to ensure
    the Veterans' Disability Benefits Commission protects the principles
    guiding the Department of Defense (DOD) disability retirement program
    and Department of Veterans' Affairs (VA) disability compensation
    system.
        Final Retired Paycheck
        TMC 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
        TMC recommends corrective legislation, including the
    recommendations made by the DOD in their 2001 Uniformed Services Former
    Spouse Protection Act (USFSPA) report, be enacted to eliminate
    inequities in the administration of the USFSPA.
        Tax Relief for Uniformed Services 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, Federal Employees Health Benefits Program (FEHBP),
    and Long Term Care.
    Health Care Issues
        Full Funding For The Defense Health Budget
        TMC strongly recommends the subcommittee continue its watchfulness
    to ensure full funding of the Defense Health Program, including
    military medical readiness, needed TRICARE Standard improvements, and
    the DOD peacetime health care mission. It is critical that The Retired
    Officers Association Defense Health Budget be sufficient to secure
    increased numbers of providers needed to ensure access for TRICARE
    beneficiaries in all parts of the country.
        Pharmacy Cost Shares for Retirees
        TMC urges the subcommittee to continue to reject imposition of cost
    shares in military pharmacies and oppose increasing other pharmacy cost
    shares that were only recently established. We urge the subcommittee to
    ensure that Beneficiary Advisory Groups' inputs are included in any
    studies of pharmacy services or copay adjustments.
        Permanent ID Card for Dependents Over the Age of 65
        The Coalition strongly urges the subcommittee direct the Secretary
    of Defense (SECDEF) to authorize issuance of permanent military
    identification cards to uniformed services family members and survivors
    who are age 65 and older, with appropriate guidelines for notification
    and surrender of the ID card in those cases in which eligibility is
    ended by divorce or remarriage.
        Access to TSRx for Nursing Home Beneficiaries
        TMC urges the subcommittee to direct DOD to take action to provide
    outreach and education for beneficiaries attempting to deem nursing
    homes as TRICARE authorized pharmacy services. In those instances where
    the residential facility will not participate in the TRICARE program,
    DOD must be directed to reimburse pharmacy expenses at TRICARE network
    rates to uniformed services beneficiaries who cannot access network
    pharmacies due to physical or medical constraints.
        Initial Preventive Physical Examination
        TMC requests that the subcommittee take steps to authorize the
    initial preventive physical examination (sec. 611 of Public Law 108-
    173) as a TRICARE benefit for over 65 Medicare-eligible uniformed
    services beneficiaries.
        The President's Task Force (PTF) to Improve Health Care Delivery
            for Our Nation's Veterans
        TMC asks the subcommittee to work with the Veterans' Affairs
    Committee and the Department of Veterans' Affairs (VA) and DOD to
    ensure action on the PTF recommendations including a seamless
    transition, a bi-directional electronic medical record (EMR), enhanced
    post-deployment health assessment, and implementation of an electronic
    DD214.
        TRICARE Standard Improvements
        TMC urges the subcommittee's continued oversight to ensure DOD is
    held accountable to promptly meet requirements for beneficiary
    education and support, and particularly for education and recruitment
    of sufficient providers to solve access problems for standard
    beneficiaries.
        Provider Reimbursement
        TMC requests the subcommittee's support of any means to raise
    Medicare and TRICARE rates to more reasonable standards and to support
    measures to address Medicare's flawed provider reimbursement formula.
        Healthcare for Members of the National Guard and Reserve
        TMC urges permanent authority for cost-share access to TRICARE for
    all members of the Selected Reserve--those who train regularly--and
    their families in order to ensure medical readiness and provide
    continuity of health insurance coverage. As an option for these service
    members, the Coalition urges authorizing the government to pay part or
    all of private health insurance premiums when activation occurs, a
    program already in effect for reservists who work for the DOD.
        Disproportionate Share Payments
        TMC urges the subcommittee to further align TRICARE with Medicare
    by adapting the Medicare Disproportionate Share payment adjustment to
    compensate hospitals with larger populations of TRICARE beneficiaries.
        Administrative Burdens
        TMC 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.
        TRICARE Prime (Remote) Improvements
        TMC requests that the subcommittee authorize family members who are
    eligible for TRICARE Prime Remote to retain their eligibility when
    moving to another prime remote area when the government funds such move
    and there is no reasonable expectation that the service member will
    return to the former duty station.
        Coordination of Benefits and the 115 percent Billing Limit Under
            TRICARE Standard
        TMC strongly recommends that the subcommittee direct the 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
        TMC requests the subcommittee's continued oversight to assure that,
    should the DOD choose to exercise its authority and reinstate NAS
    requirements, beneficiaries and their providers receive effective,
    advance notification.
        TRICARE Next Generation of Contracts (TNEX)
        TMC 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.
        Prior Authorization under TNEX
        TMC urges the subcommittee's continued efforts to reduce and
    ultimately eliminate requirements for pre-authorization and asks the
    subcommittee to assess the impact of new prior authorization
    requirements upon beneficiaries' access to care.
        Portability and Reciprocity
        TMC urges the subcommittee to monitor the new contracts to
    determine if the new system facilitates portability and reciprocity to
    minimize the disruption in TRICARE services for beneficiaries.
        Health Care Information Lines (HCIL)
        TMC urges the subcommittee to direct the DOD to modify the TNEX
    contract to make HCIL access universal for all beneficiaries and to
    develop a plan to provide for uniform administration of HCIL services
    nationwide.
        Uniform Formulary Implementation
        TMC urges the subcommittee to ensure a robust uniform formulary is
    developed, with reasonable medical-necessity rules and increased
    communication to beneficiaries about program benefits, pre-
    authorization requirements, appeals, and other key information.
        TRICARE Benefits for Remarried Widows
        TMC urges the subcommittee to restore equity for surviving spouses
    by reinstating TRICARE benefits for otherwise qualifying remarried
    spouses whose second or subsequent marriage ends because of death,
    divorce or annulment, consistent with the treatment accorded CHAMPVA-
    eligible survivors.
        TRICARE Prime Continuity in Base Realignment and Closure (BRAC)
            Areas
        TMC urges the subcommittee to amend title 10 to require
    continuation of TRICARE Prime network coverage for uniformed services
    beneficiaries residing in BRAC areas.
        TRICARE Retiree Dental Plan
        TMC 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 outside the United
    States.
        Pre-Tax Premium Conversion Option
        TMC urges the subcommittee to support HR 1231 to provide active
    duty and uniformed services beneficiaries a tax exclusion for premiums
    paid for TRICARE Prime enrollment fees, TRICARE dental coverage and
    health supplements, and FEHBP.
        Extended Care Health Option (ECHO)
        TMC 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 ECHO program upon all beneficiary classes, and that beneficiary
    groups' input be sought in the evaluation of the program.

                                    OVERVIEW

        Mr. Chairman, TMC 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. The subcommittee's strong
    support to improve military pay, housing allowances, health care, and
    other personnel programs has made a significant difference in the lives
    of active, Guard, and Reserve personnel and their families. This is
    especially true for our deployed service members, and their families
    and survivors, who are defending this Nation in our global war on
    terror.
        The subcommittee's support of last year's landmark authority to
    eliminate the offset of retired pay for veterans' disability
    compensation for all retirees with disabilities of at least 50 percent,
    and for all retirees disabled by combat or combat-related training.
    These and the many other important provisions of the National Defense
    Authorization Act (NDAA) for Fiscal Year 2004 will enhance and enrich
    the quality of life of our service members, retirees and their families
    and survivors 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,
    last year we 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, and the Coalition thanks the
    subcommittee for rejecting the administration's advice last year to cap
    military raises, and staying the course with prior provisions for
    better than average raises through fiscal year 2006.
        But, despite this tremendous growth in military compensation, we
    are deeply troubled by how hard troops have to work--and their families
    have to sacrifice--for that compensation.
        Today's reality is simple--service members and their families are
    being asked to endure ever-greater workloads and ever-greater
    sacrifices. Repeated deployments, often near back-to-back, have
    stressed the force to the point where retention and readiness would
    suffer now, if it weren't for the Services' stop-loss policies and
    massive recalls of Guard and Reserve members. The hard fact is that we
    don't have a large enough force in the majority of components to carry
    out today's missions and still be prepared for new contingencies that
    may arise elsewhere in the world.
        Your fiscal year 2004 defense bill provisions authorizing--for the
    first time ever--the concurrent receipt of retired pay and veterans'
    disability compensation eliminated a century-old inequity for tens of
    thousands of severely disabled retirees. We applaud the subcommittee
    for this unprecedented and historic legislation and ask the
    subcommittee to be sensitive to the tens of thousands who continue to
    experience unfair reductions in their retired pay.
        TMC appreciates past improvements to the SBP that extended SBP
    eligibility to the survivors of those killed on active duty. However,
    very serious SBP inequities remain to be addressed for older survivors,
    most of them widows, who see a drastic reduction in their survivor
    benefit when they reach age 62. Increasing their survivor annuity to at
    least the level afforded survivors of Federal civilians is a top
    Coalition priority.
        In testimony today, TMC 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 3.8 percent of this Nation's gross domestic product
    (GDP)--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 and survivors, as well.
        The subcommittee has taken action to help relieve the stress of
    repeated deployments and last year's authority to extend the temporary
    increases in Imminent Danger Pay (IDP) and Family Separation Allowance
    (FSA) is one example of the many notable and commendable improvements
    made during the last several years in military compensation and health
    care programs. However, 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 significant out-of-pocket
    expenses with each military relocation.
        The war on terrorism has now intensified with sustained operations
    in Iraq and Afghanistan. Members' patriotic dedication has been the
    fabric that has sustained this increased workload, and a temporarily
    depressed economy and Service stop-loss policies have deterred losses
    for now. But the longer-term outlook is problematic.
        Experienced (and predominantly married) officers, noncommissioned
    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 going home to their
    families every night, 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 stress 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 (OPTEMPO)
        The Coalition is dismayed at the DOD's reluctance to accept
    Congress' repeated offers to increase Service end strength to relieve
    the stress on today's Armed Forces, who are clearly now sustaining an
    increased OPTEMPO to meet today's global war on terror. While we are
    encouraged by the Army's announcement to temporarily increase their end
    strength by 30,000, we are deeply concerned that administration-
    proposed plans for selected temporary manpower increases rely too
    heavily on continuation of stop-loss policies, unrealistic retention
    assumptions, overuse of the Guard and Reserves, optimistic scenarios in
    Southwest Asia, and the absence of any new contingency needs.
        The DOD has also responded to your offers to increase end strength
    with their intention to transform forces, placing non-mission essential
    resources in core warfighting skills. While the DOD's transformation
    vision is a great theory, its practical application will take a long
    time--time we do not have after years of extraordinary OPTEMPO that is
    exhausting our downsized forces.
        In fact, the Joint Chiefs testified that their forces were stressed
    before September 11 and end strength should have been increased then.
    Now, almost 3 years later, after engaging in two major operations,
    massive Guard and Reserve mobilizations, and broad implementation of
    ``stop-loss'' policies, the only reason end strength has not been
    increased is because of the Department's ``transformation'' plan--a
    plan they have not finalized with Congress.
        Administration and military leaders warn of a long-term mission
    against terrorism that requires sustained, large deployments 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 have been increased
    several years ago to sustain today's pace of operations. Deferral of
    meaningful action to address this problem cannot continue without
    risking serious consequences. Real relief is needed now. There is no
    certainty that missions will decline, which means that the only prudent
    way to assure we relieve the pressure on service members and families
    is to increase 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 irritants, but
    they can't fix fatigue and lengthy and more frequent 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 OPTEMPO 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 retention
    and recruiting worse.
        TMC strongly recommends restoration of Service end strengths to
    sustain the long-term global war on terrorism and fulfill national
    military strategy. The Coalition supports increases in 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
        TMC appreciates the subcommittee's leadership during the last 6
    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 last year when the
    Director of the Office of Management and Budget (OMB) proposed capping
    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 were engaged in combat operations in Afghanistan and Iraq--it
    was just bad, failed policy.
        The President ultimately rejected his senior budget official's
    advice; but, while supporting a 4.1 percent pay raise for most of the
    uniformed services, the administration's fiscal year 2004 budget
    proposed to cap the pay of National Oceanic and Atmospheric
    Administration (NOAA) and U.S. Public Health Service (USPHS) officers
    at 2 percent. TMC strongly objected to this disparate treatment of
    members in those uniformed services and your subcommittee ensured that
    NOAA and USPHS personnel received the same 4.1 percent pay raise. We
    strongly urge the subcommittee to reject any requests from the
    administration recommending treatment of NOAA and USPHS commissioned
    officers that is different from that accorded 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 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 5.4 percent as of 2004.
        While it would take another 5 years to restore full comparability
    at the current pace, we sincerely appreciate this subcommittee's
    decision to change the prior law that would have resumed capping pay
    raises at below private sector growth and enacting a new law requiring
    all raises, beginning in fiscal year 2007, to at least equal private
    sector wage growth as measured by the Bureau of Labor Statistics
    Employment Cost Index (ECI).

        TMC urges the subcommittee to restore full pay comparability on the
    quickest possible schedule, and to reject any request from the
    administration to cap future pay raises for any segment of the
    uniformed services population.
    Pay Table Reform
        The subcommittee also has supported the DOD plan to fix problems
    within the basic pay table by authorizing special ``targeted''
    adjustments for specific grade and longevity combinations in order to
    align career service members' pay with private sector earnings of
    civilians with similar education and experience.
        The Coalition supports the DOD plan for targeted raises; but, once
    again, the Coalition was disappointed with the actions of the OMB--this
    time, by their recently reported denial for a $300 million request from
    DOD to continue targeted raises for career service members.
        While the Coalition is most appreciative of the administration's
    support this year to continue ECI-plus raises provided for by the NDAA
    for Fiscal Year 2000, we are deeply disappointed that they would deny a
    request from DOD to complete the plan to fix the pay of career service
    members, and we strongly urge this subcommittee to authorize continued
    targeting of additional increases for career service members to correct
    shortcomings in their pay tables.
        However, the Coalition does request that DOD outline their plan for
    targeted raises so that service members, and others who are concerned
    about military pay, know, and understand the objectives of such
    differential raises. To the extent that targeted raises are needed, the
    DOD needs to identify the ultimate ``objective pay table'' toward which
    the targeted raises are aimed.
        TMC believes all members need and deserve at least a 3.5 percent
    raise in 2005 to continue progress toward eliminating the existing pay
    raise comparability shortfall. The Coalition also believes additional
    targeted raises are needed to address the largest comparability
    shortfalls for career enlisted members and warrant officers vs. private
    sector workers with similar education, experience and expertise.

    Commissaries
        The Coalition continues to be very concerned about preserving the
    value of the commissary benefit--which is widely recognized as the
    cornerstone of quality of life benefits and a valued part of the
    service members' total compensation package.
        During the past year, the DOD announced plans to close a number of
    commissaries, replace the traditional three-star officer serving as
    chairman of the Commissary Operating Board (COB) with a political
    appointee, and require a study on instituting variable pricing for
    commissary products. These proposals are apparently intended to save
    money by reducing the annual appropriation supporting the Defense
    Commissary Agency (DeCA), which operates 275 commissaries worldwide.
    The COB recommendation is also viewed as another indicator of DOD's
    ongoing interest in eventually privatizing the benefit.
        The Coalition supports cost savings and effective oversight and
    management. However, we are concerned about the unrelenting pressure on
    DeCA to cut spending and squeeze additional efficiencies from its
    operations--despite years of effective reform initiatives and
    recognition of the agency for instituting improved business practices.
        The Coalition is particularly opposed to the concept of variable
    pricing, which the administration acknowledges is aimed at reducing
    appropriated funding. This can only come at the expense of reducing
    benefits for patrons.
        The commissary is a highly valued quality of life benefit not
    quantifiable solely on a dollars appropriated basis. As it has in the
    past, TMC opposes any efforts to privatize commissaries or reduce
    benefits to members, and strongly supports full funding of the benefit
    in fiscal year 2005 and beyond.
        TMC opposes all privatization and variable-pricing initiatives and
    strongly supports full or even enhanced funding of the commissary
    benefit to sustain the current level of service for all patrons,
    including Guard and Reserve personnel and their families.

    Family Readiness and Support
        Family readiness is a key concern for the approximately 60 percent
    of service members with families. Allocating adequate resources for the
    establishment and maintenance of family readiness and support programs
    is part of the cost of effectively fulfilling the military mission.
        Service members and their families must understand and be aware of
    benefits and programs available to them and who to contact with
    questions and concerns--both at the command level and through the
    respective Service or DOD--in order to effectively cope with the
    challenges of deployment. It is also important to meet childcare needs
    of the military community including Guard and Reserve members who are
    being called to active duty in ever-increasing numbers.
        TMC urges improved family readiness through education and outreach
    programs and increased childcare availability for service members and
    their families and associated support structure to assist families left
    behind during deployments of active duty, Guard and Reserve members.

    Education Benefits for Career Service members
        Career service members who entered active service between 1 January
    1977 and 30 June 1985 and declined to enroll in the Veterans Education
    Assistance Program (VEAP) are the only group of currently serving
    members (other than service academy graduates and certain Reserve
    Officer Training Corps (ROTC) scholarship recipients) who have not been
    offered an opportunity to enroll in the MGIB. There are approximately
    90,000 personnel in this situation. Noteworthy is the fact that many
    were discouraged from signing up for VEAP, as it was acknowledged then
    to be a woefully inferior program compared to the Vietnam-era GI Bill
    and the subsequent MGIB that commenced on 1 July 1985. These senior
    leaders are the backbone of today's force and critical to the success
    of the war effort and other military operations. When they complete
    their careers, they should have been afforded at least an opportunity
    to say ``yes or no'' to veterans' education benefits under the MGIB.
        TMC strongly recommends authorizing a MGIB sign-up window for
    career service members who declined VEAP when they entered service.

    Basic Allowance for Housing
        TMC supports revised housing standards that are more realistic and
    appropriate for each pay grade. Many enlisted personnel, for example,
    are unaware of the standards for their respective pay grade and assume
    that their BAH level is determined by a higher standard than they may
    in reality be entitled to. This causes confusion about the mismatch
    between the amount of BAH they receive and the actual cost of their
    type of housing. As an example, enlisted members are not authorized to
    receive BAH for a three-bedroom single-family detached house until
    achieving the rank of E-9--which represents only 1 percent of the
    enlisted force--yet many personnel in more junior pay grades do in fact
    reside in detached homes. The Coalition believes that as a minimum,
    this BAH standard (single family detached house) should be extended
    gradually to qualifying service members beginning in grade E-8 and
    subsequently to grade E-7 and below over several years as resources
    allow.
        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 DOD
    proposed a similar 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 completed in 2005. Unfortunately, housing and utility costs continue
    to rise, and the pay comparability gap, while diminished over recent
    years thanks to the subcommittee's leadership, continues. Members
    residing off base face higher housing expenses along with significant
    transportation costs, and relief is especially important for junior
    enlisted personnel living off base who do not qualify for other
    supplemental assistance.
        TMC urges the subcommittee to direct gradual adjustments in grade-
    based housing standards to more adequately cover members' current out-
    of-pocket housing expenses and to complete the elimination of average
    out-of-pocket housing expenses in fiscal year 2005.

    Permanent Change of Station
        TMC 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 37.5 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 Coalition also greatly appreciates the provisions in the NDAA
    for Fiscal Year 2004 to provide full replacement value for household
    goods lost or damaged by private carriers during government directed
    moves, and the Coalition looks forward to the timely implementation of
    the DOD comprehensive ``Families First'' plan to improve claims
    procedures for service members and their families.
        The overwhelming majority of service families own two privately
    owned vehicles (POVs), 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 second
    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 in their
    children's education and their spouse's career progression. 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.
        TMC urges continued upgrades of permanent change-of-station
    reimbursement allowances in fiscal year 2005 to recognize that the
    government, not the service member, should be responsible for paying
    the cost of government-directed relocations.

    Basic Allowance for Subsistence
        The Coalition is grateful to the subcommittee for establishing a
    food-cost-based standard for BAS and ending the 1 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 while at their
    home duty station.
        TMC 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.

                       NATIONAL GUARD AND RESERVE ISSUES

        TMC 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
        Since September 11, 2001, more than 350,000 members of the National
    Guard and Reserve have been mobilized and many thousands more are in
    the activation pipeline. Today, they face all the same challenges as
    their active counterparts, with a deployment pace greater than any time
    since World War II.
        Guard/Reserve OPTEMPO has placed enormous strains on employers and
    family members alike. 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 that policy and the
    prominent role of the National Guard and Reserve Forces in the national
    security equation. Still, we are concerned that ever-rising operational
    employment of these 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 will likely face
    stiff resistance with employers and increased financial burdens under
    the current policy of multiple activations over the course of a Reserve
    career. Some senior Reserve leaders are in fact alarmed over likely
    manpower losses if action is not taken to relieve pressures on Guard
    and Reserve troops.
        TMC strongly urges immediate attention to the looming crisis that
    is placing unprecedented stress on National Guard and Reserve manpower
    and missions.

    Healthcare for Members of the National Guard and Reserve
        TMC is most appreciative to Congress for ensuring that the
    Temporary Reserve Health Care Program was included in the NDAA for
    Fiscal Year 2004. This program will provide temporary coverage, until
    December 2004, for National Guard and Reserve members who are uninsured
    or do not have employer-sponsored health care coverage. TRICARE
    officials plan to build on existing TRICARE mechanisms to expedite
    implementation; however, no one is certain how long this will take.
    Immediate implementation is required.
        TMC recommends permanent authorization of cost-share access to
    TRICARE to support readiness, family morale, and deployment health
    preparedness for Guard and Reserve service 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.
    Guard and Reserve family members are eligible for TRICARE if the
    member's orders to active duty are for more than 30 days; but, many of
    these families would prefer to preserve the continuity of their 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. Many Guard and Reserve
    families live in locations where it is difficult or impossible to find
    providers who will accept new TRICARE patients. Recognizing these
    challenges for its own reservist-employees, the DOD routinely pays the
    premiums for the FEHBP when activation occurs. This benefit, however,
    only affects about 10 percent of the Selected Reserve.
        TMC urges the authority for Federal payment of civilian health care
    premiums (up to the TRICARE limit) as an option for mobilized service
    members.
        Dental readiness is another key aspect of readiness for Guard and
    Reserve personnel. Currently, DOD offers a dental program to Selected
    Reserve members and their families. The program provides diagnostic and
    preventive care for a monthly premium, and other services including
    restorative, endodontic, periodontic and oral surgery services on a
    cost-share basis, with an annual maximum payment of $1,200 per enrollee
    per year. However, only 5 percent of eligible members are enrolled.
        During this mobilization, soldiers with repairable dental problems
    were having teeth pulled at mobilization stations in the interests of
    time and money instead of having the proper dental care administered.
    Congress responded by passing legislation that allows DOD to provide
    medical and dental screening for Selected Reserve members who are
    assigned to a unit that has been alerted for mobilization in support of
    an operational mission, contingency operation, national emergency, or
    war. Unfortunately, waiting for an alert to begin screening is too
    late. During the initial mobilization for Operation Iraqi Freedom
    (OIF), the average time from alert to mobilization was less than 14
    days, insufficient to address deployment dental standards. In some
    cases, units were mobilized before receiving their alert orders. This
    lack of notice for mobilization continues, with many reservists
    receiving only days of notice before mobilizing.
        TMC recommends expansion of the TRICARE Dental Plan benefits for
    Guard and Reserve service members. This would allow all National Guard
    and Reserve members to maintain dental readiness and alleviate the need
    for dental care during training or mobilization.

    Reserve Retirement Upgrade
        The fundamental assumption for the Reserve retirement system
    established in 1947 is that a reservist has a primary career in the
    civilian sector. But it's past time to recognize that greatly increased
    military service demands over the last dozen years have cost tens of
    thousands of reservists significantly in terms of their civilian
    retirement accrual, civilian 401(k) contributions, and civilian job
    promotions.
        The DOD routinely relies upon the capabilities of the Reserve
    Forces across the entire spectrum of conflict from homeland security to
    overseas deployments and ground combat. This reliance is not just a
    trend--it's a central fixture in the national security strategy. Since
    September 11, 2001, more than 350,000 Reserve component service members
    have been called to extended active duty. That represents almost 40
    percent of the ``drilling'' Reserve Force structure--those assigned to
    military positions and training regularly. These activations are
    expected to continue, absent a significant adjustment either in mission
    allocation or end strength. The DOD, however, has shown little interest
    in reducing the burden on the Reserve Forces. Inevitably, civilian
    career potential and retirement plans will be hurt by frequent and
    lengthy activations.
        The time has come to recognize the Reserve retirement system as a
    complement, rather than a supplement to civilian retirement programs.
    Failing to acknowledge and respond to the changed environment could
    have far-reaching, catastrophic effects on Reserve participation and
    career retention.
        TMC urges a reduction in the age when a Guard/Reserve component
    member is eligible for retired pay to age 55 as an option for those who
    qualify for a non-regular retirement.

    Selected Reserve Montgomery GI Bill (SR-MGIB) Improvements
        Individuals who first become members of the National Guard or
    Reserve are eligible for the SR-MGIB.
        Unlike the basic MGIB (chapter 30, title 38), chapter 1606 of title
    10 governs the Reserve GI Bill program. The problem is that the Reserve
    SR-MGIB program competes with National Guard and Reserve pay accounts
    for funding. During the first 14 years of the SR-MGIB, benefits
    maintained 47 percent comparability with the basic MGIB. But, in the
    last 5 years, the SR-MGIB has slipped to 29 percent of the basic
    program. This occurred at a time when the Guard and Reserve have been
    mobilized and deployed unlike any time since World War II. The
    Coalition believes that total force equity requires proportional
    adjustments to the SR-MGIB whenever benefits rise under the regular
    MGIB. One way to facilitate this objective is to transfer basic funding
    authority for ``chapter 1606'' (10 USC) benefits program to title 38.
        TMC recommends a three-phased increase in SR-MGIB benefits to
    restore it to its original value at 47 percent of the MGIB rate. The
    Coalition also recommends transfer of the Reserve SR-MGIB authority
    from title 10 to title 38 to permit proportional benefit adjustments in
    the future.

    Guard/Reserve Family Support Programs
        Guard and Reserve families have been called upon to make more and
    more sacrifices as OIF and Operation Enduring Freedom (OEF) continue.
    These families represent communities throughout the Nation--and most of
    these communities are not close to military installations. As a result,
    these families members face unique challenges since they do not have
    access to traditional family support services that their active duty
    counterparts have on military installations.
        Providing a core set of family programs, not bound by geographic
    location, would help these families meet these challenges. While many
    programs are already in place, there is a need for uniform availability
    of these programs to all Reserve component families. These programs
    include, but are not limited to: State and regional family assistance
    centers; a responsive and flexible child care system to meet the unique
    needs of Reserve families; a family support structure that recognizes
    that Reserve families do not have much experience with military life
    and need more information about the services available to them and how
    to access the various support systems; and, finally, funding for
    staffing since volunteers have been providing these support services,
    many of them experiencing similar difficulties with their sponsors
    deployed.
        We applaud the support shown to families by community organizations
    like the American Red Cross, the American Legion, the Veterans of
    Foreign Wars (VFW) and local Chambers of Commerce. But with the
    continued and sustained activation of the Reserve component, a stronger
    support structure needs to be implemented and sustained.
        TMC urges that adequate funding be made available for a core set of
    family support programs and benefits that meet the unique needs of
    Guard and Reserve component families.
    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 3
    occasions to 60, 75 and most recently, to 90 points.
        However, the fundamental question is why National Guard and Reserve
    members are not permitted to credit all the IDT 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.
        TMC recommends lifting the 90-point cap on the number of IDT points
    earned in a year that may be credited for National Guard and Reserve
    retirement purposes.

                            SURVIVOR PROGRAM ISSUES

        The Coalition thanks the subcommittee for past support of
    improvements to the SBP including the provision in the NDAA for Fiscal
    Year 2002 that extended SBP eligibility to members who die on active
    duty, regardless of years of service, and the fiscal year 2004
    provision that improved election options for these survivors. These
    actions helped a great deal in addressing a longstanding survivor
    benefits disparity.
        But very serious SBP inequities remain to be addressed. The
    Coalition hopes that this year the subcommittee will be able to
    support, at the very least, an increase in the minimum SBP annuity for
    survivor's age 62 and older.

    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. 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 19 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 81
    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 below 28 percent in the late 1980s,
    Congress acted to restore the balance by reducing retiree premiums. Now
    that the situation is far worse, 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 (including Members of Congress)
    survivors compared to their military counterparts.

              FEDERAL CIVILIAN VS. MILITARY SBP ANNUITY AND SUBSIDY
                                    [Percent]
    ------------------------------------------------------------------------
                                         CSRS \1\     FERS \2\     Military
    ------------------------------------------------------------------------
    Post-62 of Ret. Pay..............          55           50           35
    Gov't Subsidy....................          48           33          19
    ------------------------------------------------------------------------
    \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 much longer
    period. The combination of greater premium payments and lower age-62
    benefits leave military retirees with a less advantageous premium-to-
    benefit ratio--and therefore a far lower Federal survivor benefit
    subsidy than their retired Federal civilian counterparts.
        The NDAA 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.
        TMC strongly supports legislation sponsored by Senator Mary
    Landrieu and Represenative Jeff Miller (S. 1916 and H.R. 3763,
    respectively) that, if enacted, would eliminate the disparity over a
    10-year period--raising the minimum SBP annuity to 40 percent of SBP-
    covered retired pay on October 1, 2005; to 45 percent in 2008; and to
    55 percent in 2014.
        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.
        TMC strongly recommends elimination of the age-62 SBP 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. 1916 and H.R. 3763.
    30-Year Paid-Up SBP
        Congress approved a provision in the NDAA 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.
        TMC 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 5 more years
    for relief, or as many retirees believe, waiting for them to die off.
        TMC recommends accelerating the implementation date for the 30-year
    paid-up SBP initiative to October 1, 2004.

    SBP-DIC Offset
        Currently, SBP survivors whose sponsors died of service-connected
    causes have their SBP annuities reduced by the amount of DIC 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 the Servicemembers' Group Life Insurance (SGLI)
    benefit.
        TMC recommends eliminating the DIC offset to SBP annuities,
    recognizing that the two compensations serve different purposes, and
    one is not substitutable for the other.

                               RETIREMENT ISSUES

        TMC 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
        TMC applauds Congress for the landmark provisions in the NDAA for
    Fiscal Year 2004 that expand combat related special compensation to all
    retirees with combat-related disabilities and authorizes--for the first
    time ever--the unconditional concurrent receipt of retired pay and
    veterans' disability compensation for retirees with disabilities of at
    least 50 percent. Disabled retirees everywhere are extremely grateful
    for this subcommittee's action to reverse an unfair practice that has
    disadvantaged disabled retirees for over a century.
        While last year's concurrent receipt provisions will benefit tens
    of thousands of disabled retirees, an equal number were left behind.
    The fiscal challenge notwithstanding, the principle behind eliminating
    the disability offset for those with disabilities of 50 percent is just
    as valid for those with 40 percent and below and the Coalition urges
    the subcommittee to extend this principle to the thousands of disabled
    retirees who were left out of last year's legislation.
        We understand that a significant concern among some critics that
    prevented broader concurrent receipt action was the need for a review
    of the VA disability system. The Coalition believes much of the concern
    is misplaced, and that the VA system should be able to withstand
    reasonable scrutiny. The Coalition stands ready to assist the Veterans'
    Disability Benefits Commission and participate in the debate with
    relevant information and data affecting a full spectrum of disabled
    veterans and their families and survivors. Most importantly, the
    Coalition urges the subcommittee to ensure that the commission remains
    focused on the fundamental principles that have served as the
    foundation for both the DOD disability retirement and VA disability
    compensation processes--principles of fairness, due process, and the
    unique aspect that military duty is 24/7. We look forward to completion
    of the review and revalidation of the process as important steps toward
    resolving concurrent receipt inequity.
        TMC urges subcommittee leaders and members to be sensitive to the
    need for further adjustments to last year's concurrent receipt
    provision and to eliminate the disability offset for all disabled
    retirees. As a priority, the Coalition urges the subcommittee to ensure
    the Veterans' Disability Benefits Commission protects the principles
    guiding the DOD disability retirement program and VA disability
    compensation system.

    Final Retired Paycheck
        TMC believes the policy requiring the recovery of a deceased
    member's final retired paycheck 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--an arduous and frustrating
    task, at best--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.''
        TMC 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
        TMC 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 DOD'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 1-year deemed election period for SBP
    eligibility be eliminated; 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; and DFAS should be authorized
    to garnish ordered, unpaid child support payments from the former
    spouse's share of retired pay. 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. The Coalition 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.
        The Coalition believes that, at a minimum, the subcommittee should
    approve those initiatives that have the consensus of the military and
    veterans' associations, including the NMFA. The Coalition would be
    pleased to work with the subcommittee to identify and seek consensus on
    other measures to ensure equity for both service members and former
    spouses.
        TMC recommends corrective legislation be enacted to eliminate the
    inequities in the administration of the USFSPA, to include
    consideration of the recommendations made by the DOD in their 2001
    USFSPA report.

    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 Internal Revenue Service (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 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, TRDP, FEHBP,
    and Long Term Care.

                           HEALTH CARE TESTIMONY 2004

        TMC is most appreciative of the subcommittee's exceptional efforts
    over several years to honor the government's health care commitments to
    all uniformed services beneficiaries. These subcommittee-sponsored
    enhancements represent great advancements that should significantly
    improve health care access while saving all uniformed services
    beneficiaries thousands of dollars a year. The Coalition particularly
    thanks the subcommittee for last year's outstanding measures to address
    the needs of TRICARE standard beneficiaries as well as to provide
    increased access for members of the Guard and Reserve components.
        While much has been accomplished, we are equally concerned about
    making sure that subcommittee-directed changes are implemented and the
    desired positive effects actually achieved. We also believe some
    additional initiatives will be essential to providing an equitable and
    consistent health benefit for all categories of TRICARE beneficiaries,
    regardless of age or geography. The Coalition looks forward to
    continuing our cooperative efforts with the subcommittee's members and
    staff in pursuit of this common objective.

                   FULL 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--including graduate medical education and continuing
    education, full funding of both direct care and purchased care sectors,
    providing access to the military health care system for all uniformed
    services beneficiaries, regardless of age, status or location. A fully
    funded health care benefit is critical 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.
        We are grateful that last year, Congress provided supplemental
    appropriations to meet growing requirements in support of the
    deployment of forces to Southwest Asia and Afghanistan in the global
    war against terrorism.
        But we are concerned by reports from the Services that the current
    funding level falls short of that required to meet current obligations
    and that additional supplemental funding will once again be required.
    For example, we have encountered several instances in which local
    hospital commanders have terminated service for retired beneficiaries
    at military pharmacies, citing budget shortfalls as the reason. Health
    care requirements for members returning from Iraq are also expected to
    strain the military delivery system in ways that we do not believe were
    anticipated in the budgeting process.
        Similarly, implementation of the TRICARE Standard requirements in
    last year's authorization act--particularly those requiring actions to
    attract more TRICARE providers--will almost certainly require
    additional resources that we do not believe are being budgeted for.
        Financial support for these increased readiness requirements,
    TRICARE provider shortfalls and other needs will most likely require
    additional funding.
        TMC strongly recommends the subcommittee continue its watchfulness
    to ensure full funding of the Defense Health Program, including
    military medical readiness, needed TRICARE Standard improvements, and
    the DOD peacetime health care mission. It is critical that the Defense
    health budget be sufficient to secure increased numbers of providers
    needed to ensure access for TRICARE beneficiaries in all parts of the
    country.

    Pharmacy Cost Shares for Retirees
        Late last year, the OMB and the DOD considered a budget proposal
    that envisioned significantly increasing retiree cost shares for the
    TRICARE pharmacy benefit, and initiating retiree copays for drugs
    obtained in the direct care system. While the proposal was put on hold
    for this year, the Coalition is very concerned that DOD is undertaking
    a review that almost certainly will recommend retiree copay increases
    in fiscal year 2006.
        Thanks to the efforts of this subcommittee, it was less than 3
    years ago that Congress authorized the TRICARE Senior Pharmacy Program
    (TSRx) and DOD established $3 and $9 copays for all beneficiaries.
    Defense leaders highlighted this at the time as ``delivering the health
    benefits military beneficiaries earned and deserve.'' But the Pentagon
    already has changed the rules, with plans to remove many drugs from the
    uniform formulary and raise the copay on such drugs to $22.
        Now, there are new proposals to double and triple the copays for
    drugs remaining in the formulary--to $10 and $20, respectively. One can
    only surmise that this would generate another substantial increase in
    the non-formulary copay--perhaps even before the $22 increase can be
    implemented.
        Budget documents supporting the change rationalized that raising
    copays to $10/$20 would align DOD cost shares with those of the VA
    system. This indicates a serious misunderstanding of the VA cost
    structure, unless the administration also plans to triple VA cost
    shares. At the present time, the VA system requires no copayments at
    all for medications covering service-connected conditions, and the cost
    share for others is $7.
        The Coalition believes Congress will appropriate the funds needed
    to meet uniformed services retiree health care commitments if only the
    administration will budget for it. The Coalition is concerned that DOD
    does not seem to recognize that it has a unique responsibility as an
    employer to those who served careers covering decades of arduous
    service and sacrifice in uniform. Multiple administrations have tried
    to impose copays in military medical facilities, and Congress has
    rejected that every time. We hope and trust that will continue.
        The Coalition vigorously opposes increasing retiree cost shares
    that were only recently established. Congress's recent restoration of
    retiree pharmacy benefits helped restore active duty and retired
    members' faith that their government's health care promises would be
    kept. If implemented, this proposal would undermine that trust, which
    in the long term, can only hurt retention and readiness.
        TMC urges the subcommittee to continue to reject imposition of cost
    shares in military pharmacies and oppose increasing other pharmacy cost
    shares that were only recently established. We urge the subcommittee to
    ensure that Beneficiary Advisory Groups' inputs are included in any
    studies of pharmacy services or copay adjustments.

                     TRICARE FOR LIFE (TFL) IMPLEMENTATION

        The Coalition is pleased to report that, thanks to this
    subcommittee's continued focus on beneficiaries, TMC representatives
    remain actively engaged in an Office of the SECDEF (OSD)-sponsored
    action group, the TRICARE Beneficiary Panel. This group was formed
    initially to deal with TFL implementation. Subsequently the group has
    broadened its scope from refining TFL to tackling broader TRICARE
    beneficiary concerns. We are most appreciative of the positive working
    relationship that has evolved and continues to grow between the
    Beneficiary Panel and the staff at the TRICARE Management Authority
    (TMA). This collegiality has gone a long way toward making the program
    better for all stakeholders. From our vantage point, TMA continues to
    be committed to implementing TFL and other health care initiatives
    consistent with congressional intent and continues to work vigorously
    toward that end.
        The Coalition is concerned that some ``glitches'' for TFL
    beneficiaries remain. The Beneficiary Panel has provided a much-needed
    forum to exchange DOD and beneficiary perspectives and identify
    corrective actions. However, some issues are beyond the policy purview
    of the department and require congressional intervention. 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.

    Permanent ID Card for Dependents Over the Age of 65
        With the advent of TFL, expiration of TFL-eligible spouses' and
    survivors' military identification cards--and the threatened denial of
    health care claims--has caused our frail and elderly members and their
    caregivers significant administrative and financial distress.
        Previously, many of them who lived miles from a military
    installation or who resided in nursing homes and assisted living
    facilities simply did not bother to renew their ID cards upon the 4-
    year expiration date. Before enactment of TFL, they had little to lose
    by not doing so. But now, ID card expiration cuts off their new and
    all-important health care coverage.
        A 4-year expiration date is reasonable for younger family members
    and survivors who have a higher incidence of divorce and remarriage,
    but it imposes significant hardship and inequity upon elderly
    dependents and survivors.
        The Coalition is concerned that many elderly spouses and survivors
    with limited mobility find it difficult or impossible to renew their
    military identification cards. A number of seniors are incapacitated
    and living in residential facilities, some cannot drive, and many more
    do not live within a reasonable distance of a military facility. The
    threat of loss of coverage is forcing many elderly spouses and
    survivors to try to drive long distances--sometimes in adverse weather,
    and at some risk to themselves and others--to get their cards renewed.
        Renewal by mail can be confusing, and obtaining information on
    Service- and locality-specific mail-order renewal requirements can be
    very difficult for beneficiaries or their caregivers. Those who cannot
    contend with the daunting administrative requirements now face a
    terrible and unfair penalty.
        The Coalition strongly urges the subcommittee direct the SECDEF to
    authorize issuance of permanent military identification cards to
    uniformed services family members and survivors who are age 65 and
    older, with appropriate guidelines for notification and surrender of
    the ID card in those cases in which eligibility is ended by divorce or
    remarriage.

    Access to TSRx for Nursing Home Beneficiaries
        Once again, the Coalition would like to bring to the subcommittee's
    attention the plight faced by TSRx beneficiaries residing in nursing
    homes who continue to encounter limitations in utilizing the TSRx
    benefit. The Coalition is most grateful for report language contained
    in House Armed Services Committee Report, Public Law 107-436, regarding
    waiver of the TSRx deductible for such beneficiaries. The subcommittee
    directed the SECDEF to implement policies and regulations or make any
    legislative changes to waive the annual deductible for these patients,
    and report to the Armed Services Committees by March 31, 2003.
        By way of review for the subcommittee, because of state pharmacy
    regulations, patient safety concerns and liability issues, the vast
    majority of nursing homes have limitations on dispensing medications
    from outside sources. In rare cases where the nursing home will accept
    outside medications, some beneficiaries have been successful in
    accessing medications via a local TRICARE network pharmacy or the
    TRICARE Mail Order Pharmacy (TMOP). These fortunate individuals use the
    TSRx program with the lower cost shares designated for participating
    pharmacy services.
        However, the vast majority of nursing home residents must rely on
    the nursing home to dispense medications. As a result, these
    beneficiaries must seek TRICARE reimbursement for these medications and
    in most cases, this is treated as a non-network pharmacy--which means
    the individual is responsible for a $150 deductible ($300 if there is a
    family), plus higher copayments per prescription. The TRICARE non-
    network pharmacy deductible policy was intended to create an incentive
    for beneficiaries to use the TMOP or retail network pharmacies.
    However, this policy unintentionally penalizes beneficiaries in nursing
    homes who have no other options.
        One solution is to work with the nursing home to have them to sign
    on as a network pharmacy. But experience indicates that few if any
    nursing homes are willing to become TRICARE authorized pharmacies, thus
    subjecting helpless beneficiaries to deductibles and increased cost
    shares--as if they had voluntarily chosen to use a non-network
    pharmacy.
        A Pentagon report to Congress last May states ``the use of non-
    network pharmacy services by TRICARE beneficiaries residing in nursing
    homes in not widespread.'' The Coalition strongly disagrees. In fact,
    because no effort has been made to educate beneficiaries or nursing
    homes about this problem, the vast majority of beneficiaries residing
    in nursing homes are not even aware that they have the ability to file
    paper claims for reimbursement.
        The report further states,

              ``When such occurrences have been brought to our attention,
            we have consistently been able to deal with this issue on a
            case-by-case basis and have been universally successful in
            either identifying a network pharmacy that can serve the
            nursing home beneficiary, or bringing the non-network pharmacy
            used by the nursing home into the TRICARE network.''

        The Coalition takes great exception to this unfounded assertion.
    Our experience with actual members indicates a nearly universal lack of
    success in resolving this issue.
        Pharmacy cost shares were established to direct beneficiaries to a
    more cost effective point of access. However, many of our frail and
    elderly beneficiaries are now residing in institutions where
    circumstances preclude them from accessing the TRICARE pharmacy at
    network cost shares. The Coalition asks the subcommittee to take action
    to end this financial burden to those whose circumstances are out of
    their control.
        TMC urges the subcommittee to direct DOD to take action to provide
    outreach and education for beneficiaries attempting to deem nursing
    homes as TRICARE authorized pharmacy services. In those instances where
    the residential facility will not participate in the TRICARE program,
    DOD must be directed to reimburse pharmacy expenses at TRICARE network
    rates to uniformed services beneficiaries who cannot access network
    pharmacies due to physical or medical constraints.

    Initial Preventive Physical Examination
        The Coalition is grateful that sec. 611 (Public Law 108-173), the
    Medicare Prescription Drug Improvement, and Modernization Act. Sec. 611
    authorizes an initial preventative physical examination for Medicare-
    eligible beneficiaries turning 65. We are most appreciative of this
    effort to address preventive care for seniors. This one-time
    examination is not a covered TRICARE benefit.
        Because this is a Medicare benefit and not a TRICARE benefit, TFL
    beneficiaries are liable for all Medicare co-payments. The billed
    charge may not exceed 115 percent of the Medicare Maximum Allowable
    Charge (MMAC). If the beneficiary's provider charges the maximum
    allowed by law (115 percent of the MMAC), Medicare would pay 80 percent
    and the beneficiary would be liable for co-payments of up to 35 percent
    of MMAC. If the provider accepts Medicare assignment, the TFL
    beneficiary would be responsible for a 20-percent cost share.
        Therefore, in order to prevent TFL beneficiaries from incurring
    this out of pocket cost, the Coalition requests that the TRICARE
    benefit package be modified to mirror this new Medicare enhancement.
        TMC requests that the subcommittee take steps to authorize the
    initial preventive physical examination (sec. 611 of Public Law 108-
    173) as a TRICARE benefit for over-65 Medicare-eligible uniformed
    services beneficiaries.

    The President's Task Force to Improve Health Care Delivery for Our
            Nation's Veterans
        The Coalition has endorsed the final report of the President's Task
    Force (PTF) to Improve Health Care Delivery for Our Nation's Veterans.
    It is the Coalition's hope that this subcommittee will take action on
    many of the PTF recommendations and work with the Veteran's Affairs
    Committee, the DOD, and the Department of Veterans' Affairs (VA) to
    move forward with greater collaborative efforts to enhance health care
    delivery for those who have earned these benefits through service to
    their country in uniform.
        A significant goal is a seamless transition to veteran status for
    retirees or for those separating--relying on collaboration for success.
    As soon as an individual enters the armed services, both agencies have
    a stake in their health status. Therefore, in order to provide quality
    health care, that information must be shared between the VA and DOD.
        Lessons learned from the first Gulf War taught us that a better job
    must be done to collect, track, and analyze occupational exposure data.
    Without this information, benefits determinations cannot be fairly
    adjudicated, nor can the causes of service related disorders be
    understood. Last year, DOD initiated an enhanced post-deployment health
    assessment process for service members deployed in support of OIF. The
    outcome of this project will be a marker to determine if this PTF
    recommendation is being implemented effectively.
        To do so, both agencies must share this exposure information and
    any other health status data electronically. VA and DOD will have to
    complete development of an interoperable bi-directional EMR--the
    lynchpin to a seamless transition. The technology exists but the will
    must be found to move forward to completion.
        Another important recommendation is ``the one-stop physical'' upon
    separation or retirement. Offering one discharge physical, providing
    outreach and referrals for a VA Compensation and Pension examination,
    as well as following up on claims adjudication and rating is not just
    more cost effective in terms of capital and human resources; it is the
    right thing to do--to ensure that service members receive the benefits
    they have earned and deserve.
        The Government has been talking about developing an electronic DD
    214 for years, yet the document remains in paper format. Initial start-
    up costs would be paid back many times over in efficiencies gained.
    This is not just a matter of conserving resources. It is essential to
    remove barriers that hamper the benefits determination process.
        Other commissions have worked to the same effort in the past, only
    to have their recommendations sit on the shelf. Successful
    implementation will require congressional authority and additional
    funding.
        TMC asks the subcommittee to work with the Veteran's Affairs
    Committee and the VA and DOD to ensure action on the PTF
    recommendations including a seamless transition, a bi-directional EMR,
    enhanced post-deployment health assessment, and implementation of an
    electronic DD214.

                              TRICARE IMPROVEMENTS

    TRICARE Standard Improvements
        The Coalition is most grateful for the subcommittee's extraordinary
    efforts in the NDAA for Fiscal Year 2004 to improve the TRICARE
    Standard program. This legislation goes a long way toward addressing
    the number one concern expressed by our collective memberships--access
    to care for standard beneficiaries.
        Benefits already have been significantly enhanced for Medicare-
    eligibles, and for active duty beneficiaries in Prime and the Prime
    Remote program. This new legislation will address the needs of the 3.2
    million TRICARE Standard beneficiaries, many of whom find it difficult
    or impossible to find a standard provider. The Coalition is firmly
    committed to working with Congress, DOD, and the Health Services
    Support Contractors (HSSCs) to facilitate prompt implementation of
    these provisions.
        DOD will be required to track provider participation (including
    willingness to accept new patients), appoint a specific official
    responsible for ensuring participation is sufficient to meet
    beneficiary needs, recommend other actions needed to ensure the
    viability of the standard program, develop an outreach program to help
    beneficiaries find standard providers, educate them about the benefit,
    and provide problem resolution services for beneficiaries experiencing
    access problems or other difficulties.
        The Coalition is well aware that DOD has a full plate this year
    managing the transition of many new TRICARE contracts and
    implementation of major legislative initiatives, including those for
    the Guard and Reserve components. We are concerned that DOD's resources
    may be stretched thin, and the standard enhancements may take a low
    priority while other issues are addressed.
        TMC urges the subcommittee's continued oversight to ensure DOD is
    held accountable to promptly meet requirements for beneficiary
    education and support, and particularly for education and recruitment
    of sufficient providers to solve access problems for standard
    beneficiaries.

    Provider Reimbursement
        The Coalition appreciates the subcommittees efforts to address
    provider reimbursement needs in the NDAA for Fiscal Year 2004 (Public
    Law 108-136). We recognize that part of the problem is endemic to the
    Medicare reimbursement system, to which TRICARE rates are tied.
        The Coalition is greatly troubled that a flaw in the provider
    reimbursement formula led the Centers for Medicare and Medicaid (CMS)
    to cut Medicare fees 5.4 percent in recent years, and would have
    generated additional cuts in 2003 and 2004 if not for last-minute
    legislative relief.
        Cuts in Medicare (and thus TRICARE) provider payments, on top of
    providers' increasing overhead costs and rapidly rising medical
    liability expenses, seriously jeopardizes providers' willingness to
    participate in these programs. 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 causes 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 situation is growing increasingly problematic as deployments of
    large numbers of military health professionals diminish the capacity of
    the military's direct health care system. In this situation, more and
    more TRICARE patients have to turn to the civilian sector for care--
    thus putting more demands on civilian providers who are reluctant to
    take an even larger number of beneficiaries with relatively low-paying
    TRICARE coverage.
        The Coalition believes this is a readiness issue. 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 deserve the Nation's best health care,
    not the cheapest.
        Congress did the right thing by reversing the erroneous proposed
    provider payment cuts due to be implemented March 1, 2003 and January
    1, 2004 and instead provided 1.6 percent and 1.5 percent payment
    increases, respectively. But the underlying formula needs to be solved
    to eliminate the need for perennial ``band-aid'' corrections.
        The Coalition is aware that jurisdiction over the Medicare program
    is not within the authority of the Armed Services Committees, but the
    adverse impact of depressed rates on all TRICARE beneficiaries warrants
    a special subcommittee effort to find a way to solve the problem.
        TMC requests the subcommittee's support of any means to raise
    Medicare and TRICARE rates to more reasonable standards and to support
    measures to address Medicare's flawed provider reimbursement formula.

    Disproportionate Share Payments
        The Coalition is grateful for report language contained in the
    Senate Armed Services Committee Report 108-046 encouraging DOD to
    review and consider alignment of the TRICARE payment schedule with
    Medicare's disproportionate share payment adjustment to children's
    hospitals. The subcommittee expressed concern about access when
    children's hospitals provide care to TRICARE beneficiaries with high-
    cost, complex medical needs where TRICARE reimbursement rates do not
    cover the cost of care provided.
        Authorizing increased payments to hospitals that serve a
    disproportionately large number of TRICARE beneficiaries based on
    Medicare's Disproportionate Share (DSH) payment adjustment makes great
    sense. It is every bit as important that DOD safeguard access to care
    for uniformed services beneficiaries as for Medicare beneficiaries, and
    we need to encourage facilities to continue to serve this high-priority
    (but relatively low-revenue-generating) population.
        TMC urges the subcommittee to further align TRICARE with Medicare
    by adapting the Medicare DSH payment adjustment to compensate hospitals
    with larger populations of TRICARE beneficiaries.

    Administrative Burdens
        Despite significant initiatives designed to improve the program,
    providers continued to complain of low and slow payments, as well as
    burdensome administrative requirements. Once providers have left the
    TRICARE system, promises of increased efficiencies do little to
    encourage them to return. Only by easing the administrative burden 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.
        Lessons learned from TFL implementation demonstrate the
    effectiveness of using one-stop electronic claims processing to make
    automatic TRICARE payments to Medicare-providers. TFL dramatically
    improved access to care for Medicare-eligibles by relying on existing
    Medicare policies to streamline administrative procedures and claims
    processing, making the system simple for providers, and paying claims
    on time.
        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 upon implementation of the new

    TRICARE contracts (TNEX).
        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.'' This provision allows TRICARE claims to be more
    complex than that of private sector practices. One example is the
    requirement to provide a TRICARE specific claim data element
    identifying a provider by the physical location where service was
    provided (geography). This can be problematic for medical practices
    with many providers delivering services in numerous localities.
    Medicare is much simpler requiring only one identifier. The Coalition
    is hopeful that the HIPPA requirement for a national provider indicator
    (NPI) will alleviate this issue, but the implementation of the NPI has
    been pushed back to 2007.
        We do not know how these unique data elements enhance TRICARE
    claims processing, but we do know that both Medicare and the private
    sector adjudicate 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.
        TMC 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.

    TRICARE Prime (Remote) Improvements
        The Coalition is grateful for the NDAA for the 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.
        This provision allows these families to retain the TRICARE Prime
    Remote (TPR) benefit and will go a long way to provide support for
    families remotely assigned who face a period of time living without
    their sponsor. But one problem remains.
        As written, TPR benefits are authorized only if the dependents
    remain at the former duty site. When the member is assigned away from
    the family, there can be many good reasons why the family left behind
    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 or other support groups while waiting 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 TPR program if TRICARE
    Prime is not available at the location where the family will reside.
        It is in the government's interest to ensure family members left
    behind receive the best support they can. We should not write the TPR
    rules in punitive ways that penalize family members who use a
    government-authorized move to their most appropriate location during
    the member's absence.
        TMC requests that the subcommittee authorize family members who are
    eligible for TPR to retain their eligibility when moving to another TPR
    area when the government funds such move and there is no reasonable
    expectation that the service member will return to the former duty
    station.

    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 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 and Congress acknowledged the appropriateness of the
    ``coordination of benefits'' approach in implementing TFL and for
    calculating OHI pharmacy benefits. TFL pays whatever charges are left
    after Medicare pays, up to what TRICARE would have paid as first payer,
    just as they reimburse cost shares for OHI pharmacy claims. The
    Coalition believes this should apply when TRICARE is second-payer to
    any other insurance, not just when it is second-payer to Medicare or
    with pharmacy claims.
        Current policy is contrary to best business practices in the
    private sector. When a beneficiary has two insurance plans, the
    secondary pays the beneficiary liability as long as the services are
    allowed under the rules of the secondary plan.
        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 who are
    entitled to TRICARE benefits, but are saving the government a
    substantial amount of money by using their OHI, may forfeit their
    entire TRICARE benefit because of private sector employment or by
    virtue of having private health insurance. In practice, despite
    statutory intent, these individuals have no TRICARE benefit.
        The October 2003 General Accounting Office (GAO) Report, TRICARE
    Claims Processing Has Improved, but Inefficiencies Remain, states ``. .
    . when beneficiaries have other health insurance is the claims
    processing area that causes the most confusion for providers and
    beneficiaries.'' Providers and beneficiaries frequently misunderstand
    OHI claims adjudication. The confusion often arises because the OHI
    payment is equal to or greater than the TMAC, so there is no TRICARE
    payment. The result is increased customer service demand as contractors
    must answer complex inquires from both providers and beneficiaries.
        In addition to increasing demand for customer service, the GAO
    states that the procedures for calculating OHI result in inefficiencies
    as well. Not only are these rules unfair, they are also just about
    impossible to understand or explain to beneficiaries and their
    providers.
        TMC 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 to the subcommittee for the provision in
    the NDAA for Fiscal Year 2002 that has substantially eliminated the
    requirement for non-enrolled TRICARE beneficiaries to obtain a
    nonavailability statement (NAS) or preauthorization from an MTF before
    receiving certain services from a civilian provider. However, except
    for maternity care, the law allows DOD broad waiver authority that
    could diminish the practical effects of the intended relief from NAS.
    NAS's 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.

        In addition, the DOD must provide notification to affected
    beneficiaries of any future intent to require an NAS under this
    authority, and must provide at least 60 days' notice to the Armed
    Services Committees of any such intent, along with the reasons and
    intended implementation date.
        The Coalition is pleased that, at present, there is no requirement
    for NAS other than for inpatient mental health services in the TRICARE
    program.
        The Coalition has urged DOD, in the event any future NAS
    requirement is contemplated, to go beyond a mere Federal Register
    notification and make a good-faith effort to contact beneficiaries
    likely to be affected. The Coalition has urged the department to
    develop a formal program to inform standard providers and beneficiaries
    in any such event.
        TMC requests the subcommittee's continued oversight to assure that,
    should the DOD choose to exercise its authority and reinstate NAS
    requirements, beneficiaries and their providers receive effective,
    advance notification.

    TRICARE Next Generation of Contracts
        Over the next several months, the long-awaited transition to the
    new contracts will be implemented. The Coalition agrees that this is a
    critically important step, both for the Department and for
    beneficiaries. We acknowledge the complexity of this process and remain
    firmly committed to working with Congress, the Department, and the
    HSSCs to make implementation as effective as possible. Above all, we
    intend to be vigilant that the current level of service is not
    compromised. The Coalition applauds the new contracts' increased focus
    on performance, customer satisfaction and quality care.
        As these contracts are implemented, a seamless transition and
    accountability for progress are the Coalition's primary concerns. The
    Coalition is sensitive 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, have historically been tumultuous for all
    stakeholders, especially beneficiaries. The Coalition believes systems
    must be put in place that will make the transition to the new contracts
    as seamless as possible for 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 contractors.
        The Coalition will be closely monitoring our member feedback
    concerning customer service. Specifically, we are concerned that the
    outgoing HSSCs avoid any fall-off of service as their contracts wind
    down and that the handoff between the old and new contractors goes
    smoothly.
        Another important area of concern is provider churn. Contracts were
    re-awarded in four regions, therefore those beneficiaries should
    experience minimal turnover. But in the other seven regions,
    beneficiaries may have to find new physicians willing to contract with
    the new HSSC. The Coalition hopes that beneficiaries who are currently
    receiving care will be able to continue with their current provider
    through their course of treatment.
        Despite all the changes, the Coalition is hopeful that TRICARE
    beneficiaries will benefit from the new contract structure. By
    streamlining administrative requirements and being less prescriptive,
    we hope DOD will be able to improve service delivery and enhance
    access. The Coalition intends to be closely involved in the transition
    and implementation process.
        TMC 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.
        There are three areas of concern the Coalition has identified in
    the past that we hope will be addressed by the new contracts:
    Portability/Reciprocity, Prior Authorization, and HCIL. We would like
    to briefly state our concerns and ask the subcommittee's due diligence
    to provide continued oversight of these issues.
    Prior Authorization under TNEX
        While the TNEX request for proposals purportedly removed 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
    longstanding 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.
        Since each contractor has been given great leeway in this area, it
    is too soon in the implementation process for the Coalition to assess
    the impact upon beneficiaries of the new prior authorization
    requirements in each of the three regions. We will Reserve judgement at
    this time but will monitor the implementation of these requirements
    from the beneficiary's perspective.
        TMC urges the subcommittee's continued efforts to reduce and
    ultimately eliminate requirements for pre-authorization and asks the
    subcommittee to assess the impact of new prior authorization
    requirements upon beneficiaries' access to care.

    Portability and Reciprocity
        Section 735 of the NDAA for Fiscal Year 2001 required the 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. The DOD has since issued a memorandum stating
    that DOD policy requires full portability and reciprocity. Despite the
    efforts of this subcommittee, in the current system with 12 regions,
    enrollees routinely experience enrollment disruption 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 Coalition is eager to see if reducing the number of contracts
    from 12 to 3 will address this problem.
        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, beneficiaries cannot use these providers
    without great difficulty. The problem also arises when a member has a
    child attending college in a different TRICARE region.
        Our Government requires nationwide mobility of military families,
    and it is essential to ensure they are provided seamless continuity of
    health coverage. The Coalition believes 3 years is more than long
    enough to have waited for this basic quality of life problem to be
    fixed.
        TMC urges the subcommittee to monitor the new contracts to
    determine if the new system facilitates portability and reciprocity to
    minimize the disruption in TRICARE services for beneficiaries.
    Health Care Information Lines
        The Coalition is concerned that the TNEX request for proposals did
    not contain any requirement for HCIL, leaving each of the three
    military services to piecemeal these support services to beneficiaries
    in their service areas. The Coalition believes this is a grave mistake,
    works against the interests of the beneficiaries, and interferes with
    cost-effective management of the TRICARE program.
        Over 100 million civilian health plan beneficiaries nationwide have
    access to telephonic nurse advice services. HCIL services offered under
    existing TRICARE contracts played a critical role in the health care
    process for military beneficiaries. This information service is even
    more valuable when combined with a triage service that not only
    suggests a proper plan for care (self care at home, acute care, routine
    appointment with provider, or emergency room visit), but also schedules
    an appointment if necessary.
        The Coalition has seen data indicating military members and their
    spouses use HCIL services at twice the rate of the civilian population.
    No matter where the individual or family is stationed, a HCIL program
    can provide a convenient and cost-effective point of access to safe,
    trustworthy decision support and health information.
        HCILs can provide peace of mind to spouses who may have to make
    decisions without the support of their partner. These informed
    decisions help optimize effective use of MTF and purchased health care
    resources, while improving clinical and financial outcomes.
        HCIL services provide access to nurses 24 hours a day, 7 days a
    week, including times when good care is not always easily accessible.
    In many cases, children and adults who otherwise may not have received
    timely care have been assessed and directed to what turned out to be
    life-saving care.
        The Coalition believes that nurse triage programs are a win-win
    proposition as they have the potential to help control costs by
    directing patients to the appropriate level of care, while improving
    access to care and MTF appointments for those who need them.
        The Coalition fears that the omission of HCIL guidance from TNEX
    will result, at best, in a patchwork of HCIL programs implemented
    locally at the MTF level--to the extent commanders even choose to do
    so. The Coalition firmly believes that the popularity of the current
    regional HCIL services and the single HCIL contract for all outside the
    continental United States locations indicates the need for continued
    availability of a consistent level of HCIL services for all
    beneficiaries.
        TMC urges the subcommittee to direct DOD to modify the TNEX
    contract to make HCIL access universal for all beneficiaries and to
    develop a plan to provide for uniform administration of HCIL services
    nationwide.

    Uniform Formulary Implementation
        The Coalition is committed to work with the 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 (P&T) 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 (BAP) to comment on
    the formulary. Several TMC representatives are members of the BAP and
    are eager to provide input to the program. While we are aware that
    there will be limitations to access for 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 that the guidelines are 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 very steep and could present an undue financial
    burden upon beneficiaries if there is a restrictive formulary bias.
    Beneficiaries' trust will be violated if the formulary is excessively
    limited, fees rise excessively, and/or the administrative requirements
    to document medical necessity are onerous.
        DOD must do a better job of informing beneficiaries about the scope
    of the benefit--to include prior authorization requirements, generic
    substitution policy, limitations on number of medications dispensed,
    and processes for determining medical necessity. The Coalition is
    pleased to note that the department has improved its beneficiary
    education via the TRICARE website. 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 the
    DOD approaches the uniform formulary implementation, it will be
    critical to make this information readily available to beneficiaries
    and providers.
        TMC urges the subcommittee to ensure a robust uniform formulary is
    developed, with reasonable medical-necessity rules and increased
    communication to beneficiaries about program benefits, pre-
    authorization requirements, appeals, and other key information.

    TRICARE Benefits for Remarried Widows
        The Coalition believes there is a gross inequity in TRICARE's
    treatment of remarried surviving spouses whose subsequent marriage ends
    because of death or divorce. These survivors are entitled to have their
    military identification cards reinstated, as well as restoration of
    commissary and exchange privileges. In addition, they have any
    applicable SBP 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. This
    legislation (38 U.S.C. 103(g)(1)) reinstated 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.
        Military survivors merit the same consideration Congress has
    extended and the VA has implemented for CHAMPVA survivors.
        TMC urges the subcommittee to restore equity for surviving spouses
    by reinstating TRICARE benefits for otherwise qualifying remarried
    spouses whose second or subsequent marriage ends because of death,
    divorce or annulment, consistent with the treatment accorded CHAMPVA-
    eligible survivors.

    TRICARE Prime Continuity in BRAC areas
        In addition to our concerns about current benefits, the Coalition
    is apprehensive about continuity of future benefits as Congress and the
    DOD begin to consider another round of base closures.
        Many beneficiaries deliberately retire in localities close 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.
        Under current TRICARE contracts and under DOD's interpretation of
    TNEX, TRICARE contractors are supposed to continue maintaining TRICARE
    Prime provider networks in 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.
        TMC urges the subcommittee to amend title 10 to require
    continuation of TRICARE Prime network coverage for uniformed services
    beneficiaries residing in BRAC areas.

    TRICARE Retiree Dental Plan
        The Coalition is grateful for the subcommittee's leadership role in
    authorizing the TRDP. While the program is clearly successful,
    participation could be greatly enhanced with two adjustments.
        Unlike the TRICARE Active Duty Dental Plan, which enjoys a
    substantial Federal subsidy to keep premiums low, 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.
        The Coalition understands that consideration is being given to
    establishing a subsidized dental benefit covering active and retired
    Federal civilians as an adjunct to the FEHBP. If so, similar
    consideration should be provided for retired military beneficiaries.
        Another shortcoming of the TRDP is that it is not available
    overseas, but, according to the TRDP website: ``You can receive covered
    treatment anywhere in the 50 United States, the District of Columbia,
    Puerto Rico, Guam, the U.S. Virgin Islands, American Samoa, the
    Commonwealth of the Northern Mariana Islands and Canada.''
        TMC 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 outside the United
    States.

    Pre-Tax Premium Conversion Option
        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 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 FEHBP coverage with pre-tax dollars.
        The Coalition supports H.R. 2131, which would amend the tax law to
    allow Federal civilian retirees and active duty and retired military
    members pay health and dental 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.
        TMC urges the subcommittee to support H.R. 1231 to provide active
    duty and uniformed services beneficiaries a tax exclusion for premiums
    paid for TRICARE Prime enrollment fees, TRICARE dental coverage and
    health supplements, and FEHBP.

    Extended Care Health Option
        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 this subcommittee has endorsed in section 701 of the NDAA
    for Fiscal Year 2002 (Public Law 107-107) providing additional benefits
    for eligible active duty dependents by amending the Program for Persons
    with Disabilities, now termed ECHO. Once implemented, ECHO will provide
    extended benefits not available through the basic program to assist in
    the reduction of the disabling effects of a qualifying condition.
    Implementation is scheduled as the new contracts roll out this year.
        While the ECHO program will provide a tremendous benefit to active
    duty families, offering enhanced services and respite care, the
    Coalition is concerned about families transitioning to retirement
    status when benefits will terminate. The Coalition expects DOD, through
    both the Exceptional Family Member Program and the military health
    system, to provide clear education and guidance to families regarding
    the termination of ECHO benefits at retirement.
        Further, the Coalition expects that adequate and timely transition
    assistance to community-based support services be provided these
    families. The Coalition will be monitoring this transition process to
    determine whether legislation is needed to provide a benefit ``bridge''
    for disabled family members of retiring service members as until needed
    services can be secured in the local community.
        TMC 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 ECHO program upon all beneficiary classes, and that beneficiary
    groups' input be sought in the evaluation of the program.

                                   CONCLUSION

        TMC 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 outline in our
    testimony.
        Thank you very much for the opportunity to present the Coalition's
    views on these critically important topics.

        Senator Chambliss. Before we get to you, Parke Holleman, we
    have a vote that's just been called and we're going to need to
    go. Senator Pryor, we have about 10 minutes left in that, so I
    think we'll run and vote and we'll come right back and we'll
    continue with Ms. Holleman.
        Ms. Holleman. Thank you. [Recess.]
        Senator Chambliss. All right. We'll come back to order, and
    Ms. Parke Holleman, we look forward to hearing your comments.
    Thank you for being patient.

    STATEMENT OF DEIRDRE PARKE HOLLEMAN, LEGISLATIVE DIRECTOR, THE
                      RETIRED ENLISTED ASSOCIATION

        Ms. Holleman. Thank you for coming back. It is an honor for
    me to testify before you concerning the Uniformed Services SBP.
    My presentation is going to be a good deal simpler than the
    ones that have preceded me.
        I'm in an especially comfortable position because the
    National Military and Veterans Alliance, TMC, the American
    Legion, and my individual organization all agree on the issue I
    am speaking about. SBP is presently a critical program for over
    a quarter of a million people and will be the financial
    lifeline for many more in the near future. This essential
    program has many serious flaws that all the Veterans Service
    Organizations (VSO), the military organizations, hope you will
    be able to repair this year.
        When thinking about SBP, we must remember that in the last
    year we have suffered over 500 deaths and numerous injuries in
    Iraq. The country has promised our service members that we will
    care for their loved ones if they are lost. A sufficient
    survivor plan is a promise we have made to our active duty as
    well as to our retirees.
        As I am sure you are well aware, when a survivor of a
    military retiree reaches 62 years of age, his or her monthly
    SBP payments can be anywhere from 55 to 35 percent of the base
    amount. Unfortunately, the vast majority of retirees had no
    idea that this reduction occurred when they took up the plan.
    This drop is difficult for all survivors to cope with, but it
    is truly devastating for survivors of retired enlisted
    personnel. Now, instead of a typical $471 to $500 payment every
    month, not a king's ransom even at that time, they lose
    approximately a third of their monthly income. $150 to $175 a
    month is the difference between managing or continual worry.
        When the SBP program was established in 1972, Congress
    intended that the retired members' premiums would cover 60
    percent of the program's cost, while the Government would pay
    the remaining 40 percent. Because of cautious actuarial
    assumptions, the Government presently contributes approximately
    19 percent of the cost of SBP. While it was intended to be
    comparable to the Federal Civilian Retiree Survivor Plans, it
    has fallen far behind them.
        We thought that we would be able to correct this flaw last
    year with S.451, which ended the reduction in 5 yearly steps.
    But we were told that it would be far too expensive, so we have
    come back again as S.1916. It is a much less expensive bill
    because it would end the reduction in 10 yearly steps. The
    Federal Government can certainly afford to correct and improve
    this program even in this tight budgetary year.
        If a military member's survivor is qualified to receive VA
    Dependency and Indemnity Compensation (DIC), from the VA, he or
    she will suffer a dollar-for-dollar offset of the SBP payment.
    For the normal retiree, this means if he or she died of a
    service-connected condition after paying into the SBP program
    for years while being disabled, the survivor will either get a
    small SBP payment or none at all. If the DIC present amount of
    $967 a month wipes out the SBP payment completely, then the
    survivor receives a taxable lump-sum return of their paid
    premiums, but none of the benefits they paid for and planned
    for.
        A member of the Armed Services Committee, Senator Nelson of
    Florida, has tried for years to end this unfair practice. We
    hope that the members of this subcommittee will support the
    Senator's bill, S.585. Additionally, Congress has recently
    provided active duty SBP for survivors of members who die while
    on active duty. The offset applies to these widows and widowers
    as well. Clearly, Congress intended to provide an additional
    benefit when they passed active duty SBP. Unless this offset is
    ended, this new benefit is hollow.
        Third, SBP presently has a paid-out provision that allows a
    retiree to stop contributing 6\1/2\ percent of his or her base
    amount if he or she has paid into the program for at least 30
    years and has reached the age of 70. But this provision does
    not go into effect until October 1, 2008. Therefore, there are
    more and more retirees who have met both criteria but who still
    are paying into the program. Almost none of their spouses, if
    they survive the member, will ever be paid the 55 percent of
    the base amount.
        Moving the paid-out provisions to the next fiscal year
    would allow these couples who are now in their 70s to live more
    comfortably together. It would cost very little nationally, but
    it would enormously improve the situation of people who served
    our country for years.
        It is the policy of the United States to encourage our
    citizens to make plans for retirement and for their loved ones.
    It is even more important to encourage this behavior when the
    people we are speaking about have served the U.S. Government
    for decades with great risk and difficulty. The SBP program is
    intended to do just that.
        With the adoption of these proposals, SBP will be a far
    fairer program than it is today. Additionally, the improvements
    would encourage growing participation in the future.
        Again, thank you very much for this opportunity. If you do
    have any questions at this late time, I would be most pleased
    to answer them, and I introduce Mr. Duggan, who will be talking
    about the American Legion.
        [The prepared statement of Ms. Holleman follows:]

               Prepared Statement by Deirdre Parke Holleman, ESQ.

                                  INTRODUCTION

        Mr. Chairman, distinguished members of the committee, The National
    Military and Veterans Alliance (NMVA) wishes to thank you for the honor
    of testifying before your subcommittee concerning crucial improvements
    that are needed to support military retirees and their survivors.
        The alliance was founded in 1996 as an umbrella organization to
    encourage all military and veteran associations to work together
    towards their common goals. The alliance members are:

             American Logistics Association
             American Military Retirees Association
             American Military Society
             American Retirees Association
             American World War II Orphans Network
             AMVETS
             Association of Old Crows
             Catholic War Veterans
             Class Act Group
             Gold Star Wives of America
             Korean War Veterans
             Legion of Valor
             Military Order of the Purple Heart
             Military Order of the World Wars
             National Association for Uniformed Services
             National Gulf War Resource Center
             Naval Enlisted Reserve Association
             Naval Reserve Association
             Paralyzed Veterans of America
             Reserve Enlisted Association
             Reserve Officers Association
             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
             Women in Search of Equity

        The preceding organizations represent almost 5 million members and
    collectively, represent some 80 million Americans, those who serve or
    have served their country and their families.
        The overall goal of the NMVA is a strong national defense. In light
    of this overall objective, we would request that the committee examine
    the following proposals.

    Needed Improvements in the Survivor Benefit Plan (SBP)
        All the VSOs and Military Organizations participating in the NMVA
    and The Military Coalition (TMC), the American Legion, as well as
    numerous other veterans service organizations (VSO) and military
    organizations have been on the Hill this year asking Congress to
    correct the several severe shortcomings in the present SBP. Today we
    are asking you to take up this issue.

    The Drop from 55 percent to 35 percent
        When a SBP beneficiary reaches the age of 62 his or her benefit
    drops from 55 percent to 35 percent of the member's retired pay. This
    occurs at the time when more and more people are on fixed incomes and
    when their health care needs and costs are growing. It is a crippling
    surprise. Although it is clear that this reduction has always been in
    the statute it is also clear that the vast majority of retirees signing
    up for this program had no idea that this reduction occurred. It was
    never highlighted in the explanatory materials from the commencement of
    the program in 1972 onward.
        To get full a SBP annuity a retired member of the Uniformed
    Services has to contribute 6\1/2\ percent of their base amount of
    retired pay. This is a serious contribution. It is a truly responsible
    step in the process of estate planning. It is especially foresighted
    when you consider that the member is making this selection at the time
    of retirement. It is the type of planning that the Federal Government
    wishes to encourage. But it still has a real negative affect on the
    retiree and his spouses' shared retirement. It is a particularly
    expensive benefit when you consider that since, happily, retirees are
    living to old ages most SBP widows or widowers never receive a 55
    percent payment since they are already 62 when they lose their spouse.
    For enlisted retirees this reduction in benefits is especially
    devastating. The loss of between $100 and $200 a month can mean the
    difference of a comfortable old age or one that is dominated with
    worry.
        When the SBP program was instituted Congress intended the Federal
    Government to pay 40 percent of the costs (a subsidy equivalent to the
    civilian SBP) and the member was to pay the remaining 60 percent.
    Thanks to conservative assumptions and the long paying lives of the
    retirees that Government contribution is now less than 19 percent of
    the costs of the SBP program. With the unforeseen savings the Federal
    civilian program is now substantially better than the corresponding
    military program. The Federal Employees Retirement System (FERS)
    program has a 33-percent Government subsidy while the Civil Service
    Retirement System (CSRS) has a 48-percent subsidy. Additionally, the
    FERS beneficiary receives 50 percent of the employee's retired pay
    throughout her life and the CSRS beneficiary receives 55 percent. There
    is no reduction when he or she reaches 62 or any other age. While the
    Federal retirees' pay 10 percent of their retired pay for their
    survivor program they pay it for a much shorter time. When analyzing
    these programs it needs to always be remembered that Uniformed Services
    retirees are required to retire at much younger ages than are civilian
    employees. There is no good policy reason for the United States to
    provide a lesser survivor benefit for its military retirees than its
    civilian ones. We do not believe that this is what was initially
    intended. We firmly believe this is not how the program should continue
    to operate.
        The NMVA hopes that this will be the year that this problem is
    corrected.
        The NMVA respectfully requests that the members of this committee
    support the ending of the post-62 years of age reduction of SBP
    annuities. Please support S. 1916.

    SBP/VA Dependency Indemnity Compensation (DIC) Offset
        There are additional improvements that should be made in the SBP
    program. If a retiree dies of a service connected condition his or her
    spouse will qualify for DIC from the Department of Veterans' Affairs
    (VA). If the retiree has paid into SBP there is a dollar-for-dollar
    offset. (The Widow's concurrent receipt). For the vast majority of
    widows DIC completely offsets the SBP payment. If the SBP payment has
    completely swallowed up DIC the survivor will receive the premiums paid
    all those years. But the SBP premiums are returned without interest, in
    a lump sum and subject to taxation wholly in the year the money was
    returned. Even so, many seriously disabled retirees pay into SBP
    because they cannot be sure they will die of their service-connected
    disability. This is most unfair. Congress just recently passed a law to
    allow survivors of service members who are killed on active duty to
    receive SBP even though they have, of course, never paid any premiums
    into the program. But since every active duty surviving spouse is
    entitled to DIC this would be a hollow benefit if the offset were
    allowed to continue. For the retiree who paid into the SBP it may have
    been a real financial difficulty to do so but he or she wanted to
    protect their spouses' future. In both cases help is needed.
        The NMVA respectfully requests that the SBP/DIC offset be ended.
    Please support S. 585.

    SBP Paid Up Provisions
        The military SPB program was enacted in September 1972. Current law
    provides for a SBP premiums to be paid up after the retiree reaches age
    70 and has paid premiums for 30 years. However, the effective dates of
    said paid up premiums is October 1, 2008. Those retirees who enrolled
    in SBP before September 21, 1978, will pay up to 6 years longer than
    those who enrolled in SBP after September 21, 1978. These enrollees
    have been a great boon to the SBP program. Since they have happily
    lived far longer than expected they have been paying far more into this
    program than their survivors will ever receive. There is no logical
    reason why they should be required to pay premiums for a significantly
    longer time than retirees who have enrolled in SBP since September 21,
    1978. The paid up date should be moved forward to commence on October
    1, 2004. This proposed change is a matter of simple fairness. It would
    immediately improve the lives of many of our older military retirees
    and their spouses.
        The NMVA strongly recommends that the effective date for the paid
    up provisions of SBP be moved up to October 1, 2004.

                                   CONCLUSION

        At this time in our history we are once again asking our service
    members and their families to make huge sacrifices and take on enormous
    risks. Throughout the years we have been required to call on service
    members and their families again and again to take on these burdens.
    They have always willingly done so. They will do so again. Therefore,
    the rest of the country has the obligation to assure that after their
    service they will be treated with fairness and respect. The changes we
    have proposed in the SBP will make it fair and workable. It will
    succeed in accomplishing what the program has always intended to do:
    provide an adequate life for the survivors of those who have protected
    this Nation in the past and will do so in the future.

        Senator Chambliss. Thank you very much.
        Mr. Duggan.

    STATEMENT OF COL DENNIS M. DUGGAN, USA (RET.), DEPUTY DIRECTOR,
      NATIONAL SECURITY-FOREIGN RELATIONS DIVISION, THE AMERICAN
                                 LEGION

        Colonel Duggan. Thank you, Mr. Chairman. Mr. Chairman,
    distinguished members of the subcommittee, the American Legion,
    the Nation's largest organization of wartime veterans, is
    grateful for this opportunity to present its views regarding
    personnel issues as part of the NDAA for Fiscal Year 2005.
        The American Legion has always valued your leadership in
    assessing and authorizing quality of life, readiness, and
    modernization programs for the active, National Guard,
    Reserves, their families, and military retirees and their
    dependents. American Legion national commanders continue to
    visit our troops in Europe, the Balkans, and the Far East, as
    well as military posts and bases near our national convention
    cities. We also make regular visits over to visit the severely
    wounded at Walter Reed Army Medical Center.
        The American Legion, as I mentioned, salutes our men and
    women in uniform and extends its family support network
    particularly to activated guardsmen and reservists and their
    families, as well as to severely disabled, wounded personnel
    and their families through our network of some 14,000 posts
    across the country.
        The Defense budget at $402 billion, we believe, is a good
    one. It represents about 3.65 percent, as we understand, of the
    gross domestic product. A decade of overuse of our military and
    its previous underfunding and understrength requires sustained
    investments of this nature. Besides advocating efforts to fight
    the global war on terrorism and improving military and military
    retiree quality of life, we feel--and it may be not the subject
    of this particular hearing--that the Army end strengths also
    need to be increased. We feel that the Army needs another two
    divisions, or about 40,000 spaces, to not only accommodate the
    war on terrorism and peacekeeping and many commitments
    throughout.
        The DOD still appears committed to activating our
    reservists and guardsmen, and in that regard, we strongly urge
    not only the implementation of the temporary TRICARE program,
    but we would be supportive of a permanent TRICARE health care
    program as well. We expect to see war going for some time, and
    we expect to see the number of activated reservists and
    guardsmen continue to grow.
        Like you, we see this as a readiness issue as well based on
    a number of medically and dentally nondeployable troops that we
    have had, not only before deployment, but also post-deployment.
    It can also help in their treatment after deployment. But we
    fully support, of course, full concurrent receipt.
        Finally, the American Legion firmly believes that the
    survivors benefits, as just previously mentioned, need to have
    that 20 percent offset restored for the Social Security-
    eligible military survivors.
        Much has been done for the Reserve components. Much more
    needs to be done. The retirement age for guardsmen and
    reservists should be lowered also, we feel, from 60 to 55. The
    Reserve MGIB benefits also need to be substantially improved to
    be an effective recruiting tool which we believe Reserve and
    Guard Forces are going to need. It also is a rehabilitation
    education program to make up for the educational opportunity
    that they lost by fighting the war and during their activation.
        Also, the soldier and family support systems like base
    exchanges and commissaries should not be merged or
    consolidated, and variable pricing should not even be tested.
    Besides the impact on the military consumers and the commissary
    system and its funding, I'm not really sure that doing that
    variable pricing really makes a lot of good business sense from
    what I've heard before.
        Lower reimbursement rates are continuing to cause TRICARE
    providers to refuse any TRICARE patients or to reduce the
    numbers of outpatients. They'll be treating, thus limiting
    access and choice.
        The American Legion has always believed that there is
    another highly egregious inequity that needs to be fixed for
    about 27,000 military survivors, and that is the standard
    operating procedure (SOP) DIC which we think is as egregious as
    the offset of military retired pay and disability compensation.
        Again, Mr. Chairman, the American Legion thanks you for
    this opportunity to express its views, and these are all
    adopted positions adopted by national conventions by about
    6,000 delegates every year and they represent the 2.8 million
    membership of the American Legion, fully one-tenth of all
    veterans in this country. Thank you.
        [The prepared statement of Colonel Duggan follows:]

          Prepared Statement by COL Dennis Michael Duggan, USA (Ret.)

        Chairman Chambliss and distinguished members of the subcommittee:
    The American Legion is grateful for the opportunity to present its
    views regarding defense authorization for fiscal year 2005. The
    American Legion values your leadership in assessing and authorizing
    adequate funding for quality of life, readiness, and modernization of
    the Nation's Armed Forces to include the active, Reserve, and National
    Guard Forces and their families, as well as quality of life for
    military retirees and their dependents.
        Since September 2001, the United States has been involved in two
    wars--the war against terrorism in Operation Iraqi Freedom (OIF) and
    Operation Enduring Freedom (OEF). American fighting men and women are
    proving that they are the best-trained, best-equipped, and best-led
    military in the world. As Secretary of Defense Donald Rumsfeld has
    noted, the war in Iraq is part of a long, dangerous global war on
    terrorism. The war on terrorism is being waged on two fronts: overseas
    against armed terrorists and the other here protecting and securing the
    homeland. Indeed, most of what we as Americans hold dear are made
    possible by the peace and stability which the Armed Forces provide.
        The American Legion has always adhered to the principle that this
    Nation's Armed Forces must be well-manned and equipped, not just to
    pursue war, but to preserve and protect peace. The American Legion
    strongly believes that past military downsizing was budget-driven
    rather than threat focused. Once Army divisions, Navy warships, and Air
    Force fighter wings are eliminated or retired from the force structure,
    they cannot be rapidly reconstituted regardless of the threat or
    emergency circumstances. Although active duty recruiting has achieved
    its goals, the Army's stop-loss policies have obscured retention of the
    active and Reserve components. Military morale undoubtedly has also
    been adversely affected by the extension of tours in Iraq.
        The administration's budget request for fiscal year 2005 totals
    $2.4 trillion and authorizes $402 billion for defense, or about 19
    percent of the budget. The fiscal year 2005 defense budget represents a
    7-percent increase in defense spending over the current funding level.
    It also represents 3.6 percent of our gross domestic product, more than
    the 3.5 percent in the fiscal year 2004 budget. Active duty military
    manpower end strength is 1.388 million, only slightly changed from
    fiscal year 2003. Selected Reserve strength is 863,300 or reduced by
    about 25 percent from its strength levels during the Gulf War of 13
    years ago.
        Mr. Chairman, this budget must advance ongoing efforts to fight the
    global war on terrorism, sustain and improve military quality of life,
    and continue to transform the military. A decade of overuse
    underfunding of the military will necessitate sustained investments.
    The American Legion believes that this budget must also address
    increases in the military end strengths of the Services; accelerate
    ship production; provide increased funding for the concurrent receipt
    of military retirement pay and Department of Veterans' Affairs (VA)
    disability compensation for disabled military retirees; and improved
    Survivor Benefit Plans (SBP) for the retired military survivors.
        If we are to win the war on terror and prepare for the wars of
    tomorrow, we must take care of the Department's greatest assets--the
    men and women in uniform. They are doing us proud in Iraq, Afghanistan,
    and around the world.
        In order to attract and retain the necessary force over the long
    haul, the Active-Duty Force, Reserves, and National Guard continue to
    look for talent in an open market place and to compete with the private
    sector for the best young people this Nation has to offer. If we are to
    attract them to military service in the active and Reserve components,
    we need to count on their patriotism and willingness to sacrifice, to
    be sure, but we must also provide them the proper incentives. They love
    their country, but they also love their families--and many have
    children to support, raise, and educate. We have always asked the men
    and women in uniform to voluntarily risk their lives to defend us; we
    should not ask them to forgo adequate pay and allowances and subject
    their families to repeated unaccompanied deployments and substandard
    housing as well.
        With the eventual lifting of the stop-loss policy, there may be a
    personnel exodus of active duty and Reserve components from the Army.
    Retention and recruiting budgets may need to be substantially increased
    if we are to keep, and recruit, quality service members.
        The President's 2005 defense budget requests $104.8 billion for
    military pay and allowances, including a 3.5 percent across-the-board
    pay raise. It also includes $4.2 billion to improve military housing,
    putting the DOD on track to eliminate most substandard housing by
    2007--several years sooner than previously planned. The fiscal year
    2004 budget lowered out-of-pocket housing costs for those living off-
    base from 7.5 percent to 3.5 percent in 2004 so as to hopefully
    eliminate all out-of-pocket costs for the men and women in uniform by
    2005. The American Legion encourages the subcommittee to continue the
    policy of no out-of-pocket housing costs in future years.
        Together, these investments in people are critical, because smart
    weapons are worthless to us unless they are in the hands of smart,
    well-trained soldiers, sailors, airmen, marines, and Coast Guard
    personnel.
        American Legion national commanders have visited American troops in
    Europe, the Balkans, South Korea, as well as a number of installations
    throughout the United States, including Walter Reed Army Medical Center
    and Bethesda National Navy Center. During these visits, they were able
    to see first hand the urgent, immediate need to address real quality of
    life challenges faced by service members and their families. Commanders
    have spoken with families on Womens' and Infants' Compensation (WIC),
    where quality of life issues for service members, coupled with combat
    tours and other heightened operational tempos, play a key role in
    recurring recruitment and retention efforts and should come as no
    surprise. The operational tempo and lengthy deployments, other than
    combat tours, must be reduced or curtailed. Military missions were on
    the rise before September 11, and deployment levels remain high and the
    only way, it appears, to reduce repetitive overseas tours and the
    overuse of the Reserves is to increase military end strengths for the
    services. Military pay must be on par with the competitive civilian
    sector. Activated reservists must receive the same equipment, the same
    pay and timely health care as active duty personnel. If other benefits,
    like health care improvements, commissaries, adequate quarters, quality
    child care, and impact aid for education or Department of Defense (DOD)
    education are reduced, they will only serve to further undermine
    efforts to recruit and retain the brightest and best this Nation has to
    offer.
        The budget deficit is about $374 billion, the largest in U.S.
    history, and it is heading higher perhaps to $500 billion. National
    defense spending must not be a casualty of deficit reductions.

        INCREASING END STRENGTHS AND BALANCING THE ACTIVE/RESERVE FORCE
                                   STRUCTURE

        The personnel system and force structure currently in use by the
    United States Armed Forces was created 30 years ago, in the aftermath
    of the Vietnam War. By the mid-1980s, the All-Volunteer Force (AVF)
    became the most professional, highly qualified military the United
    States had ever fielded. With 18 Army divisions and 2.1 million on
    active duty, we were geared for the Cold War and that preparedness
    carried over into the Persian Gulf War. Whenever reservists were
    called-up for the Persian Gulf War or peacekeeping, in the Balkans or
    Sinai, they were never kept on duty for more than 6 months. In fact,
    many reservists volunteered to go. This system began to break down
    after September 11, 2001, with an overstretched Army which only had ten
    divisions which included a mix of infantry, armor, cavalry, air
    assault, airborne, mechanized and composite capabilities. The
    Quadrennial Defense Review (QDR), released 1 month after the September
    11 attacks, did not alter the mix of active duty and Reserve units. Nor
    did the plans for the invasion of Iraq. The DOD admitted that
    rebalancing the way Reserve Forces were used was to be a top priority.
    The DOD also said that it had seen no evidence to support calls to
    increase the size of the active Army from its current level of 480,000.
    The Reserves still account for 97 percent of the military's civil
    affairs units, 70 percent of its engineering units, 66 percent of its
    military police, and 50 percent of its combat forces. Moreover, the
    size of the active duty Army has shrunk to 34 percent of the total U.S.
    military and is currently proportionally smaller than at any time in
    its history. This split in the active and Reserve Forces have lead to
    four major problems, which has been exacerbated by the inability of the
    U.S. to get troop contributions from other nations.
        First, the Army is severely overstretched and is actively engaged
    with hostile forces in two countries. It has nearly 370,000 soldiers
    deployed in 120 countries around the globe. Of its 33 combat brigades,
    24 (or 73 percent) are engaged overseas. This leaves the United States
    potentially vulnerable in places like the Korean Peninsula, and it
    means that many combat units are sent on back-to-back deployments or
    have had their overseas tours extended unexpectedly.
        Second, the failure to increase Active Forces and reorganize the
    military's personnel and force structures resulted in National Guard
    and Reserve units being mobilized without reasonable notice nor
    equipping. A Maryland National Guard military personnel battalion, for
    example, has been mobilized three times in the last 2 years.
        The third problem created by these mobilizations is that many of
    the reservists have been called up without proper notice and kept on
    duty too long and happen to be police officers, firefighters, and
    paramedics in their civilian lives. When these personnel are called for
    military service and kept active for long periods, besides jeopardizing
    their employment, it can reduce the ability of their communities to
    deal with terrorism.
        The fourth problem with the current system is that it has lead to a
    decline in the overall readiness of the Army. In fiscal year 2003, the
    Army had to cancel 49 of its scheduled 182 training exercises. The
    first four divisions returning from Iraq in the first 5 months of this
    year will not be combat-ready again for at least 6 months since their
    equipment has worn down, troops have worn down, and warfighting skills
    have atrophied while they were doing police work. Through its stop-loss
    measures, the Army has prevented 24,000 active duty troops and some
    16,000 reservists from leaving its ranks. The Army Reserve missed its
    reenlistment goals for fiscal year 2003.
        Former Assistant Secretary of Defense Lawrence Korb recommends
    three major steps to correct these imbalances: First, the balance of
    active and Reserves must take place even during a war. Forces needed
    for occupation duty, such as military police, civil affairs and
    engineers should be permanently transferred to active duty. Second, the
    size of the Army should be quickly increased by at least two more
    divisions or 40,000 spaces. Third, given the threat to the American
    homeland, DOD cannot allow homeland security personnel to join the
    National Guard and Reserves.
        The American Legion supports these recommendations, in particular,
    by permanently increasing the end strength of the United States Army by
    two additional divisions or by at least 40,000 personnel. The Army
    simply does not have enough division-size units to adequately
    accommodate rotation of units in Iraq in a timely manner and without
    units becoming non-combat ready when they return home.
        Apparently, the DOD has resisted making these changes because of
    the expenses they would incur. But given the size of the overall
    defense budget--$420 billion--the money could be found if Congress and
    the DOD reordered its priorities.
        By 2007, the Army expects to have created a modern Army by moving
    to brigade-based organizations, rather than division-based ones. The
    Army's current 33 brigades will expand to as many as 48 brigade units
    of action, which will include five Stryker brigades. The National Guard
    would have the same common design as the Army. To accomplish these
    planned changes, the Army will temporarily add 30,000 spaces to help
    form the new organizations. However, The American Legion understands
    that about 7,000 service members of the 30,000 would be holdovers from
    the stop-loss policy. DOD also anticipates continuing to call guardsmen
    and reservists to active duty, which indicates a continuing unit and
    manpower shortage.

                         FORCE HEALTH PROTECTION (FHP)

        As American military forces are once again engaged in combat
    overseas, the health and welfare of deployed troops is of utmost
    concern to the American Legion. The need for effective coordination
    between the VA and DOD in the force protection of U.S. forces is
    paramount. It has been 13 years since the first Gulf War, yet many of
    the hazards of the 1991 conflict are still present in the current war.
        A pretreatment for the nerve agent soman, pyridostigmine bromide
    (PB), was approved by the Food and Drug Administration (FDA) just prior
    to the start of OIF. Although its effectiveness is questionable, and it
    has not been ruled out as a possible cause of multi-symptom illnesses
    reported by thousands of Gulf War veterans, this treatment turned out
    to be unnecessary; however, PB is available for use at commanders'
    discretion. The contentious anthrax vaccine is also being administered
    to deployed personnel and controversial depleted uranium munitions
    continue to play a large role in American combat operations.
        Although chemical and biological weapons have not been used against
    American troops in Afghanistan and Iraq, the potential for such an
    attack in future operations and deployments still exists. The American
    Legion is concerned about the ability of American military forces to
    operate and survive in a nuclear, biological, or chemical (NBC)
    environment. During the 1991 Gulf War, the thousands of chemical
    detection alarms were later reported as ``false alarms.'' The ability
    to properly detect the presence of NBC agents in the area of operation
    remains a grave concern.
        Just prior to OIF, questions surfaced around the DOD's ability to
    properly identify, track, and locate defective chemical protective
    suits. In October 2002, the General Accounting Office (GAO) reported
    that in May 2000, DOD ordered storage depots and units to locate
    778,924 defective suits produced by a single manufacturer. As of July
    2002, military officials were unable to account for 250,000 defective
    suits. Responding to an American Legion inquiry, officials from the
    Deployment Health Support Directorate reported they ``believed'' the
    remaining defective suits had either been destroyed or used in training
    activities. The difficulty in locating the defective suits was a result
    of inventory records lacking contract and lot numbers. GAO also
    reported that the DOD could not determine whether its older suits would
    adequately protect military personnel because some of the systems'
    records do not contain data on suit expiration. Finally, GAO reported
    that the risk of shortages of protective clothing might increase
    dramatically from the time of its report (October 2002) through at
    least 2007.
        Prior to the 1991 Gulf War deployment, troops were not
    systematically given comprehensive pre-deployment health examinations,
    nor were they properly briefed on the potential hazards, such as
    fallout from depleted uranium munitions, that they might encounter.
    Record keeping was poor. Numerous examples of lost or destroyed medical
    records of active duty and Reserve personnel were identified. Vaccines
    were not administered nor recorded in a consistent manner and records
    were often unclear or incomplete. Moreover, personnel were often not
    provided information concerning vaccinations or prescribed medications.
    Some medications were distributed with little or no documentation,
    including dosage instructions, information on possible side effects or
    instructions for service members to immediately report unexpected side
    effects to medical personnel.
        Physical examinations (pre- and post-deployment) were not
    comprehensive and information regarding troop movements/locations and
    possible environmental hazard exposures was severely lacking. The lack
    of such baseline data and other information is commonly recognized as a
    major limitation in the evaluation and understanding of potential
    causes of the unexplained multi-symptom illnesses, referred to
    collectively as Gulf War veterans' illnesses, still plaguing thousands
    of Gulf War veterans 13 years after the war. Although the government
    has conducted more than 230 research projects, at a cost of more than
    $240 million, lack of crucial deployment data has resulted in many
    unanswered questions. Unfortunately, many questions will probably never
    be answered.
        The goal of DOD's FHP policies and programs is to promote and
    sustain the health of service members during their entire length of
    service. On the surface, the FHP concept and related policies appear to
    have addressed the major problems of the past. Unfortunately, reality
    may be a different story. In previous congressional testimony,
    officials from GAO reported that although the DOD placed the
    responsibility for implementing its FHP policies with a single
    authority, the Deputy Assistant Secretary of Defense for Force Health
    Protection and Readiness, each service branch is ultimately responsible
    for implementing DOD initiatives and policies to achieve FHP goals. GAO
    noted that this caused concerns about how the Services would uniformly
    collect and share core data on deployments and how the DOD will
    integrate information on the health status of service members.
    According to GAO, DOD officials also verified that its medical
    surveillance policies and efforts depend on the priority and resources
    dedicated to their implementation.
        The American Legion would like to specifically identify an element
    of FHP that deals with DOD's ability to accurately record a service
    member's health prior to deployment and document or evaluate any
    changes in his or her health that occurred during deployment. This is
    exactly the information the VA needs to adequately care for and
    compensate service members for service-related disabilities once they
    leave active duty. Section 765 of Public Law 105-85 directed the DOD to
    take specific actions to improve medical tracking for personnel
    deployed overseas in contingency or combat operations, outlining a
    policy for pre- and post-deployment health evaluations and blood
    samples. The conduct of a thorough ``examination'' (pre- and post-
    deployment), including the drawing of blood samples, was specifically
    identified in the law.
        The DOD initially created a brief health questionnaire for
    deploying and returning service members to fill out, contrary to the
    medical examinations as required by Public Law 105-85. The pre-
    deployment questionnaire, DD Form 2795, contained eight questions and
    the post-deployment questionnaire, DD Form 2796, contained six
    questions. The American Legion, in congressional testimony presented
    last year in the early days of OIF, asserted that a self-reported
    health assessment questionnaire is not of the same value as an
    examination conducted by a physician or other medical officer. Self-
    reported health assessment is not necessarily an accurate, or reliable
    gauge of an individual's health status prior to or following
    deployment.
        In response to immense concern over the brevity and usefulness of
    the health questionnaire, the Under Secretary of Defense for Personnel
    and Readiness issued an ``enhanced'' post-deployment questionnaire (DD
    Form 2796) on April 22, 2003. The pre-deployment questionnaire was not
    changed. Upon review, The American Legion did not see any significant
    changes. Although the new version is more detailed than the previous
    one, it still does not fulfill the requirement of ``thorough'' medical
    examinations nor does it even require a medical officer to administer
    the questionnaire or counsel participating personnel. The Under
    Secretary's guidance to combatant commanders specifically states that,
    in addition to a physician, physician assistant, or nurse practitioner,
    an enlisted independent duty corpsman or independent duty medical
    technician are also authorized to administer the questionnaire. This
    means that an actual physician or other medical officer may not even be
    part of the post-deployment health assessment process in at least some,
    if not most, instances. This is unacceptable.
        Although the DOD, as part of the ``enhanced'' post-deployment
    health assessment, now requires a blood sample be obtained from
    returning personnel no later than 30 days after arrival at their home
    station or demobilization site, the DOD still relies on blood samples
    taken for human immunodeficiency virus (HIV) tests to fulfill the pre-
    deployment blood drawing requirement of Public Law 105-85. According to
    DOD procedure, deploying military personnel must be tested and found
    negative for HIV no more than 12 months before deployment on
    contingency operations. Although a specimen of serum used for this
    testing is stored at the DOD Serum Repository, the pre-deployment
    sample could be up to a year old, or older, and would, therefore, not
    be an accurate gauge of health immediately prior to deployment. This is
    unacceptable and should be re-evaluated.
        According to DOD policy, commanders are responsible for ensuring
    compliance with and implementation of FHP programs and policies. In the
    fall of 2003, GAO reported on the Army and Air Force's compliance with
    DOD's FHP and surveillance requirements for personnel deploying in
    support of Operation Joint Guardian in Kosovo and OEF in Central Asia.
    GAO reviewed selected Army and Air Force bases, medical records of
    1,071 service members (from a universe of 8,742) participating in these
    operations. GAO found noncompliance with FHP and surveillance policies
    for many active duty service members. This included required pre- and
    post-deployment health assessments, required immunizations and failure
    to maintain health-related documentation in a centralized location. Of
    the records reviewed, 38 to 98 percent were missing one or both of the
    pre- and post-deployment health assessments. The review also found that
    as many as 36 percent were missing two or more required immunizations.
    This is unacceptable and a disservice to these service members.
        Additionally noted, many service members' medical/health records
    did not include health assessments found in the DOD's centralized
    database, nor did the DOD maintain a complete centralized database of
    service members' health assessments and immunizations. GAO concluded
    the noncompliance problems it uncovered were the result of the absence
    of an effective quality assurance program at the Office of the
    Assistant Secretary of Defense for Health Affairs or at the Army or Air
    Force and reported that the centralized deployment database was missing
    information needed to track military personnel's movement in the
    theater of operations. As of July 2003, the DOD's data center had begun
    receiving location-specific deployment information from the services
    and was in the process of reviewing its accuracy and completeness at
    the time GAO released its report. The American Legion is optimistic
    these corrections will be made, but believe timely verification is
    absolutely necessary.
        As a result of its investigation, GAO recommended the DOD establish
    an effective quality assurance program to ensure the military branches
    comply with the FHP and surveillance policies for all service members.
    The DOD agreed with GAO's recommendation and informed The American
    Legion that it will create a Quality Assurance Directorate under its
    Deployment Health Support Directorate. Its focus will be on ensuring
    compliance with FHP policies on pre- and post-deployment health
    assessments, immunization records and blood drawing for HIV and post-
    deployment assessments. Annual reports will be submitted to the
    Assistant Secretary of Defense for Health Affairs.
        The American Legion appreciates DOD's increased efforts to ensure
    its FHP policies and programs are fully and consistently implemented by
    each service; however, considering DOD's checkered history with respect
    to deployment health-related matters, The American Legion remains
    skeptical of its commitment. Continued noncompliance with required FHP
    policies will result in personnel deploying with health problems and or
    encountering delays and other problems in obtaining health care and VA
    benefits when service members return, not unlike problems experienced
    by the veterans of the first Gulf War. In order to avoid the problems
    of the past, DOD must make FHP a real priority and dedicate the
    resources necessary to ensure each service branch is in full compliance
    with all policies and directives.
        Although military personnel participating in OIF and OEF have not
    been exposed to chemical munitions fallout like their counterparts in
    Operation Desert Storm, some of the experiences have been similar. Once
    again, U.S. military forces have used depleted uranium (DU) munitions.
    While exposure to DU fallout during Operation Desert Storm has not been
    definitively linked to Gulf War veterans' illnesses, it has not been
    definitively ruled out as a possible cause. The American Legion
    supports the DOD's DU awareness training program. Avoiding DU fallout
    on the battlefield may be impossible, but informing troops about
    potential health hazards and instructing them to avoid unnecessary
    risks, such as entering an enemy vehicle destroyed by DU munitions, can
    help minimize potential health risks. It is vital that the DOD conduct
    proper oversight to ensure that its DU education programs are being
    properly implemented by all of the military services.
        The controversial anthrax vaccine continues to be an important part
    of the military's FHP program. The American Legion agrees with the
    DOD's position to adequately protect military personnel against the
    threat of biological weapons attack, such as anthrax or smallpox.
    However, serious concerns with past problems associated with BioPort,
    the sole manufacturer of the vaccine, and the way adverse reactions are
    tracked and followed up by the DOD, continue to worry The American
    Legion. Problems with BioPort's manufacturing facility caused a
    shortage of FDA-approved vaccine, resulting in a slowdown of DOD's
    Anthrax Vaccine Immunization Program (AVIP). It has been 2 years since
    BioPort reestablished FDA approval. There continues to be a vaccine
    shortage resulting in only those service members on the ground in
    Southwest Asia for 15 days or more being vaccinated. The American
    Legion has long advocated a second manufacturer of the vaccine, as well
    as a newer vaccine, proven for efficacy and safety, and an inoculation
    period shorter that the current six shots.
        The anthrax vaccine controversy has existed since the first Gulf
    War. Based on the DOD's experience in tracking anthrax vaccinations,
    The American Legion is concerned. The DOD claims only 150,000 troops
    actually received the anthrax vaccine. Because of extremely poor record
    keeping, it can only verify vaccinations for less than 10,000. A
    similar controversy is emerging regarding the use of the anti-malaria
    drug Lariam. Several recent stories were published in the media about
    military personnel experiencing severe side effects, including
    depression and other psychological symptoms, after being prescribed
    Lariam. While the military is obligated to follow strict protocol when
    administering Lariam, including counseling and documenting the drug in
    the service member's health record, service members have complained
    that such procedures have not been followed.
        Lariam is only one of several anti-malarial drugs currently being
    used by the military; it is vital that its distribution is thoroughly
    documented to properly address and track side effects that may occur.
    If a service member suffers a chronic disability as a result of taking
    Lariam, but there is no documentation in the health record, proving
    service-connection becomes more difficult. This is especially true if
    the disability does not manifest, or was not identified, while the
    member was on active duty.
        Due to the duration and extent of sustained combat in OIF and OEF,
    the psychological impact on deployed personnel is of utmost concern to
    The American Legion. The military has counseling available for those
    having difficulty coping with the aftermath of combat and other
    traumatic events. The DOD needs to actively encourage troops to take
    advantage of such services. Counseling programs are useless unless
    service members feel that they can use them without adverse
    consequences to themselves and their careers. It is crucial for
    commanders to publicly inform their troops that treatment and
    counseling for stress and psychological problems are okay and no
    adverse action will be taken against any individual seeking that care.
    Post Traumatic Stress Disorder (PTSD) often manifests months or years
    after an individual has been removed from a traumatic event. There
    should be periodic follow up psychiatric evaluations for the active
    duty military and reservists upon return. The military should encourage
    treatment and counseling for those returning home. This is especially
    important for Reserve and National Guard personnel who are often
    quickly demobilized after returning from a deployment and do not have
    the same support system that is available to their active duty
    counterparts.
        Military service is inherently dangerous and certain risks are to
    be expected. The American Legion believes the Federal Government is
    obligated to provide health care and compensation to those who sustain
    chronic disabilities as a result of such service. Title 38, United
    States Code (USC), places the burden of proof in establishing a
    service-connected disability on the veteran and establishing service
    connection directly impacts the veteran's ability to access VA health
    care. The VA's ability to adequately care for and compensate our
    Nation's veterans depends directly on the DOD's efforts to maintain
    proper health records/health surveillance, documentation of troop
    locations, environmental hazard exposure data, and the timely sharing
    of this information with the VA.
        The American Legion remains appalled at the numbers of guardsmen
    and reservists who were called to active duty and not deployable due to
    existing medical and dental conditions. Unquestionably, many guardsmen
    and reservists are included in that group of 40 million or more
    Americans who have no, or limited, medical coverage. Certainly, the
    fault lies not only with Reserve component commanders, but also active
    duty commanders for knowingly calling medically unready and non-
    deployable reservists to active duty status.
        For these reasons, The American Legion is strongly supportive of
    the Guard and Reserve Readiness and Retention Act of 2004, which would
    make all Guard and Reserve members and their families eligible for
    health coverage through TRICARE regardless of their mobilization
    status. Beneficiaries would pay a modest annual premium. This change
    would, we believe, improve individual and unit readiness and eliminate
    the need for reservists and their families to change health care
    providers when mobilized. There should be a seamless transition from
    Reserve status to active status and a seamless transition from DOD to
    VA. Also, during periods of mobilization, reservists who opt to
    maintain private health care coverage, rather than TRICARE, would
    receive assistance in paying their health insurance premiums. This
    health care legislation would help with medical readiness for
    mobilization and pre-deployment, but it could also provide their post-
    deployment and post-deactivation health and dental care.
        The American Legion strongly urges Congress to mandate separation
    physical exams for all service members, particularly those that have
    served in combat zones or have had sustained deployments. The American
    Legion believes this is essential because of oftentimes-inadequate
    medical record keeping and to ease accessing VA health care and
    applying for disability compensation and other veterans programs. The
    DOD reports that only about 20 percent of discharging service members
    opt to have separation physical exams. Clearly, The American Legion
    believes separation physicals should not be optional. The American
    Legion understands many of the reasons to opt out of a separation
    physical, but there is ample evidence to prove the importance these
    physicals or lack thereof plays in the VA claims process. Knowing the
    final health status of separating service members is also in the best
    interest of public health. During this war on terrorism and frequent
    deployments, with all their strains and stresses, this figure, we
    believe, should be substantially increased.
        The American Legion strongly recommends that field hearings be
    conducted throughout the country to hear first hand accounts from those
    who served, including active, guard, Reserve and family members to
    determine how FHP is working. Further, these hearings should not be
    held near large military installations.

                                QUALITY OF LIFE

        Our major national security concern continues to be the enhancement
    of the quality of life issues for active duty service members,
    reservists, guardsmen, military retirees, and their families. During
    the last congressional session, President Bush and Congress made marked
    improvements in an array of quality-of-life issues for military
    personnel and their military families. These efforts are visual
    enhancements that must be sustained for active duty personnel,
    guardsmen, and reservists.
        In previous defense budgets, the President and Congress addressed
    improvements to the TRICARE system to meet the health care needs of
    military beneficiaries; enhanced Montgomery GI Bill (MGIB) educational
    benefits; and elimination of the disabled veterans' tax for severely
    disabled military retirees. For these actions, The American Legion
    applauds your strong leadership, dedication, and commitment. However,
    major issues still remain unresolved: the issue of concurrent receipt
    of full military retirement pay and VA disability compensation without
    the current dollar-for-dollar offset for all disabled retirees needs to
    be resolved as well as the need to improve survivors' benefits by
    eliminating the 20 percent offset at age 62.
        The American Legion will continue to convey that simple, equitable
    justice is one reason to authorize and fund concurrent receipt.
    Military retirees are the only Federal employees who continue to have
    their retired pay offset 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. The American Legion feels it is time that
    retirees receive compensation for these fiscal sacrifices. Likewise,
    military survivors have their survivors' benefits reduced from 55
    percent to 35 percent when they become social security eligible.
        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.
        Mr. Chairman, The American Legion and the Armed Forces owe you and
    this subcommittee a debt of gratitude for your strong support of
    military quality of life issues. Nevertheless, your assistance is
    needed now more than ever. Positive congressional action is needed in
    this budget to overcome old and new threats to retaining the finest
    military in the world. Service members and their families continue to
    endure physical risks to their well-being and livelihood, substandard
    living conditions, and forfeiture of personal freedoms that most
    Americans would find unacceptable. Worldwide deployments have increased
    significantly and the Nation is at war: a smaller Armed Force has
    operated under a higher operational tempo with longer work hours,
    greater dangers, and increased family separations. The very fact that
    over 300,000 guardsmen and reservists have been mobilized since
    September 11, 2001, is first-hand evidence that the United States Army
    woefully has needed at least two more active divisions for nearly a
    decade.
        Throughout the drawdown years, military members have been called
    upon to set the example for the Nation by accepting personal financial
    sacrifices. Their pay raises have been capped for years, and their
    health care system has been overhauled to cut costs, leaving military
    families with lessened access to proper health care. The American
    Legion congratulates Congress for their quality of life enhancements
    contained in past National Defense Autorization Acts (NDAAs). The
    system however, is in dire need of continued improvement.
        Now is the time to look to the force recruiting and retention
    needs. Positive congressional action is needed to overcome past years
    of negative career messages and to address the following quality of
    life features:

             Closing the Military Pay Gap With the Private Sector--
            The previous Chairman of the Joint Chiefs of Staff stated that
            the area of greatest need for additional defense spending is
            ``taking care of our most important resource, the uniformed
            members of the Armed Forces.'' To meet this need, he enjoined
            Members of Congress to ``close the substantial gap between what
            we pay our men and women in uniform and what their civilian
            counterparts with similar skills, training, and education are
            earning.'' But 11 years of pay caps in previous years took its
            toll and military pay continues to lag behind the private
            sector at about 5.4 percent. With U.S. troops battling
            terrorism in Iraq and Afghanistan, The American Legion supports
            at least a 3.5 percent military pay raise. The American Legion
            believes the gap should be erased within 3 years or less.
             Basic Allowance for Housing (BAH)--For those who must
            live off base, the provision of BAH is intended to help with
            their out-of-pocket housing expenses. Secretary of Defense
            Rumsfeld set a goal of entirely eliminating average out-of-
            pocket housing expenses. This subcommittee has taken strong
            steps in recent times to provide funding to move toward
            lowering such expenses by 2005. Please continue to work to keep
            the gap closed between BAH and the members' average housing
            costs during future years.
             Commissaries--Several years ago, the DOD had
            considered closing some 37 commissary stores worldwide and
            reducing operating hours in order to resolve a $48 million
            shortfall in the Defense Commissary Agency (DeCA). Such an
            effort to reduce or dismantle the integrity of the military
            commissary system would be seen as a serious breach of faith
            with a benefit system that serves as a mainstay for the active
            and Reserve components, military retirees, 100 percent service-
            connected disabled veterans, and others. The American Legion
            urges Congress to preserve full Federal subsidizing of the
            military commissary system and to retain this vital non-pay
            compensation benefit. Furthermore, The American Legion fully
            supported the full-time usage of commissary stores by members
            of the Reserve components, which was authorized; that the
            system not be privatized or consolidated; and that DeCA
            manpower levels not be further reduced. The American Legion
            would oppose any attempts by the DOD to impose ``variable
            pricing'' in commissaries.
             DOD Domestic Dependents Elementary and Secondary
            Schools (DDESS)--The American Legion is concerned about the
            possible transfer of DDESS, which is the target of an ongoing
            study in the DOD. The American Legion urges the retention and
            full funding of the DDESS as they have provided a source of
            high quality education for children attending schools on
            military installations.
             Absentee Voting--With the fiasco of the 2000 election
            and the difficulty members of the military had in voting
            absentee, The American Legion urges members of this
            subcommittee to direct the DOD to reinstate the military
            absentee voting ``test'' that Congress has funded and has been
            discontinued by the DOD. Many States have already implemented
            Internet voting in recent primaries.
             Cold War Victory Medal--The American Legion recommends
            that this subcommittee authorize a Cold War Victory Medal to
            those who served during the period September 2, 1945 through
            December 21, 1991, to commemorate service and victory in the
            Cold War, which eliminated the threat of a determined enemy to
            overpower the freely elected democracies of the world.

                           GI BILL EDUCATION BENEFITS

        The American Legion commends the 108th Congress for its actions to
    improve the current MGIB. A stronger MGIB is necessary to provide the
    Nation with the caliber of individuals needed in today's Armed Forces.
    The American Legion appreciates the efforts that this Congress has made
    to address the overall recruitment needs of the Armed Forces and to
    focus on the current and future educational requirements of the All-
    Volunteer Force.
        Over 96 percent of recruits currently sign up for the MGIB and pay
    $1,200 out of their first year's pay to guarantee eligibility. However,
    only one-half of these military personnel use any of the current MGIB
    benefits. This we believe is directly related to the fact that current
    GI Bill benefits have not kept pace with the increasing cost of
    education. Costs for attending the average 4-year public institution,
    as a commuter student during the 1999-2000 academic year was nearly
    $9,000. Public Law 106-419 raised the basic monthly rate of
    reimbursement under MGIB to $900 per month for a successful 4-year
    enlistment and $732 for an individual whose initial active duty
    obligation was less than 3 years. The current educational assistance
    allowance for persons training full-time under the MGIB--Selected
    Reserve is $276 per month.
        The Servicemen's Readjustment Act of 1944, the original GI Bill,
    provided millions of members of the Armed Forces an opportunity to seek
    higher education. Many of these individuals may not have been afforded
    this opportunity without the generous provisions of that act.
    Consequently, these service men and women made a substantial
    contribution not only to their own careers, but also to the economic
    well being of the country. Of the 15.6 million veterans eligible, 7.8
    million took advantage of the educational and training provisions of
    the original GI Bill. Between 1944 and 1956, when the original GI Bill
    ended, the total educational cost of the World War II bill was $14.5
    billion. The Department of Labor estimates that the government actually
    made a profit because veterans who had graduated from college generally
    earned higher salaries and therefore paid more taxes. Today, a similar
    concept applies. The educational benefits provided to members of the
    Armed Forces must be sufficiently generous to have an impact. The
    individuals who use MGIB educational benefits are not only improving
    their career potential, but also making a greater contribution to their
    community, State, and Nation. The American Legion applauds the
    improvements in the MGIB contained in the NDAA for Fiscal Year 2002,
    but there is more to be accomplished.
        Today's military educational benefits package directly competes
    with other federally-funded educational programs, such as AmeriCorps,
    Pell Grants, and others that offer equal or greater monetary benefits
    with less personal sacrifice and hardships. The American Legion
    believes that the veterans' educational benefits package for the 21st
    century must be designed to recruit outstanding individuals to meet the
    needs of the Armed Forces and to serve as a successful transition
    instrument from military service back into the civilian workforce.
        The American Legion recommends the following improvements to the
    current MGIB:

             The dollar amount of the entitlement should be indexed
            to the average cost of a college education including tuition,
            fees, textbooks, and other supplies for a commuter student at
            an accredited university, college, or trade school for which
            they qualify;
             The educational cost index should be reviewed and
            adjusted annually;
             A monthly tax-free subsistence allowance indexed for
            inflation must be part of the educational assistance package;
             Enrollment in the MGIB shall be automatic upon
            enlistment; however, benefits will not be awarded unless
            eligibility criteria have been met;
             The current military payroll deduction ($1,200)
            requirement for enrollment in MGIB must be terminated;
             If a veteran enrolled in the MGIB acquired educational
            loans prior to enlisting in the Armed Forces, MGIB benefits may
            be used to repay those loans;
             If a veteran enrolled in MGIB becomes eligible for
            training and rehabilitation under chapter 31 of title 38, USC,
            the veteran shall not receive less educational benefits than
            otherwise eligible to receive under MGIB;
             A veteran may request an accelerated payment of all
            monthly educational benefits upon meeting the criteria for
            eligibility for MGIB financial payments, with the payment
            provided directly to the educational institution;
             Separating service members and veterans seeking a
            license, credential, or to start their own business must be
            able to use MGIB educational benefits to pay for the cost of
            taking any written or practical test or other measuring device;
             Eligible veterans shall have 10 years after discharge
            to utilize MGIB educational benefits; and
             Eligible members of the Select Reserves who qualify
            for MGIB educational benefits shall receive not more than half
            of the tuition assistance and subsistence allowance payable
            under the MGIB and have up to 5 years from their date of
            separation to use MGIB educational benefits.

                               RESERVE COMPONENTS

        The advent of smaller Active-Duty Forces reinforces the need to
    retain combat-ready National Guard and Reserve Forces that are
    completely integrated into the Total Force. The readiness of National
    Guard and Reserve combat units to deploy in the war on terrorism will
    also have a cost in terms of human lives unless Congress is completely
    willing to pay the price for their readiness. With only ten active Army
    divisions in its inventory, America needs to retain the eight National
    Guard divisions, in heightened readiness postures, as its life
    insurance policy.
        Reliance on National Guard and Reserve Forces has risen 13-fold
    over the pre-Gulf War era. This trend continues even though both
    Reserve and Active Forces have been cut back 30 percent and about 25
    percent, respectively, from their Cold War highs. In addition, since
    the terrorist attacks on the American homeland on September 11, 2001,
    more than 300,000 Guard and Reserve troops have been activated to
    support homeland defense and overseas operations in the war on terror.
    Soon, 40 percent of the forces in Iraq will consist of activated
    reservists.
        National Guard and Reserve service today involves a challenging
    balancing act between civilian employment, family responsibilities, and
    military service. Increasingly, National Guard and Reserve families
    encounter stressful situations involving health care, economic
    obligations, and employer uncertainty. Much was accomplished last year
    for the Guard and Reserves. Benefit issues of particular concern in
    this area include:

             Review and upgrade the Reserve compensation and
            retirement system without creating disproportional incentives
            that could undermine Active Force retention; change the
            retirement age from 60 to 55 for guardsmen and reservists;
             Continue to restore the tax deductibility of non-
            reimbursable expenses directly related to Guard and Reserve
            training;
             Reduce the operations tempo; increase Army force
            levels; allocate adequate recruiting and retention resources;
             Streamline the Reserve duty status system without
            compromising the value of the compensation package;
             Improve Reserve MGIB benefits proportional to the
            active duty program;
             Allow reservists activated for 12 months or longer to
            enroll in the active duty MGIB;
             Allow the Guard and Reserve to accrue for retirement
            purposes all points earned annually;
             Make TRICARE permanently available to all drilling
            guardsmen and reservists and their families;
             Tax credits for employers who choose to make up the
            defense between military pay and reservists salary when they
            are activated; and
             Growing concerns are that the Reserve components,
            especially the National Guard, are being overused in
            contingency and peacekeeping operations, as these service
            members have regular civilian jobs and families as well. The
            National Guard also has State missions in their home States.
            The American Legion understands that retention rates and,
            therefore, strength levels are falling in those States, which
            have deployed or scheduled to deploy guardsmen overseas.
            Governors of these States continue to express concern that
            State missions will not be accomplished. The National Guard
            from 44 States has had a presence in 35 foreign countries.

        The American Legion is also supportive of all proposed quality of
    life initiatives that serve to improve living and working conditions of
    members of the Reserve components and their families.

                     HEALTH CARE FOR MILITARY BENEFICIARIES

        Today, there are approximately 8.2 million beneficiaries in the
    military health care program. Military retirees and their dependents
    make up nearly one half of that number, and over 500,000 retirees have
    lost or will lose their access to military health care as a result of
    the closure of approximately 40 percent of military treatment
    facilities. Access to affordable health care, regardless of age, status
    or location, has represented a major concern among military retirees.
        The American Legion also applauds your work in eliminating TRICARE
    co-payments for active duty family members. We also salute the DOD for
    reducing active duty time for reservists to 30 days for their families
    to be eligible for TRICARE. For drilling Guard and Reserve members who
    do not have health coverage from their employers, the NDAA for Fiscal
    Year 2004 authorizes premium-based TRICARE eligibility only until the
    end of the calendar year. This health care plan needs to be made
    permanent.
        The creation of TRICARE for Life (TFL) and a TRICARE Senior
    Pharmacy (TSRx) benefit in Public Law 106-398 was a historic triumph
    for Congress and those 1.3 million Medicare--eligible military retirees
    and dependents. Although Congress enacted legislation to restore
    TRICARE to Medicare-eligible beneficiaries as a wraparound to Medicare
    (TFL) and to improve TRICARE for active duty families, further
    improvements are still needed, especially for retired beneficiaries
    under age 65:

             TRICARE must be a consistent, reliable, and equitable
            health care benefit for all uniformed service beneficiaries,
            regardless of age or geography. Low reimbursement rates are
            causing providers to refuse any TRICARE patients or reduce the
            number of TRICARE patients they will treat, limiting
            beneficiary access and choice. Solution: Increase statutory
            (Medicare) payment rates; require use of existing authority to
            raise TRICARE rates where necessary to ensure sufficient
            numbers of participating providers. Streamlining payments to
            providers through Web-based claims payments.

             TRICARE may be cumbersome to use and cause
            administrative hassles for providers and beneficiaries
            attempting to obtain authorization, expedite claim repayment,
            or move between regions. Solution: Improve TRICARE Prime
            enrollment procedures, portability, and beneficiary education.
            Decrease administrative burdens, eliminate non-availability
            statement requirements, streamline claims processing
            requirements with greater reliance on electronic claims
            technology, and eliminate unnecessary reporting requirements.
            Require TRICARE contractors to assist beneficiaries in finding
            TRICARE Standard providers. Eliminating the 115 percent billing
            limit when TRICARE Standard is second payer to other health
            insurance;
             The American Legion is opposed to the integration of
            VA and DOD facilities and health care systems, however, we do
            support increased sharing arrangements;
             Institute ``benefits plus benefits'' reimbursement
            methodology. TFL pays beneficiary expenses not covered by
            Medicare (``benefits plus benefits''). For TRICARE Standard
            beneficiaries with other health insurance (OHI), TRICARE seldom
            pays expenses not covered by other insurance (``benefits less
            benefits''). Solution: Restore TRICARE reimbursement policy to
            pay up to what TRICARE would have paid had there been no OHI
            coverage (as was the policy before 1993); and
             The American Legion will work with the DOD and
            Congress to develop and maintain a comprehensive uniform
            pharmacy benefit for all beneficiaries.

        Mr. Chairman, since the commencement of the first class of
    graduates of the Uniformed Services University of Health Sciences
    (USUHS) in 1980, over 3,200 physicians continue to pursue careers as
    physicians in the Army, Navy, Air Force, and the U.S. Public Health
    Service each year. The USUHS education process emphasizes primary care
    medicine and also provides special training in military medicine and
    combat stress courses not found in civilian medical school curricula.
    USUHS graduates have also proven themselves willing to accept
    operational overseas assignments often viewed as less than desirable by
    civilian medical school graduates.
        Previous NDAAs have prohibited the closure of USUHS. The NDAA also
    provided a 5-year prohibition on reducing the staffing levels of USUHS
    below the levels established as of October 1, 1993. The American Legion
    urges Congress to resist any efforts to circumvent the law to downscale
    or close the USUHS. The American Legion is convinced that the USUHS is
    an economical source of career medical leaders who serve this nation
    during peace and war and provide military health care consistency and
    stability. The American Legion urges Congress to retain and fully fund
    USUHS as a continued source of career military physicians for the Army,
    Navy, Air Force. and U.S. Public Health Service. The American Legion
    also supports the construction of an Academic Center to accommodate the
    USUHS Graduate School of Nursing.

                         OTHER MILITARY RETIREE ISSUES

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

             VA Compensation Offset to Military Retired Pay
            (Retired Pay Restoration)--Under current law, a military
            retiree with compensable, VA disabilities cannot receive full
            military retirement pay and VA disability compensation. The
            military retiree's retirement pay is offset (dollar-for-dollar)
            by the amount of VA disability compensation awarded. The
            American Legion supports restoration of retired pay (concurrent
            receipt) for all disabled military retirees. We would like to
            thank the subcommittee for authorizing concurrent receipt for
            disabled retirees rated 50 percent and higher and for including
            Temporary Early Retirement Authority (TERA) retirees as well as
            disabled retired reservists who are receiving retired pay for
            longevity. The American Legion is also grateful for the
            Enhanced Combat-Related Special Compensation (CRSC), which was
            enacted in the NDAA for Fiscal Year 2003. Mr. Chairman, we have
            a ways to go in extending concurrent receipt to those disabled
            retirees for longevity rated 50 percent and less; including
            TERA retirees in CRSC eligibility; and extending concurrent
            receipt to those disabled retirees who were medically retired
            before reaching 20 years of service. The American Legion has
            visited Walter Reed Army Medical Center on numerous occasions
            to talk with wounded and injured young soldiers, many with
            amputated limbs suffered as a result of combat action in Iraq
            and Afghanistan. They too are prohibited from receiving both
            military retirement pay for their physical disability and VA
            disability compensation. This puts an additional financial
            strain on these severely disabled soldiers and their families.
            The American Legion is extending its Family Support Network to
            these soldiers and their families when they are medically
            retired from the service. The purposes of these two
            compensation elements are fundamentally different. A veteran's
            disability compensation is paid to a veteran who is disabled by
            injury or disease incurred or aggravated during active duty
            military service. Monetary benefits are related to the residual
            effects of the injury or disease or for the physical or mental
            pain and suffering and subsequently reduced employment and
            earnings potential. Action should be taken this year to provide
            full compensation for those military retirees who served both
            more than and fewer than 20 years in uniform and incurred
            service-connected disabilities. Disabled military retirees are
            the only retirees who pay for their own disability compensation
            from their retirement pay; and they cannot receive both
            military disability retirement pay and VA disability
            compensation. It is time to completely cease this inequitable
            practice. What better time to authorize and fund concurrent
            receipt for all disabled retirees than during this period of
            war?
             Social Security Offset to the SBP--The American Legion
            supports amending Public Law 99-145 to eliminate the provision
            that calls for the automatic offset at age 62 of the military
            SBP with Social Security benefits for military survivors.
            Military retirees pay into both SBP and Social Security, and
            their survivors pay income taxes on both. The American Legion
            believes that military survivors should be entitled to receipt
            of full Social Security benefits, which they have earned in
            their own right. It is also strongly recommended that any SBP
            premium increases be assessed on the effective date of, or
            subsequent to, increases in cost-of-living adjustments and
            certainly not before the increase in SBP as has been done
            previously. In order to see some increases in SBP benefits, The
            American Legion would support an improvement of survivor
            benefits from 35 percent to 55 percent over a 10-year period.
            The American Legion also supports initiatives to make the
            military SBP more attractive. Currently, about 75 percent of
            officers and 55 percent of enlisted personnel are enrolled in
            the Plan.
             Reducing the Retired Reservist Age from 60 to 55--The
            American Legion believes that retirement pay should be paid
            sooner as members of the Guard and Reserve are now being used
            to replace Active-Duty Forces in Afghanistan and Iraq and are
            projected to become 40 percent of total forces in those
            theaters. Similarly, these retirees and their dependents should
            be eligible for TRICARE health care and other military
            privileges when they turn 55.
             Military Retired Pay Cost of Living Adjustments
            (COLAs)--Service members, current and future, need the
            leadership of this subcommittee to ensure Congress remains
            sensitive to longstanding contracts made with generations of
            career military personnel. A major difficulty is the tendency
            of some to portray all so-called ``entitlement'' programs,
            including military retirement, as a gratuitous gift from the
            taxpayer. In truth, military retired pay is earned deferred
            compensation for accepting the unique demands and sacrifices of
            decades of military service. The military retirement system is
            among the most important military career incentives. The
            American Legion urgently recommends that the subcommittee
            oppose any changes to the military retirement system, whether
            prospective or retroactive that would undermine readiness or
            violate contracts made with military retirees.
             The SBP Veterans Dependency and Indemnity Compensation
            Offset for Survivors--Under current law, the surviving spouse
            of a retired military member who dies from a retiree was also
            enrolled in SBP, the surviving spouse's SBP benefits are offset
            by the amount of DIC (currently $948 per month). A pro-rated
            share of SBP premiums is refunded to the widow upon the
            member's death in a lump sum, but with no interest. The
            American Legion believes that SBP and DIC payments, like
            military retirement pay and disability compensation, are paid
            for different reasons. SBP is elected and purchased by the
            retiree based on his/her military career and is intended to
            provide a portion of retired pay to the survivor. DIC payments
            represent special compensation to a survivor whose sponsor's
            death was caused directly by his or her uniformed service. In
            principle, this is a government payment for indemnity or
            damages for causing the premature loss of life of the member,
            to the extent a price can be set on human life. These payments
            should be additive to any military or Federal civilian SBP
            annuity purchased by the retiree. There are approximately
            27,000 military widows/widowers affected by the offset under
            current law. Congress should repeal this unfair law that
            penalizes these military survivors.
             Uniformed Services Former Spouses Protection Act
            (USFSPA)--The American Legion urges congressional support for
            amending language to Public Law 97-252, the USFSPA. This law
            continues to unfairly penalize active duty Armed Forces members
            and military retirees. USFSPA has created an even larger class
            of victims than the former spouses it was designed to assist,
            namely remarried active duty service members or military
            retirees and their new family. The American Legion believes
            this law should be rescinded in its entirety, but as an
            absolute minimum, the provision for a lifetime annuity to
            former spouses should be terminated upon their remarriage. This
            is consistent with most divorce decrees. Based on this current
            provision, monthly provisions for life are being granted to
            former spouses regardless of marital status, need, or child
            custodial arrangements. The time has come to cease lifetime
            annuities to former military spouses, should they remarry.
            Judicial determinations of appropriate support should be
            determined on a case-by-case basis and not be viewed as an
            ``entitlement'' by former spouses as exists under current law.
            The American Legion urges hearings on the USFSPA.
             Base Realignment and Closure (BRAC)--Whenever a BRAC
            is conducted, The American Legion urges that certain base
            facilities such as base medical facilities, commissaries,
            exchanges, and other facilities be preserved for use by active
            and Reserve personnel and military retired veterans and their
            families.

                  THE AMERICAN LEGION'S FAMILY SUPPORT NETWORK

        The American Legion continues to demonstrate its support and
    commitment to the men and women in uniform and their families. The
    American Legion's Family Support Network is ready to provide immediate
    assistance to service personnel and their families, whose lives have
    been directly affected by OIF and the ongoing global war on terrorism.
    Created during the early days of Desert Shield in response to the
    massive activation of Reserve and National Guard members, the Family
    Support Network garners the resources of nearly 15,000 local posts
    nationwide to assist military families enduring hardships incurred due
    to military service.
        Since September 11, 2001, the Nation has been on high alert and
    National Guard and Reserve units have been activated in record numbers.
    As a result, the families of these men and women often find themselves
    unable to meet normal monthly household obligations. Assistance is
    needed for a variety of everyday chores and expenses. These needs range
    from routine household chores, grocery shopping, and childcare, to
    ensuring that the grass is mowed for the expecting mother whose husband
    is serving abroad.
        To actively address these issues, The American Legion maintains a
    24-hour nationwide toll-free telephone number, 1-800-504-4098, for
    service personnel and their families to call for assistance. Families
    can also request assistance electronically through the American
    Legion's Web site at www.legion.org or email at
    familysupport@legion.org. All requests are referred to The American
    Legion Department, or State, in which the call originated. Departments
    relay the collected information to a local American Legion Post. The
    post then contacts the service member or family to see how assistance
    can be provided locally. Since the creation of the Family Support
    Network in 1990, thousands of local posts have responded to meet these
    families' needs in their communities. The Family Support Network has
    handled over 3,500 requests and inquiries since the terrorist attacks
    of September 11, 2001. On average, the Family Support Network receives
    four inquires per day.
        As the Armed Forces pursue the enemies of freedom in Iraq and
    around the globe, The American Legion supports the men and women in
    uniform and their families with the Family Support Network.
    Legionnaires, who served our Nation in times of adversity, remember how
    it felt to be separated from those they loved. The Family Support
    Network is successful as a direct result of Legionnaires, at the Post
    level in local communities, responding to the needs of comrades and
    their families. As the Nation's largest veteran's organization, this
    commitment to the men and women of the Armed Forces and their families
    is absolute and steadfast. As a grateful Nation, we must ensure that no
    family endures hardships caused by military service that ensures the
    American ideals and freedom.

                           PROCUREMENT/TRANSFORMATION

        Only a few major systems currently in production would be funded in
    the fiscal year 2005 defense budget. The funding level for procurement
    is improved but needs to be sustained. The American Legion fully
    supports the Army's transformation program. Major development programs
    that The American Legion also supports include the Air Force F-22
    fighter and C-17, F/A-18Es for the Navy, and Joint Strike Fighters for
    the Air Force and Navy. Unquestionably, the Navy needs to upgrade its
    aging fleet and air arm as well as acquire more submarines. The
    American Legion strongly believes that the rate of shipbuilding needs
    to be substantially increased so that the Navy can attain its goal of
    280-300 ships. The Navy has been retiring ships faster than they have
    had them built.
        If left unadvised, omissions in the DOD's modernization budget will
    have the following implications:

             They will result in the continued deterioration of the
            defense industrial base;
             The future technological superiority of American
            forces will be at risk thereby increasing the danger to service
            members should they be called into combat. We are currently
            retiring ships and aircraft faster than they are being built;
            and
             The failure to replace and upgrade equipment in a
            timely manner will create a massive modernization shortfall in
            each of the military services and, possibly, lead to even more
            serious readiness problems in the long run.

        America's winning technology in the Persian Gulf War, like its
    victorious all-volunteer force, did not develop overnight, but had its
    genesis in the decade of the 1980s. The modernization of the Armed
    Forces since the end of the Persian Gulf War, unfortunately, has been
    delayed and curtailed. The 2005 budget request is designed to advance
    each of the transformational goals mentioned by the Secretary of
    Defense in his congressional testimony last year. It accelerates
    funding both for the development of transformation programs as well as
    by funding modernization. Recognizably, transformation is a process,
    and is a process that must continue. The Chairman of the Joint Chiefs
    of Staff in previous defense budget hearings called for procurement
    budgets of $60 billion annually, which for the first time was reflected
    in the fiscal year 2001 budget. Army procurement dollars alone have
    plummeted by almost 80 percent since the mid-1980s, and by 67 percent
    for all the Services. Trade-offs to maintain readiness within budget
    constraints have caused the Services to cancel a number of weapons
    systems and to delay others. The war on terrorism has put
    transformation on hold.
        A number of defense consulting firms have predicted that the Armed
    Forces are heading for a ``train wreck'' unless annual defense budgets
    called for procurement accounts in the $118 billion range, rather than
    in the $45-60 billion range.
        The American Legion urges Congress to preserve America's defense
    industrial base by continuing to fund research, development and
    acquisition budgets so as to retain its technological edge in the 21st
    century and assure that military production can surge whenever U.S.
    military power is committed. Some of these capabilities, such as tank
    production and shipbuilding, need to be retained. Key industrial
    capabilities that preserve more of the defense industrial base need to
    be identified and retained.
        The American Legion opposes termination or curtailing of essential
    service modernization programs, diminution of defense industrial
    capabilities, and rejects the transfers of critical defense
    technologies abroad.
        The American Legion firmly believes with the continuing threat of
    nuclear proliferation, America should retain its edge in nuclear
    capabilities as represented by the TRIAD system, and the highest
    priority should be the deployment of a national missile defense.
    Although the development and deployment of advanced theater missile
    defenses to protect U.S. forward deployed forces is imperative, any
    dismantling of acquisition programs to defend the American people is
    imprudent. America should continue to march on deploying an anti-
    ballistic missile detection and interception system that is capable of
    providing a highly effective defense against limited attacks of
    ballistic missiles. The price of maintaining a strong defense is
    expensive in terms of tax dollars, but failure to do so could prove
    much more expensive in terms of human lives and real threats to
    freedom. The national security framework provides the umbrella that
    allows Americans to work and prosper without fear. A strong national
    defense does not inhibit a strong economy; it complements it. Congress
    and the military establishment must spend tax dollars prudently and
    effectively. DOD must ensure that all aspects of its procurement and
    manning levels are responsible and disciplined.

                                  CONCLUSIONS

        Thirty years ago America opted for an all-volunteer force to
    provide for the national security. Inherent in that commitment was a
    willingness to invest the needed resources to bring into existence a
    competent, professional, and well-equipped military. The fiscal year
    2005 defense budget while recognizing the war on terrorism and homeland
    security represents another good step in the right direction.
        What more needs to be done? The American Legion recommends, as a
    minimum, that the following steps be implemented:

             Continued improvements in military pay, equitable
            increases in BAH and subsistence, military health care,
            improved educational benefits under the MGIB, improved access
            to quality child care, impact aid and other quality-of-life
            issues. The concurrent receipt of military retirement pay and
            VA disability compensation for all disabled retirees needs to
            be authorized and funded. The SBP needs to be increased from 35
            to 55 percent for Social Security-eligible military survivors.
             Defense spending, as a percentage of GDP, needs to be
            maintained at least 3.5 percent annually which this budget does
            achieve.
             The end strengths of the active Armed Forces need to
            be increased to at least 1.6 million for the Services and the
            Army needs to be increased by two more divisions.
             The QDR strategy needs to call for enhanced military
            capabilities to include force structures, increased end
            strengths and improved readiness, which are more adequately
            resourced.
             Force modernization needs to be realistically funded
            and not further delayed or America is likely to unnecessarily
            risk many lives in the years ahead.
             The National Guard and Reserves must be realistically
            manned, structured, equipped and trained, fully deployable, and
            maintained at high readiness levels in order to accomplish
            their indispensable roles and missions. Their compensation,
            health care, benefits and employment rights need to be
            continually improved.

        Mr. Chairman, this concludes The American Legion statement.

        Senator Chambliss. Thank you, Mr. Duggan, and I try to make
    it a point to visit with my folks at your annual convention in
    Macon every year. You're all my heroes and we appreciate the
    great work and service you provide to our country.
        I just have to tell you I got an e-mail from my staff. It
    looks like the budget that's going to come out of the Senate
    Budget Committee is going to call for a $7 billion reduction in
    the President's budget for the DOD, so it's going to make this
    year's Defense budget much more difficult to work with.
        I'm going to throw this out there. I don't know whether Ms.
    Raezer, you're the one that ought to answer this, but an issue
    of great concern to the DOD is how to best regulate access by
    private insurance companies to military installations and to
    the military personnel who live and work there. Documented
    abuses in the past by some agents of private insurers who were
    given access to military installations has prompted this
    concern.
        Based on your experience, what advice would you give the
    DOD about how best to control and monitor the actions of
    insurance agents on military installations?
        Ms. Raezer. I think the first piece of the DOD's action has
    to be education to service members about good financial
    practices, financial planning practices, what to look out for,
    and how to plan for your future in the most productive way. The
    DOD is starting a bigger financial literacy campaign to address
    things like insurance sales, payday lending that occurs out in
    the communities, working with spouses as well, and how to
    handle family finances when the service member goes overseas.
        We believe the DOD's tools to restrict access--and this is
    the NMFA--the Coalition supports financial literacy efforts,
    but does not have a position on the insurance access. The NMFA
    would hope that people who are trying to take advantage of our
    service members aren't allowed on an installation.
        We believe the practice has gotten a lot better as
    commanders have become more aware of it, and that's another
    piece of the education campaign that has to happen. Service
    members need to be aware that people are trying to take
    advantage of them and that there are good uses of their money
    and there are bad uses of their money. They need to be
    encouraged to seek out credit unions and become involved in
    them and use them for loans rather than other sources in the
    community that may offer attractive deals initially but then
    take them in the end.
        Commanders also need to be a part of this process.
    Commanders need to be aware of who's coming on their
    installations and selling things. Commanders need to be aware
    of what's going on downtown and who's taking advantage of their
    young service members, working local education, and also trying
    to work with the senior enlisted in the units to get better
    information to the service members and through the family
    centers. We've seen some progress in education, but we would
    hope the DOD would continue to look at ways both to educate
    service members and restrict access to the people who would
    take advantage of them.
        Senator Chambliss. Mr. Cline, according to the DOD, the
    Army Reserve and the National Guard are both slightly behind in
    meeting their recruiting goals this year, and I think General
    Schultz said this morning the Guard is about 3,000 members
    behind in recruiting right now.
        What's your assessment of this situation? What
    recommendations would you have for the DOD to ensure that this
    is not the beginning of a dangerous long-term trend?
        Sergeant Cline. Well, I can tell you this, Senator, that
    one of the issues that is affecting the Army National Guard is
    the fact that with stop-loss in effect, those active duty
    accessions that we normally get into the Guard are not there.
    That probably represents somewhere in the area of 3 to 6
    percent of the total recruiting goal.
        We need better pay and better benefits, especially in the
    Guard and Reserve. When you stop and look at the benefits that
    we provide a person coming into the Guard and Reserve,
    depending upon what type of unit they're coming into, they may
    or may not get a bonus. Other than offering them a small sum
    for the MGIB, the potential of having a retirement at age 60
    after serving 20 or 30 years in the Guard and Reserve, facing
    numerous call-ups, benefits do play a role in getting people to
    join: education benefits, TRICARE for Guard and Reserve,
    earlier retirement.
        Senator Chambliss. Dr. Schwartz, what's your assessment of
    the progress made by DOD in improving the TRICARE Standard
    option in light of the mandates provided by Congress last year?
        Dr. Schwartz. Slim, fat, and none. A report is due to
    Congress on the 31st of March. No, I apologize, sir, I didn't
    mean to be disrespectful, but we haven't seen any progress yet.
    We must keep in mind that they have a full plate this year with
    the turn of the TRICARE contracts, and that's a mammoth
    challenge. With the Guard and Reserve benefit, that's a mammoth
    challenge as well.
        However, there are ways to help beneficiaries find
    providers. We're certainly encouraged that they've set up a
    database. If you can get on the Web, you could put in a zip
    code. My hometown is Phillipsburg, New Jersey. There are few
    military beneficiaries in Phillipsburg, New Jersey. You put in
    that zip code and you can pull up how many providers have filed
    TRICARE claims in that area, so at least it gives you a
    fighting chance at trying to figure out if there is a doctor in
    your area who will take TRICARE patients.
        But we ask that the subcommittee provide oversight that the
    DOD does move forward to help our Standard folks.
        Senator Chambliss. Senator Nelson.
        Senator Ben Nelson. Thank you, Mr. Chairman. I ask
    permission to include the statement from the Gold Star Wives of
    American in the record.
        Senator Chambliss. Certainly. Without objection.
        [The information referred to follows:]

        Senator Ben Nelson. Thank you. Sergeant Cline, you and
    others have indicated the importance of benefits as part of a
    compensation package. Benefits can consist of health insurance
    benefits, and they can consist of a lot of other things. The
    commissary has always been one of those benefits. We worked
    hard and we got that extended to military families of Guard and
    Reserve members who are deployed and now we know that they're
    cutting back, we just heard, a recommended $7 billion in the
    Defense budget. That will ripple through the budget and affect
    all kinds of things. We don't know exactly how, but we know
    that it will.
        As you've heard, the commissaries are perhaps right on the
    line for closing. Does that seem to fly in the face of what you
    think is a good way to secure for recruitment and retention our
    military families?
        Sergeant Cline. Well, sir, I can tell you this. Right now,
    we are spending on average about $80,000 to train an Army
    National Guard soldier. If you let them walk out the door,
    you've just thrown away $80,000, and that's what will happen
    after they've served their 6 years of service, especially with
    the multiple call-ups that we're now facing.
        Over the course of time, a person who serves in the Guard
    and Reserve for 20 years probably will accumulate somewhere
    between 3 to 5 years of active duty time with all the schools
    that they have to attend, time away from their employers, time
    away from their families. We never stop to take that into
    consideration. Even though we have laws like the Uniformed
    Services Employment and Re-employment Act (USERA) on the books,
    that doesn't make up for the contribution that they have to
    make back to their employer. That doesn't give them that
    interest back.
        Yes, as you involuntarily mobilize somebody, they have
    three times the amount of time to pay that money in, up to 5
    years, but that doesn't include that interest. So we have to
    make changes, we have to do something. The bottom line is, you
    either pay the piper now, sir, or you're going to pay him later
    on when it's going to cost a lot more money.
        Senator Ben Nelson. So in answer to the question, I think I
    heard you say that closing the commissary is not necessarily a
    retention- or recruitment-friendly move.
        Sergeant Cline. No, it's not.
        Senator Ben Nelson. It could also be cost-ineffective and
    frustrate the effort of what you're trying to do to recruit and
    retain because of the investment in the personnel you want to
    keep them.
        Sergeant Cline. Well, last year you passed legislation to
    give unlimited commissary privileges to Guard and Reserve.
    Shortly after that, in the Army Times, Air Force Times, and
    Navy Times, it appeared: 38 commissaries to close. I had
    members call me up saying, they give me a benefit, but they're
    closing the commissary, so what benefit have I gotten? You have
    to remember that out of the entire Guard and Reserve, and
    especially the Guard, we are not closely associated with a
    military post. Some of our people have to travel hundreds of
    miles to get to a commissary. It becomes a once-a-month trek
    for mom and dad to throw the kids in the car to travel 200 or
    300 miles to get to that commissary to buy all those products
    that they need for an entire month. It's a great benefit and a
    great privilege, but the bottom line is, you start closing more
    bases and more commissaries, a benefit has gone away.
        Senator Ben Nelson. Thank you, Mr. Cline. On health care
    funding, Dr. Schwartz, you very rightfully expressed concern
    about the full funding of the Defense health budget and that
    you've heard from some of the Services that the current funding
    level falls short of the requirements. That was before the
    chairman gave us the bombshell news about what the Budget
    Committee is recommending.
        Can you tell us a little bit more about your concern as to
    what will happen if it is inadequately funded?
        Dr. Schwartz. Well, what's going to happen is, when the
    Services don't know how much money they're going to have or
    they know they have shortfalls, they can't plan for capital
    reinvestment. They may not repair a machine or they may not
    repair a roof because care has to be given to the patient. So
    they don't reinvest in the infrastructure of the organization.
    That's the thing that they let go by the wayside, and that's
    what we're fearful of.
        Also, they may try to increase the cost shares for
    beneficiaries, and I represent the beneficiaries. As I
    represent my folks, they believe that there should be adequate
    funding. Nobody wants to pay more for health care, but when we
    saw what OMB was trying to do last fall by increasing the
    retiree cost shares in the pharmacy by two to three times and
    charging them in the medical treatment facility, we see on the
    horizon that things are coming.
        So it's my job to bring my members' concerns to you and ask
    you to not increase the cost shares for the beneficiaries.
        Senator Ben Nelson. Could it also involve some sort of
    rationing of health care or a waiting line, if you will?
        Dr. Schwartz. Well, we have waiting lines now, to be quite
    candid.
        Senator Ben Nelson. But I mean additional waiting as it
    relates to health care.
        Dr. Schwartz. Well, they would have to change what are
    called the access standards, and what happens even unofficially
    is a beneficiary will call to make an appointment. The office
    may say we don't have any available for 30 days. So the naive
    consumer doesn't know that he or she has those access
    standards, and they say, well, I'm looking in my book here and
    my book says--now those beneficiaries can kind of navigate the
    system, but how many beneficiaries know what their access
    standards are?
        So it gets pushed off further and further and further, and
    even in the National Capital area, sometimes the access
    standards aren't being met, so it's an unofficial way to do
    that.
        Senator Ben Nelson. Ms. Raezer, do you have some thoughts
    about that too?
        Ms. Raezer. Well, yes, we're very concerned. When military
    treatment facilities encounter resource issues, cutbacks, the
    first thing they do is go back to what we thought we'd gotten
    away from with the introduction of TRICARE. You call on the
    third Monday after the first moon of the month in springtime
    and you ask for an appointment next month, and maybe if you're
    lucky and you got in on time, you get an appointment next
    month.
        Our association and other associations hear from not just
    family members, not just retirees, but active duty service
    members as well that military hospitals are not meeting access
    standards. People are told, ``call back, we don't have any
    appointments, call back next month.'' The worst recent example
    of that occurred with the medical hold issues at Fort Stewart
    and Fort Knox and other places last fall.
        But if the health care system is strapped for funds and
    they can't hire that extra civilian pediatrician that they need
    to meet the needs of their community, they can't hire that
    orthopedist, they can't contract for an emergency room nurse,
    care gets cut back, people are going to wait longer, and access
    standards are going to go by the wayside.
        Senator Ben Nelson. I think that takes care of my
    questions, Mr. Chairman. Thank you very much.
        Senator Chambliss. With regard to that issue at Fort
    Stewart and Fort Campbell, we had the Service vice chiefs in
    earlier this week, and we raised that issue with them because
    that was deplorable and we can't let that ever happen again.
    Some planning that was not the best in the world took place
    there. But they understand now our displeasure with what
    happened there.
        Let me just tell all of you how much we appreciate you
    being here. I think you understand that we're limited by
    funding as to a lot of things that we would like to do for our
    retired military as well as for our active duty spouses. As we
    go through this budget process this year, we're going to be
    addressing a lot of issues, and in anticipation of finding the
    funding for them somewhere along the way. We would not be able
    to know what those needs are if you didn't come and tell us
    what they are, so we appreciate very much you being here and we
    thank you for that.
        I have the testimony here of the Reserve Officers
    Association, which I want to submit for the record. It will be
    entered and we will now stand adjourned.
        [The prepared statement of the Reserve Officers Association
    of the United States follows:]

        [Questions for the record with answers supplied follow:]

                Questions Submitted by Senator Lindsay O. Graham

                              DEFENSE HEALTH CARE

        1. Senator Graham. Secretary Abell and Dr. Winkenwerder, according
    to the April 2003 General Accounting Office (GAO) report titled
    ``Defense Health Care: Army Needs to Assess the Health Status of All
    Early Deploying Reservists,'' in the group studied, none of the
    required annual medical certificates were completed by reservists and
    reviewed by units, and a significant number studied had not undergone
    either the required 2-year physical exams or the 5-year physical.
    Accordingly, the Army does not have health information on many early-
    deploying reservists. GAO recommended, and the Department of Defense
    (DOD) concurred, that the Secretary of Defense should ensure that
    early-deploying reservists complete all of the aforementioned exams and
    certifications. What has the Army done to correct this untenable
    situation that directly affects operational readiness?
        Secretary Abell and Dr. Winkenwerder. To address the findings
    contained in the GAO report, the Army recently established a task force
    comprised of personnel from both the Army Reserve and Army National
    Guard to address issues related to medical/dental readiness and take
    corrective action as recommended by the GAO. This will include the
    timely completion of the annual health certificate; assessment of
    medical/dental screening and treatment to include the correction of
    identified deficiencies; leadership accountability for individual
    medical readiness indicators; and assessment of deployability and
    retain ability standards as they relate to medical and dental
    readiness.
        Currently, the Army medical and personnel tracking systems reflect
    a 90 percent compliance with the 5-year physical requirement for
    Reserve personnel. Further improvement is expected in the area of
    required physical exams based on the recommendations of the Army Task
    Force. Automation of the annual medical certificate has been initiated
    and full implementation is expected by October 2004. It will also be
    tied into MEDPROS (the Army's medical readiness tracking system used to
    document compliance with DOD standards) in order to ensure accurate and
    timely tracking of the annual certification requirement. As this
    tracking system is Web-based and records when physicals are given and
    due, greater utilization of MEDPROS will enable unit commanders to be
    more effective in the management of the medical and dental readiness of
    their personnel. This will improve the compliance of all medical and
    dental exams when they are required.
        Both the Army National Guard and the Army Reserve increased funding
    in 2004 to support medical and dental readiness and physical
    examinations. Finally, the authority provided under section 701 of the
    National Defense Authorization Act (NDAA) for Fiscal Year 2004 will
    help all Reserve components improve the medical and dental readiness of
    their forces. The overall result will be greater effectiveness in the
    administration and compliance of physical exams, thereby improving
    operational readiness.

                          RESERVE COMPONENT RETENTION

        2. Senator Graham. Secretary Abell and Dr. Winkenwerder, according
    to General James Helmly, head of the Army Reserve, ``This is the first
    extended-duration war our Nation has fought with an all-volunteer
    force. We must be sensitive to that. We must apply proactive,
    preventive measures to prevent a recruiting-retention crisis.'' Could
    you please comment on what ``proactive, preventive measures'' might be
    used to stem the expected Reserve component retention crisis?
        Secretary Abell and Dr. Winkenwerder. We are acutely aware that the
    Reserve components are being called upon now more than they have in the
    past, and we are concerned about the impact of this increased use on
    our ability to meet our future human resource requirements. We continue
    to conduct periodic surveys of Reserve component members to monitor
    their intentions with respect to continued participation in the Guard
    and Reserve. We are currently achieving our strength objectives, but we
    remain vigilant about future enlistment and reenlistment behavior and
    trends.
        In our efforts to strengthen Reserve recruiting and retention, the
    DOD is exploring opportunities to improve the quality of life for our
    members. We have stepped up our family and employer support programs,
    and we monitor employer- and family-related issues and concerns for
    potential serious problems. Every Reserve component member returning
    from a mobilization of more than 3 months is exempt from involuntarily
    attending a unit drill for 60 days or a 2-week annual training for the
    remainder of the training year. In addition, every returning member who
    has been affected by stop loss is given a 90-day ``cool-down'' period
    before they are separated from the Service. During these periods,
    support is available from retention officers with whom the member can
    address any concerns and who will ensure that the member is aware of
    the benefits associated with the mobilization and the benefits of
    continued membership. Chaplains are available during this period to
    provide individual and family support as needed. In addition, we will
    continue to conduct member surveys to identify potential problems and
    issues of concern to members and their families.
        We are considering a number of initiatives that are focused on
    limiting the personal turbulence for our Reserve component members. We
    want to streamline the mobilization and demobilization processes to
    minimize the stress on our personnel. We are working to establish
    policies that provide some level of confidence that we will not call
    them again for a set period of time. Career stability and
    predictability regarding mobilization are areas of great importance to
    our members. Based on feedback we have received from members returning
    from mobilization, we are not overly worried about attrition right now,
    but stress on the force may reach the breaking point if we
    involuntarily call them again soon. We are working to identify early
    warning indicators that will assist us in targeting enlistment and
    reenlistment incentives before problems become serious.
        Also, we are actively engaged in examining our recruiting and
    retention incentives and the strength of our recruiter force and the
    support tools available to them to ensure that they support our human
    resource requirements.
                                     ______

                   Questions Submitted by Senator Mark Pryor

                                PHARMACY PROGRAM

        3. Senator Pryor. Dr. Winkenwerder, how significant it is for the
    DOD to have Federal pricing of pharmaceuticals in the TRICARE retail
    pharmacy program?
        Dr. Winkenwerder. It is very significant. Federal pricing in the
    retail sector allows the DOD to apply the same cost basis currently
    available for military treatment facilities and the TRICARE mail-order
    pharmacy program. Federal pricing will provide significant cost
    avoidance, leverage DOD/Department of Veterans' Affairs (VA) joint
    pharmaceutical procurement strategies, and will enable the DOD to
    deliver pharmaceutical care within projected funding.

        4. Senator Pryor. Dr. Winkenwerder, I understand that you have this
    available in the military treatment facilities and also in the TRICARE
    mail order program. Can you elaborate on this further?
        Dr. Winkenwerder. The Veterans Health Care Act (VHCA) of 1992
    established Federal ceiling prices (FCPs) of covered pharmaceuticals
    (reflecting a minimum 24 percent discount off non-Federal average
    manufacturing prices--``non-FAMP'') procured by the four designated
    agencies covered in the act: Department of Veterans' Affairs (VA), DOD,
    Coast Guard, and the Public Health Service/Indian Health Service. The
    VA administers the VHCA discount program on behalf of the four
    specified agencies. Under the Federal Supply Schedule (FSS) program,
    the General Services Administration authorized the VA to award and
    manage schedule contracts with pharmaceutical companies, under which
    Federal agencies may obtain pharmaceuticals at prices associated with
    volume buying which, at times, may be lower than FCPs under VHCA. The
    DOD currently has access to FCP and FSS prices for pharmaceuticals used
    in military treatment facilities and the TRICARE Mail Order Pharmacy
    program through either direct purchases or procurements through a
    Defense Supply Center Philadelphia Prime Vendor.

        5. Senator Pryor. Dr. Winkenwerder, how do you expect this to
    improve beneficiary satisfaction and how will the DOD have the
    authority to do this in the retail sector?
        Dr. Winkenwerder. Beneficiary satisfaction with the pharmacy
    benefit will be greatly enhanced through implementation of the new
    TRICARE Retail Pharmacy (TRRx) program. Unlike today, the new retail
    program will provide a fully portable benefit with access to network
    pharmacies for members throughout the United States and not just in
    their home TRICARE region. It will provide a continuity of benefits
    across all regions, and through the development of the Uniform
    Formulary, will provide uniform availability of pharmaceuticals in our
    dispensing venues with the associated cost-shares.
        It will also allow us to provide the retail pharmacy benefit in a
    more cost-effective manner by obtaining Federal prices in all of our
    venues. Federal prices have not been available to the DOD through
    retail pharmacies under the previous at-risk, TRICARE Managed Care
    Support Contracts (MCSC) because the VA determined the contracts were
    not structured to meet statutory requirements for an agency-controlled
    centralized commodity management system. At the time, the VA was
    concerned pharmaceuticals would not be traceable to the DOD,
    pharmaceutical payments were not made by the DOD, and there was no
    assurance that the DOD (not a contractor) would receive the benefit of
    Federal pricing. Federal pricing for the TRRx will help the DOD meet
    the challenges of providing the pharmacy benefit within authorized
    funding.
        TRRx carves out retail pharmacy from the MCSCs, consolidates
    delivery of retail prescriptions under a single Pharmacy Benefits
    Manager (PBM) contract, and addresses the VA's previous concerns under
    VHCA. The PBM contractor will provide a retail pharmacy network and act
    as fiscal intermediary, upon TRICARE Management Activity authorization,
    to issue funds from a government account in payment for prescriptions
    dispensed to TRICARE beneficiaries. A government organization, the DOD
    Pharmacy Benefits Office (PBO), will use the robust reporting and audit
    capabilities of the Pharmacy Data Transaction Service (PDTS) to verify
    beneficiary eligibility, check for drug interactions, and authorize
    prescription payments. PDTS with complete accuracy will identify
    covered drugs eligible for Federal pricing. The PBO, using industry
    standard reports from PDTS, will provide manufacturers itemized data on
    covered drugs procured through TRICARE retail network pharmacies to
    obtain refunds on covered drugs eligible for Federal pricing. The PBM
    contractor has no role in the DOD's process for obtaining refunds for
    the government account based on Federal Prices already established by
    the VA and DOD. The DOD's payment of the PBM contractor will not be
    related, directly or indirectly, to Federal pricing of pharmaceuticals
    dispensed to TRICARE beneficiaries by network pharmacies.
        In lieu of the more traditional ``brick and mortar'' distribution
    systems for military treatment facilities and the TMOP program, the new
    TRICARE retail pharmacy program will leverage electronic data
    interchange technology as the foundation for a virtual depot commodity
    management system. This structure is both consistent with the VHCA and
    with congressional direction for a system-wide redesign of the DOD's
    integrated pharmacy benefits program. It meets the DOD goals to
    transcend archaic inefficient standards to technologically-superior
    systems with better controls and efficiencies.

        6. Senator Pryor. Dr. Winkenwerder, the TRICARE Senior Pharmacy
    Program is one of the best pharmacy benefits available in the United
    States to older Americans. The TRICARE Senior Pharmacy Program,
    provided by the NDAA for Fiscal Year 2001, authorizes eligible
    beneficiaries to obtain low-cost prescription medications from the
    TRICARE Mail Order Pharmacy (TMOP) and the TRICARE network and non-
    network civilian pharmacies. These beneficiaries may also continue to
    obtain medications through military hospital and clinic pharmacies. As
    you are aware, there is currently no charge for obtaining medications
    at military treatment facilities. Recently the DOD issued Program
    Budget Decision (PBD) 731 which seeks to increase TRICARE retiree cost
    shares for prescriptions and initiate retiree cost shares for
    prescriptions obtained in military treatment facilities. I understand
    the DOD recently withdrew this proposal. I have heard from numerous
    constituents expressing their concerns about this proposal. Could you
    please discuss the reasoning behind this proposal?
        Dr. Winkenwerder. I agree that the DOD Pharmacy benefit is one of
    the best available for both our Medicare eligible beneficiaries and for
    all DOD beneficiaries. Let me assure you that there have been no
    changes to the Department's pharmacy benefit co-payment structure in
    the fiscal year 2005 President's budget.

        7. Senator Pryor. Dr. Winkenwerder, is the DOD intending to re-
    introduce this PBD at a later time?
        Dr. Winkenwerder. The fiscal year 2006 program and budget review
    has not yet begun. There are no programmatic issues on the table at
    this time.

                    COLLABORATION BETWEEN THE DOD AND THE VA

        8. Senator Pryor. Dr. Winkenwerder, there has been a significant
    emphasis and interest in improving the collaboration between the DOD
    and the VA in order to provide seamless and top quality services to our
    Nation to provide quality health care to veterans and military
    retirees. As you are aware, in 2001 President Bush signed an executive
    order establishing a Presidential Task Force, to examine and recommend
    specific actions to improve the way the VA and DOD work together. Last
    May, the Task Force released its recommendations on improving
    collaboration between the two departments. As a result of these
    recommendations, I understand there has been emphasis on deploying a
    system to share enrollment and patient records data as well. I would
    appreciate it if you could provide some other specific examples of how
    the DOD is working to implement the Presidential Task Force's
    recommendations?
        Dr. Winkenwerder. The DOD strongly supported and was an active
    participant in the activities of the President's Task Force to Improve
    Health Care Delivery to Veterans to improve access to quality health
    care for veterans and military retirees through appropriate
    collaboration between the DOD and VA health care delivery systems.
        The DOD concurred with the majority of recommendations put forth by
    the Task Force. The DOD continues to work closely with the VA toward a
    mutually beneficial, proactive Federal partnership that optimizes the
    use of resources and infrastructure to improve access to quality health
    care and increase the cost-effectiveness of each department's
    operations.
        The Final Report of the Presidential Task Force was released in May
    2003. The report focused on four major recommendations:

             The need for leadership, collaboration, and oversight;
             Providing a seamless transition to veteran status;
             Removing barriers to collaboration; and
             Timely access to health services and the mismatch
            between demand and funding.

        The DOD concurred with the recommendations regarding the need for
    leadership, collaboration, and oversight of DOD/VA collaborative
    efforts. Since the Task Force released its final report, the DOD and VA
    signed a charter for the VA-DOD Joint Executive Council that will
    further institutionalize our collaboration. One of the first actions
    taken by this body was to approve a Joint Strategic Plan.
        The DOD continues to support the recommendations to provide a
    seamless transition to veteran status. The development of interoperable
    and standards-based systems is a high priority and we are actively
    working towards achievement of this goal. The DOD and VA have
    incorporated similar objectives in our Joint Strategic Plan.
        The DOD actively seeks to remove barriers to collaboration.
    Providing incentives to our medical leadership and promulgating
    policies and guidelines will enhance sharing. The DOD is working
    closely with the VA to implement the DOD/VA Health Care Sharing
    Incentive Fund to identify and provide funding for creative
    coordination and sharing initiatives at the facility, intra-regional
    and national levels. One of the goals of this fund is to increase
    access for both Departments' beneficiaries.

        9. Senator Pryor. Dr. Winkenwerder, do you have insight at all into
    the cost savings for the DOD associated with this increased
    collaboration with the VA?
        Dr. Winkenwerder. The Department is working diligently with the VA
    to implement the recommendations of the President's Task Force. Many of
    the Task Force's recommendations concern leadership collaboration and
    oversight which could lead to potential cost savings in the future.
    However, in the short term, both Departments will be incurring
    investment costs to implement demonstration projects and other
    collaborative efforts aimed at improving access and quality of care.
    Cost savings may occur in the future when new collaboration efforts are
    more fully implemented.

                                    TRICARE

        10. Senator Pryor. Dr. Winkenwerder, what is the status of the next
    generation of TRICARE contracts?
        Dr. Winkenwerder. All contracts have been awarded as follows.

             TRICARE Dual Eligible Fiscal Intermediary Contract

                    - Wisconsin Physicians Services Insurance Corporation

             Regional Managed Care Support Contracts

                    - TriWest: West, Humana: South, HealthNet: North

             Retail Pharmacy

                    - Express Scripts, Inc.

             Marketing and Education

                    - CACI, Inc. (GSA Award) materials development
                    - Intelligencer Printing (Printing and distribution)

             National Quality Monitoring Contract

                    - Maximus, Inc

             Claims Audit Contract

                    - Meridian Resource Corp., LLC

        11. Senator Pryor. Dr. Winkenwerder, when will these contracts be
    implemented?
        Dr. Winkenwerder. Transitions will be completely accomplished by
    November 2004. Rather than transition the entire nation at one time,
    the TRICARE Management Activity determined that it would be more
    effective to transition health care services within the current regions
    over a 6 month period from April to November as shown below.

    Managed Care Support Contracts (MCSCs):

      TriWest HealthCare Alliance:............  Region 11--June 1, 2004
                                                Regions 9/10/12--July 1,
                                                 2004
                                                Regions 7 & 8--October
                                                 1,2004

      Health Net Federal Services:............  Region 2/5--July 1, 2004
                                                Region 1--September 1, 2004
      Humana Military Health Services:........  Regions 3 & 4--August 1,
                                                 2004
                                                Region 6--November 1, 2004

    TRICARE Dual-Eligible Fiscal Intermediary
     Contract (TDEFIC):
      Region 11:..............................  April 1, 2004
      Regions 2 & 5:..........................  June 1, 2004
      Remaining Regions transition
       concurrently with managed care
       transition as above.

    TRICARE Retail Pharmacy (TRRx):
      All regions:............................  June 1, 2004

    Other Services:
      Claims Audit Services Contract:.........  March 1, 2004
      National Quality Monitoring Contract:...  April 1, 2004

        All contract transitions are on schedule.

        12. Senator Pryor. Dr. Winkenwerder, one of the concerns expressed
    by beneficiary groups has been the transition to the new TRICARE
    contracts. How does DOD intend to have a seamless transition for health
    care coverage during the transition from old to new contracts?
        Dr. Winkenwerder. The TRICARE Management Activity (TMA) has set for
    itself the ambitious goal of ensuring uninterrupted health care
    services delivery for all beneficiaries throughout the transition
    process. To do this, TMA has established an oversight and management
    structure to ensure adequate planning, as well as the ability to
    quickly address any issues that might arise. Both incoming and outgoing
    contractors are required to provide and maintain detailed transition
    plans that are approved by the government and used as the basis of
    transition management.
        Teams working directly with the incoming and outgoing contractors
    are led by either a Service 0-6 or a GS-15 level manager. These teams
    are comprised of TMA, TRICARE regional offices, lead agent and service
    members with in-depth knowledge of TRICARE and direct experience with
    the program at the local level. A senior TMA director has been assigned
    overall responsibility for contract transitions and a transition chief
    has been appointed with responsibility for all aspects of TRICARE
    transition. A management team comprised of all project officers, the
    transition director, and the program manager meets weekly to review the
    status of each project, coordinate efforts, and resolve issues. This
    process provides a mechanism to increase effectiveness through sharing
    lessons learned across projects. In addition, a high-level transition
    management team, including the TMA Deputy Director, the Deputy Surgeons
    General, and the senior TMA directors, receives a monthly briefing from
    project managers covering contract transitions, IT issues, finance,
    regional transition, and local support contracting. This oversight
    level ensures that top management is made quickly aware of any issues,
    and has the opportunity to intervene in a timely manner to ensure
    resolution.
        Continuous access to health care has been addressed by identifying
    any instances where a beneficiary's current primary care manager (PCM)
    may not remain as part of the provider network, and developing
    procedures to inform beneficiaries and aligning them with a new PCM.
    Similarly, with loss of any specialty providers, the managed care
    contractors will work with the provider to complete any care in
    progress during transition.
        To ensure complete readiness for beneficiary support during
    transitions, a Customer Support Summit was held in Denver on March 23-
    24, 2004, including all incoming and outgoing TRICARE health care
    contractors, Service representatives, and TMA Departments. Excellent
    cooperation among contractors has been experienced, and it is evident
    that all are working toward the goal of ensuring that beneficiaries
    continue to receive excellent health care services.

        13. Senator Pryor. Dr. Winkenwerder, how will you keep
    beneficiaries informed through the transition to the next generation of
    TRICARE contracts?
        Dr. Winkenwerder. Beneficiary notification started as soon as the
    first contract awards were made. The TMA uses all available means to
    reach beneficiaries, including direct mass mailings, news releases,
    Web-site postings, regional briefings, and informational bulletins
    placed at appropriate outlets such as the TRICARE Service Centers.
        A Marketing and Education Committee (MEC) was established early in
    the process to oversee this critical aspect of contract transition. The
    MEC includes representatives of all health care contractors and the
    Services. A comprehensive suite of materials has been developed with a
    single look and feel to help beneficiaries understand that their
    benefit is not changing.
        TMA has also solicited the support of beneficiary interest groups
    by meeting regularly with these stakeholders, obtaining their input on
    proposed beneficiary notification processes, and keeping them informed
    of plans and progress.
        The TRICARE contractors have cooperated in developing scripts to
    use in training their staff, to ensure that a consistent message is
    delivered to beneficiaries, and that beneficiaries can obtain
    information and assistance at many entry points. Steps have been taken
    to establish messages on all current phone lines to inform and redirect
    beneficiaries during transition. The TRICARE Information Service call
    center will also be prepared to assist with inquiries.
        Each beneficiary household will receive direct notification of
    upcoming changes within the 60 day period before the start-work date of
    the new contractor in any region. All appropriate resources are in
    place to assist with any questions generated by these mailings.

        14. Senator Pryor. Dr. Winkenwerder, one of the concerns that I
    have heard frequently from my constituents is that low reimbursement
    rates are causing providers to refuse to accept TRICARE patients or
    reduce the number of TRICARE patients they will treat, which limits
    beneficiary access and choice. Can you address this?
        Dr. Winkenwerder. By law, TRICARE reimbursement rates are tied to
    Medicare rates. In medically underserved areas, either no providers
    exist and thus reimbursement levels are a non-issue or the single or
    very limited numbers of providers have made a business decision to
    exclude participation in any insurance or exclude participation in any
    insurance that reimburses less than their billed charge.
        Nevertheless, TRICARE's networks have had an impact on controlling
    this problem. TRICARE currently receives over 100 million claims
    annually. Over 97 percent of these claims are submitted by providers
    who agree to accept the TRICARE reimbursement rate as payment in full.
    In fact, approximately 85 percent of all TRICARE claims are submitted
    by providers who have proudly joined the network rendering care to our
    warriors and their families.
        The future, while made somewhat more difficult by the growing gap
    between Medicare payment levels and the reported provider cost of doing
    business, does not represent an insurmountable problem. In our new
    contracts, beginning June of this year, we have included significant
    positive and negative incentives to ensure that our contractors are
    adequately incentivized to ensure the adequacy of our networks. These
    new contracts also allow our contractors to offer providers incentives
    for joining our network and treating our military families. The DOD
    also has the authority to increase the Medicare equivalent
    reimbursement levels where access is severely impaired. While this is
    certainly not the preferred or even desired approach, it is one that is
    available when local providers refuse to treat those that serve their
    country.
        In summary, TRICARE, in general, has been successful in recruiting
    providers to treat the defenders of this Nation. We believe that our
    new contract contains the incentives that will continue and improve
    upon this success for the next few years.

        15. Senator Pryor. Dr. Winkenwerder, in your written testimony, you
    mentioned that the ``new Regional Directors have a key role in
    improving provider participation in TRICARE and in improving TRICARE
    Standard support.'' Can you elaborate on this further?
        Dr. Winkenwerder. Under the new TRICARE governance structure, the
    three TRICARE Regional Directors integrate local business plans into a
    single, regional business plan, monitor performance against the
    business plan, and manage the health and support services contracts for
    all eligible military health system beneficiaries in the region. As
    part of this regional responsibility for TRICARE, I have identified the
    TRICARE Regional Directors as the senior officials who will report to
    me for TRICARE Standard improvements, as required by section 723 of the
    NDAA for Fiscal Year 2004. These responsibilities include an advocacy
    role in seeking to maximize provider participation throughout the
    region, particularly in locations away from military facilities.
    Importantly, the new regional contracts include powerful financial
    incentives for maximizing customer satisfaction. The TRICARE Regional
    Director is the fee-determining official for the regional TRICARE
    contract, and thus is the official who decides how well the contractor
    has done in satisfying all beneficiaries--not just TRICARE Prime
    enrollees, but TRICARE Standard beneficiaries as well.

        16. Senator Pryor. Dr. Winkenwerder, in your written testimony, you
    mentioned that the DOD has initiated provider surveys and outreach
    assistance to better serve TRICARE Standard beneficiaries. What is the
    status of these surveys?
        Dr. Winkenwerder. Telephone surveys of civilian health care
    providers will be conducted in TRICARE market areas to determine how
    many health care providers are accepting new patients under TRICARE
    Standard in each market area. Telephone surveys will be conducted in at
    least 20 TRICARE market areas each fiscal year starting in fiscal year
    2004 until all market areas have been surveyed.
        In conjunction with our military beneficiary groups, the Health
    Affairs/TRICARE Management Activity (HA/TMA) has identified the six
    market areas that will be surveyed first, has developed the survey
    instrument and sampling methodology and is currently waiting for Office
    of Management and Budget (OMB) approval and clearance before
    proceeding. HA/TMA expects to field the survey in mid-late April 2004
    and have results by June 2004.

        17. Senator Pryor. Dr. Winkenwerder, how are these surveys
    disseminated to beneficiaries?
        Dr. Winkenwerder. The civilian provider surveys are targeted to
    civilian health care providers, not TRICARE beneficiaries. We are
    planning on disseminating the results of these surveys to our
    beneficiary groups with briefings and Web-based reports.

                         MILITARY IDENTIFICATION CARDS

        18. Senator Pryor. Dr. Winkenwerder, one of the recommendations of
    The Military Coalition is for the DOD to issue a permanent military
    identification card to the Uniformed Services family members and
    survivors who are age 65 and older. It is often difficult for this
    group of beneficiaries to renew their ID cards due to difficulty in
    actually getting to the military identification card facility. Is this
    something that the DOD is looking into?
        Dr. Winkenwerder. There are approximately 1.75 million people over
    the age of 65 who are eligible for entitlements/benefits that would
    necessitate the issuance of an identification card. A mail-in process
    has been established to allow for the renewal of ill cards to those
    that are unable to go to the military ill card facility for card
    issuance.

        19. Senator Pryor. Dr. Winkenwerder, will issuing a permanent ID
    card for these beneficiaries help in decreasing the issuance costs
    associated with this card, since the cards won't need to be re-issued
    at the 4-year expiration date (which is the case for all other
    beneficiaries)?
        Dr. Winkenwerder. An analysis of costs associated with the issuance
    of identification cards to this population determined that while the
    Services would save on the cost of the teslin cardstock and
    consumables, the cost savings to the infrastructure associated with the
    issuance of identification cards to this population would be
    negligible.

                          NON-COMBAT DISEASE OR INJURY

        20. Senator Pryor. Dr. Winkenwerder, in your written testimony, you
    mentioned that ``for Operation Iraqi Freedom (OIF), the rate of non-
    combat disease or injury is lower than in any previous U.S. conflict.''
    Can you elaborate further on this, to what factors do you attribute
    this to?
        Dr. Winkenwerder. The rate of disease and non-battle injury among
    U.S. forces during OIF has averaged approximately 4 visits to health
    care providers per 100 personnel per week (4 percent per week). This is
    below the rates of approximately 7 percent recorded during Operations
    Desert Shield/Desert Storm, 7 percent during Operation Joint Endeavor,
    and 8 percent during Operation Joint Guard.
        One major contributing factor is the DOD's increased emphasis on
    assuring service members are healthy when they deploy through use of
    the pre-deployment health assessment. Another factor is the emphasis on
    environmental surveillance done in theater (pre-deployment, routine;
    and incident).
        The fundamental Force Health Protection (FHP) approach is to
    anticipate all possible threats in the area of operations and to employ
    the complete ensemble of measures to prevent disease and injury in our
    force.

         MENTAL HEALTH SERVICES FOR SERVICE MEMBERS RETURNING FROM IRAQ

        21. Senator Pryor. Dr. Winkenwerder, in your written testimony, you
    mentioned that the military services have a full range of mental health
    services available for deployed personnel. Can you elaborate further on
    these available services and how these are tailored to the operational
    environment?
        Dr. Winkenwerder. It is DOD policy that service members are
    screened for mental health problems before deployment. Current or past
    mental health problems are not automatically disqualifying for
    deployment. Each individual is evaluated before deployment and a
    decision on fitness is made based on a complete evaluation of the
    individual, the problem, the demands of the deployment, and the
    availability of appropriate care during the deployment. Mental health
    support services available cover the spectrum from education and
    emotional support to psychiatric hospitalization.

             While deployed, service members are trained to
            recognize sources of stress and the symptoms of depression,
            including thoughts of suicide, in themselves and others. Mental
            health care is available in-theater to handle any mental health
            problems that might arise. This care is available through the
            military health care system from medics and corpsmen with
            individual units, through in-theater hospitals with
            psychiatrists and psychologists, to military hospitals in
            Europe and the United States to which mental health casualties
            can be sent via the air evacuation system. Army and Marine
            Corps divisions have mental health assets available to provide
            routine care or to respond to operational needs. The Army has
            Combat Stress Control units which are mobile far forward in the
            combat areas. They provide outreach education and training
            services and brief, far-forward treatment of combat stress
            reactions. The Air Force operates out of fixed facilities and
            assembles Critical Incident Stress Management teams on an as
            needed basis to meet operational requirements.
             Each Service has a Suicide Prevention Program in which
            chaplains, unit commanders, and individual service members are
            trained to recognize the signs of depression and suicidality in
            themselves or others and how to get help for the affected
            individual.
             Before returning home, service members are briefed on
            how to manage their reintegration into their families,
            including managing expectations, the importance of
            communication and the need to control alcohol use.
             During redeployment, service members are again
            screened for signs of mental health issues, including
            depression and Post Traumatic Stress Disorder (PTSD). If any
            problems are identified by the screening, the service members
            are referred for appropriate treatment and follow-up.
             After returning home, help for any mental health
            issues which may arise, including depression and PTSD, is
            available through the military health care system for active
            duty and retired service members, or through the VA for non-
            retired veterans.
             The DOD and VA have issued Clinical Practice
            Guidelines for ``Post-Deployment Health Evaluation and
            Management'' and ``Post Traumatic Stress Disorder'' to aid
            clinicians in providing optimal care for service members with
            deployment related problems.
             For families experiencing problems, help is available
            through their local family support center. Another resource is
            the Military OneSource Program, a 24-hour, 7-day-a-week, toll-
            free information and referral service available via telephone
            and the Internet to active duty soldiers, mobilized Reserve and
            National Guard, deployed civilians and their families. The
            OneSource Program provides information on matters ranging from
            everyday concerns to deployment and reintegration issues, and
            can provide referrals to the mental health care system.

                        HEALTH ASSESSMENT QUESTIONNAIRES

        22. Senator Pryor. Dr. Winkenwerder, can you discuss how the pre-
    and post-deployment questionnaires work?
        Dr. Winkenwerder. Based on the lessons learned from the Gulf War
    and subsequent deployments, the DOD implemented pre- and post-
    deployment health assessments in 1997 that help us monitor the health
    status of deploying service members. The Joint Staff and Health Affairs
    require these surveys in order to assess service members' health before
    and after deployments to assist military health care providers in
    identifying health concerns and providing medical care. The post-
    deployment health assessment was enhanced in May 2003. The paper
    assessment forms are maintained in the service member's permanent
    record and a copy is sent to the Army Medical Surveillance Activity
    where they are archived electronically. The Army is now collecting
    about 50 percent of the post-deployment health assessments
    electronically.
        Prior to deploying, all service members are required to complete a
    DD Form 2795, Pre-Deployment Health Assessment. Annotated on the DD
    Form 2795 are a review of the individual's permanent medical record, an
    update of immunizations, validation of serum sample within the past 12
    months, a pregnancy test, a TB skin test check, vision and hearing
    screening, and dental screening showing class 1 or 2 within the last
    year. A licensed health care provider then reviews the DD Form 2795
    with the service member and determines if the individual is deployable.
    This process ensures that the service member's health status is checked
    for changes since their last evaluation.
        Redeploying personnel complete the DD Form 2796, Post-Deployment
    Health Assessment. This form includes specific queries about possible
    health-threatening occupational, environmental or psychological
    exposures during deployment. Each service member undergoes a face-to-
    face post-deployment health assessment with a licensed military health
    care provider. After reviewing the service member's responses to the
    questionnaire, the health care provider asks about health concerns or
    problems, annotates the form accordingly, and determines need for
    referrals for medical evaluation, testing or examination, as indicated.
    This personal assessment includes a review of the service member's
    physical, mental, and emotional well-being. About 20 percent of the
    returning forces are being referred for health concerns related to
    their deployment. This process applies to both the active and Reserve
    components. All post-deployment medical health assessments are placed
    in the service member's permanent medical records and are forwarded to
    our central electronic archive.

        23. Senator Pryor. Dr. Winkenwerder, I understand there is a pre-
    deployment questionnaire, DD Form 2795, which contains eight questions
    and the post-deployment questionnaire, DD Form 2796, which contains six
    questions. How does this self-reported questionnaire work?
        Dr. Winkenwerder. Based on the lessons learned from the Gulf War
    and subsequent deployments, the DOD implemented pre- and post-
    deployment health assessments in 1997 that help us monitor the health
    status of deploying service members. The post-deployment health
    assessment was enhanced in May 2003 and is now a four-page form with 18
    numbered questions that require 65 to 74 responses from the service
    member. The paper assessment forms are maintained in the service
    member's permanent record and a copy is sent to the Army Medical
    Surveillance Activity where they are archived electronically.
        Prior to deploying, all service members are required to complete a
    DD Form 2795, Pre-Deployment Health Assessment. Annotated on the DD
    Form 2795 are a review of the individual's permanent medical record, an
    update of immunizations, validation of serum sample within the past 12
    months, a pregnancy test, a TB skin test check, vision and hearing
    screening, and dental screening showing class 1 or 2 within the last
    year. A licensed health care provider then reviews the DD Form 2795
    with the service member and determines if the individual is deployable.
    This process ensures that the service member's health status is checked
    for changes since their last evaluation.
        Redeploying personnel complete the DD Form 2796, Post-Deployment
    Health Assessment. This form includes specific queries about possible
    health-threatening occupational, environmental or psychological
    exposures during deployment. Each service member undergoes a face-to-
    face post-deployment health assessment with a licensed military health
    care provider. After reviewing the service member's responses to the
    questionnaire, the health care provider asks about health concerns or
    problems, annotates the form accordingly, and determines need for
    referrals for medical evaluation, testing or examination, as indicated.
    This personal assessment includes a review of the service member's
    physical, mental, and emotional well-being. About 20 percent of the
    returning forces are being referred for health concerns related to
    their deployment. This process applies to both the active and Reserve
    components. All post-deployment medical health assessments are placed
    in the service member's permanent medical records and are forwarded to
    our central electronic archive.

        24. Senator Pryor. Dr. Winkenwerder, how is the questionnaire
    disseminated to the service member?
        Dr. Winkenwerder. The pre- and post-deployment health assessments
    are given to Service members to complete at the time they perform their
    deployment or demobilization activities at their mobilization or
    demobilization centers. Medical personnel at these centers oversee the
    health assessment. The Army is doing about 50 percent of the health
    assessments electronically.

        25. Senator Pryor. Dr. Winkenwerder, how are you ensuring service
    members' compliance in completing the health assessments?
        Dr. Winkenwerder. The Services have each implemented quality
    assurance programs to ensure the program is being implemented in
    accordance with their policies. In January 2004, DOD implemented a
    deployment health medical records quality assurance program that
    monitors the Services' programs. The DOD program also conducts
    independent assessments of the completing of health assessments,
    documenting vaccinations, and incorporating in-theater medical care
    records into the individual's permanent health records through
    installation visits.

        26. Senator Pryor. Dr. Winkenwerder, how is the DOD implementing a
    quality assurance program to track military personnel's pre- and post-
    deployment health assessments?
        Dr. Winkenwerder. The key elements for implementing the DOD quality
    assurance program include periodic reports on centralized pre- and
    post-deployment health assessments, periodic reports on service-
    specific deployment health quality assurance programs, and periodic
    visits to military installations to assess deployment health programs.
    It also includes an annual report on the DOD deployment health quality
    assurance program.
        The Army Medical Surveillance Agency, which maintains centralized
    databases for deployment health assessments, provides the DOD
    Deployment Health Support Directorate with weekly reports on post-
    deployment health assessments and monthly reports on pre- and post-
    deployment health assessments. The post-deployment reports include data
    on service members' health status, medical problems, mental health and
    exposure concerns, blood samples, and referrals for post-deployment
    care. During the period January 2003 through 2004, over 90 percent of
    more than 330,000 redeploying service members have reported their
    health status as good, very good, or excellent.
        The first quarterly deployment health quality assurance program
    reports from the Services were due to DOD by March 31, 2004. The
    reports will be Service-centric and will report what the Services are
    doing, the problems they are finding, and the improvements they are
    making. Preliminary indications are that the services' programs are
    increasingly robust and encompass routine reports as well as
    installation inspections and audits.
        The DOD will conduct quarterly visits to military bases to evaluate
    the procedures for identifying deploying and redeploying personnel, the
    completion of pre- and post-deployment health assessments, and
    incorporation of theater-related health care into permanent medical
    records.

        [Whereupon, at 4:59 p.m., the subcommittee adjourned.]

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2005

                                  ----------

                           WEDNESDAY, MARCH 31, 2004

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

          ACTIVE AND RESERVE MILITARY AND CIVILIAN PERSONNEL PROGRAMS

        The subcommittee met, pursuant to notice, at 9:39 a.m. in
    room SR-232A, Russell Senate Office Building, Senator Saxby
    Chambliss (chairman of the subcommittee) presiding.
        Committee members present: Senators Chambliss, Dole, and
    Ben Nelson.
        Majority staff members present: Scott W. Stucky, general
    counsel; Diana G. Tabler, professional staff member; and
    Richard F. Walsh, counsel.
        Minority staff member present: Gerald J. Leeling, minority
    counsel.
        Staff assistants present: Bridget E. Ward and Pendred K.
    Wilson.
        Committee members' assistants present: Clyde A. Taylor IV,
    assistant to Senator Chambliss; Christine O. Hill, assistant to
    Senator Dole; Russell J. Thomasson, assistant to Senator
    Cornyn; and Eric Pierce, assistant to Senator Ben Nelson.

         OPENING STATEMENT OF SENATOR SAXBY CHAMBLISS, CHAIRMAN

        Senator Chambliss. Good morning. I apologize. Even though
    you're in the Senate, family crises still happen. We're dealing
    with a son getting married, and my wife is trying to cope with
    this, and I'm trying to cope with my wife. [Laughter.]
        Senator Ben Nelson. Senator, this will be much easier than
    that, I can assure you. [Laughter.]
        Senator Chambliss. Well, good morning. The subcommittee
    will come to order.
        The subcommittee meets today to receive testimony on the
    National Guard and Reserve military and civilian personnel
    programs and review of the Defense Authorization Request for
    Fiscal Year 2005.
        Earlier this month, we conducted subcommittee hearings at
    which Under Secretary Chu, Deputy Under Secretary Abell,
    Assistant Secretary Winkenwerder, and the personnel chiefs of
    each of the Services provided an overview of the readiness
    posture of the Department of Defense (DOD), and key issues
    relating to the fiscal year 2005 budget. Not surprisingly,
    proposals affecting the Guard and Reserve were key aspects of
    their testimony, proposals such as increased health benefits
    under TRICARE, enhanced retirement and survivor benefits, and
    special pay and bonuses to assist in recruiting and retention.
    I anticipate that we will touch on some of those subjects
    today.
        I want to underscore my admiration and respect for the
    Guard and Reserve Forces. Since coming to Congress in 1994, I
    have seen the Nation's reliance on the National Guard and
    Reserve grow dramatically through the draw-down following
    Operation Desert Storm, through the air campaign and
    peacekeeping operations in the Balkans, and, most dramatically,
    in the aftermath of the attacks of September 11, 2001.
    Operations Enduring Freedom (OEF), Noble Eagle (ONE), and Iraqi
    Freedom (OIF) have demonstrated that Guard and Reserve Forces
    are critically important to the national defense.
        The threats our Nation faces today have resulted in
    critical, but necessary, reexamination of old ways of
    mobilizing the Reserve and employing the strength that it
    represents. It has demanded and resulted in transformational
    change. That is evident in the excellent written statements our
    witnesses submitted and the stories we read in the news every
    single day. The global war on terrorism is reshaping the
    Reserve component in ways that were not foreseen just 10 years
    ago. It's been my privilege, along with Senator Zell Miller, my
    colleague from Georgia, to establish the Senate Reserve Caucus
    to emphasize our determination to support you and your
    personnel in this all-important effort to make the Guard and
    Reserve full players in our national security. I thank our
    witnesses for their great service.
        I also want to underscore that our first subcommittee
    hearing this year, on February 25, 2004, dealt with the subject
    of sexual assaults in the Armed Forces. We received assurances
    from Under Secretary Chu and the service vice chiefs that they
    are addressing this problem and are committed to taking the
    necessary steps to ensure that sexual assaults are prevented to
    the maximum extent possible. When they do occur, that
    appropriate responses are made, and resources provided to
    victims. I intend to question each of our witnesses today about
    their views on this effort.
        Today, our focus is on the Reserve component and on the
    posture of the Guard and Reserve as we commence the second
    phase of OIF. We are eager to hear about the status of our
    Reserve component forces, their readiness to serve, the morale
    and contributions of guardsmen and reservists, and the
    recommendations of the witnesses about the legislative agenda
    for fiscal year 2005.
        We're particularly interested in the status of families of
    deployed reservists and guardsmen, their access to services and
    support, and recommendations for increased assistance. As we
    all know, the families of deployed service members make many
    sacrifices and pay a special price while their loved ones are
    deployed in harm's way. I want to emphasize again today that
    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 aside their everyday lives and to serve their country as
    an integral part of our national defense. It is our obligation
    and responsibility to ensure that the transition to and from
    military service is the least disruptive 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.
        We have three panels before us today. First, we'll hear
    from Thomas Hall, Assistant Secretary of Defense for Reserve
    Affairs.
        Secretary Hall, welcome back. We're glad to have you this
    morning.
        Mr. Hall. Thank you.
        Senator Chambliss. Our second panel will consist of the
    Chief of the National Guard Bureau and the Directors of the
    Army and Air National Guard. Our third panel will be comprised
    of the Chiefs of the Army, Navy, Marine Corps, and Air Force
    Reserve, and I will introduce those witnesses later, as they
    appear.
        Before we hear from Secretary Hall, Senator Nelson, my good
    friend and colleague who is a great supporter of the Guard and
    the Reserve, as well as the Active Forces and whom I am always
    pleased to have sitting by my side and working side by side
    with, would like to speak. I'll turn to you for any comments
    you'd like to make.

                STATEMENT OF SENATOR E. BENJAMIN NELSON

        Senator Ben Nelson. Thank you, Mr. Chairman.
        I want to thank you, in particular, for holding this very
    important hearing today. We have worked so very well together
    on so many issues, and the importance of this hearing today
    can't be overstated. I join you in welcoming our witnesses,
    both the civilian and military leadership responsible for our
    Guard and Reserve Forces.
        As a matter of special privilege today, I'd like to
    recognize two National Guard soldiers who are with us today.
    Specialist Jeremy Long, from the 105th MP Company of the New
    York Army National Guard is here with us today. Specialist Long
    was wounded in action by an improvised explosive device (IED)
    that resulted in the death of his driver. Specialist Long is in
    a medical hold status at Fort Drum, New York. Specialist Long,
    we thank you for your great service. Please stand, and please
    be recognized. [Applause.]
        I also would like to recognize Sergeant Luke Daugherty from
    Lincoln, Nebraska. He's a Husker. It's good to have you with
    us. Sergeant Daugherty is a scout in the Nebraska Army National
    Guard. He has earned the distinction of competing for and
    winning the esteemed title of the Nebraska Army National Guard
    Non-Commissioned Officer (NCO) of the Year. It's a very high
    honor, indeed. We're very proud of you. Competing for and
    winning this award is the mark of an outstanding soldier. We
    offer you our congratulations. We Nebraskans and all Americans
    are proud of you, and I want to thank you once again for your
    great service to our country. Please be recognized. [Applause.]
        Senator Chambliss, we appreciate this hearing today, which
    you've called. It gives us an opportunity to address the future
    of our Reserve components. What is the role of our National
    Guard and Reserve Forces in tomorrow's national security
    strategy? Should they be more integrated in homeland security
    and homeland defense with shorter and fewer deployments? Just
    where should they fit in, in the array of military forces
    available for deployment? Those are the questions that will be
    answered.
        Now, don't get me wrong, the issue is not whether they'll
    be used; but, rather, how, when, and where will they be used?
    Our Guard and Reserve Forces must be trained and ready, but
    ready for what? Until we know how they'll be used, we don't
    know what to train them for or how to equip them. So today, it
    appears that our National Guard and Reserve Forces are
    primarily forces available for deployment. Would they be better
    used if they were more integrated into our homeland security
    and homeland defense mission? If so, they would still be
    available for deployments, but not first in line. We need to
    know the vision for the use of our National Guard and Reserves
    so that we can ensure that they are prepared for that mission.
        Another area that warrants our attention would be lessons
    that we learned from the current mobilization. As of December,
    we've mobilized nearly 320,000 Guard and Reserve personnel in
    support of our military operations throughout the world. As of
    last week, we had over 176,000 National Guard and Reserve
    personnel on active duty. These men and women have answered our
    Nation's call to service, and they've performed magnificently.
        However, their service has not been without challenges.
    Many were ordered to active duty on very short notice,
    sometimes as short as 72 hours. This didn't give them a
    realistic time or opportunity to prepare themselves, their
    families, or their employers for the service; yet they served.
    Some took a significant pay cut when they reported for duty;
    yet they served. Some reported to active duty and were not paid
    properly or at all; yet they served. Tours of duty were
    extended with little or no notice. Families and employers had
    already made plans for their return, yet they continued to
    serve magnificently. Some were injured while serving, and we
    failed to process their orders correctly, denying them pay and
    medical benefits; and yet they served.
        The men and women of our Reserve components have continued
    their outstanding service despite all of the problems that I
    have just mentioned. We need to learn from these experiences to
    make sure that we have corrective measures in place to prevent
    them from recurring.
        Senator Chambliss, we are all fully aware that our Nation
    cannot successfully conduct a significant military operation
    without the participation of our National Guard and Reserve
    personnel.
        I look forward to the testimony of our witnesses today
    regarding the future role of our Reserve component and how we
    can address the problems recently experienced by our mobilized
    troops, and provide better security for our country, and treat
    our troops more fairly. I thank you, once again, for this
    opportunity.
        Senator Chambliss. Thank you, Senator Nelson.
        Mr. Hall, we have your full statement in the record, and we
    look forward to hearing your summary of that statement at this
    time. Please proceed.

       STATEMENT OF HON. THOMAS F. HALL, ASSISTANT SECRETARY OF
                      DEFENSE FOR RESERVE AFFAIRS

        Mr. Hall. Thank you.
        I wanted to follow on your initial remarks about family,
    because this summer I will be married 41 years, and my wife
    often speaks of her challenges in dealing with me. So I echo
    that.
        I have a very short statement, in the interest of time, and
    I thank you for entering my written statement into the record.
        Mr. Chairman and Senator Nelson, I thank you for giving me
    the opportunity to speak to you today on behalf of our 1.2
    million guardsmen and reservists. This committee has always
    been very supportive of our Reserve components, and we thank
    you for that support.
        Our Reserve components are at a pivotal point, and how we
    collectively navigate the crossroads we've encountered will
    affect all of our forces, both active and Reserve, for some
    time to come. We're in the midst of one of the longest periods
    of mobilization in our history. This mobilization revealed
    areas that need improvement, like the mobilization processes,
    as Senator Nelson discussed, troop stress and high demand, low-
    density units, family support, employer support, and the need
    to rebalance the force. Our printed statement goes into detail
    on those and many other areas of concern, as well as proposed
    legislation designed to address those problems.
        Many have said we need more end strength. But what we've
    found is that we need to re-mission and re-task the troops we
    have. It's very important. I don't believe that we are out of
    people. But we're certainly out of balance. The usage rate
    across the force is not consistent. Rebalancing must occur to
    alleviate reusing the same troops over and over. Reducing troop
    stress is one of our greatest challenges and is at the top of
    my list.
        Along with rebalancing, we're into our second year of
    exploring the continuous service program, which helps improve
    force management. We're looking holistically at the complete
    range of statuses, from pure civilian to active-duty military.
    This could provide access to various levels of participation,
    civilian-acquired skills, volunteer availability, and
    additional training. This will require further exploration,
    innovation, and flexibility. My statement describes two
    continuous service efforts underway, and we expect many new
    ideas that may require legislation, if you agree with it.
        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. That
    is why rebalancing of the force is so critical, the continuous
    service so crucial, and relieving the stress on the force
    absolutely essential.
        I've had the pleasure, over the past few weeks and months,
    to visit Fort Bragg, Fort Hood, and Fort Irwin, to see and
    interface with the members of the 30th, the 39th, and the 81st
    Brigades of the National Guard that are training for their
    deployments to Iraq. I wanted to see firsthand how the training
    was going, which equipment was being used to conduct the
    training on, how the conversion from heavy status to lighter
    armored units was going, and, most of all, to see the attitude
    and the opinion from the ``deck plate,'' as we say in the Navy,
    of the young men and women that are doing the training.
        I asked them directly about their expectations for the
    deployments and what they thought about being mobilized for 16
    to 18 months. How about the 12 months boots on the ground? How
    were their families and employers reacting to the mobilization?
    Finally, were they going to stay in, or were they going to get
    out following the mobilization? I look forward to following up
    with you on many of their answers.
        In summary, what I found was wonderfully excited and
    dedicated soldiers, who are answering the call of their Nation,
    and I found virtually no difference in the attitude and
    dedication of these Guard troops than what I found during my 34
    years of active duty when I deployed with squadrons around the
    world. These young men and women, like their active-duty
    counterparts, represent the finest this Nation has to offer.
        I thank you for this opportunity to testify on behalf of
    the greatest Guard and Reserve in the world. I look forward to
    your questions.
        I did a little review and discovered that I and the other
    panelists here today have, with my 38 years of service, almost
    300 years of military service to our country including my 38
    years of service. I greatly respect these gentlemen and their
    service. One of them, Lieutenant General Jim Sherrard, will be
    retiring within a few months. He has devoted his entire adult
    life to service of his country, and I want to recognize that
    service, since it might be the last time he appears before the
    panel.
        Thank you, I'm ready for your questions.
        [The prepared statement of Mr. Hall follows:]

                   Prepared Statement by Hon. Thomas F. Hall

                                  INTRODUCTION

        Good morning, Mr. Chairman and members of the subcommittee, thank
    you for your invitation to testify today. I would like to provide
    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, our military personnel are grateful, and we thank you.

    The Assistant Secretary of Defense for Reserve Affairs' 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 (DOD).
    I take this responsibility very seriously because our Guard and Reserve
    perform vital national security functions at home and around the world,
    and are closely interlocked with the States, cities, towns, and
    communities in America. Since I last saw you, 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 in the
    States and around the world with them, and we have listened carefully
    to their comments and concerns. Again this year, we are continuing to
    closely monitor the impact of increased use on our Guard and Reserve
    members, and on their families and employers.
        My ``Acid Test for the Guard and Reserve'' remains unchanged; 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 (RC) now comprise 46 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 fiscal year 2005 Defense budget recognizes the essential
    role of the RCs in meeting the requirements of the National Military
    Strategy. It provides $33.3 billion for RC personnel, operations and
    maintenance, military construction, and procurement accounts, which is
    approximately 2.8 percent above the fiscal year 2004 appropriated
    level. Significantly, this is only 8.3 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 fiscal year 2005 funds support
    870,900 Selected Reserve personnel. The Selected Reserve consists of
    the following: Army National Guard 350,000; Army Reserve 205,000; Naval
    Reserve 83,400; Marine Corps Reserve 39,600; Air National Guard
    106,800; and Air Force Reserve 76,100; Coast Guard Reserve 10,000
    (funded by the Department of Homeland Security). Our total Ready
    Reserve, which also includes the Coast Guard Reserve, Individual Ready
    Reserve and Inactive National Guard, is approximately 1.2 million
    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.

    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. From September 11, 2001,
    through December 31, 2003, we had mobilized 319,193 RC personnel in the
    global war on terrorism. 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 December 31, 2003, 181,459 Reserve component personnel were
    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. The Service component breakdown is as
    follows:

             Army National Guard (ARNG): 91,079
             Army Reserve (USAR): 65,079
             Air National Guard (ANG): 6,420
             Air Force Reserve (USAFR): 9,376
             Navy Reserve (USNR): 1,562
             Marine Corps Reserve (USMCR): 6,774
             Coast Guard Reserve (USCGR): 1,169

        Morale is high. Reservists are proud of their contribution and
    ready to serve. They will continue to respond to the call to active
    duty as long as 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 service, fulfilling important 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.
    Managing Force Capabilities in High Demand
        With the global war on terrorism and the ongoing mobilization of
    Guard and Reserve members, we are monitoring the capabilities in the
    RCs that have been in high demand and, where necessary, identifying
    actions necessary to reduce the demand on these capabilities. To assess
    the capabilities that are projected to be in demand as we prosecute the
    war on terrorism, the DOD has conducted an analysis of what elements of
    the RC have been called-up--evaluating their usage in terms of:

             Frequency of call-up--the number of times members have
            been called to active duty since 1996.
             Percentage of available pool--what percent of the RC
            force has already been used to support current operations.
             Duration--how long the members served when they were
            called-up.

        Frequency of call-up--empirical data have revealed that, to date, a
    relatively small number of RC members have been called up in support of
    the current operation who were called up for other contingency
    operations in the last 8 years. Through December 2003, overall, 27,784
    Reserve members, or about 3.2 percent of our Selected Reserve Force of
    875,609, had been involuntarily called-up more than once since 1996
    (11,802 called-up for more than one contingency operation--Bosnia,
    Kosovo, Southwest Asia, and ONE/OEF/OIF--and another 15,982 called-up
    more than once for the current contingency--ONE/OEF/OIF). This
    indicates that from a macro perspective, the frequency of call-ups does
    not indicate an excessively high demand on the Reserve Force at this
    time.
        Percent of available pool--to mitigate the depletion of the
    available pool of Reserve assets, the DOD policy is that RC members
    will not serve involuntarily more than 24 cumulative months and to
    utilize volunteers to the maximum extent possible. In viewing the
    available pool from the macro level, it might appear that the overall
    percentage of the RC force that has been used to support operations
    since September 11 may be approaching a level difficult to sustain over
    a prolonged campaign. Through December 2003, about 37 percent of the
    Selected Reserve Force was mobilized in just over 2 years of this
    operation. However, the usage rate is not consistent across the force.
    Some career fields--like force protection, civil affairs, intelligence
    and air crews--have been used at a much higher rate. Other career
    fields--like medical administration, legal, and dental--have been used
    at a much lower rate. Currently, the utilization is concentrated in
    about one-fourth of the officer career fields and about one-fourth of
    the enlisted career fields; furthermore, the highest utilization is
    concentrated in a relatively small number of selected career fields.
        Duration--tour lengths for RC call-ups have increased for every
    operation since Operations Desert Shield/Desert Storm. The average tour
    length for Operations Desert Shield/Desert Storm was 156 days. For
    operations in Bosnia, Kosovo, and Southwest Asia, the average tour
    length was about 200 days. For those members who have completed tours
    of duty during the current contingency, tour lengths have averaged
    about 320 days.
        We are taking steps to address the possible depletion of needed
    resources that include:

             Increasing international military participation in
            Iraq, and developing Iraqi capacity to conduct police and
            security tasks and increasing actionable intelligence to
            disrupt threats to stability in Iraq.
             Rebalancing the Active and Reserve Force mix and
            capabilities. By identifying about 100,000 billets for possible
            restructuring over the next several years.
             Reviewing over 300,000 military positions for possible
            ``civilianization,'' thereby increasing the number of military
            in the operational force.

        All these actions are high priorities for the DOD since they will
    provide greater stability and predictability for reservists, their
    families and employers, and will optimize the forces available over
    what is anticipated to be a long war.
        Predictability is an important key to using the Reserves. It is now
    routine for the Army Guard to plan and execute Bosnia and Kosovo
    missions. They are currently maintaining about 474 guardsmen in the
    Sinai. The Army Reserve provides most of the logistics support in
    Kosovo. Future rotations in Iraq and Afghanistan will be planned in
    advance, providing more time for the RC to train at home in
    preparation.
        Force protection continues to be an important requirement for the
    force in the global war on terrorism both at home and abroad. Reserve
    personnel provide the majority of force protection to military
    personnel and installations worldwide. As of February 25, 2004, the
    Army National Guard had 6,021 soldiers augmenting Air Force security
    forces--providing support at Air Force bases for the second and final
    year of this mission. Approximately 9,000 soldiers provided force
    protection for the Air Force the first year. This initiative is one
    example of innovative solutions for force protection in the global war
    on terrorism as the Air Force rebalances its security forces through an
    increase in training capacity, use of contractors, and technological
    solutions.
        The Guard and Reserve are important partners in daily military
    operations and will play a major role in any future operations while
    maintaining their traditional role as citizen soldiers. We must ensure
    that when we employ members of the Guard and Reserve, they are provided
    meaningful missions and we retain them on active duty for only as long
    as is necessary to accomplish the mission.

    Rebalancing the Force
        The Reserve components continue to make significant and lasting
    contributions to the Nation's defense and to the global war on
    terrorism while the armed services transform to be more responsive,
    lethal, and agile. However, it has become evident that the balance of
    capabilities in the active and Reserve components is not the best for
    the future. There is a need for rebalancing to improve the
    responsiveness of the force and to help ease stress on units and
    individuals with skills in high demand.
        Repeated mobilizations are not a major problem yet. Through
    December 31, 2003, just over 3 percent of the Selected Reserve Force
    serving today had been involuntarily called-up more than once since
    1996. Thus, force rebalancing is necessary in some areas, but in other
    areas innovative management actions may be sufficient to reduce the
    stress of over-use.
        Easing or reducing the stress on the force requires a multifaceted
    approach by the DOD--no single solution will resolve the challenges
    faced by the Services. To achieve this goal, the DOD engaged in a
    cohesive rebalancing strategy consisting of the following points:

             Move later deploying active component (AC) forces
            forward in operation plans and early deploying RC forces later
            in the plan and shift assets between combatant commanders. This
            would enhance early responsiveness by structuring forces to
            reduce the need for involuntary mobilization during the early
            stages of a rapid response operation.
             Introduce innovative management techniques such as
            enhanced volunteerism, expanded use of reachback, streamlined
            mobilization processes to improve responsiveness, and
            employment of innovative management practices such as the
            continuum of service and predictable overseas rotations.
             Rebalance capabilities by converting lower priority
            structure to higher priority structure both within and between
            the AC and RC.

        Through this comprehensive rebalancing strategy the DOD will gain
    added efficiencies from its existing force structure that may preclude
    any necessity to increase force end strength. This rebalancing strategy
    has already resulted in about 10,000 changes in military spaces both
    within and between the AC and RC to address stressed career fields in
    fiscal year 2003, and about 20,000 more in fiscal year 2004. The fiscal
    year 2005 budget supports about 20,000 additional changes as well.
        A breakdown of specific fiscal year 2005 Service-rebalancing
    initiatives includes:

             Army--12,000 spaces converted to improve early
            responsiveness in the transportation, quartermaster, medical,
            and engineer career fields. Conversions will also reduce stress
            on military police, Special Operations Forces, and intelligence
            career specialties.
             Navy--1,000 spaces converted to reduce stress in
            security forces.
             Marine Corps--3,000 spaces converted to reduce stress
            in Air Naval Gunfire Liaison Companies, security forces, and
            intelligence career fields.
             Air Force--4,000 conversions to reduce stress in
            security forces, aircrews and maintenance career fields.

        Additional plans embedded in the Future Years Defense Plan (FYDP)
    include further conversions and major rebalancing efforts to improve
    readiness and capabilities. In total, the Services plan to rebalance
    about 100,000 spaces between fiscal years 2003 and 2009.
        By employing innovative force management practices, the Services
    can perhaps achieve the greatest degree of flexibility in utilizing the
    Total Force, while reducing the stress on critical career fields and
    the need for involuntary mobilization. Each Service is unique.
    Approaches such as the continuum of service, reachback, improved
    predictability through rotational overseas presence, and improvements
    to the mobilization process, can help to ensure that the Services have
    access to individuals with the skills and capabilities required for
    both emergent operations and sustained, day-to-day activities.
        In total, the initiatives described reflect a cohesive rebalancing
    strategy that will ease the stress on the Reserve Forces. Rebalancing
    efforts will not happen overnight. The process will be iterative and
    ongoing, as demands on the Total Force change and new requirements
    create different stresses on the force. By proceeding in this manner,
    the DOD will be able to achieve its transformational goals, ensure the
    judicious and prudent use of its RCs, and ultimately assure victory in
    the global war on terrorism.

                               TRAINING THE FORCE

        The Guard and Reserve are preserving their well-earned reputation
    as the best trained and best led RCs in the world. However, our global
    environment has changed significantly since September 11, and our
    approach to training and readiness has changed accordingly. As we
    prosecute the global war on terrorism, training to meet required
    readiness levels remains a Departmental priority and attention is
    focused on optimizing training effectiveness and efficiency.
        Meeting these challenges requires both short-term and long-term
    solutions. As an example, we are finding that functions for which units
    and personnel are structured and trained do not always match the
    current and emerging mission requirements. While rebalancing efforts
    provide force structure solutions, immediate retraining of our
    reservists provides a near-term solution. Once units are identified for
    future force rotations, retraining begins immediately to maximize time
    available prior to deployment. Currently, innovative concepts such as
    employing 4-week training venues, known as ``2+2s'' or ``pop-ups''--
    that are comprised of 2-weeks of annual training coupled with follow-on
    2-weeks of Active Duty Training (ADT)--are quickly and effectively
    meeting these challenges. Although our solution set is effective, it is
    not yet efficient.
        We need additional tools, innovations and flexibility to better
    manage current training/retraining efforts. To this objective, a
    proposed legislative change requests removal of the ``other than for
    training'' exclusion from existing mobilization statutes. The ability
    to schedule and conduct well-planned, phased training will yield
    maximum benefits in both the learning experience and skills retention.
    Coupled with the DOD's ``train, mobilize, deploy'' approach to RC
    employment, we will capitalize on scarce resources, reduce ``cross-
    leveling'' and unit disruptions, and eliminate some ``post-
    mobilization'' training. This approach allows units to train together
    and deploy as cohesive, effective units. Ancillary benefits also
    include increased predictability, stability and relevance for RC
    members, and protections and benefits for members' families not
    previously available while participating in required training in a
    nonmobilized status.
        Effective and meaningful training is only relevant if RCs are
    responsive and rapidly deployable in the joint strategic environment.
    Toward that end, we've worked to ensure the RCs are included in all
    training transformation initiatives and other joint training
    opportunities. These joint opportunities will result in a significantly
    improved overall capability of our Armed Forces.
        Also included in the training transformation initiative is the use
    of cutting edge training technologies that will significantly improve
    members' access to required training--anytime, anywhere. When
    implemented, training transformation will deliver joint training
    worldwide and provide a major step forward for Reserve members,
    providing distributed learning with embedded simulations that will
    enable ``see, learn, do'' training. These and other technology-based
    initiatives will optimize use of training days, while limiting time
    away from employers and families.
        Our part-time citizen soldiers, sailors, airmen, and marines have
    responded magnificently to their Nation's call. They have faced
    significant training challenges supporting the global war on terror--
    challenges they have met head-on and overcome--and I am immensely proud
    of their accomplishments.

    A Continuum of Service
        We are in our second year of transitioning to a new approach in
    force management called ``continuum of service.'' The continuum of
    service will facilitate varying levels of participation and enable
    members to more easily move between active and Reserve service.
    Particularly for reservists, this approach would enable them to
    voluntarily move from the traditional Reserve training regimen (or
    simply being available as part of the Individual Ready Reserve (IRR)
    manpower pool) to full-time service for a period of time--or into a
    participation level somewhere between full-time and the traditional 38
    days of Reserve training each year. Or move in the other direction--
    fewer days of participation as their circumstances dictate. The
    continuum of service also applies to the active service member who
    could easily move into a RC for a period of time, without jeopardizing
    his or her career and opportunity for promotion.
        Just as the continuum of service encourages volunteerism in the
    standing force, it also creates opportunities for military retirees and
    other individuals with specialized skills to serve on a more flexible
    basis, if their skills are needed.
        The ``continuum of service'' has a number of important advantages:
    in addition to capitalizing on volunteerism, it will enhance the
    ability of the Armed Forces to take advantage of the highly technical
    skills many reservists have developed by virtue of their experience in
    the private sector--while at the same time creating opportunities for
    those in the Active Force to acquire those kinds of skills and
    experiences. It also improves our capability to manage the military
    workforce in a flexible manner, with options that currently exist only
    in the private sector. Finally, there are certain skills that are hard
    to grow or maintain in the full-time force, but may be ideally suited
    for part-time service in a RC, such as certain language skills and
    information technology specialties. The continuum of service can
    provide the opportunity for highly trained professionals to serve part-
    time and provide a readily available pool of these highly specialized
    individuals who would be available as needed.
        We have two programs that started last year using this concept. In
    August 2003, the Army implemented an innovative new program to recruit
    Arabic speakers directly into the Individual Ready Reserve. The program
    focuses on recruiting American citizens or U.S. permanent residents
    (many of Iraqi origin) who are fluent in languages that are needed for
    the global war on terrorism. By the end of 2003, the Army had enlisted
    144 heritage Arabic speakers. By the end of this year, we expect the
    number of volunteers participating in this program to exceed 250.
    Recruits include individuals skilled in the following languages:
    Arabic-Modern Standard; Arabic-Gulf-Iraqi; Pushtu; Pushtu-Afghan;
    Pushtu-Peshawari; Kurdish; Turkish; Dari/Persian-Afghan/Persian-Dari.
    Once they complete all training requirements, many will deploy to Iraq
    to assist in the reconstruction effort.
        The second initiative now under way is a small pilot program aimed
    at leveraging people with a unique set of civilian skills that are hard
    to grow and maintain on active duty, but who can, in small numbers,
    have a dramatic impact on our military's success on the battlefield.
    This program, known as the Defense Wireless Service Initiative, is
    recruiting highly skilled wireless engineers and spectrum managers to
    help us better manage our increased use and reliance on the
    electromagnetic spectrum in the execution of combat operations and
    employment of smart weapons. Our office is working with the Army to
    imbed a total of eight reservists (four officers and four enlisted)
    into an Army structure that will work in two four-person teams to
    analyze operational scenarios and lay down networks for the Army. When
    called, these reservists will deploy to perform real-time operational
    spectrum management.
        While we are making strides to implement the continuum of service,
    there are areas in which we need your assistance. They include:

             Providing more consistency in management and
            accounting of reservists serving on active duty.
             Providing greater flexibility in using inactive duty
            for reach-back and to perform virtual duty.
             Allowing for an alternative military service
            obligation and streamlined basic training for certain
            individuals accessed into the force with unique civilian
            acquired skills.
             Providing the authority to establish auxiliaries for
            the Army, Navy and Marine Corps, modeled after the very
            successful Coast Guard Auxiliary.

        These changes will help the DOD optimize the use of the force and
    facilitate volunteerism, thus reducing the need to involuntarily call-
    up Guard and Reserve members.

    Balancing Critical National Security Resources
        To preclude conflicts between Ready Reserve members' military
    mobilization obligations and their civilian employment requirements
    during times of war or national emergency, the DOD conducts a
    continuous ``screening'' program to ensure the availability of Ready
    reservists for mobilization. Though once a mobilization is declared--as
    occurred on September 14, 2001, all additional screening activities
    cease and all Ready Reserve members are considered immediately
    available for active duty service. At that time, no new 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 DOD 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 DOD established a special
    exemption process to help accomplish overall national security efforts.
    As of December 31, 2003, we have processed 263 requests from civilian
    employers to delay or exempt a reservist-employee from mobilization. We
    approved 98 requests for exemptions, 90 reservists were authorized a
    delay in reporting to give the employer time to accommodate the pending
    mobilization of the employee, and 75 requests were denied. We continue
    to receive exemption requests as additional reservists are identified
    for mobilization and process them as expeditiously as possible.

    Reserve Component 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 44 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 32 of the 44 congressionally
    authorized teams as being operational. The locations of the 12 new
    teams, designated in the National Defense Authorization Act for Fiscal
    Year 2004, have not been formally released by the Assistant Secretary
    of Defense for Homeland Defense.
        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 44
    strategically placed teams will support our Nation's local first
    responders as a State response in dealing with domestic incidents. The
    RCs WMD-CST funding for fiscal year 2004 is $184.4 million, and the
    budget request for fiscal year 2005 is for $189.9 million. In the
    National Defense Authorization Act for Fiscal Year 2004, Congress
    directed the Secretary of Defense to field 12 new teams and to develop
    a plan to establish an additional 11 WMD-CSTs, in order to have at
    least one in each State and territory.
        The DOD is also leveraging the capabilities of existing specialized
    RC 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 was approved for fiscal year
    2004 to continue training Army Reserve chemical soldiers to perform
    these domestic decontamination and reconnaissance missions and also to
    sustain 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.

    Recruiting and Retention
        Historically, the recruiting market for the RCs 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
    means a smaller number of prior service military members available for
    the Reserve Force. In the non-prior service market, the propensity of
    17-25 year olds to consider military service is lower than in the past.
    Compounding these difficulties, all Services and their RCs are trying
    to recruit from essentially the same non-prior service market--the same
    population from which civilian employers recruit.
        However, even in the face of these challenges, in the aggregate,
    the RCs exceeded their authorized end strengths for fiscal year 2003,
    which is the ultimate objective of the recruiting program. Where
    recruiting difficulties occurred, retention was more than sufficient to
    offset potential strength shortages. Where retention was lower than
    hoped for, recruiting missions were exceeded. Overall, we are well
    positioned to recruit and retain sufficient Reserve component personnel
    to meet currently projected force levels for the immediate future.
        The RCs have not experienced a significant exodus of personnel as a
    result of the recent relatively high use of the Reserve and National
    Guard. Attrition was lower than expected in almost every component.
    Only in the Air National Guard did attrition exceed the established
    ceilings (12.7 percent versus a ceiling of 12.0 percent). Although this
    is an issue that the Air National Guard is monitoring closely, it is
    not considered to be a significant problem, as recruiting was well
    above program goal and the Air National Guard exceeded its end strength
    objective.
        Although the RCs achieved 2003 strength objectives and are
    continuing that success thus far in 2004, we remain vigilant about the
    possible impacts of an improving economy and high operations tempo on
    our ability to sustain desired strength levels.
        To assist the RCs in their recruiting and retention efforts, we are
    proposing an accession/affiliation bonus for officers. This will
    provide an incentive for officers leaving active duty who possess
    skills that are critically short in the Selected Reserve and
    individuals with no prior military experience who can fill junior
    officer shortages to join the Guard or Reserve. This would be the first
    bonus designed to fill the officer ranks in the Selected Reserve, other
    than bonuses for officers in the health professions, and will provide
    the RCs with a much needed recruiting tool that targets both
    experienced, trained, prior service officers and non-prior service
    individuals.

    Compensating Guard and Reserve Personnel
        As requested in the Senate report that accompanied the National
    Defense Authorization Act for Fiscal Year 2003, we examined
    compensation programs for RC members. That report was recently sent to
    the Committees on Armed Services, and includes not only those items
    that the committees specifically requested, but also addresses areas of
    interest and concern to RC members. The compensation system must
    support the current employment of the Reserve Force and it must be
    flexible enough to respond to any emerging or future trends that result
    from the increased use of the Guard and Reserve. We strongly believe
    that pay and benefits must be focused on those members who are bearing
    the burden of mobilization and deployment, and that the DOD must have
    the tools to respond quickly and decisively with a compensation and
    benefits package that supports our mobilized and deployed troops. There
    are many Guard and Reserve members who have been affected by the
    current mobilization and more will be affected in the future. The
    review that was conducted and the report that was forwarded to both
    Committees on Armed Services identifies some areas where action is
    required to ensure the equitable treatment of RC members.
        Some of the topics identified in the report have already been
    resolved with your assistance, such as lodging expenses for mobilized
    reservists when they are in a leave status, providing the spouse of a
    reservist who dies while performing inactive duty training with an
    annuity, and authorizing hazardous duty pay for members who perform
    duty in the polar regions. We are also proposing legislation that would
    authorize an officer accession/affiliation bonus for service in the
    Selected Reserve and a provision to correct a flaw in the method that
    the high 36-month average is calculated for RC members who are retired
    because of a disability. However, more is needed, and we will continue
    to address those areas where reservists are disadvantaged by the
    compensation system, such as a different, generally lower, housing
    allowance for reservists on active duty for less than 140 days.
        One area of continuing interest is the Reserve retirement system.
    There have been a number of proposals that would lower the age at which
    Reserve retirees would be able to begin drawing retired pay. While the
    DOD is not opposed to making changes to the Reserve retirement system,
    it is important to ensure that retirement reforms are consistent with
    the overall goals of Reserve personnel management, maintain equity
    between active and Reserve personnel, are cost-effective, and
    contribute to improved force management.
        Before undertaking a new Reserve entitlement that imposes a large
    cost burden on the DOD, the Federal Government and ultimately the
    taxpayers, we need to be assured that such a change is necessary and
    that it will not only benefit Reserve retirees, but also ensure that we
    are able to maintain sufficient numbers of high quality Reserve
    personnel with the requisite mix of skills and experience. Retirement
    benefits help shape the force, creating a Reserve Force with certain
    characteristics and a specific distribution of personnel by rank and
    years of service.
        While we recognize that the frequency and length of deployments
    have increased over the past 2 years for a portion of the Reserve
    Force, maintaining equity in the DOD retirement system must consider
    such demands in conjunction with those of a full-time active duty
    career. The readiness levels, frequency of deployments, permanent
    change of station moves, the impact on families, the reduced employment
    opportunities for spouses and the need to start a second career at an
    advanced age are just a few of the considerations in providing an
    immediate annuity for Active-Duty Force members who complete at least
    20 years of active service.
        Reducing the retirement age for Reserve personnel, however, does
    not provide immediate compensation to those who are currently bearing
    the burden of mobilization and deployment. Only about 24 percent of RC
    members in the force today will actually qualify for retirement. With
    an average RC career of just over 10 years and the mean age of those
    who are mobilized at about 35, many who are actually bearing the burden
    of mobilization and deployment will never benefit from such changes.
        RAND, which is in the second year of a study to develop a
    predictive model on the effects that possible changes to the Reserve
    retirement system will have on recruiting and retention, has provided
    some preliminary views on the proposals that would lower eligibility
    for receipt of retired pay to age 55. They project that such a change
    would have very little effect on force management. RAND notes that the
    value of retirement benefits is heavily discounted by new recruits and
    junior Reserve personnel. The result of such a change would cost the
    DOD nearly $7 billion over the next 10 years and the Federal Government
    over $13.6 billion with no appreciable influence on force management
    since the immediate beneficiaries are almost exclusively those who have
    already made a retirement decision and are no longer serving. While the
    proposals to reduce the retirement age based on additional years of
    service may provide a more direct effect on retention, increased
    retention of our most senior members could inadvertently undermine
    retention of mid-grade personnel by limiting promotion opportunities.
        The bottom line is that we must compensate our Guard and Reserve
    members fairly, ensuring comparability, that is, equal pay for equal
    work, for those who are currently sustaining the burdens of Reserve
    service. Increasing the overall present value of Reserve retirement
    will have little impact on recruiting and retention. However,
    increasing such lifetime entitlements can limit our ability to provide
    appropriate incentives for recently deployed and deploying personnel,
    to enhance force readiness and to improve force management.

    Health Care Enhancements
        Since the events of September 11, 2001, the DOD has made a number
    of improvements in access to healthcare for the 319,193 RC members
    mobilized through December 31, 2003, in support of the global war on
    terrorism and their dependents. First, TRICARE Prime has been made
    available to the families of reservists ordered to active duty for more
    than 30 days, a significant reduction from the previous 179-day
    threshold. At the same time, RC eligibility for TRICARE Prime Remote
    has been expanded to include eligible family members who resided with
    the RC member prior to mobilization and deployment.
        The DOD has continued the TRICARE Demonstration Project, approved
    by the Secretary, specifically to assist the families of mobilized
    reservists with the transition to TRICARE. The demonstration project
    reduces out of pocket expenses for Reserve family members and makes it
    easier for them to maintain continuity of care with their existing
    healthcare providers. Under this ongoing project, the annual deductible
    (up to $300 per family) for those members who do not or cannot enroll
    in TRICARE Prime is waived. 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 DOD will pay up to 15 percent above TRICARE maximum allowable
    charges for family members receiving care from providers not
    participating in TRICARE and who bill in excess of TRICARE maximum
    allowable charges.
        In addition to assisting the families of mobilizing and deploying
    RC members, the DOD is focused on ensuring and enhancing the medical
    readiness and deployability of Reserve members. RC dental readiness
    remains a challenge, although we have made considerable progress. DOD
    policy requires an annual dental examination for all active duty and
    Selected Reserve members. The TRICARE Dental Program (TDP) offers
    members a comprehensive dental option. A standard dental screening form
    has been approved by the DOD for use by a reservist's civilian dentist
    to assist the RCs in tracking the dental readiness of members.
        Certain of the enhancements enacted in the National Defense
    Authorization Act for Fiscal Year 2004 directly affect mobilized and
    mobilizing RC members. The authority to provide medical and dental
    screening and necessary care for members who have been alerted for
    mobilization allows us to ensure members are fit for active duty, meet
    deployment standards, and are provided any necessary treatment when a
    deficiency is detected. In addition, RC members may now be eligible for
    TRICARE upon receipt of a ``delayed effective date active duty order''
    of greater than 30 days in support of a contingency or 90 days prior to
    mobilization whichever date is later. The period of transitional
    medical assistance for Reserve members separated from active duty of
    more than 30 days in support of a contingency operation--previously 60
    or 120 days--has been extended to 180 days.
        We intend to implement the provision that allows certain RC members
    who are eligible for unemployment benefits or who are not covered by an
    employer-sponsored healthcare benefits plan to enroll in TRICARE. To
    assure effective implementation we propose a demonstration project to
    determine the impact of these benefits on Reserve medical readiness and
    RC recruiting and retention.
        Another area worth exploring may be how to expand the TRICARE
    provider network, since 52 percent of reservists don't live within a
    TRICARE catchment area. With a larger TRICARE provider network, the
    number of families that would have to change providers could be
    reduced, thus making the transition into and out of TRICARE much more
    transparent for Reserve families.
        Assuring the medical readiness of activated Reserve members remains
    a priority, as is providing continuity of care for Reserve families
    transitioning to active duty dependent status. However, it is important
    to proceed carefully when considering costly new entitlement programs.
    Any new permanent healthcare enhancements must consider their cost-
    effectiveness with respect to recruiting, retention and readiness
    benefits for the RCs.

    Family Readiness
        Taking care of our Guard and Reserve members and their families
    continues to be a top priority for the DOD. We constantly are examining
    our policies and programs to ensure that our reservists do not feel
    disenfranchised and that we have systems in place that support their
    families. The partnership my office established with the DOD Office of
    Family Policy continues to reap dividends as every program and every
    initiative is examined from a total force perspective. We are making
    extensive use of technology to reach out to Guard and Reserve members
    and their families about their benefits and how to access them. We are
    continually looking for opportunities to improve and expand our
    outreach efforts to ensure Guard and Reserve members and their families
    receive the support they richly deserve. A robust family support
    network is particularly critical when Guard and Reserve members are
    mobilized and deployed. While each component manages its own family
    program, there are many challenges that are common to all families
    regardless of the Service or component of the member. To bridge
    possible gaps between Service unique programs and common challenges,
    the DOD has worked with the Services and their Reserve components to
    evolve family readiness and support programs to achieve Joint Service
    Total Force capabilities. The goal of this initiative is for any
    service member or family member to receive assistance and support at
    any family service activity, regardless of the member's Service or
    component affiliation. To accomplish this, we have found that it is
    valuable to bring together those responsible for family readiness
    planning, programming, managing, and implementing family programs from
    all Services and components at all levels. This is the only way we can
    truly achieve a Total Force perspective in providing family readiness
    training and services to enhance mission readiness. The Services and
    the OSD staff have embraced this approach and are working
    collaboratively to support our men and women in uniform and their
    families.
        Family assistance center personnel and unit family support groups
    are on the front lines when it comes to assisting service members and
    their families. That is why the National Guard established 400 family
    assistance centers that service more than 400 communities in the States
    and territories--to ensure there is local support not only for Guard
    members, but any service member and any family.
        We have also taken positive actions to ``get the word out'' about
    entitlements and benefits available to the Reserve community, and how
    to access them. We know that information and communication are
    essential to Reserve families. We published a ``Guide to Reserve Family
    Member Benefits'' which 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--to name just a few of the
    topics covered. Additionally, we published a family readiness ``tool
    kit'' that is available to assist commanders, service members, family
    members and family program managers in preparing Guard and Reserve
    members and their families for mobilization, how to cope with
    deployment and how to handle redeployment/demobilization and family
    reunions. These events can be very stressful for the service member and
    the family, as they must adjust to each step in the mobilization,
    deployment, redeployment, demobilization and reunion process. These
    publications are available on the Reserve Affairs Web site, which can
    be accessed through DefenseLink.
        We are constantly looking for opportunities to improve the support
    that our Guard and Reserve members and their families need and deserve.
    We expect the best from them and they should expect and get no less
    from us.

    Personnel and Pay Information Technology
        We are all acutely aware that the existing personnel and pay
    systems are not necessarily compatible and do not support our human
    resources objectives for the 21st century. We need a system that
    provides a single source for personnel and pay management of service
    members throughout their career, regardless of service, component or
    duty status. The Defense Integrated Military Human Resource System
    (DIMHRS) will provide the DOD with the capability to effectively manage
    service members across the full operational spectrum--during peacetime
    and war, capturing accurate and timely data as members move between
    duty statuses to include mobilization and demobilization. The system
    will support the full range of personnel life-cycle activities from
    accession through separation or retirement. Key functions include
    ensuring proper pay and benefits, tracking personnel in theater, and
    transferring individuals to other Services or components.
        DIMHRS is scheduled to be fielded in the Army starting during the
    first quarter of fiscal year 2006 and be fully operational in all
    Services by the end of fiscal year 2007. But any problems we are
    experiencing in paying our mobilized Guard and Reserve members must be
    addressed now. The Defense Finance and Accounting Service (DFAS)--
    recognizing that the current Defense Joint Military Pay System (DJMS)
    is aging, limiting the responsiveness, efficiency, and high quality
    customer service that our members deserve--is developing an interim
    system called Forward Compatible Military Pay (FCP). FCP will be a
    bridge to correct the problems currently being encountered by our
    mobilized reservists until DIMHRS is fully implemented. Implementation
    of FCP will begin no later than March 2005 and be completed by March
    2006. While we would like to have the system in place today, we can all
    appreciate the complexity of launching a new system, even an interim
    one, and I would like to acknowledge DFAS for taking on this
    initiative.

    Employer Support of the Guard and Reserve
        Employer support for employee participation in the National Guard
    and Reserve remains an area of great concern. Employer support is
    absolutely critical to recruiting and retaining quality men and women
    for our Reserve component forces. Building employer support requires a
    strong network comprised of both military and civilian-employer
    leaders, capable of fostering communication, education and an exchange
    of information. Employers' understanding of their legal requirements
    concerning support for Guard and Reserve employees is imperative.
        The National Committee for Employer Support of the Guard and
    Reserve (ESGR) is the DOD's primary office for outreach and education
    to employers. ESGR coordinates, trains, funds and directs the efforts
    of a community based national network of over 4,200 volunteers,
    organized into 55 committees located in every State, the District of
    Columbia, Guam, Puerto Rico, the Virgin Islands and in Europe. ESGR has
    developed and implemented new training programs for their volunteers,
    planned new industry symposia to bring together industry segments with
    military and Department leaders, expanded their presence at industry
    conferences, and further developed and enhanced their partnerships with
    the national, State, and local chambers of commerce, and local and
    national human resource organizations.
        Although we established a Guard and Reserve Employer Database in
    late 2001 in which reservists could voluntarily provide information
    about their civilian employers, we were having limited success in
    populating the database. However, information about the civilian
    employers of reservists is necessary for the DOD to meet its statutory
    responsibilities to consider ``civilian employment necessary to
    maintain national health, safety, or interest'' (10 USC, Sec. 12302)
    when determining members to be recalled, especially members with
    critical civilian skills, and to inform employers of reservists
    concerning their rights and responsibilities under the Uniformed
    Services Employment and Reemployment Rights Act.
        Last year, we began laying the groundwork for a mandatory reporting
    program. That effort will culminate with the rollout of a new Civilian
    Employment Information (CEI) program by late spring of this year. Under
    the CEI program, reservists will be required to provide information
    about their employers. We have been working closely with the Services
    and the RCs in the development of this program to ensure we protect the
    privacy of reservists with respect to the use of this information about
    their civilian employers. For example, we would not directly contact an
    employer about an individual reservist unless the reservist asked for
    our assistance with an employer issue. But we could work with an
    employer as part of our broader outreach efforts to inform all
    employers about the Guard and Reserve.
        Populating the Guard and Reserve Employer Data Base is critical in
    order to clearly focus employer outreach efforts. It will enable us to
    work closely with the civilian employers who are directly affected by
    the mobilization of reservists. The use of this program will also
    assist in other research projects we have undertaken to determine if
    and when significant problems with employers are emerging.
    Understanding the challenges civilian employers must address will help
    us identify steps we can take that will be most beneficial to them--
    strengthening our employer support program and making service in the
    Guard and Reserve easier for our members.
        In addition to these efforts, other major initiatives include:

             Determining employer attitudes through surveys.
             Developing personal relationships with employers.
             Supplying systems to create ESGR volunteer manpower
            efficiencies.
             Developing follow-up processes to sustain employer
            support.
             Providing support at all mobilization and
            demobilization locations.

        The tens of thousands of man-hours from the ESGR volunteers each
    year determines the success of the program as measured by the
    employer's understanding of their role in the Nation's defense, as well
    as their continued strong support of their National Guard and Reserve
    employees. Those volunteer efforts are true patriotism at work!

    Civil Military Programs
        In support of the President's call for Americans to serve, the DOD
    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 2005 is $66.1 million for Challenge and $15.1 million for
    STARBASE.
        Operating in 24 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
    48 military facilities located in 29 States, the District of Columbia,
    and Puerto Rico, has enhanced military-civilian community relations and
    reached approximately 350,000 young children. AC and RC 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 AC and RC 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 real world scenarios without deploying overseas. Program
    expenditures for fiscal year 2004 are $24.7 million. The budget request
    for fiscal year 2005 is $20.0 million.

                        EQUIPMENT AND FACILITY READINESS

    National Guard and Reserve Equipment
        The fiscal year 2005 budget includes $1.6 billion to procure needed
    equipment for the RCs. In the past, the RCs relied on cascaded
    equipment from the ACs to help the shortfalls, however, given the fact
    that the majority of the support functions are in the RCs, there is
    little equipment available to flow from the AC. In addition, the
    equipment that has been recently deployed from both the AC and RC has
    been exposed to extreme heat and a very sandy environment that is
    taking its toll on engines, generators, compressors, etc. The normal
    peacetime usage rate for ground equipment is 3,000 to 4,000 miles a
    year and in the wartime environment it is currently being used 3,000 to
    4,000 miles a month, a 12-fold increase. With the combination of these
    two major factors, the life of the equipment is being shortened
    dramatically from what was programmed in peacetime. We are convinced
    that only by modernizing the equipment of our Reserve Forces will the
    DOD reap the full potential of a capabilities based force in the
    future. Key equipment items planned for the RCs included in the fiscal
    year 2005 President's budget request are:

             Army National Guard and the Army Reserve: Global Air
            Traffic Management, aircraft modifications, air traffic
            control, high-mobility multipurpose wheeled vehicle (HMMWV),
            Family of Medium Tactical Vehicles (FMTV), Family of Heavy
            Tactical Vehicles (FHTV), float ribbon bridges, tactical
            bridging, generators, and MLRS launcher systems.
             Air National Guard and Air Force Reserve: Aircraft
            modifications for the F-16, C-5, C-130, KC-135 and HH-60,
            common aircraft support equipment, tactical communications--
            electronics equipment, and base information and communications
            infrastructure.
             Naval Reserve: C-40 aircraft, tactical vehicles,
            aircraft modifications for the C-130, H-53, adversary, and
            C\4\ISR equipment.
             Marine Corps Reserve: High mobility artillery rocket
            system, night vision equipment, and amphibious assault vehicle.

    National Guard and Reserve Facilities
        Military Construction
        The fiscal year 2005 military construction investment for new
    facilities affecting all RCs is $590 million and represents
    approximately 6.2 percent of the DOD's overall military construction
    and family housing requests of $9.4 billion. The President's budget
    request provides new Armed Forces Reserve Centers, vehicle maintenance
    facilities, organizational maintenance shops, and aircraft maintenance
    facilities for the RC missions. These new facilities begin to address
    the needed replacement of the RCs' infrastructure in support of
    military transformation programs. The fiscal year 2005 budget request
    continues the DOD'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 2005 facility sustainment,
    restoration, and modernization (SRM) request is approximately $950
    million. The DOD continues its commitment toward restoring and
    modernizing existing facilities. The RCs were allocated 95 percent of
    their requirements. The recapitalization rate will be continually
    reviewed to meet the 2008 goal of a 67-year rate. The fiscal year 2005
    request reflects a concerted effort by the DOD to reduce the SRM
    backlog and improve the Guard and Reserve facility readiness rating.
        Environmental Program
        The installation environmental programs managed by each RC 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 2005 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 military construction 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 concepts.
    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 (Introduced
            on March 24, 2004, as S.2299)
        Sec. 402. New title for the Vice-Chief of the National Guard
    Bureau.
        Sec. 411. End strengths for Selected Reserve.
        Sec. 412. End strengths for Reserves on active duty in support of
    the Reserves.
        Sec. 413. End strengths for military technicians (dual status).
        Sec. 414. Fiscal year 2005 limitation on number of non-dual status
    technicians.
        Sec. 415. Special rule for computing the high-36 month average for
    Reserve component members.
        Sec. 509. Length of terms for the Assistants to the Chairman of the
    Joint Chiefs of Staff for National Guard and Reserve Matters.
        Sec. 521. Revised concept of inactive duty and repeal of funeral
    honors duty.
        Sec. 522. Authorized strengths of Navy and Marine Corps Reserve
    flag and general officers.
        Sec. 523. Mandatory retention on active duty to qualify for
    retirement pay.
        Sec. 524. Amendment to the purpose of the Reserve components.
        Sec. 525. Accounting and management of National Guard and Reserve
    personnel performing active or full-time duty.
        Sec. 526. Waive requirement that Reserve chiefs and National Guard
    directors must have significant joint duty experience.
        Sec. 527. Extending age limits for Reserve and National Guard
    general and flag officers.
        Sec. 528. Expanded use of Reserve component members to perform
    developmental testing and new equipment.
        Sec. 581. Release of taxpayer addresses to help locate individuals
    with military service obligations.
        Sec. 582. Alternate initial military service obligation for persons
    with specialized skills.
        Sec. 583. Basic training requirement for certain members with
    specialized skills.
        Sec. 611. One-year extension of certain bonus and special pays for
    Reserve Forces.
        Sec. 612. Bonus for officers to serve in the Selected Reserve in a
    critical skill or manpower shortage.
        Sec. 905. Chain of succession for the Chief, National Guard Bureau.
        Sec. 1042. Establishment of auxiliaries within the military
    departments. Additional legislative proposals not part of S.2229
        Improved involuntary access to Reserve component members for
    enhanced training.
        Extension of payment for Federal Employees Health Benefits Plan
    (FEHBP) for mobilized Federal employees.

                                   CONCLUSION

        This administration views a mission-ready National Guard and
    Reserve as a critical element of our National Security Strategy. As a
    result, our RCs 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. That is why
    rebalancing of the force is so critical, the continuum of service is so
    crucial, and relieving the stress on the force is absolutely essential.
        Thank you very much for this opportunity to testify on behalf of
    the greatest Guard and Reserve Force in the world.

        Senator Chambliss. Thank you, Mr. Secretary.
        Senator Nelson and I, along with other Members of the
    Senate, have had an opportunity to visit with our guardsmen and
    women, too, and they are doing a terrific job. I have found the
    morale of those individuals that are serving to be very high.
        However, when you talk to their spouses, who have all of a
    sudden been cast into the role of paying bills when they've
    never done that before, who are having to worry about a flat
    tire when they never had to worry about that before, who are
    having to worry about making sure that their kids get to school
    on time every single day and that they get to work on time
    every day, it becomes another issue. I know you do surveys and
    counseling from time to time with families of deployed
    individuals. I'd like to hear the good side of it, with respect
    to what you heard from the troops, but, also, an opportunity to
    engage with spouses of those deployed individuals. What's their
    reaction to these long-term deployments?
        Mr. Hall. I have had the opportunity to visit with the
    families. I conduct a town hall meeting each and every place I
    go, and I invite the families. I have gone to deploying troops
    in which they have brought their families together, and I spoke
    with them about the challenges. Of course, during my active-
    duty service, my wife had to cope with deployments, but we had
    an active-duty base where we generally lived around, so we were
    located near that base, where we had a support mechanism.
        The challenge for our Guard and Reserve is that they're
    dispersed throughout the country, and they're not near an
    active-duty installation that might have the support
    facilities. I would ask my colleagues that follow to talk to
    you about their individual programs.
        From our perspective, we are dedicated to ensuring that
    each and every spouse of every deploying trooper is contacted
    during or before that deployment by someone to say, ``I am your
    support system.'' The manner in which we do that is to take a
    joint approach, since, in many places, we don't have the exact
    unit that you're serving in. The National Guard has over 400
    family service centers throughout the country. We have 700
    total if you add the rest of our Reserve components. Certainly
    within the radius of those 700 centers, there's going to be
    someone that can help you.
        I applaud General Blum's efforts to try to draw together a
    headquarters in which we will have representatives from all the
    Services that can help with the spouses out there and also with
    jointness within the individual States.
        About 2 years ago, we also established a Web-based system
    where we have counselors and advisors 24/7 that can answer
    questions that you might have if you're a spouse left behind,
    on any topic. What we've also done is go to the deploying
    troopers, and we've laminated a card, and it gives that
    telephone number that you're supposed to call and assuming they
    take it home to the spouse--``Here's the number to call.'' We
    also have a Reserve Affairs Web site that we operate which has
    useful tool kits of data at www.defenselink.mil/ra/
    familyreadiness.
        I think I will leave it to my colleagues to talk about
    their individual programs. What I want you to know is that,
    based on my own long military experience, the support of those
    families and children during their hour of need when their
    members are gone is absolutely critical, and we're dedicated to
    continuing the programs that I mentioned.
        Senator Chambliss. One of the issues that we continue to
    talk about as we moved through the authorization process last
    year as well as this year is equalizing benefits between the
    Guard and Reserve and Active Force. While we never will get to
    the point to where they're totally equal, and probably
    shouldn't, there are certain things that we feel are important,
    from the standpoint of morale, and also recruiting and
    retention in order to give you the assets and tools you need.
        In your written statement, you referred to the RAND study
    that's currently being conducted regarding the impact and costs
    of reducing the age at which reservists can collect retirement.
    This has been a much-asked-for issue on the part of reservists.
    The downsides of reducing the age to 55 include higher cost to
    the government and perhaps service members staying in longer
    and, therefore, preventing promotion opportunities for more
    junior personnel. However, there is an intangible benefit,
    which I'm not sure the RAND study will study, and the cost of
    it taken into account, and that is the benefit to the Reserve
    and the cost savings achieved by giving people an incentive to
    stay in the Reserve for a longer period of time. It seems this
    would likely save money by retaining our most well-trained
    people, thereby having fewer new people that we have to train
    to replace them.
        Can you comment on the likely cost savings that we may
    achieve through increased retention of more senior officer and
    enlisted personnel?
        Mr. Hall. We believe, and I believe, personally, very
    strongly, that we need to take a very broad look at our pay,
    benefits, and compensation. Anytime we get ready to change that
    system, such as the 55-year retirement or other kinds of
    proposals that have come forward, we need to ask, whether or
    not the intended consequences of that target those bearing the
    brunt of service today. We have about 130,000 of our guardsmen
    and reservists between the ages of 55 and 60; 30,000 of those
    are still serving. They're ones that are dedicated Americans
    that have already served, but they're not the ones that are
    deploying today.
        The RAND study is about 1 year into its 2-year study.
    Preliminary results tell us that our younger guardsmen and
    reservists serving today who are 17- to 30-years old, heavily
    discount deferred compensation. It is not something which is
    important to them for recruiting and retention. What they put a
    high price on are the kind of benefits that we can give them
    and their families today to enhance their service today.
        We want to make sure that if we make any changes, if the
    top line remains the same, and if we only have a certain amount
    of money to spend, that we target it towards those serving and
    bearing the brunt today. We believe that some of the proposals
    with TRICARE and 55-year retirement do not do that. They are
    very costly, and they do not have an impact on the recruiting
    and retention of the people that we need to retain. Many of
    those people that would be affected by the early retirement are
    military technicians that are very valuable, that serve between
    the ages of 55 and 60.
        As a bottom line, Mr. Chairman, I think we need to be very
    careful and target the limited funds that we have to support
    those bearing the brunt today, instead of deferred
    compensation. I would like to incentivize people to stay
    longer, rather than leave earlier. People are healthier so we
    can use them. I think incentives ought to be towards staying
    longer, rather than leaving earlier.
        Senator Chambliss. Speaking of TRICARE, Senator Daschle and
    Senator Lindsey Graham appeared before this subcommittee at a
    previous hearing and made a presentation on their proposal to
    make TRICARE available to our guardsmen and reservists. That's
    an issue that we'll be discussing as we move through the
    authorization process.
        In looking at the budget from DOD, there were no
    initiatives that were forthcoming in this area. In your
    statement, speaking on behalf of DOD, you state your intent to
    implement section 702 of last year's National Defense
    Authorization Act, which does allow TRICARE enrollment for
    Reserve component members who are unemployed or ineligible for
    employer-sponsored health benefits. When do you expect section
    702 to be implemented?
        Mr. Hall. Dr. Winkenwerder, the Assistant Secretary of
    Defense for Health Affairs, whom I believe you have spoken with
    and I have talked with as recently as this week, states that
    they are moving forward to implement that as soon as they can.
    They have not given me the date, but I am convinced that they
    are moving forward on that.
        If you wanted to talk a little bit about the other
    provisions, such as TRICARE, we can, or we can defer that,
    because I have a few comments on what Congress passed last year
    and how we're proceeding on the other provisions.
        Senator Chambliss. I think it's such a critical issue.
    Anything you want to add or address, we would welcome.
        Mr. Hall. There are a couple of areas. The TRICARE
    demonstration program that has been in effect for a couple of
    years, has been exceptionally well-received, and I thank you
    for that. It extends for people that are in the current
    mobilization where our guardsmen and reservists and their
    families have the opportunity to waive the non-availability
    statement, and waive the $300 co-pay, and they have the
    opportunity for 115 percent pay on and above TRICARE.
        Beyond that, the provisions that you mentioned, from 702 on
    down to 708 last year, were very helpful. In particular, having
    180 days in which a guardsman or reservist and their families
    may be cared for after he or she leaves service, allows them to
    transition to their civilian policy and their job, and is very
    helpful. This is the same as for the active-duty personnel.
    That's already implemented. The rest of the provisions, which
    involve up to 90 days prior to your deployment, in which you
    and your family may be treated is in the process of being
    implemented.
        What I believe you provided was a framework which the DOD
    is working hard to implement. There are some ending dates for
    some of the provisions, such as December 31. I think we should
    consider extending those dates. That's certainly your judgment
    on that, but I think we have an adequate TRICARE implementation
    from last year, and an adequate bill, and perhaps it could be
    extended. But I do not see, at this point, that having TRICARE
    for non-mobilized personnel all the time in a drilling status
    is the wisest use of our funds. I think it's adequate now.
    Perhaps the provisions could be extended. We need to work very
    hard to implement all the provisions as soon as we can.
        Senator Chambliss. I would encourage you to do that. There
    were reasons why that was part of last year's Defense
    Authorization Act. We need the DOD to act on that. We made a
    commitment to the guardsmen and reservists, and we need the DOD
    to move.
        Mr. Hall. Sir, I think Dr. Winkenwerder has received your
    message loud and clear. I will continue to relay your message,
    and I will support its rapid implementation. Since my portfolio
    is the Guard and Reserve, I'll continue to support that.
        Senator Chambliss. Senator Nelson.
        Senator Ben Nelson. Thank you, Mr. Chairman.
        The statistic of 130,000 Guard and Reserve personnel being
    between the age of 55 and 60 means that in the near future, 9
    percent of the Reserve component members will be retiring. Is
    that your understanding?
        Mr. Hall. Yes, sir.
        Senator Ben Nelson. Recruitment and retention of the below-
    55 members is going to be extremely important, and that's why I
    applaud your efforts to try to make sure that the compensation
    and benefits are competitive with the outside world, in terms
    of employment. It's also why we have to work on some sort of
    rebalancing of the Guard mission.
        In rebalancing the forces, Secretary Rumsfeld, in July
    2003, issued a memorandum. One of the objectives contained in
    the memorandum was to, ``structure forces in order to limit
    involuntary mobilization to not more than 1 year every 6
    years.'' It appears that the objective is designed to provide
    some degree of predictability to those who choose to join our
    Guard and Reserve Forces.
        In spite of the well-intentioned effort here, I've heard
    this concept described in two rather inconsistent ways. One
    description is that it is, in a sense, a limit. Guard and
    Reserve personnel can plan on no more than a 1-year
    mobilization in a 6-year period, barring extraordinary
    circumstances, when, of course, they would do whatever our
    national security might require. The other interpretation,
    which I received recently when I was back home, was that Guard
    and Reserve personnel should expect to be mobilized 1 year in
    every 6. The Guard member talking to me about that said that
    explaining to an employer or a spouse that a service member
    expects to be deployed is quite different than explaining that
    if he or she is deployed under normal circumstances, it
    wouldn't be more frequently than 1 year every 6 years.
        Do you know what the DOD position is on that? Is it a
    limit, not to expect it? Or is it an expectation to expect it?
    Maybe you can help.
        Another objective stated in the Secretary of Defense's
    memorandum was, ``structure Active and Reserve Forces to reduce
    the need for involuntary mobilization of the Guard and Reserve.
    Eliminate the need for involuntary mobilization during the
    first 15 days of a rapid-response operation.'' I would like to
    have you explain the first quote, if you can; and then approach
    the second quote.
        Mr. Hall. I certainly can, and I'm happy to do that. I'm
    very familiar with that memo.
        First let me say, both of those are planning factors; they
    are not policy, and they are not and should not be taken so. To
    answer our guardsmen and reservists, they should not expect an
    interpretation of those. Those were planning factors.
        The genesis of it was the following. The Secretary of
    Defense asked us to look at how many times we had mobilized
    over the past 13 years. We've mobilized our Guard and Reserve
    eight times over the past 13 years. He asked us to look within
    those mobilizations to see how many times we mobilized people
    two, three, and four times, because that puts a great deal of
    stress on the employers and families. We found out that a small
    group went two, three, and four times.
        Senator Ben Nelson. Was that because of the skill sets that
    they had?
        Mr. Hall. Yes.
        Senator Ben Nelson. Was it transportation or something of
    that sort?
        Mr. Hall. Yes, sir. I was just getting to that. That's
    about 28,000 of them, 3 percent, and we discovered it's all the
    same skill set. It's civil affairs, it's mortuary units, it's
    force protection, and it's air-traffic control. While it's a
    very small amount, if we continue to mobilize them, then we're
    going to have problems. He therefore asked another question:
    How many of our Guard and Reserve have we used since September
    11? We have used about 37 percent, but we have 63 percent that
    we have not used. So it's as important to look at the ones that
    we have not used as it is to look at the ones that we have
    used, and then come to some conclusion: Do we need to
    rebalance?
        So we went to the Services and asked, ``Given a planning
    factor of one in six''--he said, it might be one in four; it
    might be one in five--``why do we have to, every time we have a
    crisis, in the first 15 days call up the Guard and Reserve? We
    have 1.4 million active duty. Can't we handle each and every
    crisis without always having to go to the Guard and Reserve?
    Are you going to be able, with your Active-Duty Forces and
    Guard, to restructure your force so that we can provide
    predictability?'' You hit upon it. Predictability is the most
    important thing. I know my own family wanted to know when I
    would be deployed, how long I was going to be there, and when I
    was going to be home. An employer wants to know that. The
    Services have looked at it and said, ``We think we can
    rebalance.'' Some of them differ somewhat on the one in five,
    and one in six. Perhaps that's a stress point. We don't know
    whether if you're told once in every 6 years, you're going have
    to go for 6 months. We don't know whether that's too much
    stress or too little. Without performing an analysis and
    developing the metrics, we have nothing to work with.
        So, in 2003, we have rebalanced about 10,000 billets. In
    2004, we're currently rebalancing 20,000. Now there are 20,000
    in the budget that's before you. We have about 50,000 more to
    go. As we rebalance the 100,000 or so billets in these critical
    skills, build more civil affairs, and build more military
    police, then we won't have to go to the well in those critical
    specialities. We hope to tell a guardsman and reservist some
    idea of what, in a normal circumstance, would be a requirement
    for mobilization.
        We're using them as planning factors. From that, we hope to
    develop predictability models. That is what I say to the
    guardsmen and reservists--and, by the way, I think guardsmen
    and reservists expect to be called up whenever their Nation
    needs them. That's the kind of young men and women they are.
    They will do whatever.
        But they do want to know, so they can work with those
    employers. That's the reason for the memo, and that's its
    genesis. We're about halfway through that rebalancing effort,
    and next year we expect to get the remainder of it, and develop
    the type of force that we need.
        Senator Ben Nelson. Right now, the Guard and Reserve units
    that you've described, with the skill sets, are first-line.
        Mr. Hall. Yes.
        Senator Ben Nelson. That's a layer. They're the first ones
    to come in. Are you working to have it more of a tranche that
    goes down alongside? In other words, they can be for excess
    requirements or for additional surplus. They are complementary
    as well as supplemental, as opposed to front line. If somebody
    is in the civil affairs and has a skill set in that unit, they
    know that they'll be called to duty if we go above a certain
    level of Active-Duty Forces, as opposed to you're going to
    deploy every time, having multiple deployments because we
    haven't rebalanced yet.
        Mr. Hall. We're approaching it in a couple of ways. First
    of all, we're not transferring large amounts to active duty
    from the Guard and Reserve. We're rebalancing within the
    active, and rebalancing within the Guard and Reserve. What
    we're doing, particularly within the Guard and Reserve, is
    creating a larger base to draw from, so if you build more civil
    affairs people, then you don't have to go to the same ones each
    and every time. We are rebalancing, not by transferring between
    components, but within the components, to provide a larger
    base.
        Plus we have a lot of excess artillery because of our
    strategy. My colleagues can give you some examples. We're
    creating 18 provisional military police battalions from those
    artillery battalions training out in Fort Leonard Wood. They're
    provisional for a couple of years. They will have a Military
    Occupational Specialty (MOS) if later on we need to move them
    back the other way. We're hedging against the requirements, and
    creating a larger base to draw from; thus, not stressing the
    same individuals all the time.
        Senator Ben Nelson. I understand that, but it seems to me
    that we're setting it up, therefore, to be that the Guard and
    Reserve units are not supplemental; they're going to be
    primary. It's just whether you have enough of them so they
    don't have a multiple deployment. I was hoping that you were
    going to find a way to absorb some of those skill sets in the
    Active-Duty Forces so that the Guard gets called in those
    unusual circumstances where you need more personnel, not
    because you need their particular skill set so that they can
    count on being called up on any emergency. I'm a little
    troubled. I think a tranche approach, as opposed to a layer
    approach, would seem to me to make more sense, so that you
    don't have to call on them until you get to the point where
    you've exhausted all the active-duty troops. Otherwise, we're
    setting up where they can expect a call-up, as opposed to not
    expecting a call-up unless circumstances are so dire, or
    sustained use, of active-duty troops would require them to come
    in and provide some support.
        Mr. Hall. It's a point well-taken, and it echoes Secretary
    Rumsfeld's concern about needing to build more civil affairs
    capability within the active-duty, so that it is there to be
    used, and we would only go to the Guard and Reserve after we've
    used that up. There's another way in which you can do it. We
    have later-deploying Active-Duty Forces for other contingencies
    that could be moved forward. You certainly incur a risk, if
    they're designed for another contingency. But if you assess
    that risk, then you can move them forward, and use them in the
    early stages, and you would not have to go to the Guard and
    Reserve each time. His concern is exactly that. Civil affairs,
    for example, is an ideal mission for the Guard and Reserve,
    because those kinds of people do that in their civilian jobs as
    city managers, etc. It's ideally suited to the Guard and
    Reserve. It's a little more difficult on the active side to
    maintain those skills. But we're looking at accomplishing what
    you want as part of this rebalancing.
        Senator Ben Nelson. You'd better tell the people who are in
    civil affairs that you're more likely to get called up because
    of what your skill sets are. Perhaps, depending on the unit and
    their particular skills, some are less likely to be called up
    than others. If we're dealing with expectations, I think we
    have to deal realistically with what those expectations are up
    front. Otherwise, I don't think it's being fair to the Guard
    and Reserve units, and we want to be fair, and I know you do
    too.
        Mr. Hall. Yes, sir. I agree. I think my colleagues can also
    elaborate somewhat on their approach to the expectations of the
    individual components. I concur with you.
        Senator Ben Nelson. I have another question, but I think
    what I can do is perhaps ask some of the other members of the
    panel. That'll deal with the use of Guard and Reserve units
    more for homeland defense. It doesn't downplay or in any way
    denigrate their service to the country, but it probably has a
    greater impact on homeland security, rather than having them
    the equivalent of an Active-Duty Force, one that's only home
    for a period of time until they get called up again so that
    they need to consider themselves active duty, just not called
    up at the moment. I don't think that's what they're signing up
    for. We can really deal with expectations in a realistic
    fashion in a fair way.
        Mr. Hall. Yes, sir, I would certainly think that General
    Blum and General Schultz and our National Guard, which is
    ideally positioned in every State for homeland security, would
    be happy to discuss some of their views on how our Guard Forces
    might be used for homeland security, as well as multi-missions
    that they have.
        Senator Ben Nelson. As former governor and the titular head
    of the Guard in Nebraska, I appreciate those thoughts, because
    the homeland defense is nothing more than home-town and home-
    State defense when it comes down to it. So thank you.
        Thank you, Mr. Chairman.
        Senator Chambliss. Thank you.
        Senator Dole.
        Senator Dole. Thank you, Mr. Chairman.
        Secretary Hall, many of our Guard and reservists, who are
    called up, are either working for small businesses or they are
    small-business owners. Given the historic magnitude of the
    activations and the substantial economic ramifications from
    that, would you outline for the subcommittee how you prepare
    these small business owners and employees for the possibility
    of 12 to 18 months away? How do you do that before they're
    activated? How do you do it after they return? What's the plan?
        Mr. Hall. It's good to see you. I didn't see you come in,
    I'm sorry. I was in the great State of North Carolina, and had
    the opportunity to go and talk to some business owners. I went
    to New Bern, North Carolina, which I hadn't been to.
        Senator Dole. Thank you.
        Mr. Hall. I talked to a town hall meeting and a couple of
    groups, and one of the young men--they're all young to me
    today--came up and said, ``I own a company. There are five of
    us in the company. I'm the owner. I'm in the Guard and Reserve.
    My number two is in the Guard and Reserve, and we're both being
    called up, and there are only three people left in my
    company.'' You have the very problem that we have, in dealing
    with employers. The large companies such as Home Depot, that
    has 1,800 people mobilized, Mr. Nardelli does--do not have the
    same challenge as people with practices, that are gone, and
    have small businesses. We're looking for ideas, and trying to
    work with them to see what we can do.
        Senator Dole. North Carolina is a State of small
    businesses.
        Mr. Hall. I asked the owner of this company in New Bern,
    ``What are you going to do?'' He said, ``Well, the three others
    are going to carry on, along with hiring some temporary
    employees.'' I think it is an area where we need to work with
    them, and try to do what we can. There are a number of ideas
    and proposals for tax breaks for companies. These are potential
    areas and ideas that we could float around. I think our largest
    challenge is not with our big companies. Also, I would mention
    doctors and perhaps attorneys who have practices, because when
    you leave, your clients have a tendency to go somewhere else.
        Senator Dole. Right.
        Mr. Hall. We're working as closely with them as we can.
    We're also always examining potential legislation and other
    things that we can help them with.
        Senator Dole. Okay. Several weeks ago Dr. Chu was here, and
    he talked about the implementation of the Defense Integrated
    Military Human Resources System (DIMHRS) that will include
    every Guard and Reserve member as an integrated part of the DOD
    database system.
        Mr. Hall. Yes.
        Senator Dole. The target date for that, I believe, is the
    first quarter of 2006. In your opinion, will DIMHRS resolve the
    record-keeping discrepancies that we've been dealing with, that
    continue to plague the Guard and Reserve members? Do you think
    that's going to take care of it? How do you propose to resolve
    pay problems in the interim?
        Mr. Hall. Yes, ma'am. The need for this has existed for a
    long time, including the time that I was on active duty. You're
    quite right, the initial operating capability of the DIMHRS is
    2006, with a full operating capability in 2007.
        In the meantime, we have a more pressing problem, and that
    is with pay. I believe we have a commitment to pay, accurately
    and quickly, our Guard and Reserve and our active-duty;
    therefore, recognizing that, there's an initiative that will
    speed up the common-pay system, not the personnel, and it's
    called ``forward compatibility pay.'' I met with that group a
    month ago, and they're going to back up to initial operating
    capability, in 2005, a pay system that will make a common pay
    system, and continue to work on getting the personnel system
    down the way.
        Senator Dole. Right.
        Mr. Hall. In addition to that, the problems we've
    experienced, which you're well aware of, with paying some of
    our Guard and Reserve are recognized. Earlier in the year, we
    mobilized some military pay companies. We asked the Defense
    Finance and Accounting System (DFAS) to hire some more people,
    and to attack that problem. We are committed each and every
    time we hear of a pay problem. There are some more initiatives
    to speed that up, and when DIMHRS is fully implemented, it is
    the long-term answer. However, we need to do something quicker,
    so we're going to work on pay, and we're not going to wait
    until 2007. It will reach Initial Operating Capability (IOC)
    next year.
        Senator Dole. What about reenlistment incentives, and the
    difference between the two? What's available to National Guard
    soldiers is different than the Reserves. What is the National
    Guard doing to address the difference? How can the Senate
    assist in this? I'm wondering if there's any reason why the
    statutory limitation should not be changed?
        Mr. Hall. Generals Blum and Schultz and James can talk
    about what the National Guard is doing in particular on those
    programs. I think what we attempt to do is to recognize that
    there is a difference in the type of service. Being unequal is
    not necessarily unfair. Our bonuses and our pay should
    characterize the nature of service. Certainly this is not your
    grandfather or your father's Guard and Reserve, and people are
    serving longer periods of time. But, still, the difference
    between being part-time and full-time, it's somewhat blurred.
    We have to recognize the type of service, and ensure that our
    bonuses and pay recognize it. I think they do fairly. As for
    the exact approach of the Guard and Reserve on bonuses, I would
    defer to the next panel.
        Senator Dole. All right, thank you.
        Thank you, Mr. Chairman.
        Senator Chambliss. Mr. Secretary, is it correct that 20 to
    25 percent of the current deployed troops in Iraq being Guard
    and Reserve, and also that by the time the next rotation is
    complete at the end of this year, that that figure will rise to
    as much as 50 to 55 percent?
        Mr. Hall. I think a figure of closer to 40 percent is what
    we're going to grow to within the Guard and Reserve Forces.
    That is the number that I've been working with. I have not
    heard as high as 55. I think it's safe to say, with the
    upcoming OIF rotation, 40 percent of our forces will be Guard
    and Reserve.
        Senator Chambliss. Even though you're rebalancing the force
    and you're trying to make do with what you have, I'm a little
    bit concerned about the answers to some of your questions today
    relative to deployment, relative to benefits. I hope that
    there's a lot of thought process going on every single day as
    to how we're going to make sure that we're treating our current
    guardsmen and women and reservists fairly and equitably, and
    that we're committing the resources to them that really need to
    be committed to them, and also that there is planning on the
    part of your office for how to implement these benefits that
    have already been provided. I can tell you that there will be
    additional benefits given to guardsmen and reservists during
    this authorization process.
        There's a challenge out there to make sure that we have
    these men and women very well-prepared when they're called on.
    We know they're going to be called on. I would just ask that
    your office continue to rethink the process of providing these
    additional benefits that have already been provided and that
    will be provided, and that we make sure that we're treating
    these men and women, and their families, in the way that a
    consensus of the Members of Congress want them to be treated. I
    don't think that's any different from what folks at DOD think.
    I am a little bit concerned that we're not moving at the rate
    and in the direction that I think Congress has asked the DOD to
    proceed with respect to our guardsmen and reservists. Is there
    anything else?
        Senator Ben Nelson. I have one final thought. In terms of
    the compensation, to be fair to our Guard and Reserve units who
    are deployed, we've proposed, and I would hope that DOD would
    support, the equivalent of a 401(k) deployment fund. In other
    words, it would permit Guard and Reserve men and women to put
    aside money with favorable tax treatment, so that at the time
    they're deployed, they can pull it back out and supplement
    their income. In other words, it's really providing for that
    day of deployment. Others might consider it a rainy-day fund,
    but this is a deployment fund that would benefit particularly
    those individuals in practices or who have businesses that
    would see a sizeable reduction in their pay and their income
    due to deployment. This would at least help them average that
    out so that they get it done. When we proposed that last year,
    it got to the Finance Committee, and I think it died. If we had
    the active support of DOD, I don't think it would languish; I
    think it might actually see the light of day, and I think it
    would be very beneficial to a number of our members of the
    Guard and Reserve units.
        Mr. Hall. Yes, sir.
        Senator Chambliss. Secretary Hall, thank you for your
    testimony. There may be additional written questions that will
    be submitted to you by these three Senators, as well as Members
    who could not be here. We'd ask that you please get those
    responses back to us as soon as possible.
        Mr. Hall. Yes, sir. I appreciated having the opportunity to
    be with you and speak to the Senate Reserve Caucus, and I thank
    you for that leadership.
        Senator Chambliss. We appreciate that you were there the
    other day, and did a great job speaking to us.
        Mr. Hall. I'm going to stay with my colleagues here as they
    testify.
        Thank you very much.
        Senator Chambliss. Great. Thank you.
        I'd now like to welcome our next panel, Lieutenant General
    H. Steven Blum, who is the Chief of the National Guard Bureau;
    Lieutenant General Roger C. Schultz, the Director of the Army
    National Guard; and Lieutenant General Daniel James III,
    Director of the Air National Guard.
        Gentlemen, if you all will please have a seat. Good
    morning. [Pause.]
        Gentlemen, thank you very much for your service and your
    commitment to our country in these complex times that we're in
    today in the United States, as well as around the world. You
    and the men and women that serve under each and every one of
    you are doing a terrific job. From all Members of the United
    States Senate, we say thank you, and hope you tell them ``job
    well done.''
        We appreciate your being here today, we have each of your
    written statements for the record, but we'd ask that you
    summarize that statement.
        General Blum, we'll begin with you.

      STATEMENT OF LTG H. STEVEN BLUM, USA, CHIEF, NATIONAL GUARD
                      BUREAU, ARMY NATIONAL GUARD

        General Blum. Thank you, sir. Thank you, Mr. Chairman.
        Senator Chambliss, Senator Nelson and other members of the
    subcommittee, thanks for the opportunity for providing General
    Schultz, General James, and myself the opportunity to come and
    testify this morning. We appreciate your appreciation of the
    tremendous service of these young men and women that we've
    brought with us today.
        Senator Nelson, you introduced two individuals. I'd like to
    complete the introduction, if I might. I have an Air National
    Guard member here who is a senior master sergeant. Drew, would
    you please stand. This is Drew Horn, from Pennsylvania. He has
    a distinguished record in both Afghanistan and Iraq, as well as
    back here at home, and he rounds out the joint team of the
    National Guard, Army, and Air. I completely appreciate your
    recognition of them today. [Applause.]
        Ladies and gentlemen, your National Guard has three
    priorities. The first priority is homeland defense, which gets
    to Senator Nelson's issue right up front. We feel that homeland
    defense is our number one mission for your National Guard, both
    here, every day, 24/7, for the last 367 years. We intend to be
    your primary force, for governors, and as your first military
    responders that can be called up by the governor in any State
    or territory of this great Nation. We will not only be homeland
    defense forces. We see our homeland defense job being in two
    places, both here at home and abroad, simultaneously. What
    these great citizen soldiers and airmen have just come back
    from is really homeland defense in depth, or the scheduled away
    game, but we must, as you pointed out earlier, very well and
    rightfully be ready for the unscheduled home game at any given
    time or any act of nature, any reduced human suffering, or any
    natural disaster in which the governor may need to call
    military forces to supplement or support civilian forces in
    their State or territory.
        The second priority is to support the warfighting. We are a
    dual-mission force. The Army and the Air National Guard are
    constitutionally established as a dual-mission citizen militia.
    In 1903, Congress made sure that the National Guard was
    available and able, and rightfully so, because of the
    experience of the Spanish-American War and the Civil War in our
    own Nation earlier. Most specifically, because of some
    difficulties in the Spanish-American War, legislation was put
    in place to make sure that the Army National Guard and,
    subsequently, the Air National Guard, which didn't exist then,
    but now has a dual-mission, and serves as a Federal Reserve of
    the Air Force and the Army, National Guard serves as a Federal
    Reserve of the Army. We're quite proud of that. All of those
    skills, capabilities, training, and equipment are quite
    transferrable to use for responding to the governors. It
    actually is an enabler and an enhancer. I think it's great.
    It's what our Founding Fathers intended, that we would be a
    citizen militia Nation, and that we would never go to war
    without the American people behind it. Some people call that
    the Abrams Doctrine. I call that the Constitution. I think the
    Founding Fathers had that in mind, that we would never go to
    war as a Nation without our National Guard, we shouldn't, and
    we didn't, and I don't think we should in the future.
        Now, to what degree we participate, how early we get in
    there, and how late we stay, is subject to debate by the
    national leadership. We were ready to respond and support the
    warfight anytime, anywhere.
        Our third priority is to transform and change, so that
    we're relevant and ready for today and tomorrow, and not just a
    reenactment group that has not changed from the past. Frankly,
    the National Guard has neglected changing for the last 60 years
    to the extent it should, not by its own fault. It did what it
    was designed to do; it did what it was asked to do; and it did
    what it was resourced to do. The statutes and policies were put
    in place for the National Guard to be a strategic reserve to be
    called upon only for something in the nature of World War III,
    to go overseas. We were resourced that way, and we were to be a
    cadre force with higher force structure allowance than end
    strength, which means some hollowness that would be filled up
    by volunteers or draftees, really. We haven't had a draft in 30
    years, and we forgot to change anything when we stopped the
    draft. So our refill mechanism doesn't exist as it did, and our
    model is wrong for the way we're using the Guard today, and
    we'll need to use the Guard for the next several years. We need
    to transform from a Cold War deterrent structure that was a
    strategic reserve, to be an operational reserve, much like our
    Air National Guard, which, 20 years ago, the United States Air
    Force fully integrated as an operational reserve element. The
    Air Force uses the Air National Guard and the Air Force Reserve
    every day that ends with ``Y'' year round, whether we're at
    peace or at war. They know how to manage that cycle where it
    doesn't stress the force. The Army has now, in the last 2\1/2\
    years, discovered the Army National Guard as an operational
    reserve, and they're trying to apply us as an operational
    reserve through the mechanisms of a strategic reserve, which is
    why the mobilization system is wrong for today and does need
    massive transformation. The process is archaic for the way
    we're using the Guard and the Army Reserve today, and the other
    Reserve component forces today.
        Specifically, the mobilization process is most flawed when
    you talk about Army National Guard and Army Reserve. General
    Helmly will probably talk to that a little bit later, as well.
        We need to move from that to what we need to be, and that
    means we need to transform.
        To get to your issue, there was an issue several years ago
    of whether the National Guard was relevant. In less than 2
    years from now, all eight once-considered-irrelevant Guard
    division headquarters will have deployed overseas. All eight.
    We will be starting our cycle for the second time around for
    those forces that were once considered to be irrelevant.
        We have moved from being questioned as being irrelevant, to
    being essential, as you can see. Forty percent of the troops on
    the ground in Iraq at Easter of this year will be guardsmen and
    reservists. One-hundred percent of the forces on the ground in
    Bosnia, Kosovo, and in the Sinai will be Guard and Reserve.
    One-hundred percent. A significant number, approaching somewhat
    slightly less than half of the forces in Afghanistan will be
    Guard and Reserve. We are clearly an essential force. If we're
    going to be essential and if we're going to be necessary and
    relevant, and now people in the Pentagon, and DOD, and in
    Congress really need to see what some governors saw 5, 6, 7
    years ago for homeland defense. They are now taking that very
    seriously since September 11. So in our national security
    strategy of 1-4-2-1, one being homeland defense, the National
    Guard sees itself as the primary first military responder in
    that effort. However, we'll need all the help of the Navy, Air
    Force, Marine Corps Reserve, and the Army Reserve, which are
    represented in this room, as well.
        American citizens should get all of the capabilities that
    DOD can bring to the fight without turf and parochialism
    interfering. Hence, the establishment of a Joint Force
    Headquarters in every State and territory would facilitate that
    kind of a response. These headquarters would be under the
    control of the governors, but serve the combatant commanders of
    Northern Command (NORTHCOM) and the newly-established Office of
    the Secretary of Defense (OSD) for Homeland Defense, if
    Secretary McHale would need us to respond through orders to
    NORTHCOM. Then we have a mechanism to actually plug in your
    Army and Air National Guard assets to a Joint Force
    Headquarters.
        Moving to the last part, the predictability piece, we need
    to rebalance the force and get the right ``shelf stockage'' so
    I have enough stockage on the shelf that I don't need to keep
    rotating the same item over and over and over; I can use it
    every fifth or sixth time, which gets us to some predictability
    model. No, sir, we have not guaranteed that you'll be called
    only in 6 years, or that you would be called every 6 years; it
    is to allow something that gives us a little bit of certainty
    and predictability in these uncertain and unpredictable times.
        Lastly, we want to recognize that we're both deployable
    warriors for the overseas warfight, as well as guardians of our
    homeland. Most importantly, in the end it's all about people,
    and that's why it's so important that we have the opportunity
    to present these issues to this subcommittee and answer your
    questions.
        Thank you, sir.
        Senator Chambliss. Thank you, General.
        General Schultz.

    STATEMENT OF LTG ROGER C. SCHULTZ, USA, DIRECTOR, ARMY NATIONAL
                                 GUARD

        General Schultz. Mr. Chairman, members of the subcommittee,
    thanks for your concern for our soldiers and their welfare, and
    for our families and their well-being.
        Mr. Chairman, I am definitely honored to represent two
    soldiers here today who represent thousands around the world,
    and who have deployed in all corners of this globe. In
    particular, I believe we're indebted to what they have done in
    spite of all the systems, and all the processes that weren't
    necessarily as we would have hoped in place. You know the
    stories well, because you hear, from back home, without a
    doubt.
        Mr. Chairman, since the September 11 attacks, we've called
    more than 175,000 soldiers from the Army National Guard to
    Federal duty. Today, we have 94,973 soldiers on duty. They have
    responded to every call. I am, indeed, proud to represent them
    here today. You must keep in mind, also, Mr. Chairman, that we
    are welcoming home thousands of soldiers from current duty
    around the world. As we bring home a number of our members, we
    are also deploying many of our members.
        My point here in this brief opening is to say that while we
    didn't plan on soldiers responding on very short notice, but
    because of their quality and leadership in their ranks, we were
    able to pull out some of the missions that we originally hadn't
    planned, in every detail. They responded to every aspect of the
    mission.
        Mr. Chairman, readiness in the Guard has taken on a new
    dimension, and we no longer have time to take months of
    preparation and planning. This is a very different expectation,
    in terms of what we ask of our soldiers and our employers
    today, which puts a certain amount of stress in the way we go
    about our operation, and the way we go about our business.
        My point is, we prepared for a very different war. Our
    units are not all designed as they ought to be. We have change
    on the horizon for the National Guard, and I will work with
    each of the adjutants general, and General Blum at the National
    Guard Bureau, no doubt, to line up with each State their
    current unit set so that we do address the homeland defense
    missions as well as the rest of the missions required by the
    Army.
        Mr. Chairman, our priority is going to come down to this.
    As I'm talking with a soldier about to deploy to Iraq, his
    concern is not about a bonus; his concern is not about a policy
    that we may be debating here in Washington; he said, ``General,
    what I want to do is bring the squad home safely.'' That is our
    priority.
        Thank you.
        Senator Chambliss. Thank you, General.
        General James.

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

        General James. Mr. Chairman, on behalf of the more than
    107,000 men and women of the Air National Guard, I'd like to
    thank you for the opportunity to come and speak with you here
    today, and thank you for your support of our great Air National
    Guard, our National Guard, and our Services, in general.
        This has been an incredible year for the Nation and for the
    National Guard. We've continued to actively participate in the
    global war on terrorism. We've done so with determination and
    pride, and continue to validate all things that we thought
    about ourselves as an organization. If we are trained and
    resourced to fight, we will deliver the mission as true
    professionals.
        Our contributions over the past year have been astounding,
    especially when you look at OIF. We've flown over 111,000
    sorties for over 340,000 hours, and we've activated, at our
    peak time, up to 36,000 members.
        Of special interest to you, I'm sure, is that OIF was the
    first combat employment of the integrated 116th Air Control
    Wing, in Georgia, flying the Joint Surveillance and Targeting
    Attack Radar System (JSTARS). The wing leadership, the Guard,
    and active crew members all performed superbly. Except for some
    administrative issues we still have to clear up, they have
    validated the concept of a blended or integrated wing. It will
    work. It can work, and we're very proud of their performance.
        We're currently working on a plan to posture the Air
    National Guard for missions our Nation will need in the future.
    We're currently reviewing the capabilities that we have, and
    those that will be required, for the air and space force of the
    future. We're already well into developing initiatives that
    will allow the Guard, the Air National Guard, to participate in
    new weapons systems, like the F/A-22 and the RQ-1 Predator
    unmanned aerial vehicle (UAV). We're excited about the
    prospects of being involved in those new weapons systems, and
    working side-by-side, as we have so effectively in the past,
    with our active component brethren.
        We're proud of our performance. We're proud of our
    individuals, because, as General Blum said, what this really is
    all about is people. We appreciate the support that you've
    given us through legislation and funding, so that we could do
    our job.
        Some time ago, the Air Force decided that, as General Blum
    pointed out earlier, the Air National Guard and the Air Force
    Reserve deserved to be funded and resourced at a higher level
    than they had in the past. They were embraced as full partners
    in the total force, and we have performed up to their
    expectations. In order to continue to do that, we ask that you
    continue to support us.
        Thank you for the opportunity to speak with you today.
        [The National Guard 2005 Posture Statement follows:]

        Senator Chambliss. Thank you very much, General. Thanks for
    mentioning the 116th. They hold a very special place in my
    heart, as does all the activity at Robins. That particular unit
    is, without question, going to be the model for the future of
    the integrated and blended force. General Lynn and his folks
    are doing a terrific job, and it always makes me feel good when
    I have an Army officer come in here and testify about what's
    going on, on the battlefield. Invariably, every one of them
    will mention they couldn't do their job without JSTARS. For
    that to be a joint operation of the Guard and Reserve, says an
    awful lot about the men and women, but it also says an awful
    lot about the leadership. So I appreciate all of your comments.
        If you heard my opening statement, I talked about the
    situation involving sexual assault. The incidence of sexual
    assault in any of the Armed Forces, including our forces in
    Iraq, has resulted in the Secretary of Defense directing a
    review of policy and programs aimed at preventing sexual
    assault, investigating and prosecuting offenses, and responding
    to the needs of victims. I'd like for each one of you to tell
    us what you've done in your organization in response to the DOD
    review and your assessment of what needs to be done in your
    organization to ensure appropriate policies and programs are in
    place.
        General Blum.
        General Blum. Certainly, sir. First of all, we see sexual
    assault as a reprehensible crime. It must be dealt with
    harshly, immediately, and fully, and I'll let General Schultz
    tell you what we're doing with the Army Guard leadership.
    General James will address what we're doing with the Air Guard
    leadership to make sure that this is well-understood by all
    service members in all ranks.
        General Schultz.
        General Schultz. Mr. Chairman, based on the point you
    raised, I've been working with the Army staff, and our members
    of the staff as well, with regard to developing Army policies.
    The one case we've had in the Guard, that was a soldier who was
    on active duty at the time, but no doubt she's still a member
    of one of the State Guards, and we carry the very specific
    intent of looking after her own well-being as we move through a
    pretty troubling case. We have, inside the Army, been part of
    the review process. In other words, we review the rules and the
    policies that need to be in place. We've had very active,
    aggressive staffing on the points you raise here of concern.
        Even though the circumstance that I'm talking about took
    place on active duty, we've been in touch with the installation
    commander and the staff down there to make certain that we can
    contribute in any way, in a constructive sense, to the outcome
    of those cases.
        General James. Mr. Chairman, as far as the Air National
    Guard is concerned, we have taken the lead on that. The Vice
    Chief of Staff of the Air Force is polling our units to find
    out how big a problem we have. What I'm concerned about is
    whether or not we have the proper training and the proper tools
    for the leadership of these units out in the field so that they
    can identify, counsel, and prevent sexual assault. That's the
    bottom line.
        In concert with that, I have personally contacted every
    Adjutant General (TAG) in the States and asked that they talk
    to each one of their unit commanders to make sure that they're
    aware of what's available, that they understand the signs, and
    that they have processes in place that will not only identify
    the problem and train for awareness of the problem, but will
    also make sure that we bring justice to the situation, and that
    we are approachable and understand the depth that the victim
    feels when something like this happens.
        Today, I'm only aware of two cases that have come forward.
    I would not be surprised if there were more, but I do know that
    we are focusing on this, and we will take appropriate action,
    and all of our folks out there in the field will have the
    proper processes and procedures in place to make sure that this
    criminal behavior is not indicative of our service.
        Senator Chambliss. General, this issue is going to continue
    to get a lot of focus and a lot of attention from this
    subcommittee, because we're simply not going to tolerate this,
    whether it's the Active Force, Guard, Reserve, or whoever. The
    best way that we can find out what's going on is to hear from
    you, and you in turn will ask your leadership the right
    questions. If you don't ask the right questions, you're not
    going to get the right answers; therefore, oftentimes, we're
    not going to get the right answers, and then we're going to
    turn around and read a story in the newspaper about some
    incident that's happened.
        I would urge that each of you pay extra attention to this
    issue and make sure that your leadership is well-aware of the
    commitment and obligation of each of your respective branches
    to ensure that this doesn't happen, and, when it does, that
    proper treatment is given. Likewise, the members of this
    subcommittee, as well as every Member of the United States
    Senate, knows that this is such a critical issue and that we
    want to make sure that the resources are available to you, and
    that you have all the tools that you need to deal with this
    issue. We're going to continue to ask you questions relative to
    this issue at every opportunity. It's an area of leadership
    where we simply need to start at the top and work all the way
    to the bottom to make sure that the policies of each respective
    branch are being carried out.
        General Blum, it seems that every week we're reading
    stories about recruiting and retention relative to Guard,
    Reserve, and the Active Force. While we're doing pretty well
    right now, although we've had some slack times with Guard
    recruiting, we want to make sure that we're doing everything,
    from a legislative perspective, relative to giving you the
    tools necessary to continue to recruit America's finest in each
    branch of the Guard and the Reserve. As each of you know, what
    we've tried to do is equalize some of the benefits from the
    Guard, Reserve, and Active Force standpoint.
        If you will, tell us the reaction on the other end. Are we
    giving you what you need? Are there additional measures that
    might be given to you that will provide your recruiting forces
    with better opportunities to recruit men and women, as well as
    retain men and women?
        General Blum. Thank you, sir. First of all, what we're
    seeing is the all-volunteer force being tested for the first
    time in a crucible of an extended war. We're going to see how
    our young men and women of this Nation are influenced to join,
    and see who influences those young men and women to join the
    military, in either the active, Reserve, or National Guard.
    This year is somewhat even more trying for two reasons. One,
    we're sustaining casualties on an all-too-regular basis, and,
    two, there's some debate as to how we're prosecuting this war,
    and people have varying attitudes on it.
        As long as the American people feel that what we're doing
    with our military is right, and that we are truly defending our
    way of life, our liberties, our freedoms, our neighbors, and
    our loved ones, I think the young men and women of this country
    will respond, and they will answer the call to colors, and they
    have, and they are. All of this is counterintuitive, frankly. I
    will be quite frank and tell you that I thought recruiting
    would wane. I thought reenlistments would fall off, and I
    thought we would be in a lot more trouble maintaining our end
    strength right now than we are having.
        Now, having said that, we watch it every day, because in
    the Guard and Reserve, as this subcommittee, in particular,
    recognizes, there's three partners to that citizen soldier
    being there. It's the soldier himself or herself, it's their
    family, and it's their employer. If any one of those three legs
    to that three-legged stool fails, we will fail and be unable to
    raise and train and have the capability to respond which this
    Nation needs. So we watch this very carefully.
        In summary, the Air National Guard and the Army National
    Guard are confident that they will make their end strength this
    year. We do have a few little hiccups, and there's reasons for
    those hiccups. About half of our force used to come from prior
    service. In other words, they'd come out of the active-duty
    Army, Navy, Marine Corps, Coast Guard, and Air Force, and some
    would join our ranks. About half of our enlistments every year
    could be attributed to that. Right now, the propensity to do
    that is less, because if they come into our ranks, the
    likelihood is that they will be deployed, and they may as well
    stay on active duty if that's the case. If they truly want to
    end their military career, and they don't want to end up right
    back overseas in the short range, they'll probably not have the
    propensity to join the Guard or the Reserve. There is a
    manpower pool and a personnel fill pool that I think will come
    back in time. But, right now, that is hurting us.
        In spite of that, however, we are making our end strength,
    because we are doing well in bringing first-term enlistments
    in, and we're doing much better than we've projected to do on
    reenlisted. These soldiers that you see here are staying with
    us, in numbers higher than we anticipated. Thank goodness for
    that, because without that we would be in trouble right now.
    We're watching that propensity to reenlist. If that falls off,
    then, again, we will have difficulty maintaining our end
    strength.
        One place that has been suggested by Senator Dole where we
    could use some help is in the combat zone. We talked about
    equality, and we've talked about equity. Once you're mobilized,
    everybody over there bleeds red. Everybody faces the same
    hardships and dangers, so there should be an identical, not
    similar, place where benefits, compensation, and opportunities
    should be identical. Right now, active-duty soldiers in the
    same foxhole with these young men can reenlist with a tax-free
    reenlistment bonus, and we cannot access that because of policy
    and statute. I think we need to address the policy, and if you
    see it appropriate for Congress to address the statute, that
    would be welcome.
        Senator Chambliss. General, you heard Secretary Hall state
    that he estimates that 40 percent of the men and women in Iraq
    will be Guard and Reserve when the current rotation is
    completed. I've heard higher numbers, but let's assume it's 40
    percent. That's significantly higher than where we are today.
    Are your men and women prepared to meet that challenge?
        General Blum. Absolutely, sir. The forces that we're
    sending in, the 81st, the 30th, the 39th, and the forces that
    have been identified, the 278th, the 256th from Louisiana, the
    116th from Idaho, and the 42nd division headquarters out of New
    York, will be the best-trained, best-equipped American
    soldiers, and best-prepared to do what they're being asked to
    do of any American soldiers or any other army that has ever
    deployed to go into a combat zone. I honestly feel that way.
    That is not the way we were when we sent some of the young
    soldiers that you see here today. Some of them had to overcome
    a system that did not prepare them as well as the next group
    will be and as well as the next group that is just arriving in
    theater right now currently is.
        Every soldier over there now has the body armor. Every
    soldier over there right now has the ballistic helmet. Every
    soldier that we're deploying from the National Guard has the
    new weapons system, new siting systems, and the individual
    rapid-fielding initiatives. The Army has put their money where
    their mouth is on this, and they've put it in front of active-
    duty soldiers. We got it before certain elements of active-duty
    soldiers that are deployed. So the Army has truly, for the
    first time in my lifetime, put us first and put the National
    Guard combat soldiers as ``the'' priority for equipping,
    training, and preparing them for this mission. The short answer
    is absolutely yes, sir.
        Senator Chambliss. General James, we talked about the 116th
    and the JSTARS. We have an issue there on re-engining those
    weapons systems, and of course, we have three options. We can
    either do nothing, which is going to be expensive from the
    standpoint of upkeep; we can buy new engines; or we can lease
    new engines. Could you tell me what thought process is going on
    and how we're moving in a direction of addressing this issue?
        General James. You have it just right. There are three
    courses of action we could take, all of which are going to cost
    us money or performance. If we stay the way we are, the upkeep
    of the current engines increases and the ceiling that the
    aircraft can operate is diminished. The upkeep gets to be
    expensive. Purchasing new engines is also expensive.
        The lease program looks most attractive to me because this
    is an issue where it's already been benchmarked in the airline
    industry. The proposed lease will get the amortization rate
    down to as low as 11 years if they use the front-end funding
    that they'd like to use. Originally it was going to be about 14
    years. There was some funding earmarked to increase the redline
    on the current engines. In other words, the hot section of the
    red engines that allow it to operate a little differently, and
    a little higher. It doesn't provide us any more thrust, really.
    I have talked with people from Northrop Grumman and Pratt &
    Whitney, and I personally think that the lease is probably the
    best way to go.
        We don't want to do anything that's going to jeopardize a
    follow-on aircraft or mission, so we have to look very
    carefully at the monies we spend and make sure that they will
    be spent wisely, that it will give us the performance that we
    need, and it will not jeopardize a follow-on command-and-
    control surveillance airplane.
        Senator Chambliss. Okay. Thank you.
        Senator Nelson.
        Senator Ben Nelson. Thank you, Mr. Chairman.
        Let me add my comments to what Senator Chambliss said about
    sexual assault. It's clear that the standard has to be for zero
    tolerance, with the expectation that someday we will achieve
    that with education, training, and prosecution. I said a few
    weeks ago that I didn't get a sense of passion from the
    military in dealing with this. At that time, it seemed that the
    military treated it as an annoyance, as opposed to a
    significant problem. This was before it was brought to the
    level that it is at right now. I'm sensing that perhaps there
    is a change. I'm not going to suggest it's because we're
    raising the issue that that's happening. I think perhaps it's a
    recognition that this is more than an annoyance, that it is a
    serious problem, particularly when young men and women in the
    military face dangers from their own personnel, in many
    instances, rather than from the enemy. Consequently, I
    appreciate what you're seeking to do, but I hope that you can
    extend our concern to the commanders under your command, so
    that they can deal with it with the same passion I think we all
    have to. It's just absolutely unacceptable behavior. It's not
    an annoyance; it's a major problem that needs to be dealt with,
    and you should deal with it that way. I sense there is a
    changing--maybe more a demonstration of concern. I'm not going
    to suggest for a minute that you've looked at it as an
    annoyance, but I think people below you have said, ``Oh, here
    we go again,'' or, ``Now, this is a lot of paperwork,'' or,
    ``Now, I'm going to have to spend a lot of my time dealing with
    this issue.'' If we can treat it the way I'm suggesting, I
    think perhaps the incidents will reduce, and then someday we
    can hope that we'll be free of that kind of activity. So I
    appreciate it.
        I note, in the training, on how important it is to have
    current training for current needs. As you said, when the Guard
    and Reserve units were left during the interim, following the
    Korean War or Vietnam, it was a Cold War preparation, not a
    current force prepared to deal with current requirements. We
    need to be prepared for what future requirements may require,
    which may involve retraining and reprogramming and retooling to
    be ready to go. Now, General Schultz, I understand that
    beginning as early as last December, the bill-payer drills have
    sought substantial funding reductions from the Army National
    Guard, including several hundred million dollars from your pay
    account in order to come up with funding offsets that can be
    used to help address the shortfalls resulting from the Army's
    enormous expenditures caused by the deployments to Iraq and
    Afghanistan. We're now at the midpoint of the fiscal year
    already, and we know that the Army and the OSD will be
    conducting midyear reviews to determine whether the funds
    provided for fiscal year 2004 will be sufficient to last the
    year and how to realign funding from other programs to make up
    the shortfall.
        Does the Army National Guard have any excess or lower-
    priority funding that can be made available to address the
    financial challenges faced by the total Army in the current
    fiscal year? I'll ask you that in a second. With thousands of
    soldiers mobilized and deployed, the Army National Guard should
    be experiencing some cost avoidance from your active-duty and
    annual training accounts. In light of this cost avoidance, I
    understand that the Army has cut some of your fiscal year 2005
    training funds. The second question is, do you have enough
    training funds budgeted to do the kind of training, retraining,
    and retooling to have a current force to keep up?
        First, do you have any of those funds that might be lying
    around in unused accounts that others are going to go after?
    Second, if those funds are taken from you, and you're
    inadequately funded to train, how are you going to meet the
    expectations that General Blum has already indicated?
        General Schultz. Senator, the Army National Guard has been
    reduced in our personnel accounts by $334 million for the
    current year. That's a part of the mobilization offset. In
    other words, we have 90,000+ soldiers on active duty today, and
    so the discussion would be that some of that money could come
    back into an Army or an OSD set of budget interests.
        Senator Ben Nelson. Will it balance, at the end of the day?
        General Schultz. Senator Nelson, the Guard today has enough
    money to get through 2004.
        Senator Ben Nelson. With adequate training to maintain a
    current force with the kinds of training that you need to do
    what your current expectations are, or future expectations?
        General Schultz. Right. Our operations and maintenance
    funds have not been reduced. Personnel accounts have been
    reduced by the amount that I just outlined.
        I've met with General Schoomaker, our Chief of Staff, and
    he said, ``If you get in trouble, you can count on me to help
    you out.'' I have the Chief's backing should we get in a real
    bind. As you might imagine, we have moved all kinds of money in
    different places than we had started this training year,
    because we've mobilized so many more units than we had
    originally planned.
        So in 2004, we're okay with our personnel and operations
    accounts. In 2005, there's already an anticipation that we're
    going to have some level of mobilization. So in the budget
    planning, our accounts have decremented by a certain estimate,
    and what our 2005 active-duty strength would be is unknown
    right now. So the accounts are, right now, being adjusted for
    those amounts.
        Senator Ben Nelson. The obvious concern I have is, as this
    money moves from one account to the next, sort of like musical
    chairs, at the end of the day, will one of those accounts be
    short as you move around? That is a concern. I'm not asking you
    to answer that, because you're in the process of receiving and
    giving; and, at the end of the day, it's General Schoomaker's
    choice to do it. He may come over to General James and say,
    ``We need a little bit of money. Can you help us out through
    the rest of the year?'' [Laughter.]
        I'm sure the Air Force, as a matter of courtesy, will be
    very glad to extend that to the Army. But we are concerned with
    seeing that the training and the retraining that General Blum's
    talking about occurs. In my experience, when you start seeing
    cuts and moving money around, something gets left out. It's not
    going to be payroll. Instead it's usually research and
    development, but in your case, training and retraining that can
    be deferred. It's sort of like deferred maintenance: put it off
    just a little bit more, we'll get it in the next year. This is
    a town where next year doesn't always come, when it comes to
    budgeting and putting things off.
        General Schultz. Senator, I might also say, we've learned a
    lot of lessons from OIF mobilization rotation number one, and
    we're now calling units to active duty earlier than we did
    during that initial period of mobilization. So there would be a
    burden, not on Guard accounts, but more so on the title 10,
    active-Army pay account, even more so than ours. We call it a
    phased mobilization. But it does move money in different
    places, for sure.
        Senator Ben Nelson. We just hope, at the end of the day,
    that all those accounts have the money that will be required to
    do what is expected and required of the Guard and Reserve.
    General Blum, you made an excellent point in saying that you've
    moved from where the Guard was looked at as the equivalent of
    stepchildren, and to the point now where you are coequal
    partners in warfighting, as well as in preparedness for
    warfighting. From my standpoint, as a former governor, I think
    that's encouraging. It's also discouraging, because they pull
    you out, and governors still need a presence, and suddenly what
    they need is now deployed somewhere else. It's a mixed bag. We
    want you to be in the position you are, but we also want to
    make certain that the homeland and the hometown and the home
    State needs are being met.
        General Blum. Sir, if I could address that for just a
    moment. I met with the National Governors Association just
    about 3 weeks ago, and if I could get one of my guys to put up
    a big pie chart in the back of the room right now.

        General Blum. This is what I committed to the 51 of the
    governors of the 54 that were present. The other three, I've
    already subsequently spoken with one on one, but they too,
    agree that this makes sense to them, and I'd submit it to you.
    With your previous experience, you'd be well-qualified to see
    it. This would satisfy your appetite for being able to fulfill
    your duties and responsibilities and authorities as the elected
    official of the State, as the governor, and also as the
    commander in chief of your National Guard.
        If you look at the pie chart over here, this green quadrant
    represents the reality of what we're suffering right now. It
    depends on how you want to characterize it, but that green
    quarter piece of that pie chart shows that about 25 percent of
    our force is deployed overseas, is unavailable to their
    families, their employers, and certainly to the governors to be
    able to respond in the State or the territory.
        What I promised the governors is that the yellow block is
    the next 25 percent that we've identified that is going to be
    getting ready. For some period of time, they are available to
    the governors on shorter periods of responsiveness, but mostly
    their focus is getting ready to go do the overseas warfight. We
    don't want to interrupt that if we don't have to. If
    circumstances are sufficient, then that force is available to
    the governors.
        The other part, the half that's in red, is always available
    to the governors. What I have committed to the governors, is,
    in our rebalancing, as we move to modularity, as we
    redistribute capabilities around the Nation so that each
    governor has transportation, aviation, engineers,
    communications, command and control, civil support teams, or
    teams that are tailored to handle weapons of mass destruction
    or counterterrorist type response, ultimately in every State,
    then we can ensure that this model that you see here would be
    kind of the dashboard model for every State and territory.
        When I came in as the Chief, in April, it wasn't that way.
    As a matter of fact, some States had 75 percent of the State
    guardsmen on green, gone, and left the governors with virtually
    nothing. I don't want the governors calling the President of
    the United States, saying, ``You're leaving me uncovered. You
    have to make a choice whether your Guard goes overseas or stays
    at home.''
        What we need to do is rebalance our force, spread the
    burden, share the pain, so that no governor has to put more
    than a 25 percent contribution for the overseas warfight, short
    of World War III. I'm talking about the rate we're being used
    for the last 3 years, and we anticipate will be used for the
    next 2 or 3 years, at least. This model is pretty good.
        General Schultz, General James, and I are working very
    closely with the Joint Staff, DOD, Joint Forces Command, and
    forces command, in particular, to make sure that when we call
    up a unit--for instance, if we were to call up Pennsylvania,
    and we need the 28th Division, we don't want to take 80 percent
    of Pennsylvania out. What we need to do in the future is
    redistribute those one-state divisions into multi-state
    divisions, and one-state brigades into multi-state brigades.
    The governors see this. I've talked to the TAGs, and about 85
    percent of them are onboard right now too. They'll ultimately
    all come onboard, because it's the right thing to do for
    America.
        That's where we're going, sir, and I hope that addresses
    the fact that we are taking not only sexual assault seriously,
    we're taking homeland defense seriously, as well.
        Senator Ben Nelson. Thank you, General. I think you very
    definitely are. I recall my days with Adjutant General Stanley
    Hing, who, unfortunately, is experiencing some health
    challenges right now, but I had to rely on him on numerous
    occasions, due to emergencies such as floods, windstorms, and
    the like.
        General Blum. Absolutely.
        Senator Ben Nelson. We had to rely on that.
        I think what you're doing is rebalancing within the Guard
    and Reserve units, and I think that is important. I am
    concerned about Secretary Hall's statement that we're
    rebalancing. We're not necessarily rebalancing between Guard
    and Reserve units and active duty, and that's what we're
    probably going to spend some more time on. I think the Chairman
    and I are concerned. Maybe we don't fully understand it, but to
    the extent that I understand it right now, I'm a little bit
    concerned that we're just setting up the Guard and the Reserve
    units, not as excess, but alongside on a primary basis. I'll
    have to learn more about that and understand the logic of that.
        Certainly the rebalancing within the Guard strikes me as an
    important thing, not just for the States, but for a fair
    deployment, as well.
        General Blum. If we're going to continue to use the Guard
    and the Reserve as we have been using it for almost the last 3
    years, and what we see as the foreseeable future, we really
    need to look at the resourcing model for your Army National
    Guard and your Army Reserve if you're going to use them as an
    operational reserve. General Schultz is absolutely correct in
    what he said, and I would have said exactly the same words, or
    very similar.
        It is not resourced today to be an operational reserve. The
    Air Guard is. The Air Force Reserve is. The Army Reserve
    components are not, and it needs some attention. General
    Schoomaker understands this and is committed to trying to do
    something with that, but we may need some help on that when the
    end of the day comes.
        Senator Ben Nelson. One further thing. General James, I
    know that, as General Blum just said, the Air Guard is already
    involved in an operational setting. It's my understanding that,
    as part of homeland security, the Air Guard will be available
    to provide additional air support in the event of some question
    about an air emergency like September 11, when aircraft were
    mobilized. These aircraft would try to intercept, or at least
    be in position to intercept, the flying bombs that were the
    result of the terrorist attacks. But now we have mechanisms in
    place to have various capacity for mobilization and scrambling
    in the case of air emergencies. We have somewhere around 1,700,
    as I understand it, since we've been in that position. So,
    operationally, that clearly makes sense for homeland security.
    I know you're also operational for support and have been for
    the war in Iraq and Afghanistan, as well.
        But can you tell a little bit about what's happening there,
    which really is homeland security, for that mobilization?
        General James. Senator, what happened was, as a Nation, we
    made an assumption that we would be attacked from outside our
    borders. At that time, we had seven alert sites, with two
    aircraft each. We had 14 aircraft poised to defend America from
    outside. Our radars did not look inward. They all looked
    outside. Our ability to coordinate between the Federal Aviation
    Administration (FAA) for air traffic, deconfliction, and
    situational awareness was all in a peacetime external-threat
    environment. Since that time, we've made great strides. We may
    have had 14 airplanes on alert when that happened, but, within
    hours, we had 24, 44, 78, and, by the end of the day, we had
    hundreds of airplanes that were ready to go all across the
    Services.
        Right now, we're operating 16 alert sites. We also have
    what we used to call ``random unscheduled combat air patrols''
    that are launched in response to different things, from the
    President's travel to other threat scenarios and threat levels
    that we're made aware of. So we've come a long way in that
    regard.
        Now, I will tell you, just as that day, 100 percent of
    those airplanes that were on alert were Air National Guard,
    because that was the mission that we had accepted. Right now,
    we have one active-duty alert site, and of the 16, all are Air
    National Guard.
        So we've increased the number. We've also increased the
    flexibility. We have sites now that are not permanent sites,
    but we can bring aircraft up on alert, spread out throughout
    the United States. The majority of the Combat Air Patrols
    (CAPs) are now flown, as they weren't originally, by the active
    component. That's the agreement we made so that we could come
    up to the 16-site number. There's a bill out there to pay for
    that. It's about $170 million per year that we still have to
    get resolved between Air Combat Command and the Air National
    Guard for the Future Years Defense Program (FYDP). It's
    expensive, but it's certainly money well spent, in my
    estimation. We've come a long way.
        Senator Ben Nelson. I appreciate that. Thank you very much.
        Thank you, Mr. Chairman.
        Senator Chambliss. Thank you.
        General, one last question. The issue of making TRICARE
    available to non-active-duty members of the Guard and the
    Reserve was put on the table last year. It's going to be up for
    discussion again this year. Apparently, OSD does not put this
    at a very high profile, from the standpoint of where funds can
    and should be expended. What's the thought of the Guard
    relative to making TRICARE available to your men and women when
    they're not on active duty?
        General Blum. As I said, sir, at the very outset it's all
    about people, and we're committed to taking care of our people
    and their families and, as an adjunct member of their family,
    their employers and that relationship because that is the
    cornerstone that enables us to be the organization that we are.
        When we're on active duty, TRICARE is identical to the
    benefits for active-duty soldiers, service members, and their
    families. Post-mobilization, for 180 days is identical for
    soldiers leaving active duty. The Guard experiences the same
    thing.
        Where we have a discrepancy, inequity, or where we don't
    have parity or identical systems is in the pre-mobilization
    piece. You alluded to that earlier. There are certain times
    when things should be identical and equitable; and then there's
    other times where the service isn't exactly identical and
    equitable, and maybe the compensation or the benefits should
    not be equal.
        I'm more interested in medical readiness, as a readiness
    issue. As a taxpayer and as a senior military leader, I don't
    want to spend a quarter of a million or a half a million
    dollars training soldiers or airmen, and then when I need them
    the most, I can't deploy them because they were not medically
    ready.
        Right now, the Guard and the Reserve are in a real
    quandary. Our commanders have responsibilities, but they don't
    have the authority and they don't have the resources to address
    the medical readiness that we really need to address pre-
    mobilization, prior to them being called to active duty. The
    same thing is even extended to the families when you talk about
    healthcare there.
        I think that needs to be looked at in a holistic manner. I
    wouldn't rush into this one, because it is a very complex
    issue. We're not even in agreement among the senior leaders. We
    agree on what I just said, but we do not agree how to fix that
    right now, and I think that needs to be carefully studied.
        Probably what would be useful is the provisions that
    Congress put in place last year. They seemed to be reasonable,
    and we probably ought to use that as a test case. I would
    encourage them to be extended. We could carefully study that
    and see if we need to make any adjustments down the line before
    we rush wholesale into trying to fix a problem. The cure could
    be worse than the disease.
        Senator Chambliss. This issue is going to continue to be
    debated as we go through the authorization process, so as
    senior leadership continues to discuss this, I wish you'd keep
    us informed as to the thought process that you have on this
    issue.
        General Blum. Yes, sir.
        Senator Chambliss. Gentlemen, thank you very much, again,
    for your service to our country. Thanks for being here today.
    Again, we may have written questions from Senator Nelson and
    myself or other members of the panel. If we do submit them to
    you, we would appreciate a very prompt response.
        Thank you.
        General Blum. Again, thank you for the opportunity to
    appear, and thank you for your strong support of our uniformed
    service members.
        Senator Chambliss. Our next panel will consist of
    Lieutenant General James R. Helmly, Chief of the Army Reserve;
    Vice Admiral John G. Cotton, Chief of the Naval Reserve;
    Lieutenant General Dennis McCarthy, Commander of the Marine
    Forces Reserve; and Lieutenant General James E. Sherrard, Chief
    of the Air Force Reserve. Gentlemen, if you all would please
    find your seats. [Pause.]
        Gentlemen, thank you for being here. Likewise, we would say
    to you, thanks for the great work you do, and your leadership
    is just so valuable to our country in these very difficult
    times. I hope you will express to all the men and women serving
    under each of you how much we appreciate their service to our
    country and their great patriotism for America.
        I want to take a moment of personal privilege to say to my
    good friend, Jimmy Sherrard, that we're going to miss you, come
    June 1. Of course, you've announced you're going to be leaving
    and retiring, and even though that's delayed by a year, we
    needed you, and we appreciate very much you staying around.
        General Sherrard was actually at Dobbins Air Force Base in
    1994 when I was first elected to Congress. He came to Robins in
    1995, about the time I got there and was sworn in, and Robins
    Air Force Base is kind of the heart and soul of middle Georgia.
    He knows what a spot in my heart it has. General Sherrard and
    his wife, Marsha, and I became very good friends. They are
    great Americans. Jimmy, it's been a real pleasure to get to
    know you and have a chance to work with you. We will miss you,
    but we know you'll still be around. You've been through some
    difficult times personally and professionally, and we're glad
    to see you looking so good, and we're glad you're here today,
    and we look forward to hearing from each of you.
        General Helmly, we will start with you. We have your
    written statements, so if you'll please take a minute to
    summarize those statements, we'll move ahead.

       STATEMENT OF LTG JAMES R. HELMLY, USAR, CHIEF, U.S. ARMY
                                RESERVE

        General Helmly. Thank you, Mr. Chairman.
        I also acknowledge General Sherrard's service and sacrifice
    for our country. We are, in fact, all members of the joint
    team, and I would tell you that the soldiers of the Army
    Reserve and, I'm sure, my peers at the table and in the
    National Guard are privileged to serve with General Sherrard.
        Mr. Chairman and members of this distinguished
    subcommittee, thank you for the opportunity and, indeed, the
    honor to testify on behalf of the 211,000 soldiers, 12,000
    civilian employees, and the families of the United States Army
    Reserve, an integral component of the world's greatest army, an
    army at war for a Nation at war. I'm Ron Helmly, and I'm an
    American soldier in your Army, and very proud of that.
        I'm joined this morning by Command Sergeant Major Michele
    Jones, the senior enlisted soldier of the Army Reserve, and two
    Army Reserve veterans of the current war and operations in
    Iraq, First Sergeant Bradley Irish, the senior noncommissioned
    officer of the 299th Engineer Bridge Company, and Sergeant
    Andrew Carnahan, a squad leader in that same unit. [Applause.]
        First Sergeant Irish is a schoolteacher from Maryland, and
    Sergeant Carnahan is a college student at the current time. The
    299th was attached to the 3rd Infantry Division, the Marne
    Division, in their heroic and history-making march on Baghdad,
    and, in fact, was one of the first Army units since World War
    II to perform a river crossing, opposed under fire, in order to
    allow the 3rd Division to move to the other side of the
    Euphrates River.
        Today, as we speak, nearly 60,000 Army Reserve soldiers are
    on active duty in Iraq, Kuwait, Afghanistan, the Continental
    United States, and elsewhere around the world as part of
    America's global war on terrorism, serving courageously and
    proudly. They are joined by another 151,000 Army Reserve
    soldiers training and preparing for mobilization, or resting
    and refitting after just being demobilized. These modern-day
    patriots are your neighbors who live in your communities, work
    in your factories, teach your children, deliver your babies and
    your mail, and share your everyday lives. They willingly
    answered the call to duty to perform missions that they've
    trained well for.
        Since September 11, 2001, more than 100,000 Army Reserve
    soldiers have served on active duty as a part of the global war
    on terrorism. Tragically, 21 of these soldiers have made the
    ultimate sacrifice in service to their Nation to help keep
    their fellow citizens and their families and neighbors safe and
    free. We are deeply in their debt, and honor their memories by
    our actions here today.
        Your invitation to testify comes at a time of profound and
    unprecedented change and challenge in the dynamics of our
    Nation's security environment. Since September 11, 2001, we
    have been embroiled in a war with a wily, determined enemy who
    is intent on destroying our very way of life. As we engage
    these enemies, we recognize that carrying out current missions
    is not, in and of itself, sufficient. The very forces that
    caused this war to be different from other wars have propelled
    the world into a period of unprecedented change and volatility.
    We must simultaneously confront today's challenges while
    preparing for tomorrow's.
        A critical issue that must be recognized is that this is
    the first extended-duration war our Nation has fought with an
    all-volunteer force. January marked the 30th anniversary of the
    all-volunteer force. This tremendous policy change in our
    Nation has brought the Army Reserve and, indeed, all of our
    Armed Forces an unheard of and unprecedented quality of our
    members, yet the all-volunteer force also brings expectations
    and sensitivities that we must confront with regard to how we
    support our people, how we train them, and how and when we
    employ those people.
        To meet the demands of our Nation and the needs of our Army
    and Joint Force team, we must change the way we man the Army
    Reserve. We must change the way we organize, train, and prepare
    the force. To accomplish this change, the culture of the Army
    Reserve must change. This is a period of deep change from the
    old to the new, but we must forge this change while
    simultaneously continuing the fight in the current war. We're
    not simply afforded the luxury of hanging a sign outside the
    U.S. Army Reserve Command Headquarters in Atlanta that says
    ``Closed for Remodeling.'' The culture must change from one
    that expects 1 weekend a month, and 2 weeks in the summer, to
    one that understands fully and completely, ``I am, first of
    all, an American soldier, though not on daily active duty.
    Before and after a call to active duty, I am expected to live
    and, in fact, demonstrate Army and national values. I must
    prepare for mobilization as if, indeed, I knew the hour and the
    day that it would come.''
        Gentlemen, I look forward to your questions. Thank you for
    the opportunity to be here this morning.
        [The prepared statement of General Helmly follows:]

                 Prepared Statement by LTG James R. Helmly, USA

                                  INTRODUCTION

        Mr. Chairman and members of this distinguished subcommittee, thank
    you for the opportunity and the privilege to testify on behalf of the
    211,000 soldiers, 12,000 civilian employees, and the families of the
    United States Army Reserve, an integral component of the world's
    greatest Army; an Army at war for a Nation at war. I'm Ron Helmly, and
    I'm an American soldier in your Army, and proud of it.
        Today as we speak, nearly 60,000 Army Reserve soldiers are on
    active duty in Iraq, Kuwait, Afghanistan, in the continental United
    States, and elsewhere around the world as part of America's global war
    on terrorism, serving courageously and proudly. They are joined by
    another 151,000 Army Reserve soldiers training and preparing for
    mobilization or resting and refitting after being demobilized. These
    modern-day patriots are your neighbors who live in your communities,
    work in your factories, teach your children, deliver your babies, your
    mail, and share your everyday lives. They have willingly answered the
    call to duty to perform missions they have voluntarily trained for, and
    to honor their commitment as part of a responsive and relevant force,
    an essential element and indispensable component of the world's finest
    land force, the United States Army.
        The strength and added value we bring to that partnership is drawn
    from the people who serve in our formations. With nearly 25 percent of
    its soldiers female, and more than 40 percent minority, 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 fields who give of their time and expertise to serve our
    Nation.
        Since September 11, 2001, more than 100,000 Army Reserve soldiers
    have served on active duty as part of the global war on terrorism.
    Tragically, 21 Army Reserve soldiers have made the ultimate sacrifice
    in service to our Nation to keep their fellow citizens and their
    families and neighbors safe and free. We are deeply in their debt and
    honor their memories by our actions here today.

                                 THE CHALLENGE

        Your invitation to testify comes at a time of profound and
    unprecedented change and challenge in the dynamics of our Nation's
    security environment. Since September 11, 2001, we have been embroiled
    in a war with wily, determined enemies, who are intent on destroying
    our very way of life. In this global war on terrorism, we are
    confronting regional powers; facing the potential use of weapons of
    terror and mass destruction at home and abroad; and struggling with the
    challenges of how to secure our homeland while preserving our precious
    rights and freedoms. From the start, we have understood that this will
    be no brief campaign or a short war. It will be an enduring global war,
    a protracted war, a long struggle that lacks clear, well-defined
    borders. Have no doubt, it is a war. It challenges our national will
    and our perseverance. It tries our patience and our moral fiber. It is
    a war different, just as all previous wars have been different. Unlike
    previous wars the Army fought here on our own soil, where we in the
    armed services must be continually ready to carry out our mission when
    and where the Nation calls.
        As we engage these enemies we recognize that carrying out current
    missions is not by itself sufficient. The very forces that cause this
    war to be different have propelled the world into a period of
    unprecedented change and volatility. We live in a much-changed world
    and we must change to confront it. We must simultaneously confront
    today's challenges while preparing for tomorrow's. The Army will
    maintain its non-negotiable contract to fight and win the Nation's wars
    as we change to become more strategically responsive and dominant at
    every point across the spectrum of military operations. The confluence
    of these dual challenges, transforming while fighting and winning, and
    preparing for future wars, is the crux of our challenge--transforming
    while at war.
        Last year was my first opportunity to address this subcommittee as
    the Chief, Army Reserve. I told you then that I was humbled and sobered
    by that responsibility. That feeling remains and indeed has grown more
    profound. The Army Reserve is an organization that daily 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 land force the world has seen. Together with the
    Marine Corps, Navy, Air Force, and Coast Guard, the Army Reserve of
    your Army fights as part of the joint team: the sum of the parts is
    much greater--and that's the power we bring to the battlefield today.

                              ALL-VOLUNTEER FORCE

        A critical issue that should be recognized is that this is the
    first extended duration war our Nation has fought with an All-Volunteer
    Force (AVF). January marked the 30th anniversary of the AVF. This
    tremendous policy change in our Nation has brought the Army Reserve,
    and the Armed Forces, an unheard of quality of people. Yet the AVF also
    brings expectations and sensitivities that we must confront with regard
    to how we support our people, and how we train them, and how and when
    we employ those people.
        Title 10 of the United States Code directs the Army Reserve to
    provide units and soldiers to the Army, whenever and wherever required.
    Since 1973, the active and Reserve components have met this challenge
    with a force of volunteers, men and women who have freely chosen to
    serve their Nation. Perhaps more than any other existing policy
    decision, this momentous move from a conscript force to a force, Active
    and Reserve, manned solely by volunteers has been responsible for
    shaping today's Armed Forces, the most professional and capable
    military the world has seen. Working through this sea change in how we
    lead our force has highlighted differing challenges that we simply must
    recognize and address if we are to maintain this immensely capable
    force.
        During a recent conference celebrating 30 years of the AVF policy,
    former Secretary of Defense Melvin Laird discussed its genesis. He
    explained that while from the start, it was understood that the policy
    would apply to the Total Force, in reality, after the AVF was
    established, the focus tended to be almost exclusively on manning the
    active component--understandable since it was the tip of the spear. But
    as a result, manning the Reserve components became, in effect, an
    accidental by-product of manning the active component. This lack of a
    deliberate focus has hindered the development of force-manning policies
    that recognize the unique nature of Reserve service. As a result, the
    ``1 weekend a month and 2 weeks in the summer'' paradigm was created.
    For almost three decades, that paradigm has remained largely intact.
    The world has witnessed major change since we started relying on an
    AVF. Yet we, in the Army Reserve, allowed the continuance of
    expectations for our most critical element--our people--our
    volunteers--for a world that no longer existed.
        To meet the demands of our Nation and the needs of our Army and
    joint force team, we must change the way we man the Army Reserve, we
    must change the way we organize, train, and prepare the force, and to
    accomplish this change, the culture must change. This is a period of
    change from the old to the new. Forging a new paradigm is akin to the
    depth of change the DOD endured when transitioning from a conscript
    force to an AVF. But we must forge this change while simultaneously
    continuing the fight in the current war. We are not afforded the luxury
    of hanging a sign outside the U.S. Army Reserve Command headquarters
    that says, ``Closed for Remodeling.'' The culture must change from one
    that expects ``1 weekend a month, 2 weeks in the summer'' to one that
    understands ``I am, first of all, a soldier, though not on daily active
    duty. Before and after a call to active duty I am expected to live Army
    values; I am expected to prepare for mobilization as if I knew the day
    and the hour that it would come. I use my civilian skills and all that
    I am to perform my military duties. I understand that I must prepare to
    be called to active duty for various periods of time during my military
    career while simultaneously advancing my civilian career.''
        The Army Reserve is part of a public institution founded in law.
    Our mission and our responsibility come from this law. I would like to
    note that the law does not say for big wars, little wars, short wars,
    or medium wars, it says whenever our Army and our armed services and
    our Nation require us, we are to provide trained units and qualified
    individuals. We must change to continue fulfilling the mandate of that
    law while simultaneously perfecting and strengthening the quality force
    we have today.
    Accomplishments
        The past year has been a full one for your Army Reserve, marked by
    great efforts and remarkable achievements. Among the most significant
    have been:
        At War--Army Reserve Soldiers Called to Active Duty in 2003
        In 2003, the Army Reserve called to active duty and deployed nearly
    70,000 soldiers, more than 30 percent of the Army Reserve's 205,000
    Selected Reserve end strength, to Afghanistan, Iraq, Kuwait, and
    theaters around the world in support of Operations Enduring Freedom
    (OEF), Iraqi Freedom (OIF), Noble Eagle (ONE), and other contingency
    operations.
        377th Theater Support Command Operates Logistics on the Battlefield
        The seamless integration of the Army's active and Reserve
    components was epitomized by the Army Reserve's 377th Theater Support
    Command (TSC) during OIF. The 377th was redeployed to OIF after
    performing as the senior logistics headquarters during OEF. Once
    redeployed, the 377th TSC (headquartered in New Orleans) supported OIF,
    and reported directly to the Combined Forces Land Component Command.
        The joint and coalition flavor that the 377th TSC brought to the
    fight is a historic first. From the early hours onward, the 377th TSC
    supported combat operations from Kuwait throughout the entire battle
    space into Iraq. The headquarters commanded over 43,500 soldiers during
    the buildup of forces and subsequent combat phase of OIF, and consisted
    of 8 general officer commands and 8 area support groups. The 377th TSC
    helped shape the theater logistical footprint and was responsible for
    supporting the reception, staging, onward movement, and integration of
    all Coalition Forces, in addition to many other logistical support
    operations.
        Of particular note were the 377th's accomplishments in seaport of
    debarkation operations in Kuwait. This included the largest wartime
    combined/joint logistics over the shore operation in over 50 years, at
    the Kuwait Naval Base. These operations involved over 150 ships, 31,000
    personnel, 4,900 wheeled/tracked vehicles, over 6,000 ammunition and
    general containers, over 29,000 ammunition and general pallets, and
    over 2,500 other pieces of cargo. The base was operated by units of
    377th and the Army Reserve's 143rd Transportation Command
    (headquartered in Orlando).
        Three Consolidated and Streamlined Support Commands Established
             Army Reserve Personnel Command (AR-PERSCOM) Merged
            with Human Resources Command (HRC)

        Effective 2 October 2003, the St. Louis, Missouri-based Army
    Reserve Personnel Command inactivated and merged with the Total Army
    Personnel Command to form the U.S. Army HRC. The HRC envisions becoming
    the Nation's premier human resources provider. The HRC mission is to
    execute the full spectrum of human resources programs, services, and
    systems to support the readiness and well-being of Army personnel
    worldwide.
        The HRC executes Army personnel policies and procedures under the
    direction of the Department of the Army G-1. It integrates, manages,
    monitors, and coordinates military personnel systems to develop and
    optimize utilization of the Army's human resources in peace and war.
    HRC is the activity within the Department of the Army responsible for
    managing the Individual Ready Reserve (IRR) and Standby Reserve. The
    HRC will also plan for and integrate civilian personnel management and
    processes to attain a fully integrated HR focus.

             Army Reserve Engineers Integrated with DA ACSIM

        Effective 1 October 2003, the Army Reserve Engineers, formerly
    known as the Office of the Chief, Army Reserve (OCAR) Engineer Staff
    and the U.S. Army Reserve Command (USARC) Engineer Staff, transferred
    to the Army's Assistant Chief of Staff for Installation Management
    (ACSIM) and Headquarters, Installation Management Agency (IMA).
        The former OCAR Engineer Staff (Arlington, VA) was integrated as a
    separate division within the Department of the Army, ACSIM, as the
    ACSIM-Army Reserve Division (ACSIM-ARD). The former USARC Engineer
    Staff (Atlanta, GA) was integrated as a separate division within the
    HQ, IMA, as the IMA-Army Reserve Division (IMA-ARD). The IMA-ARD is
    split-stationed between Arlington, VA and Atlanta, GA.
        The ACSIM-ARD and IMA-ARD program, plan, and execute base
    operations support (e.g., environmental, maintenance and repair, and
    sustainment) and military construction functions on behalf of the Army
    Reserve and its more than 900 Army Reserve centers worldwide and two
    power projection platform installations (Fort Dix, NJ and Fort McCoy,
    WI).

             Army Reserve Chief Information Office (CIO) Merged
            with DA CIO/G-6

        At a 25 June 2003 signing ceremony, the Department of the Army CIO/
    G-6, and I formalized a memorandum of agreement that integrates the
    Army Reserve, CIO into the Department of the Army CIO/G-6.
        The Army Reserve counts communication and signal technology as one
    of its core capabilities--an enduring skill-rich capability across the
    spectrum of operations. With this integration, the Army Reserve
    demonstrates a commitment to both the transformation of the Army and to
    a common/single Army enterprise. With this integration, the Army
    Reserve Enterprise Integration Office will continue to be responsible
    for C4/IT planning, programming, budgeting, and execution support for
    all related Army Reserve appropriations. The Department of the Army
    CIO/G-6 will provide resource guidance and policy oversight, ensuring
    that Army Reserve C4/IT requirements are integrated and validated as
    part of broader Army requirements.
        FEDS--HEAL Program Expanded and Improved
        The Army Reserve Surgeon's office worked with the Veteran's
    Administration to expand and improve the Federal Strategic Health
    Alliance (FEDS-HEAL) program. This initiative includes the addition of
    consolidated medical and dental records review, centralized appointment
    scheduling, dental treatment, vision examinations and eyeglass and lens
    insert procurement, and support to soldier readiness processing
    activities.
        The year began with a concerted effort to enhance soldier readiness
    in support of OIF. This resulted in 85,000 records being reviewed by
    the FEDS-HEAL Program Office, which subsequently initiated and
    completed 48,000 physical examinations, 31,000 dental examinations,
    3,200 dental treatment services, 71,000 immunizations (not including
    Anthrax), 22,500 Anthrax immunizations, and 1,000 vision examinations.
    The effort has been sustained via routine SRP support across the
    Nation. The effect has been to increase readiness and minimize
    processing time and the frequency of non-deployable soldiers being
    called to active duty.
        In addition, the effectiveness of FEDS--HEAL was enhanced by the
    program's extension to the Army National Guard, Air Force Reserve, six
    Active component dental treatment facilities, and the occupational
    health programs of the Army National Guard and Reserve.

                             GROWING CONTRIBUTIONS

        Prior to Operations Desert Shield and Desert Storm, Army Reserve
    soldiers provided minimal support to military missions. That all
    changed with the first Gulf War, when almost 95,000 Army Reserve
    members were called to active duty--and they not only responded but
    performed that duty well, contributing over 14 million duty days of
    support. Since that war, the Army Reserve provided between 1 million
    and 4 million duty days annually to total force missions until the
    terrorist attacks of September 11, 2001. Once again the Army Reserve
    has responded quickly and continuously with over 95,000 members serving
    on active duty and providing nearly 16 million duty days of support to
    the Active Forces in fiscal year 2003.
        The increased personnel tempo became steady-state even before
    September 11 as our Reserve soldiers took their places among the
    rotational forces that are still keeping the peace in Eastern Europe.
    Our military police, medical, civil affairs, and public affairs solders
    continue to provide their skills and capabilities in Operations Joint
    Endeavor and Joint Guardian in Bosnia and Kosovo.
        In the wake of the events of September 11, came the global war on
    terrorism, ONE in the United States, and the subsequent campaign, OEF
    in Afghanistan and Kuwait. Civil affairs units made up 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 lead in reestablishing a free, functioning society.
    Numerous new schools were built and medical aid provided to the people
    of Afghanistan. These soldiers represent the goodwill and interests of
    the American people with every classroom they build and every skill
    they teach, every functioning social capability they help create, and
    every contact they make with the native population. Your Army Reserve
    soldiers are doing an incredible job.
        In OIF our troops have liberated Iraq and brought down Saddam
    Hussein. Today they remain, boots on the ground, helping restore the
    fabric of Iraqi society and its infrastructure and return self-
    determination to the people of Iraq who are free for the first time in
    more than 30 years.
        No one expects this mission to be completed soon or the war on
    terrorism to be won quickly. Both will try our patience and test our
    resolve as a Nation and as an Army. Both will require new
    organizational and institutional paradigms and expectations if we are
    to prevail in our present endeavors and prosper in future ones. The
    world will remain a dangerous and unstable place for the foreseeable
    future. We must so organize ourselves and our efforts that we have the
    institutional endurance and moral stamina robustness to accomplish our
    missions effectively, efficiently, and definitively.

                           THE IMPERATIVE FOR CHANGE

        Despite the clear relevance and strength demonstrated by these
    examples, we, the Army as an institution, are not without our
    challenges. First and foremost, we, the Army Reserve, must evolve as an
    institution to accommodate the changes in our environment. The
    division-oriented, set-piece battles of the past, now share the stage
    with conflicts in which smaller interchangeable units will be combined
    in formations tailored to meet specific threats and situations and to
    offer the combatant commander the capabilities he needs to contain and
    defeat the enemy, and prevail upon the shifting, asymmetrical
    battlefields of the 21st century.

                             ARMY RESERVE RESPONSE

        The Army Reserve is moving to meet that challenge, preparing
    changes to training, readiness and policies, practices, and procedures.
    We are restructuring how we train and prepare the force by establishing
    a Trainee, Transient, Holdee, and Student Account, much like the active
    Army, to manage our force more effectively. We are preparing plans to
    support the continuum of service concept recently proposed by the OSD,
    which 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. We are excited by the
    potential of such transition proposals.

    Federal Reserve Restructuring Initiative (FRRI)
        Our initiatives concerning the management of individuals and units
    in the Army Reserve are the catalyst of the evolving Army Reserve--The
    Federal Reserve Restructuring Initiative. Six imperatives are necessary
    in order for the Army Reserve to change to a 21st century force. These
    imperatives are: re-engineer the call to active duty process; transform
    Army Reserve command and control; ensure ready units; implement human
    resources life cycle management; build a rotational base in our force;
    and re-engineer individual soldier capabilities.

    Calls to Active Duty Reform
        Changing our industrial-age, Cold-War era call-to-active-duty and
    mobilization process remains a critical component to realizing the
    capabilities and potential of our highly skilled, loyal and sacrificing
    soldiers. The Nation's existing process is designed to support a
    traditional, linear, gradual build-up of large numbers of forces and
    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. Today, multiple,
    operational requirements, unclear, uncertain, and dynamic alliances,
    and the need for agile, swift, and decisive combat power, forward
    presence in more responsive ways, and smaller-scale contingency
    operations, demand a fundamentally different approach to the design,
    use, and rotation of the Army Reserve Forces. Rather than a ``force in
    Reserve,'' the Army Reserve has become and serves more as a
    complementary force of discrete specialized, skill-rich capabilities
    and a building block for teams and integrated units of capabilities,
    all essential to generating and sustaining forces. The process of
    accessing and employing these forces must be overhauled completely to
    become more efficient, flexible, and responsive to the Nation's needs,
    yet sensitive to, and supportive of the soldier, the family, and the
    civilian employer. To do this we require a more decentralized, agile,
    and responsive process that accommodates the mission requirement while
    simultaneously providing greater predictability for soldier, family,
    and employer.
        Changing the way we employ soldiers starts with changing the way we
    prepare for calls to active duty. The current process is to alert a
    unit for calls to active duty, conduct administrative readiness
    preparations at home station, and then send the unit to the
    mobilization station for further administrative and logistical
    preparedness processing and to train for deployment. This alert-train-
    deploy process, while successful in Operations Desert Shield/Desert
    Storm, today inhibits responsiveness. By changing to a train-mob-deploy
    model, and dealing with administrative and logistical requirements
    prior to calls to active duty, we will reduce the time needed to bring
    units to a campaign quality level needed for operations. This will
    require us to resource more training events at home station through the
    use of devices, simulators, and simulations. As you would expect, this
    shift in paradigms will increase pre-call-to-active-duty operational
    tempo (OPTEMPO) beyond the current statutory level and will require
    greater effort and resources to achieve. We are confident that the
    increased costs will pay significant dividends in terms of readiness
    and deployability.

    Realigning Force Command and Control
        Our evolutionary force structure journey actually began 10 years
    ago and is accelerating rapidly today. In 1993 we reorganized to
    produce a smaller, more efficient, and more effective structure. Our
    overall strength was reduced by 114,000 soldiers, or 36 percent,
    leaving us with a 205,000-soldier statutory end strength today. We
    continue our journey from a Cold-War Army Reserve Force to our current,
    fully engaged Army Reserve Force, to a changed, even more responsive
    and capable future Army Reserve Force that will include a rotational
    capability. In the 1990s, we cut the number of our Army Reserve
    commands by more than half and re-invested those resources 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 journey continues today as we
    mature plans for further realignments and force structure initiatives.
    Between fiscal years 2005 and 2008, we will reduce our force structure
    by 35,000 spaces, reinvesting those into remaining units in order to
    man them at 100 percent. Simultaneously, we will redesign the remaining
    force into more capable modular organizations and reduce the number of
    general officer functional commands and the number of general officer
    command and control headquarters subordinate to the Army Reserve
    Command.
        The Army Reserve is the Nation's repository of experience,
    expertise, and vision regarding soldier and unit calls to active duty.
    We do have forces capable of mobilizing in 24 hours and moving to their
    active duty stations within 48 hours, as we demonstrated in response to
    September 11. This norm of quick and precise calls to active duty
    ability will become institutionalized in the processes and systems of
    the future and give our forces the ability to marshal Army Reserve
    soldiers rapidly and smoothly.

    Trainees, Transients, Holdees, and Students (TTHS) Account
        The most immediately effective methods for improving Army Reserve
    unit readiness is to harvest the personnel authorizations (spaces)
    associated with those units whose historical missions have been largely
    overtaken by events and whose consequent relevance to war plans and
    missions has been significantly reduced or eliminated all together.
    These spaces can then be used as a holding account that increases unit
    readiness by removing unready soldiers from troop program unit spaces.
    Currently, unready soldiers are carried on the rolls for a variety of
    reasons and reported as unavailable to fill force authorized positions.
    With the creation of the TTHS account, these unready soldiers will be
    assigned to the TTHS account where they will be trained and managed
    until they can be assigned to a unit in a duty-qualified status.
        This procedure can be accomplished within existing manpower and
    funding levels. This initiative will improve the quality of service for
    individual soldiers and relieve unit commanders of a major
    administrative challenge thus enabling them to better focus on calls to
    active duty and readiness activities.
        The TTHS account will be used to manage vacancies and the
    assignment of qualified soldiers to authorized positions, thus
    increasing retention with a positive soldier-oriented life-cycle
    management program.

    Individual Augmentee Program and Continuum of Service
        In today's operational milieu, there is a growing need to establish
    a capability-based pool of individual soldiers with a range of
    specialties who are readily available, organized, and trained for calls
    to active duty 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 specialists for unforeseen,
    unplanned-for-contingencies, operations, and exercises. Therefore, I
    have directed the establishment of an Individual Augmentee Program
    within the Selected Reserve to meet these needs.
        The Individual Augmentee Program is intended 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 affecting their readiness, cohesion,
    and future employment effectiveness. This program will allow soldiers
    to participate at several levels of commitment, and supports the OSD
    proposal for a continuum of service that enables service members to
    move more easily between their services' components during their
    careers.

    Rotating the Force
        While changing industrial-age mobilization, personnel, training,
    and development policies is necessary, restructuring our force so that
    we can implement predictable and sustainable rotations based upon depth
    in capability is also necessary. We are committed to achieving a
    capability ratio that will manage Army Reserve deployments to once
    every 4 or 5 or 6 years. Predictable and sustainable utilization is a
    key factor in maintaining soldier, family, and civilian employer
    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 long
    term source of skill-rich capabilities for small scale contingency
    conflicts and follow-on operations. Properly executed, predictable
    rotations will provide our units with operational experience; provide a
    sense of fulfillment for our soldiers; impart a sense of order for our
    soldiers, and even out the work load across the force. The recent
    changes to the Operation Enduring Freedom and Operation Iraqi Freedom
    rotational schedules are an important step in establishing those
    rotational capabilities.

    Rebalancing the Force
        There has been considerable concern raised about what is viewed as
    excessive reliance on the Nation's Reserve components both for small-
    scale operations such as the Balkans rotations and for long-term
    contingency operations such as OEF and OIF. While only 33 percent of
    Army Reserve troop strength is currently called to active duty, and
    while that level of usage does not seem extreme, raw numbers alone do
    not tell the whole story. Some units, notably, military police and
    truck transportation units are in fact over-extended, and it is true
    that some types of units have been used more in the war on terrorism
    than others. Military police (MPs), civil affairs, military
    intelligence, transportation and biological detection and surveillance
    capabilities are the highest in utilization. We are committed to
    eliminating these pockets of specialty over-stress by increasing the
    number of some units in both the active component and the Army Reserve
    and Army National Guard.
        The DOD is currently deeply involved in determining how to
    rebalance the active-Reserve component force mix to mitigate the
    effects of over-use of particular specialties. Currently, 313 Standard
    Requirement Codes (types of units) are found exclusively in the Army
    Reserve. The Army Reserve has been able to meet the challenges with
    this structure thus far, but clearly the structure requires change and
    perhaps augmentation to meet the continuing demand for these skill-rich
    capabilities that are more practically sustained in a Reserve component
    force.

    Recruiting and Retention
        Recruiting and retention is an area of the highest importance to
    the Army Reserve and a volunteer force. Our responsibilities 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 4 straight years from 2000 to 2003. In fiscal
    year 2004, however, we are 182 accessions short of expected year-to-
    date mission out of a projected 10,156 accessions. While this is cause
    for some concern, I am not alarmed over this because we are currently
    at 103 percent strength.
        Although generally successful in overall mission numbers, we
    continue to experience difficulty in attracting and retaining qualified
    individuals in certain critical wartime specialties. 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, has 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 transferred from the Accessions Command to the Army Reserve.
    Tenets of this transfer included: establishment of career crosswalk
    opportunities between recruiters and retention transition non-
    commissioned officers (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 Military
    Operational Specialty (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 available to ensure success in attaining recruiting goals and
    maintaining critical shortages and skills.
        As for the retention of this all-volunteer force, during the mid-
    1980s, at the height of the Cold War, the Army Reserve averaged a 36-38
    percent officer and enlisted attrition at a time when we were never
    used. Today, after 8 continuous years of calls to active duty and use,
    since 1997, we are averaging 24-26 percent attrition. Interestingly,
    the retention rates appear to be higher in those units that get called
    to active duty than in those that are not called. Our soldiers feel the
    pressure, they understand the sacrifice, and they recognize their
    contributions to the common good and their fellow citizens. They are
    proud and they are determined. I am profoundly impressed by their
    performance, their commitment, and their dedication every day.
        Historically, our retention program has been 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. 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.
        In response, the Army Reserve developed the Commanders 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 Commanders 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 Commanders Retention Program, the
    Army Reserve has reduced enlisted troop program unit attrition by
    nearly 12 percentage points. The enlisted attrition rate in fiscal year
    2003 was 25.5 percent.
        The attrition rate for fiscal year 2004 is projected to increase to
    30.4 percent, due to an increase in the Expiration of Term of Service
    (ETS) population, expected retirements as well as recalls to active
    duty. The exact impact of demobilization of troops rotating out of
    theater having served in OIF1 and OEF3 remains to be seen. The next
    several months will tell the tale as stop-loss provisions are lifted 90
    days after our troops are released from active duty.
        Overall, the Army Reserve successfully accomplished its fiscal year
    2003 recruiting mission while achieving the Department of the Army and
    DOD quality marks. Beginning fiscal year 2004, the Army Reserve
    transitioned the U.S. Army Recruiting Command (USAREC) from a contract
    recruiting mission to a ship mission as well as began a 3-year phased
    implementation of the Delayed Entry Program (DEP) similar to the active
    Army. To support these efforts the Army Reserve recruiting mission will
    increase over the next 3 years and will stabilize by fiscal year 2007.
    The purpose of these two initiatives is to better utilize our training
    seat resources and to reduce overall unit attrition. 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 also affect prior service
    accessions. With the defense drawdown we have seen a corresponding
    decrease in the available prior service market in the IRR. This affects
    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.
        The Army Reserve is currently experiencing a shortfall of 4,200
    company grade officers. 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 managed
    flexibility during their transition to civilian life will be a win for
    the Army and the officer.
        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.

                                FAMILY PROGRAMS

        A functional family readiness program is important in peace and
    critical in war. Family programs provide invaluable family assistance
    during peacetime and calls to active duty, to include training for
    family program directors and volunteers in support of family readiness
    activities. These volunteers and contract employees provide information
    referral and outreach to family members and deployed soldiers. Within
    this system are 25 contractors serving in family program director
    positions whose duties include aiding in promoting families' awareness
    of benefits and entitlements, orienting family members to Army Reserve
    systems, programs, and way of life.
        In preparation for calls to active duty deployment, these
    volunteers and staff provide an extensive briefing for both families as
    well as soldiers. These family services include briefings by members of
    the Chaplains Corps who explain what happens to spouses or families
    upon separation. We also provide briefings when the service member
    returns and coach the family members to expect changes upon the
    soldier's return to home.
        The average Army Reserve soldier is older and more likely to be
    married than the average active component soldier. While all families
    face hardships when their soldier is called to the colors, Army Reserve
    families have additional challenges as they generally do not live near
    an installation that can provide services. While historically we have
    relied extensively on volunteers, experience has shown we must increase
    the amount of full time staff available for families. We will soon have
    25 additional family readiness group assistants positioned in locations
    where they can assist geographically isolated families of mobilized
    soldiers. We also have begun the process of accreditation to ensure the
    program delivers a consistent level of service to families. We continue
    to work on obtaining more resources for the program.
        During Operations Desert Shield/Desert Storm, Army Reserve family
    readiness programs were sparse. Today, these programs are extensive,
    and they are providing a support network for our families. We have been
    able to meet the needs of our deployed Army Reserve soldiers, and will
    continue to do so. We are anticipating challenges in the future.

                             INFORMATION TECHNOLOGY

    Network Service/Data Center
        The Army Reserve is redesigning its information technology
    infrastructure to support the global war on terrorism and greatly
    increase the survivability of our information technology infrastructure
    in the event of a cyber or physical attack. This redesigned
    infrastructure will establish a network service/data center that
    supports the continental United States. With this redesign, the Army
    Reserve would have the technological capability to sustain existing
    Army systems or field new Army systems to meet readiness requirements.
    The redesign will also enhance the timely dissemination of information
    supporting command and control of areas of mobilization, training, and
    overall data exchange.

    Force Protection
        The Force Protection Program within the Army Reserve is designed to
    provide security and preparedness to meet the full spectrum of threats
    facing Army Reserve facilities and stand-alone facilities worldwide.
    The program is an integrated set of five security activities: physical
    security, antiterrorism, law enforcement, information operations, and
    installation preparedness.
        The timely and accurate flow of threat information is the
    foundation of the overall Force Protection Program within the Army
    Reserve. Vulnerability and risk assessments coupled with current threat
    information provides a solid crisis management planning platform for
    the Army Reserve stand alone facilities and installations.
        The Army Reserve Force Protection Program enables commanders to
    prioritize facilities and focus resources using a proven decisionmaking
    methodology. The Army Reserve Force Protection Program is being used to
    dramatically repair and upgrade facilities, train leaders and integrate
    security programs to ensure fully capable units are available to
    support combatant commanders in the global war on terrorism.
        Installation preparedness concentrates on detailed planning,
    integrated training and for the coordinated response of first
    responders such as fire, police, and emergency services to incidents
    involving weapons of mass destruction or industrial accidents and
    disasters on or near Army Reserve facilities and installations.
        The Army Reserve is challenged with its existing military and
    civilian manpower structure. To sustain the current Force Protection
    Program and meet the demands of emerging requirements, we must expand
    contract requirements for physical security, antiterrorism
    vulnerability and risk assessments, force program leader training and
    exercise planning for the entire Army Reserve.
        Currently, the Army Reserve meets installation access control
    requirements, but sustainment of access control combined with the
    additional stand alone facility level security requirements associated
    with the global war on terrorism has become a challenge.
        Funding to support these critical security programs will allow the
    Army Reserve to continue to repair facilities, train leaders, and
    integrate security programs to ensure fully capable units are available
    to support combatant commanders in the global war on terrorism.

    Equipment Procurement and Modernization
        Increasing demands placed on the Army Reserve highlight the
    importance of equipment that is mission-essential. In addition, the
    increased use of Reserve Forces in operational missions and the global
    war on terrorism has highlighted the importance of having compatible
    and modern equipment. In order for our soldiers to be able to
    seamlessly integrate on the battlefield, our equipment must be
    operationally and technically compatible. Without complete
    interoperability, the ability of the Army Reserve to accomplish its
    combat support and combat service support missions would be diminished.
    The need to quickly and efficiently deploy Army Reserve units
    invalidates the old Cold War planning that Army Reserve units will have
    sufficient mobilization time to replace non-interoperable equipment or
    fill shortfalls deliberately accepted as ``necessary risk.'' Retaining
    older, less effective equipment or filling the Army Reserve's
    authorized levels of equipment only partially, leads to delays as a
    limited pool of Army Reserve equipment is transferred between
    deploying, redeploying, and non-deploying units and Army Reserve
    soldiers are trained or retrained to operate more modern equipment,
    they did not have access to during drills and annual training. The
    National Guard and Reserve Equipment Appropriation (NGREA) has been a
    significant and essential tool to improve the Army Reserve through
    force modernization.
        Meeting these challenges requires not only that the Army Reserve be
    issued modern, interoperable equipment, but that the resources to
    maintain the readiness of this equipment also be provided. Sufficient
    funding needs to be provided to allow the Army Reserve to reach higher
    standards of readiness than currently maintained as an element of risk
    accepted by the Army under constrained budgets. Until the Army Reserve
    can be fully equipped with modern items, sustaining the combat and
    deployment readiness of the equipment currently on hand is essential.
    This requires full funding of operations and maintenance requirements
    and continuing support of the Army's depot maintenance program, which
    is vital to maintaining the readiness of Army Reserve equipment, while
    extending service life, reducing life cycle costs, and improving safety
    for Army Reserve soldiers.
        Combat support and combat service support transformation is a vital
    link to the Army Transformation Plan. The Army Reserve is the main
    provider of this capability for the Army and the Army must continue to
    modernize the Reserve components along a timeline that ensures the
    Reserve components remain interoperable and compatible with the active
    component. The Army Reserve is continuing to support the Army's
    transformation through the assignment of equipment from Army Reserve
    units to Army prepositioned stocks (APS) and stay-behind equipment
    (SBE) in Iraq and Afghanistan.
        Equipment modernization of the Army Reserve is indispensable in
    meeting the goals of the Army's Transformation Campaign Plan. Full
    integration into the Army's modernization plan to implement force
    interoperability enables our units to deliver required combat service
    and combat service support ensuring our Army's operational success.

    Facility Revitalization
        The Army Reserve installation community proudly sustains 2 of the
    Army's major installations and 12 regional support commands. These
    regional commands function as ``virtual installations'' with facilities
    in 1,160 communities across all 50 States, United States territories,
    and in Europe.
        Our primary facilities, Army Reserve centers, are prominent symbols
    of The Army on Main Street America. They often create the very first
    impressions of the entire Army and present a permanent billboard for
    all Americans to see. Unfortunately, most Army Reserve facilities
    consist of 1950s era structures that remain virtually the same as when
    they were constructed. They are sorely in need of modernization or, as
    in most cases, replacement.
        Army Reserve soldiers train in widely dispersed training centers
    and support facilities worldwide, whose 40 million square feet of space
    equates to more square footage than Forts Hood, Sill, and Belvoir
    combined. Our facilities experience the same type of challenges active
    Army posts do. The impacts of poor facility conditions are even more
    acute for our soldiers. Overcrowded, inadequate, and poorly maintained
    facilities seriously degrade our ability to train and sustain units as
    well as sapping soldier morale and esprit de corps.

                                    SUMMARY

        In today's national security environment, the Army Reserve has many
    challenges--we accept these without hesitation. These challenges find
    expression in our reliance on Reserve component forces in contingency
    operations. Historically our Nation has placed great reliance on the
    Reserve components of soldiers, marines, sailors, and airmen to expand
    the Armed Forces for operations during time of war. The nature of
    warfare has changed drastically and we must also change. As BG David
    Fastabend notes in his unpublished white paper, Serving a Nation at
    War; a Campaign-Quality Army with a Joint and Expeditionary Mindset,
    ``Although the fundamental nature of war is constant, its methods and
    techniques change chameleon-like to match the strategic context and
    capabilities at hand.'' We must also change to accommodate the 21st
    century strategic context and operational reality. 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 world.
    The issues we have brought to you today--changing how we man, train,
    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 and against enemies who threaten our freedoms and
    security.
        We are grateful to Congress and the Nation for supporting the Army
    Reserve and our most precious resource, our soldiers--the sons and
    daughters of America.
        Thank you.

        Senator Chambliss. Thank you.
        Admiral Cotton.

       STATEMENT OF VADM JOHN G. COTTON, USNR, CHIEF, U.S. NAVAL
                                RESERVE

        Admiral Cotton. Good morning, Mr. Chairman. Thanks for this
    opportunity.
        I have to be quite honest, in the last 5\1/2\ months that
    I've been Chief of the Naval Reserve, just like the recruiting
    poster, my life has been accelerated, and it seems to be
    picking up speed each day.
        I didn't bring any sailors with me today to talk about
    their accomplishments at the front. Rather, I would like to
    bring to everyone's attention and remember something that
    happened just a few weeks here ago in Baltimore. On a stormy
    Saturday afternoon, the brave men and women of Naval Reserve
    Center Baltimore responded within minutes and were on the scene
    to rescue people off a capsized water taxi. A youngster, who
    wasn't trained to do this, used the front of the boat, the ramp
    that lowered to pick up the edge of the pontoon, to rescue
    others that were trapped underneath. I'm also proud to say that
    in 2 weeks we'll be at Baltimore to present the brave people
    that jumped into the frigid waters medals for their heroism. We
    have heroes overseas, and we have heroes right here at home
    with us.
        That demonstrates, I think, what the generals ahead of me
    have talked about, and that's the dual mission of our Reserve
    and our Guard, that not only overseas does us proud, but here
    stands ready for homeland security.
        The Navy and the Naval Reserve have been concentrating in
    the last year on one Navy. We recruit together, we train
    together, we deploy together, and all our policies are exactly
    the same.
        There are four quick points I'd like to make. This is our
    strategic plan for this next year.
        First, we're aligning. We don't need to have separate
    staffs or separate headquarters. We work together. In New
    Orleans and here in Washington, DC, we have embedded with the
    Navy. We're one alignment and one staff. We do that with
    recruiting; we do it with our training; and we do it with our
    admirals, as well.
        We're synchronizing the force. In the past, we've had seven
    separate readiness commands around the country, along with ten
    regional Navy commands. We are now aligning those headquarters,
    and, in the future, will align the functionalities of those
    regions to better respond not only to homeland security
    requirements, but also a mobilization of our proud sailors to
    go forward.
        We are also assessing the force at Fleet Forces Command.
    Under Admiral Fallon, who now speaks for all fleets around the
    globe, his team is looking at the requirements for the future
    Navy, not the Cold War construct. As a result, every billet and
    every unit in the Naval Reserve is being assessed for its
    value, for its risk mitigation, and for its capabilities as we
    measure it against Seapower 21. I'm proud to say that the Naval
    Reserve is matched up very well against Seapower 21's 61
    capabilities--in fact, we have 59 of them--as well as civilian-
    unique capabilities, over 800 of them, that are oftentimes used
    in times of crisis.
        Lastly, we'll take the results of this, and you'll see, in
    the first preview of the Program Objective Memoranda (POM) 2006
    budget, a synchronized, assessed, Navy and Naval Reserve that
    will be programmed together to better project warfighting
    wholeness as a unified Navy.
        I look forward to your questions, gentlemen.
        [The prepared statement of Admiral Cotton follows:]

                Prepared Statement by VADM John G. Cotton, USNR

                                   I. OPENING

        Mr. Chairman and members of this subcommittee, thank you for the
    opportunity to speak with you today about some of the important changes
    that are happening in the Navy and its Reserve, and to give you a
    report on our accomplishments and current state of readiness.
        As we look back, we see clearly that the tragic attack on our
    country on September 11, 2001, and the operations that followed,
    prompted significant changes for the Armed Forces, including the Guard
    and Reserve. Members of the National Guard and the Reserve have been
    called upon more in this global war on terrorism than at any other time
    since World War II. The Chief of Naval Operations (CNO) has said,
    ``Change to make us better is completely necessary to make our Navy
    even better and to build the 21st century Navy, and the Reserve is a
    key part of our growth and our future.''
        We are meeting the CNO's challenge head on, changing our culture
    and the shape of the force, moving away from an obsolete Cold War
    construct to one that provides tailorable, flexible capability in
    support of 21st century warfighting. Active-Reserve Integration is
    about more than gaining business efficiencies . . . it is about
    capitalizing on the skills, dedication and patriotism of the citizen-
    sailors that make up our force. The Navy's Reserve will be structured,
    equipped and trained to complement the capabilities inherent in
    SeaPower 21, and will leverage technology to take advantage of skills
    and abilities carried by our sailors on the coasts and in the heartland
    of America.
        Integration is a journey, and we are sharing this voyage with our
    active component shipmates. The CNO and senior fleet leadership have
    taken ownership of their Reserve, from recruiting and training, to
    equipment and readiness. The fleet is identifying the capabilities it
    will require the Navy's Reserve to provide, an input that the active
    and Reserve components together will use to design and shape the force.
    This new sense of ownership will build closer day-to-day operational
    relationships and allow for the seamless connection of total force
    capabilities in the right place, and at the right time.
        To enable recapitalization of the Navy, CNO has directed that
    efficiencies be realized in all areas of operations, and in both active
    and Reserve components. The Navy is fully integrating its Reserve into
    the new Fleet Response Plan (FRP) through both unit level and
    individual augmentation during day-to-day operational support, while
    maintaining the ability to mobilize reservists and equipment to support
    expanded surge operations around the globe. The fundamental construct
    of FRP is a surge-ready fleet, able to sail to any troubled spot in the
    world, swiftly defeat the enemy, and then reconstitute in minimum time.
    Therefore, the Navy and its Reserve will continually be in a surge
    status requiring minimum time to reset. Experienced and trained Reserve
    personnel are ideally suited for this surge capability. The basic 24
    drill days per year and 14 days of annual training are provided at 20
    percent of the cost of full time personnel, and they leverage prior
    Navy investment in training and maintain a continuum of service. Most
    reservists have both fleet experience and critical civilian skills to
    contribute to this concept of efficient utilization, and will fit
    perfectly into the unique surge mission requirements of the Navy's
    Reserve as envisioned in SeaPower 21.
        The Navy's Reserve has always been and will continue to be an
    important element of the Navy's Total Force. In the CNO's own words,
    ``. . . with the Navy's Reserve playing such a vital role in our day-
    to-day operations, it is imperative that we continue to properly assess
    and fund Reserve personnel and readiness requirements now and in the
    future.'' The Navy's Reserve contributes daily to support fleet
    operations and provides critical surge and sustainment capabilities to
    meet real world contingencies. However, to remain relevant, reservists
    must be even more accessible, flexible, and adaptable to better support
    fleet operations both at home and abroad. Every structural change being
    considered for the future is intended to ensure that the Navy's Reserve
    remains an important element of the Navy team. Providing a more tightly
    integrated force creates the opportunity for reservists to train,
    deploy, and operate alongside their active counterparts using current
    doctrine, concepts, and tactics, as well as the most modern equipment
    in the Navy's inventory.
        The Navy is evolving, and its Reserve is in step with the changes.
    For instance, Navy is aligning missions by capabilities and has created
    Fleet Forces Command to meld the fleets into a single, integrated
    force. The first change we made to support this alignment was to assign
    both the Commander, Naval Reserve Force (CNRF) in Washington, DC, and
    Commander, Naval Reserve Forces Command (CNRFC) in New Orleans, LA,
    ``additional duty'' to Commander, Fleet Forces Command (CFFC) in
    Norfolk, VA. For the first time ever, one fleet commander acting for
    all other Navy commanders, is conducting a Zero Based Review (ZBR),
    where every Reserve unit and billet is being reviewed for capability
    relevance and alignment with fleet requirements, and then forwarded to
    CNO for inclusion in future budget deliberations and requests. The
    Navy's Reserve will continue to provide mission capable units and
    individuals to the Navy-Marine Corps team throughout the full range of
    operations, from peace to war, and will do so in a much more efficient
    and integrated manner. The Navy has taken charge of its Reserve Force
    to further enable it to provide predictable and effective support to
    the fleet, ready and fully integrated, in the most efficient manner
    possible.

                      II. NAVY RESERVE PRIORITIES FOR 2004

        The Reserve's priorities have been aligned with those established
    by CNO for the entire Navy.
    Priority #1: Manpower
        Manpower is, and will remain, the Navy's number one priority. The
    Navy competes for the best people, and we are engaged on two fronts:
    recruiting the right people and improving retention. The focus is on
    capabilities and our recruiting objectives will be driven by fleet
    requirements. We need to attract and retain smart and savvy sailors to
    employ the advanced technologies that we will rely on in the network
    centric future.
        Navy leadership understands the consequences of sustained and
    repeated recalls on our Reserve personnel, their families, and
    employers. Our judicious use of individual and unit mobilizations has
    demonstrated the Navy's efficient, tailored and volunteer-based method
    of mobilization. Retention remains at an all-time high and post-
    mobilization surveys of recalled personnel indicate strong job
    satisfaction. Our proud, patriotic citizen-sailors have, and will
    continue, to answer the call in defense of freedom and liberty. CFFC's
    integration initiative will build on this success by increasing mission
    relevance, and ensuring that every reservist is delivering the
    capability and expertise required by the fleet and the Joint Force
    Commander.
        We are pleased to report that recruiting remained strong in 2003.
    Last year we achieved 106 percent of our enlisted recruiting goal.
    Largely due to record high retention rates in the active duty Navy, 40
    percent of these enlisted accessions were Non-Prior Service (NPS)
    personnel. While very qualified, many with advanced degrees, these NPS
    personnel require additional training before being assigned
    mobilizations billets. Officer recruiting, also challenged by high
    retention in active duty warfare designated communities, finished at 91
    percent of the fiscal year goal. Our recruiters met goal last year for
    both officer and enlisted full-time support personnel. The Navy's
    Reserve had an attrition rate of 17.8 percent in fiscal year 2003, and
    ended the year manned at 100.2 percent of authorized end strength.
    Although we are pleased with our results in these important manpower
    categories for last year, fiscal year 2004 brings similar challenges.
    We believe we can meet our recruiting goals in part because Reserve
    recruiting became one of the first commands to fully align with their
    active duty counterpart. Commander, Naval Reserve Recruiting Command
    (CNRRC) in New Orleans, LA, became Commander, Naval Reserve Recruiting
    Region (CNRRR) and is now aligned with the Navy Recruiting Command
    (CNRC), in Millington, TN. We are very optimistic that prototype
    recruiting stations combining both active duty and full-time Reserve
    recruiters opening this year will result in improved recruiting
    efficiencies. Furthermore, active duty commands are being directed to
    increase their efforts to keep trained and talented personnel leaving
    the Active Force on the Navy team by recruiting them directly into the
    Navy's Reserve. Keeping Navy veterans serving, especially those with
    critical skills and qualifications, is very important and has the
    support of the entire chain of command, both active and Reserve.
        Navy Reserve end strength requested in the fiscal year 2005
    President's budget is 83,400, a decrease of 2,500 from fiscal year
    2004. This decrease is due primarily to the rebalancing of Naval
    Coastal Warfare units into the active component, the decommissioning of
    a fleet hospital, and medical program billet reductions due to force
    restructuring. We expect that the requested end strength in this budget
    is sufficient for the Navy's Reserve to meet fleet requirements.
    However, ongoing initiatives and total force capability analysis may
    result in modifications to this target in the future.
    Priority #2: Current Readiness
        During Operation Iraqi Freedom (OIF), the Navy had 8 carrier strike
    groups, 6 expeditionary strike groups, and nearly 100,000 sailors and
    marines deployed around the world in support of the global war on
    terrorism. The near term goal for the Navy's Reserve is to provide a
    force shaped by fleet requirements and driven by SeaPower 21. To
    achieve this goal, we will continue to align with the Navy, measure
    risk, present options and rapidly move ahead with assignment of units
    and personnel to match requirements with capabilities. These
    assessments will be driven by the question: What resources can we apply
    that will enhance effectiveness and efficiency, and will contribute to
    warfighting wholeness? If the analysis indicates that the number of
    reservists should be adjusted to meet current requirements and future
    capabilities, we will make that happen. If that means that some
    equipment must be retired or realigned to support the Active Force,
    then we will ensure that the Navy's Reserve is integrated with the
    fleet and trains on and operates the Navy's newest, most capable
    platforms and systems.
        Following the attack on U.S.S. Cole, the Navy recognized the
    immediate need for increased force protection and added 6,619 new
    active component and 1,379 Reserve component antiterrorism and force
    protection billets. Current readiness was also enhanced in the fiscal
    year 2004 budget with funding to operate an additional frigate (FFG) in
    the Navy's Reserve Force, execute flying hours at 100 percent of
    requirement, and support ship maintenance to meet CNO's goal. Aviation
    depot maintenance funding was increased to ensure that 100 percent of
    CNO engine and airframe maintenance goals are achieved. In fiscal year
    2004, base support funding has been consolidated Navy-wide under
    Commander, Naval Installations to eliminate redundancies, generate
    economies of scale, and provide enhanced readiness support to shore
    activities, both active and Reserve. It is expected that further
    efficiencies will be realized by combining base support for active and
    Reserve personnel where overlaps and excess capabilities exist.
        The very much appreciated National Guard and Reserve equipment
    appropriation for fiscal year 2004 provided readiness support
    modifications, upgrades, and procurement of items for expeditionary
    warfare units, trainers and simulators to improve the availability of
    readiness training, as well to acquire eight Swiss F-5 aircraft to
    replace aging Reserve adversary training assets. The appropriation also
    included funds to complete the last two upgrades to Reserve F/A-18As to
    ``A-Plus,'' providing precision strike capability and placing them on
    par with fleet F/A-18Cs. Funds were first applied to improve current
    readiness and then to enhance future readiness, and were coordinated
    with Navy warfare and resource sponsors.
    Priority #3: Future Readiness
        Improved accessibility and integration are the cornerstones of the
    Navy Reserve's contribution to future readiness. For example, full
    integration will ensure that Navy reservists in aviation Fleet Response
    Units (FRU) will be able to quickly activate and support global
    operations under the CNO's Fleet Response Plan (FRP). Our vision is a
    Reserve Force that is better prepared and more capable for both unit
    and individual mobilization requirements. Co-locating our Reserve
    personnel and hardware with their supported fleet units streamlines the
    activation process enabling individuals to train alongside, and be more
    familiar, with the units they will augment. Co-location enables FRU
    aircrews to train and operate state-of-the-art equipment, as well as
    leverage Active Force tactics and doctrine. Reserve experience and
    availability can also be used to provide onsite fleet support.
    Concurrently, retaining and strengthening the Squadron Augment Unit
    (SAU) concept continues the vital contribution that our experienced
    Reserve instructor and maintenance cadre provides to the Fleet
    Replacement Squadrons (FRS). As an aside, every pilot flying combat
    missions in Operation Enduring Freedom (OEF) and OIF was trained by
    dedicated and professional Navy Reserve aviators providing airwing
    adversary, fleet exercise and training command support.
        Under the guidance of Commander, Fleet Forces Command, the Navy has
    begun an initiative that will lead to a more integrated total force in
    which Navy Reserve capabilities are tied directly to active units in
    support of SeaPower 21 mission capabilities. The active component is
    currently engaged to clearly articulate requirements for the Navy's
    Reserve. CFFC's Reserve integration cell will recommend the future
    Reserve Force structure necessary to meet these fleet capability
    requirements. Coordination has already begun with a complete zero-based
    review of Navy Reserve capabilities. Active duty commands have been
    tasked to identify their Reserve support requirements and to describe
    potential new capabilities they need from their reservists to more
    readily meet their mission requirements.
        To fully realize SeaPower 21, the Navy and its Reserve will align,
    organize, integrate, and transform around the four warfighting pillars
    of Sea Strike, Sea Shield, Sea Base, and FORCEnet. SeaPower 21 embodies
    a number of maritime capabilities that are in the domain of expertise
    the Navy brings to the Joint Force. To provide sufficient operational
    range and depth to many of these capabilities, and to efficiently and
    effectively meet its requirements as part of the Joint Force, Navy must
    leverage its investment in the extraordinary capabilities, critical
    skills, innovative nature, and entrepreneurial spirit of its Reserve
    personnel.
        We support the Secretary of Defense's goal of rebalancing the
    active-Reserve component force mix to eliminate the need for
    involuntary mobilization, especially during the first 15 days of an
    operation. Our fiscal year 2005 budget submission reflects the
    additional active-Reserve rebalancing changes needed for the Navy to
    meet this goal.
        At present, no homeland defense/homeland security (HLD/HLS) mission
    has been assigned to the Navy's Reserve, but the Assistant Secretary of
    Defense for Reserve Affairs and the Assistant Secretary of Defense for
    Homeland Defense are conducting a study to determine the appropriate
    role of Reserve components in these critical areas. Upon completion of
    the study, new and existing naval capabilities present in the Navy's
    Reserve could be assigned HLD/HLS missions. These might include harbor
    defense, port security, maritime surveillance and tracking, AT/FP
    roles, Joint Fires Network Units and maintenance of shipping channels.
    As we move forward, evolving missions will continue to influence our
    force shaping and integration initiatives, with the endstate being a
    more combat-capable total force.
    Priority #4: Quality of Service
        Quality of Service is the combination of quality of life and
    quality of work. It is about achieving balance, personal and
    professional. The Navy will continue to strive to make available the
    best facilities and equipment to train, deploy, and fight, and our
    reservists will benefit from ongoing integration and alignment efforts.
    Ensuring that our Navy's reservists can rely on predictability,
    periodicity, pay and benefits, will greatly assist each sailor to
    achieve that balance.

             Predictability: Every sailor in the Navy's Reserve
            wants to make a difference and needs to know with reasonable
            advance notice, when and where they will train or perform
            operational support, whether mobilized, on active duty orders
            or on routine drills. As part of a fully integrated force,
            reservists will train or perform meaningful work that provides
            or enhances capabilities required by the fleet. Additionally,
            individual reservists will be able to anticipate drills and
            periods of active duty through processes that will track and
            match necessary skills to appropriate billets or orders.
             Periodicity: Individual reservists' availability
            varies during the year and with each employer. These periods of
            availability can be leveraged to enable each sailor to provide
            meaningful fleet support. ``Flexible drilling'' is encouraged
            to allow reservists to combine traditional drill weekends to
            work for a week once a quarter, 2 weeks every 6 months, or even
            for several weeks once a year to satisfy participation
            requirements. If a unit or individual is called to mobilize,
            reservists should receive as much notice as is possible, with a
            target of 30 days, to help minimize potential employer or
            family conflicts.
             Pay and Benefits: Reservists should be assured that
            their benefits will appropriately address their individual and
            family needs, whether serving at home or abroad. Development of
            a single pay and benefits system continues to be a priority to
            standardize the administration of both active and Reserve
            personnel in all services.

        Continuous professional improvement is important to every sailor,
    active and Reserve. Accordingly, the Navy's Reserve is a full partner
    with the Navy in the Sea Warrior initiative, enabling an individual to
    easily access and monitor their career progression and future options.
    Navy reservists have full access to both the Navy-Marine Corps Intranet
    (NMCI) as well as the Navy Knowledge Online (NKO) web portal, which
    connects every sailor, active, Reserve or retired, and families, to
    information that will significantly aid in their overall education,
    growth and development.
    Priority #5: Alignment
        The Navy will continue to take an active role in optimizing the
    balance of Active and Reserve Forces to support our National Military
    Strategy (NMS) and win the global war on terror. We recognize that this
    balance is dynamic and we continuously review our force structure and
    capability in order to improve integration and alignment. Integration
    provides the Navy's Reserve a path to current equipment, concepts and
    tactics, thereby increasing combat readiness and warfighting wholeness.
    Through integration, the Navy's Reserve will become a more capable and
    agile force with increased warfighting capability and a much-improved
    ability to meet fleet requirements.
        In support of alignment and efficiency, we recently consolidated
    three Navy Reserve staffs in New Orleans into a single Echelon III
    staff to function as the provider of Reserve capabilities to Fleet
    Forces Command. Commander, Naval Air Forces Reserve (CNAFR) has been
    assigned as Vice Commander Naval Reserve Forces Command, further
    aligning Reserve capabilities under a single structure to work with the
    active component to fully align and integrate the Navy's Reserve. CNAFR
    has also been assigned additional duty to Commander, Naval Air Forces
    (CNAF) in San Diego, CA, to align active and Reserve aviation
    capabilities.
        We are embedding key full-time support staff in headquarters, fleet
    and type commands. We have developed strategic linkages between Reserve
    Forces Command and Fleet Forces Command with tangible results, and
    continue to build new bridges throughout the Navy. This was done to
    more closely align Reserve and Active Forces and to improve combat
    effectiveness and efficiency. These actions will strengthen ties
    between the Navy's Active and Reserve Forces and are the first steps in
    an overall initiative that seeks to define, and subsequently forge a
    cohesive ``total force'' team that can more effectively satisfy the
    Navy's operational requirements. We will continue to identify and
    propose practical ways to better integrate reservists and equipment
    with the fleet, and have taken steps to accelerate and solidify our
    integration efforts. We are also participating in a new officer
    exchange program with other Guard and Reserve components, starting with
    the Army National Guard. This initiative will lead to full integration
    at National Guard State Headquarters Command Units to support Northern
    Command's (NORTHCOM) homeland security initiatives.

                              III. ACCOMPLISHMENTS

        Today's strategic environment requires naval forces that can
    rapidly deliver decisive combat power through a rotational, surge
    capable force. OEF and OIF demonstrated not only the tactical value of
    this operational concept, but also the potent warfighting capabilities
    of a flexible, responsive maritime force, operating either
    independently or as part of a broader Joint Force. The Navy's Reserve
    played a significant role in the surge to war.
        On September 17, 2001, the first mobilization orders were sent to
    the force. Since that day, 4,537 officers and 18,436 enlisted personnel
    have been mobilized, providing operational support to either their
    supported commands or to combatant commanders around the world. With
    respect to OIF, 12,046 Navy reservists served their country in Navy and
    joint commands. While some units and equipment were mobilized in
    support of OIF, we have been able to maximize individual mobilizations
    to support requirements submitted by combatant commanders, validated by
    the CNO's staff, and ordered to active duty by the Chief of Naval
    Personnel. For example, 362 drilling reservists were mobilized to
    augment the staff of Commander, U.S. Fifth Fleet, the Naval Component
    Commander for Commander, U.S. Central Command and other subordinate
    commands. These Navy reservists supported this active duty staff in the
    development of the OIF air plan. Since January 2003, 478 Navy
    reservists attached to Navy Cargo Handling Battalions across the United
    States were mobilized to facilitate the movement of cargo from bases in
    the United States and overseas to the Central Command area of operation
    theater in support of OIF.
        A group of Navy reservists from Fort Worth, TX, made history on the
    decks of U.S.S. Theodore Roosevelt (CVN 71). For the first time since
    the Korean War, an entire Navy Reserve tactical aviation squadron
    deployed aboard an aircraft carrier when the ``Hunters'' of Strike
    Fighter Squadron 201 were ordered to active duty. Completing a short
    notice workup, the squadron fully integrated with the active airwing,
    completed 224 combat sorties, delivered 125 tons of ordnance in combat,
    and impressed everyone with their experience, dedication, and
    capabilities.
        When 800 active duty medical personnel from the National Naval
    Medical Center (NNMC), Bethesda, MD embarked in U.S.N.S. Comfort in
    March 2003 and another 498 NNMC medical personnel deployed as part of
    Casualty Receiving and Trauma Ship's team members, 548 Navy reservists
    were recalled to support the National Naval Medical Center. Civilian
    trauma and orthopedic surgeons were mobilized to treat the wounds of
    those sailors and marines who required more specialized care.
        Eight hundred forty three naval reservists have been activated to
    support Marine Forces during the war, including 592 enlisted corpsmen
    assigned to provide critical battlefield medical support to front-line
    marine units. 134 Navy Reserve corpsmen have recently been recalled to
    support the marines' rotation in conjunction with OIF II. Of these, 24
    reservists are volunteers for their second year of activation, while
    the remainder have just begun their first activation under the current
    partial mobilization authority.
        Another success story was the mobilization of the ``Firehawks'' of
    Helicopter Combat Support Special Squadron Five (HCS-5) based at Naval
    Air Station North Island, CA, and their subsequent deployment to Iraq,
    where they continue to support Central Command (CENTCOM) operations. In
    March 2003, 70 percent of this squadron's selected reservists were
    recalled to active duty in preparation for OIF. This squadron is
    composed solely of drilling reservists and full-time support personnel,
    and is one of two squadrons in the Navy dedicated to Naval Special
    Warfare support and combat search and rescue. The Firehawks fly the
    latest model of the HH-60H Seahawk helicopter and their average pilot
    has more than 12 years of experience flying, and most have over 2,500
    military flight hours. Although the majority of their flights in the
    Iraqi theater have supported special operations ground force missions,
    the squadron has other warfighting capabilities. The Firehawks have
    participated in operations in urban areas and have assisted with
    medical and casualty operations. As of the March 5, 2004, the squadron
    had flown 916 sorties and logged 1,738 flight hours.
        Navy reservists from the Redwolves of HCS-4 based at Norfolk Naval
    Base will soon deploy to relieve the combat veterans of HCS-5. This
    critical capability embedded in the Navy's Reserve has proved to be
    invaluable in the support of special operations and the development of
    new tactics in the hostile urban warfare environment. It is a
    predictable and periodic capability that was ready when called upon;
    just what the vision of future Reserve contributions will be. They have
    trained with the special warfare units and now deploy with them to
    combat.
        Recently, over 500 members of the Navy Reserve Expeditionary
    Logistics Support Force have been mobilized in support of OIF II, and
    it is anticipated that over 500 Seabees will be mobilized as well.
    Their combat service support capabilities are in demand to help relieve
    the U.S. Army and Coalition Forces in Iraq.

                                  IV. SUMMARY

        Before I close, I would like to thank this committee for the
    support you have provided the Navy's Reserve and all of the Guard and
    Reserve components. Last year's budget included several positive
    benefits that will help us recruit and retain our talented personnel to
    better support the Navy and joint commands. As you can see, this is a
    very exciting period for the Navy and its Reserve. The CNO has
    challenged every sailor to review current ways of doing business and
    find solutions to improve effectiveness and find efficiencies. The
    Navy's Reserve has accepted the challenge and promises the members of
    this committee that we will continue to do just that--examine all
    facets of our operation to support the fleet and accelerate our Navy's
    advantage.

        Senator Chambliss. Thank you, Admiral.
        General McCarthy.

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

        General McCarthy. Mr. Chairman and Senator Nelson, thank
    you very much for the opportunity to appear here on behalf of
    the Marine Corps Reserve.
        The Marine Corps Reserve today is deployed both throughout
    the United States, in their home training centers, and around
    the world. I'm told that the Commandant appeared before a
    committee of Congress not too long ago, and said that the sun
    never sets on the United States Marine Corps. The sun never
    sets on the Marine Corps Reserve, either.
        The force that we've mobilized consists of over 26,000 of
    our marines, drawn from both the Selected Reserve and the
    Individual Ready Reserve. They've served in combat, and they
    have served with great distinction.
        Like the other Services, we are assessing the balance of
    that force. We're trying to determine the optimum organization.
    I would tell you that the Marine Corps Reserve that existed on
    September 11, 2001, was a pre-trained, balanced, and
    sustainable force. To use General Blum's terms, it was and
    remains an operational Reserve for the Marine Corps. The
    adjustments that we will make in the Marine Corps Reserve are
    not likely, in my judgment, to be radical in nature. I think
    that we will tweak the balance, but we will not be required to
    make radical adjustments in either our force structure or our
    organization.
        We are facing a circumstance that, frankly, none of us have
    faced before. This idea that we need to sustain a level of
    mobilization year after year after year presents challenges
    that are new to us. Right now, we are meeting those challenges
    magnificently. As I tell people every place I go, the
    unhappiest marines in my force that I run into are those that
    we haven't called on yet. They want to go. They want to do
    their Nation's work, and they're ready to do it successfully.
        How long we will be able to sustain that is certainly a
    question that all of us in a leadership role need to pay close
    attention to. We're meeting our recruiting goals. We're
    exceeding our historic retention levels. Things look very good
    right now. But all of us need to keep a very close eye on that,
    because, as General Helmly said, this is the first time we've
    done this with an All-Volunteer Force.
        One of the key elements that I stress with our force is
    family readiness. I tell the marines in my headquarters that in
    Marine Forces Reserve, just about everything we do is at the
    tactical level. The one thing that we do that has strategic
    significance is our family readiness and sustaining those
    families. We work hard at that. It's critical to our success.
    The families that I talk to on a regular basis know that we're
    engaged. We don't always do it right, but we work hard at it.
    We've had tremendous support from families. As a result of
    that, I think from employers as well.
        Overall, the status of your Marine Corps Reserve is very
    solid. The leaders of your Marine Corps Reserve are keeping
    their eye on it and keeping their finger on the pulse. I think
    that we have a force that you can be proud of.
        I look forward to answering any specific questions that you
    have.
        Thank you, sir.
        [The prepared statement of General McCarthy follows:]

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

                                  INTRODUCTION

        Chairman Chambliss, Senator Nelson, distinguished members of the
    subcommittee; it is my honor to report to you on the state of readiness
    of your Marine Corps Reserve as a partner in the Navy-Marine Corps
    team. Your marines are firmly committed to warfighting excellence, and
    the support of Congress and the American people has been indispensable
    to our success in the global war on terrorism. Your sustained
    commitment to improving our Nation's Armed Forces to meet the
    challenges of today as well as those of the future is vital to the
    security of our Nation. On behalf of all marines and their families, I
    thank this subcommittee for your continued support.

                        YOUR MARINE CORPS RESERVE TODAY

        As the last few years have demonstrated, the Marine Corps Reserve
    is a full partner in our total force. Reserve units participated in all
    aspects Operation Iraqi Freedom (OIF), providing air, ground, and
    combat service support as well as a large number of individual
    augmentees to marine and joint staffs. Reserve units continue to fill
    critical roles in our Nation's defense during the global war on
    terrorism--whether deployed in Iraq, Afghanistan, the Georgian
    Republic, Djibouti, Kuwait, and Guantanamo Bay, Cuba or on standby at
    U.S. bases to quickly respond to homeland security crises.
        The Marine Corps has completed 27,389 Reserve activations, in
    response to both internal and joint operational requirements. Marine
    Forces Reserve has maximized the use of Individual Ready Reserve (IRR)
    volunteers, 4,570 have been activated to meet these requirements,
    primarily in the areas of staff augmentation, such as linguists,
    intelligence specialists, and for force protection requirements.
        During the peak of Operation Enduring Freedom (OEF) and OIF, the
    Marine Corps had 21,316 Reserve marines on active duty.
        Marine Forces Reserve proved once again that it was ready, willing,
    and able to accomplish its primary mission of augmenting and
    reinforcing the active component by seamlessly integrating into the I
    Marine Expeditionary Force. As an example of the level of support
    Reserve marines provided, 6th Engineer Support Battalion, the second
    largest battalion in the Marine Corps mobilized 1,972 of its 2,172
    marines from 11 separate sites. The unit is comprised of 10 companies
    spread among 12 Reserve centers across the U.S. During the war, the
    battalion, commanded by LtCol. Roger Machut, USMCR, distributed 8
    million gallons of fuel, produced and distributed over 3.1 million
    gallons of water, and provided material handling support for numerous
    convoys. In addition, the unit built the longest Hose Reel Fuel line
    system (80 miles), the largest tactical fuel farm and the longest
    Improved Ribbon Bridge in Marine Corps' history.
        The Fourth Marine Division was equally engaged. Two infantry
    battalions, 2nd Battalion, 23rd Marines and 2nd Battalion, 25th Marines
    were directly engaged in ground combat, as was 4th Light Armored
    Reconnaissance Battalion, 4th Assault Amphibian Battalion, and other
    combat support and combat service support outfits. Reserve officers and
    staff non-commissioned officers (NCOs) effectively trained their units
    for combat and led them successfully in battle.
        Marine Reserve KC-130Ts proved their worth. Using the most modern
    night vision equipment, they participated in 3rd Marine Aircraft Wing's
    assault support effort, landing on highways and dirt strips to resupply
    Forward Arming and Refueling Points that supported the I Marine
    Expeditionary Force's 500-kilometer drive from Basra to Baghdad and on
    to Tikrit.
        The seamless integration of Reserve units is a credit to the Marine
    Corps commitment to total force. A strong inspector-instructor system,
    providing a top notch staff of active duty and active Reserve personnel
    at each site, and a demanding Mobilization and Operational Readiness
    Deployment Test program ensure Marine Corps Reserve units achieve the
    highest level of pre-mobilization readiness. Marine Corps Reserve Units
    train to a high readiness standard, eliminating the need for post-
    mobilization certification. For OIF the Marine Corps Reserve executed a
    rapid and efficient mobilization. While some of our Reserve units
    deployed in as little as 6 days from notification, on the whole our
    units averaged 23 days from notification to deployment. None of our
    units missed their deployment window. In fact, many of our units were
    notified, activated, and ready to deploy faster than strategic lift was
    available.
        The ability of the Marine 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 the Marine team--both active and
    Reserve.

                              MARINES AND FAMILIES

        Our future success will rely firmly on the Marine Corps' most
    valuable asset--our marines and their families.
    Operational Tempo Relief
        In addition to supporting Operations Noble Eagle (ONE), OEF, and
    OIF, Reserve marines provided operational tempo relief to the active
    component. Notably, 96 Reserve marines volunteered to participate in
    the West African Training Cruise (WATC 04), creating the first Reserve
    Marine Corps WATC, a biannual 6th Fleet sponsored exercise in West
    Africa. During the months of October and November 2003, the marines
    deployed to West Africa from various Reserve Training Centers (RTC)
    throughout the Midwest via Air Force strategic lift. There they boarded
    the high speed vessel (HSV) Swift and sailed Africa's west coast
    conducting training exercises with military forces from South Africa,
    Cameroon, Ghana, Gambia, and Senegal.
        Marine Forces Reserve also provided the majority of Marine Corps'
    support to the Nation's counterdrug 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 marine units supported 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.
        Similarly, 335 Reserve marines volunteered to deploy to South
    America to participate in Unitas 45-04. Sponsored by ComUSNavSouth,
    Unitas is an annual naval and amphibious exercise that takes place
    throughout South America. This will be the second Unitas sourced
    primarily from the Selected Marine Corps Reserve (SMCR). This year the
    SMCR marines of MARFOR Unitas will conduct a 13-week training program
    at Camp Lejeune, North Carolina, and subsequently embark on the U.S.S.
    Tortuga. From the Tortuga the marines will disembark to conduct
    bilateral training with our allies in the Caribbean and the Pacific. In
    Peru, MARFOR Unitas 45-04 will conduct a multi-national amphibious
    exercise that includes forces from Argentina, Bolivia, Chile, Ecuador,
    Mexico, Panama, Peru, and Uruguay.
    Education
        The Marine Corps Reserve continues to be a young force with about
    70 percent of SMCR marines under 25 years old and serving on their
    first enlistment. Over 40 percent of Reserve marines are college
    students. Although many educational institutions support activated
    service members by refunding tuition and awarding partial credit for
    courses begun but not completed, there are no laws offering academic
    and financial protections for Reserve military members who are college
    students. We support the Employer Support of the Guard and Reserve's
    (ESGR) initiatives to improve communication between Reserve component
    personnel and their educational institutions.
    Mobilization Support
        Mobilization readiness is our number one priority and the men and
    women in the Marine Corps Reserve have responded enthusiastically to
    the call to duty. Approximately 98 percent of marines reported when
    mobilized. One of the keys to this success is the support given to the
    marines and their family members prior to, during, and after
    activation.
        Programs such as MCCS One Source provide marines and their families
    with around-the-clock information and referral service for subjects
    such as parenting, childcare, education, finances, legal issues, elder
    care, health, wellness, deployment, crisis support, and relocation via
    toll-free telephone and Internet access. MCCS One Source familiarizes
    our activated Reserve marines and their families not located near major
    military installations to the requirements and procedures associated
    with military programs such as TRICARE.
    TRICARE
        Marine Forces Reserve recognizes family readiness as an essential
    part of mobilization preparedness. Upon activation, Reserve families
    must make significant adjustments in lifestyle. Civilian jobs and/or
    educational commitments must be correctly managed: proper notifications
    provided to employers to ensure legal protections, continued good
    marine-employer relations and an eventual smooth return. Health care
    issues can be challenging, with families often required to shift
    providers in order to use TRICARE benefits.
        Since September 11, Congress has gone to great lengths to improve
    TRICARE benefits available to the Guard and Reserve. Reserve members
    are now eligible for dental care under the Tricare Dental Plan for a
    minimal monthly fee. Mobilized Reserves are granted additional
    transitional benefits once their activation is complete. In an effort
    to increase awareness of the new benefits, Reserve members are now
    receiving more information regarding the changes through an aggressive
    education and marketing plan. Finally, the newest, temporary changes
    include provisional benefits to marines and their family members 90
    days prior to their activation date and up to 180 after deactivation
    and extending TRICARE coverage to members and their families who are
    either unemployed or employed but not eligible for employer-provided
    health coverage. These benefits ensure that members have the means to
    become medically and dentally qualified for deployment prior to
    activation and remain qualified. We appreciate your continued support
    of these valuable health care benefits.
    Family Support
        At each of our Reserve Training Centers, the Key Volunteer Network
    Program serves as the link between the deployed command and the
    families, providing unit spouses with official communication,
    information, and referrals. This creates a sense of community within
    the unit. Additionally, the Lifestyle Insights, Networking, Knowledge
    and Skills (L.I.N.K.S.) Program is a spouse-to-spouse orientation
    service offered to new marine spouses to acquaint them with the
    military lifestyle and the Marine Corps, including the challenges
    brought about by deployments. Online and CD-ROM versions of L.I.N.K.S.
    makes this valuable tool more readily accessible to working spouses of
    Reserve marines not located near Marine Corps installations. The
    Peacetime/Wartime Support Team and the support structure within the
    inspector and instructor staff provide families of deployed marines
    with assistance in developing proactive, prevention-oriented steps such
    as family care plans, powers of attorney, family financial planning,
    and enrollment in the Dependent Eligibility and Enrollment Reporting
    System. Our deployed commanding officers have confirmed the importance
    of this family readiness support while they were away and as part of
    their homecoming.
    Marine For Life
        Our commitment to take care of our own includes a marine's
    transition from honorable military service back to civilian life. The
    Marine For Life Program's mission is to provide sponsorship for our
    more than 27,000 marines who honorably leave Active service each year.
    The program was created to nurture and sustain the positive, mutually
    beneficial relationships inherent in our ethos, ``Once a Marine, Always
    a Marine.'' In cities across the United States, marines help marines
    and their families transition from active duty to their establishment
    within a new community. Sponsorship includes assistance with
    employment, education, housing, childcare, veterans' benefits, and
    other support services needed to make a smooth transition.
        Reserve marines have a unique opportunity to help their fellow
    transitioning marines and also use this program. To provide this
    support, Marine For Life taps into the network of former marines and
    marine-friendly businesses, organizations, and individuals that are
    willing to lend a hand to a marine who has served honorably.
        The Marine For Life Program was initiated in fiscal year 2002 and
    will reach full operational capability this fiscal year. In addition to
    110 Reserve marines serving as ``Hometown Links,'' an enhanced web-
    based electronic network, easily accessed by marines worldwide, will
    help support the program. The Marine For Life Program is a nationwide
    network available to all marines honorably leaving active service. It
    serves to improve their transition to civilian life and ensure that no
    marine who honorably wore the Eagle, Globe, and Anchor is lost to the
    Marine Corps family.
        The Marine Corps Reserve also provides a significant community
    presence in and around our 187 sites nationwide. An important
    contribution Marine Forces Reserve provides is support for military
    funerals for our veterans. The active duty staff members and Reserve
    marines at our sites performed 6,117 funerals in 2003 and we anticipate
    supporting 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 and Devens,
    Massachusetts where we perform several funerals each week. We
    appreciate Congress exempting these marines from counting against
    active duty end strength.

                               CURRENT READINESS

        As of March 1, 2004, the Marine Corps Reserve was over 98,000
    strong. While 59 percent of this population (58,571) is in the IRR, the
    remaining 41 percent (40,235) are assigned to units, either as drilling
    members or active Reserve marines, or are in the training pipeline for
    units.
        The Marine Corps Reserve is a pre-trained, balanced, and
    sustainable force capable of rapid deployment to a combat environment.
    It is important to note that less than 1 percent of our SMCR unit
    strength represents a Reserve-unique capability. The current Marine
    Forces Reserve structure also reflects a large enterprise ratio: 98
    percent are deployable warfighters. (A minimal number of active duty
    and Reserve personnel are in administrative/support roles.)
        As of 18 March, 5,125 Reserve marines were on duty in support of
    contingency operations worldwide; 3,924 from Selected Marine Corps
    Reserve units and 1,201 Individual Augmentees. Reserve marines are
    fully integrated with and serving alongside their active duty
    counterparts in every hotspot in the global war on terrorism.
        As of January 2004, we began activating marines that will support
    OIF II. To meet worldwide commitments, the Department of Defense has
    established a predictable and sustainable, capabilities-based tour
    length and rotation schedule for OIF II. Reserve marines are receiving
    1-year activation orders and will deploy in theater for up to 7 months.
    This contributes to making Marine Forces Reserve a more sustainable
    force. Marine Forces Reserve currently has 3,308 marines mobilized for
    OIF II, 1st rotation. We are anticipating activating approximately
    3,500 marines in the summer for OIF II, 2nd rotation.
        Judicious use and coordinated planning has enabled us to activate
    only 1,153 Reserve marines more than once, 406 of those are currently
    activated. Since September 11, 20,403 (62 percent) of SMCR marines,
    1,128 (64 percent) of Individual Mobilization Augmentees, and 4,486 (8
    percent) of Individual Ready Reserve Marines have been activated. The
    latter is worth particular note as our IRR provides us versatility--an
    added dimension to our capability.

        Marine Forces Reserve has identified several specialties as
    critical. To mitigate this challenge, volunteers from the IRR and from
    other Military Occupational Specialties, such as artillery, have been
    cross-trained to reinforce these critical specialties.
        Additionally building on the important lessons learned of the last
    year, the Marine Corps is pursuing several initiatives to enhance the
    Reserves' capabilities as a ready and able partner of the Total Force
    Marine Corps. These pending initiatives include: increasing the number
    of Reserve military police units; establishing and reinforcing an
    Intelligence Support Battalion that will enhance command and control
    and increase Reserve component intelligence assets, to include placing
    Reserve Marine Intelligence Detachments at the Joint Reserve
    Intelligence Centers; returning some of our civil affairs structure to
    the active component to provide enhanced planning capabilities for
    operational and Service headquarters; and refocusing our Individual
    Augmentee management program to meet growing joint and internal
    requirements.
        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. The use of ADSW enables us to
    use marines who volunteer for short periods of active duty, rather than
    involuntarily activating Reserve marines.
        The requirement for ADSW has increased to support pre-mobilization
    activities during fiscal years 2003 and 2004 and will be further
    challenged during post-mobilizations. In fiscal year 2003, the Marine
    Corps executed 942 work-years of ADSW at a cost of $51.5 million.
    Continued support and funding for this critical program will enhance
    flexibility thereby ensuring our Total Force requirements are met.
    Recruiting and Retention
        The Marine Corps Reserve has achieved historically high retention
    rates in fiscal year 2003 and, the retention rate for the Marine Corps
    Reserve remains favorable with a 7- to 10-percent increase over
    retention rates in the near-term past. Marine Forces Reserve will not
    be complacent about these positive trends. Every Marine Corps leader
    knows the role of leadership, training, and family readiness programs
    in the recruiting and retention of our marines.
        With the accession of 6,174 non-prior service marines and 2,663
    prior service marines, the Marine Corps Reserve met and exceeded,
    respectively, current recruiting goals. Current Military Occupational
    Specialty (MOS) match rates are exceeding the goal of 75 percent with
    an enlisted MOS match rate of 87.4 percent and officer match rate of
    75.8 percent.
        As of 29 February 2004, our end strength was 40,235, which is 635
    above our authorized end strength but within the allowable 2 percent
    variation. Officer recruiting and retention remains our most
    challenging concern. This is due to the low attrition rate for company
    grade officers from the Active Force. The Marine Corps recruits Reserve
    officers almost exclusively from the ranks of those who have first
    served an active duty tour as a marine officer. We are exploring
    methods to increase the participation of company grade officers in the
    SMCR through increased recruiting, increased command emphasis on
    Reserve opportunities and participation, and Reserve officer accession
    programs for qualified enlisted marines.
        The Marine Corps supports the legislative proposal to allow bonuses
    for officers in the SMCR who fill a critical skill or shortage. We
    currently have a shortage of Reserve company grade officers and this
    bonus could complement other efforts we are making to increase their
    participation.
    National Guard and Reserve Equipment Appropriations (NGREA)
        The $44 million provided by fiscal year 2004 NGREA will provide the
    Reserve Force with the systems needed to improve mission capability and
    readiness now and into the future. Important communications systems
    such as the SMART-T, EPLARS, and Iridium Satellite phones will greatly
    enhance our ability to integrate with the active component. This year's
    funding also allows us to purchase and install the AH-1W Electronic
    Warfare Suite (AFC-230) for almost half of our attack helicopters. This
    is a defensive system required for all Marine Corps aircraft operating
    in OIF II.
    Equipment
        I am most pleased to report that every Reserve marine deployed
    during OIF and OEF and those currently deployed into harm's way are
    fully equipped with the most current Individual Clothing/Combat
    Equipment (ICCE) and Individual Protective Equipment (IPE).
        Congressional funding has enabled us to begin issue of the new
    Marine Corps combat utility uniform.
        Operationally, since I last testified, over 40,000 pieces of
    Reserve combat equipment including individual and crew served weapons,
    night vision devices, radios, computers as well as principle end items
    have been deployed, engaged in theatre, redeployed through the
    maintenance cycle and returned to Reserve Training Centers. This
    equipment is now reconstituted and ready for future deployment.
        Maintaining current readiness levels will require continued support
    as our equipment continues to age at a pace exceeding replacement.
    Within Reserve aviation, the average age of our youngest platform is
    the UC-35 at 6 years, followed by the AH-1W Cobra at 11 years, the CH-
    53E at 16 years, the KC-130T at 18 years, the F/A-18A at 20 years, and
    the F-5 at 31 years. Our oldest platforms--platforms that have exceeded
    programmed service life--include the UH-1N at 33 years (20-year service
    life) and the CH-46E at 37 years (20-year service life with ``safety,
    reliability, and maintainability'' extension to 30 years). Maintaining
    these aging legacy platforms requires increased financial and manpower
    investment with each passing year due to obsolescent parts and higher
    rates of equipment failure. Aircraft maintenance requirements are
    increasing at an approximate rate of 8 percent per year. For example,
    for every hour the CH-46E is airborne it requires 37 maintenance man-
    hours.
        The increasing age of our equipment is also a challenge within the
    Reserve ground component. I am pleased to report that we are meeting
    these challenges in several areas. Of our 3,448, aging High Mobility
    Multipurpose Wheeled Vehicle, Basic and A1 (HMMWV A1) variants, Marine
    Forces Reserve replaced 1,162 with the HMMWV A2 variant. Of our 1,233
    5-ton truck fleet, 604 have been replaced with the Medium Tactical
    Vehicle Replacement (MTVR).
        We are receiving about 300 new HMMWV A2 each year and based on that
    replacement rate, the projected full replacement will be completed in
    fiscal year 2009. We are scheduled to receive an additional 301 MTVRs
    between now and November 2004 with our entire 5-ton truck fleet
    replaced in fiscal year 2005.
        Efforts to improve our communications capabilities have focused on
    increased fielding of several tactical single-channel radio programs
    including the PRC-117 satellite radios, PRC-150 HF radios and PRC-148
    squad radios. Previous NGREA funding has allowed Marine Forces Reserve
    to field a myriad of alternative power source devices to all Reserve
    communication units, providing a range of alternative power options
    that is comparable and in some cases exceeds that of active component
    units.
        As I mentioned earlier, mobilization readiness is my number one
    priority. In order to continue seamless integration into the active
    component, my ground component priorities are the sustained improvement
    of ICCE/IPE and overall equipment readiness. With your continued
    support, Marine Forces Reserve will deploy marines with the best
    available individual equipment and principal end items needed to
    accomplish their mission and return home safely.
        We are thankful for and remain confident in the readiness of the
    Marine Corps Reserve, and we seek your continued support in the fiscal
    year 2005 President's budget. Your continued support is critical in our
    ability to maintain readiness and mission capability to support
    operations in support of the global war on terrorism.

                                 INFRASTRUCTURE

        Marine Forces Reserve is and will continue to be a community-based
    force. This is a fundamental strength of Marine Forces Reserve. Our
    long-range strategy is to maintain that fundamental strength by
    maintaining our connection with communities in the most cost effective
    way. We do not want to be located exclusively in just several large
    metropolitan areas or consolidated into a few isolated enclaves.
        We seek every opportunity to divest Marine Corps-owned
    infrastructure and to locate our units in Joint Reserve Centers (JRC).
    Marine Forces Reserve units are located at 187 sites in 48 states, the
    District of Columbia, and Puerto Rico; 33 sites are owned or leased by
    the Marine Corps Reserve, 154 are either tenant or joint sites. Fifty-
    three percent of the Reserve centers we occupy are more than 30 years
    old, and of these, 37 are over 50 years old.
        Investment in infrastructure has been a billpayer for pressing
    requirements and near-term readiness for most of the last decade. The
    transition to Facilities Sustainment, Restoration, and Modernization
    (FSRM) funding has enabled us to more accurately capture our
    requirements and budget accordingly. As with the active component, we
    do not expect to be able to bring our facilities to acceptable levels
    of readiness before fiscal year 2013. In fiscal year 2003 we funded
    seven Whole Center Repairs in a step forward to meeting the fiscal year
    2013 goal. This will reduce the facilities currently rated below
    acceptable levels to 58 percent. We still face a backlog in restoration
    and modernization across the Future Years Defense Program (FYDP) of
    over $30 million. Adequately maintaining facilities is critical to
    providing training centers that support the readiness of our marines
    and sailors and sends a strong message to them about the importance of
    their service. Replacing inadequate facilities is also part of our
    overall infrastructure program. The yearly presidential budget average
    for new military construction of $8.67 million for the previous 6
    fiscal years has allowed us to address our most pressing requirements.
        Past vulnerability assessments identified $33.6 million in projects
    to resolve antiterrorism/force protection (ATFP) deficiencies at the 41
    sites that we own or at which we have responsibility for site
    maintenance. We have expended $8.3 million the last 2 years to reduce
    these vulnerabilities. The age of our infrastructure means that much of
    it was built well before ATFP was a major consideration in design and
    construction. These facilities will require ATFP resolution through
    structural improvements, relocation, replacement, or the acquisition of
    additional stand-off distance. All these expensive solutions will be
    prioritized and achieved over the long-term to provide the necessary
    level of force protection for all our sites. We continue to improve the
    ATFP posture at our RTCs and are acting proactively to resolve the
    issues and deficiencies.

    Base Realignment and Closure (BRAC)
        We see BRAC 2005 as an opportunity for efficient joint ventures and
    increasing training center utilization while still maintaining our
    community presence. We plan to reduce our restoration, modernization
    backlog and ATFP vulnerability through joint basing in BRAC 2005. We
    are consulting with the other Reserve components and collecting data
    for the Joint Cross Service Groups and the Secretary of the Navy
    Infrastructure Analysis Team to analyze and develop the best possible
    Reserve basing solutions while also striving to ensure that the Marine
    Corps Reserve is not the victim of an unintended consequence of a
    larger closure. For example, an unintended consequence of closure of
    Naval Station Roosevelt Roads is the closure of our collocated RTC. We
    are working with the Army Reserve and National Guard to mitigate the
    situation by reducing the military construction requirement through a
    joint solution to our basing requirements in Puerto Rico.
        Our fiscal year 2005 President's budget submission for Military
    Construction Naval Reserve (MCNR) is $12.5 million, 32 percent greater
    than the fiscal year 2004 enacted level. The fiscal year 2005 request
    addresses our most pressing requirement--a new RTC and Vehicle
    Maintenance Facility (VMF) in Jacksonville, FL and a VMF in Norfolk,
    VA. We support maximized use of joint--where we partner with one of the
    other Services--construction projects to the greatest extent
    practicable for efficiency and economy. Joint construction often
    provides the most cost effective solution for each of the Services and
    to the taxpayer. In addition to the MCNR program, we are evaluating the
    feasibility of other innovative solutions to meeting our infrastructure
    needs, such as real property exchange and public-private ventures. The
    overall condition of Marine Corps Reserve facilities continues to
    demand a sustained, combined effort of innovative facilities
    management, proactive exploration of and participation in joint
    facility projects, and a well-focused use of the construction program.

                        MODERNIZATION AND TRANSFORMATION

        The following modernization priorities represent low investment/
    high pay-off capabilities, closely linked to Marine Corps operational
    concepts and doctrine, relevant to the combatant commanders, and
    essential to the survival of our marines in combat.
    Command, Control, Communications, and Computers (C4)
        With your help, we have made great strides in C4 equipment
    readiness during the past year. Marine Forces Reserve's C4 readiness
    increased noticeably, due to the fiscal year 2003 NGREA. As I speak to
    you today, a detachment of our 4th Air Naval Gunfire Liaison Company
    (ANGLICO) is in Iraq, outfitted with high frequency and satellite radio
    equipment almost completely procured with the fiscal year 2003 NGREA
    funds. This marks the first time in the past year and a half an ANGLICO
    unit performed its mission without provisioning radio equipment from
    its gaining force commander.
        There are a few areas that I would like to bring to your attention
    in which you may again assist us. Because of the increased reliance on
    Marine Forces Reserve's military police and civil affairs capabilities,
    we have validated additional requirements for 200 handheld radios.
    Critical new requirements have emerged for our civil affairs groups'
    coordination and command-and-control capabilities such as the
    additional validated need for 100 AN/PRC-148 handheld radios and 50
    single channel/satellite AN/PRC-117 radios to meet the unexpected
    growth in civil affairs capabilities.

    Digital Data Servers
        Progress has been made in fielding new equipment to bridge the gap
    between active component units and their Reserve counterparts. However,
    there are areas of improvement in which you can help speed the closure
    of the gap.
        Prior to completion of Marine Forces Reserve fielding, 24 MFR DDS
    suites were reallocated to support training requirements for OIF. The
    shortage of DDS suites limits the ability of Marine Forces Reserve
    units to transfer data.

    Data Relay: The CoNDOR Initiative
        Today, battalion-level units in the Total Force are unable to
    receive robust data communications beyond line-of-sight. Regimental-
    level units rely on satellite and multi-channel radios to maintain
    reliable SIPRNet communications to senior and parallel headquarters
    across the battlefield. The data link down to battalion-level units is
    the Enhanced Position and Location Reporting System (EPLRS), but it has
    a range limited by line-of-sight. The range limitation does not allow
    the SIPRNet to be extended from the regimental level to distant or fast
    moving battalion-level and below units. The Marine Corps CoNDOR
    initiative is an attempt to extend data networks beyond line-of-site.
    CoNDOR, which stands for C2 on-the-move Network Digital Over-the-
    Horizon Relay, uses satellite and ground radio relays mounted on HMMWVs
    in three variants. It also allows units to use non-EPLRS radios to
    connect to tactical data networks. Though in the early stages of
    development, the Marine Corps Reserve's tactical C4 effectiveness as
    well as that of the active component could be significantly enhanced
    with fielding of the CoNDOR initiative.

    Navy-Marine Corps Intranet (NMCI)
        Another area that would benefit from your assistance is the
    fielding of deployable and non-deployable computers. With the delay of
    Marine Forces Reserve's transition to the NMCI, many Marine Reserve
    units have not received up-to-date hardware to replace their aging
    computers. At least 12 percent of our computers are incapable of
    running the Marine Corps-approved operating systems, creating
    compatibility and reliability issues. Marine Forces Reserve is advance-
    fielding NMCI deployable computers to units deploying for operations to
    mitigate this problem. While this is a quick fix, it does not solve the
    primary issue of aging computers in the force. Presently, Marine Forces
    Reserve is only funded for approximately 8,000 NMCI computers.
    Unfortunately this leaves 6,000 required NMCI computers, in the form of
    user seats, unfunded. Without the funding to replace our aging
    computers, Marine Forces Reserve will have to contend with critical
    long-term computer compatibility and reliability issues.

    AN/PRC-150
        The fiscal year 2004 NGREA significantly mitigated our high
    frequency radio readiness issues with the purchase of man-packed AN/
    PRC-150 radios to replace the obsolescent AN/PRC-104s. However, the
    acquisition objective for AN/PRC-150 radios will grow as more of the
    20-year-old AN/PRC-104s become unserviceable. Our unfunded requirement
    is 130 AN/PRC-150s. Continued support for the funding of the AN/PRC-
    150s will keep potential high frequency radio readiness issues at bay.
        As the transformation of our force continues, there will be a
    greater need for newer tactical C4 equipment to fill voids in satellite
    communications and data communications areas. Requirements for the
    Lightweight Multiband Satellite Terminal (LMST) will increase to
    provide the same wideband satellite communications capability resident
    in the active component's major communications units. Tactical data
    network requirements will continue to grow and so will the need for a
    continued refreshing of computer technology in the force. During the
    next year, requirements for additional LMSTs and tactical data network
    equipment will be identified for funding.
        In the past few minutes, I pointed out several challenges in C4
    readiness for Marine Forces Reserve. However, I want to emphasize that
    while challenges remain, your support in providing a path for us to
    replace and sustain our C4 equipment has placed your Marine Reserve in
    a much better C4 posture than a year ago.

                                 TRANSFORMATION

    Continuum of Service
        Driven by the unique requirements of OEF and OIF, the Secretary of
    Defense has challenged the DOD to transition from a ``Cold War
    approach'' in many areas of national security policy and action. This
    mandate applies with particular force to those charged with employing
    the incredibly rich resource that the 1.2 million men and women of the
    Guard and Reserve constitute.
        We must replace the blunt manpower instruments in use today with a
    kit of flexible, precise tools that allow members of the Reserve to
    move back and forth along a ``continuum of service'' that reflects both
    the needs of those who serve, and the requirements of those who would
    employ them. Continuum of service describes the full spectrum of
    Reserve marine availability, ranging from marines in the IRR who do not
    routinely train as members of a Reserve unit and who may never be
    recalled to active duty, to individuals who perform short-term active
    service during the course of a year, to the Reserve marine who
    volunteers for active duty for many months or a year. The continuum
    spans the range of potential employment--from 0 to 365 days in any
    given year--and encompasses all categories of Reserve duty from drills
    and annual training, to active duty in support of specific requirements
    and contingencies, to full mobilization.
        Conceiving of Reserve service as a continuum matches the individual
    marine's capacity for service with operational requirements. It
    recognizes that an individual's ``capacity for service'' will probably
    change throughout that service member's career; and it recognizes there
    is value to the Nation at every point along the continuum. Finally,
    such an approach recognizes that gaining combatant commanders have a
    vast array of differing requirements amenable to a Reserve component
    solution.
        The distinction between ``emergency manpower'' and ``contingency
    manpower'' is another aspect of the continuum of service, and is useful
    in understanding both resources and requirements. The requirement for
    ``emergency manpower'' is characterized by the once-in-a-generation
    requirement to build up the force for a major combat contingency like
    Operation Desert Storm or OIF. The ``emergency'' portion of the force
    comprises the vast majority of the 1.2 million men and women in the
    Guard and Reserve. The ``contingency'' manpower force, a smaller but
    still important segment, is a resource that can be applied against
    ongoing requirements, ranging from individuals who augment service on
    joint staffs for days or weeks, to scheduled unit rotations such as to
    the Sinai, Kosovo, or Unitas.
        The idea that Reserve and Guard service can be a continuum and not
    a succession of polar opposites will require fundamental changes of
    both substance and perception. As we know, the increased use of the
    Guard and Reserve has been a reality for years. However, the
    administrative, personnel, and manpower systems supporting the Guard
    and Reserve have not kept pace with the increase in, and changing
    nature of, Reserve service. There are no insurmountable obstacles to
    the development and implementation of flexible tools to maximize use of
    this Nation's citizen-warriors. Taking transformational steps will
    provide the Nation with a key element of the affordable national
    defense taxpayers seek.

                                   CONCLUSION

        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 DOD model for total force integration
    and expeditionary capability.

        Senator Chambliss. Thank you, General.
        General Sherrard, I'm sure in 1965, when you were flying
    those T-41s out of Moody, over my hometown, you had no idea
    you'd be up here testifying before this subcommittee. We want
    you to know we're pleased to have you here.

    STATEMENT OF LT. GEN. JAMES E. SHERRARD III, USAF, CHIEF, U.S.
                           AIR FORCE RESERVE

        General Sherrard. Thank you very much, Mr. Chairman and
    Senator Nelson. It's, indeed, an honor. I must thank you very
    much for those very kind words.
        You're right. In 1965 when I was over Homerville, Georgia,
    I didn't have a clue about what life was going to be, other
    than the fact that I was getting paid to go fly, and there was
    nothing better.
        I must tell you that it is, indeed, an honor and a
    privilege that I have the chance to speak with you today and
    talk about the accomplishments of the men and women of the Air
    Force Reserve. I'm extremely proud of them. In our prepared
    statement, we put some facts that I think you will find most
    interesting. They are truly a dedicated force, as all of my
    colleagues represent, a force equally as dedicated and capable.
    It's essential for the things that we're being asked of in
    support of our Nation. They, in fact, are that.
        In doing so, I must tell you that I view three major
    priorities that we watch very carefully and take great interest
    in all the time within the Air Force Reserve, the first
    obviously being people. Recruiting and retention is important.
    As my colleagues have said, we continue to watch recruiting. It
    is difficult, there's no question about it. We're maintaining
    recruiting goals and exceeding the goal, but the big dilemma
    for us, in the Air Force Reserve, in particular, is the limited
    number of active-duty prior-service members available for us to
    bring into our force. In past years, we were an 80 percent/20
    percent force, and roughly 80 percent prior service, we would
    bring them in. Today, that has dropped to 61/39. That creates
    longer training times and more expensive training dollar
    requirements that are necessary to bring the non-prior service
    member up to the level of experience that we need to do the
    things that we're being asked to go do.
        On the retention side, I would tell you we're doing great,
    and we want to continue to watch that. I personally believe
    it's still too early to call the actual state we're going to be
    in. If I go back and look in the 1992-1994 timeframe, after
    Operations Desert Shield and Desert Storm, we were averaging
    somewhere between 10,000 to 11,000 losses a year. Obviously, in
    2002, we were stop-lossed almost the entire year, our losses
    were extremely low. In 2003, we had an increase, up to slightly
    above what our normal average is. The historic average over
    about a 13-year period has been about 9,100 people. We had just
    over 10,000 that left us in fiscal year 2003. In 2004, it
    doesn't appear we will reach that level, but I want to be very
    careful, because everyone understands the important role that
    they have, and they want to be part of it. I've heard my Navy
    friends say before and I'm very proud to say that we, in the
    Air Force Reserve, can also attest for those members that were
    mobilized either in Operation Desert Shield or Operation Desert
    Storm or under the current operations we have a higher
    retention rate, between 8 percent to as high as about 11
    percent in some areas, over the force that was not mobilized.
    That speaks well for those members, knowing the important role
    that they play. We also have to make certain that we, in fact,
    provide them the requisite resources and protections, as well
    as fair compensation, in order to retain that member into the
    future. That will be so essential for us to do our business.
        One of the key priorities under the people category is
    maintaining a workplace that is safe, free of discrimination,
    and free of harassment, and that is a top priority within our
    command. We will always endeavor to do that. I think it ties
    right in with your comments and concerns about sexual assault.
    I will tell you that we insist on zero-tolerance for sexual
    assault. It is a crime, and it is not something that can be
    condoned.
        We are part of the active Air Force's program, in terms of
    evaluating policies and procedures determining what we need to
    be changing and evaluating. We have that response due to the
    Vice Chief of Staff of the Air Force (VCSAF) on April 9. I just
    had my teams complete our last location, where we went and
    looked at each of the Air Force Reserve host locations. The
    tenant locations were looked at as the Active Force came and
    looked at their host locations from their perspective. There
    are certainly some challenges that we will have to face in our
    world, unlike the active-duty world, in terms of status of the
    members either at the time that the incident may have occurred,
    or afterwards, as well as the availability of the right
    processes for support of the member because we don't have full-
    time medical support, we don't have full-time counseling, and
    things of that type. So we have to make certain we have
    connection within the community which can provide services, or
    the opportunity to get victims to an active-duty facility which
    will provide that so-critical resource to the member in their
    time of need. They, in fact, must know that they have a place
    to which they can come to and seek assistance, and not become a
    victim a second time. It is intolerable if that should happen.
    We would all be very remiss in our duties if we were to let
    this happen.
        I would echo what was said earlier when it comes to the
    question of equitable and fair treatment within the terms of
    compensation and benefits. I can only speak for the Air Force
    Reserve, but the key point to remember is that we provide about
    20 percent of the Air Force's combat capability for about 4
    percent of the Air Force's Total Obligation Authority (TOA).
    That's a great return on the investment that the American
    taxpayer has placed in each of us.
        That being said, we have to make certain that we don't have
    the perception, whether it's actually there or just in the
    mindset of the member, of haves and have-nots. I firmly
    believe, as the compensation review study just put out the
    other day, where it talks about maintaining the 1/30th rule, I
    certainly agree with that. We also need to look for equity
    within all the processes.
        Two examples I would give you, that have been mentioned
    earlier, are reenlistment bonuses, the wide disparity that we
    have, the limitations in what we can and cannot go do, as well
    as critical skills bonuses; the fact that we in the Reserve
    component don't have that authority, but they have it in the
    Active Force. It's something that I believe is manageable, and
    I think it would be the right thing to do, that you get paid at
    an equal rate as your active-duty counterpart, based on the
    fact that you're getting 1/30th. You work a full month,
    obviously you're exactly like the Active Force and doing the
    exact same things that you would expect to be compensated
    accordingly.
        The second major priority is readiness. I'm very proud to
    say that we in the Air Force maintain one tier of readiness.
    That's important in the way we do business within the Air
    Force. Both the Air Force Reserve and Air National Guard have
    units which are capable of deploying no later than 72 hours
    after notification. We rely on volunteerism. Our missions are
    such that we can utilize such until we reach the point that the
    volunteerism capabilities don't match what the requirements ask
    us to do, and then we must step forward and utilize the
    mobilization process to meet needs. That is the exact position
    we're in today.
        The third bullet is modernization. Obviously, we need
    requisite equipment and need to make sure that it is relevant
    and that it's capable of providing what the combatant commander
    needs. In our case, it's precision munitions capability. We
    need to have that. Another major piece that I would mention is
    our ability to have integrated operational capability within
    the Air Force. We've been in the associate business within the
    Air Force Reserve since 1968. It has served us well in the
    strategic airlift and the air refueling world.
        We have since taken this capability into the undergraduate
    pilot training program, where we're providing 225 full-time
    instructors or equivalents who relieve stress on our critical
    active-duty pilot force. We have also begun a fighter associate
    program, as well as Airborne Warning and Control System (AWACS)
    special operations. You name it, we're involved, and we're
    going to continue to look at new ways to utilize an integrated
    force to give us a better capability within the Air Force, and
    do the things our Nation is asking of us to do.
        As I said earlier, I am extremely pleased and proud to
    represent the 79,000-plus men and women of the Air Force
    Reserve. I am pleased to have had the opportunity to serve in a
    military force which has been so graciously supported by you
    and the other Members of Congress over the years. I leave
    knowing that I have enjoyed every single day. My only regret is
    that I cannot ever again be that second lieutenant leaving
    Moody Air Force Base to go out on my first assignment.
        So I stand ready to answer any questions that you may have,
    sir.
        [The prepared statement of General Sherrard follows:]

          Prepared Statement by Lt. Gen. James E. Sherrard III, USAFR

        Mr Chairman, and distinguished members of the subcommittee, I would
    like to offer my sincere thanks for this opportunity, my last, to
    testify before you. As of 30 Sep 03, United States Air Force Reserve
    (USAFR) has a total of 8,135 people mobilized under Partial
    Mobilization Authority. These individuals are continuing to perform
    missions involving: Security, Intelligence, Flight Operations for
    Combat Air Patrols (CAPs), Communications, Air Refueling Operations,
    Strategic and Tactical Airlift Operations, Aero Medical, Maintenance,
    Civil Engineering and Logistics. The Partial Mobilization for the
    global war on terrorism is the longest sustained, large-scale
    mobilization in the history of the Air Force. AFR mobilizations peaked
    at 15,332 on April 16, 2003, during Operation Iraqi Freedom (OIF) with
    a cumulative 28,239 mobilizations sourced in every contingency
    supporting global war on terrorism since September 11, 2001. Early
    global war on terrorism operations driven by rapid onset events and
    continued duration posed new mobilization and re-mobilization
    challenges, which impacted OIF even though only a portion of the
    Reserve capability was tapped.
        In direct support of Operation Enduring Freedom (OEF), OIF, and the
    global war on terrorism, Air Force reservists have flown a multitude of
    combat missions into Afghanistan and Iraq. The 93rd Bomb Squadron is an
    example of one of the many units to successfully integrate with Active-
    Duty Forces during combat missions in OEF and OIF. Reserve crews, which
    comprise 8 percent of the conventional crews, flew on 42 percent of all
    B-52 combat missions during four combat deployments in support of these
    operations. The 93rd Bomb Squadron performed many operations that were
    a first for B-52 operations as well as demonstrating maximum
    flexibility as a warfighting unit. One of their B-52s was the first to
    employ Precision Strike Laser Guided Bomb self-designate capability
    using the Litening II targeting pod. Reserve aircrews have also flown
    C-17 airland/airdrop missions into Afghanistan and Iraq delivering
    humanitarian aid and supplies for the warfighting effort. They also
    provided air refueling tanker crews and support personnel from the
    434th Air Refueling Wing at Grissom ARB, Indiana (KC-135) 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 (ONE) by flying combat air patrols over key American cities
    (301st Fighter Wing, JRB NAS Fort Worth, Texas, 482d Fighter Wing,
    Homestead ARB, Florida, and 419th Fighter Wing, Hill AFB, Utah). These
    units were also deployed at various times in support of OEF and OIF
    operations.

                                   RECRUITING

        The Air Force Reserve continued to address new challenges in 2003.
    Partial mobilization persists, though it's reducing day-by-day, but
    volunteerism continues to be a significant means of contribution.
    Dedicated members of the Air Force Reserve continue to meet validated
    operational requirements. Recruiting and retention of quality service
    members is taking top priority for the Air Force Reserve Command (AFRC)
    and competition for these members among other Services, as well as
    within the civilian community has reached an all-time high.
        AFRC end strength for fiscal year 2003 was 98.8 percent of
    authorized end strength.
        Recruiting continues to pose other significant challenges as well.
    The pool of active duty separatees continue to shrink from its peak
    prior to force reduction over a decade ago, and a perceived likelihood
    of activation and deployment are being cited as significant reasons why
    separating members are declining to choose continuing military service
    in the Reserve. These issues further contribute to the civilian
    sector's ability to attract these members away from military service.
        The Air Force Reserve is developing a strategy to take advantage of
    an Active-Duty Force Shaping initiative. Within this fiscal year, Air
    Force will offer active duty members the opportunity to use the Palace
    Chase program to change components. While the details are not fully
    approved, the Air Force Reserve may have an unprecedented opportunity
    to access prior service members in critical career skills.
        We are hopeful that we will be able to preserve the training and
    experience of some 16,000 personnel who may take advantage of the
    opportunity to serve under Palace Chase, but we must ensure the right
    force mix and the right faces to match our vacancies--it's not just a
    ``numbers drill''.
        One consequence of the reduced success in attracting separating
    members from active duty is the need to make up this difference through
    attracting non-prior service members. While having enough Basic
    Military Training and Technical Training School quotas has long been an
    issue, the increased dependence on non-prior service accessions strains
    these requirements even further.

                                   RETENTION

        Though retention was enhanced through ``Stop-Loss'' in the previous
    2 years, the eventual effects of this program may be felt in this
    fiscal year. Even though ``Stop-Loss'' was terminated in June 2003, the
    6-month manning policy provides an additional period of relief. Coupled
    with the policy to establish a separation date 6 months from the end of
    redeployment, if there will be a subsequent impact on retention, it
    will be felt in this fiscal year.
        We continue to look for viable avenues to enhance retention of our
    reservists. The Reserve enlisted bonus program is a major contributor
    to attract and retain both unit and individual mobilization augmentee
    members in those critical (Unit Type Code tasked) career fields. We
    successfully increased the prior service enlistment bonus amount to
    $8,000 this past year for a maximum 6-year enlistment in accordance
    with related legislative authority granted in 2003. We continue to
    explore the feasibility of expanding the bonus program across AFRC as
    determined necessary; however, no decision has yet been made to
    implement. The Aviation Continuation Pay (ACP), Career Enlisted Flyers
    Incentive Pay (CEFIP), and Aviation Career Incentive Pay (ACIP)
    continue to be offered to retain our rated assets, both officer and
    enlisted.
        One of the most positive quality-of-life enhancements occurred when
    the DOD reduced the required threshold for dependent eligibility for
    TRICARE Prime from 179 days of consecutive active duty to 31 days of
    duty. This threshold reduction allows for greater dependent health care
    for the vast majority of Reserve members serving on periods of active
    duty, and will greatly increase volunteerism across the force for a
    wide variety of requirements. Additionally, the National Defense
    Authorization Act for Fiscal Year 2004 provides for three temporary
    improvements to the overall TRICARE system for Air Force Reserve
    members: access to heath care for inactive members and their
    dependents, provided they are eligible for unemployment compensation or
    not otherwise eligible for employer-provided health care; earlier
    TRICARE eligibility for Air Force Reserve members with delayed
    effective-date activation orders; and finally, the period of time
    granted for transition health care coverage was expanded from 60 and
    120 days up to 180 days for all members separating from active duty.
    These vast improvements in the TRICARE program, though temporary, will
    continue to pay dividends in the quality-of-life characterization for
    our Air Force Reserve members, and ultimately serve as a critical
    readiness tool.

    Space Operations
        AFRC provides over 1,100 trained space officer, enlisted, civilian,
    and contractor personnel at more than 15 locations to acquire, plan,
    launch, task, operate, assess, and protect more than 28 weapon systems
    at 155 units worldwide for Air Force Space Command, United States
    Strategic Command, Headquarters Air Force, National Reconnaissance
    Office, and others. An annual budget of over $22 million funds AFRC
    space operations and requirements providing command, control,
    computers, communication, intelligence, surveillance, reconnaissance
    (C\4\ISR), navigation, weather, missile warning, network security and
    force protection support to warfighters around the globe.

             Nine associate units at four locations operate Global
            Positioning System (GPS), Space-Based Infrared System (SBIRS),
            Defense Support Program (DSP), and Defense Meteorological
            Satellite Program (DMSP) satellites; fully integrate with the
            Network Operations and Security Center (NOSC) and Space AOC;
            conduct test and space aggressor activities; and provide
            security forces for land-based facilities.
             Nearly 700 individual mobilization augmentees (IMAs)
            at more than 15 locations provide support in all areas of the
            `cradle-to-grave' life cycle of national space assets.
             AFRC space personnel have been fully involved in
            planning and executing military activities supporting ONE, OEF,
            OIF, and Operations Northern and Southern Watch.
             Reserve associate programs have been highly successful
            and are projected for additional growth in the future.
            Associate unit concepts being studied include space control,
            launch operations, intercontinental ballistic missile (ICBM)
            communications, and Space Operations School.

    Associate Program
        The AFRC associate program meshes Reserve units with active-duty
    units at bases throughout the United States. AFRC units use host
    aircraft and equipment for their training and work directly with their
    active duty counterparts. Associate mobility units fly C-141
    Starlifter, C-5 Galaxy, and C-17 Globemaster III transports along with
    KC-10 Extender and KC-135 Stratotanker tanker aircraft. In the spring
    of 1996, AFRC began filling aircrew and maintenance support personnel
    positions in the 513th Air Control Group, an E-3 Sentry Airborne Air
    Control System unit.
        AFRC is continuing to expand the scope of the associate program
    into new mission areas. New units supporting Air Education and Training
    Command's undergraduate pilot training program are being managed by the
    340th Flying Training Group located at Randolph Air Force Base, Texas,
    and the 301st Fighter Squadron, F-16 associate instructor pilot program
    at Luke Air Force Base, Ariz. AFRC has an associate fighter unit at
    Shaw Air Force Base, SC, associate pilots flying F-16s with the
    ``Aggressor'' squadron at Nellis AFB, Nev., and an associate flight
    test unit integrated with the Federal Aviation Administration.
        The flexibility of the associate program allows for the effective
    and efficient use of highly trained AFRC aircrew members. Associate
    units also provide aircraft maintenance personnel to maintain the
    active duty aircraft ensuring the utilization of our air frames to the
    maximum extent.
        The 919th Special Operations Wing, Duke Field, Fla., trains in one
    of the U.S. military's most unique missions--special operations. Wing
    aircraft include MC130E Combat Talon I aircraft equipped for use in
    night/adverse weather, low-level, deep-penetration tactical missions.
    These aircraft have also been modified to conduct air-to-air refueling
    with special operations helicopters. In February 2000, the 8th Special
    Operations Squadron (active duty) joined the 711th SOS at Duke Field as
    a reverse associate unit--meaning active duty personnel fly Reserve-
    owned aircraft. The 919th SOW manages all Talon I aircraft in the Air
    Force inventory. This is a first for Air Force Special Operations
    Command and the second time in Air Force history since the EC-121
    mission.
        The wing also flies the MC-130P Combat Shadow aircraft (5th SOS),
    which has been modified with new secure communications, self-contained
    inertial navigation, countermeasures systems and night vision goggle-
    compatible lighting. The aircraft's primary mission is to conduct
    single-ship or formation in-flight refueling of special operations
    helicopters in a low to selected medium-threat environment. On October
    1, 1999, the 5th SOS moved to Eglin AFB to join the 9th SOS (active
    duty) as an associate Reserve unit. This marked another first in the
    special operations mission area.
        Finally, as mentioned above, the associate program in the space
    operations arena is rapidly expanding.
        Associate units provide several benefits and enhancements to
    include the following:

             Force multiplier which increases surge capability for
            war time or contingencies
             Continuity as AFRC forces provide stability and a
            service option for departing active duty personnel
             Experience as reservists tend to have more years of
            service and bring invaluable civilian experience and knowledge
            to the military
             Efficiencies due to Reserve cost savings and sharing
            of weapon systems and equipment.

                                 MODERNIZATION

        Effective modernization of Air Force Reserve assets is a key issue
    to remaining a relevant and combat ready force. It has been and
    continues to be apparent that the Reserve component is crucial to the
    defense of our great Nation. The events of September 11 cemented the
    total force initiatives already in place and AFRC is working shoulder-
    to-shoulder with the active duty and Air National Guard components in
    the long battle to defeat terrorism. Even before September 11, USAFR
    was an active participant in day-to-day AF operations. USAFR is no
    longer a force held in reserve solely for possible war or contingency
    actions--we are an operational reserve, at the tip of the spear. It is
    therefore imperative that we remain a relevant and combat ready force
    for the future.
        Our modernization strategy is sound but is dependent upon lead
    command funding. Lead command funding of AFRC modernization priorities
    continues to be one of our challenges. We continue to work with the DOD
    and the Department of the Air Force to address our requirements. We
    greatly appreciate your support for the increase to the National Guard
    and Reserve Equipment Authorization (NGREA) funding in the National
    Defense Authorization Act for Fiscal Year 2004, as we strive to utilize
    the best technological advances available to us, to keep our people
    safe in current theaters of operations. Success in meeting our
    modernization goals depends on our cohesive and focused approach to
    accepting new mission areas, while ensuring the continued success of
    current mission areas and robust interaction with the lead commands, as
    well as keeping Congress informed of USAFR initiatives.

                              FLEET MODERNIZATION

    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 GPS navigation system, Night
    Vision Imaging System (NVIS) and NVIS compatible aircraft lighting,
    Situational Awareness Data Link (SADL), Targeting Pod integration, GPS
    steered ``smart weapons'', an integrated Electronics Suite, Pylon
    Integrated Dispense System (PIDS), Digital Terrain System (DTS), and
    the ALE-50 (towed decoy system). 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 Advanced Technology (AT), an upgrade
    to 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. 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. AFRC will
    complete the purchase of AT upgrade kits and finish pod purchases for
    the F-16 this fiscal year. 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 farsighted 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 useable 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 are needed
    to 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 Operation
    Desert Storm, OEF, and OIF. 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. An interim solution using
    Avionics Interface Modules to integrate Litening II targeting pods was
    developed by the Air Reserve component to bring added combat capability
    quickly to the battlefield. This capability must be integrated
    permanently to bring full precision strike abilities to the fight. The
    Precision Engagement and Suite 3 programs will further expand this
    combat capability and help correct limitations of aged systems. Two
    other programs, Embedded GPS and Integrated Flight and Fire Control
    Computer (IFFCC) will increase the navigation accuracy and the overall
    capability of the fire control computer, both increasing the weapon
    system's overall effectiveness.
        One of the A-10 challenges is resources for upgrade in the area of
    high threat survivability. The Avionics to EW Buss modification will
    enhance survivability by providing some automated flare dispensing.
    Previous efforts have focused on an accurate missile warning system and
    effective, modern flares; however a new preemptive covert flare system
    may increase survivability. 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. In an effort to increase loiter
    time, we are installing fire suppressant foam in our Sergeant Fletcher
    external fuel tanks, allowing removal of current flight restrictions
    regarding use of the external tanks in combat scenarios. 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. However, 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. AFRC A/OA-10s need upgraded structures and
    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;
             Target coordinate updates to joint direct attack
            ammunition (JDAM) and wind-corrected munitions dispenser
            (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 other operation requires additional
    avionics modernization and changes to the weapons capabilities such as
    the Avionics Midlife Improvement (AMI), Conventional Enhancement
    Modification (CEM), and the Integrated Conventional Stores Management
    System (ICSMS). Effective precision strike capability was proven during
    OEF/OIF using Litening II Targeting Pods. Permanent targeting pod
    integration is needed to retain this capability in the future. Changes
    in the threat environment are also driving modifications to the
    defensive suite including Electronic Counter Measures Improvement
    (ECMI). Modifications to enhance stand-off jamming capability are also
    underway to bring the B-52 into the AEA arena. The B-52 in the AEA
    configuration will provide the United States Air Force with the
    capability to deny, deceive, and destroy the enemy.
        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. Advanced weapons integration
    programs are needed for Joint Air to Surface Standoff Missile (JASSM),
    Joint Standoff Weapon (JSOF), and Miniature Air Launched Decoy (MALD)
    capability to be fully realized. These integrated advanced
    communications systems will enhance the B-52 capability to launch and
    modify target locations while airborne. Other communications
    improvements are Link 16 capability for intra-theater data link, 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 on 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 I. 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 has accelerated the
    installation of the APN-241 radar as a replacement for the APN-59. All
    AFRC assets will be upgraded to provide Night Vision Imaging System
    (NVIS) mission capability for C-130 combat rescue aircraft. Necessary
    upgrades include defensive capability for the increasing infrared
    missile threat such as the Large Aircraft Infrared Countermeasures
    (LAIRCM) system.

    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 Para
    rescue 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

        Work continues on the Personnel Recovery Vehicle (PRV), a
    replacement for the ageing HH-60G helicopter sometime in the 2011
    timeframe.

    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 twenty to two 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. Ongoing and future modernization efforts by AFRC include APN
    241 radar and LAIRCM for our C-130H2/H3 aircraft. Fiscal year 2004
    funds provided for APN 241 radar need additional funding in fiscal year
    2005 to continue modifying the C-130H2s. LAIRCM is required to protect
    the aircraft from current and future IR threats. The AN/AAQ-24 LAIRCM
    system uses a laser beam to defeat the missile and does not rely on
    hazardous and politically sensitive expendables that highlight the
    aircraft to additional threat. This is a multi-year program, fiscal
    years 2005-2009.

    WC/C-130J Hercules
        The current 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 six WC-130J models at Keesler AFB, MS undergoing
    Qualification Test and Evaluation (QT&E). The remaining four aircraft
    currently loaned to Lockheed Marietta will be delivered to Keesler AFB
    in January 2005. Deliveries are based on the resolution of deficiencies
    identified during tests. This will impact the start of operational
    testing and the achievement of interim operational capability (IOC).
    Major deficiencies include: propellers (durability/supportability) and
    radar tilt and start up attenuation errors. AFRC continues to work with
    the manufacturer to resolve the QT&E documented deficiencies. The 815th
    ALS has 5 C-130Js at Keesler AFB. Conversion to eight PAA C-130J
    stretch aircraft is to be completed by fiscal year 2007.

    C-5 Galaxy
        Over the next 5 years, there will be important decisions made that
    will change the complexion of the AFRC C-5 Fleet. Currently, there are
    primarily sustainability modifications to the weapons systems to allow
    it to continue as the backbone of the airlift community. Two major
    modifications will be performed on the engines to increase reliability
    and maintainability. Additionally, the C-5B fleet will receive the
    avionics modernization that replaces cockpit displays while upgrading
    critical navigational and communications equipment. AFRC C-5As are not
    currently programmed to receive these modifications. The C-5A fleet has
    no Defensive Avionics Systems, and this lack of capability has
    significantly hampered the ability of the C-5A to participate actively
    in the global war on terrorism. If these aircraft are not upgraded,
    then they must be retired starting in fiscal year 2008.

    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, AFRC 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 transition to new mission aircraft is completed.

    KC-135E/R Stratotanker
        One of AFRC's most challenging modernization issues concerns our
    unit-equipped KC-135s. Seven of the nine 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. The
    remaining KC-135Es are being retired, and are being replaced by KC-
    135Rs. The last AFRC FC-135E will be retired in 4Q fiscal year 2005.
        The ability of the 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 the year 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.

                                   CONCLUSION

        I would like to thank this committee and the Senate for your
    continuing support. I am proud to tell you that our AFRC continues to
    be a force of choice whenever an immediate and effective response is
    required to meet the challenges of today's world. For more than 30
    years the Air Force has relied upon the Reserve components to meet
    worldwide commitments. The events of September 11, 2001 and the global
    war on terrorism continue to highlight that reliance and have changed
    the way we think about and employ our forces. About one in three Air
    Force reservists has been mobilized at some point since that time.
    Transformation has proven to be an important aspect of the Air Force
    Reserve as we become more and more relevant in today's world.
        We are ready in peace or war, available for quick response, and
    able to stay the course when called upon. Although we are involved more
    now in the daily mission of the Air Force, the focus of the Air Force
    Reserve Command continues to be readiness--we train during periods of
    peace so that we are ready to perform our wartime missions wherever we
    are needed, whenever we are called.
        Like our active duty partners, the men and women of the Air Force
    Reserve are very busy. Trying to balance the demands of military
    service, family, and a civilian profession can be a demanding task, but
    ours is made easier by the support we receive from the American
    taxpayers, Congress, the DOD, and the Air Force.
        The Air Force Reserve Command made major Air and Space
    Expeditionary Force (AEF) contributions in fiscal year 2003. AFRC met
    virtually 100 percent of both aviation and support commitments,
    deployed over 23,350 (14,130 aviation and 9,220 support) mobilized and
    volunteer personnel to meet these commitments. The challenge for fiscal
    year 2004 will be to meet the continued AEF demands of the global war
    on terrorism primarily with volunteers if the number of mobilized
    personnel decreases.
        I would like to close by offering my sincere thanks to each member
    of this committee for your continued support and interest in the well-
    being and quality of life of each Air Force reservist. The recent pay
    increases and added benefits of the last few years have helped us
    through a significant and unprecedented time of higher operations
    tempo, calling for each member of the Air Force Reserve to give 200
    percent to the mission while still keeping families and employers
    happy. This will be my final opportunity to represent these fine young
    men and women as the Chief of Air Force Reserve, and I leave, knowing
    that we are on the right path: a stronger, more focused, force. A force
    no longer in Reserve, but integrated into the very fiber of the Air
    Force; the tip of the spear.
        Each of you can be proud of what we've accomplished together on
    behalf of our great Nation. Again, I offer my thanks to you and my
    sincerest best wishes for the future.

        Senator Chambliss. Once again, thank you for your great
    service to our country. We appreciate you.
        General Sherrard. Thank you, sir.
        Senator Chambliss. General Sherrard addressed the issue of
    sexual assault. Let me turn to the other three of you and ask
    you this question. You heard my question to the other panel. I
    want to know what you're doing, and how you're addressing this,
    particularly in light of the Secretary's request for a review
    of policy and procedures.
        General Helmly, will you start, please?
        General Helmly. Senator, thank you. I would only add the
    following two points. First of all, just within the Army
    Reserve we have closed 18 cases involving 18 victims and 16
    subjects. We have five cases still open. Of course, we are
    engaging, as part of the Army policy, not only in a review, but
    in the development of additional directives.
        I would add one other point. I believe that we have to
    place, if you will, ``added emphasis'' within the Reserve
    components. The military culture is a zero-defects culture in
    this regard. We do not tolerate any instances of it. Over time,
    military values today differ somewhat from those values
    practiced in civilian society. Sex is emphasized in our
    society. Our soldiers, sailors, airmen, and marines from the
    Reserve components spend a large amount of that time exposed to
    the values in that society, where, in some corners,
    unfortunately, such instances are not looked upon with the same
    degree of disdain and abhorrence that we, in the military,
    apply to sexual assault or, indeed, sexual harassment. It is
    our intention, within the Army Reserve, to make it an added
    emphasis and to approach it with energy, Senator, and passion,
    as you described. I've directed the Inspector General (IG) of
    the Army Reserve Command to begin a special review of the
    development of ethical cultures within the Army Reserve dealing
    with this issue, in my judgment, as the commander, of values in
    civil society. Are they differing that much from those values
    as practiced within the military culture?
        Those are the only two additional points that I would make
    to what's been discussed previously.
        Senator Chambliss. Admiral.
        Admiral Cotton. Yes, sir. I'd just like to say that about
    14 years ago, we went through a tough chapter in our Navy
    history with incidents that everyone probably remembers. As a
    result, the Navy and the Naval Reserve have placed great
    emphasis on this topic ever since. The Naval Reserve is a full
    participant in what we call the Sexual Assault Victim
    Intervention (SAVI) program. We emphasize this throughout our
    leadership courses. We all live by our honor, courage,
    commitment, and core values. Last year we had one substantiated
    case, and we have one this year. Those are both one too many.
    Our programs are very effective, and they're emphasized at all
    command levels.
        Senator Chambliss. General.
        General McCarthy. Senator, I take very seriously the
    suggestion that we, as military leaders, perhaps haven't given
    the correct impression about how seriously we take this. That
    may very well be the case. I know that it is something that
    General Hagee has emphasized to his commanders, and I have to
    mine. But I understand the importance of redoubling our efforts
    to make sure people, our subordinates, understand where we come
    from and where we stand on this issue.
        It seems to me it is, in large measure, a leadership
    challenge, but leadership has to be translated into resources
    and support. I believe we're doing that throughout the Marine
    Corps and the Marine Corps Reserve.
        In preparation for this hearing today, I read General
    Nyland's statement, the Assistant Commandant, and I was struck
    by his comment, and I'm going to steal it from him and adopt
    it, that: ``A victim of an assault like this is a wounded
    comrade, and we never leave a wounded comrade on the
    battlefield.'' That's a pretty good approach, and we'll do
    everything we can to live up to that.
        Senator Chambliss. General Sherrard, you raised an
    interesting issue, in talking about making reenlistment bonuses
    for Reserve personnel equal to the active-duty. I'm not
    familiar enough with how the Air Force, for example, does this.
    Is there a set reenlistment bonus for a sergeant major or a
    captain that has a certain number of years of service that the
    Air Force gives so that you could translate into a comparable
    bonus?
        General Sherrard. Yes. In fact, it is based on the skill,
    and then depending on the particular position in their career
    path at the time of their enlistment, or reenlistment. In our
    case, we're allowed only one reenlistment bonus per individual,
    and we have a set limit on what that can be for those members.
    In terms of reenlistment bonuses, I think there's a mechanism
    by which you can compensate the members based on the 1/30th
    rule. If you should have a mobilization, you have an equal
    force, and Reserve members should not feel that their service
    is any less deserving than the other members. This is a very
    key point that I think we all need to watch. In doing so, I
    think it would also allow us to maintain the fiscal constraints
    which we all have to live under, knowing that we're providing a
    Reserve Force, one which is not there 365 days a year but one
    which would allow equitable compensation for the member each
    day of duty, appropriately, in all categories, whether it be
    housing, enlistment bonuses, or aviation incentive pay on a
    equitable fashion.
        Senator Chambliss. Is that same thing basically true for
    the other Services?
        Admiral Cotton. Yes, sir.
        General Helmly. It is, Senator. In the Army, the Reserve
    components are limited to one reenlistment bonus during a
    career. Further, there are matters of policy that mitigate
    against the health of that reenlistment program. An example is
    the fact that within a year of their expiration term of service
    (ETS) an active component member can gain a reenlistment bonus.
    The Reserve component member must be within 90 days of their
    ETS. That, in itself, is illogical, because when one is within
    90 days, one has probably already made up their mind on whether
    or not to stay or to leave. A year, or the farther out you get,
    you have much greater flexibility, in terms of inducing the
    person to stay.
        Admiral Cotton. Senator, I'd like to add that for several
    years now, the Navy and Navy Reserve have shared the same pay
    system, called Navy Standard Integrated Personnel System
    (NSIPS). We developed it at the Naval Reserve. It's based on
    the same software that DIMHRS someday will be based on. We've
    been kind of a ``sea trial,'' if you would. I have to say it's
    very successful, as witnessed by very few pay issues as we
    mobilized folks to go overseas who are on the active pay
    system. It works. Along with that comes the pay, the benefits,
    and the bonuses that you talked about. We share the same
    policies that the active component has, and if we go after a
    special critical skill set, we do so in the same manner that
    active Navy does.
        General McCarthy. We depend probably less on reenlistment
    bonuses and reenlistment incentives. Our force shape is
    different. But the requirement for critical-skills incentive
    pay is an important one. It's one that we need to continue to
    work. The help that we've gotten in the past has been very
    useful. It's something we need to continue to study.
        I was talking to one of the staffers for Senator Collins
    this morning about critical-skills incentive pay for language
    skills, for example. These are some issues that we do need to
    continue to work.
        Senator Chambliss. Senator Nelson.
        Senator Ben Nelson. Thank you, Mr. Chairman.
        I am encouraged about the attention that I'm getting here
    on the sexual assault issue. It looks like it is not looked at
    as an annoyance, but as a serious crime. The reference to the
    victim as a wounded comrade, I think, perhaps says it best. We
    wouldn't want to shoot our comrades, friendly fire or
    otherwise; so why would anyone engage in this sort of activity?
    It's not enough said, because there will be more said, but I
    think the stronger the effort from the top down, making certain
    that all the commanders carry out the message, the sooner I
    think we'll see a reduction in the numbers. Certainly, that has
    to be our goal.
        General Helmly, I asked before about the Army and the
    shifting money around so that at some point, there's a pot that
    gets emptied out and it's used for other causes. What are your
    thoughts about your funding? Have your funds been cut? Are you
    in danger of having them cut? Can you tell us a little bit
    about what you think your funding is and whether it's adequate
    to meet your needs?
        General Helmly. Thank you, Senator.
        In fiscal year 2004, our current year, our funding is
    sufficient. I would like to cite the fact that last year, in
    fiscal year 2003, we approached this body through the Army and
    the DOD, and were successful in reprogramming about $170
    million from Reserve personnel Army appropriations, our pay
    account, into operations and maintenance (O&M) appropriations.
    We used every penny of that to deal with the changed paradigms
    in this war. The rapidity of mobilization and pace no longer
    allows us to fund entirely out of active Army accounts, once we
    have mobilized the unit and purchased and stockpiled repair
    parts and other forms of special equipment, everything from
    goggles to holsters to cold-weather clothing. We have an entire
    list of things that we purchase with the O&M dollars, prior to
    mobilization, that contributes to warfighting readiness.
        This year, in fiscal year 2004, our Reserve Personnel
    Allotment (RPA) account was reduced by $175-or-so million. Part
    of that was attributable to a mobilization offset. We'll be
    able to approach Congress with only about $42 million in
    reprogramming. Next year, in fiscal year 2005, our account was
    reduced by $272 million to pay for some of the TRICARE
    provisions that were extended in last year's law, and also as a
    mobilization offset.
        In our judgment, the numbers there are incorrect. As my
    counterpart, General Schultz, did, I have met with the Chief of
    Staff, Army, and I have received his commitment and support to
    visit this issue at midyear this year and next year, and,
    further, received the Army's agreement that, henceforth, we
    will be included as a part of the supplemental request that
    comes from the DOD to this body to pay for obligations against
    the global war on terrorism.
        So yes, our funds were reduced. In our judgment, it was by
    an inordinate amount. We have received the commitment of the
    Army leadership to address that and to ensure that we're
    adequately funded next year and this year.
        Senator Ben Nelson. Of course, as I've indicated, I'm
    worried about robbing Peter to pay Paul, but robbing Peter to
    pay Peter within the Army is going to be a subject of our focus
    as we go through the year, because we can't simply come up
    short. There is a concern about supplementals, as you
    understand. It's easy to say, ``Well, we'll get that from the
    supplemental,'' but I think in the budgeting process this year,
    if it holds, there is an account set up for potential
    supplementals. I've found back here, just as it is in the
    States, you can only spend that dollar once and can only
    account for it once.
        General Helmly. Right.
        Senator Ben Nelson. So we are going to be very concerned
    about how that works out throughout the year.
        Senator Helmly. Senator, I would add that we're very
    conscious of that. While we deal in specific discreet
    appropriations between Services and components, et cetera, as
    you say, a dollar is a dollar, and that really is the
    foundation of where we're going in the future, where we propose
    to, in fact, reduce our structure and harvest existing dollars
    to reinvest in the remaining structure to bring the readiness
    of that remaining force to much higher levels.
        Senator Ben Nelson. Clearly, training and equipping is an
    investment for readiness, and that's what has to be maintained.
    As someone who has put together budgets in the past, knowing
    that I had to balance them, because you can't borrow at the
    State level, and you can't be in deficit, I have maybe a unique
    interest in seeing it done in an appropriate fashion. The
    budgeting process in Washington is the equivalent of making a
    pie a piece at a time, and I'd like to see the comprehensive
    approach. That's why I'm going to be asking these kinds of
    questions about the budgeting and the funding, because I think
    it is essential. We can't just get to the end of the year and
    say, ``Whoops, we're just a little bit short.''
        General Helmly. Yes, sir.
        Senator Ben Nelson. I'm sure you'll keep us posted on that
    throughout the year, as I'm sure General Schoomaker will keep
    us posted, as well.
        General Helmly. Yes, sir.
        Senator Ben Nelson. We talked about retention incentives,
    and probably have hammered that pretty hard, but I think you
    can get a sense that we share your concern about future
    retention and recruitment. The loss of a fully trained soldier,
    airman, or marine is a cost to the military and, therefore, to
    our budgeting. We want to make sure that we have in place for
    you adequate means to keep the best and the brightest, and
    those who will contribute the most, and in whom we have
    invested a great deal of money, and have expectations, as well.
    I think we have an openness to suggestions that you may come up
    with as you go through the next year, in looking at your
    recruitment. There may be some additional or different
    mechanisms that you can use. I pledge my support to work with
    you.
        I have felt that, for the Guard and Reserve units, the
    equivalent of a deployment 401(k) to set aside money for the
    days when you are deployed, so that you can pull it out and
    augment your income at home is a good idea. The dependents are
    a little bit happier when the budget isn't squeezed as tight as
    it might otherwise be squeezed. I don't know about our
    reservists back there, but I have talked to others, who said,
    ``If I could just set aside some money, and then pull it out
    without bad or unfavorable tax consequences to have a little
    bit more to pull out when it's necessary.'' We thought it was a
    great idea. Unfortunately, we seem to be the only ones who
    thought it was a great idea.
        If there are other avenues, please let us know, because I
    know we would be committed to helping you in every way we can.
        General Helmly. Senator, I believe you're familiar with the
    DOD Thrift Savings Plan (TSP).
        A program for all members, whether they're deployed or not.
    I would refer you back to the Vietnam era. The DOD had a
    special program for those who were deployed to Southeast Asia
    understanding you were bringing in some additional monies in
    the form of hostile-fire pay, and there was also, in those
    days, a tax exclusion also, to contribute some portion of that
    to such a plan. I'm sure that our books still record how that
    was run and what the business rules were in conjunction with
    the law. I think that might be a place that that search could
    begin.
        Senator Ben Nelson. That is a helpful suggestion, thank
    you, General.
        Are the other branches fully funded and not worried about
    whether you're going to be able to balance the accounts at the
    end of the fiscal year?
        Admiral.
        Admiral Cotton. Senator, I'd like to say that timing is
    everything. Just last night the Naval Reserve completed its
    midyear review by Navy, and we were praised for the way we're
    executing this year's funding. Across the board, we're funded.
    We're doing okay.
        With that said, there is a certain increased tempo of
    operations (OPTEMPO) in certain skill sets such as security,
    force protection, and particularly our transport of our OIF-2
    personnel going overseas. This is swept up in the Navy cost of
    war, and we are being looked at by them, and will be funded.
    We're included on the team. So it's a good-news story, sir.
        Senator Ben Nelson. You're not going to be, at the end of
    the day, inadequately funded, or need a source of money for the
    other things.
        Admiral Cotton. Any shortfalls are addressed by Navy, sir,
    to make sure that we can carry out the requirements.
        Senator Ben Nelson. I'm sure Admiral Clark will be most
    generous in making sure that all happens.
        General McCarthy.
        General McCarthy. Sir, we transferred some money last year
    from our Reserve manpower account to the active account because
    we had fairly large numbers of people who were mobilized and
    who weren't drawing on the Reserve account. I felt like that
    was done in a very responsible way. The amounts that were
    transferred were about right. I think that, overall, that
    worked very well.
        The thing that really made a difference to our overall
    funding last year, quite frankly, was the rather sizeable
    increase that occurred in the National Guard and Reserve
    Equipment Account (NGREA) funding. It enabled us to do some
    equipment purchases that we would not otherwise have been able
    to do. That may not be the best way to fund the equipment
    account, but it's better than not funding the equipment
    account. That was a big plus for us last year.
        This year, it appears that our funding levels are about on
    track, and I think that we're executing those programs very
    efficiently, and I don't see any danger that we will be out of
    balance in our accounts.
        Senator Ben Nelson. Thank you.
        General.
        General Sherrard. Sir, we, too, transferred money within
    the Air Force last year, based on having a significant number
    of people mobilized. We also had our 2004 funds decremented
    based on a certain number which was anticipated to be
    mobilized. I believe that we will be able to complete the year
    within the appropriations we were given, but, as I mentioned
    earlier, with the reduced number of active-duty members that
    we've been able to have the opportunity to ask to join our
    force, we have been forced to go to more of the non-prior
    members, which, in fact, drives up our initial active duty for
    training costs which we have in order to continue to operate
    out of that budget. So we've moved our monies within our two
    budget activity codes, from budget activity 2, which is our
    special tour, training tour days, up to budget activity 1,
    which is where that initial active-duty tour capability must be
    in order to pay those members to go to Basic Military Training
    (BMT). We are stable today, but we have no wiggle room. I don't
    anticipate nor foresee us having any military personnel
    account, RPA dollars, to transfer. We have reached our limit on
    our below threshold reprogramming authority and our ability to
    move between our two budget activity codes.
        The important thing is maintaining readiness, maintaining
    our folks at the levels that are expected, and, more
    importantly, making certain that as we do our training, we do
    it in a manner that is safe. If it cannot be done safely, we do
    not do it. If training has to be slowed/stopped, we certainly
    will do that, rather than put our members and our equipment at
    risk.
        Senator Ben Nelson. Thank you very much.
        Thank you, Mr. Chairman.
        Senator Chambliss. Thank you, Senator Nelson.
        Gentlemen, it's been a very good hearing. I very much
    appreciate your being here and giving us insight into your
    issues. I assure that as we move forward in the authorization
    process, we're going to take all of this into consideration.
        I thank you. We have also received the prepared statements
    of the Naval Reserve Association and the Fleet Reserve
    Association which will be submitted for the record. With that,
    this hearing stands adjourned.
        [The prepared statements of the Naval Reserve Association
    and the Fleet Reserve Association follow:]

              Prepared Statement by The Naval Reserve Association

        Chairman Chambliss, Senator Nelson, and distinguished members of
    the subcommittee, on behalf of our 22,000 members, and on behalf of
    advocacy for the 86,000 active naval reservists, the mirrored interest
    of Guard and Reserve components, we are grateful for the opportunity to
    submit testimony, and for your efforts in this hearing.
        Last year a popular craze in the press was to write about the
    plight of the mobilized reservist. These articles emphasized the
    anxiety of being away from work and or family. Today, a climate of
    continued utilization and sacrifice is painted as guardsmen and
    reservists replace combat tested personnel as they rotate home.
    Unfortunately, we are all more aware along with the active components
    of military deaths and casualties of our Armed Forces in Iraq. Our
    Guard and Reserve personnel are serving 365 days a year and have
    suffered in the casualties. These are the times that bring the issue of
    parity between the active component personnel and the Reserve component
    personnel to the forefront and into question. Selective Reserve
    Montgomery GI Bill (MGIB) improvements, TRICARE for selected reservists
    and an early retirement are three import equity issues to our members.
        We do not have to remind Congress why you needed to provide for
    these Guard and Reserve Forces, but it is noted that it is a good thing
    you did, or where would we be today--by calling on them to go and serve
    in every major conflict that we have experienced in recent memory. As
    of today--350,000 Guard and Reserve members recalled since September
    11, 2001, is a true testimony of their surge-ability and readiness, and
    of the requirement to have a healthy Reserve component in all our
    Services. These are the forces that add `just in time' combat might
    when our Nation calls. Judged by this metric of combat might, they are
    cost-effective and efficient resources.
        The performance and efforts of today's military is without question
    in the forefront of our national and international news. Without
    question our Armed Forces is at the height of military prominence and
    involvement in our national security strategy. We foresee that this
    reliance will remain this way, as long as we are in this protracted war
    on terrorism, and executing both the National Security Strategy and
    evolving Homeland Security Strategy. Truly our Reserve components are
    providing for the defense of our Nation.
        Yet, while these Guard and Reserve Forces are fighting the war in
    Iraq and being used throughout the world in peacekeeping missions,
    there are some who believe that they add little value; that resources
    authorized and appropriated by Congress could be used better somewhere
    else. The Guard and Reserve is oftentime the first payer in any attempt
    to balance the budget. In the Navy, dedicated Naval Reserve equipment
    that has been used in this recent war (F-18s, HH-60s, Coastal Warfare
    small boats) is being eliminated and Reserve units have been targeted
    for decommissioning. The fact that the equipment and personnel would be
    needed in a larger conflict (Korea, China) or could be utilized in
    homeland security is of little matter. Some of this is being
    mislabelled as transformational, and some of it is being engineered to
    occur as an outcome under base realignment and closure (BRAC). For
    these and other reasons Congress must remain engaged in maintaining our
    Reserve and Guard components.
        We respectfully call on Congress to review and question current
    transformation and rebalancing efforts because of the aforementioned
    and the following;

             Guard and Reserve service members are responding
            without question, or hesitation.
             Guard and Reserve service members' families are
            responding without question.
             Guard and Reserve service members' employers are
            responding without question.
             Guard and Reserve hardware units have responded and
            are responding without question.
             Guard and Reserve hardware units have performed at and
            above standards and actually above any active component
            standard.
             Naval Reserve members and their families as a whole,
            view transformation and active Reserve integration acceptable,
            but understand that this means they will no longer have real
            units, with Required Operating Capabilities, and Programmed
            Operating Capabilities justifications. How reservists will be
            trained is a detail that hasn't been answered under current
            plans.
             Successful transformation of a Reserve component is
            rarely completed, solely with DOD or Service input. Outside
            assistance is necessary to achieve the right mix and right
            balance.

        Rarely has there been this massive effort of organizational--
    equipment, personnel, cultural, and resource--transformation at the
    same time our country is at war. More importantly, rarely has our
    country attempted transformation of our Services while war is being
    conducted on several fronts.
        The Navy is engaged from the top down and ground up in
    transformation of the Navy and Fleet response--developing expeditionary
    forces, redoing training matrices, procuring new technologies that will
    transform naval warfighting efforts, and now at the same time,
    implementing massive change of including the Naval Reserve service, in
    active training matrices.
        This is all being done, when our Nation called upon the service
    members of the Naval Reserve--they responded, and now they are finding
    out their units are going to no longer exist--because we need more
    efficient, more effective, capabilities based surging forces. These are
    forces that cost 50 percent less than any active duty members or unit.
    They maintain their readiness--directed and reported by active
    components, at an overall higher sustained rate over time than their
    active counterpart. The Naval Reserve Force knows it must change, and
    some instances understands better business practices much better than
    any active member. However, they are now under the microscope of
    change, with more to loose than any Active Force member.
        Reservists have not shown any achilles' heel as of yet. They are
    willing to sacrifice family and employment to serve their country,
    unexpectedly. 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. Yet, they are being used again and again.
        Rather than confront budget appropriators, the active components
    have been content to fill their force shortfalls with Reserve manpower,
    and this has been arguably good for the country.
        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 as it is with any individual member of the armed
    services. They want to be used how they have been trained, and they
    want to complement the Active Forces. Recall and proper use of
    reservists need constant monitoring and attention. We agree that
    transformation of legacy personnel manpower program is overdue. But,
    congressional involvement in personnel transformation is mandatory,
    along with outside independent involvement.
        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 was until last year an institutional bias to issuing
    reservists one set of orders for longer than 30 days thereby denying
    them greater entitlements. We still, after your impressive efforts in
    fiscal year 2004, believe that a continuum of entitlements for all
    Guard and reservists requires monitoring.
        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. This has proven its worth over and over,
    and is relevant.
        The question we are asking is: ``Are the DOD legislative
    initiatives, rebalancing efforts and especially Department of Navy
    efforts--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 old mistakes in the future, and the Naval
    Reserve Association stands ready to assist in turning lessons learned
    into improved policy.
        Leaving nothing to chance however, we strongly urge Congress to
    legislate a commission on the transformation of Guard and Reserve of
    the 21st century. The transformation of our military is dynamic and
    includes the extended utilization of the Guard and Reserve Forces.
    There are numerous reviews of these issues. We feel it is time for
    Congress to take a thorough look at these issues with a commission in
    order to address the many problems that we are experiencing with our
    Guard and Reserve Forces. A congressional commission is warranted to
    review these issues properly.
        Mr. Chairman and distinguished members of the committee, thank you
    for this opportunity. Details of specific issues of concern by our
    Association follow; we hope you can help address them.

                                   PERSONNEL

    Selective Reserve MGIB improvements
        Issue: Currently SelRes MGIB benefits are at 19 percent of active
    duty entitlements.
        Position: This shows clearly the priority of SelRes service
    members. This benefit should be higher and closer to the 48 percent
    mandated benefit. We must consider upgrading this benefit for those
    members that are responding to our Nation's call.
    Temporary Recall of Reserve Officers (Three Years or Less)
        Issue: To properly match the Reserve officers 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: Strongly support 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.

    Healthcare
        Issue: 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.
        Position: We applaud the efforts of the TRICARE Management Activity
    (TMA). TMA has a strong sense of which the customer is. They emphasize
    communications, and are proactive at working with the military
    associations. Congress took decisive action in establishing the
    temporary healthcare program for Guard and Reserve Forces during the
    National Defense Authorization Act for Fiscal Year 2004. The Naval
    Reserve Association (NRA) would like to see a continued effort at
    implementing the established TRICARE health plan for uninsured drilling
    reservists, and establishing this program as a permanent program.

    Early Reserve Retirement
        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. The DOD study on this issue was nonconclusive.
        Position: Over the last two decades and recently more has been
    asked of guardsmen and reservists than ever before. The nature of the
    contract has changed; Reserve component members need to see recognition
    of the added burden they carry. Providing an option that reduces the
    retired with pay age to age 55 carries importance in retention,
    recruitment, and personnel readiness.
        The NRA suggests a cost neutral approach to this issue that would
    not be that ``expensive.''
        The NRA recommends for discussion/debate that Reserve retirement
    with pay prior to age 60 be treated like taking Social Security
    retirement early--if you elected to take it at say age 55, you take it
    at an actuarially reduced rate.
        Most of the cost projected by DOD is for TRICARE healthcare, which
    begins when retirement pay commences. Again, if one takes Social
    Security before reaching age 65 they are not eligible for Medicare. NRA
    suggests that TRICARE for reservists be decoupled from pay, and
    eligibility remains at age 60 years.
        At a minimum, the committee should consider the various initiatives
    and the cost neutral approach during the debate.

                                FORCE STRUCTURE

    Roles and Missions
        Issue: 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,
    implement changes that improve war fighting.
        Position: Navy has yet to deliver a vision of use of and equipping
    of the Naval Reserve Force. A commission on the transformation of the
    Guard and Reserve for the 21st century is warranted.
    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 reservist 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 an active duty member should be able to rotate
    off active duty for a period, spending that tenure as a reservist,
    returning to active duty when family, or education matters are
    corrected.
        Position: The Guard and Reserve should not be viewed as a
    temporary-hiring agency. 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.

    100 Percent Mission Ownership
        Issue: DOD 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. ``And
    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.''
        Position: America is best defended through a partnership between
    the Government, the military, and the people. The NRA 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! 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.

    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 NRA 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, these models frequently fail
            in business, too.

    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 is ill advised.
    Besides being attempted several times before, 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 on equipment. The training and
    personnel readiness of Guard and Reserve members depends on constant
    hands-on equipment exposure. History shows 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 and often better
    training readiness. Current and future war fighting 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
    hardware from the active component has never been successful for many
    functional reasons. The NRA recommends strengthen the Reserve and Guard
    equipment in order to maintain highly qualified trained Reserve and
    Guard personnel.

    Closure of Naval Reserve Activities
        Issue: Discussion has emerged, 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 NRA 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 was a
    forced restructuring that RIFFed many senior officer 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 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 Reserves; retention would
    plummet, training and readiness would suffer.

                                    SUMMARY

    Commission on Transformation of Guard and Reserve of 21st Century
        The transformation of our military is dynamic and includes the
    extended utilization of the Guard and Reserve Forces. There are
    numerous reviews of these issues. We feel it is time for Congress to
    take a detailed look at these issues with a commission in order to
    address the many problems that we are experiencing with our Guard and
    Reserve Forces. A congressional commission is warranted to review these
    issues properly.
        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 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. Navy plans do not provide for these key points and
    do not treat the reservist correctly. 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.
                                     ______

              Prepared Statement by the Fleet Reserve Association

                                    THE FRA

        The Fleet Reserve Association (FRA) is the oldest and largest
    organization serving enlisted men and women in the active, Reserve, and
    retired components of the Navy, Marine Corps, and Coast Guard, and as a
    congressionally chartered association recognized by the Department of
    Veterans' Affairs (VA), as a representative of all veterans seeking its
    assistance.
        FRA also is a major participant in the 35-member consortium, The
    Military Coalition (TMC). Members of its staff serve in a number of TMC
    leadership roles. Master Chief Barnes is co-chairman for the Military
    Personnel/Compensation/Commissary Committee. Another, Retired Navy Sr.
    Chief Bob Washington, is co-chairman of the Health Committee, and FRA's
    Legislative Counsel, Retired Marine Sgt. Major Mack McKinney, is one of
    the four TMC elected officers.
        FRA efforts over its nearly 80 years have resulted in legislation
    enhancing quality of life programs for Sea Services personnel and other
    members of the Uniformed Services while protecting their rights and
    privileges. CHAMPUS, now TRICARE, was an initiative of FRA, as was the
    Uniformed Services Survivor Benefit Plan (USSBP). As of late, FRA led
    the way in reforming REDUX, obtaining targeted pay increases for mid-
    level enlisted personnel, and sea pay for junior enlisted sailors.
        FRA's motto is: ``Loyalty, Protection, and Service.''

                 CERTIFICATION OF NON-RECEIPT OF FEDERAL FUNDS

        Pursuant to the requirements of House Rule XI, the FRA has not
    received any Federal grant or contract during the current fiscal year
    or either of the 2 previous fiscal years.

                                  INTRODUCTION

        Mr. Chairman and other distinguished members of the subcommittee:
    the FRA is grateful for the opportunity to present personnel goals for
    fiscal year 2005. Before continuing, I want to express deep
    appreciation on behalf of the association's membership for the quality
    of life improvements for our Nation's men and women in the uniformed
    services implemented over the past few years. What this august group
    has done for our active duty, Reserve, and retired service members is
    not only superlative but unusually generous for Congress in comparison
    with the previous two to three decades.
        FRA salutes you for a job superbly done.
        In light of the generosity of this subcommittee and Congress, the
    association is hesitant to submit additional requests. However, in
    representing its membership, FRA must make an effort to voice concerns
    of the men and women serving in or having retired from the United
    States Navy, Marine Corps, and Coast Guard.
        Reservists are concerned about health care, operational tempo
    (OPTEMPO), enhanced retirement benefits, special pays, and increased
    MGIB proceeds. In the Active Force, the plea is for increased
    compensation to compensate for the arduous operational and personal
    tempos thrust upon the members of the uniformed services. Others prefer
    better housing, perhaps increased child-care programs, or any of the
    many programs and benefits available to them and their families. The
    retired community seeks positive changes to the USSBP, full concurrent
    receipt of military retirement pay and VA service connected payments,
    and a reasonable access to health care services.
        What follows is a list of recommendations on Reserve issues.

                                  HEALTH CARE

    Reserve Deployment and Post-Deployment Health Issues
        FRA is most appreciative to Congress for including the Temporary
    Reserve Health Care Program (Sections 702) in the National Defense
    Authorization Act for Fiscal Year 2004. This program will provide
    temporary coverage, until December 2004, for Reserve members who are
    uninsured or do not have employer-sponsored health care coverage.
    TRICARE officials plan to build on existing TRICARE mechanisms to
    assist in implementation; however, the TRICARE Management Activity is
    not certain how long this will take. Reserve component members are
    anxious to enroll, and fear that the coverage period may be lost.
    Immediate implementation is required. TRICARE officials plan to build
    on existing TRICARE mechanisms to expedite implementation; however, no
    one is certain how long this will take. Immediate implementation is
    required.
        The Association is also grateful to the subcommittee for sections
    703 and 704 of the National Defense Authorization Act. Section 703,
    Earlier Eligibility Date for TRICARE Benefits for Members of Reserve
    Components, provides TRICARE health care coverage for reservists and
    their family members starting on the date a ``delayed-effective-date
    order for activation'' is issued. Section 704, Temporary Extension of
    Transitional Health Care Benefits, changes the period for receipt of
    transitional health care benefits from 60 or 120 days to 180 days for
    eligible beneficiaries. These provisions should be easier to implement
    than the TRICARE buy-in provision of section 702 and we understand that
    the technical fixes to the Defense Eligibility and Enrollment Reporting
    System (DEERS) are being made to implement the section 704 benefits. We
    are concerned, however, that the latest word from DOD, a February 12,
    2004, press release announcing the implementation of these benefits,
    provided few details about the implementation and continued to
    encourage beneficiaries to save their receipts for health care incurred
    in the demonstration period ``in the event the sponsor is determined to
    be eligible and the care qualifies for retroactive TRICARE
    reimbursement once the 2004 Temporary Reserve Health Benefit Program
    begins.''
        Congress recognized the extraordinary sacrifices of our citizen-
    soldiers by extending this pre- and post-mobilization coverage. Now
    it's time to recognize the changed nature of 2lst century service in
    our Nation's Reserve Forces by making these pilot programs permanent.
        FRA urges the subcommittee to endorse permanent authorization of
    all provisions of the Temporary Reserve Health Care Program (Sec. 702,
    703, and 704 P.L. 108-136) to support readiness, family morale, and
    deployment health preparedness for Reserve service members.
        Other medical and family readiness issues of concern to FRA include
    the following:

             Optional Payment of Premiums for Employer or Personal
            Health Insurance. Reserve family members are eligible for
            TRICARE if the member's orders to active duty are for more than
            30 days; but some families would prefer to preserve the
            continuity of their 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. Many Reserve families live
            in locations where it is difficult or impossible to find
            providers who will accept new TRICARE patients.
              Recognizing these challenges for its own reservist-employees,
            the Department of Defense routinely pays the premiums for the
            Federal Employee Health Benefit Program (FEHBP) when activation
            occurs. In addition, Congress authorized all other Federal
            departments and agencies to provide this benefit. If this
            benefit is good for the roughly 10 percent of the Selected
            Reserve who are Federal workers, it ought to be provided in
            kind to the rest of the Reserve as an option.

        The FRA urges the subcommittee to authorize payment of civilian
    health care premiums (up to the TRICARE limit) as an option for
    mobilized service members.

             Dental readiness. Currently, DOD offers a dental
            program to Selected Reserve members and their families. The
            program provides diagnostic and preventive care for a monthly
            premium, and other services including restorative, endodontic,
            periodontic, and oral surgery services on a cost-share basis,
            with an annual maximum payment of $1,200 per enrollee per year.
            However, only 5 percent of eligible members are enrolled.
              During this mobilization, soldiers with repairable dental
            problems had teeth pulled at mobilization stations to meet
            deployment timetables. Congress responded by passing
            legislation that allows DOD to provide medical and dental
            screening for Selected Reserve members who are assigned to a
            unit that has been alerted for mobilization in support of an
            operational mission, contingency operation, national emergency,
            or war. Unfortunately, waiting for an alert to begin screening
            is too late. During the initial mobilization for OIF, the
            average time from alert to mobilization was less than 1.4 days,
            insufficient to address deployment dental standards. In some
            cases, units were mobilized before receiving their alert
            orders. This lack of notice for mobilization continues, with
            many reservists get only days notice before call-up.

        FHA recommends expansion of the TRICARE Dental Plan benefits for
    Reserve service members. This would allow these personnel to maintain
    dental readiness and enable reservists to meet readiness and deployment
    standards.

             Medical Holds. The Association is grateful for the
            subcommittee's leadership in drawing attention to and directing
            action on the medical hold backlogs. While the association
            appreciates the subcommittee's efforts as well as those of the
            defense medical community, we believe that a root cause of
            medical holds is the lack of consistent and comprehensive
            screening protocols, and the resources to support them.
             Reserve component members often must complete their
            physical exams in the private sector. For those who do not have
            insurance there is an understandable reluctance to incur an
            unreimbursable expense. Even for those with employer-sponsored
            insurance or insurance through others means, a routine physical
            is often not a covered benefit. (Routine physicals are not a
            TRICARE Standard benefit either.) Providing the military
            services with adequate resources to ensure that Reserve
            component  members receive required medical screening and
            treatment necessary to ensure medical readiness must be a high
            priority.
             Coordination of TRICARE--VA Benefits During Post-
            Deployment Period. In 2002, the VA established a policy
            permitting returning Reserve combat theatre veterans to have 2-
            years' access to VA care without regard to a VA disability
            rating (VHA Directive 2002-049). Service members are assigned
            to VA priority group `6' pending completion of their ratings.
            While FRA applauds this effort to provide extended benefits, we
            have several concerns.
              During transition there will be an overlapping period when
            service members will have both TRICARE and VA benefits. The
            Association has concerns about ``the handoff' of these
            individuals from one system to the other. What kind of support
            is available to assist them to better understand which benefit
            to use and when? How proactive are both departments in
            educating service members?
              Eventually, these new veterans will undergo medical
            evaluation and some may receive a VA disability compensation
            rating. For those assigned to VA priority groups 1-6, the usual
            access rules will apply. Unless they have been reliant on VA
            services those assigned to VA priority 7 or 8 could be
            disenrolled from VA health care. That could defeat the
            objective of continuous health surveillance beyond the 2-year
            window.

        FRA is grateful for extended TRICARE and VA health benefit coverage
    for returning reservists and we recommend closer collaboration between
    DOD and VA to ensure service members are educated on their coverage
    alternatives during transition.
    Mental Health Care Services
        As previously stated, acute physical injuries arising from combat
    receive world-class care. The FRA is concerned about scars of war that
    can't be seen or easily evaluated--the psychological conditions that
    inevitably arise from war, such as post-traumatic stress disorder
    (PTSD) and escalated domestic violence. The demographics of the
    volunteer force are vastly different than the largely conscripted
    forces of conflicts before the first Gulf War. Today, more than 50
    percent of the force is married and many young service members have
    dependent children.
        While both the DOD and the VA have experience treating mental
    illness caused by war, our concern is also for the families who must
    adjust to service members who return with the physical, emotional, and
    psychological scars of war. Who will be there to help the family
    members whose lives will be changed forever?
        FRA is deeply concerned about the mental health of all returning
    service members and their families. Reserve component members and their
    families--many of whom live far from the support services provided on
    military installation--may experience additional stressors as a result
    of the disruption from mobilization. The association is also concerned
    that many of the mental health issues may not emerge until sometime in
    the future, after these families' eligibility for TRICARE has ended.
    Where will these families find the help they may need? How will
    deployment-related mental health issues that emerge among Reserve
    component service members and their families after the service members'
    return to their civilian occupation and communities be identified and
    tracked in statistics of deployment-related health care issues?
        FRA notes that all service members and Reserve component personnel
    and their families can now access the ``OneSource'' 24-hour information
    and referral service previously available only for Marine Corps and
    Army personnel. OneSource provides information and assistance in such
    areas as parenting and childcare, educational services, financial
    information and counseling, civilian legal advice, elder care, crisis
    support, and relocation information. The service is available via
    telephone, email, or the web and is designed to augment existing
    service support activities and to link customers to key resources, web
    pages, and call centers. It will also be available to family center
    staff.
        FRA recommends that the subcommittee endorse the necessary
    resources to support robust psychological services for our Nation's
    service members and veterans.

                                      PAY

        Always number one in most surveys completed by FRA and the Active
    Forces is pay. This distinguished subcommittee, alerted to this fact
    for the past 6 years, has improved compensation that, in turn, enhanced
    the recruitment and retention of uniformed personnel in an all-
    volunteer environment. Adequate and targeted pay increases for middle
    grade and senior petty and noncommissioned officers have contributed to
    improved morale and readiness. With a uniformed community that is more
    than 50 percent married, satisfactory compensation relieves much, if
    not all the tension brought on by operational and personal tempos.
        For the fiscal year 2005, the administration has recommended a 3.5
    percent across the board basic pay increase for members of the Armed
    Forces. This is commensurate with the 1999 formula to provide increases
    of 0.5 percentage points greater than that of the previous year for the
    private sector. With the addition of targeted raises, the formula has
    reduced the pay gap with the private sector from 13.5 percent to 5.2
    percent following the pay increase programmed for January 1, 2005.
        FRA, however, is disappointed that the Office of Management and
    Budget (OMB) is opposed to targeted pay increase for certain enlisted
    and officer pay grades. This in the face of the DOD's projected
    recommendation to affect targeted pays along the line of those
    authorized for fiscal year 2004. Targeting pay hikes for fiscal year
    2005 and fiscal year 2006 will aide the DOD's quest to increase basic
    pay for career personnel to equal those in the private sector earned by
    workers having similar education and experience levels. Comparability
    with private sector wage growth remains a fundamental underpinning of
    the all-volunteer force. To ignore it would result in severe
    consequences to the national defense.
        FRA urges the subcommittee to adopt a targeted pay table for fiscal
    year 2005, at least proportionate to that of January 1, 2004, and
    ensure that uniformed members of the Public Health Service (USPHS) are
    included in the pay increase authorized for fiscal year 2005.

                               OPERATIONAL TEMPO

        The increase in the use of Reserve units to serve along side active
    duty components in Iraq, as an example, has caused considerable
    challenges for individual reservists. Not only has their mobilization
    placed a strain on employment and income, but the family as well.
    Employer support, once strong, decreases as more essential employees
    are whisked off to spend longer periods in uniform leaving the employer
    frustrated with having to find a replacement and, at the same time,
    hold the position open for the reservist's return.
        FRA has always supported the Total Force Policy but is concerned
    that the sustained use of Reserve Forces will eventually harm the
    recruiting and retention of young men and women willing to serve as
    future citizen sailors, marines, and coast guardsmen. The United States
    must maintain a strong Reserve Force at all times in the event of a
    greater need than at the present.
        FRA recommends that a review of the Reserve's role in the Total
    Force Policy be affected at the earliest and that it provide
    recommendations to this subcommittee on what enhancements are necessary
    to recruit and retain the number of reservists required for the defense
    of the United States. Recommendations may include such issues as tax
    relief, healthcare, retirement upgrades, improvements in the MGIB-SR,
    and family support programs.

    Force Size/Readiness/OPTEMPO/PERSTEMPO
        Force size, readiness, OPTEMPO, and personnel tempo (PERSTEMPO)
    should be addressed simultaneously. Readiness cannot be achieved at the
    high level demanded if force size is inadequate in numbers, OPTEMPO is
    too heavy and PERSTEMPO is affecting the performance of individual
    service members. FRA believes that all are suffering due to a shortage
    of uniformed members. Once again, DOD apparently is so concerned with
    the cost of personnel that it is reluctant to increase manpower
    strengths when it's obvious to FRA and others there is a need for more
    troops. If DOD says there is no requirement for more troops than
    authorized, then why did three of the military services issue stop-loss
    orders to many of their uniformed personnel? ``It reflects the fact
    that the military is too small,'' says Charles Moskos, a leading
    military sociologist, ``which nobody wants to admit.''
        The Department played an integral role in having Congress give
    birth to the all-volunteer force. As such, it must stay the course
    realizing that people who volunteer to lay down their lives and limbs
    will not do so at the same level of compensation offered their
    predecessors of the WWII-Vietnam era. Today 50 percent or more of our
    military personnel are married and have families. It costs money to
    enfold these families under the military's social umbrella. If the
    United States desires an all-volunteer Armed Force, it will have to pay
    the price. Paying the price will allow the Department to increase the
    size of its uniformed force in order to relieve the pressure of lengthy
    deployments, long hours on duty, and family concerns, each having its
    own negative effect on readiness. One service chief stated that he
    would spend every dollar available to ``modernize'' his service (how
    many years now?), but not one cent more for people. Such a statement
    seems incredible when one knows historically that final victory is in
    the hands of the people.
        FRA recommends that the military services be afforded the
    opportunity to determine the size of its forces and the number of
    personnel necessary to perform the mission. However, it does little
    good to authorize an increase in manpower when funding is not
    supportive of the numbers.

                                   EDUCATION

        FRA advocates the creation of a benchmark for the MGIB so its
    benefits will keep pace with the cost of an average 4-year college
    education. Even with the October 1, 2004, increases in basic rates, a
    MGIB student looking forward to completing the 2004-2005 academic year
    will have to pay out-of-pocket about one-third the cost of a 4-year
    course of education in a public college or university. If married, the
    shortfall in benefits will place a heavier financial burden on the
    student.
        A significant percentage of the Navy's enlisted force has no
    educational benefits. It seems ironic that an individual enlisting in
    the military services is eligible to enroll in the MGIB while another
    seeking to reenlist does not have the opportunity. Allowing service
    members to enroll in the MGIB upon reenlisting in the Armed Forces
    should be the norm.
        FRA continues to support increased benefits for participation in
    the MGIB and to authorize certain service members the opportunity to
    enroll or re-enroll in the MGIB.
        MGIB-SR. The Selected Reserve MGIB has failed to maintain a
    creditable rate of benefits with those authorized in title 38, chapter
    30. Other than cost-of-living increases, only two improvements in
    benefits have been legislated since 1985. In that year MGIB rates were
    established at 47 percent of active duty benefits. This past October 1,
    the rate fell to 27 percent of the chapter 30 benefits. While the
    allowance has inched up by only 7 percent since its inception, the cost
    of education has climbed significantly.
        FRA stands four square in support of the Nation's reservists. To
    provide an incentive for young citizens to enlist and remain in the
    Reserves, FRA recommends to Congress the pressing need to enhance the
    MGIB-SR rates for those who choose to participate in the program.

    Academic Protection for reservists
        There are cases where reservists, attending higher institutions of
    learning, called to active duty in the defense of the Nation and its
    citizens, lose credits or pre-paid tuition costs because they did not
    complete the course of instruction. FRA believes Congress should adopt
    provisions of law that require colleges and universities to retain and
    reactivate the credits and prepaid costs for the reservists upon
    demobilization.
        FRA urges Congress to adopt legislation that would provide academic
    and financial protection to members of the Reserve who are attending an
    institution of higher learning when called to active duty.

           UNIFORMED SERVICES FORMER SPOUSES PROTECTION ACT (USFSPA)

        The USFSPA is a statute adopted without hearings on the House side
    and no up-or-down vote in the Senate. As one member of the House said
    at the time, the law will cause more problems than it will solve. How
    true the prediction.
        Since its inception in 1982, more than two-thirds of States have
    adopted community property laws. More have turned to no-fault decisions
    in determining the outcome of divorces. Some of the actions were the
    result of State courts embracing the USFSPA as a means to automatically
    strip military retirees of their hard-earned retirement pay for the
    payment of alimony to a former spouse who in far too many cases, failed
    to dedicate the same number of years to the marriage and the military.
    Whether serving in war or peace, the military member is credited only
    2\1/2\ percentage points for each year of active duty. It takes at
    least 20 years to receive sufficient credits to qualify for retirement.
    On reaching that plateau the member becomes entitled to 50 percent of
    his or her active duty pay. Fifty percent of the member's active duty
    pay, by the way, is nearer to 30 percent of all pay and allowances
    earned while serving in uniform.
        One of the major problems with USFSPA is it allows State courts to
    consider military retired pay as property that may be divided between
    the retiree and the spouse/former spouse. The court, with little or no
    knowledge of how the retiree earns retired pay, grants the spouse/
    former spouse a portion of that retired pay for the life of the
    retiree, regardless of the number of years of marriage. A lifetime of
    payments to a spouse/former spouse for a period of marriage less than
    20 years during which the retiree was slowly accruing only 2\1/2\
    percent for each of those years is unfair, inequitable and
    discriminating.
        The spouse/former spouse should not be entitled to more than an
    equal percentage of the retiree's retirement pay for each year of
    marriage and should not be in receipt of that amount for any longer
    than the number of years of marriage. Although the service member is
    not entitled to retired pay until the minimum credible time is
    completed, the former spouse can become eligible at any time based on
    the decision of a civil court.
        It's a terrible law. Moreover, since State courts have little if
    anything to say about how the military directs its people to serve the
    Nation, and service members agree only to defend the Constitution, why
    does the Federal Government dump its fiscal responsibilities to its
    uniformed members onto the State courts?
        FRA recommends that this subcommittee, this Congress, accept the
    responsibility of conducting a review and the possible adoption of
    amendments to the Uniformed Services Former Spouses Protection Act. [10
    USC, 1408] to establish a more equitable division of the service
    member's retirement pay with a spouse/former spouse upon dissolution of
    a marriage.

                             SURVIVOR BENEFIT PLAN

        FRA has experienced a greater concern for improving the Uniformed
    Services Survivor Benefit Program (USSBP) than any issue on its Web
    site (www.fra.org). With an average age of 68 on the association's
    membership roll, the concern is justified. Most convincing is the need
    to revise the language in the current plan to reduce the ``social
    security offset'' that penalizes annuitants at a time when the need is
    the greatest. Then there are the many members, age 70 and older, who
    have been paying into the plan for more than 30 years with the only
    relief more than 4 years into the future.
        There are three compelling reasons to amend the plan. One, the cost
    of participating in USSBP has increased from 60 percent for the
    military retiree to more than 80 percent allowing the DOD to renege on
    its original charge to provide 40 percent of the cost. Two, the USSBP
    was fashioned from the survivor program for retired Federal employees,
    yet the military retiree on the average will pay more for participating
    in his or her plan and the military retiree's survivor will receive a
    smaller annuity. Three, the military retiree on the average will pay
    into the USSBP over a longer period than the Federal retiree. Although
    Congress has adopted a time for USSBP participants to halt payments of
    premiums (when payments of premiums equal 30 years and the military
    retiree is 70 years of age) the date is more than 4 years away.
    Military retirees enrolling on the initial enrollment date (1972) will
    this September be paying premiums for 32 years, by 2008, 36 years.
        FRA recommends and urges the subcommittee to adopt the House bill,
    H.R. 3763, that would amend the USSBP to restore the value of service
    members participating in the program by increasing the survivor annuity
    over a 10-year period to 55 percent, and the date 2008 to October 31,
    2004, when certain participants attaining the age of 70 and having made
    payment to the plan for at least 30 years are no longer required to
    make such payments.

                           MEDICAL CARE RECOVERY ACT

        In the summer of 2003 while the new Sergeant Major of the Marine
    Corps was in the process of assuming his duty, his wife was nearly
    killed by a ``wayward driver.'' She spent weeks in a Navy hospital the
    recipient of emergency brain surgery, intensive care, military air
    transportation to Washington, DC, from California, and both
    occupational and physical therapy. Now the Navy is proceeding to
    recover the returns from the insurance companies of both parties, an
    estimated $100,000.
        The Navy, as with the other Services, cites a 41-year-old law,
    Medical Care Recovery Act, as the basis to collect payment for medical
    care administered to uniformed personnel. According to a January 4,
    2004, news article by James W. Crawley in the San Diego Union Tribune,
    the Navy collected $11 million in reimbursements from insurance
    companies in the past year ``that would have gone to sailors, marines,
    and their dependents.''
        Apparently, the law is reasonable. The Navy operates its medical
    facilities with taxpayer funds and it is only right that these
    expenditures be recovered whenever possible. However, the question of
    fairness rises to the front when the process of recovery goes against
    the victim. FRA believes any recovery should come from the insurance of
    the party at fault. In many cases the proceeds from the victim's
    insurance policy will be earmarked for expenses involved in the
    continued care of the victim, baby-sitting, replacement vehicle, and
    other everyday living requirements not now accomplished on a personal
    basis but by payment or hire.
        The ironic part of this statute is that recovery is only
    collectible through a third party. If a service member is injured as a
    result of ``willful and negligent'' acts and in receipt of medical care
    in a military treatment facility, no claim of recovery can be made
    against the member.
        The law does allow the Secretary concerned to waive a claim of the
    United States. However, it is doubtful that affected service members
    are aware such a waiver may be granted if requested. Such knowledge
    such be disseminated to all service members through the military's
    information program and upon receipt of treatment and care at a
    military treatment facility.
        FRA recommends a review of the law, 10 U.S.C. 1095, and the
    possibility of an amendment authorizing the no-fault victim to retain a
    certain percentage of the proceeds from insurance claims so the no-
    fault victim will not bear a fiscal burden during a time of financial
    need.

                                  OTHER ISSUES

    Health Care
        The Fleet Reserve Association has prepared a statement on health
    care available on request to Bob Washington, Director of Legislative
    Programs, 703-683-1400, or e-mail (legfra@fra.org).
    Military Construction/Family Housing
        The association's statement on Military Construction/Family Housing
    is available on request to Bob Washington at the above addresses.

                                   CONCLUSION

        FRA is grateful for the opportunity to present its Reserve goals
    for fiscal year 2005. If there are questions or a need for further
    information, please call Bob Washington, FRA Director of Legislative
    Programs, at 703-683-1400.

        [Whereupon, at 12:10 p.m., the subcommittee adjourned.]