[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


                     U.S. GOVERNMENT PRINTING OFFICE
93-576 PDF                 WASHINGTON DC:  2005
---------------------------------------------------------------------
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512ï¿½091800  
Fax: (202) 512ï¿½092104 Mail: Stop IDCC, Washington, DC 20402ï¿½090001


                      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:]

    [GRAPHIC] [TIFF OMITTED] T3576.001
    
    [GRAPHIC] [TIFF OMITTED] T3576.002
    
    [GRAPHIC] [TIFF OMITTED] T3576.003
    
    [GRAPHIC] [TIFF OMITTED] T3576.004
    
    [GRAPHIC] [TIFF OMITTED] T3576.005
    
    [GRAPHIC] [TIFF OMITTED] T3576.006
    
    [GRAPHIC] [TIFF OMITTED] T3576.007
    
    [GRAPHIC] [TIFF OMITTED] T3576.008
    
    [GRAPHIC] [TIFF OMITTED] T3576.009
    
    [GRAPHIC] [TIFF OMITTED] T3576.010
    
    [GRAPHIC] [TIFF OMITTED] T3576.011
    
    [GRAPHIC] [TIFF OMITTED] T3576.012
    
    [GRAPHIC] [TIFF OMITTED] T3576.013
    
    [GRAPHIC] [TIFF OMITTED] T3576.014
    
    [GRAPHIC] [TIFF OMITTED] T3576.015
    
    [GRAPHIC] [TIFF OMITTED] T3576.016
    
    [GRAPHIC] [TIFF OMITTED] T3576.017
    
    [GRAPHIC] [TIFF OMITTED] T3576.018
    
    [GRAPHIC] [TIFF OMITTED] T3576.019
    
    [GRAPHIC] [TIFF OMITTED] T3576.020
    
    [GRAPHIC] [TIFF OMITTED] T3576.021
    
    [GRAPHIC] [TIFF OMITTED] T3576.022
    
    [GRAPHIC] [TIFF OMITTED] T3576.023
    
    [GRAPHIC] [TIFF OMITTED] T3576.024
    
    [GRAPHIC] [TIFF OMITTED] T3576.025
    
    [GRAPHIC] [TIFF OMITTED] T3576.026
    
    [GRAPHIC] [TIFF OMITTED] T3576.027
    
    [GRAPHIC] [TIFF OMITTED] T3576.028
    
    [GRAPHIC] [TIFF OMITTED] T3576.029
    
    [GRAPHIC] [TIFF OMITTED] T3576.030
    
    [GRAPHIC] [TIFF OMITTED] T3576.031
    
    [GRAPHIC] [TIFF OMITTED] T3576.032
    
    [GRAPHIC] [TIFF OMITTED] T3576.033
    
    [GRAPHIC] [TIFF OMITTED] T3576.034
    
    [GRAPHIC] [TIFF OMITTED] T3576.035
    
    [GRAPHIC] [TIFF OMITTED] T3576.036
    
    [GRAPHIC] [TIFF OMITTED] T3576.037
    
    [GRAPHIC] [TIFF OMITTED] T3576.038
    
    [GRAPHIC] [TIFF OMITTED] T3576.039
    
    [GRAPHIC] [TIFF OMITTED] T3576.040
    
    [GRAPHIC] [TIFF OMITTED] T3576.041
    
    [GRAPHIC] [TIFF OMITTED] T3576.042
    
    [GRAPHIC] [TIFF OMITTED] T3576.044
    
    [GRAPHIC] [TIFF OMITTED] T3576.043
    
    [GRAPHIC] [TIFF OMITTED] T3576.045
    
    [GRAPHIC] [TIFF OMITTED] T3576.046
    
    [GRAPHIC] [TIFF OMITTED] T3576.047
    
    [GRAPHIC] [TIFF OMITTED] T3576.048
    
    [GRAPHIC] [TIFF OMITTED] T3576.049
    
    [GRAPHIC] [TIFF OMITTED] T3576.050
    
    [GRAPHIC] [TIFF OMITTED] T3576.051
    
    [GRAPHIC] [TIFF OMITTED] T3576.052
    
    [GRAPHIC] [TIFF OMITTED] T3576.053
    
    [GRAPHIC] [TIFF OMITTED] T3576.054
    
    [GRAPHIC] [TIFF OMITTED] T3576.055
    
    [GRAPHIC] [TIFF OMITTED] T3576.056
    
    [GRAPHIC] [TIFF OMITTED] T3576.057
    
    [GRAPHIC] [TIFF OMITTED] T3576.058
    
    [GRAPHIC] [TIFF OMITTED] T3576.059
    
    [GRAPHIC] [TIFF OMITTED] T3576.060
    
    [GRAPHIC] [TIFF OMITTED] T3576.061
    
    [GRAPHIC] [TIFF OMITTED] T3576.062
    
    [GRAPHIC] [TIFF OMITTED] T3576.063
    
    [GRAPHIC] [TIFF OMITTED] T3576.064
    
    [GRAPHIC] [TIFF OMITTED] T3576.065
    
    [GRAPHIC] [TIFF OMITTED] T3576.066
    
    [GRAPHIC] [TIFF OMITTED] T3576.067
    
    [GRAPHIC] [TIFF OMITTED] T3576.068
    
    [GRAPHIC] [TIFF OMITTED] T3576.069
    
    [GRAPHIC] [TIFF OMITTED] T3576.070
    
    [GRAPHIC] [TIFF OMITTED] T3576.071
    
    [GRAPHIC] [TIFF OMITTED] T3576.072
    
    [GRAPHIC] [TIFF OMITTED] T3576.073
    
    [GRAPHIC] [TIFF OMITTED] T3576.074
    
    [GRAPHIC] [TIFF OMITTED] T3576.075
    
    [GRAPHIC] [TIFF OMITTED] T3576.076
    
    [GRAPHIC] [TIFF OMITTED] T3576.077
    
    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 
[email protected]. 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 ([email protected]).
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.]

                                 
